Page | ||||
Part I Financial Information |
||||
Item 1. Financial Statements |
4 | |||
a) Unaudited Condensed Consolidated Balance Sheets |
4 | |||
b) Unaudited Condensed Consolidated Statements of Income |
5 | |||
c) Unaudited Condensed Consolidated Statements of Cash Flows |
6 | |||
d) Unaudited Condensed Consolidated Statements of Stockholders Equity and Comprehensive Income |
7 | |||
e) Notes to Unaudited Condensed Consolidated Financial Statements |
8 | |||
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations |
23 | |||
Item 3. Quantitative and Qualitative Disclosure About Market Risk |
34 | |||
Item 4. Controls and Procedures |
34 | |||
Part II Other Information |
||||
Item 1. Legal Proceedings |
34 | |||
Item 1A. Risk Factors |
34 | |||
Item 2. Unregistered Sale of Equity Securities and Use of Proceeds |
34 | |||
Item 3. Defaults Upon Senior Securities |
34 | |||
Item 4. Submission of Matters to a Vote of Security Holders |
35 | |||
Item 5. Other Information |
35 | |||
Item 6. Exhibits |
35 |
2
3
As at March 31, | As at December | |||||||||||
2007 | 2007 | 2007 | ||||||||||
Convenience | ||||||||||||
translation | ||||||||||||
into US$ | ||||||||||||
(Note 2) | ||||||||||||
Rs. | Rs. | $ | ||||||||||
ASSETS |
||||||||||||
Current assets: |
||||||||||||
Cash and cash equivalents |
Rs. | 2,131,824 | Rs. | 1,262,396 | $ | 32,032 | ||||||
Restricted cash |
938,333 | 629,100 | 15,963 | |||||||||
Investment in short-term mutual funds |
| 24,147 | 613 | |||||||||
Accounts receivable |
1,188,406 | 1,987,214 | 50,424 | |||||||||
Due from employees |
7,726 | 6,107 | 155 | |||||||||
Inventories |
28,686 | 35,018 | 889 | |||||||||
Prepaid expenses |
118,207 | 128,255 | 3,254 | |||||||||
Net investment in leases |
16,560 | 6,869 | 174 | |||||||||
Other current assets |
289,673 | 282,730 | 7,174 | |||||||||
Total current assets |
4,719,415 | 4,361,836 | 110,678 | |||||||||
Restricted cash |
1,000 | 1,000 | 25 | |||||||||
Deferred income taxes |
66,104 | 13,380 | 340 | |||||||||
Net investment in leases |
12,032 | 6,937 | 176 | |||||||||
Property, plant and equipment-net |
1,644,564 | 1,950,580 | 49,495 | |||||||||
Goodwill and other intangible assets |
192,390 | 182,548 | 4,632 | |||||||||
Investments in affiliated companies |
302,956 | 450,007 | 11,419 | |||||||||
Other assets |
224,491 | 385,385 | 9,779 | |||||||||
Total assets |
Rs. | 7,162,952 | Rs. | 7,351,673 | $ | 186,544 | ||||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||||||
Current liabilities: |
||||||||||||
Borrowings from banks |
800,000 | 237,704 | 6,032 | |||||||||
Current instalments of capital lease obligations |
2,476 | 2,823 | 72 | |||||||||
Trade accounts payable |
316,935 | 912,349 | 23,150 | |||||||||
Accrued liabilities |
737,284 | 793,434 | 20,133 | |||||||||
Deferred revenue |
450,030 | 508,389 | 12,900 | |||||||||
Advances from customers |
89,908 | 110,540 | 2,805 | |||||||||
Other current liabilities |
89,855 | 106,667 | 2,707 | |||||||||
Total current liabilities |
2,486,488 | 2,671,906 | 67,799 | |||||||||
Capital lease obligations, excluding current instalments |
3,671 | 3,268 | 83 | |||||||||
Other liabilities |
121,938 | 141,913 | 3,601 | |||||||||
Total liabilities |
2,612,097 | 2,817,087 | 71,483 | |||||||||
Minority interest |
169,765 | 189,775 | 4,815 | |||||||||
Stockholders equity |
||||||||||||
Common stock, Rs 10 par value; 50,000,000 equity shares
authorized (as of March 31, 2007 : 50,000,000) ; Issued and
outstanding: 42,820,082 shares as of December 31,2007
and 42,800,265 shares as of March 31, 2007 |
428,003 | 428,201 | 10,865 | |||||||||
Additional paid-in capital |
16,325,960 | 16,370,042 | 415,378 | |||||||||
Accumulated deficit |
(12,378,114 | ) | (12,462,961 | ) | (316,239 | ) | ||||||
Accumulated other comprehensive income |
5,241 | 9,529 | 242 | |||||||||
Total stockholders equity |
4,381,090 | 4,344,811 | 110,246 | |||||||||
Total liabilities and stockholders equity |
Rs. | 7,162,952 | Rs. | 7,351,673 | $ | 186,544 | ||||||
4
Quarter ended December 31 | Nine Months ended December 31 | |||||||||||||||||||||||
2006 | 2007 | 2007 | 2006 | 2007 | 2007 | |||||||||||||||||||
Convenience | Convenience | |||||||||||||||||||||||
translation | translation | |||||||||||||||||||||||
into US$ | into US$ | |||||||||||||||||||||||
(Note 2) | (Note 2) | |||||||||||||||||||||||
Rs. | Rs. | $ | Rs. | Rs. | $ | |||||||||||||||||||
Revenue |
||||||||||||||||||||||||
Products |
Rs. | 136,457 | Rs. | 213,570 | $ | 5,419 | Rs. | 385,407 | Rs. | 523,449 | $ | 13,282 | ||||||||||||
Services |
1,254,830 | 1,318,717 | 33,461 | 3,707,359 | 3,885,443 | $ | 98,590 | |||||||||||||||||
Total Revenue |
1,391,287 | 1,532,287 | 38,880 | 4,092,766 | 4,408,892 | 111,872 | ||||||||||||||||||
Cost of revenue |
||||||||||||||||||||||||
Products |
121,744 | 201,470 | 5,112 | 334,420 | 461,749 | 11,717 | ||||||||||||||||||
Services |
624,536 | 655,224 | 16,626 | 1,813,215 | 1,978,319 | 50,198 | ||||||||||||||||||
746,280 | 856,694 | 21,738 | 2,147,635 | 2,440,068 | 61,915 | |||||||||||||||||||
Selling, general and administrative
expenses |
437,853 | 539,613 | 13,692 | 1,397,427 | 1,653,032 | 41,944 | ||||||||||||||||||
Provision for doubtful receivables and
advances |
68,676 | 29,440 | 747 | 142,340 | 110,107 | 2,794 | ||||||||||||||||||
Impairment of assets |
| | | | | | ||||||||||||||||||
Depreciation |
102,385 | 118,864 | 3,016 | 297,705 | 352,900 | 8,955 | ||||||||||||||||||
Amortisation of intangible assets |
10,964 | 10,529 | 267 | 44,400 | 23,332 | 592 | ||||||||||||||||||
Employee stock compensation expense |
5,039 | 10,295 | 261 | 46,509 | 39,618 | 1,005 | ||||||||||||||||||
Foreign exchange (gain) / loss, net |
20,558 | (1,830 | ) | (46 | ) | (23,781 | ) | 18,149 | 461 | |||||||||||||||
Total operating expenses |
1,391,755 | 1,563,605 | 39,675 | 4,052,235 | 4,637,206 | 117,666 | ||||||||||||||||||
Operating profit/(loss) |
(468 | ) | (31,318 | ) | (795 | ) | 40,531 | (228,314 | ) | (5,794 | ) | |||||||||||||
Other income, net |
31,059 | 24,735 | 628 | 97,125 | 94,290 | 2,393 | ||||||||||||||||||
Gain on sale of investment in subsidiary |
226 | | | 226 | | | ||||||||||||||||||
Equity in net profit of affiliate |
18,650 | 81,409 | 2,066 | 42,544 | 147,051 | 3,731 | ||||||||||||||||||
Net Profit / (Loss) before income tax and minority interest |
49,467 | 74,826 | 1,899 | 180,426 | 13,027 | 330 | ||||||||||||||||||
Income tax expense |
| (42,803 | ) | (1,086 | ) | | (77,864 | ) | (1,976 | ) | ||||||||||||||
Net Profit / (Loss) before minority
interest |
49,467 | 32,023 | 813 | 180,426 | (64,837 | ) | (1,646 | ) | ||||||||||||||||
Minority interest |
7,896 | 5,824 | 148 | 7,896 | 20,010 | 508 | ||||||||||||||||||
Net Profit / (loss) after tax |
Rs. | 41,571 | Rs. | 26,199 | $ | 665 | Rs. | 172,530 | Rs. | (84,847 | ) | $ | (2,154 | ) | ||||||||||
Net Profit/(loss) per share (basic) |
0.97 | 0.61 | 0.02 | 4.03 | (1.98 | ) | (0.05 | ) | ||||||||||||||||
Net Profit/(loss) per share (diluted) |
0.97 | 0.61 | 0.02 | 4.02 | (1.98 | ) | (0.05 | ) | ||||||||||||||||
Basic Weighted average Equity Shares
used in computing Profit/(loss) per
Share |
42,743,011 | 42,820,082 | 42,820,082 | 42,822,399 | 42,838,055 | 42,838,055 | ||||||||||||||||||
Diluted Weighted average Equity
Shares used in computing Profit/(loss) per share |
42,842,653 | 42,846,165 | 42,846,165 | 42,927,221 | 42,838,055 | 42,838,055 |
5
Nine months ended December 31, | ||||||||||||
2006 | 2007 | 2007 | ||||||||||
Convenience | ||||||||||||
translation | ||||||||||||
into US$ | ||||||||||||
(Note 2) | ||||||||||||
Rs. | Rs. | $ | ||||||||||
Net profit / (loss) |
Rs. | 172,530 | Rs. | (84,847 | ) | $ | (2,154 | ) | ||||
Adjustments to reconcile net loss to net cash provided by / (used
in) operating activities: |
||||||||||||
Income taxes |
| 77,864 | 1,976 | |||||||||
Depreciation |
297,705 | 352,900 | 8,955 | |||||||||
Amortization of intangible assets |
44,400 | 23,332 | 592 | |||||||||
Employee stock compensation expense |
46,509 | 39,618 | 1,005 | |||||||||
Equity in profit of affiliate |
(42,544 | ) | (147,051 | ) | (3,731 | ) | ||||||
(Gain) / loss on sale of property, plant and equipment |
(165 | ) | 598 | 15 | ||||||||
Provision for doubtful receivables and advances |
142,340 | 110,107 | 2,794 | |||||||||
Gain on disposal of subsidiary |
(226 | ) | | | ||||||||
Minority interest |
147,356 | 20,010 | 508 | |||||||||
Unrealized gain / (loss) on account of exchange differences |
(3,543 | ) | (6,897 | ) | (175 | ) | ||||||
Changes in assets and liabilities: |
| |||||||||||
Accounts receivable |
(343,971 | ) | (905,194 | ) | (22,969 | ) | ||||||
Due from employees |
17,378 | 1,619 | 41 | |||||||||
Inventories |
147 | (6,332 | ) | (161 | ) | |||||||
Prepaid expenses |
(40,126 | ) | (10,048 | ) | (255 | ) | ||||||
Other assets |
(41,016 | ) | (153,951 | ) | (3,906 | ) | ||||||
Trade accounts payable and accrued liabilities |
(92,773 | ) | 653,315 | 16,577 | ||||||||
Deferred revenue |
(53,296 | ) | 58,359 | 1,481 | ||||||||
Advances from customers |
(49,817 | ) | 20,632 | 524 | ||||||||
Other liabilities |
(116,371 | ) | 11,646 | 295 | ||||||||
Net cash provided/(used) by operating activities |
Rs. | 84,517 | Rs. | 55,680 | $ | 1,412 | ||||||
Cash flows from investing activities: |
||||||||||||
Net movement in cash-restricted |
| 309,233 | 7,847 | |||||||||
Expenditure on property, plant and equipment |
(481,995 | ) | (665,923 | ) | (16,897 | ) | ||||||
Proceeds from sale of property, plant and equipment |
3,909 | 6,410 | 163 | |||||||||
Expenditure on intangible assets |
(66,177 | ) | (13,490 | ) | (342 | ) | ||||||
Business acquisition (net of cash) |
(92,934 | ) | | | ||||||||
Receipts in respect of assets given on sale-type leases |
8,019 | 14,786 | 375 | |||||||||
Purchase of short term investments |
| (20,316 | ) | (516 | ) | |||||||
Net cash used in investing activities |
Rs. | (629,178 | ) | Rs. | (369,300 | ) | $ | (9,370 | ) | |||
Cash flows from financing activities: |
||||||||||||
Repayments of short term borrowings from Banks,net |
| (562,296 | ) | (14,268 | ) | |||||||
Payments under capital lease obligation |
(4,805 | ) | (56 | ) | (1 | ) | ||||||
Net proceeds from issuance of common stock |
68,275 | 4,662 | 118 | |||||||||
Net cash provided by financing activities |
Rs. | 63,470 | Rs. | (557,690 | ) | $ | (14,151 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents |
(2,857 | ) | 1,882 | 48 | ||||||||
Net increase / (decrease) in cash and cash equivalents |
(484,048 | ) | (869,428 | ) | (22,061 | ) | ||||||
Cash and cash equivalents at the beginning of the period |
2,822,501 | 2,131,824 | 54,093 | |||||||||
Cash and cash equivalents at the end of the period |
Rs. | 2,338,453 | Rs. | 1,262,396 | $ | 32,032 | ||||||
Supplementary Information |
||||||||||||
Cash paid towards interest |
566 | 4,056 | 103 | |||||||||
Cash paid / (refund received) towards income taxes |
46,102 | 92,730 | 2,353 | |||||||||
Additions to property, plant and equipment represented by
capital lease obligations |
4,453 | 3,751 | 95 |
6
Additional | Accumulated | Total | ||||||||||||||||||||||||||
Common Stock | Paid In | Comprehensive | Other | Accumulated | Stockholders | |||||||||||||||||||||||
Shares | Par Value | Capital | Income | Comprehensive | Deficit | Equity | ||||||||||||||||||||||
Nos. | Rs. | Rs. | Rs. | Income | Rs. | Rs. | ||||||||||||||||||||||
Balance as of March 31, 2007 |
42,800,265 | 428,003 | 16,325,960 | 5,241 | (12,378,114 | ) | 4,381,090 | |||||||||||||||||||||
Issue of common stock |
19,817 | 198 | 4,464 | 4,662 | ||||||||||||||||||||||||
Employee stock compensation expense |
39,618 | 39,618 | ||||||||||||||||||||||||||
Comprehensive income |
||||||||||||||||||||||||||||
Net Profit / (loss) |
(84,847 | ) | (84,847 | ) | (84,847 | ) | ||||||||||||||||||||||
Other comprehensive income/ (loss) |
||||||||||||||||||||||||||||
Translation adjustments |
457 | | ||||||||||||||||||||||||||
Unrealised gain on investment in
securities |
3,831 | |||||||||||||||||||||||||||
4,288 | 4,288 | 4,288 | ||||||||||||||||||||||||||
Comprehensive Income |
(80,559 | ) | ||||||||||||||||||||||||||
Balance as of December 31, 2007 |
42,820,082 | 428,201 | 16,370,042 | 9,529 | (12,462,961 | ) | 4,344,811 | |||||||||||||||||||||
Balance as of December 31, 2007
(Convenience translation into US $-
Note 2) |
10,865 | 415,378 | 242 | (316,239 | ) | 110,246 | ||||||||||||||||||||||
7
1. | Description of business | |
Sify Technologies Limited (Sify) together with its subsidiaries (India World Communications Limited, Sify Communications Limited, Sify Networks Private Limited and Sify International Inc.) (collectively referred to as the Company) is engaged in providing various services, such as Corporate Network and Data Services, Internet Access Services, Online Portal and Content Offerings and selling products related to such services. | ||
2. | Summary of significant accounting policies | |
a. Basis of preparation of financials statements | ||
The accompanying unaudited condensed financial statements have been prepared in accordance with U.S GAAP in Indian Rupees (Rs), the national currency of India. Solely for the convenience of the reader, the financial statements as of and for the nine months ended December 31, 2007 have been translated into United States dollars at the noon buying rate in New York City on December 31, 2007 for cable transfers in Indian rupees, as certified for customs purposes by the Federal Reserve Bank of New York of U.S. $1 = Rs 39.41 No representation is made that the Indian rupee amounts have been, could have been or could be converted into United States dollars at such a rate or at any other rate on, December 31, 2007 or at any other date. | ||
b. Interim Information | ||
Interim information presented in the condensed consolidated financial statements has been prepared by the management without audit and, in the opinion of management, includes all adjustments of a normal recurring nature that are necessary for the fair presentation of the financial position, results of operations, and cash flows for the periods shown, is in accordance with US GAAP. These financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Companys annual report on Form 20-F for the fiscal year ended March 31, 2007. | ||
c. Investment securities. | ||
The Company classifies its debt and equity securities in one of the three categories: trading, held-to-maturity or available-for-sale, at the time of purchase and re-evaluates such classifications as of each balance sheet date. Trading and available-for-sale securities are recorded at fair value. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts. Unrealized holding gains and losses on trading securities are included in income. Temporary unrealized holding gains and losses, net of the related tax effect, on available-for-sale securities are excluded from income and are reported as a part of other comprehensive income in stockholders equity until realized. Realized gains and losses from the sale of trading and available-for-sale securities are determined on a first-in-first out basis and are included in income. A decline in the fair value of any available-for-sale or held-to-maturity security below cost that is deemed to be other than temporary results in a reduction in carrying amount to fair value with a charge to the income statement. Fair value for mutual fund units is based on published per unit value, which is the basis for current transactions. Non-readily marketable equity securities for which there is no readily determinable fair value are recorded at cost, subject to an impairment charge to the income statement for any other than temporary decline in value. |
8
d. Recent accounting pronouncement | ||
SFAS No. 157: | ||
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS No. 157 provides guidance on determination of fair value and lays down the fair value hierarchy to classify the source of information used in fair value measurement. The Company is currently evaluating the impact of SFAS No. 157 on its financial statements and will adopt the provisions of SFAS No. 157 for the fiscal year beginning April 1, 2008. | ||
SFAS No. 159: | ||
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (SFAS No. 159). This statement permits entities to choose to measure many financial instruments and certain other items at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS No. 159 is effective for the fiscal year beginning April 1, 2008. The Company is currently evaluating the impact that the adoption of SFAS No. 159 will have on its consolidated financial statements. | ||
SFAS No. 141R: | ||
In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS No. 141R), which is a revision of SFAS No. 141, Business Combinations. This statement establishes principles and requirements for how an acquirer: recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any no controlling interest in the acquiree; recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. The Company will be required to apply this new standard prospectively to business combinations for which the acquisition date is on or after the beginning of the annual reporting period beginning on or after December 15, 2008. Early adoption is prohibited. The Company is currently evaluating the impact of SFAS No. 141R on its consolidated financial statements. | ||
3. | Acquisition of Globe Travel Business | |
During the quarter ended June 2006, the Company acquired the business of Globe Travels which operates an online travel agency. Management believes that this acquisition marks Sifys entry into the fast growing online travel business, particularly e-ticketing, the category with highest revenues and fastest growth in online e-commerce today. The management also believes that the addition of a travel portal is in line with the Companys strategy of providing end-to-end services to Sify users Price paid / payable amounting to Rs 116,219 (USD 2,571,303) in respect of the acquisition was allocated based on a preliminary allocation of estimated fair value (determined by the management) of the assets, properties and rights on the date of acquisition. | ||
During the nine months ended December 31, 2007, the Company has finalised the purchase price allocation resulting in an increase in recorded goodwill from Rs 26,921 to Rs 36,200. | ||
4. | Income taxes | |
Effective April 1, 2007, the Company adopted Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income taxes An interpretation of Statement of Financial Accounting Standards No.109 (FIN 48). The interpretation prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions considered or to be considered in income tax returns. Historically, the Company has not incurred any penalties or interest relating to unrecognized tax benefits. |
9
Upon adoption the Company did not have any liability for income tax relating to uncertain tax positions. The adoption of FIN 48 did not have any impact on the retained earnings or provision for taxation as of April 1, 2007. |
FIN 48 also requires that changes in judgment that result in subsequent recognition, de-recognition or change in a measurement of a tax position taken in a prior annual period (including any related interest and penalties) be recognized as a discrete item in the period in which the change occurs This change will not impact the manner in which the Company recorded income taxes on an annual basis and did not impact its recorded income tax provision in the quarter ended December 31, 2007. | ||
A listing of open tax years is given below: |
Jurisdiction | Open tax years | |
India |
1997-98 to 2006-2007 |
5. | Cash and cash equivalents | |
Restricted cash presented under current assets of Rs 629,100 ( Rs 938,333 as at March 31, 2007) and non current assets of Rs 1,000 (Rs 1,000 as at March 31, 2007), represent deposits held under lien against overdraft facilities and bank guarantees available to the Company towards future performance obligations. The fair values of cash and cash equivalents approximate their carrying values. |
10
6. | Accounts receivable | |
Account receivable as of March 31, 2007 and December 31, 2007 are stated net of allowance for doubtful receivables. The Company maintains an allowance for doubtful receivables based on its age and collectability. Accounts receivable are not collateralised except to the extent of refundable deposits received from cyber cafés franchisees and from cable television operators | ||
Accounts receivables consist of: |
As at | As at | |||||||
March 31, 2007 | December 31, 2007 | |||||||
Due from customers |
1,290,030 | 2,159,897 | ||||||
Less: Allowance for doubtful debts |
101,624 | 172,683 | ||||||
Balance at the end of the period |
1,188,406 | 1,987,214 | ||||||
The activity in the allowance for doubtful accounts receivable is given below: |
As at | As at | |||||||
March 31, 2007 | December 31, 2007 | |||||||
Rs | Rs | |||||||
Balance at the beginning of the year |
200,047 | 101,624 | ||||||
Add : Additional provision |
153,638 | 110,107 | ||||||
Less : Bad debts written off |
252,061 | 39,048 | ||||||
Balance at the end of the year |
101,624 | 172,683 | ||||||
7. | Other current assets | |
Other current assets consist of: |
As at | As at | |||||||
March 31, 2007 | December 31, 2007 | |||||||
Rs | Rs | |||||||
Vendor advances and deposits |
159,785 | 87,088 | ||||||
Advances for expenses |
5,025 | 82,983 | ||||||
Accrued income |
73,702 | 41,774 | ||||||
Interest earned but not due |
51,161 | 70,885 | ||||||
289,673 | 282,730 | |||||||
11
8. | Investment securities | |
Investment in securities consists of the following: |
As at | As at | |||||||||||||||||||||||
March 31, 2007 | December 31, 2007 | |||||||||||||||||||||||
Gross | Gross | |||||||||||||||||||||||
Unrealized | Unrealized | |||||||||||||||||||||||
Carrying | Holding | Carrying | Holding | |||||||||||||||||||||
value | Gains | Fair value | value | Gains | Fair value | |||||||||||||||||||
Available-for-sale: |
||||||||||||||||||||||||
Investment in
short-term mutual
funds |
| | | 20,316 | 3,831 | 24,147 |
9. | Investments in affiliates | |
In March 2006, MF Global Overseas Limited (MFG), a Company incorporated in United Kingdom acquired 70.15% of equity share capital of MF Global Sify Securities Private Limited, formerly Man Financial-Sify Securities India Private Limited (MF Global) from Refco Group Inc., USA (Refco). Thereby, MFG holds 70.15% of MF Global and the balance, 29.85% of MF Global equity shares, is held by Sify. MFG is a subsidiary of Man Group plc, a Company incorporated in United Kingdom. | ||
The summarized unaudited financial information as to assets, liabilities and results of operations of MF Global and its subsidiaries is presented below: |
Balance Sheet | As at | As at | ||||||
March 31, 2007 | December 31, 2007 | |||||||
Rs | Rs | |||||||
Current assets |
4,097,993 | 21,452,436 | ||||||
Non-current assets |
280,079 | 189,018 | ||||||
Total Assets |
4,378,072 | 21,641,454 | ||||||
Current liabilities |
3,363,146 | 20,133,892 | ||||||
Shareholders equity |
1,014,926 | 1,507,562 | ||||||
Total Liabilities and Shareholders equity |
4,378,072 | 21,641,454 | ||||||
Statement of Operations | For the quarter ended December 31, | |||||||
2006 | 2007 | |||||||
Rs | Rs | |||||||
Revenues |
289,916 | 852,981 | ||||||
Net Profit |
62,479 | 272,728 | ||||||
12
10. | Goodwill and other intangible assets, net | |
As at December 31, 2007, the Companys goodwill and other intangible assets amounted to Rs 50,796 and Rs 131,752 respectively (Rs 41,517 and Rs 150,873, as at March 31, 2007 respectively). The following are the details of other intangible assets: |
Weighted | As at March 31, 2007 | As at December 31, 2007 | ||||||||||||||||||
average | Gross carrying | Accumulated | Gross carrying | Accumulated | ||||||||||||||||
life | Amount | Amortization | Amount | Amortization | ||||||||||||||||
Technical know-how fees |
| 82,753 | 82,753 | 82,753 | 82,753 | |||||||||||||||
Portals and web content |
| 52,730 | 52,711 | 52,730 | 52,730 | |||||||||||||||
Customer contracts and others |
4.58 | 141,881 | 60,252 | 128,770 | 73,874 | |||||||||||||||
Systems software |
2.87 | 239,846 | 219,714 | 257,163 | 227,526 | |||||||||||||||
ILD / NLD License fee |
20.00 | 50,000 | 907 | 50,000 | 2,781 | |||||||||||||||
Rs | 567,210 | Rs | 416,337 | 571,416 | 439,664 | |||||||||||||||
Estimated amortization expense in future years for the carrying value of other intangible assets: |
For the year ended March 31, | ||||
Rs | ||||
2007-08 |
25,927 | |||
2008-09 |
23,988 | |||
2009-10 |
20,110 | |||
2010-11 |
17,601 | |||
2011-12 |
2,500 |
In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, the Company does not amortize goodwill but tests it for impairment on an annual basis. The Company has not recognized any impairment of goodwill during the year ended March 31, 2007 and for nine months ended December 31, 2007. | ||
11. | Other assets | |
Other assets consist of: |
As at | As at | |||||||
March 31, 2007 | December 31, 2007 | |||||||
Rs | Rs | |||||||
Deposits |
105,653 | 126,733 | ||||||
Staff advances recoverable |
150 | | ||||||
Witholding taxes |
105,734 | 187,405 | ||||||
Deposit with Department of Income Tax |
12,954 | 71,247 | ||||||
224,491 | 385,385 | |||||||
13
Withholding taxes represent taxes deducted at source by the customer and paid to the Government, which is refundable to the Company. Deposit with Department of Income Tax represents tax demands paid to the authorities under protest. Refer to note 20 (a). | ||
12. | Employee stock options | |
Compensation cost in respect of the stock option plans is accounted under FASB Statement No.123 (revised 2004), Share Based Payment. Accordingly, the Company has recorded stock compensation expense of Rs 10,295 and Rs 39,618 for the quarter and period ended December 31, 2007. | ||
During the nine months ended December 31, 2007, the Company has also issued 119,400 options under Associate stock option plan 2005 and 128,900 options under Associate stock option plan 2007. The fair value of each option was estimated on the date of grant using the Black-Scholes model with the following assumptions: |
Quarter | Nine months | |||
ended | ended | |||
December 31, | December 31, | |||
2007 | 2007 | |||
Dividend yield |
| | ||
Assumed Volatility |
46.30% - 95.45% | 46.30% - 95.45% | ||
Risk Free interest rate |
3.25% - 4.84% | 3.25% - 4.84% | ||
Expected Term |
18-45 months | 18-45 months |
In September 2007, the Shareholders of the Company approved a new scheme for allotment of shares to employees i.e. Associate Stock Option Plan 2007. Consequently 797,600 unissued options available under the earlier Associate Stock Option Plan 2005 are no longer available for issuance. | ||
13. | Earnings per share | |
In accordance with SFAS No. 128, Earnings per Share, basic earnings per share are computed using the weighted average number of common shares outstanding during the period. Diluted income / (loss) is computed by considering the impact of the potential issuance of ordinary shares on the weighted average number of shares outstanding. |
14
Quarter ended | Nine months ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2006 | 2007 | 2006 | 2007 | |||||||||||||
Earnings |
||||||||||||||||
Net Profit / (loss) |
41,571 | 26,199 | 172,530 | (84,847 | ) | |||||||||||
Equity shares |
||||||||||||||||
Weighted average number of equity shares
outstanding |
42,743,011 | 42,820,082 | 42,822,399 | 42,838,055 | ||||||||||||
Effect of dilutive equivalent shares-stock options |
99,642 | 26,083 | 104,822 | | ||||||||||||
Weighted average number of equity shares and
equivalent shares outstanding |
42,842,653 | 42,846,165 | 42,927,221 | 42,838,055 |
Certain potential ordinary shares were excluded from the calculation of diluted income/loss per share for the nine months period ended December 31, 2007 as the shares would have had an antidilutive effect due to the loss reported by the Company. The Companys outstanding shares include shares held with a depositary to represent equity shares underlying the Companys ADSs. | ||
14. | Gratuity | |
The Company provides for gratuity, a defined benefit retirement plan (the Gratuity Plan) covering all employees. The Gratuity Plan commenced on April 1, 1997. The plan provides a lump sum payment to vested employees at retirement or termination of employment of an amount based on the respective employees salary and the years of employment with the Company. The Company provides the gratuity benefit through annual contributions to a fund managed by the Life Insurance Corporation of India (LIC). Under this scheme, the settlement obligation remains with the Company, although the LIC administers the scheme and determines the contribution premium required to be paid by the Company. | ||
Net gratuity costs for the quarter and period ended December31, 2006 and 2007 included: |
Quarter ended | Nine months ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2006 | 2007 | 2006 | 2007 | |||||||||||||
Rs | Rs | Rs | Rs | |||||||||||||
Service cost |
1,904 | 1,752 | 5,712 | 5,254 | ||||||||||||
Interest cost |
416 | 412 | 1,249 | 1,235 | ||||||||||||
Expected returns on plan assets |
(41 | ) | (239 | ) | (122 | ) | (717 | ) | ||||||||
Recognized net actuarial
(gain)/ loss |
(117 | ) | | (350 | ) | | ||||||||||
Net gratuity costs |
2,163 | 1,925 | 6,489 | 5,772 |
15
Quarter ended | Period ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2006 | 2007 | 2006 | 2007 | |||||||||||||
Discount rate |
8. | % | 9.45 | % | 8 | % | 9.45 | % | ||||||||
Long-term rate of
compensation increase |
6 | % | 6 | % | 6 | % | 6 | % | ||||||||
Rate of return on plan assets |
7.5 | % | 7.5 | % | 7.5 | % | 7.5 | % |
For the year ended March 31, |
||||
2008 |
1,425 | |||
2009 |
2,078 | |||
2010 |
3,374 | |||
2011 |
5,080 | |||
2012 |
8,719 | |||
2013 to 2018 |
50,896 |
15. | Deferred revenue | |
Deferred revenue includes the following amounts of unearned income: |
| For the Companys corporate network / data services division, revenue relating to the connectivity / hosting charges and from provision of digital certificates; | ||
| For the Companys Internet access services and online portal services divisions, revenue relating to the internet access charges and the advertisement charges respectively; and | ||
| For the Companys other service division, revenue relating to development of e-learning software. |
As at | ||||||||
As at | December 31, | |||||||
March 31, 2007 | 2007 | |||||||
Rs | Rs | |||||||
Corporate network/data services |
351,933 | 410,868 | ||||||
Internet access services |
61,459 | 56,126 | ||||||
Online portal services |
21 | 64 | ||||||
Other services |
36,617 | 41,331 | ||||||
450,030 | 508,389 | |||||||
16
16. | Borrowings | |
The Company has short term borrowings of Rs 237,704 as at December 31, 2007 (Rs 800,000 as at March 31, 2007), from its bankers for working capital requirements. The borrowings are secured by fixed deposits held by the Company. The borrowings bear interest ranging from 8 to 9.75% and are repayable within one year from the balance sheet date. |
17. | Products and services | |
Breakup of revenues against products and services are as follows: |
Quarter ended December 31, | Nine months ended December 31, | |||||||||||||||
2006 | 2007 | 2006 | 2007 | |||||||||||||
Rs | Rs | Rs | Rs | |||||||||||||
Revenue |
||||||||||||||||
Service revenue |
Rs | 1,176,129 | 1,230,783 | Rs | 3,458,028 | 3,621,867 | ||||||||||
Initial franchise fee |
11,666 | 7,944 | 47,244 | 33,993 | ||||||||||||
Installation service revenue |
67,035 | 79,990 | 202,087 | 229,583 | ||||||||||||
1,254,830 | 1,318,717 | 3,707,359 | 3,885,443 | |||||||||||||
Product revenue |
136,457 | 213,570 | 385,407 | 523,449 | ||||||||||||
Rs | 1,391,287 | 1,532,287 | Rs | 4,092,766 | 4,408,892 | |||||||||||
18. | Segment reporting | |
SFAS No 131, Disclosures about Segments of an Enterprise and Related Information, establishes standards for the way that public business enterprises report information about operating segments and related disclosures about products and services, geographic areas and major customers. The Companys operations predominantly relate to connectivity to enterprises and providing Internet access to retail subscribers (both home access and public access). The Company also operates portals, Sify.com, Samachar.com and SifyMax.in that provide a variety of India-related content to audiences both in India and abroad, and which generates revenue from advertisements and other value added services. | ||
The primary operating segments of the Company are: |
| Corporate network/data services, which provides Internet, connectivity, security and consulting, hosting and managed service solutions; | ||
| Retail Internet access services, from homes and through cybercafés; | ||
| Online portal and content offerings; and | ||
| Other services, such as development of e-learning software. |
17
Quarter ended December, 31 2006 | ||||||||||||||||||||
Corporate | Internet | |||||||||||||||||||
Network / Data | Access | Online Portal | Other | |||||||||||||||||
Services | Services | Services | Services | Total | ||||||||||||||||
Revenues |
810,151 | 458,311 | 75,668 | 47,157 | 1,391,287 | |||||||||||||||
Allocated Expenses |
(519,090 | ) | (431,031 | ) | (86,354 | ) | (39,598 | ) | (1,076,073 | ) | ||||||||||
Minority interest |
(7,896 | ) | (7,896 | ) | ||||||||||||||||
Segment operating income / (loss) |
283,165 | 27,280 | (10,686 | ) | 7,559 | 307,318 | ||||||||||||||
Unalllocated Corporate expenses |
(180,958 | ) | ||||||||||||||||||
Foreign exchange gain / (loss) |
(20,558 | ) | ||||||||||||||||||
Other income / (expense), net |
(2,518 | ) | ||||||||||||||||||
Equity in profits of affiliates |
18,650 | |||||||||||||||||||
Depreciation & amortization |
(118,388 | ) | ||||||||||||||||||
Interest income net |
38,025 | |||||||||||||||||||
Income taxes |
||||||||||||||||||||
Net Profit / (loss) |
41,571 | |||||||||||||||||||
18
Quarter ended December, 31 2007 | ||||||||||||||||||||
Corporate | Internet | |||||||||||||||||||
Network / Data | Access | Online Portal | Other | |||||||||||||||||
Services | Services | Services | Services | Total | ||||||||||||||||
Revenues |
1,053,154 | 369,511 | 55,636 | 53,986 | 1,532,287 | |||||||||||||||
Allocated Expenses |
(678,707 | ) | (342,377 | ) | (72,168 | ) | (54,553 | ) | (1,147,805 | ) | ||||||||||
Minority interest |
(5,824 | ) | | (5,824 | ) | |||||||||||||||
Segment operating income / (loss) |
368,623 | 27,134 | (16,532 | ) | (567 | ) | 378,658 | |||||||||||||
Unalllocated Corporate expenses |
(291,062 | ) | ||||||||||||||||||
Foreign exchange gain / (loss) |
1,830 | |||||||||||||||||||
Other income / (expense), net |
71 | |||||||||||||||||||
Depreciation & amortization |
(139,689 | ) | ||||||||||||||||||
Interest income net |
37,785 | |||||||||||||||||||
Income Taxes |
(42,803 | ) | ||||||||||||||||||
Equity in profits of affiliates |
81,409 | |||||||||||||||||||
Net Profit / (loss) |
26,199 | |||||||||||||||||||
Nine Months ended December, 31 2006 | ||||||||||||||||||||
Corporate | Internet | |||||||||||||||||||
Network / Data | Access | Online Portal | Other | |||||||||||||||||
Services | Services | Services | Services | Total | ||||||||||||||||
Revenues |
2,351,441 | 1,410,435 | 211,409 | 119,481 | 4,092,766 | |||||||||||||||
Allocated Expenses |
(1,420,130 | ) | (1,353,647 | ) | (203,658 | ) | (106,365 | ) | (3,083,800 | ) | ||||||||||
Minority interest |
(7,896 | ) | | | | (7,896 | ) | |||||||||||||
Segment operating income / (loss) |
923,415 | 56,788 | 7,751 | 13,116 | 1,001,070 | |||||||||||||||
Unallocated Corporate expenses |
(614,368 | ) | ||||||||||||||||||
Foreign exchange gain / (loss) |
23,781 | |||||||||||||||||||
Other income / (expense), net |
(1,721 | ) | ||||||||||||||||||
Equity in profits of affiliates |
42,544 | |||||||||||||||||||
Depreciation & amortization |
(388,614 | ) | ||||||||||||||||||
Interest income net |
109,838 | |||||||||||||||||||
Net Profit / (loss) |
172,530 | |||||||||||||||||||
19
Nine Months ended December, 31 2007 | ||||||||||||||||||||
Corporate | Internet | |||||||||||||||||||
Network / Data | Access | Online Portal | Other | |||||||||||||||||
Services | Services | Services | Services | Total | ||||||||||||||||
Revenues |
2,905,366 | 1,187,296 | 149,726 | 166,504 | 4,408,892 | |||||||||||||||
Allocated expenses |
(1,857,775 | ) | (1,095,560 | ) | (227,445 | ) | (153,221 | ) | (3,334,001 | ) | ||||||||||
Minority interest |
(20,010 | ) | | | | (20,010 | ) | |||||||||||||
Segment operating income / (loss) |
1,027,581 | 91,736 | (77,719 | ) | 13,283 | 1,054,881 | ||||||||||||||
Corporate expenses |
(893,901 | ) | ||||||||||||||||||
Foreign exchange gain / (loss) |
(18,149 | ) | ||||||||||||||||||
Other income / (expense), net |
1,515 | |||||||||||||||||||
Depreciation & amortization |
(415,851 | ) | ||||||||||||||||||
Interest income net |
117,471 | |||||||||||||||||||
Income taxes |
(77,864 | ) | ||||||||||||||||||
Equity in profits of affiliates |
147,051 | |||||||||||||||||||
Net Profit / (loss) |
(84,847 | ) | ||||||||||||||||||
19. | Sales-Type Leases | |
The Companys leasing arrangement consist of leasing various types of routers, modems and other equipment for establishing virtual private networks and providing bandwidth to its customers in its corporate connectivity business. The leases are classified as sales-type leases and expire after a period of three years. The following lists the components of the net investment in sales-type leases: |
As at | As at | |||||||
March 31, 2007 | December 31, 2007 | |||||||
Rs | Rs | |||||||
Minimum lease payments receivable |
30,493 | 14,669 | ||||||
Less: Unearned income |
1,901 | 863 | ||||||
Net investment in sales-type leases |
28,592 | 13,806 | ||||||
The minimum lease payments receivable for each of the fiscal years are as follows: |
For the year ending March 31, | ||||
2008 |
1,962 | |||
2009 |
7,275 | |||
2010 |
5,432 | |||
Total |
14,669 | |||
20
20. | Commitments and contingencies |
a) | During the year ended March 31, 2006, the Company received a notice from the Income-Tax Department of India for the financial years 2002 and 2003 for a sum of Rs 103,000 stating that no withholding tax has been deducted in respect of international bandwidth and leased line payments made by the Company to international bandwidth / lease line service providers Subsequently, the demand was revised to Rs 77,724 by the income tax authorities. Under the Income tax regulations the Company is required to pay such amounts in 12 monthly installments under protest if it seeks to dispute the demand. Accordingly, the Company has paid all installments under protest and challenged such demands. The Company believes that withholding taxes need not be deducted if the service provider did not have any permanent establishment in India and has not installed any equipment at the Companys premises. The Company has demonstrated to the tax authorities that international service providers neither had a permanent establishment in India nor installed any equipment at the Companys premises, and hence concluded that the likelihood of the loss contingency is remote and no provision for the loss contingency is considered necessary. The amounts paid under protest are included under Other assets. |
b) | The Company has outstanding financial and performance guarantees for various statutory purposes and letters of credit totalling Rs 641,115 and Rs 649,193 as of March 31, 2007 and December 31, 2007 respectively. These guarantees are generally provided to governmental agencies. |
c) | Additionally, the Company is also involved in lawsuits, claims and proceedings, which arise in the ordinary course of business. There are no such items pending that the Company expects to be material in relation to its business. |
21. | Legal proceedings |
a) | The Company and certain of its erstwhile officers and directors are named as defendants in a securities class action lawsuit filed in the United States District Court for the Southern District of New York. This action, which is captioned In re Satyam Infoway Ltd. Initial Public Offering Securities Litigation, also names several of the underwriters involved in Sifys initial public offering of American Depositary Shares as defendants. This class action is brought on behalf of a purported class of purchasers of Sifys ADSs from the time of Sifys Initial Public Offering (IPO) in October 1999 through December 2000. The central allegation in this action is that the underwriters in Sifys IPO solicited and received undisclosed commissions from, and entered into undisclosed arrangements with, certain investors who purchased Sifys ADSs in the IPO and the aftermarket. The complaint also alleges that Sify violated the United States federal securities laws by failing to disclose in the IPO prospectus that the underwriters had engaged in these allegedly undisclosed arrangements. More than 300 issuers have been named in similar lawsuits. | ||
In July 2002, an omnibus motion to dismiss all complaints against issuers and individual defendants affiliated with issuers was filed by the entire group of issuer defendants in these similar actions. In October 2002, the cases against the Companys executive officers who were named as defendants in this action were dismissed without prejudice. In February 2003, the court in this action issued its decision on defendants omnibus motion to dismiss. This decision denied the motion to dismiss the Section 11 claim as to the Company and virtually all of the other issuer defendants. The decision also denied the motion to dismiss the Section 10(b) claim as to numerous issuer defendants, including the Company. On June 26, 2003, the plaintiffs in the consolidated IPO class action lawsuits currently pending against Sify and over 300 other issuers who went public between 1998 and 2000, announced a proposed settlement with Sify and the other issuer defendants. The proposed settlement provides that the insurers of all settling issuers will guarantee that the plaintiffs recover $1 billion from non-settling defendants, including the investment banks who acted as underwriters in those offerings. In the event that the plaintiffs do not recover $1 billion, the insurers for the settling issuers will make up the difference. |
21
The Company believes that it has sufficient insurance coverage to cover the maximum amount that it may be responsible for under the proposed settlement. Although the Federal District Court has preliminarily approved the settlement, it is possible that the Federal District Court may not finally approve the settlement in whole or part. The Company believes the maximum exposure under this settlement, in the event that the plaintiffs recover nothing from the non-settling defendants, is approximately U.S. $3.9 million, an amount which the Company believes is fully recoverable from the Companys insurer. | |||
b) | The Company is party to additional legal actions arising in the ordinary course of business. Based on the available information, as of December 31, 2007.Sify believes that it has adequate legal defenses for these actions and that the ultimate outcome of these actions will not have a material adverse effect on Sify. |
22. | Acquisition of minority interest in Subsidiary | |
The Board of Directors of the Company at their meeting held on February 10, 2008 approved the merger of Sify Communications Limited, a subsidiary of the Company with retrospective effect from April 1, 2007, subject to approval by the shareholders, the Honourable High Court and other statutory authorities. The shareholders of the Company at the Extraordinary General Meeting held on March 17, 2008 have accorded their assent on the said merger. The Company has filed a petition with the Honourable High Court of Madras, India, for the proposed merger and is pending approval. | ||
23. | Reclassification | |
Certain prior periods amounts have been reclassified to confirm to the current periods presentation. |
22
| Corporate network/data services, which provides Internet Connectivity including VPN & VPN-MPLS services, Security and Consulting, Hosting and Managed service solutions, Enterprises Application Services and Digital Identity Certificates. | ||
| Internet Access Services both private (to homes) public access (through cyber cafes) | ||
| online portal services and content offerings; and | ||
| other services, such as development of content for e-learning and Infrastructure Management Services. |
23
24
| Revenue from corporate network/data services has increased by Rs 243.00 million, or 29.99%, from Rs 810.15 million for three months ended December 31, 2006 to Rs 1,053.15 million for three months period ended December 31, 2007 primarily due to (i) increase of Rs 72.24 million or 13.38% in the revenue from connectivity services on account of increase in the scope and volume of services/products provided to the corporate clients, (ii) increase of Rs 113.24 million or 151.91% on account of increased sale of hardware/software to Banking and Financial Services (BFSI) clients, (iii) increase of Rs 30.57 million or 59.44% in hosting services on account of business from new customers and (iv) increase of Rs 27.28 million or 929.50% in voice services on account of higher utilization as well as addition of new clients. (v) increase of Rs 15.81 million or 15.88% from other corporate data services. The increase is partially offset by a decrease of Rs 16.14 million or 38.79% in the revenue from Safescrypt, as the one time business that we had in three months ended December 31, 2006 from Ministry of Company Affairs, was not repeated in three months ended December 31, 2007. | |
| Revenue from internet access services has decreased significantly by Rs 88.80 million or 19.38% from Rs 458.31 million for three months ended December 31, 2006 to Rs 369.51 million for three months ended December 31, 2007. Such decrease is primarily on account of (i) decrease in cybercafé revenue to the extent of Rs 38.44 million or 24.88%, due to loss of subscribers and lower usage by the existing customers, (ii) decrease in revenue from Voice over IP services to the extent of Rs 33.96 million or 58.89% due to reduction in utilization minutes and (iii) decrease in revenue from dial up amounting to Rs 17.63 million or 100% on account loss of business to public sector telecom companies as they offer bundled services to the customers. This reduction in revenues is offset by increase in broadband usage and other services by Rs 1.23 million or 0.54%. |
25
| Revenue from online portal services has decreased by Rs 20.03 million or 26.47%, from Rs 75.67 million for three months ended December 31, 2006 to Rs 55.64 million for three months ended December 31, 2007 due to (i) decrease of revenue from e-commerce amounting to Rs 12.10 million or 44%, on account of reduction in the number of corporate orders during the current period. Such decrease is pursuant to managements decision of not concentrating on this revenue stream considering the lower margins (ii) decrease of revenue amounting to Rs 6.87 million or 76.79% from online travel business. The business in online travel has been impacted on account of increased competition from the existing operators and (iii) decrease from other miscellaneous services by Rs 0.97 million or 1.70%. | |
| Revenue from other services has increased by Rs 6.83 million or 14.48%, from Rs 47.16 million for three months ended December 31, 2006 to Rs 53.99 million for three months ended December 31, 2007. Such increase is due to increase in the customer base in the e-learning revenue stream. |
| The cost of revenue for our corporate network/data services has increased by Rs 20.35 million or 6.03% from Rs 337.00 million for three months ended December 31, 2006 to Rs 357.35 million for three months ended December 31, 2007. The increase is primarily due to (i) increase in bandwidth procurement costs amounting to Rs 42 million or 28.76 % and (ii) increase of Rs 3 million in other direct costs. The increase in cost is impacted by reduction in the cost of revenue for safescrypt due to discontinuance of one time business from Ministry of Company Affairs. | |
| The cost of revenue for our internet access services has decreased by Rs 39.08 million or 15% from Rs 256.92 million for three months ended December 31, 2006 to Rs 217.84 million for three months ended December 31, 2007. The decrease is primarily due to (i) a reduction of Rs 20.78 million or 13.07% in the revenue share paid to franchisees and cable TV operators due to the reduction in the business, (ii) reduction of Rs 18.30 million or 20.65% in lease line expenses is on account of reduced usage during the current period. | |
| The cost of revenue for our portal services has marginally decreased by Rs 1.48 million or 3.57% from Rs 41.44 million for three months ended December 31, 2006 to Rs 39.96 million for three months ended December 31, 2007. The decrease is primarily due to lesser corporate orders executed during the current period. | |
| The cost of sales for other services increased by Rs 17.33 million or 48.20% from Rs 35.95 million for three months ended December 31, 2006 to Rs 53.28 million for three months ended December 31, 2007. The increase is primarily on account of additional man power costs incurred for e-Leaning business. |
26
| Revenue from corporate network/data services has increased by Rs 553.92 million, or 23.56%, from Rs 2,351.44 million for nine months ended December 31, 2006 to Rs 2,905.36 million for nine months ended December 31, 2007. This increase is primarily due to (i) increase of Rs 173.62 million or 9.94% in the revenue from connectivity services on account of increase in the scope and volume of services/products provided to the corporate clients, (ii) increase of Rs 191.07 million or 76.91% on account of increased sale of hardware/software to BFSI clients, (iii) increase of Rs 66.67 million or 46.25% in hosting services on account of business from new customers, (iv) increase of Rs 85.47 million or 1,089.52 % in voice services on account of higher utilization as well as addition of new clients and (v) increase of Rs 74.77 million or 21.94% from |
27
other corporate data services. The increase has been marginally offset by (i) a decrease of Rs 5.70 million or 2.81% in the revenue from Safescrypt, as one time business that we had in nine months ended December 31, 2006 from Ministry of Company Affairs that was not repeated in nine months ended December 31, 2007 and (ii) a decrease of Rs 31.98 million or 100% from Sify Assure due to lack of projects for assurance services. | ||
| Revenue from internet access services has decreased significantly by Rs 223.14 million or 15.82% from Rs 1,410.44 million for nine months ended December 31, 2006 to Rs 1,187.30 million for nine months ended December 31, 2007. Such decrease is primarily on account of (i) decrease in cybercafé revenue to the extent of Rs 92.05 million or 18.48 %, due to loss of subscribers and lower usage by the existing customers, (ii) decrease in revenue from Voice over IP services to the extent of Rs 109.90 million or 57.75% due to reduction in utilization minutes (iii) decrease in revenue from dial up amounting to Rs 63.39 million or 91.75 % on account loss of business to public sector telecom companies as they offer bundled services to the customers and (iv) decrease of Rs 4.86 million or 11.15% from other services. This reduction in revenues is offset by increase in broadband usage and other services by Rs 46.76 million or 7.64 % | |
| Revenue from online portal services has decreased by Rs 61.68 million or 29.18%, from Rs 211.41 million for nine months ended December 31, 2006 to Rs 149.73 million for nine months ended December 31, 2007 due to (i) decrease from banner advertisement by Rs 35.62 million or 26.96% is on account of increased competition and change in business model from click based model to lead based model during the current period (ii) decrease of revenue from e-commerce business amounting to Rs 16.15 million or 31.04 %, on account of reduction in the number of corporate orders during the current period. Such decrease is pursuant to managements decision of not concentrating on this revenue stream considering the lower margins (iii) decrease of revenue amounting to Rs 9.91 million or 36.37 % from online travel business. The business in online travel has been impacted on account of increased competition from the existing operators. | |
| Revenue from other services has increased by Rs 47.02 million or 39.36 %, from Rs 119.48 million for nine months ended December 31, 2006 to Rs 166.50 million for nine months ended December 31, 2007. Such increase is due to increase in the customer base in the e-learning revenue stream. |
| The cost of sales for our corporate network/data services has increased by Rs 210.72 million or 23.70% from Rs 888.92 million for nine months ended December 31, 2006 to Rs 1,099.64 million for nine months ended December 31, 2007. The increase is primarily due to (i) increase in bandwidth procurement costs amounting to Rs 151 million or 37.93% (ii) increase of Rs 32.19 million or 17.48% incurred towards additional man power resources and (iii) increase of Rs 18.92 million or 80.82% in the cost incurred for rendering document management services due to increase in such business. | |
| The cost of sales for our internet access services has decreased by Rs 132.85 million or 16.05% from Rs 827.34 million for the nine months ended December 31, 2006 to Rs 694.49 million for the nine months ended December 31, 2007. The decrease is primarily due to (i) reduction of Rs 42.85 million or 8.77% in the revenue share paid to franchisees and cable TV operators due to the reduction in the business, (ii) reduction of Rs 50.00 million or 18.45% in lease line expenses on account of the reduced usage during the current period and (iii) a reduction of Rs 40.00 million or 58.82% in voice procurement costs due to reduction in Voice over IP business. | |
| The cost of sales for our portal services has marginally decreased by Rs 5.96 million or 7.15% from Rs 83.28 million for nine months ended December 31, 2006 to Rs 77.32 million for nine months ended December 31, 2007. The decrease is primarily due to a decrease of Rs 21.30 million or 50.53% in the procurement for e- |
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commerce as the management has taken a conscious decision to reduce the business in this segment considering the lower margin as well as increase in the content costs amounting to Rs 13.49 million or 39.01% on account of price rise for the contents. | ||
| The cost of sales for our other services has increased by Rs 47.91 million or 47.98% from Rs 99.84 million for nine months ended December 31, 2006 to Rs 147.75 million for nine months ended December 31, 2007. The increase is primarily on account of additional man power costs incurred for e-Leaning and IMS business. |
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For the Nine months | ||||||||||||||||||||
Fiscal year ended | ended | |||||||||||||||||||
March 31, | December 31, | |||||||||||||||||||
2005 | 2006 | 2007 | 2007 | 2007 | ||||||||||||||||
(in thousands) | ||||||||||||||||||||
Net profit / (loss) from continuing
operations |
Rs | (307,576 | ) | Rs | (149,245 | ) | Rs | 187,760 | Rs | (84,847 | ) | $ | (2,154 | ) | ||||||
Net decrease/(increase) in working
capital |
227,872 | (135,666 | ) | (582,917 | ) | (329,954 | ) | (8,373 | ) | |||||||||||
Other adjustments for non-cash items |
559,821 | 505,293 | 573,676 | 470,481 | 11,939 | |||||||||||||||
Net cash provided by/(used in)
operating activities |
480,117 | 220,382 | 178,519 | 55,680 | 1,412 | |||||||||||||||
Net cash provided by/(used in)
investing activities |
(552,669 | ) | (426,406 | ) | (1,727,025 | ) | (369,300 | ) | (9,370 | ) | ||||||||||
Net cash provided by/(used in)
financing activities |
69,182 | 1,684,055 | 866,060 | (557,690 | ) | (14,151 | ) | |||||||||||||
Effect of exchange rate changes on
cash |
1,479 | 20,558 | (8,231 | ) | 1,882 | 48 | ||||||||||||||
Net increase/(decrease) in cash and
cash equivalents |
(1,891 | ) | 1,498,589 | (690,677 | ) | (869,428 | ) | (22,061 | ) |
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Contractual Obligations | Payments Due by Period | (Rs Million) | ||||||||||||||||||
more | ||||||||||||||||||||
Less than 1 | than 5 | |||||||||||||||||||
Total | Year | 1-3 years | 3-5 years | years | ||||||||||||||||
Short-term borrowings |
237.70 | 237.70 | | | | |||||||||||||||
Capital Lease Obligations |
6.09 | 2.82 | 3.27 | | | |||||||||||||||
Purchase obligations |
34.29 | 34.29 | | | | |||||||||||||||
Total contractual
obligations |
278.08 | 274.81 | 3.27 | | |
a. | In accordance with SFAS No. 87, Employers Accounting for Pensions, and SFAS No. 106, Employers Accounting for Postretirement Benefits Other Than Pensions, as amended by SFAS No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans an amendment of FASB Statements No. 87, 88, 106, and 132(R), the total accrued benefit liability for defined benefit and contribution plans recognized as of December 31, 2007, was Rs 18,316 and disclosed under other liabilities. | |
b. | Other liabilities also include Rs 123,596 deposits received from franchisees. | |
For such amounts, the extent of the amount and the timing of payment / cash settlement are not readily estimable or determinable, at present. Accordingly, we did not include these amounts in the contractual obligations table. | ||
c. | Standby letter of credit and guarantees disclosed in note 20 (b) has not been included in the above mentioned table of contractual obligations. |
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Number | Description | |||
12.1 | Rule 13a-14(a) Certification of Chief Executive Officer |
|||
12.2 | Rule 13a-14(a) Certification of Chief Financial Officer |
|||
13.1 | Section 1350 Certification of Chief Executive Officer |
|||
13.2 | Section 1350 Certification of Chief Financial Officer |
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SIFY TECHNOLOGIES LIMITED | ||||||
By: | /s/ MP Vijay Kumar | |||||
Name: | M P Vijay Kumar | |||||
Title: | Chief Financial Officer |
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