Sify Technologies Limited (NASDAQ: NASDAQ:SIFY), a leader in integrated ICT solutions and services, has reported its financial results for the fourth quarter and fiscal year 2023-2024. The company witnessed an overall revenue increase of 7%, while profits experienced a significant decline, with profit before tax and profit after tax decreasing by 77% and 93% respectively. This mixed financial performance comes amidst the company's continued investment in infrastructure and services to support digital transformation in India.
Key Takeaways
- Revenue for FY 2023-24 increased by 7% to INR 35,634 million.
- EBITDA grew by 7%, reaching INR 6,756 million.
- Profit before tax and profit after tax saw a steep decline of 77% and 93% over the previous year.
- Data center colocation services revenue grew by 9%, while digital services revenue decreased by 1%.
- Network (LON:NETW) centric services revenue saw a 10% increase.
- The company's infrastructure expanded with 1,033 fiber nodes and 7,835 contracted LDR and service points across India.
- Sify invested $7.22 million in Silicon Valley startups as part of its venture capital initiative.
- Capital expenditure for the year amounted to INR 12,377 million.
- A rights offering was proposed to finance the expansion of data centers and invest in digital services business growth.
Company Outlook
- Sify expects to continue investing in data center and network infrastructure expansion.
- Two new greenfield data center projects in Noida and Chennai are set to go live in fiscal 2025.
- Additional capacity expansions are planned for Mumbai and another city in the following fiscal year.
Bearish Highlights
- Profitability took a significant hit with a major decrease in both profit before tax and profit after tax.
- Revenue from digital services experienced a slight decline of 1% over the last year.
Bullish Highlights
- The company reported growth in data center colocation services and network centric services by 9% and 10% respectively.
- Sify's infrastructure expansion with increased fiber nodes and service points supports its growth trajectory.
Misses
- The overall growth in revenue was overshadowed by the substantial drop in profitability.
Q&A Highlights
- The rights offering is aimed at engaging existing shareholders in the company's growth and financing data center expansions.
- The projected CapEx for the upcoming fiscal year will be similar to the previous two years.
- The company's data center in Mumbai is expected to be two-thirds occupied by the end of March 2025.
- Network services' performance has been organic with a stronger quarter four.
- The decrease in digital services revenue was attributed to lower project numbers in integration services, while cloud and network managed services continue to grow.
- The data privacy law in India has been pronounced, but the rules are yet to be issued, and it is not expected to have a major impact on demand for Sify's services.
Sify Technologies continues to navigate a challenging market environment while investing in strategic areas to support the digital transformation of enterprises in India. Despite the decline in profitability, the company's infrastructure expansion and service diversification strategies position it to capitalize on the growing demand for digital services in the region.
InvestingPro Insights
Sify Technologies Limited (NASDAQ: SIFY) has been navigating through a challenging financial landscape, as evidenced by the mixed results in their recent earnings report. To provide a more comprehensive understanding of the company's current market position, here are some key metrics and tips from InvestingPro:
InvestingPro Data:
- Market Cap (Adjusted): $224.89M
- P/E Ratio (Adjusted) last twelve months as of Q3 2024: 486.62, indicating a high valuation relative to earnings.
- Revenue Growth last twelve months as of Q3 2024: 11.0%, showcasing a solid top-line expansion.
InvestingPro Tips:
1. Sify operates with a significant debt burden, which could be a concern for investors given the company's profit declines.
2. The stock price has fallen significantly over the last three months by 23.12%, which may signal a potential buying opportunity for investors who believe in the company's long-term growth prospects.
Investors considering Sify Technologies as part of their portfolio should note that the company is a prominent player in the Diversified Telecommunication Services industry and is expected to remain profitable this year. While Sify does not pay a dividend, it could appeal to growth-focused investors.
For those seeking additional insights, InvestingPro offers more tips on Sify Technologies. Utilize coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and explore the full range of 11 InvestingPro Tips to inform your investment strategy.
Full transcript - Sify Technologies (SIFY) Q4 2024:
Operator: Good morning, everyone, and welcome to Sify Technologies Financial Results for the Fourth Quarter and Fiscal Year 2023 to 2024. At this time, all participants have been placed on a listen-only mode, and the floor will be opened for questions after the presentation. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Praveen Krishna. Praveen, over to you.
Praveen Krishna: Thank you, and good morning, Jenny. I would like to extend a warm welcome to all of our participants on behalf of Sify Technologies Limited. I'm joined on the call today by my Chairman, Raju Vegesna; my Executive Director and Group CFO, Mr. M. P. Vijay Kumar; and my Chief Executive Officer, Mr. Kamal Nath. 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 Weber Shandwick at +1 (212) 546 8260, and we will have one sent to you. Alternately, you may obtain a copy of the release at the Investor Information section on the company's corporate website at www.sifytechnologies.com/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 Sify 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 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 our 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 therefore 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 protections 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 turn the table over to Mr. Raju Vegesna, Chairman of Sify Technologies. Chairman?
Raju Vegesna: Thank you, Praveen. Good morning, and thank you for joining us on the call. India's potential continues to attract the attention of the international business leaders. Their confidence reflects positively on our business environment, attracting investments and fostering partnerships. I am committed to fostering this growth, ensuring that India continues to thrive on the world stage and Sify has a central role to play. Let me bring Kamal, our CEO, to expand on some of the business highlights for the past year. Kamal?
Kamal Nath: Yeah. Thank you, Raju. As enterprises advance their digital transformation and digitalization goals, they are strategically realigning their digital architecture across applications, hybrid cloud, network security and edge environments. Customer experience, business continuity, cybersecurity, application modernization and artificial intelligence enablement are the pivotal catalyst driving this recalibration. Our robust infrastructure investments and comprehensive services portfolio are structured to precisely adverse customer objectives. Concurrently, we are maintaining proactive engagement with our clients, identifying their existing requirements, and customizing our offerings to align with their evolving needs. Let me now expand on the business highlights for the year. Revenue from data center colocation services for FY ’23-‘24 grew by 9% over last year. Revenue from digital services for FY ’23-‘24 decreased by 1% over last year. Revenue from network centric services for FY ’23-‘24 grew by 10% over last year. The revenue speed between the businesses for the year was data center colocation services at 31%, digital services at 28%, and network services at 41%. As of March 31, 2024, Sify provide services via 1,033 fiber nodes across the country, a 16% increase respectively over the same quarter last year. As of March 31, 2024, Sify has deployed 7,835 contracted LDR and service points across the country. At close of financial year, Sify has invested a cumulative of $7.22 million in startups in the Silicon Valley area, as part of our corporate venture capital initiative. 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 year. Vijay?
M. P. Vijay Kumar: Yeah. Thank you, Kamal. Good morning, everyone. Let me briefly present the financial performance for the financial year 2023-‘24. Revenue was INR35,634 million an increase of 7% over last year. EBITDA was INR6,756 million, an increase of 7% over last financial year. Profit before tax was INR232 million, a decrease of 77% over the last year. Profit after tax was INR49 million, a decrease of 93% over last year. Capital expenditure for the year was INR12,377 million. Our three businesses have unlocked tailored growth avenues, attracted targeted investments and fostered valuable partnerships. Our investment philosophy encompasses expanding data center presence to new locations for sustained growth, increasing capacity at existing facilities to meet the foreseeable demand and fortifying our network infrastructure and cloud interconnectivity. Simultaneously, we are prioritizing the expansion of our people, capabilities and competencies, equipping them with essential skills, tools and processes to drive innovation and efficiency. All the while, we remain steadfast in our commitment to cost effectiveness and fiscal prudence. Cash balance at the end of the year was INR5,835 million. I will now hand over to our Chairman for his closing remarks. Chairman?
Raju Vegesna: Thank you, everyone. And as I outlined, India is continuously growing and we are in the midst of this progress and we are going to continuously grow. Operator?
Operator: Thank you very much. We are now opening the floor for questions. [Operator Instructions] Your first question is coming from Greg Burns of Sidoti and Company. Greg, your line is live.
Greg Burns: Good morning. Could you just talk about the rationale behind the proposed rights offering versus maybe some other form of capital?
Raju Vegesna: As far as the rights offering is concerned, the objective was to finance the expansion of our data centers and also to invest in our Digital Services business growth, considering that we also incidentally are in the 25th year of listing at NASDAQ. It was an opportunity to engage with all the existing shareholders to participate in the next phase of growth. And hence, the rights issue instead of raising any external capital.
Greg Burns: Okay. What is your projected CapEx for this coming fiscal year?
Raju Vegesna: The projected CapEx will be similar to what we have done in the last two years. Last two years, we have done on an average about INR1,400 crores -- INR1,400 crores. We will have a similar run rate.
Greg Burns: Okay. And then maybe you could talk about the roadmap of your data center roadmap a little bit. I know the Tower 5 in Mumbai came online, and I think there was a tower in Noida maybe that was coming online in April. Is that online currently and what do you have in the roadmap for fiscal 2025 and ‘26?
Raju Vegesna: Yeah. For the Fiscal 2025, there are two greenfield projects which will go live. One at Noida, which is the National Capital Region, Delhi, another at Chennai. These two facilities will go live. And in the next fiscal, there will be additional capacity, which will come up in Mumbai and in another of the cities which will happen, which we are at the early stages of finalizing our design and plan for the same.
Greg Burns: Okay. Maybe could you quantify -- maybe in terms of like added capacity, like what's your existing capacity now and maybe what that, I guess the roadmap that you just laid out adds?
Raju Vegesna: Yeah. The existing capacity is about 120 megawatt of IT power capacity. And the two new facilities, which are going to go live this year will have a design capacity of 26 megawatt each, but these capacities will be made operational in phases over the next two years.
Greg Burns: Okay. And then maybe we could just -- to that idea of like things coming on in phases, I guess the Tower 5 in Mumbai, I guess it's around 40 megawatts of total capacity. What has been sold or what's currently operational and how does that get rolled out now that the tower is up and running?
Raju Vegesna: Yeah. So that's a 38 megawatt facility of which by end of this fiscal March 25, nearly two-third of the capacity will be fully occupied and the rest will get occupied in the following year.
Greg Burns: Okay. And then, maybe we could just focus in on this quarter a little bit. Can you just talk about network services? They were a little bit stronger. The growth there was a little bit stronger than we were looking for. Can you just talk, was there anything unusual about the quarter or is that a good growth rate to or a good number to build off of for our models going forward?
Raju Vegesna: Yeah. The network business performance has been fairly organic. The quarter four was relatively better. But importantly, we continue to expand on our network infrastructure. And similar to data center, we are committed to substantial investments for expanding our network infrastructure, given the fact that edge data centers will come into play in the country and we will continue to invest there.
Greg Burns: Okay. And then the digital services were down a little bit from a year ago. Was there anything in particular of note driving that or not?
Raju Vegesna: The outlook in the market is looking good. Our engagements with the customers are getting deeper. We are continuing to invest in building people's capability and we should start seeing results in the foreseeable future.
Greg Burns: But within that digital services, were cloud services up and maybe technology integration services down? Was there any -- within the category of digital services, what was the mix driving that 1% down?
Raju Vegesna: Yeah. The integration services, the projects are lower than in the past, but the cloud and the network managed services continue to scale.
Greg Burns: Okay. Perfect. And then what is the status of the data privacy law? Has it been -- is it being implemented yet or there is still trying to -- sorry, go ahead.
Raju Vegesna: No. I didn’t get the question. [Multiple Speakers] Data privacy law, okay. As far as data privacy law is concerned, it's yet to become effective. The law has been pronounced, but the rules are yet to be issued. Most likely after the new government is formed, we should see that law becoming effective.
Greg Burns: Okay. And with that timeline in mind, are you seeing an increase in inbound activity or pipeline activity or have you seen any impact from that law on your business yet?
Raju Vegesna: No, I think India data center growth and network growth is independent of the data privacy law. I don't think localization per se is something which is driving demand. I think we have bigger driver of demand in the form of AI and ML activities. I think those are much bigger drivers. Apart from the digitalization programs of the India Enterprises, I think those are driving demand much stronger. I don't think regulatory support is going to make a huge delta.
Greg Burns: Okay. All right. Great.
Raju Vegesna: Thanks.
Operator: Thank you. Thank you very much. [Operator Instructions] Okay. I'm not seeing any further questions come into queue. I'll now hand back over to the management team for any closing comments.
Raju Vegesna: Thank you. Thank you for joining us and continuously interacting with the rest of the year. Thank you.
Operator: Thank you very much, everybody. Thank you. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation. Thank you everyone.
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