Sify Infinit CEO flags price war risk in $4B data centre plan

Sify Infinit Spaces, the company that built India's first commercial data centre, sees a path to raising $4 billion over four years for expansion. CEO Sharad Agarwal laid out the plan in a Mint interview, pointing to debt, public markets and institutional placements as funding sources.

The subsidiary of Sify Technologies Ltd plans to use internal cash flow for near-term growth before tapping external markets. Agarwal said accruals are enough to support 10-20% growth this year. The problem is that the market demands more.

"The market is growing in such a way that we need to grow 50-70% year-on-year to keep pace," Agarwal said. "For that, we'll need more capital."

The company filed a draft red herring prospectus last October, seeking to raise ₹3,700 crore at a ₹37,000 crore valuation. Bloomberg reported June 16 that the planned IPO was put on hold "due to weak market conditions." Agarwal declined to offer a timeline, saying only that the company would pursue a listing "as quickly as possible."

A second risk hangs over the fundraise. Agarwal warned that a price war in data centre services could collapse the industry's ability to generate returns for investors. With operators across India adding capacity fast and competing hard on pricing, margins could compress across the board.

"If expansion slows, there could be a price war, and access to capital could get restricted," he said. "It's a capital-intensive industry. The industry itself would collapse if prices start falling."

For now, the industry is still growing fast enough to absorb new capacity. Agarwal said Sify would "continuously tap the market through follow-on offers, private placements or QIPs."

Chairman Raju Vegesna had committed $5 billion by 2030 to expand the company's data centre and networking businesses. Agarwal called that target "small" measured against current industry demand.

"A capital expenditure of $5 billion is good enough for just 1 GW of data centre capacity," he said. The company is not chasing big market-share targets, Agarwal added. Its goal is to protect its position and raise funds as needed.

Sify Infinit Spaces reported FY25 operating revenue of ₹1,428.4 crore and net profit of ₹126.4 crore, according to financials sourced via Tofler. Cash reserves rose 18% year-on-year to ₹1,230.7 crore. Total debt rose 17% to ₹2,318.2 crore.

Peers are raising capital on a similar scale. Nxtra, the data centre arm of Bharti Enterprises, announced a $1 billion investment in March from Alpha Wave, Carlyle and Anchorage. CtrlS Datacenters raised ₹4,000 crore from a Canadian pension board in June. Yotta Data Services raised $150 million from non-institutional investors in July. Yotta and CtrlS plan to go public within a year; Nxtra said it would list in two to three years.

Vijay Agrawal, an analyst at Equirus Capital, said investors would look at Sify's track record. "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," he said. "Ultimately, they are betting on the company's growth and whether it can generate return on equity."