The complete transcript of the 21st Annual General Meeting held on June 08, 2002 at Bangalore.
N. R. Narayana Murthy Chairman and Chief Mentor
N. R. Narayana Murthy: Well, first of all welcome to the 21st Annual General Meeting of your company, Infosys. The piece that you saw and listened to just now was conceived by our SETLabs, the Software Engineering and Technology Labs.
As is the tradition with Infosys, I would now like to request that all of us introduce ourselves. We will start with Mr. Srinath Batni, who is on the left side.
Srinath Batni: I head the Geographic Practice, which is focused on West North American markets in Infosys, apart from being on the board of Infosys.
Rama Bijapurkar: I am an Independent Director on the board.
Phaneesh Murthy: I head Sales and Marketing, and I head the Communications Practice in Infosys.
Prof. Jitendra Vir Singh: I am an Independent Director, and an external director and in addition to that I am a Professor at the Wharton School in Philadelphia.
K. Dinesh: I handle Human Resources, Information Systems, Quality, and Communication Design Group in Infosys.
Deepak M. Satwalekar: Independent Director and Chairman of the Audit committee.
Sen. Larry Pressler: From Washington DC, an Independent Director.
N. R. Narayana Murthy: I am the Chairman and Chief Mentor of the company.
Nandan M. Nilekani: I am the Chief Executive Officer of the company.
S. Gopalakrishnan: Good afternoon. I am the Chief Operating Officer.
Prof. Marti G. Subrahmanyam: Independent Director and Chairman of the Compensation committee. I am a Professor at the Stern School at New York University.
S. D. Shibulal: Good afternoon. I am head of Delivery at Infosys.
Dr. Omkar Goswami: Hi, Independent Director at Infosys and I am the Chief Economist at the Confederation of Indian Industries.
T. V. Mohandas Pai: I head the Finance function at Infosys.
V. Balakrishnan: I am Vice President - Finance, and Company Secretary.
U. Ramadas Kamath: I am Associate Vice President - Accounts and Administration.
Mohan Sekhar: Hello, I am head of Delivery for Canada and North East USA.
Y. Parameswar: Hello, head of Communications and Product Services Delivery.
B. G. Srinivas: Hello, I head the Enterprise Solutions group.
Dr. P. Balasubramanian: Good afternoon, head of the Domain Competency Group.
Capt. Deepak Sinha: Good afternoon, I look after Computers and Communications Division.
Girish G. Vaidya: I head the Banking Business Unit of Infosys.
Dr. M. S. S. Prabhu: I head Engineering Services and Consultancy Practice.
U. B. Pravin Rao: Good afternoon. I head the Europe Practice.
J. Sivashankar: Good afternoon. I head the Information Systems function at Infosys.
H. R. Binod: Hello, I am responsible for Commercial and Facilities function in Infosys.
Sanjay Purohit: Good afternoon. I head the Corporate Services Group and the Quality, and I am the Secretary of the Management Council.
Hema Ravichandar: Good afternoon. I am responsible for Human Resources Development at Infosys.
N. R. Narayana Murthy: Thank you Hema. We have two Independent Directors who are not here today. First one is Mr. Philip Yeo, who is the Chairman of the Life Sciences Board of Singapore and one of the architects of modern Singapore. He is not in a position to be here today due to certain pressing reasons, family reasons. Similarly, Mr. Claude Smadja, who is an Advisor to the World Economic Forum and he is also the founder of Smadja & Associates. He is an Additional Director. He is also coming up for election today, but he again will not be able to take part in the proceedings today due to certain unavoidable reasons.
The next item. As you people know, we have a tradition at Infosys where we rotate the Chairmanship of the annual general meetings to have a sense of camaraderie and to have a sense of participation. This time, with your consent, I would like to invite Senator Larry Pressler, one of the Independent Directors, to chair the AGM. As all of you know Larry is an extraordinary friend of India, probably the finest friend of India in the United States in the political arena. He is a Rhodes Scholar, he has been to Harvard, he is a famous lawyer, and above all, as I said, he has his heart at the right place for India. And I think certainly for all of us, the members of the board as well as the officers of the company and the entire 10,700 Infoscions, it is a great privilege to have him on our board and with your consent I will request him to chair the AGM.
{Applause}
Senator Larry Pressler Independent Director
Sen. Larry Pressler: Thank you Mr. Murthy for giving me an opportunity to preside over this meeting. We have 185 members present in person and 66 persons by proxies to conduct the proceedings of this meeting. The quorum being present, I call this meeting to order. The register of director's shareholding is kept open and is available for inspection by the members near the registration counter. The registry of proxies is available for inspection near the registration counter. With the consent of the members, I take the notice convening the meeting as read. Thank you.
Now, may I request Mr. Murthy, Chairman and Chief Mentor of the company, to deliver the Chairman's address.
{Applause}
N. R. Narayana Murthy: Dear shareholders, I welcome you all to the 21st Annual General Meeting of your company. At the outset, I thank you all for your trust and your support. Your company has performed satisfactorily during the last fiscal. Under the Indian GAAP, the revenues grew by 37% over fiscal 2001, while our profits from ordinary activities went up by 29.6%. According to the US GAAP, our revenues grew by 31.7% over the last fiscal, while the net income grew by 24.6%.
Every year when I speak to you people at this forum, I get into the business details. But this year, I want to move away from that theme, and instead I will dwell on an extraordinary trait that I have witnessed in this organization. I refer to the integrity, honesty, decency, courage, and the culture of hard work and sacrifice displayed by every Infoscion. I have been witness to several happy events during my tenure at Infosys. However, none has gladdened me more than this exemplary behavior of every Infoscion. Let me explain why I feel so happy. Firstly, your company has shown that it has the best forecasting system in the industry in India. Your company contacted several customers and prospects, conducted several surveys and used this data in the forecasting model of the company to project a revenue growth of 30% in dollar terms on April 10, 2001. When your company announced this estimate, the whole industry differed with us, saying that we were underestimating growth and we did not seem to know what the marketplace was like. However, today, all of us know that the growth of the Indian software development industry in dollar terms, for the year ending March 31, 2001, was around 18%. I am glad that we grew by 31.7% in dollar terms and exceeded our own projections. This aligns with our philosophy of under-promise and over-deliver.
The second reason why I am very happy today is that your company has once again lived up to the highest standards of corporate governance. Corporate governance is about leveling with stakeholders and creating a bond of trust and faith with them by making sure that at all points of time that we are honest in dealing with them. I am happy that my colleague, Mr. Nandan Nilekani, my other colleagues on the board as well as the rest of the Infoscions did what they believed was right and honorable, even if it meant possible short-term loss of market capitalization. These are people who have yet again demonstrated the Infosys philosophy, i.e., when in doubt, disclose. Ladies and gentlemen, such people are rare in India. I admire them for leveling with you and for strengthening the bond of trust and friendship. Please join me in applauding them.
{Applause}
The third reason why I am happy with Infoscions is that, an Infoscion lives by his / her words, no matter what the costs are. The mantra of every Infoscion during the year was to live up to the promises made to every stakeholder. After all, long-term relationships are fostered only that way. Despite a very challenging economic environment in the marketplace, these men and women toiled day and night, away from their loved ones, neglecting their personal comfort and needs, to make sure that we deliver even better value for money to our customers. The fact that repeat business has contributed 87.6% to the total revenue last year is an evidence of this. The fact that we added 116 new clients, of whom 62 were added after the highly deplorable events of September 11, is yet another evidence. These people realized that strengthening the honor and glory of the Infosys community in such troubled times requires painful personal sacrifices. The willingness to forsake any salary increases, to cut costs, and to work extra hours, all with a smile. In sum, Infosys to me represents the best of what a civilized society is all about.
The fourth reason why I salute every Infoscion is for their enthusiasm, their energy, and enterprise in starting several new initiatives undaunted by the tough battle to redeem the pledge that they made to you last year. It is in this context that I mention our initiatives in the area of business process management, in systems integration, and in IT outsourcing. Investment of up to $5 million has been approved for your company's foray into the BPM. A separate company, Progeon, has been formed to offer this service. I am glad to say that Mr. Phaneesh Murthy, who is a member of the board, in-charge of Sales and Marketing in Infosys, has been nominated the Chairman of Progeon. Infoscions are truly people who symbolize what Robert Kennedy once said. He said, "Some men see things as they are and wonder why, I dream of things that never were and say why not."
The fifth reason why I am very happy is that I see a great band of leaders at Infosys. I believe that my colleague, Mr. Nandan Nilekani, the new CEO, will achieve much more for this organization than I have been able to do so far. In this task he is very ably assisted by Mr. Kris Gopalakrishnan, the Chief Operating Officer, by other members of the board, and of course by the finest team of professionals. I wish them success in their new roles. I want to remind all Infoscions at the same time that their success, and indeed the success of your company, lies in adhering to the time-tested principles of your company, i.e., following a strong value system, practicing leadership by example, enhancing speed, imagination and excellence in execution in every thing that we do, and of course putting the interest of the Infosys community above their own.
Now, let me come to the other important issues. During the year, Mr. Ramesh Vangal, retired as a Director. Your company is extremely grateful to Mr. Vangal for his invaluable contributions, and we wish him the best in every one of his endeavors. Further, Mr. Claude Smadja, Principal Advisor to the World Economic Forum and Director of Smadja & Associates was inducted as an Additional Director.
On your behalf and on behalf of the Board of Directors, I salute our committed Infoscions on yet another year of excellent achievements. We also place on record our appreciation of our clients, our vendor partners, our investors, and our bankers for their unwavering support and trust. We are also grateful to the various departments of the Government of India and in particular the Ministry of Communications and Information Technology, the Software Technology Parks of India, the Reserve Bank of India, VSNL, the Ministry of Commerce, and the Ministry of Finance, and of course, especially the departments of Customs and Excise. We are also very grateful to the Government of Karnataka, governments of Maharashtra, Orissa, Punjab, Tamil Nadu, and of course we are very grateful to the various departments of Information Technology in these states. I am also very thankful to the trustees of the Infosys Foundation for sparing their valuable time and energy in their activities.
Ladies and gentlemen, I remain confident that Infosys will continue to grow and prosper, and continue to deserve your support and investment.
Thank you very much.
{Applause}
Sen. Larry Pressler: Thank you Mr. Murthy. I request Nandan Nilekani, Chief Executive Officer, President and Managing Director, to make a presentation on "The Emerging Infosys."
{Applause}
Nandan M. Nilekani Chief Executive Officer, President and Managing Director
Nandan Nilekani: Thank you Senator Pressler. What I will do in the next few minutes is try to give you a sense of some of the strategic issues that we are facing and what is our response to that.
Basically, my perspective is in three parts. I will talk about the strategic imperatives, I will talk about how we have changed in these challenging times, and what is the architecture for change that we have selected to go forward.
Now, clearly we are at a critical point in this IT services global industry. Infosys brings several assets to the table, a great pool of talent, high quality execution, a perfect model for global delivery that we have done over the last 20 years, a customer-first culture, and a lean organization. At the same time, we are competing globally with large global majors whose strengths are in deep, high-level client relationships, very good readymade solution sets, a consulting mindset, and a full range of services. Now, therefore our challenge, in a sense there is a convergence happening here where companies like Infosys which has certain assets are trying to acquire other kind of capabilities, and the global majors which have other kind of assets are trying to acquire the kind of capabilities that we have. So, in a sense we are trying to build all the things that we need at the front-end like the consulting mindset, the brand building, the full range of services, and these global majors are trying to build some of our attributes like global delivery model and the kind of talent that we have. So, clearly, both sets of companies are actually in a sense converging from different directions and that is really the strategic challenge that we face. How fast we are able to execute as against how fast they are able to execute in coming into our space. Now, when we did a survey of our clients, it came out very clearly that the customers whom we service believe that we deliver a better return on investment and that we also maintain a satisfying relationship and overall compared to our competitors found that we really gave them value for money. This was done of a response of about 268 managers from 134 current clients, and the global companies were compared by these clients. So, clearly, the customers whom we work for are satisfied with us. Our challenge is to take this experience and make it known elsewhere so that we build a much greater base and footprint.
So, this has given us the confidence to fuel our aspirations, to create a large global organization that delivers consistent performance and profits as we have done in the past, as a company which is really reckoned for creating customer and employee value, which means building deep relationships and loyalty, as an end-to-end business transformation player, somebody who understand how technology can be best leveraged for business transformation, and clearly leveraging the global delivery model which we have pioneered and perfected, which we believe leads to sustained excellence and execution, and managed by a very talented, best-in-class, set of people with a strong performance ethic. So, we have the challenge of essentially growing the company as we change the value proposition and strengthen it, and we have to do that, we have to grow in this market, we have to do that in a market which has become much more difficult in the last one year, which has become much more competitive, it is much more focused on return on investment, we have to do that taking our talent and grasping on that talent from outside. And that is what the emerging Infosys is all about.
So, the plan therefore consists of an integrated change management approach, which starts with the premise that the key to this is strengthening our client relationships, making sure that we have stronger, deeper bonds with the clients by providing end-to-end business solutions that cover a range of transformation capabilities, by expanding our market both in terms of geography and in terms of verticals, by using the global delivery model in every activity so that the value chain can be best optimized, and by re-orienting a mindset to enhance client value. Now, strengthening client relationship essentially means things like increasing our footprint in our clients' IT needs. That means instead of doing just working in one part of the customer, working in many parts of the customer. It is bringing the best of Infosys into every transaction so that they see the value of what we can do. It is building multilevel relationships with all levels of hierarchy in the customer organization so that we have strong enduring bonds, and clearly strengthening the process and systems that deal with the customer to give a better quality of service. Similarly, end-to-end business solutions is all about broadening our service capabilities as we have talked about, creating solution frameworks, and demonstrating thought leadership in the kind of things that we bring to the table.
Similarly, when we talk about expanding our market and business footprint, it is about things like strengthening the brand, strengthening alliances, we have alliances for example with Microsoft with Tibco. Strengthening that, growing through acquisitions, and therefore both creating a footprint that is much wider geographically as well as in terms of vertical businesses that you want to be in. And as we said, the key to this is leveraging the global delivery model which is not only making the existing services much more effective using the global delivery model but also defining the global delivery model for every new service that we introduce and also creating a global network of development centers across the world not just in India, and also taking global delivery model to the business enabling service, i.e., whether it is payroll or visa processing or whatever, make sure that we leverage our global delivery capabilities for delivering that service even internally.
And then of course re-orienting the mindset even more to create client value, which again has many subtexts to it, creating a high performance work ethic, creating a global work force. Today, Infosys has employees from 29 nationalities, over 150 people from across the world of 29 nationalities But as we go forward it is going to be even more multicultural, even more heterogeneous and we have to integrate that and make that successful, we have to get where we don't have these competencies, we have to recruit those competencies, and develop leadership and the whole ILI (Infosys Leadership Institute) and all those initiatives are to develop leaders to enable and manage this growth.
So, we have really had our strategic framework to go across, as I said that the imperative is that we build an Infosys, which is of that nature. We have identified the pieces of what is required to make that happen, and we have put all this together in an internal integrated change program that we call as Infy+. Essentially this is really the umbrella brand under which we do all the change program that we have. This is a program which has the total commitment of senior leadership, it is an integrated structured program where we have cross-functional teams to make it happen, we have a way to track the initiatives, we have a way to allocate budgets for these initiatives so that it is done systematically, and budget allocations are done only based on prior proof of success, using the balance scorecard to measure progress and performance, and we are using all the quality initiatives and the leadership institute to comprehensively drive this change program. So, we have a certain vision of where the marketplace is, where our role is, where our business model requires us to be. We have identified the key themes to make this happen and we have a change program in place called Infy+ to actually make it happen on the ground. And this is a strategic framework under which we are going ahead.
Our vision, as we have said before, is we will be a globally respected corporation that provides best-of-breed business solutions leveraging technologies, that means our strength is going to be in using technology for business transformation, delivered by best-in-class people from across the world, and that is what we are aspiring to in the Infy+ integrated change program.
Thank you.
{Applause}
Sen. Larry Pressler: Thank you. I request Mr. S. Gopalakrishnan, Chief Operating Officer and Deputy Managing Director to make a presentation on "The State of the Markets and New Initiatives."
S. Gopalakrishnan Chief Operating Officer and Deputy Managing Director
S. Gopalakrishnan: Good afternoon. Let me start by addressing probably something which is at the top of your mind. As you know, we have tensions in the region. There are some visits which have been canceled or postponed from our prospects or clients. The general sentiment about business with India is getting affected by the tensions in this region. There is no short-term impact as we see today, but if the situation persists it is possible that there may be a longer-term impact.
We are watching the situation. Infosys has a robust business continuity plan. As you know, we have distributed our centers to different parts of the country, in the eastern region, in the western region, the south, and the north, and they are geographically well spread out. The architecture of the campus is such that we have no single point of failure, whether it is in the way the buildings are designed, the networks are designed, how we have built each building, ground plus two, etc. So, basically starting from the architecture of the building, the architecture of the network, the architecture of how the people are distributed, how the projects are set up, etc., it is planned such that there is no single point of failure. Even if we have to move a project from one location to another location, from India to outside India, the whole thing is modeled such that it is very easy to do that. We are further testing this on an ongoing basis. We are in constant touch with our customers to reassure them that we have things under control and we will be able to deliver to their requirements.
Now, let us look at how we have worked through the last year. The last year was basically a period of economic slowdown and the recovery was clearly affected by what happened in the events of September 11. In spite of that, Infosys, as Murthy has already pointed out, has met our guidance of 30%, actually have grown more than that. We have consolidated and built on the organization's strength. We have taken this time to put in a plan in place, that Nandan has already pointed out to you, and some of these aspects I will also cover in my presentation. We have actually taken this time to consolidate and built on the strengths of the company, and have actually a future plan in place today. Of course we have exercised cost control, we have learnt to manage under lower visibility, where the things were uncertain, projects were getting delayed, closure of contracts were getting delayed, and things like that. There is an operations planning process, which happens on a regular basis, there is budgeting on quarterly basis and not on annual basis, that is a change we have made today, and salary links have been linked to company performance, that means more and more of salaries actually on a variable framework, more and more for the increase is on a variable framework. We had actually frozen any hiring in any of our support departments, the business enabler departments have actually stepped forward during this time and in spite of the company growing, etc., have delivered during this time.
As you can see, we were able to save on cost on an ongoing basis, quarter upon quarter. Started with 1.2% in the first quarter, went up to 4.3% in the last quarter, and that is how we have been able to meet the guidance numbers which I had given to you. We have strengthened the performance orientation, built a culture of high performance ethic, we have focused on hiring on certain areas, because we wanted to make sure that we continue to invest in the market. So, we actually set up new offices and hired people for sales and marketing, we have actually built the next generation of leadership through the Infosys Leadership Institute. In fact, the whole education set up of Infosys has won the International Corporate University Exchange Award instituted by Financial Times of London, which we believe is a true achievement for all the effort we have put in, in creating an environment where learning is very important. We have ensured employee loyalty through good times and bad, we have met our commitments to people who were given offers, and think that all of them will be joining in the next few months, and we have had no lay offs at all.
Like I already mentioned, we have created new service lines on IT outsourcing, business process management, and systems integration. We have strengthened our existing services -- consulting and package implementation today constitute 14% of our revenues. We have expanded into new verticals like utilities and health care, expanded into new geographies. We have actually increased development center sizes outside India.
Some of the awards won by the company. I won't go through all of them, but basically we have won awards for every aspect of the business being the best employer, the best in corporate governance, best corporate citizen, which we are quite proud of because of the contributions to the society and things like that.
So, the key learning has been that a strong, de-risked business model helps succeed in both growth and recessionary environments. Openness and adaptability to change is key, because you have to react to the environment. Cost cuts, but focus on sustaining growth even in difficult times. As I said, we have invested in sales and marketing. Capitalize on opportunities thrown up by the turbulent environment. We have started new services during this time and of course there is a clear move towards offshore from the large multinationals. Today, offshoring is becoming mainstream and we see that as a trend which continues, going forward.
So, let us look at some of the market trends. As you know, the outsourcing and outsourcing to offshore locations like India, where India is probably the number one location, is one of the fastest growing segments of the services industry. It is growing at 26%. Over all, IT services are growing about 12%. So, clearly we see an opportunity going forward for companies like Infosys.
The key drivers, which are driving this trend towards outsourcing, are that customers want to focus on their core business. IT is a specialized service or a specialized discipline. So, they want to focus on their core financial restructuring, cost control, focus on return on investment, etc., is saying that you must variabelize your cost, you must look at outsourcing more and more. Innovation on the supply side, advancements in enabling technologies, looking at how you manage vendor relationships, how do you look at large outsourcing contracts, how do you distribute your project leveraging technology across the globe, etc., have clearly shown that outsourcing to India, outsourcing to offshore locations are really the way forward. So, like I said, the responses also have enabled this to happen. Companies like Infosys are maturing, the size, the value proposition, the quality of the deliverables, our focus on building the brand equity, etc., is clearly helping actually in this trend also. We believe that the outsourcing market itself would be growing by at least 23% during 2002, while IT spending is probably going to come down, that means people are moving toward outsourcing. Companies are offshoring higher-end work like design, high-level strategy services, architecture design, etc. There is a focus on reducing costs and remaining competitive, and this is going to fuel the trend of more services, not just software development, business process out sourcing, etc., to move towards a global outsourcing format. Offshoring related risks are well mitigated, except for probably the tension, which is happening. We hope it will be temporary, but the offshoring related risks are actually well mitigated. The IT services from India increased by 29% to Rs. 36,500 crore. Indian companies now service nearly 220 of the Global 1000 companies. NASSCOM itself is forecasting higher growth for the year. And, Indian quality benefits are understood and quality is increasingly important to global companies.
Nandan talked about the difference between how we are able to deliver services today, the value proposition we are bringing out compared to some of the global competitors. And of course, the skill shortage will continue in the IT services industry worldwide, especially at the project management, program management, architecture, etc., we are seeing that the entry-level projects, the starting itself, the projects are larger. You know, typically, companies try out what they would like to do on a pilot basis and then they would proceed to larger projects. We are seeing that moving up to may be $300,000 per project for us.
Let us look at how Infosys is responding. Nandan has already talked about it, so I will just quickly go through that. A large global organization, an end-to-end business transformation player, looking at all the right services, reckoned for creating customer and employee value, leveraging the global delivery model, just not in the delivery of services but how we ourselves as a company leverage the geographical spread and the India operations, and of course managed by talented, best-in-class people. The foundation of all this, which has helped Infosys time and again is our PSPD model, which stands for predictability, sustainability, profitability, and de-risking. And in every decision we take, every strategy we look at, this is the foundation on which these are built, looking at broad range of services, looking at long-term relationships with our customers, making sure that any new service etc., we look at the profitability of that, and of course doing all this making sure that risk for the business is minimized. This is the footprint of our services today. So, except for the management consulting piece, Infosys goes all the way from operations consulting, technology consulting, enterprise architecture definition, now we have IT outsourcing, business process outsourcing, systems integration, maintenance, re-engineering, etc. So, here we can see some of the new services and how it fits into the total set of services, which we deliver.
We are looking at acquisitions. We continue to look at this and, of course, we need to make sure that there is strategic fit, we need to make sure that it does add value to Infosys, to you, and we continue to look at this from a consulting viewpoint, from building the front-end capability view point, looking at complementary skill sets, and we have a team looking at acquisition on an ongoing basis.
The vertical footprint is expanding. We are looking at new verticals like government, pharmaceuticals, and life sciences. We are, of course, consolidating our presence in existing vertical segments. Revenue from transportation segment has gone up from about $5.6 million to $14.7 million, energy and utility has gone up from $6.1 million to $10.9 million. We are expanding our geographical footprint. Today Europe contributes $106 million from $30 million 3 years back. The rest of the world has increased to $39.8 million. We have presence in 35 cities, 10 offshore centers in India, 6 proximity centers across the US, UK, Canada, and of course Nandan talked about employees from 29 nationalities today.
The service footprint also has broadened. The new services, which were started in the last 3 years, have contributed significantly. Revenue from package implementation has gone up from $12.2 million to $53.4 million. Consulting has gone up to $22.9 million, and engineering services has gone up to $14.1 million.
We have created a new company called Progeon for business process management. Infosys is planning to invest $5 million. We have got additional funding from Citigroup Ventures to the tune of $20 million. It will focus on business transactions and accounting services to start with, and we will expand into other areas over time. You must have read in the press about the announcement of our deals with GreenPoint Mortgage, one of the largest wholesale mortgage lenders in the US. Some of the deals which we have won, Eastman Chemicals, looking at Infosys as a strategic e-business partner, we have looked at some of the new engagements there, complex financial systems to increase flexibility and back office efficiencies. At Cardif, we are looking at an end-to-end systems implementation. Northwestern Mutual, again a long-term association with Infosys. Cable and Wireless. Our services are expanding, we are getting larger and larger deals as we speak.
So, let us look at what is the winning formula as we see. Strong relationship model, wide portfolio of services, excellence in execution, focus on processes and systems, global delivery model, sustainable margins, and a company which understands the pressures of the capital market, has the predictability of revenues, profits, etc. 88% of the revenue came from repeat business shows the strong relationship model. We have added new services over the last few years. We are investing in systems and processes and are constantly fine-tuning them. We are investing in building knowledge assets, leadership, etc., through the leadership institute. We have pioneered the global delivery model, 70% of the effort on an average happens in India, truly optimized the global delivery model, netting margins of 30% through the last 6 challenging quarters, and we have met or exceeded the guidance for the past 9 years.
Thank you very much.
{Applause}
Sen. Larry Pressler: Thank you Mr. Gopalakrishnan. Members may note that we have commenced serving high tea in the refreshment area. Now we are coming to the formal part of the proceedings of the meeting. I request Mr. Balakrishnan, Company Secretary and Vice President - Finance, to read the auditors report.
V. Balakrishnan Company Secretary and Vice President - Finance
V. Balakrishnan: Yeah. Before that, there is a presentation on the financial performance. Good afternoon ladies and gentlemen. In the next few slides, let me take you through the financial performance of Infosys for the fiscal year ending March 31, 2002.
Highlights of the year. We achieved a growth rate of 32% in dollar terms, as against the guidance of 30% that we had given in April 2001. Our banking unit, which sells the software products in India and some of the Asian and African countries, had grown revenues by 100% and touched 100 crore this year. We have added 116 new clients during the year of which 62 were added after September 11. We have declared a total dividend of Rs. 20 per share, increasing the payout to 17% as compared to 12% in the previous year.
Well, the board approved an investment up to $5 million into business process management. We have formed a separate company called Progeon. Citigroup invested $20 million into Progeon Limited. We hope this son does better than the father.
Year at a glance. Last year, the income has grown by 37% in rupee terms to 2,603 crore. Export income has grown by 36% to 2,552 crore. We have maintained our leadership by being the largest listed software exporter in India even in the last year. Our gross profit has increased by 34%. The operating profit has increased by 36% to reach 1,037 crore. The profit before tax has increased by 36% and profit after tax increased by 30%.
So, let us look at the drivers of growth. We have grown by 32% in dollar terms. In terms of volume we have grown by 34%, and in terms of price we have de-grown by 2.5%. We experienced intense pricing pressure in the market. The on-site rates have gone up by 3.6%, but offshore rates have come down by 7.5%, resulting in a blended per capita rate coming down by 5.5%. But, we have negated the decrease in rates by increasing the volumes. The on-site volume has increased by 24%, offshore volume has increased by 44%, and the blended volume has increased by 38%. We have also improved our utilization. The utilization rates, including trainees, have gone up to 70%, from 67% last year.
Well, ultimately the bottom line matters. We have taken a lot of cost control measures last year to keep up the promise we have made to the investors. We have made some of our salaries a variable cost by linking it to the company's performance. We have changed our recruitment pattern -- we have gone into just in time recruitments. We have also reduced some of the non-sales support costs by offshoring some of the work back to India. We have also looked at some of the internal policies like travel, and rationalized those policies. We have re-negotiated with some of the vendors on telecom and travel side and reduced our rates. We have also cut costs by vacating some of the leased premises. Overall, we have reduced our cost by 3.5%. And though there is an increase in on-site salary cost, because we have to comply with the rules in the US. When you send employees on work permits, we have to pay them specified salaries. Otherwise, we have to get some letters from our customers that they have not fired any of their employees. So, we complied with the law fully in the US, and there was an increase in cost due to that of 1.1% of the revenues. But we were still able to maintain the margins. The gross margins were 53%, the operating profits were 40%, and profit after tax was 31%.
Our revenues are well-segmented. Two percent of our revenue came from India, but we carried the "Made in India" tag all around the world. 71% of our revenue came from North America, 19.5% came from Europe, and 7.3% from the rest of the world. In terms of business segments, it is well segmented. Development revenue has come down from 40% to 32%. However, the maintenance revenue has gone up from 25% to 29%, during the year. In terms of vertical domains, manufacturing is almost the same from 17.8% to 17.1%. Insurance has gone up from 14.2% to 16.3%, and banking and financial services have gone up from 19.5% to 20.4%. In terms of technology, distributed systems continues to be the largest share. 48.3% of the revenues came from distributed systems and 14.4% from the mainframe. In terms of fixed price, and time and materials, fixed price constituted 31.6% as against 28.2% in the previous year.
It is a fact that no country can match India in terms of software development and in terms of quality of people. So, today, we have 70% of the efforts for software development happening in India and 50.8% of the revenues comes from offshore delivery of the software.
We have taken several measures to de-risk our business, so that our shareholders can live happily. Active clients are 293. Last year it was 273. We have added 116 new clients. However, we have rationalized the clients, because there are some dotcom customers and venture funded companies. That is why the net addition is only 20. Our top client contributed 6.1% of the revenue, top five clients contributed 24%, and top 10 clients contributed 39.4%. In terms of million dollar clients, we have 83 million dollar clients, 25 $5-million clients, 16 $10-million clients, and six $20-million clients.
Telecom is one of the segments where there was a lot of challenge. During the last year, they have gone through a bad phase. So, we have reduced the exposure to telecom in line with our de-risking policy. The telecom revenues have come down from 18.4% of the revenue to 15.6% of the revenue during the last fiscal.
Our balance sheet is in better shape. We have a size of 35, 16, and 49. 35 in fixed and other assets, 16 are sundry debtors, and 49 are cash and cash equivalents. Probably we will get the Miss Universe title in the corporate world.
{Applause}
Our receivables are under control, 69% of our receivables are less than 30 days, 30% is between 31 to 60 days, and in terms of day receivables it is 47 days as compared to 58 days during the last year.
Well, nobody knows what can happen in the future. But, we take all the steps today to insure our future. We hired 1,548 people during the last year. We have strengthened our sales force. We have opened new offices in Netherlands, Singapore, and Switzerland. We have also spent substantial amount on the capex.
Our cash flows are strong. Our operating cash flows are 820 crore. We ended this year with 1,026 crore. As you all remember, this company was started in 1981 with Rs. 10,000 of cash, and today we have 1,000 crore, despite heavy investment in capex. We have spent around 322 crore in capex during the last year. Depreciation went up by 42% and depreciation as a percentage of revenue has gone up to 6.2% from 5.9% during the last year.
Yeah, we want all the money.
We are trying to strike a balance between cash required in the business and our future strategic objectives. We have a financial policy where we said we would maintain liquid assets up to 25% of our revenue and 40% of our total assets. Our cost of capital today is 17.17%. We also have a benchmark that our return of capital should be two times our cost of capital and three times the invested capital, excluding cash. We need cash to fund the ongoing capex requirement, to meet our growth objectives, to fund operational expenses and other strategic initiatives and also to maintain business continuity in case of exigencies. If you look at the benchmark we have a benchmark of two times return on capital, we earned 3.2 times last year. We have a benchmark of three times return on invested capital and we earned 4.8 times. We have a benchmark of 30% operating cash flows and we earned 31.5. Our days of the sales outstanding benchmark was 60, we have 47. So, in terms of benchmark we achieved all these objectives, still maintaining the cash.
You are going to see a lot of bar graphs in the next few slides.
The return on net worth is 46.6% as compared to 56.1% last year. The return on capital employed is 54.4% as compared to 62.6%. The return on invested capital is 83.1% as compared to 105.4% last year. Capital output ratio is 1.5 as against 1.71 last year. The invested capital output ratio is 2.79 as against 3.34 last year. Value added to total revenue is 83.9% as against 79.8%. EPS has gone up to 122 from 94. Cash EPS has gone to 146 from 111, and dividend payout has increased to 17% from 12%. In terms of book value it is Rs. 314, price earnings multiple is 30.5, and market price adjusted IPO price is Rs. 62,737. In terms of strength of the invisible, our brand value has gone up to Rs. 7,256 crore, EVA is Rs. 510 crore, value added is Rs. 2,239 crore. HR value, where we use the Lev & Schwartz Model to value the human resources in Infosys, has gone up to Rs. 9539 crore and education index is Rs. 31,385 crore. Revenue from image enhancing clients is 56%. Average age of the employees has gone up. Fortunately it is not because of the people on the stage, but because we recruited a lot of laterals during the year.
In terms of US GAAP, our revenue has gone up by 32%, the gross profit has gone up by 27%, and the operating income has gone up by 30%. Operating income excluding stock compensation cost has gone up by 29%, net income has grown by 25% to 164 million, and net income excluding stock compensation cost has gone up to 169 million showing a growth of 24%.
Well, investors are our first love.
Share transfers in physical form completed within 15 days. All the investor grievances were addressed within 10 days. Today, 99.05% of the company's shares are held in electronic form. Pending share transfer litigation cases are 18. In none of these cases Infosys is directly involved. Also, this year, in the Finance Act, the government has changed the dividend tax regulations. There is going to be a withholding tax, whenever the company pays dividend. Up to Rs. 1,000 there is no withholding tax. But if investor's dividend and interest income is between Rs. 1,000- Rs. 50,000 they can give Form-15G. The government has not yet notified Form-15G. So, as soon as the shareholders approve the dividend, dividend will be paid to all the shareholders, excluding shareholders whose dividend income is between Rs. 1,000- Rs. 50,000. We will wait for the government to notify Form-15G. We have made a lot of representations. But in any case, once the government notifies Form-15G, we will circulate it to all the shareholders, and then we will pay the dividend, depending on the tax status. In any case, we have to pay it within 30 days from the date of declaration.
{Applause}
This was also one of the wishes from the shareholders at last year's AGM.
Infosys granted Rs. 3.75 crore to Infosys Foundation. It is a not-for-profit organization to support the initiatives that benefit society at large. We continue the social programs initiated in 1999 -- Catch Them Young, Rural Reach, and Train the Trainer. Infosys has donated 1,185 computers to 435 institutions during the year.
The Institute of Chartered Accountants of India has awarded the best annual report award to Infosys for the seventh time in succession.
{Applause}
The Institute of Company Secretaries of India has given a national award for excellence in corporate governance. Asiamoney award for best investor relations in India for 2001. Corporate citizenship award by Economic Times of India, and we were ranked number one in Corporate Governance Watch 2002 by CLSA.
Thank you.
{Applause}
Sen. Larry Pressler: Now, we are coming to the formal part of the proceedings. I request Mr. Balakrishnan to read the auditors report.
V. Balakrishnan: For the members, Infosys Technologies Limited,
We have audited the attached Balance Sheet of Infosys Technologies Limited, the Company, as at March 31, 2002 and the profit and loss account of the Company for the year ended on that date, annexed there to, and report that:
(1) As required by the Manufacturing and Other Companies (Auditor's Report) Order, 1988, issued by the Company Law Board in terms of Section 227(4A) of the Companies Act, 1956, we enclose in the Annexure a statement on the matters specified in paragraphs 4 and 5 of the said Order.
(2) Further to our comments in the Annexure referred to in paragraph 1 above:
a. we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purpose of our audit;
b. in our opinion, proper books of accounts as required by law have been kept by the Company so far as appears from our examination of these books;
c. the Balance Sheet and Profit and Loss Account dealt with by this report are in agreement with the books of account;
d. in our opinion, the Balance Sheet and Profit and Loss Accounts dealt with by this report are prepared in compliance with the accounting standards referred to in Section 211 (3C) of the Companies Act, 1956, to the extent applicable;
e. on the basis of the written representations received from the directors of the Company, and taken on record by the board of directors, we report that none of the directors is disqualified as at March 31, 2002 from being appointed as a director in terms of Section 274 (1)(g) of the Companies Act, 1956; and
f. in our opinion, and to the best of our information and according to the explanations given to us, the said accounts give the information required by the Companies Act, 1956, in the manner so required and give a fair view:
i. in the case of the Balance Sheet, of the state of affairs of the Company, as at March 31, 2002; and
ii. in the case of Profit and Loss Account, of the profit for the year ended on that date.
Bangalore.
April 10, 2002.
Signed by S. Balasubrahmanyam
For Bharat S. Raut & Co.
Thank you.
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Sen. Larry Pressler: Thank you. We now come to item #1 of the notice, adoption of accounts. The balance sheet, profit and loss account, directors' report, and auditors report for the year ended March 31, 2002 are already with the members. If any member desires to ask any question, he may do so. Please restrict your questions only to matters relating to adoption of accounts. Any other questions of a general nature will be taken up at the end of the meeting. So, we are open for questions relating to adoption of accounts.
Yes we have a question. Do we have a microphone for that gentleman?
Alex Rebello: Respected, exceptionally unique, role model Chairman and Mentor Mr. Narayana Murthy, honorable, hardworking, wisdom-wise, quietly effective, Managing Director, Mr. Nilekani, experts in the field, directors on board, and my fellow lucky shareholders. I am Mr. Alex J. Rebello, and as usual a small interested, concerned, and proud shareholder. I was happy to receive the beautifully transparent and exhaustively informative balance sheet and report, was joyful to go through it, and made it a point to attend this meeting without fail. I have gone through the report, though not in full, but especially the part in which the shareholder-friendly Chairman and the board have decided to give us a sumptuous dividend of 400%. A unique and exemplary decision. Of course, there is still scope for improving. When I finished reading this, I received the balance sheet of Hindustan Lever, where Mr. Banga has given us 500%. Not only this, but also by this process, they have the credit for making many of our shareholders lakhpatis as also crorepatis, thanks to our lovable Mr. Narayana Murthy sir. Now I hope the other chairman, including Mr. Azim Premji of Wipro also took such shareholder-friendly decisions. Now coming to the balance sheet and report, is there anything more to say or tell? As for me, I have nothing but praise and commend it. If there is anything to point out, I am sure my other intelligent and wise shareholder friends will do it. As for me, I have nothing to say but bravo and congratulations to the whole team of the great Infosys. Finally, requesting you Infosys to keep it up and rise higher and higher.
And all of you for hearing me patiently I close but before that, (in Kannada) innu Kannadadalle yaradu matugalu. Wandaniya adhyaksha, Narayana Murthyaware, slaghniya nirdeshakavargadaware, mattu heshedhara mitrare, bandhumitrare, Namma adhyaksha Narayana Murthyavarannu yasto slaghisiddaru saladu. Yakenadre, namma idi deshdallie, e warsha, iduwarege, shekeda 400 rastu labhavamshavannu kottawaralli nanna tiluvalikemerege iware modalaneawaru, matte obbare agiruwavuru. Addallade, nooraru heshedhararannu lakhpathi awarnegivu kotiyadipathi agiruvaru madidha hemme matthu kirthi aware obbarige agidhe. Adhrindha nanna, mattu nimmyellara paravagi awarige kruthagnathegalu hagu wandanegalu matthu dhanyawadagalu. E kewala matagallannu helee, eddannu mugisuttene.
Sen. Larry Pressler: Further questions? Yeah.
Shobhana Mehta: (in Hindi) Manniya shree chairman sahib, director bhaiyon aur shareholder bhai behan. Mera naam Sobhana Mehta. Sir, balance sheet in time mili. Hamare secretary department ne balance sheet colorful, informative, aur transparent banaie hai. So, best presentation ke liye mai hamare company secretary Shri V. Balakrishnanji aur unki poori teamwork ko dhanyawad deti hoon. Page number 20 par, results dekhe. Kahoongi global slowdown impact ke bawajood bhi excellent aur encouraging performance dikhaya hai, total revenue growth 36.99%, operating profit growth rate of 35.66%, aur profit after tax, an extraordinary item Rs. 870.96 crore, as against Rs. 628.8 crore, increase of 29.62%, saath me earning per share, book value per share, vaghera bhi increase raha. So, short me yehi kahoongi, ki all-round improvement deekhaye hai, our acche result ko dekhate hooye, apne total dividend bhi Rs. 20 diya, 400%, on per value of Rs. 5. So, acche performance ke liye mai apne chairman saheb ko, poore board ko, aur apne sabhi employees bahen bhaiyon ko bahut, bahut hardik badhaie dete hooye kahoongi ke ye sab aaploogo ki mehanat aur lagan se kaam karne ka parinam hai jo salosaal acche performance dekhane ko milte hai aur isliye may special Mumbai se aayee hoo. Apne Mumbai may Mumbai ke shareholdero ke liye Oberoi may broadcast arrangement ki hai, magar kehate hai na Sir, Jo baat tujh me hai, tere tasvir me nahin. {Applause} So, mujhe laga ki wahan door se kuch maza nahin ayega, so aap se mai bahoot waise bhi impressed thi, so socha ki aap ko milkar, aap se baat ho jaye to jayda aacha rahega.
Sir, ab ek ladies hone ke nate, mari sab se pahale query yahi hai ki, page number 107, 13, what is the employee strength Infosys, usme female ka last year se ratio kum ho gaya hai, 16.86% as against 17.20%, so aisa kyon? Aaz ke jamane me dekhiye ladies kaha se kaha pahoonch gayi hai, our government ne bhi ladies ko encourage karne ke liye 30% seats rakhi hai. Halanki de na de, alag baat hai. Lekin sir, please aap is baat par jaroor gaur karenge kyonki aap government ki taraha nahi hai. Aur sir, 22-25% ladies ke liye aap fix rakhiye, aur ab hamare board par bhi dekhiye, sirf ek lady director hai, saath me management council me bhi only one lady. Ab to har ek field may ladies aage aa rahin hai, so Sir, aap se mai yahi ummeed karoongi ki aap ladies ko encourage karate hooyen at least 25% employees ladies ko rakhenge. Sir page number 16 par, company secretary ka naam nahin hai, jo hona chahiye. Sir hamare board par, 16 directors hai. Sir articles of memorandum may kitne hai, agar ek jagah bachate hai to aur kisi ladies ko hi aap rakhiye. Sir, page number 22, Yantra Corporation, sir ye paise kab thak wapis ayenge, ya aap use wipe out karenge? Sir, page number 26, aapne sab ko thanks kiya hai, sir mere hisab se, hamare registrar ko bhi thanks karna chahiye. Kyonki agar registrar in time balance sheet nahi pahoonchate to aaz main yaha nahi hoti. So sir, ye next time ap jara dhayan rakhiye. Page number 71, aggregate exigencies, diye hai, wo rupees in crores may he hai na sir, waha likhna raha gaya hai. Aur Tata Elxsi ne, kaafi justifications diya hai, waise aap bhi dijiye. Sir, donations diya hai, last year se compare thoda kum diya hai, but ye kahin political party ko to nahin diya na sir? Kyonki political party ko mat dijiye aur kahi pe bhi digiye. Page number 81, par sabhi directors ne sign kiya hai, wo bahhot hi acche baat hai, ye pahali company dekh rahi hoo ke sabhi directors itne acche interest leke sign kiya hai. Sir, page number 57, top line, what is the e-inventing? Page number 82, internal auditors kwon hai? Page number 103, 12, legal proceeding may kitne shares outstanding hai? Page number 120, number 3, what is a beta radiant? Economic value added Rs. 510.16 crore as against Rs. 389.02 crore, aur enterprise value down hoyi hai, use improve karne ke liye company kya step lene wali hai sir? Kya buy back ka koyi plan hai aap ka sir? Aur buy back ka kuch plan rakhe to attractive price pe rakhiye sir, kyonki kahi logo ne 13,000 pe liya hai, aaz 4,000 ke andar aa gaya hai bhav. Page number 134, income taxes, last para, second line, as on March 31, 2002-2001, and 2000 hona chahiye, iske bazaye aage wapas 2002 likha hai, so sir wapis 2002 kaise aya zaara mujhe samjhaiye? Sir, page number 147, 1.14, retirement benefit to employees, jo paise fund me dale hai company nay, usme Infosys ke share kitne hai? Page number 188, art and culture, sir art and culture may kis type ke art aur culture ko aap sanman dete hai aur usme activities kya hoti hai? Page number 192, Japan corporate governance, aap ne diya hai, sir wahan ki lipi me aap ne diya hai, jo bhartiya sanvidhan may nahin hai, so uska translation bhi aap hame digiye, to accha rahega. Sir, what is the vertical market and what is the top line institution knowledge? What is the active client? Sir aap se bahoot kuch sikhana hai, mai to kuch bhi nahi hoo aap ke samne. Isliye sir pooch rahi hoo. Agar aap ke pas time ho to bahoot sari queries thi sir, par mai ne soona ki yaha bahoot kum speakers aate hai aur bahoot kum baat karate hai, to mai bhi short may he khatam karoongi. Sir, aap register office Bangalore may hoone say, as per law AGM yahan rakhte hai, to sir kyon na aap EGM ho to Mumbai me rakhiye, taki mere taraha koyi Bangalore people Mumbai may bhi aa sake. Aur sir analyst's meet bhi aap Mumbai may rakhiye aur usme speaker ko boolayiye. Sir, lastly kahoongi ki hamari company ko during the year jo 13 awards mile hai, iske liye mai apne chairman saheb ko, poore board ko, aur apne sabhi employees jo mehanat karate hai din aur raat, wo sabhi ko bahoot bahoot hardik badhaie deti hoo, congratulations. Aur aaz aapne jo resolution rakha hai, wo sabhi may mai fully support karti hoo, aur aap sab ko year 2002 ke liye subhkamnaye dete hooye kahoongi, chairman saheb, aapne jo yogdaan diya hai is company ke liye, wakayi may taarif-e-kabil hai, aur Infosys ko ye kahoongi, East or West, Infosys is the best. {Applause} Aaz, yaha aake, mujhe wakiye may bahoot hi accha laga, aap sab se milke bahoot khushi huyi, aur aap aur hamari company din dowgooni raat chowgooni tarakki karti rahe, yahi shubh kamanaye deti hoo, aur yaha itna accha presentations dekh kar mujhe bhi do word kahne ko mun ho raha hai. Jab se maine Infosys ke share liye hai, kahati hoo tumhe paa kar aur bhi paane ki tamanna liye baithi hoo. Bonus ke roop may ha sir, paise se nahin.
{Applause}
Mujhe pata hai ki shayad ye meri takdir may hai bhi ya nahi, phir bhi he ishwar mujhe naummeed mat karna, kahte hai ki ummeed pe duniya kayam hai, phir naummeed kyon hona? Kyonki isi raftar se hamari company tarakki karti rahi, to mujhe poora faith hai, next year hamare chairman sahab jaroor bonuses declare karenge. Isi ke saath mera dhanyavad.
{Applause}
Sen. Larry Pressler: Thank you very much. We would request that comments be limited to three minutes because of the time constraints we are under.
Nandan Nilekani: I think, I would just like to answer that. I think the lady has raised many important issues in her question. I will quickly answer a few of them. I think, in terms of the number of women employees, as you know, Infosys is an equal opportunity employer across the world, and we do welcome people from all parts of the world, men and women, and we do look forward to having more women in our workforce as well as on our board. Regarding Yantra, Yantra is no longer a subsidiary of Infosys. Currently, we own about 16% of Yantra. It has its own management and based on their decisions it will affect how our investment goes, but we no longer have any management interest in Yantra. Regarding donations, Infosys donates money only to charitable causes, primarily to the Infosys Foundation, and does not really do any other kind of donations. E-inventing is simply a term used when you use the Internet and electronic business to make business more effective with customers, with suppliers, with employees, and things like that. In terms of the Japanese GAAP, as you know, as a matter of policy we give GAAP in many countries. This is because our shareholders come from all over the world, and this is for them to have access to financial information in their own language and using the accounting principles of their country. In terms of vertical markets, what we mean is, a financial sector is a vertical market, or pharmaceuticals is a vertical market, i. e, industries or companies that are in one particular industry like pharmaceuticals, banking, finance, that we call them as vertical markets. Active clients are clients with whom we do business. So these are some of the points you raised. I will also ask Mohan now to just quickly speak in a very short time about some other issues raised. You talked about internal audit, you talked about outstanding shares, you talked about the beta factor, you talked about the EVA, and you talked about how much of the pension fund holds Infosys share. So, Mohan, can you quickly answer these five questions and then give it back to Larry?
T. V. Mohandas Pai: (in Hindi)Questions ke liye bahut shukriya. Achha, Nandan saheb ne thoda kuch questions to answer kiya hai, mein dusra questions answer karunga. Apne pucha ye figures crores mein kyon nahi hai. Kyon ki hamne ek note diya hai ke sab figures crores mein he honge. Isliye har page par crore likhna too achha nahi hoga. Beta variant hai sensitivity of the stock to the movement in the index. Ye to ek technical bat hai aur is me stock ka risk humko pata chalta hai. EVA mane economic value added, excess of returns over the cost of capital for any firm. Buyback ke bare mein apne pucha tha, main Nandan saheb se puchunga ke wo iska jawab de. Aur, aapne pucha ki Mumbai mein kyon EGM nahi karenge, woh bhi Nandan saheb bat karenge. Aur bonus ke bare mein bhi apne pucha, woh bhi Nandan saheb bat karenge. Agar humne apka koi question ke liye jawab nahi diya hai, jab ye recording decipher hoga aur hamara jawab bhi decipher hoga. Agar koi question ke liye jawab nahi diya to hum apko likhdenge, ya to web par daldenge. Thank you.
Nandan Nilekani: (in Hindi) Mohan ne sab questions mere pas diya hai abhi. Certainly, I think your suggestions are well taken and at the moment there is no consideration for either a buyback or a bonus share, and regarding the AGM, I think the requirement it be held in the same city as the registered office, which is in Bangalore. EGM? Okay. Well, for EGM we require some E to happen. But when the occasion arises for an EGM then we will look at that. Thank you.
Male Speaker: Dear Infoscions, I find from the balance sheet that there has been a very good development and expansion. Our company has penetrated almost every part, nook and corner of the globe and has done exceedingly good business, which is profitable and say, very pleasing because we Indians have, in the early stages, lagged behind in this respect. But we have falsified that notion amongst the nations of the world. Ours has become a billion dollar cash rich, debt free company. These characteristics are very few amongst other companies. Of course, Mr. Rebello raised the name of Hindustan Lever. I think that may perhaps be the only company which has got some of those characteristics with the 500% dividend they have declared. Now, becoming a debt free company is very, very rare because some of the best ones have them for some reason for other. When I received the balance sheet, when the postman delivered it, I looked at the bulk and put it aside, thinking it is for my leisure time to go through. After sometime, say after a day or two, when I took it up, I was so very much delighted. I could not keep it down. It went on for minute to hours, because every sentence, every point that was brought in has a very pleasing and a very informative aspect. This is not being done in my opinion because I am a shareholder in hundreds of companies, actually more than a 100, and none of the companies have produced such an informative document. It is a compendium of information which a person, not even being a member of Infosys, can derive and know. For this, if any award is being instituted in our country, it should go to Infosys. And I am already told that Tatas have done it, isn't it? That they have declared it as one of the best balance sheet. This trend will continue and all of us will have even better days to come. Thank you very much.
{Applause}
Dr. Manu Kulkarni: I am Dr. Manu Kulkarni. This is page 107. The age composition of the workforce is extremely young, and being a multinational the staff keeps traveling. This mobility and young age are very high-risk goods for getting HIV Aids. The International Labor Organization has insisted majority of the multinationals to have a written policy on the prevention of HIV Aids in the workplace. I am afraid, if they have not done it, I request the Infosys friends to kindly evolve a written policy on the prevention of HIV Aids in the workplace as well as protection, care, and cure. Today, the South African companies are being wiped out because of HIV Aids. And when we say that Indians are very free from HIV Aids, I do not agree. India is floating on HIV Aids bomb, and no company is free from this. Because of the young workforce, I am concerned with this. If it happens to my age group, I am not bothered. The mean age of the workforce is 25. It is very, very risky. So, 10,000 staff, very young population. This is a fertile place for getting HIV Aids. Please have a written policy. It is not just saying we are taking care of them. We need a written policy. The International Labor Organization has a written policy on the website you can access. I can help as a shareholder in my own way. Thank you very much.
B. Shanmukhappa: B. Shanmukhappa a shareholder from Davangere. Sir, my question and also my proposal. Infosys is the leader as far as software industry is concerned, and it made the country also leader in the software industry. From the last two years, what you have come across in the balance sheet of Infosys in 1999, 1998, 1997, the NP is 70%, 90%, and 120%. After 2000 and 2001 because of the economic recession and adversities and bad days, September attack, these are the adverse conditions.. But the question is sir, the situations, there is no limit for sky because we have limit for our sight. Sir, adverse conditions are always there in the world, but how far you are in a position to explore the opportunities so that we can grow fast and strongly. That what effort you are in a position to take, and you are in a position to do, and further as you accept the challenge. How far you are able to succeed in meeting these challenges? That is what I wanted to know as being the shareholder of the company.
Male Speaker: (in Hindi) Namaskar. Stageholders and shareholders, main sirf itna kahana chahata hoon ki jab ye dividend ke roop mein jo humko paise mil rahe hai, shareholders ko, uske upar government ke najar hai. To, kyon na aisa kiya jaye, koi aur scheme rakh di jaye ki shareholders ko uske bare mein benefit mil sake. You may try it. Thank you.
Nandan Nilekani: Thank you for your suggestion and we will look at that. Regarding the point about strategy. Yes, we did have 100% growth for a couple of years in the boom time of economy. In the last year, we grew at 30%, which was a slowing of growth. But I think that 30% growth with 30% net margin, and new employees being hired, etc., has to be seen in a global context, where most companies were actually shrinking in size, going into loses and becoming bankrupt. So I think, relative to that, the performance has been reasonable. Regarding the future strategy, we have spoken about it. I spoke about our strategy. Kris talked about our initiatives. We do see the market as being competitive, but I believe the entire management team of Infosys is fully committed to a strategic direction and working very hard to make it happen. Thank you.
K. V. Satyanarayan Rao: At the outset, I thank the top management as also every Infoscion for having shown good results during a difficult year. Though it may not be very good, but compared to the situation they have done well. I thank them once again. Though flawless top management has nothing to add, but I have some suggestions to make. First, as per the balance sheet, the idle cash, i. e., cash balance and bank balances are Rs. 772 crore. Of course, in many meetings and in press reports they say it is required for making acquisitions and all that. My only suggestion is to keep the cash balance to the minimum required. Of course, they may require for anything, but let them keep it to the extreme possible. Idle cash may be utilized for better purposes such as any expansion or any productive purposes. That is what my thinking, but it is left to the top management to think about this, how much cash they really need. And another thing is, the share capital of the company is Rs. 33 crore, where as reserves and surplus is Rs. 2,047 crore, that is, 62 times more than the capital. This is a very good sign for the company. But as a shareholder, I have my own suggestions. The company history if you take it, they have issued bonus in 86, 89, 91, 92, 94, 97, 99, every alternative year they have issued, or at least once in 3 years. Now, since 2000, they have not issued a bonus issue. This year we expected, but they have not declared. My only humble request is that many of us, have paid more money for the shares because of the share market depletion. Some of us might have paid, say, 8,000, 10,000, but now it is only 3,300 like that. At least, it is our own risk. We have nothing to do, nothing to complain against the company, but to mitigate our losses, at least I request the company to give some, at least 1:10, or 1:1, or anything that will mitigate our losses. That is what I request. And another thing is, recruitments on most outstanding basis. Of course I agree there is no point in taking up that matter. But my only request is, as a shareholder, our children or grandchildren may be well qualified and fit in to the recruitment of the Infosys to their standard, but they may not be more outstanding. But if they fit into that, let them give some preference, or they may think that, at least 5 years, 10 years, continues shareholding, like that. If it is possible, I think, this suggestion also you may take. I thank the management at the outset. Thank you.
Sen. Larry Pressler: We thank you. In terms of the speeches, we have to now limit them to 1 or 2 minutes because of the time constraints. So, there is still freedom of speech, but it is limited speech.
Gundu Rao: Okay. Thank you Mr. President, I shall make it in half a minute. That should give a bonus of half a minute to another speaker. I have just one small suggestion. We are very proud of the winners of Infosys awards of excellence, which have been recorded here. If it is feasible and practical and if you can present them at the next, you know, for this year's awards of excellence at the next year, we would have an opportunity to meet them and congratulate them in person. Of course, you can consider about the feasibility of that. Now, the four essays, which have appeared in the annual report by Mr. Shibulal, by Mr. Phaneesh, and by the other two external directors are excellent and substantial matters are there. I am sure all my colleagues here would have enjoyed reading it. Now, I will come to the specific queries on the annual report. Now, on page #114 there is total software revenue per human resource value, it is 0.27 for the current year against 0.37 in the previous year. The next figure is value added per human resource value, 0.23 against 0.31. When I read this, I was a little bit nonplussed; I wanted to know what this is all about. Then the next figure we see is the value of human resources per employer has gone up dramatically to 0.89 compared to 0.52. Then, I thought that if we look at another ratio then it would give us clearly what the contribution of each individual human being or software engineer is worth . Therefore, I took out software revenue as a ratio of number of employees, which gave us a figure of 0.24 against 0.19, a substantial higher value. Therefore, each employee of Infosys has contributed substantially higher value by way of software revenue, and congratulations to all the Infoscions on that.
Now, my question is about the financial status of the company. Now, as my friend said, there is a substantial surplus money, I would not say surplus, you know, a cash reserve or whatever you call it, is there. Therefore, perhaps apart from the technical aspect of it, you have to design a payment, let's say, payment product to your clients. For example, say, when we had the cash short, the simplest thing was the pay as you earn scheme. Now, for example, Mr. Phaneesh has said, enterprise value additions. If you are able to, and I am sure you are able to, demonstrate the cost savings which a client would get by adopting the Infosys projects, then that becomes a cost saving for him. Therefore, the cost saving which is resulting on account of the implementation of the Infosys project comes back to Infosys. i. e, pay as payback as you earn kind of a thing. That is one option. Another option is, pay, rather take a third party payment guarantees. For example, Infosys revenues keep coming and the third party depending on his assessment of the party, the supplier and the client, produces another way for that one. So, this could be the second option to attract the extra business to the company, where you have found that there is a downturn in economy, there is a restriction on the cash flow, and the people are very weary about putting extra money into information technology. So, these are the three suggestions which I thought our wise people and the board would certainly look at., I am sure they might have already looked at it, but it may be worthwhile visiting this again.
Sen. Larry Pressler: Thank you very much. Thank you.
Gundu Rao: Thank you. I finished in 2 minutes, sorry for that.
N. R. Narayana Murthy: No, Mr. Gundu Rao, kindly understand that there are many people who are asking. We don't want a situation where they don't have opportunity. So, I would say, if everybody can take one minute and then ask the questions straight in a minute, then, I think this will be a much better shareholder democracy than a few people filibustering.
Male Speaker: I have two questions please. Number one, the share of your business as far as our country is concerned is not only low, it continues to be low. I would like to know what actions Infosys is taking to market its expertise within the country. I have a small worry here. If our software improves the hardware of other countries, that hardware will compete with our hardware. Ultimately, our hardware will go out of business. So, please market your software excellence within the country. Second question is that complacency is enemy to any organization. I would like you to benchmark your performance among the best in the world in your line and indicate to the shareholders. Thank you.
Nandan Nilekani: I think both are good suggestions. Currently, in India, we do business only in the banking sector where we are the dominant supplier of banking software products through our FINACLE™ range of products. As economy grows and becomes more competitive, we will look at other sectors to operate in. At the moment, we are operating in the banking sector. I think your second suggestion is very valid. We do some benchmarking internally. We also use the Malcolm Baldridge framework, which allows us to benchmark different dimensions. But, I think it is a good suggestion and perhaps next time we will look at providing more information on a benchmarking basis. Thank you.
Female Participant: Infosys company is really a very shareholder-friendly company and we are very happy with the presentations that were made, which were very intelligible and very informative to shareholders who would otherwise not have the opportunity to know about this. Now, if we take up page #118, my friend here, little earlier, mentioned about the reserves being about 60 times. Well, I will go a little further beyond that. Of this 60%, the general reserve is about 51 times and that has been contributed by the Infoscions themselves. On the other hand, if we take up the share premium account, that is about nearly 10 times, which has been contributed by the shareholders themselves. I would request that something be done for the sake of the shareholders of that amount, either capitalizing it, but just now it was mentioned that bonus issues were not on the cards. Well, at least do something about the shareholders from that amount in whichever way you would like to. And, another point is the face value is now Rs. 5, and the share market value is quite high, though I wouldn't say it is as high as it was once upon a time, but it is quite high, and many people do not find it within their reach to become shareholders of this company. I would suggest that you could reduce the share. I should not use the word reduce, it gives another implication. I would suggest that it may be split up to a smaller amount where by the shares will be within the reach of many more thousands, and not only that, the volume of transaction on the stock exchanges will be much, much more. Thank you sir. I hope I have not taken too much time.
Nandan Nilekani: Thank you very much for your suggestions, and we will certainly consider this in the board and look at whether in action it can be done. At the moment, there is no such action being planned.
Sen. Larry Pressler: We will have to at some point, yes? One or two more questions, and then additional questions could be submitted in writing because we are running out of time.
Male Participant: Infosys being a world-class company, I want to know if they can think of a path-breaking action by becoming close allies of sterling departments like space, DRDO, atomic energy, where frontier areas of science and technology are being tackled, and where 100% technical software is a very important part. They can make a national contribution, keeping aside the subse bada rupiya, money, money, etc., apart for a while. This would be a national service by Infosys, which makes the entire country proud.
Nandan Nilekani: Thank you for the suggestion. We will consider it. Thank you.
Sen. Larry Pressler: Additional questions can be submitted in writing. I request any member to move the resolution for the adoption of accounts.
Male Participant: Excuse me, I am having some questions in writing, can I pass it on to the stage.
Sen. Larry Pressler: Yes. We have a long way to go this afternoon. Thank you very much for your consideration, that is very kind of you. I request any member to move the resolution for the adoption of accounts.
(Mr. Alex J. Rebello proposes the resolution)
It is being motioned.
Is there a second?
(Mr. Sampangi Ram seconds the resolution)
There is a second.
It is seconded.
I request the members in favor of the resolution to raise their hands.
(Members raise their hands)
I request the members who are against the resolution to raise their hands.
(Members raise their hands)
I declare the resolution as passed with the requisite majority.
Declaration of dividend. Item #2 of the notice on declaration of dividends. The Board has recommended a final dividend of Rs. 12.50 per share, pro rata, making in all a total dividend of Rs. 20 per share, pro rata, including an interim dividend of Rs. 7.50 per share paid during November 2001 for the year 2001-2002. Are there any questions from members pertaining to this item?
(There were no questions)
I request any member to propose.
(Ms. Shobhana Mehta proposes the resolution)
Yes, it is made and seconded.
(Mr. Gundu Rao seconds the resolution)
I request the members in favor of the resolution to raise their hands.
(Members raise their hands)
I request the members who are against the resolution to raise their hands.
(Members raise their hands)
I declare the resolution as passed with the requisite majority.
I can't see very well on the lights, so I assume everybody is raising their hand at the right time.
To appoint a Director in place of Mr. Nandan Nilekani, who retires by rotation as well for re-election. In terms of Article 122 of the Articles of Association, Mr. Nandan Nilekani retires by rotation and being eligible offers himself for reappointment. I request any member to propose the resolution.
(Mr. Alex J. Rebello proposes the resolution)
It has been made. Is it seconded?
(Mr. Sampangi Ram seconds the resolution)
Seconded.
I request the members in favor of the resolution to raise their hands.
(Members raise their hands)
I request the members who are against the resolution to raise their hands.
(Members raise their hands)
Unless there is an objection, I declare the resolution as passed with the requisite majority.
To appoint a Director in place of Mr. Philip Yeo. He retires by rotation and is eligible for re-election. In terms of Article 122 of the Articles of Association, Mr. Philip Yeo retires by rotation and being eligible offers himself for reappointment. I request any member to propose the resolution.
Male Participant: Yeo has not attended most of the board, or this one, committee meeting, and now we are faced with the task of appointing him again. So, my point is, is he first interested, number one. Number two, will he show better attendance in the future board or committee meetings?
N. R. Narayana Murthy: Well, let me answer that. Mr. Philip Yeo has played a very important role in enhancing the revenue of the company by connecting us with a lot of prospects in Asia Pacific. He has also been always available on teleconferencing whenever we needed him and when we needed to consult him. Being a very, very successful person as I explained, he was the chairman of the Economic Development Board of Singapore. Now, he is the chairman of Life Sciences Board. He is also on several boards throughout the world as well as universities, etc. The fact that he has not been able to be present physically in as many number of meetings as you and I would want to, need not at all detract from the sterling contribution that he has made to the growth of your company. So, I want you to kindly keep that in mind, because if you want a high quality, well-known global personality, then the way to leverage their strength is by way of videoconferencing, teleconferencing, as well as of course, you know, their help in enhancing the growth possibility. So, kindly keep that in mind.
Male Participant: Is video-conferencing and teleconferencing going to be allowed by the government?
N. R. Narayana Murthy: Well, let us put it this way. Right now, there are discussions going on. We have taken it up with the Ministry of Law and Company Affairs, and who knows it is quite possible. After all we are in a period of globalization. You know, if you want directors from all over the world, then this is a logical extension. But at this point of time, I am not in a position to comment. But this is a matter which, see, we have taken it up, and who knows, we may be successful in convincing the government.
Sen. Larry Pressler: In the matter of Philip Yeo, I request any member to propose the resolution.
(Mr. U.S. Pai proposes the resolution)
I request any member to second the resolution.
(Mr. Bharat K. Shah seconds the resolution)
I request the members in favor of the resolution to raise their hands.
(Members raise their hands)
I request the members opposed to raise their hands.
(Members raise their hands)
I declare the resolution as passed with requisite majority.
To appoint a Director in place of Mr. K. Dinesh who retires by rotation and is eligible for re-election. Item #5 of notice. In terms of Article 122 of the Articles of Association, Mr. K. Dinesh retires by rotation and being eligible offers himself for reappointment. I request any member to propose the resolution, if there is no discussion.
(Mr. Sharif proposes the resolution)
I request any member to second the resolution.
(Mr. Vijaykumar seconds the resolution)
I request the members in favor of the resolution to raise their hands.
(Members raise their hands)
I request the members who are against the resolution to raise their hands.
(Members raise their hands)
I declare the resolution as passed with requisite majority.
To appoint a Director in place of Mr. T. V. Mohandas Pai who retires by rotation and is eligible for re-election. In terms of Article 122 of the Articles of Association, Mr. T. V. Mohandas Pai retires by rotation and being eligible offers himself for reappointment. If there are no questions, I request any member to propose the resolution.
(Mr. Sudhir Kamath proposes the resolution)
I request any member to second the resolution.
(Ms. Shobhana Mehta seconds the resolution)
I request the members in favor of the resolution to raise their hands.
(Members raise their hands)
I request the members who are against the resolution to raise their hands.
(Members raise their hands)
I declare the motion as passed with the requisite majority.
To appoint a Director in place of Mr. Phaneesh Murthy who retires by rotation and is eligible for re-election. Item #7 of notice. In terms of Article 122 of the Articles of Association, Mr. Phaneesh Murthy retires by rotation and being eligible offers himself for reappointment. If there are no questions, I request any member to propose the resolution.
(Mr. Sampangi Ram proposes the resolution)
I request any member to second the resolution and state your name.
(Mr. Shenoy seconds the resolution)
I request the members in favor of the resolution to raise their hands.
(Members raise their hands)
I request the members who are against the resolution to raise their hands.
(Members raise their hands)
I declare the resolution as passed with requisite majority.
Appointment of auditors, item #8 of notice. The auditors M/s. Bharat S. Raut and Company, chartered accountants. We discussed at the meeting and confirmed their eligibility and willingness to accept the office if reappointed. Are there any questions, if not, I request any member to propose the resolution to appoint the accountants.
(Ms. Megha proposes the resolution)
I request any member to second the resolution and state your name.
(Mr. Prakash Chand seconds the resolution)
I request the members in favor of the resolution to raise their hands.
(Members raise their hands)
I request the members who are against the resolution to raise their hands.
(Members raise their hands)
I declare the resolution as passed with the requisite majority.
Now, we come to the special business in the agenda. Approval of the appointment of Mr. N. R. Narayana Murthy as Chairman and Chief Mentor for a further period of 5 years from April 30, 2002, item #9 of notice. Mr. Murthy was appointed as the Chairman and Chief Executive Officer of the company for the remaining term of his tenure with effect from February 11, 1999. As part of the company's initiative to create an enduring leadership for the company, the board considered it expedient to appoint Mr. Murthy as the Chairman and Chief Mentor of the company, and he has been appointed accordingly at the board meeting held on January 10, 2002. Mr. Murthy shall hold his office as the Chairman and Chief Mentor for a further period of 5 years with effect from May 01, 2002. I now seek your approval for his appointment as Chairman and Chief Mentor of the company for a further period of 5 years with effect from May 01, 2002. Are there any questions? And, I request any member to propose the resolution as stated in the notice.
(Ms. Shobhana Mehta proposes the resolution)
I request any member to second the resolution
(Mr. Shanmugham seconds the resolution)
I request the members in favor of the resolution to raise their hands.
(Members raise their hands)
I request the members who are against the resolution to raise their hands.
(Members raise their hands)
I declare the resolution as passed with requisite majority and I congratulate our great leader.
{Applause}
Approval of appointment of Mr. Nandan Nilekani as Chief Executive Officer. He was appointed as Managing Director, President, and Chief Operating Officer of the company for the remaining term of his tenure with effect from February 11, 1999. As part of the company's initiative to create an enduring leadership for the company, the board considered it expedient to appoint Mr. Nilekani as Chief Executive Officer, President, and Managing Director of the company, and he has been appointed accordingly at the board meeting held on January 10, 2002. He shall hold his office as Chief Executive Officer, President, and Managing Director for a further period of 5 years with effect from May 01, 2002. I now seek your approval for his appointment as Chief Executive Officer, President, and Managing Director of the company. If there aren't any questions, I request any member to propose the resolution as stated in the notice, and second.
(Mr. Shanmugham proposes the resolution and Mr. Vijay Kumar seconds the resolution)
I request the members in favor of the resolution to raise their hands.
(Members raise their hands)
I request the members who are against the resolution to raise their hands.
(Members raise their hands)
I declare the resolution as passed with the requisite majority.
{Applause}
Approval of appointment of Mr. K. Dinesh as the whole time Director of the company for a period of 5 years from April 30, 2002. Mr. Dinesh was appointed as a whole time Director of the company for a further period of 5 years with effect from May 01, 2002. He shall hold his office as a whole time Director of the company for a further period of 5 years with effect from May 01, 2002. I now seek your approval for his appointment as a whole time Director of the company. If there aren't any questions, I request any member to propose the resolution as stated in the notice.
A proposer, and a seconder.
(Mr. Alex J. Rebello proposes the resolution and Mr. .K. K. Shenoy seconds the resolution)
I request the members in favor of the resolution to raise their hands.
(Members raise their hands)
I request the members who are against the resolution to raise their hands.
(Members raise their hands)
I declare the resolution as passed with the requisite majority.
Approval of appointment of Mr. S. D. Shibulal as the whole time Director of the company with a further period of 5 years from January 10, 2002. He was appointed as a whole time Director of the company for a further period of 5 years with effect from January 10, 2002. Mr. Shibulal shall hold his office as a whole time Director of the company for a further period of 5 years. I now seek your approval for his appointment as a whole time Director of the company. If there are no questions, I request any member to propose the resolution.
Male Speaker: Well, I think there is a certain mindset at Infosys that says that leaders should walk the talk, and that there should be a minimum gap in terms of salaries between the highest level and the lowest level, and that is all there to see. Everybody has subscribed to it, and we are all very happy that it is so.
N. R. Narayana Murthy: No, please. You know, in the case of page 29, Rs. 1 crore, or whatever salary it is. When you pay in dollars you should not convert it into rupees because you have to look at that salary in comparison with salaries in other companies in that country. So, please do not compare that with salaries in India and say, it is high, it is low, etc, etc.
I request any members to propose the resolution as stated in this notice.
(Mr. Kamath proposes the resolution)
And a second.
(Mr. Sharif seconds the resolution)
I request the members in favor of the resolution to raise their hands.
(Members raise their hands)
I request the members who are against the resolution to raise their hands.
(Members raise their hands)
I declare the resolution as passed with the requisite majority.
Appointment of Mr. Claude Smadja as a Director liable to retire by rotation. Claude Smadja was co-opted as an additional director of the company with effect from October 25, 2001, pursuant to Section 260 of the Companies Act, 1956. Mr. Smadja holds office of Director up to the date of ensuing annual general meeting. The company has received notice in writing from a member along with a deposit of Rs. 500 proposing the candidature of Mr. Claude Smadja for the office of Director with the provisions of Section 257 of the Companies Act, 1956. None of the Directors other than him is interested in this resolution. Now, I seek your approval to appoint him as Director liable to retire by rotation. If there are no questions, I request any member to propose the resolution as stated in the notice.
(Mr. Alex J. Rebello proposes the resolution and Ms. Shobhana Mehta seconds the resolution)
Yes, proposed and seconded.
I request the members in favor of the resolution to raise their hands.
(Members raise their hands)
I request the members who are against the resolution to raise their hands.
(Members raise their hands)
I declare the resolution as passed with the requisite majority.
Approval of the maximum permissible limit of investment by foreign institutional investors in the paid up capital of the company. The Reserve Bank of India in consultation with the Government of India has increased the maximum level of investment by foreign institutional investors in software companies from 49% to 100% of the paid up equity capital of the concerned companies. However, this is subject to the approval of the company's board of directors and the general body. The resolution at item #14 of the notice seeks shareholder approval for increases in the permitted FII investment limits up to 100%. The board considers the increased investment to be in the interest of company. The company recommends the resolution for increasing the maximum limit of FII investment in the company to 100% of the paid up equity share capital of the company. None of the Directors are concerned or interested in this resolution. Now, I seek your approval by means of special resolution to increase the maximum permissible limit of FIIs in the company from 49% to 100% of the paid up equity capital of the company. Are there any questions from members pertaining to this item?
I request any member to propose the resolution as stated in the motion.
(Mr. Shanmugham proposes the resolution)
And I request a second.
(Mr. Sampangi Ram seconds the resolution)
I request the members in favor of this resolution to raise their hands.
Male Participant: Chairman and shareholders.
Sen. Larry Pressler: If you could just limit to 2 minutes, and I apologize.
Male Participant: Yes, one minute is enough for me, because this is a resolution as an open invitation to the foreigners to invade our company. Number two, it is a death nail for the shareholders to lose our entity as a shareholder to the Infosys. Is it necessary sir? Because by giving this 100%, the FIIs are clear to do what they were doing. They were purchasing the shares and Reserve Bank of India says, if the level is more then immediately sell. They have to sell it. Then, the market will come down and they make profit and get out. And another one is, these FIIs because we are giving them more liberal attitude, we have, the shareholders already have lost in these three points. Number one, in the loss of investment nearly crore of rupees about 4 to 5 years ago. Number two, because we have gone to ADRs instead of raising amount in India, we have to reduce the share capital or split our shares instead of issuing bonus share by reserving. Again, we have lost. And number three, our investment in Yantra also we are losing every year. And, already we are having the 10% from the Singapore and the other, in page number what is called is there, already that shareholders pattern is shown. So, another 39% is enough for FIIs to have their say in our company itself. Why we should increase to 100%? It is almost selling it. Is our Chairman interested to sell the shares itself to the foreign company, means 100%, where will we be? Therefore, I feel and I request that Chairman again to withdraw this resolution and shareholders also will see that the resolution is not put in to vote. In the interest of the shareholders, I request all the shareholders to say that this resolution is voted out. Thank you gentlemen.
N. R. Narayana Murthy: May I answer this?
Male Participant: Yes, please answer sir.
N. R. Narayana Murthy: Let's remember that the government and Reserve Bank of India have discussed and debated it. They have consulted various associations and they have realized that in these days of globalization, we have to compete on our strength. We cannot compete based on our fear. We cannot shy away from globalization based on our fear. So, let me assure you that just as this company has leveraged power of globalization, has leveraged the power of markets in the countries outside India just as we have, and just last year $545 million from markets outside India. I believe that in the future too by keeping an open mind, by being confident, by saying we will compete on our strength, this company will go from strength to strength. I think, as a company that has accepted, that has leveraged power of globalization, I believe that we should welcome the move of the Government of India in raising the remainder from 49% to 100%, and as a Chairman of this company, let me assure you that it is not in the interest of any of the members of the board to sell and run away. We are here to run this company. We are here to make sure that our shareholders get better and better and better return. But at the same time remember that we have to play the game with consistency, with integrity of our ideas and our concepts. We cannot take one stand in one aspect and a completely different stand in some other aspect. So, in keeping with all of that, we are confident that this is going to be only good for the company.
{Applause}
Sen. Larry Pressler: I request any member to propose the resolution and state your name.
(Mr. Shanmugham proposes the resolution)
And a second.
(Mr. Sampangi Ram seconds the resolution)
I request the members in favor of the resolution to raise their hands.
(Members raise their hands)
I request the members who are against the resolution to raise their hands.
(Members raise their hands)
I declare the resolution as passed with a requisite majority.
With this, the formal part of the 21st annual general meeting comes to an end. Thank you for attending the 21st annual general meeting, and I hereby declare the proceedings as closed. However, the floor is open for any questions from Mumbai or London.
N. R. Narayana Murthy: Before we start on questions from Mumbai and from London, I would like to place on record our sense of deep appreciation for the extraordinary efforts made by three people who have come from outside India. Senator Larry Pressler, who chaired this meeting,
{Applause}
Prof. Marti G. Subrahmanyam and Prof. Jitendra Singh.
{Applause}
These are the people who demonstrate very convincingly that there is no problem in India. No amount of anybody talking on CNN or any other thing will convince us. So, I am extremely grateful to all the three people because we need more and more such examples, you know, in such tough times. That is one, and I would also like to place on record, our sense of deep gratitude to Senator Pressler for chairing this meeting. So, at this point in time, I think, we move on to Mumbai and London. You guys can ask questions. However, remember this is not part of the AGM. The Chairman, Senator Pressler has closed the AGM, the formal proceedings of the AGM. This will not go on record; this will be a session primarily to satisfy any informational requirements that you may have.
Sen. Larry Pressler: The gentleman from Mumbai, go ahead.
S. Krishnan (From Mumbai): Yeah thank you. Good evening to all the members on the dais. We have Mr. Dahyalal Shah, who is the member of the company, he wants to ask some things to the people on the dais. He has been waiting at this venue since 1 p.m. Thank you.
Dahyalal Shah (From Mumbai): (in Hindi) Mera naam Dahyabhai Shah hai. Bhartiya parampara ke mutabik, pehle guru ka smaran aur saraswati devi ka awahan karke mein do shabd kahana chahunga. Guru brahma guru vishnum guru devo maheshwara, guru sakshat parabrahma tasme sri guruve namaha, uvagre vasti nityam brahma rupa saraswati, saraswati mahabhagye varde kamarupini. Manch par baithe huye sare mahajano, Board of Directors, President sab, aur mere pyare shareholder bhaiyo, yahanke aur Bangalore me upastit huye. Mera yahi prashan ek hai ki kuch sal pahale maine N. R. Narayana Murthy ko TV par dekha tha, aur unhone kaha tha ke aaj mere share ka bhav 3,000 rupiya hai, aur 3,000 rupiye mein bhi jo koi bhav se share lega uska 6,000 rupiya ho jayega. Tabhi unka lot 50 ka tha, aur 50 lot 3000 se lene ke liya ded lakh rupiya mangta tha. Uske bad jo unke tariqii huye, unka share ka bhav 16,000 tak gaya, bad mein 12,000 aya. Humare jaise kaye senior citizenone 9,000, 10,000, 12,000 mein woh share liye hai, aap uska bhav 3,000 rupiya ho gaya hai. Mein Narayana Murthy se ye kahunga ke tumne jabe wo time kahatha ke 3,000 mein share loge to 3,000 aur melega, to mein aaj unse ye puchna chahata hoon ke kya aaj ke bazaar mein tum ye kaha sakte ho ke aaj agar hum 3,000 me share lele to uske 6,000 rupiya hojayenge, ya 3,000 ke 1,500 rupiye hojayenge. Mein unse ye ummid karta hoon ke jab tum tariqqi kar rahe ho, tumhara itna growth hai, to fundament ke upar tumhara share kyon nahi chalta hai? Tumhara 16,000 ka 30,000 kyon nahi huwa? Tumhara 16,000 ka 3,000 rupiya kyon huwa? Iske bhi mujhe karan aur uske ishab se jawab chaheye. Shukriya.
N. R. Narayana Murthy: You know, I am sorry I don't know if I understand your question fully, but certainly I think I got the gist of it. Let me tell you one thing. I have never ever in the entire history of this company said buy the share at this price and this share price will go up to this. In fact, as a matter of principle, we have always said that our business is not to worry about the ticker tape. Our business is to satisfy our customers, our business is to satisfy our employees, our business is to make sure that we obey the law of the land, our business to make sure that we run our business efficiently and the stock market, if any, should be the result. None of us in this company has ever worried about the stock price. So, I don't think while I can fully appreciate your dilemma, I don't think we in the company will be able to offer any comment or any suggestions on the share price. There are enough analysts, there are enough people who know these things, you know, and we do not know this issue at all. I think you should consult those people.
Sen. Larry Pressler: Question from London? Question from Mumbai.
S. Krishnan (From Mumbai): Yeah, we have another shareholder Mr. Lincoln Koilo who wants to ask a question to the members on the dais.
Lincoln Koilo (From Mumbai): Respected chairman Mr. Narayana Murthy, members of the board, and my fellow shareholders, I have no question to ask an eminent board that we enjoy. I have only a small suggestion to make, which may or may not have attracted the attention of the board by now. In a very competitive environment, the board and the management group would be taking all possible steps for cost-effectiveness in every sphere. There is one area in the context of the dematerialization of shares and the rolling market lot of one share, every shareholder with 3000 and odd rupees is entitled to his annual report as of now. And I think the average cost of the annual report these days is between Rs. 500 to 600, by way of a small suggestion, the company could send out a small coupon or a voucher to all the shareholders having shares below a threshold limit of, say, 100 shares, offering them the facility to get the whole annual report on the Web at the nearest café. I think this might help in saving a considerable amount of money for the numerous shareholders that we already have. Thank you sir.
N. R. Narayana Murthy: You know, I can fully understand and appreciate your suggestion. But, so far, we have taken the stand that for us whether a shareholder has one share or a million shares, both are equally important. That is the true spirit of a democracy.
{Applause}
However, the point that you talked about, yes, I think it costs approximately about Rs. 200, Mohan correct me, Rs. 145 per copy and we, yes, we will and we have already made the whole thing available on Web as well as CD-ROM. But certainly I think what we need to do is this. All of us together have to take it up. As a whole corporate community we will have to debate this issue, you know with bodies like CII, FICCI, ASSOCHAM, etc., and then perhaps come to some conclusion in consultation with the Government of India. I don't think any of us can do it without any such overall consent. So, however, I think it is a good suggestion, we will start discussing this issue with the relevant people. Thank you.
Sen. Larry Pressler: Question from Mumbai, go ahead.
S. Krishnan (From Mumbai): We have another shareholder, Mr. Yogesh Jhunjhunwala, who wants to ask a question. He also represents a minority shareholder and has hosted a website for the minority shareholder. Thank you.
Yogesh Jhunjhunwala (From Mumbai): Good evening to all of you sirs. I am Yogesh Jhunjhunwala Our representative Ms. Shobhana Mehta is already sitting with you. We congratulate you on your excellent performance. We have done in-depth study of your company. We find it as a great share to buy today. Congratulations once again. My only one question, which the shareholders asked in a slightly different manner, is your EVA has gone up where as your enterprise value is going down. I mean, I am not trying to ask you about the market price again, but the enterprise value should logically go up when the EVA go up. What are you going to do about it? Please spell out if you can. Otherwise, we will meet some time, I hope before the next AGM, in an EGM in Mumbai. Thank you.
Nandan Nilekani: I think, as Mr. Murthy mentioned little earlier, our focus is on our business, satisfying our customers, creating value, and we will focus on that.
Sen. Larry Pressler: Question from London? No questions from London. Any more questions from Mumbai?
S. Krishnan (From Mumbai): No more questions from Mumbai. Thank you.
Sen. Larry Pressler: Good. We are closed. The meeting is over.
{Applause and end of the event.}
