6-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

Report of Foreign Private Issuer

Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934

For the quarter ended December 31, 2005

Commission File Number 000-25383

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 — 560 100, Karnataka, India. +91-80-2852-0261

(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 þ 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 Noþ

     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

 EXHIBIT 99.13

 EXHIBIT 99.14

DISCLOSURE OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

     We hereby furnish the United States Securities and Exchange Commission with copies of the following information concerning our public disclosures regarding our results of operations and financial condition for the quarter ended December 31, 2005. 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 January 11, 2006, we announced our results of operations for the quarter ended December 31, 2005. 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, respectively.

     On January 11, 2006, 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.

     In our press conference, we used a presentation entitled “Performance of the Infosys group for the Third Quarter ended December 31, 2005,” which we have attached to this Form 6-K as Exhibit 99.4. We have also made available to the public on our web site, www.infosys.com, a fact sheet that provides details on our profit and loss account summary for the quarters ended December 31, 2005 and 2004 (as per Indian GAAP); profit and loss account summary for the nine months ended December 31, 2005 and 2004 (as per Indian GAAP); revenue by geographical segment, service offering, project type, and industry classification; information regarding our client concentration; employee information and metrics; infrastructure information; consolidated IT services information; and reconciliation of accounts as per Indian GAAP and U.S. GAAP. We have attached this fact sheet to this Form 6-K as Exhibit 99.5.

     On January 11, 2006, 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 99.6 and 99.7, respectively.

     Our officers held a question and answer session with analysts from CNBC India on January 11, 2006. The transcript of this question and answer session is attached to this Form 6-K as Exhibit 99.8. In addition, our officers and directors attended a “Meet the Investors” interview conducted by NDTV, a national news television channel in India on January 11, 2006. The transcript of this session is attached to this Form 6-K as Exhibit 99.9.

     We placed advertisements in certain Indian newspapers concerning our results of operations for the quarter ended December 31, 2005, under Indian GAAP. A copy of the form of this advertisement is attached to this Form 6-K as Exhibit 99.10.

     We have made available to the public on our web site, www.infosys.com, the following: U.S. GAAP Unaudited Consolidated Financial Information for the quarter ended December 31, 2005; Auditors’ Report to the Members of Infosys Technologies Limited, Indian GAAP Financial Statements and Schedules to the Financial Statements for the quarter and nine months ended December 31, 2005; and Auditors’ Report to the Board of Directors on the Consolidated Financial Statements of Infosys Technologies Limited and its Subsidiaries, Indian GAAP Consolidated Financial Statements of and Infosys Technologies Limited and Subsidiaries and Schedules to the Consolidated Financial Statements for the quarter ended December 31, 2005. We have attached these documents to this Form 6-K as Exhibits 99.11, 99.12, and 99.13, respectively.

     Our chief mentor, Mr. N.R. Narayana Murthy met with the employees of the company in an “Infosys Meets its Mentor” session conducted by NDTV. The transcript of this session is attached to this Form 6-K as Exhibit 99.14.

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

Date: January 18, 2006

INDEX TO EXHIBITS

No.	Exhibits
99.1	U.S. GAAP Press Release
99.2	Indian GAAP Press Release
99.3	Transcript of January 11, 2006, 10:30 a.m. IST Press Conference
99.4	Presentation: Performance of the Infosys group for the Third Quarter ended December 31, 2005
99.5	Fact Sheet regarding Registrant’s Profit and Loss Account Summary for the quarters ended December 31, 2005 and 2004 (consolidated as per Indian GAAP); Profit and Loss Account Summary for the nine months ended December 31, 2005 and 2004 (consolidated as per Indian GAAP); Revenue by Geographical Segment, Service Offering, Project Type, and Industry Classification; Information regarding Client Concentration; Employee Information and Metrics; Infrastructure Information; Consolidated IT Services Information; and Reconciliation of Accounts as per Indian GAAP and U.S. GAAP
99.6	Transcript of January 11, 2006 2:00 p.m. IST Earnings Call
99.7	Transcript of January 11, 2006 6:00 p.m. IST Earnings Call
99.8	Transcript of January 11, 2006 CNBC India Question and Answer session with Company’s Officers
99.9	Transcript of January 11, 2006 NDTV “Meet the Investors” session with Company’s Officers and Directors
99.10	Form of Advertisement placed in Indian Newspapers
99.11	U.S. GAAP Unaudited Consolidated Financial Information for the quarter ended December 31, 2005
99.12	Auditors’ Report to the Members of Infosys Technologies Limited, Indian GAAP Financial Statements and Schedules to the Financial Statements for the quarter and nine months ended December 31, 2005
99.13	Auditors’ Report to the Board of Directors on the Consolidated Financial Statements of Infosys Technologies Limited and its Subsidiaries, Indian GAAP Consolidated Financial Statements of Infosys Technologies Limited and Subsidiaries and Schedules to the Consolidated Financial Statements for the quarter ended December 31, 2005
99.14	Transcript of January 11, 2006 NDTV “Infosys Meets its Mentor” session between the Chief Mentor and Employees of the Company

EX-99.1

EXHIBIT 99.1

Infosys Technologies Limited – Financial Release December 31, 2005 US GAAP Press Release

Infosys Technologies (NASDAQ: INFY) Announces Results for the Quarter ended December 31, 2005

Q3 revenues grow year-on-year by 32%

Bangalore, India – January 11, 2006

Highlights

Consolidated results for the quarter ended December 31, 2005

• Third quarter revenues at $ 559 million, up 32.2% from the corresponding quarter last fiscal

• Earnings per American Depositary Share (ADS) increased to $ 0.53 from $ 0.42 in the corresponding quarter last fiscal

• 36 new clients were added during the quarter

• Gross addition of 5,135 employees for the quarter (net 3,226 employees)

• 49,422 employees as on December 31, 2005

Outlook for the quarter and fiscal year ending March 31, 2006

• Consolidated revenues expected to be between $ 582 million and $ 584 million for the quarter ending March 31, 2006 (YoY growth of 27.9% – 28.4%) and $ 2.14 billion for the fiscal year ending March 31, 2006; (YoY growth of 34.6%)

• Consolidated earnings per ADS expected to be between $ 0.55 and $ 0.56 for the quarter ending March 31, 2006; (YoY growth of 17.0% – 19.2%) and between $ 2.04 to $ 2.05 for the fiscal year ending March 31, 2006; (growth of 29.9% – 30.6%)

Infosys Technologies Limited (“Infosys” or “the company”) today announced financial results for its third quarter ended December 31, 2005. Revenues for the quarter aggregated $ 559 million, up 32.2% from $ 423 million for the quarter ended December 31, 2004.

“We have seen another quarter of steady growth,” said Nandan M. Nilekani, CEO, President and Managing Director. “Our initiatives in strategic alignment, capability building and operational excellence are all on track.”

“We have just celebrated the 10th anniversary of some of our development centers outside Bangalore,” said S. Gopalakrishnan, Member of the Board and COO. “All these centers have matured and are contributing significantly to Infosys’ growth.”

Infosys’ continued focus on being the business transformational partner for its clients gained significant momentum this quarter.

Infosys’ Strategic Global Sourcing Unit and Infosys Consulting Inc. undertook an assessment of the sourcing strategy and processes for a leading hi-tech company. This assessment will enable the client to achieve its vision of consolidating vendors, reducing spend on local contractors while increasing spend on offshore managed services vendors.

In a strategic engagement, Infosys was selected as the global sourcing partner for a large aerospace conglomerate in the US. Infosys successfully implemented three large business-critical systems for a leading aerospace company in the US, including the replacement of a SGI-based graphics and arts illustration system with a Windows-based SGE solution. Infosys is re-engineering the client’s engineering and authoring application for improved performance and scalability.

One of the largest insurance and financial services companies in North America has sought Infosys’ expertise in developing an agency front-end portal that will strengthen its distribution capacity and drive product performance, while providing a common technology solution to enhance agent productivity.

Page 1 of 5

Infosys Technologies Limited – Financial Release December 31, 2005 US GAAP Press Release

A premier luxury retailer, dedicated to providing customers with distinctive merchandise and superior service, has sought Infosys’ expertise to improve item management functionality for its direct and catalog channels through process and systems improvement.

New services at Infosys such as Infrastructure Management Services (IMS) and Independent Validation Services (IVS) continued to gain traction this quarter. In the IMS arena, Infosys won a large multi-year contract in infrastructure support for a large, Europe-based global client in investment banking. In the area of IVS, Infosys is building a Testing Center of Excellence (TCoE) for the largest grocery home-shopping service in the world.

“In the last two quarters, we have been able to build on our consulting capabilities,” said S. D. Shibulal, Member of the Board and Head – Worldwide Customer Sales & Delivery. “Our collaborative approach to the market-place, combined with the strengths of our various business units, is finding good traction with our clients and is showing positive results.”

“The rupee remained volatile during the quarter,” said T. V. Mohandas Pai, Member of the Board and CFO. “The benefit of rupee depreciation on the operating margin was offset by the hedges at the non-operating level. Liquidity continues to be strong.”

Update on Progeon Limited

Akshaya Bhargava, Managing Director and Chief Executive Officer, has expressed a desire to leave Progeon for personal reasons and will remit office from March 1, 2006. Akshaya has been associated with Progeon from its early days and has been one of the main factors for Progeon’s current success.

Amitabh Chaudhry, currently Chief Operating Officer, will take over as Managing Director and Chief Executive Officer with effect from March 2, 2006. Amitabh has been associated with Progeon since early 2003 and has been responsible for building industry-leading execution capabilities within Progeon.

Mr. N. R. Narayana Murthy, Chairman and Chief Mentor, Infosys Technologies Limited, said, “Akshaya has led Progeon from a start-up to its current eminent position. We wish him all success in his future endeavors. Amitabh’s role has been seminal in building the operations and solutions team at Progeon and in managing its high growth.”

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 our 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 within the meaning of Section 27A of the U.S. Securities Act of 1993, as amended, and section 21E of the U.S. Securities Exchange Act of 1934, as amended, 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 our investments, risks and uncertainties regarding fluctuations in earnings, our ability to manage growth, intense competition in IT, business process outsourcing and consulting services including those factors which may affect our cost advantage, wage increases in India, our ability to attract

Page 2 of 5

Infosys Technologies Limited – Financial Release December 31, 2005 US GAAP Press Release

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, 2005, our report on Form 6-K for the quarterly period ended June 30, 2005 filed on July 28, 2005 and our report on Form 6-K for the quarterly period ended September 30, 2005 filed on October 21, 2005. These filings are available at www.sec.gov. We 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. We do not undertake to update any forward-looking statements that may be made from time to time by or on our behalf.

Contact

Investor Relations	V. Balakrishnan, India	Sandeep Mahindroo, India
	+ 91 (80) 2852-0440	+ 91 (80) 5116-7759
	balakv@infosys.com	sandeep_mahindroo@infosys.com
Media Relations	Bani Paintal Dhawan, India	Peter Mclaughlin, USA
	+ 91 (80) 2852 2408	+ 1 (213) 268-9363
	Bani_Dhawan@infosys.com	Peter_Mclaughlin@infosys.com

Page 3 of 5

Infosys Technologies Limited – Financial Release December 31, 2005 US GAAP Press Release

Infosys Technologies Limited and subsidiaries

Consolidated Balance Sheets

	(Dollars in millions except share and per share data)
	As of
	March 31, 2005 (1)		December 31, 2005
			(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	410	$	477
Investment in liquid mutual fund units		278		492
Trade accounts receivable, net of allowances		303		310
Deferred tax assets		2		2
Prepaid expenses and other current assets		35		39
Unbilled revenue		32		35
Total current assets		1,060		1,355
Property, plant and equipment, net		352		457
Goodwill		8		8
Deferred tax assets		8		11
Other assets		26		31
Total Assets	$	1,454	$	1,862
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	1	$	2
Client deposits		7		3
Other accrued liabilities		124		140
Deferred tax liabilities		—		1
Income taxes payable		23		17
Unearned revenue		20		42
Total current liabilities		175		205
Non-current liabilities
Preferred stock of subsidiary		21		—
Other non-current liabilities		5		5
Minority Interests		—		13
Stockholders’ Equity
Common stock, $0.16 par value 300,000,000 equity shares authorized, Issued and outstanding - 270,570,549 and 274,525,163 equity shares as of March 31, 2005 and December 31, 2005 respectively		31		31
Additional paid-in capital		266		379
Accumulated other comprehensive income		33		(6	)
Retained earnings		923		1,235
Total stockholders’ equity		1,253		1,639
Total Liabilities and Stockholders’ Equity	$	1,454	$	1,862

(1) March 31, 2005 balances were obtained from audited financial statements

Page 4 of 5

Infosys Technologies Limited – Financial Release December 31, 2005 US GAAP Press Release

Infosys Technologies Limited and subsidiaries

Unaudited Consolidated Statements of Income

	(Dollars in millions except share and per share data)
	Three months ended					Nine months ended
	December 31,					December 31,
	2004		2005			2004		2005
Revenues	$	423	$	559		$	1,137	$	1,559
Cost of revenues		241		319			642		890
Gross profit		182		240			495		669
Operating Expenses:
Selling and marketing expenses		26		35			76		102
General and administrative expenses		34		41			91		124
Amortization of intangible assets		—		—			1		—
Total operating expenses		60		76			168		226
Operating income		122		164			327		443
Other income, net		11		(1	)		17		15
Income before income taxes and minority interest		133		163			344		458
Provision for income taxes		21		18			52		52
Income before minority interest		112		145			292		406
Minority Interest		—		2			—		3
Net income	$	112	$	143		$	292		403
Earnings per equity share
Basic	$	0.42	$	0.53		$	1.09	$	1.49
Diluted	$	0.40	$	0.51		$	1.07	$	1.44
Weighted average equity shares used in computing earnings per equity share
Basic		267,360,142		272,357,876			266,307,767		270,875,779
Diluted		275,372,238		279,912,922			272,581,961		278,434,381

Page 5 of 5

EX-99.2

EXHIBIT 99.2

Infosys Technologies Limited – Financial Release December 31, 2005 Indian GAAP Press Release

Q3 revenues grow year-on-year by 35%

Bangalore, India – January 11, 2006

Highlights

Consolidated results for the quarter ended December 31, 2005

• Income was Rs. 2,532 crore for the third quarter ended December 31, 2005; YoY growth was 34.97%

• Net profit was Rs. 649 crore for the third quarter ended December 31, 2005; YoY growth was 30.58%

• Earnings per share before exceptional items increased to Rs. 23.68 from Rs. 18.50 for the corresponding quarter in the previous year, an increase of 28%

Others

• 36 new clients were added during the quarter by Infosys and subsidiaries

• Gross addition of 5,135 employees (net 3,226 employees) for the quarter by Infosys and subsidiaries

• 49,422 employees as on December 31, 2005 for Infosys and subsidiaries

“We have seen another quarter of steady growth,” said Nandan M. Nilekani, CEO, President and Managing Director. “Our initiatives in strategic alignment, capability building and operational excellence are all on track.”

Business outlook

The company’s outlook (consolidated) for the quarter and the fiscal year ending March 31, 2006, under Indian GAAP and US GAAP, is as follows:

Outlook under Indian GAAP – consolidated

Quarter ending March 31, 2006*

• Income is expected to be in the range of Rs. 2,590 crore and Rs. 2,599 crore; YoY growth of 30.35% – 30.80%

• Earnings per share before exceptional items is expected to be between Rs. 24.30 and Rs. 24.70; YoY growth of 27.83% – 29.93%

Fiscal year ending March 31, 2006*

• Income is expected to be in the range of Rs. 9,487 crore and Rs. 9,496 crore; YoY growth of 33.10% – 33.20%

• Earnings per share before exceptional items is expected to be between Rs. 89.90 and Rs. 90.30; YoY growth of 30.69% – 31.27%

* conversion 1 US$ = Rs. 44.50

Outlook under US GAAP

Quarter ending March 31, 2006

• Consolidated revenues is expected to be in the range of $ 582 million and $ 584 million; YoY growth of 27.91% – 28.35%

• Consolidated earnings per American Depositary Share is expected to be between $ 0.55 and $ 0.56; YoY growth of 17.02% – 19.15%

Page 1 of 8

Infosys Technologies Limited – Financial Release December 31, 2005 Indian GAAP Press Release

Fiscal year ending March 31, 2006

• Consolidated revenues is expected to be $2.14 billion; growth of 34.59%

• Consolidated earnings per American Depositary Share is expected to be between $ 2.04 and $ 2.05; growth of 29.94% – 30.57%

“We have just celebrated the 10th anniversary of some of our development centers outside Bangalore,” said S. Gopalakrishnan, Member of the Board and COO. “All these centers have matured and are contributing significantly to Infosys’ growth.”

Expansion of services and significant projects

Infosys’ continued focus on being the business transformational partner for its clients gained significant momentum this quarter.

Infosys’ Strategic Global Sourcing Unit and Infosys Consulting Inc. undertook an assessment of the sourcing strategy and processes for a leading hi-tech company. This assessment will enable the client to achieve its vision of consolidating vendors, reducing spend on local contractors while increasing spend on offshore managed services vendors.

Infosys’ Hi-Tech and Discrete Manufacturing unit (HTDM) along with Infosys’ Product Engineering practice is helping a major hi-tech corporate in building a GSM cell phone for emerging markets. HTDM is also working with Infosys’ subsidiary Progeon to offer business process outsourcing (BPO) services to a leading discrete manufacturer in the Master Data Management arena.

“In the last two quarters, we have been able to build on our consulting capabilities,” said S. D. Shibulal, Member of the Board and Head – Worldwide Customer Sales & Delivery. “Our collaborative approach to the market-place, combined with the strengths of our various business units, is finding good traction with our clients and is showing positive results.”

A global software company sought Infosys’ expertise in boosting its R&D effectiveness by enhancing, maintaining and testing its core products. The partnership will free up the client’s R&D resources while creating a predictable delivery and client services model to manage its core products.

In a strategic engagement, Infosys was selected as the global sourcing partner for a large aerospace conglomerate in the US. Infosys successfully implemented three large business-critical systems for a leading aerospace company in the US, including the replacement of a SGI-based graphics and arts illustration system with a Windows-based SGE solution. Infosys is re-engineering the client’s engineering and authoring application for improved performance and scalability.

One of the largest insurance and financial services companies in North America has sought Infosys’ expertise in developing an agency front-end portal that will strengthen its distribution capacity and drive product performance, while providing a common technology solution to enhance agent productivity.

A premier luxury retailer, dedicated to providing customers with distinctive merchandise and superior service, has sought Infosys’ expertise to improve item management functionality for its direct and catalog channels through process and systems improvement.

Infosys continued to make inroads in the European market. A leading UK-based multi-utility company in the gas, power and utilities services industry signed up Infosys to implement Microsoft BizTalk for creating connectivity infrastructure for its market-facing and customer-facing businesses.

New services at Infosys such as Infrastructure Management Services (IMS) and Independent Validation Services (IVS) continued to gain traction this quarter. In the IMS arena, Infosys won a large multi-year contract in infrastructure support for a large, Europe-based global client in investment banking. In the area of IVS, Infosys is building a Testing Center of Excellence (TCoE) for the largest grocery home-shopping service in the world.

Page 2 of 8

Infosys Technologies Limited – Financial Release December 31, 2005 Indian GAAP Press Release

An Australian retail chain engaged Infosys to assess its Oracle BEPL integration strategy and implementation. A pharmaceutical multinational in Australia has engaged Infosys to undertake a complete upgrade of its worldwide Oracle database, operating system and applications infrastructure. Other new accounts in Australia include one of the largest privately owned professional services and recruitment companies in the world and an energy utility that supplies gas and electricity to 1.1 million homes in Australia.

Infosys’ subsidiary in China continued to forge ahead, acquiring a number of new clients this quarter. A global provider of reliable power, precision environmental and connectivity solutions for telecommunications and data network infrastructure engaged with Infosys to develop a next-generation energy system management software.

Finacle^®

Finacle^®, the universal banking solution from Infosys, consolidated its position as a preferred choice for large global banks. ANB Bank, a Global 500 bank headquartered in Saudi Arabia, licensed Finacle^® to power its retail banking initiative.

In India, Centurion Bank of Punjab, a private sector bank, selected Finacle^® for its technology-led business transformation initiative. UCO Bank, a leading public sector bank, has also deployed Finacle^® to achieve cost advantage and derive significant business benefits.

Update on Progeon Limited

Akshaya Bhargava, Managing Director and Chief Executive Officer, has expressed a desire to leave Progeon for personal reasons and will remit office from March 1, 2006. Akshaya has been associated with Progeon from its early days and has been one of the main factors for Progeon’s current success.

Amitabh Chaudhry, currently Chief Operating Officer, will take over as Managing Director and Chief Executive Officer with effect from March 2, 2006. Amitabh has been associated with Progeon since early 2003 and has been responsible for building industry-leading execution capabilities within Progeon.

Mr. N. R. Narayana Murthy, Chairman and Chief Mentor, Infosys Technologies Limited, said, “Akshaya has led Progeon from a start-up to its current eminent position. We wish him all success in his future endeavors. Amitabh’s role has been seminal in building the operations and solutions team at Progeon and in managing its high growth.”

Intellectual Property Development

Infosys is actively engaged in software services and solutions research and development. The Software Engineering and Technology Lab (SETLabs) spearheads Infosys’ commitment to innovation and Intellectual Property (IP) development. During this quarter, SETLabs generated 7 invention disclosures and filed 6 patents.

In the last three quarters since April 2005, 82 invention disclosures were generated and 20 patents were filed.

Liquidity and capital expenditure

Cash and cash equivalents, including investments in liquid mutual funds, increased by Rs. 555 crore during the quarter, from Rs. 3,793 crore to Rs. 4,348 crore, after incurring capital expenditure of Rs. 260 crore. Operating cash flows for the quarter ended December 31, 2005 were Rs. 798 crore (Rs. 449 crore for the quarter ended December 31, 2004).

“The rupee remained volatile during the quarter,” said T. V. Mohandas Pai, Member of the Board and CFO. “The benefit of rupee depreciation on the operating margin was offset by the hedges at the non-operating level. Liquidity continues to be strong.”

Page 3 of 8

Infosys Technologies Limited – Financial Release December 31, 2005 Indian GAAP Press Release

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 our 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, within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended – 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 our investments, risks and uncertainties regarding fluctuations in earnings, our ability to manage growth, intense competition in IT, business process outsourcing and consulting 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, 2005 and quarters ended June 30, 2005 and September 30, 2005. These filings are available at www.sec.gov. We 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. We do not undertake to update any forward-looking statements that may be made from time to time by or on our behalf.

Page 4 of 8

Infosys Technologies Limited – Financial Release December 31, 2005 Indian GAAP Press Release

INFOSYS TECHNOLOGIES LIMITED

	in Rs. crore
Balance Sheet as at	December 31, 2005		March 31, 2005
SOURCES OF FUNDS
SHAREHOLDERS’ FUNDS
Share capital		137		135
Reserves and surplus		7,113		5,107
		7,250		5,242
APPLICATION OF FUNDS
FIXED ASSETS
Original cost		2,825		2,183
Less: Depreciation and amortization		1,265		1,006
Net book value		1,560		1,177
Add: Capital work-in-progress		444		318
		2,004		1,495
INVESTMENTS		2,309		1,329
DEFERRED TAX ASSETS		46		34
CURRENT ASSETS, LOANS AND ADVANCES
Sundry debtors		1,314		1,253
Cash and bank balances		1,570		1,481
Loans and advances		1,451		995
		4,335		3,729
LESS: CURRENT LIABILITIES AND PROVISIONS
Current liabilities		727		577
Provisions		717		768
NET CURRENT ASSETS		2,891		2,384
		7,250		5,242

NOTE:

The audited Balance Sheet as on December 31, 2005 has been taken on record at the board meeting held on January 11, 2006

Page 5 of 8

Infosys Technologies Limited – Financial Release December 31, 2005 Indian GAAP Press Release

INFOSYS TECHNOLOGIES LIMITED

	in Rs. crore, except per share data
	Quarter ended					Nine months ended
Profit and Loss Account for the	December 31,					December 31,
	2005			2004		2005		2004
Income from software services and products		2,398			1,798		6,535		4,960
Software development expenses		1,276			960		3,508		2,662
GROSS PROFIT		1,122			838		3,027		2,298
Selling and marketing expenses		129			101		374		292
General and administration expenses		160			126		469		344
		289			227		843		636
OPERATING PROFIT BEFORE INTEREST, DEPRECIATION AND AMORTIZATION		833			611		2,184		1,662
Interest		—			—		—		—
Depreciation and amortization		109			69		274		175
OPERATING PROFIT AFTER INTEREST, DEPRECIATION AND AMORTIZATION		724			542		1,910		1,487
Other income		(2	)		47		73		95
Provision for investments		—			—		—		—
NET PROFIT BEFORE TAX		722			589		1,983		1,582
Provision for taxation		80			93		226		237
NET PROFIT AFTER TAX		642			496		1,757		1,345
Balance Brought Forward		2,341			764		1,428		71
Less: Residual dividend paid for fiscal 2004		—			—		—		3
Additional dividend tax		—			—		—		2
		2,341			764		1,428		66
AMOUNT AVAILABLE FOR APPROPRIATION		2,983			1,260		3,185		1,411
DIVIDEND
Interim		—			—		177		134
Final		—			—		—		—
Total dividend		—			—		177		134
Dividend tax		—			—		25		17
Balance in Profit and Loss Account		2,983			1,260		2,983		1,260
		2,983			1,260		3,185		1,411
EARNINGS PER SHARE
(Equity shares, par value Rs. 5/- each)
Basic		23.43			18.45		64.53		50.22
Diluted		22.78			17.90		62.70		49.14
Number of shares used in computing earnings per share
Basic		27,37,71,476			26,87,73,742		27,22,89,379		26,78,62,078
Diluted		28,16,04,953			27,71,10,460		28,02,43,496		27,37,70,692

NOTE:

The audited Profit and Loss Account for the quarter and nine months ended December 31, 2005 has been taken on record at the board meeting held on January 11, 2006

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

Page 6 of 8

Infosys Technologies Limited – Financial Release December 31, 2005 Indian GAAP Press Release

CONSOLIDATED FINANCIAL STATEMENTS OF INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES

	in Rs. crore
Consolidated Balance Sheet as at	December 31, 2005		March 31, 2005
SOURCES OF FUNDS
SHAREHOLDERS’ FUNDS
Share capital		137		135
Reserves and surplus		7,175		5,090
		7,312		5,225
MINORITY INTEREST		60		—
PREFERENCE SHARES ISSUED BY SUBSIDIARY		—		94
		7,372		5,319
APPLICATION OF FUNDS
FIXED ASSETS
Original cost		2,958		2,287
Less: Depreciation and amortization		1,309		1,031
Net book value		1,649		1,256
Add: Capital work-in-progress		447		318
		2,096		1,574
INVESTMENTS		2,205		1,211
DEFERRED TAX ASSETS		57		45
CURRENT ASSETS, LOANS AND ADVANCES
Sundry debtors		1,394		1,322
Cash and bank balances		1,694		1,576
Loans and advances		1,496		1,024
		4,584		3,922
LESS: CURRENT LIABILITIES AND PROVISIONS
Current liabilities		849		657
Provisions		721		776
NET CURRENT ASSETS		3,014		2,489
		7,372		5,319

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

Infosys Technologies Limited – Financial Release December 31, 2005 Indian GAAP Press Release

CONSOLIDATED FINANCIAL STATEMENTS OF INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES

	in Rs. crore, except per share data
	Quarter ended					Nine months ended
Consolidated Profit and Loss Account for the	December 31,						December 31,
	2005			2004		2005		2004
Income from software services, products and business process management		2,532			1,876		6,897		5,142
Software development and business process management expenses		1,327			992		3,644		2,723
GROSS PROFIT		1,205			884		3,253		2,419
Selling and marketing expenses		158			117		448		344
General and administration expenses		186			149		547		407
		344			266		995		751
OPERATING PROFIT BEFORE INTEREST, DEPRECIATION AND AMORTIZATION AND MINORITY INTEREST		861			618		2,258		1,668
Interest		—			—		—		—
Depreciation and amortization		117			74		293		187
OPERATING PROFIT AFTER INTEREST, DEPRECIATION AND AMORTIZATION AND BEFORE MINORITY INTEREST		744			544		1,965		1,481
Other income		(5	)		46		68		92
Provision for investments		—			—		1		—
NET PROFIT BEFORE TAX AND MINORITY INTEREST		739			590		2,032		1,573
Provision for taxation		83			93		233		240
NET PROFIT AFTER TAX AND BEFORE MINORITY INTEREST		656			497		1,799		1,333
Minority Interest		7			—		13		—
NET PROFIT AFTER TAX		649			497		1,786		1,333
Balance brought forward		2,350			751		1,415		70
Less: Residual dividend paid		—			—		—		2
Additional dividend tax		—			—		—		2
		2,350			751		1,415		66
AMOUNT AVAILABLE FOR APPROPRIATION		2,999			1,248		3,201		1,399
DIVIDEND
Interim		—			—		177		134
Final		—			—		—		—
Total dividend		—			—		177		134
Dividend tax		—			—		25		17
Balance in Profit and Loss Account		2,999			1,248		2,999		1,248
		2,999			1,248		3,201		1,399
EARNINGS PER SHARE
(Equity shares, par value Rs. 5/- each)
Basic		23.68			18.50		65.59		49.77
Diluted		23.02			17.95		63.73		48.69
Number of shares used in computing earnings per share
Basic		27,37,71,476			26,87,73,742		27,22,89,379		26,78,62,078
Diluted		28,16,04,953			27,71,10,460		28,02,43,496		27,37,70,692

Page 8 of 8

EX-99.3

Exhibit 99.3

INFOSYS TECHNOLOGIES LIMITED
Q3 RESULTS PRESS CONFERENCE
JANUARY 11, 2006

CORPORATE PARTICIPANTS

Nandan Nilekani
Infosys Technologies — CEO, President and CEO

Kris Gopalakrishnan
Infosys Technologies — COO and Deputy MD

Mohandas Pai
Infosys Technologies — CFO

S.D. Shibulal
Infosys Technologies — Head — Delivery and Sales

Srinath Batni
Infosys Technologies — Member of the Board

PRESS PARTICIPANTS

Madhavan
Reuters

Balaji
Rediff

Chitra
Bloomberg

Arun Iyer
Economic Times

Bani

A very Happy New Year to all of you. Good afternoon, welcome to Infosys third quarter result press conference. Eid-Mubarak sir. As always, we will start the press conference with Nandan providing an overview on the financial performance. This will be followed by Kris talking about the operational performance like clients acquisition, HR, etc. We shall have the Q&A thereafter. I would request you to press the black button in the panel in front of you to ask the question. Also, please give your name and the name of your publication before asking the question. Thanks. We just I think have to wait for 2 minutes for Nandan, he is on his way.

Over to Nandan.

Nandan Nilekani

Thanks Bani and I would like to welcome all of you to this presentation of the performance of Infosys for the third quarter ended December 31, 2005. This will be done in two parts. I will give you some overview, then Kris will go through the operational highlights and I will comeback for the future.

This is a safe harbor clause, which we give you every time and we would like to read this in great detail in the next 10 seconds.

Okay, let me talk about the financial performance. This quarter Q3 of FY06 on Indian GAAP year-to-year growth in income was 35% and net profit was 30.6%. On US GAAP the year-to-year growth was 32.2% and net income growth was 27.7%. This quarter, new clients added were about 36 and our repeat business this quarter was at 93.2%. In terms of employees on a gross level, we added 5,135 employees and on a net level we added 3,226 employees. Therefore, our year-end employee head count as of December 31, 2005 was 49,422.

This is the statement of the income highlights for Indian GAAP. For the quarter our income was Rs. 2,532 crores with a gross profit of Rs. 1,205 crores. Our operating profit was Rs. 861 crores, which as you can see was 17.2% improvement over Q2 and a 39.3% improvement over Q3 of last year and operating profit after depreciation was Rs. 744 crores. We had negative impact on the other income of Rs. 5 crores. So after all this, our profit after tax is Rs. 649 crores. This gives you the size of the balance sheet, as you see the total size of the balance sheet is Rs. 7,312 crores.

With that I will request Kris to go through the operational performance. Kris...

Kris Gopalakrishnan

Thank you Nandan. Let me start by wishing everyone Happy New Year and Eid-Mubarak.

North America continues to be 65% of our revenues. Europe has shown increase in growth. Europe is growing faster than other regions for us. North America is keeping pace with the growth of the company. So, North America is 65%, Europe is 24.9%, India is 1.4%, and rest of the world is 8.7% of revenues.

Our utilization excluding trainees is 78.7% compared to 79.1%. We had said that the range we look at is about 78% to 81-82% and so it is well within that range. As Nandan said, we have added significant number of people this quarter also and our utilization including trainees is 70%.

Fixed price and time and material, we continue to track, not much difference. Onsite-offshore revenues also are almost the same as last quarter, not much difference. There is significant change here in this. We have now two clients over $80 million and if you look at the numbers you can see that number of $60 million clients, number of $50 million clients, all the way to number of million dollar clients have increased. We have now more than 200 clients who give us million dollars or more.

There are 36 new clients added and across the board we had growth in the number of clients. Infosys Strategic Global Sourcing Unit, which is the unit which looks at some of the special opportunities, some of the larger opportunities, etc. and Infosys Consulting are the units which are looking at the new types of deals, which are coming in, strategy, sourcing, etc. So they had a project with a large hi-tech company. HTDM which is our High Tech Discrete Manufacturing group had a project along with Progeon and you will see that many of the projects which we are winning now contain multiple services and involve multiple units. A large insurance and financial services company has looked at Infosys for a portal which will strengthen its distribution capacity and drive product performance.

Infrastructure Management is a new area for us and we have a point of view here where we look at ownership of the asset separate from control of the asset and Infosys is involved in operating the asset or managing the asset and we are winning more number of deals in this area. Testing is Independent validation and Services is another service which was started in the last 2-3 years and it is doing very well.

Geographically, Australia and China are adding more number of clients. China is developing the Chinese market also and it is on track and Finacle continues to add more number of clients and more number of wins.

From a HR perspective, we ended the quarter with 49,422 employees which is a gross addition of 5,135, and at the experience people level we have added 927 people. Attrition is 10.8% and we expect to add about 3,400 people in this quarter at the gross level.

Infosys continues to invest in building infrastructure and investing in facilities and things like that because of the growth. The capex incurred was Rs. 260 crores in this quarter. As of December 31, 2005, we have 90,12,000 square feet of space which is capable of accommodating 42,000 professionals and the difference between the total number of professionals and the space available is because some of the people are overseas and some of the people are traveling. This does not include the space available abroad. This is only space in India. And we have 38 lakhs or 3.8 million square feet under construction, which can accommodate another 17,000 professionals approximately.

So now I will hand it back to Nandan.

Nandan Nilekani

Let me briefly spend some time on the outlook for the future and then we will go down to questions. For the quarter ended March 31, 2006, we expect income to be between Rs. 2,590 crores to Rs. 2,599 crores. This on a year-to-year basis is a growth of between 30.35% to 30.80% and Earnings Per Share before exceptional items between Rs. 24.30 to Rs. 24.70, which is a year-to-year growth of between 27.8% to 29.3%. For the full year, we expect income to be between

Rs. 9,87 crores to Rs. 9,496 crores, which is a growth rate of about 33% and Earnings Per Share before exceptional items is between Rs. 89.9 to Rs. Rs. 90.3 per share, which is a growth of between 30-31%.

To summarize, we have seen another quarter of steady growth, a quarter where we grew 6.7% in dollar terms and 10.4% in rupee terms. Client additions continue to be strong. We added 36 new clients this quarter. Our base of million dollar clients went to 206. Our initiatives which we have been working on for last few years in aligning the company strategically to make sure there is congruence, in building the capabilities both in terms of the capabilities of our people inside as well as by recruiting the right profile of laterals and our focus on operational excellence as personified in another quarter where the DSO is at 56 days is all on track. I think those initiatives are working on track.

At the same time, what we are finding is that in the last several years, we have invested a lot in new services like consulting, like BPO, like Systems Integration, Infrastructure Management, Independent Validation, Enterprise solutions. We have invested in verticalizing and creating business units. We have setup subsidiaries in China and Australia apart from Consulting and Progeon and we are finding that whenever we approach the market with collaborative approach where we bring all our strengths of our business units or subsidiaries or other ECUs into the fray, we are finding that it is creating good traction with the clients. Rupee has remained volatile during the quarter. Because of the rupee, on the operating margin side we had a gain of 1.9% about $10 million but that was offset by a loss of $12 million on the hedging, which impacted on the non-operating side. So the net impact was $10 million positive on the operating side, $12 million negative on the non-operating side, leading to a net loss of $2 million because of the rupee.

So I think that is what we had to say and I think this is how we see the quarter. We will be happy to take any questions at this stage. Thank you very much.

Mohandas Pai

It is because of the rupee. If you look at the US GAAP figures, presentation because is in rupees. If you look at the US GAAP it is about 4.5 to 4.7% and the Indian GAAP is less primarily because of the rupee. You know the last quarter, the average rate of the rupee was 45.34 and for this quarter we have taken the guidance at 44.50.

Mohandas Pai

Yes, for the last quarter the average of the rupee was 45.30 and for this quarter we have taken the guidance at 44.5.

Shibulal

Entering a country cannot be a tactical move, it has to be a strategic move. So for us to enter a country, the country has to have a certain amount of maturity in the market as well as a reasonable margin proposition. At this point, we operate in India with Finacle. We have a very strong presence. Probably, we have the largest presence in India from a banking package perspective. So to enter India we need to look at the other factors like how strategic it is, and we also have the philosophy that we will produce the skill set available and sell where the demand is high. So in that sense, there are no current plans to enter India from a strategic view, even though there are certain deals, which we pursue occasionally based on the tactical issues. Thank you.

Male speaker

Nandan, Mr. Narayana Murthy recently has said in Mysore that if the infrastructure is not improved, Infosys would move out of Bangalore. What is the status on that?

Nandan Nilekani

Just to give you the background. Today, we have close to 50,000 employees, we operate in 9 cities in India apart from our global presence and we operate in three cities in Karnataka, Bangalore, Mysore and Mangalore and we will continue to look at opportunities in all the cities as we go forward and I think fundamentally we will grow where we have the opportunity to grow, where we have the infrastructure to grow and that would be our operating model.

Mohan you want to add something?

Mohandas Pai

Right now, if you look at 41,600 seats, about 16,000 odd are in Bangalore. If you look at the 16,500 seats that are being constructed only 2,500 is in Bangalore. If you complete all this seats you will have possibly about 58,000. Out of 58,000, maybe 18,000 could be in Bangalore. So as it is if you look at the last four to five years, the share of Bangalore has been coming down because of the fact that we are growing faster in other centers. Bangalore is the large center for us. We are growing faster and over the last four years despite repeated applications, we still have not got land to expand in Bangalore. We are constrained for space in Bangalore. We do not have land in Bangalore. There is a traffic problem on the Hosur road. We cannot expand on the Hosur road. We have to go elsewhere but elsewhere we do not have land to expand. Nobody has given us land. We have been trying.

Male participant

Continue with this, where are you moving out?

Male participant

No, Mr. Narayana Murthy specifically raised the issue of infrastructure. Is it the infrastructure problem or what? The way you are saying that it is [not audible].

Mohandas Pai

I think it is a bit of both. Because first of all travel times in Bangalore are expanded because the industry has grown so much and obviously people want lesser travel time. And two, the industry has grown very large in Bangalore. So if an industry grows larger, you have to lookout outside and we have been outside for the last 12 years. So we have been growing outside and outside is growing faster than in Bangalore and three which is a very significant issue for Bangalore. If you look at a survey which was done and released in the press, all the software companies in Bangalore say that their hiring in Bangalore for fiscal 2007 is going to be significantly lower than their hiring in fiscal 2005. I think there is a message here.

Nandan Nilekani

See, I think the thing is that you have to look at this way. You have to see how we have to decide. I mean, for example this year, we are making 21,200 offers to people to join Infosys. Now they have to come in, they have to be trained, they have to sit somewhere, they need an office space. Obviously we will build our facilities and expand where we can quickly do that where there is infrastructure, where there is land. If we do not have it, we do not grow it. It is a matter outside our hands because we have to grow and we will grow where there is a path of least resistance.

Male participant

Or is it the result of the spat between Mr. Narayana Murthy and Deve Gowda ended in this decision or how do you look at it?

Mohandas Pai

No, because it takes time for us to react, right? For us to build it takes about 9-10 months. For us to hire and put people into operations take 6-7 months. There is a food chain where we are operating, there is a pipeline, so nothing happens instantly.

Mohandas Pai

We have 9 centers.

Mohandas Pai

Well, I think Pune we have about 7,500 people, in Chennai we have close to 7,000 people, in Bangalore about 16,000 people, in Mohali we have about 600 people now, in Hyderabad we have I think 4,500 people, Bhuvaneshwar 1,800, Mangalore 1,800, and about 800 in Trivandrum. So we are all over India. In Chandigarh, we have a 3,000 seater center coming. It has been delayed because of SEZ approvals. It should happen this quarter. So obviously in the North in Chandigarh we are growing. We have land in Pune to grow. So Pune we are adding capacity. We have land in Chennai to grow, we are adding capacity. We have no space in Mangalore so we are not adding capacity because there is no place to add capacity. In Bangalore, excluding one building we have

constructed, there is no place to add capacity, so we are not growing in Bangalore. But we are growing in Mysore, we have got 4500 seats in Mysore. 1800 employees 4500 seats, the world’s largest global education center. So we have made significant investment in Mysore. So like Nandan said our investments are, where it is possible to scale up, where it is easier to hire people, and Bangalore is a very attractive location. But from our point of view we just do not have space to add.

Madhavan

Yeah, I want to ask you something on China strategy, because I think DSP Merrill Lynch came out with a report last month which seems to suggest that Indian companies have only essential a two-year lead in some of the aspects of the IT competitiveness, particularly those where the domains are closer to manufacturing or telecom equipment. Wanted to have your views on, if there is a benchmarking possibility where India stands vis-a-vis China, particularly Infosys, and also maybe link it up to what you are doing yourself from that point of view?

Shibulal

Yeah, actually our China center has been operational for some time now. We have about 400 plus people there at this point. We operate in the Chinese market as a local organization as well as we are trying to deliver globally from there, from the China center. Now talking about the lead, our experience is not that two-year experience. What we are finding is that while there is technical talent available, the depth of management skills whether it is project management, program management, or knowledge in the domain that is financial industry or healthcare industry is behind. So I do not believe that the lead time is two years. It will be definitely more than that.

Madhavan

I also wanted to ask you a bit about the intellectual property strategy because historically Infosys is known more as an IT company with a consulting focus. So it will be nice to have some details on where you stand strategically and what kind of patents and IP are we talking about new strategy. Is this going to give you better fees vis-a-vis global competitors in some way now that you are in the Tier I bracket?

Kris Gopalakrishnan

When we look at IP, there are three different types of IP we look at. One is in the area of software engineering, improving the productivity, the quality, the capability of our own business and so we work in the area of requirements definition, doing maintenance better, developing tools for supporting our services and things like that and some of these are getting patented. The second area where we work in are in the technology areas like RFID or mobile technology or in the area of convergence of the different technologies when it comes to business or looking at embedded systems and distributed ubiquitous processing, capability available and things like that and here we look at how does it impact Infosys and how does it impact our clients and sometimes the patents in these areas are applied along with our clients because we work on joint projects and things like that. The third area is where the client hires Infosys to do R&D. So this is developing new products for our clients and new technologies for our clients and it is a joint development and things like that and again patents maybe applied jointly with the clients. Currently, we have about 85 applications. So it is a growing number of patent applications coming up and we need to

look at how we can leverage this better. It is definitely, the IP content in the services we deliver, the technologies we work on, the lead we have in terms of how fast we enter a new technology is increasing. So for example in the RFID area alone, almost three years back we came up with the first [not audible] server, which is required in order to sit between the business application at the back-end and the readers which sit in the front end. We needed something which sits in the middle and we developed that because something was not available in the market. Today it is available in the market and so since we are not a product company, we do not take it to market but we developed that actually through in-house R&D. So there are a lot of instances like this where proactively we are creating IP and we are doing R&D.

Kris Gopalakrishnan

No, it is past almost five years when we had set up our Software Engineering and Technology Labs. So formally we created that. Before that it was happening, but it was not happening in a central group and the patenting thing is almost two years old. So in the last two years there has been lot of focus on patenting and things like that. It is just not sufficient to do patent application. We will have to also create a mechanism to defend that patent. So those are things which we need to now look at. So this does help in pricing. It helps in differentiation. It helps in increasing the productivity. It helps us go to our clients proactively with solutions.

Male participant

But how many patents you have now?

Kris Gopalakrishnan

We have I think about 3-4, which are granted and the remaining are 85. It takes some time for it goes through several steps and processes.

Male participant

Kris, last time you talked about expanding in the Eastern sector also, any further news on that?

Kris Gopalakrishnan

We have a center in Bhubaneshwar. We are as we said last time in the process of looking at Calcutta. Unfortunately, neither me nor Mohan got time in this quarter. So we hope to do as soon as possible.

Mohandas Pai

The hedging impact is a net Rs. 55 crores. So if you take the other income figure you had interest income of about Rs. 45 crores, then you had other income of Rs. 5 crores which is miscellaneous

income. So it is Rs. 50 crores, Rs. 55 crores was the loss on hedges, foreign exchange difference. So you have a negative of Rs. 5 crores.

Mohandas Pai

No it is just that the rupee was more volatile. The hedging was not able to cover the rupee movement. So the rupee was much more volatile than the hedging could manage. And also Balaji we mark our position to market because when you mark it market that means whatever is the position as of the cut off date, it is all accounted for totally. Right now for this quarter our estimates are based upon a rupee-dollar rate of 44.50 whereas for the quarter end the rupee was 44.95. So we have not taken the quarter end, we have taken the rupee rate as the date we completed our guidance.

Balaji

And how much is your                     .

Mohandas Pai

About $300 million, all in options. We are hedged in range-bound options, options are in a range, $300 million. A great majority of them in the quarter and some of them over a period of time.

Mohandas Pai

Well we don’t know, we have to evaluate on a daily basis because right now we don’t know what the rupee is going to be tomorrow.

Mohandas Pai

Yes sir. Absolutely sir.

Mohandas Pai

No, new clients are coming in at 3-4% higher but the impact of the new clients is already into the model because the value of the new clients as of the last quarter was 93%, that is repeat business is 93%. New clients are 7%. So 7% higher prices, the impact of the 7% on the total 100% is marginal.

Male participant

Nandan, Mr. Narayana Murthy had also hinted that if infrastructure is a problem, you could be developing centers outside India. Which are the countries that you have in mind where you could be like, or is there any plan?

Kris Gopalakrishnan

If you look at development capability, we have presence in Mauritius, a small presence in Mauritius, in Czech Republic, in both Prague and Bruno, in Toronto, Canada and of course a large number of people in our centers in London, Frankfurt, Tokyo. Australia we have significant presence and in several cities in the US. So at any point of time you can say that for delivering services like consulting, technology architecture design and things like that, we have people locally present. And then the coding, testing, etc. is typically China, India, Mauritius, Bruno, places like that Prague.

I just want to clarify one thing on the previous question. We have 24 actual applications for patent files and 85 in the process of being filed total. Disclosed, that is, we have done the preliminary disclosure on 85.

Bani

We will take one last question.

Chitra

I actually have two questions, basically if you could tell us your hiring plans for fiscal year 2007 and how would you describe the Japanese opportunity, what is Infosys’ strategy for addressing that market?

Mohandas Pai

I think we will split the answer, the hiring plan for 2007 will be disclosed in the meeting in April when we give our guidance. We have made about 6,500 campus offers for the next year. We are possibly among all software companies, with the highest number of offers out there in the marketplace for the next year.

Srinath Batni

On the Japanese opportunity, the Japanese companies are quite actively looking at India now. Recently there was a visit by                      which is equivalent of CII after 5 years to India and they are looking at India with very renewed interest because of the retiremental which is going to happen in Japan in next two-three years. So we are looking at that as a bigger opportunity as a wave which we want to encash.

Bani

Thank you everyone for joining us... Sure Balaji, go ahead... Who would you like to address it to?

Mohandas Pai

Balaji the hiring is dependent upon the college hires that we have contracted with for the next year. The college hires come in large numbers in the second quarter and lesser number in third quarter. So second quarter of a fiscal year you will always see a hump, and two, the attrition is up on a LTM basis from about 10 % to 10.8%, which is very marginal and this quarter we have hired people. But the fact remains that the availability of people in the fourth quarter is the least, third and fourth quarter comes down compared to the first the second quarter. The second quarter we have more people joining from colleges and the first quarter there is some amount of people coming from the colleges but in the market place there is a tight supply.

Mohandas Pai

No, what Kris said was that we will hire 21,200 people in this year gross, 21,200 people. Out of which we will be hiring 3,400 people. That means about 17,800 people have already been hired. So whatever projection we have made, we are right on track to meet those projections. These are all gross numbers.

Bani

Any other questions?

Arun

One small question, this is Arun Iyer from ET. You have been losing a lot of senior level management people. How critical is this? Because you usually cite personal reasons for the departure of these senior level people.

Nandan Nilekani

No, I think there are two ways to look at it. Of course they are all qualified, capable individuals who have contributed to the success of Infosys and therefore every one of them leaving is a loss to the company. At the same time I think we have built a platform. We have built a global platform. We have built a brand. We have built an engine of growth. So to that extent a lot of the value is in the way we do things and I think we have a very strong bench of leaders who are able to step up to the plate and take leadership positions which has what has happened in everyone of these instances. So I think the impact in terms of the company’s growth and strategy and future that has not changed.

Mohandas Pai

Well keep it in the bank. No, capex this year will be about 1,130 crores, we have spent about Rs. 815 crores in the three quarters. So we are right on track for the capital spending, and we could be spending something like Rs. 3 crores a day, and maybe Rs. 4.5 crores a working day. It is very difficult to spend money too and liquidity is about $969 million, about Rs. 4340 crores and that is there to meet any contingent requirements that might arise.

Bani

Thank you everyone.

Mohandas Pai

Yes, they are all invested in bank deposits and liquid money market mutual funds giving us a post tax yield of something like 4.5%.

Bani

Folks, people will be available for comments after this as well, but we shall break now. Balaji, we will take it off line, okay?

Mohandas Pai

Yes, FBT continues to be an issue in the sense that the finance minister said FBT is not going to be revoked, that is point #1. The finance minister said that he is looking at giving some incentives to industries which generate employment. We read in the press like everybody else and our expectations are that the budget continues and no new imposes will be made. Well, 10A the sunset clause dies, comes in at 2009 March and I think our expectations are [not audible] because the SEZ scheme has come.

Nandan Nilekani

I think Balaji, I mean with all due respect we really have to close now. Can we close it now?

Bani

Yes. Thank you everyone for joining us. Please join us for lunch outside.

EX-99.4

Exhibit 99.4

Performance of Infosys for the Third Quarter ended December 31, 2005 Nandan M. Nilekani Chief Executive Officer, President and Managing Director S. Gopalakrishnan Chief Operating Officer and Deputy Managing Director

Safe Harbour Certain statements in this presentation concerning our future growth prospects are forward- looking statements, within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended - 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 our investments, risks and uncertainties regarding fluctuations in earnings, our ability to manage growth, intense competition in IT, business process outsourcing and consulting 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, 2005 and quarters ended June 30, 2005 and September 30, 2005. These filings are available at www.sec.gov. We 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. We do not undertake to update any forward-looking statements that may be made from time to time by or on our behalf.

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

Financial Performance

Highlights Q3 FY 06 Q2 FY 06 Q3 FY 05 Indian GAAP YOY Growth Income 35.0% 31.2% 49.2% Net profit 30.6% 35.6% 51.4% US GAAP YOY Growth Revenues 32.2% 38.3% 53.3% Net income 27.7% 42.3% 57.8% New clients added 36 34 38 Repeat business 93.2% 96.5% 95.0% Employees Period end headcount 49,422 46,196 35,229 Gross addition 5,135 8,026 3,164 Net addition 3,226 6,390 2,280

(Rs. crore) FY2006 FY2006 FY2005 % growth over Q3 Q2 Q3 Q2 06 Q3 05 Income 2,532 2,294 1,876 10.4 35.0 Software dev expenses 1,327 1,212 992 9.5 33.8 Gross profit 1,205 1,082 884 11.4 36.3 S,G&A expenses 344 348 266 -1.1 29.3 Operating profit 861 734 618 17.3 39.3 Depreciation 117 96 74 21.9 58.1 Operating profit after depreciation 744 638 544 16.6 36.8 Other income (5) 44 46 -111.4 -110.9 Provision for investment - 1 - - - Profit Before Tax 739 681 590 8.5 25.3 Provision for tax 83 69 93 20.3 -10.8 Profit After Tax 656 612 497 7.2 32.0 Minority interest 7 6 - 16.7 - PAT after minority interest 649 606 497 7.1 30.6 Highlights (Indian GAAP)

(Rs. crore) Dec 31, 2005 % Dec 31, 2004 % LIABILITIES Shareholders' funds 7,312 100 4,821 100 Total liabilities 7,312 100 4,821 100 ASSETS Fixed assets 2,096 29 1,431 30 Investments 2 - 2 - Deferred tax assets 57 1 43 1 Current assets Cash & equivalents* 4,348 59 2,738 57 Accounts receivables 1,314 18 1,039 21 Other current assets 939 13 733 15 Less: Current liabilities (1,444) (20) (1,165) (24) Net current assets 5,157 70 3,345 69 Total assets 7,312 100 4,821 100 Balance Sheet Summary *Includes investment in liquid Mutual Funds

Operational Performance

% Q3 2006 Q2 2006 Q3 2005 North America 65.0 65.4 66.6 Europe 24.9 23.7 22.1 India 1.4 1.5 2.1 Rest of the world 8.7 9.4 9.2 Total 100.0 100.0 100.0 Region-wise Revenue

Utilization Including training Excluding training Q3 FY 2006 0.7 0.787 Q2 FY 2006 0.729 0.791

Revenues by Project type % Q3 2006 Q2 2006 Q3 2005 Fixed Price 28.4 28.7 31.4 Time & Materials 71.6 71.3 68.6 Total 100.0 100.0 100.0

Onsite-Offshore Revenue % Q3 2006 Q2 2006 Q3 2005 Onsite 48.6 48.8 49.0 Offshore 51.4 51.2 51.0 Total 100.0 100.0 100.0

Customer Concentration Q3 2006 Q2 2006 Q3 2005 Client contribution to revenues (%) Top client 4.5 4.4 4.9 Top 5 clients 17.6 17.8 19.8 Top 10 clients 29.9 30.6 32.1 No. of clients* Million dollar 206 191 156 5 million+ 78 76 65 10 million+ 51 48 37 20 million+ 25 23 18 30 million+ 18 16 10 40 million+ 14 11 7 50 million+ 7 6 4 60 million+ 5 4 3 70 million+ 2 2 1 80 million+ 2 1 - 90 million+ 1 1 - Clients accounting for >5% of revenue - - - *Last Twelve Months

Client Addition & Expansion of Services

Client Addition & Expansion of Services Client acquisitions during the quarter were 36 Infosys' Strategic Global Sourcing Unit and Infosys Consulting Inc. undertook an assessment of the sourcing strategy and processes for a leading hi-tech company Infosys Hi-Tech and Discrete Manufacturing unit along with Infosys' Product Engineering practice is helping a major hi-tech corporate in building a GSM cell phone for emerging markets HTDM is also working with Infosys' subsidiary Progeon to offer business process outsourcing services to a leading discrete manufacturer in the Master Data Management arena Infosys successfully implemented three large business-critical systems for a leading aerospace company in the US

Client Addition & Expansion of Services One of the largest insurance and financial services companies in North America has sought Infosys' expertise in developing an agency front-end portal that will strengthen its distribution capacity and drive product performance, while providing a common technology solution to enhance agent productivity A leading UK-based multi-utility company in the gas, power and utilities services industry signed up Infosys to implement Microsoft BizTalk for creating connectivity infrastructure for its market-facing and customer-facing businesses In the IMS arena, Infosys won a large multi-year contract in infrastructure support for a large, Europe-based global client in investment banking In the area of IVS, Infosys is building a Testing Center of Excellence (TCoE) for the largest grocery home-shopping services in the world

Client Addition & Expansion of Services Australia A pharmaceutical multinational in Australia has engaged Infosys to undertake a complete upgrade of its worldwide Oracle database, operating system and applications infrastructure Other new accounts include one of the largest privately owned professional services and recruitment companies in the world and an energy utility that supplies gas and electricity to 1.1 million homes in Australia China A global provider of reliable power, precision environmental and connectivity solutions for telecommunications and data network infrastructure engaged with Infosys to develop a next-generation energy system management software

Finacle(r) ANB Bank, a Global 500 bank headquartered in Saudi Arabia, licensed Finacle(r) to power its retail banking initiative Centurion Bank of Punjab selected Finacle(r) for its technology- led business transformation initiative UCO Bank has also deployed Finacle(r) to achieve cost advantage and derive significant business benefits

Human Resources

Human Resources Dec 2005 Sep 2005 Total employee strength 49,422 46,196 Software professionals 46,484 43,441 Gross addition 5,135 8,026 Laterals 927 1,166 Net addition 3,226 6,390

Capex and Infrastructure

Capex and Infrastructure Capital expenditure of Rs. 260 crore was incurred during the quarter As on December 31, 2005, the company had 90,11,739* sq. ft of space capable of accommodating 41,666 professionals and 38,01,880* sq. ft under completion capable of accommodating 16,900 professionals *Excluding subsidiaries

Outlook for the Future

Indian GAAP - Consolidated Quarter ending March 31, 2006 Income is expected to be between Rs. 2,590 crore and Rs. 2,599 crore; YOY growth of 30.35% to 30.80% Earnings per share before exceptional items is expected to be between Rs. 24.30 and Rs. 24.70; YOY growth of 27.83% to 29.93% Fiscal year ending March 31, 2006 Income is expected to be between Rs. 9,487 crore and Rs. 9,496 crore; growth of 33.10% to 33.2% Earnings per share before exceptional items is expected to be between Rs. 89.90 and Rs 90.30; growth of 30.69% to 31.27%

Summary

Summary Another quarter of steady growth Client addition continues to be strong Our initiatives in strategic alignment, capability building and operational excellence are all on track Our collaborative approach to the market-place, combined with the strengths of our various business units, is finding good traction with our clients Rupee remained volatile during the quarter Benefit of rupee depreciation on the operating margin was offset by the hedges at the non-operating level

Thank You

EX-99.5

EXHIBIT 99.5

EX-99.6

Exhibit 99.6

INFOSYS TECHNOLOGIES LIMITED
Q3 RESULTS EARNINGS CALL
JANUARY 11, 2006

CORPORATE PARTICIPANTS
Nandan Nilekani
Infosys Technologies — CEO, President and MD
Kris Gopalakrishnan
Infosys Technologies — COO and Deputy MD
Mohandas Pai
Infosys Technologies — CFO
S.D. Shibulal
Infosys Technologies — Head — Delivery and Sales

CALL PARTICIPANTS
Manoj Singla
JP Morgan
Bhuvnesh Singh
CSFB
Pratik Gupta
Citigroup.
Shailesh Jaitly
Nomura
Supratim Basu
Deutsche Bank
Amit Khurana
IL&FS Investmart
Mitali Ghosh
DSP Merrill Lynch
Shekhar Singh
ICICI Securities
Anantha Narayan
JM Morgan Stanley
Trideep Bhattacharya
UBS
Hitesh Zaveri
Edelweiss Capital
Aviral Gupta
Karma Capital
Milind
Dalal and Broacha
Ashwin Mehta
Alchemy

Moderator

Good afternoon ladies and gentlemen. I am Prathiba, the moderator, for this conference. Welcome to the Infosys earnings call. For the duration of the presentation, all participants’ lines will be in the listen-only mode. After the presentation, the question answer session will be conducted for participants connected to the SingTel Bridge followed by a question and answer session for participants connected to India. I would now like to hand over to the Infosys management. Thank you and over to Infosys.

Sandeep

Good afternoon and thank you all for joining us today to discuss the financial results for the quarter ending December 31, 2005. I am Sandeep from the Investor Relations Team in Bangalore. Joining us today in this conference room is CEO and President, Mr. Nandan Nilekani; COO, Mr. Gopalakrishnan; and CFO, Mr. Mohandas Pai, along with other members of the senior management. We will start with a brief statement on the performance of the company for the quarter ended December 31, 2005 and the outlook for the quarter and the year ending March 31, 2006. After that, we will open up the discussion for Q&A. Before I pass on to Mr. Nilekani, I would like to remind you that anything that we say which refers to our outlook for the future is a forward-looking statement and must be read in conjunction with the risks that the company faces. A full statement and explanation of these risks is available with our filings with the SEC, which can be found on www.sec.gov. I would now like to pass onto Mr. Nilekani, President and CEO.

Nandan Nilekani

Thank you Sandeep and I would like to welcome all of you to this call for the Q3 results for this financial year. This quarter has been a quarter which we have seen a quarter of steady growth. As you know, in the last few years, we have had many initiatives and strategic alignment and congruence building capabilities of out people and operational excellence and I am glad to tell you that all these initiatives are on track. We have grown at about 6.7% under US GAAP. Under Indian GAAP, we have grown at 10.4% because of the rupee depreciation and we have also given our outlook for the next quarter and for the year. We expect that the income for the quarter ending March 31, 2006, is going to be in the range of Rs. 2,590 crores to Rs. 2,599 crores which on a year-on-year basis is a growth of 30.35 to 30.80% and Earnings Per Share before exceptional items between Rs. 24.30 to Rs. 24.70 which is a year-on-year growth of 27.83 to 29.93% and for the full year, we are looking at between Rs. 9,487 crores to Rs. 9,496 crores in terms of income and Earnings Per Share before exceptional items between Rs. 89.9 to Rs. 90.3 which again a year-on-year growth is between 30.69 to 31.27%. Pricing has generally remained stable with a small upward bias and we have added 36 new clients this quarter. So I think overall its has been a good quarter, it has been a steady quarter, it’s been on track with what we said we would do. We think that we are on target. We are seeing growth in different parts of the business. I think the only big thing this quarter was really the volatility of the rupee which Mr. Pai will talk about a little later. With that, I will request my colleague, Kris Gopalakrishnan, to give you some more highlights for the quarter before he in turn hands it to Mohan to dwell into the intricacies of the financial statement.

Kris Gopalakrishnan

Thank you Nandan and let me start by wishing everyone a Happy New Year. North America is continuing to grow at the same pace as the company. Europe has grown much faster. Europe percentage of the total revenue has gone up to 24.9 from 23.6 and consequently of course as a percentage Asia-Pacific and India has come down, but in absolute terms even Asia-Pacific and India are also growing. From a services perspective, package implementation, consulting, testing, business process management, that is, Progeon subsidiary, infrastructure management, are some of the faster growing services. Maintenance is keeping pace with the company growth rate. If you look at industry vertical perspective, banking and capital markets, retail, energy and services sectors are growing faster than the company average. For example, banking and capital markets is now 29% of our revenues. The total contribution of banking, insurance, and financial services is almost 36% of revenues, kind of same as before, insurance has come down. Per capita revenue is almost the same as before. Onsite has come down by 0.1%, offshore has gone up by 0.2%, blended there is an increase of 0.1%. As Nandan said, the pricing environment is stable with an upward bias. The number of million-dollar clients has gone up to 206 from 191 and the number $5 million relationships, $10 million relationships, $25 million relationships, all have gone up. We have two clients giving us revenues of more than $80 million and one client giving us revenue of $90 million. The largest client is 4.5% of the revenues and repeat business is 93%. We added 5,135 gross number of employees of which 927 were with prior experience. We expect to add another 3,400 to 3,500 people in Q4. This is the gross addition. This is in line with what we said we will do for the year. For the year, we had said that we will look at about 20,200, now it looks like 21,200 employees. Attrition has gone up a little bit to 10.8%. Q3 last year was 10.3%, so its in the same range and not cause for significant concern. Utilization is 78.7, last quarter it was 79.1. So utilization is in the range we expect it to be, that’s the range we are trying to manage our utilization to 78 to 82%. So its in the range and we continue to invest in building out infrastructure. We have currently about 3.8 million square feet of space under construction, which can accommodate another 17,000 people. So infrastructure, recruitment, and customer additions, etc., is on track. Now, I will give it to Mohan.

Mohandas Pai

Thank you Kris. Folks I will talk about the margins and I will talk about the rupee. We have seen our operating margin go up to 34% from 32%. Out of this 2 percentage points, about 1.8% has come because of the rupee impact. There has been a small uptick also because of the fact that SG&A has come down from 15.2 to 13.6, but we have hired a larger number of people than we had budgeted earlier much faster than we did. We spent more money on training and that did have an impact on our margins and if you look at the SG&A expenses, it has come down by about 1.6% and the major reason for that has been in G&A, the provision for bad and doubtful debts has gone from a positive of Rs. 9 cr to a negative of Rs. 4 cr, Rs. 4 cr because we could write back something due to collection as we provide for everything over 180 days. Apart from that, spending has been broadly in consonance with what we had projected at the beginning of the quarter. If you look at the rupee, two significant things happened in the rupee. The rupee depreciated very fast in the first two months and then appreciated equally fast soon thereafter. So the rupee had an average depreciation for the quarter of 3.48% against the dollar and at the period end, the depreciation had come down to 2.30%. So the average was Rs. 45.30 for the quarter and the quarter end was Rs. 44.95. Our guidance is based upon Rs. 44.50 and that explains why the Indian GAAP revenue numbers are growing at a slower pace than the dollar numbers. Because for the last quarter, that is the third quarter, the translation or the conversion was at Rs. 45.30 and for the fourth quarter we are taking it at Rs. 44.50. The impact on revenues has been about 3.7% or about Rs. 69 crores. On the operating income, the rupee depreciation had an impact of Rs. 45 crores. The translation impact has been about Rs. 6.8 crores positive. The hedging an impact of

Rs. 70.8 crores, a total negative impact of about Rs. 18.8 crores on the overall rupee movements during the quarter. So we had an overall impact of Rs. 55 crores negative in our other income line and that’s why you see the total other income being negative for this quarter to the extent of Rs. 5 crores. We think that going forward the rupee could be slightly more stable in this quarter, though nobody can predict how the rupee will behave, but we do have about $300 million on a consolidated basis in hedges, but this time on an option basis. The options are all range bound options, a large part of the options will mature in the fourth quarter and some of them will carry on later because these options were originally taken to hedge against the translation impact. So the big news for this quarter has been that margins have been steady, the pricing has been stable with an upward bias and if you look at the pricing, you find that the pricing has been slightly up for the offshore, slightly down for onsite, no great trend compared to the previous quarter. But if you go behind the numbers and look at the number of working days for the time and material per capita revenues, which is 70% of the revenues and if you normalize the whole thing, you will find that there is indeed an uptake in prices though the impact of the uptake in prices is yet to be felt in the per capita revenue numbers going forward. We open the floor now for questions. Thank you.

Moderator

Thank you very much sir. At this moment, I would like to hand over the floor to Ameena to conduct the Q&A session for participants at the SingTel Bridge. This will be followed by the Q&A session for participants at the India. Thank you and over to Ameena.

Moderator (Ameena)

Thank you Prathiba. We will now begin the Q&A session for participants connected to the SingTel Bridge. Please press 01 to ask a question. The first question is from Mr. Manoj of JP Morgan. Go ahead sir.

Manoj

Hello, good afternoon and congratulations to the management team on a decent quarter. My question basically relates to the volume growth. We have seen a 6.3% volume growth this quarter which is, one, slightly weaker than what we see from Infosys normally in the December quarter, last year was 12% and the year before that was 11%. Secondly, if I look at the trend over the last four quarters except for September where we delivered 10%, volume growth has been slightly on the weaker side, 6% in March, 2.6% in June, 6% this quarter, and this in comparison to both Infosys’ history and to other peers in the sector. Can you explain that?

Mohandas Pai

Yes the data that you say is right. If you recall that last year, we had three quarters of double digit growth in the beginning of the year, first three quarters, then it came down to single digit. Then the first quarter of this year, we had this impact of the followthrough because of Sarbanes-Oxley and other issues that we faced and also large client issues, which were very specific to that quarter. Second quarter we had a double-digit growth rate and third quarter has been 6.7%. We do believe that last year there was a huge impulse of growth because the market came off a low level, then offshoring took off and became more mainstream. Now offshoring and growth is in a much more steady phase. But if you look at the entire year, we will be growing this year in

revenue terms at about 34%. So last year, we grew much higher at around 49% in volumes and this year, we are growing at about 34%. So if you look at it, we could say that offshoring has become more secular, growth has become more secular, there is as a deeper level of interest, the upsurge that came because people were sitting on the fence is not there this year. Its much more back to normal business.

Manoj

So Mohan, are we trying to say that this 6-7% kind of a growth, is this more of a secular trend going forward one should be looking at?

Mohandas Pai

Well, we are not making any statements at this point of time because we are looking at trying to get our budgets ready and the forecast reconciled for the next year. So we are not going to make any statement at this point of time about next year.

Manoj

Sure, and one very last question on the margin front. We had seen a pretty stable EBITDA margin of around 32% for quite sometime, and this quarter because of the rupee it has jumped to around 34%, now going forward, I think, especially in the medium term, should we again look at a 32% kind of a range?

Mohandas Pai

Well I think you should look at margins moving in the narrow range for core part of the business because that is our intention and that’s the way we budget. Whenever we see pricing uptakes for the margins going up because of economies of scale, we try to plow it back into the business because we want to focus on growth with stable margins. So if you see an upsurge on margins, it could be because the rupee has become more volatile or depreciated or whatever and if you see an impact on the margin negatively, it could be that the rupee has appreciated because on the rupee front, there is apart from hedging for a quarter or slightly more than a quarter, there is very little you can do, but I think you should look for stable margins with a small movement up and down in the core business in the future because that is our strategy.

Manoj

Thanks Mohan, thanks a lot.

Moderator

Thank you. Next we have Mr. Bhuvnesh Singh from CSFB.

Bhuvnesh Singh

Congratulations to the whole team. I saw one change this year that compared to forward contract in the previous quarter now we have shifted to options. Mohan can you explain why this change has happened and what could be the impact going forward?

Mohandas Pai

Well, we shifted to options basically to ensure that we have more arms in our armory to meet any volatility that could happen both for options and for futures. We are marking the position to market as the quarter end. So in terms of the actual impact of the options, we made a study, the option impact would have been almost similar to that of the forward in terms of its impact on our bottom line. These are just some more weapons to take. As you are well aware, we don’t take a very activist role, we take a pessimist role on the options just to hedge to make sure that if we forecast the EPS for a quarter, we are able to reduce the risk in the EPS due to movement on the currency rates by effective hedging for that single quarter. So I think you should not read too much into it except to say possibly that we are looking at more options, more options in terms of having arms in the armory.

Bhuvnesh Singh

Okay. Mohan a very simple question. If say rupee stays where it is today, then could it have any impact on this quarter numbers because of just forward cover changing?

Mohandas Pai

No, it is mark to market at Rs. 45.30 and the rupee is Rs. 44.50, so between Rs. 45.30 and Rs. 44.50, it is very minimal impact. The impact could be because of the fact that the pound has become slightly stronger and Euro has become slightly stronger because the dollar has gone down, but compared to the impact, we are already seeing from Rs. 45.30 to Rs. 44.5, an 0.80 paise impact. That is about 1.8% and therefore the 34% could get impacted to the extent of 50% of 1.8%, so apart from that the option is having any material impact.

Bhuvnesh Singh

Okay, and I have got one more question on gross margins. This time in US GAAP terms our gross margins declined slightly despite the help from rupee, any particular reason?

Mohandas Pai

The gross profit went up to 47.6% as against 47.2% in Indian GAAP in the second quarter and if you look at the numbers in the gross margin, you find that the salary and bonus including overseas staff compensation went to 43.6% as against 42.6% in the previous quarter. So there is a 1% of revenue increase in cost because we hired more number of people faster to come into the system so that our people could be greatly empowered to grow the business. If you look at this, then you find that the cost of revenue has come down to 52.4 from 52.8. So without the rupee depreciation the impact could have been slightly higher.

Bhuvnesh Singh

Thanks Mohan.

Moderator

Thank you very much sir. Next we have Mr. Pratik from Citi Group.

Pratik

Questions regarding some comments you made in the press in the morning, just want to get a clarification regarding comments about, you said that as you grow larger you would need to have a larger bench strength. I was wondering if you meant that in absolute terms or percentage terms of the overall head count and also you said that your top clients will not grow at the same rate, I was just wondering whether there is a change in strategy towards focusing more on the smaller and medium-sized clients versus larger accounts and then I have a couple of followup questions on tax and capex as well.

Shibulal

This is Shibulal. On the utilization front, our utilization target is somewhere around 78% and Mohan’s point was that as our business is growing, we are acquiring larger and larger deals. So if you look five years back, a customer would tell us to ramp up by 10 or 20 people, today that number is in three digits, 100 and 200 people and they expect us to ramp up much faster. So take advantage of growth situation, what Mohan was pointing out was that it is important to have people on the ground in absolute numbers and as well as impact on the percentage to have more people on the bench which will be available for us to scale and also well qualified and well competent and who are well trained. So Mohan was making a point that it is important for us to have that bench, invest into it, so that we can take advantage of the growth. That was on the first question. The second question was about the customers, right. If you look at our growth, what we are noticing is that two years back, we had a three year strategy of taking customers with $50 million, we have about 7 customers today. In fact, last quarter to this quarter, the number has gone from 6 to 7 on $50 million customers. At the same time, as a certain size, much above $50 million, we are seeing a certain amount of slow down in these customers. We are also noticing that the customers between $20 million to $40 million is definitely growing faster. So overall our growth is very robust. At the same time, now we have a new program launch, which is a large account development program, which is mainly focused on customers above $50 million to over with the strategy to further grow them into the next level.

Pratik

Okay, basically what you are saying is that the utilization rate target is still 78%, that’s #1, and second could you just also elaborate a bit more on the tax rate that’s been at 11% or so this quarter as well, and what are you budgeting for the coming quarter and also any preliminary indications for the next year, do you see any big uptake in the tax rate next year and also your capex for this quarter please?

Mohandas Pai

As far as the tax rate is concerned, if you normalize the tax for the loss on the other income side, where the other income is a negative Rs. 5 crores, so overall it should have been a positive figure

or something like maybe Rs. 50 crores, then if you normalize the tax on that, you will find the tax rate would be the same as the previous quarter normalized with a write back. Tax rate could be something like about 13.1 to 13.3%. Going forward, next year, we don’t see any of our units coming off the tax holiday having any substantial impact on our margins. The tax rate will move in a narrow range next year. We don’t think it will have a material impact. And as far as capex is concerned, we have said that this year, we are going to spend approximately about Rs. 1,130 odd crores and we stick to that. We have spent about Rs. 815 crores and the balance money, we are right on track to spend that money. Of course, spending about let’s say Rs. 4.2 crores, every single working day is a bit tough. We have to really ramp up capacity to spend, but the capex program is on plan, and I will give you a hint how we spend capex, it may look large to you. We did about $12,000 for every person you hire, so this year we are going to hire gross 20,000 people, we are going to maybe add 20,000 seats including work-in-progress. So it means that you need 20,000 x $12,000, that is, $240 million plus you will need some capex for technology for carrying on at the rate of $1000 per person and you get this number.

Pratik

And just that earlier question about 78% utilization, that’s still the target, right?

Mohandas Pai

Well broadly around that range because 78% utilization is a sweet spot because at that point you can have potential to grow by about 3-4% if business comes by, you will have necessary slack, you will have necessary bench. If you go to 81%, if you suddenly need some growth you won’t be able to do it and you are working, you are having a just in hand policy which does not work so well. If you come to 76%, it may be much better, but some inefficiency could come in and you want to have a tight operation. For this point of time, 78% could be very good, 76% could be a figure you could look at as you are able to get people.

Pratik

Okay, thank you.

Moderator

Thank you very much sir. Next we have Mr. Shailesh of Nomura.

Shailesh

Hello, I had a question on one of your smaller product segments, this is the banking product group. This segment which has seen quite a decent sequential growth, yet if I look at your manpower additions in this quarter, probably one of the ___additions which you have seen in any of the quarters. Can we take it as a sign of a lot bigger traction and lot bigger growth trend in this segment going forward and if so, if could also help explain as to which geographies are you seeing bigger traction?

Kris Gopalakrishnan

For Finacle, we are expanding in countries in the Asia Pacific region like Singapore, Thailand, Sri Lanka, India of course, in Africa we are expanding. We are also trying to look at developed markets like Switzerland, UK, and in longer term US. We have some clients in South America, so the footprint actually is becoming more and more global. The number of deals we are winning is also increasing. We have wins in Middle East, Singapore, in Thailand, etc., in the recent past. So on one side, we have to get involved in the implementation which requires more people as we grow. Second, we have to invest in development of new features which are not there in the product because we are entering into so many countries and if you look at the growth rate of product business itself from last year to this year, products have grown in the last 12 months from $31.9 million to $62.01 million to date, which is a growth rate of about 94% actually. So its grown much faster than the company and it requires investment in people, it requires investment in the development of the product itself.

Shailesh

Also some clarification, would certain part of this business be of recurring nature. If so, could you quantify that?

Mohandas Pai

Yes, certain part is of recurring nature because you have what is called an Annual Technical Services. The Annual Technical Services maybe 18-20% of the business right now because it is built over a period of time on the license revenue. Typically 15-20% license revenue is paid every year as Annual Technical Services, so that becomes an annuity stream, but you need to have a large installed base of licenses to build it up to an appreciable level, we are still in the phase of growing.

Shailesh

And this BPO part of the business, because if I look at the quarterly growth rates in persons, this is the first quarter your quarterly growth rate has fallen below 10%. So are there any timing issues which are more one-time issues or this is the growth pattern going to emerge going forward that is less than 10%? Is it a secular trend there or is it more of timing nature?

Mohandas Pai

No, I think if you look at the third quarter, we grew 6.7% and if you look at the number of days, there were 3 less working days, the impact of that is about 3.1 to 3.2%, so you are seeing a growth rate of 9.9%. And of course you will ask the question what about the fourth quarter? The third quarter has been in track, the impact of lesser working days is there. If you normalize this, you are in very good shape. The fourth quarter is a very peculiar quarter because even in the last year, the growth in the fourth quarter was the lowest amongst the growth rate for all the four quarters. So this year too, the fourth quarter growth rate barring the first quarter, which had two exceptional terms will be less than the normal growth rate and because people are coming off their holidays, they have to start spending and we have to see how they pan out the budget, so it is slightly premature to be aggressive in this quarter. So we said based upon what we see at this point of time this is the growth rate that we see right now. As things go on, we will see what happens.

Shailesh

Mohan, one last question, about SG&A. If my memory serves right, either in the last quarter or the quarter before, you had mentioned that you would be targeting in the long term about 14%. Even if I take into account the provisions that’s fallen to about 13.75%, do we expect SG&A to go back to that 14% range or this 13.5 to 13.75% range is going to be something which possibly could sustain for a bit longer time?

Mohandas Pai

Well there are two issues about SG&A. The SG&A of the parent company and the SG&A of the subs. As you are aware, you are seeing IC ramp up by selling capacity, so therefore the SG&A is a much higher percentage. The SG&A for Progeon right now is something like about 18-19% much higher than Infosys because they have to scale up rapidly and the per capita incomes are lower. The SG&A for China is higher, the SG&A for Australia is higher, and if all of them make up a larger part of the business or some of them continue to make losses, it will have an impact on the parent company and overall consolidated figure and therefore you see some movement. I would think that 14% for the group on a consolidated basis is a good figure. 13% is something that you aim for to make sure that you have some slack in the system. Between 13-14% the optimized revenue levels for the subsidiaries will determine that and I think between 13-14%, we are in good shape to make the kind of investments that you want.

Shailesh

Thank you very much.

Mohandas Pai

Thank you.

Moderator

Thank you. Next we will have Mr. Anthony Miller from Arete Research.

Moderator (Prathiba)

We will now move out the questions from India. Participants connected to the India bridge may please press *1 if you wish to ask a question. On pressing *1, participants will get a chance to present their questions on a first-in-line basis. Participants are requested to kindly use only handsets while asking a question. Please restrict to one question in the initial round of Q&A session. To ask a question, please press *1 now.

First in line, we have a question from Mr. Supratim Basu of Deutsche Bank, please go ahead sir.

Supratim Basu

Yes thanks. I was just wondering given that you have been meeting clients at the start of the year, if you could give us some color in terms of what the budgets looking like for this year and why you expect the January, February, March quarter to be lower than the December quarter which actually has lower number of working days as you pointed out last time.

Shibulal

Let me start with the study which I recently saw from Gartner. Gartner projects that the IT services market will grow at around an average of 6% for the next couple of years, and the Indian side of that market, the market available in the Indian industry will be about 15% growth year after year, and also the Indian industry is only about 3% of the global IT spend at this point. So in that sense, there is a good potential for the industry to grow. Now from a client perspective, we are seeing things very much in line or similar to this. Some customers we are seeing increase in budgets. There are a few customers who have told us that their budgets will remain stable. At the same time, the interest in the Global Delivery Model and the interest in leveraging that model to create a competitive advantage is definitely secular across the board.

Supratim Basu

And Q4 versus Q3?

Shibulal

Pardon, please repeat the question.

Supratim Basu

Q4 versus Q3, I mean why do you expect fourth quarter, on the January, February, and March quarter’s growth to actually be lower than this quarter’s growth especially when you have fewer working days in this quarter?

Mohandas Pai

I think the working days in the quarter have been normalized this quarter because this quarter is no big shakes on the working days compared to the previous quarter, fourth to third, but I think it is just that last year we saw the fourth quarter to be lower amongst all the quarters and this quarter we see a similar trend sitting here as we do at the beginning of the year. We need to check up the impact and at this point of time we feel that this is what we see going forward. Shibu you want to add something.

Shibulal

As Mohan has said, our guidance is a statement of fact as we see it today and not a statement of hope. We also have a couple of customers whose budgets come to an end in the end of the year and they have to restart in the first quarter. So all that is factored in the guidance of Q4.

Mohandas Pai

Supratim, there is no trend. Let us make it clear. We do not see any trend, we do not see any movements in the market place and no macro issue.

Supratim Basu

Okay and Mohan if you could just take me through forex breakdown of that 580 million loss that you have reported, what are the various components in that?

Mohandas Pai

Yes, let me give you those components. We had a translation positive impact of Rs. 17 crores. We have a hedging impact negative of Rs. 72 crores, so the net negative impact of Rs. 55 crores, 72 minus 17.

Supratim Basu

Okay, and what is the outstanding cover right now?

Mohandas Pai

The outstanding cover right now is about $300 million and all in options.

Supratim Basu

Okay, thank you very much.

Mohandas Pai

Thank you, and all are marked to market as it is. They are all marked to market and they are range bound options.

Moderator

Thank you very much sir. Participants are requested to kindly restrict to one question in the initial round of the Q&A session. We have our next question from the line of Amit Khurana with IL&FS, please go ahead sir.

Amit Khurana

Hello, thank you very much. Mohan could you just explain as to how do we account for these options going forward, I mean in both the cases, in the money and out of the money, just at a very a basic levels please?

Mohandas Pai

Well they are all marked to market.

Amit Khurana

At the end of the quarter?

Mohandas Pai

Yes, end of the quarter marked to market. So it depends upon the options which we get, which are ripe for discharging during the quarter and most of them fall due in the month end and depends upon the value at the month end and going forward it depends upon how the rupee appreciates or depreciates because they are range bound and the ranges are between 1.5 to 2%.

Amit Khurana

Okay.

Mohandas Pai

So, you are protected at the bottom and the top, but it goes beyond the bottom or beyond the top, obviously it impacts you. So right now we have marked to market. The beauty of what we do is totally marked to market as of quarter end and we do not carry the past to the next quarter.

Amit Khurana

Okay, so if I get this, at a conceptual level does this reduce your volatility from the forex perspective when compared to the forward contracts?

Mohandas Pai

No, the options do reduce some volatility because you have a bottom and a top protection, but if it goes beyond a range, for example some of this options are let us say there are no options with a premium, you don’t pay an option premium, some of these options have clauses that if it goes beyond a certain level, you have to deliver twice the number of, twice the quantum of the option, that’s why I made this remark in a very limited sense.

Amit Khurana

Okay and from the costing perspective, there is no major difference?

Mohandas Pai

Yes, there is no major difference. I mean I made this remark in a very limited sense because in some of the options you have to deliver twice if it goes beyond a certain range.

Amit Khurana

Okay fine, thank you very much.

Mohandas Pai

Thank you.

Moderator

Thank you very much sir. Next question comes from the line of Ms. Mitali with Merrill Lynch. Hello, madam could you speak up a little, your audio is slightly feeble.

Mitali

Hello, okay. My question is again on the guidance for this fourth quarter that you have given. If I understood correctly, you have essentially based it on the fact that last quarter I guess the non-top-10 clients did not grow too well and that was really more related to holiday season issues, etc. But are there any client specific issues that we should be aware of and maybe some of the large clients or any other spending or offshoring related hiccups that you are building a contingency for?

Nandan Nilekani

No, there is no such thing. I think we do not see any such things on the horizon and it is basically for the reasons we talked about earlier. It is nothing to do with the any specific clients as such.

Mitali

Okay, and secondly would it be possible to have a feel of your top client and top five clients on a like to like basis, whoever was top and top 5 for Q2, and how they have grown in Q3?

Mohandas Pai

Well something, the top client has grown sequentially by 9.8%. This is based upon, you see we look at the data differently Mitali. What we do is we take the top clients for Q3 and then map them to the same client for Q2 and Q2 they may not be in the top 5. So I do not know what data you follow because if you see the top 5 clients have grown by 12.1%, top 10 have grown by 9.3%, top 15 by 7.4%, top 20 by 6.5%, and top 25 by 5.7%.

Mitali

Okay.

Mohandas Pai

It basically means that the growth rate in the clients between 11-25 is much lower; between 1-10 is much higher.

Mitali

Right and you said this is like to like.

Mohandas Pai

Yes, this is like to like for this quarter. However, one or two clients have de-grown quite substantially this quarter for whatever reason but it does not impact. If you remember what we said, what we have said in the call earlier that in every quarter you have one or two large clients who do not grow or de-grow, it is a normal occurrence. Nothing out of the ordinary, but if two or three come together, then it could have some impact. If a whole vertical gets impact like Sarbanes-Oxley, then you could have an impact. We don’t see anything like that in this quarter.

Mitali

Sure, and one last question. The subsidiaries Infosys Consulting, China and Australia, where do you see that on the break-even route?

Kris Gopalakrishnan

This is Kris here. Infosys Consulting did about $10 million this quarter. It is forecast to do about $13 million next quarter. It was planning to break-even in Q4 but it may get delayed by a quarter or so because we may accelerate recruitment. Infosys China is still in investment mode. On the local markets, we are doing better than leveraging China for the global markets. Australia is on track and doing well. Progeon of course has done extremely well.

Mitali

Right, any estimate on when China and Australia you are targeting for break-even?

Kris Gopalakrishnan

Australia has already broken even. It has done well actually. Progeon of course is 24.7%. Mohan you have Australia margins?

Mohandas Pai

Australia on a stand-alone basis is about 4.9% margin for the last three quarters. It is already broken even but we have to get it up to the margin of the onsite income of Infosys.

Mitali

Right and China?

Mohandas Pai

China is negative. It had a negative income of $1 million this quarter. It is supposed to break-even in the fourth quarter, but it may take more time primarily because of a different reason. We are seeing that the business for the China market is growing as the budget but the business for the global market out of China is not growing as per the market. The reason could be that the clients take more time to give business there. The traction is much slower and we have Mr. Shibulal now as the Chairman of the China Board to make sure that we can ramp up growth and hopefully we should see greater growth in China.

Mitali

Okay, thank you very much.

Moderator

Thank you very much madam. Participants are requested to kindly restrict to one question in the initial round of Q&A session. Next in line, we have a question from Shekhar Singh of ICICI Securities, please go ahead sir.

Shekhar Singh

Hello sir, congratulations on a very good set of numbers. Just wanted to know like if you would just add up China, Consulting, and Australia all three, what will be the revenues and what will the total profits for all three put together?

Mohandas Pai

Okay, Progeon is 22.53, Australia standalone is 17.19. So between two of it you have something like about 40, consulting is about 10, 50, and China is about 2, 52, okay. Net income, Progeon is about 5.5 and Australia 1.36, that is about 6.86 and you have a loss of 2.72 for consulting, so 6.86 minus 2.72 will give something likely about $4 million, slightly less than $4 million and China is 1 by $3 million, so it means I think you have got a very important point it means on $52 million of business, you have got only $3 million of net income. That means the parent company is subsidizing the baby subsidiaries to the extent of 26% revenue that she should earn. Progeon is earning its keep and earning at 24.4, but for the rest, that is for the rest about $30 million, you are having a negative of something like about $2.5 million.

Shekhar Singh

Secondly sir, just wanted to know like what was the spending on visas this quarter and what is the expected spending on the visa in the coming quarter?

Mohandas Pai

The spending on visas was very marginal. It came off at about $3.5 million and spending on visas in the fourth quarter would be of a like number.

Shekhar Singh

And lastly, in the global environment some of your onsite competitors seem to be suggesting that things are definitely on a roll both in terms of pricing as well as in terms of increase in IT budgets, if you can also just throw some light on this thing?

Nandan Nilekani

No, I think we certainly don’t see IT budgets going up substantially. We think that IT budgets will go up in the low single digits and we do not think that the fundamental desire of the customer to get better value for money has gone away. We think that customers are expecting more and more from the technology providers because of the pressure of globalization, technology, regulation and so on and we continue to believe that the existing set of providers have not really met the bar in terms of what clients want. So we think that while the IT spending as a percentage is not going up very substantially, we think the substitution impact of what we are doing is impacting the system which is why we are able to grow at much higher growth rates than in competition and so I think it is not so much absolute money going up, really the reallocation of money towards providers and service offerings which give more value to the customer.

Shekhar Singh

Okay, and lastly, one of your competitors actually has been doing very well in the communication service provider space, an onsite competitor. Now the thing is like on the financial services side, the Indian companies with the offshore model, they have done very well, but somehow on the telecom service provider side it seems that the Indian companies seem to be lagging slightly behind in terms of penetration and all.

Nandan Nilekani

No no, , of course we don’t give you the list of our clients, but let me assure you that Infosys has a very strong presence in the communication service provider space. We have some of the largest companies in the world, in the US, in Europe and Australia, and Asia, and so on and so forth. And we are very happy with the way it is doing today, we have about 15.8% of our revenues coming from telecom. It is not just a question of telecom. I think it is not just the question of providing software services for their IS systems. We are working with them on their networks. For example, we have a very good network management center for British Telecom in Pune and we are working with them on their new deployments. Many of our clients are rolling out broadband, they are rolling out DSL networks, they are migrating their core networks to IP platforms and we are all a very integral part of those programs. So I think we are very happy with how we are doing in the telecom space.

Shekhar Singh

And if you can just highlight, there seems to be a possibility of some very strong growth coming from the communication services providers. Do you also see something similar; that was the last question, thanks?

Nandan Nilekani

Well certainly I think it is a big space for us and we expect it to grow and we have good plans for it. At the same time, it is not the only arrow in our quiver. We have a wide portfolio of service offerings, wide portfolio of verticals and wide geographic footprints. So I think this will definitely be one of the top of 4 or 5 engines of growth for us next year.

Shekhar Singh

Okay sir, thanks a lot.

Moderator

Thank you very much sir. Once again, participants are requested to kindly restrict to one question in the initial round of Q&A session. Next question comes from the line of Mr. Anantha Narayan of JM Morgan Stanley.

Anantha Narayan

Thanks, let me wish all of you all a very Happy New Year. Mohan I just had one small clarification on one of the balance sheet items. There seems to be some loans and advances towards GE Capital Services made in this quarter for about Rs. 235 crores. What is that regarding?

Mohan

No it is the deposit made Anantha for earning interest. We had it for long except last quarter, we took the money back because the interest rates were low and this quarter we gave it back. As you are aware, we allocate a part of the money to be kept as deposits with certain AAA rated corporates, HDFC and GE come in that category. They are not banks or financial institutions classified elsewhere. So it is just a loan deposit to earn interest, nothing else.

Anantha Narayan

Okay Mohan thanks a lot.

Mohandas Pai

Thank you Anantha.

Moderator

Thank you very much sir. Next question comes from the line of Mr. Trideep with UBS, please go ahead sir.

Trideep

Good afternoon, congratulations on the results. My question was on fourth quarter margins, the guidance that you have given. Does it imply that we are talking about a decline in margins in the fourth quarter, EBITDA margins I mean?

Mohandas Pai

No, it is just that the margins are converted at Rs. 44.50 as against Rs. 45.30 average in the third quarter, that’s all.

Trideep

I see and just to kind of reconfirm- your fourth quarter is lower than the expected guidance, slightly lowest numbers is primarily on account of your conservatism and not on account of any anticipated event, particularly with respect to any particular customer.

Mohandas Pai

No, there are no secular events or mid-term to long-term events that are factored into the guidance.

Trideep

I see, okay, thanks a lot, best of luck.

Moderator

Thank you very much sir. Our next question comes from Mr. Pankaj Kapoor of ABN AMRO, please go ahead with your question sir.

Pankaj Kapoor

Yes thanks, my question has been answered, thank you.

Moderator

Thank you very much sir. Coming up next is a question from Mr. Hitesh Zaveri of Edelweiss.

Hitesh Zaveri

Hello, my question is with regard to the Finacle. I wanted to check with you what possibilities you see in the North America and Europe continent for Finacle going forward, thanks?

Kris Gopalakrishnan

See, when we enter a new country, we have to make sure that we have the features in the product which support the operations in that country. So in that sense we are making the required

changes market-by-market and country-by-country. We already have some opportunity in the internet banking space in North America and Europe. For core banking, we have to make some more changes, but we plan to do that so that we can enter those markets. Some of the European certain parts of the package are already deployed.

Hitesh Zaveri

Right, have you bagged any deals from your banking and financial institution clients where there has been larger opportunities where Finacle is the center and lot of services going from your BFS side where the deal size typically has been even larger $20 million plus. My question essentially is that whether you have some orders which have been large, revamping order from a banking organization?

Kris Gopalakrishnan

In geographies in the Asia-Pacific region, we have won some deals where our services group is working along with Finacle group. For example, our Enterprise Solutions group which is the package implementation group, has a service around Finacle implementation, so we are seeing some synergies and joint ventures.

Hitesh Zaveri

Sure, thank you.

Moderator

Thank you very much sir. Coming up next is a question from Aviral Gupta of Karma Capital.

Aviral Gupta

Good afternoon sir. Wish You Happy New Year. How do you see the visibility in terms of revenues and earnings for the next three quarters? I mean I will be grateful if you can answer this.

Mohandas Pai

Well I think we answered it for one quarter and for the other two quarters coming after this quarter, we will answer in April.

Aviral Gupta

Can you give us some guidance as far as rupee-dollar parity is concerned; depreciation, appreciation, some sort of indications which you have in your mind?

Mohandas Pai

I think my opinion is as good as yours because nobody knows how the rupee is going to behave. It could be flat. The consensus is that it may not be volatile this quarter, but then the value of the consensus is till it is proved otherwise, which could happen tomorrow. So you are trying to hedge it for one quarter to make sure that whatever guidance we give we are protected. After that the market is there.

Aviral Gupta

Okay, thank you.

Moderator

Thank you very much sir. Next question comes from Mr. Milind of Dalal and Broacha, please go ahead sir.

Milind

Congratulations for amazing consistency in performance. I had one question. Could you tell us approximately when you see some of your major units becoming taxable?

Mohandas Pai

That is a good question. Now it is given there in our annual report because we have about I think 12 to 13 STPs and the day they are coming off. But you see it is very difficult to estimate because the older STPs are in a constant revenue mode. That means, the revenues are not going to grow up because there isn’t a capacity. All the new growth is coming in the newer STPs which have a tax holiday still 2009. For example, I would estimate that about 98% incremental revenues for the next year would come from STPs which are tax sheltered. So if you grow at a particular pace, then the share of the old STP which is taxable becomes less and less. So long as you keep it at a point, which is not very high then you are in great shape, and #2, for fiscal year 2008 onwards a very, very substantial part of the incremental revenue will come from the SEZ, which will be exempt for the first 5 years 100% and 50% for the next 10 years. So right now our view is that we may not see a large jump in the tax rate in fiscal 2010, but we are not able to quantify what exactly is this because it depends on the growth rates.

Milind

Okay, thank you very much.

Moderator

Thank you very much sir. Next question comes from Mr. Ashwin Mehta of Alchemy.

Ashwin Mehta

Hello, just one question regarding your development revenues. We see the development revenues recapturing share and growing at a healthy pace in the last two quarters. Are you seeing fresh

incremental development spending coming in, and if so, is it coming in from your existing clients or its newer clients that are coming in with the development work?

Kris Gopalakrishnan

We are seeing increase in discretionary spending, a slight increase and it is not yet significant enough to say that it is a long-term trend. We are seeing this happening both in existing clients as well as new clients, both actually, but our business growth is primarily from the existing clients. So in that sense you can say that it is biased towards existing clients.

Ashwin Mehta

Just one more point regarding your testing practice. It seems to have de-grown which is quite contrary to what was conveyed in our interaction with the management. Can you please comment on that?

Kris Gopalakrishnan

No, it has not. If you look at year-on-year, if you look at the last 12-month numbers, you will see that it is not de-grown; it is growing faster than the company average. For example, if you look at the last 12 months, the testing service has grown 44.6%. So it is growing faster than the company. This is actually last 9 months. Last 12 months, it has grown 53.5%. So it is growing faster than the company. Because the size is small and it is still not as big as the rest of the services, it is only about 6% of the revenues actually, so one or two projects this way and that way can show a quarter upon quarter difference, that is only thing which is happening.

Ashwin Mehta

Thanks and one more question regarding the labor market. Are you seeing tightness in terms of recruitments and is your move towards maintaining your larger bench size, one of the factors in that is the tightness in the labor market?

Mohandas Pai

It is an offensive move and defensive move. Offensive move because you need slack to grow revenues and a defensive move because, yes, as time goes by the rates for good quality talent will become safe. For example, today Progeon is hiring a lot of analysts. Are there enough analysts available in the market place, there aren’t. Is the market going to get tight, very tight. Is the price is going to go up, very much so. So you need to build up capacity and hang on to people and I think it is a both a defensive move and offensive move.

Ashwin Mehta

Thanks a lot.

Nandan Nilekani

Okay, I think we have come to the end of the analyst call today. I am very grateful to all of you on this call and we do hope that we have answered most of your questions. We will place the lot of this information on the website so that you can access that and if you have any further questions, I would urge you to write to our Investor Relations folks and they will get back to you as soon as possible. Thank you very much and see you next quarter.

Moderator

Ladies and gentlemen, thank you for choosing WebEx 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-99.7

Exhibit 99.7

INFOSYS TECHNOLOGIES LIMITED
Q3 RESULTS EARNINGS CALL
JANUARY 11, 2006

CORPORATE PARTICIPANTS
Nandan Nilekani
Infosys Technologies — CEO, President and MD
Kris Gopalakrishnan
Infosys Technologies — COO and Deputy MD
Mohandas Pai
Infosys Technologies — CFO
S.D. Shibulal
Infosys Technologies — Head — Delivery and Sales

CONFERENCE CALL PARTICIPANTS
Rod Bourgeois
Sanford Bernstein
Adam Frisch
UBS
David Grossman
Thomas Weisel Partners
Julio Quinteros
Goldman Sachst
Moshe Katri
SG Cowen
Lou Miscioscia
Lehman Brothers
Ashish Thadani
Gilford Securities
Sam Saunders
Soleil Fulcrum

Operator

Good morning. My name is Luanne and I will be your conference facilitator. At this time I would like to welcome everyone to the Infosys third-quarter earnings call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question and answer session. If you would like to ask a question during this time, simply press star and the number 1 on your telephone keypad. If you would like to withdraw your question during this time, please press star and the number 2 on your telephone keypad. I will now turn the call over to the Infosys management team in Bangalore. Thank you. You may begin your conference.

Sandeep Mahindroo

Good morning and thank you all for joining us today to discuss the financial results for the quarter ended December 31, 2005. I am Sandeep from the investor relations team in Bangalore. Joining us today on this conference room is CEO and President Mr. Nandan Nilekani, COO Kris Gopalakrishnan, and CFO Mr. Mohandas Pai, along with other members of the senior management. We will start with a brief statement on the performance of the Company for the recently concluded quarter, the outlook for the quarter and year ending March 31, 2006. After that we will open up the discussion for Q&A. Before I hand over to Mr. Nilekani, I would like to remind you that anything that we say which refers to our outlook for the future is a forward-looking statement and must be read in conjunction with the company faces. A full statement and explanation of these risks is available with our filings with the SEC which can be found on www.sec.gov. I would now like to pass on to Mr. Nilekani, President and CEO of Infosys.

Nandan Nilekani

Thank you, Sandeep and a good welcome to all of you to this third-quarter earnings call for Infosys for the quarter ended December 31, 2005. Let me give you a brief set of highlights after which I will request my colleague Kris Gopalakrishnan to give you some more highlights and then Mr. Pai will give you a peek into the financials.

For the quarter, the third quarter, our revenues on a year-to-year basis grew by 32%. Our revenues for the quarter were $559 million and our earnings per ADS increased to $0.53 from $0.42 in the corresponding quarter in the last fiscal.

This quarter was a good quarter in terms of customer additions. We had added 36 new customers during the quarter. It was also a good quarter in terms of broadening the base of $1 million customers. $1 million customers went up to 206.

This particular quarter we added a gross employee addition of 5,135, which on a net basis was 3,226 employees. With this, our employee strength for the quarter ended at 49,422 as of December 31, 2005. Now on the employee front. we plan to continue to add. We expect to add about 3,500 employees for the current quarter ending March 31st. And therefore our total hiring for the year on a gross basis is expected to be 21,200, which is about 1,000 more than what we had said when we spoke on the last call.

We have also given our guidance for the quarter and fiscal year ending March 31, 2006. We expect revenues for the quarter ending March 31 to be between $582 to $584 million which on a year-to-year basis is a growth of 27.9 to 28.4%. And for the year we expect revenues to be $2.14 billion which on a year-to-year is a growth of 34.6%. The consolidated earnings per ADS is expected to be within $0.55 to $0.56 for the quarter which is a growth of about 17 to 19% and between $2.04 to 2.05 for the year — that is $2.04 to $2.05 for the year — which is a growth between 29 to 30%.

I think this quarter has been a steady quarter. We have had 6.7% sequential growth under U.S. GAAP. Pricing has remained stable with an upward bias and I think the important thing is that the strategic direction is on track. We are finding a lot of alignment and congruence in our strategic direction. All our initiatives in the last few years and on operational excellence are proving to bear fruit. There’s a big thrust in Infosys on capability building to ensure that our people have the right set of skills to deal with the challenges of the future. We are confident that this is going on well and our people are constantly getting re-skilled and re-scaled for the future. And generally speaking, I think we are on the right track. We think that the global brand is now well-established. We are now at a point where we are on equal terms with global players in terms of mind recognition, brand and mind share. We continue to attract a lot of boardroom-level meetings, a lot of visits to Infosys at the CEO level. And I think it’s really the strategic envelope of what we have to do is well-defined. It’s really a question of how well and how quickly we execute on what we have to do and what we have to do is again a very open book for all of you.

With this, I request my colleague Kris to continue. Kris?

Kris Gopalakrishnan

Thanks Nandan and good morning to every one of you in the U.S.

Let me talk about first clients. We have increased the number of $1 million relationships from 191 to 206. Infact the number of $10 million relationships have gone up from 48 to 51. We have two clients giving us revenue of $80 million. The previous quarter it was one client. And if I look at the growth, Europe as a region has grown faster than other regions. Europe is 24.9% of revenue up from 23.6%. Actually last 12 months, Europe has shown a growth of 51.4%.

In terms of services, many of our new services like package implementation or Enterprise Solutions, consulting, testing, business process management through our subsidiary Progeon, Infrastructure management, all these services are growing faster than the company average. Progeon has shown a growth of more than 100% in the last nine months.

From an industry perspective, banking and capital markets, retail, energy and utilities, services, these are the industry verticals which have been growing faster than the Company average. For example, banking and capital markets in the last nine months has grown by 53.6%.

At the pricing level, as Nandan said, we have seen a slight uptick. In the offshore revenue per employee and overall at the blended level, a 0.1% improvement. We see pricing to be stable with an upward bias. Utilization is 78.7%. And it’s in the range we want to maintain. We want to make sure that we have a sufficient number of people to accelerate growth if we see an opportunity and that range is around 78 to 80%. And that’s the level at which we are maintaining utilization including trainees. Including trainees it is about 70%. So we have sufficient number of people to meet the growth requirements. In the infrastructure side also, we are making significant investments. We have 3.8 million square feet of space under construction which can house another 16,500 employees.

With this I will pass it on to Mohandas.

Mohandas Pai

Thank you, Kris. Folks, I will take you through the margins for this quarter.

Revenues have been $559 million dollars. Our gross profit has been 43%, the same as last quarter even though the rupee had depreciated during this quarter.

To look at the components of cost of revenue, the Indian salary component has gone up from 13.1% to 13.9%. What we have done this quarter is to accelerate the hiring for the quarter. And that’s why if you look at the fact sheet, the total trainee person month is 15,175, as against 9,518 previous quarter, going up from 7.4% of total person months for the quarter to 10.5%. This has increased the cost and a part of the extra money that we would have made has been put in accelerating the hiring of people and putting them into training so that we could have more people as we go along at the cost of revenue side.

And if you look at SG&A expenses, the expenses have come down to 13.6% from 15.3%, primarily because last quarter we had a provision for accounts receivable of 0.4% and now we have a credit of 0.1% that’s a change of 0.5%. And in a couple of heads of expenses, actual expenses have come down. So we are seeing the benefits of economies of scale like we spoke about earlier. Another issue which we are seeing is for our subsidiaries, namely Infosys China, Infosys Consulting and Infosys Australia, that the expected level of profitability has not come up with the budgets that we had and therefore, those costs on a consolidated had to be absorbed in the parent company.

Now, our operating income has gone up to 29.4% from 27.7% driven by the reduction of SG&A and partly by the fact that the rupee also appreciated at the SG&A level. Non-operating income which was 1.9% of revenues previous quarter has come to 0.2% negative. We have had a foreign exchange difference of $12 million which had to be taken as a negative in the non-operating income line. That’s because we had an increase in operating income by about $10 million for the benefit impact of the rupee depreciation. And the corresponding negative impact was in the non-operating income line because we had effective hedges to match all of that.

The key issue during the quarter was that the rupee depreciated by about 5% and on average by about 3.4%, and at the closing rate, depreciation was about 2.3%. So the hedges worked both ways for us this quarter since the rupee depreciated and came down.

So overall, if you look at what we have done, we have achieved what we set out to achieve. We have slightly accelerated the hiring of people. Another important factor you’ll notice is the tax rate. The effective tax rate has come down 11.2% because of the fact that non-operating income which is subject to tax, has been negative for the quarter. If you factor that in, the effective tax rate would be around 13.2%.

Overall for this quarter we’re going to hire, like Kris said, about 3,500 people and take up the number of people, 21,200 people for this entire year, up by about 1000 people. And we need to accelerate hiring. Going forward we see a clear trend of trying to build a deeper bench because now we have about 15 horizontals and verticals and the market has experienced demand in many areas.

We are also seeing a new trend of clients coming and asking us to ramp up pretty fast. For example, for the ABN Amro deal, we had to have people ready and waiting on the bench for three or four months before we actually started working just to make sure that the moment the green signal was gotten we could get to work and ramp up aggressively. Like that we see many large clients coming to us because they do believe that we have the capability to ramp up to meet their expectation in the shortest possible time. That means that there will be a need going forward for a deeper bench, reduced utilization rate, with a greater flexibility to increase the quantum of revenues. Otherwise we could up resource-constraint if we run a very tight utilization like we are doing.

Thank you very much, and we look forward to your questions.

Operator

At the start, I would like to remind everyone that if you wish to ask a question, please press * and the number 1 on your telephone keypad. We will pause for just a moment to compile the list of questions. The first question comes from the line of Rod Bourgeoin from Sanford Bernstein.

Rod Bourgeois

Mohan, your revenue growth in fiscal ‘04 was about 41%; then in fiscal ‘05 you did 50%. Your sequential revenue growth this quarter is suggesting annualized revenue growth somewhere closer to 30%. Do you think that is more of a sustainable growth rate than the growth rate you had over the last couple of years and is there sort of a secular growth rate that you think you’re able to sustain in the current range?

Mohandas Pai

That’s a very loaded question. Let me give you some top-of-the-mind thinking. Two years ago we had a much higher growth rate but then we were coming off a very stagnant market. And we have been answering the question till then that in the case there is a slowdown in our markets we will see an increase in revenue. And after a gap we did see an increase in revenue, and that’s why you saw the increase in revenue in ‘04 and ‘05.

Now, of course, we have a much larger base, we have a much more complex suite of offerings and we have a much more robust client list which is growing pretty rapidly. So I think going forward, our ability to grow will depend upon our ability to have a deeper bench and hire a larger number of people, train them, recruit them, keep them with us to meet the demand that we are going to see.

Overall for the future, right now at this point of time we do not think that demand is a constraint but we do think our ability to deliver on time, meet all the complex requirements of clients in various verticals and horizontals, that is going to be the test for (indiscernible) like that. I don’t want to directly answer the question as to what could be a sustainable growth rate going forward because you know we are close to the next year. We will answer that question.

But if you look at this year, if you exclude one quarter where we had a low growth rate, if you look at this year, if you take out one quarter where you had a low growth rate, that is the first quarter, sequentially the growth rate compared to the last quarter of previous year was lower. The rest of the year has been pretty good. Historically we see that the last quarter of most years, that is the first quarter of the calendar year, is the slowest quarter of growth for the entire year.

So I think the sustainable growth rate will depend upon the capabilities of the offshore players the next two years to deliver and will depend upon the growth in various verticals and horizontals. And you’ll see that each of the verticals and horizontals grow at differential rates every quarter. I hope I answered the question. But on the sustainable growth rate, I will reserve my judgment until April.

Rod Bourgeois

OK great And a quick question on the margins. Given that the rupee is trading below 44 per dollar, how do you think margins will be affected as you move into the March quarter? Can you give us a direction on that?

Mohandas Pai

I think we have had an operating margin of about 29.4%and we have been hovering between 27 to 28% over the last few quarters. So we’ve seen a jump up. We do think that an operating margin 27.5 to 28.5 would be a sustainable operating margin. If you see a jump up and the benefits coming through rupee

depreciation, in the short run there could be a counterbalance in the non-operating income level. So 27.5% to 28.5%; that could be the range that one should aim for.

And the fourth quarter, I think we should be in the range, because the rupee is down as it is. Our projections are based upon 44.50 per dollar whereas the average for the third quarter was 45.30.

Operator

Your next question comes from the line of Adam Frisch with UBS.

Adam Frisch

I’m sure ___covered more specific questions on the numbers already on your local call. So I will focus on two more general topics. First, there’s been increasing chatter around company-specific execution issues with all companies that are getting larger in deal sizes. So I was wondering, as your deal sizes get larger, what are you doing internally in terms of QA or internal controls to minimize the risk associated with these larger programs?

Shibulal

This is Shibulal. Definitely over a period of time, the complexity of the projects which we execute have gone up. Today we run at any time, 4,500 projects at any point in time. Many of these projects are large complex projects. They span multiple countries as well as multilingual capabilities. So we have done a number of things. We have increased our process capability. We have implemented tools across the board. We have created new frameworks like Infosys production support IPSP. We have increased our compliance to processes. And we have a process which will identify high-risk projects in advance. So we have a new process in place which will identify high-risk projects and prevent them from getting into critical risks. We have a high-risk cell which will monitor high-risk projects continuously.

Adam Frisch

Secondly, has your M&A strategy changed at all, given the seemingly increasing focus around consolidation within the services industry?

Kris Gopalakrishnan

This is Kris here. From a strategic point of view, we are looking at acquisitions in consulting. We are looking at acquisitions to increase our geographical presence especially in Europe.We have done one acquisition in Australia which worked very well, we believe for expanding our presence in Australia. At any point of time we look at two or three companies. We have discussions with them and on our terms which is very important for us. When we find the right opportunity, the right fit, the right valuation, we will do an acquisition. We don’t want to be forced to do an acquisition because we are growing organically. We have, we believe, a good growth. The challenge in any acquisition especially in the services space, is holding onto the people. And the data shows that maybe about 80% of the acquisitions do not deliver the value that’s expected. So we want to be very cautious when we look at acquisitions.

In the last 12 months, we have added about more than 13,000 employees. So just by organic means itself, we are growing significantly and that’s why we don’t want to grow through acquisitions. We want to do acquisitions for strategic purposes. That’s our intent right now.

Adam Frisch

A final question for Mohan. You said demand is not a constraint right now. Are you seeing the supply of workers be a constraint at any point now or in the near future?

Mohandas Pai

I don’t think the supply is going to be constrained but the constraint is going to be your capability to hire the right talent and train them at the entry level. At the middle level, you need to expect not more than 25, 30% of all entrants coming in laterally because that’s the pool of talent that is available. And smaller companies lose out larger number in future, but great majority will come in from the colleges. There’s enormous supply in the colleges. But those companies who have built up training capability, those companies who have the faculty to train, those companies who can train them rapidly and bring them up to scale, they’re the ones who will succeed.

We have a training capability of about, let’s say, 20,000 people a year, with 4,500 people being trained at any time in Mysore. In Mysore, we are expanding our capacity from 4,500 people at one time to nearly 14,000 people at a single time. We’re going to spend about $150 million keeping up our training capacity in Mysore and other places just to make sure that we have invested adequately to meet the requirements of growth for the future. So the supply is not a constraint, but ability to get them, train them, enable them, empower them in the shortest possible time.

To give you an idea of the cost, it costs us $5,000 to train one person coming from the college, and $1,000 to get a middle level lateral recruit to speed. If you hire 20,000 people, and 15,000 of them come from the colleges. That means we need to spend $75 million. And if you hire larger numbers, that’s the kind of training cost that you need to absorb, but we are geared up for that. Companies that have not made the investment, who cannot pay this cost — well there could be severe challenges.

Operator

Your next question comes from the line of David Grossman, Thomas Weisel Partners.

David Grossman

Mohan, you guys signed a lot of new business in the first six months of the fiscal year. I was wondering, could you give us a sense of the pace at which those new contracts are ramping and any trends you see in that? Are they ramping kind of in line with your expectations, or slower or faster than you would have anticipated?

Mohandas Pai

David, I will ask Kris to answer this question.

Kris Gopalakrishnan

So, if you look at the top few clients, there is a churn sometimes in any quarter would not grow as much as other clients. But if I look at the top 25 clients, some clients have grown sequentially 39% and the highest growth rate has been 50% in this quarter. So there is momentum in our top 25 clients. Just to read out, top five clients have grown 12%, top 10 clients have grown 9.3%, the next 5 clients have grown 7.4%. So some of them are growing faster than the company average and there is still momentum left. In fact, in this quarter alone, out of the 36 clients we have added, 10 are from the Fortune 500 list.

David Grossman

In terms, of the actual new business that you’ve signed recently, are those contracts ramping, the new customers, in line with your expectations, more quickly, or perhaps slower than you had anticipated?

Kris Gopalakrishnan

There are contracts like ABN AMRO which ramp up very fast but most of the contracts are of the traditional nature, where we do one or two projects. But the difference is, the ramp up is much faster. It started on our two projects, but within a year, within 18 months, as Mohan was saying, they are expecting us to grow significantly. We have now multiple services through Progeon, Consulting, Infrastructure Management. So we have a lot more to offer to those clients, and we ramp up much faster.

David Grossman

So if we take ABN AMRO as an example, I think you said it would contribute only nominally to this quarter and I think $3 million next quarter. Should we expect more of a hockey stick in fiscal ‘07 from that contract than we would from the other more traditional contracts?

Kris Gopalakrishnan

Yes. You should expect that.

David Grossman

And if I recall, the December quarter had fewer workdays sequentially. If that’s correct, I don’t know you gave a number, I think, of what you thought the impact could be on the growth rate. Could you just refresh us on what impact that had on the sequential growth rate in revenue?

Mohandas Pai

We had three less working days. We had 61 days this quarter compared to 64 days the previous quarter. And those three working days had an impact of 3.1% on revenue this quarter. So the revenue growth would have been in normal circumstances, maybe about 9.8% or so. It is less because of working days, so less compared to the previous quarter.

And of course, David, you’re going to ask, what about next quarter, the fourth quarter? The fourth quarter has the same number of working days, the same number of working days as the third quarter. There’s one day more in the fourth quarter compared to the third quarter. But the key challenge in the fourth quarter, the quarter that we are here right now, is the fact that it is the first quarter of the calendar year. We saw

last year that the first quarter of the calendar year is challenging because clients just come back from their holidays, they have a new budget; they close their old budget and they have to reopen new budgets. And if you have more transaction-led deals, not annuity deals like maintenance and you have a larger number of developmental deals or you have a larger number of enterprise solution deals and consulting deals, it takes some time for the work to ramp up. And that’s why you’re seeing under U.S. GAAP our growth rate for this quarter is about 4.2%, which at this point of time we feel comfortable with. This is not a reflection on the state of the market, not a reflection on the potential growth in the market. It’s just that this is the first quarter of the year. We saw the same last year when the first quarter was indeed challenging. And we feel comfortable with this number at this point of time.

David Grossman

I’m sorry; where did you get the 4% number you quoted? What does that relate to?

Mohandas Pai

That is for the fourth quarter of this year. That is January, February, March.

David Grossman

I see.

Mohandas Pai

That’s the guidance that we have given for this quarter

David Grossman

And actually, Mohan, getting back to your commentary about customers asking you to maintain a deeper bench. What impact is that having on your margins, if any? I know you discussed in the second half of the year investing 150 basis points in both growth initiatives and capacity. So should I assume that the requirement for maintaining a deeper bench because it clearly got reflected in the utilization rates during the quarter and obviously, the gross margins. Should I assume that was embodied in the 150 basis points, or is the requirement for a deeper bench above and beyond that?

Mohandas Pai

David, the bench will be offshore. So the cost of the bench could be 50 to 75 basis points not much higher because I think the utilization that we have of about 79 or thereabouts, should ideally be something like about maybe 78%, or much better at 76%. So that will give us the flexibility. Because we were operating for a large part of the quarter at 80-81%. We had people coming off training and getting into January in the last month and that brought it down for the entire quarter to some extent. But overall, this number does not give you the flexibility to meet client needs.

We are finding this more and more because of the fact that we have 15 horizontals and verticals. Many, many clients. And each clients’ behavior is difficult to track. And sometimes clients come and ask us to ramp up fast and quote for work and do not have people to send them there. And the skills requirement of the various divisions are totally different. Then there are visa commitments. For example, you have a

certain number of visas for the U.S., the visas are closed until September. And therefore, you need to make sure that you can take up the work with people who have ready visas. And to move them up from other units would be difficult unless you have more people in visas and bring down the visa utilization rate. Or if the client wants to work in Europe, it takes maybe two to three months to get a visa.

So I think the complexity in the business is increasing and you need to increase the bench so that you can have the flexibility to grow more rapidly within the quarter. Every quarter there should be a flexibility of 3 or 4% for the quarterly growth and that should be in the number of people that you have, so that you can take advantage of market circumstances and growth that comes to ramp up rapidly. That flexibility is reduced and that’s what we want to build but that will cost us maybe 50 basis points to 75 basis points. And once you are past that, it can easily pay for itself many times over.

David Grossman

So getting back to your commentary earlier about investing 150 basis points of revenue in these various initiatives. Did you kind of meet that expectation in the third quarter and does your fourth quarter guidance reflect that as well?

Mohandas Pai

Oh ya. I said that in the context that we will make this investment. The investment depends upon the availability of margin also. And what we do normally is that we can accelerate hiring to some extent, get people faster than what we anticipated because we are upto speed in terms of what we can do. We can increase our banding exercise. We can accelerate the hiring of people in the client-facing group and things like that. So we use this flexibility to prepare for growth better. We do think that the focus should be on growth. We have a great delivery capacity. The market demand remains good. We must have the ability for growth and we need to prepare for that

David Grossman

I guess the question was Mohan, did you kind of hit that target in the third quarter and are you expecting to hit that target in the fourth quarter, of being able to invest 150 basis points?

Mohandas Pai

We didn’t invest that much. We couldn’t invest that much. We probably invested about 75 basis points in the third quarter. In the fourth quarter we’re looking to invest an equivalent number.

David Grossman

One last question on the tax rate in the fourth quarter. I know it’s probably variable depending on where foreign currency comes out but are we still pretty much in that range of 13 to 14%?

Mohandas Pai

I think the tax rate we have taken for the fourth quarter is about 13.5% because we have taken the non-operating income which is normal without exchange difference of about $9 million.

Operator

The next question comes from the line of Julio Quinteros from Goldman Sachs.

Julio Quinteros

I just wanted to go back and talk first of all about the change in the gross margin. Maybe Mohan, if you can kind of walk through the individual components. As we look at the gross margin for the current quarter versus last quarter, what were sort of the issues that had the biggest basis point impacts? Because I guess relative to last quarter, where the rupee was, we would have expected to have seen a little bit stronger gross margin performance. So maybe can you just walk us through what where the biggest basis point impacts were, both from a cash and a non-cash perspective, if you could focus on some of the depreciation items as well?

Mohandas Pai

If you look at the gross margin, our component called Indian salaries has gone up from 13.1% to 13.9%. Since they are paid in rupees which means that the rupee impact would be higher because of this issue. And it is about 0.8%. Our depreciation has gone up from 4.2% to 4.6%. So that is an increase of 0.4% there. And all this has led to the neutralization of the benefits of the rupee depreciation at that level. Because in this line item of 56.8% of revenues which is the cost of revenue, 30.6% is spent on overseas salaries and another 3% is spent on expenses abroad. So you basically have 34% out of 56.8% being spent in convertible currency or the dollar.

So you have about 22.8% which is spent in rupees where you had a beneficial impact of the rupee depreciation in terms of getting a larger quantum of rupees. And we had an average depreciation of the rupee of 3.4%. So 3.4% of 22.8%, that is something like 0.8% or 0.9%, is the benefit that we got of the rupee depreciation. So that is being balanced largely by the hike in the salaries component because we accelerated the hiring and enhanced training. And the other expenses which came up because of higher depreciation because of higher capitalization has been counteracted by a slight reduction of the rest of expenditure.

If we look at SG&A expenses, the impact from SG&A expenses has been that has been down by 1.7%, primarily led by a reduction in outside consulting charges by 0.3% and a turnaround in the provisioning for doubtful accounts receivable of 0.5%. So both of them add up to something like 0.8%. So this is a big-ticket item here, apart from this there has been a small decline in other heads of expenditure. So overall, it adds up to about 1.7%.

Julio Quinteros

What about the change in overseas travel expenses? That was something that looked like it was down about just by my calculations, roughly $4.5 to about $5 million. Is that something that bounces back next quarter as we look forward?

Mohandas Pai

It will remain at the same level next quarter because we don’t see a bump up happening in our foreign travel expenses or the visas because we had expected that to happen. That’s why it didn’t count on that

because as part of what we had budgeted for in quarter three because we said that the U.S. visas had closed. And we are not going to invest in those U.S. visas. And the jump up in quarter two was basically because of U.S. visas.

Julio Quinteros

But the window opens again in April, correct?

Mohandas Pai

Yes.

Julio Quinteros

Okay. So you won’t see any impact in the March quarter. But going into the June quarter, you would expect to start investing again in that area?

Mohandas Pai

Yes. In the June quarter and quarter, we would expect more investment. In the March quarter, we don’t expect any appreciable increase from where we are today.

Julio Quinteros

Got it. And I just wanted to go back to your previous point about carrying a deeper bench. I wanted to sort of make a connection from that point to the second point you made about the work being more sort of transaction-oriented or I guess the way I would think about it is being more discretionary in nature whether it’s package implementation work, or development work, etc. What is the visibility that you run and maybe also the risk related to that, that you run in keeping a deeper bench when more of your work down the road could conceivably come from more discretionary areas if you keep the bench and all of a sudden the work doesn’t show up? How much visibility do you really have on this bench that you’re willing to keep if more of the work is going to go towards discretionary projects?

Mohandas Pai

Let me explain this, because the way we plan is to look at the potential revenues for four quarters based upon what our client facing group tells us is the market potential and look at the number of people that we need to have, billable and then work backwards to see how much time we need to hire them and make them and empower them to make them billable. So that’s the model we do. We work on a very tight model.

But because of this issue, we will possibly accelerate the hiring from two quarters down to now and carry them longer. So essentially, you’re looking at carrying costs for maybe two quarters. Because the third quarter down the line, you could cut the number of people that you’re going to hire from the market in case it doesn’t come up to speed. So like I said, the additional cost could be 50 basis points or 75 basis points of revenue and it will normalize in about three quarters time. There’s a lead-time for hiring, the lead-time for training and apart from the offers that we make at the college level. For example, next year

we have made offers of about 6,500 at the college level, gross offers. We’ve got to see how many of them join and the balance we pick up from the market, both at the lateral and entry level and that way we could fine-tune. So risk if all, is for two quarters.

Julio Quinteros

Okay. And then finally, on the top clients, I just want to double check. Is the top client that you reported this quarter the same as last quarter?

Kris Gopalakrishnan

Sorry this quarter is the same. Last quarter there was a change.

Julio Quinteros

This quarter is the same?

Kris Gopalakrishnan

This quarter it is the same as last quarter. Last quarter it changed.

Julio Quinteros

Okay. That’s it for me. Thank you.

Operator

Your next question comes from Moshe Katri, SG Cowen.

Moshe Katri

I wanted to focus a bit about some of the ongoing initiatives, whether it’s China, Australia or the U.S. consulting side of the business. Can we get an update on where these initiatives are in terms of scale, the expansion and then also in terms of the ability of some of these units for their profitability to come at par with Infosys as a whole? Thanks

Kris Gopalakrishnan

We have about 400 employees in China. China is doing on target for local market work. That is, in the Chinese market we are doing on target with respect to the plans we have. With respect to the global market, we are slightly behind. We are trying to catch up. It also requires a little bit more scale because our global markets require multiple technologies, multiple capabilities and things that having a small unit in China with 400 employees. It’s slightly difficult to meet all the requirements and so it takes a little bit more time to really service the global markets. And so we are slightly behind there. But overall, it’s satisfactory.

With respect to capability, we’re finding that on newer technologies, for example, capabilities in Java, capabilities in coding etc, the resources, the people we find are very, very good. In project management, in their knowledge of business, industry verticals, ability to do complex assignments, etc, as expected, the Chinese DC is behind and that’s why we are combining the management capability from other DCs with the technical capabilities in the China DC to service the projects.

Moshe Katri

Can you also talk a bit about Australia and the U.S. consulting side of the business? I’m pretty curious, is there any way for you guys to give us a feel on when do you think we’re going to start seeing the margins or the probability of these units to actually ramp up and kind of get to the same levels as the whole company is, in terms of where it is today?

Kris Gopalakrishnan

I’ll talk about Australia, Consulting, and then I’ll come back to your question on margin. Australia stand-alone is doing actually very well in terms of attacking the market and getting new business and things like that. From a margin perspective, they need to improve a little bit more. It is positive, margin positive. And that means we are not losing money in Australia. It is positive but it has to come up to the onsite margins for the rest of Infosys.

Infosys Consulting did $10 million of revenue; looking at $13 million of revenue in Q4. We were hoping to break even in Q4 but we may accelerate the recruitment and there may be a delay in breakeven for Infosys Consulting. But it’s on track uptil now, with respect to its business plan.

Overall, as I look across the various subsidiaries, Progeon is doing very well with growth of more than 100% this year, operating margin of 24.7%, almost 25%. The Company average is around 26%, so that’s very close to that. Next is Australia, which is positive, but it needs to improve a little bit. And China and Consulting are on investment mode and we still need to support them at this point.

Mohandas Pai

We had $28 million of revenue this quarter from Infosys Australia, Infosys Consulting and China. And we had a loss of $2.4 million on this $28 million. Since we have a 26% net margin, around 26%, on this $28 million, if it was the Infosys parent company business, we would earn something like $7.5 million net. And if you add the loss of $2.4 million to that, we have made an income of $10 million on the parent company, which has gone to subsidize the losses of the three subsidiaries. So overall, the group profit is about 26%.

The $10 million on the parent company revenue, of $500 million, $510 million, is approximately 2%. So the parent company should have a normal margin of 28%. Now, this is all the investment that we have made, which will bear fruit later. We anticipated that Infosys China and Infosys Consulting would break even in the fourth quarter. We do think that they will break-even two or three quarters down the line next year because they’re still sub-scale and they still need to grow and we have to make more investment.

Moshe Katri

Thanks for the details, Mohan. And then the last question. Can you comment on the recent departure from Progeon? Is there anything specific that Infosys is doing to make sure that we won’t see more of these departures that we have been seeing? Thanks.

Mohandas Pai

I think this is a very difficult issue. You’re dealing with people. And the key thing, what we can do as an organization is to make sure that you have a bench of leadership. You have succession planning and have leadership because that’s the only long-term sustainable thing. For example, in Progeon, Akshaya is leaving us, Amitabh who is COO is here right now and he has stepped in as CEO. Amitabh has been with us here for three years and Amitabh is a natural leader. We had a change in our Head of Sales in Infosys when Basab left, Hema left. We hired the capable people stepping into the bench. So I think the key issue is we have a deep management layer. Nandan, do you want to add anything?

Nandan Nilekani

I think first of all we have to look at these departures in terms of the scale of the organization. The company has close to 50,000 employees. It’s a company that is growing, as you see, at over 30% a year. And it actually has a very deep bench of leaders. And to the extent that we can, we are trying to expose all these leaders to you. This company is not a one-man show; it’s not about a few stars. It’s really about a broad bench of leaders who are working out there in the trenches to make this happen.

So I think that’s the philosophy. We believe that every one of these people who left was a good person and definitely very capable and we certainly miss them. At the same time, our effort of the last 25 years is to build a platform, a platform with high-quality people, with great systems, processes, brand. And we think the platform is really the fundamental source of our strength. And in each of these cases we have ensured that we have better or more than adequate people replacing them. And as you will notice, in none of these functions have we even missed a beat in terms of our business performance.

Also, I think, if you ask the question are we going to see more of this, frankly, I can’t answer that question. There’s no way anybody in this room can answer who will leave tomorrow and those kind of questions. All we can say is that we have build a strong bench of leaders, we have built a very de-risked business model, we have built a platform and we believe that Infosys is impervious to this kind of thing.

Mohandas Pai

I think if you folks visit us you can see the kind of people that we have and need a larger number of people, then I think you could test the veracity of the statement. A large number of people are extremely good and you see only a few faces. You see me, you see Nandan, you see Shibul, you see a few people. You read about only a few people in the press. But you must visit us and see a larger layer of people who are there in the leadership team.

Operator

Your next question comes from the line Lou Miscioscia from Lehman Brothers.

Lou Miscioscia

I was hoping you could maybe go into a little bit more detail on the taxes, in the sense of, obviously, it came down. Maybe explain why, when the other income line is negative, it’s changing the absolute tax rate so much. Maybe some guidance for fourth quarter. And also, where you think in general it might head for ‘07.

Mohandas Pai

In the other income line, we had a negative of $12 million because of exchange differences. And we have a normal income of something like $9 million as interest income. And we have about $2 million coming out of other income, basically from interest on tax refunds or whatever which is a small recurring item to some extent.

So this $12 million, as against a normal income of about $10 million to $11 million, gave us a loss of $1 million. The next quarter, we don’t anticipate anything like this because the total hedges that we have is based upon options in the range and they have been fully marked to market. The extreme volatility of the rupee movement created an increase in the operating income level and a decline in foreign exchange differences, except the foreign exchange differences was higher by $2 million.

Now, the tax rate is based upon the normal income plus the income that comes from the interest income, which is substantially taxable. If you net off the tax impact on the non-operating income, you’ll come to an effective tax rate of 13.1%-13.2%.

Now going forward, the core business is substantially exempt from tax until 2009. The exemption is dependent upon the units which have been in business for not more than 10 years. Next year, a few units will come off the tax holiday but the total revenue from these units is a very small part of the overall revenue. And the tax holiday will be completed by the end of fiscal 2009. Now, we have one unit running in a Special Economic Zone in Chennai and that unit has got 1,000 people, it’s ramping up. We have another unit which has been approved in Chandigarh, where we are building capacity of 3,000 people and expanding later. We have another in principal approval for a campus in Pune for SEZ. And also Mangalore, where we have to build a new campus. So we do think a substantial, very substantial part of incremental growth in fiscal 2008, will come from the Special Economic Zone. So when we come off the tax holiday in 2010, the effective tax rate will depend upon the quantum of revenues that come from special economic zones, at which point of time there will be three years of incremental growth — 2008, 2009 and 2010. What would be the component of these three years to the overall income will determine the effective tax rate?

So, I think we need to wait for some more time before we come to a conclusion. We don’t think there will be a substantial jump in 2010 at this point of time, because SEZ scheme gives tax holiday for the first five years.

Lou Miscioscia

Okay. How about 2007, in the sense of you’re basically at 14.7% taxes in ‘05. It looks like this year is coming in at about 12%. Do you expect to go back more to an ‘05 level?

Mohandas Pai

Yes, I would think that maybe within 13.5% to 14.5% would be an effective rate for next year.

Operator

The next question comes from Ashish Thadani from Gilford Securities.

Ashish Thadani

There appears to be some noticeable pockets of weakness more than the usual in the rest-of-world segment, the consulting and testing services, as well as the telecom and transportation verticals, quarter on quarter that is. Could you explain what might be contributing to this?

Mohandas Pai

Transportation is because of one big client which has come off and continues to come off. And we we’re making up for that in transportation. Consulting is just a flux of business. We don’t see a trend. Nandan?

Nandan Nilekani

I think the real way to look at consulting is to look at consulting and package implementation together because I think that would be the way to look at it. If you notice consulting; yes, you’re right in saying that the consulting revenue is at 3.1%. But you’ll notice that the package implementation has gone up from 15.8% to 16.3%. And frankly, when the legacy companies talk about consulting, they actually talk about package implementation as much as consulting. So if you really look at these two together, it’s close to 20%. And one of the big endeavors in the last year has been to make our consulting and our package implementation services work seamlessly together to create an end-to-end value realization capability. That is working very well in the field. And this combination is enabling us to bid for global transformation projects with our large clients. So I think I would see package implementation and consulting together, to see the strength of the service offering for us.

Ashish Thadani

That’s helpful. What about telecom and testing? Anything happening over there?

Nandan Nilekani

I think testing is doing well. Perhaps we have to look at it. Yes, it is not material. I think telecom infact is going well. I think telecom is really probably, if you look at it, some of it could be related to the R&D side. But certainly telecom service provider segment is booming for us. We are now working with seven of the world’s largest service providers and these include large firms in the U.S. It includes firms like BT in the UK and so forth. And we think that that is going to be a growth area for us Ashish.

Ashish Thadani

Very quickly, the strong demand environment has translated into a 14% year-on-year increase in offshore wages in April but only a 1% year-on-year increase in offshore revenue productivity. Should we expect that this gap will narrow and to what extent in the future?

Mohandas Pai

We’ve been saying for some time that prices are going up for new business. Two, we’ve been saying that new business is coming in at 3 or 4% higher. And three, all you folks have been asking show it to us in the per capita revenues. And we’ve been saying that it’s a portfolio impact and is working its way through. There that’s a very interesting piece of data. You see the per capita revenue this quarter compared to the last quarter is flat; very small change. Small uptake in offshore, small downslide in on-site. But, 70% of revenues come from time and material contracts. And this quarter we had three less working days. That means the total number of billed hours will be less compared to the previous quarter. That obviously means that some of the rate impact is coming through. So there is a real rate impact upside in the whole model.

Now, how do we estimate this for the fourth quarter or the future going forward? We have to wait and see. Because this quarter, in the fourth quarter, we have a small increase in the number of working days of 1%. So we are to see how it works through the portfolio impact. But if you get behind the figures, all this is beginning to show and over a period of time it will show in a much more apparent manner.

Ashish Thadani

Thank you very much, and good luck for the future.

Operator

The next question comes from the line Jamie Friedman from Soleil Fulcrum.

Sam Saunders

This is Sam Saunders in for Jamie Friedman. I just wanted to delve into the headcount additions a bit more. I think you’ve done a great job explaining how those will support the strategic vision going forward. But could you just comment on to what extent the front-end loaded nature of those headcount additions are competitively driven?

Mohandas Pai

This year we’ll have 21,200 people gross. We started off the beginning of the year by saying we’ll have 13,000 people. In the July guidance we increased it to 18,000 people. In the October guidance we said it will be 20,200 people. And now the January guidance we have said will be 21,200.

Now, obviously, the ramp-up is not showing up in the revenues, primarily because we have extended some of the training period because they’re giving more specialized training to people, as we need them to join many more different internal units. So the training is getting much more specialized. And like Shibu has told you, we are in the midst of a large certification drive for the mid-level. So that people develop real expertise and people develop more capabilities to go up the value chain. So the total quantum of training in the system has increased this year to better prepare for the future.

LTM Dec 05, we 1.34 million applications for jobs. We tested 146,000 people, interviewed 44,400, offered 19,500, and 15,520 joined. The yield rate has gone up to 1.2% from 0.9% the previous fiscal year.

Now, the key question is- are there enough people in the system? There are enough people in the system. We’re the largest hirer from the college education system for the next year. We made more than 6,500 offers for fiscal ‘07. People join in the second and third quarter of the next fiscal. But, like I said earlier,

the key challenge for companies to ramp up and get the growth in India is going to be the ability to get them and train them and invest in them for training. For people who don’t have it, the cost will increase.

Sam Saunders

So should we look at fiscal ‘06 as an investment year and perhaps that utilization rate should increase next year? Or is this something that’s going to be endemic to the business for some time now?

Mohandas Pai

I think the utilization rate, we should bring it down to have increased flexibility in the model. We’re working at a fairly high utilization rate. And when you look at utilization rate, we work on a 12 month basis. Please remember that we work on a 12 month basis. Out of the 100% that a person could work for a year, about one month will be the leave, that’s 8.33% gone and about four to five or ten to fifteen days of training; that’s 4.3%. That is 12%. Then you need some kind of bench. A normal bench for people who get off projects go to a new project. So if you look at that, you have an effective capability of something like about 88%. We are at 79 to 80%. So the flexibility in the system is very, very limited and we want to increase the flexibility to take care of the market.

Nandan Nilekani

I think the way to look at this is how we see the cost of the downside of having lower utilization versus the upside of having the flexibility to respond to rapid market conditions. And I think that’s really the question. And our view is that in an expanding market where there’s tremendous opportunity, it’s worth planning for lower utilization. And the costs of that are relatively small compared to what we can get on the upside by really availing upon the opportunity in front of us. It is that balance that we are trying to achieve.

I will now hand over the mike to Sandeep.

Sandeep Mahindroo

This brings us to the end of this earnings call. Thank you folks for joining us today. We look forward to talking to you again next quarter.

Nandan Nilekani

Thank you very much. This is Nandan here signing off. I think we are delighted that all of you have come on this call and asked some really searching and incisive questions and we look forward to sharing this again with you a quarter from now. In the meantime, all the data will be put on our Website. Also, please feel free to send us e-mail questions to our investor relations so that we can get back to you at the earliest. Thank you very much and goodnight.

Operator

This concludes today’s conference call. You may now disconnect.

EX-99.8

Exhibit 99.8

INFOSYS TECHNOLOGIES LIMITED
CNBC — BOARDROOM
JANUARY 11, 2006

CORPORATE PARTICIPANTS

Nandan Nilekani
Infosys Technologies — CEO, President and MD

Kris Gopalakrishnan
Infosys Technologies — COO and Deputy MD

Mohandas Pai
Infosys Technologies — CFO

S.D. Shibulal
Infosys Technologies — Head — Delivery and Sales

Merwin Fernandez
Infosys Technologies — Head — Finacle

Chandra Shekar Kakal
Infosys Technologies — Head — Enterprise Solutions

Udayan

Welcome back. You have heard the Infosys numbers by now. You have seen a reasonable degree of analysis on those numbers from global and local analysts and now it is time to hear it from the horse’s mouth. The top management of Infosys is here with us. You know about the numbers now. How operating margins have gone up, how the hit has come in on the other income side, which is why the numbers might be slightly lower than what we were expecting because there were losses on the other income column. Nandan Nilekani, S. Gopalakrishnan, S.D. Shibulal and Mohandas Pai have joined us to talk about their numbers and how they see the next quarter panning out as well. Thanks very much and Happy New Year to all of you gentlemen.

Nandan Nilekani

Same to you.

Udayan

How has the quarter been Nandan?

Nandan Nilekani

I think it has been a good steady quarter. In rupee terms we have grown at 10.4%, in dollar terms of course we have grown less at 6.7%. We have crossed 200 million dollar customers, 206. As you mentioned, the operating margins, we have gained 1.9%, though we have lost out on the non-operating side. On a gross level we added over 5,000 employees. We expect to add another 3,500 gross number of employees in Q4. So, I think overall it has been a good steady quarter and we are on track on our strategy.

Udayan

Mohan, a few analysts are a bit surprised. A. On the 34% operating margin. B. On the loss on the other income. Could you just layout what exactly happened on the operating and non-operating side?

Mohandas Pai

You must see how the rupee moved. The rupee depreciated rapidly by about 5.2% and then the rupee appreciated. So overall on the rupee we had a 3.4% average depreciation for the quarter and then we had a 2.3% quarter end to quarter end depreciation. It basically meant that we had an increase in operating revenue to the extent of maybe 1.8% out of the 1.9% arising because of the rupee depreciation. At the same time, since we are almost fully hedged at the beginning of the quarter on a net inflow basis, we had to suffer the downside of a foreign exchange difference being negative. This quarter is all about the impact of the rupee on the margins. We have had a $10 million positive impact on the operating line, we had a $12 million negative impact on exchange differences. So overall there has been a $2 million negative impact on the bottom line because of the rupee. If the rupee had behaved differently and stayed at what it was, the result

would have been much more favorable, but then the volatility of the rupee created all this kind of excitement.

Udayan

Kris, volume growth. Could you just throw a little bit more color on that, the kind of volume growth that you have seen and from which quarters and which category of clients most of it has come in?

Kris Gopalakrishnan

If you look at vertical industry, banking and capital markets have shown good growth, our energy and utilities have shown good growth. From a geography perspective, Europe has shown good growth and from the services perspective most of the services which we started recently and especially the business process management, Progeon, has shown very good growth.

Mithali

Mohan have you changed your strategy then for the rest of the financial year in terms of how you will now approach the rupee?

Mohandas Pai

Yes we have said that we will have some options outstanding and watch very carefully. I think the volatility in the market place may call for a more active hedging policy. Our hedging policy has been very passive. We don’t trade in the market place because of our philosophy but we have to see whether we should have stop losses and whether we should be much more active. That’s an ongoing debate that we keep having because this kind of volatility is very difficult to handle and globally too we have seen volatility, we have seen the dollar appreciate, then we have seen the dollar come down, other currencies go up. We have seen interest rates stability coming in United States. We have seen expectation of interest rates hike and the Euro globally. So you know it has been choppy.

Mithali

Nandan, compare how the first half of the financial year panned out vis-a-vis how the second half will. Is there less seasonality perhaps in your growth because there have always been lesser working days and what have you?

Nandan Nilekani

Yes, we had that challenge in Q3. And if you look at our guidance for Q4, it is about 2.4%. So, I think it is not seasonality but what does happen is Q3 tends to be the period with vacations and holidays typically and it is the year ending for many companies. Q4 becomes the Q1 for the calendar year which is mostly the year for most of our customers and it is also the year when they reset their budgets, they look at their growth plans and so on and so forth. So I think there are some of those attributes which do come in into the mix. But I think the fundamentals in terms of

low cost strategy or secular growth of the market, the opportunities, I think that continues to be very much on track.

Udayan

Shibu, throw some light on pricing and from a delivery perspective whether you have seen any significant changes there at all between new and existing clients?

Shibulal

Actually pricing continues to be stable with an upward bias. Our new customers are coming in at probably 3-4% higher than our average, Infosys average but at the same time note that 93% plus of our business is coming from repeat business. That means, the flow through to happen it takes a bit of time. On the demand side, the demand continues to be robust. Europe is definitely showing better demand. In fact our revenue from Europe has gone up by almost a percentage, 23.7 to 24.9% from last quarter to this quarter. The ABN deal has definitely put us in a different position in the market, specially in Europe.

Udayan

Mohan, would you say then that this jump in operating margins is a little bit of a blip and that will not be your mean operating margin as you look forward into the next two to three quarters?

Mohandas Pai

Well it depends on the rupee because this is mostly the rupee impact. It depends on the rupee. If the rupee remains where it is, for example if you take the quarter end, the rupee was slightly lower. The rupee has appreciated since then. It was about Rs. 45.30 as an average, now it has come down to something like about Rs. 44.2 and odd. So it is already down. Our guidance is based upon Rs. 44.50 which I think is a fair rate because we have not taken into impact the Euro appreciation. So right now we are more or less on par, but it all depends how the rupee is going to behave. On the business front, the margins have been very secular. The margins have been secular. The margins have been strong because our philosophy is that if you make higher margins you put it back into the business because the key thing for all of us is growth. First priority is growth. Growth with good margins. Growth with a good steady margins. So we want to invest back into the business and that we have been doing for the last four quarters.

Udayan

Okay, let us take a break now. We have just about started, lots to talk to the management about, but it is fun to hear Mohan talk about stop losses. It is first time I am hearing him talk about stop losses. We will take a break, come right back and talk more about the business.

Welcome back, we have just about started with the Infosys Board Room. Nandan Nilekani, S. Gopalakrishnan, Mohandas Pai, and S.D. Shibulal have been telling us how this quarter has been and where operating margins will eventually end up given what the rupee is doing which is pretty much zigzagging all over the place. Let us talk a little bit about the fourth quarter guidance,

which Infosys has held out today. Nandan, you want to put in perspective what you are seeing for the current quarter?

Nandan Nilekani

Yes, we have given, for rupee guidance we have given a guidance of between 2.3 to 2.7% growth for the fourth quarter and that is based on our current outlook, what we are seeing in terms of business, what we are seeing in terms of our clients new budgeting cycles and so forth. We think that is the appropriate guidance for the year and that is what we are seeing today.

Udayan

What you are hearing from your large spenders, the $5 million plus kind of clients. You won’t give guidance now for FY07. Can we get the sense that some of those large client issues which had cropped up in the middle of this year, they have receded to the background, business momentum is intact for the larger clients?

Nandan Nilekani

No I think we should look at it in two different ways. Broadly I think the trend continues to be positive. The secular growth story is very much there. I think we are getting more and more, as I said we have over 200 clients now generating more than a million dollars and I think the Infosys brand is getting very strong. We are getting a lot of visits by customers, CEOs. So I think that part of it is very much there. Individually, there are some clients where when you reach a very high level of the spending, then you obviously won’t have the same sequential growth in those accounts that you have in smaller accounts. So our strategy is to widen the pyramid of our accounts and to make sure there are enough growing accounts across the base, and that is how we expect to reach our goals.

Udayan

Coming on that Kris, the kind of growth you are seeing from mature large clients versus the new clients which are getting in, will the growth in new clients, new business ___?

Kris Gopalakrishnan

What we are seeing now in terms of the number of million dollar relationships, the number of $5 million, the number of $10 million relationships, all these are growing and the largest client is 4.5% of our revenues. So the pyramid is definitely widening and we have to look at new services to actually create a jump in some of the existing relationships. The footprint has to broaden and that is something we are looking at.

Mithali

Shibu, you were making a point about pricing improving, of course the main pricing would probably be just about 0.5%, but for the coming few quarters are you seeing traction from that space, pricing improving as well along with your volume growth?

Shibulal

Pricing as I said is with a slight upward bias. So the new customers do come at slightly higher price, 3-4%, but please remember 7% of our revenue comes from new customers in this quarter. In fact, next quarter it may even drop because our repeat business fluctuates anywhere between 93-97%, so to see an overall increase it takes a bit of time. And most of the contract negotiations which we are doing today also have slight increases built in. So pricing is stable with an upward bias.

Mithali

And in the ABN-AMRO deal, of course that’s the one that excited the market most. Has that changed the dynamics for companies like Infosys now when you go out and pitch for a bigger client?

Nandan Nilekani

Yeah, I think it has had three or four implications. One is, it was a big deal in Europe. I think it showed that European organizations also have to look at outsourcing in a big way. So to that extent I think the mindset has improved in terms of outsourcing and so on and so forth. The second thing is that it was global competition, and I think it showed that people like us and our colleagues at TCS have truly arrived on the global scene and it is really everybody competing for the same pie. The third thing is that we have been advocating for a long time that this total outsourcing model is going to go away where you give everything to one company and hope for the best. That is a wrong model. The right model is what we call as Modular Global Sourcing where you look at best of breed suppliers and give individual chunk of the work to different suppliers and this was a classic sort of endorsement of that model. So I think it had a number of strategic implications.

Udayan

Mohan, just two points. An analyst was mentioning just a while back, depreciation has gone up in this quarter and talking about whether debtor days have increased as well, could you just....

Mohandas Pai

No, debtor days have come down to 57 days, which is pretty good. It was 59 days last quarter. Depreciation has gone up primarily because of the fact that as you come closer to the year and you capitalize, the period for which you depreciate in the first year comes down. Two, you had to put into place lot more number of seats. We have 41,000 seats, 9 million square feet in use, 3.8 million square feet under construction; 16,000 seats under construction. So we have a huge program to put into place. We have 49,000 employees, 41,000 seats. We are running behind, but the fact is when you count the seats, you don’t take into account the capacity we have overseas or the people who are travelling. So even now we are very tight for place, at about maybe 102-105% utilization in space too. So look at this, we are operating full up in space. We have to work very hard to get a space. We have to make sure we solve the traffic problem. We have got to make sure that there are enough flights coming into this country and if you look at all this the industry growth is putting into light the fact that India maybe running out of capacity in many

ways. So I think the external environment is going to impact the growth of companies more in future in India.

Udayan

Fair point. Kris, 3,200 employees. Tell us a little bit about utilization levels. Given the kind of additions that you want to do in the fourth quarter, do you see that having any implications on margins, your hiring plans?

Kris Gopalakrishnan

No, that is factored. The hiring is factored into our guidance and with that we hope to maintain the margins. We are looking at 3,400 people to be added and there is a seasonality. If you look at July-August-September, that is when the campus hires join and there is a peak and then it kind of tapers off and then again it picks up next year. So that kind of pattern is what we see happening now also. If you look at the numbers we gave for second half, it is about 1,000 people more actually now if you look at it

Mohandas Pai

There is one other issue Udayan, I think as companies grow larger they need to have a deeper bench. We are very fine driving utilization at 80%, very fine getting people just in time and training them and making things happen but as you grow bigger, the business becomes more complex. I think companies have to invest in creating a larger bench and I think you have to bear the cost of this bench and make sure that you focus on growth because as you become larger you do not want to miss growth opportunities and growth opportunities come from the client and you cannot just go hire in the market place and say I am going to hire and I am going to meet the client’s requirement. So you have to keep a larger bench in place when you become larger because clients come and the clients today want to ramp up faster. Many clients come and say that look I want ramp up to 200-300 people in a matter of 2 or 3 months and they depend upon people like us who are larger players to do that because we are capable of doing that and that means it puts pressure on us to have a much deeper bench to meet all requirements and then go on. I think it is an issue which we have to face in future.

Mithali

Shibu, what about the newer spaces because you made the point about growth in consulting as well. How has that grown for this quarter?

Shibulal

Actually Consulting this quarter we have billed $10 million. Next quarter we are expecting another probably $13 million plus. More than consulting, the new integrated offerings, we are having consulting all the way up to end-to-end implementation, that is something which we introduced into the market over the last two-three quarters. It is definitely seeing traction with our customers. For example, in one of the global hi-tech manufacturers, they have contracted with us. If you look at geographic realignment from a vendor perspective. So they are asking us to do an assignment where we will realign the geographies, consolidate the vendors and the give them

value from that whole process. So our offering, our integrated offering starting from board room to boiler room kind of offering is definitely seeing traction in the market.

Udayan

Board room to boiler room, that is a nice phrase. We will take another break. When we come back so much more to discuss, so we will touch upon Progeon, we have not even discussed that. Some other issues like MNC competition, consolidation in the space, all of that when we join in a minute with the Infosys top brass.

Welcome back, we are still talking to the Infosys top management, let us get right back to them. Nandan, a couple of issues, MNC competition and how things have panned out in the last quarter, are you finding more teeth in your market?

Nandan Nilekani

Not at all. In fact, I think we are finding more and more, ABN is a good example but many other deals where we are completing head on head with them, we are winning a lot of them. I think now it is really, it is one level of situation and we are very comfortable that we can take on MNC competition. In fact I think what we have been saying for the last two to three years that they will be forced to come here, they will be forced to change their model, all that is coming true.

Udayan

You have also had instances in the last three months where a couple of the mid tier technology companies have had to issue guidance changes downwards. Do you get the sense that the larger players are eating away a larger share of the pie with every incremental quarter?

Nandan Nilekani

Well I think the game has changed. I think it is game of consolidation, it requires large players with deep pockets, financial strength, brand, infrastructure and so forth. And customers are making much bigger bets on their partners, and therefore they are looking for the longevity of companies. So in some sense I think there is a bias in favor of larger companies.

Udayan

Mohan update us on Progeon for this quarter and also tell us whether Akshaya’s departure will have any material difference?

Mohandas Pai

Progeon has done $22.53 million as against $20.55 million. So it is right on track, it has met its budget. Its bottom line is healthy at 24.4%. So, bottom line is healthy, the top line has grown. It has added on a couple of clients and there is a big strong pipeline. We have a new head of sales who is come in to drive up the pipeline. So I think Progeon is in very good shape. Yes, Akshaya is leaving us. He is leaving us on the March 1, 2006 and he is leaving us for personal reasons. He

has been with us for 4 years. He helped the company assemble the team together and sow the idea of a transaction based BPO company and if you look at Progeon on an incremental basis, look at the revenue that we added this year. We have gone up from $42 m to $86m. So we are adding about $44 million and if you take 44 million dollars and stack it all against other players, we will be either number two or number three. Even though in total size we will be number eight or ten, if you look at the incremental revenue add this year, we will be number two or number three. So the company’s model has been established, done very well. Now we have a deep bench in terms of succession planning, Amitabh is COO, he is stepping into Akshaya’s shoes and taking over from Akshaya. We have made sure there is smooth transition and I think the duty of the management team has been that we build a bench to make sure that there are enough senior people to take over on the business. So I think overall Progeon is in very good shape.

Mithali

Nandan just getting back to the point you were making about more muscle for companies like Infosys. Anything like ABN-AMRO in the pipeline, the market has been talking about GM of course, if you would want to respond to that?

Nandan Nilekani

Well, I cannot talk about specific deals, but what we have done Mithali is we have a group called Strategic Global Sourcing which is only focussed on such kind of deals and they are working on a number of potential opportunities but I cannot really comment on them nor when they will happen nor we say will happen.

Mithali

You want to comment on rumors of special dividend pay out perhaps that Infosys is considering?

Mohandas Pai

Well, I think many people come and talk to us about the cash balance that we have. We have about $969 million. It has gone up by Rs. 555 crores more than about $130 million this quarter, and naturally the cash goes up, people look and ask us what to do, people talk to us and we should carry their message to the board and ask the board to look at suggestions made by investors.

Udayan

The board is here.

Mohandas Pai

We have independent board too, independent members...

Udayan

One last question Nandan before we say bye to you. Give us some sense on the inorganic front because some of your competitors who are large enough, they are also making some interesting moves on the BPO front etc. in the global market. You have so far resisted from doing that. Is it a conscious strategy or you still haven’t have looked but not found anything?

Nandan Nilekani

No, I think people are welcome to do what they feel is right. We believe that fundamentally we have to make our organic growth robust which we have been doing for the last five years which is why we are growing faster than anybody else and we see acquisitions as an instrument to achieve your strategic goals when you get the right kind of people, right domain knowledge, the right market access and so forth. So if the right deal comes along we will definitely make it but we are not like weathered to any such thing and fundamentally we will focus on growing our organic story well and incrementally adding strategic intent through acquisitions.

Udayan

Good luck for the quarter. Thanks very much. Thanks Mohan very much. We will of course come back with the rest of the management team and three new members of the Infosys top management team will join up now. We will talk about Infosys Consulting with Kris. All of that when we return after this break.

Welcome back, you are still with the Infosys Board Room and you have heard the first half of it where we talked quite optimistically about the quarter and for they year ahead without any specific projections. Margins may not remain at these levels, it depends to a large extent on the rupee which is what has led to the spike in this quarter and we have heard them talk about businesses like Progeon and how they are shaping up. It is time to turn to another part of the business which is becoming increasingly larger and more influential, Infosys Consulting. Kris can you give us an update and whether you are on track with what you said two quarters back?

Kris Gopalakrishnan

Definitely we are on track, if you look at the revenues we did about $10 million, we are looking to do about $13 million in Q4. We are on track in terms of recruitment. More importantly, when we look at the type of engagements, the downstream revenues which are coming in and the size of engagements, I think it is on track.

Udayan

Shibu, from a delivery perspective tell us what is happening on the ground? When you actually pitch for large clients are you getting the highest amount of competition from large domestic players, smaller niche domestic players, or largely MNC?

Shibulal

Actually we are starting to see more and more MNCs at this stage. In fact my belief is that they are starting to see us a lot more. If you look at what has happened us, if you look at five years

back, our average project size was $500,000. Today we are going into a lot more of multimillion dollar projects, $4 and 5 million which is where they used to operate. So they are starting to see us a lot more. Today at least 30 to 40% of our transformational projects or discretionary spend, we are seeing direct competition from the global majors and that I believe will continue.

Mithali

What about China, you have made a point about growth in Europe but how has that come out as a market in this quarter?

Kris Gopalakrishnan

From a market perspective, China is on track. It is really from a development center perspective, as a base for software development we need to continue to invest. We need to grow in scale. China has 350 employees now, it is growing. We are continuing to recruit in China.

Mithali

Mohan, just getting back to Progeon for a bit, in terms of not just retention but also getting in strong employee talent because for a couple of smaller IT companies, BPO specific, it is not just about retaining talent, it is getting skilled talent, are you getting that for Progeon as a business?

Mohandas Pai

Well it is becoming slightly harder because competition is becoming more keen and today overall in this country there are lot more jobs available than there were two or three years ago. So you have to be attractive, you got to get people in, you have to go up the value chain, you have to reduce attrition. Attrition is fairly high in the business right now. So I think lot more HR action is called for in the BPO space.

Udayan

What is your biggest challenge right now as the CFO, Mohan? When you look at various things, you spoke about manpower, foreign exchange, infrastructure, what is your biggest challenge as a CFO?

Mohandas Pai

I think the biggest challenge as a CFO is mainly based upon three premises. One is the global risk perception. I mean we are a global company though head quartered in India with a largely Indian work force. Now as we globalize and become much bigger, the risk that you face as a global player becomes much more evident. The risk of currency fluctuations, the risk of hiring people, the risk of doing business, the risk of legal jurisdiction, the risk of taxation issues, all these will come to boil because you are facing it around the world, becoming more complex. And the second thing that we are facing is keener competition. As you become a larger player in this business the overall market is not growing as fast as you are growing, that means you are growing in market share and when you grow in market share, you are going to have a lot more players coming in, lot more established players competing with you and the only place and then you have

got to compete for scale, you have got to compete for scalability, you got to compete on economic terms. So competition is going to become much keener in future. The third thing which is going to, which is at the top of your mind is about investor expectations. You are becoming a larger player and you have become much more visible and globally as a part of the software service space, you are becoming much more visible and much larger. If you look at the three large players who are offshore, they are becoming much more visible globally for investors in the software service space. So there is a shift happening in the space, a fight for let us say capital and that is an issue that should be the back of your mind. In fact our ADR issue was a move in this direction, it is a very strategic thing to make sure that you increase the liquidity in the market place abroad where people want to invest their capital.

Mithali

For one you have got 10.

Udayan

Many challenges in Mohan’s life, stop losses... Just one question Shibu to you on this whole multiple vendor thing which Nandan spoke about. Do you see it taking away from the size of the deals that you are able to crack, the fact that maybe your deal size might get distributed among a few vendors?

Shibulal

Actually if you look at the total outsourcing space, that is one point which Nandan talked about, our view is very clear. The old way of doing total outsourcing was that, you outsourced your people, process, technology and infrastructure to one single vendor and that is a mega deal and that goes to one single vendor and what we believe is that the customer is getting less advantage from that, they are losing control, they are depending on one vendor. So we believe that if you get broken up, and ABN is an example but for us we are not in the infrastructure space. We are mostly in the process and technology space and that is where we are playing and that is our sweet spot. We believe that there as long as we get a fair share, there is no impact on the size of the deal for us.

Mithali

One quick word Mohan also on the kind of capex plans you have because you made the point about the facility in Mysore, for the next few quarters are we to expect a stronger capex for Infosys?

Mohandas Pai

Well, this year we will be spending about Rs. 1,100 crores odd and Rs. 1,100 crores in India if you exclude the oil companies which is a significant amount. If you rank us, we don’t get credit for that but if you rank us, it is quite a significant amount and we plan to build about 3.5 million square feet. The whole of this country builds 22.5 million square feet of ready office space and we are building alone 3.5 million square feet. So we are a heavy capex spender but our capex depends upon number of people we hire. For example, we have to spend $12,000 per person that we hire, approximately about maybe Rs. 5.5 lakh per person. So if you hired 20,000 people

gross, and you need 20,000 seats, you need to spend about Rs. 1,000 crores. So our capex next year will be in tune with our hiring plans and need to build capacity.

Udayan

Kris, the one thing which unnerves a few analysts is the kind of rate at which you constantly need to keep on adding people. Do you see this model getting challenged at any point in the future because at the run rate of 2,500-3,000 people every quarter, from whatever bottleneck, can that destabilize your growth going forward?

Kris Gopalakrishnan

That is one thing which we always look at, how can we make sure that the growth engine continues to go on and on one side we want to be a preferred employer in India, so make sure that our HR practices, make sure that the opportunities for employees within the company is one of the best in the country, in terms of infrastructure, learning, challenges, growth, etc. On the other side, we are also investing in China, we are investing in recruitment outside the country to kind of hedge and make sure that we de-risk it to some extent. Having said that, India continues to be the number one location for outsourcing and that is the reason why the competition for resources is increasing in India and the only solution from a company perspective is to make sure that you are a preferred employer. From a government, from an industry, from an academic perspective we need to make sure that number of students coming out, the intake into engineering colleges increases. We need to look at other pools of employment like B.Sc. etc. For certain services we can use just B.Sc. graduates. So there are multiple strategies you would look at in order to make sure that this growth continues.

Udayan

Okay, time for another break. When we come back another gentleman from the Infosys top management will join us. That is in a minute and we will talk about a few other things with Infosys top management as well. Do not go away we still got about 20 minutes to go before we wind down the curtain for this quarter.

Welcome back, you are still watching Board Room with the Infosys top management, Mohan and Shibu are still with us. We are now joined by two other members of the Infosys management team, Chandrashekar Kakal, who is the Head of the Enterprise Solutions group, he joins us and Merwin Fernandez, who heads Finacle, Infosys’ banking suite of products, also is with us. Thanks very much gentlemen for joining in.

Merwin, tell us what has happened with Finacle in this quarter?

Merwin Fernandez

It has been a very good quarter for Finacle. We have added 5 new clients in this quarter, 15 new clients in the last nine months, sequential growth of 12%, year on year growth of around 65%. 9 months ended we have grown by around 94%. We have seen very good traction in Europe, also in APAC. So it has been a good quarter.

Udayan

Internationally have you been able to make substantial wins because I-Flex and Oracle after their deal might have become stronger competition for you internationally.

Merwin Fernandez

Exactly. See, last 3 months or last 9 months we have seen very good traction internationally. In fact bulk of the growth is coming internationally. DBS Bank has been a very good win for us. Australia has been good. We have added 3 new clients in Australia in the last 12 months. Europe again, we have added 3-4 new clients and also we are in discussions with several large banks there. After from ABN, we have also added another leading European bank, and                      again the relationship has expanded.

Udayan

Do you think it makes sense to compliment the Finacle suite with any other product in that space because some of your competitors have gone and picked up small product companies with some products which are complimentary to their product offerings.

Merwin Fernandez

We have also added a lot of different solutions to the Finacle, I mean the Finacle umbrella. For example, web based cash management, we have added recently. Wealth management we have added, mobile solutions we have added. Some of these have been through internal development and something like treasury has been through acquisition. Our focus currently is more on the retail and investment banking space. Unlike some of our competitors who are more focussed on the corporate space and currently the traction we see in the market is more on the retail space, they are in fact trying to gear up and strengthen their story there. We have a very good story on the retail space. For example, the kind of scalability we have with 20,000 users and close to 14-15 million clients, 10 million transactions, none of our competitors have that kind of a story on the retail space.

Udayan

Mohan, just to come back on this point, you would have noted what some of the other larger companies like TCS have done in the BPO space in terms of acquisitions. Progeon has no such plan to complement?

Mohandas Pai

We do have plans, we are looking at acquisitions. We have not done it but we do have plans because in some areas it does make sense to grow by acquiring capacity rather than grow organically because it gives you a leg up. But the key thing is to have the young companies build a strong management team, deep capabilities, have strong delivery capability. We have done all that. We have been looking at acquisitions, we came close to it, did not do it, could not happen, but I guess I am optimistic.

Udayan

What kind of acquisition would it be, would it be in the transaction space and would it be in one of those developed countries like UK and US?

Mohandas Pai

Yes, it has to be there. It will be in the transaction space. It will be in a vertical where we need to get a leg up like a mature vertical. For example, the insurance vertical is a very mature vertical, there are fewer players. Deep pockets of expertise is required and people want capability immediately, they do not have time to build up capability because that market may not be growing at a very fast pace, it is consolidated. So in that area we may need. In F&A accounting we have been growing rapidly, so another area. But a bigger area is knowledge services. In knowledge services we have 160 people and we are doing quite well there. We are seeing strong traction and we may need to hire more economists, more statisticians, more equity analysts and the like. We released a big ad just now to add because we are seeing strong traction there and there an acquisition could make sense.

Udayan

You said you were considering it but did not do the deal. Let me ask this bluntly. Do you sense any kind of inertia on the part of the management because you have not done a large acquisition deal, little bit of hesitancy because you could take the first step there.

Mohandas Pai

No, it is not inertia Udayan. It is just that we are very strategic in our thinking. We do not want to make an acquisition, a large acquisition to get our face in the press, to become more popular and become more romanticized or possibly to grow scale because we believe that competitor’s model is not working out and they have to change their model. So you don’t buy something for scale, a model which is not doing well. So we want to get those strategic bits to improve the product offering that we have. So I think we have been very strategic, it has not worked out but we have done Australia. We have done a product acquisition for Finacle, in fact we have done two product acquisitions for Finacle. So we have something. Others have done more, but you know we are trying.

Udayan

Chandra Shekar, Enterprise Solutions how has this quarter been?

Chandra Shekar Kakal

As you already heard, package implementation services has been very strong growth in the last quarter. We have been one of the fastest growing group in the company so far and we continue to see that kind of a growth. We operate globally cutting across industry verticals and then cutting across the globe. So wherever growth happens in the geography or in the vertical, it helps us to grow. And traction with Infosys Consulting also has helped us. So they are able to do the business                      higher end of the consulting work and then we continue to do package implementation related services and we work with all the leading ERP packages and CRM packages like SAP,

Oracle CRM, Seibel, and PeopleSoft all of that. So all in all it helps us to have our risk diversified this way and then continue to grow.

Udayan

Who are your key competitors in this space, would it be multinational competition primarily or large domestic players who you fight with in this space?

Chandra Shekar Kakal

See we have emerged as a credible alternative to the traditional global SIs, global implementations and global roll out kind of a story. So traditional global SIs like the big four consulting firms and some of the local consulting firms, local SIs are the competition for us.

Udayan

We will take a break on that note. When we come back, okay, last 5-10 minutes with the Infosys top management for this quarter. So we will ask them a few questions which we might have not asked already, back in a second with last shot at the management for this quarter.

Welcome back, last few minutes with the Infosys top management. We have been talking to the Head of Enterprise Solution, Head of Finacle and Shibu and Mohan of course have been with us for the last hour or so. Mohan just to start off with a slightly more macro question on what is happening in the space, do you see the need for consolidation among Indian software providers right now. Do you see that happening at all?

Mohandas Pai

Right now I think for the top 5 players, their challenge is to fight the global battle, there is a need for some in the top 5 to be in the top 5 in the world in the next 2-3 years and as you can see globally the market share of the top 5 players in India is growing while the global market is not growing at the same pace and they continue growing for the next two years then I think there is going to be a keener competition but within the industry, within India, you see at the next level there could be a need for consolidation because that slice of the market is not growing and that is slightly worrisome and I think if you look at it from the global point of view too, there are some very clear winners, people who are very strong and people who are not so strong, who are not growing, who are shrinking in size. So I think lot of things happening globally.

Mithali

Couple of other verticals as well Mohan, you haven’t talked about, smaller perhaps retail for one and telecom the other, and what sort of growth prospect you see over there?

Mohandas Pai

I think telecom has very strong growth potential because we have a practice called Communication Service Providers, which is growing at 8-10% sequentially within telecom and we have seven of the ten top telecom providers in the US as our clients and that vertical is

growing. And in the telecom space VOIP coming into the market place is going to create a different set of paradigm for the people who are in the fixed line business. So there is a rapid increase in technology spending, rapid increase in transformation of the space. I think the growth rate is pretty good. Shibu you want to add to that.

Shibulal

On the retail front also I believe the growth rate will be very good because we have actually rolled out certain solutions like lead time optimization, which is seeing good traction in the market.

Mithali

Finacle as a product, are there virgin areas which haven’t been gone into or geographical areas that you think you can actually aggressively push the product?

Merwin Fernandez

Geographically right now where we are pushing the Finacle and where we are seeing also lot of traction is Europe. That is one market where most analysts also feel is opening up much faster than rest of the world, of course excluding the Asia-Pacific. So if you look at Europe for example, leading analyst firm recently has talked about a European bank spending close to 100 billion Euro in application renewal over the next 10 years and they are talking about even in a single deal spends could go up to 250 million Euro and we are seeing that actually on the ground in the form of RFPs and discussions that we are having with the various banks and that is the market where we are very bullish and we are really focused on.

Udayan

Chandrashekar, just in your space, take us through the pricing issues at this point in time and whether the kind of traction you are seeing is higher than the average 10% odd volume growth that Infosys is showing as a composite entity?

Chandra Shekar Kakal

In the new customers which we are acquiring, there is a pricing increase trend and then whenever we combine our services with the Infosys Consulting services, we are able to get good traction on the pricing front. On the tradition existing clients where our repeat business is happening and then we have agreed contracts with them so the pricing continues to be the same, but on the newer client, newer areas, and when we combine that with Infosys Consulting services                      there is a traction on the upward front.

Udayan

And on volume growth, is it higher or lower than the 10-11% sequentially that Infosys is                     .

Chandra Shekar Kakal

Yeah, we are seeing that volume growth is also happening. We have grown by double digits, 10.3% in the last quarter on quarter and we see promising future. There is lot of business available. We are talking of $75 billion space in which all the Indian companies put together are not making more than $1-1.5 billion. So there is a lot of future available for us and all the global corporations could be our prospects and customers because we are talking of global service here, cutting across industry verticals, cutting across geographies. So we don’t see any problem in the volume growth that can happen.

Udayan

Last word with you Mohan, you will be $2 billion plus by the end of this year. Is the base a problem at all because...

Mohandas Pai

No..

Udayan

You are confident that you would do this kind of growth rates regardless of the base that you...

Mohandas Pai

No, I am not talking about growth rates. I am talking about growth per se. I am confident I will be among the fastest growing players in this business globally. We have a very robust engine, we have built a good strong HR engine, financially we are very strong and we have an excellent client-facing group. Our main strength is our client facing group, that layer of people who meet the clients to sell our services, they are absolutely world class. They have taken on the competition, they have done very well. Then on the delivery side 92% deliver on-time within budget for the last 12 years is a record which is unparalleled in the entire industry. So we are very strong and I think if you look at it we will be among the fastest growing players, among the top three in the world for quite a long time. I do not talk about the growth rate, but I think life is all about comparisons.

Udayan

Last quarter you were telling me comparisons are                      now you are telling me life is all about comparisons.

Mohandas Pai

Comparison is                      in some circumstances, but you look at the global market place, let us say somebody is growing 50% and you grow 30%, you come and tell me, it is not enough. So the whole market is growing 15%, you grow 25%, that is fabulous. But the growth rate is always in relation to somebody else especially in our market place. But the offshore industry is growing at a faster pace than the overall market and within the offshore industry we are growing among the majors at the fastest pace.

Udayan

I like that confidence. Thanks very much gentlemen. Wish you luck for the next quarter.

Mohandas Pai

Thank you very much.

Udayan

That is all from Infosys now. Verdict, well I suppose most analysts would have said the operating numbers look very good, volume growth is on track. So no great disappointment for this quarter. We will take a break now on Infosys, we will come back after the break, talk to a smaller technology company. iGATE come in with results and they have taken a Rs. 11 crore hit on investments. We will ask Phaneesh Murthy where that came from after the break.

EX-99.9

Exhibit 99.9

Infosys Technologies

Infosys Results Coverage (NDTV Profit)

January 11, 2006 (11 a.m.)

Host

Good morning. You are watching this special coverage as far as the Infosys numbers are concerned. Let me just recap those numbers once again for the benefit of our viewers. Net revenue for Infosys Technologies, they were at Rs. 2532 crores, that is a gain of about 10.4%, so Infosys once again have clocked what could be called as sequential double-digit growth. Profit 649; they do not look very, very euphoric or explosive, but they are certainly a tad below what the street was expecting. Let us turn our attention to what the consensus was, what was the brokers’ consensus and there you go. Sales versus actual. The expected was Rs. 2517 crores., Infosys had actually crossed as far as the revenue front is concerned, in line with expectations, the actual revenue stood at Rs. 2527 crores. Profits, however, are a tad below, I am emphasizing on the word tad below what the general consensus was. Let us turn our attention to some more high points or so to speak as far as those numbers are concerned. There you go. The Q4 sales guidance is in the range of Rs. 2590 to Rs. 2599 crores. Equally important, the EPS guidance for the Q4, perhaps the most crucial one, that’s reasonably optimistic. The upper band is at about 24.7 versus the lower band which is again above 24. So what Infosys is indicating is, look profits are growing and revenue is growing, but in Q4 they expect the profits to probably go faster than the revenue. That is a very important point or a very important indication which has come from Infosys. Till about two or three quarters ago, we would digest for Infosys, yes Infosys is growing but there were concerns as far as operating profit margins were concerned. I will get down into where this optimism is coming from, but just to re-visit one important number. Their full year EPS has been increased to about 9.3. Now, in terms of a very ballpark estimate, Infosys now needs to grow at 4.77% in order to meet their guidance or in order to meet their guidance, the wise man in the street would say that is nothing because Infosys in fact has clocked what would could be called as a 10% growth on quarter-on-quarter. So, last two or three quarters, they are actually growing at about 10%, so that is something which I would say is would be a reasonable assumption that Infosys is likely to beat their guidance. More and more updates on Infosys Technologies. I will recap as many data points as possible. They have added about 36 new clients in Q3 that is the last quarter. The net addition, now we are not talking about total addition, we are talking about net addition which essential means there was an attrition rate of about 9-10%. That’s not much because considering what Wipro and what Satyam are clocking, 10% would be roughly as far as their attrition rate is concerned. So, the net addition is 3266. Now, here is a brief look at how the client additions have moved for Infosys Technologies. Q4, I am talking about three quarters ago they had added 37 clients, Q1 they added 36, Q2 2006 that is the last quarter, they have added 34, and the quarter the Q3 they have added about 36 new clients, so the new client addition has been very robust and very impressive also. We are looking at possible new clients coming in the range of about $50-100 million kind of run rate, so that is one of the big reasons why margins have expanded for Infosys. Infosys in the last quarter when we spoke to them clearly indicated yes margins are looking up and equally important the new business, the new

client addition, or the new billing rates on new clients are growing at about 3-4%. We will get some estimations from the management. We would be cutting to Vikram in a second or two. Now, there he would be joined by the top management, top brass of Infosys so to speak. Q3 operating profit margins, that is one, and that is the one which is perhaps very, very crucial for Infosys Technologies, let us stay with that graphic and let me just do that tall comparison. Infosys margins now have appreciated for a two quarters in a row. They were at 26.6% in Q1. They have appreciated to about 32%, and Q3 they have gone up further and they have gone up to about 34%. So that is one which is big, big improvement as far as margins are concerned. Margins for Infosys Technologies have actually gone up to about 34%. US contribution, just to give you an indication which is still constant 65.4% to 65%, so US contribution is okay. Like I said, the hallmark of Q3 has been the fact that margin expansion has been very, very strong, but like I said, now let us just go to Vikram and he is standing by with the top brass of Infosys Technologies in Bangalore.

Vikram

Right, we are here in Bangalore with one and only Nandan Nilekani sitting right next to me, CEO of Infosys. First of all, just a broad thing about what has been really bothering you in the last quarter, rupee? You would wish that the rupee is much ...

Nandan Nilekani

Well yes, the rupee has been fairly volatile, but we do not really worry about it because that is something beyond our control. I think we are on track on our strategy. We had a steady quarter. We grew 10.4% in rupee terms and 6.7% in dollar terms. We have 206 customers now who are million dollars, so I think in terms of our strategic intent and direction, we are very much on track.

Vikram

All right, now let me just tell you what we are going to do over the next half an hour. You have heard the basic parameters for him as to what has happened. We are going to be quizzing him in some detail over the next 15-20 minutes. Kris is going to be joining us a little later as will Bala, and then of course at 1:45 do remember to tune in to us coming out of here in Bangalore. The Chief Mentor of Infosys, Mr. Narayana Murthy exclusively here on NDTV Profit is going to be talking young Infosysians. It is the 25 years of the company of course and we will be getting a sense of his vision as to where he thinks the next 25 years are going to take Infosys, but that is a little later in the day. For the moment, we are going to continue to grill Nandan a bit on what actually lies behind the numbers. I just want to come back to the rupee a little bit. Because there were a lot of analysts who had earlier thought that would the rupee weakening, it is great news for IT companies, I know there were some people, you had a given a guidance of about 629 or so for this quarter, many had given a up track of 650-660 and the logic that they were using to do that is that rupee has depreciated, Infosys hadn’t factored in such a weak rupee and therefore it should be good news for the company, now that other income hit which you have taken is because of the hedging is that primarily what it is?

Nandan Nilekani

Basically what happened is we did have an improvement on the operating margin of 1.9%. That is about $10 million we gained on the operating margins, but because of the negative impact of the hedges, we lost out about $12 million on the non-operating levels, so net-net we had a negative impact of $2 million because of the rupee, so it was really the hedging cost is $12 million dollars which offset the $10 million gain on the operating margins.

Vikram

So operating margins essentially went up because the rupee was weak?

Nandan Nilekani

That is right, and so the impact of the rupee weakening was 1.9% on the operating margin.

Vikram

Okay, so you are saying that the rupee weakened, that helped your operating margin, but because you had hedged against it in a very aggressive sort of fashion ...

Nandan Nilekani

Yes, what we felt at that time was a right thing.

Vikram

Are you going to change your strategy now? Obviously the rupee is volatile, no one quite seems to know what is happening, the weakness took people by surprise, bouncing back has taken ___ by surprise. You think now you need to move to a slightly more active way of hedging?

Nandan Nilekani

Well, I think, we are constantly under discussion on the hedging policy and Mohan talked about the fact that we should look at things like stop losses, but they have not really taken decisions yet. They will obviously see whether this whole thing will require a different response and we will evaluate that, discuss with the board and then only take the decision.

Vikram

Okay, your operating margins, actually a lot of people seemed quite definitely surprised that it is at 34%. Where there any other factors, other than rupee which ___ to that?

Nandan Nilekani

No I think the major contribution was the rupee because we had a slight improvement on revenue productivity. So, I think if you look at the other parameters, it is pretty much the same. So, I think the rupee will be a dominant factor in that.

Vikram

The new clients who are coming in, you have increased them from 191 to 206, you have now got clients who are more than one million. You have added more, you have added new clients.

Nandan Nilekani

Yes, 36 clients this quarter.

Vikram

What sort of rates are they coming in at? There seemed to be higher than what you have ...

Nandan Nilekani

Yes, they are higher than our existing rates, but what happens is that the contribution of business in the total is a very small component from these guys, because we have 90-95% repeat business and to that extent even though the newer business maybe at higher rates, it does not really seep into the revenue productivity because the bulk of the revenue is still coming from the existing customers.

Vikram

Blockbuster deals may not be quite as many as you might have wanted. Is there a problem in that to get those blockbuster deals you have to slash your rates?

Nandan Nilekani

No, I think blockbuster deals, one is they have long lead times and second they are unpredictable and to that extent I think we do not rely on that for our business. We do our business and if blockbuster deals come along, then that is good news, but we have a growth now called strategic global sourcing which only focuses on big deals and they are building a lot of competence there, and we have been arguing that the future is not about single company outsourcing the whole thing, but it is going to be what you call as modular global sourcing where companies will divide up the stack into best of breed and give it to different companies and I think we are going to compete very, very favorably in that situation.

Vikram

You said a long lead time, are there several in the pipeline. You have got 500 giant blockbuster $2 billion deals which are all going to come up somewhere in the next fiscal?

Nandan Nilekani

No, I think whatever is in the pipeline, after looking discounting its probably value will be in our guidance, so take our guidance as the overall envelop of these things.

Vikram

Okay, I in fact, wanted to come to your guidance a little bit. Your are saying EPS of about 94 the whole year, which seems to imply that Q4 is necessarily going to be a sensational quarter so to say.

Nandan Nilekani

In fact, if you drill down and look at our revenue guidance for Q4 in rupee terms, we have said that in rupee terms it will grow by 2.3 to 2.7%.

Vikram

Okay, let me on that note just try and get Nikunj and Nikunj has been sitting there and he has being eying your projections for Q4 with some amount of interest. Nikunj carry on, I know you have some questions about Q4 in particular.

Nikunj

Good morning Nandan and congratulations on those numbers. Nandan, pretty much from what Vikram has left, you mean that Q4 is going be a strong quarter. There are going to be more number of working days. How come there is a possible hint at the slow down? You are growing at about 10%, but if I take again the upper range of your guidance not that exciting, Nandan.

Nandan Nilekani

Yes, I think when we give the guidance we look at the state of the business today, we look at the business in the pipeline, we look at our capacities, we look at the fact that many of our customers are looking at their budgets and setting fresh budgets for the new calendar year, so I think we have to view it in that perspective. I think in the overall macro-secular sense, we do not see any slowdown at all. We are comfortable that our story is on track, our brand is on track, and the pipeline is on track, but you know quarter is just 90 days and you have to figure out how do you make sure that you get the best revenue in that quarter.

Nikunj

Right, thanks a lot Vikram, I am just itching to ask Nandan one more question. Nandan, again, a marked difference when it comes to your outlook, when it comes to profits, and revenue, so can we assume and say look you know the margin visibility of 34% is here to stay because your profit guidance or EPS guidance is slightly stronger than your revenue guidance?

Nandan Nilekani

Well you know, we expect our margins to be in a small band and remember one thing that we also want to invest in our business. We invest in our business in two ways. One, in terms of investing in our future direction, in new programs that we have, in adding more people in sales, and in adding more people in consulting. The second way we invest in making sure that we give our employees better incentives and better

compensation. So, if there is an improvement in margins, we would also use some of that improvement to do these two things. To that extent, it is going to be within the narrow band.

Vikram

All right, narrow band there in margins. Just looking at what it is going to take ___ ramp up. Sales, marketing costs, areas which you said you might need to use some to the increase margins in. Where you see the pinch perhaps coming?

Nandan Nilekani

Well, certainly I think we have to invest more in our transformation. Because we are trying to build point of view in the market place ___, we have to invest in our consulting, we have to invest in China, we have to invest in many of our new initiatives in the new services, so I think there is no shortage of areas where we want to make those investments. It is really a question of choosing which, where to put our money behind.

Vikram

You were talking about employees a short while back. Are you a little concerned at the very top end, you had Basab left, Hema left, now Akshay is gone, are you concerned or do you think you are grooming great talent that you will find other ....

Nandan Nilekani

Well, I think first of all, you know, all the people you mentioned are very good talented people and obviously they were all adding value to the firm and to extent we missed their presence in the firm. At the same time, I think we have one very strong focus on systems and processes so that we reduce individual involvement and drive it through much of a platform approach and second I think we have a large bench of able leaders, so to that extent, I think the company will do exactly what it is set out to do.

Vikram

You have been a bit modest, aren’t you, with Infosys one of the key aspects people look at is those stars out there and those great people. ___ Infosys would do just as well if you were to take a three-year vacation?

Nandan Nilekani

Oh, I am sure it will. I think the point is that it is not about stars, I mean, it is possible that some people more visible to the public than others, but when you go and look at below the hood the extraordinary talent, you may not know the names, but really great talent and they all work together as a team to make it happen. I think, it is a great example of teamwork. To that extent, I think we have less dependence on individuals.

Vikram

Why did Akshay leave, was it because Progeon was not doing ...

Nandan Nilekani

No, I think Progeon has been doing exactly what it is set out to do. I think he played a critical role in establishing Progeon as a transaction-based BPO. A lot of people at that time said we are doing a wrong thing, that we are going to grow too slowly, but I think the truth has been vindicated that our approach was the right approach.

Vikram

When you are looking now at the big strategic areas, let us move away little bit from the nuts and bolts of the numbers. Consulting was obviously something which you have spoken about in some detail, that’s an area which you thought would give a lot of thrust to, has that in fact working out on track?

Nandan Nilekani

Absolutely, we have done $10 million of revenue in the last quarter. We expect in this quarter to do $12 to $13 million of revenue. We are very much on track. We had said we will be about 300 employees by March 07, we expect to be pretty much on track on that and most importantly, integrating our consulting capabilities with our enterprise solutions where we do things like global deployment of SAP and this integration of consulting with ES is allowing us to go to large corporations at the executive level and help them on major transformation and change programs, so in terms of a direction, the strategic intent is definitely being fulfilled.

Vikram

We have spoken about this in the past that for Indian companies like Infosys, the challenge is to use your backend out here and move into the board rooms in places like America or Europe, where as some of your American and other competitors, they are there in the boardrooms, but they have to now figure out a way of being the global delivery. Where are we positioned?

Nandan Nilekani

Oh, I think Infosys is very well positioned on this.

Vikram

___.

Nandan Nilekani

Absolutely, I mean if you look at the last quarter alone, if I were to list all the CEOs who have come to the Infosys Campus, it is an extraordinary list. I think, we have broken the glass feeling on that we are well networked with the main boards of the large companies. We meet them in the international forum like in Davos and all that, and fundamentally, I think Infosys is now recognized, very well admired brand globally.

Vikram

25 years of Infosys, is it time to dramatically change the company or no? Why fix something that’s not broken?

Nandan Nilekani

No, I think we are doing some transformation initiatives, which we think will create a different company in the coming years. To that extent, but you know, we break that up into little incremental steps, so you are going to see the impact after some time.

Vikram

All right, 90 guidance EPS for the full year, are you being conservative again as always or not?

Nandan Nilekani

No I think we are looking at the numbers today this is what we feel.

Vikram

It is of course the month also, where you get a lot of the Americans will be sitting and making their budgets, IT budgets for the next full year. What is the sort of signal you are getting, 5% up or 10% up, 15% up?

Nandan Nilekani

No I think IT spending is going to be very much in low single digits. I do not think it is going to go up. What is important is how they are changing the outsourcing mix and that is the point we make; that in the last five years we grew at 45% compounded when IT spending grew only at 5% so it is the mix, so substitution effect that we have on the legacy players, that is important.

Vikram

Right Nandan, well thank you so much for joining us. We are going to take a very quick break at this time, but after that other members of the Infosys board, Kris is going to be joining us. Bala will get into the numbers a little more details and also look at the new mixes which are coming in outsourcing, what about infrastructure outsourcing. That is a new exciting area we would be talking to Priti about that when we come back and of course do remember once again at 1:45 remember to watch NDTV Profit, Mr. Narayana Murthy talking to young Infosysians giving them his vision for the company in the next 25 years or so. That will be coming up live right from here from the Infosys Campus in Bangalore. Do stay with us, we will be joined by other members of the Infosys board in just a few minutes.

Welcome back, we are coming to you from the Infosys Campus in Bangalore. We just heard Nandan Nilekani and as I am reminding one more time, at 1:45 of course Mr. Narayana Murthy is going to be joining us talking to young Infosysians. But let us try and continue to get a sense of what these numbers actually mean. I am now being joined by Kris, who needs very little further introduction of course; Priti Rao, Infrastructure Management Services Head. She is also the Head of the Pune

Development Center, Vice President of Infrastructure Management. We are going to be asking you as to how that particular brand of outsourcing is going to proceed and Mr. Balakrishnan who is Company Secretary, Senior Vice President Finance also is going to be talking to us in some details about the numbers. Kris, I mean obviously, the one question which we were putting Nandan on the mat for was how could your hedging strategy go so wrong?

Kris Gopalakrishnan

Well I think the volatility of the rupee has been quite a lot and I think probably we need to look at it more actively. We have not been very active. We looked at something which is reasonable for a company of our size and maybe we need to become more active and maybe Bala can comment more on that.

Vikram

Bala, volatility how does volatility hit you. Were you really expecting the rupee to appreciate and you are taking big bets on that, and it did not appreciate, went down and so you took this $12 million hit?

V. Balakrishnan

No first of all, we do not speculate. Our policy is to hedge our exposures. This quarter has been very volatile quarter because if you look at the rupee it depreciated by something around 4.8% between October and December, and again appreciated by 2.7%, so huge volatility, which we have never seen in any quarter in the past. So, when the rupee moves in such a wide range and the volatility is very high, it naturally hits you, even if you have hedge in position. We had a $300 million cover in the beginning of the quarter, and at the end of quarter, we have something around $238 million of hedging. We had an impact on the non-operating income to the extent of 2.3% of our revenue, but at the same time, we had a benefit on the operating income, so net-net it has not impacted us in a big way, but the volatility has caused this factor on the non-operating side.

Vikram

But when you are comparing other income this quarter and last quarter, is that pretty much what the difference is or are there other elements of other income which had ___ the other income has really fallen what ....

V. Balakrishnan

I think the main difference is the rupee-dollar exchange difference, otherwise the other income is almost stable.

Vikram

How much depreciation? The depreciation also seems to have a according to your numbers gone up a bit, 58% if I remember right?

V. Balakrishnan

See we have increased our capex. In fact, we have given a guidance of $260-290 million of investment during this year, so the increase in investment has caused a slight increase in depreciation. I think, overall it is okay. It is not that big.

Kris Gopalakrishnan

You know, we are growing, we are adding lot of people and so we need to have facilities in advance of the people joining and that is actual reason.

Vikram

Okay ___ you are sort of putting up the infrastructure a bit in advance. ___ of the big challenges Priti in the infrastructure, naturally it is all very well to grow, but you have to figure out how you are going to build the infrastructure?

Priti

Okay, the infrastructure that Kris is talking about is different and the infrastructure that I manage is more ...

Vikram

Yes, deliberately I am asking is, I think, the reason I am asking you this question is have you had that experience in building the sort of infrastructure, infrastructure outsourcing becomes a whole new area for you to get into.

Priti

Yes it is. In fact, if you look at the emerging trend for any analysts’ reports, it is obvious that infrastructure management is the newest and emerging trend. There is a huge market. It is expected that next year, it would be about a billion dollars of infrastructure outsourcing that will be delivered out of India. Our point of view is that we differentiate between the asset ownership and the services is getting extremely good acceptance from our customers, so I think it is a challenge, but we fell we are positively placed.

Vikram

All right, you think it could be, I mean, is it potentially one of the bigger areas, which Infosys could be moving into?

Priti

It is, I think it is considered as a growth engine within Infosys. We have significantly invested into creating three network operation centers in three of our allocations in India. We are investing seriously into the certification program, because this is a technology business. It the trust area to us and a core business to us going forward.

Vikram

Okay let us just ahead now a little bit. You are guiding at about 90 EPS for the entire year. Does that mean that Q4 is not looking all that hot because take a look at Q3, you had a large number of holidays, you delivered a certain growth, Q4 more working days, people would expect you do even better.

Kris Gopalakrishnan

See there is certain characteristics with each of those quarters. So, Q3 for example is quarter where holidays were there and we have to factor those in, but Q4 is also a quarter where the budgets are coming to an end for our clients and sometimes they accelerate the spending because the budgets are coming to an end. Now Q4 is a quarter, which is Q1 for our clients, is a quarter when the budgets are set and released and we will come to know when the budgets are going to be released when we enter the quarter, when we start working with the clients in the quarter, so it is little bit cautious. If you look at last year also, we started kind of slow and then it picked up in Q2 of the fiscal.

Vikram

Okay what are the sort of hints that you are starting to get already. You must be getting some hints from your clients, as to where the IT budgets likely to be this particular year.

Kris Gopalakrishnan

We believe that more and more, we need to look at larger assignments, transformation of assignments; given the size of the company, also we need to go after larger deals and things like that; and we are seeing that from our clients we are seeing that they are looking at increasing their spending offshore. They are looking to increase their spending on transformational projects. There is an improvement in the sentiment and investment in technology, hence is I think on the rise.

Vikram

Okay, I know that Nikunj has some questions. Nikunj what are the analysts really saying after Infosys came out with its numbers. You might want to fire a couple of the questions that the analysts have really been asking, and you know the big question that they are posing. You might want fire them to Kris. I think Kris can hear loud and clear.

Nikunj

Right. Good morning Kris and congratulations once again on those numbers. Kris, one of the key questions which when I interacted with some of the analysts was that look the industry right now is making acquisitions, Wipro has done two acquisitions in Q3, TCS has done two acquisitions in Q3, how come we do not see that penetration level or that commitment coming from Infosys?

Vikram

Okay Nikunj you were a bit faint, I think Kris could not hear you very clearly. He is asking about acquisitions. Your are seeing a lot of your competitors going out there, making acquisitions, some nice big dramatic headlines ___ and what might

eventually impact on the company itself. Why is Infosys not out there with the shopping bags with the cash ....

Kris Gopalakrishnan

Sure, we do look at acquisitions, but we look at acquisitions from a strategic perspective. We are not looking at acquisitions for growth. You know, the company is growing. We believe that we have a leadership position in this industry. We are growing organically and our strategy is to make sure that from an organic perspective, we have everything safe in place, all the right services, right solutions, etc. At any point of time, we would look at maybe one, two, three opportunities for acquisitions from a business perspective or from a geography perspective, and we have a certain criteria for acquisitions. You know we have to make sure that it is at the right value. They need to bring in complementary services. There has to be minimal overlap if possible.

Vikram

For example, acquisition in the consulting space, I mean because that’s an area you want to move into. You could make an acquisition there, buy somebody who has already got a presence in boardrooms. Let’s say maybe in the new territory like Europe for example where you have not been the Indian IT company ___ or even in Asia Pacific, you might want to make an acquisition there. I mean, actually that is what some analysts feel.

Kris Gopalakrishnan

Sure, we are looking at it in Asia Pacifica. In Australia, we made an acquisition when we brought Expert Systems. In Europe also, we are looking at acquisitions, but it has to be on our terms and that’s the key. We should not be pressured. We should not be saying, you know, we need to make an acquisition this quarter. That’s not how we look at acquisitions.

Vikram

All right. Nikunj any other question?

Nikunj

Right. Vikram, the other common question as far as analysts were concerned is that 34% kind of a margin Vikram, is that sustainable, yes, Q4 no question asked, but Q1 is when the salary impact or the salary hit for Infosys would come, so sense perhaps from the top management that 34% operating profit margins, are they there for next two or three quarters?

Vikram

Okay, I have to figure out whom to through that to?

Kris Gopalakrishnan

I can respond to that, I was able to hear it a little bit. Basically, see when we look at quarter upon quarter differences, where we see an improvement in margin, we start investing in the business, so that the operating margin is maintained. That has been the philosophy of the company. We are investing in consulting. We are investing in China. We are investing in our Finacle division, and we are investing in recruitment where we look at what should be the optimum bench or what could be the best utilization we should have so that the growth can be managed and so when you look at the April quarter, where typically for Infosys, the compensation increases happen, then we need to calibrate the investments such that again the margins are maintained and that is what we would look at, but looking at next year right now is probably too early. We would look at it from April perspective.

Vikram

I remember last year you had said that Q1 is not necessary a good quarter. Are you already getting sense that Q1 of next year may not be..., there were reasons for it last year?

Kris Gopalakrishnan

From a growth perspective, at least right now we are optimistic about the business opportunities and things like that. Now, we need to look at when we compose it to Q1, what are the compensation increases we need to give, etc. Those are the things which we will talk about come April.

Vikram

All right fine, final words Bala anything else that you want to touch on. Something on numbers which you think why has not anybody asking me about? Okay, here it is I am giving you a blank cheque. I am asking you about it.

Bala

Well numbers are good. We are able to maintain the margins, except for the rupee, there is no surprises during the quarter, so overall I think everybody is happy.

Vikram

Everyone is happy, are you happy?

Kris Gopalakrishnan

Yes definitely.

Vikram

___ such a results are coming out on market holidays, so you cannot immediately judge what the markets make of it?

Kris Gopalakrishnan

No we plan this almost one year in advance.

Vikram

You did not know, it is going to be Eid.

Bala

We publish the days one year in advance for all the board meetings.

Vikram

So you ___ for the last two quarters. All right, so all of you seem to be happy, and we will of course figure out what the markets are made of it, but that will only be tomorrow. Could be other reasons, of course Reliance will be a factor I suspect also when trading starts, but that is it from the moment from us here at the Infosys campus in Bangalore like we thank all of you so much for joining us. Remember 1:45 Mr. Narayana Murthy is going to be talking to us and talking to young Infosysians, giving the vision of the company perhaps for the next 25 years, they have just finished 25, so do tune into us for that. For the moment I am going to hand you back to Nikunj to Delhi and let’s continue to take stock about the other results that has been incoming in.

Nikunj

Infosys Technologies, I might sound really repetitive on them but lets take a look at Infosys numbers. Infosys numbers, profits a tad below market expectations, but again we are talking about consensus, but we got an big explanation from the management. We have just heard Mr. Nandan Nilekani on the channel with Vikram and he was pretty confident that there is no reason to believe that there is going to be a slow down. Equally interesting, they their confident that 34% margins probably are here to stay, that is very confident, they are pretty confident that the billing rates are moving up with an upward bias, new client additions are happening at the rapid base, not worried about rupee-dollar movements against the dollar. Next loss, and that explains why there was a dent as per that particular aspect was concerned. Net loss of nearly $2 million on the forex hedge. Let us recap Nandan Nilekani and a whole host of other important board members who interacted with NDTV profit today.

Nandan Nilekani

But because of the negative impact of the hedges we lost out about $12 million on the non-operating level, so net-net we had negative impact of $2 million because of rupees, so it was really the hedging cost us $12 billion, which offset the $10 million gain on the operating margin.

Vikram

So operating margin essentially went up because the rupee was week?

Nandan Nilekani

That’s right, so the impact of the rupee weakening was 1.9% on the operating margin.

Vikram

Okay so you are saying that the rupee weakened has helped your operating margin but because you are hedged against it in a very aggressive sort of a fashion.

Nandan Nilekani

Well what we felt at that time was a right thing.

Vikram

Are you going to change your strategy now? Obviously the rupee is volatile, no one quite seems to know what is happening, the weakness took people by surprise, bouncing back has taken the ___ by surprise. You think now you need to move to a slightly more active way of hedging?

Nandan Nilekani

Well, I think, we are constantly under discussion on the hedging policy and Mohan talked about the fact that we should look at things like stop losses, but they have not really taken decisions yet. They will obviously see whether this whole thing will require a different response and we will evaluate that, discuss with the board and then only take the decision.

Vikram

Okay, your operating margins, actually a lot of people seemed quite definitely surprised that at 34%. Where there any other factors, other than rupee which ___ to that?

Nandan Nilekani

No I think the major contribution was the rupee because we had a slight improvement on revenue productivity. So, I think if you look at the other parameters, it is pretty much the same. So, I think the rupee will be dominant factor in that.

Vikram

The new clients who are coming in, you have increased them from 191 to 206, you have now got clients who are more than one million. You have added more, you have added new clients.

Nandan Nilekani

Yes, 36 clients this quarter.

Vikram

What sort of rates are they coming in at? There seemed to be higher than what you have ...

Nandan Nilekani

Yes, they are higher than our existing rates, but what happens is that the contribution of business in the total is a very small component from these guys, because we have 90-95% repeat business and to that extent even though the newer business maybe at higher rates, it does not really seep into the revenue productivity because the bulk of the revenue is still coming from the existing customers.

Vikram

Blockbuster deals may not quite as many as you might have wanted. Is there a problem in that to get those blockbuster deals where you have to slash your rates?

Nandan Nilekani

No, I think blockbuster deals, one is they have long lead times and second they are unpredictable and to that extent I think we do not rely on that for our business. We do our business and if blockbuster deals come along, then that is good news, but we have a growth now called strategic global sourcing which only focuses on big deals and they are building a lot of competence there, and we have been arguing that the future is not about single company outsourcing the whole thing, but it is going to be what you call as modular global sourcing where companies will divide up the stack into best of breed and give it to different companies and I think we are going to compete very, very favorably in that situation.

Vikram

You said a long lead time, are there several in the pipeline. You have got 500 giant blockbuster $2 billion deals which are all going to come up somewhere in the next fiscal?

Nandan Nilekani

No, I think whatever is in the pipeline, after looking discounting its probably value will be in our guidance, so take our guidance as the overall envelop of these things.

Vikram

Okay, I in fact, wanted to come to your guidance a little bit. Your are saying EPS of about 94 the whole year, which seems to imply that Q4 is necessarily going to be a sensational quarter so to say.

Nandan Nilekani

In fact, if you drill down and look at our revenue guidance for Q4 in rupee terms, we have said that in rupee terms it will grow by 2.3 to 2.7%.

Host

You just heard Nandan Nilekani and ___ that big and important crucial big picture that has ___. Here’s a view from some more board members, Kris, and we also spoke to Priti, so here is a view from the overall board members of Infosys Technologies.

Nandan

We expect the margins to be in a small band and remember one thing that we also want to invest in our business. We invest in our business in two ways. One in terms of investing in our future direction, in new programs that we have, in adding more people in sales, and in adding more people in consulting. The second way we invest in making sure that we give our employees better incentives and better compensation. So, if there is an improvement in margins, we would also use some of that improvement to do these two things. To that extent, it is going to be within the narrow band.

Bala

This quarter has been very volatile quarter because if you look at the rupee it depreciated by something around 4.8% between October and December, and again appreciated by 2.7%, so huge volatility, which we have never seen in any quarter in the past. So, when the rupee moves in such a wide range and the volatility is very high, it naturally hits you, even if you have hedge in position. We had a $300 million cover in the beginning of the quarter, and at the end of quarter, we have something around $238 million of hedging. We had an impact on the non-operating income to the extent of 2.3% of our revenue, but at the same time, we had a benefit on the operating income, so net-net it has not impacted us in a big way, but the volatility has caused this factor on the non-operating side.

Kris

So, Q3 for example is quarter where holidays were there and we have to factor those in, but Q4 is also a quarter where the budgets are coming to an end for our clients and sometimes they accelerate the spending because the budgets are coming to an end. Now Q4 is a quarter, which is Q1 for our clients, is a quarter when the budgets are set and released and we will come to know when the budgets are going to be released when we enter the quarter, when we start working with the clients in the quarter, so it is little bit cautious. If you look at last year also, we started kind of slow and then it picked up in Q2 of the fiscal.

Priti

In fact, if you look at the emerging trend for any analysts’ reports, it is obvious that infrastructure management is the newest and emerging trend. There is a huge market. It is expected that next year, it would be about a billion dollars of infrastructure outsourcing that will be delivered out of India. Our point of view that we differentiate between the asset ownership and the services is getting extremely good acceptance from our customers, so I think it is a challenge, but we fell we are positively placed.

Host

Right, just finally step aside from Infosys because there is let me assure, there is plenty of other corporate action, corporate development in India today. Even the markets are shut, but lets take a break right now but just a programming reminder. At 1:45 today on the channel in NDTV special Mr. N. R. Narayana Murthy, the Chief Mentor of Infosys Technologies would be interacting with young Infosysian, watch out for that program and stay tune 1:45 in NDTV especially with the chief man, Chief Mentor, Narayana Murthy.

NOTE:

1. Please verify the proper nouns and their spellings, and the acronyms.

2. Please verify the names of the speakers and their order of appearance.

3. Bolded words need to be confirmed for their accuracy.

4. Blanks in the transcripts represent inaudible or incomprehensible words.

Infosys Technologies
Infosys Results Coverage (NDTV Profit)
January 11, 2006 (1 p.m.)

Shelly

Its today Infosys came out with its numbers and they have been important for the markets tomorrow, they will have to deal with both Reliance and Infosys and react to that there on Dalal Street. What has been happening overall on the Infosys numbers, just to give you what those figures look like, if you have been waking late up this afternoon because of a holiday across the markets on the occasion of Eid its just about in line with expectation with sales, but look at profit, its below expectations and that is at about Rs. 649 crores, we are looking at an overall jump year-on-year of about 30%, but if you look at Q-on-Q figure that is up only 7%. The markets were expecting slightly more than that, so the profit figure there below expectations. Markets have had no chance to react to these numbers. We know that tomorrow when they come up with it, but they have increased their revenue guidance something that they always do and keep the market somewhat assured. The fourth quarter sales guidance at Rs. 2590 crores to Rs. 2599 crores, that is the kind of sales guidance they have come up with. They have also gone on to increase the EPS guidance and that is between Rs.24.30 Ps to Rs.24.70 Ps. The entire full year guidance then again sort of something to watch out for and they reiterated during every quarter in case if they want to reevaluate; it is at Rs.89.90 Ps to about Rs.90.30 Ps. That’s the EPS guidance. Let us have a look at some of the other important factors and then we play out what the management has been saying before we dissect these numbers with Nikunj about the market perspective, but first the client additions when you look at third quarter, it is 36. It has been just about the trend that we have been witnessing at this juncture for Infosys. They have been maintaining that, but watch out for the fact that third quarter was also the quarter when there were lots of holidays being sort of technically the last quarter for companies overseas, so full of Christmas leaves and also Thanksgiving, but also utilization rates are important and again we have seen a slight dip there at about 70% as compared to 72-73% last time and the first quarter was at a high of about 74%. Onsite, we are looking at the contribution of onsite of the revenues. Third quarter, 48.6 just about a shade lower than last time, but not of any significance in terms of the decline. The third quarter offshore at 51.4, a marginal increase there, just a marginal one. This is the US contribution, but now let us just play out what the management told us a host issues. The rupee has what has been hurting them and this time around their hedging strategy did not completely go in favor.

Nandan

We expect our margins to be in a small band and remember one thing that we also want to invest in our business. We invest in our business in two ways. One in terms of investing in our future direction, in new programs that we have, in adding more people in sales, and in adding more people in consulting. The second way we invest in making sure that we give our employees better incentives and better compensation. So, if there

is an improvement in margins, we would also use some of that improvement to do these two things. To that extent, it is going to be within the narrow band.

Bala

This quarter has been a very volatile quarter because if you look at the rupee it depreciated by something around 4.8% between October and December, and again appreciated by 2.7%, so huge volatility, which we have never seen in any quarter in the past. So, when the rupee moves in such a wide range and the volatility is very high, it naturally hits you, even if you have hedge in position. We had a $300 million cover in the beginning of the quarter, and at the end of quarter, we have something around $238 million of hedging. We had an impact on the non-operating income to the extent of 2.3% of our revenue, but at the same time, we had a benefit on the operating income, so net-net it has not impacted us in a big way, but the volatility has caused this factor on the non-operating side.

Kris

So, Q3 for example is quarter where holidays were there and we have to factor those in, but Q4 is also a quarter where the budgets are coming to an end for our clients and sometimes they accelerate the spending because the budgets are coming to an end. Now Q4 is a quarter, which is Q1 for our clients, is a quarter when the budgets are set and released and we will come to know when the budgets are going to be released when we enter the quarter, when we start working with the clients in the quarter, so it is little bit cautious. If you look at last year also, we started kind of slow and then it picked up in Q2 of the fiscal.

Priti

In fact, if you look at the emerging trend for any analysts’ reports, it is obvious that infrastructure management is the newest and emerging trend. There is a huge market. It is expected that next year, it would be about a billion dollars of infrastructure outsourcing that will be delivered out of India. Our point of view that we differentiate between the asset ownership and the services is getting extremely good acceptance from our customers, so I think it is a challenge, but we fell we are positively placed.

Shelly

Well that is Narayana Murthy. He is coming up in a couple of minutes from now practically about half an hour or so, when Infosys Meets its Mentor and that is a special show that we have for you that is going to come up here on Profit. Vikram Chandra live from Bangalore, so do stay tuned for that, where Infosysians do meet their mentor.

EX-99.10

EXHIBIT 99.10

	Infosys Technologies Limited
	Regd. office: Electronics City, Hosur Road, Bangalore – 560 100, India.

Audited financial results for the quarter and nine months ended December 31, 2005

(in Rs. crore, except per share data)

	Quarter ended					Nine months ended				Year ended
	December 31,					December 31,				March 31,
	2005			2004		2005		2004		2005
Income from software services and products		2,398			1,798		6,535		4,960		6,860
Software development expenses		1,276			960		3,508		2,662		3,655
Gross profit		1,122			838		3,027		2,298		3,205
Selling and marketing expenses		129			101		374		292		392
General and administration expenses		160			126		469		344		488
Operating profit before interest, depreciation and amortization		833			611		2,184		1,662		2,325
Interest		—			—		—		—		—
Depreciation and amortization		109			69		274		175		268
Operating profit after interest, depreciation and amortization		724			542		1,910		1,487		2,057
Other income		(2	)		47		73		95		128
Provision for investments		—			—		—		—		—
Net profit before tax and exceptional item		722			589		1,983		1,582		2,185
Provision for taxation		80			93		226		237		325
Net profit after tax and before exceptional item		642			496		1,757		1,345		1,860
Exceptional item — net income from sale of investments in Yantra Corporation		—			—		—		—		45
Net profit after tax and exceptional item		642			496		1,757		1,345		1,905
Paid-up equity share capital (par value Rs. 5/- each, fully paid) (see note 9)		137			135		137		135		135
Reserves and surplus		7,113			4,609		7,113		4,609		5,107
Earnings per share (par value Rs. 5/- each)
Before exceptional items
Basic		23.43			18.45		64.53		50.22		69.26
Diluted		22.78			17.90		62.70		49.14		67.46
After exceptional items
Basic		23.43			18.45		64.53		50.22		70.95
Diluted		22.78			17.90		62.70		49.14		69.10
Dividend per share (par value Rs. 5/- each)
Interim dividend		—			—		6.50		5.00		5.00
Final dividend		—			—		—		—		6.50
Total dividend		—			—		6.50		5.00		11.50
Total dividend percentage (%)		—			—		130.00		100.00		230.00
Aggregate of non-promoters’ shareholding (unaudited)
Number of shares		22,07,84,446			21,05,92,568		22,07,84,446		21,05,92,568		21,17,06,813
Percentage of shareholding		80.42			78.15		80.42		78.15		78.24

Other information: (in Rs. crore)

	Quarter ended					Nine months ended					Year ended
	December 31,					December 31,					March 31,
	2005			2004		2005			2004		2005
Staff costs		1,141			857		3,061			2,327		3,182
Items exceeding 10% of aggregate expenditure		—			—		—			—		—
Details of other income:
Interest on deposits		25			16		73			49		72
Dividends on mutual funds		24			9		54			26		37
Miscellaneous income		4			2		10			6		10
Exchange differences		(55	)		20		(64	)		14		9
Total		(2	)		47		73			95		128

Audited Consolidated financial results of Infosys Technologies Limited and subsidiaries

(in Rs. crore, except per share data)

	Quarter ended					Nine months ended				Year ended
	December 31,					December 31,				March 31,
	2005			2004		2005		2004		2005
Income from software services, products and business process management		2,532			1,876		6,897		5,142		7,130
Software development and business process management expenses		1,327			992		3,644		2,723		3,765
Gross profit		1,205			884		3,253		2,419		3,365
Selling and marketing expenses		158			117		448		344		461
General and administration expenses		186			149		547		407		569
Operating profit before interest, depreciation, amortization, minority interest and exceptional item		861			618		2,258		1,668		2,335
Interest		—			—		—		—		—
Depreciation and amortization		117			74		293		187		287
Operating profit after interest, depreciation, amortization and before minority interest and exceptional item		744			544		1,965		1,481		2,048
Other income		(5	)		46		68		92		124
Provision for investments		—			—		1		—		—
Net profit before tax, minority interest and exceptional item		739			590		2,032		1,573		2,172
Provision for taxation		83			93		233		240		325
Net profit after tax and before minority interest and exceptional item		656			497		1,799		1,333		1,847
Exceptional item — net income from sale of investments in Yantra Corporation		—			—		—		—		45
Net profit after tax and exceptional item and before minority interest		656			497		1,799		1,333		1,892
Minority interest		7			—		13		—		—
Net profit after tax, exceptional item and minority interest		649			497		1,786		1,333		1,892
Paid-up equity share capital (par value Rs. 5/- each, fully paid) (see note 9)		137			135		137		135		135
Reserves & surplus		7,175			4,592		7,175		4,592		5,090
Preference shares issued by subsidiary		—			94		—		94		94
Earnings per share (par value Rs. 5/- each)
Before exceptional items
Basic		23.68			18.50		65.59		49.77		68.79
Diluted		23.02			17.95		63.73		48.69		67.00
After exceptional items
Basic		23.68			18.50		65.59		49.77		70.48
Diluted		23.02			17.95		63.73		48.69		68.64
Dividend per share (par value Rs. 5/- each)
Interim dividend		—			—		6.50		5.00		5.00
Final dividend		—			—		—		—		6.50
Total dividend		—			—		6.50		5.00		11.50
Total dividend percentage (%)		—			—		130.00		100.00		230.00
Aggregate of non-promoters’ shareholding (unaudited)
Number of shares		22,07,84,446			21,05,92,568		22,07,84,446		21,05,92,568		21,17,06,813
Percentage of shareholding		80.42			78.15		80.42		78.15		78.24

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.

Notes:

1 The audited financial statements have been taken on record by the Board of Directors at its meeting held on January 11, 2006. There are no qualifications in the auditors’ reports for these periods. The information presented above is taken from the audited financial statements as stated.

2 On October 11, 2005 the Board of Directors approved an interim dividend of Rs. 6.50 per share (130%) on equity shares of par value of Rs. 5. The record date of the payment of dividend was October 18, 2005. The dividend has been since paid out.

3 Information on investor complaints pursuant to Clause 41 of the Listing Agreement for the quarter ended December 31, 2005:

Nature of complaints received	Opening balance	Additions	Disposals	Closing balance
Dividend related	—	229	229	—

4 During the quarter ended December 31, 2005 the company disbursed a loan of US$ 2 million (Rs. 9 crore) to its wholly owned subsidiary, Infosys Technologies (Shanghai) Co. Limited, China. The amount is repayable within five years from the date of disbursement at the discretion of the subsidiary.

5 During the quarter ended September 30, 2005 the company invested US$ 5 million (Rs. 22 crore) in its wholly owned subsidiary, Infosys Consulting Inc. As of December 31, 2005 the company has invested an aggregate of US$ 15 million (Rs. 67 crore) in the subsidiary.

6 During the nine months ended December 31, 2005 the tax authorities in an overseas tax jurisdiction completed the assessment of income up to fiscal 2004. Based on the assessment order, management has re-estimated its tax liabilities and written back an amount of Rs. 20 crore. The tax provision for the nine months period is net of the write-back.

7 During the quarter ended June 30, 2005 the company successfully completed the sponsored secondary ADS program of over US$ 1 billion. This is the largest-ever international equity offering from India and the first POWL (Public Offer Without Listing) issue by an Indian company in Japan.

8 On June 30, 2005 Citicorp International Finance Corporation exercised its rights under the shareholder’s agreement with Progeon and converted the preference shares to equity shares. Pursuant to the conversion, the share capital of Progeon increased by Rs. 9 crore to Rs. 33 crore and the share premium increased by Rs. 79 crore to Rs. 85 crore.

9 During the nine months ended December 31, 2005 and 2004 and the year ended March 31, 2005 the company issued 39,54,614; 28,92,080 and 40,06,325 equity shares respectively, pursuant to the exercise of stock options by certain employees under the 1998 and 1999 stock option plans.

10 Mr. Philip Yeo retired by rotation as a director of the company at the Annual General Meeting held on June 11, 2005.

11 The Board of Directors appointed Mr. David L. Boyles as an additional director of the company effective July 12, 2005.

 Segment reporting (Consolidated — Audited) (in Rs. crore)

	Quarter ended				Nine months ended				Year ended
	December 31,				December 31,				March 31,
	2005		2004		2005		2004		2005
Revenue by industry segment
Financial services		911		661		2,481		1,794		2,466
Manufacturing		357		270		942		755		1,032
Telecom		400		341		1,139		934		1,320
Retail		262		176		701		517		698
Others		602		428		1,634		1,142		1,614
Total		2,532		1,876		6,897		5,142		7,130
Less: Inter-segment revenue		—		—		—		—		—
Net revenue from operations		2,532		1,876		6,897		5,142		7,130
Segment profit before tax, interest, depreciation and amortization:
Financial services		301		219		794		566		782
Manufacturing		112		86		286		246		338
Telecom		157		119		436		312		452
Retail		86		61		224		193		253
Others		205		133		518		357		516
Total		861		618		2,258		1,674		2,341
Less: Interest		—		—		—		—		—
Less: Other un-allocable expenditure
(excluding un-allocable income)		117		74		293		193		293
Operating profit before tax		744		544		1,965		1,481		2,048

Notes on segment information

Principal segments

The company’s operations predominantly relate to providing technology 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.

		By order of the Board
		for Infosys Technologies Limited
Bangalore, India	S. Gopalakrishnan	Nandan M. Nilekani
January 11, 2006	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 quarter and nine months ended December 31, 2005, prepared as per US GAAP. A summary of the financial statements is as follows:

(in US$ million, except per ADS data)

	Quarter ended				Nine months ended				Year ended
	December 31,				December 31,				March 31,
	2005		2004		2005		2004		2005
Revenues		559		423		1,559		1,137		1,592
Cost of revenues		319		241		890		642		904
Gross profit		240		182		669		495		688
Net income		143		112		403		292		419
Earnings per American Depositary Share
Basic		0.53		0.42		1.49		1.09		1.57
Diluted		0.51		0.40		1.44		1.07		1.52
Total assets		1,862		1,305		1,862		1,305		1,454
Cash and cash equivalents		477		389		477		389		410
Liquid mutual funds		492		244		492		244		278

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

	Quarter ended				Nine months ended					Year ended
	December 31,				December 31,					March 31,
	2005		2004		2005		2004			2005
Consolidated net profit as per Indian GAAP		143		112		403		295			423
Deferred taxes		—		—		—		2			2
Gain on forward foreign exchange contracts		—		—		—		(4	)		(4	)
Amortization of intangible assets		—		—		—		(1	)		(2	)
Consolidated net income as per US GAAP		143		112		403		292			419

Safe Harbor: Certain statements in this release concerning our future growth prospects are forward-looking statements, within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended, 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 our investments, risks and uncertainties regarding fluctuations in earnings, our ability to manage growth, intense competition in IT, business process outsourcing and consulting 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, 2005 and Form 6-K for the quarters ended June 30, 2005 and September 30, 2005. These filings are available at www.sec.gov. We 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. We do not undertake to update any forward-looking statements that may be made from time to time by or on our behalf.

EX-99.11

EXHIBIT 99.11

INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

	(Dollars in millions except share and per share data)
	As of
	March 31, 2005 (1)		December 31, 2005
			(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	410	$	477
Investment in liquid mutual fund units		278		492
Trade accounts receivable, net of allowances		303		310
Deferred tax assets		2		2
Prepaid expenses and other current assets		35		39
Unbilled revenue		32		35
Total current assets		1,060		1,355
Property, plant and equipment, net		352		457
Goodwill		8		8
Deferred tax assets		8		11
Other assets		26		31
Total Assets	$	1,454	$	1,862
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts payable	$	1	$	2
Client deposits		7		3
Other accrued liabilities		124		140
Deferred tax liabilities		—		1
Income taxes payable		23		17
Unearned revenue		20		42
Total current liabilities		175		205
Non-current liabilities
Preferred stock of subsidiary		21		—
Other non-current liabilities		5		5
Minority interests		—		13
Stockholders’ Equity
Common stock, $0.16 par value 300,000,000 equity shares authorized, Issued and outstanding - 270,570,549 and 274,525,163 equity shares as of March 31, 2005 and December 31, 2005 respectively		31		31
Additional paid-in capital		266		379
Accumulated other comprehensive income		33		(6	)
Retained earnings		923		1,235
Total stockholders’ equity		1,253		1,639
Total Liabilities and Stockholders’ Equity	$	1,454	$	1,862

(1) March 31, 2005 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

	(Dollars in millions except share and per share data)
	Three months ended December 31,					Nine months ended December 31,
	2004		2005			2004		2005
Revenues	$	423	$	559		$	1,137	$	1,559
Cost of revenues		241		319			642		890
Gross profit		182		240			495		669
Operating Expenses:
Selling and marketing expenses		26		35			76		102
General and administrative expenses		34		41			91		124
Amortization of intangible assets		—		—			1		—
Total operating expenses		60		76			168		226
Operating income		122		164			327		443
Other income, net		11		(1	)		17		15
Income before income taxes and minority interest		133		163			344		458
Provision for income taxes		21		18			52		52
Income before minority interest		112		145			292		406
Minority interest		—		2			—		3
Net income	$	112		143			292		403
Earnings per equity share
Basic	$	0.42	$	0.53		$	1.09	$	1.49
Diluted	$	0.40	$	0.51		$	1.07	$	1.44
Weighted average equity shares used in computing earnings per equity share
Basic		267,360,142		272,357,876			266,307,767		270,875,779
Diluted		275,372,238		279,912,922			272,581,961		278,434,381

See accompanying notes to the unaudited consolidated financial statements

2

INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOME

										Accumulated other						(Dollars in millions)
	Common stock				Additional paid-		Comprehensive			comprehensive			Retained			Total stockholders’
	Shares		Par value		in capital		income			income			earnings			equity
Balance as of March 31, 2004		266,564,224	$	9	$	157				$	39		$	748		$	953
Common stock issued		2,892,080		—		67					—			—			67
Cash dividends		—		—		—					—			(222	)		(222	)
Income tax benefit arising on exercise of stock options		—		—		4					—			—			4
Stock split effected in the form of a stock dividend		—		22		—					—			(22	)		—
Comprehensive income
Net income		—		—		—	$	292			—			292			292
Other comprehensive income
Translation adjustment		—		—		—		3			3			—			3
Comprehensive income							$	295
Balance as of December 31, 2004		269,456,304	$	31	$	228				$	42		$	796		$	1,097
Balance as of March 31, 2005		270,570,549	$	31	$	266				$	33		$	923		$	1,253
Common stock issued		3,954,614		—		101					—			—			101
Cash dividends		—		—		—					—			(91	)		(91	)
Change in proportionate share of subsidiary resulting from issuance of stock by subsidiary		—		—		12					—			—			12
Comprehensive income
Net income		—		—		—	$	403			—			403			403
Other comprehensive income
Unrealized gain on mutual fund investments, net of taxes								1			1			—			1
Translation adjustment		—		—		—		(40	)		(40	)		—			(40	)
Comprehensive income							$	364
Balance as of December 31, 2005		274,525,163	$	31	$	379				$	(6	)	$	1,235		$	1,639

See accompanying notes to the unaudited consolidated financial statements

3

INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS

	(Dollars in millions)
	Nine months ended December 31,
	2004			2005
Operating Activities:
Net income	$	292		$	403
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		42			66
Deferred taxes		(3	)		(2	)
Changes in assets and liabilities
Trade accounts receivable		(85	)		(16	)
Prepaid expenses and other current assets		(1	)		(2	)
Unbilled revenue		(5	)		(4	)
Income taxes		11			(3	)
Accounts payable		—			2
Client deposits		(7	)		(4	)
Unearned revenue		11			23
Other accrued liabilities		13			20
Net cash provided by operating activities		268			483
Investing Activities:
Expenditure on property, plant and equipment		(130	)		(184	)
Loans to employees		1			(1	)
Non-current deposits placed with corporations		(11	)		(9	)
Withdrawal of non-current deposits with corporations		—			1
Investment in liquid mutual fund units		(56	)		(418	)
Redemption of liquid mutual fund units		32			193
Net cash used in investing activities		(164	)		(418	)
Financing Activities:
Proceeds from issuance of common stock		67			101
Payment of dividends		(222	)		(91	)
Net cash (used in)/provided by financing activities		(155	)		10
Effect of exchange rate changes on cash		(5	)		(8	)
Net increase / (decrease) in cash and cash equivalents during the period		(56	)		67
Cash and cash equivalents at the beginning of the period		445			410
Cash and cash equivalents at the end of the period	$	389		$	477
Supplementary information:
Cash paid towards taxes	$	43		$	58

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 technology services firm. 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. Changes in the proportionate share of Infosys in the equity of subsidiaries resulting from additional equity issued by the subsidiaries are accounted for as an equity transaction in consolidation.

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, 2005.

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 financial statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the consolidated financial statements.

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 and revenue from the end of the last billing to the balance sheet date is recognized as unbilled revenues. Revenue from fixed-price, fixed-timeframe 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-timeframe contracts. Costs associated with such support services are accrued at the time related revenues are 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

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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-timeframe basis. Revenue on time-and-material contracts is recognized as the related services are rendered. Revenue from fixed-price, fixed-timeframe 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	Vehicles	5 years
Plant and equipment	5 years	Computer equipment	2-5 years
Furniture and fixtures	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.

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 is 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.

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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.

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. Diluted earnings per share reflects the potential dilution from equity shares issuable through employee stock options and preferred stock of subsidiary. The dilutive effect of employee stock options is reflected in diluted earnings per share by application of the treasury stock method. The dilutive effect of convertible securities is reflected in diluted earnings per share by application of the if-converted method. If securities have been issued by a subsidiary that enable their holders to obtain the subsidiary’s common stock, the earnings of the subsidiary shall be included in the consolidated diluted earnings per share computations based on the consolidated group’s holding of the subsidiary’s securities.

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 earnings per share are 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 are based on the new number of shares.

1.14 Income taxes

Income taxes are accounted 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 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 of deductions 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.

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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 March 31, 2005 and December 31, 2005 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. Limits 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

The company uses derivative financial instruments such as foreign exchange forward and option contracts to mitigate the risk of changes in foreign exchange rates on accounts receivable and forecasted cash flows denominated in certain foreign currencies. The counterparty for these contracts is generally a bank. Although the company believes that these financial instruments 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.

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. Till March 2005, the company made 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 had no further obligations to the Plan beyond its monthly contributions. Certain employees of Progeon were also eligible for superannuation benefit. Progeon made monthly provisions under the superannuation plan based on a specified percentage of each covered employee’s salary. Progeon had 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. From April 1, 2005, a substantial portion of the monthly contribution amount is paid directly to the employees as an allowance and a nominal amount is contributed to the trusts.

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 pension fund. The rate at which the annual interest is payable to the beneficiaries by the trust is being administered by the government. The company has an obligation to fund any shortfall on the yield of the trust’s investments over the administered interest rates.

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 exceeds 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.

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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 per share data)
	Nine months ended December 31,
	2004			2005
Net income, as reported	$	292		$	403
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(22	)		(9	)
Pro forma net income	$	270		$	394
Earnings per share:
Basic — as reported	$	1.09		$	1.49
Basic — pro forma	$	1.01		$	1.45
Diluted — as reported	$	1.07		$	1.44
Diluted — proforma	$	0.99		$	1.41

There have been no grants of stock options by Infosys Technologies Limited during the nine months ended December 31, 2004 and 2005.

1.20 Dividends

Final dividends on equity shares 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.

2. Notes to the unaudited consolidated financial statements

2.1 Trade accounts receivable

Trade accounts receivable as of March 31, 2005 and December 31, 2005, net of allowance for doubtful accounts of $4 million and $2 million respectively, amounted to $303 million and $310 million. The age profile of trade accounts receivable, net of allowances is given below.

	In %
	As of
	March 31, 2005		December 31, 2005
Period (in days)
0 - 30		55.2		62.6
31 - 60		32.2		27.6
61 - 90		4.6		6.5
More than 90		8.0		3.3
		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 $25 million were outstanding as of March 31, 2005 and December 31, 2005. The estimated fair values of related party receivables amounted to $21 million as of March 31, 2005 and December 31, 2005. 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.

The required repayments of employee loans outstanding as of December 31, 2005 are as detailed below.

	(Dollars in millions)
Twelve months ending December 31,
2006	$	17
2007		4
2008		2
2009		1
2010		1
	$	25

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2.3 Preferred stock of subsidiary

Infosys holds a majority 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. 12,250,000 equity shares have been issued to Infosys in each of April 2002 and March 2004 for an aggregate consideration approximating $5 million. Pursuant to the agreement, CIFC was issued 4,375,000 (0.0005%) cumulative convertible preference shares in each of June 2002 and March 2004 for an aggregate consideration approximating $20 million.

The stock subscription agreement provided that unless earlier converted pursuant to an agreement in this behalf between the company and CIFC, these cumulative convertible preference shares shall automatically be converted into equity shares upon the earlier of, (i) one year prior to Progeon’s initial public offering (IPO) date, (ii) June 30, 2005, or (iii) at the holder’s option, immediately upon the occurrence of any Liquidity Event. The term “Liquidity Event” includes any of a decision of the Board of Directors of Progeon 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 Progeon. Each preference share was convertible into one equity share of par value $0.20 each. Indian law requires redemption of preference shares within a period of 20 years.

The carrying value of the preference shares was $21 million as of March 31, 2005. On June 30, 2005, the preference shares have been converted to equity shares of Progeon as per the terms of the stock subscription agreement. As of December 31, 2005, CIFC holds 8,750,000 equity shares of Progeon. Infosys’ percentage ownership in Progeon immediately before and immediately after the conversion of preference shares was 99.5% and 73.4% respectively. The transaction resulted in a change of $12 million in the proportionate share of Infosys in the equity of Progeon and the change has been accounted for as an equity transaction in consolidation.

2.4 Other income, net

Other income, net, consists of the following:

	(Dollars in millions)
	Nine months ended December 31,
	2004			2005
Interest income	$	12		$	17
Income from mutual fund investments		6			13
Foreign exchange loss, net		(1	)		(15	)
	$	17		$	15

2.5 Income taxes

The provision for income taxes in the income statement comprises:

	(Dollars in millions)
	Nine months ended December 31,
	2004			2005
Current taxes
Domestic taxes	$	12		$	17
Foreign taxes		43			37
		55			54
Deferred taxes
Domestic taxes		(1	)		(1	)
Foreign taxes		(2	)		(1	)
		(3	)		(2	)
Aggregate taxes	$	52		$	52

All components of the aggregate taxes of $52 million for the nine months ended December 31, 2004 and 2005 are allocated to the continuing operations of the company. Foreign current taxes for the nine months ended December 31, 2005 include a credit of $5 million being the effect of a change in the estimate of taxes payable in a foreign jurisdiction. The decrease in the estimate arose on completion of assessment proceedings by taxation authorities.

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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,			December 31,
	2005			2005
Deferred tax assets:
Property, plant and equipment	$	8		$	11
Allowances on trade accounts receivable		1			—
Investments		1			1
Compensated absences and other accruals		1			1
Others		—			1
		11			14
Less: Valuation allowance		(1	)		(1	)
		10			13
Deferred tax liabilities:
Unrealized gain on investments in liquid mutual fund units		—			(1	)
Net deferred tax assets	$	10		$	12

2.6 Earnings per share

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

	Nine months ended December 31,
	2004		2005
Basic earnings per equity share — weighted average number of common shares outstanding excluding unallocated shares of ESOP		266,307,767		270,875,779
Effect of dilutive common equivalent shares — stock options outstanding		6,274,194		7,558,602
Diluted earnings per equity share — weighted average number of common shares and common equivalent shares outstanding		272,581,961		278,434,381

2.7 Derivative financial instruments

The company uses derivative financial instruments such as foreign exchange forward and option contracts to mitigate the risk of changes in foreign exchange rates on accounts receivable and forecasted cash flows denominated in certain foreign currencies. The counterparty for these contracts is generally a bank. Infosys held foreign exchange forward contracts of $353 million and $15 million as of March 31, 2005 and December 31, 2005 respectively. The foreign exchange forward contracts mature between one to 12 months. As of December 31, 2005, the company held foreign currency option contracts of $26 million and range barrier options of $238 million, Euro 6 million and United Kingdom Pound Sterling 6 million.

2.8 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 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.

11

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 assets are used interchangeably. Management believes that it is not practical to provide segment disclosures relating to those costs and expenses, and accordingly these expenses are separately disclosed as “unallocated” and adjusted 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.

2.8.1 Industry segments

(Dollars in millions)
	Financial
Nine months ended December 31, 2004	services		Manufacturing		Telecom		Retail		Others		Total
Revenues	$	395	$	167	$	207	$	114	$	254	$	1,137
Identifiable operating expenses		167		73		87		45		103		475
Allocated expenses		107		39		50		27		70		293
Segmental operating income	$	121	$	55	$	70	$	42	$	81	$	369
Unallocable expenses												42
Operating income												327
Other income, net												17
Income before income taxes												344
Provision for income taxes												52
Net income											$	292

	Financial
Nine months ended December 31, 2005	services		Manufacturing		Telecom		Retail		Others		Total
Revenues	$	561	$	213	$	257	$	159	$	369	$	1,559
Identifiable operating expenses		236		94		97		65		148		640
Allocated expenses		147		54		61		43		106		411
Segmental operating income	$	178	$	65	$	99	$	51	$	115	$	508
Unallocable expenses												65
Operating income												443
Other income, net												15
Income before income taxes and minority interest												458
Provision for income taxes												52
Income before minority interest												406
Minority interest												3
Net income											$	403

12

2.8.2 Geographic segments

(Dollars in millions)
							Rest of the
Nine months ended December 31, 2004	North America		Europe		India		World		Total
Revenues	$	746	$	250	$	21	$	120	$	1,137
Identifiable operating expenses		313		101		5		56		475
Allocated expenses		184		59		5		46		294
Segmental operating income	$	249	$	90	$	11	$	18	$	368
Unallocable expenses										41
Operating income										327
Other income, net										17
Income before income taxes										344
Provision for income taxes										52
Net income									$	292

							Rest of the
Nine months ended December 31, 2005	North America		Europe		India		World		Total
Revenues	$	1,009	$	377	$	27	$	146	$	1,559
Identifiable operating expenses		422		150		13		55		640
Allocated expenses		259		91		7		54		411
Segmental operating income	$	328	$	136	$	7	$	37	$	508
Unallocable expenses										65
Operating income										443
Other income, net										15
Income before income taxes and minority interest										458
Provision for income taxes										52
Income before minority interest										406
Minority interest										3
Net income									$	403

2.8.3 Significant clients

No client individually accounted for more than 10% of the revenues in the nine months ended December 31, 2004 and 2005.

13

EX-99.12

EXHIBIT 99.12

AUDITORS’ REPORT TO THE MEMBERS OF INFOSYS TECHNOLOGIES LIMITED

We have audited the attached Balance Sheet of Infosys Technologies Limited (the Company) as at 31 December 2005, the profit and loss account for the quarter and nine months ended on that date and the cash flow statement for the nine months 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 31 December 2005;
(ii)	in the case of the Profit and Loss Account, of the profit of the Company for the quarter and nine months ended on that date; and
(iii)	in the case of the Cash Flow Statement, of the cash flows of the Company for the nine months ended on that date.

for BSR & Co
Chartered Accountants

Subramanian Suresh
Partner
Membership No. 83673

Bangalore
11 January 2006

INFOSYS TECHNOLOGIES LIMITED

in Rs. crore
Balance Sheet as at	Schedule	December 31, 2005		March 31, 2005
SOURCES OF FUNDS
SHAREHOLDERS’ FUNDS
Share capital	1		137		135
Reserves and surplus	2		7,113		5,107
			7,250		5,242
APPLICATION OF FUNDS
FIXED ASSETS	3
Original cost			2,825		2,183
Less: Depreciation and amortization			1,265		1,006
Net book value			1,560		1,177
Add: Capital work-in-progress			444		318
			2,004		1,495
INVESTMENTS	4		2,309		1,329
DEFERRED TAX ASSETS	5		46		34
CURRENT ASSETS, LOANS AND ADVANCES
Sundry debtors	6		1,314		1,253
Cash and bank balances	7		1,570		1,481
Loans and advances	8		1,451		995
			4,335		3,729
LESS: CURRENT LIABILITIES AND PROVISIONS
Current liabilities	9		727		577
Provisions	10		717		768
NET CURRENT ASSETS			2,891		2,384
			7,250		5,242
SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS	22

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

As per our report attached

for BSR & 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	David L. Boyles	K. Dinesh
	Director	Director	Director	Director
	S. D. Shibulal	T. V. Mohandas Pai	Srinath Batni	V. Balakrishnan
Bangalore	Director	Director and	Director	Company Secretary and
January 11, 2006		Chief Financial Officer		Senior Vice President – Finance

1

INFOSYS TECHNOLOGIES LIMITED

in Rs. crore, except per share data
			Quarter ended					Nine months ended
	Schedule		December 31,					December 31,
Profit and Loss Account for the		2005			2004		2005		2004
Income from software services and products			2,398			1,798		6,535		4,960
Software development expenses	11		1,276			960		3,508		2,662
GROSS PROFIT			1,122			838		3,027		2,298
Selling and marketing expenses	12		129			101		374		292
General and administration expenses	13		160			126		469		344
			289			227		843		636
OPERATING PROFIT BEFORE INTEREST, DEPRECIATION AND AMORTIZATION			833			611		2,184		1,662
Interest			—			—		—		—
Depreciation and amortization			109			69		274		175
OPERATING PROFIT AFTER INTEREST, DEPRECIATION AND AMORTIZATION			724			542		1,910		1,487
Other income, net	14		(2	)		47		73		95
Provision for investments			—			—		—		—
NET PROFIT BEFORE TAX			722			589		1,983		1,582
Provision for taxation	15		80			93		226		237
NET PROFIT AFTER TAX			642			496		1,757		1,345
Balance Brought Forward			2,341			764		1,428		71
Less: Residual dividend paid			—			—		—		3
Additional dividend tax			—			—		—		2
			2,341			764		1,428		66
AMOUNT AVAILABLE FOR APPROPRIATION			2,983			1,260		3,185		1,411
Dividend
Interim			—			—		177		134
Final			—			—		—		—
Total dividend			—			—		177		134
Dividend tax			—			—		25		17
Balance in profit and loss account			2,983			1,260		2,983		1,260
			2,983			1,260		3,185		1,411
EARNINGS PER SHARE *
Equity shares of par value Rs. 5/- each
Basic			23.43			18.45		64.53		50.22
Diluted			22.78			17.90		62.70		49.14
Number of shares used in computing earnings per share
Basic			27,37,71,476			26,87,73,742		27,22,89,379		26,78,62,078
Diluted			28,16,04,953			27,71,10,460		28,02,43,496		27,37,70,692
SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS	22

* refer to note 22.2.20

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

As per our report attached

for BSR & 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	David L. Boyles	K. Dinesh
	Director	Director	Director	Director
	S. D. Shibulal	T. V. Mohandas Pai	Srinath Batni	V. Balakrishnan
Bangalore	Director	Director and	Director	Company Secretary and
January 11, 2006		Chief Financial Officer		Senior Vice President – Finance

2

INFOSYS TECHNOLOGIES LIMITED

in Rs. crore
		Nine months ended
		December 31,
Cash Flow Statement for the	Schedule	2005			2004
CASH FLOWS FROM OPERATING ACTIVITIES
Net profit before tax			1,983			1,582
Adjustments to reconcile net profit before tax to cash provided by operating activities
(Profit)/ loss on sale of fixed assets			—			—
Depreciation and amortization			274			175
Interest and dividend income			(127	)		(75	)
Provision for investments			—			—
Effect of exchange differences on translation of foreign currency cash and cash equivalents			1			(8	)
Changes in current assets and liabilities
Sundry debtors			(61	)		(350	)
Loans and advances	16		(56	)		(96	)
Current liabilities and provisions	17		139			30
Income taxes paid during the period	18		(253	)		(185	)
NET CASH GENERATED BY OPERATING ACTIVITIES			1,900			1,073
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets and change in capital work-in-progress	19		(783	)		(559	)
Proceeds on disposal of fixed assets			—			—
Investment in subsidiaries (refer to note 22.2.16)			(22	)		—
Investments in securities	20		(958	)		(151	)
Interest and dividend income			127			75
NET CASH USED IN INVESTING ACTIVITIES			(1,636	)		(635	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of share capital on exercise of stock options			453			301
Dividends paid during the period			(353	)		(1,020	)
Dividend Tax paid during the period			(50	)		—
NET CASH USED IN FINANCING ACTIVITIES			50			(719	)
Effect of exchange differences on translation of foreign currency cash and cash equivalents			(1	)		8
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS			313			(273	)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD			1,683			1,839
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD	21		1,996			1,566
SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS	22

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

As per our report attached

for BSR & 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	David L. Boyles	K. Dinesh
	Director	Director	Director	Director
	S. D. Shibulal	T. V. Mohandas Pai	Srinath Batni	V. Balakrishnan
Bangalore	Director	Director and	Director	Company Secretary and
January 11, 2006		Chief Financial Officer		Senior Vice President – Finance

3

INFOSYS TECHNOLOGIES LIMITED

in Rs. crore, except as otherwise stated
Schedules to the Balance Sheet as at	December 31, 2005		March 31, 2005
1 SHARE CAPITAL
Authorized
Equity shares, Rs. 5/- par value
30,00,00,000 (30,00,00,000) equity shares		150		150
Issued, Subscribed and Paid Up
Equity shares, Rs. 5/- par value*
27,45,25,163 ( 27,05,70,549) equity shares fully paid up		137		135
[Of the above, 25,84,92,302 ( 25,84,92,302) equity shares, fully paid up have been issued as bonus shares by capitalization of the general reserve]
		137		135
Forfeited shares amounted to Rs. 1,500/- (Rs. 1,500/-)
* For details of options in respect of equity shares, refer to note 22.2.11
* also refer to note 22.2.20 for details of basic and diluted shares
2 RESERVES AND SURPLUS
Capital reserve		6		6
Share premium account — As at April 1,		900		461
Add: Receipts on exercise of stock options issued to employees		451		439
		1,351		900
General reserve — As at April 1,		2,773		2,683
Less: Capitalized for issue of bonus shares		—		100
Add: Transferred from the Profit and Loss Account		—		190
		2,773		2,773
Balance in Profit and Loss Account		2,983		1,428
		7,113		5,107

4

INFOSYS TECHNOLOGIES LIMITED

Schedules to the Balance Sheet

3 FIXED ASSETS in Rs. crore except as otherwise stated

Particulars	Original cost								Depreciation and amortization								Net book value
							As at								As at		As at
	As at				Deductions/		December 31,		As at		For the		Deductions/		December 31,		December 31,		As at
	April 1, 2005		Additions		Retirement		2005		April 1, 2005		period		Retirement		2005		2005		March 31, 2005
Land : free-hold		30		—		—		30		—		—		—		—		30		30
leasehold		90		11		—		101		—		—		—		—		101		90
Buildings*		731		264		—		995		119		44		—		163		832		612
Plant and machinery*		389		154		—		543		216		65		—		281		262		173
Computer equipment*		574		149		7		716		427		113		7		533		183		147
Furniture and fixtures*		326		79		8		397		202		52		8		246		151		124
Vehicles		1		—		—		1		—		—		—		—		1		1
Intangible assets Intellectual property rights		42		—		—		42		42		—		—		42		—		—
		2,183		657		15		2,825		1,006		274		15		1,265		1,560		1,177
Previous year		1,570		687		74		2,183		804		268		66		1,006		1,177

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 Progeon Limited, a subsidiary company. Please refer to note 22.2.6 for details

5

INFOSYS TECHNOLOGIES LIMITED

			in Rs. crore
Schedules to the Balance Sheet as at	December 31, 2005		March 31, 2005
4 INVESTMENTS
Trade (unquoted) – at cost
Long- term investments
In subsidiaries
Progeon Limited, India. 2,44,99,993 (2,44,99,993) equity shares of Rs. 10/- each, fully paid		25		25
Infosys Technologies (Shanghai) Co. Limited, China		23		23
Infosys Technologies (Australia) Pty Limited, Australia 1,01,08,869 (1,01,08,869) equity shares of A $0.11 par value, fully paid		66		66
Infosys Consulting, Inc. USA 1,50,00,000 (1,00,00,000) common stock of US $1.00 par value, fully paid		67		45
		181		159
In other investments*		16		16
Less: Provision for investments		14		14
		2		2
Non-trade (unquoted), current investments, at the lower of cost and fair value
Liquid mutual funds *		2,126		1,168
		2,309		1,329
Aggregate amount of unquoted investments		2,309		1,329

* refer to note 22.2.16 for details of investments

5 DEFERRED TAX ASSETS
Fixed assets	45	31
Sundry debtors	1	3
	46	34
6 SUNDRY DEBTORS
Debts outstanding for a period exceeding six months
Unsecured
considered doubtful	10	11
Other debts
Unsecured
considered good (including dues from subsidiary companies)*	1,314	1,253
considered doubtful	1	8
	1,325	1,272
Less: Provision for doubtful debts	11	19
	1,314	1,253

* For details of dues from subsidiary companies, refer to note 22.2.7	—	—
Includes dues from companies where directors are interested	—	—
7 CASH AND BANK BALANCES
Cash on hand	—	—
Balances with scheduled banks in Indian Rupees
In current accounts *	80	78
In deposit accounts	1,234	1,213
Balances with non-scheduled banks in foreign currency **
In current accounts	256	190
	1,570	1,481
*includes balance in unclaimed dividend account	4	3
**refer to note 22.2.13 for details of balances in non-scheduled banks

6

INFOSYS TECHNOLOGIES LIMITED

			in Rs. crore
Schedules to the Balance Sheet as at	December 31, 2005		March 31, 2005
8 LOANS AND ADVANCES
Unsecured, considered good
Loans to subsidiary (refer to note 22.2.7)		9		—
Advances
prepaid expenses		16		33
for supply of goods and rendering of services		10		2
advance to gratuity trust		27		—
others *		5		11
		67		46
Unbilled revenues		150		139
Advance income tax		579		403
Loans and advances to employees **
housing and other loans		49		58
salary advances		49		41
Electricity and other deposits		16		16
Rental deposits		12		14
Deposits with financial institutions and body corporate		529		268
Mark to Market on options/ due on forward contracts		—		10
		1,451		995
Unsecured, considered doubtful
Loans and advances to employees		—		—
		1,451		995
Less: Provision for doubtful loans and advances to employees		—		—
		1,451		995
* includes advances to subsidiary company, refer to note 22.2.7		5		2
** includes dues by non-director officers of the company		—		—
Maximum amounts due by non-director officers at any time during the period/year		—		—
9 CURRENT LIABILITIES
Sundry creditors
goods and services *		—		1
accrued salaries and benefits
salaries		4		11
bonus and incentives		155		182
unavailed leave		65		61
for other liabilities
provision for expenses		163		118
retention monies		13		15
withholding and other taxes payable		90		51
for purchase of intellectual property rights		20		19
others		3		4
		513		462
Advances received from clients		12		29
Unearned revenue		187		83
Mark to Market on options/ due on forward contracts		11		—
Unclaimed dividend		4		3
		727		577
* Of which, dues to subsidiary companies, refer to note 22.2.7		—		1
10 PROVISIONS
Proposed dividend		—		176
Provision for
tax on dividend		—		25
income taxes *		707		546
post-sales client support and warranties		10		21
		717		768
* refer to note 22.2.12

7

INFOSYS TECHNOLOGIES LIMITED

										in Rs. crore
	Quarter ended						Nine months ended
	December 31,						December 31,
Schedules to Profit and Loss Account for the	2005			2004			2005			2004
11 SOFTWARE DEVELOPMENT EXPENSES
Salaries and bonus including overseas staff expenses		987			733			2,632			1,990
Overseas group health insurance		12			9			36			24
Contribution to provident and other funds		22			20			62			55
Staff welfare		9			7			20			14
Technical sub-contractors — subsidiaries		92			64			266			186
Technical sub-contractors — others		29			30			83			68
Overseas travel expenses		60			44			172			142
Visa charges and others		7			5			53			25
Software packages
for own use		34			31			98			78
for service delivery to clients		6			4			25			13
Communication expenses		10			10			35			29
Computer maintenance		7			4			14			11
Consumables		4			3			12			9
Rent		3			2			9			5
Provision for post-sales client support and warranties		(6	)		(6	)		(9	)		13
		1,276			960			3,508			2,662
12 SELLING AND MARKETING EXPENSES
Salaries and bonus including overseas staff expenses		74			58			210			169
Overseas group health insurance		1			1			3			2
Contribution to provident and other funds		—			1			1			1
Staff welfare		—			—			1			—
Overseas travel expenses		14			11			42			33
Visa charges and others		2			1			7			4
Traveling and conveyance		1			4			2			8
Commission charges		10			7			27			15
Brand building		14			8			36			25
Professional charges		5			5			19			13
Rent		3			3			10			8
Marketing expenses		3			1			9			8
Telephone charges		2			1			4			3
Communication expenses		—			—			—			—
Printing and stationery		—			—			1			1
Advertisements		—			—			1			1
Office maintenance		—			—			—			—
Sales promotion expenses		—			—			1			1
Consumables		—			—			—			—
Software packages
for own use		—			—			—			—
Insurance charges		—			—			—			—
Rates and taxes		—			—			—			—
		129			101			374			292

8

INFOSYS TECHNOLOGIES LIMITED

									in Rs. crore
	Quarter ended					Nine months ended
	December 31,					December 31,
Schedules to Profit and Loss Account for the	2005			2004		2005			2004
13 GENERAL AND ADMINISTRATION EXPENSES
Salaries and bonus including overseas staff expenses		33			26		90			66
Overseas group health insurance		—			—		1			1
Contribution to provident and other funds		2			2		5			5
Professional charges		25			17		65			41
Telephone charges		18			10		54			30
Power and fuel		16			10		45			29
Traveling and conveyance		17			8		45			25
Overseas travel expenses		3			2		9			5
Visa charges and others		1			—		3			1
Office maintenance		19			10		47			28
Guest house maintenance*		—			—		1			1
Insurance charges		5			7		16			21
Printing and stationery		2			2		7			5
Donations		4			8		13			17
Rent		2			3		7			12
Advertisements		3			3		10			7
Repairs to building		3			4		11			8
Repairs to plant and machinery		3			2		8			5
Rates and taxes		3			2		7			6
Professional membership and seminar participation fees		2			1		6			4
Postage and courier		1			1		4			4
Books and periodicals		1			1		3			2
Provision for bad and doubtful debts		(4	)		6		6			17
Provision for doubtful loans and advances		—			—		—			—
Commission to non-whole time directors		—			—		1			1
Freight charges		—			—		1			1
Bank charges and commission		—			—		1			1
Research grants		—			—		1			—
Auditor’s remuneration
statutory audit fees		—			—		—			—
certification charges		—			—		—			—
others		—			—		—			—
out-of-pocket expenses		—			—		—			—
Miscellaneous expenses (refer to note 22.2.15)		1			1		2			1
		160			126		469			344
*for non-training purposes
14 OTHER INCOME
Interest received on deposits with banks and others*		25			16		73			49
Dividend received on investment in liquid mutual funds (non- trade unquoted)		24			9		54			26
Miscellaneous income (refer to note 22.2.15)		4			2		10			6
Exchange differences		(55	)		20		(64	)		14
		(2	)		47		73			95
*Tax deducted at source		4			2		14			9
15 PROVISION FOR TAXATION
Income taxes*		86			93		238			237
Deferred taxes		(6	)		—		(12	)		—
		80			93		226			237
* refer to note 22.2.12

9

INFOSYS TECHNOLOGIES LIMITED

				in Rs. crore
	Nine months ended
	December 31,
Schedules to Cash Flow Statements for the	2005			2004
16 CHANGE IN LOANS AND ADVANCES
As per the Balance Sheet *		1,451			920
Less: Deposits with financial institutions and body corporate, included in cash and cash equivalents		(426	)		(201	)
Advance income taxes separately considered		(579	)		(341	)
		446			378
Less: Opening balance considered		(390	)		(282	)
		56			96
* includes loans to subsidiary
17 CHANGE IN CURRENT LIABILITIES AND PROVISIONS
As per the Balance Sheet		1,444			1,091
Add/ (Less): Provisions separately considered in the cash flow statement Income taxes		(707	)		(496	)
Dividends		—			—
Dividend tax		—			—
		737			595
Less: Opening balance considered		(598	)		(565	)
		139			30
18 INCOME TAXES PAID
Charge as per the Profit and Loss Account		226			237
Add: Increase in advance income taxes		176			131
Increase/(Decrease) in deferred taxes		12			—
Less: (Increase)/Decrease in income tax provision		(161	)		(183	)
		253			185
19 PURCHASE OF FIXED ASSETS AND CHANGE IN CAPITAL WORK-IN-PROGRESS
As per Balance Sheet		657			550
Less: Opening Capital work-in-progress		(318	)		(203	)
Add: Closing Capital work-in-progress		444			212
		783			559
20 INVESTMENTS IN SECURITIES *
As per the Balance Sheet		2,309			1,178
Add: Provisions made on investments		—			—
		2,309			1,178
Less: Investment made in subsidiaries		(22	)		—
Opening balance considered		(1,329	)		(1,027	)
		958			151
* refer to note 22.2.16 for investment and redemptions
21 CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD
As per the Balance Sheet		1,570			1,365
Add: Deposits with financial institutions, included herein		426			201
		1,996			1,566

10

INFOSYS TECHNOLOGIES LIMITED

Schedules to the Financial Statements for the quarter and nine months ended December 31, 2005

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, 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 technology services organisation. 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 technical consulting, design, development, re-engineering, maintenance, systems integration and package evaluation and implementation. In addition, the Company offers software products for the banking industry.

22. 1 Significant accounting policies

22.1.1 Basis of preparation of financial statements

The 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. The interim financial statements are prepared to conform to the accounting standard on “Interim Financial Reporting”. 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.

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 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. Where no reliable estimate can be made, a disclosure is made as contingent liability. 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 percentage of completion method. On time-and-materials contracts, revenue is recognized as the related services are rendered. Cost and earnings in excess of billings are classified as unbilled revenue while billing in excess of cost and earnings is classified as unearned revenue. Provision for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the current estimates. 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 percentage of 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 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

11

22.1.7 Retirement benefits to employees

22.1.7.a Gratuity

Infosys provides for gratuity, a defined benefit retirement plan (the “Gratuity Plan”) covering eligible employees. In accordance with the Payment of Gratuity Act, 1972, 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 investments as permitted by law.

22.1.7.b Superannuation

Certain employees of Infosys are also participants in a defined contribution plan. Untill March 2005, the company made 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 had no further obligations to the Plan beyond its monthly contributions. From April 1, 2005, a substantial portion of the monthly contribution amount is paid directly to the employees as an allowance and a nominal amount is contributed to the trust.

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 Infosys Technologies Limited Employee’s Provident Fund Trust equal to a specified percentage of the covered employee’s salary. Infosys also contributes to a government administered pension fund on behalf of its employees. The interest rate payable by the trust to the beneficiaries every year is being notified by the government. The company has an obligation to make good the shortfall, if any, between the return from the investments of the trust and the notified interest rate.

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 the daily rates. 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 foreign exchange forward contracts and options to hedge its exposure to movements in foreign exchange rates. The use of these foreign exchange forward contracts and options reduces the risk or cost to the company and the company does not use the foreign exchange forward contracts or options 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 or option 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 a designation as 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 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.

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/exceptional 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 issues 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.

12

22.2 Notes on accounts

Amounts in the financial statements are presented in Rupees crore, except for per share data and as otherwise stated. Certain amounts do not appear due to rounding off, and are detailed in Note 22.3. All exact amounts are stated with the suffix “/-”. One crore equals 10 million.

The previous period/ year figures have been regrouped / reclassified, wherever necessary to conform to the current presentation.

22.2.1 Aggregate expenses

The aggregate amounts incurred on certain specific expenses that are required to be disclosed under Schedule VI to the Companies Act, 1956

							in Rs. crore
	Quarter ended						Nine Months ended
	December 31,						December 31,
	2005			2004			2005			2004
Salaries and bonus including overseas staff expenses		1,094			817			2,932			2,225
Contribution to provident and other funds		24			23			68			61
Staff welfare
Staff welfare		9			7			21			14
Group health insurance and others		—			—			—			—
Overseas group health insurance		13			10			40			27
Overseas travel expenses		77			57			223			180
Visa charges and others		10			6			63			30
Traveling and conveyance		18			12			47			33
Technical sub-contractors — subsidiaries		92			64			266			186
Technical sub-contractors — others		29			30			83			68
Software packages
for own use		34			31			98			78
for service delivery to clients		6			4			25			13
Professional charges		30			22			84			54
Telephone charges		20			11			58			33
Communication expenses		10			10			35			29
Power and fuel		16			10			45			29
Office maintenance		19			10			47			28
Guest house maintenance*		—			—			1			1
Commission charges		10			7			27			15
Brand building		14			8			36			25
Rent		8			8			26			25
Insurance charges		5			7			16			21
Computer maintenance		7			4			14			11
Printing and stationery		2			2			8			6
Consumables		4			3			12			9
Donations		4			8			13			17
Advertisements		3			3			11			8
Marketing expenses		3			1			9			8
Other miscellaneous expenses		—			—			—			—
Repairs to building		3			4			11			8
Repairs to plant and machinery		3			2			8			5
Rates and taxes		3			2			7			6
Professional membership and seminar participation fees		2			1			6			4
Postage and courier		1			1			4			4
Provision for post-sales client support and warranties		(6	)		(6	)		(9	)		13
Books and periodicals		1			1			3			2
Provision for bad and doubtful debts		(4	)		6			6			17
Provision for doubtful loans and advances		—			—			—			—
Commission to non-whole time directors		—			—			1			1
Sales promotion expenses		—			—			1			1
Freight charges		—			—			1			1
Bank charges and commission		—			—			1			1
Auditor’s remuneration
statutory audit fees		—			—			—			—
certification charges		—			—			—			—
others		—			—			—			—
out-of-pocket expenses		—			—			—			—
Research grants		—			—			1			—
Miscellaneous expenses (refer to note 22.2.15)		1			1			2			1
		1,565			1,187			4,351			3,298

* for non-training purposes

The above expenses for the quarter and nine months ended December 31, 2005 include Fringe Benefit Tax (FBT) in India amounting to Rs. 3 crore and Rs. 9 crore, wherever applicable.

13

22.2.2 Capital commitments and contingent liabilities

				in Rs. crore
	As at
	December 31, 2005				March 31, 2005
Estimated amount of unexecuted capital contracts (net of advances and deposits)		217				273
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		26				13
Claims against the company, not acknowledged as debts		74	*			16
(Amount paid to statutory authorities totals Rs. 57 crore on account of claims not acknowledged as debts)
Forward contracts and Options outstanding
In US$		—			US$	349,000,000
(Equivalent approximate in Rs. crore)		—				1,539
Range barrier options in USD	$	237,500,000
(Equivalent approximate in Rs. crore)		1,068
Range barrier options in Euro	€	6,000,000				—
(Equivalent approximate in Rs. crore)		32				—
Range barrier options in GBP	£	6,000,000				—
(Equivalent approximate in Rs. crore)		47				—

* Claims against the Company not acknowledged as debts include a demand (received on April 15, 2005) from the Indian tax authorities for payment of additional tax of Rs. 53 crore, including interest of Rs. 16 crore, upon completion of their tax review for fiscal 2002. The tax demand is mainly on account of disallowance of a portion of the deduction to its taxable income under Indian law claimed by the company under Section 10A of the Income-tax Act. Deduction under Section 10A of the Income-tax Act is determined by the ratio of “Export Turnover” to “Total Turnover”. The disallowance arose from certain expenses incurred in foreign currency being reduced from Export Turnover but not also reduced from Total Turnover.

The company is contesting the demand and management, including its tax advisers, believe that its position will likely be upheld in the appellate process. No tax expense has been accrued in the financial statements for the tax demand raised. Management believes that the ultimate outcome of this proceeding will not have a material adverse effect on the company’s financial position and results of operations.

22.2.3 Quantitative details

The company is primarily engaged in the development and maintenance of computer software. The production and sale of such software cannot be expressed in any generic unit. Hence, it is not possible to give the quantitative details of sales and certain information as required under paragraphs 3, 4C and 4D of part II of Schedule VI to the Companies Act, 1956.

22.2.4 Imports (valued on the cost, insurance and freight basis)

							in Rs. crore
		Quarter ended				Nine months ended
		December 31,				December 31,
	2005		2004		2005			2004
Capital goods		40		32		156			94
Software packages		4		1		8			4
		44		33		164			98

22.2.5 Activity in foreign currency

							in Rs. crore
		Quarter ended				Nine months ended
		December 31,				December 31,
	2005		2004		2005			2004
Earnings in foreign currency (on receipts basis)
Income from software services and products		2,323		1,690		6,448			4,539
Interest received on deposits with banks		2		—		4			1
Expenditure in foreign currency (on payments basis)
Travel expenses		61		40		216			149
Professional charges		13		9		31			23
Technical Sub-Contractors - Subsidiaries		91		91		248			206
Other expenditure incurred overseas for software development		652		604		1,895			1,739
Net earnings in foreign currency (on the receipts and payments basis)
Net earnings in foreign exchange		1,508		946		4,062			2,423

22.2.6 Obligations on long-term, non-cancelable operating leases

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

							in Rs. crore
		Quarter ended				Nine months ended
		December 31,				December 31,
	2005		2004		2005			2004
Lease rentals recognized during the period/ year		8		9		26			26

		As at
Lease obligations	December 31, 2005		March 31, 2005
Within one year of the balance sheet date		22		20
Due in a period between one year and five years		76		65
Due after five years		20		24
		118		109

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

14

Fixed assets provided on operating lease to Progeon, a subsidiary company, as at December 31, 2005 and March 31, 2005 :-

					in Rs. crore
			Accumulated			Net book
Particulars	Cost		depreciation			value
Building		28		5			23
		13		3			10
Plant and machinery		13		5			8
		6		4			2
Computers		1		1			—
		1		1			—
Furniture & fixtures		11		8			3
		9		7			2
Total		53		19			34
		29		15			14

The aggregate depreciation charged on the above for the quarter and nine months ended December 31, 2005 amounted to Rs. 2 crore and Rs. 3 crore respectively (for the quarter and nine months ended December 31, 2004 was Rs. 1 crore and Rs. 3 crore respectively).

The company has non-cancelable operating leases on equipped premises leased to Progeon. The leases extend for periods between 36 months and 70 months from the date of inception. The lease rentals received are included as a component of other Income. The lease rental commitments from Progeon are as given below:-

			in Rs. crore
		As at
Lease rentals	December 31, 2005			March 31, 2005
Within one year of the balance sheet date		8			7
Due in a period between one year and five years		12			9
Due after five years		—			—
		20			16

The rental income from Progeon for the quarter and nine months ended December 31, 2005 amounted to Rs. 3 crore and Rs. 8 crore respectively (for the quarter and nine months ended December 31, 2004 was Rs. 2 crore and Rs. 6 crore respectively).

22.2.7 Related party transactions

List of related parties:
					Holding, as at
Name of the related party	Country	December 31, 2005				March 31, 2005
Progeon Limited	India		72.05	%			99.54	%
Infosys Technologies (Australia), Pty Limited	Australia		100	%			100	%
Infosys Technologies (Shanghai) Co. Limited	China		100	%			100	%
Infosys Consulting, Inc.	USA		100	%			100	%
Progeon s. r. o *	Czech Republic		72.05	%			99.54	%

* Progeon s.r.o is a wholly owned subsidiary of Progeon Limited.

The details of the related party transactions entered into by the company, in addition to the lease commitments described in note 22.2.6, for the quarter and nine months ended December 31, 2005 and 2004 are as follows:-

							in Rs. crore
	Quarter ended				Nine months ended
	December 31,				December 31,
Particulars	2005		2004		2005			2004
Capital transactions:
Financing transactions
Progeon (Including Progeon s.r.o)		—		—		—			—
Infosys Australia		—		—		—			—
Infosys China		9		—		9			19
Infosys Consulting		—		23		22			45
Rental deposit repaid
Progeon		—		—		2			—
Revenue transactions:
Purchase of services
Progeon (Including Progeon s.r.o)		1		—		2			1
Infosys Australia		58		59		177			181
Infosys China		3		2		6			2
Infosys Consulting		30		3		81			3
Purchase of shared services including facilities and personnel
Progeon (Including Progeon s.r.o)		—		—		1			—
Infosys Australia		—		—		—			—
Infosys China		—		—		—			—
Infosys Consulting		—		—		—			—
Sale of services
Progeon (Including Progeon s.r.o)		—		—		—			—
Infosys Australia		1		—		4			—
Infosys China		—		—		1			—
Infosys Consulting		1		1		2			1
Sale of shared services including facilities and personnel
Progeon (Including Progeon s.r.o)		2		4		11			11
Infosys Australia		—		—		—			—
Infosys China		—		—		—			—
Infosys Consulting		2		—		4			—

15

Details of amounts due to or due from and maximum dues from subsidiaries for the quarter and nine months ended December 31, 2005 and year ended March 31, 2005:

			in Rs. crore
	As at
Particulars	December 31, 2005			March 31, 2005
Sundry Debtors
Progeon (Including Progeon s.r.o)		—			—
Infosys Australia		—			—
Infosys China		—			—
Infosys Consulting		—			—
Sundry Creditors
Progeon (Including Progeon s.r.o)		—			—
Infosys Australia		—			—
Infosys China		—			1
Infosys Consulting		—			—
Loans and advances
Progeon (Including Progeon s.r.o)		—			—
Infosys Australia		—			—
Infosys China		14			2
Infosys Consulting		—			—
Maximum balances of loans and advances
Progeon (Including Progeon s.r.o)		2			—
Infosys Australia		—			—
Infosys China		14			3
Infosys Consulting		5			1

During the quarter and nine months ended December 31, 2005, an amount of Rs. 2 crore and Rs. 9 crore respectively (for the quarter and nine months ended December 31, 2004 Rs.3 crore and Rs.11 crore respectively) has been donated to Infosys Foundation, a not-for-profit foundation, in which certain directors of the company are trustees.

22.2.8 Transactions with key management personnel

Particulars of remuneration and other benefits paid to key management personnel during the quarter and nine months ended December 31, 2005 and December 31, 2004 have been detailed in Schedule 22 since the amounts are less than a crore.

16

22.2.9 Research and development expenditure

					in Rs. crore
	Quarter ended				Nine months ended
	December 31,				December 31,
	2005		2004		2005		2004
Capital		—		—		—		—
Revenue		25		19		77		49
		25		19		77		49

22.2.10 Dues to small-scale industrial undertakings

As at December 31, 2005 and March 31, 2005, the company has no outstanding dues to small-scale industrial undertaking.

22.2.11 Stock option plans

The company has two stock option plans that are currently operational.

1998 Stock Option Plan (“the 1998 Plan”)

The 1998 Plan was approved by the board of directors in December 1997 and by the shareholders in January 1998, and is for issue of 58,80,000 ADSs representing 58,80,000 equity shares. 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						Nine months ended
	December 31,						December 31,
Number of options granted, exercised and forfeited during	2005			2004			2005			2004
Options outstanding, beginning of period		27,46,732			37,02,050			30,54,290			38,71,010
Granted		—			—			—			—
Less: exercised		(273,648	)		(287,879	)		(547,378	)		(371,647	)
forfeited		(25,420	)		(93,724	)		(59,248	)		(178,916	)
Options outstanding, end of period		24,47,664			33,20,447			24,47,664			33,20,447

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 2,64,00,000 equity shares to the employees. The compensation committee administers the 1999 Plan. Options were issued to employees at an exercise price that is not less than the fair market value.

	Quarter ended						Nine months ended
	December 31,						December 31,
Number of options granted, exercised and forfeited during	2005			2004			2005			2004
Options outstanding, beginning of period		1,21,24,188			1,65,78,897			1,40,54,937			1,83,62,120
Granted		—			—			—			—
Less: exercised		(1,592,003	)		(1,307,755	)		(3,407,236	)		(2,520,433	)
forfeited		(31,590	)		(209,672	)		(147,106	)		(780,217	)
Options outstanding, end of period		1,05,00,595			1,50,61,470			1,05,00,595			1,50,61,470

The aggregate options considered for dilution are set out in note 22.2.20

17

22.2.12 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.

Infosys now also has operations in Special Economic Zones (“SEZs”). Income from SEZs are fully tax exempt for the first 5 years, 50% exempt for the next 5 years and 50% exempt for another 5 years subject to fulfilling certain conditions.

During the nine months ended December 31, 2005, the tax authorities in an overseas tax jurisdiction completed the assessment of income upto fiscal year 2004. Based on the assessment order, management has re-estimated its tax liabilities and written back an amount of Rs. 20 crore. The tax provision for the nine months is net of the write-back.

22.2.13 Cash and bank balances

Details of balances as on balance sheet dates and the maximum balances during the period/ year with non-scheduled banks:-

				in Rs. crore
			As at
Balances with non-scheduled banks	December 31, 2005			March 31, 2005
In current accounts
ABN Amro Bank , Taipei, Taiwan		2			—
Bank of America, Palo Alto, USA		186			126
Bank of China, Beijing, China		—			—
Citibank NA, Melbourne, Australia		5			3
Citibank NA, Hong Kong		—			—
Citibank NA, Singapore		—			—
Citibank NA, Tokyo, Japan		2			2
Citibank NA, Sharjah, UAE		—			—
Deutsche Bank, Brussels, Belgium		3			1
Deutsche Bank, Frankfurt, Germany		23			6
Deutsche Bank, Amsterdam, Netherlands		1			—
Deutsche Bank, Paris, France		2			1
Deutsche Bank, Zurich, Switzerland		8			4
HSBC Bank PLC, Croydon, UK		13			5
ICICI Bank UK Ltd., London, UK		2			30
ICICI Bank — Toronto, Canada		—			2
Nordbanken, Stockholm, Sweden		—			—
Nova Scotia Bank, Toronto, Canada		—			—
Royal Bank of Canada, Toronto, Canada		9			10
UFJ Bank, Tokyo, Japan		—			—
Svenska Handels Bank, Stockholm, Sweden		—			—
		256			190

					in Rs. crore
	Quarter ended				Nine months ended
	December 31,				December 31,
Maximum balance with non-scheduled banks during the	2005		2004		2005		2004
In current accounts
ABN Amro Bank, Taipei, Taiwan		2		—		2		1
Bank of America, Palo Alto, USA		391		247		391		265
Bank of China, Beijing China		—		—		—		—
Bank of Melbourne, Melbourne, Australia		—		—		—		—
Citibank NA, Melbourne, Australia		36		75		54		75
Citibank NA, Hong Kong		—		—		—		—
Citibank NA, Singapore		—		—		—		—
Citibank NA, Tokyo, Japan		9		8		36		8
Citibank NA, Sharjah, UAE		—		—		—		—
Deutsche Bank, Brussels, Belgium		18		33		31		33
Deutsche Bank, Frankfurt, Germany		35		39		38		39
Deutsche Bank, Amsterdam, Netherlands		2		1		2		1
Deutsche Bank, Paris, France		5		4		5		4
Deutsche Bank, Zurich, Switzerland		11		5		13		8
HSBC Bank PLC, Croydon, UK		78		33		78		47
ICICI Bank UK Ltd., London, UK		17		26		35		31
ICICI Bank — Toronto, Canada		8		—		11		—
Merrill Lynch Esop A/C — Fremont, USA		—		29		—		29
Nordbanken, Stockholm, Sweden		—		—		—		—
Nova Scotia Bank, Toronto, Canada		—		1		—		6
Royal Bank of Canada, Toronto, Canada		13		15		13		13
Sanva Bank, Tokyo, Japan		—		—		—		—
Svenska Handels Bank, Stockholm, Sweden		2		2		2		3
UFJ Bank, Tokyo, Japan		—		—		28		1

The cash and bank balances include interest accrued but not due on fixed deposits amounting to Rs. 9 crore for the quarter ended December 31, 2005 (for the year ended March 31, 2004 Rs. 10 crore).

18

22.2.14 Loans and advances

“Advances” mainly comprises prepaid travel and per-diem expenses and advances to vendors.

Deposits with financial institutions:-

				in Rs. crore
			As at
	December 31, 2005			March 31, 2005
Deposits with financial institutions and body corporate:
Housing Development Finance Corporation Limited (“HDFC”)		201			202
GE Capital Services India Limited		225			—
Life Insurance Corporation of India		103			66
		529			268
Interest accrued but not due (included above)		2			1

Maximum balance held as deposits with financial institutions and body corporate:

					in Rs. crore
	Quarter ended				Nine months ended
	December 31,				December 31,
	2005		2004		2005		2004
Deposits with financial institutions and body corporate:
Housing Development Finance Corporation Limited (“HDFC”)		201		202		202		202
GE Capital Services India Limited		225		—		225		—
Life Insurance Corporation of India (“LIC”)		103		49		105		49

Mr. Deepak M. Satwalekar, Director, is also a Director of HDFC. Except as director in this financial institution, he has no direct interest in any transactions.

Deposit with LIC represents amount deposited to settle employee benefit/ leave obligations as and when they arise during the normal course of business.

22.2.15 Fixed assets

Profit / (loss) on disposal of fixed assets

					in Rs. crore
	Quarter ended				Nine months ended
	December 31,				December 31,
	2005		2004		2005		2004
Profit on disposal of fixed assets, included in miscellaneous income		—		—		—		—
(Loss) on disposal of fixed assets, included in miscellaneous expenses		—		—		—		—
Profit / (loss) on disposal of fixed assets, net		—		—		—		—

Depreciation charged to the profit and loss account relating to assets costing less than Rs. 5,000/- each

					in Rs. crore
	Quarter ended				Nine months ended
	December 31,				December 31,
	2005		2004		2005		2004
Charged during the period		17		11		27		15

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 100% 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 December 31, 2005.

19

22.2.16 Details of Investments

	in Rs. crore
	As at
	December 31, 2005		March 31, 2005
Long — term investments
CiDRA Corporation, USA
14,124 (12,752) Series D convertible preferred stock at US$ 90 each, fully paid, par value US$ 0.01 each		5		5	*
72,539 (72,539) Class A common stock, par value US$ 0.001 each		—		—
2,139 (2,139) Non voting redeemable preferred stock, par value US$ 0.01 each		—		—
CyVera Corporation, USA
Nil (25,641) , Series A preferred stock par value US$ 0.001		—		—
OnMobile Systems Inc., (formerly Onscan Inc.) USA
1,00,000 (1,00,000) common stock at US$ 0.4348 each, fully paid, par value US$ 0.001 each		—		—	*
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		—		—	*
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		9		9	*
M-Commerce Ventures Pte Ltd, Singapore
100 (100) ordinary shares of Singapore $ 1 each, fully paid, par value Singapore $ 1 each		—		—
684 (684) redeemable preference shares of Singapore $ 1, fully paid, at a premium of Singapore $ 1,110 per redeemable preferred stock		2		2
216 (216) redeemable preference shares of Singapore $ 1, fully paid, par value Singapore $ 1 each		—		—
Software Services Support Education Center Limited
Nil (1) equity share of Rs. 10 each, fully paid, par value Rs. 10 Illumina Inc.		—		—
758 (nil) common stock at USD 0.01 per share		—		—
The Saraswat Co-operative Bank Limited, India
Nil (1,035) equity shares of Rs. 10 each, fully paid, par value Rs. 10		—		—
Less: Provision for investment		16		16
		14		14
		2		2

* Investments that are provided for in whole

Current investments — Liquid Mutual

					in Rs. crore
	Number of units as at				Amount As at
	December 31, 2005		March 31, 2005		December 31, 2005		March 31, 2005
ABN Amro Cash Fund		74,929,549		—		75		—
Birla Cash Plus Institutional Premium Fund		99,477,727		9,24,76,122		100		100
CanLiquid Institutional Fund		59,728,831		—		60		—
Chola Liquid Fund Institutional Plus		46,308,937		—		54		—
Deutsche Bank Insta-Cash Plus Fund		63,903,437		4,99,57,408		64		50
DSP Merrill Lynch Liquidity Fund		50,041,448		6,05,17,461		62		75
Grindlays Cash Fund — Super Institutional Plan C		149,905,772		7,07,47,373		150		75
HDFC Liquid Fund — Premium Plus		100,017,948		8,36,11,057		120		100
HSBC Cash Fund — Institutional Plus		99,631,222		7,48,98,088		100		75
ING Vysya Liquid Fund — Super Institutional		78,874,225		—		79		—
JM High Liquidity Fund		95,896,031		7,69,31,305		96		77
Kotak Liquid — Institutional Premium		149,536,869		8,97,41,740		150		90
Principal Cash Management Fund		134,907,037		5,49,75,911		135		55
Prudential ICICI Liquid Plan — Institutional Plus		83,710,163		8,37,14,699		100		100
Reliance Liquid Fund Treasury Plan — Institutional Option		93,770,153		5,30,22,669		96		86
SBI Magnum Institutional Income — Savings		118,938,888		2,38,20,119		125		25
Sundaram Money Fund — Institutional		29,683,288		—		30		—
Templeton India Treasury Management Account		1,200,444		9,49,782		120		95
UTI Liquid Cash Plan — Institutional		1,477,424		4,94,901		150		50
TLSM Tata Liquid Super High Inv Fund		1,331,587		6,24,358		150		70
LICMF Liquid Fund — Dividend Plan		101,119,288		4,15,28,325		110		45
						2,126		1,168
At cost						1,626		733
At fair value						500		435
						2,126		1,168

20

Details of investments in and disposal of securities during the quarter and nine Months ended December 31, 2005 and 2004:-

						in Rs. crore
	Quarter ended					Nine months ended
	December 31,					December 31,
	2005			2004		2005		2004
Investment in securities
Subsidiaries		—			23		22		63
Long-term investments		—			—		—		—
Liquid Mutual funds		191			90		1,749		205
		191			113		1,771		268
Redemption / Disposal of Investment in securities
Subsidiaries		—			—		—		—
Long-term investments		—			—		—		—
Liquid Mutual funds		321			—		791		117
		321			—		791		117
Net movement in investments		(130	)		113		980		151

Investment purchased and sold during the nine Months ended December 31, 2005:-

					in Rs. crore
Name of the fund	Face value Rs /-		Units			Cost
Birla Cash Plus Institutional Premium Fund		10		49,680,060			50
Templeton India Treasury Management Account		1000		1,198,981			120
HSBC Cash Fund — Institutional Plus		10		49,782,946			50
Prudential ICICI Liquid Plan — Institutional Plus		10		41,766,209			50
ING Vysya Liquid Fund — Super Institutional		10		34,862,988			35

Particulars of investments made during the quarter and nine Months ended December 31, 2005 and 2004:-

					in Rs. crore
	Quarter ended				Nine months
	December 31,				December 31,
Particulars of investee companies	2005		2004		2005		2004
Progeon, India		—		—		—		—
Infosys China		—		—		—		18
Infosys Australia		—		—		—		—
Infosys Consulting		—		23		22		45
M-Commerce Ventures Pte. Limited, Singapore		—		—		—		—
		—		23		22		63

Conversion of Cumulative Preference shares in Progeon

Progeon had issued an aggregate of 87,50,000 0.005% Cumulative Convertible Preference shares of par value Rs. 100 each to Citicorp International Finance Corporation(“CIFC”) for an aggregate consideration of Rs. 94 crore as per the shareholder’s agreement as of March 31, 2005. Each preference share was convertible to one equity share of par value Rs. 10/-. On June 30, 2005 CIFC exercised its rights under the shareholder’s agreement and converted the preference shares to equity shares. Pursuant to the conversion, the equity share capital of Progeon increased by Rs 9 crore to Rs 33 crore and the share premium increased by Rs. 79 crore to Rs. 85 crore. As of December 31, 2005, Infosys’ equity holding in Progeon was 72.05%.

21

22.2.17 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 December 31, 2005 and 2004 :-

											in Rs. crore
	Financial
	services		Manufacturing		Telecom		Retail		Others			Total
Revenues		848		349		362		257		582			2,398
		626		265		318		176		413			1,798
Identifiable operating expenses		362		154		144		103		235			998
		253		115		147		71		166			752
Allocated expenses		201		82		85		61		138			567
		151		64		77		43		100			435
Segmental operating income		285		113		133		93		209			833
		222		86		94		62		147			611
Unallocable expenses													109
													69
Operating income													724
													542
Other income (expense), net													(2	)
													47
Net profit before taxes													722
													589
Income taxes													80
													93
Net profit after taxes													642
													496

Nine months ended December 31, 2005 and 2004:-

											in Rs. crore
	Financial
	services		Manufacturing		Telecom		Retail		Others			Total
Revenues		2,313		924		1,028		692		1,578			6,535
		1,700		751		878		515		1,115			4,959
Identifiable operating expenses		979		414		421		285		666			2,765
		710		328		424		199		461			2,122
Allocated expenses		563		223		248		168		384			1,586
		403		178		208		122		264			1,175
Segmental operating income		771		287		359		239		528			2,184
		587		245		246		194		390			1,662
Unallocable expenses													274
													175
Operating income													1,910
													1,487
Other income (expense), net													73
													95
Net profit before taxes													1,983
													1,582
Income taxes													226
													237
Net profit after taxes													1,757
													1,345

22

Geographic segments
Quarter ended December 31, 2005 and 2004 :-

in Rs. crore
							Rest of the
	North America		Europe		India		World		Total
Revenues		1,577		590		35		196		2,398
		1,206		399		40		153		1,798
Identifiable operating expenses		663		223		18		94		998
		486		157		11		98		752
Allocated expenses		373		140		8		46		567
		292		96		10		37		435
Segmental operating income		541		227		9		56		833
		428		146		19		18		611
Unallocable expenses										109
										69
Operating income										724
										542
Other income (expense), net										(2	)
										47
Net profit before taxes										722
										589
Income taxes										80
										93
Net profit after taxes										642
										496

Nine months ended December 31, 2005 and 2004:-

in Rs. crore
							Rest of the
	North America		Europe		India		World		Total
Revenues		4,280		1,565		117		573		6,535
		3,285		1,085		94		495		4,959
Identifiable operating expenses		1,818		612		56		279		2,765
		1,365		432		26		299		2,122
Allocated expenses		1,039		380		28		139		1,586
		779		257		22		117		1,175
Segmental operating income		1,423		573		33		155		2,184
		1,141		396		46		79		1,662
Unallocable expenses										274
										175
Operating income										1,910
										1,487
Other income (expense), net										73
										95
Net profit before taxes										1,983
										1,582
Income taxes										226
										237
Net profit after taxes										1,757
										1,345

23

22.2.18 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 affect 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 December 31, 2005 the company has provided for doubtful debts of Rs. 1 crore (as at March 31, 2005 Rs 8 crore) 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 pursues the recovery of the dues, in part or full.

22.2.19 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 depository bank, which is the registered shareholder on record for all owners of the company’s ADSs. The depositary bank purchases the foreign currencies and remits dividends to the ADS holders.

Particulars of dividends remitted:-

in Rs. crore
	Number of shares		Quarter ended				Nine months ended
	to which the		December 31,				December 31,
Particulars	dividends relate		2005		2004		2005		2004
Final and one-time special dividend for Fiscal 2004		52,92,612		—		—		—		61
Interim dividend for fiscal 2006		3,80,51,211		25		—		—		—
Final dividend for fiscal 2005		3,77,66,327		—		—		25		—

22.2.20 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				Nine months ended
		December 31,				December 31,
	2005		2004		2005		2004
Number of shares considered as basic weighted average shares outstanding		27,37,71,476		26,87,73,742		27,22,89,379		26,78,62,078
Add: Effect of dilutive issues of shares/stock options		78,33,477		83,36,718		79,54,117		59,08,614
Number of shares considered as weighted average shares and potential shares outstanding		28,16,04,953		27,71,10,460		28,02,43,496		27,37,70,692

22.2.21 Cash flow statement

The balance of cash and cash equivalents includes Rs. 4 crore as at December 31, 2005 (Rs.3 crore for the year ended March 31, 2005), set aside for payment of dividends.

24

22.3 Details of rounded off amounts

The financial statements are represented in Rs. crore as per the approval received from Department of Company Affairs “DCA” earlier. Those items which were not represented in the financial statement due to rounding off to the nearest Rs. crore are given below.

          Balance Sheet Items

in Rs. crore
Schedule		Description	December 31, 2005		As at	March 31, 2005
	3	Fixed assets
		Additions
		Vehicles		0.52			—
		Land: free-hold		0.01			—
		Deductions/retirements
		Plant and machinery		0.14			—
		Depreciation & Amortization
		Vehicles		0.13			0.28
	8	Unsecured, Considered doubtful
		Loans and advances to employees		0.40			0.23
	8	Provision for doubtful loans and advances to employees		0.40			0.23
	22.2.6	Computers
		- Net Book Value		—			0.05
	22.2.7	Maximum balances of loans and advances
	22.2.7	- Progeon		2.36			0.45
		Balances with non-scheduled banks
	22.2.13	- ABN Amro Bank , Taipei, Taiwan		1.61			0.02
		- Bank of China, Beijing, China		0.03			0.02
		- Citibank NA, Hong Kong		0.26			—
		- Citibank NA, Singapore		0.22			0.35
		- Citibank NA, Sharjah, UAE		0.04			0.03
		- Deutsche Bank, Amsterdam, Netherlands		1.30			0.15
		- Nordbanken, Stockholm, Sweden		0.02			0.12
		- UFJ Bank, Tokyo, Japan		0.05			0.32
		- Svenska Handels Bank, Stockholm, Sweden		0.42			0.35
	22.2.16	Long- term investments
		- OnMobile Systems Inc., (formerly Onscan Inc.) USA
		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
		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

                         Profit & Loss Items

in Rs. crore
			Quarter ended						Nine months ended
			December 31,						December 31,
Schedule		Description	2005			2004			2005			2004
Profit & Loss account
		Provision for investments		(0.27	)		(0.39	)		0.30			(0.33	)
		Residual Dividend Paid		—			—			0.25			2.32
		Additional Dividend Tax		—			—			0.03			2.27
	12	Selling & Marketing expenses
		Contribution to Provident and other funds		0.32			0.53			0.79			1.24
		Staff welfare		0.49			0.08			0.90			0.28
		Consumables		0.06			0.03			0.19			0.15
		Software packages for own use		—			—			0.06			0.01
		Communication expenses		0.20			0.02			0.46			0.04
		Printing and stationery		0.28			0.27			1.20			0.80
		Advertisements		0.30			0.45			1.10			0.76
		Office maintenance		0.03			0.05			0.32			0.18
		Insurance charges		0.02			0.11			0.02			0.16
		Rates and taxes		—			—			—			0.03
		Sales promotion expenses		0.32			0.27			0.77			0.67
	13	General and Administration expenses
		Provision for doubtful loans and advances		0.26			0.04			0.37			0.15
		Commission to non-whole time directors		0.33			0.38			0.96			1.16
		Freight charges		0.15			0.20			0.56			0.57
		Bank charges and commission		0.28			0.28			0.84			0.85
		Research grants		0.35			0.24			0.56			0.43
		Auditor’s remuneration — statutory audit fees		0.15			0.09			0.33			0.27
		Others		—			0.07			—			0.07
		Out of Pocket Expenses		0.01			0.01			0.02			0.02
	14	Provision for taxation
		Deferred taxes		(5.96	)		0.49			(11.79	)		0.35

25

in Rs. crore
			Quarter ended						Nine months ended
			December 31,						December 31,
Schedule		Description	2005			2004			2005			2004
	22.2.1	Aggregate expenses
		Provision for doubtful loans and advances		0.26			0.04			0.37			0.15
		Commission to non-whole time directors		0.33			0.38			0.96			1.16
		Sales promotion expenses		0.32			0.27			0.77			0.67
		Freight charges		0.15			0.20			0.56			0.57
		Bank charges and commission		0.28			0.28			0.84			0.85
		Auditor’s remuneration — audit fees		0.15			0.09			0.33			0.27
		— Others		—			0.07			—			0.07
		— out-of-pocket expenses		0.01			0.01			0.02			0.02
		Research grants		0.35			0.24			0.56			0.43
	22.2.5	Activity in foreign currency
		Interest received on deposits with banks		2.00			0.27			4.00			1.00
	22.2.7	Related party transactions
		Revenue transactions:
		Progeon (Including Progeon s.r.o)
		Purchase of services		0.69			0.33			1.66			0.63
		Purchase of shared services including facilities and personnel		0.47			0.18			1.23			0.28
		Sale of services		—			0.04			—			0.12
	22.2.9	Research and development expenditure
		Capital Expenditure		0.16			—			0.16			—
	22.2.13	Maximum balance with non-scheduled banks during the period/ year
		- ABN Amro Bank, Taipei, Taiwan		1.61			0.04			1.61			0.96
		- Bank of China, Beijing China		0.04			0.07			0.07			0.08
		- Bank of Melbourne, Melbourne, Australia		—			—			—			0.23
		- Citibank NA, Hong Kong		0.47			0.18			0.47			0.18
		- Citibank NA, Singapore		0.25			0.43			0.37			0.48
		- Citibank NA, Sharjah, UAE		0.16			0.09			0.16			0.16
		- Deutsche Bank, Amsterdam, Netherlands		2.09			1.00			2.09			1.00
		- Nordbanken, Stockholm, Sweden		0.12			—			0.12			—
		- UFJ Bank, Tokyo, Japan		0.72			—			28.15			1.00
		- Sanwa Bank, Tokyo, Japan		—			0.02			—			—
	22.2.15	Profit / (loss) on disposal of fixed assets
		- Profit on disposal of fixed assets, included in miscellaneous income		0.11			0.01			0.34			0.17
		- (Loss) on disposal of fixed assets		(0.25	)		(0.01	)		(0.28	)		(0.05	)
		- Profit/(Loss) on disposal of fixed assets, net		(0.14	)		—			0.06			0.12

                            Cash Flow Statement Items

in Rs. crore
				For the Period Ended
Schedule		Description	December 31, 2005				December 31, 2004
Cash flow statement		(Profit)/ loss on sale of fixed assets			(0.14	)		(0.12	)
		Proceeds on disposal of fixed assets			(0.14	)		0.34
	18	Increase/(Decrease) in deferred taxes			(11.79	)		(0.35	)
	20	Provision for investments			0.30			(0.33	)

26

Transactions with key management personnel

Key management personnel comprise our directors and statutory officers.

Particulars of remuneration and other benefits paid to key management personnel during the quarter and nine Months ended December 31, 2005 and December 31,2004

						in Rs. crore
		Contributions
		to provident		Perquisites		Total
Name	Salary	and other funds		and incentives		Remuneration
Chairman and Chief Mentor
N R Narayana Murthy	0.03		0.01		0.06		0.10
	0.03		0.01		0.06		0.10
	0.09		0.03		0.17		0.29
	0.09		0.03		0.13		0.25
Chief Executive Officer, President and Managing Director
Nandan M Nilekani	0.03		0.01		0.06		0.10
	0.03		0.01		0.06		0.10
	0.09		0.03		0.16		0.28
	0.09		0.03		0.13		0.25
Chief Operating Officer and Deputy Managing Director
S Gopalakrishnan	0.03		0.01		0.06		0.10
	0.03		0.01		0.06		0.10
	0.09		0.03		0.17		0.29
	0.09		0.04		0.12		0.25
Whole-time Directors
K Dinesh	0.03		0.01		0.06		0.10
	0.03		0.01		0.06		0.10
	0.09		0.03		0.15		0.27
	0.09		0.03		0.12		0.24
S D Shibulal	0.23		—		0.07		0.30
	0.21		—		0.14		0.35
	0.68		—		0.21		0.89
	0.62		—		0.25		0.87
T V Mohandas Pai	0.05		0.02		0.11		0.18
	0.04		0.01		0.14		0.19
	0.15		0.06		0.34		0.55
	0.13		0.04		0.28		0.45
Srinath Batni	0.04		0.02		0.11		0.17
	0.04		0.01		0.13		0.18
	0.13		0.05		0.30		0.48
	0.12		0.04		0.25		0.41
Other Senior Management Personnel
V Balakrishnan	0.03		0.01		0.09		0.13
	0.03		0.01		0.13		0.17
	0.09		0.03		0.31		0.43
	0.09		0.03		0.31		0.43

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

27

EX-99.13

Exhibit 99.13

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 31 December 2005, the consolidated profit and loss account for the quarter and nine months ended on that date and the consolidated cash flow statement for the nine months 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 31 December 2005;
(b)	in the case of the consolidated profit and loss account, of the profit of the Infosys Group for the quarter and nine months 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 nine months ended on that date.

for BSR & Co.
Chartered Accountants

Subramanian Suresh
Partner
Membership No. 83673

Bangalore
11 January 2006

CONSOLIDATED FINANCIAL STATEMENTS OF INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES

in Rs. crore
Consolidated Balance Sheet as at	Schedule		December 31, 2005		March 31, 2005
SOURCES OF FUNDS
SHAREHOLDERS’ FUNDS
Share capital		1		137		135
Reserves and surplus		2		7,175		5,090
				7,312		5,225
MINORITY INTEREST				60		—
PREFERENCE SHARES ISSUED BY SUBSIDIARY*		3		—		94
				7,372		5,319
APPLICATION OF FUNDS
FIXED ASSETS		4
Original cost				2,958		2,287
Less: Depreciation and amortization				1,309		1,031
Net book value				1,649		1,256
Add: Capital work-in-progress				447		318
				2,096		1,574
INVESTMENTS		5		2,205		1,211
DEFERRED TAX ASSETS		6		57		45
CURRENT ASSETS, LOANS AND ADVANCES
Sundry debtors		7		1,394		1,322
Cash and bank balances		8		1,694		1,576
Loans and advances		9		1,496		1,023
				4,584		3,921
LESS: CURRENT LIABILITIES AND PROVISIONS
Current liabilities		10		849		656
Provisions		11		721		776
NET CURRENT ASSETS				3,014		2,489
				7,372		5,319
SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS		23

^* refer to note 23.2.16

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

As per our report attached

for BSR & 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	David L. Boyles	K. Dinesh
	Director	Director	Director	Director
	S. D. Shibulal	T. V. Mohandas Pai	Srinath Batni	V. Balakrishnan
Bangalore	Director	Director and	Director	Company Secretary and
January 11, 2006		Chief Financial Officer		Senior Vice President — Finance

1

CONSOLIDATED FINANCIAL STATEMENTS OF INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES

in Rs. crore, except per share data
Consolidated Profit and Loss Account for the	Schedule		Quarter ended					Nine months ended
			December 31,					December 31,
			2005			2004		2005		2004
Income from software services, products and business process management				2,532			1,876		6,897		5,142
Software development and business process management expenses		12		1,327			992		3,644		2,723
GROSS PROFIT				1,205			884		3,253		2,419
Selling and marketing expenses		13		158			117		448		344
General and administration expenses		14		186			149		547		407
				344			266		995		751
OPERATING PROFIT BEFORE INTEREST, DEPRECIATION, AMORTIZATION, MINORITY INTEREST				861			618		2,258		1,668
Interest `				—			—		—		—
Depreciation and amortization				117			74		293		187
OPERATING PROFIT BEFORE TAX AND MINORITY INTEREST				744			544		1,965		1,481
Other income		15		(5	)		46		68		92
Provision for investments				—			—		1		—
NET PROFIT BEFORE TAX, MINORITY INTEREST				739			590		2,032		1,573
Provision for taxation		16		83			93		233		240
NET PROFIT AFTER TAX AND BEFORE MINORITY INTEREST				656			497		1,799		1,333
Minority interest				7			—		13		—
NET PROFIT AFTER TAX AND MINORITY INTEREST				649			497		1,786		1,333
Balance Brought Forward				2,350			751		1,415		70
Less: Residual dividend paid				—			—		—		2
Additional dividend tax				—			—		—		2
				2,350			751		1,415		66
AMOUNT AVAILABLE FOR APPROPRIATION				2,999			1,248		3,201		1,399
Dividend
Interim				—			—		177		134
Final				—			—		—		—
Total dividend				—			—		177		134
Dividend tax				—			—		25		17
Balance in profit and loss account				2,999			1,248		2,999		1,248
				2,999			1,248		3,201		1,399
EARNINGS PER SHARE *
Equity shares of par value Rs. 5/- each
Basic				23.68			18.50		65.59		49.77
Diluted				23.02			17.95		63.73		48.69
Number of shares used in computing earnings per share
Basic				27,37,71,476			26,87,73,742		27,22,89,379		26,78,62,078
Diluted				28,16,04,953			27,71,10,460		28,02,43,496		27,37,70,692
SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS		23

^* refer to note 23.2.17

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

As per our report attached

for BSR & 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	David L. Boyles	K. Dinesh
	Director	Director	Director	Director
	S. D. Shibulal	T. V. Mohandas Pai	Srinath Batni	V. Balakrishnan
Bangalore	Director	Director and	Director	Company Secretary and
January 11, 2006		Chief Financial Officer		Senior Vice President — Finance

2

CONSOLIDATED FINANCIAL STATEMENTS OF INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES

in Rs. crore
Consolidated Cash Flow Statement for the	Schedule		Nine months ended
				December 31,
			2005			2004
CASH FLOWS FROM OPERATING ACTIVITIES
Net profit before tax				2,032			1,573
Adjustments to reconcile net profit before tax to cash provided by operating activities (Profit)/ loss on sale of fixed assets				—			—
Depreciation and amortization				293			187
Interest and dividend income				(133	)		(78	)
Provisions for investments				1			—
Effect of exchange differences on translation of foreign currency cash and cash equivalents				(3	)		(9	)
Changes in current assets and liabilities
Sundry debtors				(72	)		(387	)
Loans and advances		17		(59	)		(89	)
Current liabilities and provisions		18		176			81
Income taxes paid during the period		19		(257	)		(193	)
NET CASH GENERATED BY OPERATING ACTIVITIES				1,978			1,085
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of fixed assets and change in capital work-in-progress		20		(815	)		(587	)
Proceeds on disposal of fixed assets				—			—
Investments in securities		21		(995	)		(111	)
Interest and dividend income				133			78
NET CASH USED IN INVESTING ACTIVITIES				(1,677	)		(620	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issue of preference share capital				—			—
Proceeds from issuance of share capital on exercise of stock options				453			301
Dividends paid during the period, including dividend tax				(403	)		(1,020	)
NET CASH USED IN FINANCING ACTIVITIES				50			(719	)
Effect of exchange differences on translation of foreign currency cash and cash equivalents				4			8
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS				355			(246	)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD				1,790			1,929
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD		22		2,145			1,683
SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS		23

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

As per our report attached

for BSR & 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	David L. Boyles	K. Dinesh
	Director	Director	Director	Director
	S. D. Shibulal	T. V. Mohandas Pai	Srinath Batni	V. Balakrishnan
Bangalore	Director	Director and Chief Financial Officer	Director	Company Secretary and
January 11, 2006				Senior Vice President — Finance

3

CONSOLIDATED FINANCIAL STATEMENTS OF INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES

in Rs. Crore except per share data
Schedules to the Consolidated Balance Sheet as at	December 31, 2005		March 31, 2005
1 SHARE CAPITAL
Authorized
Equity shares, Rs. 5/- par value 30,00,00,000 (30,00,00,000) equity shares		150		150
Issued, Subscribed and Paid Up
Equity shares, Rs. 5/- par value*		137		135
27,45,25,163 (27,05,70,549) equity shares fully paid up
[Of the above, 25,84,92,302 (25,84,92,302) equity shares fully paid up have been issued as bonus shares by capitalization of the general reserve]
		137		135
Forfeited shares amounted to Rs. 1,500/- (Rs 1,500/-)
* For details of options in respect of equity shares, refer to note 23.2.7
* Refer to note 23.2.17 for details of basic and diluted shares
2 RESERVES AND SURPLUS
Capital reserve		6		6
Capital reserve on consolidation		49		—
Share premium account — As at April 1,		900		461
Add: Receipts on exercise of stock options issued to employees		451		439
		1,351		900
Foreign currency translation adjustment		—		(1	)
General reserve — As at April 1,		2,770		2,680
Less: Capitalized for issue of bonus shares		—		100
Add: Transfer from the Profit and Loss Account		—		190
		2,770		2,770
Balance in Profit and Loss Account		2,999		1,415
		7,175		5,090
3 PREFERENCE SHARES ISSUED BY SUBSIDIARY
Authorized
0.0005% Cumulative convertible preference shares, Rs. 100/- par value
Nil (87,50,000) preference shares		—		88
Issued, Subscribed and Paid Up
0.0005% Cumulative convertible preference shares, Rs. 100/- par value
nil (87,50,000) preference shares fully paid up*		—		88
Premium received on issue of preference shares		—		6
		—		94

^* Refer to note 23.2.16

4

CONSOLIDATED FINANCIAL STATEMENTS OF INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES

Schedules to the Consolidated Balance Sheet

4 FIXED ASSETS	in Rs. Crore except as otherwise stated
Particulars	Original cost								Depreciation and amortization								Net book value
	As at April 1,				Deletions/		As at December		As at April 1,		For the		Deletions/		As at December		As at		As at
	2005		Additions		Retirement		31, 2005		2005		period		Retirement		31, 2005		December 31, 2005		March 31, 2005
Goodwill		41		—		—		41		—		—		—		—		41		41
Land: free-hold		30		—		—		30		—		—		—		—		30		30
leasehold		90		11		—		101		—		—		—		—		101		90
Buildings		731		264		—		995		119		44		—		163		832		612
Plant and machinery		395		157		—		552		218		66		—		284		268		177
Computer equipment		610		164		7		767		446		126		7		565		202		164
Furniture and fixtures		341		85		8		418		205		55		8		252		166		136
Leasehold improvements		6		4		—		10		1		2		—		3		7		5
Vehicles		1		1		—		2		—		—		—		—		2		1
Intangible assets
Intellectual property rights		42		—		—		42		42		—		—		42		—		—
		2,287		686		15		2,958		1,031		293		15		1,309		1,649		1,256
Previous year		1,634		728		75		2,287		810		288		67		1,031

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

5

CONSOLIDATED FINANCIAL STATEMENTS OF INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES

in Rs. crore
Schedules to the Consolidated Balance Sheet as at	December 31, 2005		March 31, 2005
5 INVESTMENTS
Trade (unquoted) — at cost
Long-term investments		16		16
Less: Provision made for investments		14		14
		2		2
Non-trade (unquoted), current investments, at the lower of cost and fair value
Liquid mutual funds		2,203		1,209
		2,205		1,211
Aggregate amount of unquoted investments		2,205		1,211
6 DEFERRED TAX ASSETS
Fixed assets		47		33
Sundry debtors		1		3
Leave provisions and others		9		9
		57		45
7 SUNDRY DEBTORS
Debts outstanding for a period exceeding six months
Unsecured
considered good		—		—
considered doubtful		9		11
Other debts
Unsecured
considered good*		1,394		1,322
considered doubtful		1		8
		1,404		1,341
Less: Provision for doubtful debts		10		19
		1,394		1,322
* Includes dues from companies where directors are interested		—		—
8 CASH AND BANK BALANCES
Cash on hand		—		—
Balances with scheduled banks
In current accounts *		137		83
In deposit accounts in Indian Rupees		1,279		1,250
Balances with non-scheduled banks
In deposit accounts in foreign currency		—		26
In current accounts in foreign currency		278		217
		1,694		1,576
*includes balance in unclaimed dividend account		4		3

6

CONSOLIDATED FINANCIAL STATEMENTS OF INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES

in Rs. crore
Schedules to the Consolidated Balance Sheet as at	December 31, 2005		March 31, 2005
9 LOANS AND ADVANCES
Unsecured, considered good
Advances
prepaid expenses		20		36
for supply of goods and rendering of services		11		2
advance to gratuity trust		27		—
others		3		16
		61		54
Unbilled revenues		158		141
Advance income tax		579		404
Loans and advances to employees *
housing and other loans		49		58
salary advances		51		43
Electricity and other deposits		16		17
Rental deposits		15		15
Deposits with financial institutions and body corporate (refer note 23.2.9)		554		280
Deposits with government authorities		—		—
Mark to Market on options/due on forward contracts		—		10
Other assets		13		1
		1,496		1,023
Unsecured, considered doubtful
Loans and advances to employees		—		—
		1,496		1,023
Less: Provision for doubtful loans and advances to employees		—		—
		1,496		1,023
*includes dues by non-director officers of the company		—		—
Maximum amounts due by non-director officers at any time during the period/ year		—		—
10 CURRENT LIABILITIES
Sundry creditors
capital goods		—		1
goods and services		6		4
accrued salaries and benefits
salaries		6		15
bonus and incentives		186		199
unavailed leave		87		77
for other liabilities accrual for expenses		207		141
retention monies		13		14
withholding and other taxes payable		102		60
for purchase of intellectual property rights		20		19
others		3		5
		630		535
Advances received from clients		13		29
Unearned revenue		190		89
Unclaimed dividend		4		3
Mark to Market on options/due on forward contracts		12		—
		849		656
11 PROVISIONS
Proposed dividend		—		176
Provision for
tax on dividend		—		25
income taxes*		709		546
post-sales client support and warranties		12		29
		721		776
* refer to note 23.2.8.

7

CONSOLIDATED FINANCIAL STATEMENTS OF INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES

in Rs. crore
Schedules to Consolidated Profit and Loss Account for the	Quarter ended						Nine months ended
	December 31,						December 31,
	2005			2004			2005			2004
12 SOFTWARE DEVELOPMENT AND BUSINESS PROCESS MANAGEMENT EXPENSES
Salaries and bonus including overseas staff expenses		1,105			815			2,963			2,203
Contribution to provident and other funds		24			21			67			57
Staff welfare		10			8			24			16
Overseas travel expenses		78			56			258			186
Traveling and conveyance		—			3			—			6
Technical sub-contractors		40			34			111			72
Software packages
for own use		35			32			102			82
for service delivery to clients		6			4			25			14
Communication expenses		14			13			46			40
Rent		7			4			19			8
Computer maintenance		7			4			15			12
Consumables		4			3			12			11
Provision for post-sales client support and warranties		(9	)		(6	)		(15	)		13
Miscellaneous expenses		6			1			17			3
		1,327			992			3,644			2,723
13 SELLING AND MARKETING EXPENSES
Salaries and bonus including overseas staff expenses		96			70			271			207
Contribution to provident and other funds		1			1			1			1
Staff welfare		1			—			1			—
Overseas travel expenses		18			14			56			41
Traveling and conveyance		2			4			3			10
Brand building		14			8			37			27
Commission and earnout charges		11			7			28			15
Professional charges		5			5			20			14
Rent		4			3			12			9
Marketing expenses		3			2			9			8
Telephone charges		2			1			4			4
Communication Expenses		—			—			1			—
Printing and stationery		—			—			1			1
Advertisements		—			1			1			2
Sales promotion expenses		—			—			1			1
Office maintenance		—			—			—			1
Insurance charges		—			—			—			—
Consumables		—			—			—			—
Software packages
for own use		—			—			—			—
Computer maintenance		—			—			—			—
Rates and taxes		—			—			—			—
Miscellaneous expenses		1			1			2			3
		158			117			448			344

8

CONSOLIDATED FINANCIAL STATEMENTS OF INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES

in Rs. crore
Schedules to Consolidated Profit and Loss Account for the	Quarter ended					Nine months ended
	December 31,					December 31,
	2005			2004		2005			2004
14 GENERAL AND ADMINISTRATION EXPENSES
Salaries and bonus including overseas staff expenses		43			36		122			91
Contribution to provident and other funds		2			2		6			6
Staff welfare		1			—		1			1
Telephone charges		20			12		60			35
Professional charges		27			20		70			51
Power and fuel		17			11		49			31
Office maintenance		20			11		53			30
Traveling and conveyance		17			9		47			27
Overseas travel expenses		5			3		16			8
Insurance charges		6			7		18			23
Printing and stationery		3			3		9			8
Rates and taxes		3			2		9			7
Donations		4			8		13			17
Rent		2			4		8			14
Advertisements		3			3		10			7
Professional membership and seminar participation fees		2			2		7			5
Repairs to building		3			3		11			7
Repairs to plant and machinery		3			2		8			5
Postage and courier		1			1		4			4
Books and periodicals		1			1		3			2
Recruitment and training		2			1		5			2
Provision for bad and doubtful debts		(4	)		6		6			17
Provision for doubtful loans and advances		—			—		—			—
Commission to non-whole time directors		—			—		1			1
Auditor’s remuneration
statutory audit fees		—			—		1			1
certification charges		—			—		—			—
others		—			—		—			—
out-of-pocket expenses		—			—		—			—
Bank charges and commission		1			—		1			1
Freight charges		—			—		1			1
Research grants		1			—		1			—
Software packages
for own use		1			—		1			1
Miscellaneous expenses		2			2		6			4
		186			149		547			407
15 OTHER INCOME
Interest received on deposits with banks and others*		27			16		76			51
Dividend received on investment in liquid mutual funds (non-trade unquoted)		25			9		57			27
Miscellaneous income, net (refer to note 23.2.10)		1			—		3			1
Exchange differences		(58	)		21		(68	)		13
		(5	)		46		68			92
*Tax deducted at source		4			2		14			9
16 PROVISION FOR TAXATION
Income taxes*		81			93		245			245
Deferred taxes		2			—		(12	)		(5	)
		83			93		233			240
* refer to note 23.2.8.

9

CONSOLIDATED FINANCIAL STATEMENTS OF INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES

in Rs. crore
Schedules to Consolidated Cashflow Statements for the	Nine months ended
	December 31,
	2005			2004
17 CHANGE IN LOANS AND ADVANCES
As per the Balance Sheet		1,496			946
Less: Deposits with financial institutions and body corporate,
included in cash and cash equivalents		(451	)		(213	)
Advance income taxes separately considered		(579	)		(341	)
		466			392
Less: Opening balance considered		(407	)		(303	)
		59			89
18 CHANGE IN CURRENT LIABILITIES AND PROVISIONS
As per the Balance Sheet		1,570			1,165
Add/ (Less): Provisions separately considered in the cash flow statement
Income taxes		(709	)		(497	)
Dividends		—			—
Dividend tax		—			—
		861			668
Less: Opening balance considered		(685	)		(587	)
		176			81
19 INCOME TAXES PAID
Charge as per the Profit and Loss Account		233			240
Add:  Increase in advance income taxes		175			131
Increase / (Decrease) in deferred taxes		12			3
Less: (Increase) / Decrease in income tax provision		(163	)		(181	)
		257			193
20 PURCHASE OF FIXED ASSETS AND CHANGE IN CAPITAL WORK-IN-PROGRESS
As per the schedule 4 to Balance Sheet		686			581
Less: Opening Capital work-in-progress		(318	)		(208	)
Add: Closing Capital work-in-progress		447			214
		815			587
21 INVESTMENTS IN SECURITIES *
As per the Balance Sheet		2,205			1,057
Add: Provisions made on investments		1			—
		2,206			1,057
Less: Opening balance considered		(1,211	)		(946	)
		995			111
* refer to note 23.2.11 for details of investments and redemptions
22 CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD
As per the Balance Sheet		1,694			1,470
Add: Deposits with financial institutions, included herein		451			213
		2,145			1,683

10

CONSOLIDATED FINANCIAL STATEMENTS OF INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES

Schedules to the Consolidated Financial Statements for the quarter ended December 31, 2005

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 technology services organisation. The group of companies (“the Group”) provide end-to-end business solutions that leverage technology thus enabling its clients to enhance business performance. The Group’s operations are to provide solutions that span the entire software life cycle encompassing technical 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 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. The interim financial statements are prepared to conform to the accounting standard on “Interim Financial Reporting”. 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.

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 standard on Consolidated Financial Statements issued by the ICAI. The financial statements of Infosys — the parent company, 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.Where no reliable estimate can be made, a disclosure is made as contingent liability. 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 percentage of completion method. On time-and-materials contracts, revenue is recognized as the related services are rendered. Cost and earnings in excess of billings are classified as unbilled revenue while billing in excess of cost and earnings is classified as unearned revenue. Provision for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the current estimates. 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 percentage of 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 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

11

23.1.7 Retirement benefits to employees

23.1.7.a Gratuity

Infosys provides for gratuity, a defined benefit retirement plan (the “Gratuity Plan”) covering eligible employees at the company and Progeon. In accordance with the Payment of Gratuity Act, 1972, 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 Infosys and Progeon respectively. Infosys fully contributes all ascertained liabilities to the Infosys Technologies Limited Employees’ Gratuity Fund Trust (the “Trust”). Progeon fully contributed all ascertained liabilities to the Progeon Employees’ Gratuity Fund Trust. Trustees administer contributions made to the Trust and contributions are invested in specific investments, as permitted by law.

23.1.7.b Superannuation

Certain employees of Infosys are also participants in a defined contribution plan. Until March 2005, the company made 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 had no further obligations to the Plan beyond its monthly contributions. Certain employees of Progeon were also eligible for superannuation benefit. Progeon made monthly provisions under the superannuation plan based on a specified percentage of each covered employee’s salary. Progeon had 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. From April 1, 2005, a substantial portion of the monthly contribution amount is paid directly to the employees as an allowance and a nominal amount is contributed to the trust.

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 remaining contributions are made to government administered provident fund. The interest rate payable by the trust to the beneficiaries every year is being administered by the government. The company has an obligation to make good the short fall, if any, between the return from its investments and the administered interest rate.

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.

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 the daily rates. 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 company uses foreign exchange forward contracts and options to hedge its exposure to movements in foreign exchange rates. The use of these foreign exchange forward contracts and options reduces the risk or cost to the company and the company does not use the foreign exchange forward contracts or options 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 and option 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 a designation as 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 for each of the consolidated entities.

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/exceptional 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 issues 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.

12

23.2 Notes on accounts

Amounts in the financial statements are presented in Rupees crore, except for per share data and as otherwise stated. Certain amounts do not appear due to rounding off, and are detailed in note 23.3. All exact amounts are stated with the suffix “/-”. One crore equals 10 million.

The previous period/ year figures have been regrouped / reclassified, wherever necessary to conform to the current presentation.

23.2.1 Aggregate expenses

The aggregate amounts incurred on certain specific expenses:

in Rs. crore
	Quarter ended						Nine months ended
	December 31,						December 31,
	2005			2004			2005			2004
Salaries and bonus including overseas staff expenses		1,244			921			3,356			2,501
Contribution to provident and other funds		27			24			74			64
Staff welfare		12			8			26			17
Overseas travel expenses		101			73			330			235
Traveling and conveyance		19			16			50			43
Technical sub-contractors		40			34			111			72
Software packages
for own use		36			32			103			83
for service delivery to clients		6			4			25			14
Professional charges		32			25			90			65
Telephone charges		22			13			64			39
Communication expenses		14			13			47			40
Power and fuel		17			11			49			31
Office maintenance		20			11			53			31
Rent		13			11			39			31
Brand building		14			8			37			27
Commission and earnout charges		11			7			28			15
Insurance charges		6			7			18			23
Printing and stationery		3			3			10			9
Computer maintenance		7			4			15			12
Consumables		4			3			12			11
Rates and taxes		3			2			9			7
Advertisements		3			4			11			9
Donations		4			8			13			17
Marketing expenses		3			2			9			8
Professional membership and seminar participation fees		2			2			7			5
Repairs to building		3			3			11			7
Repairs to plant and machinery		3			2			8			5
Postage and courier		1			1			4			4
Provision for post-sales client support and warranties		(9	)		(6	)		(15	)		13
Books and periodicals		1			1			3			2
Recruitment and training		2			1			5			2
Provision for bad and doubtful debts		(4	)		6			6			17
Provision for doubtful loans and advances		—			—			—			—
Commission to non-whole time directors		—			—			1			1
Sales promotion expenses		—			—			1			1
Auditor’s remuneration
statutory audit fees		—			—			1			1
certification charges		—			—			—			—
others		—			—			—			—
out-of-pocket expenses		—			—			—			—
Bank charges and commission		1			—			1			1
Freight charges		—			—			1			1
Research grants		1			—			1			—
Miscellaneous expenses		9			4			25			10
		1,671			1,258			4,639			3,474

The above expenses for the quarter and nine months ended December 31, 2005 include Fringe Benefit Tax (FBT) in India amounting to Rs. 4 crore and Rs. 11 crore respectively (for quarter and nine months ended December 31, 2004, Rs. nil & Rs. nil) wherever applicable.

13

23.2.2 Capital commitments and contingent liabilities

in Rs. crore
	As at
	December 31, 2005			March 31, 2005
Estimated amount of unexecuted capital contracts
(net of advances and deposits)		221			275
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		28			16
Claims against the company, not acknowledged as debts		74	*		16
(Amount paid to statutory authorities totals Rs. 57 crore on account of claims not acknowledged as debts)
Forward contracts outstanding
In US$	US $	15,000,000		US $	353,317,400
(Equivalent approximate in Rs. crore)		67			1,558
Options Contract Outstanding
Put options purchased	US $	8,500,000			—
(Equivalent approximate in Rs. crore)		38			—
Call options sold	US $	17,000,000			—
(Equivalent approximate in Rs. crore)		76
Range barrier options in US $	US $	237,500,000
(Equivalent approximate in Rs. crore)		1,068			—
Range barrier options in Euro	€	6,000,000			—
(Equivalent approximate in Rs. crore)		32			—
Range barrier options in GBP	£	6,000,000			—
(Equivalent approximate in Rs. crore)		47			—

* Claims against the Company not acknowledged as debts include a demand (received on April 15, 2005) from the Indian tax authorities for payment of additional tax of Rs. 53 crore, including interest of Rs. 16 crore, upon completion of their tax review for fiscal 2002. The tax demand is mainly on account of disallowance of a portion of the deduction to its taxable income under Indian law claimed by the company under Section 10A of the Income-tax Act. Deduction under Section 10A of the Income-tax Act is determined by the ratio of “Export Turnover” to “Total Turnover”. The disallowance arose from certain expenses incurred in foreign currency being reduced from Export Turnover but not reduced from Total Turnover.

The company is contesting the demand and management, including its tax advisers, believe that its position will likely be upheld in the appellate process. No tax expense has been accrued in the financial statements for the tax demanded. Management believes that the ultimate outcome of this proceeding will not have a material adverse effect on the company’s financial position and results of operations.

23.2.3 Obligations on long-term, non-cancelable operating leases

The lease rentals charged during the quarter and nine months ended December 31, 2005 and 2004 and maximum obligations on long-term non-cancelable operating leases payable as per the rentals stated in the respective agreements:-

in Rs. crore
	Quarter ended				Nine months ended
	December 31,				December 31,
	2005		2004		2005		2004
Lease rentals recognized during the period		13		11		39		31

Lease obligations	As at
	December 31, 2005		March 31, 2005
Within one year of the balance sheet date		22		27
Due in a period between one year and five years		87		83
Due after five years		28		25
		137		135

The operating lease arrangements extend upto a maximum of ten years from their respective dates of inception and relates to rented overseas premises and car rentals. Some of these lease agreements have price escalation clause.

23.2.4 Related party transactions

During the quarter and nine months ended December 31, 2005, an amount of Rs. 2 crore and Rs. 9 crore (for the quarter and nine months ended December 31, 2004 was Rs. 3 crore and Rs. 11 crore) has been donated to Infosys Foundation, a not-for-profit foundation, in which certain directors of the company are trustees.

23.2.5 Transactions with key management personnel

Particulars of remuneration and other benefits paid to key management personnel during the quarter and nine months ended December 31, 2005 and December 31, 2004 have been detailed in Schedule 23.3, since the amounts are less than a crore.

23.2.6 Research and development expenditure

in Rs. crore
	Quarter ended				Nine months ended
	December 31,				December 31,
	2005		2004		2005		2004
Capital		—		—		—		—
Revenue		25		19		77		49
		25		19		77		49

23.2.7 Stock option plans

The company has two stock option plans that are currently operational.

1998 Stock Option Plan (“the 1998 Plan”)
The 1998 Plan was approved by the board of directors in December 1997 and by the shareholders in January 1998, and is for issue of 58,80,000 ADSs

in Rs. crore
Number of options granted, exercised and forfeited during the	Quarter ended						Nine months ended
	December 31,						December 31,
	2005			2004			2005			2004
Options outstanding, beginning of period		27,46,732			37,02,050			30,54,290			38,71,010
Granted		—			—			—			—
Less: exercised		(273,648	)		(287,879	)		(547,378	)		(371,647	)
forfeited		(25,420	)		(93,724	)		(59,248	)		(178,916	)
Options outstanding, end of period		24,47,664			33,20,447			24,47,664			33,20,447

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

in Rs. crore
Number of options granted, exercised and forfeited during the	Quarter ended						Nine months ended
	December 31,						December 31,
	2005			2004			2005			2004
Options outstanding, beginning of period		1,21,24,188			1,65,78,897			1,40,54,937			1,83,62,120
Granted		—			—			—			—
Less: exercised		(1,592,003	)		(1,307,755	)		(3,407,236	)		(2,520,433	)
forfeited		(31,590	)		(209,672	)		(147,106	)		(780,217	)
Options outstanding, end of period		1,05,00,595			1,50,61,470			1,05,00,595			1,50,61,470

The aggregate options considered for dilution are set out in note 23.2.17

14

Progeon’s 2002 Plan

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.

The activity in Progeon’s 2002 Plan during the quarter and nine months ended December 2005 and 2004:-

Number of options granted, exercised and forfeited	Quarter ended						Nine months ended
	December 31,						December 31,
	2005			2004			2005			2004
Options outstanding, beginning of period		32,68,100			31,80,793			31,16,518			31,24,625
Granted		1,85,820			54,100			9,94,120			3,25,500
Less: exercised		(85,773	)		(1,700	)		(640,975	)		(8,025	)
forfeited		(275,463	)		(61,593	)		(376,979	)		(270,500	)
Options outstanding, end of period		30,92,684			31,71,600			30,92,684			31,71,600

Proforma Accounting for Progeon Stock Option Plan

Guidance note on “Accounting for employee share based payments” issued by Institute of Chartered Accountants of India establishes financial accounting and reporting principles for employee share based payment plans. The guidance note applies to employee share based payment plans, the grant date in respect of which falls on or after April 1, 2005.

As allowed by guidance note, Progeon has elected to continue to apply the intrinsic value-based method of accounting described above, and has adopted the disclosure requirements of guidance note “Accounting of employee share based premiums”. Had the compensation cost for Progeon’s stock-based compensation plan been determined in a manner consistent with the fair value approach described in guidance note, the Company’s net Income and basic and diluted earnings per share as reported would have reduced to the proforma amounts as indicated:-

	Quarter ended				Nine months ended
	December 31,				December 31,
	2005		2004		2005		2004
Net Profit:
As Reported		649		497		1,786		1,333
Less: Stock-based employee compensation expense		1		—		3		—
Adjusted Proforma		648		497		1,783		1,333
Basic Earnings per share as reported		23.68		18.50		65.59		49.77
Proforma Basic Earnings per share		23.64		18.50		65.48		49.77
Diluted Earnings per share as reported		23.02		17.95		63.73		48.69
Proforma Earnings per share as reported		22.99		17.95		63.63		48.69

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

Dividend yield %		0.00%
Expected life	1 through 6 years
Risk free interest rate		7.13%
Volatility		50.00%

23.2.8 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.

Infosys now also has operations in a Special Economic Zone. Income from SEZs are fully tax exempt for the first 5 years, 50% exempt for the next 5 years and 50% exempt for another 5 years subject to fulfilling certain conditions.

During the nine months ended December 31, 2005, the tax authorities in an overseas tax jurisdiction completed the assessment of income upto fiscal year 2004. Based on the assessment order, management has re-estimated its tax liabilities and written back an amount of Rs.20 crore. The tax provision for the nine months is net of the write-back.

23.2.9 Loans and advances

Deposits with financial institutions and body corporate comprise:-

in Rs. crore
	As at
	December 31, 2005		March 31, 2005
Housing Development Finance Corporation Limited (“HDFC”)		216		214
GE Capital Services India Limited		235		—
Life Insurance Corporation of India (“LIC”)		103		66
		554		280
Interest accrued but not due (included above)		2		2

Mr. Deepak M. Satwalekar, Director, is also a Director of HDFC. Except as director in this financial institution, he has no direct interest in any transactions.

Deposit with LIC represents amount deposited solely to settle employee benefit/ leave obligations as and when they arise during the normal course of business.

15

23.2.10 Fixed assets

Profit / loss on disposal of fixed assets

in Rs. crore
	Quarter ended				Nine months ended
	December 31,				December 31,
	2005		2004		2005		2004
Profit on disposal of fixed assets, included in miscellaneous income		—		—		—		—
Loss on disposal of fixed assets, included in miscellaneous expenses		—		—		—		—
Profit/(loss) on disposal of fixed assets, net		—		—		—		—

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 100% 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 December 31, 2005.

23.2.11 Details of Investments

Details of investments in and disposal of securities during the quarter and nine months ended December 31, 2005 and 2004:-

in Rs. crore
	Quarter ended					Nine months ended
	December 31,					December 31,
	2005			2004		2005		2004
Investment in securities
Liquid Mutual funds		228			101		1,850		255
		228			101		1,850		255
Redemption / Disposal of Investment in securities
Liquid Mutual funds		352			10		855		144
		352			10		855		144
Net movement in investment		(124	)		91		995		111

23.2.12 Holding of Infosys in its subsidiaries

Name of the subsidiary	Country of	Holding as at
	incorporation	December 31, 2005			March 31, 2005
Progeon Limited	India		72.05	%		99.54	%
Infosys Technologies (Australia) Pty Ltd.	Australia		100	%		100	%
Infosys Technologies (Shanghai) Co. Ltd.	China		100	%		100	%
Infosys Consulting Inc.	USA		100	%		100	%
Progeon s.r.o. *	Czech Republic		72.05	%		99.54	%

* Progeon s.r.o is a wholly owned subsidiary of Progeon Limited.

22.2.13 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 December 31, 2005 the company has provided for doubtful debts of Rs. 1 crore (as at March 31, 2005 Rs. 8 crore) 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 pursues the recovery of the dues, in part or full.

16

23.2.14 Segment reporting

The Group’s operations predominantly relate to providing IT services and Business Process Management, delivered to customers globally operating in various industry segments. Accordingly, 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 Group 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 Group 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 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 December 31, 2005 and 2004

in Rs. crore
	Financial
	services		Manufacturing		Telecom		Retail		Others		Total
Revenues		911		357		400		262		602		2,532
		661		270		341		176		428		1,876
Identifiable operating expenses		384		156		150		103		231		1,024
		269		116		138		72		170		765
Allocated expenses		226		89		93		73		166		647
		173		68		84		43		125		493
Segmental operating income		301		112		157		86		205		861
		219		86		119		61		133		618
Unallocable expenses												117
												74
Operating income												744
												544
Other income (expense), net												(5	)
												46
Net profit before taxes												739
												590
Income taxes												83
												93
Net profit after taxes												656
												497

Nine months ended December 31, 2005 and 2004

in Rs. crore
	Financial
	services		Manufacturing		Telecom		Retail		Others		Total
Revenues		2,481		942		1,139		701		1,634		6,897
		1,794		755		934		517		1,142		5,142
Identifiable operating expenses		1,045		418		429		286		648		2,826
		756		329		392		201		469		2,147
Allocated expenses		642		238		274		191		468		1,813
		472		180		230		123		316		1,321
Segmental operating income		794		286		436		224		518		2,258
		566		246		312		193		357		1,674
Unallocable expenses												293
												193
Operating income												1,965
												1,481
Other income (expense), net												67
												92
Net profit before taxes												2,032
												1,573
Income taxes												233
												240
Net profit after taxes												1,799
												1,333

17

Geographic segments

Quarter ended December 31, 2005 and 2004

in Rs. crore
							Rest of the
	North America		Europe		India		World		Total
Revenues		1,645		630		35		222		2,532
		1,248		414		40		174		1,876
Identifiable operating expenses		684		243		17		80		1,024
		503		167		11		84		765
Allocated expenses		413		147		8		79		647
		313		101		9		70		493
Segmental operating income		548		240		10		63		861
		432		146		20		20		618
Unallocable expenses										117
										74
Operating income										744
										544
Other income (expense), net										(5	)
										46
Net profit before taxes										739
										590
Income taxes										83
										93
Net profit after taxes										656
										497

Nine months ended December 31, 2005 and 2004

in Rs. crore
							Rest of the
	North America		Europe		India		World		Total
Revenues		4,462		1,667		118		650		6,897
		3,377		1,126		94		545		5,142
Identifiable operating expenses		1,871		664		53		238		2,826
		1,412		454		25		256		2,147
Allocated expenses		1,143		399		28		243		1,813
		829		270		22		206		1,327
Segmental operating income		1,448		604		37		169		2,258
		1,136		402		47		83		1,668
Unallocable expenses										293
										187
Operating income										1,965
										1,481
Other income (expense), net										67
										92
Net profit before taxes										2,032
										1,573
Income taxes										233
										240
Net profit after taxes										1,799
										1,333

18

23.2.15 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:-

in Rs. crore
Particulars	Number of shares to		Quarter ended				Nine months ended
	which the dividends		December 31,				December 31,
	relate		2005		2004		2005		2004
Final and one-time special dividend for fiscal 2004		52,92,612		—		—		—		61
Interim dividend for fiscal 2006		3,80,51,211		25		—		—		—
Final dividend for fiscal 2005		3,77,66,327		—		—		25		—

23.2.16 Conversion of cumulative preference shares in Progeon

Progeon had issued an aggregate of 87,50,000 0.005% Cumulative Convertible Preference shares of par value Rs. 100 each to Citicorp International Finance Corporation (“CIFC”) for an aggregate consideration of Rs. 93.80 crore per the shareholder’s agreement as of March 31, 2005. Each preference share was convertible to one equity share of par value Rs. 10/-.

On June 30, 2005 CIFC exercised its rights under the shareholder’s agreement and converted the preference shares to equity shares. Pursuant to the conversion, the equity share capital of Progeon increased by Rs. 9 crore to Rs. 33 crore and the share premium increased by Rs. 79 crore to Rs. 85 crore. Infosys’ equity holding in Progeon as of December 31, 2005 was 72.05%.

23.2.17 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				Nine months ended
	December 31,				December 31,
	2005		2004		2005		2004
Number of shares considered as basic weighted average shares outstanding		27,37,71,476		26,87,73,742		27,22,89,379		26,78,62,078
Add: Effect of dilutive issues of shares/stock options		78,33,477		83,36,718		79,54,117		59,08,614
Number of shares considered as weighted average shares and potential shares outstanding		28,16,04,953		27,71,10,460		28,02,43,496		27,37,70,692

23.2.18 Cash flow statement

The balance of cash and cash equivalents includes Rs. 4 crore as at December 31, 2005 (for the year ended March 31, 2005 Rs. 3 crore) set aside for payment of dividends.

19

23.3 Details of rounded off amounts

The financial statements are represented in Rs. crore as per the approval received from Department of Company Affairs “DCA” earlier. Those items which were not represented in the financial statement due to rounding off to the nearest Rs. crore are given below.

Balance Sheet Items

in Rs. crore
		As at
Schedule	Description
		December 31, 2005	March 31, 2005
Balance Sheet	Minority Interest	7.37	0.14
2	Capital reserve on consolidation	0.69	0.10
4	Fixed assets
	Purchases
	Vehicles	0.59	0.35
	Land: free-hold	0.01	9.59
	Disposal
	Plant and machinery	0.15	—
	Depreciation
	Vehicles	0.13	0.04
8	Cash on hand	0.04	0.02
9	Deposits with government authorities	0.01	0.05
	Unsecured, considered doubtful
	Loans and advances to employees	0.40	0.23
	Provision for doubtful loans and advances to employees	0.40	0.23
21	Provision for investments	0.27	0.10

Profit & Loss Items
in Rs. crore
		Quarter ended		Nine months ended
Schedule	Description	December 31,		December 31,
		2005	2004	2005	2004
13	Selling and Marketing expenses
	Marketing expenses	3.14	—	8.77	—
	Contribution to provident and other funds	0.50	—	1.07	—
	Advertisements	0.30	—	0.80	—
	Printing & Stationery	0.31	0.36	0.86	—
	Sales promotion expenses	0.32	0.35	0.59	—
	Office maintenance	0.04	0.05	0.28	—
	Insurance charges	0.23	0.18	0.33	0.42
	Computer maintenance	—	—	0.00	0.12
	Communication Expenses	0.32	—	0.45	—
	Staff welfare	0.54	0.11	0.97	0.40
	Cost of Software Packages for Own Use	—	0.01	0.06	0.01
	Consumables	0.06	0.03	0.12	0.24
	Rates & Taxes	0.00	—	0.00	0.03
14	General and Administrative expenses
	Staff welfare	0.57	0.37	0.57	—
	Provision for doubtful loans and advances	0.26	0.04	0.33	0.15
	Commission to non-whole time directors	0.37	0.39	0.68	—
	Auditor’s remuneration :
	Statutory audit fees	0.35	0.30	0.60	—
	Certification charges	0.01	0.07	0.01	0.07
	Out-of-pocket expenses	0.01	0.01	0.02	0.02
	Freight charges	0.18	0.20	0.36	—
	Research grants	0.35	0.24	0.44	0.43
	Software packages for own use	0.42	0.37	0.42	—
	Recruitment and training	1.76	—	5.50	—
	Bank charges and commission	0.35	0.31	0.54	—
	Rates and taxes	2.73	—	8.81	—
15	Other Income
	Miscellaneous Income	1.21	(0.01)	2.74	0.49
	Exchange differences	(57.60)	—	(68.05)	—
16	Provision for Taxaton
	Prior Period	—	—	0.06	—
	Deferred taxes	1.91	(0.45)	(1.84)	—
21	Provision for investments	(0.27)	(0.39)	0.29	(0.33)
23.2.1	Aggregate expenses
	Marketing expenses	3.14	—	8.77	—
	Recruitment and training	—	—	—	—
	Provision for doubtful loans and advances	0.26	0.04	0.41	0.15
	Commission to non-whole time directors	0.38	0.39	1.06	—
	Sales promotion expenses	0.32	0.35	0.97	—
	Auditor’s remuneration
	statutory audit fees	0.35	0.30	0.88	—
	Certification charges	0.01	0.07	0.01	0.07
	Others	—	—	—	—
	out-of-pocket expenses	0.01	0.01	0.02	0.02
	Bank charges and commission	0.35	0.31	1.00	—
	Freight charges	0.18	0.20	0.58	—
	Research grants	0.36	0.24	0.57	0.43
23.2.10	Profit on disposal of fixed assets, included in miscellaneous income	0.11	0.01	0.34	0.17
	Loss on disposal of fixed assets, included in miscellaneous expenses	(0.25)	(0.01)	(0.28)	(0.05)
	Profit/(loss) on disposal of fixed assets, net	(0.14)	—	0.06	0.12

Cash Flow Statement Items

in Rs. Crore
Schedule	Description	For the Nine months ended
		December 31,
		2005	2004
Cash Flow	(Profit)/ loss on sale of fixed assets	0.06	(0.12)
Statement	Provisions for investments	0.29	(0.33)
	Proceeds on disposal of fixed assets	0.25	0.32
	Proceeds from the issue of preference share capital	—	(0.05)

20

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 nine months ended December 31, 2005 and 2004 are as follows:

in Rs. crore
Name	Salary		Contributions		Perquisites		Total
			to provident and		and incentives		Remuneration
			other funds
Chairman and Chief Mentor
N R Narayana Murthy		0.03		0.01		0.06		0.10
		0.03		0.01		0.06		0.10
		0.09		0.03		0.17		0.29
		0.09		0.03		0.13		0.25
Chief Executive Officer, President and Managing Director
Nandan M Nilekani		0.03		0.01		0.06		0.10
		0.03		0.01		0.06		0.10
		0.09		0.03		0.16		0.28
		0.09		0.03		0.13		0.25
Chief Operating Officer and Deputy Managing Director
S Gopalakrishnan		0.03		0.01		0.06		0.10
		0.03		0.01		0.06		0.10
		0.09		0.03		0.17		0.29
		0.09		0.04		0.12		0.25
Whole-time Directors
K Dinesh		0.03		0.01		0.06		0.10
		0.03		0.01		0.06		0.10
		0.09		0.03		0.15		0.27
		0.09		0.03		0.12		0.24
S D Shibulal		0.23		—		0.07		0.30
		0.21		—		0.14		0.35
		0.68		—		0.21		0.89
		0.62		—		0.25		0.87
T V Mohandas Pai		0.05		0.02		0.11		0.18
Chief Financial Officer		0.04		0.01		0.14		0.19
		0.15		0.06		0.34		0.55
		0.13		0.04		0.28		0.45
Srinath Batni		0.04		0.02		0.11		0.17
		0.04		0.01		0.13		0.18
		0.13		0.05		0.30		0.48
		0.12		0.04		0.25		0.41
Other Senior Management Personnel
V Balakrishnan		0.03		0.01		0.09		0.13
Company Secretary		0.03		0.01		0.13		0.17
		0.09		0.03		0.31		0.43
		0.09		0.03		0.31		0.43

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

21

EX-99.14

Exhibit 99.14

Infosys Meets Its Mentor

NDTV Profit

January 11, 2006

Host

Hello and welcome to this special program Infosys Meets Its Mentor. Mentor of course sitting next me, arguably one of the best-known Indian businessman in the world and certainly one of the best-known Indian entrepreneur, if it is fair to describe you as that, Mr. Narayana Murthy, Chief Mentor of Infosys, who is going to be stepping down as the Executive Chairman of Infosys about 7-8 months from now. I am sure all the people are nervous, and among the people who would be nervous are these young people sitting next to us out here, who are all Infosys employees. They are all young Infosys employees. They have all got lots of questions about the company, about the direction that it is going to take, don’t necessarily ask questions about your individual salary increments, maybe address that later after this program is over, but any other questions you have, this is yours, put forth questions to Mr. Murthy. But before we start, obviously this is going to be a landmark year for Infosys as well, 25 years, so I wonder if you want to tell them, basically your vision, these 25 years have of course been pretty dramatic, another 25 years to go similar to this.

Narayana Murthy

Well, I often say that we are still in the early years of our marathon. After all, 25 years is a small period, short period in the life of a corporation, so my request to every one of you is that you people work hard, work smart, work with a value system, so that this organization can be intact even after 250 years. I think that’s the resolution that all of us need to make.

Host

Don’t worry about 25 years, worry about 250 years. Now who is going to start of the questioning, and you can be fairly free and frank in your questioning, I am sure Mr. Murthy is not going to mind, so who is going to kick it off, you?

Narayana Murthy

I have only one request that it should be alternately a man and woman, okay.

Satish

My question to you is the media has traditionally been portraying India as a hot destination for IT companies primarily because of the fact that we provide low cost services. In the years going ahead, how can we as Infosys and as Indian software professionals change that perception?

Host

Change it from being just low cost to other areas.

Narayana Murthy

Well it is already happening. If you look at the kind of work that we are doing, if you look at the fact that Infosys Consulting is attacking problems that are very strategic. If you look at the fact we do more and more end-to-end business solutions. It is already happening. So the key direction is, we should ask the following two questions. In what way are we going to be more and more and more relevant to the customer’s business. Second in what way will what we do have better and better and greater impact on customer’s business. If we keep asking these two questions, we will automatically become more and more valuable in customer’s eye. Then you will get better per capita revenue productivity, better profits, and all of that.

Host

So you are already seeing this change starting to happen, but you now interact with global leaders and all these prime ministers come here, have they stopped seeing India as a low-cost destination, is that pretty much still the selling point?

Narayana Murthy

They don’t talk about the cost aspect. What they are all very pleasantly surprised is the fact that India has now received the center stage in the global bazaar as far as hi-tech business is concerned. So they are very, very happy that India is playing its legitimate role at last in the global bazaar.

Host

At last, India now.

Shefali

We often keep hearing people like us complaining that even though India is changing, the government is not able to support us in terms of the infrastructure and the support, what do think we independently as citizens can do to make a difference?

Narayana Murthy

I am often reminded of what late President Kennedy once said, he said, “ask not what the country can do for you, ask instead what you can do for your country,” in that sense I suppose, we the privileged, we the fortunate ones perhaps have to think of in what way we can add value to the society and that can be done by doing our work better, by being more and more honest, by being more and more professional. I think that’s the best way to create a sense of positivism.

Host

But of course, difficult individually sir for us build roads, power plants individually, that we will have to of course get some state help I think.

Narayana Murthy

I think we need help definitely. It’s happening. For example, all of you have noticed some work that has started on the road to Electronic City, right, and what’s going to happen in another perhaps 18 months or so, you will see a wonderful four-lane road which is a toll road, so you people can zip through to the office in 10 minutes from the Silk Board to here, so it will happen.

Host

I am sure all of them are waiting for that day.

Vivian

We are now about 50,000 employees in Infosys and the rate at which we are growing, we may even touch 100,000 soon, but if you see today the percentage of non-Indian employees in the workforce is small, so as we gain more international outlook and open more offices worldwide, do you see this percentage of non-Indians in the workforce raising significantly, can we expect to see some of them working in India as well?

Narayana Murthy

Yes. First of all, we have a plan to enhance this percentage. I don’t want to get into specific numbers. Second, there are 55 Japanese here on this campus. #2 there are 100 Chinese students, and I am sure they will all be very happy to join Infosys. #3 I attended the Wharton Infosys Business Transformation Award function and there, there were American employees of Infosys who are managing the Infosys press conference, Laura and Nathan, and I was told that they have five American employees in the marketing function here. It is already happening. We have to make life better for them. We have to welcome them. We have to treat them with lot of affection. We have to invite them to our homes. We have to make their quality of life better, and then I can assure you more and more people will come. We will have to do that.

Host

If I could just take up from the point which you made, something which I am sure personally must be striking you, 25 years ago, you would have known every Infosys employee by first name; 50,000, obviously there will be lot of them whom you have never met them or interacted with, do you miss that, do you miss not knowing every employee and how you gonna ensure you are going to keep in touch?

Narayana Murthy

I certainly miss not knowing every employee particularly because most of the new employees are young people, and I always said that I feel much younger when I am in their presence. That’s why I don’t miss an opportunity to address you people, but then we have created a mechanism whereby everybody in the company has somebody that they can go to, somebody that they can cry on their shoulders, somebody that they can go to in their hours of dilemma, their moral conflict, whatever problems they have, somebody that will celebrate, somebody that will salute and cheer them, because we have 585 leaders in this company today, thanks to our 3-tier program. So in other words

they say, it is not necessary that everybody has to go to one individual or one individual has to relate to everybody. Let’s create a group of, a cadre of people all of whom represent the same value system, the same confidence, the same enthusiasm, the same energy, the same vision, and then it is so much easier. That’s how organizations scale up.

Host

All right.

Shruthi

Good afternoon sir. If you look back at the past 25 years, do you think there are things which could have been done in a different manner?

Narayana Murthy

You know, Amartya Sen once said that in a democracy, you do not see disasters, that’s why you wouldn’t have a huge famine because there are checks and balances in democracy. Infosys to me is a wonderful example of an enlightened democracy. To that extent, I would say because there is so much debate, so much discussion, everything is discussed quite seriously, we have not had any major blunders because this is a place of leadership of ideas not leadership of men or women, so because of that I believe that we have not had any major blunders, but certainly there are many things that we could have done better.

Host

Well what would be some of your big regrets, something which you wished you had done that?

Narayana Murthy

I am not sure if I would classify them as regrets, but perhaps we could have accelerated a little bit more in the initial years, but we didn’t. Then probably we could have had even much greater revenue and profits and all of that, so that’s the.

Host

But no other single big regret?

Narayana Murthy

No.

Host

A strategic direction you could have taken?

Narayana Murthy

No, not really because we have always discussed and debated issues. Its an enlightened democracy.

Host

Okay.

Andy

Hello, I am from Switzerland and I have a question concerning the culture of Infosys. Actually like two major chances I had, one is to transform Infosys from a technology company to strategic consultancy and the other is to make it really a globalized company, and therefore like their culture is like an Indian culture and the technology-based culture, so what will they remain as core values?

Narayana Murthy

You know it is a very interesting question. What I have always believed that there are universal values; honesty, decency, working hard, satisfying the customer, respecting fellow employees, not taking advantage of somebody who is weaker than you; all these are universal values. I believe whether it is India, Switzerland, or US, they are all the same. On the other hand, there are values, there are aspects of each culture that we can learn from. For example, Switzerland is known for its quality, its known for everything running on time. On the other hand, India is known for its wonderful family system, that is even in organization, we are like members of the family; India is known for tolerance, India is known for being able to making sacrifices for the sake of happiness of others. I think each culture has its own positive. I do believe that we have to integrate all those things and make it again the part of the universal Infosys culture.

Host

But I think just to take you on from that, will Infosys always then remain an Indian company because you said 250 years you have to look ahead, you don’t necessarily look at Shell now and say it is a Dutch company, you don’t necessarily look at, these companies transcend nationality, do you see that change happening that Infosys stops being an Indian company or a purely Indian company?

Narayana Murthy

Well I would say that Infosys will obviously remain as a company founded by Indians. That is history, that cannot be changed. It may continue to remain as a company with headquarters in India, may or may not, that again.

Host

You are saying that’s may or may not?

Narayana Murthy

May not, who know tomorrow there maybe many centers of gravity. So, there could one in Zurich, one in Boston, one in Bangalore and all of that; however, what my vision for

Infosys is that it should be a place where people of different nationalities, different races, and different religious beliefs coming together and competing with each other in an environment of utmost courtesy and dignity to add greater and greater value to our customers day after day after day. In other words, we want people of all nationalities, all religious beliefs, all races, there are all there together to satisfy customers more and more; however, they will work in an environment of utmost courtesy and dignity.

Host

Sir, again I am just trying to pin you down on this one. Do you think is it a possibility that one, taking up from what he said, Infosys will not any longer be a purely Indian company or for that matter a purely tech company, it will be seen as something as could have changed completely, 5 years, 10 years, 20 years down the line?

Narayana Murthy

Today, a whopping 97% of our revenue comes from outside India, its global. Second, 50% of our equity is held by non-Indians, global investors. Third, we have already started our operations in Shanghai, a development center in Shanghai. We have a development center in Toronto. We have a development center in London, one in Boston, one is San Francisco. We have Infosys Australia. We have Infosys Consulting in the US. So it all depends upon how each of these organs will grow. If it happens, if adds value to Infosys, certainly let it transform itself to anything that it wants as long as it continues the value system than has been already accepted by all of us, as long as it brings value to our customers, why not?

Host

All right, the possibility of morphing Infosys. A very interesting thought to leave you with just for a minute or two. We are going to take a very quick break and will be back just after that to continue the special show, Infosys Meets Its Mentor.

Welcome back to this special program, Infosys Meets Its Mentor. We have a whole group here of Infosys employees who are getting a chance to fire some reasonably searching questions at the man who is their mentor, their founder, and for the moment at least their Executive Chairman as well. I have to say it is fascinating, the questions that are coming out are the sorts we will never hear any analysts coming up with, so giving an entire new aspect and an entire new insight into the company.

Male Participant

Good afternoon sir, this is [not audible]. Sir just wanted to know, since after you stepped down, in what role can we expect to see you associated with Infosys because we want you to be on Infosys with us?

Narayana Murthy

You are very kind. I will be for the next 5 years the non-executive chairman of Infosys, which means I will be in charge of the board functioning, I will be in charge of the governance function, I will come here definitely once a quarter. I may come a few more times.

Host

You are going to come here once in a quarter did you just say?

Narayana Murthy

Yes.

Host

I saw everyone’s expression suddenly changing when you said that. Only once in a quarter?

Narayana Murthy

By and large, I may come a few more times, because I will keep my office in the heritage building. Now I have two offices today, one in the corporate block and one in the heritage building, so I will continue my office in the heritage building. I will come once in while, but more importantly, I am building an office for myself near my office, so that I can walk if possible, but everyone of you is most welcome to come there. Have a cup of coffee and ask me any question and demand me to add value in any manner that you people see [not audible].

Host

So 50,000 [not audible] 200,000, you could have lots of cups of tea.

Narayana Murthy

No problems at all. We are gearing up for that.

Host

You are gearing up for that.

Padmapriya

Good afternoon sir. This is Padmapriya, I work for the systems integrations department and I have this question. If you were born in 1980 like us instead of 1946, would the world have seen a different NRN and then what would have been your challenges and your approach to handle them as against what it was at your time?

Narayana Murthy

Frankly, I will tell this is again, now my belief is that younger people are smarter and smarter, smarter than older people gets reinforced with this question. I will tell you my daughter was born in 1980. She is now 25 plus whatever it is. I find her to be a lot more confident, she is a lot smarter like you all. She has lot more ambition which is good and I think she sees the entire globus as her arena. In that sense, I would say I would have

been a little bit smarter, I would have had a better perception of the world, so I would have been a better personality definitely. There is no doubt.

Host

Do you think that you have had different ambitions, would you have gone into different areas? Would you still be a techie.

Narayana Murthy

That is a difficult thing to say because it’s all shaped by your circumstances. Probably I would have been still a techie because even today I read books on theoretical computer science and in fact somebody was asking me what I would do after 20th August, I said, look I have so many books on theoretical computer science I will be reading, reading about NC complete problems and all I am sure you people know what is NC complete. So I think that will continue, but I would have been a much smarter, much better person if I was born in 1980.

Host

I can tell you that some of the people who have been born in 2000 and 2005 are becoming even smarter [not audible] generation which is coming up.

Narayana Murthy

Absolutely.

Nishanth

Good evening, sir. This is Nishanth. This question is a bit more personal, I hope you don’t mind answering.

Narayana Murthy

No, not at all.

Nishanth

Today, here we are almost 25 years, Infosys has done a lot and you probably achieved everything you set out to and more, so what is it that at this point of your life excites you or keeps you going?

Narayana Murthy

You know there are many, many things. First of all, if all of us can make this a better place for future generation. If we can attack the basic problems of poverty, that is, providing access to education, healthcare, nutrition, and shelter to every child in India, and in the world, not just in India, I think we would all be happier people. At a more mundane and at a more micro level, I think I want every Infosian to become better in every dimension and I think that’s what all of us should work for.

Host

Would it be fair to say that you are saying your canvas increasingly shifting from being painting on an Infosys sort of a canvas to worrying more about country, problems of the country is facing?

Narayana Murthy

You know, if it is leading to the question whether I would enter politics, no. On the other hand, as a person who will be 60 by 20th August, it is only natural that I keep worrying more and more about what we would be leaving for our children, our grandchildren because I wouldn’t have too many years left, so in that sense yes I have been more concerned.

Host

All right, maybe there.

Shivaditta

Good afternoon.

Narayana Murthy

It is a very nice name, wonderful name.

Shivaditta

Thank you. I remember the first time I met you, you gave me the same compliment sir. Thank you twice. My question during the formative years of Infosys, especially during the difficult times, which habit or personal discipline helped most to sustain you till the finish?

Narayana Murthy

First of all, value system, that is, honesty, decency, fairness, that is very, very important because remember, there were seven of us who founded this company. If I did not conduct myself in a manner that the other six people had full confidence in me, then they may have left the company, one. Second, if they thought I was putting my hand in the [not audible], when I was not looking, they too could have done very legitimately. So I think in anything value system is very important. Second is discipline. I am extremely disciplined. Sometimes people say I am as disciplined as the Swiss, which I take it as a compliment. So I would say value system, discipline, hard work, being open minded, and fair, I think they are very important.

Ankur

Good afternoon sir. You just said that in your free time you would like to read to theoretical computer science, considering that most of us are out here are bachelors, when would you encourage us to go back to studies and serve you back?

Narayana Murthy

No actually, you can do it while you are working at Infosys. I have always said that as long as we complete our obligation, that is, if I am given eight hours to do a job, if I complete it in six hours, then the remaining two hours should be set aside to improve my own knowledge. So you should do it while you are working. You don’t have to wait.

Host

So reading between the lines, what he just said, two messages. One, don’t goof up at work that’s #1, do your work. And #2, don’t quit Infosys. So two important signals which are given.

Neeta

Sir we have taken up so many different projects in so many countries round the globe, what you think about expanding business in India?

Narayana Murthy

Remember that we have probably 70% of the banking market in India. India is a large country. In India, it costs a lot to travel from place A to place B, and still the spirit of competition is not as prevalent as in some of the more advanced countries, and then the idea that you can leverage technology to become even more competitive is not as well routed in the Indian minds as elsewhere. So in 1989 we said we will first be in one area, consolidate it, and that’s why right from 1989 we have been in the area of banking. In fact, we spent much more per capita on banking, you know the Finacle thing, than any other service. So once we are satisfied with our foray in banking, I am sure we will expand to others.

Host

Just to take up from your point, you said 97% revenues come from outside not so much from India, but would you think it is time now for Infosys to perhaps turns its attention more on other types of products that you can have for India, [not audible] bridge the digital divide, you can have better certain softwares that might for example help in mediation between the farmers and the mundis, stuff like that. New types of products that could actually be useful here in India as opposed to just something that people [not audible].

Narayana Murthy

For example, the other day our retail people were telling me about how they use the RFID technology to handle inventory of stents in the ICU. I don’t want to get into details of that, that’s a very, very critical crucial issue because this is ICU, which they put in your heart and other parts of the blood vessel system. So we are wherever possible, we are adding value and we will continue to add value. You are right absolutely, there is no doubt.

Sachin

My question to you is what do think is going to be the future driver for growth in Infosys? We hear a lot that infrastructure services and things like those, it is a huge potential in the industry, so do you think that is going to be the area for growth for Infosys in the future or any other area?

Narayana Murthy

First of all, consulting led business is definitely going to be a big thing because you have to solve more and more business problems. We have to become more and more relevant to the customer. Second infrastructure management services, IMS is another fast growing area. Third, enterprise systems, ES is growing very fast. Fourth, our business process management, which Progeon is spearheading, that is transaction services, research based value additions. These are all growing services, systems integration. All these areas have tremendous potential.

Host

All right, time for just one last question.

Female Participant

Sir you are a role model to a lot of us. In such short span of time, you have achieved so much, what I would also like to know is how did you manage your work life balance with so many accomplishments to your name, that’s what I would like to ask you.

Narayana Murthy

Well when you are an entrepreneur, you have a certain passion, and in that passion, you forget about all other stuff, where you are a high quality professional, you are one such, you get so much wedded to what you are doing because you want to satisfy the customer. I have been very lucky in the sense that my wife has understood it and she supported me because I have a very important point to make here, that is, for the first time in the history of the world, in the last 400 years, India has received a little bit of recognition, as a legitimate player, as an important player in the hi-tech area in the global bazaar. This is the time when all of us should seize and make sure that India consolidates its position, and for India to consolidate, a few generations will have to sacrifice. So in that sense, I believe that all of us have to work very hard.

Host

So that’s a general message I am going to leave with. Time for sacrifice. This is the India’s moment in the sun and we make sure we consolidate it, its for us to grab that.

Narayana Murthy

Thanks a lot Vikram. [not audible], there is an idol.

Host

Of course if they all do it, it will also be great for the company wouldn’t this. The basic message to all of you from him, work harder, its good for Infosys and its good for the company. On that note, I thank you all so much for joining us.

Narayana Murthy

You know they have much greater responsibility. I had responsibilities in the first 25 years. They have responsibilities for 250 years.

Host

250 years of responsibility on their young shoulders.

Narayana Murthy

All on their young shoulders.

Host

Perhaps, your break is up, time to get back to work. Thanks a lot for joining us.

Narayana Murthy

Thank you all.

Host

That’s it for the moment from the Infosys campus.

NOTE:

1.	Please verify the proper nouns and their spellings, and the acronyms.
2.	Please verify the names of the speakers and their order of appearance.
3.	Bolded words need to be confirmed for their accuracy.
4.	Blanks in the transcripts represent inaudible or incomprehensible words.