6-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

Report of Foreign Issuer
Pursuant to Section 13a-16 or 15d-16 of the Securities Exchange Act of 1934

For the quarter ended September 30, 2004

Commission File Number 333-72195

Infosys Technologies Limited

(Exact name of Registrant as specified in its charter)

Not Applicable

(Translation of Registrant’s name into English)

Bangalore, Karnataka, India
(Jurisdiction of incorporation or organization)

Electronics City, Hosur Road, Bangalore, Karnataka, India 561 229. +91-80-852-0261
(Address of principal executive offices)

     Indicate by check mark registrant files or will file annual reports under cover Form 20-F or Form 40-F:

          Form 20-F x Form 40-F o

     Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g 3-2(b) under the Securities Exchange Act of 1934.

          Yes o No x

If “Yes” is marked, indicate below the file number assigned to registrant in connection with Rule 2g 3-2(b).

Not applicable.

TABLE OF CONTENTS

EXHIBIT 99.1

EXHIBIT 99.2

EXHIBIT 99.3

EXHIBIT 99.4

EXHIBIT 99.5

EXHIBIT 99.6

EXHIBIT 99.7

EXHIBIT 99.8

EXHIBIT 99.9

EXHIBIT 99.10

EXHIBIT 99.11

EXHIBIT 99.12

DISCLOSURE OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

     We hereby furnish the Commission with copies of the following information concerning our public disclosures regarding our results of operations for the quarter ended September 30, 2004. The following information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

     On October 12, 2004, we announced our results of operations for the quarter ended September 30, 2004. We issued press releases announcing our results under U.S. Generally Accepted Accounting Principles (“GAAP”) and Indian GAAP, copies of which are attached to this Form 6-K as exhibits 99.1 and 99.2.

     On October 12, 2004, we held a press conference to announce our results, which was followed by a question-and-answer session with those attending the press conference. The transcript of this press conference is attached to this Form 6-K as exhibit 99.3. On the same day, we also held two teleconferences with investors and analysts to discuss our results. Transcripts of those two teleconferences are attached to this Form 6-K as exhibits 99.4 and 99.5.

     In our press conference, we used a presentation entitled “Performance of Infosys for the Second Quarter ended September 30, 2004,” which we have attached to this Form 6-K as exhibit 99.6. We have also made available to the public on our Web site, www.infosys.com, a spreadsheet that provides details on the Company’s revenues by region, service offering, project type, and industry classification and information on client concentration. We have attached this spreadsheet to this Form 6-K as exhibit 99.7.

     Our officers held a question-and-answer session with analysts from CNBC India on October 12, 2004. The transcript of this question-and-answer session is attached to this Form 6-K as exhibit 99.8.

     We placed advertisements in certain Indian newspapers concerning our results of operations for the quarter ended September 30, 2004 under Indian GAAP. A copy of the form of this advertisement is attached to this Form 6-K as exhibit 99.9.

     We have made available to the public on our Web site, www.infosys.com, the following: U.S. GAAP unaudited consolidated financial statements and notes for the quarter ended September 30, 2004; auditor report, Indian GAAP consolidated financial statements and note to accounts for the quarter ended September 30, 2004; and auditor report, Indian GAAP financial statements and note to accounts for the quarter ended September 30, 2004. We have attached these documents to this Form 6-K as exhibits 99.10, 99.11 and 99.12, respectively.

SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly organized.

Infosys Technologies Limited

/s/ Nandan M. Nilekani

Nandan M. Nilekani
Chief Executive Officer, President
and Managing Director

Dated: October 19, 2004

INDEX TO EXHIBITS

Exhibits

99.1	U.S. GAAP Press Release
99.2	Indian GAAP Press Release
99.3	Transcript of October 12, 2004 12:15 p.m. IST Press Conference
99.4	Transcript of October 12, 2004 2:00 p.m. IST Earnings Call
99.5	Transcript of October 12, 2004 6:00 p.m. IST Earnings Call
99.6	Presentation: Performance of Infosys for the Second Quarter Ended September 30, 2004
99.7	Spreadsheet Regarding Registrant’s Revenue by Region, Service Offering, Project Type, and Industry Classification and Information Regarding Client Concentration
99.8	Transcript of October 12, 2004 CNBC India Question-and-Answer Session with Company’s Officers
99.9	Form of Advertisement Placed in Indian Newspapers
99.10	U.S. GAAP Unaudited Consolidated Financial Statements and Notes for the Quarter Ended September 30, 2004
99.11	Auditor Report, Indian GAAP Consolidated Financial Statements and Note to Accounts for the Quarter Ended September 30, 2004
99.12	Auditor Report, Indian GAAP Financial Statements and Note to Accounts for the Quarter Ended September 30, 2004

EX-99.1

Exhibit 99.1

PRESS RELEASE

Infosys Technologies (NASDAQ: INFY) Announces Results for the Quarter ended September 30, 2004

Growth momentum continues in Q2

Guidance revised upwards. Revenue is expected to grow 46% to 47% in fiscal 2005

Fremont, California – October 12, 2004

Highlights

Results for the quarter ended September 30, 2004

• Second quarter revenues at $ 379 million, up 51% from the corresponding quarter last fiscal

• Earnings per American Depositary Share (ADS) increased to $ 0.36 from $ 0.25* in the corresponding quarter last fiscal

• 32 new clients were added during the quarter for Infosys and its subsidiaries

• Net addition of 5,010 employees for the quarter for Infosys and its subsidiaries

• 32,949 employees as on September 30, 2004 for Infosys and its subsidiaries

* adjusted for the two for one stock dividend distributed on July 6, 2004. Each ADS represents one equity share.

Outlook for the quarter ending December 31, 2004 and the fiscal year ending March 31, 2005

• Consolidated net revenues expected to be between $ 407 million and $ 410 million for the quarter ending December 31, 2004, (growth of 48% to 49%) and between $ 1,555 million and $ 1,561 million for the fiscal year ending March 31, 2005; growth of 46% to 47%.

• Consolidated earnings per ADS* expected to be $ 0.38 for the quarter ending December 31, 2004, (growth of 41%) and $ 1.46 for the fiscal year ending March 31, 2005; growth of 42%.

* adjusted for the two for one stock dividend distributed on July 6, 2004. Each ADS represents one equity share.

Infosys Technologies Limited (“Infosys” or “the company”) today announced financial results for its second quarter ended September 30, 2004. Revenues for the quarter aggregated $ 379 million, up 51% from $ 251 million for the quarter ended September 30, 2003.

Net income was $ 97 million ($ 65 million for the quarter ended September 30, 2003) and earnings per ADS was $ 0.36 ($ 0.25 for the quarter ended September 30, 2003*).

* adjusted for the two for one stock dividend distributed on July 6, 2004. Each ADS represents one equity share.

“Offshoring has become a mega trend in the industry, as more customers leverage their partnership with Infosys to increase their global competitiveness,” said Nandan M. Nilekani, CEO, President and Managing Director. “We continue to focus on scalability, which is the key to rapid growth, and on differentiation, which is the key to higher client value.”

“We have scaled up our recruitment, education and leadership development infrastructure to meet the growing business needs,” said S. Gopalakrishnan, Member of the Board and COO. “This quarter, we hired 5,010 net employees for the group.”

Infosys’ business solutions continued to make clients in the Retail industry more efficient and competitive. A leading discount retailer in the US has selected Infosys as a preferred provider of IT consulting for a strategic sourcing initiative. Additionally, a major European Retailer chose Infosys to implement an RFID solution. This solution enables the retailer to achieve faster throughput and high visibility in Retail Supply Chain processes.

Energy and Utilities companies are also leveraging the power of technology in increasing customer focus. A Fortune 500 company in the US chose Infosys to provide application development and maintenance services in the area of customer relationship management. A large utility company is using Infosys’ expertise in rewriting its customer information systems. One of the top 10 technology companies in the

Page 1 of 4

PRESS RELEASE

world, and one of the largest companies in the IT storage space are partnering with Infosys for the development of a storage management product.

“Sourcing strategically from service providers has become the outsourcing approach for many companies, and we see this trend across all industries,” said Basab Pradhan, Head – World-wide Sales and Senior Vice President. “Our strong leadership in technology and sourcing solutions, combined with our excellence in execution, is helping our clients meet their objectives effectively.”

“The total volume growth during the quarter was 12.6%, with offshore volume growing more rapidly, at 15.3%,” said S. D. Shibulal, Member of the Board and Head – World-wide Customer Delivery. “Investments in the various plans of our business units, supported by robust business platforms, have started yielding results, and are contributing to the growth momentum.”

“Pricing has been stable. Our expense management model has demonstrated flexibility in absorbing the cost of recruiting 5,010 net employees while maintaining margins,” said T. V. Mohandas Pai, Member of the Board and Chief Financial Officer. “We have spent $ 38 million on Property, plant and equipment during the quarter, and we have about 3.5 million sq. ft. of infrastructure under construction.”

About the company

Infosys is a leading global technology services firm founded in 1981. Infosys provides end-to-end business solutions that leverage technology for its clients across the entire software life cycle: consulting, design, development, re-engineering, maintenance, system integration, package evaluation and implementation. In addition, Infosys offers software products to the banking industry, as well as business process management services through its majority-owned subsidiary, Progeon. For more information, contact V. Balakrishnan at +91 (80) 2852 0440 in India or visit us on the World Wide Web at www.infosys.com.

Safe Harbor

Certain statements in this release concerning our future growth prospects are forward-looking statements, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, our ability to manage growth, intense competition in IT services including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, industry segment concentration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks or system failures, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which Infosys has made strategic investments, withdrawal of governmental fiscal incentives, political instability and regional conflicts, legal restrictions on raising capital or acquiring companies outside India, and unauthorized use of our intellectual property and general economic conditions affecting our industry. Additional risks that could affect our future operating results are more fully described in our United States Securities and Exchange Commission filings, including our Annual Report on Form 20-F for the fiscal year ended March 31, 2004. These filings are available at www.sec.gov. Infosys may, from time to time, make additional written and oral forward-looking statements, including statements contained in the company’s filings with the Securities and Exchange Commission and our reports to shareholders. The company does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of the company.

Page 2 of 4

TABLE OF CONTENTS

PRESS RELEASE

Infosys Technologies Limited and Subsidiaries

Consolidated balance sheets as of

($ in millions)

	March 31, 2004 *		September 30, 2004
			(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	445	$	335
Investment in liquid mutual fund units		218		210
Trade accounts receivable, net of allowances		150		202
Deferred tax assets		–		2
Prepaid expenses and other current assets		36		30
Unbilled revenue		24		29
Total current assets		873		808
Property, plant and equipment, net		228		263
Goodwill		8		7
Intangible assets, net		2		1
Deferred tax assets		7		7
Other assets		14		22
Total Assets	$	1,132	$	1,108
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	1	$	2
Client deposits		15		9
Other accrued liabilities		99		101
Income taxes payable		22		28
Unearned revenue		15		22
Total current liabilities		152		162
Non-current liabilities
Preferred stock of subsidiary		22		20
Other non-current liabilities		5		5
Stockholders’ Equity
Common stock, $0.16 par value 300,000,000 equity shares authorized as of September 30, 2004
Issued and outstanding – 266,564,224 and 267,860,670 equity shares as of March 31, 2004 and September 30, 2004 respectively		9		31
Additional paid-in capital		157		188
Accumulated other comprehensive income		39		(15	)
Retained earnings		748		717
Total stockholders’ equity		953		921
Total Liabilities And Stockholders’ Equity	$	1,132	$	1,108

* March 31, 2004 balances were obtained from audited financial statements

Page 3 of 4

PRESS RELEASE

Infosys Technologies Limited and Subsidiaries

Unaudited consolidated statements of income

($ in millions, except share and per share data)

	Three months ended				Six months ended
	September 30				September 30
	2003		2004		2003		2004
Revenues	$	251	$	379	$	484	$	713
Cost of revenues		142		214		275		401
Gross profit		109		165		209		312
Operating Expenses:
Selling and marketing expenses		18		26		35		50
General and administrative expenses		20		30		38		56
Amortization of stock compensation expense		—		—		1		—
Amortization of intangible assets		3		—		4		1
Total operating expenses		41		56		78		107
Operating income		68		109		131		205
Other income		10		6		16		6
Income before income taxes		78		115		147		211
Provision for income taxes		13		18		24		31
Net income	$	65	$	97	$	123	$	180
Earnings per equity share
Basic	$	0.25	$	0.36	$	0.47	$	0.68
Diluted	$	0.24	$	0.35	$	0.46	$	0.66
Weighted average equity shares used in computing earnings per equity share
Basic		262,364,112		266,262,865		262,349,472		265,781,580
Diluted		265,650,900		272,121,905		264,979,408		271,186,823

Page 4 of 4

EX-99.2

Exhibit 99.2

PRESS RELEASE

Growth momentum continues in Q2

Guidance revised upwards. Revenue is expected to grow 47% to 48% in fiscal 2005

Bangalore, India – October 12, 2004

Highlights

Consolidated results for the quarter ended September 30, 2004

• Income was Rs. 1,749.33 crore for the second quarter ended September 30, 2004, an increase of 51.88% over the comparable income for the corresponding quarter in the previous year

• Net profit after tax was Rs. 447.37 crore for the second quarter ended September 30, 2004, an increase of 48.64% over the comparable net profit for the corresponding quarter in the previous year

• Earnings per share from ordinary activities increased to Rs. 16.71 from Rs. 11.36* for the corresponding quarter in the previous year, an increase of 47.10%

• Interim dividend of Rs. 5.00 per share (100% on an equity share of par value of Rs. 5 each) as compared to Rs. 3.63* (72.50% on an equity share of par value of Rs. 5 each) for the corresponding period in the previous year

* adjusted for the 3:1 bonus issue of shares distributed on July 6, 2004

Others

• 32 new clients were added during the quarter

• Net addition of 5,010 employees for the quarter

• 32,949 employees as on September 30, 2004

Business outlook

“Offshoring has become a mega trend in the industry, as more customers leverage their partnership with Infosys to increase their global competitiveness,” said Nandan M. Nilekani, CEO, President and Managing Director. “We continue to focus on scalability, which is the key to rapid growth, and on differentiation, which is the key to higher client value.”

The company’s outlook (consolidated) for the quarter ending December 31, 2004 and the fiscal year ending March 31, 2005, under Indian GAAP and US GAAP, is as follows:

Under Indian GAAP – consolidated

Outlook for the quarter ending December 31, 2004*

• Income is expected to be in the range of Rs. 1,869 crore and Rs. 1,882 crore; YoY growth of 49% to 50%

• Earnings per share is expected to be Rs. 17.10; YoY growth of 38%

Outlook for the fiscal year ending March 31, 2005*

• Income is expected to be in the range of Rs. 7,132 crore and Rs. 7,160 crore; growth of 47% to 48%

• Earnings per share is expected to be Rs. 67.00; growth of 43%

* conversion 1 US$ = Rs. 45.91

Page 1 of 8

PRESS RELEASE

Under US GAAP

Outlook for the quarter ending December 31, 2004

• Consolidated net revenues is expected to be in the range of $ 407 million to $ 410 million; YoY growth of 48% to 49%

• Consolidated earnings per American Depositary Share is expected to be $ 0.38; YoY growth of 41%

Outlook for the fiscal year ending March 31, 2005

• Consolidated net revenues is expected to be in the range of $ 1,555 million to $ 1,561 million; growth of 46% to 47%

• Consolidated earnings per American Depositary Share is expected to be $ 1.46; growth of 42%

“We have scaled up our recruitment, education and leadership development infrastructure to meet the growing business needs,” said S. Gopalakrishnan, Member of the Board and COO. “This quarter, we hired 5,010 net employees for the group.”

Interim dividend

The company has declared an interim dividend of Rs. 5.00 per share (100% on an equity share of par value of Rs. 5 each) at the board meeting held today. An interim dividend of Rs. 3.63* (72.50% on an equity share of par value of Rs. 5 each) was declared for the corresponding period in the previous year. The record date for payment of dividend will be October 19, 2004.

* adjusted for the 3:1 bonus issue of shares distributed on July 6, 2004

Expansion of services and significant projects

Infosys and its subsidiaries added 32 clients during the quarter. The company continued to provide the assurance of Infosys predictability to global corporations, assisting them in improving their competitiveness.

Infosys’ business solutions continued to make clients in the Retail industry more efficient and competitive. A leading discount retailer in the US has selected Infosys as a preferred provider of IT consulting for a strategic sourcing initiative. Additionally, a major European Retailer chose Infosys to implement an RFID solution. This solution enables the retailer to achieve faster throughput and high visibility in Retail Supply Chain processes.

Large corporations in the Automotive and Aerospace industry are increasingly using the Infosys-pioneered Global Delivery Model to improve efficiency. A premier UK-based Aerospace services company chose Infosys’ services for a design and analysis project of an aircraft sub-system. A well-known player in the European auto industry also started working with Infosys for a design and analysis project.

Energy and Utilities companies are also leveraging the power of technology in increasing customer focus. A Fortune 500 company in the US chose Infosys to provide application development and maintenance services in the area of customer relationship management. A large utility company is using Infosys’ expertise in rewriting its customer information systems. One of the top 10 technology companies in the world, and one of the largest companies in the IT storage space are partnering with Infosys for the development of a storage management product.

Infosys’ relationship with large telecom players continued, with the addition of one of the largest wholesale telecom carriers in Europe to its client portfolio. Infosys is engaged in a critical assignment to re-architect the account management portal of a large US-based carrier providing voice and data services. The company has also started providing Oracle application support to another premier communications service provider in the US.

Page 2 of 8

PRESS RELEASE

Infosys strengthened its presence in the financial and insurance industries with the addition of a German multi-billion euro insurance organization. Infosys was selected to help in replacing an existing hierarchical database, and thereby achieve organization-wide uniformity and reduced licensing costs. A company providing proxy voting and corporate governance solutions to its global client base selected Infosys to provide business consulting services.

Infosys started working with a pan-European government organization in the deployment of payroll and financial solutions.

“Sourcing strategically from service providers has become the outsourcing approach for many companies, and we see this trend across all industries,” said Basab Pradhan, Head – World-wide Sales and Senior Vice President. “Our strong leadership in technology and sourcing solutions, combined with our excellence in execution, is helping our clients meet their objectives effectively.”

“The total volume growth during the quarter was 12.60%, with offshore volume growing more rapidly, at 15.30%,” said S. D. Shibulal, Member of the Board and Head – World-wide Customer Delivery. “Investments in the various plans of our business units, supported by robust business platforms, have started yielding results, and are contributing to the growth momentum.”

Banking Products

The sale of the Finacle^® suite of products made significant headway during the quarter. Union Bank of the Philippines (UBP), one of the top 10 banks in Philippines, has licensed Finacle^® core banking and e-Banking solutions. This win marks a key breakthrough for Finacle^® in the core banking space in South East Asia. IDBI Ltd. has chosen to deploy Finacle^® as the bank’s core banking platform across 101 locations, by March 2005. UTI Bank, an existing customer, chose Finacle^® treasury solution making it Finacle’s first win in the treasury solution space in India. Additionally, a leading private sector bank in India licensed Finacle^® wealth management solution and Finacle^® CRM solutions during the quarter.

Liquidity and capital expenditure

Cash and cash equivalents, including investments in liquid mutual funds, increased by Rs. 350.05 crore during the quarter, from Rs. 2,152.02 crore to Rs. 2,502.07 crore, after incurring capital expenditure of Rs. 176.06 crore.

“Pricing has been stable. Our expense management model has demonstrated flexibility in absorbing the cost of recruiting 5,010 net employees while maintaining margins,” said T. V. Mohandas Pai, Member of the Board and Chief Financial Officer. “We have spent Rs. 176.06 crore on capital expenditure during the quarter, and we have about 3.5 million sq. ft. of infrastructure under construction.”

Update on Infosys Technologies (Shanghai) Company Limited

Infosys Technologies (Shanghai) Company Limited has appointed James Lin as the Chief Executive Officer. James has over 20 years experience in the software industry. He has been the Client Solution Principal for IBM Global Services in China and prior to that, he was with Tandem Computers in California for over a decade. James holds a master’s degree in Computer Science.

Page 3 of 8

PRESS RELEASE

Accolades

Infosys has won the 2004 Annual Asian Most Admired Knowledge Enterprise (MAKE) award. A panel of Asian Fortune Global 500 business executives and leading knowledge management experts chose the 2004 Asian MAKE winners. Only organizations founded and headquartered in Asia were eligible for this MAKE study. The expert panel rated organizations against the MAKE framework of eight key knowledge performance dimensions that are the visible drivers of competitive advantage.

“It is with pleasure that we acknowledge the honor of being ranked as a Most Admired Knowledge Enterprise for the third time in succession,” said K. Dinesh, Member of the Board and Head – Quality and Productivity, Education & Research, Information Systems and Communication Design Group. “Knowledge Management at Infosys is a powerful tool for delivering differentiated value to customers.”

In a survey conducted by CLSA, Infosys has been voted as having the highest Corporate Governance score amongst all the Asian large-cap corporations (excluding Japan). The survey covered the Corporate Governance developments across 450 companies in the Asian (excluding Japan) markets. Infosys had a score of 87% as against an average of 81% for the top ten corporations. According to the report, Infosys continues to be the highest scorer in India and the Asia Pacific, having essentially maintained its top ranking since 2001. The company has continued to stay a step ahead of the prevailing Corporate Governance norms and has implemented most of the reforms before these became mandatory.

About the company

Infosys is a leading global technology services firm founded in 1981. Infosys provides end-to-end business solutions that leverage technology for its clients across the entire software life cycle: consulting, design, development, re-engineering, maintenance, system integration, package evaluation and implementation. In addition, Infosys offers software products to the banking industry, as well as business process management services through its majority-owned subsidiary, Progeon. For more information, contact V. Balakrishnan at +91 (80) 2852 0440 in India or visit us on the World Wide Web at www.infosys.com.

Safe Harbor

Certain statements in this release concerning our future growth prospects are forward-looking statements, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, our ability to manage growth, intense competition in IT services including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, industry segment concentration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks or system failures, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which Infosys has made strategic investments, withdrawal of governmental fiscal incentives, political instability and regional conflicts, legal restrictions on raising capital or acquiring companies outside India, and unauthorized use of our intellectual property and general economic conditions affecting our industry. Additional risks that could affect our future operating results are more fully described in our United States Securities and Exchange Commission filings including our Annual Report on Form 20-F for the fiscal year ended March 31, 2004 and on Form 6-K for the quarter ended June 30, 2004. These filings are available at www.sec.gov. Infosys may, from time to time, make additional written and oral forward-looking statements, including statements contained in the company’s filings with the Securities and Exchange Commission and our reports to shareholders. The company does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of the company.

Page 4 of 8

PRESS RELEASE

INFOSYS TECHNOLOGIES LIMITED

in Rs.crore

Balance Sheet as at	September 30, 2004		September 30, 2003		March 31, 2004
SOURCES OF FUNDS
SHAREHOLDERS’ FUNDS
Share capital		133.93		33.13		33.32
Reserves and surplus		3,937.53		3,302.48		3,220.11
		4,071.46		3,335.61		3,253.43
APPLICATIONS OF FUNDS
FIXED ASSETS
Original cost		1,809.12		1,414.53		1,570.23
Less: Depreciation and amortization		885.03		683.27		803.41
Net book value		924.09		731.26		766.82
Add: Capital work-in-progress		252.63		62.00		203.48
		1,176.72		793.26		970.30
INVESTMENTS		1,064.97		476.99		1,027.38
DEFERRED TAX ASSETS		35.77		33.87		35.63
CURRENT ASSETS, LOANS AND ADVANCES
Sundry debtors		892.06		577.26		632.51
Cash and bank balances		1,251.78		1,382.71		1,638.01
Loans and advances		812.93		786.63		693.22
		2,956.77		2,746.60		2,963.74
LESS: CURRENT LIABILITIES AND PROVISIONS
Current liabilities		566.92		370.99		560.44
Provisions		595.85		344.12		1,183.18
NET CURRENT ASSETS		1,794.00		2,031.49		1,220.12
		4,071.46		3,335.61		3,253.43

NOTE:

The audited Balance Sheet as at September 30, 2004 has been taken on record at the board meeting held on October 12, 2004

Page 5 of 8

PRESS RELEASE

INFOSYS TECHNOLOGIES LIMITED

in Rs. Crore, except per share data

Profit and Loss Account for the	Quarter ended September 30,				Half-year ended September 30,				Year ended
	2004		2003		2004		2003		March 31, 2004
INCOME
Software services and products
Overseas		1,659.27		1,115.98		3,106.69		2,174.63		4,694.69
Domestic		30.29		18.77		54.26		42.10		66.20
		1,689.56		1,134.75		3,160.95		2,216.73		4,760.89
Software development expenses		909.96		587.16		1,701.87		1,159.94		2,495.31
GROSS PROFIT		779.60		547.59		1,459.08		1,056.79		2,265.58
Selling and marketing expenses		103.08		80.44		190.47		160.16		335.08
General and administration expenses		116.78		88.72		218.02		169.90		346.85
		219.86		169.16		408.49		330.06		681.93
OPERATING PROFIT BEFORE INTEREST, DEPRECIATION AND AMORTIZATION		559.74		378.43		1,050.59		726.73		1,583.65
Interest		—		—		—		—		—
Depreciation and amortization		56.55		62.33		105.93		106.59		230.90
OPERATING PROFIT AFTER INTEREST, DEPRECIATION AND AMORTIZATION		503.19		316.10		944.66		620.14		1,352.75
Other income		30.23		44.28		48.22		76.73		127.39
Provision for investments		0.07		0.22		0.06		6.59		9.67
NET PROFIT BEFORE TAX		533.35		360.16		992.82		690.28		1,470.47
Provision for taxation		78.50		60.00		143.50		112.00		227.00
NET PROFIT AFTER TAX		454.85		300.16		849.32		578.28		1,243.47
Balance brought forward		462.36		278.12		70.51		—		—
Less: Residual dividend paid for Fiscal 2004		—		—		2.32		—		—
Dividend tax on the above		1.97		—		2.27		—		—
		460.39		278.12		65.92		—		—
AMOUNT AVAILABLE FOR APPROPRIATION		915.24		578.28		915.24		578.28		1,243.47
DIVIDEND
Interim		133.93		96.09		133.93		96.09		96.09
Final		—		—		—		—		99.96
One-time special dividend		—		—		—		—		666.41
Total dividend		133.93		96.09		133.93		96.09		862.46
Dividend tax		17.50		12.31		17.50		12.31		110.50
Amount transferred - general reserve		—		—		—		—		200.00
Balance in Profit and Loss account		763.81		469.88		763.81		469.88		70.51
		915.24		578.28		915.24		578.28		1,243.47
EARNINGS PER SHARE*
Equity shares of par value Rs. 5/- each
Basic		16.99		11.33		31.76		21.82		46.84
Diluted		16.61		11.23		31.14		21.69		46.26
Number of shares used in computing earnings per share
Basic		26,76,76,465		26,50,28,112		26,74,06,246		26,50,04,404		26,54,47,776
Diluted		27,37,76,678		26,72,97,616		27,27,68,201		26,66,04,340		26,87,87,016

* adjusted for the 3:1 bonus issue of shares distributed on July 6, 2004

NOTE: The audited Profit and Loss Account for the quarter and half-year ended September 30, 2004 has been taken on record at the board meeting held on October 12, 2004.

A Fact Sheet providing the operating metrics of the company can be downloaded from www.infosys.com

Page 6 of 8

PRESS RELEASE

CONSOLIDATED FINANCIAL STATEMENTS OF INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES

in Rs. crore

Consolidated Balance Sheet as at	September 30, 2004		September 30, 2003		March 31, 2004
SOURCES OF FUNDS
SHAREHOLDERS’ FUNDS
Share capital		133.94		33.13		33.32
Reserves and surplus		3,921.45		3,300.93		3,216.26
		4,055.39		3,334.06		3,249.58
MINORITY INTERESTS		—		—		—
PREFERENCE SHARES ISSUED BY SUBSIDIARY		93.51		49.00		93.56
		4,148.90		3,383.06		3,343.14
APPLICATIONS OF FUNDS
FIXED ASSETS
Original cost		1,893.51		1,423.85		1,633.65
Less: Depreciation and amortization		898.64		686.63		809.84
Net book value		994.87		737.22		823.81
Add: Capital work-in-progress		254.23		65.63		208.05
		1,249.10		802.85		1,031.86
INVESTMENTS		966.02		464.74		945.45
DEFERRED TAX ASSETS		44.50		33.87		39.97
CURRENT ASSETS, LOANS AND ADVANCES
Sundry debtors		926.32		592.59		651.45
Cash and bank balances		1,325.61		1,387.26		1,721.51
Loans and advances		851.80		822.74		721.05
		3,103.73		2,802.59		3,094.01
LESS: CURRENT LIABILITIES AND PROVISIONS
Current liabilities		613.80		376.30		580.93
Provisions		600.65		344.69		1,187.22
NET CURRENT ASSETS		1,889.28		2,081.60		1,325.86
		4,148.90		3,383.06		3,343.14

Principles of consolidation: The financial statements are prepared in accordance with the principles and procedures for the preparation and presentation of consolidated financial statements as set out in the Accounting Standard on Consolidated Financial Statements prescribed by the Institute of Chartered Accountants of India. The financial statements of the parent company Infosys Technologies Limited (“Infosys” or “company”) and its subsidiaries have been combined on a line-by-line basis by adding together the book values of like items of assets, liabilities, income and expenses after eliminating intra-group balances and transactions and resulting unrealized gains / losses.

Page 7 of 8

PRESS RELEASE

CONSOLIDATED FINANCIAL STATEMENTS OF INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES

in Rs. Crore, except per share data

	Quarter ended September 30,				Half-year ended September 30,				Year ended
Consolidated Profit and Loss Account for the	2004		2003		2004		2003		March 31, 2004
INCOME
Software services and products and business process management
Overseas		1,719.26		1,133.06		3,212.71		2,204.43		4,786.72
Domestic		30.07		18.74		54.00		42.07		66.23
		1,749.33		1,151.80		3,266.71		2,246.50		4,852.95
Software development and business process management expenses		926.66		595.28		1,731.88		1,174.87		2,538.67
GROSS PROFIT		822.67		556.52		1,534.83		1,071.63		2,314.28
Selling and marketing expenses		122.27		82.69		227.47		164.34		350.90
General and administration expenses		139.37		92.37		257.04		175.35		369.19
		261.64		175.06		484.51		339.69		720.09
OPERATING PROFIT BEFORE INTEREST, DEPRECIATION & AMORTIZATION AND MINORITY INTERESTS		561.03		381.46		1,050.32		731.94		1,594.19
Interest		—		—		—		—		—
Depreciation and amortization		60.63		63.42		113.20		108.56		236.73
OPERATING PROFIT AFTER INTEREST, DEPRECIATION & AMORTIZATION AND BEFORE MINORITY INTERESTS		500.40		318.04		937.12		623.38		1,357.46
Other income		29.60		43.16		45.31		75.10		123.38
Provision for investments		0.07		0.22		0.06		6.59		9.67
NET PROFIT BEFORE TAX AND MINORITY INTERESTS		529.93		360.98		982.37		691.89		1,471.17
Provision for taxation		82.56		60.00		146.67		112.00		227.54
NET PROFIT BEFORE MINORITY INTERESTS		447.37		300.98		835.70		579.89		1,243.63
Minority Interests		—		—		—		—		—
NET PROFIT AFTER TAX AND MINORITY INTERESTS		447.37		300.98		835.70		579.89		1,243.63
Balance brought forward		456.39		278.91		70.67		—		—
Less: Residual dividend paid for Fiscal 2004		—		—		2.31		—		—
Dividend tax on the above		1.97		—		2.27		—		—
		454.42		278.91		66.09		—		—
AMOUNT AVAILABLE FOR APPROPRIATION		901.79		579.89		901.79		579.89		1,243.63
DIVIDEND
Interim		133.93		96.09		133.93		96.09		96.09
Final		—		—		—		—		99.96
One-time special dividend		—		—		—		—		666.41
Total dividend		133.93		96.09		133.93		96.09		862.46
Dividend tax		17.50		12.31		17.50		12.31		110.50
Amount transferred — general reserve		—		—		—		—		200.00
Balance in Profit and Loss account		750.36		471.49		750.36		471.49		70.67
		901.79		579.89		901.79		579.89		1,243.63
EARNINGS PER SHARE*
Equity shares of par value Rs. 5/- each
Basic		16.71		11.36		31.25		21.88		46.85
Diluted		16.34		11.26		30.64		21.75		46.27
Number of shares used in computing earnings per share
Basic		26,76,76,465		26,50,28,112		26,74,06,246		26,50,04,404		26,54,47,776
Diluted		27,37,76,678		26,72,97,616		27,27,68,201		26,66,04,340		26,87,87,016

* adjusted for the 3:1 bonus issue of shares distributed on July 6, 2004

Page 8 of 8

EX-99.3

Exhibit 99.3

INFOSYS TECHNOLOGIES
Q2 FY05 CONFERENCE CALL
OCTOBER 12, 2004

Female speaker: Good afternoon everybody. Thank you for joining us today to discuss the 2^nd quarterly results of Infosys. We will start with a joint presentation by Nandan Nilakeni, CEO, and Kris Gopalakrishnan, Chief Operating Officer. We will then throw the floor open for questions. Please remember to identify yourselves with your name and the name of your organization before you ask a question. May I request you to keep your cell phones on the silent mode please. Thanks. Over to you Nandan.

Nandan Nilakeni: Good morning and welcome to this 2^nd quarter results for Infosys, performance of Infosys for the 2^nd quarter. I will give you the brief financial highlights after which I will request my colleague Kris Gopalakrishnan to go over some of the other highlights and I will come back to give you an outlook for the future and summary. This, of course, is our usual Safe Harbor Clause. Now the financial performance, this quarter our on a year-to-year growth our income has grown by 51.9% on Indian GAAP and PAT has grown by 48.6%. On the US GAAP, the year-to-year growth revenue has been 51% and (unclear) net income has grown by 49.3%. This quarter we have added 32 new customers taking it to 61 for the half year. And the repeat business is at 96.3%. Also this quarter has been a quarter with the highest additions of a net of 5010 people into the company and therefore on a group basis our total employee strength is 32,949. The total income for the quarter has been 1749 crores. An operating profit of 561 crores, and a profit after tax from ordinary activities of 447 crores which on a sequential basis is essentially 15.2% on the profit side. For the half year, the income has been at 3266 crores and a profit after tax from ordinary activities at 835 crores, and this is a 44% growth. The balance sheet today has total shareholder funds and total liabilities of 4148 crores, and on the asset side the [not audible] cash and cash equivalent is at 2500 crores. So this is the broad summary of the financials. Now I will request my colleague Kris to go through the operational performance. Kris.

Kris Gopalakrishnan: Thank you Nandan, and good afternoon everyone. Our revenue by geography remained by and large same as the previous quarter, but if you look at the last year numbers versus now, you can see that the rest of the world and Europe have gone up. Rest of the world, you know, [not audible] primarily because the acquisition of Expert as well as leveraging that we have grown the business in Europe proactively marketing in Europe to increase the business there. Our utilization continues to be in the healthy high 70s [not audible], low 80s, this is excluding trainees. This is a range we try to keep our utilization because of the significant addition at the entry level, etc., our utilization including trainees is 71.4%. Fixed price versus time and material is almost the same like previous quarter. Our onsite revenue has come down to 49.8% from 51.9%, whereas offshore has gone up to 50.2%. Now this is for the consolidated, you know, group, consolidated group numbers. In terms of effort, the onsite effort has actually come down to 31.5% for IT services alone and this is actually a [not audible] one of the lowest numbers in the recent few quarters actually. So we

have been proactively shifting the business to offshore. These numbers are healthy, this is the client concentration. We have 146 $ million clients, we have 60 $5 million clients, we have 7 $40 million clients. So you can see that there is improvement in all the parameters here. The largest client count contributes to 5.5% of the revenues. As Nandan said, we have added 32 new clients. The growth has been all around across all industries. Here are some examples. A major European retailer chose Infosys to implement an RFID solution. This is a pilot project [not audible] we did. Basically we have been focusing on technology based or business trend based solution, and you will see some examples of us getting traction on our solution or value based marketing efforts. In the financial sector, Infosys has helped a company looking at their proxy voting and corporate governance solution. Now, this is an example of a consulting - led solution. Telecom as a sector has done well this quarter, and both in the service provider space as well as in the product group, we have seen actually significant growth this quarter. We have continued to see acquisitions of clients in the automotive and aerospace [not audible] sector. In the energy and utility sector, a Fortune 500 company in the US chose Infosys to provide application development and maintenance where a customer relationship management [not audible] our enterprise solutions group also continues to see significant traction. In the other space, you know, we have started working with an IT storage [not audible] company for their product development. So our product engineering group also has seen further addition of clients. Our banking business unit continues to do well. Unit Bank of Philippines, IDBI Bank, UTI Bank, and a leading private sector bank in India has licensed Finacle wealth management and CRM solutions during the quarter.

The total employee strength for the group stands at almost close to 33,000. [not audible] In Infosys Technologies about 31,000 people are software personnel. Of these 838 belong to the banking business unit. The gross additions were 6078 out of which about 1052 were laterals or experienced employees. The net addition of 5010 is almost equivalent to the total number we added in the financial year 2003. In financial year 2003, we added about 5100 employees. We have almost touched that in just one quarter in this financial year. We have spent about 176 crores during the quarter. We had said that we will spend about 600 - 750 crores and for the remainder of the year, we are looking to spend about 285 - 430 crores of capital expenses. We have about 50 lakh square feet of space in use and 35 lakh square feet under construction. This will give us space for additional about 15,000 software professionals. Back to Nandan.

Nandan Nilakeni: Thank you Kris. Now this is our guidance for the quarter and for the fiscal year. This is Indian GAAP consolidated. For the quarter ending December 31, we expect income between 1869-1882 crores which on a year-to-year basis is 49-50% growth, and earnings per share of Rs.17, which on a year-to-year growth is 38%. And for the fiscal year ending March 31, 2005, we expect income to be between 7132 crores to 7160 crores, which is an annual growth rate of 47-48%, and we expect earnings per share for the full year to be Rs.67, which is a growth rate of 43%. To summarize, we have revised our guidance upwards for the financial year, as I said growth rate top line 48 and 43 earnings. We have also issued an interim dividend of Rs.5 per share which is 100% on an [not audible] equity share of par value of Rs.5. So, Rs.5 per share is the

interim dividend that we have announced today. As you have seen our growth momentum continues, particularly notable is that while the total volume growth during the quarter was 12.6%, the onsite growth was 7% and the offshore growth was 15.3%. So I think this quarter has been successful in driving offshore growth at a much more, at really twice the pace as the onsite growth, which is part of our desire to increase our offshore presence. We also noticed that our whole philosophy of modular global sourcing and strategic sourcing has now become more and more accepted by the market place for many companies across many industries. Pricing has been stable, we have had, on the revenue productivity side, our onsite revenue productivity [not audible] has gone up by 1.7% and our offshore revenue productivity has gone up by 0.7%. So pricing has been stable with a small uptick. As you can see, we continue to focus on scalability, whether it is adding 5000 net employees, whether it is having 3.5 million square feet under construction, whether it is building India’s largest college campus in Mysore. We believe that scalability is very important because scalability is key to rapid growth. At the same time, we want to marry [not audible]differentiation to the scalability which is why we are investing over $30 million in various initiatives including our banking products, investing in Infosys Consulting, investing in Solutions and Alliances, investing in our IT and BPO services, investing in new services, investing in Progeon, you know, it is all these things are there, and therefore we believe that the key to our future is combining the scalability which we have demonstrated quarter after quarter with differentiation so that our customers perceive significant improvement in their client value, and that is really what our focus is on today. We have also been able to demonstrate that even as we hired 5010 net employees, our expense management model, which over the last couple of years we have focused on bringing in more variable cost and all the other things we have done on the balance sheet, we have shown that the balance sheet is able to absorb the additional cost of recruiting 5000 net people while maintaining the margins. And in fact our utilization including trainees has gone down to 72%. But the fact is that the business model, the scalability now can absorb these expenses and still maintain margins. So this is a broad outlook. We believe that our focus going forward is to continue to scale up our business even as we invest in our differentiating [not audible] solutions so that our clients get higher value. With that thank you and we will be happy to take any questions.

Gayathri: Mr. Nilakeni, I am Gayathri from Doordarshan. The question of offshore model, now that John Kerry, US presidential candidate has said that legislative means will be used to prevent outsourcing by private as well as by the government in the US, what is your, because you have always said that global delivery is your strong point. How are you going to overcome this problem?

Nandan Nilakeni: Well I think we really need to wait and see how it all pans out and you know the offshoring debate continues with different levels of, you know, intensity. Has been doing so for the last year or so. But our view is that while there is a debate on outsourcing and offshoring, basically what we are doing is a win - win for both America and India, because by what we do, we deliver better productivity for our customers, we help them in becoming more competitive, enable them to make more profits and become stronger in which, and they create more jobs [not audible]. Therefore, all in

all in helps in improving the productivity and standard of living there. At the same time we are creating 1000s of new jobs here and therefore I think it is a win - win for both countries, and we will continue to espouse that point of view.

Gayathri: Is business a captive to politics?

Nandan Nilakeni: Well, I think, you know, a lot of decisions in economics are linked to politics. So I do not think that is anything unusual. But I think overall [not audible] we are comfortable that outsourcing and offshoring will be a mega trend. We believe that our business model simply delivers superior value proposition to the world’s large companies, and we believe that that will play an important role in continuing the trend.

Speaker: [not audible] ...Mega trend?

Nandan Nilakeni: You have not given me your written list of questions? Oh, it is here, I am sorry. Yeah, I am sorry, I should never assume that you have not done that. I think when we say mega trend, what we are saying is that the power of modern telecommunications and modern computing, you know, power which has happened over the last 40 years has enabled the world to get connected over this huge network and while this has happened parallely the service content of the world economy has gone up, and a large part of the service content is really activity that is fungible over a wire and therefore the, and plus you know the economic liberalization in China and India. So we have put all these things together, where work will be done in the future will be different from where it was done in the past, and we think that is a mega trend.

Male participant: Nandan, could you just elaborate on the 30 million investment, could you give more details on that?

Nandan Nilakeni: I will ask Mohan to give the details of the break down.

Mohandas Pai: We had said that we will invest $32 million in our businesses. It is all revenue expenditure and we said that we will invest about $10 million in our banking business, that is, the product business, and the balance will be invested to the extent of 16 million in our IBUs, for the business plan. The China initiative will take $2.5 million, and the consulting initiative $3.5 million. In the first half of this year, we have totally invested about $7.5 million. In Q3, our target is to invest up to $12.5 million and the balance in Q4. Now this is a part of our revenue expenditure, and thus far you see that in the Q3 guidance we have shown a decline in net income of 1%. That is because if you look at the incremental increase in investment between Q2 and Q3 is about $5 million and $5 million on revenue of about 400 odd is about 1%.

Male participant: [Not audible] .

Nandan Nilakeni: NOT AUDIBLE currently we are operating in 9 cities across the country including 3 in Karnataka. And as you saw in the slide, we currently have 3.5

million square feet of construction happening in these 9 cities. So we are expanding rapidly in the existing 9 cities. At this point in time, we really have not identified a 10^th location. But as the time comes, we will form a team and they will go around the country and identify a possible 10^th location. We do not have anything specific to report at this stage.

Srinivasan: Nandan, this is Srinivasan from Associated Press. From one angle your second revision of forecast is a happy news but from another angle, you know, the credibility of your year beginning forecast suffers. Does that mean that you did not have enough visibility at the beginning of the year? Or you are trying to be too conservative leaving room for future revisions? You know, how does it pan out, and is it better for us to have a much clearer guidance in the beginning of the year so that it does not get revised that much so steeply like, you know, 15 percentage points or so from the beginning of the year. Can you comment on it please?

Nandan Nilakeni: I will ask Mohan to answer that. Mohan…

Mohan: I think this is a wonderful question because this is a question that others have asked us too at different points of time. Our philosophy on guidance has been that since we are driving the business amongst everybody, various stakeholders, we should have the best visibility about the business and we should share the visibility. Now, how do we ensure that we create a guidance which is credible, because it is important that you create a guidance in which there is considerable faith internally and externally. So what we do is we have a planning model which looks at revenues based upon book business and based upon anticipated business for the entire year. And that exercise we update every quarter. So we have a four quarter rolling plan for our guidance. And at the beginning of every financial year, we have a planning exercise where our marketing people, sales people and everybody else gets together and work out what is the probability of achieving a certain number. So based upon the business as of the date that we give the guidance or may be two or three days before that, we give a guidance. So our guidance where our best estimate as of 12^th April 2004, and then we make sure that every month we look at our achievements, we make sure that we look at business potential every month and look at whatever steps we need to take, and we try our hard best to see that we achieve the guidance and try to over achieve. Now the beginning of the quarter, we are not very sure whether we are going to over achieve because we do not know. There is uncertainty in the business, it is a business, and there is uncertainty. So end of the quarter we look at the actual figures, go through the cycle very often. So we are seeing an increase in the guidance but there is no certainty that going on forward there will always be an increase. But what we could promise with a great degree of certainty is the probability of our reaching our guidance levels is high because there is credibility of data, credibility of information. But is there a certainty we are going to exceed our guidance quarter upon quarter? There is no certainty. To the outside world, since we have a good planning system, it looks almost easy, but inside we do know that we have to work very hard, factor in a great degree of uncertainty, build a planning model, and there is a lot of hard work going behind the numbers.

Male participant: Mr. Pai, as an offshoot of that question, it would be nice if you could just give us the rupee story that you give every quarter and it seems that your approach should take a very quarterly view of the rupee and marking and market has really paid off. So if you could kindly elaborate on that, it would be nice.

Mohan: Well, I do not want to say that our strategy has paid off because it is only hindsight to look good or bad. In the first week of April we looked very bad because we had a very small forward cover. Now it looks good, because the market has moved our way. It does not mean that we were very smart or we knew what is going to happen. It is just serendipity, we had a particular view, maybe we could not have the courage to take a very large position in the month of March, whatever it is but what we essentially try to do as a part of a hedging policy is to hedge for two quarters going forward. So we did our budget at Rs.43.40 to a dollar when we gave our first guidance, and then we found [not audible] the rupee depreciating, and we gave a second guidance in the month of July at 45.61. So a part of the upgrade of the guidance in the second quarter was due to the rupee appreciation which gave us approximately Rs.300 crores of revenue, and it meant about 150 - 160 crores of profit out of which a large part we put it back into our business through our business plan. So for increasing our guidance, the rupee is also a part of the issue. Now for this quarter, we have given, we have placed our guidance at about 45.91, the quarter ending rates, and that is the rate at which we have forecasted the guidance. We have $180 million of forward hedges in place, but all of them have been marked to market. Please remember before the last quarter when we spoke about hedges, there was a profit or a loss sitting in the books, but now all this 180 million is marked to market. Our view on the rupee is that the rupee would be stable over the next two or three quarters. We may not see great volatility. We have seen the oil price go up, and that is a matter of concern, but we also  [not audible] which said that the share of invisibles in India’s exports is going up. There is a surplus invisibles and the software industry is also driving this invisibles up. We have seen an increase in FDI, and we have seen an uptake in inflation because the rupee had depreciated. So we think that Central Bank would try to manage the float because of inflation concerns, and that is a view.

Speaker: ……question, I also asked a related question, and then just, are you saying that, you know, you will be certainly revising the next quarter again the guidance for the year?

Mohan: ……….we are not saying that we are going to revise the next quarter guidance at all. It may not happen at all. All we are saying is whatever guidance we have given, we believe there is a great degree credibility and certainty in that guidance. To give an example of the kind of things that we need to do, next quarter we said we will grow at 7.9% in our guidance, right? Now, please understand that there is an impact of 3% because of lesser working days this quarter. Compared to the previous quarter, this quarter we have got lesser working days and if we calculate the revenues on that, it has an impact of 3% on sequential growth. So there are many exercises that we need to do. So I would state very clearly that our guidance is based upon the picture as we see it today and there is a great degree of credibility because of planning model and certainty, and we

cannot state with any degree of certainty whether we are going to increase our guidance at the end of the third quarter.

Speaker: Few companies, Nandan, have decided to boycott Bangalore IT.Com. What is your stand on that?

Nandan Nilakeni: I think really we need to discuss this at two levels. Clearly all of us are concerned about the slow down in the pace of infrastructure development and while, you know, lots of global companies are coming here, and I think we need to raise that concern which we have done that with many of the bodies both privately and in public meetings. At the same time, I think, you know, we have worked long and hard to build a global brand for Bangalore, and I do not think you should compromise that. So we will do our usual participation in Bangalore IT.Com.

Madhavan: Hi, Madhavan from Reuters. I just have to ask a couple of questions on hiring and clients. You see, the head count is at 5010 new hires in the latest quarter. Could we have the break up between Progeon and Infosys on this? And also we heard this morning that the planned hiring could go up and what was 10,000 could be even higher up. Could we have a number on that please in the next two quarters? And also I wanted you to reconfirm the number of clients, is it around 451 because you have not given the total number of clients this quarter?

Female speaker: Let me take the numbers first. Total employees, Infosys Technology is 29,800, Progeon 2689. Second question which you had was kind of number hire for the rest of the year, and that is 4000-4500 people in the next two quarters.

Male participant: Attrition rate? [not audible]

Female speaker: Attrition rate is 10.8%.

Male participant: [not audible] the full year that basically means you are going to be hiring about 2500 people more than anticipated, is that correct? Because 7200 are already in I think.

Female speaker: Yes, we have our year-to-date hiring of close to 8000. We are looking at 4000 - 4500 more for the rest of the year. So, yes, it is 2000 - 2500 more.

Kris Gopalakrishnan: And, yeah, the second question was active clients, we have 431 clients at the end of the quarter.

Male participant: And one small thing I wanted was the break up in the 5000 numbers added in the latest quarter, how much in Progeon and how much in Infosys please?

Female speaker: Net addition in Infosys is 4547, that is Infosys Technologies. Net addition in Progeon is 420.

Sridharchari: Sridharchari from the Tribune. Kris, you had a figure there for the rest of the world, 17% or something like that. How much of it is from China and how is the trend going there?

Kris Gopalakrishnan: [not audible], you know, revenue from China is negligible. We have just started. We are recruiting people. We are also starting to do couple of projects there for our global clients. We are very happy with what we have been able to achieve but just started.

Male participant: I just wanted to know if you are growing at this pace, and you are hiring 5000 people in one quarter this time, why is that that the prices are just stable. Another way of putting is why are the prices stagnant? Are you able to kind of demand better prices and aren’t you able to command that, you know, to give a percentage increase for your existing clients? How is it going?

Nandan Nilakeni: Yes, thanks. We have, you know, you have to look at pricing in two different aspects, one is pricing with existing clients where we do need to do fine tuning over time when clients come up for contract renewals. But we are very happy with the way the pricing we are getting with our new clients. We are seeing a 4-5% uptake in pricing on new clients compared to our older clients. And also as part of this whole effect of pricing, our service mix is really important. You have to look at the service mix and increasingly we are selling higher value and higher price point services like consulting and enterprise solutions, and system integration and services, which will take our average revenue productivity and pricing higher.

Male participant: Would you be able to add some numbers to that please?

Nandan Nilakeni: Well, as I said, on new accounts we are seeing pricing that is 4-5% on average above our existing accounts. Service mix, if you look at the growth rates of enterprise solutions, which we have given on our handouts, you will find the growth rates on new services like enterprise solutions, consulting, SI will be higher than the rest of the company. So the share of those services is going up.

Subbu: Yeah, this is Subbu from Economic Times. I have a followup question on China. There were some reports that you are setting up a second development center there and you are planning to ramp up to around 20,000 people. The second part of the question not related to that is that what is happening to your Trade Mark infringement case?

Male Speaker: As we have already declared that we are building this facility for 200 people for this year and that is going on as per the business plan. About 45 people we have hired so far with a net addition of 29 people this quarter in China. Regarding the second question....

Mohan Das Pai: As for the Trade Mark case, the Trade Mark Appellate board had said that for certain categories, like for example, hardware and stationery, we cannot extend the Infosys trade mark. And our stand has been just as the Tata’s have a

trade mark, you cannot start any lingerie with Tata trade mark because you damage the brand. For example, there was somebody who started some clothing with the Benz trade mark in Delhi, and the Delhi High Court came down against them. So we had quoted that, but the Appellate Tribunal had otherwise. So we are going up in appeal. It is not against our core business of software, it is against an extension of the brand to many things which are part of the entire chain for which we have a trade mark. We have registered our trade mark in 17 countries, we have a strong brand equity amongst of the public of this country, and to use our brand for some other unrelated thing could imply that it carries the assurance of Infosys, so we have gone in appeal and the appeal should be held. So we wait for the appeal. We believe that we have a very strong case.

Thyagraj Sharma: This is Thyagaraj Sharma from the Statesman. You talked about the possibility of going to a 10^th city, would that be Calcutta, one? Secondly, what happened to your proposal for acquiring 100 acres of land from the State Government. Is it still in a limbo? And just one last question, Mr. Balu had come, the Union Minister had talked about an elevated plane here, and he had also talked about the Electronic City Association funding almost 33. odd percent. We have not heard anything on that from the Association in the Electronic City. Is it just to pull the wool over our eyes that this proposal has been mentioned or is something actually happening?

Nandan Nilakeni: You know, as I said, we have not, we are not really at this point actively looking. But I am sure we will do that one of these days, and I think there are a number of cities which have, you know, suggested that we could start a center there including Calcutta and Jaipur, and Noida, and you know, Madhya Pradesh and Bhopal, Indore and all that. So we will look at all these cities, we will put a team together. We have a rigorous process of looking at all the advantages and then we will decide. So that process will happen and that will be a fair transparent process across the country. Regarding the elevated highway, yes, [not audible] the association and the companies in and around this area have, in principle, agreed that they will chip - in in the construction of that elevated roadway. So that is not, it is true, it is not a figment of anybody’s imagination. And the association did meet with the minister about two weekends back and this draft proposal is on the table, but it is early days and we have to flesh it out as to what is the special purpose vehicle, which will be created, because there will be multiple shareholders. What will be the toll, how will the toll revenues be allotted. I think there are number of issues to be sorted out. But the principle and the idea are in motion.

Male participant: Just as a follow to that, I think an internal study which we had done mentioned the cost of 14 crores per kilometer, but this project is talking about 360 crores for the entire 9 kilometer project. Why do you think that kind of differential exists?

Mohandas Pai: Well, the earlier proposal for an elevated four lane way, two lane on either side over the drain. So you will have two lanes this side and two lanes that side, it is more cost effective. What the NHAI proposed is a four - lane highway running right in the middle of the median because they feel that it is aesthetically better and the cost will be higher. But there is a cost estimate, we have to look into that and see the design

parameters. We have the view that this elevated road should be used only by cars and buses and not by heavy goods vehicle. So, it is the design issue which has to be looked at like Nandan said it is preliminary right now.

Male participant: [not audible].

Nandan Nilakeni: Ya, I think that we are in the process of you know, identifying and finalizing that 100 acres.

Male participant: Is it near the Devanahalli airport, because your clients can immediately go? Are you looking at Devanahalli? [not audible]

Nandan Nilakeni: Well, there are various options. Obviously we will look at place which has got a very broad road, which has got access from many areas, which has got reasonably good infrastructure, which has a large hinter land of residential accommodations so people could stay there and have a very low commute. Like Jayanagar is to Electronic City. Obviously all these are a part of the consideration.

Male participant: [not audible].

Nandan Nilakeni: Yes, I mean, they agreed to give us 300 acres in a sanction three years back. But the key thing is when do they give us.

I think there has been sensible progress made on that and the Government is very serious. The Industries Secretary has spoken to us and met us. The IT Secretary is trying very hard. They have seemed to identify some piece of land which they want to show us. So I think there is reasonable cause for optimism [not audible] right now.

Male participant: [not audible].

Nandan Nilakeni: No, we are not being diplomatic. We saw two pieces of land, and we found that the land did not suit us. Then we saw a piece of land, then we negotiated with the land owners, and it is not an acquisition, a negotiated rate to make through the fair rate. The negotiations came up and then when we looked at the master plan, we found that in that piece of land, there is an irrigation canal, there is a six lane highway going, there is an elevated train way going. And we asked the Government to clarify whether this CDP still holds good. And they did not come back to us, and we said till you clarify we do not want to go ahead. And then the elections took place, the whole thing fell through the crack. So, now we have revived the whole thing and the new Industry Secretary has promised us, they are very serious, they are going to give it to us, they put a team in place, they are looking at two or three locations, and we are optimistic.

Male participant:      .mangalore, which part of mangalore, when when ?

Nandan Nilakeni: No, I think we should clarify this. You know, there was some piece of land very near to where we were which belonged to the government. It had to do with

the fact that there were some government quarters there. We had gone with the proposal to the government to state very clearly that we will rebuild those quarters and take a part of the land so that it is a win - win situation for everybody. And there was some kind of a in principle approval for that, and it dragged on and on and on, and now the proposal seems to be becoming less and less of a certainty in that particular place.

Male participant: Can I ask you something about the telecom surge [not audible] in the business. There seems to be a very significant rise. It will be nice to know bit more of detail as to what kind of clients, and what kind of segments are you getting in this new business which has shown a jump in revenues in telecom space?

Nandan Nilakeni: This is coming from the telecom service provider business across the world. We have telecom service provider clients, you know, in Asia - Pacific, we have them in Europe, we have them in US. And increasingly these companies are looking at, you know, global offshoring primarily for two reasons. One is that their traditional revenues from telephony are coming down, so they need to reduce cost and become more efficient on the traditional side of their business, and secondly they are all investing in upgrading the networks and going from circuit switching network to a full package switching network, voice over IP, and all that. So both these things are big drivers today in the global telecommunications industry and we have a really good set of blue chip clients in that space. And that is the reason for that growth.

Male participant: Sorry if I have missing it, but how are your operating profit margins moving both sequentially and year - on - year with 5000 people it is easy to lose sight of it no?

Mohan Das Pai: No, at least we do not lose sight. If you look at the consolidated figures, our operating profits under Indian GAAP for the second quarter has been 28.6% and for the first quarter has been 28.8% essentially flat and we have managed to absorb the cost of this new hiring. Our other income has, however, gone up, gone up to about 1.7%. So overall our net profits have been at   % [not audible] as against 25.6, that is after absorbing the losses of our subsidiaries. Our subsidiaries have made losses and we have absorbed those losses, and I think Balaji has asked a question about subsidiaries to say that the difference between consolidated and Infosys standalone is 7.48 crores negative. The standalone figures are higher. Yes, Progeon for instance has made a profit of 5.22 crores as against a negative net income of 3.31 crores. Australia is positive at 3.66 crores. Consulting is negative at 13.86 crores, and Infosys China is negative at 2.50 crores. If you add up all the profits and if you add up all the negative figures, you get a net negative for subsidiaries of 7.48, and if you add 7.48 to the consolidated figure of 447.37, you get something like 454 crores, 454.8 crores on a standalone basis.

Male participant: At the corollary, is it right to say that as you are in an investing stage in BPO in Australia and China and so on, your operating profit margins will more or less remain flat despite the increase in business and that new client, higher prices from new clients.

Mohan Das Pai: I think as a corollary, it is right to say that we are making substantial investments into the business, we are investing $32 million and this is going as a revenue expenditure and to that extent the operating income will be relatively flat.

Gayathri <Doordarshan>: You have a major client in Radio frequency ID space, what is the potential of this business? And are there any clients within India?

Nandan Nilakeni: RFID is fairly new technology with great potential. It has impact in the entire supply chain of products from consumer product companies, transportation, supply - distribution companies, as well as in retail. We are focused on building our own intellectual property on RFID and how it will impact businesses across these verticals. Right now it is very early days. Nobody actually is seeing a whole lot of revenue coming out of RFID, neither us, nor our competitors, but we are very certain that this is a big one for the industry. So the work that we are doing for instance, this client that we mentioned is on a pilot. And those are the kinds of things that are getting done right now, pilots to prove the concept, prove that it is going to work and prove the business case.

Male participant: Hello, Saikat from Bloomberg.

Male participant: I just wanted to ask you one, just right, I just heard the [not audible] story, I do not know whether I have missed it, but the story behind the 5000 people that you have hired this quarter, the business story behind it. The second question is, if you can give me an update on what is happening with the consulting division?

Kris ??? : Yeah, on the recruitment front, as you have seen, we have revised our guidance. We are seeing a healthy business situation. We have had good growth this quarter. At the same time, we have a forecasting model which looks at four quarter rolling plan. Although that plan we come up with the requirement. This quarter again is also the quarter in which the campus recruitment people join us. Out of the 5000 plus people who joined us, 2266 people are from the campus recruitment. And the campus recruitment which happened last year, in fact, they come into the system within a span of three to four months. So that also reflects into this quarter’s numbers.

Male participant: Okay… [not audible]

Mohan: Steve will answer the question on consulting,….

Steve: So, the update on consulting is, things are going great, we think the model is being proved everyday in the market that, I think the message is that we have been really resonating with clients that the ability of combining very very good consulting with very good global delivery technology is I think the right model. I think our clients are telling us that. And so it is going great and we are, the other very encouraging sign is to, is the fact that we are being able to recruit really top talent, if you look at the people that we

have gotten on board are some of the best consultants anywhere in the world and so that is, I think a great sign.

Male participant: Can you give any numbers in terms of client additions in the consulting space?

Steve: Yeah, I think all of our numbers are consolidated in with the larger numbers.

Kris ??? : Yeah, actually, I think this quarter we have added three clients in consulting led activities. The revenue has been $0.3 million.

Female speaker: We are now totally about 21 employees within Infosys Consulting and this quarter we have added 13.

Male participant: Is that thirteen or thirty

Female speaker: 13, one three.

Male participant: I am just inquisitive about this, looking at the manner in which you have given your guidance and the rate at which you are growing, what interests me is your ability to get larger outsourcing deals in the future, in the coming quarters. I would like you to comment on what is exactly being happening on that front?

Kris Gopalakrishnan: On one side, you know, we are seeing our existing relationships growing, you know, number of $10 million client, number of $20 million, number of $30 million, number of $40 million clients are growing. Now, some of these growths are coming from our traditional services, some from our ability to look at the outsourcing deal, taking over employees and things like that. We are bidding for more and more such projects and our credibility in this space is going up; one, because we have a point of view on how strategic sourcing should be done or hold positioning around modular global sourcing. Second, you know, the size of Infosys itself gives credibility to us going after larger projects, and in all these large projects now, offshore is a must in some sense, you know, clients want to leverage offshore even in the large outsourcing projects. So they are including offshore service providers like Infosys in many of those deals.

Male participant: The second part of the second question and the first question and the second part of the third has not been answered.

[not audible] second part of the first question and second part of the third question.

Nandan Nilakeni: Going by the trend and the growth momentum continuing, are you likely to revise your outlook further in January 05, that one?

Male participant: [not audible]

Nandan Nilakeni: Yeah, I mean, at this point in time, I think we have looked at all the issues and we have given the guidance based on our current perception of the outlook as well as our capacity to meet the outlook. But I think the mega trend is something, you know, I think it is not about this quarter or next quarter. As I said, there is a global rebalancing of work force that is happening due to a variety of circumstances that have come together and therefore it has longer term implications where the world economy is going to move. So that I think will continue for many years. I think, the next part of your question is have you factored the outcome and the possibility of John Kerry getting into the White House? Is that the one?

Male participant: Yeah.

Nandan Nilakeni: …..with his anti - outsourcing policies in your guidance? I think our guidance I think has factored in the uncertainty on the political side, yeah.

Male participant: Yeah, …..from your comments it looks that there is every possibility of the guidance being revised.

Nandan Nilakeni: Well, I think…

Male participant: [not audible].

Nandan Nilakeni: At this point all I can say Balaji is that seeing the outlook, seeing the fact that the third quarter has significant number of non working days, seeing the fact that there is election on [not audible], we have factored all that in and we have given a certain guidance and you know, we just have to go with that at the moment.

Female speaker: I think we have time for one last question.

Male participant: What are the new services you referred to in your speech?

Male Speaker: You know, we have introduced new services over the last few quarters. We have the infrastructure management service, we have the system integration service which is rolling out, solutions like XP roll out, infrastructure effectiveness, operational effectiveness along with Microsoft, and we also have consulting which is a new service, you know, which we, we have had it but now we have gone to the next level of consulting.

Female speaker: Please join us for lunch outside. Thank you again for coming.

EX-99.4

Exhibit 99.4

INFOSYS TECHNOLOGIES
Q2 FY05 EARNINGS CALL
OCTOBER 12, 2004

Moderator: Good afternoon ladies and gentleman. I am Prathiba, the moderator for this conference. Welcome to the Infosys second quarter earnings call. For the duration of the presentation all participants’ lines will be in the listen-only mode. After the presentation, the Q&A session will be conducted for participants connect to the SingTel Bridge. After that, there would be a Q&A session for participants connected to CyberBazaar India. I would now like to hand over the floor to Infosys Management. Thank you and over to Infosys.

Krishnan: Thank you Prathibha. Good afternoon and thank you all for joining us today to discuss the financial results for the second quarter and half year ended September 30, 2004. I am Krishnan, and I am a member of investor relation team in Bangalore. Joining me today in this conference room in Bangalore, India, is CEO and President Mr. Nandan Nilekani, COO Mr. Kris Gopalakrishnan, and CFO Mr. Mohandas Pai and other members of senior management team. We will start with a brief statement on the performance of company during the quarter and the outlook for the future. After which we will open up the discussion for question and answers. Before I hand over to Mr. Nilekani, I have a small but important task to perform in reminding you that anything that we say that refers to our outlook for the future is a forward looking statement and it must read in conjunction with the risk that the company faces. A full statement and explanation of these risk is with our filing with SEC which may be found on www.sec.gov. I would now like to hand over to Mr. Nandan Nilekani, President and CEO of Infosys technology.

Nandan Nilekani: Thank you Krishnan, I think we have a good quarter. Based on quarter and the business outlook we have revised the guidance for the financial year. We are now saying, we will do between Rs.7132 crores to Rs.7160 crores, which is annual growth rate of between 47-48% and we expect earnings per share to be Rs.67 which is an annual growth rate of 43%. In addition, we have declared an interim dividend of Rs.5 per share which is 100% on equity share of par value of Rs.5. Another important facet of this quarter was the strong growth in effort especially on the offshore side. Kris will tell you more about that. We are also finding that our whole philosophy of modular global sourcing is now becoming accepted by customers and is approaching, is the outsourcing approach for many companies across all industries. Our pricing has been stable and our focus is to continue to focus on scalability and one dimension of that is more than 5000 people that we have hired, but equally importantly we want to combine scalability which gives us rapid growth with differentiation which is a key to higher client value, and therefore our focus on rapid growth combined with quick differentiation is really the essence of our model. With this, I will request Kris to go through the operational performance. After which Mr. Pai will go through the financial performance. Kris.

Kris Gopalakrishnan: Thank you Nandan. Good afternoon everyone. If you look at geography wise, North America is 65.2% of revenues, Europe is 21.4, rest of the world is 11.7, and India is 1.7. If you look at last 12 month basis, Europe and rest of the world have gone up and it is because of proactive marketing as well as the Expert acquisition in Australia. Utilization continues to be high, excluding trainees it is 81%, including trainees it is 71.4. This is the quarter where we get most of our campus recruits joining the company and that’s one of the reasons why we had 5010 net addition of employees. The onsite ratio has come down to 31.5% in terms of effort. This is a proactive initiative we have taken. This is beneficial to our clients and it also helps Infosys margins. We have 146 million dollar clients, 60 $5 million clients, last quarter we had 53 $5 million clients, 31 $10 million clients versus 27 last quarter, 7 $40 million client compared to 5 $40 million clients. So in all these parameters we have seen growth. We have 3 $50 million clients. The top client contributes to 5.5% of revenues. Top 5 clients contribute 21.6% of revenues which is the same as last quarter. We added 32 new clients. The growth has been similar across all vertical industries. One sector which stands out is probably the telecom sector which we saw good growth this quarter. This is coming from both the carriers, the services provider space as well as on the product side. We are seeing some investment happening from the R&D product companies. Finacle which is our banking product has made further inroads outside India as well as in India and continues to do well. We have had 5010 employees net addition, with this the total strength of the group stands at 32,949. We had invested Rs.176 crores in capital expenses this quarter, with this, in the first half we have invested Rs.312 crores. For the rest of the year we estimate an investment of about Rs.285-430 crores of capital investment. We have about 50 lakh square feet of space, which is capable of accommodating about 26,000 professionals and we have 35 lakh square feet under construction which will accommodate a further 15000 professionals, Mohan......

Mohan: Thank you Kris. Pricing has been stable during the quarter. Pricing has been stable with a positive upward bias. We have seen some new clients come in at higher rates. We have seen some uptake in the pricing with existing clients where they came up for negotiations. Our margins have been stable. Under Indian GAAP, operating profit was 28.6% as against 28.8% the previous quarter. SG&A was 15% as against 14.7% on a consolidated basis. We have seen nonoperating income go up to 1.7% from about 1% last quarter, the reason has been that we have had a positive exchange variation of Rs.4.3 crore rupees as against the negative 13.92, and this has led to a slightly higher other income. Tax rate is up at 4.7% as against 4.2 because of taxation on other income. We have also seen that we have the ability to hire and meet part of the training cost of 5000 professionals in this particular quarter. Cash flows have been strong and we have a surplus cash balance of about Rs.350 crores which has been added to our cash balance. We have a foreign exchange hedge of $180 million as at quarter end, which has been marked to market at 45.91. Thank you very much now we are open to questions from all of you.

Moderator: Thank you very much sir. At this moment I would like to hand over the floor to Zaini at SingTel to conduct the Q&A for participants connected there. After this

we will have a question and answer session for India participants. Thank you and over to Zaini.

Moderator: Thank you Prathiba. We will no begin the Q&A session for participants connected to this SingTel Bridge. Please press *0 to ask a question. Thank you.

Nandan Nilekani: Prathiba is there a problem.

Moderator: Hello Zaini.

Moderator: Just a moment please, Prathiba.

Nandan Nilekani: Do you think we can start with India.

Moderator: We can go on to questions in India sir.

Moderator: Just a moment please.

Nandan Nilekani: Prathiba I think we will go with India and then.

Moderator: Sure sir we will do that.

Moderator: Prathiba.

Moderator: Yes Zaini, do you have questions there.

Moderator: Yes we do Prathibha.

Moderator: Could you please announce the first participant.

Moderator: Yes, just a moment.

Moderator: We will move over to India first sir, then we will take questions from SingTel.

Nandan Nilekani: Yes please.

Moderator: Thank you very much sir. We will now begin the Q&A interactive session for India participants. Participants who wish to ask questions please press *1 on your touchtone enabled telephone keypad. On pressing *1, participants will get a chance to present their questions on a first-in-line basis. Participants are requested to kindly restrict to one question in the initial round of Q&A session. Please use handsets while asking a question. To ask a question, please press *1 now.

First in line, we have Mr. Ashish Agarwal from IL&FS.

Ashish: My first question is regarding the pricing scenario, do you see a stable billing rates or do you see that billing rates will increase going forward and what is the billing rate for this quarter?

Basab Pradhan: Yeah, this is Basab Pradhan, Head of Sales. We are seeing a slight uptake on pricing with new MSA’s , new clients that we are signing up of about 4 to 5% on the contracts that we have signed in the last two to three months. On existing contracts we have had two or three instances where upon contract negotiations we have received a prize increase but it is far away from becoming a trend. I will hand this over to Mohan for the billing rates information.

Mohandas Pai: On site went up sequentially by 1.7% to 10889, and offshore by 0.7% 4532. So there has been an uptake, it is a the question of the mix, there has been some new business at new rates, but new business is not making an impact on the portfolio, but overall like we said, pricing is stable with a positive upward bias, in the sense that new customers are coming in at higher rates.

Ashish: Yeah, this quarter, you have added on 5000 people, it is basically the freshers which have been added or and other thing like, you said that, in the next two quarter it will be 4000 to 4500 people, so you expect more of these, what will be the profile of these people which you will add, will it be the fresher or lateral entry?

Hema: Hi this is Hema here. We have a typical ratio, we added about 4300 freshers and 900 experienced hires in the software professionals area. And our typical trends are in the range of 70 to 80% of our recruitment is at the entry level, and the rest is the experienced hires. Same trend would continue.

Moderator: Thank you very much sir. We take our next question from Mr. Amit Khurana of IL&FS.

Amit: Thank you so much, just to take this forward, the issue of getting the price increases, Basab, could you give us the sense of how easy it is to get the price increases, I mean are the clients very receptive on this, especially we still have a very strong competition coming in from (clear) non-Indian vendors, so what are the considerations now at the client level that they are open to giving price hikes for the new engagements?

Basup Pradhan: Well, I can tell you from long experience that clients are never receptive to rate increases. So really it is a question of what is the supply-demand equation out there, what is the competition, and right now, our focus on increasing our revenue productivity or average bill rates is really to look at the service mix that we have, and see if we can change it from primarily a heavy weightage towards application development and application maintenance to other services like enterprise solutions, like technology solutions and consulting, and these we feel can take our average bill rates higher. On the MSA’s as I mentioned earlier, with new contracts on new clients, we are able to get higher than our average bill rates by about 4 to 5%. That is what we have seen in the

last few months. With existing clients, the norm is going to be while there always be exceptions, but the norm is going to be that the rate re-negotiations will happen when the contract comes up for renewal, and at that time, you know, its again, it depends on whether the rates are, they feel that the rates are above market or not and then its negotiation, and I think beyond that it is really hard to pin the tail of the donkey on this.

Amit: Okay, just one final clarification? Mohan you gave us the rates productive for offshore and on site, does that include Progeon averages as well?

Mohandas Pai: No, it is only for software services, only for Infosys and the service business like in Australia too. It is not for Progeon

Amit: All right, thanks a lot and all the best.

Moderator: Thank you very much sir. Coming up next is a question from Mr. Anantha Narayan of JM Morgan Stanley.

Anantha: Thank you and good afternoon everyone. The business has scaled up quite significantly in the past 4 or 5 years and the foot print has increased as well, Has there been any difference in the visibility that you have going forward over this period of time?

Kris Gopalakrishnan: Our standard practice is that we have 85 to 90% visibility for the quarter coming, and as we go forward, for example, over the next four quarters, we have typically 60 to 65% visibility, and you know, it does not really change because that is how we base our guidance, forecast, etc.., on, how we do our planning, in some sense it is part of the model itself.

Anantha: But wouldn’t visibility increase as the scale of the business increases with customers, and as the business gets more diversified?

Kris Gopalakrishnan: See our model always has been focused on building long-term relationships, high percentage of repeat business. So, the model continues actually, and we have good relationship with our clients. We have good feel for where the market is going, but it is limited and that continues.

Anantha: Okay, thanks a lot.

Moderator: Thank you very much sir. Next in line we have Mr. Sanjeev Kapur from Sharrkhan.

Sanjeev: Hi, good afternoon. We listened to Basab regarding prices for the new clients going up by 4 to 5%? Can we just be a little bit more elaborative.... Is it in limit to a particular vertical or is it..., and what is driving those prices going up?

Mohandas Pai: The 4 to 5% on new client contracts that I mentioned is across the board, all industries, and...the .... My surmise is that it is more a question of the excess supply

in the system getting mopped up and spends in IT looking up, so we will have to see how this progresses over time, I would not jump to long-term conclusions yet on this.

Sanjeev: So it this sort of, what you are saying is, what we are getting is basically is that with demand supply sort of matching, or so is it something which is sustainable sort of, this price increase?

Mohandas Pai: While rates have been stable..over... for a while, right, for 2 or 3 quarters the rates have been stable. This is the first real sign of an uptake that we have seen both in terms of revenue productivity, but also in terms of the new client contracts that we are signing. So I would not make any long-term conclusions out of this and wait and see at least one or two more quarters.

Sanjeev: Okay thanks.

Moderator: Thank you very much sir. Next is a question from Mr. Shekar Singh of ICICI Securities.

Shekar Singh: Hello.

Moderator: Hello Mr. Singh.

Shekar Singh: Yeah.

Moderator: Are you on a speakerphone sir.

Shekar Singh: Yeah.

Moderator: Could you please pickup your handset there is a lot of feedback.

Shekar Singh: There is no handset over here.

Moderator: Okay, please continue.

Shekar Singh: I just wanted to know that there is this sharp shift in offshore effort or basically increase in this offshore effort, any specific reason for it.

Moderator: Yes sir, you can please go ahead, we have the management with us.

Nandan Nilekani: Yeah, Prathiba, I just want to make a small announcement. I am sorry we have got disconnected at this end. We will extend this call for another five more minutes. Thank you.

Shekar Singh: Okay. Basically the question which I was asking was, there has been a shift in offshore revenues as well as in terms of effort almost like 200 basis points, is there any specific reason for it or is it just a quarter on quarter fluctuation.

Shibulal: Yeah, Hi, this is Shibulal, Head of Worldwide Delivery. For the last few quarters we have focused on moving work offshore. We believe that it is much more value add for our customers and also for Infosys, and we have also added new services like testing, which are predominantly offshore centric. For example testing last quarter was about 5.3% of in our revenue. This quarter it is about 5.7%, so the focus we have on moving work offshore, having the portfolio of services in which some of the services are predominantly offshore, and growing at the faster rate has made that happen, thank you.

Shekar Singh: And, it does not have anything to do with the visa..., or if you can just give me an update on how the visa situation is within Infosys.

Shibulal: It has nothing to do with the visa situation. Our visa situation is fairly under control. We have 10,000 plus US visas, H1 and L1s together. Our utilization of visas at this point is about 52% to 55%, which is pretty healthy, and you know, at this point we do not see any material impact from visas over the next two to three quarters.

Shekar Singh: Thanks a lot.

Moderator: Thank you very much sir. Participants are kindly requested to use your handsets while asking a question. Next in line, we have Mr. Suprathim Basu from Deutsch Bank.

Suprathim Basu: Thanks, nice set of numbers. Quick question on the margins, you had two positive factors affecting your margins basically your move to offshore and the currency, and one negative factor which is the utilization, could you just walk me through in terms of what has been the interplay of these three factors.

MDP: I think I will take the question further to give you some more insight into the margins.

Suprathim Basu: Okay.

MDP: The average rupee-dollar rate for this quarter was 46.22, as against 45.31, so we had a depreciation of the rupee of 2%, and the period end rate was almost the same and that has given us an advantage of approximately Rs.26.28 crore rupees, and this was factored in when we gave the guidance because we said if there is an appreciation of.. I mean a depreciation of the rupee then the extra revenues will go into funding a business plan, so we have funded our business plan to the extent of about $5.1 million. So the rupee exchange rate has been utilized by increased spending as we had promised much earlier because that is what it is. Two, we had higher expenses this quarter on other issues, like for example increased cost of US healthcare, and we made some provision for post sale customer support. You see the post sale customer support has increased, systems are beefed up and we also had to pay some higher pay-roll tax in Australia. So if you factor all that in, the improvement in the margin because of the pricing and because of the fact that you had a greater offshore has been utilized by certain higher investments and expenditure that you had to incur although the margins are relatively flat.

Suprathim Basu: Okay, you have actually mentioned sometime back I think in your analyst day that that Infosys is comfortable with the margins that it is currently earning, and any gains that you get from say the currency or operating leverage would get plowed back in the business, so this is really the first quarter where we are seeing that plan in action.

MDP: Well this investment plan was there in the quarter one-two, but quarter one was just about $2.3 million, it has gone up to $5.1 million this quarter, I mean third quarter we plan to spend about $12.5 million. That is why if you look at the estimate you will find a slight decline in the margins, net margin, because we are going to spend another $5 million more in terms of our Q3. You must also understand that we have accelerated hiding. The hiring that we had in the second quarter is accelerated compared to the guidance we gave beginning of second quarter. The part of the expenditure also has been met out of this.

Suprathim Basu: Okay, so in effect are you then saying that there has been accelerated fulfillment of your annual plan and hence you should get a margin pickup at the end of the year.

Nandan Nilekani: Well, all we are saying is that we had accelerated hiring looking at business prospects so as to be ready if the business prospects turns out to be what it could be. So, to that extent, we have created a bench to meet the requirements because obviously the prospects are better in the previous quarter and we have increased our guidance.

Suprathim Basu: Thank you and good luck.

Nandan Nilekani: But I must make this statement that, for the next quarter we have given a guidance of 7.9% sequential growth, but please remember if you calculate the number of working days in the third quarter, the impact of lesser working days in the third quarter which are also billable days compared to second quarter has a impact on growth of 3% sequentially.

Suprathim Basu: Thank you.

Moderator: Thank you very much sir. At this movement, we would be taking questions from SingTel. After the Q&A session at SingTel, we come back to India to take the remaining questions. Thank you and over to Zaini.

Moderator: Thank you Prathiba, we will no begin the Q&A session for participants connected the SingTel bridge, please press 01 to ask a question. We have Mick Dillon calling in from Reuters Research, UK, go ahead sir.

Mic Dillon: Hi, its Mick Dillon here. I just wanted to ask a couple of short questions, if I may. The US growth, we have seen up until this quarter, 5 straight declines in US growth, and this quarter we have seen a re-acceleration, is that an industry trend or is that just Infosys specific if you have any opinion on that. The second question is, the last two questions are numbers questions, could I please get the head count and so the net adds in the quarter excluding Progeon, and finally the annualized billing rates please. Thank you.

Basab Pradhan: This is Basab Pradhan, I will answer the first question. You know, sequential growth quarter to quarter is a number that operates in a certain range because, you know, of the way period ending effects impact unclear it. As you go into the business units and geos and so on, the jumpiness just increases. So I really would not....

Mic Dillon: ...... I was speaking of the annualized growth in the US, not the sequential growth. So just as an example in March 03, that was 57% year on year growth in the US, then it declined down to 25% by June 04, and has now seen a re-acceleration to 33% year on year growth in US. Has the US as an industry reaccelerated or is this an Infosys specific issue.

Basab Pradhan: No, we do not really see that there is any difference between this quarter or the next quarter in the way the US operations are working. If there is a slow uptake in the IT spend, that is something which have been saying for the last couple of quarters, so it is possible that that is factored into the slight acceleration you see, but we expect that sequential growths in other parts of the world because they have grown on a smaller base will continue to exceed the US’ growth in the future as well.

Mic Dillon: I guess the trend I was looking for is do you expect annualized year on year growth in the US to continue to accelerate now that you have seen a turnaround in the growth rate, as I said, it had been declining for five straight quarters on an annualized

basis, and now on an annualized basis it is growing again. Is this an expectation, you think will continue, or would at least try and continue.

Basab Pradhan: No we don’t expect the acceleration to continue in the US or nor do we have any expectation on the deceleration side. We think growth in all parts of the world for the company will continue to be strong and inline with the rest of the world as well.

Mic Dillon: Okay thank you, and just the head count numbers and the annualized bill rates.

Hema: The net additions for Infosys Technologies is 4547.

Mic Dillon: 4547.

Hema: Yeah.

Mic Dillon: Thank you, and I was just wondering what the annualized bill rates were as well please.

Mohandas Pai: Okay, let me give the monthly bill rates, you can multiply by 12. 10889 per month for onsite, and 4532 offshore per month.

Mic Dillon: Great, that is brilliant. Thank you very much.

Mohandas Pai: Thank you.

Moderator: Next, we have got Pratik Gupta from Citi Group, Singapore, go ahead please.

Pratik Gupta: ..........plan to spend about $12.5 million in the third quarter, I am assuming that all your investment plans, like you said earlier on would be sort of a reflection of any excess margins, which you earn. So, I am just wondering that if you for some reason the margins don’t pan out to be what they are, in the sense that, if let say the rupee appreciates or something, then would you be willing to cut back on the investments or would you rather accept a slightly lower margin. So, that is question No.1. And question 2 was, if you can just give us an update on the consulting and the Progeon businesses, please.

Mohandas Pai: Let me talk to you on the investment part. The investment is as per our sanctioned plan, and quite obviously in second quarter it has been slightly less than what we had sanctioned, and we have indicated a smaller margin and that the margin is slightly higher coupled with increase in other income. Now the investment in the third and fourth quarter is as per the budget, and at this point of time, we do think that we will go ahead with that sitting where we are and seeing what we do. We will go ahead with that, and quite obviously, if the rupee were to appreciate or some unforeseen happens, we will

reexamine the whole issue and see what is committed and what is not committed, what is variable, what can be deferred, what gives greater value and take appropriate decisions.

Progeon, I will ask my colleague, Ramesh Kamath, the CFO of Progeon to talk about some numbers, before that I will request Steve to talk about Infosys Consulting.

Pratik Gupta: Sure thanks.

Steve Pratt: Hi this is Steve Pratt from Infosys Consulting. This is our first financial quarter and we expected our first revenue when we did indeed achieve that. The most important part of this quarter was building the leadership team of Infosys Consulting and from that perspective it was an really an outstanding quarter. We got very good recruits from the top-consulting firms, and I believe our strategy was to recruit the top 10% from those firms and I think we have achieved that [not audible]. I am very happy with the first part of our plan, which is to get the right team. Also with clients that, the message is clearly resonating with clients that are looking for a better alternative to the current consulting firms, and I think the model of bringing in very good high-end business consulting with very high quality global delivery and technology at an overall lower cost is really resonating. And from an internal team work perspective, I can say it could not have been much better that we are I think executing very well in the go to market areas and so I was very very happy with first quarter, I thought it was a great start.

Pratik Gupta: Could you just give us, what is your head count in consulting right now, and are you still on track for the 75 you have targeted by year end.

Steve: Yes we are on track, and so we had between number of people who have started and the number of people who have accepted we are at 34 right now.

Pratik Gupta: Okay Thank you.

Ramesh Kamath: About Progeon. Progeon has added two customers this quarter taking the total customer count to 18. The revenues for this quarter were 42 crores and the net profit was 5.2 crore as against a loss in the previous quarter of about 3.3 crores. We have added 420 employees taking the total head count to 2689 employee. Thank you.

Moderator: We have got Mr. Jay Sharma. Mr. Jai Sharma from Citi Group go ahead please.

Jay Sharma: Hi, congrats on great results. Just on the revenue growth this year, you are trying to add almost 500 million dollar in revenues, and I was wondering as we look into next financial year, do you think this kind of growth is sustainable and what are the challenges.

Nandan Nilekani: While, I think, we have look at you know 47-48 close to 50% growth, which is broadly what you are saying, but I think it is a little premature for us to talk about next year. It will depend on the continued outlook, it will depend on our ability to

scale up. It will depend on how well our investments and differentiation pay off, and also I think it will depend on how we end the year. Because you know the ending quarter of this financial year is the ramp for the next year. So, I think the lot will depend on that. So, I think it is little premature to talk about it at the moment.

Jay Sharma: But Nandan, in terms of 500 million addition, this is rather huge number and 50% volume growth, again a huge number, has there anything changed in the business from what you have been seeing over last few years, and do you see that trend continuing into next year.

Nandan Nilekani: No I think you are seeing the accumulated impact of a number of things that we have done.

1.	I think we have done a good job on the reorganization. Today, we have 17 IBUs and ECUs, all of them dedicated to a particular industry or to particular geography or to a particular service line, and we have created these groups of empowered people who are all having their business plans and executing on those business plans. So we are creating multiple engines of growth.
2.	We are investing in subsidiaries in China, in Australia, Infosys Consulting and Progeon, so that also we expect to contribute.
3.	I think our recruitment engine has been scaled up, and they have done a remarkable job in that, and the very fact that they were able to recruit more than 5000 people on a net basis is testimony to the recruitment engine being scaled up.
4.	Our training also has been scaled up with the largest corporate university coming up in Mysore, where we can train 4000 people at a time, and so on and so forth. I think lot of investment, then I think our whole focus on performance matrix for employees, variable compensation, all those, role banding, these are all changes that have been you know orchestrated over the last 2-3 years, are all now in place, and then I think we have built the robust business platforms, which is to do with technology, systems processes, automation, streamlining of business process and all that. So it is difficult to pin it down to any one thing, but I think in the last year or two, we have done a lot of internal transformational work. So I think in that sense you know our focus has been to create a scalable robust business platform, and I think those things are now kicking in and you are seeing the impact of that in the growth rates.

Jay Sharma: Okay thanks and a small clarification for Mohan. Mohan, I was seeing, in ADR, sorry, for the US GAAP the EPS going up from 36 cents to 38 cents, so it is about 6%, but the Indian GAAP, the Indian rupee EPS is growing just from 16.7 to 17.2 by 2%, so just not very sure why is that.

Mohandas Pai: Well it has to do with the Indian rupee. For example, the average rupee dollar rate for the second quarter was 46.22 and in this quarter obviously the rate is, closing rate is 45.91, and we budgeted on 45.91. Plus like as I said, we are spending $5 million more, plus the full cost of the 5000 people hiring and training is going to come in this quarter because the hiring has been over the quarter and we started the opening balance of 5000 people who are under training. If you factored in, and all the investment,

you will see a slight flattening of the margins. As far as the US GAAP is concerned, it is a currency factor that is playing out there quite there. In India is the currency factor, essentially difference is that currency factor.

Jay Sharma: Okay thanks a lot.

Moderator: Next we have Mr. Mahesh Vaze from New York Brisk Securities, go ahead Sir.

Mahesh Vaze: Mohan, your post sales client support provision has appeared only in last couple of quarters, whereas the fixed-price business as proportion of revenues has remained almost constant. What is the reason behind this?

Mohandas Pai: Well, no discernible trend, it is just that post sale customer support is linked to the level of execution of orders when they all end and there is no discernible trend, and we also make sure that any point of time we capture any delays in the project or any thing like that and put it as part of a provision. So if you look at it in the past it has always been slightly lumpy depending upon the closure of projects and many other events

Mahesh Vaze: Secondly Nandan, if one looks at the sequential growth then it is highest in several quarters, may be the last time it was above 15% was third quarter 01. Is there in your view some cyclical element to this growth, or its all structured.

Mohandas Pai: Yeah before Nandan answers that, I will just explain one point, for the next quarter I think we set is only 7.9% right.

Mahesh Vaze: Yeah.

Mohandas Pai: The reason is that there are lesser working days in quarter three compare to quarter two and the same number of working days were there in quarter three compared to quarter two, the growth rate will be up by another 3%. So, 3% of the growth rate for the third quarter is explained by the lesser number of working days, now Nandan will answer the cyclical thing.

Nandan Nilekani: I don’t think there is any cyclical thing, I think way to look at this whole thing is we have a long term secular trend which is driven by you know globalization, the global network created by technology, the coming online of a huge work force in India and China, and the general focus, you know, the world GDP is moving from more and more into services and specially fungible services. So I think there is a macro trend, which is driving that, and I think Infosys in particular because of its brand position and position of preeminence in India is at the intersection of these global trends, so that is driving the secular growth. Now it may be that in a given quarter you know customers may be spending less or there may be uncertainty, so those kind of things will be there, but the underlying secular trend I think is very strong.

Mahesh Vaze: One last thing, do you as Infosys have any preferences for one of the other presidential candidate, do you think one of them would be more positive.

Nandan Nilekani: We don’t take a view on the elections of other countries.

Mahesh Vaze: No but in terms of the policies I am talking about.

Nandan Nilekani: No I think we will pass on that.

Mahesh Vaze: Okay, fine. Thanks a lot and all the best.

Moderator: We have a final question from Mr. Bhuvanesh Singh form CSFB Singapore.

Bhuvanesh Singh: Congratulations on very good results. I had just one small clarification to ask. Mohan you mentioned that next quarter we have got less number of working days hence our growth is impacted by 3%, so when we go back to January quarter would the growth be positively impacted by 3% back, as we return back to the number of days.

Mohandas Pai: Well, I mean, you have a point in the sense that the number of working days in the fourth quarter this year could be higher, it definitely will have an impact in the growth rate other things remaining the same, but sitting as we do here when you make a forecast for the fourth quarter you do so on the base of the available information and that is why you will find at the sequential growth for the fourth quarter is 6.9% obviously, we will have a re-look once this quarter is over to see what is there in the fourth quarter.

Bhuvanesh Singh: So we haven’t currently basically kept this 3% number when we did the fourth quarter forecast.

Mohandas Pai: No we have not done that, we have just done on the basis of the model we have like I said in the press interview, we have a very sophisticated four dimensional model which looks at trends, which looks at data from the sales force, which looks at the data from the delivery folks, then factors in all the possibilities, and gives them a expected value and comes out with the number, so this number is what we have got on the system right now.

Bhuvanesh Singh: okay thanks. Just another small clarification, we mentioned that we have had some re-negotiations already done, has anyone of our top10 clients finished the re-negotiations or have they started it now or when does it happen.

Nandan Nilekani: Well the client contract that we have got negotiated upwards in this quarter, none of them were top10 clients. In the next few months we will have I think one or two of them that will come up for re-negotiation, but not in the past quarter.

Bhuvanesh Singh: Just on that, is there any postponement of re-negotiation because of the elections thing US, some clients saying that we will do it after the elections or something or is it going as per the normal routine.

Nandan Nilekani: No, re-negotiations will not get postponed because there is ongoing work there, so it will be a matter of renewing the contract, taking a re-look at the pricing and moving forward, in fact we haven’t really had any postponement on new client starts either. So, if there are any people there holding back because of the elections, there aren’t too many of them to impact our business at this stage.

Bhuvanesh Singh: Okay. thanks a lot.

Moderator: At this moment there are no further questions from participants at SingTel, I would like to hand over the proceedings back to Prathiba.

Moderator: Thank you very much Zaini.

Moderator: You are welcome.

Moderator: We will continue the Q&A session at India. We have our next question coming up from Mr. Kawaljit of Kotak.

Alroy: Ya, this is Alroy from Kotak, this question is for Nandan, I just wanted to know what kind of conditions need to prevail if Infosys’ margins need to halve from the current level.

Nandan Nilekani: What’s that.

Kawaljit: What conditions need to prevail if Infosys’ margin were to half from the current levels.

Nandan Nilekani: You mean come down you are saying?

Kawaljit: Yes yes come down, what kind of conditions need to you know exist in that kind of trend has to emerge.

Nandan Nilekani: Thermonuclear war definitely. Well, I think one is clearly pricing in the market and I think part of pricing is related to global inflation and generally customer perception of rising prices, part of it is related to commoditization of the services that we offer, part of it is related to demand-supply mismatch, part of it is related to our inability to create differentiation in the services and so forth, so clearly that’s an area where you know if it is not executed well, things can go wrong. And the other thing clearly is you know cost pressures as the demand for resources goes up, there no commensurate increase in resources, and you know, so obviously that combination of pricing flatness and costs going up will create the cleft stick approach to the margins. I would think those are the two big ones.

Kawaljit: And in terms of pricing at least as of now seems it seems to be you know positive trend somewhat you are seeing.

Nandan Nilekani: Yeah, I think as we have said, our pricing is stable, we have seen a small uptake, but its too early to read any trend into the uptake. We have got 1.7% improvement in onsite revenue productivity, a 0.7% improvement in offshore revenue productivity. New contracts are being signed on a typically 4-5% above our mean rate, our average rate. So I think those are the, you know, indicators we are, plus the other thing which we are doing is, we are trying to change the composition and increase the composition of revenue that are led from new services like consulting and other services, so all these things are contributing to the mix but I think its too early to say it’s a trend line, all we can say is pricing is stable and we see a small uptake but its too early to declare it as a trend line.

TAPE ENDS

Kawaljit: And how much of your price stability basically derives from the fact that the multinational competition hasn’t been you know as intense as one would have envisaged earlier, and you see that changing your price equation, maybe you know, when that intensifies you know something like 18 months or 24 months down the line.

Nandan Nilekani: No, I think the multinational competition certainly with couple of the big two incumbents is definitely there. I think everybody has woken up to the challenge. So I think that we have absorbed a lot of the multinational factor, and in our view the pricing contamination that is happening for the incumbents is a far more significant problem than the pricing pressure they will exert on us, because I don’t think in any market place a high cost provider can put pricing pressure on a low cost provider, it doesn’t make sense. So what is happening is that, while, as they expand their offshore, certainly I think the competition for human resources frankly is a bigger issue to me then the pricing pressure, but more importantly what is happening is as the world starts adjusting to a new equilibrium of valued performance price that we are bringing to the table, they are going to demand the same kind of pricing and value productivity from their existing suppliers, and therefore the price compression that is going to happen on them to my mind is a far bigger thing to worry about then any small pricing pressure on us.

Kawaljit: Thank you.

Moderator: Thank you very much sir. Next in line we have Ms. Neeta from Deccan Net.

Neeta: Good Morning

Moderator: Ms Neeta are you on the speaker phone madam.

Neeta: No, I am not.

Moderator: Okay, please go ahead.

Neeta: Good Afternoon, I would like to know why it is that the SG&A cost has gone up, because generally a small company when it transgresses into a medium sized or large company, this change is evident, are you going through a transformation so to speak.

Nandan Nilekani: Let me assure you that it is not our intention to increase SG&A at all, but if you look at the figures you will find that SG&A has gone up in the sense that there has been a slight uptick from 14.7% to 15%, and this has come up because of the fact that two of our subsidiaries in China and Infy Consulting in the United States are having negative net income, and negative net income implies that they are spending a lot of money on sales and marketing without corresponding revenues, and that is being absorbed. If you look at Infosys on a standalone basis, then SG&A in Quarter 2 is just 13% as against 12.8% in Quarter 1, and sales and marketing has gone up to 6.1% from 5.9% in the previous quarter. Where as G&A has remained constant at 6.9% in the last two quarters. It means that in Infosys we are investing in sales and marketing because that is the engine that gets us revenue, and our subsidiaries sales and marketing efforts are without corresponding revenue for two of them is driving up our cost to slight extent. We are very conscious of this. We look at it almost every week to make this sure that we don’t get this big company syndrome.

Neeta: Right. That’s what I was wondering. And also, I see that you are shifting focus from North America to Europe and other parts of the world, is it because you are trying to explore new avenues and de-risk from North America and other American, south American, the America combination so to speak, and what are the constraints that you face when you enter a new market like Europe with the language and the pricing policies.

Kris Gopalakrishnan: Definitely we have over the last few quarters proactively tried to increase the non–US business. We invested in acquiring Expert in Australia. We invested in sales and marketing in Europe, so that is the reason why you are seeing a shift. We want to have a balanced mix of revenues from different geographies. North America continues to be the best and the biggest market, still we want to balance our portfolio to reduce the risk. When you enter new markets of course there is language, culture etc., and the credibility in that market, brand equity in that market, all those things are factors which need to be addressed. In the Non-English speaking countries like Germany, France or Italy or Japan etc., it becomes all the more important that you have sufficient number of people who can speak the local languages. We are aware of the situation and we are making investments, for example. Japanese classes for some of our employees, we have recruited in Japan and got those employees to work in India for some time before they will go back to Japan, so there are various initiatives we are taking to address the issue of language, culture, etc.

Neeta: Right. Thank you so much.

Moderator: Thank you very much madam, we take our next question from Mr. Surinder Goel of SSKI Securities.

Surinder: Good afternoon everyone. Nandan, you spoke on increase in modular global sourcing, just wanted to understand in your opinion what kind of impact will it have on the growth rates and profitability for Indian IT services players over the coming years.

Basup Pradhan: Okay, this is Basup. On the modular global sourcing and generally the way we look at IT and sourcing, we believe that it has got into a stage where it is well understood enough for companies to look at their IT not as one incomprehensible hole, but to look at its parts and figure out how to optimize each single part, you know, kind of like the way automobiles are put together today. Now, the impact that has on growth and profitability, I believe that to a certain extent in a not very sophisticated manner Indian Companies today are actually, their model serves the modular global sourcing paradigm. And the real question is going to be how does MGS impact the incumbents and outsourcing, and we believe that there will be a fairly disruptive impact to the large outsources who really thrive on this all at once re-badge everyone, homogenous IT that needs to be just made more efficient by cutting head count that kind of a model, and I think the modularity that we are getting our clients to see in their IT and sourcing initiatives will be disruptive to their business model.

Surinder: Okay. Does it imply higher growth potential in existing service lines.

Basup Pradhan: Well, as I said we and other Indian IT Companies have been working under the modularity, the modular global sourcing paradigm. So, compared to our current growth and profitability I don’t see that getting impacted, but really the impact is going to be on how we can use this to take market share from the incumbents and that’s going to be the interesting battle in the market place.

Surinder: Okay. Thanks a lot

Moderator: Thank you very much sir. We take our next question from Mr. Chellappa of Franklin Templeton

Chellappa: Good afternoon, what are the major risks to revenue growth at this point of time.

Nandan Nilekani: What is the question?

Chellappa: What are the major risks to revenue growth at this point of time.

Nandan Nilekani: Well, I think the major risk to revenue growth at this point of time has been stated in our filing with SEC, the risk would include country risk like visa risk, it could include political risk like a War, it could include some hostilities breaking out between areas, it could include pricing risk like a large global player coming and doing something very dramatic, I mean, we can imagine many many risks, but the key thing is,

what are the risks on the table that could impact us. I think we have factored in whatever we believed could be the risk into our model at this point of time.

Chellappa: Okay thanks.

Moderator: Thank you very much sir. I would like to hand over the floor back to the Infosys Management for final remarks.

Nandan Nilekani: Well once again at the end of the analyst conference for Quarter 2, I am grateful to all the participants both in India and abroad, and we do hope that you been able to get a good understanding of where we are and where we are going, and we look forward to having a similar conversation with all of you same time in January, thank you very much. Bye.

Moderator: Ladies and gentlemen thank you for choosing CyberBazaar`s Conferencing Service. That concludes this conference call. Thank you for your participation. You may now disconnect your lines. Thank you and have a nice day.

EX-99.5

Exhibit 99.5

INFOSYS TECHNOLOGIES
Q2 FY05 INVESTOR EARNINGS CALL
OCTOBER 12, 2004

Moderator: Good morning ladies and gentlemen, welcome to the Infosys Technologies Investor conference call for the quarter ended September 30, 2004. At this time, all participants are in a listen - only mode. Later we will conduct a question and answer session. Please note that this conference is being recorded. If you do not wish to be recorded, please disconnect now. I will now like to hand over the call to Mr. Sandeep Shah, General Manager of investor relations. Mr. Shah you may begin.

Sandeep Shah: Thank you Sandra. Good morning and hello ladies and gentlemen. Thank you for joining us to discuss results of our quarter ended September 30, 2004. I hope all of you have had a chance to read our press release and fact sheets that are also posted on our web site at www.infosys.com. I have with me today in the conference room in Bangalore, Nandan Nilekani, President and CEO, [not audible] members of senior management team. We will begin with some comments from the management on the results of the quarter and we will open up the call for participants. Before I hand over the call I have one duty to perform in reminding you anything that we say today with reference to the outlook for the future would be a forward-looking statement and subject to risk such as those listed by us in our filings with SEC. The filings can be accessed at SEC website at www.sec.gov. With that I turn the call over to Bangalore, Nandan Nilekani.

Nandan: Thanks Sandeep and I would like to welcome all of you to this call. The analyst call for the second quarter of FY 2005. We are happy to announce the results. We have revised our guidance upwards. We expect now that our revenue for the year is going to grow between 46-47%. For the second quarter, our revenues were at $379 million, which is up 51% from the corresponding quarter in the last fiscal and our earning per ADS has increased to 36 cents from 25 cents in the corresponding quarter last fiscal. This is after adjusting for the 2:1 stock dividend, which we did in July 2004. This quarter also has some notable landmarks. We added 32 new clients across Infosys and all its subsidiaries. This quarter was a record in terms of new employee addition. We added 5010 net employees for the quarter taking the total employee strength for Infosys and its subsidiaries to over 32,949 employees. We believe that the growth that we have shown and the growth that we have forecast for the year is proof of what we have been arguing for quite sometime that offshoring is now a mega trend in the industry and as more and more companies leverage the relationship with Infosys to increase their global competitiveness, we think that this is a trend which is going to continue, and not only it is a trend which is going to help Infosys to grow, it is also a trend which has huge implications for the current structure and formation of the industry. At Infosys, our focus is on combining scalability and you saw the various measure of scalability, the number of people we hired, the fact that we are building 3.5 million square feet of office space, the fact that we process a million application, the fact that we hired 5000 people in a quarter. These are all instruments or these are all metrics that measure our scalability. But just as

we are using scalability to establish rapid growth, as you are aware, we are now focussing on creating better business value, better client value through differentiation and here as you know we have made a number of investments, the most prominent being the $20 million investment in Infosys Consulting, which we believe will enable us to create what we think is the template of the company of the future, which is something which combines the best of global delivery with the best of world class consulting. So, I think this quarter’s result is one more reaffirmation of our strategic intent, one more reaffirmation of the offshoring trend, and I think it is also reaffirmation of the Infosys’ ability to execute with excellence in all dimensions of its business. With this, I will hand over to my colleague Kris Gopalakrishnan to say a few words and then hand over to Mr. Mohandas Pai.

Kris Gopalakrishnan: Thanks Nandan. Looking at geographical breakup of revenues, Europe and the rest of the world continues to be our focus areas in terms of growing non - North Americans revenues. In the last 12 months, Europe has gone from 18% of revenues to 21.4% of revenues. Rest of the world has gone up from 6.5% of revenues to 11.7%. Rest of world contains Infosys Australia and we did an acquisition in Infosys Australia. Our utilization excluding trainees is a healthy 81%, including trainees it is 71.4%. We brought in lot of people at entry level who are undergoing training. The campus recruits normally join between June and September in India. There is no change in the ratio of fixed price versus time and material projects from last quarter to this quarter. Fixed priced projects are 29.7% of revenues. We saw a significant increase in offshore effort. Offshore effort has gone to 68.5% of the total effort, onsite coming down to 31.5%. So this is as a results of a proactive initiative we had taken over the last few quarters to move some work offshore. Offshore is beneficial to Infosys as well as to our clients. We saw increase in the number of 40-million-dollar clients from 5 to 7. Number of 30-million-dollar clients from 8 to 10, and the number of million - dollar clients have gone up from 141 to 146. The contribution of revenues from top client is 5.5%, top 5 clients is 21.6, and top 10 clients is 34.7; around the same percentage from previous quarters. So that has not increased. We have added 32 new clients this quarter. Growth has come in all the vertical industries in which we are operating. One sector which stands out is probably telecom, which is seeing some revival in growth. We have significantly invested in growing this by diversifying from product companies to services companies. The revenue from this sector over the last 12 months has gone from 15.2% of revenues to 18% of revenues. We have invested about $7.5 million in various business plans, product development in the banking business unit, the Infosys Consulting initiative, China initiative, etc. This is about 1.1% of revenues in this half. So we are continuing to invest in the future of the company. Nandan already talked about investment in infrastructure. We have 3.5 million square feet of infrastructure under development, which can take on an additional 15,000 employees. We have scaled up our recruitment, training, etc., to bring in 5000 employees in one quarter. This is equal to, almost equal to, the total number of employees we hired in the financial year 2003. In financial year 2003, we hired about 5100 employees. So in just one quarter we have hired 5010 employees this financial year. Mohan…

Mohandas Pai: Thank you Kris. Folks, revenues were $378.6 million as against $334.6, a sequential increase of 13.1%. Gross margin for this quarter was 43.6% as against 43.4% the previous quarter. We do not see a trend in increase in gross margin except to say that there has been a slight uptake due to many reasons, one of which is the fact that more work has moved offshore. SG&A expenses are 15% as against 14.7%. Sales and marketing has gone up to 7% as against 6.8%. G&A is at 8% as against 7.8% of revenues the previous quarter. The uptake in G&A is primarily because of certain consulting charges we paid to a global consultant for an initiative that we had in the corporation this quarter and it is not a trend. Our income before income taxes has gone up to 30.2% as against 28.6%, the reason is that non - operating income is at 1.7% as against 0.1%. The last quarter, we had a negative impact of marking to market all our forex exposure hedges, which resulted in a negative income of 6.8 under non - operating income. In this quarter, we have a positive impact of $1.4 million, and that is why non - operating income has gone up to 1.7. Operating income is at 28.5 this quarter as against 28.7 the previous quarter. The tax provision has gone up to 4.7% of revenues effectively 15.5% of pre tax as against 13.3% because of the tax on non - operating income. There has also been a slight uptake in the taxes payable in India on the income chargeable to Indian corporate tax because of a cess levied by the government, which is marginal, otherwise we stick to our full year forecast that taxes will be 4.3% of revenues or around 14 - 14.5%, for the full year we hope to see such an average. So the story is that we have had a great quarter. Margins have been stable. Pricing has been stable. We have seen a slight uptake in the prices from our new clients as also a slight uptake because in renegotiation with the existing clients where some contracts have come up for renewal, and in this quarter onsite prices have gone up by 1.7% and offshore by 0.7%. We do not think that is a very, is a trend upwards, except to say pricing is stable with an upward bias. We do not see any great discounting in the market place or unstable prices. Pricing has been stable with an upward bias. If you look at our guidance for the next quarter, we have said that the next quarter guidance will be between $407 - 411 million, and the reason for the guidance at 7.9% sequential growth rate in the revenues as compared to 13.1% in Q2, and 10.5% in Q1 is that in the current quarter, that is, Q3, there are lesser number of working days because of the Christmas holidays and the run up to the new year, and this is having an impact of about 3.1% on total revenues. We have estimated that the EPS in terms of the guidance would go up to about 38 cents for the third quarter, and you would notice that 38 cents would be equal to a net income of 24.5% as against 25.5% that was earned in Q2. The reason for the small decline of 1% lies in the fact that this quarter, that is Q3, we are spending $5 million more than we spent in Q2 on our business plan expenditure as per the initial indication made by us. We had stated that we are going to spend $32 million on business initiatives and R&D initiatives in our banking unit and this is part of this. We are accelerating the spending in Q3 and that has a marginal impact on our net income. Apart from that the prices and margins are expected to be stable. Thank you very much and we will now be happy to answer any questions that you might have.

Moderator: Thank you. We will now begin the question and answer session. If you have any question you will need to press *1 on your touchtone phone. You will hear an acknowledgement, please thank you. If your question has been answered and you wish to be removed from the queue, please press the “pound” sign. Your questions will be

queued in the order that they are received. If you are using a speakerphone, please pick up the handset before pressing the numbers. Once again, if there are any questions, please press *1 on your touchtone phone. The first question is from Moshik from SG (inaudible). Please speak your question.

Moshik: Hi, a great quarter. I have a couple of questions. One on your, during your earlier call you mentioned a 4 - 5% bill rate increases. Maybe you can comment on that and maybe, what is your view in terms of the sustainability of some of the pricing flexibility that you are seeing in the market? Next, it seems that we have seen a year - over - year growth acceleration in terms of North American comparisons in terms of revenue growth. Maybe you can comment on that. And then maybe you can comment about wage inflation and turnover for the quarter, and then do you have any views about wage inflation looking into 2005? And finally, maybe you can talk about your future plans for increasing the ADR floats here in the US? Thank you.

Basab Pradhan: Okay, Hi! This Basab Pradhan, Head of Sales. I will take the first two questions. The first one was on pricing and the second one was on the share of business from North America. On the pricing, in the last few months, we have seen new MSAs, I mean MSAs with new clients, they have been done at a 4 - 5% premium over our average MSA rates. We hope and expect that the new clients that we signed on will continue to be at this higher level. However, our existing clients, the rate increases there will have to really follow a cycle of contract expiry and renegotiation, and that will happen when, at the right times when the contract expires and it needs to be renegotiated. And our attempt at that time will be to fine tune, to tune those rates to come at or about the average rates for the contracts that are below them and to seek some rate increases for the contracts that are already above average rates. So that is, you know, that is basically the direction we will be going in on rates on, MSA rates for clients. Now, this does not, I did not talk about our service mix and all the work we are doing and expanding into services that have higher bill rates and so on. And that is actually bearing, that is being very successful and we hope to see some bill rate increases because of that as well. Into your next question on the share of revenue from North America, this quarter does give us a feeling that, you know, there is a bounce back in the North American business but I would just caution before we read too much into that, we still expect our European and rest of the world business to grow faster than the North American business simply because of the flow of large numbers. North America is more than 70% of our business. If you look at last 12 months growth rates, North America is 30.1% growth over the same period in the previous year. Europe is 72.4% and the rest of the world is 127.2%. So that is a fair bit of difference there. We expect that to continue. We did have a quarter in the past where we had a blip in the North American business, which as we pointed out in the earnings call was due to a particular dip, a dip in a particular client, which since has been corrected. So it was not really a trend there. So that is as far as the North American share of business is concerned. I will hand over to Mohan for the other questions.

Mohandas Pai: There are two questions left; one is on wage inflation, other is on the ADR. On the issue of wage inflation, our position has been and remains based upon factual evidence that there is wage inflation at the middle level because of growth. There

is not much wage inflation at the entry level, it is relatively flat. We are able to source a lot of talent. However, we need to invest in training such talent, and the situation has not changed. As regards the ADR, at the time of the listing around end July last year we had said that we will not do an ADR for 18-24 months from the date of the listing and that position remains true even today. Thank you.

Moshik: Mohan, can you comment some about turnover and all that, thanks.

Hema Ravichanda: The attrition percentage is 10.8% for Infosys Technology. It is flat. In fact there is a slight dip from the last quarter.

Moshik: Thank you.

Moderator: The next question is from (inaudible). Sir, please state your question.

Male participant: Thank you, a great quarter. I just had one question. We want to keep it or if Nandan could talk more about the turnover at the senior level, we have heard some rumblings about, you know, management turnover across the industry, across both sides, both offshore companies hiring from the multinationals and vice-a-versa. So if you could provide some clarity on that issue that will be helpful. Thank you.

Hema Ravichanda: We are not seeing significant turnover at the senior levels. It is very much in keeping with the industry trends. People have left, if they have, to start off their own companies or to run a consulting business of their own. Some of them have joined other companies, but it is very much in keeping with the trend in Infosys in the overall number percentage, it is lower than the attrition percentage which we have at junior levels, and in tier I, and high leaders, it is hardly anything.

Male participant: Okay, thank you.

Moderator: The next question is from Deep Choudary from Mid West Research. Please state you question.

Deep Choudary: Thank you. Congratulations on a fabulous execution here. Two questions; first regarding the packaged application implementation. I was thinking if you can give us some color like what are the customers doing and how is Infosys adding value. The second question I have is on your banking product, some of my research is showing the pilots that you are running have a lot of passion. I was wondering when do you think you can monetise the initial pilots and also some competitive reaction that may be happening, because you are entering the product rather than just pure services. Any dynamics on that will also be appreciated. Thank you.

Basab Pradhan: I will take the package implementation question. Our enterprise solutions practice which is what has been entrusted with the package implementation business is actually where we think we heard the incumbent consulting firms the most,

because that is really the sweet spot of the big consulting system integrators. We have, in the past few years, that has been one of, actually the highest growth service. It is now also one of the two largest units practices in the company. We have basically created a model of delivering package implementation in the global delivery model, which is extremely disruptive to the incumbents. There is a huge play there on the bill rates that they have and the bill rates at which we can make handsome margins, and we are taking full advantage of that. And this is across the board, all industries and all geographies. Shib would you want to add anything to that?

Shibulal: Yeah, actually. Some of the activities, which we do, are, you know, we do full end-to-end implementation. We do version upgrade and we also do multicountry roll out for some of the customers who have operations across the board. It is all global roll out, and it also involves the standardization of one single template in multiple countries and localizing them for the local needs.

Deep Choudary: And regarding your banking product, when do you think the palate can be converted to moneymaking machines?

Kris Gopalakrishnan: Our banking business unit has been in existence for quite a number of years. Products constitute 2.9% of revenues. In that sense it is a very small group within the company. Having said that, we are making significant progress. It is one of the leading banking product in India with over 70% market share in the large banks. It is also, you know, gaining market share in certain geographies, you know, developing markets like Sri Lanka, Nepal, Nigeria, you know, in Asia and African markets, and also moving into developed markets like Europe and US. We are investing in this product, we are investing about $10 million in internationalizing this product for the developed markets and adding new features, and in the product space, the revenue recognition happens as the product is implemented and used. So there is some tail to the product revenue. Plus, of course, we get maintenance revenue from the product also.

Deep Choudary: Excellent, thank you.

Moderator: The next question is from Joseph Bathy from Jefferey’s. Please state your question.

Joseph: Yes, a couple of questions here. Clearly from top line acceleration here this quarter, if you could comment on if you are seeing any leverage in the top line this quarter perhaps from may be some bill rates increases passing into the business over the top line strictly bringing your growth. And secondly if you could comment a little bit on the mix moving offshore  -  if we continue to see that as a trend and what would be driving that. And then thirdly, if you could talk a little bit about if you are seeing any more business risks to the business, given the significant hiring this quarter and [not audible] the manager, so many new programmers [not audible] on a head count basis. Thank you.

Shibulal: I will comment on the offshore part. There has been a lot of focus on moving work offshore over the last few quarters, so that is in fact a result of a lot of activities which we have done over last few months. We also believe that that is one of the ways we can add higher and higher value to our customers as well as to Infosys. It is also important to note that some of the new services likes testing, which is predominantly offshore centric where we can have offshore effort of may be 80 - 90%, is growing at a faster pace. If you look at it last quarter, testing was about 5.3% of the revenue, this quarter it is about 5.7%. So, the portfolio mix coupled with focus on moving work offshore has resulted in current numbers. Thank you. Mohan....

Mohandas Pai: You asked a question about the pricing impact in this quarter’s revenue. For the onsite part, prices have been up by 1.7% sequentially. Offshore has been up by 0.7%; however, since more work has been done offshore because of volume growth at 15.3% offshore as against 7.1% onsite, the blended rate has slightly come down because the mix has changed. So, it essentially means that offshore revenues sequentially have grown by 15.1% for software services, onsite revenues have grown by 8.9%, and the revenue for services has grown to $358.33 million out of $379 million, the balance coming from products and the BPO business. So the revenues have grown by 12.2% sequentially and there has been an uptake in pricing.

Kris Gopalakrishnan: Now regarding the last question on risks because of our size, we have been doing a lot of things over the years in terms of creating systems, processes to scale the organization, to manage this growth from quality system, use of quality systems, use of systems to manage every single process including our software development process, recruitment process, training, etc., creation of a cadre of managers and leaders through our internal training programs, you know we have three separate training programs; one in terms of technology and methodology, second in terms of managerial training, and third in terms of leadership training. So we have looked at what are the possible risks as we scale up and we have tried to create an organization, which can scale up, and the proof of the pudding is in eating right? So, you can see that we have been able to recruit 5010, assimilate them, we have been able to maintain the margins, and have significant facilities in construction in work - in - progress and things like that. Our repeat business also is very high, 96.3% is repeat business.

Joseph: Thank you and then maybe just one quick followup. You know clearly a very large net higher numbers here in the quarter, but would your expectations be on transferring these people to billable assignments and what kind of time line might you be looking at?

Kris Gopalakrishnan: See most of them undergo 3-1/2 months training when they join the company and then they get absorbed into projects over next three to six months, depending on business.

Joseph: Thank you.

Moderator: The next question is from David Grossman from Thomas Weisel Partners, please state your question.

David Grossman: Thank you, you know I am looking at the guide vis-à-vis the actual results for the quarter, can you, you know help us understand what the upside as conservatism entering the quarter with some concerns perhaps around your selection and how that may impact that it may have or perhaps you could give us some insight into your guidance vis-à-vis the actual results for the quarter.

Kris Gopalakrishnan: Outwardly may be the clients are reluctant to talk about what they doing, but you can see from the growth numbers that they are significantly moving work towards offshore either through work they work they do with Infosys or setting up captive units and things like that, so businesses have embraced offshore in a big way and it’s primarily due to the economic benefits they drive without any loss of quality it increases the flexibility and all the normal reasons why you know this has become a big trend today. We are not seeing an impact on the business though, you know in the public eye this is being discussed in the political arena it is being discussed.

David Grossman: So you did not see anything particularly in the quarter that brought the higher results would be driving acceleration as the trend offshore in your business other than, I guess the pricing increase that you talked about earlier.

Kris Gopalakrishnan: Yeah, we are not seeing negative now see its always possible that, you know, something could trigger some legislative changes or things like that, now you cannot completely predict these things are control these things. So that risk is always there, public opinion can change or influence business in the future, but right now we don’t see anything.

David Grossman: Then may be at first you can talk a little about the H1B situation, I mean obviously it looks like the entire allotment may have been absorbed you know immediately in the new fiscal year and obviously you have a pipeline of visa to accommodate your growth this year but just looking into fiscal ‘06 and beyond can you help us better understand, you know some of the options available to, if in fact the H1B visa situation becomes [not audible].

Kris Gopalakrishnan: Yeah, it’s an interesting situation. We have anticipated in some sense that at some point it will get exhausted, last year I think it went through February, this year on the first day itself it got exhausted, also the numbers have come down, effectively there are I believe about 58,000 or 59,000 H1s available. We have the requested number of visas for the next twelve months right now. The utilization is about 55% in terms of the total number of visas we have. So, we have some flexibility here, these visas are valid for 3 years to 6 years, so there is some flexibility. Now going forward you know we have to plan we have to prepare ourselves, what we have done is as part of our scalability initiative we have created systems, we have captured every employee’s employment data electronically such that these applications can be filed or printed in the US online etc., and reduce the time taken to apply, then it goes into the

processing and things like that and you know that takes its own time, but whatever we can do internally to prepare ourselves we have done.

David Grossman: What is the right now I guess specifically you know should we expect different facts you know the demand for visas continuing

[not audible]

Kris Gopalakrishnan: One of course, we prepare ourselves and try and anticipate and apply. But probably a longer trend is that more businesses will go offshore, or offshore effort will go up. We will be recruiting, more employees in local market, which we are already starting to do. We will do campus recruitment. One clarification is that this does not cover portability. We can move people from one location to the other. Flexibility is available. If we recruit a new HI person in the US, we can move the person with the visa to a new company. Some of the unintended consequences will be that companies in the US embracing offshore in a faster way and significant way, working with companies like the Infosys, setting up captive units. Some of the companies have faced the situation that they are not able to recruit in the campuses because they cannot get an H1 visa for the person, so what happens is now they will instead of recruiting in the US, they will recruit in India and setup offshore research facilities, offshore centers, etc., that could be an unintended consequence of limiting the H1 visas. There is also pressure from the industry in the US to increase the limit as you now.

David Grossman: Actually can you just provide us an update as of the end of September what the number of visas you had both in inventory as well as in process?

Kris Gopalakrishnan: We have about 11,000 visas, which is including H, L, etc., and currently the utilization is about 55%.

David Grossman: Okay.

Kris Gopalakrishnan: See at any point, David, we have about you now 30% of the employees outside on project you now short - term assignments etc. About 65% of our business comes from US, so you can calculate you now how many people, you know it comes, it really comes to about 6000, so that is the 55%.

David Grossman: Okay thank you, and I am wondering Mohan, looking at your guidance for the year I assume that is basic EPS guidance, is that correct?

Mohandas Pai: Yes David, we always give the basic EPS because the guide, yes.

David Grossman: So would that normally kind of adjust to about $1.42 for the [not audible].

Mohandas Pai: Well the guidance is a $1.46 for this year; I mean I am talking about our financial year that is March’05.

David Grossman: Right, and then I am just wondering on a fully diluted basis is it about a still running about penny a share?

Mohandas Pai: Yes.

David Grossman: Per quarter?

Mohandas Pai: Yes it is running at about a penny and half, yes.

David Grossman: Okay just one last question, could you provide Mohan just what the Progeon revenues were for the quarter?

Mohandas Pai: Yes, I will talk about Progeon. Let me give the revenues of all the subsidiaries: Progeon did $9.12 million in Q2 as against $7.16 million. For the full year they are expected to do around $36.5 to $38 million. In Q2, Progeon earned a net income of $1.13 million as compared to a deficit of $900,000 the previous quarter, so there has been a turnaround. The turnaround has been because last quarter they had an impact of a forex movement against them and this quarter there is a slight positive and that has been part of the turnaround. They also increased their utilization and they managed to make sure that the cost remained almost the same. Infosys Australia has done about $17.24 million, but with Infosys Australia part of the work that Australia does is also work done for the parent, so if you take the net impact they would have done something like $7 million. Infosys Consulting has earned its first revenue $320,000. Infosys China had a small revenue. So overall the subsidiaries are doing well. Progeon is earning a profit, Infosys Australia is earning a profit, Infosys Consulting is in a growth phase and is having a net deficit, Infosys China is having a net deficit, overall for all the subsidiaries taken together there is a net deficit this quarter.

Moderator: The next question would be from George Christ from [not audible]. Please state your question.

George: Hi! Thanks very much and congratulations on very nice results. I guess the one pursue couple of questions again. On the wage inflation ideas you talked about more mid level, see more wage inflation around the middle not much on the entry level, can you give us the sense if I can say where did wage inflation rate considering the number of people that we were talking about at the different levels, and I guess I am looking to see the assumption as to whether the 4 to 5% a year getting on incremental view you know new projects you work is covering that weighted wage inflation rate?

Mohandas Pai: Yes, I think this wage inflation issue should be explained properly because for you there it looks like a very large number but for us its an acceptable number. Wage inflation could be on the entire basket between 15 - 20%, but the basket is essential in India. Wages paid in India constitute about 13% of total revenues because you must remember we work onsite, we work offshore, and for the onsite part, that is the work done outside India, for the total revenue the wages are about 35%. So on 13% even

if you have a 20% hike it is 2.6% of revenues. So our strategy is that this is manageable. We expect to go up the value chain by changing the mix to do more work in say packaged implementation and possibly consulting to make sure that we get a higher margin which will minimize a part of the wage inflation, and two, we will see some economies of scale in reducing the other cost of revenues apart from wages and SG&A so that this could be neutralized. This is our game plan going forward and we do think that we can work at it very strongly and it is a feasible plan, also 20% of the offshore wages are variable, so 20% of 13% today is variable is linked to revenues, is linked to margins, is linked to individual performance. So they too in the case of a downturn there is protection, and when you increase the wages by 15-20% for the basket, a large part of that increase is variable.

George: That’s very helpful, I guess the second question I wanted to ask you that is given the drive offshore, lot of client scaling the amount of work they are giving, while it still may be small as the percentage of overall spend, do you see client’s interest in their own captive unit increasing at all, is that kind of trend anywhere on the radar screen?

Kris Gopalakrishnan: Yes, captive units are increasing in size. Some of the captive units are actually being sold off also more on the BPO side, even some small ones on the IT side also have been sold off also, even in the last six months there were 3-4 instances where we have seen that the captive units were actually transferred to the service provider. So that’s part of the trend, as the offshore becomes mainstream, we believe that it will have characteristic very similar to the US market where some part of the work will be done in-house, equivalent is captive unit, and some part of the work will be done through outsourced partners through companies like Infosys.

George: Okay, great! Thank you very much.

Moderator: The next question is from Sandra [not audible] from Adam Partners. Please state your question.

Sandra: Thank you. You had mentioned something on consulting that you are operating at a net deficit, can you talk a little bit more about your initiatives there, how many people you have, what you are doing for clients, and also what’s the pricing differential is, and your consulting practicing in comparison to your average price?

Steve: It was actually a great quarter, so the real highlight of the quarter was building up the leadership team, these are our first financial quarter so, we were able to recruit, you know we had a strategy of recruiting top 10 talents from consulting firms and it looks like that has proved up this quarter and that we have used personnel networks and just otherwise finding candidates and we have really terrifically to shifting in place now, so that has translated into our first revenue which was targeted for this quarter and happened. Just to give you may be a couple of examples, one was, one client was in the financial services industry, he was a project director for the CEO that was helping to redefine the business model they were trying to expand internationally, so we went ahead and did the, so I compared the analysis, than we did the process design for the core

processes of the company, and now that has translated into some fairly large scaled technology implementation that will be happening over the next few quarters, and we are also working with a transportation company that is basically the board has decided to invest about $120 in transforming the company, and they have hired us to lead what they are calling the transformation management office to help how to re - integrate the company into a great competitive advantage, and so that is it a couple of examples.

Sandra: So how many people on the consulting practice now.

Steve: So within our team if you take the smallest view that it would be just our core team, if you count the number of people who have started and accepted we are 34, but if you take the larger, what we were finding is that there is a larger community with in Infosys with which we can work who have very deep expertise in domain, domain consulting group, the consulting within the business units, and the enterprise solutions, and if you add up all those people it is about 1300 people. So I think if you look at the scale that we have to go against the incumbents that’s probably a more accurate view of it, from just a pure consulting skills.

Sandra: Okay, and the pricing differential on your consulting practice, if you have that in comparison to the average price at Infosys.

Steve: Actually we are comparing it more to the globe majors and although we think we deserve more, we probably we are just trying to price at the market for the major consulting firms,

Sandra: Okay.

Kris Gopalakrishnan: Just to add to this, see the way we deliver consulting is going to be different and the consulting will also leverage the global delivery model, so we were able to reduce the overall cost, even though per person billing rate will not be different as Steve mentioned, also the downstream work, you know if you take the total project will also be done at lower cost because again it will be leveraging the global delivery model. In fact if you look at our package implementation service, it is exactly the same kind of work many of the global system integrators do and we are able to do that at much lower total cost of ownership for our clients because we are doing about 50% of the work from offshore and this is one of the fastest growing services for Infosys.

Steve: Just to follow on that quickly, as things like financial analysis, competitive analysis, training development, some of the communications, and planning of what can be done, you know around the world, so that is proving to be very effective and our general model for like if your putting in a large customer service application without the customer service processes, our model would be about 40% of the work being done onsite and 60% being done around the world as opposed to most of our competitors where it is maybe 90:10. That is a big difference to the client.

Sandra: It is. The two examples that you made, the financial services client and the transportation client, was there an existing consulting firm that they were working with or were these clients of yours that you sold new consulting business to?

Steve: Yeah the financial services client, the incumbent was IBM, and so we have replaced them, and at the transportation company, this was a new initiative, so they had their experience with a lot of consulting firms but they chose us.

Sandra: Okay just a couple of other questions, how many contracts were renewed in the quarter overall for the company?

Mohandas Pai: What is the question?

Sandra: I am sorry, the question was how many contracts did you renew in the quarter, you talked about new clients. I am wondering how many clients renewed in the quarter?

Basab Pradhan: So you know, I would be able to tell you that we have you know above $5 million in revenue. We renewed three contracts; below that there may have been several which I don’t have the numbers for right now.

Sandra: Okay and the renewals were they also at the 4% to 5% premium, which you talked about on the new MSAs, or what was the pricing on these renewals?

Basab Pradhan: Yes.

Sandra: They were at increased rates?

Basab Pradhan: yeah, there were two of them that were in the range and one of the renewals was you know our existing rates were well above the average, so we could not justify an increase.

Sandra: Okay, just another question on pricing and that is, what is the differential that you see for the multimillion to 40 million plus clients in comparison to a client at $5, 6, 7 million. Is there a difference in what you are charging these customers and can you give a little detail on what that difference is?

Basab Pradhan: Well, you know it depends a lot on the kind of work and also it depends on where we started out, if we started out with high rates generally they tend to be a little sticky, but by and large as the size grows the client starts expecting a better deal for volumes discounts and so on.

Sandra: And what about the pricing on the custom application development side, pricing as well as what comparators are you seeing that are most effective in the market place today?

Basab Pradhan: Well, custom application development is something we are trying to move away from application maintenance and sell more bundled with business values, so combine it with consulting and sell it more as a business value project. So I think that piece of the business is really in play right now, we think we have a pretty good shot at defining how that will get done and how it will get sold and delivered and actually priced, you know if we can come up with value pricing mechanisms, we have a lot of play on the margins, so it gives a lot of room for a some innovative pricing mechanism there.

Sandra: I am curious why the transition on the customer application development business given that the industry researches are saying that in 2005 this should be an area of very rapid growth, what’s driving your decision there?

Basab Pradhan: Well, it is an area of rapid growth, sure., It is also an area of strength for us and that is the place where we do want to see added value to our clients as well as some more value to ourselves.

Sandra: And who are the strongest competitors in the area in your opinion?

Basab Pradhan: See it is both the incumbents, the big consulting firms, as well as some of our Indian competitors, I think they are coming from both sides.

Sandra: Okay thank you.

Kris Gopalakrishnan: operator, can we take one last question.

Moderator: Yeah, our last question will be from Julio [not audible] from Goldman Sachs, please state your question.

Julio: Good evening guys. One quick question for Mohan, just been working at the financials, I am not seeing a little bit of a just something I wanted to get some clarity on.In the statement of cash flows Mohan on the US GAAP, you report amortization of intangible assets of one million dollars, and then in the US GAAP income statement, the same line item amortization of intangible assents is zero, could you just walk us through with the discrepancies there, where is it bundled it some other expense items?

Mohandas Pai: It is because of rounding off the millions Julio, it is just that it is a rounding off for the millions that is there, so when you round it off this is what is happening. I mean it is no trend or anything like that, it’s just a rounding off.

Julio: It is not even rounding, there is nothing in ......

Mohandas Pai: No there is nothing in intangibles that you have now, it is just a rounding off.

Julio: Okay, so why is there a million dollars in the statement of cash books

Mohandas Pai: It is in our Australian subsidiary, remember we had acquired an Australian subsidiary, there was a intangible asset there which needed to be amortized over a particular period and that is what it is. In the parent company we don’t have any intangible assents in the balance sheet.

Julio: Okay got it. I think you guys have pretty much answers everything, so I am going to leave at that, and I will just follow up with Sandeep over here in the US. Thank you.

Mohandas Pai: Thank you Julio.

Male Participant: Mohan one question, break up of million dollar other income break up [not audible].

Mohandas Pai: If you look at non-operating income and you want a break up, this quarter the total non-operating income is $6.4 million, out of which the interest income is 4.8. There is something called others, which are some small items 0.2, and exchange differences are 1.4. In the same quarter last year it was $16 million, 9 million for interest income, foreign exchange gain/loss was about 7 million, and it was one million from mutual funds. This is for the six months ended September 30. Remember that this quarter we had $6.4 million, last quarter it was $0.2 million, and the net is about $6.2 million for the six months. So if you look at our financial statements, the figures are on six months to six months basis, and the last quarter being negligible, the whole thing shows up as $6 million in the financial statement.

Sandeep Shah: Thank you ladies and gentlemen.

Moderator: Thank you ladies and gentlemen, this concludes today’s teleconference. You may now disconnect.

EX-99.6

Exhibit 99.6

Performance of Infosys for the Second Quarter ended September 30, 2004

© Infosys Technologies Limited 2004-2005 Nandan M. Nilekani            S. Gopalakrishnan Chief Executive Officer, President and Managing Director            Chief Operating Officer and Deputy Managing Director

Safe Harbour

Certain statements in this release concerning our future growth prospects are forward-looking statements, which involve a number of risks, and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, our ability to manage growth, intense competition in IT services including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, industry segment concentration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks or system failures, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which Infosys has made strategic investments, withdrawal of governmental fiscal incentives, political instability and regional conflicts, legal restrictions on raising capital or acquiring companies outside India, and unauthorized use of our intellectual property and general economic conditions affecting our industry. Additional risks that could affect our future operating results are more fully described in our United States Securities and Exchange Commission filings including our Annual Report on Form 20-F for the fiscal year ended March 31, 2004 and Quarterly Report on Form 6-K for the quarter ended June 30, 2004. These filings are available at www.sec.gov. Infosys may, from time to time, make additional written and oral forward looking statements, including statements contained in the company’s filings with the Securities and Exchange Commission and our reports to shareholders. The company does not undertake to update any forward-looking statement that may be made from time to time by or on behalf of the company.

© Infosys Technologies Limited 2004-2005 Slide 2

Agenda

Ø	Financial Performance
Ø	Operational Performance
Ø	Client Acquisition & Expansion of Services
Ø	Human Resources
Ø	Capex and Infrastructure
Ø	Outlook for the Future
Ø	Summary

© Infosys Technologies Limited 2004-2005 Slide 3

Financial Performance

© Infosys Technologies Limited 2004-2005

Highlights

	Q2 FY 05			Q1 FY 05			H1 FY 05
Indian GAAP
Y-O-Y Growth
Income		51.9	%		38.6	%		45.4	%
PAT from ord. Activities		48.6	%		39.2	%		44.1	%
US GAAP
Y-O-Y Growth
Revenues		51.0	%		43.4	%		47.3	%
Net income		49.3	%		42.4	%		46.0	%
New clients		32			29			61
Repeat business		96.3	%		98.5	%		97.3	%
Headcount Gross addition		6,078			3,233			9,311
Net addition		5,010			2,305			7,315
Period end headcount		32,949			27,939			32,949

© Infosys Technologies Limited 2004-2005 Slide 5

Highlights (Indian GAAP - Quarterly)

(Rs. crore)

	FY2005		FY2005			FY2004		% growth over
	Q2		Q1			Q2		Q1 05		Q2 04
Income		1,749.33		1,517.38			1,151.80		15.29		51.88
S/w development expenses		926.66		805.22			595.28		15.08		55.67
Gross profit		822.67		712.16			556.52		15.52		47.82
S,G&A expenses		261.64		222.89			175.06		17.39		49.46
Operating profit		561.03		489.27			381.46		14.67		47.07
Depreciation		60.63		52.53			63.42		15.42		(4.40	)
Operating profit after depreciation		500.40		436.74			318.04		14.58		57.34
Other income		29.60		15.70			43.16		88.54		(31.42	)
Provision for investment		0.07		(0.01	)		0.22		—		—
PBT		529.93		452.45			360.98		17.12		46.80
Provision for tax		82.56		64.11			60.00		28.78		37.60
PAT from ordinary activities		447.37		388.34			300.98		15.20		48.64

© Infosys Technologies Limited 2004-2005 Slide 6

Highlights (Indian GAAP - Half yearly)

(Rs. crore)

	FY2005				FY2004
	H1		%		H1		%		growth
Income		3,266.71		100.0		2,246.50		100.0		45.4
S/w development expenses		1,731.88		53.0		1,174.87		52.3		47.4
Gross profit		1,534.83		47.0		1,071.63		47.7		43.2
S,G&A expenses		484.51		14.8		339.69		15.1		42.6
Operating profit		1,050.32		32.2		731.94		32.6		43.5
Depreciation		113.20		3.5		108.56		4.8		4.3
Operating profit after depreciation		937.12		28.7		623.38		27.8		50.3
Other income		45.31		1.4		75.10		3.3		(39.7	)
Provision for investment		0.06		—		6.59		0.3		—
PBT		982.37		30.1		691.89		30.8		42.0
Provision for tax		146.67		4.5		112.00		5.0		31.0
PAT from ordinary activities		835.70		25.6		579.89		25.8		44.1

© Infosys Technologies Limited 2004-2005 Slide 7

Balance Sheet Summary

(Rs. crore)

	Sept 30, 2004			%			Sept 30, 2003			%
LIABILITIES
Shareholders’ funds		4,148.90			100			3,383.06			100
Total liabilities		4,148.90			100			3,383.06			100
ASSETS
Fixed assets		1,249.10			30			802.85			24
Investments		2.04			—			14.93			—
Deferred tax assets		44.50			1			33.87			1
Current assets
Cash & equivalents		2,502.07			60			2,185.91			65
Accounts receivables		926.32			22			592.59			17
Other current assets		639.32			16			488.83			14
Less: Current liabilities		(1,214.45	)		(29	)		(720.99	)		(21	)
Net current assets		2,853.26			69			2,546.34			75
Total assets		4,148.90			100			3,383.06			100

© Infosys Technologies Limited 2004-2005 Slide 8

Operational Performance © Infosys Technologies Limited 2004-2005

Region-wise Revenue

%

	FY2005		FY2005		FY2004
	Q2		Q1		Q2
North America		65.2		65.2		73.9
Europe		21.4		22.2		18.0
India		1.7		1.6		1.6
Rest of the world		11.7		11.0		6.5
Total		100.0		100.0		100.0

© Infosys Technologies Limited 2004-2005 Slide 10

© Infosys Technologies Limited 2004-2005 Slide 11

Revenues by Project type

%

	FY2005		FY2005		FY2004
	Q2		Q1		Q2
Fixed Price		29.7		29.7		35.2
Time & Materials		70.3		70.3		64.8
Total		100.0		100.0		100.0

© Infosys Technologies Limited 2004-2005 Slide 12

Onsite-Offshore Revenue split

%

	FY2005		FY2005		FY2004
	Q2		Q1		Q2
Onsite		49.8		51.9		51.7
Offshore		50.2		48.1		48.3
Total		100.0		100.0		100.0

© Infosys Technologies Limited 2004-2005 Slide 13

Customer Concentration

	FY2005			FY2005			FY 2004
	Q2			Q1			Q2
Top client contribution to revenues		5.5	%		5.3	%		6.6	%
Top 5 client contribution to revenues		21.6	%		21.6	%		24.6	%
Top 10 client contribution to revenues		34.7	%		34.3	%		37.9	%
Million dollar clients*		146			141			119
Five-million+ dollar clients*		60			53			40
Ten-million+ dollar clients*		31			27			22
Twenty-million+ dollar clients*		16			15			10
Thirty-million+ dollar clients*		10			8			5
Forty-million+ dollar clients*		7			5			3
Fifty-million+ dollar clients*		3			3			—

*Last Twelve Months

© Infosys Technologies Limited 2004-2005 Slide 14

Client Acquisition & Expansion of Services © Infosys Technologies Limited 2004-2005

Client Acquisition & Expansion of Services

Ø	Client acquisitions during the quarter were 32
Ø	Retail industry

• A leading discount retailer in the US has selected Infosys as a preferred provider of IT consulting for a strategic sourcing initiative

• A major European Retailer chose Infosys to implement an RFID solution. This solution enables the retailer to achieve faster throughput and high visibility in Retail Supply Chain processes

Ø Financial Sector

• Infosys strengthened its presence in the financial and insurance industries with the addition of a German multi-billion euro insurance organization. Infosys was selected to help in replacing an existing hierarchical database, and thereby achieve organization-wide uniformity and reduced licensing costs

• A Company providing proxy voting and corporate governance solutions to its global client base selected Infosys to provide business consulting services

© Infosys Technologies Limited 2004-2005 Slide 16

Client Acquisition & Expansion of Services

Ø Telecom sector

• Infosys’ relationship with large telecom players continued, with the addition of one of the largest wholesale telecom carriers in Europe to its client portfolio

• Infosys is engaged in a critical assignment to re-architect the account management portal of a large US-based carrier providing voice and data services

• We also started providing Oracle application support to another premier communications service provider in the US

Ø Automotive and Aerospace sector

• A premier UK-based Aerospace services company chose Infosys’ services for a design and analysis project of an aircraft sub-system

• A well-known player in the European auto industry also started working with Infosys for a design and analysis project

© Infosys Technologies Limited 2004-2005 Slide 17

Client Acquisition & Expansion of Services

Ø Energy and Utilities Sector

• A Fortune 500 company in the US chose Infosys to provide application development and maintenance services in the area of customer relationship management

• A large utility company is using Infosys’ expertise in rewriting its customer information systems

Ø Others

• One of the top 10 technology companies in the world, and one of the largest companies in the IT storage space is partnering with Infosys for the development of a storage management product

• Infosys started working with a pan-European government organization in the deployment of payroll and financial solutions

© Infosys Technologies Limited 2004-2005 Slide 18

Banking Products

Ø The sale of the Finacle^® suite of products made significant headway during the quarter

• Union Bank of the Philippines (UBP), one of the top 10 banks in Philippines, has licensed Finacle^® core banking and e-Banking solutions. This win marks a key breakthrough for Finacle^® in the core banking space in South East Asia

• IDBI Ltd. has chosen to deploy Finacle^® as the bank’s core banking platform across 101 locations, by March 2005

• UTI Bank, an existing customer, chose Finacle^® treasury solution making it Finacle’s first win in the treasury solution space in India

• A leading private sector bank in India licensed Finacle^® wealth management solution and Finacle^® CRM solutions during the quarter

© Infosys Technologies Limited 2004-2005 Slide 19

Human Resources

© Infosys Technologies Limited 2004-2005

Human Resources

• Total employee strength at 32,949 as on September 30, 2004, up from 27,939 as on June 30, 2004

• 30,922 software professionals as on September, 2004, up from 26,028 as on June 30, 2004

• Of these software professionals, 838 belong to the Banking Business Unit

• Gross addition of employees during the quarter was 6,078 out of which 1,052 were laterals

• Net addition of 5,010 employees during the quarter as compared to 2,305 during the quarter ended June 30, 2004

© Infosys Technologies Limited 2004-2005 Slide 21

Capex and Infrastructure

© Infosys Technologies Limited 2004-2005

Capex and Infrastructure

• Capital expenditure of Rs.176.06 crores was incurred during the quarter

• As on September 30, 2004, the company had 50,41,250* sq. ft of space capable of accommodating 25,803 professionals and 34,86,900* sq. ft under completion capable of accommodating 14,365 professionals

* Excluding subsidiaries

© Infosys Technologies Limited 2004-2005 Slide 23

Outlook for the Future © Infosys Technologies Limited 2004-2005

Indian GAAP - Consolidated

Ø Quarter ending December 31, 2004

• Income is expected to be between Rs. 1,869 crore and Rs. 1,882 crore; YOY growth of 49% to 50%

• Earnings per share is expected to be Rs. 17.10; YOY growth of 38%

Ø Fiscal year ending March 31, 2005

• Income is expected to be between Rs. 7,132 crore and Rs. 7,160 crore; growth of 47% to 48%

• Earnings per share is expected to be Rs. 67.00; growth of 43%

© Infosys Technologies Limited 2004-2005 Slide 25

Summary © Infosys Technologies Limited 2004-2005

Summary

Ø	Guidance for FY 2005 revised upwards
Ø	Interim dividend of Rs. 5.00 per share (100% on an equity share of par value of Rs. 5 each)
Ø	Growth momentum continues in Q2. Total volume growth during the quarter was 12.60%, with offshore volume growing more rapidly, at 15.30%
Ø	Sourcing strategically from service providers has become the outsourcing approach for many companies across all industries
Ø	Pricing has been stable
Ø	We continue to focus on scalability, which is the key to rapid growth, and on differentiation, which is the key to higher client value
Ø	Hired 5,010 net employees for the group during the quarter
Ø	Our expense management model has demonstrated the flexibility in absorbing the cost of recruiting 5,010 net employees while maintaining margins

© Infosys Technologies Limited 2004-2005 Slide 27

Thank You

© Infosys Technologies Limited 2004-2005

EX-99.7

Exhibit 99.7

Fact Sheet – Consolidated Financial Data, Second Quarter, 2004-05

Profit and Loss Account summary for the Quarter ended

(Consolidated as per Indian GAAP)

in Rs. crore, except per share data

											Growth % in
											Q2 FY 2005
	September 30,				Growth			Quarter ended			over Q1 FY
Particulars	2004		2003		(%)			June 30, 2004			2005
INCOME
Software services, products and business process management
Overseas		1,719.26		1,133.06		51.74			1,493.45			15.12
Domestic		30.07		18.74		60.46			23.93			25.66
TOTAL INCOME		1,749.33		1,151.80		51.88			1,517.38			15.29
Software development and business process management expenses		926.66		595.28		55.67			805.22			15.08
GROSS PROFIT		822.67		556.52		47.82			712.16			15.52
Selling and marketing expenses		122.27		82.69		47.87			105.21			16.22
General and administration expenses		139.37		92.37		50.88			117.68			18.43
		261.64		175.06		49.46			222.89			17.39
OPERATING PROFIT BEFORE INTEREST, DEPRECIATION & AMORTIZATION AND BEFORE MINORITY INTERESTS		561.03		381.46		47.07			489.27			14.67
Interest		—		—		—			—			—
Depreciation and amortization		60.63		63.42		(4.40	)		52.53			15.42
OPERATING PROFIT AFTER INTEREST, DEPRECIATION & AMORTIZATION AND MINORITY INTERESTS		500.40		318.04		57.34			436.74			14.58
Other income		29.60		43.16		(31.42	)		15.70			88.54
Provision for investments		0.07		0.22		(68.18	)		(0.01	)		—
NET PROFIT BEFORE TAX AND MINORITY INTERESTS		529.93		360.98		46.80			452.45			17.12
Provision for taxation		82.56		60.00		37.60			64.11			28.78
NET PROFIT BEFORE MINORITY INTERESTS		447.37		300.98		48.64			388.34			15.20
Minority interests		—		—		—			—			—
NET PROFIT AFTER TAX AND MINORITY INTERESTS		447.37		300.98		48.64			388.34			15.20
EARNINGS PER SHARE* (Equity shares, par value Rs. 5/- each)
Basic		16.71		11.36		47.10			14.54			14.92
Diluted		16.34		11.26		45.12			14.29			14.35

* adjusted for the 3:1 bonus issue of shares distributed on July 6, 2004

www.infosys.com        1

Fact Sheet – Consolidated Financial Data, Second Quarter, 2004-05

Profit and Loss Account summary for the Half-year ended

(Consolidated as per Indian GAAP)

in Rs. crore, except per share data

								Year ended
	September 30,				Growth			March 31,
Particulars	2004		2003		(%)			2004
INCOME
Software services, products and business process management
Overseas		3,212.71		2,204.43		45.74			4,786.72
Domestic		54.00		42.07		28.36			66.23
TOTAL INCOME		3,266.71		2,246.50		45.41			4,852.95
Software development and business process management expenses		1,731.88		1,174.87		47.41			2,538.67
GROSS PROFIT		1,534.83		1,071.63		43.22			2,314.28
Selling and marketing expenses		227.47		164.34		38.41			350.90
General and administration expenses		257.04		175.35		46.59			369.19
		484.51		339.69		42.63			720.09
OPERATING PROFIT BEFORE INTEREST, DEPRECIATION & AMORTIZATION AND MINORITY INTERESTS		1,050.32		731.94		43.50			1,594.19
Interest		—		—		—			—
Depreciation and amortization		113.20		108.56		4.27			236.73
OPERATING PROFIT AFTER INTEREST, DEPRECIATION & AMORTIZATION AND MINORITY INTERESTS		937.12		623.38		50.33			1,357.46
Other income		45.31		75.10		(39.67	)		123.38
Provision for investments		0.06		6.59		(99.09	)		9.67
NET PROFIT BEFORE TAX AND MINORITY INTERESTS		982.37		691.89		41.98			1,471.17
Provision for taxation		146.67		112.00		30.96			227.54
NET PROFIT BEFORE MINORITY INTERESTS		835.70		579.89		44.11			1,243.63
Minority interests		—		—		—			—
NET PROFIT AFTER TAX AND MINORITY INTERESTS		835.70		579.89		44.11			1,243.63
EARNINGS PER SHARE* (Equity shares, par value Rs. 5/- each)
Basic		31.25		21.88		42.82			46.85
Diluted		30.64		21.75		40.87			46.27

* adjusted for the 3:1 bonus issue of shares distributed on July 6, 2004

www.infosys.com        2

Fact Sheet – Consolidated Financial Data, Second Quarter, 2004-05

REVENUE BY GEOGRAPHICAL SEGMENT

	Quarter ended						LTM
	Sept 30, 2004		June 30, 2004		Sept 30, 2003		Sept 30, 2004		Sept 30, 2003
	%		%		%		%		%
North America		65.2		65.2		73.9		66.8		73.6
Europe		21.4		22.2		18.0		21.2		17.7
India		1.7		1.6		1.6		1.3		1.9
Rest of the world		11.7		11.0		6.5		10.7		6.8
Total		100.0		100.0		100.0		100.0		100.0

REVENUE BY SERVICE OFFERING

	Quarter ended						LTM
	Sept 30, 2004		June 30, 2004		Sept 30, 2003		Sept 30, 2004		Sept 30, 2003
	%		%		%		%		%
Development		25.1		26.1		25.2		25.3		29.0
Maintenance		29.2		28.8		31.6		29.7		28.3
Re-engineering		6.5		5.8		5.9		6.1		5.8
Package implementation		15.1		15.0		12.6		15.3		12.8
Consulting		3.0		3.4		3.4		3.3		4.0
Testing		5.7		5.3		6.0		5.4		4.5
Engineering services		2.0		1.9		2.1		2.0		2.4
Business process management		2.4		2.1		1.5		2.1		1.1
Other services		8.1		9.2		8.9		8.2		8.3
Total services		97.1		97.6		97.2		97.4		96.2
Products		2.9		2.4		2.8		2.6		3.8
Total revenues		100.00		100.0		100.0		100.0		100.0

REVENUE BY PROJECT TYPE *

	Quarter ended						LTM
	Sept 30, 2004		June 30, 2004		Sept 30, 2003		Sept 30, 2004		Sept 30, 2003
	%		%		%		%		%
Fixed Price		29.7		29.7		35.2		30.9		36.4
Time & Materials		70.3		70.3		64.8		69.1		63.6
Total		100.0		100.0		100.0		100.0		100.0

“LTM” - Last Twelve Months
* Excluding products

www.infosys.com        3

Fact Sheet – Consolidated Financial Data, Second Quarter, 2004-05

REVENUE BY INDUSTRY

	Quarter ended						LTM
	Sept 30, 2004		June 30, 2004		Sept 30, 2003		Sept 30, 2004		Sept 30, 2003
			%		%		%		%
Insurance, banking & financial services		35.1		34.0		38.9		35.0		37.8
Insurance		9.8		9.6		15.2		10.5		13.9
Banking & financial services		25.3		24.4		23.7		24.5		23.9
Manufacturing		14.7		15.0		15.0		14.6		15.7
Retail		9.5		11.4		11.7		11.0		11.5
Telecom		18.5		17.9		15.4		18.0		15.2
Energy & Utilities		2.9		2.9		3.0		2.8		3.2
Transportation & logistics		7.5		7.6		7.1		7.3		7.0
Services		8.1		6.1		5.0		6.5		5.4
Others		3.7		5.1		3.9		4.8		4.2
Total		100.0		100.0		100.0		100.0		100.0

CLIENT DATA

	Quarter ended
	Sept 30, 2004			June 30, 2004			Sept 30, 2003
Active Clients		431			419			347
Added during the quarter		32			29			29
Number of million dollar clients*		146			141			119
Number of 5 million+ dollar clients*		60			53			40
Number of 10 million+ dollar clients*		31			27			22
Number of 20 million+ dollar clients*		16			15			10
Number of 30 million+ dollar clients*		10			8			5
Number of 40 million+ dollar clients*		7			5			3
Number of 50 million+ dollar clients*		3			3			—
Clients accounting for >5% of revenue		1			1			1
Revenue – top client		5.5	%		5.3	%		6.6	%
Revenue – top 5 clients		21.6	%		21.6	%		24.6	%
Revenue – top 10 clients		34.7	%		34.3	%		37.9	%
Repeat business		96.3	%		98.5	%		95.7	%
Account receivables – LTM (in days)		58			58			51

“LTM” - Last Twelve Months
* LTM Revenues

www.infosys.com        4

Fact Sheet – Consolidated Financial Data, Second Quarter, 2004-05

EFFORT AND UTILIZATION

	Quarter ended
	Sept 30, 2004			June 30, 2004			Sept 30, 2003
Effort
Onsite		27.7	%		29.4	%		29.9	%
Offshore		72.3	%		70.6	%		70.1	%
Revenue
Onsite		49.8	%		51.9	%		51.7	%
Offshore		50.2	%		48.1	%		48.3	%
Utilization
Including trainees		71.4	%		73.4	%		73.6	%
Excluding trainees		81.0	%		79.7	%		84.0	%

PERSON MONTHS DATA

	Quarter ended
	Sept 30, 2004		June 30, 2004		Sept 30, 2003
Billed – Onsite		17,358		16,211		11,875
– Offshore		45,375		38,894		27,778
TOTAL		62,733		55,105		39,653
Non Billable		14,755		14,061		7,558
Trainees		10,389		5,901		6,676
Sales & Support		4,964		4,652		4,283
TOTAL		92,841		79,719		58,170

EMPLOYEE METRICS

	Quarter ended
	Sept 30, 2004			June 30, 2004			Sept 30, 2003
Total Employees		32,949			27,939			20,158
S/W professionals		30,922			26,028			18,580
Billable		24,977			23,761			15,988
Banking Product Group		838			685			501
Trainees		5,107			1,582			2,091
Sales & Support		2,027			1,911			1,578
Gross Addition		6,078			3,233			2,851
Net Addition		5,010			2,305			2,181
Lateral Employees		1,052			746			338
Attrition % (LTM) *		10.8	%		10.9	%		9.1	%

“LTM” - Last Twelve Months
* Excluding subsidiaries

www.infosys.com        5

Fact Sheet – Consolidated Financial Data, Second Quarter, 2004-05

INFRASTRUCTURE (as on Sept 30, 2004)**

	Completed				Work in Progress				Land
	Built-Up Area				Built-Up Area				acquired during
	(Sq Ft)		No. of Seats		(Sq Ft)		No. of Seats		the Qtr (acres)
Bangalore		1,863,836		11,262		471,000		2,000		0.90
Pune		589,647		3,626		309,000		2,500
Chennai		496,317		2,906		308,000		2,470
Hyderabad		462,000		2,865		454,000		1,215
Bhubaneshwar		284,000		2,000		230,000		1,250
Mangalore		198,000		1,240		—		160
Mysore (including ILI)*		1,104,450		1,484		1,362,900		1,450
Mohali		21,000		200		3,30,000		3,100		20.00
Trivandrum		22,000		220		22,000		220
Total		5,041,250		25,803		3,486,900		14,365		20.90

*	Infosys Leadership Institute
**	Excluding subsidiaries

CONSOLIDATED IT SERVICES

	Sept 30, 2004		June 30, 2004		Sept 30, 2003
Effort – Services (Person months)
Onsite		17,267		16,118		11,873
Offshore		37,574		32,592		24,499
Revenue – Services ($ million)
Onsite		188.03		172.69		129.72
Offshore		170.29		146.65		110.20

www.infosys.com        6

Fact Sheet – Consolidated Financial Data, Second Quarter, 2004-05

Reconciliation of accounts as per Indian GAAP and US GAAP

in Rs. Crore

	Quarter ended						Year ended
	Sept 30, 2004			Sept 30, 2003			March 31, 2004
Consolidated Net Profit as per Indian GAAP		447.37			300.98			1,243.63
Amortization of deferred stock compensation		—			(4.90	)		(12.87	)
Deferred taxes		0.35			(1.30	)		(5.05	)
Gain on forward foreign exchange contracts		—			3.50			16.01
Amortization of Intangibles		(1.17	)		—			(1.19	)
Others		—			(1.50	)		(6.05	)
Consolidated Net income as per US GAAP		446.55			296.78			1,234.48

Reasons for differences in net income as per Indian GAAP and US GAAP

Amortization of deferred stock compensation

The Accounting Principles Board Opinion No. 25 of US GAAP requires the accounting of deferred stock compensation on issue of stock options to employees, being the difference between the exercise price and the market value as determined by the quoted market prices of the common stock on the grant date.

Gain on forward exchange contracts

Until April 1, 2004, Indian GAAP required the premium/discount on forward contract to be recognized as income or expenditure over the life of the related contract. Under US GAAP, the same is marked-to-market as on the reporting date. The resultant gain / loss is recognized immediately in the income statement. Effective April 1, 2004, the company changed its accounting policy in India in line with the revised Accounting Standard 11 on forward contracts and hence the company has decided to account for the forward exchange contracts based on their designation as ‘effective hedges’ or ‘not effective’.

Amortization of Intangibles

US GAAP requires the purchase price in business combination transactions to be allocated to identifiable assets and liabilities, including intangible assets. Intangible assets are to be amortized over the estimated useful life. The amortization relates to that of an intangible asset identified in allocation of the purchase price of Expert Information Services Pty Limited, Australia.

www.infosys.com        7

EX-99.8

Exhibit 99.8

Infosys Technologies (CNBC)
Q2 FY05 Results
October 12, 2004

Male correspondent: We have got Mr. Nandan Nilekani, MD, CEO and president of Infosys and Mr. Mohandas Pai, Director and CFO of Infosys. What’s gone right in this course?

Nandan: In the last year, we have put in several scalable engines of growth. That’s why we have been able to revise our guidance revenues for the year to between 45% and 46%.

Male correspondent: What surprised the market is the net addition of 5010 employees. We were constantly told that this is the gross addition. This is the largest we have seen in a long while

Nandan Nilekani: Yeah, I think it is highest ever. 5010 net employees net employees joint, but this is across the whole group.

Male correspondent: How much of it is from Progeon?

Nandan Nilekani: Most of it is Infosys.

Male correspondent: Infosys.

Nandan Nilekani: Yeah, but I think the important thing is that we have been able to show scalability on the recruitment front, and I think that is the point we are trying to make is that on the one hand we want to create scalability in terms of gross employee addition or infrastructure, at the same time, we are investing in all new differentiation methods, like consulting and all that. We are trying to combine both these things together.

Male correspondent: Mohan, is it a bigger challenge to manage your margins in the state of this kind of employee additions which are happening and take us through the margin picture from various pulls and pressures angles in this quarter.

Mohandas Pai: Udayan, what we have done over the last several quarters is to build in a flexible expense management system. We have made it such that there is a large percentage of variable cost, which you monitor on a regular basis, and when we monitor this cost, we make sure that they are within certain norms. So, we have the flexibility within the model to absorb certain levels of expenditure. For example, this quarter, we spent about $5.5 million on business plan initiative, which is very good, and we also make sure that we have some flexibility managed exchange rate movement. So, if you look at our gross margin, gross margin has been almost the same as the previous quarter even in this quarter at about 47% marginally higher. If you look at the operating profits, operating profits have been 28.6% as against about 28.8% in the previous quarter, so

almost the same, but the other income has gone up. Other income is 1.7% of revenues as against 0.1, and at the operating level it has been almost the same. At the net profit level is flat at 25.6 to 25.6, but the reason for the operating income for the free cash income going up is a fact that other income has gone up.

Male correspondent: Why is it Mohan? We were expecting to see it come down because we thought that there would be hedging losses. We were hedged at about 46, if I remember correctly? No forex losses in this quarter?

Mohandas Pai: We had hedged at 45.99 and since we mark to market all our forward positions, there is no more loss to pay. So, right now, we are hedged at 45.91, because that is the closing rate, and this quarter, because it went up from 45.99 to 45.91, we had a profit. So overall, there is no loss that we are carrying forward in the balance sheet.

Male correspondent: Right. Nandan, volume growth, 12.6% once again in this quarter, but a larger offshore component, which we will talk about, are you going to see this kind of growth, because 5000 addition probably means that you expect this kind of volume growths to continue for the next two or three quarters?

Nandan Nilekani: Well, we do expect to see volume growth, and we actually, if you actually look at the skew in the growth, it is 15% offshore growth and just 7% onsite growth. So I think, we have able to drive the growth moving it to offshore, and obviously when we are hiring about 5000 people, the idea is to put them to, but that is all factored into our guidance.

Male correspondent: Mohan, two points, what this means for the guidance, 15% offshore growth versus 7% onsite growth and what’s happening with your billing rate picture, put these two together, how are your margin picture for the next two quarters?

Mohandas Pai: Well, I think the pricing has been stable. We have seen an uptick in prices from clients who have come on this year, in the first quarter and the second quarter. We have seen some uptick in prices from clients who have been with us for sometime, because when the pricing negotiation happened we got some rate increases from the clients. So overall, the pricing has been stable with a upward bias. I won’t say that the pricing is going up in a substantial manner. We need to see some movement. We actually had an uptick in onsite rate by 1.7%, in offshore rate by about 0.7%, but I won’t say it as a trend, but I would say it is stable. What this essentially means is that the negatives that were there earlier about pricing being unstable, about employee cost going up, have all been factored into the model, so we have growth in terms of making further investment into the business to ensure that the growth engines are chugging along. We added 5010 people across the board in this corporation. Now, we are spending an enormous amount of money on training. We spent $5000 per head for training in our global training facility in Mysore. So, on this 5000 people, we have a large investment that we are going to make, and this is already partly taken into our cost. So I would suggest that over the last quarters what we had done, we are seeing the results now.

Male correspondent: What operating margins are you factoring in? While giving out Rs.67 per share guidance, what about the rupee and the offshoring component, what margins are you factored in?

Mohandas Pai: Well, we have taken the trend analysis, and said basically what we have done in terms of onsite and offshore would remain with a slight uptick is onsite based up on our project management system. We have a system inside wherein we book all the projects, we know the ratios, and based on the ratios we project for the next two quarters. We have taken the rupee essentially at Rs.45.91, what is the rupee rate, because we are hedged to some extent, and we have taken the same rupee going forward. We have factored in in fact a higher level investment in a business plan. So you notice that the net profit has come down by 1% in our guidance for the 3^rd quarter compared to this quarter because we are spending $5.3 million more on our business plan. So, it is an investment expenditure that we are making, so we have this within our model to make investment expenditure. We are looking at stability this quarter with growth, but if you notice the growth rate, the growth rate is down in the 3^rd quarter, 7.9% as against the growth rate of a higher figure this quarter. The reason is that in the 3^rd quarter, we have more holidays. When you come to a size, if you have more holidays in one quarter compared to the previous quarter, revenue growth rates to come down.

Male correspondent: Sure, Nandan, are you moving to a new level of scalability of your growth, 5000 net additions, the kind of ramping up that you are speaking out, half-million square feet. Will it require far more by way of quarterly capex going forward and, is it a challenge to manage this kind of a growth, because we are seeing much more aggressive employee addition.

Nandan Nilekani: Obviously, you know, as the scale becomes larger, you know, the challenges are more, but the advantage now we have is that because we have created this integrated business units and, you know, ECU, we really cater to a layer of management, and you are going to meet one of them, Ashok Vemuri later, who is really running their business unit like a separate company. Each of them is running, maybe a $100-200 million company. To that extent, I think on the business side, we have created the multiple engines of growth, but as a back end of this, you know, hiring and infrastructure is all across the board, and that we have to scale up. But I think both our HR people led by Hema as well as the facility people led by Mohan have done a tremendous job in coping with the increased demand.

Male correspondent: At this rate, at end of this year or in the next year, you will have 50,000 employees. Is it manageable, the size that you are talking about now, 50,000 seat corporation in another 4-5 quarters?

Nandan Nilekani: Well, you know, a few years back we were 3000, and people said could you manage 30,000 people, and we have reached 32,000 people. So, I think we have tried to put in a lot of management tools to manage the scale. You know, distribution in multiple DCs, distribution in multiple IBUs, training facility that can train them, management structures that can even look after their needs. The whole idea is

using technology and communication to reach out to them. The whole host of things we have done to manage the scale. But certainly, it is always a challenge when you add a large number of people, but you know, we are trying to make a deal with all the challenges.

Male correspondent: Well, we have just begun on his board room. But we will need to take a short break. Catch up on the market as well when we come back after the break. What Infosys and TCS are doing to their board. One announcing, one has announced good results, and the other is expected to announce results later this evening. We will talk about all those stocks and, of course, catch up with Infosys top management when we come back after this break.

Male correspondent: Welcome back. You are watching the Infosys Board Room live from Bangalore. As we do every quarter, we just started off with Nandan and Mohan and they have been telling us that this has been another good quarter, and they are getting more aggressive with their ramp up [not audible] good volume growth [not audible] guidance has been up, and now they expect 47 to 48% top line growth in this year, revenue growth in this year, and 43% by way of earning per share growth. We are also joined by S. Gopalakrishnan now. He is also a member of the board and Deputy Managing Director of Infosys. Kris, good to see you again. We have just been talking to Nandan and Mohan. Kris, [not audible] on the kind of volume growth you are seeing and what you are doing in terms of employees, because that is the number which has hit the market, 5,000 net employees in this quarter. What are you moving towards in the next 2 or 3 quarters?

Kris Gopalakrishnan: Definitely, the momentum is there in terms of business. We have proactively moved business to offshore, which is going to help us actually with respect to margins going forward, but we are investing in the business as Mohan talked about. And, this period, you know, between June to September is really the time when campus recruits actually join the company. So, that is one of the reasons why, you know, we have good additions this quarter.

Male correspondent: What we have seen in terms of the difference between offshoring growth and on-site growth in this quarter, is it a trend, because it looks a very large gap. Because it is very good for your margins, if you can do it, continue to do it. You see this kind of a 15% versus 7%, give or take one or two percentage points growth rate in offshore versus onsite?

Kris Gopalakrishnan: We always wanted to maintain our offshore/onsite ratio between 65-35, right. So, between 30-35% onsite is the range we are looking at.

Female Correspondent: Mr. Gopalakrishnan, hi, this is Mini here. A quick take really on the recruitment. You said, September, the first quarter is, September is normally the time when it peaks, the recruitment cycle. Going across the next 2 quarters, would the new recruitments in Infosys be as much as this, at 5000, or do you think it would be perhaps lower?

Kris Gopalakrishnan: For the next quarter, we are looking at about 4000-4500 people to be added.

Female Correspondent: When will you start putting pressure on this cost really, Mr. Gopalakrishnan? I guess, the company has managed to keep the cost at bay, and as we understand it, most of these recruitments are at lower level, so it does put too much of pressure as far as salaries go, but when will this start catching up with the company?

Kris Gopalakrishnan: We have been revising our compensation on an ongoing basis. At the beginning of the year, we had raised the fixed component by about 17% average. We have given an interim revision. So, all that is absorbed, and you know, we are still able to maintain the margins.

Female Correspondent: Right. As far as the middle management level goes, is there pressure as far as salary increases go as far as the company’s balance sheet is concerned?

Kris Gopalakrishnan: Yes, definitely, the pressure is at the experienced middle management level. The situation is really the competition for talent and, you know, the competition is in India with multinationals coming, with all of us, all the Indian companies growing. So, the competition really is competition for talent and we are aware of that, and that is why, you know, we have taken proactively steps to increase the variable component, we have been looking at the market and keeping up with the market in terms of compensation, etc.

Female Correspondent: Right. Mr. Pai, get you in here just moving here, on one hand, you have capacity expansion, which is pretty aggressive, on the other you have recruitment. Getting back to the margins, what kind of volume growth will have to take place for the company to actually justify this kind of increases on both capex and the employee addition?

Mohandas Pai: Mini, as far as capex goes, with beginning of the year we said that we will spent $600-$750 million. We have 25,500 seats in use now. We are building 14,000 seats. We have 33,000 people. So looking at growth, if we add about 10,000 seats, well obviously you have to invest in capex ahead of requirement. Right now, we are behind in adding to capex. So we think that going forward, we have enough cash and be able to manage that in a manner which is almost just in time which matches with out growth. Two, our recruitment depends upon our business planning cycle, so we plan for up to an year, and we look at quarter to quarter business prospects, and based upon the requirements for the next two quarters we start the hiring, some part of the hiring is obviously a commitment made one year ahead in the campuses, and the balance part of the hiring is obviously just in time hiring for the market place based upon the model. So, we have made sure that at no point of time would we be caught unawares by a shift in market forces. Therefore, I would state that our flexible expense management system

and the planned model ensures that we can maintain margin as we grow because we can look ahead and plan.

Male correspondent: Nandan, where is this kind of growth coming from? Are you essentially seeing a lot of new clients coming into your fold or is this a long-awaited ramp up which is finally happening. Because, consistently 12-13% kind of sequential growth in volume, you yourself have seen very good growth, that is why you are ramping up so aggressively. Which part of the market is opening up for you?

Nandan: I think all these different factors are kicking in. You know, existing customers are looking at how they can expand their engagement with us, and that is the hype because we have launched a lot of new services in the last couple of years whether it is our SI service, infrastructure management, consulting, BPO, all these things. So, we already have an existing relationship and we have new services that give them value, you can, you know, sort of expand the kitty and expand the share of wallet that you have. So, that is one clear trend which is happening. The other thing is that we are seeing interest in many new companies, many new industries, for example telecommunication service providers, now they have become much more focused on offshoring, and oil and gas and automotive, and you know, sectors historically outsourcing was done in the more (not audible) sectors like technology and financial services, but now more and more every sector, pharma is looking at it. Presently, expansion of the market place, and also in a sense the geography expansion with European companies. So, across the world, I think there is greater acceptance and lower perception of risk, which is sort of macro thing. In our case specifically it is both mining existing customers as well as from these new customers.

Male correspondent: What about outsourcing backlash? Has the noise died down because we are getting very close to the elections and two quarters running into the elections you have shows very good volume growth, so do you think of that as a bit of a thing of the past, or will it come up again closer to the elections?

Nandan: Well, I think, you know, it is unpredictable, and we are in the last phase of the US presidential elections. It is obviously an issue that will be debated and will get highlighted. So, I think we have to wait for a quarter and really look up in January and really see how the dust settles on the issue.

Male correspondent: This quarter there have not been too much by way of few clients holding back work because of getting close to the elections?

Nandan: Well, I think those are already in the game are going on with what they have to do. I think there may be a fraction of people on the margin who are new players who may be deferring the decision, but the people already, have continued.

Male correspondent: Time for another break now of course we will continue for the next 40 minutes, so keep an eye on the market because volume (not audible) is doing very well and is still up almost 2.5-3%. The market has slipped into the red. The results

have come in a mood of correction for the last couple of days, and the market has been looking quiet, and Infosys has not been able to turn around the sentiment in the market, that has vanished for the sector because most of the tech stocks have done well, but the market overall is looking a bit sluggish. Infosys, of course, is up and so is the rest of the tech pack. We will come back with more on the markets and more on Infosys. Basab Pradhan will also be joining at the CNBC top management.

Welcome back, you are watching Bazaar. We are live from Bangalore, we are talking to the Infosys top management, unfortunately this has not been a great morning for the market, there are still very sluggish, but technology is looking good, Infosys particularly is back to 1720 odd or 1730 odd which is about high from which had slipped about 10 days back and then back all the way to 1600, but it has come back to touch that high, of course these are 3 year high that Infosys is trading, and that is in terms of the stock price. We have been talking to Nandan, Mohan and Kris, and we are now joined by Basab Pradhan who is head of global sales at Infosys, he is the man who has spent most of the time in the US and in the key markets gets the business back for Infosys, also good to see you in, numbers look good, business is fine?

Basab Pradhan: Yes, everything looks good and this quarter the numbers looks great as we can tell, and you know this is an engine that is firing on all cylinders, so we are really happy about where we are and the future as well.

Male correspondent: Big growth in offshoring, are you finding it easier to convert work into offshore rather than onsite now; this quarter has been fairly strong in terms of the lot of places, I was just talking to Kris about?

Basab Pradhan: I don’t think it is going to be a circular trend because we are doing several different things, some of which will perhaps be a little more onsite heavy, the work we are doing on our solutions, but overall we understand that our clients get value if we do more work offshore and that is the way we would like to guide things.

Male correspondent: I was just asking Nandan about how strong is the ramp up is from the existing client versus any notable editions that you are making, which is driving the volume growth of 12% sequentially. Could you just breakup the two areas and tell us where do you see the biggest momentum coming from?

Basab Pradhan: We have momentum all across, clients that we have had for years are growing, our stable is large as well as growing, clients that we have added recently in the last two years are showing strong growth and we continue to add clients. We have added 32 clients this quarter, so there is growth all around and we are very happy with the increase of revenue as well and a lot of new business is coming from the business value side of our thrust which is on solutions and consulting, so we are really happy with the way, the quality of revenue is also growing.

Male correspondent: Kris with this kind of volume growth, at some point one would expect intuitively speaking that your prices would start to inch up, you have not seen that

happening in the last couple of quarter? Is it a matter of time before it happens or do you expect volumes to grow but prices still remaining fairly flattish for the next 2 to 4 quarter?

Kris Gopalakrishnan: We saw a slight uptake in the onsite and offshore prices this quarter, though it is too early to say, we see a small upward momentum, but price is dependent on other conditions in a competition. It is dependent on inflation and it depends on the salary cost in the market in which we operate, etc., you know the availability of resources in the market, so what we are seeing or what we are saying is that it is stable at this point.

Male correspondent: Basab, $3 million is the average client size for you, given the kind of company that you work with that does not seem like a very large numbers. Do you see that changing as you go forward, more of your larger clients doing bigger business with you and are some of the matrix in your results pointing in that direction, where you are getting some of the clients getting more and more business out of you?

Basab Pradhan: Well this is just a number that is a bit of a trap there, if you get in and look at $3 million a client, because you can stop adding new clients and bring that number up and that is not what we are, you know when we are investing in growth and so on, we want to do. I think the numbers you want to look are how many clients do we have about $10 million, $20 million and $30 million, so we have 10 clients over $30 million and we keep increasing that numbers of 3 clients over $50 million, so that is all good news and that is what we focused on, taking classy accounts, growing them, as well as adding potentially classy accounts as well.

Mini: Just to check really, is the new clients that you have, or the ramp ups you have, are you doing that at better pricing, is there a more maneuverability as far as pricing is concerned for Infosys in the new contract?

Basab Pradhan: Yes Mini, I would agree that there are things that are happening there with our new client acquisition. One is that, we are able to get about 4 to 5% extra percentage points on our pricing. We are also making entries into new accounts from the business value of ours. So we are really working on solutions, entries through consulting, which is resulting in better pricing rather than productivity.

Mini: Basab, in fact both market analyst we have spoken to now about these numbers had said that considering that Infosys now offers the entire gamut of services including consulting, your BPO arm, your product, you could possibly make further in roads into new clients? Is that happening? Is that trend discernable really for the company?

Basab Pradhan: Absolutely, we are adding new clients that are Progeon only at this point and then our attempts will be to cross sell into other services. We are adding new clients which are consulting lead, it is happening all across. We are adding new clients which

are only enterprise solutions, IMS, the new services that we have, so it is an engine that is firing in all cylinders.

Mini: Basab, every time we speak to you, you have at least in the last two quarters been telling us that the pricing environment is stable with an upward bias, at least it looks like this. When will it really change, when do you expect a real up move in pricing? Are the markets indicating anything?

Basab Pradhan: Pricing is a product of many different things. What we want to do is, take all the levers we have, like business value, selling business value automatically raises the prices. If we enter through consulting, we get better rates, that is automatic. Looking at new client acquisitions and how we can position ourselves to get better pricing and as I said earlier, we are getting focused at this point higher and higher in our new client acquisition, and then we still have to continue to fine tune our pricing as the contracts come up for renewal for our existing clients, so we have to do all three things, and I think the time has not yet come when we will see large scale price increase with existing clients, but the other two things are getting us good dividends.

Mini: We will be taking a short break, we have many more questions for the Infosys management, that is coming up for you. Also we run a check on the market and the NISE has corrected, it is currently at 1803, holding on 1800, so what is the outlook there, we will come back with the market share prices, so stay right there.

Male correspondent: Welcome back, you are watching Bazaar. In the midst of an Infosys Board Room, while we take a small diversion because of the trading and NIFTY is actually down about 7 odd points, even as Infosys continues to be up 32 odd rupees, it is good day for technology, it is not such a good day for the market, the correction which started a couple of days back seems to be continuing and we are in the midst of slightly sluggish moods into the markets, the volumes too are not great since yesterday, it just ended up with 11,800 crores. Quick take on Infosys numbers and on the market, we are now joined by Nilesh Shah of Kotak Securities.

Nilesh morning, quickly, first on the market, before we talk Infosys, what is the general feeling for the next few days, do earnings come out?

Nilesh: Udayan I think, the markets look a bit sluggish in the near term and the medium terms and I think it is clearly because of the way oil is inching up. It is now hovering close to $54 a barrel and that is now concern which his dominating in the minds of everybody, so I think the fair amount of caution is going to prevail. Obviously, the Infosys results are providing some amount of relief to the markets, but I think what will be equally critical would be the numbers which would come out from the non-technology companies, more particularly the mobile companies, the energy companies, and the banking stock, and what are the kind of numbers they are going to come out with and what is the kind of guidance or directions of earning that there are likely to provide for the balance part of the year. I think that is going to be very, very critical for the markets.

Male correspondent: In the event of sluggish market for the next few days, do you expect a substantial correction from here on or the markets just go through a phase of consolidation and wait for the earnings and then take it from there?

Nilesh: I think it could be more a phase of consolidation and I think it would be bit of premature thing to really say that there might be a very steep correction, but what looks really certain is I think is we might see a level of about 5500 or so for the Index and then I think when the results come out from the other major non-tech companies, I think then probably the trend will kind of get decided, whether we are going to kind of, whether 5500 is going to become a base or there is a further down side from the 5500.

Mini: Nilesh, a quick check on the old economy stalwarts, as far as numbers go, lot is expected from the metal companies, from companies like ONGC, there is small refineries, do you think the prices actually reflect what the markets are expecting as far as results go?

Nilesh: I think one would have to really take it on a case-to-case basis rather than make a very generic statement, but what we believe is that the earnings momentum in the companies that you mentioned is going to be pretty strong. So I don’t think there is any kind of concern out there, more particularly for companies like ONGC or the ferrous metal companies, I think they are going to be reporting very, very strong earnings. The real concern is going to come out from the automobile companies and the banking and the financial stocks and one will really have the see the implications of high oil prices and high inflammation on the earnings of these companies.

Mini: Nilesh, this time there is no getting away from technology today, a lot of the technology companies including TCS of course which comes out with numbers are reacting pretty well to those Infosys numbers, are you not expecting a lot as far as TCS is concerned, or can we actually use the same parameters for all the technology counters, or is there some need for caution here?

Nilesh: I think Mini the top three companies, which is Infosys, Wipro and TCS probably, are getting bracketed together and so to that extent, the Infosys numbers are definitely an indication of things to come for both Wipro and TCS. In terms in the tier 2 technology companies, I think it would be difficult to make a generalization and each of those companies perhaps will be far more vulnerable to a changing environment, we saw that in the MphasiS BFL results yesterday which posted a loss as far as the forex earnings go, though of course operating numbers were good, but I clearly think that the top three technology companies are demonstrating strong execution capabilities and the ability to manage growth, the fact that Infosys recruited 5000 people in one quarter, really speaks of execution capabilities.

Mini: Right Nilesh, thanks so much for joining us. Nilesh of Kotak Securities, Udayan over to you.

Male correspondent: That’s a thumbs up for Infosys, but a bit of a thumbs down for the market, saying that sluggishness could continue for the interim period and we could see the market going back to about 5500 level. We still got the Infosys management with us, just get a quick word on Progeon, we have not spoken about that. Mohan sum up the Progeon quarter for us?

Mohandas Pai: Progeon did about $9.1 million from 7.2, they had a profits of $1.1 million as against a loss of $900,000. And the profit has come about because of favorable foreign exchange environment, because last quarter they had a forex loss to carry, and has also come about because of scaling up, because of the fact that some of the clients have gone live and the investment they made in training has come good, so overall I think it has been very positive. I think for the full year, we are now looking at about $37 to $38 million up from $32 to $34, so the growth momentum continues to be strong. We have had good client addition and some of the clients with whom we have tied up business are giving us very high-end work.

Male correspondent: Nandan are we in race to buy the GE’s BPO business?

Nandan: No.

Male correspondent: Is there a categorical no or a no comments?

Nandan: No, we are not.

Male correspondent: Okay, that is news, that is interesting. Basab, what is the noise leading up to the elections? Do you see any kind of disturbance at all or is it one more of those things which the media loves to talk about but actually does not effect business on the ground?

Basab Pradhan: Well actually you know we have talked about this every board room for the last three, and we frankly expected a little more noise than there is, and in the last two quarters, it has died down to where it is really no longer an issue, offshore outsourcing services no long is so much of the issue, obviously the jobs is an issue, the economy is an issue, and the other things of course. So we don’t expect, we have not excited it to impact business for a while.

Male correspondent: Kris a quick take on what this kind of aggressive hiring does to all those ratios that we like looking at in the market utilization ratio etc? Where does it guide do to all those parameters?

Kris Gopalakrishnan: Our utilization excluding training is 81% and we want to keep it high 70s, low 80s, so it is in the right range. Including trainees is about 72%. And that will keep going up and down as we take trainees. This could have an impact, as they come out of training etc., on the utilization, it may come down little bit, but business is strong, we are able to absorb the people.

Male correspondent: Well Basab we will thank you now, thanks very much for joining in. We will slip into another break, of course Shibulal will also join us after this break and he will talk about issues pertaining to delivery, we are talking about the critical issue of H1B, a bit of news this morning itself that may be that sealing might be relaxed a little bit, what does it mean to Infosys, we will take to management about all of that, stay with us and we will be right back.

You have been watching the Infosys Board Room, we have got about 20 minutes to go to sum up this quarter for us. We have still got Nandan, Mohan and Kris and now we are joined by B. Shibulal who is head of global delivery. He is going to talk on critical issues like H1B and how it effects Infosys there, of course lot of other thing like offshoring as well. Shibu good to see you again.

Shibulal: Nice to see you, good morning.

Male correspondent: H1B, what’s happening in that space, are you constrained that with this stamp do you expect any relaxation, has it affected business in any material way?

Shibulal: See at this point we have approximately 10,000 plus H1, L1 visas for US. However, our utilization at this point is about 52-53%. We (inaudible) H1 utilization and L1 utilization. We comply to all the regulations which are there in US. The validity of the visas which we get is approximately 3-5 years. So it is about 52-53% utilization, and also our onsite to offshore ratio remaining at a very healthy level 31%- 32%. We don’t see major issue at this point in time for the next 12 months.

Male correspondent: Given that you are recruiting so aggressively and on the other hand H1B supplies are limited or finite, do you expect any kind of miss match problems at all in the next 3-4 quarters?

Shibulal: Not in the next 3-4 quarters, earlier in the next year H1B quota will became available next year, we plan to help (inaudible). We have a streamlined process for applying, whereby the number of errors in the applications are very low. So we get most of the applications which we make, so at this point we don’t see any problems for the next 3-4 quarters?

Mini: Mr. Gopalakrishnan, if I can just ask you a question on Finacle really, that is not something we have touched upon. You got some big deals happening this quarter, take us through the numbers over there and the outlook for Finacle.

Kris Gopalakrishnan: The banking business unit is doing very well. It is growing in line with our overall growth actually, and in the product space what happens is recognize the revenue as the product is utilized by the end user by the customer, and the revenues will flow over the next few quarters.

Mini: Right, in terms of client acquisitions over there, saw some big deals happen both internationally and within the country, what is the breakup like as far as domestic and international deals go?

Kris Gopalakrishnan: I don’t have the number in terms of break up between international and domestic with me, but we are doing well in India, majority of the public sector and private sector banks use Finacle, and oversea from Asia-Pacific and Africa we are starting to make inroads into Europe and our objective is to leverage Finacle for the developed markets in the future.

Mini: Right. Mr. Nilekani, can I bring you in here just a border question really to keep getting back to the US scene really despite the fact that the company has been extremely bullish. This has also been a quarter with a lot of tech downgrades, lot of question marks (inaudible) on spending by companies. Are you saying that you are not witnessing anything like that on the ground. Any kind of impact as far as your plans go?

Nandan: Well I think if you take overall tech spending, you are right, not much growth which is happening in tech spending. But what is happening is that people are trying to get more value for the tech spending, they want to get they want to reduce their cost, operating expenses, they want to increase the money that is released for spending on new initiatives, and they are looking at the whole host of means, whether it is using commodity technology, whether it is offshoring, whether it is open source. So they are using a whole new sort of techniques to reduce their cost and get more for money, and so while overall spending is still flat or slightly going up, I think certain sectors like offshoring and global approach to resourcing are definitely still having a lot of growth. I think that is a disconnect which is there.

Male correspondent: Shibu why don’t you update us on Infosys Consulting, what’s been the progress in this quarter and are you close to making any kind of money on that part of the business?

Shibulal: Infosys Consulting has been doing fairly well. We have had 50 offers and employment together, that means we have made 50 offers, quite a few people joined, we have opened three customers, within Infosys Consulting. The most important point is that is not a Infosys Consulting sale, it is a Infosys sale, that means we are selling end-to-end solutions which we are creating, starting from consulting all over to implementation and that is what our customers are buying in to and that is showing a very good sign. We have approximately $0.3 million in revenue losses. Our loss this quarter has been approximately $0.8 million. I think it is below what we actually planned, but again coming back to the most important point that our customers are buying into our end-to-end story, that is starting from consulting all the way in to implementation.

Male correspondent: Thank for that Shibu. We will slip in to another break, when we come back final words from the top management and the interesting addition to the Infosys board room this time, we will get one of their division heads to come and talk to us, the man who heads BFSI initiative, the banking and financial services, we will talk to

the head of that division when we cam back after this break. Keep watching we are about nearing the end of this quarter’s Board Room.

Welcome back, you are watching the Infosys Board Room live from Bangalore. I have spoken about all that there is been talking about guidance all of which, it is time to get focused on one vertical which is very important, in fact it is the hand that feeds mouth of many IT companies in India, the banking financial services vertical and capital market. It is a very very key vertical and today we are joined by Ashok who heads the BFSI business for Infosys and he will give us some interesting details on how this business is panning in the US. Ashok welcome to Board Room, thanks for joining in.

Ashok: Good morning Udayan.

Male correspondent: This is a big stake, it is very important for all IT companies. How is it shaping up for the last couple of quarters?

Ashok: It is shaping up extremely well, very strongly in fact. One of the key things is that our solution focus, our deep domain expertise, our ability to understand the process workflow, is finding significant resonance with our client and we are able to derive high value for them.

Male correspondent: Which part of the space is most exciting right now. It is vanilla bank, or is the capital markets segment which is coming out of the woods, or insurance remains the big player here?

Ashok: I think we are finding significant traction. I think it is also a function what we are able to deliver to them. We are working at a boardroom level, for example, in strategic directions, setting of business transformation, we are working to improve their operation efficiency parameters, we are working in the risk management, compliance and regulatory stakes, as well as bringing execution capability to deliver against those set recommendation. So we are finding traction across the space.

Male correspondent: You are well entrenched in that space, in that sense do you see any kind of pricing movements improvement happening in the space. Is it one of the spaces where you will see good volume growth but not too much price growth going forward?

Ashok: I think for our traditional services, we are definitely seeing very stable pricing environment with an upward bias. But I think the thing to focus on is our differentiated value added services and solution, and I think our higher value pricing on those deep domain expertise and the solutions that we are bringing to the table is finding significant resonance with our clients.

Mini: Ashok this is also an area of intense competition, you have competition coming in from the smaller players. Tell us, normally, we have heard of pricing pressure coming in from them, undercutting happening in this space. Is that visible even now in the markets?

Ashok: Mini I think the nature of the market has changed significantly and the expectations of our clients have of their services providers has changed. They are looking for players who have scale, who have deep domain expertise, who can proactively bring solutions to the table, and who can actually do projects like, for example integrated IT and operations, and I think they are looking for people who can bring that proactively and for those companies that are able to provide that services, I don’t necessarily think there is too much of a pricing impact.

Mini: Ashok, also how much of a ramp up do you actually have you seen in this quarter as far as this particular vertical is concerned. Because there is also a sense in which the certain saturation seems to have been (inaudible) that quarter, considering the kind of number of players vertical, are you witnessing any of that or you think there is lot of room over here for companies to both ramp up its existing clients as well as get new clients.

Ashok: I think we are seeing both, we are definitely seeing an upward trend in volume growth from our existing clients because the mix of solutions and services that we are bringing to the table has moved up in value. We are also seeing client acquisition and we are seeing improvement in pricing on that. I think the key thing to drive is that as long as you are able to differentiate and provide impact and basket of your capability we are seeing growth happen.

Mini: Right, Mr. Nilekani if I can come to you just moving away from this particular vertical, interesting news came out this morning. Patni Computers has actually acquired a telecommunications services company, every quarter we ask you about acquisition, it is not secret that companies like your Infosys are sitting on a whole lot of cash ready, what stage will you start looking at acquisitions really, because you have done small acquisitions but no big once as yet, you know considering the game play that you have laid out, the kind of volume growth you are seeing, the kind of capex you are seeing, you know employee additions, would inorganic growth also be a way out for the company in the future?

Nandan: I don’t think we are looking at acquisition as a source of growth, because we think at the end of the day, it is building an organic growth engine that matters and if you look at the world’s great companies the Dell, the Walmart, the Toyota’s, the WallGreens, they all have essentially grown organically. Where we do look at acquisitions is where it fits in to our strategic intent, our strategic intent is to combine the best of our global delivery model with the best of top class consulting domain knowledge, and there if you feel that organically we can’t ramp up at fast we can, we would like to embellish that side of the business with point acquisitions, and we continue to look at offering in that space and we will do so if it makes sense. But we have to see the strategic acquisitions in terms of our overall strategic intent and not just as a substitute for growth, which we think should be essentially organic.

Male correspondent: Ashok, just to go back to BFSI, are you able to speak to your clients for the entire range. Not only the Infosys services, but Progeon on one hand and

Infosys Consulting on the other hand. Do you have clients which actually are coming in and through any kind of interest doing the entire range of work with you?

Ashok: Absolutely, in fact what we are seeing is an interest in being able to provide end-to-end services. We are, for example, working in as I said earlier in the strategic planning and business transformation area, which is a consulting driven thing, for example, in a post merger IT integration scenario, and we are working on the process outsourcing space at the operational level we are doing a lot of IT capability and integrating IT and process in a seamless fashion. So we have a whole range of services that we bring to the table and there are buyers out there for that.

Male correspondent: Okay, well it is time to end up. Mohan from a CFO’s perspective, second half key challenges. You have taken the hit on the forex side, you have marked it to market, so the pain is taken now, what from your perspective is the key challenge for margins in the next second half?

Mohandas Pai: I think the key challenge for margins is the level of investment commitment that we are going to make to look at growth for the next year, because now our expense management system is stable. The rupee has a sense of stability, we have a better handle on how to manage the rupee. The employee cost pressure has been managed fairly well, we had a variable cost model. So overall, I think we are fairly stable now. We added on lot of people. We have put in money on the ground for investment, the investment are going to fructify. So overall, it is stable, and I am looking at making substantial investment more based upon demand for the next year.

Male correspondent: Nandan is pinching already. Do economic conditions matter Nandan, because if we now, everybody who took the call, some people are saying US GDP growth might slow down substantially. Do we think matter for technology outsourcing, would you be cautions or do you think we are out of the woods in the terms of volume?

Nandan: No I think if there is a significant slow down in the US, whether it is oil triggered or whatever, sure it will have its implications, because whenever there is a slide there, we are not immune to the macroeconomic factors. But if you take the secular trend, I think the push towards offshoring and outsourcing continues to be very strong, and I think our position in the market, our brand position is helping us. I think the way we see this is, we have put in place most of our building blocks for the future. Our challenge is to manage scale and differentiate our offerings and do it in a flawless manner of execution.

Male correspondent: Thanks. Good luck with that. Good luck for the second half gentlemen. Thanks very much for joining us.

Kris Gopalakrishnan: Thank you.

Male correspondent: Well that’s it for this quarter. First half is over, everything is gone well at the Infosys campus and let us see if they can deliver on their promises on the second half. Thanks very much for watching. I will be back next quarter with the Infosys offering for you. Till then I hand you back to the studio. Thanks very much.

EX-99.9

Exhibit 99.9

	Infosys Technologies Limited
	Regd. Office : Electronics City, Hosur Road, Bangalore - 560 100, India.

Audited financial results for the quarter and half-year ended September 30, 2004

(in Rs. crore, except per share data)

	Quarter ended				Half-year ended				Year ended
	September 30,				September 30,				March 31,
	2004		2003		2004		2003		2004
Income from software services and products
Overseas		1,659.27		1,115.98		3,106.69		2,174.63		4,694.69
Domestic		30.29		18.77		54.26		42.10		66.20
Total		1,689.56		1,134.75		3,160.95		2,216.73		4,760.89
Software development expenses		909.96		587.16		1,701.87		1,159.94		2,495.31
Gross profit		779.60		547.59		1,459.08		1,056.79		2,265.58
Selling and marketing expenses		103.08		80.44		190.47		160.16		335.08
General and administration expenses		116.78		88.72		218.02		169.90		346.85
Operating profit before interest, depreciation and amortization		559.74		378.43		1,050.59		726.73		1,583.65
Interest		—		—		—		—		—
Depreciation and amortization		56.55		62.33		105.93		106.59		230.90
Operating profit after interest, depreciation and amortization		503.19		316.10		944.66		620.14		1,352.75
Other income		30.23		44.28		48.22		76.73		127.39
Provision for investments		0.07		0.22		0.06		6.59		9.67
Profit before tax		533.35		360.16		992.82		690.28		1,470.47
Provision for taxation		78.50		60.00		143.50		112.00		227.00
Profit after tax		454.85		300.16		849.32		578.28		1,243.47
Paid-up equity share capital (par value Rs. 5/- each, fully paid) (see note 10)		133.93		33.13		133.93		33.13		33.32
Reserves & surplus		3,937.53		3,302.48		3,937.53		3,302.48		3,220.11
Earnings per share (par value Rs. 5/- each) *
Basic *		16.99		11.33		31.76		21.82		46.84
Diluted *		16.61		11.23		31.14		21.69		46.26
Dividend per share (par value Rs. 5/- each) *
Interim dividend *		5.00		3.63		5.00		3.63		3.63
Final dividend *		—		—		—		—		3.75
One-time special dividend *		—		—		—		—		25.00
Total dividend *		5.00		3.63		5.00		3.63		32.38
Total dividend percentage (%) *		100		73		100		73		648
Aggregate of non-promoters’ shareholding (unaudited)
Number of shares *		20,89,88,934		19,42,50,008		20,89,88,934		19,42,50,008		19,58,84,244
Percentage of shareholding		78.02		73.28		78.02		73.28		73.50

* Adjusted for the issue of bonus shares in the ratio of 3:1 allotted on July 3, 2004, as per Accounting Standard 20 (AS 20) on Earnings Per Share.

Segment reporting (in Rs. crore)

	Quarter ended				Half-year ended				Year ended
	September 30,				September 30,				March 31,
	2004		2003		2004		2003		2004
Revenue by industry segment
Financial services		584.38		436.26		1,073.97		837.23		1,722.08
Manufacturing		257.63		172.89		485.28		343.43		716.47
Telecom		303.95		171.61		560.33		327.75		774.83
Retail		166.85		134.34		338.76		261.72		563.16
Others		376.75		219.65		702.61		446.60		984.35
Total		1,689.56		1,134.75		3,160.95		2,216.73		4,760.89
Less : Inter-segment revenue		—		—		—		—		—
Net revenue from operations		1,689.56		1,134.75		3,160.95		2,216.73		4,760.89
Segment profit before tax, interest, depreciation and amortization:
Financial services		196.35		143.41		365.14		263.22		559.66
Manufacturing		88.51		52.66		158.95		106.66		225.38
Telecom		87.99		62.76		151.92		111.88		263.38
Retail		59.46		47.98		131.12		97.15		211.29
Others		127.43		71.62		243.46		147.82		323.94
Total		559.74		378.43		1,050.59		726.73		1,583.65
Less : Interest		—		—		—		—		—
Less : Other un-allocable expenditure
(excluding un-allocable income)		56.55		62.33		105.93		106.59		230.90
Operating profit before tax		503.19		316.10		944.66		620.14		1,352.75

Notes on segment information

Principal segments

The company’s operations predominantly relate to providing technology, consulting and business process management services, delivered to clients globally, operating in various industry segments. Accordingly, revenues represented along industry verticals comprise the primary basis of the segmental information set out above.

Segmental capital employed

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 support services are used interchangeably between segments. Accordingly, no disclosure relating to total segment assets and liabilities has been made.

Note:

1.	The above audited quarterly and half-yearly results have been taken on record by the Board of Directors at its meeting held on October 12, 2004. There are no qualifications in the auditors’ reports issued for these periods.
2.	An interim dividend of Rs. 5.00 per share (100% on an equity share of Rs. 5/-) has been declared at the above board meeting. The record date for the payment of dividend will be October 19, 2004. The interim dividend in the previous year was Rs. 3.63 per share (73% on an equity share of par value of Rs. 5/-) as adjusted for bonus issue of three equity shares for each equity share.
3.	Other information:

(in Rs. crore)

	Quarter ended				Half-year ended					Year ended
	September 30,				September 30,					March 31,
	2004		2003		2004			2003		2004
Staff costs		779.55		567.25		1,470.82			1,104.25		2,365.86
Items exceeding 10% of aggregate expenditure		—		—		—			—		—
Details of other income:
Interest on deposits		13.47		19.90		33.10			42.65		82.88
Dividends		8.30		3.53		16.94			3.53		17.40
Miscellaneous income		2.28		1.97		4.26			3.81		7.68
Exchange differences		6.18		18.88		(6.08	)		26.74		19.43
Total		30.23		44.28		48.22			76.73		127.39

4. Information on investor complaints pursuant to clause 41 of the listing agreement for the quarter ended September 30, 2004

	Opening balance	Additions	Disposals	Closing balance
Nature of complaints received
Dividend / Bonus shares related	0	53	53	0

5.	On April 8, 2004, the Board approved the formation of a new wholly-owned subsidiary, Infosys Consulting, Inc., (Infosys Consulting) incorporated in Texas, USA, to enhance the consulting capabilities of Infosys’ Global Delivery Model. The Board approved an investment of up to US$ 20 million in Infosys Consulting. As of September 30, 2004, the company had invested US$ 5 million (Rs. 21.97 crore) in the subsidiary.
6.	During the half-year ended September 30, 2004, the company invested US$ 4 million (Rs. 18.46 crore) in its wholly-owned subsidiary, Infosys Technologies (Shanghai) Co. Limited, China. As of September 30, 2004, the company had invested US$ 5 million (Rs. 23.01 crore) in the subsidiary. Infosys Technologies (Shanghai) Co. Limited has appointed Mr. James Lin as the Chief Executive Officer.
7.	Pursuant to the revision of Accounting Standard 11 (AS 11) on Accounting for the Effects of Changes in Foreign Exchange Rates, the company revised its accounting policy relating to forward exchange contracts as of April 1, 2004. Accordingly, the company has marked-to-market its forward exchange contracts as of September 30, 2004 and the profits for the quarter and half-year ended September 30, 2004 are higher by Rs. 10.75 crore and lower by Rs. 21.61 crore respectively.
8.	The company is informed by the statutory auditors that the name of their firm has been changed from M/s Bharat S. Raut & Co. to M/s BSR & Co.
9.	The final dividend of Rs. 3.75/- per share for the financial year ended March 31, 2004 and the special one-time dividend of Rs. 25/- per share, as adjusted for bonus issue of three equity shares for each equity share, was approved by the shareholders in the Annual General Meeting held on June 12, 2004 and the same was paid on June 14, 2004.
10.	Shareholders approved a bonus issue of three equity shares for each equity share in India and a stock dividend of two ADSs for each ADS in USA at its Annual General Meeting held on June 12, 2004. The bonus shares were allotted on July 3, 2004. Pursuant to the stock dividend, the ratio of ADSs to equity shares changed to one equity share for each ADS.
11.	In the Annual General Meeting held on June 12, 2004, the shareholders approved the delisting of company shares from the Bangalore Stock Exchange. The shares were delisted on June 22, 2004.
12.	During the half-year ended September 30, 2004 and 2003 and the year ended March 31, 2004 the company issued 12,96,446; 1,03,576 and 15,91,912 equity shares respectively, pursuant to the exercise of stock options by certain employees under the 1998 and 1999 stock option plans.

Audited consolidated financial results of Infosys Technologies Limited and its subsidiaries

(in Rs. crore, except per share data)

	Quarter ended				Half-year ended				Year ended
	September 30,				September 30,				March 31,
	2004		2003		2004		2003		2004
Income from software services, products and business process management
Overseas		1,719.26		1,133.06		3,212.71		2,204.43		4,786.72
Domestic		30.07		18.74		54.00		42.07		66.23
Total		1,749.33		1,151.80		3,266.71		2,246.50		4,852.95
Software development and business process management expenses		926.66		595.28		1,731.88		1,174.87		2,538.67
Gross profit		822.67		556.52		1,534.83		1,071.63		2,314.28
Selling and marketing expenses		122.27		82.69		227.47		164.34		350.90
General and administration expenses		139.37		92.37		257.04		175.35		369.19
Operating profit before interest, depreciation and amortization		561.03		381.46		1,050.32		731.94		1,594.19
Interest		—		—		—		—		—
Depreciation and amortization		60.63		63.42		113.20		108.56		236.73
Operating profit after interest, depreciation and amortization		500.40		318.04		937.12		623.38		1,357.46
Other income		29.60		43.16		45.31		75.10		123.38
Provision for investments		0.07		0.22		0.06		6.59		9.67
Profit before tax		529.93		360.98		982.37		691.89		1,471.17
Provision for taxation		82.56		60.00		146.67		112.00		227.54
Profit after tax		447.37		300.98		835.70		579.89		1,243.63
Paid-up equity share capital (par value Rs. 5/- each, fully paid) (see note 10)		133.94		33.13		133.94		33.13		33.32
Reserves & surplus		3,921.45		3,300.93		3,921.45		3,300.93		3,216.26
Preference shares issued by subsidiary		93.51		49.00		93.51		49.00		93.56
Earnings per share (par value Rs. 5/- each) *
Basic *		16.71		11.36		31.25		21.88		46.85
Diluted *		16.34		11.26		30.64		21.75		46.27
Dividend per share (par value Rs. 5/- each) *
Interim dividend *		5.00		3.63		5.00		3.63		3.63
Final dividend *		—		—		—		—		3.75
One-time special dividend *		—		—		—		—		25.00
Total dividend *		5.00		3.63		5.00		3.63		32.38
Total dividend percentage (%) *		100		73		100		73		648
Aggregate of non-promoters’ shareholding (unaudited)
Number of shares *		20,89,88,934		19,42,50,008		20,89,88,934		19,42,50,008		19,58,84,244
Percentage of shareholding		78.02		73.28		78.02		73.28		73.50

* Adjusted for the issue of bonus shares in the ratio of 3:1 allotted on July 3, 2004, as per Accounting Standard 20 (AS 20) on Earnings Per Share.

Note:

Principles of consolidation: The financial statements are prepared in accordance with the principles and procedures for the preparation and presentation of consolidated financial statements as set out in the Accounting Standard on Consolidated Financial Statements prescribed by the Institute of Chartered Accountants of India. The financial statements of the parent company and its subsidiaries have been combined on a line-by-line basis by adding together the book values of like items of assets, liabilities, income and expenses, after eliminating intra-group balances and transactions and resulting unrealized gains / losses. The consolidated financial statements are prepared by applying uniform accounting policies.

		By order of the Board
		for Infosys Technologies Limited
Bangalore, India	S. Gopalakrishnan	Nandan M. Nilekani
October 12, 2004	Chief Operating Officer	Chief Executive Officer,
	and Deputy Managing Director	President and Managing Director

The Board has also taken on record the unaudited consolidated results of Infosys Technologies Limited and its subsidiaries for the three months and half-year ended September 30, 2004, prepared as per US GAAP. A summary of the financial statements is as follows:

(in US $ million, except per ADS data)

	Three months ended				Half-year ended				Year ended
	September 30,				September 30,				March 31,
	2004		2003		2004		2003		2004
Revenues		379		251		713		484		1,063
Cost of revenues		214		142		401		275		602
Gross profit		165		109		312		209		461
Net income		97		65		180		123		270
Earnings per American Depositary Share *
Basic *		0.36		0.25		0.68		0.47		1.03
Diluted *		0.35		0.24		0.66		0.46		1.01
Total assets		1,108		854		1,108		854		1,132
Cash and cash equivalents		335		376		335		376		445
Liquid mutual funds		210		98		210		98		218

* Adjusted for a two for one stock dividend to ADS holders. Currently, each ADS represents one equity share.

The reconciliation of net income as per Indian GAAP (audited) and US GAAP (unaudited) is as follows: (in US $ million)

	Three months ended					Half-year ended						Year ended
	September 30,					September 30,						March 31,
	2004		2003			2004			2003			2004
Consolidated net profit as per Indian GAAP		97		66			183			125			272
Amortization of deferred stock compensation expense		—		(1	)		—			(2	)		(3	)
Deferred taxes		—		—			2			—			(1	)
Gain on forward foreign exchange contracts		—		1			(4	)		1			4
Amortization of Intangible assets		—		—			(1	)		—			—
Others		—		(1	)		—			(1	)		(2	)
Consolidated net income as per US GAAP		97		65			180			123			270

Certain statements in this release concerning our future growth prospects are forward-looking statements, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding the success of its investments, risks and uncertainties regarding fluctuations in earnings, our ability to manage growth, intense competition in IT services including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, industry segment concentration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks or system failures, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which Infosys has made strategic investments, withdrawal of governmental fiscal incentives, political instability and regional conflicts, legal restrictions on raising capital or acquiring companies outside India, and unauthorized use of our intellectual property and general economic conditions affecting our industry.

Additional risks that could affect our future operating results are more fully described in our United States Securities and Exchange Commission filings including our Annual Report on Form 20-F for the fiscal year ended March 31, 2004 and the quarter ended June 30, 2004. These filings are available at www.sec.gov. Infosys may, from time to time, make additional written and oral forward-looking statements, including statements contained in the company’s filings with the Securities and Exchange Commission and our reports to shareholders. The company does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of the company.

EX-99.10

Exhibit 99.10

INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS AS OF

	March 31, 2004		September 30, 2004
	(1)
			(Unaudited)
			(Dollars in millions)
ASSETS
Current Assets
Cash and cash equivalents	$	445	$	335
Investment in liquid mutual fund units		218		210
Trade accounts receivable, net of allowances		150		202
Deferred tax assets		–		2
Prepaid expenses and other current assets		36		30
Unbilled revenue		24		29
Total current assets		873		808
Property, plant and equipment, net		228		263
Goodwill		8		7
Intangible assets, net		2		1
Deferred tax assets		7		7
Other assets		14		22
Total Assets	$	1,132	$	1,108
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	1	$	2
Client deposits		15		9
Other accrued liabilities		99		101
Income taxes payable		22		28
Unearned revenue		15		22
Total current liabilities		152		162
Non-current liabilities
Preferred stock of subsidiary		22		20
Other non-current liabilities		5		5
Stockholders’ Equity
Common stock, $0.16 par value
300,000,000 equity shares authorized as of September 30, 2004
Issued and outstanding – 266,564,224 and 267,860,670 equity shares as of March 31, 2004 and September 30, 2004 respectively (See Note 2.9)		9		31
Additional paid-in capital		157		188
Accumulated other comprehensive income		39		(15	)
Retained earnings		748		717
Total stockholders’ equity		953		921
Total Liabilities And Stockholders’ Equity	$	1,132	$	1,108

(1) March 31, 2004 balances were obtained from audited financial statements

See accompanying notes to the unaudited consolidated financial statements

1

INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME

	Three months ended September 30,				Six months ended September 30,
	2003		2004		2003		2004
	(Dollars in millions except share and per share data )
Revenues	$	251	$	379	$	484	$	713
Cost of revenues		142		214		275		401
Gross profit		109		165		209		312
Operating Expenses:
Selling and marketing expenses		18		26		35		50
General and administrative expenses		20		30		38		56
Amortization of stock compensation expense		—		—		1		—
Amortization of intangible assets		3		—		4		1
Total operating expenses		41		56		78		107
Operating income		68		109		131		205
Other income		10		6		16		6
Income before income taxes		78		115		147		211
Provision for income taxes		13		18		24		31
Net income	$	65	$	97	$	123	$	180
Earnings per equity share
Basic	$	0.25	$	0.36	$	0.47	$	0.68
Diluted	$	0.24	$	0.35	$	0.46	$	0.66
Weighted average equity shares used in computing earnings per equity share (See Note 2. 9)
Basic		262,364,112		266,262,865		262,349,472		265,781,580
Diluted		265,650,900		272,121,905		264,979,408		271,186,823

See accompanying notes to the unaudited consolidated financial statements

2

INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

	(Dollars in millions)
	Common stock
										Accumulated other			Deferred							Total
	Shares		Par value		Additional paid-in		Comprehensive			comprehensive			stock			Retained			stockholders’
	(See Note 2.9)				capital		income			income			compensation			earnings			equity
Balance as of March 31, 2003		264,972,312	$	9	$	127				$	(32	)	$	(3	)	$	525		$	626
Common stock issued		103,576		—		1					—			—			—			1
Cash dividends		—		—		—					—			—			(23	)		(23	)
Amortization of compensation related to stock option grants		—		—		—					—			2			—			2
Comprehensive income
Net income		—		—		—	$	123			—			—			123			123
Other comprehensive income
Translation adjustment		—		—		—		25			25			—			—			25
Comprehensive income							$	148
Balance as of September 30, 2003		265,075,888	$	9	$	128				$	(7	)	$	(1	)	$	625		$	754
Balance as of March 31, 2004		266,564,224	$	9	$	157				$	39			—		$	748		$	953
Common stock issued		1,296,446		—		27					—			—			—			27
Cash dividends		—		—		—					—			—			(189	)		(189	)
Income tax benefit arising on exercise of stock options		—		—		4					—			—			—			4
Stock split effected in the form of a stock dividend (See Note 2.9)				22		—					—			—			(22	)		—
Comprehensive income
Net income		—		—		—	$	180			—			—			180			180
Other comprehensive income
Translation adjustment		—		—		—		(54	)		(54	)		—			—			(54	)
Comprehensive income							$	126
Balance as of September 30, 2004		267,860,670	$	31	$	188				$	(15	)		—		$	717		$	921

See accompanying notes to the unaudited consolidated financial statements

3

INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES

UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six months ended September 30,
	2003			2004
	(Dollars in millions)
OPERATING ACTIVITIES:
Net income	$	123		$	180
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation		20			25
Amortization of intangible assets		4			1
Provision for investments		1			—
Deferred taxes		1			(2	)
Amortization of stock compensation expense		2			—
Changes in assets and liabilities
Trade accounts receivable		(16	)		(60	)
Prepaid expenses and other current assets		(6	)		5
Unbilled revenue		2			(7	)
Income taxes		10			9
Accounts payable		—			1
Client deposits		—			(6	)
Unearned revenue		2			8
Other accrued liabilities		12			7
Net cash provided by operating activities		155			161
Investing Activities:
Expenditure on property, plant and equipment		(29	)		(72	)
Loans to employees		2			1
Non-current deposits with corporations		—			(8	)
Investment in liquid mutual fund units		(98	)		(24	)
Redemption of liquid mutual fund units		—			20
Net cash used in investing activities		(125	)		(83	)
Financing Activities:
Proceeds from issuance of common stock		1			27
Payment of dividends		(22	)		(189	)
Net cash used in financing activities		(21	)		(162	)
Effect of exchange rate changes on cash		13			(26	)
Net increase in cash and cash equivalents during the period		22			(110	)
Cash and cash equivalents at the beginning of the period		354			445
Cash and cash equivalents at the end of the period	$	376		$	335
Supplementary information:
Cash paid towards taxes	$	13		$	24
Stock split effected in the form of a stock dividend (See Note 2.9)

See accompanying notes to the unaudited consolidated financial statements

4

INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1	Company overview and significant accounting policies
1.1	Company overview

Infosys Technologies Limited (Infosys) along with its majority owned and controlled subsidiary, Progeon Limited (Progeon), and wholly owned subsidiaries Infosys Technologies (Australia) Pty. Limited (Infosys Australia), Infosys Technologies (Shanghai) Co. Limited (Infosys China) and Infosys Consulting Inc (Infosys Consulting) is a leading global information technology, or IT, services company. The company provides end-to-end business solutions that leverage technology thus enabling its clients to enhance business performance. The company provides solutions that span the entire software life cycle encompassing consulting, design, development, re-engineering, maintenance, systems integration and package evaluation and implementation. In addition, the company offers software products for the banking industry and business process management services.

1.2 Basis of preparation of financial statements

The consolidated financial statements include Infosys and its subsidiaries (the company) and are prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). Infosys consolidates entities in which it owns or controls more than 50% of the voting shares. The results of acquired businesses are included in the consolidated financial statements from the date of acquisition. Inter-company balances and transactions are eliminated on consolidation.

1.3 Use of estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions are used for, but not limited to accounting for costs and efforts expected to be incurred to complete performance under software development arrangements, allowance for uncollectible accounts receivable, future obligations under employee benefit plans, provisions for post-sales customer support, the useful lives of property, plant, equipment and intangible assets and income tax valuation allowances. Actual results could differ from those estimates. Appropriate changes in estimates are made as management become aware of changes in circumstances surrounding the estimates. Changes in estimates are reflected in the financials statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the consolidated financial statements.

Interim information presented in the consolidated financial statements has been prepared by the management without audit and, in the opinion of management, includes all adjustments of a normal recurring nature that are necessary for the fair presentation of the financial position, results of operations and cash flows for the periods shown, and is in accordance with GAAP. These financial statements should be read in conjunction with the consolidated financial statements and related notes included in the company’s annual report on Form 20-F for the fiscal year ended March 31, 2004.

1.4 Revenue recognition

The company derives revenues primarily from software development and related services, licensing of software products and from business process management services. Arrangements with customers for software development and related services are either on a fixed price, fixed timeframe or on a time and material basis.

Revenue on time-and-material contracts is recognized as the related services are performed. Revenue from the end of the last billing to the balance sheet date is recognized as unbilled revenues. Revenue from fixed-price, fixed-time frame contracts is recognized as per the percentage-of-completion method. Guidance has been drawn from paragraph 95 of Statement of Position (SOP) 97-2, Software Revenue Recognition, to account for revenue from fixed price arrangements for software development and related services in conformity with SOP 81-1. The input (efforts expended) method has been used to measure progress towards completion as there is a direct relationship between input and productivity. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the current contract estimates. Costs and earnings in excess of billings are classified as unbilled revenue while billings in excess of costs and earnings are classified as unearned revenue. Maintenance revenue is recognized ratably over the term of the underlying maintenance agreement.

The company provides its clients with a fixed-period warranty for corrections of errors and telephone support on all its fixed-price, fixed-time frame contracts. Costs associated with such support services are accrued at the time related revenues are

5

recorded and included in cost of revenues. The company estimates such costs based on historical experience and estimates are reviewed on a periodic basis for any material changes in assumptions and likelihood of occurrence.

In accordance with SOP 97-2, license fee revenues are recognized when persuasive evidence of an arrangement exists, delivery has occurred, the license fee is fixed and determinable, and the collection of the fee is probable. Arrangements to deliver software products generally have three elements: license, implementation and Annual Technical Services (ATS). The company has applied the principles in SOP 97-2 to account for revenue from these multiple element arrangements. Vendor specific objective evidence of fair value (VSOE) has been established for ATS. VSOE is the price charged when the element is sold separately. When other services are provided in conjunction with the licensing arrangement, the revenue from such contracts are allocated to each component of the contract using the residual method, whereby revenue is deferred for the undelivered services and the residual amounts are recognized as revenue for delivered elements. In the absence of an established VSOE for implementation, the entire arrangement fee for license and implementation is recognized as the implementation is performed. Revenue from client training, support and other services arising due to the sale of software products is recognized as the services are performed. ATS revenue is recognized ratably over the period in which the services are rendered.

Revenues from business process management and other services are recognized on both, the time-and-material and fixed-price, fixed-time frame basis. Revenue on time-and-material contracts is recognized as the related services are rendered. Revenue from fixed-price, fixed-time frame contracts is recognized as per the proportional performance method using an output measure of performance.

When the company receives advances for services and products, such amounts are reported as client deposits until all conditions for revenue recognition are met.

1.5 Cash and cash equivalents

The company considers all highly liquid investments with a remaining maturity at the date of purchase / investment of three months or less and that are readily convertible to known amounts of cash to be cash equivalents. Cash and cash equivalents comprise cash, and cash on deposit with banks, and corporations.

1.6 Investments

Investments in non-readily marketable equity securities of other entities where the company is unable to exercise significant influence and for which there are no readily determinable fair values are recorded at cost. Declines in value judged to be other than temporary are included in earnings.

Investment securities designated as “available for sale” are carried at their fair value. Fair value is based on quoted market prices. Temporary unrealized gains and losses, net of the related tax effect are reported as a separate component of stockholders’ equity until realized. Realized gains and losses and declines in value judged to be other than temporary on available for sale securities are included in earnings.

The cost of securities sold is based on the specific identification method. Interest and dividend income are recognized when earned.

1.7 Property, plant and equipment

Property, plant and equipment are stated at cost, less accumulated depreciation. The company depreciates property, plant and equipment over their estimated useful lives using the straight-line method. The estimated useful lives of assets are as follows:

Buildings	15 years
Plant and equipment	5 years
Furniture and fixtures	5 years
Vehicles	5 years
Computer equipment	2-5 years

The cost of software purchased for internal use is accounted under SOP 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. Deposits paid towards the acquisition of these long lived assets outstanding at each balance sheet date and the cost of assets not put to use before such date are disclosed under “Capital work-in-progress”. Costs of improvements that substantially extend the useful life of particular assets are capitalized. Repairs and maintenance cost are charged to earnings when incurred. The cost and related accumulated depreciation are removed from the consolidated financial statements upon sale or disposition of the asset.

6

The company evaluates the recoverability of these assets whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying value of the assets exceeds the fair value of the assets. Assets to be disposed are reported at the lower of the carrying value or the fair value less the cost to sell.

1.8 Business combinations

Business combinations have been accounted using the purchase method under the provisions of Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standard (SFAS) No. 141, Business Combinations. Cash and amounts of consideration that are determinable at the date of acquisition are included in determining the cost of the acquired business.

1.9 Goodwill

Goodwill represents the cost of the acquired businesses in excess of the fair value of identifiable tangible and intangible net assets purchased. Goodwill is tested for impairment on an annual basis, relying on a number of factors including operating results, business plans and future cash flows. Recoverability of goodwill is evaluated using a two-step process. The first step involves a comparison of the fair value of a reporting unit with its carrying value. If the carrying amount of the reporting unit exceeds its fair value, the second step of the process involves a comparison of the fair value and carrying value of the goodwill of that reporting unit. If the carrying value of the goodwill of a reporting unit exceeds the fair value of that goodwill, an impairment loss is recognized in an amount equal to the excess. Goodwill of a reporting unit shall be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount.

1.10 Intangible assets

Intangible assets are amortized over their respective individual estimated useful lives on a straight-line basis. The estimated useful life of an identifiable intangible asset is based on a number of factors including the effects of obsolescence, demand, competition, and other economic factors (such as the stability of the industry, and known technological advances), and the level of maintenance expenditures required to obtain the expected future cash flows from the asset.

Intangible assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying value of the assets exceeds the fair value of the assets.

1.11 Research and development

Research and development costs are expensed as incurred. Software product development costs are expensed as incurred until technological feasibility is achieved. Research and development costs and software development costs incurred under contractual arrangements with customers are accounted as cost of revenues.

1.12 Foreign currency

The functional currency of the company is the Indian rupee (Rs.). The functional currency for Infosys Australia, Infosys China and Infosys Consulting is the respective local currency. The consolidated financial statements are reported in U.S. dollars. The translation of Rs. to U.S. dollars is performed for balance sheet accounts using the exchange rate in effect at the balance sheet date and for revenue, expense and cash-flow items using a monthly average exchange rate for the respective periods. The gains or losses resulting from such translation are included in “Other comprehensive income”, a separate component of stockholders’ equity. The translation of the financial statements of foreign subsidiaries from the local currency to the functional currency of the company is also performed on the same basis.

Foreign-currency denominated assets and liabilities are translated into the functional currency at exchange rates in effect at the balance sheet date. The gains or losses resulting from such translation are included in earnings. Transaction gains or losses realized upon settlement of foreign currency transactions are included in determining net income for the period in which the transaction is settled. Revenue, expense and cash-flow items denominated in foreign currencies are translated into the functional currency using the exchange rate in effect on the date of the transaction.

7

1.13 Earnings per share

Basic earnings per share is computed by dividing net income for the period by the weighted average number of equity shares outstanding during the period. Diluted earnings per share is computed by dividing net income by the diluted weighted average number of equity shares outstanding during the period. The dilutive effect of convertible securities is reflected in diluted earnings per share by application of the if-converted method. Diluted earnings per share reflects the potential dilution from equity shares issuable through employee stock options and preferred stock of subsidiary.

If the number of common shares outstanding increases as a result of a stock dividend or stock split or decreases as a result of a reverse stock split, the computations of basic and diluted EPS is adjusted retroactively for all periods presented to reflect that change in capital structure. If such changes occur after the close of the reporting period but before issuance of the financial statements, the per-share computations for that period and any prior-period financial statements presented is based on the new number of shares.

1.14 Income taxes

Income taxes are accounted for using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities, and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of changes in tax rates on deferred tax assets and liabilities is recognized as income in the period that includes the enactment date. The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance for any tax benefits of which future realization is not more likely than not. Changes in valuation allowance from period to period are reflected in the income statement of the period of change. Deferred taxes are not provided on the undistributed earnings of subsidiaries outside India where it is expected that the earnings of the foreign subsidiary will be permanently reinvested. Tax benefits earned on exercise of employee stock options in excess of compensation charged to earnings are credited to additional paid in capital. The income tax provision for the interim period is based on the best estimate of the effective tax rate expected to be applicable for the full fiscal year.

1.15 Fair value of financial instruments

In determining the fair value of its financial instruments, the company uses a variety of methods and assumptions that are based on market conditions and risks existing at each balance sheet date. The methods used to determine fair value include discounted cash flow analysis and dealer quotes. All methods of assessing fair value result in general approximation of value, and such value may never actually be realized.

1.16 Concentration of risk

Financial instruments that potentially subject the company to concentrations of credit risk consist principally of cash equivalents, trade accounts receivable, investment securities and hedging instruments. By nature, all such financial instruments involve risk, including the credit risk of non-performance by counterparties. In management’s opinion, as of September 30, 2004 there was no significant risk of loss in the event of non-performance of the counterparties to these financial instruments, other than the amounts already provided for in the financial statements, if any. Exposure to credit risk is managed through credit approvals, establishing credit limits and monitoring procedures. The company’s cash resources are invested with corporations, financial institutions and banks with high investment grade credit ratings. Limitations are established by the company as to the maximum amount of cash that may be invested with any such single entity.

1.17 Derivative financial instruments

On April 1, 2001, the company adopted SFAS 133, Accounting for Derivative Instruments and Hedging Activities as amended, when the rules became effective for companies with fiscal years ending March 31. The company enters into foreign exchange forward contracts where the counter party is generally a bank. The company purchases foreign exchange forward contracts to mitigate the risk of changes in foreign exchange rates on accounts receivable and forecasted cash flows denominated in certain foreign currencies. Although these contracts constitute hedges from an economic perspective, they do not qualify for hedge accounting under SFAS 133, as amended. Any derivative that is either not designated a hedge, or is so designated but is ineffective per SFAS 133, is marked to market and recognized in earnings immediately.

8

1.18 Retirement benefits to employees

1.18.1 Gratuity

In accordance with the Payment of Gratuity Act, 1972, Infosys provides for gratuity, a defined benefit retirement plan (the Gratuity Plan) covering eligible employees. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee’s salary and the tenure of employment.

Liabilities with regard to the Gratuity Plan are determined by actuarial valuation. The company fully contributes all ascertained liabilities to the Infosys Technologies Limited Employees’ Gratuity Fund Trust (the Trust). In case of Progeon, contributions are made to the Progeon Employees Gratuity Fund Trust. Trustees administer contributions made to the Trust and contributions are invested in specific designated instruments as permitted by law and investments are also made in mutual funds that invest in the specific designated instruments.

1.18.2 Superannuation

Certain employees of Infosys are also participants in a defined contribution plan. The company makes monthly contributions under the superannuation plan (the Plan) to the Infosys Technologies Limited Employees Superannuation Fund Trust based on a specified percentage of each covered employee’s salary. The company has no further obligations to the Plan beyond its monthly contributions. Certain employees of Progeon are also eligible for superannuation benefit. Progeon makes monthly provisions under the superannuation plan based on a specified percentage of each covered employee’s salary. Progeon has no further obligations to the superannuation plan beyond its monthly provisions which are periodically contributed to a trust fund, the corpus of which is invested with the Life Insurance Corporation of India.

1.18.3 Provident fund

Eligible employees of Infosys receive benefits from a provident fund, which is a defined contribution plan. Both the employee and the company make monthly contributions to the provident fund plan equal to a specified percentage of the covered employee’s salary. The company contributes a part of the contributions to the Infosys Technologies Limited Employees’ Provident Fund Trust. The remaining portion is contributed to the Government administered provident fund.

In respect of Progeon, eligible employees receive benefits from a provident fund, which is a defined contribution plan. Both the employee and Progeon make monthly contributions to this provident fund plan equal to a specified percentage of the covered employee’s salary. Amounts collected under the provident fund plan are deposited in a government administered provident fund.

1.19 Stock-based compensation

The company applies the intrinsic value-based method of accounting prescribed by Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations including FASB Interpretation No. 44, Accounting for Certain Transactions involving Stock Compensation an interpretation of APB Opinion No. 25, issued in March 2000, to account for its fixed stock option plans. Under this method, compensation expense is recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. SFAS 123, Accounting for Stock-Based Compensation, established accounting and disclosure requirements using a fair value-based method of accounting for stock-based employee compensation plans. As allowed by SFAS 123, the Company has elected to continue to apply the intrinsic value-based method of accounting described above, and has adopted the disclosure requirements of SFAS 148, Accounting for Stock-Based Compensation – Transition and Disclosure, an amendment of FASB Statement No. 123. All stock options issued to date have been accounted as a fixed stock option plan.

9

The following table illustrates the effect on net income and earnings per share if the company had applied the fair value recognition provisions of SFAS Statement No. 123, Accounting for Stock-Based Compensation, to stock-based employee compensation.

	(Dollars in millions except share and per share data )
	Six months ended September 30
	2003			2004
Net income, as reported	$	123		$	180
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects		2			—
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(29	)		(16	)
Pro forma net income	$	96		$	164
Earnings per share: (See Note 2.9)
Basic – as reported	$	0.47		$	0.68
Basic – pro forma	$	0.36		$	0.62
Diluted – as reported	$	0.46		$	0.66
Diluted – pro forma	$	0.36		$	0.61

The fair value of each option is estimated on the date of grant using the Black-Scholes model with the following assumptions:

	Six months ended September 30
	2003			2004
Dividend yield %		0.2	%		—
Expected life	1-5 years				—
Risk free interest rate		5.2%-5.7	%		—
Volatility		60-75	%		—

There have been no grants of stock options by Infosys during the six months ended September 30, 2004.

1.20 Dividends

Final dividends on common stock are recorded as a liability on the date of declaration by the stockholders and interim dividends are recorded as a liability on the date of declaration by the board of directors.

1.21 Reclassifications

Certain reclassifications have been made to conform prior period data to the current presentations.

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2	Notes to the consolidated financial statements
2.1	Trade accounts receivable

Trade accounts receivable as of March 31, 2004 and September 30, 2004, net of allowance for doubtful accounts of $3 million and $4 million respectively, amounted to $150 million and $202 million. The age profile of trade accounts receivable, net of allowances is given below.

	In %
	As of
	March 31, 2004		September 30, 2004
Period (in days)
0 – 30		69.7		76.4
31 – 60		21.6		11.2
61 – 90		4.7		7.6
More than 90		4.0		4.8
		100.0		100.0

2.2 Related parties

The company provides loans to eligible employees in accordance with policy. No loans have been made to employees in connection with equity issues. The employee loans are repayable over fixed periods ranging from 1 to 100 months. The annual rates of interest at which the loans have been made to employees vary between 0% through 4%. Loans aggregating $27 million and $25 million were outstanding as of March 31, 2004 and September 30, 2004.

The required repayments of employee loans outstanding as of September 30, 2004 are as detailed below.

	(Dollars in millions)
Year ending September 30,	Repayment
2005	$	13
2006		3
2007		2
2008		3
2009		1
Thereafter		3
	$	25

The estimated fair values of related party receivables amounted to $24 million and $21 million as of March 31, 2004 and September 30, 2004 respectively. These amounts have been determined using available market information and appropriate valuation methodologies. Considerable judgment is required to develop these estimates of fair value. Consequently, these estimates are not necessarily indicative of the amounts that the company could realize in the market.

2.3 Other income

Other income consists of the following:

	(Dollars in millions)
	Six months ended September 30
	2003			2004
Interest income	$	9		$	7
Income from mutual fund investments		1			4
Foreign exchange gain/ (loss), net		7			(5	)
Provision for investments		(1	)		—
	$	16		$	6

The provision for investments during the six months ended September 30, 2003 include write-downs to investments in CiDRA Corporation ($1.0 million) and Stratify Inc ($0.4 million). These write-downs were required due to the non-temporary impact of adverse market conditions on these entities’ business models and contemporary transactions on the securities of the entities which have been indicative of their current fair value.

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2.4 Income taxes

The provision for income taxes in the income statement comprises:

	(Dollars in millions)
	Six months ended September 30
	2003		2004
Current taxes
Domestic taxes	$	7	$	8
Foreign taxes		16		25
		23		33
Deferred taxes
Domestic taxes		1		(1	)
Foreign taxes		—		(1	)
		1		(2	)
Aggregate taxes	$	24	$	31

All components of the aggregate taxes of $24 million and $31 million for the six months ended September 30, 2003 and 2004 are allocated to the continuing operations of the company. Tax benefits of $ 4 million earned on exercise of employee stock options have been credited to additional paid in capital during the six months ended September 30, 2004.

The tax effects of significant temporary differences that resulted in deferred tax assets and liabilities, and a description of the financial statement items that created these differences are as follows:

	(Dollars in millions)
	As of
	March 31, 2004			September 30, 2004
Deferred tax assets:
Property, plant and equipment	$	6		$	7
Allowances on trade accounts receivable		1			1
Investments		3			3
Accrual for compensated absences		1			1
Others		—			1
		11			13
Less: Valuation allowance		(2	)		(3	)
		9			10
Deferred tax liabilities
Gains on foreign exchange forward contracts		(1	)		—
Intangible assets		(1	)		(1	)
		(2	)		—
Net deferred tax assets	$	7		$	9

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. Management considers the scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes that it is more likely than not the company will realize the benefits of those deductible differences, net of the existing valuation allowance at September 30, 2004. The valuation allowance relates to provision for doubtful debts and investments. The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carry forward period are reduced. The valuation allowance was $ 2 million as of March 31, 2004. The valuation allowance increased by $ 1 million during the six months ended September 30, 2004.

The provision for foreign taxes is due to income taxes payable overseas, principally in the United States of America. The company benefits from certain significant tax incentives provided to software firms under Indian tax laws. These incentives presently include: (i) an exemption from payment of Indian corporate income taxes for a period of ten consecutive years of operation of software development facilities designated as “Software Technology Parks” (the STP Tax Holiday); and (ii) a

12

tax deduction for profits derived from exporting computer software (the Export Deduction). The Government of India has amended the tax incentives available to companies set up in designated STPs. The period of the STP Tax Holiday available to such companies is restricted to ten consecutive years, beginning from the financial year when the unit started producing computer software or April 1, 1999, whichever is earlier.

2.5 Earnings per share

The following is a reconciliation of the equity shares used in the computation of basic and diluted earnings per equity share:

	Six months ended September 30
	2003		2004
Basic earnings per equity share – weighted average number of common shares outstanding excluding unallocated shares of ESOP		262,349,472		265,781,580
Effect of dilutive common equivalent shares – stock options outstanding		2,629,936		5,405,243
Diluted earnings per equity share – weighted average number of common shares and common equivalent shares outstanding		264,979,408		271,186,823

Options to purchase 1,072,399 shares under the 1998 Plan and 3,936,042 shares under the 1999 Plan were not considered for calculating diluted earnings per share for the six months ended September 30, 2004 as their effect was anti-dilutive.

The computations of basic and diluted EPS has also been adjusted retroactively for all periods presented to reflect the change in capital structure. See Note 2.9

2.6 Derivative financial instruments

The company enters into foreign exchange forward contracts where the counter party is generally a bank. The company considers the risks of non-performance by the counter party as non-material. Infosys held foreign exchange forward contracts of $149 million and $188 million as of March 31, 2004 and September 30, 2004. The foreign exchange forward contracts mature between one to 12 months.

2.7 Segment reporting

SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, establishes standards for the way that public business enterprises report information about operating segments and related disclosures about products and services, geographic areas, and major customers. The company’s operations predominantly relate to providing IT solutions, delivered to customers located globally, across various industry segments. The Chief Operating Decision Maker 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, revenues represented along industry classes comprise the principal basis of segmental information set out in these financial statements. Secondary segmental reporting is performed on the basis of the geographical location of customers. The accounting principles consistently 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 summary of significant accounting policies.

Industry segments for the company are primarily financial services comprising enterprises providing banking, finance and insurance services, manufacturing enterprises, enterprises in the telecommunications (telecom) and retail industries, and others such as utilities, transportation and logistics companies. 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.

Revenue in relation to segments is categorized based on items that are individually identifiable to that segment, while expenditure is categorized in relation to the associated turnover of the segment. Allocated expenses of the geographic segments include expenses incurred for rendering services from the company’s offshore software development centers and on-site expenses. Certain expenses such as depreciation, which form a significant component of total expenses, are not specifically allocable to specific segments as the underlying services 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 only against the total income of the company.

Fixed assets used in the company’s business are not identified to any of the reportable segments, as these are used interchangeably between segments. Management believes that it is currently not practicable to provide segment disclosures relating to total assets and liabilities since a meaningful segregation of the available data is onerous.

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.

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2.7.1 Industry Segments

(Dollars in millions)

Six months ended September 30, 2003

	Financial
	services		Manufacturing		Telecom		Retail		Others		Total
Revenues	$	185	$	74	$	73	$	56	$	96	$	484
Identifiable operating expenses		78		32		29		21		39		199
Allocated expenses		50		19		20		14		25		128
Segmental operating income	$	57	$	23	$	24	$	21	$	32	$	157
Unallocable expenses												26
Operating income												131
Other income, net												16
Income before income taxes												147
Provision for income taxes												24
Net income											$	123

Six months ended September 30, 2004

	Financial
	services		Manufacturing		Telecom		Retail		Others		Total
Revenues	$	246	$	106	$	130	$	74	$	157	$	713
Identifiable operating expenses		106		46		56		29		65		302
Allocated expenses		67		24		31		17		42		181
Segmental operating income	$	73	$	36	$	43	$	28	$	50		230
Unallocable expenses												25
Operating income												205
Other income, net												6
Income before income taxes												211
Provision for income taxes												31
Net income											$	180

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2.7.2 Geographic segments

(Dollars in millions)

Six months ended September 30, 2003

	North						Rest of the
	America		Europe		India		World		Total
Revenues	$	360	$	86	$	9	$	29	$	484
Identifiable operating expenses		151		34		3		11		199
Allocated expenses		95		22		2		9		128
Segmental operating income	$	114	$	30	$	4	$	9		157
Unallocable expenses										26
Operating income										131
Other income, net										16
Income before income taxes										147
Provision for income taxes										24
Net income									$	123

Six months ended September 30, 2004

	North						Rest of the
	America		Europe		India		World		Total
Revenues	$	464	$	156	$	12	$	81	$	713
Identifiable operating expenses		199		63		3		37		302
Allocated expenses		113		36		3		30		182
Segmental operating income	$	152	$	57	$	6	$	14		229
Unallocable expenses										24
Operating income										205
Other income, net										6
Income before income taxes										211
Provision for income taxes										31
Net income									$	180

2.7.3 Significant clients

No client individually accounted for more than 10% of the revenues in the six months ended September 30, 2003 and 2004.

2.8 Litigation

The company is subject to legal proceedings and claims, which have arisen, in the ordinary course of its business. Legal actions, when ultimately concluded and determined, will not, in the opinion of management, have a material effect on the results of operations or the financial position of the company.

In the year ended March 31, 2004, Ms. Jennifer Griffith, a former employee, filed a lawsuit against the company and its former director, Mr. Phaneesh Murthy. The lawsuit was served on the company during the quarter ended December 31, 2003. The trial of the lawsuit is scheduled shortly. Based on its present knowledge of facts, management estimates that the lawsuit will not have material impact on the result of operation or financial position of the company.

2.9 Stock split

On June 12, 2004, the members of the company approved a 3:1 bonus issue on the equity shares of the company. The bonus issue has the nature of a stock split effected in the form of a stock dividend with 3 additional shares being issued for every share held. Bonus shares have been allotted to shareholders on July 3, 2004. The computations of basic and diluted EPS has been adjusted retroactively for all periods presented to reflect the change in capital structure. All references in these financial statements to number of shares, per share amounts and market prices of equity shares are retroactively restated to reflect stock splits made.

15

EX-99.11

Exhibit 99.11

CONSOLIDATED FINANCIAL STATEMENTS OF INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES

in Rs. crore

Consolidated Balance Sheet as at	Schedule		September 30, 2004		September 30, 2003		March 31, 2004
SOURCES OF FUNDS
SHAREHOLDERS’ FUNDS
Share capital		1		133.94		33.13		33.32
Reserves and surplus		2		3,921.45		3,300.93		3,216.26
				4,055.39		3,334.06		3,249.58
MINORITY INTERESTS				—		—		—
PREFERENCE SHARES ISSUED BY SUBSIDIARY		3		93.51		49.00		93.56
				4,148.90		3,383.06		3,343.14
APPLICATIONS OF FUNDS
FIXED ASSETS		4
Original cost				1,893.51		1,423.85		1,633.65
Less: Depreciation and amortization				898.64		686.63		809.84
Net book value				994.87		737.22		823.81
Add: Capital work-in-progress				254.23		65.63		208.05
				1,249.10		802.85		1,031.86
INVESTMENTS		5		966.02		464.74		945.45
DEFERRED TAX ASSETS		6		44.50		33.87		39.97
CURRENT ASSETS, LOANS AND ADVANCES
Sundry debtors		7		926.32		592.59		651.45
Cash and bank balances		8		1,325.61		1,387.26		1,721.51
Loans and advances		9		851.80		822.74		721.05
				3,103.73		2,802.59		3,094.01
LESS: CURRENT LIABILITIES AND PROVISIONS
Current liabilities		10		613.80		376.30		580.93
Provisions		11		600.65		344.69		1,187.22
NET CURRENT ASSETS				1,889.28		2,081.60		1,325.86
				4,148.90		3,383.06		3,343.14
SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS		23

The schedules referred to above form an integral part of the consolidated balance sheet.

As per our report attached

for BSR & Co.
(formerly Bharat S Raut & Co.)
Chartered Accountants

Subramanian Suresh	N. R. Narayana Murthy	Nandan M. Nilekani	S. Gopalakrishnan	Deepak M. Satwalekar
Partner Membership No. 83673	Chairman and Chief Mentor	Chief Executive Officer, President and Managing Director	Chief Operating Officer and Deputy Managing Director	Director
	Marti G. Subrahmanyam	Omkar Goswami	Larry Pressler	Rama Bijapurkar
	Director	Director	Director	Director
	Claude Smadja	Sridar A. Iyengar	K. Dinesh	S. D. Shibulal
	Director	Director	Director	Director
	T. V. Mohandas Pai	Srinath Batni	V. Balakrishnan
Bangalore October 12, 2004	Director and Chief Financial Officer	Director	Company Secretary and Senior Vice President - Finance

CONSOLIDATED FINANCIAL STATEMENTS OF INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES

in Rs. Crore, except per share data

			Quarter ended September 30,				Half year ended September 30,				Year ended March 31,
Consolidated Profit and Loss Account for the	Schedule		2004		2003		2004		2003		2004
INCOME
SOFTWARE SERVICES, PRODUCTS AND BUSINESS PROCESS MANAGEMENT
Overseas				1,719.26		1,133.06		3,212.71		2,204.43		4,786.72
Domestic				30.07		18.74		54.00		42.07		66.23
				1,749.33		1,151.80		3,266.71		2,246.50		4,852.95
SOFTWARE DEVELOPMENT AND BUSINESS PROCESS MANAGEMENT EXPENSES		12		926.66		595.28		1,731.88		1,174.87		2,538.67
GROSS PROFIT				822.67		556.52		1,534.83		1,071.63		2,314.28
SELLING AND MARKETING EXPENSES		13		122.27		82.69		227.47		164.34		350.90
GENERAL AND ADMINISTRATION EXPENSES		14		139.37		92.37		257.04		175.35		369.19
				261.64		175.06		484.51		339.69		720.09
OPERATING PROFIT BEFORE INTEREST, DEPRECIATION & AMORTIZATION AND MINORITY INTEREST				561.03		381.46		1,050.32		731.94		1,594.19
INTEREST				—		—		—		—		—
DEPRECIATION AND AMORTIZATION				60.63		63.42		113.20		108.56		236.73
OPERATING PROFIT AFTER INTEREST, DEPRECIATION & AMORTIZATION AND MINORITY INTERESTS				500.40		318.04		937.12		623.38		1,357.46
OTHER INCOME		15		29.60		43.16		45.31		75.10		123.38
PROVISION FOR INVESTMENTS				0.07		0.22		0.06		6.59		9.67
NET PROFIT BEFORE TAX AND MINORITY INTERESTS				529.93		360.98		982.37		691.89		1,471.17
PROVISION FOR TAXATION		16		82.56		60.00		146.67		112.00		227.54
NET PROFIT BEFORE MINORITY INTERESTS				447.37		300.98		835.70		579.89		1,243.63
MINORITY INTERESTS				—		—		—		—		—
NET PROFIT AFTER TAX AND MINORITY INTERESTS				447.37		300.98		835.70		579.89		1,243.63
Balance brought forward				456.39		278.91		70.67		—		—
Less: Residual dividend paid for fiscal 2004				—		—		2.31		—		—
Dividend tax on the above				1.97		—		2.27		—		—
				454.42		278.91		66.09		—		—
AMOUNT AVAILABLE FOR APPROPRIATION				901.79		579.89		901.79		579.89		1,243.63
DIVIDEND
Interim				133.93		96.09		133.93		96.09		96.09
Final				—		—		—		—		99.96
One-time special dividend				—		—		—		—		666.41
Total dividend				133.93		96.09		133.93		96.09		862.46
Dividend tax				17.50		12.31		17.50		12.31		110.50
Amount transferred — general reserve				—		—		—		—		200.00
Balance in Profit and Loss account				750.36		471.49		750.36		471.49		70.67
				901.79		579.89		901.79		579.89		1,243.63
EARNINGS PER SHARE *
Equity shares of par value Rs. 5/- each
Basic				16.71		11.36		31.25		21.88		46.85
Diluted				16.34		11.26		30.64		21.75		46.27
Number of shares used in computing earnings per share
Basic				26,76,76,465		26,50,28,112		26,74,06,246		26,50,04,404		26,54,47,776
Diluted				27,37,76,678		26,72,97,616		27,27,68,201		26,66,04,340		26,87,87,016
SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS		23

* refer to note 23.3.21

The schedules referred to above form an integral part of the consolidated profit and loss account.

As per our report attached

for BSR & Co.
(formerly Bharat S Raut & Co.)
Chartered Accountants

Subramanian Suresh	N. R. Narayana Murthy	Nandan M. Nilekani	S. Gopalakrishnan	Deepak M. Satwalekar
Partner Membership No. 83673	Chairman and Chief Mentor	Chief Executive Officer, President and Managing Director	Chief Operating Officer and Deputy Managing Director	Director
	Marti G. Subrahmanyam	Omkar Goswami	Larry Pressler	Rama Bijapurkar
	Director	Director	Director	Director
	Claude Smadja	Sridar A. Iyengar	K. Dinesh	S. D. Shibulal
	Director	Director	Director	Director
	T. V. Mohandas Pai	Srinath Batni	V. Balakrishnan
Bangalore October 12, 2004	Director and Chief Financial Officer	Director	Company Secretary and Senior Vice President – Finance

CONSOLIDATED FINANCIAL STATEMENTS OF INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES

in Rs. crore

			Quarter ended September 30,						Half year ended September 30,						Year ended March 31,
Consolidated Cash Flow Statement for the	Schedule		2004			2003			2004			2003			2004
CASH FLOWS FROM OPERATING ACTIVITIES
Net profit before tax				529.93			360.98			982.37			691.89			1,471.17
Adjustments to reconcile net profit before tax to cash provided by operating activities
(Profit)/Loss on sale of fixed assets				(0.05	)		—			(0.12	)		0.01			0.41
Depreciation and amortization				60.63			63.42			113.20			108.56			236.73
Interest and dividend income				(22.92	)		(23.91	)		(52.28	)		(47.22	)		(102.23	)
Provisions for investments				0.07			0.22			0.06			6.59			9.67
Effect of exchange differences on translation of foreign currency cash and cash equivalents				(1.86	)		1.59			(9.01	)		3.17			4.91
Changes in current assets and liabilities
Sundry debtors				(89.69	)		(27.09	)		(274.87	)		(73.94	)		(132.80	)
Loans and advances		17		(25.68	)		4.03			(60.30	)		(5.44	)		(17.67	)
Current liabilities and provisions		18		107.67			18.99			51.24			56.89			262.20
Income taxes paid during the period/ year		19		(96.94	)		(49.33	)		(108.83	)		(60.51	)		(108.60	)
NET CASH GENERATED BY OPERATING ACTIVITIES				461.16			348.90			641.46			680.00			1,623.79
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of fixed assets and change in capital work-in-progress		20		(176.07	)		(72.63	)		(330.53	)		(133.76	)		(425.86	)
Acquisition of Expert Information Systems Pty. Limited, Australia				—			—			—			—			(66.68	)
Proceeds on disposal of fixed assets				0.14			(0.01	)		0.21			0.23			1.43
(Investments) in / disposal of securities		21		(112.11	)		(349.83	)		(20.63	)		(450.38	)		(934.17	)
Interest and dividend income				22.92			23.91			52.28			47.22			102.23
NET CASH USED IN INVESTING ACTIVITIES				(265.12	)		(398.56	)		(298.67	)		(536.69	)		(1,323.05	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issue of preference share capital				0.01			—			(0.05	)		—			44.56
Proceeds from issuance of share capital on exercise of stock options (refer note 23.3.22.b)				40.81			4.02			124.74			5.08			122.27
Dividends paid during the period/ year, including dividend tax				(1.97	)		—			(869.14	)		(108.35	)		(216.75	)
NET CASH USED IN FINANCING ACTIVITIES				38.85			4.02			(744.45	)		(103.27	)		(49.92	)
Effect of exchange differences on translation of foreign currency cash and cash equivalents				3.12			(1.59	)		10.39			(3.17	)		(5.76	)
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS				238.01			(47.23	)		(391.27	)		36.87			245.06
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD/YEAR				1,300.08			1,768.40			1,929.36			1,684.30			1,684.30
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD/ YEAR		22		1,538.09			1,721.17			1,538.09			1,721.17			1,929.36
SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS		23

The schedules referred to above form an integral part of the consolidated cash flow statement.

As per our report attached

for BSR & Co.
(formerly Bharat S Raut & Co.)
Chartered Accountants

Subramanian Suresh	N. R. Narayana Murthy	Nandan M. Nilekani	S. Gopalakrishnan	Deepak M. Satwalekar
Partner Membership No. 83673	Chairman and Chief Mentor	Chief Executive Officer, President and Managing Director	Chief Operating Officer and Deputy Managing Director	Director
	Marti G. Subrahmanyam	Omkar Goswami	Larry Pressler	Rama Bijapurkar
	Director	Director	Director	Director
	Claude Smadja	Sridar A. Iyengar	K. Dinesh	S. D. Shibulal
	Director	Director	Director	Director
	T. V. Mohandas Pai	Srinath Batni	V. Balakrishnan
Bangalore October 12, 2004	Director and Chief Financial Officer	Director	Company Secretary and Senior Vice President – Finance

CONSOLIDATED FINANCIAL STATEMENTS OF INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES

in Rs. crore

Schedules to the Consolidated Balance Sheet as at	September 30, 2004		September 30, 2003		March 31, 2004
1 SHARE CAPITAL
Authorized
Equity shares, Rs. 5/- par value 30,00,00,000 (10,00,00,000; 10,00,00,000) equity shares		150.00		50.00		50.00
Issued, Subscribed and Paid Up
Equity shares, Rs. 5/- par value* 26,78,60,670 (6,62,68,972; 6,66,41,056) equity shares fully paid up		133.94		33.13		33.32
[Of the above, 25,84,92,302 (5,78,88,200.; 5,78,88,200) equity shares, fully paid up have been issued as bonus shares by capitalization of the general reserve]
		133.94		33.13		33.32
Forfeited shares amounted to Rs. 1,500/- (Rs. 1,500/-; Rs. 1,500/-)
* For details of options in respect of equity shares, refer to note 23.3.9
* Refer to note 23.3.21
2 RESERVES AND SURPLUS
Capital reserve		5.94		5.94		5.94
Share premium account
As at April 1,		460.90		338.83		338.83
Add: Received on exercise of stock options issued to employees		124.42		5.07		122.07
		585.32		343.90		460.90
Foreign currency translation adjustment		0.53		—		(0.85	)
General reserve
As at April 1,		2,679.60		2,479.60		2,479.60
Less: capitalized for issue of bonus shares		100.30
Add: Transfer from the profit and loss account		—		—		200.00
		2,579.30		2,479.60		2,679.60
Balance in profit and loss account		750.36		471.49		70.67
		3,921.45		3,300.93		3,216.26
3 PREFERENCE SHARES ISSUED BY SUBSIDIARY
Authorized
0.0005% Cumulative convertible preference shares, Rs. 100/- par value 87,50,000 (43,75,000, 87,50,000) preference shares		87.50		43.75		87.50
Issued, Subscribed and Paid Up
0.0005% Cumulative convertible preference shares, Rs. 100/- par value 87,50,000 (43,75,000 , 87,50,000) preference shares fully paid up*		87.50		43.75		87.50
Premium received on issue of preference shares		6.01		5.25		6.06
		93.51		49.00		93.56
* for details of the terms relating to the preference shares, refer to note 23.3.19

CONSOLIDATED FINANCIAL STATEMENTS OF INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES

Schedules to the Consolidated Balance Sheet

4 FIXED ASSETS in Rs. crore

	Original cost									Depreciation and amortization
	Cost as at		Additions during		Deletions during			Cost as at		As at		For the		Deductions for			As at
Particulars	April 1, 2004		the period/ year		the period/ year			September 30, 2004		April 1, 2004		period/ year		the period/ year			September 30, 2004
Goodwill		40.52		—		—			40.52		—		—		—			—
Land: free-hold		20.05		0.15		—			20.20		—		—		—			—
leasehold		70.20		17.98		—			88.18		—		0.31		—			0.31
Buildings		459.61		99.05		—			558.66		80.47		16.37		—			96.84
Plant and machinery		283.35		41.17		6.14	**		318.38		165.27		24.17		6.10	**		183.34
Computer equipment		461.84		81.28		10.77	**		532.35		370.37		49.51		10.77	**		409.11
Furniture and fixtures		252.87		43.06		7.58	**		288.35		151.12		22.66		7.53	**		166.25
Leasehold improvements		2.64		1.50		—			4.14		0.20		0.14		—			0.34
Vehicles		0.43		0.16		—			0.59		0.27		0.04		—			0.31
Intangible assets
Intellectual property rights		42.14		—		—			42.14		42.14		—		—			42.14
		1,633.65		284.35		24.49			1,893.51		809.84		113.20		24.40			898.64
Previous period		1,279.04		145.52		0.71			1,423.85		578.54		108.56		0.48			686.63
Previous year		1,279.04		361.88		7.27			1,633.65		578.54		236.73		5.43			809.84

[Additional columns below]

[Continued from above table, first column(s) repeated]

in Rs. crore

	Net book value
	As at		As at		As at
Particulars	September 30, 2004		September 30, 2003		March 31, 2004
Goodwill		40.52		—		40.52
Land: free-hold		20.20		15.87		20.05
leasehold		87.87		32.74		70.20
Buildings		461.82		364.31		379.14
Plant and machinery		135.04		125.16		118.08
Computer equipment		123.24		74.97		91.47
Furniture and fixtures		122.10		112.04		101.75
Leasehold improvements		3.80		—		2.44
Vehicles		0.28		0.11		0.16
Intangible assets
Intellectual property rights		—		12.02		—
		994.87		737.22		823.81
Previous period
Previous year

Note: Buildings include Rs. 250/- being the value of 5 shares of Rs. 50/- each in Mittal Towers Premises Co-operative Society Limited.

** amount includes the retiral of assets which are not in active use with original cost of Rs. 23.22 and accumulated depreciation of Rs. 23.17

CONSOLIDATED FINANCIAL STATEMENTS OF INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES

in Rs. crore

Schedules to the Consolidated Balance Sheet as at	September 30, 2004		September 30, 2003		March 31, 2004
5 INVESTMENTS
Trade (unquoted) – at cost
Long- term investments		30.01		51.21		30.01
Less: Provision for investments		27.97		36.28		27.97
		2.04		14.93		2.04
Non-trade (unquoted), at the lower of cost and fair value, current investments
Liquid mutual funds		963.98		449.81		943.41
		966.02		464.74		945.45
Aggregate of unquoted investments - carrying value / cost		966.02		464.74		945.45
6 DEFERRED TAX ASSETS
Fixed assets		31.14		23.05		27.13
Investments		3.00		8.20		6.60
Sundry debtors		2.78		2.62		2.14
Leave provisions and others		7.58		—		4.10
		44.50		33.87		39.97
7 SUNDRY DEBTORS
Debts outstanding for a period exceeding six months
Unsecured
considered good		—		—		—
considered doubtful		12.23		14.16		9.07
Other debts
Unsecured
considered good*		926.32		592.59		651.45
considered doubtful		5.84		4.79		4.29
		944.39		611.54		664.81
Less: Provision for doubtful debts		18.07		18.95		13.36
		926.32		592.59		651.45
* Includes dues from companies where directors are interested		1.95		1.42		0.16
8 CASH AND BANK BALANCES
Cash on hand		0.18		0.07		0.01
Balances with scheduled banks
In current accounts *		158.10		95.08		226.87
In deposit accounts in Indian Rupees		951.79		1,145.04		1,317.28
Balances with non-scheduled banks
In deposit accounts in foreign currency		17.97		10.49		13.86
In current accounts in foreign currency		197.57		136.58		163.49
		1,325.61		1,387.26		1,721.51
*includes balance in unclaimed dividend account		3.38		1.78		1.98
*includes balance in escrow account		—		0.81		0.04

CONSOLIDATED FINANCIAL STATEMENTS OF INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES

in Rs. crore

Schedules to the consolidated Balance Sheet as at	September 30, 2004		September 30, 2003		March 31, 2004
9 LOANS AND ADVANCES
Unsecured, considered good
Advances
prepaid expenses		35.15		28.41		37.95
for supply of goods and rendering of services		6.72		2.02		5.83
Others		12.48		12.82		3.65
		54.35		43.25		47.43
Unbilled revenues		134.39		85.58		103.09
Advance income tax		276.09		198.13		210.27
Loans and advances to employees *
housing and other loans		67.77		101.29		83.36
salary advances		40.74		26.79		36.37
Electricity and other deposits		14.12		12.91		9.50
Rental deposits		16.44		16.16		14.98
Deposits with financial institutions and body corporate		247.48		333.91		207.85
Deposits with government authorities		0.01		—		0.01
Other assets		0.41		4.72		8.19
		851.80		822.74		721.05
Unsecured, considered doubtful
Loans and advances to employees		0.23		0.54		0.09
		852.03		823.28		721.14
Less: Provision for doubtful loans and advances to employees		0.23		0.54		0.09
		851.80		822.74		721.05
* includes dues by non-director officers of the company		0.04		—		—
Maximum amounts due by non-director officers at any time during the year		0.04		0.06		0.06
10 CURRENT LIABILITIES
Sundry creditors
for capital goods		2.00		0.43		1.48
for goods and services		5.39		0.65		2.65
for accrued salaries and benefits
salaries		17.66		12.71		15.22
bonus and incentives		164.29		128.74		243.78
unavailed leave		54.06		29.42		51.82
for other liabilities
provision for expenses		99.46		59.50		63.77
retention monies		13.15		5.97		5.27
withholding and other taxes payable		59.41		24.81		44.46
for purchase of intellectual property rights		20.62		20.27		19.21
others		12.79		6.91		2.25
		448.83		289.41		449.91
Advances received from clients		39.11		13.92		65.19
Unearned revenue		102.49		71.19		63.85
Loss on forward exchange contracts		19.99		—		—
Unclaimed dividend		3.38		1.78		1.98
		613.80		376.30		580.93
11 PROVISIONS
Proposed dividend		133.93		96.09		766.37
Provision for
tax on dividend		17.50		12.31		98.19
income taxes		424.93		231.05		316.74
post-sales client support and warranties		23.92		4.67		5.13
retiral benefits		0.37		0.57		0.79
		600.65		344.69		1,187.22

CONSOLIDATED FINANCIAL STATEMENTS OF INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES

in Rs. crore

	Quarter ended September 30,					Half year ended September 30,					Year ended March 31,
Schedules to Consolidated Profit and Loss Account for the	2004		2003			2004		2003			2004
12 SOFTWARE DEVELOPMENT AND BUSINESS PROCESS MANAGEMENT EXPENSES
Salaries and bonus including overseas staff expenses		736.08		486.34			1,388.33		943.83			2,079.57
Staff welfare		4.60		2.93			8.21		6.14			13.49
Contribution to provident and other funds		19.85		13.34			36.16		24.28			51.63
Overseas travel expenses		66.47		43.54			130.00		86.75			174.00
Consumables		5.05		2.05			8.39		3.79			10.09
Cost of software packages
for own use		27.74		21.47			49.77		35.07			64.84
for service delivery to clients		6.11		2.48			9.65		12.34			16.12
Cost of technical sub-contractors		24.54		8.27			38.81		35.42			65.78
Computer maintenance		4.82		3.22			7.90		5.58			12.26
Communication expenses		13.81		9.98			26.51		19.48			42.58
Provision for post-sales client support and warranties		11.58		(0.32	)		18.79		(0.15	)		0.30
Traveling and conveyance		2.45		0.51			3.80		0.87			3.44
Rent		2.51		1.47			4.19		1.47			4.57
Other miscellaneous expenses		1.05		—			1.37		—			—
		926.66		595.28			1,731.88		1,174.87			2,538.67
13 SELLING AND MARKETING EXPENSES
Salaries and bonus including overseas staff expenses		71.48		50.81			137.09		101.95			216.47
Staff welfare		0.11		0.17			0.28		0.25			0.75
Contribution to provident and other funds		0.37		0.81			0.76		1.24			1.82
Overseas travel expenses		12.96		9.92			26.51		19.22			42.57
Consumables		0.08		0.03			0.21		0.08			0.20
Cost of software packages
for own use		—		—			0.01		0.01			0.18
Computer maintenance		0.01		0.01			0.12		0.02			0.04
Traveling and conveyance		4.94		0.29			6.32		0.62			2.29
Rent		2.56		3.95			5.64		6.90			15.19
Telephone charges		1.67		1.20			2.84		2.29			5.16
Professional charges		5.96		0.78			9.09		2.78			6.11
Printing and stationery		0.35		0.25			0.65		0.52			1.05
Advertisements		0.66		0.12			0.87		0.24			0.64
Brand building		12.67		9.41			18.44		15.15			34.23
Office maintenance		0.28		0.07			0.71		0.11			0.88
Power and fuel		—		0.01			—		0.03			0.04
Insurance charges		0.15		0.01			0.24		0.04			0.11
Rates and taxes		—		—			0.03		0.03			0.08
Bank charges and commission		—		—			—		0.01			0.02
Commission charges		6.73		0.64			8.49		2.91			7.27
Marketing expenses		0.27		1.83			6.57		2.69			6.45
Sales promotion expenses		0.34		0.09			0.58		0.20			0.72
Miscellaneous expenses		0.68		2.29			2.02		7.05			8.63
		122.27		82.69			227.47		164.34			350.90

CONSOLIDATED FINANCIAL STATEMENTS OF INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES

in Rs. crore

		Quarter ended					Half year ended					Year ended
		September 30,					September 30,					March 31,
Schedules to Consolidated Profit and Loss Account for the		2004			2003		2004			2003		2004
14	GENERAL AND ADMINISTRATION EXPENSES
	Salaries and bonus including overseas staff expenses		29.28			18.57		55.20			36.32		81.93
	Staff welfare		0.17			0.03		0.31			0.04		0.28
	Contribution to provident and other funds		1.87			1.26		3.60			2.47		5.02
	Overseas travel expenses		2.72			2.28		4.81			3.99		7.07
	Traveling and conveyance		9.95			5.19		18.78			9.51		22.72
	Cost of software packages for own use		0.49			0.42		0.91			0.42		1.89
	Rent		6.08			3.66		10.44			10.77		19.38
	Telephone charges		12.70			7.63		22.90			14.96		30.25
	Professional charges		18.24			10.05		30.82			16.72		36.29
	Printing and stationery		2.85			1.10		4.76			3.47		6.11
	Advertisements		2.57			0.36		4.67			1.36		5.51
	Office maintenance		10.70			6.43		19.06			12.72		29.32
	Repairs to building		2.68			1.49		4.01			3.39		10.52
	Repairs to plant and machinery		1.54			1.51		3.11			2.60		4.85
	Power and fuel		10.46			7.55		20.08			14.97		30.14
	Recruitment and training		0.28			0.09		0.85			0.13		1.21
	Insurance charges		7.62			6.26		15.31			11.53		24.67
	Rates and taxes		2.38			1.01		4.95			2.21		5.62
	Donations		4.83			3.51		9.05			7.02		14.29
	Auditor’s remuneration
	statutory audit fees		0.22			0.10		0.42			0.18		0.63
	certification charges		—			—		—			—		0.10
	others		—			—		—			—		0.06
	out-of-pocket expenses		0.01			0.01		0.01			0.01		0.02
	Provision for bad and doubtful debts		5.26			10.73		11.58			14.02		15.99
	Provision for doubtful loans and advances		0.09			0.12		0.11			0.13		0.14
	Bank charges and commission		0.36			0.19		0.62			0.40		0.73
	Commission to non-whole time directors		0.39			0.39		0.78			0.78		1.49
	Postage and courier		1.45			0.71		2.92			1.95		3.98
	Books and periodicals		0.70			0.35		1.28			0.58		1.51
	Research grants		0.09			0.12		0.19			0.18		0.54
	Freight charges		0.14			0.15		0.37			0.30		0.84
	Professional membership and seminar participation fees		1.43			0.66		3.03			1.36		3.71
	Miscellaneous expenses		1.82			0.44		2.11			0.86		2.38
			139.37			92.37		257.04			175.35		369.19
15	OTHER INCOME
	Interest received on deposits with banks and others*		14.27			20.36		34.60			43.67		84.51
	Dividend received on investment in liquid mutual funds (non-trade unquoted)		8.65			3.55		17.68			3.55		17.72
	Miscellaneous income		0.25			0.25		0.51			1.32		1.13
	Exchange differences (refer to note 23.2)		6.43			19.00		(7.48	)		26.56		20.02
			29.60			43.16		45.31			75.10		123.38
	*Tax deducted at source		2.44			4.30		6.74			8.57		16.82
16	PROVISION FOR TAXATION
	Current period/ year
	Income taxes		82.57			55.53		151.07			108.14		228.54
	Deferred taxes		(0.01	)		4.47		(4.40	)		2.94		(1.11	)
			82.56			60.00		146.67			111.08		227.43
	Prior period/ years		—			—		—			0.92		0.11
			82.56			60.00		146.67			112.00		227.54

CONSOLIDATED FINANCIAL STATEMENTS OF INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES

in Rs. crore

		Quarter ended						Half year ended						Year ended
		September 30,						September 30,						March 31,
Schedules to Consolidated Cashflow Statements for the		2004			2003			2004			2003			2004
17	CHANGE IN LOANS AND ADVANCES
	As per the Balance Sheet		851.80			822.74			851.80			822.74			721.05
	Less: Deposits with financial institutions and body corporate, included in cash and cash equivalents (refer note 23.3.22.c)		(212.48	)		(333.91	)		(212.48	)		(333.91	)		(207.85	)
	Advance income taxes separately considered		(276.09	)		(198.13	)		(276.09	)		(198.13	)		(210.27	)
			363.23			290.70			363.23			290.70			302.93
	Less: Opening balance considered		(337.55	)		(294.73	)		(302.93	)		(285.26	)		(285.26	)
			25.68			(4.03	)		60.30			5.44			17.67
18	CHANGE IN CURRENT LIABILITIES AND PROVISIONS
	As per the Balance Sheet		1,214.45			720.99			1,214.45			720.99			1,768.15
	Add/ (Less): Provisions separately considered in the cash flow Statement
	Income taxes		(424.93	)		(231.05	)		(424.93	)		(231.05	)		(316.74	)
	Dividends		(133.93	)		(96.09	)		(133.93	)		(96.09	)		(766.37	)
	Dividend tax		(17.50	)		(12.31	)		(17.50	)		(12.31	)		(98.19	)
			638.09			381.54			638.09			381.54			586.85
	Less: Opening balance considered		(530.42	)		(362.55	)		(586.85	)		(324.65	)		(324.65	)
			107.67			18.99			51.24			56.89			262.20
19	INCOME TAXES PAID
	Charge as per the Profit and Loss Account		82.56			60.00			146.67			112.00			227.54
	Add: Increase in advance income taxes		75.27			34.31			65.82			(92.31	)		(80.17	)
	Increase / (Decrease) in deferred taxes		0.30			(4.47	)		4.53			(2.94	)		3.16
	Less: (Increase) / Decrease in income tax provision		(61.19	)		(40.51	)		(108.19	)		43.76			(41.93	)
			96.94			49.33			108.83			60.51			108.60
20	PURCHASE OF FIXED ASSETS AND CHANGE IN CAPITAL WORK-IN-PROGRESS
	As per the schedule 4 to Balance Sheet		206.69			52.45			284.35			145.52			361.88
	Less: Opening Capital work-in-progress		(284.85	)		(45.45	)		(208.05	)		(77.39	)		(77.39	)
	Acquisition of Expert Information Systems Pty. Limited, Australia		—			—			—			—			(66.68	)
	Add: Closing Capital work-in-progress		254.23			65.63			254.23			65.63			208.05
			176.07			72.63			330.53			133.76			425.86
21	INVESTMENTS IN / (DISPOSAL OF) SECURITIES*
	As per the Balance Sheet		966.02			464.74			966.02			464.74			945.45
	Add: Provisions on investments		0.07			0.22			0.06			6.59			9.67
			966.09			464.96			966.08			471.33			955.12
	Less: Opening balance considered		(853.98	)		(115.13	)		(945.45	)		(20.95	)		(20.95	)
			112.11			349.83			20.63			450.38			934.17
	* refer to note 23.3.14 for details of investments and redemptions
22	CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD / YEAR
	As per the Balance Sheet		1,325.61			1,387.26			1,325.61			1,387.26			1,721.51
	Add: Deposits with financial institutions and body corporate, included herein		212.48			333.91			212.48			333.91			207.85
			1,538.09			1,721.17			1,538.09			1,721.17			1,929.36

Schedules to the Consolidated Financial Statements for the quarter and half year ended September 30, 2004

23. Significant accounting policies and notes on accounts

Company overview

Infosys Technologies Limited (Infosys or the company) along with its majority owned and controlled subsidiary, Progeon Limited, India (Progeon), and wholly owned subsidiaries Infosys Technologies (Australia) Pty. Limited (Infosys Australia), Infosys Technologies (Shanghai) Co. Limited (Infosys China) and Infosys Consulting, Inc., USA (Infosys Consulting), is a leading global information technology services group of companies (“the Group”). The Group provides end-to-end business solutions that leverage technology thus enabling its clients to enhance business performance. The Group provides solutions that span the entire software life cycle encompassing consulting, design, development, re-engineering, maintenance, systems integration and package evaluation and implementation. In addition, the Group offers software products for the banking industry and business process management services.

23. 1 Significant accounting policies

23.1.1. Basis of preparation of financial statements

The accompanying financial statements are prepared in accordance with Indian Generally Accepted Accounting Principles (“GAAP”) under the historical cost convention on the accruals basis. GAAP comprises mandatory accounting standards issued by the Institute of Chartered Accountants of India (“ICAI”) and guidelines issued by the Securities and Exchange Board of India. Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.

Management evaluates all recently issued or revised accounting standards on an on-going basis. There are no accounting standards that although not mandatory for adoption as of the balance sheet date, have material impact on the financial statements.

The financial statements are prepared in accordance with the principles and procedures required for the preparation and presentation of consolidated financial statements as laid down under the accounting standards on Consolidated Financial Statements issued by the ICAI. The financial statements of the parent company, Infosys, Progeon, Infosys China, Infosys Australia and Infosys Consulting have been combined on a line-by-line basis by adding together book values of like items of assets, liabilities, income and expenses after eliminating intra-group balances and transactions and resulting unrealized gain/loss. The consolidated financial statements are prepared by applying uniform accounting policies in use at the Group. Minority interests have been excluded. Minority interests represent that part of the net profit or loss and net assets of subsidiaries that are not, directly or indirectly, owned or controlled by the company.

Goodwill has been recorded to the extent the cost of acquisition, comprising purchase consideration and transaction costs, exceeds the fair value of the net assets in the acquired company and will be tested for impairment on an annual basis. Exchange difference resulting from the difference due to translation of foreign currency assets and liabilities in subsidiaries is disclosed as foreign currency translation adjustment.

23.1.2. Use of estimates

The preparation of the financial statements in conformity with GAAP requires Management to make estimates and assumptions that affect the reported balances of assets and liabilities and disclosures relating to contingent assets and liabilities as at the date of the financial statements and reported amounts of income and expenses during the period. Examples of such estimates include provisions for doubtful debts, future obligations under employee retirement benefit plans, income taxes, post-sales customer support and the useful lives of fixed assets and intangible assets.

Management periodically assesses using external and internal sources whether there is an indication that an asset may be impaired. An impairment occurs where the carrying value exceeds the present value of future cash flows expected to arise from the continuing use of the asset and its eventual disposal. The impairment loss to be expensed is determined as the excess of the carrying amount over the higher of the asset’s net sales price or present value as determined above. Contingencies are recorded when it is probable that a liability will be incurred, and the amount can be reasonably estimated. Actual results could differ from those estimates.

23.1.3. Revenue recognition

Revenue from software development on fixed-price, fixed-time frame contracts where there is no uncertainty as to measurement or collectability of consideration is recognized as per the proportionate-completion method. On time-and-materials contracts, revenue is recognized as the related services are rendered. Annual Technical Services revenue and revenue from fixed-price maintenance contracts are recognized proportionately over the period in which services are rendered. Revenue from the sale of user licenses for software applications is recognized on transfer of the title in the user license, except in multiple element contracts, where revenue is recognized as per the proportionate-completion method.

Profit on sale of investments is recorded on transfer of title from the company and is determined as the difference between the sales price and the then carrying value of the investment. Interest is recognized using the time-proportion method, based on rates implicit in the transaction. Dividend income is recognized when the company’s right to receive dividend is established.

23.1.4. Expenditure

The cost of software purchased for use in the software development and services is charged to cost of revenues in the year of acquisition. Charges relating to non-cancelable, long-term operating leases are computed primarily on the basis of the lease rentals, payable as per the relevant lease agreements. Post-sales customer support costs are estimated by management, determined on the basis of past experience. The costs provided for are carried until expiry of the related warranty period. Provisions are made for all known losses and liabilities. Leave encashment liability is determined on the basis of an actuarial valuation.

23.1.5. Fixed assets, intangible assets and capital work-in-progress

Fixed assets are stated at cost, less accumulated depreciation. Direct costs are capitalized until fixed assets are ready for use. Capital work-in-progress comprises outstanding advances paid to acquire fixed assets and the cost of fixed assets that are not yet ready for their intended use at the balance sheet date. Intangible assets are recorded at the consideration paid for acquisition.

23.1.6. Depreciation and amortization

Depreciation on fixed assets is applied on the straight-line method based on useful lives of assets as estimated by the Management. Depreciation for assets purchased/sold during the period is proportionately charged. Individual low cost assets (acquired for less than Rs. 5,000/-) are entirely depreciated in the year of acquisition. Intangible assets are amortized over their respective individual estimated useful lives on a straight-line basis, commencing from the date the asset is available to the company for its use. Management estimates the useful lives for the various fixed assets as follows:

Buildings	15 years
Plant and machinery	5 years
Computer equipment	2-5 years
Furniture and fixtures	5 years
Vehicles	5 years
Intellectual property rights	1-2 years

23.1.7. Retirement benefits to employees

23.1.7.a. Gratuity

In accordance with the Payment of Gratuity Act, 1972, Infosys provides for gratuity, a defined benefit retirement plan (the “Gratuity Plan”) covering eligible employees at the company and Progeon. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee’s salary and the tenure of employment.

Liabilities with regard to the Gratuity Plan are determined by actuarial valuation as at the balance sheet date and as per gratuity regulations for the company and Progeon respectively. The company fully contributes all ascertained liabilities to the Infosys Technologies Limited Employees’ Gratuity Fund Trust (the “Trust”). Trustees administer contributions made to the Trust and contributions are invested in specific designated instruments, as permitted by law. Investments are also made in mutual funds that invest in the specific designated instruments.

23.1.7.b. Superannuation

Certain employees of Infosys are also participants of a defined contribution plan. The company makes monthly contributions under the superannuation plan (the “Plan”) to the Infosys Technologies Limited Employees’ Superannuation Fund Trust based on a specified percentage of each covered employee’s salary. The company has no further obligations to the Plan beyond its monthly contributions. Certain employees of Progeon are also eligible for superannuation benefit. Progeon makes monthly provisions under the superannuation plan based on a specified percentage of each covered employee’s salary. Progeon has no further obligations to the superannuation plan beyond its monthly provisions. Under the Plan, the aggregate contributions along with interest thereon are paid on the retirement, death, incapacitation or termination of an employee.

23.1.7.c. Provident fund

Eligible employees receive benefits from a provident fund, which is a defined contribution plan. Both the employee and the company make monthly contributions to the provident fund plan equal to a specified percentage of the covered employee’s salary. The company contributes a part of the contributions to the Infosys Technologies Limited Employees’ Provident Fund Trust. The remainders of the contributions are made to government administered provident fund. The company has no further obligations under the provident fund plan beyond its monthly contributions.

In respect of Progeon, eligible employees receive benefits from a provident fund, which is a defined contribution plan. Both the employee and Progeon make monthly contributions to this provident fund plan equal to a specified percentage of the covered employee’s salary. Amounts collected under the provident fund plan are deposited in a government administered provident fund. Progeon has no further obligations under the provident fund plan beyond its monthly contributions.

The aggregate contributions along with interest thereon are paid on the retirement, death, incapacitation or termination of an employee.

23.1.8. Research and development

Revenue expenditure incurred on research and development is expensed as incurred. Capital expenditure incurred on research and development is depreciated over the estimated useful lives of the related assets.

23.1.9. Foreign currency transactions

Revenue from overseas clients and collections deposited in foreign currency bank accounts are recorded at the exchange rate as of the date of the respective transactions. Expenditure in foreign currency is accounted at the exchange rate prevalent when such expenditure is incurred. Disbursements made out of foreign currency bank accounts are reported at a rate that approximates the actual monthly average rate. Exchange differences are recorded when the amount actually received on sales or actually paid when expenditure is incurred is converted into Indian Rupees. The exchange differences arising on foreign currency transactions are recognized as income or expense in the period in which they arise.

Fixed assets purchased at overseas offices are recorded at cost, based on the exchange rate as of the date of purchase. The charge for depreciation is determined as per the Group’s accounting policy.

Monetary current assets and monetary current liabilities denominated in foreign currency are translated at the exchange rate prevalent at the date of the balance sheet. The resulting difference is also recorded in the profit and loss account.

23.1.10. Forward contracts in foreign currencies

The Group uses forward exchange contracts to hedge its exposure to movements in foreign exchange rates. The use of these forward exchange contracts reduces the risk or cost to the group and the group does not use the forward exchange contracts for trading or speculation purposes.

The Group records the gain or loss on effective hedges in the foreign currency fluctuation reserve until the transactions are complete. On completion the gain or loss is transferred to the profit and loss account of that period. To designate a forward contract as an effective hedge, Management objectively evaluates and evidences with appropriate supporting documents at the inception of each contract whether the contract is effective in achieving offsetting cash flows attributable to the hedged risk. In the absence of an effective hedge, a gain or loss is recognized in the profit and loss account.

23.1.11. Income tax

Income taxes are computed using the tax effect accounting method, where taxes are accrued in the same period the related revenue and expenses arise. A provision is made for income tax annually based on the tax liability computed after considering tax allowances and exemptions. Provisions are recorded when it is estimated that a liability due to disallowances or other matters is probable.

The differences that result between the profit offered for income taxes and the profit as per the financial statements are identified and thereafter a deferred tax asset or deferred tax liability is recorded for timing differences, namely the differences that originate in one accounting period and reverse in another, based on the tax effect of the aggregate amount being considered. The tax effect is calculated on the accumulated timing differences at the end of an accounting period based on prevailing enacted or substantially enacted regulations. Deferred tax assets are recognized only if there is reasonable certainty that they will be realized and are reviewed for the appropriateness of their respective carrying values at each balance sheet date. The income tax provision for the interim period is made based on the best estimate of the annual average tax rate expected to be applicable for the full fiscal year.

23.1.12. Earnings per share

In determining earnings per share, the Group considers the net profit after tax and includes the post-tax effect of any extra-ordinary item. The number of shares used in computing basic earnings per share is the weighted average number of shares outstanding during the period. The number of shares used in computing diluted earnings per share comprises the weighted average shares considered for deriving basic earnings per share, and also the weighted average number of equity shares that could have been issued on the conversion of all dilutive potential equity shares. The diluted potential equity shares are adjusted for the proceeds receivable had the shares been actually issued at fair value (i.e. the average market value of the outstanding shares). Dilutive potential equity shares are deemed converted as of the beginning of the period, unless issued at a later date. The number of shares and potentially dilutive equity shares are adjusted for any stock splits and bonus shares issued effected prior to the approval of the financial statements by the Board of Directors

23.1.13. Investments

Trade investments are the investments made to enhance the Group’s business interests. Investments are either classified as current or long-term based on Management’s intention at the time of purchase. Current investments are carried at the lower of cost and fair value. Cost for overseas investments comprises the Indian Rupee value of the consideration paid for the investment. Long-term investments are carried at cost and provisions recorded to recognize any decline, other than temporary, in the carrying value of each investment.

23.1.14. Cash flow statement

Cash flows are reported using the indirect method, whereby net profit before tax is adjusted for the effects of transactions of a non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from regular revenue generating, investing and financing activities of the Group are segregated. Cash flows in foreign currencies are accounted at average monthly exchange rates that approximate the actual rates of exchange prevailing at the dates of the transactions.

23.2 Change in accounting policy

Accounting standard 11, “The effect of changes in foreign exchange rates”, was revised by the ICAI with effect from April 1, 2004 and prescribes accounting for forward exchange contracts based on whether these are entered into for hedging purposes or for trading /speculation purposes. Further, it has been recently clarified that the revised standard does not cover forward exchange contracts entered in to hedge the foreign currency risk of a firm commitment or a highly probable forecast transaction. Upto March 31, 2004, such segregation was not required and the difference between the forward rate and the exchange rate on the date of the transaction was recognized as income or expense over the life of the contract.

The Group has adopted the revised accounting standard effective April 1, 2004 to the extent applicable in respect of outstanding forward exchange contracts. The forward exchange contracts constitute hedges from an economic perspective, and the Group has decided to account for these forward exchange contracts based on their designation as ‘effective hedges’ or ‘not effective’. To designate a forward contract as an effective hedge, management objectively evaluates and evidences with appropriate supporting documentation at the inception of each forward contract, whether these forward contracts are effective in achieving offsetting cash flows attributable to the hedged risk or not. The gain or loss on effective hedges is recorded in the foreign currency fluctuation reserve until the hedged transactions occur and are then recognized in the profit and loss account. In the absence of an effective hedge, the gain or loss is recognized in the profit and loss account.

Gains and losses on forward exchange contracts are computed by multiplying the foreign currency amount of the forward exchange contract by the difference between the forward rate available at the reporting date for the remaining maturity of the contract and the contracted forward rate (or the forward rate last used to measure a gain or loss on that contract for an earlier period). The group also assesses on an ongoing basis at the end of each reporting period whether designated hedges are effective and prospectively reclassifies the hedge as necessary.

Consequent to the change in accounting policy, the profits for the quarter and half year ended September 30, 2004 are higher by Rs. 9.96 crore and lower by Rs. 24.91 crore respectively.

23.3 Notes on accounts

All amounts in the financial statements are presented in Rupees 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’s / year’s figures have been regrouped / reclassified, wherever necessary to conform to the current period’s presentation.

23.3.1 Aggregate expenses

The following are the aggregate amounts incurred on certain specific expenses:

	Quarter ended					Half year ended					Year ended
	September 30,					September 30,					March 31,
	2004		2003			2004		2003			2004
Salaries and bonus including overseas staff expenses		836.84		555.72			1,580.62		1,082.10			2,377.97
Contribution to provident and other funds		22.09		15.41			40.52		27.99			58.47
Staff welfare		4.88		3.13			8.80		6.43			14.52
Overseas travel expenses		82.15		55.74			161.32		109.96			223.64
Consumables		5.13		2.08			8.60		3.87			10.29
Cost of software packages
for own use		28.23		21.89			50.69		35.50			66.91
for service delivery to clients		6.11		2.48			9.65		12.34			16.12
Computer maintenance		4.83		3.23			8.02		5.60			12.30
Communication expenses		13.81		9.98			26.51		19.48			42.58
Cost of technical sub-contractors		24.54		8.27			38.81		35.42			65.78
Provision for post-sales client support and warranties		11.58		(0.32	)		18.79		(0.15	)		0.30
Traveling and conveyance		17.34		5.99			28.90		11.00			28.45
Rent		11.15		9.08			20.27		19.14			39.14
Telephone charges		14.37		8.83			25.74		17.25			35.41
Professional charges		24.20		10.83			39.91		19.50			42.40
Printing and stationery		3.20		1.35			5.41		3.99			7.16
Advertisements		3.23		0.48			5.54		1.60			6.15
Office maintenance		10.98		6.50			19.77		12.83			30.20
Repairs to building		2.68		1.49			4.01		3.39			10.52
Repairs to plant and machinery		1.54		1.51			3.11		2.60			4.85
Power and fuel		10.46		7.56			20.08		15.00			30.18
Recruitment and training		0.28		0.09			0.85		0.13			1.21
Brand building		12.67		9.41			18.44		15.15			34.23
Insurance charges		7.77		6.27			15.55		11.57			24.78
Rates and taxes		2.38		1.01			4.98		2.24			5.70
Commission charges		6.73		0.64			8.49		2.91			7.27
Donations		4.83		3.51			9.05		7.02			14.29
Auditor’s remuneration
statutory audit fees		0.22		0.10			0.42		0.18			0.63
certification charges		—		—			—		—			0.10
others		—		—			—		—			0.06
out-of-pocket expenses		0.01		0.01			0.01		0.01			0.02
Provision for bad and doubtful debts		5.26		10.73			11.58		14.02			15.99
Provision for doubtful loans and advances		0.09		0.12			0.11		0.13			0.14
Bank charges and commission		0.36		0.19			0.62		0.41			0.75
Commission to non-whole time directors		0.39		0.39			0.78		0.78			1.49
Postage and courier		1.45		0.71			2.92		1.95			3.98
Books and periodicals		0.70		0.35			1.28		0.58			1.51
Research grants		0.09		0.12			0.19		0.18			0.54
Freight charges		0.14		0.15			0.37		0.30			0.84
Professional membership and seminar participation fees		1.43		0.66			3.03		1.36			3.71
Marketing expenses		0.27		1.83			6.57		2.69			6.45
Sales promotion expenses		0.34		0.09			0.58		0.20			0.72
Miscellaneous expenses		3.55		2.73			5.50		7.91			11.01
		1,188.30		770.34			2,216.39		1,514.56			3,258.76

23.3.2. Capital commitments and contingent liabilities

			As at
	September 30, 2004		September 30, 2003		March 31, 2004
Estimated amount of unexecuted capital contracts (net of advances and deposits)		262.79		97.06		200.92
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		13.43		8.30		11.58
Claims against the company, not acknowledged as debts		4.53		4.51		4.53
Forward contracts outstanding
In US$	US$	188,000,000	US$	150,250,000	US$	149,000,000
(Equivalent approximate in Rs. crore)	(Rs. 849.25)		(Rs. 699.12)		(Rs. 671.14)
Unamortized income		—		3.21		3.15

In the year ended March 31, 2004, Ms. Jennifer Griffith, a former employee, filed a lawsuit against the company and its former director, Mr. Phaneesh Murthy. The lawsuit was served on the company during the quarter ended December 31, 2003. The trial of the lawsuit is scheduled shortly. Based on its present knowledge of facts, management estimates that the lawsuit will not have material impact on the result of operation or financial position of the company.

23.3.3. Obligations on long-term, non-cancelable operating leases

The lease rentals charged during the period and maximum obligations on long-term non-cancelable operating leases payable as per the rentals stated in the respective agreements are as follows:

	Quarter ended				Half year ended				Year ended
	September 30,				September 30,				March 31,
	2004		2003		2004		2003		2004
Lease rentals recognized during the period/year		9.76		9.07		18.65		19.13		39.14

			As at
Lease obligations	September 30, 2004		September 30, 2003		March 31, 2004
Within one year of the balance sheet date		30.16		27.49		27.00
Due in a period between one year and five years		65.20		59.16		61.42
Due after five years		4.06		7.39		4.82
		99.42		94.04		93.24

The operating lease arrangements extend for a maximum of ten years from their respective dates of inception and relates to rented overseas premises and car rentals.

23.3.4. Related party transactions

During the quarter and half year ended September 30, 2004, an amount of Rs. 4.00 and Rs. 8.00 has been donated to Infosys Foundation, a not-for-profit trust, in which certain directors of the company are trustees. Donation to the foundation for the quarter and half year ended September 30, 2003 and year ended March 31, 2004 were Rs. 3.50, Rs. 7.00 and Rs. 12.00 respectively.

Details of the transactions with the companies in which certain directors of the company are also director: -

	Quarter ended				Half year ended				Year ended
	September 30,				September 30,				March 31,
Particulars	2004		2003		2004		2003		2004
Purchase of services
SupplyChainge Inc., USA		—		—		—		0.71		0.71
Sale of services
ICICI Bank Limited, India		0.52		3.61		1.80		4.50		6.54

The company has an alliance with Supplychainge Inc., USA to jointly market and deliver lead-time optimization solutions. Prof. Marti G. Subrahmanyam, an external director of the company, is also a director on the board of ICICI Bank Limited, India and SupplyChainge Inc., USA.

23.3.5. Transactions with key management personnel

Key management personnel comprise our directors and statutory officers.

Particulars of remuneration and other benefits provided to key management personnel during the quarter and half year ended September 30, 2004 and 2003 and the year ended March 31, 2004 are set out below.

			Contributions
			to provident and		Perquisites		Total
Name	Salary		other funds		and incentives		Remuneration
Chairman and Chief Mentor N R Narayana Murthy		0.03		0.01		0.03		0.07
		0.02		0.01		0.01		0.04
		0.06		0.02		0.07		0.15
		0.04		0.02		0.04		0.10
		0.08		0.04		0.10		0.22
Chief Executive Officer, President and Managing Director Nandan M Nilekani		0.03		0.01		0.03		0.07
		0.02		0.01		0.01		0.04
		0.06		0.02		0.07		0.15
		0.05		0.02		0.05		0.12
		0.09		0.04		0.10		0.23
Chief Operating Officer and Deputy Managing Director S Gopalakrishnan		0.03		0.02		0.02		0.07
		0.02		0.01		0.01		0.04
		0.06		0.03		0.06		0.15
		0.04		0.02		0.05		0.11
		0.08		0.04		0.10		0.22
Whole-time Directors K Dinesh		0.03		0.01		0.02		0.06
		0.03		0.01		0.01		0.05
		0.06		0.02		0.06		0.14
		0.05		0.02		0.05		0.12
		0.09		0.04		0.10		0.23
S D Shibulal		0.22		—		—		0.22
		0.28		—		—		0.28
		0.41		—		0.11		0.52
		0.44		—		0.12		0.56
		0.76		—		0.23		0.99
T V Mohandas Pai		0.05		0.01		0.05		0.11
Chief Financial Officer		0.03		0.01		0.02		0.06
		0.09		0.03		0.14		0.26
		0.05		0.02		0.05		0.12
		0.11		0.04		0.16		0.31
Srinath Batni		0.04		0.01		0.04		0.09
		0.03		0.01		0.02		0.06
		0.08		0.03		0.12		0.23
		0.05		0.02		0.04		0.11
		0.10		0.04		0.13		0.27

					Reimbursement of		Total
Name	Commission		Sitting fees		expenses		remuneration
Non-Whole time Directors Deepak M Satwalekar		0.04		—		—		0.04
		0.05		—		0.01		0.06
		0.09		—		0.01		0.10
		0.09		0.01		0.01		0.11
		0.21		0.01		0.01		0.23
Marti G Subrahmanyam		0.05		—		0.01		0.06
		0.04		—		0.02		0.06
		0.10		—		0.04		0.14
		0.09		—		0.03		0.12
		0.19		—		0.07		0.26
Philip Yeo		0.05		—		—		0.05
		0.04		—		—		0.04
		0.10		—		—		0.10
		0.07		—		—		0.07
		0.15		—		0.01		0.16
Jitendra Vir Singh		—		—		—		—
		—		—		—		—
		—		—		—		—
		—		—		—		—
		0.08		—		—		0.08
Omkar Goswami		0.05		—		—		0.05
		0.04		0.01		—		0.05
		0.10		—		0.01		0.11
		0.08		0.01		0.01		0.10
		0.18		0.01		0.01		0.20
Larry Pressler		0.05		—		—		0.05
		0.03		—		—		0.03
		0.10		—		—		0.10
		0.07		—		—		0.07
		0.16		—		0.01		0.17
Rama Bijapurkar		0.05		—		—		0.05
		0.04		—		—		0.04
		0.09		0.01		—		0.10
		0.08		—		0.01		0.09
		0.19		0.01		0.01		0.21
Claude Smadja		0.05		0.01		0.05		0.11
		0.03		—		0.03		0.06
		0.10		0.01		0.07		0.18
		0.06		—		0.06		0.12
		0.15		—		0.09		0.24
Sridar A lyengar		0.05		—		—		0.05
		0.04		—		0.02		0.06
		0.10		—		0.04		0.14
		0.08		—		0.07		0.15
		0.18		0.01		0.13		0.32

Other Senior Management Personnel

Particulars of remuneration and other benefits provided to other key management personnel during the quarter and half year ended September 30, 2004 and 2003 and the year ended March 31, 2004 are set out below.

			Contributions to								Outstanding
			provident and		Perquisites		Total		Total loans		loans and
Name	Salary		other funds		and incentives		remuneration		granted		advances
V Balakrishnan,		0.03		0.01		0.07		0.11		0.04		0.04
Company Secretary		0.03		0.01		0.04		0.08		—		—
		0.06		0.02		0.18		0.26		0.04		0.04
		0.06		0.02		0.10		0.18		—		—
		0.12		0.04		0.22		0.38		—		—

In addition, the details of the options granted to non-whole time directors and other senior officers during the quarter and half year ended September 30, 2004 and 2003 and year ended March 31, 2004 are as follows:

				Number of
				options		Exercise price		Expiration of
Name	Date of Grant	Option plan		granted		(in Rs.)		options
Non-Wholetime Directors
Sridar A lyengar	April 10, 2003		1999		8,000		762.44	April 9, 2013

23.3.6. Exchange differences

Other income includes exchange differences of Rs. 6.43 and Rs. (7.48) for the quarter and half year ended September 30, 2004 respectively (for the quarter and half year ended September 30, 2003, the corresponding amounts were Rs. 19.00 and Rs. 26.56 and for the year ended March 31, 2004, the amount was Rs. 20.02 ).

23.3.7. Research and development expenditure

	Quarter ended				Half year ended				Year ended
	September 30,				September 30,				March 31,
	2004		2003		2004		2003		2004
Capital		—		0.24		—		0.32		1.48
Revenue		16.19		10.97		30.12		16.58		43.06
		16.19		11.21		30.12		16.90		44.54

23.3.8. Unearned revenue

Unearned revenue as at September 30, 2004 amounting to Rs. 102.49 (Rs. 71.19 as at September 30, 2003 and Rs. 63.85 as at March 31, 2004) primarily consists of client billings on fixed-price, fixed-time-frame contracts for which the related costs have not yet been incurred.

23.3.9. Stock option plans

The company currently has three stock option plans. These are summarized below.

1994 Stock Option Plan (“the 1994 Plan”)

The 1994 plan elapsed in fiscal year 2000 and, consequently, no further grants will be made under this plan.

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. The Government of India approved 29,40,000 ADSs representing 14,70,000 equity shares for issue under the Plan. The options may be issued at an exercise price that is not less than 90% of the fair market value of the underlying equity share on the date of the grant. The 1998 Plan automatically expires in January 2008, unless terminated earlier. All options under the 1998 Plan are exercisable for ADSs representing equity shares. A compensation committee comprising independent members of the board of directors administers the 1998 Plan. All options have been granted at 100% of fair market value.

	Quarter ended						Half year ended						Year ended
	September 30,						September 30,						March 31,
Number of options granted, exercised and forfeited	2004			2003			2004			2003			2004
Options outstanding, beginning of period/year		37,41,476			48,68,794			38,71,010			50,06,812			50,06,812
Granted during the period/year		,0			83,200			,0			1,90,800			1,91,800
Exercised during the period/year		(62,140	)		(45,288	)		(83,768	)		(70,320	)		(5,17,740	)
Forfeited during the period/year		22,714			(98,284	)		(85,192	)		(3,18,870	)		(8,09,862	)
Options outstanding, end of period/year		37,02,050			48,08,422			37,02,050			48,08,422			38,71,010

1999 Stock Option Plan (“the 1999 Plan”)

In fiscal 2000, the company instituted the 1999 Plan. The shareholders and the board of directors approved the plan in June 1999, which provides for the issue of 66,00,000 equity shares to the employees. The compensation committee administers the 1999 Plan. Options will be issued to employees at an exercise price that is not less than the fair market value.

	Quarter ended						Half year ended						Year ended
	September 30,						September 30,						March 31,
Number of options granted, exercised and forfeited	2004			2003			2004			2003			2004
Options outstanding, beginning of period/year		1,71,62,132			2,05,43,044			1,83,62,120			2,02,44,684			2,02,44,684
Granted during the period/year		,0			1,40,600			,0			7,44,800			7,71,200
Exercised during the period/year		(3,26,394	)		(33,136	)		(12,12,678	)		(33,256	)		(10,74,172	)
Forfeited during the period/year		(2,56,841	)		(3,97,148	)		(5,70,545	)		(7,02,868	)		(15,79,592	)
Options outstanding, end of period/year		1,65,78,897			2,02,53,360			1,65,78,897			2,02,53,360			1,83,62,120

The aggregate options considered for dilution are set out in note 23.3.21

The above options will automatically be adjusted for the bonus shares issued in the same proportion. The respective exercise price will also reduce in the same proportion.

Progeon’s 2002 Plan provides for the grant of stock options to employees of Progeon and was approved by the board of directors and stockholders in June 2002. All options under the 2002 Plan are exercisable for equity shares. The 2002 Plan is administered by a Compensation Committee comprising three members, all of whom are directors of Progeon. The 2002 Plan provides for the issue of 52,50,000 equity shares to employees, at an exercise price, which shall not be less than the Fair Market Value (“FMV”) on the date of grant. Options may also be issued to employees at exercise prices that are less than FMV only if specifically approved by the members of the company in general meeting. The options issued under the 2002 Plan vest in periods ranging between one through six years, although accelerated vesting based on performance conditions is provided in certain instances. All options granted have been accounted for as a fixed plan.

The activity in Progeon’s 2002 Plan in the quarter and half year ended September 30, 2004 and 2003 and year ended March 31, 2004 is set out below

	Quarter ended					Half year ended					Year ended
	September 30,					September 30,					March 31,
Number of options granted, exercised and forfeited	2004			2003		2004			2003		2004
Outstanding at the beginning of the period/year		32,47,075			18,01,175		31,24,625			18,01,175		18,01,175
Granted during the period/year		66,800			6,63,750		2,71,400			6,63,750		14,01,150
Exercised during the period/year		(3,625	)		0		(6,325	)		0		0
Forfeited during the period/year		(1,34,457	)		0		(2,08,907	)		0		(77,700	)
Options granted, end of period/year		31,75,793			24,64,925		31,80,793			24,64,925		31,24,625

23.3.10. Pro forma disclosures relating to the Employee Stock Option Plans (“ESOPs)

The Securities and Exchange Board of India (“SEBI”) issued the Employee Stock Option Scheme and Employee Stock Purchase Scheme Guidelines in 1999, which is applicable to all stock option schemes established on or 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 of the options over the exercise price of the options, including up-front payments, if any, is to be recognized and amortized on a straight-line basis over the vesting period. All options under the 1998 and 1999 stock option plans have been issued at fair market value, hence there are no compensation costs.

The company’s 1994 stock option plan was established prior to the SEBI guidelines on stock options.

Had the stock compensation costs for this stock option plan been determined as per the guidelines issued by SEBI, the company’s reported net profit would have been reduced to the pro forma amounts indicated below.

	Quarter ended				Half year ended				Year ended
	September 30,				September 30,				March 31,
	2004		2003		2004		2003		2004
Net profit:
- As reported		447.37		300.98		835.70		579.89		1,243.63
- Adjusted pro forma		447.37		296.06		835.70		569.94		1,230.73

23.3.11.Income taxes

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.

Most of the company’s and all of Progeon’s operations are conducted through Software Technology Parks (“STPs”). Income from STPs are tax exempt for the earlier of 10 years commencing from the fiscal year in which the unit commences software development, or March 31, 2009.

23.3.12. Loans and advances

Deposits with financial institutions and a body corporate comprise:

			As at
	September 30, 2004		September 30, 2003		March 31, 2004
Deposits with financial institutions:
Housing Development Finance Corporation Limited		212.48		207.94		207.85
Life Insurance Corporation of India		35.00		—		—
Deposit with body corporate:
GE Capital Services India Limited		—		125.97		—
		247.48		333.91		207.85
Interest accrued but not due (included above)		1.48		2.51		1.45

The financial institution and the body corporate have superior credit ratings from a premier credit rating agency in the country.

Mr. Deepak M. Satwalekar, Director, is also a Director of HDFC Limited. Except as director in this financial institution, he has no direct interest in any transactions.

23.3.13. Fixed assets

Profit / loss on disposal of fixed assets

	Quarter ended					Half year ended					Year ended
	September 30,					September 30,					March 31,
	2004			2003		2004			2003		2004
Profit on disposal of fixed assets		0.09			—		0.16			0.01		0.04
Loss on disposal of fixed assets		(0.04	)		—		(0.04	)		—		(0.45	)
Profit/(loss) on disposal of fixed assets, net		0.05			—		0.12			0.01		(0.41	)

The company has entered into lease-cum-sale agreements to acquire certain properties. In accordance with the terms 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. These amounts are disclosed as “Land - leasehold” under “Fixed assets” in the financial statements. Additionally, certain land has been purchased for which the company has possession certificate for which sale deeds are yet to be executed as at September 30, 2004.

During the year ended March 31, 2004, management reduced the remaining estimated useful life of the intellectual property in a commercial software application product to three months, effective August 2003 and treasury management product to two months, effective November 2003. The revised estimation represents management’s present evaluation of the expected future commercial benefits from these products. The revision has resulted in an increased charge to the profit-and-loss account of Rs. 20.28 during the year ended March 31, 2004.

23.3.14. Details of Investments

The following are the particulars of strategic investments made by the Group during the quarter and half year ended September 30, 2004 and 2003 and year ended March 31,2004.

During the year ended March 31, 2004, the Company invested Rs 0.54 in M-Commerce Ventures Pte. Limited, Singapore (M-Commerce) for 20 ordinary shares of face value Singapore $ (“S$”) 1/- each, fully paid at par and 180 redeemable preference shares of face value S$ 1/- each, fully paid for a premium of S$ 1,110. The company also received Rs 0.61 towards return of premium of S$ 1,110/- each on 216 redeemable preference shares of face value of S$ 1/- each during the year. Accordingly, the aggregate investment in M-Commerce as at March 31, 2004 amounts to Rs 2.04.

During the year ended March 31, 2004, the company received from CiDRA Corporation, USA (CiDRA), an amount of Rs. 6.05 in cash; 72,539 Class A common stock of par value US$ 0.001 each of CiDRA, 2,139 Non-voting redeemable preferred stock of par value US$ 0.01 each of CiDRA, 12,921, Series A preferred stock par value $0.001 of CyVera Corporation, USA on a buy back offer. The company also received 12,720 Series A preferred stock par value $0.001 of CyVera Corporation, USA, due to company’s holding in CiDRA.

During the year ended March 31, 2004, Infosys received Rs. 3.22 from Workadia Inc. and Rs. 0.47 from Stratify Inc. towards recovery of the amounts invested. The remainder of the investment was written off during the year ended March 31, 2004.

Details of investments in and disposal of securities during the quarter and half year ended September 30, 2004 and 2003 and year ended March 31, 2004:-

	Quarter ended				Half year ended				Year ended
	September 30,				September 30,				March 31,
	2004		2003		2004		2003		2004
Investment in securities
Long-term investments		—		—				—		0.54
Liquid Mutual funds		124.65		369.51		154.05		469.51		943.84
		124.65		369.51		154.05		469.51		944.38
Redemption / Disposal of Investment in securities
Long-term investments										10.21
Liquid Mutual funds		12.53		19.51		133.41		19.51		—
		12.53		19.51		133.41		19.51		10.21
Net movement in investment		112.11		350.00		20.63		450.00		934.17

23.3.15. Proportionate holding of Infosys in its subsidiaries

As of September 30, 2004 Infosys held 99.97% of equity shares in Progeon. The company held the entire equity capital of Progeon as of March 31, 2004 and September 30, 2003. As of September 30, 2004, Infosys also holds the entire equity capital of each of its subsidiaries, other than Progeon, since each subsidiary’s incorporation.

23.3.16. Unbilled revenue

Unbilled revenue as at September 30, 2004 amounts to Rs. 134.39 (Rs. 85.58 as at September 30, 2003 and Rs. 103.09 as at March 31, 2004) primarily comprises the revenue recognized in relation to efforts incurred on fixed-price, fixed-time-frame contracts until the balance sheet date.

23.3.17. Segment reporting

The company’s operations predominantly relate to providing IT services, delivered to customers globally operating in various industry segments. Accordingly, IT service revenues represented along industry classes comprise the primary basis of segmental information set out in these financial statements. Secondary segmental reporting is performed on the basis of the geographical location of customers.

The accounting principles consistently used in the preparation of the financial statements are also consistently applied to record income and expenditure in individual segments. These are as set out in the note on significant accounting policies.

Industry segments at the company are primarily financial services comprising customers providing banking, finance and insurance services; manufacturing companies; companies in the telecommunications and the retail industries; and others such as utilities, transportation and logistics companies.

Income and direct expenses in relation to segments is categorized based on items that are individually identifiable to that segment,while the remainder of the costs 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 services are used interchangeably. The company 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 directly charged against total income.

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.

Customer relationships are driven based on the location of the respective client. 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.

Geographical revenues are segregated based on the location of the customer who is invoiced or in relation to which the revenue is otherwise recognized.

Industry segments

Quarter ended September 30, 2004 and September 30, 2003

	Financial services		Manufacturing		Telecom		Retail		Others		Total
Revenues		616.53		257.71		323.21		167.17		384.71		1,749.33
		447.62		172.89		177.25		134.34		219.70		1,151.80
Identifiable operating expenses		263.27		107.88		127.55		67.81		161.88		728.39
		182.81		74.86		67.34		51.11		90.55		466.67
Allocated expenses		165.98		61.48		80.57		38.97		112.91		459.91
		119.64		44.70		47.77		34.73		56.83		303.67
Segmental operating income		187.28		88.35		115.09		60.39		109.92		561.03
		145.17		53.33		62.14		48.50		72.32		381.46
Unallocable expenses												60.63
												63.42
Operating income												500.40
												318.04
Other income (expense), net												29.53
												42.94
Net profit before taxes												529.93
												360.98
Income taxes												82.56
												60.00
Net profit after taxes												447.37
												300.98

Half year ended September 30, 2004 and September 30, 2003

	Financial services		Manufacturing		Telecom		Retail		Others		Total
Revenues		1,132.78		485.56		593.78		340.72		713.87		3,266.71
		857.13		343.42		337.58		261.72		446.65		2,246.50
Identifiable operating expenses		486.67		212.69		254.85		129.48		299.17		1,382.86
		361.04		147.61		134.28		96.62		183.03		922.58
Allocated expenses		298.37		112.68		146.13		79.82		190.29		827.29
		230.67		87.95		91.94		67.03		114.39		591.98
Segmental operating income		347.74		160.19		192.80		131.42		224.41		1,056.56
		265.42		107.86		111.36		98.07		149.23		731.94
Unallocable expenses												119.44
												108.56
Operating income												937.12
												623.38
Other income (expense), net												45.25
												68.51
Net profit before taxes												982.37
												691.89
Income taxes												146.67
												112.00
Net profit after taxes												835.70
												579.89

Year ended March 31, 2004

	Financial services		Manufacturing		Telecom		Retail		Others		Total
Revenues		1,775.02		716.46		805.61		565.87		989.99		4,852.95
Identifiable operating expenses		755.68		311.25		318.46		212.76		418.64		2,016.79
Allocated expenses		464.82		176.67		209.13		142.19		248.77		1,241.58
Segmental operating income		554.52		228.54		278.02		210.92		322.58		1,594.58
Unallocable expenses												237.12
Operating income												1,357.46
Other income (expense), net												113.71
Net profit before taxes												1,471.17
Income taxes												227.54
Net profit after taxes												1,243.63

Geographic segments

Quarter ended September 30, 2004 and September 30, 2003

							Rest of the
	North America		Europe		India		World		Total
Revenues		1,140.84		374.15		30.07		204.27		1,749.33
		850.96		207.07		18.74		75.03		1,151.80
Identifiable operating expenses		483.30		154.79		9.57		80.73		728.39
		354.12		82.40		2.55		27.60		466.67
Allocated expenses		282.40		90.11		6.94		80.46		459.91
		224.71		54.71		4.85		19.40		303.67
Segmental operating income		375.14		129.25		13.56		43.08		561.03
		272.13		69.96		11.34		28.03		381.46
Unallocable expenses										60.63
										63.42
Operating income										500.40
										318.04
Other income (expense), net										29.53
										42.94
Net profit before taxes										529.93
										360.98
Income taxes										82.56
										60.00
Net profit after taxes										447.37
										300.98

Half year ended September 30, 2004 and September 30, 2003

							Rest of the
	North America		Europe		India		World		Total
Revenues		2,129.11		711.91		54.00		371.69		3,266.71
		1,668.77		398.04		42.07		137.62		2,246.50
Identifiable operating expenses		908.69		287.07		14.26		172.81		1,382.83
		702.13		159.23		12.89		48.33		922.58
Allocated expenses		515.94		169.32		12.29		136.01		833.56
		442.07		103.87		10.76		35.28		591.98
Segmental operating income		704.48		255.52		27.45		62.87		1,050.32
		524.57		134.94		18.42		54.01		731.94
Unallocable expenses										113.20
										108.56
Operating income										937.12
										623.38
Other income (expense), net										45.25
										68.51
Net profit before taxes										982.37
										691.89
Income taxes										146.67
										112.00
Net profit after taxes										835.70
										579.89

Year ended March 31, 2004

							Rest of the
	North America		Europe		India		World		Total
Revenues		3,459.86		932.57		66.23		394.29		4,852.95
Identifiable operating expenses		1,453.94		376.72		18.23		167.90		2,016.79
Allocated expenses		879.47		235.63		16.41		110.46		1,241.97
Segmental operating income		1,126.45		320.22		31.59		115.93		1,594.19
Unallocable expenses										236.73
Operating income										1,357.46
Other income (expense), net										113.71
Net profit before taxes										1,471.17
Income taxes										227.54
Net profit after taxes										1,243.63

23.3.18. Dividends remitted in foreign currencies

Infosys does not make any direct remittances of dividends in foreign currency. The company remits the equivalent of the dividends payable to the holders of ADS (“ADS holders”) in Indian Rupees to the depositary bank, which is the registered shareholder on record for all owners of the company’s ADSs. The depositary bank purchases the foreign currencies and remits dividends to the ADS holders.

Particulars of dividends remitted are as follows:-

			Quarter ended				Half year ended				Year ended
	Number of shares to		September 30,				September 30,				March 31,
Particulars	which the dividends relate		2004		2003		2004		2003		2004
Final dividend for Fiscal 2003		21,60,870		—		—		—		3.13		3.13
Interim dividend for fiscal 2004		51,78,450		—		—		—		—		7.51
Final and one-time special dividend for Fiscal 2004		52,92,612		—		—		60.87		—		—

23.3.19. Cumulative convertible preference shares

Progeon issued 87,50,000 0.0005% cumulative convertible preference shares of par value Rs. 100 each in two equal tranches to Citicorp International Finance Corporation (“Citicorp”), on June 24, 2002 and March 31, 2004 in accordance with the shareholder’s agreement. The total cash consideration received was Rs. 93.80, comprising an amount of Rs. 87.50 and Rs. 6.30, respectively towards preference share capital and share premium.

Unless earlier converted pursuant to an agreement in this behalf between Progeon and Citicorp, all the convertible preference shares shall automatically be converted into equity shares, (i) one year prior to the Initial Public Offering (“IPO”) Date or (ii) June 30, 2005 or (iii) at the holder’s option, immediately upon the occurrence of any Liquidity Event; whichever is earlier. The term “Liquidity Event” includes any decision of the Board of Directors to make an IPO, merger, reconstruction, capital reorganization or other event which, in the sole opinion of the holder of the convertible preference shares, amounts to an alteration in the capital structure of the company. Each preference share is convertible into one equity share, par value Rs. 10 each.

In the event of any liquidation, dissolution or winding up of Progeon, either voluntary or involuntary, each holder of the preference shares will be paid an amount of Rs. 112/- per preference share, as adjusted for stock dividends, combinations, splits, recapitalization and the like, in preference to any distribution of any assets of Progeon to the holders of equity shares.

Upon the completion of the distribution described above, the remaining assets and funds of the company available for distribution to shareholders shall be distributed among all holders of preference shares and equity shares based on the number of equity shares held by each of them(assuming a full conversion of all the preference shares).

23.3.20. Provisions for investments

The Company evaluates all investments for any diminution in their carrying values that is other than temporary. The company made a provision of Rs. nil and Rs. nil during the quarter and half year ended September 30, 2004 (Rs. nil and Rs. 6.35 during the quarter and half year ended September 30, 2003 and Rs. 9.24 during the year ended March 31, 2004) on Trade investments.

The company provided Rs. 0.07 and Rs. 0.06 during the quarter and half year ended September 30, 2004 (Rs. 0.22 and Rs. 0.24 during the quarter and half year ended September 30, 2003 and Rs. 0.43 during the year ended March 31, 2004) on revision of the carrying amount of non-trade current investments to fair value.

23.3.21. Reconciliation of basic and diluted shares used in computing earnings per share

At the annual general meeting held on June 12, 2004, the shareholders approved the issue of bonus shares in the ratio of three bonus shares for each share. The record date for the bonus issue was July 2, 2004 and the shares were allotted on July 3, 2004. All basic and diluted shares used in determining earnings per share are after considering the effect of bonus issue

	Quarter ended				Half year ended				Year ended
	September 30,				September 30,				March 31,
	2004		2003		2004		2003		2004
Number of shares considered as basic weighted average shares outstanding		26,76,76,465		26,50,28,112		26,74,06,246		26,50,04,404		26,54,47,776
Add: Effect of dilutive issues of shares/stock options		61,00,213		22,69,504		53,61,955		15,99,936		33,39,240
Number of shares considered as weighted average shares and potential shares outstanding		27,37,76,678		26,72,97,616		27,27,68,201		26,66,04,340		26,87,87,016

23.3.22. Notes on the statement of cash flow

23.3.22.a

The balance of cash and cash equivalents includes Rs. 3.38 as at September 30, 2004 (Rs. 1.78 as at September 30, 2003 and Rs. 1.98 as at March 31, 2004) set aside for payment of dividends. Also, an amount of Rs. nil has been retained in escrow as at September 30, 2004 (Rs. 0.81 as at September 30, 2003 and Rs. 0.04 as at March 31, 2004).

23.3.22.b

During the quarter ended September 30, 2004, Infosys issued bonus shares at the ratio of three equity shares for each equity share in India and a stock dividend of two ADSs each for each ADS in USA. Consequently, the share capital of the company stands increased by Rs. 100.30. The bonus shares were issued by capitalization of general reserves.

23.3.22.c

Deposits with financial institutions and body corporate include an amount of Rs. 35 deposited with Life Insurance Corporation of India to settle employee benefit obligation as and when they arise during the normal course of business. This amount is considered as restricted cash and is hence not considered Cash and cash equivalents.

AUDITORS’ REPORT TO THE BOARD OF DIRECTORS ON
THE CONSOLIDATED FINANCIAL STATEMENTS OF
INFOSYS TECHNOLOGIES LIMITED AND ITS SUBSIDIARIES

We have audited the attached consolidated balance sheet of Infosys Technologies Limited (the Company) and its subsidiaries (collectively called ‘the Infosys Group’) as at 30 September 2004, the consolidated profit and loss account and the consolidated cash flow statement for the quarter and half year ended on that date, annexed thereto. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

We report that the consolidated financial statements have been prepared by the Company’s management in accordance with the requirements of Accounting Standard (AS) 21, Consolidated Financial Statements, issued by the Institute of Chartered Accountants of India.

In our opinion and to the best of our information and according to the explanations given to us, the consolidated financial statements give a true and fair view in conformity with the accounting principles generally accepted in India:

(a)	in the case of the consolidated balance sheet, of the state of affairs of the Infosys Group as at 30 September 2004;
(b)	in the case of the consolidated profit and loss account, of the profit of the Infosys Group for the quarter and half year ended on that date; and
(c)	in the case of the consolidated cash flow statement, of the cash flows of the Infosys Group for the quarter and half year ended on that date.

for BSR & Co.
(formerly Bharat S Raut & Co.)
Chartered Accountants

Subramanian Suresh
Partner
Membership No. 83673

Bangalore
12 October 2004

EX-99.12

Exhibit 99.12

INFOSYS TECHNOLOGIES LIMITED

in Rs. crore

Balance Sheet as at	Schedule		September 30, 2004		September 30, 2003		March 31, 2004
SOURCES OF FUNDS
SHAREHOLDERS’ FUNDS
Share capital		1		133.93		33.13		33.32
Reserves and surplus		2		3,937.53		3,302.48		3,220.11
				4,071.46		3,335.61		3,253.43
APPLICATIONS OF FUNDS
FIXED ASSETS		3
Original cost				1,809.12		1,414.53		1,570.23
Less: Depreciation and amortization				885.03		683.27		803.41
Net book value				924.09		731.26		766.82
Add: Capital work-in-progress				252.63		62.00		203.48
				1,176.72		793.26		970.30
INVESTMENTS		4		1,064.97		476.99		1,027.38
DEFERRED TAX ASSETS		5		35.77		33.87		35.63
CURRENT ASSETS, LOANS AND ADVANCES
Sundry debtors		6		892.06		577.26		632.51
Cash and bank balances		7		1,251.78		1,382.71		1,638.01
Loans and advances		8		812.93		786.63		693.22
				2,956.77		2,746.60		2,963.74
LESS: CURRENT LIABILITIES AND PROVISIONS
Current liabilities		9		566.92		370.99		560.44
Provisions		10		595.85		344.12		1,183.18
NET CURRENT ASSETS				1,794.00		2,031.49		1,220.12
				4,071.46		3,335.61		3,253.43
SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS		22

The schedules referred to above form an integral part of the balance sheet

As per our report attached

for BSR & Co.
(formerly Bharat S Raut & Co.)
Chartered Accountants

Subramanian Suresh	N. R. Narayana Murthy	Nandan M. Nilekani	S. Gopalakrishnan	Deepak M. Satwalekar
Partner	Chairman	Chief Executive Officer,	Chief Operating Officer	Director
Membership No. 83673	and Chief Mentor	President and Managing	and Deputy Managing
		Director	Director
	Marti G. Subrahmanyam	Omkar Goswami	Larry Pressler	Rama Bijapurkar
	Director	Director	Director	Director
	Claude Smadja	Sridar A. Iyengar	K. Dinesh	S. D. Shibulal
	Director	Director	Director	Director
	T. V. Mohandas Pai	Srinath Batni	V. Balakrishnan
Bangalore	Director and	Director	Company Secretary and
October 12, 2004	Chief Financial Officer		Senior Vice President – Finance

INFOSYS TECHNOLOGIES LIMITED

in Rs. Crore, except per share data

			Quarter ended				Half year ended				Year ended
			September 30,				September 30,				March 31,
Profit and Loss Account for the	Schedule		2004		2003		2004		2003		2004
INCOME
SOFTWARE SERVICES AND PRODUCTS
Overseas				1,659.27		1,115.98		3,106.69		2,174.63		4,694.69
Domestic				30.29		18.77		54.26		42.10		66.20
				1,689.56		1,134.75		3,160.95		2,216.73		4,760.89
SOFTWARE DEVELOPMENT EXPENSES		11		909.96		587.16		1,701.87		1,159.94		2,495.31
GROSS PROFIT				779.60		547.59		1,459.08		1,056.79		2,265.58
SELLING AND MARKETING EXPENSES		12		103.08		80.44		190.47		160.16		335.08
GENERAL AND ADMINISTRATION EXPENSES		13		116.78		88.72		218.02		169.90		346.85
				219.86		169.16		408.49		330.06		681.93
OPERATING PROFIT BEFORE INTEREST, DEPRECIATION AND AMORTIZATION				559.74		378.43		1,050.59		726.73		1,583.65
INTEREST				—		—		—		—		—
DEPRECIATION AND AMORTIZATION				56.55		62.33		105.93		106.59		230.90
OPERATING PROFIT AFTER INTEREST, DEPRECIATION AND AMORTIZATION				503.19		316.10		944.66		620.14		1,352.75
OTHER INCOME		14		30.23		44.28		48.22		76.73		127.39
PROVISION FOR INVESTMENTS				0.07		0.22		0.06		6.59		9.67
NET PROFIT BEFORE TAX				533.35		360.16		992.82		690.28		1,470.47
PROVISION FOR TAXATION		15		78.50		60.00		143.50		112.00		227.00
NET PROFIT AFTER TAX				454.85		300.16		849.32		578.28		1,243.47
Balance brought forward				462.36		278.12		70.51		—		—
Less: Residual dividend paid for Fiscal 2004				—		—		2.32		—		—
Dividend tax on the above				1.97		—		2.27		—		—
				460.39		278.12		65.92		—		—
AMOUNT AVAILABLE FOR APPROPRIATION				915.24		578.28		915.24		578.28		1,243.47
DIVIDEND
Interim				133.93		96.09		133.93		96.09		96.09
Final				—		—		—		—		99.96
One-time special dividend				—		—		—		—		666.41
Total dividend				133.93		96.09		133.93		96.09		862.46
Dividend tax				17.50		12.31		17.50		12.31		110.50
Amount transferred — general reserve				—		—		—		—		200.00
Balance in Profit and Loss account				763.81		469.88		763.81		469.88		70.51
				915.24		578.28		915.24		578.28		1,243.47
EARNINGS PER SHARE *
Equity shares of par value Rs. 5/- each
Basic				16.99		11.33		31.76		21.82		46.84
Diluted				16.61		11.23		31.14		21.69		46.26
Number of shares used in computing earnings per share
Basic				26,76,76,465		26,50,28,112		26,74,06,246		26,50,04,404		26,54,47,776
Diluted				27,37,76,678		26,72,97,616		27,27,68,201		26,66,04,340		26,87,87,016
SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNT:		22

* refer to note 22.3.24

The schedules referred to above form an integral part of the profit and loss account.

As per our report attached

for BSR & Co.
(formerly Bharat S Raut & Co.)
Chartered Accountants

Subramanian Suresh	N. R. Narayana Murthy	Nandan M. Nilekani	S. Gopalakrishnan	Deepak M. Satwalekar
Partner	Chairman	Chief Executive Officer,	Chief Operating Officer	Director
Membership No. 83673	and Chief Mentor	President and Managing Director	and Deputy Managing Director
	Marti G. Subrahmanyam	Omkar Goswami	Larry Pressler	Rama Bijapurkar
	Director	Director	Director	Director
	Claude Smadja	Sridar A. Iyengar	K. Dinesh	S. D. Shibulal
	Director	Director	Director	Director
	T. V. Mohandas Pai	Srinath Batni	V. Balakrishnan
Bangalore	Director and	Director	Company Secretary and
October 12, 2004	Chief Financial Officer		Senior Vice President – Finance

INFOSYS TECHNOLOGIES LIMITED

in Rs. crore

			Quarter ended						Half year ended						Year ended
			September 30,						September 30,						March 31,
Cash Flow Statement for the	Schedule		2004			2003			2004			2003			2004
CASH FLOWS FROM OPERATING ACTIVITIES
Net profit before tax				533.35			360.16			992.82			690.28			1,470.47
Adjustments to reconcile net profit before tax to cash provided by operating activities
(Profit)/Loss on sale of fixed assets				(0.05	)		—			(0.12	)		(0.01	)		(0.04	)
Depreciation and amortization				56.55			62.33			105.93			106.59			230.90
Interest and dividend income				(21.77	)		(23.43	)		(50.04	)		(46.18	)		(100.28	)
Provision for investments				0.07			0.22			0.06			6.59			9.67
Effect of exchange differences on translation of foreign currency cash and cash equivalents				(1.13	)		1.59			(8.24	)		3.16			6.59
Changes in current assets and liabilities
Sundry debtors				(73.08	)		(19.96	)		(259.55	)		(65.12	)		(120.37	)
Loans and advances		16		(26.97	)		8.33			(53.92	)		(1.52	)		(1.34	)
Current liabilities and provisions		17		94.02			16.58			25.27			55.59			245.50
Income taxes paid during the period/ year		18		(94.50	)		(49.22	)		(102.45	)		(60.28	)		(107.13	)
NET CASH GENERATED BY OPERATING ACTIVITIES				466.49			356.60			649.76			689.10			1,633.97
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets and change in capital work-in-progress		19		(166.61	)		(68.82	)		(312.45	)		(127.20	)		(429.87	)
Proceeds on disposal of fixed assets				0.15			(0.01	)		0.22			0.09			1.43
Acquisition of Expert Information Systems Pty. Limited, Australia				—			—			—			—			(66.68	)
(Investments in) / disposal of securities		20		(133.46	)		(349.83	)		(37.65	)		(450.38	)		(937.17	)
Interest and dividend income				21.77			23.43			50.04			46.18			100.28
NET CASH USED IN INVESTING ACTIVITIES				(278.15	)		(395.23	)		(299.84	)		(531.31	)		(1,332.01	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of share capital on exercise of stock options (note 22.3.25.b)				40.80			4.01			124.73			5.07			122.27
Dividends paid during the period/ year, including dividend tax				(1.97	)		—			(869.15	)		(108.35	)		(216.75	)
NET CASH USED IN FINANCING ACTIVITIES				38.83			4.01			(744.42	)		(103.28	)		(94.48	)
Effect of exchange differences on translation of foreign currency cash and cash equivalents				1.13			(1.59	)		8.24			(3.16	)		(6.59	)
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS				228.30			(36.21	)		(386.26	)		51.35			200.89
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD/YEAR				1,224.84			1,726.07			1,839.40			1,638.51			1,638.51
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD / YEAR		21		1,453.14			1,689.86			1,453.14			1,689.86			1,839.40
SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS		22

The schedules referred to above form an integral part of the cash flow statement.

As per our report attached

for BSR & Co.
(formerly Bharat S Raut & Co.)
Chartered Accountants

Subramanian Suresh	N. R. Narayana Murthy	Nandan M. Nilekani	S. Gopalakrishnan	Deepak M. Satwalekar
Partner	Chairman	Chief Executive Officer,	Chief Operating Officer	Director
Membership No. 83673	and Chief Mentor	President and Managing	and Deputy Managing
		Director	Director
	Marti G. Subrahmanyam	Omkar Goswami	Larry Pressler	Rama Bijapurkar
	Director	Director	Director	Director
	Claude Smadja	Sridar A. Iyengar	K. Dinesh	S. D. Shibulal
	Director	Director	Director	Director
	T. V. Mohandas Pai	Srinath Batni	V. Balakrishnan
Bangalore	Director and	Director	Company Secretary and
October 12, 2004	Chief Financial Officer		Senior Vice President – Finance

INFOSYS TECHNOLOGIES LIMITED

in Rs. crore

Schedules to the Balance Sheet as at	September 30, 2004		September 30, 2003		March 31, 2004
1 SHARE CAPITAL
Authorized
Equity shares, Rs. 5/- par value 30,00,00,000 (10,00,00,000; 10,00,00,000) equity shares		150.00		50.00		50.00
Issued, Subscribed and Paid Up
Equity shares, Rs. 5/- par value* 26,78,60,670 (6,62,68,972; 6,66,41,056) equity shares fully paid up		133.93		33.13		33.32
[Of the above, 25,84,92,302 (5,78,88,200; 5,78,88,200) equity shares, fully paid up have been issued as bonus shares by capitalization of the general reserve]
		133.93		33.13		33.32
Forfeited shares amounted to Rs. 1,500/- (Rs. 1,500/-; Rs. 1,500/-) * For details of options in respect of equity shares, refer to note 22.3.13 * also refer to note 22.3.25
2 RESERVES AND SURPLUS
Capital reserve		5.94		5.94		5.94
Share premium account
As at April 1,		460.90		338.83		338.83
Add: Received on exercise of stock options issued to employees		124.42		5.07		122.07
		585.32		343.90		460.90
General reserve
As at April 1,		2,682.76		2,482.76		2,482.76
Less: capitalized for issue of bonus shares		100.30		—		—
Add: transfer from the profit and loss account		—		—		200.00
		2,582.46		2,482.76		2,682.76
Balance in profit and loss account		763.81		469.88		70.51
		3,937.53		3,302.48		3,220.11

INFOSYS TECHNOLOGIES LIMITED

Schedules to the Balance Sheet

3 FIXED ASSETS

in Rs. crore

Particulars	Original cost
	Cost as at		Additions during		Deletions during			Cost as at
	April 1, 2004		the period/ year		the period/ year			September 30, 2004
Land : free-hold*		20.05		0.15		—			20.20
leasehold		70.20		17.98		—			88.18
Buildings*		459.61		99.06		—			558.67
Plant and machinery*		281.39		40.97		6.14	**		316.22
Computer equipment		444.86		71.85		10.77	**		505.94
Furniture and fixtures*		251.55		33.13		7.50	**		277.18
Vehicles		0.43		0.16		—			0.59
Intangible assets
Intellectual property rights		42.14		—		—			42.14
		1,570.23		263.30		24.41			1,809.12
Previous period		1,273.32		141.76		0.55			1,414.53
Previous year		1,273.32		302.94		6.03			1,570.23

[Additional columns below]

[Continued from above table, first column(s) repeated]

in Rs. crore

Particulars	Depreciation and amortization
	As at		For the		Deductions for			As at
	April 1, 2004		the period/ year		the period/ year			September 30, 2004
Land : free-hold*		—		—		—			—
leasehold		—		—		—			—
Buildings*		80.47		16.37		—			96.84
Plant and machinery*		165.10		23.96		6.10	**		182.96
Computer equipment		363.79		43.89		10.76	**		396.92
Furniture and fixtures*		151.64		21.67		7.45	**		165.86
Vehicles		0.27		0.04		—			0.31
Intangible assets
Intellectual property rights		42.14		—		—			42.14
		803.41		105.93		24.31			885.03
Previous period		577.15		106.59		0.47			683.27
Previous year		577.15		230.90		4.64			803.41

[Additional columns below]

[Continued from above table, first column(s) repeated]

in Rs. crore

	Net book value
	As at		As at		As at
	September 30, 2004		September 30, 2003		March 31, 2004
Land : free-hold*		20.20		15.88		20.05
leasehold		88.18		32.74		70.20
Buildings*		461.83		364.33		379.14
Plant and machinery*		133.26		124.84		116.29
Computer equipment		109.02		69.32		81.07
Furniture and fixtures*		111.32		112.01		99.91
Vehicles		0.28		0.11		0.16
Intangible assets
Intellectual property rights		—		12.03		—
		924.09		731.26		766.82
Previous period
Previous year

Note: Buildings include Rs. 250/- being the value of 5 shares of Rs. 50/- each in Mittal Towers Premises Co-operative Society Limited.

* includes certain assets provided on operating lease to Progoen Limited, a subsidiary company. Please refer to note 22.3.6 for detail

** amount includes the retiral of assets which are not in active use, with original cost of Rs. 23.22 and accumulated depreciation of Rs. 23.17

INFOSYS TECHNOLOGIES LIMITED

in Rs. crore

Schedules to the Balance Sheet as at	September 30, 2004		September 30, 2003		March 31, 2004
4 INVESTMENTS
Trade (unquoted) – at cost
Long- term investments
In subsidiaries
Progeon Limited, India.
2,44,99,993 (1,22,49,993; 2,44,99,993) equity shares of Rs. 10/- each, fully paid,		24.50		12.25		24.50
Infosys Technologies (Shanghai) Co. Limited, China		23.01		—		4.55
Infosys Technologies (Australia) Pty Limited, Australia 1,01,08,869 (nil; 1,01,08,869) equity shares of A$0.11 par value, fully paid,		66.69		—		66.69
Infosys Consulting, Inc. USA 50,00,000 (nil; nil) common stock of US $1.00 par value, fully paid		21.97		—		—
		136.17		12.25		95.74
In other investments*		30.01		51.21		30.01
Less: Provision for investments		27.97		36.28		27.97
		2.04		14.93		2.04
Non-trade (unquoted), at the lower of cost and fair value, current investments
Liquid mutual funds *		926.76		449.81		929.60
		1,064.97		476.99		1,027.38
Aggregate of unquoted investments — carrying value / cost		1,064.97		476.99		1,027.38
* refer to note 22.3.19 for details of investments
5 DEFERRED TAX ASSETS
Fixed assets		29.99		23.05		26.89
Investments		3.00		8.20		6.60
Sundry debtors		2.78		2.62		2.14
		35.77		33.87		35.63
6 SUNDRY DEBTORS
Debts outstanding for a period exceeding six months
Unsecured
considered doubtful		12.23		14.16		9.07
Other debts
Unsecured
considered good (including dues from subsidiary companies)*		892.06		577.26		632.51
considered doubtful		5.84		4.79		4.29
		910.13		596.21		645.87
Less: Provision for doubtful debts		18.07		18.95		13.36
		892.06		577.26		632.51
* For details of dues from subsidiary companies, refer to note 22.3.7		0.05		—		—
Includes dues from companies where directors are interested		1.95		1.42		0.16
7 CASH AND BANK BALANCES
Cash on hand		—		0.07		—
Balances with scheduled banks
In current accounts *		156.29		93.63		179.25
In deposit accounts in Indian Rupees		919.95		1,142.54		1,299.28
Balances with non-scheduled banks**
In deposit accounts in foreign currency		—		10.49		0.04
In current accounts in foreign currency		175.54		135.98		159.44
		1,251.78		1,382.71		1,638.01
*includes balance in unclaimed dividend account		3.38		1.78		1.98
*includes balance in escrow account		—		0.81		0.04
**refer to note 22.3.16 for details of balances in non-scheduled banks

INFOSYS TECHNOLOGIES LIMITED

in Rs. crore

Schedules to the Balance Sheet as at			September 30, 2004		September 30, 2003		March 31, 2004
	8	LOANS AND ADVANCES
		Unsecured, considered good
		Advances
		prepaid expenses		32.85		25.52		37.32
		for supply of goods and rendering of services		6.59		2.02		5.83
		Others (including loans and advances to subsidiary companies)*		5.37		12.22		4.51
				44.81		39.76		47.66
		Unbilled revenues		121.94		84.81		92.86
		Advance income tax		275.80		197.45		209.98
		Loans and advances to employees **
		housing and other loans		67.77		101.28		83.26
		salary advances		38.00		26.79		33.62
		Electricity and other deposits		13.75		12.78		9.08
		Rental deposits		14.50		14.53		14.93
		Deposits with financial institutions and body corporate		236.36		307.15		201.39
		Other assets		—		2.08		0.44
				812.93		786.63		693.22
		Unsecured, considered doubtful
		Loans and advances to employees		0.23		0.54		0.09
				813.16		787.17		693.31
		Less: Provision for doubtful loans and advances to employees		0.23		0.54		0.09
				812.93		786.63		693.22
		* For details of advances to subsidiary companies, refer to note 22.3.7		0.99		—		0.85
		** includes dues by non-director officers of the company		0.04		—		—
		Maximum amounts due by non-director officers at any time during the period / year		0.04		0.06		0.06
	9	CURRENT LIABILITIES
		Sundry creditors
		for goods and services (including dues to subsidiary companies) *		25.42		0.65		11.36
		for accrued salaries and benefits
		salaries		16.49		12.57		14.58
		bonus and incentives		146.90		127.94		239.80
		unavailed leave		40.07		29.42		41.45
		for other liabilities
		provision for expenses		82.90		56.15		59.41
		retention monies*		14.72		5.97		6.88
		withholding and other taxes payable		47.48		24.30		34.70
		for purchase of intellectual property rights		20.62		20.27		19.21
		others		11.36		6.91		3.02
				405.96		284.18		430.41
		Advances received from clients		36.69		13.91		65.19
		Unearned revenue		100.90		71.12		62.86
		Loss on forward exchange contracts		19.99		—		—
		Unclaimed dividend		3.38		1.78		1.98
				566.92		370.99		560.44
		* For details of dues to subsidiary companies, refer to note 22.3.7		26.56		—		12.95
	10	PROVISIONS
		Proposed dividend		133.93		96.09		766.37
		Provision for
		tax on dividend		17.50		12.31		98.19
		income taxes		420.50		231.05		313.49
		post-sales client support and warranties		23.92		4.67		5.13
				595.85		344.12		1,183.18

INFOSYS TECHNOLOGIES LIMITED

in Rs. crore

			Quarter ended					Half year ended					Year ended
			September 30,					September 30,					March 31,
Schedules to Profit and Loss Account for the			2004		2003			2004		2003			2004
	11	SOFTWARE DEVELOPMENT EXPENSES
		Salaries and bonus including overseas staff expenses		674.45		482.59			1,271.79		937.37			2,015.47
		Staff welfare		4.13		2.86			7.48		5.99			13.17
		Contribution to provident and other funds		19.19		12.99			34.95		23.74			49.90
		Overseas travel expenses		61.10		43.07			117.48		84.68			168.19
		Consumables		4.15		2.05			6.50		3.77			8.94
		Cost of software packages
		for own use		26.23		21.47			46.81		35.07			64.84
		for service delivery to clients		6.04		2.48			9.55		12.34			16.04
		Cost of technical sub-contractors		86.21		7.61			159.16		34.29			109.89
		Computer maintenance		3.90		3.14			6.74		5.44			11.89
		Communication expenses		10.86		7.75			19.67		15.93			32.18
		Provision for post-sales client support and warranties		11.57		(0.32	)		18.79		(0.15	)		0.30
		Rent		2.13		1.47			2.95		1.47			4.50
				909.96		587.16			1,701.87		1,159.94			2,495.31
	12	SELLING AND MARKETING EXPENSES
		Salaries and bonus including overseas staff expenses		58.60		49.36			111.30		99.20			207.25
		Staff welfare		0.08		0.15			0.20		0.23			0.59
		Contribution to provident and other funds		0.34		0.79			0.71		1.17			1.73
		Overseas travel expenses		11.93		9.26			24.70		18.04			40.45
		Consumables		0.06		0.02			0.12		0.08			0.19
		Cost of software packages
		for own use		0.01		—			0.01		0.01			0.18
		Computer maintenance		—		0.01			—		0.02			0.02
		Communication expenses		0.01		—			0.02		—			0.01
		Traveling and conveyance		3.51		0.28			3.95		0.60			1.43
		Rent		2.57		3.94			5.57		6.90			15.19
		Telephone charges		1.44		1.19			2.52		2.29			5.06
		Professional charges		5.18		0.78			8.02		2.74			5.75
		Printing and stationery		0.30		0.25			0.53		0.52			0.99
		Advertisements		0.17		0.12			0.31		0.24			0.53
		Brand building		11.78		9.42			17.37		15.14			34.23
		Office maintenance		0.06		0.07			0.13		0.11			0.24
		Power and fuel		—		0.01			—		0.03			0.04
		Insurance charges		0.02		0.01			0.05		0.04			0.11
		Rates and taxes		—		—			0.03		0.03			0.08
		Bank charges and commission		—		—			—		0.01			0.02
		Commission charges		4.32		0.64			8.49		2.91			7.27
		Marketing expenses		2.52		1.76			6.04		2.61			5.99
		Sales promotion expenses		0.18		0.09			0.40		0.20			0.69
		Miscellaneous expenses		—		2.29			—		7.04			7.04
				103.08		80.44			190.47		160.16			335.08

INFOSYS TECHNOLOGIES LIMITED

in Rs. crore

			Quarter ended				Half year ended					Year ended
			September 30,				September 30,					March 31,
Schedules to Profit and Loss Account for the			2004		2003		2004			2003		2004
	13	GENERAL AND ADMINISTRATION EXPENSES
		Salaries and bonus including overseas staff expenses		21.06		17.36		41.12			34.26		73.11
		Contribution to provident and other funds		1.70		1.15		3.27			2.29		4.64
		Overseas travel expenses		2.12		1.87		4.17			3.57		6.36
		Traveling and conveyance		8.79		5.18		16.76			9.51		22.27
		Rent		4.97		3.66		8.99			10.77		19.19
		Telephone charges		10.95		7.47		19.59			14.76		29.21
		Professional charges		14.70		9.79		23.79			16.28		33.92
		Printing and stationery		1.89		1.05		3.18			3.39		5.87
		Advertisements		2.38		0.37		4.47			1.36		5.50
		Office maintenance		10.02		6.32		18.29			12.55		28.83
		Repairs to building		2.68		1.49		4.00			3.39		10.28
		Repairs to plant and machinery		1.54		1.51		3.11			2.60		4.85
		Power and fuel		9.66		7.19		18.51			14.39		28.68
		Insurance charges		7.05		6.06		14.17			11.19		23.73
		Rates and taxes		2.22		0.94		4.51			2.15		5.38
		Donations		4.83		3.52		9.05			7.02		14.29
		Auditor’s remuneration
		statutory audit fees		0.09		0.08		0.18			0.15		0.31
		certification charges		—		—		—			—		0.03
		others		—		—		—			—		0.24
		out-of-pocket expenses		—		—		0.01			0.01		0.02
		Provision for bad and doubtful debts		5.25		10.73		11.58			14.02		15.99
		Provision for doubtful loans and advances		0.09		0.12		0.11			0.13		0.14
		Bank charges and commission		0.33		0.16		0.57			0.35		0.73
		Commission to non-whole time directors		0.39		0.39		0.78			0.78		1.49
		Postage and courier		1.42		0.70		2.79			1.94		3.91
		Books and periodicals		0.70		0.34		1.28			0.58		1.51
		Research grants		0.09		0.12		0.19			0.18		0.54
		Freight charges		0.14		0.15		0.37			0.30		0.84
		Professional membership and seminar participation fees		1.37		0.65		2.82			1.27		3.57
		Miscellaneous expenses		0.35		0.35		0.36			0.71		1.42
				116.78		88.72		218.02			169.90		346.85
	14	OTHER INCOME
		Interest received on deposits with banks and others*		13.47		19.90		33.10			42.65		82.88
		Dividend received on investment in liquid mutual funds (non-trade unquoted)		8.30		3.53		16.94			3.53		17.40
		Miscellaneous income		2.28		1.97		4.26			3.81		7.68
		Exchange differences (refer to note 22.2)		6.18		18.88		(6.08	)		26.74		19.43
				30.23		44.28		48.22			76.73		127.39
		*Tax deducted at source		2.35		4.19		6.60			8.52		16.55
	15	PROVISION FOR TAXATION
		Current period/ year
		Income taxes		78.26		55.53		143.64			108.14		226.31
		Deferred taxes		0.24		4.47		(0.14	)		2.94		1.18
				78.50		60.00		143.50			111.08		227.49
		Prior period/ years		—		—		—			0.92		(0.49	)
				78.50		60.00		143.50			112.00		227.00

INFOSYS TECHNOLOGIES LIMITED

in Rs. crore

			Quarter ended						Half year ended						Year ended
			September 30,						September 30,						March 31,
Schedules to Cash Flow Statements for the			2004			2003			2004			2003			2004
	16	CHANGE IN LOANS AND ADVANCES
		As per the Balance Sheet		812.93			786.63			812.93			786.63			693.22
		Less: Deposits with financial institutions and body corporate, included in cash and cash equivalents		(201.36	)		(307.15	)		(201.36	)		(307.15	)		(201.39	)
		Advance income taxes separately considered		(275.80	)		(197.45	)		(275.80	)		(197.45	)		(209.98	)
				335.77			282.03			335.77			282.03			281.85
		Less: Opening balance considered		(308.80	)		(290.36	)		(281.85	)		(280.51	)		(280.51	)
				26.97			(8.33	)		53.92			1.52			1.34
	17	CHANGE IN CURRENT LIABILITIES AND PROVISIONS
		As per the Balance Sheet		1,162.77			715.11			1,162.77			715.11			1,743.62
		Add/ (Less): Provisions separately considered in the cash flow Statement
		Income taxes		(420.50	)		(231.05	)		(420.50	)		(231.05	)		(313.49	)
		Dividends		(133.93	)		(96.09	)		(133.93	)		(96.09	)		(766.37	)
		Dividend tax		(17.50	)		(12.31	)		(17.50	)		(12.31	)		(98.19	)
				590.84			375.66			590.84			375.66			565.57
		Less: Opening balance considered		(496.82	)		(359.08	)		(565.57	)		(320.07	)		(320.07	)
				94.02			16.58			25.27			55.59			245.50
	18	INCOME TAXES PAID
		Charge as per the Profit and Loss Account		78.50			60.00			143.50			112.00			227.00
		Add: Increase in advance income taxes		74.98			34.20			65.82			(92.54	)		(80.01	)
		Increase/(Decrease) in deferred taxes		(0.24	)		(4.47	)		0.14			(2.94	)		(1.18	)
		Less: (Increase)/Decrease in income tax provision		(58.74	)		(40.51	)		(107.01	)		43.76			(38.68	)
				94.50			49.22			102.45			60.28			107.13
	19	PURCHASE OF FIXED ASSETS AND CHANGE IN CAPITAL WORK-IN-PROGRESS
		As per the schedule 3 to Balance Sheet		197.05			51.05			263.30			141.76			302.95
		Less: Opening Capital work-in-progress		(283.07	)		(44.23	)		(203.48	)		(76.56	)		(76.56	)
		Add: Closing Capital work-in-progress		252.63			62.00			252.63			62.00			203.48
				166.61			68.82			312.45			127.20			429.87
	20	INVESTMENTS IN / DISPOSAL OF SECURITIES *
		As per the Balance Sheet		1,064.97			476.99			1,064.97			476.99			1,027.38
		Add: Provisions on investments		0.07			0.22			0.06			6.59			9.67
				1,065.04			477.21			1,065.03			483.58			1,037.05
		Less: Opening balance considered		(931.58	)		(127.38	)		(1,027.38	)		(33.20	)		(33.20	)
				133.46			349.83			37.65			450.38			1,003.85
		* refer to note 22.3.19 for investment and redemptions
	21	CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD / YEAR
		As per the Balance Sheet		1,251.78			1,382.71			1,251.78			1,382.71			1,638.01
		Add: Deposits with financial institutions and body corporate, included herein		201.36			307.15			201.36			307.15			201.39
				1,453.14			1,689.86			1,453.14			1,689.86			1,839.40

Schedules to the Financial Statements for the quarter and half year ended September 30, 2004

22 Significant accounting policies and notes on accounts

Company overview

Infosys Technologies Limited (Infosys or the company) along with its majority owned and controlled subsidiary, Proge on Limited, India (Progeon),and wholly owned subsidiaries Infosys Technologies (Australia) Pty. Limited (Infosys Australia), Infosys Technologies (Shanghai)Co. Limited (Infosys China) and Infosys Consulting, Inc., USA (Infosys Consulting), is a leading global information technology services company. The Company provides end-to-end business solutions that leverage technology thus enabling its clients to enhance business performance. The Company provides solutions that span the entire software life cycle encompassing consulting, design, development, re-engineering, maintenance, systems integration and package evaluation and implementation. In addition, the Company offers software products for the banking industry and business process management services.

22. 1 Significant accounting policies

22.1.1. Basis of preparation of financial statements

The accompanying financial statements are prepared in accordance with Indian Generally Accepted Accounting Principles (“GAAP”) under the historical cost convention on the accruals basis. GAAP comprises mandatory accounting standards issued by the Institute of Chartered Accountants of India (“ICAI”), the provisions of the Companies Act, 1956 and guidelines issued by the Securities and Exchange Board of India. Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.

Management evaluates all recently issued or revised accounting standards on an on-going basis. There are no accounting standards that although not mandatory for adoption as of the balance sheet date, have material impact on the financial statements.

22.1.2. Use of estimates

The preparation of the financial statements in conformity with GAAP requires Management to make estimates and assumptions that affect there ported balances of assets and liabilities and disclosures relating to contingent assets and liabilities as at the date of the financial statements and reported amounts of income and expenses during the period. Examples of such estimates include provisions for doubtful debts, future obligations under employee retirement benefit plans, income taxes, post-sales customer support and the useful lives of fixed assets and intangible assets.

Management periodically assess using external and internal sources whether there is an indication that an asset may be impaired. An impairment occurs where the carrying value exceeds the present value of future cash flows expected to arise from the continuing use of the asset and its eventual disposal. The impairment loss to be expensed is determined as the excess of the carrying amount over the higher of the asset’s net sales price or present value as determined above. Contingencies are recorded when it is probable that a liability will be incurred, and the amount can be reasonably estimated. Actual results could differ from those estimates.

22.1.3. Revenue recognition

Revenue from software development on fixed-price, fixed-time frame contracts where there is no uncertainty as to measurement or collectability of consideration is recognized as per the proportionate-completion method. On time-and-materials contracts, revenue is recognized as the related services are rendered. Annual Technical Services revenue and revenue from fixed-price maintenance contracts are recognized proportionately over the period in which services are rendered. Revenue from the sale of user licenses for software applications is recognized on transfer of the title in the user license, except in multiple element contracts, where revenue is recognized as per the proportionate-completion method.

Profit on sale of investments is recorded on transfer of title from the company and is determined as the difference between the sales price and the then carrying value of the investment. Lease rentals are recognized ratably on a straight line basis over the lease term. Interest is recognized using the time-proportion method, based on rates implicit in the transaction. Dividend income is recognized when the company’s right to receive dividend is established.

22.1.4. Expenditure

The cost of software purchased for use in the software development and services is charged to cost of revenues in the year of acquisition. Charges relating to non-cancelable, long-term operating leases are computed primarily on the basis of the lease rentals, payable as per the relevant lease agreements. Post-sales customer support costs are estimated by management, determined on the basis of past experience. The costs provided for are carried until expiry of the related warranty period. Provisions are made for all known losses and liabilities. Leave encashment liability is determined on the basis of an actuarial valuation.

22.1.5. Fixed assets, intangible assets and capital work-in-progress

Fixed assets are stated at cost, less accumulated depreciation. Direct costs are capitalized until fixed assets are ready for use. Capital work-in-progress comprises outstanding advances paid to acquire fixed assets, and the cost of fixed assets that are not yet ready for their intended use at the balance sheet date. Intangible assets are recorded at the consideration paid for acquisition.

22.1.6. Depreciation and amortization

Depreciation on fixed assets is applied on the straight-line basis over the useful lives of assets estimated by the Management. Depreciation for assets purchased/ sold during a period is proportionately charged. Individual low cost assets (acquired for less than Rs. 5,000/-) are entirely depreciated in the year of acquisition. Intangible assets are amortized over their respective individual estimated useful lives on a straight-line basis, commencing from the date the asset is available to the company for its use. The management estimates the useful lives for the various fixed assets as follows:-

Buildings	15 years
Plant and machinery	5 years
Computer equipment	2-5 years
Furniture and fixtures	5 years
Vehicles	5 years
Intellectual property rights	1-2 years

22.1.7. Retirement benefits to employees

22.1.7.a. Gratuity

In accordance with the Payment of Gratuity Act, 1972, Infosys provides for gratuity, a defined benefit retirement plan (the “Gratuity Plan”) covering eligible employees. The Gratuity Plan provides a lump sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee’s salary and the tenure of employment. Liabilities with regard to the Gratuity Plan are determined by actuarial valuation as of the balance sheet date, based upon which, the company contributes all the ascertained liabilities to the Infosys Technologies Limited Employees’ Gratuity Fund Trust (the “Trust”). Trustees administer contributions made to the Trust and contributions are invested in specific designated instruments, as permitted by law. Investments are also made in mutual funds that invest in the specific designated instruments.

22.1.7.b. Superannuation

Certain employees of Infosys are also participants of a defined contribution plan. The company makes monthly contributions under the superannuation plan (the “Plan”) to the Infosys Technologies Limited Employees Superannuation Fund Trust based on a specified percentage of each covered employee’s salary. The Plan provides for the payment of the aggregate contributions along with interest thereon at retirement, death, incapacitation or termination of employment. The company has no further obligations to the Plan beyond its monthly contributions.

22.1.7.c. Provident fund

Eligible employees receive benefits from a provident fund, which is a defined contribution plan. Aggregate contributions along with interest thereon is paid at retirement, death, incapacitation or termination of employment. Both the employee and the company make monthly contributions to the provident fund plan equal to a specified percentage of the covered employee’s salary.

Infosys contributes a part of the contributions to the Infosys Technologies Limited Employees’ Provident Fund Trust. The remaining contributions are made to a government administered provident fund. The company has no further obligations under the provident fund plan beyond its monthly contributions.

22.1.8. Research and development

Revenue expenditure incurred on research and development is expensed as incurred. Capital expenditure incurred on research and development is depreciated over the estimated useful lives of the related assets.

22.1.9. Foreign currency transactions

Revenue from overseas clients and collections deposited in foreign currency bank accounts are recorded at the exchange rate as of the date of the respective transactions. Expenditure in foreign currency is accounted at the exchange rate prevalent when such expenditure is incurred. Disbursements made out of foreign currency bank accounts are reported at a rate that approximates the actual monthly average rate. Exchange differences are recorded when the amount actually received on sales or actually paid when expenditure is incurred, is converted into Indian Rupees. The exchange differences arising on foreign currency transactions are recognized as income or expense in the period in which they arise.

Fixed assets purchased at overseas offices are recorded at cost, based on the exchange rate as of the date of purchase. The charge for depreciation is determined as per the company’s accounting policy.

Monetary current assets and monetary current liabilities that are denominated in foreign currency are translated at the exchange rate prevalent at the date of the balance sheet. The resulting difference is also recorded in the profit and loss account.

22.1.10. Forward contracts in foreign currencies

The company uses forward exchange contracts to hedge its exposure to movements in foreign exchange rates. The use of these forward exchange contracts reduces the risk or cost to the company and the company does not use the forward exchange contracts for trading or speculation purposes.

The company records the gain or loss on effective hedges in the foreign currency fluctuation reserve until the transactions are complete. On completion the gain or loss is transferred to the profit and loss account of that period. To designate a forward contract as an effective hedge, Management objectively evaluates and evidences with appropriate supporting documents at the inception of each contract whether the contract is effective in achieving off setting cash flows attributable to the hedged risk. In the absence of an effective hedge, a gain or loss is recognized in the profit and loss account.

22.1.11. Income tax

Income taxes are computed using the tax effect accounting method, where taxes are accrued in the same period the related revenue and expenses arise. A provision is made for income tax annually based on the tax liability computed, after considering tax allowances and exemptions. Provisions are recorded when it is estimated that a liability due to disallowances or other matters is probable.

The differences that result between the profit considered for income taxes and the profit as per the financial statements are identified, and there after a deferred tax asset or deferred tax liability is recorded for timing differences, namely the differences that originate in one accounting period and reverse in another, based on the tax effect of the aggregate amount being considered. The tax effect is calculated on the accumulated timing differences at the end of an accounting period based on prevailing enacted or substantially enacted regulations. Deferred tax assets are recognized only if there is reasonable certainty that they will be realized and are reviewed for the appropriateness of their respective carrying values at each balance sheet date. The income tax provision for the interim period is made based on the best estimate of the annual average tax rate expected to be applicable for the full fiscal year.

22.1.12. Earnings per share

In determining earnings per share, the company considers the net profit after tax and includes the post tax effect of any extra-ordinary item. The number of shares used in computing basic earnings per share is the weighted average number of shares outstanding during the period. The number of shares used in computing diluted earnings per share comprises the weighted average shares considered for deriving basic earnings per share, and also the weighted average number of equity shares that could have been issued on the conversion of all dilutive potential equity shares. The diluted potential equity shares are adjusted for the proceeds receivable, had the shares been actually issued at fair value (i.e. the average market value of the outstanding shares). Dilutive potential equity shares are deemed converted as of the beginning of the period, unless issued at a later date. The number of shares and potentially dilutive equity shares are adjusted for any stock splits and bonus shares issued effected prior to the approval of the financial statements by the board of directors.

22.1.13. Investments

Trade investments are the investments made to enhance the company’s business interests. Investments are either classified as current or long-term based on the Management’s intention at the time of purchase. Current investments are carried at the lower of cost and fair value. Cost for overseas investments comprises the Indian Rupee value of the consideration paid for the investment. Long-term investments are carried at cost and provisions recorded to recognize any decline, other than temporary, in the carrying value of each investment.

22.1.14. Cash flow statement

Cash flows are reported using the indirect method, whereby net profit before tax is adjusted for the effects of transactions of a non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from regular revenue generating, investing and financing activities of the company are segregated. Cash flows in foreign currencies are accounted at average monthly exchange rates that approximate the actual rates of exchange prevailing at the dates of the transactions.

22.2 Change in accounting policy

Accounting standard 11, “The effect of changes in foreign exchange rates”, was revised with effect from April 1, 2004 and prescribes accounting for forward exchange contracts based on whether these are entered into for hedging purposes or for trading /speculation purposes. Further, it has been recently clarified that the revised standard does not cover forward exchange contracts entered in to hedge the foreign currency risk of a firm commitment or a highly probable forecast transaction. Upto March 31, 2004, such segregation was not required and the difference between the forward rate and the exchange rate on the date of the transaction was recognized as income or expense over the life of the contract.

The Company has adopted the revised accounting standard effective April 1, 2004 to the extent applicable in respect of outstanding forward exchange contracts. The forward exchange contracts constitute hedges from an economic perspective, and the Company has decided to account for these forward exchange contracts based on their designation as ‘effective hedges’ or ‘not effective’. To designate a forward contract as an effective hedge, management objectively evaluates and evidences with appropriate supporting documentation at the inception of each forward contract, whether these forward contracts are effective in achieving offsetting cash flows attributable to the hedged risk or not. The gain or loss on effective hedges is recorded in the foreign currency fluctuation reserve until the hedged transactions occur and are then recognized in the profit and loss account. In the absence of an effective hedge, the gain or loss is recognized in the profit and loss account.

Gains and losses on forward exchange contracts are computed by multiplying the foreign currency amount of the forward exchange contract by the difference between the forward rate available at the reporting date for the remaining maturity of the contract and the contracted forward rate (or the forward rate last used to measure a gain or loss on that contract for an earlier period). The Company also assesses on an ongoing basis at the end of each reporting period whether designated hedges are effective and prospectively reclassifies the hedge as necessary.

Consequent to the change in the accounting policy, the profits for the quarter and half year ended September 30, 2004 are higher by Rs. 10.75 crore and lower by Rs. 21.61 crore respectively.

22.3 Notes on accounts

All amounts in the financial statements are presented in Rupees 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’s / year’s figures have been regrouped / reclassified, wherever necessary to conform to the current period’s presentation.

22.3.1 Aggregate expenses

The following are the aggregate amounts incurred on certain specific expenses that are required to be disclosed under Schedule VI to the Companies Act, 1956.

	Quarter ended					Half year ended					Year ended
	September 30,					September 30,					March 31,
	2004		2003			2004		2003			2004
Salaries and bonus including overseas staff expenses		754.11		549.31			1,424.21		1,070.83			2,295.83
Contribution to provident and other funds		21.23		14.93			38.93		27.20			56.27
Staff welfare		4.21		3.01			7.68		6.22			13.76
Overseas travel expenses		75.15		54.20			146.35		106.29			215.00
Consumables		4.21		2.07			6.62		3.85			9.13
Cost of software packages
for own use		26.24		21.47			46.82		35.08			65.02
for service delivery to clients		6.04		2.48			9.55		12.34			16.04
Computer maintenance		3.90		3.15			6.74		5.46			11.91
Communication expenses		10.87		7.75			19.69		15.93			32.19
Cost of technical sub-contractors		86.21		7.61			159.16		34.29			109.89
Provision for post-sales client support and warranties		11.57		(0.32	)		18.79		(0.15	)		0.30
Traveling and conveyance		12.30		5.46			20.71		10.11			23.70
Rent		9.67		9.07			17.51		19.14			38.88
Telephone charges		12.39		8.66			22.11		17.05			34.27
Professional charges		19.88		10.57			31.81		19.02			39.67
Printing and stationery		2.19		1.30			3.71		3.91			6.86
Advertisements		2.55		0.49			4.78		1.60			6.03
Office maintenance		10.08		6.39			18.42		12.66			29.07
Repairs to building		2.68		1.49			4.00		3.39			10.28
Repairs to plant and machinery		1.54		1.51			3.11		2.60			4.85
Power and fuel		9.66		7.20			18.51		14.42			28.72
Brand building		11.78		9.42			17.37		15.14			34.23
Insurance charges		7.07		6.07			14.22		11.23			23.84
Rates and taxes		2.22		0.94			4.54		2.18			5.46
Commission charges		4.32		0.64			8.49		2.91			7.27
Donations		4.83		3.52			9.05		7.02			14.29
Auditor’s remuneration
statutory audit fees		0.09		0.08			0.18		0.15			0.31
certification charges		—		—			—		—			0.03
others		—		—			—		—			0.24
out-of-pocket expenses		—		—			0.01		0.01			0.02
Provision for bad and doubtful debts		5.25		10.73			11.58		14.02			15.99
Provision for doubtful loans and advances		0.09		0.12			0.11		0.13			0.14
Bank charges and commission		0.33		0.16			0.57		0.36			0.75
Commission to non-whole time directors		0.39		0.39			0.78		0.78			1.49
Postage and courier		1.42		0.70			2.79		1.94			3.91
Books and periodicals		0.70		0.34			1.28		0.58			1.51
Research grants		0.09		0.12			0.19		0.18			0.54
Freight charges		0.14		0.15			0.37		0.30			0.84
Professional membership and seminar participation fees		1.37		0.65			2.82		1.27			3.57
Marketing expenses		2.52		1.76			6.04		2.61			5.99
Sales promotion expenses		0.18		0.09			0.40		0.20			0.69
Miscellaneous expenses		0.35		2.64			0.36		7.75			8.46
		1,129.82		756.32			2,110.36		1,490.00			3,177.24

22.3.2. Capital commitments and contingent liabilities

				As at
	September 30, 2004			September 30, 2003			March 31, 2004
Estimated amount of unexecuted capital contracts (net of advances and deposits)		254.11			94.59			192.49
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		12.74			8.30			11.23
Claims against the company, not acknowledged as debts		4.53			4.51			4.53
Forward contracts outstanding
In US$	US$	180,000,000		US$	139,000,000		US$	143,000,000
(Equivalent approximate in Rs. crore)		(Rs. 812.49	)		(Rs. 647.56	)		(Rs. 643.93	)
Unamortized income		—			3.04			3.13

In the year ended March 31, 2004, Ms. Jennifer Griffith, a former employee, filed a lawsuit against the company and its former director, Mr. Phaneesh Murthy. The lawsuit was served on the company during the quarter ended December 31, 2003. The trial of the lawsuit is scheduled shortly. Based on its present knowledge of facts, management estimates that the lawsuit will not have material impact on the result of operation or financial position of the company.

22.3.3 Quantitative details

The company is primarily engaged in the development and maintenance of computer software. The production and sale of such software cannot be expressed in any generic unit. Hence, it is not possible to give the quantitative details of sales and certain information as required under paragraphs 3, 4C and 4D of part II of Schedule VI to the Companies Act, 1956.

22.3.4. Imports (valued on the cost, insurance and freight basis)

	Quarter ended				Half year ended				Year ended
	September 30,				September 30,				March 31,
	2004		2003		2004		2003		2004
Capital goods		26.22		14.11		62.14		34.88		70.64
Software packages		0.97		3.70		2.59		3.81		10.26
		27.19		17.81		64.73		38.69		80.90

22.3.5. Activity in foreign currency

	Quarter ended				Half year ended				Year ended
	September 30,				September 30,				March 31,
	2004		2003		2004		2003		2004
Earnings in foreign currency (on the receipts basis)
Income from software services and products		1,593.13		1,095.51		2,848.58		2,098.64		4,531.54
Interest received on deposits with banks		0.49		0.23		0.73		0.52		1.02
Expenditure in foreign currency (on the payments basis)
Travel expenses		55.59		40.18		108.88		75.72		165.34
Professional charges		7.51		7.07		14.14		19.16		30.87
Other expenditure incurred overseas for software development		646.22		420.23		1,249.77		827.79		1,730.43
Net earnings in foreign currency (on the receipts and payments basis)
Net earnings in foreign exchange		884.30		628.26		1,476.52		1,176.49		2,605.92

22.3.6. Obligations on long-term, non-cancelable operating leases

The lease rentals charged during the period and maximum obligations on long-term non-cancelable operating leases payable as per the rentals stated in the respective agreements are as follows:-

	Quarter ended				Half year ended				Year ended
	September 30,				September 30,				March 31,
	2004		2003		2004		2003		2004
Lease rentals recognized during the period/year		9.66		9.07		17.50		19.14		38.88

			As at
Lease obligations	September 30, 2004		September 30, 2003		March 31, 2004
Within one year of the balance sheet date		22.65		27.49		25.04
Due in a period between one year and five years		44.20		59.16		56.74
Due after five years		3.03		7.39		4.82
		69.88		94.04		86.60

The operating lease arrangements extend for a maximum of ten years from their respective dates of inception and relates to rented overseas premises and car rentals.

Fixed assets stated below have been provided on operating lease to Progeon, a subsidiary company, as at September 30, 2004, September 30, 2003 and March 31, 2004

			Accumulated		Net book
Particulars	Cost		depreciation		value
Building		12.56		2.41		10.15
		10.24		0.96		9.28
		12.57		1.99		10.58
Plant and machinery		5.45		3.41		2.04
		3.70		1.12		2.58
		5.44		2.96		2.48
Computers		1.32		1.20		0.12
		1.23		0.76		0.47
		1.24		1.07		0.17
Furniture & fixtures		9.47		6.28		3.19
		5.60		1.59		4.01
		9.16		5.48		3.68
Total		28.80		13.30		15.50
		20.77		4.43		16.34
		28.41		11.50		16.91

The aggregate depreciation charged on the above during the quarter and half year ended September 30, 2004 amounted to Rs. 0.89 and Rs. 1.80 respectively (for the quarter and half year ended September 30, 2003 was Rs. 1.08 and Rs. 1.74 and for the year ended March 31, 2004 was Rs. 4.41).

The company has entered in to non-cancelable operating lease arrangement for premises leased to Progeon. The lease for premises extends for periods between 36 months and 70 months from their respective dates of inception. The lease rentals received are included as a component of sale of services (refer note 22.3.7 below). Lease rental commitments on contract from Progeon are as given below:-

			As at
Lease rentals	September 30, 2004		September 30, 2003		March 31, 2004
Within one year of the balance sheet date		6.05		8.02		8.02
Due in a period between one year and five years		5.48		9.29		9.48
Due after five years		—		—		—
		11.53		17.31		17.50

The rental income from Progeon for the quarter and half year ended September 30, 2004 amounted to Rs. 2.02 and Rs. 3.89 respectively (for the quarter and half year ended September 30, 2003 was Rs. 1.61 and Rs. 2.82 and for the year ended March 31, 2004 was Rs. 6.49).

22.3.7. Related party transactions

The company entered into related party transactions with Progeon, a subsidiary company. The transactions in addition to the lease commitments described in note 22.3.6. are set out below:-

	Quarter ended				Half year ended				Year ended
	September 30,				September 30,				March 31,
Particulars	2004		2003		2004		2003		2004
Capital transactions:
Financing transactions - amount paid to Progeon for issue of nil (nil; 1,22,50,000) fully paid equity shares of Rs 10/- each at par		—		—		—		—		12.25
Rental deposit received		—		1.61		—		1.61		1.61
Revenue transactions:
Purchase of services		0.18		—		0.30		0.14		0.70
Shared services including facilities and personnel		0.10		—		0.10		—		—
		0.28		—		0.40		0.14		0.70
Sale of services
Business consulting services		0.04		0.03		0.08		0.03		0.12
Shared services including facilities and personnel		3.52		3.40		7.32		6.41		12.70
		3.56		3.43		7.40		6.44		12.82

The company entered into related party transactions with Infosys Australia, a subsidiary company. The transactions are set out below: -

	Quarter ended				Half year ended				Year ended
	September 30,				September 30,				March 31,
Particulars	2004		2003		2004		2003		2004
Capital transactions:
Purchase of fixed assets		—		—		—		—		3.50
Transfer of advances		—		—		—		—		2.33
Revenue transactions:
Purchase of services		62.63		—		121.99		—		47.20
Sale of services
Software services & products-overseas		—		—		0.12		—		2.93
Shared services including facilities and personnel		—		—		—		—		—
		—		—		0.12		—		2.93

The company entered into related party transactions with Infosys Shanghai, a subsidiary company. The transactions are set out below: -

	Quarter ended				Half year ended				Year ended
	September 30,				September 30,				March 31,
Particulars	2004		2003		2004		2003		2004
Capital transactions:
Financing transactions - amount remitted towards capital		18.46		—		18.46		—		4.55
Revenue transactions:
Purchase of services		0.12		—		0.12		—		—
Sale of services
Software services & products-overseas		—		—		—		—		—
Shared services including facilities and personnel		—		—		—		—		—
		—		—		—		—		—

The company entered into related party transactions with Infosys Consulting, a subsidiary company. The transactions are set out below.

	Quarter ended				Half year ended				Year ended
	September 30,				September 30,				March 31,
Particulars	2004		2003		2004		2003		2004
Capital transactions:
Financing transactions - amount paid to Infosys Consulting for issue of 50,00,000 (nil; nil) common stock of US$1.00 par value, fully paid		—		—		21.97		—		—
Revenue transactions:
Purchase of services		0.57		—		0.57		—		—
Sale of services
Software services & products-overseas		0.16		—		0.16		—		—
Shared services including facilities and personnel		—		—		—		—		—
		0.160		—		0.16		—		—

Sundry Debtors includes dues from subsidiary companies, as given below: -

			As at
	September 30, 2004		September 30, 2003		March 31, 2004
Progeon Limited, India		—		—		—
Infosys Technologies (Shanghai) Company Limited, China		—		—		—
Infosys Technologies (Australia) Pty Limited, Australia		0.05		—		—
Infosys Consulting, Inc., USA		—		—		—
		0.05		—		—

Sundry Creditors includes dues to subsidiary companies, as given below: -

	As at
	September 30, 2004		September 30, 2003		March 31, 2004
Progeon Limited, India		1.61		—		1.61
Infosys Technologies (Shanghai) Company Limited, China		0.12		—		—
Infosys Technologies (Australia) Pty Limited, Australia		24.83		—		11.34
Infosys Consulting, Inc., USA		—		—		—
		26.56		—		12.95

Loans and Advances includes dues from subsidiary companies, as given below: -

	As at
	September 30, 2004		September 30, 2003		March 31, 2004
Progeon Limited, India		—		—		—
Infosys Technologies (Shanghai) Company Limited, China		0.99		—		0.85
Infosys Technologies (Australia) Pty Limited, Australia		—		—		—
Infosys Consulting, Inc., USA		—		—		—
		0.99		—		0.85

Maximum balances of loans and advances due from subsidiary companies : -

	Quarter ended September 30,				Half year ended September 30,				Year ended March 31,
Particulars	2004		2003		2004		2003		2004
Progeon Limited, India		—		—		—		—		—
Infosys Technologies (Shanghai) Company Limited, China		0.99		—		0.99		—		—
Infosys Technologies (Australia) Pty Limited, Australia		—		—		—		—		—
Infosys Consulting, Inc., USA		—		—		—		—		—

During the quarter and half year ended September 30, 2004, an amount of Rs. 4.00 and Rs. 8.00 has been donated to Infosys Foundation, a not-for-profit trust, in which certain directors of the company are trustees. Donation to the foundation for the quarter and half year ended September 30, 2003 and year ended March 31, 2004 were Rs. 3.50, Rs. 7.00 and Rs. 12.00 respectively.

Details of the transactions with the companies in which certain directors of the company are also director: -

	Quarter ended September 30,				Half year ended September 30,				Year ended March 31,
Particulars	2004		2003		2004		2003		2004
Purchase of services
SupplyChainge Inc., USA		—		—		—		0.71		0.71
Sale of services
ICICI Bank Limited, India		0.52		3.61		1.80		4.50		6.54

The company has an alliance with SupplyChainge Inc., USA to jointly market and deliver lead-time optimization solutions. Prof. Marti G. Subrahmanyam, an external director of the company, is also a director on the board of ICICI Bank Limited, India and SupplyChainge Inc., USA.

22.3.8. Transactions with key management personnel

Key management personnel comprise our directors and statutory officers.

Particulars of remuneration and other benefits provided to key management personnel during the quarter and half year ended September 30, 2004 and 2003 and the year ended March 31, 2004 are set out below:-

			Contributions
			to provident and		Perquisites		Total
Name	Salary		other funds		and incentives		Remuneration
Chairman and Chief Mentor
N R Narayana Murthy		0.03		0.01		0.03		0.07
		0.02		0.01		0.01		0.04
		0.06		0.02		0.07		0.15
		0.04		0.02		0.04		0.10
		0.08		0.04		0.10		0.22
Chief Executive Officer, President and Managing Director
Nandan M Nilekani		0.03		0.01		0.03		0.07
		0.02		0.01		0.01		0.04
		0.06		0.02		0.07		0.15
		0.05		0.02		0.05		0.12
		0.09		0.04		0.10		0.23
Chief Operating Officer and Deputy Managing Director
S Gopalakrishnan		0.03		0.02		0.02		0.07
		0.02		0.01		0.01		0.04
		0.06		0.03		0.06		0.15
		0.04		0.02		0.05		0.11
		0.08		0.04		0.10		0.22
Whole-time Directors
K Dinesh		0.03		0.01		0.02		0.06
		0.03		0.01		0.01		0.05
		0.06		0.02		0.06		0.14
		0.05		0.02		0.05		0.12
		0.09		0.04		0.10		0.23
S D Shibulal		0.22		—		—		0.22
		0.28		—		—		0.28
		0.41		—		0.11		0.52
		0.44		—		0.12		0.56
		0.76		—		0.23		0.99
T V Mohandas Pai		0.05		0.01		0.05		0.11
Chief Financial Officer		0.03		0.01		0.02		0.06
		0.09		0.03		0.14		0.26
		0.05		0.02		0.05		0.12
		0.11		0.04		0.16		0.31
Srinath Batni		0.04		0.01		0.04		0.09
		0.03		0.01		0.02		0.06
		0.08		0.03		0.12		0.23
		0.05		0.02		0.04		0.11
		0.10		0.04		0.13		0.27

					Reimbursement of
Name	Commission		Sitting fees		expenses		Total remuneration
Non-Whole time Directors
Deepak M Satwalekar		0.04		—		—		0.04
		0.05		—		0.01		0.06
		0.09		—		0.01		0.10
		0.09		0.01		0.01		0.11
		0.21		0.01		0.01		0.23
Marti G Subrahmanyam		0.05		—		0.01		0.06
		0.04		—		0.02		0.06
		0.10		—		0.04		0.14
		0.09		—		0.03		0.12
		0.19		—		0.07		0.26
Philip Yeo		0.05		—		—		0.05
		0.04		—		—		0.04
		0.10		—		—		0.10
		0.07		—		—		0.07
		0.15		—		0.01		0.16
Jitendra Vir Singh		—		—		—		—
		—		—		—		—
		—		—		—		—
		—		—		—		—
		0.08		—		—		0.08
Omkar Goswami		0.05		—		—		0.05
		0.04		0.01		—		0.05
		0.10		—		0.01		0.11
		0.08		0.01		0.01		0.10
		0.18		0.01		0.01		0.20
Larry Pressler		0.05		—		—		0.05
		0.03		—		—		0.03
		0.10		—		—		0.10
		0.07		—		—		0.07
		0.16		—		0.01		0.17
Rama Bijapurkar		0.05		—		—		0.05
		0.04		—		—		0.04
		0.09		0.01		—		0.10
		0.08		—		0.01		0.09
		0.19		0.01		0.01		0.21
Claude Smadja		0.05		0.01		0.05		0.11
		0.03		—		0.03		0.06
		0.10		0.01		0.07		0.18
		0.06		—		0.06		0.12
		0.15		—		0.09		0.24
Sridar A Iyengar		0.05		—		—		0.05
		0.04		—		0.02		0.06
		0.10		—		0.04		0.14
		0.08		—		0.07		0.15
		0.18		0.01		0.13		0.32

Other Senior Management Personnel

Particulars of remuneration and other benefits provided to other key management personnel during the quarter and half year ended September 30, 2004, 2003 and the year ended March 31, 2004 are set out below:-

			Contributions to		Perquisites						Outstanding
			provident and		and		Total		Total loans		loans and
Name	Salary		other funds		incentives		remuneration		granted		advances
V Balakrishnan,		0.03		0.01		0.07		0.11		0.04		0.04
Company Secretary		0.03		0.01		0.04		0.08		—		—
		0.06		0.02		0.18		0.26		0.04		0.04
		0.06		0.02		0.10		0.18		—		—
		0.12		0.04		0.22		0.38		—		—

In addition, the details of the options granted to non-whole time directors and other senior officers during the quarter and half year ended September 30, 2004 and 2003 and year ended March 31, 2004 are as follows:-

				Number of
				options		Exercise price		Expiration of
Name	Date of Grant	Option plan		granted		(in Rs.)		options
Non-Whole time Directors
Sridar A Iyengar	April 10, 2003		1999		8,000		762.44	April 9, 2013

22.3.9. Exchange differences

Other income includes exchange differences of Rs. 6.18 and Rs. (6.08) for the quarter and half year ended September 30, 2004 (for the quarter and half year ended September 30, 2003, the corresponding amounts were Rs. 18.88 and Rs. 26.74 and for the year ended March 31, 2004, the amount was Rs. 19.43 ).

22.3.10. Research and development expenditure

	Quarter ended September 30,				Half year ended September 30,				Year ended March 31,
	2004		2003		2004		2003		2004
Capital		—		0.24		—		0.32		1.48
Revenue		16.19		10.97		30.12		16.58		43.06
		16.19		11.21		30.12		16.90		44.54

22.3.11. Unearned revenue

Unearned revenue as at September 30, 2004 amounting to Rs. 100.90 (Rs. 71.12 as at September 30, 2003 and Rs. 62.86 as at March 31, 2004) primarily consists of client billings on fixed-price, fixed-time-frame contracts for which the related costs have not yet been incurred.

22.3.12. Dues to small-scale industrial undertakings

As at September 30, 2004, September 30, 2003 and March 31, 2004, the company has no outstanding dues to small-scale industrial undertaking.

22.3.13. Stock option plans

The company currently has three stock option plans. These are summarized below.

1994 Stock Option Plan (“the 1994 Plan”)

The 1994 plan elapsed in fiscal year 2000 and, consequently, no further grants will be made under this plan.

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. The Government of India approved 29,40,000 ADSs representing 14,70,000 equity shares for issue under the Plan. The options may be issued at an exercise price that is not less than 90% of the fair market value of the underlying equity share on the date of the grant. The 1998 Plan automatically expires in January 2008, unless terminated earlier. All options under the 1998 Plan are exercisable for ADSs representing equity shares. A compensation committee comprising independent members of the board of directors administers the 1998 Plan. All options have been granted at 100% of fair market value.

	Quarter ended September 30,						Half year ended September 30,						Year ended March 31,
Number of options granted, exercised and forfeited	2004			2003			2004			2003			2004
Options outstanding, beginning of period/year		37,41,476			48,68,794			38,71,010			50,06,812			50,06,812
Granted during the period/year		,0			83,200			,0			1,90,800			1,91,800
Exercised during the period/year		(62,140	)		(45,288	)		(83,768	)		(70,320	)		(5,17,740	)
Forfeited during the period/year		22,714			(98,284	)		(85,192	)		(3,18,870	)		(8,09,862	)
Options outstanding, end of period/year		37,02,050			48,08,422			37,02,050			48,08,422			38,71,010

1999 Stock Option Plan (“the 1999 Plan”)

In fiscal 2000, the company instituted the 1999 Plan. The shareholders and the board of directors approved the plan in June 1999, which provides for the issue of 66,00,000 equity shares to the employees. The compensation committee administers the 1999 Plan. Options will be issued to employees at an exercise price that is not less than the fair market value.

	Quarter ended September 30,						Half year ended September 30,						Year ended March 31,
Number of options granted, exercised and forfeited	2004			2003			2004			2003			2004
Options outstanding, beginning of period/year		1,71,62,132			2,05,43,044			1,83,62,120			2,02,44,684			2,02,44,684
Granted during the period/year		,0			1,40,600			,0			7,44,800			7,71,200
Exercised during the period/year		(3,26,394	)		(33,136	)		(12,12,678	)		(33,256	)		(10,74,172	)
Forfeited during the period/year		(2,56,841	)		(3,97,148	)		(5,70,545	)		(7,02,868	)		(15,79,592	)
Options outstanding, end of period/year		1,65,78,897			2,02,53,360			1,65,78,897			2,02,53,360			1,83,62,120

The aggregate options considered for dilution are set out in note 22.3.24

22.3.14. Pro forma disclosures relating to the Employee Stock Option Plans (“ESOPs)

The Securities and Exchange Board of India (“SEBI”) issued the Employee Stock Option Scheme and Employee Stock Purchase Scheme Guidelines in 1999, which is applicable to all stock option schemes established on or 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 of the options over the exercise price of the options, including up-front payments, if any, is to be recognized and amortized on a straight-line basis over the vesting period. All options under the 1998 and 1999 stock option plans have been issued at fair market value, hence there are no compensation costs.

The company’s 1994 stock option plan was established prior to the SEBI guidelines on stock options.

Had the stock compensation costs for this stock option plan been determined as per the guidelines issued by SEBI, the company’s reported net profit would have been reduced to the pro forma amounts indicated below:-

	Quarter ended September 30,				Half year ended September 30,				Year ended March 31,
	2004		2003		2004		2003		2004
Net profit:
- As reported		454.85		300.16		849.32		578.28		1,243.47
- Adjusted pro forma		454.85		295.24		849.32		568.33		1,230.57

22.3.15. Income taxes

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.

Most of Infosys’ operations are conducted through Software Technology Parks (“STPs”). Income from STPs are tax exempt for the earlier of 10 years commencing from the fiscal year in which the unit commences software development, or March 31, 2009.

22.3.16. Cash and bank balances

Details of balances kept with non-scheduled banks as on balance sheet dates and the maximum balances kept with non-scheduled banks during the period/year are as follows:-

			As at
Balances with non-scheduled banks	September 30, 2004		September 30, 2003		March 31, 2004
In current accounts
ABN Amro Bank , Taipei, Taiwan		0.04		0.67		0.94
Bank of America, Palo Alto, USA		103.99		95.56		108.03
Bank of America, Dallas, USA		—		1.82		—
Bank of China, Beijing China		0.05		0.02		0.03
Bank of Melbourne, Melbourne, Australia		—		0.19		0.23
Citibank NA, Melbourne, Australia		18.95		1.73		20.21
Citibank NA, Hong Kong		0.01		0.02		0.09
Citibank NA, Singapore		0.43		0.29		0.47
Citibank NA, Sydney, Australia		—		—		0.04
Citibank NA, Tokyo		0.06		0.09		0.08
Citibank NA, Sharjah UAE		0.08		0.05		0.03
Deutsche Bank, Brussels, Belgium		13.10		1.96		3.30
Deutsche Bank, Frankfurt, Germany		4.08		5.18		2.03
Deutsche Bank, Netherlands		0.23		0.36		0.05
Deutsche Bank, Paris, France		1.73		0.34		0.30
Deutsche Bank, Zurich, Switzerland		1.15		2.48		0.40
HSBC Bank PLC, Croydon, UK		12.66		13.98		11.17
ICICI Bank UK Ltd.		8.78		—		—
Nordbanken, Stockholm, Sweden		0.06		—		0.02
Nova Scotia Bank, Toronto, Canada		0.11		6.69		5.33
Royal Bank of Canada, Canada		8.50		2.13		6.21
Svenska Handeb Bank, Sweden		1.09		0.37		0.26
UFJ Bank, Tokyo, Japan		0.44		2.05		0.22
		175.54		135.98		159.44

	Quarter ended				Half year ended				Year ended
	September 30,				September 30,				March 31,
Maximum balance held in non-scheduled banks during the period/year	2004		2003		2004		2003		2004
In current accounts
ABN Amro Bank, Taipei, Taiwan		0.96		0.69		0.96		0.69		0.96
Bank of America, Palo Alto, USA		252.58		262.55		252.58		262.55		263.45
Bank of America, Dallas, USA		—		6.73		—		6.73		6.98
Bank of China, Beijing China		0.08		0.06		0.08		0.06		0.13
Bank of Melbourne, Melbourne, Australia		—		1.15		0.23		2.87		3.20
Citibank NA, Melbourne, Australia		52.54		3.19		52.54		3.19		20.21
Citibank NA, Hong Kong		0.16		0.28		0.16		0.28		0.41
Citibank NA, Singapore		0.47		0.35		0.48		0.35		0.57
Citibank NA, Sydney, Australia		—		—		0.04		—		15.31
Citibank NA, Tokyo		6.64		4.61		6.67		5.72		5.74
Citibank NA, Sharjah, UAE		0.16		0.10		0.16		0.10		0.11
Deutsche Bank, Brussels, Belgium		33.16		11.73		33.16		13.28		18.24
Deutsche Bank, Frankfurt, Germany		19.16		10.91		27.19		10.99		22.37
Deutsche Bank, Netherlands		0.48		0.59		1.05		0.72		1.69
Deutsche Bank, Paris, France		3.68		2.97		3.68		2.97		2.97
Deutsche Bank, Zurich, Switzerland		8.26		2.74		8.26		2.74		14.69
Fleet Bank (Bank of Boston), Boston, USA		—		—		—		0.97		0.97
HSBC Bank PLC, Croydon, UK		30.73		13.98		47.30		19.10		38.00
ICICI Bank, Uk Limited. London		30.87		—		30.87		—		—
Merrill Lynch Esop A/C		5.27		—		5.27		—		—
National Bank of Sharjah, UAE		—		—		—		0.08		0.08
Nordbanken, Stockholm, Sweden		0.27		0.23		0.27		0.41		0.41
Nova Scotia Bank, Toronto, Canada		6.37		6.69		6.37		6.69		8.69
Royal Bank of Canada, Canada		9.66		2.13		9.66		2.13		10.09
Svenska Handels Bank, Sweden		2.58		1.66		2.95		2.36		4.25
UFJ Bank, Tokyo, Japan		0.44		2.67		0.71		2.67		2.67

The cash and bank balances include interest accrued but not due on fixed deposits amounting to Rs. 4.95 for the half year ended September 30, 2004 (Rs. 7.54 for the half year ended September 30, 2003 and Rs. 7.28 for the year ended March 31, 2004).

22.3.17. Loans and advances

“Advances” mainly comprises prepaid travel and per-diem expenses and advances to vendors.

Deposits with financial institutions and a body corporate comprise:-

			As at
	September 30, 2004		September 30, 2003		March 31, 2004
Deposits with financial institutions:
Housing Development Finance Corporation Limited (“HDFC”)		201.36		201.46		201.39
Life Insurance Corporation of India		35.00		—		—
Deposit with body corporate:
GE Capital Services India Limited		—		105.69		—
		236.36		307.15		201.39
Interest accrued but not due (included above)		1.36		2.15		1.39

Maximum balance held as deposits with financial institutions and a body corporate:-

	Quarter ended				Half year ended				Year ended
	September 30,				September 30,				March 31,
	2004		2003		2004		2003		2004
Deposits with financial institutions:
Housing Development Finance Corporation Limited (“HDFC”)		201.54		201.70		201.56		201.70		201.70
Life Insurance Corporation of India		35.00		—		35.00		—		—
Deposit with body corporate:
GE Capital Services India Limited		—		151.71		—		151.82		151.82

The financial institutions and the body corporate have superior credit ratings from a premier credit rating agency in the country.

Mr. Deepak M Satwalekar, Director, is also Director of HDFC. Except as director in the financial institution, he has no direct interest in any transactions.

22.3.18. Fixed assets

Profit / (loss) on disposal of fixed assets

	Quarter ended					Half year ended					Year ended
	September 30,					September 30,					March 31,
	2004			2003		2004			2003		2004
Profit on disposal of fixed assets		0.09			—		0.16			0.01		0.04
(Loss) on disposal of fixed assets		(0.04	)		—		(0.04	)		—		—
Profit / (loss) on disposal of fixed assets, net		0.05			—		0.12			0.01		0.04

Depreciation charged to the profit and loss account relating to assets costing less then Rs. 5,000/- each

	Quarter ended				Half year ended				Year ended
	September 30,				September 30,				March 31,
	2004		2003		2004		2003		2004
Charged during the period/year		3.50		4.60		4.39		6.24		28.61

The company has entered into lease-cum-sale agreements to acquire certain properties. In accordance with the terms 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. These amounts are disclosed as “Land - leasehold” under “Fixed assets” in the financial statements. Additionally, certain land has been purchased for which the company has possession certificate for which sale deeds are yet to be executed as at September 30, 2004.

During the year ended March 31, 2004, management reduced the remaining estimated useful life of the intellectual property in a commercial software application product to three months, effective August 2003 and treasury management product to two months, effective November 2003. The revised estimation represents management’s present evaluation of the expected future commercial benefits from these products. The revision has resulted in an increased charge to the profit and loss account of Rs. 20.28 during the year ended March 31, 2004.

22.3.19. Details of Investments

				As at
	September 30, 2004			September 30, 2003			March 31, 2004
Long- term investments
Yantra Corporation, USA,
20,00,000 (20,00,000; 20,00,000) common stock at US$ 0.20 each, fully paid, par value US$ 0.01 each		1.42	*		1.42	*		1.42	*
1 (1; 1) Fully paid warrant to purchase 55,00,000 common stock, at US$ 0.19 each, exercise price of US$ 0.01 each		3.91	*		3.91	*		3.91	*
6,36,363 (6,36,363; 6,36,363 ) Series A convertible preferred stock, at US$ 0.75 each, fully paid, par value US$ 0.01 each		1.73	*		1.73	*		1.73	*
CiDRA Corporation, USA
12,752 (33,333; 12,752) Series D convertible preferred stock at US$ 90 each, fully paid, par value US$ 0.01 each		5.11	*		13.40	*		5.11	*
72,539 (nil; 72,539) Class A common stock, par value US$ 0.001 each		—			—			—
2,139 (nil; 2,139 ) Non voting redeemable preferred stock, par value US$ 0.01 each		—			—			—
Alpha Thinx Mobile Phone Services AG, Austria
Nil (nil; nil) bearer shares at € 20 each, fully paid, par value € 1 each		—			—			—
CyVera Corporation, USA
25,641 (nil; 25,641) , Series A preferred stock par value $ 0.001		—			—			—
Asia Net Media (BVI) Ltd., the British Virgin Islands
3,00,00,000 (3,00,00,000; 3,00,00,000) ordinary shares at US$ 0.05 each, fully paid, par value US$ 0.01 each		6.85	*		6.85	*		6.85	*
OnMobile Systems Inc., (formerly Onscan Inc.) USA
1,00,000 (1,00,000; 1,00,000) common stock at US$ 0.4348 each, fully paid, par value US$ 0.001 each		0.20	*		0.20	*		0.20	*
1,00,000 (1,00,000; 1,00,000) Series A voting convertible preferred stock at US$ 0.4348 each, fully paid, par value US$ 0.001 each		0.20	*		0.20	*		0.20	*
44,00,000 (44,00,000; 44,00,000) Series A non-voting convertible preferred stock at US$ 0.4348 each, fully paid, par value US$ 0.001 each		8.55	*		8.55	*		8.55	*
M-Commerce Ventures Pte Ltd, Singapore
100 (100; 100) ordinary shares of Singapore $ 1 each, fully paid, par value Singapore $ 1 each		—			—			—
684 (774; 684) redeemable preference shares of Singapore $ 1, fully paid, at a premium of Singapore $ 1,110 per redeemable preferred stock		2.04			2.30			2.04
216 (nil; 216) redeemable preference shares of Singapore $ 1, fully paid, par value Singapore $ 1 each		—			—			—
Stratify Inc. (formerly PurpleYogi Inc.), USA
Nil (2,76,243; Nil) Series D convertible preferred stock at US$ 1.81 each, fully paid, par value US$ 0.001 each		—			2.33	*		—
Workadia Inc. USA
Nil (22,00,000; Nil) Series B convertible preferred stock at US$ 1.00 each, fully paid, par value US$ 0.0002 each (adjusted for stock splits)		—			10.32	*		—
Software Services Support Education Center Limited
1 (1; 1) equity share of Rs. 10 each, fully paid, par value Rs. 10		—			—			—
The Saraswat Co-operative Bank Limited, India
1,035 (1,035; 1,035) equity shares of Rs. 10 each, fully paid, par value Rs. 10		—			—			—
		30.01			51.21			30.01

* Investments that are provided for in whole or in part

			As at
	September 30, 2004		September 30, 2003		March 31, 2004
Liquid Mutual Funds, India
Birla Cash Plus Fund 9,98,80,127 (4,99,80,213 ; 9,99,03,547) Units		99.89		49.99		99.92
Deutsche Bank Insta-Cash Fund 2,50,14,776 (nil ; 2,46,26,175) Units		25.01		—		25.00
DSP Merrill Lynch Liquidity Fund 4,03,72,579 (2,01,89,176 ; 4,03,72,579) Units		50.06		25.03		50.08
Grindlays Cash Fund 7,07,47,373 (4,71,94,744 ; 9,43,07,163) Units		74.99		50.00		99.95
HDFC Liquid Fund 8,36,11,057 (4,19,18,602 ; 7,11,51,648) Units		100.15		50.00		85.00
HSBC Cash Fund 4,99,83,048 (2,39,58,064 ; 4,78,71,898) Units		49.98		25.00		49.97
JM High Liquidity Fund 7,69,31,305 (4,98,96,121 ; 9,97,76,708) Units		76.99		49.99		99.99
Kotak Mahindra Liquid Fund 8,97,41,740 (4,98,94,722 ; 9,97,12,325) Units		90.00		49.98		99.98
Principal Cash Management Fund 5,49,75,911 (nil; 5,49,47,898) Units		55.00		—		55.00
Prudential ICICI Liquid Plan 8,37,14,699 (4,18,45,986; 8,37,14,699) Units		99.76		49.85		99.77
Reliance Liquid Fund Treasury Plan 5,57,44,168 (4,83,23,652 ; 3,93,95,110) Units		84.89		49.95		59.90
SBI Insta Cash Fund 2,37,55,900 (nil; 2,37,55,900) Units		25.02		—		25.02
Templeton India Treasury Management Account 7,00,054 (201,071 ; 4,42,156) Units		70.02		25.02		55.02
UTI Liquid Cash Plan 2,49,23,733 (2,49,23,733 ; 2,49,23,733) Units		25.00		25.00		25.00
		926.76		449.81		929.60
At cost		572.13		250.06		490.02
At fair value		354.63		199.75		439.58
		926.76		449.81		929.60

Details of investments in and disposal of securities during the quarter and half year ended September 30, 2004 and 2003 and year ended March 31, 2004:-

	Quarter ended				Half year ended				Year ended
	September 30,				September 30,				March 31,
	2004		2003		2004		2003		2004
Investment in securities
Subsidiaries		18.46		—		40.43		—		83.49
Long-term investments		—		—		—		0.54		0.54
Liquid Mutual funds		115.00		350.00		115.00		450.00		930.03
		133.46		350.00		155.43		450.54		1,014.06
Redemption / Disposal of Investment in securities
Subsidiaries		—		—		—		—		—
Long-term investments		—		2.56		—		3.31		10.21
Liquid Mutual funds		—		—		117.78		—		—
		—		2.56		117.78		3.31		10.21
Net movement in investments		133.46		347.44		37.65		447.23		1,003.85

The following are the particulars of strategic investments made during the quarter and half year ended September 30, 2004 and 2003 and during the year ended March 31, 2004:-

	Quarter ended				Half year ended				Year ended
	September 30,				September 30,				March 31,
Particulars of investee companies	2004		2003		2004		2003		2004
Progeon Limited, India		—		—		—		—		12.25
Infosys Technologies (Shanghai) Co. Limited, China		18.46		—		18.46		—		4.55
Infosys Technologies (Australia) Pty Limited, Australia		—		—		—		—		66.69
Infosys Consulting, Inc., USA		—		—		21.97		—		—
M-Commerce Ventures Pte. Limited, Singapore *		—		—		—		0.19		(0.07	)
		18.46		—		40.43		0.19		83.42

* Net of redemptions

Subsidiaries

On April 8, 2004, the Board approved the formation of a new wholly-owned subsidiary, Infosys Consulting, Inc., incorporated in Texas, USA (Infosys Consulting) to enhance business consulting revenues in Infosys’ global delivery model. The Board approved an investment of up to US$ 20 million in Infosys Consulting. As of September 30, 2004, the company had invested US$ 5.00 million (Rs. 21.97) in the subsidiary.

On January 2, 2004, the company acquired 100% of equity in Expert Information Services Pty Limited, Australia. The transaction value approximates Aus $ 32.0 million (US $ 24.32 million or Rs. 110.90). The consideration comprises a payment in cash on conclusion, an earn-out on achieving financial conditions over a three year period ending March 31, 2007, and the release of the balance retained in escrow for representations and warranties made by the selling share holders. The acquired company has been renamed as Infosys Technologies (Australia) Pty Limited. As of September 30, 2004, the company had invested Rs. 66.69 for 1,01,08,869 equity shares of Aus $ 0.11 par value, fully paid.

On October 10, 2003, the company set up a wholly-owned subsidiary in the People’s republic of China named Infosys Technologies (Shanghai) Co. Limited. The subsidiary will be capitalized at US$ 5 million ( Rs. 22.78). As of September 30, 2004, the company had invested US$ 5.0 million (Rs. 23.01) in the subsidiary.

Infosys holds 99.97% of the equity share capital of Progeon. The equity shares have been issued to Infosys as per the terms of the stock subscription agreement signed in April 2002, between Infosys, Citicorp International Finance Corporation (“CIFC”) and Progeon. 122,49,993 equity shares have been issued to Infosys in April 2002 and 1,22,50,000 in March 2004 for an aggregate consideration of Rs. 24.50. Pursuant to the agreement, CIFC has been issued 4,375,000 0.0005% cumulative convertible preference shares each on June 30, 2002 and March 31, 2004 for an aggregate consideration of Rs. 93.80. The preference shares are convertible to an equal number of equity shares based on certain events as agreed between the company and CIFC.

Other investments

During the year ended March 31, 2004, the Company invested Rs 0.54 in M-Commerce Ventures Pte. Limited, Singapore (M-Commerce) for 20 ordinary shares of face value Singapore $ (“S$”) 1/- each, fully paid at par and 180 redeemable preference shares of face value S$ 1/- each, fully paid for a premium of S$ 1,110. The company also received Rs 0.61 towards return of premium of S$ 1,110/- each on 216 redeemable preference shares of face value of S$ 1/- each during the year. Accordingly, the aggregate investment in M-Commerce as at March 31, 2004 amounts to Rs 2.04.

During the year ended March 31, 2004, the company received from CiDRA Corporation, USA (CiDRA), an amount of Rs. 6.05 in cash; 72,539 Class A common stock of par value US$ 0.001 each of CiDRA, 2,139 Non-voting redeemable preferred stock of par value US$ 0.01 each of CiDRA, 12,921, Series A preferred stock par value $0.001 of CyVera Corporation, USA on a buy back offer. The company also received 12,720 Series A preferred stock par value $0.001 of CyVera Corporation, USA, due to company’s holding in CiDRA.

During the year ended March 31, 2004, Infosys received Rs. 3.22 from Workadia Inc. and Rs. 0.47 from Stratify Inc. towards recovery of the amounts invested. The remainder of the investment was written-off during the year ended March 31, 2004.

Provisions for investments

The Company evaluates all investments for any diminution in their carrying values that is other than temporary. The amount of provision made on Trade investments during the quarter and half year ended September 30, 2004 amounted to Rs. nil and Rs. nil respectively (Rs. nil and Rs 6.35 during the quarter and half year ended September 30, 2003 and Rs. 9.24 during the year ended March 31, 2004). The company provided Rs.0.07 and Rs. 0.06 during the quarter and half year ended September 30, 2004 (Rs. 0.22 and Rs. 0.24 during the quarter and half year ended September 30, 2003 and Rs. 0.43 during the year ended March 31, 2004) on revision of the carrying amount of non-trade current investments to fair value.

22.3.20. Unbilled revenue

Unbilled revenue as at September 30, 2004 amounts to Rs. 121.94 (Rs. 84.81 as at September 30, 2003 and Rs. 92.86 as at March 31, 2004) primarily comprises the revenue recognized in relation to efforts incurred on fixed-price, fixed-time-frame contracts until the balance sheet date.

22.3.21. Segment reporting

The company’s operations predominantly relate to providing IT services, delivered to customers globally operating in various industry segments. Accordingly, IT service revenues represented along industry classes comprise the primary basis of segmental information set out in these financial statements. Secondary segmental reporting is performed on the basis of the geographical location of customers. The accounting principles consistently used in the preparation of the financial statements are also consistently applied to record income and expenditure in individual segments. These are as set out in the note on significant accounting policies.

Industry segments at the company are primarily financial services comprising customers providing banking, finance and insurance services; manufacturing companies; companies in the telecommunications and the retail industries; and others such as utilities, transportation and logistics companies.

Income and direct expenses in relation to segments is categorized based on items that are individually identifiable to that segment, while the remainder of the costs 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 services are used interchangeably. The company 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 directly charged against total income.

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.

Customer relationships are driven based on the location of the respective client. 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.

Geographical revenues are segregated based on the location of the customer who is invoiced or in relation to which the revenue is otherwise recognized.

Industry segments

Quarter ended September 30, 2004 and September 30, 2003

	Financial
	services		Manufacturing		Telecom		Retail		Others		Total
Revenues		584.38		257.63		303.95		166.85		376.75		1,689.56
		436.26		172.89		171.61		134.34		219.65		1,134.75
Identifiable operating expenses		249.10		107.87		143.70		67.72		159.75		728.14
		178.37		74.86		63.81		51.11		90.39		458.54
Allocated expenses		138.93		61.25		72.26		39.67		89.57		401.68
		114.48		45.37		45.04		35.25		57.64		297.78
Segmental operating income		196.35		88.51		87.99		59.46		127.43		559.74
		143.41		52.66		62.76		47.98		71.62		378.43
Unallocable expenses												56.55
												62.33
Operating income												503.19
												316.10
Other income (expense), net												30.16
												44.06
Net profit before taxes												533.35
												360.16
Income taxes												78.50
												60.00
Net profit after taxes												454.85
												300.16

Half year ended September 30, 2004 and September 30, 2003

	Financial
	services		Manufacturing		Telecom		Retail		Others		Total
Revenues		1,073.97		485.28		560.33		338.76		702.61		3,160.95
		837.23		343.43		327.75		261.72		446.60		2,216.73
Identifiable operating expenses		457.00		212.59		277.03		128.33		294.44		1,369.39
		356.61		147.62		130.75		96.62		182.88		914.48
Allocated expenses		251.83		113.74		131.38		79.31		164.71		740.97
		217.40		89.15		85.12		67.95		115.90		575.52
Segmental operating income		365.14		158.95		151.92		131.12		243.46		1,050.59
		263.22		106.66		111.88		97.15		147.82		726.73
Unallocable expenses												105.93
												106.59
Operating income												944.66
												620.14
Other income (expense), net												48.16
												70.14
Net profit before taxes												992.82
												690.28
Income taxes												143.50
												112.00
Net profit after taxes												849.32
												578.28

Year ended March 31, 2004

	Financial
	services		Manufacturing		Telecom		Retail		Others		Total
Revenues		1,722.08		716.47		774.83		563.16		984.35		4,760.89
Identifiable operating expenses		728.69		311.01		317.93		210.29		413.33		1,981.25
Allocated expenses		433.73		180.08		193.52		141.58		247.08		1,195.99
Segmental operating income		559.66		225.38		263.38		211.29		323.94		1,583.65
Unallocable expenses												230.90
Operating income												1,352.75
Other income (expense), net												117.72
Net profit before taxes												1,470.47
Income taxes												227.00
Net profit after taxes												1,243.47

Geographic segments

Quarter ended September 30, 2004 and September 30, 2003

	North						Rest of the
	America		Europe		India		World		Total
Revenues		1,112.63		359.66		30.29		186.98		1,689.56
		837.30		203.64		18.77		75.04		1,134.75
Identifiable operating expenses		468.52		148.34		9.57		101.71		728.14
		346.76		81.63		2.55		27.60		458.54
Allocated expenses		264.52		85.51		7.20		44.45		401.68
		219.73		53.44		4.93		19.68		297.78
Segmental operating income		379.59		125.81		13.52		40.82		559.74
		270.81		68.57		11.29		27.76		378.43
Unallocable expenses										56.55
										62.33
Operating income										503.19
										316.10
Other income (expense), net										30.16
										44.06
Net profit before taxes										533.35
										360.16
Income taxes										78.50
										60.00
Net profit after taxes										454.85
										300.16

Half year ended September 30, 2004 and September 30, 2003

	North						Rest of the
	America		Europe		India		World		Total
Revenues		2,079.38		686.58		54.26		340.73		3,160.95
		1,643.25		393.75		42.10		137.63		2,216.73
Identifiable operating expenses		879.62		275.18		14.36		200.23		1,369.39
		694.79		158.46		12.90		48.33		914.48
Allocated expenses		487.45		160.89		12.73		79.90		740.97
		426.62		102.24		10.92		35.74		575.52
Segmental operating income		712.31		250.51		27.17		60.60		1,050.59
		521.84		133.05		18.28		53.56		726.73
Unallocable expenses										105.93
										106.59
Operating income										944.66
										620.14
Other income (expense), net										48.16
										70.14
Net profit before taxes										992.82
										690.28
Income taxes										143.50
										112.00
Net profit after taxes										849.32
										578.28

Year ended March 31, 2004

	North						Rest of the
	America		Europe		India		World		Total
Revenues		3,401.42		913.84		66.20		379.43		4,760.89
Identifiable operating expenses		1,422.01		371.35		18.25		169.64		1,981.25
Allocated expenses		856.13		229.10		16.73		94.03		1,195.99
Segmental operating income		1,123.28		313.39		31.22		115.76		1,583.65
Unallocable expenses										230.90
Operating income										1,352.75
Other income (expense), net										117.72
Net profit before taxes										1,470.47
Income taxes										227.00
Net profit after taxes										1,243.47

22.3.22. Provision for doubtful debts

Periodically, the company evaluates all customer dues to the company for collectibility. The need for provisions is assessed based on various factors including collectibility of specific dues, risk perceptions of the industry in which the customer operates, general economic factors, which could effect the customer’s ability to settle. The company normally provides for debtor dues outstanding for 180 days or longer as at the balance sheet date. As at September 30, 2004 the company has provided for doubtful debts of Rs. 5.84 (Rs. 4.79 as at September 30, 2003 and Rs 4.29 as at March 31, 2004) on dues from certain customers although the outstanding amounts were less than 180 days old, since the amounts were considered doubtful of recovery. The company continues pursuing the parties for recovery of the dues, in part or full.

22.3.23. Dividends remitted in foreign currencies

Infosys does not make any direct remittances of dividends in foreign currency. The company remits the equivalent of the dividends payable to the holders of ADS (“ADS holders”) in Indian Rupees to the depositary bank, which is the registered shareholder on record for all owners of the company’s ADSs. The depositary bank purchases the foreign currencies and remits dividends to the ADS holders.

Particulars of dividends remitted are as follows:-

			Quarter ended				Half year ended				Year ended
	Number of shares to which the dividends		September 30,				September 30,				March 31,
Particulars	relate		2004		2003		2004		2003		2004
Final dividend for Fiscal 2003		21,60,870		—		—		—		3.13		3.13
Interim dividend for fiscal 2004		51,78,450		—		—		—		—		7.51
Final and one-time special dividend for Fiscal 2004		52,92,612		—		—		60.87		—		—

22.3.24. Reconciliation of basic and diluted shares used in computing earnings per share

At the annual general meeting held on June 12, 2004, the shareholders approved the issue of bonus shares in the ratio of three bonus shares for every share held. The record date for the bonus issue was July 2, 2004 and shares were allotted on July 3, 2004. All basic and diluted shares used in determining earnings per share are after considering the effect of bonus issue.

	Quarter ended				Half year ended				Year ended
	September 30,				September 30,				March 31,
	2004		2003		2004		2003		2004
Number of shares considered as basic weighted average shares outstanding		26,76,76,465		26,50,28,112		26,74,06,246		26,50,04,404		26,54,47,776
Add: Effect of dilutive issues of shares/stock options		61,00,213		22,69,504		53,61,955		15,99,936		33,39,240
Number of shares considered as weighted average shares and potential shares outstanding		27,37,76,678		26,72,97,616		27,27,68,201		26,66,04,340		26,87,87,016

22.3.25. Notes on the statement of cash flow

22.3.25.a.

The balance of cash and cash equivalents includes Rs. 3.38 as at September 30, 2004 (Rs. 1.78 as at September 30, 2003 and Rs. 1.98 as at March 31, 2004) set aside for payment of dividends. Also, an amount of Rs. nil has been retained in escrow as at September 30, 2004 (Rs. 0.81 as at September 30, 2003 and Rs. 0.04 as at March 31, 2004).

22.3.25.b. Issue of bonus shares

During the quarter ended September 30, 2004, Infosys issued bonus shares at the ratio of three equity shares for each equity share in India and a stock dividend of two ADSs for each ADS in USA. Consequently, the share capital of the company stands increased by Rs. 100.30. The bonus shares were issued by capitalization of general reserves.

22.3.25.c

Deposits with financial institutions and body corporate include an amount of Rs. 35 deposited with Life Insurance Corporation of India to settle employee benefit obligations as and when they arise during the normal course of business. This amount is considered as restricted cash and is hence not considered “Cash and cash equivalents”.

AUDITORS’ REPORT TO THE MEMBERS OF INFOSYS TECHNOLOGIES LIMITED

We have audited the attached Balance Sheet of Infosys Technologies Limited (the Company) as at 30 September 2004, the Profit and Loss Account and Cash Flow Statement of the Company for the quarter and half year ended on that date, annexed thereto. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

We report that:

(a)	we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;
(b)	in our opinion, proper books of account have been kept by the Company so far as appears from our examination of those books;
(c)	the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account;
(d)	in our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report comply with the Accounting Standards issued by the Institute of Chartered Accountants of India, to the extent applicable; and
(e)	in our opinion and to the best of our information and according to the explanations given to us, the said accounts give a true and fair view in conformity with the accounting principles generally accepted in India:

(i)	in the case of the Balance Sheet, of the state of affairs of the Company as at 30 September 2004;
(ii)	in the case of the Profit and Loss Account, of the profit of the Company for the quarter and half year ended on that date; and
(iii)	in the case of the Cash Flow Statement, of the cash flows of the Company for the quarter and half year ended on that date.

for BSR & Co
(formerly Bharat S Raut & Co.).
Chartered Accountants

Subramanian Suresh
Partner
Membership No. 83673

Bangalore
12 October 2004