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Infosys Ltd

BSE: 500209 | NSE: INFY ISIN: INE009A01021
Market Cap: [Rs.Cr.] 2,46,645.92 Face Value: [Rs.] 5
Industry: Computers - Software - Large

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Director's Report
Board

To the members,

We are delighted to present the report on our business and operations for the year ended March 31, 2015.

1. Results of our operations

in Rs. crore , except per share data

Particulars

Standalone

Consolidated

2015 2014 2015 2014
Income from software services and products 47,300 44,341 53,319 50,133
Software development expenses 27,828 26,738 31,834 30,804
Gross profit 19,472 17,603 21,485 19,329
Selling and marketing expenses 2,549 2,390 2,946 2,625
General and administration expenses 2,961 2,686 3,668 3,323
Operating profit before depreciation 13,962 12,527 14,871 13,381
Depreciation and amortization 913 1,101 1,017 1,317
Operating profit 13,049 11,426 13,854 12,064
Other income 3,337 2,576 3,430 2,664
Profit before exceptional item and tax 16,386 14,002 17,284 14,728
Profit on transfer of business (1) 412 - - -
Profit before tax 16,798 14,002 17,284 14,728
Tax expense 4,634 3,808 4,911 4,072
Profit before minority interest and share in net profit / (loss) of associate 12,164 10,194 12,373 10,656
Share in net profit / (loss) of associate - - (1) -
Profit for the period 12,164 10,194 12,372 10,656
Surplus - opening balance 30,392 25,383 31,453 26,041
Dividend eliminated on consolidation of trust - 13 21 13
Reserves on transfer of assets and liabilities of Infosys Consulting India Limited - 6 - -
Reserves on consolidation of trust - 50 - -
Deconsolidation of trust (2) (42) - - -
Amount available for appropriation 42,514 35,646 43,846 36,710
Dividend
Interim 1,723 1,149 1,723 1,149
Final 3,388 2,469 3,388 2,469
Total dividend 5,111 3,618 5,111 3,618
Dividend tax 1,034 615 1,034 615
Amount transferred to general reserve 1,217 1,021 1,217 1,021
Amount transferred to other reserve (3) - - 1 3
Surplus - closing balance 35,152 30,392 36,483 31,453
Earnings Per Share (EPS) before exceptional item (4)(5)
Basic 102.33 89.20 108.26 93.25
Diluted 102.33 89.20 108.25 93.25
EPS after exceptional item (4)(5)
Basic 105.91 89.20 108.26 93.25
Diluted 105.91 89.20 108.25 93.25

Notes: The above figures are extracted from the standalone and consolidated financial statements as per Indian Generally Accepted Accounting Principles (GAAP).

1 crore = 10 million

 

(1) On April 15, 2014, the Board of Directors (‘the Board’) of Infosys authorized the Company to execute a Business Transfer Agreement and related documents with EdgeVerve Systems Limited (EdgeVerve), subject to securing the requisite approval from shareholders in the Annual General Meeting. Subsequently, at the Annual General Meeting held on June 14, 2014, the shareholders authorized the Board to enter into a Business Transfer Agreement and related documents with EdgeVerve, with effect from July 1, 2014 or such other date as may be decided by the Board. The Company has undertaken an enterprise valuation by an independent valuer and accordingly the business has been transferred for a consideration of Rs. 421 crore (US $70 million) with effect from July 1, 2014. Net assets amounting to Rs. 9 crore have also been transferred and accordingly a gain of' 412 crore has been recorded as an exceptional item. The consideration has been settled through the issue of fully-paid-up shares in EdgeVerve. The transfer of assets and liabilities is accounted for at carrying values and does not have any impact on the consolidated financial statements.

 

(2) Effective January 1, 2015, Infosys Limited Employees' Welfare Trust has been deconsolidated consequent to SEBI (Share Based Employee Benefits) Regulations, 2014 issued on October 28, 2014.

 

(3) Under the Swiss Code of Obligation, a few Lodestone subsidiaries are required to appropriate 5% of the annual profit to legal reserve until this equals 20% of the paid-up share capital. To the extent it does not exceed one-half of the share capital, the general reserve may be used only to cover losses or for measures designed to sustain the Company through difficult times, to prevent unemployment or to mitigate its consequences.

 

(4) Equity shares are at par value of '5/- each.

 

(5) The Company has allotted 57,42,36,166fully-paid-up equity shares of face value Rs. 5/- each during the year ended March 31,2015, pursuant to a bonus issue approved by the shareholders through a postal ballot. The record date fixed by the Board was December 3, 2014. A bonus share of one equity share for every equity share held, and a stock dividend of one American Depositary Share (ADS) for every ADS held, respectively, has been allotted. Consequently, the ratio of equity shares underlying the ADSs held by an American Depositary Receipt holder remains unchanged. Earnings per share (EPS) of the previous year has been adjusted for the bonus issue, in accordance with Accounting Standard (AS) 20 - Earnings Per Share.

Revenues - standalone

Our total income on a standalone basis increased to '47,300 crore from Rs. 44,341 crore in the previous year, at a growth rate of 6.7%. Our software export revenues aggregated to Rs. 45,993 crore, up by 6.8% from Rs. 43,063 crore in the previous year. Out of the total revenue, 64.0% came from North America, 21.8% from Europe, 2.8% from India and 11.4% from the Rest of the World. On a standalone basis, our share of revenues from all parts of the world outside North America has decreased to 36.0% in the current year from 36.9% in the previous year.

Revenues - consolidated

Our total income on a consolidated basis increased to Rs. 53,319 crore from Rs. 50,133 crore in the previous year, at a growth rate of 6.4%. Our software export revenues aggregated to Rs. 52,035 crore, up by 6.5% from Rs. 48,839 crore in the previous year. Out of the total revenue, 61.5% came from North America, 24.1% from Europe, 2.4% from India, and 12.0% from the Rest of the World. A focus of our growth strategy is to expand our business to parts of the world outside North America to diversify our revenues. On a consolidated basis, our share of revenues from all parts of the world outside North America decreased to 38.5% in the current year from 39.3% in the previous year.

Profits - standalone

Our gross profit on a standalone basis amounted to Rs. 19,472 crore (41.2% of revenue), as against Rs. 17,603 crore (39.7% of revenue) in the previous year. Sales and marketing costs were 5.4% of our revenue for each of the years ended March 31, 2015 and March 31, 2014. General and administration expenses were 6.3% and 6.0% of our revenues during the current year and previous year, respectively. The operating profit before depreciation amounted to Rs. 13,962 crore (29.5% of revenue), as against Rs. 12,527 crore (28.3% of revenue) in the previous year. The profit before exceptional item and tax was Rs. 16,386 crore (34.7% of revenue), as against Rs. 14,002 crore (31.6% of revenue) in the previous year.

Profits - consolidated

Our gross profit on a consolidated basis amounted to Rs. 21,485 crore (40.3% of revenue), as against Rs. 19,329 crore (38.6% of revenue) in the previous year. Sales and marketing costs were 5.5% and 5.2% of our revenue for the years ended March 31, 2015 and March 31, 2014, respectively General and administration expenses were 6.9% and 6.7% of our revenues during the current year and previous year, respectively. The Operating Profit before Depreciation amounted to Rs. 14,871 crore (27.9% of revenue), as against Rs. 13,381 crore (26.7% of revenue) in the previous year. The profit before tax was Rs. 17,284 crore (32.4% of revenue), as against Rs. 14,728 crore (29.4% of revenue) in the previous year.

Capital expenditure on tangible assets - standalone

This year, on a standalone basis, we capitalized '2,540 crore. This comprises Rs. 694 crore for investment in computer equipment, Rs. 3 crore on vehicles and the balance of Rs. 1,843 crore on infrastructure investments.

In the previous year, we capitalized Rs. 2,381 crore. This comprised Rs. 672 crore for investment in computer equipment, Rs. 3 crore on vehicles and the balance of Rs. 1,706 crore on infrastructure investments.

Capital expenditure on tangible assets - consolidated

On a consolidated basis, we capitalized Rs. 2,673 crore in the current year. This comprises Rs. 778 crore for investment in computer equipment, Rs. 6 crore on vehicles, and the balance of Rs. 1,889 crore on infrastructure investments.

In the previous year, we capitalized Rs. 2,533 crore. This comprised Rs. 759 crore for investment in computer equipment, Rs. 11 crore on vehicles, and the balance of Rs. 1,763 crore on infrastructure investments.

Liquidity

We continue to be debt-free and maintain sufficient cash to meet our strategic objectives. We understand that liquidity in the Balance Sheet has to balance between earning adequate returns and the need to cover financial and business risks. Liquidity enables us to make a rapid shift in direction, if there is a market demand. During fiscal 2015, internal cash flows have more than adequately covered working capital requirements, capital expenditure, investment in subsidiaries and dividend payments. As on March 31, 2015, on a standalone basis, we had liquid assets of Rs. 29,705 crore, as against Rs. 28,149 crore at the previous year end. On a consolidated basis, we had liquid assets of Rs. 32,543 crore at the current year-end, as against Rs. 30,277 crore at the previous year end. These funds comprise deposits with banks and highly rated financial institutions, liquid mutual funds, fixed maturity plans, certificates of deposit, tax-free bonds and government bonds. The details of the tax-free bonds and government bonds are disclosed under the ‘non-current investments’ section in the financial statements in this Annual Report.

Appropriations

Dividend

The Board, in its meeting held on April 24, 2015, decided to revise and increase the dividend payout ratio to up to 50% of post-tax consolidated profits effective fiscal 2015 from the existing cap of up to 40%.

The Board, in its meeting held on October 10, 2014, declared an interim dividend of Rs. 30/- per equity share (not adjusted for bonus issue). Further, the Board, in its meeting held on April 24, 2015, has recommended a final dividend of Rs. 29.50/- per equity share (equivalent to Rs. 14.75/- per share post the 1:1 bonus issue, if the 1:1 bonus issue approved by members, pursuant to the Postal Ballot Notice dated April 24, 2015) for the financial year ended March 31, 2015. The proposal is subject to the approval of shareholders at the Annual General Meeting to be held on June 22, 2015.

The total dividend appropriation (excluding dividend tax) for the current year is Rs. 5,111 crore, as against Rs. 3,618 crore in the previous year. Dividend (including dividend tax) as a percentage of consolidated net profit after tax is 49.8%, as compared to 39.7% in the previous year.

The Register of Members and Share Transfer Books will remain closed on June 17, 2015 for the purpose of payment of the final dividend for the financial year ended March 31, 2015, and the Annual General Meeting. The Annual General Meeting is scheduled to be held on June 22, 2015.

Bonus shares

The Company, in December 2014, had issued bonus shares to the shareholders of the Company in proportion of 1:1 and consequently, the paid-up share capital of the Company increased from 57,42,36,166 to 1,14,84,72,332 shares.

Particulars of loans, guarantees or investments

Loans, guarantees and investments covered under Section 186 of the Companies Act, 2013 form part of the notes to the financial statements provided in this Annual Report.

Transfer to reserves

We propose to transfer Rs. 1,217 crore to the general reserve. An amount of Rs. 35,152 crore is proposed to be retained in the surplus.

Fixed deposits

We have not accepted any fixed deposits and, as such, no amount of principal or interest was outstanding as of the Balance Sheet date.

Particulars of contracts or arrangements made with related parties

Particulars of contracts or arrangements with related parties referred to in Section 188(1) of the Companies Act, 2013, in the prescribed Form AOC-2, is appended as Annexure 2 to the Board's report.

Material changes and commitments affecting financial position between the end of the financial year and date of report

On April 24, 2015, the Board authorized the Company to execute a Business Transfer Agreement and related documents with the Company's subsidiary, EdgeVerve, subject to securing the requisite approval from shareholders through postal ballot. The proposed transfer of the business of Finacle and Edge Services to EdgeVerve is at an estimated consideration of up to Rs. 3,400 crore and up to Rs. 220 crore, respectively. On April 24, 2015, the Company entered into a definitive agreement to acquire Kallidus Inc. (doing business as Skava) and its affiliate, a leading provider of digital experience solutions, including mobile commerce and in-store shopping experiences, to large retail clients, for a consideration of US $120 million (approximately Rs. 750 crore), including a deferred component and retention bonus.

The Board, in its meeting held on April 24, 2015, has considered, approved and recommended a bonus issue of one equity share for every equity share held and a stock dividend of one American Depositary Share (ADS) for every ADS held, respectively, as on a record date to be determined. Consequently, the ratio of equity shares underlying the ADSs held by an American Depositary Receipt holder would remain unchanged. The bonus issue of equity shares and ADSs will be subject to approval by the shareholders through postal ballot, and any other applicable statutory and regulatory approvals.

Apart from these, there have been no other material changes and commitments affecting the financial position of the Company between the end of the financial year and the date of the report.

Variation in market capitalization

As at March 31,

Increase / (decrease)in %
2015 2014
Market capitalization ( in Rs. crore ) 2,54,771 1,88,510 35.1
Price earnings ratio (1) 20.5 17.6 16.5
Percentage increase in the market price of the shares in comparison with the last public offer price (2) 5,97,687

Notes: Data based on share prices quoted on NSE.

 

(1) Based on consolidated Indian GAAP financial statements.

 

(2) Last public offer price has been adjusted for bonus issues and stock split.

Management's discussion and analysis

In terms of the provisions of Clause 49 of the Listing Agreement, the Management's discussion and analysis is set out in this Annual Report.

2. Business

Strategy

Our strategic objective is to build a sustainable organization that remains relevant to the agenda of our clients, while generating profitable growth for our investors.

In order to do this, we will apply the priorities of our strategy — renew and new — to our own business and cascade it to everything we do. This applies to our solution and service offerings, our client and employee engagement processes, and to the operational processes of the Company. These translate to the following strategic focus areas :

Differentiate our solution and service offerings : In process-oriented services — infrastructure management, business process outsourcing, and software testing or maintenance — our strategy will be to embrace the concepts of automation and artificial intelligence to improve productivity, gain higher accuracy and reduce the total cost to clients. We are leveraging our Global Delivery Model to provide scale, quality, expertise and cost advantages to our projects with clients. We are building differentiated platforms such as our Edge Suite, our Finacle core banking product and the Infosys Information Platform. We will leverage the advantages of open source technologies in providing innovative and high cost-benefit performance solutions to our clients. We will continue to invest in emerging mobile and digital technologies and big data analytics.

Pursue strategic alliances and acquisitions : We are developing alliances that complement our core competencies. We are partnering with leading technology software providers in creating, deploying, integrating and operating business solutions for our clients. We plan to deploy our capital in making selective business acquisitions that augment our expertise, complement our presence in certain market segments and accelerate the execution of our strategies.

Build deep and impactful client relationships : Our strategy is to engage with clients on their large transformative programs, both in traditional IT areas as well as for their new digital business initiatives. We are expanding existing client relationships by providing them a broad set of end-to-end service offerings and increasing the size, nature and number of projects we do with them. We will acquire new clients, and increase our presence in new geographies and market segments by investing in targeted business development and marketing. We will invest in high-performing consulting and business development teams and the processes and systems required to make them effective. We will continue to ensure our brand is differentiated, global and respected.

Build a culture within the Company that delivers innovation to clients : We will create the required environment, structures, ecosystems and economic models that will spur innovation across the Company. We are using Design Thinking methods to elicit new problem statements and bring together our deep knowledge of client industries and emerging technologies to solve problems for our clients. We have allocated US $500 million towards an innovation fund to tap into innovation networks of early stage companies and universities to gain access to new thinking and business models. We will continue to build a collaborative and entrepreneurial culture in the organization.

Attract and retain a global, diverse, motivated and high performing employee base : Our employees are our biggest assets. To meet the evolving need of our clients, our priority is to attract and engage the best talent in the right locations with the right skills. We are fully committed to strengthening our brand to continue to be the ‘employer of choice’. A series of measures have been initiated to empower our employees through trust and accountability. We have overhauled our performance management system to bring in more objectivity, created internal marketplace for employees to work on challenging assignments, and increased the focus on providing a safe and transparent working environment. We are guided by our value system which motivates our attitudes and actions. Our core values are Client Value, Leadership by Example, Integrity and Transparency, Fairness and Excellence (C-LIFE). We have invested substantially in training, which is central to our employees' learning and career development process. We are committed to creating a work environment that is social, fun and collaborative. We continue to provide employees with life-long learning opportunities in a transparent and meritocratic culture.

Enhance our operational effectiveness for agility and cost : We will periodically assess the effectiveness of our organization structure and processes to optimize it for alignment with our strategic objectives and agility. We continually evaluate critical cross-functional processes and benchmark them with best-in-class practices to optimize costs and enable swift and effective response to our clients. We constantly monitor and optimize various operational parameters such as the cost and utilization of resources, distribution of employees around the world, the cost of operating our campuses and optimally realizing the efficiencies of scale and the strengths of our Global Delivery Model.

Organizational changes

To enhance our agility in the market, sharpen our competitive differentiation and defragment centers of excellence, we realigned our organizational structure. The realignment is effective April 1, 2015. Our go-to-market units are organized around five global industry segments :

• Financial Services

• Manufacturing

• Retail, CPG & Logistics

• Energy, Utilities, Communications & Services

• Life Sciences, Healthcare & Insurance

Apart from the five industry segments, our businesses in India, China and Japan are run as standalone regional business units.

Our service delivery will be organized as horizontal centers of excellence or service lines, with a focus on nurturing innovation, to drive differentiation across the industry segments. This organization will comprise the following service lines :

• Infosys Global Consulting

• Global Delivery

- Enterprise Solutions

- Infosys Digital

- Enterprise Mobility

- Custom Application Development

- Application Management Services

- Independent Validation Solutions

- Business Intelligence

- Engineering Services

- Cloud and Infrastructure Services

• Products

- Finacle

- EdgeVerve

• Platforms

• Infosys BPO

Client base

Our client-centric approach continues to bring us high levels of client satisfaction. We derived 97.8% of our consolidated revenues from repeat business this fiscal. We, along with our subsidiaries, added 221 new clients, including a substantial number of large global corporations. Our total client base at the end of the year stood at 950. The client segmentation for the current and previous years on a consolidated basis is as follows :

in nos.
Clients 2015 2014
1 million dollar + 529 501
5 million dollar + 244 232
10 million dollar + 159 148
25 million dollar + 83 78
50 million dollar + 47 42
75 million dollar + 29 24
100 million dollar + 15 13
200 million dollar + 4 3
300 million dollar + - 1

Infrastructure

We added 35.62 lakh sq. ft. of physical infrastructure space during the year. The total available space as on March 31, 2015 stands at 403.68 lakh sq. ft. The number of marketing offices as on March 31,2015 was 85, compared to 73 in the previous year.

Subsidiaries and associates

We, along with our subsidiaries, provide consulting, technology, outsourcing and next-generation services. At the beginning of the year, we had 11 direct subsidiaries. As on March 31, 2015, we have 13 direct subsidiaries, 29 step-down subsidiaries and one associate.

During the year, the Board of Directors (‘the Board’)reviewed the affairs of the subsidiaries. In accordance with Section 129(3) of the Companies Act, 2013, we have prepared consolidated financial statements of the Company and all its subsidiaries, which form part of the Annual Report. Further, a statement containing the salient features of the financial statement of our subsidiaries in the prescribed format AOC-1 is appended as Annexure 1 to the Board's report. The statement also provides the details of performance, financial positions of each of the subsidiaries.

In accordance with Section 136 of the Companies Act, 2013, the audited financial statements, including the consolidated financial statements and related information of the Company and audited accounts of each of its subsidiaries, are av

Futures & Options Quote
Expiry Date :
3,366.55    12.20 (0.36%)
Instrument: FUTSTK
Expiry Date: 31-Jul-2014
Open Price: 3,330.55
Average Price: 3,361.63
No. of Contracts Traded: 14,377
Open Interest: 19,56,250
Underlying: INFY
Market Lot: 125
Previous Close: 3,366.55
Day's High | Low: 3,383.50 | 3,326.05
Turnover (Cr.): 604.13
Open Int. Change: -4,15,500 ([17.52]% )
Key Information

Key Executives:

Jeffrey S Lehman , Director

R Seshasayee , Chairman (Non-Executive)

Ravi Venkatesan , Director

U B Pravin Rao , Whole Time Director & COO


Company Head Office / Quarters:

Electronics City,
Hosur Road,
Bangalore,
Karnataka-560100
Phone : Karnataka-91-80-28520261 / Karnataka-
Fax : Karnataka-91-80-28520362 / Karnataka-
E-mail : investors@infosys.com
Web : http://www.infosys.com

Registrars:

Karvy Computershare Pvt Ltd
Karvy Selenium Tow-B,Pl-31&32 Gachibowli ,Nanakramguda ,Hyderabad-500032

 
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