Sify Technologies Limited (SIFY) Q2 2014 Earnings Report, Transcript and Summary

Greetings and welcome to the Sify Technologies Second Quarter Fiscal Year 2013/2014 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator instructions). As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Christopher Chu. Thank you, Mr. Chu, you may begin.

Thank you operator. 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 Raju Vegesna, Chairman; Kamal Nath, Chief Executive Officer; and M.P. Vijay Kumar, Chief Financial Officer of Sify Technologies. Following our comments on the results, there will be an opportunity for questions. If you don’t have a copy of our press release, please call Grayling at 646-284-9400 after the call and we will have one sent to you. Alternatively, you may obtain a copy of the release at the Investor information section of the Company’s corporate website at www.sifycorp.com. 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 earning release may include non-GAAP measures. Sify’s results for the year are according to the IFRS reporting Standard, and will differ somewhat from GAAP the 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 on 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 press 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 Vegesna, Chairman and Managing Director of Sify. Raju.

Okay, thank you Chris. Good morning, thank you for joining us on the call. I’m pleased to share with you the continuing improvement to both revenue and profitability the clients are considering their exposure and carefully evaluating decisions to on the ITP infrastructure, spending this very challenging economic scenario. So our five business units telecom, Data Center and Services, cloud and managed services and application driven and our Technology Integration Services, as an integrated solution its working very well and we are capturing lot of the market share. As the market is growing and also we are talking a lot of the market share from the competitors. We are seeing in early demand for IT, Commodity and Innovations in becoming a products and service differentiators and as a closer look to at our DNA, some of our recent wins will shed light on how some of the innovation practices we are responsible pursuing the clients on our ways. To reflect this past quarter, I would ask Kamal, our CEO to explain some of the business highlights of the last quarter.

Yeah. Thank you, Raju. As our Chairman noted the external business at the moment is upper than ever. However, our integrated services approach around Sify's services on third-party solution is trending wide acceptance with the customers. For us we are able to address bigger pie of the customer IT landscape while working on lowering customer’s IT spend. This has both short and long-term significance for us as we move forward. Now, allow me to take you through some of the business highlights for the quarter. As far as Telecom service is concerned, it grew by 35% over the same quarter last year. Data services within Telecom services grew by 34% over the same quarter last year. A global company in the aviation technology space awarded Sify a very larger network integration and outsourcing contract covering all key airports in India. The large public sector bank awarded Sify a contract for purporting its online banking space. Sify is also as large and has DDoS detection and mitigation service for its customers, which would enable customers with large internet facing businesses to protect and secure their business DDoS attacks. Our new Data Center at Noida is seeing a lot of traction; work on the new Data Center in Mumbai is being accelerated to expand the capacity over there. Renewals for Data Center business came from all industries including the logistics measures a leading government, state government electricity board and Telecom multinational and a largest banking account operator in India. New business included one of India’s leading English language publications, a homegrown banking measures and one of the oldest Indian companies in the mobile power business. Cloud and Managed Services business grew by 46% over the same quarter last year, the business signed up a premier education institution and a food multi-national this…

Thank you, Kamal, and good morning, everyone. I will now provide the detailed financial results for the second quarter of financial year 2013, 2014. Revenue for the quarter ended September 30, 2013 was INR2505 million an increase of 22% over the same quarter last year. EBITDA for the quarter was INR424 million, an increase of 180% over the same quarter last year. Net profit for the quarter was INR111 million as against [ph] a net loss of INR57 million for the same quarter previous year after excluding a one-time gain of INR658 million from sale of associated associate as reported earlier. Capital expenditure during the quarter was INR700 million and cash balance as of the end of the quarter was INR1614 million. We are seeing a consistent upward trend in both revenue and profitability. Earlier, we have decided that future investment an infrastructure would be demand led. This has led to a deeper focus on monetizing existing capacity, which can be seen in our improving bottom-line performance. With the Noida Data Center ready and our new Mumbai Data Center being completed by end of this fiscal year, we should also start realizing additional revenue from the investments we have made over the last several quarters. The focus continues to be on higher possible asset utilization and lowering the operating cost which exceeds the momentum in our net result. I’ll now hand over to our Chairman for its closing remarks. Raju.

Thank you, Vijay. Like while – we must navigate carefully under the current market condition. I see these conditions are favorable for Sify following reasons; Clients will utilize the opportunity to consolidate vendors. Only those with robust infrastructure, consistent performance and a sound delivery system we will stand to gain. For us it is a very good opportunity to leverage our all five services and solutions to focus to up sell at the clients, a tighter market means clients are willing to pay for innovation across the products and services. I formally believe that as a team we have the people, resources and solution and drive to utilize and monetize the opportunities in front of us. Thank you for joining us on this call. Now, I will hand over to the operator for questions. Operator.

Thank you, sir. We’ll now be conducting a question-and-answer session. (Operator Instructions). Our first question today’s is coming from Mohan Raju from Sify Technologies. Please proceed with your question. Mohan Raju – Sify Technologies: Good morning, Kamal, Raju and Vijay. Congratulations for your quarter two results and important growth and continued profitability of Sify. Good to see the consistency in a tough market. A question from my side, recently we saw a press release of $23 million funds that Sify has kept aside for focusing on cloud Managed Services and Security. So in this regard just want to know is there any acquisition that Sify has made using this fund or plans to make. So if Kamal can highlight on this.

Now I will address on this, what we are looking at this is basically as Sify as we want to present like instead of a non-adjusted [indiscernible] product at a service company in India. We are looking at some forward investments, looking at to bring some new technologies as we are having you know both Telecom and IT Services and top of that being as disruptive what I call is a disruptive is happening in the market the whole infrastructure technology and services. We want to bring some of the new services, such that the whole – our cliental will get come benefit and those are the things what we are looking at. Part of this thing maybe we invest some of our funds also to acquisition and also to build small startups and whatever the things make sense relevant for the Sify as a platform to grow and beyond our Telecom and Data Center infrastructure these are the services what our interest to fund this opportunities. That is what we are looking for. Mohan Raju – Sify Technologies: Sure thanks. Thanks Raju for that.

(Operator Instructions). Our next question today’s coming from Rajeev Babia from PO [ph]. Please proceed with your question.

Yeah, hi, Raju, Kamal and Vijay. I would like to understand what plan Sify is having as for as an organic growth in India is concerned. Are we looking out for any easier acquisitions?

No, we cannot disclose until we have such things materialized. Yes, the such kind of opportunity is also happening, because the market is getting consolidated. So there are people in the telecom side, there are people in IT Services, there some consolidation is going to happen and yes we are looking for such opportunities. But I cannot disclose anything we are – there until we have publically completed.

Sure, thanks.

Thank you. (Operator Instructions). One moment please, while we poll for further questions. If there are no further questions today, I’d like to turn the floor back over the management for any further or closing comments.

Thank you everyone for joining on this call. I’m look forward to interacting with you again next quarter. Thank you again. Good bye.

Thank you. This does conclude today’s teleconference. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.