SIFY

Good day, ladies and gentlemen, and welcome to the Sify Technologies financial results for full year 2025-2026. At this time, all participants are on a listen-only mode, and the floor will be open for questions and comments following the presentation. If anyone should require operator assistance during the call, please press star zero on your telephone keypad. Please note, this call is being recorded. I will now turn the conference over to your host, Mr. Praveen Krishna, Head of Investor Relations. Praveen, the floor is yours.

Thank you, Ollie. I would like to extend a warm welcome to all our participants on behalf of Sify Technologies Limited. I'm joined on the call today by my Chairman, Mr. Raju Vegesna, and my Executive Director and Group CFO, Mr. M P Vijay Kumar. Following our comments on the release, there'll be an opportunity for questions. If you do not have a copy of our press release, please call Lury Group, our IR agency, 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 sifytechnologies.com/investors. A replay of today's call may be accessed by dialing on the number 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 will be made available on Sify's website. Before we continue, I would like to point out that certain statements contained in the earnings release and on this conference call are forward-looking statements rather than historical facts, and are subject to risks and uncertainties that could cause actual results to differ materially from those described.

With respect to such forward-looking statements, the company seeks protection afforded by the Private Securities Litigation Reform Act of 1995. These risks include a variety of factors, including competitive developments and risk factors listed from time to time. 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. I would now like to introduce Mr. Raju Vegesna, my Chairman.

Thank you, Praveen. Good morning, everyone. Thank you for joining us on the call. India's digital journey continues to accelerate with renewed clarity and purpose. The convergence of resilient infrastructure, progressive policy framework, and an increasingly innovation-driven enterprise ecosystem is positioning India as a cornerstone of the global digital space. Enterprises today are moving beyond adoption to technology optimization. This evolution is not only strengthening the businesses, but also enabling inclusive growth, expanding opportunities across sectors and communities. The recent Union Budget has recommended a tax holiday for foreign cloud players who utilize Indian data centers to serve global customers. This is expected to add to the tailwinds for a domestic data center growth. With sustained investment in digital infrastructure and such strong regulatory vision, India is reinforcing its credentials as a technology hub.

In this environment, Sify is uniquely positioned to partner with enterprises in their next phase of transformation, delivering integrated solutions that power growth and resilience. I remain confident that our strategic direction and combined with India's enduring strengths will enable us to play a pivotal role in shaping a future-ready digital ecosystem. Let me now bring in our Executive Director and Group CFO, Mr. M P Vijay Kumar, to explain both the business and financial highlights for the year. Vijay Kumar.

Thank you, Chairman. Our businesses continue to deliver focused growth with each unit capitalizing on its distinct market opportunities, attracting strategic investments, and building meaningful partnerships. Our investment philosophy remains consistent and forward-looking, expanding our data center footprint into new and emerging locations for long-term growth, augmenting capacity at existing facilities to address immediate demand, and further strengthening our network and cloud interconnect ecosystem. In parallel, and more importantly, we continue to invest in our people, equipping them with the right skills, tools, and processes to drive innovation, efficiency, and customer success. All these initiatives are being executed with focus on cost competitiveness, cash flow optimization, and fiscal discipline, ensuring that we maintain a strong financial foundation, which supports our growth ambitions.

In accordance with the Amendment Agreement to the Debenture Subscription Agreement with Kotak, the additional coupon payable on Compulsory Convertible Debenture, pursuant to the conversion at equity in February 2026, is recognized as expense in the statement of income. We have received the final observations from SEBI on our draft red herring prospectus for our data center subsidiary, Sify Infinit Spaces Limited, and we will time the issue and listing to a conducive market environment based on bankers' guidance. The cash balance as at end of the year was INR 507.1 million. Let me now expand on the business highlights for the year. The revenue split between the businesses for the year was Network Services 39%, Data Center Services 39.5%, Digital Services 22%. Segment revenue for the year increased 12% in Network Services, 23% in Data Center Services, and decreased marginally 2% in Digital Services.

Segment results for the year have increased by 91% in Network Services, 24% in Data Center Colocation Services, and decreased 67% for Digital Services. The data center subsidiary sold 17 MW of data center capacity in the year. Cumulatively sold capacity stands at 129 MW, and during the quarter, the data center business has contracted an additional 81 MW to be delivered in the coming quarters this financial year, 2026-2027. As of March 26th, Sify provide Network Services via 1,224 fiber nodes, an 8% increase over the same quarter last year. As of March 31, 2026, Sify deployed 10,340 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 briefly sum up the financial performance for the year. Revenue was INR 44,877 million, an increase of 13% over last year.

EBITDA was INR 9,871 million, an increase of 31% over last year. Loss before tax was INR 941 million, and loss after tax was INR 1,366 million. Capital expenditure during the year was INR 13,282 million. I will now hand over to our Chairman for his closing remarks. Chairman?

Thank you, M P Vijay Kumar. Our businesses are mutually reinforcing pillars that together they create a resilient end-to-end digital ecosystem. Strong connectivity enables scalable data infrastructure, while our data centers power secure high-performance platforms for advanced digital solutions. In turn, our digital services unlock value for enterprises and consumers, driving demand across the entire stack. As India accelerates its digital transformation, this integrated approach positions us as a trusted partner at scale. It will also enhance our global credibility, building lasting image equity while strengthening our brand among investors, partners, and stakeholders alike. Thank you for joining us on this call. I will now hand over to the Operator for questions. Operator?

Thank you, sir. Ladies and gentlemen, at this time, we will be conducting our 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, and you may press star two if you wish 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. Thank you. Our first question is coming from Greg Burns with Sidoti & Company. Your line is live.

Good morning. Could you just give us the numbers around what the existing design capacity for your data center business is and how much operational capacity has been sold?

Yeah. The total design capacity of the 14 facilities which are live is 188 MW, out of which 129 MW of capacity is revenue generating at present.

At the end of March.

As of March 26th.

Okay. The 81 MW that you mentioned, that is contracted and in your backlog?

Yeah. That is the backlog. That is for new facilities which are currently under construction, which will go live in the early part of the second quarter.

Okay.

Will be delivered in a phased manner to the customer.

Okay. Perfect. In terms of CapEx, I guess it was INR 13 million this year. What is the guidance or what is your outlook for this year? About a similar level of CapEx, or will it be increasing again this year?

The CapEx will be higher for this year. Given that we are almost doubling our capacity, it will be significantly higher.

Okay. Are you seeing any bottlenecks in terms of either energy availability or inputs like memory that might impact the pace of your rollouts?

At present, we aren't seeing anything here. There is very good support from the Union Government as well as the state governments for the data center infrastructure creation in India. In fact, as the Chairman mentioned in his remarks, the government has also gone forward with committing a 20-year tax holiday for foreign cloud service providers who host their capacity in India for serving the global market. There are a good number of customers who are in active conversation in this to avail this benefit.

Okay, great. Thank you.

Thanks, Greg.

Thank you. Once again, ladies and gentlemen, if you have any questions or comments, please press star one on your telephone keypad. Our next question is coming from Prateek Singh with IIFL Capital. Your line is live.

Hi. Thanks for this opportunity, just taking it ahead from Greg's question. I know that we kind of, in the DRHP, we have given numbers on build capacity, installed, and operational, which was 188, 127, and 111 as of FY 2025 end. I understand that 188 is still 188. Can you just give us a sense as to how the other two numbers have changed, which are installed and operational?

Yeah. The 127 MW which is installed is at 140, and 111 MW is at 129.

Understood. When we say that 81 MW is backlog, and when you said early part of second quarter, by second quarter here, we mean the second financial year quarter, right?

Correct.

Does it mean that by.

Will be delivered in a phased manner.

Okay.

Yeah.

Typically that takes 15 months-18 months for the entire 81 MW to be revenue generating?

No, the current customer schedule is to deliver it within this financial year.

Understood. Another question is, Sir, when you talked about almost doubling of capacity this year, we are talking about doubling of the design capacity, which is 188 MW, going to almost 370 MW-380 MW?

No, I'm talking about doubling of the revenue generating capacity.

Also we will build the design capacity also beyond that, beyond 188 MW.

Understood, sir. Just one last question. Given that there is so much happening, I visited your Rabale site also last month, and I noticed that we are also providing the opportunity of liquid cooling. If one had to get a sense as to what kind of EBITDA per megawatt, how liquid cooling would differ versus the current scenario, at least one can assume on the base basis that our EBITDA per megawatt would largely at least be what we are doing right now without liquid cooling, or do we think that liquid cooling, the EBITDA per megawatt might be a bit lower than what we are doing right now?

No, it could be little higher, but I think that too much of specifics, maybe we can have a conversation separately because customer contracts have some unique elements, the way they are constructed. Typically, considering higher capital deployment, you tend to get a higher return.

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

Yeah. Thank you.

Thank you. Our next question is coming from Sri Tulsidutt, who is an investor. Your line is live.

Good morning, sir. This is Srikanth here. I almost join all of your earnings call. I couldn't follow the earlier conversation because I joined late. However, my questions are more specific to the India listing. One, given that it looks like you have all the approvals now, is there any deferment in the IPO because of this whole geopolitical situation across the globe? Two is, has the IPO size been decided? There have been speculations, somebody's quoting one number, somebody else is quoting another number. Those two would be my specific questions.

Okay. Let me take the latter one. The size is already communicated as part of the DRHP. It is INR 2,500 crores of primary and INR 1,200 crores of offer for sale, a partial exit from the existing growth capital partner, Kotak. Total INR 3,700.

Okay.

That is already part of the DRHP filed and approved. Second, as far as the deferment is concerned, there is no deferment per se except that we're waiting for the guidance from the bankers on the timing of the actual issuance and listing. As Management, we have done our road shows, approvals are all in place. We'll get guided with the bankers for the next steps.

At those numbers, what does it translate to the enterprise value of Sify Infinit Spaces?

That would be little difficult to comment here. I think depends on how the book building process goes, and once that is done, as part of the updated DRHP, it would be visible.

Okay. Not a problem.

Yeah. Thanks, Srikanth. Thank you.

Thank you for the opportunity.

Thank you.

Thank you. Just a quick reminder, ladies and gentlemen, it's star one if you have any questions or comments. We have another question from Prateek Singh with IIFL Capital. Your line is live.

Hi. Thanks for the follow-up. Sir, in the last call, if I remember correctly, we had said that we are working on two expansions, which were 77 MW and 52 MW, if I'm not wrong. Can you just guide us as to which are the locations where these two expansions are coming in? Are they both in Rabale or in Noida or other places? We also mentioned that the 77 MW earlier was 52 MW, and because of higher density, it was taken up to 77 MW. Is there any opportunity to take this 52 MW that we're talking about right now to 77 MW or 80 MW also?

Both of them are at Rabale, Prateek. The facility which you have visited, you'd have seen the construction right adjacent to the place where you had all the meetings and the facility visit. That is the 77 MW one, which we'll be delivering to the customer now. Right opposite, you'd have seen the other two towers, which are the 52 MW, and based on the customer engagement, the final usage of that could be higher than 52 MW. At this point in time, it's been designed for that, but it has the capacity to scale up for a higher capacity. Both of them are in Rabale, part of the campus.

This 52 MW also will be commissioned or will be, Sir?

Yeah, 52 MW or a part of it will get commissioned this financial year, and the other part the first quarter of next financial year.

Thank you. Sir, you were saying something?

Yeah, Prateek, I would invite you once again to our campus so that you can have a good sense of the progress which has happened in those two facilities which are getting ready for delivery.

Sure. Thanks a lot, sir.

Thank you. Our next question is coming from Sourabh Arya with Oaklane Capital. Your line is live.

Yeah. Hi, sir. Am I audible?

Yes. Sourabh.

Yeah. Hi.

You're audible.

First question is, can you give some color for all three businesses going into next year? Like obviously, you were expecting till last quarter improvement in Data Services and even improvement in Network business. How should we think about all three businesses from revenue growth and margin perspective?

Yeah. Typically, it's forward-looking statements, Sourabh, and we refrain from that, but I can just give you a 30,000 feet view. Data Center business growth numbers I've already communicated as part of our communication. As against 129 MW of revenue-generating capacity, we have contracted for delivery this year. Already 81 MW of capacity is there. As far as the Network Services business is concerned, it's organically growing at double-digit numbers, of course, low double-digit numbers. That growth should happen along with the digital infrastructure consumption which we are witnessing in the country. On the IT Services business, we continue to stay focused on investing in people to build capabilities for the AI kind of infrastructure services.

A lot of work is happening over the last 18 months-24 months, and as and when the consumption picks up in the domestic market, we'll be ready for delivering those services. That investment will continue to be there for some time, given the fact that we are confident about its long-term prospects.

On the margin side, if you could give, like you were expecting breakeven of data services business, so how should we?

Yeah. I'll not be able to give a specific quarter. There is work happening to get to breakeven. I'll not be able to give a specific quarter when we will achieve that.

Okay. Sure. Over two years, you expect it to turn around? How should we?

Yeah. It should be.

How should we look at the progress of this business then? Would it be quarterly improvements?

No, you should see quarterly improvement going forward. I think two years is a very reasonable period to see that we get to break-even. It's a very reasonable period.

Okay. Whatever is happening in Middle East, so do you think some of the demand will shift to India? Have you started seeing it in interaction with clients that they're inquiring about?

Yeah, we are seeing that happen for our Data Center colocation business, and consequently, to our Network business as well.

Okay. Perfect, sir. Thank you. Thank you very much. All the best.

Thank you.

Thank you. As we have no further questions on the lines at this time, I would like to turn the call back over to management for any closing remarks.

Thank you for everyone, and your time on this call. Have a good day.

Thank you. Ladies and gentlemen, this does conclude today's conference, and you may disconnect your lines at this time. We thank you for your participation.

Thank you, Ollie.

Good morning, everyone, and welcome to the Sify Technologies financial results for the third quarter FY 2025-2026. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Praveen Krishna, Head of Investor Relations of Sify Technologies. Praveen, the floor is yours.

Thank you, Jenny. 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; and Mr. M.P. Vijay Kumar, Executive Director and Group CFO. . 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 Luri 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 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 announcement made in previous years. The presentation of the most directly comparable financial measures calculated and presented in accordance with the 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's website. Before we continue, I'd like to point out that certain statements contained in the earnings release and on this call are forward-looking statements rather than historical facts and are subject to risks and uncertainties that could cause actual results to differ materially from those described. With respect to such forward-looking statements, the company seeks protection afforded by the Private Securities Litigation Reform Act of 1995. These risks include a variety of factors, including competitive developments and risk factors listed from time to time in the company's SEC reports and public releases. Those lists are intended to identify certain principal factors that could cause actual results to differ materially from those described in the forward-looking statements but are not intended to represent a complete list of all risks and uncertainties inherent to the company's business. I would now like to introduce Mr. Raju Vegesna, Chairman of Sify Technologies. Chairman?

Thank you, Praveen. Good morning, everyone. And thank you for joining us on the call. India's growth story has moved decisively from promising to performance. Strong economic fundamentals, policy continuity and accelerating digital adoption are positioning India as a central pillar in the global technology ecosystem. India IT is entering into a new phase, one defined not only by scale, by -- but by leadership in digital infrastructure, cloud and AI-led innovations. As enterprises and government intensify their focus on AI, cloud and data-driven platforms, demand for the secure and high-performance and governance digital infrastructure is rising rapidly. At Sify, our strategy is aligned with this inflection point through a sustained investment in hyperscaler data centers, resilient networks and AI-driven platforms, positioning us to enable the next decade of enterprise transformation in India. Let me now bring in our Executive Director and Group CFO. Mr. M. P. Vijay Kumar to explain both the business and financial highlights. Vijay Kumar?

Yes. Thank you, Chairman. We continue to exercise fiscal discipline while making measured investments to strengthen our long-term capabilities. Our capital allocation across data centers, networks, and people for digital platforms remains guided by a disciplined approach to risk and future readiness with a focus on long-term value creation. Let me now expand on the business highlights for the quarter. The revenue split between the businesses for the quarter was Network services 37%, data center co-location services 40% and Digital services, 23%. In this quarter, data center co-location capacity of 9.1 megawatts was sold. As of December 31, 2025, Sify Network Services provides services via 1,214 fiber nodes, a 9% increase over the same quarter last year. And as at the same date, we have so far deployed 9,695 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 briefly sum up the financial performance for Q3 of financial year 2025-'26. Revenue was INR 11,596 million, an increase of 11% over the same quarter last year. EBITDA was INR 2,470 million, an increase of 29% over the same quarter last year. Loss before tax was INR 257 million and after tax INR 329 million. Capital expenditures during the quarter was INR 3,452 million and cash balance at the end of the quarter, 31st December 2025, was INR, 3,627 million. I will now hand over to our Chairman for his closing remarks.

Thank you, Vijay Kumar. Sify is committed to driving technology-led growth by enabling enterprises to modernize, expand and capture new opportunities. Our resilient infrastructure and comprehensive portfolio of services provide a strong foundation to deliver sustainable value and long-term returns. As we execute on this road map, I want to thank you for your continued confidence and support in our vision for the future. Thank you for joining us on this call. I will now hand over to the operator for any questions.

[Operator Instructions] Our first question is coming from Greg Burns of Sidoti & Company.

I just wanted to start off just asking about maybe an update on the timing for the IPO of Infinit Spaces. Are there any milestones that are upcoming? Or how should we think about the major milestones that still need to be completed and the timing -- the expected timing for that IPO?

Yes, Greg, we filed the draft prospectus middle of October 2025. And usually in the period of 3 to 4 months, we get the securities regulators approval. We are expecting the approval of the draft prospectus this month. And we will be guided by the bankers on the exact timing of opening the issue and getting listed. Once we get the SEBI's approval this month, there are additional processes in terms of updating the draft prospectus with the financials as of 31 December. And basis the banker's guidance, we will go to the market for listing.

Okay. And I guess you mentioned that you had sold an additional, I think, 9 megawatts of capacity this past quarter. Could you update us on maybe what your total design capacity currently is and how much of that in total has been sold?

Yes. The total design capacity is 188 megawatts, out of which the capacity which is ready for service is 130 megawatts. And out of 130, the total sold capacity is about 127 megawatts.

Okay. Great. And then of I don't know, maybe over the next 6 to 12 months, could you give us maybe an update on the road map for your new data center construction, maybe in terms of either DCs or capacity that you expect to bring online?

Yes. There are 2 facilities in our Rabale data center campus, which will go live in this calendar year for which we have contracted with the customer. And there are other 2 greenfield projects, which are under construction. One of which will get delivered middle of this calendar year and the other will get delivered middle of the next calendar year.

And the total capacity of those 4 facilities?

Okay. The aggregate capacity of all the 4 facilities at present is about 125 megawatts, but basis customers' actual deployment, the capacity could be a little higher because we are seeing customers bringing in AI workloads into the country. It has just begun. So the densities are expected to increase.

All right. And then lastly, the digital services still operating at a loss. How should we think about that part of the business longer term. At what point do you expect that to maybe either be at breakeven or profitable? When are you going to start to get some operating leverage on the investments you're making there?

Yes. To breakeven -- I don't want to sound forward-looking, but let me give a little guidance to the extent I can. The next fiscal year, '26-'27, latter part of the year, we should hopefully become breakeven. And depending on how the services market scales up for the new offerings, which we are investing, we will see profitability thereafter. .

Our next question is coming from [ Ramesh Vijaj ] of StockHifi.

Sir, you mentioned the 12.16 megawatt capacity sold since June 2025. How much of this is already revenue generating?

Out of that, the revenue generating will be about 4 megawatts because a substantial part of the orders have come in December, which will generate revenue in the coming quarter.

What is the average contract tenure and return on capital employed per megawatt?

For hyperscaler, the average [Technical Difficulty]

Hello, Jenny. We are experiencing difficulties on the line?

Yes. Ramesh, I'm going to just boost your line. Are you quite far away from your handset?

No, we are able to speak. I hope you guys are able to hear us.

That's better.

Jenny just a confirmation. I think we lost Vijay on this call.

Okay. Bear with me one second. Vijay's line is still connected. Vijay, can you hear us? Okay. The line is still connected. Just bear with me a second. I'll try and pull the line, just one second. Okay. I'm trying to get Vijay back in the call. So just bear with me, I try and do that. Okay. One second.

Yes, please. He got dropped, so he's asking to connect again.

Okay. For the moment, we have lost Vijay, and I'm not getting him back in at the moment. I will keep trying. In the meantime, if -- would you like me to carry on with any questions. We still have Ramesh on the line.

I would give it another -- could you hold for a minute, please? Could you hold for a minute?

Yes, certainly. Yes. Ladies and gentlemen, we'll just wait a moment to see if we can get the Chairman back on the line.

I have Vijay on my phone, and he is listening in on this call, so he can take your questions.

Okay. So Ramesh, if you would like to ask your question again.

The question was regarding the tenure of [indiscernible] .

Yes. The hyperscale contracts are all for a tenure of 7 years and with renewal for 2 further terms of a similar period and for enterprise contracts, it is 5 years and which usually tend to get renewed for similar periods.

Okay. Return on capital employed each megawatt per megawatt?

Return on capital employed, we measure it essentially for the stabilized facilities, which is facilities when they get fully populated. And for the fully populated facilities, the return on capital employed is in high teens.

So this IPO, which you're coming out with Sify Infinit, is this proceed going to be used for debt reduction of parent level? Or is it going to be used for fresh network expansion?

The IPO primary portion of it is going to go for data center expansion. A portion of the funds will go towards retiring the existing loans, and we will replace those loans with lower cost and longer-term infrastructure debt subsequently.

So how is Sify Infinit structurally separated like more debt, cash flow, everything, how exactly is it separated?

Yes. Sify Infinit Spaces is the 100% subsidiary of Sify Technologies Limited, separate legal entity. And its separate financial statements are available on our website. They are also available in the IPO documents which we have presented. It's also available at the MCA portal. The separate financial statements are available. And since our [ debt ] is listed in the Bombay Stock Exchange, the quarterly results are also updated in the Bombay Stock Exchange portal.

Okay. is the existing Sify shareholders ADR going to get any kind of shareholder quota in the new IPO?

We have been advised by the bankers that the existing ADR shareholders are holders of American Securities and the legal framework does not allow any priority to be given. However, the U.S. shareholders who have -- if you are in U.S., you can -- and you have a nonresident account in India, you can participate through the NRE account which you have here.

[Operator Instructions] Our next question is coming from Prateek Singh of IIFL Capital.

The first question is on the depreciation. So basically, I understand that the management estimates useful life for power equipment to be around 8 years. Is it something -- does it mean that after 8 years, we'll need to replace power equipment? I don't think so, right? It's just for accounting, the power equipment would be lasting for 15, 20 years. Is this understanding correct?

Exactly. You're right, Prateek. In fact, we have been in business for about 25 years. And except for certain items like the UPS and the batteries, rest of them have a life north of 15 years, north of 15 years. One of the reasons the company took a depreciation policy of an average of 8 to 10 years is to coincide with the pricing model, which the company adopts. So our pricing model assumes 8 to 10 years' capital recovery. And hence, the depreciation is synced to that.

The next question is on margins of the data center business, which is kind of a steady state and growing very well for us. Margins, while I understand that they are stable, we saw a small dip in margin this quarter. So usually, when we have to forecast numbers, how should we look at it? Is it like hyperscalers? Are they driving pricing down or the situation is quite tight in India, and that's not the case. It might be due to power costs going up. How should we look at margins and pricing environment going ahead?

Okay. The EBITDA margins are consistent between 44% to 45%, 100 basis points difference at times arises between quarters, depending on the customers ramping up their IT power consumption. So when -- for example, Rabale Tower 5 went live in the last 9 months, and those equipments have come in, which have contributed to capacity revenue, but the power revenues start scaling up over a period of time. And similarly, whenever new large capacities come live, there are -- there is that period of ramping up for about 6 to 9 months where you have some operating expenses, which later give us the operating leverage to reduce the same. So it generally fluctuates between 100 to 200 basis points. Otherwise, it's close to 45%.

Understood. And sir, so like you said, like sir said earlier that our design capacity is 188, installed is around 130, operational is 127. So did I hear it correct, the installed is 130, right? Or was it 150?

130.

Okay. So these are the same numbers as of June as per the DRHP. So does it mean that the CapEx that we are doing right now is going into capital work in process and we can see a step jump when a new facility is commissioned.

Correct. Correct. You're right. The design capacity of 180 between the DRHP of June and now is the same. A substantial amount of capacity is going to get added in this calendar year, where we have Rabale Tower 6 and 7, which will go live and Rabale 11 also, which is going to go live. So you'll have a substantial capacity getting added.

And what kind of time difference do we see? Like -- so I understand that design capacity is bare shell, right, without UPS, gensets and all those things and installed capacity has all those things. So what kind of time difference do we see between 130 going to 188? Is it more like 6, 7 months? Or is it more like 12 months? So basically, how long does it take for installed capacity to rise to the level of design capacity in short?

Yes. So the markets are divided as Mumbai and other cities. In Mumbai, the recent experience is any capacity you add, the design capacity getting fully populated is approximately about 15 months, 15 months, whereas in other cities, where you build on a tower concept, where you build a core and shell meet the future demand because when customers come in, they see whether the capacity is scalable, that becomes one of the important requirements. So in other markets, they experience this, it takes about 3 to 4 years to get fully populated. But at times, if a hyperscale customer comes in, then it gets populated earlier. The second question you had on pricing. We are not seeing any pricing challenges, whether it is hyperscale customers or the enterprise customers. The pricing -- the return on capital is fairly consistent [indiscernible] for customers to look at it is availability of capacity on time. And the service providers quality of product and operations and maintenance is a key criteria for the customers and it continues to be so now.

Understood. And sir, just a bit...

Prateek, your line cut out for a second. Would you mind reasking the question, please?

Sure. So is my line clear now?

Yes.

Better. Better.

Yes. So on the related party disclosures in the DRHP, when we talk about expense transfer and revenue transfer with the Sify Technologies, I wanted to get more sense as to what these are and how should we look at it?

Yes. Yes. So the related party transactions are broadly 2 things. The revenue transfer and the expense transfer, which you see there is actually in the context of some of the contracts which were signed by the parent company before the data center business was carved out. So those customer contracts have remained with the parent company because they are largely with the public sector companies, so those contracts, whatever revenue comes, we pass it on as it is to the data center entity as per the business transfer agreement. So parent company does not have any margin. It's just a simple revenue and expense transfer, which is -- that's point number one. Second is there are 3 data center assets, which are owned by the parent company. Those assets have been given on lease to the subsidiary because when we did the business transfer in 2020, it was tax efficient to retain the asset in the parent company and give it on a long-term lease to the subsidiary. The third point is as far as the go-to-market of the company is concerned, the go-to-market, we have for hyperscale business, a dedicated go-to-market team within the data center entity. But for the domestic enterprise business, we leverage on the go-to-market capabilities, which are there in the parent company, where we have about 5,000 enterprise customers. So that go-to-market cost and the marketing costs are apportioned on an actual cost basis to the data center entity.

Understood. And just one last clarification. When sir said that December quarter will -- the capacity sold in December quarter will generate revenue in the upcoming quarter. By upcoming quarter, do we mean March or June?

March, March, March. A few more questions we can interact any time at your convenience, please feel free to reach out to us.

Our next question is coming from Sourabh Arya of Oaklane Capital.

Am I audible?

Yes, you are. Yes.

Sir, my first question is actually on the Network business. So why this business is flat in this quarter?

Yes. As far as the Network business is concerned, during this quarter, we had some bit of price corrections for our existing customers. Second is there is also a small shift of customers moving from MPLS to Internet and when the customers move from MPLS to Internet because of the new technologies like SD-WAN and SASE, the price realization comes down. But at the same time, we manage our costs also to protect our margin. So volume-wise, we would have grown, but the revenue numbers would look a little flattish.

So does that mean this exercise will continue? And second, then how should one look at the growth of this business? Because I was under the impression, ultimately, it should grow in line with the data center business.

Correct. Correct. Correct. And that's actually what will happen. The Network business will grow similar to the Data Center business, but probably not at the same pace because Data Center growth momentum is significantly higher, but Network will also grow alongside the Data Center business.

Okay. And second was there's continuous new [ Vizag ] and this Google partnership on the networking side. Can you explain that if like what exactly is happening? And what kind of CapEx Sify would be doing because these are very large numbers that keep coming.

Yes, yes. So as far as Sify Network business is concerned, you might be aware, we are a carrier-neutral cable landing station operator in the country. We have one operating cable landing station in Mumbai for over a decade where there are 3 cable systems, which are landing and those cable systems may take them into the city to the various data centers. Now some of the hyperscalers, as part of their overall strategy, are looking at landing capacities in other cities in India. Visakhapatnam happens to be one such chosen location. So Google for their cable landing system, which is coming on the eastern side has chosen Sify as the partner for setting up the cable landing station where their cable will come and land. So this cable will land in a data center, which we are setting up in Visakhapatnam, which we call as an edge data center, where we'll have some anchor customers as well. And this cable will land there. And this cable from the data center and the cable landing station investment is not a material investment. It's a very strategic investment, though. The material investment will be carrying the capacity from the cable landing station to Google's own data center, which they are putting up in Visakhapatnam, which is not too much of a distance. So that will be a capital investment to be done. At this point in time, we don't have a real estimate of how much is that. But typically, those investments are largely funded by the customer themselves. So they would not be balance sheet heavy for Sify Technologies.

Okay. That is fine. So you will continue to benefit from this but not by putting too much of capital.

Correct. Correct. It's a very strategic investment. What it actually helps us in the long term is carrying the traffic which comes to the subsea cable systems into the data centers, length and breadth of the country. So that's the kind of strategic position it comes. It's similar to an international -- cable landing station is similar to an international airport where the traffic comes in. And from there, you carry the traffic to your network into the domestic cities. So that's a simpler way of understanding the cable landing station investment.

Okay. Okay. And one last question. So you said that the new data centers, the Rabale, the new towers, there the capacity is some 30s, right, per tower. But you are seeing some AI investments if they can upgrade the capacity. But is the -- so does it mean the CapEx per megawatt for some of these upgradation is far more than your traditional $5 million, $6 million per megawatt investment, which happens in normal scenario?

Yes. So currently, what is happening, Sourabh, is the 4 data centers, 2 of them are 77 megawatts, the other 2 are 55-megawatt. The 77 megawatts we are going to host AI infrastructure of the customer. So a customer is bringing in substantial amount of AI into that facility. This facility was originally designed for 52, whereas now it's going to be for 77 megawatts. And the incremental capacity, incremental CapEx cost for the AI is marginal for us, and some of it is getting funded by the customers themselves because they are bringing some proprietary design. Second, coming to the 52 megawatt is what I mentioned. The other 52 megawatts, which I mentioned, has been originally designed for cloud workloads. But if the customer is coming with AI workloads, we have the opportunity of increasing that 52-megawatt to a higher capacity. So it depends eventually on what kind of workloads the customer is bringing in.

Sure. This is helpful. Just very lastly. So when the normal DCs there, you have got air cooling. So does it mean -- and as you are saying, the CapEx would not increase much and it is done by the customer only. So does it mean none of these new capacities have some liquid cooling, et cetera, which are very, very expensive. And even if those are there, those would be borne by the customer.

No, no, no. That's not the right way to understand. All our data centers, which have gone live since 2024, are NVIDIA certified and capable of hosting liquid cooling systems. They're all designed for that. And our new facilities, Rabale 6 and 7, which is coming, right from day 1, will have liquid cooling system. And the commercial engagement with the customers varies from customer to customer, contract to contract. Some contracts we incur the whole amount and it gets added to the capacity charges. Some customers, the customer invests in that for which we enable the same. So it depends on contract to contract and customer-wise. And whenever you have the liquid cooling system coming in, the incremental cost is approximately $1.3 million per megawatt.

$1.3 million per megawatt, right?

Correct. Correct. Correct.

Okay. Okay. That is helpful, and that is borne by the customer or by you?

As I told you in some cases, the customer does it. Sometimes we do it and charge from the customers.

Okay. Perfect. And one last, if I can squeeze, is on the data services side, though you gave the guidance that maybe we will see some flat margins for breakeven by next year, second half. But what kind of ramp-up in this business is expected? Like because you've been building this business for quite some time now. And what are the green shoots?

We are expecting a combination of actions to help us get to breakeven. One is from our portfolio of services. We will look at focusing on 2 or 3 services more for revenue ramp-up like we have the cloud and managed services, the network managed services and the security managed services. So those are a portfolio, which we will see some revenue growth to help us get to breakeven, where we are actually developing capabilities around AI ops to bring the differentiation to the customers. That's part one. Some of the portfolios where the scale of opportunity is limited, we might decide to repurpose those resources and get them to businesses which are productive. So we are looking at that carefully, and we will do it in a calibrated manner over the next 3 to 4 quarters. We have good quality resources engineers, very young engineers, whom we have trained good quality people. So we would like to monetize their capabilities by increasing the focus on certain set of services.

Our next question is coming from [ Ramesh Vijaj ] of StockHifi. Ramesh, can you hear us? Ramesh. It's quite hard to hear you.

Are you able to hear me?

Yes, we can hear you now. You can ask a question.

There is a small thing that we would like to know. How should we go forward with this equity stability, especially such as CapEx and debt going forward, which is continuing to rise?

Yes. As the capital requirements is substantially for the data center business, and our initiative now to do an IPO helps us to create the stock as a currency. The initial primary capital which you are raising should take care of the demand growth for the next 2 to 3 years. And thereafter, we should be able to do a combination of rights and QIPs to raise capital to meet the incremental capital requirements. In fact, this listing is essentially to fund the growth for the future, given the fact that the business has very good prospects over the next decade.

What kind of offloading has been -- or what kind of new equity is being issued? How much percentage would be impacting for the existing shareholders for the Sify Infinit?

The DRHP has been filed and it is in the company's domain. I would encourage given the fact that these are all subject to capital market regulations, I encourage you to read the same. The primary capital which we are raising is INR 2,500 crores, and there's an offer for sale from our capital partner, Kotak, where we have [ Arya ] and GIC as LPs, where they'll be liquidating a small portion of their existing holding for INR 1,200 crores. So total issue size is INR 3,700 crores.

And our next question is coming from Prateek Singh of IIFL Capital.

Just a clarification on an earlier answer. So when we said we have 4 capacities in line, Rabale, 2 brownfield and 2 greenfield. So these 2 greenfield are in Rabale as well or they are in some other city or some of the area?

Yes, Prateek, all the 4 are greenfield. All the 4 are greenfield. 2 of them are right adjacent to the existing facilities. And the other is right opposite -- other 2 are right opposite the existing facilities. They all constitute a single CapEx. All the 4 are greenfield projects.

Okay. In Rabale itself, right? All 4 are in Rabale.

In Rabale. They're all part of the same campus and all the 4 are greenfield projects.

Understood. Understood. And when we sign these AI contracts, do they have -- do we expect to maintain similar kind of return on capital employed in AI contracts like cloud? Or would they be a bit higher?

At present, we are seeing same kind of returns. Early stages, Prateek, let's see how it increases in the future. But at present, it's the same set of returns.

Okay. And the Andhra Edge facility will be 50 megawatts. Is that the right understanding?

No, no, no. Andhra Edge facility is on a land parcel of 3.6 acres. The initial design could be for 5 acres, but it's early stages. Once everything is firmed up, we will communicate to you. It's early stages. But typically, all the edge sites, we are designing it for 5 megawatts.

Understood.

And just to clarify on that Andhra one. Apart from the 3.6, we have a land allotment of 50 acres, probably your 50-megawatt context came there. So we have a land allotment of 50 acres, which is there in Visakhapatnam, which is for the future capacity additions depending on how the demand comes in.

Well, we appear to have reached the end of our question-and-answer session. I will now hand back over to Raju for any closing comments.

Thank you for joining us on the call. Have a good day. Thank you. .

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

Greetings, and welcome to the SIFI Technologies Financial Results for Second Quarter Financial Year 2025-2026 Conference Call. [Operator Instructions] And please note, this conference is being recorded. I will now turn the conference over to your host, Mr. Praveen Krishna. Sir, you may begin.

Thank you, Ali. I'd like to extend a warm welcome to all our participants on behalf of SIFI Technologies Limited. I'm joined on the call today by Sir. Raju Vegesna, Chairman; and Mr. M.P. Vijay Kumar, Executive Director and Group CFO of SIFI 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 Luri Group at 1 (646) 824-2856, and we'll have one 1 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.convestors. 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 SIFI 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 Standard, or IFRS, and will defer some work from the GAAP announcements made in previous years. The 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 developments and risk factors listed from time to time in the company's SEC reports and public releases. Those lists are intended to identify certain principal factors that could cause actual results to differ materially from those described in the forward-looking statements but are not intended to represent a complete list of all risks and uncertainties inherent to the company's business. Let me now introduce Mr. Raju Begesna, Chairman of Sify Technologies Limited. Chairman.

Thank you, Praveen. Good morning. Thank you for joining us on the call. As India's digital transformation is entering a decisive phase, redefining its role in the global technology ecosystem. The acceleration in the cloud adoption, AI integration and data center expansion underscores India emerges as the next hub of digital infrastructure. Our focus remains on aligning with this momentum through the sustained investments in the hyperscale data center robust network expansion and I release cell platforms. These initiatives are strengthening our position as a trusted enabler of enterprise transformation across both public and private sectors. We believe the next decade will see India's set global benchmark for digital innovation. Sify will continue to play a pivotal role in empowering the journey, building the infrastructure and platforms that will drive the country's growth in the AI-led economy. Let me now bring our Executive Director and Group CFO, Mr. Vijay Kumar, to explain both on the business and the financial highlights. Vijay Kumar?

Yes. Thank you, Chairman. We remain steadfast in our commitment to fiscal discipline while continuing to invest strategically for long-term growth. The current phase of expansion across our data center, network and digital platforms. reflects deliberate choices to build future ready capabilities. The network and data center businesses are scaling as per plan, the loss in our IT services business, represents our continued investment to prepare ourselves for the opportunities ahead. Our liquidity position remains robust underpinned by prudent cash flow management and operational efficiency. As we move ahead, our focus will be on sustaining agility in financial planning, embedding accountability and sustainability into every vision and driving enduring value creation for all stakeholders. Let me now expand on the business highlights for the quarter. The revenue split between the 3 businesses for the quarter was Network services, 41%; data center services, 13% and digital services 20%. During the quarter, Sify sold 3-megawatt additional data center capacity, as of 30th September 2025, Sify provides services via 1,196 fiber nodes across the country, a 12% increase over the same quarter last year and has deployed 9,992 contracted SDWAN 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 briefly sum up the financial performance for Q2 for financial year '25, '26. Revenue was INR 10,533 million, an increase of 3% over the same quarter last year. EBITDA was INR 2,361 million, an increase of 20% over the same quarter last year. Loss before tax was INR 194 million and loss after tax was INR 275 million. Capital expenditure during the quarter was INR 3,064 million. The cash balance at the end of the quarter was INR 4,149 million. I will now hand over to our Chairman for his closing remarks. Chairman?

Thank you, Vijay Kumar. In the coming quarters, our focus will sharpen an empowering AI-led transformation and partnering with the new generation of enterprises that ready to innovate and scale with our integrated infrastructure and mature suite of digital services, Sify stands poised to lead in this new era of intelligent computing. I extend my sincere thanks to your continued trust and belief in our future. Thank you for joining on this. I will now hand over to the operator for questions.

[Operator Instructions] Our first question is coming from Jonathan Atkin with RBC Capital.

A couple of questions, if I may, about the data center services segment. First of all, can you give us a flavor for the types of returns, financial returns that you are achieving when you do sort of like the 3-megawatt deal that you referred to and just the range of financial returns that you're thinking about for enterprise as well as hyperscale deals. And if you could also remind us what you consider to be kind of your all-in cost of capital.

So as far as the 3-megawatt deal is concerned, it's a very small enterprise deal. Our data center business is both hyperscale and enterprise, approximately in the ratio of 2/3, 1/3, and our project IRR historically have yielded IRRs north of 20%, which is a little late 20% kind of IRRs have been the returns which we have generated.

And then as you look at the opportunity set, given where India is in terms of hyperscale AI, but also enterprise AI adoption as we look over the next couple of years, what do you see the sales pipeline looking like that you could accommodate? And then any sort of general comments about other players in the market that are also building in some cases, larger scale projects compared to yourself and how you see the competitive environment?

The next couple of -- yes, please, sir, please go ahead.

John, basically, as you know that we have big campuses in Mumbai and in Noida and Chennai. And we invested what are the basic requirements as India I scales up, we are getting ready. Like similarly, we are looking at multiple places. And basically, we are capable of delivering big projects, and we are looking at this AI momentum tick off in India, and which is we are seeing some positiveness both hyperscalers and enterprises. So what is in a simple sense, is we are ready to expand. And your point is there are other people. Yes, there are other people. But I think one other thing is being 25 years in the market in India, and we are established as a brand. And I think we will get our own share here.

And then lastly, just in terms of the breadth of opportunity, you mentioned 3 markets where there's scale development and demand, but also a lot of activity around edge, like multiple double-digit number of cities where there is also data center opportunities that are recognized and maybe comment about the edge opportunity as well as maybe how that kind of fits in with your network services business?

Yes. So yes, we are building edge data centers also. And one of the uniqueness of Sify is having a network business that positions us not only just a colo player and network integrated with that. So we have a plan to expand these Tier 2, Tier 3 cities where it is age is important. And we have our own sites planning, building 10 to 12 sites over the time based on the demand. So there also, we are making ahead into certain cities. Once they're live, we will more than happy to share with. And yes, you're right. It also we are playing -- we are going to play a role.

Our next question is coming from Greg Burns with Sidoti & Company.

Just wanted to ask about the proposed IPO of Infinite spaces. Why was now the right time to consider that type of transaction?

Yes. So Greg, the tailwinds for the data center, colocation industry growth is very strong. And it is important to have access to capital. And the listing will help us to continuously access capital to meet the demand forecast, which we see.

Okay. And what percent of the -- the new entity will Sify retained ownership of?

We will retain ownership of a substantial percentage grade the exact percentage will be known after the book building process is completed. But what we will be holding is a very substantial percentage going forward and actually [indiscernible] we will dilute.

Okay. Great. And Kotak, their investment is converting into Infinite spaces equity? Or are they -- does it convert into Sify Technologies equity? And what percent -- or how much stock are there debentures converting into?

Yes. So their debentures will get converted into Sify Infinite Spaces equity. And this conversion will happen after the draft prospectus is filed by -- is approved by the securities regulator in India. And at that time, we'll publish the exact percentage of how much will be they're holding. And Kotak's interest is to remain invested in the company. A small portion of their holding, they will be offering for sale as part of the public offering, essentially to support the float on that stock.

Okay. And then you mentioned kind of how your network business integrates or works with the data center operations. So once you split off the data center business. Are they going to be signing long-term like multiyear agreements with the networking operations? Or are they free to kind of go contract elsewhere?

No. Even at present, the contracting happened separately for the networking with the parent company, which carries the licenses for the networking business. And for co-location, there are separate contracts which are entered with the data center company. The customer relationships and the go-to-market strategy for the company will continue to remain the same. And to our customers, we'll present an integrated offering where they'll consume network services, colocation services and IT services, which they would require.

Okay. Great. And then just lastly, you mentioned the 3 megawatts of new contracting capacity this quarter. Can you just give us the full complexion of the data center business. I know you have 14 operational like how much design capacity do you have in the market and versus like what is currently operational?

We have about 188 megawatts of design capacity, which is ready for sale, out of which about 130-megawatt is built. And what is now sold is a small requirement for one of our existing customers. The rest of it is ready for sale and at different stages of customer conversations for contracting.

Okay. And then what is the -- I guess, the road map for the rest of the -- or maybe the next 12 months in terms of data center builds, how much design capacity are you how much design capacity, I guess, is in the pipeline to be built out?

Yes. So Greg, I have a little bit of a constraint. Generally, we don't make forward statements and more importantly, having filed the draft prospectus with the securities regulator I'm prohibited from making any forward statements. But I just want to suffice it to say that there is a substantial amount of new greenfield project construction, which is happening in parallel.

Our next question is coming from [ Maher Saker ] with [ Prithvi ].

I have a few detailed questions and we'll take a bit of time for the Q&A. So my first question is regarding the IP of the Sify Infinite Spaces, in which Sify Technologies directly holds equity given that Sify NASDAQ listed entirely where about 84% is held by Promoter Group and 16% by ADR holders. Could you please explain the rationale behind pursuing the IPO of Sify Infinite through a holding company structure under rather than directly distributing ownership or demerger based structure in Sify Infinite between promoters and ADR holders in the same 84-16 proportion and then proceeding with the -- so basically, because of this holding company set up, both the promoter shareholders and ADR holders are currently unable to directly participate in the valuation upside of the data center business. So what was the like strategic regulator, your tax rationale behind adopting this holding company now.

Prithvi, I think it's a very involved question. I think we have got guided largely by our bankers and advisers in terms of the best structure for raising capital. And as you know, the data center business is completely India-focused business and capital-intensive business. And equally important, there is depth of capital market in India, which we have witnessed over the last few years. And in terms of value realization, and to eventually reflect hopefully, in the parent company. The bankers have advised is the best part.

Like actually, I have also the limited knowledge. So if you had gone through the demo structure, so it would have been helpful to the minority holders to unlock the value. So like is there any intent post IPO to simplify the structure?

It's difficult to respond to that, Prithvi, now. We will see it as time passes by whatever best headways we get in terms of what is best for the shareholders, we will certainly see.

It would be just helpful like if you can keep this in the mine like for future perspective. And my next question is regarding -- like I just wanted to get a sense of the road map like what is the expected time line for the infinite IPO from here?

Yes, the DRHP was filed last week. And usually, CB takes a time of 3 months for approval of the draft prospectus. And thereafter, we get guided by the bankers in terms of what is the appropriate timing to take to the market.

Okay. Okay. My next question is regarding the network services business. So if we look at the trend over the last decade, the operating margins have declined materially from 23%, 25% during FY 2016 to '20 to about 10%, 15% levels between -- in last 5 years, even though revenues have grown only at about 5%, 6% CAGR. So while I noticed the recent improvement in margins in Q1 and Q2 at around 14%, 18%, could you please like elaborate on what led to this sharp margin compression earlier like is this margin behavior structural or cyclical? Can we expect this segment to gradually revert to the 20%-plus range as utilization and demand improves?

Correct. It is structural, and it's by design. And you have started witnessing the improvement in margin. What happens is as the network expansion happens. And more importantly, when you invest in new age networks to support AI kind of demand. You invest in new infrastructure, which will take time to monetize. And these are important investments, which have to be done ahead of time. So these are done by design and as a structure and the trend which you have observed should continue. .

Okay. So like should we assume like the current 14%, 16% band as the new steady state?

No, no, no, no. it should get better.

So like over the future period should -- we should be able to see 20% plus kind of range, right?

Yes. That's our expectation, and we are working towards that.

Okay. And my last question is on the digital services segment. So like similarly, over the last decade, the business has shown like in revenue growth periods of high growth like FY 2016 to '18, then FY '23, followed by flat or negative years with an overall CAGR of about 11%. At the same time, operating margins have steadily eroded from around 15%, 20% during FY '16, '18 to negative territory in '24, '25. And the losses have also continued in Q1 and Q2. So can you please help us let me understand the key factors behind this deterioration?

Yes. So 2 reasons, Prithvi. One is there's a complete change in the way IT is getting consumed by enterprises post-COVID. Earlier, there is to be a substantial amount of IT projects, which were delivered on a system integration model. But post-COVID, most of it is consumed as a service. So project-based revenues by design as a company, we have chosen to scale it down. So unlike in the past, that's 1 reason. Second is also what's happening in the last 3, 4 years, and we have consistently shared in all our communication. This is a business where we are investing significantly in terms of people and in terms of building IP to be very relevant for the way IT is going to be consumed by the large enterprises and the upper end of the medium enterprises. So there's a lot of work happening there. It will take some time. It will take some time. But we are confident that we will be relevant to the market with the investments which we are making now. And we'll continue to do this for a few more quarters before we start hopefully seeing the results.

[Operator Instructions] We have a question from [ Sri Tho ] who is a private investor.

I have a couple of questions, pretty much in line with what other participants have asked. Correct me if I'm wrong, from whatever I have reviewed the published results. The network services has grown at 16%. Data Services is around 25%. The digital services has degrown around 30%, 35%. This quarter. Is that a fair statement?

Yes.

So related to this, the digital services, I know we have spoken like in the last few quarters, that whole offering is being redesigned, maybe some non-value added services are being discontinued. That entire division is being revamped, so to speak. I know the network services and data center are kind of related to each other that you could offer both. How much of digital services is stand-alone? And how much is it actually dependent on other 2 businesses? So to reframe the question, data center client might request even the network services. How much of them are actually requesting for digital services?

Yes. So Srikanth, as far as the IT services are concerned, we broadly offer network managed services, then we offer the cloud and managed services. then we have security-related services broadly at a high level. The network managed services is very closely linked with our network business, the network infrastructure business. So in the network managed services, we manage for enterprises, large and including the bank's PSUs. We manage the networks for them. irrespective of where they are sourcing from the whole network is managed best. So there is a correlation there. And as far as the cloud and managed services are concerned. The cloud services, ultimately for the customers that require a good network to reach the cloud, whether it is cloud, which we build for them in our facility or the public clouds. So we have solutions, including technology platforms, which help enterprises to manage hybrid cloud consumption where they consume partly from public cloud and partly from the private cloud, which is set up on our data center, there's a correlation. And our security solutions are again largely around the infrastructure related security solution, whether it is security at the network layer or at the data center layer or the cloud layer. And of course, we do some bit of security around applications as well. So there is correlation. And beyond this, as far as our enterprise customers are concerned, the customer touch points are similar. So our effort is to ensure that -- in the large enterprises, we are able to maximize our share of engagement with them. So we have witnessed some amount of success in that. will continue to put our efforts to get it better.

Okay. Okay. So the other question, again, going on to the digital services. So it's basically the loss in the Digital Services division has dragged the overall results. Otherwise, this quarter result is probably similar to last quarter, maybe it growth? Had it not been for the loss in digital services?

Correct. Correct. Correct.

Okay. Okay. So obviously, I'm sure this division is on focus now on everybody's radar that you would obviously don't want this to drag the results of other divisions within the group.

Correct. Correct. You're right. And we are focused on that. But we don't want to stop investigated because in the -- unlike the network and data center where your investments are in balance sheet items, in the case of IT services business, your investment is in the P&L item. So this loss sort of reflects our investments for the future. And of course, we are focused on reducing this monetizing it early. And if some of our beds are not working, we will redesign our strategy. And also, we are focused on that.

Okay. Okay. And 1 last question, sir, on the upcoming IPO. The fact that the CPI Infinity spaces will be listed in India. Sify Technologies is the holding company, which is a NASDAQ listed. So we are indirectly a shareholder in not indirectly, directly shareholder in Sify Infinity Spaces, which will be listed in India. Given that the existing Sify Technologies shareholders will not be able to directly participate other than any Indian resident who can apply in the IPO, have you considered doing any kind of -- I mean lack of better word, maybe private placement or some kind of opportunity for existing investors and Sify Technologies who have an appetite to probably participate in the proposed IPO other than just applying in the IPO whoever is eligible?

Yes. We haven't done any specific work on this. But let me socialize with the bankers. We have guided on the entire process by the bankers of regulatory process and what is best for maximizing the value to all the existing shareholders.

It just may be a nice way of rewarding the existing shareholders.

I've understood your ask, but I think I need to be conscious of the regulatory network as well.

As we have no further questions on the line at this time, I would like to turn the call back over to Mr. Raju Vegesna, for any closing remarks.

No. Thank you very much for joining this call and having continuous interest in Sify, and have a good day. Thank you.

Thank you, ladies and gentlemen. This does conclude today's call. You may disconnect your lines at this time, and we thank you for your participation.