Sify Technologies (NASDAQ:SIFY) reported first-quarter financial results on Wednesday. The transcript from the company's first-quarter earnings call has been provided below.

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View the webcast at https://www.webcaster5.com/Webcast/Page/2184/54259

Summary

Sify Technologies Ltd reported a revenue increase of 15% year-over-year for Q1 FY 26-27, reaching INR 12,352 million, with adjusted EBITDA up 42% to INR 3,005 million.

The company is heavily investing in capacity expansion and network modernization to meet AI, cloud, and data demand, with capital expenditure for the quarter at INR 6,708 million.

Sify's data center business showed significant activity, with 5 megawatts sold and ongoing construction of 150 megawatts, aiming for future operational capacity to exceed 220 megawatts.

Management highlighted India's digital transformation as a major growth driver and emphasized Sify's strategic positioning in key markets and its integrated service portfolio as competitive advantages.

The company is preparing for an IPO for its subsidiary, Sify Infinite Spaces, with market conditions being closely monitored for optimal timing.

Operational highlights include a 7% increase in fiber nodes and strategic plans for edge data centers in tier 2 and 3 cities.

Challenges mentioned included a temporary margin reduction in the data center business due to power tariff revisions, and digital services showing negative EBITDA with efforts to improve profitability.

Full Transcript

OPERATOR

Greetings. Welcome to the Sify Technologies financial results for the 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-0 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

Thank you, Holly. I would like to extend a warm welcome to all our participants on behalf of Sify Technologies Ltd. I'm joined on the call today by my Chairman, Mr. Raju Vegesna, and by Executive Director and Group CFO Mr. M P 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 Lohri Group at 1-646-824-2856 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 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 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 involve 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 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.

Raju Vegesna, Chairman & Managing Director

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 and 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, networks, 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 to 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.

M P Vijay Kumar, Executive Director and Group CFO

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 continues 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 5 megawatts of capacity in the quarter, and as of 30 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 financial year 26-27. Revenue was INR 12,352 million, an increase of 15% over the same quarter last year. Adjusted EBITDA was INR 3,005 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 6,708 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.

Raju Vegesna, Chairman & Managing Director

Thank you, Vijay Kumar. 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, 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

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 and Company.

Greg Burns, Sidoti and Company

Good morning. Do you have an update on the potential timing for the Sify Infinite Spaces IPO?

M P Vijay Kumar, Executive Director and Group CFO

Yeah. As far as the IPO timing is concerned, the bankers are actively evaluating the right time when the market appetite will be good and will appreciate the quality of the asset. From the company side, we stay ready for listing once the bankers advise us on going ahead.

Greg Burns, Sidoti and Company

Okay, thank you. And then you mentioned you sold 5 megawatts of capacity in the quarter. How much capacity is currently live and operational, and what is your current design capacity of existing data centers? And then maybe can you give us an update on what you expect to go live or how much capacity is currently under construction and expected to become operational over the next 12 months? Thank you.

M P Vijay Kumar, Executive Director and Group CFO

So the capacity which is designed and ready is 188 megawatts. The operational live revenue-generating capacity is 134 megawatts. And the capacity which will get delivered in this fiscal will be about 100 megawatts. And there is another 150 megawatts of capacity under construction.

Greg Burns, Sidoti and Company

Okay. So 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

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, Sidoti and Company

Okay. And can you just maybe give us your thoughts on what are the primary differentiators for Sify? Why is Sify winning in the market? What are the reasons that you think Sify differentiates itself and how you're driving success?

M P Vijay Kumar, Executive Director and Group CFO

No, I think there is some uniqueness in the market presence for about the time of more than 20 years and existing hyperscalers and the enterprises that make us different. And also our presence in all our key markets like Mumbai, Chennai, Noida, Hyderabad, Bangalore, and a small portion in Calcutta, that makes us a unique position and also our having a network around our data centers, connectivity, availability. So it is not a 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.

So as an integrated player, having data centers, network, and having a good power availability story will help to win such kind of data center deals.

Greg Burns, Sidoti and Company

All right, thanks. And then I know you're in all the major hubs but what is the opportunity for edge capacity building out data centers in smaller markets? Is there an opportunity there for you and is that currently on your roadmap?

M P Vijay Kumar, Executive Director and Group CFO

Yeah, we have already opportunity there. We already completed two such data centers as Lucknow and Chandigarh and we are also constructing two more. So we are having a plan about building across India in tier 2 and tier 3 cities, about 10 to 12 edge data centers over the next few years. So these opportunities because India not only depends upon these six major metro cities but these secondary cities are also very important. So our presence, we are building strategically, 2 to 3 edge data centers per year, that's what we are looking at.

Greg Burns, Sidoti and Company

All right, thank you very much.

M P Vijay Kumar, Executive Director and Group CFO

Thank you.

OPERATOR

Your next question for today is from Pratik Singh with IIFL Capital.

Pratik Singh, IIFL Capital

Hello. Hi sir. Thanks for the opportunity. So I understand that the sold capacity has now gone to 134. The installed capacity which was 140 at the end of FY26. What would that number be? Okay. And the design capacity has been at 188 megawatts for four or five quarters now. So just want to understand how does it work. So we first focus on completing the installed capacity and then build new capacity or both of these cannot be done parallelly.

M P Vijay Kumar, Executive Director and Group CFO

Yeah, I was answering the previous speaker. There is another 100 megawatts of capacity which coincidentally will be both design plus installed capacity which will be delivered this year and another 150 megawatts of capacity which is under construction.

Pratik Singh, IIFL Capital

Okay, so 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 to 230 for the entire year?

M P Vijay Kumar, Executive Director and Group CFO

Yeah, it should be north of that.

Pratik Singh, IIFL Capital

Understood. And my second question is by when will this 81 megawatts that we signed last quarter start to generate revenue?

M P Vijay Kumar, Executive Director and Group CFO

It will start generating from the end of quarter two, but it will reflect significantly in Q3 and Q4.

Pratik Singh, IIFL Capital

Understood. And about margins. So 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 229 million rupees. So margins there have fallen from 45% EBITDA margin to 43%. So is this the new normal? Any one-offs that we saw this quarter in the data center business or how should we look at it?

M P Vijay Kumar, Executive Director and Group CFO

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.

Pratik Singh, IIFL Capital

Okay. And it is something which we cannot pass on to our customers.

M P Vijay Kumar, Executive Director and Group CFO

We are working with the customer. So in case it happens, it will reflect later. But from a conservative and accounting requirement perspective, we have taken it into cost.

Pratik Singh, IIFL Capital

Understood. And just one last clarification in the last results press release, FY26 and equity was around 25 billion rupees. Sorry. Yeah. 25,024.994 million rupees which is now changed to 18,933. Is it just a rectification or was there any reclassification or any kind of an equilibrium debt conversion?

M P Vijay Kumar, Executive Director and Group CFO

Let me check on that. To my knowledge, it is a reclassification on the consolidated side, the CCDs which were there, which were 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. So that's the difference between the two.

Pratik Singh, IIFL Capital

Understood. Thanks. And I'll join back the queue.

OPERATOR

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

Pratik Singh, IIFL Capital

Thanks for the opportunity again. So any plans in the interim, like one of your nearest peers recently raised capital via a private round. Any plans for that if the IPO proceedings get delayed?

M P Vijay Kumar, Executive Director and Group CFO

The IPO is our primary target right now. And no plans for any kind of a private round as of now. We have Kotak supporting us on equity for the growth. So we are pursuing the IPO path and any capital requirement in the unlikely situation of IPO getting delayed, Kotak will step in.

Pratik Singh, IIFL Capital

Okay, so given your Capex is quite high, I mean it is short of almost double the quarterly rate that we used to see earlier because you're on a very strong growth path and as you said it would remain the same, maybe 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. So in that case, you're saying that Kotak will be happy to support.

M P Vijay Kumar, Executive Director and Group CFO

Correct. They are committed to the growth of the company so they will step in. But even otherwise, there are several other strategic investors who have shown keen interest but we will evaluate when it is necessary.

Pratik Singh, IIFL Capital

Understood. And the final question on my side is on Sify Technologies. So how should we look at the digital services business this time? Also, it was 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-on-year basis and also on a QOQ basis. So what kind of a growth path do we see for digital or by when can we expect an EBITDA break-even there?

M P Vijay Kumar, Executive Director and Group CFO

Yes. So 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. But on the EBITDA side, we are all working for reduction of the losses quarter on quarter basis. There is active guidance from the board as well in terms of getting it to a path of profitability soon. So a lot of work is happening. I am not in a position to communicate to you this specific 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.

Pratik Singh, IIFL Capital

Understood. And similar comments on network services because it has been growing quite well. Can we expect similar kind of growth over the next few quarters in networks as well?

M P Vijay Kumar, Executive Director and Group CFO

Yeah, network revenue, it will grow organically. I think that's a reasonably mature market, so that growth should be reasonably good.

Pratik Singh, 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

Thanks, Pratik, 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 and I will now turn the call over to Raju for closing remarks.

Raju Vegesna, Chairman & Managing Director

Thank you for your time on this call. Have a good day. Thank you very much.

OPERATOR

This concludes today's conference and you may disconnect your lines at this time. Thank you for your participation.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.