logo-sifyThe board of NASDAQ listed Sify Technologies Ltd has approved the transfer of the company’s “non-telecom” business to a wholly owned subsidiary called Sify Networks Private Limited. The slump sale to the subsidiary is for a consideration of Rs. 450 million. The non-telecom business comprises of:

— ELearning business: involves development of custom e-learning content services, content management etc, delivered as web based training or instructor led training programs. This business has been valued at Rs 306 million, including working capital.

— Software Development Team Associates and Products includes a software and development segment valued at Rs. 4.5 crores, with products for “ITEST, SLEM, BEACON and DMS”; Forum, for forward supply chain management, valued at Rs 65.2 million; HR assets have been valued at Rs.

The HR assets have been valued based on cost to maturity method. Cost of development of the Human Capital to be transferred forms the basis and the value of the HR assets is Rs. 38.4 million.

It appears that Sify may want to build upon its E-Learning business separately, and separate it from its portals, access and enterprise business. In FY09, Sify reported a Rs.49.19 million or 19.14 % increase in the revenue from their E-learning services.

Access and Consumer Business Performance

Legal Expenses: Sify’s legal expenses increased by Rs. 130.2 million due to a one time payment in connection with the pending litigation with Yahoo.

In the annual report filing from Sify, the company has said that revenue from Consumer One services, which include both its Internet Access services (Sify Broadband and cybercafe business) and Online Portal services (Sify.com and other portals), has decreased 25.62 % by Rs 450.48 million to Rs 1,305.51 million for the year ended March 31, 2009 (FY09), from Rs 1,755.99 million for the year ended March 31, 2008 (FY08).

— Internet Access Business: Internet Access revenues declined 26.99% by Rs 417.04 million, accounting for Rs. 1,128.18 million of revenues for FY09, as compared to Rs. 1,545.23 million for FY08. This decrease is being attributed to:

  • Broadband Services: Revenues were down by Rs.163.25 million, due to decrease in subscribers. Subscribers of the high speed Internet access to homes decreased by 24.65 % to 165,000 at the end of FY09, from 218,000 at the end of FY08.  Consequently, the revenue share paid out to Cable Television Operators (franchisees) reduced by Rs. 162.93 million.
  • Cybercafe: Revenues were down by Rs.190.48 million, due to closure of active cybercafes caused by unexpected rent increases in the current year incurred by the franchisees and the economic slow down. Sify is required to pay a commission at approximately 70% of the revenue generated by the franchisees from internet usage at cybercafes. The number of active cybercafés decreased from 2,165 to 1,791 at FY09 end.
  • Voice: Revenues were down by Rs.49.70 million due to price reductions offered by Sify for customer retention and acquisition. Costs paid in the form of Voice Termination charges declined by Rs.12.74 million
  • Other Internet Access related services: decrease of Rs.13.61million ($ 0.26 million) in revenues.

— Portal services: declined by 15.87% or Rs. 33.44 million, accounting for Rs.177.33 million of revenues for FY09, as compared to Rs. 210.77 million for FY08. The cost of goods sold and services rendered for the portal business decreased 39.53%, by Rs. 47.84 million to Rs. 73.16 million in FY09, from Rs.121 million for FY08.

The revenue break-up:

  • Corporate Orders: declined by Rs. 26.44 million. According to the company, this is a high volume low profit margin business, and Sify decided not to opt for orders where margins became unattractive due to the economic downturn. Sify saved Rs. 18.45 million in costs of vouchers due to the decline in orders.
  • Travel Services: decreases by Rs.7 million due to depressed aviation market for air traffic between US and India, and increased competition.

Additionally:

  • Content costs declined by Rs. 25.04 million, with content being sourced at lower costs.
  • Payment Gateway Costs: Fewer transactions led to a reduction of Rs.0.68 million in the cost of payment gateways
  • Gaming Revenue Share: Sify paid Rs. 7.24 million less in the revenue share for the Games, due to a drop in gaming revenue.

Much more in the Annual Report filing with the SEC.

Related:

— Sify Appoints President, Consumer Infrastructure Services; What Restructuring?
— Q1-10: Sify Losses Reduce; Consumer Revenues Down 30.82%; Samachar.com Mobile