Sify (SIFY) Q1 2026 Earnings Call Transcript

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DATE

Friday, July 18, 2025 at 8:30 a.m. ET

CALL PARTICIPANTS

Chairman — Raju Vegesna

Executive Director and Group CFO — M.P. Vijay Kumar

Investor Relations — Praveen Krishna

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TAKEAWAYS

Revenue: Revenue was INR 10,723 million for Q1 FY2026, up 14% year-over-year, reflecting growth across several business segments.

EBITDA: EBITDA was INR 2,111 million for Q1 FY2026, representing an 18% increase year-over-year.

Loss Before Tax: INR 322 million during the first quarter of FY2026, directly impacted by depreciation, interest, and manpower expenses linked to investment initiatives.

Loss After Tax: INR 388 million after including subsidiary data center taxation (IFRS).

Capital Expenditure: INR 2,874 million invested in building out infrastructure, including data center capacity.

Operational Data Center Capacity: 138 megawatts now built and available following the commissioning of 8.6 megawatts.

Segment Revenue Mix: Network services represented 41% of total revenue for the quarter, data center colocation services 37%, and digital IT services 22% of total revenue.

Network Footprint Expansion: Fiber nodes increased 14% quarter-over-quarter, enhancing national coverage.

SD-WAN Deployments: 9,473 contracted SD-WAN service points now active across India.

Greenfield Data Centers: New facilities in Delhi and Chennai with 26 megawatts design capacity each have opened; two Mumbai sites (52 megawatts each) remain under construction, with additional projects possible.

Colocation AI Model: Sify Technologies Limited introduced a pay-per-use colocation model for NVIDIA-certified, liquid-cooled data centers, allowing clients to "bring your own GPUs" and consume rack space on a usage basis.

Segment Profitability: Data center EBITDA margin is "close to 45%," according to management, and digital IT services segment remains loss-making due to ongoing investment.

Digital Services Strategy: Transitioning from project-based to recurring annuity revenues led to flat top-line performance and higher segmental losses; management reiterated the move is conscious and ongoing.

Earnings Leverage Timeline: Executive Director and Group CFO M.P. Vijay Kumar stated, "anywhere between twelve to eighteen months for us to start seeing results from the efforts we have put in over the last two years."

SUMMARY

Sify Technologies Limited (NASDAQ:SIFY) reported increases in both revenue and EBITDA, while remaining in a loss-making position due to strategic investments and cost growth. Management commissioned 8.6 megawatts of new data center capacity and affirmed significant additional capacity under construction in Mumbai.

Chairman Raju Vegesna stressed Sify Technologies Limited's role as an infrastructure leader supporting India’s public and private AI and cloud adoption strategies.

Executive Director and Group CFO M.P. Vijay Kumar highlighted that IT services remains in an investment-heavy phase, "with losses expected to shrink" as annuity revenue builds over the next year to year-and-a-half.

Sify Technologies Limited's pay-per-use colocation model for NVIDIA-certified data centers is described by Vegesna as "probably unique" targeting global demand for flexible, AI-ready hosting in India.

Segment profitability diverges: data centers remain the key margin contributor, while digital services continue to be a drag until recurring revenue gains scale.

INDUSTRY GLOSSARY

SD-WAN: Software-Defined Wide Area Network—virtual network architecture allowing enterprises to manage network services over wide geographic regions with improved flexibility and efficiency.

Colocation (Kolo) Model: A service whereby enterprises lease rack or floor space in a data center to deploy their own hardware; Sify Technologies Limited’s pay-per-use model allows customers to host their own GPUs and pay based on usage rather than fixed lease terms.

Greenfield Data Center: A newly constructed, purpose-built facility, rather than a renovated or repurposed site, typically incorporating the latest design and technology standards.

Annuity Revenues: Recurring, contractually based revenues generated from ongoing service agreements, as opposed to one-time project fees.

Full Conference Call Transcript

Some of the financial measures referred to during this call and the earnings release may include non-GAAP measures. Sify Technologies Limited'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 will be made available on Sify Technologies Limited'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. Those described. 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 release. 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 Mr.

Raju Vegesna, Chairman of Sify Technologies Limited. Chairman?

Raju Vegesna: Thank you, Praveen. Good morning, and thank you for joining us on the call. As India is entering into a new generation of IT transformation, I firmly believe that the next decade of digital infrastructure will be written in India. The pace at which public and private enterprises are investing in technology, cloud adoption, and automation is unmatched, driven by an urgency not just to participate in the digital economy, but to lead it. Government policy, industry ambitions, and a vibrant innovation ecosystem are combining to create a perfect storm of opportunity.

National programs like Digital India and the India AI mission are bringing in investment in compute infrastructure and digital access, while regulatory clarity is unlocking private capital into hyperscale data centers, 5G, and beyond. India is not just consuming AI; it's rapidly climbing up the value chain to become a creator of IT tools, frameworks, and domain-specific solutions. This ambition will translate into robust demand for integrated infrastructure that supports high-performance workloads, edge computing, and sovereign data requirements. India will not just be the growth market; it will be the growth engine. Let me now bring in our Executive Director and Group CFO, Mr. M.P. Vijay Kumar, to explain both the business and the financial highlights of the last quarter.

Vijay Kumar?

M.P. Vijay Kumar: Thank you, Chairman. Greetings to all. We remain steadfast in our commitment to cost efficiency and fiscal discipline as we navigate an increasingly complex business environment. Every investment decision is taken with long-term value creation in mind, overseen by a rigorous approach to risk management and effective execution. While our current results reflect the impact of depreciation, interest cost, and increased manpower expense, these are highly conscious trade-offs in our strategy to build future-ready capabilities across our businesses. At the same time, we are embedding sustainability as a foundational business tenet well beyond the requirements of regulatory compliance.

Ultimately, our focus remains on delivering predictable long-term value to the stakeholders while staying true to our disciplined investment philosophy and high standards of accountability. Let me now expand on the business highlights for the quarter. The revenue split between the three businesses for the quarter was network services 41%, data center colocation services 37%, and digital IT services 22%. During the quarter, Sify Technologies Limited commissioned 8.6 megawatts of additional data center capacity. As of December 2024, Sify Technologies Limited was providing services via fiber nodes across the country, and since then, we have seen an increase of 14% over the same quarter, quarter on quarter.

Sify Technologies Limited has deployed about 9,473 contracted SD-WAN service points across the country. A detailed list of our key wins is recorded in our press release, which is now live on our website. Let me briefly sum up the financial performance for quarter one of financial year 2026. Revenue was INR 10,723 million, an increase of 14% over the same quarter last year. EBITDA was INR 2,111 million, an increase of 18% over the same quarter last year. Loss before tax was INR 322 million, and loss after tax was INR 388 million after considering the tax on the profits from our data center subsidiary. Capital expenditure during the quarter was INR 2,874 million.

I will now hand over to our Chairman for his closing remarks. Chairman?

Raju Vegesna: Thank you, Vijay Kumar. In the quarters to come, we will deepen our focus on enabling AI workloads and attracting a new generation of forward-thinking enterprises. With our integrated infrastructure, digital infrastructure, and proven service maturity, we are uniquely positioned to lead. I thank you for your continued belief in our journey. We remain energized by the possibilities that lie ahead. Thank you for joining on this call. I will now hand over to the operator for any questions. Operator?

Operator: Thank you very much, Chairman. At this time, we will be conducting our question and answer session. If you would like to ask a question, before you press the keys. Please wait a moment whilst we poll for questions. Thank you. Your first question is coming from Greg Burns of Sidoti and Company. Greg, your line is live.

Greg Burns: Good morning. Actually, update on the data center capacity that you added this quarter. Can you just remind us how much data center capacity has already been commissioned as in operation and maybe what your expectations are for the next twelve months in terms of how much capacity you expect to be coming online?

M.P. Vijay Kumar: Yeah. So two things. One is two greenfield data center projects at the National Capital Region, Delhi, and at Chennai have gone live in the last four months. Both of which have a design capacity of 26 megawatts each. From the operational capacity perspective, about 8.6 megawatts got added in the quarter, taking the total operational capacity built capacity available for sale to 138 megawatts.

Greg Burns: Okay. Great. Thank you. And then I guess is there a, like, a timeline or a road map for other greenfield data centers that you're bringing online this year, or is that not something you're ready to share?

M.P. Vijay Kumar: Yeah. No. There are two data center facilities which are coming up in Mumbai, which are under construction. Which will go live later part of this financial year. Both of them have a design capacity of about 52 megawatts. And beside that, there is another greenfield project also which is under construction, which details we'll discuss once the project reaches a little advanced stage of completion.

Greg Burns: Okay. Great. Thank you. And I just wanted to talk a little bit about the pay-per-use colocation AI model that you expressed released a couple months ago. Can you just talk about you know, maybe how that model works? What kind of investment is required on your end, and maybe what you expect the returns to be, the maybe the payback period or the types of returns you expect to get on that model? Thank you.

Raju Vegesna: Okay. So, Greg, the way payback colo model works. See, we have three data center campuses. Mumbai, Chennai, and Noida, all are certified by NVIDIA. We are the first guy certified by NVIDIA liquid cooling for 130 kilowatt per rack. So the way, you know, these data centers are ready to use for a liquid cooling, and now what we are doing if anybody wants globally, want to host their GPUs in one of these facilities, we are offering Kolo as a per usage model. So, for example, we took about five or six different GPU types from Nvidia, and we are offering per hour base, per demand base, per monthly base, per year base.

That way, anybody wants to deploy like, AI cloud, for either AI training, AI inferencing, globally, so they can host with us. And, you know, so that is a business model we are offered. I think we are offered probably unique I don't think anybody offered as you go model. And we are getting some interest. You know, we can you know, all these three centers are capable of doing this. So we just started. And we are getting some interest. Global presence. Global requirements. To host here. At this point, we don't know the numbers and we are, you know, marketing at this point, and there is some interest.

Greg Burns: Okay. Great. Thanks. So just so I understand, you are buying your own GPUs hosting them in your own facilities, and then leasing them out on a per use basis. That's what's happening here? That's the model?

Raju Vegesna: No. No. No. No. We are not buying GPUs. Other than GPUs, bring your own GPUs. And we can offer you pay-per-use model. Okay. So if you look at if we look at it, you know, GPU per hour, they charge. Right? Something like that. So to complement that, if somebody has GPUs, they can bring these GPUs and we are offer colo model to match that GPU pricing, so that way one can offer GP as a pay-per-model service in a

Greg Burns: Yep. Okay. Okay. Thanks. And then you know, Vijay, you talked about kind of the how you've been investing into the business and how that's maybe detracting from near-term profitability, but obviously, you expect to benefit from that over time. Is there a timeline on maybe when we might see a little bit more leverage flowing through the model? Is there a horizon on that? Is it a one, two-year kinda still investment period that's gonna be going on? Is there any anything you could help us there with kind of looking out to the future and when we might see a little bit more leverage in the business?

M.P. Vijay Kumar: Yeah. So, Greg, as you would have observed from the press release information, segment reporting the network business, and the data center business are doing pretty well. The digital IT services is the business where we continue to invest in people to build capabilities. In terms of a horizon at this point in time, while I don't want to sound forward-looking, but I see anywhere between twelve to eighteen months for us to start seeing results from the efforts we have put in over the last two years. Should to flower start flowing in.

Greg Burns: Okay. Great. That's very helpful. Thank you. Thank you very much. Thank you.

Operator: Your next question is coming from Mihir Sakar of Pritby. Mihir, your line is live.

Mihir Sakar: Thank you so much for the opportunity. So, actually, I'm joining this call for the first time, and I still want to call you to delete it. Oh,

Operator: Mihir, your technology will be cutting out. It's very difficult to hear. Can you just try a different location? Yeah. Yeah. Just a second.

Mihir Sakar: Okay. May I repeat on the hand? Can you hear me now?

Operator: Yes. That's better.

Mihir Sakar: Okay. Thank you. Yes. My question was regarding the data center business. Is our current capacity after the 8.3 megawatts that we have added? As of today.

M.P. Vijay Kumar: Hundred and thirty-eight megawatts of capacity is built and operational.

Mihir Sakar: Okay. And what is our plan for this financial year? How much are we planning to add?

M.P. Vijay Kumar: As I was responding to the earlier queries, we have taken two greenfield data center projects live. Where both of them have a design capacity of 26 megawatts each. And as the customer demand gets built up, we will keep operationalizing a portion of the capacity.

Mihir Sakar: Okay. Okay. And are there any plans for the IPO of the digital CC Infinite space? On the cards?

M.P. Vijay Kumar: At this point in time, we continue to evaluate various sources of raising capital. And we'll get guided by our board as to what would be the best option for raising capital and the timing of the same. We'll keep the market informed at the right time when there's a tangible addition.

Mihir Sakar: Okay. Okay. And on the digital services business, so I was just going through the detailed segmental report. So on a year-on-year basis, I think so pretty much the top line has been flat and losses have also increased on the operational basis. So what kind of what are your plans for the digital services business? And can you throw some color, like, paint some picture, like, why the top line has been flat and what our plans would turn around this segment.

M.P. Vijay Kumar: Yeah. The reason for the top line to be flat is a change in the model where there is a focus more on annuity revenues versus project-based revenues. So earlier, the share of project-based revenues used to be high. We have been gradually moving to recurring or annuity services business. So we'll continue to build our annuity business. And as far as the losses are concerned, there are functions of the investment we are making in people. We started this journey about three years back. And we continue to build our capabilities to be relevant for the India IT services market about which we are very confident about India enterprises outsourcing their IT to companies like us.

Mihir Sakar: Okay. And, like, what kind of timeline or horizon have you planned to turn this around? Like, into profit?

M.P. Vijay Kumar: Yeah. Well, I don't want to sound as forward-looking. The current plan is over the next twelve to eighteen months, we should see the losses shrinking and the operating performance getting better.

Mihir Sakar: Okay. Okay. And, actually, I was trying to reach out to Mr. Praveen Krishna who handles our IIM, and I actually wanted to get a more detailed understanding of our business model offline. So would it be possible to arrange a call, or can we connect offline? After the call?

M.P. Vijay Kumar: You can connect. We can be here. We can be here. Yeah.

Mihir Sakar: Yeah. Actually, I already, shoot you a mail, like, a month ago. I will send the mail again. So what would be the email ID on which I can send?

Praveen Krishna: Praveen.Krishna@sifycorp.com.

Mihir Sakar: Okay. Thank you so much. Yeah. That's it, Have a good day.

Operator: Thank you very much. Just a reminder there, if there are any remaining questions, you can still join the queue by pressing star one. Your next question is coming from Sri Gopal Bajaj, who is a Private Investor. Sri, your line is live.

Sri Gopal Bajaj: Sir, good evening. This is Sri Gopal Bajaj here. Thank you for the opportunity. I have a couple of questions which are, you know, more or less in line with what I have asked probably in the previous earnings call as well. The first question would be the newly opened Chennai DC has now started adding to the revenue.

M.P. Vijay Kumar: Yes.

Sri Gopal Bajaj: Okay. Okay. Second thing is that, you know, given that you're an IT services, that kind of a company, not a pure brick and mortar manufacturing company, I would have thought the EBITDA margin should expand. Right? I mean, closer to the 25% range. But I see that it's consistently always in that 19, 20% range, including this quarter, it's about roughly 20%. When do you see that margins expanding, you know, given that so many VCs are already functional over a period of time. When do you see some kind of, you know, operating leverage kicking in?

M.P. Vijay Kumar: Yeah. Sri Gopal Bajaj, Vijay Kumar here. We have these three distinct businesses with different capital deployment characteristics. The data center business has an EBITDA margin of close to 45%. And we have a network business, which has an EBITDA margin of about 18%. And we have the IT services business, which the earlier queries also sought information, which is work in progress.

Sri Gopal Bajaj: Okay. Okay. And the full year, I mean, I know, generally, you know, you don't give any guidance. In terms of growth across the three segments, would it be safe to assume double-digit kind of a growth for the rest of the year?

M.P. Vijay Kumar: That's a wish list all of us work for.

Sri Gopal Bajaj: Okay. Okay. And I see that, you know, the network business has always been stable, you know, roughly around 40% of the overall business. Data center, obviously, being an emerging sector and the growth sector, you know, has slowly crept up from I don't know, from 25% contribution to the top line to now almost close to 35, 36%, I think. And the digital has been kind of de-growing from, you know, 28, 29% to now, I think, this quarter, maybe roughly 21, 22%.

M.P. Vijay Kumar: You're right. This is in line with the conscious call that, you know, the digital will remain a part of the offering, but we don't see that as a growth driver.

Sri Gopal Bajaj: No. No. No. That will be a growth driver. But there's a change of the business model, which was articulating earlier. The digital services earlier used to be more project-based revenue. Whereas now it's more of services-based revenue. And when you do annuity recurring kind of a business, revenues are small, but they come over a longer period. So that's a conscious decision we took about a few years back, and it is work in progress as we are changing the mix.

Sri Gopal Bajaj: Right. Right. And, you know, I'm not looking at the net income as such. But even the EBITDA margins have been, you know, slightly improving. Not that much. What are the, you know, I'm sure it's a combination of both like, you know, wherever we can get some kind of premium pricing or premium offerings. Or add-on services to get the traditional additional margin. And or maybe, you know, some sort of operating leverage or, you know, reduction in SG&A. When do you see that, you know, the margins more towards the at the group level, I'm talking about, the consolidated level, seeing more in the 25% region?

M.P. Vijay Kumar: No. At a point where we are

Sri Gopal Bajaj: Yeah.

M.P. Vijay Kumar: Sorry. No. Of course. Of course. Of course. Of course.

Raju Vegesna: We have bigger aspirational goals, but we are trying to achieve that. Yeah. Yeah.

M.P. Vijay Kumar: So once we see the IT services business gain traction, automatically, we should see that reflecting in the consolidated EBITDA.

Sri Gopal Bajaj: Any of course, I know you guys are trying very hard. Any will it will it see a gradual like, a hundred basis point kind of improvement over next several quarters.

M.P. Vijay Kumar: No. We are certainly working for that. Certainly working for that. Certainly working for that.

Sri Gopal Bajaj: I think at 25% margin, everything changes. Right? You know, the books look far more accretive.

Raju Vegesna: Our focus is not on the consolidated one because all the three businesses are different. Different. Different characteristic. Yeah. So I think we will I don't want to spell out the characteristics the target EBITDA, but data center will be more or less will get little operating leverage benefit. Network, we will see little higher operating leverage benefit. On the IT services business, once we get the offerings more stable, and it gets to profitability. It improved.

Sri Gopal Bajaj: Okay. Okay. That's it, sir. I don't have any further questions, and I sincerely thank you for the opportunity. And all the best for the future.

M.P. Vijay Kumar: Thank you. Thank you very much.

Operator: Well, we appear to have reached the end of our question and answer session. I will now hand back over the management team for their closing remarks.

Raju Vegesna: Thank you. For your time on this call. Have a great day. Thank you.

Operator: Thank you very much. That does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. We thank you for your participation.

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