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 who parted ways with the company a
few months back in a major top management overhaul. Ramaraj, who was credited
for many firsts like launching India's first private ISP to pioneering the
concept of iWays (Sify branded cyber cafes) to listing the company in Nasdaq
(first Internet company to do so). 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.
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 top
management shakeup has indeed come as a surprise. Vegesna, who started
ServerWorks in 1994 with just around four people, was instrumental in making
ServerWorks a leading company in the Intel-based PC server chipsets in just
seven years. More impressive was Vegesna sold ServerWorks to Broadcom for $1.8
bn.
The |
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 |
When Vegesna came on board, his expectations were very high due
to his successful entrepreneurial record. Industry watchers see this as the
starting point of friction with the existing management team headed by Ramaraj.
But when Q1 FY '07 results saw Sify recording net profits created an
impression that all is well. In July 2006, Ramaraj and some of his fellow senior
colleagues like Rustom Irani, CTO exited the company for better opportunities.
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.
The 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. Both Q1 and Q2 of the ongoing fiscal have been good
for Sify and indicate its bottom line is on the threshold of better times ahead.
Reflecting on the financial performance, Raju Vegesna, MD and CEO of Sify 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."
The profitability, which Vegesna and his team are pitching for, hinges on the company's three key divisions-enterprise, access media and portals |
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."
Growth & 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.
'People chose to move on -Raju CEO and MD, Sify A well know
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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. For instance, the company has tied up with IRCTC to facilitate
iWay users to book railway e-tickets on cash payments in iWays. On the high
speed Internet space, Sify's broadband users crossed two lakh subscribers
during the JAS quarter of this fiscal. Company sources claim a healthy growth on
the portals' side.
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.
Shrikanth G
shrikanthg@cybermedia.co.in