Amounts in the financial statements are presented in Rupees crore, except for per share data and as otherwise stated. Certain amounts do not appear due to rounding off, and are detailed in Note 23.3. All exact amounts are stated with the suffix ‘/-’. One crore equals 10 million. The previous year figures have been regrouped / reclassified, wherever necessary to conform to the current presentation.
The aggregate amounts incurred on expenses are as follows :
Year ended March 31, |
2010 | 2009 |
| Salaries and bonus including overseas staff expenses | 9,913 | 9,533 |
| Contribution to provident and other funds | 265 | 227 |
| Staff welfare | 30 | 64 |
| Overseas group health insurance | 142 | 145 |
| Overseas travel expenses | 398 | 493 |
| Visa charges and others | 95 | 121 |
| Travel and conveyance | 61 | 82 |
| Technical sub-contractors – subsidiaries | 1,210 | 861 |
| Technical sub-contractors – others | 269 | 305 |
| Software packages | ||
| For own use | 309 | 274 |
| For service delivery to clients | 17 | 41 |
| Professional charges | 242 | 228 |
| Telephone charges | 117 | 153 |
| Communication expenses | 46 | 58 |
| Power and fuel | 122 | 125 |
| Office maintenance | 132 | 138 |
| Guest house maintenance | 4 | 5 |
| Commission charges | 16 | 21 |
| Brand building | 55 | 62 |
| Rent | 62 | 60 |
| Insurance charges | 23 | 18 |
| Computer maintenance | 22 | 23 |
| Printing and stationery | 9 | 10 |
| Consumables | 22 | 20 |
| Donations | 43 | 21 |
| Advertisements | 3 | 6 |
| Marketing expenses | 11 | 15 |
| Repairs to buildings | 33 | 31 |
| Repairs to plant and machinery | 31 | 21 |
| Rates and taxes | 26 | 29 |
| Professional membership and seminar participation fees | 8 | 9 |
| Postage and courier | 8 | 8 |
| Provision for post-sales client support and warranties | (2) | 39 |
| Books and periodicals | 3 | 3 |
| Provision for bad and doubtful debts | (1) | 74 |
| Provision for doubtful loans and advances | – | 1 |
| Commission to non-whole-time directors | 6 | 6 |
| Sales promotion expenses | 1 | 1 |
| Freight charges | 1 | 1 |
| Bank charges and commission | 2 | 2 |
| Auditors' remuneration | ||
| Statutory audit fees | 1 | 1 |
| Research grants | 25 | 19 |
| Miscellaneous expenses | – | 4 |
| 13,780 | 13,358 |
| Particulars | As at March 31, |
||
| 2010 | 2009 | ||
| Estimated amount of unexecuted capital contracts (net of advances and deposits) | 267 | 344 | |
| Outstanding guarantees and counter guarantees to various banks, with respect to the guarantees given by those banks in favor of various government authorities and others | 3 | 3 | |
| Claims against the Company, not acknowledged as debts(1) [Net of amount paid to statutory authorities Rs. 241 crore (Rs. 200 crore)] |
28 | 3 | |
| in million | in Rs. crore | in million | in Rs. crore | |
Forward contracts outstanding |
||||
| In USD | 228 | 1,024 | 245 | 1,243 |
| In Euro | 16 | 97 | 20 | 135 |
| In GBP | 7 | 48 | 15 | 109 |
| In AUD | 3 | 12 | – | – |
Options contracts outstanding |
||||
| In USD | 200 | 898 | 173 | 877 |
| (1) | Claims against the Company not acknowledged as debts include demand from the Indian tax authorities for payment of additional tax of Rs. 214 crore (Rs. 197 crore), including interest of Rs. 39 crore (Rs. 43 crore) upon completion of their tax review for fiscal 2005 and fiscal 2006. The tax demands are mainly on account of disallowance of a portion of the deduction claimed by the Company under Section 10A of the Income tax Act. The deductible amount is determined by the ratio of export turnover to total turnover. The disallowance arose from certain expenses incurred in foreign currency being reduced from export turnover but not reduced from total turnover. The matter for fiscal 2005 and 2006 is pending before the Commissioner of Income tax (Appeals) Bangalore.
The Company is contesting the demands and the Management, including its tax advisors, believes that its position will likely be upheld in the appellate process. No tax expense has been accrued in the financial statements for the tax demand raised. The Management believes that the ultimate outcome of this proceeding will not have a material adverse effect on the Company's financial position and results of operations. |
As of the Balance Sheet date, the Company's net foreign currency exposures that are not hedged by a derivative instrument or otherwise is Rs. 891 crore. (Rs. 1,136 crore as at March 31, 2009).
The Company is primarily engaged in the development and maintenance of software. The production and sale of such software cannot be expressed in any generic unit. Hence, it is not possible to give the quantitative details of sales and certain information as required under paragraphs 3, 4C and 4D of part II of Schedule VI to the Companies Act, 1956.
| Particulars | Year ended March 31, |
|
| 2010 | 2009 | |
Capital goods |
91 | 207 |
Software packages |
10 | 8 |
| 101 | 215 | |
| Particulars | Year ended March 31, |
|
| 2010 | 2009 | |
| Earnings in foreign currency (on receipts basis) | ||
| Income from software services and products | 21,072 | 19,812 |
| Interest received from banks and others | 3 | 24 |
| Expenditure in foreign currency (on payments basis) | ||
| Travel expenses (including visa charges) | 404 | 480 |
| Professional charges | 150 | 124 |
| Technical sub-contractors – subsidiaries | 1,210 | 861 |
| Overseas salaries and incentives | 5,950 | 5,878 |
| Other expenditure incurred overseas for software development | 675 | 700 |
| Net earnings in foreign currency | 12,686 | 11,793 |
The lease rentals charged during the year and maximum obligations on long-term, non-cancelable operating leases payable as per the rentals stated in the respective agreements are as follows:
| Particulars | Year ended March 31, | |
| 2010 | 2009 | |
| Lease rentals recognized during the year | 62 | 60 |
| Lease obligations payable | As at March 31, | |
| 2010 | 2009 | |
| Within one year of the Balance Sheet date | 48 | 46 |
| Due in a period between one year and five years | 149 | 154 |
| Due after five years | 24 | 30 |
The operating lease arrangements extend upto a maximum of ten years from their respective dates of inception and relates to rented overseas premises. Some of the lease agreements have a price escalation clause.
Fixed assets provided on operating lease to Infosys BPO, a subsidiary company, as at March 31, 2010 and March 31, 2009 are as follows:
Particulars |
Cost | Accumulated depreciation |
Net book value |
| Buildings | 59 | 21 | 38 |
| 59 | 17 | 42 | |
| Plant and machinery | 18 | 15 | 3 |
| 18 | 12 | 6 | |
| Computer equipment | 1 | 1 | – |
| 1 | 1 | – | |
| Furniture and fixtures | 3 | 2 | 1 |
| 3 | 2 | 1 | |
| Total | 81 | 39 | 42 |
| 81 | 32 | 49 |
The aggregate depreciation charged on the above assets during the year ended March 31, 2010 amounted to Rs. 7 crore (Rs. 8 crore for the year ended March 31, 2009).
The rental income from Infosys BPO for the year ended March 31, 2010 amounted to Rs. 16 crore. (Rs. 16 crore for the year ended March 31, 2009.)
List of related parties:
| Name of subsidiaries | Country | Holding, as at March 31, |
|
| 2010 | 2009 | ||
| Infosys BPO | India | 99.98% | 99.98% |
| Infosys Australia | Australia | 100% | 100% |
| Infosys China | China | 100% | 100% |
| Infosys Consulting(1) | USA | 100% | 100% |
| Infosys Mexico(2) | Mexico | 100% | 100% |
| Infosys Sweden(3) | Sweden | 100% | – |
| Infosys Brazil(4) | Brazil | 100% | – |
| Infosys Public Services Inc(5) | USA | 100% | – |
| Infosys BPO s. r. o(6) | Czech Republic | 99.98% | 99.98% |
| Infosys BPO (Poland) Sp.Z.o.o(6) | Poland | 99.98% | 99.98% |
| Infosys BPO (Thailand) Limited(6) | Thailand | 99.98% | 99.98% |
| Mainstream Software Pty Limited(7) | Australia | 100% | 100% |
| Infosys Consulting India Limited(8) | India | 100% | – |
| McCamish Systems LLC (9) | USA | 99.98% | – |
| (1) | During the year ended March 31, 2010, the Company made an additional investment of Rs. 50 crore (US $10 million) in Infosys Consulting Inc which is a wholly-owned subsidiary. As of March 31, 2010 and March 31, 2009, the Company has invested an aggregate of Rs. 243 crore (US $55 million) and Rs.193 crore (US $45 million), respectively in the subsidiary.
|
| (2) | During the year ended March 31, 2010, the Company made an additional investment of Rs. 18 crore (Mexican Peso 50 million) in Infosys Mexico which is a wholly-owned subsidiary. As of March 31, 2010 and March 31, 2009 the Company has invested an aggregate of Rs. 40 crore (Mexican Peso 110 million) and Rs. 22 crore (Mexican Peso 60 million), respectively in the subsidiary. |
| (3) | During the year ended March 31, 2009, the Company incorporated wholly-owned subsidiary, Infosys Technologies (Sweden) AB, which was capitalized on July 8, 2009. |
| (4) | On August 7, 2009, the Company incorporated wholly-owned subsidiary, Infosys Tecnologia DO Brasil LTDA. As of March 31, 2010 the Company has invested an aggregate of Rs. 28 crore (BRL 11 million) in the subsidiary |
| (5) | On October 9, 2009, the Company incorporated wholly-owned subsidiary, Infosys Public Services Inc. As of March 31, 2010, the Company invested Rs. 24 crore (US $5 million) in the subsidiary. |
| (6) | Infosys BPO s.r.o, Infosys BPO (Poland) Sp.Z.o.o, Infosys BPO (Thailand) Limited and McCamish Systems LLC are wholly-owned subsidiaries of Infosys BPO. |
| (7) | Mainstream Software Pty Limited is a wholly-owned subsidiary of Infosys Australia. |
| (8) | On August 19, 2009, Infosys Consulting Inc incorporated a wholly-owned subsidiary, Infosys Consulting India Limited. As of March 31, 2010, Infosys Consulting has invested Rs. 1 crore in the subsidiary. |
| (9) | On December 4, 2009, Infosys BPO acquired 100% of the voting interests in McCamish Systems LLC (McCamish), a business process solutions provider based in Atlanta in the U.S. The business acquisition was conducted by entering into Membership Interest Purchase Agreement for a cash consideration of Rs. 173 crore and a contingent consideration of Rs. 67 crore. The acquisition was completed during the year and accounted as a business combination which resulted in goodwill of Rs. 227 crore. |
Infosys guarantees the performance of certain contracts entered into by its subsidiaries.
The details of amounts due to or due from as at March 31, 2010 and March 31, 2009 are as follows :
| Particulars | As at March 31, |
|
| 2010 | 2009 | |
| Loans and advances | ||
| Infosys China | 46 | 51 |
| Sundry debtors | ||
| Infosys China | 19 | – |
| Infosys Australia | 7 | 4 |
| Infosys Mexico | 1 | 1 |
| Infosys Consulting | 26 | – |
| Infosys Brazil | 1 | – |
| Infosys BPO (Including subsidiaries) | 2 | – |
| Sundry creditors | ||
| Infosys China | 18 | 4 |
| Infosys Australia | 20 | 16 |
| Infosys BPO (Including subsidiaries) | 7 | 1 |
| Infosys Consulting | 43 | – |
| Infosys Consulting India | 1 | – |
| Infosys Mexico | 5 | – |
| Infosys Sweden | 1 | – |
| Deposit taken for shared services | ||
Infosys BPO |
7 | 3 |
The details of the related party transactions entered into by the Company and maximum dues from subsidiaries, in addition to the lease commitments described in Note 23.2.6, for the years ended March 31, 2010 and March 31, 2009 are as follows :
| Particulars | Year ended March 31, |
|
| 2010 | 2009 | |
| Capital transactions : | ||
| Financing transactions | ||
| Infosys Consulting | 50 | 22 |
| Infosys China | – | 19 |
| Infosys Mexico | 18 | – |
| Infosys Brazil | 28 | – |
| Infosys Public Services | 24 | – |
| Loans / Advances | ||
| Infosys China | – | 10 |
| Revenue transactions : | ||
| Purchase of services | ||
| Infosys Australia | 634 | 471 |
| Infosys China | 134 | 81 |
| Infosys Consulting | 378 | 275 |
| Infosys Sweden | 11 | – |
| Infosys BPO (Including subsidiaries) | 3 | 1 |
| Infosys Brazil | 5 | – |
| Infosys Mexico | 45 | 33 |
| Purchase of shared services including facilities and personnel | ||
| Infosys BPO (Including subsidiaries) | 53 | 32 |
| Interest income | ||
| Infosys China | 3 | 3 |
| Sale of services | ||
| Infosys Australia | 25 | 10 |
| Infosys China | 10 | 2 |
| Infosys Consulting | 25 | 4 |
| Infosys BPO (Including subsidiaries) | – | 1 |
| Sale of shared services including facilities and personnel | ||
| Infosys BPO (Including subsidiaries) | 71 | 53 |
| Infosys Consulting | 4 | 3 |
| Maximum balances of loans and advances | ||
| Infosys Australia | 51 | 35 |
| Infosys China | 48 | 51 |
| Infosys BPO (Including subsidiaries) | 4 | – |
| Infosys Mexico | 4 | 4 |
Infosys Consulting |
35 | 26 |
During the year ended March 31, 2010, an amount of Rs. 34 crore (Rs. 20 crore for the year ended March 31, 2009) was donated to Infosys Foundation, a not-for-profit foundation, in which certain directors of the Company are trustees.
During the year ended March 31, 2010, an amount of Rs. 23 crore (Rs. 15 crore for the year ended March 31, 2009) has been granted to Infosys Science Foundation, a not-for-profit foundation, in which certain directors and officers of the Company are trustees.
Key management personnel comprise directors and members of executive council.
Particulars of remuneration and other benefits paid to key management personnel during the years ended March 31, 2010 and March 31, 2009 have been detailed in Schedule 23.4.
The aggregate managerial remuneration under Section 198 of the Companies Act 1956, to the directors (including managing director) is as follows :
| Particulars | Year ended March 31, |
|
2010 |
2009 |
|
| Whole-time directors | ||
| Salary | 2 |
2 |
| Contribution to provident and other funds | – |
– |
| Perquisites and incentives | 7 |
6 |
| Total remuneration | 9 |
8 |
| Non-whole-time directors | ||
| Commission | 6 |
6 |
| Reimbursement of expenses | 1 |
1 |
| Total remuneration | 7 |
7 |
Computation of net profit in accordance with Section 349 of the Companies Act, 1956, and calculation of commission payable to non-whole-time directors are as follows :
| Particulars | Year ended March 31, | |
| 2010 | 2009 | |
| Net profit after tax before exceptional item | 5,755 | 5,819 |
| Add: | ||
| Whole-time directors' remuneration | 9 | 8 |
| Commission to non-whole-time directors | 6 | 6 |
| Provision for bad and doubtful debts | (1) | 74 |
| Provision for doubtful loans and advances | – | 1 |
| Depreciation as per books of accounts | 807 | 694 |
| Provision for taxation | 1,717 | 895 |
| 8,293 | 7,497 | |
| Less: | ||
| Depreciation as envisaged under Section 350 of the Companies Act(1) | 807 | 694 |
| Net profit on which commission is payable | 7,486 | 6,803 |
| Commission payable to non-whole-time directors : | ||
| Maximum allowed as per the Companies Act, 1956 at 1% | 75 | 68 |
| Maximum approved by the shareholders at 1% (1%) | 75 | 68 |
| Commission approved by the Board | 6 | 6 |
During the years ended March 31, 2010 and March 31, 2009, Infosys BPO has provided for commission of Rs. 0.12 crore and Rs. 0.12 crore to a non-whole-time director of Infosys.
| Particulars | Year ended March 31, |
|
| 2010 | 2009 | |
| Capital | 3 |
31 |
| Revenue | 437 |
236 |
The Company has two Stock Option Plans.
1998 Stock Option Plan (‘the 1998 Plan’)
The 1998 Plan was approved by the Board of Directors in December 1997 and by the shareholders in January 1998, and is for issue of 1,17,60,000 ADSs representing 1,17,60,000 equity shares. All options under the 1998 Plan are exercisable for ADSs representing equity shares. A compensation committee comprising independent members of the Board of Directors administers the 1998 Plan. All options have been granted at 100% of fair market value. The 1998 Plan lapsed on January 6, 2008, and consequently no further shares will be issued to employees under this plan.
1999 Stock Option Plan (‘the 1999 Plan’)
In fiscal 2000, the Company instituted the 1999 Plan. The shareholders and the Board of Directors approved the plan in September 1999, which provides for the issue of 5,28,00,000 equity shares to the employees. The compensation committee administers the 1999 Plan. Options were issued to employees at an exercise price that is not less than the fair market value. The 1999 Plan lapsed on June 11, 2009, and consequently no further shares will be issued to employees under this plan.
The activity in the 1998 Plan and 1999 Plan during the year ended March 31, 2010 and March 31, 2009 are set out below.
| Particulars | Year ended March 31, |
|
| 2010 | 2009 | |
| The 1998 Plan: | ||
| Options outstanding, beginning of year | 9,16,759 | 15,30,447 |
| Less: Exercised | 6,14,071 | 4,55,586 |
| Forfeited | 60,424 | 1,58,102 |
| Options outstanding, end of year | 2,42,264 | 9,16,759 |
| The 1999 Plan: | ||
| Options outstanding, beginning of year | 9,25,806 | 14,94,693 |
| Less: Exercised | 3,81,078 | 3,78,699 |
| Forfeited | 3,40,264 | 1,90,188 |
| Options outstanding, end of year | 2,04,464 | 9,25,806 |
The weighted average share price of options exercised under the 1998 Plan during the year ended March 31, 2010 and March 31, 2009 was Rs. 2,266 and Rs. 1,683, respectively. The weighted average share price of options exercised under the 1999 Plan during the year ended March 31, 2010 and March 31, 2009 was Rs. 2,221 and Rs. 1,566, respectively.
The following table summarizes information about the 1998 and 1999 share options outstanding as of March 31, 2010 :
| Range of exercise prices per share (Rs.) | Year ended March 31, 2010 |
||
| Number of shares arising out of options |
Weighted average remaining contractual life |
Weighted average exercise price |
|
| The 1998 Plan: | |||
| 300-700 | 1,74,404 | 0.94 | 551 |
| 701-1,400 | 67,860 | 1.27 | 773 |
| 2,42,264 | 1.03 | 613 | |
| The 1999 Plan: | |||
| 300-700 | 1,52,171 | 0.91 | 439 |
| 1,401-2,500 | 52,293 | 1.44 | 2,121 |
| 2,04,464 | 1.05 | 869 | |
The following table summarizes information about the 1998 and 1999 share options outstanding as of March 31, 2009 :
| Range of exercise prices per share (Rs.) | Year ended March 31, 2009 |
||
| Number of shares arising out of options |
Weighted average remaining contractual life |
Weighted average exercise price |
|
| The 1998 Plan: | |||
| 300-700 | 3,37,790 | 1.46 | 567 |
| 701-1,400 | 4,93,048 | 1.56 | 980 |
| 1,401-2,100 | 76,641 | 0.46 | 1,693 |
| 2,101-2,800 | 6,880 | 0.13 | 2,453 |
| 2,801-4,200 | 2,400 | 0.02 | 2,899 |
| 9,16,759 | 1.41 | 904 | |
| The 1999 Plan: | |||
| 300-700 | 3,00,976 | 1.55 | 429 |
| 701-1,400 | 2,23,102 | 0.60 | 802 |
| 1,401-2,500 | 4,01,728 | 1.06 | 2,121 |
| 9,25,806 | 1.11 | 1,253 | |
The aggregate options considered for dilution are set out in Note 23.2.19
Proforma accounting for stock option grants
Infosys applies the intrinsic value-based method of accounting for determining compensation cost for its stock-based compensation plan. Had the compensation cost been determined using the fair value approach, the Company's net profit and basic and diluted earnings per share as reported would have reduced to the proforma amounts as indicated :
| Particulars | Year ended March 31, |
|
| 2010 | 2009 | |
| Net profit after exceptional item | ||
| As reported | 5,803 | 5,819 |
| Less: Stock-based employee compensation expense | 1 | 7 |
| Adjusted proforma | 5,802 | 5,812 |
| Basic earnings per share as reported | 101.22 | 101.65 |
| Proforma basic earnings per share | 101.21 | 101.52 |
| Diluted earnings per share as reported | 101.10 | 101.48 |
| Proforma diluted earnings per share | 101.09 | 101.35 |