Sify Limited F3Q05 (Qtr Ending Dec 31, 2005) Earnings Conference Call Transcipt (SIFY)

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Sify Ltd. (NASDAQ:SIFY)

Q3 2005 Earnings Conference Call

January 17th 2006, 8.30 AM

Executives

Truc Nguyen, Investor Relations

R. Ramaraj, CEO & Managing Director

Durgesh Mehta, Chief Financial Officer

Analysts

George Mihalos, Gilford Securities

Bob Allison, Value Price Properties

Himanshu Shah, Shah Capital Partners

Operator

Good morning and welcome to the Sify Limited Conference Call for the Earnings Results for the Third Quarter ended 31st December 2005. I would now like to introduce your host for the conference, Miss. Truc Nguyen, Investor Relations for Sify Limited.

Truc Nguyen, Investor Relations

Thank you operator. I would like to extend a warm welcome to all our participants today on behalf of Sify Limited. I am joined on the call today by R. Ramaraj, Chief Executive Officer and Durgesh Mehta, Chief Financial Officer of Sify Limited. 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 the Global Consulting Group formerly The Emit Broad Company (ph) at 646-284-9426 and my colleague Christopher Chew, will have one 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.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 website.

Some of the financial measures referred to during this call and in the earnings release may include non-GAAP measures. A presentation of the most directly comparable financial measures calculated and presented in accordance with GAAP and in reconciliation of such non-GAAP measures. All the differences between such non-GAAP measures and the most comparable financial measures calculated and presented in accordance with GAAP are also available on the 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 subjected to risks and uncertainties that would cause actual results to differ materially from those described. With respect to such forward-looking statements, the company’s seeks protection afforded by The Private Securities Litigations 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 principle 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. R. Ramaraj, CEO of Sify. Mr. Ramaraj?

R. Ramaraj, CEO & Managing Director

Thank you, Truc. Good morning everybody. I would like to welcome everyone on the call once again and thank you for joining us. First of all, we are pleased to report a significant improvement in our bottomline and have reduced the loss as per US GAAP to less than $0.01 per share. As per Indian GAAP however, the results of Sify actually show a profit of 1.6 million for the quarter including a one-time credit of $1.2 million. The one-time income represents export incentives, which are not recognized as income in US GAAP. Our topline grew 27% year-on-year, the significant contribution from the portal business as well as broadband to home segment of Access Media. We had decided to focus on three key businesses: Enterprise, Access Media, and Portals. Each of these will be headed by an empowered unit head who will be responsible for driving the growth and accountable for the profits of that unit. This will help drive our growth and vision and the same time will have a flatter organization structure.

George Zacharias, the COO has decided to move on to a career opportunity outside Sify. George has been an integral part of our top management team and we appreciate his contribution over the past years. We wish him the very best in the future endeavors. I will now briefly introduce Durgesh who joined us early December as our CFO. Durgesh comes to us from Unilever in the Middle East that he was the Finance Director overseeing Unilever’s business in 7 countries in that region. Prior to this he was in Unilever in India for 25 years becoming the Finance Director for Unilever in India, before moving to their Middle East operations. He will now take you through our financial highlights. Durgesh?

Durgesh Mehta, Chief Financial Officer

Thank you Ram. Hello and good morning to everyone. I shall now go into some details of our financial performance for the last quarter. Our revenues were $26.7 million for third quarter, which is a growth of 27% in the quarter ended, compared – 27% higher than in the quarter ended 31st December 2004. The sequential growth in revenues over the previous quarter was 2.5%. However, our revenues from services grew by 6.5% on a sequential basis. This would be a more accurate measure of growth in our services as the previous quarter had a larger than usual element of revenues from hardware sales required for us to provision the services to some of our corporate customer. Our gross margin has improved from 44% in Q2 to 48% in the quarter under review. Our cash profit in adjusted EBITDA terms for the quarter was $2.25 million compared to $1.21 million in the preceding quarter. Our net loss has substantially come down from $1.4 million in second quarter and $2.1 million in Q3 of last year. We ended the quarter with a cash balance of $25.5 million after incurring a capital expenditure of $3.1 million during the quarter. This amount of our cash-on-hand excludes approximately $37.5 million of net proceeds from the closing in January 2006 of the strategic investments by Infinity Capital Ventures, LP. So Sify’s funding position continues to be strong and we believe adequate for the company’s growth plan for expansion. Ram will now take you through the some of the highlights of the quarter. Ram?

R. Ramaraj, CEO & Managing Director

Thanks Durgesh. I would now like to cover a few significant achievements during the quarter, starting with our unique ability to influence the overall consumer internet experience in India, to grow our revenues and use, and our user base across portals, Cyber Cafes and broadband to home.

First of all, our portals performance. Revenues for the portal grow 17% on a sequential basis and over 82% growth compared to the same quarter last year. Both gain from increases in advertising and sponsorship on the back of a growing array of rich broadband content on Sifymax.in: our broadband portal, which offers the best content experience for users in broadband. For example, after the very successful Indian Idol, Saregamapa and MTV Roadies, big programs. Sifymax is now the exclusive broadband partner for Indian Idol 2, which promises to be even more successful than the first. In fact, it’s already becoming the most popular reality show in India. Sifymax not only has the complete archives, but also exclusive behind the scene for pages, chats with contestants.

Another initiative leveraging our iWay Cyber Cafe chain, chains reached will be the chance to videoconference with these participants and contestants from across 15 Metros, mini-metros and towns across India as part of our exclusive tie-up with Indian Idol 2. We’ve also added a new hit show ‘Sanya’ from Hungama TV, which was launched with exclusive clips, contests and mobile downloads of episodes. And you can see we are betting on broadband to get more and more Indians on to the Internet, on to Sify’s portal offerings.

Another new initiative that’s been very well received is our cricket video scorecard, which continues to delight cricket fans by installing an instant reply video of catches, run outs, sixes and fours almost as soon as they happened and are recorded on the scorecard in real-time. All the user has to do is click on the four or six on the scorecard, which they have opened on the computer as a window follow the live action. Video clip of the action clicked on immediately opens and plays for the user. We’ve acquired the rights for the India-Pakistan cricket test series currently being played so fans can continue to watch the action even when at work.

Another significant achievement was the rating of our Tamil website, as the best Tamil website of 2005 by a noted writer, Tamil writer and thinker Sujatha. Rating was published in Ananda Vikatan's New Year special titled ‘Sujatha 2005 Awards’. Ananda Vikatan is the largest circulated Tamil weekly and a very popular magazine. Our Tamil portal is not just a translation of the English version’s content but developed to reflect the interest cultural context and literary tradition of each language. For being rated the best Tamil website as we believe recognition of our efforts to ensure compelling content in every language.

At about 39 million Internet users currently, India has less 5% of its population online. According to the Internet and Mobile Association of India, Indian Internet users are expected to grow to 100 million users over the next two years. We believe that language content will be a key factor in catalyzing this kind of growth and determining leadership in portals in future. So we have taken the lead in enabling quality language content with our portal already available in five Indian languages besides English. The highlights of our Access Media initiatives in enhancing the consumer Internet experience starts with our iWay network, which gives broadband access to Indians now to some 3100 places across 149 cities in the country. And the network is already a part of over a million Indian lives. Our intention is to take it much further using our world-class network expertise and tools and experience. iWay's are also being successfully presented as centers for e-commerce, for users for online purchase of railway and airline tickets, this is becoming widely accepted. This will be extended to online shopping, auction, bill payments as users become familiar and the convenient of doing these things online.

Four applications that are seeing strong growth at iWay had been online games and Internet telephony. Online games which have grown by 50% over the last quarter are now played from over a 1,000 iWay's with games enabled PC’s and from 200 Sify Gamedromes, which are special game center that we are opening across the country. More that 500,000 hours of games are played in our iWays and game zones during the quarter.

Beta of A3 successful MMORPG game from Korea continues to do well and we look at formally launching it and we reach a critical mass of users sometime hopefully during the April quarter when we think the students would be in their summer vacation. Internet telephony usage grew by about 30% over the previous quarter and strong revenue growth witnessed in usage by the fast growing ITES segment, which is an area of focus for us in the addition to consumer views at iWays and standalone Internet telephony booth or Sify Telecentre.

Our broadband service Sify high-speed Internet access to home grew to over 150,000 with the services expanded to 83 cities from 125,000 subscribers and 73 cities in the last quarter. We intent to spearhead getting many more Indians online with the iWay network but also with the cable television operators as franchisee to take advantage of the home PC growth in the country, which is currently at about 2.5 million PC’s according to IDC.

Our Enterprise Business Unit which covers Manage Network Service in India, such as VPN services, hosting and security services and offshore manage services such as our remote management of IT infrastructure, and managed security services continued to grow both in India and abroad. In addition to customer wins across service lines the highlight of the quarter of the order for setting up ‘Garuda’, a Nation Wide High Speed Grid Computing Initiative. This will connect the country's prestigious Scientific Institutes, premier Educational Institutes and Universities such as Indian Institute of Science and the Indian Institute of Technology with high speed MPLS network across the country. This is the first major win achieved in partnership with the Power Grid Corporation of India, which has an extensive fiber network in the country on its power grid.

We also received global recognition for our remote IT infrastructure management services at Forrester now being our special strengths in remote offshore base management of IT infrastructure. Sify has been featured in The Forrester Wave Global Delivery Infrastructure Management Q4 2005 among the top contenders offering IT service system.

Plan for international growth and expansion, I’d now like to brief you on our plans for growth and expansion in the future. We have leveraged the recent strategic investment in Sify and our strong financial position to take our successful service delivery business models global. We plan to do this with our expertise infrastructure and leadership position for both the consumer businesses and the enterprise services in addition to growing them in India.

We see the iWay cyber café chain with technology tools and remote delivery of service capability as an opportunity that can be extended to countries that face similar challenges with regard to infrastructure and PC penetration. Similarly our remote management of IT infrastructure services which has already receive recognition and a growing roster of customers will be augmented with other services that can be remotely managed or delivered.

There is already a technology team to deliver devoted to delivery of services internationally. It extends our footprint of global connectivity and services as we’ve identified opportunities across both the consumer and technology service lines. I’ll now hand over to Durgesh who will elaborate on the new structure and also on Sify Communications Limited. Durgesh?

Durgesh Mehta, Chief Financial Officer

As mentioned by Ram, we have three main business units comprising of Enterprise Services, Access Media, and Portal. The structure of strategic business unit responsible mainly for topline revenue growth was well in past. However, with Sify having grown over 40% compounded annually over last 6 years, each business has now achieved a scale. So now in future the business heads will not only drive revenue growth for their business unit but will also have direct profit responsibility. Rahul Swarup will drive Enterprise Services; Shrikant Joshi who developed the Access Media business to its current size will grow this business, while Surya Mantha who returned to India will focus on building the Portal business.

The technology division represents Sify’s core competence for service delivery in terms of the IP expertise, applications development capability, processes and tools. Rustom Irani who headed the Technology, and nurtured its capability in addition to developing our world-class network will now build on this for both domestic and for international expansion.

Sify Communication Limited, the Government of India change its telecomm policy in November, as per which they abolished a separate IP VPN license system. The existing Internet service provider who are providing this VPN service have been given an option to migrate to NLD/ILD license in order to continue to provide the VPN service. Sify was not eligible for obtaining this license since it has 98% foreign holding. So in order to comply with this statutory requirement for obtaining this license, Sify has transferred the VPN business to Safescrypt, a subsidiary of Sify.

The value for this transfer of business was determined by a reputed international audit and consultancy firm. Safescrypt has now been renamed as Sify Communications with effect from 20th December 2005. Sify Communications has applied for an NLD/ILD license with a view to operate the VPN service. Sify has divested 26% of shares in Sifycomm to Infinity Satcom Universal Private Ltd., an Indian company and an affiliate of Sify’s controlling stakeholder. I will now hand it back to Ram for concluding comments. Ram?

R. Ramaraj, CEO & Managing Director

In closing I would like to reiterate that the outlook for the Indian economy continues to be bullish, according to Forrester, there is increasing use of IT by large, small and medium enterprises in India, is increasing demand for enterprise technology services. Internet and Mobile Association of India expects Internet users to grow from current 39 to 100 million by 2007. Growing international demand for software, IT services, remote managed enterprise and IT infrastructure services of India as per Nasscom is very encouraging and the opportunity to leverage our successful service delivery models for the public Internet access to other developing countries also widens our opportunity also.

In conclusion our growth in revenue continues and the scope now beyond that of the opportunities in India, and made investments to our network expertise tools, forces bandwidth and they will leverage these for continued growth and sustained profitability. We will now turn the call over the operator to open the line for questions.

Question-and-Answer Session

Operator

Ladies and gentlemen at this we will be conducting a question and answer session. If you would like to ask a question, please press “*” “1” on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You may press “*” “2” if you would like to remove the question from the queue. The participants using speaker equipment it maybe necessary to pickup your handset before pressing the “*” keys. One moment please hold while we go for questions. Our first question is coming George Mihalos of Gilford Securities. Please proceed with your question.

Q - George Mihalos

Good evening gentlemen and welcome aboard Durgesh. I guess I’ll have a couple of questions and I will break-in out by business vertical perhaps, if we start on the portal front, with the portal business itself profitable during the quarter excluding any contributions from Sify Repco and is, is Sifymax itself profitable on a standalone basis?

A - R. Ramaraj

Yes both, both Sify the portal as well as Sifymax standalone growth profit.

Q - George Mihalos

Okay, and given the traction that you have been speaking about, do you see any upward movement, upward movement in your ad-rates going forward, and can you perhaps comment on the number of online customers you are servicing versus a year ago.

A - R. Ramaraj

First of all, I think with the broadband side of the business, Sifymax and the fact that, more than 1.1 million people coming into the iWays plus a 150,000 broadband users, Indian Idol 2 for example, evaluated a number of pure portals and then chose Sifymax, because they saw that users would be able to see this through broadband and therefore Sify was the only one that control the entire internet broadband experience, because of that Sifymax is able to get far more CPM rates than Sify itself or any other competitor, and we are definitely seeing an upward movement in the CPM rates.

Q - George Mihalos

Can you give us a sense as to how big that movement is, or can we not comment on that?

A - R. Ramaraj

Not yet, maybe this is early, this is the first quarter where we started getting to see this advertising on Sifymax, I think we should look at it at least for another 3 months before we comment.

Q - George Mihalos

Okay, fair enough, and just moving to the retail side of the business, couple of questions there, how stable do you view your broadband pricing on a go-forward basis?

A - R. Ramaraj

This has been over the last four quarters a drop of above 10% in our ARPU in the last four quarters, in spite of I would think more than 50% to 60% drop by competition. We have added or compared to some of our other competitors much, much faster in terms of number of net customers as during the quarter December. We would in our estimate be the second largest after the government telephone company in this side of the business at the end of December. And our growth has not been as seriously impacted by the price cuts by some of our competitors but there has been, we have dropped our price by about 10% over four quarters.

Q - George Mihalos

And can you comment a little bit as to the decline in per café contribution of revenue. It looks like some of the browsing revenue seems to be on the decline, despite initiating the gaming program. Can you comment on that perhaps a little bit?

A - R. Ramaraj

Definitely George. The number of PCs that we had, we are adding as you know close to 2 iWays a day, we added almost 200+ during the last quarter. We take the revenues of these new also when we factor in the average revenue per PC per day. And because of, it takes about 6 months before some of these new iWays, especially in some of the smaller towns come closer to breakeven, compared to the ones that we had in this city in the past, which is why you are seeing a drop in terms of revenue per PC per day. That is, we think that will start, if we start putting an age analysis and look at the older ones, we are actually seeing either the same or increase in revenue in those; it’s the new ads that are pulling down the average at the moment.

Q - George Mihalos

And the last question that I have is, how do you view on a competitive landscape, we knew recent rulings by the government regarding VPN services in the voice over IP protocols and this new triple play threat that some of the larger competitors, the BSNL’s and Bharti’s maybe attacking the smaller ISPs with?

A - R. Ramaraj

I think, as in any ruling with the government, I think there is good news and not so good news. The good news I think is that we would be able now to run voice also along with data and the ILD and NLD side of the business, our ability to carry voice in our network would actually now go up. We also as you know there is a very large BPO business and corporate voice and we think that it is a great opportunity that we can examine now, both for, bringing in voice as well as managing the corporate voice in the country. So that is the first side, on the side of a triple play, the biggest challenge as you know George, is that the cost of bandwidth in this country whether domestic or international, while it has been falling above 30% year-on-year is still far away from international bandwidth prices. Therefore, in order to offer good triple play, take IPTV, while we have the technology today in Sify to offer IPTV, we will have to give minimum a 4Mbps in that last line, for the customer to have some level of experience, the cost today that a customer pays is less than $5 for 256k and if we have to go to 4Mbps it will be something like maybe $1000 or so, on 4 MBPS, $1000 per year, so about a $100 or so a month in the current pricing. We don’t think 1) some of the DSL technologies currently can do it. 2) I don’t think that customer can pay when the cable to him about 100+ channels comes at $5 a month. So while triple play is exciting, the bandwidth prices are prohibited, some of the technology is being used by competition, we’ll not allow that to happen quickly. So, we don’t think that is as much a threat. The not-so-good news is it’s not yet an opportunity for us either in the near-term because the bandwidth prices are still not competitive.

Q - George Mihalos

Okay thank you. And just the final question number here on the corporate end, it sounds like a lot more of your future revenue growth is going to be coming from the international RIM services. Is that correct and what are your plans more specifically to address that market?

A - R. Ramaraj

John that is not correct. While we have some very serious plans to grow international, in the near-term we think majority of our corporate enterprise revenues will come from domestic India. So one there as you know, according to Frost & Sullivan and everybody else, we have a commanding market share and we are getting win against competitive bids from Telco’s even in the last quarter, where we got one of the most prestigious orders. On the international side, we are examining the option of both organic and we are seeing whether there is a reasonable inorganic opportunity possible also. But it is just exploratory at this moment.

Q - George Mihalos

Okay thank you.

A - R. Ramaraj

Thanks George.

Operator

As a reminder ladies and gentlemen if you do have a question, hit “*” “1” on your telephone keypad at this time. One moment please while I call for questions. Our next question is coming from Bob Allison of Value Price Properties. Please proceed with your question.

Q - Bob Allison

Yes good evening. Looking at your quarter-to-quarter from September 30 to December 1, I know that your loss per share went from minus 28 to minus 13. Do you see this type of reduction continuing which would lead to a profit in the next quarter?

A - R. Ramaraj

As you know, we do not give guidance but if you look at our last few quarters, all steps have been are to make sure paths to profitability and the trends are very clear that we have been successful in bringing down the losses and actually increasing the profitability quarter-on-quarter and the trend is very clear.

Q - Bob Allison

And one other question, since you’re now expanding into other markets, will this lead to even increased profitability down the future as you go outside of India?

A - R. Ramaraj

I would think couple of reasons why we want to look outside India. First is, I don’t want to undermine the fact that the market in India itself is growing and growing quite rapidly as per all research records. So we will focus on India to make sure we continue to grow and hold the leadership market share that we have in our business. We are looking at international opportunities because we now think that we have reached to certain maturity in the tools and technologies that we have developed that we think and we deployed internationally even in our consumer business. If we can do franchise businesses and manage remotely 3,000+ iWays in India, we think it is reasonable that in a country like say Brazil or anyone of those other countries similar to India, there could be such an opportunity. The second is that we are seeing a lot of interest in offshoring remote infrastructure support. And that is an area where we’ve been working, we have some successes already sitting in India, and we think that that’s the core strength area for us with tools that we have developed, we manage already nearly 35,000 devices on our network, many customers domestically in India on our network and a few international. We think that this with US revenues, or international revenues, the dollar revenues and rupee costs, we think that this could be profitable.

Q - Bob Allison

Thank you very much.

A - R. Ramaraj

Thank you.

Operator

Our next question is coming from Himanshu Shah of Shah Capital Partners. Please proceed with your question.

Q - Himanshu Shah

Yeah, good evening. A couple of questions, what was the employee count at the end of the year?

A - R. Ramaraj

1900, 1-9-0-0.

Q - Himanshu Shah

So your employees, you had the same employees at the end of September, correct?

A - R. Ramaraj

That is correct.

Q - Himanshu Shah

What kind of employment growth should we look for at Sify in 2006, if any?

A - R. Ramaraj

Our model is been that we would like because we run our business substantially using tools and technologies, we think that beyond the certain level of fixed costs, we do not necessarily have to increase our manpower in direct proportions to our revenues. That is part of our unique business model; we are hoping therefore that we would like to keep our increase in manpower under 20% going forward year-on-year, that’s our objective.

Q - Himanshu Shah

What, couple of other questions. What kind of revenue growth, I mean you guys have grown at 30+% for a number of years. Based on the initiatives that you have taken and the kind of re-org that you have done, should we expect the same kind of revenue growth for foreseeable future?

A - R. Ramaraj

The market is continuing to stay healthy in India. And indications are that the opportunities in India will continue to grow at 30% to 40% year-on-year. And we therefore as leaders have the opportunity to grow this, definitely in that range, we have that opportunity. In addition, we are looking at international opportunities. I think, we are equipped to continue to maintain this growth rate that’s our objective.

Q - Himanshu Shah

And in terms of your CapEx, I know you’ve made some comments last quarter that we might have seen the top of it, but with the reorganization that you guys have done, is that going to change or is that, I mean are you going to continue to spend around 3 million a quarter or should we see higher or lower?

A - R. Ramaraj

In order to meet current plans as they are, the CapEx would remain similar. There we may look at is as we find that we have an opportunity to enter the new market or the fact that if we do find an attractive inorganic opportunity that is where you may see some of the capital getting spent that we have, have sitting in the bank today. But to run our current businesses, we would continue to invest similar to the previous quarters.

Q - Himanshu Shah

Two last questions, one on, as you look at your 3 business units that you have now, where do you see the most growth out of the three, for the next couple of years?

A - R. Ramaraj

Because our portal in absolute terms is still very small in India not just us but all portals. The percentage growth we think would be the fastest in portals. For us, we think that would happen because we think broadband is the way the world is moving and so is India and we have the control of both the access as well as the content. So we think the #1 opportunity, we think in terms of percentage growth would be the portal. The second would be, I think the Cyber Cafe and the broadband and third would be the Enterprise.

Q - Himanshu Shah

And I know, you have kind of talked about, there was an earlier question on ad-rates. Ad-rates have been growing up across the globe at major portals, you talked that, you are seeing some growth but I’m just surprised that how come, you know Samachar and the other top sites that you guys own haven’t seen that kind of an ad-rate growth, at least I don’t know see it in the revenue numbers?

A - R. Ramaraj

Actually portal revenue numbers from last year to this year have grown by 82%. And that is really coming because of the numbers of the increase in the ARPU or the CPM rates. So you are seeing it, but I think as the number of subscribers grow, you will start seeing this becoming more relevant to the advertising world. If you look at this Indian Idol 2, there have been a lot of sponsors because they suddenly realize Sify is the one that can give both at the iWay as well as on the portal a unique experience. So we’re still getting some new kind of advertisers coming in sponsors. We found people sponsoring the Video scorecards. So there are unique ways people are starting to see how this medium could be used. The base still is small relative to a market like yours in the US.

Q - Himanshu Shah

Last question is on the…

A - R. Ramaraj

You are going to see a better upside, sorry.

Q - Himanshu Shah

On the Sifycomm, that you guys sold at 26% to Infinity Satcom. Now what was the price that it was sold at? Now what is the, what are the proceeds that the company received?

A - Durgesh Mehta

The total proceeds of the 26% share, it is Rs. 13 crores or $4 million approximately which is the, and the basis on which it was sold was the book value of this company because as of now that company is just like a startup, it was in existing subsidiary of Sify but with very little business.

Q - Himanshu Shah

So, typically…

A - Durgesh Mehta

Like almost, one can say a green opportunity and therefore what we have sold is that the book value.

Q - Himanshu Shah

So the Sifycomm has a book value of around $16 million approximately give and take a million?

A - Durgesh Mehta

Yes.

Q - Himanshu Shah

And you sold it a, I mean, a…

A - Durgesh Mehta

1 thick.

Q - Himanshu Shah

How did you guys determined the value, I mean why would you sell it, I mean, is that, I mean it was an independent analysis Ram that you…?

A - R. Ramaraj

That is right.

Q - Himanshu Shah

Okay.

A - Durgesh Mehta

We bought that valued by a reputed firm of – international firm of charted accountants and consultants.

A - R. Ramaraj

Deloitte actually, sorry Durgesh. Deloitte did the valuation and the reason why we were forced to sell to in the fixed percent to an Indian company was that, that was the only way we could apply for the NLD/ILD license. Now as you must be aware, this notification came sometime in November and effective 1st January, we were required to move to this new structure. So within a very short period we have to find a local investor, restructure the company and convince them that it’s a good opportunity. So that is the reason why we did this on this basis and as advised by Deloitte.

Q - Himanshu Shah

So most likely your pro forma cash at 31st of March would be close to $67 million, $68 million some with…

A - R. Ramaraj

The less CapEx at quarter is what we see, correct.

Q - Himanshu Shah

I’m sorry? Please come again.

A - R. Ramaraj

Less any CapEx in this quarter: Q4.

Q - Himanshu Shah

No, no, I’m just looking at 25.5 million that you had in cash at the end of December plus you’ve got 37.5 million from the extra shares that you sold.

A - R. Ramaraj

You’re right, you’re right. I am sorry, you are right.

Q - Himanshu Shah

And first the $4 million that you’re getting for Sifycomm, correct?

A - R. Ramaraj

That is already included in the 25.5.

Q - Himanshu Shah

Oh it is, the 14 - even if it was 25.5?

A - R. Ramaraj

That is right.

Q - Himanshu Shah

Okay all right, thank you.

A - R. Ramaraj

All right.

Operator

Sir, there are no further questions in the queue at this time, I’d like to turn the floor back over to our speakers for any further comments.

R. Ramaraj, CEO & Managing Director

Thank you for joining us on the call and we look forward to interacting with all of you in this quarter and/or on the same time next quarter. Thank you all.

Operator

This concludes the teleconference, thank you for your participation.

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