Good day, and welcome to the Sify Technologies financial results for second quarter fiscal year twenty twenty-four twenty-five. At this time, all participants are on a listen-only mode. After management's prepared remarks, there will be a question and answer session. I would now like to turn the call over to your host, Praveen Krishna, of Investor Relations. The floor is yours. Thank you, Kelly. I'd like to extend a warm welcome to all our participants on behalf of Sify Technologies Limited. I'm joined on the call today by Mr. Raju Vegesna, Chairman, M.P. Vijay Kumar, Executive Director and Group CFO, and Kamal Nath, Chief Executive 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 Weber Shandwick at one two one five four six eight two six zero, and we'll 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 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'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 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 all 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 of Sify Technologies Limited. Chairman? Thank you, Praveen. Good morning, and thank you for joining us on the call. The enterprise landscape in India is undergoing a transformative evolution, driven by a confluence of regulatory advancements, innovative business models, and robust infrastructure development. As we navigate this dynamic environment, it is clear that India is emerging as a global hub for information and communication technology, ICT. Regulatory frameworks are becoming increasingly conducive to business growth, allowing for an ecosystem that encourages innovation and investment. Initiatives such as the Digital India, the Make in India campaign, streamline processes, incentivize entrepreneurship. This shift is not just about adopting new tools, it is about reimagining how we conduct business and deliver value to our stakeholders. Let me now bring in our CEO, Kamal Nath, to explain the business highlights. Kamal? Yeah. Thank you, Raju. As enterprises embark on their digital transformation journeys, they are reshaping their IT frameworks to integrate a diverse array of innovative solutions. The overarching goal remains the same, which is to enhance user satisfaction, ensure operational resilience, and safeguard digital assets. To support these ambitions, we are making significant capital investments and expanding our range of offerings. Our strategic focus on delivering innovative outcomes through our comprehensive suite of infrastructure and digital services uniquely positions us to partner with businesses during this pivotal transformation. Let me now expand on the business highlights for the quarter. The revenue split between the businesses for the quarter was data center colocation services at 32%, digital services at 32%, and network services at 36%. During the quarter, Sify commissioned 6.5 megawatts of data center capacity in Mumbai. As of September thirtieth, two thousand twenty-four, Sify provides services via one thousand sixty-nine fiber nodes across the country, a 12% increase over the same quarter last year. Sify has now deployed ten thousand fifty-seven SD-WAN service points across the country. A detailed list of our key wins is recorded in our press release, now live on our website. Let me bring in Vijay, our Executive Director and Group CFO, to elaborate on the financial highlights for the quarter. Vijay? Thank you, Kamal. Good morning, everyone. We draw our attention to Sify adopting the new standard of International Accounting Standards Board, recent issuance of IFRS 18 on presentation and disclosure in financial statements, starting with the last quarter ending June thirtieth, 2024. By adopting the new framework, we seek to maintain clarity and consistency in our financial communications. Importantly, while our presentation may change, there is no change in the total income or net profit. Let me briefly sum up the financial performance for quarter two of financial year 2024-25. Revenue was INR 1,027.5 million, an increase of 17% over the same quarter last year. EBITDA was INR 196.3 million, an increase of 29% over the same quarter last year. Profit before tax was INR 87 million, and profit after tax was INR 49 million. Capital expenditure during the quarter was INR 2,594 million. The cash balance at the end of the quarter was INR 7,574 million. We remain committed to cost effectiveness and fiscal prudence in our operating decision-making. Our ongoing investments reflect a forward-thinking perspective that anticipates market trends. We expect these efforts will positively impact our net profit in the near future. However, it is essential to acknowledge that these investments also lead to increased depreciation and interest costs in the financial statements. We are actively scaling our sustainable practices across all our businesses, with particular emphasis on our data centers. This commitment to sustainability is not just a compliance measure, it is integral to our long-term strategy and resonates with the broader digital transformation initiative being pursued by industries. I'll now hand over to our chairman for his closing remarks. Chairman? Thank you, Vijay Kumar. The network, data center, and digital businesses are now attracting the best of the breed of clients, partnerships, and capital. That is the beginning of our next phase of growth. Thank you for joining on this call. I will now hand over to the operator for questions. Operator? Certainly. The floor is now open for questions. If you have any questions or comments, please press star one on your phone at this time. We ask that while posing your question, you please pick up your handset if listening on a speakerphone to provide optimum sound quality. Please hold just a moment while we poll for questions. Your first question is coming from Greg Burns with Sidoti & Company. Please pose your question. Your line is live. Morning. Just a question about the demand environment. Where are you seeing the most demand growth coming from? Is it from hyperscalers, or is it from enterprise customers? And then could you just talk about maybe how AI, the growth of AI is maybe reshaping the demand environment? Thank you. Greg, this is Raju. As we grow always between hyperscalers enterprise, one of the thing is Sify is unique. We are not just depending upon hyperscalers. We have a good footprint of enterprise customers in our data centers. That is the way we look at it, in the same ratio of an hyperscalers and the enterprises, we are continuously growing. To answer your second question, AI. AI is just starting in India, so enterprises started looking AI, and we have a big summit going this week, NVIDIA AI Summit. You know, we are part of the sponsors, and we are getting ready our AI plans. As you already know, we are the first certified by NVIDIA for the air cooling and liquid cooling, up to a hundred and thirty kilowatt per rack. We are very much excited and what NVIDIA is doing. We see a lot more potential, not only for Indian consumption, for a global consumption supplied by India, with having a talent of IT resources to operate AI requirements, you know? We see a great potential possible for India, and we are ready, and we are the first one ready with such kind of data centers, AI-ready data centers, across three cities: Mumbai, Chennai and Noida. Noida means Delhi. Yeah, perfect. You mentioned, I guess, commissioning 6.5 megawatts of data center capacity in this past quarter. Can you just update us on maybe the number of data centers you operate, how much megawatt of capacity that you currently have operational, and maybe what the roadmap is for the rest of the year? How much capacity do you expect to bring online for the remainder of this fiscal year? Vijay Kumar here. We currently have a data center capacity, which is live and operational for about 120 megawatts, of which 105 megawatts is already being consumed by the customers, and rest of it are in different stages of contracting. And beyond that, there are greenfield projects which we commenced last year, which are nearing completion and should go live in the next few months, where these facilities have a design capacity at present of about 52 megawatts aggregate, but scalable much higher, of which initially we will enable about 6 megawatts to go live. All right, perfect. Thank you. In the quarter, digital services was a lot stronger than we were modeling. Was there anything in particular driving that? Was it from, you know, project-based technology integration services work or more recurring, cloud and managed services type of growth? Yeah. No, this turnaround in quarter two is attributed to some project-based revenues in our network managed services business, and that has contributed to the positive change in this quarter. Okay, perfect. Okay, thanks. Then, in terms of the new non-convertible debt that you took on, it seemed like the rate was pretty favorable. How did that rate compare to your existing debt, and are you planning to use that new debt to pay off some of your old debt, or is it just gonna be put towards maybe investments into the business? Yeah. So this debt was raised in our data center colocation subsidiary, and it is listed on the Bombay Stock Exchange here. This is a fifteen-year debt with a five-year moratorium and repayment starting from the sixth year onwards, one-tenth over the remaining ten years thereafter. In terms of the cost of this debt, it is about forty basis points lower than the debt which it is replacing now, and this entire proceeds have been used for replacing the existing debt. Having said that, the existing debt was due for repayment over the next eighteen months, whereas this debt, which is replacing the old debt, has a longer tenure, so in addition, it in fact relief for funding the growth of the data center capacities. Yeah, perfect. And the debt balance and the cash balance that you mentioned, does that include... Oh, I get, I guess I'm sorry. Yeah. You're just replacing, but that includes this- Correct. This thing. Exactly. You're right. You got it right. Got it right. Okay. And then in terms of spending, your SG&A, maybe as a percent of revenue, if we look at it as a% of revenue, do you expect that, given the investment roadmap that you have laid out, do you expect that to increase as a% of revenue or kind of maintain at the current levels? It should maintain at the current level. We have actually invested quite a bit on SG&A over the last three years, and with assets getting monetized, we should be able to maintain at current level for foreseeable future. Okay. Okay, perfect. That's all for me. Thank you. Thanks, Greg. Your next question is coming from Jonathan Atkin with RBC Capital Markets. Please pose your question. Your line is live. Thank you. I was interested in what you're seeing among Indian domestic enterprise commitments. This is now for your data center business, or are we talking about multiyear contract terms? Can you give us a flavor for that and how that might compare with the length of the commitments that you're signing with some of your international customers? As far as the data center customers are concerned, as Mr. Vegesna mentioned, in response to the previous query, we have customers who are hyperscalers and the enterprise segment. The hyperscale contracts are an average length of about nine years, which are renewable further, and the enterprise customers contracts are on an average about five years, and with potential for renewal thereafter. Our past historical experience is we have had almost nil churn in our customer base. And then I'm interested in the customer preferences, particularly on the international side. For your larger deals, are the customers expressing a preference for you to build the full turnkey data center? Or, to what extent are they preferring or willing to perhaps take powered shells, where they would then kind of complete the fit-out work after you deliver the shell? ... Jonathan, this is Raju. So it is both ways. There are build-to-suit opportunities. There is a shell kind of model and also the colo model, right? So they're mixing based on the demand of these kind of things. So now, as build-to-suits, you know, it takes longer time. And when the opportunities comes, you know, they don't have requirements, they can do it. I think they will. They're adopting even colo models, you know? I got a couple more if you'll bear with me. So I'm interested in just kind of you mentioned AI. Any inkling that you have as to what that means in terms of the customer use case? Are we talking about machine learning? Are we talking about large foundation models? Is it AI inference at this point? What, how do you see this today, and then maybe going forward as best as you can tell over the next couple of years, how is the topology evolving within India? So the way I look at it, Jonathan, is AI still evolving in India. So Indian enterprises' point of view, they're building the models and are collecting the data to use the AI in India. But what I see is some of the hyperscalers already having AI capability, people are adapting. And also other opportunities, you know, as you know, to deploy AI, you need to have certain kind of data centers and, you know, other, you know, training, you know, IT resources to run those models. So being India equipped with, you know, having a data centers, having a power, having skill sets of the people, I believe India is in a unique position to take advantage in this AI evolution, you know. That is the way I'm betting, you know, right? It's just starting in India. Thank you. Last question or two. A lot of foreign capital, joint venture capital coming into India, with very, very significant build ambitions, and I'm interested in the implications it has on you from a competitive standpoint, or not. Maybe these are mutually validating types of capital allocation, where it's kind of like a rising tide lifts all boats, or do you view that as competitive? And then any implications from this, you know, data center development on your network services business? No, I think, you know, that, that is always will be there. One is being in India, being an attractive to, for a lot of people deploy their capital. That means, you know, they're trying to bet India. So being an established player, being a domestic player, India or Indian origin, data centers, we have our mind share and our, market share. So that is the way we look at it, and we are one of the few, capable of delivering end-to-end data center services, you know, building from ground to, you know, capable of, you know, customizing the data centers, you know, different variants of the data centers, and how do you equip for the new AI readiness, trying to do 130 kilowatt per rack. You know, we are in a... There are a lot of real estate players entering into the market. We are not a real estate kind of player, we are a technology data center player. And building, you know, over the twenty years and going through, you know, we are building generation three data centers. That is an advantage for us, Jonathan. Lastly, just the Indian fiber market, particularly things like dark fiber. Can you maybe describe the landscape? You obviously have a lot. It's a big part of your business, but other kind of investments and deployments that you see going on for the industry overall around dark fiber. Yeah. So as you see, you know, now, you know, having a cloud and the data center, the whole, you know, server-client model is evolving. Networking plays a big role. So as you can see, our networking business also growing with the data centers, and we are in a unique position to do both network and the data center opportunities. So it's not-- it may not be our data centers, still we provide a connectivity to the data centers. So it goes, you know, I believe, you know, both network and the data center has to be... It's growing, and some of the existing networks are outdated and not capable of servicing the kind of bandwidth is required, you know, for, especially for AI applications. It's a great opportunity for us to building new networks with the new technologies, you know? Thank you very much. Thank you. Once again, if you do have any remaining questions or comments, please press star one at this time. Your next question is coming from Sri Gopal Bajaj with Stockifi. Please pose your question. Your line is live. Could you repeat the name of- Can you repeat? Yeah. This is Sri Gopal Bajaj here from Stockifi. Am I audible? Yes, yes. Please go ahead. ... Yeah. What is your current data center, which is already on colocation? And what is the future plan, which is coming on stream? No, we cannot talk about much over the future. We have data centers in- Okay Six markets in India. We have in Mumbai, Chennai, Bangalore, Hyderabad, Kolkata, and Noida, that is Delhi. So we are an established player. We are one of the top players of the data center. And, you know, we are hosting some of the hyperscalers, we are hosting some of the enterprises. So we are an established player, more than twenty years in the data center business. What is the current size? We are. At least you can ex- Current size, Current size, we have 120. I'm Vijay Kumar here. We have 120 megawatts of capacity, which is built, of which about 105 megawatts is already under consumption by the customer, and the remaining is at different stages of contracting. Going forward, you still intend to continue with your debt position in the same manner, or you are having any plans to cut down on the debt? No, debt will be integral part of our data center capacity expansion. Typically, our model is to take two-thirds of our project cost as debt. Rest of it is funded by equity, including internal accruals. You cannot disclose the future plans. Is that clear? Yeah. Yeah, we are bound by the forward-looking statements, restrictions which are there. Okay. Okay, thank you. Thank you. Okay, your next question is coming from Shrikant Pogarju. Please pose your question. Your line is live. Yeah, hi. Good evening, everybody. Mr. Raju, Mr. Kamal Nath, and Mr. Vijay Kumar, congratulations on a good set of numbers, and also returning back to profits. I have some, you know, very specific questions. Please excuse me if there is anything which is which sounds out of normal due to lack of my knowledge about part of your business. If I understand correctly, the network services had one royalty or some kind of an income this quarter. Has that aided to put the company this quarter back into...? I mean, you know, are there any one-offs? Sorry, your voice was not coming clearly. Clearly, yeah. Uh. You said- Sorry, something around network- Can you hear me now? Yeah, it's better. You said something around network business. Yeah. There was some additional income or license fee I'm referring to in this quarter, or some kind of a fee or an income. How much of that has contributed to the profits this quarter? So the question is, are there any one-offs in this quarter? No, there are no one-off items in our network business. Network and data center business largely are annuity kind of revenue. On the IT services business, there are always some projects which get executed in quarters. Okay, okay. So if... Yeah, even if there is one additional client in the next quarter, it could be some other client which could be contributing. Is that correct? Correct. And the size could vary. Size of the project could vary. Right. Right. I mean, I have a few questions. I'll go to my second question, if, if it is okay. Please, please. So the gross margins are always going to be this steady in that, you know, 30, 35, 36, 34 kind of a range. Given that this is more of an, you know, an IT services kind of a company, I would have thought the gross margins would be closer to 50. Is my understanding wrong? Yeah, we broadly have three businesses which have quite distinct characteristics, and all the three businesses are, in terms of revenue, one-third each, approximately. As far as the network services are concerned, it's a reasonably asset-light model with substantial amount of expenses being capacity, which is leased out from third-party telecom operators. And on data center business, we have a power as a significant cost, which is largely a pass-through, from which we get from customers, which we pay to the state electricity boards. And on the IT projects and IT services business, we have a combination of projects and services, and that's a business where, over the last two years, we have been incurring substantial amount of expenses for capacity building, both in terms of people, upskilling them, and on tools. So the margins, historically, as you mentioned, are at that range of thirty-four, thirty-five, but we need to dissect those and understand them separately. ... But even at the consolidated level, overall, considering this is not like a manufacturing intensive kind of business, do- Yes. Is it even possible at some stage, the gross margins will be, you know, north of fifty? Is that even a possibility- No. for a company, for a business like this? I wouldn't be able to comment on that. At least in the foreseeable future, it's unlikely to be that number. Okay, okay. So I'll move on to my next question. Given that, you know, the interest as an expense and depreciation for, you know, a company which is building a lot of capacities will always be, you know, proportionately going, growing along with the revenue. Can we consider that the numbers currently we are seeing this quarter, both for the depreciation and the interest expense, kind of at the peak level? Are these the peak levels, or we, you, we have...? No, no, the depreciation will increase quite substantially. There are a couple of greenfield projects which are expected to go live in the coming months, and once those facilities go live, the depreciation number will increase. And since the interest capitalization on the projects under construction will also cease, there will be an impact on the interest as well. All the loans are INR denominated, or do you have any foreign loans? Yes. No, all the loans are INR denominated. Okay, okay. You know, I see that the cash balance probably from maybe $50 million to $90 million. Is that right? I mean, two numbers, but you know, from $50 million now- You're right. We are close to about ninety million ca- Yeah. -cash balance. Yeah. What has helped that? You are right. Two reasons. One is we recently did a Rights issue, and those proceeds are yet to be fully deployed in expansion. And second is some marginal improvement in the operating efficiency. In terms of any specific numbers, I know there is some moratorium of, you know, initial five years for maybe the loan which was recently converted into bonds. There is a five-year moratorium. Yes. Does it mean that the interest doesn't have to be expensed into the P&L for the five years? No, no, no, no. The interest will come into P&L, and the interest will also be a cash flow. Only the moratorium is for the principal. Oh, moratorium is only for the principal. Okay, okay. Okay. Thank you for the clarification. Thank you, Shrikant. So now, you know, consider. No, sorry, one last question. No, please. Now that, you know, these three are the AC and the depreciation and interest expense, you know, that, that actually take away, you know, the substantial amount of contribution or margin generated by the, by the business as such. At what stage, you know, considering that you have, you know, ambitious plans to build more data centers, I see that almost five, six thousand crores to be deployed over the next several years to build additional capacities. The path to free cash flows is, you know, several quarters away or several years away. You know, that, that would, that, that is something investors would always be interested to see, right? You know, generation of any free cash flows. Yeah. So if you're looking at free cash flow after considering new capital expenditure, then it is certainly a few years away. Because the data center industry is poised for a fairly high CAGR, and substantial amount of capacity will be added by us and our peers in the industry as well. So I don't think any of us will stop or slow down expansion of our data center capacity. But if you're looking at free cash flow only after replacement CapEx, of course, even now we are pretty well positioned, and we'll continue to have positive cash flows there. All the future expansion, you know, the numbers, I see, you know, close to $600-$700 million to be deployed over the next few years, will be a combination of, again, debt as well as internal accruals? Yeah, yeah, you're right. Okay, okay. So thank you very much, Mr. Vijay Kumar. I'm done with my questions. But once again, congratulations to the team to turning back into profits. And we hope next quarters you will do better than this quarter. Thank you. Thank you. You do have a follow-up question from Gopal Bajaj with Stockifi. Please pose your question. Your line is live. Mr. Vijay Kumar, can I just know, what is your realization per megawatt? See, these are customer specific numbers, Gopal. No, average- And, uh- -average realization. ... See, okay. I don't think we can disclose it. Yeah, I don't think it will be appropriate, but it's available in our published financials, the gross revenue. And I told you about the capacity. You could do a reverse working on that. Reverse working on that, so. Okay. Because the reason- One thing that I would even- Yeah, I'd just like to help you on that. I did the backward calculation. I did the backward calculation. Yeah. I was getting around INR one crore, INR one crore per month, INR one crore, INR four lakhs per month in Indian terms. Okay. So what I was Okay. The other two businesses are giving you very, thin margins. Are you doing anything for that part of it? One is the networking, the other part is, which is like hardly a gross profit of a few percentage, below, mid-teens also. Correct. So there's a lot of work we are putting across for our IT services business. That's. We see a huge opportunity for that as India embraces more of digitalization. But, you know, when you do services business in India, it comes at a low margins and scope creeps, which are there. So we are getting our processes better. But fundamentally, we have belief in India enterprises consuming more IT services from service providers like us in the future, and we would like to stay invested in that business. Okay. Thank you, sir. Thank you. Once again, congrats. Thank you. Thank you. There appear to be no further questions in queue at this time. I would now like to turn the floor back over to Praveen Krishna for any closing remarks. Yeah, this is Raju again. Thank you for your time on this call. We look forward to interacting with you through the year. Have a good day. Thank you. Thank you, everyone. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.