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Infosys Technologies
BSE: 500209 | NSE: INFOSYSTCH | ISIN: INE009A01021 | Computers - Software
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| Directors Report | Year End : Mar '08 |
The are delighted to present the report on our business and operations
for the year ended March 31, 2008.
1. Results of operations in Rs. crore, except per share data
2008 2007
Income from software services and products 15,648 13,149
Software development expenses 8,876 7,278
Gross profit 6,772 5,871
Selling and marketing expenses 730 719
General and administration expenses 1,079 927
Operating profit before interest and depreciation 4,963 4,225
Interest - -
Depreciation 546 469
Operating profit before tax and exceptional items 4,417 3,756
Other income, net 683 375
Provision for investments - 2
Net profit before tax and exceptional items 5,100 4,129
Provision for taxation™ 630 352
Net profit after tax and before exceptional items 4,470 3,777
Income on sale of investments, net of taxes - 6
Net profit after tax and exceptional items 4,470 3,783
Profit & loss account balance brought forward 4,844 2,195
Less: Residual dividend paid - 4
Dividend tax on the above - 1
Amount available for appropriation 9,314 5,973
Dividend
Interim 343 278
Final 415 371
Special dividend 1,144 -
Total dividend 1,902 649
Dividend tax 323 102
Amount transferred to general reserve 447 378
Balance in profit and loss account 6,642 4,844
EPS(2) before exceptional items
Basic 78.24 67.82
Diluted 77.98 66.33
EPS(2)after exceptional items
Basic 78.24 67.93
Diluted 77.98 66.44
Note: 1 crore equals 10 million
(1) Includes tax reversal ojRs. 121 crore and Rs. 125 cwre for fiscal
2008 and 2007 respectively
(2) Equity shares are ojpar value of Rs. 5/- each
2. Business
Total income increased to Rs. 15,648 crore from Rs. 13,149 crore in the
previous year, at a growth rate of 19%. Our software export revenues
aggregated Rs. 15,429 crore, up by 19% from Rs. 12,935 crore in the
previous year. Of these, 63.1% of the revenues came from Nonh America,
26.9% from Europe, and 8.6% from the rest of the world. The revenue
from Europe increased from Rs. 3,393 crore to Rs. 4,207 crore, with a
growth rate of 24% which is higher than the other regions. The share of
fixed-price component of the business was 33%, compared to 28% during
the previous year. Blended revenue productivity, in dollar terms,
increased by 5.3% during the year. The gross profit amounted to Rs.
6,772 crore (43.3% of revenue) as against Rs. 5,871 crore (44.6% of
revenue) in the previous year. The onsite revenues decreased from
51.7% in the previous year to 50.9%. The onsite person-months comprised
29.8% of the total billed efforts, compared to 30.1% during the
previous year. The operating profit amounted to Rs. 4,963 crore (31.7%
of revenue) as against Rs. 4,225 crore (32.1% of revenue) in the
previous year. Sales and marketing costs were 4.7% and 5.5% of our
revenue during the year ended March 31,2008 and 2007. General and
administration expenses decreased from 7% in the previous year to 6.9%.
We continue to reap the benefits of economies of scale. The net profit
after tax and exceptional item was Rs. 4,470 crore (28.6% of revenue)
as against Rs. 3,783 crore (28.8% of revenue) in the previous year. The
net profit for the year included a tax reversal of Rs. 121 crore
(previous year Rs. 125 crore). The tax provisions were reversed as it
was no longer required in various overseas jurisdictions.
We seek long-term partnerships with clients while addressing their
various IT requirements. Our customer-centric approach has resulted in
high levels of client satisfaction. We derived 97% of our revenues from
repeat business (i.e. a client who also contributed to revenues during
the previous fiscal year). We added 170 new clients, with a substantial
number of large global corporations. The total client base at the end
of the year stood at 538. Further, we have 310 million-dollar clients
(275 in the previous year), 141 five-million-dollar clients (107), 89
ten-million-dollar clients (71), 18 fifty-million-dollar clients (12),
and 6 hundred-million-dollar clients (3). During the year, one of our
clients contributed more than 0 million of revenues. We added 45.12
lakh sq. ft. of physical infrastructure space. The total available
space now stands at 164.77 lakh sq. ft. The number of marketing offices
as of March 31, 2008 was 47.
3. Subsidiaries
We have five subsidiaries: Infosys BPO Limited, Infosys Technologies
(Australia) Pty. Limited, Infosys Technologies (China) Company Limited,
Infosys Consulting, Inc. and Infosys Technologies S. de R. L. de C. V
and five step-down subsidiaries: Infosys BPO S.R.O., Pan Financial
Shared Services India Private Limited, P-Financial Services Holdings B.
V, Infosys BPO (Poland) Sp. Z.o.o, and Infosys BPO (Thailand) Limited.
Infosys BPO Limited (IBPO)
Infosys BPO Limited (formerly Progeon Limited) was incorporated in
April 2002, in India, to address opportunities in business process
management. As of March 31, 2008, we hold 99.98% of the equity share
capital and voting power of Infosys BPO. During the year, Infosys BPO
serviced 72 clients, added 5 clients, and generated Rs. 937 crore in
consolidated revenue,withanet profit ofRs. 153crore. The employee
strength as on March 31, 2008 was 16,295. Our total investment in
Infosys BPO as of March 31, 2008 was Rs. 659 crore. During the year,
IBPO concluded a sale and purchase agreement with Koninklijke Philips
Electronics N.V. (Philips) by means of which it made a 100% investment
in the share capital amounting Rs. 107 crore in P-Financial Services
Holding B.V., the Netherlands entity (Holding Company). This
acquisition will help IBPO in acquiring domain skill sets in the
finance and administration space, as well as enhance its global
presence with centers in Thailand and Poland.
Infosys Technologies (Australia) Pty. Limited In January 2004, we
acquired, for cash, 100% of the equity in Expert Information Services
Pty. Limited, Australia, for US .3 million (Rs. 66 crore). The
acquired company was renamed Infosys Technologies (Australia) Pty.
Limited. During the year, Infosys Technologies (Australia) Pty. Limited
serviced 49 clients and generated Rs. 556 crore in revenue, with a net
profit of Rs. 101 crore. The employee strength as on March 31, 2008 was
363,
Infosys Technologies (China) Company Limited Infosys Technologies
(China) Company Limited (Infosys China) is a wholly-owned subsidiary
and was formed to expand our business operations in China. We have
invested US million (Rs. 46 crore) of capital in Infosys China and
advanced a loan of US million (Rs. 32 crore) as of March 31,2008.
During the year, Infosys China serviced 59 clients, and generated a
revenue of Rs. 77 crore, with a net loss of Rs. 7 crore. The employee
strength as on March 31, 2008 was 699.
Infosys Consulting, Inc.
In April 2004, we established Infosys Consulting, Inc., a wholly-owned
subsidiary, in Texas, U.S., to add high-end consulting capabilities to
our Global Delivery Model. The Board had approved an investment of up
to US million in the share capital of Infosys Consulting, Inc. We
have invested US million (Rs. 171 crore) as of March 31,2008.
During the year, Infosys Consulting serviced 90 clients, and generated
a revenue of Rs. 246 crore, with a net loss of Rs. 51 crore. The
employee strength as on March 31, 2008 was 265.
Infosys Technologies S. de R. L. de C. V.
During the year, we established our first Latin American subsidiary,
and opened a development center and office for the region in Monterrey,
Mexico. The subsidiary, Infosys Technologies S. de R. L. de C. V,
provides our complete range of business consulting and information
technology services for clients in ail industries including banking,
financial services, retail, consumer packaged goods, resource, energy
and utilities. The center provides key offerings in business process
outsourcing, infrastructure management and packaged solutions
implementation. The Board has approved an investment of up to Mexican
Pesos 59.9 million. During the year, Infosys Mexico serviced six
clients, and generated a revenue of Rs. 3 crore, with a net loss of Rs.
7 crore. The employee strength as on March 31, 2008 was 75. Our
investment in the subsidiary as of March 31, 2008 was Rs. 22 crore.
4. Finacle
Finacle, our universal banking solution, helps banks win in the flat
world by enabling them to shift their strategic and operational
priorities. It maximizes their opportunities for growth while
minimizing the risks that come with large-scale business
transformation. This modular solution addresses the core banking,
treasury, wealth management, consumer and corporate e-banking, mobile
banking and web-based cash management requirements of universal, retail
and corporate banks worldwide. We recently released Finacle® version
10, which brings a whole new set of offerings including Islamic
banking, wealth management and enhanced mobile banking solutions.
Finacle® currently powers 109 banks across 60 countries, helping them
serve over 20,000 branches, 160 million customers, 230 million
accounts, and 1,50,000 concurrent users, supporting over 69 million
peak banking transactions per day spread across multiple installations.
Independent reports by renowned research firms have positioned Finacle®
among the leaders in the global evaluation of retail core banking
solution vendors. Finacle® has also emerged as one of the most scalable
core banking solutions in the world by achieving an unparalleled
performance benchmark of 104 million effective transactions per hour
(29,010 ETPS).
5. Quality
We continue to invest and reap benefits through quality initiatives.
In August 2007, Infosys China was appraised at Level 5 of the latest
CMMI model, vl.2. It is the first company in China to hold this
certification.
Apart from continued focus and surveillance audits in ISO
certifications such as ISO 9001-TickIT, ISO 27000, AS 9100, etc., our
quality department manages key process improvement initiatives. Our
quality initiatives are aligned to business goals of units through the
balanced scorecard approach.
Some of the key process improvement initiatives are:
* 1PM+, an integrated project management suite, to improve project and
program management
* Enhanced focus on tools and reuse to improve productivity
* BrITe (Businessfesults impact @ Infosys Technologies), an innovative
methodology that uniquely blends IT-specific Six Sigma approach with
statistical predictive modeling and Lean principles to address diverse
business critical parameters. We have a trademark for this improvement
methodology.
* The iSOP (Infosys Scaling Outstanding Performance) program to
evaluate and identify improvements in units using the Baldrige model
* Metrics-based models to evaluate quality of object-oriented design
* PRIMA awards, a quarterly recognition program for execution
excellence. The PRIMA framework has helped to manage and improve
excellence.
6. Software Engineering and Technology Labs
The Software Engineering and Technology Labs (SETLabs) at Infosys is
the center for applied technology research in software engineering and
enterprise technology. SETLabs leverages emerging technologies for
improving engineering effectiveness and developing client-focused
business solutions. During the year, SETLabs built several solutions,
frameworks, tools and methodologies in the areas of software
engineering, high performance and grid computing, convergence
technologies, information management, Web 2.0 and knowledge
engineering. During the year, more than 100 articles were published by
SETLabs researchers in leadingjournals, magazines and conference
proceedings. SETLabs Briefings published three industry-specific
issues related to insurance, banking and capital markets, and energy
verticals, in addition to its regular issues. A special issue on
testing was also published. SETLabs conducted 24 Innovation Workshops
with customers from the US and Australia, to identify research
collaboration possibilities. SETLabs collaborated with leading national
and international universities such as the Indian Institute of
Information Technology, Hyderabad, Purdue University, University of
Southern California, and Queensland University of Technology.
Researchers from BT Group PLC and SETLabs will also collaborate on
research and innovation. A Memorandum of Understanding (MoU) has been
signed to this effect.
We currently have two issued patents granted by the US Patent and
Trademark Office. An aggregate of 119 patent applications are pending
in the US Patent and Trademark Office and Indian Patent Office.
7. Reorganization
During the year, we reorganized our business units in anticipation of
changes in the global IT industry and to differentiate vis-a-vis our
competitors. The reorganization, effective November 2007, will help us
to enhance the One Infy experience and will, in turn, deepen our
transformational capabilities. The restructuring will also help us to
broaden our customer base and strengthen our current portfolio through
scale benefits. The new opportunities will leverage the strengths of
our next-generation of leaders.
Highlights
* Six vertical Industry Business Units (IBUs) and five Horizontal
Business Units (HBUs) that cut across all verticals
* The European business divided into industry verticals, and integrated
within the IBUs
* The New Growth Engines (NGE) unit formed to expand business in
Australia, China, Japan, Middle East, Canada, South America and Latin
America
* India Business Unit formed to focus on India and tap the growing
domestic market
* Increased focus on delivery excellence
* Consolidated consulting skills
* Consolidated sales and marketing functions
Executive Council
As part of the re-organization, an Executive Council (EC), chaired by
the CEO, consisting of the COO, CFO, executive board members and select
unit heads, was constituted, to leverage the strengths of our next
generation of leaders.
The responsibilities of the EC members include participation in the
formulation of business strategy with the Board, framing policy for
strategy deployment, ensuring management and operational supervision,
and enabling risk mitigation strategies.
8. Branding
During the year, we received the Diamond Award for the best global
brand campaign in the category of Sharpening Brand and Competitive
Differentiation from the IT Services Marketing Association (ITSMA). We
got extensive coverage in leading global print, electronic and digital
media. Time magazine commented on our professionalism with the headline
Meritocracy is the model. Newsweek referred to us as a Titan of
globalization. BusinessWeek, The Independent, The Guardian, Financial
Times, BBC World, CNBC and CNN covered Infosys during the year. We
were also featured on leading online business and technology
destinations like www.cio.com, www.businessweek.com and www.forbes.com.
CNBC promoted the Infosys brand on its channels across the US, Europe
and Asia as a sponsor of the Whos in charge? debate and as the host
of the 2020: Future By Design breakfast at Davos.
Our employees continued to demonstrate thought leadership and domain
expertise with papers in leading industry publications like Bank
Accounting & Finance (The Subprime Mortgage Market: Current State and
the Road Ahead), Wall Street & Technology (Corporate Actions
Outsourcing Utilizing a SaaS Model) and Manufacturing Business
Technology (Win in the flat world: Apply Lean principles across the IT
organization).
We were recognized as a leader by leading analyst firms for many of our
offerings. A leading analyst firm ranked us as a leader in global IT
infrastructure outsourcing, SAP implementation providers and Oracle
implementation providers. We also figured as a leader for North America
and Europe Offshore Application Services. Infosys BPO was ranked
amongst the top six comprehensive FAO service providers by a leading
analyst firm.
We were the key sponsor of many flagship events including Sapphire and
Oracle Open World. Our executives were invited speakers at leadingh
C-level conclaves like India Economic Summit, Fortune CEO Summit and
World Economic Forum.
We have leveraged Web 2.0 technologies for effective online branding.
Our blogs ran on www.economist.com, our videos run on YouTube and the
investor section of our website was voted as the winner in the Best
Investor Relations Website and Best Corporate Governance categories
in Asia Pacific and Africa by MZ Consult NY LLC, in the 2008 investor
relations global rankings. We also launched our own intranet-based TV
channel, Infy TV, for internal communication and branding. Infosys
Foundation is sponsoring the ACM (Association for ¦ Computing
Machinery) Award through an endowment. The ACM-Infosys Foundation Award
in the Computing Sciences recognizes personal-contributions by young
scientists and system developers to a contemporary innovation that,
through its depth, fundamental impact and broad implications,
exemplifies the greatest achievements in the discipline. The award
carries a cash prize of US ,50,000. We also instituted a Rs. 1
million Infosys Mathematics Award jointly with the National Institute
of Advanced Studies in order to encourage research in mathematics and
sciences.
9. Awards
These are some of the awards that we received during the financial year
2007-08:
* Award for best investor relations by an APAC company in the US market
at IR Magazine US Awards 2008
* ICAI judged the Infosys Annual Report 2007 as the best in the
Information Technology, Communication and Entertainment Enterprises
category
* The International Association of Outsourcing Professionals (IAOP)
named Infosys in its 2008 Global Outsourcing 100
* Best Investor Relations Website and Company with Best Corporate
Governance Practices in Investor Relations (IR) Global Rankings 2008 in
APAC categories
* Voted the New Age Employer of Choice in 2007 in a poll conducted by
CNBC-TV18, CNBC Awaaz and Moneycontrol.com
* We moved up to No. 14 on FinTech 100, an international annual listing
of the top 100 global application and service providers to the
financial services industry
* Named Best Outsourcing Partner in Waters Readers Survey
* Named a leader in Global IT Infrastructure Outsourcing
* NASSCOM-India Today Woman Corporate Award for excellence in gender
inclusivity
* Global MAKE award for the fourth year
* Fortunes Top 10 Companies for Leaders
* Bloom Group named Infosys.com as a prospect-friendly website
* The Reputation Institute named Infosys, a globally respected company
* Dun & Bradstreets Top Indian IT Companies 2007
* LACP Silver Award for Infosys Annual Report
* 2007 Optimas Award in the Global Outlook category
Our customers and market influencers also commended our service
excellence and delivery efficiency during the year:
* The 2007 Boeing Performance Excellence Award (BPEA) from The Boeing
Company for a 12-month gold-level performance
* Named Royal Bank of Scotland Groups 2007 Best Technology Supplier
* Two Partner in Progress awards from Sears Holdings Corporation
* DaimlerChryslers IPS Supplier of the Year 2006
* Named Salisburys 2006 IT Supplier of the Year
10. Development centers
During the year, we incurred capital expenditure aggregating Rs. 1,181
crore on physical infrastructure, (Rs. 1,194 crore during the previous
year), and another Rs. 189 crore on technological infrastructure, (Rs.
249 crore in the previous year). In all, Rs. 1,370 crore has been
invested, as against (Rs. 1,443 crore in the previous year).
As of March 31, 2008, in India, we had 164.77 lakh sq. ft. of space
with 77,754 seats, and an additional 83.63 lakh sq. ft. under
construction that would provide 26,881 seats.
11. Liquidity
We continue to be debt-free, and maintain sufficient cash to meet our
strategic objectives. Liquidity in the balance sheet needs to balance
between earning adequate returns and the need to cover financial and
business risks. Liquidity also enables us to make a rapid shift in
direction, should the market so demand. During fiscal 2008, internal
cash flows have more than adequately covered working capital
requirements, capital expenditure, investment in subsidiaries and
dividend payments, leaving a surplus of Rs. 2,079 crore. As on March
31, 2008, we had liquid assets of Rs. 7,689 crore as against
Rs. 5,610 crore at the previous year-end. These funds have been
invested in deposits with banks and highly-rated financial
institutions.
12. Increase in share capital
During the year, we issued 7,85,896 shares on the exercise of stock
options under the 1998 and 1999 employee stock option plans. Due to
this, the outstanding issued, subscribed and paid-up equity share
capital increased from 57,12,09,862 shares to 57,19,95,758 shares
asofMarch31,2008.
13. Appropriations
Dividend
In October 2007, we paid an interim dividend of Rs. 6/- per share (120%
on par value of Rs. 5/-). We recommend a final dividend of
Rs. 7.25 per share (145% on par value of Rs. 5/- per share) and a
special dividend of Rs. 20/- per share (400% on par value of Rs. 5/-
each).
We recommended the special dividend on crossing a significant milestone
of reaching US $ 1 billion in net profits.
The total dividend amount is Rs. 1,902 crore, as against Rs. 649 crore
for the previous year. Dividend (including dividend tax) as a
percentage of profit after tax is 49.8% (19.8% excluding the special
dividend) as compared to 19.9% in the previous year.
The register of members and share transfer books will remain closed
from May 31,2008 to June 14,2008, both days inclusive. Our Annual
General Meeting has been scheduled for June 14, 2008.
Transfer to reserves
We propose to transfer Rs. 447 crore to the general reserve. An amount
of Rs. 6,642 crore is proposed to be retained in the profit and loss
account.
14. Dividend policy
Our current financial policy is to pay dividends up to 20% of net
profits. The Board reviewed the policy, and considering* the need to
balance the cash required in the business with that of enhancing
returns to shareholders, decided to increase the dividend payout ratio
up to 30% of net profits effective fiscal 2009.
15. Corporate governance
We continue to be a pioneer in benchmarking our corporate governance
policies with the best in the world. Our efforts are widely recognized
by investors in India and abroad. We have undergone the corporate
governance audit by ICRA and CRISIL. ICRA has rated our corporate
governance practices at CGR 1. CRISIL has assigned CRISIL GVC Level 1
rating to us. We have complied with the recommendations of the
Narayana Murthy Committee on Corporate Governance constituted by the
Securities and Exchange Board of India (SEBI). For fiscal year 2008,
the compliance report is provided in the Corporate governance report
section of this Annual Report. The auditors certificate on compliance
with the mandatory recommendations of the committee is annexed to this
report. We have documented our internal policies on corporate
governance. In line with the committees recommendations, the
Managements discussion and analysis of the financial position of the
Company is provided in this Annual Report and is incorporated here by
reference. We continue our practice of providing a report on our
compliance with the corporate governance requirements of six countries,
in their national languages, for the benefit of our shareholders in
those countries. During the year, we continued to fully comply with
the US Sarbanes-Oxley Act of 2002. Several aspects of the Act such as
the Disclosure Committee Requirements, Whistleblower Policy, and Code
of Conduct for Senior Officers and Executives have already been
instituted..
16. Additional information to shareholders
We continue to provide additional information in the form of intangible
assets score sheet, human resources accounting and value-added
statement.
We used to report the Current cost adjusted financial statements as
an additional information to the shareholder, using the methodology
prescribed by the Guidance Note on Accounting for Changing Prices
issued by the Institute of Chartered Accountants of India which is
similar to IAS 29 issued by the International Accounting Standards
Committee (IAS). Recently, the International Practices Task Force
(IPTF) appointed by the AICPAs Center for Audit Quality had identified
certain hyper-inflationary economies for which this standard is
applicable. IPTFs criteria for identifying hyper-inflationary
economies is similar to that of IAS 29, Financial Reporting in
Hyper-inflationary Economies. Since, this standard is applicable only
to identified hyper-inflationery economies, we do- not consider it
relevant to continue publishing this report and the same has been
discontinued starting this fiscal year.
During the year, NASDAQ modified its rules relating to dispatch of
annual reports to ADR holders. Under the amended rules, a company can
host the annual report on its website, in lieu of physical
distribution. We have decided to adopt this rule and accordingly have
made the annual report and the filing with the US Securities and
Exchange Commission (SEC) in Form 20-F available on our website
www.infosys.com. However, a physical copy will be made available to
shareholders on request.
Consequent to this, we are not circulating the Form 20-F filing with
SEC to our shareholders in India, but the same would be made available
to shareholders on request. However, the extract-of the audited balance
sheet and income statement as per US GAAP is provided in the Annual
Report.
The International Financial Reporting Standards (IFRS) are gaining the
attention of companies, regulators and investing communities across the
globe. Many countries have adopted IFRS and some of them, including
India, are in the process of adopting the same. Recently, SEC permitted
Foreign Private Issuers to file financial statements in accordance with
IFRS without any reconciliation with US GAAP SEC is in the process of
announcing a framework and rules for adoption of IFRS by domestic
companies in the US.
Currently, we report our financials under both Indian and US GAAP We
also report in substantial compliance with the GAAP of six countries
namely - Australia, Japan, UK, France, Germany and Canada. We have
evaluated the requirements of IFRS and believe that we are fully
prepared to adopt IFRS. However, we will await the issuance of final
framework and rules for adoption of IFRS by domestic companies by SEC
before we adopt the same-. In the interim, we have provided the balance
sheet and income statement in substantial compliance with IFRS in the
Annual Report.
17. Particulars under Section 212 of the Companies Act
As per Section 212 of the Companies Act, 1956, we are required to
attach the directors report, balance sheet, and profit and loss
account of our subsidiaries. We had applied to the Government of India
for an exemption from such an attachment as we present the audited
consolidated financial statements in the Annual Report. We believe that
the consolidated accounts present a full and fair picture of the state
of affairs and the financial condition, and are accepted globally. The
Government of India has granted us exemption from complying with
Section 212. Accordingly, the Annual Report does not contain the
financial statements of these subsidiaries. We will make available the
audited annual accounts and related information of subsidiaries, where
applicable, upon request by any of our investors. These documents will
also be available for inspection during business hours at our
registered office in Bangalore, India.
18. Particulars of employees
As required under the provisions of Section 217(2A) of the Companies
Act, 1956, read with the Companies (Particulars of Employees) Rules,
1975, as amended, the names and other particulars of employees are set
out in the annexure to this report. The Department of Company
Affairs has amended the Companies (Particulars of Employees) Rules,
1975 to the effect that particulars of employees of companies engaged
in the information technology sector posted and working outside India,
not being directors or their relatives, drawing more than Rs. 24 lakh
per financial year or Rs. 2 lakh per month, as the case may be, need
not be included in the statement. Accordingly, the statement included
in this report does not contain the particulars of employees who are
posted and working outside India.
19. Directors
As per Article 122 of the Articles of Association, Claude Smadja,
Sridar A. Iyengar, Nandan M. Nilekani, K. Dinesh and Srinath Batni
retire by rotation in the forthcoming Annual General Meeting. All of
them, being eligible, offer themselves for re-appointment.
20. Responsibility statement of the Board
The directors responsibility statement, setting out the compliance
with the accounting and financial reporting requirements specified
under Section 217 (2AA) of the Companies Act, 1956, in respect of the
financial statements, is annexed to this report.
21. Auditors
The auditors, M/s. BSR & Co. Chartered Accountants, retire at the
ensuing Annual General Meeting and have confirmed their eligibility and
willingness to accept office, if re-appointed.
22. 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.
23. Conservation of energy, research and development, technology
absorption, foreign exchange earnings and outgo
The particulars as prescribed under Sub-section (l)(e) of Section 217
of the Companies Act, 1956, read with the Companies (Disclosure of
particulars in the report of the Board of Directors) Rules, 1988, are
set out in the annexure to this report.
24. Human resource management
Employees are vital to the Company. We have created a favorable work
environment that encourages innovation and meritocracy. We have also
set up a scalable recruitment and human resources management process,
which enables us to attract and retain high caliber employees. We
added 13,659 (net) and 22,671 (gross) employees, taking the total
strength to 73,490 (net) up from 59,831 at the end of the previous
year. Our attrition rate stands at 13.4% compared to 13.7% for the
previous year. Attrition, excluding involuntary separations, stood at
12.1% compared to 12.2% in the previous year. Over the last year,
8,85,035 people applied to us for employment and we continue to remain
an employer of choice in our industry.
25. Sustainability initiatives
Sustainability to us means measuring success by how much wealth we
create responsibly for our customers, employees, the society in which
we operate and all our other stakeholders. This commitment is embedded
in the setting up of a Sustainability Executive Council to promote our
efforts and help the business units view operations in that context.
We believe in creating sustainable frameworks with academia, NGOs,
non-profit organizations, and civil and trade bodies to reach out to
communities as well as help create policies with the government.
Enabling work environment
A good workplace, as we define it, balances our commitment to the
health and safety of employees while reducing the environmental impact.
* Our commitment to Health, Safety and Environment (HSE) is deployed
through Project Ozone, a comprehensive HSE management system initiated
in 2003. Our goals in the medium term include reducing the consumption
of water, power and paper by 25% and carbon emissions by 10%. We plan
to become carbon neutral in the next two years by managing and reducing
carbon emissions, reducing carbon intensity by purchasing green energy
and creating carbon sinks.
* Our Health Assessment and Lifestyle Enrichment (HALE) initiative,
focuses on enhancing the emotional value-add of our employees, by
optimizing their health, quality of life and work environment. We have
created world-class gymnasiums, swimming pools, aerobics centers,
tennis courts, etc. This year, HALE conducted 52 events related to
health and wellness in which 13,200 employees participated. All
employees are covered by health insurance, while contractual employees
benefit from subsidized annual medical check-ups.
Enabling employees
* Diversity and inclusion: As a global organization, diversity enables
us to build confidence and trust in the minds of customers and
employees. Our employees belong to 70 nationalities. We have recruited
239 disabled employees. To attract the most competitive talent, we
offer an inclusive work environment. Our principle is to de-emphasize
the differences and celebrate commonality. We have set up a Diversity
Office guided by a Diversity Council comprising members from across the
Infosys Group. We have created support systems and programs for
employees, especially working mothers, the disabled and employees of
different nationalities. We have also introduced diversity dashboards,
an inclusivily index and a 360 degree feedback mechanism for managers
to ensure that all employees are aware of their accountability to
diversity and inclusion.
* Employee education: We are committed to equipping employees with
skills that will help their career and personal growth.
* Our Education and Research (E&R) department offers technical and
project management training to employees. Through the foundation
program, all entry-level employees are trained at the Global Education
Center in Mysore. It amounted to 6,13,738 training person days. On the
role-based training front, employees opted for both classroom as well
as e-learning courses on technical and project management skills,
leading to 37,710 training person days. About 27,604 employees
completed their technical competency certification program this year.
We piloted the internship program for India-based, final-year Computer
Science students this year. So far, 243 interns from 33 premier
colleges have joined the program. During the year, E&R won the ASTD
(American Society for Training and Development) BEST award.
* Infosys Leadership Institute (IL1): ILI caters to employees needs in
the areas of behavioral and leadership skills and supports personal
development through systematic processes. ILIs efforts resulted in
1,80,019 training person-days this year.
* Project Management Center of Excellence (PMCoE): PMCoE focuses on
enhancing the project management competencies of our employees through
multiple interventions. To date, PMCoE has trained over 2,800 managers
in professional project management framework. We have over 1,800
managers / senior managers certified as Project Management
Professionals from PMI, USA. .PMCoE will help the business through
continuous improvements on consultancy capability, mentoring
structures, training modules and best practices.
* ES Academy: The Academy trained 1,400 MBA graduates (functional
consultants) in domain, technology, project management and quality
processes, and leadership. During the year, 4,000 software engineers
were trained in domain and business processes. It also provides
technical and domain certifications that are benchmarked with world-
class academic certifications. Since 2005, the Academy has certified
16,000 employees. It continues to collaborate with external educational
units like Oracle University and Seibel University, in order to
leverage their knowledge-base for our functional and technical
consultants. Besides the internal education programs, we fund higher
education programs for employees who wish to pursue degrees such as
MBA, MCA, MS, CFA, etc. Since 2005, we have sponsored the education of
about 280 employees.
* Knowledge Management (KM):The KM initiative was formally launched at
Infosys China during the year. We maintain our successful run with new
methodologies for knowledge sharing and adoption. Knowledge blogs and
customized wiki solutions are rolled out to employee communities to
help them foster collaborative networks for speedier and smart project
execution. Our central knowledge repository saw significant growth in
volumes and quality this year with more than 30,000 knowledge assets,
complemented by half as many documents distilled from projects and
process-mandated artifacts. In addition, other KM systems host around
90,000 knowledge interactions and are archived.
Empowering society
Since inception in 1981, we have created multiple frameworks for
corporate governance, education, infrastructure and inclusive growth.
We believe that corporations must reach out to the society and help by
improving the quality of education and healthcare through various
community development programs. Our Corporate Social Responsibility
(CSR) activities are carried out at four different levels:
* Global initiatives to develop human capital by creating sustainable
frameworks with educational institutes for training students and
faculty
* The Infosys Foundation has a dedicated team to reach out to the
underprivileged and enrich their lives
* At the Board level, members lead by example by participating in the
advisory councils of NGOs and civil bodies, and donating their time,
money and effort to various causes
* At the employee level, location-wise CSR teams address local
requirements
Our five key CSR themes are education, healthcare, art and culture,
rural upliftment and inclusive growth. We identify partners and
beneficiaries based on their goals, credibility, performance and
alignment to our vision and values. The initiatives in education,
inclusive growth and pro bono engagements are detailed here, while
initiatives on healthcare, art and culture, and rural upliftment are
detailed in our report on Infosys Foundation. Education
* Primary level initiatives
* We are a key sponsor of the Ahshaya Patra foundation which provides
unlimited free meals for economically-disadvantaged school students. We
assist 80,000 children across India through this meal scheme.
* We have set up more than 15,000 libraries and are also actively
involved in constructing classrooms, renovating old school buildings,
donating school equipment, conducting career counseling and providing
scholarships to students
* Secondary level initiatives
* Catch Them Young (CTY), our initiative to motivate school students to
dream big and aim high, has benefitted around 6,390 students since 2005
* Computers@Classrooms initiative donated 1,803 computers to schools
and NGOs to promote computer awareness
* Tertiary level initiatives:
* We have collaborated with 1,309 colleges in India and abroad, and
trained 4,200 teachers and 87,424 students since 2005.
* Campus Connect, our high impact and largest academic initiative, was
started in 2004. It focuses on preparing industry- ready IT
professionals by aligning skills of engineering students with industry
needs. There are 490 colleges currently partnering with us and together
we have enabled 25,521 students (with 15,000 in the pipeline) during
the year.
* Project Genesis is aimed at aligning the teaching methodology and
course-curriculum at graduate schools to the BPO industrys needs,
especially in smaller towns, to improve the students employability.
About 798 teachers and 22,619 students from 389 colleges were
benefitted this year. The number of students who benefited from this
program increased by almost 200%.
* InStep, our global internship program, attracts students from the
best academic institutions around the world to work on live and
organizationally relevant projects. The 80+ colleges include Stanford,
Oxford, Cornell, Purdue, Harvard and others from Spain, Italy, Denmark,
Norway, Chile, Colombia and Israel. We receive, on an average, 12,000
applications and select 100+ students every year.
* Infosys Fellowship Program, instituted at 12 premier academic
institutions in India, supports research leading to a Ph.D
* Through Industry Academia Partnership (IAP), Infosys BPO works on
aligning course curriculum with industry requirements. As part of the
program, we provide summer internships for final-year students and
offer employment based on performance. Since its inception in 2007, IAP
has covered 17 colleges, enabling 714 students. A knowledge center in
Rajasthan is currently being set up.
* Academic Entente (AcE) is a strategic initiative in which our
employees collaborate with faculty from leading universities like
Harvard, Stanford and Tuck School of Business, to publish case studies
on innovation and consulting. Our employees participate in
industry-academia conferences and guest lectures at prestigious forums,
such as the Balanced Scorecard Hall of Fame. Student groups and faculty
members also visit our campuses.
* Every year, we train students from countries at the nascent / stage
of developing knowledge workers such as Thailand, Panama, China,
Malaysia and Mauritius. While the travel costs are borne by the
respective governments, we fund their training and accommodation. We
have trained 560 students since 2005. In Australia, we promote tertiary
education by providing student scholarships.
Inclusive growth
* We have recruited 239 disabled people for our Infosys BPO operations,
making us the biggest employer of the disabled in the Indian IT
industry. Through the disability initiative, we help the selected
employees gain relevant competencies for the ITeS industry and enable
our managers to create an inclusive work environment. Our goal is to
increase the number of disabled employees to at least 2% of our
workforce in ITeS.
* Infosys Womens Inclusivity Network (IWIN), our gender inclusive
program, was initiated in 2003. IWIN works with bodies like NASSCOM to
create frameworks and research on gender inclusion. Women employees
constitute 31 % of our workforce today. This year, to mark
International Womens Day, we launched SPARK, a unique two-day event
for women students in their fourth-sixth semester from engineering
colleges across India. The event witnessed the participation of 420
colleges.
* Special Training Program (STP), aims at enabling students from rural
areas to join the IT / ITeS industry, and has so far benefitted 479
students.
In addition, 60% of our development centers in India are located in
Tier 2 and 3 cities. This infrastructure policy has created employment
for 30,632 employees and the planned expansion will facilitate an
additional 21,000 employees in these locations. It has further
facilitated business / employment for the local community. We continue
to take up pro bono engagements with both Indian and global bodies. We
are partnering with Expand, a non-profit international development
organization, to develop an information and communication technology
(ICT)-enabled application that would minimize inventory requirements,
reduce waste, and allow retailers and farmers to be better integrated.
26. Employee Stock Option Plan (ESOP)
Infosys Young Indians (INFYi), the first corporate chapter of
Confederation of Indian Industry (CII), aims to provide a platform for
social entrepreneurs by undertaking activities in economy, education,
environment, healthcare and youth affairs. Currently, more than 50
young Infoscions are working on a set of social entrepreneurship ideas.
We constantly monitor the progress of initiatives. On the education
front, we conduct periodic reviews with academia partners. The success
is measured by the annual increase in the number of students and
teachers who volunteer to get trained. For example, the Special
Training program conducted at IIIT-B for socially and economically
underprivileged, resulted in close to 100% placements this year.
Further details on our sustainability initiatives will he available in
the sustainability report to he published on our website
www.infosys.eom in the near future.
We had introduced various stock option plans for our employees. The
details of options granted under the 1998 Stock Option Plan (the 1998
Plan) and the 1999 Stock Option Plan (the 1999 Plan) are given in the
table.
The Securities and Exchange Board of India (SEBI) has issued the
(Employee Stock Option Scheme and Employee Stock Purchase Scheme)
Guidelines, 1999. This is effective for all stock option schemes
established after June 19, 1999. In accordance with these guidelines,
the excess of the market price of the underlying equity shares as of
the date of the grant over the exercise price of the option, including
up-front payments, if any, is to be recognized and amortized on a
straight line basis over the vesting period. Our 1994 option plan came
to an end in fiscal 2000.
We have the 1998 stock option plan and 1999 stock option plan, where
the options are issued to the employees at an exercise price not less
than the fair market value. If the compensation cost on account of
stock options granted after June 30, 2003 (as required by the amendment
effective June 30, 2003) under 1998 and 1999 plans was computed using
the fair value method, our compensation cost would have been higher by
Rs. 13 crore and Rs. 1 crore and our profit would hence be less by Rs.
13 crore and Rs. 1 crore for fiscal 2008 and 2007 respectively The
impact on EPS for fiscal 2008 and 2007 would be Rs. 0.23 and Rs. 0.02
respectively.
During fiscal 2008 and 2007, stock options under the 1998 Plan have not
been granted, hence the weighted average fair values of grant during
these years are nil.
During fiscal 2008, stock options under the 1999 Plan have not been
granted and hence the weighted average fair values of grant during
fiscal 2008 is ml.
During fiscal 2007, we granted 6,38,761 options under the 1999 Plan
with a weighted average fair value of Rs. 582 per option.
2008
No. of options Weighted average
exercise price
1998 Plan
Outstanding at the beginning of the year 20,84,124 900
Forfeited (53,212) 2,050
Exercised (5,00,465) 775
Outstanding at the end of the year 15,30,447 813
Vested at the end of the year 15,30,447 813
1999 Plan
Outstanding at the beginning of the year 18,97,840 1,121
Granted - -
Forfeited (1,17,716) 1,167
Exercised (2,85,431) 634
Outstanding at the end of the year 14,94,693 1,163
Vested at the end of the year 10,89,041 593
2007
No. of options Weighted average
exercise price
45,46,480 908
(1,71,143) 1,845
(22,91,213) 860
20,84,124 900
20,84,124 900
1,91,79,074 575
6,38,761 2,121
(1,11,306) 552
(1,78,08,689) 572
18,97,840 1,121
12,59,079 613
Acknowledgments
We thank our customers, vendors, investors and bankers for their
continued support during the year. We place on record our appreciation
of the contribution made by employees at all levels. Our consistent
growth was made possible by their hard work, solidarity, cooperation
and support.
We thank the Governments of various countries where we have operations.
We also thank the Government of India, particularly the Ministry of
Communication and Information Technology, the Customs and Excise
Departments, the Income Tax Department, the Software Technology Parks -
Bangalore, Chennai, Chandigarh, Hyderabad, Jaipur, Mysore, Pune,
Bhubaneswar, Mangalore, Thiruvananthapuram and New Delhi - the Ministry
of Commerce, the Ministry of Finance, the Reserve Bank of India, the
state governments, and other government agencies for their support, and
look forward to their continued support in the future.
for and on behalf of the Board of Directors
S. Gopalakrishnan S. D. Shibulal
Chief Executive Officer and Chief Operating
Officer and
Managing Director Director
Bangalore
April 15, 2008
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| Source : Religare Technova | |
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