EXHIBIT 19.1
INFOSYS TECHNOLOGIES LIMITED
Report for the second quarter ended September 30, 1999
[GRAPHIC APPEARS HERE]
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1
At a glance - Indian GAAP
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Rs. in crores, except per equity share data
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Quarter ended Half year ended Year ended
September 30, September 30, March 31,
---------------------------------------------------------------- 1999
1999 1998 1999 1998
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For the period
Total revenue 217.88 120.44 401.94 218.86 512.74
Export revenue 205.07 118.10 373.69 214.48 500.25
Operating profit (PBIDT) 85.93 42.05 163.86 73.66 191.75
Profit after tax (PAT) from ordinary 65.71 28.40 126.32 52.07 132.92
activities
PBIDT as a percentage of total 38.98% 34.92% 39.29% 33.66% 37.40%
revenue
PAT (from ordinary activities) as a 29.63% 23.58% 29.72% 23.79% 25.92%
percentage of total revenue
Earnings per share (from ordinary 19.37 8.59 35.24 15.75 40.19
activities)
Dividend per share NA NA 3.00 2.50 7.50
Dividend amount NA NA 9.92 4.00 12.11
Capital investment 38.56 22.70 59.76 33.16 71.68
At the end of the period
Total assets 687.68 220.62 574.43
Fixed assets - net 140.42 85.75 100.72
Cash and equivalent 453.80 63.64 416.66
Working capital 546.50 127.63 472.96
Total debt - - -
Net worth 687.68 220.62 574.43
Equity 33.07 16.02 33.07
Market capitalization 23,589.06 4,086.79 9,672.80
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Note: Rs. One crore equals Rs. 10 million.
All ratios are calculated excluding income from exchange differences on
translation of foreign currency deposits kept abroad. Market capitalization is
calculated by considering the Indian market price for shares outstanding at the
period / year-end.
EPS figures have been calculated for the period and has not been annualized.
[BAR CHARTS APPEARS HERE]
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2
Letter to shareholders
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Dear Shareholder,
We are delighted at the company's performance this quarter. Total income
(Revenues) for the quarter was Rs. 217.88 crore ($47.9 million) compared to Rs.
120.44 crore ($28.2 million) for the corresponding quarter in the previous year,
a growth of 81% (70%). Export income (Export revenues) grew to Rs. 205.07 crore
($47.3 million) from Rs. 118.10 crore ($27.8 million) for the corresponding
quarter in the previous year, a growth of 74% (70%).
Net profit from ordinary activities (Net income) for the quarter was Rs. 65.71
crore ($14.7 million) as compared to Rs. 28.40 crore ($6.2 million) for the
corresponding quarter in the previous year, an increase of 131% (139%).
Operating profit (Operating income) was Rs. 85.93 crore ($14.6 million) as
compared to Rs. 42.06 crore ($8.2 million) for the corresponding quarter in the
previous year, a growth of 104% (79%).
Other income (Other income, net) of Rs. 9.58 crore ($2.2 million) in the current
quarter includes Rs. 3.91 crore ($0.9 million) of interest on deployment of
funds raised through issue of American Depositary Shares (ADS), Rs. 1.30 crore
($0.3 million) from the sale of Special Import Licences, and an amount of Rs.
1.65 crore ($0.4 million) arising from exchange rate differences on translation
of foreign currency deposits. Excluding the above, net profit (net income) for
the current quarter was Rs. 58.85 crore ($13.1 million), a 107% (113%) increase
over the comparable net profit of Rs. 28.40 crore ($6.2 million) for the quarter
ended September 30, 1998.
The shift in the business towards e-commerce related work is rapid. Your company
is committed to creating knowledge infrastructure, acquiring people with
technical skills in the e-commerce area and e-inventing the company. This may
require your company to incur business restructuring costs. A provision of Rs.
3.50 crore (based on current estimates) was made in the Indian GAAP financial
statements in the current quarter towards costs related to e-inventing the
company. During this quarter, 10.3% of your company's total income were
e-commerce related and we are continuing our focus in this area. Your company's
strategic approach to the Year 2000 opportunity has ensured top and bottom line
growth, despite a planned decline in Year 2000 revenues to 9.4% of total income
in the quarter.
Your company believes that it has identified the major systems, software
applications and related equipment used in connection with its internal
operations that must be modified or upgraded in order to minimize the
possibility of a material disruption to its business from the Year 2000 problem.
Your company has converted its financial applications software to programs
certified by its suppliers as Year 2000 compliant. In tests conducted to-date on
other systems, no significant Year 2000-related problems have been found.
Consequent to all the updates and modifications made to its systems, your
company believes that its internal systems are Year 2000 ready. All these
activities were carried out with internal resources and where necessary, with
aid from the vendors who supplied the systems.
Although your company maintains redundant voice and data communication links,
any sustained disruption of your company's ability to transmit and receive voice
and/or data would have a material adverse effect on its business, results of
operations and financial condition. Your company has been led to believe that
all its telecommunication service providers are Year 2000 ready and therefore
does not expect significant disruption of these facilities.
Your company added 22 new clients in the quarter. New clients include E-business
clients like Expense Vision, Petopia.com and Man.com. These clients have availed
of the "Product Co-development Service" of your company. As part of this
service, your company sets up a dedicated Product Competency Center which
becomes a virtual extension of the client's software engineering team, ensuring
faster time-to-market and better quality.
During the quarter, your company accelerated the hiring resulting in a net
addition of 835 employees. The total strength of your company increased to 4,778
as of this quarter end. Your company's global delivery model enables it to
recruit and train large number of employees ahead of the requirements without
substantially impacting the margins. As the IT environment becomes more complex
and ever changing, your company's strategy of investing in continuous education
of its people and research is paying off.
Mr. N. S. Raghavan, one of the founders and Joint Managing Director, expressed
his intention to seek retirement from the membership of the Board of Directors
in order to enable him to pursue charitable activities on a full-time basis. The
Board reluctantly accepted his request. Mr. N. S. Raghavan will retire from the
Board of Directors and the post of Joint Managing Director with effect from
February 7, 2000. It is difficult to imagine Infosys without Mr. N. S. Raghavan.
He has been a close and affectionate colleague in this marathon of building
Infosys. His desire to spend his post-retirement time on charitable activities
deserves our applause.
As part of the globalization process, your company had earlier stated its
intention to start development centers outside India. Based on the
recommendations of an internal committee, your company decided to set up an
overseas software development center in Canada. This initiative will help
satisfy client requirements more effectively.
The construction of Phase I of the software development facility at Pune
Infotech Park, Hinjawadi, Pune is nearing completion. Two software blocks (each
with a capacity to accommodate 300 employees) and the concomitant support
facilities are scheduled for inauguration in mid-October. The Phase II of the
software development facility at Pune Infotech Park, Hinjawadi, Pune to
accommodate 600 employees is also progressing satisfactorily. Construction of
one more block of 70,000 sq. ft of Infosys Park, Phase I is progressing well.
Construction of 2,70,000 sq. ft at Infosys Park, Phase II, adjacent to the
company's headquarters in Electronics City, is progressing as per schedule.
We thank all Infoscions, who through their hard work, dedication and commitment
have made this yet another productive quarter, and look forward to reporting to
you the results of the quarter ending December 31, 1999.
Bangalore Nandan M. Nilekani N. R. Narayana Murthy
October 8, 1999 Managing Director, President Chairman
and Chief Operating Officer and Chief Executive Officer
Note: Figures and terminology in parenthesis refer to US GAAP financial
statements, and are in US dollars.
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3
Auditor's report to the members of Infosys Technologies Limited
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We have audited the attached Balance Sheet of Infosys Technologies Limited (the
Company) as at 30 September, 1999 and the Profit and Loss Accounts of the
Company for the half-year and quarter ended on that date, annexed thereto, and
report that:
1. As required by the Manufacturing and Other Companies (Auditor's Report)
Order, 1988, issued by the Company Law Board in terms of Section 227(4A) of
the Companies Act, 1956, we enclose in the Annexure a statement on the
matters specified in paragraphs 4 and 5 of the said Order.
2. Further to our comments in the Annexure referred to in paragraph 1 above:
a. We have obtained all the information and explanations which, to the
best of our knowledge and belief, were necessary for the purpose of
our audit.
b. In our opinion, proper books of account, as required by law, have been
kept by the Company so far as appears from our examination of these
books.
c. The Balance Sheet and Profit and Loss Accounts dealt with by this
report are in agreement with the books of account.
d. In our opinion, the Balance Sheet and Profit and Loss Account dealt
with by this report have been prepared in compliance with the
accounting standards referred to in sub section (3C) of Section 211 of
the Companies Act, 1956, to the extent applicable;
e. In our opinion, and to the best of our information, and according to
the explanations given to us, the said accounts give the information
required by the Companies Act, 1956, in the manner so required, and
give a true and fair view:
i. in the case of the Balance Sheet, of the state of affairs of the
Company as at 30 September, 1999; and
ii. in the case of the Profit and Loss Accounts, of the profit for
the half-year and quarter ended on that date.
3. We have also examined the attached Cash Flow Statements of the Company for
the half-year and quarter ended 30 September, 1999. The Statements have
been prepared by the Company in accordance with the requirements of Clause
32 of the listing agreements entered into with the Stock Exchanges.
for Bharat S Raut & Co.
Chartered Accountants
Bangalore Ravi Ramu
October 08, 1999 Partner
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4
Balance Sheet as at
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in Rs.
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September 30 March 31
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1999 1998 1999
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SOURCES OF FUNDS
SHAREHOLDERS' FUNDS
Share capital 33,06,95,500 16,01,73,500 33,06,95,500
Reserves and surplus 654,61,29,197 204,60,49,410 541,36,15,748
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687,68,24,697 220,62,22,910 574,43,11,248
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APPLICATION OF FUNDS
FIXED ASSETS
Gross block 201,20,83,575 133,32,67,084 168,92,38,345
Less : Depreciation 102,07,57,018 59,84,23,054 83,09,14,934
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Net block 99,13,26,557 73,48,44,030 85,83,23,411
Add : Capital work-in-progress 41,28,99,285 12,26,42,827 14,88,35,800
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140,42,25,842 85,74,86,857 100,71,59,211
INVESTMENTS 75,48,469 7,24,71,960 75,48,469
CURRENT ASSETS, LOANS AND ADVANCES
Sundry debtors 133,47,09,804 59,01,34,640 84,51,88,425
Cash and bank balances 377,68,71,030 63,63,59,775 405,04,82,999
Loans and advances 164,28,14,672 41,67,37,697 68,35,96,522
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675,43,95,506 164,32,32,112 557,92,67,946
Less: Current liabilities 58,78,14,181 19,97,43,633 42,83,42,481
Provisions 70,15,30,939 16,72,24,386 42,13,21,897
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NET CURRENT ASSETS 546,50,50,386 127,62,64,093 472,96,03,568
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687,68,24,697 220,62,22,910 574,43,11,248
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SIGNIFICANT ACCOUNTING POLICIES AND
NOTES ON ACCOUNTS
The Schedules referred to above and the notes thereon form an integral part of
the Balance Sheet.
This is the Balance Sheet referred
to in our report of even date.
for Bharat S Raut & Co.
Chartered Accountants
Ravi Ramu N.R. Narayana Murthy Nandan M. Nilekani Susim M. Datta Deepak M. Satwalekar
Partner Chairman and Managing Director, Director Director
Chief Executive Officer President
and Chief Operating
Officer
Ramesh Vangal Marti G. Subrahmanyam N.S. Raghavan S. Gopalakrishnan
Director Director Joint Managing Deputy Managing Director
Director
Place: Bangalore K. Dinesh S.D. Shibulal T.V. Mohandas Pai V. Viswanathan
Date: October 8, 1999 Director Director Sr. Vice-President Company Secretary
(F&A)
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5
Profit and Loss Account
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in Rs.
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Quarter ended September 30 Half year ended September 30 Year ended
March 31
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1999 1998 1999 1998 1999
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INCOME
Software development services and
products
Overseas 205,07,22,424 118,09,83,329 373,69,33,425 214,47,71,315 500,25,40,418
Domestic 3,22,64,605 1,90,05,058 4,87,60,599 3,04,47,144 8,63,71,250
Sale of special import licenses 1,29,96,393 - 1,29,96,393 - -
Other income 8,28,22,042 43,71,375 22,07,35,287 1,33,97,323 3,84,71,833
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217,88,05,464 120,43,59,762 401,94,25,704 218,86,15,782 512,73,83,501
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EXPENDITURE
Software development expenses 113,07,67,428 65,92,35,809 202,26,48,720 121,74,92,099 261,51,74,052
Administration and other expenses 15,37,31,464 9,92,83,387 28,98,70,425 19,91,90,300 45,75,30,137
Provision for Contingencies - - 3,33,00,000 - 6,66,00,000
Provision towards e-inventing the 3,50,00,000 - 3,50,00,000 - -
Company
Provision for investment in - 2,53,00,000 - 3,53,00,000 7,05,95,674
subsidiary
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131,94,98,892 78,38,19,196 238,08,19,145 145,19,82,399 320,98,99,863
Operating profit (PBIDT) 85,93,06,572 42,05,40,566 163,86,06,559 73,66,33,383 191,74,83,638
Interest - - - - -
Depreciation 10,72,23,769 7,40,72,227 20,04,41,918 12,34,36,092 35,89,30,078
Profit before tax 75,20,82,803 34,64,68,339 143,81,64,641 61,31,97,291 155,85,53,560
Provision for tax
- earlier periods 17,00,000 1,75,00,000 17,00,000 1,75,00,000 4,32,00,000
- current period 9,33,00,000 4,50,00,000 17,33,00,000 7,50,00,000 18,62,00,000
Profit after tax from ordinary 65,70,82,803 28,39,68,339 126,31,64,641 52,06,97,291 132,91,53,560
activities
Extraordinary income (net of tax) - - - - 2,34,54,103
Net profit 65,70,82,803 28,39,68,339 126,31,64,641 52,06,97,291 135,26,07,663
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AMOUNT AVAILABLE FOR APPROPRIATION 65,70,82,803 28,39,68,339 126,31,64,641 52,06,97,291 135,26,07,663
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Dividend
Interim 9,92,08,200 4,00,43,000 9,92,08,200 4,00,43,000 4,00,43,011
Final 8,10,32,734
Dividend Tax 1,09,12,902 40,04,300 1,09,12,902 40,04,300 1,21,07,574
Amount transferred
- capital reserve - - - - 2,34,54,103
- general reserve - - - - 119,59,70,241
Balance in Profit and Loss Account 54,69,61,701 23,99,21,039 115,30,43,539 47,66,49,991 -
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65,70,82,803 28,39,68,339 126,31,64,641 52,06,97,291 135,26,07,663
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SIGNIFICANT ACCOUNTING
POLICIES AND NOTES ON ACCOUNTS
The Schedules referred to above and the notes thereon form an integral part of
the Profit and Loss Account.
This is the Profit & Loss Account
referred to in our report of even date.
for Bharat S Raut & Co.
Chartered Accountants
Ravi Ramu N.R.Narayana Murthy Nandan M. Nilekani Susim M. Datta Deepak M. Satwalekar
Partner Chairman and Managing Director, Director Director
Chief Executive Officer President
and Chief Operating
Officer
Ramesh Vangal Marti G. Subrahmanyam N.S. Raghavan S. Gopalakrishnan
Director Director Joint Managing Deputy Managing Director
Director
Place: Bangalore K. Dinesh S.D. Shibulal T.V.Mohandas Pai V.Viswanathan
Date: October 8, 1999 Director Director Sr. Vice-President Company Secretary
(F&A)
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6
Schedules to the Profit and Loss Account
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in Rs.
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Quarter ended September 30 Half year ended September 30 Year ended March 31
------------------------------------------------------------------------------------
1999 1998 1999 1998 1999
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OTHER INCOME
Interest received on deposits with 6,52,40,572 35,08,437 12,10,22,337 1,23,10,678 3,67,00,927
banks and others.
Tax deducted at source Rs. 52,48,295
(Rs. 6,74,082)
Profit on sale of Assets 4,16,230 - 4,63,777 - -
Miscellaneous income 7,08,917 8,62,938 14,90,472 10,86,645 17,70,906
Exchange differences * 1,64,56,323 - 9,77,58,701 - -
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8,28,22,042 43,71,375 22,07,35,287 1,33,97,323 3,84,71,833
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*Exchange differences on translation of foreign currency deposit maintained abroad
SOFTWARE DEVELOPMENT EXPENSES
Salaries and bonus including 73,71,21,957 35,98,78,983 132,43,61,020 69,31,81,636 151,56,56,923
overseas staff expenses
Staff welfare 1,01,02,147 78,05,647 1,97,02,371 1,40,42,054 3,06,17,200
Contribution to provident and other 4,04,04,539 1,77,94,463 6,09,67,314 4,63,64,461 11,42,90,209
funds
Foreign tour and travel 19,44,34,563 14,43,03,794 37,35,69,658 24,67,37,676 58,11,20,975
Consumables 47,39,041 18,97,536 1,06,07,532 27,63,865 1,06,44,207
Cost of software packages
for own use 6,00,62,634 6,13,26,147 9,28,54,660 10,25,34,030 14,86,91,737
for domestic software 24,53,002 23,04,627 40,65,059 40,16,868 1,78,19,890
development
Provision for post-sales client 1,09,23,398 1,78,08,473 1,75,96,154 1,92,09,784 2,19,18,587
support
Computer maintenance 61,45,308 1,34,23,968 1,00,78,359 1,86,21,544 3,29,08,467
Communication expenses 5,64,28,375 2,21,19,577 9,47,60,089 4,78,98,292 9,59,08,515
Consultancy charges 79,52,464 1,05,72,594 1,40,86,504 2,21,21,889 4,55,97,342
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113,07,67,428 65,92,35,809 202,26,48,720 121,74,92,099 261,51,74,052
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ADMINISTRATION AND OTHER EXPENSES
Rent 2,37,09,030 1,82,67,185 4,42,39,431 3,56,24,624 7,44,54,587
Legal and professional charges 1,69,66,773 1,12,73,529 2,94,93,829 2,35,37,784 5,37,56,388
Travelling and conveyance 1,64,00,037 94,18,657 2,71,78,379 1,87,25,381 4,15,37,200
Telephone charges 1,07,93,680 1,56,74,390 2,45,99,217 2,67,15,939 5,15,34,846
Power and fuel 1,00,90,670 61,23,149 2,01,08,110 1,18,07,207 2,73,37,769
Provision for bad and doubtful debts 70,23,453 18,26,947 1,90,43,237 44,14,374 (13,06,919)
Office maintenance 97,79,872 64,89,180 1,81,88,757 1,45,81,303 2,95,44,190
Printing and stationery 70,99,944 32,72,629 1,53,91,827 83,07,159 1,76,34,923
Donations 1,01,86,367 22,19,735 1,41,86,367 40,21,335 1,49,82,357
Sundry marketing expenses 53,93,530 35,60,383 1,30,53,262 63,77,852 1,92,56,725
Other miscellaneous expenses 90,58,142 42,02,716 1,27,87,412 1,02,96,746 1,80,79,939
Advertisements 68,68,674 11,59,566 1,12,36,927 26,89,853 76,84,502
Insurance charges 49,72,795 25,19,451 90,30,631 57,47,241 1,28,78,968
Postage and courier 25,29,800 14,14,441 61,99,736 35,98,107 79,15,959
Rates and taxes 37,24,887 34,21,294 57,43,646 67,84,556 1,16,79,290
Repairs to plant and machinery 27,39,781 24,96,561 41,49,262 42,09,715 86,47,678
Repairs to building 13,87,841 23,24,990 40,04,836 45,28,897 1,08,24,460
Commission Charges - - 34,84,800 4,96,700 7,40,413
Research Grants 25,00,000 - 25,00,000 - 3,09,00,000
Books and periodicals 8,34,026 23,64,234 21,48,750 40,71,713 76,72,725
Bank charges and commission 8,08,085 8,66,850 17,62,932 18,78,814 38,95,031
Auditor's remuneration
- audit fees 4,67,500 3,50,000 8,92,500 7,00,000 14,35,000
- certification charges - - - - 2,00,000
- other services - - - - 8,00,000
- out-of-pocket expenses 50,000 37,500 1,00,000 75,000 1,50,000
Bad loans and advances written off 3,46,577 - 3,46,577 - 52,94,106
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15,37,31,464 9,92,83,387 28,98,70,425 19,91,90,300 45,75,30,137
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7
Statement of Cash Flows
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in Rs.
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Quarter ended September 30, Half year ended September 30, Year ended
March 31, 1999
----------------------------------------------------------------
1999 1998 1999 1998
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Cash flows from operations
Profit before tax 75,20,82,803 34,64,68,339 143,81,64,641 61,31,97,291 155,85,53,560
Other Income (8,21,13,125) (35,14,051) (21,92,44,815) (1,23,56,967) (3,67,00,927)
Provision for contingencies - - 3,33,00,000 - 6,66,00,000
Provision for e-inventing the Company 3,50,00,000 - 3,50,00,000 - -
Provision for investment in subsidiary - 2,53,00,000 - 3,53,00,000 7,05,95,674
Depreciation, depletion and amortization 10,72,23,769 7,40,72,227 20,04,41,918 12,34,36,092 35,89,30,078
Decrease (increase) in sundry debtors (26,71,34,722) (7,25,12,893) (48,95,21,379) (19,12,85,973) (44,63,39,758)
Decrease (increase) in loans and (8,30,09,030) (5,85,36,394) (17,73,97,884) (10,42,08,713) (15,32,76,222)
advances
Increase (decrease) in current 4,17,59,020 3,10,80,523 17,70,67,854 10,69,16,563 33,82,24,214
liabilities and provisions
Income taxes paid (10,92,26,480) (2,51,95,430) (13,84,37,481) (6,90,39,814) (16,79,23,184)
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Net cash from operations 39,45,82,235 31,71,62,321 85,93,72,854 50,19,58,479 158,86,63,435
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Cash flows from financing
Proceeds from issue of American - - - - 296,86,28,400
Depositary Shares
Expenses relating to issue of American (3,26,400) - (2,05,30,090) - (17,33,14,415)
Depositary Shares
Dividends paid (including dividend tax) - - (8,91,36,007) (5,79,89,512) (10,20,36,824)
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Net cash used for financing (3,26,400) - (10,96,66,097) (5,79,89,512) 269,32,77,161
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Cash flows from investing
Income from investments 6,52,40,572 35,14,051 12,10,22,337 1,23,56,967 3,67,00,927
Proceeds of sale of investments (net of - - - - 6,06,20,029
tax)
Proceeds of sale of fixed assets 4,20,448 1,23,860 5,71,709 2,39,716 2,39,716
Purchase of fixed assets (38,55,70,016) (22,69,54,087) (59,76,16,481) (33,16,25,584) (71,67,91,924)
Other long-term investments - - - - (75,38,109)
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Net cash used for investing (31,99,08,996) (22,33,16,176) (47,60,22,435) (31,90,28,901) (62,67,69,361)
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Effect of exchange differences on 1,64,56,323 - 9,77,58,701 - -
translation of foreign currency deposit
maintained abroad
Total increase (decrease) in cash and 7,43,46,839 9,38,46,145 27,36,84,322 12,49,40,066 365,51,71,235
cash equivalents during the period
CASH AND CASH EQUIVALENTS AT THE 444,72,30,805 54,25,13,630 416,65,90,944 51,14,19,709 51,14,19,709
BEGINNING OF THE PERIOD
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CASH AND CASH EQUIVALENTS AT THE END OF 453,80,33,967 63,63,59,775 453,80,33,967 63,63,59,775 416,65,90,944
THE PERIOD
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These are the Cash Flow Statements
referred to in our report of even date.
for Bharat S Raut & Co.
Chartered Accountants
Ravi Ramu N.R.Narayana Murthy Nandan M. Nilekani Susim M. Datta Deepak M. Satwalekar
Partner Chairman and Managing Director, Director Director
Chief Executive President
Officer and Chief Operating Officer
Ramesh Vangal Marti G. Subrahmanyam N.S. Raghavan S. Gopalakrishnan
Director Director Joint Managing Director Deputy Managing Director
Place: Bangalore K. Dinesh S.D. Shibulal T.V. Mohandas Pai V.Viswanathan
Date: October 8, 1999 Director Director Sr. Vice-President Company Secretary
(F&A)
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8
Reconciliation of Balance Sheet items with cash flow items
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in Rs.
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Quarter ended September 30, Half year ended September 30, Year ended
March 31, 1999
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1999 1998 1999 1998
- --------------------------------------------------------------------------------------------------------------------------------
1. Loans and advances
As per Balance sheet 164,28,14,672 41,67,37,697 164,28,14,672 41,67,37,697 68,35,96,522
Less: Deposits with financial (76,11,62,937) - (76,11,62,937) - (11,61,07,945)
institutions/body corporate, included
in cash equivalents
Advance income taxes considered (32,78,45,496) (8,93,96,851) (32,78,45,496) (8,93,96,851) (19,10,80,222)
separately
----------------------------------------------------------------------------------------------------------------------------
Balance considered for preparing the cash flow 55,38,06,239 32,73,40,846 55,38,06,239 32,73,40,846 37,64,08,355
statement
----------------------------------------------------------------------------------------------------------------------------
2. Additions to fixed assets
As per Balance sheet 11,48,32,169 23,19,78,997 33,35,52,996 28,21,96,029 64,11,69,396
Add: Closing capital work-in-progress 41,28,99,285 12,26,42,827 41,28,99,285 12,26,42,827 14,88,35,800
Less: Opening capital work-in-progress (14,21,61,438)(12,76,67,737)(14,88,35,800) (7,32,13,272) (7,32,13,272)
----------------------------------------------------------------------------------------------------------------------------
Balance considered for preparing the cash flow 38,55,70,016 22,69,54,087 59,76,16,481 33,16,25,584 71,67,91,924
statement
----------------------------------------------------------------------------------------------------------------------------
3. Cash and cash equivalents
As per Balance sheet 377,68,71,030 63,63,59,775 377,68,71,030 63,63,59,775 405,04,82,999
Add: Deposits with financial 76,11,62,937 - 76,11,62,937 - 11,61,07,945
institutions/body corporate (as per 1
above)
----------------------------------------------------------------------------------------------------------------------------
Balance considered for preparing the cash flow 453,80,33,967 63,63,59,775 453,80,33,967 63,63,59,775 416,65,90,944
statement
----------------------------------------------------------------------------------------------------------------------------
4. Income taxes paid
As per Profit and Loss account 9,50,00,000 6,25,00,000 17,50,00,000 9,25,00,000 22,94,00,000
Add: Decrease(increase) in balance in (9,50,05,897) (2,17,00,000) (17,33,27,793) (1,69,52,470) (15,66,52,471)
provision for taxes account
Increase(decrease) in balance in advance 10,92,32,377 (1,56,04,570) 13,67,65,274 (65,07,716) 9,51,75,655
income tax account
----------------------------------------------------------------------------------------------------------------------------
Balance considered for preparing the cash flow 10,92,26,480 2,51,95,430 13,84,37,481 6,90,39,814 16,79,23,184
statement
----------------------------------------------------------------------------------------------------------------------------
5. Other income
As per Profit and Loss account 9,58,18,435 43,71,375 23,37,31,680 1,33,97,323 3,84,71,833
Less: Income from operating activities (1,37,05,310) (8,57,324) (1,44,86,865) (10,40,356) (17,70,906)
----------------------------------------------------------------------------------------------------------------------------
Balance considered for preparing the cash flow 8,21,13,125 35,14,051 21,92,44,815 1,23,56,967 3,67,00,927
statement
----------------------------------------------------------------------------------------------------------------------------
6. Current liabilities and provisions
As per Balance sheet 128,93,45,120 36,69,68,019 128,93,45,120 36,69,68,019 84,96,64,378
Less: Provision for taxation considered (40,46,85,281)(9,16,57,487) (40,46,85,281) (9,16,57,487) (23,13,57,488)
separately
Provision for dividend considered (9,92,08,200) (4,00,43,000) (9,92,08,200) (4,00,43,000) (8,10,32,734)
separately
Provision for dividend tax considered (1,09,12,902) (40,04,300) (1,09,12,902) (40,04,300) (81,03,273)
separately
Provision for contingencies (9,99,00,000) - (9,99,00,000) - (6,66,00,000)
Provision for e-inventing the Company (3,50,00,000) - (3,50,00,000) - -
----------------------------------------------------------------------------------------------------------------------------
Balance considered for preparing the cash flow 63,96,38,737 23,12,63,232 63,96,38,737 23,12,63,232 46,25,70,883
statement
----------------------------------------------------------------------------------------------------------------------------
These are the Cash Flow Statements
referred to in our report of even date.
for Bharat S Raut & Co.
Chartered Accountants
Ravi Ramu N.R.Narayana Murthy Nandan M. Nilekani Susim M. Datta Deepak M. Satwalekar
Partner Chairman and Managing Director, Director Director
Chief Executive Officer President
and Chief Operating
Officer
Ramesh Vangal Marti G. Subrahmanyam N.S. Raghavan S. Gopalakrishnan
Director Director Joint Managing Director Deputy Managing Director
Place: Bangalore K. Dinesh S.D. Shibulal T.V.Mohandas Pai V.Viswanathan
Date: October 8, 1999 Director Director Sr. Vice-President (F&A) Company Secretary
- --------------------------------------------------------------------------------
9
Significant accounting policies
- --------------------------------------------------------------------------------
1 Basis for preparation of financial statements
The financial statements are prepared under the historical cost convention,
in accordance with Indian Generally Accepted Accounting Principles (GAAP),
the accounting standards issued by the Institute of Chartered Accountants
of India and the provisions of the Companies Act, 1956, as adopted
consistently by the Company. All income and expenditure having a material
bearing on the financial statements are recognized on the accrual basis.
The preparation of the financial statements in conformity with GAAP
requires that the management make estimates and assumptions that affect the
reported amounts of assets and liabilities, and disclosure of contingent
assets and liabilities as of the date of the financial statements, and the
reported amounts of revenue and expenses during the reporting period.
Examples of such estimates include estimates of expected contract costs to
be incurred to complete software development, provision for doubtful debts,
future obligations under employee retirement benefit plans and the useful
lives of fixed assets. Actual results could differ from those estimates.
2 Revenue recognition
Revenue from software development on a time-and-material basis is
recognized based on software developed and billed to clients as per the
terms of specific contracts. In the case of fixed-price contracts, revenue
is recognized based on the milestones achieved as specified in the
contracts, on the percentage of completion basis. Revenue from the sale of
software products is recognized when the sale has been completed with the
passing of title. Revenue from Annual Technical Services (ATS) is
recognized on a pro rata basis over the period in which such services are
rendered. Interest on deployment of surplus funds is recognized using the
time-proportion method, based on interest rates implicit in the
transaction. Dividend income is recognized when the right to receive
dividend is established. Revenue from the sale of Special Import Licences
is recognized when the licences are actually sold.
3 Expenditure
Expenses are accounted on the accrual basis and provisions are made for all
known losses and liabilities. Provisions are made for future unforeseeable
factors which may affect the ultimate profit on fixed-price software
development contracts. The cost of software purchased for use in software
development and services is charged to revenue in the same year. The leave
encashment liability of the Company is provided on the basis of actuarial
valuation. Provisions are made towards likely expenses on providing
post-sales client support for fixed-price contracts.
4 Fixed assets
Fixed assets are stated at the cost of acquisition, less accumulated
depreciation. Direct costs are capitalized till the assets are ready to be
put to use. These costs include financing costs relating to specific
borrowing(s) attributable to fixed assets.
5 Capital work-in-progress
Advances paid towards the acquisition of fixed assets, and the cost of
assets not put to use before the period-end, are disclosed under capital
work-in-progress.
6 Depreciation
Depreciation on fixed assets is provided using the straight-line method,
based on useful lives as estimated by the management. Depreciation is
charged on a pro rata basis for assets purchased / sold during the period.
Individual assets costing less than Rs. 5,000 are depreciated in full in
the year of purchase. The management's estimate of useful lives for the
various fixed assets is given below.
Building 15 years
Plant and machinery 5 years
Computer equipment 2-5 years
Furniture and fixtures 5 years
Vehicles 5 years
7 Retirement benefits to employees
7.1 Gratuity
In accordance with the Indian law, Company provides for gratuity, a defined
benefit retirement plan covering all employees. The plan provides a lump
sum payment to vested employees at retirement, death or termination of
employment, based on the respective employee's salary, and the years of
employment with the Company.
The Company has established the Infosys Technologies Limited Employees'
Group Gratuity Fund Trust (the Trust). Liabilities with regard to the
gratuity plan are determined by actuarial valuation, based upon which, the
Company makes contributions to the Trust. Trustees administer the
contributions made to the Trust. The funds contributed to the Trust are
invested in specific designated securities as mandated by law, and
generally comprise central and state government bonds, and debt instruments
of government-owned corporations.
- --------------------------------------------------------------------------------
10
7.2 Superannuation
Apart from being covered under the gratuity plan described above, the
senior officers of the Company are also participants of a defined
contribution benefit plan. The plan is termed the superannuation plan to
which the Company makes monthly contributions, based on a specified
percentage of each covered employee's salary. The Company has no further
obligations under the plan beyond its monthly contributions.
7.3 Provident fund
In addition to the above benefits, all employees receive benefits from a
provident fund which is a defined contribution plan. Both the employee and
the employer make monthly contributions to the plan equal to 12% of the
covered employee's salary.
The Company has established a Provident Fund Trust to which a part of the
contributions are made each month. The remainder of the contributions are
made to the Government's provident fund. The Company has no further
obligations under the plan beyond its monthly contributions.
8 Research and development
Capital and revenue expenditure incurred on research and development is
charged off to revenue in the same year in which such expenditure is
incurred.
9 Foreign currency transactions
Sales made to clients outside India and realizations deposited into foreign
currency bank accounts are accounted for on the basis of the exchange rate
as on the date of the transaction. Adjustments are made for any variations
in the sale proceeds on conversion into Indian currency upon actual
receipt. Expenditure in foreign currency is accounted at the exchange rate
prevalent when such expenditure is incurred. Disbursements made out of
foreign currency bank accounts are reported at a rate that approximates the
actual monthly rate. Fixed assets purchased at overseas offices are
accounted for on the basis of the actual cost incurred at the exchange rate
prevalent at the time of purchase. Depreciation is charged as per Company
policy. Exchange differences arising on foreign currency transactions are
recognized as income or expense in the period in which they arise.
Current assets and current liabilities denominated in foreign currency are
translated at the exchange rate prevalent at the date of the balance sheet.
The resulting difference is accounted for in the profit and loss account.
In the case of forward contracts, the difference between the forward rate
and the exchange rate on the date of the transaction is recognized as
income or expense over the life of the contract.
10 Investments
Investments are classified into current investments and long-term
investments. Current investments are carried at the lower of the cost and
the fair value, and provision is made to recognize any decline in the
carrying value. Long-term investments are carried at cost, and provision is
made to recognize any decline, other than temporary, in the value of such
investment. Overseas investments are carried at their original rupee cost
less provision as described above.
11 Investment in subsidiary
The investment in the subsidiary is accounted on the cost method, whereby,
the Company recognizes only dividends received from the subsidiary as
income. In case of losses made by the subsidiary, other than temporary,
adequate provision is made to recognize any decline in the value of the
investment.
12 Income tax
Provision is made for income tax on a yearly basis, under the tax-payable
method, based on the tax liability as computed after taking credit for
allowances and exemptions. In case of matters under appeal, due to
disallowances or otherwise, full provision is made when the said
liabilities are accepted by the Company.
Notes on accounts
- --------------------------------------------------------------------------------
The previous period's figures have been recast / restated, wherever necessary,
to conform to the current period's classification.
1. Contingent liabilities
a. The estimated amount of contracts remaining to be executed on capital
account, and not provided for (net of advance) is Rs 61,66,53,437 as
at September 30, 1999. The amount of such contracts as at September
30, 1998 was Rs. 18,18,16,277.
b. The company has outstanding counter guarantees of Rs. 1,58,84,263 as
at September 30, 1999, to various banks, in respect of guarantees
given by the said banks in favour of various government authorities.
The counter guarantees outstanding, as at September 30, 1998 was Rs.
2,91,13,719.
c. Claims against the company, not acknowledged as debts, amounted to Rs.
17,91,814 as at September 30, 1999. Such claims as at September 30,
1998 was Rs. Nil.
- --------------------------------------------------------------------------------
11
d. The Company has issued letters of credit outstanding to various
vendors amounting to Rs. Nil as at September 30, 1999. The
corresponding figure as at September 30, 1998 was Rs. 38,17,000.
2. Quantitative details
The company is 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.
3. Managerial remuneration paid to the chairman, managing director and
whole-time directors
in Rs.
-------------------------------------------------------------------------------------------------------------------------------
Three months ended Six months ended
September 30, September 30,
---------------------------------------------------------------------------
1999 1998 1999 1998
-------------------------------------------------------------------------------------------------------------------------------
Salary 9,73,800 9,73,800 19,47,600 19,47,600
Contribution to provident and other funds 3,09,780 3,09,780 6,19,560 6,19,560
Perquisites 6,32,970 8,66,783 15,78,369 17,35,505
4. Managerial remuneration paid to non-whole-time directors
in Rs.
-------------------------------------------------------------------------------------------------------------------------------
Three months ended Six months ended
September 30, September 30,
---------------------------------------------------------------------------
1999 1998 1999 1998
-------------------------------------------------------------------------------------------------------------------------------
Sitting fees 4,000 8,000 44,000 30,000
Reimbursement of expenses 2,25,891 2,66,850 4,56,605 4,11,701
5. Imports on CIF basis
in Rs.
-------------------------------------------------------------------------------------------------------------------------------
Three months ended Six months ended
September 30, September 30,
---------------------------------------------------------------------------
1999 1998 1999 1998
-------------------------------------------------------------------------------------------------------------------------------
Capital goods 7,75,09,947 9,97,13,370 15,38,94,938 12,01,66,669
Software packages 1,67,09,821 1,82,49,612 2,08,06,798 2,62,35,025
6. Expenditure in foreign currency
in Rs.
-------------------------------------------------------------------------------------------------------------------------------
Three months ended Six months ended
September 30, September 30,
---------------------------------------------------------------------------
1999 1998 1999 1998
-------------------------------------------------------------------------------------------------------------------------------
Travel expenses 14,18,36,600 14,81,73,047 31,35,70,860 23,16,94,796
Professional charges 58,93,140 34,77,006 1,20,76,246 1,01,60,920
Other expenditure incurred overseas for 58,00,33,181 23,26,90,925 92,16,15,097 49,91,43,886
software development
7. Earnings in foreign exchange
in Rs.
-------------------------------------------------------------------------------------------------------------------------------
Three months ended Six months ended
September 30, September 30,
---------------------------------------------------------------------------
1999 1998 1999 1998
-------------------------------------------------------------------------------------------------------------------------------
Income from software development charges and 182,51,55,780 110,84,46,434 348,81,42,974 195,13,76,128
products on a receipt basis
Interest received on deposits with banks 4,31,26,392 35,08,437 8,55,70,358 1,05,57,901
8. Depreciation on assets costing less than Rs. 5,000 each
During the quarter, the Company charged depreciation at one hundred percent
in respect of assets costing less than Rs. 5,000 each, amounting to Rs.
1,50,93,874 and Rs. 2,27,08,905 for the three months period ended September
30, 1999 and six months period ended September 30, 1999 respectively. The
corresponding figure for the previous period amounted to Rs. 4,40,64,957
and Rs. 5,24,82,496 respectively.
9. Depreciation
With effect from October 1, 1998, the Company revised the estimates of
useful lives of buildings (software centers and others) from 28 years / 58
years to 15 years. Due to this change, depreciation for the three months
period ended September 30,1999 and six months period ended September 30,
1999 is higher by Rs. 52,23,571 and Rs. 1,08,76,561. As a result, the
profit for the three months period ended September 30, 1999 and six months
period ended September 30,1999 is lower by Rs. 52,23,571 and Rs.
1,08,76,561 on a comparative basis.
10. Exchange differences
The Company has earned net realized and unrealized exchange gains of Rs.
6.89 crore and Rs. 8.39 crore for the three months period ended September
30, 1999 and September 30, 1998 respectively and Rs.18.64 crore and Rs.
13.50 crore for the six months period ended September 30, 1999 and
September 30, 1998 respectively. This includes Rs. 1.65 crore (previous
period Rs. nil ) and Rs. 9.78 crore (previous period Rs. nil) for the three
months and six months period ended September 30, 1999 respectively arising
from exchange differences on translation of foreign currency deposits with
State Bank of India, Nassau, OBU, New York, disclosed separately under
"Other income" in the financial statements. The balance of Rs. 5.24 crore
and Rs. 8.39 crore, for the three months period ended September 30, 1999
and September 30, 1998 and Rs. 8.86 crore and Rs. 13.50 crore for the six
months period ended September 30, 1999 and September 30, 1998 respectively,
and is included under "Income from software development services and
products-overseas".
11 Research and development expenditure
Research and development expenses charged to the Profit and Loss Account on
both capital and revenue accounts for the three month period ended
September 30, 1999 and six month period ended September 30, 1999 amounted
to Rs. 2,26,17,590 and Rs. 3,88,51,990 (previous period - Rs. 1,65,94,875
and Rs. 3,18,95,500). This includes Rs. nil being the depreciation charged
at 100% in respect of R & D assets acquired during the period (previous
period - Rs. 1,01,625).
12 Investment in subsidiary
During the quarter ended September 30, 1998, the Company made a provision
for Rs. 2,53,00,000 on its investment in Yantra Corporation, a subsidiary
company. The corresponding figure for the current quarter is nil.
13 Provision for contingencies
The Company had instituted a contingency plan effective October 1, 1998 to
meet any possible disruption in client support due to the Year 2000 impact
on the technology and communication infrastructure provided to the Company
by its vendors. The contingency plan called for the creation of a total
provision of Rs. 20.00 crore based on an initial estimate. This provision
was required to be made over six quarters starting October 1998.
Accordingly, the Company has made a total provision of Rs. 9.99 crore up to
the quarter ended June 30, 1999 (including Rs. 3.33 crore for the quarter
ended June 30, 1999). The Company has been led to believe that all its
telecommunication service providers are Year 2000 ready and therefore does
not expect significant disruption of these facilities. During this quarter,
the Company made an appraisal and re-estimated the provision required for
meeting such contingencies over the next two quarters and is of the opinion
that the provision already made is adequate for the purpose and hence no
further provision is required.
14. Provision for e-inventing the Company
The shift in the business towards e-commerce related work is very rapid.
The Company is committed to creating knowledge infrastructure, acquiring
people with technical skills in the e-commerce area, and for e-inventing
the Company which may require the Company to incur business restructuring
cost. A provision of Rs. 3.50 crore was made during this quarter towards
costs (based on the current estimates) related to e-inventing the Company.
No such provision was made during the earlier quarters.
15 Unearned revenue
Unearned revenue as of September 30, 1999 of Rs. 27.76 crore consists
primarily of client billings on fixed-price, fixed-time-frame contracts for
which related costs were not yet incurred.
16 Dues to Small-Scale Industrial undertakings
As of September 30, 1999, the Company had no outstanding dues to
small-scale industrial undertakings.
- --------------------------------------------------------------------------------
13
17 Balance of unutilized money raised by issue
During the year ended March 31, 1999, the Company made an Initial Public
Offering (IPO) of American Depositary Shares (ADS) amounting to Rs 296.86
crore (equivalent to US$ 70,380,000). The ADSs are listed on the NASDAQ
exchange in the United States (US). The unutilized monies out of the issue,
after meeting issue expenses, amounting to Rs 300.49 crore (equivalent to
US$ 68,950,554) is included under "Deposit accounts in foreign currency
with Scheduled Banks" in the financial statements.
18 ADS issue expenses
During the half year ended September 30, 1999, the company received
additional bills for costs incurred during the ADS issue. The details of
such expenses are given under:
in Rs.
------------------------------------------------------------------
Legal and accounting fees 1,28,26,437
------------------------------------------------------------------
Printing charges 77,03,653
------------------------------------------------------------------
TOTAL 2,05,30,090
------------------------------------------------------------------
19 Stock options
The Company currently has two stock option plans. These are summarized
below.
1998 Stock Offer plan(the 1998 plan)
The Company's 1998 Plan provides for the grant of non-statutory stock
options and incentive stock options to employees of the Company. The
establishment of the 1998 Plan was approved by the Board of Directors in
December 1997 and by the shareholders in January 1998. The Government of
India approved the 1998 Plan, subject to a limit of US$ 50 million on the
aggregate value of equity shares reserved under the 1998 Plan. Accordingly,
the number of equity shares reserved under the 1998 Plan may be reduced by
the Board of Directors from time to time to comply with this limit of US$
50 million. A total of 8,00,000 equity shares are currently reserved for
issuance pursuant to the 1998 Plan. These options may be issued at an
exercise price that is not less than 90% of the fair market value of the
underlying equity share on the date of the grant. The 1998 Plan will
terminate in January 2008, unless terminated sooner. All options under the
1998 Plan are exercisable for ADSs representing equity shares. A committee
of the Board of Directors administers the 1998 Plan. As of September 30,
1999, options to acquire an aggregate of 106,500 equity shares were granted
to employees concurrent with the Company's IPO in the US at an exercise
price equal to the IPO issue price.
1999 Stock Offer Plan (the 1999 Plan)
In fiscal 2000, the Company instituted the 1999 Plan. The 1999 Plan was
approved by the share holders and the Board of Directors in June 1999. The
1999 Plan provides for the issue of 33,00,000 equity shares to employees.
The 1999 Plan is administered by a Compensation Committee comprising a
maximum of seven members, the majority of whom are independent directors on
the Board of Directors. Under the 1999 Plan, options will be issued to
employees at an exercise price which shall not be less than the Fair Market
Value. Fair Market Value means the closing price of the Company's shares in
the stock exchange where there is the highest trading volume on a given
date and if the shares are not traded on that day, the closing price on the
next trading day. Under the 1999 Plan, options may also be issued to
employees at exercise prices that are less than FMV only if specifically
approved by the members of the Company in a general meeting. As of
September 30, 1999, no options have been issued to employees under the 1999
Plan.
20 Employee Stock Option Plan (ESOP)
The Securities and Exchange Board of India (SEBI) recently issued the
(Employee Stock Option Scheme and Employee Stock Purchase Scheme)
Guidelines, 1999 which is effective for all stock option schemes
established after June 19, 1999. In accordance with these guidelines, the
excess of the market price of the underlying equity shares as of the date
of the grant of the options over the exercise price of the options,
including up-front payments, if any is to be recognized and amortized on a
straight line basis over the vesting period.
The Companies 1994 stock option plan was established prior to the SEBI
guidelines on stock options.
Had the stock compensation costs for this stock option plan been determined
as per the guidelines issued by SEBI, the Company's reported net profit
would have been reduced to the proforma amounts indicated below.
in Rs.
---------------------------------------------------------------------------------------------------------------
Three months ended Six months ended
September 30, September 30,
----------------------------------------------------------------------------
1999 1998 1999 1998
---------------------------------------------------------------------------------------------------------------
Net profit:
- As reported 65,70,82,803 28,39,68,339 126,31,64,641 52,06,97,291
- Adjusted pro forma 60,09,10,486 26,43,55,932 115,34,29,790 48,20,37,140
---------------------------------------------------------------------------------------------------------------
14
21 Provision for taxation
The Company's profits from export activities are deductible from taxable
income. Further, most of the Company's operations are conducted through
100% Export Oriented Units, which are entitled to a tax holiday for a
period of ten years from the date of commencement of operations. The
provision for taxation includes taxes payable in respect of domestic income
and that arising on the Company's overseas operations, primarily in the
United States, Europe, Far East and South East Asia.
22 Cash and Bank balance
The Company has a deposit of USD 73,841,730 (Rs. 321,80,22,575) in EEFC
account as at September 30, 1999. Bank balances in overseas deposit account
includes an net amount of USD 68,950,554 (Rs. 300,48,65,132) received on
ADS program and maintained as deposit along with the accrued interest with
State Bank of India, Nassau, OBU, New York.
23 Loans and advances
Advances recoverable in cash or kind or for value to be received mainly
comprise of prepaid travel and per-diem expenses and advance paid to
vendors towards current assets.
Deposits with financial institutions consists of Rs. 25,47,68,334 and Rs.
25,32,64,877 deposited with Housing Development Finance Corporation
Limited, and ICICI Limited, respectively. Mr. Deepak M Satwalekar, is the
Managing Director in Housing Development Finance Corporation Limited. Mr. N
R Narayana Murthy and Prof. Marti G. Subrahmanyam are Directors in ICICI
Limited. Except as directors in these financial institutions they have no
direct interest in these transactions. Deposit with a body corporate
consists of Rs. 25,31,29,726 deposited with GE Capital Services India. All
these financial institutions and a body corporate have AAA rating from
CRISIL. There is no unpaid interest as on date.
Provision for doubtful loans and advances comprise of provisions made for
deposit kept with a Company and for loans and advances given to employees.
The Company has filed recovery suit against this company in a court of law
and the court has attached the property of this company against the claims
of unpaid deposit amount. The adjudication on this issue is pending.
However as matter of abundant precaution,a provision has been made.
24 Current liabilities
Sundry creditors for other liabilities represent mainly the retention
amount payable to the vendors, and amounts accrued for various other
operational expenses.
25 Fixed assets
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 outright at the 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 agreement. These
amounts are disclosed as "Land - leasehold" under "Fixed assets" in the
financial statements.
26 Set off of unearned revenues
The Company entered into an agreement with a customer for providing
software services in an earlier year. The Company collected a portion of
amounts receivable from this customer in respect of work performed for the
customer under this agreement. The customer subsequently went into
liquidation. In fiscal 1999, the company raised invoices in its books of
account for the remainder of the contracted value of the services to be
performed under the agreement amounting to Rs 3,24,52,521 in order to stake
its claim in the liquidation proceedings. The Company subsequently informed
the Reserve Bank of India about the claim raised by it on the customer.
This amount was treated as "Unearned revenues" in the financial statements
for fiscal 1999. The Company has set off the amount receivable from the
customer against the amount earlier treated as "Unearned revenue", in the
previous quarter. The Company is actively pursuing liquidation proceedings
to recover this amount.
- --------------------------------------------------------------------------------
15
At a glance - US GAAP
- -----------------------------------------------------------------------------------------------------------------------------------
US$ in millions, except per equity share data
- -----------------------------------------------------------------------------------------------------------------------------------
Quarter ended Half-year ended Year ended
------------------------------------------------------------
September 30, September 30, September 30, September 30, March 31, 1999
1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------------
For the period
Total revenue 47.94 28.24 87.67 51.90 120.96
Operating income 14.62 8.18 26.92 14.23 22.87
Net income 14.72 6.16 28.03 10.94 17.45
Operating income as a percentage of total revenue 30.49% 28.96% 30.71% 27.41% 18.91%
Net income as a percentage of total revenue 30.70% 21.81% 31.97% 21.07% 14.42%
Basic earnings per share 0.45 0.20 0.85 0.36 0.57
Capital investment 8.72 5.48 12.97 6.99 16.12
At the end of the period
Total assets 181.22 65.12 153.66
Property, plant and equipment - net 32.22 20.66 23.90
Cash and equivalents 104.13 21.54 98.87
Working capital 123.27 33.76 110.62
Total debt - - -
Shareholders' equity 162.25 49.17 139.61
Common stock 8.59 4.55 8.59
Market capitalization 9,457.85 962.73 2,852.24
- -----------------------------------------------------------------------------------------------------------------------------------
Note: Market capitalization is calculated by considering the NASDAQ market price
for shares outstanding at the period/year end except as of Sep 30, 1998 where
the same has been calculated by considering the Indian market price.
[BAR CHARTS APPEARS HERE]
- --------------------------------------------------------------------------------
16
Form 6 - K
- --------------------------------------------------------------------------------
Page 16 - 47
- --------------------------------------------------------------------------------
17
Shareholder information
- --------------------------------------------------------------------------------
1. Listing on stock exchanges in India at Bangalore Stock Exchange Ltd.
Stock Exchange Towers, No. 51, 1st Cross, J.C. Road, Bangalore - 560027.
Tel.: 91-80-299 5234, Fax: 91-80-299 5242
The Stock Exchange, Mumbai
Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai - 400 001.
Tel.: 91-22-265 5581, Fax: 91-22-265 8121
National Stock Exchange of India Ltd.
Trade World, Senapati Bapat Marg, Lower Parel, Mumbai - 400 013.
Tel.: 91-22-497 2950, Fax: 91-22-491 4275/85
2. Listing fees Paid for all the above stock exchanges for 1999-2000.
3. Listing on stock exchanges NASDAQ National Market in the United States
outside India 33 Whitehall Street, New York, NY-1004-4087
Tel.: 1-212-709-2400, Fax: 1-212-709-2496
4. Registered office Electronics City, Hosur Road, Bangalore - 561 229, India.
Tel.: 91-80-852 0261, Fax: 91-80-852 0362
Homepage: www.itlinfosys.com
5. Stock market data relating to shares listed in India
a. The company's market capitalization is included in the computation of
the BSE-30 Sensitive Index (Sensex), the BSE Dollex and S&P CNX NIFTY
Index.
b. Monthly high and low quotations as well as the volume of shares traded
at Mumbai, National and Bangalore Stock Exchanges during the
three-month period ended September 30, 1999 are:
-----------------------------------------------------------------------------------------------------------------------
BSE NSE BgSE
---------------------------------------------------------------------------------------------
High Low Volume High Low Volume High Low Volume
Rs. Rs. Nos. Rs. Rs. Nos. Rs. Rs. Nos.
-----------------------------------------------------------------------------------------------------------------------
July, 1999 5,960 3,622 27,22,986 5,515 3,641 24,76,873 * * *
August 5,715 4,820 17,65,916 5,740 4,780 16,50,790 5,775 4,800 570
September 7,955 5,400 15,64,028 7,960 5,406 15,77,086 7,500 5,600 147
-----------------------------------------------------------------------------------------------------------------------
Total 60,52,930 57,04,749 717
-----------------------------------------------------------------------------------------------------------------------
% of volume traded to
total number of shares
outstanding 18.90%# 17.81%# 0.01%#
# The number of shares outstanding has been taken to be 3,20,34,400. The
American Depositary Shares (ADSs) have been excluded for the purpose of
this calculation.
* There was no trading in the shares of Infosys on the Bangalore Stock
Exchange during July 1999.
6. Share transfers in physical Karvy Consultants Limited
form and other communication
regarding share Registrars and Share Transfer Agents
certificates, dividends, and
change of address, etc., in T.K.N. Complex, No. 51/2, Vanivilas Road,
India may be addressed to
Opp. National College, Basavanagudi,
Bangalore - 560 004.
Tel.: 91-80-662 1184, Fax: 91-80-662 1169
Email: KARVY.BGL@KARVY.sprintrpg.ems.vsnl.net.in
7. Share transfer system
The Securities and Exchange Board of India (SEBI) has mandated that
investors should compulsorily trade in dematerialized form in the
securities of Infosys from January 4, 1999. Investors are required to open
an account with a Depositary Participant to trade in dematerialized form. A
list of Depositary Participants is available with the National Securities
Depositary Limited (NSDL). A booklet entitled "An Investor's Guide to
Depositaries" is available at www.itlinfosys.com.
Shares sent for physical transfer are generally registered and returned
within a period of 15 days from the date of receipt, if the documents are
clear in all respects. The Share Transfer Committee of the company meets as
often as required.
The total number of shares transferred in physical form during the quarter
ended September 30, 1999 was 2,87,568 (previous year - 2,23,727). 99.79% of
transfers (previous year - 73.54%) were completed within 15 days. Shares in
dematerialized form were transferred within 10 days, on the average.
- --------------------------------------------------------------------------------
18
-----------------------------------------------------------------------------------------------------------
1999 1998
---------------------------------------------------------------------------------------------
Transfer No. of No. of No. of No. of %
period transferees (folios) shares % transferees (folios) shares
in days New Existing New Existing
-----------------------------------------------------------------------------------------------------------
1-10 25 12 2,86,168 99.51 52 42 1,20,115 53.69
11-15 6 0 800 0.28 26 18 44,410 19.85
16 - 20 2 0 200 0.07 36 29 38,302 17.12
*21 and above 1 2 400 0.14 19 11 20,900 9.34
-----------------------------------------------------------------------------------------------------------
34 14 2,87,568 100.00 133 100 2,23,727 100.00
-----------------------------------------------------------------------------------------------------------
* Delays beyond 21 days were due to compliance of legal requirements.
8. Investors' services - Complaints received during the three-month period
ended September 30
-----------------------------------------------------------------------------------------------------
1999 1998
-------------------------------------------------
Nature of complaints Received Cleared Received Cleared
-----------------------------------------------------------------------------------------------------
1. Non-receipt of share certificates 0 0 24 24
2. Non-receipt of bonus shares 22 22 3 3
3. Letters from Stock Exchanges, SEBI, etc. 0 0 0 0
4. Non-receipt of dividend warrants 16 16 10 10
-----------------------------------------------------------------------------------------------------
38 38 37 37
-----------------------------------------------------------------------------------------------------
The Company has attended to most of the investors' grievances /
correspondence within a period of 10 days from the date of receipt of the
same, during the quarter ended September 30, 1999.
9. Legal proceedings
There are some pending cases relating to disputes over title to shares, in
which the company was made a party. These cases are however not material in
nature.
10. Distribution of shareholding as on September 30
-------------------------------------------------------------------------------------------------
1999 1998
-----------------------------------------------------------------------
No. of equity No. of % of No. of % of No. of % of No. of % of
share- share- shares share- share- share- shares share-
shares held holders holders holding holders holders holding
-------------------------------------------------------------------------------------------------
1 - 100 6,864 44.92 2,10,821 0.66 1,192 19.16 1,13,762 0.71
101 - 200 2,060 13.48 3,96,053 1.24 1,638 26.34 3,49,768 2.18
201 - 500 2,626 17.18 9,85,410 3.08 1,968 31.65 8,63,223 5.38
501 - 1000 2,051 13.42 15,51,110 4.84 687 11.04 8,48,537 5.29
1001 - 5000 1,297 8.49 26,26,305 8.20 455 7.32 5,58,495 3.48
5001 - 10000 153 1.00 11,00,813 3.44 79 1.27 11,87,032 7.41
10001 and above 231 1.51 2,48,54,933 77.58 201 3.22 1,20,96,383 75.55
Shares in transit in NSDL - - 3,08,955 0.96 - - - -
-------------------------------------------------------------------------------------------------
15,282 100.00 3,20,34,400 100.00 6,215 100.00 1,60,17,200 100.00
American Depositary 1* 10,35,000 - -
Shares
-------------------------------------------------------------------------------------------------
Total 15,283 3,30,69,400 6,215 1,60,17,200
-------------------------------------------------------------------------------------------------
* Held by beneficial owners outside India.
- --------------------------------------------------------------------------------
19
11. Categories of shareholders as on September 30
-----------------------------------------------------------------------------------------------------------
1999 1998
--------------------------------------------------------------------------------
Voting
Category No. of Voting No. of No. of strength No. of
shareholders strength (%) shares held shareholders (%) shares held
-----------------------------------------------------------------------------------------------------------
Individuals 14,272 25.18 83,27,240 5,833 28.08 44,97,043
Companies 646 1.37 4,54,021 179 2.44 3,91,157
FIIs 154 25.58 84,59,343 102 24.67 39,52,550
OCBs and NRIs 88 0.74 2,44,908 26 0.25 39,700
Founders and their families 18 29.58 97,82,100 18 30.77 49,27,800
Mutual Funds, Banks, FIs 104 13.48 44,57,833 57 13.79 22,08,950
Shares in transit in NSDL - 0.94 3,08,955 - - -
American Depositary Shares 1* 3.13 10,35,000 - - -
-----------------------------------------------------------------------------------------------------------
Total 15,283 100.00 3,30,69,400 6,215 100.00 1,60,17,200
-----------------------------------------------------------------------------------------------------------
* Held by beneficial owners outside India.
12. Shares under lock-in
Details of shares held by employees under the Employee Stock Offer Plan
(ESOP) subject to lock-in are given below. These shares are also included
in the categories of shareholders given in (11) above.
--------------------------------------------------------------------------------------------
Number of shares subject to lock-in as on September 30
------------------------------------------------------------------------
1999 1998
------------------------------------------------------------------------
Period of lock-in No. of shares No. of employees No. of shares No. of employees
--------------------------------------------------------------------------------------------
4-5 years 3,95,200 1,052 - -
3-4 years 2,52,400 342 1,08,100 161
2-3 years 1,03,200 152 1,33,200 110
1-2 years 1,30,600 106 1,11,900 77
0-1 years 1,07,100 75 - -
--------------------------------------------------------------------------------------------
As on September 30, 1999, 588 employees hold rights to 1,73,900 shares
which are subject to a lock-in of 4-5 years. Currently, 1,667 employees are
beneficiaries of the ESOP. The ITL Employees Welfare Trust holds, as on
September 30, 1999, 70,600 shares for future grants. Shares subject to
lock-in held by the employees will be transferred back to the ITL Employees
Welfare Trust when such employees leave the services of the company.
13. Dematerialization of shares and liquidity
Your company was the first in India to pay a one-time custodial fee of Rs.
44.43 lakh to National Securities Depositary Limited (NSDL). Consequently,
the company's shareholders do not have to pay depositary participants the
custodial fee charged by the NSDL, on their holding. This payment of a
one-time custodial fee extends to the issue of bonus shares too. The
company hopes that this initiative will enthuse shareholders to
dematerialize their holding in the company. Over 87% of the company's
shares are now held in electronic form.
A detailed letter explaining the methodology of using a Depositary as well
as a booklet entitled "An Investor's Guide to Depositaries" was sent to all
shareholders in November 1998. Copies of this booklet are available to
shareholders on request.
14. Financial calendar (tentative and subject to change)
Interim dividend payment (if any) November 1999
Financial reporting for the third quarter ending December 31, 1999 January 11, 2000
Financial results for the year ending March 31, 2000 April 11, 2000
Annual General Meeting for the year ending March 31, 2000 May 2000
15. Investors' correspondence in India may be addressed to:
Mr. V. Viswanathan,
Company Secretary, Investors' Service Cell,
Infosys Technologies Ltd., Electronics City,
Hosur Road, Bangalore - 561 229, India.
Tel.: 91-80-852 1518, Fax: 91-80-852 0362
(e-mail address: invest@itlinfosys.com)
Any queries relating to the financial statements of the company may be
addressed to:
Mr. T. V. Mohandas Pai,
Senior Vice President (F&A),
Infosys Technologies Ltd., Electronics City, Hosur Road,
Bangalore - 561 229, India.
Tel.: 91-80-852 0396, Fax: 91-80-852 0362
(e-mail address: mdpai@itlinfosys.com)
- --------------------------------------------------------------------------------
20
16. Reuters code - INFY.BO (BSE) Bloomberg code - INFO IN (BSE) Bridge code - IN;INF (BSE)
INFY.NS (NSE) NINFO IN (NSE) IN;INFN (NSE)
INFY.O (NASDAQ) US;INFY (NASDAQ)
17. Stock market data relating to American Depositary Shares (ADSs)
a. ADS listed at NASDAQ National Market in the United States
b. Ratio of ADS to equity shares 2 ADS for one equity share
c. ADS symbol INFY
d. The American Depositary Shares issued under the ADS program of the company were listed on the NASDAQ National Market in the
United States on March 11, 1999. The monthly high and low quotations as well as the volume of ADSs traded at NASDAQ
National Market for the quarter ended September 30, 1999 are:
---------------------------------------------------------------------------
High Low Volume
$ Rs.# $ Rs.# Nos.
---------------------------------------------------------------------------
July, 1999 121.88 10,550 57.38 4,966 23,40,200
August 107.75 9,368 79.75 6,933 8,53,700
September 147.75 12,878 97.81 8,525 12,01,900
---------------------------------------------------------------------------
Percentage of volume traded to total float 212.36%
US$ have been converted into Rupees at the monthly closing rates.
# 2 ADS = 1 equity share
e. American Depositary Shares premium to the shares traded on the Indian
Stock Exchanges
[CHART APPEARS HERE]
2 ADSs = 1 equity share (Source: Bloomberg)
f. Investor correspondence in P. R. Ganapathy
the US may be addressed to Investor Relations Officer
Infosys Technologies Limited
34760, Campus Drive,
Fremont CA 94555, USA.
Tel.: 1-510-742-3030, Mobile: 1-510-872-4412,
Fax: 1-510-742-2930, E-mail: guns@itlinfosys.com
g. Name and address of the Bankers Trust Company
Depositary bank Corporate Trust and Agency Services
4 Albany Street
New York, NY 10006, USA.
Tel.: 1-212-250-8500, Fax: 1-212-250-5644.
Bankers Trust Company
702, Dalamal House
Jamnalal Bajaj Marg, Nariman Point
Mumbai - 400 021, India.
Tel.: 91-22-284 3593, Fax: 91-22-284 3652.
h. Name and address of the ICICI Limited
Custodian in India Mistry Bhavan, 1 Floor
Sir Dinshaw Vacha Road
122, Backbay Reclamation
Mumbai - 400 020, India.
Tel.: 91-22-204 4370, Fax: 91-22-204 4237.
- --------------------------------------------------------------------------------
21
Segment information
- ------------------------------------------------------------------------------------------------------------------------------------
Rs. in lakhs
- ------------------------------------------------------------------------------------------------------------
Quarter ended Half-year ended Year ended
September September September September March
30, 1999 30, 1998 30, 1999 30, 1998 31, 1999
- ------------------------------------------------------------------------------------------------------------
Geographical segment
North America 16,718.10 9,643.25 31,082.53 17,887.91 41,739.11
Europe 3,084.40 1,418.43 5,876.59 2,225.72 4,753.03
Rest of the World 1,109.73 748.16 1,998.19 1,334.09 3,533.26
India 875.82 233.76 1,236.95 438.44 1,248.43
- ------------------------------------------------------------------------------------------------------------
21,788.05 12,043.60 40,194.26 21,886.16 51,273.83
============================================================================================================
Business segment
Branded services 2,096.91 3,376.24 4,243.18 6,173.97 11,321.57
Products 875.41 367.56 1,132.33 507.94 1,444.89
Software development and maintenance 17,857.55 8,256.09 32,481.44 15,070.28 38,122.66
Treasury 958.18 43.71 2,337.31 133.97 384.71
- ------------------------------------------------------------------------------------------------------------
21,788.05 12,043.60 40,194.26 21,886.16 51,273.83
============================================================================================================
* Exchange differences arising on translation of foreign currency deposits
kept abroad have been included under Treasury.
By geographical area - quarter ended September 30, 1999
By business segment - quarter ended September 30, 1999
Data for charts for the quarter ended Sep 30, 1999
Geographical segment
North America 76.7%
Europe 14.2%
Rest of the World 5.1%
India 4.0%
- ---------------------------------------------------------
=========================================================
Business segment
Branded services 9.6%
Products 4.0%
Software development and maintenance 82.0%
Treasury 4.4%
[CHART APPEARS HERE]
- --------------------------------------------------------------------------------
22
Ratio analysis
- -------------------------------------------------------------------------------------------------------------------
Quarter ended Half-year ended Year ended
September September September September March 31,
30, 1999 30, 1998 30, 1999 30, 1998 1999
- -------------------------------------------------------------------------------------------------------------------
Ratios - Financial performance
Export revenue/Total revenue (%) 94.84 98.06 95.29 98.00 97.57
Domestic revenue/Total revenue (%) 1.49 1.58 1.24 1.39 1.68
Other income/Total revenue (%) 3.67 0.36 3.47 0.61 0.75
Employee costs/Total revenue (%) 36.42 32.01 35.83 34.43 32.39
Administration expenses/Total revenue (%) 7.11 8.24 7.39 9.10 8.92
Operating expenses/Total revenue (%) 61.02 65.08 60.71 66.34 62.60
Depreciation/Total revenue (%) 4.96 6.15 5.11 5.64 7.00
Tax/Total revenue (%) 4.39 5.19 4.46 4.23 4.47
Effective tax rate (Tax/PBT) (%) 12.91 18.04 13.06 15.08 14.72
EBIDTA/Total revenue (%) 38.98 34.92 39.29 33.66 37.40
PAT from ordinary activities/Total revenue (%) 29.63 23.58 29.72 23.79 25.92
PAT from ordinary activities/Average net worth 35.61 47.92 34.05 46.74 54.16
(%)*
ROCE (PBIT/Average capital employed) (%)* 40.90 58.47 39.17 55.04 63.51
Return on invested capital (%)* 118.38 75.28 113.83 73.56 86.30
Invested capital output ratio* 4.28 3.22 4.11 3.14 3.39
Ratios - Balance Sheet
Debt-Equity ratio - - -
Debtors turnover ( Days) 64 50 61
Current ratio 5.24 4.48 6.57
Cash and equivalents/Total assets (%) 65.49 28.84 72.51
Cash and equivalents/Total assets (%) 42.98 28.84 46.50
(excluding ADR issue proceeds)
Depreciation for the period/Average gross block 21.66 20.70 26.19
(%)
Technology investment/Total revenue (%) 6.65 10.62 8.55
Ratios - Growth**
Export revenue (%) 74 100 74 108 99
Total revenue (%) 80 95 79 103 97
Operating expenses (%) 68 93 64 100 87
Operating profit (%) 100 97 109 110 116
Net profit (from ordinary activities) (%) 126 106 124 126 120
Per share data
Earnings per share from ordinary activities 19.37 8.59 35.24 15.75 40.19
(Rs.)
Cash earnings per share from ordinary 22.61 10.83 41.30 19.48 51.05
activities (Rs.)
Book value (Rs.), period end 205.00 66.72 205.00 66.72 174.00
Price/Earning, end of the period 92.05 74.23 101.21 80.98 72.77
- -------------------------------------------------------------------------------------------------------------------
* Annualized
** Denotes growth compared with figures of the corresponding period in the
previous year.
Note: The ratio calculations are based on Indian GAAP.
All ratios are calculated excluding income from exchange differences on
translation of foreign currency deposit kept abroad.
EPS figures have been calculated for the period and has not been
annualized.
Invested capital ratios has been calculated by adjusting the average liquid
assets against the average net worth and adjusting the revenue earned from
liquid assets after taxes against net profits.
- --------------------------------------------------------------------------------
23
US
Infosys Technologies Limited
34760, Campus Drive
Fremont CA 94555.
Tel: (510) 742-3000
Fax: (510) 742-3090
Infosys Technologies Limited
20 Commerce Drive
Cranford NJ 07016.
Tel: (908) 497-1710
Fax: (908) 497-1770
Canada
Infosys Technologies Limited
208 Evans Avenue #207
Toronto ON M8Z 1J7, Canada.
Tel: 416-259-9578
Fax: 416-259-1046
UK
Infosys Technologies Limited
Suite 412, Premier Suites
Exchange House
494 Midsummer Boulevard
Milton Keynes MK9 2EA, UK.
Tel: 44-1-908-608-272
Fax: 44-1-908-608-279
Germany
Infosys Technologies Limited
T.O.P.A.S 2 Mergenthalerallee 79-81
65760 Eschborn, Frankfurt
Germany.
Tel: 49-6196-9202115
Fax: 49-6196-9202200
Japan Bankers
Infosys Technologies Limited State Bank of Mysore
4F, Madre Matsuda Building Hongkong and Shanghai Banking Corporation Ltd.
4-13 Kioi-cho, Chiyoda-ku State Bank of India
Tokyo 102-0094, Japan. ICICI Banking Corporation Limited
Tel: 81-3-3234-3597 Bank of America
Fax: 81-2-3239-3300 Company Secretary
India V. Viswanathan
Infosys Technologies Limited Auditors
Electronics City, Hosur Road Bharat S Raut and Company
Bangalore 561 229, India. Chartered Accountant
Tel: 91-80-8520261 Independent auditors - US GAAP
Fax: 91-80-8520362 KPMG Peat Marwick
- --------------------------------------------------------------------------------
24