| § | | Consumer Care and Lighting revenue increased by 34% from Rs. 5,625 million for the year ended March 31, 2006 to Rs. 7,563 million for the year March 31, 2007.Our Consumer Care and Lighting revenue increased by 32%. The increase in revenue is attributable to an increase in the volume of our soap, lighting, furniture products and Personal Care Products of Unza. Our gross profit as a percentage of our revenues from the Consumer Care and Lighting segment increased by 333 bps. This increase was primarily due to an increase in the proportion of revenue from the range of products manufactured by Unza, which typically have higher gross margins. Selling and marketing expense as percentage of revenue from our Consumer Care and Lighting segment has increased from 22.04% for the year ended March 31, 2008 to 24.22% for the year ended March 31, 2009. This increase is primarily due to increase in proportion of revenues from Unza. Selling and distribution expense as a percentage of our revenue is typically higher in Unza products. Further in fiscal 2009, we incurred higher brand promotion and advertisement spends in Indian market. General and administrative expense as percentage of revenue from our Consumer Care and Lighting segment has increased from 5.58% for the year ended March 31, 2008 to 6.25% for the year ended March 31, 2009. This increase is primarily due to Unza. General and administrative expense as a percentage of our revenue is typically higher in Unza products. As a result of the above, operating income from our Consumer Care and Lighting segment increased by 25%. Analysis of years ended March 31, 2008 and 2007 | § | | Our Consumer Care and Lighting revenue increased by 93%. This increase in revenue is attributable to an increase in sales volume of our soap, lighting and furniture products, an increase in the prices of certain products and the integration of salesUnza from our acquisitionAugust 2007, which contributed additional revenues of Northwest.Rs 4,823. | |
| § | | AsOur gross profits as a percentage of our revenues from the Consumer Care and Lighting revenue, gross profit decreasedsegment increased by 2% from 37% for the year ended March 31, 2006 to 35% for the year ended March 31, 2007.548 bps. This increase was primarily due to an increase in the |
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| | | proportion of revenuerevenues from furniture and lightingthe range of products manufactured by Unza, which typically have lowerhigher gross margins as compared to soap products.margins. | |
| § | | Selling and marketing expenses forof our Consumer Care and Lighting businesssegment increased by 28% from Rs. 1,160 million for the year ended March 31, 2006 to Rs. 1,483 million for the year ended March 31, 2007.117%. This was primarily due anto the increase in sales promotion expenses for building brands and expanding market share in select geographies and the integration of our acquisition of Unza group from August 2007 which resulted in this business segmentadditional selling and increase in sales personnel and increase in compensation costs.marketing expenses of Rs. 1,630. |
| § | | General and administrative expenses of our Consumer Care and Lighting segment increased by 580%. This is primarily attributable to integration of our acquisition of Unza group from August 2007 which resulted in additional general and administrative expenses of Rs. 600. |
| § | | As a result of the above, operating income of our Consumer Care and Lighting business increased by 34% from Rs. 799 million for the year ended March 31, 2006 to Rs. 1,069 million for the year ended March 31, 2007. |
Analysis of year ended March 31, 2006 and 2005
| § | | Consumer Care and Lighting revenue increased by 23% from Rs. 4,555 million for the year ended March 31, 2005 to Rs. 5,625 million for the year March 31, 2006. This was primarily due to increased efforts on expanding market presence in select geographies which resulted in higher sales of soap products, lighting (luminous and compact fluorescent lamp)73%. | | | § | | As a percentage of Consumer Care and Lighting revenue, gross profit increased by 1% from 36% for the year ended March 31, 2005 to 37% for the year ended March 31, 2006. This was due to an increase in the proportion of revenues from soap products which typically have higher margins than lighting products. | | | § | | Selling and marketing expenses for our Consumer Care and Lighting business increased by 32% from Rs. 877 million for the year ended March 31, 2005 to Rs. 1,160 million for the year ended March 31, 2006. This was primarily due an increase in sales promotion expenses for building brands and expanding market share in select geographies in this business segment and an increase in sales personnel and an increase in compensation costs. | | | § | | General and administrative expenses for Consumer Care and Lighting increased by 24% from Rs. 82 million for the year ended March 31, 2005 to Rs. 102 million for the year ended March 31, 2006. The increase was primarily due to an increase in compensation costs as part of our compensation review which is effective from November 2005. | | | § | | As a result of the above, operating income of our Consumer Care and Lighting increased by 19% from Rs. 671 million for the year ended March 31, 2005 to Rs. 798 million for the year ended March 31, 2006. |
Others, including reconciling items Analysis of year ended March 31, 2009 and 2008 Revenue from our Others segment, including reconciling items, decreased by 10%, from Rs. 11,930 for the year ended March 31, 2008 to Rs. 10,704 for the year ended March 31, 2009. This decrease was primarily driven by a decrease in revenue from our hydraulic cylinders and tipping gear systems business. The decline in the revenues is attributable to slowdown in the global markets which has impacted the market for infrastructure engineering products in Indian and European markets. Operating income from our Others segment, including reconciling items, decreased from Rs. 515 for the year ended March 31, 2008 to Rs. (932) for the year ended March 31, 2009. This is primarily due to loss Rs. 281 in our hydraulic cylinders and tipping gear systems business as against income of Rs. 1,006 in the corresponding previous year. This loss is attributable to the contraction in the sales volume of infrastructure engineering business due to the slowdown in the global market. Analysis of year ended March 31, 2008 and 2007 Revenue from our Others segment, including reconciling items, increased by 64%, from Rs. 7,263 for the year ended March 31, 2007 and 2006to Rs. 11,930 for the year ended March 31, 2008. This was primarily due to 47
| § | | Revenue from Others increased from Rs. 3,279 million for the year ended March 31, 2006 to Rs. 7,063 million for the year ended March 31, 2007. This was primarily due to integration of the revenues arising from our acquisition of Hydrauto Group for the full year in fiscal 2008 as compared to a part of Rs. 2,756 millionthe year in fiscal 2007, and an increase in revenue from the sale of hydraulic cylinders and tipping gear systems. | | | § | | As a percentage of revenue, gross profit declined from 25% of revenue for the year ended March 31, 2006 to 19% of revenue for the year ended March 31, 2007. This was primarily due to integration of our acquisition of Hydrauto Group, which reported a gross profit of 13% during the year ended March 31, 2007. | | | § | | Selling and marketing expenses for Others, including reconciling items, have increased from Rs. 270 million for the year ended March 31, 2006 to Rs. 523 million for the year ended March 31, 2007. This increase is attributable to an increase in use of premium distribution channel for deliveries and due to integration of Hydrauto Group during the year ended March 31, 2007. | | | § | | General and administrative expenses for Others, including reconciling items, have increased from Rs. 151 million for the year ended March 31, 2006 to Rs. 596 million for the year ended March 31, 2007. This was primarily due to integration of our acquisition of Hydrauto Group during the year ended March 31, 2007. | | | § | | As a result of the above, operating income of Others, including reconciling items, declined from Rs. 360 million for the year ended March 31, 2006 to Rs. 231 million for the year ended March 31, 2007. |
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Analysis of year ended March 31, 2006 and 2005
| • | | Revenue from Others increased by 22% from Rs. 2,681 million for the year ended March 31, 2005 to Rs. 3,279 million for the year ended March 31, 2006. This was primarily due to a 37% increase in the revenues from the sale of hydraulic cylinders and tipping gear systems in our Wipro Infrastructure Engineering business. | | | • | | Selling and marketing expenses for Others, including reconciling items, increased by 25% from Rs. 216 million for the year ended March 31, 2005 to Rs. 270 million for the year ended March 31, 2006. | | | • | | General and administrative expenses for Others, including reconciling items, increased by 12% from Rs. 135 million for the year ended March 31, 2005 to Rs. 151 million for the year ended March 31, 2006. | | | • | | As a result of the above, operating income of Others, including reconciling items, declined by Rs. 31 million from Rs. 391 million for the year ended March 31, 2005 to Rs. 360 million for the year ended March 31, 2006. |
Acquisitions
Acquisition of Ownership Interest in a Subsidiary
As of March 31, 2005, we held approximately 93% of the outstanding equity shares of Wipro BPO Solutions Limited which we refer to as Wipro BPO. The remaining shares were held by employee shareholders.
During the year ended March 31, 2006, we acquired the 7% balance from the employee shareholders at fair value for an aggregate consideration of Rs. 852 million. This step-acquisition resulted in goodwill and intangibles of Rs. 304 million and Rs. 15 million respectively. As a result of this transaction, Wipro BPO became our wholly owned subsidiary.
We completed the following acquisitions during the year ended March 31, 2006.
mPower Software Services Inc. and subsidiaries
In December 2005, we acquired 100%above, operating income of the equity of mPower Software Services Inc. and subsidiaries (mPower)Others, including the minority shareholding held by MasterCard International in mPact India, a joint venture between MasterCard International and mPower Inc,reconciling items, increased from Rs. 273 for an aggregate cash consideration of Rs. 1,275 million. mPower Software Services Inc. is a US based Company engaged in providing IT services in the payments service sector.
As a part of this acquisition, we plan to provide MasterCard a wide range of services including application development and maintenance, infrastructure services, package implementation, BPO and testing. We believe that through this acquisition, we will be able to expand domain expertise in the payment service sector and increase the addressable market for IT services.
The total purchase price has been allocated to the acquired assets and liabilities as follows:
| | | | | Description | | Fair value | | | | (in millions) | | Net tangible assets | | Rs. | 185 | | Customer-related intangibles | | | 513 | | Deferred tax liabilities | | | (177 | ) | Goodwill | | | 754 | | | | | | Total
| | Rs. | 1,275 | | | | | |
BVPENTE Beteiligungsverwaltung GmbH and subsidiaries
In December 2005, we acquired 100% of the equity of BVPENTE Beteiligungsverwaltung GmbH and subsidiaries (New Logic). New Logic is a European system-on-chip design company. The consideration included an upfront consideration of Rs. 1,156 million, subject to working capital adjustments, and an earn-out of Euro 27 million to be determined and paid in the future based on financial targets being achieved over a 3 year period. During the year ended March 31, 2007 we paid an additional consideration ofto Rs. 69 million towards the working capital adjustment. We have determined that a portion of the earn-out, up to a maximum of Euro 2 million is linked to the continuing employment of one of the selling shareholders. The balance earn-out will be recorded as additional purchase price when the contingency is resolved.
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We believe that through this acquisition, we have acquired strong domain expertise in semiconductor Intellectual Property (IP) cores and complete system-on-chip solutions with digital, analog mixed signal and Radio Frequency (RF) design services. The acquisition also enables us to access over 20 customers in the product engineering space.
The purchase price has been allocated to the acquired assets and liabilities as follows:
| | | | | Description | | Fair value | | | | (in millions) | | Net tangible assets | | Rs. | 307 | | Customer-related intangibles | | | 117 | | Technology-related intangibles | | | 96 | | Deferred tax liabilities | | | (53 | ) | Goodwill | | | 758 | | | | | | Total
| | Rs. | 1,225 | | | | | |
We completed the following acquisitions during515 for the year ended March 31, 2007.
cMango Inc. and subsidiaries
In April 2006, we acquired 100%2008. This increase in operating income was primarily due to increase in profits of our infrastructure engineering business on account of increase in the equityvolume of cMango Inc. and subsidiaries (cMango). cMango is a provider of Business Service Management (BSM) solutions. The consideration (including direct acquisition costs) included a cashoperations. This increase was partially offset by the fringe benefit tax payment of Rs. 884 million and375.
Acquisitions An active acquisition program is an earn-outimportant element of USD 12 million to be determined and paidour corporate strategy. In the last three fiscal years, we have invested over Rs. 47,268 in the futureaggregate, to acquire companies including the acquisitions of Infocrossing and Unza. In January 2009, we acquired Citi Technology Services Limited (Subsequently renamed as Wipro Technology Services Limited — WTS), an India based on specific financial targets being achieved overprovider of information technology services and solutions. WTS has a two year period. The earn-out will be recorded as additional purchase price whenstrong competency in Technology Infrastructure Services (TIS), application development and maintenance services (ADM) for cards, capital markets and corporate banking. Typically, the contingency is resolved.significant majority of our integration activities related to an acquisition are substantially completed within three to six months after the closing of the acquisition. We believe that through thisour acquisition we will expandprogram supports our operationslong-term strategic direction, strengthens our competitive position, particularly in the Business Management Services sector. This acquisition also enables us to access over 20 customers in the Business Management services sector. The purchase price has been preliminarily allocated to the acquired assets and liabilities as follows:
| | | | | Description | | Fair value | | | | (in millions) | | Net tangible assets/(liabilities) | | Rs. | (23 | ) | Customer-related intangibles | | | 132 | | Deferred tax liabilities | | | (46 | ) | Goodwill | | | 821 | | | | | | Total
| | Rs. | 884 | | | | | |
RetailBox BV and subsidiaries
In June 2006, we acquired 100% of the equity of RetailBox BV and subsidiaries (Enabler). Enabler is in the business of providing comprehensive IT solutions and services. The consideration (including direct acquisition costs) included a cash payment of Rs. 2,442 million and an earn-out of Euro 11 million to be determined and paid in the future based on specific financial targets being achieved over a two year period. The earn-out will be recorded as additional purchase price when the contingency is resolved.
Through this acquisition we aim to provide a wide range of services including Oracle retail implementation, digital supply chain, business optimization and integration. Further, through this acquisition, we aim to expandacquiring new domain expertise, both in the retail and technology sectors and obtain a presence in five different geographical locations.
The purchase price has been preliminarily allocated to the acquired assets and liabilities as follows:
| | | | | Description | | Fair value | | | | (in millions) | | Net tangible assets | | Rs. | 389 | | Customer-related intangibles | | | 298 | | Deferred tax liabilities | | | (104 | ) | Goodwill | | | 1,859 | | | | | | Total
| | Rs. | 2,442 | | | | | |
Northwest Switchgear Limited
In May 2006, we acquired a substantial portion of the business of North-west Switchgear Limited a manufacturer and distributor of switches, sockets and miniature circuit breakers (collectively ‘the products’) under the trademark/ brand name North-West. The consideration (including direct acquisition costs) included a cash payment of
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Rs 1,132 million and an earn-out of Rs. 200 million to be determined and paid in the future based on achievement of a specified revenue levels over a period of four years. Further, we have entered into a non-compete and manufacturing agreement with the sellers. Under the manufacturing agreement, the seller will manufacture the products for us using certain assets and employees retained by the seller. The manufacturing agreement is for a period of five years. Amounts paid by us for such manufacturing services will be recorded through the income statement. The earn-outs which are not linked to any post-acquisition services by the seller will be recorded as additional purchase consideration when the contingency is resolved.
Based on the guidance in EITF Issue No. 98-3, Determining Whether a Non-monetary Transaction Involves Receipt of Productive Assets of a Business, we have accounted for this transaction as an acquisition of a business. A significant portion of the consideration has been allocated to the trademark/brand name North-West.
The purchase price has been preliminarily allocated to the acquired assets and liabilities as follows:
| | | | | Description | | Fair value | | | | (in millions) | | Net tangible assets | | Rs. | 34 | | Marketing-related intangibles | | | 1,098 | | | | | | Total
| | Rs. | 1,132 | | | | | |
Saraware Oy
In June 2006, we acquired 100% of the equity of Saraware Oy (Saraware) a Company involved in providing design and engineering services to telecom companies. We acquired Saraware for an aggregate consideration of Rs. 947 million and an earn-out of Euro 7 million to be determined and paid in future based on financial targets being achieved over a period of 18 months. In addition, amounts collected against certain specific reward/ incentive assets at the acquisition date are payable to the sellers. We have paid Rs. 149 million against specific reward/ incentives collected and Rs. 19 million as earn-out against targets achieved during the period ended March 31, 2007. The earn-out and the additional payments are recorded as additional purchase price when the related contingencies are resolved.
Through this acquisition we aimexpands our customer base, increases our ability to expand our presenceservice offerings and greater scale to grow our earnings and increase stockholders’ value. See Note 3 of our Notes to Consolidated Financial Statements for additional information related to our acquisitions.
We routinely review potential acquisitions. We currently expect to finance our acquisitions through cash generated from operations, cash and cash equivalents and investments in the engineering services space in Finlandliquid and the Nordic region. The purchase price has been preliminarily allocatedshort-term mutual funds as of March 31, 2009. However, for strategic acquisitions, we could decide to the acquired assets and liabilities as follows:
| | | | | Description | | Fair value | | | | (in millions) | | Net tangible assets/(liabilities) | | Rs. | 187 | | Customer-related intangibles | | | 254 | | Deferred tax liabilities | | | (89 | ) | Goodwill | | | 763 | | | | | | Total
| | Rs. | 1,115 | | | | | |
Quantech Global Services
In July 2006, we acquired 100% of theor be required to obtain additional debt or equity of Quantech Global Services LLC and Quantech Global Services Ltd (Quantech). Quantech provides computer aided design and engineering services. The consideration includes upfront cash payment of Rs. 142 million, a deferred cash payment of USD 3 million and an earn-out tofinancing. We cannot be determined and paid in the future basedcertain that additional financing, if needed, will be available on specific financial targets being achieved over a period of 36 months.
Through this acquisition, we aim to strengthen our presence in the mechanical engineering design and analysis services sector.
The purchase price has been preliminarily allocated to the acquired assets and liabilities as follows:
| | | | | Description | | Fair value | | | | (in millions) | | Net tangible assets/(liabilities) | | Rs. | (230 | ) | Customer-related intangibles | | | 45 | | Deferred tax liabilities | | | (16 | ) | Goodwill | | | 482 | | | | | | Total
| | Rs. | 281 | | | | | |
Hydrauto Group
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In November 2006, we acquired 100% of the equity of Hydrauto Group AB (Hydrauto). Hydrauto is engaged in the production, marketing and development of customized hydraulic cylinders solution for mobile applications such as mobile cranes, excavator, dumpers and trucks. The consideration (including direct acquisition cost) included cash payment of Rs. 1,412 million. Through this acquisition we aim to gain an entry into Europe, access to a customer base built over the past few decades and complementary engineering skills.
The purchase price has been preliminarily allocated to the acquired assets and liabilities as follows:
| | | | | Description | | Fair value | | | | (in millions) | | Net tangible assets/(liabilities) | | Rs. | 202 | | Customer-related intangibles | | | 74 | | Deferred tax liabilities | | | (25 | ) | Goodwill | | | 1,161 | | | | | | Total
| | Rs. | 1,412 | | | | | |
3D Networks
In November 2006, we acquired 100% of the equity of the India, Middle East and South Asian operations of 3D Networks and Planet PSG. 3D Networks provides business communication solutions that include consulting, voice, data and converged solutions and managed services. These specialized solutions are deployed in the ITES/IT, Telecom, Banking and Finance, Government and Service verticals. Planet PSG provides professional services on voice and speech platforms in the Asia Pacific region. The consideration (including direct acquisition cost) included upfront cash payment of Rs. 904 million and a maximum earn-out of USD 44 million to be determined and paid in the future based on achieving certain agreed financial targets over a 24 months period. We believe that this acquisition is a strategic fit as it complements Wipro’s existing practice capabilities and differentiates Wipro as the most comprehensive IT Solutions provider across segments.
The purchase price has been preliminarily allocated to the acquired assets and liabilities as follows:
| | | | | Description | | Fair value | | | | (in millions) | | Net tangible assets/(liabilities) | | Rs. | 508 | | Customer-related intangibles | | | 136 | | Deferred tax liabilities | | | (46 | ) | Goodwill | | | 306 | | | | | | Total
| | Rs. | 904 | | | | | |
For all the above acquisitions except New Logic and mPower, the purchase consideration has been allocated on a preliminary basis based on management’s estimates. We are in the process of making a final determination of the carrying value of assets and liabilities, which may result in changes in the carrying value of net assets recorded. Finalization of the purchase price allocation, which is expected to be completed during the period ending June 30, 2007 may result in certain adjustments to the above allocations.favorable terms, or if at all.
Stock compensation expense Effective April 1, 2006, we adopted SFAS No. 123 (revised 2004), Share-Based Payment, (SFAS No. 123 (R)), which requires the measurement and recognition of compensation expense for all stock-based payment awards based on the grant-date fair value of those awards. Previously, we used the intrinsic value based method, permitted by Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock issued to Employees, to account for itsour employee stock-based compensation plans and had adopted the pro-forma disclosure provisions of SFAS No. 123, Accounting for Stock-Based Compensation. We have adopted SFAS No. 123(R) using the modified prospective application method. Under this approach we have recognized compensation expenseexpenses for share-based payment awards granted prior to, but not yet vested as of April 1, 2006, based on the grant date fair value estimated in accordance with the provisions of SFAS No. 123. Pursuant to adoption of SFAS No. 123(R), we have recognized an additional compensation expense of Rs. 165.00165 million for the year ended March 31, 2007. As of March 31, 2007, there were 7,499,9802009, 122,746 options are outstanding under our WRSUP 2004stock option plan and 1,551,33016,270,226 options are outstanding under our WARSUP 2004restricted stock unit option plan. The compensation cost arising from such grants is being amortized over the relevant vesting period of five years. 52
period. As a result of the above, we have amortized stock compensation expenses of Rs. 354 million,1,336, Rs. 652 million1,076 and Rs. 1,336 million1,636 for the years ended March 31, 2005, 20062007, 2008 and 20072009, respectively. The stock compensation charge has been allocated to cost of revenue and selling and marketing expenses and general and administrative expenses in line with the nature of the service rendered by the employee who received the benefit. The allocation is as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended March 31, | | | Year ended March 31, | | | | 2005 | | 2006 | | 2007 | | | 2009 | | 2008 | | 2007 | | | | (in millions) | | | (in millions) | | Cost of revenue | | Rs. | 238 | | Rs. | 437 | | Rs. | 1,045 | | | Rs. | 1,232 | | Rs. | 840 | | Rs. | 1,044 | | Selling and marketing expenses | | 49 | | 75 | | 169 | | | 197 | | 137 | | 169 | | General and administrative expenses | | 67 | | 140 | | 122 | | | 166 | | 99 | | 122 | | | | | | | | | | | | | | | | | | | Rs. | 354 | | Rs. | 652 | | Rs. | 1,336 | | | Rs. | 1,595 | | Rs. | 1,076 | | Rs. | 1,336 | | | | | | | | | | | | | | | | |
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The Indian Finance Act, 2005 imposes an additional income tax on companies called a “Fringe Benefits Tax”, or FBT. Pursuant to this Act, companies are deemed to have provided fringe benefits to their employees if certain defined expenses and employee stock option expenses are incurred. These expenses, or a portion thereof, are deemed to be a fringe benefit to the employees and subjects a company to tax at a rate of 30%, exclusive of applicable surcharge and cess. FBT on all stock options is assessed that are exercised on or after April 1, 2007, and is based on the intrinsic value of the stock options on the vesting date. We record the FBT liability for employee stock options at the time of exercise of employee stock options. The FBT and other similar taxes enacted in the future by the Government of India could adversely affect our profitability. In our income statement, the FBT is allocated as cost of revenues, selling and marketing expenses and general and administrative expenses on the basis of its nature. The Indian tax laws permit the employer to recover the FBT from the employee as the tax relates to benefits accruing to the employees. Pursuant to such law, we have amended our stock option plans to recover the amount from the employees relating to employee stock options. For options granted prior to March 31, 2007, although the FBT expense will be recorded through our income statement, the corresponding recovery, which is directly linked to exercise of stock options, will be recorded as additional exercise price. The FBT liability for outstanding options as of March 31, 2009, based on market price of our shares is approximately Rs. 1,281. Amortization of Intangible Assets Intangible assets are amortized over their estimated useful lives in proportion to the economic benefits consumed in each period. We have amortized intangible assets of Rs. 140 million,379, Rs. 94 million724 and Rs. 379 million1,535 for the years ended March 31, 2005, 20062007, 2008 and 20072009, respectively. The increase is due to amortization of intangibles of Infocrossing, Unza and CTS. Foreign Exchange Gains/(Losses), net Foreign exchange gains,gains/ (losses), net, comprise: | • | | exchange differences arising from the translation or settlement of transactions in foreign currency; and | | | • | | Exchange differences arising from the translation or settlement of transactions in foreign currency, except for exchange differences on debt denominated in foreign currency (which are reported within Other income, net); and The changes in fair value for derivatives not designated as hedging derivatives and ineffective portion of the hedging instruments. For forward foreign exchange contracts which are designated and effective as accounting hedges, the marked to market gains and losses are deferred and reported as a component of other comprehensive income in stockholder’s equity and subsequently recorded in the income statement when the hedged transaction occurs along with the hedged item. |
Others, net
Others, net, include net gains on the sale of property, plant, equipment, and other operating income.
Loss on Direct Issue of Stock by Subsidiary
As of March 31, 2004, Wipro BPO had 4,745,731 employee stock options outstanding under the Wipro BPO option plan. During the year ended March 31, 2005, 4,637,375 options vested and were exercised at a price of Rs. 57 per share.
As the exercise price per option was less than our carrying value per share, the decline in the carryingincome statement when the hedged transaction occurs, along with the hedged item. Changes in the fair value of our ownership interestderivative instruments which are economic hedges in respect of Rs. 207 million has been includeddebt denominated in the statement offoreign currency are reported in Other income, for the year ended March 31, 2005 as a loss on the direct issue of stock by a subsidiary.net.
The shares issued as a result of the option exercises are covered by a share repurchase feature that entitles us to repurchase these shares at the then fair value and also gives the employee the right to sell the shares back to us at the then fair value. Both we and the employee can exercise this repurchase right after six months from the date of option exercise. During the year ended March 31, 2005, we acquired 4,147,561 shares from the employees of Wipro BPO for an aggregate consideration of Rs. 618 million, pursuant to the repurchase right. The excess of consideration paid over the value of minority interest acquired amounting to Rs. 189 million has been recorded as goodwill.
Other Income, net Our other income, net includes interest income on liquid and short-term investments, net of interest and related expense on short-term borrowings from banks, short-term and long-term debt, dividend income, exchange differences arising from the translation or settlement of debt denominated in foreign currency and changes in fair value of related derivative instruments and realized gains/losses on the sale of investment securities. Equity in Earnings/Losses of Affiliates Wipro GE Medical Systems Private Limited. (Wipro GE).We hold a 49% equity interest in Wipro GE Medical Systems Private Limited, a venture where General Electric, USA holds the balance of 51%. 53
WeP Peripherals (WeP).We held a 36.9% interest as of March 31, 2006 in WeP Peripherals. In December 2006, we sold a portion of our interest in WeP Peripherals subsequent to which, our ownership interest in WeP Peripherals reduced to 15% and we do not have the ability to exercise significant influence over the operating and financial policies of WeP Peripherals. Accordingly, we now account for our investment under the cost method.
W M Netserv.We record our 80.1% ownership interest in WM Netserv by the equity method as the minority shareholder in the investee has substantive participative rights as specified in EITF Issue No. 96-16, Investor’s Accounting for an Investee When the Investor Has a Majority of the Voting Interest but the Minority Shareholder or Shareholders Have Certain Approval or Veto Right.
Income Taxes Our net income earned from providing services at client premises outside India is subject to tax in the country where we perform the work. Most of our tax paid in countries other than India can be applied as a credit against our Indian tax liability to the extent that the same income is liable to tax in India. Currently, we benefit from certain tax incentives under Indian tax laws. As a result of these incentives, our operations have not been subject to significant Indian tax liabilities. These tax incentives currently include a tax holiday from payment of Indian corporate income taxes for our Global IT Services and Products business operatedbusinesses operating from specially designated “SoftwareSoftware Technology Parks” and “SpecialHardware Technology Parks and Special Economic Zones” in India and an income tax deduction of 100% for profits derived from exporting information technology services. As a result, a substantial portion of our pre-tax income has not been subject to significant tax in recent years. For the years ended March 31, 2005, 2006 and 2007 our tax benefits were Rs. 4,591 million, Rs. 4,721 million and Rs. 6,464 million respectively, from such tax incentives.Zones. We are currently also eligible for exemptions from other taxes, including customs duties. 49
InSoftware Technology and Hardware Technology Parks.Under this scheme there is provision for an income tax deduction of 100 percent for profits derived from exporting information technology services for the Finance Act, 2005,first ten years from the Governmentcommencement of India introduced a separate tax holiday scheme for units set up under designated special economic zones engaged in manufacture of articles or in provision of services. Previously, the tax holiday for these parks was scheduled to expire in stages with a mandated maximum expiry period of March 31, 2009. The Finance Act, 2008 has extended the availability of the ten year tax holiday by period of one year such that the tax holiday will be available until the earlier of fiscal year 2010 or ten years. Special Economic Zone.Under this scheme, units in designated special economic zones which begin providing services on or after April 1, 2005 will be eligible for a deduction of 100 percent of profits or gains derived from the export of services for the first five years from commencement of provision of services and 50 percent of such profits or gains for a further five years. Certain tax benefits are also available for a further five years subject to the unit meeting defined conditions. As a result, a substantial portion of our pre-tax income has not been subject to a significant tax in India in recent years. When our tax holiday and income tax deduction exemptions expire or terminate, our costs will increase. Additionally, the Government of India could enact similar laws in the future, which could further impair the tax incentives which benefit our business. Profits from certain other undertakings are also eligible for preferential tax treatment. In addition, dividend income from certain category of investments is exempt from tax. For the years ended March 31, 2007, 2008 and 2009 our tax benefits were Rs. 7,948, Rs. 8,450 and Rs. 10,368, respectively, from such tax incentives. When our tax holiday and income tax deduction exemptions expire or terminate, our costs will increase. We haveThe Company received tax demands from the Indian income tax authorities for the financial years ended March 31, 2001, 2002, 2003 and 20032004, respectively aggregating to Rs. 8,100 million11,127 (including interest of Rs. 750 million)1,503). The tax demands weredemand was primarily on account of denial of deduction claimed by usthe Company under Section 10A of the Income Tax Act 1961, (Act), in respect of profits earned by ourits undertakings in Software Technology Park at Bangalore. We had appealed against these demands. In March 2006,The appeals filed by the Company for the above years to the first appellate authority vacatedwere allowed in favor of the Company, thus deleting substantial portion of the demand raised by the Income tax demandsauthorities. On further appeal filed by the income tax authorities, the second appellate authority upheld the claim of the company for the years ended March 31, 2001, 2002, 2003 and 2002. The income tax authorities have filed an appeal. In March 2007, the first Income tax appellate authority upheld the deductions claimed by us under Section 10A of the Act, which vacates a substantial portion of the demand for the year ended March 31, 2003.
2004. In December 2006, we2008, the Company received, on similar grounds, an additional tax demand of Rs. 3,027 million5,388 (including interest of Rs. 753 million)1,615) for the financial year ended March 31, 2004 on similar grounds as earlier years. We have2005. The Company has filed an appeal against this demand.the said demand within the time limits permitted under the statute. Considering the facts and nature of disallowance and the order of the appellate authorityauthorities upholding our claims for earlier years, we believe that the final outcome of the above disputedisputes should be in our favor and there willshould not be any material impact on ourthe financial statements. The range of loss relating to these contingencies is between zero and the amount of the demand raised.demand. Although we currently believe we will ultimately prevail in our appeals, the resultsresult of such appeals, and any subsequent appeals, cannot be predicted with certainty. Should we fail to prevail in our appeals,appeal, or any subsequent appeals, in any reporting period, the operating results of such reporting period could be materially adversely affected. ThePursuant to the changes in the Indian Finance Act, 2005 imposes an additional income tax on companies calledlaws, Minimum Alternate Tax (MAT) has been extended to income in respect of which a “Fringe Benefits Tax”, or FBT. Pursuantdeduction is claimed under section 10A and 10B; consequently, we have calculated our domestic tax liability for fiscal 2009 after considering MAT. The excess tax paid under MAT provisions over and above normal tax liability can be carried forward and set-off against future tax liabilities computed under normal tax provisions. The unrecognized tax benefits has increased by Rs. 2,429 during the year ended March 31, 2009 primarily due to this Act, companies are deemed to have provided fringe benefits to their employees if certain defined expenses are incurred. A portionadditional tax credit carryforward of these expenses is deemed to be a fringe benefit to the employees and subjects a company to tax at a rate of 30%, exclusive of applicable surcharge and cess. The Fringe Benefits Tax and other similar taxes enactedRs. 918 reported in the future byincome tax filings for the Governmentyear ended March 31, 2008 and on account of India could adversely affect our profitability.additional impact in the current year in relation to uncertain tax positions taken in the current year. 54
Liquidity and Capital Resources The Company’s cash flow from operating, investing and financing activities, as reflected in the Consolidated Statement of Cash Flows on page 99, is summarized in the table below: 50
| | | | | | | | | | | | | | | | | | | | | | | Year ended March 31, | | Year on Year Change | | | 2009 | | 2008 | | 2007 | | 2009-08 | | 2008-07 | Net cash provided by/(used in) continuing operations: | | | | | | | | | | | | | | | | | | | | | Operating activities | | Rs. | 36,832 | | | Rs. | 24,595 | | | Rs. | 30,161 | | | Rs. | 12,237 | | | Rs. | (5,566 | ) | Investing activities | | | (27,693 | ) | | | (28,505 | ) | | | (21,377 | ) | | | 812 | | | | (7,128 | ) | Financing activities | | | 44 | | | | 30,798 | | | | (5,180 | ) | | | (30,754 | ) | | | 35,978 | | Net change in cash and cash equivalents | | | 9,184 | | | | 26,888 | | | | 3,604 | | | | (17,704 | ) | | | 23,284 | | Effect of exchange rate changes on cash and cash equivalent | | | 663 | | | | (30 | ) | | | (50 | ) | | | 693 | | | | 20 | |
As of March 31, 2009, we had cash and cash equivalent, short-term investments, and short-term deposits of Rs. 69,547. Cash and cash equivalent, short-term investments and short-term deposits, net of debt was Rs. 12,741. In addition we have unused credit lines of Rs. 19,160. To utilize these lines of credit we require the consent of the lender and compliance with certain financial covenants. We have historically financed our working capital and capital expenditure significantly through our operating cash flows. As of March 31, 2007, we had cashflows and cash equivalents of Rs. 12,418 million, investments in liquid and short-term mutual funds of Rs. 32,410 million and unused lines of credit of approximately Rs. 3,204 million, US$ 25 million and GBP 6 million from our bankers for working capital requirements. To utilize this line of credit we need to comply with certain financial covenants. As of March 31, 2007 we were in compliance with such financial covenants.through bank debt, as required. Cash provided by operating activities increased by Rs. 12,237, while net income increased by Rs. 2,174 during the same period. The increase in cash provided by operating activities was primarily due to reduction in receivable days in the IT Services segment from 67 days in March 2008 to 60 days in March 2009 and greater focus on strengthening our working capital position resulting in increase in accounts payable and accrued expenses. Receivable days as of a reporting date is the proportion of receivables, including unbilled and unearned revenue to the revenues for the respective fiscal quarter multiplied by 90. Further, our net income included Rs. 3,973 of non-cash charge relating to reinstatement of foreign currency loan and mark to market gains/losses on related cross-currency interest rate swaps. These were offset by Rs. 12,196 of cash losses on roll-over of cash flow hedges and hedge of net investment in foreign operation. Cash provided by operating activities decreased from Rs. 30,161 for the year ended March 31, 2007 to Rs. 24,595 for the year ended March 31, 2008. Our net income increased by 11% during the year ended March 31, 2008. The decline was primarily due to increases in our accounts receivable, unbilled revenues, deferred contract costs and inventories. Increase in accounts receivable was primarily due to an increase in receivable days in IT Services and Products. Unbilled revenues increased due to an increase in the proportion of revenues from fixed price projects. This is partially offset by the increase in unearned revenue and advance from customers. Inventories in our infrastructure engineering products business increased due to our strategy to reduce impact of procurement lead time. Cash used in investing activities for the year ended March 31, 20072009 was Rs. 30,162 million(27,693). Cash provided by operating activities was utilized for the net purchase of investments amounting to Rs. (1,030), the purchase of property, plant and equipment amounting to Rs. (16,234) and payments made in connection with acquisitions of Rs. (6,679). Cash used in investing activities for the year ended March 31, 2008 was Rs. (28,505) against Rs. 20,192 million(21,377) in the year ended March 31, 2006. This increase2007. Cash provided by operating activities, net proceeds from sale/maturity of 49% wasinvestments and net proceeds from short-term borrowings/long-term debt were utilized to finance the acquisitions amounting to Rs. (32,789) and purchase of property, plant and equipment amounting to Rs. (14,674) which is primarily driven by a 44% increase in net income from Rs. 20,270 millionthe growth strategy of the Company. Cash provided by financing activities for the year ended March 31, 2006 to2009 was Rs. 29,169 million44. Cash provided by financing activities for the year ended March 31, 2007. Depreciation and amortization increased from2008 was Rs. 3,195 million for the year ended March 31, 2006 to30,798 against Rs. 4,309 million for the year ended March 31, 2007. Similarly stock based compensation increased from Rs. 662 million for the year ended March 31, 2006 to Rs. 1,336 million for(5,180) of cash used in financing activities during the year ended March 31, 2007. This increase is primarily due to new stock options granted during the year. The increase in individual line under operating asset and liability was generally consistent with the increase in business volumes during the year. Cash used in investing activities for the year ended March 31, 2007 was Rs. 21,377 million against Rs. 17,299 million in the year ended March 31, 2006. During the year ended March 31, 2007, Rs. 7,800 million was utilized for acquisitions against Rs. 2,777 million utilized during the year ended March 31, 2006. This increase was primarily driven by our business growth strategies. We expect to continue fund acquisitions through cash generatednet proceeds from operations. During the year ended March 31, 2007, we utilized Rs. 11,392 million for acquiring property, plant and equipment which was consistent with an increase in operations and business volumes. The remaining amounts were invested in liquid and short-term mutual funds.
Cash used in financing activities for the year ended March 31, 2007 was Rs. 5,180 million against Rs. 305 million of cash provided by financing activities during the year ended March 31, 2006. This increase was primarily due to dividends paid amounting to Rs. 16,111 million which isborrowings/long-term debt partially offset by cash receipts onlower proceeds from issuance of equity shares amountingshares. The funds were utilized to Rs. 8,894 million and short-term borrowings amounting to Rs. 1,825 million.fund the acquisitions.
We have proposed to pay a cash dividend of Re. 1Rs. 4 per share on our equity shares and ADRs.AD Rs. This proposal is subject to approval by the shareholders of the Company. We expect a dividend payout (excluding corporate dividend tax) of approximately Rs. 1,4595,860 million. We maintain debt/borrowing level that we have established through consideration of a number of factors including cash flow expectations, cash required for operations and investment plans. We continually monitor our funding requirement and strategies are executed to maintain sufficient flexibility to access global funding sources, as needed. The increase in our outstanding debt and borrowings is primarily due to depreciation of Indian rupee against the U.S. dollars and Japanese Yen (JPY). Please refer to Note 16 of our Notes to the Consolidated Financial Statements for more details on borrowings. As discussed above, cash generated from operations is our primary source of liquidity. We believe that our cash and cash equivalent along with cash generated from operations would be sufficient to meet the repayment obligations in respect of debt / borrowings. 51
As of March 31, 20072009, we had contractual commitments of Rs. 3,432 million5,371 ($ 80 million)106) related to capital expenditures on construction or expansion of software development facilities, Rs. 7,091 ($ 139) related to non-cancelable operating lease obligations and Rs. 3,255 ($ 64) related to other purchase obligations. Plans to construct or expand our software development facilities are dictated by business requirements. In relation to our acquisitions, a portion of the purchase consideration is payable upon achievement of specified earnings targets in future. Details are given below. We currently intend to finance our planned construction and expansion entirely throughexpect that our cash and cash equivalents, and investments in liquid and short termshort-term mutual funds as of March 31, 2007.and the cash flows expected to be generated from our operations in future would generally be sufficient to fund the earn-out payments and our expansion plans. | | | | | | | Maximum Earn-out payable | | Acquired entity | | Earn-out Period | | RetailBox BV and subsidiaries (Enabler) | | Euro 11 Million | | | 2 years | BVPENTE Beteiligungsverwaltung GmbH and its | | Euro 27 Million | subsidiaries (New Logic) | | 3 years | North-West Switchgear Limited | | Rs. 200 Million | | | 4 years | India, Middle East and SAARC operations of 3D | | USD 44 million | Networks and Planet PSG | | 2 years | Saraware Oy | | Euro 7 Million | | | 1.5 years | cMango Inc and subsidiaries (cMango) | | USD 12 Million | | | 2 years | Quantech Global Services (Quantech) | | To be determined | | | 3 years |
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In the normal course of business, we transfer accounts receivables, net investment in sale-type finance receivable and employee advances (financial assets). These transfers can be with or without recourse. As at March 31, 2007,2009, we had transferred financial assets of Rs. 480 million.539 without recourse. Our liquidity and capital requirements are affected by many factors, some of which are based on the normal ongoing operations of our businesses and some of which arise from uncertainties related to global economies and the markets that we target for our services. In addition, we routinely review potential acquisitions. In the future, we may require or choose to obtain additional debt or equity financing. We cannot be certain that additional financing, if needed, will be available on favorable terms, if at all. Off-Balance Sheet Arrangements We have not entered into any off-balance sheet arrangements as defined by SEC Final Rule 67 (FR-67), “Disclosure in Management’s Discussion and Analysis about Off-Balance Sheet Arrangements and Aggregate Contractual Obligations”. Contractual obligations The table of future payments due under known contractual commitments as of March 31, 2007,2009, aggregated by type of contractual obligation, is given below: In Rs. million
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | Payments due in | | Total | | | | | | | contractual | | 2012-13 | | contractual | | | | Payments due in | | 2014-15 | | | payment | | 2007-08 | | 2008-10 | | 2010-12 | | onwards | | Particulars | | | payment | | 2009-10 | | 2010-12 | | 2012-14 | | onwards | Short-term borrowings | | | 36,472 | | 36,472 | | — | | — | | — | | Long-term debt | | 888 | | 328 | | 530 | | 30 | | — | | | 18,916 | | 235 | | 411 | | 18,270 | | — | | Obligations under capital leases | | | 1,418 | | 504 | | 513 | | 334 | | 67 | | Estimated interest payment (1) | | | 2,277 | | 511 | | 1,132 | | 634 | | — | | Capital commitments | | | 5,371 | | 5,371 | | — | | — | | — | | Non-cancelable operating lease obligation | | 2,573 | | 395 | | 699 | | 526 | | 953 | | | 7,901 | | 1,064 | | 2,020 | | 1,649 | | 3,168 | | Capital Commitments | | 3,432 | | 3,432 | | — | | — | | — | | | Purchase obligations | | 3,160 | | 3,160 | | — | | — | | — | | | 3,255 | | 3,255 | | — | | — | | — | | Other long-term liabilities(1) | | 277 | | 128 | | 149 | | — | | — | | | Other long-term liabilities(2) | | | 932 | | 786 | | 41 | | �� | 10 | | 95 | |
PurchaseOur purchase obligations include all commitments to purchase goods or services of either a fixed or minimum quantity that meet any of the following criteria: (1) they are non-cancelable, or (2) we would incur a penalty if the agreement was terminated. If the obligation to purchase goods or services is non-cancelable, the entire value of the contract washas been included in the above table. If the obligation is cancelable, but we would incur a penalty if cancelled, the amount of the penalty is included as a purchase obligation. (1)In accordance with SFAS No. 87, “Employers’ Accounting for Pensions,” and SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions,” as amended by SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — an amendment of FASB Statements No. 87, 88, 106, and 132(R),” the total accrued benefit liability for defined benefit and contribution plans recognized as of March 31, 2007, was Rs. 492 million. This accrued liability is included under other long-term liabilities in the consolidated balance sheet. This amount is impacted by, among other items, pension expense funding levels, change in plan demographics and assumptions, return on plan assets etc. Because the accrued liability does not represent expected liquidity needs, we did not include this amount in the contractual obligation table. This was completely funded in April 2007. (1) | | | Interest payments for long-term fixed rate debts have been calculated based on applicable rates and payment dates.Interest payments on floating rate debt have been calculated based on the payment dates and interest rates as of March 31, 2009 for each relevant debt instrument. |
(2) | | | In accordance with SFAS No. 87, Employers’ Accounting for Pensions, and SFAS No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions,” as amended by SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — an amendment of FASB Statements No. 87, 88, 106, and 132(R),” the net accrued benefit liability for defined benefit recognized as of March 31, 2009, was Rs. 269, which is reported as a component of other liabilities in the balance sheet. Other liabilities in the balance sheet also include amount of Rs. 2,321 towards uncertain tax positions. For these amounts, the extent of the amount and timing of payment/cash settlement is not reliably estimable or determinable, at present, and accordingly have not been disclosed in the table above. |
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Research and Development Research and Development investments in IT Services and Products business is directed towards developing solutions that have broad applications across various industry segments and developing expertise in emerging technologies. Over a period of two to three years Research and Development efforts in identified areas are focused on developing in-depth solutions, frameworks and applications. Research and Development initiatives are executed through Centers of Excellence or CoE and Innovation Initiative. CoEs are designed to enable growth of existing practice and/or create a new practice. CoEs focus on creating competencies in specific existing and emerging technologies and domains. CoEs create thought leadership by publishing white papers and participating in industry forums. Currently, we have CoEs focusing on Wireless and 56
Broadband Communication, Computing Platforms like Grid Computing, e-Biz technologies like Web services, Retail Supply chain management and other similar areas. Innovation initiative is directed towards creating new solutions and intellectual property which potentially expand our service offerings. Innovation initiative covers the entire cycle of Idea Generation, Incubation and Successful Execution. We focus on Process Innovations, Delivery Innovations, Technology Innovations, Product Innovations and Business Innovations. We were awarded the NASSCOM’s IT Innovation Award 2005 for our pioneering work in next generation managed services platform. Research and development expenditures for the years ended March 31, 2005, 2006 and 2007 were Rs. 274 million, Rs. 202 million and Rs. 268 million, respectively.
Trend Information IT Services.The shift in role of Information and Technology (IT) from merely supporting business to transforming business, is driving productivity gains and helping create new business models. This has led to an increase in the importance of IT. The increasing acceptance of outsourcing and off-shoring of activities as an economic necessity has contributed to the continued growth in our revenue. However the recent crisis in the financial and credit markets in the United States, Europe and Asia have resulted in global economic slowdown. According to World Economic Outlook Update published by the International Monetary Fund in January 2009, the GDP of United States is projected to contract by 1.6% in fiscal 2009 and during the same period the GDP of Euro area is projected to contract by 2%. In an economic slowdown our value proposition of delivering significant cost benefits through superior execution, delivery of services through optimal mix of low cost and nearshore centers and assuming responsibility for delivering targeted savings from defined baseline costs is very compelling to our customers. However, in an economic slowdown, our clients could reduce, postpone or defer decisions on IT spending and outsourcing. This could result in lower IT spending in the near term. Our outlook on revenues for the IT Services and Products.We believe thatsegment for the three months ending June 30, 2009 in some measure reflects these factors. Further, we expect increased competition among IT companies, commoditization of services and high volume transactions in IT services limitswhich may limit our ability to increase our prices and improve our profits.prices. We continually strive to differentiate ourselves from the competition innovateby innovating service delivery models, adoptadopting new pricing strategies and demonstratedemonstrating our value proposition to the clientclients to sustain prices and profits. We have also acquired businesses to augment our existing services and capabilities. Our acquisitions have also allowed us to sustain and in certain circumstances improve our prices and profits. Gross profit as a percentage of revenues in our IT Services and Products business decreased from 36% insegment for the year ended March 31, 20062009 is 33%. We anticipate difficulties in significantly improving our gross profits, among other things, due to 34%the following reasons: Our limited ability to increase prices; Increases in the year ended March 31, 2007. We anticipate difficulty in sustaining or improvingproportion of services performed at client location; and The impact of exchange rate fluctuations on our profits due to:rupee realizations | • | | pricing pressures; | | | • | | increases in proportion of services performed at client location — some of our newer service offerings, such as consulting and package implementation, require a higher proportion of services to be performed at the client’s premises; | | | • | | increases in wages for our IT professionals; | | | • | | the impact of amortization of stock compensation cost; and | | | • | | the impact of exchange rate fluctuations on our rupee realizations; |
We expect these trends to continue for the foreseeable future. In response to the possible reduction in demand for IT services, pressure on gross margins and the increased competition from other IT services companies, we are focusing on offering services with higher margins, on;
Performance And Capital Efficiency (PACE) program- reduce capex spends, deliver process and application optimization and assume ownership of specific IT areas to reduce baseline IT spends for the client; strengthening our delivery model, increasingmodel; cost containment initiatives and driving higher employee productivity, investing in emerging technology areas, managing our cost structure, productivity; aligning our resources to expected demanddemand; and 53
increasing the utilization of our IT professionals. To remain competitive, we believe that we need to innovate, identify and position ourselves in emerging technology areas and increase our understanding of industry, business and impact of IT on the business.
Our IT Services and Products business segment is also subject to fluctuations primarily resulting from factors such as:
| • | | the effect of seasonal hiring which occurs in the quarter ended September 30; | | | • | | the time required to train and productively use new employees; | | | • | | the proportion of services we perform at client sites for a particular project; | | | • | | exchange rate fluctuations; and | | | • | | the size, timing and profitability of new projects. |
BPO Services. Although we believe that the increasing acceptance of outsourcing and offshoring as an economic necessity has contributed to continued growth in our revenue, we have experienced pricing pressures in our BPO Services business due to increased competition among IT companies. Gross profit as a percentage of revenues in BPO Services increased from 24% in the year ended March 31, 2006 to 34% in the year ended March 31, 2007. We anticipate difficulty in sustaining or improving our profits due to, among other things, the impact of the high percentage on fixed costs, attrition rates and composition of voice based services in our revenues from BPO services. Our BPO Services business segment is also subject to seasonal fluctuations. India and AsiaPac IT Services and Products.In our India and AsiaPac IT Services and Products business segment, we have experienced pricing pressures due to increased competition among IT companies. Large multinational
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corporations like IBM, HP and HPDell have identified India as a key focus area. TheOur gross marginsmargin in the products component of this business segment decreasedis also impacted by 1%the proportion of our business derived from 11%the sale of traded and manufactured products. Our IT Products business segment is also subject to seasonal fluctuations. Our revenue in this business segment is driven by the capital expenditure budgets and spending patterns of our clients, who often delay or accelerate purchases in reaction to tax depreciation benefits on capital equipment. As a result revenue from our IT Product business segment for the yearquarters ended March 31 2006 to 10% forand December 31 are typically higher than other quarters of the year ended March 31, 2007.year. Consumer Care and Lighting.Our Consumer Care and Lighting business segment is also subject to seasonal fluctuations. Our revenues in this segment are also subject to commodity price fluctuations. Our quarterly revenue, operating income and net income have varied significantly in the past and we expect that they are likely to vary in the future. You should not rely on our quarterly operating results as an indication of future performance. Such quarterly fluctuations may have an impact on the price of our equity shares and ADSs. Dividends.Final dividends on common stock are recorded as a liability on the date of declaration by the stockholders and the interim dividends are recorded as a liability on the date of declaration by the board of directors. Recent accounting pronouncements FASB Interpretation No. 48. .In July 2006, the FASB issued Interpretation (FIN) No. 48, Uncertainty in Income Taxes. FIN 48 applies to all tax positions within the scope of SFAS No. 109, Accounting for Income Taxes, and clarifies when and how to recognize tax benefits in the financial statements with a two-step approach of recognition and measurement. FIN 48 is effective for fiscal years beginning after December 15, 2006, and, as a result, is effective for the Company commencing April 1, 2007. FIN 48 also requires the enterprise to make explicit disclosures about uncertainties in their income tax positions, including a detailed roll-forward of tax benefits taken that do not qualify for financial statement recognition. The Company is currently evaluating the impact of FIN 48 on the consolidated financial statements. SFAS No. 157.141R.In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS No. 157). SFAS No. 157 defines ‘fair value’ as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS No. 157 provides guidance on determination of fair value and lays down the fair value hierarchy to classify the source of information used in fair value measurement. We are currently evaluating the impact of SFAS No. 157 on our financial statements and will adopt the provisions of SFAS No. 157 for the fiscal year beginning April 1, 2008. SFAS No. 159.In FebruaryDecember 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (SFAS141 (revised 2007),“Business Combinations”(SFAS No. 159)141R), which is a revision of SFAS No. 141,“Business Combinations”. This statement permits entitiesestablishes principles and requirements for how an acquirer: recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree; recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and determines what information to choosedisclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. We are required to apply this new standard prospectively to business combinations for which the acquisition date is on or after the beginning of the annual reporting period beginning on or after December 15, 2008. Early adoption is prohibited. We will adopt this statement effective April 1, 2009 and its effects on future periods will depend on the nature and significance of business combinations subject to SFAS No. 141R.
On April 1, 2009, the Financial Accounting Standards Board (FASB) issued FASB Staff Position No. FAS 141(R)-1, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies”(the FSP), to amend and clarify the initial recognition and measurement, subsequent measurement and accounting, and related disclosures arising from contingencies in a business combination under SFAS No. 141R. The effects of this FSP on future periods will depend on the nature and specific facts of business combinations subject to SFAS No. 141R. SFAS No. 160.In December 2007, the FASB issued SFAS No. 160,“Non-controlling Interests in Consolidated Financial Statements” (SFAS No. 160 — an amendment of ARB No. 51). SFAS No. 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the non-controlling interest, changes in a parent’s ownership interest and the valuation of retained non-controlling equity investments when a subsidiary is deconsolidated. SFAS No. 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the non-controlling owners. We are required to adopt this new standard for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. We do not expect the adoption of this statement to have a material effect on the Consolidated Financial Statements. SFAS No. 161.In March 2008, the FASB issued SFAS No. 161,“Disclosures about Derivative Instruments and Hedging Activities — An Amendment of FASB Statement No. 133” (SFAS No. 161). SFAS No. 161 requires enhanced disclosures on derivative and hedging activities by requiring objectives to be disclosed for using derivative instruments in terms of underlying risk and accounting designation. This statement requires disclosures on the need of using derivative instruments, accounting of derivative instruments and related hedged items, if any, under SFAS No. 133 and the effect of such instruments and related hedge items, if any, on the financial position, financial performance and cash flows. We are required to adopt this new statement for fiscal years beginning after November 15, 2008. Pursuant to the transition provisions of the statement, we will adopt SFAS No. 161 in fiscal year 2009 and will present the required disclosures in the prescribed format on a prospective basis. This statement does not impact the consolidated financial results as it is disclosure-only in nature. 54
FSP SFAS 142-3In April 2008, the FASB issued FSP SFAS 142-3, “Determination of the Useful Life of Intangible Assets”(FSP 142-3). This guidance is intended to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible Assets”(SFAS 142), and the period of expected cash flows used to measure many financial instruments and certain other items atthe fair value. The objective isvalue of the asset under SFAS 141R when the underlying arrangement includes renewal or extension of terms that would require substantial costs or result in a material modification to improve financial reporting by providing entities with the opportunity to mitigate volatilityasset upon renewal or extension. Companies estimating the useful life of a recognized intangible asset must now consider their historical experience in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions.renewing or extending similar arrangements or, in the absence of historical experience, must consider assumptions that market participants would use about renewal or extension as adjusted for SFAS No. 159142’s entity-specific factors. FSP 142-3 is effective for the fiscal yearus beginning April 1, 2008.2009. We are currently evaluatingwould be required to adopt this FSP prospectively for all assets acquired after April 1, 2009 and early adoption is prohibited. Its effects on future periods will depend on the impact that the adoptionnature and specific facts of assets acquired subject to SFAS No. 159 will have142. FSP 132 (R)-1In December 2008, the FASB issued FSP SFAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets”(FSP 132(R)-1). This guidance amends SFAS No. 132(R), “Employers’ Disclosures about Pensions and Other Postretirement Benefits”, to require more detailed disclosures about the fair value measurements of employers’ plan assets including (a) investment policies and strategies; (b) major categories of plan assets; (c) information about valuation techniques and inputs to those techniques, including the fair value hierarchy classifications (as defined by SFAS No. 157) of the major categories of plan assets; (d) the effects of fair value measurements using significant unobservable inputs (Level 3) on ourchanges in plan assets; and (e) significant concentrations of risk within plan assets. The disclosures required by the FSP is effective for us beginning April 1, 2009. This statement does not impact the consolidated financial statements.results as it is disclosure-only in nature. Critical accounting policies Critical accounting policies are defined as those that in our view are the most important to thefor portrayal of the Company’s financial condition and results and thatwhich place the most significant demands on management’s judgment. For a detailed discussion on the application of these and other accounting policies, please refer to Note 2 to the Notes to Consolidated Financial Statements. Revenue Recognition We derive our revenues primarily from two sources: (i) product revenue and (ii) service revenue. Product Revenue Product revenue is recognized when there is persuasive evidence of an arrangement, the product has been delivered in accordance with the sales contract, the sales price is fixed or determinable, and collectibilitycollectability is reasonably assured. The product is considered delivered to the customer once it has been shipped, and title and risk of loss has been transferred. We generally consider a binding purchase order or a signed contract as persuasive evidence of an arrangement. Persuasive evidence of an arrangement may take different forms depending upon the customary practices of a specific class of customers. We provide lease financing for our products primarily through sales-type leases. We classify our leases in accordance with SFAS No. 13, Accounting for Leases. The vast majority of our leases qualify as sales-type leases using the present value of minimum lease payments classification criteria outlined in SFAS No. 13. We believe that our sales-type lease portfolio contains only normal collection risk with no important uncertainties with respect to future costs. Accordingly, we record the fair value of equipment as sales revenue, the cost of equipment as cost of sales and the minimum lease payments plus the estimated residual value as gross finance receivables. The difference between the gross finance receivable and the equipment fair value is recorded as unearned income and is amortized as income over the lease term using the interest rate implicit in the lease. Equipment residual values are determined at inception of the lease using estimates of equipment fair value at the end of the lease term. Revenue from sale of software products is recognized in accordance with SOP 97-2, Software Revenue Recognition. In multiple element software arrangements, revenue is allocated to each element based on fair value. The fair value of elements within the scope of SOP 97-2 is determined using Vendor-Specific Objective Evidence (VSOE). In the absence of VSOE for all elements, the residual method is used where VSOE exists for all the undelivered elements. Where VSOE of the undelivered element cannot be determined, revenue for the delivered elements is deferred until the undelivered elements are delivered. If sufficient VSOE does not exist to allocate revenue to the elements and Post-Contract Customer Support (PCS) is the only undelivered element, the entire arrangement fee is recognized ratably over the PCS term. Since there is no reasonable basis of separating the license revenue from PCS, the entire revenue is classified as product revenues. 5855
Service Revenue Service revenue is recognized when there is persuasive evidence of a contract,an arrangement, the sales price is fixed or determinable, and collectibilitycollectability is reasonably assured. Time-and-materials service contract revenue is recognized as the services are rendered. Revenue from fixed-price, fixed-timeframe contracts that involve significant production, modification or customization of the software is accounted for in conformity with ARB No. 45, using the guidance in Statement of Position (SOP) 81-1, and the Accounting Standards Executive Committee’s conclusion in paragraph 95 of SOP 97-2, Software Revenue Recognition. Fixed-price, fixed-timeframe contracts, which are similar to “contracts to design, develop, manufacture, or modify complex aerospace or electronic equipment to a buyer’s specification or to provide services related to the performance of such contracts” and “contracts for services performed by architects, engineers, or architectural or engineering design firms” as laid out in paragraph 13 of SOP 81-1, are also accounted for in conformity with SOP 81-1. In these Fixed-price,fixed-price, fixed-timeframe contracts revenue is recognized using the percentage-of-completion method. We use the input (cost expended) method to measure progress towards completion. Percentage of completion method accounting relies on estimates of total expected contract revenue and costs. We follow this method when reasonably dependable estimates of the revenues and costs applicable to various elements of the contract can be made. Key factors we review to estimate the future costs to complete include estimates of future labor costs and productivity efficiencies. Because the financial reporting of these contracts depends on estimates that are assessed continually during the term of these contracts, recognized revenue and profit are subject to revisions as the contract progresses to completion. When estimates indicate that a loss will be incurred, the loss is provided for in the period in which the loss becomes evident. To date, we have not had any fixed-price, fixed-timeframe contracts that resulted in a material loss. We evaluate change orders to determine whether such change orders are normal element and form part of the original scope of the contract. If the change orders are part of the original scope of the contract, no changes are made to the contract price. For other change orders, contract revenue and costs are adjusted only after the approval of the changes to the scope and price by us and the client. Costs that are incurred for a specific anticipated contract and that will result in no future benefits unless the contract is obtained are not included in contract costs before the receipt of the contract. However, such costs are deferred only if the cost can be directly associated with specific anticipated contract and the recoverability from that contract is deemed to be probable. Maintenance revenue is recognized ratably over the term of the agreement. Revenue from certain service arrangement involving defined but dissimilar acts is generally recognized using the proportional performance method. We defer certain upfront non-recurring costs incurred in the initial phases of outsourcing contracts to the extent that such costs represent costs of initial set-up activities or customer training, supportacquisition costs. The deferred costs are specific internal costs or external costs directly related to set-up activities necessary to execute the outsourced services. Deferred amounts are protected in the event of early termination of the contract and other servicesare monitored regularly for impairment. Impairment is recognized asevaluated for a particular contract by comparing the related services are performed.estimated undiscounted cash flows from the arrangement with the unamortized costs. If the unamortized costs exceed the undiscounted cash-flow, a loss is recognized. Revenues from BPO Services are derived from both time-based and unit-priced contracts. Revenue is recognized as services are performed, under the specific terms of the contracts with the customers. We have determined that certain process transition activities performed in the initial phases of certain BPO service contracts do not represent the culmination of a separate earning process. Revenue and related costs of such activities are deferred and recognized ratably over the period in which the subsequent BPO services are performed. Deferred costs are limited to the amount of deferred revenues. Revenue Arrangements with Multiple Deliverables BasedFor all revenue arrangements with multiple deliverables, based on the guidance in EITF Issue No. 00-21 we recognizerecognizes revenues on the delivered products or services only if: • | | The revenue recognition criteria applicable to the unit of accounting is met; | | • | | The delivered element has value to the customer on a standalone basis. The delivered unit will have value on a standalone basis if it is being sold separately by other vendors or the customer could resell the deliverable on a standalone basis; | | • | | There is objective and reliable evidence of the fair value of the undelivered item(s); and | | • | | If the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item(s) is considered probable and substantially in our control. |
The revenue recognition criteria applicable to the unit of accounting is met; The delivered element has value to the customer on a standalone basis. The delivered unit will have value on a standalone basis if it is being sold separately by other vendors or the customer could resell the deliverable on a standalone basis; There is objective and reliable evidence of the fair value of the undelivered item(s); and If the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item(s) is considered probable and substantially in our control. The arrangement consideration is allocated to the units of accounting based on their fair values. The revenue recognized for the delivered items is limited to the amount that is not contingent upon the delivery or performance of the undelivered items. In certain cases, the application of the contingent revenue provisions of EITF Issue No. 00-21 could result in recognizing a loss on the delivered element. In such cases, the cost recognized is limited to the amount of non-contingent revenues recognized and the balance of costs are recorded as an asset and are reviewed for impairment based on the estimated net cash flows to be received for future deliverables under the contract. These costs are subsequently recognized on recognition of the revenue allocable to the balance of deliverables. 56
Assessments about whether the delivered units have a value to the customer on a standalone basis, impact of forfeiturereturns and similar contractual provisions, and determination of fair value of each unit would affect the timing of revenue recognition and would impact our results of operations. 59
Volume discount.
We account for volume discounts and pricing incentives to customers using the guidance in EITF Issue 01-09, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products). The discount terms in our arrangements with customers generally entitle the customer to discounts, if the customer completes a specified level of revenue transactions. In some arrangements, the level of discount varies with increases in the levels of revenue transactions. We recognize discount obligations as a reduction of revenue based on the ratable allocation of the discount to each of the underlying revenue transactions that result in progress by the customer toward earning the discount. We recognize the liability based on its estimate of the customer’s future purchases. If we cannot reasonably estimate the customer’s future purchases, then the liability is recorded based on the maximum potential level of discount. We recognize changes in the estimated amount of obligations for discounts using a cumulative catch-up adjustment.
Accounting Estimates While preparing financial statements we make estimates and assumptions that affect the reported amount of assets, liabilities, disclosure of contingent liabilities at the date of financial statements and the reported amount of revenues and expenses for the reporting period. Specifically, we make estimates of the uncollectability of our accounts receivable by analyzing historical payment patterns, customer concentrations, customer credit-worthiness and current economic trends. If the financial condition of a customer deteriorates, additional allowances may be required. OurIn accounting for amortization of stock compensation, we estimate stock option forfeitures. Any revisions of liability relating to pending litigation is based on currently available facts and our assessment of the probability of an unfavorable outcome. Considering the uncertainties about the ultimate outcome and the amount of losses, we re-assess our estimates as additional information becomes available. Such revisions in our estimates could materially impact our results of operations and our financial position. We provide for inventory obsolescence, excess inventory and inventories with carrying values in excess of market values based on our assessment of the future demands, market conditions and our specific inventory management initiatives. If market conditions and actual demands are less favorable than our estimates, additional inventory write-downs may be required. In all cases inventory is carried at the lower of historical cost or market value. Accounting for Income taxes As part of the process of preparing our consolidated financial statements we are required to estimate our income taxes in each of the jurisdictions in which we operate. We are subject to tax assessments in each of these jurisdictions. A tax assessment can involve complex issues, which can only be resolved over extended time periods. Though we have considered all these issues in estimating our income taxes, there could be an unfavorable resolution of such issues that may affect results of our operations. We also assess the temporary differences resulting from differential treatment of certain items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are recognized in our consolidated financial statements. We assess our deferred tax assets on an ongoing basis by assessing our valuation allowance and adjusting the valuation allowance appropriately. In calculating our valuation allowance we consider the future taxable incomes and the feasibility of tax planning initiatives. If we estimate that the deferred tax asset cannot be realized at the recorded value, a valuation allowance is created with a charge to the statement of income in the period in which such assessment is made. We have not created a deferred tax liability in respect of the basis difference in the carrying value of investments in domestic subsidiaries, since we expect to realize this in a tax-free manner and the current tax laws in India provide means by which we can realize our investment in a tax-free manner. We are subject to a 15% branch profit tax in the United States to the extent the net profit attributable to our U.S. branch for the fiscal year is greater than the increase in the net assets of the U.S. branch for the fiscal year, as computed in accordance with the Internal Revenue Code. As of March 31, 2007, the U.S. branch’s net assets amounted to approximately $ 155 million. We have not triggered the branch profit tax and, consistent with our business plan, we intend to maintain the current level of our net assets in the United States. Accordingly, we did not record a provision for branch profit tax as of March 31, 2007.2009. We account for uncertainty in income taxes in the financial statements in accordance with Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an Interpretation of FASB Statement No. 109 (FIN 48). The accounting and disclosure of tax positions taken or expected to be taken on a tax return are based on the recognition threshold and measurement attribute as prescribed by FIN 48. We recognize penalties and interest related to unrecognized tax benefits as a component of other income, net. Derivatives and Hedge Accounting, and Exchange Rate Risk Although our functional currency is the Indian rupee, we transact a significant portion of our business in foreign currencies, particularly the U.S. dollar. The exchange rate between the rupee and the dollar has changed substantially in recent years and may fluctuate substantially in the future. Consequently, the results of our operations are affected as the rupee fluctuates against the U.S. dollar. Our exchange rate risk primarily arises from our foreign currency revenues, cash balances, payables and debt. We enter into derivative instruments to primarily hedge our forecasted cash flows denominated in certain foreign currencies, foreign currency debt and net investment in overseas operations. The derivative instruments also include short term forward foreign exchange contracts pursuant to a roll-over hedging strategy which are replaced with successive new contracts up to the period in which the forecasted transactions are expected to occur. We also designate zero-cost collars, which qualify as net purchased options, to hedge the exposure to variability in expected future foreign currency cash inflows due to exchange rate movements. 57
We designate the derivatives in respect of forecasted transactions, which meet the hedging criteria, as cash flow hedges. Changes in the derivative fair values that are designated, effective and qualify as cash flow hedges, under SFAS No. 133 Accounting for Derivative Instruments and Hedging Activities, are deferred and recorded as a component of accumulated other comprehensive income until the hedged transactions occur. On occurrence of the hedge transaction, these amounts are reclassified to the consolidated statements of income and reported along with the hedged item. With respect to derivatives acquired pursuant to the roll-over hedging strategy, the changes in the fair value of discount or forward premium points are recognized in consolidated statements of income of each period. Gains and losses upon roll-over of derivatives acquired pursuant to the roll-over hedging strategy are deferred and recorded as a component of accumulated other comprehensive income until the hedged transactions occur and are reclassified to the consolidated statements of income and reported along with the hedged item. We have also hedged the foreign currency risk relating to a portion of our investment in overseas operations through foreign exchange derivative contracts and net purchased options. The entire mark to market and realized gains/losses relating to the effective portion of the hedges is recognized in other comprehensive income to offset the translation gains/losses relating to the hedged investments. This would be transferred to the income statement upon sale or disposal of foreign operation. Changes in fair value for derivatives not designated as hedging derivatives and ineffective portion of the hedging instruments are recognized in consolidated statements of income of each period. We assess the hedge effectiveness at the end of each reporting period generally using the dollar offset method. Hedge ineffectiveness could result from forecasted transactions not happening in the same amounts or in the same periods as forecasted or changes in the counterparty credit rating. Further, change in the basis of designating derivatives as hedges of forecasted transactions could alter the proportion of derivatives which are ineffective as hedges. Hedge ineffectiveness increases volatility of the consolidated statements of income since the changes in fair value of an ineffective portion of derivatives is immediately recognized in the consolidated statements of income. As of March 31, 2009, there were no significant gains or losses on derivative transactions or portions thereof that have become ineffective as hedges, or associated with an underlying exposure that did not occur. Business Combinations, Goodwill and Intangible Assets We allocate the purchase price of acquired companies to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values. We may engage third-party appraisal firms to assist us in determining the fair values of certain assets acquired and liabilities assumed. Such valuations require us to make significant estimates and assumptions, especially with respect to intangible assets. Acquired intangible assets may represent indefinite-life intangibles (e.g., certain brands), determinable life intangibles (e.g., customer-related intangibles) or residual goodwill. Of these, only the costs of determinable life intangibles are amortized to expense over their estimated useful life. The estimated useful life determined based on a number of factors, ranges from two to thirty years. The value of indefinite life intangible assets and residual goodwill is not amortized, but is tested at least annually for impairment. In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, we have assigned all the assets and liabilities, including goodwill, to the reporting units. We review goodwill for impairment annually and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable. The provisions of SFAS No. 142 require that a two-step impairment test be performed on goodwill. In the first step, we compare the fair value of the reporting unit to its carrying value. We determine the fair value of our reporting units using the income approach. 60
Under the income approach, we calculate the fair value of a reporting unit based on measurement techniques such as discounted cash flow analyses. If the fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not impaired and we are not required to perform further testing. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then we must perform the second step in order to determine the implied fair value of the reporting unit’s goodwill and compare it to the carrying value of the reporting unit’s goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. That is, the fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid to acquire the reporting unit. If the carrying value of a reporting unit’s goodwill exceeds its implied fair value, then we must record an impairment loss equal to the difference. To assist in the process of determining goodwill impairment, we obtain appraisals from independent valuation firms. In addition we perform internal valuation analyses and consider other market information that is publicly available. We may also obtain appraisals from independent valuation firms in certain cases. The discounted cash flow approach and the income approach, which we use to estimate the fair value of our 58
reporting units, are dependent on a number of factors including estimates of future market growth and trends, forecasted revenue and costs, appropriate discount rates and other variables. We base our fair value estimates on assumptions we believe to be reasonable, but which are unpredictable and inherently uncertain. Actual future results may differ from those estimates. Derivatives and Hedge Accounting, and Exchange Rate RiskGoodwill Impairment Testing
Although our functional currencyWe test goodwill for impairment at least on an annual basis. In accordance with the guidance in paragraph 20 of SFAS No. 142, “Goodwill and Other Intangible Assets” we also evaluate goodwill for impairment, if there are events and conditions which require evaluation for impairment. Determining whether an impairment has occurred requires valuation of the respective reporting unit, which we estimate using the discounted cash flow method. Valuation of reporting unit is judgmental in nature and involves the Indian rupee, we transact a major portionuse of our business in foreign currencies, particularly the U.S. dollar.significant estimates and assumptions which includes revenue growth rates and operating margins used to calculate projected future cash flows, risk-adjusted discount rate, future economic and market conditions. The exchange rate between the rupee and the dollar has changed substantially in recent years and may fluctuate substantially in the future. Consequently, the results of our operations are adversely affected as the rupee appreciates against the U.S. dollar. Our exchange rate risk primarily arises from our foreign currency revenues, receivables and payables. We enter into forward foreign exchange contracts (derivatives) to mitigate the risk of changes in foreign exchange rates on accounts receivables and forecasted cash flows denominated in certain foreign currencies. The derivatives also include short term forward foreign exchange contracts pursuant to a roll-over hedging strategy which are replaced with successive new contracts up to the period in which the forecasted transactions are expected to occur. We also designate zero-cost collars, which qualify as net purchased options, to hedge the exposure to variability in expected future foreign currency cash inflows due to exchange rate movements beyond a defined range. The range comprises an upper and lower strike price. At maturity, if the exchange rate remains within the range the cash inflows are realized at the spot rate, otherwise the cash inflows are realized at the upper or lower strike price. We designate the derivatives in respect of forecasted transactions, which meet the hedging criteria, as cash flow hedges. Changes in the derivative fair valuesevaluation showed that are designated, effective and qualify as cash flow hedges, under SFAS No. 133 Accounting for Derivative Instruments and Hedging Activities, are deferred and recorded as a component of accumulated other comprehensive income until the hedged transactions occur and are then recognized in the consolidated statements of income. With respect to derivatives acquired pursuant to the roll-over hedging strategy, the changes in the fair value of discount or forward premium points are recognized in consolidated statements of income of each period.
Gains and losses upon roll-over of derivatives acquired pursuant to the roll-over hedging strategy are deferred and recorded as a component of accumulated other comprehensive income until the hedged transactions occur and are then recognized in the consolidated statements of income.
Changes in fair value for derivatives not designated as hedging derivatives and ineffective portion of the hedging instruments are recognized in consolidated statements of income of each period. We assess the hedge effectiveness at the end of eachall our reporting period.units exceeded their book values.
Hedge ineffectiveness could result from forecasted transactions not happening in the same amounts or in the same periods as forecasted or changes in the counterparty credit rating. Further, change in the basis of designating derivatives as hedges of forecasted transactions could alter the proportion of derivatives which are ineffective as hedges. Hedge ineffectiveness increases volatility of the consolidated statements of income since the changes in fair value of an ineffective portion of derivatives is immediately recognized in the consolidated statements of income.
We may not purchase adequate instruments to insulate ourselves from foreign exchange currency risks. The policies of the Reserve Bank of India may change from time to time which may limit our ability to hedge our foreign currency exposures adequately. In addition, any such instruments may not perform adequately as a hedging mechanism. We may, in the future, adopt more active hedging policies, and have done so in the past.
As of March 31, 2007 there were no significant gains or losses on derivative transactions or portions thereof that have become ineffective as hedges, or associated with an underlying exposure that did not occur.
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Item 6. Directors, Senior Management and Employees Directors and Senior Management Our directors and executive officers, their respective ages and positions as of March 31, 2007 are2009 were as follows: | | | | | | | Name | | Age | | Position | Azim H. Premji | | | 6163 | | | Chief Executive Officer, Chairman of the Board and Managing Director (designated as “Chairman”) | Dr. Ashok S Ganguly | | | 7173 | | | Director | B.C. Prabhakar | | | 6365 | | | Director | Dr. Jagdish N. Sheth | | | 6870 | | | Director | Narayanan Vaghul | | | 7072 | | | Director | BillWilliam Arthur Owens | | | 6769 | | | Director | P.M. Sinha | | | 6668 | | | Director | Suresh C. Senapaty | | | 5052 | | | CFO and Director | Suresh Vaswani | | | 49 | | | Joint CEO, IT Business and Director | Girish S Paranjpe | | | 51 | | | Joint CEO, IT Business and Director | Anurag Behar | | | 40 | | | Chief Financial Officer, and Executive, Vice President, FinanceWipro Infrastructure Engineering | Pratik Kumar | | | 41 | | | Executive Vice President, Human Resources | Suresh VaswaniVineet Agrawal | | | 47 | | | President-Global IT Service Lines,President, Wipro Technologies; President-Wipro InfotechConsumer Care and Lighting | Vineet AgrawalPratik Kumar | | | 4543 | | | Executive Vice President — HR, Brand and Corp. Communication | T K Kurien | | | 49 | | | President, Global Programs, Consulting Practice and New Initiatives, Wipro Consumer Care & LightingLimited | Ranjan Acharya | | | 4648 | | | Senior Vice President, Human Resources Development, Wipro Limited | Girish S ParanjpeDeb | | | 4951 | | | President-Banking, Finance and Insurance Vertical, Wipro Technologies | Sudip Banerjee | | | 47 | | | President-Enterprise Solutions, Wipro Technologies | Dr. A.L. Rao | | | 58 | | | President, Technology Services and Chief OperatingGlobal Delivery Officer, | Ramesh Emani | | | 50 | | | President-Embedded & Product Engineering Solutions, Wipro Technologies |
Azim H. Premjihas served as our Chief Executive Officer, Chairman of our Board of Directors and Managing Director (designated as Chairman) since September 1968. Mr. Premji holds a Bachelor of Science, or B.S. in Electrical Engineering from Stanford University.University, U.S.A. Dr Ashok Gangulyhas served as a Director on our Board since 1999. He is currently the Chairman of Firstsource Solutions Ltd (formerly ICICI OneSource Ltd)Limited and ABP Pvt LtdPrivate Limited (Ananda Bazar Patrika Group) and has been a Director on the Central Board of the Reserve Bank of India, since November 2000. Dr Ganguly also currently serves as a non-executive director of Mahindra & Mahindra, ICICI Knowledge Park and Tata AIG Life Insurance Co LtdLimited and a Director on the Advisory Board of Microsoft Corporation (India) Pvt Ltd.Private Limited and Hemogenomics Private Limited. He is a member of the Prime Minister’s Council on Trade and Industry as well as the Investment Commission and the India-USA CEO Council, set up by the Prime Minister of India and the President of the USA.U.S.A. He is also a member of the National Knowledge Commission to the Prime Minister.Minister of India. He is a former member of the Board of British Airways Plc (1996-2005)(1996- 59
2005) and Unilever Plc/NV (1990-97). Dr Ganguly was formerly Chairman of Hindustan Unilever Limited (1980-90). In 2006, Dr Ganguly was awarded the CBE (Hon) by the United Kingdom. In 2008, Dr Ganguly received the Economic Times Lifetime Achievement Award and, more recently, he was the recipient of the Padma Vibhushan, India’s second highest civilian award. ��B.C. Prabhakarhas served as a Director on our Board since February 1997. He ishas been a practicing lawyer since April 1970. Mr. Prabhakar holds a B.A. in Political Science and Sociology and an LL.B.a BL. from Mysore University.University, India. Mr. B C Prabhakar serves as a non-executive Director of Automotive Axles Limited and 3M India Limited Dr. Jagdish N. Shethhas served as a Director on our Board since January 1999. He ishas been a professor at Emory University since July 1991. Dr Sheth is also on the Boards of Cryo-Cell International Inc,Innovolt Inc., Adayana Inc, Shasun Chemicals and Drugs Limited and Manipal AcuNova Private Limited.Shasun Pharma Solutions Limited (UK). Dr. Sheth holds a B. Com (Honors) from Madras University, anIndia, a M.B.A. and a Ph.D in Behavioral Sciences from the University of Pittsburgh.Pittsburgh, U.S.A. Narayanan Vaghulhas served as a Director on our Board since June 1997. He was the Chairman of the Board of ICICI Bank Limited sincefrom September 1985 and after its merger with ICICI Bank Limited continues to be the Chairman of the combined entity.till April 2009. Mr. Vaghul is also on the Boards of Mahindra and Mahindra Ltd., Mahindra World City Developers Limited, Nicholas Piramal Healthcare Limited, National Aviation Company of India Ltd., Hemogenomics Pvt. Ltd., Himatsingka Seide Limited, Asset Reconstruction CompanyIAL Airport Services Limited, Air India Air Transport Services Limited, Air India Engineering Services Limited Azim Premji Foundation, Air India Air Transport Services Limited,and Apollo Hospitals Enterprise Limited and Air India Limited. Mr. Vaghul is also the Chairman of the Compensation Committee of Mahindra and Mahindra Limited Apollo Hospitals and Nicholas Piramal India Ltd.Limited. Mr. N Vaghul is also a member of the Audit Committee in Arcelor Mittal, Air India Limited, Nicholas Piramal India Limited and Mahindra World City Developers Limited. MrMr. N. Vaghul is also the lead independent Director of our Company. Mr. Vaghul holds Bachelor (Honors) degree in Commerce from Madras University. 62
Priya Mohan Sinhabecame a Director of our company on January 1, 2002. He has served as the Chairman of PepsiCo India Holdings Limited and President of Pepsi Foods Limited since July 1992. From October 1981 to November 1992, he was on the Executive Board of Directors of Hindustan Lever Limited. From 1981 to 1985 he also served as Sales Director of Hindustan Lever. Currently, he is also on the Boards of ICICI Bank Limited, Bata India Limited, Indian Oil Corporation Limited, Lafarge India Pvt. Limited and Azim Premji Foundation. Mr. Sinha holds a Bachelor of Arts from Patna University and he has also attended Advanced Management Program in the Sloan School of Management, Massachusetts Institute of Technology.
Mr. BillWilliam Arthur Owenshas held senior leadership positions at large multinational corporations. From April 2004 to November 2005, Mr. Owens served as Chief Executive Officer and Vice Chairman of the Board of Directors of Nortel Networks Corporation, a networking communications company. From August 1998 to April 2004, Mr. Owens served as Chairman of the Board of Directors and Chief Executive Officer of Teledesic LLC, a satellite communications company. From June 1996 to August 1998, Mr. Owens served as President, Chief Operating Officer and Vice Chairman of the Board of Directors of Science Applications International Corporation (SAIC), a research and engineering firm. Presently, Mr. Owens serves as a member of the Board of Directors of Polycom Inc., a media communications company; Daimler Chrysler AG, an automotive company; Embarq, Intelius and Force 10. Mr. Owens holds a M.B.A. (Honors) degree from George Washington University, a B.S. in Mathematics from the U.S. Naval Academy and a B.A. and M.A. in Politics, Philosophy and Economics from Oxford University. Mr Owens ishas been a director in ourthe company from July 1, 2006. Priya Mohan Sinhabecame a Director of our Company on January 1, 2002. He has served as the Chairman of PepsiCo India Holdings Limited and President of Pepsi Foods Limited since July 1992. From October 1981 to November 1992, he was on the Executive Board of Directors of Hindustan Lever Limited. From 1981 to 1985 he also served as Sales Director of Hindustan Lever. Currently, he is also on the Boards of ICICI Bank Limited, Bata India Limited, Lafarge India Pvt. Limited and Azim Premji Foundation. Mr. Sinha holds a Bachelor of Arts from Patna University and he has also attended Advanced Management Program in the Sloan School of Management, Massachusetts Institute of Technology, U.S.A. Mr Sinha is also the Chairman of the Nomination, Governance and Compensation Committee of Bata India Limited. Mr. Sinha is also on the Advisory Board of Rieter. Suresh C. Senapatyhas served as our Chief Financial Officer and Executive Vice President, Finance,Director since January 1995April 2008 and served with us in other positions since April 1980. Mr. Senapaty holds a B. Com. from Utkal University in India, and is a Fellow Member of the Institute of Chartered Accountants of India. Suresh Vaswanihas served as Joint CEO, IT Business and Executive Director since April 2008 and has served with us in other positions since June 1987. Mr. Vaswani holds a Bachelor of Technology, or B.Tech. from the Indian Institute of Technology, or IIT, Kharagpur, India and a Post Graduate Diploma in Management from the Indian Institute of Management, Ahmedabad, India. Girish S Paranjpehas served as Joint CEO, IT Business and Executive Director since April 2008 and has served with us in other positions since July 1990. Mr. Paranjpe holds a B.Com. from Bombay University, India and is a Fellow Member of Institute of Chartered Accountants of India and Institute of Cost and Works Accountants of India. Anurag Beharhas served as CEO of Wipro Infrastructure Engineering since March 20, 2008 and has served with us in other positions since May 20, 2002. Mr. Anurag Behar holds a Masters Degree in Business Administration (MBA) from XLRI-Jamshedpur and Bachelors degree in Engineering from Regional Engineering College, Trichy. Vineet Agrawalhas served as President of Wipro Consumer Care and Lighting since July 2002 and has served with us in other positions since December 1985. Mr. Agrawal holds a B.Tech. from IIT, New Delhi, India and an M.B.A from Bajaj Institute of Management Studies, Mumbai, India. 60
Pratik Kumarhas served as our Executive Vice President,Vice-President, Human Resources, since April 2002, and has served with us in other positions since November 1991. Mr. Pratik Kumar holds a B. A. from Delhi University and an M.B.A. from Xavier Labour Relations Institute (XLRI), Jamshedpur, India. Suresh VaswaniT K Kurienhas served as President-Global IT Service Lines, Wipro Technologies and President WCS, Global Programs & Strategic Initiative of Wipro Infotech since December 2000,23rd June, 2008 and has served with us in other positions since June 1987.February 11, 2000. Mr. VaswaniKurien is a Chartered Accountant and holds a Bachelor of Technology, or B.Tech. from the Indian Institute of Technology, or IIT, Kharagpur, and a Post Graduate Diploma in Management from the Indian Institute of Management, Ahmedabad. Vineet Agrawalhas served as President of Wipro Consumer Care and Lighting since July 2002 and has served with us in other positions since December 1985. Mr. Agrawal holds a B.Tech. from IIT, New Delhi, and an M.B.A from Bajaj Institute of Management Studies, Mumbai.B. Com.
Ranjan Acharyahas served as Senior Vice President-HumanVice-President-Human Resources Development since April 2002, and has served with us in other positions since July 1994. Mr. Ranjan Acharya holds a B.S. from Pune University, India and an M.B.A. from Symbiosis Institute of Business Management, Pune, India. Girish S ParanjpeS. Debhas served as President – Banking, Finance and Insurance VerticalChief Global Delivery Officer of Wipro Technologies since October 2000,April 30, 2008 and has served with us in other positions since July 1990.June 29, 1982. Mr. Paranjpe holds a B.Com. from Bombay University andS Deb is a Fellow Member of Institute of Chartered Accountants of IndiaManagement Graduate and Institute of Costholds MBA Degree from IIM Ahmedabad and Works Accountants of India. Sudip Banerjeehas served as President-Enterprise Solutions of Wipro Technologies since February 2002 and has served with us in other positions since November 1983. Mr. Sudip holds a B.A. from Delhi University and Diploma in Management from All India Management Association.
Dr. A.L. Raohas served as President-Technology Services and Chief Operating Officer of Wipro Technologies since October 2000 and has served with us in other positions since August 1980. Dr. Rao holds a B.S., M.S. and Ph.D. in Nuclear Physics from Andhra University in India.
Ramesh Emanihas served as President-Embedded and Product Engineering Solutions of Wipro Technologies since October 2003, and has served with us in other positions since November 1983. Mr. Emani holds a B.Tech. from Jawaharlal Nehru Technology University, Hyderabad and Master of Technology, or M.Tech.B.Tech from IIT Kanpur.Kharagpur.
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Compensation Director Compensation Our Board Governance and Compensation Committee determines and recommends to our Board of Directors the compensation payable to our directors. All board-level compensation is subject to approval by our shareholders. Each of our non-employee directors receive an attendance fee per meeting of $ 224.82$393 (Rs. 20,000 wef August 1, 2008 and prior to that Rs 10,000) during the current year for every Board and Committee meeting they attend. Our directors are reimbursed for travel and out-of-pocket expenses in connection with their attendance at Board and Committee meetings. Additionally, we also compensate non-employee directors by way of commission, which is limited to a fixed sum payable as approved by the Board subject to a maximum of 1% of the net profits of the Company as approved by the shareholders, as follows: 1. | | Dr. Ashok S Ganguly receives approximately $ 27,842 (Rs. 1,200,000) per year. | | 2. | | Narayan Vaghul receives approximately $ 32,482 (Rs. 1,400,000) per year. | | 3. | | Dr. Jagdish N. Sheth receives approximately $ 50,000 (Rs. 2,155,000) per year. | | 4. | | P. M. Sinha receives approximately $ 23,201 (Rs. 1,000,000) per year. | | 5. | | B. C. Prabhakar receives approximately $ 13,921 (Rs. 600,000) per year. | | 6. | | Bill Owens receives approximately $60,000 (Rs. 2,568,000) per year. | shareholders. In the fiscal year ended March 31, 2007,2009, we paid an aggregate of $ 207,4460.28 million (Rs. 8,923,000)14.6 million) as commission to our non-employee directors. Executive Compensation The annual compensation of our executive directors is approved by our Board Governance and Compensation Committee, within the parameters set by the shareholders at the shareholders meetings, and the annual compensation of our other executive officers is approved by our Board Governance and Compensation Committee. Remuneration of our executive officers, including our employee directors, consists of a fixed component, performance bonus and a variable performance linked incentive. The following two tables present the annual and long termlong-term compensation earned, awarded or paid for services rendered to us for the fiscal year ended March 31, 20072009 by our Executive Directors and members of our administrative, supervisory or management bodies. | | | | | | | | | | | | | | | | | | | | Annual Compensation ($) | | | | | | | | | | | | | | | | | | | | | | Annual Compensation ($) | | | | | Salary and | | Commission/In | | | | | | Salary and | | Commission/ | | Long-term compensation | Name | | allowances | | centives (1) | | Housing (2) | | Others | | allowances | | Incentives (1) | | Housing (2) | | Others | (Deferred Benefit (3)&(4)) | Azim H. Premji | | $ | 100,004 | | $ | 556,845 | | $ | 48,724 | | $ | 15,949 | | | $ | 84,729 | | $ | 105,710 | | $ | 58,974 | | $ | 12,947 | | $ | 33,782 | | | | | Suresh C. Senapaty | | 168,295 | | 55,899 | | 25,058 | | 2,891 | | | 215,388 | | 119,443 | | 29,486 | | 433 | | 33,496 | | | | | Pratik Kumar | | 140,902 | | 46,753 | | — | | 9,372 | | | 183,234 | | 86,914 | | — | | 770 | | 19,283 | | | | | Vineet Agrawal | | 148,779 | | 56,562 | | — | | 3,336 | | | 190,562 | | 58,097 | | — | | 4,682 | | 27,740 | | | | | Suresh Vaswani | | 166,254 | | 53,627 | | 5,068 | | 734 | | | 209,035 | | 161,979 | | 10,967 | | 2,327 | | 36,299 | | | | | Sudip Banerjee | | 154,082 | | 46,344 | | — | | 480 | | | | | | Ranjan Acharya | | | 141,485 | | 50,413 | | — | | 95 | | 11,877 | | Girish S. Paranjpe | | 149,327 | | 71,261 | | 10,900 | | 519 | | | 202,368 | | 150,944 | | 10,084 | | 159 | | 35,097 | | | | | Dr. A.L. Rao | | 158,676 | | 60,853 | | 1,791 | | | | | | Ranjan Acharya | | 106,621 | | 37,547 | | 43 | | | | | | Ramesh Emani | | 154,859 | | 53,997 | | 864 | | | S Deb | | | 106,280 | | 91,808 | | — | | 1,067 | | 19,013 | | Anurag Behar | | | 100,181 | | 56,229 | | — | | 1,165 | | 14,142 | | T K Kurien | | | 169,679 | | 151,182 | | 10,615 | | 1,286 | | 19,446 | |
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| | | 1. | | Azim H. Premji was paid commissions at the rate of 0.3% on incremental Net Profitsnet profits of the Company over the previous year. Net Profits areyear computed based on the method approved by the Board Governance and Compensation Committee and in accordance with the provisions of the Indian Companies Act, 1956. All other executives were paid incentives under a Quarterly Performance Linked Scheme based on achievement of pre-defined profit targets. | |
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2. | | The value of thishousing perquisite accounts for more than 25% of the total value of all perquisites and personal benefits received in fiscal 2007. |
| | | | | | | | | | | | | | | | | | | | | | | Long Term Compensation ($) | | | | | | | | | | | | | | | No. of RSUs | | | | | | | | | No. of Equity | | | | | | granted | | | | | Deferred | | Shares Granted | | Grant | | during the | | | Name | | benefits(1)(2) | | during the year | | Price | | year | | Grant price | Azim H. Premji | | | 109,426 | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | Suresh C. Senapaty | | | 13,193 | | | | — | | | | — | | | | 14,000 | | | | 0.05 | | | | | | | | | | | | | | | | | | | | | | | Pratik Kumar | | | 12,111 | | | | — | | | | — | | | | 14,000 | | | | 0.05 | | | | | | | | | | | | | | | | | | | | | | | Vineet Agrawal | | | 9,285 | | | | — | | | | — | | | | 14,000 | | | | 0.05 | | | | | | | | | | | | | | | | | | | | | | | Suresh Vaswani | | | 13,015 | | | | — | | | | — | | | | 14,000 | | | | 0.05 | | | | | | | | | | | | | | | | | | | | | | | Sudip Banerjee | | | 13,833 | | | | — | | | | — | | | | 14,000 | | | | 0.05 | | | | | | | | | | | | | | | | | | | | | | | Girish S. Paranjpe | | | 13,520 | | | | — | | | | — | | | | 14,000 | | | | 0.05 | | | | | | | | | | | | | | | | | | | | | | | Dr. A.L. Rao | | | 12,385 | | | | — | | | | — | | | | 7,000 | | | | 0.05 | | | | | | | | | | | | | | | | | | | | | | | Ranjan Acharya | | | 9,771 | | | | — | | | | — | | | | 9,000 | | | | 0.05 | | | | | | | | | | | | | | | | | | | | | | | Ramesh Emani | | | 13,088 | | | | — | | | | — | | | | 14,000 | | | | 0.05 | |
| | 2009. | (1) | 3. | | Deferred benefits are payable to employees by way of our contribution to the Provident Fund and Pension Fund. The Provided Fund is a statutory fund to which Wipro and our employees contribute every month. A lump sum payment on separation and a Pensionpension payment on attaining the age of superannuation are payable from the balance standing to the credit of the Fund, as per the Employee Provident Fund and Miscellaneous Provisions Act, 1952. | | (2)4. | | Under our pension plans, any pension that is payable to an employee is not computed on the basis of final compensation, but on the accumulated pension fund to the credit of the employee as the date of separation, death, disability or retirement. We annually contribute 15% of Mr. Premji’s base salary and commission earned for that year to our pension fund for the benefit of Mr. Premji. For all other employees, we contribute 15% of their respective base salaries to our pension for their benefit. These contributions are included in this column. |
We operate in numerous countries and compensation for our officers and employees may vary significantly from country to country. As a general matter, we seek to pay competitive salaries in all the countries in which we operate. Board Composition Our Articles of Association provide that the minimum number of directors on our board of directors shall be four and the maximum number of directors shall be twelve.fifteen. As of March 31, 2007,2009, we had seventen directors on our Board. Our Articles of Association provide that at least two-thirds of our directors shall be subject to retirement by rotation. One third of these 65
directors must retire from office at each annual generalthe Annual General meeting of the shareholders. Mr. B C Prabhakar, Dr Jagdish N Sheth and Mr. William Arthur Owens, the three directors who will retire by rotation at the next annual General meeting of shareholders, are eligible for reelection. It has been proposed that they be reappointed at the forthcoming Annual General meeting of the Company to be held in July, 2009. A retiring director is eligible for re-election. Up to one-third of our directors can be appointed as non-retiring directors. Currently, Azim H. Premji is a non-retiring director. The term of the non-retiring director expires on July 30, 2009. The terms of each of our directors and their expiration dates are: | | | | | Name | | Expiration of current term of | | | Name | | office | | Term of office | Azim H. Premji | | July 30, 20072009 | | 2 years and seven months | Dr. Jagdish Sheth | | Annual General Meeting 20082009 | | Retirement by rotation | Dr. Ashok S Ganguly | | Annual General Meeting 20082010 | | Retirement by rotation | B. C. Prabhakar | | Annual General Meeting 20072009 | | Retirement by rotation | N. Vaghul | | Annual General Meeting 20072010 | | Retirement by rotation | P. M. Sinha | | Annual General Meeting 20092010 | | Retirement by rotation | BillWilliam Arthur Owens | | Annual General Meeting 2009 | | Retirement by rotation | Suresh C Senapaty | | April 17, 2013 | | 5 years from the date of appointment | Girish S Paranjpe | | April 17, 2013 | | 5 years from the date of appointment | Suresh Vaswani | | April 17, 2013 | | 5 years from the date of appointment |
Option Grants There were no option grants to our Chief Executive Officer, Chairman and Managing Director (designated as “Chairman”) in the fiscal years ended March 31, 20062008 and 2007.2009. Details of options granted to other senior management executives till March 31, 2009 are reported elsewhere in this Item 6 under the section titled “Share Ownership.” Option Exercises and Holdings Our Chairman did not exercise or hold any options during the fiscal year ended March 31, 2007.2009. The details of stock options held and exercised till March 31, 2009 with respect to other senior management executives are reported elsewhere in this Item 6 under the section titled “Share Ownership.” Terms of Employment Arrangements and Indemnification Agreements Under the Companies Act, our shareholders must approve the salary, bonus and benefits of all employee directors at a General Meeting of Shareholders. Each of our employee directors have signed an agreement containing the terms and conditions of employment, including a monthly salary, performance bonus and benefits including vacation, medical reimbursement and pension fund contributions. These agreements have varying terms ranging from a two to five year period, but either we or the employee director may generally terminate the agreement upon six months notice to the other party. 62
The terms of our employment arrangements with Azim H. Premji, Pratik Kumar, Suresh C. Senapaty, Ranjan Acharya, Suresh Vaswani, Sudip Banerjee, Dr. A.L. Rao,Anurag Behar, Girish S Paranjpe, T K Kurien, S Deb and Vineet Agrawal and Ramesh Emani provide for up to a 180-day notice period, up to 21 days of leave per year in addition to statutory holidays, and an annual compensation review. Additionally, employees are required to relocate as we may determine, and to comply with confidentiality provisions. We also have entered into agreements to indemnify our directors and officers for claims brought under any rule of law to the fullest extent permitted by applicable law. These agreements, among other things, indemnify our directors and officers for certain expenses, judgments, fines and settlement amounts incurred by any such person in any action or proceeding, including any action by or in the right of Wipro Limited, arising out of such person’s services as our director or officer, including claims which are covered by the Insurance Policy on Director’s and Officer’s Liability Insurance taken by the Company. Board Committee Information AuditAudit/Risk and Compliance Committee The Audit Committee of our Board of Directors, which was formed in 1987, reviews, acts on and reports to our Board of Directors with respect to various auditing and accounting matters. This Committee was renamed as Audit/Risk and Compliance Committee with effect from April 22, 2009. The primary responsibilities are: 66
• | | Auditing and accounting matters, including recommending the appointment of our independent auditors to the shareholders | | • | | Compliance with legal and statutory requirements | | • | | Integrity of the Company’s financial statements, discussing with the independent auditors the scope of the annual audits, and fees to be paid to the independent auditors. | | • | | Performance of the Company’s Internal Audit function, Independent Auditors and accounting practices. | | • | | Review of related party transactions, functioning of Whistle Blower mechanism, and | | • | | Implementation of the applicable provisions of the Sarbanes Oxley Act 2002 including review on the progress of internal control mechanisms to prepare for certification under Section 404 of the Sarbanes Oxley Act 2002. | Auditing and accounting matters, including recommending the appointment of our independent auditors to the shareholders, The ChairmanCompliance with legal and statutory requirements, Integrity of the Company’s financial statements, discussing with the independent auditors the scope of the annual audits, and fees to be paid to the independent auditors, Performance of the Company’s Internal Audit Committee is present atfunction, Independent Auditors and accounting practices, Review of related party transactions, functioning of Whistle Blower mechanism, and Implementation of the Annual General Meeting.applicable provisions of the Sarbanes Oxley Act, 2002 including review on the progress of internal control mechanisms to prepare for certification under Section 404 of the Sarbanes Oxley Act, 2002. All members of our AuditAudit/Risk and Compliance Committee are independent non executivenon-executive directors and financially literate. The Chairman of our AuditAudit/Risk and Compliance Committee has the accounting or related financial management expertise. Independent Auditors as well as Internal Auditors always have independent meetings with the AuditAudit/Risk and Compliance Committee and also participate in the AuditAudit/Risk and Compliance Committee meetings. Our Executive Vice President-FinanceCFO & CFODirector and other Corporate Officers make periodic presentations to the AuditAudit/Risk and Compliance Committee on various issues. The AuditAudit/Risk and Compliance Committee is comprised of the following three non-executive directors: | | | | | | | | | Mr. N. Vaghul | | - | | Chairman of the Audit Committee | | | | Messrs. P. M. Sinha and B. C. Prabhakar | | - | | Mr. N. Vaghul — Chairman of the Audit Committee Mr. P. M. Sinha and B. C. Prabhakar — Members of the Audit Committee |
Our AuditAudit/Risk and Compliance Committee held five meetings during our 20072009 fiscal year. Our AuditAudit/Risk and Compliance Committee has adopted a charter.an amended charter in April 2009. The amended charter of the Audit/Risk and Compliance Committee is available under the investor relations section on our website at www.wipro.com.www.wipro.com. Board Governance and Nomination Committee In April 2009, the Board Governance and Compensation Committee was split into two separate committees and reconstituted as Board Governance & Nomination Committee and Compensation Committee. The amended charters of these two Committees were approved by the Board in April 2009 and this reconstitution is with effect from April 22, 2009. These charters committees are available on our website under www.wipro.com. After this reconstitution, the members of the Board Governance & Nomination Committee are as follows: 63
Dr. Ashok S Ganguly Chairman of the Board Governance and Nomination Committee Mr. N. Vaghul, P.M. Sinha and Bill Owens Members of the Board Governance and Nomination Committee All members of the Board Governance and Nomination Committee are independent non-executive directors The primary responsibilities of the Board Governance and CompensationNomination Committee are: | • | | Determine and approve salaries, benefits and stock option grants to Senior Management employees and Directors of our Company. | | | • | | Act as Administrator of the Company’s Employee Stock Option Plans and Employee Stock Purchase Plans drawn up from time to time | | | • | | Develop and recommend to the Board Corporate Governance Guidelines applicable to the Company | | | • | | Evaluation of the Board on a continuing basis including an assessment of the effectiveness of the full Board, operations of the Board Committees and contributions of individual directors |
Develop and recommend to the Board Corporate Governance Guidelines applicable to the Company, Evaluation of the Board on a continuing basis including an assessment of the effectiveness of the full Board, operations of the Board Committees and contributions of individual directors, and Lay down policies and procedures to assess the requirements for induction of new members on the Board. Implementing policies and processes relating to corporate governance principles Ensuring that appropriate procedures are in place to assess Board membership needs and Board effectiveness Reviewing the Company’s policies that relate to matters of Corporate Social Responsibility, including public issues of significance to the Company and its stakeholders Developing and recommending to the Board of Directors for its approval an annual evaluation process of the Board and its Committees. Formulating the Disclosure Policy, its review and approval of disclosures; Overseeing Compensation Committee The members of the Compensation Committee are as under: Dr. Ashok S Ganguly Chairman of the Board Governance and Compensation Committee Mr. N. Vaghul and P.M. Sinha Members of the Board Governance and Compensation Committee The primary responsibilities of the Compensation Committee are: Determine and approve salaries, benefits and stock option grants to senior management employees and Directors of our Company. Approve and evaluate the compensation plans, policies and programs for Whole-time Directors and Senior Management. Act as Administrator of the Company’s Employee Stock Option Plans and Employee Stock Purchase Plans drawn up from time to time, Our Executive Vice President-Human Resources makes periodic presentations to the Board Governance and Compensation Committee on compensation reviews and performance linked compensation recommendations. All members of the Board Governance and Compensation Committee are independent non-executive directors. | | | | | | | Dr. Ashok S Ganguly | | Chairman of the Board Governance and Compensation Committee | | | | Messrs. N. Vaghul and P.M. Sinha | | Members of the Board Governance and Compensation Committee |
Our During the year 2008-09, our erstwhile Board Governance and Compensation Committee held four meetings during our 2007 fiscal year. Our Board Governance & Compensation Corporate Governance Committee has adopted a charter. The charter is available under the investor relations section on our website at www.wipro.com.meetings.
Employees Employees As of March 31, 2009, we had over 100,000 employees, including over 70,000 IT professionals. Highly trained and motivated people are critical to the success of our business. To achieve this, we focus on attracting and retaining the best people possible. A combination of strong brand name, a congenial working environment and competitive compensation programs enables us to attract and retain these talented people. 6764
Our human resources department is centralized at our corporate headquarters in Bangalore and functions across all of our business segments. We have implemented corporate-wide recruiting, training, performance evaluation, compensation and compensationbenefit programs that are tailored to address the needs of each of our business segments. Recruiting We hire entry level graduates from both the top engineering and management universities in India, as well as more experienced lateral hires through employee referral programs, advertisements, placement consultants, our website postings and walk-ins. To facilitate employee growth within Wipro Limited, all new openings are first offered to our employees. The nature of work, skill sets requirements and experience levels are highlighted to the employees. Applicants undergo the regular recruitment process and, if selected, get assigned to their new roles. Training Each of our new recruits must attend an eight week intensive training program when they begin working with us. New or recent graduates must also attend additional training programs that are tailored to their area of technology. We also have a mandatory continuing education program that requires each IT professional to attend at least 40 hours of continuing education classes to improve their understanding and competency of new technologies, as well as to develop leadership and personal self-development skills. We currently have 82 full-time faculty members to provide these training courses. We supplement our continuing education program for existing employees by sponsoring special programs at leading educational institutions, such as the Indian Institute of Management, Bangalore, Birla Institute of Technology and Science, Pilani, Symbiosis Institute of Business Management, Pune and others, to provide special skill set training in areas such as Business Skills and Project management to any of our IT professionals who choose to enroll and meet the eligibility criteria of these Institutes. Performance Evaluations Employees receive written performance objectives that they develop in cooperation with their respective managers. They are measured against these criteria annually in a formal review process which includes self-reviews and reviews from peers, managers and subordinates. Compensation We continually strive to provide our employees with competitive and innovative compensation packages. Our compensation packages include a combination of salary, stock options, pension, and health and disability insurance. We measure our compensation packages against industry standards and seek to match or exceed them. We adopted an employee stock purchase plan in 1984.1984, employee stock option plan in 1999 and 2000 and restricted stock unit option plan in 2004, 2005 and 2007. We have devised both business segment performance and individual performance linked incentive programs that we believe more accurately link performance to compensation for each employee. For example, we link cash compensation to a business segment’s quarterly operating margin objectives. We have started an in-house wellness program called Fit for Life aimed at increasing health quotient of employees. Share Ownership The following table sets forth, as of March 31, 2007,2009, for each director and executive officer, the total number of equity shares, ADSs and vested and unexercised options to purchase equity shares and ADSs. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission. All information with respect to the beneficial ownership of any principal shareholder has been furnished by such shareholder and, unless otherwise indicated below, we believe that persons named in the table have sole voting and sole investment power with respect to all the shares shown as beneficially owned, subject to community property laws, where applicable. The shares beneficially owned by the directors include the equity shares owned by their family members to which such directors disclaim beneficial ownership. The number of shares beneficially owned includes equity shares, equity shares underlying ADSs and the shares subject to vested options that are currently exercisable. For the convenience of the readers, the stock option grant price has been translated into U.S. dollars based on the noon buying rate in the Citycertified foreign exchange rates published by Federal Reserve Board of New York on March 30, 2007, for cable transfers in Indian rupees as certified for customs purposes by the Federal Reserve Bank of New York31, 2009, which was Rs. 43.1050.87 per $ 1.00. The share numbers and percentages listed below are based on 1,458,999,6501,464,980,746 equity shares outstanding as of March 31, 2007.2009. 6865
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Percentage | | Equity | | | | | | Percentage | | Equity | | | | | | | of Equity | | Shares | | | | | | of Total | | Shares | | | | | | | Equity Shares | | Shares | | Underlying | | | | | | Equity Shares | | Equity | | Underlying | | | | | | | beneficially | | Beneficially | | Options | | Grant | | | | beneficially | | Shares | | Options | | Exercise | | | Name | | owned | | Owned | | Granted | | Price ($) | | Date of expiration | | owned | | Outstanding | | Granted | | Price($) | | Date of expiration | Azim H. Premji (1) | | 1,161,136,260 | | 79.58 | | — | | — | | — | | | 1,161,116,260 | | 79.25 | | — | | — | | — | B. C. Prabhakar (2) | | 3,000 | | * | | — | | — | | — | | | 3,000 | | * | | — | | — | | — | Dr. Jagdish Sheth | | — | | — | | — | | — | | — | | | — | | — | | — | | — | | — | Dr. Ashok S Ganguly | | — | | — | | — | | — | | — | | | 1,000 | | * | | — | | — | | — | N. Vaghul | | — | | — | | — | | — | | — | | | — | | — | | — | | — | | — | P. M. Sinha(3) | | 20,000 | | * | | — | | — | | — | | | 20,000 | | * | | — | | — | | — | Suresh C. Senapaty | | 122,300 | | * | | 14,400 | | 0.05 | | October 2010 | | 115,250 | | * | | 4,800 | | 0.05 | | October 2010 | | | 14,000 | | 0.05 | | July 2011 | | 8,400 | | 0.05 | | July 2011 | | | | 50,000 | | 0.05 | | May 2013 | Pratik Kumar | | 59,100 | | * | | 14,400 | | 0.05 | | October 2010 | | 32,800 | | * | | 4,800 | | 0.05 | | October 2010 | | | | 8,400 | | 0.05 | | July 2011 | | | 14,000 | | 0.05 | | July 2011 | | 30,000 | | 0.05 | | May 2013 | Vineet Agrawal | | 138,600 | | * | | 14,400 | | 0.05 | | October 2010 | | 141,020 | | * | | 4,800 | | 0.05 | | October 2010 | | | 14,000 | | 0.05 | | July 2011 | | 8,400 | | 0.05 | | July 2011 | | | | 40,000 | | 0.05 | | May 2013 | Suresh Vaswani | | 96,948 | | * | | 16,800 | | 0.05 | | October 2010 | | 57,168 | | * | | 5,600 | | 0.05 | | October 2010 | | | 14,000 | | 0.05 | | July 2001 | | 8,400 | | 0.05 | | July 2011 | Sudip Banerjee | | 52,000 | | * | | 16,800 | | 0.05 | | October 2010 | | | | | 50,000 | | 0.05 | | May 2013 | | | | 60,000 | | 9.61 | | May 2013 | S Deb | | | 72,000 | | * | | 4,000 | | 0.05 | | October 2010 | | | | 7,200 | | 0.05 | | July 2011 | | | 14,000 | | 0.05 | | July 2011 | | 18,000 | | 0.05 | | May 2013 | Girish S. Paranjpe | | 49,000 | | * | | 16,800 | | 0.05 | | October 2010 | | 28,800 | | * | | 5,600 | | 0.05 | | October 2010 | | | 14,000 | | 0.05 | | July 2011 | | 8,400 | | 0.05 | | July 2011 | Dr. A.L. Rao | | 82,360 | | * | | 16,800 | | 0.05 | | October 2010 | | | | | 50,000 | | 0.05 | | May 2013 | | | | 60,000 | | 9.61 | | May 2013 | T K Kurien | | | 64,808 | | * | | 3,200 | | 0.05 | | October 2010 | | | | 7,200 | | 0.05 | | July 2011 | | | 7,000 | | 0.05 | | July 2011 | | 50,000 | | 0.05 | | May 2013 | Ranjan Acharya | | 21,000 | | * | | 12,000 | | 0.05 | | October 2010 | | 21,100 | | * | | 4,000 | | 0.05 | | October 2010 | | | 9,000 | | 0.05 | | July 2011 | | 5,400 | | 0.05 | | July 2011 | Ramesh Emani | | 24,700 | | * | | 16,800 | | 0.05 | | October 2010 | | | | 14,000 | | 0.05 | | July 2011 | | 9,000 | | 0.05 | | May 2013 | Anurag Behar | | | 30,866 | | * | | 4,000 | | 0.05 | | October 2010 | | | | 6,000 | | 0.05 | | July 2011 | | | | 20,000 | | 0.05 | | May 2013 |
| | | * | | Represents less than 1% of the shares.total equity shares outstanding as of March 31, 2009. | | (1) | | Includes 326,259,000 shares held by Hasham Traders (a partnership), of which Mr. Premji is a partner, 325,017,000 shares held by Prazim Traders (a partnership), of which Mr. Premji is a partner, 324,244,800 shares held by Zash Traders (a partnership), of which Mr. Premji is a partner, 38,263,000 shares held by Napean Trading Investment Co. Pvt. Ltd., of which Mr. Premji is a director, 51,014,200 shares held by Regal Investments Trading Co. Pvt. Ltd., of which Mr. Premji is a director, 38,860,600 shares held by Vidya Investment Trading Co. Pvt. Ltd., of which Mr. Premji is a director, 1,434,6001,414,600 shares held jointly by Mr. Premji and members of his immediately family andfamily. In addition 8,316,000 shares held by the Azim Premji Foundation (I) Pvt. Ltd and 10,000 sharesare held by Azim Premji Foundation (I) Pvt. Ltd. Mr. Premji disclaims beneficial ownership of 8,316,000 shares held by Azim Premji Foundation (I) Pvt. Ltd and 10,000 shares held by Azim Premji Foundation Pvt. Ltd. |
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| | | (2) | | The shares are jointly held with an immediate family member of Mr. Prabhakar. | | (3) | | The shares are jointly held with an immediate family member of Mr. P M Sinha. |
EMPLOYEE STOCK OPTION PLANS Wipro Employee Restricted Stock Unit Plan 2005 We have various employee stock options and restricted stock unit option plans (collectively referred to as ‘stock option plans’). Our Wipro Restricted Stock Unit Plan 2005, or 2005 unit plan,stock option plans provides for the grant of options to eligible employees and directors. The creation of our 2005 unit plan was approvedOur stock option plans are administered by our Board of Directors on June 14, 2005 and by our shareholders on July 21, 2005. Our 2005 unit plan became effective on July 21, 2005, and unless terminated sooner, the plan will terminate automatically on July 20, 2015. A total of 12,000,000 equity shares (as adjusted for corporate actions from time to time) are currently reserved for issuance pursuant to the plan. Our Board Governance and Compensation Committee (by the Compensation Committee wef April 22, 2009) (‘the Committee’) appointed by our Board of Directors administer our 2005 unit plan.Directors. The committee has the sole power to determine the
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terms of the units granted, including the exercise price, selection of eligible employees and directors, the number of equity shares to be covered by each option, the vesting and exercise periods, and the form of consideration payable upon such exercise. In addition, the committee has the authority to amend, suspend or terminate the 2005 stock plan with the approval of the shareholders, provided that no such action may adversely affect the rights of any participant under the plan. The Committee has the powers to interpret the terms of the Plan and options granted pursuant to the Plan. The plan does not confer any right to the participant with respect to continuing the participant’s status as an employee with the Company. Our 2005 unit plan does not allow for the transfer of options and only the participant may exercise an option during his or her lifetime. The vesting period for the options under the plan shall range from 12 months to not more than 84 months. A participant must exercise any vested units prior to termination of service with us and within a specified period post separation as per the Plan. The exercise price of options granted under our 2005 unit plan will be determined by the committee. Our 2005 unit plan provides that in the event of our merger with or into another corporation or a sale of substantially all of our assets, the successor corporation shall either assume the outstanding units or grant equivalent units to the holders. If the successor corporation neither assumes the outstanding units nor grants equivalent units, such outstanding units shall vest immediately, and become exercisable in full.
ADS Restricted Stock Unit Plan 2004 (ADS option)
Our ADS Restricted Stock Unit Plan 2004, or 2004 ADS unit plan, provides for the grant of options to our eligible employees and directors. The creation of our 2004 ADS unit plan was approved by our Board of Directors on April 16, 2004 and by our shareholders on June 11, 2004. The 2004 ADS unit plan became effective on June 11, 2004, and unless terminated sooner, the 2004 ADS unit plan will terminate automatically on June 10, 2014. A total of 12,000,000 ADSs, representing 12,000,000 equity shares (as adjusted for corporate action from time to time), are currently reserved for issuance pursuant to the plan.
Our Board Governance and Compensation Committee appointed by our Board of Directors administer the 2004 ADS unit plan. The committee has the sole power to determine the terms of the units granted, including the exercise price, selection of eligible employees, the number of ADSs to be covered by each ADS option, the vesting and exercise periods, and the form of consideration payable upon such exercise. In addition, the committee has the authority to amend, suspend or terminate the stock plan provided that no such action may adversely affect the rights of any participant under the plan. The Committee has the powers to interpret the terms of the plan and the ADS options granted pursuant to the plan. The plan does not confer any right to the participant with respect to participant’s status as an employee with the Company.
Our 2004 ADS unit plan does not allow for the transfer of units and only the participant may exercise an option during his or her lifetime. The vesting period for the options under the plan shall range from 12 months to not more than 84 months. A participant must exercise any vested options prior to termination of service with us and within a specified period post separation as per the Plan. The exercise price of options granted under our 2004 ADS unit plan will be determined by the committee.
Our 2004 ADS unit plan provides that in the event of our merger with or into another corporation or a sale of substantially all of our assets, the successor corporation shall either assume the outstanding units or grant equivalent units to the holders. If the successor corporation neither assumes the outstanding units nor grants equivalent units, such outstanding units shall vest immediately, and become exercisable in full.
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Wipro Employee Restricted Stock Unit Plan 2004
Our Wipro Restricted Stock Unit Plan 2004, or 2004 unit plan, provides for the grant of options to eligible employees and directors. The creation of our 2004 unit plan was approved by our Board of Directors on April 16, 2004 and by our shareholders on June 11, 2004. Our 2004 unit plan became effective on June 11, 2004, and unless terminated sooner, the plan will terminate automatically on June 10, 2014. A total of 12,000,000 equity shares (as adjusted for corporate actions from time to time) are currently reserved for issuance pursuant to the plan.
Our Board Governance and Compensation Committee appointed by our Board of Directors administer the 2004 unit plan. The committee has the sole power to determine the terms of the units granted, including the exercise price, selection of eligible employees, the number of equity shares to be covered by each option, the vesting and exercise periods, and the form of consideration payable upon such exercise. In addition, the committee has the authority to amend, suspend or terminate the 2004 stock plan with the approval of the shareholders, provided that no such action may adversely affect the rights of any participant under the plan. The Committee has the powers to interpret the terms of the Plan and options granted pursuant to the Plan. The plan does not confer any right to the participant with respect to continuing the participant’s status as an employee with the Company.
Our 2004 unit plan does not allow for the transfer of options and only the participant may exercise an option during his or her lifetime. The vesting period for the options under the plan shall range from 12 months to not more than 84 months. A participant must exercise any vested options prior to termination of service with us and within a specified period post separation as per the Plan. The exercise price of options granted under our 2004 unit plan will be determined by the committee.
Our 2004 unit plan provides that in the event of our merger with or into another corporation or a sale of substantially all of our assets, the successor corporation shall either assume the outstanding units or grant equivalent units to the holders. If the successor corporation neither assumes the outstanding units nor grants equivalent units, such outstanding units shall vest immediately, and become exercisable in full.
2000 ADS Option Plan
Our 2000 ADS option plan provides for the grant of two types of options to our employees and directors: incentive stock options, which may provide our employees with beneficial U.S. tax treatment, and non-statutory stock options. Our 2000 ADS option plan was approved by our Board of Directors in September 2000 and by our shareholders on April 26, 2000. Unless terminated sooner by our Board, our 2000 ADS option plan will terminate automatically in September 2010. A total of 9,000,000 ADSs, representing 9,000,000 equity shares (as adjusted for corporate actions from time to time), are currently reserved for issuance under our 2000 ADS option plan. All options under our 2000 ADS option plan will be exercisable for ADSs. Either our Board of Directors or a committee of our Board of Directors administers our 2000 ADS option plan. The committee has the power to determine the terms of the options granted, including the exercise prices, the number of ADSs subject to each option, the exercisability thereof, and the form of consideration payable upon such exercise. In addition, the committee has the authority to amend, suspend, or terminate our 2000 ADS option plan, provided that no such action may affect any ADS previously issued and sold or any option previously granted under our 2000 ADS option plan.
Our 2000 ADS option plan generally does not allow for the transfer of options and only the optionee may exercise an option during his or her lifetime. An optionee generally must exercise an option within three months of termination of service. If an optionee’s termination is due to death or disability, his or her option will fully vest and become exercisable and the option must be exercised within twelve months after such termination. The exercise price of incentive stock options granted under our 2000 ADS option plan must at least equal the fair market value of the ADSs on the date of grant. The exercise price of non-statutory stock options granted under our 2000 ADS option plan must at least equal 90% of the fair market value of the ADSs on the date of grant. The term of options granted under our 2000 ADS option plan may not exceed ten years. Our 2000 ADS option plan provides that in the event of our merger with or into another corporation or a sale of substantially all of our assets, the successor corporation shall either assume the outstanding options or grant equivalent options to the holders. If the successor corporation neither assumes the outstanding options nor grants equivalent options, such outstanding options shall vest immediately, and become exercisable in full.
2000 Employee Stock Option Plan
Our 2000 stock plan providesvesting period for the grant of stock options to eligible employees and directors. The creation of our 2000 stock plan was approved by our Board of Directors on April 26, 2000, and by our shareholders on July 27, 2000. Our 2000 stock plan became effective on September 15, 2000, and unless terminated sooner, our 2000 stock plan will terminate automatically on September 15, 2010. A total of 150,000,000 equity shares (as adjusted for corporate
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actions from time to time) are currently reserved for issuance pursuant to our 2000 stock plan. All options under our 2000 stock plan will be exercisable for our equity shares.
Our Board Governance & Compensation Committee appointed by our Board of Directors administers our 2000 stock plan. The committee has the powerplan(s) range from 12 months to determine the terms of the options granted, including the exercise price, the number of shares subject to each option, the exercisability thereof, and the form of consideration payable upon such exercise. In addition, the committee has the authority to amend, suspend or terminate our 2000 stock plan, provided that no such action may adversely affect the rights of any optionee under our 2000 stock plan.
Our 2000 stock plan generally does not allow for the transfer of options and only the optionee may exercise an option during his or her lifetime.more than 84 months. An optionee generally must exercise any vested options within seven daysa prescribed period as per the respective stock option plans generally before termination date of the stock option plan. A participant must exercise any vested options prior to termination of servicethe services with us.us and within a specified post-separation period generally within three months from date of the separation. If an optionee’s termination is due to death, disability or retirement, his or her option will fully vest and become exercisable. Generally, such options must be exercised within six months after termination.
The exercise price of stock options granted under our 2000 stock plan will be determined by the committee. Normally, the term of options granted under our 2000 stock plan may not exceed seven years. Our 2000 stock plan provides that in the eventsalient features of our merger with or into another corporation or a sale of substantially all of our assets, each option shall be proportionately adjusted to give effect to the merger or asset sale.stock plans are as follows:
1999 Employee Stock Option Plan | | | | | | | | | | | | | | | | | | | | | | | | | | | Range of | | | | | | | | | | | | | | Authorized | | | exercise | | | | | | | Termination | | | | | Name of Plan | | Shares(1) | | | prices | | | Effective date | | | date | | | Other remarks | | 1999 Employee Stock option Plan | | | 30,000,000 | | | Rs. | 171 – 490 | | | July 29, 1999 | | July 28, 2009 | | There are no stock options outstanding under this plan | | | | | | | | | | | | | | | | | | | Wipro Employee Stock Option Plan 2000 (2000 Plan) | | | 150,000,000 | | | Rs. | 171 – 490 | | | September 15, 2000 | | September 15, 2010 | | In the event of our merger with or into another corporation or a sale of substantially all of our assets, each option under this plan, shall be proportionately adjusted to give effect to the merger or asset sale.
There are no stock options outstanding under this plan. | | | | | | | | | | | | | | | | | | | Stock Option Plan (2000 ADS Plan) | | | 9,000,000 | | | $ | 3 – 7 | | | September, 2000 | | September, 2010 | | In event of merger of the Company with other corporation or sale of substantially of all our assets, the successor corporation shall either assume the outstanding units or grant equivalent units to the holders. If the successor corporation neither assumes the outstanding units nor grants equivalent units, such outstanding units shall vest immediately, and become exercisable in full. | | | | | | | | | | | | | | | | | | | Wipro Restricted Stock Unit Plan (WRSUP 2004 plan) | | | 12,000,000 | | | Rs. | 2 | | | June 11, 2004 | | June 10, 2014 | | | | | | | | | | | | | | | | | | | | Wipro ADS Restricted Stock Unit Plan (WARSUP 2004 plan) | | | 12,000,000 | | | $ | 0.04 | | | June 11, 2004 | | June 10, 2014 | | | | | | | | | | | | | | | | | | | | Wipro employee Restricted Stock Unit Plan 2005 (WSRUP 2005 plan) | | | 12,000,000 | | | Rs. | 2 | | | July 21, 2005 | | July 20, 2015 | | | | | | | | | | | | | | | | | | | | Wipro employee Restricted Stock Unit Pl 2007 (WSRUP 2007 plan) | | | 10,000,000 | | | Rs. | 2 | | | July 18, 2007 | | July 17, 2017 | |
Our 1999 stock plan provides for the grant of stock options to eligible employees and directors. Our 1999 stock plan was approved by our Board of Directors on April 30, 1999 and by our shareholders on July 29, 1999. Unless terminated sooner, our 1999 stock plan will terminate automatically on July 28, 2009. A total of 30,000,000 equity shares (as adjusted for corporate actions from time to time) are currently reserved for issuance pursuant to our 1999 stock plan. All options under our 1999 stock plan will be exercisable for our equity shares.
There are no stock options outstanding under this plan and we do not intend to grant options under this plan. | | | (1) | | Subject to adjustment for corporate action from time to time. |
Wipro Equity Reward Trust We established the Wipro Equity Reward Trust, or WERT, in 1984 to allow our employees to acquire a greater proprietary stake in our success and growth, and to encourage our employees to continue their association with us. The WERT, which is administered by a Board of Trustees is designed to give eligible employees the right to receive restricted shares and other compensation benefits at the times and on the conditions that we specify. Such compensation benefits include voluntary contributions, loans, interest and dividends on investments in the WERT and other similar benefits. The WERT is administered by a board of trustees that generally consists of between two and six members as appointed by us. We select eligible employees to receive grants of shares and other compensation from the WERT and communicate this information to the WERT. We select employees based upon various factors, including, without limitation, an employee’s performance, period of service and status. The WERT awards the number of shares that each employee is entitled to receive out of the shares we issued to the WERT at its formation. We also determine the time intervals that an employee may elect to receive them. The shares issued under the WERT are generally not transferable for a period of four years after the date of issuance to the employee. Shares from the WERT are issued in the joint names of the WERT and the employee until such restrictions and obligations are fulfilled by the employee. After the four-year period, complete ownership of the shares is transferred to the employee.
If employment is terminated by death, disability or retirement, his or her restricted shares are transferred to the employee’s legal heirs or continue to be held by the employee, as the case may be, and such individuals may exercise any rights to those shares for up to ninety days after employment has ceased. The Trustees of the WERT have the authority to amend or terminate the WERT at any time and for any reason. The WERT is subject to all applicable laws, rules, regulations and approvals by any governmental agencies as may be required. 67
Item 7. Major Shareholders Andand Related Party Transactions Major Shareholders The following table sets forth certain information regarding the beneficial ownership of our equity shares as of March 31, 2007,2009, of each person or group known by us to own beneficially 5% or more of our outstanding equity shares. 72
Beneficial ownership is determined in accordance with the rules of the SEC and includes voting and investment power with respect to such shares. Shares subject to vested options that are currently exercisable are deemed to be outstanding or to be beneficially owned by the person holding such options for the purpose of computing the percentage ownership of such person, but are not deemed to be outstanding or to be beneficially owned for the purpose of computing the percentage ownership of any other person. All information with respect to the beneficial ownership of any principal shareholder has been furnished by such shareholder and, unless otherwise indicated below, we believe that persons named in the table have sole voting and sole investment power with respect to all the shares shown as beneficially owned, subject to community property laws, where applicable. The number of shares and percentage ownership are based on 1,458,999,6501,464,980,746 equity shares outstanding as of March 31, 2007.2009. | | | | | | | | | | | | | | | | Number of Shares | | | | | | | | | | | | | | beneficially held as of | | | | Number of Shares beneficially | | | Name of Beneficial Owner | | Class of Security | | March 31, 2007 | | % of Class | Name of Beneficial Owner | | Class of Security | | held as of March 31, 2009 | | % of Class | Azim H. Premji (1) | | Equity | | 1,161,136,260 | | 79.58 | | Azim H. Premji (1) | | Equity | | 1,161,116,260 | | 79.25 | | Hasham Traders | | Equity | | 326,259,000 | | 22.36 | | Hasham Traders | | Equity | | 326,259,000 | | 22.27 | | Prazim Traders | | Equity | | 325,017,000 | | 22.28 | | Prazim Traders | | Equity | | 325,017,000 | | 22.18 | | Zash Traders | | Equity | | 324,244,800 | | 22.22 | | Zash Traders | | Equity | | 324,244,800 | | 22.13 | |
| | | (1) | | Includes 326,259,000 shares held by Hasham Traders (a partnership), of which Mr. Premji is a partner, 325,017,000 shares held by Prazim Traders (a partnership), of which Mr. Premji is a partner, 324,244,800 shares held by Zash Traders (a partnership), of which Mr. Premji is a partner, 38,263,000 shares held by Napean Trading Investment Co. Pvt. Ltd., of which Mr. Premji is a director, 51,014,200 shares held by Regal Investments Trading Co. Pvt. Ltd., of which Mr. Premji is a director, 38,860,600 shares held by Vidya Investment Trading Co. Pvt. Ltd., of which Mr. Premji is a director, 1,434,6001,414,600 shares held jointly by Mr. Premji and members of his immediately family andfamily. In addition 8,316,000 shares held by the Azim Premji Foundation (I) Pvt. Ltd and 10,000 sharesare held by Azim Premji Foundation (I) Pvt. Ltd. Mr. Premji disclaims beneficial ownership of 8,316,000 shares held by Azim Premji Foundation (I) Pvt. Ltd and 10,000 shares held by Azim Premji Foundation Pvt. Ltd. |
Our American Depositary Shares are listed on the New York Stock Exchange. Each ADS represents one equity share of par value Rs. 2 per share. Our ADSs are registered pursuant to Section 12(g)12(b) of the Securities Exchange Act of 1934 and, as of March 31, 2007,2009, are held by approximately 20,22914,945 holders of record in the United States. Our equity shares can be held by Foreign Institutional Investors, or FIIs, and Non-resident Indians, or NRIs, who are registered with the Securities and Exchange Board of India, or SEBI, and the Reserve Bank of India, or RBI. Currently, 7.85%7.53% of the Company’s equity shares are held by these FIIs, and NRIs, some of which may be residents or corporate entities registered in the United States of America and elsewhere. We are not awareunaware of whichwhether FIIs, and/or NRIs hold our equity shares as residents or as corporate entities registered in the United States. Our major shareholders do not have a differential voting right with respect to their equity shares. To the best of our knowledge, we are not owned or controlled directly or indirectly by any Government or by any other corporation. We are not aware of any arrangement, the operation of which may at a subsequent date result in a change in control, of our Company. Related Party Transactions Terms of Employment Arrangements and Indemnification Agreements.We are a party to various employment and indemnification agreements with our directors and executive officers. See “Terms of Employment Arrangements and Indemnification Agreements” under Item 6 of this Annual Report for a description of the agreements that we have entered into with our directors and executive officers. 68
Item 8. Financial Information Consolidated Statements and Other Financial Information Please refer the following financial statements and the Auditor’s Report under item 18 in this Annual Report for the fiscal year ended March 31, 2007:2009: Report of the independent registered public accounting firm; 73
| • | | Consolidated Balance Sheet as of March 31, 2006 and 2007; | | | • | | Consolidated Statements of Income for the years ended March 31, 2005, 2006 and 2007; | | | • | | Consolidated Statements of Stockholders’ Equity and comprehensive income for the years ended March 31, 2005, 2006 and 2007; | | | • | | Consolidated statements of Cash Flows for the years ended March 31, 2005, 2006 and 2007; and | | | • | | Notes to the Consolidated Financial Statements. | Consolidated Balance Sheets as of March 31, 2008 and 2009;Consolidated Statements of Income for the years ended March 31, 2007, 2008 and 2009; Consolidated Statements of Stockholders’ Equity and Comprehensive income for the years ended March 31, 2007, 2008 and 2009; Consolidated Statements of Cash Flows for the years ended March 31, 2007, 2008 and 2009; and Notes to the Consolidated Financial Statements. Legal Proceedings Please see the section tiledtitled “Legal Proceedings” under Item 4 of this Annual Report for this information. Dividends Although the amount varies,The public companies in India typically pay cash dividends.dividends even though the amount of such dividends varies from company to company. Under Indian law, a corporation payscan pay dividends upon a recommendation by the Board of Directors and approval by a majority of the shareholders, who have the right to decrease but not increase the amount of the dividend recommended by the Board of Directors. Under the Indian Companies Act, 1956, dividends may be paid out of profits of a company in the year in which the dividend is declared or out of the undistributed profits of previous fiscal years. For the year ended March 31, 2005,During fiscal 2007, we paid a final dividend of Rs. 2.50 per equity share. For the year ended March 31, 2006, we paid a final dividend of Rs. 5 per equity share. For the year ended March 31, 2007, the Board of Directors approved an interim cash dividend of Rs. 5 per share totaling toand a final cash dividend of Rs. 8,253.05. In accordance with Indian regulations5 per share. During fiscal 2008, we paid an amount equivalent to the interim cash dividend net of taxes amounting to Rs. 7,237.88 has been transferred to2 per share and a specific bank account pending payment to the shareholders. The balance in this bank account can only be usedfinal dividend of Rs. 1 per share. During fiscal 2009, we paid a final cash dividend of Rs. 4 per share.
We have proposed to pay a cash dividend of Rs. 4 per share on our equity shares and ADRs. This proposal is subject to approval by the specifiedshareholders of the Company. We expect a dividend are not available for general use and are accordingly reflected as restricted cash in the consolidated balance sheet.payout (excluding corporate dividend tax) of approximately Rs. 5,860 million. Although we have no current intention to discontinue dividend payments, we cannot assure you that any future dividends will be declared or paid or that the amount thereof will not be decreased. Holders of ADSs will be entitled to receive dividends payable on equity shares represented by such ADSs. Cash dividends on equity shares represented by ADSs are paid to the Depositary in rupees and are generally converted by the Depositary into U.S. dollars and distributed, net of depositary fees, taxes, if any, and expenses, to the holders of such ADSs. The Board of Directors has, subject to the approval of shareholders at the forthcoming Annual General Meeting in July 18, 2007, recommended a final dividend of Re. 1 per share on equity shares and ADSs for the year ended March 31, 2007. The dividend, if declared, will be payable to the shareholders who are on the records of the Company as on the opening hours of July 1, 2007.
Significant Changes None. Item 9. The Offer and Listing Price History Our equity shares are traded on The Stock Exchange, Mumbai or BSE and The National Stock Exchange of India Limited, or NSE. WeDuring the year we have also appliedobtained approval for de-listing our equity shares from the KolkattaKolkata Stock Exchange Association Limited and await the approval.Limited. Our American DepositoryDepositary Shares, as evidenced by American DepositoryDepositary Receipts, or ADRs, are traded in the U.S. on the New York Stock Exchange, or NYSE, under the ticker symbol “WIT”. Each ADS represents one equity share. Our ADSs began trading on the NYSE on October 19, 2000. 69
As of March 31, 2007,2009, we had 1,458,999,6501,464,980,746 issued and outstanding equity shares. This includes 22,573,070As of March 31, 2009, there were approximately 14,945 record holders of ADRs evidencing 23,692,051 ADSs (equivalent to 22,573,07023,692,051 equity shares). As of March 31, 2007,2009, there were approximately 197,774228,457 record holders of our equity shares listed and traded on the Indian Stock Exchanges and approximately 20,229 record holders of ADSs.Exchanges. 74
The following tables set forth for the periods indicated the price history of our equity shares and ADSs on the BSE, NSE and the NYSE. The stock prices for the prior periods prior to July 2005 are re-statedrestated to reflect the stock dividend issued by the Company in July 2005 in the ratio of 1:1.from time to time. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | BSE | | NSE | | NYSE | | | | | | | Price per equity share | | Price per equity share | | Price per ADS | | | | | | | High (Rs.) | | Low (Rs.) | | High ($) | | Low ($) | | High (Rs.) | | Low (Rs.) | | High ($) | | Low ($) | | High ($) | | Low ($) | Fiscal Year ended March 31, | | | 2007 | | | | 690.00 | | | | 383.00 | | | | 16.01 | | | | 8.89 | | | | 691.00 | | | | 381.25 | | | | 16.03 | | | | 8.80 | | | | 18.44 | | | | 10.18 | | | | | 2006 | | | | 573.00 | | | | 285.55 | | | | 12.88 | | | | 6.41 | | | | 585.90 | | | | 272.00 | | | | 13.17 | | | | 8.65 | | | | 22.38 | | | | 9.62 | | | | | 2005 | | | | 389.00 | | | | 200.00 | | | | 8.91 | | | | 4.59 | | | | 387.50 | | | | 198.00 | | | | 8.88 | | | | 4.54 | | | | 12.85 | | | | 5.81 | | | | | 2004 | | | | 310.17 | | | | 131.88 | | | | 7.15 | | | | 3.04 | | | | 311.67 | | | | 132.90 | | | | 7.18 | | | | 3.06 | | | | 9.90 | | | | 3.05 | | | | | 2003 | | | | 312.50 | | | | 177.17 | | | | 6.58 | | | | 3.73 | | | | 312.50 | | | | 177.17 | | | | 6.58 | | | | 3.73 | | | | 6.72 | | | | 3.71 | | | | | 2002 | | | | 327.50 | | | | 127.50 | | | | 6.89 | | | | 2.69 | | | | 329.00 | | | | 126.50 | | | | 6.92 | | | | 2.66 | | | | 7.34 | | | | 2.83 | | Quarter Ended | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | March 31, 2007 | | | | | | | 690.00 | | | | 531.00 | | | | 16.01 | | | | 12.32 | | | | 691.00 | | | | 527.15 | | | | 16.03 | | | | 12.23 | | | | 18.44 | | | | 14.62 | | December 31, 2006 | | | | | | | 614.00 | | | | 507.65 | | | | 14.25 | | | | 11.78 | | | | 670.00 | | | | 449.50 | | | | 15.55 | | | | 10.43 | | | | 16.39 | | | | 12.96 | | September 30, 2006 | | | | | | | 533.90 | | | | 441.25 | | | | 12.39 | | | | 10.24 | | | | 533.65 | | | | 442.30 | | | | 12.38 | | | | 10.26 | | | | 13.31 | | | | 11.23 | | June 30, 2006 | | | | | | | 598.90 | | | | 383.00 | | | | 13.90 | | | | 8.89 | | | | 599.00 | | | | 381.25 | | | | 13.90 | | | | 8.80 | | | | 15.50 | | | | 10.18 | | March 31, 2006 | | | | | | | 573.00 | | | | 440.20 | | | | 12.88 | | | | 9.89 | | | | 585.90 | | | | 385.00 | | | | 13.17 | | | | 8.66 | | | | 15.49 | | | | 11.90 | | December 31, 2005 | | | | | | | 470.00 | | | | 355.00 | | | | 10.57 | | | | 7.98 | | | | 470.00 | | | | 355.75 | | | | 10.57 | | | | 8.00 | | | | 12.75 | | | | 9.62 | | September 30, 2005 | | | | | | | 385.80 | | | | 350.05 | | | | 8.67 | | | | 7.87 | | | | 384.80 | | | | 345.20 | | | | 8.65 | | | | 7.76 | | | | 21.60 | | | | 9.59 | | June 30, 2005 | | | | | | | 388.00 | | | | 285.55 | | | | 8.72 | | | | 6.42 | | | | 384.90 | | | | 272.00 | | | | 8.65 | | | | 6.12 | | | | 22.38 | | | | 17.59 | | March 31, 2005 | | | | | | | 382.50 | | | | 312.50 | | | | 8.77 | | | | 7.17 | | | | 380.00 | | | | 305.18 | | | | 8.71 | | | | 7.00 | | | | 12.55 | | | | 9.81 | | Six Months Ended | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (monthly for last six months) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | April 30, 2007 | | | | | | | 600.00 | | | | 515.00 | | | | 13.92 | | | | 11.95 | | | | 604.80 | | | | 515.00 | | | | 14.03 | | | | 11.95 | | | | 17.24 | | | | 15.13 | | March 31, 2007 | | | | | | | 618.80 | | | | 531.00 | | | | 14.36 | | | | 12.32 | | | | 609.50 | | | | 527.15 | | | | 14.14 | | | | 12.23 | | | | 16.92 | | | | 14.62 | | February 28, 2007 | | | | | | | 690.00 | | | | 536.55 | | | | 16.01 | | | | 12.45 | | | | 691.00 | | | | 549.75 | | | | 16.03 | | | | 12.76 | | | | 18.44 | | | | 15.52 | | January 31, 2007 | | | | | | | 660.00 | | | | 566.10 | | | | 15.31 | | | | 13.13 | | | | 675.00 | | | | 561.35 | | | | 15.66 | | | | 13.02 | | | | 18.00 | | | | 15.25 | | December 31, 2006 | | | | | | | 614.00 | | | | 542.00 | | | | 14.25 | | | | 12.58 | | | | 613.90 | | | | 521.65 | | | | 14.24 | | | | 12.10 | | | | 16.39 | | | | 14.76 | | November 30, 2006 | | | | | | | 604.00 | | | | 523.10 | | | | 14.01 | | | | 12.14 | | | | 670.00 | | | | 449.50 | | | | 15.55 | | | | 10.43 | | | | 16.12 | | | | 14.00 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | BSE | | NSE | | NYSE | | | Price per equity share | | Price per equity share | | Price per ADS | | | High (Rs.) | | Low (Rs.) | | High ($) | | Low ($) | | High (Rs.) | | Low (Rs.) | | High ($) | | Low ($) | | High ($) | | Low ($) | Fiscal Year ended March 31, | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 2009 | | | 537.90 | | | | 181.70 | | | | 10.57 | | | | 3.57 | | | | 535.00 | | | | 180.40 | | | | 10.52 | | | | 3.55 | | | | 14.53 | | | | 5.04 | | 2008 | | | 600.00 | | | | 325.00 | | | | 14.99 | | | | 8.12 | | | | 635.00 | | | | 324.00 | | | | 15.87 | | | | 8.10 | | | | 17.24 | | | | 9.85 | | 2007 | | | 690.00 | | | | 383.00 | | | | 16.01 | | | | 8.89 | | | | 691.00 | | | | 381.25 | | | | 16.03 | | | | 8.80 | | | | 18.44 | | | | 10.18 | | 2006 | | | 573.00 | | | | 285.55 | | | | 12.88 | | | | 6.41 | | | | 585.90 | | | | 272.00 | | | | 13.17 | | | | 8.65 | | | | 22.38 | | | | 9.62 | | 2005 | | | 389.00 | | | | 200.00 | | | | 8.91 | | | | 4.59 | | | | 387.50 | | | | 198.00 | | | | 8.88 | | | | 4.54 | | | | 12.85 | | | | 5.81 | | | Quarter Ended | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | March 31, 2009 | | | 261.40 | | | | 195.00 | | | | 5.14 | | | | 3.83 | | | | 263.8 | | | | 196.50 | | | | 5.19 | | | | 3.86 | | | | 8.75 | | | | 5.04 | | December 31, 2008 | | | 351.70 | | | | 181.70 | | | | 6.91 | | | | 3.57 | | | | 364.40 | | | | 180.40 | | | | 7.16 | | | | 3.55 | | | | 9.98 | | | | 5.66 | | September 30, 2008 | | | 460.90 | | | | 317.00 | | | | 9.06 | | | | 6.23 | | | | 465.00 | | | | 320.10 | | | | 9.14 | | | | 6.29 | | | | 12.18 | | | | 8.88 | | June 30, 2008 | | | 537.90 | | | | 402.00 | | | | 10.57 | | | | 7.90 | | | | 535.00 | | | | 401.10 | | | | 10.52 | | | | 7.88 | | | | 14.53 | | | | 10.89 | | March 31, 2008 | | | 528.00 | | | | 325.00 | | | | 13.19 | | | | 8.12 | | | | 529.05 | | | | 324.00 | | | | 13.22 | | | | 8.10 | | | | 14.99 | | | | 9.85 | | December 31, 2007 | | | 552.00 | | | | 428.00 | | | | 13.79 | | | | 10.69 | | | | 552.00 | | | | 426.15 | | | | 13.79 | | | | 10.65 | | | | 16.49 | | | | 12.81 | | September 30, 2007 | | | 530.50 | | | | 425.00 | | | | 13.26 | | | | 10.62 | | | | 532.00 | | | | 425.00 | | | | 13.29 | | | | 10.62 | | | | 16.40 | | | | 12.49 | | June 30, 2007 | | | 600.00 | | | | 507.10 | | | | 14.99 | | | | 12.67 | | | | 635.00 | | | | 505.00 | | | | 15.89 | | | | 12.62 | | | | 17.24 | | | | 15.13 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Six Months Ended | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | April 30, 2009 | | | 332.00 | | | | 240.00 | | | | 6.53 | | | | 4.72 | | | | 333.45 | | | | 240.15 | | | | 6.55 | | | | 4.72 | | | | 9.60 | | | | 6.90 | | March 31, 2009 | | | 261.40 | | | | 195.00 | | | | 5.14 | | | | 3.83 | | | | 263.80 | | | | 196.50 | | | | 5.19 | | | | 3.86 | | | | 7.82 | | | | 5.04 | | February 28, 2009 | | | 231.90 | | | | 204.25 | | | | 4.56 | | | | 4.02 | | | | 232.00 | | | | 204.05 | | | | 4.56 | | | | 4.01 | | | | 7.33 | | | | 5.69 | | January 31, 2009 | | | 255.00 | | | | 200.00 | | | | 5.01 | | | | 3.93 | | | | 255.00 | | | | 201.00 | | | | 5.01 | | | | 3.95 | | | | 8.75 | | | | 6.09 | | December 31, 2008 | | | 264.25 | | | | 214.20 | | | | 5.19 | | | | 4.21 | | | | 265.00 | | | | 214.00 | | | | 5.21 | | | | 4.21 | | | | 8.49 | | | | 6.1 | | November 30, 2008 | | | 289.90 | | | | 208.00 | | | | 5.70 | | | | 4.09 | | | | 286.00 | | | | 206.80 | | | | 5.62 | | | | 4.07 | | | | 8.74 | | | | 5.66 | |
| | | The $ figure under BSE and NSE columns denote the share price in rupees converted to US $ at the rate of exchange of 1 US$ = Rs. 50.87 | | (1) | | Source: BSE data was obtained fromwww.bseindia.com and NSE data was obtained fromwww.nseindia.com. NYSE data was obtained fromwww.finance.yahoo.com.www.finance.yahoo.com. |
Plan of Distribution Not applicable. Markets Trading Practices and Procedures on the Indian Stock Exchanges BSE and NSE (Exchanges) together account for more than 80%90% of the total trading volume on the Indian Stock Exchanges. Trading on both of these exchanges is accomplished on electronic trading platforms. Trading is done on a two-day fixed settlement basis on all of the exchanges. Any outstanding amount at the end of the settlement period is settled by delivery and payment. However, institutional investors are not permitted to ‘net out’ their transactions and must trade on a delivery basis. 70
Orders can be entered with a specified term of validity that may last until the end of the session, day or settlement period. Dealers must specify whether orders are for a proprietary account or for a client. Exchanges specify certain margin requirements for trades executed on the exchange, including margins based on the volume or quantity of exposure that the broker has on the market, as well as market-to-market margins payable on a daily basis for all outstanding trades. Trading on Exchanges normally takes place from 10:00 a.m. to 3:30 p.m. on all weekdays, except holidays. Exchanges do not permit carry forward trades. They have separate margin requirements based on the net 75
exposure of the broker on the exchange. Exchanges also have separate online trading systems and separate clearing houses. BSE was closed from January 11 through January 13, 1993 due to a riot in Mumbai. It was also closed on March 12, 1993 due to a bomb explosion within its premises. From December 14 through December 23, 1993 the BSE was closed due to a brokers’ strike, and from March 20 through March 22, 1995, the governing board of the BSE closed the market due to a default of one of the broker members and due to which the trading of equity shares on the BSE has been suspended. There have been no closures of the Indian Stock Exchanges in response to “panic” trading or large fluctuations. On May 17, 2004, Exchanges have observed that there were wide fluctuations in the prices of various securities / SENSEX/Nifty, thereby resulting in a halt in the trading activity at the exchanges on two occasions, as per the Securities and Exchange Board of India or SEBI prescribed guidelines on Circuit Breakers. BSE and NSE were closed on July 28, 2005a few occasions, in the interest of protection of investor interests, due to rainfluctuation in Mumbai.prices caused by various events from time to time. On MayJanuary 22, 2006 Exchanges have observed that there were2008, the market tumbled in opening trade due to panic selling triggering the market wide fluctuationscircuit filter after the intra-day 10% fall. On November 27, 2008, due to terrorist attack in the pricescity of various securities / SENSEX/Nifty, thereby resulting in a halt inMumbai, the trading activity,BSE and NSE were closed. The stock exchanges in India now operate on a trading day plus two, or T+2 rolling settlement systems. At the end of the T+2 period, obligations are settled with buyers of securities paying for and receiving securities, while sellers transfer and receive payment for securities. The SEBI has moved to a T+2 settlement system, and is subsequently planning to move to a T+1 settlement system. In order to contain the risk arising out of the transactions entered into by the members in various securities either on their own account or on behalf of their clients, the largest exchanges have designed risk management procedures, which include compulsory prescribed margins on the individual broker members, based on their outstanding exposure in the market, as well as stock specific margins from the members. There are generally no restrictions on price movements of any security on any given day. In order to restrict abnormal price volatility, the SEBI has instructed the stock exchanges to apply the following price bands, calculated at the previous day’s closing price as follows: Market Wide Circuit Breakers: Market wideMarket-wide circuit breakers are applied to the market for movements by 10%, 15% and 20% for two prescribed market indices; the SensexSENSEX for the BSE and the Nifty for the NSE. If any of these circuit breaker thresholds are reached, trading on all equity and equity derivates markets nationwide is halted. Price Bands: Price Bands are This circuit filtersbreaker brings about a coordinated trading halt in all equity and equity derivative markets nationwide. The market wide circuit breakers would be triggered by movement of 20% movements either upSENSEX or down and are applied to most securities traded in the markets, excluding securities included inNSE S&P CNX Nifty whichever is breached earlier. In case of a 10% movement of either of these indices, there would be a 1-hour market halt if the BSE Sensexmovement takes place before 1 p.m. In case the movement takes place at or after 1 p.m. but before 2.30 p.m. there will be a trading halt for half an hour. In case the movement takes place at or after 2.30 p.m. there will be no trading halt at the 10% level and the NSE Nifty indices and derivatives products.
Amendments to SEBI (DIP) Guidelines, 2000;
In the eventmarket will continue trading. If there is a 15% movement of book built issues in an Initial Public Offering, or IPO, it has been decided to increase the allocation to Retail Individual Investors (RIIs) from the existing 25% to 35%, and to correspondingly reduce the allocation to Non-Institutional Investors (NIIs) from the existing 25% to 15%. Further,either index, there will be a 2-hour market halt if the book built issuesmovement takes place before 1 p.m. If the 15% trigger is reached on or after 1 p.m. but before 2 p.m., there will be a 1 hour halt. If the 15% trigger is reached on or after 2 p.m. the trading will halt for the remainder of the day. In case of a 20% movement of the index, the trading will be halted for the remainder of the day. The percentages are made pursuantcalculated on the closing index value of the quarter. These percentages are translated into absolute points of index variations (rounded off to the requirement of mandatory allocation of 60% to QIBs in terms of Rule 19(2)(b) of the Securities Contract Regulations Rules, 1956, the respective figures shall be 30% of the RIIs and 10% for NIIs.
The RII at present is defined in value terms as one who can apply for shares up to a maximum amount of Rs.1,00,000.
The Securities and Exchange Board of India or SEBI has introduced the regime of private placements of securities by Indian listed companies called Qualified Institutions Placements or QIP. The new regime has been introduced in the form of Chapter XIIIA of the SEBI (Disclosures and Investor Protection) Guidelines, 2000, or DIP Guidelines, on May 8, 2006 or the Amendment.
QIPs are basically the issue of “specified securities” by Indian companies to Qualified Institutional Buyers, QIBs. The Amendment defines the specified securities as equity shares, fully convertible debentures, partly convertible debentures or any securities other than warrants, which are convertible into or exchangeable with equity shares at a later date.
Reduction in the bidding period
To effect a change in the existing bidding period, which may not exceed 10 business days subject to a three day extensionnearest 25 points in case of a revision in price bands, SEBI has decided to reduceSENSEX). At the bidding period fromend of each quarter, these absolute points of index variations are revised and made applicable for the current 5-10 business day period (including holidays) to a 3-7 business day period.next quarter.
76
Disclosure of Price Band/Floor Price in case of listed companiesIndex based market wide circuit breaker
The existing DIP guidelines require all issuers (whether listed or unlisted) makingExchange implements on a public issue throughquarterly basis, the book building process to discloseindex based market wide circuit breaker system. The system is applicable at three stages of the price band/floor price in the Red Herring Prospectus / application form. SEBI has also decided to give an option to listed issuers toindex movement either disclose the price band in the red herring prospectus or application form or to disclose the price band/floor priceway at least one day before the bid opens.10%, 15% and 20%. Listing The SEBI has promulgated regulations creating an independent self-regulatory authority calledfor listing and is governed through circulars issued from time to time by amending the Central Listing Authority, orAgreement entered into by listed companies with stock exchanges. The Stock Exchanges monitor the CLA. No stock exchange can consider a listing application unless it is accompanied by a letterlisted companies under the supervision of recommendation from the CLA. However, currently the CLA is not fully operational. This law has since been repealed and the authority dissolved.SEBI. The National Stock Exchange of India Limited The market capitalization of the capital markets (equities) segment of the NSE as of May 9, 2007March 31, 2009 was approximately Rs. 35.8128.96 trillion or approximately $ 831569 billion. The clearing and settlement operations of the NSE are managed by its wholly-owned subsidiary, the National Securities Clearing Corporation Limited. Funds settlement takes place through designated clearing banks. The National Securities Clearing Corporation Limited interfaces with the depositaries on the one hand and the clearing banks on the other to provide delivery versus payment settlement for depositary-enabled trades. As of May 9, 2007,March 31, 2009, the NSE had 798117 members comprised of 2996 corporate members, 11 individual members 736 companies, 33and 10 firms. 71
Bombay Stock Exchange Limited The estimated aggregate market capitalization of stocks trading on the BSE as of May 9, 2007March 31, 2009 was approximately Rs. 8.7730.86 trillion or approximately $ 204606 billion. The BSE began allowing online trading in May 1995. As of May 9, 2007,March 31, 2009, the BSE had 8541,007 members, comprised of 140175 individual members, 672809 Indian companies 22 partnership firms and 20 composite corporate members.23 Foreign Institutional Investors. Only a member of the stock exchange has the right to trade in the stocks listed on the stock exchange. Derivatives Trading in derivatives in India takes place either on separate and independent derivatives exchanges or on a separate segment of an existing stock exchange. The derivative exchange or derivative segment of a stock exchange functions as a self-regulatory organization under the supervision of the SEBI. Depositories The National Securities Depository Limited and Central Depositary Services (India) Limited are the two depositories that provide electronic depositary facilities for trading in equity and debt securities in India. The SEBI mandates that a company making a public or rights issue or an offer for sale to enter into an agreement with a depository for dematerialization of securities already issued or proposed to be issued to the public or existing shareholders;shareholders. The SEBI has also provided that the issue and allotment of shares in initial public offerings and/or the trading of shares shall only be in electronic form. Securities Transaction Tax A brief description of the securities transaction tax and capital gains treatment under India law is provided under the section “Taxation”. Item 10. Additional Information Share Capital Our authorized share capital is Rs. 3,550,000,0003,300,000,000 divided into 1,650,000,000 equity shares of Rs. 2/- each and 25,000,000 preference shares of Rs. 10/- each. As of March 31, 2007, 1,458,999,6502009, 1,464,980,746 equity shares, par value Rs. 2 per share were issued, outstanding and fully paid. We currently have no convertible debentures or warrants outstanding.outstanding, except options outstanding under our employee stock option plans. Memorandum and Articles Of Association 77
Set forth below is a brief summary of the material provisions of our Articles of Association and the Indian Companies Act, 1956 all as currently in effect. Wipro Limited is registered under the Companies Act, with the Registrar of Companies, Karnataka, Bangalore, India, with Company No. 20800. The following description of our Articles of Association does not purport to be complete and is qualified in its entirety by the Articles of Association, and Memorandum of Association, of Wipro Limited that are included as exhibits to our registration statement on Form F-1 filed with the Securities and Exchange Commission on September 26, 2000. Our Articles of Association provide that the minimum number of directors shall be four and the maximum number of directors shall be twelve.fifteen As of March 31, 2007,2009, we have seven10 directors. Our Articles of Association provide that at least two-thirds of our directors shall be subject to retirement by rotation. One third of these directors must retire from office at each annual generalAnnual General meeting of the shareholders. A retiring director is eligible for re-election. Up to one-third of our directors can be appointed as permanent directors. Currently, Azim H. Premji is a non-retiring director. The term of the office of our non-retiring director expires on July 30, 2009. Our Articles of Association do not mandate the retirement of our directors under an age limit requirement. Our Articles of Association do not require our Board members to be shareholders in our company. Our Articles of Association provide that any director who has a personal interest in a transaction must disclose such interest, must abstain from voting on such transaction and may not be counted for purposes of determining whether a quorum is present at the meeting. The remuneration payable to our directors may be fixed by our Board of Directors in accordance with provisions of the Indian Companies Act, 1956, and the rules and regulations prescribed by the Government of India. 72
Objects and Purposes of Our Memorandum of Association The following is a summary of our existing Objects as set forth in Section 3 of our Memorandum of Association: | • | | To purchase or otherwise acquire and take over any lands. | | | • | | To carry on the business of extracting vegetable oil. | | | • | | To manufacture and deal in hydrogenated vegetable oil. | | | • | | To carry on business as manufacturers, sellers, buyers, exporters, importers, and dealers of fluid power products. | | | • | | To carry on business as mechanical engineers, tool makers, brass and metal founders, mill-makers, mill-wrighters, machinists and metallurgists. | | | • | | To carry on the trade or business of manufacturing and distributing chemical, synthetic and organic products. | | | • | | To carry on business as manufacturers, exporters, sellers, dealers and buyers in all types and kinds of goods, articles and things. | | | • | | To carry on business in India and elsewhere as manufacturer, assembler, designer, builder, seller, buyer, exporter, importer, factors, agents, hirers and dealers of computer hardware and software and any related aspects thereof. | | | • | | To carry on research and development activities on all aspects related to products business and objects of our company. | | | • | | To construct, equip and maintain mills, factories, warehouses, godowns, jetties and wharves, and any other conveniences or erection suitable for any of the purpose of our company. | | | • | | To carry on all or any of the business of soap and candle makers, tallow merchants, chemists, druggists, dry salters, oil-merchants, manufacturers of dyes, paints, chemicals and explosives and manufacturers of and dealers in pharmaceutical, chemical, medicinal and other preparations or compounds, perfumery and proprietary articles and photographic materials and derivatives and other similar articles of every description. |
To undertake and carry on the business of providing all kinds of information technology based and enabled services in India and internationally, electronic remote processing services, eServices, including all types of Internet-based/ Web enabled services, transaction processing, fulfillment services, business support services including but not limited to providing financial and related services of all kinds and description including billing services, processing services, database services, data entry business-marketing services, business information and management services, training and consultancy services to businesses, organizations, concerns, firms, corporations, trusts, local bodies, states, governments and other entities; to establish and operate service processing centers for providing services for back office and processing requirements, marketing, sales, credit collection services for companies engaged in the business of remote processing and IT enabled services from a place of business in India or elsewhere, contacting and communicating to and on behalf of overseas customers by voice, data image, letters using dedicated international private lines to handle business process management, remote help desk management; remote management. 78
| • | | To carry on any other trade or business whatsoever as can in the opinion of us be advantageously or conveniently carried on by us. | | | • | | To carry on the business of metal working and manufacturing. | | | • | | To acquire and take over the whole or any part of the business, property and liabilities of any person or persons, firm or corporation carrying on any business which we are authorized to carry on or possessed of any property or rights suitable for our purposes. | | | • | | To manufacture or otherwise acquire and deal in containers and packing materials of any kind. | | | • | | To apply for, purchase or otherwise acquire any patents, inventions, licenses, concessions and the like conferring an exclusive or non-exclusive or limited right to use, any secret or other information as to any invention. | | | • | | To purchase or otherwise acquire, manufacture, and deal in all raw materials, stores, stock-in-trade, goods, chattels and effects. | | | • | | To enter into any partnership or any arrangement for sharing profits, union of interests, joint ventures, reciprocal concession or otherwise. | | | • | | To purchase or otherwise acquire all or any part of the business, property and liabilities of any person, company, society, for all or any of the purposes within the objects of our company. | | | • | | To enter into any arrangement with any Governments or authorities. | | | • | | To provide for the welfare of persons in the employment of our company, or formerly engaged in any business acquired by our company, and the wives, widows, families or dependants of such persons. | | | • | | To undertake, carry out, promote and sponsor rural development, including any program for promoting the social and economic welfare or uplift of the public in any rural area. | | | • | | To undertake, carry out, promote and sponsor or assist in any activity for the promotion and growth of the national economy and for discharging what the directors may consider to be the social and moral responsibilities of our company to the public or any section of the public. | | | • | | To undertake and carry on the business of providing all kinds of information technology based and enabled services in India and internationally, electronic remote processing services, eServices, including all types of Internet-based/ Web enabled services, transaction processing, fulfillment services, business support services including but not limited to providing financial and related services of all kinds and description including billing services, processing services, database services, data entry business-marketing services, business information and management services, training and consultancy services to businesses, organizations, concerns, firms, corporations, trusts, local bodies, states, governments and other entities; to establish and operate service processing centers for providing services for back office and processing requirements, marketing, sales, credit collection services for companies engaged in the business of remote processing and IT enabled services from a place of business in India or elsewhere, contacting and communicating to and on behalf of overseas customers by voice, data image, letters using dedicated international private lines; and to handle business process management, remote help desk management; remote management; remote customer interaction, customer relationship management and customer servicing through call centers, email based activities and letter/fax based communication, knowledge storage and management, data management, warehousing, search, integration and analysis for financial and non financial data. | | | • | | To act as information technology consultants and to operate a high technology data processing center for providing information processing, analysis, development, accounting and business information and data to customers in India and internationally; to carry on the business of gathering, collating, compiling, processing, analyzing, distributing, selling, publishing data and information and including conduct of studies and research, and marketing of information and services and providing access to information regarding financial operations and management, financial services, investment services business and commercial operations, financial status, creditworthiness and rating, consumer responses and management of businesses of all kinds and descriptions by whatever name called. | To carry on business in India and elsewhere as manufacturer, assembler, designer, builder, seller, buyer, exporter, importer, factors, agents, hirers and dealers of computer hardware and software and any related aspects thereof.79
| • | | To carry on the business as Internet service provider and undertake any and all kinds of Internet/web based activities and transactions; to design, develop, sell, provide, maintain, market, buy, import, export, sell and license computer software, hardware, computer systems and programs products, services and to give out computer machine time and to carry on the business of collecting, collating, storing, devising other systems including software programs and systems. | | | • | | From time to time, to subscribe or contribute to any charitable, benevolent or useful object of a public nature. | To carry on all or any of the business of soap and candle makers, tallow merchants, chemists, druggists, dry salters, oil-merchants, manufacturers of dyes, paints, chemicals and explosives and manufacturers of and dealers in pharmaceutical, chemical, medicinal and other preparations or compounds, perfumery and proprietary articles and photographic materials and derivatives and other similar articles of every description.To carry on business as manufacturers, sellers, buyers, exporters, importers, and dealers of fluid power products. To carry on the business of extracting vegetable oil, manufacture and deal in hydrogenated vegetable oil. To carry on any other trade or business whatsoever as can in the opinion of us be advantageously or conveniently carried on by us. To carry on the business of solutions for water treatment including but not limited to ultra pure water, waste water treatment, water reuse and desalination and related activities. To carry on the business of renewable energy systems and food and agricultural product processing and related industries, Borrowings Power Exercisable by the Directors The Board of Directors have the authority to make borrowings upto a limit of one time the Companies paid-up capital and free reserves. Borrowings beyond this limit will require the approval of the shareholders of the Company. Description of Equity Shares Dividends Under the Indian Companies Act, 1956, unless our Board of Directors recommends the payment of a dividend, we may not declare a dividend. Similarly, under our Articles of Association, although the shareholders may, at the annual generalAnnual General meeting, approve a dividend in an amount less than that recommended by the Board of Directors, they cannot increase the amount of the dividend. In India, dividends generally are declared as a percentage offixed sum per share on the par value of a company’s equity shares. The dividend recommended by the Board, if any, and subject to the limitations described above, is distributed and paid to shareholders in proportion to the paid up value of their shares within 30 days of the approval by the shareholders at the annual generalAnnual General meeting. Pursuant to our Articles of Association, our Board of Directors has discretion to declare and pay interim dividends without shareholder approval. Under the Indian Companies Act, 1956, read with the listing agreements entered into with Indian stock exchanges, dividends can only be paid in cash to the registered shareholder at a record date fixed on or prior to the annual generalAnnual General meeting or to his order or his banker’s order. The Companies Act provides that any dividends that remain unpaid or unclaimed after the 30-day period are to be transferred to a special bank account. We transfer any dividends that remain unclaimed for seven years from the date of the transfer to the Investor Education and Protection Fund created by the Indian Government. AfterGovernment after the transfer to this fund, such unclaimed dividends can not be claimed. stipulated time. Under the Companies Act, dividends may be paid out of profits of a company in the year in which the dividend is declared or out of the undistributed profits of previous fiscal years.years subject to transfer of a portion. Before declaring a dividend greater than 10% of the par value of its equity shares, a company is required under the Companies Act to transfer to its reserves a minimum percentage of its profits for that year, ranging from 2.5% to 10%, depending upon the dividend percentage to be declared in such year. 73
The Companies Act further provides that, in the event of an inadequacy or absence of profits in any year, a dividend may be declared for such year out of the company’s accumulated profits, subject to the following conditions:fulfillment of certain conditions. | • | | the rate of dividend to be declared may not exceed 10% of its paid up capital or the average of the rate at which dividends were declared by the company in the prior five years, whichever is less; | | | • | | the total amount to be drawn from the accumulated profits earned in the previous years and transferred to the reserves may not exceed an amount equivalent to 10% of its paid up capital and free reserves, and the amount so drawn is to be used first to set off the losses incurred in the fiscal year before any dividends in respect of preference or equity shares are declared; and | | | • | | the balance of reserves after withdrawals shall not fall below 15% of its paid up capital. |
We are subject to taxation for each dividend declared, distributed or paid for a relevant period by our company. Bonus Shares In addition to permitting dividends to be paid out of current or retained earnings as described above, the Companies Act permits a company to distribute an amount transferred from the general reserve or other permitted reserves, including share premium account and surplus in the company’s profit and loss account, to its shareholders in the form of bonus shares (similar to a stock dividend). The Companies Act also permits the issuance of bonus shares from a share premium account. Bonus shares are distributed to shareholders in the proportion recommended by the Board of Directors. Shareholders on recordDirectors to such shareholders on a fixed record date when they are entitled to receive such bonus shares. Audit and Annual Report 80
At least 21 days before the Annual General Meeting of shareholders (excluding the days of mailing and date of the meeting,), we must distribute to our shareholders a detailed version of our audited Indian GAAP balance sheet and profit and loss account and the related reports of our Board of Directors and the Auditors, together with a notice convening the general meeting. Securities and Exchange Board of India (SEBI)SEBI has permitted dispatch of abridged financial statements to shareholders in India in lieu of detailed version of financial statements. Under the Companies Act, a company must file the balance sheet and annual profit and loss account presented to the shareholders within 30 days of the conclusion of the Annual General Meeting with the Registrar of Companies. A company must also file an annual return containing a list of the company’s shareholders and other company information within 60 days of the conclusion of the meeting. Consolidation and Subdivision of Shares The Indian Companies Act permits a company to split or combine the par value of its shares, provided such split or combination is not made in fractions. Shareholders of record on a fixed record date are entitled to receive the split or combination. Preemptive Rights, Issue of Additional Shares and Distribution of Rights The Companies Act gives shareholders the right to subscribe for new shares in proportion to their respective existing shareholdings unless(unless otherwise determined by a special resolution passed by a General Meeting of the shareholders. Under the Companies Act, in the event of an issuance of securities, subject to the limitations set forth above, a company must first offer the new shares to the shareholders on a fixed record date. The offer must include: (i)) and the right, exercisable by the shareholders of record, to renounce the shares offeredsuch subscription right in favor of any other person; and (ii) the number of shares offered and the period of the offer, which may not be less than 15 days from the date of offer. If the offer is not accepted, it is deemed to have been declined. The Board of Directors is authorized under the Companies Act to distribute any new shares not purchased by the preemptive rights holders in the manner that it deems most beneficial to the company. Holders of ADSs may not be permitted to participate in any such offer. If we ever plan to distribute additional rights to purchase our equity shares, we will give prior written notice to the depositary bank and we will assist the depositary bank in determining whether it is lawful and reasonably practicable to distribute rights to purchase additional ADSs to holders. The depositary bank will establish procedures to distribute rights to purchase additional ADSs to holders and to enable such holders to exercise such rights if it is lawful and reasonably practicable to make the rights available to holders of ADSs, subject to all of the documentation contemplated in the deposit agreement (such as opinions to address the lawfulness of the transaction). You may have to pay fees, expenses, taxes and other governmental charges to subscribe for the new ADSs upon the exercise of your rights. The depositary bank is not obligated to establish procedures to facilitate the distribution and exercise by holders of rights to purchase new equity shares directly, rather than new ADSs. The depositary bank will not distribute the rights to you if: we do not timely request that the rights be distributed to you or we request that the rights not be distributed to you; we fail to deliver satisfactory documents to the depositary bank; or it is not reasonably practicable to distribute the rights. 74
| • | | we do not timely request that the rights be distributed to you or we request that the rights not be distributed to you; | | | • | | we fail to deliver satisfactory documents to the depositary bank; or | | | • | | it is not reasonably practicable to distribute the rights. |
The depositary bank will sell the rights that are not exercised or not distributed if such sale is lawful and reasonably practicable. The proceeds of such sale will be distributed to holders as in the case of a cash distribution. If the depositary bank is unable to sell the rights, it will allow the rights to lapse. Voting Rights At any General Meeting, voting is by show of hands unless a poll is demanded by a shareholder or shareholders present in person or by proxy holding at least 10% of the total shares entitled to vote on the resolution or by those holding shares with an aggregate paid up capital of at least Rs. 50,000. Upon a show of hands, every shareholder entitled to vote and present in person has one vote and, on a poll, every shareholder entitled to vote and present in person or by proxy has voting rights in proportion to the paid up capital held by such shareholders. The Chairman of the Board has a deciding vote in the case of any tie. Any shareholder of the company may appoint a proxy. The instrument appointing a proxy must be delivered to the company at least 48 hours prior to the meeting. A proxy 81
may not vote except on a poll. A corporate shareholder may appoint an authorized representative who can vote on behalf of the shareholder, both upon a show of hands and upon a poll. Ordinary resolutions may be passed by simple majority of those present and voting at any General Meeting for which the required period of notice has been given. However, certain resolutions such ascalled special resolutions in many instances like for example amendments ofto the Articles of Association and changes into certain clauses in the Memorandum of Association, the commencement of a new line of business, the waiver of preemptive rights for the issuance of any new shares and a reduction of share capital,etc require that votes cast in favor of the resolution (whether by show of hands or poll) are not less than three times the number of votes, if any, cast against the resolution. As per the Companies Act, not less than two-third of the directors of a public company shall retire by rotation and be appointed by the shareholders in the general meeting. Liquidation Rights Subject to the rights of creditors, employees and the holders of any shares entitled by their terms to preferential repayment over the equity shares, if any, in the event of our winding-up, the holders of the equity shares are entitled to be repaid the amounts of paid up capital or credited as paid up on those equity shares. All surplus assets after payments to the holders of any preference shares at the commencement of the winding-up shall be paid to holders of equity shares in proportion to their shareholdings. Preference Shares Preference shares have preferential dividend and liquidation rights. Preference shares may be redeemed if they are fully paid, and only out of our profits, or out of the proceeds of the sale of shares issued for purposes of such redemption. Holders of preference shares do not have the right to vote at shareholder meetings, except on resolutions which directly affect the rights of their preference shares. However, holders of cumulative preference shares have the right to vote on every resolution at any meeting of the shareholders if the dividends due on the preference shares have not been paid, in whole or in part, for a period of at least two years prior to the date of the meeting. Currently, we have no preference shares issued and outstanding. Redemption of Equity Shares Under the Companies Act, unlike preference shares, equity shares are not redeemable. Liability on Calls Not applicable. Discriminatory Provisions in Articles There are no provisions in our Articles of Association discriminating against any existing or prospective holder of such securities as a result of such shareholder owning a substantial number of shares. Alteration of Shareholder Rights Under the Companies Act, the rights of any class of shareholders can be altered or varied with the consent in writing of the holder of not less than three-fourths of the issued shares of that class or with the sanction of a special resolution passed at a separate meeting of the holders of the issued shares of that class if the provisions with respect to such variation isare contained in the memorandumMemorandum of Association or articlesArticles of Association of the company,Company, or in the absence of any such provision in the memorandumMemorandum of Association or articles,Articles of Association, if such variation is not prohibited by the terms of issue of the shares of that class. Under the Companies Act, the Articles of Association may be altered only by way of a special resolution. 75
Meetings of Shareholders We must convene an annual generalAnnual General meeting of shareholders within six months after the end of each fiscal year and may convene an extraordinary general meeting of shareholders when necessary or at the request of a shareholder or shareholders holding at least 10% of our paid up capital carrying voting rights. The annual generalAnnual General meeting of the shareholders is generally convened by our Secretary pursuant to a resolution of our Board of Directors. Written notice setting out the agenda of the meeting must be given at least 21 days, excluding the days of mailing and date of the meeting, prior to the date of the general meeting to the shareholders of record. Shareholders who are registered as shareholders on a pre-determined date are entitled to such notice or their proxies and have a right to attend or vote at such meeting. The annual generalAnnual General meeting of shareholders must be held at our registered office or at such other place within the city in which the registered office is located. Meetings other than the annual generalAnnual General meeting may be held at 82
any other place if so determined by our Board of Directors. Our Articles of Association provide that a quorum for a general meeting is the presence of at least five shareholders in person. Additionally, shareholder consent for certain items or special business is required to be obtained by a postal ballot. In order to obtain the shareholders’ consent, our Board of Directors appointappoints a scrutinizer, who is not in our employment, who, in the opinion of the Board, can conduct the postal ballot voting process in a fair and transparent manner in accordance with the provisions of Companies (Passing of the Resolution by Postal Ballot) Rules, 2001. Limitations on the Rights to Own Securities The limitations on the rights to own securities, including the rights of non-resident or foreign shareholders to hold the securities, imposed by Indian law are discussed in Item 10 of this Annual Report, under the section titled “Currency Exchange Controls” and is incorporated herein by reference. Voting Rights of Deposited Equity Shares Represented by ADSs Under Indian law, voting of the equity shares is by show of hands unless a poll is demanded by a member or members present in person or by proxy holding at least 10% of the total shares entitled to vote on the resolution or by those holding an aggregate paid up capital of at least Rs. 50,000. A proxy may not vote except on a poll.
As soon as practicable after receipt of notice of any meetings or solicitation of consents or proxies of holders of shares or other deposited securities, our Depositary shall fix a record date for determining the holders entitled to give instructions for the exercise of voting rights. The Depositary shall then mail to the holders of ADSs a notice stating (a) such information as is contained in such notice of meeting and any solicitation materials, (b) that each holder on the record date set by the Depositary therefore will be entitled to instruct the Depositary as to the exercise of the voting rights, if any, pertaining to the deposited securities represented by the ADSs evidenced by such holders of ADRs, and (c) the manner in which such instruction may be given, including instructions to give discretionary proxy to a person designated by us. On receipt of the aforesaid notice from the Depositary, our ADS holders may instruct the Depositary on how to exercise the voting rights for the shares that underlie their ADSs. For such instructions to be valid, the Depositary must receive them on or before a specified date. The Depositary will try, as far as is practical,practicable, and subject to the provisions of Indian law and our Memorandum of Association and our Articles of Association, to vote or to have its agents vote the shares or other deposited securities as per our ADS holders’ instructions. The Depositary will only vote or attempt to vote as per an ADS holder’s instructions. The Depositary will not itself exercise any voting discretion. Neither the Depositary nor its agents are responsible for any failure to carry out any voting instructions, for the manner in which any vote is cast, or for the effect of any vote. There is no guarantee that our shareholders will receive voting materials in time to instruct the Depositary to vote and it is possible that ADS holders, or persons who hold their ADSs through brokers, dealers or other third parties, will not have the opportunity to exercise a right to vote. Register of Shareholders; Record Dates; Transfer of Shares We maintain a register of shareholders. The register ofour shareholders in electronic form is maintained through the National Securities Depository Limited and the Central Depository Services (India) Ltd. For the purpose of determining the shares entitled to annual dividends, the register is closed for a specified period prior to the annual generalAnnual General meeting. The date on which this period begins is the record date. To determine which shareholders are entitled to specified shareholder rights, we may close the register of shareholders. The Companies Act requires us to give at least seven days’ prior notice to the public before such closure. We may not close the register of shareholders for more than thirty consecutive days, and in no event for more than forty-five days in a year. Trading of our equity shares, however, may continue while the register of shareholders is closed. Shares held through depositaries are transferred in the form of book entries or in electronic form in accordance with the regulations laid down by SEBI. Transfers of beneficial ownership of shares held through a depository are exempt from stamp duty. Transfers of equity shares in book-entry form require both the seller and the purchaser of the equity shares to establish accounts with depository participants appointed by depositories established under the Depositories Act, 1996. Upon delivery, the equity shares shall be registered in the name of the relevant depository on our books and this depository shall enter the name of the investor in its records as the beneficial owner. The transfer of beneficial ownership shall be effected through the records of the depository. The beneficial owner shall be entitled to all rights and benefits and subject to all liabilities in respect of his securities held by a depository. 83
The requirement to hold the equity shares in book-entry form will apply to the ADS holders when the equity shares are withdrawn from the depository facility upon surrender of the ADSs. In order to trade the equity shares in the Indian market, the withdrawing ADS holder will be required to comply with the procedures described above. 76
Following the introduction of the Depositories Act, 1996, and the repeal of Section 22A of the Securities Contracts (Regulation) Act, 1956, which enabled companies to refuse to register transfers of shares in some circumstances, the equity shares of a public company are freely transferable, subject only to the provisions of Section 111A of the Companies Act. Since we are a public company, the provisions of Section 111A will apply to us. Our Articles of Association currently contain provisions which give our directors discretion to refuse to register a transfer of shares in some circumstances. Furthermore, in accordance with the provisions of Section 111A(2) of the Companies Act, our directors may refuse to register a transfer of shares if they have sufficient cause to do so. If our directors refuse to register a transfer of shares, the shareholder wishing to transfer his, her or its shares may file a civil suit or an appeal with the Company Law Board or National Company Law Tribunal. Pursuant to Section 111A(3), if a transfer of shares contravenes any of the provisions of the Indian Securities and Exchange Board of India Act, 1992, or the regulations issued thereunder, or the Indian Sick Industrial Companies (Special Provisions) Act, 1985, or any other Indian laws, the Company Law Board or National Company Law Tribunal may, on application made by the company,Company, a depositary incorporated in India, an investor, the Securities and Exchange Board of India or other parties, direct the rectification of the register of records. The Company Law Board or National Company Law Tribunal may, in its discretion, issue an interim order suspending the voting rights attached to the relevant shares before making or completing its investigation into the alleged contravention. Notwithstanding such investigation, the rights of a shareholder to transfer the shares will not be restricted. Under the Companies Act, unless the shares of a company are held in a dematerialized form, a transfer of shares is effected by an instrument of transfer in the form prescribed by the Companies Act and the rules thereunder together with delivery of the share certificates. Our transfer agent for our equity shares is Karvy Computershare Pvt. Limited located in Bangalore, Karnataka,Hyderabad, India. Company Acquisition of Equity Shares Under the Companies Act, approvalthe Company can reduce its Company’s share capital subject to fulfillment of at least 75% of a company’s shareholders voting on the matter and approval of the High Court or National Company Law Tribunal of the state in which the registered office of the company is situated is required to reduce a company’s share capital. A company may, under some circumstances, acquire its own equity shares without seeking the approval of the High Court or National Company Law Tribunal. However, a company would have to extinguish the shares it has so acquired within the prescribed time period.conditions. A company is not permitted to acquire its own shares for treasury operations. An acquisition by a company of its own shares that does not rely on an approval of the High Court/National Company Law Tribunal must comply with prescribed rules, regulations and conditions of the Companies Act. In addition, public companies which are listed on a recognized stock exchange in India must comply with the provisions of the Securities and Exchange Board of India (Buy-back of Securities) Regulations, 1998, or Buy-back Regulations. Since we are a public company listed on two recognized stock exchanges in India, we would have to comply with the relevant provisions of the Companies Act and the provisions of the Buy-back Regulations.
Disclosure of Ownership Interest Section 187C of the Indian Companies Act requires beneficial owners of shares of Indian companies who are not holders of record to declare to the company details of the beneficial owner. Any person who fails to make the required declaration within 30 days may be liable for a fine of up to Rs. 1,000 for each day the declaration is not made. Any lien, promissory note or other collateral agreement created, executed or entered into with respect to any share by the registered owner thereof, or any hypothecation by the registered owner of any share, pursuant to which a declaration is required to be made under Section 187C, shall not be enforceable by the beneficial owner or any person claiming through the beneficial owner if such declaration is not made. Failure to comply with Section 187C will not affect the obligation of the company to register a transfer of shares or to pay any dividends to the registered holder of any shares. While it is unclear under Indian law whether Section 187C applies to holders of ADSs of the company, investors who exchange ADSs for the underlying Equity Shares of the Company will be subject to the restrictions of Section 187C. Additionally, holders of ADSs may be required to comply with such notification and disclosure obligations pursuant to the provisions of the Depositary Agreement to be entered into by such holders, the company and a depositary. Provisions on Changes in Capital Our authorized capital can be altered by an ordinary resolution of the shareholders in a General Meeting. The additional issue of shares is subject to the preemptive rights of the shareholders and provisions governing the issue of 84
additional shares are discussed in Item 10 of this Annual Report. In addition, a company may increase its share capital, consolidate its share capital into shares of larger face value than its existing shares or sub-divide its shares by reducing their par value, subject to an ordinary resolution of the shareholders in a General Meeting. Takeover Code and Listing Agreements Under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, or Takeover Code, upon the acquisition of more than 5%,10%,14%,54%, 10%, 14%, 54% or 74% of the outstanding shares or voting rights of a publicly-listed Indian company, a purchaser is required to notify the company and the company and the purchaser is required to notify all the stock exchanges on which the shares of such company are listed. An ADS holder would be subject to these notification requirements. Upon the acquisition of 15% or more of such shares or voting rights, or a change in control of the company, the purchaser is required to make an open offer to the other shareholders, offering to purchase 20% of all the outstanding shares of the company or such number of shares that will result in the public shareholding not falling below the minimum public holding requirement, whichever is lower. SEBI has recently amended the Takeover Code to relax any of the provisions of the Takeover Code if the Directors of the Company have been removed by the Government or statutory authority and new Directors appointed by the Government or statutory authority provided the new Directors have devised a plan providing for transparent, open and competitive process of bidding for continued operations of the Company and for smooth takeover by an acquirer, Since we are a listed company in India, the provisions of the Takeover Code will apply to us. If an acquirer holding more than 15% but less than 55% of shares acquires 5% or more shares during a fiscal year, the acquirer is required to make a public announcement offering to purchase from the other shareholders at least 20% of all the outstanding shares of the company at a minimum offer price determined pursuant to the Takeover Code. Any further acquisition of outstanding shares or voting rights of a publicly listed company by an acquirer who holds more than 55% but less than 75% of shares or voting rights also requires the making of an open offer to acquire such number of shares as would not result in the public shareholding being reduced to below the minimum specified in the listing agreement. As per the amendment effective May 26, 2006, if a Company has made a public issue offering 10% capital to public in India or has obtained relaxation from SEBI, the above limits of 75% shall be read as 90% in such cases. Where the public shareholding in a target company may be reduced to a level below the limit specified in the listing agreement the acquirer may acquire such shares or voting rights only in accordance with guidelines or regulations regarding delisting of securities specified by the Securities and Exchange Board of India. In addition, no acquirer may acquire more than 55% of the outstanding shares or voting rights of a publicly listed company through market purchases or preferential allotments. Any such acquisition beyond 55% is required to be divested in a manner specified in the Takeover Code. Since we are a listed company in India, the provisions of the Takeover Code will apply to us and to any person acquiring our equity shares or voting rights in our company. However, the Takeover Code provides for a specific exemption from this provision to an ADS holder and states that this provision will apply to an ADS holder only once he or she converts the ADSs into the underlying equity shares. An acquirer is required to disclose the aggregate of the pre and post acquisition of shareholding and voting rights of the acquirer to the target company when such acquisition aggregates to 5%, 10%,14%,54% and 74% of the voting rights. The creeping acquisition limits provided under SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, have been changed to 5% with effect from October 1, 2002 in any fiscal year.
Although the provisions of the listing agreements entered into between us and the Indian Stock Exchanges on which our equity shares are listed will not apply to equity shares represented by ADSs, holders of ADSs may be required to comply with such notification and disclosure obligations pursuant to the provisions of the Depository Agreement to be entered into by such holders, our company and a depositary.
The Takeover Code permits conditional offers as well as the acquisition and subsequent delisting of all shares of a company, and provides specific guidelines for the gradual acquisition of shares or voting rights. Specific obligations of the acquirer and the Board of Directors of a target company in the offer process have also been set out. Acquirers making a public offer are also required to deposit into an escrow account a percentage of the total consideration, which amount will be forfeited if the acquire does not fulfill his obligations. In addition, the Takeover Code introduces the “chain principle” by which the acquisition of a holding company will obligate the acquirer to make a public offer to the shareholders of each listed subsidiary companies.
The general requirements to make such a public announcement do not, however, apply entirely to bail-out takeovers when a promoter is taking over a financial weak company, but not to a “sick industrial company” pursuant to a rehabilitation scheme approved by a public financial institution or a scheduled bank. A “financial weak company” is a company which has at the end of the previous financial year accumulated losses, which have resulted in the erosion of more than 50% but less than 100% of the total sum of its paid up capital and free reserves at the end of the previous financial year. A “sick industrial company” is a company registered for more than five years which has at the end of any financial year accumulated losses equal to or exceeding its entire net worth.
The Takeover Code does not apply to acquisitions involving the acquisition of shares, as follows;
by allotment in a public/rights issue (subject to compliance with certain terms and conditions);
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| • | | pursuant to an underwriting agreement; | | | • | | by registered stockbrokers in the ordinary course of business on behalf of customers; | | | • | | in unlisted companies provided it does not result in an indirect acquisition of a listed entity; | | | • | | pursuant to a scheme of reconstruction or amalgamation; | | | • | | pursuant to a scheme under Section 18 of the Sick Industrial Companies (Special Provisions) Act, 1985; or; | | | • | | in terms of the guidelines or regulations regarding delisting of securities specified or framed by SEBI. |
The Takeover Code does not apply to acquisitions in the ordinary course of business by public financial institutions either on their own account or as a pledge. The tender offer requirements under the Takeover Code do not apply to the acquisition of ADSs so long as such ADSs are not converted into equity shares. However, the acquisition of ADSs (irrespective of conversion into underlying equity shares) is subject to disclosure and reporting requirements under the Takeover Code.
A listed company can be delisted under the provisions of the SEBI (Delisting of Securities) Guidelines, 2003, which govern voluntary and compulsory delisting of shares of Indian companies from the stock exchanges. Amendment to the SEBI (Delisting of Securities) Guidelines, 2003
In order to simplify the existing framework with respect to Compulsory Delisting and make it possible for stock exchanges to delist the Companies which are noncompliant with the provisions of Listing Agreement, it has been decided to amend the SEBI (Delisting Of Securities) Guidelines, 2003. The amendment seeks to ensure adequate and wide public notice of the fact of delisting and disclosure of the fair value through newspapers and notice boards/trading systems of the stock exchange upon delisting of a security. The amendment also seeks to determine the fair value of securities by persons appointed by the stock exchange out of a panel of experts, which shall also be selected by the stock exchange.
Minimum Level of public shareholding
In order to ensure availability of floating stock on a continuous basis and to bring about greater transparency in respect of disclosure of shareholding pattern of companies, Securities and Exchange Board of India (SEBI) vide its circular dated April 13, 2006, (as amended), has decided to bring in the following policy changes to the continuous listing requirements:
All listed companies , other than those mentioned hereunder, will be required to ensure minimum level of public shareholding at 25% of the total number of issued shares of a class or kind for the purpose of continuous listing:
| • | | Companies which, at the time of initial listing, had offered less than 25% but not less than 10% of the total number of issued shares of a class or kind, in terms of Rule 19(2)(b) of Securities Contract (Regulation) Rules 1957 (SCRR) or companies desiring to list their shares by making an Initial Public Offering (IPO) of at least 10% in terms of Rule 19(2)(b) of SCRR. | | | • | | Companies which have, irrespective of the percentage of their shares with public at the time of initial listing, reached a size of 20 million or more in terms of number of listed shares and Rs. 10 billion or more in terms of market capitalization. |
The companies falling in the above categories will be required to maintain the minimum level of public shareholding at 10% of the total number of issued shares of a class or kind for the purpose of continuous listing. The aforesaid requirement of maintaining minimum level of public shareholding on a continuous basis will not be applicable to government companies (as defined under Section 617 of the Companies Act, 1956), infrastructure companies (as defined under clause 1.2.1(xv) of the SEBI (DIP) Guidelines, 2000) and companies referred to the Board for Industrial and Financial Reconstruction.
The “public shareholding” for the purpose of continuous listing, will continue to comprise of shares held by entities other than promoters and promoter group. It shall not include the shares held by custodians against which depository receipts are issued overseas. The terms “Promoter” and “Promoter group” shall have the same meaning as is assigned to them under the SEBI (Disclosure & Investor Protection) Guidelines, 2000.
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Increasing the public shareholding to the minimum level
As a result of the above circular there may be two categories of companies, viz., those which are non-compliant and those which may subsequently become non-compliant on account of factors such as compliance with directions of a court, tribunal, regulatory or statutory authority, compliance with SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, re-organization of capital by way of a scheme of arrangement, etc.
SEBI decided to provide a transparent mechanism to such noncompliant companies for enabling them to graduate to the level of compliant companies. The mechanism for increasing the public shareholding to the minimum level will inter alia provide for various modes of issuing shares in domestic market and reasonable time period, as approved by Specified Stock Exchange. This disclosure requirement applies to Wipro and we are complaint with this regulation.
Material Contracts We are a party to various employment arrangements and indemnification agreements with our directors and executive officers. See “Terms of Employment Arrangements and Indemnification Agreements” under Item 6 of this Annual Report for a further description of the employment arrangements and indemnification agreements that we have entered into with our directors and executive officers. Currency Exchange Controls Foreign Investments in India are governed by the provisions of Section 6 of the Foreign Exchange Management Act (FEMA) 1999 and are subject to the Regulations issued by the Reserve Bank of India under FEMA 1999. The Regulations have been published pursuantfrom time to Notification No. FEMA 20/2000-RB dated May 3, 2000.time. The Foreign Direct Investment Scheme under the Reserve Bank’s Automatic Route enables Indian Companies (other than those specifically excluded in the scheme) to issue shares to persons resident outside India without prior permission from the RBI, subject to certain conditions. General permission has been granted for the transfer of shares and convertible debentures by a person resident outside India as follows: (i) for transfers of shares or convertible debentures held by a person resident outside India other than NRI, to any person resident outside India and (ii) NRIs are permitted to transfer shares or convertible debentures of Indian company to other NRIs. A person resident outside India may transfer securities of an Indian company to General permission has also been given for transfers between a person resident in India by way of gift. However, where such transfer is not by way of gift, prior approval of the RBI is necessary only if certain prescribed conditions are not met. . For transfer of existing shares or convertible debentures of an Indian company by a person resident in India toand a person resident outside India by way of sale, the transferor shall make an application to Authorized Dealer for permission subject to certain conditions being met.stipulated conditions.
In cases where such conditions are not met, approval of the Central Government and the Reserve Bank of India may be also required. Banks in India may now allow remittance from India by a person resident in India up to USD 200,000, per financial year, for any permitted current or capital account transaction or a combination of both. General Shares of Indian companies represented by ADSs may be approved for issuance to foreign investors by the Government of India under the Issue of Foreign Currency Convertible Bonds and Equity Shares (through Depositary Receipt Mechanism) Scheme, 1993, or the 1993 Regulation, as modified from time to time, promulgated by the Government of India. The 1993 Regulation is distinct from other policies or facilities, as described below, relating to investments in Indian companies by foreign investors. The issuance of ADSs pursuant to the 1993 Regulation also affords to holders of the ADSs the benefits of Section 115AC of the Indian Income Tax Act, 1961 for purposes of the application of Indian tax law. The Reserve Bank of India, or RBI, has issued a notification directing that Indian companies may utilize up-to 100 percent of proceeds realized from the sale of ADSs for overseas investments. In February 2002, the RBI issued a circular stating that the terms of Regulation 4A of the Reserve Bank of India Notification No. FEMA 20/2000-RB dated May 3, 2000, as amended by Notification No. FEMA 41/2001-RB dated March 2, 2001, allow aA registered broker is permitted to purchase shares of an Indian company on behalf of a person resident outside of India for the purpose of converting those shares into ADSs/GDSs. However, such conversion is subject to compliance with the provisions of the Issue of Foreign Currency Convertible Bonds and Ordinary Shares (Through DepositoryDepositary Receipt Mechanism) Scheme 1993 and the periodic guidelines issued by the Central Government. This would mean that ADSs converted into Indian shares may be converted back into ADSs, subject to the limits of sectoral caps.
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The Operative Guidelines for the limited two-way fungibility under the “Issue of Foreign Currency Convertible Bonds and Ordinary Shares” (Through DepositoryDepositary Receipt Mechanism) Scheme 1993 has also been approved by the Government of India. These guidelines provide that a re-issuance of ADSs/GDSs is permitted to the extent of ADSs/GDSs, have been redeemed for underlying shares and sold in the domestic market. The re-issuance must be within the specified limits. The conditions to be satisfied in this regard are: (i) the shares are purchased on a recognized stock exchange; (ii) the Indian company has issued ADS/GDS, (iii) the shares are purchased with the permission of the custodian of the ADSs/GDSs of the Indian company and are deposited with the custodian; and (iv) the number of shares so purchased shall not exceed the number of ADSs/GDSs converted into underlying shares. The procedure forshares pursuant to conversion of ADS into equity shares into ADSs/GDSs is as follows: (i) on request byunder the overseasDepositary Agreement and (v) investor for the acquisition of shares for re-issuance of ADSs/GDSs, the SEBI registered broker will purchase shares from a stock exchange after verifyingand other intermediaries comply with the custodian asprovisions of 1993 Scheme and related guidelines issued from time to the availability of “Head Room” (i.e., the number of ADSs/GDSs originally issued minus number of ADSs/GDSs outstanding further adjusted for ADSs/GDSs redeemed into underlying shares and registered in the name of the non-resident investor(s)); (ii) an Indian broker purchases the shares in the name of the overseas depository; (iii) after the purchase, the Indian broker places the domestic shares with the custodian; (iv) the custodian advises the overseas depository on the custody of domestic shares and to issue corresponding ADSs/GDSs to the investor; and (v) the overseas depository issues ADSs/GDSs to the investor.time.
Transfer of ADSs and Surrender of ADSs A person resident outside India may transfer the ADSs held in Indian companies to another person resident outside India without any permission. A person resident in India is not permitted to hold ADSs of an Indian company, except in connection with the exercise of stock options. An ADS holder is permitted to surrender the ADSs held by him in an Indian company and to receive the underlying equity shares under the terms of the Deposit Agreement. Under Indian regulations, the re-deposit of these equity shares with the depositary to ADSs may not be permitted. 78
Sponsored ADS The amendment to the FEMA regulations permit an issuer in India to sponsor the issue of ADSs through an overseas depositary against underlying equity shares accepted from holders of its equity shares in India for offering outside of India. The sponsored issue of ADSs was possible only if the following conditions are satisfied: There have been amendments to the Issue of Foreign Currency Convertible Bonds and Ordinary Shares (through DepositoryDepositary Receipt Mechanism), Scheme 1993 and primarily the amendments were on the Eligibility of Issuer, Eligibility of Subscriber, Pricing of the offerings, and Voting Rights.Rights, | • | | the price of the offering is determined by the managing underwriters of the offering; | | | • | | the ADS offering is approved by the FIPB; | | | • | | the ADS offering is approved by a special resolution of the shareholders of the issuer in a general meeting; | | | • | | the facility is made available to all the equity shareholders of the issuer; | | | • | | the proceeds of the offering are repatriated into India within one month of the closing of the offering; | | | • | | the sales of the existing equity shares are made in compliance with the Foreign Direct Investment Policy (as described above) in India; | | | • | | the number of shares offered by selling shareholders are subject to limits in proportion to the existing holdings of the selling shareholders when the offer is oversubscribed; and | | | • | | the offering expenses do not exceed 7% of the offering proceeds and are paid by shareholders on a pro-rata basis. |
the ADS offering is approved by the FIPB; the ADS offering is approved by a special resolution of the shareholders of the issuer in a general meeting; the facility is made available to all the equity shareholders of the issuer; the proceeds of the offering are repatriated into India within one month of the closing of the offering; the sales of the existing equity shares are made in compliance with the Foreign Direct Investment Policy in India; the number of shares offered by selling shareholders are subject to limits in proportion to the existing holdings of the selling shareholders when the offer is oversubscribed; and the offering expenses do not exceed 7% of the offering proceeds and are paid by shareholders on a pro-rata basis. The issuer is also required to furnish a report to the RBI specifying the details of the offering, including the amount raised through the offering, the number of ADSs issued, the underlying shares offered and the percentage of equity in the issuer represented by the ADSs. Conditions for issuance of ADS/GDS outside India by Indian Companies Eligibility of issuer: An Indian Company, which is not eligible to raise funds from the Indian Capital Market including a company which has been restrained from accessing the securities market by the Securities and Exchange Board of India (SEBI) will not be eligible to issue ADS/GDS apart from Foreign Currency Convertible Bonds. Eligibility of subscriber: Erstwhile Overseas Corporate Bodies (OCBs) who are not eligible to invest in India through the portfolio route and entities prohibited to buy, sell or deal in securities by SEBI will not be eligible to subscribe to (i) Foreign Currency Convertible Bonds and (ii) ADS/GDS 88
Pricing: The pricing of ADS/GDS and Foreign Currency Convertible Bonds should be made at a price not less than the higher of the following two averages: (i) | (i) | | The average of the weekly high and low of the closing prices of the related shares quoted on the stock exchange in India during the six months preceding the relevant date; or |
(ii) | (ii) | | The average of the weekly high and low of the closing prices of the related shares quoted on a stock exchange in India during the two weeks preceding the relevant date. |
The “relevant date” means the date thirty days prior to the date on which the meeting of the general body of shareholders is held, in terms of section 81 (IA) of the Companies Act, 1956, to consider the proposed issue. Foreign Direct Investment In July 1991, the Government of India raised the limit on foreign equity holdings in Indian companies from 40% to 51% in certain high priority industries. The RBI gives automatic approval for such foreign equity holdings. The Foreign Investment Promotion Board, or FIPB, currently under the Ministry of Finance, was thereafter formed to facilitate companies to make long-term investments in India. Foreign equity participation in excess of 51% in such high priority industries or in any other industries up to Rs. 6 billion is currently allowed only with the approval of the FIPB. Proposals in excess of Rs. 6 billion require the approval of the Cabinet Committee on Foreign Investment. Proposals involving the public sector and other sensitive areas require the approval of Cabinet Committee on Economic Affairs. These facilities are designed for direct foreign investments by persons who are not residents of India who are not NRIs, or FIIs (as each term is defined below), or foreign direct investors. The Department of Industrial Policy and Promotion, a part of the Ministry of Industry, issued detailed guidelines in January 1998 for consideration of foreign direct investment proposals by the FIPB, or the Guidelines. Under the Guidelines, sector specific guidelines for foreign direct investment and the levels of permitted equity participation have been established. In March 2000, the RBI issued a notification that foreign ownership of up to 49%, 50%, 51%, 74% or 100%, depending on the category of industry, would be allowed without prior permission of the RBI. The issues to be considered by the FIPB, and the FIPB’s areas of priority in granting approvals are also set out in the Guidelines. The basic objective of the Guidelines is to improve the transparency and objectivity of the FIPB’s consideration of proposals. However, because the Guidelines are administrative guidelines and have not been codified as either law or regulations, they are not legally binding with respect to any recommendation made by the FIPB or with respect to any decision taken by the Government of India in cases involving foreign direct investment. In May 1994, the Government of India announced that purchases by foreign investors of ADSs as evidenced by ADRs and foreign currency convertible bonds of Indian companies will be treated as direct foreign investment in the equity issued by Indian companies for such offerings. Therefore, offerings that involve the issuance of equity that results in Foreign Direct Investors holding more than the stipulated percentage of direct foreign investments (which depends on the category of industry) would require approval from the FIPB. In addition, in connection with offerings of any such securities to foreign investors, approval of the FIPB is required for Indian companies whether or not the stipulated percentage limit would be reached, if the proceeds therefrom are to be used for investment in non-high priority industries.
In July 1998, the Government of India issued guidelines to the effect that foreign investment in preferred shares will be considered as part of the share capital of a company and will be processed through the automatic RBI route or will require the approval of the FIPB, as the case may be. Investments in preferred shares are included as foreign direct investment for the purposes of sectoral caps on foreign equity, if such preferred shares carry a conversion option. If the preferred shares are structured without a conversion option, they would fall outside the foreign direct investment limit but would be treated as debt and would be subject to special Government of India guidelines and approvals.
Over a period of time particularly since 1991, the Government of India has relaxed the restrictions on foreign investment. Subject to certain conditions, under current regulations, foreign direct investment inand most industry sectors does not require prior approval of the FIPB or RBI, if the percentage of equity holding by all foreign investors doesdo not exceed specified industry specific thresholds. Purchases by foreign investors of ADSs are treated as direct foreign investment in the equity issued by Indian companies for such offerings. Foreign investment up to 100% of company’s share capital is currently permitted in the IT industry. Subsequent Transfers
Restrictions for subsequent transfers Government of sharesIndia has recently clarified about the calculation of Indian companies between residents and non-residents were relaxed significantly as of October 2004foreign investment in sectors other than the financial services sector. As a result, for a transfer between a resident and a non-resident of securities of an Indian in the IT sector, no prior approval of either the RBICompany through direct or indirect routes for such investment.
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the Government of India is required, as long as certain conditions are met. These conditions include compliance, as applicable, with pricing guidelines and the ownership restrictions based on the nature of the foreign investor. Transfers of shares from residents to non-residents which trigger the provision of the Takeover Code require prior approval of the Government of India or the RBI. If a sale or purchase is conducted on a stock exchange at prevailing market prices, the pricing guidelines will be deemed satisfied. For off-market, negotiated transactions, the guidelines require a transaction price based on the prevailing market price.
Transfers between two non-residents are not subject to RBI approvals or compliance with pricing guidelines. However, for industries other than the IT sector, approval of the Government of India would be required if the transferee of shares have an existing venture in India in the same field, unless the existing venture is sick or defunct or the investment of the parties in the existing venture is less than 3%.
Investment by Non-Resident Indians A variety of facilities for making investments in shares of Indian companies is available to individuals of Indian nationality or origin residing outside India, or NRIs. These facilities permit NRIs to make portfolio investments in shares and other securities of Indian companies on a basis that is not generally available to other foreign investors. A Non-Resident Indian (NRI) or a Person of Indian Origin (PIO) resident outside India may invest by way of contribution to the capital of a firm or a proprietary concern in India on a non-repatriation basis. These facilities are different and distinct from investments by Foreign Direct Investors described above. Indian companies are now allowed, without prior Government of India approval, to invest in joint ventures or wholly-owned subsidiaries outside India. The amount invested may not exceed twofour times the net worth of the company or its equivalent in a financial year. RBI no longer recognizes Overseas Corporate Bodies, or OCBs as an eligible class of investment vehicle under various routes and schemes under the foreign exchange regulations. NRIs are permitted to make investments through a stock exchange, or Portfolio Investments on favorable tax and other terms under India’s Portfolio Investment Scheme. Under the scheme, an NRI can purchase up to 5% of the paid up value of the shares issued by a company, subject to the condition that the aggregate paid up value of shares purchased by all NRIs does not exceed 10% of the paid up capital of the company. The 10% ceiling may be exceeded if a special resolution is passed in a general meeting of the shareholders of a company, subject to the overall ceiling of Foreign Direct Investment limit. In terms of Schedule 1 of the Notification No. FEMA 20/2000-RB dated May 3, 2000, a person resident outside India can purchase equity shares / compulsorily convertible preference shares and compulsorily convertible debentures (equity instruments) issued by an Indian company under the FDI policy and the Indian company is allowed to receive the amount of consideration in advance towards issue of such equity instruments, subject to the terms and conditions laid down therein. Further, general permission is available to Indian companies to refund the amounts received towards purchase of shares under Regulation 5 (1) of Notification No. FEMA 20/2000-RB dated May 3, 2000, as amended from time to time. Reserve Bank of India vide circular No. 20 dated December 14, 2007 decided that with effect from November 29, 2007, the equity instruments should be issued within 180 days of the receipt of the inward remittance. In case, the equity instruments are not issued within 180 days from the date of receipt of the inward remittance or date of debit to the NRE/FCNR (B) account, the amount of consideration so received should be refunded immediately to the non-resident investor by outward remittance through normal banking channels or by credit to the NRE/FCNR (B) account, as the case may be or approach Reserve Bank of India with an action plan for allotment of equity shares. It is also clarified that the advances against equity instruments may be received only where the FDI is allowed under the automatic route. Investment Byby Foreign Institutional Investors In September 1992, the Government of India issued guidelines which enable foreign institutional investors or FIIs, including institutions such as pension funds, investment trusts, asset management companies, nominee companies and incorporated/institutional portfolio managers, to invest in all the securities traded on the primary and secondary markets in India. Under the guidelines, FIIs are required to obtain an initial registration from the SEBI and a general permission from the RBI to engage in transactions regulated under FEMA. FIIs must also comply with the provisions of the SEBI Foreign Institutional Investors Regulations, 1995. When it receives the initial registration, the FII also obtains general permission from the RBI to engage in transactions regulated under FEMA. Together, the initial registration and the RBI’s general permission enable the registered FII to buy (subject to the ownership restrictions discussed below) and sell freely tradable securities issued by Indian companies; realize capital gains on investments made through the initial amount invested in India; subscribe or renounce rights offerings for shares; appoint a domestic custodian for custody of investments held; and repatriate the capital, capital gains, dividends, income received by way of interest and any other compensation received towards the sale or renunciation of rights offerings of shares. As of December 2003, the RBI vide A.P. circulars No. 53 and 54 have permitted such registered FIIs or sub- accounts of FIIs as well as unincorporated entities abroad to buy or sell equity shares and debentures of Indian companies (excluding those in the print media sector), units of domestic mutual funds, dated Government Securities and Treasury Bills through stock exchanges in India at the ruling market price, invest or trade in exchange traded derivative contracts, and also to buy or sell shares and debentures etc. of listed and unlisted companies otherwise than on stock exchanges at a price approved by SEBI/ RBI as per the terms and conditions prescribed. Ownership Restrictions SEBI and RBI regulations restrict investments in Indian companies by FIIs and NRIs or collectively, Foreign Direct Investors. Under current SEBI regulations applicable to Wipro Limited, subject to the requisite approvals of the shareholders in a General Meeting, Foreign Direct Investors in aggregate may hold no more than 49% of a company’s equity shares, excluding the equity shares underlying the ADSs. However, under Vide Notification No. FEMA.45/2001-RB dated September 20, 2001 under Foreign Exchange Management (Transfer or Issue of Security by a person resident outside India) Regulations, 2001, theThe limit of FII investment in a company has been linked to sectoral caps/statutory ceiling as applicable to the concerned industry subject to obtaining the approval of the shareholders by a special resolution. NRIs in aggregate may hold no more than 24% of a company’s equity shares, (subject to obtaining 90
the approval of the shareholders by a special resolution) excluding the equity shares underlying the ADSs. Furthermore, SEBI regulations provide that no single FII may hold more than 10% of a company’s total equity shares and no single NRI may hold more than 5% of a company’s total equity shares. There is uncertainty under Indian law about the tax regime applicable to FIIs which hold and trade ADSs. FIIs are urged to consult with their Indian legal and tax advisers about the relationship between the FII guidelines and the ADSs and any equity shares withdrawn upon surrender of ADSs. More detailed provisions relating to FII investment have been introduced by the SEBI and RBI with the introduction of the SEBI Foreign Institutional Investors Regulations, 1995 and the RBI circulars in this regard. These provisions relate to the registration of FIIs, their general obligations and responsibilities, and certain investment conditions and restrictions. The SEBI registered FII shall restrict allocation of its total investment between equities and debt in the Indian capital market in the ratio of 70:30. The FII may form a 100% debt fund and get such fund registered with SEBI.
Registered FIIs may trade in all exchange traded derivative contracts on the stock exchanges in India subject to the position limits as prescribed by SEBI from time to time. The SEBI has also permitted private placements of shares by listed companies with FIIs, subject to the prior approval of the RBI under FEMA. Such private placement must be made at the average of the weekly highs and lows of the closing price over the preceding six months or the preceding two weeks, whichever is higher.
Open market purchases of securities of Indian companies in India by Foreign Direct Investors or investments by NRIs and FIIs above the ownership levels set forth above require Government of India approval on a case-by-case basis.
The Reserve Bank of India in circular No. 44 dated December 8, 2003 has imposed certain restrictions on OCBs in making any new investments as well as on the sale or transfer of shares held by them.
Government of India Approvals
Approval of the Foreign Investment Promotion Board, or FIPB, for foreign direct investment by ADS holders is required. Specific approval of the Reserve Bank of India, or RBI, will have to be obtained for:
| • | | any renunciation of rights in the underlying equity shares in favor of a person resident in India; and | | | • | | the sale of the underlying equity shares by a person resident outside India to a person resident in India and vice versa if the prescribed conditions for such sale/purchase are not met. |
In such cases, the foreign investor would have to apply to the Reserve Bank of India by submitting Form TS1, which requires information as to the transferor, the transferee, the shareholding structure of the company whose shares are to be sold, the proposed price and other information. The Reserve Bank of India is not required to respond to a Form TS1 application within any specific time period and may grant or deny the application at its discretion. Exceptions to this requirement of Reserve Bank of India approval include sales made in the stock market through a registered Indian broker, through a recognized stock exchange in India at the prevailing market rates, or if the shares are offered in accordance with the terms of an offer under the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. The proceeds from any sale of the underlying equity shares by a person resident outside India to a person resident in India may be transferred outside India after receipt of Reserve Bank of India approval (if required), and the payment of applicable taxes and stamp duties.
No approval is required for transfers of ADSs outside India between two non-residents. Any person resident outside India who desires to sell equity shares received upon surrender of ADSs or otherwise transfer such equity shares within India should seek the advice of Indian counsel as to the requirements applicable at that time.
Overseas investment — Liberalization Regulation 6 of the Notification No.FEMA.120/RB-2004 dated July 7, 2004 to read with Circular No. 42 dated May 12, 2005 and monetary policy pronouncement of April,dated Sep 26, 2007 of Reserve Bank of India in terms of which an Indian entity iswas permitted to invest up to 300400 per cent of their net worth in overseas Joint Ventures and/or Wholly Owned Subsidiaries (JV/WOS) in any bonafide business activity under automatic route. Accordingly, under the automatic route for overseas investment, eligible Indian companies are permitted to invest in overseas in JV/WOS up to 300 per cent of their net worth. It was further clarified by the Reserve Bank of India that the ceiling is not applicable to the investments made out of balances held in EEFC accounts and out of the proceeds of ADR / GDR issue, as hitherto. This enables Authorized Dealers to allow remittances under automatic route up to 400 per cent of the net worth as on the date of the last audited balance sheet of the investing companies, after considering the proposals received from such companies. 9180
| | | to allow remittances under automatic route up to 300 per cent of the net worth as on the date of the last audited balance sheet of the investing companies, after considering the proposals received in form ODA. | | | • | | With a view to grant more operational flexibility to the corporates in India it has been decided to further liberalize the various Regulations as under: | | | • | | Presently, only promoter corporates are permitted to offer guarantees on behalf of their Wholly Owned Subsidiaries (WOSs) or Joint Ventures (JVs), under the Automatic Route and issue of personal, collateral and third party guarantees requires prior approval of Reserve Bank (RBI) and is considered by them, on a case by case basis. | | | • | | With a view to simplify the procedure, RBI has decided to enlarge the scope of guarantees covered under the Automatic Route. Accordingly, Indian entities may offer any forms of guarantee — corporate or personal, primary or collateral, guarantee by the promoter company, guarantee by group company, sister concern or associate company in India, provided that : |
| o | | All ‘financial commitments’ including all forms of guarantees are within the overall prescribed ceiling for overseas investment of the Indian party, for example, currently within 300% of the net worth of the investing company (Indian party), | | | o | | No guarantee is open ended, for example, the amount of the guarantee should be specified upfront; and | | | o | | As in the case of corporate guarantees, all guarantees are required to be reported to RBI, in Form ODR. |
General Permission for disinvestment
Currently, in terms of Regulation 16 ofNotification No.FEMA 120/RB-2004 dated July 7, 2004, all disinvestments that involve a ‘write off’ i.e. where the amount repatriated on disinvestment is less than the amount of the original investment, can be made by the Company.
| • | | in cases where the JV / WOS is listed in the overseas stock exchange. | | | • | | in cases where the Indian promoter company is listed on a stock exchange in India and has a net worth of not less than Rs. 1,000 million; or | | | • | | where the Indian promoter is an unlisted company and the investment in overseas venture does not exceed USD 10 million. |
Taxation The following summary is based on the law and practice of the Indian Income-tax Act, 1961, or Income-Tax Act, including the special tax regime contained in Sections 115AC and 115ACA of the Income-tax Act read with the Issue of Foreign Currency Convertible Bonds and Ordinary Shares (through Depositary Receipt Mechanism) Scheme, 1993, as amended on, January 19, 2000, or the Issue of Foreign Currency Convertible bonds and Ordinary Shares Scheme. The Income-tax Act is amended every year by the Finance Act of the relevant year. Some or all of the tax consequences of Sections 115AC and 115ACA may be amended or changed by future amendments to the Income-tax Act. We believe this information is materially complete as of the date hereof, however, this summary is not intended to constitute a complete analysis of the individual tax consequences to non-resident holders or employees under Indian law for the acquisition, ownership and sale of ADSs and equity shares. Residence. For purposes of the Income-tax Act, an individual is considered to be a resident of India during any fiscal year if he or she is in India in that year for: | • | | a period or periods amounting to 182 days or more; or | | | • | | 60 days or more and, within the four preceding years has been in India for a period or periods amounting to 365 days or more. |
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60 days or more and, within the four preceding years has been in India for a period or periods amounting to 365 days or more. The period of 60 days referred to above shall be read as 182 days (i) in case of a citizen of India who leaves India in a fiscal year for the purposes of employment outside of India or (ii) in case of a citizen of India or a person of Indian origin living abroad who visits India and within the four preceding years has been in India for a period or periods amounting to 365 days or more. A company is a resident of India if it is incorporated in India or the control and the management of its affairs is situated wholly in India. Companies that are not residents of India would be treated as non-residents for purposes of the Income-tax Act. Taxation of Distributions.As per Section 10(34) of the Income Tax Act, dividends paid by Indian Companies on or after April 1, 2003 to itstheir shareholders (whether resident in India or not) are not subject to tax. However, the Company paying the dividend is currently subject to a dividend distribution tax of 12.50%15% on the total amount it distributes, declares or pays as a dividend, in addition to the normal corporate tax. Additionally, the Finance Act, 2006 levies a surcharge of 10% on such tax and an additional surcharge namely “education cess” of 2%3% on such tax and surcharge, after which the dividend distribution tax payable would be 14.03%17%. Any distributions of additional ADSs or equity shares to resident or non- resident holders will not be subject to Indian tax. Taxation of Capital Gains. The following is a brief summary of capital gains taxation of non-resident holders and resident employees in respect of the sale of ADSs and equity shares received upon redemption of ADSs. The relevant provisions are contained mainly in sections 45, 47(vii)(a), 115AC and 115ACA, of the Income Tax Act, in conjunction with the Issue of Foreign Currency Convertible Bonds and Ordinary Shares Scheme. Gains realized upon the sale of ADSs orand shares that have been held for a period of more than thirty-six months and twelve months, respectively, are considered long termlong-term capital gains. Gains realized upon the sale of ADSs orand shares that have been held for a period of thirty six months or less and twelve months or less, respectively, are considered short term capital gains. Capital gains are taxed as follows: Gains from a sale of ADSs outside India, by a non-resident to another non-resident are not taxable in India. Long-term capital gains realized by a resident employee from the transfer of the ADSs will be subject to tax at the rate of 10%. Short-term capital gains on such a transfer will be taxed at graduated rates with a maximum of 30%. Long-term capital gains realized by non-resident upon the sale of equity shares obtained through the redemption of ADSs, settlement of such sale being made off a recognized stock exchange, are subject to tax at a rate of 10%. Short-term capital gains on such transfer will be taxed at graduated rates with a maximum of 30%. 81
| • | | Gains from a sale of ADSs outside India, by a non-resident to another non-resident are not taxable in India. | | | • | | Long term capital gains realized by a resident employee from the transfer of the ADSs will be subject to tax at the rate of 10%. Short-term capital gains on such a transfer will be taxed at graduated rates with a maximum of 30%. | | | • | | Long-term capital gains realized by non-resident upon the sale of equity shares obtained through the redemption of ADSs, settlement of such sale being made off a recognized stock exchange, are subject to tax at a rate of 10%. Short-term capital gains on such transfer will be taxed at graduated rates with a maximum of 30%. | | | • | | Long-term capital gains realized by a non-resident upon the sale of equity shares obtained through the redemption of ADSs, settlement of such sale being made on a recognized stock exchange, is exempt from tax and the Short-term capital gains on such sale will be taxed at 10%. An additional tax called “Securities Transaction Tax”, or “STT” (described in detail below will be levied at the time of settlement. |
Long-term capital gains realized by a non-resident upon the sale of equity shares obtained through the redemption of ADSs, settlement of such sale being made on a recognized stock exchange, is exempt from tax and the Short-term capital gains on such sale will be taxed at 15%. An additional tax called “Securities Transaction Tax”, or “STT” (described in detail below will be levied at the time of settlement. In addition to the above rates, the Finance Act 2006 levies a surcharge of 10% will be levied on the above taxes, in the case of resident employees orand 2.5% in the case of non-resident individuals, in case their aggregate taxable income exceed Rs. 10,00,000 during the relevant financial year and an additional surcharge called “education cess” of 2%3% on the above tax and surcharge. The above rates may be reduced by the applicable tax treaty in case of non-residents. The capital gains tax is computed by applying the appropriate tax rates to the difference between the sale price and the purchase price of the equity shares or ADSs. UnderIn 1992, the IssueGovernment allowed established Indian Companies to issue foreign currency convertible bonds (FCCB). Effective April 2008, the conversion of Foreign Currency Convertible BondsFCCB’s into shares or debentures of any company shall not be treated as a ‘transfer’ and Ordinary Shares Scheme,consequently will not be subject to capital gains tax upon conversion. Further, the purchase pricecost of equityacquisition of the shares in an Indian listed company received in exchange for ADSs willupon conversion of the bond shall be the market price of the underlying shares on the date that the depository gives notice to the custodian of the delivery of the equity shares in exchange forat which the corresponding ADSs’ or the “stepped up” basis purchase price. The market price will bebond was acquired. Prior to this amendment, the price of the equity shares prevailingreceived on The Stock Exchange, Mumbai or the National Stock Exchange. There is no corresponding provision under the Income Tax Act in relation toconversion was arrived by using the “stepped up” basis for the purchase price of equity shares. However the tax department in India has not denied this benefit. In the event that the tax department denies this benefit, the original purchase price of ADSs would be considered the purchase price for computing the capital gains tax.basis. According to the Issue of Foreign Currency Convertible Bonds and Ordinary Shares Scheme, a non-resident holder’s holding period for the purposes of determining the applicable Indian capital gains tax rate in respect of equity 93
shares received in exchange for ADSs commences on the date of the notice of the redemption by the depositorydepositary to the custodian. However, the Issue of Foreign Currency Convertible Bonds and Ordinary Shares Scheme does not address this issue in the case of resident employees, and it is therefore unclear as to when the holding period for the purposes of determining capital gains tax commences for such a resident employee. The Issue of Foreign Currency Convertible Bonds and Ordinary Shares Scheme provides that if the equity shares are sold on a recognized stock exchange in India against payment in Indian rupees, they will no longer be eligible for the preferential tax treatment. It is unclear as to whether section 115AC and the Issue of Foreign Currency Convertible Bonds and Ordinary Shares Scheme are applicable to a non-resident who acquires equity shares outside India from a non-resident holder of equity shares after receipt of the equity shares upon redemption of the ADSs. It is unclear as to whether capital gains derived from the sale of subscription rights or other rights by a non-resident holder not entitled to an exemption under a tax treaty will be subject to Indian capital gains tax. If such subscription rights or other rights are deemed by the Indian tax authorities to be situated within India, the gains realized on the sale of such subscription rights or other rights will be subject to Indian taxation. The capital gains realized on the sale of such subscription rights or other rights, which will generally be in the nature of short term capital gains, will be subject to tax at variable rates with a maximum rate of 40% in case of a foreign company and at graduated rate with a maximum of 30%, in case of resident employees and non-resident individuals. In addition to this, there will be a surcharge of 10%2.5% in the case of all corporate holders and in the case of non-corporate holders with an aggregate taxable income exceeding Rs. 10,00,0001,000,000 and an additional surcharge called “education cess” of 2%3% on the above tax and surcharge. As per Section 55(2) of the Income Tax Act, the cost of any share (commonly called a “bonus share”) allotted to any shareholder without any payment and on the basis of such shareholder’s share holdings, shall be nil. The holding period of bonus shares for the purpose of determining the nature of capital gains shall commence on the date of allotment of such shares by the company. Securities Transaction Tax:The Finance Act, 2004 has introduced certain new provisions with regard to taxes on the sale and purchase of securities, including equity shares. On and after October 1, 2004, in respect of a sale and purchase of equity shares entered into on a recognized stock exchange, (i) both the buyer and seller are required to pay each a Securities Transaction Tax, or STT at the rate of 0.075%0.125% of the transaction value of the securities, if a transaction is a delivery based transaction i.e. the transaction involves actual delivery or transfer of shares; (ii) the seller of the shares is required to pay a STT at the rate of 0.015%0.025% of the transaction value of the securities, if the transaction is a non-delivery based transaction, i.e. a transaction settled without taking delivery of the shares. The Finance Act, 2005 has increased the rate STT, with effect from April 1, 2005, in respect of a sale and purchase of equity shares entered into on a recognized stock exchange, to 0.1% for delivery based transactions and 0.02% for non-delivery based transactions. Withholding Tax on Capital Gains. Any gain realized by a non-resident or resident employee on the sale of equity shares is subject to Indian capital gains tax, which, in the case of a non-resident is to be withheld at the source by the buyer. However, as per the provisions of Section 196D(2) of the Income Tax Act, no withholding tax is required to be deducted by way of capital gains arising to Foreign Institutional Investors as defined in Section 115AD of the Income Tax Act on the transfer of securities defined in Section 115AD of the Income Tax Act. 82
Buy-back of Securities. Indian companies are not subject to any tax on the buy-back of their shares. However, the shareholders will be taxed on any resulting gains. Our company would be required to deduct tax at source according to the capital gains tax liability of a non-resident shareholder. Stamp Duty and Transfer Tax. Upon issuance of the equity shares underlying our ADSs, companies will be required to pay a stamp duty of 0.1% per share of the issue price of the underlying equity shares. A transfer of ADSs is not subject to Indian stamp duty. However, upon the acquisition of equity shares from the depositorydepositary in exchange for ADSs, the non-resident holder will be liable for Indian stamp duty at the rate of 0.25% of the market value of the ADSs or equity shares exchanged. A sale of equity shares by a non-resident holder will also be subject to Indian stamp duty at the rate of 0.25% of the market value of the equity shares on the trade date, although customarily such tax is borne by the transferee. Shares must be traded in dematerialized form. The transfer of shares in dematerialized form is currently not subject to stamp duty. Wealth Tax. The holding of the ADSs and the holding of underlying equity shares by resident and non-resident holders will be exempt from Indian wealth tax. Non-resident holders are advised to consult their own tax advisors regarding this issue. 94
Gift Tax and Estate Duty. Indian gift tax was abolished as of October 1998. Indian Estate Duty was abolished as of March 1985. On and after September 1, 2004, a sum of money exceeding Rs. 25,000 (approx $ 570), received by aan individual without consideration will be subject to tax at graduated rates with a maximum of 30% (excluding applicable surcharge and education cess), unless the same was received from a relative as defined in Explanation under Section 56(v), or on the occasion of the marriage of the Individual or under a will or by way of inheritance or in contemplation of death of the payer. The Taxation Laws Amendment Bill, 2005 introduced in the Parliament on May 12, 2005 proposes to levy the above tax in case the sum of money exceeds in aggregate Rs. 50,000 in a fiscal year. We cannot assure that these provisions will not be amended further in future. Non-resident holders are advised to consult their own tax advisors regarding this issue. Service Tax. Brokerage or commission paid to stock brokers in connection with the sale or purchase of shares is subject to a service tax of 12%10% excluding surcharges and education cess. The stock broker is responsible for collecting the service tax from the shareholder and paying it to the relevant authority. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE INDIAN AND THEIR LOCAL TAX CONSEQUENCES OF ACQUIRING, OWNING OR DISPOSING OF EQUITY SHARES OR ADSs. Material United States Federal Tax Consequences The following is a summary of the material U.S. federal income and estate tax consequences that may be relevant with respect to the acquisition, ownership and disposition of equity shares or ADSs and is for general information only. This summary addresses the U.S. federal income and estate tax considerations of holders that are U.S. persons. U.S. persons are citizens or residents of the United States, or corporations (or other entities treated as corporations for United States federal income tax purposes) created in or under the laws of the United States or any political subdivision thereof or therein, estates, the income of which is subject to U.S. federal income taxation regardless of its source and trusts for which a U.S. court exercises primary supervision and a U.S. person has the authority to control all substantial decisions. This summary is limited to U.S. persons who will hold equity shares or ADSs as capital assets. This summary is limited to U.S. persons who will hold equity shares or ADSs as capital assets. In addition, this summary is limited to U.S. persons who are not residents in India for purposes of the Convention between the Government of the United States of America and the Government of the Republic of India for the avoidance of Double Taxation and the prevention of Fiscal Evasion with respect to taxes on income. If a partnership holds the equity shares or ADSs, the tax treatment of a partner will generally depend upon the status of the partner and upon the activities of the partnership. A partner in a partnership holding equity shares or ADSs should consult his/her/its own tax advisor. This summary does not address tax considerations applicable to holders that may be subject to special tax rules, such as banks, insurance companies, financial institutions, dealers in securities or currencies, tax-exempt entities, persons that will hold equity shares or ADSs as a position in a “straddle” or as part of a “hedging” or “conversion” transaction for tax purposes, persons that have a “functional currency” other than the U.S. dollar or holders of 10% or more, by voting power or value, of the shares of our company. This summary is based on the tax laws of the United States as in effect on the date of this document and on United States Treasury Regulations in effect or, in some cases, proposed, as of the date of this document , as well as judicial and administrative interpretations thereof available on or before such date and is based in part on the assumption that each obligation in the deposit agreement and any related agreement will be performed in accordance with its terms. All of the foregoing is subject to change, which change could apply retroactively and could affect the tax consequences described below. 83
Each prospective investor should consult his, her or its own tax advisor with respect to the U.S. federal, state, local and foreign tax consequences of acquiring, owning or disposing of equity shares or ADSs. Ownership of ADSs. For U.S. federal income tax purposes, holders of ADSs will be treated as the owners of equity shares represented by such ADSs. Dividends. Except for equity shares, if any, distributed pro rata to all shareholders of our company, including holders of ADSs, the gross amount of any distributions of cash or property with respect to equity shares or ADSs will generally be included in income by a U.S. holder as foreign source dividend income at the time of receipt, which in the case of a U.S. holder of ADSs generally should be the date of receipt by the depository,depositary, to the extent such distributions are made from the current or accumulated earnings and profits (as determined under U.S. federal income tax principles) of our company. Such dividends will not be eligible for the dividends received deduction generally allowed to corporate U.S. holders. To the extent, if any, that the amount of any distribution by our company exceeds our company’s current and accumulated earnings and profits as determined under U.S. federal income tax principles, such 95
excess will be treated first as a tax-free return of the U.S. holder’s tax basis in the equity shares or ADSs and thereafter as capital gain. Subject to certain conditions and limitations, dividends paid to non-corporate U.S. holders, including individuals, may be eligible for a reduced rate of taxation if we are deemed to be a “qualified foreign corporation” for United States federal income tax purposes. A qualified foreign corporation includes a foreign corporation if (1) its shares (or, according to legislative history, its ADSs) are readily tradable on an established securities market in the United States, or (2) it is eligible for the benefits under a comprehensive income tax treaty with the United States. In addition, a corporation is not a qualified foreign corporation if it is a passive foreign investment company (as discussed below). The ADSs are traded on the New York Stock Exchange. Due to the absence of specific statutory provisions addressing ADSs, however, there can be no assurance that we are qualified foreign corporation solely as a result of our listing on New York Stock Exchange. Nonetheless, we may be eligible for benefits under the comprehensive income tax treaty between India and the United States. The reduced rate of taxation will not apply to dividends received in taxable years beginning after December 31, 2010.Each2010. Each U.S. holder should consult its own tax advisor regarding the treatment of dividends and such holder’s eligibility for reduced rate of taxation. Subject to certain conditions and limitations, any Indian dividend withholding tax imposed upon distributions paid to a U.S. holder should be eligible for credit against the U.S. holder’s federal income tax liability. Alternatively, a U.S. holder may claim a deduction for such amount, but only for a year in which a U.S. holder does not claim a credit with respect to any foreign income taxes. The overall limitation on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. For this purpose, distributions on equity shares or ADSs will be income from sources outside the United States, and, for tax years beginning before January 1, 2007, will generally be “passive income”, or “financial services income”, and for tax years beginning after December 31, 2006, will generally be “passive category income” or “general category income” for purposes of computing the United States foreign tax credit allowable to a U.S. holder. If dividends are paid in Indian rupees, the amount of the dividend distribution included in the income of a U.S. holder will be in the U.S. dollar value of the payments made in Indian rupees, determined at a spot exchange rate between Indian rupees and U.S. dollars applicable to the date such dividend is included in the income of the U.S. holder, regardless of whether the payment is in fact converted into U.S. dollars. Generally, gain or loss, if any, resulting from currency exchange fluctuations during the period from the date the dividend is paid to the date such payment is converted into U.S. dollars will be treated as U.S. source ordinary income or loss. Sale or Exchange of Equity Shares or ADSs. A U.S. holder generally will recognize gain or loss on the sale or exchange of equity shares or ADSs equal to the difference between the amount realized on such sale or exchange and the U.S. holder’s tax basis in the equity shares or ADSs, as the case may be. Such gain or loss will be capital gain or loss, and will be long-term capital gain or loss if the equity shares or ADSs, as the case may be, were held for more than one year. Gain or loss, if any, recognized by a U.S. holder generally will be treated as U.S. source passive category income or loss for U.S. foreign tax credit purposes. Capital gains realized by a U.S. holder upon sale of equity shares (but not ADSs) may be subject to certain tax in India. See taxation –— “Taxation of Distributions –— Taxation of Capital Gains”. Due to limitations on foreign tax credits, however, a U.S. holder may not be able to utilize any such taxes as a credit against the U.S. holder’s federal income tax liability. Estate Taxes. An individual shareholder who is a citizen or resident of the United States for U.S. federal estate tax purposes will have the value of the equity shares or ADSs held by such holder included in his or her gross estate for U.S. federal estate tax purposes. An individual holder who actually pays Indian estate tax with respect to the equity shares will, however, be entitled to credit the amount of such tax against his or her U.S. federal estate tax liability, subject to a number of conditions and limitations. 84
Backup Withholding Tax and Information Reporting.Reporting. Any dividends paid, or proceeds on a sale of, equity shares or ADSs to or by a U.S. holder may be subject to U.S. information reporting, and a backup withholding tax (currently at a rate of 28%) may apply unless the holder is an exempt recipient or provides a U.S. taxpayer identification number, certifies that such holder is not subject to backup withholding and otherwise complies with any applicable backup withholding requirements. Any amount withheld under the backup withholding rules will be allowed as a refund or credit against the holder’s U.S. federal income tax, provided that the required information is furnished to the Internal Revenue Service. Passive Foreign Investment Company. A non-U.S. corporation will be classified as a passive foreign investment company for U.S. Federal income tax purposes if either: 75% or more of its gross income for the taxable year is passive income; or
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on average for the taxable year by value, or, if it is not a publicly traded corporation and so elects, by adjusted basis, if 50% or more of its assets produce or are held for the production of passive income.
| • | | 75% or more of its gross income for the taxable year is passive income; or | | | • | | on average for the taxable year by value, or, if it is not a publicly traded corporation and so elects, by adjusted basis, if 50% or more of its assets produce or are held for the production of passive income. |
We do not believe that we satisfy either of the tests for passive foreign investment company status for 2005. Since this determination is made on an annual basis, however, no assurance can be given that we will not be considered a passive foreign investment company in future taxable years. If we were to be a passive foreign investment company for any taxable year, U.S. holders would be required to either: | • | | pay an interest charge together with tax calculated at an ordinary income rates on “excess distributions,” as the term is defined in relevant provisions of U.S. tax laws, and on any gain on a sale or other disposition of equity shares; | | | • | | if an election is made, a “qualified electing fund” (as the term is defined in relevant provisions of the U.S. tax laws), include in their taxable income their pro rata share of undistributed amounts of our income; or | | | • | | if the equity shares are “marketable” and a mark-to-market election is made, mark-to-market the equity shares each taxable year and recognize ordinary gain and, to the extent of prior ordinary gain, ordinary loss for the increase or decrease in market value for such taxable year. |
If we are treated as a passive foreign investment company, we do not plan to provide information necessary for the ‘qualified electing fund’ election. The above summary is not intended to constitute a complete analysis of all tax consequences relating to ownership of equity shares or ADSs. You should consult your own tax advisor concerning the tax consequences of your particular situation. Documents on Display This report and other information filed or to be filed by Wipro Limited can be inspected and copied at the public reference facilities maintained by the SEC at: | • | | 100 F Street, NE Washington D.C, 20549 | | | • | | Northwestern Atrium Center 500 West Madison Street Suite 1400 Chicago, Illinois 60661-2511 |
Copies of these materials can also be obtained from the Public Reference Section of the SEC, 100 F Street, NE., Washington, DC 20549, at prescribed rates. The SEC maintains a website atwww.sec.gov that contains reports, proxy and information statements, and other information regarding registrants that make electronic filings with the SEC using its EDGAR system. Additionally, documents referred to in this Form 20-F may be inspected at our corporate offices which are located at Doddakannelli, Sarjapur Road, Bangalore, Karnataka, 560035, India. Item 11. Quantitative and Qualitative Disclosures About Market Risk (in millions, except share data and where otherwise stated) General 85
Market risk is the risk of loss of future earnings, to fair values or to future cash flows that may result from a change in the price of a financial instrument. The value of a financial instrument may change as a result of changes in the interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market risk sensitive instruments. Market risk is attributable to all market risk sensitive financial instruments including investments, foreign currency receivables, and payables and long-term debt. Our exposure to market risk is a function of our investment and borrowing activities and our revenue generating activities in foreign currency. The objective of market risk management is to avoid excessive exposure of our earnings and equity to loss. Most of our exposure to market risk arises out of our foreign currency account receivables. 97
Risk Management Procedures We manage market risk through a corporate treasury department, which evaluates and exercises independent control over the entire process of market risk management. Our corporate treasury department recommends risk management objectives and policies which are approved by senior management and our Audit Committee. The activities of this department include management of cash resources, implementing hedging strategies for foreign currency exposures, borrowing strategies, and ensuring compliance with market risk limits and policies on a daily basis. Components of Market Risk Our exposure to market risk arises principally from exchange rate risk.risk and Interest rate risk. Other sources of risk is the other component of our marketinclude credit risk, counter-party risk and liquidity risk. Exchange rate risk.risk. Our exchange rate risk primarily arises from our foreign exchange revenue, receivables, cash balances, forecasted cash flows, payables and foreign currency debt. A significant portion of our revenue is in U.S. dollars, euro and pound sterling, while a significant portion of our costs are in Indian rupees. The exchange rate between the rupee and dollar, euro and pound sterling has fluctuated significantly in recent years and may continue to fluctuate in the future. Appreciation of the rupee against the dollarthese currencies can adversely affect our results of operations. We evaluate our exchange rate exposure arising from these transactions and enter into foreign currency forward contractsderivative instruments to mitigate such exposure. We follow established risk management policies, including the use of derivatives like forward foreign exchange contracts to hedge forecasted cash flows denominated in foreign currency. AsSee Note 14 of our Notes to the Audited Consolidated Financial Statements for information relating to outstanding derivative contracts as of March 31, 2006, we had forward contracts to sell amounting to $592 million2009. All derivative instruments are recognized in the balance sheet and £4 million and net purchased options to sell $254 million and £8 million. Asmeasured at fair value. Changes in fair value for foreign currency derivative instruments that do not qualify as hedges and/ or any ineffective portion of March 31, 2007, we had forward contracts to sell amounting to $345 million,€16 million and £88 million and forward contracts to buy amounting to $185 million. In addition, we also had net purchased options to sell $36 million and€ 13 million. hedges are recognized in our consolidated income statement in the current period. In connection with cash flow hedges, we have recorded Rs. 114,72, Rs. 202,(1,097) and Rs. 72(16,859) of net gains/(losses) as a component of accumulated and other comprehensive income within stockholders’ equity as at March 31, 2005, 2006 and 2007. Sensitivity analysis of exchange rate risk
As at March 31, 2007, a Rs.12008 and 2009.
As of March 31, 2009, Rs. 1 increase / decrease in the spot rate for exchange of Indian Rupee with U.S. dollar would result in approximately Rs. 160 million1,498 decrease / increase in the fair value of the Company’s forward contracts.foreign currency dollar denominated derivative instruments. As of March 31, 2009, 1% movement in the exchange rate between U.S. Dollar and Yen would result in approximately Rs. 183 increase/decrease in the fair value of cross-currency interest rate swaps. Interest rate risk.Our interest rate risk primarily arises from our investment securities.securities and floating rate debt, including various revolving and other lines of credit (refer note 16 to the financial statements). Our investments are primarily in short-term investments, which do not expose us to significant interest rate risk. We manage our net exposure to interest rate risk relating to borrowings, through the proportion of fixed rate borrowing and floating rate borrowing in its total borrowing portfolio. To manage this mix, we may enter into interest rate swap agreements, which allows us to exchange periodic payments based on a notional amount and agreed upon fixed and floating interest rates. As of March 31, 2009, substantially all of our debt was subject to floating interest rates, which reset at short intervals. Accordingly, the carrying value of such debt approximates fair values. If interest rates were to increase by 100 bps from March 31, 2009, an additional annual interest expenses on our floating rate debt would amount to approximately Rs. 2,276 on a pre-tax basis. Credit risk. Our credit risk arises from the possibility that customers may not be able to settle their obligations as agreed. To manage this, we periodically assess the financial reliability of customers, taking into account the financial position, past experience and other factors. Individual risk limits are set accordingly. No single customer accounted for 5% or more of the accounts receivable as of March 31, 2008 and 2009 and revenues for the years ended March 31, 2007, 2008 and 2009 and there is no significant concentration of credit risk. 86
Counterparty risk. Counterparty risk encompasses issuer risk on marketable securities, settlement risk on derivative and money market contracts and credit risk on cash and time deposits. Issuer risk is minimized by only buying securities which are at least AA rated. Settlement and credit risk is reduced by the policy of entering into transactions with counterparties that are usually at highly rated banks or financial institutions. Exposure to these risks is closely monitored and kept within predetermined parameters. We have policies that limit the amount of credit exposure to any financial institution. The limits are regularly assessed and determined based upon credit analysis including financial statements and capital adequacy ratio reviews. In addition, net settlement agreements are contracted with significant counterparties. Liquidity risk. Liquidity risk is defined as the risk that we would not be able to settle or meet our obligations on time or at a reasonable price. Our corporate treasury department is responsible for liquidity, funding as well as settlement management. In addition, liquidity and funding risks, related processes and policies are overseen by management. Management monitors our net liquidity position through rolling forecasts on the basis of expected cash flows. As on March 31, 2009, our cash and cash equivalents are held with major regulated financial institutions. Fair value.value. The fair value of our market rate risk sensitive instruments, other than forward contracts and option contracts,derivative instruments, closely approximates their carrying value. Item 12. Description of Securities Other Than Equity Securities Not applicable. PART II Item 13. Defaults, Dividend Arrearages and Delinquencies Not applicable. Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds Not Applicable Item 15. Controls and Procedures Evaluation of disclosureDisclosure controls and procedures.
Based on their evaluation as of March 31, 2007,2009, our Chief Executive Officerprincipal executive officer and Chief Financial Officerprincipal financial officer have concluded that our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, are effective to ensure that information required to be 98
disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and that material information related to us and our consolidated subsidiaries is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions about required disclosures. Change in internal controls.
During the period covered by this Annual Report, there were no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
Compliance with the New York Stock Exchange Corporate Governance Rules
The Company presently complies with all the practices as described in the final Corporate Governance Rules and Listing Standards of the New York Stock Exchange as approved by the Securities and Exchange Commission on November 4, 2003 and codified in Section 303A of the NYSE Listed Company Manual.
A detailed compliance report with the final Corporate Governance rules of the New York Stock Exchange will be separately filed with the New York Stock Exchange.forms.
MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Management is responsible for establishing and maintaining adequate internal control over financial reporting ofas defined in Rules 13a-15(f) and 15(d)-15(f) under the company. InternalExchange Act. The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. The company’sCompany’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the companyCompany are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 87
Management, conducted an evaluationwith the participation of the Company’s Chief Executive Officer and Chief Financial Officer, assessed the effectiveness of internal control over financial reporting as of March 31, 2009. In conducting this assessment of internal control over financial reporting, management based its evaluation on the framework in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation,assessment, management concluded that the company’s internal control over financial reporting was effective as of March 31, 2007. Management’s assessment does not include an assessment of the internal control over financial reporting of two entities acquired during the year ended March 31, 2007, Hydrauto Group AB and subsidiaries and Retailbox B.V and subsidiaries, with total assets of Rs 3,842.01 million and net revenues of Rs 4,243.85 million included in the consolidated financial statements of the Company as of and for the year ended March 31, 2007.2009.
Our independent registered public accounting firm, KPMG, has audited the consolidated financial statements in this annual reportAnnual Report on Form 20-F, and as part of their audit, has issued their report, included herein, on (1) our management’s assessment of the effectiveness of our internal control over financial reporting and (2) the effectiveness of our internal control over financial reporting as of March 31, 2007.2009. 88
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Stockholders Wipro Limited We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control Over Financial Reporting,that Wipro Limited and subsidiariessubsidiaries’ (the Company) maintained effective“Company”) internal control over financial reporting as of March 31, 2007,2009, based on criteria established inInternal Control—Control - Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).The management of the Company is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting.reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion 99
on management’s assessment and an opinion on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management’s assessment,assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control andbased on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. In our opinion, management’s assessment that the Company maintained effective internal control over financial reporting as of March 31, 2007, is fairly stated, in all material respects, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of March 31, 2007,2009, based on criteria established inInternal Control—Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company acquired Hydrauto Group AB and subsidiaries (Hydrauto) and RetailBox BV and subsidiaries (RetailBox) during the year ended March 31, 2007 and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of March 31, 2007, Hydrauto and RetailBox’s internal control over financial reporting associated with total assets of Rs 3,842.01 million and net revenues of Rs 4,243.85 million included in the consolidated financial statements of the Company as of and for the year ended March 31, 2007. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Hydrauto and RetailBox.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of the Company as of March 31, 20072009 and 2006,2008, and the related consolidated statements of income, stockholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended March 31, 2007,2009, and our report dated May 21, 200715, 2009 expressed an unqualified opinion on those consolidated financial statements. KPMG Bangalore, India
May 21, 200715, 2009
10089
Change in internal controls over financial reporting. During the period covered by this Annual Report, there were no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect our internal control over financial reporting. Compliance with the New York Stock Exchange Corporate Governance Rules The Company presently complies with all the practices as described in the final Corporate Governance Rules and Listing standards of the New York Stock Exchange as approved by the Securities and Exchange Commission on November 4, 2003 and codified in Section 303A of the NYSE Listed Company Manual. A detailed compliance report with the final Corporate Governance rules of the New York Stock Exchange will be separately filed with the New York Stock Exchange. Item 16 A. Audit Committee Financial Expert The Audit Committee is responsible for reviewing reports of our financial results, audits, internal controls, and compliance with federal procurement laws and regulations. The committee selects the independent registered public accounting firm and approves all related fees and compensation and reviews their selection with the Board of Directors. The committee also reviews the services proposed to be performed by the independent registered public accounting firm to ensure their independence with respect to such services. Members of the committee are non-management directors who, in the opinion of the Company’s Board of Directors, are independent as defined under the applicable rules of the New York Stock Exchange. The Board has determined that Mr. Narayan Vaghul qualifies as an Audit Committee Financial Expert as defined by the applicable rules of the SEC. Item 16 B. Code of Ethics Our Audit Committee has adopted a written Code of Ethics, as defined in Item 406 of Regulation S-K, applicable to our principal executive officer, principal financial officer, principal accounting officer and all officers working in our finance, accounting, treasury, internal audit, tax, legal, purchase, financial analyst, investor relations functions, disclosure committee members, and senior management, as well as members of the Audit Committee and the boardBoard of directors.Directors. Our Code of Ethics is available under the investor relations section on our website at www.wipro.com.www.wipro.com. We will post any amendments to, or waivers from, our Code of Ethics at that location on our website. Our Audit Committee has also adopted an Ombuds process policy wherein it has established procedures for receiving, retaining and treating complaints received, and procedures for the confidential, anonymous submission by employees of complaints regarding questionable accounting or auditing matters, conduct which results in a violation of law by Wipro or in a substantial mismanagement of companyCompany resources. Under this policy, our employees are encouraged to report questionable accounting matters, any reporting of fraudulent financial information to our shareholders, the government or the financial markets any conduct that results in a violation of law by Wipro to our management (on an anonymous basis, if employees so desire). Likewise, under this policy, we have prohibited discrimination, retaliation or harassment of any kind against any employee who, based on the employee’s reasonable belief that such conduct or practices have occurred or are occurring, reports that information or participates in an investigation. Our Ombuds process policy is available under the investor relations section on our website at www.wipro.com.www.wipro.com. We have also adopted an updated Code of Business Conduct and Ethics, applicable to all officers, directors and employees. Our updated Code of Business Conduct and Ethics is available under the investor relations section on our website at www.wipro.com.www.wipro.com. Item 16 C. Principal Accountant Fees and Services Our Audit Committee charter requires us to obtain the prior approval of our audit committee on every occasion that we engage our principal accountants or their associated entities and on every occasion that they provide us with any non-audit services. At the beginning of each year, the Audit Committee reviews the proposed services, including the nature, type and scope of services contemplated and approves the related fees, to be rendered by these firms during the year. In addition, Audit Committee pre-approval is also required for those engagements that may arise during the course of the year that are outside the scope of the initial services and fees pre-approved by the Audit Committee. The following table presents fee for professional audit services rendered by KPMG for the audit of the Company’s annual financial statements and fees billed for other services rendered by KPMG. | | | | | | | | | | | | | | | In millions | | | | Year ended March 31, | | | | 2006 | | | 2007 | | Audit fees | | Rs. | 17.67 | | | Rs. | 48.20 | | Tax fees | | | 22.31 | | | | 18.69 | | All other fess | | | — | | | | 2.04 | | | | | | | | | Total | | Rs. | 39.98 | | | Rs. | 68.93 | | | | | | | | |
10190
In millions | | | | | | | | | | | | | | | Year ended March 31, | | | | 2007 | | | 2008 | | | 2009 | | Audit fees | | Rs. | 48.20 | | | Rs. | 62.21 | | | Rs. | 74.69 | | Audit related fees | | | — | | | | 6.07 | | | | — | | Tax fees | | | 18.69 | | | | 14.12 | | | | 37.25 | | All other fees | | | 2.04 | | | | 2.20 | | | | 3.36 | | | | | | | | | | | | Total | | Rs. | 68.93 | | | Rs. | 84.60 | | | Rs. | 115.30 | | | | | | | | | | | |
Audit services —comprise fees for professional services in connection with the audit of Company’s annual consolidated financial statements and their attestation and report concerning internal control over financial reporting and reviews of interim financial statement, as well as auditsstatement. Audit related fees —relate to financial due–diligence services provided in connection with the acquisition of statutory financial statements of Wipro Limited and its subsidiaries.Infocrossing Inc. Tax services—- comprise fees for tax compliance, tax assessment and tax planning services rendered by the independent registered public accounting firm. These services include corporate tax services like assistance with foreign income tax, value added tax, transfer pricing study, Governmentgovernment sales tax and equivalent tax matters in local jurisdictions and assistance with local tax authority reporting requirements for tax compliance purposes. Our Audit Committee charter requires us to take the prior approval of our Audit Committee on every occasion we engage our principal accountants or their associated entities to provide us any audit or non-audit services. We disclose to our Audit Committee the nature of services that are provided and the fees to be paid for the services. All of the audit or non-audit services provided by our principal accountants or their associated entities in the previous two fiscal years have been pre-approved by our Audit Committee. Item 16 D. Exemptions from the Listing Standards for Audit Committees We have not sought any exemption from the listing standards for Audit Committees applicable to us as foreign private issuer, pursuant to Rule 10(A)-3(d) of the Securities Exchange Act of 1934. Item 16 E. Purchase of Equity Securities by the Issuer and Affiliated Purchasers None. Item 16 F. Changes in registrant’s Certifying Accountant None. Item 16 G. Corporate Governance Beacause our securities are listed on a national securities exchange, we are required to provide a concise summary of any significant ways in which our corporate governance practices differ from those followed by domestic companies under the listing standards of that exchange. Being a foreign private issuer, we are permitted to follow home country practice in lieu of the provisions of this Section 303A of the NYSE Listed Company Manual, except that we are required to comply with the requirements of Sections 303A.06, 303A.11 and 303A.12(b) and (c) thereof. With regard to Section 303A.11, although the Company’s required home country standards on corporate governance may differ from the NYSE listing standards, the Company’s actual corporate governance policies and practices are generally in compliance with the NYSE listing standards applicable to domestic companies. Some of the key practices followed in the home country as per home country laws are disclosed elsewhere in this report. Part III Item 17. Financial Statements See Item 18. 10291
Item 18. Financial Statements CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION REPORT OF AUDIT COMMITTEE The Board of Directors and Stockholders of Wipro Limited In connection with the March 31, 20072009 consolidated financial statements prepared under United States Generally Accepted Accounting Principles, the Audit Committee: (1) reviewed and discussed the consolidated financial statements with management; (2) discussed with the auditors the matters required by Statement on Auditing Standards No. 61, as amended,114, and the Sarbanes-Oxley Act of 2002; and (3) reviewed and discussed with the auditors the matters required by NYSE listing standards.Listing Standards. Based upon these reviews and discussions, the Audit Committee recommended to the board of directors that the audited consolidated financial statements be included in the Annual Report on Form 20-F to be filed with the Securities and Exchange Commission of the United States of America. | | | | | | | Bangalore, India
May 21, 2007 | | N.Vaghul N. Vaghul | | P. M. Sinha | | B. C. Prabhakar | May 15, 2009 | | Chairman | | P. M. Sinha Member | | B. C. Prabhakar Member |
10392
REPORT OF MANAGEMENT Management of Wipro is responsible for the integrity and objectivity of the consolidated financial statements and related notes. The consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) and include amounts based on judgments and estimates by management. Management is also responsible for the accuracy of the related data in the annual report and its consistency with the financial statements. Management maintains internal control systems designed to provide reasonable assurance that assets are safeguarded, transactions are executed in accordance with management’s authorization and properly recorded, and accounting records are adequate for preparation of financial statements and other financial information. These are reviewed at regular intervals to ascertain their adequacy and effectiveness. In addition to the system of internal controls, the Company has articulated its vision and core values which permeate all its activities. It also has corporate policies to ensure highest standards of integrity in all business transactions, eliminate possible conflicts of interest, ensure compliance with laws, and protect confidentiality of proprietary information. These are reviewed at periodic intervals. The consolidated financial statements have been audited by the Company’s independent registered public accounting firm, KPMG. Their responsibility is to audit these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States) and express their opinion on the fairness of presentation of the statements. The Audit Committee of the board comprisingcomprised entirely of independent directors conducts an ongoing appraisal of the independence and performance of the Company’s internal and external auditors and monitors the integrity of Company’s financial statements. The Audit Committee meets several times during the year with management, internal auditors and the independent registered public accounting firm to discuss audit activities, internal controls and financial reporting matters. | | | | | | | | Azim H. Premji | | | Chairman and Chief Executive Officer | | | | | | S.C. Senapaty | | | Executive Vice President – Finance | Bangalore, India | | Chief Financial Officer | May 21, 2007 | | | | | and Director |
Bangalore, India May 15, 2009 10493
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Stockholders Wipro Limited We have audited the accompanying consolidated balance sheets of Wipro Limited and subsidiaries (the Company) as of March 31, 20072009 and 2006,2008, and the related consolidated statements of income, stockholders’ equity and comprehensive income, and cash flows for each of the years in the three-year period ended March 31, 2007.2009. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of March 31, 20072009 and 2006,2008, and the results of their operations and their cash flows for each of the years in the three-year period ended March 31, 2007,2009, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of the Company’s internal control over financial reporting as of March 31, 2007,2009, based on criteria established in Internal Control-IntegratedControl — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated May 21, 200715, 2009 expressed an unqualified opinion management’s assessmenton the effectiveness of and the effective operation of,Company’s internal control over financial reporting. KPMG Bangalore, India
May 21, 200715, 2009 10594
WIPRO LIMITED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in millions, except share data) | | | | | | | | | | | | | | | | | | | | | | | | | | | As of March 31, | | | As of March 31, | | | | 2006 | | 2007 | | 2007 | | | 2008 | | 2009 | | 2009 | | | | Convenience | | | Convenience | | | | translation into | | | translation | | | | US$ | | | into US$ | | | | (Unaudited) | | | (Unaudited) | | ASSETS | | | Current assets: | | | Cash and cash equivalents (Note 4) | | Rs. | 8,857.70 | | 12,412.17 | | 287.98 | | | Rs. | 39,270 | | Rs. | 49,117 | | $ | 966 | | Restricted cash (Note 17) | | — | | 7,237.88 | | 167.93 | | | Investments in liquid and short-term mutual funds (Note 8) | | 30,315.25 | | 32,410.43 | | 751.98 | | | Short-term investments (Note 8) | | | 14,808 | | 16,180 | | 318 | | Accounts receivable, net of allowances (Note 5) | | 20,593.11 | | 28,466.58 | | 660.47 | | | 38,908 | | 46,217 | | 909 | | Costs and earnings in excess of billings on contracts in progress | | 4,336.06 | | 5,096.48 | | 118.25 | | | Unbilled revenue | | | 8,305 | | 13,843 | | 272 | | Inventories (Note 6) | | 2,064.61 | | 4,150.37 | | 96.30 | | | 7,172 | | 8,686 | | 171 | | Deferred income taxes (Note 21) | | 168.28 | | 381.71 | | 8.86 | | | 790 | | 3,639 | | 72 | | Other current assets (Note 7) | | 7,896.60 | | 10,411.97 | | 241.58 | | | 19,092 | | 27,040 | | 532 | | | | | | | | | | | | | | | | | Total current assets | | 74,231.61 | | 100,567.59 | | 2,333.35 | | | 128,345 | | 164,722 | | 3,238 | | Property, plant and equipment, net (Note 9) | | 17,777.40 | | 26,541.43 | | 615.81 | | | 39,822 | | 49,862 | | 980 | | Investments in affiliates (Note 13) | | 1,043.09 | | 1,241.79 | | 28.81 | | | 1,343 | | 1,670 | | 33 | | Investment securities | | 13.17 | | 357.32 | | 8.29 | | | 355 | | 338 | | 7 | | Deferred income taxes (Note 21) | | 182.91 | | 48.53 | | 1.13 | | | — | | 169 | | 3 | | Intangible assets, net (Note 10) | | 854.33 | | 2,670.84 | | 61.97 | | | 12,480 | | 17,604 | | 346 | | Goodwill (Note 3,10) | | 7,480.85 | | 12,697.71 | | 294.61 | | | 38,943 | | 49,502 | | 973 | | Other assets (Note 7) | | 1,243.97 | | 1,958.92 | | 45.45 | | | 3,214 | | 6,681 | | 131 | | | | | | | | | | | | | | | | | Total assets | | Rs. | 102,827.33 | | Rs. | 146,084.13 | | $ | 3,389.42 | | | Rs. | 224,502 | | Rs. | 290,548 | | $ | 5,712 | | | | | | | | | | | | | | | | | | | | LIABILITIES AND STOCKHOLDERS’ EQUITY | | | Current liabilities: | | | Borrowings from banks (Note 15) | | Rs. | 448.91 | | 2,892.77 | | 67.12 | | | Current portion of long-term debt | | 135.70 | | 327.79 | | 7.61 | | | Short-term borrowings (Note 16) | | | Rs. | 28,804 | | Rs. | 36,472 | | $ | 717 | | Current portion of long-term debt (Note 16) | | | 406 | | 235 | | 5 | | Current portion of obligations under capital leases (Note 9) | | | 323 | | 504 | | 10 | | Accounts payable | | 4,145.96 | | 7,060.49 | | 163.82 | | | 13,082 | | 18,017 | | 354 | | Accrued expenses | | 6,600.63 | | 7,597.94 | | 176.29 | | | 8,110 | | 14,452 | | 284 | | Accrued employee costs | | 4,425.13 | | 5,186.57 | | 120.34 | | | 5,160 | | 7,035 | | 138 | | Advances from customers | | 1,015.75 | | 1,314.52 | | 30.50 | | | 2,136 | | 3,127 | | 61 | | Billings in excess of costs and earnings on contracts in progress | | 600.51 | | 1,818.48 | | 42.19 | | | Unearned revenue | | | 4,162 | | 6,918 | | 136 | | Other current liabilities (Note 11) | | 6,047.95 | | 16,623.16 | | 385.68 | | | 12,519 | | 26,121 | | 513 | | | | | | | | | | | | | | | | | Total current liabilities | | 23,420.54 | | 42,821.72 | | 993.55 | | | 74,702 | | 112,881 | | 2,220 | | Long-term debt, excluding current portion | | 119.95 | | 560.46 | | 13.00 | | | Long-term debt, excluding current portion (Note 16) | | | 14,522 | | 18,681 | | 367 | | Obligations under capital leases, excluding current portion (Note 9) | | | 701 | | 914 | | 18 | | Deferred income taxes (Note 21) | | 127.46 | | 463.98 | | 10.77 | | | 2,098 | | 4,023 | | 79 | | Other liabilities | | 395.04 | | 769.91 | | 17.86 | | | Other liabilities (Note 11) | | | 3,011 | | 3,632 | | 71 | | | | | | | | | | | | | | | | | Total liabilities | | 24,062.99 | | 44,616.07 | | 1,035.18 | | | 95,034 | | 140,131 | | 2,755 | | | | | | | | | | | | | | | | | | | | Minority interest | | | 114 | | 235 | | 5 | | | | | Stockholders’ equity: | | | Equity shares at Rs. 2 par value: 1,650,000,000 shares authorized; Issued and outstanding: 1,425,754,267 and 1,458,999,650 shares as of March 31, 2006 and 2007 (Note 16,17) | | 2,851.51 | | 2,918.00 | | 67.70 | | | Equity shares at Rs. 2 par value: 1,650,000,000 shares authorized; Issued and outstanding: 1,461,453,320 and 1,464,980,746 shares as of March 31, 2008 and 2009 (Note 17) | | | 2,923 | | 2,930 | | 58 | | Additional paid-in capital (Note 22) | | 16,521.07 | | 24,508.45 | | 568.64 | | | 26,441 | | 29,025 | | 571 | | Deferred stock compensation | | | (2,202.42 | ) | | — | | — | | | Accumulated other comprehensive income | | 433.70 | | 93.77 | | 2.18 | | | Accumulated other comprehensive loss | | | | (1,076 | ) | | | (9,873 | ) | | | (194 | ) | Retained earnings (Note 18) | | 61,160.56 | | 73,947.92 | | 1,715.72 | | | 101,066 | | 128,642 | | 2,529 | | Equity shares held by a controlled Trust: 7,869,060 and 7,961,760 shares as of March 31, 2006 and 2007 (Note 22) | | | (0.08 | ) | | | (0.08 | ) | | | (0.00 | ) | | Equity shares held by controlled Trusts: 7,961,760 and 8,930,563 shares as of March 31, 2008 and 2009 (Note 22) | | | — | | | (542 | ) | | | (11 | ) | | | | | | | | | | | | | | | | Total stockholders’ equity | | 78,764.34 | | 101,468.06 | | 2,354.24 | | | 129,354 | | 150,182 | | 2,952 | | | | | | | | | | | | | | | | | Total liabilities and stockholders’ equity | | Rs. | 102,827.33 | | Rs. | 146,084.13 | | $ | 3,389.42 | | | Rs. | 224,502 | | Rs. | 290,548 | | $ | 5,712 | | | | | | | | | | | | | | | | |
See accompanying notes to the consolidated financial statements. 10695
WIPRO LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (in millions, except share and per share data) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended March 31, | | | Year ended March 31, | | | | 2005 | | 2006 | | 2007 | | 2007 | | | 2007 | | 2008 | | 2009 | | 2009 | | | | Convenience | | | Convenience | | | | translation | | | translation into | | | | into US$ | | | US$ | | | | (Unaudited) | | | (Unaudited) | | Revenues: | | | Global IT Services and Products | | | IT Services | | Rs. | 54,280.19 | | Rs. | 73,061.33 | | Rs. | 101,508.81 | | 2,355.19 | | | BPO Services | | 6,433.03 | | 7,664.23 | | 9,412.80 | | 218.39 | | | India and AsiaPac IT Services and Products | | | Services | | 4,709.07 | | 6,096.68 | | 8,368.81 | | 194.17 | | | Rs. | 117,819 | | Rs. | 146,170 | | Rs. | 193,924 | | $ | 3,787 | | Products | | 8,694.10 | | 10,380.40 | | 15,519.67 | | 360.09 | | | 31,612 | | 51,258 | | 60,640 | | 1,217 | | Consumer Care and Lighting | | 4,555.38 | | 5,625.04 | | 7,558.50 | | 175.37 | | | Others | | 2,680.73 | | 3,279.20 | | 7,062.74 | | 163.87 | | | | | | | | | | | | | | | | | | | | | | Total | | 81,352.50 | | 106,106.88 | | 149,431.33 | | 3,467.08 | | | 149,431 | | 197,428 | | 254,564 | | 5,004 | | | | | | | | | | | | | | | | | | | | | Cost of revenues: | | | Global IT Services and Products | | | IT Services | | 33,780.07 | | 46,986.13 | | 66,817.77 | | 1,550.30 | | | BPO Services | | 4,740.25 | | 5,809.54 | | 6,172.97 | | 143.22 | | | India and AsiaPac IT Services and Products | | | Services | | 2,679.35 | | 3,548.82 | | 4,611.64 | | 107.00 | | | | (76,488 | ) | | | (98,606 | ) | | | (129,769 | ) | | | (2,527 | ) | Products | | 7,814.82 | | 9,285.88 | | 13,943.47 | | 323.51 | | | | (25,980 | ) | | | (40,630 | ) | | | (48,407 | ) | | | (976 | ) | Consumer Care and Lighting | | 2,926.22 | | 3,556.43 | | 4,905.14 | | 113.81 | | | Others | | 1,914.06 | | 2,459.93 | | 5,749.25 | | 133.39 | | | | | | | | | | | | | | | | | | | | | | Total | | 53,854.77 | | 71,646.73 | | 102,200.24 | | 2,371.23 | | | | (102,468 | ) | | | (139,236 | ) | | | (178,176 | ) | | (3,503 | ) | | | | | | | | | | | | | | | | | | | | Gross profit | | 27,497.73 | | 34,460.15 | | 47,231.09 | | 1,095.85 | | | 46,963 | | 58,192 | | 76,388 | | 1,502 | | Operating expenses: | | | Selling and marketing expenses | | | (5,466.26 | ) | | | (6,764.35 | ) | | | (9,172.92 | ) | | | (212.83 | ) | | | (9,173 | ) | | | (13,807 | ) | | | (17,762 | ) | | | (349 | ) | General and administrative expenses | | | (3,743.60 | ) | | | (5,238.97 | ) | | | (7,639.23 | ) | | | (177.24 | ) | | | (7,639 | ) | | | (10,820 | ) | | | (14,696 | ) | | | (289 | ) | Research and development expenses | | | (273.54 | ) | | | (202.26 | ) | | | (267.71 | ) | | | (6.21 | ) | | Amortization of intangible assets (Note 10) | | | (140.29 | ) | | | (63.95 | ) | | | (269.23 | ) | | | (6.25 | ) | | | (269 | ) | | | (616 | ) | | | (1,488 | ) | | | (29 | ) | Foreign exchange losses, net | | | (92.12 | ) | | | (288.49 | ) | | | (235.69 | ) | | | (5.47 | ) | | Foreign exchange gains/(losses), net | | | | (197 | ) | | 125 | | | (1,596 | ) | | | (31 | ) | Others, net | | 75.29 | | 70.14 | | 221.48 | | 5.14 | | | 221 | | 640 | | 544 | | 11 | | | | | | | | | | | | | | | | | | | | | Operating income | | 17,857.21 | | 21,972.27 | | 29,867.79 | | 692.99 | | | 29,906 | | 33,714 | | 41,390 | | 814 | | Loss on direct issue of stock by subsidiary | | | (206.58 | ) | | — | | — | | — | | | Other income, net (Note 19) | | 798.82 | | 1,275.86 | | 2,666.84 | | 61.87 | | | 2,628 | | 2,167 | | | (1,816 | ) | | | (36 | ) | Equity in earnings of affiliates (Note 13) | | 158.08 | | 287.97 | | 317.88 | | 7.38 | | | 318 | | 257 | | 362 | | 7 | | | | | | | | | | | | | | | | | | | | | Income before income taxes , minority interest and cumulative effect of change in accounting principle | | 18,607.53 | | 23,536.10 | | 32,852.51 | | 762.24 | | | Income before income taxes, minority interest and cumulative effect of change in accounting principle | | | 32,852 | | 36,138 | | 39,936 | | 785 | | Income taxes (Note 21) | | | (2,693.57 | ) | | | (3,264.73 | ) | | | (3,722.61 | ) | | | (86.37 | ) | | | (3,723 | ) | | | (3,873 | ) | | | (5,422 | ) | | | (107 | ) | Minority interest | | | (81.21 | ) | | | (1.40 | ) | | — | | — | | | — | | | (24 | ) | | | (99 | ) | | | (2 | ) | | | | | | | | | | | | | | | | | | | | Income before cumulative effect of change in accounting principle | | 15,832.75 | | 20,269.97 | | 29,129.90 | | 675.87 | | | 29,129 | | 32,241 | | 34,415 | | 677 | | Cumulative effect of change in accounting principle (Note 2) | | — | | — | | 39.09 | | 0.90 | | | 39 | | — | | — | | — | | | | | | | | | | | | | | | | | | | | | Net income | | Rs. | 15,832.75 | | Rs. | 20,269.97 | | Rs. | 29,168.99 | | 676.77 | | | Rs. | 29,168 | | Rs. | 32,241 | | Rs. | 34,415 | | $ | 677 | | | | | | | | | | | | | | | | | | | | | Earnings per equity share: (Note 23) | | | Basic | | | Income before cumulative effect of change in accounting principle | | 11.38 | | 14.41 | | 20.42 | | 0.47 | | | 20.42 | | 22.23 | | 23.67 | | 0.47 | | Cumulative effect of change in accounting principle | | — | | — | | 0.03 | | 0.00 | | | 0.03 | | — | | — | | — | | Net income | | 11.38 | | 14.41 | | 20.45 | | 0.47 | | | 20.45 | | 22.23 | | 23.67 | | 0.47 | | | | | Diluted | | | Income before cumulative effect of change in accounting principle | | 11.29 | | 14.24 | | 20.17 | | 0.47 | | | 20.17 | | 22.16 | | 23.63 | | 0.46 | | Cumulative effect of change in accounting principle | | — | | — | | 0.03 | | 0.00 | | | 0.03 | | — | | — | | — | | Net income | | 11.29 | | 14.24 | | 20.20 | | 0.47 | | | 20.20 | | 22.16 | | 23.63 | | 0.46 | | Weighted-average number of equity shares used in computing earnings per equity share: | | | Basic | | 1,391,554,372 | | 1,406,505,974 | | 1,426,709,163 | | | 1,426,709,163 | | 1,450,604,615 | | 1,454,010,222 | | Diluted | | 1,399,846,782 | | 1,423,679,230 | | 1,444,467,557 | | | 1,444,467,557 | | 1,454,780,607 | | 1,456,290,715 | |
See accompanying notes to the consolidated financial statements. 10796
WIPRO LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME (in millions, except share and per share data) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Accumulated | | | | | | | | | | | | | | | | | | | | | | Additional | | | | | | | | | | | Other | | | | | | | Equity Shares held by a | | | Total | | | | Equity Shares | | | Paid in | | | Deferred Stock | | | Comprehensive | | | Comprehensive | | | Retained | | | Controlled Trust | | | Stockholders’ | | | | No. of Shares | | | Amount | | | Capital | | | Compensation | | | Income | | | Income/(loss) | | | Earnings | | | No. of Shares | | | Amount | | | Equity | | Balance as of March 31, 2004 | | | 1,396,554,912 | | | | 465.52 | | | | 7,176.68 | | | | (9.88 | ) | | | | | | | 918.64 | | | | 37,812.87 | | | | (7,887,060 | ) | | | (0.08 | ) | | | 46,363.75 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash dividends (Note 17) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (7,575.99 | ) | | | — | | | | — | | | | (7,575.99 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Issuance of equity shares on exercise of options | | | 10,586,132 | | | | 10.36 | | | | 2,566.77 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 2,577.13 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Equity shares forfeited, net of issuance by Trust | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (6,000 | ) | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Stock split effected in the form of stock dividend (Note 16) | | | — | | | | 931.26 | | | | — | | | | — | | | | — | | | | — | | | | (931.26 | ) | | | — | | | | — | | | | — | | Compensation related to employee stock incentive plan, net of reversals (Note 22) | | | — | | | | — | | | | 3,529.12 | | | | (3,529.12 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | Amortization of compensation related to employee stock incentive plan | | | — | | | | — | | | | — | | | | 353.86 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 353.86 | | Comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income | | | — | | | | — | | | | — | | | | — | | | Rs. | 15,832.75 | | | | — | | | | 15,832.75 | | | | — | | | | — | | | | 15,832.75 | | Other comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Translation adjustments | | | — | | | | — | | | | — | | | | — | | | | 29.69 | | | | — | | | | — | | | | — | | | | — | | | | — | | Unrealized gain on investment securities, net (net of tax effect of Rs. 59.59) | | | — | | | | — | | | | — | | | | — | | | | 92.92 | | | | — | | | | — | | | | — | | | | — | | | | — | | Unrealized loss on cash flow hedging derivatives, net | | | — | | | | — | | | | — | | | | — | | | | (945.16 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total other comprehensive income/ (loss) | | | | | | | | | | | | | | | | | | | (822.55 | ) | | | (822.55 | ) | | | — | | | | — | | | | — | | | | (822.55 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Comprehensive income | | | | | | | | | | | | | | | | | | Rs. | 15,010.20 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance as of March 31, 2005 | | | 1,407,141,044 | | | Rs. | 1,407.14 | | | Rs. | 13,272.57 | | | Rs. | (3,185.14 | ) | | | | | | Rs. | 96.09 | | | Rs. | 45,138.37 | | | | (7,893,060 | ) | | Rs. | (0.08 | ) | | Rs. | 56,728.95 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash dividends (Note 17) | | | — | | | | — | | | | — | | | | — | | | | | | | | — | | | | (3,997.74 | ) | | | — | | | | — | | | | (3,997.74 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Issuance of equity shares on exercise of options | | | 18,613,223 | | | | 32.58 | | | | 4,671.40 | | | | — | | | | | | | | — | | | | — | | | | — | | | | — | | | | 4,703.98 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Stock split effected in the form of stock dividend (Note 16) | | | — | | | | 1,411.79 | | | | (1,161.75 | ) | | | — | | | | | | | | — | | | | (250.04 | ) | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Equity shares granted to employees by Trust | | | — | | | | — | | | | — | | | | — | | | | | | | | — | | | | — | | | | 24,000 | | | | — | | | | — | | Reversals related to employee stock incentive plan, net of issuances (Note 22) | | | — | | | | — | | | | (330.49 | ) | | | 298.94 | | | | | | | | — | | | | — | | | | — | | | | — | | | | (31.55 | ) | Amortization of compensation related to employee stock incentive plan | | | — | | | | — | | | | — | | | | 683.78 | | | | | | | | — | | | | — | | | | — | | | | — | | | | 683.78 | | Excess income tax benefit related to employee stock incentive plan | | | — | | | | — | | | | 69.34 | | | | — | | | | | | | | — | | | | — | | | | — | | | | — | | | | 69.34 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income | | | — | | | | — | | | | — | | | | — | | | Rs. | 20,269.97 | | | | — | | | | 20,269.97 | | | | — | | | | — | | | | 20,269.97 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Other comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Translation adjustments | | | — | | | | — | | | | — | | | | — | | | | 19.97 | | | | — | | | | — | | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Additional | | | | | | | | | | | Accumulated Other | | | | | | | Equity Shares held by | | | Total | | | | Equity Shares | | | Paid in | | | Deferred Stock | | | Comprehensive | | | Comprehensive | | | Retained | | | controlled Trusts | | | Stockholders’ | | | | No. of Shares | | | Amount | | | Capital | | | Compensation | | | Income | | | Income/(loss) | | | Earnings | | | No. of Shares | | | Amount | | | Equity | | Balance as of March 31, 2006 | | | 1,425,754,267 | | | Rs. | 2,852 | | | Rs. | 16,521 | | | Rs. | (2,202) | | | | | | | Rs. | 434 | | | Rs. | 61,161 | | | | (7,869,060 | ) | | Rs. | — | | | Rs. | 78,764 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash dividends (Note 17) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (16,382 | ) | | | — | | | | — | | | | (16,382 | ) | Elimination of deferred stock compensation balance on adoption of SFAS No. 123 (R) (Note 2) | | | — | | | | — | | | | (2,202 | ) | | | 2,202 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | Cumulative effect of change in accounting principle (Note 2) | | | — | | | | — | | | | (39 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (39 | ) | Issuance of equity shares on exercise of options (Note 22) | | | 32,095,328 | | | | 64 | | | | 8,830 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 8,894 | | Issuance of equity shares on exercise of options through non-recourse note (Note 22) | | | 1,150,055 | | | | 2 | | | | (2 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | Equity shares forfeited, net of issuance by Trust | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (92,700 | ) | | | — | | | | — | | Compensation cost related to employee stock incentive plan | | | — | | | | — | | | | 1,336 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 1,336 | | Excess income tax benefit related to employees stock incentive plan | | | — | | | | — | | | | 65 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 65 | | Comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income | | | — | | | | — | | | | — | | | | — | | | | 29,169 | | | | — | | | | 29,169 | | | | — | | | | — | | | | 29,169 | | Other comprehensive income / (loss) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | Translation adjustments (Note 15) | | | — | | | | — | | | | — | | | | — | | | | (131 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | Unrealized gain on investment securities, net (net of tax effect of Rs. 25) | | | — | | | | — | | | | — | | | | — | | | | 45 | | | | — | | | | — | | | | — | | | | — | | | | — | | Unrealized gain on cash flow hedging derivatives, net (Note 14) | | | — | | | | — | | | | — | | | | — | | | | (130 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total other comprehensive loss | | | — | | | | — | | | | — | | | | — | | | | (216 | ) | | | (216 | ) | | | — | | | | — | | | | — | | | | (216 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Comprehensive income | | | — | | | | — | | | | — | | | | — | | | | 28,953 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Adjustment to initially apply SFAS No. 158 (net of tax effect of Rs. (18)) | | | — | | | | — | | | | — | | | | — | | | | — | | | | (124 | ) | | | — | | | | — | | | | — | | | | (124 | ) | Balance as of March 31, 2007 | | | 1,458,999,650 | | | Rs. | 2,918 | | | Rs. | 24,508 | | | Rs. | — | | | | — | | | Rs. | 94 | | | Rs. | 73,948 | | | | (7,961,760 | ) | | Rs. | — | | | Rs. | 101,468 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash dividends (Note 17) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (5,123 | ) | | | — | | | | — | | | | (5,123 | ) | Issuance of equity shares on exercise of options (Note 22) | | | 2,453,670 | | | | 5 | | | | 687 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 692 | | Compensation cost related to employee stock incentive plan | | | — | | | | — | | | | 1,076 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 1,076 | | Gain on sale of long-lived assets to the controlling shareholder,(net of tax effect of Rs. 52) | | | — | | | | — | | | | 102 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 102 | | Excess income tax benefit related to employees stock incentive plan | | | — | | | | — | | | | 68 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 68 | | Comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
10897
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Accumulated | | | | | | | | | | | | | | | | | | | | | | Additional | | | | | | | | | | | Other | | | | | | | Equity Shares held by a | | | Total | | | | Equity Shares | | | Paid in | | | Deferred Stock | | | Comprehensive | | | Comprehensive | | | Retained | | | Controlled Trust | | | Stockholders’ | | | | No. of Shares | | | Amount | | | Capital | | | Compensation | | | Income | | | Income/(loss) | | | Earnings | | | No. of Shares | | | Amount | | | Equity | | Unrealized gain on investment securities, net (net of tax effect of Rs. 114.94) | | | — | | | | — | | | | — | | | | — | | | | 229.11 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Unrealized gain on cash flow hedging derivatives, net | | | — | | | | — | | | | — | | | | — | | | | 88.53 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total other comprehensive income | | | — | | | | — | | | | — | | | | — | | | | 337.61 | | | | 337.61 | | | | — | | | | — | | | | — | | | | 337.61 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Comprehensive income | | | | | | | | | | | | | | | | | | Rs. | 20,607.58 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance as of March 31, 2006 | | | 1,425,754,267 | | | Rs. | 2,851.51 | | | Rs. | 16,521.07 | | | Rs. | (2,202.42 | ) | | | | | | Rs. | 433.70 | | | Rs. | 61,160.56 | | | | (7,869,060 | ) | | Rs. | (0.08 | ) | | Rs. | 78,764.34 | | | | | �� | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash dividends (Note 17) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (16,381.63 | ) | | | — | | | | — | | | | (16,381.63 | ) | Elimination of deferred stock compensation balance on adoption of SFAS No. 123 (R) | | | — | | | | — | | | | (2,202.42 | ) | | | 2,202.42 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cumulative effect of change in accounting principle (Note 2) | | | — | | | | — | | | | (39.09 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (39.09 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Issuance of equity shares on exercise of options | | | 32,095,328 | | | | 64.19 | | | | 8,830.25 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 8,894.44 | | Issuance of equity shares on exercise of options through non-recourse note (Note 22) | | | 1,150,055 | | | | 2.30 | | | | (2.30 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Equity shares forfeited, net of issuance by Trust | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (92,700 | ) | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Compensation cost related to employee stock incentive plan | | | — | | | | — | | | | 1,336.40 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 1,336.40 | | Excess income tax benefit related to employees stock incentive plan | | | — | | | | — | | | | 64.54 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 64.54 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Net income | | | — | | | | — | | | | — | | | | — | | | | 29,168.99 | | | | — | | | | 29,168.99 | | | | — | | | | — | | | | 29,168.99 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Other comprehensive loss | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Translation adjustments | | | — | | | | — | | | | — | | | | — | | | | (130.81 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | Unrealized gain on investment securities, net (net of tax effect of Rs. 25.48) | | | — | | | | — | | | | — | | | | — | | | | 45.06 | | | | — | | | | — | | | | — | | | | — | | | | — | | Unrealized gain on cash flow hedging derivatives, net (Note 14) | | | — | | | | — | | | | — | | | | — | | | | (130.48 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total other comprehensive loss | | | — | | | | — | | | | — | | | | — | | | | (216.23 | ) | | | (216.23 | ) | | | — | | | | — | | | | — | | | | (216.23 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Comprehensive income | | | — | | | | — | | | | — | | | | — | | | | 28,952.76 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Adjustment to initially apply SFAS No. 158 (net of tax effect of Rs. 18.05) | | | — | | | | — | | | | — | | | | — | | | | — | | | | (123.70 | ) | | | — | | | | — | | | | — | | | | (123.70 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance as of March 31, 2007 | | | 1,458,999,650 | | | | 2,918.00 | | | | 24,508.45 | | | | — | | | | | | | | 93.77 | | | | 73,947.92 | | | | (7,961,760 | ) | | | (0.08 | ) | | | 101,468.06 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance as of March 31, 2007 ($) (Unaudited) | | | | | | | 67.70 | | | | 568.64 | | | | — | | | | | | | | 2.18 | | | | 1,715.72 | | | | | | | | — | | | | 2,354.24 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Additional | | | | | | | | | | | Accumulated Other | | | | | | | Equity Shares held by | | | Total | | | | Equity Shares | | | Paid in | | | Deferred Stock | | | Comprehensive | | | Comprehensive | | | Retained | | | controlled Trusts | | | Stockholders’ | | | | No. of Shares | | | Amount | | | Capital | | | Compensation | | | Income | | | Income/(loss) | | | Earnings | | | No. of Shares | | | Amount | | | Equity | | Net income | | | — | | | | — | | | | — | | | | — | | | | 32,241 | | | | — | | | | 32,241 | | | | — | | | | — | | | | 32,241 | | Other comprehensive income / (loss) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Translation adjustments (Note 15) | | | — | | | | — | | | | — | | | | — | | | | 110 | | | | — | | | | — | | | | — | | | | — | | | | — | | Unrecognized actuarial loss, net [net of tax effect of Rs. (17) ] | | | — | | | | — | | | | — | | | | — | | | | (59 | ) | �� | | — | | | | — | | | | — | | | | — | | | | — | | Unrealized loss on investment securities, net [net of tax effect of Rs. (25)] | | | — | | | | — | | | | — | | | | — | | | | (52 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | Unrealized loss on cash flow hedging derivatives, net (Note 14 ) | | | — | | | | — | | | | — | | | | — | | | | (1,169 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total other comprehensive loss | | | — | | | | — | | | | — | | | | — | | | | (1,170 | ) | | | (1,170 | ) | | | — | | | | — | | | | — | | | | (1,170 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Comprehensive income | | | — | | | | — | | | | — | | | | — | | | | 31,071 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance as of March 31, 2008 | | | 1,461,453,320 | | | Rs. | 2,923 | | | Rs. | 26,441 | | | Rs. | — | | | | | | | Rs. | (1,076) | | | Rs. | 101,066 | | | | (7,961,760 | ) | | Rs. | — | | | Rs. | 129,354 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Cash dividend (Note 17) | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (6,839 | ) | | | — | | | | — | | | | (6839 | ) | Issuance of equity shares to wholly owned trust (Note 17) | | | 968,803 | | | | 2 | | | | 540 | | | | — | | | | — | | | | — | | | | — | | | | (968,803 | ) | | | (542 | ) | | | — | | Issuance of equity shares on exercise of options (Note 22) | | | 2,558,623 | | | | 5 | | | | 431 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 436 | | Compensation cost related to employee stock incentive plan (Note 22) | | | — | | | | — | | | | 1,595 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 1,595 | | Excess income tax benefit related to employee stock incentive plan | | | — | | | | — | | | | 18 | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | 18 | | Comprehensive income / (loss) | | | | | | | | | | | | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | Net income | | | — | | | | — | | | | — | | | | — | | | | 34,415 | | | | — | | | | 34,415 | | | | — | | | | — | | | | 34,415 | | Other comprehensive income / (loss) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Translation adjustments (Note 15) | | | — | | | | — | | | | — | | | | — | | | | 4,771 | | | | — | | | | — | | | | — | | | | — | | | | — | | Unrecognized actuarial gain, net [net of tax effect of Rs. 27] | | | — | | | | — | | | | — | | | | — | | | | 101 | | | | — | | | | — | | | | — | | | | — | | | | — | | Unrealized loss on investment securities, net (net of tax effect of Rs. (131)) (Note 8) | | | — | | | | — | | | | — | | | | — | | | | (260 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | Unrealized loss on cash flow hedging derivatives, net (net of tax effect of Rs. (2,353)) (Note 14) | | | — | | | | — | | | | — | | | | — | | | | (13,409 | ) | | | — | | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total other comprehensive loss | | | | | | | | | | | | | | | — | | | | (8,797 | ) | | | (8,797 | ) | | | — | | | | — | | | | — | | | | (8,797 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Comprehensive income | | | | | | | | | | | | | | | — | | | | 25,618 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance as of March 31, 2009 | | | 1,464,980,746 | | | Rs. | 2,930 | | | Rs. | 29,025 | | | Rs. | — | | | | | | | Rs. | (9,873) | | | Rs. | 128,642 | | | | (8,930,563 | ) | | Rs. | (542 | ) | | Rs. | 150,182 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance as of March 31, 2009 ($) | | | | | | $ | 58 | | | $ | 571 | | | $ | — | | | | | | | $ | (194 | ) | | $ | 2,529 | | | | | | | $ | (11 | ) | | $ | 2,952 | |
See accompanying notes to the consolidated financial statements 10998
WIPRO LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended March 31, | | | Year ended March 31, | | | | 2005 | | 2006 | | 2007 | | 2007 | | | 2007 | | 2008 | | 2009 | | 2009 | | | | Convenience | | | Convenience | | | | translation into | | | translation into | | | | US$ | | | US$ | | | | (Unaudited) | | | (Unaudited) | | Cash flows from operating activities: | | | Net income | | Rs. | 15,832.75 | | Rs. | 20,269.97 | | Rs. | 29,168.99 | | 676.79 | | | Rs. | 29,168 | | Rs. | 32,241 | | Rs. | 34,415 | | $ | 677 | | Adjustments to reconcile net income to net cash provided by operating activities: | | | Gain on sale of property, plant and equipment | | | (108.82 | ) | | | (7.75 | ) | | | (9.98 | ) | | | (0.23 | ) | | | (10 | ) | | | (20 | ) | | | (28 | ) | | | (1 | ) | Cumulative effect of change in accounting principle | | — | | — | | | (39.09 | ) | | | (0.91 | ) | | | (39 | ) | | — | | — | | — | | Depreciation and amortization | | 2,578.25 | | 3,195.03 | | 4,309.28 | | 99.98 | | | 4,309 | | 6,067 | | 8,357 | | 164 | | Deferred tax charge/(benefit) | | | (83.05 | ) | | 14.97 | | | (28.76 | ) | | | (0.67 | ) | | Unrealized exchange gain | | — | | 74.71 | | 470.20 | | 10.91 | | | Gain on sale of investment securities, net | | — | | | (237.72 | ) | | | (549.27 | ) | | | (12.74 | ) | | Loss on direct issue of stock by subsidiary | | 206.58 | | — | | — | | — | | | Deferred tax expense/(benefit) | | | | (29 | ) | | | (409 | ) | | | (799 | ) | | | (16 | ) | Unrealized exchange (gain) / loss | | | 470 | | | (596 | ) | | 6,770 | | 133 | | Deferred cancellation losses relating to roll-over cash flow hedges | | | — | | — | | | (11,357 | ) | | | (223 | ) | Cancellation losses relating to net investment in foreign operations | | | — | | — | | | (839 | ) | | | (16 | ) | Gain on sale of investment securities | | | | (549 | ) | | | (771 | ) | | | (681 | ) | | | (13 | ) | Stock based compensation | | 353.86 | | 652.23 | | 1,336.40 | | 31.01 | | | 1,336 | | 1,076 | | 1,595 | | 31 | | Excess income tax benefit related to employee stock incentive plan | | — | | 69.34 | | — | | — | | | Equity in earnings of affiliates | | | (158.08 | ) | | | (287.97 | ) | | | (317.88 | ) | | | (7.38 | ) | | | (318 | ) | | | (257 | ) | | | (362 | ) | | | (7 | ) | Minority interest | | 81.21 | | 1.40 | | — | | — | | | — | | 24 | | 99 | | 2 | | Changes in operating assets and liabilities: | | | Accounts receivable | | | (3,833.42 | ) | | | (5,362.82 | ) | | | (6,551.18 | ) | | | (152.00 | ) | | Costs and earnings in excess of billings on contracts in progress | | | (639.81 | ) | | | (1,596.41 | ) | | | (760.42 | ) | | | (17.64 | ) | | Accounts receivable, net of allowances | | | | (6,167 | ) | | | (7,720 | ) | | | (6,460 | ) | | | (127 | ) | Unbilled revenue | | | | (760 | ) | | | (3,208 | ) | | | (5,538 | ) | | | (109 | ) | Inventories | | | (330.97 | ) | | | (295.45 | ) | | | (1,060.34 | ) | | | (24.60 | ) | | | (1,060 | ) | | | (1,842 | ) | | | (1,513 | ) | | | (30 | ) | Other assets | | 856.35 | | | (2,284.40 | ) | | | (1,767.84 | ) | | | (41.02 | ) | | | (2,152 | ) | | | (7,738 | ) | | | (4,120 | ) | | | (81 | ) | Accounts payable | | 980.64 | | 28.23 | | 1,497.43 | | 34.74 | | | 1,497 | | 2,211 | | 3,707 | | 73 | | Accrued expenses and employee costs | | 2,317.30 | | 3,990.98 | | 892.79 | | 20.71 | | | 893 | | 4,157 | | 8,204 | | 161 | | Advances from customers | | 316.89 | | 336.62 | | 1,383.51 | | 32.10 | | | Advances from customers and unearned revenue | | | 1,384 | | 3,153 | | 3,604 | | 71 | | Other liabilities | | 636.76 | | 1,630.71 | | 2,187.77 | | 50.76 | | | 2,188 | | | (1,773 | ) | | 1,778 | | 35 | | | | | | | | | | | | | | | | | | | | | Net cash provided by operating activities | | 19,006.44 | | 20,191.67 | | 30,161.61 | | 699.81 | | | 30,161 | | 24,595 | | 36,832 | | 724 | | | | | | | | | | | | | | | | | | | | | | | | Cash flows from investing activities: | | | Expenditure on property, plant and equipment | | | (6,612.81 | ) | | | (7,485.94 | ) | | | (11,391.63 | ) | | | (264.31 | ) | | | (11,392 | ) | | | (14,674 | ) | | | (16,592 | ) | | | (326 | ) | Proceeds from sale of property, plant and equipment | | 322.00 | | 113.25 | | 148.87 | | 3.45 | | | 149 | | 479 | | 358 | | 7 | | Dividends received from affiliates | | 8.40 | | 14.12 | | — | | — | | | Purchase of investments | | | (70,698.67 | ) | | | (58,706.63 | ) | | | (123,725.63 | ) | | | (2,870.66 | ) | | | (123,726 | ) | | | (231,684 | ) | | | (342,717 | ) | | | (6,737 | ) | Proceeds from sale of investments | | 66,383.54 | | 52,043.18 | | 121,541.75 | | 2,820.00 | | | 121,542 | | 250,013 | | 341,687 | | 6,717 | | Investments in inter-corporate deposits | | — | | | (500.00 | ) | | | (250.00 | ) | | | (5.80 | ) | | Redemption of inter-corporate deposits | | — | | — | | 100.00 | | 2.32 | | | Purchase of intangible assets | | | (280.54 | ) | | — | | — | | — | | | Investments in interest–bearing deposits with corporates | | | | (250 | ) | | | (500 | ) | | | (3,750 | ) | | | (74 | ) | Redemption of interest-bearing deposits with corporates | | | 100 | | 650 | | — | | — | | Payment for acquisitions, net of cash acquired | | | (617.99 | ) | | | (2,777.03 | ) | | | (7,800.14 | ) | | | (180.98 | ) | | | (7,800 | ) | | | (32,789 | ) | | | (6,679 | ) | | | (131 | ) | | | | | | | | | | | | | | | | | | | | Net cash used in investing activities | | | (11,496.07 | ) | | | (17,299.05 | ) | | | (21,376.78 | ) | | | (495.98 | ) | | Net cash provided by / (used in) investing activities | | | | (21,377 | ) | | | (28,505 | ) | | | (27,693 | ) | | | (544 | ) | | | | | | | | | | | | | | | | | | | | | | | Cash flows from financing activities: | | | Proceeds from issuance of equity shares | | 2,577.13 | | 4,766.79 | | 8,894.44 | | 206.37 | | | 8,894 | | 692 | | 436 | | 9 | | Proceeds from issuance of equity shares by a subsidiary | | 266.25 | | — | | — | | — | | | — | | 55 | | — | | — | | Proceeds from/(repayments of) short-term borrowing from banks, net | | | (405.08 | ) | | | (196.06 | ) | | 1,825.19 | | 42.35 | | | Repayment of long-term debt | | — | | | (268.36 | ) | | 146.78 | | 3.41 | | | Proceeds/(repayment) from/of short-term borrowings, net | | | 1,825 | | 21,370 | | 6,454 | | 127 | | Repayment of long-term debt and obligation under capital leases | | | — | | | (1,081 | ) | | | (460 | ) | | | (9 | ) | Proceeds from long-term debt | | | 147 | | 15,087 | | 425 | | 8 | | Payment of cash dividends | | | (7,575.99 | ) | | | (3,997.74 | ) | | | (8,873.30 | ) | | | (205.89 | ) | | | (8,873 | ) | | | (5,393 | ) | | | (6,829 | ) | | | (134 | ) | Movement in restricted cash relating to cash dividends | | — | | — | | | (7,237.88 | ) | | | (167.93 | ) | | | (7,238 | ) | | — | | — | | — | | Excess income tax benefit related to employee stock incentive plan | | — | | — | | 64.54 | | 1.50 | | | 65 | | 68 | | 18 | | — | | | | | | | | | | | | | | | | | | | | | Net cash provided by/(used in) financing activities | | | (5,137.69 | ) | | 304.63 | | | (5,180.23 | ) | | | (120.19 | ) | | Net cash provided / (used in) financing activities | | | | (5,180 | ) | | 30,798 | | 44 | | 1 | | | | | | | | | | | | | | | | | | | | | | | | Net increase in cash and cash equivalents during the year | | 2,372.68 | | 3,197.25 | | 3,604.60 | | 83.63 | | | 3,604 | | 26,888 | | 9,184 | | 181 | | Effect of exchange rate changes on cash | | 0.92 | | | (10.31 | ) | | | (50.13 | ) | | | (1.16 | ) | | | (50 | ) | | | (30 | ) | | 663 | | 13 | | Cash and cash equivalents at the beginning of the year | | 3,297.16 | | 5,670.76 | | 8,857.70 | | 205.52 | | | 8,858 | | 12,412 | | 39,270 | | 773 | | | | | | | | | | | | | | | | | | | | | Cash and cash equivalents at the end of the year | | Rs. | 5,670.76 | | Rs. | 8,857.70 | | Rs. | 12,412.17 | | 287.99 | | | Rs. | 12,412 | | Rs. | 39,270 | | Rs. | 49,117 | | $ | 966 | | | | | | | | | | | | | | | | | | | | | | | | Supplementary information: | | | Cash paid for interest | | Rs. | 56.12 | | Rs. | 34.95 | | Rs. | 124.63 | | 2.89 | | | Rs. | 125 | | Rs. | 1,440 | | Rs. | 2,400 | | $ | 47 | | Cash paid for taxes | | 2,354.70 | | 4,542.59 | | 4,251.82 | | 98.65 | | | Cash paid for income taxes | | | 4,252 | | 5,459 | | 7,798 | | 153 | |
See accompanying notes to the consolidated financial statements 11099
WIPRO LIMITED AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (in millions, except share data and where otherwise stated) 1. Overview Wipro Limited (Wipro), together with its subsidiaries (collectively, the Company) is a leading India based provider of IT Services, and Products, including Business Process Outsourcing (BPO) services, globally. Further, Wipro has other businesses such as India and AsiaPac IT Services and Products, and Consumer Care and Lighting.Lighting and Infrastructure Engineering. Wipro is headquartered in Bangalore, India. 2. Significant Accounting Policies The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses and disclosure of contingent assets and liabilities. Actual results could differ from these estimates. Basis of preparation of financial statements. The accompanying consolidated financial statements of the Company have been prepared in accordance with U.S. GAAP. Functional currency and exchange rate translation. The functional currency of Wipro and its domestic subsidiaries is the Indian rupee, the national currency of India. The functional currency of theWipro’s foreign subsidiaries is determined based on an evaluation of the individual and collective economic factors as discussed in Statement of Financial Accounting Standard (SFAS) No. 52, Foreign Currency Translation. The translationassets and liabilities of thesubsidiaries that have local functional currency of these foreign subsidiariesare translated into Indian rupee is performed for balance sheet accounts usingrupees at the exchange rate in effect at the balance sheet date and for revenuedate. Revenue and expense accounts using an appropriateare translated at monthly weighted-average exchange rate for the respective periods. The gains or losses resulting from such translation are reported as a separate component of stockholders’ equity.equity under accumulated other comprehensive income. Foreign currency transactions are translated into the functional currency at the rates of exchange prevailing on the date of respective transactions. Monetary assets and liabilities in foreign currency are translated into the functional currency at the exchange rates prevailing on the balance sheet date. The resulting exchange gains/(losses) are included in the statement of income. Gains/(losses) relating to debt denominated in foreign currency are included in Other income, net. All other exchange gains/(losses) are reported in comprehensive income/(loss). Convenience translation. The accompanying consolidated financial statements have been reported in Indian rupees.rupees, the national currency of India. Solely for the convenience of the readers, the financial statements as of and for the year ended March 31, 2007,2009, have been translated into U.S.US dollars at the noon buying rate incertified foreign exchange rates published by Federal Reserve Board of New York City on March 30, 2007, for cable transfers in Indian rupees, as certified for customs purposes by the Federal Reserve Bank of New York31, 2009, of $ 1 = Rs. 43.10.50.87. No representation is made that the Indian rupee amounts have been, could have been or could be converted into U.S.United States dollars at such a rate or any other rate. Recently adopted accounting pronouncements.In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. SFAS No. 157 defines “fair value”, establishes a framework for the measurement of fair value and enhances disclosures about fair value measurements. The statement does not require any new fair value measures but its provisions apply when fair value measurements are performed as required or permitted under other accounting pronouncements. In February 2008, the FASB approved FASB Staff Position No.157-2, “Effective Date of FASB statement No. 157”, which grants a one-year deferral of SFAS No. 157’s fair-value measurement requirements for non-financial assets and liabilities, except for items that are measured or disclosed at fair value in the financial statements on a recurring basis. Effective April 1, 2008, the Company adopted SFAS No. 157 for financial assets and liabilities recognized at fair value on a recurring basis. The partial adoption of SFAS No. 157 for financial assets and liabilities did not have a material impact on the Company’s financial position and results of operations. The valuation techniques required by SFAS No. 157 are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. These two types of inputs create the following fair value hierarchy: Level 1 | | Quoted prices for identical instruments in active markets. | | Level 2 | | Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. | | Level 3 | | Significant inputs to the valuation model are unobservable |
The Company adopted SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (SFAS No. 159) effective April 1, 2008. Adoption of SFAS No. 159 did not have a material effect on the Company’s consolidated financial statements. Principles of consolidation. The consolidated financial statements include the financial statements of Wipro and all of its subsidiaries, which are more than 50% owned and controlled. All inter-company accounts and transactions are eliminated on consolidation. The Company accounts for investments by the equity method where its investment in the voting stock gives it the ability to exercise significant influence over the investee. The Company does not consolidate entities where the minority shareholders have certain significant participative rights which provide for effective involvement in significant decisions in the ordinary course of business, Such investments are accounted by the equity method of accounting. 100
Cash equivalents. The Company considers investments in highly liquid investmentsinstruments that are purchased with remaining maturities, at the date of purchase/investment, of three months or less to be cash equivalents. Revenue recognition. Services.Revenue from services, as rendered, are recognized when persuasive evidence of an arrangement exists, the sales price is fixed or determinable and collectibility is reasonably assured. Revenues from software development services comprise revenues from time-and-material and fixed-price contracts. Revenue on time-and-material contracts is recognized as the related services are performed. Revenue from fixed-price, fixed-time frame contracts is recognized in accordance with the percentage of completion method. Guidance has been drawn from the Accounting Standards Executive Committee’s conclusion in paragraph 95 of Statement of Position (SOP) 97-2, Software Revenue Recognition, to account for revenue from fixed price arrangements for software development and 111
related services in conformity with SOP 81-1, Accounting for Performance of Construction-Type and Certain Production-Type Contracts. The input (cost expended) method has been used to measure progress towards completion as there is a direct relationship between input and productivity. Provisions for estimated losses on contracts-in-progress are recorded in the period in which such losses become probable based on the current contract estimates. Maintenance revenue is deferred and recognized ratably over the term of the agreement. Revenue from customer training, supportcertain service arrangement involving defined but dissimilar acts is generally recognized using the proportional performance method. Revenues from BPO Services are derived from both time-based and other servicesunit-priced contracts. Revenue is recognized as the related service is performed. Costs thatservices are incurred for aperformed, in accordance with the specific anticipated contract and that will result in no future benefits unlessterms of the contract is obtainedwith the customers. Revenue and costs attributable to certain process transition activities are deferred where such activities do not included in contract costs beforerepresent the receiptculmination of the contract. However, sucha separate earnings process. Such revenue and related costs are recognized ratably over the period in which the related services are performed. Deferred costs are limited to the amount of deferred only if the cost can be directly associated with a specific anticipated contract and the recoverability from that contract is deemed to be probable.revenues. Products.Revenue from sale of products is recognized when persuasive evidence of an arrangement exists, the product has been delivered in accordance with the sales contract, the sales price is fixed or determinable and collectibility is reasonably assured. Revenue from sales of equipment under sales-type lease is recorded at the inception of lease. The Company has adoptedrecords the gross finance receivable, unearned income and the estimated residual value of the leased equipment on consummation of sales-type lease. Residual values are estimated based upon the average expected proceeds to be received at the end of the lease term. Unearned income represents the excess of the gross finance receivable plus the estimated residual value over the sales price of the equipment. The Company recognizes unearned income as financing revenue using the interest method over the lease term. Revenue from sale of third-party software products is recognized in accordance with SOP 97-2, Software Revenue Recognition. In multiple element software arrangements, revenue is allocated to each element based on fair value. The fair value of elements within the scope of SOP 97-2 is determined using Vendor-Specific Objective Evidence (VSOE). In the absence of VSOE for all elements, the residual method is used where VSOE exists for all the undelivered elements. Where VSOE of the undelivered element cannot be determined, revenue for the delivered elements is deferred until the undelivered elements are delivered. If sufficient VSOE does not exist to allocate revenue to the elements and Post-Contract Customer Support (PCS) is the only undelivered element, the entire arrangement fee is recognized ratably over the PCS term. Since there is no reasonable basis of separating the license revenue from PCS, the entire revenue is classified as product revenues. Multiple Element.For all revenue arrangements with multiple deliverables, based on the guidance in EITF Issue No. 00-21 for all revenue arrangements with multiple deliverables. Based on this guidance, the Company recognizes revenues on the delivered products or services only if:
| • | | The revenue recognition criteria applicable to the unit of accounting is met; | | | • | | The delivered element has value to the customer on a standalone basis. The delivered unit will have value on a standalone basis if it is being sold separately by other vendors or the customer could resell the deliverable on a standalone basis; | | | • | | There is objective and reliable evidence of the fair value of the undelivered item(s); and | | | • | | If the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item(s) is considered probable and substantially in control of the Company. |
101
The delivered element has value to the customer on a standalone basis. The delivered unit will have value on a standalone basis if it is being sold separately by other vendors or the customer could resell the deliverable on a standalone basis;
There is objective and reliable evidence of the fair value of the undelivered item(s); and
If the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered item(s) is considered probable and substantially in control of the Company.
The arrangement consideration is allocated to the units of accounting based on their fair values. The revenue recognized for the delivered items is limited to the amount that is not contingent upon the delivery or performance of the undelivered items. In certain cases, the application of the contingent revenue provisions of EITF Issue No. 00-21 could result in recognizing a loss on the delivered element. In such cases, the cost recognized is limited to the amount of non-contingent revenues recognized and the balance costs are recorded as an asset and are reviewed for impairment based on the estimated net cash flows to be received for future deliverables under the contract. These costs are subsequently recognized on recognition of the revenue allocable to the balanceremaining deliverables. Revenues from BPO Services are derived from both time-based and unit-priced contracts. Revenue is recognized as the related services are performed, in accordance with the specific terms of the contract with the customers. Others. Revenues are shown net of excise duty, sales tax, value added tax, service tax and applicable discounts and allowances. Recurring operating costs are expensed as incurred. Certain upfront non-recurring costs incurred in the initial phases of outsourcing contracts and contract acquisition costs, are deferred and amortized usually on a straight line basis over the term of the contract. The Company periodically estimates the undiscounted cash flows from the arrangement and compares it with the unamortized costs. If the unamortized costs exceed the undiscounted cash flow, a loss is recognized. Costs that are incurred for a specific anticipated software development services contract and that will result in no future benefits unless the contract is obtained are not included in contract costs. However, such costs are deferred if the cost can be directly associated with a specific anticipated contract and the recoverability from that contract is deemed to be probable. When the Company receives advance payments from customers for sale of products or provision of services, such payments are reported as advances from customers until all conditions for revenue recognition are met. Volume discount.The Company accounts for volume discounts and pricing incentives to customers using the guidance in EITF Issue 01-09, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products). The discount terms in the Company’s arrangements with customers generally entitle the customer to discounts, if the customer completes a specified level of revenue transactions. In some arrangements, the level of discount varies with increases in the levels of revenue transactions. The Company recognizes discount obligations as a reduction of revenue based on the ratable allocation of the discount to each of the underlying revenue transactions that result in progress by the customer toward earning the discount. The Company recognizes the liability based on its estimate of the customer’s future purchases. If the Company cannot reasonably estimate the customer’s future purchases, then the liability is recorded based on the maximum potential level of discount. The Company recognizes changes in the estimated amount of obligations for discounts using a cumulative catch-up adjustment. 112
Warranty costs.The Company accrues the estimated cost of warranties at the time when the revenue is recognized. The accruals are based on the Company’s historical experience of material usage and service delivery costs. Shipping and handling costs.Shipping and handling costs are included in selling and marketing expenses. Inventories. Inventories are stated at the lower of cost and market value. Cost is determined using the weighted-average method for all categories of inventories. Investment securities. The Company classifies its debt and equity securities in one of the three categories: trading, held-to-maturity or available-for-sale, at the time of purchase and re-evaluates such classifications as of each balance sheet date. Trading and available-for-sale securities are recorded at fair value. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts. Unrealized holding gains and losses on trading securities are included in income. Temporary unrealized holding gains and losses, net of the related tax effect, on available-for-sale securities are excluded from income and are reported as a part of other comprehensive incomeincome/(loss) in stockholders’ equity until realized. Realized gains and losses from the sale of trading and available-for-sale securities are determined on a first-in-first out basis and are included in income. A decline in the fair value of any available-for-sale or held-to-maturity security below cost that is deemed to be other than temporary results in a reduction in carrying amount to fair value with a charge to the income statement. Fair value for mutual fund units is based on published per unit value, which is the basis for current transactions. Non-readily marketable equity securities for which there is no readily determinable fair value are recorded at cost, subject to an impairment charge to the income statement for any other than temporary decline in value. Investments in affiliates. The Company’s equity in the earnings/(losses) of affiliates is included in the statement of income and the Company’s share of net assets of affiliates is included in the balance sheet.sheet, subject to an impairment charge to the income statement for any other than temporary decline in value. 102
Shares issued by subsidiary/affiliate. The issuance of stock by a subsidiary/affiliate to third parties reduces the proportionate ownership interest in the investee. Unless the issuance of such stock is part of a broader corporate reorganization or unless realization is not assured, the Company recognizes a gain or loss, equal to the difference between the issuance price per share and the Company’s carrying amount per share. Such gain or loss is recognized in the statement of income when the transaction occurs. Property, plant and equipment.Property, plant and equipment are stated at cost. The Company depreciates property, plant and equipment over the estimated useful life using the straight-line method. Assets under capital lease and leasehold improvements are amortized over theirthe shorter of estimated useful life or the related lease term, as appropriate.term. The estimated useful lives of assets are as follows: | | | | | Buildings | | | 30 to 60 | years | Plant and machinery | | | 2 to 20 21 | years | Computer equipment | | | 2 to 3 6 | years | Furniture, fixtures and equipment | | 5 | 3 to 10 | years | Vehicles | | | 4 | years | Computer software for internal use | | | 2 to 6 | years |
Software for internal use is primarily acquired from third-party vendors and is in ready to use condition. Costs for acquiring this software are capitalized and subsequent costs are charged to the statement of income. The capitalized costs are amortized on a straight-line basis over the estimated useful life of the software. Deposits paid towards the acquisition of property, plant and equipment outstanding as of each balance sheet date and the cost of property, plant and equipment not ready for use before such date are disclosed under capital work-in-progress. The interest cost incurred for funding an asset during its construction period is capitalized based on the actual investment in the assetaverage accumulated expenditure and the average cost of funds. The capitalized interest is included in the cost of the relevant asset and is depreciated over the estimated useful life of the asset. Business combinations, goodwill and intangible assets. In accordance with SFAS No. 141, Business Combinations, the Company uses the purchase method of accounting for all business combinations.combinations consummated after June 30, 2001. Intangible assets acquired in a business combination are recognized and reported apart from goodwill if they meet the criteria specified in SFAS No. 141. Any purchase price allocated to an assembled workforce is not accounted separately. In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, all assets and liabilities of the acquired business including goodwill are assigned to the reporting units. The Company does not amortize goodwill but instead tests goodwill for impairment at least annually, using athe two step impairment process. The fair value of the reporting unit is first compared to its carrying value. The fair value of reporting units is determined using the income approach based on measurement techniques such as discounted cash flow analyses.approach. If the 113
fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not impaired. If the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit, then the implied fair value of the reporting unit’s goodwill is compared with the carrying value of the reporting unit’s goodwill. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. If the carrying value of a reporting unit’s goodwill exceeds its implied fair value, then an impairment loss equal to the difference is recorded. IntangibleThe Company amortizes intangible assets acquired individually, with a group of other assets or in a business combinationover their estimated useful lives unless such lives are carried at cost less accumulated amortization. Thedetermined to be indefinite. Amortizable intangible assets are amortized over their estimated useful lives in proportion to the economic benefits consumed in each period. Intangible assets with indefinite lives are tested at least annually for impairment and written down to the fair value as required. The estimated useful lives of the amortizable intangible assets are as follows: | | | | | Customer-related intangibles | | | 2 to 5 | years | | Marketing-related intangibles | | | 2 to 20 30 | years | | Technology-based intangibles | | | 5 | years |
Start-up costs. Cost of start-up activities including organization costs are expensed as incurred. Research and development. Revenue expenditure on research and development is expensed as incurred. Capital expenditure incurred on equipment and facilities that are acquired or constructed for research and development activities and having alternative future uses, is capitalized as tangible assets when acquired or constructed. Software product development costs are expensed as incurred until technological feasibility is achieved. 103
Impairment or disposal of long-lived assets. Long-lived assets and assets group, including certain identifiable intangible assets, to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Such assets are considered to be impaired if the carrying amount of the assets is higher than the future undiscounted net cash flows expected to be generated from the assets. The impairment amount to be recognized is measured by the amount by which the carrying value of the assets exceeds its fair value. The Company measures long-lived assets held-for-sale, at the lower of carrying amount or fair value, less costs to sell. Earnings per share. In accordance with SFAS No. 128, Earnings Per Share, basic earnings per share is computed using the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted-average number of common and dilutive common equivalent shares outstanding during the period, using the treasury stock method for options and warrants, except where the results would be anti-dilutive. Dividends.Final dividend on the common stock is recorded as a liability on the date of declaration by the stockholders. Interim dividends are recorded as a liability on the date of declaration by the board of directors. Income taxes. Income taxes are accounted for using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss carry-forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The deferred tax asset is reduced by a valuation allowance if it is more likely than not that some portion or all of the asset will not be realized. Excess income tax benefit on exercise of employee stock options is credited to additional paid-in capital. The Company recognizes penalties and interest related to unrecognized tax benefits as a component of Other income, net. The Company adopted FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an Interpretation of FASB Statement No. 109 (FIN 48) on April 1, 2007. FIN 48 clarifies the accounting and reporting for uncertainties in income tax law. This Interpretation prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions considered or to be considered in income tax returns. Refer note 21 for additional information relating to impact of adoption of FIN 48. Stock-based compensation.Effective April 1, 2006, the Company adopted SFAS No. 123 (revised 2004), Share-Based Payment, (SFAS No. 123 (R)), which requires the measurement and recognition of compensation expense for all stock-based payment awards based on the grant-date fair value of those awards. Previously, the Company used the intrinsic value based method, permitted by Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock issued to Employees, to account for its employee stock-based compensation plans and had adopted the pro-forma disclosure provisions of SFAS No. 123, Accounting for Stock-Based Compensation (SFAS No. 123). awards The Company adopted SFAS No. 123(R) using the modified prospective application method. Under this approach, the Company has recognized compensation expense for share-based payment awards granted prior to, but not yet vested as of April 1, 2006, based on the grant date fair value under Black-Scholes model estimated in accordance with the provisions of SFAS No. 123. 114
The impact of adoption of SFAS 123 (R) using the modified prospective approach on the Company’s financial statement is given below:
| | | | | | | | | | | Year ended | | | | | Particulars | | March 31, 2007 | | | | | | Operating Income | | | (165.00 | ) | | | | | Income before income taxes, minority interest and cumulative effect of change in accounting principle | | | (165.00 | ) | | | | | Income before cumulative effect of change in accounting principle | | | (165.00 | ) | | | | | Net Income | | | (125.91 | ) | | | | | Earnings per equity share | | | | | | | | | Basic | | | (0.09 | ) | | | | | Diluted | | | (0.09 | ) | | | | | Cash provided by operating activities | | | (64.54 | ) | | | | | Cash provided in financing activities | | | 64.54 | | | | | |
SFAS No. 123(R) requires that deferred stock-based compensation previously recorded under APB Opinion No. 25 and outstanding on the date of adoption be eliminated against additional paid-in capital. Accordingly, the deferred compensation balance of Rs. 2,202.42 was eliminated against additional paid-in capital on April 1, 2006.
Under APB Opinion No. 25, the Company had a policy of recognizing the effect of forfeitures only as they occurred. Accordingly, as required by SFAS No. 123 (R), on April 1, 2006, the Company estimated the number of outstanding instruments, which are not expected to vest and recognized a gain of Rs. 39.0939 representing the reversal of compensation cost for such instruments previously recognized in statement of income as cumulative effect of changes in accounting principle. Had For awards with a graded-vesting schedule, if vesting is based only on a service condition, the Company recognizes the compensation cost foron a straight-line basis over the year ended March 31, 2005 and 2006, been determined in a manner consistent withrequisite service period of the fair value approach described in SFAS No. 123, the Company’s net income and earnings per share as reported would have been reduced to the pro-forma amounts indicated below:
| | | | | | | | | | | Year ended March 31, | | | | 2005 | | | 2006 | | | Net income, as reported | | Rs. | 15,832.75 | | | Rs. | 20,269.97 | | Add: Stock–based employee compensation expense included in reported net income, net of tax effects | | | 353.86 | | | | 619.43 | | Less: Stock-based employee compensation expense determined under fair value based method, net of tax effects | | | (1,598.10 | ) | | | (1,190.50 | ) | | | | | | | | Pro-forma net income | | Rs. | 14,588.51 | | | Rs. | 19,698.90 | | | | | | | | | | | | | | | | | | Earnings per share: Basic | | | | | | | | | As reported | | | 11.38 | | | | 14.41 | | | | | | | | | Pro-forma | | | 10.49 | | | | 14.01 | | | | | | | | | | | | | | | | | | Earnings per share: Diluted | | | | | | | | | As reported | | | 11.29 | | | | 14.24 | | | | | | | | | Pro-forma | | | 10.44 | | | | 13.87 | | | | | | | | |
entire award. The Company has granted 11,376,196, 55,5007,050,766, 746,686 and 7,056,7668,366,676 options under Restricted Stock Unit Plans, at a nominal exercise price of Rs. 2 per share, during the years ended March 31, 2005, 20062007, 2008 and 2007.2009. Since these options have been granted at a nominal exercise price, the intrinsic value on the date of grant approximates the fair value of the options.underlying stock. Derivatives and hedge accounting.The Company purchases forward foreign exchange contracts/option contracts (derivatives) to mitigate the risk of changes in foreign exchange rates on accounts receivable and forecasted cash flows denominated in certain foreign currencies. The strategy also includes purchase of series of short-term forward foreign exchange contracts which are replaced with successive new contracts up to the period in which the forecasted transactions are expected to occur (roll-over hedging). The Company also designates zero-cost collars, which qualify as net purchased options, to hedge the exposure to variability in expected future foreign currency cash inflows due to exchange rate movements beyond a defined range.inflows. 104
In accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, the Company recognizes all derivatives as assets or liabilities measured at their fair value, regardless of the purpose or intent of holding them. In respect of derivatives designated and effective as cash flow hedges, gains or losses 115
resulting from changes in the fair value are deferred and recorded as a component of accumulated other comprehensive income within stockholder’s equity until the hedged transaction occurs and are then recognized in the consolidated statements of income along with the hedged item. The Company assesses hedge effectiveness based on overall change in fair value of derivative instrument. However, for derivatives acquired pursuant to roll-over hedging strategy, the forward premium/discount points are excluded from assessing hedge effectiveness. Changes in fair value for derivatives not designated as hedging derivatives and ineffective portion of the hedging instruments are recognized in consolidated statements of income of each period and are reported within foreign exchange gains/ (losses), net under operating expenses. In respect of derivatives designated as hedges, the Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Company also formally assesses both at the inception of the hedge and on an ongoing basis, whether each derivative is highly effective in offsetting changes in fair values or cash flows of the hedged item. If it is determined that a derivative is not highly effective as a hedge, or if a derivative ceases to be a highly effective hedge, the Company, prospectively, discontinues hedge accounting with respect to that derivative. The Company also designates foreign currency forward contracts and net purchased options as hedges of net investments in foreign operations. The effective portion of the hedge is recognized in translation adjustments in other comprehensive income and transferred to consolidated statement of income upon sale or disposal of the foreign operation. Reclassifications.Certain amounts in the prior years’ consolidated financial statements and notes have been reclassified to confirmconform to the current yearsyear’s presentation. Recent accounting pronouncements FASB Interpretation No. 48.In July 2006, the FASB issued Interpretation (FIN) No. 48, Uncertainty in Income Taxes. FIN 48 applies to all tax positions within the scope of SFAS No. 109, Accounting for Income Taxes, and clarifies when and how to recognize tax benefits in the financial statements with a two-step approach of recognition and measurement. FIN 48 is effective for fiscal years beginning after December 15, 2006, and, as a result, is effective for the Company commencing April 1, 2007. FIN 48 also requires the enterprise to make explicit disclosures about uncertainties in their income tax positions, including a detailed roll-forward of tax benefits taken that do not qualify for financial statement recognition. The Company is currently evaluating the impact of FIN 48 on the consolidated financial statements. SFAS No. 157.141R.In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS No. 157). SFAS No. 157 defines ‘fair value’ as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS No. 157 provides guidance on determination of fair value and lays down the fair value hierarchy to classify the source of information used in fair value measurement. The Company is currently evaluating the impact of SFAS No. 157 on its financial statements and will adopt the provisions of SFAS No. 157 for the fiscal year beginning April 1, 2008. SFAS No. 159.In FebruaryDecember 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities (SFAS141 (revised 2007), “Business Combinations”(SFAS No. 159)141R), which is a revision of SFAS No. 141, “Business Combinations”. This statement permits entitiesestablishes principles and requirements for how an acquirer: recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed and any non-controlling interest in the acquiree; recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and determines what information to choosedisclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. The Company will be required to apply this new standard prospectively to business combinations for which the acquisition date is on or after the beginning of the annual reporting period beginning on or after December 15, 2008. Early adoption is prohibited. The company will adopt this statement effective April 1, 2009 and its effects on future periods will depend on the nature and significance of business combinations subject to SFAS No. 141R.
On April 1, 2009, the Financial Accounting Standards Board (FASB) issued FASB Staff Position No. FAS 141(R)-1, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies”(the FSP), to amend and clarify the initial recognition and measurement, subsequent measurement and accounting, and related disclosures arising from contingencies in a business combination under SFAS No. 141R. The effects of this FSP on future periods will depend on the nature and specific facts of business combinations subject to SFAS No. 141R. SFAS No. 160.In December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in Consolidated Financial Statements”(SFAS No. 160 — an amendment of ARB No. 51). SFAS No. 160 establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the non-controlling interest, changes in a parent’s ownership interest and the valuation of retained non-controlling equity investments when a subsidiary is deconsolidated. SFAS No. 160 also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the non-controlling owners. The Company will be required to adopt this new standard for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. The company does not expect the adoption of this statement to have a material effect on the Consolidated Financial Statements. SFAS No. 161.In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities – An Amendment of FASB Statement No. 133”(SFAS No. 161). SFAS No. 161 requires enhanced disclosures on derivative and hedging activities by requiring objectives to be disclosed for using derivative instruments in terms of underlying risk and accounting designation. This statement requires disclosures on the need of using derivative instruments, accounting of derivative instruments and related hedged items, if any, under SFAS No. 133 and the effect of such instruments and related hedge items, if any, on the financial position, financial performance and cash flows. The Company will be required to adopt this new statement for fiscal years beginning after November 15, 2008. Pursuant to the transition provisions of the statement, the company will adopt SFAS No. 161 in fiscal year 2009 and will present the required disclosures in the prescribed format on a prospective basis. This statement does not impact the consolidated financial results as it is disclosure-only in nature. 105
FSP SFAS 142-3In April 2008, the FASB issued FSP SFAS 142-3, “Determination of the Useful Life of Intangible Assets”(FSP 142-3). This guidance is intended to improve the consistency between the useful life of a recognized intangible asset under SFAS No. 142, “Goodwill and Other Intangible Assets”(SFAS 142), and the period of expected cash flows used to measure many financial instruments and certain other items atthe fair value. The objective isvalue of the asset under SFAS 141R when the underlying arrangement includes renewal or extension of terms that would require substantial costs or result in a material modification to improve financial reporting by providing entities with the opportunity to mitigate volatilityasset upon renewal or extension. Companies estimating the useful life of a recognized intangible asset must now consider their historical experience in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions.renewing or extending similar arrangements or, in the absence of historical experience, must consider assumptions that market participants would use about renewal or extension as adjusted for SFAS No. 159142’s entity-specific factors. FSP 142-3 is effective for the fiscal yearCompany beginning April 1, 2008.2009. The Company would be required to adopt this FSP prospectively for all assets acquired after April 1, 2009 and early adoption is currently evaluatingprohibited. Its effects on future periods will depend on the impact that the adoptionnature and specific facts of assets acquired subject to SFAS No. 159 will have142. FSP 132 (R)-1In December 2008, the FASB issued FSP SFAS 132(R)-1, “Employers’ Disclosures about Postretirement Benefit Plan Assets”(FSP 132(R)-1). This guidance amends SFAS No. 132(R), “Employers’ Disclosures about Pensions and Other Postretirement Benefits”, to require more detailed disclosures about the fair value measurements of employers’ plan assets including (a) investment policies and strategies; (b) major categories of plan assets; (c) information about valuation techniques and inputs to those techniques, including the fair value hierarchy classifications (as defined by SFAS No. 157) of the major categories of plan assets; (d) the effects of fair value measurements using significant unobservable inputs (Level 3) on ourchanges in plan assets; and (e) significant concentrations of risk within plan assets. The disclosures required by the FSP is effective for the Company beginning April 1, 2009. This statement does not impact the consolidated financial statementsresults as it is disclosure-only in nature. 3. Acquisitions The Company completed the following acquisitions during the year ended March 31, 2006.Fiscal 2009
Wipro BPOCiti Technology Services Limited
As of March 31, 2005, the Company’s ownership interest in Wipro BPO was approximately 93%. During the year ended March 31, 2006, the Company acquired the balance 7% of the equity shares from the employee shareholders at fair value for an aggregate consideration of Rs.852.00 million. The step-acquisition resulted in goodwill and intangibles of Rs.304.14 million and Rs.14.86 million respectively. mPower Software Services Inc. and subsidiaries
In December 2005,On January 1, 2009, the Company acquired 100% of the equity of mPower SoftwareCiti Technology Services Inc. and subsidiaries (mPower) including the minority shareholding held by MasterCard International in mPactLimited (Subsequently renamed as Wipro Technology Services Limited — WTS). WTS is an India a joint venture between MasterCard International and mPower Inc, for an aggregate cash consideration of Rs. 1,274.57 (including direct acquisition costs). mPower Software Services Inc. is a US based company engaged in providing IT services in the payments service sector.
As a part of this acquisition, the Company plans to provide MasterCard a wide range of services including application development and maintenance, infrastructure services, package implementation, BPO and testing. The Company believes that through this acquisition, it will be able to expand domain expertise in the payment service sector and increase the addressable market for IT services.
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The total purchase price has been allocated to the acquired assets and liabilities as follows:
| | | | | Description | | Fair value | | | Net tangible assets | | Rs. | 185.39 | | Customer-related intangibles | | | 513.13 | | Deferred tax liabilities | | | (177.50 | ) | Goodwill | | | 753.55 | | | | | | Total
| | Rs. | 1,274.57 | | | | | |
BVPENTE Beteiligungsverwaltung GmbH and subsidiaries
In December 2005, the Company acquired 100% of the equity of BVPENTE Beteiligungsverwaltung GmbH and subsidiaries (New Logic). New Logic is a European system-on-chip design company. The consideration included a upfront consideration of Rs. 1,156.54 (including direct acquisition costs), subject to working capital adjustments, and an earn-out of Euro 26.70 to be determined and paid in the future based on financial targets being achieved over a 3 year period. During the year ended March 31, 2007, the Company paid an additional consideration of Rs. 68.76 (Euro 1.18) towards the working capital adjustment. The Company has determined that a portion of the earn-out, up to a maximum of Euro 2.50 is linked to the continuing employment of one of the selling shareholders. The balance earn-out will be recorded as additional purchase price when the contingency is resolved.
The Company believes that through this acquisition, it has acquired strong domain expertise in semiconductor Intellectual Property (IP) cores and complete system-on-chip solutions with digital, analog mixed signal and Radio Frequency (RF) design services. The acquisition also enables the Company to access over 20 customers in the product engineering space.
The purchase price has been allocated to the acquired assets and liabilities as follows:
| | | | | Description | | Fair value | | | Net tangible assets | | Rs. | 307.15 | | Customer-related intangibles | | | 117.40 | | Technology-related intangibles | | | 95.72 | | Deferred tax liabilities | | | (53.00 | ) | Goodwill | | | 758.03 | | | | | | Total
| | Rs. | 1,225.30 | | | | | |
The Company completed the following acquisitions during the year ended March 31, 2007.
cMango Inc. and subsidiaries
In April 2006, the Company acquired 100% of the equity of cMango Inc. and subsidiaries (cMango). cMango is a provider of Business Service Management (BSM) solutions.information technology services and solutions to Citi Group worldwide. The consideration (including direct acquisition costs) includedwas comprised of a cash payment of Rs. 884.25 and an earn-out of USD 12.00 to be determined and paid in the future based on specific financial targets being achieved over a two year period. The earn-out will be recorded as additional purchase price when the contingency is resolved.
6,205. The Company believes that through thisthe acquisition it will expand its operationsenhance Wipro’s capabilities to address Technology Infrastructure Services (TIS) and Application Development and Maintenance Services (ADM) in the Business Management Services sector. This acquisition also enables the Company to access over 20 customers in the Business Managementfinancial services sector.industry The purchase price has been preliminarily allocated to the acquired assets and liabilities as follows: | | | | | Description | | Fair value | | | Net tangible assets/(liabilities)Cash and cash equivalents | | Rs. | (23.081,342 | ) | Property, plant and equipment | | | 403 | | Customer-related intangibles | | | 132.641,948 | | Deferred tax liabilities | | | (46.42 | ) | Goodwill | | | 821.113,186 | | Other assets | | | 1,150 | | Short-term borrowings and long-term debt | | | (23 | ) | Deferred income taxes, net | | | (545 | ) | Other liabilities | | | (1,256 | ) | | | | | Total | | Rs. | 884.256,205 | | | | | |
RetailBox BV The preliminary allocation of the purchase price included in the current period balance sheet is based on the best estimates of management. The completion of the purchase price allocation may result in adjustments to the carrying value of the WTS recorded assets and subsidiariesliabilities, revisions of the useful lives of intangible assets and the determination of any residual amount that will be allocated to goodwill. The related depreciation and amortization from the acquired assets is also subject to revision based on the final allocation.
Others In June 2006,During the year ended March 31, 2009, the Company acquired 100% of the equity of RetailBox BVpaid Rs. 656 towards other acquisitions and subsidiaries (Enabler). Enabler isRs. 816 in the business of providing comprehensive IT solutions and services. The consideration (including direct acquisition costs) included a cash payment of Rs. 2,442.12 and an earn-out of Euro 11.00payments relating to be determined and paidacquisitions consumated in the future based on specific financial targets being achieved over a two year period. The earn-out will be recorded as additional purchase price when the contingency is resolved.prior years. 117106
Through this acquisitionFiscal 2008 and 2007
A summary of the Company aims to provide a wide range of services including Oracle retail implementation, digital supply chain, business optimization and integration. Further, through this acquisition, the Company aims to expand domain expertise bothacquisitions completed in the retailfiscal 2008 and technology sectors and obtain a presence in five different geographical locations. The purchase price has been preliminarily allocated to the acquired assets and liabilities as follows:2007 is given below
| | | | | DescriptionName of entity and effective | | Fair value | | Management’s assessment of business | date of acquisition | | Nature of business | | rationale | | Net tangible assetsUnza Holdings Limited and subsidiaries (‘Unza’)
(August 2007) | | Rs. | 388.88 | | Customer-related intangiblesManufacturer and marketer of personal care products | | | 297.92 | Strengthen the Company’s brand portfolio and market presence in South East Asia and provide synergy in terms of access to common vendors, formulation and brands | Deferred tax liabilities | | | (104.27 | ) | Goodwill | | | 1,859.59 | | | | | | TotalInfocrossing Inc. and subsidiaries (‘Infocrossing’)
(September 2007)
| | Rs. | 2,442.12IT infrastructure management, enterprise application and business process outsourcing services provider | | Broadens the Company’s data center and mainframe capabilities and strengthens its competitive positioning in offering infrastructure management services | | | | | | India, Middle East and SAARC operations of 3D Networks and Planet PSG (‘3D Group’)
(November 2006) | | Business communication solutions include consulting, voice, data and converged solutions, and managed services | | Complements the Company’s existing practice capabilities and differentiates the Company as a comprehensive IT Solutions provider across segments. | | | | | | Hydrauto Group AB (‘Hydrauto Group’)
(November 2006) | | Production, marketing and development of customized hydraulic cylinders solution | | Provides an entry into European markets, access to customer base and complementary engineering skills. | | | | | | Quantech Global Services LLC and Quantech Global Services Ltd (‘Quantech’)
(July 2006) | | Computer Aided Design and Engineering services | | Strengthens Company’s presence in the mechanical engineering design and analysis services sector. | | | | | | RetailBox BV and subsidiaries (‘Enabler Group’)
(June 2006) | | Software development services, implementation and support of IS systems for retail industry. | | Expansion of the Company’s range of IT solution services (including Oracle retail implementation, digital supply chain, business optimization and integration.) and expand domain expertise. | | | | | | Saraware Oy (‘Saraware’)
(June 2006) | | Providing design and engineering services to telecom industry. | | Expansion of presence in the engineering services space in Finland and the Nordic region. | | | | | | Business of North-West Switchgear Limited (‘North –West’)
(May 2006) | | Manufacturer and distributor of switches, sockets and miniature circuit breakers | | Expansion of the presence in electrical product segment | | | | | | cMango Inc and subsidiaries (‘cMango Group’)
(April 2006) | | Business management service solutions | | Expansion of operations in the Business Management Services sector and access to customers in the Business Management services sector. |
Northwest Switchgear Limited
In May 2006, the Company acquired a substantial portion of the business of North-west Switchgear Limited a manufacturer and distributor of switches, sockets and miniature circuit breakers (collectively ‘the products’) under the trademark/ brand name North-West. The consideration (including direct acquisition costs) included a cash payment of Rs 1,131.66 and an earn-out of Rs. 200.00 to be determined and paid in the future based on achievement of a specified revenue levels over a period of four years. Further, the Company has entered into a non-compete and manufacturing agreement with the sellers. Under the manufacturing agreement, the seller will manufacture the products for the Company based on certain assets and employee retained by the seller. The manufacturing agreement is for a period of five years. Amounts paid by the Company for such manufacturing services will be recorded through the income statement. The earn-outs which are not linked to any post-acquisition services by the seller will be recorded as additional purchase consideration when the contingency is resolved.
Based on the guidance in EITF Issue No. 98-3, Determining Whether a Non-monetary Transaction Involves Receipt of Productive Assets of a Business, the Company has accounted for this transaction as an acquisition of a business. A significant portion of the consideration has been allocated to the trademark/brand name North-West.
Thetotal purchase price has been preliminarily allocated to the acquired assets and liabilities as follows:
| | | | | Description | | Fair value | | | Net tangible assets | | Rs. | 33.75 | | Marketing-related intangibles | | | 1,097.91 | | | | | | Total
| | Rs. | 1,131.66 | | | | | |
Saraware Oy
In June 2006, the Company acquired 100% of the equity of Saraware Oy (Saraware) a Company involved in providing design and engineering services to telecom companies. The Company acquired Saraware for an aggregate consideration of Rs. 947.25 (including direct acquisition costs) and an earn-out of Euro 7 to be determined and paid in future based on financial targets being achieved over a period of 18 months. In addition, amounts collected against certain specific reward/ incentive assets at the acquisition date are payable to the sellers. The Company has paid Rs. 148.92 against specific reward/ incentives collected and Rs. 19.33 (Euro 0.33) as earn-out against targets achieved during the period ended March 31, 2007. The earn-out and the additional payments are recorded as additional purchase price when the related contingencies are resolved.
Through this acquisition the Company aims to expand its presence in the engineering services space in Finland and the Nordic region.
The purchase price has been preliminarily allocated to the acquired assets and liabilities as follows:
| | | | | Description | | Fair value | | | Net tangible assets/(liabilities) | | Rs. | 186.98 | | Customer-related intangibles | | | 254.72 | | Deferred tax liabilities | | | (89.15 | ) | Goodwill | | | 762.95 | | | | | | Total
| | Rs. | 1,115.50 | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | Purchase | | | | | | | | | | | | | | | | | consideration | | | | | | | Deferred | | | | | | | | | | including | | | | | | | tax | | | Intangible | | | | | Name of entity | | earn-outs | | | Net assets | | | liabilities | | | assets | | | Goodwill | | | Unza | | Rs. | 10,254 | | | Rs. | (514 | ) | | Rs. | (812 | ) | | Rs. | 4,720 | | | Rs. | 6,860 | | | Infocrossing | | | 17,640 | | | | (5,684 | ) | | | (2,395 | ) | | | 7,618 | | | | 18,101 | | | 3D Group | | | 1,276 | | | | 508 | | | | (46 | ) | | | 72 | | | | 742 | | | Hydrauto Group | | | 1,412 | | | | 498 | | | | (123 | ) | | | 136 | | | | 901 | | | Quantech | | | 281 | | | | (230 | ) | | | (16 | ) | | | 46 | | | | 481 | | | Enabler Group | | | 2,968 | | | | 389 | | | | (104 | ) | | | 284 | | | | 2,399 | | | Saraware | | | 1,326 | | | | 187 | | | | (89 | ) | | | 338 | | | | 890 | | | North-West | | | 1,132 | | | | 34 | | | | — | | | | 1,098 | | | | — | | | cMango Group | | | 884 | | | | (23 | ) | | | (46 | ) | | | 78 | | | | 875 | | | | | | | | | | | | | | | | | | | Total | | Rs. | 37,173 | | | Rs. | (4,835 | ) | | Rs. | (3,631 | ) | | Rs. | 14,390 | | | Rs. | 31,249 | | | | | | | | | | | | | | | | | |
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Quantech Global Services
In July 2006, the Company acquired 100% of the equity of Quantech Global Services LLC and Quantech Global Services Ltd (Quantech). Quantech provides computer aided design and engineering services. The consideration includes upfront cash payment of Rs. 142.00 (including direct acquisition costs), a deferred cash payment of USD 3.00 and an earn-out to be determined and paid in the future based on specific financial targets being achieved over a period of 36 months. The earn-out will be recorded as additional purchase price when the contingency is resolved.
Through this acquisition, the Company aims to strengthen its presence in the mechanical engineering design and analysis services sector.
The purchase price has been preliminarily allocated to the acquired assets and liabilities as follows:
| | | | | Description | | Fair value | | | Net tangible assets/(liabilities) | | Rs. | (230.33 | ) | Customer-related intangibles | | | 45.92 | | Deferred tax liabilities | | | (16.07 | ) | Goodwill | | | 481.77 | | | | | | Total
| | Rs. | 281.29 | | | | | |
Hydrauto Group
In November 2006, the Company acquired 100% of the equity of Hydrauto Group AB (Hydrauto). Hydrauto is engaged in the production, marketing and development of customized hydraulic cylinders solution for mobile applications such as mobile cranes, excavator, dumpers and trucks. The consideration (including direct acquisition cost) included cash payment of Rs. 1,412.17. Through this acquisition the Company aims to gain an entry into Europe, access to a customer base built over the past few decades and complementary engineering skills.
The purchase price has been preliminarily allocated to the acquired assets and liabilities as follows:
| | | | | Description | | Fair value | | | Net tangible assets/(liabilities) | | Rs. | 201.81 | | Customer-related intangibles | | | 73.57 | | Deferred tax liabilities | | | (24.76 | ) | Goodwill | | | 1,161.55 | | | | | | Total
| | Rs. | 1,412.17 | | | | | |
3D Networks
In November 2006, the Company acquired 100% of the equity of the India, Middle East and SAARC operations of 3D Networks and Planet PSG. 3D Networks provides business communication solutions that include consulting, voice, data and converged solutions and managed services. These specialized solutions are deployed in the ITES/IT, Telecom, Banking and Finance, Government and Service segments. Planet PSG provides professional services on voice and speech platforms in the Asia Pacific region. The consideration (including direct acquisition cost) included upfront cash payment of Rs. 903.95 and a maximum earn-out of U.S. dollars 43.78 to be determined and paid in the future based on achieving certain agreed financial targets over a 24 months period. The earn-out will be recorded as additional purchase price when the contingency is resolved. The Company believes that this acquisition is a strategic fit as it complements Wipro’s existing practice capabilities and differentiates Wipro as the most comprehensive IT Solutions provider across segments.
The purchase price has been preliminarily allocated to the acquired assets and liabilities as follows:
| | | | | Description | | Fair value | | | Net tangible assets/(liabilities) | | Rs. | 507.77 | | Customer-related intangibles | | | 136.24 | | Deferred tax liabilities | | | (45.86 | ) | Goodwill | | | 305.80 | | | | | | Total
| | Rs. | 903.95 | | | | | |
For all the above acquisitions completed during During the year ended March 31, 2007,2009, the purchase consideration has been allocated on a preliminary basis based on management’s estimates. The Company is in the process of making a final determination of the carrying value of assets and liabilities, which may result in changes in the carrying value of net assets recorded. Finalization ofcompleted the purchase price allocation which is expected to be completed duringin respect of the period ending June 30, 2007 may result in certain adjustmentsacquisitions of Infocrossing and Unza. The following table presents the final allocation of purchase price for Infocrossing and Unza:
| | | | | | | | | Description | | Infocrossing | | | Unza | | Cash and cash equivalents | | Rs. | 775 | | | Rs. | 619 | | Property, plant and equipment | | | 2,038 | | | | 1,310 | | Customer-related intangibles | | | 7,618 | | | | 1,318 | | Marketing-related intangibles | | | — | | | | 3,402 | | Goodwill | | | 18,101 | | | | 6,860 | | Other assets | | | 1,987 | | | | 2,275 | | Short-term borrowings and long-term debt | | | (5,326 | ) | | | (2,747 | ) | Deferred income taxes, net | | | (2,395 | ) | | | (812 | ) | Other liabilities | | | (5,158 | ) | | | (1,971 | ) | | | | | | | | Total | | Rs. | 17,640 | | | Rs. | 10,254 | | | | | | | | |
The purchase price allocation to the above allocations.identifiable intangible assets included in these financial statements is as follows: 119
| | | | | | | | | | | Infocrossing | | | Unza | | Intangible assets with determinable lives | | | | | | | | | | | | | | | | | | Marketing-related intangibles | | Rs. | — | | | Rs. | 1,250 | | Customer-related intangibles | | | 7,618 | | | | 1,318 | | | | | | | | | Total | | Rs. | 7,618 | | | Rs. | 2,568 | | | | | | | | | | | | | | | | | | Intangible assets with indefinite lives | | | | | | | | | | | | | | | | | | Marketing-related intangibles | | Rs. | — | | | Rs. | 2,152 | | | | | | | | | Total | | Rs. | — | | | Rs. | 2,152 | | | | | | | | | | | | | | | | | | Total intangible assets | | Rs. | 7,618 | | | Rs. | 4,720 | | | | | | | | |
The assessment of marketing-related intangibles (brands) that have an indefinite life and those that have a determinable life were based on a number of factors, including the competitive environment, market share, brand history, product life cycles, operating plan and macroeconomic environment of the countries in which the brands operate. 4. Cash and Cash Equivalents Cash and cash equivalents as of March 31, 20062008 and 2007 comprise2009 are comprised of cash and cash on deposit with banks and highly liquid investments.banks. 5. Accounts Receivable Accounts receivable are stated net of allowance for doubtful accounts. The Company maintains an allowance for doubtful accounts based on financial condition of its customers and aging of the accounts receivable. Accounts receivable are generally not collateralized. The activity in the allowance for doubtful accounts receivable is given below: | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended March 31, | | | Year ended March 31, | | | | 2005 | | 2006 | | 2007 | | | 2007 | | 2008 | | 2009 | | Balance at the beginning of the year | | Rs. | 720.02 | | 846.54 | | 1,115.78 | | | Rs. | 1,258 | | Rs. | 1,388 | | Rs. | 1,096 | | Additional provision during the year, net of collections | | 151.89 | | 275.24 | | 280.02 | | | 280 | | 289 | | 939 | | Bad debts charged to provision | | | (25.37 | ) | | | (6.00 | ) | | | (149.68 | ) | | Uncollectable receivables charged against allowance | | | | (150 | ) | | | (581 | ) | | | (116 | ) | | | | | | | | | | | | | | | | Balance at the end of the year | | Rs. | 846.54 | | 1,115.78 | | 1,246.12 | | | Rs. | 1,388 | | Rs. | 1,096 | | Rs. | 1,919 | | | | | | | | | | | | | | | | |
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The increase in provision during the year is primarily attributable to additional reserves recorded by the Company, pursuant to filing of credit protection arrangement by one of the Customer in Canada, the United States and Europe. 6. Inventories Inventories consist of the following: | | | | | | | | | | | | | | | | | | | As of March 31, | | | As of March 31, | | | | 2006 | | 2007 | | | 2008 | | 2009 | | Stores and spare parts | | Rs. | 198.02 | | Rs. | 297.72 | | | Rs. | 455 | | Rs. | 691 | | Raw materials and components | | 692.01 | | 1,584.13 | | | 2,950 | | 2,668 | | Work-in-process | | 288.73 | | 491.21 | | | 1,078 | | 694 | | Finished goods | | 885.85 | | 1,777.31 | | | 2,689 | | 4,633 | | | | | | | | | | | | | | | Rs. | 2,064.61 | | 4,150.37 | | | Rs. | 7,172 | | Rs. | 8,686 | | | | | | | | | | | | |
7. Other Assets Other assets consist of the following: | | | | | | | | | | | | | | | | | | | As of March 31, | | | As of March 31, | | | | 2006 | | 2007 | | | 2008 | | 2009 | | Prepaid expenses | | Rs. | 1,107.18 | | Rs. | 1,359.05 | | | Rs. | 2,800 | | Rs. | 3,509 | | Prepaid rentals for leasehold land | | 74.89 | | 596.53 | | | 645 | | 1,293 | | Due from officers and employees | | 753.68 | | 884.31 | | | 1,503 | | 1,359 | | Advances to suppliers | | 467.19 | | 711.45 | | | 1,373 | | 753 | | Balances with statutory authorities | | 130.76 | | 207.12 | | | 548 | | 854 | | Deposits | | 1,388.89 | | 1,591.01 | | | 1,889 | | 2,274 | | Interest-bearing corporate deposits | | 500.00 | | 650.00 | | | Interest-bearing deposits with corporate(1) | | | 500 | | 4,250 | | Advance income taxes | | 3,670.89 | | 4,844.25 | | | 6,990 | | 9,933 | | Deferred contract costs | | 339.59 | | 397.44 | | | 2,864 | | 2,524 | | Derivative asset | | 338.11 | | 378.51 | | | 1,002 | | 1,165 | | Others | | 369.39 | | 751.22 | | | 2,192 | | 5,807 | | | | | | | | | | | | | | | 9,140.57 | | 12,370.89 | | | 22,306 | | 33,721 | | | | | | | | | Less: Current assets | | | (7,896.60 | ) | | | (10,411.97 | ) | | | (19,092 | ) | | (27,040 | ) | | | | | | | | | | | | | | Rs. | 1,243.97 | | Rs. | 1,958.92 | | | Rs. | 3,214 | | Rs. | 6,681 | | | | | | | | | | | | |
| | | (1) | | Such deposits earn a fixed rate of interest and will be liquidated within 12 months. |
Sales-type leases Others include receivables on account of sales-type leases and are generally due in monthly, quarterly or semiannual installments over periods ranging from 3 to 5 years Details of sales-type leases are given below: | | | | | | | | | | | As of March 31, | | | | 2008 | | | 2009 | | Gross finance receivables | | Rs. | 323 | | | Rs. | 4,017 | | Unguaranteed residual value | | | 84 | | | | 172 | | Unearned income | | | (79 | ) | | | (765 | ) | | | | | | | | Net investment in finance receivables | | Rs. | 328 | | | Rs. | 3,424 | | | | | | | | |
As of March 31, 2009, minimum lease receivable for each of the five succeeding fiscal years are as follows: | | | | | Year ending March 31, | | Amount | | 2010 | | Rs. | 1,024 | | 2011 | | | 840 | | 2012 | | | 1,022 | | 2013 | | | 881 | | 2014 | | | 250 | | | | | | Total | | Rs. | 4,017 | | | | | |
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8. InvestmentInvestments Securities InvestmentInvestments securities consist of the following: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As of March 31, 2006 | | As of March 31, 2007 | | | As of March 31, 2008 | | As of March 31, 2009 | | | | Gross Unrealized | | Gross Unrealized | | | | | Gross | | Gross | | Gross | | Gross | | | | | | Carrying Value | | Holding Gains | | Fair Value | | Carrying Value | | Holding Gains | | Fair Value | | | Carrying | | Unrealized | | Unrealized | | Carrying | | Unrealized | | Unrealized | | | | | | | | Value | | Gains | | Loss | | Fair Value | | Value | | Gains | | Loss | | Fair Value | | Available-for-sale: | | | Investments in liquid and short-term mutual funds | | Rs. | 29,816.83 | | Rs. | 498.42 | | Rs. | 30,315.25 | | Rs. | 31,841.47 | | Rs. | 568.96 | | Rs. | 32,410.43 | | | Investment in liquid and short-term mutual funds | | | Rs. | 14,317 | | Rs. | 491 | | Rs. | — | | Rs. | 14,808 | | Rs. | 15,133 | | Rs. | 300 | | Rs. | (221) | | Rs. | 15,212 | | Certificate of deposits | | | — | | — | | — | | — | | 947 | | 21 | | — | | 968 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total | | | Rs. | 14,317 | | Rs. | 491 | | Rs. | — | | Rs. | 14,808 | | Rs. | 16,080 | | Rs. | 321 | | Rs. | (221) | | Rs. | 16,180 | | | | | | | | | | | | | | | | | | | | |
120
Dividends from available-for-sale securities during the years ended March 31, 2005, 20062007, 2008 and 20072009 were Rs. 679.36,1,686, Rs. 862.601,428 and Rs. 1,685.932,265 respectively and are included in other income. 9. Property, Plant and Equipment Property, plant and equipment consist of the following: | | | | | | | | | | | | | | | | | | | As of March 31, | | | As of March 31, | | | | 2006 | | 2007 | | | 2008 | | 2009 | | Land | | Rs. | 1,261.14 | | Rs. | 1,571.07 | | | Rs. | 2,127 | | Rs. | 2,775 | | Buildings | | 4,590.53 | | 6,095.44 | | | 9,679 | | 15,275 | | Plant and machinery | | 5,545.08 | | 7,870.93 | | | 13,327 | | 21,522 | | Furniture, fixtures and equipment | | 2,996.87 | | 3,933.58 | | | 6,853 | | 7,785 | | Computer equipment | | 6,761.66 | | 8,732.29 | | | 10,518 | | 12,621 | | Vehicles | | 1,324.31 | | 1,821.38 | | | 2,417 | | 2,715 | | Computer software for internal use | | 1,793.37 | | 2,831.09 | | | 2,916 | | 3,773 | | Capital work-in-progress | | 6,248.52 | | 10,189.45 | | | 13,544 | | 13,052 | | | | | | | | | | | | | | | 30,521.48 | | 43,045.23 | | | 61,381 | | 79,518 | | Accumulated depreciation | | | (12,744.08 | ) | | | (16,503.80 | ) | | Accumulated depreciation and amortization | | | | (21,559 | ) | | | (29,656 | ) | | | | | | | | | | | | | | Rs. | 17,777.40 | | Rs. | 26,541.43 | | | Rs. | 39,822 | | Rs. | 49,862 | | | | | | | | | | | | |
Depreciation expense for the years ended March 31, 2005, 20062007, 2008 and 2007,2009 is Rs. 2,437.96,3,931, Rs. 3,101.235,343 and Rs. 3,930.566,821 respectively. This includes Rs. 194.91,400, Rs. 205.93752 and Rs. 385.61913 as depreciation of capitalized internal use software, during the years ended March 31, 2005, 20062007, 2008 and 2009, respectively. Property, plant and equipment include assets acquired under capital leases which consist of the following: | | | | | | | | | | | As of March 31, | | | | 2008 | | | 2009 | | Plant and machinery | | Rs. | 201 | | | Rs. | 307 | | Software | | | — | | | | 32 | | Furniture, fixtures and equipment | | | — | | | | 2 | | Computer equipment | | | 2,045 | | | | 2,492 | | | | | | | | | | | | 2,246 | | | | 2,833 | | Accumulated depreciation and amortization | | | (1,145 | ) | | | (1,769 | ) | | | | | | | | | | Rs. | 1,101 | | | Rs. | 1,064 | | | | | | | | |
Depreciation expense in respect of these assets was Rs. 5, Rs. 170 and Rs. 307 for the years ended March 31, 2007, 2008 and 2009 respectively. 110
The following is a schedule of future minimum lease payments under capital leases, together with the present value of the net minimum lease payments as of March 31, 2009. | | | | | Year ending March 31, | | Amount | | 2010 | | Rs. | 547 | | 2011 | | | 404 | | 2012 | | | 277 | | 2013 | | | 228 | | 2014 | | | 135 | | Thereafter | | | 70 | | | | | | Total minimum lease payments | | | 1,661 | | Less: Amount representing interest | | | (243 | ) | | | | | Present value of net minimum lease payments | | Rs. | 1,418 | | Less: Current portion of obligation under capital leases | | | (504 | ) | | | | | Obligations under capital leases, excluding current portion | | Rs. | 914 | | | | | |
10. Goodwill and Other Intangible Assets Information regarding theThe Company’s intangible assets acquired either individually or in a business combination consists of the following: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | As of March 31, | | | | As of March 31, | | | 2008 | | 2009 | | | | 2006 | | 2007 | | | Gross | | | | Gross | | | | | | | | Gross carrying | | Accumulated | | Gross carrying | | Accumulated | | | | | carrying | | Accumulated | | carrying | | Accumulated | | | | | | amount | | Amortization | | Net | | amount | | Amortization | | Net | | | amount | | Amortization | | Net | | amount | | Amortization | | Net | | Technology-based intangibles | | Rs. | 130.02 | | Rs. | 34.07 | | Rs. | 95.95 | | Rs. | 130.02 | | Rs. | 71.40 | | Rs. | 58.62 | | | Rs. | 130 | | Rs. | 103 | | Rs. | 27 | | Rs. | 130 | | Rs. | 127 | | Rs. | 3 | | Customer-related intangibles | | 1,050.27 | | 600.39 | | 449.88 | | 2,147.45 | | 937.29 | | 1,210.16 | | | 4,585 | | 1,518 | | 3,067 | | 13,175 | | 2,758 | | 10,417 | | Marketing-related intangibles | | 382.43 | | 73.93 | | 308.50 | | 1,480.48 | | 78.42 | | 1,402.06 | | | Marketing-related intangibles* | | | 9,172 | | 190 | | 8,982 | | 4,882 | | 461 | | 4,421 | | Effect of translation adjustment | | | 464 | | 60 | | 404 | | 3,371 | | 608 | | 2,763 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Rs. | 1,562.72 | | Rs. | 708.39 | | Rs. | 854.33 | | Rs. | 3,627.935 | | Rs. | 1,087.11 | | Rs. | 2,670.84 | | | Rs. | 14,351 | | Rs. | 1,871 | | Rs. | 12,480 | | Rs. | 21,558 | | Rs. | 3,954 | | Rs. | 17,604 | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | * | | Gross carrying amount for marketing-related intangibles include indefinite life intangible asset of Rs. 4,873 and 2,152 as of March 31, 2008 and 2009 respectively. |
During the year ended March 31, 2009, the Company completed the purchase price allocation of Infocrossing and Unza. Please refer to the discussion on finalization of purchase price allocation in Note 3 of the Notes to Consolidated Financial Statements. The estimated amortization expense for intangible assets for the five succeeding years is set out below: | | | | | | | | | Year ending March 31, | | Amount | | | Amount | | | | 2008 | | Rs. | 492.02 | | | 2009 | | 460.19 | | | 2010 | | 350.57 | | | Rs. | 1,524 | | 2011 | | 152.75 | | | 1,390 | | 2012 | | 55.57 | | | 1,267 | | Thereafter | | 1,159.74 | | | 2013 | | | 1,242 | | 2014 | | | 1,229 | | | | | | | | | Total | | Rs. | 2,670.84 | | | Rs. | 6,652 | | | | | | | | |
The movement in goodwill balance is given below: | | | | | | | | | | | | | | | | | | | Year ended March 31, | | | Year ended March 31, | | | | 2006 | | 2007 | | | 2008 | | 2009 | | Balance at the beginning of the year | | Rs. | 5,614.98 | | Rs. | 7,480.85 | | | Rs. | 12,706 | | Rs. | 38,943 | | Goodwill relating to acquisitions (Note 3) | | 1,851.01 | | 5,392.77 | | | Goodwill relating to acquisitions including earn-out payments (Note 3, 13) | | | 26,270 | | 4,831 | | Adjustment relating to finalization of purchase price allocation | | — | | | (103.60 | ) | | | (215 | ) | | | (635 | ) | Tax benefit allocated to goodwill | | — | | | (14.40 | ) | | | (51 | ) | | — | | Effect of translation adjustments | | 14.86 | | | (57.91 | ) | | 233 | | 6,363 | | | | | | | | | | | | | Balance at the end of the year | | Rs. | 7,480.85 | | Rs. | 12,697.71 | | | Rs. | 38,943 | | Rs. | 49,502 | | | | | | | | | | | | |
121111
Goodwill as of March 31, 20062008 and 20072009 has been allocated to the following reportable segments: | | | | | | | | | | | | | | | | | | | | As of March 31, | | Segment | | As of March 31, | | | 2008 | | 2009 | | | | 2006 | | 2007 | | | IT Services and Products | | Rs. | 2,742.39 | | Rs. | 6,502.71 | | | BPO Services | | 3,982.00 | | 3,982.00 | | | India and AsiaPac IT Services and Products | | 756.46 | | 1,044.63 | | | IT Services | | | Rs. | 32,672 | | Rs. | 39,724 | | IT Products | | | 278 | | 581 | | Consumer Care and Lighting | | | 4,641 | | 7,933 | | Others | | — | | 1,168.37 | | | 1,352 | | 1,264 | | | | | | | | | | | | | Total | | Rs. | 7,480.85 | | Rs. | 12,697.71 | | | Rs. | 38,943 | | Rs. | 49,502 | | | | | | | | | | | | |
11. Other Current Liabilities Other current liabilities consist of the following: | | | | | | | | | | | | | | | | | | | As of March 31, | | | As of March 31, | | | | 2006 | | 2007 | | | 2008 | | 2009 | | Statutory dues payable | | Rs. | 1,820.99 | | Rs. | 2,634.92 | | | Taxes payable | | 3,044.10 | | 4,573.00 | | | Dividends payable | | — | | 7,237.88 | | | Income taxes payable | | | Rs. | 3,617 | | Rs. | 5,852 | | Statutory dues and other taxes payable | | | 5,663 | | 8,370 | | Warranty obligations | | 664.86 | | 742.03 | | | 924 | | 969 | | Derivative liability | | 12.53 | | 109.89 | | | 2,571 | | 12,024 | | Liability for retirement benefits | | | 479 | | 652 | | Others | | 505.47 | | 1,325.44 | | | 2,276 | | 1,886 | | | | | | | | | | | | | | | Rs. | 6,047.95 | | Rs. | 16,623.16 | | | 15,530 | | 29,753 | | Less: Current liabilities | | | 12,519 | | 26,121 | | | | | | | | | | | | | | | | Rs. | 3,011 | | Rs. | 3,632 | | | | | | | | |
The activity in warranty obligations is given below: | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended March 31, | | | Year ended March 31, | | | | 2005 | | 2006 | | 2007 | | | 2007 | | 2008 | | 2009 | | Balance at the beginning of the year | | Rs. | 357.36 | | 361.08 | | 664.86 | | | Rs. | 665 | | Rs. | 742 | | Rs. | 924 | | Additional provision during the year | | 373.46 | | 601.20 | | 827.32 | | | 827 | | 1,016 | | 683 | | Reduction due to payments | | | (369.74 | ) | | | (297.42 | ) | | | (750.15 | ) | | | (750 | ) | | | (834 | ) | | | (638 | ) | | | | | | | | | | | | | | | | Balance at the end of the year | | Rs. | 361.08 | | 664.86 | | 742.03 | | | Rs. | 742 | | Rs. | 924 | | Rs. | 969 | | | | | | | | | | | | | | | | |
12. Operating Leases The Company leases office and residential facilities under cancelable and non-cancelable operating lease agreements that are renewable on a periodic basis at the option of both the lessor and the lessee. Rental payments under such leases were Rs. 566.85,1,412, Rs. 848.851,880 and Rs. 1,412.252,526 for the years ended March 31, 2005, 20062007, 2008 and 2007,2009, respectively. Details of contractual payments under non-cancelable leases are given below: | | | | | | | | | Year ending March 31, 2008 | | 394.66 | | | 2009 | | 358.07 | | | Year ending March 31, | | | Amount | | 2010 | | 340.91 | | | Rs. | 1,064 | | 2011 | | 279.35 | | | 1,018 | | 2012 | | 247.25 | | | 1,002 | | 2013 | | | 820 | | 2014 | | | 830 | | Thereafter | | 953.15 | | | 3,168 | | | | | | | | | Total | | Rs. | 2,573.39 | | | Rs. | 7,902 | | | | | | | | |
Prepaid rentals for leasehold land included under Other assets, represent leases obtained for a period ofranging from 60 years andto 90 years. The prepaid expense is being charged over the lease term and is included under other assets.to the statement of income. 122
13. Investments in Affiliates Wipro GE Medical Systems (Wipro GE) The Company has accounted for its 49% interest in Wipro GE by the equity method. The carrying value of the investment in Wipro GE as of March 31, 20062008 and 2007,2009 was Rs. 841.571,343 and Rs. 1,119.65,1,670 respectively. The Company’s equity in the income of Wipro GE for yearsyear ended March 31, 2005, 20062007, 2008 and 20072009 was Rs. 125.95,302, Rs. 259.16257 and Rs. 302.22362 respectively. 112
In March 2004, 2005 and 2006, Wipro GE had received tax demands aggregating Rs.843.81, including interest, from Indian income tax authorities for the financial years ended March 31, 2001, 2002, 2003 and 2003.2004 aggregating to Rs 976, including interest. The tax demands were primarily on account of transfer pricing adjustments and denial of export benefits and tax holiday benefits claimed by Wipro GE under the Indian Income Tax Act, 1961 (the Act). Additionally, in December 2006, Wipro GE received tax demands aggregating Rs.132.42, including interest, from Indian income tax authorities for the financial years ended March 31, 2004 on similar grounds. Wipro GE has appealed against the said demands before the first appellate authority. The first appellate authority vacated the tax demands for the years ended March 31, 2001, 2002, 2003 and 2004. The income tax authorities have filed an appeal for the years ended March 31, 2001, 2002, 2003 and 2004. In December 2008, Wipro GE received, on similar grounds, an additional tax demand of Rs. 552 (including interest) for the financial year ended March 31, 2001.2005. Wipro GE has filed an appeal against the said demand within the time limits permitted under the statute. Considering the facts and nature of disallowance and the order of the appellate authority upholding the claims of Wipro GE, Wipro GE believes that the final outcome of the disputes should be in favour of Wipro GE and the contingency will not have any material adverse effect on theits financial position and results of operations. The range of loss due to this contingency is between zero and the amount ofto which the demand raised. WeP Peripherals (WeP)
The Company previously accounted for its 36.9% interest as of March 31, 2006 in WeP by the equity method. The carrying value of the equity investment in WeP Peripherals as of March 31, 2006 was Rs. 201.52.
In December 2006, the Company sold a portion of its interest in WeP Peripherals for a consideration of Rs. 160.00 and recorded a net gain of Rs 40.16. Subsequent to this sale, the Company’s ownership interest in WeP Peripherals is reduced to 15% and the Company does not have the ability to exercise significant influence over the operating and financial policies of WeP Peripherals. Accordingly, the Company has subsequently accounted for the balance investment of Rs. 79.86 under the cost method.
WM Net Serv
The Company has accounted for its 80.1% ownership interest in WM NetServ by the equity method as the minority shareholder in the investee has substantive participative rights as specified in EITF Issue No. 96-16, Investor’s Accounting for an Investee When the Investor Has a Majority of the Voting Interest but the Minority Shareholder or Shareholders Have Certain Approval or Veto Rights. The carrying value of the equity investment in WM Net Serv as of March 31, 2007 was Rs. 122.14. The Company’s equity in the loss of WM Net Serv for year ended March 31, 2007 was Rs. 24.50.raised.
14. Financial Instruments and Concentration of Risk Concentration of risk. Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, investments in liquid and short-term mutual funds, other investments securities, derivative financial instruments, accounts receivable and corporate deposits. The Company’s cash resourcesfunds are invested with financial institutions and commercial corporations with high investment grade credit ratings. Limits have been established by the Company as to the maximum amount of cash that may be invested with any such single entity. To reduce its credit risk, the Company performs ongoing credit evaluations of customers. No single customer accounted for 10%5% or more of the accounts receivable as of March 31, 20062008 and 20072009 and revenues for the years ended March 31, 2005, 20062007, 2008 and 2007.2009. Derivative financial instruments. The Company is exposed to foreign currency fluctuations on foreign currency assets and/ liabilities, forecasted cash flowsrevenues denominated in foreign currency.currency and net investments in foreign operations. The Company follows established risk management policies, including the use of derivatives to hedge foreign currency assets and/ liabilities, foreign currency forecasted cash flows. Therevenues and net investments in foreign operations. In these derivative instruments a bank is generally the counter party is a bank and the Company considers the risks of non-performance by thesuch counterparty as non-material. The Company enters into master agreements with the counter parties. These master agreements contain netting-off provisions, which partially mitigate the credit exposure to counter-parties. The company closely monitors the credit worthiness of counterparties. A majority of the forward foreign exchange/option contracts mature between one to twelve months and the forecasted transactions are expected to occur during the same period. The balance portions of these forward foreign exchange / option contracts mature between twelve to sixty months. 123
The following table presents the aggregate contracted principal amounts of the Company’s derivative contracts outstanding: | | | | | | | | | | | | | | | | | | | As of March 31, | | As of March 31, | | | 2006 | | 2007 | | 2008 | | 2009 | Forward contracts | | | Sell | | $ | 592.23 | | $ | 345.00 | | | $ | 2,775 | | $ | 1,374 | | | | £ | 4.00 | | € | 16.00 | | | € | 105 | | € | 79 | | | | £ | 87.6 | | | £ | 61 | | £ | 53 | | | | | Buy | | — | | $ | 184.56 | | | $ | 435 | | $ | 438 | | | | | ¥ | 7,580 | | ¥ | 23,170 | | Net purchased options (sell) | | $ | 254.00 | | $ | 36.00 | | | | | | Net purchased options (to sell) | | | $ | 641 | | $ | 562 | | | | £ | 8.00 | | € | 13.00 | | | € | 24 | | € | — | | | | | £ | 84 | | £ | 54 | | Net written options (sell) | | $ | 6.00 | | — | | | | | £ | 5.00 | | — | | | ¥ | 7,682 | | ¥ | 6,130 | | | | | Cross-currency interest rate swap | | | ¥ | — | | ¥ | 35,016 | |
In connection with cash flow hedges, the Company has recorded Rs. 113.81,72, Rs. 202.34,(1,097) and Rs. 71.86(16,859) of net gains/(losses) as a component of accumulated and other comprehensive income within stockholders’ equity as at March 31, 2005, 20062007, 2008 and 2009, respectively. Out of net losses in connection with cash flow hedges accumulated in other comprehensive income within shareholders equity Rs. 6,102 will be reclassified into earnings over the period of next 12 months. The Company has also recognized a mark to market loss of Rs. Nil, Rs. 495 and Rs. 4,410 for the period ended March 31, 2007, respectively.2008 and 2009 respectively, relating to changes in fair value of derivative financial instruments, designated as hedges of net investment in non-integral foreign operations, in translation adjustments in other comprehensive income. 113
The following table summarizes activity in the accumulated and other comprehensive incomeincome/(loss) within stockholders’ equity related to all derivatives classified as cash flow hedges during the years ended March 31, 2005, 20062007, 2008 and 2007.2009. | | | | | | | | | | | | | | | | | | | | | | | | | | | As of March 31, | | | As of March 31, | | | | 2005 | | 2006 | | 2007 | | | 2007 | | 2008 | | 2009 | | Balance as at the beginning of the year | | Rs. | 1,058.97 | | Rs. | 113.81 | | Rs. | 202.34 | | | Rs. | 202 | | Rs. | 72 | | Rs. | (1,097 | ) | | | Net gains reclassified into net income on occurrence of hedged transactions | | | (1,058.97 | ) | | | (113.81 | ) | | | (202.34 | ) | | Net (gain)/loss reclassified into net income on occurrence of hedged transactions | | | | (202 | ) | | | (72 | ) | | 1,019 | | Deferred cancellation losses relating to roll-over hedging | | | (159.60 | ) | | — | | — | | | — | | — | | | (11,357 | ) | Changes in fair value of effective portion of outstanding derivatives | | 273.41 | | 202.34 | | 71.86 | | | 72 | | | (1,097 | ) | | | (5,424 | ) | | | | | | | | | | | | | | | | Unrealized gain/(losses) on cash flow hedging derivatives, net | | | (945.16 | ) | | 88.53 | | | (130.48 | ) | | Unrealized gain/ (loss) on cash flow hedging derivatives, net | | | | (130 | ) | | | (1,169 | ) | | | (15,762 | ) | | | | | | | | | | | | | | | | | | Balance as at the end of the year | | Rs. | 113.81 | | Rs. | 202.34 | | Rs. | 71.86 | | | Rs. | 72 | | Rs. | (1,097 | ) | | Rs. | (16,859 | ) | | | | | | | | | | | | | | | |
As of March 31, 20062008 and 20072009 there were no significant gains or losses on derivative transactions or portions thereof that have become ineffective as hedges, or associated with an underlying exposure that did not occur. 15. BorrowingsAccumulated Other Comprehensive Income The accumulated other comprehensive income also includes the translation reserve. The opening and closing balance in translation reserve is given below: | | | | | | | | | | | | | | | Year ended March 31, | | | | 2007 | | | 2008 | | | 2009 | | Balance at the beginning of the period | | Rs. | (89 | ) | | Rs. | (220 | ) | | Rs. | (110 | ) | Translation adjustments | | | (131 | ) | | | 605 | | | | 9,181 | | Movement in effective portion of hedges of net investment in foreign operations | | | — | | | | (495 | ) | | | (4,410 | ) | | | | | | | | | | | Balance at the end of the period | | Rs. | (220 | ) | | Rs. | (110 | ) | | Rs. | 4,661 | | | | | | | | | | | |
16. Debt Short-term borrowings from Banksbanks primarily consist of lines of credit of approximately Rs. 9,387, US$ 513, JPY 22,026, SEK 87, SAR 90 and RM (Malaysian Ringgit) 284 from bankers primarily for working capital requirements. Out of these, as of March 31, 2009, the Company has unutilized lines of credit aggregating Rs. 5,238, US$ 171, SEK 7, SAR 15 and RM 167 respectively. To utilize these unused lines of credit, we require consent of the lender and compliance with the certain financial covenants. Additionally, the Company has lines of credit in various other currencies equivalent to Rs. 2,468, of which Rs. 2,265 is unutilized as of March 31, 2009. Significant portion of the aforementioned lines of credit are revolving credit facilities and floating rate foreign currency loans, renewable quarterly. These facilities bear floating rate of interest, referenced to LIBOR and a spread, determined based on market condition. The Company has an Indian linenon-fund based revolving credit facilities in various currencies equivalent to Rs. 10,663 for operational requirements that can be used for the issuance of letters of credit and bank guarantees. As of March 31, 2009, an amount of Rs. 6,985.50, a US line3,229 was unutilized out of creditthese non-fund based facilities. A summary of US$ 25.00 and a UK line of credit of GBP 6 from its bankers for working capital requirements. Alllong- term debt is as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | As of March 31, 2008 | | | As of March 31, 2009 | | | | Foreign | | | Indian | | | Foreign | | | Indian | | | | | | | Final | | Currency | | currency | | | Rupee | | | currency | | | Rupee | | | Interest rate | | | maturity | | Unsecured external commercial borrowing | | | | | | | | | | | | | | | | | | | | | | | | | Japanese Yen | | | 35,016 | | | Rs. | 14,070 | | | | 35,016 | | | Rs. | 18,052 | | | | 3.56 | % | | | 2013 | | Unsecured term loan | | | | | | | | | | | | | | | | | | | | | | | | | Indian Rupee | | | NA | | | | 245 | | | | NA | | | | 631 | | | | 6.05 | % | | | 2014 | |
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| | | | | | | | | | | | | | | | | | | | | | | | | | | As of March 31, 2008 | | | As of March 31, 2009 | | | | Foreign | | | Indian | | | Foreign | | | Indian | | | | | | | Final | | Currency | | currency | | | Rupee | | | currency | | | Rupee | | | Interest rate | | | maturity | | Euro | | | 3 | | | | 186 | | | | 0.05 | | | | 3 | | | | 3.70 | % | | | 2010 | | Secured term loan | | | | | | | | | | | | | | | | | | | | | | | | | Swedish Krona | | | 63 | | | | 427 | | | | 37 | | | | 230 | | | | 2.25 | % | | | 2013 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | 14,928 | | | | | | | | 18,916 | | | | | | | | | | Less: Current portion | | | | | | | 406 | | | | | | | | 235 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Long term debt, less current portion | | | | | | Rs. | 14,522 | | | | | | | Rs. | 18,681 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The company has entered into cross-currency interest rate swap (CCIRS) in connection with the lines of credit are renewable annually. The Indian line of credit bears interest atunsecured external commercial borrowing. Please refer to the prime ratediscussion on CCIRS in Note 19 of the bank, which averaged 8.5% forNotes to Consolidated Financial Statements. Principal payments required on long-term debt in each of the next five fiscal years endedending March 31 2006are as follows | | | | | Year ending March 31, | | Amount | | 2010 | | Rs. | 235 | | 2011 | | | 227 | | 2012 | | | 184 | | 2013 | | | 18,210 | | 2014 | | | 60 | | | | | | Total | | Rs. | 18,916 | | | | | |
The unsecured external commercial borrowing contains certain covenants that limit future borrowings and 2007.payments towards acquisitions in a financial year. The US lineterms of credit bears interest at 60 basis points over the US$ London Inter-Bank Offered Rateother secured and UK lineunsecured debt and borrowings also contain certain restrictive covenants primarily requiring the Company to maintain certain financial ratios. As of credit bears interest at 70 basis points overMarch 31, 2009, the GBP London Inter-Bank Offered Rate. The facilitiesCompany has met the relevant covenants. A portion of the above short-term borrowings and long-term debt aggregating to Rs. 876 are secured by inventories, accounts receivable and certain property, plant and contain financial covenantsequipment. Interest expense was Rs. 125, Rs. 1,440 and restrictions on indebtedness. DuringRs. 2,691 for the year ended March 31, 2007, as a part of its acquisition,2008 and 2009 respectively. Interest capitalized by the Company assumed bank borrowings amounting towas Rs. 366Nil, Rs. 419 and Rs. 459359 for Saraware and Hydrauto Group respectively. 16. Stock Dividend
In June 2004, the members of the Company approved a stock dividend in the ratio of 2 additional equity shares or ADS for every equity share or ADS held. Accordingly, the Company has issued 465,631,260 additional shares and has transferred an amount of Rs. 931.26 from retained earnings to equity shares. Share and per share data for all periods reported have been adjusted to reflect the stock dividend. In accordance with the shareholder’s approval, capitalization of retained earnings aggregating Rs. 931.26 has been recorded during the year ended March 31, 2005.
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In July 2005, the members of the Company approved a stock dividend, effective August 24, 2005, in the ratio of 1 additional equity shares or ADS for every equity share or ADS held. Accordingly, the Company issued 705,893,574 additional shares2007, 2008 and has transferred an amount of Rs. 1,161.75 from additional paid in capital and Rs. 250.04 from retained earnings, to equity shares. The allocation between additional paid in capital and retained earnings is in line with the local statutory accounts. Share and per share data for all periods reported have been adjusted to reflect the stock split effected in the form of stock dividend. In accordance with the shareholder’s approval, capitalization of additional paid in capital and retained earnings aggregating Rs. 1,411.79 has been recorded in the year ended March 31, 2006.2009 respectively.
17. Equity Shares and Dividends Currently, the Company has only one class of equity shares. For all matters submitted to vote in the shareholders meeting, every holder of equity shares, as reflected in the records of the Company on the date of the shareholders meeting shall have one vote in respect of each share held. In October 2000, the Company made a public offering of its American Depositary Shares, or ADSs, to international investors. The equity shares represented by the ADS carry similar rights as to voting and dividends as the other equity shares. In July 2005, the members of the company approved for increase in authorized capital of the Company from 750,000,000 to 1,650,000,000.
Dividends are paid in Indian rupees. Indian law mandates that any dividend, exceeding 10% of thecompany is 1,650,000,000 equity shares canof Rs. 2 each at par value as of March 31, 2009. During the year ended March 31, 2009, the company issued 968,803 shares to its wholly owned trust (Wipro Inc Benefit Trust) pursuant to a common control transaction.
During the year ended March 31, 2009, the Company completed the merger of a few of its subsidiaries with Wipro Limited, the parent entity. Pursuant to the terms of merger approved by the courts in India, Company issued 968,803 fully paid equity shares of Rs 542 to a controlled trust. This transaction was determined to be declared out of distributable profits only after thea common control transfer, of up to 10% of net income computed in accordance with current regulationsthe guidance in SFAS No. 141 and EITF 02-5, Definition of ‘Common Control’ in relation to a general reserve. Also, the remittance of dividends outside India is governed by Indian law on foreign exchange. Dividend payments are also subject to applicable taxes. In the event of liquidation of the affairs of the Company, all preferential amounts, if any, shall be discharged by the Company. The remaining assets of the Company, after such discharge, shall be distributedFASB Statement No. 141, Accordingly, no adjustments were made to the holderscarrying value of equity shares in proportion to the number of shares held by them.assets and liabilities.
The Company paid cash dividends of Rs. 7,575.99,16,111, Rs. 3,997.745,123 and Rs. 8,128.586,829 during the years ended March 31, 2005, 20062007, 2008 and 2007.2009 respectively. The dividends per share were Rs. 4.84,10, Rs. 2.503 and Rs. 54 during the years ended March 31, 2005, 20062007, 2008 and 2007,2009, respectively. Additionally, in March 2007, the Board of Directors of the Company approved an additional cash dividend of Rs. 5 per share totaling Rs. 8,253.05. In accordance with Indian regulations, an amount equivalent to the additional cash dividend, net of taxes, amounting to Rs. 7,237.88 has been transferred to a specific bank account pending payment to the shareholders. The balance in this bank account can only be used to pay the specified dividend, is not available for general use and is accordingly reflected as restricted cash in the consolidated balance sheet. 18. Retained Earnings Retained earnings as of March 31, 20062008 and 2007, also2009, include Rs. 922.011,294 and Rs. 1,084.491,621 respectively, of undistributed earnings in equity of affiliates. 115
19. Other Income, Net Other income consists of the following: | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended March 31, | | | Year ended March 31, | | | | 2005 | | 2006 | | 2007 | | | 2007 | | 2008 | | 2009 | | Interest income | | Rs. | 35.79 | | Rs. | 198.09 | | Rs. | 682.51 | | | Rs. | 683 | | Rs. | 1,505 | | Rs. | 1,930 | | Interest expense | | | (56.12 | ) | | | (34.95 | ) | | | (260.81 | ) | | | (261 | ) | | | (1,064 | ) | | | (2,332 | ) | Dividend income | | 679.36 | | 862.60 | | 1,685.93 | | | 1,686 | | 1,428 | | 2,265 | | Gain on sale of investment securities, net | | 35.59 | | 237.72 | | 549.27 | | | Gain on sale of investment securities | | | 549 | | 771 | | 681 | | Foreign exchange loss, net | | | | (39 | ) | | | (496 | ) | | | (4,535 | ) | Others | | 104.20 | | 12.40 | | 9.94 | | | 10 | | 23 | | 175 | | | | | | | | | | | Rs. | 2,628 | | Rs. | 2,167 | | Rs. | (1,816 | ) | | | Rs. | 798.82 | | Rs. | 1,275.86 | | Rs. | 2,666.84 | | | | | | | | | | | | | | | | | |
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Foreign exchange gain / (losses) relates to exchange gain/ (losses) on debt denominated in foreign currency and derivative financial instruments related to such foreign currency debt.
The Company purchased a CCIRS in conjunction with a Yen-denominated External Commercial Borrowing (ECB) to offset its U.S. Dollar denominated foreign currency exposure arising from its investment in Wipro Inc. (a subsidiary). While the CCIRS along with the Yen-denominated ECB, is an economic hedge of the net investment in the foreign operation, this combination does not qualify as a hedging instrument within SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities and its related guidance. Accordingly, the total mark to market losses on such CCIRS along with exchange loss on Yen-denominated ECB amounting to Rs 3,973 has been accounted for in the income statement within Other income, net above. 20.20. Shipping and Handling Costs
Selling and marketing expenses for the years ended March 31 2005, 20062007, 2008 and 2007,2009, include shipping and handling costs of Rs. 356.96,807, Rs. 555.371,039 and Rs. 807.03885 respectively. 21. Income Taxes Income taxes have been allocated as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended March 31, | | | Year ended March 31, | | | | 2005 | | 2006 | | 2007 | | | 2007 | | 2008 | | 2009 | | Income from continuing operations | | Rs. | 2,693.57 | | Rs. | 3,264.73 | | Rs. | 3,722.61 | | | Rs. | 3,723 | | Rs. | 3,873 | | Rs. | 5,422 | | Stockholders equity for: | | | Income tax benefits relating to employee stock options | | — | | | (69.34 | ) | | | (64.54 | ) | | Income tax benefits relating to employee stock incentive plans | | | | (65 | ) | | | (68 | ) | | | (18 | ) | Gain on sale of long-lived asset to the controlling shareholder | | | — | | 52 | | — | | Adjustments to initially apply SFAS No. 158 | | — | | — | | | (18.05 | ) | | | (18 | ) | | — | | — | | Unrealized gains on investment securities, net | | 59.59 | | 114.94 | | 25.48 | | | Unrecognized actuarial (gain)/loss, net | | | — | | | (17 | ) | | 27 | | Unrealized gains / (loss) on investment securities, net | | | 25 | | | (25 | ) | | | (131 | ) | Unrealized gain / (loss) on cash flow hedging derivatives | | | — | | — | | | (2,353 | ) | Tax benefit allocated to goodwill | | — | | — | | | (14.40 | ) | | | (14 | ) | | | (51 | ) | | — | | | | | | | | | | | | | | | | | Total income taxes | | Rs. | 2,753.16 | | Rs. | 3,310.33 | | Rs. | 3,651.10 | | | Rs. | 3,651 | | Rs. | 3,764 | | Rs. | 2,947 | | | | | | | | | | | | | | | | |
Income taxes relating to continuing operations consist of the following: | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended March 31, | | | Year ended March 31, | | | | 2005 | | 2006 | | 2007 | | | 2007 | | 2008 | | 2009 | | Current taxes | | | Domestic | | Rs. | 1,642.97 | | Rs. | 1,605.19 | | Rs. | 1,574.59 | | | Rs. | 1,575 | | Rs. | 2,641 | | Rs. | 3,683 | | Foreign | | 1,133.65 | | 1,644.57 | | 2,176.78 | | | 2,177 | | 1,641 | | 2,538 | | | | | | | | | | | | | | | | | | | Rs. | 2,776.62 | | Rs. | 3,249.76 | | Rs. | 3,751.37 | | | Rs. | 3,752 | | Rs. | 4,282 | | Rs. | 6,221 | | | | | | | | | | | | | | | | | | | | Deferred taxes | | | Domestic | | | (70.45 | ) | | | (7.82 | ) | | | (0.95 | ) | | | (1 | ) | | | (319 | ) | | | (291 | ) | Foreign | | | (12.60 | ) | | 22.79 | | | (27.81 | ) | | | (28 | ) | | | (90 | ) | | | (508 | ) | | | | | | | | | | | | | | | | | | | (83.05 | ) | | 14.97 | | | (28.76 | ) | | | (29 | ) | | | (409 | ) | | | (799 | ) | | | | | | | | | | | | | | | | Total income tax expense | | Rs. | 2,693.57 | | Rs. | 3,264.73 | | Rs. | 3,722.61 | | | Rs. | 3,723 | | Rs. | 3,873 | | Rs. | 5,422 | | | | | | | | | | | | | | | | |
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The reconciliation between the provision of income tax of the Company and amounts computed by applying the Indian statutory income tax rate is as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended March 31, | | | Year ended March 31, | | | | 2005 | | 2006 | | 2007 | | | 2007 | | 2008 | | 2009 | | Income before taxes, minority interest and cumulative effect of change in accounting principle | | Rs. | 18,607.53 | | Rs. | 23,536.10 | | Rs. | 32,852.51 | | | Income before taxes and minority interest | | | Rs. | 32,852 | | Rs. | 36,138 | | Rs. | 39,936 | | Enacted income tax rate in India | | | 36.59 | % | | | 33.66 | % | | | 33.66 | % | | | 33.66 | % | | | 33.99 | % | | | 33.99 | % | | | | | | | | | | | | | | | | Computed expected tax expense | | 6,808.50 | | 7,922.25 | | 11,058.15 | | | 11,058 | | 12,283 | | 13,574 | | Effect of: | | | Income exempt from tax | | | (4,706.64 | ) | | | (5,129.26 | ) | | | (7,498.43 | ) | | | (7,948 | ) | | | (8,450 | ) | | | (10,368 | ) | Basis differences that will reverse during the tax holiday period | | 245.03 | | 291.24 | | 526.12 | | | Income taxed at higher rates | | 111.59 | | 229.95 | | 124.56 | | | Loss on direct issue of stock by subsidiary | | 75.74 | | — | | — | | | Basis differences that will reverse during a tax holiday period | | | 526 | | | (21 | ) | | 350 | | Income taxed at higher/ (lower) rates | | | 125 | | | (50 | ) | | | (229 | ) | Income taxes relating to prior years | | 122.23 | | | (175.15 | ) | | | (701.90 | ) | | | (702 | ) | | | (530 | ) | | | (369 | ) | Effect of change in tax rates | | | (9.62 | ) | | 17.14 | | — | | | — | | 5 | | — | | Changes in valuation allowances | | | 7 | | 138 | | 314 | | Expenses disallowed for tax purposes | | — | | 111.37 | | 197.31 | | | 647 | | 481 | | 2150 | | Others, net | | 46.74 | | | (2.81 | ) | | 16.80 | | | 10 | | 17 | | — | | | | | | | | | | | | | | | | | Total income tax expense | | Rs. | 2,693.57 | | Rs. | 3,264.73 | | Rs. | 3,722.61 | | | Rs. | 3,723 | | Rs. | 3,873 | | Rs 5,422 | | | | | | | | | | | | | | | |
A substantial portion of the profits of the Company’s India operations are exempt from Indian income taxes being profits attributable to export operations and profits from undertakings situated in Software Technology and Hardware Technology Parks. Under the tax holiday, the taxpayer can utilize an exemption from income taxes for a period of any ten consecutive years. The Company has opted for this exemption from the year ended March 31, 1997, for undertakings situated intax holidays on all facilities under Software Technology and Hardware Technology Parks.Parks were scheduled to expire in stages with a mandated maximum expiry period of March 31, 2009. However, on May 10, 2008, the Finance Act, 2008 extended the availability of the ten year tax holiday by a period of one year such that the tax holiday will now be available until the earlier of fiscal year 2010 or ten years after the commencement of a tax holiday for an individual undertaking. Additionally, under the Special Economic Zone Act, 2005 scheme, units in designated special economic zones which being providing services on or after April 1, 2005 will be eligible for a deduction of 100 percent of profits or gains derived from the export of services for the first five years from commencement of provision of services and 50 percent of such profits and gains for a further five years. Certain tax benefits are also available for a further five years subject to the unit meeting defined conditions. Profits from certain other undertakings are also eligible for preferential tax treatment. In addition, dividend income from certain category of investments is exempt from tax. The aggregate rupee and per share (basic) effects of these tax exemptions, are Rs. 4,706.647,948 and Rs. 3.395.57 per share for the year ended March 31, 2005,2007 , Rs. 5,129.268,450 and Rs. 3.645.82 per share for the year ended March 31, 20062008 and Rs. 7,498.4310,368 and Rs. 5.267.13 per share for the year ended March 31, 2007.2009. 126
The components of the net deferred tax asset are as follows: | | | | | | | | | | | | | | | | | | | As of March 31, | | | As of March 31, | | | | 2006 | | 2007 | | | 2008 | | 2009 | | Deferred tax assets | | | Allowance for doubtful accounts | | Rs. | 105.44 | | Rs. | 217.14 | | | Rs. | 193 | | Rs. | 260 | | Accrued expenses and liabilities | | 224.28 | | 313.46 | | | 553 | | 766 | | Carry-forward capital losses | | 56.26 | | — | | | Carry-forward business losses | | 917.37 | | 1,019.20 | | | 2,224 | | 2,790 | | Minimum alternate tax | | | 126 | | 126 | | Loss on hedging derivatives | | | — | | 2,353 | | Deferred income | | | 309 | | 420 | | Others | | 60.91 | | 69.06 | | | 35 | | 7 | | | | | | | | | | | | | Total gross deferred tax assets | | 1,364.26 | | 1,618.86 | | | 3,440 | | 6,722 | | Less: valuation allowance | | | (524.55 | ) | | | (531.13 | ) | | | (619 | ) | | | (932 | ) | | | | | | | | | | | | Net deferred tax assets | | Rs. | 839.71 | | Rs. | 1,087.73 | | | Rs. | 2,821 | | Rs. | 5,790 | | | | | | | | | | | | | | | | Deferred tax liabilities | | | Property, plant and equipment | | Rs. | 22.43 | | Rs. | 79.88 | | | Rs. | 419 | | Rs. | 533 | | Intangible assets | | 202.01 | | 560.03 | | | 2,760 | | 4,464 | | Amortizable goodwill | | 63.60 | | 84.80 | | | Undistributed earnings of affiliates | | 153.49 | | 196.83 | | | Unrealized gains on investment securities, net | | 174.45 | | 199.93 | | | | | | | | | | Total gross deferred tax liability | | 615.98 | | Rs. | 1,121.47 | | | Amortizable tax goodwill | | | 472 | | 527 | | Unrealized gains on investments securities | | | 175 | | 42 | | Investment in affiliates | | | 246 | | 320 | | Others | | | 57 | | 119 | | Total gross deferred tax liabilities | | | Rs. | 4,129 | | Rs. | 6,005 | | | | | | | | | | | | | Net deferred tax assets / (liabilities) | | Rs. | 223.73 | | Rs. | (33.74 | ) | | Rs. | (1,308 | ) | | Rs. | (215) | | | | | | | | | | | | |
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In assessing the realizability of remaining deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences and loss carry-forwards become deductible or utilizable. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences and loss carry-forwards, utilizable, net of the existing valuation allowances at March 31, 2007.2009. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carry-forward period are reduced. Upon acquisition of Wipro Nervewire, New Logic, Saraware and Hydrauto, the Company was entitled to utilize tax benefits of Rs. 264.55, Rs. 280.75, Rs. 26.60 and 74.80 respectively, on pre-acquisition carry-forward business losses. Based on projections of future taxable income and tax planning strategies management believes that the Company will be able to realize tax benefits onlyPursuant to the extentchanges in the Indian income tax laws in fiscal 2007, Minimum Alternate Tax (MAT) has been extended to income in respect of Rs. 172.36 onwhich deduction is claimed under section 10A and 10B of the pre-acquisition carry-forward losses. Consequently,Act; consequently, the Company has recordedcalculated its tax liability for current domestic taxes after considering MAT. The excess tax paid under MAT provisions over and above normal tax liability can be carried forward and set-off against future tax liabilities computed under normal tax provisions. The Company was required to pay MAT during fiscal 2008 and, accordingly, a valuation allowance fordeferred tax asset of Rs. 126 million has been recognized on the remaining amount. Reversal, if any, of the valuation allowance would be recorded as a reduction of goodwill arising from the respective acquisitions. The carry-forward business lossesbalance sheet as of March 31, 2007, expire as follows:
| | | | | Year ending March 31: | | | | | 2013 | | Rs. | 24.00 | | 2014 | | | 28.00 | | 2015 | | | 66.00 | | 2024 | | | 315.00 | | 2025 | | | 209.00 | | Thereafter | | | 2,703.14 | | | | | | | | Rs. | 3,345.14 | | | | | |
2008, which can be carried forward for a period of 7 years. The increase in valuation allowancetax loss carry-forwards of Rs. 229.16 for the year ended7,735 as of March 31, 20062009 relates to certain subsidiaries. Approximately, Rs. 4,765 of these tax loss carry-forwards is on account of valuation allowance ofnot currently subject to expiration dates. The remainder, approximately Rs. 199.76 recognized on the deferred tax assets on pre-acquisition carry-forward business losses of New Logic and valuation allowance of Rs. 29.40 recognized on operating losses of certain subsidiaries for the year ended March 31, 2006. The increase2,970 expires in valuation allowance of Rs. 6.58 for the year ended March 31, 2007 is on account of pre-acquisition losses / operating losses of subsidiaries of Rs. 62.84 offset by a reversal of valuation allowance, on realization, in respect of capital loss of Rs. 56.26.various years through fiscal 2029. A significant portion ofThe income before income taxes, minority interest and cumulative effect of change in accounting principle for each of the fiscal years 2007, 2008 and 2009 is primarily from Indian sources.domestic entities. The Company indefinitely reinvests eligibleall the accumulated undistributed earnings of foreign subsidiaries, and accordingly, has not recorded any deferred taxes in relation to such undistributed earningearnings of its foreign subsidiaries. It is impracticable to determine the undistributed earningearnings and the additional taxes payable when these earnings are remitted. 127
The Company is subject to a 15% branch profit tax in the USU.S. to the extent the net profit during the fiscal year attributable to its USU.S. branch are greater than the increase in the net assets of the USU.S. branch during the fiscal year, computed in accordance with the Internal Revenue Code. As of March 31, 2007,2009, the USU.S. branch’s net assets amounted to approximately $ 155.249. The Company has not triggered the branch profit tax and intends to maintain the current level of its net assets in the USU.S. as is consistent with its business plan. Accordingly, a provision for branch profit tax has not been recorded as of March 31, 2009. Effective April 1, 2007, the Company adopted Financial Accounting Standards Board Interpretation 48, Accounting for Uncertainty in Income Taxes — An Interpretation of Statement of Financial Accounting Standards No. 109 (FIN 48). The adoption of FIN 48 did not have any impact on the retained earnings or provision for taxation as of April 1, 2007. A reconciliation of the beginning and ending balance of unrecognized tax benefits is as follows: | | | | | | | | | | | Year ended March 31, | | Particulars | | 2008 | | | 2009 | | Beginning balance | | Rs. | 3,378 | | | Rs. | 4,431 | | Increases related to current year tax positions | | | 1,442 | | | | 1,042 | | Increases related to prior year tax positions | | | 135 | | | | 1,387 | | Decreases related to prior year tax positions | | | (253 | ) | | | (541 | ) | Reductions related to lapsing of statutes of limitation | | | (162 | ) | | | (144 | ) | Impact of foreign currency translation | | | (109 | ) | | | 199 | | | | | | | | | Ending balance | | Rs. | 4,431 | | | Rs. | 6,374 | | | | | | | | |
The unrecognized tax benefits has increased by Rs. 2,429 during the year ended March 31, 2009 primarily due to certain additional tax credit carry forward of Rs. 918 reported in the income tax filings for the year ended March 31, 2008 and on account of additional impact in the current year in relation to uncertain tax position taken in the current year. The unrecognized tax benefits decreased by Rs. 685 during the year ended March 31, 2009 due to reversal of tax provision upon completion of tax assessment by the tax authorities in a particular tax jurisdiction, expiry of statute of limitation and revision of tax accruals relating to transfer pricing. 118
The Companies’ total unrecognized tax benefits as of March 31, 2008 and March 31, 2009, if recognized, would reduce the tax provisions by Rs. 4,410 and Rs. 6,374, respectively and thereby would effect the Company’s effective tax rate. Although it is difficult to anticipate the final outcome on timing of resolution of any particular uncertain tax position, the Company believes that the total amount of unrecognized tax benefits will be decreased by Rs. 160 during the next 12 months due to expiry of statue of limitation. The Company’s policy is to include any penalties and interest related to unrecognized tax benefits as a component of other income, net. As of March 31, 2008 and as of March 31, 2009, the Company had provisions of Rs. 313 and Rs 374 respectively on account of accrued interest and penalties related to unrecognized tax benefits. Interest and penalties included in other income, net were Rs. 199 and Rs. 61 for the year ended March 31, 2008 and 2009, respectively. For each major jurisdiction, we have listed out the periods for which the income tax authorities can review/audit Company’s income tax filings. Additionally, certain tax positions relate to earlier years, which are currently under appeallate authorities and courts and have been included in Note 26. | | | | | Jurisdiction | | Open tax years | India | | 2004-05 to 2008-09 | United States — federal taxes | | 2004-05 to 2008-09 | United States — state taxes | | 2002-03 to 2008-09 | United Kingdom | | 2002-03 to 2008-09 | Japan | | 2002-03 to 2008-09 | Canada | | 2000-01 to 2008-09 |
22. Employee Stock Incentive Plans Wipro Equity Reward Trust (WERT).In 1984, the Company established a controlled trust called the WERT. Under this plan, the WERT would purchase shares of Wipro out of funds borrowed from Wipro. The Company’s Compensation Committee would recommend to the WERT, officers and key employees, to whom the WERT will grant shares from its holding. The shares have been granted at a nominal price. Such shares would be held by the employees subject to vesting conditions. The shares held by the WERT are reported as a reduction from stockholders’ equity. The movement in the shares held by the WERT is given below: | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended March 31, | | Year ended March 31, | | | 2005 | | 2006 | | 2007 | | 2007 | | 2008 | | 2009 | Shares held at the beginning of the year | | 7,887,060 | | 7,893,060 | | 7,869,060 | | | 7,869,060 | | 7,961,760 | | 7,961,760 | | Shares granted to employees | | — | | | (24,000 | ) | | — | | | — | | — | | — | | Grants forfeited by employees | | 6,000 | | — | | 92,700 | | | 92,700 | | — | | — | | | | | | | | | | | | | | | | | Shares held at the end of the year | | 7,893,060 | | 7,869,060 | | 7,961,760 | | | 7,961,760 | | 7,961,760 | | 7,961,760 | | | | | | | | | | | | | | | | |
Wipro Employee Stock Option Plan 1999 (1999 Plan).plan and Restricted Stock Unit Option Plan.In July 1999, the Company established the 1999 Plan. Under the 1999 Plan, the Company is authorized to issue up to 30 million equity shares to eligible employees.A summary of general terms of grants under stock option plans and restricted stock unit plans are as follows: | | | | | | | | | | | | | | | Range of Exercise | Name of Plan | | Authorized Shares | | Prices | Wipro Employee Stock Option Plan 1999 (1999 Plan) | | | 30,000,000 | | | Rs. | 171 – 490 | | | Wipro Employee Stock Option Plan 2000 (2000 Plan) | | | 150,000,000 | | | Rs. | 171 – 490 | | | Stock Option Plan (2000 ADS Plan) | | | 9,000,000 | | | $ | 3 – 7 | | | Wipro Restricted Stock Unit Plan (WRSUP 2004 plan) | | | 12,000,000 | | | Rs. | 2 | | | Wipro ADS Restricted Stock Unit Option Plan (WARSUP 2004 plan) | | | 12,000,000 | | | $ | 0.04 | | | Wipro employee Restricted Stock Unit Option Plan 2005 (WSRUP 2005 plan) | | | 12,000,000 | | | Rs. | 2 | | | Wipro employee Restricted Stock Unit Option Plan 2007 (WSRUP 2007 plan) | | | 10,000,000 | | | Rs. | 2 | |
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Employees covered byunder the 1999 Planstock option plans and restricted stock unit option plans (collectively stock option plans) are granted an option to purchase shares of the Company at the respective exercise prices, subject to the requirementsrequirement of vesting. | | | | | | | | | | | | | | | | | | | Year ended March 31, 2005 | | | | | | | | | | | | | | | | Weighted- | | | | | | | | | | | | | | | | average | | | | | | | | | | | | Weighted- | | | remaining | | | | Shares arising | | | Range of exercise | | | average exercise | | | contractual | | | | out of options | | | prices | | | price | | | life(months) | | Outstanding at the beginning of the year | | | 8,365,265 | | | Rs. | 171 – 181 | | | Rs. | 181 | | | 18 months | | | | 11,916,150 | | | | 309 – 421 | | | | 311 | | | 26 months | | | | | | | | | | | | | | | | | | Forfeited and lapsed during the year | | | (76,440 | ) | | | 171 – 181 | | | | 181 | | | | — | | | | | (600,138 | ) | | | 309 – 421 | | | | 309 | | | | — | | | | | | | | | | | | | | | | | | | Exercised during the year | | | (4,086,872 | ) | | | 171 – 181 | | | | 181 | | | | — | | | | | (2,056,358 | ) | | | 309 – 421 | | | | 309 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding at the end of the year | | | 4,201,953 | | | | 171 – 181 | | | | 181 | | | 6 months | | | | 9,259,654 | | | | 309 – 421 | | | | 311 | | | 14 months | | | | | | | | | | | | | | Exercisable at the end of the year | | | 4,201,953 | | | | 171 – 181 | | | | 181 | | | 6 months | | | | 6,959,606 | | | Rs. | 309 – 421 | | | Rs. | 311 | | | 14 months | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | Year ended March 31, 2006 | | | | | | | | | | | | | | | | Weighted- | | | | | | | | | | | | | | | | average | | | | | | | | | | | | Weighted- | | | remaining | | | | Shares arising | | | Range of exercise | | | average exercise | | | contractual | | | | out of options | | | prices | | | price | | | life(months) | | Outstanding at the beginning of the year | | | 4,201,953 | | | Rs. | 171 – 181 | | | Rs. | 181 | | | 6 months | | | | 9,259,654 | | | | 309 – 421 | | | | 311 | | | 14 months | | | | | | | | | | | | | | | | | | Forfeited and lapsed during the year | | | (91,462 | ) | | | 171 – 181 | | | | 181 | | | | — | | | | | (224,530 | ) | | | 309 – 421 | | | | 309 | | | | — | | | | | | | | | | | | | | | | | | | Exercised during the year | | | (4,110,491 | ) | | | 171 – 181 | | | | 181 | | | | — | | | | | (5,056,811 | ) | | | 309 – 421 | | | | 310 | | | | — | | | | | | | | | | | | | | | | | | | Outstanding at the end of the year | | | — | | | | 171 – 181 | | | | — | | | | — | | | | | 3,978,313 | | | | 309 – 421 | | | | 312 | | | 3 months | | | | | | | | | | | | | | Exercisable at the end of the year | | | — | | | | 171 – 181 | | | | — | | | | — | | | | | 3,978,313 | | | Rs. | 309 – 421 | | | Rs. | 312 | | | 3 months | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Year ended March 31, 2007 | | | | | | | | | | | | | | | Weighted- | | | | | | | | | | | | | | | average | | | | | | | | | | | Weighted- | | remaining | | | Shares arising | | Range of exercise | | average exercise | | contractual | | | out of options | | prices | | price | | life(months) | Outstanding at the beginning of the year | | | 3,978,313 | | | | 309 – 421 | | | | 312 | | | 3 months | | | Forfeited and lapsed during the year | | | (75,795 | ) | | | 309 – 421 | | | | 309 | | | | — | | | Exercised during the year | | | (3,902,518 | ) | | | 309 – 421 | | | | 312 | | | | — | | | Outstanding at the end of the year | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | | | Exercisable at the end of the year | | | — | | | | — | | | | — | | | | — | | | | | | | | | | | | | | | | | | |
The total intrinsic value of options exercised during the years ended March 31, 2005, 2006, and 2007, was Rs. 702.25, Rs. 1,191.78, and Rs. 731.40, respectively. As of March 31, 2007 options outstanding and exercisable under the 1999 Plan had an intrinsic value of Rs Nil and Rs Nil, respectively. As of March 31, 2007, the unamortized stock compensation expense under the 1999 Plan is Rs Nil.
Wipro Employee Stock Option Plan 2000 (2000 Plan)vesting conditions (generally service conditions).In July 2000, the Company established the 2000 Plan. Under the 2000 Plan, the Company is authorized to issue up to 150 million equity shares to eligible employees. Employees covered by the 2000 Plan are granted options to purchase equity shares of the Company subject to vesting.
Stock option activity under the 2000 Plan is as follows:
| | | | | | | | | | | | | | | | | | | Year ended March 31, 2005 | | | | | | | | | | | | | | | | Weighted- | | | | | | | | | | | | | | | | average | | | | | | | | | | | | Weighted- | | | remaining | | | | Shares arising | | | Range of exercise | | | average exercise | | | contractual life | | | | out of options | | | prices | | | price | | | (months) | | Outstanding at the beginning of the year | | | 514,800 | | | Rs. | 172 – 255 | | | Rs. | 230 | | | 57 months | | | | 31,135,056 | | | | 264 – 396 | | | | 266 | | | 59 months | | | | 13,627,098 | | | | 397 – 408 | | | | 399 | | | 42 months | | | | | | | | | | | | | | | | | | Forfeited and lapsed during the year | | | (67,050 | ) | | | 172 – 255 | | | | 231 | | | | — | | | | | (1,892,582 | ) | | | 264 – 396 | | | | 266 | | | | — | | | | | (965,950 | ) | | | 397 – 408 | | | | 400 | | | | — | | | | | | | | | | | | | | | | | | | Exercised during the year | | | (54,854 | ) | | | 172 – 255 | | | | 226 | | | | — | | | | | (3,061,976 | ) | | | 264 – 396 | | | | 264 | | | | — | | | | | | | | | | | | | | |
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| | | | | | | | | | | | | | | | | | | Year ended March 31, 2005 | | | | | | | | | | | | | | | | Weighted- | | | | | | | | | | | | | | | | average | | | | | | | | | | | | Weighted- | | | remaining | | | | Shares arising | | | Range of exercise | | | average exercise | | | contractual life | | | | out of options | | | prices | | | price | | | (months) | | Outstanding at the end of the year | | | 392,896 | | | | 172 – 255 | | | | 231 | | | 45 months | | | | 26,180,498 | | | | 264 – 396 | | | | 267 | | | 47 months | | | | 12,661,148 | | | | 397 – 408 | | | | 399 | | | 30 months | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Exercisable at the end of the year | | | 165,876 | | | | 172 – 255 | | | | 231 | | | 45 months | | | | 15,729,818 | | | | 264 – 396 | | | | 267 | | | 47 months | | | | 8,862,804 | | | Rs. | 397 – 408 | | | Rs. | 399 | | | 30 months | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Year ended March 31, 2006 | | | | | | | | | | | | | | | | Weighted- | | | | | | | | | | | | | | | | average | | | | | | | | | | | | Weighted- | | | remaining | | | | Shares arising | | | Range of exercise | | | average exercise | | | contractual life | | | | out of options | | | prices | | | price | | | (months) | | Outstanding at the beginning of the year | | | 392,896 | | | Rs. | 172 – 255 | | | | 231 | | | 45 months | | | | 26,180,498 | | | | 265 – 396 | | | | 267 | | | 47 months | | | | 12,661,148 | | | | 397 – 458 | | | | 399 | | | 30 months | | | | | | | | | | | | | | | | | | Forfeited and lapsed during the year | | | (18,000 | ) | | | 172 – 255 | | | | 229 | | | | — | | | | | (790,554 | ) | | | 265 – 396 | | | | 267 | | | | — | | | | | (831,625 | ) | | | 397 – 458 | | | | 398 | | | | — | | | | | | | | | | | | | | | | | | | Exercised during the year | | | (82,320 | ) | | | 172 – 255 | | | | 221 | | | | — | | | | | (5,243,687 | ) | | | 265 – 396 | | | | 266 | | | | — | | | | | (1,929,556 | ) | | | 397 – 458 | | | | 397 | | | | — | | | | | | | | | | | | | | | Outstanding at the end of the year | | | 292,576 | | | | 172 – 255 | | | | 233 | | | 37 months | | | | 20,146,257 | | | | 265 – 396 | | | | 267 | | | 35 months | | | | 9,899,967 | | | | 397 – 458 | | | | 399 | | | 19 months | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Exercisable at the end of the year | | | 186,732 | | | | 172 – 255 | | | | 233 | | | 36 months | | | | 16,165,662 | | | | 265 – 396 | | | | 267 | | | 38 months | | | | 9,899,967 | | | Rs. | 397 – 458 | | | Rs. | 399 | | | 19 months | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Year ended March 31, 2007 | | | | | | | | | | | | | | | Weighted- | | | | | | | | | | | | | | | average | | | | | | | | | | | Weighted- | | remaining | | | Shares arising | | Range of exercise | | average exercise | | contractual life | | | out of options | | prices | | price | | (months) | Outstanding at the beginning of the year | | | 292,576 | | | | 172-255 | | | | 233 | | | 37 Months | | | | | 20,146,257 | | | | 265-396 | | | | 267 | | | 35 Months | | | | | 9,899,967 | | | | 397-458 | | | | 399 | | | 19 Months | | | | | | | | | | | | | | | | | | | Forfeited and lapsed during the year | | | (91,924 | ) | | | 172-255 | | | | 229 | | | | — | | | | | (973,249 | ) | | | 265-396 | | | | 274 | | | | — | | | | | (100,634 | ) | | | 397-458 | | | | 398 | | | | — | | | | | | | | | | | | | | | | | | | Exercised during the year | | | (175,802 | ) | | | 172-255 | | | | 228 | | | | — | | | | | (17,729,437 | ) | | | 265-396 | | | | 266 | | | | — | | | | | (8,312,435 | ) | | | 397-458 | | | | 399 | | | | — | | Outstanding at the end of the year | | | 24,850 | | | | 172-255 | | | | 236 | | | 23 Months | | | | | 1,443,571 | | | | 265-396 | | | | 267 | | | 23 Months | | | | | 1,486,898 | | | | 397-458 | | | | 399 | | | 7 Months | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Exercisable at the end of the year | | | 24,850 | | | | 172-255 | | | | 235 | | | 22 Months | | | | | 1,443,571 | | | | 265-396 | | | | 267 | | | 23 Months | | | | | 1,486,898 | | | | 397-458 | | | | 399 | | | 7 Months | | | | | | | | | | | | | | | | | | |
The total intrinsic value of options exercised during the years ended March 31, 2005, 2006, and 2007, was Rs. 262.46, Rs. 985.69, and Rs. 7,240.43, respectively. As of March 31, 2007 options outstanding and exercisable under the 2000 Plan had an intrinsic value of Rs 668.18 and Rs 668.18, respectively. As of March 31, 2007, the unamortized stock compensation expense under the 2000 Plan is Rs Nil.
Stock Option Plan (2000 ADS Plan).In April 2000, the Company established the 2000 ADS Plan. Under the 2000 ADS Plan, the Company is authorized to issue options to purchase up to 9 million American Depositary Shares
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(ADSs) to eligible employees. Employees covered by the 2000 ADS Plan are granted an option to purchase ADSs representing equity shares of the Company subject to the requirements of vesting.
Stock option activity under the 2000 ADS Plan is as follows:
| | | | | | | | | | | | | | | | | | | Year ended March 31, 2005 | | | | | | | | | | | | | | | | Weighted- | | | | | | | | | | | | | | | | average | | | | | | | | | | | | Weighted- | | | remaining | | | | Shares arising out | | | Range of exercise | | | average | | | contractual | | | | of options | | | prices | | | exercise price | | | life (months) | | Outstanding at the beginning of the year | | | 429,300 | | | $ | 3.46 – 5.01 | | | $ | 4.32 | | | 54 months | | | | 3,392,022 | | | | 5.82 – 6.90 | | | | 6.44 | | | 45 months | | | | | | | | | | | | | | | | | | Forfeited and lapsed during the year | | | (60,000 | ) | | | 5.82 – 6.90 | | | | 6.53 | | | | — | | | | | | | | | | | | | | | | | | | Exercised during the year | | | (24,750 | ) | | | 3.46 – 5.01 | | | | 3.77 | | | | — | | | | | (1,301,322 | ) | | | 5.82 – 6.90 | | | | 6.35 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding at the end of the year | | | 404,550 | | | | 3.46 – 5.01 | | | | 4.35 | | | 42 months | | | | 2,030,700 | | | | 5.82 – 6.90 | | | | 6.50 | | | 33 months | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Exercisable at the end of the year | | | 197,956 | | | | 3.46 – 5.01 | | | | 4.37 | | | 42 months | | | | 1,546,300 | | | $ | 5.82 – 6.90 | | | $ | 6.51 | | | 33 months | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Year ended March 31, 2006 | | | | | | | | | | | | | | | | Weighted- | | | | | | | | | | | | | | | | average | | | | | | | | | | | | Weighted- | | | remaining | | | | Shares arising out | | | Range of exercise | | | average | | | contractual | | | | of options | | | prices | | | exercise price | | | life (months) | | Outstanding at the beginning of the year | | | 404,550 | | | $ | 3.46 – 5.01 | | | $ | 4.35 | | | 42 months | | | | 2,030,700 | | | | 5.82 – 6.90 | | | | 6.50 | | | 33 months | | | | | | | | | | | | | | | | | | Forfeited and lapsed during the year | | | (48,000 | ) | | | 3.46 – 5.01 | | | | 4.00 | | | | — | | | | | (180,000 | ) | | | 5.82 – 6.90 | | | | 6.07 | | | | — | | | | | | | | | | | | | | | | | | | Exercised during the year | | | (117,650 | ) | | | 3.46 – 5.01 | | | | 4.45 | | | | | | | | | (641,858 | ) | | | 5.82 – 6.90 | | | | 6.53 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding at the end of the year | | | 238,900 | | | | 3.46 – 5.01 | | | | 4.38 | | | 31 months | | | | 1,208,842 | | | | 5.82 – 6.90 | | | | 6.50 | | | 21 months | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Exercisable at the end of the year | | | 176,938 | | | | 3.46 – 5.01 | | | | 4.33 | | | 31 months | | | | 911,621 | | | $ | 5.82 – 6.90 | | | $ | 6.45 | | | 21 months | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | Year ended March 31, 2007 | | | | | | | | | | | | | | | | Weighted- | | | | | | | | | | | | | | | | average | | | | | | | | | | | | Weighted- | | | remaining | | | | Shares arising out | | | Range of exercise | | | average | | | contractual | | | | of options | | | prices | | | exercise price | | | life (months) | | Outstanding at the beginning of the year | | | 238,900 | | | | 3.46 – 5.01 | | | $ | 4.38 | | | 31 months | | | | 1,208,842 | | | | 5.82 – 6.90 | | | | 6.50 | | | 21 months | | | | | | | | | | | | | | | | | | Exercised during the year | | | 122,250 | | | | 3.46 – 5.01 | | | | 4.41 | | | | — | | | | | 769,403 | | | | 5.82 – 6.90 | | | | 6.51 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding at the end of the year | | | 116,650 | | | | 3.46 – 5.01 | | | | 4.39 | | | 19 months | | | | 439,439 | | | | 5.82 – 6.90 | | | | 6.15 | | | 11 months | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Exercisable at the end of the year | | | 116,650 | | | | 3.46 – 5.01 | | | | 4.39 | | | 19 months | | | | 439,439 | | | | 5.82 – 6.90 | | | $ | 6.15 | | | 11 months | | | | | | | | | | | | | | | |
The total intrinsic value of options exercised during the years ended March 31, 2005, 2006, and 2007, was Rs. 232.55, Rs. 181.02, and Rs. 325.08, respectively. As of March 31, 2007 options outstanding and exercisable under the ADS Plan had an intrinsic value of Rs 241.27 and Rs 241.27, respectively. As of March 31, 2007, the unamortized stock compensation expense under the ADS Plan is Rs Nil.
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Restricted Stock Unit Plans:In June 2004, the Company established a rupee option plan titled Wipro Restricted Stock Unit Plan (WRSUP 2004) and a dollar option plan titled Wipro ADS Restricted Stock Unit Plan (WARSUP 2004). The Company is authorized to issue up to 12 million options to eligible employees under each plan. Options under the plan will be granted at a nominal exercise price (par value of the equity shares).
These options vestgenerally vests over a period of five years from the date of grant. Upon vesting, the employees can acquire one equity share for every option. The options are subject to forfeiture if the employee terminates employment before vesting. The excess of market price on the date of grant over the exercise price payable by the employeesmaximum contractual term for aforementioned stock option plans is recognized as compensation cost. The Company has elected to amortize the compensation cost on a straight-line basis over the vesting period.generally ten years. StockThe following table summarizes stock option activity under WRSUP 2004 plan isactivity: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended March 31, | | | | | | | | 2007 | | | 2008 | | | 2009 | | | | | | | | | | | | Weighted | | | | | | | Weighted | | | | | | | Weighted | | | | | | | | | | | | Average | | | | | | | Average | | | | | | | Average | | | | Range of | | | | | | | Exercise | | | | | | | Exercise | | | | | | | Exercise | | | | Exercise Prices | | | Number | | | Price | | | Number | | | Price | | | Number | | | Price | | | | | Outstanding at the | | Rs. | 171 – 490 | | | | 34,317,113 | | | Rs. | 310 | | | | 2,955,319 | | | Rs. | 333 | | | | 1,219,926 | | | Rs. | 264 | | beginning of the year | | $ | 3 – 7 | | | | 1,447,742 | | | $ | 6 | | | | 556,089 | | | $ | 6 | | | | 8,706 | | | $ | 5 | | | | Rs. | 2 | | | | 7,598,174 | | | Rs. | 2 | | | | 10,946,864 | | | Rs. | 2 | | | | 9,700,163 | | | Rs. | 2 | | | | $ | 0.04 | | | | 1,000,720 | | | $ | 0.04 | | | | 1,551,330 | | | $ | 0.04 | | | | 1,885,236 | | | $ | 0.04 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Granted | | Rs. | 171 – 490 | | | | — | | | Rs. | — | | | | — | | | Rs. | — | | | | 120,000 | | | Rs. | 489 | | | | $ | 3 – 7 | | | | — | | | $ | — | | | | — | | | $ | — | | | | — | | | $ | — | | | | Rs. | 2 | | | | 6,132,636 | | | Rs. | 2 | | | | 81,300 | | | Rs. | 2 | | | | 6,882,415 | | | Rs. | 2 | | | | $ | 0.04 | | | | 918,130 | | | $ | 0.04 | | | | 665,386 | | | $ | 0.04 | | | | 1,484,261 | | | $ | 0.04 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Exercised | | Rs. | 171 – 490 | | | | (30,120,192 | ) | | Rs. | 308 | | | | (1,211,880 | ) | | Rs. | 374 | | | | 345,099 | | | Rs. | 263 | | | | $ | 3 – 7 | | | | (891,653 | ) | | $ | 6 | | | | (500,199 | ) | | $ | 6 | | | | 4,400 | | | $ | 4.7 | | | | Rs. | 2 | | | | (2,036,918 | ) | | Rs. | 2 | | | | (574,051 | ) | | Rs. | 2 | | | | 1,762,283 | | | Rs. | 2 | | | | $ | 0.04 | | | | (196,620 | ) | | $ | 0.04 | | | | (167,540 | ) | | $ | 0.04 | | | | 446,841 | | | $ | 0.04 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Forfeited and lapsed | | Rs. | 171 – 490 | | | | (1,241,602 | ) | | Rs. | 283 | | | | (523,513 | ) | | Rs. | 400 | | | | 873,687 | | | Rs. | 264 | | | | $ | 3 – 7 | | | | — | | | $ | — | | | | (47,184 | ) | | $ | 7 | | | | 2,700 | | | $ | 5.82 | | | | Rs. | 2 | | | | (747,028 | ) | | Rs. | 2 | | | | (753,950 | ) | | Rs. | 2 | | | | 1,020,710 | | | Rs. | 2 | | | | $ | 0.04 | | | | (170,900 | ) | | $ | 0.04 | | | | (163,940 | ) | | $ | 0.04 | | | | 452,015 | | | $ | 0.04 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding at the | | Rs. | 171 – 490 | | | | 2,955,319 | | | Rs. | 333 | | | | 1,219,926 | | | Rs. | 264 | | | | 121,140 | | | Rs. | 487 | | end of the year | | $ | 3 – 7 | | | | 556,089 | | | $ | 6 | | | | 8,706 | | | $ | 5 | | | | 1,606 | | | $ | 4.7 | | | | Rs. | 2 | | | | 10,946,864 | | | Rs. | 2 | | | | 9,700,163 | | | Rs. | 2 | | | | 13,799,585 | | | Rs. | 2 | | | | $ | 0.04 | | | | 1,551,330 | | | $ | 0.04 | | | | 1,885,236 | | | $ | 0.04 | | | | 2,470,641 | | | $ | 0.04 | |
The following table summarizes information about stock options outstanding as follows:of March 31, 2009 | | | | | | | | | | | | | | | Year ended March 31, 2005 | | | | | | | | | | | | Weighted- | | | | | | | | | | | | average | | | | | | | | | | | | remaining | | | | Shares arising out | | | | | | | contractual life | | | | of options | | | Exercise price | | | (months) | | Outstanding at the beginning of the year | | | — | | | Rs. | — | | | | — | | | | | | | | | | | | | | | Granted during the year | | | 9,792,596 | | | | 2 | | | 72 months | | | | | | | | | | | | | | Forfeited during the year | | | (272,940 | ) | | | 2 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding at the end of the year | | | 9,519,656 | | | | 2 | | | 66 months | | | | | | | | | | | | | | | | | | | | | | | | Exercisable at the end of the year | | | — | | | Rs. | — | | | | — | | | | | | | | | | | |
| | | | | | | | | | | | | | | Year ended March 31, 2006 | | | | | | | | | | | | Weighted- | | | | | | | | | | | | average | | | | | | | | | | | | remaining | | | | Shares arising out | | | | | | | contractual life | | | | of options | | | Exercise price | | | (months) | | Outstanding at the beginning of the year | | | 9,519,656 | | | Rs. | 2 | | | 66 months | | | | | | | | | | | | | | Granted during the year | | | 55,500 | | | | 2 | | | 72 months | | | | | | | | | | | | | | Forfeited during the year | | | (694,572 | ) | | | 2 | | | | — | | | | | | | | | | | | | | | Exercised during the year | | | (1,282,410 | ) | | | 2 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding at the end of the year | | | 7,598,174 | | | | 2 | | | 54 months | | | | | | | | | | | | | | | | | | | | | | | | Exercisable at the end of the year | | | 518,321 | | | Rs. | 2 | | | 54 months | | | | | | | | | | |
| | | | | | | | | | | | | | | Year ended March 31, 2007 | | | | | | | | | | | Weighted- | | | | | | | | | | | average | | | | | | | | | | | remaining | | | Shares arising out | | | | | | contractual life | | | of options | | Exercise price | | (months) | Outstanding at the beginning of the year | | | 7,598,174 | | | | 2 | | | | 54 | | | | | | | | | | | | | | | Granted during the year | | | 2,492,560 | | | | 2 | | | | 72 | | | | | | | | | | | | | | | Forfeited during the year | | | (553,836 | ) | | | 2 | | | | — | | | | | | | | | | | | | | | Exercised during the year | | | (2,036,918 | ) | | | 2 | | | | — | | | | | | | | | | | | | | | | | | Outstanding at the end of the year | | | 7,499,980 | | | | 2 | | | | 49 | | | | | | | | | | | | | | | | | | Exercisable at the end of the year | | | 195,982 | | | | 2 | | | | 43 | |
Stock option activity under WARSUP 2004 plan is as follows:
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| | | | | | | | | | | | | | | Year ended March 31, 2005 | | | | | | | | | | | | Weighted- | | | | | | | | | | | | average | | | | | | | | | | | | remaining | | | | Shares arising out | | | | | | | contractual life | | | | of options | | | Exercise price | | | (months) | | Outstanding at the beginning of the year | | | — | | | $ | — | | | | — | | | | | | | | | | | | | | | Granted during the year | | | 1,583,600 | | | | 0.04 | | | 72 months | Forfeited during the year | | | (47,500 | ) | | | 0.04 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding at the end of the year | | | 1,536,100 | | | | 0.04 | | | 66 months | | | | | | | | | | | | | | | | | | | | | | | | Exercisable at the end of the year | | | — | | | $ | — | | | | — | | | | | | | | | | | |
| | | | | | | | | | | | | | | Year ended March 31, 2006 | | | | | | | | | | | | Weighted- | | | | | | | | | | | | average | | | | | | | | | | | | remaining | | | | | | | | | | | | contractual life | | | | Shares arising out | | | | | | | (months) | | | | of options | | | Exercise price | | | | | Outstanding at the beginning of the year | | | 1,536,100 | | | $ | 0.04 | | | 66 months | | | | | | | | | | | | | | Exercised during the year | | | (148,440 | ) | | | 0.04 | | | | — | | Forfeited during the year | | | (386,940 | ) | | | 0.04 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding at the end of the year | | | 1,000,720 | | | | 0.04 | | | 54 months | | | | | | | | | | | | | | | | | | | | | | | | Exercisable at the end of the year | | | 116,400 | | | $ | 0.04 | | | 54 months | | | | | | | | | | |
| | | | | | | | | | | | | | | Year ended March 31, 2007 | | | | | | | | | | | Weighted- | | | | | | | | | | | average | | | | | | | | | | | remaining | | | Shares arising out | | | | | | contractual life | | | of options | | Exercise price | | (months) | Outstanding at the beginning of the year | | | 1,000,720 | | | $ | 0.04 | | | | 54 | | | | | | | | | | | | | | | Granted during the year | | | 918,130 | | | $ | 0.04 | | | | 72 | | Exercised during the year | | | (196,620 | ) | | $ | 0.04 | | | | | | Forfeited during the year | | | (170,900 | ) | | $ | 0.04 | | | | | | | | | | | | | | | | | | | | | | Outstanding at the end of the year | | | 1,551,330 | | | $ | 0.04 | | | | 54 | | | | | | | | | | | | | | | Exercisable at the end of the year | | | 122,980 | | | $ | 0.04 | | | | 54 | |
Restricted Stock Unit Plan 2005:In July 2005, the Company established a new option plan titled Wipro employee Restricted Stock Unit Plan 2005 (WRSUP 2005). The Company is authorized to issue up to 12 million options to eligible employees under the plan. Options under the plan will be granted at a nominal exercise price (par value of the equity shares).
These options vest over a period of five years from the date of grant. Upon vesting the employees can acquire one equity share for every option. The options are subject to forfeiture if the employee terminates employment before vesting. The excess of market price on the date of grant over the exercise price payable by the employees is recognized as compensation cost. The Company has elected to amortize the compensation cost on a straight-line basis over the vesting period.
133
Stock option activity under WSRUP 2005 plan is as follows:
| | | | | | | | | | | | | | | Year ended March 31, 2007 | | | | | | | | | | | Weighted- | | | | | | | | | | | average | | | | | | | | | | | remaining | | | Shares arising out | | | | | | contractual life | | | of options | | Exercise price | | (months) | Outstanding at the beginning of the year | | | — | | | | — | | | | — | | | Granted during the year | | | 3,640,076 | | | | 2 | | | | 72 | | Exercised during the year | | | — | | | | 2 | | | | — | | Forfeited during the year | | | (193,192 | ) | | | 2 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Outstanding at the end of the year | | | 3,446,884 | | | | 2 | | | | 63 | | | | | | | | | | | | | | | Exercisable at the end of the year | | | — | | | | 2 | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | Options Outstanding | | Options Exercisable | | | | | | | Weighted | | | | | | | | | | Weighted | | | | | | | | | Average | | Weighted | | | | | | Average | | Weighted | | | | | | | Remaining | | Average | | | | | | Remaining | | Average | Range of | | | | | | Life | | Exercise | | | | | | Life | | Exercise | Exercise Prices | | Numbers | | (Months) | | Price | | Numbers | | (Months) | | Price | | | | Rs. 171 – 490 | | | 121,140 | | | | 63.4 | | | Rs. | 487 | | | | 1,140 | | | | 2.93 | | | | 254 | | $ 3 – 7 | | | 1,606 | | | | 11.9 | | | $ | 4.70 | | | | 1,606 | | | | 11.9 | | | | 4.70 | | Rs 2 | | | 13,799,585 | | | | 44 | | | Rs. | 2 | | | | 2,975,987 | | | | 26 | | | | 2 | | $ 0.04 | | | 2,470,641 | | | | 51 | | | $ | 0.04 | | | | 208,412 | | | | 27 | | | $ | 0.04 | |
The weighted-average grant-date fair value of options granted during the year ended March 31, 2005, 2006,years 2007, 2008 and 20072009 was Rs. 319.23,512, Rs. 458.00578 and Rs. 511.92,319, for each option respectively. The total intrinsic value of stock options exercised during the years ended March 31, 2005, 2006,2007, 2008, and 2007,2009, was Rs. Nil,9,578, Rs. 632.22,713 and Rs. 1,282.41,654 respectively. As of March 31, 2007 options2009 stock option outstanding and exercisable under the RSU Plan had an aggregate intrinsic value of Rs 7,162.67Rs. 2,976 and Rs 193.34,Rs. 418 respectively. As of March 31, 2007,2009, the unamortized stock compensation expense under the RSU Planstock option plans is Rs 4,198.59Rs. 3,327 and the same is expected to be amortized over a weighted average period of approximately 3.83 years. An amendment to the Indian tax regulations levies a tax titled Fringe Benefit Tax (FBT) on all employee stock options, that are exercised on or after April 1, 2007, and is based on the intrinsic value of the stock options on the vesting date. The FBT liability is triggered only if the options are exercised. Consistent with the guidance in EITF Issue No. 00-16, Recognition and Measurement of Employer Payroll Taxes on Employee Stock Based Compensation, the Company 120
records the FBT expense when the stock option is exercised since the FBT liability is triggered only subsequent to exercise. The tax laws permit the employer to recover the FBT from the employee as the tax relates to benefits that accrue to the employee. Consequent to the amendment in the tax regulations, the Company has modified its employee stock option plans to recover the FBT from the employees. The Company’s recovery of FBT from the employees is directly linked to the exercise of the stock option by such employee and is recorded as an additional component of the exercise price of the options based on the guidance previously provided by Issue 15 of EITF Issue No. 00-23, Issues Related to the Accounting for Stock Compensation under APB Opinion No. 25 and FASB Interpretation No. 44. The fair value of each option granted has been determined using the Binomial option pricing model. The model includes assumptions regarding dividend yields, expected volatility, expected terms, risk free interest rates and expected FBT recovery. These assumptions reflect management’s best estimates, but involve inherent market uncertainties based on market conditions generally outside of the Company’s control. As a result, if other assumptions had been used in the current period, stock-based compensation expense may have been impacted. Further, if the management uses different assumptions in future periods, stock based compensation expense may be materially impacted in future years. The fair value of each option is estimated on the date of grant using the Binomial model with the following assumptions: | | | | | | | Year ended March 31, | | | 2009 | Expected term | | | 5 – 7 years | | Risk free interest rates | | | 7.36 – 7.42 | | Volatility | | | 35.81 – 36.21 | | Dividend yield | | | — | |
Total stock compensation cost recognized under the employee stock incentive plans is Rs. 353.86,1,336, Rs. 652.231,076 and Rs. 1,336.40, respectively1,595 during the year ended March 31, 2005, 20062007, 2008 and 20072009 respectively. The compensation cost has been allocated to cost of revenues and operating expenses as follows: | | | | | | | | | | | | | | | Year ended March 31, | | | | 2005 | | | 2006 | | | 2007 | | Cost of revenues | | Rs. | 238.27 | | | Rs. | 437.20 | | | Rs. | 1,044.83 | | Selling and marketing expenses | | | 49.20 | | | | 75.16 | | | | 168.95 | | General and administrative expenses | | | 66.39 | | | | 139.87 | | | | 122.62 | | | | | | | | | | | | | | Rs. | 353.86 | | | Rs. | 652.23 | | | Rs. | 1,336.40 | | | | | | | | | | | |
In the stock option activity table for 1999 Plan, 2000 Plan and 2000 ADS Plan, the Company previously had not reflected the impact of options lapsed. Additionally, the Company had not reported the correct weighted average contractual life for the 2000 Plan and 2000 ADS Plan. During the year ended March 31, 2007, the disclosures have been suitably amended. These matters had no impact on the amounts reported in the financial statements. | | | | | | | | | | | | | | | Year ended March 31, | | | | 2007 | | | 2008 | | | 2009 | | Cost of revenues | | Rs. | 1,044 | | | Rs. | 840 | | | Rs. | 1,232 | | Selling and marketing expenses | | | 169 | | | | 137 | | | | 197 | | General and administrative expenses | | | 123 | | | | 99 | | | | 166 | | | | | | | | | | | | | | Rs. | 1,336 | | | Rs. | 1,076 | | | Rs. | 1,595 | | | | | | | | | | | |
Modification of Employee Stock Incentive PlansPlan During the year ended March 31, 2007, through a short-term inducement offer, the Company agreed to an arrangement whereby if certain vested options were exercised within the offer period through financing by an independent third-party financial institution, the Company would bear the interest obligation relating to this financing. The loan by the third-party financial institution is with no recourse to the Company. 11,879,065 options were exercised during the offer period. The Company has accounted for this arrangement as a short-term inducement resulting in modification accounting. Accordingly, incremental compensation cost of Rs. 86.4586 had been recorded during the year ended March 31, 2007. During the year ended March 31, 2008 and 2009, the Company has been recorded.revised the estimates of its interest obligation relating to the non-recourse financing and has accordingly recorded an additional compensation expense of Rs. 261 and 14 respectively. Additionally, as a part of this arrangement 1,150,055 other vested options were exercised by certain employees through a non-recourse interest free loan aggregating Rs. 326.17326 by a controlled trust.trust, during the year ended March 31, 2007. Even though this transaction does not represent an exercise for accounting purpose, to reflect the legal nature of shares issued, an amount of Rs. 2.30,2, equivalent to the par value of shares issued has been transferred from additional paid-in capital to common stock. During the year ended March 31, 2008 and 2009, the employees have repaid Rs. 34 and Rs. 142, respectively of the interest free loan. These amounts have been recognized as additional paid in capital in shareholders equity. 121
23. Earnings Per Share A reconciliation of net income and equity shares used in the computation of basic and diluted earnings per equity share is set out below: 134
| | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended March 31, | | | Year ended March 31, | | | | 2005 | | 2006 | | 2007 | | | 2007 | | 2008 | | 2009 | | Earnings | | | Net income | | Rs. | 15,832.75 | | Rs. | 20,269.97 | | Rs. | 29,168.99 | | | Rs. | 29,168 | | Rs. | 32,241 | | Rs. | 34,415 | | Effect of dilutive instruments of subsidiary | | | (27.97 | ) | | — | | — | | | | | | | | | | | | Net income (adjusted for full dilution) | | Rs. | 15,804.78 | | Rs. | 20,269.97 | | Rs. | 29,168.99 | | | | | | | | | | | | | | | | | | | | | Equity shares | | | Weighted average number of equity shares outstanding | | 1,391,554,372 | | 1,406,505,974 | | 1,426,709,163 | | | 1,426,709,163 | | 1,450,604,615 | | 1,454,010,222 | | Effect of dilutive equivalent shares-stock options | | 8,292,410 | | 17,173,256 | | 17,758,394 | | | 17,758,394 | | 4,175,992 | | 2,280,493 | | | | | | | | | | | | | | | | | Weighted average number of equity shares and equivalent shares outstanding... | | 1,399,846,782 | | 1,423,679,230 | | 1,444,467,557 | | | Weighted average number of equity shares and equivalent shares outstanding | | | 1,444,467,557 | | 1,454,780,607 | | 1,456,290,715 | | | | | | | | | | | | | | | | |
Shares held by the controlled WERT and Wipro Inc Benefit Trust (WIBT) have been reduced from the equity shares outstanding for computing basic and diluted earnings per share. Shares exercised through a non-recourse loan by the WERT, have been reduced from the equity shares outstanding and shares held by employees subject to vesting conditions have been included in outstanding equity shares for computing basic and diluted earnings per share. Options to purchase 12,661,148, Nil and Nil equity shares were outstanding during the year ended March 31, 2005, 2006 and 2007, respectively, but were not included in the computation of diluted earnings per share because the exercise price of the options was greater than the average market price of the equity shares.
24. Employee Benefit Plans Gratuity. In accordance with applicable Indian laws, the Company provides for gratuity, a defined benefit retirement plan (Gratuity Plan) covering certain categories of employees. The Gratuity Plan provides a lump sum payment to vested employees, at retirement or termination of employment, an amount based on the respective employee’s last drawn salary and the years of employment with the Company. The Company provides the gratuity benefit through annual contributions to a fund managed by the Life Insurance Corporation of India (LIC). Under this plan, the settlement obligation remains with the Company, although the Life Insurance Corporation of India administers the plan and determines the contribution premium required to be paid by the Company. In September 2006,Effective March 31, 2007, the Financial Accounting Standards Board (FASB) issuedCompany adopted SFAS No. 158, Employers’ Accounting for Defined Benefit Pensionwhich required the recognition in pension obligations and Other Postretirement Plans (SFAS No. 158), which amends SFAS No. 87, 88, 106, and 132(R). This standard requires that companies record an asset or liability on the consolidated balance sheet equal to the over or under funded status of their defined benefit and other postretirement benefit plans effective for fiscal years ending after December 15, 2006. For each plan, the funded status is defined by SFAS No. 158 as the difference between the fair value of plan assets (for funded plans) and the respective plan’s projected benefit obligation. The projected benefit obligation represents a liability based on the plan participant’s service to date and their expected future compensation at their projected retirement date. Upon adoption of SFAS No. 158 and recognition of the funded status on the company’s consolidated balance sheet, all previously unrecognized amounts (unrecognized gains or losses and prior service cost) as well as subsequent changes in funded status are reflected in accumulated other comprehensive income (loss), net of tax, inactuarial gains or losses, prior service costs or credits and transition assets or obligations that had previously been deferred under the stockholder’s equity. The incremental impactreporting requirements of applying SFAS No. 158 on individual line items in87, SFAS No. 106 and SFAS No. 132(R). As a result of the consolidated balance sheetadoption, the Company recorded Rs. 124 as a reduction of the March 31, 2007 is given below:retained earnings.
| | | | | | | | | | | | | | | Before | | | | | | After Application | | | Application of | | | | | | of SFAS No. | | | SFAS No. 158 | | Adjustments | | 158 | Other current liabilities | | | 16,481.41 | | | | 141.75 | | | | 16,623.16 | | Total current liabilities | | | 42,679.97 | | | | 141.75 | | | | 42,821.72 | | Deferred income taxes | | | 482.03 | | | | (18.05 | ) | | | 463.98 | | Total liabilities | | | 44,492.37 | | | | 123.70 | | | | 44,616.07 | | Accumulated other comprehensive income | | | 217.47 | | | | (123.70 | ) | | | 93.77 | | Total stockholder’s equity | | | 101,591.76 | | | | (123.70 | ) | | | 101,468.06 | | Total liabilities and stockholder’s equity | | | 146,084.13 | | | | — | | | | 146,084.13 | |
Obligations and Funded Status135
| | | | | | | | | | | | | | | | | | | As of March 31, | | | As of March 31, | | | | 2006 | | 2007 | | | 2008 | | 2009 | | Change in the benefit obligation | | | Projected Benefit Obligation (PBO) at the beginning of the year | | Rs. | 634.46 | | Rs. | 755.93 | | | Rs. | 1,027 | | Rs. | 1,381 | | Service cost | | 163.52 | | 192.67 | | | 258 | | 347 | | Interest cost | | 45.66 | | 55.16 | | | 89 | | 146 | | Benefits paid | | | (47.08 | ) | | | (77.10 | ) | | | (135 | ) | | | (119 | ) | Actuarial loss/(gain) | | | (40.62 | ) | | 100.19 | | | 142 | | | (89 | ) | | | | | | | | | | | | PBO at the end of the year | | 755.93 | | 1,026.85 | | | 1,381 | | 1,666 | | | | | | | | | | | | | | | | Change in plan assets | | | Fair value of plan assets at the beginning of the year | | 597.73 | | 656.16 | | | 727 | | 1,250 | | Actual return on plan assets | | 53.11 | | 58.82 | | | 104 | | 112 | | Employer contributions | | 52.40 | | 89.14 | | | 554 | | 154 | | Benefits paid | | | (47.08 | ) | | | (77.10 | ) | | | (135 | ) | | | (119 | ) | | | | | | | | | | | | Plan assets at the end of the year | | 656.16 | | 727.03 | | | 1,250 | | 1,397 | | | | | | | | | | | | | | | | Funded status | | | (99.77 | ) | | | (299.82 | ) | | | (131 | ) | | | (269 | ) | | | | Unrecognized actuarial loss/(gain) | | 58.67 | | — | | | Unrecognized transition obligation | | 1.67 | | — | | | Unrecognized actuarial cost | | 2.31 | | — | | | | | | | | | | Accrued liability | | Rs. | (37.12 | ) | | Rs. | (299.82 | ) | | | | | | | | |
Following is the summary of amounts in accumulated other comprehensive income / (loss) as of March 31, 20062008 and 20072009 that have not yet been recognized in the consolidated statements of income as components of net gratuity cost: 122
| | | | | | | | | | | | | | | | | | | Year ended March 31, | | | Year ended March 31, | | | | 2006 | | 2007 | | | 2008 | | 2009 | | Net actuarial loss | | Rs. | — | | Rs. | 137.54 | | | Rs. | 217 | | Rs. | 89 | | Net prior service cost | | — | | 2.81 | | | — | | — | | Net transitional obligation | | — | | 1.40 | | | — | | — | | | | | | | | | | | | | Total accumulated other comprehensive income | | Rs. | — | | Rs. | 141.75 | | | Rs. | 217 | | Rs. | 89 | | | | | | | | | | | | |
Net gratuity cost for the years ended March 31, 2004, 20052007, 2008 and 20062009 included: | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended March 31, | | | Year ended March 31, | | | | 2005 | | 2006 | | 2007 | | | 2007 | | 2008 | | 2009 | | Service cost | | Rs. | 114.88 | | Rs. | 163.52 | | Rs. | 192.67 | | | Rs. | 193 | | Rs. | 258 | | Rs. | 347 | | Interest cost | | 31.56 | | 45.66 | | 55.16 | | | 55 | | 89 | | 146 | | Expected return on assets | | | (29.49 | ) | | | (30.58 | ) | | | (42.24 | ) | | | (42 | ) | | | (54 | ) | | | (89 | ) | Amortization of transition liabilities | | 10.96 | | 10.34 | | | (4.00 | ) | | Amortization of transition liabilities/actuarial loss | | | | (4 | ) | | 13 | | 17 | | Adjustments(1) | | — | | — | | | (77.55 | ) | | | (78 | ) | | — | | — | | | | | | | | | | | | | | | | | Net gratuity cost | | Rs. | 127.91 | | Rs. | 188.94 | | Rs. | 124.04 | | | Rs. | 124 | | Rs. | 306 | | Rs. | 421 | | | | | | | | | | | | | | | | |
| | | (1) | | TillThrough March 31, 2006, for a certain category of employees, the Company previously recorded and disclosed a defined benefit plan as a defined contribution plan. During the year ended March 31, 2007, the Company recorded an adjustment of Rs 77.5578 as a credit to the income statement to record this plan as a defined benefit plan. The impact of this adjustment is not material to the income statement, accrued liability/(prepaid (prepaid asset) and the overall financial statement presentation. |
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The weighted average actuarial assumptions used to determine benefit obligations are: | | | | | | | | | | | | | | | | | | | | | | | As of March 31, | | As of March 31, | | | | | 2006 | | 2007 | | 2008 | | 2009 | Discount rate | | | | | | | 8 | % | | | 9.6 | % | | | 9.35 | % | | | 8.85 | % | Rate of increase in compensation levels | | | | | | | 7 | % | | | 7 | % | | | 7 | % | | | 5 | % | Rate of return on plan assets | | | | | | | 7 | % | | | 7.5 | % | | | 7.5 | % | | | 8 | % |
The weighted average actuarial assumptions used to determine net periodic gratuity cost are: | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended March 31, | | Year ended March 31, | | | 2005 | | 2006 | | 2007 | | 2007 | | 2008 | | 2009 | Discount rate | | | 8 | % | | | 8 | % | | | 8 | % | | | 8 | % | | | 9.6 | % | | | 8.85 | % | Rate of increase in compensation levels | | | 7 | % | | | 7 | % | | | 7 | % | | | 7 | % | | | 7 | % | | | 5 | % | Rate of return on plan assets | | | 7 | % | | | 7 | % | | | 7 | % | | | 7 | % | | | 7. 5 | % | | | 8 | % |
The Company assesses these assumptions with its projected long-term plans of growth and prevalent industry standards. The Company estimates the long-term return on plan assets based on the average rate of return expected to prevail over the next 15 to 20 years in the types of investments held. As of March 31, 2005, 20062007, 2008 and 2007,2009, a significant portion of the plan assets were invested in debt securities. Accumulated benefit obligation was Rs. 458.41988 and Rs. 737.631,387 as of March 31, 20062008 and 20072009 respectively. | | | | | | | | | Expected contribution to the fund for the year ending March 31, 2008 | | Rs. | 195.01 | | | Expected contribution to the fund for the year ending March 31, 2010 | | | Rs. | 764 | | | | | | | | | | | | Expected benefit payments from the fund for the year ending March 31: | | | 2008 | | 216.84 | | | 2009 | | 200.11 | | | 2010 | | 219.80 | | | Rs. | 494 | | 2011 | | 270.31 | | | 445 | | 2012 | | 332.38 | | | 451 | | 2013 | | | 471 | | 2014 | | | 459 | | Thereafter | | 1,644.88 | | | 1,645 | | | | | | | | | Total | | 2,884.32 | | | Rs. | 3,965 | | | | | | | | |
The expected benefits are based on the same assumptions used to measure the company’sCompany’s benefit obligations as of March 31, 2007.2009. Superannuation. Apart from being covered under the Gratuity Plan described above, the employeessenior officers of the Company also participate in a defined contribution plan maintained by the Company. This plan is administered by the LIC and ICICI.third-party agencies. The Company makes annual contributions based on a specified percentage of each covered employee’s salary. From April 1, 2005, the Company discontinued superannuation contributions for certain category of employees and paid such contribution amounts as cash compensation to the employees. The Company has no further obligations under the plan beyond its annual contributions. 123
Provident fund.In addition to the above benefits, all employees receive benefits from a provident fund, a defined contribution plan. The employee and employer each make monthly contributions to the plan equal to 12% of the covered employee’s salary. A portion of the contribution is made to the provident fund trust established by the Company, while the remainder of the contribution is made to the Government’s provident fund. The Government mandates the annual yield to be provided to the employees on their corpus. The Company has an obligation to make good the shortfall, if any, between the yield on the investments of trust and the yield mandated by the Government. The Company contributedrecognized an expense of Rs. 995.93,1,407, Rs. 1,035.782,383 and Rs. 1,407.002,737 towards contribution to various defined contribution and benefit plans during the years ended March 31, 2005, 20062007, 2008 and 2007 respectively as follows:2009 respectively. | | | | | | | | | | | | | | | Year ended March 31, | | | | 2005 | | | 2006 | | | 2007 | | Defined contribution | | Rs. | 868.02 | | | Rs. | 846.84 | | | Rs. | 1,282.96 | | Defined benefit | | | 127.91 | | | | 188.94 | | | | 124.04 | | | | | | | | | | | | Total | | Rs. | 995.93 | | | Rs. | 1,035.78 | | | Rs. | 1,407.00 | | | | | | | | | | | |
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25. Related Party Transactions The Company has the following transactions with related parties:
| | | | | | | | | | | | | | | Year ended March 31, | | | | 2005 | | | 2006 | | | 2007 | | Wipro GE: | | | | | | | | | | | | | Revenues from sale of computer equipment and administrative and management support services | | Rs. | 111.68 | | | Rs. | 114.01 | | | Rs. | 29.24 | | Rent, travel and related expenses | | | 1.61 | | | | — | | | | — | | Purchase of software | | | 0.45 | | | | — | | | | — | | | | | | | | | | | | | | | WeP Peripherals: | | | | | | | | | | | | | Revenues from sale of computer equipment and services | | | 10.48 | | | | 19.67 | | | | 4.91 | | Fees received for usage of trade mark | | | — | | | | — | | | | — | | Payment for services | | | 7.50 | | | | 2.37 | | | | — | | Purchase of printers | | | 176.79 | | | | 118.88 | | | | 193.76 | | | | | | | | | | | | | | | Azim Premji Foundation (entity controlled by principal shareholder of the Company): | | | | | | | | | | | | | Revenues from sale of computer equipment and services | | | 6.71 | | | | 3.64 | | | | 3.35 | | | | | | | | | | | | | | | Principal shareholder: | | | | | | | | | | | | | Payment of lease rentals | | | 1.13 | | | | 1.13 | | | | 1.13 | |
The Company has the following receivables from related parties, which are reported as other assets/other current assets in the balance sheet:
| | | | | | | | | | | As of March 31, | | | | 2006 | | | 2007 | | Wipro GE | | Rs. | 51.70 | | | Rs. | 3.88 | | WeP Peripherals | | | 4.19 | | | | — | | Azim Premji Foundation | | | 0.04 | | | | — | | | | | | | | | | | Rs. | 55.93 | | | | 3.88 | | | | | | | | |
The Company has the following payables to related parties, which are reported as other current liabilities in the balance sheet:
| | | | | | | | | | | As of March 31, | | | | 2006 | | | 2007 | | WeP Peripherals | | Rs. | 38.85 | | | | — | | | | | | | | | | | Rs. | 38.85 | | | | — | | | | | | | | |
26. Sale of accounts receivable / employee advancesfinancial assets
From time to time, in the normal course of business, the Company transfers accounts receivables, net investment in sales-type finance receivables and employee advances (financials assets) to banks. Under the terms of the arrangements, the Company surrenders control over the financial assets and accordingly the transfers are recorded as sale of financial assets. The sale of financial assets may be with or without recourse. Under arrangements with recourse, the Company is obligated to repurchase the uncollected financial assets, subject to limits specified in the agreement with the banks. Additionally, the Company retains servicing responsibility for the transferred financial assets. Gains and losses on sale of financial assets are recorded at the time of sale based on the carrying value of the financial assets, fair value of servicing liability and recourse obligations. Loss on sale is recorded at the time of sale. During the years ended March 31, 2005, 20062007, 2008 and 2007,2009, the Company transferred financial assets of Rs. 737.80,480, Rs. 258.671,625 and Rs. 480.00539 respectively, under such arrangements and has included the proceeds in net cash provided by operating activities in the consolidated statements of cash flows. This transfer resulted in loss of Rs. 42.03,9, Rs. 9.2841 and Rs. 8.6035 for the years ended March 31, 2005, 20062007, 2008 and 20072009 respectively, which is included in general and administrative expense. As at March 31, 20062008 and 2007,2009, the maximum amounts of recourse obligation in respect of the transferred financial assets are Rs. 20.40Nil and Rs. 48.00Nil respectively. 138
27.26. Commitments and Contingencies
Capital commitments. As of March 31, 20062008 and 2007,2009, the Company had committed to spend approximately Rs. 1,714.22Rs. 7,266 and Rs. 3,432.255,371 respectively, under agreements to purchase property and equipment. These amounts are net of capital advances paid in respect of these purchases. Other commitments. The Company’s Indian operations have been established as a Software Technology Park Unit under a plan formulated by the Government of India. As per the plan, the Company’s India operations have export obligations to the extent of 1.5 times the employee costs for the year on an annual basis and 5 times the amount of foreign exchange released for capital goods imported, over a five year period. The consequence of not meeting this commitment in the future, would be a retroactive levy of import duty on certain computer hardware previously imported duty free. As of March 31, 2007,2009, the Company has met all commitments required under the plan. As of March 31, 20062008 and 2007,2009, the Company had contractual obligations to spend approximately Rs. 1,946Rs 3,256 and Rs. 3,160.183,255 respectively; under purchase obligations which include commitments to purchase goods or services of either a fixed or minimum quantity that meet certain criteria. Guarantees. As of March 31, 20062008 and 2007,2009, performance and financial guarantees provided by banks on behalf of the Company to the Indian Government, customers and certain other agencies amount to approximately Rs. 2,941.204,392 and Rs. 3,013.116,103 respectively, as part of the bank line of credit. Contingencies and lawsuits.lawsuits The Company had received tax demands from the Indian income tax authorities for the financial years ended March 31, 2001, 2002, 2003 and 20032004 aggregating to Rs. 8,100.4911,127 (including interest of Rs. 750.38)1,503). The tax demand was primarily on account of denial of deduction claimed by the Company under Section 10A of the Income Tax Act 1961, in respect of profits earned by its undertakings in the Software Technology Park at Bangalore. The appeals filed by the Company had appealed against these demands. Thefor the above years to the first appellate authority has vacatedwere allowed in favour of the Company, thus deleting substantial portion of the demand raised by the Income tax demandsauthorities. On further appeal filed by the income tax authorities, the second appellate authority upheld the claim of the Company for the years ended March 31, 2001, 2002, 2003 and 2003. The income tax authorities have filed an appeal for the year ended March 31, 2001 and 2002. 2004. In December 2006,2008, the Company received, anon similar grounds, additional tax demand of Rs. 3,027.205,388 (including interest of Rs. 753.09)1,615) for the financial year ended March 31, 2004 on similar grounds as earlier years.2005. The Company has filed an appeal against this demand.the said demand within the time limits permitted under the statute. 124
Considering the facts and nature of disallowance and the order of the appellate authority upholding the claims of the Company for earlier years, the Company believes that the final outcome of the above disputes should be in favor of the Company and there willshould not be any material impact on the Company’s financial position and results of operations.statements. The range of loss relatingdue to these contingenciesthis contingency is between zero and the amount ofto which the demand is raised. Certain other income-tax relatedThe company is subject to legal proceedings are pending against the Company. Potential liabilities, if any,and claims which have been adequately provided for, and the Company does not currently estimate any incremental liability in respect of these proceedings. Additionally, the Company is also involved in lawsuits, claims, investigations and proceedings, including patent and commercial matters, which arisearisen in the ordinary course of business. There are no such matters pending that the Company expects to be material in relation to its business. The company’s management does not reasonably expect that legal actions, when ultimately concluded and determined, will have a material and adverse effect on the results of operations or the financial position of the company.
28.27. Segment Information
The Company is currently organized by the following segments: (a) Global IT Services and Products (comprising of IT Services and BPO Services segments) (b) India and AsiaPac IT Services and Products (c) Consumer Care and Lighting and (d) ‘Others’.
The Chairman of the Company has been identified as the Chief Operating Decision Maker (CODM) as defined by SFAS No. 131, Disclosure about Segments of an Enterprise and Related Information. The Chairman of the Company evaluates the segments based on their revenue growth, operating income and return on capital employed. The management believes that return on capital employed is considered appropriate for evaluating the performance of its operating segment.segments. Return on capital employed is calculated as earnings from continuing operations before interest expenses, tax, minority interests and cumulative effect of change in accounting principleoperating income divided by the average of the capital employed at the beginning and at the end of the year.period. Capital employed includes total assets of the respective segments less all liabilities, except for short-term borrowings, long-term debt and obligations under capital leases. Operating segments with similar economic characteristics and complying with other aggregation criteria specified in SFAS No. 131 have been combined to formIn April 2008, the Company’s reportable segments. Consequently,Company re-organized its IT Services and BPO services qualify as reportable segments underbusinesses by combining the Global IT Services and Products.Products business and the India and AsiaPac IT Services and Products business and appointed joint Segment Chief Executive Officers for the combined IT businesses. Consequent to the reorganization, the Company identified IT Services and IT Products as the new operating and reportable segments within its IT business. There is no change in the reportable segments for other businesses. 139
The IT Services segment provides IT and IT enabled services to customers. Key service offering includes software application development, application maintenance, research and development services for hardware and software design, to technologydata center outsourcing services and telecommunication companiesbusiness process outsourcing services.
IT Products segment sells a range of Wipro personal desktop computers, Wipro servers and Wipro notebooks. We are also value added reseller of desktops, servers, notebooks, storage products, networking solutions and packaged software application development services to corporate enterprises. The BPO services segment provides Business Process Outsourcing services to large global corporations. As discussed in Note 3 on Acquisitions, between March 2006 and March 2007, the Company made several acquisitions. The operations of mPower, New Logic, cMango, Enabler, Saraware Oy and Quantech, which represent a componentfor leading international brands. In certain total outsourcing contracts of IT Services segment, the company delivers hardware, software and Products,other related deliverables. Revenue relating to these items are currently being reviewed by the CODM separately and have accordingly been reported separately as ‘Acquisitions’.
The India and AsiaPac IT Services and Products segment focuses primarily on addressingin the IT and electronic commerce requirements of companies in India, Middle East and Asia Pacific region.Products segment.
The Consumer Care and Lighting segment manufactures, distributes and sells soaps, toiletries,personal care products, baby care products, lighting products and hydrogenated cooking oils for the Indian and Asian market. ‘Others’ consist of business segments that do not meet the requirements individually for a reportable segment as defined in SFAS No. 131. Corporate activities such as treasury, legal and accounting, which do not qualify as operating segments under SFAS No. 131 have been considered as reconciling items. Fringe benefit tax, which is an expenditure related tax, incurred by the Company is not allocated to individual segments and is reported as a reconciling item. Segment data for previous periods has been reclassified on a comparable basis. Information on reportable segments is as follows: Information on reportable segments is as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended March 31, 2005 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | India and | | | | | | | | | Year ended March 31, 2007 | | | | Global IT Services and Products | | AsiaPac IT | | Consumer | | | | | | | Consumer | | | | | | | | BPO | | Services and | | Care and | | Reconciling | | | | | IT Services and Products | | Care and | | Reconciling | | | | | | IT Services | | Services | | Total | | Products | | Lighting | | Others | | Items | | Entity Total | | | IT Services | | IT Products | | Total | | Lighting | | Others | | Items | | Entity Total | | Revenues | | 54,236.07 | | 6,477.15 | | 60,713.22 | | 13,403.17 | | 4,555.38 | | 2,680.73 | | — | | 81,352.50 | | | 117,819 | | 16,990 | | 134,809 | | 7,559 | | 7,063 | | — | | 149,431 | | | | | Exchange rate fluctuations | | 20.01 | | | (44.12 | ) | | | (24.11 | ) | | | (8.62 | ) | | | (0.23 | ) | | | (6.74 | ) | | 39.70 | | — | | | | (179 | ) | | | (25 | ) | | | (204 | ) | | 4 | | 3 | | 197 | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total revenues | | 54,256.08 | | 6,433.03 | | 60,689.11 | | 13,394.55 | | 4,555.15 | | 2,673.99 | | 39.70 | | 81,352.50 | | | 117,640 | | 16,965 | | 134,605 | | 7,563 | | 7,066 | | 197 | | 149,431 | | Cost of revenues | | | (33,780.07 | ) | | | (4,740.25 | ) | | | (38,520.32 | ) | | | (10,494.17 | ) | | | (2,926.22 | ) | | | (1,914.06 | ) | | — | | | (53,854.77 | ) | | | (76,488 | ) | | | (15,325 | ) | | | (91,813 | ) | | | (4,905 | ) | | | (5,748 | ) | | — | | | (102,468 | ) | Selling and marketing expenses | | | (3,121.70 | ) | | | (101.77 | ) | | | (3,223.47 | ) | | | (1,150.26 | ) | | | (876.68 | ) | | | (184.10 | ) | | | (31.75 | ) | | | (5,466.26 | ) | | | (6,587 | ) | | | (581 | ) | | | (7,168 | ) | | | (1,483 | ) | | | (477 | ) | | | (45 | ) | | | (9,173 | ) | | | | General and administrative expenses | | | (2,225.94 | ) | | | (513.16 | ) | | | (2,739.10 | ) | | | (787.66 | ) | | | (82.26 | ) | | | (126.93 | ) | | | (7.65 | ) | | | (3,743.60 | ) | | | (6,487 | ) | | | (436 | ) | | | (6,923 | ) | | | (120 | ) | | | (501 | ) | | | (95 | ) | | | (7,639 | ) | Research and development expenses | | | (273.54 | ) | | — | | | (273.54 | ) | | — | | — | | — | | — | | | (273.54 | ) | | Amortization of intangible assets | | | (52.00 | ) | | | (70.00 | ) | | | (122.00 | ) | | — | | | (18.29 | ) | | — | | — | | | (140.29 | ) | | | (244 | ) | | | (13 | ) | | | (257 | ) | | | (5 | ) | | | (7 | ) | | — | | | (269 | ) | Exchange rate fluctuations | | — | | — | | — | | — | | — | | — | | | (92.12 | ) | | | (92.12 | ) | | — | | — | | — | | — | | — | | | (197 | ) | | | (197 | ) | Others, net | | 14.56 | | — | | 14.56 | | 7.21 | | 19.11 | | 17.54 | | 16.87 | | 75.29 | | | 93 | | 29 | | 123 | | 17 | | 51 | | 29 | | 220 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Operating income of segment (1) | | 14,817.39 | | 1,007.85 | | 15,825.24 | | 969.67 | | 670.81 | | 466.44 | | | (74.95 | ) | | 17,857.21 | | | | | | | | | | | | | | | | | | | | | | | | | Total assets of segment | | 29,297.05 | | 8,747.54 | | 38,044.59 | | 5,676.32 | | 1,670.62 | | 1,948.26 | | 24,735.32 | | 72,075.11 | | | Capital employed | | 21,289.71 | | 8,122.14 | | 29,411.85 | | 1,594.54 | | 936.44 | | 1,403.21 | | 24,479.91 | | 57,825.95 | | | Return on capital employed | | | 78 | % | | | 14 | % | | | 60 | % | | | 52 | % | | | 86 | % | | | Accounts receivable | | 10,765.92 | | 977.11 | | 11,743.03 | | 2,292.42 | | 263.66 | | 507.25 | | — | | 14,806.36 | | | | | | Cash and cash equivalents and investments in liquid and short-term mutual funds | | 3,877.87 | | 1,519.93 | | 5,397.80 | | 101.85 | | 142.63 | | 493.40 | | 22,492.67 | | 28,628.35 | | | Depreciation | | 1,666.79 | | 515.74 | | 2,182.53 | | 93.32 | | 65.54 | | 47.90 | | 48.67 | | 2,437.96 | | |
140125
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended March 31, 2006 | | | Year ended March 31, 2007 | | | | | Consumer | | | | | | | | | IT Services and Products | | Care and | | Reconciling | | | | | | | IT Services | | IT Products | | Total | | Lighting | | Others | | Items | | Entity Total | | Operating income of segment(1) | | | 27,927 | | 639 | | 28,566 | | 1,067 | | 384 | | | (111 | ) | | 29,906 | | | | | | | | | | | | | | | | | | | | | | Total assets of segment | | | 85,905 | | 4,677 | | 7,742 | | 48,443 | | 146,767 | | Capital employed opening | | | 44,939 | | 1,310 | | 2,833 | | 30,387 | | 79,469 | | Capital employed closing | | | 59,835 | | 3,094 | | 5,659 | | 36,662 | | 105,250 | | Average capital employed | | | 52,387 | | 2,202 | | 4,246 | | 33,524 | | 92,359 | | Return on capital employed | | | | 55 | % | | | 49 | % | | — | | — | | 33 | %- | Accounts receivable | | | 26,139 | | 723 | | 1,221 | | — | | 28,083 | | Cash and cash equivalents and investments securities | | | 9,902 | | 358 | | 251 | | 34,312 | | 44,823 | | Depreciation | | | 3,673 | | 103 | | 139 | | 16 | | 3,931 | | | | India and | | | | | | | | | | AsiaPac IT | | | | | | | | | Year ended March 31, 2008 | | | | Global IT Services and Products | | Services | | Consumer | | | | | | | Consumer | | | | | | | | | | BPO | | and | | Care and | | Reconciling | | | | | IT Services and Products | | Care and | | Reconciling | | | | | | IT Services | | Acquisitions | | Services | | Total | | Products | | Lighting | | Others | | Items | | Entity Total | | | IT Services | | IT Products | | Total | | Lighting | | Others | | Items | | Entity Total | | Revenues | | 72,591.13 | | 470.20 | | 7,664.23 | | 80,725.56 | | 16,477.08 | | 5,625.04 | | 3,279.20 | | — | | 106,106.88 | | | 146,170 | | 24,545 | | 170,715 | | 14,639 | | 12,074 | | — | | 197,428 | | | | | Exchange rate fluctuations | | | (172.15 | ) | | | (1.88 | ) | | | (37.78 | ) | | | (211.81 | ) | | | (2.34 | ) | | 0.20 | | 5.38 | | 208.57 | | — | | | 90 | | 74 | | 164 | | | (20 | ) | | | (19 | ) | | | (125 | ) | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total revenues | | 72,418.98 | | 468.32 | | 7,626.45 | | 80,513.75 | | 16,474.74 | | 5,625.24 | | 3,284.58 | | 208.57 | | 106,106.88 | | | 146,260 | | 24,619 | | 170,879 | | 14,619 | | 12,055 | | | (125 | ) | | 197,428 | | Cost of revenues | | | (46,605.98 | ) | | | (380.15 | ) | | | (5,809.54 | ) | | | (52,795.67 | ) | | | (12,834.70 | ) | | | (3,556.43 | ) | | | (2,459.93 | ) | | — | | | (71,646.73 | ) | | | (98,407 | ) | | | (22,036 | ) | | | (120,443 | ) | | | (8,681 | ) | | | (9,913 | ) | | | (199 | ) | | | (139,236 | ) | Selling and marketing expenses | | | (3,863.85 | ) | | | (28.92 | ) | | | (49.45 | ) | | | (3,942.22 | ) | | | (1,391.59 | ) | | | (1,160.42 | ) | | | (236.26 | ) | | | (33.86 | ) | | | (6,764.35 | ) | | | (9,013 | ) | | | (852 | ) | | | (9,865 | ) | | | (3,222 | ) | | | (632 | ) | | | (88 | ) | | | (13,807 | ) | General and administrative expenses | | | (3,345.48 | ) | | | (47.01 | ) | | | (751.52 | ) | | | (4,144.01 | ) | | | (841.24 | ) | | | (102.22 | ) | | | (112.02 | ) | | | (39.48 | ) | | | (5,238.97 | ) | | | (8,312 | ) | | | (894 | ) | | | (9,206 | ) | | | (816 | ) | | | (704 | ) | | | (94 | ) | | | (10,820 | ) | Research and development expenses | | | (202.26 | ) | | — | | — | | | (202.26 | ) | | — | | — | | — | | — | | | (202.26 | ) | | Amortization of intangible assets | | | (8.00 | ) | | | (17.76 | ) | | | (4.94 | ) | | | (30.70 | ) | | | (12.00 | ) | | | (21.25 | ) | | — | | — | | | (63.95 | ) | | | (441 | ) | | | (30 | ) | | | (471 | ) | | | (111 | ) | | | (34 | ) | | — | | | (616 | ) | Exchange rate fluctuations | | — | | — | | — | | — | | — | | — | | — | | | (288.49 | ) | | | (288.49 | ) | | — | | — | | — | | — | | — | | 125 | | 125 | | Others, net | | 7.09 | | 3.47 | | — | | 10.56 | | 9.27 | | 13.21 | | 11.11 | | 25.99 | | 70.14 | | | 401 | | 62 | | 463 | | 53 | | 106 | | 18 | | 640 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Operating income of segmen(1) | | 18,400.50 | | | (2.05 | ) | | 1,011.00 | | 19,409.45 | | 1,404.48 | | 798.13 | | 487.48 | | | (127.27 | ) | | 21,972.27 | | | Operating income of segment(1) | | | 30,488 | | 869 | | 31,357 | | 1,842 | | 878 | | | (363 | ) | | 33,714 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total assets of segment | | 40,062.66 | | 3,341.01 | | 11,426.57 | | 54,830.24 | | 8,322.33 | | 2,344.75 | | 2,410.94 | | 34,919.08 | | 102,827.34 | | | 138,879 | | 23,137 | | 16,250 | | 46,603 | | 224,869 | | Accounts receivable | | 14,674.20 | | 432.35 | | 849.12 | | 15,955.67 | | 3,350.62 | | 563.75 | | 723.07 | | — | | 20,593.11 | | | Cash and cash equivalents and investments in liquid and short-term mutual funds | | 5,000.57 | | 245.69 | | 4,097.57 | | 9,343.83 | | 240.81 | | 178.03 | | 367.89 | | 29,042.39 | | 39,172.95 | | | Depreciation | | 2,128.92 | | 59.41 | | 623.80 | | 2,812.13 | | 117.05 | | 81.73 | | 58.87 | | 31.45 | | 3,101.23 | | | Capital employed opening | | 21,289.71 | | — | | 8,122.14 | | 29.411.85 | | 2,245.41 | | 936.44 | | 1,403.21 | | 23,829.04 | | 57,825.95 | | | 59,835 | | 3,094 | | 5,659 | | 36,662 | | 105,250 | | Capital employed closing | | 27,777.90 | | 3,049.94 | | 10,337.07 | | 41,164.91 | | 3,124.13 | | 1,309.70 | | 1,790.09 | | 32,080.06 | | 79,468.89 | | | 99,673 | | 19,308 | | 6,990 | | 48,219 | | 174,190 | | Average capital employed | | 24,533.81 | | 1,524.97 | | 9,229.61 | | 35,288.38 | | 2,684.77 | | 1,123.07 | | 1,596.65 | | 27,954.55 | | 68,647.42 | | | 79,754 | | 11,201 | | 6,325 | | 42,440 | | 139,720 | | Return on capital employed | | | 75 | % | | | 11 | % | | | 55 | % | | | 52 | % | | | 71 | % | | | | 39 | % | | | 16 | % | | — | | — | | | 24 | % | Accounts receivable | | | 35,241 | | 2,246 | | 1,421 | | — | | 38,908 | | Cash and cash equivalents and investments securities | | | 22,103 | | 735 | | 104 | | 31,136 | | 54,078 | | Depreciation | | | 4,818 | | 198 | | 308 | | 19 | | 5,343 | | | | | | | Year ended March 31, 2009 | | | | | Consumer | | | | | | | | | IT Services and Products | | Care and | | Reconciling | | | | | | | IT Services | | IT Products | | Total | | Lighting | | Others | | Items | | Entity Total | | Revenues | | | Rs. | 192,635 | | Rs. | 33,519 | | Rs. | 226,154 | | Rs. | 19,302 | | Rs. | 9,108 | | Rs. | — | | Rs. | 254,564 | | | | | Exchange rate fluctuations | | | | (1,442 | ) | | | (95 | ) | | | (1,537 | ) | | | (59 | ) | | | (150 | ) | | 1,746 | | — | | | | | | | | | | | | | | | | | | | | | | Total revenues | | | 191,193 | | 33,424 | | 224,617 | | 19,243 | | 8,958 | | 1,746 | | Rs. | 254,564 | | Cost of revenues | | | | (128,089 | ) | | | (30,175 | ) | | | (158,264 | ) | | | (10,785 | ) | | | (8,672 | ) | | | (455 | ) | | | (178,176 | ) | Selling and marketing expenses | | | | (11,270 | ) | | | (1,335 | ) | | | (12,605 | ) | | | (4,660 | ) | | | (293 | ) | | | (204 | ) | | | (17,762 | ) | General and administrative expenses | | | | (12,234 | ) | | | (717 | ) | | | (12,951 | ) | | | (1,203 | ) | | | (416 | ) | | | (126 | ) | | | (14,696 | ) | Amortization of intangible assets | | | | (1,061 | ) | | | (23 | ) | | | (1,084 | ) | | | (365 | ) | | | (39 | ) | | — | | | (1,488 | ) | Exchange rate fluctuations | | | — | | — | | — | | — | | — | | | (1,596 | ) | | | (1,596 | ) | Others, net | | | 271 | | 44 | | 315 | | 64 | | 136 | | 29 | | 544 | | | | | | | | | | | | | | | | | | |
126
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended March 31, 2007 | | | | | | | | | | | | | | | | | | | | India and | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | AsiaPac | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | IT | | | | | | | | | | | | | | | | | Global IT Services and Products | | | Services | | | Consumer | | | | | | | | | | | | | | | | | | | | | BPO | | | | | | | and | | | Care and | | | | | | | Reconciling | | | | | | | IT Services | | | Acquisitions | | | Services | | | Total | | | Products | | | Lighting | | | Others | | | Items | | | Entity Total | | Revenues | | | 96,688.37 | | | | 4,820.44 | | | | 9,412.80 | | | | 110,921.61 | | | | 23,888.48 | | | | 7,558.50 | | | | 7,062.74 | | | | — | | | | 149,431.33 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Exchange rate fluctuations | | | (140.57 | ) | | | (15.03 | ) | | | (23.85 | ) | | | (179.45 | ) | | | (25.07 | ) | | | 4.40 | | | | 3.06 | | | | 197.06 | | | | — | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total revenues | | | 96,547.80 | | | | 4,805.41 | | | | 9,388.95 | | | | 110,742.16 | | | | 23,863.41 | | | | 7,562.91 | | | | 7,065.80 | | | | 197.06 | | | | 149,431.33 | | Cost of revenues | | | (62,671.33 | ) | | | (4,146.44 | ) | | | (6,172.97 | ) | | | (72,990.74 | ) | | | (18,555.11 | ) | | | (4,905.14 | ) | | | (5,749.25 | ) | | | — | | | | 102,200.24 | | Selling and marketing expenses | | | (4,882.83 | ) | | | (116.82 | ) | | | (100.02 | ) | | | (5,099.67 | ) | | | (2,067.89 | ) | | | (1,482.75 | ) | | | (477.84 | ) | | | (44.77 | ) | | | (9,172.92 | ) | General and administrative expenses | | | (4,230.46 | ) | | | (511.59 | ) | | | (982.52 | ) | | | (5,724.57 | ) | | | (1,198.32 | ) | | | (120.04 | ) | | | (500.35 | ) | | | (95.95 | ) | | | (7,639.23 | ) | Research and development expenses | | | (267.71 | ) | | | — | | | | — | | | | (267.71 | ) | | | — | | | | — | | | | — | | | | — | | | | (267.71 | ) | Amortization of intangible assets | | | — | | | | (220.11 | ) | | | (5.09 | ) | | | (225.20 | ) | | | (32.04 | ) | | | (4.33 | ) | | | (7.66 | ) | | | — | | | | (269.23 | ) | Exchange rate fluctuations | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (235.69 | ) | | | (235.69 | ) | Others, net | | | 12.92 | | | | 80.61 | | | | 0.10 | | | | 93.63 | | | | 29.08 | | | | 18.74 | | | | 50.54 | | | | 29.49 | | | | 221.48 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Operating income of segment(1) | | | 24,508.39 | | | | (108.94 | ) | | | 2,128.45 | | | | 26,527.90 | | | | 2,039.13 | | | | 1,069.38 | | | | 381.24 | | | | (149.86 | ) | | | 29,867.79 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Total assets of segment | | | 53,475.17 | | | | 11,406.08 | | | | 7,816.36 | | | | 72,697.61 | | | | 12,525.54 | | | | 4,676.63 | | | | 6,499.63 | | | | 49,684.73 | | | | 146,084.13 | | Accounts receivable | | | 19,275.43 | | | | 1,095.75 | | | | 1,097.06 | | | | 21,468.24 | | | | 5,053.64 | | | | 723.33 | | | | 1,221.37 | | | | — | | | | 28,466.58 | | Cash and cash equivalents and investments in liquid and short-term mutual funds | | | 6,137.25 | | | | 2,455.60 | | | | 420.78 | | | | 9,013.63 | | | | 887.81 | | | | 357.98 | | | | 251.24 | | | | 34,311.94 | | | | 44,822.60 | | Depreciation | | | 2,710.70 | | | | 176.84 | | | | 616.66 | | | | 3,504.20 | | | | 168.03 | | | | 103.76 | | | | 139.05 | | | | 15.52 | | | | 3,930.56 | | Capital employed opening | | | 27,777.90 | | | | 3,049.94 | | | | 10,337.07 | | | | 41,164.91 | | | | 3,124.13 | | | | 1,309.70 | | | | 1,790.09 | | | | 32,080.06 | | | | 79,468.89 | | Capital employed closing | | | 37,403.64 | | | | 10,257.15 | | | | 6,456.04 | | | | 54,116.83 | | | | 5,717.95 | | | | 3,093.82 | | | | 4,417.08 | | | | 37,903.41 | | | | 105,249.09 | | Average capital employed | | | 32,590.78 | | | | 6,653.54 | | | | 8,396.55 | | | | 47,640.87 | | | | 4,421.04 | | | | 2,201.76 | | | | 3,103.59 | | | | 34,991.73 | | | | 92,358.99 | | Return on capital employed | | | 75 | % | | | -2 | % | | | 25 | % | | | 56 | % | | | 46 | % | | | 49 | % | | | — | | | | — | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended March 31, 2009 | | | | | | | | | | | | | | | | Consumer | | | | | | | | | | | | | | IT Services and Products | | | Care and | | | | | | | Reconciling | | | | | | | IT Services | | | IT Products | | | Total | | | Lighting | | | Others | | | Items | | | Entity Total | | Operating income of segment(1) | | Rs. | 38,810 | | | Rs. | 1,218 | | | Rs. | 40,028 | | | Rs. | 2,294 | | | Rs. | (326) | | | Rs. | (606) | | | Rs. | 41,390 | | | | | | | | | | | | | | | | | | | | | | | | | Total assets of segment | | | | | | | | | | Rs. | 192,406 | | | Rs. | 22,574 | | | Rs. | 7,667 | | | Rs. | 68,440 | | | Rs. | 291,087 | | Capital employed opening | | | | | | | | | | | 99,673 | | | | 19,308 | | | | 6,990 | | | | 48,219 | | | | 174,190 | | Capital employed closing | | | | | | | | | | | 125,243 | | | | 18,507 | | | | 6,452 | | | | 57,023 | | | | 207,225 | | Average capital employed | | | | | | | | | | | 112,458 | | | | 18,908 | | | | 6,721 | | | | 52,621 | | | | 190,708 | | Return on capital employed | | | | | | | | | | | 36 | % | | | 12 | % | | | | | | | | | | | 22 | % | Accounts receivable | | | | | | | | | | | 43,034 | | | | 2,414 | | | | 769 | | | | — | | | | 46,217 | | Cash and cash equivalents and investments securities | | | | | | | | | | | 23,163 | | | | 881 | | | | 32 | | | | 41,221 | | | | 65,297 | | Depreciation | | | | | | | | | | | 6,198 | | | | 298 | | | | 306 | | | | 19 | | | | 6,821 | |
| | | (1) | | Operating income of segments is after recognition of stock compensation expense arising from the grant of options: |
141
| | | | | | | | | | | | | | | | | | | | | | | | | Segments | | 2005 | | 2006 | | 2007 | | 2007 | | 2008 | | 2009 | | IT Services | | Rs. | 297.55 | | Rs. | 539.71 | | 1,151.06 | | | Rs. | 1,218 | | Rs. | 948 | | Rs. | 1,368 | | BPO Services | | 12.62 | | 22.77 | | 48.89 | | | India and AsiaPac IT Services and Products | | 19.02 | | 39.64 | | 79.56 | | | IT Products | | | 62 | | 59 | | 102 | | Consumer Care and Lighting | | 5.84 | | 9.02 | | 23.29 | | | 23 | | 42 | | 75 | | Others | | 4.49 | | 16.63 | | 13.15 | | | 13 | | 5 | | 18 | | Reconciling items | | 14.34 | | 35.10 | | 20.45 | | | 20 | | 22 | | 32 | | | | | | | | | | | Total | | | 1,336 | | 1,076 | | 1,595 | | | | | | | | | | |
The Company has four geographic segments: India, the United States, Europe and Rest of the world. Revenues from the geographic segments based on domicile of the customer are as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | Year ended March 31, | | | Year ended March 31, | | | | 2005 | | 2006 | | 2007 | | | 2007 | | 2008 | | 2009 | | India | | Rs. | 19,349.64 | | Rs. | 21,803.91 | | Rs. | 30,650.06 | | | Rs. | 30,650 | | Rs. | 46,891 | | Rs. | 52,908 | | United States | | 41,811.59 | | 53,481.07 | | 72,846.27 | | | 72,846 | | 87,552 | | 116,281 | | Europe | | 16,602.35 | | 24,310.22 | | 36,972.00 | | | 36,972 | | 48,259 | | 57,109 | | Rest of the world | | 3,588.92 | | 6,511.68 | | 8,963.00 | | | 8,963 | | 14,726 | | 28,266 | | | | | | | | | | | | | | | | | | | Rs. | 81,352.50 | | Rs. | 106,106.88 | | Rs. | 149,431.33 | | | Rs. | 149,431 | | Rs. | 197,428 | | Rs. | 254,564 | | | | | | | | | | | | | | | | |
30.28. Fair Value of Financial InstrumentsDisclosures
The Company measures certain financial assets and liabilities at fair value on a recurring basis, including derivative instruments and investment securities. The fair value measurements of these derivative instruments and investment securities using the following inputs as of March 31, 2009: | | | | | | | | | | | | | | | | | | | | | | | Fair value measurements at | | | | | | | reporting date | Particulars | | Total | | Level 1 | | Level 2 | | Level 3 | Assets | | | | | | | | | | | | | | | | | Derivative instruments(a) | | Rs. | 1,165 | | | Rs. | — | | | Rs. | 1,165 | | | Rs. | — | | Investments in liquid and short-term mutual funds(b) | | | 15,212 | | | | 15,212 | | | | | | | | — | | Investments in Certificate of Deposits(b) | | | 968 | | | | — | | | | 968 | | | | — | | Liabilities | | | | | | | | | | | | | | | | | Derivative instruments(c) | | | 12,024 | | | | — | | | | 12,024 | | | | — | |
| | | (a) | | Included in other current assets in the consolidated balance sheet | | (b) | | Included in short term investments in the consolidated balance sheet | | (c) | | Included in other current liabilities in the consolidated balance sheet |
Derivatives.The Company involves independent appraisers to determine the fair value of derivative instruments. The fair value is determined based on observable market inputs including currency spot and forward rates, yield curves, currency volatility etc. Investments.Investments in liquid & short-term mutual funds which are classified as available-for-sale are measured using quoted market prices at the reporting date multiplied by the quantity held. Fair value of investments in certificate of deposits, classified as available for sale is determined by an independent appraiser using the market observable yields. Further, the fair value of the Company’s current assets and current liabilities approximate their carrying value because of their short term maturity. Such financial instruments are classified as current and are expected to be liquidated within the next twelve months. A substantial portion of the Company’s long-term debt has been contracted at floating rate of interest which is reset at short intervals. Accordingly, carrying value of such debt approximates fair value as of March 31, 2009. 142127
Item 19. Exhibits | | | Exhibit | | | Number | | Description | 1.1 | | Articles of Association of Wipro Limited, as amended (1) | | | | 1.2 | | Memorandum of Association of Wipro Limited, as amended (1) | | | | 1.3 | | Certificate of Incorporation of Wipro Limited, as amended (1) | | | | 2.1 | | Form of Deposit Agreement (including as an exhibit, the form of American Depositary Receipt) (1) | | | | 2.2 | | Wipro’s specimen certificate for equity shares (1) | | | | 4.1 | | 1999 Employee Stock Option Plan (1999 plan) (1) | | | | 4.2 | | 2000 Employee Stock Option Plan (2000 plan) (1) | | | | 4.3 | | Wipro Equity Reward Trust (1) | | | | 4.4 | | 2000 ADS Option Plan (2000 ADS Plan) (3) | | | | 4.5 | | Wipro Employee ADS Restricted Stock Unit Plan 2004 (WARSUP 2004 plan) (4) | | | | 4.6 | | Wipro Employee Restricted Stock Unit Plan 2004 (WRSUP 2004 plan)(5) | | | | 4.7 | | Form of Indemnification Agreement, as amended (3) | | | | 4.8 | | Form of Agreement for Appointment/Re-appointment of Executive Directors (5) | | | | 4.9 | | Sample Letter of appointment to Non Executive Directors (5) | | | | 4.10 | | Wipro Employee Restricted Stock Unit Plan 2005 (WRSUP 2005 plan) (6) | | | | 4.11 | | Wipro Employee Restricted Stock Unit Plan 2007 (WRSUP 2007 Plan) (9) | | | | 4.12 | | Amendment No. 1 to 1999 plan, 2000 plan, 2000 ADS plan, WRSUP 2004 Plan, WARSUP 2004 Plan and WRSUP 2005 Plan (9) | | | | 4.13 | | Amendment No. 2 to 1999 plan, 2000 plan, WRSUP 2004 Plan and WRSUP 2005 Plan (9) | | | | 4.14 | | Amendment No. 3 to WRSUP 2004 Plan and WRSUP 2005 Plan (9) | | | | 4.15 | | Amendment No. 2 to WARSUP 2004 Plan (9) | | | | 4.16 | | Amendment No. 3 to 2000 Plan (9) | | | | 11.1 | | Code of Ethics for Principal and Finance Officers (2) | | | | 12.1 | | Certification of Chief Executive Officer under Section 302 of the Sarbanes Oxley Act | | | | 12.2 | | Certification of Chief Financial Officer under Section 302 of the Sarbanes Oxley Act | | | | 13 | | Certification of Chief Executive Officer and Chief Financial Officer under Section 906 of the Sarbanes Oxley Act | 23.1 | | | 15.1 | | Consent of Independent Registered Public Accounting Firm | 99.1 | | | 15.2 | | Wipro’s Ombudsprocess (2) | 99.2 | | | 15.3 | | Code of Business Conduct and Ethics (7) | 99.3 | | Amendment No.1 to the Charter For The | 15.4 | | Audit Committee Of The Board Of Directors Of Wipro Limited filed as exhibit no. 99.3 of 20-F filed on June 13, 2005Charter (8) | 99.4 | | | 15.5 | | Board Governance and Compensation Committee Charter (6) |
| | | (1) | | Incorporated by reference to exhibitsExhibits filed with the Registrant’s Registration Statement on Form F-1 (File No. 333-46278) in the form declared effective September 26, 2000.2000, and amended exhibits filed with the Registrant’s Form 6-K (File No. 001-16139) filed on July 30, 2008. | | (2) | | Incorporated by reference to Exhibits filed with the Registrant’s Annual Report on Form 20-F filed on June 9, 2003. | | (3) | | Incorporated by reference to Exhibits filed with the Registrant’s Annual Report on Form 20-F filed on May 17, 2004. | | (4) | | Incorporated by reference to Exhibits filed with the Registrant’s Registration Statement on Form S-8 filed on February 28, 2005. | | (5) | | Incorporated by reference to Exhibits filed with the Registrant’s Annual Report on Form 20-F filed on June 13, 2005. | | (6) | | Incorporated by reference to Exhibits filed with the Registrant’s Annual Report on Form 20-F filed on June 22, 2006. | | (7) | | Incorporated by reference to Exhibits filed with the Registrant’s Annual Report on Form 20-F filed on May 30, 2007 | | (8) | | Incorporated by reference to Exhibits filed with the Registrant’s Annual Report on Form 20-F filed on June 13, 2005, as amended by Exhibit with the Registrant’s Annual Report on Form 20-F filed on May 30, 2007 | | (9) | | Incorporated by reference to Exhibits filed with the Registrant’s Annual Report on Form 20-F filed on May 30, 2008 |
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SIGNATURES The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf. For Wipro Limited | | | | | Bangalore, India | | /s/ Azim H. Premji | | /s/ Suresh C. Senapaty | | | | | | Date: May 30, 200718, 2009 | | Azim H. Premji,
| | Suresh C. Senapaty, | | | | | | | | Chairman and Managing Director | | Suresh C. Senapaty,
Executive Vice President, FinanceChief Financial Officer and Director |
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