Sify Technologies Limited (NASDAQ:SIFY) Q2 2026 Earnings Call Transcript

Sify Technologies Limited (NASDAQ:SIFY) Q2 2026 Earnings Call Transcript October 27, 2025

Operator: Greetings, and welcome to the SIFI Technologies Financial Results for Second Quarter Financial Year 2025-2026 Conference Call. [Operator Instructions] And please note, this conference is being recorded. I will now turn the conference over to your host, Mr. Praveen Krishna. Sir, you may begin.

Praveen Krishna: Thank you, Ali. I’d like to extend a warm welcome to all our participants on behalf of SIFI Technologies Limited. I’m joined on the call today by Sir. Raju Vegesna, Chairman; and Mr. M.P. Vijay Kumar, Executive Director and Group CFO of SIFI Technologies. 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 Luri Group at 1 (646) 824-2856, and we’ll have one 1 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.convestors. 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. Sify’s results for the year are according to the International Financial Reporting Standard, or IFRS, and will defer some work from the GAAP announcements made in previous years. The 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 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. Let me now introduce Mr. Raju Begesna, Chairman of Sify Technologies Limited. Chairman.

Raju Vegesna: 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 emerges as the next hub of digital infrastructure. Our focus remains on aligning with this momentum through the sustained investments in the hyperscale data center robust network expansion and I release 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 for digital innovation.

Sify will continue to play a pivotal role in empowering the 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?

M. Vijay Kumar: Yes. 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 vision and driving enduring value creation for all stakeholders.

Let me now expand on the business highlights for the quarter. The revenue split between the 3 businesses for the quarter was Network services, 41%; data center services, 13% and digital services 20%. During the quarter, Sify sold 3-megawatt additional data center capacity, as of 30th September 2025, Sify 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 SDWAN 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 10,533 million, an increase of 3% over the same quarter last year. EBITDA was INR 2,361 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 3,064 million. The cash balance at the end of the quarter was INR 4,149 million. I will now hand over to our Chairman for his closing remarks. Chairman?

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

Q&A Session

Operator: [Operator Instructions] Our first question is coming from Jonathan Atkin with RBC Capital.

Jonathan Atkin: 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 3-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.

M. Vijay Kumar: So as far as the 3-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 2/3, 1/3, and our project IRR historically have yielded IRRs north of 20%, which is a little late 20% kind of IRRs have been the returns which we have generated.

Jonathan Atkin: 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?

M. Vijay Kumar: The next couple of — yes, please, sir, please go ahead.

Raju Vegesna: John, basically, as you know that we have big campuses in Mumbai and in Noida and Chennai. And we invested what are the basic requirements as India I scales up, we are getting ready. Like similarly, we are looking at multiple places. And basically, we are capable of delivering big projects, and we are looking at this AI momentum tick off in India, and which is we are seeing some positiveness both hyperscalers and enterprises. So what is in a simple sense, is we are ready to expand. And 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 here.

Jonathan Atkin: And then lastly, just in terms of the breadth of opportunity, you mentioned 3 markets where there’s scale development and demand, but also a lot of activity around edge, like multiple double-digit number of cities where there is 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?

Raju Vegesna: Yes. So yes, we are building edge data centers also. And one of the uniqueness of Sify is having a network business that positions us not only just a colo player and network integrated with that. So we have a plan to expand these Tier 2, Tier 3 cities where it is age is important. And we have our own sites planning, building 10 to 12 sites over the time based on the demand. So there also, we are making ahead into certain cities. Once they’re live, we will more than happy to share with. And yes, you’re right. It also we are playing — we are going to play a role.

Operator: Our next question is coming from Greg Burns with Sidoti & Company.

Gregory Burns: Just wanted to ask about the proposed IPO of Infinite spaces. Why was now the right time to consider that type of transaction?

M. Vijay Kumar: Yes. So Greg, the tailwinds for the data center, colocation 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.

Gregory Burns: Okay. And what percent of the — the new entity will Sify retained ownership of?

M. Vijay Kumar: We will retain ownership of a substantial percentage grade 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 and actually [indiscernible] we will dilute.

Gregory Burns: Okay. Great. And Kotak, their investment is converting into Infinite spaces equity? Or are they — does it convert into Sify Technologies equity? And what percent — or how much stock are there debentures converting into?

M. Vijay Kumar: Yes. So their debentures will get converted into Sify Infinite Spaces equity. And this conversion will happen after the draft prospectus is filed by — is approved by the securities regulator in India. And at that time, we’ll publish the exact percentage of how much will be they’re holding. And Kotak’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.

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

M. Vijay Kumar: No. 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, colocation services and IT services, which they would require.

Gregory Burns: Okay. Great. And then just lastly, you mentioned the 3 megawatts of new contracting capacity this quarter. Can you just give us the full complexion of 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 is currently operational?

M. Vijay Kumar: We have about 188 megawatts 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.

Gregory Burns: Okay. And then what is the — I guess, the road map 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?

M. Vijay Kumar: Yes. 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 suffice it to say that there is a substantial amount of new greenfield project construction, which is happening in parallel.

Operator: Our next question is coming from [ Maher Saker ] with [ Prithvi ].

Unknown Attendee: I have a few detailed questions and we’ll take a bit of time for the Q&A. So my first question is regarding the IP of the Sify Infinite Spaces, in which Sify Technologies directly holds equity given that Sify 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 Sify Infinite through a holding company structure under rather than directly distributing ownership or demerger based structure in Sify Infinite between promoters and ADR holders in the same 84-16 proportion and then proceeding with the — so basically, because of this holding company set up, 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 like strategic regulator, your tax rationale behind adopting this holding company now.

M. Vijay Kumar: Prithvi, I think it’s a very involved question. I think we have got guided largely by our bankers and advisers 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 is the best part.

Unknown Attendee: Like actually, I have also the limited knowledge. So if you had gone through the demo structure, so 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?

M. Vijay Kumar: It’s difficult to respond to that, Prithvi, now. We will see it as time passes by whatever best headways we get in terms of what is best for the shareholders, we will certainly see.

Unknown Attendee: It would be just helpful like if you can keep this in the mine like for future perspective. And my next question is regarding — like I just wanted to get a sense of the road map like what is the expected time line for the infinite IPO from here?

M. Vijay Kumar: Yes, the DRHP was filed last week. And usually, CB takes a time of 3 months for approval of the draft prospectus. And thereafter, we get guided by the bankers in terms of what is the appropriate timing to take to the market.

Unknown Attendee: 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 5 years, even though revenues have grown only at about 5%, 6% CAGR. So while I noticed the recent improvement in margins in Q1 and Q2 at around 14%, 18%, could you please like elaborate on what led to this sharp margin compression earlier like 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?

M. Vijay Kumar: 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 demand. 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. .

Unknown Attendee: Okay. So like should we assume like the current 14%, 16% band as the new steady state?

M. Vijay Kumar: No, no, no, no. it should get better.

Unknown Attendee: So like over the future period should — we should be able to see 20% plus kind of range, right?

M. Vijay Kumar: Yes. That’s our expectation, and we are working towards that.

Unknown Attendee: Okay. And my last question is on the digital services segment. So like similarly, over the last decade, the business has shown like in revenue growth periods of high growth like FY 2016 to ’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 us let me understand the key factors behind this deterioration?

M. Vijay Kumar: Yes. So 2 reasons, Prithvi. One is there’s a complete change in the way IT is getting consumed by enterprises post-COVID. Earlier, there is to be a substantial amount of IT projects, which were delivered on a system integration model. But post-COVID, most of it is consumed as a service. So project-based revenues by design as a company, we have chosen to scale it down. So unlike in the past, that’s 1 reason. Second is also what’s happening in the last 3, 4 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 IP 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.

Operator: [Operator Instructions] We have a question from [ Sri Tho ] who is a private investor.

Unknown Attendee: 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 degrown around 30%, 35%. This quarter. Is that a fair statement?

M. Vijay Kumar: Yes.

Unknown Attendee: So related to this, the digital services, I know we have spoken like 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 that you could offer both. How much of digital services is stand-alone? And how much is it actually dependent on other 2 businesses? So to reframe the question, data center client might request even the network services. How much of them are actually requesting for digital services?

M. Vijay Kumar: Yes. So Srikanth, 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 for enterprises, large and including the bank’s PSUs. We manage the networks for them. irrespective of where they are sourcing from the whole network is managed best. So there is a correlation there. And as far as the cloud and managed services are concerned. The cloud services, ultimately for the customers that require a good network to reach the cloud, whether it is cloud, 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 center, there’s 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 the cloud layer. And of course, we do some bit of security around applications as well. So there is correlation. And beyond this, as far as our enterprise customers are concerned, the customer touch points 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. will continue to put our efforts to get it better.

Unknown Attendee: Okay. Okay. So the other question, again, going on to the digital services. So it’s basically the loss in the Digital Services division has dragged the overall results. Otherwise, this quarter result is probably similar to last quarter, maybe it growth? Had it not been for the loss in digital services?

M. Vijay Kumar: Correct. Correct. Correct.

Unknown Attendee: 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.

M. Vijay Kumar: Correct. Correct. You’re right. And we are focused on that. But we don’t want to stop investigated because in the — 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 beds are not working, we will redesign our strategy. And also, we are focused on that.

Unknown Attendee: Okay. Okay. And 1 last question, sir, on the upcoming IPO. The fact that the CPI Infinity spaces will be listed in India. Sify Technologies is the holding company, which is a NASDAQ listed. So we are indirectly a shareholder in not indirectly, directly shareholder in Sify Infinity Spaces, which will be listed in India. Given that the existing Sify Technologies 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 and Sify Technologies who have an appetite to probably participate in the proposed IPO other than just applying in the IPO whoever is eligible?

M. Vijay Kumar: Yes. We haven’t done any specific work on this. But let me socialize with the bankers. We have guided on the entire process by the bankers of regulatory process and what is best for maximizing the value to all the existing shareholders.

Unknown Attendee: It just may be a nice way of rewarding the existing shareholders.

M. Vijay Kumar: I’ve understood your ask, but I think I need to be conscious of the regulatory network as well.

Operator: As we have no further questions on the line at this time, I would like to turn the call back over to Mr. Raju Vegesna, for any closing remarks.

Raju Vegesna: No. Thank you very much for joining this call and having continuous interest in Sify, and have a good day. Thank you.

Operator: 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.