Sify Technologies Limited — FY2022 Form 20-F
Business context and reporting period. This is Sify’s annual report for the fiscal year ended March 31, 2022, not a standalone fourth-quarter report. Sify provides network-centric, data center and digital ICT services, primarily to enterprise customers in India. Its financial statements are consolidated, prepared under IFRS and presented in Indian rupees. Amounts below are in ₹ million unless stated otherwise; U.S. dollar figures in the filing are convenience translations.
Key financial results
| Metric | FY2022 | FY2021 | Change |
|---|---|---|---|
| Revenue | ₹27,025.7 | ₹24,319.5 | +11% |
| Operating profit | ₹2,872.7 | ₹2,390.6 | +20% |
| Operating margin | 10.63% | 9.83% | +0.80 percentage points |
| Profit before tax | ₹1,848.2 | ₹1,600.3 | +15% |
| Income tax expense | ₹590.3 | ₹68.4 | Higher by ₹521.8 |
| Net profit | ₹1,257.9 | ₹1,531.9 | -18% |
| Net margin | 4.65% | 6.30% | -1.65 percentage points |
| Basic / diluted EPS | ₹6.89 / ₹6.73 | ₹8.53 / ₹8.45 | Lower year over year |
Revenue growth was led by data center services, up ₹1,953 million, and network-centric services, up ₹1,072 million; digital services declined ₹319 million. Data center revenue rose 35% to ₹7,494 million, network revenue rose to ₹12,011 million, and digital services revenue fell 4% to ₹7,520 million. One data center customer generated ₹3,038 million, more than 10% of Group revenue.
Cost of goods and services rose 9% to ₹16,042 million. Data center power costs increased ₹773 million, reflecting higher facility utilization and tariffs; network costs rose with added capacity and links. SG&A increased 9% to ₹4,944 million. Depreciation and amortization increased 16% to ₹3,298 million as new assets were capitalized. Management attributed the improved operating margin to higher asset utilization and revenue mix. A ₹14.6 million goodwill impairment was recorded after Sify discontinued current-affairs and sports content on its portal.
Cash flow, liquidity and debt
- Cash from operating activities was ₹2,245 million, down from ₹6,967 million. The filing attributes the decline in part to higher receivables and inventory, tax payments of ₹1,275 million, and working-capital movements; customer advances and payables provided offsets.
- Cash used in investing was ₹7,593 million, mainly for data centers, renewable energy and network expansion. Capital expenditure was ₹4,811 million, and committed capital expenditure at year-end was approximately ₹6,651 million.
- Cash from financing was ₹4,170 million, principally reflecting increased borrowings and proceeds from the data center subsidiary’s Kotak financing. Cash and cash equivalents including restricted cash were ₹4,574 million at March 31, 2022, versus ₹5,502 million a year earlier; ₹792 million was restricted. Cash net of bank overdrafts, as reported in the cash flow statement, was ₹4,202 million.
- Net current assets were ₹902 million, compared with ₹287 million. The balance sheet reported borrowings of ₹14,880 million, lease liabilities of ₹2,207 million and bank overdrafts of ₹372 million. Management separately stated total borrowings including lease liabilities of ₹17,459 million, of which ₹7,975 million was due within 12 months. It estimated next-year interest outflow at ₹589 million.
- Sify used ₹5,067 million of a ₹6,010 million working-capital facility during FY2022 and reported ₹2,235 million of unused non-fund limits. Management said operating cash and existing credit lines were expected to meet liquidity needs, while noting that future capital needs and funding sources could change.
Material changes, outlook and risks
- Growth increasingly came from data centers: their share of revenue rose to 27.74% from 22.85%, while network services were 43.94% and digital services 28.32%. Sify reported 101 MW of data center capacity across 11 facilities and said 67 MW of a planned 231 MW of green power had been delivered by year-end.
- Management’s FY2023 strategy is “digital@core,” building on “cloud@core” through infrastructure investment, productized solutions, employee skills and automation. Sify expects further capital expenditure in FY2023 but provided no specific earnings or revenue guidance.
- Sify Infinit Spaces agreed to receive up to ₹4,000 million from Kotak Special Situations Fund before March 31, 2023 and may seek up to a further ₹6,000 million under specified conditions. It had received ₹2,020 million by February 2022. Proceeds are intended for data center expansion, land, renewable energy and debt repayment. The CCDs are mandatorily convertible, carry a 6% coupon, and include a put-option arrangement with the parent in specified circumstances.
- The Board recommended no FY2022 dividend, citing the pandemic recovery, geopolitical and supply-chain uncertainty, and the need to conserve capital for expansion.
- Key risks include intense pricing competition, utilization and power-cost exposure, substantial data center investment and funding needs, customer concentration, collection risk, cyber and service disruptions, and dependence on third-party network providers. The filing also identifies COVID-19 aftereffects, inflation, supply-chain disruption and Russia’s invasion of Ukraine as sources of uncertainty.
- Telecom license-fee disputes remain a contingency. Sify challenged demands on revenue from non-licensed businesses; the Madras High Court had stayed recovery, and proceedings remained pending. TDSAT quashed certain demands in February 2022, while related appeals and issues remained subject to further proceedings. Other disclosed matters include service-tax and provident-fund disputes and export obligations under the EPCG scheme.
- The auditor issued an unqualified opinion on the IFRS financial statements and on internal control over financial reporting. The auditor identified valuation of trade receivables as a critical audit matter. Management and the auditor reported effective internal controls as of March 31, 2022.
Important facts for investors to verify
- Reconcile the filing’s debt and liquidity disclosures, including the stated ₹17,459 million total borrowings including leases, balance-sheet borrowings, overdrafts and the ₹7,975 million due within 12 months.
- Assess the quality and collection timing of receivables: net trade receivables were ₹10,785 million, including ₹1,293 million aged over 365 days; the auditor highlighted receivable valuation as a critical audit matter.
- Track the customer contributing more than 10% of revenue and test whether data center growth and utilization can offset declining digital-services revenue and rising power costs.
- Review funding, conversion and put-option terms for the Kotak CCDs, and the funding plan for ₹6,651 million of capital commitments and continued expansion.
- Confirm the status and potential financial exposure of telecom license-fee, service-tax, provident-fund and EPCG matters. The filing presents some litigation amounts in different sections and units, so the exact exposures should be checked against the audited notes.
- Check reported figures against the full audited statements: portions of the filing contain apparent inconsistencies, including a network-segment growth percentage that conflicts with the reported revenue increase.