1. Company overview
Infosys Limited (''Infosys'' or ''the Company'') along with its controlled
trust, Infosys Science Foundation, majority-owned and controlled
subsidiary, Infosys BPO Limited and its controlled subsidiaries
(''Infosys BPO'') and wholly-owned and controlled subsidiaries, Infosys
Technologies Australia Pty. Limited (''Infosys Australia''), Infosys
Technologies (China) Co. Limited (''Infosys China''), Infosys
Technologies S. de R. L. de C. V. (''Infosys Mexico''), Infosys
Technologies (Sweden) AB (''Infosys Sweden''), Infosys Tecnologia do
Brasil Ltda (''Infosys Brasil''), Infosys Public Services, Inc. (''Infosys
Public Services''), Infosys Consulting India Limited, Infosys Americas,
Inc. (''Infosys Americas''), Edgeverve Systems Limited (''Edgeverve''),
Infosys Technologies (Shanghai) Co. Limited (''Infosys Shanghai'') and
Lodestone Holding AG and its controlled subsidiaries (''Infosys
Lodestone'') is a leading global services corporation. The Company
provides business consulting, technology, engineering and outsourcing
services to help clients build tomorrow''s enterprise. In addition, the
Company offers software products and platforms.
2 Notes to accounts for the year ended March 31, 2014
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.
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.
During the year ended March 31, 2013, the amount of per share dividend
recognized as distributions to equity shareholders was Rs. 42/-. The
dividend for the year ended March 31, 2013 includes Rs. 27/- per share of
final dividend. The total dividend appropriation amounted to Rs. 2,815
crore including corporate dividend tax of Rs. 403 crore.
The Board of Directors, in their meeting on October 11, 2013 declared
an interim dividend of Rs. 20/- per equity share.
Further the Board of directors, in their meeting on April 15, 2014
proposed a final dividend of Rs. 43/- per equity share. The proposal is
subject to the approval of shareholders at the Annual General Meeting
to be held on June 14, 2014. 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.
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, after distribution of all preferential amounts. However, no
such preferential amounts exist currently. The distribution will be in
proportion to the number of equity shares held by the shareholders.
Stock option plans
The Company had two Stock Option Plans.
1998 Stock Option Plan (''the 1998 Plan'')
The 1998 Plan was approved by the Board of Directors in December 1997
and by the shareholders in January 1998, and is for issue of
1,17,60,000 ADSs representing 1,17,60,000 equity shares. All options
under the 1998 Plan are exercisable for ADSs representing equity
shares. The 1998 Plan is administered by a compensation committee (now
known as the management development and compensation committee), all of
whom are independent members of the Board of Directors and through the
Infosys Limited Employees'' Welfare Trust (the Trust). All options had
been granted at 100% of fair market value. The 1998 Plan lapsed on
January 6, 2008, and consequently no further shares will be issued to
employees under this plan.
1999 Stock Option Plan (''the 1999 Plan'')
In fiscal year 2000, the Company instituted the 1999 Plan. The
shareholders and the Board of Directors approved the plan in September
1999, which provides for the issue of 5,28,00,000 equity shares to the
employees. The 1999 Plan is administered by a compensation committee
(now known as the management development and compensation committee),
all of whom are independent members of the Board of Directors and
through the Trust. Options were issued to employees at an exercise
price that is not less than the fair market value. The 1999 Plan lapsed
on September 11, 2009, and consequently no further shares will be
issued to employees under this plan.
There were no share options outstanding and exercisable as of March 31,
2014 and March 31, 2013.
The weighted average share price of options exercised under the 1999
Plan during the year ended March 31, 2013 was Rs. 2,374/-
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, 2014 and March 31, 2013, the Company has provided for
branch profit tax of Rs. 303 crore and Rs. 315 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. 35 crore movement on account of
exchange rate during the year ended March 31, 2014.
Profit on disposal of fixed assets during the year ended March 31, 2014
is Rs. 1 crore (less than Rs. 1 crore for the year ended March 31, 2013).
The Company has entered into lease-cum-sale agreements to acquire
certain properties. In accordance with the terms of some of these
agreements, the Company has the option to purchase the properties on
expiry of the lease period. The Company has already paid 99% of the
value of the properties at the time of entering into the lease-cum-sale
agreements with the balance payable at the time of purchase. These
amounts are disclosed as ''Land – leasehold'' under ''Tangible assets'' in
the financial statements
The aggregate depreciation charged on the above assets during the year
ended March 31, 2014 amounted to Rs. 3 crore (Rs. 4 crore for the year
ended March 31, 2013).
The rental income from Infosys BPO for the year ended March 31, 2014
amounted to Rs. 17 crore (Rs. 17 crore for the year ended March 31, 2013).
Obligations on long-term, non-cancelable operating leases
The operating lease arrangements, are renewable on a periodic basis and
for most of the leases extend up to a maximum of ten years from their
respective dates of inception and relates to rented premises. Some of
these lease agreements have price escalation clauses.
4. 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. 228 crore and Rs. 85 crore representing the proportionate
charge of the deferred consideration has been recognized as an expense
during the years ended March 31, 2014 and March 31, 2013 respectively.
5. Investment in Edgeverve Systems Limited
On February 14, 2014, Infosys incorporated a wholly-owned subsidiary
called Edgeverve Systems Limited (Edgeverve). Edgeverve would focus on
developing and selling products and platforms. On April 15, 2014, the
Board of Directors of Infosys has authorized the Company to execute a
Business Transfer Agreement and related documents with Edgeverve,
subject to securing the requisite approval from shareholders in the
ensuing Annual General Meeting scheduled on June 14, 2014.
Provision for doubtful debts
Periodically, the Company evaluates all customer dues to the Company
for collectability. The need for provisions is assessed based on
various factors including collectability of specific dues, risk
perceptions of the industry in which the customer operates, general
economic factors, which could affect the customer''s ability to settle.
The Company normally provides for debtor dues outstanding for six
months or longer from the invoice date, as at the Balance Sheet date.
The Company pursues the recovery of the dues, in part or full.
6. Cash and cash equivalents
Cash and cash equivalents as of March 31, 2014 and March 31, 2013
include restricted cash and bank balances of Rs. 203 crore and Rs. 192
crore, respectively. The restrictions are primarily on account of cash
and bank balances held as margin money deposits against guarantees and
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.
Infosys'' operations are conducted through Software Technology Parks
(''STPs'') and Special Economic Zones (''SEZs''). Income from STPs were tax
exempt for the earlier of 10 years commencing from the fiscal year in
which the unit commences software development, or March 31, 2011.
Income from SEZs 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 conditions.
7. 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 24 19
Claims against the Company,
not acknowledged as debts (1) 169 535
[Net of amount paid to
statutory authorities Rs.
1,716 crore (Rs. 1,114 crore)]
Estimated amount of
unexecuted capital contracts
(net of advances and deposits) 827 1,139
in million in Rs.
crore in million in Rs.
Forward contracts outstanding
In USD 724 4,338 814 4,419
In Euro 49 405 50 348
In GBP 73 732 55 453
In AUD 75 415 70 396
In USD 20 120 - -
(1) Claims against the Company not acknowledged as debts include
demands from the Indian Income tax authorities for payment of
additional tax of Rs. 1,548 crore (Rs. 1,088 crore), including interest of
Rs. 430 crore (Rs. 313 crore) upon completion of their tax review for
fiscal years 2006, 2007, 2008 and 2009. These income tax demands are
mainly on account of disallowance of a portion of the deduction claimed
by the Company under Section 10A of the Income Tax Act. The deductible
amount is determined by the ratio of export turnover to total turnover.
The disallowance arose from certain expenses incurred in foreign
currency being reduced from export turnover but not reduced from total
turnover. The tax demand for fiscal years 2007, 2008 and 2009 also
includes disallowance of portion of profit earned outside India from
the STP units and disallowance of profits earned from SEZ units. The
matter for fiscal years 2006, 2007, 2008 and 2009 are pending before
the Commissioner of Income tax (Appeals), Bangalore. 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.
As of the Balance Sheet date, the Company''s net foreign currency
exposures that are not hedged by a derivative instrument or otherwise
is Nil (Rs. 1,189 crore as at March 31, 2013).
The foreign exchange forward and options contracts mature within 12
months. The table below analyzes the derivative financial instruments
into relevant maturity groupings based on the remaining period as of
the Balance Sheet date :
The Company recognized a gain on derivative financial instruments of Rs.
217 crore and Rs. 68 crore during the years ended March 31, 2014 and
March 31, 2013, respectively, which is included in other income.
8. 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 revised Schedule VI to the
Companies Act, 1956.
9. 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 depository bank purchases the foreign currencies and remits
dividends to the ADS holders.
10. Merger of Infosys Consulting India Limited
The Honorable 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.
11. 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) and enterprises in Retail, Consumer packaged goods and
Logistics (RCL), enterprises in Life Sciences and Healthcare (LSH).
Geographic segmentation is based on business sourced from that
geographic region and delivered from both on-site and off-shore. 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 comprising
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 on-site 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. 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.
During the year ended March 31, 2010, a reimbursement obligation of Rs. 2
crore has been recognized towards settlement of gratuity liability of
Infosys Consulting India Limited (ICIL). This has been offset pursuant
to transfer of all assets and liabilities of ICIL on account of merger.
As at March 31, 2014 and March 31, 2013, the plan assets have been
primarily invested in government securities. 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. 110 crore to the gratuity trust during the fiscal year
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, 2014 and March 31, 2013
amounts to Rs. 11 crore and Rs. 15 crore, respectively and disclosed under
''Other long-term liabilities'' and ''other current liabilities''.
The Company has aligned the gratuity entitlement for majority of its
employees prospectively to the Payment of Gratuity Act, 1972. This
amendment has resulted in a curtailment gain of Rs. 69 crore for the year
ended March 31, 2013 which has been recognized in the Statement of
Profit and Loss for the year ended March 31, 2013.
12. Provident fund
The Company contributed Rs. 262 crore towards provident fund during the
year ended March 31, 2014 (Rs. 240 crore during the year ended March 31,
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 Actuarial Society of India has issued the final guidance for
measurement of provident fund liabilities during the quarter ended
December 31, 2011. The actuary has accordingly provided a valuation and
based on the below provided assumptions there is no shortfall as at
March 31, 2014, March 31, 2013, March 31, 2012, March 31, 2011 and
March 31, 2010.
The Company contributed Rs. 202 crore to the superannuation trust during
the year ended March 31, 2014, (Rs. 176 crore during the year ended March
14. Restricted deposits
Restricted deposits as at March 31, 2014 include Rs. 977 crore (Rs. 724
crore as at March 31, 2013) deposited with financial institutions to
settle employee-related obligations as and when they arise during the
normal course of business.
15. Dues to micro small and medium enterprises
As at March 31, 2014, Rs. 1 crore is outstanding to micro and small
enterprises. There are no interests due or outstanding on the same.
The Company has no dues to micro and small enterprises during the
quarter and year ended March 31, 2013.
On May 23, 2011, the Company received a subpoena from a grand jury in
the United States District Court for the Eastern District of Texas.
The subpoena required that the Company provide to the grand jury
certain documents and records related to its sponsorships for, and uses
of, B1 business visas. The Company complied with the subpoena. In
connection with the subpoena, during a meeting with the United States
Attorney''s Office for the Eastern District of Texas, the Company was
advised that it and certain of its employees are targets of the grand
In addition, the 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 that the DHS has reviewed,
and may impose fines and penalties on the Company related to such
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
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
Under the Settlement Agreement, the Company agreed, among other things,
- The company will pay to the United States an aggregate amount equal
to -213 crore;
- The Company will retain, for a period of two years from the date of
the Settlement Agreement, an independent third-party auditor or
auditing firm at its expense which will annually review and report on
its Forms I-9 compliance, which reports shall be submitted to the U.S.
Attorney; and Within 60 days after the first anniversary of the
Settlement Agreement, the Company will furnish a report to the U.S.
Attorney concerning the Company''s compliance with its internal B-1 visa
use policies, standards of conduct, internal controls and disciplinary
procedures. In return, the United States agreed, among other things,
- The United States will file a motion to dismiss with prejudice the
complaint it will file in the United States District Court for the
Eastern District of Texas relating to allegations made by the United
States regarding the Company''s compliance with laws regulating H1-B and
B-1 visas and Forms I-9 (the ''Alleged Conduct'');
- The United States will not use the Alleged Conduct to revoke any
existing visas or petitions or deny future visas or petitions for the
Company''s foreign nationals, and will evaluate each visa or petition on
its own individual merits;
- The United States will not use the Alleged Conduct to debar or
suspend the Company from any B-1 or H1-B immigration program, and the
United States will not make any referrals to any government agencies
for such debarment or suspension proceedings related to the Alleged
- The United States will release the Company and each of its current
and former employees, directors, officers, agents and contractors from
any civil, administrative or criminal claims the United States has or
may have arising out of or pertaining to the Alleged Conduct, subject
to certain exceptions specified in the Settlement Agreement.
Further, separate from, but related to the Settlement Agreement, U.S.
Immigration and Customs Enforcement has confirmed that it will not
impose debarment from any B-1 or H1-B immigration program on the
Company related to the Alleged Conduct.
The Company recorded a charge related to the Settlement Agreement
including legal costs of Rs. 219 crore in the year ended March 31, 2014
related to the matters that were the subject of the Settlement
Agreement. The said amounts were 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.
17. Exceptional item
During the year ended March 31, 2013, the Company received dividend of
Rs. 83 crore from its wholly-owned subsidiary Infosys Australia. The tax
on such dividend is Rs. 14 crore.