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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 20-F
(Mark One)
Registration statement pursuant to section 12(b) or (g) of the Securities
Exchange Act of 1934
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended March 31, 1999
Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Transition period from ______to ________
Commission File Number 333-72195
INFOSYS TECHNOLOGIES LIMITED
(Exact name of Registrant as specified in its charter)
Not Applicable
(Translation of Registrant's name into English)
Bangalore, Karnataka, India
(Jurisdiction of incorporation or organization)
Electronics City, Hosur Road,
Bangalore, Karnataka
India 561 229
+91-80-852-0261
(Address of principal executive offices)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
None Not Applicable
Securities registered pursuant to Section 12(g) of the Act:
American Depositary Shares,
each represented by one-half of one Equity Share, par value Rs. 10 per share.
(Title of class)
Securities for which there is a
reporting obligation pursuant to Section 15(d) of the Act:
Not Applicable
(Title of class)
Indicate the number of outstanding shares of each of the issuer's classes of
capital or common stock as of the close of the period covered by the annual
report. 33,069,400 Equity Shares
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes |_| No |X|
Indicate by check mark which financial statement item the registrant has elected
to follow.
Item 17 |_| Item 18 |X|
Currency of Presentation and Certain Defined Terms
Unless the context otherwise requires, references herein to the "company" or to
"Infosys" are to Infosys Technologies Limited, a limited liability company
organized under the laws of the Republic of India. References to "U.S." or
"United States" are to the United States of America, its territories and its
possessions. References to "India" are to the Republic of India. Yantra
Corporation, a Delaware Corporation ("Yantra"), in which the company holds a
minority interest, is considered a subsidiary of the company for purposes of
Indian GAAP. "Infosys" is registered Indian trademark of the company. All other
trademarks or tradenames used in this Annual Report on Form 20-F ("Annual
Report") are the property of their respective owners.
In this Annual Report, references to "$" or "Dollars" or "U.S. Dollars" are to
the legal currency of the United States and references to "Rs" or "Rupees" or
"Indian Rupees"" are to the legal currency of India. The company's financial
statements are presented in Indian Rupees and translated into U.S. Dollars and
are prepared in accordance with United States generally accepted accounting
principles ("U.S. GAAP"). References to "Indian GAAP" are to Indian generally
accepted accounting principles. Except as otherwise specified, financial
information is presented in Dollars. References to a particular "fiscal" year
are to the company's fiscal year ended March 31 of such year.
Unless otherwise specified herein, financial information has been converted into
Dollars at the noon buying rate in New York City for cable transfers in foreign
currencies as certified for customs purposes by the Federal Reserve Bank (the
"Noon Buying Rate") on March 31, 1999, which was Rs. 42.35 per $1.00. For the
convenience of the reader, this Annual Report contains translations of certain
Indian rupee amounts into U.S. Dollars which should not be construed as a
representation that such Indian Rupee or U.S. Dollar amounts referred to herein
could have been, or could be, converted to U.S. Dollars or Indian Rupees, as the
case may be, at any particular rate, the rates stated below, or at all. Any
discrepancies in any table between totals and sums of the amounts listed are due
to rounding. For historical information regarding rates of exchange between
Indian rupees and U.S. Dollars, see "Selected Financial Data--Exchange Rates."
Forward-Looking Statements May Prove Inaccurate
IN ADDITION TO HISTORICAL INFORMATION, THIS ANNUAL REPORT CONTAINS CERTAIN
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934,
AS AMENDED. THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN ARE SUBJECT TO
CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THOSE REFLECTED IN THE FORWARD-LOOKING STATEMENTS. FACTORS THAT
MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED
IN THE SECTION ENTITLED "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" AND ELSEWHERE IN THIS REPORT. READERS ARE
CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH
REFLECT MANAGEMENT'S ANALYSIS ONLY AS OF THE DATE HEREOF. IN ADDITION, READERS
SHOULD CAREFULLY REVIEW THE OTHER INFORMATION IN THIS ANNUAL REPORT AND IN THE
COMPANY'S PERIODIC REPORTS AND OTHER DOCUMENTS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION ("SEC") FROM TIME TO TIME.
Part I
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Item 1. Description of Business
1.1 Company Overview
The company, one of India's leading information technology ("IT") services
companies, utilizes an extensive non-U.S. based ("offshore")
infrastructure to provide managed software solutions to clients worldwide.
Headquartered in Bangalore, India, the company has eleven state-of-the-art
offshore software development facilities located throughout India that
enable it to provide high quality, cost-effective services to clients in a
resource-constrained environment. The company's services, which may be
offered on a fixed-price, fixed-time frame or time-and-materials basis,
include custom software development, maintenance (including Year 2000
conversion) and re-engineering services as well as dedicated offshore
software development centers ("OSDCs") for certain clients. In each of its
service offerings, the company assumes full project management
responsibility in order to strengthen client relationships, offer higher
value-added services and enhance its profitability. In addition, the
company develops and markets certain company-owned software products. As a
result of its extensive network of offshore software development
facilities, its quality systems, its disciplined processes and its
significant investment in people, the company has built a platform from
which it has been able to achieve significant growth to date.
The company's initial public offering ("IPO") was in February 1993 on the
Bangalore Stock Exchange and raised approximately $4.4 million in gross
aggregate proceeds. To further fund its capital programs, Infosys raised
approximately $7.7 million in gross aggregate proceeds in a private
placement of shares in October 1994. These shares were purchased by
foreign institutional investors, mutual funds as well as Indian domestic
financial institutions and corporations. Most recently, in order to
partially fund the expansion of its existing Indian facilities and
telecommunication infrastructure in Bangalore, Bhubaneswar, Chennai,
Mangalore and Pune and to develop new facilities, the company raised
approximately $70.38 million in gross aggregate proceeds through its
initial U.S. public offering of American Depositary Shares ("ADSs") on
March 11, 1999.
Through its worldwide sales headquarters in Fremont, California and
sixteen other sales offices located in the United States, Canada, the
United Kingdom, Germany, Japan and India, the company markets its services
to large IT-intensive businesses. During fiscal 1999, the company derived
82.0% of its revenues from North America, 9.3% from Europe and 1.7% from
India. While the company derives its revenues primarily from the United
States, Infosys maintains a diversified client base, with its largest
client representing 6.4% of fiscal 1999 revenues. As of March 31, 1999,
the company had approximately 115 clients. This diversified client base is
comprised primarily of Fortune 500 companies and other multinational
companies. As a result of its commitment to quality and client service,
the company enjoys a high level of repeat business. For fiscal 1999 and
1998, existing clients from the previous fiscal year generated 90.0% and
83.1%, respectively, of the company's revenues.
The company was incorporated in 1981 by seven founders who shared a vision
to build a world-class IT services organization based on a deeply-held
value system, leadership-by-example, and continuous innovation. Six of
these original founders have remained with the company, and, together with
other members of the company's management council, have pursued their
vision by focusing on certain key strategies including: (i) pursuing a
world-class operating model; (ii) investing heavily in human resources;
(iii) focusing on managed software solutions; (iv) capitalizing on a well
established offshore development model; (v) maintaining a disciplined
focus on business and client mix; and (vi) pursuing growth opportunities.
In recognition of its efforts, the company was voted "Best Managed
Company" in India by Asiamoney in each of the last three years, was
selected as "Company of the Year" by The Economic Times Awards for
Corporate Excellence and was awarded the Silver Shield in each of the last
three years by the Institute of Chartered Accountants of India as the
Indian company with the best presentation of financial statements by a
non-financial company. Management believes that this reputation for
leadership and innovation and the recognition it has received has been and
will continue to be a key competitive advantage, particularly in
attracting and retaining the highest quality IT professionals.
1.2 Subsidiaries and Joint Ventures
The company also holds a minority interest in Yantra and is a joint
venture member of the JASDIC Park Company ("JASDIC") which is an
Indo-Japanese consortium founded by Kenichi Ohmae. Yantra's primary
objectives are to develop, sell and support software products in the
retail and distribution areas. When Infosys established Yantra, it
transferred the intellectual property rights in Eagle (now known as
WMSYantra), a software solution for warehouse management, to Yantra, for
shares of common stock of Yantra. Subsequently, in September 1997, Yantra
raised working capital funds from the company and U.S. venture capitalists
through a private placement of its convertible preferred stock. In the
Fall of 1998, the company sold 1,363,637 shares of Yantra's preferred
stock it held to a U.S. venture capital fund based in Boston. As a result
of this sale, the company reduced its interest in Yantra to less than
one-half of the voting stock of Yantra and therefore, as of October 20,
1998, does not recognize Yantra's performance in the company's financial
statements.
JASDIC was formed as a consortium of several Japanese companies and three
Indian companies, including Infosys. JASDIC's primary objectives are to
provide high-quality software services from India to the Japanese market.
During fiscal 1999, the company invested 24 million Yen in JASDIC with the
purpose of promoting the company's strategy of diversifying its geographic
customer base.
1.3 Industry Overview
In today's increasingly competitive business environment, companies have
become dependent on IT not only for efficiency in day-to-day operations,
but also as a strategic tool for re-engineering business processes,
restructuring organizations and for reacting quickly to competitive,
regulatory and technological changes. For these reasons, IT capabilities
are particularly critical in certain vertical markets like financial
services, utilities and telecommunications that are undergoing rapid
deregulation and globalization. As corporations have become increasingly
reliant on their IT systems, the technological challenge of managing such
systems has increased. IT departments must not only implement new systems
based on technologies such as Internet and client/server systems, but
maintain and update legacy systems to work with the latest software and
hardware, to expand functionality, to recognize and process dates that
begin in the year 2000 and to handle other developments such as the
conversion to Eurocurrency.
As businesses have become more dependent on IT, corporate budgets for IT
services have grown dramatically. Dataquest has estimated that the
worldwide market for IT consulting, development, integration and
outsourcing will increase to $291 billion by 2001 from $177 billion in
1998. The need to outsource is particularly acute for companies whose IT
staffs lack the requisite skill set and project management capabilities to
implement new technologies, yet are reluctant to work solely with outdated
technology. As a result, such companies seek third-party IT service
providers to implement new technology and support existing legacy systems.
Additionally, in many cases, businesses are being forced to outsource IT
projects due to the difficulty and expense of recruiting and training
sufficient IT staff in a resource-constrained environment. Outsourcing
enables businesses to minimize the risks and reduce the time-to-completion
of large IT projects by shifting some or all of their IT responsibilities
to capable service organizations. In addition to this trend towards
outsourcing, the IT services industry has also benefited recently from a
significant demand for Year 2000 conversion services.
Simultaneously with this significant increase in demand for IT services,
the supply of qualified IT professionals has decreased in most developed
countries, particularly the United States, Western Europe and Japan.
According to the United States Department of Education, the number of
bachelor degrees in computer science awarded annually at U.S. universities
fell by 41.7% from 41,889 in 1986 to 24,404 in 1995. One result of this
downward trend is a growing shortage of IT professionals in the United
States; the Information Technology Association of America reports that the
number of unfilled positions for IT professionals was 346,000 in January
1998 in U.S. companies with more than 100 employees. Furthermore, the
United States Department of Commerce has estimated that between 1994 and
2005, U.S. companies will require more than one million new IT
professionals to fill the newly created positions and to replace workers
who are retiring or are otherwise leaving the IT sector.
This shortage of IT professionals, along with recent advances in
telecommunications and the growing acceptance of telecommuting, has led to
the globalization of the market for IT services. It is now well accepted
that remote offshore software development and maintenance is possible if
the offshore facilities implement world-class physical and technological
infrastructure, proven quality processes, project management methodologies
and data communications infrastructure to provide video conferencing, the
Internet, e-mail and remote computer access. By outsourcing software
development and maintenance projects to offshore IT service providers,
establishing overseas facilities or joint venturing with foreign partners,
companies have been able to access skilled IT professionals in lower cost
environments with a large population of English-speaking technical talent.
India: A Source for Software Services. According to a survey of U.S.
software service vendors conducted by the World Bank, India is the leading
offshore destination for companies seeking to outsource software
development or IT projects. India's National Association of Software and
Service Companies ("NASSCOM") estimates that India's export revenue from
software, including software services, was approximately $1.8 billion in
fiscal 1998 and will reach $4.0 billion by fiscal 2000, contributing to
total Indian software industry revenues of approximately $5.9 billion by
fiscal 2000.
There are three key factors contributing to this rapid growth of India's
software market. First, India has a large, skilled labor pool that is
available at a relatively low labor cost. With over four million
engineers, India ranks second only to the United States as the country
with the largest population of English-speaking technical personnel.
According to NASSCOM, the number of software professionals employed by the
Indian software industry has grown from approximately 56,000 in fiscal
1990 to approximately 200,000 in fiscal 1998. In addition, India has more
than 1,800 engineering colleges and technical institutes to produce
approximately 68,000 graduates annually in IT. This sizable pool of IT
talent in India is available to companies worldwide. According to Software
Productivity Research, the average annual wage for software professionals
in India is approximately 15% of the average U.S. rate. Although wages in
India are rising faster than in the United States, the labor rate
differential is anticipated to remain a competitive advantage for Indian
companies in the foreseeable future.
A second key factor driving the Indian software market is the capability
of Indian IT firms to produce high quality software deliverables. A
NASSCOM analysis of international quality standards of the top 300 Indian
software companies showed that 109 had already acquired ISO 9000 or SEI
certification, with an additional 76 anticipated to acquire such
certification by December 1999. These capabilities have led to the
recognition of India's IT talent by companies worldwide. To take advantage
of India's high quality IT services at attractive prices, companies
worldwide have outsourced their software services needs to India
unrestrained by distances or transportation limitations that often
handicap Indian manufacturing firms. In fact, the 10 to 12 hour time
difference between India and its largest market, the United States, allows
work to be carried on by Indian teams on a 24-hour basis, shortening cycle
times and improving productivity and service quality.
The final factor driving the Indian software market is the recognition by
the successive Indian governments in recent times of the importance of the
IT sector in the Indian economy. In 1991, the Government of India
introduced a number of measures to liberalize the economy and address the
economic difficulties that India had been facing. These measures
included policies to stimulate investment in infrastructure industries and
the growing Indian software industry. This commitment to the software
sector has been and continues to be pursued by each successive government
since 1991. For example, the most recent Government of India established
the National Task Force on Information Technology in April 1998 with a
mandate to make recommendations that detail policies designed to increase
India's IT exports. In addition, software firms benefit from a variety of
incentives, such as relief from import duties on hardware, a tax deduction
for income derived from software exports, and infrastructure support for
companies operating in Software Technology Parks.
1.4 Strategy
1.4.1 Business Strategy
The company's vision is to become a globally respected corporation
providing best-of-breed solutions employing best-in-class professionals.
In order to achieve this goal, the company focuses on the following key
elements of its business strategy:
Pursue World Class Operating Model. The management believes that one of
the most critical factors to the company's success has been its commitment
to pursue high quality standards in all aspects of its business, including
deliverables to the customers, human resource management, investor
relations, planning, finance, physical and technological infrastructure,
sales and marketing. In its services and operations, the company achieves
quality through rigorous adherence to highly evolved processes, including
a detailed approach to planning and execution, multi-level testing and
careful tracking and analysis of quality control. The company is certified
under the ISO 9001 and TickIT quality standards. In addition, the company
has been certified at Level IV of the Capability Maturity Model, a
software-specific quality management model developed by the Software
Engineering Institute at Carnegie Mellon University. This model defines
five levels of process maturity for a software organization. Certification
to Level IV has been achieved by only 2% of the more than 1,000 software
companies assessed under the Capability Maturity Model. Infosys also
adheres to high quality standards in its investor relations. For example,
the company was one of the first public Indian companies to adopt U.S.
GAAP reporting in fiscal 1995 and quarterly-audited Indian financial
statements in fiscal 1998.
Invest Heavily in Human Resources. The company believes that its continued
success will depend upon its ability to recruit, train, deploy and retain
highly talented IT professionals. Even as the field of software
engineering has been attracting the best and brightest Indian students,
management believes the company has become, for Indian engineering
graduates, one of the most sought after employers. The company focuses its
recruiting efforts on the top 20% of the students from the engineering
departments of Indian universities and uses a series of tests and
interviews to identify the best applicants. In an effort to attract the
most highly qualified candidates, the company has spent significant
resources in creating a quality work environment. For example, its main
facility in Bangalore, which spans five acres, encompasses not only
160,000 sq. ft. of office space but also 150,000 sq. ft. of landscaping, a
cafeteria, outdoor sitting area, library and gymnasium as well as tennis,
volleyball and basketball courts. Through this campus-like environment,
the company fosters a collegial atmosphere and informal culture, which is
further promoted by its "open door" operating philosophy where
communication and ideas flow freely irrespective of title or tenure. The
company also offers its IT professionals challenging assignments,
competitive salaries and benefits and one of the first stock option plans
adopted by a public Indian company. In addition, the company invests
heavily in training, including 14-week training sessions for newly
recruited IT professionals as well as a variety of two-week continuing
education courses in technology and management skills conducted by a
33-person faculty. As a result of this high level of investment in its
people, management believes that the company has become one of the most
attractive employers for Indian software professionals and that its
attrition rate is significantly below the industry average.
Focus on Managed Software Solutions. Since its inception, the company has
dedicated itself to providing managed software solutions, many of which
are offered on a fixed-price, fixed-time frame basis. By taking full
project management responsibility in every project, the company provides
its clients high quality, cost-effective solutions with low risk. Such
services offer the company the opportunity to build client confidence with
the potential benefit of enhanced margins. Management believes that by
demonstrating the ability to manage and successfully execute large
projects, the company is better positioned to become a long-term partner
to its clients for all of their software needs. In addition, by retaining
project management responsibility, the company accumulates significant
industry expertise and continues to develop and refine its software
development tools and proprietary methodologies.
Capitalize on a Well-Established Offshore Development Model. As one of the
pioneers of the offshore software development model, the company has made
significant investments in its infrastructure and has developed the
advanced processes and expertise necessary to manage and successfully
execute projects in multiple locations with seamless integration. The
company has high levels of project management skills and rigid controls as
evidenced by its Level IV Capability Maturity Model certification. This
commitment to quality allows the company to successfully
execute approximately 80% of its project work in India while maintaining a
high level of client satisfaction. These capabilities not only provide
significant cost advantages but also shorten the time to deliver a
solution to the client. With significant investments in offshore software
development facilities, plans to expand significantly its available
facilities and plans to hire additional IT professionals, the company
believes that it is well-positioned to serve clients globally in a
resource-constrained environment.
Maintain Disciplined Focus on Business and Client Mix. The company
provides a wide range of software services and maintains a disciplined
focus on its business mix in an effort to avoid service or client
concentration. Beginning in fiscal 1996, the company aggressively sought
to minimize its client concentration and to accept as clients only those
that met strict guidelines for overall revenue potential and
profitability. For fiscal 1999 and fiscal 1998, the company's largest
client accounted for 6.4% and 10.5%, respectively, of revenues and its
five largest clients accounted for 28.4% and 35.1%, respectively, of
revenues. Similarly, the company has endeavored to maintain a balance
among its service offerings despite certain trends in the marketplace, in
particular, Year 2000 remediation services. This balance is key to
ensuring that the technology skill sets of the company's IT professionals
remain diversified. Such diversification is critical in not only providing
the company the flexibility to adapt to changing market conditions but
also attracting and retaining highly skilled professionals who seek the
opportunity to continue to learn new technologies.
1.4.2 Growth Strategy
From fiscal 1994 to fiscal 1999, the company experienced compounded annual
revenue and net income growth rates of 66% and 46%, respectively, and grew
from approximately 480 IT professionals to approximately 3,160. The
following are the key elements of the company's growth strategy:
Broaden Service Offerings. To meet all of its clients' IT needs, the
company strives to offer a comprehensive range of services by continuously
evaluating new and emerging technologies. As a full-service provider, the
company believes that it can increase its revenues from existing clients
as well as attract new clients. Toward this end, the company has
opportunistically expanded its services beyond its core development,
maintenance and re-engineering services. For example, the company has
recently begun initiatives to develop practices focused on packaged
applications implementation, e-commerce and Internet/intranet services.
Management believes that these services will increasingly become a
significant part of the company's portfolio of services.
Increase Business with Existing Clients. In fiscal 1999, the company
provided software services for more than 115 clients in the United States,
Europe and Japan. A key objective of the company's growth strategy is to
expand the nature and scope of its engagements with existing clients by
both increasing the volume of its projects and expanding the breadth of
services offered. Establishing broad, long-term relationships potentially
increases the quality and efficiency of the company's service to a
particular client since each project performed for a client increases the
company's understanding of the client's systems, requirements and business
practices. For the same reason, establishing broad, long-term
relationships with a client also reduces the company's marketing costs,
increases the client's reliance on the company and creates barriers to
entry for competitors. The company seeks to foster such relationships by
delivering high quality services on time and on budget and, over the
course of a relationship, by increasing the integration of its services
with the client's internal IT operations. To date, this approach has been
highly effective. Despite the company's high rate of growth during the
last few years, over 80% of the revenues in fiscal 1999 and 1998 were
generated from companies who were clients in the prior fiscal year.
Develop New Clients. The company pursues several new client development
strategies. First, the company offers a broad array of managed software
solutions that provide an initial entry into a new client. Second, Infosys
believes that it can leverage the industry-specific expertise it has
developed in key vertical markets (financial services, manufacturing and
distribution, retail, telecommunications and technology) to further
develop its portfolio of clients in these targeted markets. This vertical
market orientation continues to help Infosys design and develop re-usable
software tools and processes which have specific applications to clients
in these markets and which can improve the company's efficiency and
productivity. Finally, the company intends to expand its global sales and
marketing infrastructure by hiring new sales and marketing personnel,
opening additional regional sales offices and increasing its marketing
expenditures. Infosys currently maintains sales and marketing offices in
17 locations and intends to add new offices in North America and Europe.
The management believes that increasing the company's geographic presence
will enhance its ability to establish and support new client
relationships.
Increase Revenue per IT Professional. To increase its revenue per IT
professional, the company continually focuses on building expertise in
vertical markets, refining its software development tools and
methodologies, and storing and disseminating institutional knowledge in
order to improve efficiency and productivity. Additionally, to enhance
productivity per IT professional, Infosys continually monitors client
accounts for profitability and seeks to select new clients and maintain
relationships with existing clients that maximize the company's long-term
profit margins. The company's policy is to decline or discontinue projects
that do not offer the potential to meet the company's profit
margin targets. Finally, the company is seeking to increase the proportion
of projects that are undertaken on a fixed-price, fixed-time frame rather
than a time-and-materials basis. The management believes that effectively
structured fixed-price, fixed-time frame projects benefit the client by
reducing the client's risk, while offering the company the potential
benefit of enhanced margins for projects that are performed efficiently.
Expand and Diversify Base of IT Professionals. Management believes that a
critical element of the company's growth trategy is its ability to
increase its base of IT professionals. To address this issue, the company
plans to build new software development facilities in locations where it
can access local pools of talent as well as increase the number of
professionals employed at its existing locations. In addition, the company
is looking to other fields of expertise, such as business school graduates
and accountants, for recruiting. Accordingly, the company has approved
plans to expand its facilities in Bangalore, Bhubaneswar, Chennai,
Mangalore, Pune and elsewhere. The company is also contemplating addition
of facilities in the United States, Europe and Asia.
Pursue Selective Strategic Acquisitions. The company believes that
pursuing selective acquisitions of IT services and software applications
firms could potentially expand the company's technical expertise,
facilitate expansion into new vertical markets and increase the client
base. Although no acquisitions are currently being contemplated, the
company anticipates that it will seek to identify and acquire companies
that have well-developed applications in vertical markets, extensive
client bases or proprietary technical expertise and would otherwise
complement the company's business.
1.4.3 The Infosys Offshore Development Model
The Indian offshore development model was initiated in the mid-1980's as a
method of dividing software project activities between a service
provider's offshore software development facility and a client's on-site
location. This model contains many features that are attractive to IT
consumers who are primarily located in the United States, Europe and
Japan, including: (i) access to a large pool of highly skilled,
English-speaking IT professionals; (ii) relatively low labor costs of IT
professionals offshore; (iii) the ability to provide high quality IT
services at internationally recognized standards; (iv) the capability to
work on specific projects on a 24-hour basis by exploiting time zone
differences between India and client sites; and (v) the ability to
accelerate the delivery time of larger projects by parallel processing
different phases of a project's development. While some U.S. and European
companies have commenced their own operations in India, most large
corporations have opted to form strategic alliances with local Indian IT
companies to reduce the risks and start-up costs of operations in India.
As one of the pioneers of the offshore development model, Infosys has a
long history of successfully executing projects between its clients' sites
in North America, Europe and Asia and the company's offshore software
development facilities in India. In a typical software development or
re-engineering assignment, the company assigns a small team of two to five
IT professionals to visit a client's site and determine the scope and
requirements of the project. Once the initial specifications of the
engagement have been established, the project managers return to India to
supervise a much larger team of 10 to 50 IT professionals dedicated to the
development of the required software or system. A small team remains at
the client's site to track changes in scope and address new requirements
as the project progresses. The client's systems are then linked via
satellite to the company's facilities enabling simultaneous processing in
as many as four offshore software development facilities. Once the
development stage of the assignment is completed and tested in India, a
team returns to the client's site to install the newly developed software
or system and ensure its functionality. At this phase of the engagement,
the company will often enter into an ongoing agreement to provide the
client with comprehensive maintenance services from one of its offshore
software development facilities. In contrast to development projects, a
typical maintenance assignment requires a larger team of 10 to 20 IT
professionals to travel to the client's site to gain a thorough
understanding of all aspects of the client's system. The majority of the
maintenance team subsequently returns to the offshore software development
facility, where it assumes full responsibility for day-to-day maintenance
of the client's system, while coordinating with a few maintenance
professionals who remain stationed at the client's site. By pursuing this
model, the company completes approximately 80% of its project work at its
offshore software development facilities in India.
The company's project management techniques, risk management processes and
quality control measures enable the company to complete projects
seamlessly across multiple locations with a high level of client
satisfaction. Certified under ISO 9001, TickIT and at Level IV of the
Capability Maturity Model, the company rigorously adheres to highly
evolved processes. These processes govern all aspects of the software
product life cycle, from requirements to testing and maintenance. The
company seeks to prevent defects through its quality program, which
includes obtaining early sign off on acceptance test scripts, project
specifications and design documents, assigning software quality advisors
to help each team set up appropriate processes for each project and
adhering to a multi-level testing strategy. Defects are documented,
measured, tracked and analyzed, and feedback is provided to the project
manager. The company compiles metrics for not only defect density and
size, but also actual effort as compared to project estimates, adherence
to schedule and productivity. Frequent internal and external audits are
conducted to assure compliance with procedures.
All of these procedures have been continuously refined throughout the
company's history of providing its clients with offshore software
development services.
In addition to the processes and methodologies necessary to successfully
execute the offshore model, the company has invested significant resources
in its infrastructure to ensure uninterrupted service to its clients. The
company has invested in redundant infrastructure with "warm" backup sites
and redundant telecommunication capabilities with alternate routings to
provide its clients with high service levels. Additionally, the company
utilizes two telecommunications carriers in India and has installed in its
principal facilities multiple international satellite links connecting
with network hubs in Fremont, California and in Dedham, Massachusetts. A
different ocean cable connecting Europe and the United States serves each
of these hubs. Moreover, the company has installed wireless links among
its facilities in Bangalore and intends to install wireless links among
its other Indian facilities by the end of 1999.
1.5 Service Offerings and Products
The company's services include software development, maintenance and
re-engineering services as well as dedicated OSDCs for certain clients. In
each of its service offerings the company assumes full project management
responsibility for each project it undertakes rather than providing
supplemental personnel to work under a client's supervision. In addition
to its IT services, the company as well as its minority-owned subsidiary,
Yantra, also develop and market certain packaged applications software.
1.5.1 Software Development
The company provides turnkey software development, typically pursuant to
fixed-price, fixed-time frame contracts. The projects vary in size and may
involve the development of new applications or new functions for existing
software applications. Each development project typically involves all
aspects of the software development process, including definition,
prototyping, design, pilots, programming, testing, installation and
maintenance. In the early stage of a development project, Infosys
personnel often work at a client's site to help determine project
definition and to estimate the scope and cost of the project. Infosys then
performs design review, software programming, program testing, module
testing, integration and volume testing, primarily at its own facilities
in India. For example, for a telecommunications client facing deregulation
and subsequent declining market share, the company partnered with a
specialty marketing firm to design and implement a customer rewards
program. Infosys was able to work with both the marketing firm and the
client to complete this project within six months, ensuring the system's
technical proficiency and enabling the client to reverse the trend of
declining market share.
1.5.2 Software Maintenance
The company provides maintenance services for large legacy software
systems. Maintenance services include minor and major modifications and
enhancements (including Year 2000 and Eurocurrency conversion) and
production support. Such systems are either mainframe-based or
client/server and are typically essential to a client's business, though
over time they become progressively more difficult and costly for the
client's internal IT department to maintain. By outsourcing the
maintenance responsibilities to Infosys, clients can control costs and
free their IT departments for other work. The company's IT professionals
take an engineering approach to software maintenance, focusing on the
long-term functionality and stability of the client's overall system and
attempting to avoid problems stemming from "quick-fix" solutions. The
company performs most of the maintenance work at its own facilities using
satellite-based links to the client's system. In addition, the company
maintains a small team at the client's facility to coordinate support
functions. Infosys was a pioneer in managing time-zone differences between
India and the United States to provide near 24-hour maintenance services.
As an example, the IT department of a large retailer with inadequate and
inflexible systems was overburdened by both building new systems and
maintaining the current legacy infrastructure. The company was able to
assume maintenance responsibilities for these systems in a short time
frame and reduce maintenance costs to the client by utilizing its offshore
facilities.
1.5.3 Software Re-Engineering
The company's re-engineering services assist clients in migrating to new
technologies while extending the life cycle of existing systems that are
rich in functionality. Projects include re-engineering software to migrate
applications from mainframe to client/server architectures, to extend
existing applications to the Internet, to migrate from existing operating
systems to UNIX or Windows NT or to update from a non-relational to a
relational database technology. For companies with extensive proprietary
software applications, implementing such technologies may require
rewriting and testing millions of lines of software code. As with its
other services, the company has developed proven methodologies that govern
the planning, execution and testing of the software re-engineering
process. For instance, for a nationwide manufacturer and distributor
experiencing operating inefficiency with a legacy system installed in its
two call centers, the company re-engineered the system to run in a
distributed processing environment with front-end Internet browser-
based capabilities allowing 24-hour Internet access to the client's
distribution systems. As a result, the client was able to consolidate its
call center workforce into one location and reduce its workforce by over
50%.
1.5.4 Dedicated Offshore Software Development Centers
The company has pioneered the concept of dedicated OSDCs in which a
software development team that is dedicated to a single client uses
technology, tools, processes and methodologies unique to that client. Each
dedicated OSDC is located at a company facility in India and is staffed
and managed by the company. Once the project priorities are established by
the client, the company, in conjunction with the client's IT department,
manages the execution of the project. By focusing on a single client over
an extended time frame, the dedicated OSDC team gains a deeper
understanding of the client's business and technology and can begin to
function as a virtual extension of the client's software team.
1.5.5 New Services
The company is also focussed in certain new service areas such as (i)
Internet consulting, which includes developing applications for
Internet/intranet solutions and e-commerce solutions; (ii) Euro
conversion, which assists clients in making their systems Euro compliant;
and (iii) engineering services, which include software product design. For
example, the company recently developed an integrated e-commerce online
shopping site for one of its U.S. clients, which included four different
systems and gave the company complete cycle responsibility for the
project.
1.5.6 Software Products
In addition to the IT services described above, the company develops and
markets certain proprietary software applications. BANCS 2000 is an
on-line, retail and corporate banking system that offers rich
functionality, scalability and flexibility for automation of banking
operations. This product is used by banks in emerging markets that seek to
implement state-of-the-art banking technology and achieve high levels of
client service. BANCS 2000 has been installed at more than 420 bank
branches in India, Sri Lanka, Nepal, Indonesia and Tanzania. Through
Yantra, the company also develops and markets WMSYantra, an open systems
software package for warehouse management.
1.6 Markets and Sales Revenue
The company markets its services primarily to large IT-intensive
organizations in North America, Europe and Japan. The company focuses on
certain market segments, including financial services, manufacturing and
distribution, retail, telecommunications and technology. The company
provides a wide range of IT services and maintains a disciplined focus on
its business mix in an effort to avoid service or client concentration.
Beginning in fiscal 1996, the company aggressively sought to minimize its
client concentration and to accept as clients only those that met strict
guidelines for overall revenue potential and profitability. For fiscal
1997, fiscal 1998 and fiscal 1999, the company's largest client accounted
for 15.6%, 10.5% and 6.4%, respectively, of revenues. Revenues for the
last three fiscal years by geographic area are as follows:
----------------------------------------------------------------------------------------------------------------------------
Year ended March 31, 1999 1998 1997
----------------------------------------------------------------------------------------------------------------------------
North America $ 99,203,989 $56,211,753 $31,057,917
Europe 11,302,791 6,179,621 3,256,502
India 2,051,492 1,799,368 3,921,741
Rest of the world 8,396,954 4,139,219 1,349,759
----------------------------------------------------------------------------------------------------------------------------
$120,955,226 $68,329,961 $39,585,919
============================================================================================================================
1.7 Sales and Marketing
The company sells and markets its services and products from 17 sales
offices located in five countries. In the United States, the company
presently has sales offices located in Atlanta, Boston, Chicago, Dallas,
Detroit, Fremont, Los Angeles, New York and Seattle. Additionally, the
company's international sales offices are located in Canada, Germany,
India, Japan and the United Kingdom. With its global sales headquarters in
Fremont, California and its corporate marketing group in Bangalore, India,
the company's sales and marketing efforts are targeted toward IT-intensive
organizations in North America, Europe and Japan. As of March 31, 1999,
the company had 29 sales and marketing employees outside of India. To
continue this focus on countries with sophisticated IT services needs, the
company intends to expand its global sales and marketing infrastructure by
opening additional regional sales and marketing offices in North America
and Europe. In addition, the company has partnered with Teksels S.A., a
Swiss firm, to assist its efforts in Switzerland.
From its offices located around the world, the company's sales
professionals contact prospective clients in developed markets and
position the company as a leading IT services provider with operations in
India. In many cases, potential clients in their search for offshore IT
services providers submit a request for proposal from the leading Indian
software firms, including the company. The company's superior management
team, quality of work, competence of its IT
professionals, and competitive prices are often cited as reasons for the
award of competitive contracts. In addition, the company's impressive
client references and endorsements as well as its willingness to
participate in trade shows and speaking engagements, have helped the
company to generate greater awareness for its services. The company
believes that its NASDAQ listing and its profile as a public company in
the United States will further enhance its corporate marketing efforts.
The company has focused its sales and marketing efforts on expanding the
scope and depth of its relationships with existing clients. Although
initially the company may only provide one service to a client, the
company seeks to convince the client to expand and diversify the type of
services the client outsources to the company. As a result, the company
strengthens its relationships with its clients by closely integrating its
services with its clients' IT operations. The success of this targeted
strategy is reflected in the company's high "repeat" rate of business.
Over 80% of the company's revenues in each of the last three fiscal years
have been generated from pre-existing clients.
In marketing certain services, the company has pursued a "branded
services" strategy. For example, the company markets its Year 2000
conversion services under the brand name "In2000(R)" so as to highlight
the well-developed tool set and proprietary methodology used to deliver
these services. By establishing branded services, the company's objective
is to enhance the credibility and facilitate the marketing of such
services. These brand names also enable the company to market its services
to new clients who may already recognize the brand name.
1.8 Research and Development
The company has committed and expects to continue to commit in the future,
a material portion of resources to research and development. Research and
development efforts are focused on development and refinement of
methodologies, tools and techniques, implementation of metrics,
improvement in estimation process, and the adoption of new technologies.
The company's research and development expenses for fiscal years 1999,
1998 and 1997 were $2.8 million, $1.8 million and $2.1 million,
respectively which represents approximately 2.3%, 2.6% and 5.3% of total
revenues, respectively.
1.9 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. Part of the
company's competitive advantage has historically 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. 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.
1.10 Human Resources
As of March 31, 1999, the company had approximately 3,770 employees,
including approximately 3,160 IT professionals, up from approximately
2,605 and approximately 2,200, respectively, as of March 31, 1998. The
company invests heavily in its programs to recruit, train and retain
qualified employees, and management believes the company has established a
reputation as one of the most desirable employers for software engineers
in India.
The company focuses its recruiting efforts on the top 20% of students from
engineering departments of Indian schools and relies on a rigorous
selection process involving a series of tests and interviews to identify
the best applicants. Because the company emphasizes flexibility and
innovation, applicants are selected on the basis of their ability to learn
as well as their academic achievement, conceptual knowledge and their
temperament for, and fit with, the company's culture. The company's
reputation as a premier employer enables it to select from a large pool of
qualified applicants. For example, in fiscal 1999, the company received
approximately 74,450 job applications, tested approximately 22,480,
interviewed approximately 6,340 and extended job offers to approximately
2,000 of whom approximately 1,550 accepted. The company seeks to attract
and motivate IT professionals by offering: an entrepreneurial environment
that empowers IT professionals; programs that recognize and reward
performance; challenging assignments; a continuous updating of skills; and
a culture that emphasizes openness, integrity and respect for the
employee. IT professionals receive competitive salaries and benefits and
are eligible to participate in the company's stock option plans. In
addition, the company spends significant resources on training and
continuing education. To conduct training, the company employs a 33-person
faculty, including 20 with doctorate or master's degrees. The faculty
conducts 14-week training sessions for new recruits and a variety of
two-week continuing education courses in technology and management skills.
At any given time, approximately 15% of the company's IT professionals are
working on-site at client facilities in the United States and elsewhere
while the balance are working off-site in India. On average, approximately
530, 330 and 190 of the company's IT professionals worked on-site in the
United States and elsewhere per month in fiscal 1999, fiscal 1998 and
fiscal 1997, respectively. On average, approximately 2,630, 1,780 and
1,210 of the company's IT professionals and support staff worked off-site
in India per month in fiscal 1999, fiscal 1998 and fiscal 1997.
The company's professionals that 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, 1999, substantially all of the company's
personnel in the United States were working pursuant to H-1B visas (300
persons) or L-1 visas (125 persons). Both H-1B and L-1 visas require that
recipients meet certain education requirements; however, only employees
who have worked for the company for at least one year are eligible to
obtain L-1 visas. The company is generally able to obtain H-1B and L-1
visas within two to four months of applying for such visas, which remain
valid for three years. 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 the years in which this limit is reached, the
company may be unable to obtain H-1B visas necessary to bring critical
Indian IT professionals to the United States on an extended basis. The
H-1B limit was reached in May 1998 for the U.S. government's fiscal year
ending September 30, 1998. The company planned for the H-1B limit being
reached prior to the end of the U.S. government's current fiscal year
primarily by forecasting its annual needs for such visas early in the U.S.
government's fiscal year and applying for such visas as soon as
practicable. In addition, the company utilizes L-1 visas whenever
available and redeploys existing H-1B visa holders in order to minimize
the number of new H-1B visas needed by the company. While the company
anticipated that such limit would 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.
The market for hiring software professionals is highly competitive.
Competing employers include multinational corporations that perform
software development in India through subsidiaries and joint ventures with
Indian companies; a number of well-known Indian IT services and software
product companies; and a large number of small and medium regional
companies, many with affiliates or parent companies in the United States
and Europe.
1.11 Intellectual Property
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 or deliverables. The company also
develops software products and software tools which are licensed to
clients and remain the property of the company. The company relies upon a
combination of non-disclosure and other contractual arrangements and
copyright, trade secret and trademark laws to protect its proprietary
rights in technology. 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. The
source code for the company's proprietary software is generally protected
as trade secrets and as unpublished copyrighted works. The company has
obtained registration of INFOSYS as a trademark in India but not in the
United States. The company does not have any patents or registered
copyrights in the United States. The company generally applies for
trademarks and service marks to identify its various service and product
offerings.
The laws of India may not, under some circumstances, permit the protection
of the company's proprietary rights in the same manner or to the same
extent as the laws of the United States. India is a member of the Berne
Convention and the Universal Copyright Convention, as revised at Paris
(1971), both international treaties. As a member of the Berne Convention,
the Government of India has agreed to extend copyright protection under
its domestic laws to foreign works, including works created or produced in
the United States. The company believes that laws, rules, regulations and
treaties in effect in the United States and India are adequate to protect
it from misappropriation or unauthorized use of its copyrights. However,
there can be no assurance that such laws will not change in ways that may
prevent or restrict the protection of the company's proprietary rights.
There can be no assurance that the steps taken by the company to protect
its proprietary rights will be adequate to deter misappropriation of any
of its 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 on 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 is no
assurance that the company would 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.
Item 2. Description of Property
The company's corporate office consists of 220,000 square feet of land
with 150,000 square feet of landscaped area, a 160,000 square feet
building with 32 conference rooms and leisure infrastructure, including
cafeteria, sports facilities and gymnasium, situated at Electronics City,
Bangalore, India. This facility is owned by Infosys. The technological
infrastructure at the corporate office includes over a 1,000 networked
workstations, several Netware, UNIX and WINDOWS NT servers, systems from
HP, IBM, SUN, DEC, COMPAQ, ACER and AST, a video-conferencing facility,
and multiple 64 kbps data communication links.
As part of its strategy to provide high quality services to its clients,
the company has a detailed facility management plan. First, the company
seeks to provide its Indian IT professionals with facilities that are
comparable to those used by software companies in the United States and
Europe. Second, the company seeks to establish facilities near large
sources of technical talent. Third, the company equips its facilities to
minimize vulnerability to interruptions in local utility and
telecommunication services.
The company acquired the land where its corporate headquarters are located
from the State of Karnataka in 1993 and has subsequently acquired parcels
for various other offices, pursuant to certain lease cum sale agreements
(the "Conditional Purchase Agreements"), which are used by the State of
Karnataka to make land available to private companies for specific
purposes. Under the Conditional Purchase Agreements, property is sold
subject to a long-term (typically 25-year), rental-free lease which
transfers ownership to the buyer at the end of the period provided that
the buyer uses the land for specified purposes. The Conditional Purchase
Agreements require the company to use the various parcels for software
development facilities. Typically, the company pays 99% of the purchase
price at the time the agreement is signed and pays the remaining 1% when
the term is concluded.
The company has its worldwide sales headquarters in Fremont, California
and branch sales offices in Atlanta, Bangalore, Boston, Chennai, Chicago,
Dallas, Detroit, Frankfurt, London, Los Angeles, Mumbai, New Delhi, New
York, Seattle, Tokyo and Toronto. All sales offices, except the Mumbai
office, are in leased facilities.
The company plans to expand its facilities to meet its anticipated growth.
Currently, the company is planning new facilities in Bangalore,
Bhubaneswar, Chennai, Mangalore and Pune to provide an additional 890,000
square feet of office space. The following table sets forth certain
information as of March 31, 1999 relating to the company's principal
facilities and proposed developments:
------------------------------------------------------------------------------------------------------------------------------
Location Approximate Ownership Type of Facility
Sq.ft.
------------------------------------------------------------------------------------------------------------------------------
Bangalore, India 300,000(1) Conditional Proposed Software
(Plots 45, 46, 97C, 97D and 97E, Hosur Road) Purchase Development Facility
Bangalore, India 150,000(2) Conditional Proposed Software
(Plots 4/1, 4/2, 4/3, 4/4, 26/1, 26/2, Hosur Road) Purchase Development Facility
Bangalore, India 160,000(3) Conditional Corporate Headquarters,
(Plots 44 and 97A, Hosur Road) Purchase Software Development Facility
Bangalore, India (Dickenson Road) 7,000 Owned Software Development Facility
Bangalore, India (BTM Layout) 11,300 Leased Software Development Facility
Bangalore, India (Koramangala) 18,700 Leased Software Development Facility
Bangalore, India (J.P. Nagar, Phase II) (4) Owned Proposed Office Premises
Bangalore, India (J.P. Nagar, Phase III) 59,500 Leased Software Development Facility
Bangalore, India (Adarsh Gardens) 78,700 Owned Employee Residence Flats
Bangalore, India (Survey No. 9, Phase II) (5) Leased Proposed Software
Development Facility
Mangalore, India 14,100 Leased Software Development Facility
Mangalore, India 5,100 Owned Employee Residence Flats
Mumbai, India 1,200 Owned Sales and Marketing Office
Pune, India 43,700 Leased Software Development Facility
Pune, India 160,000(6) Conditional Proposed Software
Purchase Development Facility
Pune, India 3,300 Owned Employee Residence Flats
Bhubaneswar, India 52,900 Leased Software Development Facility
Bhubaneswar, India 150,000(7) Leased Proposed Software
Development Facility
Chennai, India 26,600 Leased Software Development Facility
Chennai, India 23,200 Leased Software Development Facility
Fremont, California 6,200 Leased Worldwide Sales Headquarters
------------------------------------------------------------------------------------------------------------------------------
1. Total land parcel is 516,404 square feet and proposed facility is
300,000 square feet.
2. Total land parcel is 613,107 square feet and proposed facility is
150.000 square feet.
3. Total land parcel is 220,000 and the square feet and facility is
160,000 square feet.
4. The company has not yet determined the aggregate square feet of the
proposed development. The land parcel is approximately 16,500 square
feet.
5. The company has not yet determined the aggregate square feet of the
proposed development. The land parcel is approximately 87,100 square
feet.
6. Total land parcel is 877,244 and the square feet and proposed
facility is 160,000 square feet.
7. Total land parcel is 293,333 and the square feet and proposed
facility is 150,000 square feet.
Item 3. Legal Proceedings
The company is not currently a party to any material legal proceedings.
Item 4. Control of Registrant
To the best of its knowledge, the company is not owned or controlled
directly or indirectly by any government or by any other corporation.
The following table sets forth certain information regarding the
beneficial ownership of the equity shares at March 31, 1999 of (i) each
person or group known by the company to own beneficially 10% or more of
the outstanding equity shares and (ii) the beneficial ownership of all
officers and directors as a group, in each case as reported to Infosys by
such persons.
---------------------------------------------------------------------------------------------------------
Name of Beneficial Owner Shares 1 Percentage of Equity Shares
Beneficially Owned Beneficially Owned
---------------------------------------------------------------------------------------------------------
All directors and officers as a group (25 persons) 10,303,336 31.16%
---------------------------------------------------------------------------------------------------------
1. Number of shares and percentage ownership is based on 33,069,400
equity shares outstanding as of March 31, 1999. Beneficial ownership
is determined in accordance with rules of the SEC and includes
voting and investment power with respect to such shares. Shares
subject to options that are currently exercisable or exercisable
within 60 days of March 31, 1999 are deemed to be outstanding and to
be beneficially owned by the person holding such options for the
purpose of computing the percentage ownership of such person, but
are not deemed to be outstanding and to be beneficially owned for
the purpose of computing the percentage ownership of any other
person. All information with respect to the beneficial ownership of
any principal shareholder has been furnished by such shareholder
and, unless otherwise indicated below, the company believes that
persons named in the table have sole voting and sole investment
power with respect to all the shares shown as beneficially owned,
subject to community property laws, where applicable. The shares
beneficially owned by the directors include the equity shares owned
by their family members to which such directors disclaim beneficial
ownership.
Item 5. Nature of Trading Market
5.1 General
The company's equity shares are traded on the Mumbai, Bangalore and
National Stock Exchanges in India. The company's equity shares are traded
in the U.S. on the NASDAQ National Market under the symbol "INFY" in the
form of American Depositary Shares ("ADSs") as evidenced by American
Depositary Receipts ("ADRs"). Each equity share of the company is
represented by two American Depositary shares ("ADSs"). The ADRs
evidencing ADSs were issued by the depositary Bankers Trust Company (the
"Depositary"), pursuant to a Deposit Agreement dated March 11, 1999 (the
"Deposit Agreement").
The number of outstanding equity shares in the company, as of March 31,
1999, was 33,069,400. As of March 31, 1999, there were approximately 2,700
record holders of ADRs evidencing 2,070,000 ADSs (equivalent to 1,035,000
equity shares). As of March 31, 1999, there were 9,526 record holders of
the 32,034,400 equity shares listed and traded on the stock exchanges in
India.
5.2 Trading Practices and Procedures on the Indian Stock Exchanges
The Stock Exchange, Mumbai ("BSE") and the National Stock Exchange ("NSE")
together account for more than 80% of the total trading volume on the
Indian stock exchanges. Trading on both of these exchanges is accomplished
through on-line execution. These two stock exchanges handle over 100,000
trades per day with volumes in excess of Rs. 20 billion. Trading takes
place on a five-day fixed settlement basis on most of the exchanges,
including the BSE and NSE. Any outstanding amount at the end of the
settlement period is settled by delivery and payment. However,
institutional investors are not permitted to "net out' their transactions
and must trade on a delivery basis only.
The BSE permits carry forwards of trades in certain securities by
non-institutional investors with an associated charge. In addition, orders
can be entered with a specified term of validity that may last until the
end of the session, day or settlement period. Dealers must specify whether
orders are for a proprietary account or for a client. The BSE specifies
certain margin requirements for trades executed on the exchange, including
margins based on the volume or quantity of exposure that the broker has on
the market, as well as mark-to-market margins payable on a daily basis for
all outstanding trades. Trading on the BSE takes place from 10:00 a.m. to
3:30 p.m. on all weekdays, except holidays. The NSE does not permit carry
forwards of trades. It has separate margin requirements based on the net
exposure of the broker on the exchange. The NSE trades from 9:30 a.m.
until 4:00 p.m. on weekdays, except holidays. The NSE and BSE have
separate online trading systems and separate clearing houses.
The BSE was closed from January 11 through January 13, 1993 due to a riot
in Mumbai. It was also closed on March 12, 1993 due to a bomb explosion
within the premises of the BSE. From December 14 through December 23,
1993, the
BSE was closed due to a broker's strike, and from March 20 through March
22, 1995, the Governing Board of the BSE closed the market due to a
default of one of the broker members. There have been no closures of the
Indian stock exchanges in response to "panic" trading or large
fluctuations. Most of the Indian stock exchanges do, however, have a
specific price band for each security listed. When a price fluctuation
exceeds the specified limits of the price band, trading of the security is
stopped. Such price volatility controls and the specific price bands are
decided by each individual exchange and may differ.
The table below sets forth, for the periods indicated, the high and low
closing sales prices for the equity shares on the Stock Exchange, Mumbai
and the National Stock Exchange
------------------------------------------------------------------------------------------------------------------------------
The Stock Exchange, Mumbai National Stock Exchange
------------------------------------------------------------------------------------------------------------------------------
Fiscal Year Ended Price per Price per Price per Price per
March 31, Equity Share1 (in Rs.) Equity Share (in $) Equity Share (in Rs.) Equity Share (in $)
------------------------------------------------------------------------------------------------------------------------------
High Low High Low High Low High Low
------------------------------------------------------------------------------------------------------------------------------
1999
First Quarter 1,253.50 948.38 29.50 22.32 1300.00 921.00 30.59 21.67
Second Quarter 1,375.00 1,088.88 31.92 25.51 1393.00 1074.50 32.34 24.95
Third Quarter 1,486.88 1,104.88 34.92 26.06 1555.00 1070.00 36.55 25.15
Fourth Quarter 3,450.00 1,469.00 81.46 34.69 3457.00 1215.00 81.63 28.69
1998
First Quarter 478.50 253.25 13.35 7.07 487.50 237.50 13.60 6.63
Second Quarter 798.50 481.06 22.07 13.30 630.00 540.50 17.42 14.94
Third Quarter 798.50 559.50 20.32 14.24 804.50 550.50 20.48 14.01
Fourth Quarter 913.88 540.38 23.12 13.67 940.00 525.00 23.78 13.28
1997
First Quarter 179.56 117.50 5.07 3.33 180.25 124.75 5.09 3.52
Second Quarter 178.94 158.00 5.00 4.42 180.00 159.00 5.03 4.44
Third Quarter 191.25 157.75 5.32 4.44 192.50 155.25 5.35 4.32
Fourth Quarter 294.06 191.25 8.20 5.33 300.00 197.50 8.36 5.50
------------------------------------------------------------------------------------------------------------------------------
1. Data from Stock Exchange, Mumbai as reported by Bloomberg. The
prices quoted on Bangalore Stock Exchange may be different.
5.3 Principal United States Trading Market
The American Depositary Shares ("ADSs") commenced trading on the NASDAQ
National Market, effective March 11, 1999. The table below sets forth, for
the periods indicated, high and low trading prices for the ADSs (each ADS
representing one-half of one equity share).
--------------------------------------------------------------------------
Fiscal Year ended March 31, 1999 Price per ADR in $
High Low
--------------------------------------------------------------------------
1999
Fourth Quarter (beginning March 11, 1999) 50.00 37.375
--------------------------------------------------------------------------
Item 6. Exchange Controls and Other Limitations Affecting Security Holders
Foreign investment in the Indian securities is generally regulated by the
Foreign Exchange Regulation Act, 1973 ("FERA"). Under Section 29(1)(b) of
FERA, no person or company resident outside India that is not incorporated
in India (other than a banking company) can purchase the shares of any
company carrying on any trading, commercial or industrial activity in
India without the permission of the Reserve Bank of India ("RBI"). Also,
under Section 19(1)(d) of FERA, the transfer and issuance of any security
of any Indian company to a person resident outside India requires the
permission of the RBI. Under Section 19(5) of FERA, no transfer of shares
in a company registered in India by a non-resident to a resident of India
is valid unless the transfer is confirmed by the RBI upon application
filed by the transferor or the transferee. Under guidelines issued by the
RBI, the RBI will approve such transfers if such transfer is transacted on
an Indian stock exchange through a registered stock broker. Furthermore,
the issuance of rights and other distributions of securities to a
non-resident also require the prior consent of the RBI.
6.1 General
Shares of Indian companies represented by ADSs may be approved for
issuance to foreign investors by the Government of India under the Issue
of Foreign Currency Convertible Bonds and Equity Shares (through
Depositary Receipt Mechanism) Scheme, 1993 (the "1993 Regulation"), as
modified from time to time, promulgated by the Government of India. The
1993 Regulation is distinct from other policies or facilities, as
described below, relating to
investments in Indian companies by foreign investors. The issuance of ADSs
pursuant to the 1993 Regulation also affords to holders of the ADSs the
benefits of Section 115AC of the Indian Income Tax Act, 1961 for purposes
of the application of Indian tax law.
6.2 Foreign Direct Investment
In July 1991, the Government of India raised the limit on foreign equity
holdings in Indian companies from 40% to 51% in certain high priority
industries. The RBI gives automatic approval for such foreign equity
holdings. The Foreign Investment Promotion Board (the "FIPB"), currently
under the Ministry of Industry, was thereafter formed to negotiate with
large foreign companies wishing to make long-term investments in India.
Foreign equity participation in excess of 51% in such high priority
industries or in any other industries up to Rs. six billion is currently
allowed only with the approval of the FIPB. Proposals in excess of Rs. six
billion require the approval of the Cabinet Committee on Foreign
Investment. Proposals involving the public sector and other sensitive
areas require the approval of Cabinet Committee on Economic Affairs. These
facilities are designed for direct foreign investments by non-residents of
India who are not NRIs, OCBs or FIIs (as each term is defined below)
("Foreign Direct Investors"). The Department of Industrial Policy and
Promotion, a part of the Ministry of Industry, issued detailed guidelines
in January 1997 for consideration of foreign direct investment proposals
by the FIPB (the "Guidelines"). Under the Guidelines, sector specific
guidelines for foreign direct investment and the levels of permitted
equity participation have been established. In January 1998, the RBI
issued a notification that foreign ownership of up to 50%, 51% or 74%,
depending on the category of industry, would be allowed without prior
permission of the RBI. The issues to be considered by the FIPB, and the
FIPB's areas of priority in granting approvals are also set out in the
Guidelines. The basic objective of the Guidelines is to improve the
transparency and objectivity of the FIPB's consideration of proposals.
However, because the Guidelines are administrative guidelines and have not
been codified as either law or regulations, they are not legally binding
with respect to any recommendation made by the FIPB or with respect to any
decision taken by the Government of India in cases involving foreign
direct investment.
In May 1994, the Government of India announced that purchases by foreign
investors of ADSs as evidenced by ADRs and foreign currency convertible
bonds of Indian companies will be treated as direct foreign investment in
the equity issued by Indian companies for such offerings. Therefore,
offerings that involve the issuance of equity that results in Foreign
Direct Investors holding more than the stipulated percentage of direct
foreign investments (which depends on the category of industry) would
require approval from the FIPB. In addition, in connection with offerings
of any such securities to foreign investors, approval of the FIPB is
required for Indian companies whether or not the stipulated percentage
limit would be reached, if the proceeds therefrom are to be used for
investment in non-high priority industries. With respect to the activities
of the company, FIPB approval is required for any direct foreign
investment in the company which exceeds 51% of the total issued share
capital of the company.
In July 1997, the Government of India issued guidelines to the effect that
foreign investment in preferred shares will be considered as part of the
share capital of a company and will be processed through the automatic RBI
route or will require the approval of the FIPB, as the case may be.
Investments in preferred shares are included as foreign direct investment
for the purposes of sectoral caps on foreign equity, if such preferred
shares carry a conversion option. If the preferred shares are structured
without a conversion option, they would fall outside the foreign direct
investment limit but would be treated as debt and would be subject to
special Government of India guidelines and approvals.
6.3 Investment by Non-Resident Indians and Overseas Corporate Bodies
A variety of special facilities for making investments in India in shares
of Indian companies is available to individuals of Indian nationality or
origin residing outside India ("NRIs") and to overseas corporate bodies
("OCBs"), at least 60% owned by such persons. These facilities permit NRIs
and OCBs to make portfolio investments in shares and other securities of
Indian companies on a basis not generally available to other foreign
investors. These facilities are different and distinct from investments by
Foreign Direct Investors described above.
6.4 Investment by Foreign Institutional Investors
In September 1992, the Government of India issued guidelines which enable
foreign institutional investors ("FIIs"), including institutions such as
pension funds, investment trusts, asset management companies, nominee
companies and incorporated/institutional portfolio managers, to invest in
all the securities traded on the primary and secondary markets in India.
Under the guidelines, FIIs are required to obtain an initial registration
from the Securities and Exchange Board of India ("SEBI") and a general
permission from the RBI to engage in transactions regulated under FERA.
FIIs must also comply with the provisions of the SEBI Foreign
Institutional Investors Regulations, 1995. When it receives the initial
registration, the FII also obtains general permission from the RBI to
engage in transactions regulated under FERA. Together, the initial
registration and the RBI's general permission enable the registered FII to
buy (subject to the ownership restrictions discussed below) and sell
freely securities issued by Indian companies, to realize capital
gains on investments made through the initial amount invested in India, to
subscribe or renounce rights offerings for shares, to appoint a domestic
custodian for custody of investments held and to repatriate the capital,
capital gains, dividends, income received by way of interest and any
compensation received towards sale or renunciation of rights offerings of
shares.
6.5 Ownership Restrictions
SEBI and RBI regulations restrict investments in Indian companies by FIIs,
NRIs and OCBs (collectively, "Foreign Direct Investors"). Under current
SEBI regulations applicable to the company, Foreign Direct Investors in
aggregate may hold no more than 30% of the company's equity shares,
excluding the equity shares underlying the ADSs, and NRIs and OCBs in
aggregate may hold no more than 10% of the company's equity shares,
excluding the equity shares underlying the ADSs. Furthermore, SEBI
regulations provide that no single FII may hold more than 10% of the
company's total equity shares and no single NRI or OCB may hold more than
5% of the company's total equity shares.
FIIs may only purchase securities of public Indian companies (other than
the ADSs) through a procedure known as a "preferential allotment of
shares", which is subject to certain restrictions. These restrictions will
not apply to equity shares issued as stock dividends or in connection with
rights offerings applicable to the equity shares underlying the ADSs.
There is uncertainty under Indian law about the tax regime applicable to
FIIs which hold and trade ADSs. FIIs are urged to consult with their
Indian legal and tax advisers about the relationship between the FII
guidelines and the ADSs and any equity shares withdrawn upon surrender of
ADSs.
More detailed provisions relating to FII investment have been introduced
by the SEBI with the introduction of the SEBI Foreign Institutional
Investors Regulations, 1995. These provisions relate to the registration
of FIIs, their general obligations and responsibilities, and certain
investment conditions and restrictions. One such restriction is that the
total investment in equity and equity-related instruments should not be
less than 70% of the aggregate of all investments of an FII in India. The
SEBI has also permitted private placements of shares by listed companies
with FIIs, subject to the prior approval of the RBI under FERA. Such
private placement must be made at the average of the weekly highs and lows
of the closing price over the preceding six months or the preceding two
weeks, whichever is higher.
Under the Securities and Exchange Board of India (Substantial Acquisition
of shares and Takeovers) Regulations, 1997 approved by the SEBI in January
1997 and promulgated by the Government of India in February 1997 (the
"Takeover Code"), which replaced the 1994 Takeover Code (as defined
herein), upon the acquisition of more than 5% of the outstanding shares of
a public Indian company, a purchaser is required to notify the company and
all the stock exchanges on which the shares of the company are listed.
Upon the acquisition of 15% or more of such shares or a change in control
of the company, the purchaser is required to make an open offer to the
other shareholders offering to purchase at least 20% of all the
outstanding shares of the company at a minimum offer price as determined
pursuant to the rules of the Takeover Code. Upon conversion of ADSs into
equity shares, an ADS holder will be subject to the Takeover Code.
Open market purchases of securities of Indian companies in India by
Foreign Direct Investors or investments by NRIs, OCBs and FIIs above the
ownership levels set forth above require Government of India approval on a
case-by-case basis.
6.6 Voting Rights of Deposited Equity Shares Represented by ADSs
Under Indian law, voting of the equity shares is by show of hands unless a
poll is demanded by a member or members present in person or by proxy
holding at least one-tenth of the total shares entitled to vote on the
resolution or by those holding an aggregate paid up capital of at least
Rs. 50,000. A proxy may not vote except on a poll.
As soon as practicable after receipt of notice pursuant to the Deposit
Agreement of any meeting of holders of equity shares or other deposited
securities, the Depositary shall fix a record date for determining the
Holders entitled to give instructions for the exercise of voting rights,
if any, as provided in the Deposit Agreement and shall mail to the Holders
a record notice which shall contain: (i) such information as is contained
in such notice of meeting; (ii) a statement that the Holders of record at
the close of business on a specified record date will be entitled, subject
to any applicable provisions of Indian law and of the Memorandum and
Articles of the company governing the deposited securities represented by
their respective ADSs evidenced by their respective ADRs; (iii) a brief
statement as to the manner in which such instructions may be given
including (a) an express indication that the Depositary should demand a
poll or instruct the Chairman of the Meeting (the "Chairman") or a person
designated by the Chairman to demand a poll in the event that a poll is
not otherwise demanded pursuant to Indian law and (b) an express
indication that instructions may be given to the Depositary to give a
discretionary proxy to a person designated by the company; and (iv) a
statement that if the Depositary does not receive instructions from a
Holder, such Holder may under certain circumstances be deemed to have
instructed the Depositary to give a discretionary proxy to a person
designated by the company to vote
such deposited securities. Upon the written request of a Holder on such
record date, received on or before the date established by the Depositary
for such purpose, the Depositary shall endeavor, insofar as is practicable
and permitted under the applicable provisions of Indian law and of the
Memorandum and Articles of the company governing the deposited securities,
to vote or cause to be voted the amount of deposited securities
represented by such ADSs evidenced by such ADRs in accordance with the
instructions set forth in such request. In the event that the Depositary
receives express instructions from Holders to demand a poll with respect
to any matter to be voted on by Holders, the Depositary may notify the
Chairman or a person designated by the Chairman of such instructions and
request the Chairman or such designee to demand a poll with respect to
such matters and the company agrees that the Chairman or such designee
will make their reasonable best efforts to so demand a poll at the meeting
at which such matters are to be voted on and to vote such equity shares in
accordance with such Holders' instructions; provided, however, that prior
to any demand of a poll or request to demand a poll by the Depositary upon
the terms set forth herein, the company is required, at its own expense,
to use its best efforts to obtain and deliver to the Depositary an opinion
of Indian counsel, reasonably satisfactory to the Depositary, stating that
such action is in conformity with all applicable laws and regulations and
that such demand for a poll by the Depositary or a person designated by
the Depositary will not expose the Depositary to any liability to any
person. The Depositary shall not have any obligation to demand a poll or
request the demand of a poll if the company shall not have delivered to
the Depositary the local counsel opinion set forth in this paragraph.
The Depositary agrees not to, and shall ensure that the Custodian and each
of their nominees does not vote, attempt to exercise the right to vote, or
in any way make use of, for purposes of establishing a quorum or
otherwise, the equity shares or other deposited securities represented by
the ADSs evidenced by an ADR other than in accordance with such
instructions from the Holder or as provided below. The Depositary may not
itself exercise any voting discretion over any equity shares. If the
Depositary does not receive instructions from any Holder with respect to
any of the deposited securities represented by the ADSs evidenced by such
Holder's ADRs on or before the date established by the Depositary for such
purpose, such Holder shall be deemed, and the Depositary shall deem such
Holder, to have instructed the Depositary to give a discretionary proxy to
a person designated by the company to vote such deposited securities;
provided that: (i) no such discretionary proxy shall be given with respect
to any matter as to which the company informs the Depositary (and the
company agrees to provide such information as promptly as practicable in
writing) that (a) the company does not wish such proxy given, (b)
substantial opposition exists or (c) the rights of the holders of equity
shares will be adversely affected; and (ii) the Depositary shall not have
any obligation to give such discretionary proxy to a person designated by
the company if the company shall not have delivered to the Depositary the
local counsel opinion and representation letter set forth in the next
paragraph.
Prior to each request for the delivery of a discretionary proxy upon the
terms set forth herein, the company shall, at its own expense, deliver to
the Depositary: (i) an opinion of Indian counsel, reasonably satisfactory
to the Depositary, stating that such action is in conformity with all
applicable laws and regulations; and (ii) a representation letter from the
company (executed by a senior officer of the company) which (a) designates
the person to whom any discretionary proxy should be given, (b) confirms
that the company wishes such discretionary proxy to be given and (c)
certifies that the company has not and shall not request the discretionary
proxy to be given as to any matter as to which substantial opposition
exists or which may adversely affect the rights of holders of equity
shares.
Item 7. Taxation
7.1 Indian Taxation
7.1.1 General
The following summary is based on the provisions of the Income Tax Act, 1961
(the "Indian Tax Act"), including the special tax regime contained in Section
115AC (the "Section 115AC Regime") and the 1993 Regulation. The Indian Tax Act
is amended every year by the Finance Act of the relevant year. Some or all of
the tax consequences of the Section 115 AC Regime may be amended or changed by
future amendments of the Indian Tax Act.
THE SUMMARY SET FORTH BELOW IS NOT INTENDED TO CONSTITUTE A COMPLETE ANALYSIS OF
THE INDIVIDUAL TAX CONSEQUENCES TO NON-RESIDENT HOLDERS UNDER INDIAN LAW FOR THE
ACQUISITION, OWNERSHIP AND SALE OF ADSS AND EQUITY SHARES BY NON-RESIDENT
HOLDERS. PERSONAL TAX CONSEQUENCES OF AN INVESTMENT MAY VARY FOR INVESTORS IN
VARIOUS CIRCUMSTANCES AND POTENTIAL INVESTORS SHOULD THEREFORE CONSULT THEIR OWN
TAX ADVISERS ON THE TAX CONSEQUENCES OF SUCH ACQUISITION, OWNERSHIP AND SALE,
INCLUDING SPECIFICALLY THE TAX CONSEQUENCES UNDER THE LAW OF THE JURISDICTION OF
THEIR RESIDENCE AND ANY TAX TREATY BETWEEN INDIA AND THEIR COUNTRY OF RESIDENCE.
7.1.2 Residence
For purposes of the Indian Tax Act, an individual is considered to be a
resident of India during any financial year if he: (i) is in India in that
year for a period or periods amounting to 182 days or more; or (ii) is in
India in that year for 60 days or more and, in case of a citizen of India
or a person of Indian origin, who, being outside India, comes on a visit
to India, is in India for more than 182 days effective April 1, 1995 and
in each case within the four preceding years has been in India for a
period or periods amounting to 365 days or more. A company is resident in
India if it is registered in India or the control and the management of
its affairs is situated wholly in India.
7.1.3 Taxation of Distributions
Pursuant to the Finance Act, 1997, withholding tax on dividends paid to
shareholders no longer applies. Distributions to Non-resident Holders of
additional ADSs or equity shares or rights to subscribe for equity shares
("Rights") made with respect to ADSs or equity shares are not subject to
Indian tax.
7.1.4 Taxation of Capital Gains
Any gain realized on the sale of ADSs or equity shares by a Non-resident
Holder to another Non-resident Holder outside India is not subject to
Indian capital gains tax. However, as Rights are not expressly covered by
the Indian Income Tax Act, 1961, it is unclear, as to whether capital gain
derived from the sale of Rights by a Non-resident Holder (not entitled to
an exemption under a tax treaty) to another Non-resident Holder outside
India will be subject to Indian capital gains tax. If such Rights are
deemed by the Indian tax authorities to be situated within India, the
gains realized on the sale of such Rights will be subject to customary
Indian taxation as discussed below.
Since the issuance of the ADSs has been approved by the Government of
India under the Section 115AC Regime, Non-resident Holders of the ADSs
will have the benefit of tax concessions available under the Section 115AC
Regime. The Section 115AC Regime provides that if the equity shares are
sold on an Indian Stock Exchange against payment in Indian rupees, they
will no longer be eligible for such concessional tax treatment. However,
the Section 115AC Regime is unclear, as to whether such tax treatment is
available to a non-resident who acquires equity shares outside India from
a Non-resident Holder of equity shares after receipt of the equity shares
upon surrender of the ADSs. If concessional tax treatment is not
available, gains realized on the sale of such equity shares will be
subject to customary Indian taxation as discussed below.
Subject to any relief provided pursuant to an applicable tax treaty, any
gain realized on the sale of equity shares to an Indian resident or inside
India generally will be subject to Indian capital gains tax which is to be
deducted at the source by the buyer. For the purpose of computing capital
gains tax, the cost of acquisition of equity shares received in exchange
for ADSs will be determined on the basis of the prevailing price of the
shares on any of the Indian stock exchanges on the date that the
Depositary gives notice to the custodian of the delivery of the equity
shares in exchange for the corresponding ADSs. A Non-resident Holder's
holding period (for purposes of determining the applicable Indian capital
gains tax rate) in respect of equity shares received in exchange for ADSs
commences on the date of the notice of the redemption by the Depositary to
the Custodian. The Indo-U.S. Treaty does not provide an exemption from the
imposition of Indian capital gains tax.
Taxable gain realized on equity shares (calculated in the manner set forth
in the prior paragraph) for more than 12 months (long-term gain) is
subject to tax at the rate of 10%. Taxable gain realized on equity shares
held for 12 months or less (short-term gain) is subject to tax at variable
rates with a maximum rate of 48%. The actual rate of tax on short-term
gain depends on a number of factors, including the legal status of the
Non-resident Holder and the type of income chargeable in India.
7.1.5 Stamp Duty and Transfer Tax
Upon issuance of the equity shares, the company is required to pay a stamp
duty of 0.1% per share of the issue price of the underlying equity shares.
A transfer of ADSs is not subject to the Indian stamp duty. However, upon
the acquisition of equity shares from the Depositary in exchange for ADSs,
the holder will be liable for Indian stamp duty at the rate of 0.5% of the
market value of the ADSs or equity shares exchanged. A sale of equity
shares by a registered holder will also be subject to Indian stamp duty at
the rate of 0.5% of the market value of the equity shares on the trade
date, although customarily such tax is borne by the transferee.
7.1.6 Gift and Wealth Tax
ADSs held by Non-resident Holders and the underlying equity shares held by
the Depositary as a fiduciary and the transfer of ADSs between
Non-resident Holders and the Depositary will be exempt from Indian gift
tax and Indian wealth tax. Although Indian gift tax was abolished
effective October 1, 1998, a gift tax may apply to transfers by way of
gift of equity shares or ADSs in the future. Investors are advised to
consult their own tax advisers in this context.
7.1.7 Estate Duty
Under current Indian law, there is no estate duty applicable to a
Non-resident Holder of ADSs or equity shares.
7.2 United States Federal Taxation
The following is a summary of the material U.S. federal income and estate
tax matters that may be relevant with respect to the acquisition,
ownership and disposition of equity shares or ADSs. This summary addresses
only the U.S. federal income and estate tax considerations of holders that
are citizens or residents of the United States, partnerships or
corporations created in or under the laws of the United States or any
political subdivision thereof or therein, estates, the income of which is
subject to U.S. federal income taxation regardless of its source and
trusts ("U.S. Holders") or are not U.S. Holders ("Non-U.S. Holders") and
that will hold equity shares or ADSs as capital assets. This summary does
not address tax considerations applicable to holders that may be subject
to special tax rules, such as banks, insurance companies, dealers in
securities or currencies, tax-exempt entities, persons that will hold
equity shares or ADSs as a position in a "straddle" or as part of a
"hedging" or "conversion" transaction for tax purposes, persons that have
a "functional currency" other than the U.S. dollar or holders of 10% or
more (by voting power or value) of the stock of the company. This summary
is based on the tax laws of the United States as in effect and on United
States Treasury Regulations in effect (or, in certain cases, proposed), as
well as judicial and administrative interpretations thereof available on
or before such date and is based in part on representations of the
Depositary and the assumption that each obligation in the Depositary
Agreement and any related agreement will be performed in accordance with
its terms. All of the foregoing are subject to change, which change could
apply retroactively and could affect the tax consequences described below.
EACH INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR WITH RESPECT TO THE U.S.
FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF ACQUIRING, OWNING
AND DISPOSING OF EQUITY SHARES OR ADSs.
7.2.1 Ownership of ADSs
For U.S. federal income tax purposes, holders of ADSs will be treated as
the owners of equity shares represented by such ADSs.
7.2.2 Dividends
Distributions of cash or property (other than equity shares, if any,
distributed pro rata to all shareholders of the company, including holders
of ADSs) with respect to equity shares will be includible in income by a
U.S. Holder as foreign source dividend income at the time of receipt,
which in the case of a U.S. Holder of ADSs generally will be the date of
receipt by the Depositary, to the extent such distributions are made from
the current or accumulated earnings and profits of the company. Such
dividends will not be eligible for the dividends received deduction
generally allowed to corporate U.S. Holders. To the extent, if any, that
the amount of any distribution by the company exceeds the company's
current and accumulated earnings and profits as determined under U.S.
federal income tax principles, it will be treated first as a tax-free
return of the U.S. Holder's tax basis in the equity shares or ADSs and
thereafter as capital gain.
A U.S. Holder will not be eligible for a foreign tax credit against its
U.S. federal income tax liability for Indian taxes paid by the company and
deemed under Indian law to have been paid by the shareholders of the
company, unless it is a U.S. company holding at least 10% of the Indian
company paying the dividends.
U.S. Holders should be aware that dividends paid by the company generally
will constitute "passive income" for purposes of the foreign tax credit.
The Internal Revenue Code applies various limitations on the amount of
foreign tax credit that may be available to a U.S. taxpayer. U.S. Holders
should consult their own tax advisors with respect to the potential
consequences of those limitations.
A Non-U.S. Holder of equity shares or ADSs generally will not be subject
to U.S. federal income tax or withholding tax on dividends received on
equity shares or ADSs unless such income is effectively connected with the
conduct by such Non-U.S. Holder of a trade or business in the United
States
7.2.3 Sale or Exchange of Equity Shares or ADSs
A U.S. Holder generally will recognize gain or loss on the sale or
exchange of equity shares or ADSs equal to the difference between the
amount realized on such sale or exchange and the U.S. Holder's tax basis
in the equity shares or ADSs, as the case may be. Such gain or loss will
be capital gain or loss, and will be long-term capital gain or loss if the
equity shares or ADSs, as the case may be, were held for more than one
year. Gain, if any, recognized by a U.S. Holder generally will be treated
as U.S. source passive income for U.S. foreign tax credit purposes.
A Non-U.S. Holder of equity shares or ADSs generally will not be subject
to U.S. federal income or withholding tax on any gain realized on the sale
or exchange of such equity shares or ADSs unless: (i) such gain is
effectively connected
with the conduct by such Non-U.S. Holder of a trade or business in the
U.S.; or (ii) in the case of any gain realized by an individual Non-U.S.
Holder, such holder is present in the United States for 183 days or more
in the taxable year of such sale and certain other conditions are met.
If dividends are paid in Indian rupees, the amount of the dividend
distribution includible in the income of a U.S. Holder will be in the U.S.
dollar value of the payments made in Indian rupees, determined at a spot
exchange rate between Indian rupees and U.S. dollars applicable to the
date such dividend is includible in the income of the U.S. Holder,
regardless of whether the payment is in fact converted into U.S. dollars.
Generally, gain or loss (if any) resulting from currency exchange
fluctuations during the period from the date the dividend is paid to the
date such payment is converted into U.S. dollars will be treated as
ordinary income or loss.
7.2.4 Estate Taxes
An individual shareholder who is a citizen or resident of the United
States for U.S. federal estate tax purposes will have the value of the
equity shares or ADSs owned by such holder included in his or her gross
estate for U.S. federal estate tax purposes. An individual holder who
actually pays Indian estate tax with respect to the equity shares will,
however, be entitled to credit the amount of such tax against his or her
U.S. federal estate tax liability, subject to certain conditions and
limitations.
7.2.5 Backup Withholding Tax and Information Reporting Requirements
Under current U.S. Treasury Regulations, dividends paid on equity shares,
if any, generally will not be subject to information reporting and
generally will not be subject to U.S. backup withholding tax. Information
reporting will apply to payments of dividends on, and to proceeds from the
sale or redemption of, equity shares or ADSs by a paying agent (including
a broker) within the United States to a U.S. Holder (other than an "exempt
recipient", including a corporation, a payee that is a Non-U.S. Holder
that provides an appropriate certification and certain other persons). In
addition, a paying agent within the United States will be required to
withhold 31% of any payments of the proceeds from the sale or redemption
of equity shares or ADSs within the United States to a holder (other than
an "exempt recipient") if such holder fails to furnish its correct
taxpayer identification number or otherwise fails to comply with such
backup withholding requirements.
7.2.6 Passive Foreign Investment Company
A non-U.S. corporation will be classified as a passive foreign investment
company (a "PFIC") for U.S. Federal income tax purposes if it satisfies
either of the following two tests: (i) 75% or more of its gross income for
the taxable year is passive income; or (ii) on average for the taxable
year (by value or, if the company so elects, by adjusted basis) 50% or
more of its assets produce or are held for the production of passive
income.
The company does not believe that it satisfies either of the tests for
PFIC status. If the company were to be a PFIC for any taxable year, U.S.
Holders would be required to either: (i) pay an interest charge together
with tax calculated at maximum ordinary income rates on certain "excess
distributions" (defined to include gain on a sale or other disposition of
equity shares); or (ii) if a Qualified Electing Fund election is made, to
include in their taxable income their pro rata share of certain
undistributed amounts of the company's income.
Item 8. Selected Financial Data
8.1 Selected Financial Data
This information set forth under the caption "Summary Consolidated
Financial Data" on page 110 of the Infosys Annual Report for fiscal 1999
and such information is hereby incorporated herein by reference.
8.2 Exchange Rates
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
the equity shares on the Indian stock exchanges and, as a result, will
likely affect the market price of the ADSs in the United States, and vice
versa. Such fluctuations will also affect the U.S. dollar conversion by
the Depositary of any cash dividends paid in Indian rupees on the equity
shares represented by the ADSs. The following table sets forth, for the
fiscal years indicated, certain information concerning the exchange rates
between Indian rupees and U.S. dollars based on the Noon Buying Rate:
-----------------------------------------------------------------------------------------------------------
Fiscal Year Ended March 31, Period End 1 Average 1, 2 High Low
-----------------------------------------------------------------------------------------------------------
1994 3 Rs. 31.37 Rs. 31.52 Rs. 31.75 Rs. 31.37
1995 3 31.43 31.38 31.90 31.37
1996 34.35 33.47 38.05 31.36
1997 35.88 35.70 36.85 34.15
1998 39.53 37.37 40.40 35.71
1999 42.35 42.10 43.68 39.25
-----------------------------------------------------------------------------------------------------------
1. The Noon Buying Rate at each period end and the average rate for
each period differed from the exchange rates used in the preparation
of the company's consolidated financial statements.
2. Represents the average of the Noon Buying Rate on the last day of
each month during the period.
3. From March 1, 1992 through August 19, 1994, the rupee was not
permitted to fully float and convert on the current account.
Instead, a dual exchange rate mechanism made the rupee partially
convertible by permitting conversion of 60% of the foreign exchange
received on a trade or revenue account at a market-determined rate
and the remaining 40% at the official Government of India rate.
8.3 Dividends
Although the amount varies, it is customary for public companies in India
to pay cash dividends. Under Indian law, a corporation pays dividends upon
a recommendation by the Board of Directors and approval by a majority of
the shareholders, who have the right to decrease but not increase the
amount of the dividend recommended by the Board of Directors. Under the
Indian Companies Act, dividends may be paid out of profits of a company in
the year in which the dividend is declared or out of the undistributed
profits of previous fiscal years. In the last three fiscal years, the
company declared an aggregate of approximately $0.29 per equity share, as
adjusted to reflect the company's stock dividend in March 1999, in cash
dividends (equivalent to approximately $0.145 per ADS). Although the
company has no current intention to discontinue dividend payments, there
can be no assurance that any future dividends will be declared or paid or
that the amount thereof will not be decreased. Owners of ADSs will be
entitled to receive dividends payable in respect of the equity shares
represented by such ADSs. The equity shares represented by ADSs will rank
pari passu with existing equity shares of the company in respect of
dividends. Cash dividends in respect of the equity shares represented by
the ADSs will be paid to the Depositary in rupees and except as otherwise
described in the Deposit Agreement will be converted by the Depositary
into U.S. dollars and distributed, net of Depositary fees and expenses, to
the holders of such ADSs.
With respect to equity shares issued by the company during a particular
fiscal year (including the equity shares underlying the ADSs issued to the
Depositary, dividends declared and paid for such fiscal year generally
will be prorated from the date of issuance to the end of such fiscal year.
Once a cash dividend is declared, equity shares entitled to prorated
dividends are quoted on the Indian stock exchanges at the same price as
equity shares entitled to full dividends. However, upon sale of and
payment for equity shares entitled to a prorated dividend, the selling
broker will deduct the difference between the full dividend and the
prorated dividend from the sale price of such shares. Holders of ADSs will
only receive dividends prorated from the date of issuance of the
underlying equity shares to the end of the fiscal year for which such
dividends are declared and paid. As a result, holders of ADSs will receive
little or no dividend for fiscal 1999. Until dividends for fiscal 1999
have been paid, this disparity in dividend treatment 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. ADSs
withdrawn from the Depositary in exchange for the underlying equity shares
will receive proceeds reduced by the difference between the full dividend
and the prorated dividend, upon sale of and payment for such equity
shares.
The following table sets forth the annual dividends paid per equity share
for each of the years indicated.
--------------------------------------------------------------------------
Year ended March 31, Dividend paid per equity share 1
Indian Rupee $
--------------------------------------------------------------------------
1999 7.50 0.18
1998 6.00 0.07
1997 5.50 0.04
1996 5.00 0.04
1995 4.50 0.04
--------------------------------------------------------------------------
1. Dividends are payable pro-rata from the date of allotment.
Item 9. Management's Discussion and Analysis of Financial Condition and Results
of Operations
9.1 This information is set forth under the caption "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" on pages 111 through 124 of the Infosys Annual Report
for Fiscal 1999 and such information is hereby incorporated herein
by reference.
9.2 In addition the following information, which is not set forth under
the caption "Management's Discussion and Analysis of Financial
Condition and Results of Operations" on pages 111 through 124 of the
Infosys Annual Report for Fiscal 1999 may be read as part of the
Management's Discussion and Analysis of Financial Condition of
Operations as required by this item.
9.2.1 Investment in Yantra Corporation
Prior to October 20, 1998, the company owned a majority of the voting
stock of Yantra which develops and markets an open system software package
for warehouse management. As a result, 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, the Yantra 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 the Yantra shares held by the company, thereby reducing the
company's interest to less than one-half of the voting stock of Yantra. As
a result, Yantra's results after October 20, 1998 have not been 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. Yantra's gross profits were 2.0% and
1.4% of the company's gross profits for these same periods. No minority
interest has been recorded because all of the common stock is owned by the
company.
9.2.2 Principles of Currency Translation
In fiscal 1999, over 90% 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 date the revenue is
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 shareholders' 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 the rupee appreciates against the
U.S. dollar.
9.2.3 Income Tax Matters
The company benefits from certain significant tax incentives provided to
software firms under the 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"). Under present law, the Export
Deduction remains available after expiration of the STP Tax Holiday. All
but one of the company's software development facilities are located in a
designated Software Technology Park. The
benefits of these tax incentive programs have historically resulted in an
effective tax rate for the company well below statutory rates, and the
company expects this trend to continue absent a change in policy by the
Government of India. 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.
9.2.4 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.
9.2.5 Year 2000 Compliance
Many existing computer systems, software applications and other control
devices use only two digits to identify a year in the date field, without
considering the impact of the upcoming change in the century. Others do
not correctly process "leap year" dates. As a result, such systems and
applications could fail or create erroneous results unless modified so
that they can correctly process data related to the year 2000 and beyond.
As a result, during the last three years, the company has continued to
assess the impact that the Year 2000 problem may have on its operations
and has identified the following areas of its business that may be
affected:
Client IT Services and Products. The company has evaluated each of its IT
services and software products and believes that each is substantially
Year 2000 compliant. In making such evaluations, the company has utilized
its experience in providing Year 2000 compliance services to its clients.
Internal Infrastructure. The Year 2000 problem could affect the systems,
transaction processing, computer applications and devices used by the
company to operate and monitor all major aspects of its business,
including financial systems (such as general ledger, accounts payable and
payroll), customer services, infrastructure, materials requirement
planning, master project scheduling, networks and telecommunications
systems. The company believes that it has identified the major systems,
software applications and related equipment used in connection with its
internal operations that must be modified or upgraded in order to minimize
the possibility of a material disruption to its business. The company has
converted its financial applications software to programs certified by the
suppliers as Year 2000 compliant and is currently in the process of
modifying and upgrading all other affected systems. The company expects to
complete this process by early 1999. All costs associated with carrying
out the company's plan for the Year 2000 problem are being expensed as
incurred and have not been significant to date. The company believes the
total of such costs will not have a material adverse effect on the
company's business, results of operations and financial condition.
Third Party Suppliers. The company relies directly and indirectly on
systems utilized by its suppliers for telecommunications, utilities,
electronic hardware and software applications. Pursuant to its service
delivery model, the company must maintain active voice and data
communications between its main offices in Bangalore, the offices of its
clients and its other software development facilities. Although the
company maintains redundant software facilities and satellite
communications links, any sustained disruption 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 business, results of
operations and financial condition. To assess supplier Year 2000
readiness, the company has sent two separate questionnaires to a majority
of its third party suppliers and believes that it will complete this
assessment process by early 1999. While the company expects to resolve any
significant Year 2000 problems with its suppliers in a timely manner,
there can be no assurance that these suppliers will not encounter delays
or unforeseen problems that affect their service to the company. The
company currently believes that any required upgrades, modifications or
replacements of these third party systems will be fulfilled without cost
to the company and will not have a material adverse effect on the
company's business, results of operations and financial condition.
Facilities. Systems such as air conditioning and security systems at the
company's facilities may also be affected by the Year 2000 problem. The
company is currently assessing the potential effects of and costs of
upgrading and modifying these systems. The company estimates that the
total cost to the company of completing any required upgrades,
modifications or replacements of these systems will not have a material
adverse effect on the company's business, results of operations and
financial condition.
The company is currently developing contingency plans to address the Year
2000 issues that may pose a risk to its operations and expects such plans
to be completed by mid-1999. Such plans may include accelerated
replacement of
affected systems or software, temporary use of redundant or back-up
systems or the implementation of manual procedures. The company believes
that the most reasonably likely worst case scenario should Infosys not
achieve Year 2000 Compliance is the intermittent or temporary disruption
in telecommunications, which could cause inefficiencies and delays,
particularly, delays in providing support services to clients. To minimize
the impact of any potential telecommunications disruptions, the company is
also considering temporary measures such as placing additional IT
professionals at client sites. In assessing the worst case scenario, the
company has taken into account the nature of its operations as well as the
availability of its IT professionals to attend to any internal problems
that may arise. There can be no assurance that any contingency plans
implemented by the company would be adequate to meet the company's needs
without materially impacting its operations, that any such plan would be
successful or that the company's business, results of operations and
financial condition would not be materially adversely affected by the
delays and inefficiencies inherent in conducting operations in an
alternative manner.
The information above contains forward-looking statements which reflect
the current views of the company with respect to Year 2000 compliance of
the company's internal systems and third party suppliers, and the related
costs and potential impact on the company's financial performance. As
indicated above, these assessments may ultimately prove to be inaccurate.
9.2.6 Accounting Pronouncements
The American Institute of Certified Public Accountants recently issued
Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." SOP 98-1 requires that
certain costs related to the development of internal-use software be
capitalized or amortized over the estimated useful life of the software.
SOP 98-1 is effective for financial statements issued for fiscal years
beginning after December 15, 1998. The company estimates that all software
acquired for internal use has a relatively short useful life, usually less
than one year. The company, therefore, currently charges to income the
cost of acquiring such software entirely at the time of acquisition. The
company does not believe that adopting the provisions of SOP 98-1 will
have a significant impact on its consolidated financial statements.
Item 10. Directors and Officers of the Registrant
The directors and executive officers of the company, their respective ages
as of March 31, 1999, and their respective positions with the company are
as follows:
-----------------------------------------------------------------------------------------------------------------
Name Age Position
-----------------------------------------------------------------------------------------------------------------
N. R. Narayana Murthy 52 Chairman and Chief Executive Officer
Nandan M. Nilekani 43 Managing Director, President and Chief Operating Officer
Susim M. Datta 1, 2 62 Non-Executive Director
Deepak Satwalekar 1, 2 50 Non-Executive Director
Ramesh Vangal 1, 2 44 Non-Executive Director
Dr. Marti G. Subrahmanyam 2 52 Non-Executive Director
Raghavan N. S. 55 Director and Head - Human Resources, Education & Research
Gopalakrishnan S. 43 Director and Head - Customer Delivery & Technology
Dinesh K. 44 Director and Head - Quality, Productivity & MIS
Shibulal S. D. 44 Director and Head - Manufacturing & Distribution and
Internet & Intranet Business Units
Ajay Dubey 41 Vice President - Financial Services and Transportation Business Unit
Ashwani K. Khurana 48 Senior Vice President and Head - Marketing, Banking Business Unit
Dr. P. Balasubramanian 49 Senior Vice President and Head - Financial Services and Transportation Business Unit
Girish Vaidya 48 Senior Vice President and Head - Banking Business Unit
Hema Ravichandar 38 Senior Vice President and Head - Human Resources Development
Jan DeSmet 40 Vice President - Consulting Services and Head - Strategic Business Unit-4
T. V. Mohandas Pai 40 Senior Vice President and Head - Finance and Administration
Phaneesh Murthy 35 Senior Vice President and Head - Worldwide Sales
Prabhu M. S. S. Dr. 51 Senior Vice President and Head - Engineering Services Business Unit
Raghavan S. 37 Associate Vice President and Head - Quality & Productivity
Raghupathi G. Bhandi 38 Vice President - Enterprise Resource Planning
Rajiv Kuchhal 33 Associate Vice President and Head - Nortel OSDC Business Unit
Srinath Batni 44 Senior Vice President and Head - Retail and Telecom Business Unit
Vasudeva L. Rao 37 Vice President - Manufacturing and Distribution
Yegneshwar S. Dr. 38 Associate Vice President and Head - Education and Research
-----------------------------------------------------------------------------------------------------------------
1. Member of the Compensation Committee
2. Member of the Audit Committee
N. R. Narayana Murthy has served as Chairman of the Board and Chief
Executive Officer of Infosys since 1981, when he founded the company with
six software professionals. Mr. Murthy also served as Managing Director of
Infosys until February 1999. While at Infosys, from 1992 to 1994, Mr.
Murthy also served as the President of National Association of Software
and Service Companies ("NASSCOM"). Mr. Murthy is on the Governing Council
of the National Information Technology Task Force of India and was voted
"IT Man of the Year" for 1996 by Dataquest India. In 1998, Mr. Murthy was
awarded the prestigious J.R.D. Tata Corporate Leadership Award. Since
August 1998, Mr. Murthy has served as a director of the Industrial Credit
and Investment Corporation of India ("ICICI") and since 1998, he has
served as a director of Videsh Sanchar Nigam Limited ("VSNL"). He is a
Fellow of the All India Management Association ("AIMA") and the Computer
Society of India ("CSI"). Mr. Murthy received a B.E. in Electrical
Engineering from the University of Mysore and a M.Tech. from the Indian
Institute of Technology ("IIT"), Kanpur.
Nandan M. Nilekani is a co-founder of Infosys and has served as a Director
since 1981, Head - Marketing and Sales of Infosys since 1987, Head -
Banking Business Unit since 1997 and Managing Director, President and
Chief Operating Officer since February 1999. From 1981 to 1987, Mr.
Nilekani was in the United States managing the marketing and development
efforts of Infosys. Mr. Nilekani is a co-founder of NASSCOM and received a
B.Tech. in Electrical Engineering from IIT, Mumbai.
Susim M. Datta has served as a Director of Infosys since 1997. He is
Chairman of Castrol India Ltd. and IL&FS Venture Corporation Ltd. He is a
Director of Philips India Ltd., Tata Trustee Company Ltd. and various
other publicly-held corporations in India. From 1990 to 1996, he was
Chairman of Hindustan Lever Ltd. and all Unilever Group Companies in India
and Nepal. Mr. Datta is a Trustee of the government-sponsored India Brand
Equity Fund Trust and a member of the Advisory Board of the Council for
Fair Business Practices, Mumbai. He
is also Chairman of the Board of Governors of IIM, Bangalore and the Goa
Institute of Management. Mr. Datta received a M.Sc. from Calcutta
University.
Deepak M. Satwalekar has served as a Director of Infosys since 1997. He
has been Managing Director of Housing Development Finance Corporation Ltd.
since 1993, and was Deputy Managing Director since 1990. He has been a
member of the Managing Committee of the Bombay Chamber of Commerce and
Industry from 1996 to 1998. Mr. Satwalekar was also a Member of the
Economic Affairs Committee of the Indo-American Chamber of Commerce from
1993 to 1994 and 1996 to 1997. He is a Director of several companies in
India and elsewhere. Mr. Satwalekar received a B.Tech. in Mechanical
Engineering from IIT, Mumbai and a M.B.A. from the American University.
Dr. Marti G. Subrahmanyam has served as a Director of Infosys since April
1998. He has served as the Charles E. Merrill Professor of Finance and
Economics at the Stern School of Business at New York University since
1991 and has been a visiting professor at IIT, Chennai, INSEAD, IIM,
Ahmedabad and Manchester Business School, among other academic
institutions. Dr. Subrahmanyam has written several books and published
numerous articles in the areas of finance and economics. He is a Director
of ICICI Limited, Nomura Asset Management Inc. and Deutsche Software India
Ltd., a subsidiary of Deutsche Bank AG. Dr. Subrahmanyam received a
B.Tech. from IIT, Chennai, a Diploma in Business Administration, from IIM,
Ahmedabad and a Ph.D. in Finance and Economics from the Massachusetts
Institute of Technology.
Ramesh Vangal has served as a Director of Infosys since 1997. He has
served as the President of Seagram Asia Pacific since 1997. From 1994 to
1997, he was a member of the Worldwide Operating Council of PepsiCo and
was President of PepsiCo Foods International, Asia Pacific. From 1985 to
1994, he served in various management capacities for PepsiCo. Mr. Vangal
received a B.Tech. from IIT, Mumbai and a M.Sc. in Business from the
London Business School. He also holds a Certificate Diploma, Accounting
and Finance from the Institute of Chartered Accountants, London.
N. S. Raghavan is a co-founder of Infosys and has served as a Director
since 1981 Head - Human Resources and Education of Infosys since 1996.
From 1981 to 1996, he served in various senior management positions within
Infosys. Mr. Raghavan received a B.E. in Electrical Engineering from
Andhra University.
S. Gopalakrishnan is a co-founder of Infosys and has served as a Director
since 1981 and Head - Client Delivery and Technology of Infosys since
1996. From 1994 and 1996, Mr. Gopalakrishnan was head of Technical Support
Services for Infosys. From 1987 to 1994, he was Technical Vice President
and managed all projects at the U.S.-based KSA/Infosys, a former joint
venture between the company and Kurt Salmon Associates. Prior to that, Mr.
Gopalakrishnan was Technical Director of Infosys, responsible for the
technical direction of the company. Mr. Gopalakrishnan received a M.Sc. in
Physics and an M.Tech. in Computer Science from IIT, Chennai.
K. Dinesh is a co-founder of Infosys and has served as a Director since
1985. He has served as Head - Quality, Productivity and MIS of Infosys
since 1996. From 1991 to 1996, Mr. Dinesh served in various project
management capacities and was responsible for worldwide software
development efforts for Infosys. From 1981 to 1990, he managed projects
for Infosys in the United States. Mr. Dinesh received a M.Sc. degree in
Mathematics from Bangalore University.
S. D. Shibulal is a co-founder of Infosys and has served as a Director
from 1984 to 1991 and since 1997. He has served as Head - Manufacturing,
Distribution and Year 2000 Business Unit and Head - Internet and Intranet
Business Unit of Infosys since 1997. From 1991 to 1996, Mr. Shibulal was
on sabbatical from Infosys and served as Senior Information Resource
Manager at Sun Microsystems, Inc. From 1981 to 1991, he worked for Infosys
in the United States on projects in the retail and manufacturing
industries. Mr. Shibulal received a M.Sc. in Physics from the University
of Kerala and a M.S. in Computer Science from Boston University.
Ajay Dubey has served as Vice President - Financial Services and
Transportation Business Unit of Infosys since April 1999. From 1995 to
1999, he was an Associate Vice President working in the Financial Services
and Transportation Business Unit. He joined the company in 1993 as a
Senior project manager. From 1990 to 1993, he served as a Technical Team
leader in ANZ Grindlays, New Zealand. Mr. Dubey received a B.Tech. from
IIT, Kanpur in 1980.
Ashwani K. Khurana has served as Senior Vice President and Head - Banking
Business Unit (Sales and Support) of Infosys since 1994. He joined the
company in 1992 as Managing Director of Infosys Digital Systems Pvt. Ltd.,
formerly a subsidiary of the company. Prior to that, for 14 years, Mr.
Khurana was a Regional Manager for WIDIA India Limited, an Indian
subsidiary of KRUPP WIDIA of Germany, an industrial product manufacturer.
Mr. Khurana received a B.Tech. from IIT, Delhi.
Dr. P. Balasubramanian has served as Senior Vice President and Head -
Financial Services and Transportation Business Unit of Infosys since 1995.
From 1989 to 1992, Dr. Balasubramanian was Chief Executive Officer and
Technical Director of Hitek Software Engineers Limited ("Hitek"), Jamaica,
West Indies. From 1992 to 1994, he was
a Technical Director of Hitek. From 1986 to 1989, Dr. Balasubramanian was
Chief Executive Officer of Cholamandalam Software Limited, Chennai. Dr.
Balasubramanian has been invited as guest faculty to several executive
training programs in India as well as at the University of West Indies.
Dr. Balasubramanian received a B.Tech. and M.Tech from IIT, Chennai and a
Ph.D. in Operations Research and Financial Management from Purdue
University.
Girish Vaidya has served as Senior Vice President and Head - Banking
Business Unit of Infosys since April 1999. Prior to that, Mr. Vaidya was
Director and Head Operations India for ANZ Grindlays with whom he had been
since 1975. Mr. Vaidya received a B.E. from S.P College of Engineering,
Mumbai in 1973 and an M.B.A from IIM, Calcutta in 1975.
Hema Ravichandar has served as Senior Vice President and Head - Human
Resources of Infosys since 1998. From 1996 to 1998, Ms. Ravichandar was an
independent consultant. From 1992 to 1995, she served as Head - Human
Resources at Infosys. From 1983 to 1992, Ms. Ravichandar was employed by
Motor Industries Company Limited as Deputy Manager - Human Resource
Development. Ms. Ravichandar received a B.A. in Economics and a post
graduate diploma in management from IIM, Ahmedabad.
Jan DeSmet has served as Vice President - Consulting Services and Head -
Strategic Business Unit-4 since January 1999. From 1996 to1998, Mr. DeSmet
was Senior Principal with Diamond Technology Partners in Chicago. Mr.
DeSmet received a M.B.A from the University of Dallas in 1982.
T. V. Mohandas Pai has served as Senior Vice President and Head - Finance
and Administration of Infosys since 1996. From 1994 to 1996, he served as
Vice President of Finance at Infosys. From 1988 to 1994, Mr. Pai was
Executive Director of Prakash Leasing Limited. He was also a member of the
Capital Markets Committee of the Institute of Chartered Accountants of
India. Mr. Pai received a B.Com. from St. Joseph's College of Commerce,
Bangalore and a LL.B. from the University Law College, Bangalore. Mr. Pai
is a Fellow Member of the Institute of Chartered Accountants of India.
Phaneesh Murthy has served as Senior Vice President and Head - Worldwide
Sales of Infosys since 1996. From 1992 to 1996, Mr. Murthy was a Marketing
Manager for Infosys based in the United States. From 1987 to 1992, he
worked in sales and marketing for Sonata, a software division of Indian
Organic Chemicals Ltd. Mr. Murthy received a B.Tech. in Mechanical
Engineering from IIT, Chennai and a post graduate diploma in business
administration from IIM, Ahmedabad.
Dr. M. S. S. Prabhu has served as Senior Vice President and Head -
Engineering Services Business Unit of Infosys since 1997. From 1994 to
1997, Dr. Prabhu served as head of CAD/CAM group at Tata Consultancy
Services. From 1972 to 1994, he served in various capacities for the
Indian Satellite Research Organization. Dr. Prabhu received a B.E. in
Civil Engineering from Bangalore University and a Ph.D. in Aeronautical
Engineering from Indian Institute of Science, Bangalore.
Raghavan S. has served as Associate Vice President and Head - Quality &
Productivity since April 1999. From 1987 to 1999 Mr. Raghavan has served
in various capacities for the company, starting as a Software Engineer in
1987 upto a Senior project manager in 1999. Mr. Raghavan received a B.E.
from Osmania University in 1983.
Raghupathi G. Bhandi has served as Vice President of Infosys since April
1998. From 1995 to 1998, he started and developed the company's first
software development facility outside of Bangalore. From 1991 to 1995, Mr.
Bhandi worked in the Quality Department of Infosys with attention to ISO
9000 certification. From 1988 to 1991, he was an Assistant Manager on
projects in the United States and Europe. Mr. Bhandi received a B.E. from
Mysore University and a M.Tech. in Industrial Management and Engineering
from IIT, Kanpur.
Rajiv Kuchhal has served as Associate Vice President of Infosys since 1998
and Head--Nortel OSDC Business Unit of Infosys since April 1998. From 1990
to 1998, Mr. Kuchhal served in various capacities for the company,
including projects relating to an electronic telex interface and
management of the Nortel OSDC before it became a separate business unit.
Mr. Kuchhal received a B.Tech. in Electrical and Electronics Engineering
from IIT, Delhi.
Srinath Batni has served as Senior Vice President and Head - Retail and
Telecommunications Business Unit of Infosys since 1996. After joining
Infosys in 1992, Mr. Batni was a Project Manager. From 1990 to 1992, he
was Manager of Technical Support for PSI Bull, an Indian software
development subsidiary of Bull, S.A., a French company. Mr. Batni received
a B.E. in Mechanical Engineering from Mysore University and a M.E. in
Mechanical Engineering from the Indian Institute of Science, Bangalore.
Vasudeva L. Rao has served as Vice President of Infosys since April 1998,
operating in the distribution and logistics domains of the Manufacturing
and Distribution Business Unit. From 1994 to 1996, he was an Associate
Vice President working in the Manufacturing and Distribution Unit. From
1991 to 1994, he served as a project manager in the retail industry at
Software Sourcing Company, formerly KSA/Infosys. From 1985 to 1991, Mr.
Rao was a software engineer for Infosys based in the United States. Mr.
Rao received a B.E. in Mechanical Engineering from Bangalore University.
Dr. S. Yegneshwar has served as Associate Vice President and Head --
Education and Research of Infosys since 1996. From 1993 to 1996, Dr.
Yegneshwar was a group leader of the Software Engineering group in the
Education and Research Department of Infosys. From 1990 to 1993, he was an
Assistant Professor of Computers and Information Systems at IIM,
Ahmedabad, where he taught courses in software engineering and management
to postgraduate and doctoral students. Dr. Yegneshwar received a B.E. in
Mechanical Engineering from the Birla Institute of Technology and Science,
Pilani and a Ph.D. in Computer Science and Engineering from IIT, Mumbai.
Item 11. Compensation of Directors and Officers
In fiscal 1999, the company's four non-employee directors were paid an
aggregate of $ 56,671 (translated at the Noon Buying Rate on March 31,
1999). Directors who are also employees of the company do not receive any
additional compensation for their service on the board of directors.
Directors are also reimbursed for certain expenses in connection with
their attendance at the board and the committee meetings.
The table below, for the officers and directors of the company, sets forth
compensation for the fiscal year ended March 31, 1999.
--------------------------------------------------------------------------
Annual Compensation Awards
Name Salary Bonus Other Annual
Compensation
--------------------------------------------------------------------------
Narayana N. R. Murthy $ 31,178 -- $ 4,905
Nandan M. Nilekani 30,455 -- 4,905
Susim M. Datta -- -- --
Deepak Satwalekar -- -- --
Ramesh Vangal -- -- --
Dr. Marti G. Subrahmanyam -- -- --
Ajay Dubey 18,587 -- 2,872
Ashwani K. Khurana 25,311 -- 4,011
Balasubramanian P. Dr. 29,589 -- 4,606
Dinesh K. 30,226 -- 4,905
Girish Vaidya* 5,500 -- 891
Gopalakrishnan S. 29,779 -- 4,905
Hema Ravichandar* 5,660 -- 952
Jan DeSmet* 40,333 -- --
Mohandas Pai T. V. 25,721 -- 5,812
Phaneesh Murthy 198,870 -- --
Prabhu M. S. S. Dr. 27,682 -- 4,360
Raghavan N. S. 29,527 -- 4,905
Raghavan S. 16,650 -- 1,743
Raghupathi G. Bhandi 20,568 -- 2,995
Rajiv Kuchhal 17,265 -- 2,629
Shibulal S. D. 29,058 -- 4,905
Srinath Batni 23,126 -- 5,268
Vasudeva L. Rao 18,287 -- 2,827
Yegneshwar S. Dr. 16,024 -- 2,464
--------------------------------------------------------------------------
* Indicates the Annual Compensation Awards only from commencement of
service in the year
Item 12. Options to Purchase Securities from Registrant or Subsidiaries.
12.1 Benefit Plans
1994 Employees Stock Offer Plan. The ESOP was approved by the shareholders
on June 25, 1994 and adopted by the Board of Directors on September 15,
1994. The ESOP provides for the grant of rights to purchase equity shares
to eligible employees. Each stock purchase right provides the right to
acquire one equity share of the company.
The ESOP is administered by an advisory board which consists of three
company directors and two independent members. The company has created an
employee welfare trust (the "Trust") to hold the equity shares eligible
for future issuance and subject to vesting under the ESOP. The advisory
board selects eligible full-time employees for the grant of stock purchase
rights from the Trust. The advisory board, in its discretion, selects
employees based upon various
factors, including, without limitation: employee performance, period of
service and status in the company. Founders of the company are not
eligible to participate in the ESOP.
Stock purchase rights granted under the ESOP are generally
non-transferable by the employee. However, if the employee terminates
employment by resignation, dismissal or severance, his or her stock
purchase rights are canceled and his or her equity shares subject to
vesting are transferred back to the Trust. If the employee terminates
employment by death or retirement, his or her stock purchase rights and
equity shares subject to vesting are transferred to the employee's legal
heirs or shall continue to be held by the employee, as the case may be.
Each purchase right entitles the holder to purchase one equity share at an
exercise price of Rs. 100 (representing $2.36 per equity share at the Noon
Buying Rate in effect on March 31, 1999). The stock purchase rights issued
under the ESOP are exercisable for a period of five years after the date
of issuance of the stock purchase right to the employee from the Trust.
Equity shares received by an employee under the ESOP are non-transferable
for a period of five years from the date the stock purchase right was
issued to the employee. After the expiration of this lock- in period, the
employee shall become the absolute owner of the equity shares. If the
company declares a stock dividend, the dividend shares distributed to ESOP
participants would not be subject to vesting. The ESOP is subject to all
applicable laws, rules, regulations and to such approvals by any
governmental agencies as may be required.
As of March 31, 1999, the Trust held 54,800 equity shares which are
reserved for issuance upon exercise of stock purchase rights to be granted
by the Trust in the future.
1998 Stock Option Plan. The company's 1998 Stock Option Plan (the "1998
Plan") provides for the grant of nonstatutory stock options and incentive
stock options (within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Internal Revenue Code")), to employees of
the company. The establishment of the 1998 Plan was approved by the Board
of Directors in December 1997 and by the shareholders in January 1998. The
Government of India has approved the 1998 Plan, subject to a $50 million
limit on the aggregate market value of the equity shares reserved pursuant
to the 1998 Plan. Accordingly, the total equity shares reserved for
issuance may be reduced by the Board of Directors from time to time to
comply with the Government of India's $50 million limit. A total of
800,000 equity shares are currently reserved for issuance pursuant to 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 ADSs represented by ADRs.
The 1998 Plan is administered by a committee of the Board (the
"Committee"). The Committee has the power to determine the terms of the
options granted, including the exercise price, the number of ADSs subject
to each option, the exercisability thereof, and the form of consideration
payable upon such exercise. In addition, the Committee has the authority
to amend, suspend or terminate the 1998 Plan, provided that no such action
may affect any ADS previously issued and sold or any option previously
granted under the 1998 Plan.
Options granted under the 1998 Plan are not generally transferable by the
optionee, and each option is exercisable during the lifetime of the
optionee only by such optionee. Options granted under the 1998 Plan must
generally be exercised within three months of the end of optionee's status
as an employee of the company, but in no event later than the expiration
of the option's term. In the event of optionee's termination as a result
of death or disability, the vesting and exercisability of the optionee's
option will accelerate in full and the option must be exercised within 12
months after such optionee's termination by death or disability, but in no
event later than the expiration of the option's term. The exercise price
of incentive stock options granted under the 1998 Plan must be at least
equal to the fair market value of the ADSs on the date of grant. The
exercise price of nonstatutory stock options granted under the 1998 Plan
must be at least equal to 90% of the fair market value of the ADSs on the
date of grant. With respect to any participant who owns stock possessing
more than 10% of the voting power of all classes of the company's
outstanding capital stock, the exercise price of any incentive stock
option granted must equal at least 110% of the fair market value on the
grant date and the term of such incentive stock option must not exceed
five years. The term of all other options granted under the 1998 Plan may
not exceed 10 years.
The 1998 Plan provides that in the event of a merger of the company with
or into another corporation, a sale of substantially all of the company's
assets or a like transaction involving the company, each option shall be
assumed or an equivalent option substituted by the successor corporation.
If the outstanding options are not assumed or substituted as described in
the preceding sentence, the vesting and exercisability of each option will
accelerate in full.
The following table sets forth the options to purchase securities that
were outstanding as of March 31, 1999.
-----------------------------------------------------------------------------------------------------
Class of Securities Total Amount of Securities Exercise price Expiration dates
-----------------------------------------------------------------------------------------------------
Equity shares 40,000 $2.36 March 2005
American Depositary Shares 1,07,000 $34.00 March 2004-2009
-----------------------------------------------------------------------------------------------------
The following table sets forth the options to purchase securities held by
executive officers and directors that were outstanding as of March 31,
1999.
-----------------------------------------------------------------------------------------------------------
Name Average Exercise Price Option Vesting Date No. of ADSs/
Equity Shares
-----------------------------------------------------------------------------------------------------------
Options to Purchase ADSs
Balasubramanian P. $ 34.00 March 2003 3,000
Hema Ravichandar 34.00 March 2003 3,000
Jan DeSmet 34.00 March 2003 40,000
Mohandas Pai T. V. 34.00 March 2003 3,000
Phaneesh Murthy 34.00 March 2003 40,000
Prabhu M. S. S. 34.00 March 2003 3,000
Raghupathi G. Bhandi 34.00 March 2003 3,000
Rajiv Kuchhal 34.00 March 2003 3,000
Srinath Batni 34.00 March 2003 3,000
Vasudeva Rao L. 34.00 March 2003 3,000
Yegneshwar S. 34.00 March 2003 3,000
Options to Purchase Equity shares
Girish Vaidya $ 2.35 March 2005 8,000
Hema Ravichandar 2.35 March 2005 32,000
-----------------------------------------------------------------------------------------------------------
Item 13. Interest of Management in Certain Transactions
Yantra Corporation
In December 1996, the company transferred all rights, title and interest
in and to the WMSYantra (formerly known as EAGLE) software product to
Yantra, then a majority-owned subsidiary of the company. Yantra granted
Infosys a non- exclusive right to reproduce, distribute and service the
product to the extent necessary to fulfill the company's pre-existing
contractual obligations for the product. In consideration for this
transaction Infosys received 7,500,000 shares of common stock of Yantra,
which had a fair market value at the time of $0.20 per share. In September
1997, the company purchased 2,000,000 shares of Series A Preferred Stock
of Yantra at $0.75 per share. Certain of the company's directors or
officers are directors of Yantra. As of March 31, 1998, Mr. Phaneesh
Murthy, an executive officer of the company, held options to purchase
100,000 shares of common stock of Yantra at an exercise price of $0.10 per
share, all of which were granted on September 29, 1997. Other than Mr.
Phaneesh Murthy, none of the company's directors or officers beneficially
owns any shares or options of Yantra. On October 20, 1998, the company
sold 1,363,637 shares of Series A Preferred Stock of Yantra for $1.10 per
share to an unaffiliated purchaser. As a result, the company reduced its
interest in Yantra to less than one-half of voting stock of Yantra.
Employment Agreements
The company has entered into agreements with its employee directors
containing a monthly salary, performance bonus and benefits including
vacation, medical reimbursement and pension fund contributions. These
agreements are made for a five-year period, but either the company or the
employee director may terminate the agreement upon six months notice to
the other party.
Loans to Employees
Pursuant to an employee loan program, the company grants loans to
employees to acquire certain assets such as property or vehicles. Such
loans are made at interest rates ranging from 0% to 4% and are repayable
over fixed periods ranging from one to 100 months. The loans generally are
secured by the assets acquired by the employees. As of March 31, 1999,
there were $5.2 million in loans outstanding to employees, of which
$265,669 were loans receivable from executive officers of the company in
amounts less than $60,000.
PART II
- --------------------------------------------------------------------------------
Item 14. Description of Securities to be Registered
Not applicable.
PART III
- --------------------------------------------------------------------------------
Item 15. Defaults upon Senior Securities
Not applicable.
Item 16. Changes in Securities, Changes in Security for Registered Securities
and Use of Proceeds
On March 11, 1999 the company completed its initial U.S. public offering
(the "U.S. IPO") of 2,070,000 American Depositary Shares representing
1,035,000 equity shares, par value Rs. 10 per share (including the
exercise of the underwriters' over-allotment option consisting of 270,000
American Depositary Shares representing 135,000 equity shares) at a public
offering price of $34.00 per American Depositary Share pursuant to a
registration statement on Form F-1 (file no. 333-72195) filed with the
Securities Exchange Commission (the "Registration Statement"). All of the
shares registered were sold. NationsBanc Montgomery Securities LLC,
BancBoston Robertson Stephens, BT Alex. Brown and Thomas Weisel Partners
LLC were on the managing underwriters of the U.S. IPO. Aggregate gross
proceeds to the company (prior to deduction of underwriting discounts and
commissions and expenses of the offering) were $70,380,000. There were no
selling stockholders in the U.S. IPO.
The company paid underwriting discounts and commissions of $3,477,600 and
other expenses are estimated to be $1,750,000 in connection with the U.S.
IPO. The total expenses to the company are estimated to be $5,227,600 (out
of which an amount of $4,112,824 was paid as of March 31, 1999) and the
net proceeds to the company in the IPO would be $65,152,400.
From March 10, 1999, the effective date of the Registration Statement, to
March 31, 1999, no part of the net proceeds were used for any of the uses
of proceeds stated in the Form F-1 Registration Statement and the funds
are reserved for general corporate purposes.
PART IV
- --------------------------------------------------------------------------------
Item 17. Financial Statements and Supplementary Data
The company has elected to provide financial statements pursuant to Item
18 of Form 20-F.
Item 18. Financial Statements and Supplementary Data
The following financial statements of the company and the auditors' report
appearing on pages 126 through 146 of the Infosys Annual Report for Fiscal
1999 are hereby incorporated herein by reference:
o Independent Auditors' Report
o Balance Sheets as of March 31, 1999 and 1998.
o Statements of Income for the years ended March 31, 1999, 1998 and
1997.
o Statements of Shareholders' Equity for the years ended March 31,
1999, 1998 and 1997.
o Statements of Cash Flows for the years ended March 31, 1999, 1998
and 1997.
o Notes to Financial Statements.
The Infosys Annual Report for Fiscal 1999, except for those portions which
are expressly incorporated by reference in this filing, is furnished for
the information of the Securities and Exchange Commission and is not to be
deemed as filed as a part of this Report on Form 20-F.
Item 19. Financial Statements and Exhibits
a. Financial Statements
The following financial statements of the company included in Item 18 of
this Report on Form 20-F are hereby incorporated by reference from the
Infosys Annual Report for Fiscal 1999, filed as Exhibit 13.1 to this
Report on Form 20-F.
o Independent Auditors' Report
o Balance Sheets as of March 31, 1999 and 1998.
o Statements of Income for the years ended March 31, 1999, 1998 and
1997.
o Statements of Shareholders' Equity for the years ended March 31,
1999, 1998 and 1997.
o Statements of Cash Flows for the years ended March 31, 1999, 1998
and 1997.
o Notes to Financial Statements.
b. Exhibits
--------------------------------------------------------------------------
Exhibit Number Description of Document
--------------------------------------------------------------------------
*3.1 Articles of Association of the Registrant, as
amended.
*3.2 Memorandum of Association of the Registrant, as
amended.
*3.3 Certificate of Incorporation of the Registrant, as
currently in effect.
*4.1 Form of Deposit Agreement among the Registrant,
Bankers Trust Receipts issued thereunder (including
as an exhibit, the form of American Depositary
Receipt).
*4.2 Registrant's Specimen Certificate for Equity Shares.
*10.1 Registrant's 1998 Stock Option Plan and form of
Option Agreement.
*10.2 Registrant's Employees Stock Offer Plan.
*10.3 Employees Welfare Trust Deed of Registrant Pursuant
to Employees Stock Offer Plan.
*10.4 Form of Indemnification Agreement.
13.1 Infosys Annual Report for Fiscal 1999.
27.1 Financial Data Schedule.
- --------------------------------------------------------------------------------
* Incorporated by reference to exhibits filed with the Registrant's
Registration Statement on Form F-1 (File No. 333-72195) in the form
declared effective on March 10, 1999.
Signatures
Pursuant to the requirements of Section 12 of the Securities Exchange Act
of 1934, the registrant certifies that it meets all the requirements for
filing on Form 20-F and has duly caused this annual report to be signed on
its behalf by the undersigned, thereunto duly authorized.
for Infosys Technologies Limited
/s/ N. R. Narayana Murthy
Bangalore N. R. Narayana Murthy
May 13, 1999 Chairman
and Chief Executive Officer
/s/ Nandan M. Nilekani
Nandan M. Nilekani
Managing Director, President
and Chief Operating Officer