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Sify: Better Times Ahead

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DQI Bureau
New Update

Some companies are so personality driven that the CEOs are more
popular than the company. Sify is one such company, and was synonymous with R
Ramaraj, the charismatic former CEO of Sify. Strangely, Ramaraj left Sify at a
time when the company started showing profits after years of ailing bottomline.
A breather came in AMJ FY '07, with the company posting a net profit of $1.36
mn as against a net loss of $2.14 mn in the corresponding  quarter of the
previous year. But it seems the turnaround was just a silver lining as one takes
a closer look at the scheme of events leading to the management overhaul.

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The Old Order Crumbles

When Raju Vegesna of Infinity Capital Ventures bought around 40% stake in
Sify from Satyam Computers for $100 mn, in November 2005, analysts expected
organizational change. Post the buy out, Raju Vegesna was named as chairman of
the Board and in July 2006, became the company's CEO and MD.

The
Changed Order

Raju Vegesna:


CEO and MD

Suri Venkat: COO

Bhaskar Sayyaparaju: CTO

V Sivaramakrishnan: President,
Portals

Pijush Kanti Das: President,
Access Media

Ashish Arora: SVP, Enterprise
Solutions
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It becomes clear that Vegesna should have done some kind of due
diligence of the key people on the existing set up at Sify and the deliverables
over a period of time. Another question is that Sify's consistent top line
growth was not in sync with its bottom line. Is it lack of business focus or a
strategy? This is the bone of contention that many analysts see for the sweeping
changes.

New Order Charges In

Currently, the company is going through a transition. The profitability
momentum is maintained and when we look at Q2 FY 2006-07, in which Sify posted a
net profit of $1.49 mn as against a net loss of $1.34 mn in the corresponding
quarter the previous year. Reflecting on the financial performance, Raju Vegesna
says, "We are beginning to see the effects of the business analysis and
structuring conducted during the first two quarters of this year in the form of
improved margins and better cost management."

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Vegesna intends to usher in profitable growth through a unified
strategic approach that is expected to bring in greater synergies across
business lines and better-cost management. Commenting on the second quarter
results, the company's CFO, Durgesh Mehta says, "The last two quarters
have set the stage for profitable growth with better management of bandwidth and
other overheads costs. The continued focus on synergies across businesses for
better productivity and leveraging scale should also contribute towards this
objective."

'People
chose to move on in a market that is exploding... I did not initiate any
changes in management' 


-Raju Vegesna, CEO and MD, Sify

A well known Silicon Valley
entrepreneur, Raju Vegesna is currently Sify's CEO and MD. His
investment company, Infinity Capital Ventures, picked up 40% stake in Sify
for about $100 mn in November 2005. In July 2006, he became MD and CEO of
Sify. Six months have elapsed since Vegesna took control of Sify; how did
things pan out during this time and what's in store for Sify? In an
exclusive interview to Voice&Data, Raju Vegesna puts things in
perspective. Excerpts:

On the company



Sify is a great company, started and built over the years by its
management with many pioneering as well as industry leading standards and
services. I invested in the company as a strategic investor. With about a
40% ownership, my interest lay in helping steer the company to further
growth and profitability by direct involvement.

On the priorities

Now that we have grown Sify to a certain size, scale and spread, our
priorities are to expand and grow profitably while continuing to invest in
technology capabilities and infrastructure such as our network reach,
capacity and data centers.

The first priority is
profitable growth. The second is to grow with greater synergies across
businesses. The third priority is to take Sify's business international.

On the last six months

Over the last six months or so, we have worked to synergize teams in
enterprise, engineering support and customer care to better serve our
customers across consumer and enterprise. We have also taken some hard
decisions to clean up the books financially so that we have a clean slate
going forward. We have a very capable chief operating officer, CVS Suri
and a CTO with international experience, S Bhaskar.

On the challenges

Attracting and retaining the right kind of talent will continue to be a
challenge going forward for some time to come. The second challenge will
be to scale fast, as this is a time of rapid growth, and I believe size
will matter. The last is the regulatory challenge.

On global expansion plans

We have also accelerated our international offerings in infrastructure
management services and will continue to focus on increasing our revenues
and customer base from this business. We are also looking at how we can
take the iWay chain to other countries with a similar low PC penetration
profile.

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Growth and Profitability

The profitability, which Vegesna and his team are pitching for, hinges on
the company's three key divisions-enterprise, access media and portals. On
the enterprise side, hosting and Network services is expected to power Sify's
growth. For instance, the company has some significant wins for its hosting
services in Q2 of this fiscal year as it signed enterprise customers like Royal
Sundaram, NSE, SBI among others.

Meanwhile, its iWay branded cyber cafes (3,559 cafes) are spread
across 154 Indian cities. The company is also working towards making iWays as an
e-commerce hub.

While the results were good and indicate the company is on the
growth path, much depends on the company's continued acceleration in areas
like enterprise and broadband access. It also needs to counter the growing
competition looming from competitors like BSNL and Airtel in the broadband
space. Looking at the Sify's profitability patterns in the first two quarters
of FY 2006-07, it indicates the new management's continued focus on the
existing business lines. Analysts expect more defined changes after the end of
this fiscal and if Sify was able to post a net profit for the whole year, then
it means all these changes have worked in the company's favor. With lots of
expectation, Sify is all set to graduate to the next orbit full of challenges
and new growth opportunities.

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Shrikanth G

shrikanthg@cybermedia.co.in