1. Notes to accounts for the year ended March 31, 2016
Amounts in the financial statements are presented in Rs, crore, except
for per equity 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.
In the period of five years immediately preceding March 31, 2016 :
The Company has allotted 1,14,84,72,332 fully-paid-up shares of face
value Rs, 5 each during the quarter ended June 30, 2015, pursuant to
bonus issue approved by the shareholders through a postal ballot. The
book closure date fixed by the Board was June 17, 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.
For both the bonus issues, 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, have been allotted. Consequently, the
ratio of equity shares underlying the ADSs held by an American
Depositary Receipt holder remains unchanged. Options granted under the
restricted stock unit plan have been adjusted for bonus shares.
During the year ended March 31, 2015, the amount of dividend per share
recognized as distribution to equity shareholders includes Rs, 29.50 per
share of final dividend (not adjusted for bonus shares on June 17,
2015) and Rs, 30 per share of interim dividend (not adjusted for bonus
shares of June 17, 2015 and December 3, 2014). The total dividend
appropriation for the year ended March 31, 2015 amounted to Rs, 6,145
crore, including corporate dividend tax of Rs, 1,034 crore.
The Board has increased dividend payout ratio from up to 40% to up to
50% of post-tax consolidated profits effective fiscal 2015.
The Board of Directors, in its meeting on October 12, 2015, declared an
interim dividend of Rs, 10 per equity share. Further the Board of
Directors, in its meeting on April 15, 2016, has proposed a final
dividend of Rs, 14.25 per equity share for the financial year ended March
31, 2016. The proposal is subject to the approval of shareholders at
the Annual General Meeting to be held on June 18, 2016. The total
dividend appropriation for the year ended March 31, 2016 amounted to Rs,
6,704 crore, including corporate dividend tax of Rs, 1,134 crore.
The Central Government, in consultation with the National Advisory
Committee on Accounting Standards, has amended the Companies
(Accounting Standards) Rules, 2006 (''principal rules''), through a
notification issued by the Ministry of Corporate Affairs dated March
30, 2016. The Companies (Accounting Standards) Rules, 2016 is effective
March 30, 2016. According to the amended rules, the above-mentioned
proposed dividend will not be recorded as a liability as at March 31,
2016. (Refer to Para 8.5 of AS-4 – Contingencies and Events occurring
after Balance Sheet date). The Company believes, based on a legal
opinion, that the Rule 3(2) of the principal rules has not been
withdrawn or replaced and accordingly, the Companies (Accounting
Standards) Rule, 2016 will apply for the accounting periods commencing
on or after March 30, 2016. Therefore the Company has recorded Rs, 3,939
crore as liability for proposed dividends (including corporate dividend
tax) as at March 31, 2016.
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
2015 Stock Incentive Compensation Plan : SEBI issued the Securities and
Exchange Board of India (Share Based Employee Benefits) Regulations,
2014 (''SEBI Regulations'') which replaced the SEBI ESOP Guidelines,
1999. The 2011 Plan (as explained below) was required to be amended and
restated in accordance with the SEBI Regulations. Consequently, to
effect this change and to further introduce stock options / ADRs and
other stock incentives, the Company put forth the 2015 Stock Incentive
Compensation Plan (''the 2015 Plan'') for approval to the shareholders of
the Company. Pursuant to the approval by the shareholders through a
postal ballot which ended on March 31, 2016, the Board of Directors has
been authorized to introduce, offer, issue and allot share-based
incentives to eligible employees of the Company and its subsidiaries
under the 2015 Plan. The maximum number of shares under the 2015 Plan
shall not exceed 2,40,38,883 equity shares (this includes 1,12,23,576
equity shares which are currently held by the Trust towards the 2011
Plan). 1,70,38,883 equity shares will be issued as RSUs at par value
and 70,00,000 equity shares will be issued as stock options at market
price. These instruments will vest over a period of four years and the
Company expects to grant the instruments under the 2015 Plan over a
period of four to seven years.
2011 RSU Plan : The Company had a 2011 RSU Plan (''the 2011 Plan'') which
provided for the grant of restricted stock units (RSUs) to eligible
employees of the Company. The Board of Directors recommended the
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 was
1,13,34,400 and the 2011 Plan was expected to continue in effect for a
term of 10 years from the date of initial grant under the plan. During
the year ended March 31, 2015, the Company
made a grant of 1,08,268 restricted stock units (adjusted for bonus
issues) to Dr. Vishal Sikka, Chief Executive Officer and Managing
Director. The Board, in its meeting held on June 22, 2015, on the
recommendation of the nomination and remuneration committee, further
granted 1,24,061 RSUs to Dr. Vishal Sikka. These RSUs are vesting 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
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. Further, the Company
has earmarked 1,00,000 equity shares for employee welfare activities
approved by the shareholders through the postal ballot which ended on
March 31, 2016. The equity shares currently held under this plan, i.e.
1,12,23,576 equity shares (this includes the aggregate number of equity
shares that may be awarded under the 2011 Plan as reduced by 10,824
equity shares already exercised by Dr. Vishal Sikka and 1,00,000 equity
shares which have been earmarked for welfare activities of the
employees) have been subsumed under the 2015 Plan.
Further, the award granted to Dr. Vishal Sikka on June 22, 2015 was
modified by the nomination and remuneration committee on April 14,
2016. There is no modification or change in the total number of RSUs
granted or the vesting period (which is four years). The modifications
relate to the criteria of vesting for each of the years. Based on the
modification, the first tranche of the RSUs will vest subject to
achievement of certain key performance indicators for the year ended
March 31, 2016. Subsequent vesting of RSUs for each of the remaining
years would be subject to continued employment.
In accordance with the SEBI Regulations, 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.
2. Investment in Noah Consulting LLC
On November 16, 2015, Infosys acquired 100% membership interest in Noah
Consulting LLC, a leading provider of advanced information management
consulting services for the oil and gas industry. The business
acquisition was conducted by entering into a share purchase agreement
for a cash consideration of US million (approximately Rs, 216 crore),
contingent consideration of up to US million (approximately Rs, 33
crore on acquisition date) and retention bonus of up to US million
(approximately Rs, 212 crore on acquisition date). The payment of
contingent consideration to the sellers of Noah was dependent on the
achievement of certain financial targets by Noah for the years ended
December 31, 2015 and December 31, 2016. During the year ended March
31, 2016, based on the assessment of Noah achieving the targets for the
respective periods, the entire contingent consideration was reversed.
3. Investment in Kallidus Inc. and Skava Systems Pvt. Ltd.
On June 2, 2015, Infosys acquired 100% of the voting interests in
Kallidus Inc., (d.b.a Skava) (Kallidus), a leading provider of digital
experience solutions, including mobile commerce and in-store shopping
experiences to large retail clients and 100% of the voting interests of
Skava Systems Private Limited, India, an affiliate of Kallidus. The
business acquisition was conducted by entering into a share purchase
agreement for a cash consideration of US million
(approximately Rs, 578 crore) and a contingent consideration of up to US
million (approximately Rs, 128 crore on acquisition date), the
payment of which is dependent upon the achievement of certain financial
targets by Kallidus over a period of three years ending on December 31,
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 has made this investment to
form a new company along with Dream Works 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. As of March
31, 2016, Infosys Nova Holdings holds 16% of the equity interest in DWA
5. 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 a cash
consideration of Rs, 1,398 crore.
6. 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. 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 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 equity shares in
On April 24, 2015, the Board of Directors of Infosys has authorized the
Company to execute a Business Transfer Agreement and related documents
with EdgeVerve, to transfer the business of Finacle and Edge Services.
Post the requisite approval from shareholders through a postal ballot
on June 4, 2015, a Business Transfer Agreement and other related
documents were executed with EdgeVerve to transfer the business with
effect from August 1, 2015. The Company has undertaken an enterprise
valuation by an independent valuer and accordingly the business was
transferred for a consideration of Rs, 3,222 crore and Rs, 177 crore for
Finacle and Edge Services, respectively. Net assets amounting to Rs, 363
crore (including working capital amounting to Rs, 337 crore) have been
transferred and accordingly a gain of Rs, 3,036 crore has been recorded
as an exceptional item. The consideration was settled through an issue
of 85,00,00,000 equity
shares amounting to Rs, 850 crore and 25,49,00,000 non-convertible
redeemable debentures amounting to Rs, 2,549 crore in EdgeVerve, post the
requisite approval from shareholders on December 11, 2015.
7.Investment in Infosys Consulting Holding AG (Formerly Lodestone
On October 22, 2012, Infosys acquired 100% of the outstanding share
capital of Infosys Consulting 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,
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. During
the quarter ended December 31, 2015, the liability towards deferred
consideration was settled.
Amounts of Rs, 110 crore and Rs, 219 crore, representing the proportionate
charge of the deferred consideration have been recognized as an expense
during the years ended March 31, 2016 and March 31, 2015, respectively.
The eligible R&D revenue and capital expenditure are Rs, 54 crore and Nil
for the year ended March 31, 2016 respectively and Rs, 160 crore and Nil
towards revenue and capital expenditure respectively for the year ended
March 31, 2015.
8. Segment reporting
The Company''s operations predominantly relate to providing end-to-end
business solutions to enable clients enhance their business
performance. During the year ended March 31, 2016, the Company
reorganized its segments to enhance executive-customer relationships,
improve focus of sales investments and increase management oversight.
However, the reorganizations did not have any impact on the reportable
segments as per AS 17 ''Segment reporting'' apart from Manufacturing
being named Manufacturing and Hi-tech. The 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)
- Manufacturing and Hi-tech (MFG & HI-TECH)
- Energy & utilities, Communications and Services (ECS)
- Retail, Consumer packaged goods and Logistics (RCL)
- Life Sciences and Healthcare (LSH)
Geographic segmentation is based on business sourced from specific
geographic regions and delivered from both onsite and offshore
locations. 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.
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 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.
As at March 31, 2016 and March 31, 2015, the plan assets have been
primarily invested in insurer managed funds. The estimates of future
salary increases, considered in actuarial valuation, take account of
inflation, seniority, promotion and other relevant factors such as
supply and demand factors in the employment market. The Company expects
to contribute Rs, 74 crore to the gratuity trust during the fiscal 2017.
Effective July 1, 2007, the Company revised the employee death benefits
provided under the gratuity plan, and included all eligible employees
under a consolidated term insurance cover. Accordingly,
the obligations under the gratuity plan reduced by Rs, 37 crore, which is
being amortized on a straight-line basis to the Statement of Profit and
Loss over 10 years representing the average future service period of
the employees. The unamortized liability as at March 31, 2016 and March
31, 2015 amounts to Rs, 4 crore and Rs, 7 crore, respectively and disclosed
under ''Other long-term liabilities'' and ''Other current liabilities''.
9. Provident fund
The Company contributed Rs, 345 crore towards provident fund during the
year ended March 31, 2016 (Rs, 295 crore during the year ended March 31,
The Guidance on Implementing AS 15, Employee Benefits (revised 2005)
issued by the 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 the guidance issued by the Actuarial
Society of India during the quarter ended December 31, 2011, and based
on the assumptions listed below, there is no shortfall as at March 31,
2016, 2015, 2014, 2013 and 2012.
10. Restricted deposits
Restricted deposits as at March 31, 2016 comprise Rs, 1,154 crore (Rs,
1,039 crore as at March 31, 2015) deposited with financial institutions
to settle employee-related obligations as and when they arise during
the normal course of business.
11. Corporate social responsibility
As per Section 135 of the Companies Act, 2013, a company, meeting the
applicability threshold, needs to spend at least 2% of its average net
profit for the immediately preceding three financial years on corporate
social responsibility (CSR) activities. The areas for CSR activities
are eradication of hunger and malnutrition, promoting education, art
and culture, healthcare, destitute care and rehabilitation, environment
sustainability, disaster relief and rural development projects. A CSR
committee has been formed by the Company as per the Act. 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,
- Gross amount required to be spent by the Company during the year is Rs,
- Amount spent during the year :
In addition to the activities mentioned above, the Company has spent Rs,
86 crore on multiple CSR initiatives including Chennai flood disaster
relief, environment sustainability and conservation of natural
resources aimed at long-term sustainability of the ecosystem.
12. Indian accounting standards
The Ministry of Corporate Affairs (MCA), through its notification
in the Official Gazette dated February 16, 2015, notified the Indian
Accounting Standards (Ind AS) applicable to certain classes of
companies. Ind AS would replace the existing Indian GAAP prescribed
under Section 133 of the Companies Act, 2013 read with Rule 7 of the
Companies (Accounts) Rules, 2014. For Infosys and its subsidiaries,
Ind AS would be applicable for the accounting periods beginning
April 1, 2016, with a transition date of April 1, 2015.
The Company has evaluated the effect of transition from Indian GAAP
to Ind AS and the following are the areas which would have an impact
on account of the transition on the Company :
- Fair valuation of certain financial instruments
- Employee costs pertaining to defined benefit obligations
- Discounting of certain long-term liabilities
- Share-based payments
Further, there would be a change in the presentation of financial
statements including additional disclosures.