Q4 2012 Sify Technologies Ltd Earnings Conference Call

Apr 25, 2012 AM EDT
Thomson Reuters StreetEvents Event Transcript
E D I T E D   V E R S I O N

SIFY - Sify Technologies Ltd
Q4 2012 Sify Technologies Ltd Earnings Conference Call
Apr 25, 2012 / 12:30PM GMT 

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Corporate Participants
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   *  Christopher Chu
      Grayling - IR
   *  Raju Vegesna
      Sify Technologies Ltd. - CEO, Managing Director
   *  Vijay Kumar
      Sify Technologies Ltd. - CFO

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Conference Call Participants
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   * Ananda

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Presentation
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Operator   [1]
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 Greetings and welcome to the Sify Technologies' financial results for fiscal year 2011. 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. It is now my pleasure to introduce your host, Christopher Chu of Grayling. Thank you, Mr. Chu, you may begin.

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 Christopher Chu,  Grayling - IR   [2]
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 Thank you, Operator. I would like to extend a warm welcome to all of our participants on behalf of Sify. I'm joined on the call today by Raju Vegesna, Chairman and Managing Director, and M.P. Vijay Kumar, Chief Financial Officer of Sify Technologies.

 Following our comments on the results there will be an opportunity for questions. If you don't have a copy of our press release please call us at (646)284-9426 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.sifycorp.com. A replay of today's call may be accessed by dialing in on the numbers provided in the press release or by accessing the webcast in the investor information section of the Sify corporate website.

 Some of the financial measures referred to during this call and in the earnings releases may include non-GAAP measures since these 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 begin I would like to point out that certain statements contained in the earnings releases 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 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 PRs. 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 risk and uncertainties inherent to the Company's business.

 I would now like to introduce Mr. Raju Vegesna, Chairman and Managing Director of Sify. Raju?

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 Raju Vegesna,  Sify Technologies Ltd. - CEO, Managing Director   [3]
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 Thank you, Chris.

 Good morning. Thank you for joining us on the call. When I addressed you at the same time last year I focused on three points. One, our thrust into managed services; our aggressively pursing the government's e-governance initiatives for opportunities beyond the enterprise segment; third, reorienting the consumer business to focus [exploring] the SOHO/SMB market in India.

 Over the last few quarters our results are showing clear tractions in each of these objectives. Today our network, IT and software services have carved out strong reputations and clienteles from the Gulf, both in the industry and among the government. At the same time we are strengthening our portfolio for new services such as the cloud services, audio conferencing and soon video conferencing services for large, medium and small enterprise. The investments we made in previous fiscal years in the EIG cable capacity recently went live and will begin to contribute revenue in the coming year.

 At the beginning of this calendar year we setup a cable landing station in Mumbai. GBI became the first to land their cable here. We also have signed a landing equipment with MENA to use the same facility. This cable landing station, the first by an ICT player in India is continuing testimony of our resolve to [proudly] go where we have been. These partnerships will help us to take our services to multiple countries across several continents. Our India domestic network footprint today reaches more than 700 plus cities and towns with more than 1,350 base stations.

 The telecom policy announced last year seeks to reach 160 million broadband connections in India by 2014 through a national broadband network. With the actual implementation begins on the ground Sify will be in well-position to take advantage of the same. Our confidence stems from the fact that 66% of our SMB business has come from the tier 2 and tier 3 cities this year. In line with the best market practices we also unified the customer-facing team so that the customer gets to see the complete portfolio of our services under the brand Sify from a single representative.

 Such a leaner team will also able to cross-sell multiple services, create more opportunities and advance our footprint through more effective management of our growing set of channel partners. Our earlier results and continued customer feedback show us that we are on the right track. Now I request Vijay Kumar, our CFO, to expand the financial highlights of this year. Afterwards I will explain our plans for the way forward.

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 Vijay Kumar,  Sify Technologies Ltd. - CFO   [4]
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 Thank you, Raju, and good morning everyone.

 I will now provide detailed financial results for financial year 2011-'12. Sify's revenues for the year were at INR7,742 million as against previous year's revenues of INR6,886 million, an increase of 12%.

 EBITDA for the year was INR527 million as compared to INR235 million last year, a growth of 124%. The net loss before tax for financial year '11-'12 stood at INR327 million as against a net loss of INR520 million in financial year 2010-'11. Cash balance at the end of the quarter was INR893 million.

 Our continued focus on optimizing cost while retaining our growth momentum is yielding positive results. Operating cash flow continues to be positive and gross margins have remained steady in spite of continuing pricing pressure in the market. As a result, we are seeing a consistent contribution to our EBITDA from both existing and new value-added services we have introduced. Simultaneously, we are at a stage where we are continually investing in expanding capacity and increasing our presence in tier 2 and tier 3 cities as well as expanding our fiber access in tier 1 cities.

 Our capacity utilization is gradually reaching critical levels with our data centers nearing full capacity utilization and network assets showing higher asset productivity. As reported earlier, we concluded our exit from our financial services affiliate, MFG Sify, which is expected to be concluded in the near term after regulatory approvals.

 In line with the subscription agreement, our promoters have infused fresh capital of INR500 million to support our new investments in the last quarter of 2011-'12, making it a cumulative INR2,500 million thus far.

 Earlier this year, as shared with your earlier, our shares were upgraded to the NASDAQ Global Select Market, an acknowledgement of our Board's consistent pursuance of ethical corporate governance, financial and business practices.

 I will now hand you over to Raju for his final comment.

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 Raju Vegesna,  Sify Technologies Ltd. - CEO, Managing Director   [5]
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 Thank you, Vijay. Let me allow to recap our position of Sify from an Internet company. We reengineered ourselves into a multi-services enterprise [ICG] company. Recognizing the importance that software was going to play in many of our services we created a separate substitute to expand our focus from internal to external software services. We then moved forward into emerging technologies like cloud services, security services, and managed services, then (inaudible) into SMB market. Last year, we reiterated our resolve to pursue the government for a large e-governance project; government projects by nature have longer lead time in acquisition and are extremely competitive. I'm happy to state that our endurance pursuing the government projects over the last couple of years is beginning to show the results. Along the way these steps have earned us respect and clienteles across the broad spectrum.

 During the coming fiscal year we will continue to make further investments to enforce our strength in the network reach which have been a key asset in both enterprise and the government sector. We'll also significantly expand our data center capacity as our current DCs are nearing full capacity. We will be bringing -- we will be introducing new internal network products to leverage our growing global capabilities.

 Some exciting new products, new converged ICT products for Indian market also in the pipeline. These will deliver enhanced value at a price point that are attractive for both enterprise and SMB clients such that we also recognize the importance of the marketing our services particularly as we begin to address the exploding SMB market.

 Going forward, our efforts on the ground will now be supplemented with a cohesive market strategy across all services. And that I believe is going to give Sify a step up. Thank you for joining on the call. I will now hand over to the operator for questions.



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Questions and Answers
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Operator   [1]
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 Thank you. Ladies and gentlemen, we will now be conducting a question-and-answer session. (Operator Instructions)

 [Ananda], private investor.

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Ananda   [2]
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 Okay, I was just wondering, there's only one question coming from an individual investor, are we having any analysts following the Company from the United States or no?

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 Vijay Kumar,  Sify Technologies Ltd. - CFO   [3]
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 Ananda, we do not have information of anyone specifically researching the Company, but we do have a few research analysts calling sporadically to enquire about the Company's business plans. But I don't recall having seen any published analyst report on Sify in the recent past.

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Ananda   [4]
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 Okay. So I believe India is probably one of the hottest place, it has a lot of growth going forward, if that is the case, and if you are on the communication and the Internet sectors, I'm just thinking, should we not like have somebody follow the Company and provide some light to the investment community so that the people get more information, more knowledge about Sify.

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 Vijay Kumar,  Sify Technologies Ltd. - CFO   [5]
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 Appreciate your thought, Ananda; we will make some efforts in that direction.

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Ananda   [6]
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 Okay, thank you very much. And one last question I have is the report seem to be much better than last year, so we are like progressing, we're making money or maybe like not losing that much money as against the last year, which is a good sign, that's the way it should be. When do you think you'll be like making money, like not losing? Do you have any road map like how many years or how many quarters it's going to take like to make some money?

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 Vijay Kumar,  Sify Technologies Ltd. - CFO   [7]
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 Ananda, you'll appreciate that it's a little forward-looking statement. And consequently, I cannot share a timeframe on the call. Nevertheless, the proof is in the pudding in the sense that the last couple of years' performance gives you an indication, and more so, the performance over the last four quarters gives an informed investor like you a sense of the direction and the timing in which we are likely to be in black.

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Ananda   [8]
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 Okay, I understand that. Maybe with time we'll come to know.

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 Vijay Kumar,  Sify Technologies Ltd. - CFO   [9]
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 Yes.

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Ananda   [10]
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 Are there any informations you can provide in terms of earnings per share, what was the loss?

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 Vijay Kumar,  Sify Technologies Ltd. - CFO   [11]
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 Yes. Loss per share? On weighted average share it is $0.52. (sic -- see Press Release)

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Ananda   [12]
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 For the whole year. And what was the loss for the last year?

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 Vijay Kumar,  Sify Technologies Ltd. - CFO   [13]
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 Loss for the last year was -- just a second -- a small correction, Ananda, for the full year loss it is INR3.16, it's not INR0.52. INR0.52 is for the quarter. It's INR3.16. And for the last year it is INR9.74.

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Ananda   [14]
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 You are talking about in rupees, right?

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 Vijay Kumar,  Sify Technologies Ltd. - CFO   [15]
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 Yes, in rupees; yes, in rupees.

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Ananda   [16]
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 Okay, so INR9.24 for last year and --

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 Vijay Kumar,  Sify Technologies Ltd. - CFO   [17]
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 INR3.74 for last year.

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Ananda   [18]
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 That is 2010. And for 2011, INR3.16.

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 Vijay Kumar,  Sify Technologies Ltd. - CFO   [19]
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 For '11-'12 it is INR3.16, you are right.

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Ananda   [20]
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 Okay, so we made pretty much very good movement over there; we're like losing almost 66% lesser. And I hope maybe in the next year or so we may see some positive results.

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 Vijay Kumar,  Sify Technologies Ltd. - CFO   [21]
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 Yes, thank you for that.

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 Raju Vegesna,  Sify Technologies Ltd. - CEO, Managing Director   [22]
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 See, one thing is, I want to add, Ananda, this is, as you know, this is, we are an infrastructure providing the network and the data centers. So we are an emerging market unlike United States or Europe. So when you are an emerging market we continuously have to invest. So that is the, being an infrastructure company providing an IT infrastructure we need to invest before realization. We cannot build a partial room of a data center or anything; we have to build a full-blown data center. And it takes three, four years to fulfill the whole data center.

 So that is our nature of the business. We need to invest beforehand. So what is the measure we look at is we are operationally efficient, EBITDA positive, right, than the net positive kind of thing. So as an emerging country and emerging company we are going to continuously investing for future growth.

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Ananda   [23]
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 Okay, very much appreciated. This INR9.74 loss or INR3.16 loss is not EBITDA, right, it's the GAAP measure? Is that the GAAP measure?

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 Vijay Kumar,  Sify Technologies Ltd. - CFO   [24]
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 Yes, it's the GAAP measure, IFRS GAAP measure.

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Ananda   [25]
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 Okay. So in fact, in that case I think EBITDA would be like positive, I believe.

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 Vijay Kumar,  Sify Technologies Ltd. - CFO   [26]
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 Obviously.

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Ananda   [27]
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 Okay. That's all I want to know. Thank you very much.

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 Vijay Kumar,  Sify Technologies Ltd. - CFO   [28]
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 Thanks.

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Operator   [29]
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 (Operator Instructions) Gentlemen, it appears we have no further questions at this time. I will now turn the floor back over to management for any closing remarks.

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 Raju Vegesna,  Sify Technologies Ltd. - CEO, Managing Director   [30]
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 Thank you, operator, and thank you everyone for joining us on the call. We look forward to interacting with you all through the new fiscal year. Thank you and goodbye.

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Operator   [31]
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 This does conclude today's teleconference, you may disconnect your lines at this time, and we thank you for your participation.




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