Infosys Chairman's Speech > Engineering - Heavy > Chairman's Speech from Infosys - BSE: 500209, NSE: INFY


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Chairman's Speech (Infosys) Year : Mar '15
Dear Stakeholder,
 I am extremely proud and at the same time humbled to write to you for
 the first time as the CEO of Infosys. As someone who grew up in the
 world of technology and IT, I have tremendous respect for what Infosys''
 founders have built.
 Mr. Murthy and his co-founders opened an entirely new industry and with
 that, an opportunity for businesses to operate in entirely new ways and
 to bring new value by leveraging IT services.
 They also opened an unprecedented opportunity for people to pursue new
 career paths and new beginnings inside and outside their native
 countries. Infosys helped to not only make the world flat but
 articulated this in a way that opened imaginations worldwide. The
 Infosys founders were true entrepreneurs, but the unique things they
 brought to the company put Infosys in a different league - a sense of
 responsibility and quality in serving clients, an unparalleled
 integrity and transparency in operations, and a culture and a deeply
 held passion for education and training, scaling mountaintops only a
 rare few companies achieve in their entire history.
 When we look at Infosys today, we can see that it has been a year of
 great transition for the company. Our full-year performance was
 average.  There were hard-fought battles in a difficult climate, one in
 which clients'' expectations are changing, new emerging technologies are
 rapidly coming to market and where the landscape of services companies
 has become vastly more competitive. We also faced our own internal
 leading to lagging growth while high attrition rates and the departures
 of many key executives put tremendous pressure on our business and on
 performance. We were learning to work in a new environment and in new
 ways, and it has been a difficult learning experience. But, with
 learning comes the promise of renewing ourselves and the opportunity to
 pursue entirely new horizons.
 As I look over the last year, I already see many promising signs for
 the future. For the year ended March 31,2015, consolidated revenues
 were Rs. 53,319 crore, which is a year-on-year growth of 6.4%. In U.S.
 dollar terms, consolidated revenues were US ,711 million, which is a
 year-on-year growth of 5.6%. We saw significant cross-currency
 movements during the year, and our revenues grew by 7.1% in constant
 Our focus on operational improvements led to an increase in offshore
 effort mix from 69.4% in fiscal 2014 to 71.2% in fiscal 2015.
 Additionally, utilization (excluding trainees) improved from 76.4% in
 fiscal 2014 to 80.9% in fiscal 2015. These measures led to a
 significant improvement in operating margins to 25.9% in fiscal 2015
 compared to 24.0% in fiscal 2014. This improvement was despite stepped
 up investments in the business - we gave compensation increases to our
 employees effective April 1,2014 and followed it up with a second round
 of increases to over 20,000 employees in Q3; we promoted over 25,000
 employees during fiscal 2015 and increased the variable salary payout
 to 86% in fiscal 2015 compared to 64% in fiscal 2014.  During the year,
 employee headcount increased to 1,76,187 from 1,60,405 for Infosys and
 its subsidiaries.
 The improvement in operating margins also reflected in net profits
 growing by 15.8% year on year to Rs. 12,329 crore for the year ended
 March 31, 2015. Consequently, Earnings Per Share (EPS) also grew 15.8%
 to Rs. 107.88 during the year. We have been able to reduce quarterly
 annualized attrition for Infosys Limited from 23.4% in Q1 2015 to 13.4%
 in Q4 2015. The number of employees leaving Infosys Limited has reduced
 by more than half from May 2014 to March 2015. This shows that our
 efforts to increase investments in employees, provide them
 opportunities for promotion and increase the ease of doing business
 through simplification of internal processes, are being recognized by
 our employees.
 With the objective of broadening the shareholder base and further
 enhancing liquidity, we announced a bonus issue of 1:1 in October 2014
 which was completed in December 2014.
 This led to a 24% increase in the number of shareholders from 3,62,000
 in September 2014 to 4,48,000 in December 2014. The Board, in its
 meeting on April 24, 2015, has considered, approved and recommended
 another 1:1 bonus issue for shareholders'' approval.
 In line with our focus on enhancing shareholder returns, the Board
 decided to increase the dividend payout ratio from up to 40% of
 post-tax profits to up to 50% of post-tax profits effective fiscal
 2015. This translates to a final dividend of Rs. 29.50 per share for
 fiscal 2015 (equivalent to Rs. 14.75 per share after the 1:1 bonus issue,
 if approved by shareholders). We had liquid assets of Rs. 32,585 crore at
 the end of fiscal 2015 as compared to Rs. 30,251 crore at the end of
 fiscal 2014.
 Overall, there are many positive signs within these numbers, and I
 believe this is an indication that our strategy to achieve large-scale
 growth is the right one. We have taken several measures to improve our
 competitiveness in winning large deals in areas such as application
 maintenance, software testing, infrastructure management and business
 process outsourcing. We realigned our organizational structure to
 increase focus on expanding client relationships while at the same time
 defragmenting our service lines to enable innovation and better
 solution building.
 We continue to invest in automation solutions such as the Infosys
 Automation Platform and through our recent acquisition of Panaya. We
 continue to sharpen accountability at all levels of the organization
 for delivering client value and for revenue growth. We are putting in
 place structures that enable us to leverage our consulting and
 technology strengths to proactively identify opportunities for
 innovative, high impact strategic projects. And we are simplifying and
 improving our processes to become a highly connected, agile and
 innovative organization, where accountability and empowerment go hand
 in hand.
 In new areas, we are training our own internal teams in Design Thinking
 and bringing this powerful methodology of finding, defining and solving
 entirely new problems to our clients - already reaching 25,000
 employees and many clients. In big data and platforms, we introduced
 the Infosys Information Platform to help our clients capture, analyze
 and act on data in new ways, all using open source technologies that
 bring more security and agility, and an unprecedented price performance
 to enterprises. In artificial intelligence, we are working with clients
 to identify and build solutions for highly complex business problems.
 Going beyond automation, we are bringing artificial intelligence to
 more cognitive tasks that previously have not been solvable by software
 or systems - specific complex business problems such as airplane engine
 balancing through artificial neural networks, or incident ticket
 classification through a mix of unsupervised topic models and
 supervised learnings. I believe we are far ahead of others in this
 space. There are many more things we will do in the new aspect of our
 strategy, for ourselves and with our clients, and this will begin to
 contribute significantly to our overall revenue through new revenue
 models and by enabling us to be much more proactive in growing our
 existing client relationships in more meaningful ways.
 We are also increasing the depth of what we can do ourselves with
 strategic acquisitions and investments. We acquired Panaya, which is
 enabling us to bring higher-margin solutions to our clients in the area
 of automation; we are also acquiring Skava, which will enable us to
 bring entirely new digital retail shopping experiences to our large
 retail clients. We have made some key investments which I believe will
 help us look to entirely new areas, for example through our investment
 in Nova, a venture between Infosys and DreamWorks Animation, a leader
 in animation technology and animation films. Nova will develop and
 commercialize image-generation technology in order to provide
 end-to-end digital manufacturing capabilities for companies involved in
 the design, manufacturing, marketing or distribution of physical
 consumer products.
 We are also investing in Airviz in the internet of things area.
 Across all these areas of renew and new, we are sharply differentiating
 our existing services to be more competitive in the marketplace. We
 have also begun to create new revenue models and new consumption models
 that bring more value to our clients and ultimately will bring more
 value to shareholders through high-growth areas such as new services
 and business models, new platforms and new unique skills among our most
 important asset - our people. There is a feeling among our clients that
 we have elevated the conversation significantly to something much more
 strategic.  The strategy of renew and new is taking hold and making its
 way tangibly to our clients.
 The strength of our organization, our brand and our business was
 reflected in numerous awards and recognitions that we won during the
 year in aspects as diverse as business and management, technology
 innovation, diversity, sustainability, and service offerings. While
 each one of them is special, we are especially proud of the awards we
 have won for Corporate Governance, and our Diversity and Sustainability
 initiatives, since these reflect our ethos and define who we are. Our
 Sustainability Report provides detailed information on our responsible
 business practices across parameters in accordance with the Global
 Reporting Initiative''s G4 framework.
 Going forward, I see tremendous potential for us to grow and lead.
 However, it will take us time to see the results of the changes we have
 made, and are continuing to make, within and outside. It will take us
 time to renew and re-imagine how we work, from sales to client services
 to delivery to finance and legal.
 I believe we have a promising year ahead of us in the near term. Our
 year-on-year guidance for fiscal 2016 is for growth to be in the range
 of 10-12% in constant currency. Looking beyond this year, the mission
 of our management team is to prepare the company to achieve an
 aspirational goal of US  billion in revenue by calendar 2020 with at
 least 30% operating margin, with specific targets of:
 - Increasing revenue per FTE to US ,000 by deploying automation
 and innovation in existing businesses, with a goal of generating at
 least 30% productivity improvements in existing service lines from
 these solutions and thereby making us more competitive to win large
 - New platforms and our Edge portfolio working on different revenue
 models will contribute disproportionately to our revenue per person.
 - New services such as Design Thinking, solutions in artificial
 intelligence and intellectual property-led businesses to contribute at
 least 10% of revenues.
 - Inorganic investment strategies to influence approximately US .5
 billion of new revenue.
 - Bringing attrition levels down to the lowest in the industry and
 achieving at least 25% in diversity in our top leadership. Our
 aspiration is to make Infosys a great place to work, attracting the
 best talent in the industry globally.
 - Building a vibrant ecosystem from the ground up by investing in,
 incubating and growing innovative start-ups and companies that will
 help define the next generation of services and business models.
 As I look ahead to the coming year, and to our next 33 years, I see
 incredible opportunities in front of us, as a company, as employees and
 as an industry.  There is fundamental change happening all around us, a
 digital transformation that is bringing about an entirely new way for
 each of us, in all walks of life, to work, live and interact. I am
 excited by the role Infosys plays in this journey, by our potential to
 become the leading IT services company in the world, and a bellwether
 once again.
 And finally, I would like to say a special word of thanks to Mr. Murthy
 for his extraordinary creation, his tremendous service to this company
 and for his support in our transition. The deep culture of education
 and training that Mr. Murthy and the Infosys founders created from the
 beginning will be the foundation of our success going forward.
 It is what will open our minds and imaginations to our own potential,
 and to the challenges we will face, and overcome. I look forward to
 sharing our progress and milestones, as we scale these next frontiers,
 on an ongoing basis with clients, partners, shareholders and with all
 of you.
                                                Dr. Vishal Sikka
 Chennai                             Chief Executive Officer and
 April 24, 2015                                Managing Director
Source : Dion Global Solutions Limited
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