Sify Infinit Spaces hits valuation roadblock ahead of IPO

Mumbai: The proposed initial share sale by Sify Infinit Spaces has hit a valuation roadblock, with a wide gap between what the data centre (DC) operator is seeking and what investors are currently willing to offer, people aware of the matter told ET.

Sify is seeking a valuation of ₹40,000 crore while investors haven't moved beyond ₹22,000-25,000 crore since April. Therefore, Sify has been silent lately and may revisit the market next year, the people said.

If the valuations were near the company's ballpark estimates, the share sale may have been scheduled this year itself, said the people cited above. In the absence of relevant local benchmarks, the recent listing of ESDS Software Solutions - with a smaller operational footprint - has added another dimension to the valuation tug-of-war.


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ESDS is a smaller cloud and DC company, which entered the market at a valuation of around ₹5,000 crore this month. Within days, its market capitalization reached ₹22,000 crore.

Sify Infinit Spaces secured approval from the Securities and Exchange Board of India (Sebi) in January this year for its public offering. It is the data centre subsidiary of Sify Technologies. JM Financial, CLSA India, J.P. Morgan India, Kotak Mahindra Capital and Morgan Stanley India are the book running lead managers to the proposed issue.

Sify had earlier planned to raise about ₹3,700 crore through an IPO and was seeking a valuation of as much as $4.2 billion, or roughly ₹35,000-37,000 crore. The company subsequently put the offering on hold amid weak market conditions while its valuation ambitions have now risen to ₹40,000 crore.

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Sify did not respond to ET's queries till press time.

The company reported revenue of ₹1,428.4 crore in FY25, up 28.2% from ₹1,114.2 crore in FY24. EBITDA rose to ₹634.2 crore from ₹465.3 crore, while profit after tax increased to ₹126.4 crore from ₹93.2 crore.

In Sify's case, there are two major factors at play - the broader equity market conditions as well as the perception of data centres as an investment category.

A 'Value' Market

India's DC sector has a compelling growth story, but institutional investors are becoming increasingly valuation conscious, according to Prakriti Jaiswal, Partner, JSA Advocates & Solicitors.

"The challenge is the gap between future growth assumptions and present-day financial performance," she said, adding that investors are willing to back scalable digital infrastructure, yet they are reluctant to pay premium multiples for capacity in a business where real profits are several years away.

In many cases, DCs are seeking valuations based on future AI-driven demand, while public market investors are underwriting businesses based on current earnings and execution risks, she said.

Besides, India's primary market has cooled sharply this year. Institutional investors are becoming more selective. Companies have been cutting issue sizes, accepting lower valuations or delaying IPOs altogether.

Bankers are also seeking to leave more value on the table for public market investors to avoid a sharp correction in shares after listing, particularly given weaker conditions in the secondary market.

To be fair, India does not have a large listed DC player to benchmark value, although the ESDS listing and D-Street's subsequent scramble for its stock provide some measure of domestic investor appetitive for the sector.

"Sify is valuing itself on the promise of AI, while institutions see a landlord with racks and power contracts," said Dev Chandrasekhar, founder of Transcendum, a Mumbai-based valuations and strategic advisory firm. "With no listed peer to settle the question, the ESDS rally proves only that the market rewards a narrative, not that it will pay for scale before contracted GPU revenue shows up."

India's DC industry is at the beginning of a significant expansion cycle. Roughly $400 billion of capital has been committed by global hyperscalers and Indian conglomerates. India's DC capacity is expected to grow from 1.6 Gigawatt to 10 Gigawatt in seven years. Meanwhile, the US alone is expected to grow from 31 Gigawatt to 84 Gigawatt by 2030.

Yet investors remain cautious about how much of this opportunity can translate into sustainable returns, particularly as concerns around the scale of global AI spending and valuations have intensified.