Infosys is a global leader in consulting, technology, outsourcing and
next-generation services. Along with its subsidiaries, Infosys provides
Business IT services (comprising application development and
maintenance, independent validation, infrastructure management,
engineering services comprising product engineering and life cycle
solutions and business process management); consulting and systems
integration services (comprising consulting, enterprise solutions,
systems integration and advanced technologies); products, business
platforms and solutions to accelerate intellectual property-led
innovation including Finacle®, our banking solution; and offerings in
the areas of analytics, cloud, and digital transformation.
The Company is a public limited company incorporated and domiciled in
India and has its registered office at Bengaluru, Karnataka, India.
The Company has its primary listings on BSE Limited and the National
Stock Exchange in India. The Company''s American Depositary Shares
representing equity shares are also listed on the New York Stock
Exchange (NYSE), NYSE Euronext London and NYSE Euronext Paris.
2 Notes to accounts for the year ended March 31,2015
Amounts in the financial statements are presented in Rs. crore, except
for per share data and as otherwise stated. All exact amounts are
stated with the suffix ''/-''. One crore equals 10 million.
The previous period figures have been regrouped / reclassified,
wherever necessary to conform to the current period presentation.
Effective January 1, 2015, Infosys Limited Employees'' Welfare trust
(trust) has been deconsolidated consequent to SEBI (Share Based
Employee Benefits) Regulations, 2014 issued on October 28, 2014. The
Company has only one class of shares referred to as equity shares
having a par value of Rs. 5/-. Each holder of equity shares is entitled
to one vote per share.
The Company declares and pays dividends in Indian rupees. The dividend
proposed by the Board of Directors is subject to the approval of the
shareholders in the ensuing Annual General Meeting.
In the period of five years immediately preceding March 31,2015
The Company has allotted 57,42,36,166 fully paid-up equity shares of
face value Rs. 5/- each during the quarter ended December 31, 2014
pursuant to a bonus issue approved by the shareholders through a postal
ballot. The record date fixed by the Board of Directors was December 3,
2014. 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. Options granted under the stock
option plan have been adjusted for bonus shares.
During the year ended March 31, 2014, the amount of dividend per share
recognized as distribution to equity shareholders was Rs. 63/- (not
adjusted for bonus issue). The dividend for the year ended March 31,
2014 includes Rs. 43/- per share (not adjusted for bonus issue) of final
dividend. The total dividend appropriation for the year ended March
31,2014 amounted to Rs. 4,233 crore, including corporate dividend tax of
Rs. 615 crore.
The Board of Directors, in its meeting of October 10, 2014, declared an
interim dividend of Rs. 30/- per equity share (not adjusted for bonus
issue). Further the Board of Directors, in its meeting of April 24,
2015, have proposed a final dividend of Rs. 29.50/- per equity share
(equivalent to Rs. 14.75/- per share after 1:1 bonus issue, if approved
by shareholders) 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 for the year ended March 31,2015 would amount to
approximately Rs. 6,145 crore including corporate dividend tax of Rs. 1,034
The Board has decided to revise and increase dividend payout ratio from
up to 40% to up to 50% of post-tax consolidated profits effective
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. Accordingly, the record
date for the bonus issues of equity shares and ADSs will be announced
in due course.
In the event of liquidation of the Company, the holders of equity
shares will be entitled to receive any of the remaining assets of the
Company in proportion to the number of equity shares held by the
shareholders, after distribution of all preferential amounts.
Stock option plan
2011 RSU Plan (''the 2011 Plan'') : The Company has a 2011 RSU Plan
which provides for the grant of restricted stock units (RSUs) to
eligible employees of the Company. The Board of Directors recommended
establishment of the 2011 Plan to the shareholders on August 30, 2011
and the shareholders approved the recommendation of the Board of
Directors on October 17, 2011 through a postal ballot. The maximum
aggregate number of shares that may be awarded under the 2011 Plan is
56,67,200 (currently held by the Infosys Limited Employees'' Welfare
Trust and adjusted for bonus shares issued) and the plan shall continue
in effect for a term of 10 years from the date of initial grant under
the plan. The RSUs will be issued at par value of the equity share. The
2011 Plan is administered by the management development and
compensation committee, now known as nomination and remuneration
committee, (''the committee'') and through the Infosys Limited
Employees'' Welfare Trust (''the trust''). The committee comprises
independent members of the Board of Directors.
During the year ended March 31, 2015, the Company made a grant of
27,067 restricted stock units to Dr. Vishal Sikka, Chief Executive
Officer and Managing Director. The RSUs will vest over a period of four
years from the date of the grant in the proportions specified in the
award agreement. The RSUs will vest subject to the achievement of
certain key performance indicators as set forth in the award agreement
for each applicable year of the vesting tranche and continued
employment through each vesting date.
In accordance with the Securities and Exchange Board of India (Share
Based Employee Benefits) Regulations, 2014, the excess of the closing
market price on the grant date of the RSUs over the exercise price is
amortized on a straight-line basis over the vesting period.
The weighted average remaining contractual life of RSUs outstanding as
of March 31,2015 under the 2011 Plan was 2.39 years.
The differential on stock compensation expense if the ''fair value''
of the RSUs on the date of the grant were considered instead of the
''intrinsic value'' during the year ended March 31, 2015 is less than
Rs. 1 crore. Consequently, there is no impact on earnings per share.
The fair value for the above impact analysis is estimated on the date
of grant using the Black-Scholes-Merton model with the following
The expected term of an RSU is estimated based on the vesting term and
contractual term of the RSU, as well as expected exercise behavior of
the employee who receives the RSU. Expected volatility during the
expected term of the RSU is based on historical volatility of the
observed market prices of the Company''s publicly traded equity shares
during a period equivalent to the expected term of the RSU.
The weighted average fair value of RSUs on grant date was Rs. 3,355/-
During the year ended March 31, 2015, the Company recorded an employee
compensation expense of Rs. 2 crore in the Statement of Profit and Loss.
2.1 Deferred taxes
Deferred tax assets and deferred tax liabilities have been offset
wherever the Company has a legally enforceable right to set-off current
tax assets against current tax liabilities and where the deferred tax
assets and deferred tax liabilities relate to income taxes levied by
the same taxation authority.
As at March 31, 2015 and March 31,2014, the Company has provided for
branch profit tax of Rs. 316 crore and Rs. 303 crore respectively, for its
overseas branches, as the Company estimates that these branch profits
would be distributed in the foreseeable future. The change in provision
for branch profit tax includes Rs. 13 crore movement on account of
exchange rate during the year ended March 31,2015.
2.1.1 Investment in Lodestone Holding AG
On October 22, 2012, Infosys acquired 100% of the outstanding share
capital of Lodestone Holding AG, a global management consultancy firm
headquartered in Zurich, Switzerland. The acquisition was executed
through a share purchase agreement for an upfront cash consideration of
Rs. 1,187 crore and a deferred consideration of up to Rs. 608 crore.
The deferred consideration is payable to the selling shareholders of
Lodestone on the third anniversary of the acquisition date and is
contingent upon their continued employment for a period of three years.
The investment in Lodestone has been recorded at the acquisition cost
and the deferred consideration is being recognized on a proportionate
basis over a period of three years from the date of acquisition. An
amount of Rs. 219 crore and Rs. 228 crore, representing the proportionate
charge of the deferred consideration has been recognized as an expense
during the years ended March 31, 2015 and March 31, 2014 respectively.
2.1.2 Investment in EdgeVerve Systems Limited
On February 14, 2014, a wholly-owned subsidiary, EdgeVerve Systems
Limited (''EdgeVerve''), was incorporated. EdgeVerve was created to
focus on developing and selling products and platforms. 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, subject to securing the requisite approval
from shareholders in the Annual General Meeting. Subsequently, at the
AGM 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 million)
with effect from July 1, 2014. Net assets amounting to Rs. 9 crore have
also been transferred and accordingly a gain of Rs. 412 crore has been
recorded as an exceptional item. The consideration has been settled
through the issue of fully paid-up shares in EdgeVerve.
2.1.3 Investment in Panaya Inc.
On March 5, 2015, Infosys acquired 100% of the voting interests in
Panaya Inc. (''Panaya''), a Delaware Corporation in the United
States. Panaya is a leading provider of automation technology for
large-scale enterprise and software management. The business
acquisition was conducted by entering into a share purchase agreement
for cash consideration of approximately Rs. 1,398 crore.
2.1.4 Investment in DWA Nova LLC
During the year ended March 31, 2015, Infosys Nova Holdings LLC
acquired 20% of the equity interests in DWA Nova LLC for a cash
consideration of Rs. 94 crore. The Company invested Rs. 94 crore to form a
new company along with DreamWorks Animation (DWA). The new company,
DWA Nova LLC, 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.
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 approximately Rs. 750 crore including a deferred
component and retention bonus.
The revision in the useful life of assets held at April 1, 2014 has
resulted in a decrease in deferred tax credit by Rs. 165 crore for the
year ended March 31, 2015 (Refer to Note 2.8).
The provision for taxation includes tax liabilities in India on the
Company''s global income as reduced by exempt incomes and any tax
liabilities arising overseas on income sourced from those countries as
per Indian Income Tax Act, 1961. Infosys'' operations are conducted
through Software Technology Parks (''STPs'') and Special Economic
Zones (''SEZs''). Income from STPs were tax exempt for the first 10
years from the fiscal in which the unit commenced software development,
or March 31, 2011 whichever is earlier. Income from SEZs Unit is fully
tax exempt for the first five years, 50% exempt for the next five years
and 50% exempt for another five years subject to fulfilling certain
2.2 Contingent liabilities and commitments (to the extent not provided
in Rs. crore
Particulars As at March 31,
Outstanding guarantees and counter
guarantees to various banks, in respect
of the guarantees given by those banks in
favor of various government authorities
and others 22 24
Claims against the Company, not
acknowledged as debts (1) 167 169
[Net of amount paid to statutory
authorities Rs. 3,572 crore (Rs. 1,716 crore)]
Estimated amount of unexecuted capital
contracts (net of advances and deposits) 1,272 827
(1) Claims against the Company not acknowledged as debts include demand
from the Indian Income tax authorities for payment of tax of Rs.3,337
crore C 1,548 crore), including interest of Rs. 964 crore C 430 crore)
upon completion of their tax assessment for fiscal 2006, fiscal 2007,
fiscal 2008, fiscal 2009 and fiscal 2010. These demands were paid to
statutory tax authorities which includes Rs. 1,788 crore paid during the
year ended March 31, 2015 consequent to demand from tax authorities in
India for fiscal 2010 towards denial of certain tax benefits. The
Company has filed an appeal with the Income Tax Appellate Tribunal.
Demand for fiscal 2006, fiscal 2007, fiscal 2008 and fiscal 2009
includes disallowance of a portion of the deduction claimed by the
Company under Section 10A of the Income Tax Act as determined by the
ratio of export turnover to total turnover. This disallowance arose
from certain expenses incurred in foreign currency being reduced from
export turnover but not reducedfrom total turnover Demand for fiscal
2007, fiscal 2008, fiscal 2009 and fiscal 2010 also includes
disallowance of portion of profit earned outside India from the STP
units and disallowance of profits earned from SEZ units under Section
10AA of the Income Tax Act. The matters for fiscal 2007, fiscal 2008
andfiscal 2009 are pending before the Commissioner of Income Tax
(Appeals) Bengaluru. For the matter of fiscal 2006, the Commissioner of
Income Tax (Appeals) has passed a partly favorable order. The order
giving effect of said Commissioner Order is awaited. The Company is
contesting the demand and the Management including its tax advisors
believes that its position will likely be upheld in the appellate
process. The Management believes that the ultimate outcome of these
proceedings will not have a material adverse effect on the Company''s
financial position and results of operations.
The Company recognized a gain of Rs. 499 crore and Rs. 217 crore on
derivative instruments during the years ended March 31, 2015 and March
31,2014, respectively, which is included in ''Other income''.
2.3 Quantitative details
The Company is primarily engaged in the development and maintenance of
computer 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 5 (viii)(c) of general instructions for preparation of the
Statement of Profit and Loss as per Schedule III to the Companies Act,
2.4 Dividends remitted in foreign currencies
The Company remits the equivalent of the dividends payable to equity
shareholders and holders of ADS. For ADS holders the dividend is
remitted in Indian rupees to the depository bank, which is the
registered shareholder on record for all owners of the Company''s ADSs.
The depositary bank purchases the foreign currencies and remits
dividends to the ADS holders.
2.5 Merger of Infosys Consulting India Limited
The Hon''ble High Court of Karnataka sanctioned the scheme of
amalgamation of Infosys Consulting India Limited (ICIL) with Infosys
Limited with an effective date of August 23, 2013 and an appointed date
of January 12, 2012. ICIL was a wholly-owned subsidiary of Infosys
Limited and was engaged in software related consultancy services. The
merger of ICIL into Infosys Limited has been accounted for under
pooling of interest method referred to in Accounting Standard 14,
Accounting for Amalgamation (AS-14).
All the assets and liabilities of ICIL on and after the appointed date
and prior to the effective date have been transferred to Infosys
Limited on a going concern basis. As ICIL was a wholly-owned subsidiary
of Infosys Limited, no shares have been allotted to the shareholders
upon the scheme becoming effective.
The eligible R&D revenue and capital expenditure are Rs. 160 crore and
Nil for the year ended March 31, 2015, and Rs. 261 crore and Nil towards
revenue and capital expenditure for the year ended March 31,2014.
2.6 Segment reporting
The Company''s operations predominantly relate to providing end-to-end
business solutions to enable clients to enhance business performance.
Effective quarter ended March 31, 2014, the Company reorganized its
business to strengthen its focus on growing existing client
relationships and increasing market share through service
differentiation and operational agility. Consequent to the internal
reorganization, there were changes effected in the reportable industry
segments based on the ''management approach'' as laid down in AS 17,
''Segment reporting'', and an additional segment, Life Sciences and
Healthcare, was identified. The Chief Executive Officer evaluates the
Company''s performance and allocates resources based on an analysis of
various performance indicators by industry classes and geographic
segmentation of customers. Accordingly, segment information has been
presented both along industry classes and geographic segmentation of
customers, industry being the primary segment. The accounting
principles used in the preparation of the financial statements are
consistently applied to record revenue and expenditure in individual
segments, and are as set out in the significant accounting policies.
Industry segments for the Company are primarily enterprises in
Financial Services and Insurance (FSI), enterprises in Manufacturing
(MFG), enterprises in the Energy and utilities, Communication and
Services (ECS), enterprises in Retail, Consumer packaged goods and
Logistics (RCL) and enterprises in Life Sciences and Healthcare (LSH).
Geographic segmentation is based on business sourced from a particular
geographic region and delivered from both onsite and offshore. North
America comprises the United States of America, Canada and Mexico;
Europe includes continental Europe (both the east and the west),
Ireland and the United Kingdom; and the Rest of the World comprises all
other places except those mentioned above and India. Consequent to the
above change in the composition of reportable industry segments, the
prior year comparatives have been restated.
Revenue and identifiable operating expenses in relation to segments are
categorized based on items that are individually identifiable to that
segment. Allocated expenses of segments include expenses incurred for
rendering services from the Company''s offshore software development
centers and onsite expenses, which are categorized in relation to the
associated turnover of the segment. Certain expenses such as
depreciation, which form a significant component of total expenses, are
not specifically allocable to specific segments as the underlying
assets are used interchangeably. The Management believes that it is not
practical to provide segment disclosures relating to those costs and
expenses, and accordingly these expenses are separately disclosed as
''unallocated'' and adjusted against the total income of the Company.
Fixed assets used in the Company''s business or liabilities contracted
have not been identified to any of the reportable segments, as the
fixed assets and services are used interchangeably between segments.
Accordingly, no disclosure relating to total segment assets and
liabilities are made. Geographical information on revenue and industry
revenue information is collated based on individual customers invoiced
or in relation to which the revenue is otherwise recognized.
2.7 Provident fund
The Company contributed Rs. 295 crore towards provident fund during the
year ended March 31, 2015 (Rs. 262 crore during the year ended March
The Guidance on Implementing AS 15, ''Employee benefits'' (revised
2005) issued by Accounting Standards Board (ASB) states that benefits
involving employer established provident funds, which require interest
shortfalls to be recompensed are to be considered as defined benefit
plans. The actuary has provided a valuation for provident fund
liabilities on the basis of guidance issued by Actuarial Society of
India during the quarter ended December 31, 2011 and based on the
assumptions provided below, there is no shortfall as at March 31, 2015,
2014, 2013, 2012 and 2011, respectively.
2.8 Corporate social responsibility
As per Section 135 of the Companies Act, 2013, a corporate social
responsibility (CSR) committee has been formed by the Company The areas
for CSR activities are eradication of hunger and malnutrition,
promoting education, art and culture, healthcare, destitute care and
rehabilitation and rural development projects. The funds were primarily
allocated to a corpus and utilized through the year on these activities
which are specified in Schedule VII of the Companies Act, 2013.
2.9 Dues to micro, small and medium enterprises
As at March 31, 2015, less than Rs. 1 crore is outstanding to micro and
small enterprises (Rs. 1 crore as at March 31, 2014). There are no
interests due or outstanding on the same.
In 2011, U.S. Department of Homeland Security (''DHS'') reviewed the
Company''s employer eligibility verifications on Form I-9 with respect
to its employees working in the United States. In connection with this
review, the Company was advised that the DHS has found errors in a
significant percentage of its Forms I-9.
On October 30, 2013, the Company settled the foregoing matters and
entered into a Settlement Agreement (''Settlement Agreement'') with
the U.S. Attorney, the DHS and the United States Department of State
(''State'', and collectively with the U.S. Attorney and the DHS,
''the United States'').
In the Settlement Agreement, the Company denied and disputed all
allegations made by the United States, except for the allegation that
the Company failed to maintain accurate Forms I-9 records for many of
its foreign nationals in the United States in 2010 and 2011 as required
by law, and that such failure constituted civil violations of certain
laws. During the year ended March 31, 2014, the Company recorded a
charge related to the settlement agreement (including legal costs) of Rs.
219 crore related to the matters that were the subject of the
Settlement Agreement. The said amount was paid prior to December 31,
2013. In addition, the Company is subject to legal proceedings and
claims, which have arisen in the ordinary course of business. The
Management does not reasonably expect that these legal actions, when
ultimately concluded and determined, will have a material and adverse
effect on the Company''s results of operations or financial condition.
2.11 Finacle and Edge Services
On April 24, 2015, the Board of Directors of Infosys authorized the
Company to execute a Business Transfer Agreement and related documents
with EdgeVerve, a wholly-owned subsidiary, subject to securing the
requisite approval from shareholders. 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,