Sify Technologies Q1 FY 2026-27 Earnings Call - Heavy CapEx and Data Center Expansion Fuel Growth Ahead of Infinit Spaces IPO

Operator: Welcome to the Sify Technologies financial results for first quarter FY 2026 and 2027. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I would now like to turn the conference over to your host, Praveen Krishna. You may begin.

Praveen Krishna, Head of Investor Relations, Sify Technologies Limited: Thank you, Holly. I would like to extend a warm welcome to all our participants on behalf of Sify Technologies Limited. I am joined on the call today by my chairman, Mr. Raju Vegesna, and my executive director and group CFO, Mr. MP Vijay Kumar. 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 Lurie Group at 1-646-824-2856 and we 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.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 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 is 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 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 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 like to introduce my chairman, Mr. Raju Vegesna. Chairman?

Raju Vegesna, Chairman, Sify Technologies Limited: Thank you, Praveen. Good morning, everyone. Thank you for joining us on the call. India’s digital transformation is entering a phase of execution at scale. What was once a digital transformation agenda has now become a business imperative, with organizations investing in technology to improve productivity, resilience, and customer experience. The country continues to benefit from a unique combination of progressive policy initiatives, expanding digital infrastructure, and a deep pool of technology talent. As AI adoption gathers pace, the need for secure, scalable, and interconnected digital infrastructure will become even more critical. This presents a significant opportunity for India to strengthen its position as a global technology and innovation lab. At Sify, we continue to align our investments with these long-term trends. Our integrated portfolio of data centers, network, and digital services enables us to support customers as they modernize their technology environments and prepare for an AI-enabled future.

India is no longer preparing for the digital future, it is actively shaping it. Sify remains committed in building the infrastructure and capabilities that will help power this next chapter of growth. Let me now bring our Executive Director and Group CFO, Mr. M.P. Vijay Kumar, to explain both the business and financial highlights of this quarter. Vijay?

M.P. Vijay Kumar, Executive Director and Group CFO, Sify Technologies Limited: Thank you, Chairman. During the quarter, we continued to strengthen the operational foundation of our businesses through disciplined execution, improved resource utilization, and targeted investments across each of our portfolios. We continue to invest in capacity expansion, network modernization, and technology platforms that position us to address emerging demand from AI, cloud, and data-intensive workloads. At the same time, we remain vigilant in managing costs, optimizing cash flows, and enhancing operational efficiency across the organization. While investment in infrastructure and talent continue to influence depreciation, interest, and people cost, these are aligned with our long-term growth objective and supported by a prudent approach to risk management and financial planning. Our priority remains unchanged, maintaining a strong balance sheet, preserving financial flexibility, and creating enduring value for shareholders through disciplined growth and responsible stewardship of capital. Let me now expand on business highlights for the quarter.

The revenue split between the three businesses for the quarter was network services 39%, data center colocation services 42%, and IT digital services 19%. The data center subsidiary sold five megawatts of capacity in the quarter, and as of 30th June 2026, Sify provides network services via 1,238 fiber nodes across the country, a 7% increase over the same quarter last year. A detailed list of our key wins is recorded in our press release, now live on our website. Let me briefly sum up the financial performance for quarter one of financial year 2026-27. Revenue was INR 1,235.2 million, an increase of 15% over the same quarter last year. Adjusted EBITDA was INR 300.5 million, an increase of 42% over the same quarter last year. Profit for the quarter was INR 65 million. Capital expenditure during the quarter was INR 670.8 million.

Cash balance at the end of the quarter was INR 4,597 million. I will now hand over to our Chairman for his closing remarks. Chairman?

Raju Vegesna, Chairman, Sify Technologies Limited: Thank you, Vijaykumar. With our integrated portfolio of services, Sify is well-positioned to support enterprises as they build resilient, scalable, and future-ready digital ecosystems. I would like to express my sincere gratitude to our customers, shareholders, partners, and employees, and all other stakeholders for their continued trust, support, and confidence in Sify. Together, we remain committed to contributing to India’s digital future and capturing the opportunities that lie ahead. Thank you for joining on this call. I will now hand over to the Operator for questions. Operator?

Operator: Certainly. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Your first question for today is from Greg Burns with Sidoti & Company.

Greg Burns, Analyst, Sidoti & Company: Good morning. Do you have an update on the potential timing for the Sify Infinit Spaces IPO?

M.P. Vijay Kumar, Executive Director and Group CFO, Sify Technologies Limited: Yeah. As far as the IPO timing is concerned, the bankers are actively evaluating the right time where the market appetite will be good and will appreciate the quality of the asset we are. From the company’s side, we stay ready for listing once the bankers advise us on going ahead.

Greg Burns, Analyst, Sidoti & Company: Okay. Thank you. You mentioned you sold 5 MW of capacity in the quarter. How much capacity is currently live and operational, and what is your current design capacity of existing data centers?

M.P. Vijay Kumar, Executive Director and Group CFO, Sify Technologies Limited: Yes.

Greg Burns, Analyst, Sidoti & Company: Maybe, can you give us an update on what you expect to go live or how much capacity is currently under construction and, I guess, expected to become operational over the next 12 months? Thank you.

M.P. Vijay Kumar, Executive Director and Group CFO, Sify Technologies Limited: Yeah. The capacity which is designed and ready is 188 MW. The operational live revenue generating capacity is 134 MW, and the capacity which will get delivered in this fiscal will be about 100 MW, and there is another 150 MW of capacity under construction.

Greg Burns, Analyst, Sidoti & Company: Okay. Do you expect the CapEx to remain at the level you had this first quarter for the remainder of the year, or is it going to maybe ramp up from here?

M.P. Vijay Kumar, Executive Director and Group CFO, Sify Technologies Limited: The CapEx is likely to be higher for the remaining part of this year as we get ready to deliver capacity for the customers.

Greg Burns, Analyst, Sidoti & Company: Okay. Can you just maybe give us your thoughts on what are the primary differentiators for Sify? Why is Sify winning in the market? Maybe what are the reasons that you think that Sify differentiates itself and how you’re driving success?

Raju Vegesna, Chairman, Sify Technologies Limited: No, I think there is some uniqueness in the market presence for over the time of more than 20 years, and existing hyperscalers and the enterprises. That makes us different. Also our presence in all our key markets like Mumbai, Chennai, Noida, Hyderabad, Bangalore, and small portion in Kolkata. That makes us a unique position. Also our having a network around our data centers, connectivity, availability. It’s not any one-time kind of thing, because the way the Sify portfolio has all these things, and also we have cable landing stations we are building. As an integrated player, complete, having a data centers network and having a good power availability story. That will help to win such kind of data center deals.

Greg Burns, Analyst, Sidoti & Company: All right, thanks. I know you’re in all the major hubs, but what is the opportunity for edge capacity building up data centers in smaller markets? Is there an opportunity there for you and is that currently on your roadmap?

Raju Vegesna, Chairman, Sify Technologies Limited: Yeah. We have already opportunity there. We already completed two such data centers, edge Lucknow and Chandigarh, and we are also constructing two more. We are having a plan about building across India in tier 2, tier 3 cities, about 10-12 edge data centers over the next few years. These opportunities, because India not only depending upon the six major metro cities, but these secondary cities also very important. Our presence, we are building strategically two, three edge data center per year. That’s what we are looking at.

Greg Burns, Analyst, Sidoti & Company: Okay. All right, thank you very much.

Raju Vegesna, Chairman, Sify Technologies Limited: Thank you.

Operator: Your next question for today is from Prateek Singh with IIFL Capital.

Raju Vegesna, Chairman, Sify Technologies Limited: Hi, Prateek.

Prateek Singh, Analyst, IIFL Capital: Hello. Hi, sir. Thanks for the opportunity. I understand that the sold capacity has now gone to 134. The installed capacity, which was 140 end of FY 2026, what would that number be?

M.P. Vijay Kumar, Executive Director and Group CFO, Sify Technologies Limited: 154.

Prateek Singh, Analyst, IIFL Capital: Okay. The design capacity has been at 188 MW for four, five quarters now. I just wanted to understand how does it work. We first focus on completing the installed capacity and then build new capacity? Both of these cannot be done parallelly?

M.P. Vijay Kumar, Executive Director and Group CFO, Sify Technologies Limited: Yeah, I was answering the previous speaker. There is another 100 MW of capacity, which coincidentally will be both design plus installed capacity, which will be delivered this year. Another 150 MW of capacity, which is under construction.

Prateek Singh, Analyst, IIFL Capital: Okay. Can we assume that from a sold capacity of 134 right now, revenue generating capacity next year would be somewhere in the range of 220, 230 for the entire year?

M.P. Vijay Kumar, Executive Director and Group CFO, Sify Technologies Limited: Yeah, it should be north of that.

Prateek Singh, Analyst, IIFL Capital: Understood. My second question is, by when will this 81 MW that we signed last quarter, by when will this start to generate revenue?

M.P. Vijay Kumar, Executive Director and Group CFO, Sify Technologies Limited: It’ll start generating from end of quarter two, but it’ll reflect significantly in Q3 and Q4.

Prateek Singh, Analyst, IIFL Capital: Understood. About margins, our revenue has risen on a quarter-on-quarter basis, but gross profit has come down. Seems to be driven by the data center business, where revenue has risen 10% on a QOQ basis, but EBITDA is largely flat at around INR 292 million. Margins there have fallen from 45% EBITDA margin to 43%. Is this the new normal? Any one-offs that we saw this quarter in data center business, or how should we look at it?

M.P. Vijay Kumar, Executive Director and Group CFO, Sify Technologies Limited: It is essentially a one-off, which is there in the context of some power tariff revision, which has taken place for one of the facilities.

Prateek Singh, Analyst, IIFL Capital: Okay. It is something which we cannot pass it on to our customers?

M.P. Vijay Kumar, Executive Director and Group CFO, Sify Technologies Limited: We are working with the customer, so in case it happens, it’ll reflect later. From a conservative and accounting requirement perspective, we have taken it into cost.

Prateek Singh, Analyst, IIFL Capital: Understood. Just one last clarification. In the last results press release, FY 2026 end equity was around INR 25 billion. Sorry. Yeah, 25,249.94 million INR, which has now changed to INR 189.33. Is it just a rectification or was there any reclassification or any kind of an equity debt conversion?

M.P. Vijay Kumar, Executive Director and Group CFO, Sify Technologies Limited: Can you repeat the equity figure?

Prateek Singh, Analyst, IIFL Capital: Yeah, the equity figure that you give in the end. Equity borrowings, long-term, short-term, cash balance, net debt. The equity number in April, when you reported your March-end results, the March-end number at that point of time was INR 249.94 in the press release, which has now changed to INR 189.33. Wanted to check, is it just a rectification or any kind of a reclassification which has happened?

M.P. Vijay Kumar, Executive Director and Group CFO, Sify Technologies Limited: Let me check on that. To my knowledge, it is a reclassification on the consolidated side. The CCDs which were there, the Compulsory Convertible Debentures, which the parent company was holding in the subsidiary, we took the final accounting position that we will treat it as debt until the listing happens. That’s the difference between the two.

Prateek Singh, Analyst, IIFL Capital: Understood. Thanks, I’ll join back the queue.

M.P. Vijay Kumar, Executive Director and Group CFO, Sify Technologies Limited: Welcome.

Operator: Once again, if you would like to ask a question, please press star one. You have a follow-up question coming from Prateek Singh. Your line is live.

Prateek Singh, Analyst, IIFL Capital: Thanks for the opportunity again. Any plans in the interim, like one of your nearest peers recently raised capital via a private round. Any plans of that if the IPO proceedings get delayed? The IPO is our primary target right now and no plans for any kind of a private round as of now?

M.P. Vijay Kumar, Executive Director and Group CFO, Sify Technologies Limited: No, we have Kotak supporting us on equity for the growth. We are pursuing the IPO path, and any capital requirement in the unlikely situation of IPO getting delayed, Kotak will step in.

Prateek Singh, Analyst, IIFL Capital: Okay. Given your CapEx is quite high, it has shot up almost double the quarterly rate that we used to see earlier because you are on a very strong growth path. As you said, the run rate may be even higher in the next three quarters. There might be a case where we may need funding if the IPO does not happen by then. In that case, you’re saying that the Kotak will be happy to support.

M.P. Vijay Kumar, Executive Director and Group CFO, Sify Technologies Limited: Correct. They have offered to stay committed to the growth of the company, so they will step in. Even otherwise, there are several other strategic investors who have shown keen interest. We will evaluate when it is necessary.

Prateek Singh, Analyst, IIFL Capital: Understood. The final question on my side is on Sify Technologies. How should we look at the digital services business? This time also it was a negative EBITDA. While I understand that it may remain negative EBITDA for quite some time, but in terms of revenue also, we saw a decline on a year-over-year basis and also on a QOQ basis. What kind of a growth path do we see for digital, or by when can we expect an EBITDA breakeven there?

M.P. Vijay Kumar, Executive Director and Group CFO, Sify Technologies Limited: Yeah. As far as the revenue growth is concerned, we may not see too much of a growth because we are focusing more on services revenue versus project-based revenue. On the EBITDA side, we are all working for reduction of the losses quarter-over-quarter basis. There is active guidance from the board as well in terms of getting it to a path of profitability soon. A lot of work is happening. I’m not in a position to communicate to you the specific steps, but we continue to stay focused and you can actually see the result of our efforts, in terms of the reduction in loss at EBITDA level, vis-a-vis the previous year first quarter, and also vis-a-vis the sequential previous quarter.

Prateek Singh, Analyst, IIFL Capital: Understood. Similar comments on network services because it has been growing quite well. Can we expect similar kind of a growth over the next few quarters in networks as well?

M.P. Vijay Kumar, Executive Director and Group CFO, Sify Technologies Limited: Yeah. Network revenue, it will grow organically. I think that’s a reasonably mature market, that growth should be reasonably good.

Prateek Singh, Analyst, IIFL Capital: Understood. Thanks for your time to answer all my questions and all the best.

M.P. Vijay Kumar, Executive Director and Group CFO, Sify Technologies Limited: No, no, thanks, Prateek, for staying engaged.

Operator: As a reminder, if you would like to ask a question, please press star one. We have reached the end of the question and answer session. I will now turn the call over to Raju for closing remarks.

Raju Vegesna, Chairman, Sify Technologies Limited: Thank you for your time on this call. Have a good day. Thank you very much.

Operator: This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.