Anant Raj Ltd Q2 FY2025 Concall Summary

Key Takeaways

• Record quarter, data center revenue begins: Revenue grew 54% YoY as the 6 MW Manesar data center started contributing, alongside sustained real estate performance.
• Ashok Cloud launched, revenue from day one: The company's own cloud went live on October 7, 2024, with a model where billing starts immediately, unlike co-location which has a handover lead time.
• Aggressive capacity buildout underway: 28 MW of IT load targeted by March 2025, scaling to 63 MW by March 2026, with 14 MW of that earmarked for cloud.
• Balance sheet rapidly deleveraging: Strong operational cash flow has the company on track to hit net debt-free status by Q3 FY25.
• What to watch next quarter: The full-quarter revenue impact of the second 6 MW data center unit, the pace of cloud customer additions, and the January group housing launch after the election-related delay.

Data Center & Cloud: The New Growth Engine

• Revenue contribution begins: The 6 MW data center at Manesar contributed INR8 crores to EBITDA in Q2 FY25. A second 6 MW unit was handed over to clients during the quarter, so its full impact will only appear in the next quarter.
• Co-location vs. cloud revenue recognition: Co-location carries a lead time for handover and server installation before revenue starts. Cloud billing begins from day one, which is why the October 7 Ashok Cloud launch generated revenue immediately.
• Cloud business model: Currently offered as Infrastructure-as-a-Service (IaaS), with total billing potential of ~INR150 crores per MW per year. Work has begun on Platform-as-a-Service (PaaS), with Software-as-a-Service (SaaS) planned for the future.
• Cloud capex intensity: Each megawatt of cloud capacity requires an additional investment of close to INR100 crores, reflecting the specialized hardware and software stack.
• Capacity roadmap: 28 MW of IT load (co-location plus cloud) is fully tied up with clients and will be operational at Manesar and Panchkula by end of FY2025. A further 35 MW will be added next year, taking total capacity to 63 MW by March 2026, of which 14 MW will be cloud. By end of FY25, at least 4 MW will be in the cloud category.
• Third location identified: After Manesar and Panchkula, the next data center site will be at Rai.
• Competitive moat: The company began its data center buildout in 2019, constructing buildings with specialized strength requirements. Management argues that any new entrant starting today would need a similar multi-year lead time to reach comparable scale.

Amit Sarin: "The good part about cloud is that your rentals start from day one. Co-location, you know, things take time because the facilities are made, then you hand it over, then the servers start to come in. But this year, in this case, your revenues start from day one itself."

Real Estate: Sustained Contribution, Leasing Pivot

• Group housing launch delayed, now imminent: The Estate Residences launch was pushed back by the Haryana elections and the model code of conduct. It is now back on track for January.
• Commercial leasing strategy revived: With finances restored, the company has returned to its old policy of developing commercial properties and leasing them out rather than selling them. Current quarterly rental income, excluding data centers, is INR12.5 crores and is expected to triple over the next two years from pipeline projects.
• Land bank expansion in Gurgaon: 20 acres were acquired in Gurgaon during the quarter. The acquisition included large parcels at higher prices and small, stranded chunks within the township that came very cheaply, averaging ~INR20 crores per acre. The land will be used primarily for group housing with some plotted development, subject to permissions, with launches expected next year.
• Partnership structure on 11.35 acres: A portion of the acquired land involves an external partner because buying out the entire parcel would have been too expensive. All development rights will be exercised by the company.
• Delhi land bank on hold: The company's 101 fully-owned acres in Delhi will only be developed once the new master plan is notified. The stated focus for the next four years is the 63-A Gurgaon project and the data center and cloud businesses.
• Birla JV deliveries commence: Phase I deliveries have begun, with approximately 228 units already handed over.

Amit Sarin: "Touch wood now with the finances all back in place and looking good, we are back to our old policy wherein we will develop commercial and only lease it out."

Fundraising & Capital Allocation

• QIP enabling resolution passed: An enabling resolution was taken for a INR2,000 crores QIP, with an EGM to be held subject to Board approval. The entire amount is earmarked purely for the data center business, primarily to fund the cloud expansion.
• Real estate is self-funded: Management stated explicitly that the real estate division is fully funded from internal sources and requires no external capital.
• QIP timing is flexible: The company will go to the market as and when needed. It is currently comfortable on cash and no work will stop. Internal accruals from the 35 MW buildout may be sufficient, meaning the full QIP amount may not be required.
• Net debt-free by Q3 FY25: Disciplined debt management supported by strong operational cash flow has enabled aggressive leverage reduction, and the company remains firmly on track to achieve net debt-free status by the end of the next quarter.

Partnerships & Technical Architecture

• Orange is the cloud technology partner: The technical tie-up for Ashok Cloud is with Orange, the French company. Orange is entitled to technical fees based on revenue, while Anant Raj owns all the equipment and Orange runs it technically.
• Private and government community cloud: The initial cloud setup is split: 50% is a private cloud, and the remaining 50% is a government community cloud that qualifies as a sovereign cloud.
• Ambition to compete with hyperscalers: Management's stated ambition is to move up the stack from IaaS to PaaS and eventually SaaS, putting the company in direct competition with the world's largest hyperscalers.

Amit Sarin: "In this, you are going to be then competing with all the hyperscalers and the largest ones in the world. That is the category we want to go into."

Guidance & Commitments

Key Metrics