Sify Technologies' (SIFY) CEO Kamal Nath on Q3 2016 Results - Earnings Call Transcript

| About: Sify Technologies (SIFY)

Sify Technologies Limited (NASDAQ:SIFY)

Q3 2016 Earnings Conference Call

January 20, 2016 08:30 AM ET

Executives

Trúc Nguyen - Investor Relations

Raju Vegesna - Chairman

Kamal Nath - Chief Executive Officer

Vijay Kumar - Chief Financial Officer

Analysts

Operator

Greetings and welcome to the Sify Technologies Third Quarter 2015/2016 Conference Call. At this all participants are in a listen-only mode. A 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 Trúc Nguyen. Please go ahead Mr. Nguyen.

Trúc Nguyen

Thank you, Kevin. I would like to extend a warm welcome to all 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 do not have a copy of our press release, please call me at Grayling at 646-284-9418, and we will have one sent to you. Alternatively, you can obtain the copy of the release at the Investor Information section on 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 earnings releases 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 Sify’s 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 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 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 with the company’s business.

With that, I would now like to introduce Mr. Raju Vegesna, Chairman of Sify Technologies Limited, Raju?

Raju Vegesna

Hi Trúc, Thank you, Trúc. Good morning. Wish you Happy New Year and thanks for joining us on the call. I’m happy to report that we’ve performed well in a quarter that’s typically challenging for the enterprise segment. And this year was coupled with natural calamities that affected our coastal City of Chennai.

I’m very proud of the commitments owned by my team. And many of whom experienced this year impact on their homes and family lives, but delivered superior service to their customers who were counting on Sify for mission critical high Sify services and solutions.

Many of our clients reported an increased depreciation of the value in having a single window overview of their entire outsource services with us. As we grow our India customer base and we are increasingly positioning ourselves as a global player leveraging our India scale to serve global enterprise customers. The recent launch of our Global Delivery Center at Hyderabad is a step towards in that direction.

To reflect on the past quarter, I would like to ask Kamal, our CEO, to expand on some of the businesses highlights. Kamal?

Kamal Nath

Yes, thank you Raju. This quarter continued the growth trend of the previous quarters with another strong order book performance like the previous quarter both from existing and new customers. We are firmly establishing ourselves in the market. We have also seen healthy mix of business from run rate deals, strategic large deals as well as Government and Public Sector projects.

While customer satisfaction continues to be our focus area, we were gratified to receive recognition from several industry groups. This quarter, Sify was recognized as the Most Promising Brand and the Best Service Provider for Data Center Transformation services, Integrated Data Center services and Managed Network services. This, points to the acceptance and maturity of our services in the market.

Let me spend some time on the business highlights for the quarter, starting with Telecom business. Revenue from the data business grew by 11% over the same quarter last year. Revenue from internet grew by around 27% over the same period last year driven by the adoption of Cloud and Hybrid network by next generation companies.

Key wins in this category were from a Micro logistics company, a leading e-Commerce player in India and a slew of technology products. The business signed up more than 130 clients during the quarter. Sify’s wide-area network transformation business continues to see traction with customers. During the quarter, Sify won a contract to rollout a dealer network for a large auto major in India. This is the third such large win in the segment in the last 9 months.

Sify's Network Managed services business continues to grow, and Sify received industry and customer acclaim as the Best Managed Network Services Provider of the year at the fourth CIO Choice awards.

During the quarter, Sify handed over key projects to its customers including a high capacity network for a leading content player in India. Other projects handed over include a significant part of the deal won with Insurance filed in last quarter.

Sify kicked off its network up-gradation program designed to upgrade Data Center Interconnect multi-fold, both from a capacity and capability standpoint. The first phase of this new network upgrade will be available for commercial use by April 2016.

As far as the Data Center Services business is concerned, revenue grew more than 14% over the same quarter last year. The business signed up 15 new clients during the quarter. Sify contracted to provide Data Centre services for a new age Payment Gateway Company of India.

A multi-national company providing home asset finance contracted with Sify for their hosting requirements. Two nationalized banks also signed up for their Data Center requirement. Others who signed up for co-location services were a Mobile Value Added Services company and one of the country's leading online derivatives exchanges. One of India's largest circulated English daily accorded Sify as the Best Enterprise Data Center award.

Cloud and Managed Services business. This business revenue grew 24% compared to the same quarter last year. Sify added a total of 14 new clients this quarter. New contracts this quarter included a leading e-Commerce shopping website, an online wallet provider, one of the largest Home loan & housing finance companies in India, and a leading provider of Chemical and Cleaning supplies & services. An investment advisory platform also signed up for Managed Services objective.

Coming to Applications Integration Services business unit, this business unit’s revenue recorded a 4% growth over the same quarter last year. We have acquired 7 new clients during the quarter. One of India's largest FMCG companies signed up for Managed SAP services with us. A State Government has signed up for Talent Management Solutions. A State Co-operative Bank signed up for Application Development project. And Sify also concluded three large deals with different players in the BFSI segment for Application Services.

The Technology Integration Services business revenue grew by 86% over the same quarter last year. The Business added 20 new clients across Security, Collaboration and Network Integration business. A Public sector oil refining major signed up for a technology refresh across multiple plants pan-India. One of India's largest FMCG players signed up for a large scale infrastructure augmentation with Sify. There were multiple wins from the State governments in the area of Security services, Network services, Wi-Fi and Collaboration services.

I will now hand you over to Vijay, our CFO to expand on the financial highlights for the past quarter. Vijay?

Vijay Kumar

Thank you, Kamal and good morning everyone. I join my Chairman and Kamal in wishing all of you a very Happy 2016. I will now provide detailed financial results for the third quarter of financial year 2015/2016.

Revenue for the quarter was INR 3,877 million, an increase of 23% over the same quarter last year. EBITDA for the quarter was INR 610 million, an increase of 14% over the same quarter last year. Net Profit for the quarter was INR 114 million, an increase of 37% over the same quarter last year. Capital expenditure during the quarter was INR 535 million.

Our operating performance continues to be sustained over last several quarters. Our commitment to investment continues, consistent with our continuous scrutiny of costs and asset utilization. Cash balance at the end of the quarter was INR 2,223 million.

I will now hand you over to our Chairman for his closing remarks. Chairman?

Raju Vegesna

Thank you, Vijay. We are excited about the overall growth of India as a direction the industry is taking up. What that means is a lot of our services will now be sharpened by this emerging opportunity. And our ICT Solutions and Services should see an increase in demand from this upcoming opportunity.

Our recurred and domestic project deliveries and our comprehensive area services are also turning out to be strong validators for our North American market push. We will keep you abreast of our developments in the time. Thank you for joining us on this call.

Now, I hand over to the operator for questions.

Question-and-Answer Session

Operator

Raju Vegesna

Thank you everyone for joining us on the call and we look forward to interacting with you through the coming year. Have a good day. Thank you.

Operator

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

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