Sify posts maiden net profit of $2.3mn for the year

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Sify Limited (Nasdaq National Market: SIFY), a leader in consumer Internet and Enterprise Services in India with global delivery capabilities, announced today its Unaudited consolidated US GAAP results for the year and fourth quarter ended 31^st March 2007.

 

Performance Highlights for the year 2006-07:

 

·  Sify reported revenues of $ 128 million for the full financial year 2006-07, 17.9 % higher than the previous year.

 

·  Net profit for the year was $ 2.3 million compared to a net loss of $3.50 million for the previous fiscal.

 

· Net profit for the year was impacted due to Provision for Doubtful Debts (PDD) on overdue amounts carried on the books for a period of time amounting to $ 5.7 million.

 

·   Cash profit, in Adjusted EBITDA terms, grew from $ 6.7 million in the last financial year to $ 11.6 million for the current fiscal, a 76% increase over the previous year. See below for a reconciliation of Adjusted EBITDA.

 

·   Gross margin for the year improved from 45.9% in the previous fiscal to 47.3% for the current year.

 

Performance Highlights for Quarter 4:

 

·    Sify reported revenues of $ 33.0 million for the quarter ended 31^st March 2007, 10.7 % higher than the quarter ended 31st March 2006.  The sequential growth in revenues over the previous quarter was at 2.5%.

 

·    Net loss for the quarter was $ 1.7 million compared to a net profit of $0.6 million in the same quarter of the previous fiscal year.

 

·    Net profit for the quarter was impacted due to the following reasons: Provision for Doubtful Debts (PDD) on overdue amounts carried on the books for a period of time amounted to $ 2.39 million during the quarter; Exchange loss of $ 0.4 million incurred on account of the stronger Rupee against the Dollar.

 

·    Cash profit for the quarter, in Adjusted EBITDA terms, was $ 0.5 million compared to $2.8 million in the same quarter of the previous fiscal year.  See below for a reconciliation of Adjusted EBITDA.

 

·    Sify ended the quarter with a cash balance of $ 52.69 million after capital expenditures of $ 3.19 million during the quarter

 

Mr.  Raju  Vegesna,  Board Chairman and MD & CEO, Sify Limited, said, "I am extremely  pleased  that  we  have been able to report a net profit for the year  for  the first time, despite the restructuring of the businesses that we have effected over the last six months. These changes are now falling in place  for  future growth and profitability, while the initiatives launched during  the  last  quarter  should  generate  the  momentum  going forwards particularly  in  the  consumer businesses. I am also satisfied that we now have  a  strong  management  team  in  place  to  build  the business going forwards.  I believe that most of what we wanted to put in place by the end of this financial year has been achieved, and we can now turn our focus and collective energies to building profitable growth going forwards".

 

Mr.  Pijush  K  Das,  Chief Financial Officer, Sify Limited, said, "We have taken  some  bold financial decisions, particularly with regard to doubtful debts,  in the interest of our financial health going forwards. We are also reworking  our  billing  and  collection  systems  to ensure that these are minimized  in future. I am also confident the steps taken over the last two quarters  for  increased  efficiencies and margin improvements will deliver greater  results  going  forwards. We are now well set to focus on building the  businesses for revenue growth and profitability for the financial year 2007-08".

 

Enterprise Services:

 

Business wins:

 

Network  services:  Key  business  wins  during  the  quarter,  along  with additional  engagements from some large customers for VPN services included Apeejay  Park Hotels, Atos, CMC Limited, Genpact, Hutch, R Systems and SAME Deutz Fahr. There were also key wins in Internet services and International MPLS services to enterprises.

 

Hosting services: Key wins during the quarter for hosting services included IBM-Airtel, Macquarie Bank, Star TV and United Bank of India.

 

SifySecure:  Key  wins  during  the quarter include Financial Technologies , ICICI bank , Indian Bank and Hutch and Genpact for PKI related solutions.

 

Application Services:  Key wins in application services include the African Development  Bank,  Escorts Construction Equipment, Kintetsu World Express, National  Informatics Centre (NIC) and SAME Deutz Fahr for web applications and ICAI for online examinations.

 

International Business:

 

Sify continued its thrust in expanding its international business, led by two lines of service; Remote Infrastructure Management and Corporate eLearning Services. Both lines of business are seeing excellent customer traction and several important wins in the last quarter:

·    Sify has been chosen by a California based market research company focused on the wireless space to remotely manage their IT infrastructure

·    Sify has been chosen by a global consumer products company headquartered in UK to remotely manage their server infrastructure. Sify will be delivering these services from its global management center in Chennai

·    Sify has been selected as the preferred eLearning services partner by one of the world's largest pharmaceutical companies, for whom Sify is already providing eLearning content development as well as remote infrastructure support for their learning technology platforms. Sify expects this engagement to scale to $3-4 Million per year in the next 12-18 months

·    Sify has been awarded substantial repeat orders from a global leader in computer software, to provide eLearning courseware for several of their current and forthcoming products. This relationship is expected to yield $3-4 Million in revenues in 2007-08

·    Sify has been chosen as the learning services provider by a global leader in aero energy to provide a range of learning services including learning strategy design and content development. Sify has already completed the design phase and will now be developing a range of eLearning courses over the next 2 years, valued at over $3.0 Million.

 

As part of its international expansion, Sify has opened new sales offices in London and Dubai. This is in addition to its two existing offices in California and New Jersey, USA.

 

Consumer Services:

 

Broadband:

 

Direct Renewal Facility: A major initiative accomplished in the beginning of the quarter was the introduction of a Direct Renewal Facility with a renewal button on the log in client for broadband subscribers. This makes their renewal process as easy as clicking on the button, choosing from the option of packages that they are offered, and paying online, or using the other payment options. So the subscriber now has the freedom to recharge according to need, convenience and time of day without having to depend on anyone. This completely replaces the earlier offline system of having to call in for renewals and having their cheques collected.

 

Launch of Sify Phone: Another major initiative launched on Valentine's Day was the Sify Phone VOIP initiative. With a Sify Phone, a Sify Broadband customer can now call his loved ones (with a Sify Broadband connection and a Sify Phone) with unlimited calls for a subscription of just Rs 250 per month.

 

This is also a value-added service with the potential to add to revenues beyond browsing revenues in the following quarters.

 

Online learning courses: Online learning offers a huge opportunity in India where  education  is seen by the middle class as the key to upward mobility and highly valued. As a result, school and college going students are under enormous  pressure  to  excel,  often  doing  a slew of value added courses beyond  what  they  cover in school or college to give them the edge. These

often are far from home, adding to the stress of travel and time management of  students.  Our intention is to enable online learning that obviates the need for travel and for adhering to a fixed schedule.

 

The benefits of online learning with Sify go beyond convenience of time and place  with  collective learning with exposure to peers adding to student's ability  to  understand concepts. Sify's courses are designed to shrink the country  into a classroom where students can interact with peers across the country, and also have their doubts addressed by a panel of experts online.

The first such initiative is Sify Mathguru, an innovative math-help program that's  uses  a  virtual  notebook  and  pen to explain the solution in the teacher's voice as it annotates.

 

This  was followed by the Sify Class Teacher, an online science program for children  from  grade  1  through  10,  designed  to  encourage independent learning  with  300 hours of interactive, multi-media learning and over 20, 000  assessments.  With  the  launch of these two online learning services, Sify  aims to usher in an era of anytime, anywhere learning at an extremely

affordable  price.  These  programs  are available for the children of Sify broadband subscribers for a subscription of just Rs 100 per month.

 

The  intention is to offer a bundle of benefits beyond the basic connection to  offer  true  value  to  customers that makes the Sify Broadband service competitive and profitable.

 

I-way Cyber Cafes:

 

Rs  10  penetration  pack:  In  a  major  new  initiative  to  drive up new registrations,  a  Rs 10 subscriber pack was introduced for both trial, and for  those stopping by for occasional use. This pack also served to correct the  perception  that iWays are more expensive than the average cyber café. This   initiative  resulted  in  the  number  of  active  registered  users increasing  by  45000 users during the quarter. This initiative should help in continuing to increase the number of users iWays attract in the quarters ahead

 

The  Internet  Learning  Program initiative: was rolled out across 38 towns during the quarter. The launch of this program was widely reported in local newspapers  and  city editions of national newspapers. It was also featured on  cable  television in a few of the towns where the program was launched. Underprivileged  students in every town were given free packages during the

launch  period.   The  program  covered  bank  employees,  students, senior citizens,  training  Institutes,  public sector institutions and women. The response has been encouraging with about 5000 people completing the program during the quarter.

 

Railway  ticket  bookings:  In addition to the 500 iWays that signed up for Railways  ticket  bookings  the  previous  quarter, an additional 695 cafes signed  up during this quarter. Marketing activity was initiated during the quarter to increase awareness of the train ticket booking facility at Iways to establish

 

iWays  as synonymous with rain ticket bookings in consumer's minds. We have also  signed  up  66  cafes  as exclusive travel agents for railways ticket bookings.

 

Online bill payments enabled: Another major new initiative in the services area  was  the  Electronic  Bill  Payments  and  Presentment  (EBPP) system introduced  in  7  cities  at  over  300  of  our  cafes. With this system, consumers  can  now  pay  their utility bills online with cash at the iWays close  to  their  homes.  The online payment to the utility is made through Sify's  payment gateway, integrated with Bill Desk (an online bill payments Company), which runs the back-end.

 

Cyber cafes as Western Union Money Transfer centers: During the quarter, an agreement  was  signed  with  Western  Union  for iWays across 24 states to become  money  transfer  points.  This  is being rolled out across iWays in these states in a phased manner.

 

These  eServices  initiatives  launched during this quarter are expected to increase footfalls and revenues at the iWays in the following quarters with the  strategy  being  to  penetrate the market by adding value to customers beyond browsing.

 

Online  games:  During  the quarter, Sify partnered with Korean online game developer  Entwell  for  publishing  "Nostale"  game  in  India.  This is a fantasy  based  MMORPG game with cyber items for sale as the revenue model. Nostale  is  in the top 5 games list in Taiwan and top the 10 games list in Japan. Users of Sify's A3India game have already started trading in avatars

and  other  virtual assets, and this was felt to be a good time to launch a game with the sale of cyber items built in.

 

A  Grand  Gaming  challenge  was  conducted  in alliance with Sony's Animax channel,  nVidia,  the Times of India, HCL computers and Gigabyte across 66 cities  and towns in India. The regional finals were held in Delhi, Kolkata and Bangalore, culminating in a Grand Finale at Mumbai. The competition was very successful with widespread awareness over the Animax channel on TV, in print  and  online,  with  about  4500  avid gamers competing for the grand

prize.

 

Portals:

 

Union  Budget  coverage:  Sify.com's finance portal Walletwatch.com covered the  Union  Budget  Analysis  live  on video as well as in text. The Budget Special focused on the impact of the budget on the daily life of consumers. Users  could  opt  for  specific  categories  like  taxation,  commodities, consumer  durables  etc.  for  which  they could receive customized mailers

containing  articles and information related to impact of the budget on the subject  of  their  particular  interest.  The  all-inclusive coverage also included  a  run-up  to  the  Budget,  which covered expectations about the budget,  sector wish lists, market moods, detailed analysis by experts like CRISIL  which  was  carried in text as well as live on video, views & other news.  The  site  also  covered  the  Economic Survey and the Union Railway Budget.  During  this  period  there  was  a  significant jump in number of visitors.

 

Sifymall.com:  the  online  shopping  portal  of Sify.com offered a special range  of gift items and offers for Valentine's Day. The number of visitors to  the  site  doubled  vs.  last year during this period and the number of transactions  also achieved significant growth as more visitors made use of the  convenience  and  wide range of online gifting options for their loved ones across the country. In addition to the popular gifting categories like flowers,  chocolates  and  gift  hampers, jewelry and electronic items also experienced growth  during this period. A unique service offered by Sifymall was a live serenade  with  a guitarist playing a romantic song and before delivering a bouquet  of  roses to user's loved ones. Sifymall.com also offered items of special  interest  to  women  on  the Women's Day special around March 8th, 2007. All proceeds from the Women's Day Special were given to Nanhi Kali, a charitable organization working for the benefit of the girl child.

 

Khel.com:  the sports channel of Sify.com, offered the best online coverage of the most awaited  sporting  event  in  the  country - the Cricket World Cup. Matches featuring  India,  as  one would expect, experienced peak traffic. Sify.com also  offered  its  users  the first time ever opportunity to interact with Indian  cricketing  sensation  and the MTV Youth Icon of the year, Mahinder Singh  Dhoni, through a series of exclusive web chats on Khel.com. Over one

thousand users participated in each of the one-hour chat sessions. Sify.com also  offered  its  users  Web  exclusive  interviews  with cricketers like Tendulkar,  Yuvraj  and  Shreeshant,  as  well  as  columns by experts like Gavasker, Miandad and Allan Border.

 

Sifymax.com:  the  leading broadband portal from Sify.com, was the official partner for the Lakme Fashion Week Summer Collection. Sifymax.com conducted the  Live  streaming of the hottest fashion extravaganza in the country for all  5  days of the event. Sify.com also offered behind the scenes footage, interviews  with  designers, models and celebrities on www.lfw.sifymax.com .

 

Sifymax.com  was the official Internet partner for the Zee Cine Awards, one of  India's  most  prestigious  cine  awards,  held  this  year at Genting, Malaysia.  Over  one hundred thousand users voted online for their favorite stars  &  movies  to  win  the  prestigious  ZCA award through Sifymax.com. Sifymax.com  also  partnered  with  Zee to offer video clips from the first ever reality show based on cricket "Cricket Stars".

 

Unbeatable film content on Sify.com: The site launched the official website of  Nayanthara, the leading South Indian cine queen, in 4 languages- Tamil, Telugu,  Malayalam, & English. Video clips from her movies, interviews with her,  photo  galleries  and  other  information  about  her is available on www.nayanthara.sifymax.com,  continuing  Sify.com's  close association with

the  film  fraternity  and  providing a platform for Stars to interact with their  fans.  In  line with this objective Sify.com launched official movie sites  for  the  movies  Pokkiri  (www.pokkiri.sifymax.com)  and also Evano Oruvan  (www.evanooruvan.sifymax.com)   starring  the  nation's  heartthrob Madhavan. Sify.com also conducted  interactive  events where fans of actress Asin who won the Sify.com' Users Choice  Award  for  Best Actress 2007 could meet her. Fans of leading actor Vijay  were  also  given  the  chance  to meet their favourite star through online and mobile-based contests.

 

Earnings Conference Call:

 

In  conjunction  with the earning release, Sify will host a conference call at  8:30am  EDT  with  Mr.  Raju  Vegesna,  Chairman of the Board and Chief Executive  Officer, Mr. Suri Venkat, Chief Operating Officer and Mr. Pijush Kanti Das, Chief Financial Officer.

 

Interested  parties  may  participate  in  the  conference  call by dialing 877-407-8031  (U.S.  or Canada) or 201-689-8031 (international), which will also be simultaneously broadcast live over the Internet at www.sifycorp.com or  www.vcall.com.   Please allow extra time prior to the call to visit the site  and  download  the streaming media software required to listen to the

Internet broadcast.

 

The  online  archive  of  the  Web cast will be available shortly after the conference  call,  or  investors  can  listen  to  the  replay  by dialing 877-660-6853 or 201-612-7415 and entering account number 286 and conference ID number 236818. Please allow for some time post conference call to access the archive of the Web cast.

 

Board of Directors:

 

Mr  S  R  Sukumara,  Director on the Board, was inducted as a member of the Compensation and Audit Committees.

 

Mr  R D Thulasiraj, Director on the Board, resigned from the Board to focus on  his  current  assignment  with the Aravind Eye Hospital, its expansion, growth  and  outreach activities. His resignation was accepted at the Board meeting  of  the  23rd April 07. As a result, he has also resigned from the Audit Committee and Compensation Committee of which he was a member.

 

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