|Software development expensesa|
|Salaries and bonusa||9,216a||43.6a||8,935a||44.1a||3.1a|
|Overseas travel expensesa||401a||1.9a||506a||2.5a||(20.8)a|
|Cost of software packagesa||326a||1.5a||315a||1.6a||3.5a|
|Post-sales customer support and warrantiesa||(2)a||–a||39a||0.2a||(105.1)a|
We incurred software development expenses at 54.7% of revenues, compared to 55.0% during the previous year. Employee costs relate to salaries paid to employees in India and include overseas staff expenses. The total software professionals person-months increased to 9,95,956 for the year ended March 31, 2010, from 9,13,610 person-months during the previous year, an increase of 9.0%. Of this, the onsite and offshore billed person-months (including software products) are 1,75,581 and 4,97,108 for the year ended March 31, 2010, as compared to 1,79,329 and 4,52,911 for the previous year. The non-billable and trainees person-months were 3,23,267 and 2,81,370 during the current and previous year respectively. The non-billable and trainees person-months were 32.5% and 30.8% of the total software professional person-months for the current and previous year respectively. We added 18,905 employees (gross) and 6,837 employees (net) during the year as compared to 21,196 employees (gross) and 12,361 employees (net) during the previous year.
The utilization rates of billable employees for the years ended March 31, 2010 and March 31, 2009 are as follows :
The cost of technical sub-contractors includes Rs. 1,210 crore toward purchase of services from subsidiaries for the year ended March 31, 2010, as against Rs. 861 crore in the previous year. The details of such related party transactions are available in the Notes to Accounts. The balance amount was utilized toward availing the services of external consultants to augment skill sets that were required in various projects. We continue to engage the services of these consultants on a need basis.
The overseas travel expenses representing cost of travel overseas for software development constituted approximately 1.9% and 2.5% respectively of total revenue for the years ended March 31, 2010 and March 31, 2009. Overseas travel expenses include visa charges of Rs. 92 crore (0.4% of revenues) for the year, compared to Rs. 116 crore (0.6% revenues) in the previous year.
Cost of software packages primarily represents the cost of software packages and tools procured for our internal use. These packages and tools enhance the quality of our services and also meet the needs of software development. It also includes software procured from third parties for resale with our banking product suite, Finacle™. The cost of software packages was 1.5% and 1.6% respectively of the revenues for the years ending March 31, 2010 and March 31, 2009. Our accounting policy is to charge such purchases to the Profit and Loss accounts in the year of purchase.
A major part of our revenues is generated from offshore software development. We use high-end communication tools in order to establish real-time connections with our clients. The communication expenses represent approximately 0.2% and 0.3% of revenues for the years ending March 31, 2010 and March 31, 2009 respectively.
The provision for post-sale customer support and warranties saw a reversal of Rs. 2 crore against the charge of Rs. 39 crore for the years ended March 31, 2010 and March 31, 2009 respectively.
Other expenses representing staff welfare, computer maintenance, consumables and rent approximate to 0.5% of revenues during the year (same as the previous year).
The gross profit during the year was Rs. 9,581 crore representing 45.3% of revenues compared to Rs. 9,119 crore representing 45.0% of revenues in the previous year.
We incurred selling and marketing expenses at 4.6% of our total revenues, same as the previous year. Selling and marketing expenses primarily consist of employee costs which include bonus payment. All other expenses excluding the employee cost were 1.0% of revenues during the year as compared to 1.2% in the previous year.
The number of sales and marketing personnel increased from 747 as at March 31, 2009 to 800 as at March 31, 2010.
We and our subsidiaries added 141 new customers as compared to 156 during the previous year.
We incurred general and administration expenses amounting to 5.9% of our total revenues, compared to 6.3% during the previous year. All other expenses excluding the employee cost were 4.3% of revenues during the year as compared to 4.9% in the previous year.
Employee costs increased as the number of administration personnel increased from 3,427 as at March 31, 2009 to 3,922 as at March 31, 2010.
We earned an operating profit (PBIDTA) of Rs. 7,360 crore, representing 34.8% of total revenues compared to Rs. 6,906 crore, representing 34.0% of total revenues, during the previous year.
We provided Rs. 807 crore and Rs. 694 crore toward depreciation for the years ended March 31, 2010 and March 31, 2009 representing 3.8% and 3.4% of total revenues. The depreciation for the years ended March 31, 2010 and March 31, 2009 includes an amount of Rs. 86 crore and Rs. 71 crore, toward 100% depreciation on assets costing less than Rs. 5,000 each. The depreciation as a percentage of average gross block (excluding land) is 13.7% and 13.9% for the years ending March 31, 2010 and 2009 respectively.
Our treasury policy allows us to invest in short-term instruments with a maturity of up to 365 days, with a limit on individual fund / bank. The increase in interest income during the year was on account of higher cash generation in the business and increase in the average yield during the year.
We use foreign exchange forward contracts and options to hedge our exposure to movements in foreign exchange rates. The use of these foreign exchange forward contracts and options reduces our risks / costs. We do not use foreign exchange forward contracts or options for trading or speculation purposes.
Foreign exchange gain / (losses) include transaction and translation losses of Rs. 237 crore and a gain of Rs. 294 crore for the years ended March 31, 2010 and March 31, 2009 respectively and option / forward contracts-gain of Rs. 276 crore and a loss of Rs. 666 crore for the years ended March 31, 2010 and March 31, 2009 respectively.
The composition of currency-wise revenues for the years ended March 31, 2010 and March 31, 2009 is as follows :
|US Dollar (US $)a||74.4a||72.3a|
|UK Pound (GBP)a||8.5a||11.8a|
|Australian Dollar (AUD)a||5.8a||4.4a|
Every 1% movement in the Rupee against the US Dollar has an impact of approximately 40 basis points on operating margin.
We have provided for our tax liability both in India and overseas. For the year ended March 31, 2008 and 2009, the Company had calculated its tax liability under Minimum Alternate Tax ( MAT). The MAT liability can be carried forward and set off against the future tax liabilities. In the current year, the Company has calculated its tax liability under normal provisions of the Income Tax Act and utilized the brought forward MAT Credit.
The profits attributable to operations under the STP scheme are exempted from income tax for a consecutive period of ten years from the financial year in which the unit starts producing computer software, or March 31, 2011, whichever is earlier.
The details regarding the commencement of operations at our STP locations and the year upto which the deduction under the STP scheme is available are as follows :
|Software Technology Park||Year of Commencement(1)||
|Claimed from(1)||Available upto(1)|
|Electronics City, Bangalorea||1995a||1997a||2004a|
|Phase I, Electronics City, Bangalorea||1999a||1999a||2008a|
|Phase II, Electronics City, Bangalorea||2000a||2000a||2009a|
During the financial year one more SEZ at Thiruvananthapuram, with an approved area of about 50 acres, commenced production.
As per the SEZ Act, the unit 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 a further five years. Certain tax benefits are also available for a further five years subject to the unit 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)||
|Claimed from(1)||Available upto(1)|
|Mahindra City, Chennaia||2006a||2006a||2020a|
Other fiscal benefits, including indirect tax waivers are being extended for setting up, operating and maintaining the unit.
For the current year, approximately 13% of our revenues came from STP operations which are under tax holiday, 17% of revenues came from SEZ operations and 70% of our revenues are 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 :
Year ended March 31,
Tax provision for the year ended March 31, 2010, includes a reversal of Rs. 316 crore, relating to SEZ units for the previous years as the provisions are no longer required. The provision for deferred taxes includes an amount of Rs. 232 crore provided toward branch profit tax pertaining to certain overseas tax jurisdictions.
The effective tax rate increased to 23.0% in fiscal 2010 as compared to 13.3% in fiscal 2009.
Our net profit declined by 0.3% to Rs. 5,803 crore for the year ended March 31, 2010 from Rs. 5,819 crore in the previous year. This represents 27.5% and 28.7% of total revenue for the year ended March 31, 2010 and March 31, 2009 respectively.
Our basic EPS declined by 1.3% during the year to Rs. 100.37 per share from Rs. 101.65 per share in the previous year. The outstanding shares used in computing basic EPS increased from 57,24,90,211 for the year ended March 31, 2009 to 57,33,09,523 for the year ended March 31, 2010, an increase of 0.1%.
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.