Sify Infinit Spaces, the first company to have built a commercial data centre in India, is confident of raising up to $4 billion through debt and public markets over the next four years to expand its capacity, even as uncertainties from the prolonged West Asia war have delayed its plans to go public and a potential threat of dwindling prices of data centre services looms large.
In an interview with Mint, Sharad Agarwal, chief executive of Sify Technologies Ltd's data centre subsidiary, said the firm will rely on its own cash flow to expand its data centre capacity by 10-20%, after which it will seek funds by raising debt, taking the subsidiary public, and offering follow-on offers to invest to institutional investors.
Agarwal declined to offer a timeline for the public listing, and said Sify will pursue it “as quickly as possible”.
“Raising funds is a continuous exercise. One source to fund our expansion is through accruals; the free cash flow from our business is enough for 10-20% growth this year. But the market is growing in such a way that we need to grow 50-70% year-on-year to keep pace. For that, we’ll need more capital,” he said.
Beyond the delayed initial public offering (IPO), a second key challenge to the company’s planned fund-raise, Agarwal said, could be an impending price war in the data centre industry, where operators are rapidly expanding capacities, and then dropping prices to attract customers.
“With hyperscalers and small clients alike expanding rapidly, there is ample opportunity to capture customers, even though the market is competitive,” said Agarwal.
While pricing pressure has moderated as demand has broadened beyond a handful of hyperscalers, Agarwal said it was more pronounced when one or two hyperscalers accounted for most large-capacity demand. The company's IPO draft prospectus also flagged pricing competition as a risk, stating that if competitors offer lower prices, it could lose existing clients or fail to attract new ones, materially affecting its business and financial performance.
For now, Agarwal said the industry remains in a rapid expansion phase, and to tap that, the company would “continuously tap the market through follow-on offers, private placements or QIPs (qualified institutional placements).”
Incorporated in November 2017, Sify Infinit is the data centre subsidiary of Sify Technologies, which took on its current name in January 2003, rebadging from Satyam Infoway. The latter became India’s first commercial data centre operator when it built a 1.2 megawatt (MW) data centre in Maharashtra’s Vashi, off Mumbai.
In October last year, Sify Infinit filed its draft red herring prospectus (DRHP), seeking to raise ₹3,700 crore at a valuation of ₹37,000 crore. As per its DRHP, as of June last year, the company had an active data centre capacity of 113MW. On 16 June, Bloomberg reported that the data centre operator’s planned IPO was put on hold “due to weak market conditions”.
As per its latest available financials of FY25, sourced via Tofler, Sify Infinit Spaces reported an operating revenue of ₹1,428.4 crore and a net profit of ₹126.4 crore. While its cash reserves rose 18% year-on-year to ₹1,230.7 crore during the fiscal, its total debt also rose 17% to ₹2,318.2 crore during the period.
In July last year, ahead of filing for public listing, Raju Vegesna, chairman and managing director of parent firm Sify Technologies Ltd, had committed $5 billion by 2030 to expand the company’s data centres and networking infrastructure businesses.
Agarwal, however, said Vegesna’s investment target is “small” by the current data centre industry standard in India. “A capital expenditure of $5 billion is good enough for just 1 gigawatt (GW) of data centre capacity. This is small in terms of the scale at which the industry is growing today. Our investment plans remain constant because we plan to only improve our market share and not chase big targets, or at least maintain the market share. We’ll raise funds to invest, as required, based on this target,” he said.
Sector spurt
To be sure, the company's peers have also announced large investment plans. On 30 March, Nxtra, the data centre subsidiary of Airtel’s parent Bharti Enterprises, announced an investment of $1 billion by venture capital firms Alpha Wave, Carlyle and Anchorage. On 17 June, Hyderabad-based CtrlS Datacenters announced a fundraise of ₹4,000 crore to expand its capacity, drawing investments from Canada state government’s pension board. On 6 July, Yotta Data Services said it had raised $150 million from “non-institutional investors”.
While Yotta and CtrlS plan to go public in the next one year, Nxtra has offered a timeline of two to three years to go public.
Industry stakeholders said Sify’s fundraise plans may find investors, given that the company has been established in data centres in India for over two decades.
“They are all proven operators. Yotta has set up data centres, Sify has set up data centres, and that track record of building and running data centres is what investors are looking for," said Vijay Agrawal, analyst at brokerage firm Equirus Capital. "Ultimately, they are betting on the company’s growth and whether it can generate return on equity.”
This story has been updated to reflect a correction in Sify's plans for an IPO, which has been deferred, and to remove a quote on data centre pricing plans that was inadvertently attributed to its CEO.