Exhibit 13.1
Infosys - Technology at work
The future depends on what we do in the present.
Mahatma Gandhi
(1869-1948)
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History is replete with instances of technological
breakthroughs that have forever altered the course of
humanity. The digital revolution has brought about
unprecedented improvements in the price-performance equation
for both information storage and processing power. The
explosion of the Internet has revolutionized information
availability and exchange, and has also spurred
extraordinary innovations in business processes and
commerce. Today, physical boundaries are becoming
increasingly irrelevant and information technology is a
boardroom imperative in corporations across the globe.
Enhanced communication capabilities, ubiquitous information
access, and real-time decision-making have contributed
immensely to the rise of organizations that transcend
national boundaries. We, at Infosys, believe that
technological developments in the areas of enterprise
solutions, embedded software, optical networking and
convergence will continue to radically impact every one of
us. These developments will spur new ways of doing business,
help companies increase their focus on consumer needs, and
facilitate innovations in the form of hi-tech products and
services. This year, we bring you a collection of some of
our projects that showcase the impact of leading-edge
technologies on business.
Contents
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The year at a glance
Awards for excellence - 2000-2001
Letter to the shareholders
Infosys - Technology at work
Directors' report
Risk management
Corporate governance
Audit committee charter
Report of the committees of the board
Auditors' report
Financial statements prepared in accordance with
Indian Generally Accepted Accounting Principles (Indian GAAP)
Balance sheet
Profit and loss account
Schedules
Management's discussion and analysis of financial condition and results of
operations
Statements of cash flows
Balance sheet abstract and company's general business profile
Financial statements prepared in accordance with
United States Generally Accepted Accounting Principles (US GAAP)
Summary of consolidated financial data
Management's discussion and analysis of financial condition and results of
operations
Report of management
Independent auditors' report
Balance sheets
Statements of income
Statements of stockholders' equity
Statements of cash flows
Notes to financial statements
Information in Form 20-F of United States Securities and Exchange Commission
Shareholder information
Frequently asked questions
Additional information to shareholders
Share performance chart
Intangible assets scoresheet
Human resources accounting and value-added statement
Brand valuation
Balance sheet (including intangible assets)
Current cost adjusted financial statements
Economic value-added (EVA) statement
Ratio analysis
Statutory obligations
Management structure
A historical perspective
Infosys Foundation
Financial statements prepared in substantial compliance with
GAAP requirements of Australia, Canada, France
Germany, Japan and the United Kingdom and
reports of compliance with the respective corporate governance standards
Yantra Corporation
in Rs. crore, except per share data
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March 31, 2001 March 31, 2000 Growth %
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For the year
Total revenues 1,959.94 921.46 113
Export revenues 1,874.03 869.70 115
Operating profit (PBIDT) 808.92 378.88 114
Profit after tax (PAT) from ordinary activities 623.32 285.95 118
Profit after tax and extraordinary items 628.81 293.52 114
PBIDT as a percentage of total revenues 41.27% 41.12%
PAT from ordinary activities
as a percentage of total revenues 31.80% 31.03%
Earnings per share (from ordinary activities)
Basic 94.23 43.23 118
Diluted 93.93 43.22 117
Dividend per share 10.00 4.50 122
Dividend amount 66.16 29.76 122
Capital investment 463.35 159.87 190
PAT as a percentage of average net worth 56.08% 40.63%
At the end of the year
Total assets 1,389.64 833.30 67
Fixed assets - net 557.66 207.34 169
Cash and cash equivalents 577.74 508.37 14
Working capital 797.86 612.13 30
Total debt - - -
Net worth 1,389.64 833.30 67
Equity 33.08 33.08 -
Market capitalization 26,926.35 59,338.17 (55)
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Market capitalization is calculated by considering the share price at the
National Stock Exchange on
March 31 of the respective years on the shares outstanding as at that date.
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Awards for excellence
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"If a man does his best, what else is there?"
General George S. Patton
(1885 - 1945)
Our people work hard designing, developing and implementing high-quality
solutions for our clients. Their focus on customer satisfaction is evident in
the high repeat business we continue to secure. Further, internal functions play
a critical role - both in managing the challenges of growth and in supporting
the line functions. On the job, Infoscions maintain an unwavering eye on
creating value for the various stakeholders of the company, while demonstrating
energy, fairness and professionalism in all transactions.
As Infosys grows to nearly 10,000 people, the process of identifying high-
performers, who made valuable contributions to Infosys during the year, emerged
as a tough and challenging task. A task made even more difficult by the number
of high achievers we came across in the different departments in our
organization - each one motivated by the vision that we have set ourselves; to
be a globally respected software corporation providing best-in-class business
solutions, employing best-of-breed professionals.
The people finally selected are those who qualified on a variety of factors that
impacted their external and internal customers in a positive manner, thus
leading to substantial benefits to Infosys. These factors include: delivering in
challenging circumstances; reacting nimbly to change; rapidly assimilating new
knowledge and using it in new, unstructured situations; making significant
contributions to the knowledge base of the organization; successfully leading
and motivating team members by setting an example; and adhering to the highest
norms of values and personal integrity.
We are proud to announce the winners of this year's Awards for excellence.
Awards for excellence
2000-2001
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Goldman Sachs
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Account Management
Naresh D'Mello Sadish H. C.
Jagadish B. R. Sandeep Sehgal
Sajan Verghis Mathew Sridhar G.
Sobha Meera P. R. Sriram P.
Joydeep Muklwjee Vasudevan V. R.
Communication & Product Services
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Practice Unit management
Rajiv Kuchhal
Hariharan S. Murthy
Parameswar Y.
Ravi Kumar Sheharkar
New York Life International
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Project management
Ravi R. Anand Chandra Shekhar Matta
Babu S. K. Muthusubramanian B.
Poomima Harekrishna Peefhambar V. T.
Ritesh Khanra Srinath P.
Manoj O.
Toshiba
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Project management
Chandra Shekar Kakal
Indranil Mukherjee
Rajesh Rau A
Sriram V.
Awards for excellence
2000-2001
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EveryD.com
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Project Management
Shveta Arora Navin Kumar
Armit Deshpande V. Rohit Mehra
Sudhir Subramanya Hola George Varghese
Vaishali V. Khandekar Ghanashyam Wagle
Education & Research Team
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Scalability & enabling growth
Vivekanand P. Kochikar
Subrahmanya S. v.
Suresh J. K.
HRD Team
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Scalability & enabling growth
Gagan Bhargava
Eshan Joshi
Karthkeya N. Sarma
Sreekanth Shenoy P.
George Thomas
Globalization Initiatives
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Scalability & enabling growth
Krishnan S.
Sumil Kumar D.
Nithyanardan R.
Jayash D. Sanghrajka
Chaitanya G.
Santosh Thangavelu
Infrastructure
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Creation
Vijay Kumar C.
Maintenance
Binod H. R.
Ramadas Kamath U.
Col. Krishna C.V.
Awards for excellence
2000-2001
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New DC Setups
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Infrastructure
Dinesh S. Madhuranath K. V.
Ganapathy P. R. Natarajan S.
Dass Gunalan Vijayeendra S. Purohit
Charles Henry Hawks
Koushik R. N.
Information Systems Team
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Systems & processes
Deepak Bhalla
Nitin Gupta
Narendra Murari S.
Ramesh G.
Shivshankar J.
IMC Ramkrishna Bajaj Team
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Systems & process
Ninmalya Barua
Jude Fernandez
Meera Govind R.
Naresh T. Raisinghani
Sukumar S.
Visasixers
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Systems & process
Ardhendu Sekhar Das Khutaija Rahman
Ganesh G. Ramesh S.
Aparna Goerka Hema Ravichandar
Murali S. Kakolu
Awards for excellence
2000-2001
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Internal Customer Delight Champions
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Bataji V. Rashmita Parlja
Padmarabha Bhat. P. Prathviraj K. K.
Abhitash Kumar Y. Shankar D. P.
Muthanna Joseph Thomas A.
Banking Business Unit Management Team
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Great take off
Arnit Kumar Bhadra Girish G. Vaidya
Merwin Femandes Rivi Varghese
Jaymalya Palit Vinay C. S.
Rangarajan P.
Value Systems Champions
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Bhaskar Ghosh Vinayak Pai V.
Nandita Mohan Gurjar Priti Jay Rao
Narendran Koduvallat Suma Subramarian
Mohan M. M.
Letter to Shareholders
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Dear shareholders:
We are delighted to report on our performance in fiscal 2001. Under Indian GAAP,
revenues grew by 113% over FY2000 while net profits from ordinary activities
witnessed an increase of 118%. As transformation partners to Fortune 500 and
other established corporations, we continued to focus on building long-term
relationships, reflected in our repeat business rate of 85%. We added 4,442
employees, net of separations, and signed up 122 new clients during the year.
Recent months have witnessed unprecedented turbulence in the technology sector
in the US, which in turn has contributed to a slowdown in the overall economy.
Technology sector valuations have dropped; revenue shortfalls, profit warnings
and layoffs have become commonplace; most dot-coms are on the way to accelerated
oblivion; and the urgency for large corporations to adopt new initiatives has
declined.
IT budgets are now subject to careful consideration. Companies now seek to
maximize the return on their IT investments and therefore focus on short-
gestation projects that promise predictable, substantial payoffs. As the me-too
approach to new technology experimentation fades out, CIOs increasingly focus on
consolidation, integration and convergence imperatives, rather than on radical
advances in technology infrastructure. There is an unmistakable shift towards
value-for-money and, as a result, towards longer decision-making cycle times.
Clearly, these are challenging times for an IT services company. As self-
preservation and prudence descend on US industry, the near-term demand outlook
for IT services is not as rosy as in the boom years. The immediate future is
therefore uncertain - which is the key reason for our FY2002 estimates of 30%
growth in revenues over the year.
Our estimates are based on our current understanding of the marketplace. We
continue to be in close contact with our clients and have factored in our growth
expectations from both existing and new clients. We believe that increasing
billing rates will be a challenge in the current environment and expect the
majority of our FY2002 growth to come from increasing business volumes.
Nevertheless, we continue to be fully prepared to tap into additional business
opportunities that may arise and intend to have all the ingredients of growth in
place - infrastructure, people, processes and systems. Consequently, we
anticipate $ 80 million in capital expenditure, and intend to add between 1,500
and 2,000 people to our workforce during FY2002.
Indeed, it is during times like these that industries undergo profound
transformations. The IT services sector has begun to witness an unprecedented
flight to quality. Customers, investors and employees will gravitate towards
companies that have committed high-quality management teams, deep client
relationships, an impeccable track record of customer satisfaction, a de-risked
business model, high financial discipline, a strong value system and, above all,
the ability to manage change.
Our medium-term outlook for IT services continues to be positive. We believe
that large corporations are still in the early stages of their e-business build-
out and will face huge integration and enhancement imperatives with their
existing systems. Further, despite the current venture funding environment, we
believe that select high-quality ventures will continue to push the technology
envelope and will need strong IT partnerships to achieve their vision.
Further, we strongly believe that, at the end of the ongoing turbulence, India
will emerge stronger than ever as a preferred destination for IT outsourcing.
With many US-based IT services players facing extinction, with value-for-money
emerging as a key CIO imperative, and with the increasing recognition of the
quality of its talent, India is all set to consolidate its position as a major
force on the global IT services map. And Infosys, given its brand equity with
Indian talent and its relationships with leading universities, continues to be
the employer-of-choice for IT professionals.
Infosys continues to focus on building strong relationships with large
corporations, gaining an in-depth understanding of their decision cycles, and
maintaining an impeccable record in customer satisfaction. Our addition of 37
clients in Q4FY2001 was the highest ever in a quarter. Of the 122 clients added
during the year, the majority were large corporations. Key wins included New
York Life International, a leading life insurance firm; ABB Alstom, a global
specialist in energy and transport infrastructure; Providian, the fifth-largest
bankcard provider in the US; The Bank of Nova Scotia, a leading global financial
institution headquartered in Canada; Schlumberger, a leading international
technical company; Dynegy, a leading provider of energy and communications
solutions; Monsanto, a leading global provider of technology-based solutions and
agricultural products; Telenet, a premier telecommunications company in Belgium;
Vodafone Networks, a large UK-based mobile telecommunications company; Siemens
Energy and Automation, a provider of complete electrical, engineering and
automation solutions; and Swiss Re, one of the world's leading re-insurers. We
also entered into strategic alliances with Microsoft, TIBCO, i2 Technologies and
Intel. Further, in order to garner expertise in high-potential technology areas,
we continued to work with high-quality venture-funded companies.
During the year, we launched FINACLE(TM), an integrated core banking solution
that leverages Internet technologies to drive the operations of a bank. The
banking unit acquired 15 new clients - five out of the eight new private sector
banks in India are now powered by FINACLE(TM). In one of the largest wins for
banking software in India, we signed up Punjab National Bank for deployment of
our banking platform across 1,500 branches.
Two of Infosys' investee companies - EC Cubed, a US-based provider of B2B e-
commerce solutions, and Alpha Thinx, a Vienna-based company operating in the
wireless Internet space - filed for liquidation during the year. Due to capital
market conditions, they were unable to secure funding for their growth plans. We
derived tremendous benefits from these partnerships and were able to leverage
the expertise gained from them across our other clients. However, in line with
our conservative reporting policies, pending the conclusion of liquidation
proceedings, we have fully provided for these investments and for receivables
from these clients in our income statement for the year.
We continued to expand our presence overseas and in India, adding approximately
6,40,000 square feet in physical infrastructure space during the year. We
operationalized proximity development centers in Croydon, a suburb of London;
Lisle, a suburb of Chicago; Berkeley Heights, New Jersey; and Phoenix, Arizona
and also expanded capacity at our global development center in Toronto. We
established marketing offices in Hong Kong, Sydney, Phoenix, U.A.E., Argentina
and Paris and inaugurated the Infosys City facility in Bangalore. In order to
groom leaders of the future, we are setting up the Infosys Leadership Institute
in Mysore, Karnataka with state-of-the-art training and hostel facilities.
Strict financial discipline has always been a key imperative for Infosys. We
continue to be debt-free, to have conservative budgeting and cost management
processes, and, with $ 124 million in cash, to have a strong and healthy balance
sheet.
Infosys was ranked No. 1 in a survey by Hewitt Associates and Business Today on
the best companies to work for in India. The Far Eastern Economic Review rated
Infosys as the No. 1 company in India in the Review 2000. Infosys became the
first IT company to win the IMC Ramkrishna Bajaj National Quality Award and was
also judged by Financial Technology Asia as the Best Regional Software House.
For the sixth year in succession, we received the Silver Shield from the
Institute of Chartered Accountants of India for the Best Presented Accounts,
among the entries received from non-financial, private sector companies. The
Asiamoney poll of financial analysts voted us the best in management among
listed companies in India for the fifth time in a row. The BankAway product from
Infosys won the CSI-Wipro Award for the Best Packaged Application for the year
2000.
During the year, we inducted Prof. Jitendra Vir Singh, Vice Dean, International
Academic Affairs at the Wharton School; Dr. Omkar Goswami, Chief Economist to
the Confederation of Indian Industry; Senator Larry Pressler, Former Senator, US
Senate and presently Attorney and Senior Partner, O'Connor and Hannan LLP; Rama
Bijapurkar, a well-known management consultant; and T. V. Mohandas Pai, Srinath
Batni and Phaneesh Murthy, senior officers in the company, onto the board of
directors. Also, during the year, S.M. Datta retired from the board of
directors. During the year, V. Balakrishnan, Associate Vice President - Finance,
took up additional responsibilities as Company Secretary. On your behalf, we
wish them the very best and also salute our fellow Infoscions on another year of
sterling achievements.
/s/ Nandan M. Nilekani /s/ N. R. Narayana Murthy
Nandan M. Nilekani N. R. Narayana Murthy
Bangalore Managing Director, President Chairman and Chief Executive
April 11, 2001 and Chief Operating Officer Officer
Forward-looking statements in the letter to the shareholders should be read in
conjunction with the following cautionary statements. Certain expectations and
projections regarding future performance of the company referenced in this
Annual Report are forward-looking statements. These expectations and projections
are based on currently available competitive, financial, and economic data along
with the company's operating plans and are subject to certain future events and
uncertainties, that could cause actual results to differ materially from those
that may be indicated by such statements.
Infosys - Technology at work
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You on the cutting edge of technology have already made yesterday's
impossibilities the commonplace realities of today.
Ronald Reagan
Infosys presents a compilation of projects undertaken during the year that
showcase our expertise in leading-edge technologies and its impact on our
clients. These projects span various industries and extend from designing
automobile seat systems to developing software for enabling next-generation
optical networks.
A recurring theme across these projects is the role of Infosys as an end-to-end
partner with active involvement from conceptualization to implementation.
Further, these projects had strict time-to-market imperatives, requiring Infosys
to rapidly scale up its project team and use its Global Delivery Model to
deliver within time and budget, while meeting the highest quality benchmarks.
Infosys is partnering CiDRA in developing innovative optical networking products
that use device-level wavelength management software, thereby increasing network
effectiveness. The Johnson Controls project showcases Infosys' use of simulation
techniques and Finite Element Analysis to engineer state-of-the-art designs for
automobile seats. Infosys implemented an end-to-end ERP solution for Toshiba and
is playing a vital role in Cisco's Voice over IP and optical networking projects
by developing critical software components and solutions.
We have attempted to convey complex technology ideas in simple terms. However,
we request readers to note that it is difficult to convey such ideas without
using some technical language.
Software for Optical Networking Products
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CiDRA Corporation, a high-technology manufacturing company based in the United
States, designs, manufactures and markets networking and sensing products based
on optical fiber technology. Infosys developed the firmware for key components
of the Optical Channel Monitor (OCM), one of CiDRA's offerings for next-
generation optical networks.
Infosys managed the entire software lifecycle, from architecture definition to
implementation, for the 2-Phase Downhole Flowmeter. This device, a key component
of CiDRA's permanent remote sensing system, is designed to operate under a wide
range of temperatures, and withstand compression of over 1000 atmospheres. A
two-tier architecture was adopted using Microsoft's COM/DCOM technology to
separate the process of delivery of results from the data acquisition systems.
Further, facilities were provided for system administration, maintenance and
data access over a local area network or a modem. Infosys developed embedded
software for the Digital Signal Processor, incorporating statistical algorithms
for automatic edge detection, to ensure robust detection of optical signals and
dynamic rate computation. An Algorithm Manager was developed to control the
allocation of computational resources, based on the theory of Directional
Acyclic Graphs (DAG). A Fault Manager was also developed to enable self-health
diagnosis and autonomous failure recovery.
Next-generation optical networks
Infosys is partnering with CiDRA to develop photonic products for bandwidth
management in next-generation communication systems that will rapidly deploy and
distribute bandwidth to multiple points within the optical network. This
increased provisioning complexity will require Reconfigurable Optical Network
Elements (RONE) that have built-in intelligence through embedded software, and
provide control closer to the physical layer. Self-aware, Smart Optical Network
Elements (SONE), having intelligence in the physical layer, will reduce the
complexity of the network software required to control and optimize the optical
network.
As part of its family of AgileWave(TM) products for next-generation
communication systems, CiDRA is currently developing an OCM device. This is an
optical spectral analyzer for Dense Wavelength Division Multiplexing (DWDM)
channel monitoring that uses precisely-tunable Bragg grating technology for
improved channel resolution and optical signal-to-noise measurement. A Bragg
grating has varying refractive index along the core of the optical fiber.
Consequently, wavelength scanners based on this technology have better
resolution and higher configurability as compared to contemporary technologies.
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Infosys' contribution to the Optical Channel Monitor
The figure illustrates the basic design of the OCM device. Using an optical tap
made on a telecommunications fiber, a small amount of light is passed through an
optical filter based on CiDRA's tunable filter technology. The output of the
filter is detected by a photodiode that measures the signal power over the
wavelength band sampled by the filter. The sampled value is further filtered by
the Digital Signal Processor (DSP). Infosys developed an advanced deconvolution
signal-processing algorithm to extract data from the photo detector. The
firmware developed for the DSP handles signal processing for extracting data
from the photodetector, and also performs real-time control for filter
positioning.
The filters are scanned using a design that provides highly accurate and fast
filter positioning over many cycles. A precision feedback system allows accurate
measurement of the filter position in the wavelength domain. The filters are
controlled using a dedicated processor. Infosys was involved in developing a
real-time, closed-loop controller firmware to enable accurate sweep control of
the filter. Separate coordinated processors are currently used to sample and
filter optical power, and to control filter tuning. An independent host
processor accepts user scan and setup commands, and displays the data acquired
by the system. The calibration software developed for the host computer
incorporated compensation techniques involving two-dimensional surface
approximation techniques.
The cutting edge
Infosys' technical contributions to the OCM, together with its rapid development
and implementation of prototype embedded systems, has provided CiDRA with an
important technical advantage in the demonstration of new product feasibility in
an industry that rewards innovation and speed-to-market.
Automotive Seating System Development
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Johnson Controls Inc. (JCI) is a Fortune 500 multinational corporation involved
in the design, development and manufacturing of automotive seating and interior
systems. JCI supplies these systems to automotive giants such as Ford, GM,
Chrysler and Volvo. Using advanced techniques in mathematics, structural
mechanics, Finite Element Analysis (FEA), iterative design, and simulation,
Infosys has helped JCI reduce cost and cycle time in the design of automotive
seats.
Engineering seating system simulation
In order to ensure occupant safety in road accidents, several countries, as well
as, supranational institutions have implemented regulations that prescribe
stringent design specifications for seats and accessories.
The key technological challenge in this project was to simulate the crashing of
a vehicle. The design cases for crash analysis include head-end and rear-end
crashes against another moving or another stationary vehicle. Conventional
finite element techniques, based on implicit methods, fall short of addressing
such simulations, as the duration of the incident is typically less than one
tenth of a second. The Infosys team established an FEA methodology and analysis
process using the explicit time integration method, and performed the crash
simulation and analysis using various third-party software tools.
Infosys has implemented and simulated crash scenario models for various
combinations of key components including passenger seat, dummy placement, safety
feature profile and crash loads. The most complex part of a crash simulation is
the occupant modeling. Human dummy models representing the 95/th/ or 50/th/
percentile of the specified country's population were modeled with high accuracy
using FEA. Each dummy profile requires specifications for more than 90
components and 43 joints. The simulation takes into account factors such as
material non-linearity, contacts, deformation and plastic strain profiles. It
also includes safety-modeling features such as seat belts, retractors and pre-
tensioners. The output of the simulation process includes crash performance
metrics for the seating structure, components, mechanisms, driver safety and
passenger safety.
[CHARTS APPEAR HERE]
The Infosys edge
Infosys partnered with JCI's UK division in the complete seating system design
life-cycle, and brought its deep domain knowledge as well as its technology
expertise to the process. This has resulted in improvements in seat design, and
reductions in design cycle time. For instance, Infosys and the JCI Team designed
a seat-back structure concept in three weeks, as opposed to an industry average
cycle time of three months.
Other key contributions of Infosys are:
. Playing a significant role in developing a new class of seating systems,
compliant with European regulations, from concept to proof.
. Developing critical mechanisms for new generation seating systems, such as a
true flat-fold mechanism for tabletop, and a striker-bar mechanism for seat
anchorage. One of the sub-systems developed by the Infosys-JCI team is in the
process of being patented.
. Re-engineering existing seating systems by adding new functionality and
features.
. Rectifying problems concerning in-field seating systems, using Failure
Investigation techniques based on FEA, and successfully redesigning these
systems.
Global delivery advantage
Infosys has established a dedicated offshore facility for JCI in Bangalore that
has state-of-the-art software, such as LS-DYNA from Livermore Software
Technology Corporation and MARC from MSC Software Corporation, and high-end
multi-processor, number-crunching hardware, such as SGI Origin2200 and HP-J6000.
By segregating the product development environment into onsite and offshore
components, Infosys has been able to effectively leverage the Global Delivery
Model to deliver a high-quality, rapid-deployment solution to JCI.
Enterprising Initiatives
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Toshiba America Electronic Components Inc. is one of the largest suppliers of
semiconductors, electronic components and storage devices. The Order Fulfillment
project is an end-to-end ERP implementation for Toshiba. Infosys completed the
project in 18 months, as compared to an estimated time of 30 months by other
vendors. This was accomplished by relying on our IntERPryz methodology for ERP
implementation, deep domain expertise, and sound project management techniques.
Toshiba wanted to revamp its business processes to reduce Order-to-Delivery
lead-time, minimize inventory, increase customer service levels, and enhance
supply chain visibility. Moreover, Toshiba's diverse existing systems, built on
heterogeneous technology platforms, needed to be integrated. This was achieved
by implementing a robust, scalable, flexible and highly configurable system.
The Infosys edge
Infosys was involved in business process definition, program management, project
management, package evaluation, package implementation, key user training, and
post-production support.
Infosys helped streamline Toshiba's supply chain by implementing and integrating
solutions in Enterprise Resource Planning (ERP), Supply Chain Management (SCM)
and Warehouse Management System (WMS) / Transportation Management System
(TMS). Oracle Applications R11.0.3 was implemented to streamline manufacturing,
distribution, procurement and financial accounting processes, and was integrated
with i2 Technologies' Demand Planner. A new enterprise WMS / TMS product from HK
Systems was evaluated and implemented for improving order-execution efficiency,
outbound visibility, and reverse logistics. These applications run on Sun
Solaris 2.6 and Windows NT platforms.
An enterprise-wide data model was prepared for standardizing performance metrics
across the organization and streamlining Toshiba's internal processes. This
involved gaining a deep understanding of the business processes, and
implementing systems to extract and report these data.
Extending the ERP package
Infosys enhanced the functionalities offered by the chosen packages, by using
its IntERPryz methodology for extending the ERP solution. More than 20 modules
were designed, developed and fully integrated with the ERP package, thus,
catering to the specific non-standard functionality requirements. These add-on
applications are designed as plug-in modules.
Infosys' contributions for the add-on applications include:
. Developing a stock allocation system incorporating a rule-based algorithm
that ensures seamless execution of Toshiba's customer support plan.
. Developing a distribution system for managing the sales channel through
distributors, getting real-time visibility to the distributor's inventory,
and ensuring price protection.
. Building a sales commission system, which implements a multi-level split
commission policy, along with, the engineering design tracking for
prototypes.
. Creating an Early Shipping Advance (ESA) system to manage the inbound supply
chain visibility, starting from the factory production and warehouse to the
shipment's arrival at US ports, and then cross-docking or re-routing directly
to the customers.
High performance solution
A high degree of fault tolerance, in hardware and software, was achieved by a
three-tier solution. Cisco's Load Director was used for optimal load balancing.
A parallel concurrent processing architecture, having multiple concurrent
managers, running in separate servers, was able to process a large number of
jobs simultaneously, to enhance throughput for batch jobs. Further, 24-hour
availability was ensured by having alternate managers execute jobs in the course
of failure of any manager. Finally, an elaborate database sizing exercise
ensured optimal performance at the database level.
[CHART APPEARS HERE]
Voice over IP
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Cisco Systems Inc., a California-based company, is a leader in networking and
Internet backbone products such as routers and switches. Infosys has been chosen
as a strategic Cisco partner by the company's Global Partner Engineering (GPE)
group, and has played a vital role in the development and support of the Cisco
Call Manager (CCM), encompassing areas of test automation, stress testing,
conference control, and alarm configuration. Infosys has delivered critical
products on schedule by leveraging its expertise in the Voice over IP (VoIP)
domain. Infosys' domain knowledge in VoIP includes areas such as architecture
for IP PBX, call processing features, gateways, routers, IP phone services
protocols, routing protocols, and open telephony standards.
Call Manager
The CCM is the software-based call-processing component of the Cisco IP
Telephony solution, and is a part of the Cisco Architecture for Voice, Video and
Integrated Data (AVVID). The CCM extends enterprise telephony features and
functions to packet telephony network devices such as IP phones, media
processing devices, VoIP gateways, and multimedia applications. An IP network
consisting of the CCM, IP phones, gateways and applications provides a
distributed virtual telephony network.
[CHART APPEARS HERE]
Infosys' contribution
Infosys played a vital role in the CCM effort by developing a number of tools
and utilities for stress-testing and simulation. Key contributions include:
. Developing a Stress-testing and Performance Management tool - a highly-
configurable, real-time application for simulating heavy load scenarios for
device registration, call processing (with / without voice streaming) and
redundancy support. This tool enables the simulation of a network of over
1000 IP phones on a single PC. Multiple servers can be used to scale-up to
simulate any number of phones for stress testing.
. Developing a Media Gateway Control Protocol (MGCP) simulator - a tool for
setting up a large number of MGCP gateways and load-testing the CCM. It
emulates gateway behavior during registration to the CCM, and during
switchover and switchback of the CCMs in a cluster setup. A TCP setup has
been provided for handling Q931 messages that, in turn, can be used in the
future to stress-test such messages between the CCM and the gateways.
Currently, each installation supports 50 gateways, with an option to scale up
by having multiple installations. A command line interface test- scripting
facility has been provided for test automation.
. Building a Script Automation tool for simulating features of IP phones. This
application can handle all the messages from IP phones to PBX (a subset of
H323).
. Architecting a web-based and cross-platform-compatible Billing and Reporting
product for IP PBX. This has been rolled out as a plug-in to the CCM. It
records and classifies the call type, as well as, the Quality of Service
(QoS). It also applies rating parameters, and provides information on calls
made by users, billing, Quality of Service, traffic statistics and device
utilization. Further, it provides a Lightweight Directory Access Protocol
(LDAP) interface for enterprise information stored in different directory
servers. Among other places, the product is deployed in a space ship launched
by NASA.
Optical networking
Infosys has played a key role in the Operations Systems Modifications for the
Integration of Network Elements (OSMINE) certification for the ONS 15454
product. This required defining a TL1 interface by implementing hundreds of new
commands and correcting the behavior of existing commands. Faced with a timeline
of three months, Infosys demonstrated its ability to understand complex system
architectures rapidly. Infosys has implemented a large number of new commands
in areas such as protection switching, performance monitoring and test access,
thereby improving the quality of the software.
Board of directors Management council invitees
N. R. Narayana Murthy Bhashyam M. R. Srinjay Sengupta
Nandan M. Nilekani Associate Vice President - Regional Manager and Associate
Deepak M. Satwalekar Software Engineering Process Group Vice President - Sales - Europe
Prof. Marti G. Subrahmanyam
Ramesh Vangal Binod H. R. Srinivas B. G.
Philip Yeo Associate Vice President - Associate Vice President -
Prof. Jitendra Vir Singh Commercial & Facilities Delivery - Enterprise Solutions
Dr. Omkar Goswami
Sen. Larry Pressler Subhash Dhar Srinivasan V.
Rama Bijapurkar Regional Manager and Associate Vice President -
Gopalakrishnan S. Associate Vice President - Sales Delivery - Banking Business Unit
Dinesh K.
Shibulal S. D. Dheeshjith V. G. Sriram V.
Mohandas Pai T. V. Associate Vice President - Regional Manager and Associate
Phaneesh Murthy Delivery - Asia Pacific Vice President - Sales - Asia
Srinath Batni Pacific
Bhaskar Ghosh
Associate Vice President - Srivathsa P. S.
Development Center - Bhubaneswar Senior Manager - Recruitment - HRD
Committees of the board
Nandita Gurjar Subramanyam G. V.
Audit committee Associate Vice President - Associate Vice President -
Deepak M. Satwalekar, Chairman Learning & Development - HRD Software Engineering & Technology
Prof. Marti G. Subrahmanyam Labs
Ramesh Vangal Ramadas Kamath U.
Dr. Omkar Goswami Associate Vice President - Sukumar S.
Sen. Larry Pressler Accounts & Administration Manager - Corporate Planning
Rama Bijapurkar
Vivekanand P. Kochikar Padmanabhan Venkataraman
Compensation committee Senior Project Manager - Associate Vice President -
Prof. Marti G. Subrahmanyam, Chairman
Deepak M. Satwalekar Education & Research Delivery - Quality
Philip Yeo
Prof. Jitendra Vir Singh Sudha Kumar Venkataramanan T. S.
Dr. Omkar Goswami Associate Vice President - Associate Vice President -
Corporate Marketing Banking Business Unit
Nominations committee
Ramesh Vangal, Chairman Vijay Kumar C. Advisor to the management council
Philip Yeo Associate Vice President -
Prof. Jitendra Vir Singh Infrastructure Development Jayaram G. K., Dr.
Sen. Larry Pressler Head - Infosys Leadership
Hariharan S. Murthy Institute
Investor grievance committee Regional Manager and Associate Vice
Philip Yeo, Chairman President - Voice of the Youth
Rama Bijapurkar Sales - Communication & Product Services Ayan Chatterjee
Nandan M. Nilekani Ashiss Kumar Dash
Dinesh K. Narendran K. Mukul Gupta
Senior Project Manager - Eshan Joshi
Shibulal S. D. Development Center - Mangalore Madhavan V. B.
Manjula M. K.
Parameswar Y. Nagaraj N. S.
Associate Vice President - Vinayak Pai V.
Communication & Product Services - Meera Rajeevan
Other Telecom Business
Prasad T. P. Infosys Foundation
Regional Manager and Associate Vice Trustees
President - Sales - South North America Raghavan N. S., Chairman
Sudha Murty
Pravin Rao U. B. Sudha Gopalakrishnan
Vice President -
Delivery (South North America)
Priti Jay Rao
Associate Vice President -
Development Center - Pune
Shiv Shankar N.
Associate Vice President -
Development Center - Chennai-
Sivashankar J.
As on April 25, 2001 Associate Vice President -
Information Systems
Directors' report
- --------------------------------------------------------------------------------
To the members,
Your directors are pleased to present their report on the business and
operations of your company for the year ended March 31, 2001.
Financial results in Rs. crore except per share data *
- -----------------------------------------------------------------------------------------------------------------------
Year ended March 31 2001 2000
- -----------------------------------------------------------------------------------------------------------------------
Total income 1,959.94 921.46
Total expenditure 1,135.73 542.58
Provision for investments 15.29 -
Operating profit (PBIDT) 808.92 378.88
Interest - -
Depreciation 112.89 53.23
Profit before tax and extraordinary item 696.03 325.65
Provision for tax 72.71 39.70
Profit after tax before extraordinary item 623.32 285.95
Extraordinary item
transfer of intellectual property right (net of tax) 5.49 -
provision no longer required - 7.57
Net profit after tax and extraordinary item 628.81 293.52
Appropriations
Interim dividend - paid 16.54 9.92
Final dividend - recommended 49.62 19.84
Total dividend 66.16 29.76
Dividend tax 8.70 3.27
Transferred to general reserve 553.96 260.49
- -----------------------------------------------------------------------------------------------------------------------
Earnings per share (equity shares, par value Rs.5 each)
Basic 95.06 44.38
Diluted 94.76 44.37
- -----------------------------------------------------------------------------------------------------------------------
* 1 crore equals 10 million.
Results of operations
Total revenues grew to Rs. 1,959.94 crore from Rs. 921.46 crore last year, a
growth rate of 112.7%. Operating profit grew to Rs. 808.92 crore ( 41.27% of
total revenues) from Rs. 378.88 crore (41.12% of total revenues), a growth rate
of 113.5%. Profit after tax, from ordinary activities, increased to Rs. 623.32
crore (31.80% of total revenue) from Rs. 285.95 crore (31.03% of total revenue),
an increase of 118.0%.
During the year, the company transferred its intellectual property rights in
Onscan, a web-enabled notification product, to OnMobile Systems Inc. (formerly
known as Onscan Inc.). The product was transferred for a gross consideration of
Rs. 8.93 crore (US$ 2 million), received in the form of preferred voting and
non-voting securities of OnMobile Systems Inc. The income from the transfer of
Rs. 5.49 crore (net of tax) is disclosed as an extraordinary item.
During the year, two of your company's investee companies, EC Cubed Inc. and
Alpha Thinx Mobile Phone Services AG, filed for liquidation. Pending the
conclusion of liquidation proceedings, your company has provided Rs. 15.29 crore
towards the entire amount of these investments.
Dividend
An interim dividend of Rs. 2.50 per share (50% on par value of Rs. 5) was paid
in November 2000. Your directors now recommend a final dividend of Rs. 7.50 per
share (150% on par value of Rs. 5) aggregating Rs. 10.00 per share (200% on par
value of Rs. 5), for the current year. The total amount of dividend is Rs. 66.16
crore, as against Rs. 29.76 crore for the previous year. Dividend (including
dividend tax), as a percentage of net profit after tax from ordinary activities,
is 12.00%, as compared to 11.55% in the previous year. Under the Indian Income
Tax Act 1961, the receipt of dividend is tax-free in the
hands of the shareholders. The tax on distributed profits, payable by the
company, increased to Rs. 8.70 crore from Rs. 3.27 crore in the previous year.
Increase in share capital
Your company issued 7,417 shares on the exercise of stock options, issued under
the 1998 and 1999 employee stock option plans. Due to this, the outstanding
issued, subscribed and paid-up equity share capital increased from 6,61,50,700
shares, during the previous year, to 6,61,58,117 shares in the year under
review.
Business
Your company demonstrated all-round growth during the year. Under Indian GAAP,
revenues grew by 113% over FY2000 while net profits from ordinary activities
witnessed an increase of 118%. As transformation partners to Fortune 500
corporations, your company continued to focus on building long-term
relationships, reflected in its repeat business rate of 85%. Your company signed
up 122 new clients, the majority of whom were large corporations, and had a
total client base of 273 at the end of the year. Further, your company had 80
million-dollar clients, 19 five-million-dollar clients and 11 ten-million-dollar
clients as compared to 42, 10 and 4 in the previous year.
A sizeable proportion of your company's growth was driven by helping Fortune 500
and other established companies to embrace the new economy paradigm. The company
also worked with various venture-funded clients to garner expertise in niche
technology areas, which was leveraged to provide high-technology solutions to
larger corporations around the world. Revenues from start-up and venture-funded
companies accounted for 10.8% of total revenues. The following table provides
the percentage of income from dot-com and Internet, and telecom start-up
companies during the year.
- -----------------------------------------------------------------------------------------------------------------------
Q1 Q2 Q3 Q4 FY 2001
- -----------------------------------------------------------------------------------------------------------------------
Dot-com and Internet start-up companies 10.9% 9.5% 5.8% 4.0% 7.1%
Telecom start-up companies 6.3% 2.7% 3.5% 3.0% 3.7%
Total start-up and venture-funded companies 17.2% 12.2% 9.3% 7.0% 10.8%
- -----------------------------------------------------------------------------------------------------------------------
Given recent conditions in the capital markets, your company intends to reduce
its exposure to venture-funded companies, and to work even more selectively in
this space.
The year also saw your company scaling up on the human resources and
infrastructure front. Net of separations, 4,442 employees were added, taking the
total strength to 9,831. Your company added another 6.4 lakh square feet of
physical infrastructure space, taking the total space available to 16.7 lakh
square feet. The total number of marketing offices increased to 25, up from 20
in the previous year.
Your company's software export revenues aggregated Rs. 1,874.03 crore, up
115.48% from Rs. 869.70 crore the previous year. During the year, 74.6% of the
export revenues came from North America, 19.1% from Europe, and 6.3% from the
rest of the world. The share of the fixed-price component of the business was
28.2%, as compared to 31.5% during the previous year. Revenue productivity, in
dollar terms, grew by 27.0%.
Several market studies published recently point to a slowdown in IT spending in
the United States, which is a key market for your company. Your company is
closely monitoring the market situation and believes that its unique business
model and prudent risk-management practices, coupled with a strong customer base
and deep client relationships, give it a sustainable long-term competitive
advantage. Your company will aggressively pursue new opportunities and will
ensure adequate internal preparedness to take maximum advantage of such
opportunities.
Banking Business Unit (BBU)
With a 100% increase in revenues over the previous year, the Banking Business
Unit demonstrated rapid growth. Your company launched FINACLE(TM), an integrated
core banking solution that is centralized, multi-currency and multi-language
enabled, functionally rich, and addresses both retail and corporate banking
requirements. Positioned as a core banking e-platform that brings about a
paradigm shift in the way banking is conducted, FINACLE(TM) leverages Internet
technologies to drive the operations of a bank.
The Banking Business Unit has consolidated its position in the Indian and
African markets, and has also expanded into the Middle East. During the year, it
acquired 15 new clients, 10 in India and 5 overseas, for FINACLE(TM), BankAway,
and PayAway applications. In one of the largest wins for banking software in
India, your company signed up Punjab National Bank for deployment of its banking
platform across 1500 branches. At present, five out of the eight new private
sector banks in India are powered by FINACLE(TM). With this, your company has
gained the highest market share amongst Indian banks offering Internet banking
services.
Global software development centers
In 1999, as part of its globalization program, your company launched several
development centers outside India. During the year, your company started a
proximity development center in Croydon, a suburb of London, UK. The center
currently has 37 employees and can scale up to accommodate 82 employees. The
company also expanded capacity at its global development center in Toronto,
Canada. The center currently has 58 employees and can scale up to accommodate
114 employees. Your company also opened three proximity development centers in
the USA, at Lisle, a suburb of Chicago, Illinois; Berkeley Heights, New Jersey;
and Phoenix, Arizona. These centers have the potential to scale up to
accommodate 95, 110 and 30 personnel respectively.
Development centers in India
Your company incurred capital expenditure aggregating Rs. 349.51 crore on
physical infrastructure, up from Rs.122.40 crore the previous year. Further,
your company incurred Rs.113.84 crore on technological infrastructure, up from
Rs. 37.47 crore the previous year. Of the total capital expenditure, Rs. 349.66
crore has been capitalized during the year, up from Rs. 117.79 crore the
previous year.
The Infosys City facility in Bangalore was inaugurated during the year.
Construction of the Management Development Center is on schedule. An additional
60,000 square feet of software development infrastructure to accommodate 600
professionals is in the final stages of completion. Additionally, construction
has commenced on three software development blocks comprising 3,00,000 square
feet with a capacity to accommodate 1,800 professionals. The existing capacity
at Bangalore comprises 8,82,500 square feet capable of accommodating 4,500
professionals.
Phase II of the Pune campus is progressing as per schedule. The Mangalore campus
is complete and currently has a built-up area of 1,98,000 square feet to
accommodate 950 professionals. In both these cities, the existing leased
premises are being vacated. In Bhubaneswar, a second software development block
of 75,000 square feet to accommodate 600 professionals, along with a food court
of 28,000 square feet, is nearing completion. In Chennai, Phase I of the
software development center is substantially complete and is getting ready for
use. Phase II of the software development center comprising 2,36,000 square feet
to accommodate 1,300 professionals is under construction. Construction of Phase
I of the new campus at Hyderabad comprising 2,73,000 square feet commenced
during the year with a capacity to accommodate 1,200 professionals.
In Mysore, Phase I of the software development center and the Infosys Leadership
Institute (ILI) campus is progressing as per schedule. As of March 31, 2001, the
company had 16,65,800 square feet of space capable of accommodating 10,100
professionals and 19,08,200 square feet under construction including the ILI.
Overseas branches
To accelerate the sales effort in overseas markets, sales offices were opened in
Hong Kong, Sydney, Phoenix (Arizona), U.A.E., Argentina and Paris. During the
coming year, additional sales offices are expected to be opened in North
America, Europe and Asia. Expansion of the overseas sales network will help your
company access new markets and broaden its client base. As at the year-end, your
company had 21 marketing offices overseas.
Incubator funding
Your company is in an industry that offers great opportunity for highly
competent and entrepreneurial professionals with high aspirations. In keeping
with its philosophy of encouraging budding entrepreneurs within the
organization, your company has provided an incubation mechanism for them to
launch their own ventures while continuing to derive benefits from a close
association with Infosys. Your company incubated Yantra Corporation, a provider
of e-fulfillment solutions, in fiscal 1996 and OnMobile Systems Inc.(formerly
known as Onscan Inc.), a wireless solutions provider, in fiscal 2000.
Yantra Corporation
Yantra Corporation provides e-business software solutions for managing supply
chain transactions across the extraprise. During the year, Yantra installed a
high-quality management team and intensified its sales effort to implement its
growth objectives. Yantra also closed a $ 49 million venture funding round with
participation from Morgan Stanley Dean Witter Private Equity, Amerindo,
Broadvision, VerticalNet, Easter Chemical Company and other investors. Further,
Yantra announced a strategic alliance with Accenture (formerly known as Andersen
Consulting) to provide supply chain solutions through PureEcommerce, a fully
web-enabled application that manages, tracks and executes complex customer
transactions across a company's extended supply chain. Infosys' economic
interest in Yantra has come down to 15.8% (on a fully diluted basis). However,
Yantra continues to be a subsidiary under the Companies Act, 1956 as the
majority of the common stock is held by your company. The particulars of the
subsidiary company required
to be provided under section 212 of the Companies Act, 1956, are attached to the
Indian GAAP financial statements contained in this annual report.
OnMobile Systems Inc.
OnMobile Systems Inc. (formerly known as Onscan Inc.) is a wireless solutions
provider to enterprises and wireless carriers around the world. The company
offers platforms, applications and professional services to deliver end-to-end
wireless solutions. The company's solutions allow wireless carriers to provide
innovative services to their customers and enable enterprises to deploy
applications targeted towards their mobile workforce. During the year, your
company transferred its intellectual property rights in Onscan, a web-enabled
notification product, to OnMobile Systems Inc. The product was transferred for a
gross consideration of $ 2 million, received in the form of preferred voting and
preferred non-voting securities of OnMobile Systems Inc. Shortly thereafter,
OnMobile Systems closed a $ 15 million venture funding round with participation
from Argo Global Capital, H&Q Asia Pacific and other investors.
JASDIC
JASDIC Park Company is an Indo-Japanese consortium founded by Mr. Kenichi Ohmae,
a well-known management strategist, along with a few Japanese companies and
three Indian companies including your company. The aim of JASDIC is to provide
high-quality software services from India to the Japanese market. This is in
line with your company's strategy to diversify its geographic client base.
Revenues from JASDIC grew by 59.3% over the previous year. Your company expects
further growth in revenues from Japan through this venture.
Strategic investments
Your company had announced its intention to make selective investments in
leading-edge companies that have the potential to yield substantial business
benefits. Such investments were also envisaged in select venture capital funds.
Benefits from these investments are primarily in the form of revenue and net
income enhancements, through technology partnerships and access to the latest
technological developments. Your company has leveraged the expertise derived
from its investee companies to deliver value to large clients across the globe.
During the year, EC Cubed Inc., a US-based provider of B2B e-commerce solutions
in which your company had made a strategic investment amounting to Rs. 13.08
crore, filed for liquidation. Alpha Thinx Mobile Phone Services AG, a
Vienna-based company operating in the wireless Internet space, in which your
company had made a strategic investment amounting to Rs. 2.21 crore, also filed
for liquidation. Due to adverse capital market conditions, these entities were
unable to raise the capital required to fund their growth plans and were
therefore forced into liquidation. Pending the conclusion of liquidation
proceedings, your company has provided for the entire amount of these
investments.
Human resource management
Given the knowledge-intensive nature of your company's activities, human
resources are among its most critical assets. Recognizing this, your company has
put in place a scalable recruitment and human resource management process,
enabling it to attract and retain high-calibre employees. Your company added
4,442 employees, net of separations, taking the total strength to 9,831 - up
from 5,389 at the end of the previous year. Your company has a robust selection
process, evidenced by the ability to conduct aptitude tests for up to 10,000
applicants in a single day across India.
Entry-level engineers are put through intense technical training and are also
exposed to cross-functional training that helps hone their soft skills. Further,
all employees are eligible for your company's stock option plan. Your company's
attrition rate, at 11.2% for the year (9.2% for the previous year), is a
testimony to its ability to attract and retain high-quality talent.
In order to ensure a safe and congenial workplace, your company has formulated
and implemented a policy against sexual harassment. Process improvements have
also been made in the areas of recruitment, training and visa processing.
Quality
Your company is rated at Level 5 of the Capability Maturity Model (CMM) of the
Software Engineering Institute at Carnegie Mellon University, USA. To address
the challenges of the future and to ensure performance improvement in an
integrated manner, your company has launched the Infosys Excellence Initiative
(IEI), which is a single umbrella for all quality initiatives within the
organization. This initiative spans various functions in the organization,
namely core delivery processes, functional and cross-functional processes, and
organizational management processes. It envisages leveraging CMM Level 5 for
delivery processes, the Malcolm Baldrige framework for organizational management
processes, and 6-sigma Cross Functional Process Mapping (CFPM) techniques for
improving cross-functional processes.
The Malcolm Baldrige framework will focus on the overall assessment of your
company's business and integration of all its business activities. 6-sigma CFPM
techniques are being used to improve customer relationship management, customer
order management, talent deployment, and other cross-functional processes. For
instance, the Visasixers initiative was launched to enhance internal customer
satisfaction with the visa filing process, and to decrease response time for
specific requirements by streamlining these processes. A cross-functional team
was established which identified and implemented 18 action items, thereby
leading to 76% increase in internal customer satisfaction, 96% adherence to
service levels, and 50% reduction in cycle times.
Infosys Leadership Institute
In order to groom leaders of the future, the Infosys Leadership Institute (ILI)
campus is being constructed in Mysore, Karnataka. Leadership development is
being planned across the organization - from junior to senior levels of
management. The ILI campus will have state-of-the-art training facilities, along
with hostel facilities for the participants of the training program. This
initiative will proactively seek to develop and facilitate leadership skills
among Infoscions, through a mix of classroom and action-oriented learning.
InStep global internship program
As part of its brand building efforts with leading universities around the
world, your company has developed InStep, a global internship program. The
program selects high-quality students from top academic institutions across the
globe and deploys them on live projects in your company's offices worldwide.
InStep has had students from a variety of backgrounds, cultures, and
universities - ranging from computer science undergraduates from the
Massachusetts Institute of Technology to graduate students of business from the
Wharton School. This year, your company held InStep information sessions in 14
educational institutions in the US, UK, Canada and France. Subsequently, we
received 700 applications for just 24 internship positions. InStep is an
integral part of your company's international recruitment initiative that aims
at making its workforce truly global.
The new information infrastructure
Your company firmly believes that internal IT initiatives are a key ingredient
for sustained corporate growth. IT is an enabler of global delivery and 24 x 7
operations and is therefore a key driver of customer satisfaction. For its
internal IT systems, your company uses an intranet backbone, straddling a range
of technologies, along with a strong back-end in SAP R/3 and Microsoft
technologies.
Your company has implemented the latest SAP R/3 version 4.6 on a
state-of-the-art Storage Area Network (SAN) solution to enable high performance
and 24 x 7 availability. Further, a range of custom-built, web-enabled systems
have been implemented that address your company's business needs. Ongoing IT
initiatives range from building a globally scalable infrastructure to
implementing e-CRM and deploying extranets.
The implementation of these will
. drive information availability to a global work force,
. enhance employee and process productivity, and
. further strengthen our client partnerships.
Additional information to shareholders
In earlier years, your company provided additional information in the form of
intangible assets scoresheet, human resources accounting, value-added statement,
brand accounting, economic value-added statement, and financial statements in
substantial compliance with the GAAP of six countries, in addition to the US and
India. This information is provided in this year's Annual Report also.
Basic financial statements are generally prepared on the historic cost basis for
income measurement and asset valuation. In a changing price environment,
financial statements should reflect changes in the economic environment. The
Institute of Chartered Accountants of India has issued a Guidance Note on
Accounting for Changing Prices. Your company has recast its balance sheet and
profit and loss account for the current year in accordance with this guidance
note to reflect the impact of changing prices on its historic cost basis
financial statements. This information is provided in the section on Additional
information to shareholders.
Corporate governance
With increasing globalization, there has been a renewed thrust on corporate
governance in India. Your company continues to be a pioneer in benchmarking its
corporate governance policies with the best in the world, and its efforts are
widely recognized by investors in India and abroad.
The Kumar Mangalam Birla Committee on Corporate Governance constituted by the
Securities and Exchange Board of India (SEBI) submitted its report in November
1999 that was accepted by SEBI in December 1999. While the recommendations of
the committee have become mandatory from this year, your company complied with
most of the recommendations in fiscal 2000 itself. For fiscal 2001, the
compliance report is provided in the Corporate governance section in this
report. The auditor's certificate on compliance with the mandatory
recommendations of the committee is annexed to this report.
In addition, your directors have documented your company's internal policies on
corporate governance. In line with the committee's recommendations, the
management discussion and analysis of the financial position of the company is
provided in this Annual Report and is incorporated here by reference.
Your company has also provided a compliance report on various corporate
governance recommendations in vogue in six countries, in their local languages,
for the benefit of our shareholders in those countries.
Responsibility statement of the board of directors
The directors' responsibility statement setting out the compliance with the
accounting and financial reporting requirements specified under Section 217
(2AA) of the Companies (Amendment) Act, 2000, in respect of the financial
statements, is annexed to this report.
Employee Stock Option Plan (ESOP)
Your company has introduced various stock option plans for its employees.
Details of these, including grants to senior management, are given below. Senior
management includes directors of your company and members of its Management
Council.
1994 Stock Offer Plan (the 1994 plan)
The 1994 plan came to an end in fiscal 2000; no further options will be issued
under this plan.
1998 Stock Option Plan (the 1998 plan)
Your company has issued 9,64,840 ADS-linked stock options to 752 employees
during the year under the 1998 plan. Details of such options granted under the
1998 plan are given below.
- -----------------------------------------------------------------------------------------------------------------------
Description Details
- -----------------------------------------------------------------------------------------------------------------------
1. Total number of shares 3.20 million ADS representing 1.60 million shares
2. The pricing formula Not less than 90% of the fair market value as on date of grant
3. Ratio of ADS to equity shares One share represents two ADS
4. Options granted during the year 9,64,840 options representing 4,82,420 equity shares
5. Weighted average price per option granted $ 115.44 (Rs. 5,375); 100% of fair market value on the date of
during the year grant
6. Options vested (as of March 31, 2001) 1,47,350 options representing 73,675 equity shares
7. Options exercised during the year 12,434 options representing 6,217 equity shares
8. Money raised on exercise of options $ 4,07,128 (Rs. 1,89,07,845)
9. Options lapsed during the year 600 options representing 300 equity shares
10. Total number of options in force at the 15,65,506 options representing 7,82,753 equity shares
end of the year
11. Grant to senior management No. of options No. of options
Ajay Dubey 780 Basab Pradhan 12,000
Girish G. Vaidya 1,380 Hema Ravichandar 2,400
Jan DeSmet 6,000 Mohan Sekhar 2,400
Phaneesh Murthy 20,000 Sobha Meera 12,000
Gr. Capt. Deepak Sinha 900 Srinath Batni 2,000
- -----------------------------------------------------------------------------------------------------------------------
Total options granted to senior management during the year 59,860
- -----------------------------------------------------------------------------------------------------------------------
12. Employees holding 5% or more of the total number of options granted during
the year: Nil
1999 Stock Option Plan (the 1999 plan)
Your company has issued 19,57,830 stock options to 9,376 employees during the
year under the 1999 plan. The details of such options granted under the 1999
plan are given below.
- -----------------------------------------------------------------------------------------------------------------------
Description Details
- -----------------------------------------------------------------------------------------------------------------------
1. Total number of shares 66,00,000 shares
2. The pricing formula At the fair market value as on date of grant
3. Options granted during the year 19,57,830 options for 19,57,830 equity shares
4. Weighted average price per option granted Rs. 6,249 (100% of fair market value on the date of grant)
during the year
5. Options vested (as of March 31, 2001): 94,600 options for 94,600 equity shares
6. Options exercised during the year 1,200 options for 1,200 equity shares
7. Money raised on exercise of options: Rs. 48,78,060
8. Options lapsed during the year 1,260 options for 1,260 equity shares
9. Total number of options in force at the 27,93,980 options for 27,93,980 equity shares
end of the year
10. Grant to senior management No. of options No. of options
Ajay Dubey 2,610 Gr. Capt. Deepak Sinha 2,550
Dr. P. Balasubramaniam 3,000 Srinath Batni 5,500
Hema Ravichandar 2,200 Balakrishnan V. 6,000
T.V. Mohandas Pai 10,000 Girish G. Vaidya 5,310
M.S.S. Prabhu 3,000 Mohansekhar 4,800
Satyendra Kumar 3,000 Rajiv Kuchal 1,000
- -----------------------------------------------------------------------------------------------------------------------
Total options granted to senior management during the year 48,970
- -----------------------------------------------------------------------------------------------------------------------
11. Employees holding 5% or more of the total number of options granted during
the year: Nil
Liquidity
Your company continues to be adequately liquid and expects that this will help
achieve its growth objectives. Enhanced liquidity reduces financial risk, and
allows a rapid shift in direction should the market so demand. During the
current year, internal cash accruals have more than adequately covered working
capital requirements, capital expenditure of Rs. 463.35 crore and dividend
payments, and have resulted in a surplus of Rs. 69.36 crore. As on March 31,
2001, your company had liquid assets of Rs. 577.74 crore, as against Rs. 508.37
crore at the previous year-end. These funds have been invested both in rupee and
dollar deposits with banks and financial institutions. A high level of liquidity
reduces return on shareholders funds. However, a balance between high returns on
funds deployed in the business, and the ready availability of cash for strategic
decisions on growth will have to be maintained. The creation of physical and
technological infrastructure is expected to absorb a significant part of the
liquid assets over the next three years.
Research and education initiatives
During the year, your company trained around 4,000 entrants as part of its
induction-training program. Further, continuing education has been imparted,
both in advanced technologies as well as in managerial skills. The total
training imparted by your company to its employees during the year aggregated
about 2,50,000 person days.
The Infosys Fellowship Program instituted by your company at 12 premier academic
institutions in India to support research work leading to a Ph.D. has been well
received, and the number of fellowships instituted in the areas of information
technology, management and law has been increased from 24 to 42. Professors,
from reputed academic institutions in India and abroad, visited your company
during the year under the Infosys sabbatical program. These professors studied
and advised Infosys on practices in knowledge management (KM), training and
project management. Your company spent around 0.87% of its revenue on R&D
activities during the year.
Your company sees knowledge management as a key imperative to help manage growth
and stay competitive in the technology business. A KM deployment architecture
that addresses the four key dimensions of KM - technology, people, content and
process - has been defined and implemented internally. A `Knowledge Currency
Unit' mechanism has been defined as a key component to promote an internal
knowledge sharing culture.
Even as the KM movement is gaining momentum internally, your company has been
playing the role of a catalyst in various knowledge networks externally, by
delivering invited talks, publishing in international journals, and presenting
at international conferences, among other initiatives. Dr Karl-Erik Sveiby, an
internationally renowned expert in KM visited Infosys during the year and
observed that, "Infosys is a KM pioneer in India and, when it comes to
publishing its intangible assets in the Annual Report, even one of the pioneers
in the world. The Infosys KM initiatives seem well-balanced; they are a blend of
both IT and people initiatives, and the KM Team at Infosys has a holistic
understanding of KM."
Your company has also created extensive infrastructural facilities for education
and research during the year, with the inauguration of a dedicated building of
1,15,000 sq. ft. along with state-of-the-art equipment.
Infosys Foundation
Your company is committed to contribute to its social milieu and, in 1998,
established Infosys Foundation as a not-for-profit trust to support initiatives
that benefit society-at-large. The Foundation supports programs and
organizations devoted to the cause of destitutes, rural poor, spastics, senior
citizens and illiterates. It also helps preserve certain arts and cultural
activities of India which are under threat of fading out. Grants to the
foundation during the year aggregated Rs. 5.26 crore, as compared to Rs. 2.80
crore in the previous year.
A summary of the work done by the Foundation appears in the Infosys Foundation
section of this report. On your behalf, your directors express their gratitude
to the honorary trustees of the Foundation for sparing their valuable time and
energy for the activities of the Foundation.
Community services
Your company continued the social programs initiated in 1999 - Catch Them Young,
Rural Reach and Train the Trainer. The three programs covered about 800 urban
children from 100 schools, 2,000 children in rural schools (in five languages),
and 90 engineering college teachers from over about 60 colleges across the
country, respectively, during the year. In addition, new programs included a
summer internship program for computer science students from the IITs and a
technology workshop for 35 engineering students from 17 colleges.
Further, your company, through its Computers@Classrooms initiative launched in
January 1999, has donated 744 computers to 272 institutions across India. Your
company has also applied to the relevant authorities for permission to donate an
additional 419 computers to 180 institutes in the near future. Microsoft
continues to participate in this initiative by donating the relevant software
and we would like to place on record our appreciation for its continued support.
Awards
Your directors are happy to report on some of the awards that your company
received during the year.
. Your company was rated as the Best Employer of India by the Business
Today-Hewitt Study, from among more than 150 companies.
. Your company became the first IT company to win the IMC Ramkrishna Bajaj
National Quality Award in the services category.
. The Far Eastern Economic Review rated your company as the No. 1 company
in India in the Review 2000, an annual survey of Asia's leading
companies.
. Your company has been judged the Best Regional Software House by
Financial Technology Asia. This award acknowledges the most clever,
creative and effective use of information technology in Asia, including
Japan and Australia.
. For the sixth year in succession, your company received the Silver Shield
from the Institute of Chartered Accountants of India for the Best
Presented Accounts, among the entries received from non-financial,
private sector companies, for the year 1999-2000.
. The Asiamoney poll of financial analysts voted your company the best in
management among the listed companies in India for the fifth time in a
row.
. The BankAway product from Infosys won the CSI-Wipro Award for the Best
Packaged Application in the year 2000.
Fixed deposits
Your company has not accepted any fixed deposits and, as such, no amount of
principal or interest was outstanding as of the balance sheet date.
Directors
During the year, your directors expanded the board and co-opted Prof. Jitendra
Vir Singh, Dr. Omkar Goswami, Sen. Larry Pressler, Ms. Rama Bijapurkar, Mr. T.
V. Mohandas Pai, Mr. Srinath Batni and Mr. Phaneesh Murthy as additional
directors of the company. These appointments require the approval of the members
at the ensuing Annual General Meeting.
Mr. Susim M. Datta retired as a director of the company on May 27, 2000. As per
Article 122 of the Articles of Association, Mr. Ramesh Vangal, Prof. Marti G.
Subrahmanyam, Mr. Deepak M. Satwalekar, Mr. S. Gopalakrishnan and Mr. S.D.
Shibulal retire by rotation in the forthcoming Annual General Meeting. All of
them, being eligible, offer themselves for re-appointment.
Auditors
The auditors, Bharat S Raut & Co. Chartered Accountants, retire at the ensuing
Annual General Meeting and have confirmed their eligibility and willingness to
accept office, if re-appointed.
FII investment limit
Recently, the Government of India has raised the investment limit in an Indian
company for Foreign Institutional Investors (FII) from 40% to 49%, subject to
the approval of the board of the investee company and a special resolution by
the shareholders of such a company. Your directors are of the opinion that it
would be in the interest of the company to increase the limit of such investment
to 49%. The necessary resolutions are being placed before the members in the
ensuing Annual General Meeting.
Conservation of energy, research and development, technology absorption, foreign
exchange earnings and outgo
The particulars as prescribed under subsection (1)(e) of section 217 of the
Companies Act, 1956, read with the Companies (Disclosure of particulars in the
report of board of directors) Rules, 1988, are set out in the annexure included
in this report.
Particulars of employees
As required under the provisions of section 217(2A) of the Companies Act, 1956,
read with the Companies (Particulars of employees) Rules, 1975, as amended, the
names and other particulars of employees are set out in the annexure included in
this report.
Acknowledgments
Your directors thank the company's clients, vendors, investors and bankers for
their continued support during the year. Your directors place on record their
appreciation of the contribution made by employees at all levels, who, through
their competence, hard work, solidarity, cooperation and support, have enabled
the company to achieve consistent growth.
Your directors thank the Government of India, particularly the Department of
Electronics; the Customs and Excise departments; the Software Technology Parks -
Bangalore, Chennai, Hyderabad, Mohali, Mysore, Pune, Bhubaneswar and New Delhi;
the Ministry of Commerce; the Ministry of Finance; the Reserve Bank of India;
VSNL; the Department of Telecommunications; the state governments; and other
government agencies for their support, and look forward to their continued
support in the future.
For and on behalf of the board of directors
/s/ Nandan M. Nilekani /s/ N. R. Narayana Murthy
--------------------------- -------------------------------
Managing Director, President Chairman and Chief Executive
and Chief Operating Officer Officer
Bangalore
April 11, 2001
Annexures to the directors' report
- --------------------------------------------------------------------------------
a) Particulars pursuant to Companies (Disclosure of particulars in the report
of the board of directors) Rules, 1988
1. Conservation of energy
The operations of your company are not energy-intensive. However, adequate
measures have been taken to reduce energy consumption by using energy-
efficient computers and by the purchase of energy-efficient equipment with
the latest technologies. Your company constantly evaluates new technologies
and invests in them to make its infrastructure more energy-efficient.
Currently, your company uses CFL fittings and electronic ballast to reduce
the power consumption of fluorescent tubes. A building automation system to
control the working of air conditioners and to make them more energy-
efficient has been implemented. Energy-saving air conditioners have been
purchased and scroll compressors are being used in place of reciprocating
compressors for all packaged and split-type air conditioning systems.
Energy-efficient pumps are used for the water system. As energy costs
comprise a very small part of your company's total expenses, the financial
impact of these measures is not material.
2. Research and development (R&D)
Research and development of new services, designs, frameworks, processes and
methodologies continue to be of importance at Infosys. This allows your
company to increase quality, productivity and customer satisfaction through
continuous innovation.
a. R&D initiative at institutes of national importance
This initiative has been described in the Research and education initiatives
section in the directors' report.
b. Specific areas for R&D at Infosys
Since businesses and technologies are changing constantly, continuous
investments in research and development are of paramount importance. Your
company has taken the approach that its research must be beneficial to the
company and to its clients either in the short term or in the medium term.
As in earlier years, your company continues to conduct research in the areas
of software engineering, project management, global delivery, emerging
technologies, and new tools and techniques.
Research has been continuing in the areas of software architecture and
performance engineering. This is to help projects deliver high-performance
and high-transaction volume software solutions to clients. Research has also
been continued in object and component technologies to create modules that
enable repeatability across projects.
Your company continues to undertake research in the following areas:
General software engineering: Your company is constantly improving its
methodologies to increase quality and productivity, and to reduce
time-to-market for its clients.
New technologies: A methodology for performance-testing of web
applications has been developed.
Products: Your company continues to enhance and develop additional
products in the Banking area.
Your company has various groups engaged in R&D. The Education and Research
(E&R) department conducts short-term and long-term research in the areas of
knowledge management, education and training methodologies, and technology-
based mechanisms for delivery of education. During the year, the E&R team
published 49 papers in leading international / national journals and
conferences. Further, an e-commerce research laboratory was established by
the E&R department for building expertise and skill sets in e-commerce and
web applications. A Web Performance Testing Center was also established.
The Software Engineering and Technology Labs (SETLabs) tracks emerging
technology trends in the short-term and long-term as well as opportunities
for innovation in software development. SETLabs works on diverse areas
including, business modeling, architecture definition, technology
assessment, infrastructure and security consulting, mobile computing, object
and component technology, and operating systems and environments, to name a
few. Research findings in the software engineering area have been published
in international journals and have been presented at several reputed forums.
Built on this foundation of research is a set of cutting-edge consulting
services that SETLabs provides to your company's clients, and an extensive
repository of technical knowledge and expertise that SETLabs uses to guide
project teams to continually improve their quality and productivity.
c. Benefits derived as a result of R&D activity
Your company has been able to maintain margins despite changes in technology
and increased personnel costs. The e-commerce and the Web Performance
Testing centers have been instrumental in building expertise in the
e-commerce area.
d. Future plan of action
There will be continued focus and increased investment in the above R&D
activities. Future benefits are expected to flow in from initiatives
undertaken this year.
e. Expenditure on R&D for the year ended March 31
in Rs.
crore
---------------------------------------------------------------------------
2001 2000
---------------------------------------------------------------------------
Revenue expenditure 14.97 8.08
Capital expenditure 2.14 0.15
---------------------------------------------------------------------------
Total R&D expenditure 17.11 8.23
R&D expenditure as a percentage of total revenue 0.87% 0.89%
--------------------------------------------------------------------------
3. Technology absorption, adaptation and innovation
During the year, your company successfully migrated to a Windows 2000
backbone. Further, your company made significant additions to the number of
servers used for software development, and to the number of file and print
servers. Your company also upgraded its mainframe system from the earlier
S/390 9672/RA4 to the new H30, and standardized the use of Pentium III 733
MHz system with 256 MB RAM and at least 10 GB hard disk space as the
standard desktop PC. Further, all personnel traveling frequently for
official purposes are now given Pentium notebook computers.
During the year, your company provided all its senior managers with
productivity tools such as Palm Vx devices and mobile phones. Your company
also implemented a multi-point video-conferencing facility over IP, and
implemented IP telephony over WAN and on LAN in one of the campuses.
Further, your company has installed a 1.16TB Storage Area Network for
hosting corporate data and applications.
Your company further invested in middleware technologies, mobile
technologies and legacy modernization technologies. Your company has set up
laboratories and Centers of Excellence for technology research and
competence building. Your company joined several Technical Standards
organizations, and continues to be capable of providing total technology
solutions to its clients using new technologies and tools.
4. Foreign exchange earnings and outgo
a. Activities relating to exports, initiatives taken to increase exports,
development of new export markets for products and services, and export
plans
Your company has had a strong export focus in the past, and expects its
export thrust to continue in future. In fiscal 2001, 98.60% of software
revenues were derived from exports. Over the years, your company has
established a substantial direct marketing network all over the world and
now has marketing offices in North America, Europe and the Asia Pacific
region. These offices are staffed with sales and marketing specialists who
sell your company's services to large, international clients.
During the year, your company opened marketing offices in Hong Kong, Sydney,
Phoenix (Arizona), U.A.E., Argentina and Paris. It also set up development
centers in London, Lisle, a suburb of Chicago, Illinois; Berkeley Heights,
New Jersey; and Phoenix, Arizona. Your company also launched a global
initiative to increase the awareness of the Infosys brand, and of its
products and services. Several press and public relations exercises were
launched in the US to enhance your company's visibility. Further, your
company plans to take part in several international exhibitions to promote
its products and services.
During the year, your company's Banking Business Unit won new clients in
Nigeria, U.A.E and Mauritius.
The long-term goal of your company is to be a highly respected name in the
global market for its services and products, and to continue to realize a
significant portion of its revenue from exports.
b. Foreign exchange earned and used for the year ended March 31
in Rs.
crore
------------------------------------------------------------------------------------------------------
2001 2000
------------------------------------------------------------------------------------------------------
Foreign exchange earnings 1,728.23 851.72
Foreign exchange outgo (including capital goods and imported software packages) 727.53 336.58
------------------------------------------------------------------------------------------------------
For and on behalf of the board of directors
/s/ Nandan M. Nilekani /s/ N. R. Narayana Murthy
Nandan M. Nilekani N. R. Narayana Murthy
Bangalore Managing Director, President and Chief
April 11, 2001 and Chief Operating Officer Executive Officer
Annexures to the directors' report
b) Information as per Section 217(2A) of the Companies Act, 1956, read with the
Companies (Particulars of employees) Rules, 1975, and forming part of the
directors' report for the year ended March 31, 2001
- -----------------------------------------------------------------------------------------------------------------------------------
SI. Name Designation Qualification Age Date of
No. (Years) Joining
- -----------------------------------------------------------------------------------------------------------------------------------
1. Aashish Bansal Business Development Manager B.Tech. (IIT), PGD(IIM) 36 17.02.2000
*2. Abudmar Louay Software Developer B.E. 28 21.08.2000
*3. Akash Maiti Senior Associate B.E.(H), M.A, PGD 30 05.07.2000
*4. Albena De Assis Software Developer B.Sc. 26 17.07.2000
5. Alexandre Elvis Rodrigues Business Development Manager B.Tech., MBA 30 03.08.1998
6. Ameer Saithu Associate B.Tech., PGD 28 27.03.2000
*7. Amer Yosra Abdul Software Developer B.Sc.(H) 23 21.08.2000
8. Amitabh Pushparaj Mudaliar Associate B.E., PGD(IIM) 29 20.03.2000
*9. Amy (Yuen Chun) Wong Software Developer B.Sc. 23 22.01.2001
10. Ananda Rao Business Development Manager B.E., M.Sc. 42 25.10.1999
*11. Anant Natekar Senior Systems Analyst B.E. 25 09.02.2001
12. Andi Berkowitz Sales Administrator B.A., ASL 48 12.04.1999
*13. Andreas Suwe Project Leader B.Laws, Diploma 34 05.03.2001
*14. Anil Roy Senior Systems Analyst B.E. 26 19.02.2001
*15. Anilkumar Nechiyil Project Manager B.Sc. 40 03.01.2001
*16. Ankur Gupta Business Development Manager B.A.(H), PGD, ACA 28 17.07.2000
17. Ankush Patel Business Development Manager B.E., MBA 33 01.10.1999
*18. Anthony De Laat Delivery Manager B.A., M.Sc., B.Sc. Engg 44 12.03.2001
*19. Anupam Bhatnagar Business Development Manager B.A.(H), LLB, PGD 29 03.08.2000
*20. Arindom Basu Senior Principal B.E.(H), PGD(IIM) 34 05.02.2001
*21. Arjun K. Rao Software Developer B.E., MS 24 22.01.2001
*22. Aroun Balakrishnan Senior Systems Analyst B.Tech. 27 05.03.2001
23. Arun Kumar R. Business Development Manager B.Tech., PGD 30 05.06.1999
*24. Ashish Pandita Software Developer B.E. 27 27.11.2000
25. Ashok Vemuri Business Development Manager B.Sc.(H)., PGD 32 01.10.1999
26. Ayan Chatterjee Business Development Manager B.A.(H), PGD 29 02.11.1998
*27. Balaji Yellavalli Senior Principal B.Tech., PGD 32 18.09.2000
28. Balakrishna D. R. Assistant Project Manager B.E. 29 07.02.1994
29. Balakrishnan P. R. Business Development Manager B.Tech., MBA 28 15.11.1999
30. Balasubramanian P. Senior Vice President B.Tech.(IIT), M.Tech.(IIT), 51 01.10.1995
PhD (Purdue)
*31. Balasundaram Gajendran Software Developer B.Sc. 26 21.08.2000
32. Balu A. Assistant Project Manager B.E., Diploma 29 07.11.1994
33. Bartley Richard Higgins Business Development Manager B.A.(H), M.A 52 20.02.1997
34. Basab Pradhan Regional Manager & Vice President - B.Tech., PGD 35 03.10.1994
Sales - West North America
*35. Biji P. Thomas Associate B.E., PGD 26 24.04.2000
*36. Bindu Ajay Badola Senior Consultant (ERP) B.E. 31 09.10.2000
*37. Brit Lane Software Developer B.Sc. 24 08.05.2000
*38. Bryan Mallinson Software Developer BBM 24 15.01.2001
*39. BuuQuang Kha Software Developer B.Sc. 23 15.01.2001
40. Chandra Shekar Kakal Associate Vice President B.E., MBA 40 01.03.1999
*41. Cheng "Sean" Sixin Software Developer B.Sc., M.Sc., Diploma 32 08.05.2000
*42. Chi Tat Wong Software Developer B.E. 25 20.11.2000
- -----------------------------------------------------------------------------------------------------------------------------------
SI. Name Experience Gross Previous Employment - Designation
No. (Years) Remuneration (Rs.)
- -----------------------------------------------------------------------------------------------------------------------------------
1. Aashish Bansal 12 39,24,612 HSBC Capital Markets India Pvt. Ltd. - Senior Manager
*2. Abudmar Louay 7 1,68,604 Swiss Hotel Management - IT Instructor
*3. Akash Maiti 6 32,25,000 Andersen Consulting, Senior Consultant
*4. Albena De Assis 3 11,73,631 Siemens - Software Developer
5. Alexandre Elvis Rodrigues 7 39,42,094 Modi Xerox, Production Sales Manager
6. Ameer Saithu 5 8,00,929 PricewaterhouseCoopers, Consultant
*7. Amer Yosra Abdul 1 9,26,652 -
8. Amitabh Pushparaj Mudaliar 6 20,90,570 PricewaterhouseCoopers, Consultant
*9. Amy (Yuen Chun) Wong 1 9,17,414 Hewitt Associates, Quality Assurance Analyst
10. Ananda Rao 14 37,45,019 SE IT Technologies - Regional General Manager
*11. Anant Natekar 3 3,55,587 Fourth Technologies Inc, Consultant
12. Andi Berkowitz 11 19,22,340 Newton Wellesley Chinopractic, Office Manager
*13. Andreas Suwe 7 3,49,485 Tucows Inc. - Project Manager
*14. Anil Roy 4 3,29,681 Air Check Virginia, Database Administrator
*15. Anilkumar Nechiyil 18 11,34,684 First Data Merchant Services, Project Technical Leader
*16. Ankur Gupta 6 13,54,975 Arthur Andersen India Pvt. Ltd., Senior Consultant
17. Ankush Patel 9 56,93,010 Nortel Networks, Account Manager
*18. Anthony De Laat 19 5,06,510 Oao Technologies Canada - Delivery Director
*19. Anupam Bhatnagar 4 5,66,129 Arthur Andersen, Consultant
*20. Arindom Basu 10 9,51,974 Andersen Consulting - Senior Manager
*21. Arjun K. Rao 1 9,17,414 Recruitmentindia.Com, Webmaster/ Technical Lead
*22. Aroun Balakrishnan 5 2,09,764 Blockbuster Inc., Senior Programmer Analyst
23. Arun Kumar R. 8 51,05,674 Nokia Private Limited, Sales Manager - West & South India
*24. Ashish Pandita 3 6,21,445 Robert Bosch India Ltd. - Software Developer
25. Ashok Vemuri 9 64,57,918 Bank Of America, Assistant Vice President
26. Ayan Chatterjee 8 69,72,586 Andersen Consulting, Consultant
*27. Balaji Yellavalli 11 6,77,625 Feedback Ventures Ltd., Chief Executive Officer
28. Balakrishna D. R. 7 19,04,450 HCL-HP - Customer Relations
29. Balakrishnan P. R. 6 40,98,994 Arthur Andersen, Senior Consultant
30. Balasubramanian P. 28 15,64,794 Hitek Software Engineers Ltd. - CEO/Technical Director
*31. Balasundaram Gajendran 3 9,15,681 Queen's University - Student Software Engineer
32. Balu A. 11 19,37,788 Adarsha Polytechnic - Teacher
33. Bartley Richard Higgins 14 65,63,082 Wireless Software, Developer
34. Basab Pradhan 12 84,33,946 Lipton India Ltd., Manager
*35. Biji P. Thomas 4 6,31,855 Andersen Consulting, Senior Consultant
*36. Bindu Ajay Badola 9 11,76,367 Tata Infotech Ltd. - Systems Specialist
*37. Brit Lane 2 13,67,489 Tha Cain Gang Ltd. - Developer
*38. Bryan Mallinson 0 4,48,374 -
*39. BuuQuang Kha 0 4,15,735 -
40. Chandra Shekar Kakal 18 12,62,452 Ramco Systems - Product Manager
*41. Cheng "Sean" Sixin 7 4,28,499 Tian Tian Furniture - Manufacture Engineer
*42. Chi Tat Wong 2 5,59,723 The Peer Group - Software Developer
- -----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Sl. Name Designation Qualification Age Date of
No. (Years) Joining
- ----------------------------------------------------------------------------------------------------------------------------
*43. Craig Daniel DeDecker Software Developer BBA 22 22.01.2001
*44. Cynthia Atayan Administrative Assistant SSLC 25 01.06.2000
*45. David Spencer Principal B.A., B.Sc., MBA 36 18.09.2000
46. Dean E. Whiteside Contract Administrator B.A. 35 26.05.1998
47. Debjit Datta Chaudhuri Business Development Manager B.Sc.(H)., PGD(IIM) 28 13.10.1998
*48. Deepak Rao Senior Principal B.Tech.(IIT), PGD(IIM) 37 01.02.2001
*49. Deepak Sundarrajan Senior Systems Analyst B.E. 28 19.02.2001
50. Dinesh Krishnaswamy Director B.Sc., M.Sc. 46 01.09.1981
*51. Duncan Zhang Software Developer B.Tech. 24 08.05.2000
*52. Easaw Pallipeedikayil Easaw Business Development Manager B.E., PGD(IIM) 31 07.04.2000
*53. Eric Seubert Senior Principal B.Sc., MBA 34 28.08.2000
*54. Gaurav Garg Project Manager B.E. 28 30.01.2001
*55. Gautam P. Thakkar Principal B.Sc. 32 17.07.2000
56. George Varghese Business Development Manager B.Com. 33 26.09.1996
*57. Gigi (Chiao Chih) Tsang Software Developer B.Sc.(H). 22 15.01.2001
58. Girish Anant Pashilkar Senior Associate B.Tech.(IIT) , PGD(IIM) 29 20.03.2000
59. Girish G. Vaidya Senior Vice President B.E., PGD(IIM) 50 22.01.1999
*60. Girish M. Aswathanarayana Project Manager B.Tech., MS 31 05.03.2001
*61. Glen Michael Software Developer B.Sc. 24 21.08.2000
62. Gopal Devanahalli Business Development Manager M.Sc.(Tech), PGD 32 01.10.1999
63. Gopalakrishnan S. Deputy Managing Director B.Sc., M.Tech.(IIT) 45 01.02.1981
64. Gopinath Sutar Senior Principal B.Tech., PGD 34 01.10.1999
*65. Goseng Kelvin Lie Software Developer B.Sc.(H). 24 21.08.2000
66. Guhan Kumaran Assistant Project Manager B.E.(H) 26 26.06.1995
67. Hariharan S. Murthy Regional Manager & B.E., PGD 36 01.09.1994
Associate Vice President - Sales -
Communication & Product Services
*68. Helen Kim Systems Analyst B.A., MED 24 05.07.2000
69. Henri Mabille Senior Principal Diploma 48 01.03.2000
*70. Hoi tung (Harry) Cheung Software Developer Bcom., B.Sc.(H) 24 05.06.2000
*71. Ivan H. Brock Project Leader B.Sc., PhD 36 12.02.2001
*72. Jagdish Natarajan Iyer Business Development Manager B.E.(H), PGD(IIM) 29 15.11.1999
*73. Jahir Hussain Project Manager B.Sc., M.Sc. 31 29.01.2001
*74. Jaime Salvador Arguello Software Developer B.Sc. Engg, 23 22.01.2001
75. Jan DeSmet Vice President - BBA, MBA 41 04.01.1999
Infosys Business Consulting Services
*76. Jayaram G. K. Head - Infosys Leadership Institute B.Sc., B.E., PGD(IIM), PhD 60 05.01.2001
77. Jayashree R. Principal B.Sc.(H), M.Sc.(IIT), M.Tech.(IIT), 37 01.10.1999
PGD(IIM)
*78. Jenifer K. Adkins Sales Administrator Diploma 34 26.06.2000
*79. Jennifer La Vonne Dean Administrative Assistant B.Sc., Master of Public Adminstration 26 24.04.2000
*80. Jessica M. Chisholm Administrative Assistant B.A. 23 14.02.2001
81. Jitin Goyal Business Development Manager B.E., PGD(IIM) 30 21.12.1998
*82. John O. Fogarty Business Development Manager B.A., MBA 30 20.02.2001
*83. Jonathan Masterton Senior Systems Analyst B.Sc.(H) 27 24.07.2000
84. Judith Ann Ondina Administrative Assistant B.A. 52 16.07.1999
*85. Junqian (Tim) Wu Software Developer B.Sc. 35 08.05.2000
86. Kala Swaminathan Business Development Manager B.Sc. 32 27.01.1999
*87. Kalyana C. Gangavarapu Program Manager B.Tech., PhD (Insead) 31 12.12.2000
- -------------------------------------------------------------------------------------------------------------------------------
Sl. Name Experience Gross Previous Employment - Designation
No. (Years) Remuneration (Rs.)
- -------------------------------------------------------------------------------------------------------------------------------
*43. Craig Daniel DeDecker 2 9,17,414 Economy Advertising, System Admin Intern
*44. Cynthia Atayan 2 10,33,624 Cisco Systems - Customer Service Quality Specialist
*45. David Spencer 15 34,35,405 Spherion, Senior Manager
46. Dean E. Whiteside 7 27,56,041 Bank Of America, Systems Administrator
47. Debjit Datta Chaudhuri 7 50,11,050 Wipro Finance Ltd - Officer
*48. Deepak Rao 15 11,53,908 KPMG Consulting - Executive Consultant
*49. Deepak Sundarrajan 6 3,27,301 Humana Inc., Designer
50. Dinesh Krishnaswamy 25 16,19,457 Patni Computer Systems Pvt. Ltd.-Senior Software Engineer
*51. Duncan Zhang 1 13,96,785 -
*52. Easaw Pallipeedikayil Easaw 7 30,01,375 Apex Systems - Senior Marketing Executive
*53. Eric Seubert 11 34,32,750 Interim Technology Consulting, Director, E-Business practice
*54. Gaurav Garg 6 7,24,493 Polaris Software Lab (India) Ltd.,Consultant (System Manager)
*55. Gautam P. Thakkar 11 7,69,211 Andersen Consulting, Manager
56. George Varghese 10 66,22,825 Hitachi - Systems Administrator
*57. Gigi (Chiao Chih) Tsan 0 4,15,735 -
58. Girish Anant Pashilkar 7 34,73,672 Arthur Andersen - Senior consultant
59. Girish G. Vaidya 26 16,27,764 ANZ Grindlays Bank Ltd. - Head & Director Operations
*60. Girish M. Aswathanarayana 7 2,65,558 G. A. Sullivan, Senior Consultant
*61. Glen Michael 2 9,26,530 Industry Canada - Support Analyst
62. Gopal Devanahalli 9 49,35,775 Ford Credit Kotak Mahindra Ltd., Regional Manager
63. Gopalakrishnan S. 21 14,98,189 Software Sourcing Co. - V. P. Technical Group
64. Gopinath Sutar 12 66,97,570 A. T. Kearney, Manager
*65. Goseng Kelvin Lie 1 9,15,681 -
66. Guhan Kumaran 6 13,95,843 -
67. Hariharan S. Murthy 13 82,83,759 Redington Pvt Ltd, Marketing Manager
*68. Helen Kim 1 17,64,067 Elite Educational Institute, Admin Assistant
69. Henri Mabille 24 45,43,165 Sia Sa Group - Financial Director Group
*70. Hoi tung (Harry) Cheung 4 13,60,560 The Muses Arts & Recreation Center - Web Manager
*71. Ivan H. Brock 7 3,40,307 Escom Software Services - Development Manager
*72. Jagdish Natarajan Iyer 6 9,47,439 Reuters India Ltd. - Head - Client Solutions
*73. Jahir Hussain 7 6,56,533 Complete Business Solutions Inc, - Manager
*74. Jaime Salvador Arguello 3 9,17,414 Washington University, Web Master
75. Jan DeSmet 17 1,01,95,268 Diamond Technology Partners, Senior Principal
*76. Jayaram G. K. 30 3,51,339 Transformation Systems Inc. - Chairman
77. Jayashree R. 11 23,71,115 Schoolnet India Ltd. - Vice President
*78. Jenifer K. Adkins 16 14,68,439 Credit Lyonnais, Executive Assistant/Office Manager
*79. Jennifer La Vonne Dean 3 14,81,789 Oakland Ready To Learn, Project Administrator
*80. Jessica M. Chisholm 2 2,57,456 Linotext America Inc., Account Manager
81. Jitin Goyal 7 59,95,432 Citi Bank - Manager
*82. John O. Fogarty 8 3,47,074 Morgan Stanley Dean Witter, Vice President - Financial Advisor
*83. Jonathan Masterton 2 14,16,235 Logica UK Ltd. - Team Leader
84. Judith Ann Ondina 17 15,42,678 Sprint, Human Resource Co-ordinator
*85. Junqian (Tim) Wu 6 7,26,230 The Hospital for Sick Children - Research Specialist of Genetics
86. Kala Swaminathan 10 48,98,976 Parametric Technology Corporation, Regional Manager
*87. Kalyana C. Gangavarapu 10 3,95,291 Oracle Corp. - Practice Director
Annexures to the directors' report (contd.)
- ------------------------------------------------------------------------------------------------------------------------------
Sl. Name Designation Qualification Age Date of
No. (Years) Joining
- ------------------------------------------------------------------------------------------------------------------------------
88. Karen J. Hutton Sales Manager B.A. 40 05.01.1998
*89. Ken Wong Software Developer B.Sc. 23 15.01.2001
90. Krishna N. V. Business Development Manager B.E., PGD(XLRI) 31 20.10.1999
91. Kshitij Kumar Assistant Project Manager B.Tech. 28 27.06.1994
*92. Kumail Jaffer Software developer BCS 26 15.01.2001
*93. Laura Beth Rehrig Software Developer B.Sc. 22 22.01.2001
*94. Li John Kaming Software Developer B.Sc.(H), Diploma 26 21.08.2000
*95. Lin Quan Software Developer B.E. 30 21.08.2000
*96. Lo Szekit Software Developer B.Sc., MS 27 21.08.2000
97. Lokesh Prasad Business Development Manager B.Tech.(H), PGD 27 04.05.1998
98. Madhav Mohan Business Development Manager B.Sc., MMS 31 01.10.1999
99. Mahesh Desai Business Development Manager B.E., PGD(IIM) 28 03.06.1996
*100. Mahitha Krishnan Software Developer B.Sc., MCA 23 15.01.2001
*101. Maki Ishibashi Coordinator Diploma 27 13.07.2000
*102. Mangos Constantine Software Developer B.Com., B.A 23 21.08.2000
*103. Manish Goyal Senior systems analyst B.E. 28 27.11.2000
*104. Manish Verma Business Development Manager B.Tech., MBA 32 09.12.1999
*105. Manish Kumar Sinha Associate B.Tech.(IIT), PGD(IIM) 27 01.02.2000
106. Mary Ann Usher Sales Administrator B.A. 45 21.06.1999
*107. Mcewan Jason Richard Software developer B.Sc. 23 21.08.2000
*108. Meg Tiedemann Sales Administrator M.A. 46 06.11.2000
*109. Merlyn Lee Business development Manager B.E., M.Sc. 48 05.03.2001
110. Mohandas Pai T. V. Director & CFO B.Com., LLB, FCA 42 17.10.1994
111. Nachiket Vibhakar Sukhtankar Business development Manager B.A., B.Sc., M.A 32 29.11.1999
112. Nagarajan Venkateswaran Associate Vice President B.Tech., MS 40 17.04.2000
*113. Nanaz Rohani Sales Administrator B.Sc. 27 26.07.2000
114. Nandan M. Nilekani Managing Director, President & COO B.Tech.(IIT) 45 01.07.1981
*115. Naomi Grossack Sales Administrator BBM 26 26.06.2000
116. Narayana Murthy N. R. Chairman & CEO B.E., M.Tech.(IIT) 54 18.03.1982
*117. Natarajan B. Business Development Manager B.Tech., PGD 27 15.05.2000
118. Neelesh Marik Business Development Manager B.Tech.(IIT), PGD(IIM) 33 15.11.1999
*119. Neeraj Dubey Software Developer B.E.(H) 34 20.11.2000
*120. Neeraj Kumar Senior Systems Analyst B.E. 26 06.01.1997
121. Norman Schutz Business Development Manager B.Com. 44 21.01.1998
*122. Olga Shnaider Software Developer B.A.(H) 30 15.01.2001
*123. Omar Dominguez Software Developer B.Sc. 27 04.07.2000
124. Owhen Astorga Administrative Assistant B.A., Diploma 37 18.06.1999
*125. Padmanabhan Venkataraman Associate Vice President B.E., M.E. 46 05.03.2001
*126. Palachandra Seetharam Technical Architect B.E. 32 31.07.2000
*127. Paul Maillard Software Developer B.Sc.(H) 26 18.09.2000
*128. Pendse Mayur Arvind Software Developer B.Sc. 23 21.08.2000
*129. Peter James Mitchell Business Development Manager PUC 31 07.08.2000
130. Phaneesh Murthy Director - Sales & Marketing and B.Tech., PGD 37 08.10.1992
Communication & Product Services
131. Prabhu M. S. S. Senior Vice President B.E., PhD (IISc) 53 01.08.1997
- -----------------------------------------------------------------------------------------------------------------------------------
Sl. Name Experience Gross Previous Employment - Designation
No. (Years) Remuneration (Rs.)
- -----------------------------------------------------------------------------------------------------------------------------------
88. Karen J. Hutton 18 37,24,213 Feist & Hutton, Senior Consultant
*89. Ken Wong 0 4,15,735 -
90. Krishna N. V. 8 48,38,969 Hindustan Lever Limited - Area Sales Manager
91. Kshitij Kumar 7 19,48,789 -
*92. Kumail Jaffer 0 4,15,735 -
*93. Laura Beth Rehrig 3 9,17,414 PIL Inc, Cooperative Associate
*94. Li John Kaming 2 9,26,621 York Chinese Christian Fellowship - Secretary
*95. Lin Quan 6 10,83,343 Infotech Consulting Co. - Java Developer
*96. Lo Szekit 3 9,66,979 Philips Electronics-Advance Transformer - Design Engineer II
97. Lokesh Prasad 3 41,65,223 -
98. Madhav Mohan 9 67,72,245 Bank of America - AVP & Regional Sales Manager
99. Mahesh Desai 6 34,45,681 Pertech Computers Ltd - Marketing Manager
*100. Mahitha Krishnan 1 4,29,684 Samtech Inc. - Programmer/Consultant
*101. Maki Ishibashi 5 14,00,180 Tokyo Executive Center Inc. - Secretary
*102. Mangos Constantine 2 9,37,440 Spectrum United Mutual Funds - Accounts Administrator
*103. Manish Goyal 6 10,10,976 Elc Systems - Consultant
*104. Manish Verma 9 40,18,728 Hindustan Lever Ltd., Senior Product Manager
*105. Manish Kumar Sinha 4 2,24,273 Mckinsey & Company, Inc. - Associate
106. Mary Ann Usher 16 18,76,769 Racal Datacon Inc, Sales Support Representative
*107. Mcewan Jason Richard 4 9,37,471 Information Technology Services - Network Consultant
*108. Meg Tiedemann 14 7,92,637 Kluwer Academic Publishers, Marketing Associate
*109. Merlyn Lee 22 2,45,154 Tata Engineering Company - Trainee Engineer
& Production Engineer
110. Mohandas Pai T. V. 21 13,61,112 Prakash Leasing Limited - Executive Director
111. Nachiket Vibhakar Sukhtankar 7 44,47,105 Andersen Consulting, Manager
112. Nagarajan Venkateswaran 18 47,95,003 Synthel Inc, Troy, Michigan, Delivery Manager
*113. Nanaz Rohani 5 14,37,099 Stanford University, Academic Affairs Co-Ordinator
114. Nandan M. Nilekani 23 16,16,021 Patni Computer Systems Pvt. Ltd. - Asst. Project Manager
*115. Naomi Grossack 5 15,24,507 Communications Collaborative, Contractor
116. Narayana Murthy N. R. 32 14,97,390 Patni Computer Systems Pvt. Ltd. - Head - Software Group
*117. Natarajan B. 5 13,80,149 Arthur Andersen India Pvt. Ltd., Senior Consultant
118. Neelesh Marik 9 45,33,329 Andersen Consulting - Manager
*119. Neeraj Dubey 13 7,00,003 Cit Canada Inc - Consultant
*120. Neeraj Kumar 4 2,78,556 TELCO - Trainee
121. Norman Schutz 20 33,53,172 Ikon Technologies Services - Vice President
(Business Development)
*122. Olga Shnaider 4 4,15,735 Future Shop Ltd. - Computer Sales Specialist
*123. Omar Dominguez 4 12,16,481 Electronic Data Systems - Information Analyst Associate
124. Owhen Astorga 18 20,82,535 Palex, Inc., Payroll Administrator
*125. Padmanabhan Venkataraman 22 1,12,816 Delphi Automotive Systems - Vice President Software
Operations
*126. Palachandra Seetharam 10 16,49,903 CAP Gemini America - Senior Consultant
*127. Paul Maillard 4 9,42,485 Contax Inc - Junior Business Consultant
*128. Pendse Mayur Arvind 5 9,15,590 Mainline Foods/Dairy Queen - Night Supervisor
*129. Peter James Mitchell 8 15,54,107 Webnax.Com Au. Pty. Ltd. - Business Manager & Sales
Manager
130. Phaneesh Murthy 14 1,90,93,935 Sonata Software, Regional Manager
131. Prabhu M. S. S. 27 13,44,242 Tata Consultancy Services - Vice President
- ------------------------------------------------------------------------------------------------------------------------------
Sl. Name Designation Qualification Age Date of
No. (Years) Joining
- ------------------------------------------------------------------------------------------------------------------------------
132. Pradeep Prabhu Business Development Manager B.Com. 32 04.11.1991
*133. Pramod V. Ponkshe Project Manager B.E. 36 11.01.2001
134. Prasad T. P. Regional Manager & B.E., PGD 36 04.09.1995
Associate Vice President - Sales -
South North America
135. Praveen Kumar Senior Associate B.E., MS, PhD(Cambridge Univ.) 33 31.01.2000
*136. Raghunath Basavanahalli Business Development Manager BS in Engg 34 09.03.2001
137. Rahul Madhav Godbole Business Development Manager B.A., M.A., MBA 35 15.11.1999
138. Rajeev Minocha Business Development Manager B.E., PGD 36 26.08.1999
*139. Rajeswari Palaniappan Project Manager B.Sc., MCA 34 01.08.2000
140. Ravi Kumar Shelvankar Business Development Manager B.E., MS 32 02.01.1997
*141. Read Hugh Gorden Software Developer B.Sc. 24 21.08.2000
*142. Reka K. Maximovitch Executive Assistant B.A., MPA 30 18.10.1999
143. Ribhu Kansal Senior Systems Analyst B.E., PGD(IIM) 27 10.05.1999
144. Ritesh Mohan Idnani Business Development Manager B.Com., MBA 28 01.10.1999
*145. Roitman Evgueni Software Developer B.Sc. 24 21.08.2000
*146. Romit Dey Business Development Manager B.Sc., MBA 29 03.10.2000
*147. Ryan D. Hill Software Developer BBA 23 22.01.2001
*148. Sam Chan Software Developer B.Sc. 24 15.01.2001
*149. Sam Ho Software Developer B.Sc.(H) 26 06.11.2000
150. Samir Agrawal Associate B.Tech., PGD 29 24.03.2000
*151. Samir Bali Senior Principal B.A.(H), LLB, PGD 36 28.08.2000
*152. Sandeep Chadha Project Manager B.Tech. 33 15.02.2001
153. Sandeep Kaujalgi Business Development Manager B.E., MMS 30 17.05.1999
*154. Sanjay Dalwani Business Development Manager B.E., PGD 33 08.12.2000
155. Sanjay Dutt Business Development Manager B.Tech.(H), PGD 32 20.12.1999
*156. Sanjay Jalona Senior Project Manager M.Sc. (Tech) 32 15.12.2000
*157. Sanjay Mohan Principal B.Sc., PGD(IIM), M.E(IISc) 33 30.10.2000
*158. Sanjay Purohit Senior Manager (Quality) B.E. 34 27.12.2000
*159. Sanjay Viswanathan Business Development Manager B.A., Diploma, MBA, PGD 31 06.10.2000
*160. Sanjay Pathak Technical Architect B.Tech., MTech(IIT), PhD 31 13.12.2000
*161. Sarojendu Majumdar Associate Vice President M.Sc.(IIT) 44 30.10.2000
*162. Sasmita Mohapatra Senior Systems Analyst B.E. 26 03.07.2000
163. Sathisha B. K. Business Development Manager B.E., M.E. 32 05.01.1998
*164. Satrajit Pal Senior Project Manager B.E. 31 12.03.2001
*165. Satyendra Kumar Vice President-Quality B.Sc.(H)., M.Sc. 47 27.09.2000
*166. Seshadiri Parthasarathy Project Leader B.Tech. 29 18.12.2000
*167. Seshadri Bhoovaraghan Project Manager B.E. 27 04.12.2000
*168. Shailesh Joshi Senior Project Manager B.E. 42 18.12.2000
169. Sharad K. Hegde Senior Vice President B.Tech.(IIT), PGD 42 01.07.1983
*170. Shashidhar B. Ramakrishnaiah Project Manager B.E. 30 14.02.2001
171. Shibulal S. D. Director B.Sc., M.Sc., MS (Boston Univ.) 46 01.09.1981
*172. Shirish Agnihotri Senior Project Manager B.Sc. Engg, M.Sc. 46 24.01.2001
Management
173. Shveta Arora Associate B.E., PGD(IIM) 28 07.02.2000
- -----------------------------------------------------------------------------------------------------------------------------------
Sl. Name Experience Gross Previous Employment - Designation
No. (Years) Remuneration (Rs.)
- -----------------------------------------------------------------------------------------------------------------------------------
132. Pradeep Prabhu 11 51,27,430 Saxena Software Consultants, Senior Executive
*133. Pramod V. Ponkshe 16 10,65,160 Foxboro Japan Corporation - Project Manager
134. Prasad T. P. 12 68,72,670 Wipro Infotech, Regional Sales Manager
135. Praveen Kumar 6 49,90,719 Andersen Consulting - Manager
*136. Raghunath Basavanahalli 13 2,18,170 HCL Technologies America Inc., Account Manager
137. Rahul Madhav Godbole 10 43,34,663 Infrastructure Leasing & Financial Services Ltd.,
Senior Manager
138. Rajeev Minocha 13 46,93,027 Prefetti India Limited, Managing Director
*139. Rajeswari Palaniappan 12 24,15,042 Complete Business Solutions Inc. - Manager
140. Ravi Kumar Shelvankar 8 66,69,803 ITW Signode Ltd, Senior Executive, Sales
*141. Read Hugh Gorden 1 9,37,562 -
*142. Reka K. Maximovitch 8 16,96,236 Champion Nutrition - Administrator/ Project Manager
143. Ribhu Kansal 4 17,93,952 NIIT Ltd. - Senior Systems Associate
144. Ritesh Mohan Idnani 6 58,20,632 PricewaterhouseCoopers, Senior Consultant
*145. Roitman Evgueni 3 9,15,681 Levitronics Corp. - Analyst
*146. Romit Dey 7 2,82,264 PricewaterhouseCoopers, Principal Consultant
*147. Ryan D. Hill 0 28,881 -
*148. Sam Chan 0 4,15,735 -
*149. Sam Ho 4 7,50,116 Aim Funds Management Inc. - Senior Software Developer
150. Samir Agrawal 6 22,06,984 A. T. Kearney, Associate
*151. Samir Bali 12 5,64,481 Coopers Lybrand, Principal Consultant
*152. Sandeep Chadha 13 5,90,936 Lockheed Martin Ims, Project Leader
153. Sandeep Kaujalgi 7 29,93,175 SISL - Head, Transportation Solutions Business
*154. Sanjay Dalwani 11 10,58,019 HCL Technologies America, Inc, Account Manager
155. Sanjay Dutt 10 40,91,838 A. T. Kearney Limited, Manager - Strategy & Re-Engg.
*156. Sanjay Jalona 11 3,60,151 Gemplus India Pvt. Ltd. - Director
*157. Sanjay Mohan 7 21,36,867 Cap Gemini America, Inc. - Principal Consultant
*158. Sanjay Purohit 11 3,06,634 Tata Quality Management Services - Senior Consultant
*159. Sanjay Viswanathan 9 14,28,012 Hinduja Group Worldwide - Vice President
(Business Development)
*160. Sanjay Pathak 8 9,26,743 US Interactive - Senior Systems Architect
*161. Sarojendu Majumdar 21 21,26,142 British Telecom - Integration Manager
*162. Sasmita Mohapatra 6 20,96,624 Secor Consulting Ltd. - Consultant
163. Sathisha B. K. 11 54,43,814 Larsen & Toubro - Planning
*164. Satrajit Pal 11 2,39,014 RS Software - Project Manager & Technical Consultant
*165. Satyendra Kumar 25 8,52,911 IMR Global - Vice President
*166. Seshadiri Parthasarathy 9 6,76,421 CAT - Consultant
*167. Seshadri Bhoovaraghan 7 10,72,254 Sabre Inc., Senior Consultant
*168. Shailesh Joshi 18 9,33,368 GE Global Exchange Service - Senior Project Manager
(Extranet Development)
169. Sharad K. Hegde 20 12,83,018 Patni Computer Systems Pvt. Ltd. - Software Engineer Trainee
*170. Shashidhar B. Ramakrishnaiah 8 5,35,921 Mediaserv Information Architects Inc,
Senior Solutions Consultant
171. Shibulal S. D. 25 14,97,765 Sun Micro Systems - Senior I. R. Manager
*172. Shirish Agnihotri 17 7,29,880 MCK Comm. Inc., Calgary, Director - Product Management
173. Shveta Arora 5 22,76,796 A. T. Kearney - Associate
- ------------------------------------------------------------------------------------------------------------------------
Annexures to the directors' report (contd.)
- ------------------------------------------------------------------------------------------------------------------------
Sl. Name Designation Qualification Age Date of
No. (Years) Joining
- ------------------------------------------------------------------------------------------------------------------------
*174. Sion (Xiao) Peng Software Developer B.Sc. 28 15.01.2001
*175. Skye Winterbourne Administrative Assistant B.Sc. 29 06.06.2000
176. Sobha Meera P. R. Regional Manager & Vice President - B.E., PGD 33 12.04.1995
Sales - Canada & East North America
177. Socka Suppiah Senior Principal B.E., MBA 48 22.03.2000
*178. Sohrab Peshoton Kakalia Associate Vice President B.Sc., B.Sc. Engg, 36 11.09.2000
179. Srikanth S. Senior Associate B.E., PGD 29 11.10.1999
180. Srinath Batni Director B.E., M.E.(IISc) 46 15.06.1992
181. Srinath Kashyap Business Development Manager B.E. 35 04.12.1997
182. Srinath P. Business Development Manager B.Tech., PGD 31 23.11.1998
183. Srinivas V. Business Development Manager B.Tech.(H), PGD 31 03.06.1996
184. Srinjay Sengupta Regional Manager & B.Sc.(H) (IIT), PGD(IIM) 33 01.07.1996
Associate Vice President - Sales
185. Sriram V. Regional Manager & B.E., PGD(IIM) 36 03.01.1997
Associate Vice President - Sales
*186. Srividhya Ramakrishnan Business Development Manager B.Sc., PGD 29 03.04.2000
187. Subbalakshmi D. V. Assistant Marketing Manager B.Tech.(IIT), PGD(IIM) 33 02.09.1996
188. Subhash B. Dhar Regional Manager & B.E., PGD 34 24.02.1997
Associate Vice President - Sales -
Ebusiness Practice
*189. Suchitra Eswaran Marketing Analyst B.Com., MBA 24 15.01.2001
*190. Sudhakar Jayaram Business Development Manager B.E.(H), MBA 29 05.06.2000
*191. Sudhanshu Asthana Senior Systems Analyst B.Sc., MS, MCA 34 01.03.2001
*192. Sudhir Chaturvedi Business Development Manager B.E., PGD, MBA(Leeds Univ.) 31 15.05.2000
193. Sudhir Subramanya Holla Senior Associate B.E., PGD 30 10.11.1999
*194. Suresh Rajappa Senior Systems Analyst B.E., 30 05.03.2001
*195. Sven Andersen Norgaard Software Developer B.A. 23 22.01.2001
*196. Swaroop Krishna Systems Analyst B.E. 32 31.07.2000
*197. Thomas K Krautle Project Leader BS 31 05.04.2000
*198. Todd A. MacCallum Business Development Manager B.A., MBA 31 22.01.2001
199. Tulika Misra Systems Analyst B.Tech. 26 10.11.1997
*200. Ushvinder S. Bhatia Project Leader B.E. 30 04.07.2000
*201. Venkatesh Srinivasan Principal B.Com., ICWA, ACA 30 21.08.2000
*202. Victoria Shea H. R. Generalist B.A. 33 05.04.2000
*203. Vikas Maniar Business Development Manager B.E., PGD(IIM) 31 20.12.1999
*204. Vineet Toshniwal Business Development Manager B.E., MBA 29 19.06.2000
*205. Vishal Modi Associate B.Com., M.A., MS 27 12.06.2000
*206. Vivek Bhatnagar Business Development Manager B.E., PGD, MS 32 03.07.2000
*207. Vivekanand M. K. Project Manager B.E. 32 25.10.2000
*208. Wang Ying Software Developer B.Sc. 24 21.08.2000
*209. Yashesh Mahendra Kampani Principal B.Com., Graduate CWA, ACA 30 11.09.2000
210. Yezdi M. Mehta Business Development Manager B.Com., MBA 35 21.11.1997
*211. Ying (Karen) Li Software Developer B.Sc. 21 08.05.2000
- ------------------------------------------------------------------------------------------------------------------------------------
Annexures to the directors' report
- ------------------------------------------------------------------------------------------------------------------------------------
Sl. Name Experience Gross Previous Employment - Designation
No. (Years) Remuneration (Rs.)
- ------------------------------------------------------------------------------------------------------------------------------------
*174. Sion (Xiao) Peng 3 4,15,735 Fuzhou TV station, News reporter
*175. Skye Winterbourne 5 2,76,313 AEA Credit Union - ATM Dispute/Fraud Coordinator
176. Sobha Meera P. R. 10 86,16,203 Sonata Software, Marketing Executive
177. Socka Suppiah 10 10,24,745 Andersen Consulting - Senior Manager
*178. Sohrab Peshoton Kakalia 13 8,84,917 PSI Data Systems Ltd., Manager-Business Unit
179. Srikanth S. 6 43,25,112 Pricewater House, Consultant
180. Srinath Batni 23 12,13,404 PSI Bull (I) Ltd. - Senior Manager Marketing Technical Support
181. Srinath Kashyap 12 37,83,272 TCS, Sales, Associate Consultant
182. Srinath P. 7 60,86,098 Citi Bank N. A., Manager
183. Srinivas V. 7 54,86,572 IDM, Marketing Executive
184. Srinjay Sengupta 10 85,52,820 Procter & Gamble - Manager
185. Sriram V. 13 82,79,077 Wipro - Business Person
*186. Srividhya Ramakrishnan 6 15,64,922 Asian Paints (I) Ltd, Product Executive, Branch Executive
187. Subbalakshmi D. V. 7 7,91,455 Lintas - Executive
188. Subhash B. Dhar 12 64,60,405 Ravi Database Consul, VP Marketing
*189. Suchitra Eswaran 3 5,09,054 Hutchinson Max Telecom, Sales Officer
*190. Sudhakar Jayaram 6 23,85,120 ISC, Head - Business Development
*191. Sudhanshu Asthana 5 2,58,302 Preis24.Com AG - Trainee
*192. Sudhir Chaturvedi 6 34,56,663 Ernst & Young UK Ltd. - Senior Business Analyst
193. Sudhir Subramanya Holla 7 32,43,949 Andersen Consulting, Senior Consultant
*194. Suresh Rajappa 5 2,21,939 C. S. Solutions Inc., Analyst/IT Consultant
*195. Sven Andersen Norgaard 5 9,17,414 Oral B laboratories, Information Technology Intern
*196. Swaroop Krishna 6 12,74,861 CGI Group Inc. - Programmer
*197. Thomas K Krautle 10 17,24,481 Fujitsu International Consulting Associates, Canada -Team Leader
*198. Todd A. MacCallum 9 6,85,314 Reylon Technology, Inc., Business Development Executive
199. Tulika Misra 4 16,00,672 Tata Consultancy Services - Assistant Systems Analyst Trainee
*200. Ushvinder S. Bhatia 8 19,21,590 IBM Inc. - Analysis & Design
*201. Venkatesh Srinivasan 10 5,17,476 Arthur Andersen, Experienced Manager
*202. Victoria Shea 13 18,53,547 EDS System House - Staffing Specialist
*203. Vikas Maniar 7 40,13,983 Iridium India Telecom Limited - Regional Operations Manager
*204. Vineet Toshniwal 6 11,17,883 Bank of America - Assistant Vice President
*205. Vishal Modi 6 30,13,172 MIT Startup Kent Ridge Digital Labs, Research Scientist
*206. Vivek Bhatnagar 8 10,77,517 Andersen Consulting, Senior Consultant
*207. Vivekanand M. K. 10 22,40,505 HCL Technologies - Business Development Manager
*208. Wang Ying 1 9,15,590 -
*209. Yashesh Mahendra Kampani 6 1,39,827 PricewaterhouseCoopers, Manager
210. Yezdi M. Mehta 11 58,47,896 Dictaphone Corporation, Manager, Systems Marketing
*211. Ying (Karen) Li 1 13,28,438 Dept. of Economics, University Of Toronto -
Database Design & Maintenance
- ------------------------------------------------------------------------------------------------------------------------------------
Notes:
Remuneration comprises basic salary, allowances and taxable value of
perquisites.
* Employed for part of the year.
None of the employees are related to any director of the company
N. R. Narayana Murthy, Nandan M. Nilekani, Gopalakrishnan S., Dinesh K. and
Shibulal S. D. own more than 1% of the outstanding shares of the company as on
March 31, 2001. None of the other employees own more than 1% of the outstanding
shares of the company as on March 31, 2001.
For and on behalf of the board of directors
/s/ Nandan M. Nilekani /s/ N. R. Narayana Murthy
Nandan M. Nilekani N. R. Narayana Murthy
Bangalore
April 11, 2001 Managing Director, President Chairman
and Chief Operating Officer and Chief Executive Officer
Annexures to the directors' report (contd.)
- --------------------------------------------------------------------------------
c) The directors' responsibility statement as required under section 217 (2AA)
of the Companies (Amendment) Act, 2000
The financial statements are prepared in conformity with the accounting
standards issued by the Institute of Chartered Accountants of India and the
requirements of the Companies Act, 1956, to the extent applicable to the
company; on the historical cost convention; as a going concern and on the
accrual basis. There are no material departures from prescribed accounting
standards in the adoption of the accounting standards. The accounting policies
used in the preparation of the financial statements have been consistently
applied, except where otherwise stated in the notes on accounts.
The board of directors and the management of Infosys accept responsibility for
the integrity and objectivity of these financial statements. The estimates and
judgments relating to the financial statements have been made on a prudent and
reasonable basis, in order that the financial statements reflect in a true and
fair manner, the form and substance of transactions, and reasonably present the
company's state of affairs and profits for the year. To ensure this, the company
has taken proper and sufficient care in installing a system of internal control
and accounting records; for safeguarding assets, and, for preventing and
detecting frauds as well as other irregularities; which is reviewed, evaluated
and updated on an ongoing basis. Our internal auditors have conducted periodic
audits to provide reasonable assurance that the established policies and
procedures of the company have been followed. However, there are inherent
limitations that should be recognized in weighing the assurances provided by any
system of internal controls and accounts.
The financial statements have been audited by Bharat S Raut & Co., Chartered
Accountants, and the independent auditors.
The audit committee at Infosys meets periodically with the internal auditors and
the independent auditors to review the manner in which the auditors are
performing their responsibilities, and to discuss auditing, internal control and
financial reporting issues. To ensure complete independence, the independent
auditors and the internal auditors have full and free access to the members of
the audit committee to discuss any matter of substance.
For and on behalf of the board of directors,
Infosys Technologies Limited
d) Auditors' certificate on compliance with mandatory recommendations of Kumar
Mangalam Birla Committee Report on Corporate Governance
We have examined the relevant records of Infosys Technologies Limited (the
company) for the year ended March 31, 2001 relating to compliance with the
requirements of corporate governance as contained in the Kumar Mangalam Birla
Committee Report and state that in our opinion, and to the best of our knowledge
and according to the information and explanations given to us, the company has
complied with the mandatory requirements contained in the aforesaid report.
for Bharat S Raut & Co.
Chartered Accountants
/s/ Balaji Swaminathan
Bangalore Balaji Swaminathan
April 11, 2001 Partner
Risk management
- --------------------------------------------------------------------------------
The management cautions readers that the risks outlined below are not exhaustive
and are for information purposes only. Investors are requested to exercise their
own judgment in assessing various risks associated with the company and to refer
to discussions of some of these risks in the company's earlier Annual Reports
and Securities and Exchange Commission filings.
In a dynamic industry such as IT services, risk is an inherent aspect of
business. Risk taking is an essential ingredient for growth. The negative
fallouts of such an ingredient, however, need to be managed through effective
risk mitigation - both at the strategic as well as at the transactional level.
This is especially so in the current scenario where the business environment is
going through a turbulent phase. Revenue shortfall and profit warnings, coupled
with employee retrenchments, are the order of the day among many of the Fortune
500 companies. It is indeed during such times that a company's ability to manage
risk is put to an acid test.
Infosys' business model rests on four pillars - Predictability, Sustainability,
Profitability and De-risking (the PSPD model). This model helps the management
evaluate risk-return trade-offs and thereby make effective strategic choices.
The company focuses on long-term relationships with its clients and seeks to
become a strategic partner in their quest for competitiveness. This leads to a
predictable and sustainable revenue stream for the company. Infosys' pioneering
Global Delivery Model has helped the company consistently be among the most
profitable IT services companies in the world. The last element of the model -
de-risking - provides the company with the strength and stability to effectively
react to changes in the business environment.
A comprehensive and integrated risk management framework forms the basis of all
the de-risking efforts of the company. Prudential norms aimed at limiting
exposures are an integral part of this framework. Formal reporting and control
mechanisms ensure timely information availability and facilitate proactive risk
management. These mechanisms are designed to cascade down to the level of line
managers so that risks at the transactional level are identified and steps are
taken towards mitigation in a decentralized fashion.
The board of directors is responsible for monitoring risk levels on various
parameters and the management council ensures implementation of mitigation
measures, if required. The audit committee provides the overall direction on the
risk management policies.
1. Business portfolio risks
. E-business exposure
. Service concentration
. Client concentration
. Geographical concentration
. Vertical domain concentration
. Technology concentration
2. Financial risks
. Foreign currency rate fluctuations
. Liquidity
. Leverage
1. Business portfolio risks
Excessive dependence on any single business segment increases risk and
therefore needs to be avoided. To this end, the company has adopted
prudential norms, wherever required, to prevent undesirable concentration in
any one vertical, technology, client or geographic area.
1.1 E-business exposure
In recent years, the Internet has emerged as an efficient platform for
enabling business transactions. This has created a significant business
opportunity for IT service companies such as Infosys. Over the last two
years, Infosys has demonstrated the ability to partner with high technology
companies as well as with established corporations embracing the e-paradigm.
Due to the inherently risky nature of start-up companies, Infosys has chosen
to focus on Fortune 500 and other established corporations. This is
reflected in the table below showing a break-up of Infosys' e-business
revenues:
-----------------------------------------------------------------------------------------------------------------
Q1 Q2 Q3 Q4 FY 2001
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
Internet and e-commerce-related revenues (US $ mn) 23.0 30.8 32.5 31.2 117.5
Of this- business from established corporations 62% 70% 80% 84% 75%
- business from dot-coms and venture-funded companies 38% 30% 20% 16% 25%
-----------------------------------------------------------------------------------------------------------------
1.2 Service concentration
Infosys has an array of service offerings across various horizontal and
vertical business segments. These services are designed to offer the
company end-to-end capability in delivering IT solutions to its clients and
also add stability and predictability to the its revenue stream.
The following table provides historical data on contribution to revenues
from the various service offerings.
-------------------------------------------------------------------------------------
Service offerings FY 2001 FY 2000 FY 1999
-------------------------------------------------------------------------------------
Development 40.0% 43.7% 34.8%
Maintenance 25.4% 28.6% 41.0%
Re-engineering 9.3% 10.1% 10.7%
Package implementation 7.2% 6.0% 5.5%
Consulting 4.9% 1.6% -%
Testing 2.9% 0.7% 0.2%
Engineering services 1.7% 2.0% 0.8%
Other services 6.1% 4.7% 3.9%
Products 2.5% 2.6% 3.1%
-------------------------------------------------------------------------------------
Total 100.0% 100.0% 100.0%
-------------------------------------------------------------------------------------
1.3 Client concentration
Excessive exposure to a few large clients has the potential to impact
profitability and to increase credit risk. However, large clients and high
repeat business lead to higher revenue growth and lower marketing costs.
Therefore, the company needs to strike a balance. Infosys has chosen to
limit revenue from any one client to 10% of the total revenue.
In addition to increasing revenues from existing clients, Infosys actively
seeks new business opportunities and clients to reduce client concentration
levels. During the year, the company added 122 clients.
The following table provides historical data on client concentration.
-------------------------------------------------------------------------------------
FY 2001 FY 2000 FY 1999
-------------------------------------------------------------------------------------
Active clients 273% 194% 115%
Clients added during the year 122% 99% 39%
% of revenues from the largest client 7.3% 7.2% 6.4%
% revenues from top five clients 26.0% 30.2% 28.4%
% revenues from top ten clients 39.2% 45.7% 44.0%
Clients accounting for *5% of total revenue 3 4 5%
No. of million-dollar clients 80 42 35
No. of 5-million-dollar clients 19 10 6
No. of 10-million-dollar clients 11 4 -
No. of 20-million-dollar clients 3 - -
-------------------------------------------------------------------------------------
* More Than
1.4 Geographical concentration
A high geographical concentration of business could lead to volatility
because of political and economic factors in target markets. However,
individual markets have distinct characteristics - growth, IT spends,
willingness to outsource, costs of penetration, and price points. Cultural
issues such as language, work culture and ethics, and acceptance of global
talent also come into play. Due to these business considerations, the
company has decided not to impose any rigid limits on geographical
concentration.
Proactively looking for business opportunities in new geographies and
thereby increasing their contribution to total revenues helps manage this
risk. In line with this, the company has made significant efforts to
enhance business from Europe and Asia Pacific. The company opened five
marketing offices in the US, Europe and the Asia Pacific during this fiscal
year.
The following table provides historical data relating to geographical
concentration.
-------------------------------------------------------------------------------------
Geographical area FY 2001 FY 2000 FY 1999
-------------------------------------------------------------------------------------
North America 73.5% 78.0% 82.0%
Europe 18.8% 14.8% 9.4%
India 1.4% 1.4% 1.7%
Rest of the World 6.3% 5.8% 6.9%
-------------------------------------------------------------------------------------
Total 100.0% 100.0% 100.0%
-------------------------------------------------------------------------------------
1.5 Vertical domain concentration
Vertical domains relate to the industries in which clients operate. Infosys
has chosen to focus on certain vertical segments with a view to leverage
accumulated domain expertise to deliver enhanced value to its clients. To
ensure that cyclicality in any one industry does not adversely impact
revenues, the proportion of revenue from each vertical domain is closely
monitored. Focused marketing efforts in chosen domains serve to mitigate
this risk.
The following table provides historical information on the proportions of
revenue from various domains.
-------------------------------------------------------------------------------------
Vertical domain FY 2001 FY 2000 FY 1999
-------------------------------------------------------------------------------------
Manufacturing 17.8% 23.0% 24.6%
Insurance, banking & financial services 33.7% 30.1% 23.3%
Insurance 14.2% 15.0% 9.0%
Banking & financial services 19.5% 15.1% 14.3%
Telecom 18.4% 15.4% 14.2%
Retail 9.1% 10.6% 13.8%
Utilities 1.4% 3.0% 3.7%
Transportation & logistics 2.2% 2.8% 5.5%
Others 17.4% 15.1% 14.9%
-------------------------------------------------------------------------------------
Total 100.0% 100.0% 100.0%
-------------------------------------------------------------------------------------
1.6 Technology concentration
Being a company exposed to rapid shifts in technology, an undue focus on
any particular technology could adversely affect the risk profile of the
company. Given the rapid pace of technological change, Infosys has chosen
not to impose rigid concentration limits. Often, industry characteristics
and market dynamics determine the choice of technology.
The following table provides historical technology-related data.
-------------------------------------------------------------------------------------
Technology FY 2001 FY 2000 FY 1999
-------------------------------------------------------------------------------------
Distributed systems 44.6% 47.2% 41.5%
Mainframe / mid-range 13.6% 25.0% 37.1%
Internet 28.4% 13.6% 3.7%
Proprietary telecom systems 5.1% 6.8% 12.1%
Others 8.3% 7.4% 5.6%
-------------------------------------------------------------------------------------
Total 100.0% 100.0% 100.0%
-------------------------------------------------------------------------------------
2. Financial risks
2.1 Foreign currency rate fluctuations
While Infosys derives its revenue from 28 countries around the world, 89.6%
of revenues in fiscal 2001 was dollar-denominated. Further, all contracts
that Infosys enters into are in internationally tradeable currencies so
that the company does not end up with local currencies that have
significant non-tradability and downside risks on exchange fluctuations.
A large proportion of Infosys' expenses are in Indian rupees. Operating
profits are therefore subject to foreign currency rate fluctuations. While
a depreciation of the Indian rupee would have a favorable bottom-line
impact, an appreciation would affect the company's profitability adversely.
The table below gives the foreign currency receipts and payments.
in Rs. crore
-------------------------------------------------------------------------------------
FY 2001 FY 2000 FY 1999
-------------------------------------------------------------------------------------
Earnings in foreign currency 1,728.23 851.72 477.44
Revenue expenditure in foreign currency 612.29 296.56 162.75
Net revenue foreign currency earnings 1,115.94 555.16 314.69
Capital expenditure in foreign currency 115.24 40.02 29.81
-------------------------------------------------------------------------------------
Net foreign currency earnings 1,000.70 515.14 284.88
-------------------------------------------------------------------------------------
As a net foreign currency earner, Infosys has a natural hedge on all forex-
related payments. All dollar expenses are met out of dollar-denominated
accounts. A significant portion of the surplus funds is maintained in
foreign currency deposits. The company does not take active trading
positions in the foreign currency markets and operates only to hedge its
receivables. Any bad debt write-offs in foreign currencies are effected
only after obtaining permission from the Reserve Bank of India.
2.2 Liquidity
An essential part of the financial strategy of Infosys is to have a liquid
balance sheet. The company desires to have liquid assets at 25% of revenue
and around 40% of total assets. Operating as it does in a high technology
area, a high level of liquidity enables quick responses to rapid changes in
the environment.
Infosys also has a policy to settle its payables well within stipulated
time frames. Further, the nature of business is such that significant
investments may have to be made in marketing, and research and development
activities. All these factors call for considerable liquidity.
The following table gives data on the liquidity position of the company
based on Indian GAAP.
-------------------------------------------------------------------------------------
Ratio FY 2001 FY 2000 FY 1999
-------------------------------------------------------------------------------------
Operating cash flow as % of revenue 27.61% 27.07% 30.98%
Days of sales receivable 58% 56% 61%
Cash and equivalents as % of assets 41.57% 61.00% 72.51%
Cash and equivalents as % of revenue 29.47% 55.17% 81.26%
-------------------------------------------------------------------------------------
2.3 Leverage
Infosys has been a debt-free company for the last four financial years.
Currently, the company has a policy to use debt financing only for short-
term funding requirements, should the necessity arise.
3. Legal and statutory risks
3.1 Contractual liabilities
Litigation regarding intellectual property rights, patents and copyrights
is significantly high in the software industry. In addition, there are
other general corporate legal risks. The management has clearly charted out
a review and documentation process for contracts. This process focuses on
evaluating the legal risks involved in a contract, on ascertaining the
legal responsibilities of the company under the applicable law of the
contract, on restricting its liabilities under the contract, and on
covering the risks involved. The management has also taken sufficient
insurance cover abroad to cover possible liabilities arising out of non-
performance of the contract. The management reviews this on a continuous
basis and takes corrective action. As a matter of policy the company does
not enter into contracts that have open-ended legal obligations. To date,
the company has no material litigation in relation to contractual
obligations pending against it in any court in India or abroad.
3.2 Statutory compliance
Infosys has a compliance officer to advise the company on compliance
issues, with respect to the laws of various jurisdictions in which the
company has its business activities, and to ensure that the company is not
violating the laws of any jurisdiction where the company has operations.
The compliance officer reports to the board of directors from time to time
on the compliance or otherwise with the laws of various jurisdictions.
Various business heads give compliance certificates to the board of
directors and the compliance officer reports deviations, if any. Generally,
the company takes appropriate business decisions after ascertaining from
the compliance officer and, if necessary, from independent legal counsel,
that the business operations of the company are not in contravention of any
law in the jurisdiction in which it is undertaken. Legal compliance issues
are an important factor in assessing all new business proposals. The
company has strengthened its legal team and put in place appropriate
policies towards legal compliance. The company follows an affirmative
policy in protecting its trade name and trademark / service mark and is
actively pursuing trademark infringement suits against various persons /
companies in India.
4. Internal process risks
4.1 Leadership development
As the company experiences continuous growth, one of the key imperatives is
to develop leadership among the talent pool that the company possesses. The
Infosys Leadership Initiative has been launched to develop a large
number of leaders at various levels. This initiative would seek to develop
and facilitate leadership skills proactively among Infoscions through a mix
of classroom and action-oriented learning.
4.2 Human resource management
The key resource for Infosys is its people. The company has been able to
create a favorable work environment that encourages innovation and
meritocracy. This is reflected in the fact that Infosys was rated as the
Best Employer of India in the Business Today-Hewitt Study, based on a
survey of HR practices of leading Indian corporates.
An employee-friendly work environment combined with a well-balanced
compensation package, ensures that Infosys has one of the lowest employee
attrition rates in the industry today. The table below gives attrition
rates for the past three years:
-------------------------------------------------------------------------
FY 2001 FY 2000 FY 1999
-------------------------------------------------------------------------
Attrition rate 11.2% 9.2% 11.5%
-------------------------------------------------------------------------
Infosys enjoys excellent relationships with leading universities in India
and thus has a huge talent pool to draw from. The company added 4,033
software professionals during the year ended March 31, 2001. This was
achieved in spite of the stiff entry criteria the company sets for aspiring
employees.
4.3 Process maturity
Risk management processes at the operational level are a key requirement
for reducing uncertainty in delivering high-quality software solutions to
clients within budgeted time and cost. Adoption of quality models such as
the Software Engineering Institute's Capability Maturity Model (SEI-CMM)
has ensured that risks are identified and measures are taken to mitigate
them at the project plan stage itself. Infosys has been certified to have
software development processes at Level 5 of the CMM, a distinction that
only 37 companies in the world have achieved.
A Risk Management Guideline is in place to provide guidance to project
leaders and module leaders on ways in which risks can be identified and
mitigated. Further, important metrics are collected and analyzed for all
projects, and a database of such information is maintained to focus
attention on key improvement areas. Standard methodologies, perfected
through accumulated experience, form the basis for execution of projects in
most of Infosys' service offerings.
Infosys also has effective systems in place to ensure creation,
documentation and dissemination of experiential knowledge. The backbone of
this system is a user-friendly, searchable database known as the Body of
Knowledge (BoK) comprising knowledge components contributed by employees of
the company. Incentive schemes are in place to encourage a knowledge
sharing culture in the organization. Even so, the company has now created a
dedicated central team of experts in the knowledge management sphere to
provide further impetus to this initiative. This group will create
technology aids and also facilitate knowledge accumulation and
dissemination through innovative methods.
While Infosys has significantly mature processes in the software
development arena, the company has been focusing its attention during the
year on enhancing the process quality of other enterprise processes, and
aligning them with the organizational objectives. World-class models of
process excellence like the 6-sigma technique and the Malcolm Baldrige
quality framework guide this initiative. Through this initiative, many of
the processes critical to the long-term competitiveness of the company have
been taken up for re-engineering. The power of IT has been used in all such
instances to achieve quantum leaps in process performance.
As a result of such efforts, the company won the IMC Ramkrishna Bajaj award
during the year. This award, based on the Malcolm Baldrige National Quality
Award Framework, is given to Indian companies for enterprise process
excellence.
4.4 Internal control systems
Being a process-oriented company, Infosys has in place well-defined roles
and responsibilities for people at various levels. This, coupled with
robust internal information systems, ensures appropriate information flow
to facilitate effective monitoring. Adherence to these processes is ensured
through frequent internal audits. Additionally, the following measures are
in place to ensure proper control:
Any unbudgeted expense has to be approved by the managing director,
president and COO.
Any policy change has to be approved by a committee headed by managing
director, president and COO after a 5-year profitability impact
assessment.
Senior management personnel submit periodic reports on their activities
and achievements to be reviewed by the managing director, president and
COO.
Infosys uses an operations planning model to forecast personnel
requirements based on business projections. The personnel requirements are
incorporated into the annual capital budgeting exercise. Any material
change in the business outlook is factored into the personnel forecasts and
capital budgets. Effective budgetary control on all capital expenditure
ensures that actual spending is in line with the capital budget.
4.5 Disaster prevention and recovery
Adherence to ISO 9001 and CMM Level 5 quality standards has ensured that
the company has a robust disaster prevention and recovery system in place.
The company has a disaster recovery plan for each of its work locations as
well as for each technology category. Possible risks for each category have
been identified and action plans put in place to cope with any
contingencies. These plans are reviewed and updated periodically to make
sure that they are in tune with changes in technology and risks. All
software media brought into the company's offices are scanned for viruses
before being used. Further, Infosys has firewalls in place on all
connections to clients and to the Internet.
4.6 Technological obsolescence
The company evaluates technological obsolescence and the associated risks
on a continuing basis and makes investments accordingly. Information
technology is possibly the only area where costs for a given technology
reduce over time. The cost of acquiring technology also includes the cost
of installation and retraining.
The technology requirements of the company can be classified into three
categories; different strategies are used to manage risk in each category.
The first category is the company's desktop environment consisting of PCs
along with associated software. In this category, volumes are large and
retraining costs are high. The company considers this a commodity product
and goes for a technology that is mature- not leading-edge - so that costs
are low. The company has also standardized its user interface software so
that retraining costs are minimal. Once the warranty period on these
systems expires, they are donated to educational and charitable
institutions, after obtaining suitable approval.
The second category of systems are proprietary systems used for the
development of software for clients as well as the servers used for running
internal IS applications. The technological obsolescence in these areas is
not rapid, especially in the mainframe segment. Purchase decisions in this
category are determined by client requirements. The company has
standardized on the Windows NT platform for its internal IS needs. Network
components also fall into this category and the company is standardizing
its network components, based on a few suppliers.
The third category of systems are the tools required for software
development including project management tools, integrated software
development environments, testing and other CASE tools, collaborative
software development tools, etc. In this category, the company continuously
looks out for leading-edge products that help increase productivity and
also give the company an advantage over its competitors. In its technology
infrastructure, Infosys aims to be on par with or better than its
competitors anywhere in the world, as well as its clients. The company's
clients would like it to advise them on emerging products and technologies.
Hence, Infosys continuously invests in these technologies. Several research
initiatives are going on in the company to review and adopt the technology
for use internally, as well as, on client projects.
The company's amortization strategy reflects the requirements of the
various categories of systems. Infosys has an aggressive amortization
program under which category 1 and 2 are amortized in 2 years, except for
mainframe technology. Further, purchase of software is treated as revenue
expenditure in the same year. Other assets are also aggressively amortized
to ensure that the investment is current, and that any change in technology
would not lead to large write-offs. Such an amortization policy also
ensures full cost recovery as part of current costs.
The following table gives depreciation expense and software expense as a
proportion of revenues for the last three years (based on Indian GAAP).
-------------------------------------------------------------------------
FY 2001 FY 2000 FY 1999
-------------------------------------------------------------------------
Depreciation / average gross block 24.7% 23.5% 26.2%
Depreciation / total revenue 5.8% 5.8% 7.0%
-------------------------------------------------------------------------
Software for own use / total revenue 1.6% 1.8% 2.9%
-------------------------------------------------------------------------
5. Political risks
Recognizing that India's education system, its world-class professionals,
and its low cost structure give it an intrinsic comparative advantage in
software exports, successive governments have accorded a special status to
this industry. Given the consensus among all leading political parties on
the importance of the software industry, it is likely to remain a focus
area for governmental policy in the years to come. Business ties between
the US corporations and the Indian software industry have been strong for
several years now. These ties have been further strengthened with improving
bilateral relationships between the two governments over the past two
years. Several benefits have accrued to the industry due to this trend,
including a recent increase in the cap on H-1B work permits from 115,000
per annum to 195,000 per annum. Similar improvements have been seen with
countries such as Germany, UK, Italy and Japan. Given such positive trends,
the company believes that its exposure to political risk is not very
significant.
Corporate governance
- --------------------------------------------------------------------------------
Corporate governance policies
Infosys has been a pioneer in benchmarking its corporate governance practices
with the best in the world. Given below are the company's policies on corporate
governance.
A. Board composition
1. Responsibilities of the CEO and the COO
The current policy of the company is to have an executive chairman and
chief executive officer (CEO), and a managing director, president and chief
operating officer (COO). There is a clear demarcation of responsibilities
and authority between the two. The CEO is responsible for corporate
strategy, brand equity, planning, external contacts, acquisitions, and
board matters. The managing director and COO is responsible for all
day-to-day, operations-related issues and for the achievement of annual
targets in customer satisfaction, sales, profitability, quality,
productivity, recruitment, training and employee retention. The CEO, COO,
the other executive directors and the senior management make periodic
presentations to the board on their responsibilities, performance and
targets.
2. Size of the board
The board has sixteen members.
3. Executive and independent directors
The current policy is to have an appropriate mix of executive and
independent directors to maintain the independence of the board, and to
separate the board functions of governance and management. To ensure
independence of the board, the members of the audit committee, the
nominations committee and the compensation committee are composed entirely
of independent directors. The current board has eight independent directors
and eight executive directors. Five of the executive directors are founders
of the company.
4. Board membership criteria
Board members are expected to possess the expertise, skills and experience
required to manage and guide a high growth, hi-tech, software company
deriving revenue primarily from G-7 countries. Expertise in strategy,
technology, finance, quality and human resources is essential. Generally,
they will be between 40 and 60 years of age. They will not be relatives of
an executive director or of an independent director. They are generally not
expected to serve in any executive or independent position in any company
in direct competition with Infosys. Board members are expected to
rigorously prepare for, attend, and participate in all board and applicable
committee meetings. Each board member is expected to ensure that their
other current and planned future commitments do not materially interfere
with the member's responsibility as a director of Infosys.
5. Membership term
The board constantly evaluates the contribution of its members, and
recommends to shareholders their re-appointment periodically as per
statute. The current law in India mandates the retirement of one-third of
the board members every year and qualifies the retiring members for re-
appointment. The executive directors are appointed by the shareholders for
a maximum period of five years at one time, but are eligible for re-
appointment upon completion of their term. The non-executive directors do
not have a specified term, but retire by rotation as per law. The
nominations committee of the board, composed entirely of independent
directors, recommends such appointments / re-appointments. However, the
membership term is limited by the retirement age for the members.
6. Retirement policy
The board has adopted a retirement policy for its members. Under this
policy, the maximum age of retirement of executive directors, including the
CEO, is 60 years, which is the age of superannuation for the employees of
the company. Their continuation as members of the board upon superannuation
/ retirement is determined by the nominations committee. The age limit for
retirement from the board is 65 years.
7. Board compensation review
The compensation committee determines and recommends to the board the
compensation payable to the members of the board. The compensation of the
executive directors consists of a fixed component and a performance
incentive. The compensation committee makes a quarterly appraisal of their
performance. The annual compensation of the executive directors is approved
by the compensation committee, within the
parameters set by the shareholders at the shareholders meetings. The
shareholders determine the compensation of the executive directors for the
entire period of their term.
The compensation of the independent directors is approved at a meeting of
the full board. The compensation payable to each of the independent
directors is limited to a fixed sum per year as determined by the board.
The aggregate of these is within the limit of 0.5% of the net profits of
the company for the year, calculated as per the provisions of the Companies
Act, 1956, as approved by the shareholders, and is separately disclosed in
the financial statements. The compensation payable to the independent
directors, and the method of calculation are also disclosed separately in
the financial statements. The executive directors who are also founders of
the company have voluntarily excluded themselves from the 1994 Stock Offer
Plan, the 1998 Stock Option Plan and the 1999 Stock Option Plan. The
independent directors are also not eligible for stock options under these
plans, except the 1999 Stock Option Plan. However, no options have been
issued during the year, under the plan, to the independent directors.
8. Memberships of other boards
Executive directors are excluded from serving on the board of any other
entity, unless the said entity is an industrial entity whose interests are
germane to the business of the software industry, or a government body that
is of relevance to the software industry, or an entity whose objective is
the upliftment of society. Independent directors are generally not expected
to serve on the boards of competing companies. Other than this, there are
no limitations on them save those imposed by law and good corporate
governance.
B. Board meetings
1. Scheduling and selection of agenda items for board meetings
Normally, board meetings are scheduled at least a month in advance. Most of
them are held at the company's registered office at Electronics City,
Bangalore, India. The chairman of the board and the company secretary draft
the agenda for each meeting, along with explanatory notes, and distribute
it in advance to the board members. Every board member is free to suggest
the inclusion of items on the agenda. Normally, the board meets once a
quarter to review the quarterly results and other items on the agenda. The
board also meets on the occasion of the annual shareholders' meeting. If
necessary, additional meetings are held. Independent directors are normally
expected to attend at least four board meetings in a year. A committee of
the board meets as and when required for transacting business of a routine
nature.
2. Availability of information to the members of the board
The board has unfettered and complete access to any information within the
company, and to any employee of the company. At the meetings of the board,
it welcomes the presence of managers who can provide additional insights
into the items being discussed.
C. Board committees
1. The committees of the board
Currently, the board has four committees - the audit committee, the
compensation committee, the nominations committee and the investor
grievance committee. All these committees excluding the investor grievance
committee are composed entirely of independent directors. The investor
grievance committee is composed of a non-executive chairman and some of the
executive and non-executive directors. The functions of these committees
are described in the Report of committees of the board section in this
report.
2. Assignment and terms of service of committee members
The board decides, in consultation with the chairman, and considering the
views of individual board members, the terms of service of various
committees, and the assignment of specific board members to various
committees.
3. Frequency and duration of committee meetings and committee
agenda
The chairman of the board, in consultation with the company
secretary of the company and the committee chairman, determines the
frequency and duration of the committee meetings. Normally, the committees
meet at least twice a year. However, the audit committee meets four times a
year. The recommendations of the committee are submitted to the full board
for approval.
4. Quorum for the meetings
The quorum should be either two members or one-third of the members of the
committees, whichever is higher.
D. Management review and responsibility
1. Formal evaluation of officers
A committee headed by the chairman and CEO reviews, evaluates and decides
the annual compensation for officers of the company from the level of
associate vice president, excluding members of the management council.
Further, the compensation committee approves the compensation and benefits
for board members, as well as, for the members
of the management council. Grants of stock options, under the 1994 Stock
Offer Plan, were decided by the advisory board, constituted under the 1994
Plan. The compensation committee of the board administers the 1998 Stock
Option Plan and the 1999 Stock Option Plan.
2. Succession planning and management development
The chairman reviews succession planning and management development with
the board from time to time.
3. Board interaction with clients, employees, institutional investors,
the government and the press
The chairman and CEO handles all interactions with investors, media, and
governments. In this task, he seeks advice and help from the managing
director, president and COO, as well as the CFO, where necessary. The
managing director and COO manages all interaction with clients, taking the
advice and help of the CEO, where necessary. Both the CEO and the COO
handle employee communication.
4. Risk management
The company has an integrated approach to managing the risks inherent in
various aspects of its business. As part of this approach, the board of
directors (BoD), is responsible for monitoring risk levels on various
parameters, and the management council is responsible for ensuring
implementation of mitigation measures, if required. The audit committee
provides the overall direction on the risk management policies.
Compliance with corporate governance codes
Corporate governance has assumed great significance in India in the recent past.
Even though the Companies Act, 1956, provided a framework for corporate
governance, defined the powers, duties and responsibilities of the board, and
instituted a system of checks and balances with punishment for transgression of
law, a need was felt for a comprehensive code of corporate governance.
Globally, the Cadbury Committee on corporate governance has framed a similar
code. As already stated, the company is committed to good corporate governance
and has benchmarked itself against global best practices. The Confederation of
the Indian Industry (CII) has taken the lead in framing such a code in India.
The company has fully complied with the recommendations of CII on corporate
governance.
The Kumar Mangalam Birla Committee on Corporate Governance appointed by the
Securities and Exchange Board of India (SEBI) submitted its report in November
1999, and the report was accepted by SEBI in December 1999. The recommendations
of the committee are mandatory for the company, effective fiscal year 2001, and
compliance with the same is discussed below.
As additional disclosure of the company's compliance with corporate governance
standards, reports on compliance with the Euroshareholders Corporate Governance
Guidelines 2000, the Cadbury Committee recommendations, and the Blue Ribbon
Committee recommendations are given hereunder. Further, a note on the company's
compliance with the corporate governance guidelines of six countries, in their
respective local languages, is presented in the Financial statements prepared in
substantial compliance with GAAP requirements of Australia, Canada, France,
Germany, Japan and the United Kingdom and reports of compliance with the
respective corporate governance standards section in this report.
1. Compliance with the recommendations of the Kumar Mangalam Birla
Committee on Corporate Governance "In an age where capital flows
worldwide, just as quickly as information, a company that does not
promote a culture of strong, independent oversight, risks its very
stability and future health. Strong corporate governance is thus
indispensable to resilient and vibrant capital markets, and is an
important instrument of investor protection."
Excerpts from the Kumar Mangalam Birla Committee Report on
Corporate Governance
The company has complied with all the recommendations of the
committee.
In recommendation No.7.1 on accounting standards and financial
reporting, the committee has stated that the Institute of Chartered
Accountants of India (ICAI) should issue certain further accounting
standards that should be made mandatory. The ICAI has issued
accounting standards on segment reporting, disclosure and treatment of
related party transactions, consolidation and earnings per shares and
the same is mandatory for the accounting period commencing April 1,
2001. The ICAI has also submitted an exposure draft on accounting for
taxes on income. The company has adopted all the mandatory accounting
standards in its financial statements for the year ending March 31,
2001. The company has also provided pro-forma information in relation
to the exposure draft on accounting for income taxes in the notes to
financial statements for the year ending March 31, 2001.
The committee has required certain information set out in annexure 4 of
the committee's report to be furnished in the company's Annual Report.
The same is given below:
a. Company's philosophy on code of governance
The company is committed to good corporate governance and has
benchmarked itself against global best practices. The company provides
detailed information on various issues concerning the company's
business and financial performance. The company respects the
inalienable rights of its shareholders to information on the
performance of the company and considers itself a trustee of its
shareholders.
b. Board of directors
Composition and category of directors, as of March 31, 2001:
-------------------------------------------------------------------------
Category No. of directors %
-------------------------------------------------------------------------
Founder directors 5 31.2
Executive directors 3 18.8
Non-executive, independent directors 8 50.0
-------------------------------------------------------------------------
Total 16 100.0
=========================================================================
The chairman of the board is an executive director.
Attendance of each director at the BoD meetings and the last AGM
--------------------------------------------------------------------------------------------------------
No. of Board meetings No. of Board meetings Last AGM attendance
Director held attended (Yes/No)
--------------------------------------------------------------------------------------------------------
N. R. Narayana Murthy 5 5 Yes
Nandan M. Nilekani 5 5 Yes
Deepak M. Satwalekar 5 4 Yes
Prof. Marti G. Subrahmanyam 5 5 Yes
Ramesh Vangal 5 3 Yes
Philip Yeo 5 1 No
Prof. Jitendra Vir Singh 1 1* 1 NA
Dr. Omkar Goswami 2 1* 1 NA
Sen. Larry L. Pressler 3 1* 1 NA
Rama Bijapurkar 4 -* - NA
Gopalakrishnan S. 5 5 Yes
Dinesh K. 5 5 Yes
Shibulal S. D. 5 5 Yes
T. V. Mohandas Pai 5 4* 4 NA
Phaneesh Murthy 5 4* 4 NA
Srinath Batni 5 4* 4 NA
--------------------------------------------------------------------------------------------------------
/1/ Co-opted on October 10, 2000
/2/ Co-opted on November 13, 2000
/3/ Co-opted on January 9, 2001
/4/ Co-opted on March 29, 2001
/5/ Co-opted on May 27, 2000
* Indicates the board meetings held after appointment as a director.
Number of BoD meetings held, dates on which they were held
Five board meetings were held during the year on April 11, 2000, May
27, 2000, July 11, 2000, October 10, 2000 and January 9, 2001.
c. Audit committee
The company is listed on the BSE, NSE and BgSE in India and on the
NASDAQ in the US. In India, the SEBI has made the implementation of
the Birla committee recommendations mandatory for all listed
companies. The recommendations also require the adoption of an audit
committee charter.
Concurrently, the SEC set up the Blue Ribbon Committee which
recommended, inter alia, that every listed company adopt an audit
committee charter. Consequently, NASDAQ adopted a rule requiring all
companies seeking listing to comply with this recommendation.
The audit committee at its meeting on May 27, 2000 adopted an audit
committee charter which meets the requirements of both the SEBI and
the SEC. This charter is provided in the Audit committee charter
section of this report.
Terms of reference
The terms of reference of the audit committee are set out in the Audit
committee charter.
Composition
The audit committee consists of the following directors:
Mr. Deepak M. Satwalekar - Chairman
Prof. Marti G. Subrahmanyam
Mr. Ramesh Vangal
Dr. Omkar Goswami (from January 9, 2001)
Sen. Larry Pressler (from January 9, 2001)
Ms. Rama Bijapurkar (from April 10, 2001)
During the year, Mr. S. M. Datta retired from the directorship of the
company and also from the committee.
Meetings and attendance during the year
---------------------------------------------------------------------------
No. of committee No. of committee
Director meetings held meetings attended
---------------------------------------------------------------------------
Deepak M. Satwalekar 5 5
Prof. Marti G. Subrahmanyam 5 5
Ramesh Vangal 5 3
Dr. Omkar Goswami ** - -
Sen. Larry Pressler ** - -
Ms. Rama Bijapurkar ** - -
---------------------------------------------------------------------------
The report of the audit committee is provided in the Report of the
committees of the board section in the Annual Report.
Number of audit committee meetings held, and the dates on which they
were held Five audit committee meetings were held during the year.
They were held on April 10, 2000, May 27, 2000, July 10, 2000, October
9, 2000 and January 8, 2001.
d. Compensation committee
Terms of reference
The committee has the mandate to review and recommend compensation
payable to the executive directors and senior management of the
company and administer the company's stock option plans.
Composition
Prof. Marti G. Subrahmanyam - Chairman
Mr. Deepak M. Satwalekar
Mr. Philip Yeo (from January 9, 2001)
Prof. Jitendra Vir Singh (from January 9, 2001)
Dr. Omkar Goswami (from January 9, 2001)
Attendance during the year
-----------------------------------------------------------------------------
No. of committee No. of committee
Director meetings held meetings attended
-----------------------------------------------------------------------------
Deepak M. Satwalekar 5 5
Prof. Marti G. Subrahmanyam 5 5
Philip Yeo 5 1
Prof. Jitendra Vir Singh** - -
Dr. Omkar Goswami ** - -
-----------------------------------------------------------------------------
Number of compensation committee meetings held, and the dates on which
they were held
Five compensation committee meetings were held during the year on
April 10, 2000, May 27, 2000, July 10, 2000, October 9, 2000 and
January 8, 2001.
** Meetings held after their induction to the committee
Details of remuneration and grant of stock options to the directors
for fiscal 2001
Remuneration
in Rs. except as stated otherwise
--------------------------------------------------------------------------------------------------------------------------
Notice
Performance period Severance
Name Designation Salary incentive Commission Total (months) fee
--------------------------------------------------------------------------------------------------------------------------
N. R. Narayana Murthy Chairman and 16,60,296 1,05,450 - 17,65,746 6 -
Chief Executive Officer
Nandan M. Nilekani Managing 17,78,927 1,05,450 - 18,84,377 6 -
Director, President and
Chief Operating Officer
Deepak M. Satwalekar Director - - 11,64,000 11,64,000 - -
Prof. Marti G. Director - - 11,64,000 11,64,000 - -
Subrahmanyam
Ramesh Vangal Director - - 11,64,000 11,64,000 - -
Philip Yeo Director - - 11,64,000 11,64,000 - -
Prof. Jitendra Vir Singh Director - - 5,51,704 5,51,704 - -
Dr.Omkar Goswami Director - - 4,43,277 4,43,277 - -
Sen. Larry Pressler Director - - 2,61,501 2,61,501 - -
Rama Bijapurkar Director - - 9,567 9,567 - -
Gopalakrishnan S. Deputy 16,61,095 1,05,450 - 17,66,545 6 -
Managing Director
Dinesh K. Director 17,82,363 1,05,450 - 18,87,813 6 -
Shibulal S. D. Director 16,60,671 1,05,450 - 17,66,121 6 -
T.V. Mohandas Pai Director 13,42,501 49,567 - 13,92,068 6 -
Phaneesh Murthy Director 98,53,940 46,69,000 - 1,45,22,940 6 -
Srinath Batni Director 12,04,175 44,542 - 12,48,717 6 -
--------------------------------------------------------------------------------------------------------------------------
Grant of stock option
----------------------------------------------------------------------
Stock Options
----------------------------------------------------------------------------------------------------------------
No. of No. of Whether
Options Options Grant issued
(1999 Grant (1998 price at a Expiration
Name Designation ESOP) price ESOP) (US$) discount date
----------------------------------------------------------------------------------------------------------------
T.V. Mohandas Pai Director 10,000 5,724 - - No Feb 26, 2010
Phaneesh Murthy Director - - 20,000 98.25 No Feb 26, 2010
Srinath Batni Director 5,500 5,724 2,000 98.25 No Feb 26, 2010
----------------------------------------------------------------------------------------------------------------
The report of the compensation committee is provided in the Report of
committees of the board section in the report. No stock options were
granted to the other directors.
e. Investor grievance committee
Terms of reference
The committee oversees share transfers and monitors investor
grievances.
Composition
The members of the company's investor grievance committee are:
Mr. Philip Yeo - Chairman (from January 9, 2001)
Ms. Rama Bijapurkar (from April 10, 2001)
Mr. Nandan M. Nilekani
Mr. Dinesh K.
Mr. Shibulal S.D.
Name and designation of compliance officer
T. V. Mohandas Pai, Director - Finance & Administration and Chief
Financial Officer
Number of shareholder complaints received, number not solved to the
satisfaction of the shareholder and number of pending transfers
These details are provided in the Shareholder information section of
this report.
f. General body meetings - Location and time for the last three AGMs
-------------------------------------------------------------------------------
Year Date Venue Time
-------------------------------------------------------------------------------
1997-1998 May 30,1998 Taj Residency, No. 41/3, 3.00p.m.
M. G. Road, Bangalore, India.
1998-1999 June 12, 1999 -same as above- 3.00p.m.
1999-2000 May 27, 2000 -same as above- 3.00p.m.
-------------------------------------------------------------------------------
Whether special resolutions were put through postal ballot last year,
details of voting pattern, person who conducted the postal ballot
exercise, proposed to be conducted through postal ballot and
procedures for postal ballot.
Not applicable. The Companies (Amendment) Act (2000) provides for
postal ballot but no rules have been made thereunder.
g. Disclosures
Disclosures on materially-significant, related party transactions,
that is transactions of the company of material nature, with its
founders, the directors or the management, their subsidiaries or
relatives, etc. that may have potential conflict with the interests of
company at large.
Related parties include subsidiaries, directors of the company, and
management council members of the company. This is provided under the
paragraph "related party transactions" in the Financial statements
prepared in accordance with Indian Accounting Principles (Indian GAAP)
section in this Annual Report.
Details of non-compliance by the company, penalties, strictures
imposed on the company by any stock exchange or SEBI or any statutory
authority, on any matter related to capital markets, during the last
three years.
None.
h. Means of communication
Quarterly report sent to each household of shareholders
Since June 1997, the company has been sending quarterly reports, which
contain audited financial statements under Indian GAAP and unaudited
US GAAP financial statements, along with additional information, to
shareholders.
Quarterly results - which newspapers they are normally published in;
websites where they are displayed; whether it also displays official
news releases; and the presentations made to institutional investors
or to the analysts
The quarterly results are generally published in The Economic Times,
the Udayavani and the Business Standard. Quarterly financial
statements as well as annual financial statements, along with
segmental information, are posted on the company's website
(http://www.infy.com). Earnings calls with analysts and investors are
broadcast live on the website and their transcripts are posted on the
website soon thereafter. Any specific presentations made to analysts
and others, which are not available in the general domain, are also
posted on the company's website.
Whether the Management Discussion and Analysis section is a part of
the Annual Report or not
The Management Discussion and Analysis section is provided in both the
Financial statements prepared in accordance with Indian Generally
Accepted Accounting Principles (Indian GAAP) section and the Financial
statements prepared in accordance with United States Generally
Accepted Accounting Principles (US GAAP) section in this Annual
Report.
i. General shareholder information
This is provided in the Shareholder information section of this Annual
Report.
2. Compliance with the Euroshareholders Corporate Governance Guidelines 2000
The European shareholders group, "Euroshareholders", is the confederation
of European shareholders associations. The organization's overall task is
to represent the interests of individual shareholders in the European
Union. In April 1999, the Organization for Economic Co-operation and
Development (OECD) published its general principles on corporate
governance. The Euroshareholders guidelines are based upon the same
principles, but are more specific and detailed. The company has complied
with most of these guidelines. As an additional disclosure of the company's
compliance with corporate governance standards, a report on compliance with
the recommendations of the Euroshareholders Corporate Governance Guidelines
2000 is given hereunder.
Recommendation 1
A company should aim primarily at maximizing shareholder value in the long-term.
Companies should clearly state (in writing) their financial objectives as well
as their strategy, and should include these in the Annual Report.
This recommendation is complied with.
Recommendation 2
Major decisions which have a fundamental effect upon the nature, size, structure
and risk profile of the company, and decisions which have significant
consequences for the position of the shareholder within the corporation, should
be subject to shareholder's approval or should be decided by the AGM.
As per Indian law, the majority of these require approval of the
shareholders in the general meeting of the company.
Recommendation 3
Anti-takeover defences or other measures which restrict the influence of
shareholders should be avoided.
The company does not have any anti-takeover provisions in its Memorandum
and Articles of Association.
Recommendation 4a
The process of mergers and takeovers should be regulated and compliance with
these regulations should be supervised.
Not applicable.
Recommendation 4b
If a shareholder's stake in the company passes a certain threshold, that
shareholder should be obliged to make an offer for the remaining shares under
reasonable conditions, that is, at least the price that was paid for the control
of the company.
The Securities and Exchange Board of India has published takeover
guidelines that require an open offer by holders who acquire more than a
specified percentage of the company.
Recommendation 5
Companies should immediately disclose information which can influence the share
price as well as information about those shareholders who pass (upwards or
downwards) 5% thresholds. There should be serious penalties in case of non-
compliance.
As per the listing agreement, Indian companies are required to immediately
inform stock exchanges about all price-sensitive information. As per the
takeover guidelines of Securities and Exchange Board of India, shareholders
who hold more than 5% of the equity of the company need to intimate the
company immediately on reaching the limit. The company needs to immediately
notify the stock exchanges on which it is listed, upon receipt of such
information.
Recommendation 6
Auditors have to be independent and should be elected by the general meeting.
This recommendation is complied with.
Recommendation 7
Shareholders should be able to place items on the agenda of the AGM.
As per the Indian law, shareholders holding not less than one-tenth of the
paid-up capital of the company are entitled to requisition a general
meeting.
Recommendation 8
In addition to the regular channels, electronic means should be used by the
company to provide shareholders with price-sensitive information.
The company posts all its financial results, as well as press releases, on
its website - www.infy.com.
Recommendation 9
Shareholders shall have the right to elect members of at least one board and
shall also be able to file a resolution for dismissal. Prior to the election,
shareholders should be able to suggest candidate members of the board.
As per Indian law, directors are elected by members in the general meeting,
either by show of hands or a poll.
Recommendation 10a
The membership of non-executives on the board, whether in a one-tier or two-tier
system (member of the supervisory board), should be limited to a maximum period
of twelve years.
The current law in India mandates the retirement of one-third of the board
members every year and qualifies the retiring members for re-appointment.
Executive directors are appointed by the shareholders for a maximum period
of five years at one time but are eligible for re-appointment upon
completion of their term.
Recommendation 10b
No more than one non-executive board member should have served as an executive
member of the company.
All the non-executive directors of the company, as of date, are independent
directors.
3. Compliance with the Cadbury Committee recommendations
The Cadbury Committee was set up in May 1991, in the United Kingdom. The
stated objective of the committee was "to help raise the standards of
corporate governance and the level of confidence in financial reporting and
auditing by setting out clearly what it sees as the respective
responsibilities of those involved and what it believes is expected of
them".
As an additional disclosure of the company's compliance with corporate
governance standards, a report on compliance with the Cadbury Committee
recommendations is given hereunder.
Compliance
The Cadbury Committee on corporate governance made nineteen
recommendations. The company complies with substantially all of them except
the recommendation that - the board should consist of a majority of non-
executive directors -currently, the company has eight executive directors
and eight non-executive directors.
The company has set up committees of the board to focus on substantive
issues in the form of the audit committee, the compensation committee, the
nominations committee and the investor grievance committee. The reports of
these committees are disclosed under the Report of the committees of the
board section in this Annual Report.
Going concern statement
On the basis of current financial projections and facilities available, the
directors have a reasonable expectation that the company has adequate
resources to continue in operational existence for the foreseeable future
and, accordingly, consider that it is appropriate to adopt the going
concern basis in preparing accounts.
4. Compliance report with Blue Ribbon Committee report on improving
effectiveness of corporate audit committees
The Blue Ribbon Committee was formed under the auspices of the United
States Securities and Exchange Commission to develop a series of
recommendations to enable "audit committees to function as the ultimate
guardian of investor interests and corporate accountability". It has
recommended that exchange listing requirements be amended to require audit
committees to adopt a formal written charter and review and assess it
annually. A compliance report on the recommendations of the committee is
presented below.
Recommendation 1
Adopt the following definition of independence for purposes of service on the
audit committee.
Members of the audit committee shall be considered independent if they have no
relationship to the corporation that may interfere with the exercise of their
independence from management and the corporation.
This recommendation is complied with. None of the directors are an
interested party as defined in this recommendation.
Recommendation 2
In addition to adopting and complying with the definition of independence set
forth above for purposes of service on the audit committee, have an audit
committee comprised solely of independent directors. The committee recommends
that the NYSE and the NASD maintain their respective current audit committee
independence requirements as well as their respective definitions of
independence.
The audit committee consists only of independent, non-executive directors.
Recommendation 3
To have an audit committee comprised of a minimum of three directors, each of
whom is financially literate (as described in the section of this Report
entitled "Financial Literacy") or becomes financially literate within a
reasonable period of time after his or her appointment to the audit committee,
and further that at least one member of the audit committee have accounting or
related financial management expertise.
Infosys complies with this requirement. The members of the committees are
highly respected and accomplished professionals in the corporate and
academic worlds. They are financially literate.
Recommendation 4
Require the audit committee of each listed company to (i) adopt a formal written
charter that is approved by the full BoD and that specifies the scope of the
committee's responsibilities, and how it carries out those responsibilities,
including structure, processes, and membership requirements, and (ii) review
and reassess the adequacy of the audit committee charter on an annual basis.
The audit committee charter is provided in the Audit committee charter
section of this annual report.
Recommendation 5
Require the audit committee for each reporting company to disclose in the
company's proxy statement for its annual meeting of shareholders whether the
audit committee had adopted a formal written charter, and, if so, whether the
audit committee satisfied its responsibilities during the prior year in
compliance with its charter, which charter shall be disclosed at least
triennially in the Annual Report to shareholders or proxy statement and in the
next Annual Report to shareholders or proxy statement after any significant
amendment to that charter.
The committee further recommends that the SEC adopt a "safe harbor" applicable
to all disclosure referenced in this Recommendation 5.
This recommendation is complied with.
Recommendation 6
Require that the audit committee charter for every listed company specify that
the outside auditor is ultimately accountable to the BoD and the audit committee
as representatives of shareholders, and that these shareholder representatives
have the ultimate authority and responsibility to select, evaluate, and, where
appropriate, replace the outside auditor (or to nominate the outside auditor to
be proposed for shareholder approval in any proxy statement).
This recommendation is complied with.
Recommendation 7
Require that the audit committee charter for every listed company specify that
the audit committee is responsible for ensuring its receipt from the outside
auditors of a formal written statement delineating all relationships between the
auditor and the company, consistent with Independence Standards Board Standard
No.1, and that the audit committee is also responsible for actively engaging in
a dialogue with the auditor with respect to any disclosed relationships or
services that may impact the objectivity and independence of the auditor and to
take, or recommend that the full board take, appropriate action to ensure the
independence of the outside auditor.
This recommendation is complied with.
Recommendation 8
That Generally Accepted Auditing Standards (GAAS) require that a company's
outside auditor discuss with the audit committee the auditor's judgements about
the quality, not just the acceptability, of the company's accounting principles
as applied in its financial reporting; the discussion should include such issues
as the clarity of the company's financial disclosures and degree of
aggressiveness or conservatism of the company's accounting principles and
underlying estimates and other significant decisions made by management in
preparing the financial disclosure and reviewed by the outside auditors. This
requirement should be written in a way to encourage open, frank discussion and
to avoid boilerplate.
This recommendation is complied with. Both the internal and external
auditors have full and free access to the audit committee, its members and
the BoD. All the issues arising out of the internal and external auditors'
reports are discussed in detail in the audit committee meetings.
Recommendation 9
Require all reporting companies to include a letter from the audit committee in
the company's Annual Report to shareholders and Form 10-K Annual Report
disclosing whether or not, with respect to the prior fiscal year: (i) management
has reviewed the audited financial statements with the audit committee,
including a discussion of the quality of the accounting principles as applied
and significant judgments affecting the company's financial statements; (ii) the
outside auditors have discussed with the audit committee the outside auditors'
judgements of the quality of those principles as applied and judgments
referenced in (i) above under the circumstances; (iii) the members of the audit
committee have discussed among themselves, without management or the outside
auditors present, the information disclosed to the audit committee described in
(i) and (ii) above; and (iv) the audit committee, in reliance on the review and
discussions conducted with management and the outside auditors pursuant to (i)
and (ii) above, believes that the company's financial statements are fairly
presented in conformity with Generally Accepted Accounting Principles (GAAP) in
all material respects.
The committee further recommends that the SEC adopt a "safe harbor" applicable
to any disclosure referenced in this Recommendation 9.
This recommendation is complied with. The required report is provided
elsewhere in this Annual Report
Recommendation 10
Require that a reporting company's outside auditor conduct a SAS 71 Interim
Financial Review prior to the company's filing of its Form 10-Q. The committee
further recommends that SAS 71 be amended to require that a reporting company's
outside auditor discuss with the audit committee, or at least its chairman, and
a representative of financial management, in person, or by telephone conference
call, the matters described in AU Section 380, Communications With the audit
committee, prior to the filing of the Form 10-Q (and preferably prior to any
public announcement of financial results), including significant adjustments,
management judgement and accounting estimates, significant new accounting
policies, and disagreements with management.
Being a foreign private issuer of securities, the company files quarterly
reports on Form 6-K and yearly reports in Form 20-F with the SEC. The
financial statements included in Form 6-K and 20-F are reviewed by the
company's auditors, as per the requirements of SAS 71.
Sd Sd
Nandan M. Nilekani N. R. Narayana Murthy
Bangalore Managing Director, President Chairman and Chief
April 11, 2001 and Chief Operating Officer Executive Officer
Audit committee charter
________________________________________________________________________________
1. Primary objectives of the audit committee
The primary objective of the audit committee (the "committee") is to
monitor and provide effective supervision of the management's financial
reporting process with a view to ensure accurate, timely and proper
disclosures and the transparency, integrity and quality of financial
reporting.
The committee oversees the work carried out in the financial reporting
process- by the management, including the internal auditors and the
independent auditor - and notes the processes and safeguards employed by
each.
2. Scope of the audit committee
2.1 Provide an open avenue of communication between the independent
auditor, internal auditor, and the board of directors ("BoD").
2.2 Meet four times every year or more frequently as circumstances
require. The audit committee may ask members of management or others to
attend meetings and provide pertinent information as necessary.
2.3 Confirm and assure the independence of the external auditor and
objectivity of the internal auditor.
2.4 Review with the independent auditor the co-ordination of audit efforts
to assure completeness of coverage, reduction of redundant efforts, and the
effective use of all audit resources.
2.5 Consider and review with the independent auditor:
(a) The adequacy of internal controls including computerised
information system controls and security; and
(b) Related findings and recommendations of the independent auditor
and internal auditor together with management's responses.
2.6 Consider and review with management, internal auditor and the
independent auditor.
(a) Significant findings during the year, including the status of
previous audit recommendations;
(b) Any difficulties encountered in the course of audit work
including any restrictions on the scope of activities or access
to required information;
(c) Any changes required in the planned scope of the internal audit
plan.
2.7 Report periodically to the BoD on significant results of the foregoing
activities.
3. Composition of the audit committee
3.1 The committee shall consist solely of `independent' directors of the
company and shall be comprised of a minimum of three directors, each
of whom is `financially literate' or shall become `financially
literate' within a reasonable period of time after his or her
appointment. They should be diligent, knowledgeable, dedicated,
interested in the job and willing to devote a substantial amount of
time and energy to the responsibilities of the committee, in addition
to BoD responsibilities. At least one of the members shall have
accounting or related `financial management expertise'. The members of
the committee shall be elected by the BoD and shall continue until
their successors are duly elected. The duties and responsibilities of
a member are in addition to those applicable to a member of the BoD.
In recognition of the time burden associated with the service and,
with a view to bring in fresh insight, the committee may consider
limiting the term of audit committee service, by automatic rotation or
by other means. One of the members shall be elected as the chairman
either by the full BoD or by the members themselves, by majority vote.
3.2 The BoD may, under exceptional and limited circumstances, waive this
requirement if it is of the view that the concerned member is required
in the committee, in the best interests of the company and its
shareholders. However, the BoD shall disclose, in the next Annual
Report (Proxy Statement) subsequent to such determination, the nature
of the relationship and the reasons for that determination.
4. Relationship with independent and internal auditors
4.1 The BoD and the committee have the ultimate authority and
responsibility to select, evaluate, and, where appropriate, replace
the independent auditors in accordance with law. All possible measures
must be taken by the committee to ensure the objectivity and
independence of the independent auditors. These include:
- obtaining from the independent auditors formal written statements
delineating all relationships between the auditors and the company,
consistent with applicable regulatory requirements;
- actively engaging in dialogues with the auditors with respect to
any disclosed relationships or services that may impact their
objectivity and independence and take, or recommend that the full
BoD take appropriate action to ensure their independence;
- require and encourage the independent auditors to open and frank
discussions on their judgements about the quality, not just the
acceptability of the company's accounting principles as applied in
its financial reporting, including such issues as the clarity of
the company's financial disclosures and degree of aggressiveness or
conservatism of the company's accounting principles and underlying
estimates and other significant decisions made by the management in
preparing the financial disclosure and audited by them; and
- require the independent auditor, carrying out the attest function
in conformity with US GAAS, to perform an interim financial review
as required under Statement of Auditing Standards 71 of the
American
Institute of Certified Public Accountants and also discuss with the
committee or its chairman, and an appropriate representative of
Financial Management and Accounting, in person or by telephone
conference call, the matters described in SAS 61, Communications
with the Committee, prior to the company's filing of its Form 6-K
(and preferably prior to any public announcement of financial
results), including significant adjustments, management judgement
and accounting estimates, significant new accounting policies, and
disagreements with management.
4.2 The internal auditors of the company are in the best position to
evaluate and report on the adequacy and effectiveness of the internal
controls. Keeping in view the need for the internal auditors'
independence from management in order to remain objective, a formal
mechanism should be created to facilitate confidential exchanges
between the internal auditors and the committee, regardless of
irregularities or problems. The work carried out by each of these
auditors needs to be assessed and reviewed with the independent
auditors and appropriate recommendations made to the BoD.
5. Disclosure requirements
5.1 The committee charter should be published in the annual report once
every three years and also whenever any significant amendment is made
to the charter.
5.2 The committee shall disclose in the company's Annual Report whether or
not, with respect to the concerned fiscal year:
- management has reviewed the audited financial statements with the
committee, including a discussion of the quality of the accounting
principles as applied and significant judgements affecting the
company's financial statements;
- the independent auditors have discussed with the committee their
judgements of the quality of those principles as applied and
judgements referred to above under the circumstances;
- the members of the committee have discussed among themselves,
without management or the independent auditors present, the
information disclosed to the committee as described above;
- the committee, in reliance on the review and discussions conducted
with management and the independent auditors pursuant to the
requirements above, believes that the company's financial
statements are fairly presented in conformity with Generally
Accepted Accounting Principles ("GAAP") in all material respects;
and
- the committee has satisfied its responsibilities in compliance with
its charter.
5.3 The committee shall secure compliance that the BoD has affirmed to the
NASD/Amex Stock Exchange on the following matters, as required in
terms of the relevant NASD/Amex rules:
- Composition of the committee and independence of committee members;
- Disclosures relating to non-independent members;
- Financial literacy and financial expertise of members; and
- Review of the committee charter.
5.4 The committee shall report to shareholders as required by the relevant
rules of the Securities and Exchange Commission ("SEC") of the United
States.
6. Definitions
6.1 Independent member
In order to be `independent', members should have no relationship with
the company that may interfere with the exercise of their independence
from the management and the company. The following persons are not
considered independent:
- a director who is employed by the company or any of its affiliates
for the current year or any of the past three years;
- a director who accepts any compensation from the company or any of
its affiliates in excess of $60,000 during the previous fiscal
year, other than compensation for board service, benefits under a
tax-qualified retirement plan, or non-discretionary compensation;
- a director who is a member of the immediate family of an individual
who is, or has been in any of the past three years, employed by the
corporation or any of its affiliates as an executive officer.
"Immediate family" includes a person's spouse, parents, children,
siblings, mother-in-law, father-in-law, brother-in-law, sister-in-
law, son-in-law, daughter-in-law, and anyone who resides in such
person's home;
- a director who is a partner in, or a controlling shareholder or an
executive officer of, any for-profit business organization to which
the company made, or from which the company received, payments
(other than those arising solely from investments in the company's
securities) that exceed 5% of the company's or business
organization's consolidated gross revenues for that year, or
$200,000, whichever is more, in any of the past three years; and
- a director who is employed as an executive of another entity where
any of the company's executives serve on that entity's compensation
committee.
6.2 Financial literacy
`Financial literacy' means the ability to read and understand
fundamental financial statements. `Financial management expertise'
means past employment experience in finance or accounting, requisite
professional certification in accounting, or any other comparable
experience or background which results in the member's financial
sophistication, including being or having been a chief executive
officer or other senior officer with responsibilities to oversee
financial issues.
Report of the committees of the board
- --------------------------------------------------------------------------------
1. Compensation committee
The compensation committee consists of the following directors:
Prof. Marti G. Subrahmanyam - Chairman
Mr. Deepak M. Satwalekar
Mr. Philip Yeo (from January 9, 2001)
Prof. Jitendra Vir Singh (from January 9, 2001)
Dr. Omkar Goswami (from January 9, 2001)
During the year, Mr. S. M. Datta retired from the directorship of the company
and also from the committee. Mr. Ramesh Vangal retired from the committee with
effect from January 9, 2001.
The committee has, inter alia, the mandate to review and recommend compensation
payable to the executive directors and senior management of the company and
administer the company's stock option plans. The committee reviewed the
performance of all the executive directors and approved the compensation payable
to them for fiscal 2002, within the overall limits approved by the shareholders.
Information on compensation and other benefits provided to the executive
directors for fiscal 2001 is disclosed in the Corporate governance section of
this annual report. The committee also reviewed the compensation proposed for
all the management council members for fiscal 2002. The committee believes that
the proposed compensation and benefits, along with stock options, are adequate
to motivate and retain the senior officers of the company.
The committee also reviewed the grant of stock options on a sign-on and regular
basis to various employees of the company, during the year.
Save as disclosed, none of the directors had a material beneficial interest in
any contract of significance to which the company or any of its subsidiary
undertakings was a party, during the financial year.
Sd
Bangalore Prof. Marti G.
Subrahmanyam
April 10, 2001 Chairman, Compensation
committee
2. Nominations committee
The nominations committee of the board consists of the following directors:
Mr. Ramesh Vangal - Chairman
Mr. Philip Yeo
Prof. Jitendra Vir Singh (from January 9, 2001)
Sen. Larry Pressler (from January 9, 2001)
Mr. Deepak M. Satwalekar and Prof. Marti G. Subrahmanyam retired from the
committee with effect from January 9, 2001.
The nominations committee has the mandate to recommend the appointment of
directors to the board, to review the re-election of the members of the board
and to recommend the induction of board members into various committees. The
meeting of the nominations committee on April 10, 2001 was chaired by Mr. Philip
Yeo in the absence of Mr. Ramesh Vangal who could not attend the meeting.
The committee discussed the issue of the retirement of members of the board as
per statutory requirements. As one third of the members have to retire every
year based on their date of appointment, Mr. Ramesh Vangal, Prof. Marti G.
Subrahmanyam, Mr. Deepak M. Satwalekar, Mr. S. Gopalakrishnan and Mr. S.D.
Shibulal will retire. The committee considered their performance and recommended
that they be considered for re-appointment by the shareholders.
During the year, Mr. T.V. Mohandas Pai, Mr. Phaneesh Murthy, Mr. Srinath Batni,
Prof. Jitendra Vir Singh, Dr. Omkar Goswami, Sen. Larry Pressler and Ms. Rama
Bijapurkar were co-opted into the board as additional directors of the company.
The committee recommended that the necessary resolutions for appointing them as
directors be considered by the shareholders.
Sd
Bangalore Philip
Yeo
April 10, 2001 Chairman, Nominations
committee
3. Audit committee
The audit committee of the board consists of the following directors:
Mr. Deepak M. Satwalekar - Chairman
Prof. Marti G. Subrahmanyam
Mr. Ramesh Vangal
Dr. Omkar Goswami (from January 9, 2001)
Sen. Larry Pressler (from January 9, 2001)
Ms. Rama Bijapurkar (from April 10, 2001)
During the year, Mr. S. M. Datta retired from the directorship of the company
and also from the committee.
The committee has, inter alia, the mandate to oversee the company's financial
reporting process and the disclosure of financial information in order to ensure
that the financial statements are correct, sufficient and credible. The
committee reviewed the independence of both the internal and the statutory
auditors and expressed its satisfaction with the same. The committee discussed
the quality of the accounting principles as applied, and significant judgments
affecting the financial statements, with the management as well as the internal
and the statutory auditors of the company. The committee also discussed with the
internal and the statutory auditors, in the absence of the management, the
company's financial disclosures and the quality of the company's accounting
principles as applied, underlying judgments affecting the financial statements,
and other significant decisions made by the management in preparing the
financial disclosures. The committee, in reliance on the review and discussions
conducted with the management and the independent auditors, believes that the
company's financial statements are fairly presented in conformity with Generally
Accepted Accounting Principles in all material aspects. The committee also
reviewed the financial and risk management policies of the company and expressed
its satisfaction with the same. The committee is satisfied that it complies
fully with its responsibilities as outlined in the Audit committee charter
section of this Annual Report.
The committee secured compliance that the board of directors (BoD) has affirmed
to the NASDAQ stock exchange, under the relevant rules of the exchange on
composition of the committee and independence of the committee members,
disclosures relating to non-independent members, financial literacy and
financial expertise of members, and a review of the audit charter.
The committee reviewed the internal controls put in place to ensure that the
accounts of the company are properly maintained and that accounting transactions
are in accordance with prevailing laws and regulations. The committee found no
material discrepancy or weakness in the internal control systems of the company.
The committee recommended to the board the appointment of Bharat S Raut & Co.,
Chartered Accountants, as statutory auditors of the company for the fiscal year
ending March 31, 2002. The committee also recommended to the board that the
necessary resolutions for appointing them as auditors be placed before the
shareholders. The committee recommended the appointment of internal auditors for
various operations of the company and determined the fees payable to them.
The committee recommended to the board the appointment of KPMG as auditors of
the company for the US GAAP financial statements, for the financial year ending
March 31, 2002.
The committee also issued a letter in line with recommendation No. 9 of the Blue
Ribbon Committee on audit committee effectiveness, and the same is provided in
the Financial statements prepared in accordance with the US GAAP section of this
Annual Report.
Sd
Bangalore Deepak M. Satwalekar
April 10, 2001 Chairman, Audit committee
4. Investor grievance committee
The Investor grievance committee consists of the following directors:
Mr. Philip Yeo - Chairman (from January 9, 2001)
Ms. Rama Bijapurkar (from April 10, 2001)
Mr. Nandan M. Nilekani
Mr. Dinesh K.
Mr. Shibulal S.D.
The committee is headed by an independent director. The committee has the
mandate to review and redress shareholder grievances and to attend to share
transfers. The committee reviewed the shareholder grievances, the redress of
shareholder grievances and the share transfers for the year and expressed
satisfaction with the same. The committee also noted the shareholding in
dematerialised mode as on March 31, 2001 as being 98.30%.
Sd
Bangalore Philip Yeo
April 10, 2001 Chairman, Investor grievance
committee
Auditors' report
- --------------------------------------------------------------------------------
To
The members,
Infosys Technologies Limited
We have audited the attached Balance Sheet of Infosys Technologies Limited (the
company) as at March 31, 2001 and the Profit and Loss Account of the company for
the year 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 Account 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 are prepared in compliance with the accounting
standards referred to in Section 211(3C) of the Companies Act, 1956,
to the extent applicable;
(e) on the basis of written representations received from the directors of
the company as at March 31, 2001 and taken on record by the board of
directors, we report that no director is disqualified from being
appointed as director of the company under clause (g) of sub-section
(1) of Section 274 of the Companies Act, 1956;
(f) 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 March 31, 2001; and
(ii) in the case of the Profit and Loss Account, of the profit for the
year ended on that date.
for Bharat S Raut & Co.
Chartered Accountants
/s/ Balaji
-------------
Bangalore Balaji
Swaminathan
April 11, 2001 Partner
Annexure to the auditors' report
- --------------------------------------------------------------------------------
The Annexure referred to in paragraph 1 of the auditors' report to the members
of Infosys Technologies Limited (the company) for the year ended March 31, 2001.
We report that:
The matters contained in sub paragraph 4(D) and 4(C) of the Manufacturing and
Other Companies (Auditor's Report) Order, 1988, are not applicable to the
company.
Internal controls
1. In our opinion and according to the information and explanations given to
us, having regard to the explanations that certain items purchased are of a
special nature in respect of which suitable alternative sources do not
exist for obtaining comparative quotations, there are adequate internal
control procedures commensurate with the size of the company and the nature
of its business for the purchase of computer hardware and software,
consumables, plant and machinery, equipment and other assets. The
activities of the company do not involve the sale of goods.
2. In our opinion and according to the information and explanations given to
us, in respect of the service activities, the company, commensurate with
the size and the nature of its business, has a reasonable system of:
. recording receipts, issues and consumption of materials and allocating
materials consumed to each project;
. allocating man-hours utilised to each project; and
. authorisation and control over the allocation of labour costs to each
project.
3. In our opinion, the company has an internal audit system, commensurate with
its size and the nature of its business.
Fixed assets
4. The company has maintained proper records of fixed assets showing full
particulars, including quantitative details and location. The company has a
regular programme of physical verification of its fixed assets which, in
our opinion, is reasonable having regard to the size of the company and the
nature of its assets. In accordance with this programme, certain fixed
assets were physically verified by management during the year and no
material discrepancies were identified on such verification.
5. None of the fixed assets were revalued during the year.
Inventories
6. The company has not maintained any inventories during the year and
consequently, paragraphs 4(A)(iii) to 4(A)(vi), 4(A)(xii), 4(A)(xiv) and
4(A)(xvi) of the Manufacturing and Other Companies (Auditor's Report)
Order, 1988, are not applicable in relation to its activities.
Loans and advances
7. The parties to whom loans or advances in the nature of loans were given by
the company are regular in repaying the principal amounts as stipulated and
interest where applicable.
8. The company has not taken any loans, secured or unsecured, from companies,
firms, or other parties listed in the register maintained under Section 301
of the Companies Act, 1956, or from companies under the same management as
defined under Section 370(1B) of the Companies Act, 1956, the rate of
interest and other terms and conditions of which are, prima facie,
prejudicial to the interests of the company.
9. The company has not granted any loans, secured or unsecured, to companies,
firms, or other parties listed in the register maintained under Section 301
of the Companies Act, 1956, or to companies under the same management as
defined under Section 370(1B) of the Companies Act, 1956, the rate of
interest and other terms and conditions of which are, prima facie,
prejudicial to the interests of the company.
Transactions with parties under Section 301 of the Companies Act, 1956
10. In our opinion, and according to the information and explanations given to
us, the company has not entered into any transactions for the purchase of
goods and materials and sale of goods, materials and services, with
companies, firms, or other parties listed in the register maintained under
Section 301 of the Companies Act, 1956, and aggregating during the year to
Rs 50,000 or more in respect of each party.
Fixed deposits
11. The company has not accepted any deposits from the public and consequently
the provisions of Section 58A of the Companies Act, 1956, and the rules
framed thereunder are not applicable.
Staff welfare
12. Provident Fund and Employees' State Insurance dues were regularly deposited
during the year with the appropriate authorities.
13. On the basis of the examination of the books of account carried out by us
in accordance with generally accepted auditing practices and according to
the information and explanations given to us, no personal expenses of
employees or directors were charged to the profit and loss account, other
than those payable under contractual obligations or in accordance with
generally accepted business practice.
Taxation
14. According to the information and explanations given to us, there are no
undisputed amounts payable in respect of income tax, wealth tax, sales tax,
customs duty and excise duty that were outstanding as at March 31, 2001 for
a period of more than six months from the dates that they became payable.
Others
15. The company is not a sick industrial company within the meaning of section
3 (1) (o) of the Sick Industrial Companies (Special Provisions) Act, 1985.
for Bharat S Raut & Co.
Chartered Accountants
/s/ Balaji
---------------------
Bangalore Balaji
Swaminathan
April 11, 2001 Partner
Balance Sheet as at March 31
- ------------------------------------------------------------------------------------------------------------------------------
in Rs.
- ------------------------------------------------------------------------------------------------------------------------------
Schedule 2001 2000
- ------------------------------------------------------------------------------------------------------------------------------
SOURCES OF FUNDS
SHAREHOLDERS' FUNDS
Share capital 1 33,07,92,085 33,07,55,000
Reserves and surplus 2 1356,55,99,903 800,22,73,248
- ------------------------------------------------------------------------------------------------------------------------------
1389,63,91,988 833,30,28,248
==============================================================================================================================
APPLICATION OF FUNDS
FIXED ASSETS 3
Original cost 631,14,44,025 284,03,05,143
Less : Depreciation 244,13,15,982 133,65,20,594
- ------------------------------------------------------------------------------------------------------------------------------
Net book value 387,01,28,043 150,37,84,549
Add : Capital work-in-progress 170,65,04,250 56,96,03,505
- ------------------------------------------------------------------------------------------------------------------------------
557,66,32,293 207,33,88,054
INVESTMENTS 4 34,11,54,821 13,83,48,469
CURRENT ASSETS, LOANS AND ADVANCES
Sundry debtors 5 302,37,02,417 136,17,81,253
Cash and bank balances 6 385,06,10,285 431,79,35,730
Loans and advances 7 430,27,93,623 210,12,77,161
- ------------------------------------------------------------------------------------------------------------------------------
1117,71,06,325 778,09,94,144
Less : Current liabilities 8 134,91,81,176 67,15,06,459
Provisions 9 184,93,20,275 98,81,95,960
- ------------------------------------------------------------------------------------------------------------------------------
NET CURRENT ASSETS 797,86,04,874 612,12,91,725
- ------------------------------------------------------------------------------------------------------------------------------
1389,63,91,988 833,30,28,248
==============================================================================================================================
SIGNIFICANT ACCOUNTING POLICIES
AND NOTES ON ACCOUNTS 13
- ------------------------------------------------------------------------------------------------------------------------------
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
Balaji Swaminathan N. R. Narayana Murthy Nandan M. Nilekani Deepak M. Satwalekar Marti G. Subrahmanyam
Partner Chairman and Managing Director, Director Director
President
Chief Executive and Chief Operating
Officer Officer
Jitendra Vir Singh Omkar Goswami Larry Pressler Rama Bijapurkar
Director Director Director Director
S. Gopalakrishnan K. Dinesh S. D. Shibulal T. V. Mohandas Pai
Deputy Managing Director Director Director and Chief
Director Financial Officer
Phaneesh Murthy Srinath Batni V. Balakrishnan
Bangalore Director Director Company Secretary and
April 11, 2001 Associate Vice President
Finance
Profit and Loss Account for the year ended March 31
- ------------------------------------------------------------------------------------------------------------------------------
in Rs.
- ------------------------------------------------------------------------------------------------------------------------------
Schedule 2001 2000
- ------------------------------------------------------------------------------------------------------------------------------
INCOME
Software development services and products
Overseas 1874,02,66,421 869,69,80,931
Domestic 26,53,92,386 12,62,56,042
Other income 10 59,37,14,915 39,14,11,095
- ------------------------------------------------------------------------------------------------------------------------------
1959,93,73,722 921,46,48,068
==============================================================================================================================
EXPENDITURE
Software development expenses 11 958,17,66,650 466,26,84,578
Administration and other expenses 12 177,54,70,971 69,48,50,282
Provision for investments 15,28,98,608 -
Provision for contingencies - 3,33,00,000
Provision for e-inventing the company - 3,50,00,000
- ------------------------------------------------------------------------------------------------------------------------------
1151,01,36,229 542,58,34,860
Operating profit (PBIDT) 808,92,37,493 378,88,13,208
Interest - -
Depreciation 112,89,45,152 53,23,27,389
Profit before tax and extraordinary item 696,02,92,341 325,64,85,819
Provision for tax
earlier years 1,40,00,000 24,00,000
current year 71,31,00,000 39,46,00,000
Profit after tax before extraordinary item 623,31,92,341 285,94,85,819
Extraordinary item - transfer of intellectual property right (net of tax) 5,49,44,000 -
- provision no longer required - 7,56,70,846
Net profit after tax and extraordinary item 628,81,36,341 293,51,56,665
- ------------------------------------------------------------------------------------------------------------------------------
AMOUNT AVAILABLE FOR APPROPRIATION 628,81,36,341 293,51,56,665
Dividend
Interim 16,53,78,418 9,92,08,200
Final (Proposed) 49,61,85,878 19,84,18,210
Dividend Tax 8,69,94,211 3,27,38,905
Amount transferred - general reserve 553,95,77,834 260,47,91,350
- ------------------------------------------------------------------------------------------------------------------------------
628,81,36,341 293,51,56,665
==============================================================================================================================
EARNINGS PER SHARE (equity shares, par value Rs. 5 each)
Basic 95.06 44.38
Diluted 94.76 44.37
Number of shares used in computing earnings per share
Basic 6,61,52,131 6,61,39,372
Diluted 6,63,58,311 6,61,57,819
- ------------------------------------------------------------------------------------------------------------------------------
SIGNIFICANT ACCOUNTING POLICIES
AND NOTES ON ACCOUNTS 13
- ------------------------------------------------------------------------------------------------------------------------------
The schedules referred to above and the notes thereon form an integral part of
the Profit and Loss Account. This is the Profit and Loss Account referred to in
our report of even date.
for Bharat S Raut & Co.
Chartered Accountants
Balaji Swaminathan N. R. Narayana Murthy Nandan M. Nilekani Deepak M. Satwalekar Marti G. Subrahmanyam
Partner Chairman and Managing Director, Director Director
President
Chief Executive and Chief Operating
Officer Officer
Jitendra Vir Singh Omkar Goswami Larry Pressler Rama Bijapurkar
Director Director Director Director
S. Gopalakrishnan K. Dinesh S. D. Shibulal T. V. Mohandas Pai
Deputy Managing Director Director Director and Chief
Director Financial Officer
Phaneesh Murthy Srinath Batni V. Balakrishnan
Bangalore Director Director Company Secretary and
April 11, 2001 Associate Vice President
Finance
Schedules to the Balance Sheet as at March 31
- ------------------------------------------------------------------------------------------------------------------------------
in Rs.
- ------------------------------------------------------------------------------------------------------------------------------
2001 2000
- ------------------------------------------------------------------------------------------------------------------------------
1. SHARE CAPITAL
AUTHORIZED
Equity shares, Rs. 5 par value
10,00,00,000 equity shares 50,00,00,000 50,00,00,000
- ------------------------------------------------------------------------------------------------------------------------------
ISSUED, SUBSCRIBED AND PAID UP
Equity shares, Rs. 5 par value
6,61,58,117 (6,61,50,700) equity shares fully paid up 33,07,90,585 33,07,53,500
[Of the above, 5,78,88,200 (5,78,88,200) equity shares
fully paid up have been issued as bonus shares by
capitalization of the general reserve]
Add: Forfeited shares 1,500 1,500
- ------------------------------------------------------------------------------------------------------------------------------
33,07,92,085 33,07,55,000
==============================================================================================================================
2. RESERVES AND SURPLUS
Capital reserve 5,93,54,103 5,93,54,103
- ------------------------------------------------------------------------------------------------------------------------------
5,93,54,103 5,93,54,103
- ------------------------------------------------------------------------------------------------------------------------------
Share premium account as at April 1, 318,37,81,595 319,99,15,445
Add : Received during the year
On conversion of stock options issued to employees 2,37,48,821 1,75,65,777
- ------------------------------------------------------------------------------------------------------------------------------
320,75,30,416 321,74,81,222
Less :ADS linked stock option issue expenses - 1,01,93,113
ADS issue expenses - 2,35,06,514
- ------------------------------------------------------------------------------------------------------------------------------
320,75,30,416 318,37,81,595
- ------------------------------------------------------------------------------------------------------------------------------
General reserve as at April 1, 475,91,37,550 215,43,46,200
Add : Transfers from the Profit and Loss Account 553,95,77,834 260,47,91,350
- ------------------------------------------------------------------------------------------------------------------------------
1029,87,15,384 475,91,37,550
Schedules to the Balance Sheet as at March 31
- --------------------------------------------------------------------------------
3. FIXED ASSETS
in Rs.
---------------------------------------------------------------------------------------------------------------------------
Original cost
---------------------------------------------------------------------------------------------------------------------------
Cost as at Additions Deletions Cost as at As at
Assets April 1, 2000 during the during the March 31, April 1, 2000
year year 2001
---------------------------------------------------------------------------------------------------------------------------
Land - free-hold 1,89,83,650 7,13,75,327 - 9,03,58,977 -
Land - lease-hold 19,17,69,406 8,40,82,384 - 27,58,51,790 -
Buildings 58,90,10,239 98,80,44,371 - 157,70,54,610 5,23,14,231
Plant and machinery 51,75,81,633 60,64,52,428 35,71,054 112,04,63,007 25,00,55,738
Computer equipment 112,23,85,220 113,83,99,209 2,13,36,954 223,94,47,475 78,95,66,535
Furniture and fixtures 39,92,10,666 60,60,03,206 4,62,711 100,47,51,161 24,38,29,725
Vehicles 13,64,329 22,87,502 1,34,826 35,17,005 7,54,365
---------------------------------------------------------------------------------------------------------------------------
Total 284,03,05,143 349,66,44,427 2,55,05,545 631,14,44,025 133,65,20,594
---------------------------------------------------------------------------------------------------------------------------
Previous year 168,92,38,345 117,79,35,912 2,68,69,114 284,03,05,143 83,09,14,934
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
Depreciation Net book value
---------------------------------------------------------------------------------------------------------------------------
For the Deductions As at As at As at
Assets year during the March 31, March 31, March 31,
year 2001 2001 2000
---------------------------------------------------------------------------------------------------------------------------
Land - free-hold - - - 9,03,58,977 1,89,83,650
Land - lease-hold - - - 27,58,51,790 19,17,69,406
Buildings 8,14,69,936 - 13,37,84,167 144,32,70,443 53,66,96,008
Plant and machinery 26,02,00,030 28,41,462 50,74,14,306 61,30,48,701 26,75,25,895
Computer equipment 52,81,49,939 2,08,44,363 129,68,72,111 94,25,75,364 33,28,18,685
Furniture and fixtures 25,88,19,126 3,29,113 50,23,19,738 50,24,31,423 15,53,80,941
Vehicles 3,06,121 1,34,826 9,25,660 25,91,345 6,09,964
---------------------------------------------------------------------------------------------------------------------------
Total 12,89,45,152 2,41,49,764 244,13,15,982 387,01,28,043 150,37,84,549
---------------------------------------------------------------------------------------------------------------------------
Previous year 53,23,27,389 2,67,21,729 133,65,20,594
---------------------------------------------------------------------------------------------------------------------------
Note: Buildings include Rs. 250 being the value of 5 shares of Rs. 50 each
in Mittal Towers Premises Co-operative Society Limited.
Schedules to the Balance Sheet as at March 31
- ------------------------------------------------------------------------------------------------------------------------------
in Rs
- ------------------------------------------------------------------------------------------------------------------------------
2001 2000
- ------------------------------------------------------------------------------------------------------------------------------
4. INVESTMENTS
TRADE (UNQUOTED) - at cost
Long-term investments
Yantra Corporation, USA, a subsidiary company
75,00,000 (75,00,000) common stock at US$ 0.20 each,
fully paid, par value US$ 0.01 each 5,32,51,600 5,32,51,600
6,36,363 (6,36,363) Series A convertible preferred stock,
at US$ 0.75 each, fully paid, par value US$ 0.01 each 1,73,44,074 1,73,44,074
EC Cubed Inc., USA
13,00,108 (13,00,108) Series D convertible preferred stock
at US$ 2.3075 each, fully paid, par value US$ 0.0001 each 13,08,00,000 13,08,00,000
Alpha Thinx Mobile Phone Services AG, Austria
27,790 (Nil) bearer shares at (Euro) 20 each, fully paid, par value 1 each 2,20,98,608 -
- ------------------------------------------------------------------------------------------------------------------------------
22,34,94,282 20,13,95,674
Less: Provision for investments 22,34,94,282 7,05,95,674
- ------------------------------------------------------------------------------------------------------------------------------
- 13,08,00,000
Asia Net Media (BVI) Ltd, the British Virgin Islands 3,00,00,000 (Nil)
ordinary shares at US$ 0.05 each,
fully paid, par value US$ 0.01 each 6,84,75,000 -
CiDRA Corporation, USA
33,333 (Nil) Series D convertible preferred stock at
US$ 90 each, fully paid, par value US$ 0.01 each 13,40,08,660 -
JASDIC Park Company, Japan
480 (480) common stock at(Y)50,000 each,
fully paid, par value(Y)50,000 each 75,38,109 75,38,109
M-Commerce Ventures Pte Ltd, Singapore Units in the company, each unit
representing 1 ordinary share of Singapore $ 1 each, fully paid, par value
Singapore $ 1 and 9 redeemable preferred shares of Singapore $ 1, fully
paid, at a premium of Singapore $ 1,110 per redeemable preferred stock
70 (Nil) ordinary shares 1,845 -
630 (Nil) redeemable preference shares 1,84,45,855 -
OnMobile Systems Inc., (formerly Onscan Inc.,) USA
1,00,000 (Nil) common stock at US$ 0.4348 each,
fully paid, par value US$ 0.001 each 19,42,162 -
1,00,000 (Nil) Series A voting convertible preferred
stock at US$ 0.4348 each, fully paid, par value US$ 0.001 each 19,42,162 -
44,00,000 (Nil) Series A non-voting convertible preferred
stock at US$ 0.4348 each, fully paid, par value US$ 0.001 each 8,54,55,676 -
PurpleYogi Inc., USA
2,76,243 (Nil) Series D convertible preferred stock at US$ 1.81
each fully paid, par value US$ 0.001 each 2,33,34,992 -
Software Services Support Education Center Limited
1 (1) equity share of Rs. 10 each, fully paid, par value Rs. 10 10 10
The Saraswat Co-operative Bank Limited
1,035 (1,035) equity shares of Rs. 10 each, fully paid, par value Rs. 10 10,350 10,350
- ------------------------------------------------------------------------------------------------------------------------------
34,11,54,821 13,83,48,469
==============================================================================================================================
Aggregate of unquoted investments - carrying value / cost 34,11,54,821 13,83,48,469
5. SUNDRY DEBTORS
Debts outstanding for a period exceeding six months
Unsecured
considered doubtful 9,61,74,738 2,21,26,448
Other debts
Unsecured
considered good* 302,37,02,417 136,17,81,253
considered doubtful 8,55,48,753 -
- ------------------------------------------------------------------------------------------------------------------------------
320,54,25,908 138,39,07,701
Less: Provision for doubtful debts 18,17,23,491 2,21,26,448
- ------------------------------------------------------------------------------------------------------------------------------
302,37,02,417 136,17,81,253
==============================================================================================================================
*Includes due by subsidiary - Yantra Corporation 99,80,017 Nil
Schedules to the Balance Sheet as at March 31
- ----------------------------------------------------------------------------------------------------------------
in Rs.
- ----------------------------------------------------------------------------------------------------------------
2001 2000
- ----------------------------------------------------------------------------------------------------------------
6. CASH AND BANK BALANCES
Cash on hand 96,062 13,17,773
Balances with scheduled banks
in current accounts * 12,79,65,496 10,16,77,272
in deposit accounts in Indian rupees 181,88,52,687 22,91,45,764
in deposit accounts in foreign currency 136,36,28,601 268,41,01,874
Balances with non-scheduled banks
in deposit accounts in foreign currency
HSBC Bank Middle East, Bahrain - 66,76,98,310
in current accounts
ABN Amro Bank, Heerlen, Netherlands - 15,69,661
ABN Amro Bank, Brussels, Belgium 8,73,096 16,26,311
Bank of America, Concord, USA 27,09,344 -
Bank of America, Hong Kong 4,25,885 -
Bank of America, Los Angeles, USA - 50,60,500
Bank of America, Milpitas, USA 23,59,820 22,81,065
Bank of America, Palo Alto, USA 35,70,97,922 57,93,97,557
Bank of Boston, Boston, USA 21,30,626 16,88,886
Bank of Melbourne, Melbourne, Australia 17,26,245 2,49,124
Bank of Melbourne, Victoria, Australia 5,46,759 -
Barclays Bank, London, UK 38,36,868 44,92,122
Deutsche Bank, Frankfurt, Germany 20,22,282 36,15,221
First Chicago Bank, Chicago, USA - 21,98,743
Hongkong Bank of Canada, Toronto, Canada 5,54,537 22,42,324
HSBC Bank PLC - Croydon, London 9,76,68,994 -
Michigan National Bank, Detroit, USA - 3,87,308
Nations Bank, Dallas, USA 1,17,15,900 1,11,76,052
Nations Bank, Georgia, USA - 12,41,385
Nordbanken, Stockholm, Sweden 15,86,376 3,45,518
Nova Scotia Bank, Toronto, Canada 5,21,19,103 89,98,950
Seafirst Bank, Seattle, USA - 17,70,378
Sanwa Bank, Tokyo, Japan 12,18,670 40,43,674
Summit Bank, Bridgewater, USA 14,75,012 16,09,958
- ----------------------------------------------------------------------------------------------------------------
385,06,10,285 431,79,35,730
================================================================================================================
Maximum balance held during the year:
in deposit accounts in foreign currency
HSBC Bank Middle East, Bahrain 72,78,38,970 66,76,98,310
in current accounts
ABN Amro Bank, Heerlen, Netherlands 15,95,544 19,68,084
ABN Amro Bank, Brussels, Belgium 25,10,415 16,74,689
Bank of America, Concord, USA 11,56,12,302 -
Bank of America, Hong Kong 11,81,752 -
Bank of America, Los Angeles, USA 3,08,58,501 59,13,227
Bank of America, Milpitas, USA 5,89,07,898 4,57,78,346
Bank of America, Palo Alto, USA 92,96,33,056 71,03,42,796
Bank of Boston, Boston, USA 72,15,459 68,26,703
Bank of Melbourne, Melbourne, Australia 17,26,245 2,92,425
Bank of Melbourne, Victoria, Australia 16,34,330 -
Barclays Bank, London, UK 3,63,48,726 67,59,209
Deutsche Bank, Frankfurt, Germany 36,94,391 40,36,519
First Chicago Bank, Chicago, USA 22,07,085 49,23,828
Hongkong Bank of Canada, Toronto, Canada 1,01,66,688 1,89,92,669
HSBC Bank PLC - Croydon, London 16,51,68,657 -
Michigan National Bank, Detroit, USA 17,44,660 13,34,282
Nations Bank, Dallas, USA 3,36,69,804 1,45,77,623
Nations Bank, Georgia, USA 21,33,612 18,23,598
Nordbanken, Stockholm, Sweden 23,20,446 3,45,518
Nova Scotia Bank, Toronto, Canada 7,57,18,591 89,98,950
Seafirst Bank, Seattle, USA 31,46,158 24,05,174
Sanwa Bank, Tokyo, Japan 1,40,25,843 79,10,422
Summit Bank, Bridgewater, USA 88,91,861 35,18,916
* Includes Rs. 48,15,163 and Rs. 28,72,035 being the balance in unclaimed
dividend account as at March 31, 2001 and March 31, 2000 respectively
Schedules to the Balance Sheet as at March 31
- ---------------------------------------------------------------------------------------------------------------
in Rs.
- ---------------------------------------------------------------------------------------------------------------
2001 2000
- ---------------------------------------------------------------------------------------------------------------
7. LOANS AND ADVANCES
Unsecured, considered good
Advances
prepaid expenses 13,75,24,974 11,58,60,415
advances paid for supplies of goods and rendering of services 4,58,01,731 3,10,07,019
others 1,92,05,252 1,01,94,327
- ---------------------------------------------------------------------------------------------------------------
20,25,31,957 15,70,61,761
Costs in excess of billings 2,34,52,011 -
Advance income tax 123,73,97,792 54,40,96,353
Loans and advances to employees *
housing and other loans 50,45,83,928 38,74,34,826
salary advances 24,47,71,738 13,61,51,038
Other advances 4,76,12,044 3,23,06,323
Rent and maintenance deposits 11,56,91,996 7,84,24,995
Deposits with financial institutions / body corporate 192,67,52,157 76,58,01,865
- ---------------------------------------------------------------------------------------------------------------
Unsecured, considered doubtful 430,27,93,623 210,12,77,161
Loans and advances to employees 7,11,816 -
- ---------------------------------------------------------------------------------------------------------------
430,35,05,439 210,12,77,161
Less: Provision for doubtful loans and advances 7,11,816 -
- ---------------------------------------------------------------------------------------------------------------
430,27,93,623 210,12,77,161
===============================================================================================================
* Includes due by non-director officers of the company 1,05,74,738 1,35,08,825
Maximum amounts due by non-director officers at any time during the year 2,83,52,485 2,30,09,790
8. CURRENT LIABILITIES
Sundry creditors
for goods 13,07,477 4,25,90,239
for accrued salaries and benefits 57,42,18,368 22,44,51,291
for other liabilities
provision for expenses 17,70,70,370 7,67,74,570
retention monies 11,39,71,400 4,91,19,373
withholding and other taxes payable 5,50,36,092 7,19,14,609
others 1,78,04,294 95,50,828
- ---------------------------------------------------------------------------------------------------------------
93,94,08,001 47,44,00,910
Advances received from clients 5,66,97,811 1,85,61,551
Unearned revenue 34,82,60,201 17,56,71,963
Unclaimed dividend 48,15,163 28,72,035
- ---------------------------------------------------------------------------------------------------------------
134,91,81,176 67,15,06,459
===============================================================================================================
9. PROVISIONS
Proposed dividend 49,61,85,878 19,84,18,210
Provision for
tax on dividend 5,06,10,959 2,18,26,003
income taxes 122,90,11,741 62,60,19,742
e-inventing the company - 39,00,977
post-sales client support 7,35,11,697 5,51,91,028
gratuity - 8,28,40,000
- ---------------------------------------------------------------------------------------------------------------
184,93,20,275 98,81,95,960
===============================================================================================================
Schedules to the Profit and Loss Account for the year ended March 31
- ------------------------------------------------------------------------------------------------------------------------------
in Rs.
- ------------------------------------------------------------------------------------------------------------------------------
2001 2000
- ------------------------------------------------------------------------------------------------------------------------------
10. OTHER INCOME
Interest received on deposits with banks and others 37,54,58,594 26,68,79,106
(Tax deducted at source Rs. 4,30,12,428 and Rs. 1,67,51,195 respectively)
Sale of special import licenses 6,77,431 2,02,31,549
Miscellaneous income 1,58,66,407 49,73,365
Exchange differences * 20,17,12,483 9,93,27,075
- ------------------------------------------------------------------------------------------------------------------------------
59,37,14,915 39,14,11,095
==============================================================================================================================
*Arising on translation of foreign currency deposits maintained abroad
includes a realised gain of Rs. 5,06,25,885 (previous year : Rs. Nil)
11. SOFTWARE DEVELOPMENT EXPENSES
Salaries and bonus including overseas staff expenses 675,86,45,286 307,54,46,295
Staff welfare 8,46,06,310 4,93,07,308
Contribution to provident and other funds 33,45,76,308 22,08,36,923
Foreign travel expenses 147,22,11,655 84,09,02,293
Consumables 5,86,87,245 2,70,06,251
Cost of software packages for
own use 31,85,81,751 16,53,57,382
banking product 5,70,13,753 2,84,48,397
Computer maintenance 7,19,42,078 3,27,43,350
Communication expenses 31,52,55,986 17,31,23,718
Consultancy charges 9,19,25,609 2,85,50,034
Provision for post-sales client support 1,83,20,669 2,09,62,627
- ------------------------------------------------------------------------------------------------------------------------------
958,17,66,650 466,26,84,578
==============================================================================================================================
12. ADMINISTRATION AND OTHER EXPENSES
Professional charges 20,40,21,385 7,55,68,079
Travelling and conveyance 18,40,64,822 7,68,26,394
Rent 16,94,82,708 10,34,93,593
Telephone charges 14,02,60,363 5,93,95,252
Office maintenance 12,84,32,642 5,81,01,381
Power and fuel 11,78,45,258 5,01,41,466
Brand building 10,52,01,392 99,17,816
Donations 7,21,92,883 3,49,27,871
Advertisements 6,30,77,831 2,12,41,343
Printing and stationery 6,25,54,206 2,76,70,902
Insurance charges 5,17,55,298 2,41,35,289
Repairs to building 3,95,22,458 1,13,44,232
Repairs to plant and machinery 2,26,54,171 84,12,905
Rates and taxes 1,82,17,524 1,03,80,848
Commission charges 1,79,03,784 64,70,454
Bank charges and commission 59,39,483 42,21,668
Auditor's remuneration
audit fees 17,85,000 17,85,000
certification charges 2,00,000 2,00,000
other services - 4,50,000
out-of-pocket expenses 2,00,000 2,00,000
Bad loans and advances written off 4,141 3,13,050
Bad debts written off 27,70,254 1,59,20,938
Provision for doubtful loans and advances 7,11,816 -
Provision for bad and doubtful debts 19,27,45,549 94,03,099
Freight charges 55,72,484 23,84,004
Professional membership and seminar participation fees 2,17,10,613 75,30,693
Marketing expenses 4,26,87,545 2,94,50,685
Postage and courier 2,27,86,459 1,37,56,638
Books and periodicals 1,69,10,978 77,13,886
Commission to non-whole time directors 59,22,049 48,17,800
Sales promotion expenses 70,16,656 26,70,973
Transaction processing fee and filing fees 1,52,76,339 3,69,846
Research grants 1,00,00,000 1,03,00,000
Other miscellaneous expenses 2,60,44,880 53,34,177
- ------------------------------------------------------------------------------------------------------------------------------
177,54,70,971 69,48,50,282
==============================================================================================================================
Schedules to the Balance Sheet and Profit and Loss Account
- --------------------------------------------------------------------------------
13. SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS
Company overview
Infosys Technologies Limited ("Infosys" or "the company") is a publicly-held
company providing information technology ("IT") solutions principally to Fortune
500 and emerging new economy companies. Infosys' range of services includes IT
consulting, IT architecture, application development, e-commerce and Internet
consulting, and software maintenance. In addition, the company develops and
markets certain software products. Headquartered in Bangalore, India, Infosys
has 16 state-of-the-art offshore software development facilities located
throughout India that enables it to provide high quality, cost-effective
services to clients in a resource-constrained environment. The company also has
offices in North America, Europe and Asia.
13.1 Significant accounting policies
13.1.1 Basis of preparation of financial statements
The financial statements are prepared under the historical cost convention,
in accordance with Indian Generally Accepted Accounting Principles ("GAAP")
comprising the mandatory accounting standards issued by the Institute of
Chartered Accountants of India and the provisions of the Companies Act,
1956, on the accrual basis, as adopted consistently by the company.
The preparation of the financial statements in conformity with GAAP
requires that the management of the company ("Management") make estimates
and assumptions that affect the reported amounts of revenue and expenses of
the year, reported balances of assets and liabilities, and disclosures
relating to contingent assets and liabilities as of the date of the
financial statements. Examples of such estimates include expected
development costs to be incurred to complete software contracts, 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.
13.1.2 Revenue recognition
Revenue from software development on time-and-materials contracts is
recognized based on software developed and billed to clients as per the
terms of specific contracts. On fixed-price contracts, revenue is
recognized based on milestones achieved as specified in the contracts on
the proportionate-completion method on the basis of the work completed.
Revenue from rendering Annual Technical Services ("ATS") is recognized
proportionately over the period in which services are rendered. Revenue
from the sale of licenses for the use of software applications is
recognized on transfer of the title in the user license. 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 company's right to receive dividend is established.
Revenue from the sale of special import licenses is recognized when the
company transfers the licenses.
13.1.3 Expenditure
The cost of software purchased for use in software development and services
is charged to revenue in the year the software is acquired. Project costs
in the nature of salaries, travel and other expenses incurred on fixed
price contracts, where milestones are yet to be reached, are classified as
"Costs in excess of billings" in the balance sheet. Provisions are made for
all known losses and liabilities, future unforeseeable factors that may
affect the profit on fixed-price software development contracts, and also
towards likely expenses for providing post-sales client support on
fixed-price contracts. The leave encashment liability of the company is
provided on the basis of an actuarial valuation.
13.1.4 Fixed assets
Fixed assets are stated at cost, after reducing accumulated depreciation
until the date of the balance sheet. Direct costs are capitalized until the
assets are ready for use and include financing costs relating to any
specific borrowing attributable to the acquisition of the fixed assets.
13.1.5 Capital work-in-progress
Advances paid to acquire fixed assets and the cost of assets not put to use
before the year-end are disclosed under capital work-in-progress.
13.1.6 Depreciation
Depreciation on fixed assets is determined using the straight-line method
based on useful lives of assets as estimated by Management. Depreciation
for assets purchased / sold during the year is proportionately charged.
Individual assets acquired for less than Rs. 5,000 are entirely depreciated
in the year of acquisition. Management estimates the useful lives for the
various 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
13.1.7 Retirement benefits to employees
13.1.7a Gratuity
In accordance with the Payment of Gratuity Act, 1972, Infosys 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
years of employment with the company.
The company established the Infosys Technologies Limited Employees'
Gratuity Fund Trust (the "Trust") in 1997, until which the company made
contributions to a gratuity plan managed by the Life Insurance Corporation
of India. Liabilities with regard to the Gratuity Plan are determined by
actuarial valuation, based upon which the company contributes 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.
13.1.7b Superannuation
Apart from being covered under the Gratuity Plan described above, certain
employees of Infosys are also participants of a defined contribution plan.
The company makes monthly contributions to the superannuation plan (the
"Plan") based on a specified percentage of each covered employee's salary.
The company has no further obligations under the Plan beyond its monthly
contributions.
13.1.7c Provident fund
In addition to the above benefits, eligible employees receive benefits from
a provident fund, which is a defined contribution plan. Both the employee
and the company make monthly contributions to this provident fund plan
equal to a specified percentage of the covered employee's salary.
Infosys established a Provident Fund Trust in 1996 to which a part of the
contributions are made each month. Prior thereto, the company made
contributions to the provident fund plan administered by the Government of
India. The remainders of the contributions are made to the Government
administered provident fund. The company has no further obligations under
the provident fund plan beyond its monthly contributions.
13.1.8 Research and development
Revenue expenditure incurred on research and development is charged off as
incurred. Capital expenditure incurred on research and development is
depreciated over the estimated useful lives of the related assets.
13.1.9 Foreign currency transactions
Sales made to overseas clients and collections deposited in foreign
currency bank accounts are recorded at the exchange rate as of the date of
the respective transactions. 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. Exchange differences are
recorded when the amount actually received on sales or actually paid when
expenditure is incurred is converted into Indian Rupees. The exchange
differences arising on foreign currency transactions are recognized as
income or expense in the year in which they arise.
Fixed assets purchased at overseas offices are recorded at cost, based on
the exchange rate as of the date of purchase. The charge for depreciation
is determined as per the company's accounting policy.
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 also recorded 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.
13.1.10 Investments
Trade investments refer to the investments made with the aim of enhancing
the company's business interests in software development and services. The
investments are classified as current investments or long-term investments.
Current investments are carried at the lower of cost and fair value. Cost
for overseas investments comprises the Indian Rupee value of the
consideration paid for the investment. Provisions are recorded for any
decline in the carrying value as of the balance sheet date.
Long-term investments are carried at cost and provisions recorded to
recognize any decline, other than temporary, in the carrying value of such
investment.
The investment in the subsidiary is accounted on the cost method, whereby,
the investment is carried at cost and the company recognizes only dividends
received from the subsidiary as income in the profit and loss account.
Provisions are recorded to recognize any decline, other than temporary, in
the carrying value of the investment.
13.1.11 Income tax
Provision is made for income tax annually based on the tax liability
computed after considering tax allowances and exemptions. Provisions are
recorded as considered appropriate for matters under appeal due to
disallowances or for other reasons.
13.1.12 Earnings per share
The earnings considered in ascertaining the company's earnings per share
comprises the net profit after tax and includes the post-tax effect of any
extra-ordinary items. The number of shares used in computing basic earnings
per share is the weighted average number of shares outstanding during the
year. The number of shares used in computing diluted earnings per share
comprises the weighted average shares considered for deriving basic
earnings per share, and also the weighted average number of equity shares
which could have been issued on the conversion of all dilutive potential
equity shares. Dilutive potential equity shares are deemed converted as of
the beginning of the year, unless they have been issued at a later date.
The diluted potential equity shares have been adjusted for the proceeds
receivable had the shares been actually issued at fair value (i.e. the
average market value of the outstanding shares). The number of shares and
potentially dilutive equity shares are adjusted for stock splits and bonus
shares, as appropriate.
13.1.13 New accounting standards
The Institute of Chartered Accountants of India ("ICAI") has issued
accounting standards on segment reporting, related party disclosures and
earnings per share that are applicable to the financial statements of the
company, and are mandatory effective accounting period commencing on April
1, 2001. The ICAI has also submitted an exposure draft on accounting for
taxes on income, which is also proposed to be made mandatory effective
April 1, 2001. The company has evaluated the effect of these standards
becoming mandatory and adopted the accounting standards on segment
reporting, related party disclosures and earnings per share, and provides
pro-forma information in relation to the exposure draft on accounting for
income taxes in these financial statements.
Although Yantra Corporation, USA, is a subsidiary of Infosys as per Section
4 of the Companies Act, 1956, the financial statements have not been
consolidated since the company does not have controlling interest envisaged
by the accounting standard on consolidated financial statements also issued
by the ICAI for mandatory compliance effective April 1, 2001.
13.2 Notes on accounts
The previous year's figures have been recast / restated, wherever
necessary, to conform to the current year's classification.
13.2.1 Capital commitments and contingent liabilities
a. The estimated amount of contracts remaining to be executed on capital
account, and not provided for (net of advances) is Rs. 158,25,35,171 as
at March 31, 2001 (previous year - Rs. 80,31,29,007).
b. The company has outstanding guarantees and counter guarantees of Rs.
6,83,05,000 as at March 31, 2001, to various banks, in respect of the
guarantees given by the banks in favor of various government authorities
(previous year - Rs. 5,26,30,000).
c. Claims against the company, not acknowledged as debts, amounted to Rs.
8,75,532 as at March 31, 2001 (previous year - Rs. 32,89,661).
d. Outstanding forward contracts amounted to US$ 20,000,000 (approximately
Rs. 93,12,00,000 at year-end exchange rates) at March 31, 2001 (previous
year - US$ Nil).
13.2.2 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.
13.2.3 Imports on the Cost, Insurance and Freight basis
in Rs.
- ------------------------------------------------------------------------------------------------------------------------------
2001 2000
- ------------------------------------------------------------------------------------------------------------------------------
Capital goods 113,56,33,008 37,47,31,691
Software packages 1,67,88,389 2,54,95,652
- ------------------------------------------------------------------------------------------------------------------------------
13.2.4 Earnings in foreign exchange (on the receipts basis)
in Rs.
- ------------------------------------------------------------------------------------------------------------------------------
2001 2000
- ------------------------------------------------------------------------------------------------------------------------------
Income from software development services and products 1708,67,49,891 833,29,73,465
Interest received on deposits with banks 19,55,81,989 18,42,65,368
- ------------------------------------------------------------------------------------------------------------------------------
Expenditure in foreign currency (on the payments basis)
in Rs.
- ------------------------------------------------------------------------------------------------------------------------------
2001 2000
- ------------------------------------------------------------------------------------------------------------------------------
Travel expenses 107,69,86,908 70,29,13,532
Professional charges 14,63,89,491 4,51,95,637
Other expenditure incurred overseas for software development 489,94,99,776 221,74,57,133
- ------------------------------------------------------------------------------------------------------------------------------
Net earnings in foreign currency (on the receipts and payments basis)
in Rs.
- ------------------------------------------------------------------------------------------------------------------------------
2001 2000
- ------------------------------------------------------------------------------------------------------------------------------
Net earnings in foreign exchange 1115,94,55,705 555,16,72,531
- ------------------------------------------------------------------------------------------------------------------------------
13.2.5 Depreciation on assets costing less than Rs. 5,000 each
During the year, the company charged depreciation at 100% in respect of
assets costing less than Rs. 5,000 each, amounting to Rs. 34,99,43,502
(previous year - Rs. 13,21,59,074).
13.2.6 Managerial remuneration paid to the chairman, managing director and
whole-time directors
in Rs.
-------------------------------------------------------------------------------------------------------------------------
2001 * 2000
-------------------------------------------------------------------------------------------------------------------------
Salary 1,54,84,785 38,00,059
Contribution to provident fund and other funds 18,29,116 12,08,855
Perquisites 89,20,426 37,32,482
-------------------------------------------------------------------------------------------------------------------------
* includes the remuneration paid to three directors who were co-opted into
the board on May 27, 2000.
Mr. Phaneesh Murthy, a whole-time director, is also a non-resident.
Approval of the Central Government for the remuneration payable to him is
awaited.
13.2.7 Managerial remuneration paid to non-whole-time directors
in Rs.
-------------------------------------------------------------------------------------------------------------------------
2001 2000
-------------------------------------------------------------------------------------------------------------------------
Commission 59,22,049 48,17,800
Sitting fees 2,57,000 92,000
Reimbursement of expenses 9,09,070 10,13,703
-------------------------------------------------------------------------------------------------------------------------
Computation of net profit in accordance with Section 349 of the Companies
Act, 1956, and calculation of commission payable to non-whole time
directors
in Rs.
-------------------------------------------------------------------------------------------------------------------------
2001 2000
-------------------------------------------------------------------------------------------------------------------------
Net profit after tax from ordinary activities 623,31,92,341 285,94,85,819
Add:
1. Whole-time directors remuneration 2,62,34,327 87,41,396
2. Directors sitting fees 2,57,000 92,000
3. Commission to non-whole time directors 59,22,049 48,17,800
4. Provision for bad and doubtful debts 19,27,45,549 94,03,099
5. Provision for bad loans and advances 7,11,816 --
6. Provision on investments 15,28,98,608 --
7. Depreciation as per the books of account 112,89,45,152 53,23,27,389
8. Provision for taxation 72,71,00,000 39,70,00,000
-------------------------------------------------------------------------------------------------------------------------
846,80,06,842 381,18,67,503
Less:
Depreciation as envisaged under section 350 of the Companies Act * 112,89,45,152 39,86,14,483
-------------------------------------------------------------------------------------------------------------------------
Net profit on which commission is payable 733,90,61,690 341,32,53,020
-------------------------------------------------------------------------------------------------------------------------
Commission payable to non-whole-time directors:
Maximum allowed as per Companies Act, 1956 at 1% 7,33,90,617 341,32,530
Maximum as approved by the shareholders at 0.5% 3,66,95,309 1,70,66,265
Commission approved by the board 59,22,049 48,17,800
-------------------------------------------------------------------------------------------------------------------------
*The company depreciates fixed assets based on estimated useful lives that
are lower than those implicit in Schedule XIV of the Companies Act, 1956.
Accordingly, the rates of depreciation used by the company are higher than
the minimum rates prescribed by Schedule XIV.
13.2.8 Exchange differences
in Rs.
-------------------------------------------------------------------------------------------------------------------------
2001 2000
-------------------------------------------------------------------------------------------------------------------------
Gains on the translation of foreign currency deposits 20,17,12,483 9,93,27,075
Net realized and unrealized exchange gains - others 19,45,83,779 8,76,31,024
Total net realized and unrealized gains 39,62,96,262 18,69,58,099
-------------------------------------------------------------------------------------------------------------------------
Total realized and unrealized exchange gains comprise, gains on the
translation of foreign currency deposits which is classified as "other
income" and net realized and unrealized exchange gains, which are
classified as "Income from software development services and products -
overseas".
13.2.9 Research and development expenditure
in Rs.
-------------------------------------------------------------------------------------------------------------------------
2001 2000
-------------------------------------------------------------------------------------------------------------------------
Capital 2,14,29,903 15,27,500
Revenue 14,97,08,196 8,07,35,940
Total research and development expenses 17,11,38,099 8,22,63,440
-------------------------------------------------------------------------------------------------------------------------
13.2.10 Provision for contingencies
The company had instituted a contingency plan effective October 1, 1998 and
made a total provision of Rs. 9,99,00,000 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. In the
year ended March 31, 2000, Rs. 2,42,29,154 was spent towards the Year 2000
transition effort, which was set off against the provision and the
remainder of Rs. 7,56,70,846 was written back to the profit and loss
account.
13.2.11 Provision for e-inventing the company
The company made a provision of Rs. 3,50,00,000 for the quarter ended
September 30, 1999 towards e-inventing the company. Until March 31, 2000
the company had incurred Rs. 3,10,99,023 towards e-inventing Infosys, which
was set-off against the provision earlier made. The remainder of Rs.
39,00,977 was incurred and set-off against this provision during the first
quarter of the current year.
13.2.12 Unearned revenue
Unearned revenue as of March 31, 2001 amounting to Rs. 34,82,60,201
(previous year Rs. 17,56,71,963) primarily consists of client billings on
fixed-price, fixed-time-frame contracts for which the related costs have
not yet been incurred.
13.2.13 Dues to small-scale industrial undertakings
As of March 31, 2001, the company had no outstanding dues to small-scale
industrial undertakings (previous year Rs. Nil).
13.2.14 Balance of unutilized money raised by issue of American Depositary
Shares
During the year ended March 31, 1999, Infosys made an Initial Public
Offering of American Depositary Shares ("ADS"), of US$ 70,380,000,
equivalent to Rs. 296,86,00,000. The issue proceeds net of expenses of Rs.
19,68,00,000 were entirely utilized as of the balance sheet date. The
unutilized ADS proceeds as at March 31, 2001 is Rs. nil (Rs. 140,99,00,000
as at March 31, 2000).
13.2.15 Stock option plans
The company currently has three stock option plans. These are summarized
below.
1994 Stock Offer Plan ("the 1994 Plan")
As of March 31, 2001, 2,57,400 shares were outstanding with the Employee
Welfare Trust and options to acquire 3,30,000 shares are outstanding with
the employees under the 1994 Plan. These options were granted at an
exercise price of Rs. 50 (post split) per option. Additionally, the number
of shares earlier issued to employees subject to lock-in-period is
14,21,200 shares.
1998 Stock Option Plan ("the 1998 Plan")
The company's 1998 Stock Option Plan ("the 1998 Plan") provides for the
grant of non-statutory stock options and incentive stock options to
employees. The board of directors approved the 1998 Plan in December 1997
and the company's shareholders approved the plan in January 1998. A total
of 16,00,000 equity shares corresponding to 32,00,000 ADSs are currently
reserved for issue pursuant to the 1998 Plan. The Government of India
approved the 1998 Plan, subject to a limit of 14,70,000 equity shares,
representing 29,40,000 ADSs, to be issued under the 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 earlier. All options
under the 1998 Plan are exercisable for ADSs representing equity shares.
The compensation committee comprising members of the board of directors
administers the 1998 Plan.
-------------------------------------------------------------------------------------------------------------------------
Number of options granted, exercised and forfeited 2001 2000
-------------------------------------------------------------------------------------------------------------------------
Options granted, beginning of year 6,89,500 4,19,000
Granted during the year 9,64,840 2,94,300
Exercised during the year 12,434 23,800
Forfeited during the year 76,400 --
Options granted, end of year 15,65,506 6,89,500
-------------------------------------------------------------------------------------------------------------------------
Weighted average exercise price US$ 90.98 US$ 58.53
Rs. 4,236 Rs. 2,552
-------------------------------------------------------------------------------------------------------------------------
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 1999 Plan in June 1999. The 1999 Plan
provides for the issue of 66,00,000 equity shares to the employees. A
compensation committee comprising a maximum of five members, the majority
of whom are independent directors on the board of directors, administers
the 1999 Plan. 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 is 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 be issued to employees at exercise prices
that are less than fair market value only if specifically approved by the
members of the company in a general meeting.
-------------------------------------------------------------------------------------------------------------------------
Number of options granted, exercised and forfeited 2001 2000
-------------------------------------------------------------------------------------------------------------------------
Options granted, beginning of year 10,06,800 --
Granted during the year 19,57,830 10,14,500
Exercised during the year 1,200 --
Forfeited during the year 1,69,450 7,700
Options granted, end of year 27,93,980 10,06,800
-------------------------------------------------------------------------------------------------------------------------
Weighted average exercise price Rs. 5,572 Rs. 4,268
-------------------------------------------------------------------------------------------------------------------------
13.2.16 Pro-forma disclosures relating to the Employee Stock Option Plans
("ESOPs")
The Securities and Exchange Board of India (SEBI) issued the Employee Stock
Option Scheme and Employee Stock Purchase Scheme Guidelines in 1999, which
is applicable to all stock option schemes established on or 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. All options under the 1998 and 1999 stock option plans have
been issued at fair market value, hence, there are no compensation costs.
The company's 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 pro forma amounts indicated below.
in Rs.
- ------------------------------------------------------------------------------------------------------------------------------
2001 2000
- ------------------------------------------------------------------------------------------------------------------------------
Net profit:
- As reported 628,81,36,341 293,51,56,665
- Adjusted pro forma 605,55,42,584 271,34,60,717
- ------------------------------------------------------------------------------------------------------------------------------
13.2.17 Provision for taxation
The company's profits from export activities are partly deductible from
taxable income. However, most of Infosys' operations are conducted through
100% Export Oriented Units ("EOU"), which are entitled to a tax holiday for
a period of ten years from the date of commencement of operations. The
Government of India amended the tax incentive available to companies
operating through EOUs. The tenure of tax exemption available to such
companies is restricted to 10 consecutive years commencing from the earlier
of the fiscal year in which the unit commences software development and
March 31, 2000. Additionally, export-related tax deductions apart from the
100% EOU scheme earlier described are being phased out by fiscal 2004. 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.
13.2.18 Cash and bank balances
The cash and bank balances include interest accrued but not due on
fixed deposits amounting to Rs.1,94,43,708 for the year ended March 31,
2001 (previous year - Rs. 94,92,514).
13.2.19 Loans and advances
Advances mainly comprises prepaid travel and per-diem expenses and advances
to vendors for current assets. Deposits with financial institutions and a
body corporate comprise:
in Rs.
-------------------------------------------------------------------------------------------------------------------------
2001 2000
-------------------------------------------------------------------------------------------------------------------------
Deposits with financial institutions:
Housing Development Finance Corporation Limited 50,87,03,015 25,50,19,994
ICICI Limited 50,87,01,373 25,75,52,742
IDBI Limited 40,35,30,424 --
Deposits with body corporate:
G E Capital Services India Limited 50,58,17,345 25,32,29,129
-------------------------------------------------------------------------------------------------------------------------
192,67,52,157 76,58,01,865
-------------------------------------------------------------------------------------------------------------------------
The above amounts include interest accrued but not due amounting to Rs.
2,67,52,157 (previous year - s. 1,58,01,863).
The financial institutions and the body corporate have superior credit
ratings from a premier credit rating agency in the country.
Mr. Deepak M. Satwalekar, Director, is also director of HDFC. Mr. N. R.
Narayana Murthy, Chairman and CEO, and Prof. Marti G. Subrahmanyam,
Director, are also directors in ICICI Limited. Except as directors in these
financial institutions, these persons have no direct interest in these
transactions.
13.2.20 Current liabilities
Sundry creditors for other liabilities represent mainly the retention
amounts payable to the vendors, and amounts accrued for various other
operational expenses.
13.2.21 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 agreements.
These amounts are disclosed as Land - lease-hold under Fixed assets in the
financial statements.
13.2.22 Transfer of intellectual property rights
During the year, the company transferred its intellectual property rights
in Onscan-a web-focused wireless-enabled notification product, to OnMobile
Systems Inc. (formerly Onscan Inc.), USA, a company incubated by Infosys as
part of its ongoing effort to encourage and promote budding entrepreneurs
among its employees. The product was transferred for a gross consideration
of Rs. 8,93,40,000 (US$ 2 million), received as equity, preferred voting
and preferred non-voting securities in OnMobile Systems Inc. The income
arising out of the transfer of Rs. 5,49,44,000 (net of tax) is disclosed as
an extraordinary item.
13.2.23 Investments
PurpleYogi Inc., USA
During the year, the company made a strategic investment of Rs. 2,33,34,992
comprising 2,76,243 fully paid Series D Convertible Preferred Stock, par
value of US$ 0.001 each, at US$ 1.81 each in PurpleYogi Inc., USA.
PurpleYogi Inc. is a developer of infrastructure software for information
management, related to empowering networks to enable next generation
content management and enterprise knowledge management solutions.
M-Commerce Ventures Pte. Ltd., Singapore
The company has a commitment to invest an aggregate amount of Singapore $
("S$") 1,000,000 in M-Commerce Ventures Pte Ltd ("MCV"), a Singapore based
venture fund. As at December 31, 2000, the company had made an investment
of Rs. 1,84,47,700 (equivalent to S$ 700,000), and acquired 70 capital
units in MCV. Each unit in MCV represents one ordinary share of S$ 1 each,
issued at par, and nine redeemable preference shares at a par value of S$ 1
each, with a premium of S$ 1,110 per redeemable preference share. MCV is
promoted by the Economic Development Board, Singapore and intends to focus
on companies offering mobile portals, personal information management and
messaging, bandwidth optimization and other key enablers of m-commerce.
EC Cubed Inc., USA
During the year, EC Cubed Inc., USA ("EC Cubed"), one of the companies in
which Infosys had made a strategic investment, filed for liquidation.
Pending the conclusion of liquidation proceedings, the company has provided
for the entire investment, amounting to Rs. 13,08,00,000 in its profit and
loss account.
Alpha Thinx Mobile Phone Services AG, Austria
During the year, the company invested Rs. 2,20,98,608 (equivalent to <128>
555,800) and acquired 27,790 bearer shares of nominal value <128> 1 each,
at an issue price of <128> 20 per share in Alpha Thinx Mobile Phone
Services AG ("Alpha Thinx"), a Vienna-based company. Due to adverse market
conditions and non-availability of additional funding, the company filed
for liquidation. Pending the conclusion of liquidation proceedings, the
company has provided for the entire investment, amounting to Rs.
2,20,98,608, in its profit and loss account.
Asia Net Media BVI Ltd., the British Virgin Islands
During the year, the company invested Rs. 6,84,75,000 (equivalent to US$
1,500,000) and acquired 3,00,00,000 Ordinary Shares of par value US$ 0.01
each, at an issue price of US$ 0.05 per Ordinary Share in Asia Net Media
BVI Limited ("Asia Net"). Asia Net intends to leverage under-exploited
offline brands in media and entertainment by delivering them through online
channels, and to establish a synergistic network of companies in this
space.
CiDRA Corporation, USA
During the year, the company made a strategic investment of Rs.
13,40,08,660 comprising 33,333 fully paid Series D Convertible Preferred
Stock, par value of US$ 0.01 each, at US$ 90 each in CiDRA Corporation,
USA. CiDRA
Corporation is a developer of photonic devices for high-precision
wavelength management and control for next-generation optical networks.
13.2.24 Segment reporting
The company's operations predominantly relate to providing IT services,
delivered to customers globally operating in various industry segments.
Accordingly, IT service 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 consistently applied to record revenue and
expenditure in individual segments, are as set out in the note of
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
retailing industries; and others such as utilities, transportation and
logistics companies.
Revenue and direct expenses in relation to segments are 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.
Management 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 adjusted only against the total
income of the company.
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. Management believes
that it is currently not practicable to provide segment disclosures
relating to total assets and liabilities since a meaningful segregation of
the available data is onerous.
Customer relationships are driven based on the location of the respective
clients. 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.
13.2.25 Related party transactions
The company entered into related party transactions during the year with
Yantra Corporation, USA, the subsidiary of the company and key management
personnel.
The transactions with Yantra comprise sales of Rs. 19,64,85,967 during the
year ended March 31, 2001 (previous year - Rs. 11,40,18,373). The
outstanding dues from the subsidiary are as set out in schedule 5, Sundry
debtors, to the financial statements.
Key management personnel are non-director officers of the company, who have
the authority and responsibility for planning, directing and controlling
the activities of the company. The loans and advances receivable from
non-director officers is stated in schedule 7, Loans and advances, to the
financial statements.
13.2.26 Provisions for doubtful debts
Periodically, management evaluates all customer dues to the company for
collectibility. The need for provisions is assessed based on various
factors including collectibility 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. For the year
ended March 31, 2001, the company has provided for doubtful debts of Rs.
8,55,48,753 (previous year Rs. Nil) on dues from certain customers although
the outstanding amounts were less than 180 days old, since the amounts were
considered doubtful of recovery. Management continues pursuing the parties
for recovery of the dues, in part or full.
13.2.27 Dividends remitted in foreign currencies
The company remits dividends in foreign currency only in respect of the
holders of American Depository Shares ("ADS holders") to the depositary
bank in Indian rupees. The depositary bank is the sole registered
shareholder on record for all owners of the company's ADSs. Particulars of
dividends remitted are as follows:
--------------------------------------------------------------------------------------------------------------
Particulars Number of shares to which Year ended March 31,
the dividends relate 2001 2000
Amount (Rs.) Amount (Rs.)
--------------------------------------------------------------------------------------------------------------
Final dividend for fiscal 1999 10,35,000 - 62,10,000
Interim dividend for fiscal 2000 10,35,000 - 31,05,000
Final dividend for fiscal 2000 20,81,900 62,11,810 -
Interim dividend for fiscal 2001 20,82,567 52,06,417 -
--------------------------------------------------------------------------------------------------------------
1,14,18,227 93,15,000
--------------------------------------------------------------------------------------------------------------
Industry segments
Year ended March 31, 2001 in Rs.
- ----------------------------------------------------------------------------------------------------------------------------------
Financial services Manufacturing Telecom Retail Others Total
- ----------------------------------------------------------------------------------------------------------------------------------
Revenues 640,77,55,042 338,84,20,263 350,11,16,331 172,86,39,345 397,97,27,826 1900,56,58,807
Identifiable operating expenses 225,87,90,591 130,66,14,108 88,39,38,378 54,74,24,303 120,92,12,385 620,59,79,765
Allocated expenses 177,68,81,844 90,69,15,538 93,89,68,074 46,30,82,749 106,54,09,651 515,12,57,856
- ----------------------------------------------------------------------------------------------------------------------------------
Segmental operating income 237,20,82,607 117,48,90,617 167,82,09,879 71,81,32,293 170,51,05,790 764,84,21,186
Unallocable expenses 128,18,43,760
Operating income 636,65,77,426
Other income (expense), net 59,37,14,915
Net profit before taxes 696,02,92,341
Income taxes 72,71,00,000
- ----------------------------------------------------------------------------------------------------------------------------------
Net profit after taxes 623,31,92,341
- ----------------------------------------------------------------------------------------------------------------------------------
Year ended March 31, 2000 in Rs.
- ----------------------------------------------------------------------------------------------------------------------------------
Financial services Manufacturing Telecom Retail Others Total
- ----------------------------------------------------------------------------------------------------------------------------------
Revenues 265,30,85,370 202,83,52,254 135,55,15,518 93,73,76,882 184,89,06,949 882,32,36,973
Identifiable operating expenses 101,19,71,503 75,67,92,632 40,28,62,023 27,76,93,104 66,64,12,833 311,57,32,095
Allocated expenses 69,37,68,066 50,86,57,287 34,03,02,435 23,63,91,743 46,26,83,234 224,18,02,765
- ----------------------------------------------------------------------------------------------------------------------------------
Segmental operating income 94,73,45,801 76,29,02,335 61,23,51,060 42,32,92,035 71,98,10,882 346,57,02,113
Unallocable expenses 60,06,27,389
Operating income 286,50,74,724
Other income (expense), net 39,14,11,095
Net profit before taxes 325,64,85,819
Income taxes 39,70,00,000
- ----------------------------------------------------------------------------------------------------------------------------------
Net profit after taxes 285,94,85,819
- ----------------------------------------------------------------------------------------------------------------------------------
Geographic segments
Year ended March 31, 2001 in Rs.
- ------------------------------------------------------------------------------------------------------------------------------
North America Europe India Rest of the World Total
- ------------------------------------------------------------------------------------------------------------------------------
Revenues 1396,90,84,594 358,05,91,607 26,53,92,386 119,05,90,220 1900,56,58,807
Identifiable operating expenses 443,71,64,129 125,44,88,260 8,95,83,246 42,47,44,130 620,59,79,765
Allocated expenses 377,03,71,740 96,78,27,796 8,59,85,652 32,70,72,668 515,12,57,856
- -------------------------------------------------- --------------------------------------------------------------------------
Segmental operating income 576,15,48,725 135,82,75,551 8,98,23,488 43,87,73,422 764,84,21,186
Unallocable expenses 128,18,43,760
Operating income 636,65,77,426
Other income (expense), net 59,37,14,915
Net profit before taxes 696,02,92,341
Income taxes 72,71,00,000
- ------------------------------------------------------------------------------------------------------------------------------
Net profit after taxes 623,31,92,341
- ------------------------------------------------------------------------------------------------------------------------------
Year ended March 31, 2000 in Rs.
- ------------------------------------------------------------------------------------------------------------------------------
North America Europe India Rest of the World Total
- ------------------------------------------------------------------------------------------------------------------------------
Revenues 688,38,28,204 130,36,56,209 12,62,56,042 50,94,96,518 882,32,36,973
Identifiable operating expenses 233,90,25,514 54,42,04,124 3,92,29,204 19,32,73,253 311,57,32,095
Allocated expenses 173,76,61,289 33,01,22,096 4,52,76,088 12,87,43,292 224,18,02,765
- ------------------------------------------------------------------------------------------------------------------------------
Segmental operating income 280,71,41,401 42,93,29,989 4,17,50,750 18,74,79,973 346,57,02,113
Unallocable expenses 60,06,27,389
Operating income 286,50,74,724
Other income (expense), net 39,14,11,095
Net profit before taxes 325,64,85,819
Income taxes 39,70,00,000
Net profit after taxes 285,94,85,819
- ------------------------------------------------------------------------------------------------------------------------------
13.2.28 Reconciliation of basic and diluted shares used in computing earnings
per share
- ------------------------------------------------------------------------------------------------------------------------------
Particulars Year ended March 31,
2001 2000
- ------------------------------------------------------------------------------------------------------------------------------
Number of shares considered as basic weighted average shares outstanding 6,61,52,131 6,61,39,372
Add: Effect of dilutive issues of shares/stock options 2,06,180 18,447
Number of shares considered as weighted average shares
and potential shares outstanding 6,63,58,311 6,61,57,819
- ------------------------------------------------------------------------------------------------------------------------------
13.2.29 Pro-forma disclosures relating to deferred income taxes
The pro-forma amounts based on the following proposed accounting policy in
conformity with the referred exposure draft issued by the ICAI relating to
accounting for income taxes is given below.
Income taxes are computed using the tax effect accounting method, where
taxes are accrued in the same period the related revenue and expenses
arise. The differences that result between the profit offered 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 being considered. The tax effect is calculated on the accumulated
timing differences at the end of an accounting period based on prevailing
enacted regulations. Deferred tax assets are recognized only if there is
reasonable certainty that they will be realized and are reviewed for the
appropriateness of their respective carrying values at each balance sheet
date.
Deferred tax assets:
in Rs.
-------------------------------------------------------------------------------------------------------------------------
2001 2000
-------------------------------------------------------------------------------------------------------------------------
Fixed assets 7,07,25,385 11,55,09,912
Investments 7,44,36,031 -
Others 1,01,42,724 39,75,433
-------------------------------------------------------------------------------------------------------------------------
15,53,04,140 11,94,85,345
=========================================================================================================================
Net profit after tax:
in Rs.
-------------------------------------------------------------------------------------------------------------------------
2001 2000
-------------------------------------------------------------------------------------------------------------------------
As reported 628,81,36,341 293,51,56,665
Adjusted pro-forma 632,39,55,136 297,20,17,263
-------------------------------------------------------------------------------------------------------------------------
When the exposure draft is formally issued by the ICAI and adopted by the
company, the cumulative charge or benefit of deferred taxes until April 1,
2001, the effective date of the standard's adoption by the company, will be
recorded as an appropriation to accumulated profits, currently estimated by
management at Rs. 15,53,04,140, while the deferred tax charge or benefit
for the periods commencing from April 1, 2001 will be recorded as a part of
the income tax charge on net profits.
Attachment to the Balance Sheet as per Section 212 of the Companies Act, 1956
- --------------------------------------------------------------------------------------------------------------------
Consolidated Balance Sheets of Yantra Corporation as at March 31,
in `000s
2001 2000
------------------------ -------------------------
USD Rs. USD Rs.
---------- ------------ --------- --------------
ASSETS
Current assets:
Cash and cash equivalents 30,935 144,03,33 16,844 73,43,98
Marketable securities 10,739 50,00,08 - -
Accounts receivable, net of allowances for doubtful 2,475 11,52,36 2,805 12,22,98
accounts of $335 and $295 at March 31, 2001 and 2000
Prepaid expenses and other current assets 932 4,33,94 415 1,80,94
---------- ----------- --------- ----------
Total current assets 45,081 209,89,71 20,064 87,47,90
Property and equipment, net 5,455 25,39,85 2,539 11,07,01
Other long-term assets 950 4,42,32 285 1,24,26
---------- ------------ --------- ----------
Total assets 51,486 239,71,88 22,888 99,79,17
========== ============ ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations 1,977 9,20,49 987 4,30,33
Accounts payable 949 4,41,85 1,388 6,05,17
Accrued expenses 3,660 17,04,10 2,836 12,36,50
Deferred revenue 2,801 13,04,15 3,181 13,86,91
---------- ------------ --------- ----------
Total current liabilities 9,387 43,70,59 8,392 36,58,91
---------- ------------ --------- ----------
Long-term obligations, excluding current portion 1,507 7,01,66 3,650 15,91,40
---------- ----------- --------- ----------
Total liabilities 10,894 50,72,25 12,042 52,50,31
---------- ----------- --------- ----------
Stockholders' equity:
Redeemable convertible preferred stock, $0.01 par value;
32,809,864 and 22,717,708 shares authorized;
30,119,744 and 20,517,241 shares issued and
outstanding at March 31, 2001 and 2000 79,200 368,75,52 26,991 117,68,08
Common stock, $0.01 par value; 75,000,000 and
50,000,000 shares authorized; 10,989,744 and
10,080,100 shares issued and outstanding at
March 31, 2001 and 2000 110 51,22 101 44,04
Additional paid-in capital 3,343 15,56,50 2,722 11,86,79
Notes receivable from stockholders (653) (3,04,04) (816) (3,55,78)
Accumulated other comprehensive loss (35) (16,30) - -
Accumulated deficit (41,373) (192,63,27) (18,152) (79,14,27)
---------- ----------- --------- ----------
Total stockholders' equity 40,592 188,99,63 10,846 47,28,86
---------- ----------- --------- ----------
Total liabilities and stockholders' equity 51,486 239,71,88 22,888 99,79,17
========== =========== ========= ==========
1. The audited balance sheets of Yantra Corporation are in U.S. dollars and as
per US GAAP and, are translated into Indian Rupees at the closing exchange
rates on March 31, 2001 and 2000, of US$ 1 = Rs. 46.56 and US$ 1 = Rs.
43.60, respectively.
2. The Department of Company Affairs, Government of India, has granted
exemption from the reporting requirements of Section 212 of the Companies
Act, 1956, except in the case of the above balance sheets of Yantra
Corporation.
Management's discussion and analysis of financial condition and
results of operations
- --------------------------------------------------------------------------------
Overview
The financial statements have been prepared in compliance with the requirements
of the Companies Act, 1956, and Generally Accepted Accounting Principles (GAAP)
in India. There are no material departures from prescribed accounting standards
in the adoption of the accounting standards. The management of Infosys accepts
responsibility for the integrity and objectivity of these financial statements,
as well as for various estimates and judgements used therein. The estimates and
judgments relating to the financial statements have been made on a prudent and
reasonable basis, in order that the financial statements reflect in a true and
fair manner, the form and substance of transactions, and reasonably present the
company's state of affairs and profits for the year.
A. Financial condition
1. Share capital
- ------------------------------------------------------------------------------------------------------------------------------
Year ended March 31, 2001 2000
Number Rs. Number Rs.
--------------------------------------------------------------------------------------------------------------------------
Opening balance at the beginning of the fiscal year 6,61,50,700 33,07,53,500 3,30,69,400 33,06,94,000
Effect of stock split in February 2000 - - 3,30,69,400 -
Shares issued during the year upon
conversion of :
- options issued under 1998 plan 6,217 31,085 11,900 59,500
- options issued under 1999 plan 1,200 6,000 - -
Closing balance at the end of the fiscal year 6,61,58,117 33,07,90,585 6,61,50,700 33,07,53,500
Add: Forfeited shares - 1,500 - 1,500
--------------------------------------------------------------------------------------------------------------------------
Total 6,61,58,117 33,07,92,085 6,61,50,700 33,07,55,000
--------------------------------------------------------------------------------------------------------------------------
At present, the company has only one class of shares. In February 2000, the
company subdivided its equity share of par value Rs. 10 each into two
equity shares of par value of Rs. 5 each and the same was approved by the
shareholders at the Extraordinary General Meeting held in December 1999.
Due to this, the issued, subscribed and outstanding shares increased from
3,30,69,400 shares of par value of Rs. 10 each to 6,61,38,800 shares of par
value of Rs. 5 each. The authorized share capital of the company increased
from 5,00,00,000 equity shares of Rs. 10 par value per share to
10,00,00,000 equity shares of Rs. 5 par value per share.
During the year, 20 employees exercised 12,434 ADSs (equivalent to 6,217
equity shares of par value of Rs. 5 each) issued under the 1998 Stock
Option Plan. Also, during the year, 22 employees exercised 1,200 equity
shares issued under the 1999 Stock Option Plan. Consequently, the issued,
subscribed and outstanding shares increased by an additional 7,417 equity
shares. In comparison, during the previous year, 17 employees exercised
23,800 ADSs (equivalent to 11,900 equity shares of par value of Rs. 5 each)
issued under the 1998 Stock Option Plan leading to an increase in issued,
subscribed and outstanding shares by an additional 11,900 equity shares.
2. Reserves and surplus
The addition to the share premium account of Rs. 2,37,48,821 during the
year is due to the premium received on issue of 7,417 equity shares of par
value of Rs. 5 each on exercise of options issued under the 1998 and 1999
Stock Option Plans. During the previous year, an amount of Rs. 1,75,65,777
was added to the share premium account on account of premium received on
issue of 11,900 equity shares of par value of Rs. 5 each (equivalent to
23,800 ADSs) on exercise of options issued under the 1998 Stock Option Plan
at an exercise price of $ 17 per ADS (adjusted for the stock split of 2:1).
The reduction in the share premium of Rs. 2,35,06,514 during the previous
year relates to expenses incurred on issue of ADSs in March 1999. The total
cost related to the issue of American Depositary Shares (ADS) was Rs.
19,68,20,929 (which accounted for 6.65% of the gross issue proceeds) and
the details of the same are given below:
---------------------------------------------------------------------------
Nature of expenses Rs.
---------------------------------------------------------------------------
Travel expenses 35,91,484
India advisor's fees 1,48,43,142
Legal and accounting fees 3,37,04,384
Registration and filing fee 30,86,211
Stamp duty 29,88,150
Underwriters' spread 14,28,61,129
Contribution received from depositary (1,19,57,225)
Printing expenses 77,03,654
---------------------------------------------------------------------------
19,68,20,929
===========================================================================
Also, during the previous year, an amount of Rs. 1,01,93,113 was incurred
in connection with the registration of the ADS linked stock option plan
with the Securities and Exchange Commission, USA and the same was accounted
for as a reduction from the share premium account.
3. Fixed assets
As of March 31 in Rs.
-------------------------------------------------------------------------------------------------------------------------
Particulars 2001 2000 Growth %
-------------------------------------------------------------------------------------------------------------------------
Land - free-hold 9,03,58,977 1,89,83,650 375.98
- lease-hold 27,58,51,790 19,17,69,406 43.85
Buildings 157,70,54,610 58,90,10,239 167.75
Plant and machinery 112,04,63,007 51,75,81,633 116.48
Computer equipment 223,94,47,475 112,23,85,220 99.53
Furniture and fixtures 100,47,51,161 39,92,10,666 151.68
Vehicles 35,17,005 13,64,329 157.78
Total 631,14,44,025 284,03,05,143 122.21
Less: accumulated depreciation 244,13,15,982 133,65,20,594 82.66
Net block 387,01,28,043 150,37,84,549 157.36
Add: capital work-in-progress 170,65,04,250 56,96,03,505 199.60
Net fixed assets 557,66,32,293 207,33,88,054 168.96
Depreciation as a % of total revenues 5.76% 5.78%
Accumulated depreciation as a % of gross block 38.68% 47.05%
-------------------------------------------------------------------------------------------------------------------------
During the year, the company added Rs. 349,66,44,427 to its gross block of
assets, including investment in technology assets of Rs. 113,83,99,209. The
company also invested Rs. 15,54,57,711 on acquisition of land at Bangalore,
Chennai, Pune, Bhubaneswar, Mangalore and Mysore, all in India, for
creating software development infrastructure. During the year, the company
operationalized new software development centers at Bangalore, Chennai,
Pune, Bhubaneshwar and Mangalore, and consequently the investment in
buildings increased by Rs. 98,80,44,371. Due to all these new centers being
operationalized during the year, technology assets, plant and machinery,
and furniture and fixtures increased by Rs. 113,83,99,209, Rs. 60,64,52,428
and Rs. 60,60,03,206 respectively. As of March 31, 2001, the company had
16,65,800 sq.ft. of space capable of accommodating 10,100 professionals and
19,08,200 sq.ft. under construction, which includes 1,50,000 sq.ft. of
space for Infosys Leadership Institute which is coming up in Mysore, India.
During the previous year, the company added Rs. 117,79,35,912 to its gross
block, including investment in technology assets of Rs. 37,46,60,063.
The capital work-in-progress as at March 31, 2001 and 2000 represents
advances paid towards acquisition of fixed assets, and the cost of assets
not put to use.
During the year, the company donated 371 computer systems costing Rs.
2,05,09,882 (book value Rs.4) to certain educational institutions and the
same is disclosed under the heading Deductions during the year, under both
Gross block and Depreciation. The corresponding amount for the previous
year was Rs. 1,80,89,383 (book value Nil).
The company has a capital commitment of Rs. 1,58,25,35,171 as of March 31,
2001, as compared to Rs. 80,31,29,007 as of March 31, 2000. The company
believes that it will be able to fund its expansion plans from internal
accruals and liquid assets. The company may also take recourse to
borrowings to meet its capital expenditure, should it be deemed necessary.
4. Investments
4.1 Yantra Corporation
-------------------------------------------------------------------------------------------------------------------------
Sl. Particulars Year of Investment Investment
No investment in $ in Rs.
-------------------------------------------------------------------------------------------------------------------------
1. Investment by way of cash remittance towards issue March 31, 1996 500,000 1,73,51,600
of 25,00,000 shares of common stock at $ 0.20 per share,
par value of $ 0.01 per share
2. Investment by way of transfer of product "EAGLE" March 31, 1997 1,000,000 3,59,00,000
for a consideration of 50,00,000 shares of common stock
at $ 0.20 per share, par value of $ 0.01 per share
3. Investment by way of cash remittance towards issue March 31, 1998 1,500,000 5,45,10,000
of 20,00,000 shares of convertible preferred stock at $ 0.75
per share, par value of $ 0.01 per share
4. Sale of 13,63,637 shares of convertible preferred stock March 31, 1999 (1,022,728) (3,71,65,926)
at $ 1.10 per share, par value of $ 0.01 per share
5. Provision for investments March 31, 1999 (1,977,272) (7,05,95,674)
6. Balance as on March 31, 2001 - -
- ------------------------------------------------------------------------------------------------------------------------------
On June 14, 1999, Yantra issued Series C Preferred stock amounting to $15.0
million to various unrelated existing and new investors, thereby reducing
Infosys' economic interest in Yantra to approximately 25% on a fully
diluted basis. In July 2000, Yantra issued Series D Convertible Preferred
Stock amounting to $ 49 million, to unrelated existing and new investors,
further reducing Infosys' economic interest in Yantra to approximately 16%.
Mr. S. Gopalakrishnan, Deputy Managing Director of Infosys is a member on
the board of Yantra Corporation as of March 31, 2001. Mr. Phaneesh Murthy,
member of the board of Infosys, holds 74,992 shares in Yantra Corporation.
These shares were issued at a price of $ 0.10 each.
4.2 EC Cubed Inc.
During the previous year, an investment of $ 3,000,000 (Rs. 13,08,00,000)
was made towards the issue of 13,00,108 shares of Series D Convertible
Preferred Stock of par value of $ 0.0001 each of EC Cubed Inc. EC Cubed was
founded in 1996 and was engaged in the development and delivery of B2B e-
commerce solutions. It was ranked as one of the "Top 100 emerging companies
to watch in 2000" by ComputerWorld. Infosys was a strategic IT partner to
EC Cubed and participated in its fourth round of funding along with leading
venture capitalists. Adverse market conditions resulted in EC Cubed being
unable to raise further capital, forcing its liquidation. Pending the
conclusion of liquidation proceedings, the company has provided for the
entire amount of the investment amounting to Rs. 13,08,00,000.
Infosys' cumulative billings from EC Cubed Inc. aggregated Rs.23,02,19,800
($ 5,166,944) and the amount due was Rs. 4,66,91,951 ($ 1,002,834), which
was provided for in full during the year.
4.3 Alpha Thinx Mobile Phone Services AG.
During the current year, an investment of (Euro) 555,800 (Rs. 2,20,98,608)
was made towards the issue of 27,790 bearer shares at (Euro) 20 each, fully
paid, par value being (Euro) 1 each, in Alpha Thinx Mobile Phone Services
AG ("Alpha Thinx") - a Vienna-based company operating in the wireless
Internet space. Adverse market conditions resulted in Alpha Thinx being
unable to raise further capital and thus forced its liquidation. Pending
the conclusion of liquidation proceedings, the company has provided for the
entire amount of the investment amounting to Rs. 2,20,98,608.
Infosys' cumulative billings from Alpha Thinx aggregated Rs.6,58,32,093 ($
1,437,532) and the amount due was Rs. 1,48,99,200 ($ 320,000), which was
provided for in full during the year.
4.4 Asia Net Media (BVI) Limited
During the current year, Infosys invested an amount of $ 1,500,000 (Rs.
6,84,75,000) in Asia Net Media BVI Limited ("Asia Net") towards issue of
3,00,00,000 ordinary shares of par value $ 0.01 each, at an issue price of
$ 0.05 per ordinary share. Asia Net intends to leverage under-exploited
offline brands in media and entertainment by delivering them through online
channels and to establish a synergistic network of companies in this space.
Infosys' cumulative billings from Billboard Live International (BLI), in
which Asia Net Media holds 37% through a fully-owned subsidiary, aggregated
Rs.5,31,72,528 ($ 1,189,701) and, as of March 31, 2001, the amount due was
Rs. 1,87,17,120 ($ 402,000).
Mr. Ramesh Vangal, a non-executive director of Infosys, is a member on the
board of Asia Net Media.
4.5 CiDRA Corporation
During the current year, Infosys invested an amount of $ 2,999,970 (Rs.
13,40,08,660) in CiDRA Corporation, USA towards issue of 33,333 fully paid
Series D Convertible Preferred Stock, par value of $ 0.01 each, at $ 90 per
share. CiDRA is a developer of photonic devices for high-precision
wavelength management and control for next-generation optical networks.
Infosys' cumulative billings from CiDRA aggregated Rs. 9,74,35,821
($ 2,138,052) and, as of March 31, 2001, the amount due was Rs. 44,61,379
($ 95,820).
4.6 JASDIC Park Company
Infosys has invested an amount of Yen 24 million (Rs. 75,38,109) towards
the issue of 480 shares of JASDIC Park Company thereby holding a 12.5%
equity stake in it. JASDIC is an Indo-Japanese consortium founded by Mr.
Kenichi Ohmae, a well-known management strategist, along with a few
Japanese companies and three Indian companies including Infosys. The aim of
JASDIC is to provide high-quality software services from India for the
Japanese market. This is in line with Infosys' strategy to diversify its
geographic client base.
Infosys' cumulative billings from JASDIC aggregated Rs.44,74,19,122 ($
10,118,993) and, as of March 31, 2001, the amount due was Rs. 4,64,99,841
($ 998,708).
4.7 M-Commerce Ventures Pte. Ltd
During the current year, Infosys invested an amount of S $ 700,000 (Rs.
1,84,47,700) in M-Commerce Ventures Pte. Ltd., Singapore (MCV), towards the
issue of 70 capital units. Each capital unit represents one ordinary share
of S$ 1 each, issued at par, and nine redeemable preference shares at a par
value S $ 1 each, with a premium of S $ 1,110 per redeemable preference
share. MCV is promoted by the Economic Development Board, Singapore and
intends to focus on companies offering mobile portals, personal information
management and messaging, bandwidth optimization and other key enablers of
m-commerce.
MCV is an incubation fund in the m-commerce space and Infosys has committed
to invest an aggregate amount of S$ 1,000,000 in the fund. As of March 31,
2001, Infosys has an investment of S $ 700,000 in MCV. MCV has agreed to
position Infosys as a preferred technology partner to its investee
companies.
Mr. Philip Yeo, a non-executive director of Infosys, is the chairman of the
board of directors of EDB Investments Pte Ltd (EDBI). EDBI is the fund
manager of M-Commerce Ventures Pte Ltd.
4.8 OnMobile Systems Inc.
During the current year, Infosys invested an amount of $ 2,000,000 (Rs.
8,93,40,000) in OnMobile Systems Inc. (formerly Onscan Inc.) towards the
issue of 1,00,000 common stock at $ 0.4348 each, fully paid, par value $
0.001 each; 1,00,000 Series A Voting Convertible Preferred Stock at $
0.4348 each, fully paid, par value $ 0.001 each; and 44,00,000 series A
Non-voting Convertible Preferred Stock at $ 0.4348 each, fully paid, par
value $ 0.001 each.
OnMobile Systems Inc. was incubated by Infosys and the investment was made
in the form of transfer of intellectual property rights in Onscan - a web-
focussed wireless-enabled notification product. The income arising out of
the transfer of the product, amounting to Rs. 5,49,44,000 (net of tax), is
disclosed as an extraordinary item in the profit and loss account.
Infosys' cumulative billings from OnMobile Systems Inc. aggregated
Rs.13,84,30,739 ($ 2,993,399) and, as of March 31, 2001, the amount due was
Rs. 1,94,30,745 ($ 417,327).
Mr. S.D. Shibulal, a director of Infosys, is the chairman of the board of
OnMobile Systems Inc.
Mr. S. Gopalakrishnan and Mr. S.D. Shibulal, members of the board of
Infosys hold 200,000 and 500,000 shares, respectively, in OnMobile Systems
Inc., acquired at a price of $ 0.0435 per share. Mr. V. Balakrishnan,
Associate Vice President - Finance and Company Secretary, Infosys, holds
100,000 stock options in OnMobile Systems Inc. granted at an exercise price
of $ 0.0435 per option.
4.9 PurpleYogi Inc.
During the current year, Infosys invested an amount of $ 500,000 (Rs.
2,33,34,992) in PurpleYogi Inc. towards the issue of 2,76,243 fully paid
Series D Convertible Preferred Stock, par value of $ 0.001 each, at $ 1.81
per share. PurpleYogi is a developer of infrastructure software for
information networks that enables intelligent content management and
efficient enterprise-wide knowledge management.
4.10 Other investments
Infosys has invested Rs. 10 and Rs. 10,350 respectively in Software
Services Support Education Center Limited and The Saraswat Co-operative
Bank Limited, respectively.
5. Sundry debtors
Sundry debtors amount to Rs. 3,02,37,02,417 (net of provision for doubtful
debts amounting to Rs. 18,17,23,491) as at March 31, 2001, as compared with
Rs. 1,36,17,81,253 (net of provision for doubtful debts amounting to Rs.
2,21,26,448) as at March 31, 2000. These debtors are considered good and
realizable. The need for provisions is assessed based on various factors
including collectibility of specific dues, risk perceptions of the industry
in which the customer operates and general economic factors which could
affect the customer's ability to settle. Provisions are generally made for
all debtors outstanding for more than 180 days as also for others depending
on the management's perception of the risk. Debtors account 15.91% of total
software revenues for the year ended March 31, 2001, as compared to 15.43%
for the previous year, representing an outstanding of 58 days and 56 days
of software revenues for the respective years. The age profile is as given
below:
As of March 31
--------------------------------------------------------------------------
Period in days 2001 2000
--------------------------------------------------------------------------
0 - 30 69.2% 64.7%
31 - 60 26.6% 31.8%
61 - 90 1.7% 1.8%
More than 90 2.5% 1.7%
--------------------------------------------------------------------------
100.0% 100.0%
==========================================================================
The movements in provisions for doubtful debts during the year is as
follows :
in Rs.
--------------------------------------------------------------------------------------------------------------------------
Year ended March 31 2001 2000
--------------------------------------------------------------------------------------------------------------------------
Opening balance 2,21,26,448 1,27,23,349
Add: Amount provided during the year 19,27,45,549 94,03,099
Less: Amounts written-off during the year 3,31,48,506 -
--------------------------------------------------------------------------------------------------------------------------
Closing balance 18,17,23,491 2,21,26,448
==========================================================================================================================
Provision for bad and doubtful debts and bad debts written off as a
percentage of income were 1.00% and 0.27% in fiscal 2001 and 2000,
respectively.
6. Cash and bank balances
in Rs.
----------------------------------------------------------------------------------------------------------
As of March 31 2001 2000
----------------------------------------------------------------------------------------------------------
Cash balances 96,062 13,17,773
Bank balances in India
current accounts 9,62,49,669 10,16,77,272
deposit accounts 181,88,52,687 22,91,45,764
EEFC deposit accounts in $ 3,17,15,827 25,81,47,267
Bank balances - overseas
current accounts 54,00,67,439 63,39,94,737
deposit accounts 136,36,28,601 309,36,52,917
----------------------------------------------------------------------------------------------------------
Total cash and bank balances 385,06,10,285 431,79,35,730
Add: Deposits with financial institutions / body corporate 192,67,52,157 76,58,01,865
----------------------------------------------------------------------------------------------------------
Total cash and cash equivalents 577,73,62,442 508,37,37,595
==========================================================================================================
Cash and cash equivalents as a % of total assets 41.6% 61.0%
Cash and cash equivalents as a % of revenues 29.5% 55.2%
----------------------------------------------------------------------------------------------------------
The bank balances in India include both rupee accounts and foreign currency
accounts. They also include Rs. 48,15,163 and Rs. 28,72,035 in the
unclaimed dividend account for the years ended March 31, 2001 and 2000. The
deposit account represents deposits for short tenures.
The details of such deposits are as under:
in Rs.
---------------------------------------------------------------------
As of March 31 2001 2000
---------------------------------------------------------------------
Deutsche Bank 50,44,30,381 -
The Bank of Nova Scotia 5,16,03,579 -
Standard Chartered Bank 50,22,19,043 -
UTI Bank Limited 5,42,13,915 4,99,06,350
Citibank NA 50,62,80,563 -
Bank of America 20,01,05,206 -
State Bank of Mysore - 4,65,000
State Bank of India - 3,86,902
ICICI Bank Limited - 12,72,23,128
IDBI Bank Limited - 5,11,64,384
---------------------------------------------------------------------
Total 181,88,52,687 22,91,45,764
=====================================================================
The bank balances in overseas deposit accounts represents deposit
maintained with State Bank of India, Nassau, New York. The bank balances in
overseas current accounts are maintained to meet the expenditure of the
overseas branches in USA and other countries, and to meet project-related
expenditure overseas.
7. Loans and advances
Advances are primarily towards amounts paid in advance for value and
services to be received in future. The costs in excess of billings
represent project costs in the nature of salaries, travel and other
expenses incurred on fixed-price contracts, where milestones are yet to be
reached, as of March 31, 2001. Advance income tax represents payments made
towards tax liability for the years ended March 31, 2001 and 2000, and also
refunds due for the previous years. The company's liability towards income
tax is fully provided for. The details of advance income tax are given
below:
in Rs.
----------------------------------------------------------------------
As of March 31 2001 2000
----------------------------------------------------------------------
Domestic tax 43,56,16,548 15,75,31,957
Overseas tax 80,17,81,244 38,65,64,396
----------------------------------------------------------------------
Total 123,73,97,792 54,40,96,353
======================================================================
Deposits with financial institution and body corporate represents surplus
money deployed in the form of short-term deposits. The details of such
deposits are as under:
in Rs.
-----------------------------------------------------------------------------------------------------------
As of March 31 2001 2000
===========================================================================================================
Housing Development Finance Corporation Limited 50,87,03,015 25,50,19,994
GE Capital Services India 50,58,17,345 25,32,29,129
ICICI Limited 50,87,01,373 25,75,52,742
IDBI Limited 40,35,30,424 -
-----------------------------------------------------------------------------------------------------------
Total 192,67,52,157 76,58,01,865
===========================================================================================================
The company's treasury policy calls for investing only with highly-rated
companies for short maturities with a limit on investments in individual
companies.
Loans to employees are made to enable the purchase of assets by
employees and to meet any emergency requirements. These increased
significantly during the year, due to an increase in the number of
employees availing such loans. The details of these loans are given below:
in Rs.
--------------------------------------------------------------------
As of March 31 2001 2000
--------------------------------------------------------------------
Housing loan 25,85,17,558 22,27,03,635
Soft loan 10,14,62,528 6,57,41,196
Vehicle loan 12,47,47,042 8,51,56,036
Marriage loan 1,23,77,422 85,86,459
Other loans 74,79,378 52,47,500
--------------------------------------------------------------------
Total 50,45,83,928 38,74,34,826
====================================================================
Other advances represent electricity deposits, telephone deposits,
insurance deposits and advances of a similar nature. The rent and
maintenance deposits are towards buildings taken on lease by the company
for its software development centers in various cities. It also includes
the deposits paid by the company to house its staff which is Rs.
2,55,08,400 for the current year as compared to Rs. 1,17,01,275 for the
previous year.
8. Current liabilities
Sundry creditors for goods represent the amount payable to vendors for the
supply of goods. Sundry creditors for accrued salaries and benefits include
the provision for bonus payable to the staff, and towards the company's
liability for leave encashment valued on an actuarial basis. The details of
the same are given below:
in Rs.
-----------------------------------------------------------------------------------------------------------
As of March 31 2001 2000
-----------------------------------------------------------------------------------------------------------
Accrued salaries payable 3,80,31,047 1,47,24,431
Accrued bonus payable to employees 34,43,68,845 8,57,89,374
Leave provision - as per actuarial valuation 18,97,50,132 12,37,93,244
Others 20,68,344 1,44,242
----------------------------------------------------------------------------------------------------------
Total 57,42,18,368 22,44,51,291
==========================================================================================================
Sundry creditors for other liabilities represent amounts accrued for
various other operational expenses. Retention monies represent monies
withheld on contractor payments pending final acceptance of their work. The
withholding and other taxes payable represents tax withheld on benefits
arising out of exercise of stock options issued under the 1998 and 1999
Employee Stock Option Plan, by various employees and also other local taxes
payable in various countries on the services rendered by Infosys. All those
taxes would be paid in due course. Advances received from clients denote
monies received for the delivery of future services. Unclaimed dividends
represent dividend paid, but not encashed by shareholders, and are
represented by a bank balance of equivalent value.
9. Unearned revenue
Unearned revenue as at March 31, 2001 and 2000 consists primarily of
advance client billing on fixed-price, fixed-time-frame contracts for which
related costs were not yet incurred.
10. Provisions
Provisions for taxation represent estimated income tax liabilities, both in
India and abroad. The details are as follows:
in Rs.
------------------------------------------------------------------------
As of March 31 2001 2000
------------------------------------------------------------------------
Domestic tax 41,66,55,296 15,35,19,742
Overseas tax 81,23,56,445 47,25,00,000
------------------------------------------------------------------------
Total 122,90,11,741 62,60,19,742
========================================================================
Tax on dividend denotes taxes payable on final dividend declared for the
years ended March 31, 2001 and 2000. The tax provisions and the
corresponding advance tax payments will be set off upon completion of the
related assessments. Proposed dividend represents the final dividend
recommended to the shareholders by the board of directors, and would be
paid after the Annual General Meeting, upon approval by the shareholders.
The company has been preparing to leverage the opportunities offered by the
e-commerce marketplace, and has taken the necessary steps to do so. This
required that the company incur business restructuring costs towards
creating a knowledge infrastructure, acquiring people with technical skills
in the e-commerce area and e-inventing the company. Accordingly, the
company made a provision of Rs. 3,50,00,000 during the quarter ended
September 30, 1999. An amount of Rs. 3,10,99,023 was incurred towards
e-inventing the company and was set-off against this provision. After this
set-off, a balance of Rs. 39,00,977 remained as a provision for e-inventing
the company as on March 31, 2000. The same was spent fully and set-off
against the provision, during the current year.
The provision for gratuity represented the excess of gratuity liability as
per the actuarial valuation as of March 31, 2000 and the amount funded to
the trust. The same was funded subsequently. The company does not have any
such liability as of March 31, 2001.
B. Results of operations
1. Income
Year ended March 31 in Rs.
-----------------------------------------------------------------------------------------------------------
Particulars 2001 % 2000 % Growth %
-----------------------------------------------------------------------------------------------------------
Software development services and products
Overseas 1874,02,66,421 95.62 869,69,80,931 94.38 115.48
Domestic 26,53,92,386 1.35 12,62,56,042 1.37 110.20
Other income 59,37,14,915 3.03 39,14,11,095 4.25 51.69
-----------------------------------------------------------------------------------------------------------
Total 1959,93,73,722 100.00 921,46,48,068 100.00 112.70
===========================================================================================================
The company's revenues are generated principally on fixed-timeframe or
time-and-material basis. Revenues from services provided on a
time-and-materials basis are recognized in the month that services are
provided and related costs are incurred. Revenues from fixed-timeframe
projects are recognized upon the achievement of specified milestones
identified in the related contracts, in accordance with the percentage of
completion method. The segmentation of software development services and
products is as follows:
Year ended March 31
----------------------------------------------------------------------
Revenues by project type 2001 2000
----------------------------------------------------------------------
Fixed price 28.20% 31.50%
Time and material 71.80% 68.50%
----------------------------------------------------------------------
Total 100.00% 100.00%
======================================================================
The company's revenues are also segmented into onsite and offshore
revenues. Onsite revenues are those services which are performed at client
sites as part of software projects, while offshore services are those
services which are performed at the company's software development centers
located in India. The details of services are given below:
Year ended March 31
-------------------------------------------------------------------
Revenues by location 2001 2000
-------------------------------------------------------------------
Onsite 51.50% 48.50%
Offshore 48.50% 51.50%
-------------------------------------------------------------------
Total 100.00% 100.00%
===================================================================
The services performed onsite typically generate higher revenues
per-capita, but at lower gross margins than the same quantum of services
performed at the company's own facilities. Therefore, any increase in the
onsite effort puts pressure on the margins of the company. The details are
as below:
As of March 31
----------------------------------------------------------------------
Person-months (%) 2001 2000
----------------------------------------------------------------------
Onsite 34.00% 32.50%
Offshore 66.00% 67.50%
----------------------------------------------------------------------
Total 100.00% 100.00%
======================================================================
The growth in software development services and product revenues is due to
an all round growth in various segments of the business mix. The growth is
also mainly due to growth in business volumes and increase in billing
rates. The details of the same is given below:
-----------------------------------------------------------------------------------------------------------
Year ended March 31 2001 2000
-----------------------------------------------------------------------------------------------------------
Income from software development services and products ($ millions)
Onsite 213.03 98.57
Offshore 200.82 104.87
-----------------------------------------------------------------------------------------------------------
Total 413.85 203.44
==========================================================================================================
Person-months (Nos.)
Onsite 19,425 11,583
Offshore 37,676 24,058
Billed-total 57,101 35,641
Non-billable 15,799 9,243
Training 11,828 4,036
----------------------------------------------------------------------------------------------------------
Total software professionals 84,728 48,920
Support 9,691 7,110
----------------------------------------------------------------------------------------------------------
Total for the company 94,419 56,030
==========================================================================================================
Increase in billed person - months
Onsite 7,842 5,244
% change 67.7% 82.7%
Offshore 13,618 5,006
% change 56.6% 26.3%
Total 21,460 10,250
% change 60.2% 40.4%
- ------------------------------------------------------------------------------------------------------------------------------
Increase in income from software development services and products ($
millions)
Volume variance 126.10 59.97
% change 62.0% 49.6%
Price variance 84.31 22.51
% change 41.4% 18.6%
Total variance 210.41 82.48
% change 103.4% 68.2%
- ------------------------------------------------------------------------------------------------------------------------------
Details of geographical and business segmentation of revenues are provided
in the Risk management section in this report.
Other income as a percentage to total income declined from 4.25% in the
previous year to 3.03% in the current year. The reduction is mainly due to
software revenues growing faster than the treasury income. Also, there has
been a reduction in income from sale of special import licenses issued by
the government based on export performance of the company. The average
yield on the deposits earned by the company is given below:
in Rs.
- ------------------------------------------------------------------------------------------------------------------------------
Year ended March 31 2001 2000
- ------------------------------------------------------------------------------------------------------------------------------
Average cash and cash equivalents during the year 543,05,50,019 462,51,64,269
Interest received during the year 37,54,58,594 26,68,79,106
Average yield 6.91% 5.77%
- ------------------------------------------------------------------------------------------------------------------------------
The increase in yield is primarily due to a larger proportion of deposits
with banks and other entities in India.
2. Expenditure
Year ended March 31 in Rs.
- ------------------------------------------------------------------------------------------------------------------------------
Particulars 2001 % 2000 % Growth %
- ------------------------------------------------------------------------------------------------------------------------------
Total revenues 1959,93,73,722 100.00 921,46,48,068 100.00 112.70
Expenditure:
Software development expenses 958,17,66,650 48.89 466,26,84,578 50.60 105.50
Administration and other expenses 177,54,70,971 9.06 69,48,50,282 7.54 155.52
Provision for investments 15,28,98,608 0.78 - - -
Provision for contingencies - - 3,33,00,000 0.36 -
Provision for e-inventing the company - - 3,50,00,000 0.38 -
Total operating expenses 1151,01,36,229 58.73 542,58,34,860 58.88 112.14
Operating profit 808,92,37,493 41.27 378,88,13,208 41.12 113.50
Interest - - - - -
Depreciation 112,89,45,152 5.76 53,23,27,389 5.78 112.08
Profit before tax and extraordinary item 696,02,92,341 35.51 325,64,85,819 35.34 113.74
Provision for tax 72,71,00,000 3.71 39,70,00,000 4.31 83.15
Profit after tax before extraordinary item 623,31,92,341 31.80 285,94,85,819 31.03 117.98
Extraordinary item
- transfer of intellecutal property right
(net of tax) 5,49,44,000 0.28 - - -
- provision no longer required - - 7,56,70,846 0.82 -
Net profit after tax and extraordinary item 628,81,36,341 32.08 293,51,56,665 31.85 114.24
- ------------------------------------------------------------------------------------------------------------------------------
2.1 Software development expenses
Year ended March 31 in Rs.
- ------------------------------------------------------------------------------------------------------------------------------
Particulars 2001 % 2000 % Growth%
- ------------------------------------------------------------------------------------------------------------------------------
Salaries and bonus
including overseas staff expenses 675,86,45,286 34.48 307,54,46,295 33.38 119.76
Staff welfare 8,46,06,310 0.43 4,93,07,308 0.54 71.59
Contribution to provident and other funds 33,45,76,308 1.71 22,08,36,923 2.40 51.50
Foreign travel expenses 147,22,11,655 7.51 84,09,02,293 9.13 75.08
Consumables 5,86,87,245 0.30 2,70,06,251 0.29 117.31
Cost of software packages for
own use 31,85,81,751 1.63 16,53,57,382 1.79 92.66
banking product 5,70,13,753 0.29 2,84,48,397 0.31 100.41
Computer maintenance 7,19,42,078 0.37 3,27,43,350 0.36 119.72
Communication expenses 31,52,55,986 1.61 17,31,23,718 1.88 82.10
Consultancy charges 9,19,25,609 0.47 2,85,50,034 0.31 221.98
Provision for post-sales client support 1,83,20,669 0.09 2,09,62,627 0.23 (12.60)
- ------------------------------------------------------------------------------------------------------------------------------
958,17,66,650 48.89 466,26,84,578 50.60 105.50
==============================================================================================================================
Revenues 1959,93,73,722 100.00 921,46,48,068 100.00
- ------------------------------------------------------------------------------------------------------------------------------
Employee costs comprise approximately 37% and 36% of total revenue for the
years ended March 31, 2001 and 2000, respectively. The increase is due to
an increase in the average number of unbilled employees during the year due
to training and bench, and also a change in the onsite-offshore mix, as
compared to the previous year. The company added 4,442 employees (net)
during the year as compared to 1,623 during the previous year. The
utilization rates of the employees is as below:
- ------------------------------------------------------------------------------------------------------------------------------
Year ended March 31 2001 2000
- ------------------------------------------------------------------------------------------------------------------------------
Including trainees 67.40% 72.90%
Excluding trainees 78.30% 79.40%
- ------------------------------------------------------------------------------------------------------------------------------
Foreign travel expenses, representing cost of travel abroad for software
development and marketing, constituted approximately 8% and 9% of total
revenue for the years ended March 31, 2001 and 2000, respectively.
Cost of software packages for own use represents the cost of software
packages and tools procured for internal use, for enhancing the quality of
its services and also for meeting the needs of software development. The
cost of software packages purchased for own use has increased by
approximately 93% during the year, and was approximately 2% of the total
revenues for the years ended March 31, 2001 and 2000, respectively. The
company's policy is to charge such purchases to the profit and loss
accounts in the year of purchase.
A major part of the company's revenue comes from offshore software
development. This involves the large-scale use of satellite connectivity in
order to be online with clients. This represents approximately 2% each of
total revenues for the years ended March 31, 2001 and 2000, respectively.
The company provided an amount of Rs. 1,83,20,669 and Rs. 2,09,62,627
towards post-sales client support for the year ended March 31, 2001 and
2000, respectively. This represents a provision for post-sales obligations
of the company in respect of the outstanding fixed-price projects as at the
year-end. This had come down by approximately 13% due to reduction in
proportion of fixed-price, fixed-time frame projects to total income from
31.50% during the previous year to 28.20% in the current year.
The company also utilizes outside consultants for part of its software
development work. During the year, the company spent a sum of Rs.
9,19,25,609 towards consultancy as compared to Rs. 2,85,50,034 during the
previous year, resulting in an increase of 222%. This increase is due to
increase in number of consultants hired during the year. The company uses
these consultants mainly to meet mismatch in certain skill sets required in
various projects and would continue to use external consultants for some of
its project work on a need basis.
2.2 Administration and other expenses
Year ended March 31 in Rs.
- -----------------------------------------------------------------------------------------------------------------------
Particulars 2001 % 2000 % Growth%
- -----------------------------------------------------------------------------------------------------------------------
Travelling and conveyance 18,40,64,822 0.94 7,68,26,394 0.83 139.59
Rent 16,94,82,708 0.86 10,34,93,593 1.12 63.76
Telephone charges 14,02,60,363 0.72 5,93,95,252 0.64 136.15
Professional charges 20,40,21,385 1.04 7,55,68,079 0.82 169.98
Printing and stationery 6,25,54,206 0.32 2,76,70,902 0.30 126.06
Advertisements 6,30,77,831 0.32 2,12,41,343 0.23 196.96
Brand building 10,52,01,392 0.54 99,17,816 0.11 960.73
Office maintenance 12,84,32,642 0.66 5,81,01,381 0.63 121.05
Repairs to building 3,95,22,458 0.20 1,13,44,232 0.12 248.39
Repairs to plant and machinery 2,26,54,171 0.12 84,12,905 0.09 169.28
Power and fuel 11,78,45,258 0.60 5,01,41,466 0.54 135.03
Insurance charges 5,17,55,298 0.26 2,41,35,289 0.26 114.44
Rates and taxes 1,82,17,524 0.09 1,03,80,848 0.11 75.49
Donations 7,21,92,883 0.37 3,49,27,871 0.38 106.69
Auditors remuneration 21,85,000 0.01 26,35,000 0.03 (17.08)
Bad loans and advances written off 4,141 0.00 3,13,050 0.00 (98.68)
Bad debts written off 27,70,254 0.01 1,59,20,938 0.17 (82.60)
Provision for bad and doubtful debts 19,27,45,549 0.98 94,03,099 0.10 1949.81
Provision for doubtful loans and advances 7,11,816 0.00 - - -
Bank charges and commission 59,39,483 0.03 42,21,668 0.05 40.69
Commission charges 1,79,03,784 0.09 64,70,454 0.07 176.70
Freight charges 55,72,484 0.03 23,84,004 0.03 133.74
Professional membership and
seminar participation fees 2,17,10,613 0.11 75,30,693 0.08 188.30
Marketing expenses 4,26,87,545 0.22 2,94,50,685 0.32 44.95
Commission to non-wholetime
directors 59,22,049 0.03 48,17,800 0.05 22.92
Sales promotion expenses 70,16,656 0.04 26,70,973 0.03 162.70
Transaction processing fee and filing
fees 1,52,76,339 0.08 3,69,846 0.00 4030.46
Other miscellaneous expenses 2,60,44,880 0.13 53,34,177 0.06 388.26
Postage and courier 2,27,86,459 0.12 1,37,56,638 0.15 65.64
Books and periodicals 1,69,10,978 0.09 77,13,886 0.08 119.23
Research grants 1,00,00,000 0.05 1,03,00,000 0.11 (2.91)
- -----------------------------------------------------------------------------------------------------------------------
Total administration and other expenses 177,54,70,971 9.06 69,48,50,282 7.54 155.52
=======================================================================================================================
Revenues 1959,93,73,722 100.00 921,46,48,068 100.00
- -----------------------------------------------------------------------------------------------------------------------
The company incurred administration and other expenses at 9.06% of its
total revenue during fiscal 2001 as compared to 7.54% during the previous
year. Administration and other expenses as a percentage of total revenues
increased during the year mainly due to increase in brand building expenses
and increased provisioning for bad and doubtful debts.
Travelling and conveyance expenses increased due to the increased levels of
business and increase in number of development centers and sales offices.
Rent expenses increased by approximately 64% during the year due to
additional office properties leased during the year and increases in
rentals of certain properties previously taken on lease. Telephone charges
increased by 136% due to greater usage, in tune with the growth in
business. Professional charges increased by 170%, due to increased
globalization of the business. These charges include fees paid for availing
services such as tax consultancy, US GAAP audit, and recruitment and
training, etc. Printing and stationary increased due to increased levels of
business. Advertisement expense increased by 197% due to increase in
advertisements for recruitment purposes both in India and abroad. Brand
building expenses increased by 961% during the year. It includes expenses
incurred for participation in various seminars and exhibitions, both in
India and abroad, various sales and marketing events organized by the
company and also other advertisement and sales promotional expenses. The
company added 122 new customers during the year as compared to 99 during
the previous year. The auditors' remuneration during the previous year
includes Rs. 4,50,000 paid towards other services. There was no increase in
the auditors' fees during the current year.
Provision for bad and doubtful debts increased from Rs. 94,03,099 during
the previous year to Rs. 19,27,45,549 during the current year. The company
management evaluates all customer dues to the company for collectibility
and makes adequate provisions, wherever necessary. The company normally
provides for all debtors dues outstanding for 180 days or longer. The need
for provisions is assessed based on various factors including
collectibility 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. Provision for bad and doubtful debts and bad
debts written off as a percentage of income were 1.00% and 0.27% in fiscal
2001 and 2000, respectively. The age-profile of debtors is given below:
------------------------------------------------------------------------------------------------------------
Period in days 2001 2000
------------------------------------------------------------------------------------------------------------
0 - 30 69.2% 64.7%
31 - 60 26.6% 31.8%
61 - 90 1.7% 1.8%
More than 90 2.5% 1.7%
------------------------------------------------------------------------------------------------------------
100.0% 100.0%
============================================================================================================
The transaction processing fee and filing fees represents processing fees
paid for overseas residence permits and also processing fees to obtain
immediate cash payment from one of the customers. The increase in all other
expenses is primarily due to an increasing business.
3. Provision for investment
During the year, two of your company's investee companies, EC Cubed Inc.
and Alpha Thinx Mobile Phone Services AG, filed for liquidation. Pending
the conclusion of liquidation proceedings, your company has provided Rs.
15.29 crore towards the entire amount of these investments.
4. Operating profits
During the current year, the company earned an operating profit (profit
before interest, depreciation and tax) of Rs. 808,92,37,493 representing
41.27% of total revenues as compared to Rs. 378,88,13,208, representing
41.12% of total revenues during the previous year. Excluding other income
of Rs. 59,37,14,915 (3.03% of revenues) in the current year as compared to
Rs. 39,14,11,095 (4.25% of revenues) in the previous year, the operating
profit would have been Rs. 749,55,22,578 (39.4% of revenues) in the current
year as compared to Rs. 339,74,02,113 (38.5% of revenues) in the previous
year, despite a change in the onsite-offshore mix.
5. Interest
The company continued to be debt-free during the current year.
6. Depreciation
The company provided a sum of Rs.112,89,45,152 and Rs. 53,23,27,389 towards
depreciation for the years ended March 31, 2001 and 2000, representing
5.76% and 5.78% of total revenues, respectively. The depreciation for the
years ended March 31, 2001 and 2000, includes an amount of Rs. 34,99,43,502
and Rs. 13,21,59,074, respectively, towards 100% depreciation on assets
costing less than Rs. 5,000 each. The depreciation as a percentage of
average gross block is 24.67% and 23.50% for the years ended March 31, 2001
and 2000, respectively.
Depreciation charge includes an amount of Rs. 2,14,29,903 and Rs. 15,27,500
towards depreciation provided, in full, on assets acquired for research and
development activities for the years ended March 31, 2001 and 2000,
respectively.
7. Provision for tax
The company has provided for its tax liability both in India and overseas.
The present Indian corporate tax rate is 39.55% (comprising a base rate of
35% and a surcharge of 13% on the base rate). Export profits are entitled
to benefit under two
schemes of the Government of India. Under the first scheme (Section 80HHE
of the Income Tax Act), a proportion of the profits of the company
attributable to export activities are deductible from the income subject to
tax. Under the second scheme, the profits attributable to the operations of
the company under the 100% export oriented unit scheme -Software Technology
Park (STP) scheme is entitled to a total tax holiday of ten years. A
majority of the company's software development centers enjoy the benefits
under the STP. For the year ended March 31, 2001, approximately 97.30% of
software revenues came from software development centers operating under
the Software Technology Park Scheme.
The Government of India has recently amended the tax incentives available
to companies set up in designated STPs. The period of the STP tax holiday
available to such companies is restricted to 10 consecutive years beginning
from the financial year when the unit started producing computer software
or March 31, 2000, whichever is earlier. Additionally, the export deduction
under Section 80HHE of the Income Tax Act will be phased out equally over a
period of five years starting fiscal 2000. The details of the
operationalization of various software development centers and the year to
which the exemption under the Software Technology Park Scheme is available
is provided hereunder:
------------------------------------------------------------------------------------------------------------
Location of the STP Year of Exemption Exemption
commencement claimed from available upto
------------------------------------------------------------------------------------------------------------
Electronics City, Bangalore 1994-1995 1996-1997 2003-2004
Mangalore 1995-1996 1998-1999 2004-2005
Pune 1996-1997 1998-1999 2005-2006
Bhubaneswar 1996-1997 1998-1999 2005-2006
Chennai 1996-1997 1998-1999 2005-2006
Bannerghatta Road, Bangalore 1997-1998 1998-1999 2006-2007
Phase I, Electronics City, Bangalore 1998-1999 1998-1999 2007-2008
Phase II, Electronics City, Bangalore 1999-2000 1999-2000 2008-2009
Hinjewadi, Pune 1999-2000 1999-2000 2008-2009
Mysore 1999-2000 1999-2000 2008-2009
Hyderabad 1999-2000 1999-2000 2008-2009
Mohali 1999-2000 1999-2000 2008-2009
Sholinganallur, Chennai 2000-2001 2000-2001 2008-2009
Konark, Bhubaneshwar 2000-2001 2000-2001 2008-2009
Mangala, Mangalore 2000-2001 2000-2001 2008-2009
------------------------------------------------------------------------------------------------------------
The company has provided a sum of Rs. 1,40,00,000 and Rs. 24,00,000 during
the years ended March 31, 2001 and 2000, in respect of tax liabilities of
earlier years, consequent to the finalization of the tax assessments. The
additional liability has arisen due to certain disallowances in India which
are contested in appeal, and additional payments overseas.
The company pays taxes in various countries in which it operates on the
income that is sourced to those countries. The details of provision for
taxes are as follows:
Year ended March 31 in Rs.
------------------------------------------------------------------------------------------------------------------
Particulars 2001 2000
------------------------------------------------------------------------------------------------------------------
Overseas tax 48,31,00,000 28,70,00,000
Domestic tax 24,40,00,000 11,00,00,000
------------------------------------------------------------------------------------------------------------------
Total tax 72,71,00,000 39,70,00,000
==================================================================================================================
8. Net profit
The net profit of the company from ordinary activities amounted to Rs.
623,31,92,341 and Rs. 285,94,85,819 for the years ended March 31, 2001 and
2000, respectively. This represents 31.80% and 31.03% of total revenue for
the respective years. Excluding foreign exchange translation differences of
Rs. 39,62,96,262 (2.02% of revenues) in the current year as compared to Rs.
18,69,58,099 (2.03% of revenues) in the previous year, the net profit would
have been Rs. 583,68,96,079 (30.40% of revenues) in the current year as
compared to Rs. 267,25,27,720 (29.60% of revenues) in the previous year.
Excluding other income of Rs. 59,37,14,915 (3.03% of revenues) in the
current year as compared to Rs. 39,14,11,095 (4.25% of revenues) in the
previous year, the net profit would have been Rs. 563,94,77,426 (29.67% of
revenues) in the current year as compared to Rs. 246,80,74,724 (27.97% of
revenues) in the previous year.
9. Excess provision no longer required
The company 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 made a total provision of Rs. 9.99 crore up to the
quarter ended June 30, 1999. At that time, the company was led to believe
that all its telecommunication service providers were Year 2000 ready, and
therefore did not expect significant disruption of these facilities. During
the second quarter of the previous year, the company made an appraisal and
re-estimated the provision required for meeting such contingencies over the
next two quarters and was of the opinion that the provision already
made was adequate for the purpose and hence no further provision was
required. During the previous year an amount of Rs. 2,42,29,154 was spent
towards support for the Year 2000 transition activities and the same was
set-off against the provision made earlier. After such set-off, a balance
of Rs. 7,56,70,846 remained in the provision account, which was reversed
during the previous year, as this provision was no longer required and
disclosed as an extraordinary item in the profit and loss account.
10. Extraordinary item
Infosys announced an incubation scheme for its employees to launch their
own ventures while continuing to derive benefits from a close association
with the company. Infosys launched Yantra in 1996 under this scheme, which
is in the e-fulfillment space. Infosys had piloted another such venture -
OnMobile Systems Inc. (formerly Onscan Inc.), which is in the wireless
space. During the year, the company transferred its intellectual property
rights in the Onscan product - a web-enabled notification product to
OnMobile Systems Inc. The product was transferred for a gross consideration
of Rs. 8.93 crore (US$ 2 million), received in the form of equity,
preferred voting and preferred non-voting securities of OnMobile Systems
Inc. The income from the transfer of Rs. 5.49 crore (net of tax) is
disclosed as an extraordinary item in the profit and loss account.
11. Foreign exchange differences
An amount of Rs. 39.63 crore and Rs. 18.70 crore is included in the profit
and loss accounts for the years ended March 31, 2001 and 2000,
respectively, representing the realized and unrealized exchange gains due
to currency fluctuation. This represents 2.02% of total revenues for both
the years ended March 31, 2001 and 2000.
12. 1994 Employee Stock Offer Plan
The company instituted an Employee Stock Offer Plan (ESOP) in 1994 for all
eligible employees. Under the plan, warrants were transferred to employees
deemed eligible by the advisory board constituted for the purpose.
Accordingly, 60,00,000 warrants (as adjusted for the 1:1 bonus issue in
October 1997 and March 1999 and 2-for-1stock split in February 2000) were
issued by the company to the Infosys Technologies Limited Employees Welfare
Trust, to be held in trust and transferred to selected employees from time
to time. Warrants were issued at Re. 0.50 each and entitled the holder
thereof to apply for and be issued one equity share of par value of Rs. 5
each at a price of Rs. 50, after a period of five years from the date of
issue. The warrants and the shares to be issued were subject to a lock-in
period of five years from the date of issue. The warrants expire on
September 30, 1999, and are convertible before their expiration. All
warrants were converted into shares.
Under the ESOP scheme, the warrant holders are entitled to convert the
warrants before any bonus or rights issue. The company issued bonus shares
in the ratio of 1:1 during October 1997 and March 1999. Accordingly, the
warrant holders, including the Trust and the employees, were given an
option to convert their warrants and all warrants were converted into
shares. They were also issued bonus shares, being holders of shares as on
the record date. The company effected a stock-split (i.e., a subdivision of
every equity share of par value of Rs. 10 each into two equity shares of
par value of Rs. 5 each) in February 2000. The number of warrants issued
and shares outstanding, after adjusting for the 2-for-1 stock split in
fiscal 2000, is given below:
------------------------------------------------------------------------------------------------------------
Warrants subject to lock-in Right to shares
------------------------------------------------------------------------------------------------------------
Year ended No. of Warrants Shares issued Bonus shares No. of Shares
March 31 employees transferred to on conversion issued on employees offered to
employees of warrants, converted employees
(Net) subject to warrants, free (Net)
lock-in from lock-in
------------------------------------------------------------------------------------------------------------
1997 144 1,91,400 1,91,400 3,82,800 - -
1998 329 4,79,600 4,79,600 4,79,600 - -
1999 994 7,50,200 7,50,200 7,50,200 515 3,00,000
2000 - - - - 14 30,000
------------------------------------------------------------------------------------------------------------
Total 1,070 14,21,200 14,21,200 16,12,600 529 3,30,000
============================================================================================================
By January 2001, the lock-in period ended in respect of 2,43,200 shares of
par value of Rs. 5 each, held by 102 employees for warrants issued in April
1996. Employees hold 14,21,200 shares of par value of Rs. 5 each subject to
lock-in and 3,30,000 rights to shares of par value of Rs. 5 each, as at
March 31, 2001. 1,544 employees hold shares / rights to shares as of March
31, 2001, after netting the employees who have received shares / rights to
shares in several years.
Details of net warrants / rights to shares issued to employees
------------------------------------------------------------------------------------------------------------------
Warrants / rights to shares issued Warrants / rights to shares forfeited
------------------------------------------------------------------------------------------------------------------
Year ended March 31 No. of No. of No. of No. of
employees shares employees shares*
------------------------------------------------------------------------------------------------------------------
1995 106 2,88,200 32 75,600
1996 144 3,16,000 42 72,800
1997 193 2,49,200 49 57,800
1998 368 5,40,800 39 61,200
1999 1,750 11,56,200 241 1,06,000
2000 14 30,000 - -
- -----------------------------------------------------------------------------------------------------------------------
* 1,41,800 shares / rights to shares forfeited after the bonus issue are
included in the respective years.
Warrants originally allotted to ITL Employees' Welfare Trust 7,50,000
Less: Net warrants issued to eligible employees before bonus issue in October 1997 3,76,400
Warrants held by Trust immediately before bonus issue in October 1997 and converted to shares 3,73,600
Add: Bonus shares allotted to the Trust in October 1997 3,73,600
Shares held by the Trust immediately after bonus issue in October 1997 7,47,200
Add: Shares surrendered to the Trust after bonus issue in October 1997 26,500
Less: Net rights to shares issued to eligible employees before bonus issue in March 1999 6,64,300
Shares held by the Trust immediately before bonus issue in March 1999 1,09,400
Add: Bonus shares allotted to the Trust in March 1999 1,09,400
Shares held by the Trust immediately after bonus issue in March 1999 2,18,800
Less: Net rights to shares issued to eligible employees after bonus issue in March 1999 1,64,000
Add: Shares surrendered to the Trust after the bonus issue in March 1999 13,000
Add: Rights to shares surrendered to the Trust after the bonus issue in March 1999 31,400
Less: Net rights to shares issued to eligible employees in June 1999 15,000
Shares held by the Trust immediately before stock-split (i.e., the subdivision of equity
shares of par value of Rs. 10 each into 2 equity shares of par value of Rs. 5 each) in February 2000 84,200
Add: Additional shares of par value of Rs. 5 per share allotted to the Trust in February 2000 84,200
Shares held by the Trust immediately after the split of face value to Rs. 5 per share (in February 2000) 1,68,400
Shares held by the Trust as of March 31, 2000 1,68,400
Add: Shares surrendered to the Trust during the year 2000-01 79,200
Add: Rights to shares surrendered to the Trust during the year 2000-01 10,600
Less: Rights to shares exercised by legal heirs of employees who died while in service 800
Shares held by the Trust as on March 31, 2001 2,57,400
13. 1998 Employee Stock Option plan (1998 plan)
One of the objectives of the American Depositary Share (ADS) issue and the
consequent listing on the NASDAQ stock exchange was to institute an
ADS-linked stock option plan to attract the best and the brightest across
the world. The necessary resolutions authorizing the board to formulate the
scheme was approved by the shareholders in the Extraordinary General
Meeting held on January 6, 1999. Accordingly, your directors had put in
place an ADS-linked stock option plan termed as the "1998 Stock Option
Plan". The compensation committee of the board administers the 1998 plan.
The Government of India has approved the 1998 plan, subject to a limit of
14,70,000 equity shares of par value of Rs. 5 each representing 29,40,000
ADSs to be issued under the plan. The plan is effective for a period of 10
years from the date of its adoption by the board. The compensation
committee of the board shall determine the exercise price for the
ADS-linked stock option, which will not be less than 90% of the fair market
value on the date of grant.
The details of the grants made (adjusted for stock-split, as applicable)
under the plan is provided below:
- -----------------------------------------------------------------------------------------------------------------------
Options granted Options forfeited
- -----------------------------------------------------------------------------------------------------------------------
Month of grant No. of No. of ADSs Grant price at No. of No. of ADSs
employees* market per ADS employees
- -----------------------------------------------------------------------------------------------------------------------
April 2000 10 32,500 $ 228.85 2 8,700
May 2000 2 4,500 $ 195.00 - -
May 2000 (annual grant) 43 1,01,400 $ 154.00 8 11,600
June 2000 4 8,300 $ 190.00 1 4,000
July 2000 12 21,500 $ 182.00 1 2,200
August 2000 23 37,000 $ 123.94 2 400
September 2000 18 26,800 $ 155.55 1 200
October 2000 11 36,100 $ 114.00 - -
November 2000 10 24,300 $ 121.63 1 300
December 2000 15 20,400 $ 138.50 - -
January 2001 13 27,600 $ 92.86 1 200
February 2001 54 53,500 $ 113.70 - -
February 2001 (annual grant) 566 5,42,440 $ 98.25 - -
March 2001 20 28,500 $ 66.25 - -
- -----------------------------------------------------------------------------------------------------------------------
Total 801* 9,64,840 17 27,600
=======================================================================================================================
*Includes 49 employees who were granted ADS options twice. Therefore, the
effective number of employees granted options is 752.
During the year, 12,434 options issued under the 1998 plan were exercised
and the remaining ADS options unexercised and outstanding as at March 31,
2001 were 15,65,506.
14. 1999 Employee Stock Option Plan (1999 plan)
The shareholders approved the 1999 plan in June 1999. The 1999 plan
provides for the issue of 66,00,000 equity shares to employees, adjusted
for the recent stock split. The 1999 plan is administered by a compensation
committee of the board comprising of five members, all of whom are
independent directors on the board of directors. Under the 1999 plan,
options were issued to employees at an exercise price not less than the
fair market value. Fair market value means the closing price of the
company's shares on the stock exchange where there is the highest trading
volume on the date of grant 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 granted to employees at exercise prices that are less than the fair
market value only if specifically approved by the members of the company in
a general meeting.
The details of the grants made (adjusted for stock-split, as applicable)
under the plan is provided below:
- -----------------------------------------------------------------------------------------------------------------------
Options granted Options forfeited
- -----------------------------------------------------------------------------------------------------------------------
Month of grant No. of No. of options Grant price No. of No. of options
employees* Rs. employees
- -----------------------------------------------------------------------------------------------------------------------
April 2000 8 5,400 9,838.85 1 600
May 2000 9 6,300 7,760.95 1 700
May 2000 (annual grant) 4,217 6,42,550 5,891.35 500 79,600
June 2000 6 4,400 7,935.05 1 700
July 2000 18 13,300 8,326.45 - -
August 2000 1,766 2,15,800 7,270.55 82 11,900
September 2000 451 66,350 8,688.25 24 5,100
October 2000 512 71,250 7,288.70 19 3,700
November 2000 97 31,800 7,360.90 4 1,600
December 2000 514 75,150 7,469.75 13 1,550
January 2001 449 84,250 6,007.15 10 1,050
February 2001 409 67,050 6,383.20 6 1,250
February 2001 (annual grant) 1,028 6,33,180 5,723.75 2 900
March 2001 252 41,050 4,450.65 - -
- -----------------------------------------------------------------------------------------------------------------------
Total 9,736* 19,57,830 663 1,08,650
=======================================================================================================================
*Includes 360 employees who were granted options twice. Therefore, the
effective number of employees granted options is 9,376.
During the year, 1,200 options issued under the 1999 plan were exercised
and the remaining options unexercised and outstanding as at March 31, 2001
were 27,93,980.
The total number of existing employees offered stock options under 1994,
1998 and 1999 plans is 9,767.
15. Reconciliation of Indian and US GAAP financial statements
There are differences between the US GAAP and the Indian GAAP financial
statements. The material differences arise due to the provision for
deferred taxes and provision for deferred compensation due to the issue of
stock options to employees. The reconciliation of profits as per the Indian
and the US GAAP financial statements is given below.
in Rs. crore
- -----------------------------------------------------------------------------------------------------------------------
Profit as per the Indian GAAP financial statements 628.81
- -----------------------------------------------------------------------------------------------------------------------
Less :Amortization of deferred stock compensation expense 23.26
Provision for e-inventing the company 0.40
Transfer of intellectual property rights 5.63 29.29
- -----------------------------------------------------------------------------------------------------------------------
Add :Provision for retirement benefits to employees 3.39
Deferred taxes 3.52 6.91
- -----------------------------------------------------------------------------------------------------------------------
Net income as per the US GAAP financial statements 606.43
- -----------------------------------------------------------------------------------------------------------------------
Amortization of deferred stock compensation
The Accounting Principles Board Opinion No. 25 of US GAAP requires the
accounting of deferred stock compensation on issue of stock options to
employees, being the difference between the exercise price and the fair
value as determined by the quoted market prices of the common stock on the
grant date. In complying with this requirement, Infosys has charged to
revenue under US GAAP an amount of Rs. 23.26 crore for the year ended March
31, 2001 as deferred stock compensation.
Provision for e-inventing the company
The company had made a provision towards e-inventing under Indian GAAP. The
expenses incurred towards e-inventing the company were set off against the
provision in the Indian GAAP financial statements. Under US GAAP, this
amount was charged to the income statement.
Provision for retirement benefits
The provision for gratuity represents the valuation performed in accordance
with US GAAP.
Transfer of intellectual property rights
The amount relates to the transfer of intellectual property rights to
OnMobile Systems Inc. (formerly Onscan Inc.), USA.
Deferred income tax provision
US GAAP mandates that the tax element arising on timing differences in
amortizing various Assets and Liabilities as per tax books and financial
statements be accounted as deferred taxation and appropriate treatment be
made in the income statement. There is no such requirement under Indian
GAAP.
16. Employee stock compensation under SFAS 123
Statement of Financial Accounting Standards 123, Accounting for Stock Based
Compensation, requires the proforma disclosure of the impact of the fair
value method of accounting for employee stock valuation in the financial
statements. The fair value of a stock option is determined using an
option-pricing model that takes into account the stock price at the grant
date, the exercise price, the expected life of the option, the volatility
of the underlying stock and the expected dividends on it, and the risk-free
interest rate over the expected life of the option. Applying the fair value
based method defined in SFAS 123, the impact on the reported net profit and
basic earnings per share would be as follows:
in Rs.
- -----------------------------------------------------------------------------------------------------------------------
Year ended March 31 2001 2000
- -----------------------------------------------------------------------------------------------------------------------
Net profit: As reported 628,81,36,341 293,51,56,665
- -----------------------------------------------------------------------------------------------------------------------
Adjusted proforma 457,91,19,647 242,34,41,938
- -----------------------------------------------------------------------------------------------------------------------
Basic earnings per share: As reported 95.06 44.38
- -----------------------------------------------------------------------------------------------------------------------
Adjusted proforma 69.22 36.64
- -----------------------------------------------------------------------------------------------------------------------
C. Outlook: issues and risks
These have been discussed in detail in the Risk management section of this
report.
Auditors' certificate
To
The Members,
Infosys Technologies Limited
We have examined the cash flow statement of Infosys Technologies Limited (the
company) for the year ended March 31, 2001. The statement has been prepared by
the company in accordance with the requirements of Clause 32 of the listing
agreements entered into with the Indian Stock Exchanges.
for Bharat S Raut & Co.
Chartered Accountants
/s/ Balaji Swaminathan
Bangalore Balaji Swaminathan
April 11, 2001 Partner
Cash flow statement for the year ended March 31
- -------------------------------------------------------------------------------------------------------------------------------
in Rs.
- -----------------------------------------------------------------------------------------------------------------------
Schedule 2001 2000
- -----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before tax 696,02,92,341 325,64,85,819
Adjustments to reconcile profit before tax to cash provided
by operating activities
Profit on sale of fixed assets (9,17,890) (8,73,015)
Depreciation and amortization 112,89,45,152 53,23,27,389
Income from investments (37,54,58,594) (26,68,79,106)
Provisions on long-term investments 15,28,98,608 -
Income taxes paid during the year 1 (85,18,05,440) (35,53,53,877)
Exchange differences on translation of foreign currency deposits (20,17,12,483) (9,93,27,075)
Changes in current assets and liabilities
Sundry debtors (166,19,21,164) (51,65,92,828)
Loans and advances 2 (34,72,64,731) (41,49,70,588)
Current liabilities and provisions 3 60,92,54,409 35,99,38,427
- -----------------------------------------------------------------------------------------------------------------------
NET CASH GENERATED BY OPERATING ACTIVITIES 541,23,10,208 249,47,55,146
- -----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds on exercise of stock options 2,37,85,906 1,76,25,277
Dividends paid during the year (42,20,05,883) (19,92,57,109)
Expenses relating to the issue of American Depositary Shares ("ADSs") - (2,35,06,514)
Expenses relating to the issue of ADS-linked stock options - (1,01,93,113)
- -----------------------------------------------------------------------------------------------------------------------
NET CASH USED IN FINANCING ACTIVITIES (39,82,19,977) (21,53,31,459)
- -----------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of fixed assets 4 (463,35,45,172) (159,87,03,617)
Proceeds on sale of fixed assets 22,73,671 10,20,400
Long-term investments 5 (26,63,64,960) (13,08,00,000)
Income from investments 37,54,58,594 26,68,79,106
- -----------------------------------------------------------------------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES (452,21,77,867) (146,16,04,111)
- -----------------------------------------------------------------------------------------------------------------------
Effect of exchange differences on translation of foreign currency deposits 20,17,12,483 9,93,27,075
- -----------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents during the year 69,36,24,847 91,71,46,651
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 508,37,37,595
416,65,90,944
- -----------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR 6 577,73,62,442 508,37,37,595
=======================================================================================================================
NOTES ON THE CASH FLOW STATEMENT 7
- -----------------------------------------------------------------------------------------------------------------------
The schedules referred to above and the notes thereon form an integral part of
the cash flow statement. This is the cash flow statement referred to in our
certificate of even date.
for Bharat S Raut & Co.
Chartered Accountants
Balaji Swaminathan N. R. Narayana Murthy Nandan M. Nilekani Deepak M. Satwalekar Marti G. Subrahmanyam
Partner Chairman and Managing Director, Director Director
President
Chief Executive Officer and Chief Operating
Officer
Jitendra Vir Singh Omkar Goswami Larry Pressler Rama Bijapurkar
Director Director Director Director
S. Gopalakrishnan K. Dinesh S. D. Shibulal T. V. Mohandas Pai
Deputy Managing Director Director Director Director and
Chief Financial Officer
Phaneesh Murthy Srinath Batni V. Balakrishnan
Bangalore Director Director Company Secretary and
April 11, 2001 Associate Vice President -
Finance
Schedules to the cash flow statement for the year ended March 31
- ------------------------------------------------------------------------------------------------------------------------------
in Rs.
- -----------------------------------------------------------------------------------------------------------------------
2001 2000
- -----------------------------------------------------------------------------------------------------------------------
1 INCOME TAXES PAID DURING THE YEAR
Charge as per the profit and loss account 72,71,00,000 39,70,00,000
Add: Tax provided on Intellectual Property Rights sold 3,43,96,000 -
Less: Decrease in income tax provision (60,29,91,999) (39,46,62,254)
Increase in advance income taxes 69,33,01,439 35,30,16,131
- -----------------------------------------------------------------------------------------------------------------------
85,18,05,440 35,53,53,877
- -----------------------------------------------------------------------------------------------------------------------
2 LOANS AND ADVANCES
As per the balance sheet 430,27,93,623 210,12,77,161
Less: Deposits with financial institutions and body corporate, (192,67,52,157) (76,58,01,865)
included in cash and cash equivalents
Advance income taxes separately considered (123,73,97,792) (54,40,96,353)
- -----------------------------------------------------------------------------------------------------------------------
113,86,43,674 79,13,78,943
- -----------------------------------------------------------------------------------------------------------------------
3 CURRENT LIABILITIES AND PROVISIONS
As per the balance sheet 319,85,01,451 165,97,02,419
Less: Provisions separately considered in the cash flow Statement
Income taxes (122,90,11,741) (62,60,19,742)
Dividends (49,61,85,878) (19,84,18,210)
Dividend tax (5,06,10,959) (2,18,26,003)
- -----------------------------------------------------------------------------------------------------------------------
142,26,92,873 81,34,38,464
- -----------------------------------------------------------------------------------------------------------------------
4 PURCHASES OF FIXED ASSETS AND CHANGE IN CAPITAL WORK-IN-PROGRESS
As per the balance sheet 349,66,44,427 117,79,35,912
Add (less): Change in work-in-progress 113,69,00,745 42,07,67,705
- -----------------------------------------------------------------------------------------------------------------------
463,35,45,172 159,87,03,617
- -----------------------------------------------------------------------------------------------------------------------
5 LONG-TERM INVESTMENTS IN SECURITIES
As per the balance sheet 34,11,54,821 13,83,48,469
Add: Provisions on investments 22,34,94,282 7,05,95,674
Less: Non-cash investment (see note 7.2 below) (8,93,40,000) -
- -----------------------------------------------------------------------------------------------------------------------
47,53,09,103 20,89,44,143
- -----------------------------------------------------------------------------------------------------------------------
6 CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR
As per the balance sheet 385,06,10,285 431,79,35,730
Add: Deposits with financial institutions and body corporate, 192,67,52,157 76,58,01,865
included herein
- -----------------------------------------------------------------------------------------------------------------------
577,73,62,442 508,37,37,595
- -----------------------------------------------------------------------------------------------------------------------
7 NOTES ON THE CASH FLOW STATEMENT
7.1 Cash flows have been reported using the indirect method, whereby the net
profit is adjusted for the effects of transactions of a non-cash nature and
any deferrals or accruals of past or future cash receipts or payments,
segregating between cash flows from regular revenue generating, financing
and investing activities of the company. Cash flows in foreign currencies
are accounted at average monthly exchange rates that approximate the actual
rates of exchange prevailing at the dates of the transactions.
7.2 During the year ended March 31, 2001, the company transferred intellectual
property rights in Onscan - a web-based wireless enabled notification
product, to OnMobile Systems Inc. (formerly Onscan Inc.), USA, a company
incubated by Infosys. The product was transferred for a gross consideration
of Rs. 8,93,40,000 (approximately US$ 2,000,000) received as equity,
preferred and non-voting securities in OnMobile Systems Inc., and
accordingly, is not considered in this statement of cash flows.
Balance sheet abstract and company's general business profile
- ------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Registration details
Registration no. 13115
State code 08
Balance sheet date March 31, 2001
in Rs.
- -----------------------------------------------------------------------------------------------------------------------
Capital raised during the year
Public issue -
Rights issue -
Bonus issue -
Private placement -
Preferential offer of shares under Employee Stock Option Plan * 37,085
Position of mobilization and deployment of funds
Total liabilities 1389,63,91,988
Total assets 1389,63,91,988
Sources of funds
Paid-up capital 33,07,92,085
Reserves and surplus 1356,55,99,903
Secured loans -
Unsecured loans -
Application of funds
Net fixed assets 557,66,32,293
Investments 34,11,54,821
Net current assets 797,86,04,874
Miscellaneous expenditure -
Accumulated losses -
Performance of the company
Turnover 1959,93,73,722
Total Expenditure 1263,90,81,381
Profit / loss before tax 696,02,92,341
Extraordinary Income 5,49,44,000
Profit / loss after tax 628,81,36,341
Earnings per share from ordinary activities 94.23
Earnings per share including extraordinary income 95.06
Dividend rate (%) 200
Generic names of principal products / services of the company
Item code no. (ITC code) 85249009.10
Product description Computer software
* Issue of shares arising on the exercise of options granted to employees under the company's -
1998 ADS Plan 6,217
1999 Plan 1,200
- ---------------------------------------------------------------------------------------------------------------
N. R. Narayana Murthy Nandan M. Nilekani Deepak M. Satwalekar Marti G. Subrahmanyam
Chairman and Managing Director, Director Director
Chief Executive President and
Officer Chief Operating
Officer
Jitendra Vir Singh Omkar Goswami Larry Pressler Rama Bijapurkar
Director Director Director Director
S. Gopalakrishnan K. Dinesh S. D. Shibulal T. V. Mohandas Pai
Deputy Managing Director Director Director and
Director Chief Financial
Officer
Phaneesh Murthy Srinath Batni V. Balakrishnan
Bangalore Director Director Company Secretary and
April 11, 2001 Associate Vice
President - Finance
Financial statements for the
year ended March 31, 2001
prepared in accordance with
United States Generally Accepted Accounting Principles (U.S. GAAP)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
We are what we repeatedly do.
Excellence, then, is not an act, but a habit.
- Aristotle
(384 B.C. - 322 B.C.)
Summary of consolidated financial data
- ------------------------------------------------------------------------------------------------------------------------------
Five-year data
in thousands, except per share data
- -----------------------------------------------------------------------------------------------------------------------
2001 2000 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------
(Audited)
- -----------------------------------------------------------------------------------------------------------------------
Statements of income data:
Revenues $ 413,851 $ 203,444 $ 120,955 $ 68,330 $ 39,586
Cost of revenues 213,614 111,081 65,331 40,157 22,615
Gross profit 200,237 92,363 55,624 28,173 16,971
Operating expenses:
Selling and marketing expenses 20,683 9,644 4,944 3,370 1,976
General and administrative expenses 36,958 17,102 11,255 9,855 5,034
Amortization of deferred stock
compensation expense 5,081 5,118 3,646 1,520 768
Compensation arising from stock split - - 12,906 1,047 -
Total operating expenses 62,722 31,864 32,751 15,792 7,778
Operating income 137,515 60,499 22,873 12,381 9,193
Equity in loss of deconsolidated subsidiary - - (2,086) - -
Other income, net 9,505 9,039 1,537 801 769
Income before income taxes 147,020 69,538 22,324 13,182 9,962
Provision for income taxes 15,072 8,193 4,878 770 1,320
Subsidiary preferred stock dividends - - - 68 -
Net income $ 131,948 $ 61,345 $ 17,446 $ 12,344 $ 8,642
Earnings per equity share:
Basic $ 2.01 $ 0.93 $ 0.28 $ 0.21 $ 0.15
Diluted $ 1.98 $ 0.93 $ 0.28 $ 0.20 $ 0.15
Weighted equity shares used in computing
earnings per equity share:
Basic 65,771 65,660 61,379 59,574 58,073
Diluted 66,715 65,864 61,507 60,808 59,409
Cash dividend per equity share $ 0.14 $ 0.11 $ 0.09 $ 0.04 $ 0.02
Balance sheet data:
Cash and cash equivalents $ 124,084 $ 116,599 $ 98,875 $ 15,419 $ 8,320
Total assets 342,348 219,283 153,658 48,782 32,923
Total long-term debt - - - - -
Total stockholders' equity $ 311,792 $198,137 $ 139,610 $ 41,146 $ 30,640
- -----------------------------------------------------------------------------------------------------------------------
1. The information presented above reflects the company's 2-for-1 stock split
by means of a stock dividend in fiscal 1998 and 1999 and a 2-for-1 stock
split in fiscal 2000.
2. The financial statements of Yantra Corporation, an erstwhile subsidiary,
were consolidated with the financial statements of the company up to October
20, 1998 and are accounted for by the equity method in fiscal 1999.
3. The earnings per share calculations for fiscal years 2001, 2000 and 1999,
includes 2,070,000 equity shares (representing 4,140,000 ADSs) issued during
March 1999, in conjunction with the company's IPO in the U.S.
4. The dividends are declared in Indian rupees. Amounts presented are
translated into U.S. dollars and are indicative. Dividends are paid from the
date of holding of shares.
Management's discussion and analysis of financial condition and
results of operations
- --------------------------------------------------------------------------------
Investors are cautioned that this discussion contains forward-looking statements
that involve risks and uncertainties. When used in this discussion, the words
"anticipate", "believe", "estimate", "intend", "will" and "expect" and other
similar expressions as they relate to the company or its business are intended
to identify such forward-looking statements. The company undertakes no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events, or otherwise. Actual results,
performances or achievements could differ materially from those expressed or
implied in such forward-looking statements. Factors that could cause or
contribute to such differences include those described under the heading "Risk
Factors" in the prospectus filed with the Securities and Exchange Commission, as
well as the factors discussed in the Form 20-F, included in this report. Readers
are cautioned not to place undue reliance on these forward-looking statements
that speak only as of their dates. The following discussion and analysis should
be read in conjunction with the company's financial statements included herein
and the notes thereto.
1. Overview
Infosys, an India-based IT consulting and services company formed in 1981,
provides end-to-end consulting for global corporations. The company has
partnered with several Fortune 500 and emerging companies in building their
next generation information infrastructure for competitive advantage.
Infosys' portfolio of services includes e-strategy consulting and
solutions, maintenance and re-engineering services, large application
development and enterprise integration services. Infosys also has product
co-development initiatives with numerous communication and Internet
infrastructure companies that are creating the building blocks of the
digital economy. In addition, the company develops and markets certain
software products. The company utilizes an extensive offshore
infrastructure including dedicated offshore software development centers
("OSDCs") to provide managed software solutions to clients worldwide. From
fiscal 1997 through fiscal 2001, total revenue increased from $ 39.6
million to $ 413.8 million, the number of the company's software
professionals worldwide increased from approximately 1,410 to approximately
8,660, and the number of its India-based software development centers
increased from six to sixteen. The company also operationalized proximity
development centers in Croydon in the UK and in Chicago, New Jersey and
Phoenix in the U.S. in fiscal 2001, and one global development center in
Toronto, Canada and two proximity development centers in Fremont and Boston
in the U.S. in fiscal 2000.
The company's revenues are generated principally from software services
provided either on a fixed-price, fixed-time frame or a time-and-materials
basis. Revenues from services provided on a time-and-materials basis are
recognized in the month that services are provided and related costs are
incurred. Revenues from services provided on a fixed-price, fixed-time
frame basis are recognized upon the achievement of specified milestones
identified in the related contracts, in accordance with the percentage of
completion method. Cost of completion estimates are subject to periodic
revisions. Although the company has revised its project completion
estimates from time to time, such revisions have not, to date, had a
material adverse effect on the company's operating results or financial
condition. Since the company bears the risk of cost overruns and inflation
with respect to its fixed-price, fixed-time frame projects, the company's
operating results could be adversely affected by inaccurate estimates of
contract completion costs and dates, including wage inflation rates and
currency exchange rates that may affect cost projections. The company also
develops and markets certain software products, including banking software
that is licensed primarily to clients in Asia and Africa. Such software
products represented 2.5% of total revenues in fiscal 2001. The company
derived 73.5% of its total revenues from North America, 18.8% from Europe,
1.4% from India and 6.3% from the rest of the world in fiscal 2001.
In fiscal 2001 and fiscal 2000, the company derived 28.4% and 13.6% of its
total revenues, respectively, from Internet and e-commerce projects. Due to
shorter time-to-market considerations, e-commerce projects necessitate
higher interaction with clients. This results in a higher proportion of
services being performed at client sites. Services performed at a client
site typically generate higher per-capita revenues, but lower gross
margins, than the same quantum of services performed at the company's own
facilities in India. Consequently, any increase in work at client sites can
decrease the gross margins of the company.
Cost of revenues primarily consists of salary and other compensation
expenses, depreciation, data communications expenses, computer maintenance,
cost of software purchased for internal use, certain pre-operating expenses
for new software development centers, and foreign travel expenses. The
company depreciates personal computers and servers over two years and
mainframe computers over three years. Third party software is expensed in
the period in which it is acquired.
The company assumes full project management responsibility for each project
that it undertakes. Approximately 66.0% of the work on a project is
performed at the company's facilities in India, and the balance of the work
is performed at the client site. The proportion of work performed at the
company facilities and at client sites varies from quarter to quarter. The
company charges higher rates and incurs higher compensation expenses for
work performed at the client site. Services performed at a client site
typically generate higher revenues per-capita, but at lower gross margins,
than the same quantum of services performed at the company's facilities in
India. As a result, total revenues, cost of revenues and
gross profit in absolute terms and, as a percentage of revenues, fluctuate
from quarter to quarter based on the proportion of work performed offshore
at company facilities and at client sites.
Revenues and gross profits are also affected by employee utilization rates.
Utilization rates depend, among other factors, on the number of employees
enrolled for in-house training programs, particularly the 14 week classroom
training courses provided to new employees. Since a large percentage of new
hires begin their training in the second quarter, utilization rates have
historically been lower in the second and third quarters of a fiscal year.
Selling and marketing expenses primarily consist of expenses relating to
advertisements, brand building, rentals of sales and marketing offices,
salaries of marketing personnel, and traveling and conveyance. General and
administrative expenses comprise expenses relating to communications,
finance and administration, legal and professional charges, management,
rent, salary and other compensation, travel, and miscellaneous
administrative costs.
Other income includes interest income, income from the sale of special
import licenses and foreign currency exchange gains. Under the then
export-import policy of the Government of India, exports by Indian
companies generate credits for the exporter called "special import
licenses". These credits can be sold or used for the import of goods
included on a "restricted list" maintained by the Government of India. The
company's general policy is to sell such special import licenses in the
period in which it receives such credits. However, the new export-import
policy announced by the Government of India in fiscal 2001 has abolished
the scheme providing for benefit in the form of special import licenses to
all exporters and accordingly all exports made on or after April 1, 2000
will not get the benefits.
The company also intends to substantially expand its software development
infrastructure in India. The company had committed $ 34.0 million towards
various capital expenditure as on March 31, 2001. The company intends to
spend approximately $ 80.0 million on various capital expenditures during
fiscal 2002 and intends to use its internal accruals to fund this
expansion.
2. Results of operations
2.1 Fiscal year ended March 31, 2001 compared to fiscal year ended March 31,
2000
Revenues. Total revenues were $ 413.8 million for fiscal 2001, representing
an increase of $ 210.4 million or 103.4% over total revenues of $ 203.4
million for fiscal 2000. This increase is attributable to an increase in
volumes of business transacted of $ 126.1 million or 62.0%, and an increase
in prices at which contracts were executed in the amount of $ 84.3 million
or 41.4%. Revenues continued to increase in all segments of the company's
services. Custom software development, re-engineering, maintenance and
software development through OSDCs formed the majority of the company's
revenues. The increase in revenues was attributable, in part, to a
substantial increase in business from certain existing clients and from
certain new clients, particularly in the telecom and insurance, banking and
financial services industries. Revenues from telecom clients comprised
18.4% of revenues in fiscal 2001 as compared to 15.4% of revenues in fiscal
2000. Revenues from insurance, banking and financial services clients
comprised 33.7% and 30.1% of revenues in fiscal 2001 and 2000,
respectively. Revenue growth was also attributable to an increase in e-
commerce related revenues, which represented 28.4% of total revenues for
fiscal 2001 as compared to 13.6% of total revenues in fiscal 2000. Net
sales of FINACLE(TM) and other products represented 2.5% of total revenues
for fiscal 2001 as compared to 2.6% for fiscal 2000. Revenues from services
represented 97.5% of total revenues for fiscal 2001 as compared to 97.4%
for fiscal 2000. Revenues from fixed-price, fixed-time frame contracts and
from time-and-materials contracts represented 28.2% and 71.8%,
respectively, of total revenues for fiscal 2001 as compared to 31.5% and
68.5%, respectively, for fiscal 2000. Revenues from North America and
Europe represented 73.5% and 18.8%, respectively, of total revenues for
fiscal 2001, as compared to 78.0% and 14.8%, respectively, for fiscal 2000.
Cost of revenues. Cost of revenues was $ 213.6 million for fiscal 2001,
representing an increase of 92.2% over the cost of revenues of $ 111.1
million for fiscal 2000. The cost of revenues represented 51.6% and 54.6%
of total revenues for fiscal 2001 and 2000, respectively. This decrease in
costs as a percentage of total revenues was attributable to a favorable
business mix and a decrease in depreciation and software expenses, which
represented 7.6% and 7.9% of total revenues in fiscal 2001 and fiscal 2000,
respectively, as well as a decrease in overseas short-term allowances which
represented 26.0% and 26.4% of revenues in fiscal 2001 and 2000,
respectively.
Gross profit. As a result of the foregoing, the gross profit was $ 200.2
million for fiscal 2001, representing an increase of 116.7% over the gross
profit of $ 92.4 million for fiscal 2000. As a percentage of total
revenues, the gross profit increased to 48.4% for fiscal 2001 from 45.4%
for fiscal 2000. This increase was attributable to a favorable business mix
and a decrease in depreciation and software expenses as a percentage of
total revenue due to improved infrastructure utilization and a decrease in
overseas short-term allowances.
Sales and marketing expenses. Sales and marketing expenses were $ 20.7
million for fiscal 2001, an increase of 115.6% over sales and marketing
expenses of $ 9.6 million for fiscal 2000. As a percentage of total
revenues, the sales and marketing expenses increased to 5.0% for fiscal
2001 from 4.7% for fiscal 2000. The number of sales offices increased to 25
as on March 31, 2001 from 20 as on March 31, 2000. The increase in sales
and marketing expenses as a percentage of revenues was due to additional
sales offices opened during the year and also due to an increase in the
number of marketing personnel, which increased to 105 in fiscal 2001 from
62 in fiscal 2000.
General and administrative expenses. General and administrative expenses
were $ 36.9 million for fiscal 2001, an increase of 115.8% over general and
administrative expenses of $ 17.1 million for fiscal 2000. General and
administrative expenses were 8.9% and 8.4% of total revenues for fiscal
2001 and 2000, respectively. This marginal increase in general and
administrative expense as a percentage of revenues was a result of
increases in management, finance, administrative, and occupancy costs in
fiscal 2001, due to an increase in the scale of operations.
Amortization of deferred stock compensation expense. Amortization of
deferred stock compensation expense was $ 5.1 million in both fiscal 2001
and 2000, respectively.
Operating income. The operating income was $ 137.5 million for fiscal 2001,
an increase of 127.3% over the operating income of $ 60.5 million for
fiscal 2000. As a percentage of revenues, operating income increased to
33.2% for fiscal 2001 from 29.7% for fiscal 2000. Excluding the
amortization of deferred stock compensation expense, the operating margin
was 34.5% for fiscal 2001 as compared to 32.3% for fiscal 2000.
Other income. Other income was $ 9.5 million for fiscal 2001 as compared to
$ 9.0 million for fiscal 2000. This increase in other income was due to an
increase in interest income in the amount of $ 2.8 million resulting from
the investment of a larger cash balance and $ 1.5 million due to increase
in exchange differences on translation of foreign currency deposits. This
increase is offset by a decrease in other income due to provision for
investments aggregating $ 3.5 million in EC Cubed Inc. and Alpha Thinx
Mobile Services AG, two companies in which the company has made strategic
investments, and a decrease in income from sale of special import licences
in the amount of $ 0.4 million.
Provision for income taxes. Provision for income taxes was $ 15.1 million
for fiscal 2001 as compared to $ 8.2 million for fiscal 2000. The company's
effective tax rate decreased to 10.3% for fiscal 2001 as compared to 11.8%
for fiscal 2000. The reduction in the effective tax rate in fiscal 2001 is
due to a decrease in the Indian tax liability resulting from a higher
proportion of the company's operations qualifying for Indian tax exemptions
applicable to designated Software Technology Parks.
Net income. The net income was $ 131.9 million for fiscal 2001, an increase
of 115.2% over the net income of $ 61.3 million for fiscal 2000. As a
percentage of total revenues, the net income increased to 31.9% for fiscal
2001 from 30.1% for fiscal 2000.
2.2 Fiscal year ended March 31, 2000 compared to fiscal year ended March 31,
1999
Revenues. Total revenues were $ 203.4 million for fiscal 2000, representing
an increase of $ 82.4 million or 68.2% over total revenues of $ 121.0
million for fiscal 1999. This increase is attributable to an increase in
volumes of business transacted of $ 60.0 million or 49.6%, and an increase
in prices at which contracts were executed in the amount of $ 22.4 million
or 18.6%. Revenues continued to increase in all segments of the company's
services. Custom software development, re-engineering, maintenance and
software development through OSDCs formed a majority of the company's
revenues. The increase in revenues was attributable, in part, to a
substantial increase in business from certain existing clients and from
certain new clients, particularly in the telecom and insurance, banking and
financial services industries. Revenues from telecom clients comprised
15.4% of revenues in fiscal 2000 as compared to 14.2% of revenues in fiscal
1999. Revenues from insurance, banking and financial services clients
comprised 30.1% and 23.3% of revenues in fiscal 2000 and 1999,
respectively. Revenue growth was also attributable to an increase in e-
commerce related revenues which represented 13.6% of total revenues for
fiscal 2000 as compared to 3.7% of total revenues in fiscal 1999. Net sales
of FINACLE(TM) and other products represented 2.6% of total revenues for
fiscal 2000 as compared to 3.2% for fiscal 1999. Revenues from services
represented 97.4% of total revenues for fiscal 2000 as compared to 96.8%
for fiscal 1999. Revenues from fixed-price, fixed-time frame contracts and
from time-and-materials contracts represented 31.5% and 68.5%,
respectively, of total revenues for fiscal 2000 as compared to 36.7% and
63.3%, respectively, for fiscal 1999. Revenues from North America and
Europe represented 78.0% and 14.8%, respectively, of total revenues for
fiscal 2000 as compared to 82.0% and 9.3% respectively, for fiscal 1999.
Cost of revenues. Cost of revenues was $ 111.1 million for fiscal 2000,
representing an increase of 70.0% over the cost of revenues of $ 65.3
million for fiscal 1999. The cost of revenues represented 54.6% and 54.0%
of total revenues for fiscal 2000 and 1999, respectively. This marginal
increase in costs as a percentage of total revenues was attributable to an
increase in provision for a defined benefit plan for employees. The
increase was partially offset by a favorable business mix and a decrease in
depreciation and software expenses, which represented 7.9% and 10.0% of
total revenues in fiscal 2000 and 1999, respectively.
Gross profit. As a result of the foregoing, the gross profit was $ 92.4
million for fiscal 2000, representing an increase of 66.1% over the gross
profit of $ 55.6 million for fiscal 1999. As a percentage of total
revenues, the gross profit decreased to 45.4% for fiscal 2000 from 46.0%
for fiscal 1999. This decrease was attributable to higher provision for a
defined benefit plan for employees, which was partially offset by a
favorable business mix and a decrease in depreciation and software expenses
as a percentage of total revenue due to improved infrastructure
utilization.
Sales and marketing expenses. Sales and marketing expenses were $ 9.6
million for fiscal 2000, an increase of 95.1% over sales and marketing
expenses of $ 4.9 million for fiscal 1999. As a percentage of total
revenues, the sales and marketing expenses increased to 4.7% for fiscal
2000 from 4.1% for fiscal 1999. The number of sales offices increased to 20
as on March 31, 2000 from 16 as on March 31, 1999. The increase in sales
and marketing expense as a percentage of revenues was due to additional
sales offices opened during the year and also an increase in the number of
marketing personnel which increased to 62 in fiscal 2000 from 39 in fiscal
1999
General and administrative expenses. General and administrative expenses
were $ 17.1 million for fiscal 2000, an increase of 51.9% over general and
administrative expenses of $ 11.3 million for fiscal 1999. General and
administrative expenses were 8.4% and 9.3% of total revenue for fiscal 2000
and 1999, respectively. This decrease in general and administrative expense
as a percentage of revenues was a result of the company's ability to
increase revenues in fiscal 2000 without a corresponding increase in
management, finance, administrative and occupancy costs.
Amortization of deferred stock compensation expense. Amortization of
deferred stock compensation expense was $ 5.1 million for fiscal 2000, a
decrease of 69.1% over amortization of deferred stock compensation expense
of $ 16.6 million for fiscal 1999. Compensation expense increased
marginally for new grants of stock purchase rights in part because of the
rising market price of the equity shares. In fiscal 1999, the company
recognized an accelerated charge of $ 12.9 million as part of the company's
1998 stock dividend. The equity shares issued to Employee Stock Option Plan
(ESOP) participants in connection with the stock dividend were not subject
to vesting and as a result, one-half of the deferred compensation expense
that would have been amortized over the remaining vesting periods for the
equity shares issued under the ESOP was accelerated and charged to expense
in fourth quarter of fiscal 1999.
Operating income. The operating income was $ 60.5 million for fiscal 2000,
an increase of 164.5% over the operating income of $ 22.9 million for
fiscal 1999. As a percentage of revenues, operating income increased to
29.7% for fiscal 2000 from 18.9% for fiscal 1999. Excluding the
amortization of deferred stock compensation expense, the operating margin
was 32.3% for fiscal 2000 as compared to 32.6% for fiscal 1999.
Other income. Other income was $ 9.0 million for fiscal 2000 as compared to
$ 1.5 million for fiscal 1999. This increase in other income was due to an
increase in interest income resulting from the investment of a larger cash
balance, partly arising out of proceeds of the ADS issue during March 1999.
The increase in other income during fiscal 2000 also included $ 0.4 million
arising out of income from sale of special import licenses and $ 2.9
million due to exchange differences on translation of foreign currency
deposits which were Nil during fiscal 1999.
Provision for income taxes. Provision for income taxes was $ 8.2 million
for fiscal 2000 as compared to $ 4.9 million for fiscal 1999. The company's
effective tax rate decreased to 11.8% for fiscal 2000 as compared to 21.8%
for fiscal 1999. The effective tax rate after adjusting for a one-time
accelerated compensation charge arising out of the company's 1998 stock
dividend, which reduced the pre-tax income substantially in fiscal 1999, is
13.8%. The reduction in the effective tax rate in fiscal 2000 is due to a
decrease in the Indian tax liability resulting from a higher proportion of
the company's operations qualifying for Indian tax exemptions applicable to
designated Software Technology Parks.
Net income. The net income was $ 61.3 million for fiscal 2000, an increase
of 251.6% over the net income of $ 17.4 million for fiscal 1999. As a
percentage of total revenues, the net income increased to 30.1% for fiscal
2000 from 14.4% for fiscal 1999. The net income for fiscal 2000 of $ 61.3
million is 102.1% more than $ 30.4 million in fiscal 1999, after adjusting
for a one-time accelerated compensation charge of $ 12.9 million, arising
out of company's 1998 stock dividend which reduced the net income
substantially in fiscal 1999.
2.3 Liquidity and capital resources
The growth of the company has been financed largely from cash generated
from operations and, to a lesser extent, from the proceeds of equity issues
and borrowings. In 1993, the company raised approximately $ 4.4 million in
gross aggregate proceeds from its initial public offering of equity shares
on Indian stock exchanges. In 1994, the company raised an additional $ 7.7
million through private placements of its equity shares with foreign
institutional investors, mutual funds, Indian domestic financial
institutions and corporations. As on March 31, 2001, the company had $
124.1 million in cash and cash equivalents, $ 176.2 million in working
capital and no outstanding bank borrowings. The company's treasury policy
calls for investing only in highly rated banks, financial institutions and
companies for short maturities with a limit for individual entities. The
company retains the money both in rupee and foreign currency accounts. The
bank balances in overseas accounts are maintained to meet the expenditure
of the overseas branches in the U.S. and other countries, and to meet
project-related expenditure overseas.
Net cash provided by operating activities was $ 137.5 million, $ 71.4
million and $ 40.1 million in fiscal 2001, 2000 and 1999, respectively. Net
cash provided by operations consisted primarily of net income offset, in
part, by an increase in accounts receivable. Accounts receivable as a
percentage of total revenue, represented 15.7%, 15.4% and 16.6% for fiscal
2001, 2000 and 1999, respectively. The company's policy on accounts
receivable includes a periodic review of all such outstanding. The company
reviews the age, amount, and quality of each account receivable; the
relationship with, size of, and history of the client; and the quality of
service delivered by the company for the client to determine the
classification of an account receivable. Should the review so demand, the
company classifies accounts receivable into secured and unsecured accounts,
further sub-classified between good and doubtful accounts. The company
makes provisions for all accounts receivable classified as doubtful and for
all accounts receivable that are outstanding for more than 180 days.
Prepaid expenses and other current assets increased by $ 2.2 million, $ 2.4
million and $ 2.0 million during fiscal 2001, 2000 and 1999, respectively.
The increase in fiscal 2001 was primarily due to an increase in rental
deposits for the new software development centers, prepaid expenses and
costs in excess of billings. Costs in excess of billings represent costs
incurred on fixed-price contracts in respect of which milestones are yet to
be achieved. The increase in fiscal 2000 and 1999 was primarily due to an
increase in rental deposits for the new software development centers and
prepaid expenses. Income taxes payable decreased by $ 2.0 million in fiscal
2001 primarily due to higher advance tax payments made during the year.
Unearned revenue as of March 31, 2001 and 2000 consists primarily of
advance client billings on fixed-price, fixed-time frame contracts for
which related costs were not yet incurred. The proportion of fixed-price
contracts under which the company was entitled to bill clients in advance
increased as of March 31, 2001 over the previous year.
Net cash used in investing activities was $ 106.7 million, $ 45.7 million
and $ 17.0 million in fiscal 2001, 2000 and 1999, respectively. Net cash
used in investing activities in fiscal 2001 consisted primarily of $ 96.8
million for property, plant and equipment, loans to employees of $ 4.1
million and purchase of investments amounting to $ 5.9 million. Net cash
used in investing activities in fiscal 2000 consisted primarily of $ 35.9
million for property, plant and equipment, loans to employees of $ 6.8
million and purchase of investments amounting to $ 3.0 million. Net cash
used in investing activities in fiscal 1999 primarily consisted of $ 16.1
million for property, plant and equipment and loans to employees of $ 2.2
million, offset by proceeds from the sale of investment in Yantra amounting
to $ 1.5 million.
Publicly-traded Indian companies customarily pay dividends. For fiscal
2001, the company declared and paid a dividend of $ 5.0 million. The board
of directors also declared a dividend of $ 10.6 million at their meeting
held on April 11, 2001, which is subject to the approval of the
stockholders in the annual general meeting. For fiscal 2000, the company
declared a dividend of $ 7.1 million, which was paid partly in fiscal 2000
and partly in fiscal 2001. For fiscal 1999, the company declared a dividend
of $ 3.2 million, which was paid partly in fiscal 1999 and partly in fiscal
2000.
As on March 31, 2001, the company had contractual commitments for capital
expenditure of $ 34.0 million. The company intends to spend approximately $
80.0 million on various capital expenditure during fiscal 2002 and the same
would be met out of the internal accruals of the company. In the opinion of
the company, the working capital is sufficient for the company's present
requirements.
2.4 Foreign currency market risk
Market risks relating to the company's operations result primarily from
changes in interest rates and changes in foreign exchange rates. The
company's functional currency is the Indian rupee; however, it transacts a
major portion of its business in foreign currencies and accordingly has
foreign currency exposure through its sales in the United States and
purchases from overseas suppliers in U.S. dollars. In its U.S. operations,
the company does not actively hedge against exchange rate fluctuations,
although it may elect to do so in the future. Accordingly, changes in
exchange rates may have a material adverse effect on the company's net
sales, cost of services sold, gross margin and net income, any of which
alone or in the aggregate may in turn have a material adverse effect on the
company's business, operating results and financial condition. The exchange
rate between the rupee and the U.S. dollar has changed substantially in
recent years and may fluctuate substantially in the future. During the
four-year period from March 31, 1997 through March 31, 2001, the value of
the rupee against the U.S. dollar declined by approximately 29.8%. For
fiscal 2001, 2000 and 1999, the company's U.S. dollar-denominated revenues
represented 89.6%, 88.3% and 88.1%, respectively, of total revenues. The
company expects that a majority of its revenues will continue to be
generated in U.S. dollars for the foreseeable future and that a significant
portion of the company's expenses, including personnel costs as well as
capital and operating expenditures, will continue to be denominated in
rupees. Consequently, the company's results of operations will be adversely
affected to the extent the rupee appreciates against the U.S. dollar. The
company has sought to reduce the effect of exchange rate fluctuations on
operating results by purchasing foreign exchange forward contracts to cover
a portion of outstanding accounts receivable on a need basis. As of March
31, 2001, the company had outstanding forward contracts in the amount of $
20 million. These contracts typically mature within three months, must be
settled on the day of maturity and may be canceled subject to the payment
of any gains or losses in the difference between the contract exchange rate
and the market exchange rate on the date of cancellation. The company uses
these instruments only as a hedging mechanism and not for speculative
purposes. There can be no assurance that the company will purchase
contracts adequate to insulate itself from foreign exchange currency risks
or that any such contracts will perform adequately as a hedging mechanism.
Devaluation of the rupee will result in foreign currency translation
losses. For example, for fiscal 2001 and 2000, the company's foreign
currency translation losses were approximately $ 14.5 million and $ 5.0
million, respectively.
2.5 Reconciliation between Indian and U.S. GAAP
There are material differences between the financial statements prepared as
per Indian and U.S. GAAP. The material differences arise due to provision
for deferred taxes, accounting for stock-based compensation,
non-recognition of unrealized gains on transfers of intellectual property
rights and consolidation of accounts of subsidiary, as required by U.S.
GAAP. Indian GAAP does not require provision for deferred taxes,
amortization of deferred stock compensation and consolidation of accounts
of subsidiaries, and permits the recognition of unrealized gains on
transfers of intellectual property rights in the financial statements.
Reconciliation of net income
------------------------------------------------------------------------------------------------------------
2001 2000 1999
------------------------------------------------------------------------------------------------------------
Net profit as per Indian GAAP $ 136,837,807 $ 67,775,087 $ 32,207,070
Adjustments:
Deferred tax 769,303 850,891 625,427
Net income of subsidiary included on consolidation - - (2,085,887)
Provision for retirement benefits to employees 741,000 (741,000) -
Employee stock-based compensation plan charge
under APB Opinion no. 25 (5,081,795) (5,117,635) (3,645,576)
Compensation arising from stock split - - (12,906,962)
Provision for loss - Yantra Corporation - - 1,675,060
Provision for contingency / e-inventing the company (net) (87,387) (1,422,815) 1,576,956
Transfer of intellectual property rights (net of tax) (1,230,824) - -
------------------------------------------------------------------------------------------------------------
Net income as per U.S. GAAP $ 131,948,104 $ 61,344,528 $ 17,446,088
------------------------------------------------------------------------------------------------------------
2.6 Investment in Yantra Corporation
Prior to October 20, 1998, the company owned a majority of the voting
stock of Yantra. Consequently, all of Yantra's operating losses through
October 20, 1998 were recognized in the company's consolidated financial
statements. For fiscal 1998 and fiscal 1999, Yantra's losses recognized in
the company's financial statements were $ 1.6 million and $ 2.0 million,
respectively. On October 20, 1998, the company sold a portion of Yantra's
shares held by it, thereby reducing its interest to less than one-half of
the voting stock of Yantra. The company continues to own all of the
outstanding common stock of Yantra, but has no financial obligations or
commitments to Yantra and does not intend to provide Yantra with financial
support. Accordingly, Yantra's results after October 20, 1998 were not
recognized in the company's financial statements under U.S. GAAP. Yantra's
revenues were $ 1.3 million and $ 2.0 million for fiscal 1998 and for the
period ended October 20, 1998, respectively, while gross profits were $
574,000 and $ 546,000, respectively, for these same periods. Yantra's
revenues were 1.9% and 2.3% of the company's revenues for fiscal 1998 and
for the period ended October 20, 1998, respectively. Its gross profits
were 2.0% and 1.4% of the company's gross profits for these same periods.
Yantra currently provides e-commerce operations solutions through
PureEcommerce, a scalable web-based solution that facilitates real-time
transaction management across the extraprise. On June 14, 1999, Yantra
sold Series C Convertible Preferred Stock in the amount of $ 15 million to
unrelated existing and new investors, further reducing the company's
voting control to approximately 25%. In fiscal 2001, Yantra sold Series D
Convertible Preferred Stock in the amount of $ 49 million to unrelated
existing and new investors further reducing the company's voting control
to approximately 16% on a fully diluted basis.
2.7 Principles of currency translation
In fiscal 2001, over 96.6% of the company's revenues were generated in
U.S. dollars and European currencies. A majority of the company's expenses
were incurred in rupees, and the balance was incurred in U.S. dollars and
European currencies. The functional currency of the company is the Indian
rupee. Revenues generated in foreign currencies are translated into Indian
rupees using the exchange rate prevailing on the dates revenues are
recognized. Expenses of overseas operations incurred in foreign currencies
are translated into Indian rupees at either the monthly average exchange
rate or the exchange rate on the date the expense is incurred, depending
on the source of payment. Assets and liabilities of foreign branches held
in foreign currency are translated into Indian rupees at the end of the
applicable reporting period. For U.S. GAAP reporting, the financial
statements are translated into U.S. dollars using the average monthly
exchange rate for revenues and expenses and the period end rate for assets
and liabilities. The gains or losses from such translation are reported as
"Other comprehensive income", a separate component of stockholders'
equity. The company expects that a majority of its revenues will continue
to be generated in U.S. dollars for the foreseeable future and that a
significant portion of the company's expenses, including personnel costs
as well as capital and operating expenditures, will continue to be
denominated in rupees. Consequently, the company's results of operations
will be adversely affected to the extent that the rupee appreciates
against the U.S. dollar.
2.8 Income tax matters
The company benefits from certain significant tax incentives provided to
software firms under Indian tax laws. These incentives presently include:
(i) an exemption from payment of Indian corporate income taxes for a
period of ten consecutive years of operation of software development
facilities designated as "Software Technology Parks" (the "STP Tax
Holiday"); and (ii) a tax deduction for profits derived from exporting
computer software (the "Export Deduction"). All but one of the company's
software development facilities are located in a designated Software
Technology Park. The Government of India has recently amended the tax
incentives available to companies set up in designated STPs. The period of
the STP Tax Holiday available to such companies is restricted to 10
consecutive years beginning from the financial year when the unit started
producing computer software or March 31, 2000, whichever is earlier. Also,
the incentive available under the later scheme would be phased out equally
over a period of five years starting from fiscal 2000. The benefits of
these tax incentive programs have historically resulted in an effective
tax rate for the company well below statutory rates. There is no assurance
that the Government of India will continue to provide these incentives.
The company pays corporate income tax in foreign countries on income
derived from operations in those countries.
2.9 Effects of inflation
The company's most significant costs are the salaries and related benefits
for its employees. Competition in India and the United States for IT
professionals with the advanced technological skills necessary to perform
the services offered by the company have caused wages to increase at a
rate greater than the general rate of inflation. As with other IT service
providers, the company must adequately anticipate wage increases and other
cost increases, particularly on its long-term contracts. Historically, the
company's wage costs in India have been significantly lower than
prevailing wage costs in the United States for comparably-skilled
employees, although wage costs in India are presently increasing at a
faster rate than in the United States. There can be no assurance that the
company will be able to recover cost increases through increases in the
prices that it charges for its services in the United States.
2.10 Accounting pronouncements
Effective April 1, 2001, Infosys adopted SFAS 133, Accounting for
Derivative Instruments and Hedging Activities as amended, when the
pronouncement became effective for companies with fiscal years ending
March 31, 2001. SFAS 133 will change the accounting treatment of
derivative contracts (including foreign exchange contracts) that are
employed to manage risks. It establishes accounting and reporting
standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. All
derivatives, whether designated in hedging relationships or not, are
required to be recorded on the balance sheet at fair value. The accounting
treatment of changes in fair value is dependent upon whether or not a
derivative instrument is designated as a hedge and if so, the type of
hedge. If the derivative is designated as a fair value hedge, the changes
in the fair value of the derivative and of the hedged item attributable to
the hedged risk are recognized in earnings. If the derivative is
designated as a cash flow hedge, the effective portions of changes in the
fair value of the derivative are recorded in other comprehensive income
and are recognized in the income statement when the hedged item affects
earnings. Ineffective portions of changes in the fair value of cash flow
hedges are recognized in earnings. The company observes that the net
amount reflected in current earnings under the new rules will be
substantially similar to the amounts under existing accounting practice.
3. Risk factors
3.1 Management of growth
The company has experienced significant growth in recent periods. The
company's revenues in fiscal 2001 grew 103.4% over fiscal 2000. As of
March 31, 2001, the company employed approximately 8,660 software
professionals worldwide with 16 software development facilities in India,
six proximity development centers in the UK and USA and one global
development center in Canada, as compared to approximately 4,625 with 17
software development facilities in India, two proximity development
centers in USA and one global development center in Canada as of March 31,
2000 and 3,160 with 11 software development facilities in India as of
March 31, 1999. In fiscal 2001, 2000 and 1999, the company approved major
expansions to its existing facilities and the building of new facilities.
The company's growth is expected to place significant demands on its
management and other resources and will require it to continue to develop
and improve its operational, financial and other internal controls, both
in India and elsewhere. In particular, continued growth increases the
challenges involved in: recruiting and retaining sufficient skilled
technical, marketing and management personnel; providing adequate training
and supervision to maintain the company's high quality standards; and
preserving the company's culture and values and its entrepreneurial
environment. The company's inability to manage its growth effectively
could have a material adverse effect on the quality of the company's
services and projects, its ability to attract clients as well as skilled
personnel, its business prospects, and its results of operations and
financial condition.
3.2 Potential fluctuations in future operating results
Historically, the company's operating results have fluctuated, and may
continue to fluctuate in future, depending on a number of factors,
including: the size, timing and profitability of significant projects; the
proportion of services that are performed at client sites rather than at
the company's offshore facilities; the accuracy of estimates of resources
and time required to complete ongoing projects, particularly projects
performed under fixed-price, fixed-time frame contracts; a change in the
mix of services provided to its clients or in the relative proportion of
services and product revenues; the timing of tax holidays and other
Government of India incentives; the effect of seasonal hiring patterns and
the time required to train and productively utilize new employees; the
size and timing of facilities expansion; unanticipated increases in wage
rates; the company's success in expanding its sales and marketing
programs; currency exchange rate fluctuations and other general economic
factors. A high percentage of the company's operating expenses,
particularly personnel and facilities, are fixed in advance of any
particular quarter. As a result, unanticipated variations in the number
and timing of the company's projects or in employee utilization rates may
cause significant variations in operating results in any particular
quarter. The company believes that period-to-period comparisons of its
results of operations are not necessarily meaningful and should not be
relied upon as indications of future performance. Due to all of the
foregoing factors, it is possible that in some future quarter the
company's operating results may be below the expectations of public market
analysts and investors. In such event, the market price of the equity
shares and ADSs are likely to be materially adversely affected.
3.3 Impact of a slowdown in IT spending in the U.S.
Historically, a significant portion of the company's revenues was derived
from the U.S. For example, in fiscal 2001 and 2000, approximately 70.0%
and 73.8% of the company's revenues were derived from the U.S. Currently
there are indications of an economic slowdown in the U.S. The IT services
market in the U.S. had earlier showed remarkable resilience in fashioning
new solutions demanded by changing business and technology cycles. Going
forward, the IT services sector in the U.S. may experience some
realignment as a result of the macroeconomic forces. The continued growth
of companies in this sector will depend upon their ability to adapt to the
changes in the market and justify their customer's investments in new
projects that will drive customer retention up and costs down.
Consequently, the company's competitors may reduce contract prices to
retain customers and / or to win new contracts. This may affect the
company's ability to win new clients and retain existing clients as well
as the company's ability to sustain its current pricing strategy. This may
result in a lower revenue growth and may impact margins of the company.
Due to all of the foregoing factors, it is possible that in some future
quarter the company's operating results may be below the expectations of
public market analysts and investors. In such event, the market price of
the equity shares and ADSs are likely to be materially adversely affected.
3.4 Exposure to industry segments
The company derives a significant proportion of its revenues from certain
industry segments. For example, in fiscal 2001 the company derived 33.7%
and 18.4% of its revenues from the insurance, banking and financial
services, and telecom industry segments respectively, as compared to 30.1%
and 15.4%, respectively in fiscal 2000. There are indications that the
possible economic slowdown in the U.S. may impact the growth prospects of
companies that operate in various industry segments, for example, the
insurance, banking and financial services, and telecom industry segments.
Consequently, these companies may cut their IT spending or postpone
decisions regarding new expenditure with respect to IT spending. The
company believes that a sustained cut in IT spending and the longer
decision time that may be taken by these companies may affect the company's
ability to win new clients and / or retain existing clients as well as the
company's ability to sustain its current pricing strategy with existing
clients, in these industry segments. This may result in a lower revenue
growth and may impact margins of the company. Due to all of the foregoing
factors, it is possible that in some future quarter the company's operating
results may be below the expectations of public market analysts and
investors. In such event, the market price of the equity shares and ADSs
are likely to be materially adversely affected.
3.5 Exposure to start-up and venture-funded companies
The company works with start-up and venture-funded companies to gain access
to niche technologies. The company derived 10.8% of its revenues from
start-up and venture-funded companies in fiscal 2001. Consequent to the
possible economic slowdown in the U.S., the ability of start-up and
venture-funded companies to raise capital for their operations and
expansion plans has become difficult. As a result, the ability of the
company to grow its revenues from such companies may be adversely affected.
Additionally, such companies may not be able to pay any amounts due against
services rendered by the company. Due to the foregoing factors, it is
possible that in some future quarter the company's operating results may be
below the expectations of public market analysts and investors. In such
event, the market price of the equity shares and ADSs are likely to be
materially adversely affected.
3.6 Risks related to investments in Indian securities
The company is incorporated in India, and substantially all of its assets
and a substantial majority of its employees are located in India.
Consequently, the company's performance may be affected by changes in
exchange rates and controls, interest rates, Government of India policies,
including taxation policy, as well as political, social and economic
developments affecting India.
Political and economic environment. During the past decade and particularly
since 1991, the Government of India has pursued policies of economic
liberalization, including significant relaxations of restrictions on the
private sector. Nevertheless, the role of the Indian central and state
governments in the Indian economy as producers, consumers and regulators
has remained significant. Additionally, since 1996, the Government of India
has changed three times. The current Government of India, formed in October
1999, has announced policies and taken initiatives that support the
continuation of the economic liberalization policies pursued by previous
governments and has, in addition, set up a special IT task force to promote
the IT industry. However, the speed of economic liberalization could
change, and specific laws and policies affecting IT companies, foreign
investment, currency exchange rates and other matters affecting investment
in the company's securities could change as well. Further, there can be no
assurance that the liberalization policies will continue in the future. A
significant change in the Government of India's economic liberalization and
deregulation policies could adversely affect business and economic
conditions in India generally and the company's business in particular.
South Asia has from time to time experienced instances of civil unrest and
hostilities among neighboring countries. Events of this nature in the
future could influence the Indian economy and could have a material adverse
effect on the market for securities of Indian companies and on the business
of the company.
Government of India incentives and regulation. The company benefits from a
variety of incentives given to software firms in India, such as relief from
import duties on hardware, a tax exemption for income derived from software
exports, and tax holidays and infrastructure support for companies, such as
Infosys, operating in specially designated "Software Technology Parks".
There can be no assurance that these incentives will continue in future.
Further, there is a risk that changes in tax rates or laws affecting
foreign investment, currency exchange rates or other regulations will
render the Government of India's regulatory scheme less favorable to the
company and could adversely affect the market price of the company's equity
shares and its ADSs. Should the regulations and incentives promulgated by
the Government of India become less favorable to the company, the company's
results of operations and financial condition could be adversely affected.
Restrictions on foreign investment. Foreign investment in Indian securities
is regulated by the Foreign Exchange Management Act, 1999. In certain
emerging markets, including India, Global Depositary Shares and ADSs may
trade at a discount or premium, as the case may be, to the underlying
shares, in part because of restrictions on foreign ownership of the
underlying shares. In addition, under current Indian laws and regulations,
the Depositary can accept deposits of outstanding equity shares and issue
ADRs evidencing ADSs representing such equity shares provided the shares so
accepted for conversion into ADSs shall not exceed the number of equity
shares which were released by the Custodian pursuant to conversions of ADSs
into equity shares under the Depositary Agreement. Therefore, a holder of
ADSs who surrenders ADSs and withdraws equity shares is not permitted
subsequently to deposit such equity shares and obtain ADSs if such ADSs
obtained on conversion are in excess of the ADSs originally converted or
surrendered. This limited ability to convert equity shares into ADSs
increases the probability that the price of the ADSs will not trade on par
with the price of the equity shares as quoted on the Indian stock
exchanges. Holders who seek to sell in India any equity shares
withdrawn from the depositary facility and to convert the rupee proceeds
from such sale into foreign currency and repatriate such foreign currency
from India will have to obtain Reserve Bank of India ("RBI") approval for
each such transaction. Further, under current Indian regulations and
practice, the approval of the RBI is required for the sale of equity shares
underlying ADSs by a non-resident of India to a resident of India as well
as for renunciation of rights to a resident of India. There can be no
assurance that any such approval can be obtained.
Exchange rate fluctuations. Market risks relating to the company's
operations result primarily from changes in interest rates and changes in
foreign exchange rates. The company's functional currency is the Indian
rupee although it transacts a major portion of its business in foreign
currencies and accordingly has foreign currency exposure through its sales
in the United States and purchases from overseas suppliers in U.S. dollars.
In its U.S. operations, the company does not actively hedge against
exchange rate fluctuations, although it may elect to do so in the future.
Accordingly, changes in exchange rates may have a material adverse effect
on the company's net sales, cost of services sold, gross margin and net
income, any of which alone or in the aggregate may in turn have a material
adverse effect on the company's business, operating results and financial
condition. The exchange rate between the rupee and the U.S. dollar has
changed substantially in recent years and may fluctuate substantially in
the future. During the four-year period from March 31, 1997 through March
31, 2001, the value of the rupee against the U.S. dollar declined by
approximately 29.8%. For fiscal 2001, 2000 and 1999, the company's U.S.
dollar-denominated revenues represented 89.5%, 88.3% and 88.1%,
respectively, of total revenues. The company expects that a majority of its
revenues will continue to be generated in U.S. dollars for the foreseeable
future and that a significant portion of the company's expenses, including
personnel costs as well as capital and operating expenditures, will
continue to be denominated in rupees. Consequently, the company's results
of operations will be adversely affected to the extent the rupee
appreciates against the U.S. dollar. The company has sought to reduce the
effect of exchange rate fluctuations on operating results by purchasing
foreign exchange forward contracts to cover a portion of outstanding
accounts receivable on a need basis. As of March 31, 2001, the company had
outstanding forward contracts in the amount of $ 20 million. These
contracts typically mature within three months, must be settled on the day
of maturity and may be canceled subject to the payment of any gains or
losses in the difference between the contract exchange rate and the market
exchange rate on the date of cancellation. The company uses these
instruments only as a hedging mechanism and not for speculative purposes.
There can be no assurance that the company will purchase contracts adequate
to insulate itself from foreign exchange currency risks or that any such
contracts will perform adequately as a hedging mechanism. Devaluation of
the rupee will result in foreign currency translation losses. For example,
for fiscal 2001 and 2000, the company's foreign currency translation losses
were approximately $ 14.5 million and $ 5.0 million, respectively.
Fluctuations in the exchange rate between the rupee and the U.S. dollar
also will affect the U.S. dollar conversion by the Depositary of any cash
dividends paid in rupees on the equity shares represented by the ADSs. In
addition, fluctuations in the exchange rate between the Indian rupee and
the U.S. dollar will affect the U.S. dollar equivalent of the Indian rupee
price of equity shares on the Indian Stock Exchanges and, as a result, are
likely to affect the market prices of the ADSs in the United States, and
vice versa. Such fluctuations will also affect the dollar value of the
proceeds a holder would receive upon the sale in India of any equity shares
withdrawn from the Depositary under the Depositary Agreement. There can be
no assurance that holders will be able to convert rupee proceeds into U.S.
dollars or any other currency or with respect to the rate at which any such
conversion could occur.
3.7 Substantial investment in new facilities
As of March 31, 2001, the company had contractual commitments of $ 34.0
million for capital expenditure and has budgeted for significant
infrastructural expansion in the near future. Since such an expansion will
significantly increase the company's fixed costs, the company's results of
operations will be materially adversely affected if the company is unable
to grow its business proportionately. Although the company has successfully
developed new facilities in the past, there can be no assurance that the
company will not encounter cost overruns or project delays in connection
with any or all of the new facilities. Furthermore, there can be no
assurance that future financing for additional facilities, whether within
India or elsewhere, would be available on attractive terms or at all.
3.8 Restrictions on U.S. immigration
The company's professionals who work on-site at client facilities in the
United States on temporary and extended assignments are typically required
to obtain visas. As of March 31, 2001, substantially all of the company's
personnel in the United States were working pursuant to H-1B visas (1,090
persons) or L-1 visas (292 persons). Although there is no limit to new L-1
petitions, there is a limit to the number of new H-1B petitions that the
United States Immigration and Naturalization Service may approve in any
government fiscal year. In years in which this limit is reached, the
company may be unable to obtain the H-1B visas necessary to bring its
critical Indian IT professionals to the United States on an extended basis.
The H-1B limit had recently been increased to 195,000 for the next two
years ending September 30, 2002. The limit is yet to be reached by the U.S.
government for its fiscal year ending September 30, 2001. While the company
anticipates that such limit may be reached prior to the end of the U.S.
government's fiscal year and has made efforts to plan accordingly, there
can be no assurance that the company will continue to be able to obtain a
sufficient number of H-1B visas. Changes in existing U.S. immigration laws
that make it more difficult for the company to obtain H-1B and L-1 visas
could impair the company's ability to compete for and provide services to
clients and could have a material adverse effect on the company's results
of operations and financial condition.
3.9 Risks related to international operations
While most of the company's software development facilities are currently
located in India, the company intends to develop new software development
facilities in other regions, including potentially South-East Asia, Latin
America and Europe. The company has not yet made substantial contractual
commitments to develop such new software development facilities, and there
can be no assurance that the company will not significantly alter or
reduce its proposed expansion plans. The company's lack of experience with
facilities outside of India subject the company to further risk with
regard to foreign regulation and overseas facilities management.
Increasing the number of software development facilities and the scope of
operations outside of India subjects the company to a number of risks,
including, among other things, difficulties relating to administering its
business globally, managing foreign operations, currency exchange rate
fluctuations, restrictions against the repatriation of earnings, export
requirements and restrictions, and multiple and possibly overlapping tax
structures. Such developments could have a material adverse effect on the
company's business, results of operations and financial condition.
3.10 Dependence on skilled personnel; risks of wage inflation
The company's ability to execute project engagements and to obtain new
clients depends, in large part, on its ability to attract, train, motivate
and retain highly skilled IT professionals, particularly project managers,
software engineers and other senior technical personnel. An inability to
hire and retain additional qualified personnel will impair the company's
ability to bid for or obtain new projects and to continue to expand its
business. The company believes that there is significant competition for
IT professionals with the skills necessary to perform the services offered
by the company. There can be no assurance that the company will be able to
assimilate and manage new IT professionals effectively. Any increase in
the attrition rates experienced by the company, particularly the rate of
attrition of experienced software engineers and project managers, would
adversely affect the company's results of operations and financial
condition. There can be no assurance that the company will be successful
in recruiting and retaining a sufficient number of replacement IT
professionals with the requisite skills to replace those IT professionals
who leave. Further, there can be no assurance that the company will be
able to redeploy and retrain its IT professionals to keep pace with
continuing changes in IT, evolving standards and changing client
preferences. Historically, the company's wage costs in India have been
significantly lower than wage costs in the United States for comparably
skilled IT professionals. However, wage costs in India are presently
increasing at a faster rate than those in the United States. Changes in
the immigration laws of the countries where the company's personnel are
deputed on short-term assignments, requiring the company to pay a minimum
threshold wage higher than the current wage of these personnel as a
condition for obtaining visas or work permits may impact the profitability
of the company. In the long-term, wage increases may have an adverse
effect on the company's profit margins unless the company is able to
continue increasing the efficiency and productivity of its professionals.
3.11 Client concentration
The company has derived, and believes that it will continue to derive, a
significant portion of its revenues from a limited number of large
corporate clients. For fiscal 2001 and fiscal 2000, the company's largest
client accounted for 7.3% and 7.2%, respectively, of the company's total
revenues and its five largest clients accounted for 26.0% and 30.2%,
respectively, of the company's total revenues. The volume of work
performed for specific clients is likely to vary from year to year,
particularly since the company is usually not the exclusive outside
software service provider for its clients. Thus, a major client in one
year may not provide the same level of revenues in a subsequent year. The
loss of any large client could have a material adverse effect on the
company's results of operations and financial condition. Since many of the
contracted projects are critical to the operations of its clients'
businesses, any failure to meet client expectations could result in a
cancellation or non-renewal of a contract. However, there are a number of
factors other than the company's performance that could cause the loss of
a client and that may not be predictable. For example, in 1995, the
company chose to reduce significantly the services provided to its
then-largest client rather than accept the price reductions and increased
company resources sought by the client. In other circumstances, the
company reduced significantly the services provided to its client when the
client either changed its outsourcing strategy by moving more work
in-house and reducing the number of its vendors, or replaced its existing
software with packaged software supported by the licensor. There can be no
assurance that the same circumstances may not arise in future.
3.12 Fixed-price, fixed-time frame contracts
As a core element of its business strategy, the company continues to offer
a significant portion of its services on a fixed-price, fixed-time frame
basis, rather than on a time-and-materials basis. Although the company
uses specified software engineering processes and its past project
experience to reduce the risks associated with estimating, planning and
performing fixed-price, fixed-time frame projects, the company bears the
risk of cost overruns, completion delays and wage inflation in connection
with these projects. The company's failure to estimate accurately the
resources and time required for a project, future rates of wage inflation
and currency exchange rates or its failure to complete its contractual
obligations within the time frame committed could have a material adverse
effect on the company's results of operations and financial condition.
3.13 Infrastructure and potential disruption in telecommunications
A significant element of the company's business strategy is to continue to
leverage its various software development centers in Bangalore,
Bhubaneswar, Chennai, Mangalore, Pune, Hyderabad, Mohali and Mysore in
India, and to expand the number of such centers in India as well as
outside India. The company believes that the use of a strategically
located network of software development centers will provide the company
with cost advantages, the ability to attract highly skilled personnel in
various regions, the ability to service clients on a regional and global
basis, and the ability to provide 24-hour service to its clients. Pursuant
to its service delivery model, the company must maintain active voice and
data communication between its main offices in Bangalore, the offices of
its clients, and its other software development facilities. Although the
company maintains redundant software development facilities and satellite
communications links, any significant loss of the company's ability to
transmit voice and data through satellite and telephone communications
would have a material adverse effect on the company's results of
operations and financial condition.
3.14 Competition
The market for IT services is highly competitive. Competitors include IT
services companies, large international accounting firms and their
consulting affiliates, systems consulting and integration firms, temporary
employment agencies, other technology companies and client in-house MIS
departments. Competitors include international firms as well as national,
regional and local firms located in the United States, Europe and India.
The company expects that future competition will increasingly include
firms with operations in other countries, potentially including countries
with lower personnel costs than those prevailing in India. Historically,
one of the company's key competitive advantages has been a cost advantage
relative to service providers in the United States and Europe. Since wage
costs in India are presently increasing at a faster rate than those in the
United States, the company's ability to compete effectively will become
increasingly dependent on its reputation, the quality of its services, and
its expertise in specific markets. The company's ability to retain its
existing clients and win new clients may also be impacted by any reduction
in prices of services by competitors with a view to take advantage of the
economic downturn in the U.S. Many of the company's competitors have
significantly greater financial, technical and marketing resources and
generate greater revenue than the company, and there can be no assurance
that the company will be able to compete successfully with such
competitors and will not lose existing clients to such competitors. The
company believes that its ability to compete also depends in part on a
number of factors outside its control, including the ability of its
competitors to attract, train, motivate and retain highly skilled IT
professionals, the price at which its competitors offer comparable
services, and the extent of its competitors' responsiveness to client
needs.
3.15 Dependence on key personnel
The company's success depends to a significant degree upon continued
contributions by members of the company's senior management and other key
research and development and sales and marketing personnel. The company
generally does not enter into employment agreements with its senior
management and other key personnel that provide for substantial
restrictions on such persons leaving the company. The loss of any of such
persons could have a material adverse effect on the company's business,
financial condition and results of operations.
3.16 Potential liability to clients; risk of exceeding insurance coverage
Many of the company's contracts involve projects that are critical to the
operations of its clients' businesses and provide benefits that may be
difficult to quantify. Any failure in a client's system could result in a
claim for substantial damages against the company, regardless of the
company's responsibility for such failure. Although the company attempts
to limit its contractual liability for damages arising from negligent
acts, errors, mistakes or omissions in rendering its services, there can
be no assurance the limitations of liability set forth in its service
contracts will be enforceable in all instances or will otherwise protect
the company from liability for damages. The company maintains general
liability insurance coverage, including coverage for errors or omissions;
however, there can be no assurance that such coverage will continue to be
available on reasonable terms or will be available in sufficient amounts
to cover one or more large claims, or that the insurer will not disclaim
coverage as to any future claim. The successful assertion of one or more
large claims against the company that exceed available insurance coverage
or changes in the company's insurance policies, including premium
increases or the imposition of large deductible or co-insurance
requirements, could adversely affect the company's results of operations
and financial condition.
3.17 Risks associated with possible acquisitions
The company intends to evaluate potential acquisitions on an ongoing
basis. As of the date, however, the company has no understanding,
commitment or agreement with respect to any material future acquisition.
Since the company has not made any acquisitions in the past, there can be
no assurance that the company will be able to identify suitable
acquisition candidates available for sale at reasonable prices, consummate
any acquisition, or successfully integrate any acquired business into the
company's operations. Further, acquisitions may involve a number of
special risks, including diversion of management's attention, failure to
retain key acquired personnel and clients, unanticipated events or
circumstances, legal liabilities and amortization of acquired intangible
assets, some or all of which could have a material adverse effect on the
company's results of operations and financial condition. Under Indian law,
except in certain
limited circumstances, the company may not make any acquisition of, or
investment in, a non-Indian company without RBI and, in most cases,
Government of India approval. Even if the company does encounter an
attractive acquisition candidate, there can be no assurance that RBI and,
if required, Government of India approval can be obtained.
3.18 Risks associated with strategic investments
The company makes strategic investments in new technology start-ups in
order to gain experience in niche technologies. The company had invested
an aggregate amount of $ 5.9 million in strategic investments in fiscal
2001. However, there can be no assurance that the company will be
successful in its investments and will benefit from such investments. The
loss of any of such investments could have a material adverse effect on
the company's business, financial condition and results of operations. In
fiscal 2001, the company provided for the value of its investments in EC
Cubed Inc. and Alpha Thinx Mobile Services AG, in the amounts of $ 3
million and $ 480,300, respectively.
3.19 Risks related to software product sales
In fiscal 2001, the company derived 2.5% of its total revenue from the
sale of software products. The development of the company's software
products requires significant investments. The markets for the company's
primary software product are competitive and currently located in
developing countries, and there can be no assurance that such a product
will continue to be commercially successful. In addition, there can be no
assurance that any new products developed by the company will be
commercially successful or that the costs of developing such new products
will be recouped. A decrease in the company's product revenues or margins
could adversely affect the company's results of operations and financial
condition. Additionally, software product revenues typically occur in
periods subsequent to the periods in which the costs are incurred for
development of such products. There can be no assurance that such delayed
revenues will not cause periodic fluctuations of the company's results of
operations and financial condition.
3.20 Restrictions on exercise of preemptive rights by ADS holders
Under the Indian Companies Act, 1956 ("Indian Companies Act"), a company
incorporated in India must offer its holders of equity shares preemptive
rights to subscribe and pay for a proportionate number of shares to
maintain their existing ownership percentages prior to the issuance of any
new equity shares, unless such preemptive rights have been waived by
three-fourths of the company's shareholders. U.S. holders of ADSs may be
unable to exercise preemptive rights for equity shares underlying ADSs
unless a registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), is effective with respect to such rights
or an exemption from the registration requirements of the Securities Act
is available. The company's decision to file a registration statement will
depend on the costs and potential liabilities associated with any such
registration statement as well as the perceived benefits of enabling the
holders of ADSs to exercise their preemptive rights and any other factors
the company considers appropriate at the time. No assurance can be given
that the company would file a registration statement under these
circumstances. If the company issues any such securities in future, such
securities may be issued to the Depositary, which may sell such securities
for the benefit of the holders of the ADSs. There can be no assurance as
to the value, if any, the Depositary would receive upon the sale of such
securities. To the extent that holders of ADSs are unable to exercise
preemptive rights granted in respect of the equity shares represented by
their ADSs, their proportional interests in the company would be reduced.
3.21 Intellectual property rights
The company relies upon a combination of non-disclosure and other
contractual arrangements and copyright, trade secrets and trademark laws
to protect its proprietary rights. Ownership of software and associated
deliverables created for clients is generally retained by or assigned to
the client, and the company does not retain an interest in such software
and deliverables. The company also develops foundation and application
software products, or software "tools", which are licensed to clients and
remain the property of the company. The company has obtained registration
of INFOSYS as a trademark in India and the United States, and does not
have any patents or registered copyrights in the United States. The
company currently requires its IT professionals to enter into
non-disclosure and assignment of rights agreements to limit use of, access
to, and distribution of its proprietary information. There can be no
assurance that the steps taken by the company in this regard will be
adequate to deter misappropriation of proprietary information or that the
company will be able to detect unauthorized use and take appropriate steps
to enforce its intellectual property rights.
Although the company believes that its services and products do not
infringe upon the intellectual property rights of others, there can be no
assurance that such a claim will not be asserted against the company in
future. Assertion of such claims against the company could result in
litigation, and there can be no assurance that the company would be able
to prevail in such litigation or be able to obtain a license for the use
of any infringed intellectual property from a third party on commercially
reasonable terms. There can be no assurance that the company will be able
to protect such licenses from infringement or misuse, or prevent
infringement claims against the company in connection with its licensing
efforts. The company expects that the risk of infringement claims against
the company will increase if more of the company's competitors are able to
obtain patents for software products and processes. Any such claims,
regardless of their outcome, could result in substantial cost to the
company and divert management's attention from the company's operations.
Any infringement claim or litigation against the company could, therefore,
have a material adverse effect on the company's results of operations and
financial condition.
3.22 Control by principal shareholders, officers and directors; anti-takeover
provisions
The company's officers and directors, together with members of their
immediate families, in the aggregate, beneficially own approximately 24.9%
of the company's issued equity shares. As a result, such persons, acting
together, will likely still have the ability to exercise significant
control over most matters requiring approval by the shareholders of the
company, including the election and removal of directors and significant
corporate transactions. Such control by the company's officers and
directors could delay, defer or prevent a change in control of the
company, impede a merger, consolidation, takeover or other business
combination involving the company, or discourage a potential acquiror from
making a tender offer or otherwise attempting to obtain control of the
company.
The Indian Companies Act and the company's Articles of Association (the
"Articles") require that: (i) at least two-thirds of the company's
directors shall serve for a specified term and shall be subject to
re-election by the company's shareholders at the expiration of such terms;
and (ii) at least one-third of the company's directors who are subject to
re-election shall be up for re-election at each annual meeting of the
company's shareholders. In addition, the company's Articles provide that
Mr. N. R. Narayana Murthy, one of the company's principal founders and its
Chairman of the Board and Chief Executive Officer, shall serve as the
company's Chairman of the Board and shall not be subject to re-election as
long as he and his relatives, own at least 5% of the company's outstanding
equity securities. Furthermore, any amendment to the company's Articles
would require the affirmative vote of three-fourths of the company's
shareholders. Finally, foreign investment in Indian companies is highly
regulated. These provisions could delay, defer or prevent a change in
control of the company, impede a business combination involving the
company or discourage a potential acquiror from attempting to obtain
control of the company.
Report of the audit committee
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To the members of Infosys Technologies Limited
In connection with the March 31, 2001 financial statements prepared as per US
GAAP, the audit committee: (1) reviewed and discussed the audited financial
statements with management; (2) discussed with the auditors the matters required
by Statement on Auditing Standards No. 61; and (3) reviewed and discussed with
the auditors the matters required by Independence Standards Board Statement No.
1. Based upon these reviews and discussions, the audit committee recommended to
the board of directors that the audited financial statements be included in the
Annual Report on Form 20-F filed with the Securities and Exchange Commission of
the United States of America.
Deepak M. Satwalekar Dr. Omkar Goswami
Chairman, Audit Committee Member, Audit Committee
Bangalore Sen. Larry L Pressler Prof. Marti G Subrahmanyam
April 10, 2001 Member, Audit Committee Member, Audit Committee
Report of management
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The management is responsible for preparing the company's financial statements
and related information that appears in this Annual Report. The management
believes that the financial statements fairly reflect the form and substance of
transactions, and reasonably present the company's financial condition and
results of operations in conformity with United States Generally Accepted
Accounting Principles. The management has included, in the company's financial
statements, amounts that are based on estimates and judgments, which it believes
are reasonable under the circumstances.
The company maintains a system of internal procedures and controls intended to
provide reasonable assurance, at appropriate cost, that transactions are
executed in accordance with company authorization and are properly recorded and
reported in the financial statements, and that assets are adequately
safeguarded.
KPMG audits the company's financial statements in accordance with the generally
accepted auditing standards and provides an objective, independent review of the
company's internal controls and the fairness of its reported financial condition
and results of operations.
The board of directors of Infosys has appointed an audit committee composed of
outside directors. The committee meets with the management, internal auditors,
and the independent auditors to review internal accounting controls and
accounting, auditing, and financial reporting matters.
/s/ T. V. Mohandas Pai /s/ Nandan M. Nilekani /s/ N. R. Narayana Murthy
T. V. Mohandas Pai Nandan M. Nilekani N. R. Narayana Murthy
Bangalore Director - Finance & Managing Director, Chairman
April 11, 2001 Administration and President and Chief and Chief Executive
Chief Financial Officer Operating Officer Officer
Independent auditors' report
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To the Board of Directors and Stockholders
Infosys Technologies Limited
We have audited the accompanying balance sheets of Infosys Technologies Limited
as of March 31, 2001 and 2000, and the related statements of income,
stockholders' equity and comprehensive income, and cash flows for each of the
years in the three-year period ended March 31, 2001. 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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Infosys Technologies Limited as
of March 31, 2001 and 2000, and the results of its operations and its cash flows
for each of the years in the three-year period ended March 31, 2001, in
conformity with accounting principles generally accepted in the United States.
As explained in Note 1.3 in the accompanying notes to the financial statements,
the accounts of Infosys Technologies Limited's wholly owned subsidiary, Yantra
Corporation, which were consolidated with the financial statements of the
company prior to April 1, 1998, were accounted for by the equity method in
fiscal 1999.
/s/ KPMG
Bangalore KPMG
April 11, 2001
Balance sheets as of March 31
- -------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
2001 2000
- -------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 124,084,245 $ 116,599,486
Trade accounts receivable, net of allowances 64,942,062 31,233,515
Deferred tax assets 1,265,142 -
Prepaid expenses and other current assets 16,452,863 11,256,295
- -------------------------------------------------------------------------------------------------------------------
Total current assets 206,744,312 159,089,296
Property, plant and equipment, net 119,773,030 47,554,772
Deferred tax assets 2,070,428 2,566,266
Investments 5,577,393 3,177,938
Advance income taxes 180,113 -
Other assets 8,002,543 6,894,598
- -------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 342,347,819 $ 219,282,870
- -------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 28,082 $ 976,840
Client deposits 1,217,737 425,724
Other accrued liabilities 21,830,484 13,835,635
Income taxes payable - 1,878,977
Unearned revenue 7,479,815 4,029,173
- -------------------------------------------------------------------------------------------------------------------
Total current liabilities 30,556,118 21,146,349
STOCKHOLDERS' EQUITY
Common stock, $0.16 par value;
100,000,000 equity shares authorized, Issued and outstanding -
66,158,117 and 66,150,700 as of 2001 and 2000, respectively 8,594,106 8,593,510
Additional paid-in capital 122,017,518 121,506,726
Accumulated other comprehensive income (28,664,972) (14,137,933)
Deferred stock compensation (12,517,018) (17,598,813)
Retained earnings 222,362,067 99,773,031
- -------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 311,791,701 198,136,521
- -------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 342,347,819 $ 219,282,870
- -------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements
[CHARTS APPEAR HERE]
Statements of income for the years ended March 31
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------
2001 2000 1999
- -------------------------------------------------------------------------------------------------------------------
REVENUES $ 413,850,510 $ 203,443,754 $ 120,955,226
Cost of revenues 213,613,744 111,080,546 65,331,006
- -------------------------------------------------------------------------------------------------------------------
Gross profit 200,236,766 92,363,208 55,624,220
- -------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Selling and marketing expenses 20,682,776 9,643,970 4,943,599
General and administrative expenses 36,957,609 17,102,550 11,255,456
Amortization of stock compensation expense 5,081,795 5,117,635 3,645,576
Compensation arising from stock split - - 12,906,962
- -------------------------------------------------------------------------------------------------------------------
Total operating expenses 62,722,180 31,864,155 32,751,593
- -------------------------------------------------------------------------------------------------------------------
Operating income 137,514,586 60,499,053 22,872,627
Equity in loss of deconsolidated subsidiary - - (2,085,887)
Other income, net 9,505,343 9,038,792 1,536,998
- -------------------------------------------------------------------------------------------------------------------
Income before income taxes 147,019,929 69,537,845 22,323,738
Provision for income taxes 15,071,825 8,193,317 4,877,650
- -------------------------------------------------------------------------------------------------------------------
Net income $ 131,948,104 $61,344,528 $17,446,088
- -------------------------------------------------------------------------------------------------------------------
EARNINGS PER EQUITY SHARE
Basic $ 2.01 $ 0.93 $ 0.28
Diluted $ 1.98 $ 0.93 $ 0.28
Weighted equity shares used in computing
earnings per equity share
Basic 65,771,256 65,659,625 61,378,850
Diluted 66,714,739 65,863,990 61,507,380
- -------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements
[GRAPH APPEARS HERE]
Statements of Stockholders' Equity and Comprehensive Income
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Common stock Additional Comprehensive Accumulated
Shares Par value paid-in capital income other
Comprehensive
income
- ------------------------------------------------------------------------------------------------------------------------
Balance as of March 31, 1998 64,068,800 $4,545,811 $ 24,415,920 $ (7,042,229)
- ------------------------------------------------------------------------------------------------------------------------
Stock split - 3,800,949 - -
Cash dividends declared - - - -
Common stock issued 2,070,000 245,377 70,134,623 -
ADR issue expenses - - (4,108,924) -
Compensation related to
stock option grants - - 30,407,892 -
Amortization of compensation
related to stock option grants - - - -
Comprehensive income
Net income - - - $ 17,446,088
Other comprehensive income
Translation adjustment - - - (2,058,433) (2,058,433)
------------
Comprehensive income - - - $ 15,387,655 -
------------
Adjustment on deconsolidation of subsidiary - - - -
Repayment of loan to trust - - - -
- ------------------------------------------------------------------------------------------------------------------------
Balance as of March 31, 1999 66,138,800 8,592,137 120,849,511 (9,100,662)
- ------------------------------------------------------------------------------------------------------------------------
Cash dividends declared - - - -
Common stock issued 11,900 1,373 405,489 -
ADR issue expenses - - (777,923) -
Compensation related to stock option grants - - 1,029,649 -
Amortization of compensation related to
stock option grants - - - -
Comprehensive income
Net income - - - $ 61,344,528 -
Other comprehensive income
Translation adjustment - - - (5,037,271) (5,037,271)
------------
Comprehensive income - - - $ 56,307,257 -
------------
- ------------------------------------------------------------------------------------------------------------------------
Balance as of March 31, 2000 66,150,700 $8,593,510 $121,506,726 $(14,137,933)
- ------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
Deferred Loan to trust Retained Total
stock earnings stockholders'
compensation equity
- -------------------------------------------------------------------------------------------------------------
Balance as of March 31, 1998 $ (7,831,445) $ (936,365) $ 27,994,268 $ 41,145,960
- -------------------------------------------------------------------------------------------------------------
Stock split - - (3,800,949) -
Cash dividends declared - - (3,152,863) (3,152,863)
Common stock issued - - - 70,380,000
ADR issue expenses - - - (4,108,924)
Compensation related to
stock option grants (30,407,892) - - -
Amortization of compensation
related to stock option grants 16,552,538 - - 16,552,538
Comprehensive income
Net income - - - 17,446,088
Other comprehensive income
Translation adjustment - - - (2,058,433)
Comprehensive income - - - -
Adjustment on deconsolidation of subsidiary - - 2,468,831 2,468,831
Repayment of loan to trust - 936,365 - 936,365
- -------------------------------------------------------------------------------------------------------------
Balance as of March 31, 1999 (21,686,799) - 40,955,375 139,609,562
- -------------------------------------------------------------------------------------------------------------
Cash dividends declared - - (2,526,872) (2,526,872)
Common stock issued - - - 406,862
ADR issue expenses - - - (777,923)
Compensation related to stock option grants (1,029,649) - - -
Amortization of compensation related to
stock option grants 5,117,635 - - 5,117,635
Comprehensive income
Net income - - 61,344,528 61,344,528
Other comprehensive income
Translation adjustment - - - (5,037,271)
Comprehensive income - - - -
- -------------------------------------------------------------------------------------------------------------
Balance as of March 31, 2000 $(17,598,813) - $99,773,031 $198,136,521
- -------------------------------------------------------------------------------------------------------------
Statements of Stockholders' Equity and Comprehensive Income
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
Common stock Additional Comprehensive Accumulated Deferred
Shares Par value paid-in capital income other stock
comprehensive compensation
income
- ----------------------------------------------------------------------------------------------------------------------
Balance as of March 31, 2000 66,150,700 $8,593,510 $121,506,726 $ (14,137,933) $(17,598,813)
- ----------------------------------------------------------------------------------------------------------------------
Cash dividends declared - - - - -
Common stock issued 7,417 596 510,792 - -
Amortization of compensation
related to stock option grants - - - - 5,081,795
Comprehensive income
Net income - - - $ 131,948,104 - -
Other comprehensive income
Translation adjustment - - - (14,527,039) (14,527,039) -
---------------
Comprehensive income - - - $ 117,421,065 - -
---------------
- ----------------------------------------------------------------------------------------------------------------------
Balance as of March 31, 2001 66,158,117 $8,594,106 $122,017,518 $ (28,664,972) $(12,517,018)
- ----------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Loan to trust Retained Total
earnings stockholders'
equity
- ---------------------------------------------------------------------------
Balance as of March 31, 2000 - $ 99,773,031 $198,136,521
- ---------------------------------------------------------------------------
Cash dividends declared - (9,359,068) (9,359,068)
Common stock issued - - 511,388
Amortization of compensation
related to stock option grants - - 5,081,795
Comprehensive income
Net income - 131,948,104 131,948,104
Other comprehensive income
Translation adjustment - - (14,527,039)
Comprehensive income - - -
- ---------------------------------------------------------------------------
Balance as of March 31, 2001 - $222,362,067 $311,791,701
- ---------------------------------------------------------------------------
See accompanying notes to financial statements
Statements of cash flows for the years ended March 31
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
2001 2000 1999
- -----------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income $131,948,104 $ 61,344,528 $ 17,446,088
Adjustments to reconcile net income to net cash
provided by operating activities
(Gain)/loss on sale of property, plant and equipment (20,053) (20,153) -
Depreciation 24,527,867 12,268,169 8,521,009
Deferred tax expense / (benefit) (769,304) (850,891) (625,427)
Gain on sale of investment in deconsolidated subsidiary - - (620,958)
Amortization of deferred stock compensation expense 5,081,795 5,117,635 16,552,538
Loss relating to deconsolidated subsidiary - - 2,085,887
Provision for investments 3,480,300 - -
Changes in assets and liabilities
Trade accounts receivable (33,708,547) (11,176,837) (10,113,425)
Prepaid expenses and other current assets (2,218,954) (2,390,039) (2,035,203)
Income taxes (2,059,090) 923,180 1,492,766
Accounts payable (948,758) 901,535 (24,459)
Client deposits 792,013 407,204 (171,653)
Unearned revenue 3,450,642 (569,439) 4,598,612
Other accrued liabilities 7,957,303 5,435,835 3,015,104
- -----------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 137,513,318 71,390,727 40,120,879
- -----------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Expenditure on property, plant and equipment (96,775,745) (35,926,030) (16,123,557)
Proceeds from sale of property, plant and equipment 49,673 23,555 5,704
Loans to employees (4,085,559) (6,828,525) (2,181,715)
Proceeds from sale of investment in deconsolidated
subsidiary - - 1,500,000
Purchase of investments (5,879,755) (3,000,000) (177,576)
- -----------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (106,691,386) (45,731,000) (16,977,144)
- -----------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from issuance of equity shares 511,388 406,862 70,380,000
ADR issue expenses - (777,923) (4,108,924)
Payment of cash dividends (9,321,522) (2,526,872) (2,371,673)
Loan to trust - - 936,365
- -----------------------------------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities (8,810,134) (2,897,933) 64,835,768
- -----------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash (14,527,039) (5,037,271) (2,058,433)
Effect of deconsolidation on cash - - (2,465,372)
Net increase in cash and cash equivalents during the year 7,484,759 17,724,523 83,455,698
Cash and cash equivalents at the beginning of the year 116,599,486 98,874,963 15,419,265
- -----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at the end of the year $124,084,245 $116,599,486 $ 98,874,963
- -----------------------------------------------------------------------------------------------------------------------
Supplementary information:
Cash paid towards taxes $ 16,950,802 $ 7,270,137 $ 3,364,318
- -----------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements
Notes to Financial Statements
- --------------------------------------------------------------------------------
1 Company overview and significant accounting policies
1.1 Company overview
Infosys Technologies Limited ("Infosys" or the "company"), a publicly held
company is an information technology ("IT") consulting and service
provider, providing end-to-end consulting for global corporations. The
company has partnered with several Fortune 500 and emerging companies in
building their next generation information infrastructure for competitive
advantage. Infosys' portfolio of services includes e-strategy consulting
and solutions, maintenance and re-engineering services, large application
development and enterprise integration services. Infosys also has product
co-development initiatives with numerous communication and Internet
infrastructure companies that are creating the building blocks for the
digital economy. In addition, the company develops and markets certain
software products. Headquartered in Bangalore, India, the company has 16
state-of-the-art offshore software development facilities located
throughout India, six proximity development centers in the UK and the U.S.
and one global development center in Canada, that enable it to provide high
quality, cost-effective services to clients in a resource-constrained
environment. The company also maintains offices in North America, Europe
and Asia.
1.2 Basis of preparation of financial statements
The accompanying financial statements are prepared in accordance with U.S.
Generally Accepted Accounting Principles ("GAAP"). All amounts are stated
in U.S. dollars, except as otherwise specified.
1.3 Principles of consolidation
The financial statements of the company were consolidated with the accounts
of its wholly owned subsidiary, Yantra Corporation ("Yantra") during fiscal
1998. On October 20, 1998, the company's voting control of Yantra declined
to approximately 47%. Accordingly, the company followed the equity method
of accounting for Yantra in fiscal 1999. On June 14, 1999, Yantra sold
Series C Convertible Preferred Stock amounting to $ 15 million to unrelated
existing and new investors, reducing the company's voting control to
approximately 25%. In July 2000, Yantra sold Series D Convertible Preferred
Stock amounting to $ 49 million, to unrelated existing and new investors,
further reducing the company's voting control to approximately 16%.
The company owns 63% of the outstanding common shares of Yantra, but has no
financial obligations or commitments to Yantra and does not intend to
provide Yantra with financial support. Accordingly, the company recognized
no losses of Yantra after October 20, 1998. The excess of the company's
previously recognized losses over the basis of its investments in Yantra as
of October 20, 1998 were credited to retained earnings.
Yantra was incorporated in the United States in fiscal 1996 for the
development of software products in the retail and distribution areas.
1.4 Use of estimates
The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities on the date of the financial statements, and the reported
amounts of revenues and expenses during the year. Examples of estimates
include accounting for contract costs expected to be incurred to complete
software development, allowance for uncollectible accounts receivable,
future obligations under employee benefit plans and the useful lives of
property, plant and equipment. Actual results could differ from those
estimates.
1.5 Revenue recognition
The company derives its revenues primarily from software services and also
from the licensing of software products. Revenue on time-and-material
contracts is recognized as the related costs are incurred. Revenue from
fixed-price, fixed-time frame contracts are recognized upon the achievement
of specified milestones identified in the related contracts, as per the
percentage-of-completion method. Provisions for estimated losses on
uncompleted contracts are recorded in the period in which such losses
become probable based on the current contract estimates. The company
provides its clients with a fixed-period warranty on all its fixed-price,
fixed-time frame contracts. Costs associated with the support services are
accrued at the time related revenues are recorded.
Revenue from licensing of software products is recognized upon shipment of
products and fulfillment of acceptance terms, if any, provided that no
significant vendor obligations remain and the collection of the related
receivable is probable. When the company receives advances for software
products, such amounts are reported as client deposits until all conditions
for revenue recognition are met. Maintenance revenue is deferred and
recognized ratably over the term of the underlying maintenance agreement,
generally 12 months. Revenue from client training, support and other
services arising due to the sale of software products is recognized as the
services are performed.
1.6 Cash and cash equivalents
The company considers all highly liquid investments and deposits with a
remaining maturity at the date of purchase / investment of three months or
less to be cash equivalents. Cash and cash equivalents comprise cash, cash
on deposit with banks, marketable securities and deposits with
corporations.
1.7 Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated
depreciation. The company depreciates property, plant and equipment over
their estimated useful lives using the straight-line method. The estimated
useful lives of assets are as follows:
Buildings 15 years
Furniture and fixtures 5 years
Computer equipment 2-5 years
Plant and equipment 5 years
Vehicles 5 years
The cost of software purchased for use in software development and services
is charged to the cost of revenues at the time of acquisition. The amount
of third party software expensed during fiscal 2001, 2000 and 1999 was
$ 6,979,492, $ 3,816,840 and $ 3,538,590, respectively.
Deposits paid towards the acquisition of property, plant and equipment
outstanding at each balance sheet date and the cost of property, plant and
equipment not put to use before such date are disclosed under "Capital
work-in-progress".
1.8 Impairment of long-lived assets
The company evaluates the recoverability of its long-lived assets and
certain identifiable intangibles, if any, whenever events or changes in
circumstances indicate that their carrying amounts may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of
the carrying amount of an asset to future undiscounted net cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured by the amount by
which the carrying value of the assets exceeds the fair value of the
assets. Assets to be disposed are reported at the lower of the carrying
value or the fair value less the cost to sell.
1.9 Research and development
Research and development costs are expensed as incurred. Software product
development costs are expensed as incurred until technological feasibility
is achieved. Software product development costs incurred subsequent to
achieving technological feasibility are not significant and are expensed as
incurred.
1.10 Foreign currency translation
The accompanying financial statements are reported in U.S. dollars. The
functional currency of the company is the Indian rupee ("Rs."). The
translation of Rs. to U.S. dollars is performed for balance sheet accounts
using the exchange rate in effect at the balance sheet date, and for
revenue and expense accounts using a monthly average exchange rate for the
respective periods. The gains or losses resulting from such translation are
reported as "Other comprehensive income", a separate component of
stockholders' equity. The method for translating expenses of overseas
operations depends upon the funds used. If the payment is made from a rupee
denominated bank account, the exchange rate prevailing on the date of the
payment would apply. If the payment is made from a foreign currency, i.e.,
non-rupee denominated account, the translation into rupees is performed at
the average monthly exchange rate.
1.11 Foreign currency transactions
The company generally enters into foreign exchange forward contracts to
limit the effect of exchange rate changes on its foreign currency
receivables. Gains and losses on these contracts are recognized as income
or expense in the statements of income as incurred, over the life of the
contract.
1.12 Earnings per share
In accordance with Statement of Financial Accounting Standards ("SFAS") No.
128, Earnings Per Share, basic earnings per share are computed using the
weighted average number of common shares outstanding during the period.
Diluted earnings per share is computed using the weighted average number of
common and dilutive common equivalent shares outstanding during the period,
using the treasury stock method for options and warrants, except where the
result would be anti-dilutive.
1.13 Income taxes
Income taxes are accounted for using the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities, and their respective
tax bases and operating loss carry-forwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect of changes in tax rates on
deferred tax assets and
liabilities is recognized as income in the period that includes the
enactment date. The measurement of deferred tax assets is reduced, if
necessary, by a valuation allowance for any tax benefits of which future
realization is uncertain.
1.14 Fair value of financial instruments
The carrying amounts reflected in the balance sheets for cash, cash
equivalents, accounts receivable and accounts payable approximate their
respective fair values due to the short maturities of these instruments.
1.15 Concentration of risk
Financial instruments that potentially subject the company to
concentrations of credit risk consist principally of cash equivalents,
trade accounts receivable, investment securities and hedging instruments.
By their nature, all such financial instruments involve risk including the
credit risk of non-performance by counterparties. In management's opinion,
as of March 31, 2001 and 2000, there was no significant risk of loss in the
event of non-performance of the counterparties to these financial
instruments, other than the amounts already provided for in the financial
statements. Exposure to credit risk is managed through credit approvals,
establishing credit limits and monitoring procedures. The company's cash
resources are invested with corporations, financial institutions and banks
with high investment grade credit ratings. Limitations are established by
the company as to the maximum amount of cash that may be invested with any
such single entity.
1.16 Retirement benefits to employees
1.16.1 Gratuity
In accordance with Indian law, 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 years of employment with
the company. The company established the Infosys Technologies Limited
Employees' Group Gratuity Fund Trust (the "Gratuity Fund Trust") on April
1, 1997. Liabilities with regard to the Gratuity Plan are determined by
actuarial valuation, based upon which the company contributes to the
Gratuity Fund Trust. Trustees administer the contributions made to the
Gratuity Fund Trust. The funds contributed to the Gratuity Fund Trust are
invested in specific securities as mandated by the law and generally
consist of federal and state government bonds and the debt instruments of
government-owned corporations.
1.16.2 Superannuation
Apart from being covered under the Gratuity Plan described above, certain
employees of the company are also participants in a defined contribution
plan maintained by the company. The plan is termed the superannuation plan
(the "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.
1.16.3 Provident fund
In addition to the above benefits, eligible employees receive benefits from
a provident fund, which is a defined contribution plan. Both the employee
and the company make monthly contributions to the plan, each equal to a
specified percentage of each covered employee's salary. The company
established a provident fund trust in August 1996, to which a part of the
contributions are made each month. The remainder of the contributions is
made to the Government's provident fund. The company has no further
obligations under provident fund beyond its monthly contributions.
1.17 Investments
Investments where the company controls between 20% and 50% of the voting
interest are accounted for using the equity method. Investment securities
in which the company controls less than 20% voting interest are currently
classified as "Available-for-sale securities".
Investment securities designated as "available-for-sale" are carried at
their fair value. Fair value is based on quoted market prices. Unquoted
securities are carried at cost, adjusted for declines in value judged to be
other than temporary. Unrealized gains and losses, net of deferred income
taxes are reported as a separate component of stockholders' equity.
Realized gains and losses and declines in value judged to be other than
temporary on "Available-for-sale" securities are included in the statements
of income. The cost of securities sold is based on the specific
identification method. Interest and dividend income is recognized when
earned.
1.18 Stock-based compensation
The company uses the intrinsic value-based method of Accounting Principles
Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, to
account for its employee stock-based compensation plan. The company has
therefore adopted the proforma disclosure provisions of SFAS No. 123,
Accounting for Stock-Based Compensation.
1.19 Dividends
Dividend on common stock and the related dividend tax are recorded as a
liability on declaration.
2 Notes to the Financial Statements
2.1 Cash and cash equivalents
The cost and fair values for cash and cash equivalents as of March 31, 2001
and 2000, respectively are as follows:
- -------------------------------------------------------------------------------------------------
2001 2000
- -------------------------------------------------------------------------------------------------
Cost and fair values
Cash and bank deposits $ 82,702,111 $ 99,035,223
Deposits with corporations 41,382,134 17,564,263
- -------------------------------------------------------------------------------------------------
$ 124,084,245 $ 116,599,486
=================================================================================================
2.2 Trade accounts receivable
Trade accounts receivable, as of March 31, 2001 and 2000, net of allowance
for doubtful accounts of $ 3,902,996 and $ 507,487, respectively amounted
to $ 64,942,062 and $ 31,233,515, respectively. The age profile of trade
accounts receivable is given below.
in %
- -----------------------------------------------------------------------------------------
Period (in days) 2001 2000
- -----------------------------------------------------------------------------------------
0 - 30 69.2 64.7
31 - 60 26.6 31.8
61 - 90 1.7 1.8
More than 90 2.5 1.7
- -----------------------------------------------------------------------------------------
100.0 100.0
=========================================================================================
Trade accounts receivable include accounts receivable from Yantra amounting
to $ 214,347 and Nil as of March 31, 2001 and 2000, respectively.
2.3 Prepaid expenses and other current assets
Prepaid expenses and other current assets consist of the following:
- -------------------------------------------------------------------------------------------
2001 2000
- -------------------------------------------------------------------------------------------
Rent deposits $ 2,484,794 $ 1,798,738
Deposits with government organizations 945,189 721,476
Loans to employees 8,091,866 5,114,253
Prepaid expenses 4,349,913 3,602,334
Costs in excess of billings 503,694 -
Other advances 77,407 19,494
- -------------------------------------------------------------------------------------------
$ 16,452,863 $ 11,256,295
===========================================================================================
Other advances represent advance payments to vendors for the supply of
goods and rendering of services. Deposits with government organizations
relate principally to leased telephone lines and electricity supplies.
Costs in excess of billings represent costs incurred on fixed price
contracts in respect of which milestones are yet to be achieved.
2.4 Property, plant and equipment - net
Property, plant and equipment consist of the following:
- -------------------------------------------------------------------------------------------
2001 2000
- -------------------------------------------------------------------------------------------
Land $ 7,865,351 $ 4,833,786
Buildings 33,871,448 13,509,409
Furniture and fixtures 21,579,707 9,156,208
Computer equipment 48,098,099 25,742,780
Plant and equipment 24,064,927 11,871,138
Vehicles 75,537 31,292
Capital work-in-progress 36,651,724 13,064,301
- -------------------------------------------------------------------------------------------
172,206,793 78,208,914
Accumulated depreciation (52,433,763) (30,654,142)
- -----------------------------------------------------------------------------------------------------------------------
$ 119,773,030 $ 47,554,772
=======================================================================================================================
Depreciation expense amounted to $ 24,527,867, $ 12,268,169 and $ 8,521,009
for fiscal 2001, 2000 and 1999, respectively.
2.5 Investments
The amortized cost and fair values of available-for-sale securities by
major investment type and class of investment are as follows:
- -----------------------------------------------------------------------------------------------------------------------
Amortized cost Fair value
- -----------------------------------------------------------------------------------------------------------------------
As of March 31, 2001
M-Commerce Ventures Pte Ltd - 70 units, each unit representing 1 Ordinary Share
of S$1 each at par and 9 Redeemable Preference Shares of S$1 each at par,
with a premium of $1,110 per Redeemable Preference Share $ 399,485 $ 399,485
Asia Net Media BVI Limited - 30,000,000 Ordinary Shares, at
$0.05 each, fully paid, par value $0.01 each 1,500,000 1,500,000
EC Cubed Inc. - 1,300,108 Series D Convertible Preferred Stock,
at $2.3075 each, fully paid, par value $0.0001 each - -
Alpha Thinx Mobile Services AG - 27,790 Bearer Shares,
at (Euro) 20 each, fully paid, par value (Euro) 1 each - -
CiDRA Corporation - 33,333 Series D Convertible Preferred Stock,
at $90 each, fully paid, par value $0.01 each 2,999,970 2,999,970
JASDIC Park Company - 480 Common Stock,
at (Y)50,000 each, fully paid, par value (Y)50,000 each 177,576 177,576
PurpleYogi Inc. - 276,243 Series D Convertible Preferred Stock,
at $1.81 each fully paid, par value $0.001 each 500,000 500,000
Others 362 362
- -----------------------------------------------------------------------------------------------------------------------
$5,577,393 $5,577,393
=======================================================================================================================
As of March 31, 2000
EC Cubed Inc. - 1,300,108 Series D Convertible Preferred Stock,
at $2.3075 each, fully paid, par value $0.0001 each $3,000,000 $3,000,000
JASDIC Park Company - 480 Common Stock,
at (Y)50,000 each, fully paid, par value (Y)50,000 each 177,576 177,576
Others 362 362
- -----------------------------------------------------------------------------------------------------------------------
$3,177,938 $3,177,938
=======================================================================================================================
During the year ended March 31, 2001, EC Cubed Inc. and Alpha Thinx Mobile
Services AG ("Alpha Thinx"), two companies in which Infosys had made
strategic investments, filed for liquidation. Consequently, the company
made a provision for its entire investment in EC Cubed Inc. and Alpha Thinx
in the amounts of $ 3,000,000 and $ 480,300, respectively, as there was a
diminution in the value of this investment that is considered other than
temporary. EC Cubed Inc. and Alpha Thinx are unlisted companies.
2.6 Other assets
Other assets mainly represent the non-current portion of loans to
employees.
2.7 Related parties
The company grants loans to employees for acquiring assets such as property
and cars. Such loans are repayable over fixed periods ranging from 1 to 100
months. The annual rates of interest at which the loans have been made to
employees vary between 0% through 4%. No loans have been made to employees
in connection with equity issues. The loans are generally secured by the
assets acquired by the employees. As of March 31, 2001 and 2000, amounts
receivable from officers amounting to $ 227,121 and $ 309,835,
respectively, are included in prepaid expenses and other current assets,
and other assets in the accompanying balance sheets.
The required repayments of loans by employees are as detailed below.
- -----------------------------------------------------------------------------------------------------------------------
2001 2000
- -----------------------------------------------------------------------------------------------------------------------
2001 - $ 5,114,252
2002 $ 8,091,866 1,887,808
2003 2,517,809 1,383,397
2004 1,718,884 861,752
2005 1,033,107 696,581
2006 800,198 -
Thereafter 1,932,545 2,065,061
- -----------------------------------------------------------------------------------------------------------------------
$ 16,094,409 $ 12,008,851
=======================================================================================================================
The estimated fair values of related party receivables amounted to $
12,465,374 and $ 8,959,996 as of March 31, 2001 and 2000, respectively.
These amounts have been determined using available market information and
appropriate
valuation methodologies. Considerable judgement is required to develop
these estimates of fair value. Consequently, these estimates are not
necessarily indicative of the amounts that the company could realize in the
market.
2.8 Other accrued liabilities
Other accrued liabilities comprise the following:
- ----------------------------------------------------------------------------------------------------------
2001 2000
- ----------------------------------------------------------------------------------------------------------
Accrued compensation to staff $ 12,332,869 $ 7,747,965
Accrued dividends 103,418 65,872
Provision for post sales client support 1,578,859 1,265,849
Employee withholding taxes payable 25,000 1,530,832
Others 7,790,338 3,225,117
- ----------------------------------------------------------------------------------------------------------
$ 21,830,484 $ 13,835,635
==========================================================================================================
2.9 Employee post-retirement benefits
2.9.1 Gratuity
The following tables set out the funded status of the Gratuity Plan and the
amounts recognized in the company's financial statements in fiscal 2001,
2000 and 1999.
- -----------------------------------------------------------------------------------------------------------------------
2001 2000 1999
- -----------------------------------------------------------------------------------------------------------------------
Change in benefit obligations
Benefit obligations at the beginning of the year $ 11,043,208 $ 10,551,069 $ 1,804,504
Effect of changes in assumptions used - (2,142,149) 7,370,968
Amortization of unrecognized actuarial loss (329,928) (368,548) -
Service cost 2,627,599 3,418,688 657,328
Interest cost 1,183,461 939,603 906,157
Benefits paid (184,247) (128,803) (73,983)
Effect of exchange rate changes (758,121) (1,226,652) (113,905)
- -----------------------------------------------------------------------------------------------------------------------
Benefit obligations at the end of the year $ 13,581,972 $ 11,043,208 $ 10,551,069
- -----------------------------------------------------------------------------------------------------------------------
Change in plan assets
Fair value of plan assets at the beginning of
the year $ 4,375,821 $ 2,497,335 $ 680,499
Effect of exchange rate changes (468,275) (134,018) (48,977)
Actual return on plan assets 1,061,611 404,526 179,004
Employer contributions 5,362,995 1,736,781 1,760,792
Benefits paid (184,247) (128,803) (73,983)
- -----------------------------------------------------------------------------------------------------------------------
Plan assets at the end of the year $ 10,147,905 $ 4,375,821 $ 2,497,335
- -----------------------------------------------------------------------------------------------------------------------
Funded status $ (3,434,067) $ (6,667,387) $ (8,053,734)
Excess of actual return over estimated return on
plan assets 301,791 93,716 (41,723)
Unrecognized transitional obligation 596,106 694,446 830,826
Unrecognized actuarial cost 4,216,291 3,141,732 7,252,766
- -----------------------------------------------------------------------------------------------------------------------
(Accrued) / prepaid benefit $ 1,680,121 $ (2,737,493) $ (11,865)
- -----------------------------------------------------------------------------------------------------------------------
Net gratuity cost for fiscal 2001, 2000 and 1999 comprises the following components:
- -----------------------------------------------------------------------------------------------------------------------
2001 2000 1999
- -----------------------------------------------------------------------------------------------------------------------
Service cost $ 2,627,599 $ 3,418,688 $ 657,328
Interest cost 1,183,461 939,603 906,157
Expected return on assets (759,820) (310,810) (143,038)
Amortization of unrecognized transitional obligation 55,127 58,245 63,910
Amortization of unrecognized actuarial loss 329,928 368,548 -
Net gratuity cost $ 3,436,295 $ 4,474,274 $ 1,484,357
- -----------------------------------------------------------------------------------------------------------------------
The assumptions used in accounting for the Gratuity Plan in fiscal 2001, 2000 and 1999 are set out below.
- -----------------------------------------------------------------------------------------------------------------------
2001 2000 1999
- -----------------------------------------------------------------------------------------------------------------------
Discount rate 10% 10% 10%
Rate of increase in compensation levels 9% 9% 12%
Rate of return on plan assets 10% 10% 10%
- -----------------------------------------------------------------------------------------------------------------------
The company assesses these assumptions with its projected long-term plans of growth and prevalent industry
standards.
2.9.2 Superannuation
The company contributed $ 796,739, $ 244,248 and $ 145,051 to the
superannuation plan in fiscal 2001, 2000 and 1999, respectively.
2.9.3 Provident fund
The company contributed $ 2,339,794, $ 1,198,772 and $ 812,117 to the
provident fund in fiscal 2001, 2000 and 1999, respectively.
2.10 Stockholders' equity
The company has only one class of capital stock referred to herein as
equity shares. In fiscal 1999, the board of directors authorized a two-
for-one stock split of the company's equity shares effected in the form of
a stock dividend. Also, in November 1999, the board of directors
authorized a two-for-one stock split of the company's equity shares,
whereby each issued and outstanding equity share, par value $ 0.32 each,
was split into two equity shares, par value $ 0.16 each. All references in
the financial statements to number of shares, per share amounts and market
prices of the company's equity shares have been retroactively restated to
reflect the stock splits.
2.11 Equity shares
2.11.1 Voting
Each holder of equity shares is entitled to one vote per share.
2.11.2 Dividends
Should the company declare and pay dividends, such dividends will be paid
in rupees. The company paid cash dividends of $ 9,321,522 and $ 2,526,872
during fiscal 2001 and 2000, respectively.
Indian law mandates that any dividend be declared out of distributable
profits only after the transfer of a specified percentage of net income
computed in accordance with current regulations to a general reserve.
Moreover, the remittance of dividends outside India is governed by Indian
law on foreign exchange and is subject to applicable taxes.
2.11.3 Liquidation
In the event of a liquidation of the company, the holders of common stock
shall be entitled to receive any of the remaining assets of the company,
after distribution of all preferential amounts. The amounts will be in
proportion to the number of equity shares held by the stockholders.
2.11.4 Stock options
There are no voting, dividend or liquidation rights to the holders of
warrants issued under the company's stock option plan.
2.12 Other income, net
Other income, net, consists of the following:
- -----------------------------------------------------------------------------------------------------------------------
2001 2000 1999
- -----------------------------------------------------------------------------------------------------------------------
Interest income and others $ 8,526,635 $ 5,729,653 $ 916,040
Gain on sale of investment in subsidiary - - 620,958
Income from sale of special import licenses 14,800 426,407 -
Exchange gains 4,444,208 2,882,732 -
Provision for investments (3,480,300) - -
- -----------------------------------------------------------------------------------------------------------------------
$ 9,505,343 $ 9,038,792 $ 1,536,998
=======================================================================================================================
2.13 Operating leases
The company has various operating leases for office buildings that are
renewable on a periodic basis. Rental expense for operating leases in
fiscal 2001, 2000 and 1999 were $ 3,689,822, $ 2,387,334 and $ 1,770,413,
respectively. The operating leases can be renewed or canceled at the
company's option.
The company leases some of its office space under non-cancelable operating
leases for periods ranging between three through ten years. The schedule
of future minimum rental payments in respect of these leases is set out
below.
- --------------------------------------------------------------------------------
Year ending March 31,
- --------------------------------------------------------------------------------
2002 $ 1,568,814
2003 1,615,933
2004 1,725,610
2005 1,451,912
2006 1,159,711
Thereafter 3,092,905
- --------------------------------------------------------------------------------
$10,614,885
- --------------------------------------------------------------------------------
2.14 Research and development
General and administrative expenses in the accompanying statements of
income include research and development expenses of $ 3,610,550, $
1,904,123 and $ 2,819,326 for fiscal 2001, 2000 and 1999, respectively.
2.15 Employees' Stock Offer Plans ("ESOP")
1994 Employees Stock Offer Plan (the "1994 Plan"): In September 1994, the
company established the 1994 Plan, which provided for the issuance of
6,000,000 warrants (as adjusted for the company's 2-for-1 stock split by
means of a stock dividend in fiscal 1998 and 1999 and a 2-for-1 stock
split in fiscal 2000) to eligible employees. The warrants were issued to
an employee welfare trust (the "Trust") at Rs.0.50 each and were purchased
by the Trust using the proceeds of a loan obtained from the company. The
Trust holds the warrants and transfers them to eligible employees at
Rs.0.50 each. Each warrant entitles the holder to purchase one of the
company's equity shares at a price of Rs.50 per share. The warrants and
the equity shares received upon the exercise of warrants are subject to a
five-year aggregate vesting period from the date of issue of warrants to
employees. The warrants expire upon the earlier of five years from the
date of issue or September 1999. The fair market value of each warrant is
the market price of the underlying equity shares on the date of the grant.
In 1997, in anticipation of a share dividend to be declared by the
company, the Trust exercised all warrants held by it and converted them
into equity shares with the proceeds of a loan obtained from the company.
In connection with the warrant exercise and the share dividend, on an
adjusted basis, 3,011,200 equity shares were issued to employees of the
company who exercised stock purchase rights and 2,988,800 equity shares
were issued to the Trust for future issuance to employees pursuant to the
1994 Plan. Following such exercise, there were no longer any rights to
purchase equity shares from the company in connection with the 1994 Plan.
Only equity shares held by the Trust remained for future issues to
employees, subject to vesting provisions. The equity shares acquired upon
the exercise of the warrants vest entirely on completion of five years of
service. The warrant holders were entitled to exercise early, but the
shares received are subject to the five-year vesting period. As of March
31, 2001, the company's outstanding equity shares included 587,400 equity
shares held by the Trust of which 330,000 equity shares were allotted to
employees, subject to vesting provisions and are included in the earnings
per share calculation. The remaining 257,400 equity shares were not
considered outstanding for purposes of calculating earnings per share. The
warrants allotted and the underlying equity shares are not subject to any
repurchase obligations by the company.
The company has elected to use the intrinsic value-based method of APB 25
to account for its employee stock-based compensation plan. Accordingly, in
fiscal 2001, 2000 and 1999, the company recorded deferred compensation of
Nil, $ 1,029,649 and $ 30,407,892, respectively for the difference, on the
grant date, between the exercise price and the fair value as determined by
quoted market prices of the common stock underlying the warrants. The
deferred compensation is amortized on a straight-line basis over the
vesting period of the warrants/equity shares.
In fiscal 1999, the company declared a stock split of two equity shares
for each equity share outstanding to all its stockholders including
participants in the 1994 Plan in the form of a stock dividend and
consequently recognized an accelerated compensation charge at the time of
the stock dividend amounting to $ 12,906,962.
1998 Employees 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
stockholders in January 1998. The Government of India has approved the
1998 Plan, subject to a limit of 1,470,000 equity shares representing
2,940,000 American Depositary Shares ("ADS") to be issued under the 1998
Plan. Unless terminated sooner, the 1998 Plan will terminate automatically
in January 2008. All options under the 1998 Plan will be exercisable for
equity shares represented by ADSs. The 1998 Plan is administered by a
compensation committee comprising five members, all of who are independent
directors on the board of directors. All options under the 1998 Plan are
exercisable for equity shares represented by ADSs.
1999 Employees Stock Offer Plan (the "1999 Plan"): In fiscal 2000, the
company instituted the 1999 Plan. The stockholders and the board of
directors approved the 1999 Plan in June 1999. The 1999 Plan provides for
the issue of 6,600,000 equity shares to employees. The 1999 Plan is
administered by a compensation committee comprising five members, all of
who 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 ("FMV"). 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.
The company adopted the proforma disclosure provisions of SFAS No. 123,
Accounting for Stock-Based Compensation. Had compensation cost for the
company's stock-based compensation plan been determined in a manner
consistent with the fair value approach described in SFAS No. 123, the
company's net income and basic earnings per share as reported would have
reduced to the proforma amounts indicated below.
- -----------------------------------------------------------------------------------------------------------------------
2001 2000 1999
- -----------------------------------------------------------------------------------------------------------------------
Net income As reported $ 131,948,104 $ 61,344,528 $ 17,446,088
Adjusted proforma $ 99,690,666 $ 54,649,727 $ 16,905,336
Basic earnings per share As reported $ 2.01 $ 0.93 $ 0.28
Adjusted proforma $ 1.52 $ 0.83 $ 0.27
- -----------------------------------------------------------------------------------------------------------------------
2.15 Employees' Stock Offer Plans ("ESOP") (continued)
The fair value of each warrant is estimated on the date of grant using the
Black-Scholes model with the following assumptions:
- ---------------------------------------------------------------------------------------------------------
2001 2000 1999
- ---------------------------------------------------------------------------------------------------------
Dividend yield % 0.1% 0.1% 0.1%
Expected life 5 years 5 years 5 years
Risk free interest rate 10.8% 10.8% 10.8%
Volatility 44.0% 44.0% 44.0%
The activity in the warrants/equity shares of the 1994, 1998 and 1999
Employees Stock Offer Plans in fiscal 2001, 2000 and 1999 are set out
below.
--------------------------------------------------------------------------------------------------------------------------
2001 2000 1999
--------------------------------------------------------------------------------------------------------------------------
Shares arising Weighted Shares Weighted Shares Weighted
out of options average arising average arising average
exercise out of exercise out of exercise
price options price options price
- --------------------------------------------------------------------------------------------------------------------------------
1994 Option plan:
Outstanding at the
beginning of the year 341,400 - 328,000 - 1,037,200 -
Granted - - 30,000 $ 1.15 1,984,400 $ 0.59
Forfeited (10,600) $ 1.15 (16,600) $ 1.15 (36,400) $ 0.59
Exercised (800) $ 1.15 - - (2,657,200) $ 0.59
Outstanding at the
------------------------------------------------------------------------------------
end of the year 330,000 - 341,400 - 328,000 -
====================================================================================
Exercisable at the end of the year - - - - - -
Weighted-average fair value of
grants during the period at
less than market - $ 35.48 $ 18.43
-------- --------
1998 Option plan:
Outstanding at the
beginning of the year 344,750 - 213,000 - - -
Granted 482,420 $ 230.88 147,150 $ 228.60 213,000 $ 34.00
Forfeited (38,200) $ 172.58 (3,500) $ 34.00 - -
Exercised (6,217) $ 53.82 (11,900) $ 34.00 - -
Outstanding at the
------------------------------------------------------------------------------------
end of the year 782,753 - 344,750 - 213,000 -
====================================================================================
Exercisable at the
end of the year 55,558 - 18,100 - - -
Weighted-average fair value of
grants during the year $ 230.88 $ 228.60 $ 34.00
-------- -------- --------
1999 Option plan:
Outstanding at the beginning
of the year 1,006,800 - - - - -
Granted 1,957,830 $ 136.68 1,014,500 $ 99.12 - -
Forfeited (169,450) $ 110.06 (7,700) $127.98 - -
Exercised (1,200) $ 89.98 - - - -
Outstanding at the
------------------------------------------------------------------------------------
end of the year 2,793,980 - 1,006,800 - - -
====================================================================================
Exercisable at the
end of the year 93,400 - - - - -
Weighted-average fair value of
grants during the year $ 136.68 $ 99.12 -
-------- -------
- --------------------------------------------------------------------------------
The following table summarizes information about stock options outstanding
as of March 31, 2001:
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Outstanding Exercisable
- -----------------------------------------------------------------------------------------------------------------------
Range of Number of Weighted Weighted Number of Weighted
exercise Price shares arising average average shares arising average
out of options remaining exercise out of options exercise
contractual life price price
- -----------------------------------------------------------------------------------------------------------------------
$ 1.15 - $ 304.04 3,906,733 2.20 years $ 129.89 148,958 $ 141.77
- -----------------------------------------------------------------------------------------------------------------------
2.16 Income taxes
The provision for income taxes comprises:
-----------------------------------------------------------------------------------------------------------------------
2001 2000 1999
-----------------------------------------------------------------------------------------------------------------------
Current taxes
Domestic taxes $ 5,315,961 $ 2,505,952 $ 777,351
Foreign taxes 10,525,168 6,538,256 4,725,726
-----------------------------------------------------------------------------------------------------------------------
15,841,129 9,044,208 5,503,077
-----------------------------------------------------------------------------------------------------------------------
Deferred taxes
Domestic taxes (769,304) (850,891) (625,427)
Foreign taxes - - -
-----------------------------------------------------------------------------------------------------------------------
(769,304) (850,891) (625,427)
-----------------------------------------------------------------------------------------------------------------------
Aggregate taxes $ 15,071,825 $ 8,193,317 $ 4,877,650
=======================================================================================================================
The tax effects of significant temporary differences that resulted in
deferred tax assets and liabilities and a description of the financial
statement items that created these differences are as follows:
------------------------------------------------------------------------------------------------------------
2001 2000 1999
------------------------------------------------------------------------------------------------------------
Deferred tax assets:
Property, plant and equipment $ 1,519,016 $ 2,480,883 $ 2,315,375
Accounts receivable 1,587,629 110,000 -
Investments 1,598,712 - -
Others 217,842 85,383 -
------------------------------------------------------------------------------------------------------------
4,923,199 2,676,266 2,315,375
Less: Valuation allowance (1,587,629) (110,000) (600,000)
------------------------------------------------------------------------------------------------------------
Net deferred tax assets $ 3,335,570 $ 2,566,266 $ 1,715,375
============================================================================================================
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of
the deferred tax assets will not be realized. The ultimate realization of
deferred tax assets is dependent upon the generation of future taxable
income during the periods in which the temporary differences become
deductible. Management considers the scheduled reversal of the projected
future taxable income, and tax planning strategies in making this
assessment. Based on the level of historical taxable income and
projections for future taxable income over the periods in which the
deferred tax assets are deductible, management believes that it is more
likely than not the company will realize the benefits of those deductible
differences, net of the existing valuation differences at March 31, 2001.
The amount of the deferred tax assets considered realizable, however,
could be reduced in the near term if estimates of future taxable income
during the carry forward period are reduced.
All deferred tax expenses / (benefits) are allocated to the continuing
operations of the company.
A reconciliation of the income tax provision to the amount computed by
applying the statutory income tax rate to the income before provision for
income taxes is summarized below.
------------------------------------------------------------------------------------------------------------------
2001 2000 1999
------------------------------------------------------------------------------------------------------------------
Net income before taxes $ 147,019,929 $ 69,537,845 $ 22,323,738
Enacted tax rates in India 39.55% 38.50% 35.00%
Computed expected tax expense 58,146,382 26,772,070 7,813,308
Less: Tax effect due to non-taxable export income (57,334,527) (24,019,942) (7,680,942)
Others 3,437,865 (1,121,972) 19,558
Effect of tax rate change (8,077) (29,771) -
Effect of prior period tax adjustments 305,014 54,676 -
------------------------------------------------------------------------------------------------------------------
Provision for Indian income tax 4,546,657 1,655,061 151,924
Effect of tax on foreign income 10,525,168 6,538,256 3,701,898
------------------------------------------------------------------------------------------------------------------
Effect of prior period foreign tax adjustments - - 1,023,828
Aggregate taxes $ 15,071,825 $ 8,193,317 $ 4,877,650
------------------------------------------------------------------------------------------------------------------
The provision for foreign taxes is due to income taxes payable overseas,
principally in the United States of America. The company benefits from
certain significant tax incentives provided to software firms under Indian
tax laws. These incentives presently include: (i) an exemption from
payment of Indian corporate income taxes for a period of ten consecutive
years of operation of software development facilities designated as
"Software Technology Parks" (the "STP Tax Holiday"); and (ii) a tax
deduction for profits derived from exporting computer software (the
"Export Deduction"). All but one of the company's software development
facilities are located in a designated Software Technology Park ("STP").
The Government of India has recently amended the tax incentives available
to companies set up in designated STPs. The period of the STP tax holiday
available to such companies is restricted to 10 consecutive years
beginning from the financial year when the unit started producing computer
software or March 31, 2000, whichever is earlier. Additionally, the export
deduction will be phased out equally over a period of five years starting
from fiscal 2000.
2.17 Earnings per share
The following is a reconciliation of the equity shares used in the
computation of basic and diluted earnings per equity share:
------------------------------------------------------------------------------------------------------------------
2001 2000 1999
------------------------------------------------------------------------------------------------------------------
Basic earnings per equity share - weighted
average number of common shares outstanding
excluding unallocated shares of ESOP 65,771,256 65,659,625 61,378,850
Effect of dilutive common equivalent shares
- stock options outstanding 943,483 204,365 128,530
------------------------------------------------------------------------------------------------------------------
Diluted earnings per equity share -
weighted average number of common
shares and common equivalent shares outstanding 66,714,739 65,863,990 61,507,380
------------------------------------------------------------------------------------------------------------------
2.18 Financial instruments
Foreign exchange forward contracts
The company enters into foreign exchange forward contracts to offset the
foreign currency risk arising from the accounts receivable denominated in
currencies other than the Indian rupee, primarily the U.S. dollar. The
counter party to the company's foreign currency forward contracts is
generally a bank. Management believes that the risks or economic
consequences of non-performance by the counter party are not material to
its financial position or results of operations. There were no significant
foreign exchange gains and losses on foreign exchange forward contracts
during fiscal 2001, 2000 and 1999. As of March 31, 2001 and 2000, the
company had open foreign exchange forward contracts in the amounts of $
20,000,000 and Nil, respectively.
2.19 Segment reporting
SFAS No. 131, Disclosures about Segments of an Enterprise and Related
Information, establishes standards for the way that public business
enterprises report information about operating segments and related
disclosures about products and services, geographic areas, and major
customers. The company's operations predominantly relate to providing IT
solutions, delivered to customers located globally, across various
industry segments. In the previous year, the company provided segmental
disclosures based on the geographical segment. However, in the current
fiscal year, the Chief Operating Decision Maker evaluates the company's
performance and allocates resources based on an analysis of various
performance indicators by industry classes and geographic segmentation of
customers. Accordingly, revenues represented along industry classes
comprise the principal 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
consistently applied to record revenue and expenditure in individual
segments, and are as set out in the summary of significant accounting
policies.
Industry segments for the company are primarily financial services
comprising enterprises providing banking finance and insurance services,
manufacturing enterprises, enterprises in the telecommunications
("telecom") and retail industries, and others such as utilities,
transportation and logistics companies.
Revenue in relation to segments is categorized based on items that are
individually identifiable to that segment, while expenditure is
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. Management 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 adjusted only against the total income of the company.
Geographic segmentation is 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.
Fixed assets used in the company's business are not identified to any of
the reportable segments, as these are used interchangeably between
segments. Management believes that it is currently not practicable to
provide segment disclosures relating to total assets and liabilities since
a meaningful segregation of the available data is onerous.
Geographical information on revenue and industry revenue information is
collated based on individual customers invoiced or in relation to which
the revenue is otherwise recognized.
2.19.1 Industry segments
Year ended March 31, 2001 (in $)
----------------------------------------------------------------------------------------------------------------
Financial Manufacturing Telecom Retail Others Total
services
----------------------------------------------------------------------------------------------------------------
Revenues 139,616,739 74,004,867 76,412,722 37,684,446 86,131,736 413,850,510
Identifiable operating expenses 49,021,150 28,363,069 19,219,376 11,893,574 26,233,048 134,730,217
Allocated expenses 38,589,808 19,736,596 20,423,026 10,057,009 23,189,607 111,996,046
----------------------------------------------------------------------------------------------------------------
Segmental operating income 52,005,781 25,905,202 36,770,320 15,733,863 36,709,081 167,124,247
Unallocable expenses 29,609,661
-----------
Operating income 137,514,586
Other income (expense), net 9,505,343
-----------
Net income before taxes 147,019,929
-----------
--------------------------------------------------------------------------------------------------------------
Year ended March 31, 2000 (in $)
----------------------------------------------------------------------------------------------------------------
Financial Manufacturing Telecom Retail Others Total
services
----------------------------------------------------------------------------------------------------------------
Revenues 61,153,566 46,770,389 31,248,637 21,637,626 42,633,536 203,443,754
Identifiable operating expenses 23,665,914 16,612,901 10,222,455 6,349,884 15,971,172 72,822,326
Allocated expenses 16,326,836 11,955,090 8,010,255 5,544,554 10,899,835 52,736,570
----------------------------------------------------------------------------------------------------------------
Segmental operating income 21,160,816 18,202,398 13,015,927 9,743,188 15,762,529 77,884,858
Unallocable expenses 17,385,805
-----------
Operating income 60,499,053
Other income (expense), net 9,038,792
-----------
Net income before taxes 69,537,845
-----------
----------------------------------------------------------------------------------------------------------------
Year ended March 31, 1999 (in $)
----------------------------------------------------------------------------------------------------------------
Financial Manufacturing Telecom Retail Others Total
services
----------------------------------------------------------------------------------------------------------------
Revenues 28,194,176 29,715,264 17,205,400 16,614,712 29,225,674 120,955,226
Identifiable operating expenses 10,781,807 9,764,221 5,548,040 5,532,826 10,493,354 42,120,248
Allocated expenses 7,461,572 7,512,683 4,340,288 4,230,432 7,343,751 30,888,726
Segmental operating income 9,950,797 12,438,360 7,317,072 6,851,454 11,388,569 47,946,252
Unallocable expenses 25,073,625
-----------
Operating income 22,872,627
Equity in loss of deconsolidated subsidiary (2,085,887)
Other income (expense), net 1,536,998
-----------
Net income before taxes 22,323,738
-----------
----------------------------------------------------------------------------------------------------------------
2.19 Segment reporting (continued)
2.19.2 Geographic segments
Year ended March 31, 2001 (in $)
-----------------------------------------------------------------------------------------------------------------
North America Europe India Rest of the Total
World
-----------------------------------------------------------------------------------------------------------------
Revenues 304,242,537 77,892,656 5,778,286 25,937,031 413,850,510
Identifiable operating expenses 96,358,758 27,210,316 1,943,571 9,217,572 134,730,217
Allocated expenses 82,053,059 20,951,885 1,866,259 7,124,843 111,996,046
-----------------------------------------------------------------------------------------------------------------
Segmental operating income 125,830,720 29,730,455 1,968,456 9,594,616 167,124,247
Unallocable expenses 29,609,661
-----------
Operating income 137,514,586
Other income (expense), net 9,505,343
-----------
Net income before taxes 147,019,929
-----------
-----------------------------------------------------------------------------------------------------------------
Year ended March 31, 2000 (in $)
-----------------------------------------------------------------------------------------------------------------
North America Europe India Rest of the Total
World
-----------------------------------------------------------------------------------------------------------------
Revenues 158,723,649 30,064,939 2,912,091 11,743,075 203,443,754
Identifiable operating expenses 54,672,143 12,722,875 913,895 4,513,413 72,822,326
Allocated expenses 40,875,291 7,759,319 1,061,766 3,040,194 52,736,570
-----------------------------------------------------------------------------------------------------------------
Segmental operating income 63,176,215 9,582,745 936,430 4,189,468 77,884,858
Unallocable expenses 17,385,805
-----------
Operating income 60,499,053
Other income (expense), net 9,038,792
-----------
Net income before taxes 69,537,845
-----------
-----------------------------------------------------------------------------------------------------------------
Year ended March 31, 1999 (in $)
-----------------------------------------------------------------------------------------------------------------
North America Europe India Rest of the Total
World
-----------------------------------------------------------------------------------------------------------------
Revenues 99,203,989 11,302,791 2,051,492 8,396,954 120,955,226
Identifiable operating expenses 33,730,337 4,539,059 695,267 3,155,585 42,120,248
Allocated expenses 25,127,762 2,879,857 670,851 2,210,256 30,888,726
-------------------------------------------------------------------------------- --------------------------------
Segmental operating income 40,345,890 3,883,875 685,374 3,031,113 47,946,252
Unallocable expenses 25,073,625
-----------
Operating income 22,872,627
Equity in loss of deconsolidated subsidiary (2,085,887)
Other income (expense), net 1,536,998
-----------
Net income before taxes 22,323,738
-----------
-----------------------------------------------------------------------------------------------------------------
2.19.3 Significant clients
No clients individually accounted for more than 10% of the revenues in
fiscal 2001, 2000 and 1999, respectively.
2.20 Commitments and contingencies
The company has outstanding performance guarantees for various statutory
purposes totaling $ 1,126,611, $ 1,207,110 and $ 760,329 as of March 31,
2001, 2000 and 1999, respectively. These guarantees are generally provided
to governmental agencies.
2.21 Litigation
The company is subject to legal proceedings and claims, which have arisen,
in the ordinary course of its business. These actions, when ultimately
concluded and determined, will not, in the opinion of management, have a
material effect on the results of operations or the financial position of
the company.
2.22 Post balance sheet date events
The board of directors of the company declared a dividend of $ 10,656,913
at their meeting held on April 11, 2001. Dividend taxes payable on the
same amount to $ 1,087,005.
2.23 Non-monetary transaction
In fiscal 2001, the company transferred certain Intellectual Property
Rights ("IPR") that it had developed and owned in a product called Onscan
to OnMobile Systems Inc. (formerly Onscan Inc). Onscan is a comprehensive
web-enabled wireless notification product. In exchange for the transfer,
the company received consideration in the form of securities including
100,000 Common Stock, par value $ 0.001 each, 100,000 Series A Voting
Convertible Preferred Stock, par value $ 0.001 each and 4,400,000 Series A
Nonvoting Convertible Preferred Stock, par value $ 0.001 each. Convertible
Preferred Stock is convertible into Common Stock automatically upon the
closing of an Initial Public Offering by Onscan Inc. As of March 31, 2001,
the company's controlling interest in OnMobile Systems Inc. was
approximately 12%. The transfer was recorded at historic cost and,
accordingly, no gain was recognized on this transaction as of the date of
transfer of the IPR.
2.24 Recent accounting pronouncements
Effective April 1, 2001, Infosys adopted SFAS 133, Accounting for
Derivative Instruments and Hedging Activities as amended, when the
pronouncement became effective for companies with fiscal year ending March
31, 2001. SFAS 133 will change the accounting treatment of derivative
contracts (including foreign exchange contracts) that are employed to
manage risks. It establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded
in other contracts and for hedging activities. All derivatives, whether
designated in hedging relationships or not, are required to be recorded on
the balance sheet at fair value. The accounting treatment of changes in
fair value is dependent upon whether or not a derivative instrument is
designated as a hedge and if so, the type of hedge. If the derivative is
designated as a fair value hedge, the changes in the fair value of the
derivative and of the hedged item attributable to the hedged risk are
recognized in earnings. If the derivative is designated as a cash flow
hedge, the effective portions of changes in the fair value of the
derivative are recorded in other comprehensive income and are recognized
in the income statement when the hedged item affects earnings. Ineffective
portions of changes in the fair value of cash flow hedges are recognized
in earnings. The company observes that the net amount reflected in current
earnings under the new rules will be substantially similar to the amounts
under existing accounting practice.
Form 20-F
- --------------------------------------------------------------------------------
Pages 132 to 168
Shareholder information
________________________________________________________________________________
. Shareholder information
. Frequently asked questions (FAQ)
. Additional information to shareholders
- Share performance chart
- Intangible assets scoresheet
- Human resources accounting and value-added statement
- Brand valuation
- Balance sheet (including intangible assets)
- Current cost adjusted financial statements
- Economic value-added (EVA) statement
- Ratio analysis
- Statutory obligations
. Management structure
. A historical perspective
. Infosys Foundation
Shareholder information
________________________________________________________________________________
1. Dates of book closure May 16 to June 2 (both days inclusive)
2. Date and venue of the 3.00 p.m. on June 2, 2001 at the J.N. Tata
annual general meeting Auditorium, National Science Seminar
Complex Indian Institute of Science,
Bangalore - 560 012, India
3. Dividend payment On or after June 2, 2001, but within the
statutory time limit
4. Listing on stock exchanges Bangalore Stock Exchange Ltd. (BSE)
in India at Stock Exchange Towers, No. 51, 1 Cross, J.
C. Road, Bangalore - 560 027, India
Tel.: +91-80-299 5234, Fax: +91-80-299 5242
The Stock Exchange, Mumbai (BSE) Phiroze
Jeejeebhoy Towers, Dalal Street, Mumbai -
400 001, India
Tel.: +91-22-265 5581, Fax: +91-22-265 8121
National Stock Exchange of India Ltd.(NSE)
Trade World, Senapati Bapat Marg, Lower
Parel, Mumbai - 400 013, India
Tel.: +91-22-497 2950, Fax: +91-22-491
4275 / 85
5. Listing fees Paid for all the above stock exchanges for
2000-2001
6. 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
7. Registered office Electronics City, Hosur Road, Bangalore -
561 229, India Tel.:+91-80-8520261,Fax:+91-
80-8520362 Homepage: www.infy.com
8. Share transfers in physical Karvy Consultants Limited Registrars and
form and other communication Share Transfer Agents T.K.N. Complex, No.
regarding share certificates, 51/2, Vanivilas Road Opp. National College,
dividends, and change of Basavanagudi Bangalore - 560 004, India
address, etc. in India may be Tel.: +91-80-662 1184, Fax: +91-80-662 1169
addressed to E-mail: bangalore@karvy.com
9. Share transfer system
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 year
2000-01 was 11,356 (previous year - 3,35,878). 87.67% of transfers
(previous year - 99.16%) were completed within 15 days.
- -------------------------------------------------------------------------------------------------------------------------
Year ended March 31
- -------------------------------------------------------------------------------------------------------------------------
2001 2000
- -------------------------------------------------------------------------------------------------------------------------
Transfer No. of No. of No. of No. of
period transferees (folios) shares % transferees (folios) shares %
in days New Existing New Existing
1- 10 15 4 9,556 84.15 87 36 3,25,068 96.78
11- 15 1 - 400 3.52 22 7 8,010 2.38
16- 20 3 - 1,400 12.33 5 - 1,400 0.42
21 and above* - - - - 5 3 1,400 0.42
- -------------------------------------------------------------------------------------------------------------------------
19 4 11,356 100.00 119 46 3,35,878 100.00
=========================================================================================================================
* Delays beyond 21 days were due to compliance with legal requirements.
10. 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 for 2000-01 are:
--------------------------------------------------------------------------------------------------------------------------
BSE NSE BgSE
--------------------------------------------------------------------------------------------------------------------------
High Low Volume High Low Volume High Low Volume
Rs. Rs. Nos. Rs. Rs. Nos. Rs. Rs. Nos.
April 2000 10,626 6,651 38,63,008 10,601 6,671 38,41,367 10,568 6,541 23,243
May 8,780 5,600 80,35,618 8,740 5,525 1,06,05,877 8,749 5,501 57,567
June 8,938 6,801 75,60,300 8,950 6,833 84,59,664 8,895 6,806 73,934
July 8,815 6,401 91,78,299 8,812 6,355 88,47,755 8,790 6,400 44,147
August 8,617 6,255 1,00,98,169 8,603 6,256 1,26,23,716 8,500 6,230 64,163
September 8,930 6,950 1,40,65,483 8,949 6,975 1,33,52,783 8,998 6,985 74,460
October 7,714 6,102 1,41,69,566 7,725 6,120 1,57,50,857 7,700 6,110 59,794
November 8,042 7,150 1,08,26,217 8,014 7,160 1,28,90,086 8,025 7,150 47,303
December 7,680 5,416 1,51,85,245 8,042 5,422 1,67,18,910 7,872 5,411 45,266
January 2001 6,988 5,475 1,83,36,214 6,940 5,484 1,98,28,472 7,100 5,502 56,355
February 6,900 5,540 1,00,60,615 6,910 5,536 1,17,73,048 6,880 5,550 28,539
March 6,294 3,741 1,03,15,855 6,250 3,765 1,24,75,281 6,380 3,755 32,209
--------------------------------------------------------------------------------------------------------------------------
Total 13,16,94,589 14,71,67,816 6,06,980
% of volume traded to average 2000-01 205.55% 229.70% 0.95%
shares outstanding 1999-00 76.27% 78.09% 0.10%
1998-99 102.41% 131.42% -
--------------------------------------------------------------------------------------------------------------------------
The number of shares outstanding is 6,40,70,000. The American Depositary
Shares (ADSs) have been excluded for the purpose of this calculation.
11. Investors' services - complaints received during the year
-------------------------------------------------------------------------------------------------------------------------
Year ended March 31
-------------------------------------------------------------------------------------------------------------------------
2001 2000
-------------------------------------------------------------------------------------------------------------------------
Nature of complaints Received Attended to Received Attended to
-------------------------------------------------------------------------------------------------------------------------
1. Non-receipt of share certificates 1 1 9 9
2. Non-receipt of bonus shares / split shares 8 8 67 67
3. Letters from stock exchanges, SEBI, etc. 2 2 1 1
4. Non-receipt of dividend warrants 88 88 45 45
-------------------------------------------------------------------------------------------------------------------------
99 99 122 122
-------------------------------------------------------------------------------------------------------------------------
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 years 2000-01 and 1999-2000, except in cases that are constrained by
disputes or legal impediments.
12. Legal proceedings
There are some pending cases relating to disputes over title to shares, in
which the company is made a party. However, these cases are not material
in nature.
13. Distribution of shareholding as on March 31
------------------------------------------------------------------------------------------------------------------------
2001 2000
------------------------------------------------------------------------------------------------------------------------
No. of equity No. of % of No. of % of No. of % of No. of % of
shares held share- share- shares share- share- share- shares share-
holders holders holding holders holders holding
------------------------------------------------------------------------------------------------------------------------
1- 100 77,725 86.71 9,83,502 1.53 34,563 74.63 8,15,853 1.27
101-200 2,739 3.06 4,39,999 0.69 2,560 5.53 7,29,086 1.14
201-500 3,131 3.49 10,83,761 1.69 2,845 6.14 12,54,656 1.96
501-1000 2,586 2.88 19,03,875 2.97 2,695 5.82 21,81,550 3.41
1001- 5000 2,715 3.03 55,96,755 8.74 2,972 6.42 63,90,248 9.97
5001-10000 313 0.35 22,32,869 3.48 340 0.73 25,38,044 3.96
10001 and above 433 0.48 5,14,25,033 80.27 338 0.73 4,99,07,070 77.90
NSDL transit - - 4,04,206 0.63 - - 2,52,293 0.39
------------------------------------------------------------------------------------------------------------------------
89,642 100.00 6,40,70,000 100.00 46,313 100.00 6,40,68,800 100.00
Equity shares underlying 1 20,88,117 1 20,81,900
American Depositary Shares*
------------------------------------------------------------------------------------------------------------------------
Total 89,643 6,61,58,117 46,314 6,61,50,700
========================================================================================================================
* Held by beneficial owners outside India.
14. Categories of shareholders as on March 31
------------------------------------------------------------------------------------------------------------------------
2001 2000
------------------------------------------------------------------------------------------------------------------------
Category No. of Voting No. of No. of Voting No. of
shareholders strength (%) shares held shareholders strength (%) shares held
------------------------------------------------------------------------------------------------------------------------
Individuals 84,881 24.03 1,58,96,476 43,364 26.87 1,77,74,390
Companies 3,478 1.50 9,94,196 2,220 1.78 11,75,866
FIIs 383 28.90 1,91,14,466 270 24.38 1,61,27,027
OCBs and NRIs 675 0.75 4,97,918 299 0.75 4,95,267
Founders and their families 23 29.15 1,92,87,560 23 29.30 1,93,81,960
Mutual funds, banks, FIs 202 11.90 78,75,178 137 13.39 88,61,997
NSDL transit - 0.61 4,04,206 - 0.38 2,52,293
Equity shares underlying 1 3.16 20,88,117 1 3.15 20,81,900
American Depositary Shares*
------------------------------------------------------------------------------------------------------------------------
Total 89,643 100.00 6,61,58,117 46,314 100.00 6,61,50,700
========================================================================================================================
* Held by beneficial owners outside India.
15. Shares under lock-in
Employee Stock Offer Plan (ESOP) 1994
Details of shares of par value of Rs. 5 each held by employees under the
Employee Stock Offer Plan (ESOP) 1994 subject to lock-in are given below.
These shares are also included in the categories of shareholders given in
(14) above.
No. of shares subject to lock-in as on March 31
------------------------------------------------------------------------------------------------------------------------
2001 2000
Period of lock-in No. of shares No. of employees No. of shares No. of employees
3-4 years - - 7,82,000 1,033
2-3 years 7,50,200 994 5,00,400 340
1-2 years 4,79,600 329 2,04,000 151
0-1 year 1,91,400 144 2,57,200 105
------------------------------------------------------------------------------------------------------------------------
As on March 31, 2001, 529 employees hold rights to 3,30,000 shares of par
value of Rs. 5 each, which are subject to a lock-in of 3-4 years.
Currently, 1,544 employees hold shares under the 1994 Stock Offer Plan.
Shares subject to lock-in held by the employees will be transferred back to
the ITL Employees Welfare Trust if such employees leave the services of the
company before the vesting period. As on March 31, 2001, the ITL Employees
Welfare Trust holds 2,57,400 shares of par value of Rs. 5 each that are not
subject to further grants as the 1994 Stock Offer Plan has since been
terminated.
Employee Stock Option Plan (ESOP) 1998
The company established the 1998 Stock Option Plan, which provides for the
grant of non-statutory stock options and incentive stock options to the
employees of the company. This plan was approved by the board of directors
in December 1997, and by the shareholders in January 1998. The Government
of India has approved the 1998 plan, subject to a limit of 14,70,000 equity
shares of par value of Rs. 5 each, representing 29,40,000 ADSs to be issued
under the plan. During the year, options were granted to 752 employees to
acquire 9,64,840 ADSs, corresponding to 4,82,420 equity shares of par value
of Rs. 5 each. During the year, 20 employees exercised the options to
acquire 12,434 ADSs, corresponding to 6,217 shares of par value of Rs. 5
each. As on March 31, 2001, 757 employees hold options to acquire 15,65,506
ADSs, corresponding to 7,82,753 equity shares of par value of Rs. 5 each.
Details of the number of ADSs options granted and exercised are given
below.
No. of options granted and exercised
----------------------------------------------------------------------------------------------------------
Granted Exercised Balance
----------------------------------------------------------------------------------------------------------
Year No. of ADSs No. of ADSs ADSs
employees (net) employees
----------------------------------------------------------------------------------------------------------
1999 31 4,01,400 32 34,534 3,66,866
2000 64 2,63,100 5 1,700 2,61,400
2001 735 9,37,240 - - 9,37,240
----------------------------------------------------------------------------------------------------------
Total 16,01,740 36,234 15,65,506
==========================================================================================================
Employee Stock Option Plan (ESOP) 1999
The 1999 plan was approved by the board of directors and the shareholders
in June 1999, and was instituted in fiscal 2000. The plan provides for the
issue of 66,00,000 equity shares of par value of Rs. 5 each to the
employees. During the year, options were granted to 9,376 employees to
acquire 19,57,830 equity shares of par value of Rs. 5 each. During the
year, 22 employees exercised the options to acquire 1,200 shares of par
value of Rs. 5 each. As on March 31, 2001, 9,170 employees hold options to
acquire 27,93,980 shares of par value of Rs. 5 each. Details of shares of
par value of Rs. 5 each held by employees under the Employee Stock Offer
Plan (ESOP) 1999, are given below.
No. of options granted and exercised
-----------------------------------------------------------------------------------------------------------------------
Granted Exercised Balance
-----------------------------------------------------------------------------------------------------------------------
Year No. of No. of No. of No. of No. of
employees shares (net) employees shares shares
-----------------------------------------------------------------------------------------------------------------------
2000 1,150 9,46,000 22 1,200 9,44,800
2001 8,713 18,49,180 - - 18,49,180
-----------------------------------------------------------------------------------------------------------------------
Total 27,95,180 1,200 27,93,980
=======================================================================================================================
16. 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. Over 98% of the
company's shares are now held in electronic form.
17. Financial calendar (tentative and subject to change)
Annual General Meeting June 02, 2001
Financial reporting for the first quarter ending June 30, 2001 July 10, 2001
Financial reporting for the second quarter ending September 30, 2001 October 10, 2001
Interim dividend payment (if any) November, 2001
Financial reporting for the third quarter ending December 31, 2001 January 10, 2002
Financial results for the year ending March 31, 2002 April 10, 2002
Annual General Meeting for the year ending March 31, 2002 May / June, 2002
18. Investors' correspondence in India Any queries relating to the financial may be addressed to:
statements of the company may be addressed to:
The Company Secretary Mr. T. V. Mohandas Pai
Investors' Service Cell Director (F&A) and CFO
Infosys Technologies Ltd., Electronics City Infosys Technologies Ltd., Electronics City
Hosur Road, Bangalore - 561 229, India Hosur Road, Bangalore - 561 229, India
Tel.: +91-80-852 0440, Fax: +91-80-852 0362 Tel.: +91-80-852 0396, Fax: +91-80-852 0362
E-mail: balakv@infy.com E-mail: mdpai@infy.com
19. Reuters code- INFY.BO (BSE) Bridge code - IN;INF (BSE) Bloomberg code- INFO IN (BSE)
- INFY.NS (NSE) - IN;INFN (NSE) - NINFO IN (NSE)
- INFY.O (NASDAQ) - US;INFY (NASDAQ)
20. 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 the NASDAQ National Market for the year ended
March 31, 2001, are:
---------------------------------------------------------------------------------------------------
High Low Volume
---------------------------------------------------------------------------------------------------
$ Rs. $ Rs. Nos.
---------------------------------------------------------------------------------------------------
April 2000 284.56 24,837 131.13 11,445 5,999,400
May 214.50 19,116 130.75 11,652 3,698,600
June 199.94 17,850 154.38 13,783 1,888,300
July 186.94 16,776 120.00 10,769 2,533,000
August 169.13 15,475 96.50 8,830 3,700,100
September 164.00 15,091 121.00 11,134 2,045,300
October 137.55 12,839 105.13 9,813 2,584,900
November 147.25 13,800 112.00 10,497 1,372,600
December 141.50 13,213 90.06 8,410 2,963,900
January 2001 131.38 6,093 86.13 3,994 2,536,300
February 123.00 5,737 86.75 4,046 2,661,200
March 92.94 4,327 60.13 2,799 5,009,600
---------------------------------------------------------------------------------------------------
Total 36,993,200
---------------------------------------------------------------------------------------------------------
% of volume traded to total float 885.80%
2 ADS = 1 equity share
The number of ADSs outstanding is 4,176,234
US$ have been converted into Indian rupees at the monthly closing rates
e. Premium of American Depositary Shares over the shares traded on the
Indian stock exchanges.
The ADS price quoted below is in Indian rupees and has been converted at
the monthly closing rates.
[CHART APPEARS HERE]
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@infy.com
g. Name and address of the Deutsche Bank A.G.
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
Corporate Trust and Agency Services
Deutsche Bank A.G.
1/st/ Floor, Kodak House
222, Dr. D. N. Road
Fort, Mumbai - 400 001, India
Tel.: +91-22-207 3262, Fax: +91-22-207
9614
i. Name and address of the ICICI Limited
custodian in India ICICI Towers
Bandra Kurla Complex
Mumbai - 400 051, India
Tel.: +91-22-653 1414, Fax: +91-22-653
1164/65
Frequently asked questions
________________________________________________________________________________
1. What is an American Depositary Share ("ADS")?
Ans: An ADS is a negotiable certificate evidencing ownership of an
outstanding class of stock in a non-US company. ADSs are created when
ordinary shares are delivered to a custodian bank in the domestic market,
which then instructs a depositary bank in the US to issue ADSs based on a
predetermined ratio. ADSs are SEC registered securities and may trade
freely, just like any other security, either on an exchange or in the over-
the-counter market.
2. What is the difference between an ADS and a GDR?
Ans: ADSs and GDRs (Global Depositary Receipts) are the same in their
functionality - they both evidence ownership of foreign securities
deposited with a custodian bank. ADSs represent securities that are listed
in the United States, while GDRs represent securities listed outside of the
United States, typically in London.
3. Do the ADSs have voting rights?
Ans: Yes. In the event of a matter submitted to the holders of ordinary
shares for a vote, the ADS holders on record as at a particular date will
be allowed to instruct the depositary bank to exercise the vote in respect
of the equity shares representing the ADS held by them.
4. Are the ADSs entitled to cash dividends?
Ans: Yes, whenever dividends are paid to ordinary shareholders. Cash
dividends to ADS holders are declared in local currency and paid in dollars
(based on the prevailing exchange rate) by the depositary bank, net of the
depositary's fees and expenses.
5. Does Infosys have a dividend reinvestment program or dividend stock
purchase plan?
Ans: Infosys does not offer a dividend reinvestment program or dividend
stock program, at present.
6. Where and in which year was Infosys incorporated?
Ans: Infosys was incorporated in Mumbai, in the state of Maharashtra, in
India, on July 2, 1981.
7. When did Infosys have its initial public offer (IPO) and what was the
initial listing price? Was there any follow-on offering?
Ans: Infosys made an initial public offer in February 1993 and was listed
on stock exchanges in India in June 1993. Trading opened at Rs. 145 per
share compared to the IPO price of Rs. 95 per share. In October 1994,
Infosys made a private placement of 5,50,000 shares at Rs. 450 each to
Foreign Institutional Investors (FIIs), Financial Institutions (FIs) and
Corporates. During March 1999, Infosys issued 20,70,000 ADSs (equivalent to
10,35,000 equity shares of par value of Rs. 10 each) at $ 34 per ADS under
the American Depositary Shares Program and the same were listed on the
NASDAQ National Market.
8. Which are the stock exchanges where Infosys shares are listed and traded?
Ans: Shares of Infosys are listed and traded in India on the Bangalore
Stock Exchange, The Stock Exchange, Mumbai, and the National Stock
Exchange, Mumbai. The ADSs of Infosys are traded on the NASDAQ National
Market in the US.
9. What are the Reuters, Bridge and Bloomberg codes for Infosys stock?
-------------------------------------------------------------------------------------------------------
Ans: Exchange Reuters code Bridge code Bloomberg code
-------------------------------------------------------------------------------------------------------
The Stock Exchange, Mumbai, India INFY.BO IN;INF INFO IN
National Stock Exchange, India INFY.NS IN;INFN NINFO IN
Nasdaq, USA INFY.O US;INFY -
-------------------------------------------------------------------------------------------------------
10. What is the Infosys ADS ratio?
Ans: Each Infosys ADS represents one-half of one ordinary equity share of
Infosys.
11. What is the symbol for Infosys ADS and where is it traded?
Ans: The symbol is "INFY" and the same is traded on the NASDAQ National
Market in the US.
12. When is the next earnings release? What is the fiscal year of Infosys?
Ans: The tentative dates of earnings releases are given below. The earnings
release date will also be posted on the website www.infy.com, after
announcement to the stock exchanges.
-------------------------------------------------------------------------
Earnings release date (tentative
and subject to change)
-------------------------------------------------------------------------
First quarter ending June 30, 2001 July 10, 2001
Second quarter ending September 30, 2001 October 10, 2001
Third quarter ending December 31, 2001 January 10, 2002
Year ending March 31, 2002 April 10, 2002
-------------------------------------------------------------------------
The fiscal year of the company is the period of 12 months starting April 1,
every year.
13. What is the employee strength of Infosys?
Ans: As of March 31, 2001, Infosys had 9,831 employees, as compared to
5,389 on March 31, 2000, on a full-time basis.
The distribution of the employees is:
-----------------------------------------------------------------------------------------------------------
2001 2000
-----------------------------------------------------------------------------------------------------------
Software development including trainees 8,656 88.05% 4,623 85.79%
Support services 1,175 11.95% 766 14.21%
-----------------------------------------------------------------------------------------------------------
Total 9,831 100.00% 5,389 100.00%
-----------------------------------------------------------------------------------------------------------
The gender classification of the employees is:
Male 8,140 82.80% 4,558 84.58%
Female 1,691 17.20% 831 15.42%
-----------------------------------------------------------------------------------------------------------
Total 9,831 100.00% 5,389 100.00%
-----------------------------------------------------------------------------------------------------------
The age profile of employees is:
-----------------------------------------------------------------------------------------------------------
2001 2000
-----------------------------------------------------------------------------------------------------------
Between 20 and 25 years 6,030 62% 3,057 57%
Between 26 and 30 years 2,794 28% 1,659 31%
Between 31 and 40 years 870 9% 579 11%
Between 41 and 50 years 120 1% 83 1%
Between 51 and 60 years 17 - 11 -
-----------------------------------------------------------------------------------------------------------
Total 9,831 100% 5,389 100%
-----------------------------------------------------------------------------------------------------------
14. Does Infosys issue quarterly reports?
Ans: Yes. Infosys issues audited quarterly reports conforming to the
Indian GAAP and unaudited quarterly reports conforming to the US
GAAP, and the same are mailed to all the shareholders.
15. How do I transfer my shares in India or change my address with the transfer
agent?
Ans: To transfer shares in physical form, you have to write to the
company's registrars:
Karvy Consultants Limited
Registrars and Share Transfer Agents
T.K.N. Complex, No. 51/2, Vanivilas Road,
Opp. National College, Basavanagudi,
Bangalore - 560 004, India
Tel.: +91-80-662 1184, Fax: +91-80-662 1169,
E-mail: bangalore@karvy.com
or write to:
The Company Secretary
Infosys Technologies Limited
Electronics City, Hosur Road
Bangalore - 561 229, India
Tel.: +91-80-852 1518, Fax: +91-80-852 0362
You can also address your queries to the e-mail id: balakv@infy.com.
Transfer of shares in electronic form is effected through your
depositary participant. General correspondence regarding shares may be
addressed to the company's registrars, Karvy Consultants Limited, or to
The Company Secretary, Infosys Technologies Limited.
16. Who are the depositary and custodian for the ADS program?
Ans:Depositary Deutsche Bank A.G.
Corporate Trust and Agency Services
4 Albany Street, New York, NY 10006, USA
Tel.: +1-212-250-8500, Fax: +1-212-250-5644
Custodian ICICI Limited
ICICI Towers
Bandra Kurla Complex
Mumbai - 400 051, India
Tel.: +91-22-653 1414, Fax: +91-22-653 1164/65
17. What is the history of bonus issues (equivalent to stock split in the form
of stock dividend) and stock split at Infosys?
--------------------------------------------------------------------------------------------------------------
Ans: Year 1986 1989 1991 1992 1994 1997 1999 2000
--------------------------------------------------------------------------------------------------------------
Bonus issue ratio 1:1 1:1 1:1 1:1 1:1 1:1 1:1 -
--------------------------------------------------------------------------------------------------------------
Stock split ratio 2 for 1 2 for 1 2 for 1 2 for 1 2 for 1 2 for 1 2 for 1 2 for 1
--------------------------------------------------------------------------------------------------------------
The company completed a 2-for-1 stock split (i.e., a subdivision of every
equity share of par value of Rs. 10 each into two equity shares of par
value of Rs. 5 each) during fiscal 2000.
18. How many software development centers does Infosys have?
Ans: Infosys has 16 development centers in India - five in Bangalore, two
each in Bhubaneswar, Chennai, Mangalore and Pune, and one each in
Hyderabad, Mohali and Mysore. Infosys has one global development center in
Toronto, Canada. In addition, there are six proximity development centers
in Fremont, Boston, Chicago, New Jersey, Phoenix, Arizona in the US and in
London, UK.
19. How many marketing offices does Infosys have?
Ans: There are 21 marketing offices overseas, of which 9 are located in the
US, two in Australia, one each in the UK, Germany, Canada, Japan, Belgium,
Sweden, Hong Kong, Sharjah, Argentina and France. Besides these, there are
four marketing offices in India.
20. What is the employee strength and revenue growth since 1995?
Ans: The employee strength and revenue growth since 1995 is as follows:
As per US GAAP
- -------------------------------------------------------------------------------------------------------------------------
Fiscal year ended Total no. of Growth Net revenues Growth Net income Growth
March 31 employees % in $ million % in $ million %
- -------------------------------------------------------------------------------------------------------------------------
1995 903 58 18.11 90 3.96 48
1996 1,172 30 26.61 47 6.82 72
1997 1,705 45 39.59 49 8.64 27
1998 2,605 53 68.33 73 13.86* 60
1999 3,766 45 120.96 77 30.35* 119
2000 5,389 43 203.44 68 61.34 102
2001 9,831 82 413.85 103 131.95 115
- -------------------------------------------------------------------------------------------------------------------------
* This excludes a one-time deferred stock compensation expense arising from
stock split amounting to $ 12,906,962 and $ 1,519,739 in fiscal 1999 and
1998, respectively.
As per Indian GAAP
- -------------------------------------------------------------------------------------------------------------------------
Fiscal year ended Total no. of Growth Revenue Growth PAT* Growth
March 31 employees % in Rs. crore % in Rs. crore %
- -------------------------------------------------------------------------------------------------------------------------
1995 903 58 57.70 92 13.32 65
1996 1,172 30 93.41 62 21.01 58
1997 1,705 45 143.81 54 33.68 60
1998 2,605 53 260.37 81 60.36 79
1999 3,766 45 512.74 97 132.92 120
2000 5,389 43 921.46 80 285.95 115
2001 9,831 82 1,959.94 113 623.32 118
- -------------------------------------------------------------------------------------------------------------------------
* From ordinary activities
21. Does Infosys pay dividends? What is the dividend policy of Infosys?
Ans: Currently, Infosys pays dividend to its shareholders. The current
dividend policy is to distribute up to 20% of the PAT as dividend. The
board of directors reviews the dividend policy periodically.
22. How do I contact Infosys by telephone, mail or in person?
Ans: Members of the press can contact the following members of Infosys'
management for any information.
N. R. Narayana Murthy,
Chairman and Chief Executive Officer Tel: +91-80-852 0363 / 852 0399
Nandan M. Nilekani,
Managing Director, President and Chief
Operating Officer Tel: +91-80-852 0351
T. V. Mohandas Pai,
Director - Finance & Administration and
Chief Financial Officer Tel: +91-80-852 0396
The Infosys corporate mailing address is:
Infosys Technologies Limited,
44, Electronics City, Hosur Road,
Bangalore - 561 229, India.
Tel.: +91-80-852 0261, Fax: +91-80-852 0362
For direct correspondence, the general electronic address is
infosys@infy.com.
23. Is there any investor relations contact in the US?
Ans: Mr. P. R. Ganapathy, Investor Relations Officer, is based at the
company's Fremont office and will be available at the following address to
answer any queries from investors.
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@infy.com
--------------------------------------------
24. Is there any investor relations contact in India?
Ans: Mr. Sumanth Cidambi, Investor Relations Officer, is based at the
company's corporate office in Bangalore, India and will be available at the
following address to answer any queries from investors.
Infosys Technologies Limited
44, Electronics City, Hosur Road
Bangalore 561 229, India
Tel.: +91-80-8520261 Extn. 7904, +91-80-8522380 (Direct)
Fax: +91-80-8520362, E-mail: sumanthc@infy.com
25. Does the company have a disclosure policy?
Ans: Yes. The company has a written disclosure policy, which covers
interacting with all external constituents like analysts, fund managers,
media, etc.
26. Does the company have any quiet periods?
Ans: Yes. The company follows quiet periods prior to its earnings release
every quarter. During the quiet period, the company or any of its officials
will not discuss earnings expectations with any external people. It starts
from fifteenth of the month prior to the one in which the earnings are
going to be released and ends on the date of announcement of the earnings
numbers. Based on the tentative dates on which the earnings are going to be
released in fiscal 2002, the tentative quiet period would be as follows:
------------------------------------------------------------------------------------------------------------------
Earnings release date Quiet period
------------------------------------------------------------------------------------------------------------------
First quarter ending June 30, 2001 July 10, 2001 June 16 - July 10, 2001
Second quarter ending September 30, 2001 October 10, 2001 September 16 - October 10, 2001
Third quarter ending December 31, 2001 January 10, 2002 December 16 - January 10, 2002
Year ending March 31, 2002 April 10, 2002 March 16 - April 10, 2002
------------------------------------------------------------------------------------------------------------------
27. What has been the CAGR in revenues and net income in the last five years?
Ans: The 5 year CAGR under Indian GAAP and US GAAP are
----------------------------------------------------------------------------------------------------------------------
Indian GAAP US GAAP
----------------------------------------------------------------------------------------------------------------------
Revenues 84% Revenues 73%
----------------------------------------------------------------------------------------------------------------------
PAT from ordinary activities 97% Net income 81%
----------------------------------------------------------------------------------------------------------------------
Additional information to shareholders
Share performance chart
- --------------------------------------------------------------------------------
The Infosys management consistently cautions that the stock price performance
shown in the graph below should not be considered indicative of potential future
stock price performance.
[GRAPH APPEARS HERE]
[GRAPH APPEARS HERE]
The share price has been adjusted for two bonus issues made in fiscal 1998
and fiscal 1999, and a 2-for-1 stock split in fiscal 2000.
Additional information to shareholders (contd.)
- --------------------------------------------------------------------------------
Intangible assets scoresheet
A knowledge-intensive company leverages knowhow, innovation and reputation to
achieve success in the marketplace. Hence, these attributes should be measured
and improved upon year after year to ensure continual success. Managing a
knowledge organization necessitates a focus on the critical issues of
organizational adoption, survival, and competence in the face of ever-increasing
discontinuous environmental change. The profitability of a knowledge firm
depends on its ability to leverage the learnability of its professionals, and in
enhancing the re-usability of their knowledge and expertise.
The stock price of a company is the result of the market's valuation of its
earnings potential and growth prospects. Thus, the market provides a value to
the off-balance-sheet assets of the company - that is, those assets which are
invisible or which are not accounted for in the traditional financial
statements. The intangible assets of a company include its brand; its ability to
attract, develop and nurture a cadre of competent professionals; and its ability
to attract and retain marque clients.
Today's discerning investors take a critical look at both financial and
non-financial parameters that determine the long-term success of a company. The
non-financial parameters challenge the approach that evaluates companies solely
on the traditional measures, as they appear in their financial reports. Thus,
the intangible assets of the company have been receiving considerable attention
from corporate leaders in recent years.
The intangible assets of a company can be classified into four major categories
- - human resources, intellectual property assets, internal assets and external
assets.
Human resources
Human resources represent the collective expertise, innovation, leadership,
entrepreneurship and managerial skills endowed in the employees of an
organization.
Intellectual property assets
Intellectual property assets include know-how, copyrights, patents, products and
tools that are owned by a corporation. These assets are valued based on their
commercial potential. A corporation derives its revenues by licensing these
assets to outside users.
Internal assets
Internal assets are systems, technologies, methodologies, processes and tools
that are specific to an organization. These assets give the organization a
unique advantage over its competitors in the marketplace. These assets are not
licensed to outsiders. Examples of internal assets include methodologies for
assessing risk, methodologies for managing projects, risk policies, and
communication systems.
External assets
External assets are the market-related intangibles that enhance the fitness of
an organization for succeeding in the marketplace. Examples are customer loyalty
(reflected by the repeat business of the company) and brand value.
The score sheet
Infosys published models for valuing the two most valuable, intangible assets of
the company - human resources and the "Infosys" brand. The score sheet published
is broadly adopted from the Intangible asset score sheet provided in the book
titled The New Organizational Wealth written by Dr Karl-Erik Sveiby and
published by Berrett-Koehler Publishers Inc., San Francisco. We believe such
representation of intangible assets provides a tool to our investors for
evaluating the market-worthiness of the company.
The Infosys management cautions investors that these data are provided only as
additional information to investors. Using such reports for predicting the
future of Infosys, or any other company, is risky. The Infosys management is not
responsible for any direct, indirect or consequential losses suffered by any
person using these data.
The Infosys intangible assets scoresheet
- -----------------------------------------------------------------------------------------------------------
Knowledge capital
- -----------------------------------------------------------------------------------------------------------
Our clients Our organization
(External structure) (Internal structure)
- ---------------------------------------------------------------------------------------------------------
2000-2001 1999-2000 2000-2001 1999-2000
- -----------------------------------------------------------------------------------------------------------
Growth / renewal
- -----------------------------------------------------------------------------------------------------------
Revenue growth over 113 80 IT investment / value 9.32 7.47
previous year (%) added (%)
- -----------------------------------------------------------------------------------------------------------
Percentage of revenue from 52 47 R&D / 1.09 1.14
image-enhancing clients value added (%)
- -----------------------------------------------------------------------------------------------------------
Percentage of revenue 96 94 Total investment in 29.64 22.10
from exports organization /
value added (%)
- -----------------------------------------------------------------------------------------------------------
No. of new clients 122 99
added during the year
- -----------------------------------------------------------------------------------------------------------
Efficiency
- -----------------------------------------------------------------------------------------------------------
Sales / client 696 455 Average proportion 10.30 12.70
(in Rs. lakhs) of support staff (%)
- -----------------------------------------------------------------------------------------------------------
Sales per support staff 243 155
(in Rs. lakhs)
- -----------------------------------------------------------------------------------------------------------
Stability
- -----------------------------------------------------------------------------------------------------------
Repeat-business revenue/ 85 87 Average age of support 30.61 31.14
total revenue (%) staff
(Years)
- -----------------------------------------------------------------------------------------------------------
Sales from the five largest 26.0 30.2
clients / total revenue (%)
- -----------------------------------------------------------------------------------------------------------
Sales from the ten largest 39.2 45.7
clients / total revenue (%)
- -----------------------------------------------------------------------------------------------------------
Million dollar clients (Nos) 80 42
- -----------------------------------------------------------------------------------------------------------
Five-million dollar clients 19 10
(Nos)
- -----------------------------------------------------------------------------------------------------------
Ten-million dollar clients 11 4
(Nos)
- -----------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Our people
(Competence)
- --------------------------------------------------------------------------------
2000-2001 1999-2000
- --------------------------------------------------------------------------------
Growth / renewal
- --------------------------------------------------------------------------------
Revenue growth over Education index of all 28,725 15,544
previous year (%) staff
- --------------------------------------------------------------------------------
Percentage of revenue from
image-enhancing clients
- --------------------------------------------------------------------------------
Percentage of revenue
from exports
- --------------------------------------------------------------------------------
No. of new clients
added during the year
- --------------------------------------------------------------------------------
Efficiency
- --------------------------------------------------------------------------------
Sales / client Value added per 22.14 17.71
(in Rs. lakhs) software
engineer (in Rs. lakhs)
- --------------------------------------------------------------------------------
Value added per employee 19.87 15.46
(in Rs. lakhs)
- --------------------------------------------------------------------------------
Stability
- --------------------------------------------------------------------------------
Repeat-business revenue/ Average age of all 25.67 26.14
total revenue (%) employees
(Years)
- --------------------------------------------------------------------------------
Sales from the five largest
clients / total revenue (%)
- --------------------------------------------------------------------------------
Sales from the ten largest
clients / total revenue (%)
- --------------------------------------------------------------------------------
Million dollar clients (Nos)
- --------------------------------------------------------------------------------
Five-million dollar clients
(Nos)
- --------------------------------------------------------------------------------
Ten-million dollar clients
(Nos)
- --------------------------------------------------------------------------------
The above figures are based on Indian GAAP financial statements.
Notes:
. Marque or image-enhancing clients are those who enhance the company's
market-worthiness, typically Fortune 1000 clients. Often they are
reference clients for Infosys.
. Sales per client is calculated by dividing total revenue, excluding
other income, by the total number of clients.
. Repeat business revenue is the revenue during current year from those
clients who contributed to the revenue of the company during the
previous year also.
. Value-added is the revenue of the company less payment to all outside
resources. The value-added statement is provided in the Additional
information to shareholders section in this report.
. IT investment includes all investments in hardware and software by the
company.
. Total investment in the organization is the investment in the fixed
assets of the company.
. Average proportion of support staff is the average number of support
staff to average total staff strength of the company during the year.
. Sales per support staff is Infosys revenue divided by the average number
of support staff during the year (support staff exclude technical
support staff.
. Education index is shown as at the year-end, with primary education
calculated as 1, secondary education as 2, and tertiary education as 3.
Clients
The growth in revenue is 113% this year, compared to 80%, in the previous year.
The most valuable intangible asset of Infosys is its client base. Marque clients
or image-enhancing clients contributed around 52% of revenue this year, as
compared to 47% in the previous year. They give stability to our revenues and
also reduce our marketing costs.
The high percentage - 85% - of revenue from repeat orders during the current
year is an indication of the satisfaction and loyalty of the clients. The top 5
and 10 clients contributed around 26% and 39%, respectively, of the company's
revenue during the current year, as compared to 30% and 46%, respectively,
during the previous year. The company's strategy is to increase its client base,
and thereby reduce the risk of depending on a few large clients. During 2000-
2001, the company added 122 new clients.
Organization
During the current year, Infosys invested around 9% of the value-added on its IT
infrastructure, and 1% of the value-added on R&D activities.
A young, fast-growing organization requires efficiency in the area of support
services. The average age of the support employees is 30.61 years, as against
the previous year average age of 31.14 years. The sales per support staff, as
well as, the proportion of support staff to the total organizational staff, have
shown improvements over the previous year.
People
Infosys is in a people-oriented business. The education index of employees has
gone up substantially to 28,725 from 15,544. This reflects the quality of
employees at Infosys. The value-added per software engineer and the value-added
per employee show an increasing trend. The average age of employees as of March
31, 2001 was 25.67 as compared to 26.14 as of March 31, 2000.
Additional information to shareholders (contd.)
- --------------------------------------------------------------------------------
Human resources accounting
The dichotomy in accounting between human and non-human capital is fundamental.
The latter is recognized as an asset and is therefore recorded in the books and
reported in the financial statements, whereas, the former is totally ignored by
accountants. The definition of wealth as a source of income inevitably leads to
the recognition of human capital as one of several forms of wealth such as
money, securities and physical capital.
The Lev & Schwartz model has been used by Infosys to compute the value of the
human resources as at March 31, 2001. The evaluation is based on the present
value of the future earnings of the employees and on the following assumptions:
1. Employee compensation includes all direct and indirect benefits earned both
in India and abroad.
2. The incremental earnings based on group / age have been considered.
3. The future earnings have been discounted at 21.08% (previous year - 22.29%)
being the cost of capital for Infosys. Beta has been assumed at 1.54 based
on average beta for software stocks in the US.
- --------------------------------------------------------------------------------
As of March 31 2001 2000
- --------------------------------------------------------------------------------
No. of Value of No. of Value of
employees human resources employees human resources
(in Rs. crore) (in Rs. crore)
- --------------------------------------------------------------------------------
Production 7,641 4,406.53 4,292 1,965.14
Support -technical* 1,230 302.83 450 81.65
-others 960 414.06 647 190.63
- --------------------------------------------------------------------------------
9,831 5,123.42 5,389 2,237.42
================================================================================
* Note: Support - technical includes trainees, employees in R&D activities and
support personnel allocated to production.
Number of employees 9,831 5,389
Value of human resources 5,123.42 2,237.42
Total revenue 1,959.94 921.46
Software revenue 1,900.57 882.32
Employee cost 717.78 334.56
Value-added excluding extraordinary income 1,563.17 723.31
Net profits excluding extraordinary income 623.32 285.95
Total revenue / human resources value (ratio) 0.38 0.41
Total software revenue / human resources value (ratio) 0.37 0.39
Value-added / human resources value (ratio) 0.31 0.32
Value of human resources per employee (Rs. cr) 0.52 0.42
Employee cost / human resources value (%) 14.01% 14.95%
Return on human resources value (%) 12.17% 12.78%
Value-added statement in Rs. crore
- -----------------------------------------------------------------------------------------------------------------------
Year ending March 31 2001 2000
- -----------------------------------------------------------------------------------------------------------------------
Total revenue 1,959.94 921.46
Less:
Software development expenses (other than employee costs and
provision for post-sales client support) 238.56 129.61
Administration expenses (other than provisions) 158.20 68.54
- -----------------------------------------------------------------------------------------------------------------------
Sub-total 396.76 198.15
- -----------------------------------------------------------------------------------------------------------------------
Total value-added 1,563.18 723.31
=======================================================================================================================
Applied to meet
Employee costs 717.78 334.56
Provision for post-sales client support 1.83 2.10
Provision for bad and doubtful debts and doubtful loans and advances 19.35 0.94
Provision for contingencies - 3.33
Provision for e-inventing the company - 3.50
Provision for investments 15.29 -
Income tax 72.71 39.70
Dividend (including dividend tax) 74.86 33.04
Retained in business 661.36 306.14
- -----------------------------------------------------------------------------------------------------------------------
1,563.18 723.31
=======================================================================================================================
The figures above are based on Indian GAAP financial statements.
Additional information to shareholders (contd.)
- --------------------------------------------------------------------------------
Brand valuation
The strength of the invisible
A balance sheet discloses the financial position of a company. The financial
position of an enterprise is influenced by the economic resources it controls,
its financial structure, liquidity and solvency, and its capacity to adapt to
changes in the environment. However, it is becoming increasingly clear that
intangible assets have a significant role in defining the growth of a hi-tech
company. So quite often, the search for the added value invariably leads us back
to understanding, evaluating and enhancing the intangible assets of the
business.
From time to time, Infosys has used various models for evaluating assets off the
balance sheet to bring certain advances in financial reporting from the realm of
research to the notice of the shareholders. Such an exercise also helps the
Infosys management understand the components that make up goodwill. The aim of
such modeling is to lead the debate on the balance sheet of the future. The
Infosys management cautions the investors that these models are still the
subject of debate among researchers, and using such models and data in
predicting the future of Infosys, or any other company, is risky, and that the
Infosys management is not responsible for any direct, indirect or consequential
losses suffered by any person using these models or data.
Valuing the brand
A brand is much more than a trademark or a logo. It is a "trustmark" - a promise
of quality and authenticity that clients can rely on. Brand equity is the value
addition provided to a product or company by its brand name. It is the financial
premium that a buyer is willing to pay for the brand over a generic or less
worthy brand. Brand equity is not created overnight. It is the result of
relentless pursuit of quality in production, selling, service, advertising and
marketing. It is the integral of client experiences in dealing with the company
and the company's services over a sustained period.
Corporate brands and service brands are often perceived to be interchangeable.
Both types of brands aim at the enhancement of confidence, and the reduction of
uncertainty, in the quality of the company offerings. Therefore, companies rely
heavily on the image and personality they create for their brands, to
communicate these qualities to the marketplace.
For many businesses, brands have become critical for shareholder wealth
creation. Global brands are still the most powerful and sustainable wealth
creators in the business world, and will continue to be so in the near future.
The task of measuring brand value is a complex one. Several models are available
for accomplishing this. The most widely used one is the brand-earnings-multiple
model. There are several variants of this model. For example, by using one of
the brand valuation models, Interbrand, a brand consultancy firm, had valued
Coca-Cola at $ 72.54 billion in the year 2000, when its market capitalization
was $ 142.16 billion, on the date of brand valuation. Thus, the brand valuation
of Coca-Cola was around 51% of its market capitalization on the date of
valuation. Interestingly, the study says that technology changes such as the
Internet are only accelerating the globalization trend of the companies, and
technology companies such as Microsoft, IBM, Intel and Nokia dominated the top
five most valuable brands, in the study.
(Source : www.business2.com/chart/most_valuable_brands.html)
Goodwill is a nebulous accounting concept that is defined as the premium paid
for the tangible assets of a company. It is an umbrella concept that transcends
components like brand equity and human resources, and is the result of many
corporate attributes including core competency, market leadership, copyrights,
trademarks, brands, superior earning power, excellence in management,
outstanding work-force, competition, longevity and so on.
The Infosys management has adapted the generic brand-earnings-multiple model
(given in the article on Valuation of Trademarks and Brand Names by Michael
Birkin in the book Brand Valuation, edited by John Murphy and published by
Business Books Limited, London) to value its corporate brand "Infosys". The
methodology followed for valuing the brand is as given below:
1. Determine brand earnings
To do this,
. Determine brand profits by eliminating the non-brand
profits from the total profits of the company
. Restate the historical profits at present-day values
. Provide for the remuneration of capital to be used for
purposes other than promotion of the brand
. Adjust for taxes
2. Determine the brand-strength or brand-earning multiple
Brand-strength multiple is a function of a multitude of factors like
leadership, stability, market, internationality, trend, support and
protection. These factors have been evaluated on a scale of 1 to 100,
internally by the Infosys management, based on the information available
within the company.
3. Compute the brand value by multiplying the brand earnings by the multiple
derived in step 2 above.
The computation is as follows:
in Rs. crore
- ------------------------------------------------------------------------------------------------------------------
Year ended March 31, 2001 2000 1999
- ------------------------------------------------------------------------------------------------------------------
PBIT 696.03 325.65 155.86
Less: non-brand income 53.43 35.23 3.46
- ------------------------------------------------------------------------------------------------------------------
Adjusted profit 642.60 290.42 152.40
Inflation compound factor at 8% 1.000 1.087 1.181
Present value of profits for the brand 642.60 315.69 179.98
Weightage factor 3 2 1
Weighted profits 1,927.80 631.38 179.98
Three-year average weighted profits 456.53
Remuneration of capital 55.57
(5% of average capital employed)
Brand-related profits 400.96
Tax at 39.55% 158.58
Brand earnings 242.38
Multiple-applied 22.18
Brand value 5,376.00
- ------------------------------------------------------------------------------------------------------------------
Assumptions
1. Total revenue excluding other income after adjusting for cost of
earning such income is brand revenue, since this is an exercise to
determine the brand value of Infosys as a company and not for any of
its products or services.
2. Inflation is assumed at 8% per annum.
3. 5% of the average capital employed is used for purposes other than
promotion of the brand.
4. Tax rate is at 39.55%.
5. The earnings multiple is based on the ranking of Infosys against the
industry average, based on certain parameters (exercise undertaken
internally and based on available information).
6. The figures above are based on Indian GAAP financial statements.
Thus, it is interesting to note that while Infosys has a market
capitalization of Rs. 26,926 crore as on March 31, 2001, the value of the
"Infosys" brand alone is estimated at Rs. 5,376 crore. The corresponding
figures for market capitalization and brand value of Infosys as on March
31, 2000 and March 31, 1999 were Rs. 59,338 crore, Rs. 5,246 crore and Rs.
9,673 crore, Rs. 1,727 crore respectively.
Additional information to shareholders (contd.)
- --------------------------------------------------------------------------------
Balance sheet (including intangible assets) as at March 31, 2001
in Rs. crore
- ------------------------------------------------------------------------------------------------------------------
SOURCES OF FUNDS
SHAREHOLDERS' FUNDS
Share capital 33.08
Reserves and surplus
Share premium account 320.75
Capital reserves 10,499.42
Other reserves 1,035.81
- ------------------------------------------------------------------------------------------------------------------
11,889.06
- ------------------------------------------------------------------------------------------------------------------
APPLICATION OF FUNDS
FIXED ASSETS
Tangible assets - at cost 631.14
Less : Depreciation 244.13
- ------------------------------------------------------------------------------------------------------------------
Net block 387.01
Add : Capital work-in-progress 170.65
- ------------------------------------------------------------------------------------------------------------------
557.66
Intangible assets
Brand equity 5,376.00
Human resources 5,123.42
INVESTMENTS 34.12
CURRENT ASSETS, LOANS AND ADVANCES
Sundry debtors 302.37
Cash and bank balances 385.06
Loans and advances 430.28
- ------------------------------------------------------------------------------------------------------------------
1,117.71
Less : Current liabilities 134.92
Provisions 184.93
- ------------------------------------------------------------------------------------------------------------------
Net current assets 797.86
11,889.06
- ------------------------------------------------------------------------------------------------------------------
Notes:
1. The balance sheet is provided as additional information only. The management
accepts no responsibility for any direct, indirect or consequential losses or
damages suffered by any person relying on the same.
2. Capital reserves include the value of the "Infosys" brand and human
resources.
3. The figures above are based on Indian GAAP financial statements.
Additional information to shareholders (contd.)
- --------------------------------------------------------------------------------
Current cost adjusted financial statements
Current cost accounting ("CCA") seeks to state the value of assets and
liabilities in a balance sheet at their value and measure the profit or loss of
an enterprise by matching current costs against current revenues. CCA is based
on the concept of "operating capability", which may be viewed as the amount of
goods and services that an enterprise is capable of providing with its existing
resources during a given period. In order to maintain its operating capability,
an enterprise should remain in command of resources that form the basis of its
activities. Consequently, it becomes necessary to take into account the rising
cost of assets consumed in generating these revenues. CCA takes into account the
changes in specific prices of assets as they affect the enterprise.
The Balance Sheet and Profit and Loss Account of Infosys, on a current cost
basis are presented below. The methodology prescribed by the Guidance Note on
Accounting for Changing Prices issued by the Institute of Chartered Accountants
of India is adopted in preparing these statements.
Balance Sheet as of March 31, 2001
in Rs.
- ----------------------------------------------------------------------------------------------
Assets employed
Fixed Assets
Original cost 527,46,69,569
Accumulated depreciation 129,68,72,381
- ----------------------------------------------------------------------------------------------
397,77,97,188
Capital work in progress 170,65,04,250
- ----------------------------------------------------------------------------------------------
Net fixed assets 568,43,01,438
Investments 34,11,54,821
Current Assets, Loans and Advances:
Cash and bank balances 385,06,10,285
Loans and advances 430,27,93,623
Monetary working capital 167,45,21,241
- ----------------------------------------------------------------------------------------------
982,79,25,149
Less: Other liabilities and provisions 184,93,20,275
Net current assets 797,86,04,874
TOTAL 1400,40,61,133
- ----------------------------------------------------------------------------------------------
Financed by
Share Capital and Reserves
Share capital 33,07,92,085
Reserves
Capital reserve 5,93,54,103
Share premium 320,75,30,416
Current cost reserve 19,76,11,149
General reserve 1020,87,73,380
- ----------------------------------------------------------------------------------------------
1040,63,84,529
- ----------------------------------------------------------------------------------------------
TOTAL 1400,40,61,133
- ----------------------------------------------------------------------------------------------
Additional information to shareholders (contd.)
- --------------------------------------------------------------------------------
Current cost adjusted financial statements
Profit and Loss Account for the year ended March 31, 2001
in Rs.
- ----------------------------------------------------------------------------------------------------------------
Total income 1,959,93,73,722
Historic cost profit before tax and extraordinary item 696,02,92,341
Less: Current cost operating adjustments 8,99,42,003
687,03,50,338
Less: Gearing adjustment -
Current cost profit before tax and extraordinary item 687,03,50,338
Provision for taxation
Earlier years 1,40,00,000
Current year 71,31,00,000
Current cost profit after tax before extraordinary item 614,32,50,338
Extraordinary item - Transfer of intellectual property (net of tax) 5,49,44,000
- ----------------------------------------------------------------------------------------------------------------
Current cost profit after tax and extraordinary item 619,81,94,338
- ----------------------------------------------------------------------------------------------------------------
Appropriations
Dividend
Interim 16,53,78,418
Final (proposed) 49,61,85,878
Dividend tax 8,69,94,211
Amount transferred - general reserve 544,96,35,831
- ----------------------------------------------------------------------------------------------------------------
619,81,94,338
- ----------------------------------------------------------------------------------------------------------------
Statement of retained profits / reserves as of March 31, 2001
in Rs.
- ----------------------------------------------------------------------------------------------------------------
Opening balance of reserves 475,50,19,440
Retained current cost profit for the year 544,96,35,831
Movements on current cost reserve during the year 20,17,29,258
- ----------------------------------------------------------------------------------------------------------------
1,040,63,84,529
- ----------------------------------------------------------------------------------------------------------------
Notes:
1. The cost of technology assets comprising computer equipment decreases over
time. This is offset by an accelerated depreciation charge to the financial
statements. Consequently, such assets are not adjusted for changes in
prices.
2. This financial statement is provided for the purpose of information only.
The management accepts no responsibility for any direct, indirect or
consequential losses or damages suffered by any person relying on the same.
Additional information to shareholders (contd.)
- --------------------------------------------------------------------------------
Economic value-added (EVA) statement
Economic value-added measures the profitability of a company after taking into
account the cost of all capital including equity. It is the post-tax return on
capital employed (adjusted for the tax shield on debt) less the cost of capital
employed. Companies which earn higher returns than cost of capital create value,
while those companies that earn lower returns than cost of capital are deemed
destroyers of shareholder value.
Economic value-added analysis
- ----------------------------------------------------------------------------------------------------------------
Year ended March 31 2001 2000 1999 1998
- ----------------------------------------------------------------------------------------------------------------
1. Average capital employed (Rs. in crore) 1,111.47 703.87 245.42 142.90
2. Average debt/total capital (%) - - - -
3. Beta variant 1.54 1.48 1.48 1.48
4. Risk-free debt cost (%) 10.30 10.45 12.00 12.15
5. Market premium 7.00 8.00 9.00 10.00
6. Cost of equity (%) 21.08 22.29 25.32 26.95
7. Cost of debt (post tax) (%) NA NA NA NA
8. Weighted average cost of capital (WACC) (%) 21.08 22.29 25.32 26.95
9. PAT as a percentage of average capital employed (%) 56.08 40.63 54.16 42.24
10. Economic value-added (EVA) (in Rs. crore)
Operating profit
(PBT excluding extraordinary income) 696.03 325.65 155.86 65.86
Less: tax 72.71 39.70 22.94 5.50
Less: cost of capital 234.30 156.89 62.14 38.51
Economic value-added 389.02 129.06 70.78 21.85
11. Enterprise value (in Rs. crore)
Market value of equity 26,926.35 59,338.17 9,672.80 2,963.42
Less: cash and cash equivalents 577.74 508.37 416.66 51.14
Add: debt - - - -
Enterprise value 26,348.61 58,829.80 9,256.14 2,912.28
12. Ratios
EVA as a percentage of average capital employed (%) 35.00 18.34 28.84 15.29
Enterprise value / average capital employed 23.71 83.58 37.72 20.38
- ----------------------------------------------------------------------------------------------------------------
Notes:
1. The cost of equity is calculated by using the following formula:
return on risk-free investment + expected risk premium on equity investment
adjusted for the average beta variant for software stocks in the US
2. The figures above are based on Indian GAAP financial statements.
[GRAPH APPEARS HERE]
Additional information to shareholders (contd.)
- --------------------------------------------------------------------------------
Ratio analysis for the year ended March 31
- ----------------------------------------------------------------------------------------------------------------
2001 2000 1999
- ----------------------------------------------------------------------------------------------------------------
Ratios - Financial performance
Export revenue / total revenue (%) 95.62 94.38 97.57
Domestic revenue / total revenue (%) 1.35 1.37 1.68
Other income / total revenue (%) 3.03 4.25 0.75
Employee costs / total revenue (%) 36.62 36.31 32.39
Administration expenses / total revenue (%) 9.06 7.54 8.92
Operating expenses / total revenue (%) 58.73 58.88 62.60
Depreciation / total revenue (%) 5.76 5.78 7.00
Tax / total revenue (%) 3.71 4.31 4.47
Tax / PBT (%) 10.45 12.19 14.72
EBIDTA / total revenue (%) 41.27 41.12 37.40
PAT from ordinary activities / total revenue (%) 31.80 31.03 25.92
PAT from ordinary activities / average net worth (%) 56.08 40.63 54.16
ROCE (PBIT / Average capital employed) (%) 62.62 46.27 63.51
Return on invested capital (%) 105.67 111.68 93.47
Capital output ratio 1.71 1.25 1.36
Invested capital output ratio 3.34 3.66 3.64
Value-added / total revenue (%) 79.76 78.50 72.96
Enterprise-value / total revenue 13.44 63.84 18.08
Ratios - Balance sheet
Debt-equity ratio - - -
Debtors turnover ( Days) 58 56 61
Current ratio 3.49 4.69 6.57
Cash and equivalents / total assets (%) 41.57 61.01 72.53
Cash and equivalents / total revenue (%) 29.48 55.17 81.26
Depreciation / average gross block (%) 24.67 23.50 26.19
Technology investment / total revenue (%) 7.43 5.86 8.55
Ratios - Growth*
Export revenue (%) 115.48 73.85 99.35
Total revenue (%) 112.70 79.71 96.93
Operating expenses (%) 112.14 69.03 86.89
Operating profit (%) 113.50 97.59 116.39
Net profit ( from ordinary activities) (%) 117.98 115.14 120.19
Per-share data
Basic earnings per share from ordinary activities (Rs.) 94.23 43.23 20.71
Basic earnings per share (including extraordinary items) (Rs.) 95.06 44.38 21.07
Cash earnings per share from ordinary activities (Rs.) 111.29 51.28 26.30
Cash earnings per share(including extraordinary items) (Rs.) 112.12 52.43 26.67
Book value (Rs.) 210.05 125.97 86.84
Price / earning, end of year 43.19 207.48 70.74
Price / cash earnings, end of year 36.57 174.92 55.70
Price / book value, end of year 19.38 71.21 16.87
Price / total revenue, end of year 13.74 64.40 18.90
EPS growth (%) 117.97 108.77 120.15
PE / EPS Growth 0.37 1.91 0.61
Dividend per share (Rs.) 10.00 4.50 3.75
Dividend (%) 200 90 75
Dividend payout (%) 12.01 11.55 10.02
Dividend / adjusted public offer price (%) 168 76 63
Market price / adjusted public offer price (%) 68547 151076 24632
- ----------------------------------------------------------------------------------------------------------------
Note: The ratio calculations are based on Indian GAAP and have been adjusted
for stock split.
* Denotes growth compared with figures of the corresponding period in the
previous year
Ratio analysis
Ratio analysis is amongst the best tools available to analyze the financial
performance of a company. It allows inter-company and intra-company comparison
and analysis. Ratios also provide a bird's eye view of the financial condition
of the company. The ratios analyzed are based on Indian GAAP.
Financial performance
Exports have grown by 115% during the year, as against 74% in the previous year.
Export revenue is from various parts of the globe and is well segmented.
Segmental analysis of the revenue is provided under the Notes to financial
statements section in this report. During the year ended March 31, 2001, exports
constituted 96% of total revenue, as compared to 94% during the previous year.
USA continued to be a major market. Domestic revenue remained constant at 1% of
total revenue.
Manpower costs were approximately 37% of total revenue as compared to 36% during
the previous year. Administration expenses were approximately 9% and 8% during
the years ended March 31, 2001 and 2000, respectively.
Depreciation was at 6% of total revenue, which is same as during the previous
year. Depreciation to average gross block was at 25%, as compared to 24% during
the previous year.
Income tax expense was approximately 4% of total revenue during the years ended
March 31, 2001 and 2000. Income tax expense includes a provision of Rs. 140 lakh
for earlier years.
Profit after tax from ordinary activities was 32% of total revenue, as against
31% during the previous year.
Balance sheet analysis
The key ratios affecting the performance of the company's financial condition
are discussed below:
1. Return on average net worth
Return on average net worth is 56% as against 41% during the previous year.
As the company is maintaining around 42% of its assets in liquid funds,
where the returns are less, the above figures need further analysis. If the
average liquid assets are adjusted against the average net worth, and
revenue earned after tax from liquid assets are adjusted against net
profit, return on invested capital stands at 106%, as compared to 112%
during the previous year.
2. Debt-equity ratio
The company funds its short-term and long-term cash requirements primarily
from internal accruals. As on March 31, 2001, the company was debt-free.
3. Current ratio
Current ratio is 3.49, as compared to 4.69 as on March 31, 2000.
4. Capital output ratio
Capital output ratio is 1.71, as compared to 1.25 for the previous year.
Invested capital output ratio is 3.34, as compared to 3.66 for the previous
year
[CHARTS APPEAR HERE]
[CHARTS APPEAR HERE]
5. Value-added to total revenue
Value-added to total revenue is 80%, as compared to 79% for the previous
year. This is primarily due to higher margins. Details are given in
"Additional information to shareholders" in this report.
6. Enterprise value to total revenue
Enterprise value to total revenue is 13 times, as compared to 64 times in
the previous year.
Per share data
Per share data for the earlier years have been restated on par value of Rs. 5
per share, and adjusted for bonus issues during the previous years. Earnings per
share (EPS) (basic) is Rs. 94.23, as compared to Rs. 43.23 for the previous
year. Cash earnings per share (basic) is Rs. 111.29, as compared to Rs. 51.28
during the previous year. This is due to higher cash generation and due to
higher value addition. Book value per share has also increased to Rs. 210, as
against Rs. 126 on March 31, 2000. Dividend payout ratio for the years ended
March 31, 2001 and 2000, was 12% and 11.55% respectively.
The P/E to EPS growth was approximately 0.37, as compared to 1.91 for the
previous year. This represents the valuation of the company in comparison to its
growth in earnings.
Appreciation in the Infosys share price (adjusted for bonus issues in 1994, 1997
& 1999 and a stock split of two-for-one in 2000), over the public issue price is
more than 68547%. Since the public issue, the market capitalization of the
company has grown to Rs. 26,926.35 crore, as on March 31, 2001, from the public
issue valuation of Rs. 31.84 crore during February 1993.
[CHARTS APPEAR HERE]
Additional information to shareholders (contd.)
Statutory obligations
The company has established Software Technology Parks (STPs) - 100% export-
oriented units - for the development of software at Electronics City,
Koramangala, BTM Layout and J. P. Nagar all in Bangalore, as well as in
Mangalore, Pune, Chennai, Bhubaneswar, Hyderabad, Mohali and Mysore (all in
India). Certain capital items purchased for these centers are eligible for 100%
customs and excise duty exemption, subject to fulfillment of stipulated export
obligations, namely, five times the value of duty-free imports of capital goods,
or duty-free purchase of goods subject to excise, over a period of 5 years, on a
yearly basis. The export obligation on the wage bill was removed recently.
The non-fulfillment of export obligations may result in penalties as stipulated
by the government, which may have an impact on future profitability. The table
showing the export obligation, and the export obligation fulfilled by the
company, on a global basis, for all its STP units together, is given hereunder:
in Rs.
- ----------------------------------------------------------------------------------------------------------------
Year ended March 31 Export Export Excess/ Cumulative
obligation obligation (shortfall) excess/
fulfilled (shortfall)
- ----------------------------------------------------------------------------------------------------------------
1993 11,07,019 28,25,575 17,18,556 17,18,556
1994 2,69,45,277 8,04,57,379 5,35,12,102 5,52,30,658
1995 7,70,12,146 15,63,56,751 7,93,44,605 13,45,75,263
1996 28,42,90,379 47,64,44,106 19,21,53,727 32,67,28,990
1997 39,67,03,285 68,93,56,837 29,26,53,552 61,93,82,542
1998 73,55,63,113 142,41,27,171 68,85,64,058 130,79,46,600
1999 124,97,81,528 305,51,10,194 180,53,28,666 311,32,75,266
2000 106,87,69,005 493,45,83,400 386,58,14,395 697,90,89,661
2001 359,88,68,243 1010,27,21,393 650,38,53,150 1348,29,42,810
- ----------------------------------------------------------------------------------------------------------------
The total customs duty exempted on both computer software and hardware imported
by the company since 1993 amounts to Rs. 111.97 crore.
The company has fulfilled its export obligations, on a global basis, for all its
operations under the STP scheme. However, in the case of STPs operationalized
during the year, the export obligation will be met in the future years. On a
forward basis, the company's management is confident of fulfilling all its
export obligations.
Taxation
The economic reforms program of the government has enhanced the velocity of
business for companies in India. Being one of the signatories to the World Trade
Organization, India is committed to reducing import tariff levels, thereby
exposing the Indian entrepreneurs to global competition. The present Indian
corporate tax rate is 39.55% (comprising a base rate of 35% and a surcharge of
13% on the base rate).
The company benefits from certain significant tax incentives provided to
software firms under Indian tax laws. These incentives presently include: (i) an
exemption from payment of Indian corporate income taxes for a period of ten
consecutive years of operation of software development facilities designated as
"Software Technology Parks" (the "STP tax holiday"); and (ii) a tax deduction
for profits derived from exporting computer software under Section 80 HHE of the
Income Tax Act (the "Export deduction"). All but one of the company's software
development facilities are located in a designated Software Technology Park
("STP"). The Government of India has recently amended the tax incentives
available to companies set up in designated STPs. The period of the STP tax
holiday available to such companies is restricted to 10 consecutive years,
beginning from the financial year when the unit started producing computer
software or March 31, 2000, whichever is earlier. Additionally, the export
deduction will be phased out equally over a period of five years, starting from
fiscal 2000.
The details of the operationalization of various software development centers,
and the year till which the exemption under the STP scheme is available, is
provided hereunder:
- -----------------------------------------------------------------------------------------------------------------------
Location of the STP Year of Exemption Exemption
commencement claimed from available upto
- -----------------------------------------------------------------------------------------------------------------------
Electronics City, Bangalore 1994-1995 1996-1997 2003-2004
Mangalore 1995-1996 1998-1999 2004-2005
Pune 1996-1997 1998-1999 2005-2006
Bhubaneswar 1996-1997 1998-1999 2005-2006
Chennai 1996-1997 1998-1999 2005-2006
Bannerghatta Road, Bangalore 1997-1998 1998-1999 2006-2007
Phase I, Electronics City, Bangalore 1998-1999 1998-1999 2007-2008
Phase II, Electronics City, Bangalore 1999-2000 1999-2000 2008-2009
Hinjewadi, Pune 1999-2000 1999-2000 2008-2009
Mysore 1999-2000 1999-2000 2008-2009
Hyderabad 1999-2000 1999-2000 2008-2009
Mohali 1999-2000 1999-2000 2008-2009
Sholinganallur, Chennai 2000-2001 2000-2001 2008-2009
Konark, Bhubaneshwar 2000-2001 2000-2001 2008-2009
Mangala, Mangalore 2000-2001 2000-2001 2008-2009
- -----------------------------------------------------------------------------------------------------------------------
The benefits of these tax incentive programs have historically resulted in an
effective tax rate for the company, well below statutory rates. There is no
assurance that the Government of India will continue to provide these
incentives. The government may reduce or eliminate the tax exemptions provided
to Indian exporters anytime in the future. This may result in the export profits
of the company being fully taxed, and may adversely affect the post-tax profits
of the company in the future. On a full-tax-paid basis, without any duty
concessions on equipment, hardware and software, the company's post-tax profit
for the relevant years is estimated as below.
in Rs.
- ---------------------------------------------------------------------------------------------------------------
Year ended March 31 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------
Profit before tax (excluding extraordinary items) 696,02,92,341 325,64,85,819 155,85,53,560
Less: Additional depreciation to be 26,33,38,717 12,74,89,362 8,43,54,215
provided on duty waiver for computer equipment
Reduction in other income 7,74,13,894 3,24,71,664 1,52,47,181
Adjusted profit before tax 661,95,39,730 309,65,24,793 145,89,52,164
Less: Income tax on full tax basis 264,75,71,927 128,00,91,259 63,07,51,956
Adjusted profit after tax 397,19,67,803 181,64,33,534 82,82,00,208
Adjusted earnings per share/1/ 60.04 27.46 12.90
- ---------------------------------------------------------------------------------------------------------------
1. The earnings per share for earlier years has been restated on par value of
Rs. 5 per share and adjusted for bonus issues during the previous years.
2. The figures above are based on Indian GAAP financial statements and the tax
rates applicable to India-based income.
However, it may be noted that this is only an academic exercise. The company
has provided for income tax in full in the respective years and there is no
carried-forward liability on this account
Management Structure
________________________________________________________________________________
[CHART APPEARS HERE]
[CHART APPEARS HERE]
A historical perspective
- --------------------------------------------------------------------------------
in Rs. crore except per share data, other information and ratios
- -----------------------------------------------------------------------------------------------------------------------
Particulars 1981-82 1993-94 1994-95 1995-96 1996-97 1997-98 1998-99 1999-2000 2000-2001
- -----------------------------------------------------------------------------------------------------------------------
For the year
Revenue 0.12 30.08 57.70 93.41 143.81 260.37 512.74 921.46 1,959.94
Operating profit (PBIDT) - 9.71 19.86 33.95 50.06 88.61 191.75 378.88 808.92
Interest - 0.05 - - 0.61 - - - -
Depreciation - 0.81 4.60 8.63 10.52 22.75 35.89 53.23 112.89
Provision for taxation - 0.76 1.94 4.31 5.25 5.50 22.94 39.70 72.71
Profit after tax from
ordinary activities 0.04 8.09 13.32 21.01 33.68 60.36 132.92 285.95 623.32
Dividend - 1.17 2.31 3.63 3.99 7.03 12.11 29.76 66.16
Return on average
networth (%) 96.88 39.61 29.71 29.53 34.96 42.24 54.16 40.63 56.08
Return on average capital
employed (PBIT / average
capital employed) (%) 96.88 43.14 31.79 33.12 40.16 46.09 63.51 46.27 62.62
As at the end of the year
Share capital - 3.35 7.26 7.26 7.26 16.02 33.07 33.08 33.08
Reserves and surplus 0.04 25.35 55.20 72.58 105.58 156.94 541.36 800.23 1,356.56
Loan funds - - 6.34 4.26 - - - - -
Gross block - 8.27 25.32 46.86 71.29 105.14 168.92 284.03 631.14
Capital investment - 7.13 25.23 15.55 27.31 34.41 71.68 159.87 463.35
Net current assets 0.06 13.94 32.47 41.17 54.20 97.23 472.96 612.13 797.86
Debt-equity ratio - - 0.10 0.05 - - - - -
Market capitalization NA 191.02 348.42 355.67 731.04 2,963.42 9,672.80 59,338.17 26,926.35
Per share data
Basic earnings from
ordinary activities (Rs.)* - 1.22 2.01 3.18 5.09 9.13 20.71 43.23 94.23
Dividend per share (Rs.)** - 1.75 2.25 2.50 2.75 3.00 3.75 4.50 10.00
Book value (Rs.)* - 4.34 9.44 12.07 17.06 26.15 86.84 125.97 210.05
Other information
Number of shareholders 7 6,033 6,526 6,909 6,414 6,622 9,527 46,314 89,643
Credit rating from CRISIL
Commercial paper - - "P1+" "P1+" "P1+" "P1+" "P1+" "P1+" "P1+"
Non-convertible debentures - - "AA" "AA" "AA" "AA" "AA" "AA" "AAA"
- -----------------------------------------------------------------------------------------------------------------------
Note:The above figures are based on Indian GAAP.
* Figures for the earlier years have been restated on par value of Rs. 5 per
share and adjusted for bonus issues in previous years.
** Calculated on a per share basis, not adjusted for bonus issues in previous
years.
A historical perspective
- --------------------------------------------------------------------------------
[GRAPHS APPEARS HERE]
Infosys Foundation
- --------------------------------------------------------------------------------
A strong sense of responsibility is foremost among the core values of Infosys.
This translates into a commitment to help people and communities, to enhance the
living conditions of the rural population, and to improve education. In fiscal
2001, the Infosys Foundation continued its commitment to the rural poor, to the
underprivileged, and to the cause of education. Besides, it also helped promote
Indian arts and culture. Grants from Infosys during the year aggregated Rs. 5.26
crore as compared to Rs. 2.80 crore in the previous year.
Following are some of the projects undertaken by the Foundation during the year.
1. Initiatives for the rural poor and the underprivileged
a. Construction of a hostel commenced at the Maharshi Karve Stree
Shikshana Samsthe, Karvenagar, Pune. The hostel will offer
accommodation to girls from the poorer sections of society and is
expected to be operational by August 2001. An amount of Rs. 60 lakh has
been committed for this purpose by the Foundation.
b. Construction of a 3,800 sq. ft. orphanage at Kalahandi, Orissa, was
completed in December 2000, at a cost of aboutRs. 8 lakh.
c. The Foundation donated about 340 sewing machines to destitute women in
Karnataka and Tamil Nadu. This is expected to provide a secure means of
livelihood for them. Additionally, a substantial sum has been spent on
providing monetary assistance to these women.
d. The Foundation has aided several organizations in conducting social and
literacy awareness campaigns in rural areas. The Foundation organized
eye camps, donated ambulances and passenger vans, and donated a Braille
system to a residential school for the blind.
2. Healthcare for the poor
a. Computerization of KEM Hospital and Seth G.S. Medical College, Mumbai,
has started. This project will provide LAN and Internet facilities for
the hospital and the college.
b. Construction of additional wards for the Swami Sivananda Centenary
Hospital was launched during the year. This building will be able to
accommodate 64 in-patients.
c. Construction of a 47,000 sq. ft. dharmashala - a free ward - for cancer
patients availing treatment at the Kidwai Memorial Institute of
Oncology, Bangalore, was completed during the year. The building,
costing Rs. 3 crore, was inaugurated by S.M. Krishna, the Chief
Minister of Karnataka.
d. A building with super-specialty facilities is being planned at Sassoon
Hospital, Poona, for providing free treatment to the underprivileged.
e. A sum of Rs. 10 lakh was donated to the Swami Vivekananda Youth
Movement, Mysore district, Karnataka, for the construction of a
hospital. The hospital has been operational since August 2000.
3. Education
a. More often than not, rural children do not have access to high-quality
facilities for education. The Foundation believes that every school
should have its own library. The Shalegondu Granthalaya program has
been extremely successful since it was started in 1997-98. Under the
program, in Karnataka alone, more than 5000 sets of books have been
donated to libraries of Kannada-medium schools in rural areas. Each set
ranges from 200 to 2000 books depending on the number of students in
the school.
b. The Foundation undertook reconstruction of old government schools
located in the slums of Hyderabad, Andhra Pradesh, at a cost of about
Rs. 10 lakh.
c. The construction of a hostel for the Nehru Seva Sangh's school for the
blind at Banpur in Orissa has commenced. The total expenditure to date
is about Rs. 8 lakh.
d. A number of scholarships have been awarded to children from
economically backward families. The Pratibha Puraskar scholarship has
been instituted for such students who have excelled in academics. The
Foundation has also donated furniture and other equipment to schools.
4. Arts and culture
The Foundation strongly believes in preserving those arts and cultural
activities of India, which are under threat of fading out. A North
Karnataka folklore festival, featuring many distinguished artistes from
Janapada Samshodhana Kendra of Dharwad, was organized in April 2000.
Yoga, the art of living a healthy life, is being promoted by the
Foundation. The Foundation is also adopting, for a period of one year,
guilds that are engaged in handicrafts.
for Infosys Foundation
Bangalore N. S. Raghavan Sudha Murty Sudha Gopalakrishnan
April 11, 2001 Chairman Trustee Trustee
Financial statements prepared in substantial
compliance with GAAP requirements of various
countries and reports of compliance with the respective
corporate governance standards
[GRAPHIC APPEARS HERE]
Over the past decade, the technology and information revolutions have
fundamentally transformed economic and political relationships between
nations. Thanks to the opening up of financial markets across the
globe, investors today have a wide choice of capital markets to invest
in. Consequently, the global investor must have access to information
about the performance of any company, in any market that he / she
chooses to invest in. However, differences in language, accounting
practices, and reporting requirements in various countries render
performance reports by many companies rather investor-unfriendly.
Today, the strength of a global company lies in its ability to access
high-quality capital at the lowest cost from a global pool of
investors. Such companies study the needs of global investors and
publish financial information in a language and form understood by
their existing as well as prospective investors. In the process,
financial statistics may have to be restated and financial terminology
may need to be translated. Indeed, a key issue in international
financial analysis is the restatement and translation of financial
reports that describe operations conducted in one environment, but
which are the subject of review and analysis in another.
As an investor-friendly company, committed to the highest standards of
disclosure, we voluntarily provide unaudited financial statements
prepared in substantial compliance with the GAAP requirements of
Australia, Canada, France, Germany, Japan and the United Kingdom,
besides those of the US and India (which information appears
separately elsewhere). The financial statements are in the respective
national languages of these countries.
Further, keeping in mind their local regulations and practices, these
countries have formulated their own corporate governance standards.
This year, we provide statements on compliance with these standards in
the respective national languages of these countries.
The unaudited consolidated profit & loss accounts and balance sheets
have been prepared by converting the various financial parameters,
reported in the audited income statement of Infosys (according to the
Indian GAAP), including a consolidation of subsidiary financial
information, into the respective currencies of the above countries. In
addition, adjustments have been made for differences in accounting
principles, and in formats, between India and these countries, if any.
In the event of a conflict in interpretation, the audited Indian version of
the financial statements and the "Corporate governance" section of the annual
report should be considered. The Infosys management cautions investors that
these reports are provided only as additional information to our global
investors. Using such reports for predicting the future of Infosys, or any
other company, is risky. The Infosys management is not responsible for any
direct, indirect or consequential losses suffered by any person using these
financial statements or data.
Corporate governance reports
- --------------------------------------------------------------------------------
Australia
The Australian Institute of Company Directors, the Australian Society of
Certified Practicing Accountants, the Business Council of Australia, the Law
Council of Australia, the Institute of Chartered Accountants of Australia, and
the Securities Institute of Australia, formed a working group to study corporate
governance issues which submitted the Bosch Report on corporate governance in
1995.
Your company complies substantially with all recommendations made by the working
group, except the following:
1. Chairman and CEO - The current policy of the company is to have an
executive chairman and chief executive officer (CEO), and a managing
director, president and chief operating officer (COO). There is a
clear demarcation of responsibilities and authority between the two.
At present, the company does not have a non-executive director as
deputy chairman.
2. Composition of the board - The current strength of the board is 16,
with 8 executive directors and 8 non-executive, independent
directors.
3. Board membership term - Indian law mandates the retirement of one-
third of the board members every year and qualifies the retiring
members for re-appointment. The executive directors are appointed by
the shareholders for a maximum period of five years at one time, but
are eligible for re-appointment upon completion of their term.
Canada
"Good governance plays an important role in protecting shareholder rights,
helping to maximize shareholder value over time, and assisting the creation of
vibrant, dynamic and successful corporations." - Interim report, Joint Committee
on Corporate Governance, March 2001
The Joint Committee on Corporate Governance was established by the Canadian
Institute of Chartered Accountants (CICA), the Canadian Venture Exchange (CDNX)
and the Toronto Stock Exchange (TSE), to study various aspects of corporate
governance. The committee submitted its interim report - "Beyond compliance :
building a governance culture" - in March 2001.
Your company complies substantially with all recommendations made by the
committee, except the following:
1. Recommendation 4.1 - Selecting the CEO, monitoring performance and
succession planning - At present, the succession planning of the CEO
is not delegated to the board chairman or a lead director. At
present, the CEO is also the chairman of the company. The chairman
reviews succession planning and management development with the
board from time to time.
2. Recommendation 4.3 - Risk management - The board of directors is
primarily responsible for monitoring risk levels on various
parameters, and the management council is responsible for ensuring
implementation of mitigation measures, if required. The audit
committee provides overall direction on the risk management
policies.
3. Recommendation 5.3 - Ensuring board independence - The independent
directors of the board do not formally meet, without the management,
at regular intervals. However, they informally discuss any
substantive issues, that may arise from time to time, with the
chairman and CEO.
4. Recommendation 5.3 - Responsibilities of the chairman - The chairman
of the board is an executive director. The company has not
identified any lead director to ensure the capacity of the board to
act independent of management. The compensation committee of the
board evaluates the performance of all the directors, including the
CEO, at regular intervals.
5. Recommendation 5.4 - The role of the corporate secretary - The
company secretary reports to the chief financial officer of the
company.
Rapport sur le gouvernement d'entreprises - France
- --------------------------------------------------------------------------------
L'AFG-ASFFI est une association representant l'activite de gestion d'actifs en
France. Cette association a institue une [[ Commission portant sur le
gouvernement d'entreprises ]] afin d'examiner les divers aspects du gouvernement
d'entreprises applicables aux societes francaises. La Commission a fait
paraitre ses recommandations en septembre 1999.
La Commission portant sur le gouvernement d'entreprises a fait plusieurs
recommandations. Votre societe respecte en grande partie toutes les
recommandations faites, a l'exception des suivantes :
1. Recommandation I-B-2 - Publication de deux rapports, une version
resumee, une version complete. La societe publie un rapport annuel
detaille contenant des informations financieres et autres en detail,
et ce meme document est adresse a tous les actionnaires quelle que
soit leur participation.
2. Recommandation I-B-3 - Explication de la resolution proposee. Le
nombre de parts detenues par les administrateurs qui sont designes
pour une re-election ainsi que l'information relative aux options de
souscription d'actions accordees au personnel cle de la societe sont
divulguees dans le rapport annuel mais pas incluses dans l'etat
explicatif relatif aux resolutions devant etre approuvees lors de
l'assemblee generale ordinaire.
3. Recommandation I-B-5 - Suivi apres le vote des resolutions. La
societe ne publie pas un extrait des minutes de l'assemblee generale
ordinaire a tous les actionnaires a la fin de la reunion. Cependant,
l'ensemble du processus relatif a l'assemble generale ordinaire est
diffuse sur Internet et accessible a tous dans le monde entier.
4. Recommandation I-B-6 - Vote electronique. La societe a recours au
systeme de vote au cas ou un scrutin serait demande. Elle n'a pas
recours au vote electronique.
5. Recommandation II-A-3 - Separation des fonctions de [[ chairman of
the board ]] et de [[ chief executive officer ]]l. La politique
actuelle de la societe est d'avoir un [[ executive chairman /chief
executive officer ]], et un directeur operationnel
[[ president/chief operating officer ]]. Il existe une delimitation
claire entre les responsabilite et l'autorite de ces deux personnes.
6. Recommandation II-c - Indemnites des administrateurs. Le comite des
remunerations determine et recommande au conseil d'administration
les indemnisations allouees aux membres du conseil. L'indemnisation
des administrateurs independants est approuvee lors d'une reunion du
conseil au complet. Les indemnites allouees a l'ensemble de tous
administrateurs independants est limitee a une somme fixee
annuellement par le conseil. La somme se situe aux environs de 0,5%
du benefice net de la societe calculee conformement aux dispositions
du Companies Act (loi sur les societes) de 1956, approuvee par les
actionnaires, et est presentee separement dans les etats financiers.
L'indemnisation allouee aux administrateurs independants et la
methode de calcul sont egalement presentees separement dans les
etats financiers. Les directeurs executifs qui sont egalement les
fondateurs de la societe se sont volontairement exclus du Stock
Offer Plan de 1994, de celui de 1998 et de 1999. Les administrateurs
independants ne sont pas non plus beneficiaires des options d'achat
d'actions dans le cadre de ces plans, sauf pour celui de 1999.
Cependant, aucune option n'a ete emise au cours de l'annee aux
administrateurs independants dans le cadre du plan.
7. Recommandation II-D-2 - Non-cumul des fonctions d'administrateur.
Selon la loi indienne, personne ne peut etre administrateur dans
plus de 20 societes.
8. Recommandation II-D-4 - A l'heure actuelle, aucun des
administrateurs n'est age de plus de 65 ans.
Unternehmensfuhrungsbericht - Deutschland
"Unternehmensfuhrungsvorschriften fordern und starken das Vertrauen der
derzeitigen und kunftigen Aktionare, Darlehensgeber, Beschaftigten,
Geschaftspartner und der allgemeinen Offentlichkeit in die nationalen
und internationalen Markte." - Unternehmensfuhrungsvorschriften fur
borsennotierte deutsche Unternehmen, Juli 2000.
Das deutsche Gremium zu Fragen der Unternehmensfuhrung hatte im Juli
2000 die "Unternehmensfuhrungsvorschriften fur borsennotierte deutsche
Unternehmen" erlassen. Das Unternehmen besitzt eine
Verwaltungsratsstruktur auf einer einzelnen Ebene. Der Verwaltungsrat
setzt sich derzeit aus 16 Mitgliedern zusammen: acht an der
Geschaftsleitung beteiligte Direktoren und acht nicht an der
Geschaftsleitung beteiligte, selbststandige Direktoren. Der
Verwaltungsrat besitzt vier Ausschusse: den
Wirtschaftsprufungsausschuss, den Vergutungsausschuss, den
Nominierungsausschuss und den Investorenbeschwerdeausschuss. Alle diese
Ausschusse - mit Ausnahme des Investorenbeschwerdeausschusses - bestehen
ganzlich aus selbststandigen Direktoren. Der
Investorenbeschwerdeausschuss besteht aus einem nicht an der
Geschaftsleitung beteiligten Vorsitzenden und einigen der an der
Geschaftsleitung beteiligten Direktoren.
Das Gremium hatte eine Reihe von Empfehlungen ausgesprochen. Ihr
Unternehmen erfullt im wesentlichen alle von diesem Ausschuss
ausgesprochenen Empfehlungen, mit Ausnahme der folgenden:
1. Empfehlung II (2) (a) - Vorschriften uber Informationen und
Bekanntmachungen. Die Abstimmungsergebnisse der
Jahreshauptversammlungen werden nicht auf der Internet-Homepage des
Unternehmens bekannt gegeben. Der gesamte Ablauf der
Jahreshauptversammlung wird uber das Internet bekannt gemacht, und
alle Aktionare in jedem Teil der Welt hatten die Moglichkeit, darauf
zuzugreifen.
2. Empfehlung II (3) (a) - Vergutung. Der Aktienoptionsplan des
Unternehmens von 1999 enthalt nicht an der Geschaftsleitung
beteiligte Direktoren als Begunstigte. Laut dem Plan gehen die
Optionen uber einen Zeitraum von vier Jahren schrittweise in das
Eigentum der betreffenden Person uber. Doch ist der
Vergutungsausschuss befugt, den Eigentumubergangsplan zu andern,
wenn die Umstande es erfordern. Jedoch wurden im laufenden Jahr
bisher noch keine Optionen an die nicht an der Geschaftsleitung
beteiligten Direktoren ausgegeben.
3. Empfehlung III (1) (f) - Aktienbesitz durch die
Aufsichtsratsmitglieder. Das Unternehmen gibt Informationen zu
Personen, die wirtschaftliche Eigentumer von mehr als 5% der
Unternehmensaktien sind, in seinem Jahresbericht bekannt. Das
Unternehmen gibt daruber hinaus Informationen zu Optionen bekannt,
die im Lauf des Jahres an an der Geschaftsleitung beteiligte
Direktoren und an nicht an der Geschaftsleitung beteiligte
Direktoren vergeben wurden. Jedoch gibt das Unternehmen derzeit
keine naheren Informationen zum Aktienbesitz der Direktoren fur das
vergangene Jahr und zu den Veranderungen beim Aktienbesitz der
Direktoren fur das vergangene Jahr bekannt.
4. Empfehlung III (2) (e) - Unabhangigkeit der Wirtschaftsprufer. Der
Wirtschaftsprufungsausschuss des Verwaltungsrates besteht
ausschliesslich aus selbststandigen Direktoren des Unternehmens. Der
Wirtschaftsprufungsausschuss erhalt von den unabhangigen
Wirtschaftsprufern entsprechend den geltenden regulatorischen
Vorschriften formale schriftliche Erklarungen, in denen alle
Beziehungen zwischen den Wirtschaftsprufern und dem Unternehmen
dargelegt werden.
5. Empfehlung III (3) - Allgemeiner Ausschuss. Das Unternehmen besitzt
derzeit keinen allgemeinen Ausschuss. Der Verwaltungsrat ist fur
samtliche unternehmenspolitischen Angelegenheiten sowie fur
strategische, planerische und operative Fragen zustandig. Die
Uberwachung der Einhaltung der Unternehmensfuhrungsvorschriften
obliegt derzeit dem Wirtschaftsprufungsausschuss.
6. Empfehlung III (3) - Markt- und Kreditrisikoausschuss. Das
Unternehmen besitzt derzeit keinen Markt- und Kreditrisikoausschuss.
Der Verwaltungsrat ist fur das Management der Markt- und
Kreditrisiken des Unternehmens verantwortlich.
7. Empfehlung III (3) - Vermittlungsausschuss. Das Unternehmen besitzt
derzeit keinen Vermittlungsausschuss. Die Ernennung der Direktoren
des Verwaltungsrates obliegt dem Nominierungsausschuss.
JAPAN
[JAPANESE TEXT]
United Kingdom
"Good corporate governance is not just a matter of prescribing particular
corporate structures and complying with a number of hard and fast rules."
- -Committee on Corporate Governance, final report, January 1998
Directors' report on corporate governance
In June 1998, the London stock exchange published the principles of good
governance and the code of best practice ("the combined code") which embraces
the work of the Cadbury, Greenbury and Hampel committees, and became effective
in respect of accounting periods ending on or before December 31, 1998.
The company has complied throughout the period under review with all the
provisions of the combined code of good practice in corporate
governance, as laid down in the listing rules of the London stock
exchange, except the following:
1. Code A.2.1 - At present, the roles of chairman and chief executive
officer are not separated. The current policy of the company is to
have an executive chairman and chief executive officer (CEO), and a
managing director, president and chief operating officer (COO).
However, there is a clear demarcation of responsibilities and
authority between the two. The CEO is responsible for corporate
strategy, brand equity, planning, external contacts, acquisitions,
and board matters. The COO is responsible for all day-to-day
operations-related issues, and for the achievement of annual targets
in customer satisfaction, sales, profitability, quality,
productivity, recruitment, training and employee retention. The
company has not identified any senior member, other than the
chairman, to whom concerns can be conveyed.
2. Code A.6.2, B.1.7 and B.1.8 - The current law in India mandates the
retirement of one-third of the board members every year, and
qualifies the retiring members for re-appointment. The executive
directors are appointed by the shareholders for a maximum period of
five years at one time, but are eligible for re-appointment upon
completion of their term.
3. Code C.2.1 - Under Indian law, voting on a resolution in the Annual
General Meeting is by show of hands, unless a poll is demanded by a
member or members present in person, or by a proxy holding at least
one-tenth of the total shares and entitled to vote on the
resolution, or by those holding an aggregate paid up capital of at
least Rs. 50,000. A proxy may not vote except in a poll.
This statement along with the report of the compensation committee and
the policies mentioned in the "Corporate governance" section of this
report explains how the company has applied the governance principles
set out in section 1 of the combined code.
Internal control
The combined code has introduced a requirement that the directors'
review the effectiveness of the group's system of internal controls.
This requirement extends the directors' review to cover all controls
including:
. Financial
. Operational
. Compliance
. Risk management
The company maintains a well-established control framework, comprising
clear structures and accountabilities, well-understood policies and
procedures, and budgeting and review processes. The company has
established a system of internal controls, which is reviewed, evaluated
and updated on an ongoing basis. Our internal auditors have conducted
periodic audits to provide reasonable assurance that the established
policies and procedures of the company have been followed. However,
there are inherent limitations in weighing the assurances provided by
any system of internal controls.
In addition, the company has put in place prudent risk management norms,
which considers significant business risks and specifies the controls
needed to manage them. A detailed report is provided in the "risk
management" section of this report. Further, as the business risk
profile changes, new risks are periodically assessed. The controls are
continually monitored using the risk management process, internal audit
coverage and routine management review. The results are reviewed by the
audit committee and the board.
The directors confirm that they are satisfied that the company has
sufficient resources to continue operations for the foreseeable future.
Accordingly, they continue to adopt the going-concern basis in preparing
the financial statements.
Sd Sd
Nandan M. Nilekani N. R. Narayana Murthy
Bangalore Managing Director, President Chairman
April 11, 2001 and Chief Operating Officer and Chief Executive Officer
Financial statements prepared in substantial compliance with GAAP
requirements of Australia
- --------------------------------------------------------------------------------
Balance sheet (Unaudited)
Infosys Technologies Limited as at March 31 Australian dollars
- ------------------------------------------------------------------------------------------------------------------------------------
2001 2000
- ------------------------------------------------------------------------------------------------------------------------------------
CURRENT ASSETS
Cash 253,949,997 193,445,114
Receivables 132,909,996 51,818,160
Investments - -
Other 33,328,193 14,726,981
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 420,188,186 259,990,255
NON-CURRENT ASSETS
Receivables - -
Investments 11,068,783 5,264,401
Property, plant and equipment 245,126,694 78,896,045
Intangibles - -
Other 23,204,507 15,696,107
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL NON-CURRENT ASSETS 279,399,984 99,856,553
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 699,588,170 359,846,808
====================================================================================================================================
CURRENT LIABILITIES
Trade creditors 57,472 1,620,633
Unearned revenues 15,308,141 6,684,626
Provisions 68,980,707 31,278,580
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 84,346,320 39,583,839
NON-CURRENT LIABILITIES
Borrowings - -
Provisions - -
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL NON-CURRENT LIABILITIES - -
TOTAL LIABILITIES 84,346,320 39,583,839
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS 615,241,850 320,262,969
====================================================================================================================================
SHAREHOLDERS' EQUITY
Share capital 12,991,471 12,990,002
Reserves 602,250,379 307,272,967
Retained profits - -
Shareholders' equity attributable to members of the company 615,241,850 320,262,969
Convertible preferred stock - -
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 615,241,850 320,262,969
====================================================================================================================================
Financial statements prepared in substantial compliance with GAAP
requirements of Australia
- --------------------------------------------------------------------------------
Profit and loss account (Unaudited)
Infosys Technologies Limited for the year ended March 31 Australian dollars
- ------------------------------------------------------------------------------------------------------------------------------------
2001 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Operating revenue 771,073,557 332,658,775
Operating profit before abnormal items and income tax 277,109,396 116,864,622
Abnormal items - -
- ------------------------------------------------------------------------------------------------------------------------------------
Operating profit before income tax 277,109,396 116,864,622
- ------------------------------------------------------------------------------------------------------------------------------------
Income tax expense / (benefit) attributable to
Operating profit 27,108,845 13,001,320
Abnormal items - -
- ------------------------------------------------------------------------------------------------------------------------------------
Income tax expense / (benefit) for the year 27,108,845 13,001,320
- ------------------------------------------------------------------------------------------------------------------------------------
Operating profit after income tax 250,000,551 103,863,302
Outside equity interests in operating profit after income tax - -
Operating profit after income tax attributable to
members of Infosys Technologies Limited 250,000,551 103,863,302
Dividend on preferred stock - -
Retained profits at the beginning of the financial year - -
Aggregate of amounts transferred from reserves - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total available for appropriation 250,000,551 103,863,302
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends provided for or paid 29,681,146 11,926,546
Aggregate of amounts transferred to reserves 220,319,405 91,936,756
- ------------------------------------------------------------------------------------------------------------------------------------
Retained profits at the end of the financial year - -
- ------------------------------------------------------------------------------------------------------------------------------------
Basic earnings per share 3.80 1.58
Diluted earnings per share 3.75 1.58
- ------------------------------------------------------------------------------------------------------------------------------------
Notes:
1. The company's financial statements are prepared in Indian rupees, the reporting currency. These financial statements have been
prepared by translating revenue and expenditure at an average rate during the year; current assets, current liabilities,
property, plant and equipment, long-term borrowings at the year-end rate; and accretions to stockholders' equity at an average
rate for the year. The difference arising on translation is shown under reserves.
- ------------------------------------------------------------------------------------------------------------------------------------
2. Exchange rates used: 2001 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Average exchange rate used 1 AUD = Rs. 25.22 1 AUD = Rs. 27.70
Closing exchange rate used 1 AUD = Rs. 22.75 1 AUD = Rs. 26.28
3. Reconciliation between Indian GAAP and Australian GAAP statements: Australian dollars
- ------------------------------------------------------------------------------------------------------------------------------------
2001 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Net income as per Indian GAAP in Rs. 6,288,136,341 2,935,156,665
Net income as per Indian GAAP in Aus $ 249,331,338 105,962,334
Less : Provision for gratuity - (1,166,339)
Extraordinary income (2,178,588) (2,731,799)
Expenses against provisions for contingencies
and e-inventing the company (154,678) (1,997,407)
Add : Provision for deferred taxes 1,721,449 1,330,810
Provision for contingencies and e-inventing the - 2,465,703
company
Provision for gratuity 1,281,030 -
Net income as per Australian GAAP 250,000,551 103,863,302
- ------------------------------------------------------------------------------------------------------------------------------------
Financial statements prepared in substantial compliance with GAAP
requirements of Canada
- --------------------------------------------------------------------------------
Balance sheet (Unaudited)
Canadian dollars
- ------------------------------------------------------------------------------------------------------------------------------------
March 31 2001 2000
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Current assets
Cash and cash equivalents 195,181,164 169,457,920
Accounts receivable 102,152,109 45,392,708
Inventories - -
Prepaid expenses and other assets 25,615,418 12,900,836
- ------------------------------------------------------------------------------------------------------------------------------------
322,948,691 227,751,464
Property, plant and equipment 188,399,740 69,112,935
Investments 8,507,257 4,611,616
Deferred taxes 5,246,761 3,729,640
Other assets 12,587,783 10,020,149
- ------------------------------------------------------------------------------------------------------------------------------------
537,690,232 315,225,804
====================================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable 44,172 1,419,675
Accrued liabilities 51,101,799 26,781,318
Current portion of long-term obligations - -
Advances received from clients 1,915,467 618,718
Unearned revenue 11,765,547 5,855,732
- ------------------------------------------------------------------------------------------------------------------------------------
64,826,985 34,675,443
Long-term obligations - -
- ------------------------------------------------------------------------------------------------------------------------------------
64,826,985 34,675,443
Minority interest - -
Share capital
Common shares - 66,158,117 outstanding 12,364,630 12,363,410
(2000 - 66,150,700 outstanding)
Additional paid-in capital 117,583,215 116,801,747
Accumulated foreign currency translation adjustment (16,929,115) (25,621,031)
Retained earnings 359,844,517 177,006,235
- ------------------------------------------------------------------------------------------------------------------------------------
537,690,232 315,225,804
====================================================================================================================================
Financial statements prepared in substantial compliance with GAAP
requirements of Canada
- --------------------------------------------------------------------------------
Statement of earnings and retained earnings (Unaudited)
Canadian dollars
- ------------------------------------------------------------------------------------------------------------------------------------
Year ended March 31 2001 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Sales 625,391,866 299,804,179
Cost of sales 322,784,546 163,705,072
- ------------------------------------------------------------------------------------------------------------------------------------
Gross margin 302,607,320 136,099,107
EXPENSES
Selling, general and administration expenses 87,145,568 39,403,933
- ------------------------------------------------------------------------------------------------------------------------------------
Income from operations 215,461,752 96,695,174
Interest and other income 14,505,308 13,299,731
Interest expense - -
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings before income taxes 229,967,060 109,994,905
Provision for income taxes 22,497,040 12,237,056
Net earnings 207,470,020 97,757,849
Cash dividend declared 24,631,738 11,225,461
- ------------------------------------------------------------------------------------------------------------------------------------
182,838,282 86,532,388
Retained earnings, beginning of the year 177,006,235 90,473,847
Adjustment on deconsolidation of subsidiary - -
Capitalization of profits - -
Retained earnings, end of the year 359,844,517 177,006,235
EARNINGS PER SHARE
Net earnings
Basic 3.15 1.49
Fully diluted 3.11 1.48
Weighted average number of
shares
Basic 65,771,256 65,659,625
Fully diluted 66,714,739 65,863,990
- ------------------------------------------------------------------------------------------------------------------------------------
Notes:
1. The company's financial statements are prepared in Indian rupees, the reporting currency. These financial statements have been
prepared by translating revenue and expenditure at an average rate for the year; current assets, current liabilities, property,
plant and equipment, long-term borrowings at the year-end rate; and accretions to stockholders' equity at an average rate for
the year. The difference arising on translation is shown under accumulated foreign currency translation adjustment.
2. Exchange rate used:
Average exchange rate used 1 CAD = Rs. 30.39 1 CAD = Rs. 29.43
Closing exchange rate used 1 CAD = Rs. 29.60 1 CAD = Rs. 30.00
3. Reconciliation between the Indian GAAP and the Canadian GAAP statements:
- ------------------------------------------------------------------------------------------------------------------------------------
Net income as per Indian GAAP in Rs. 6,288,136,341 2,935,156,665
Net income as per Indian GAAP in Canadian dollars 206,914,654 99,733,492
Less : Provision for gratuity - (1,097,778)
Extraordinary income (1,807,963) (2,571,215)
Expenses against provisions for contingencies
and e-inventing the company (128,364) (1,879,992)
Add : Provision for deferred taxes 1,428,593 1,252,580
Provision for contingencies - 2,320,762
Provision for gratuity 1,063,100 -
Net earnings as per Canadian GAAP 207,470,020 97,757,849
- ------------------------------------------------------------------------------------------------------------------------------------
Financial statements prepared in substantial compliance with GAAP
requirements of France
- --------------------------------------------------------------------------------
Etats financiers prepares selon les principes comptables francais (non verifies)
Compte de resultat FRF
- ------------------------------------------------------------------------------------------------------------------------------------
2001 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Produits d'exploitation
Vente de marchandises - -
Production vendues 3,021,567,378 1,307,146,219
- ------------------------------------------------------------------------------------------------------------------------------------
Montant net du chiffres d'affaires 3,021,567,378 1,307,146,219
- ------------------------------------------------------------------------------------------------------------------------------------
Production stockee - -
Production immobilisee - -
Subventions d'exploitation - -
Reprises sur amortissements, provisions et transfert de charges - -
Autres produits - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total des produits d'exploitation (I) 3,021,567,378 1,307,146,219
- ------------------------------------------------------------------------------------------------------------------------------------
Charges d'exploitation
Achat de marchandises 9,064,190 4,214,578
Variation de stocks des biens achetes - -
Achat de matieres premieres et autres approvisionnements - -
Variations de stocks de matieres premieres et approvisionnements - -
Autres achats et charges externes - -
Salaires et traitements 1,141,149,110 495,643,041
Dotations aux amortissements et aux provisions - -
Sur immobilisations : Dotation aux amortissements 179,482,536 78,863,317
Sur immobilisations : Dotations aux provisions - -
Sur actif circulant : Dotations aux provisions - -
Pour risques et charges: dotation sur provisions - -
Autres charges 650,872,709 306,834,328
- ------------------------------------------------------------------------------------------------------------------------------------
Total des charges d'exploitation (II) 1,980,568,545 885,555,264
- ------------------------------------------------------------------------------------------------------------------------------------
Resultat d'exploitation (I-II) 1,040,998,833 421,590,955
- ------------------------------------------------------------------------------------------------------------------------------------
Quotes-parts de resultat sur operations faites en commun :
Benefice attribue ou perte transferee (III) - -
Perte attribuee ou benefices transferes (IV) - -
Produits financieres
De participations - -
D'autres valeurs mobilieres - -
Interets et produits similaires 70,082,084 57,986,829
Reprises sur provisions et transfert de charges - -
Differences positives de change - -
Produits nets sur cessions de valeurs immobilieres de placements - -
Total des produits financiers (V) 70,082,084 57,986,829
Charges financieres
Dotations aux amortissements et aux provisions - -
Interet et charges similaires - -
Differences negatives de change - -
Charges nettes sur cessions de valeurs mobilieres de placements - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total des charges financieres (VI) - -
- ------------------------------------------------------------------------------------------------------------------------------------
Resultat financier (V-VI) 70,082,084 57,986,829
Resultat courant avant impots (I-II + III-IV + V-VI) 1,111,080,917 479,577,784
Financial statements prepared in substantial compliance with GAAP
requirements of France
- --------------------------------------------------------------------------------
FRF
- ------------------------------------------------------------------------------------------------------------------------------------
2001 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Produits exceptionnels
Sur operations de gestion - -
Sue operations en capital - -
Reprises sur provisions et transfert de charges - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total des produits exceptionnels (VII) - -
- ------------------------------------------------------------------------------------------------------------------------------------
Charges exceptionnelles
Sur operations de gestion - -
Sur operations en capital - -
Dotations aux amortissements et aux provisions - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total des charges exceptionnelles (VIII) - -
- ------------------------------------------------------------------------------------------------------------------------------------
Resultat exceptionnel (VII-VIII) - -
Participation des salaries aux fruits de l'expansion (IX) - -
Impot sur les benefices (X) 108,693,968 53,353,565
Total des produits (I + III + V + VII) 3,091,649,462 1,365,133,048
Total des charges (II + IV + VI + VII + IX + X) 2,089,262,513 938,908,829
Dividendes preciputaires - -
Participation a la perte de filiale deconsolidees - -
Benefice ou perte 1,002,386,949 426,224,219
Notes:
1. Conversion en monnaie etrangere
Les etats financiers de la societe sont prepares en roupies indiennes. Ces etats financiers ont ete prepares par la conversion
des produits et des charges au taux moyen mensuel pendant l'annee; les actif et passif circulants, les immobilisations, les
emprunts a long terme et accroissements des fonds propres sont calcules au taux a la fin de l'annee et les placements a long
terme sont calcules selon le taux au moment du placement. La difference provenant des conversions est enregistree sous la
rubrique Reserves.
2. Taux de change utilise
Taux moyen de change utilise 1 FRF = Rs. 6.29 1 FRF= Rs. 6.75
Taux de change de cloture utilise 1 FRF = Rs. 6.23 1 FRF= Rs. 6.32
3. Rapprochement entre les etats financiers etablis selon les principes comptables indiens et francais: FRF
- ------------------------------------------------------------------------------------------------------------------------------------
2001 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Resultat net selon les principes comptables indiens en Rs. 6,288,136,341 2,935,156,665
Resultat net selon les principes comptables indiens en FRF 999,703,711 434,838,024
Soustraction du revenu net de la filiale inclus en consolidation en FRF
Moins: diminutions relatives aux provision retraite - (4,786,311)
Moins: Produit extraordinaire (8,735,135) (11,210,496)
Moins: Depenses liees aux provisions pour risques et charges (620,187) (8,196,767)
Addition des provisions pour impots differes en FRF 6,902,216 5,461,250
Addition relatives aux provisions pour risques et charges - 10,118,519
Addition relatives aux provision pour retraite 5,136,344
Resultat net selon les principes comptables francais en FRF 1,002,386,949 426,224,219
- ------------------------------------------------------------------------------------------------------------------------------------
Financial statements prepared in substantial compliance with GAAP
requirements of France
- --------------------------------------------------------------------------------
Etats financiers prepares selon les principes comptables francais (non verifies)
Bilan le 31 mars, FRF
- ------------------------------------------------------------------------------------------------------------------------------------
2001 2000
--------------------------------------------- --------
Actif Brut Amortissements Net Net
ou Provisions
- ------------------------------------------------------------------------------------------------------------------------------------
Actif immobilise
Immobilisations incorporelles
Frais d'etablissements - - - -
Frais de recherche et de developpement - - - -
Fonds comercial - - - -
Autres - - - -
Avance et acomptes - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
- - - -
Immobilisations corporelles
Terrains 58,781,825 - 58,781,825 33,347,003
Constructions 253,138,782 21,474,184 231,664,598 84,920,255
Installations techniques, materiel 539,311,474 289,612,587 249,698,887 94,991,231
Autres immobilisations corporelles 161,840,797 80,777,752 81,063,045 24,682,105
Immobilisations corporelles en cours 273,917,215 - 273,917,215 90,127,137
Avances et acomptes verses
- ------------------------------------------------------------------------------------------------------------------------------------
1,286,990,093 391,864,523 895,125,570 328,067,731
Immobilisations financieres
Placements evalues selon la participation - - - -
Autres participations - - - -
Creances rattachees a des participations - - - -
Autres titres immobilises 40,419,714 - 40,419,714 21,890,581
Prets - - - -
Autres - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
40,419,714 - 40,419,714 21,890,581
- ------------------------------------------------------------------------------------------------------------------------------------
Total de l'actif (I) 1,327,409,807 391,864,523 935,545,284 349,958,312
====================================================================================================================================
Actif circulant
Stocks et en-cours
Matieres premieres et autres
Approvisionnements - - - -
En cours de production (biens) - - - -
En cours de production (services) - - - -
Produits intermediaires et finis - - - -
Marchandises - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
- - - -
Prets aux employes 120,281,808 - 120,281,808 82,845,865
Creances
Creances clients et comptes rattaches - - - -
Autres creances 514,514,592 29,169,100 485,345,492 215,471,718
Capital souscrit-appele, non versel - - - -
Valeurs immobilieres de placement - - - -
Disponibilites 927,345,496 - 927,345,496 804,388,860
- ------------------------------------------------------------------------------------------------------------------------------------
1,441,860,088 29,169,100 1,412,690,988 1,019,860,578
Charges constatees d'avance 61,229,390 - 61,229,390 25,956,280
Total d'actif circulant (II) 1,623,371,286 29,169,100 1,594,202,186 1,128,662,723
Impots differes (III) 24,928,433 - 24,928,433 17,703,987
Primes de remboursement des obligations (IV) - - - -
Ecart de conversion actif (V) - - - -
- ------------------------------------------------------------------------------------------------------------------------------------
Total General (I + II + III + IV + V) 2,975,709,526 421,033,623 2,554,675,903 1,496,325,022
====================================================================================================================================
Financial statements prepared in substantial compliance with GAAP
requirements of France
- --------------------------------------------------------------------------------
FRF
- ------------------------------------------------------------------------------------------------------------------------------------
Passif 2001 2000
- -------------------------------------------------------------------------------------------------------------------------
Capitaux propres
Capital social 49,257,515 49,251,619
Primes d'emission (de fusion, d'apport) 456,082,232 452,306,585
Ecart de reevaluation - -
Reserves (benefices non distribues)
Reserve legale - -
Reserve statutaires - -
Reserves reglementees - -
Autres reserves 1,690,576,768 807,197,531
Report a nouveau - -
Resultat de l'exercice (Benefice ou perte) - -
Subventions d'investissement - -
Provisions reglementees - -
- -------------------------------------------------------------------------------------------------------------------------
Total des capitaux propres (I) 2,195,916,515 1,308,755,735
Autres capitaux propres
Benefice provenant de participation subordonnee - -
Avances et acomptes conditionnels - -
- -------------------------------------------------------------------------------------------------------------------------
Total des autres capitaux propres - -
Interets minoritaires - -
Provisions
Provision pour risques - -
Provisions pour charges - -
- -------------------------------------------------------------------------------------------------------------------------
Total des provisions (II) - -
Dettes
Dettes financieres
Emprunts obligatoires convertibles - -
Autres emprunts obligatoires - -
Emprunts et dettes aupres d'etablissements
de credit - -
Emprunts et dettes financiers divers - -
Avances et acomptes recus sur commande en cours 65,001,286 30,733,151
Dettes d'exploitation
Dettes fournisseurs et comptes rattaches 209,868 6,738,962
Dettes fiscales et sociales - -
Autres dettes
Dettes sur immobilisations et comptes rattaches - -
Autres dettes 242,795,066 127,126,510
Produits constates d'avance - -
- -------------------------------------------------------------------------------------------------------------------------
Total des dettes (III) 308,006,220 164,598,623
Interet minoritaire - -
Ecart de conversion passif (IV) 50,753,168 22,970,664
- -------------------------------------------------------------------------------------------------------------------------
Total General (I + II + III + IV) 2,554,675,903 1,496,325,022
=========================================================================================================================
Jahresabschluss erarbeitet in wesentlicher Ubereinstimmung mit den
Grundsatzen einer ordnungsgemassen Buchfuhrung (GAAP) verschiedener
Lander -Deutschland (untestiert)
- --------------------------------------------------------------------------------
Bilanz zum 31. Marz DM
- -----------------------------------------------------------------------------------------------------------------------------
2001 2000
- -----------------------------------------------------------------------------------------------------------------------------
AKTIVA
Immaterielle Vermogensgegenstande - -
Sachanlagen 266.696.905 97.893.676
Finanzanlagen 12.042.794 6.532.033
- -----------------------------------------------------------------------------------------------------------------------------
Anlagevermogen 278.739.699 104.425.709
- -----------------------------------------------------------------------------------------------------------------------------
Vorrate - -
Forderungen aus Lieferungen und Leistungen 144.605.568 64.295.621
Sonstige Forderungen und sonstige Vermogensgegenstande
36.260.946 18.273.138
Marktfahige Wertpapiere und Obligationen - -
Kasse, Bank 276.296.626 240.025.382
- -----------------------------------------------------------------------------------------------------------------------------
Umlaufvermogen 457.163.140 322.594.141
- -----------------------------------------------------------------------------------------------------------------------------
Aktiver Rechnungsabgrenzungsposten einschl. latenter Steuern 25.246.415 19.475.622
- -----------------------------------------------------------------------------------------------------------------------------
Aktiva gesamt 761.149.254 446.495.472
- -----------------------------------------------------------------------------------------------------------------------------
PASSIVA
Gezeichnetes Kapital 14.556.575 14.554.818
Kapitalrucklage 135.055.347 133.930.344
Gewinnrucklagen 519.768.859 248.894.952
- -----------------------------------------------------------------------------------------------------------------------------
Eigenkapital 669.380.781 397.380.114
- -----------------------------------------------------------------------------------------------------------------------------
Einziehbare Vorzugsaktien - -
Registrierte Gewinnbeteiligungszertifikate - -
Pensionsruckstellungen - -
Sonstige Ruckstellungen 72.339.228 37.933.878
- -----------------------------------------------------------------------------------------------------------------------------
Ruckstellungen 72.339.228 37.933.878
- -----------------------------------------------------------------------------------------------------------------------------
Verbindlichkeiten aus Lieferungen und Leistungen 62.529 2.010.870
Sonstige Verbindlichkeiten 2.711.517 876.372
- -----------------------------------------------------------------------------------------------------------------------------
Verbindlichkeiten 2.774.046 2.887.242
- -----------------------------------------------------------------------------------------------------------------------------
Passiver Rechnungsabgrenzungsposten 16.655.199 8.294.238
- -----------------------------------------------------------------------------------------------------------------------------
Passiva gesamt 761.149.254 446.495.472
=============================================================================================================================
Jahresabschluss erarbeitet in wesentlicher Ubereinstimmung mit den
Grundsatzen einer ordnungsgemassen Buchfuhrung (GAAP) verschiedener
Lander -Deutschland (untestiert)
- --------------------------------------------------------------------------------
Nach den allgemeingultigen Buchfuhrungsmethoden (GAAP) erfasster Finanzbericht (ungepruft)
Gewinn- und Verlustrechnung fur das Geschaftsjahr zum 31. Marz DM
- ----------------------------------------------------------------------------------------------------------------
2001 2000
- ----------------------------------------------------------------------------------------------------------------
Umsatzerlose 900.315.434 389.891.161
Kosten zur Erzielung der Umsatzerlose 464.681.305 212.896.168
- ----------------------------------------------------------------------------------------------------------------
Bruttoergebnis vom Umsatz 435.634.129 176.994.993
Allgemeine Kosten, Vertriebs- und Verwaltungskosten 125.454.941 51.244.267
Sonstiges betriebliche Ertrage - -
Sonstige betriebliche Aufwendungen - -
- ----------------------------------------------------------------------------------------------------------------
Betriebsgewinn 310.179.188 125.750.726
Zinsen und ahnliche Ertrage 20.881.871 17.296.116
- ----------------------------------------------------------------------------------------------------------------
Ergebnis der gewohnlichen Geschaftstatigkeit 331.061.059 143.046.842
Ausserordentliche Ertrage - -
- ----------------------------------------------------------------------------------------------------------------
Ertrag vor Steuer 331.061.059 143.046.842
Steuern vom Einkommen 32.386.786 15.914.121
Dividende auf Vorzugsaktien - -
Verlorenes Kapital durch dekonsolidierte Tochtergesellschaft - -
- ----------------------------------------------------------------------------------------------------------------
Jahresuberschuss 298.674.273 127.132.721
- ----------------------------------------------------------------------------------------------------------------
Zuweisung zu Gewinnrucklagen 263.214.372 112.534.165
Dividenden an Aktionare 35.459.901 14.598.556
Ungebundener Gewinn - -
Anmerkungen:
1. Umrechnung von Auslandswahrungen
Die Unternehmensbilanz wird in der Berichtswahrung der indischen Rupie ausgedruckt. Diese Bilanz wurde erstellt durch die Umrechnung
der Einnahmen und Ausgaben zum Jahresdurchschnittskurs; Umlaufvermogen, kurzfristigen Verbindlichkeiten, Grundstucke, Maschinen und
Anlagen und langfristigen Verbindlichkeiten sowie Erhohungen des Eigenkapitals zum Jahresendkurs, dauerhafte Investitionen zum
Umrechnungskurs zum Zeitpunht der Investition. Die Wahrungsumrechnungsdifferenz wird unter den Gewinnrucklagen ausgewiesen
- -------------------------------------------------------------------------------------------------------------------------
2. Verwendete Wechselkurse 2001 2000
- -------------------------------------------------------------------------------------------------------------------------
Verwendeter durchschnittlicher Wechselkurs 1 DM = Rs. 21,11 1 DM = Rs. 22,63
Verwendeter Jahresendwechselkurs 1 DM = Rs. 20,91 1 DM = Rs. 21,18
- -------------------------------------------------------------------------------------------------------------------------
3. Abgleich zwischen den Abschlussen nach indischen GAAP und deutschen GAAP (DM):
- -------------------------------------------------------------------------------------------------------------------------
2001 2000
- -------------------------------------------------------------------------------------------------------------------------
Jahresuberschuss nach indischen GAAP in Rs. 6.288.136.341 2.935.156.665
Jahresuberschuss nach indischen GAAP in DM 297.874.767 129.702.018
Abzuglich:
bei Konsolidierung mit aufgenommenes Nettoeinkommen / (Verlust) der
Tochtergesellschaft - -
Rucklage fur Zuwendungen - (1.427.645)
Ausserordentliche Ertrage (2.602.748) (3.343.829)
Aufwendungen fur Ruckstellungen fur Eventualverbindlichkeiten and e-Erfindungen des
Unternehmens (184.793) (2.444.904)
Plus:
Ruckstellungen fur Steuern 2.056.605 1.628.963
Ruckstellungen fur Eventualverbindlichkeiten and e-Erfindungen des Unternehmens - 3.018.118
Bestimmung fur Gratifikationen 1.530.442 -
Gewinn fur das Geschaftsjahr nach deutschen GAAP 298.674.273 127.132.721
Financial statements prepared in substantial compliance with GAAP
requirements of Japan
- --------------------------------------------------------------------------------
[JAPANESE TEXT]
Financial statements prepared in substantial compliance with GAAP
requirements of Japan
- --------------------------------------------------------------------------------
[JAPANESE TEXT]
Financial statements prepared in substantial compliance with GAAP
requirements of the United Kingdom
- --------------------------------------------------------------------------------
Balance sheet as at March 31 (Unaudited) (Pounds)
- ----------------------------------------------------------------------------------------------------------------------------------
2001 2000
- ----------------------------------------------------------------------------------------------------------------------------------
Fixed assets
Tangible fixed assets 83,934,863 29,828,630
Investments 3,790,109 1,990,339
- ----------------------------------------------------------------------------------------------------------------------------------
87,724,972 31,818,969
- ----------------------------------------------------------------------------------------------------------------------------------
Current assets
Stocks - -
Debtors 45,510,271 19,591,156
Cash at bank and in hand 86,956,087 73,136,780
Others - advances and
prepayments 17,020,090 9,892,527
Deferred tax asset 2,337,510 1,609,685
- ----------------------------------------------------------------------------------------------------------------------------------
151,823,958 104,230,148
Creditors - amounts falling due within a year
Creditors 19,679 612,721
Dividend 7,540,654 2,895,846
Provisions and other liabilities 21,321,045 11,457,097
- ----------------------------------------------------------------------------------------------------------------------------------
28,881,378 14,965,664
Net current assets 122,942,580 89,264,484
Loans and advances more than one year - -
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets less current liabilities 210,667,552 121,083,453
- ----------------------------------------------------------------------------------------------------------------------------------
Capital and reserves
Called-up share capital 5,250,225 5,249,675
Share premium account 48,247,352 47,895,413
Retained profits 157,169,975 67,938,365
- ----------------------------------------------------------------------------------------------------------------------------------
Equity shareholders' funds 210,667,552 121,083,453
Convertible preferred stock - -
- ----------------------------------------------------------------------------------------------------------------------------------
210,667,552 121,083,453
==================================================================================================================================
Financial statements prepared in substantial compliance with GAAP
requirements of the United Kingdom
- --------------------------------------------------------------------------------
Profit and loss account for the years ended March 31 (Unaudited) (Pounds)
- ----------------------------------------------------------------------------------------------------------------------------------
2001 2000
- ----------------------------------------------------------------------------------------------------------------------------------
Turnover 281,648,767 126,770,646
Operating expenses 184,614,347 85,883,592
- ----------------------------------------------------------------------------------------------------------------------------------
Operating profit 97,034,420 40,887,054
Interest receivable 6,532,548 5,623,722
Interest payable - -
Net interest (payable)/receivable 6,532,548 5,623,722
- ----------------------------------------------------------------------------------------------------------------------------------
Profit on ordinary activities before taxation and exceptional items 103,566,968 46,510,776
Exceptional items - -
- ----------------------------------------------------------------------------------------------------------------------------------
Profit on ordinary activities before taxation 103,566,968 46,510,776
Taxation on profit on ordinary activities 10,131,670 5,174,376
Profit on ordinary activities after taxation 93,435,298 41,336,400
Dividend on preferred stock - -
Equity in loss of deconsolidated subsidiary - -
Profit for the financial year 93,435,298 41,336,400
Dividends 11,093,042 4,746,628
Retained profits for the financial year 82,342,256 36,589,772
Earnings per ordinary share:
Undiluted 1.42 0.63
Diluted 1.42 0.63
- ----------------------------------------------------------------------------------------------------------------------------------
Notes:
1. The company's financial statements are prepared in Indian rupees, the reporting currency. These financial statements have been
prepared by translating revenue and expenditure at an average rate for the year; current assets, current liabilities, property,
plant and equipment, long-term borrowings at the year-end rate; and accretions to stockholders' equity at an average rate for
the year. The difference arising on translation is shown under retained profits.
2. Exchange rates used:
- ----------------------------------------------------------------------------------------------------------------------------------
2001 2000
- ----------------------------------------------------------------------------------------------------------------------------------
Average exchange rate used 1(Pounds) = Rs. 67.48 1(Pounds) = Rs. 69.60
Closing exchange rate used 1(Pounds) = Rs. 66.44 1(Pounds) = Rs. 69.51
- ----------------------------------------------------------------------------------------------------------------------------------
3. Reconciliation between Indian GAAP and UK GAAP statements: (Pounds)
- ----------------------------------------------------------------------------------------------------------------------------------
2001 2000
- ----------------------------------------------------------------------------------------------------------------------------------
Net income as per Indian GAAP in Rs. 6,288,136,341 2,935,156,665
Net income as per Indian GAAP in (Pounds) 93,185,185 42,171,791
Less : Provision for gratuity - (464,190)
Expenses against provisions for contingency and e-inventing
the company (57,809) (794,945)
Extraordinary income (814,226) (1,087,225)
Add : Provision for deferred taxes 643,375 529,647
Provision for contingency and e-inventing the company - 981,322
Provision for gratuity 478,773 -
Profit for the financial year as per the UK GAAP 93,435,298 41,336,400
- ----------------------------------------------------------------------------------------------------------------------------------