Exhibit 99.12
Standalone
AUDITORS’ REPORT TO THE BOARD OF DIRECTORS OF INFOSYS TECHNOLOGIES LIMITED
We have audited the attached Balance Sheet of Infosys Technologies Limited (‘the Company’) as at 30 June 2010, the Profit and Loss Account and the Cash Flow Statement of the Company for the quarter ended on that date, annexed thereto. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in India. 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 audit provides a reasonable basis for our opinion.
We report that:
(a) | we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit; | |
(b) | in our opinion, proper books of account have been kept by the Company so far as appears from our examination of those books; | |
(c) | the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account; | |
(d) | in our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report comply with the Accounting Standards prescribed by the Companies (Accounting Standards) Rules, 2006, to the extent applicable; and | |
(e) | in our opinion and to the best of our information and according to the explanations given to us, the said accounts give a true and fair view in conformity with the accounting principles generally accepted in India: | |
(i) | in the case of the Balance Sheet, of the state of affairs of the Company as at 30 June 2010; | |
(ii) | in the case of the Profit and Loss Account, of the profit of the Company for the quarter ended on that date; and | |
(iii) | in the case of the Cash Flow Statement, of the cash flows of the Company for the quarter ended on that date. |
for B S R & Co.
Chartered Accountants
Firm registration number: 101248W
Natrajan Ramkrishna
Partner
Membership number: 32815
Bangalore
13 July 2010
INFOSYS TECHNOLOGIES LIMITED
in Rs. crore |
Balance Sheet as at | Schedule | June 30, 2010 | March 31, 2010 |
SOURCES OF FUNDS | |||
SHAREHOLDERS' FUNDS | |||
Share capital | 1 | 287 | 287 |
Reserves and surplus | 2 | 23,184 | 21,749 |
23,471 | 22,036 | ||
DEFERRED TAX LIABILITIES | 5 | 232 | 232 |
23,703 | 22,268 | ||
APPLICATION OF FUNDS | |||
FIXED ASSETS | 3 | ||
Original cost | 6,623 | 6,357 | |
Less: Accumulated depreciation and amortization | 2,755 | 2,578 | |
Net book value | 3,868 | 3,779 | |
Add: Capital work-in-progress | 295 | 409 | |
4,163 | 4,188 | ||
INVESTMENTS | 4 | 3,032 | 4,626 |
DEFERRED TAX ASSETS | 5 | 367 | 313 |
CURRENT ASSETS, LOANS AND ADVANCES | |||
Sundry debtors | 6 | 3,570 | 3,244 |
Cash and bank balances | 7 | 11,490 | 9,797 |
Loans and advances | 8 | 4,266 | 3,898 |
19,326 | 16,939 | ||
LESS: CURRENT LIABILITIES AND PROVISIONS | |||
Current liabilities | 9 | 1,892 | 1,763 |
Provisions | 10 | 1,293 | 2,035 |
NET CURRENT ASSETS | 16,141 | 13,141 | |
23,703 | 22,268 | ||
SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS | 23 |
Note: The schedules referred to above are an integral part of the Balance Sheet.
As per our report attached
for B S R & Co.
Chartered Accountants
Natrajan Ramkrishna Partner Membership No. 32815 | N. R. Narayana Murthy Chairman and Chief Mentor | S. Gopalakrishnan Chief Executive Officer and Managing Director | S. D. Shibulal Chief Operating Officer and Director | Deepak M. Satwalekar Director |
Prof. Marti G. Subrahmanyam Director | Dr. Omkar Goswami Director | Sridar A. Iyengar Director | David L. Boyles Director | |
Prof. Jeffrey S. Lehman Director | K.V.Kamath Director | K. Dinesh Director | T. V. Mohandas Pai Director | |
Bangalore July 13, 2010 | Srinath Batni Director | V. Balakrishnan Chief Financial Officer | K. Parvatheesam Company Secretary |
INFOSYS TECHNOLOGIES LIMITED
in Rs. crore, except per share data |
Profit and Loss account for the quarter ended June 30, | Schedule | 2010 | 2009 |
Income from software services and products | 5,758 | 5,104 | |
Software development expenses | 11 | 3,282 | 2,770 |
GROSS PROFIT | 2,476 | 2,334 | |
Selling and marketing expenses | 12 | 273 | 215 |
General and administration expenses | 13 | 341 | 346 |
614 | 561 | ||
OPERATING PROFIT BEFORE DEPRECIATION | 1,862 | 1,773 | |
Depreciation | 180 | 201 | |
OPERATING PROFIT | 1,682 | 1,572 | |
Other income, net | 14 | 237 | 265 |
NET PROFIT BEFORE TAX | 1,919 | 1,837 | |
Provision for taxation (refer to note 23.2.11) | 15 | 488 | 373 |
NET PROFIT AFTER TAX | 1,431 | 1,464 | |
Balance Brought Forward | 13,806 | 10,305 | |
13,806 | 10,305 | ||
Balance in profit and loss account | 15,237 | 11,769 | |
AMOUNT AVAILABLE FOR APPROPRIATION | 15,237 | 11,769 | |
EARNINGS PER SHARE | |||
Equity shares of par value Rs. 5/- each | |||
Basic | 24.93 | 25.56 | |
Diluted | 24.92 | 25.52 | |
Number of shares used in computing earnings per share * | |||
Basic | 57,38,69,667 | 57,29,48,830 | |
Diluted | 57,41,66,171 | 57,36,51,675 | |
SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS | 23 |
Note: The schedules referred to above are an integral part of the Profit and Loss account.
* Refer to note 23.2.19
As per our report attached
for B S R & Co.
Chartered Accountants
Natrajan Ramkrishna Partner Membership No. 32815 | N. R. Narayana Murthy Chairman and Chief Mentor | S. Gopalakrishnan Chief Executive Officer and Managing Director | S. D. Shibulal Chief Operating Officer and Director | Deepak M. Satwalekar Director |
Prof. Marti G. Subrahmanyam Director | Dr. Omkar Goswami Director | Sridar A. Iyengar Director | David L. Boyles Director | |
Prof. Jeffrey S. Lehman Director | K.V.Kamath Director | K. Dinesh Director | T. V. Mohandas Pai Director | |
Bangalore July 13, 2010 | Srinath Batni Director | V. Balakrishnan Chief Financial Officer | K. Parvatheesam Company Secretary |
INFOSYS TECHNOLOGIES LIMITED
in Rs. crore |
Cash Flow statement for the quarter ended June 30, | Schedule | 2010 | 2009 |
CASH FLOWS FROM OPERATING ACTIVITIES | |||
Net profit before tax | 1,919 | 1,837 | |
Adjustments to reconcile net profit before tax to cash provided by operating activities | |||
Depreciation | 180 | 201 | |
Interest and dividend income | (243) | (228) | |
Effect of exchange differences on translation of foreign currency cash and cash equivalents | (8) | (9) | |
Changes in current assets and liabilities | |||
Sundry debtors | (326) | 222 | |
Loans and advances | 16 | (438) | (178) |
Current liabilities and provisions | 17 | 174 | 30 |
1,258 | 1,875 | ||
Income taxes paid | 18 | (203) | (292) |
NET CASH GENERATED BY OPERATING ACTIVITIES | 1,055 | 1,583 | |
CASH FLOWS FROM INVESTING ACTIVITIES | |||
Purchase of fixed assets and change in capital work-in-progress | 19 | (185) | (122) |
Investments in subsidiaries | 20 (a) | – | (50) |
Investment/(Disposal) of other securities | 20 (b) | 1,594 | (1,152) |
Interest and dividend received | 21 | 220 | 226 |
NET CASH PROVIDED BY/(USED IN) INVESTING ACTIVITIES | 1,629 | (1,098) | |
CASH FLOWS FROM FINANCING ACTIVITIES | |||
Proceeds from issuance of share capital on exercise of stock options | 4 | 18 | |
Dividends paid including residual dividend | (860) | (770) | |
Dividend tax paid | (143) | – | |
NET CASH USED IN FINANCING ACTIVITIES | (999) | (752) | |
Effect of exchange differences on translation of foreign currency cash and cash equivalents | 8 | 9 | |
NET INCREASE IN CASH AND CASH EQUIVALENTS | 1,693 | (258) | |
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD | 11,297 | 10,289 | |
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD | 22 | 12,990 | 10,031 |
SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS | 23 |
Note: The schedules referred to above are an integral part of the Cash Flow statement.
As per our report attached
for B S R & Co.
Chartered Accountants
Natrajan Ramkrishna Partner Membership No. 32815 | N. R. Narayana Murthy Chairman and Chief Mentor | S. Gopalakrishnan Chief Executive Officer and Managing Director | S. D. Shibulal Chief Operating Officer and Director | Deepak M. Satwalekar Director |
Prof. Marti G. Subrahmanyam Director | Dr. Omkar Goswami Director | Sridar A. Iyengar Director | David L. Boyles Director | |
Prof. Jeffrey S. Lehman Director | K.V.Kamath Director | K. Dinesh Director | T. V. Mohandas Pai Director | |
Bangalore July 13, 2010 | Srinath Batni Director | V. Balakrishnan Chief Financial Officer | K. Parvatheesam Company Secretary |
INFOSYS TECHNOLOGIES LIMITED
in Rs. crore, except as otherwise stated |
Schedules to the Balance Sheet as at | June 30, 2010 | March 31, 2010 | |
1 | SHARE CAPITAL | ||
Authorized | |||
Equity shares, Rs. 5/- par value | |||
60,00,00,000 (60,00,00,000) equity shares | 300 | 300 | |
Issued, Subscribed and Paid Up | |||
Equity shares, Rs. 5/- par value* | 287 | 287 | |
57,39,01,101 (57,38,25,192) equity shares fully paid up | |||
[Of the above, 53,53,35,478 (53,53,35,478) equity shares, fully paid up have been issued as bonus shares by capitalization of the general reserve] | |||
287 | 287 | ||
Forfeited shares amounted to Rs. 1,500/- (Rs. 1,500/-) | |||
* For details of options in respect of equity shares, refer to note 23.2.10 and also refer to note 23.2.19 for details of basic and diluted shares | |||
2 | RESERVES AND SURPLUS | ||
Capital reserve | 54 | 6 | |
Add: Transferred from Profit and Loss account | – | 48 | |
54 | 54 | ||
Share premium account - Opening balance | 3,022 | 2,925 | |
Add: Receipts on exercise of employee stock options | 4 | 87 | |
Income tax benefit arising from exercise of stock options | – | 10 | |
3,026 | 3,022 | ||
General reserve - Opening balance | 4,867 | 4,287 | |
Add: Transferred from Profit and Loss account | – | 580 | |
4,867 | 4,867 | ||
Balance in Profit and Loss account | 15,237 | 13,806 | |
23,184 | 21,749 |
INFOSYS TECHNOLOGIES LIMITED
Schedules to the Balance Sheet
3 FIXED ASSETS
in Rs. crore except as otherwise stated |
Particulars | Original cost | Depreciation and amortization | Net book value | |||||||
As at April 1, 2010 | Additions during the period | Deductions / Retirement during the period | As at June 30, 2010 | As at April 1, 2010 | For the period | Deductions during the period | As at June 30, 2010 | As at June 30, 2010 | As at March 31, 2010 | |
Land : Free-hold | 178 | 88 | – | 266 | – | – | – | – | 266 | 178 |
Leasehold | 138 | – | – | 138 | – | – | – | – | 138 | 138 |
Buildings * # | 3,209 | 100 | – | 3,309 | 737 | 54 | – | 791 | 2,518 | 2,472 |
Plant and machinery # | 1,149 | 35 | – | 1,184 | 597 | 54 | – | 651 | 533 | 552 |
Computer equipment # | 1,037 | 31 | 3 | 1,065 | 882 | 43 | 3 | 922 | 143 | 155 |
Furniture and fixtures # | 629 | 15 | – | 644 | 347 | 29 | – | 376 | 268 | 282 |
Vehicles | 5 | – | – | 5 | 3 | – | – | 3 | 2 | 2 |
Intellectual property right | 12 | – | – | 12 | 12 | – | – | 12 | – | – |
6,357 | 269 | 3 | 6,623 | 2,578 | 180 | 3 | 2,755 | 3,868 | 3,779 | |
Previous year | 5,986 | 787 | 416 | 6,357 | 2,187 | 807 | 416 | 2,578 | 3,779 |
Notes: * Buildings include Rs. 250/- being the value of 5 shares of Rs. 50/- each in Mittal Towers Premises Co-operative Society Limited.
# Includes certain assets provided on operating lease to Infosys BPO, a subsidiary. Refer to note 23.2.6 for details
INFOSYS TECHNOLOGIES LIMITED
in Rs. crore, except as otherwise stated |
Schedules to the Balance Sheet as at | June 30, 2010 | March 31, 2010 | |
4 | INVESTMENTS * | ||
Long- term investments– at cost | |||
Trade (unquoted) | |||
Other investments | 6 | 6 | |
Less: Provision for investments | 2 | 2 | |
4 | 4 | ||
Non-trade (unquoted) | |||
Subsidiaries | |||
Infosys BPO Limited ** | |||
3,38,22,319 (3,38,22,319) equity shares of Rs. 10/- each, fully paid | 659 | 659 | |
Infosys Technologies (China) Co. Limited | 65 | 65 | |
Infosys Technologies (Australia) Pty Limited | |||
1,01,08,869 (1,01,08,869) equity shares of AUD 0.11 par value, fully paid | 66 | 66 | |
Infosys Consulting, Inc., USA | |||
5,50,00,000 (5,50,00,000) common stock of USD 1.00 par value, fully paid | 243 | 243 | |
Infosys Technologies, S. De R.L. De C.V., Mexico | 40 | 40 | |
Infosys Technologies Sweden AB | |||
1,000 (1,000) equity shares of SEK 100 par value, fully paid | – | – | |
Infosys Technologies DO Brasil LTDA | |||
1,07,16,997 (1,07,16,997) shares of BRL 1.00 par value, fully paid | 28 | 28 | |
Infosys Public Services, Inc | |||
1,00,00,000 (1,00,00,000) common stock of USD 0.50 par value, fully paid | 24 | 24 | |
1,125 | 1,125 | ||
Current investments – at the lower of cost and fair value | |||
Non-trade (unquoted) | |||
Liquid mutual fund units | 109 | 2,317 | |
Certificates of deposit | 1,794 | 1,180 | |
1,903 | 3,497 | ||
3,032 | 4,626 | ||
Aggregate amount of unquoted investments | 3,032 | 4,626 | |
* Refer to note 23.2.15 for details of investments | |||
** Investments include 11,26,875 (13,36,331) options of Infosys BPO | |||
5 | DEFERRED TAXES | ||
Deferred tax assets | |||
Fixed assets | 212 | 201 | |
Sundry debtors | 28 | 28 | |
Other assets | 127 | 84 | |
367 | 313 | ||
Deferred tax liabilities | |||
Branch profit tax | 232 | 232 | |
232 | 232 | ||
6 | SUNDRY DEBTORS* | ||
Debts outstanding for a period exceeding six months | |||
Unsecured | |||
Considered doubtful | 86 | 79 | |
Other debts | |||
Unsecured | |||
Considered good** | 3,570 | 3,244 | |
Considered doubtful | 26 | 21 | |
3,682 | 3,344 | ||
Less: Provision for doubtful debts | 112 | 100 | |
3,570 | 3,244 | ||
* Includes dues from companies where directors are interested | 1 | 11 | |
** Includes dues from subsidiaries (refer to note 23.2.7) | 62 | 56 | |
7 | CASH AND BANK BALANCES* | ||
Cash on hand | – | – | |
Balances with scheduled banks | |||
In current accounts ** | 92 | 153 | |
In deposit accounts | 11,008 | 8,868 | |
Balances with non-scheduled banks | |||
In current accounts | 390 | 776 | |
11,490 | 9,797 | ||
* Refer to note 23.2.12 for details of balances with scheduled and non-scheduled banks | |||
** Includes balance in unclaimed dividend account (refer to note 23.2.23.a) | 3 | 2 | |
8 | LOANS AND ADVANCES | ||
Unsecured, considered good | |||
Loans to subsidiary (refer to note 23.2.7) | 47 | 46 | |
Advances | |||
Prepaid expenses | 56 | 25 | |
For supply of goods and rendering of services | 7 | 5 | |
Advance to gratuity trust | 55 | 2 | |
Withholding and other taxes receivable | 370 | 321 | |
Others | 8 | 13 | |
543 | 412 | ||
Unbilled revenues | 990 | 789 | |
Advance income taxes | 549 | 641 | |
Interest accrued but not due | 37 | 14 | |
Loans and advances to employees | |||
Housing and other loans | 37 | 38 | |
Salary advances | 93 | 62 | |
Electricity and other deposits | 72 | 60 | |
Rental deposits | 14 | 13 | |
Deposits with financial institutions (refer to note 23.2.13) | 1,931 | 1,781 | |
Mark-to-market gain on forward and options contracts | – | 88 | |
4,266 | 3,898 | ||
Unsecured, considered doubtful | |||
Loans and advances to employees | 2 | �� 2 | |
4,268 | 3,900 | ||
Less: Provision for doubtful loans and advances to employees | 2 | 2 | |
4,266 | 3,898 | ||
9 | CURRENT LIABILITIES | ||
Sundry creditors | |||
Goods and services * | 103 | 96 | |
Accrued salaries and benefits | |||
Salaries | 43 | 25 | |
Bonus and incentives | 391 | 421 | |
For other liabilities | |||
Provision for expenses | 397 | 375 | |
Retention monies | 36 | 66 | |
Withholding and other taxes payable | 297 | 235 | |
Mark-to-market loss on forward and options contracts | 17 | – | |
Gratuity obligation - unamortised amount relating to plan amendment | 25 | 26 | |
Others ** | 8 | 8 | |
1,317 | 1,252 | ||
Advances received from clients | 16 | 7 | |
Unearned revenue | 556 | 502 | |
Unclaimed dividend | 3 | 2 | |
1,892 | 1,763 | ||
* Includes dues to subsidiaries (refer to note 23.2.7) | 101 | 95 | |
** Includes deposits received from subsidiary (refer to note 23.2.7) | 7 | 7 | |
10 | PROVISIONS | ||
Proposed dividend | – | 861 | |
Provision for | |||
Tax on dividend | – | 143 | |
Income taxes * | 966 | 719 | |
Unavailed leave | 252 | 239 | |
Post-sales client support and warranties ** | 75 | 73 | |
1,293 | 2,035 | ||
* Refer to note 23.2.11 | |||
** Refer to note 23.2.20 |
INFOSYS TECHNOLOGIES LIMITED
in Rs. crore, except as otherwise stated |
Schedules to Profit and Loss account for the quarter ended June 30, | 2010 | 2009 | |
11 | SOFTWARE DEVELOPMENT EXPENSES | ||
Salaries and bonus including overseas staff expenses | 2,434 | 2,149 | |
Overseas group health insurance | 39 | 35 | |
Contribution to provident and other funds | 68 | 59 | |
Staff welfare | 8 | 7 | |
Technical sub-contractors - subsidiaries | 366 | 241 | |
Technical sub-contractors - others | 86 | 55 | |
Overseas travel expenses | 94 | 77 | |
Visa charges and others | 72 | 19 | |
Software packages | |||
For own use | 68 | 89 | |
For service delivery to clients | 17 | 11 | |
Communication expenses | 10 | 13 | |
Computer maintenance | 7 | 5 | |
Consumables | 6 | 5 | |
Rent | 5 | 7 | |
Provision for post-sales client support and warranties | 2 | (2) | |
3,282 | 2,770 | ||
12 | SELLING AND MARKETING EXPENSES | ||
Salaries and bonus including overseas staff expenses | 213 | 171 | |
Overseas group health insurance | 1 | 1 | |
Contribution to provident and other funds | 1 | 1 | |
Overseas travel expenses | 23 | 15 | |
Traveling and conveyance | 1 | 1 | |
Commission charges | 2 | 2 | |
Brand building | 15 | 12 | |
Professional charges | 6 | 4 | |
Rent | 3 | 3 | |
Marketing expenses | 4 | 2 | |
Telephone charges | 4 | 3 | |
273 | 215 | ||
13 | GENERAL AND ADMINISTRATION EXPENSES | ||
Salaries and bonus including overseas staff expenses | 90 | 79 | |
Contribution to provident and other funds | 5 | 4 | |
Professional charges | 53 | 64 | |
Telephone charges | 25 | 28 | |
Power and fuel | 37 | 31 | |
Traveling and conveyance | 16 | 13 | |
Overseas travel expenses | 3 | 2 | |
Office maintenance | 43 | 33 | |
Guest house maintenance | 1 | 1 | |
Insurance charges | 6 | 7 | |
Printing and stationery | 2 | 3 | |
Donations | 1 | 20 | |
Rent | 7 | 7 | |
Advertisements | 2 | – | |
Repairs to building | 8 | 9 | |
Repairs to plant and machinery | 7 | 7 | |
Rates and taxes | 8 | 6 | |
Professional membership and seminar participation fees | 2 | 2 | |
Postage and courier | 3 | 3 | |
Books and periodicals | 1 | 1 | |
Provision for bad and doubtful debts | 15 | 19 | |
Commission to non-whole time directors | 1 | 2 | |
Research grants | 5 | 5 | |
341 | 346 | ||
14 | OTHER INCOME, NET | ||
Interest received on deposits with banks and others * | 226 | 218 | |
Dividend received on investment in liquid mutual fund units (non-trade unquoted) | 17 | 10 | |
Miscellaneous income, net ** | 7 | 5 | |
Gains / (losses) on foreign currency, net | (13) | 32 | |
237 | 265 | ||
* includes tax deducted at source | 18 | 48 | |
** refer to note 23.2.6 and 23.2.14 | |||
15 | PROVISION FOR TAXATION | ||
Income taxes* | 542 | 381 | |
Deferred taxes | (54) | (8) | |
488 | 373 | ||
* Refer to note 23.2.11 |
INFOSYS TECHNOLOGIES LIMITED
in Rs. crore, except as otherwise stated |
Schedules to Cash Flow statements for the quarter ended June 30, | 2010 | 2009 | |
16 | CHANGE IN LOANS AND ADVANCES | ||
As per the balance sheet * | 4,266 | 3,356 | |
Less: Gratuity obligation - unamortised amount relating to plan amendment** | 25 | 28 | |
Deposits with financial institutions included in cash and cash equivalents*** | 1,500 | 1,250 | |
Interest accrued but not due | 37 | 3 | |
MAT credit entitlement | – | 262 | |
Advance income taxes | 549 | 281 | |
2,155 | 1,532 | ||
Less: Opening balance considered | 1,717 | 1,354 | |
438 | 178 | ||
* includes loans to subsidiary and net of gratuity transitional liability | |||
** refer to note 23.2.21 | |||
*** Excludes restricted deposits held with LIC of Rs. 431 crore (Rs. 253 crore) for funding leave liability | |||
17 | CHANGE IN CURRENT LIABILITIES AND PROVISIONS | ||
As per the balance sheet | 3,185 | 2,677 | |
Less: Unclaimed dividend | 3 | 5 | |
Retention money | 36 | 64 | |
Gratuity obligation - unamortised amount relating to plan amendment | 25 | 28 | |
Provisions separately considered in Cash Flow statement | |||
Income taxes | 966 | 677 | |
Proposed dividend | – | – | |
Tax on dividend | – | 131 | |
2,155 | 1,772 | ||
Less: Opening balance considered | 2,047 | 1,795 | |
Less: Opening balance of retention money | 66 | 53 | |
174 | 30 | ||
18 | INCOME TAXES PAID | ||
Charge as per the profit and loss account | 488 | 373 | |
Add/(Less) : Increase/(Decrease) in advance income taxes | (92) | 13 | |
Increase/(Decrease) in deferred taxes | 54 | 8 | |
Increase/(Decrease) in MAT credit entitlement | – | – | |
(Increase)/Decrease in income tax provision | (247) | (102) | |
203 | 292 | ||
19 | PURCHASE OF FIXED ASSETS AND CHANGE IN CAPITAL WORK-IN-PROGRESS | ||
As per the balance sheet | 269 | 237 | |
Less: Opening capital work-in-progress | 409 | 615 | |
Add: Closing capital work-in-progress | 295 | 511 | |
Add: Opening retention money | 66 | 53 | |
Less: Closing retention money | 36 | 64 | |
185 | 122 | ||
20 (a) | INVESTMENTS IN SUBSIDIARIES * | ||
As per the balance sheet | 1,125 | 1,055 | |
Less: Opening balance considered | 1,125 | 1,005 | |
– | 50 | ||
* Refer to note 23.2.15 for investment made in subsidiaries | |||
20 (b) | INVESTMENT/(DISPOSAL) OF SECURITIES * | ||
Opening balance considered | 3,497 | – | |
Less: Closing as per the balance sheet | 1,903 | 1,152 | |
1,594 | (1,152) | ||
* Refer to note 23.2.15 for investment and redemptions | |||
21 | INTEREST AND DIVIDEND RECEIVED | ||
Interest and dividend income as per profit and loss account | 243 | 228 | |
Add: Opening interest accrued but not due | 14 | 1 | |
Less: Closing interest accrued but not due | 37 | 3 | |
220 | 226 | ||
22 | CASH AND CASH EQUIVALENTS AT THE END | ||
As per the balance sheet | 11,490 | 8,781 | |
Add: Deposits with financial institutions (excluding interest accrued and not due)* | 1,500 | 1,250 | |
12,990 | 10,031 | ||
* Excludes restricted deposits held with LIC of Rs. 431 crore (Rs. 253 crore) for funding leave liability (refer to note 23.2.23b) |
Schedules to the Financial Statements for the quarter ended June 30, 2010
23. Significant accounting policies and notes on accounts
Company overview
Infosys Technologies Limited ('Infosys' or 'the Company') along with its majority-owned and controlled subsidiary, Infosys BPO Limited ('Infosys BPO') and wholly-owned and controlled subsidiaries, Infosys Technologies (Australia) Pty. Limited ('Infosys Australia'), Infosys Technologies (China) Co. Limited ('Infosys China'), Infosys Consulting Inc. ('Infosys Consulting'), Infosys Technologies S. de R. L. de C. V. ('Infosys Mexico'), Infosys Technologies (Sweden) AB. ('Infosys Sweden'), Infosys Tecnologia DO Brasil LTDA. ('Infosys Brasil') and Infosys Public Services, Inc, USA ('Infosys Public Services') is a leading global technology services corporation. The Company provides end-to-end business solutions that leverage cutting-edge technology, thereby enabling clients to enhance business performance. The Company provides solutions that span the entire software lifecycle encompassing technical consulting, design, development, re-engineering, maintenance, systems integration, package evaluation and implementation, testing and infrastructure management services. In addition, the Company offers software products for the banking industry.
23.1. Significant accounting policies
23.1.1. Basis of preparation of financial statements
These interim financial statements are prepared in accordance with Indian Generally Accepted Accounting Principles (GAAP) under the historical cost convention on the accrual basis except for certain financial instruments which are measured at fair values. GAAP comprises mandatory accounting standards as prescribed by the Companies (Accounting Standards) Rules, 2006, the provisions of the Companies Act, 1956 and guidelines issued by the Securities and Exchange Board of India (SEBI). These financial statements should be read in conjunction with the annual financial statements for the year ended March 31, 2010. Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.
These financial statements are prepared in accordance with the principles and procedures required for the preparation and presentation of financial statements as laid down under the Accounting Standard (AS) 25, 'Interim Financial Reporting'.
23.1.2. Use of estimates
The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported balances of assets and liabilities and disclosures relating to contingent liabilities as at the date of the financial statements and reported amounts of income and expenses during the period. Examples of such estimates include computation of percentage of completion which requires the Company to estimate the efforts expended to date as a proportion of the total efforts to be expended, provisions for doubtful debts, future obligations under employee retirement benefit plans, income taxes, post-sales customer support and the useful lives of fixed assets and intangible assets.
Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes in estimates are made as the Management becomes aware of changes in circumstances surrounding the estimates. Changes in estimates are reflected in the financial statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the financial statements.
The Management periodically assesses using, external and internal sources, whether there is an indication that an asset may be impaired. An impairment loss is recognized wherever the carrying value of an asset exceeds its recoverable amount. The recoverable amount is higher of the asset's net selling price and value in use, which means the present value of future cash flows expected to arise from the continuing use of the asset and its eventual disposal. An impairment loss for an asset is reversed if, and only if, the reversal can be related objectively to an event occurring after the impairment loss was recognized. The carrying amount of an asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortization or depreciation) had no impairment loss been recognized for the asset in prior years.
23.1.3.Revenue recognition
Revenue is primarily derived from software development and related services and from the licensing of software products. Arrangements with customers for software development and related services are either on a fixed-price, fixed-timeframe or on a time-and-material basis.
Revenue on time-and-material contracts are recognized as the related services are performed and revenue from the end of the last billing to the Balance Sheet date is recognized as unbilled revenues. Revenue from fixed-price and fixed-timeframe contracts, where there is no uncertainty as to measurement or collectability of consideration, is recognized based upon the percentage of completion. When there is uncertainty as to measurement or ultimate collectability revenue recognition is postponed until such uncertainty is resolved. Cost and earnings in excess of billings are classified as unbilled revenue while billing in excess of cost and earnings is classified as unearned revenue. Provision for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the current estimates.
Annual Technical Services revenue and revenue from fixed-price maintenance contracts are recognized ratably over the period in which services are rendered. Revenue from the sale of user licenses for software applications is recognized on transfer of the title in the user license, except in case of multiple element contracts, which require significant implementation services, where revenue for the entire arrangement is recognized over the implementation period based upon the percentage-of-completion. Revenue from client training, support and other services arising due to the sale of software products is recognized as the related services are performed.
The Company accounts for volume discounts and pricing incentives to customers as a reduction of revenue based on the ratable allocation of the discount / incentive amount to each of the underlying revenue transactions that result in progress by the customer towards earning the discount / incentive. Also, when the level of discount varies with increases in levels of revenue transactions, the Company recognizes the liability based on its estimate of the customer's future purchases. If it is probable that the criteria for the discount will not be met, or if the amount thereof cannot be estimated reliably, then discount is not recognized until the payment is probable and the amount can be estimated reliably. The Company recognizes changes in the estimated amount of obligations for discounts using a cumulative catchup approach. The discounts are passed on to the customer either as direct payments or as a reduction of payments due from the customer.
The Company presents revenues net of value-added taxes in its Profit and Loss account.
Profit on sale of investments is recorded on transfer of title from the Company and is determined as the difference between the sale price and carrying value of the investment. Lease rentals are recognized ratably on a straight line basis over the lease term. Interest is recognized using the time-proportion method, based on rates implicit in the transaction. Dividend income is recognized when the Company's right to receive dividend is established.
23.1.4. Provisions and contingent liabilities
A provision is recognized if, as a result of a past event, the Company has a present legal obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by the best estimate of the outflow of economic benefits required to settle the obligation at the reporting date. Where no reliable estimate can be made, a disclosure is made as contingent liability. A disclosure for a contingent liability is also made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. Where there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.
23.1.4.a.Post-sales client support and warranties
The Company provides its clients with a fixed-period warranty for corrections of errors and telephone support on all its fixed-price, fixed-timeframe contracts. Costs associated with such support services are accrued at the time when related revenues are recorded and included in cost of sales. The Company estimates such costs based on historical experience and the estimates are reviewed annually for any material changes in assumptions.
23.1.4.b. Onerous contracts
Provisions for onerous contracts are recognized when the expected benefits to be derived by the Company from a contract are lower than the unavoidable costs of meeting the future obligations under the contract. The provision is measured at lower of the expected cost of terminating the contract and the expected net cost of fulfilling the contract.
23.1.5. Fixed assets, intangible assets and capital work-in-progress
Fixed assets are stated at cost, less accumulated depreciation and impairments, if any. Direct costs are capitalized until fixed assets are ready for use. Capital work-in-progress comprises outstanding advances paid to acquire fixed assets, and the cost of fixed assets that are not yet ready for their intended use at the reporting date. Intangible assets are recorded at the consideration paid for acquisition of such assets and are carried at cost less accumulated amortization and impairment.
23.1.6. Depreciation and amortization
Depreciation on fixed assets is provided on the straight-line method over the useful lives of assets estimated by the Management. Depreciation for assets purchased / sold during a period is proportionately charged. Individual low cost assets (acquired for less than Rs. 5,000/-) are depreciated over a period of one year from the date of acquisition. Intangible assets are amortized over their respective individual estimated useful lives on a straight-line basis, commencing from the date the asset is available to the Company for its use. The Management estimates the useful lives for the other fixed assets as follows :
Buildings | 15 years |
Plant and machinery | 5 years |
Computer equipment | 2-5 years |
Furniture and fixtures | 5 years |
Vehicles | 5 years |
Depreciation methods, useful lives and residual values are reviewed at each reporting date.
23.1.7. Retirement benefits to employees
23.1.7.a. Gratuity
In accordance with the Payment of Gratuity Act, 1972, the Company provides for gratuity, a defined benefit retirement plan ('the Gratuity Plan') covering eligible employees. The Gratuity Plan provides a lump-sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee's salary and the tenure of employment with the Company.
Liabilities with regard to the Gratuity Plan are determined by actuarial valuation at each Balance Sheet date using the projected unit credit method. The Company fully contributes all ascertained liabilities to the Infosys Technologies Limited Employees' Gratuity Fund Trust (the Trust). Trustees administer contributions made to the Trust and contributions are invested in specific investments as permitted by the law. The Company recognizes the net obligation of the gratuity plan in the Balance Sheet as an asset or liability, respectively in accordance with Accounting Standard (AS) 15, 'Employee Benefits'. The Company's overall expected long-term rate-of-return on assets has been determined based on consideration of available market information, current provisions of Indian law specifying the instruments in which investments can be made, and historical returns. The discount rate is based on the Government securities yield. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in the Profit and Loss account in the period in which they arise.
23.1.7.b. Superannuation
Certain employees of Infosys are also participants in the superannuation plan ('the Plan') which is a defined contribution plan. Until March 2005, the Company made contributions under the Plan to the Infosys Technologies Limited Employees’ Superannuation Fund Trust ('the Superannuation Trust'). The Company has no further obligations to the Plan beyond its monthly contributions. Effective April 1, 2005, a portion of the monthly contribution amount is paid directly to the employees as an allowance and the balance amount is contributed to the Superannuation Trust.
23.1.7.c. Provident fund
Eligible employees receive benefits from a provident fund, which is a defined benefit plan. Both the employee and the Company make monthly contributions to the provident fund plan equal to a specified percentage of the covered employee’s salary. The Company contributes a part of the contributions to the Infosys Technologies Limited Employees’ Provident Fund Trust. The remaining portion is contributed to the government administered pension fund. The rate at which the annual interest is payable to the beneficiaries by the trust is being administered by the government. The Company has an obligation to make good the shortfall, if any, between the return from the investments of the Trust and the notified interest rate.
23.1.7.d. Compensated absences
The employees of the Company are entitled to compensated absences which are both accumulating and non-accumulating in nature. The expected cost of accumulating compensated absences is determined by actuarial valuation based on the additional amount expected to be paid as a result of the unused entitlement that has accumulated at the Balance Sheet date. Expense on non-accumulating compensated absences is recognized in the period in which the absences occur.
23.1.8. Research and development
Research costs are expensed as incurred. Software product development costs are expensed as incurred unless technical and commercial feasibility of the project is demonstrated, future economic benefits are probable, the Company has an intention and ability to complete and use or sell the software and the costs can be measured reliably.
23.1.9. Foreign currency transactions
Foreign-currency denominated monetary assets and liabilities are translated at exchange rates in effect at the Balance Sheet date. The gains or losses resulting from such translations are included in the profit or loss account. Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at fair value are translated at the exchange rate prevalent at the date when the fair value was determined. Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at historical cost are translated at the exchange rate prevalent at the date of transaction.
Revenue, expense and cash-flow items denominated in foreign currencies are translated using the exchange rate in effect on the date of the transaction. Transaction gains or losses realized upon settlement of foreign currency transactions are included in determining net profit for the period in which the transaction is settled.
23.1.10. Forward and options contracts in foreign currencies
The Company uses foreign exchange forward and options contracts to hedge its exposure to movements in foreign exchange rates. The use of these foreign exchange forward and options contracts reduce the risk or cost to the Company and the Company does not use those for trading or speculation purposes.
Effective April 1, 2008, the Company adopted AS 30, 'Financial Instruments: Recognition and Measurement', to the extent that the adoption did not conflict with existing accounting standards and other authoritative pronouncements of the Company Law and other regulatory requirements.
Forward and options contracts are fair valued at each reporting date. The resultant gain or loss from these transactions are recognized in the profit or loss account. The Company records the gain or loss on effective hedges, if any, in the foreign currency fluctuation reserve until the transactions are complete. On completion, the gain or loss is transferred to the Profit and Loss account of that period. To designate a forward or options contract as an effective hedge, the Management objectively evaluates and evidences with appropriate supporting documents at the inception of each contract whether the contract is effective in achieving offsetting cash flows attributable to the hedged risk. In the absence of a designation as effective hedge, a gain or loss is recognized in the Profit and Loss account. Currently hedges undertaken by the Company are all ineffective in nature and the resultant gain or loss consequent to fair valuation is recognized in the Profit and Loss account at each reporting date.
23.1.11. Income taxes
Income taxes are accrued in the same period that the related revenue and expenses arise. A provision is made for income tax annually, based on the tax liability computed, after considering tax allowances and exemptions. Provisions are recorded when it is estimated that a liability due to disallowances or other matters is probable. Minimum alternate tax (MAT) paid in accordance with the tax laws, which gives rise to future economic benefits in the form of tax credit against future income tax liability, is recognized as an asset in the Balance Sheet if there is convincing evidence that the Company will pay normal tax after the tax holiday period and the resultant asset can be measured reliably. The Company offsets, on a year on year basis, the current tax assets and liabilities, where it has a legally enforceable right and where it intends to settle such assets and liabilities on a net basis.
The differences that result between the profit considered for income taxes and the profit as per the financial statements are identified, and thereafter a deferred tax asset or deferred tax liability is recorded for timing differences, namely the differences that originate in one accounting period and reverse in another, based on the tax effect of the aggregate amount of timing difference. The tax effect is calculated on the accumulated timing differences at the end of an accounting period based on enacted or substantively enacted regulations. Deferred tax assets in situation where unabsorbed depreciation and carry forward business loss exists, are recognized only if there is virtual certainty supported by convincing evidence that sufficient future taxable income will be available against which such deferred tax asset can be realized. Deferred tax assets, other than in situation of unabsorbed depreciation and carry forward business loss, are recognized only if there is reasonable certainty that they will be realized. Deferred tax assets are reviewed for the appropriateness of their respective carrying values at each reporting date. The income tax provision for the interim period is made based on the best estimate of the annual average tax rate expected to be applicable for the full fiscal year. Tax benefits of deductions earned on exercise of employee share options in excess of compensation charged to Profit and Loss account are credited to the share premium account.
23.1.12. Earnings per share
Basic earnings per share is computed by dividing the net profit after tax by the weighted average number of equity shares outstanding during the period. Diluted earnings per share is computed by dividing the net profit after tax by the weighted average number of equity shares considered for deriving basic earnings per share and also the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares. The diluted potential equity shares are adjusted for the proceeds receivable had the shares been actually issued at fair value which is the average market value of the outstanding shares. Dilutive potential equity shares are deemed converted as of the beginning of the period, unless issued at a later date. Dilutive potential equity shares are determined independently for each period presented.
The number of shares and potentially dilutive equity shares are adjusted retrospectively for all periods presented for any share splits and bonus shares issues including for changes effected prior to the approval of the financial statements by the Board of Directors.
23.1.13. Investments
Trade investments are the investments made to enhance the Company’s business interests. Investments are either classified as current or long-term based on Management’s intention at the time of purchase. Current investments are carried at the lower of cost and fair value of each investment individually. Cost for overseas investments comprises the Indian Rupee value of the consideration paid for the investment translated at the exchange rate prevalent at the date of investment. Long-term investments are carried at cost less provisions recorded to recognize any decline, other than temporary, in the carrying value of each investment.
23.1.14. Cash and cash equivalents
Cash and cash equivalents comprise cash and cash on deposit with banks and corporations. The Company considers all highly liquid investments with a remaining maturity at the date of purchase of three months or less and that are readily convertible to known amounts of cash to be cash equivalents.
23.1.15. Cash flow statement
Cash flows are reported using the indirect method, whereby net profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated.
23.1.16. Leases
Lease under which the company assumes substantially all the risks and rewards of ownership are classified as finance leases. Such assets acquired are capitalized at fair value of the asset or present value of the minimum lease payments at the inception of the lease, whichever is lower. Lease payments under operating leases are recognised as an expense on a straight line basis in the profit and loss account over the lease term.
23.2. Notes on accounts
Amounts in the financial statements are presented in Rupees crore, except for per share data and as otherwise stated. Certain amounts do not appear due to rounding off, and are detailed in Note 23.3. All exact amounts are stated with the suffix '/-'. One crore equals 10 million.
The previous period figures have been regrouped / reclassified, wherever necessary to conform to the current presentation.
23.2.1. Aggregate expenses
The aggregate amounts incurred on expenses are as follows :
in Rs. crore |
Quarter ended June 30, | ||
2010 | 2009 | |
Salaries and bonus including overseas staff expenses | 2,737 | 2,399 |
Contribution to provident and other funds | 74 | 64 |
Staff welfare | 8 | 7 |
Overseas group health insurance | 40 | 36 |
Overseas travel expenses | 120 | 94 |
Visa charges and others | 72 | 19 |
Travelling and conveyance | 17 | 14 |
Technical sub-contractors - subsidiaries | 366 | 241 |
Technical sub-contractors - others | 86 | 55 |
Software packages | ||
For own use | 68 | 89 |
For service delivery to clients | 17 | 11 |
Professional charges | 59 | 68 |
Telephone charges | 29 | 31 |
Communication expenses | 10 | 13 |
Power and fuel | 37 | 31 |
Office maintenance | 43 | 33 |
Guest house maintenance | 1 | 1 |
Commission charges | 2 | 2 |
Brand building | 15 | 12 |
Rent | 15 | 17 |
Insurance charges | 6 | 7 |
Computer maintenance | 7 | 5 |
Printing and stationery | 2 | 3 |
Consumables | 6 | 5 |
Donations | 1 | 20 |
Advertisements | 2 | – |
Marketing expenses | 4 | 2 |
Repairs to building | 8 | 9 |
Repairs to plant and machinery | 7 | 7 |
Rates and taxes | 8 | 6 |
Professional membership and seminar participation fees | 2 | 2 |
Postage and courier | 3 | 3 |
Provision for post-sales client support and warranties | 2 | (2) |
Books and periodicals | 1 | 1 |
Provision for bad and doubtful debts | 15 | 19 |
Commission to non-whole time directors | 1 | 2 |
Research grants | 5 | 5 |
3,896 | 3,331 |
23.2.2. Capital commitments and contingent liabilities
in Rs. crore |
As at | ||||
Particulars | June 30, 2010 | March 31, 2010 | ||
Estimated amount of unexecuted capital contracts | ||||
(net of advances and deposits) | 356 | 267 | ||
Outstanding guarantees and counter guarantees to various banks, in respect of the guarantees given by those banks in favour of various government authorities and others | 3 | 3 | ||
Claims against the Company, not acknowledged as debts* | 28 | 28 | ||
[Net of amount paid to statutory authorities Rs. 241 crore (Rs. 241 crore)] | ||||
in million | in Rs. crore | in million | in Rs. crore | |
Forward contracts outstanding | ||||
In USD | 348 | 1,616 | 228 | 1,024 |
In Euro | 30 | 171 | 16 | 97 |
In GBP | 12 | 84 | 7 | 48 |
In AUD | 25 | 99 | 3 | 12 |
Options contracts outstanding | ||||
In USD | 195 | 906 | 200 | 898 |
* Claims against the Company not acknowledged as debts include demand from the Indian tax authorities for payment of additional tax of Rs. 214 crore (Rs. 214 crore), including interest of Rs. 39 crore (Rs. 39 crore) upon completion of their tax review for fiscal 2005 and fiscal 2006. The tax demands are mainly on account of disallowance of a portion of the deduction claimed by the Company under Section 10A of the Income tax Act. The deductible amount is determined by the ratio of export turnover to total turnover. The disallowance arose from certain expenses incurred in foreign currency being reduced from export turnover but not reduced from total turnover. The matter for fiscal 2005 and fiscal 2006 is pending before the Commissioner of Income tax (Appeals) Bangalore.
The Company is contesting the demands and the Management, including its tax advisors, believes that its position will likely be upheld in the appellate process. No tax expense has been accrued in the financial statements for the tax demand raised. The Management believes that the ultimate outcome of this proceeding will not have a material adverse effect on the Company's financial position and results of operations.
As of the Balance Sheet date, the company's net foreign currency exposures that are not hedged by a derivative instrument or otherwise is Nil. (Rs. 891 crore as at March 31, 2010).
23.2.3. Quantitative details
The Company is primarily engaged in the development and maintenance of computer software. The production and sale of such software cannot be expressed in any generic unit. Hence, it is not possible to give the quantitative details of sales and certain information as required under paragraphs 3, 4C and 4D of part II of Schedule VI to the Companies Act, 1956.
23.2.4. Imports (valued on the cost, insurance and freight basis)
in Rs. crore |
Particulars | Quarter ended June 30, | |
2010 | 2009 | |
Capital goods | 29 | 21 |
Software packages | – | 1 |
29 | 22 |
23.2.5. Activity in foreign currency
in Rs. crore |
Particulars | Quarter ended June 30, | |
2010 | 2009 | |
Earnings in foreign currency (on receipts basis) | ||
Income from software services and products | 5,371 | 5,268 |
Interest received from banks and others | – | 2 |
Expenditure in foreign currency (on payments basis) | ||
Travel expenses (including visa charges) | 152 | 92 |
Professional charges | 35 | 27 |
Technical sub-contractors - subsidiaries | 366 | 241 |
Overseas salaries and incentives | 1,600 | 1,396 |
Other expenditure incurred overseas for software development | 227 | 79 |
Net earnings in foreign currency | 2,991 | 3,435 |
23.2.6. Obligations on long-term, non-cancelable operating leases
The lease rentals charged for the quarter ended June 30, 2010 and June 30, 2009, and the maximum obligations on long-term, non-cancelable operating leases payable as per the rentals stated in the respective agreements are as follows:
in Rs. crore | ||
Particulars | Quarter ended June 30, | |
2010 | 2009 | |
Lease rentals recognized during the period | 15 | 17 |
in Rs. crore | ||
Lease obligations payable | As at | |
June 30, 2010 | March 31, 2010 | |
Within one year of the balance sheet date | 48 | 48 |
Due in a period between one year and five years | 146 | 149 |
Due after five years | 18 | 24 |
The operating lease arrangements, are renewable on a periodic basis and extend upto a maximum of ten years from their respective dates of inception and relates to rented overseas premises. Some of these lease agreements have price escalation clause.
Fixed assets provided on operating lease to Infosys BPO, a subsidiary company, as at June 30, 2010 and March 31, 2010 are as follows
in Rs. crore | |||
Particulars | Cost | Accumulated depreciation | Net book value |
Buildings | 59 | 22 | 37 |
59 | 21 | 38 | |
Plant and machinery | 18 | 16 | 2 |
18 | 15 | 3 | |
Computer equipment | 1 | 1 | – |
1 | 1 | – | |
Furniture and fixtures | 3 | 2 | 1 |
3 | 2 | 1 | |
Total | 81 | 41 | 40 |
81 | 39 | 42 |
The aggregate depreciation charged on the above assets during the quarter ended June 30, 2010 amounted to Rs. 2 crore. (Rs. 2 crore for the quarter ended June 30, 2009, respectively).
The rental income from Infosys BPO for the quarter ended June 30, 2010 amounted to Rs. 4 crore. (Rs. 4 crore for the quarter ended June 30, 2009, respectively.)
23.2.7. Related party transactions
List of related parties:
Name of subsidiaries | Country | Holding, as at | |
June 30, 2010 | March 31, 2010 | ||
Infosys BPO | India | 99.98% | 99.98% |
Infosys Australia | Australia | 100% | 100% |
Infosys China | China | 100% | 100% |
Infosys Consulting * | USA | 100% | 100% |
Infosys Mexico ** | Mexico | 100% | 100% |
Infosys Sweden | Sweden | 100% | 100% |
Infosys Brasil *** | Brazil | 100% | 100% |
Infosys Public Services, Inc. **** | USA | 100% | 100% |
Infosys BPO s. r. o ***** | Czech Republic | 99.98% | 99.98% |
Infosys BPO (Poland) Sp Z.o.o ***** | Poland | 99.98% | 99.98% |
Infosys BPO (Thailand) Limited ***** | Thailand | 99.98% | 99.98% |
Mainstream Software Pty Limited ****** | Australia | 100% | 100% |
Infosys Consulting India Limited ******* | India | 100% | 100% |
McCamish Systems LLC *****,******** | USA | 99.98% | 99.98% |
* | During the year ended March 31, 2010 the Company made an additional investment of Rs. 50 crore (USD 10 million) in Infosys Consulting, which is a wholly owned subsidiary. As of June 30, 2010 and March 31, 2010, the Company has invested an aggregate of Rs. 243 crore (USD 55 million) in the subsidiary. |
** | During the year ended March 31, 2010 the Company made an additional investment of Rs.18 crore (Mexican Peso 50 million) in Infosys Mexico, which is a wholly owned subsidiary. As of June 30, 2010 and March 31, 2010, the Company has invested an aggregate of Rs. 40 crore (Mexican Peso 110 million) in the subsidiary. |
*** | During the year ended March 31, 2010 the Company incorporated wholly-owned subsidiary, Infosys Tecnologia DO Brasil LTDA. As of June 30, 2010 and March 31, 2010 the Company has invested an aggregate of Rs. 28 crore (BRL 11 million) in the subsidiary. |
**** | During the year ended March 31, 2010, the Company incorporated wholly-owned subsidiary, Infosys Public Services, Inc. As of June 30, 2010 and March 31, 2010 the Company has invested an aggregate of Rs. 24 crore (USD 5 million) in the subsidiary. |
***** | Infosys BPO s.r.o, Infosys BPO (Poland) Sp Z.o.o, Infosys BPO (Thailand) Limited and McCamish Systems LLC are wholly owned subsidiaries of Infosys BPO. |
****** | Mainstream Software Pty Limited is a wholly owned subsidiary of Infosys Australia. |
******* | During the year ended March 31, 2010, Infosys Consulting incorporated wholly-owned subsidiary, Infosys Consulting India Limited. As of June 30, 2010 and March 31, 2010 Infosys Consulting has invested an aggregate of Rs. 1 crore in the subsidiary. |
******** | During the year ended March 31, 2010, Infosys BPO acquired 100% of the voting interests in McCamish Systems LLC (McCamish), a business process solutions provider based in Atlanta, Georgia, in the United States. The business acquisition was conducted by entering into Membership Interest Purchase Agreement for a cash consideration of Rs. 173 crore and a contingent consideration of Rs. 67 crore. The acquisition was accounted as a business combination which resulted in goodwill of Rs. 227 crore. |
Infosys guarantees the performance of certain contracts entered into by its subsidiaries
The details of amounts due to or due from as at June 30, 2010 and March 31, 2010 are as follows:
in Rs. crore | ||
Particulars | As at | |
June 30, 2010 | March 31, 2010 | |
Loans and advances | ||
Infosys China | 47 | 46 |
Sundry debtors | ||
Infosys China | 26 | 19 |
Infosys Australia | 6 | 7 |
Infosys Mexico | 1 | 1 |
Infosys Consulting | 17 | 26 |
Infosys Brazil | 3 | 1 |
Infosys BPO (Including subsidiaries) | 9 | 2 |
Sundry creditors | ||
Infosys China | 17 | 18 |
Infosys Australia | 37 | 20 |
Infosys BPO (Including subsidiaries) | 16 | 7 |
Infosys Brazil | 3 | – |
Infosys Consulting | 20 | 43 |
Infosys Consulting India | 1 | 1 |
Infosys Mexico | 6 | 5 |
Infosys Sweden | 1 | 1 |
Deposit taken for shared services | ||
Infosys BPO | 7 | 7 |
The details of the related party transactions entered into by the company and maximum dues from subsidiaries, in addition to the lease commitments described in note 23.2.6, for the quarter ended June 30, 2010 and June 30, 2009 are as follows:
in Rs. crore | ||
Particulars | Quarter ended June 30, | |
2010 | 2009 | |
Capital transactions: | ||
Financing transactions | ||
Infosys Consulting | – | 50 |
Loans/Advances | ||
– | – | |
Revenue transactions: | ||
Purchase of services | ||
Infosys Australia | 178 | 135 |
Infosys China | 52 | 28 |
Infosys Consulting | 116 | 67 |
Infosys BPO (Including subsidiaries) | 3 | 1 |
Infosys Sweden | 3 | 1 |
Infosys Mexico | 13 | 9 |
Infosys Brazil | 1 | – |
Purchase of shared services including facilities and personnel | ||
Infosys BPO (Including subsidiaries) | 22 | 19 |
Interest income | ||
Infosys China | 1 | 1 |
Sale of services | ||
Infosys Australia | 9 | 7 |
Infosys China | 2 | – |
Infosys BPO (Including subsidiaries) | 8 | – |
Infosys Consulting | 11 | 1 |
Sale of shared services including facilities and personnel | ||
Infosys BPO (Including subsidiaries) | 24 | 15 |
Infosys Consulting | 1 | 1 |
Maximum balances of loans and advances | ||
Infosys BPO (Including subsidiaries) | – | 4 |
Infosys Australia | 45 | 38 |
Infosys China | 47 | 51 |
Infosys Mexico | – | 3 |
Infosys Consulting | 30 | 18 |
During the quarter ended June 30, 2010, an amount of Nil (Rs. 20 crore for the quarter ended June 30, 2009) was donated to Infosys Foundation, a not-for-profit foundation, in which certain directors of the Company are trustees.
During the quarter ended June 30, 2010, an amount of Rs. 5 crore (Rs. 5 crore for the quarter ended June 30, 2009) has been granted to Infosys Science Foundation, a not-for-profit foundation, in which certain directors and officers of the Company are trustees.
23.2.8.Transactions with key management personnel
Key management personnel comprise directors and members of executive council.
Particulars of remuneration and other benefits paid to key management personnel during the quarter ended June 30, 2010 and June 30, 2009 have been detailed in Schedule 23.4.
23.2.9. Research and development expenditure
in Rs. crore | ||
Particulars | Quarter ended June 30, | |
2010 | 2009 | |
Capital | – | 2 |
Revenue | 117 | 115 |
23.2.10. Stock option plans
The Company has two Stock Option Plans.
1998 Stock Option Plan ('the 1998 Plan')
The 1998 Plan was approved by the Board of Directors in December 1997 and by the shareholders in January 1998, and is for issue of 1,17,60,000 ADSs representing 1,17,60,000 equity shares. All options under the 1998 Plan are exercisable for ADSs representing equity shares. A compensation committee comprising independent members of the Board of Directors administers the 1998 Plan. All options had been granted at 100% of fair market value. The 1998 Plan lapsed on January 6, 2008, and consequently no further shares will be issued to employees under this plan.
1999 Stock Option Plan ('the 1999 Plan')
In fiscal 2000, the company instituted the 1999 Plan. The shareholders and the Board of Directors approved the plan in September 1999, which provides for the issue of 5,28,00,000 equity shares to the employees. The compensation committee administers the 1999 Plan. Options were issued to employees at an exercise price that is not less than the fair market value. The 1999 Plan lapsed on June 11, 2009, and consequently no further shares will be issued to employees under this plan.
The activity in the 1998 Plan and 1999 Plan during the quarter ended June 30, 2010 and June 30, 2009 are set out below:
Particulars | Quarter ended June 30, | |
2010 | 2009 | |
The 1998 Plan : | ||
Options outstanding, beginning of period | 2,42,264 | 9,16,759 |
Less: Exercised | 40,149 | 1,24,362 |
Forfeited | 2,000 | 39,760 |
Options outstanding, end of period | 2,00,115 | 7,52,637 |
The 1999 Plan : | ||
Options outstanding, beginning of period | 2,04,464 | 9,25,806 |
Less: Exercised | 35,760 | 1,04,772 |
Forfeited | 7,575 | 17,950 |
Options outstanding, end of period | 1,61,129 | 8,03,084 |
The weighted average share price of options exercised under the 1998 Plan during the quarter ended June 30, 2010 and June 30, 2009 was Rs. 2,714 and Rs. 1,615 respectively. The weighted average share price of options exercised under the 1999 Plan during the quarter ended June 30, 2010 and June 30, 2009 was Rs. 2,656 and Rs. 1,664 respectively.
The following tables summarize information about the 1998 and 1999 share options outstanding as at June 30, 2010 and March 31, 2010 :
Range of exercise prices per share (Rs.) | As at June 30, 2010 | ||
Number of shares arising out of options | Weighted average remaining contractual life | Weighted average exercise price | |
The 1998 Plan: | |||
300-700 | 1,40,345 | 0.73 | 571 |
701-1,400 | 59,770 | 1.17 | 798 |
2,00,115 | 0.86 | 639 | |
The 1999 Plan: | |||
300-700 | 1,10,131 | 0.86 | 436 |
1,401-2,500 | 50,998 | 1.18 | 2,121 |
1,61,129 | 0.96 | 969 |
Range of exercise prices per share (Rs.) | As at March 31, 2010 | ||
Number of shares arising out of options | Weighted average remaining contractual life | Weighted average exercise price | |
The 1998 Plan: | �� | ||
300-700 | 1,74,404 | 0.94 | 551 |
701-1,400 | 67,860 | 1.27 | 773 |
2,42,264 | 1.03 | 613 | |
The 1999 Plan: | |||
300-700 | 1,52,171 | 0.91 | 439 |
1,401-2,500 | 52,293 | 1.44 | 2,121 |
2,04,464 | 1.05 | 869 |
The aggregate options considered for dilution are set out in note 23.2.19
23.2.11.Income taxes
The provision for taxation includes tax liabilities in India on the company’s global income as reduced by exempt incomes and any tax liabilities arising overseas on income sourced from those countries. Infosys' operations are conducted through Software Technology Parks ('STPs') and Special Economic Zones ('SEZs'). Income from STPs are tax exempt for the earlier of 10 years commencing from the fiscal year in which the unit commences software development, or March 31, 2011. Income from SEZs is fully tax exempt for the first 5 years, 50% exempt for the next 5 years and 50% exempt for another 5 years subject to fulfilling certain conditions. For Fiscal 2008 and 2009, the company had calculated its tax liability under Minimum Alternate Tax (MAT). The MAT credit can be carried forward and set off against the future tax payable. In fiscal 2010, the Company calculated its tax liability under normal provisions of the Income Tax Act and utilised the brought forward MAT Credit.
As at June 30, 2010, the company has provided for branch profit tax of Rs. 232 crore for its overseas branches, as the company estimates that these branch profits would be distributed in the foreseeable future.
23.2.12.Cash and bank balances
The details of balances as on Balance Sheet dates with non-scheduled banks are as follows:
in Rs. crore |
Balances with non-scheduled banks | As at | |
June 30, 2010 | March 31, 2010 | |
In current accounts | ||
ABN Amro Bank, Taiwan | 1 | 2 |
Bank of America, USA | 262 | 644 |
Citibank NA, Australia | 33 | 24 |
Citibank N.A, New Zealand | 4 | – |
Citibank NA, Singapore | – | – |
Citibank NA, Thailand | 1 | 1 |
Citibank NA, Japan | 3 | 2 |
Deutsche Bank, Belgium | 11 | 18 |
Deutsche Bank, Germany | 13 | 12 |
Deutsche Bank, Moscow (U.S.dollar account) | 1 | 1 |
Deutsche Bank, Netherlands | 2 | 7 |
Deutsche Bank, France | 3 | 1 |
Deutsche Bank, Switzerland | 1 | 10 |
Deutsche Bank, Switzerland (U.S Dollar account) | – | 1 |
Deutsche Bank, Singapore | 7 | 1 |
Deutsche Bank, UK | 34 | 29 |
Deutsche Bank, Spain | 3 | 2 |
HSBC Bank, UK | 2 | 1 |
Royal Bank of Canada, Canada | 7 | 20 |
The Bank of Tokyo - Mitsubishi UFJ Ltd., Japan | 2 | – |
390 | 776 |
The details of balances as on Balance Sheet dates with scheduled banks are as follows:
in Rs. crore |
Balances with scheduled banks in India | As at | |
June 30, 2010 | March 31, 2010 | |
In current accounts | ||
Citibank-Unclaimed dividend account | – | – |
Deustche Bank | 46 | 12 |
Deustche Bank-EEFC (Euro account) | 10 | 3 |
Deustche Bank-EEFC (Swiss Franc account) | 2 | – |
Deustche Bank-EEFC (U.S. dollar account) | 10 | 8 |
HDFC Bank - Unclaimed dividend account | 1 | 1 |
ICICI Bank | 18 | 121 |
ICICI Bank-EEFC (U.S. dollar account) | 3 | 7 |
ICICI bank-Unclaimed dividend account | 2 | 1 |
92 | 153 |
in Rs. crore |
Balances with scheduled banks in India | As at | |
June 30, 2010 | March 31, 2010 | |
In deposit accounts | ||
Allahabad Bank | 202 | 100 |
Andhra Bank | 99 | 99 |
Bank of Baroda | 825 | 299 |
Bank of India | 1,197 | 881 |
Bank of Maharashtra | 500 | 500 |
Barclays Bank | – | 100 |
Canara Bank | 1,031 | 958 |
Central Bank of India | 398 | 100 |
Corporation Bank | 276 | 276 |
DBS Bank | 49 | 49 |
HDFC Bank | 483 | – |
HSBC Bank | – | 483 |
ICICI Bank | 1,500 | 1,370 |
IDBI Bank | 900 | 900 |
ING Vysya Bank | 24 | 25 |
Indian Overseas Bank | 500 | 131 |
Jammu and Kashmir Bank | 10 | 10 |
Kotak Mahindra Bank | 25 | 25 |
Oriental Bank of commerce | 353 | 100 |
Punjab National Bank | 994 | 994 |
State Bank of Hyderabad | 200 | 200 |
State Bank of India | 79 | 126 |
State Bank of Mysore | 496 | 496 |
Syndicate Bank | 458 | 458 |
The Bank of Nova Scotia | – | – |
Union Bank of India | 314 | 93 |
Vijaya Bank | 95 | 95 |
11,008 | 8,868 | |
Total cash and bank balances as per balance sheet | 11,490 | 9,797 |
Maximum balance with non-scheduled banks during the period | Quarter ended June 30, | |
2010 | 2009 | |
In current accounts | ||
ABN Amro Bank, Taiwan | 1 | 4 |
Bank of America, USA | 710 | 634 |
Citibank NA, Australia | 142 | 115 |
Citibank NA, New Zealand | 7 | – |
Citibank NA, Singapore | – | 45 |
Citibank NA, Japan | 15 | 17 |
Citibank NA, Thailand | 1 | 1 |
Deutsche Bank, Belgium | 23 | 34 |
Deutsche Bank, Germany | 17 | 16 |
Deutsche Bank, Netherlands | 19 | 15 |
Deutsche Bank, France | 6 | 6 |
Deutsche Bank, Moscow (U.S. dollar account) | 1 | – |
Deutsche Bank, Spain | 3 | 2 |
Deutsche Bank, Singapore | 18 | – |
Deutsche Bank, Switzerland | 10 | 14 |
Deutsche Bank, Switzerland (U.S. dollar account) | 7 | 14 |
Deutsche Bank, UK | 110 | 183 |
HSBC Bank, UK | 2 | 8 |
Morgan Stanley Bank, USA | 1 | 2 |
Nordbanken, Sweden | 2 | – |
Royal Bank of Canada, Canada | 47 | 22 |
Standard Chartered Bank, UAE | 3 | – |
Svenska Handelsbanken, Sweden | 2 | 2 |
The Bank of Tokyo - Mitsubishi UFJ Ltd., Japan | 7 | 2 |
23.2.13.Loans and advances
Deposits with financial institutions:
in Rs. crore |
Particulars | As at | |
June 30, 2010 | March 31, 2010 | |
HDFC Limited | 1,500 | 1,500 |
Life Insurance Corporation of India (LIC) | 431 | 281 |
1,931 | 1,781 |
The maximum balance (including accrued interest) held as deposits with financial institutions is as follows:
in Rs. crore |
Particulars | Quarter ended June 30, | |
2010 | 2009 | |
Deposits with financial institutions: | ||
HDFC Limited* | 1,500 | 1,317 |
Life Insurance Corporation of India | 431 | 253 |
* Deepak M. Satwalekar, Director, is also a Director of HDFC Limited. Except as director in this financial institution, he has no direct interest in any transactions.
Deposit with LIC represents amount deposited to settle employee benefit obligations as and when they arise during the normal course of business. (refer to note 23.2.23.b.)
23.2.14. Fixed assets
Profit / (loss) on disposal of fixed assets during the quarter ended June 30, 2010 and June 30, 2009 is less than Rs. 1 crore and accordingly disclosed under note 23.3.
Depreciation charged to the profit and loss account includes a charge relating to assets costing less than Rs. 5,000/- each and other low value assets.
in Rs. crore |
Particulars | Quarter ended June 30, | |
2010 | 2009 | |
Depreciation charged during the period/year | 7 | 25 |
The Company has entered into lease-cum-sale agreements to acquire certain properties. In accordance with the terms of these agreements, the Company has the option to purchase the properties on expiry of the lease period. The Company has already paid 99% of the value of the properties at the time of entering into the lease-cum-sale agreements. These amounts are disclosed as 'Land - leasehold' under 'Fixed assets' in the financial statements. Additionally, certain land has been purchased for which though the company has possession certificate, the sale deeds are yet to be executed as at June 30, 2010.
23.2.15.Details of Investments
in Rs. crore |
Particulars | As at | |
June 30, 2010 | March 31, 2010 | |
Long- term investments | ||
OnMobile Systems Inc., (formerly Onscan Inc.) USA | ||
21,54,100 (21,54,100) common stock at USD 0.4348 each, fully paid, par value USD 0.001 each | 4 | 4 |
Merasport Technologies Private Limited | ||
2,420 equity shares at Rs. 8,052 each, fully paid, par value Rs. 10 each | 2 | 2 |
6 | 6 | |
Less: Provision for investment | 2 | 2 |
4 | 4 |
The details of liquid mutual fund units as at June 30, 2010 is as follows:
Particulars | Number of units | Amount (in Rs. Crore) |
Kotak Floater Long Term Plan - Weekly Dividend | 7,84,91,643 | 79 |
ICICI Prudential Flexible Income Plan Premium - Weekly Dividend Payout | 28,44,929 | 30 |
8,13,36,572 | 109 | |
At cost | 80 | |
At fair value | 29 | |
109 | ||
The details of liquid mutual fund units as at March 31, 2010 is as follows:
Particulars | Number of units | Amount (in Rs. Crore) |
Tata Floater Fund - Weekly Dividend | 27,28,06,768 | 275 |
Kotak Floater Long Term Plan - Weekly Dividend | 20,93,66,402 | 211 |
Reliance Medium Term Fund - Weekly Dividend Plan D | 13,68,30,703 | 234 |
Birla Sunlife Savings Fund - Institutional - Weekly Dividend Payout | 26,71,60,366 | 267 |
ICICI Prudential Flexible Income Plan Premium - Weekly Dividend Payout | 2,93,92,648 | 310 |
IDFC Money Manager Fund - Treasury Plan - Super Institutional Plan C - Weekly Dividend | 38,95,22,783 | 390 |
UTI Treasury Advantage Fund - Institutional Weekly Dividend Plan - Payout | 38,86,168 | 389 |
HDFC Floating Rate Income Fund - Short Term Plan - Dividend Weekly | 12,03,96,040 | 122 |
DWS Ultra Short Term Fund - Institutional Weekly Dividend | 3,96,85,983 | 40 |
SBI - SHF - Ultra Short Term Fund - Institutional Plan - Weekly Dividend Payout | 3,47,73,535 | 35 |
Franklin Templeton India Ultra Short Bond Fund Super Institutional Plan - Weekly Dividend Payout | 1,09,36,513 | 11 |
DSP Blackrock Floating Rate Fund - Institutional - Weekly Dividend | 99,866 | 10 |
Religare Ultra Short Term Fund - Institutional Weekly Dividend | 2,25,53,650 | 23 |
153,74,11,425 | 2,317 | |
At cost | 1,413 | |
At fair value | 904 | |
2,317 |
The balances held in Certificates of deposit as at June 30, 2010 is as follows:
Particulars | Face Value Rs./- | Units | Amount (in Rs. Crore) |
Punjab National Bank | 1,00,000 | 50,000 | 480 |
Bank of Baroda | 1,00,000 | 27,500 | 265 |
HDFC Bank | 1,00,000 | 25,000 | 236 |
Corporation Bank | 1,00,000 | 20,000 | 189 |
Canara Bank | 1,00,000 | 15,000 | 143 |
Andhra Bank | 1,00,000 | 15,000 | 146 |
Oriental Bank of Commerce | 1,00,000 | 10,000 | 96 |
HDFC | 1,00,000 | 25,000 | 239 |
1,87,500 | 1,794 |
The balances held in Certificates of deposit as at March 31, 2010 is as follows:
Particulars | Face Value Rs./- | Units | Amount (in Rs. Crore) |
Punjab National Bank | 1,00,000 | 50,000 | 480 |
Bank of Baroda | 1,00,000 | 27,500 | 265 |
HDFC Bank | 1,00,000 | 25,000 | 236 |
Corporation Bank | 1,00,000 | 20,000 | 189 |
Jammu and Kashmir Bank | 1,00,000 | 1,000 | 10 |
1,23,500 | 1,180 | ||
The details of investments in and disposal of securities during the quarter ended June 30, 2010 and June 30, 2009 are as follows:
in Rs. crore |
Particulars | Quarter ended June 30, | |
2010 | 2009 | |
Investment in securities | ||
Subsidiary- Infosys Consulting | - | 50 |
Certificates of deposit | 624 | - |
Liquid mutual fund units | 1,013 | 1,891 |
1,637 | 1,941 | |
Redemption / disposal of investment in securities | ||
Certificates of deposit | 10 | - |
Liquid mutual fund units | 3,221 | 739 |
3,231 | 739 | |
Net movement in investments | (1,594) | 1,202 |
The details of investment purchased and sold during the quarter ended June 30, 2010 is as follows:
Name of the fund | Face Value Rs./- | Units | Cost (in Rs. Crore) |
Birla Sun Life Cash Plus - Instl. Prem. - Daily Dividend - Reinvestment | 10 | 17,46,98,810 | 175 |
Birla Sunlife Savings Fund - Institutional - Weekly Dividend Payout | 10 | 9,19,03,006 | 92 |
ICICI Prudential Flexible Income Plan Premium - Weekly Dividend | 100 | 45,51,346 | 48 |
ICICI Prudential Liquid Super Institutional Plan - Div - Daily | 100 | 3,57,95,952 | 358 |
IDFC Money Manager Fund - Investment Plan - Inst Plan B - Weekly Div | 10 | 4,29,06,464 | 43 |
Kotak Floater Long Term - Weekly Dividend | 10 | 8,02,56,534 | 81 |
Reliance Medium Term Fund - Weekly Dividend Plan | 10 | 2,16,35,163 | 37 |
Birla Sun Life Short Term Fund - Institutional Fortnightly Dividend - Payout | 10 | 6,85,47,384 | 70 |
The details of investments purchased and sold during the quarter ended June 30, 2009 is as follows:
Name of the fund | Face Value Rs./- | Units | Cost (in Rs. Crore) |
Birla Sunlife Short Term Fund - Institutional - Fortnightly Dividend | 10 | 75,972,511.15 | 77 |
DSP Blackrock Strategic Bond Fund - Institutional Plan - Monthly Dividend | 1,000 | 490,829.78 | 50 |
DBS Chola Freedom Income - Short Term Fund - Weekly Dividend | 10 | 45,767,238.42 | 48 |
HDFC Floating Rate Income Fund - Short Term | 10 | 54,233,678.13 | 55 |
ICICI Prudential Floating Rate Plan - D - Weekly Dividend | 10 | 120,914,969.84 | 121 |
IDFC Money Manager Fund - Treasury Plan - Super Institutional Plan C Weekly Dividend | 10 | 197,785,672.33 | 198 |
Reliance Medium Term Fund - Weekly Dividend Plan - D | 10 | 2,924,746.28 | 5 |
UTI Treasury Advantage Fund - Institutional Weekly Dividend Payout | 1,000 | 1,851,457.99 | 185 |
23.2.16.Segment reporting
The Company's operations predominantly relate to providing end-to-end business solutions that leverage technology thereby enabling clients to enhance business performance, delivered to customers globally operating in various industry segments.Accordingly, revenues represented along industry classes comprise the primary basis of segmental information set out in these financial statements. Secondary segmental reporting is performed on the basis of the geographical location of customers.
The accounting principles consistently used in the preparation of the financial statements are also consistently applied to record income and expenditure in individual segments. These are as set out in the significant accounting policies.
Industry segments at the Company are primarily financial services comprising customers providing banking, finance and insurance services; manufacturing companies; companies in the telecommunications and the retail industries; and others such as utilities, transportation and logistics companies.
Income and direct expenses in relation to segments is categorized based on items that are individually identifiable to that segment, while the remainder of the costs are categorized in relation to the associated turnover of the segment.Certain expenses such as depreciation, which form a significant component of total expenses, are not specifically allocable to specific segments as the underlying services are used interchangeably.The Company believes that it is not practical to provide segment disclosures relating to those costs and expenses, and accordingly these expenses are separately disclosed as 'unallocated' and directly charged against total income.
Fixed assets used in the Company’s business or liabilities contracted have not been identified to any of the reportable segments, as the fixed assets and services are used interchangeably between segments.Accordingly, no disclosure relating to total segment assets and liabilities are made.
Customer relationships are driven based on the location of the respective client.North America comprises the United States of America, Canada and Mexico; Europe includes continental Europe (both the east and the west), Ireland and the United Kingdom; and the Rest of the World comprising all other places except, those mentioned above and India.
Geographical revenues are segregated based on the location of the customer who is invoiced or in relation to which the revenue is otherwise recognized.
Industry Segments
Quarter ended June 30, 2010 and June 30, 2009:
in Rs. crore |
Particulars | Financial services | Manufacturing | Telecom | Retail | Others | Total |
Revenues | 2,130 | 1,063 | 775 | 788 | 1,002 | 5,758 |
1,724 | 995 | 821 | 715 | 849 | 5,104 | |
Identifiable operating expenses | 967 | 492 | 385 | 385 | 466 | 2,695 |
728 | 444 | 321 | 294 | 345 | 2,132 | |
Allocated expenses | 445 | 222 | 162 | 164 | 208 | 1,201 |
405 | 234 | 193 | 168 | 199 | 1,199 | |
Segmental operating income | 718 | 349 | 228 | 239 | 328 | 1,862 |
591 | 317 | 307 | 253 | 305 | 1,773 | |
Unallocable expenses | 180 | |||||
201 | ||||||
Operating income | 1,682 | |||||
1,572 | ||||||
Other income, net | 237 | |||||
265 | ||||||
Net profit before taxes | 1,919 | |||||
1,837 | ||||||
Income taxes | 488 | |||||
373 | ||||||
Net profit | 1,431 | |||||
1,464 |
Geographic Segments
Quarter ended June 30, 2010 and June 30, 2009:
in Rs. crore |
Particulars | North America | Europe | India | Rest of the World | Total |
Revenues | 3,926 | 1,128 | 105 | 599 | 5,758 |
3,359 | 1,205 | 49 | 491 | 5,104 | |
Identifiable operating expenses | 1,805 | 523 | 52 | 315 | 2,695 |
1,398 | 474 | 18 | 242 | 2,132 | |
Allocated expenses | 819 | 235 | 22 | 125 | 1,201 |
789 | 283 | 12 | 115 | 1,199 | |
Segmental operating income | 1,302 | 370 | 31 | 159 | 1,862 |
1,172 | 448 | 19 | 134 | 1,773 | |
Unallocable expenses | 180 | ||||
201 | |||||
Operating income | 1,682 | ||||
1,572 | |||||
Other income, net | 237 | ||||
265 | |||||
Net profit before taxes | 1,919 | ||||
1,837 | |||||
Income taxes | 488 | ||||
373 | |||||
Net profit after taxes | 1,431 | ||||
1,464 |
23.2.17.Provision for doubtful debts
Periodically, the Company evaluates all customer dues to the Company for collectability. The need for provisions is assessed based on various factors including collectability of specific dues, risk perceptions of the industry in which the customer operates, general economic factors, which could affect the customer’s ability to settle. The Company normally provides for debtor dues outstanding for 180 days or longer as at the Balance Sheet date.As at June 30, 2010 the company has provided for doubtful debts of Rs. 26 crore (Rs. 21 crore as at March 31, 2010) on dues from certain customers although the outstanding amounts were less than 180 days old, since the amounts were considered doubtful of recovery. The company pursues the recovery of the dues, in part or full.
23.2.18.Dividends remitted in foreign currencies
The Company remits the equivalent of the dividends payable to equity shareholders and holders of ADS.For ADS holders the dividend is remitted in Indian rupees to the depository bank, which is the registered shareholder on record for all owners of the Company’s ADSs. The depositary bank purchases the foreign currencies and remits dividends to the ADS holders.
The particulars of dividends remitted are as follows:
in Rs. crore |
Particulars | Number of shares to which the dividends relate | Quarter ended June 30, | |
2010 | 2009 | ||
Final dividend for fiscal 2010 | 10,68,22,614 | 160 | – |
Final dividend for fiscal 2009 | 10,73,97,313 | – | 145 |
23.2.19.Reconciliation of basic and diluted shares used in computing earnings per share
Particulars | Quarter ended June 30, | |
2010 | 2009 | |
Number of shares considered as basic weighted average shares outstanding | 57,38,69,667 | 57,29,48,830 |
Add: Effect of dilutive issues of shares/stock options | 2,96,504 | 7,02,845 |
Number of shares considered as weighted average shares and potential shares outstanding | 57,41,66,171 | 57,36,51,675 |
23.2.20. Provision for post-sales client support and warranties
The movement in the provision for post-sales client support and warranties is as follows :
in Rs. crore |
Particulars | Quarter ended June 30, | |
2010 | 2009 | |
Balance at the beginning | 73 | 75 |
Provision recognized/(reversed) | 2 | (2) |
Provision utilised | – | – |
Exchange difference during the period | – | 2 |
Balance at the end | 75 | 75 |
Provision for post-sales client support is expected to be utilized over a period of 6 months to 1 year.
23.2.21.Gratuity Plan
The following table sets out the status of the Gratuity Plan as required under AS 15.
Reconciliation of opening and closing balances of the present value of the defined benefit obligation and plan assets :
in Rs. crore |
Particulars | As at | ||||
June 30, 2010 | March 31, 2010 | March 31, 2009 | March 31, 2008 | March 31, 2007 | |
Obligations at period beginning | 308 | 256 | 217 | 221 | 180 |
Transfer of obligation | – | (2) | – | – | – |
Service cost | 20 | 72 | 47 | 47 | 44 |
Interest cost | 5 | 19 | 15 | 16 | 14 |
Actuarial (gain)/ loss | 1 | (4) | – | (9) | – |
Benefits paid | (14) | (33) | (23) | (21) | (17) |
Amendment in benefit plans | – | – | – | (37) | – |
Obligations at period end | 320 | 308 | 256 | 217 | 221 |
Defined benefit obligation liability as at the balance sheet date is fully funded by the Company
Change in plan assets | |||||
Plans assets at period beginning, at fair value | 310 | 256 | 229 | 221 | 167 |
Expected return on plan assets | 7 | 24 | 16 | 18 | 16 |
Actuarial gain/ (loss) | 1 | 1 | 5 | 2 | 3 |
Contributions | 70 | 62 | 29 | 9 | 52 |
Benefits paid | (14) | (33) | (23) | (21) | (17) |
Plans assets at period end, at fair value | 374 | 310 | 256 | 229 | 221 |
Reconciliation of present value of the obligation and the fair value of the plan assets:
Fair value of plan assets at the end of the period | 374 | 310 | 256 | 229 | 221 |
Present value of the defined benefit obligations at the end of the period | 320 | 308 | 256 | 217 | 221 |
Asset recognized in the balance sheet | 54 | 2 | – | 12 | – |
Assumptions
Interest rate | 7.55% | 7.82% | 7.01% | 7.92% | 7.99% |
Estimated rate of return on plan assets | 9.36% | 9.00% | 7.01% | 7.92% | 7.99% |
Weighted expected rate of salary increase | 7.27% | 7.27% | 5.10% | 5.10% | 5.10% |
Net gratuity cost for the quarter ended June 30, 2010 and June 30, 2009 comprises of the following components:
in Rs. crore |
Particulars | Quarter ended June 30, | |
2010 | 2009 | |
Gratuity cost for the period | ||
Service cost | 20 | 17 |
Interest cost | 5 | 4 |
Expected return on plan assets | (7) | (6) |
Actuarial (gain)/loss | – | (1) |
Plan amendment amortization | (1) | (1) |
Net gratuity cost | 17 | 13 |
Actual return on plan assets | 8 | 6 |
Gratuity cost, as disclosed above, is included under salaries and bonus and is segregated between software development expenses, selling and marketing expenses and general and administration expenses on the basis of number of employees.
During the previous year, a reimbursement obligation of Rs. 2 crore has been recognized towards settlement of gratuity liability of Infosys Consulting India Limited.
As at June 30, 2010 and March 31, 2010, the plan assets have been primarily invested in government securities. The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors such as supply and demand factors in the employment market.
Effective July 1, 2007, the Company revised the employee death benefits provided under the gratuity plan, and included all eligible employees under a consolidated term insurance cover. Accordingly, the obligations under the gratuity plan reduced by Rs. 37 crore, which is being amortised on a straight line basis to the net profit and loss account over 10 years representing the average future service period of the employees.The unamortized liability as at June 30, 2010 and March 31, 2010 amounted to Rs. 25 crore and Rs. 26 crore, respectively and disclosed under 'Current Liabilities'.
The company expects to contribute approximately Rs. Nil crore to the gratuity trust during the reminder of fiscal 2011.
23.2.22.a Provident Fund
The Guidance on Implementing AS 15, Employee Benefits (revised 2005) issued by Accounting Standards Board (ASB) states that benefits involving employer established provident funds, which require interest shortfalls to be recompensed are to be considered as defined benefit plans. Pending the issuance of the final guidance note from the Actuarial Society of India, the Company’s actuary has expressed an inability to reliably measure provident fund liabilities. Accordingly the Company is unable to exhibit the related information.
The company contributed Rs. 43 crore towards Provident Fund during the quarter ended June 30, 2010. (Rs. 36 crore during the quarter ended June 30, 2009).
23.2.22.b Superannuation
The company contributed Rs. 14 crore to the Superannuation Trust during the quarter ended June 30, 2010. (Rs. 13 crore during the quarter ended June 30, 2009).
23.2.23 Cashflow statement
23.2.23.a Unclaimed dividend
The balance of cash and cash equivalents includes Rs. 3 crore as at June 30, 2010 (Rs. 2 crore as at March 31, 2010) set aside for payment of dividends.
23.2.23.b Restricted deposits
Deposits with financial institutions as at June 30, 2010 include Rs. 431 crore (Rs. 281 crore as at March 31, 2010 and Rs. 253 crore as at June 30, 2009) deposited with Life Insurance Corporation of India to settle employee-related obligations as and when they arise during the normal course of business. This amount is considered as restricted cash and is hence not considered 'cash and cash equivalents'.
23.3 Details of rounded off amounts
The financial statements are represented in Rs. crore as per the approval received from Department of Company Affairs (DCA) earlier. Those items which were not represented in the financial statement due to rounding off to the nearest Rs. crore are given as follows :
Balance Sheet Items
in Rs. crore |
Schedule | Description | As at | |
June 30, 2010 | March 31, 2010 | ||
3 | Fixed assets | ||
Lease hold | |||
Addition during the period | 0.02 | – | |
Vehicles | |||
Addition during the period | 0.31 | 0.04 | |
Deletion during the period from depreciation | 0.22 | 0.04 | |
4 | Investments | ||
Investment in Infosys Sweden | 0.06 | – | |
23.2.7 | Related party transactions | ||
Debtors | |||
Infosys BPO s.r.o. | 0.07 | 0.04 | |
Infosys BPO (Poland) | 0.12 | – | |
Infosys Thailand | – | 0.04 | |
Infosys Consulting India | 0.11 | – | |
Infosys Sweden | – | 0.08 | |
Creditors | |||
Infosys BPO s.r.o. | 0.12 | 0.16 | |
Infosys BPO (Poland) | 0.03 | – | |
Infosys Thailand | – | 0.02 | |
23.2.12 | Balances with scheduled banks | ||
Citi Bank - Unclaimed dividend account | 0.44 | 0.49 | |
HDFC Bank - Unclaimed dividend account | – | 1.00 | |
Deutsche Bank - EEFC account in Swiss Franc | – | 0.33 | |
State Bank of India | 0.05 | 0.04 | |
Bank of Baroda | 0.02 | 0.02 | |
Balances with non-scheduled banks | |||
ABN Amro Bank, Copenhagen, Denmark | – | 0.21 | |
Citibank N.A, New Zealand | – | 0.26 | |
Deutsche Bank, Moscow | – | 0.34 | |
Deutsche Bank, Zurich, Switzerland | – | 9.72 | |
Deutsche Bank, Zurich, Switzerland (U.S. dollar account) | 0.01 | 1.40 | |
Deutsche Bank, Spain | – | 1.47 | |
Bank of Baroda, Mauritius | – | 0.06 | |
Standard Chartered Bank, UAE | – | 0.09 | |
The Bank of Tokyo–Mitsubishi UFJ, Ltd., Japan | – | 0.16 | |
23.2.12 | Maximum Balances with non-scheduled banks | ||
ABN Amro Bank, Taiwan | 0.14 | – | |
ABN Amro Bank, Denmark | – | 0.34 | |
Citibank N.A, Thailand | 0.02 | – | |
Deutsche Bank Russia | – | 0.37 | |
Nordbanken, Sweden | – | 0.48 | |
Deutsche Bank, Russia (U.S. dollar account) | 0.21 | 0.21 |
Profit & Loss Items
in Rs. crore |
Schedule | Description | Quarter ended June 30, | |
2010 | 2009 | ||
Profit & Loss | Provision for Investment | 0.39 | – |
Additional dividend | 0.08 | – | |
Additional dividend tax | 0.01 | – | |
12 | Selling and Marketing expenses | ||
Visa charges and others | 0.42 | 0.30 | |
Printing & Stationery | 0.34 | 0.38 | |
Office maintenance | 0.03 | 0.05 | |
Computer maintenance | – | 0.02 | |
Sales Promotion expenses | 0.01 | 0.08 | |
Staff welfare | 0.49 | 0.36 | |
Consumables | 0.01 | 0.01 | |
Advertisements | (0.05) | 0.03 | |
Communication expenses | 0.18 | 0.24 | |
13 | General and Administrative expenses | ||
Provision for doubtful loans and advances | 0.11 | 0.10 | |
Overseas group health insurance | 0.23 | 0.19 | |
Visa charges and others | 0.35 | 0.09 | |
Auditor’s remuneration : | |||
Statutory audit fees | 0.20 | 0.17 | |
Certification charges | 0.02 | 0.01 | |
Out-of-pocket expenses | 0.01 | 0.01 | |
Freight charges | 0.20 | 0.17 | |
Bank charges and commission | 0.28 | 0.39 | |
Miscellaneous expenses | 0.04 | 0.01 | |
23.2.1 | Aggregate expenses | ||
Provision for doubtful loans and advances | 0.11 | 0.10 | |
Sales promotion expenses | 0.01 | – | |
Auditor’s remuneration | |||
Statutory audit fees | 0.20 | 0.17 | |
Certification Charges | 0.01 | 0.01 | |
Out-of-pocket expenses | 0.01 | 0.01 | |
Freight charges | 0.20 | 0.17 | |
Bank charges and commission | 0.28 | 0.39 | |
Miscellaneous expenses | 0.04 | 0.01 | |
23.2.7 | Related party transactions | ||
Revenue transactions | |||
Purchase of services - Infosys BPO s.r.o. | 0.11 | – | |
Sale of services - Infosys China | 1.77 | 0.20 | |
23.2.14 | Profit on disposal of fixed assets, included in miscellaneous income | 0.09 | 0.06 |
Cash Flow Statement Items
in Rs. crore |
Schedule | Description | Quarter ended June 30, | |
2010 | 2009 | ||
Cash flow | Profit / (loss) on sale of fixed assets | 0.09 | 0.06 |
statement | Proceeds on disposal of fixed assets | 0.10 | 0.09 |
23.4 Transactions with key management personnel
Key management personnel comprisedirectors and members of executive council.
Particulars of remuneration and other benefits paid to whole-time directors and members of executive council during the quarter endedJune 30, 2010 and June 30, 2009 are as follows:
in Rs. crore |
Name | Salary | Contributionsto provident and other funds | Perquisites and incentives | Total Remuneration |
Co-Chairman | ||||
Nandan M. Nilekani* | – | – | – | – |
0.08 | 0.02 | 0.14 | 0.24 | |
Chief Executive Officer and Managing Director | ||||
S. Gopalakrishnan | 0.08 | 0.02 | 0.19 | 0.29 |
0.08 | 0.02 | 0.16 | 0.26 | |
Chief Operating Officer and Director | ||||
S. D. Shibulal | 0.08 | 0.02 | 0.18 | 0.28 |
0.08 | 0.02 | 0.13 | 0.23 | |
Whole-time Directors | ||||
K. Dinesh | 0.08 | 0.02 | 0.19 | 0.29 |
0.08 | 0.02 | 0.16 | 0.26 | |
T. V. Mohandas Pai | 0.09 | 0.02 | 1.04 | 1.15 |
0.09 | 0.02 | 1.26 | 1.37 | |
Srinath Batni | 0.09 | 0.02 | 0.84 | 0.95 |
0.09 | 0.01 | 1.09 | 1.19 | |
Executive Council Members | ||||
Chief Financial Officer | ||||
V. Balakrishnan | 0.08 | 0.02 | 1.51 | 1.61 |
0.07 | 0.02 | 0.53 | 0.62 | |
Ashok Vemuri | 0.51 | – | 1.08 | 1.59 |
0.53 | – | 0.60 | 1.13 | |
Chandra Shekar Kakal | 0.07 | 0.02 | 1.58 | 1.67 |
0.07 | 0.01 | 0.46 | 0.54 | |
B.G. Srinivas | 0.41 | – | 1.05 | 1.46 |
0.45 | – | 0.48 | 0.93 | |
Subhash B. Dhar | 0.06 | 0.02 | 1.20 | 1.28 |
0.06 | 0.01 | 0.39 | 0.46 |
* Effective July 9, 2009, Nandan M Nilekani has relinquished the positions of Co-Chairman, Member of the Board and employee of Infosys.
Particulars of remuneration and other benefits of non-executive/ independent directors for the quarter ended June 30, 2010 and June 30, 2009 are as follows:
Name | Commission | Sitting fees | Reimbursement of expenses | Total remuneration |
Non-Whole time Directors | ||||
Deepak M Satwalekar | 0.15 | – | 0.01 | 0.16 |
0.16 | – | – | 0.16 | |
Prof.Marti G. Subrahmanyam | 0.18 | – | 0.10 | 0.28 |
0.17 | – | 0.07 | 0.24 | |
Dr.Omkar Goswami | 0.13 | – | 0.01 | 0.14 |
0.14 | – | 0.01 | 0.15 | |
Claude Smadja | 0.06 | – | 0.09 | 0.15 |
0.16 | – | 0.05 | 0.21 | |
Rama Bijapurkar * | 0.01 | – | – | 0.01 |
0.13 | – | 0.01 | 0.14 | |
Sridar A. Iyengar | 0.16 | – | 0.11 | 0.27 |
0.16 | – | 0.05 | 0.21 | |
David L. Boyles | 0.15 | – | 0.09 | 0.24 |
0.16 | – | 0.03 | 0.19 | |
Prof. Jeffrey S. Lehman | 0.16 | – | 0.01 | 0.17 |
0.16 | – | 0.13 | 0.29 | |
K.V.Kamath** | 0.13 | – | – | 0.13 |
0.11 | – | – | 0.11 | |
Non-executive director | ||||
N. R. Narayana Murthy *** | 0.15 | – | – | 0.15 |
0.15 | – | – | 0.15 |
* Resigned from the board effective April 13, 2010
** Joined the board effective May 02, 2009
*** Non-executive chairman of the board and chief mentor.
Auditors’ Report on Quarterly Financial Results and Year to Date Financial Results of Infosys Technologies Limited Pursuant to the Clause 41 of the Listing Agreement
To
The Board of Directors of Infosys Technologies Limited
We have audited the quarterly financial results of Infosys Technologies Limited (‘the Company’) for the quarter ended 30 June 2010 and the year to date financial results for the period from 1 April 2010 to 30 June 2010, attached herewith, being submitted by the Company pursuant to the requirement of Clause 41 of the Listing Agreement, except for the disclosures regarding ‘Public Shareholding’ and ‘Promoter and Promoter Group Shareholding’ which have been traced from disclosures made by the Management and have not been audited by us. These quarterly financial results as well as the year to date financial results have been prepared on the basis of the interim financial statements, which are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial results based on our audit of such interim financial statements, which have been prepared in accordance with the recognition and measurement principles laid down in Accounting Standard (AS) 25, Interim Financial Reporting, prescribed by the Companies (Accounting Standards) Rules, 2006 as per section 211 (3C) of the Companies Act, 1956 and other accounting principles generally accepted in India.
We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial results are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts disclosed as financial results. An audit also includes assessing the accounting principles used and significant estimates made by management. We believe that our audit provides a reasonable basis for our opinion.
In our opinion and to the best of our information and according to the explanations given to us, these quarterly financial results as well as the year to date financial results:
(i) | are presented in accordance with the requirements of Clause 41 of the Listing Agreement in this regard; and |
(ii) | give a true and fair view of the net profit and other financial information for the quarter ended 30 June 2010 as well as the year to date results for the period from 1 April 2010 to 30 June 2010. |
(iii) | Further, we also report that we have, on the basis of the books of account and other records and information and explanations given to us by the management, also verified the number of shares as well as percentage of shareholdings in respect of aggregate amount of public shareholdings, as furnished by the Company in terms of Clause 35 of the Listing Agreement and found the same to be correct. |
for B S R & Co.
Chartered Accountants
Firm registration number:101248W
Natrajan Ramkrishna
Partner
Membership number:32815
Bangalore
13 July 2010