Management's discussion and analysis (Contd.)
7. Provision for tax
We have provided for our tax liability both in India and overseas. The Indian corporate tax rate for the year ended March 31, 2011 is 33.22%. Export profits for the year were entitled to tax benefits under two schemes of the Government of India viz., the STPI and SEZ scheme.
7.a Software Technology Parks (STPs)
The profits attributable to operations under the STP scheme were exempted from income tax for a consecutive period of ten years from the financial year in which the unit started producing computer software, or March 31, 2011, whichever was earlier.
The details regarding the commencement of operations at our STP locations and the year upto which the deduction under the STP scheme was availed are as follows :
Software Technology Park |
Year of Commencement (1) |
Tax exemption |
|
| Claimed from (1) | Available upto (1) | ||
Electronics City, Bangalore |
1995 |
1997 |
2004 |
Mangalore |
1996 |
1999 |
2005 |
Pune |
1997 |
1999 |
2006 |
Bhubaneswar |
1997 |
1999 |
2006 |
Chennai |
1997 |
1999 |
2006 |
Phase I, Electronics City, Bangalore |
1999 |
1999 |
2008 |
Phase II, Electronics City, Bangalore |
2000 |
2000 |
2009 |
Hinjawadi, Pune |
2000 |
2000 |
2009 |
Mysore |
2000 |
2000 |
2009 |
Hyderabad |
2000 |
2000 |
2009 |
Chandigarh |
2000 |
2000 |
2009 |
Sholinganallur, Chennai |
2001 |
2001 |
2010 |
Konark, Bhubaneswar |
2001 |
2001 |
2010 |
Mangala, Mangalore |
2001 |
2001 |
2010 |
Thiruvananthapuram |
2004 |
2004 |
2011 |
(1) Financial year
7.b Special Economic Zones (SEZs)
During the financial year three more SEZ units at Mysore, Hyderabad and Mahindra City, Chennai commenced production.
As per the SEZ Act, the units will be eligible for a deduction of 100% of profits or gains derived from the export of services for the first five years from commencement of provision of services and 50% of such profits or gains for the next five years. Certain tax benefits are also available for a further five years subject to the units meeting defined conditions.
The details regarding the commencement of operations at our SEZ locations and the year upto which the deduction under the SEZ scheme is available are as follows :
Special Economic Zone |
Year of Commencement (1) |
Tax exemption |
|
Claimed from (1) |
Available upto (1) |
||
Mahindra City – unit 1, Chennai |
2006 |
2006 |
2020 |
Chandigarh |
2007 |
2007 |
2021 |
Mangalore |
2008 |
2008 |
2022 |
Pune |
2008 |
2008 |
2022 |
Thiruvananthapuram |
2010 |
2010 |
2024 |
Mysore |
2011 |
2011 |
2025 |
Hyderabad |
2011 |
2011 |
2025 |
Mahindra City – unit 2, Chennai |
2011 |
2011 |
2025 |
(1) Financial year
Other fiscal benefits, including indirect tax waivers, are being extended for setting up, operating and maintaining the unit.
For the current year, approximately 1.61% of our revenues came from the STP unit at Thiruvananthapuram, which was under tax holiday, 9.60% of revenues came from the SEZ at Mahindra City – unit 1, Chennai, which was eligible for deduction based on 50% of the profits of the unit and 13.34% of revenues came from other SEZ units, which were eligible for deduction based on entire profits of these units. The balance 75.45% of revenues came from other STP units, which were subject to full tax in India. We pay taxes in various countries in which we operate, on the income that is sourced to those countries. The details of provision for taxes are as follows :
in 
crore
Year ended March 31, |
2011 |
2010 |
Overseas tax |
502 |
433 |
Domestic tax |
2,019 |
1,551 |
2,521 |
1,984 |
|
MAT credit |
– |
(288) |
Deferred taxes |
(143) |
21 |
2,378 |
1,717 |
The effective tax rate increased to 26.96 % in fiscal 2011 as compared to 23.0% in fiscal 2010.
8. Net profit after tax
Our net profit increased by 12% to 6,443 crore for the year ended March 31, 2011 from 5,755 crore in the previous year, excluding exceptional item. This represents 25.4% and 27.2% of total revenue for the year ended March 31, 2011 and March 31, 2010 respectively.
9. Earnings Per Share (EPS)
Our basic EPS increased by 11.8% during the year to 112.26 per share from 100.37 per share in the previous year. The outstanding shares used in computing basic EPS increased from 57,33,09,523 for the year ended March 31, 2010 to 57,40,13,650 for the year ended March 31, 2011, an increase of 0.1%.
10. Segmental profitability
Our operations predominantly relate to providing end-to-end business solutions that leverage technology, thereby enabling clients to enhance business performance, delivered to customers globally operating in various industry segments. Accordingly, revenues represented along industry classes comprise the primary basis of segmental information set out in these financial statements. Secondary segmental reporting is performed on the basis of the geographical location of customers.
The income and operating income by industry and geographical segments are provided in this section.
10.a Industry segments
in crore
Finan- |
Manu- |
Telecom |
Retail |
Others |
Total |
|
Segmental revenues |
||||||
2011 |
9,293 |
4,686 |
3,134 |
3,757 |
4,515 |
25,385 |
2010 |
7,354 |
3,988 |
3,234 |
2,989 |
3,575 |
21,140 |
Growth % |
26.4 |
17.5 |
(3.1) |
25.7 |
26.3 |
20.1 |
Segmental operating income |
||||||
2011 |
3,113 |
1,572 |
990 |
1,307 |
1,432 |
8,414 |
2010 |
2,644 |
1,258 |
1,167 |
1,065 |
1,226 |
7,360 |
Growth % |
17.7 |
25.0 |
(15.2) |
22.7 |
16.8 |
14.3 |
Segmental operating profit (%) |
||||||
2011 |
33.5 |
33.5 |
31.6 |
34.8 |
31.7 |
33.1 |
2010 |
35.9 |
31.5 |
36.1 |
35.6 |
34.3 |
34.8 |
10.b Geographical segments
in crore
North America |
Europe |
India |
Rest of the World |
Total |
|
Segmental revenues |
|||||
2011 |
16,815 |
5,252 |
594 |
2,724 |
25,385 |
2010 |
14,170 |
4,633 |
269 |
2,068 |
21,140 |
Growth % |
18.7 |
13.4 |
120.8 |
31.7 |
20.1 |
Segmental operating income |
|||||
2011 |
5,684 |
1,821 |
186 |
723 |
8,414 |
2010 |
5,028 |
1,650 |
133 |
549 |
7,360 |
Growth % |
13.0 |
10.4 |
39.8 |
31.7 |
14.3 |
Segmental operating profit (%) |
|||||
2011 |
33.8 |
34.7 |
31.3 |
26.5 |
33.1 |
2010 |
35.5 |
35.6 |
49.4 |
26.5 |
34.8 |
11. Liquidity
Our growth has been financed largely through cash generated from operations.
Net cash generated from operations was 4,270 crore and 5,855 crore for the years ended March 31, 2011 and March 31, 2010 respectively. Net cash provided by / (used in) investing activities was 3,235 crore and (3,298) crore for the years ended March 31, 2011 and March 31, 2010 respectively. Net cash used in financing activities was 3,642 crore and 1,481 crore for the years ended March 31, 2011 and March 31, 2010, respectively.
12. Related party transactions
These have been discussed in detail in the Notes to the Abridged financial statements section of this report.
13. Events occurring after the Balance Sheet date
There were no significant events occurring after the Balance Sheet date.
D. Opportunities and threats
We believe our competitive strengths include :
- Leadership in sophisticated solutions that enable our clients to optimize the efficiency of their business
- Proven GDM
- Commitment to superior quality and process execution
- Strong brand and long-standing client relationships
- Status as an employer of choice
- Ability to scale
- Innovation and leadership