Sify Technologies' (SIFY) CEO Kamal Nath on Q4 2016 Results - Earnings Call Transcript

| About: Sify Technologies (SIFY)

Sify Technologies Limited (NASDAQ:SIFY)

Q4 2016 Earnings Conference Call

April 22, 2016 8:30 AM ET

Executives

Trúc Nguyen - Investor Relations

Raju Vegesna - Chairman

Kamal Nath - Chief Executive Officer

Vijay Kumar - Chief Financial Officer

Operator

Good morning and welcome to the Sify Technologies Limited Conference Call, following the earnings announcement for the year ending March 31, 2016. At this time, 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.

I would now like to introduce your host for the conference Trúc Nguyen, Investor Relations for Sify Technologies Limited.

Trúc Nguyen

Thank you, Melissa. 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 you to ask questions. If you do not have a copy of the press release, please call or email me and I will email it you, my contact details are on the release. Alternatively, you may 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 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 to the Company’s business.

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

Raju Vegesna

Trúc, thank you. Good morning and thank you for joining us on the call. This is our third straight year of profitability with strong revenue growth, since we announced our plans to become an ICT Services provider. I continue to be encouraged by our clients’ acceptance of Sify as a strategic partner in their transformational projects. We are proud to play a role as co-authors of the clients’ success stories, while also helping to change the country’s ICT landscape.

This year, Sify also took its first step toward the larger ambitions of going global; not just on signing up international clients, but also building a pool of highly skilled workforce with the launch of our Global Innovation and Development Center at Hyderabad. We believe that our complete ICT ecosystem and this on-demand workforce will be an undeniable advantage for our customers in the long run.

I would now ask Kamal our CEO to expand on some of the business highlights of the year. Kamal?

Kamal Nath

Yes, thank you Raju. Financial year 2015-2016 was our third year of Sify 3.0 journey and I am happy to share that our positioning as an ICT Solutions and Services player have led to a consistent growth in revenue, order book and profitability.

Our Infrastructure as well as Services business have contributed to the growth of each other. A significant number of our clients have endorsed us for our Data Center Transformation and Network Transformation offering while choosing us as their Integrated ICT partner.

The quantitative and qualitative performance coupled with healthy mix of run rate, Annuity and large deals have strengthened our base for a sustained growth in FY 2016-2017 and beyond.

Let me spend some time on the business highlights for the past year. To start with Telecom business, the revenue from this business – from the data business grew more than 15% over last year. Voice business grew 21% over the previous year.

The business launched the Cloud Interconnect services facilitating access to more than 10 leading cloud service providers across 30 global geographies. Enterprises now have perhaps the largest direct access to the cloud platform in India.

Business Internet saw a revenue growth of 25% with capacity almost tripling. This significant spike is on the back of explosive demand for bandwidth dependent applications.

Managed services strategy saw maturity with a 2x growth that saw the number of managed end points almost double. This was also recognized by the industry peers as the best network managed services at the CIO Choice awards 2016.

Among the biggest clients signed up were to build and manage a national banking network with multiple service providers with Sify as the primary network integrator for both infrastructure and managed services.

The eCommerce business across the country is also helping with the resultant signups to build the network for multiple large service providers. Other sign ups were a national sector telecom service provider, a national insurance provider, a total of three large public sector banks, a cement major, a non-life insurance player and a large private university. Three major international automobile manufacturers contracted the business to build their entire dealer management network and deliver comprehensive managed services to them.

Data Center Services business unit. The revenue from this business unit grew by 20% over the previous year. This business added more than 50 clients throughout the year. Our focused approach towards certain industry verticals paid rich dividends in this view. The fastest growing virtual wallet player contracted us for their complete hosting requirements in India.

A captive managed service provider for a national mobile services player has contracted the business for colocation services. During the year, the business also signed up two of the largest nationalized banks, a large format retail player, and a third-party medical insurance service player. One of the largest public sector bank has signed up for our Disaster Recovery services.

A world player in online search has signed up to park their PoP at our Noida facility, which will now enable multiple ISPs to host from here. This business has won awards for Data Center transformation services and Integrated Data Center services at the CIO Choice awards 2016.

The Cloud and Managed Services business revenue grew by over 45% over the previous year. Over the last 12 months, the business has seen increased demand from customers for cloud-aligned model of IT, including services leveraging cloud such as Backup on Cloud and Disaster Recovery on Cloud.

Content Delivery Network services has seen over 260% growth over the last year and has added more than 43 new clients in the last fiscal. The business recently signed up one of the largest power distribution companies in India to provide complete IT infrastructure on a business outcome driven “Pay per Bill” model generated from the platform. The platform is built to support over 5 million consumer bills per month and scale as needed.

Other clients added included a multinational financial subsidiary of an automobile major, a private bank, a multinational IT services player, and a pan-India housing finance company; to highlight a few. During the entire year, we transitioned more than 175 plus key customers onto our cloud platform.

The Applications Integration Services business has signed up over 25 clients for the eLearning business, while the Managed SAP services signed up more than 10 new clients across the industries like manufacturing, renewable energy, steel, and hosiery. The Managed SAP services acquired certifications like SAP Certified in Hosting Services, Cloud Services, HANA Operations, and in Application Management Services.

The business signed up multiple partnerships across India, Asia-Pac, and Middle East to enhance the service offerings and geographical reach in Talent Management businesses. The business has also won the National Education Excellence award for 2016 from ASSOCHAM.

Among the clients signed up were a multinational auto major’s financial arm, a cement major, two energy players, the national telecom player, a public sector power corporation, public sector oil exploration major, the regulatory agency for mines, a State Government’s testing and evaluation platform and one of India’s largest multi-mineral solutions provider.

Coming to the Technology Integration services business unit, the revenue of this business grew by 14%. The business added 85 new clients across Data Center IT infrastructure, Network Integration, Security and Collaboration services.

TIS Business has matured in terms of customer acceptability across customer segments of BFSI, Public Sector Unit, and Government and it helped customers setup robust IT infrastructure and services leveraging our strong service provider experience.

Business saw strong growth in focus areas with Network Integration Business growing by 23%. Data Center IT and Data Center Transformation business grew by 150%. Our Security and Collaboration Business also saw strong support from customers in BFSI and PSU and recognition of our skills in these areas.

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

Vijay Kumar

Thank you, Kamal and good morning everyone. I will now provide detailed financial results for the financial year 2015-2016. Revenue for the year ended March 31, 2016 was INR 15035 million, an increase of approximately 17% over last year. Revenue for the quarter ended March 2016 was INR 4036 million, an increase of 12% over the same quarter last year.

EBITDA for the year was INR 2449 million, an increase of 22% over last year. Net profit for the year was INR 436 million, an increase of 16% over last year. Capital expenditure during the year was INR 1781 million. The discipline exhibited over successive quarters on cost control has helped to supplement the good progress on the revenue front.

Our asset utilization has also improved with increased demand for our solution, both on the Data Center and Network side. Our capital expenditure investments remain cautious and will continue to be sync with the market movements.

I am happy to state that the Board of Directors have recommended a dividend of 10% on the paid up capital. Cash balance at the end of the year was INR 1736 million including restricted cash of INR 346 million.

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

Raju Vegesna

Thank you, Vijay. As our results are shown, client sales increased their engagement with us, while also consolidating more of their services. I see this is an endorsement for our mission to build that entire ICT ecosystem for enterprises. Thank you for joining us on this call.

I will now hand over to the operator for questions. Operator?

Question-and-Answer Session

Operator

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question comes from the line of [indiscernible] Private Investor. Please proceed with your question.

Unidentified Analyst

Is there an increase in the dividend?

Vijay Kumar

There is no increase in the dividend. It is 10%, same as in the preceding year.

Unidentified Analyst

Thank you.

End of Q&A

Operator

Thank you. There are no further questions at this time. I’ll turn the call back to management for final remarks.

Raju Vegesna

Thank you, everyone for joining us on the call and we look forward to interacting with you in the coming quarters. Thank you and have a good day.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.

THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.

If you have any additional questions about our online transcripts, please contact us at: transcripts@seekingalpha.com. Thank you!