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 June 30,  2006

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

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 June 30, 2006. 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 July 12, 2006, we announced our results of operations for the quarter ended June 30, 2006. 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 July 12, 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 First Quarter ended June 30, 2006", 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 June 30, 2006 and 2005 (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 July 12, 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 July 12, 2006. The transcript of this question and answer session is attached to this Form 6-K as Exhibit 99.8. We placed advertisements in certain Indian newspapers concerning our results of operations for the quarter ended June 30, 2006, under Indian GAAP. A copy of the form of this advertisement is attached to this Form 6-K as Exhibit 99.9.

We have made available to the public on our web site, www.infosys.com, the following: U.S. GAAP Unaudited Consolidated Financial Information for the quarter ended June 30, 2006; Indian GAAP Balance Sheet, Profit & Loss Account, Cash Flow statement, Schedules, Notes on Accounts and Auditors Report for the quarter ended June 30, 2006; Indian GAAP Consolidated Balance Sheet, Consolidated Profit & Loss Account, Consolidated Cash Flow statement, Consolidated Schedules, Consolidated Notes on Accounts and Auditors Report for the quarter ended June 30, 2006

We have attached these documents to this Form 6-K as Exhibits 99.10, 99.11, and 99.12, respectively.

.

SIGNATURES

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

Infosys Technologies Limited

/s/ Nandan M. Nilekani

Nandan M. Nilekani

Chief Executive Officer

Date: July 18, 2006

INDEX TO EXHIBITS

No.	Exhibits
99.1	U.S. GAAP Press Release
99.2	Indian GAAP Press Release
99.3	Transcript of July 12, 2006 Press Conference
99.4	Presentation: Performance of the Infosys group for the First Quarter ended June 30, 2006
99.5	Fact Sheet regarding Registrant's Profit and Loss Account Summary for the quarters ended June 30, 2006 and 2005 (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 July 12, 2006 2:00 p.m. IST Earnings Call
99.7	Transcript of July 12, 2006 6:00 p.m. IST Earnings Call
99.8	Transcript of July 12, 2006 CNBC India Question and Answer session with Company's Officers
99.9	Form of Advertisement placed in Indian Newspapers
99.10	U.S. GAAP Unaudited Consolidated Financial Information for the quarter ended June 30, 2006
99.11	Indian GAAP Balance Sheet, Profit & Loss Account, Cash Flow statement, Schedules, Notes on Accounts and Auditors Report for the quarter ended June 30, 2006
99.12	Indian GAAP Consolidated Balance Sheet, Consolidated Profit & Loss Account, Consolidated Cash Flow statement, Consolidated Schedules, Consolidated Notes on Accounts and Auditors Report for the quarter ended June 30, 2006

EX-99.2

EXHIBIT 99.2

Indian GAAP Press Release

Infosys Technologies Limited - Financial Release June 30, 2006

Q1 revenues grew sequentially by 15%

Guidance revised upwards. Revenues expected to grow 40.2% - 40.7% in fiscal 2007

Bangalore , India - July 12, 2006

Highlights

Consolidated results for the quarter ended June 30, 2006

• Income was Rs. 3,015 crore for the first quarter ended June 30, 2006; YoY growth was 45.6%
• Net profit after tax before exceptional items was Rs. 794 crore for the quarter ended June 30, 2006; YoY growth was 49.2%
• Earnings per share* before exceptional items increased to Rs. 28.71 from Rs. 19.63 for the corresponding quarter in the previous year; YoY growth was 46.3%

Others

• 38 new clients were added during the quarter by Infosys and subsidiaries
• Gross addition of 8,097 employees (net 5,694) for the quarter by Infosys and subsidiaries
• 58,409 employees as on June 30, 2006 for Infosys and subsidiaries

"Our efforts in building the brand, developing the client base, and expanding strategic accounts have fueled our robust organic model," said Nandan M. Nilekani, CEO, President and Managing Director.

Business outlook

The company's outlook (consolidated) for the quarter ending September 30, 2006 and the fiscal year ending March 31, 2007, under Indian GAAP and US GAAP, is as follows:

Outlook under Indian GAAP - consolidated

Quarter ending September 30, 2006**

• Income is expected to be in the range of Rs. 3,257 crore and Rs. 3,280 crore; YoY growth of 42.0% - 43.0%
• Earnings per share* are expected to be between Rs. 29.47 and Rs. 29.78; YoY growth of 32.4% - 33.8%

Fiscal year ending March 31, 2007**

• Income is expected to be in the range of Rs. 13,350 crore and Rs. 13,400 crore; YoY growth of 40.2% - 40.7%
• Earnings per share* are expected to be between Rs. 124.51 and Rs. 125.74; YoY growth of 38.3% - 39.6%

Outlook under US GAAP

Quarter ending September 30, 2006

• Consolidated revenues are expected to be in the range of $ 710 million and $ 715 million; YoY growth of 35.5% - 36.5%
• Consolidated earnings per American Depositary Share* are expected to be between $ 0.64 and
  $ 0.65; YoY growth of 25.5% - 27.5%

Fiscal year ending March 31, 2007

• Consolidated revenues are expected to be in the range of $ 2.91 billion and $ 2.92 billion; YoY growth of 35.4% - 35.9%
• Consolidated earnings per American Depositary Share* are expected to be between $ 2.70 and
  $ 2.73; YoY growth of 32.4% - 33.8%

* Not adjusted for issue of 1:1 bonus shares, as the record date for issue of bonus shares is July 14, 2006.
** conversion 1 $ = Rs. 45.87

"We witnessed strong growth during the quarter and we believe we have the required scale, execution capabilities and end-to-end service offering to take advantage of the momentum seen in the marketplace," said S. Gopalakrishnan, Member of the Board and COO.

Changes to Board of Directors

Mr. N. R. Narayana Murthy, Chairman and Chief Mentor, turns 60 on August 20, 2006 and as per the service rules of the company, he will retire from the services of the company on that date. In this connection, the Board resolved to appoint Mr. Murthy as an Additional Director of the company with effect from August 21, 2006 and further resolved that Mr. Murthy will serve as the Non-Executive Chairman of the Board and Chief Mentor with effect from August 21, 2006.

The Board also resolved that Mr. Nandan M. Nilekani, currently the Chief Executive Officer, President and Managing Director of the company, be re-designated as the Chief Executive Officer and Managing Director with effect from August 21, 2006 and that Mr. S. Gopalakrishnan, currently the Chief Operating Officer and Deputy Managing Director, be promoted and re-designated as the President, Chief Operating Officer and Joint Managing Director with effect from August 21, 2006.

Expansion of services and significant projects

Infosys continued to provide high quality business transformation solutions to clients by combining innovation in service delivery and technology.

In a product engineering engagement, Infosys is helping a software product company to accelerate its product development. The company will also benefit from Infosys' Infrastructure Management and System Integration services. Infosys is building an application for a home improvement and building products conglomerate to enable Sarbanes-Oxley compliance.

Infosys is re-engineering the Electronic Data Interchange (EDI) platform for a leading manufacturer to improve operational efficiency across its European operations. As a key partner in a major digital lifestyle company's Supply Chain Excellence Program, Infosys is involved in designing and implementing its demand and supply network planning processes.

Infosys is helping a large semiconductor company address its operational challenges through effective customer data management. A leading hi-tech distributor has lowered its IT support costs by adopting an Infosys shared-services model to provide Oracle ERP support for its multiple operating subsidiaries.

Infosys partnered with a major European telecommunications services provider in designing and developing an Inventory Management System to consolidate its multiple standalone systems.

Infosys is working with a large specialty retailer in the US to develop a merchandise planning application that will permit planners to model the sales and inventory plans in real-time for improved decision-making and forecasting.

A Fortune 100 pharmaceutical and medical devices manufacturer is using Infosys' expertise in strategic business transformation initiatives to achieve an efficient world-class IT services sourcing model.

Infosys is defining the product roadmap for corporate actions for a leading US financial services conglomerate. Infosys is also helping the company with a buy-or-build analysis.

"During the quarter, revenues from two of our clients crossed $ 100 million," said S. D. Shibulal, Member of the Board and Head - Worldwide Customer Sales & Delivery. "Growth in Europe continues to be strong. Our growth during the quarter is driven mainly by the telecom, financial services and manufacturing sectors."

Finacle^®

Finacle^®, the universal banking solution from Infosys, consolidated its position as a preferred choice for large global banks.

A large Indian bank is deploying Finacle^® core banking solution across 600 branches, an initiative focused on achieving significant cost advantage. United Bank of India has licensed Finacle^® to differentiate its value proposition in retail banking and manage rapid operational growth. A large financial institution in the Caribbean has selected Finacle^® consumer e-banking and corporate e-banking solutions.

State Bank of India successfully rolled out Finacle^® across its branches in 20 countries, including China, the US and Oman. Finacle^® treasury solution was rolled out in Equity Bank, Kenya, while Finacle^® core banking solution was implemented at DBS, Indonesia.

Process innovation at Infosys

During the quarter, Infosys filed 1 patent application at the United States Patent and Trademark Office (USPTO) and 8 patent applications at the patent office in India for process innovation in IT services. As of June 30, 2006, Infosys had filed 44 patent applications in India and the US.

Infosys' Research and Development arm, SETLabs, is working closely with clients in developing their technology roadmaps. Infosys is developing Intellectual Property (IP) in business-critical areas such as Service Oriented Architecture, High Performance and Grid Computing, Convergence and Mobility, Business Process Management and Information Management.

Liquidity and capital expenditure

Cash and cash equivalents, including investments in liquid mutual funds, as on June 30, 2006 was Rs. 3,434 crore (Rs. 2,684 crore as on June 30, 2005). During the quarter, Infosys incurred capital expenditure of Rs. 193 crore, paid dividend including dividend tax of Rs. 1,215 crore, and paid Rs. 530 crore towards acquisition of minority interest in Progeon Limited. Operating cash flows during the quarter ended June 30, 2006 were Rs. 466 crore (Rs. 578 crore for the quarter ended June 30, 2005).

"We benefited from the depreciation of the rupee against all major currencies during the quarter," said V. Balakrishnan, Chief Financial Officer. "Our margins have been maintained, despite increases in salaries and visa costs. We continue to focus on margins without compromising on investments needed to meet our growth objectives."

Human resources

Infosys added 8,097 (gross) employees during the quarter. About 2,000 employees joined on a single day during the quarter, which is the highest at Infosys. Infosys continues to invest in creating a strong training and recruitment engine to meet its growth objectives.

"We are well on our way to hiring 25,000 (gross) employees for the year," said T. V. Mohandas Pai, Member of the Board and Head - HRD and Education & Research. "Our employee policies and investments in education and training have made Infosys the employer of choice."

Progeon Limited

On June 30, 2006, Infosys acquired 87,50,000 equity shares (23% on a fully diluted basis) of Progeon Limited from Citicorp International Finance Corporation for a consideration of Rs. 530 crore ($ 115.13 million). As of June 30, 2006, Infosys holds 96.96% of the outstanding equity shares of Progeon Limited. The net consideration of Rs. 309 crore after withholding taxes of Rs. 221 crore was remitted to Citicorp International Finance Corporation on June 30, 2006.

Infosys in the new NASDAQ Global Select Market

Infosys was included in the new NASDAQ Global Select Market on July 3, 2006. The NASDAQ Global Select Market has the highest initial listing standards of any exchange in the world based on financial and liquidity requirements.

Bonus issue of shares

The Board has fixed July 14, 2006 as the Record Date to determine the shareholders and holders of ADSs who will receive the bonus equity shares and additional ADSs respectively.

About the company 

Infosys (NASDAQ: INFY) defines, designs and delivers IT-enabled business solutions. These provide our clients with strategic differentiation and operational superiority, thereby increasing their competitiveness. Each solution we provide is delivered with the industry-benchmark "Infosys Predictability" that gives our clients peace of mind. With Infosys, they are assured of a transparent business partner, business-IT alignment with flexibility, world-class processes, speed of execution and the power to stretch their IT budget by leveraging the Global Delivery Model that Infosys pioneered. Infosys has over 58,000 employees in over 35 offices worldwide. For more information, visit 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 segmen t 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, 2006. These filings are available at www.sec.gov. Infosys may, from time to time, make additional written and oral forward-looking statements, including statements contained in the company's filings with the Securities and Exchange Commission and our reports to shareholders. The company does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of the company.

Contact

Investor Relations	Shekar Narayanan, India +91 (80) 4116 7744 shekarn@infosys.com	Sandeep Mahindroo, USA +1 (510) 402 3563 sandeep_mahindroo@infosys.com
Media Relations	Bani Paintal Dhawan, India +91 (80) 2852 2408 Bani_Dhawan@infosys.com	Peter Mclaughlin, USA +1 (213) 268 9363 Peter_Mclaughlin@infosys.com

INFOSYS TECHNOLOGIES LIMITED

		in Rs. crore
Balance Sheet as at	June 30, 2006	March 31, 2006
SOURCES OF FUNDS
SHAREHOLDERS' FUNDS
Share capital	138	138
Reserves and surplus	7,690	6,759
	7,828	6,897
APPLICATION OF FUNDS
FIXED ASSETS
Original cost	3,075	2,837
Less: Accumulated depreciation	1,371	1,275
Net book value	1,704	1,562
Add: Capital work-in-progress	510	571
	2,214	2,133
INVESTMENTS	2,268	876
DEFERRED TAX ASSETS	63	56
CURRENT ASSETS, LOANS AND ADVANCES
Sundry debtors	1,765	1,518
Cash and bank balances	1,124	3,279
Loans and advances	1,400	1,252
	4,289	6,049
LESS: CURRENT LIABILITIES AND PROVISIONS
Current liabilities	804	808
Provisions	202	1,409
NET CURRENT ASSETS	3,283	3,832
	7,828	6,897

NOTE:

The audited Balance Sheet as at June 30, 2006 has been taken on record at the board meeting held on July 12, 2006.

INFOSYS TECHNOLOGIES LIMITED  

	in Rs. crore, except per share data
Profit and Loss Account for the	Quarter ended June 30
	2006	2005
Income from software services and products	2,867	1,967
Software development expenses	1,615	1,064
GROSS PROFIT	1,252	903
Selling and marketing expenses	167	119
General and administration expenses	211	137
	378	256
OPERATING PROFIT BEFORE INTEREST AND DEPRECIATION	874	647
Interest	-	-
Depreciation	97	75
OPERATING PROFIT BEFORE TAX AND EXCEPTIONAL ITEMS	777	572
Other income, net	129	30
Provision for investments	3	-
NET PROFIT BEFORE TAX AND EXCEPTIONAL ITEMS	903	602
Provision for taxation	104	79
NET PROFIT AFTER TAX AND BEFORE EXCEPTIONAL ITEMS	799	523
Income from sale of investments (net of taxes)	6	-
NET PROFIT AFTER TAX AND EXCEPTIONAL ITEMS	805	523
Balance Brought Forward	2,195	1,428
Less: Residual dividend paid	4	-
Additional dividend tax	1	-
	2,190	1,428
AMOUNT AVAILABLE FOR APPROPRIATION	2,995	1,951
Dividend
Interim	-	-
Final	-	-
Total dividend	-	-
Dividend tax	-	-
Amount transferred to general reserve	-	-
Balance in profit and loss account	2,995	1,951
	2,995	1,951
EARNINGS PER SHARE*
Equity shares of par value Rs. 5/- each
Before Exceptional Items
Basic	28.89	19.33
Diluted	28.22	18.79
After Exceptional Items
Basic	29.13	19.33
Diluted	28.45	18.79
Number of shares used in computing earnings per share
Basic	27,64,12,363	27,09,95,442
Diluted	28,30,19,236	27,88,25,223

* Not adjusted for issue of 1:1 bonus shares, as the record date for issue of bonus shares is July 14, 2006.

NOTE:
The audited Profit & Loss Account for the quarter ended June 30, 2006 has been taken on record at the board meeting held on July 12, 2006

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

CONSOLIDATED FINANCIAL STATEMENTS OF INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES

		in Rs. crore
Consolidated Balance Sheet as at	June 30, 2006	March 31, 2006
SOURCES OF FUNDS
SHAREHOLDERS' FUNDS
Share capital	138	138
Reserves and surplus	7,705	6,828
	7,843	6,966
MINORITY INTEREST	8	68
	7,851	7,034
APPLICATION OF FUNDS
FIXED ASSETS
Original cost	3,647	2,983
Less: Accumulated depreciation	1,433	1,328
Net book value	2,214	1,655
Add: Capital work-in-progress	510	571
	2,724	2,226
INVESTMENTS	1,638	755
DEFERRED TAX ASSETS	73	65
CURRENT ASSETS, LOANS AND ADVANCES
Sundry debtors	1,870	1,608
Cash and bank balances	1,272	3,429
Loans and advances	1,427	1,297
	4,569	6,334
LESS: CURRENT LIABILITIES AND PROVISIONS
Current liabilities	949	934
Provisions	204	1,412
NET CURRENT ASSETS	3,416	3,988
	7,851	7,034

NOTE:
Principles of consolidation: The financial statements are prepared in accordance with the principles and procedures for the preparation and presentation of consolidated financial statements as set out in the Accounting Standard on Consolidated Financial Statements prescribed by the Institute of Chartered Accountants of India. The financial statements of the parent company 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.

CONSOLIDATED FINANCIAL STATEMENTS OF INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES

	in Rs. crore, except per share data
Consolidated Profit and Loss Account for the	Quarter ended June 30
	2006	2005
Income from software services, products and business process management	3,015	2,071
Software development and business process management expenses	1,666	1,104
GROSS PROFIT	1,349	967
Selling and marketing expenses	204	141
General and administration expenses	256	162
	460	303
OPERATING PROFIT BEFORE INTEREST, DEPRECIATION AND MINORITY INTEREST	889	664
Interest	-	-
Depreciation	106	80
OPERATING PROFIT BEFORE TAX, MINORITY INTEREST AND EXCEPTIONAL ITEMS	783	584
Other income, net	128	28
Provision for investments	3	-
NET PROFIT BEFORE TAX, MINORITY INTEREST AND EXCEPTIONAL ITEMS	908	612
Provision for taxation	106	80
NET PROFIT AFTER TAX AND BEFORE MINORITY INTEREST AND EXCEPTIONAL ITEMS	802	532
Income from sale of investments (net of taxes)	6	-
NET PROFIT AFTER TAX, EXCEPTIONAL ITEMS AND BEFORE MINORITY INTEREST	808	532
Minority Interest	8	-
NET PROFIT AFTER TAX, EXCEPTIONAL ITEMS AND MINORITY INTEREST	800	532
Balance Brought Forward	2,219	1,415
Less: Residual dividend paid	4	-
Additional dividend tax	1	-
	2,214	1,415
AMOUNT AVAILABLE FOR APPROPRIATION	3,014	1,947
Dividend
Interim	-	-
Final	-	-
Total dividend	-	-
Dividend tax	-	-
Amount transferred to general reserve	-	-
Balance in profit and loss account	3,014	1,947
	3,014	1,947
EARNINGS PER SHARE*
Equity shares of par value Rs. 5/- each
Before Exceptional Items
Basic	28.71	19.63
Diluted	28.04	19.08
After Exceptional Items
Basic	28.95	19.63
Diluted	28.27	19.08
Number of shares used in computing earnings per share
Basic	27,64,12,363	27,09,95,442
Diluted	28,30,19,236	27,88,25,223

* Not adjusted for issue of 1:1 bonus shares, as the record date for issue of bonus shares is July 14, 2006.

EX-99.3

EXHIBIT 99.3

INFOSYS TECHNOLOGIES, LTD
Q1 07 PRESS CONFERENCE
JULY 12, 2006

CORPORATE PARTICIPANTS

Nandan Nilekani
Infosys Technologies - CEO, President and MD

Kris Gopalakrishnan
Infosys Technologies - COO and Deputy MD

Deepak Satwalekar
Infosys Technologies - Lead Independent Director

Mohandas Pai
Infosys Technologies - Member of the Board

V. Balakrishnan
Infosys Technologies - CFO

PRESS CONFERENCE PARTICIPANTS

Balaji
Rediff

Sumeet
Reuters

Chitra
Bloomberg

Srikant
Hindustan Times

Vijay
Zee

Bani
Good afternoon everyone. Welcome to Infosys Q1 quarter result press conference. We have with us Mr. Deepak Satwalekar, Lead Independent Director for Infosys who will make a special announcement today. We will get into the presentation on the financial performance by Nandan after the special announcement and this will be followed by a presentation by Kris on the company's operational performance. I would request you to raise your hands to ask a question and please give your name and the name of your publication. Over to Mr. Satwalekar.

Deepak Satwalekar
Good morning friends. Yesterday at the board meeting there was a decision taken. As you all know, Mr. Narayana Murthy turns 60 on 20 th August and as per the rules of Infosys, that is the age at which executives or executive directors retire. Mr. Narayana Murthy retires on 20 th August but the board felt that it is important for the company to continue to benefit from his experience and wisdom and therefore with effect from 21 st August, Mr. Murthy will be the Non-Executive Chairman of Infosys. It was also decided that he would continue in his role as Chief Mentor primarily on the basis that as Chief Mentor, he would now be responsible for really guiding the future talent and the future generation of leaders at Infosys. As Non-Executive Chairman of Infosys, we are hopeful that having shed the responsibilities of an executive office that he would now be able to devote more time to this challenging role to take Infosys to the next level. Thank you.

Nandan Nilekani
I would like to thank Deepak for coming in and making that special announcement. Now we will go to the normal part of this event which is talking about the performance of the Infosys group for the first quarter ended June 30 th 2006. This is the safe harbor clause, which you have been seeing for all these quarters. I will speak about the financial performance and then I will request my colleague Kris to talk about operational performance and some other human resources and so forth.

On the financial performance, on a year-to-year basis on Indian GAAP, our income has grown by 45.6% and PAT from ordinary activities has grown at 49.2% and on US GAAP, our year-to-year growth has been at 38.7% and net income has grown at 42.6%. The new clients added is 38 this quarter and the repeat business is at a high of 97% which is normally typical in the first quarter of a new financial year.

Our head count additions this quarter we added 8,097 employees, gross, which on a net basis was 5,694 and the period end headcount was 58,409. So we are on target and essentially we had said last time and we continue to be on target. We have said we will do 25,000 gross additions this year, 8000 in Q1, 7000 in Q2, and 10,000 in the second half of the year, so we are on schedule for that.

This is the highlight of the Indian GAAP consolidated balance sheet. The income for the quarter was Rs. 3,015 cr, which as you see, was a year-to-year growth of 45.6% and a sequential growth on a quarterly sequential basis of 14.9% or close to 15%. This was partly because of robust business growth as well as the depreciation of the rupee. The operating profit for the quarter was Rs. 889 crores, which was a improvement of 33.9% over the same quarter last year and the Profit After Tax after all exceptional items and minority interest, which is the interest in Progeon, was at Rs. 800 crores. So Rs. 800 crores was the net profit after all minority, all exceptional items. So I think that is pretty decent performance. And this was if you look at it on a year-to-year basis, was a growth of 50.4% and on a sequential basis, i.e. over Q4 of last financial year this was an improvement of 18.9% in terms of sequential growth of PAT Indian GAAP consolidated rupees.

On the balance sheet side, the total size of the balance sheet in crore was Rs. 7,851 which with net current assets of Rs. 5,000 crores on that. So that is the size of the balance sheet and you can see that this Rs. 7,851 total assets compares with Rs. 5,950 crores on the same day in the last year, this gives you a sense of the balance sheet.

With that I request my colleague Kris Gopalakrishnan to highlight some of the performance details.

Kris Gopalakrishnan
Thank you Nandan, and good afternoon to every one of you. Geographically Europe is seeing faster growth rate. So as you can see Europe is 26.2% of our revenues. Rest of the world, which includes Japan, Australia etc., is 8.4% of our revenues. Overall, geographically we have seen sequential growth in all the geographies, as a percentage Europe is growing faster.

Utilization is a healthy 76.1% excluding trainees, and including trainees it is 71.1%.

There is no material change in the ratio of Fixed Price versus Time and Material, it is around 27% Fixed Price and 73% Time and Material projects.

In onsite versus offshore there is a slight increase in onsite. In terms of effort, onsite is 33% of our revenue right now. This is to be expected when you have a faster growth clearly more number of project starts and more number of project starts onsite, then it gets transitioned back to offshore. It is also based on some of the business mix and things like that. From a revenue perspective onsite is about 50.5% and offshore is 49.5%.

We have now two $100 million relationships and eleven $50 million relationships compared to nine $50 million relationships last quarter. So clearly our large clients are growing. In fact we have seen 19% growth in the top five clients in this quarter, so we have seen significant growth in the large clientele. The top client is 5.8% of our revenue.

We have seen expansion in the clients, we have seen expansion in geographies, we have seen expansion in the different industry segments which we are operating with financial services, telecom, manufacturing showing significant growth rates. The number of clients added were 38. I won't go into the details of each one of them but you can see that we are re-engineering the EDA platform for a leading manufacturer, we worked on the supply chain excellence program for a life style company, for a US financial services conglomerate we are defining the product road map for corporate action, for a high tech distributor we are looking at Oracle ERP implementation and this is being done on a shared services model, which means that the same platform is used to support multiple clients, for a large specialty retailer we are developing a merchandise planning application. Finacle continues to do very well. A large Indian bank is deploying Finacle core banking across 600 branches. State Bank of India has successfully ro l led out Finacle across its branches outside India including China, US, and Oman.

During the quarter Infosys filed 1 patent application. As of June 30 th we have filed 44 patent applications in India and abroad and the SET Labs, which is our research and development arm, is working closely with our clients to develop tools, technologies, architectures etc. especially in some of the emerging areas like services oriented architecture, high performance in grid computing, business process management etc.

From a human resources perspective, as Nandan Said, this is a quarter where we have added 8,097 employees of which 2,140 were employees with prior experience. We have currently 4.6 million or 46 lakh square feet under construction, which can accommodate an additional 16,250 employees across various locations in India and I am going to now hand it over to Mohandas Pai, who is the Director in-Charge of HR, to talk about the changes with the board.

Mohandas Pai
Thank you Kris. Folks you heard Deepak come and tell you that Narayana Murthy will be stepping down upon retirement when he turns 60. He set the rule. So he is the first person from senior management to make sure that all of us follow the rule in future and he will be appointed as an Additional Director with effect from August 21 because he was appointed as a whole time Director and when you step down from employment your directorship ceases and the board has resolved in view of his outstanding achievement and the fact that he has played a very seminal role in creating an industry in the country that he will continue to serve the corporation for the balance 5 years as Non-Executive Chairman and carry title of the Chief Mentor. He was the first person in India to hold the title of the Chief Mentor. I think in the whole emerging markets he is the first person to hold Chief Mentor, I don't know the OECD market whether somebody has held the role of the Chief Mentor. He prob a bly is the first person in the world, then we had Singapore follow for S.M. Lee who became Senior Mentor. So I think he will continue to hold the title of Chief Mentor with effect from August 21.

We also have some more changes. Mr. Nandan M. Nilekani, who is currently the Chief Executive Officer, President and Managing Director of the corporation will be re-designated as Chief Executive Officer and Managing Director. The title of President will not be there for Mr. Nilekani. Mr. Gopalakrishnan, whom we fondly call as Kris, who is currently COO and Deputy Managing Director will be promoted and re-designated as President, Chief Operating Officer and Joint Managing Director with effect from August 21, 2006. We have always had two senior people leading the corporation. Narayana Murthy has stepped down. So we have two great leaders, Nandan and Kris, leading us. So on your behalf let me officially make this announcement and congratulate Kris. Congratulations Kris. Balaji please come. Now the outlook, Nandan.

Nandan Nilekani
Okay, let me wait for Balaji to sit down before I talk about, otherwise he may criticize me for something or the other. Thank you.

With your permission let me continue. So let me just briefly talk about the outlook. As you can see, we have revised the outlook both for the quarter and the year. So basically I am giving you the Indian GAAP consolidated outlook. We expect for the quarter ending September 30 th income is expected to be between Rs. 3,257 crores and Rs. 3,280 crores on a year-to-year growth basis this is a growth of 42% to 43%, and we expect for the same period that the earnings per share will be between Rs. 29.47 to Rs. 29.78, which is a year-to-year growth of between 32% to 33-34%, that is on the quarter. And for the full year ending March 31 st 2007, we expect income to be between Rs. 13,350 crores to Rs. 13,400 crores, which is a growth of 40.2% to 40.7%. So we are talking about 40% growth in rupee terms for the year on an annual income basis. And on the earning per share we expect the Earning Per Share to come in at about Rs. 125 per share, which we think is a growth of between 38.3% to 39.6%.

In dollar terms we are expecting the growth to be around 34.5% to 34.9% which means in dollar terms we are saying the revenues will grow from $ 2.15 billion to something like $ 2.92 billion.

Now let me come to the summary. I think as is obvious here, we have witnessed strong growth during the quarter. The growth has come about in the multiple areas, in telecommunication, in financial services, in manufacturing, in Europe. So there have been multiple engines of growth that have fuelled this growth. We have also seen an expansion of our top clients, we have had two clients whose revenue on a last 12-month basis has crossed $100 million. We continue to have 221 customers who give us more than $ 1 million dollars of business and we have 11 customers who on an LTM basis give more than $ 50 million as compared to 9 customers last quarter. So you can see there has been a all round growth and we have been saying time and time again that our growth is coming from a robust organic model. Our growth is coming because in the last few years we have built the brand, we have developed the client base, we have expanded the strategic accounts and we have built the required scale, execution capability, as we ll as the end-to-end service offerings to take advantage of the momentum seen in the market place. As you all know, we believe that we have created a new business model, a new execution model, which is faster, better and cheaper than our competitors which is why we continue to grow at these kind of growth rates even as their growth rates languish and I think this is really a disruptive business model and we represent the new as compared to the old.

On the employee side also we have seen great addition, we have a gross addition of 8,000 odd people in the quarter and as you can see our margins have been maintained. We had an impact of 3.3% on the margins because of employee wage cost and had an impact of 1.3% on margins because we invested more in visas because for visas there is a window when you have to make the applications and therefore we wanted to take full advantage of the window and we have invested. So that increased our impact on operating margin by about 1.3%. So the combined impact of this was 4.6%. At the same time, the rupee depreciation contributed an improvement of margin of 2.2% and some reduction in the depreciation on the capital side gave us a benefit of 2%. So there was a total benefit of 4.2% as opposed to a total negative impact of 4.6%. So the net impact was 0.4% on the margin. So in effect we invested in employees' welfare, we invested in visas and we were able to recover most of that because of the depreciation and reduced investment. So that is why the margins have been maintained and we expect that the margins will be maintained in the narrow band in the coming year.

With that we come to the end of our presentation and we will be happy to take questions from this august audience.

Male speaker
- ( speaker inaudible)

Bala
We have around $381 million of forward contract and options outstanding as of June 30 th. All of them have been marked to market at 45.87( phrase inaudible), which is the closing rate for the quarter

Sumeet
Sumeet from Reuters. Two questions for Nandan. What are the main reasons for revising the guidance for the full fiscal year? Do you see any risks going ahead in this fiscal year from the wage hike or the rupee-dollar fluctuations that can upset the guidance?

Nandan Nilekani
I think there are two reasons for the revision of the guidance upwards. One is of course the business performance we think is going to be more robust than what we had anticipated in April, which is reflected in the dollar guidance because we revised the dollar guidance from 28 - 30% to 35.4 - 35.9%. So that is the business growth dimension And also the rupee has depreciated against all the three major currencies - the dollar, the euro, and the pound and therefore that is contributing in addition to the growth and therefore the rupee growth is coming through at 40%. This is numbers that we stand by because when we give guidance we look at the business, so in that sense this has factored in all the factors that we talked about. We think that certainly we have done all the wage increases for the year. We have increased our offshore salaries 14-15%, we have increased our onsite salaries by 3%. We have already said that we are going to increase starting salaries on campuses next year from Rs. 2.4 to Rs. 2.7 lakh s and we have done other things to make sure that we create the right set of compensation initiatives. So that has been done so all that is factored and priced and costed into the model. The rupee volatility is an issue, but we believe that we have a hedging policy where we take forward covers for the next couple of quarters and we have mark to market policy. Whatever will happen will happen, we don't worry too much about it beyond our policy. So I think we have factored in that. There is one other issue which is whether the global economy will slow down and today the businesses with whom we talk to, find the businesses are growing very well. But the economist that we talk to worry about global imbalances, trade deficits, budget deficits all that good stuff. So we believe that even if there is a economic slow down, given the fact that our value proposition is something that gives customers faster, better and cheaper value and IT services, so we think that we will continue to be able to do well because essent ially we are a defensive play in this environment.

Balaji I know you have asked a lot of questions and you are ....

Balaji
No, no, not lot, just 6-7.

Nandan
Okay I will answer 2-3 of your questions Balaji. First of all you have asked why is the board silent on Murthy's successor, when will it be decided - the company's new Chairman?

As a matter of fact the board has not been silent on this matter, and the board has clearly said that on August 21 st when Murthy steps down as the Executive Director and therefore as Executive Chairman he will join the board as a Non-Executive Additional Director and be Chairman of the board in a non-executive capacity and given his historic association with the company and the seminal role he has played we have invited him to continue to be Chief Mentor so that he can continue to mentor and motivate a new generation of leaders. So we have answered the question.

Balaji
That is what you don't have a Chairman per se hereafter.

Nandan
He is the Chairman of the board.

Balaji
But non-executive.

Nandan
Yes, but he is the Chairman of the board.

Balaji
In the non-executive capacity?

Nandan
Yes absolutely, so we have answered that question, so nobody is silent on this matter.

Coming to the second point, you have said while Gopalakrishnan was promoted and re-designated there is no mention about my promotion. So that is surprising.

Now I don't know what it is, is that Nilekani's promotion? All I can say is that the, I don't know why you want me to be promoted but anyway ....

Balaji
There is no promotion for you.

Nandan
Yeah, actually I have slimmed down, I have reduced one title and I think it is a well-deserved thing, I think Kris has played an enormous role in the success of this company and I think it is true recognition of his contribution and his future role in the company.

Balaji
- there is not much of a change in view of this Mr. Murthy retiring as a Chairman and becoming non-executive and you what do you call ....

Nandan
No, I think what it means is that ....

Balaji
There is no promotion for you, that is what I want to know.

Nandan
No, since this is a delicate topic, I will ask Mohan to answer this.

Mohandas Pai
There is a change. I think we should recognize that. Nandan is the senior most person in the company on a full time basis. Narayana Murthy was a senior most person. Narayana Murthy will not be the senior most person. So Nandan will be the senior most person, he is the leader for the entire management team. Earlier we had Mr. Narayana Murthy to look up to, now he will be playing a non-executive role, his role is limited in the corporation, Nandan will play the role that Narayana Murthy played within the corporation even though he does not carry the title of Chairman. Because an executive Chairman is a full time role, he is here all the time to look up to, we will have to walk into Nandan's room and trouble him like we troubled Narayana Murthy, and hopefully he will see that with very great affection and mentor all of us and make sure we do our work. So the responsibility has now devolved on him even though there is no change in title under the shedding of small title and because the responsibility is that much more greater the President title has gone to Kris as a promotion and Kris will be doing a greater part of the work that Nandan was doing earlier.

Balaji
During the AGM we were given to understand, we were made to even flag the news that a successor will be decided by the board on July 11 th or 12 th, whatever it is.

Mohandas Pai
Well right now he is a successor.

Balaji
Of course, the title is not there.

Mohandas Pai
Well, lets say we don't have an executive Chairman position now. We have a Chairman of the board, because earlier Mr. Narayana Murthy was Executive Chairman, Chairman of the Board, Chief Mentor. So his role is different, but he is a successor.

Nandan
Okay, I think we should give other people an opportunity. Anybody else has a question? Yes sir. You take a mike and also just introduce yourself. That will be nice.

Vijay
Can you tell me the breakeven of your China and Australia & New Zealand?

Nandan
I think Bala you want to just take that question in terms of the finances?

Bala
If you look at the standalone numbers, standalone our revenue was Rs. 2,867 crores, Progeon did around Rs. 127 crores during the quarter, China is still in the investment phase - they had a small revenue of Rs. 3 crores, Australia is Rs. 12.55 crores on a standalone basis. Most of the flow down work comes into Infosys and Consulting on a standalone basis was Rs. 4.4 crores. So overall, for the group, it is Rs. 3,014 crores, China and the Consulting are actually in investment phase, that are still incurring losses. China will take some more time. Consulting may breakeven in the next 3-4 quarters, but Progeon and Australia are profitable.

Female correspondent
This figure of goodwill, suddenly in 3 months it has gone up from $ 8 to $ 91 million, why?

Bala
Well during the quarter we brought out the Citi's stake in Progeon. Citi was holding 23% of Progeon on a fully diluted basis. we brought it out for Rs. 530 crores, that is reflected in the goodwill because when you take a minority stake in a subsidiary it will be reflected in your balance sheet as a goodwill, that is why there is increase.

Chitra
Chitra from Bloomberg. What is the narrow band within which EBIDTA margins will move for the next year or so?

Bala
If you look at the guidance, the guidance factors in the margin to be stable for the whole year. So on a full year basis the margins will be between 31-32%.

Male correspondent( speaker inaudible)
taken care of.

Bala
Well we have _ESOP_ cost of around a million dollar or so in income statement, that will continue.

Male correspondent
Visa.

Bala
Visa, okay. Visa we invested around $11 million this quarter. This is one of the largest investment we made because when we see incremental benefits on profit, we want to reinvest into business. So we have invested around $11 million in visas applying for some 3,500 visas. So this investment is to secure our future and growth.

Kris
On an ongoing basis there will be continued visa expenses because we have to renew visas and then we to also apply for visas for other countries. This is primarily for US.

Male correspondent
Nandan, you were talking about guidance, continuing on that point, would the blast of Bombay have any impact on India as an outsourcing destination?

Nandan
No, I don't think the blast will have an impact. I think obviously the blasts were a shameful tragedy and I don't think the innocent people of Bombay deserved anything of this type. So I think clearly it was a very bad act but we think it does not have any impact. First of all we have seen terrorism across the world, we have seen it in New York, we have seen it in London, we have seen it in Madrid, so it is a phenomenon that is in many countries and I think the resilience, the courage, the dynamism with which Bombay has sprung back today back to normal shows the enormous strength and fortitude of the people in Bombay and I think the India economic story, the India fundamentals will continue. So I think there is no impact at all from that sense. Of course it is a terrible and shameful act, which should be condemned.

Female correspondent
The government has announced Special Economic Zone policy 6 months earlier. Now how does it impact on your company and several smaller companies are complaining that big companies like you have already made the investments and therefore you stand to gain in respect to their own ( phrase inaudible) ...

Mohandas Pai
Well, the Special Economic Zone is against the interest of smaller companies. The Special Economic Zone is in favor of large companies, is in favor of people who have real estate business and is against the smaller companies because NASSCOM has said the rentals for smaller companies in SEZs have gone up. Earlier small companies could set up in the garages, most of the IT companies in this country which are big, like Infosys, came up as small companies, in very small places. The regulatory regime was very conducive for them to grow up. In future, the regulatory regime is not conducive, it is against small companies, it will stifle innovation and is not a good thing for the IT industry. Today if you want to be in SEZ to get the tax benefits, you have to go to a larger place and because it is very restricted and in a larger place the real estate developer will demand higher rents. It has already happened. NASSCOM has complained, and this is a serious matter of concern for t he whole industry.

Female correspondent
(speaker inaudible).

Mohandas Pai
Yes we have taken a proactive stand as a company which started as a very small company, was innovative and which grew because of liberalization. We have told the government that this is not good for the small scale industry. Wwe need an STP like regulatory regime to help this industry and to make sure that we can focus on growth, for example, in the last 6 months since we applied for the SEZ for Infosys, we have gone more times to Delhi to meet the government than we have done in the last 12 years when we had the STP.

Female correspondent
And the Government did not respond?

Mohandas Pai
No, because the process is so long. The process is so many meetings, the environment policy has come which is a big big minus for the industry. If you want to set up more than 100,000 square feet, you have to go through an environment assessment, you have to apply, it takes 9 months 12 months. There is a transaction cost and you have to go there and you have to spend time, it is enormously challenging for all of us. We never had to do this in the last 12 years and now we have to spend time in Delhi and government works at its own pace. So we need an STP like regulatory mechanism for the industry which has SEZ benefits for incremental investment, incremental employment, so that government's mandate to create incremental employment investment is done but an STP like thing where we go to the neighboring STP, they give us approval in 24 hours. Now we have to go to Delhi, multiple meetings, multiple applications, it is hell.

Female correspondent
But at the moment the (speaker inaudible) - you can convert it.

Mohandas Pai
No we are not converting, it is only incremental investment. It is not conversion, please.

Female correspondent
( speaker inaudible.)

Mohandas Pai
Yes, I mean it helps large companies like us, yes it is true, but we grieve for the smaller companies because our heart is for the smaller companies, even though we look very big to you, our heart is that of a small company.

Nandan
I think I knew, Balaji may be since you have inquired, we can just..., which of you want to answer a question here or you want to ask another question?

Balaji
Exhaust that first.

Nandan
If I have to exhaust this we will be here till 6 o'clock yaar.

Balaji
Koi bat nahin, hum 9 baze tak yahan hai, kya baat hai, ek hi baat hai.

Nandan
Okay, has the guidance been revised upwards due to dollar appreciation or on expectations of higher business in the remaining quarters?

For both obviously, I explained that to you earlier.

Then, as in the past, will you be revising the guidance again in October?

Male correspondent
( speaker inaudible) ritual.

Nandan
Ritual?

Male correspondent
(speaker inaudible.)

Nandan
No, we are not trying to make you go through any exercise.

Male correspondent
-

Nandan
I can't talk about October, I can only talk about July. Okay.

Male correspondent
(speaker inaudible.)

Nandan
I think may be since I have given him many questions, may be Imran or someone, anybody else who has a question? Yes sir.

Srikant
Srikant from Hindustan Times. Can you hear me?

Speakers
Yes.

Srikant
Okay. Last time when we met you said you have reached a saturation point in Bangalore because you cannot add any more seats. Kris just said 46 lakh square feet are being added across the country. Now how much of that is in Bangalore and do you still continue to face a wall every time you have to expand in Bangalore?

Mohandas Pai
Yeah, we have 385,000 which is an existing construction started some 12 months ago which is getting completed this quarter. Apart from that we don't have anything else in Bangalore. So the statement stands and of course we are trying to still acquire land, hopefully if we get a parcel of land shortly because we are in discussion with some few people. We are going through the process. Let us see what happens.

Male correspondent
( speaker inaudible) number of seats here in Bangalore?

Mohandas Pai
Yeah, seats are about 2,750 out of that. Out of the 16,000 seats only about 2750 are in Bangalore, and that is a great tragedy we keep talking about that if you want to be in Bangalore and you need to create a large number of jobs, obviously you need places (phrase inaudible)sort of a campus, you cant go to leased premises.

Male correspondent
(phrase inaudible) details of that approval given and about the Sarjapur?

Mohandas Pai
No sir.

Male correspondent
Because it is a fact that the committee has given the approval but there is no headway in that.

Mohandas Pai
Well the committee has given an approval. Now it is up to us to sign consent letters with the land owners and come with a proposal and obviously they are taking a lot of time because the market has got over heated and we are still in that process because the committee took a long time to give decision and the whole market has gone up, it has got over heated. So we have to see.

Vijay
Vijay from Zee. Mohan, you spoke about the number of trips that you have to make to Delhi. We find a lot of Chief Ministers making a lot of trips to your campus. Doesn't that help in sorting over this, especially when the Environment Minister is from the DMK and you had the Chief Minister....

Mohandas Pai
Well, we had Mr. Maran come here and we requested him and Mr. Karunanidhi that this is a big problem. Mr. Maran told us give me 2 or 3 weeks and we will solve this problem and we are hopeful that he will solve, he is our minister, a very young and dynamic minister. He has promised us that he will solve it. We do hope that he will solve it. We have taken it up with the Prime Minister. Narayana Murthy has met the Prime Minister and has requested and pointed out that we will comply with all environment requirements, there is no doubt about that. We are good corporate citizens. We are ISO 14001 certified but we need a process whereby you lay down the guidelines and say you comply with all this and give a self certificate but go ahead and don't stop. So we are willing for that. Of course, that is the way the whole world works and we are not a polluting industry. It is like a house, you don't pollute in your house, there is a minimum you do, you need to do certain things in y o ur house, right. You cant avoid that, we are human beings, but apart from that there is nothing else, so it is a big challenge.

Female correspondent
Why is this big difference between Hubli and Mangalore? Why is that Hubli is lagging behind? I am just taking as an example as what is lagging there?

Mohandas Pai
Well Mangalore has better infrastructure, better connectivity, the education base is good in Hubli too but Mangalore has had it longer historically, its a port city and there is a airport which has been there for a long period of time and I think government needs to invest substantially in Hubli, give them an allocation, build up infrastructure. Not that we have succeeded in Mangalore in a big way because we went there in 1995 and we only got a SEZ now in 2005, till then we tried to get some piece of land to expand, we could not expand and nobody helped us. So we are pioneers because we took a decision in 1995 but for being pioneers we are not rewarded and nobody came to our help to give us set up a campus and make an investment, government has not been proactive in Mangalore. It just happened that we went to Mangalore first, that is all.

Male correspondent
(speaker inaudible).

Mohandas Pai
We are waiting for the government to come back with an offer.

Male correspondent
Mr. Pai you have been quoted on camera as well as in print saying because the Chief Minister of Andhra Pradesh that Hyderabad will be your largest campus and when the Tamil Nadu Chief Minister came to your campus in Bangalore, you were quoted as saying that Chennai will be the largest Infosys campus. What exactly are you up to?

Mohandas Pai
No I think it all depends. See our ambition is that the new campus will be always better than the old campus. Chennai commitment was made about 2 years ago. Right now it is on way to become the largest campus because we have the land and we are growing there. Hyderabad is the next destination and we hope that Hyderabad will be larger than Chennai because it is the later one. And tomorrow if we grow somewhere faster, that could be bigger. So it is for the moment.

Male correspondent
Does these kind of statements, has it helped you in getting procedural delays covered up in Karnataka?

Mohandas Pai
No, it does not. We get still struck in the same thing. I mean I do not know what has improved.

Male correspondent
(phrase inaudible) capex for the full fiscal year, $350-400 million are likely to be invested?

Mohandas Pai
We have about $70 million for technology and balance is for that 5 million square feet that we are building along with the interiors and everything else.

Female correspondent
I understand Mr. Murthy was a large part of the reason why Infosys has always held on to so much cash on its balance sheet. Now that he is no longer an executive, will that change, I mean you are still trying to sit on that much cash or invest it in some (phrase inaudible).

Nandan
No, I think the Infosys' philosophy whether it is on cash, or business, or human resources, or values, I think is a broadly agreed, where there is broad degree of consensus among the management team, where there is a constancy of purpose. So, I think these are not the decisions that you take based on who is there and who is not there.

Male correspondent
(speaker inaudible).

Nandan
But not everybody has a loud ....

Male correspondent
(speaker inaudible).

Nandan
Yeah correct. I think it is an excellent strategic question Balaji. I think we have said that for Infosys, acquisition is not a substitute for growth. In other words, it is not our intention to substitute for fact organic growth is anemic. We believe that organic growth is fundamental to our business model because our business model, as explained earlier, is about doing things faster, better, and cheaper in a new kind of way and therefore you cannot buy the old legacy firms and grow, then it will be a complete contamination of what we are doing. So clearly the growth will not come from acquisition of large legacy firms. Having said that, we are clear about our future directions, which is to build the next generation IT services company, which combines the best of global delivery with the best of business consulting; and towards that extent, if we need to make an acquisition because organic growth is not fast enough in terms of capability building so that we enter into new ma r ket or get a new set of service offerings or get into a new vertical, then we will certainly look at acquisitions. So for us acquisitions are required to achieve a strategic intent but acquisitions are not a substitute for robust organic growth.

Male correspondent
(speaker inaudible)

Nandan
Yeah, it could be domain expertise, a particular market entry, it could be a service offering, it could be 200 consultants, one of those things.

Yeah, anybody else? Are we done?
Okay, so if there are no other questions, I would like to thank all of you and I would like to request Bani to close the event.

Bani
Thank you everybody.

Male correspondent
One or two of my crucial questions were left there,

Bani
Can we take them offline sir?

Male correspondent
No sorry, there is no offline.

Nandan
No, offline means only you will get the answer otherwise everybody will get the answer.

Male correspondent
Welcome.

Nandan
Theek hai . Bala, just answer his questions.

Bala
Question #6. Why Infosys' standalone income is Rs. 28.67 billion, contribution of subsidies appears to be meager of Rs. 1.48 million?

It is because some part of the revenues of Infy Australia comes in Infosys because all the Global Delivery Model work of Infy Australia come into Infosys and rest of the subsidiaries are small except Progeon, that is why you do not see the impact on the group because of the subsidiaries. Over a period of time, it will change.

Next question. However net profit of parent company is 805 crores but the consolidated profit is 800 crores.

It is because both China and Consulting subsidiaries are in the investment phase, still they are making losses. China made a $2 million of loss, Consulting made a $4 million loss. We are still absorbing that loss and allowing them to grow. That is why the group profit is less than the standalone profit.

On the last question, I will ask Mohan to answer.

Mohandas Pai
Yeah Sarjapur land I answered it that we still have to acquire the land. We are negotiating with the landowners, and hopefully we could see something. We are near the end of the negotiation.

Male correspondent
(speaker inaudible).

Mohandas Pai
Bangalore is the largest campus right now. For tomorrow, we do not know. It all depends where we grow faster. We are committed to Bangalore. We want to grow in Bangalore despite all these traffic, we are committed. We are head quartered in Bangalore. We are committed. We have made large investments in Bangalore. But the dice is falling elsewhere. So we hope that we will be able to do more in Bangalore.

Male correspondent
(speaker inaudible).

Kris
That's right, the global IT services industry is showing signs of stronger growth. Yes, the number of clients added is 38. We have 469 total number of clients. We have seen actually growth in some of the existing clients this quarter. We have two $100 million relationships. We have 11 $50 million relationships. So all of these have grown. As I said in my presentation, we have seen 19% growth in our top five clients this quarter. So clearly, the buoyancy in the market is increasing the offshore spending and it is being reflected in the growth in income from our clients.

Male correspondent
(speaker inaudible).

Kris
It is sequential.

Bani
Thank you everybody. Please join us for lunch outside.

EX-99.4

EXHIBIT 99.4

EX-99.5

EXHIBIT 99.5

Fact Sheet

EX-99.6

exv99w6

EX-99.7

EXHIBIT 99.7

INFOSYS TECHNOLOGIES, LTD
Q1 07 EARNINGS CALL
JULY 12, 2006

CORPORATE PARTICIPANTS

Nandan Nilekani
Infosys Technologies - CEO, President and MD

Kris Gopalakrishnan
Infosys Technologies - COO and Deputy MD

Mohandas Pai
Infosys Technologies - Member of the Board

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

V. Balakrishnan
Infosys Technologies - CFO

Amitabh Chaudhry
Progeon - CEO

CONFERENCE CALL PARTICIPANTS

Alan Helawell
Lehman Brothers

Moshe Khatri
Cowen and Company

Rod Bourgeois
Sansford Bernstein

Joseph Forensi
Janney Montgomery Scott

Bryan Keane
Prudential

James Friedman
SIG

RR Rao
Investor

Julio Quinteros
Goldman Sachs

Joseph Vafi
Jefferies and Company

Anthony Miller
Arete Research

Good morning. My name is Cynthia and I will be your conference operator today. At this time, I would like to welcome everyone to the Infosys Technologies First Quarter and Financial Year 2007 results conference 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, then the number 1 on your telephone keypad. If you would like to withdraw your question, press the pound key. I would now turn today's call over to Infosys Technologies' management. Please go ahead.

Sandeep Mahindroo
Good morning and thank you all for joining us today to discuss the financial results for the quarter ended June 30, 2006. I am Sandeep from the investor relations team in the U.S. Joining us today on this conference call is CEO, President and MD, Mr. Nandan M. Nilekani, COO and Deputy Mr. Kris Gopalakrishnan and CFO Mr. V. Balakrishnan, and other members of the senior management. We'll start with a brief statement on the performance of the company for the recently completed quarter, followed by the outlook for the quarter ended September 30, 2006 and the year ending March 31, 2007. After that we'll open up the discussion for Q&A. Before I pass it 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 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 on to Mr. Nilekani.

Nandan Nilekani
Thank you, Sandeep, and I am indeed very glad to invite all of you to this analysts call and I do hope that we are able to answer all your questions in the next one hour. I think this has been a good quarter for Infosys. Even as we see global spending and momentum going for our business model, we are finding that our robust organic growth is being fueled by the fact that in the last few years we have done a lot of brand building of Infosys. So Infosys is a well-known brand among our global clients. Therefore our client base has gone up. Today we have 221 clients giving us more than $1 million business, we have 11 clients giving us more than $50 million of business, we have 2 clients giving us more than $100 million of business. So we are able to create the market share and the mind share in the minds of the clients and complementing that has been the fact that on the delivery side, we built the requisite scale and execution capabilities and end-to-end service offering to take fill advantage of the m arket opportunity.

Thanks to this, we've been able to have dollar growth of 11.3% sequentially quarter-to-quarter and also further accentuated by the depreciation of the rupee to the dollar, we have been able to have a 15% growth in rupee terms and consequent to the robust performance and depreciation, we have revised our guidance under U.S. GAAP to something like 35.4% to 35.9% or close to 36% and in rupee terms we have revised it to over 40%.

Later on my colleague, Kris, will talk about some of the regions and all that, but fundamentally I think this is one more revalidation of the fact that our business model is really very very clearly a superior one. It's a model of IT services that deliver faster, better and cheaper solutions to customers and as all of you know, in any industry if you create a business model and a value proposition which delivers faster, better and cheaper services to clients, then they will switch from the old to the new. And therefore what we are seeing is a substitution behavior where people are switching from the legacy firms to the new firms. People are switching from the old to the new, from yesterday to tomorrow and we think that this is just one sort of instance of the trend which is out in the marketplace. And as I explained, I think Infosys is particularly well placed because of its strong market position.

Also I think as we have been arguing for a long time now, the structural benefits of our business model can only be achieved if you build a business model organically. This cannot be done through a company trying to reconfigure itself from the legacy model to the new model. We believe that has huge consequences in terms of rebalancing the workforce, operational structure, (unintelligible) issues, control issues, transfer pricing issues between locations and so forth. So these business model changes cannot be done on the fly; you have to build them organically. And I think the strength of business model has helped us to have strong, robust organic growth where step-by-step, we have invested both on the capabilities and the scale on one side and on the brand, client acquisition and account management on the other. So I think, the results of this quarter is nothing but a very strong validation of what we have been saying now for several years and I believe that all investors and all analysts need to look at very clearly the dynamics of this industry and the long-term consequences of what we are doing to the entire ecosystem of the industry as a way of the future investment decisions. A very important announcement I want to make is that we have a couple of senior management changes that I thought I would share with you. We have Mr. Narayana Murthy who is our Chairman who has led us with distinction for the last 25 years. He is turning on August 20, 2006, and as for the service rules, he will retire from service on that day. And the board has resolved to appoint him as an Additional Director and he will become the Non- Executive Chairman of the board from August 21, 2006. And also given the seminal role that he has played in the creation of this company and its history so far, we have requested him to continue as the Chief Mentor which we believe is a Non-Executive position that enables him to provide the leadership and advice and all that for our upcoming leaders of the next generation. At the same time, we're also happy and proud to announce that Mr. Gopalakrishnan who is currently the Chief Operating Officer and the Deputy Managing Director, he is being promoted and re-designated as the President, Chief Operating Officer and Joint Managing Director and this will also come into effect from August 21, 2006. We believe this is a very welcome and very positive development and Kris will play a very, very important role in the future of this company in his new expanded role.

With this I will hand over to Kris to speak on some of the operational highlights. Kris?

Kris Gopalakrishnan
Thank you Nandan and good afternoon, good evening, good morning to each one of you.

As Nandan already mentioned, we have seen all around growth this quarter from a geographical perspective - U.S., Europe have shown growth, especially Europe compared to other geographies. From an industry perspective, telecom, financial services, manufacturing, all these sectors have shown growth and have continued to remain strong industry verticals for Infosys. From a services perspective, Package Implementation, testing, Business Process Outsourcing, application development, all have shown growth. We have 2 clients that have grown to $100 million run rate and we have about 11 clients who give us $50 million or more. So clearly, from a client perspective, from our ability to mine existing relationships from an industry perspective, geography perspective, services perspective, we've seen growth. Currently, as Nandan said, we have 221 million dollar clients, we added 38 new clients this quarter. The top 5 clients grew 19% quarter-on-quarter in this quarter. We have added 8,097 employees this quarter, tha t's the gross addition. Our attrition is at 11.9%. We've added 50 more people in sales. In fact our sales and marketing expense has gone up by about a percentage quarter-on-quarter with additional people.

We have increased salaries in India. We have increased salaries outside India. This has had an impact of 3.3% on our margin and this is offset by depreciation of rupee and a reduction in the depreciation as Bala will explain.

All in all, we have seen all around growth and as we said it's been a good quarter. Now I'll pass it on to V. Balakrishnan, CFO, to talk about the numbers.

Bala
Sure Good evening everybody. Good morning for those who are in other part of the planet.

This quarter we have seen the revenues grow by 11.3% sequentially. It comprises of 8.5% growth because of volumes, around 1.8% growth because of the change in per capita revenues. Onsite per capita revenues grew by 1.1%, offshore grew by 0.2%. On a blended basis it grew by 1.8%. This quarter we absorbed the impact of the wage increase. We increased the wages in India effective April 1 by 14% to 15% and onsite salaries by 3%. It had an impact of 3.3% on the operating margin. During the quarter, we accelerated the investment in visa. We spent around $11 million investing in visas. We made application for close to 3,500 visas because said that when there is incremental benefit, we need to reinvest in the business and that's what we did and there was an impact of stock compensation costs of around $1 million which had an impact of 0.2%. So overall, we absorbed an impact of 4.8%. We had a positive impact because the rupee depreciated by 3.6% during the quarter, the average rate of rupee was 45.65 this quarter as compared to 44.22 last quarter. So we got a positive impact of 2.2% on the operating margin. Depreciation came down by 2%. Last quarter we had a one-off impact because we had some leased premises in the UK. That is not there this quarter, so the depreciation normalized.

So overall we had a 4.8% impact and 4.2% benefit because the rupee and depreciation and the operating margin came down slightly some from 26.3% last quarter to 25.8% this quarter. So we are able to maintain the margins in spite of wage increase and the incremental investment in visas.

Going forward we increased the guidance for the whole year. Initially in the beginning of April we gave a guidance of 28% to 30% for revenues. We increased it to 35.4% to 35.9% in revenue terms and in terms of EPS, it should grow from 32.4% to 32.8%.

And if you look at the cash flow, we had acquired the minority interest in Progeon. We paid around $ 116 m million to Citi to buy out the minority stake in Progeon which resulted in goodwill and also intangible assets on the balance sheet. As of June end, we had $91 million in goodwill and $19 million in intangible assets and because of acquisition of minority stake in Progeon.

So overall in the first quarter, we have absorbed all the costs and we have maintained the market and going forward in the guidance, we assume the per capita revenues to be flat. We have not assumed any increase in per capita revenue. Today we believe the environment is stable with some of the new customers coming at higher price points. We have not assumed any big deals. Most of the growth is organic growth. We are not looking at any inorganic growth in the guidance. So overall it was a good quarter. Now we open up for questions.

Operator
Thank you. Again to ask a question please press star then the number 1 on your telephone keypad.

Your first question comes from Alan Hellawell with Lehman Brothers.

Alan Hellawell
Yes, thank you very much. Two questions - you've stated that you're quite optimistic of higher client spend in FY07 and Top 5 clients spending has increased. Can you actually give the figures of the absolute numbers on Top 5 client spending year-on-year?

Kris
This is Kris here. As I said, this quarter the top client was 5.8% of revenue, the top 5 clients constitute 19.5% of revenue, the top-10 clients constitute 31.7% and the top 20 clients constitute 47.3% of revenues. The top 5 clients have grown by 19.1%, the top 10 clients by 15.8% and top 20 clients by 9.8% in this quarter.

Alan Hellawell
Okay, great. The other question I have is, you're obviously investing a large amount of resources and you've profiled it that the learning and development center in Mysore. Can you give us a sense as to whether you think that's going to have an appreciable impact on attrition rates and staffing of project? I mean specifically from which quarter would you, if there is a material impact, would you see tangible results from this investment program?

Kris
So out of the 8,097 people we have recruited, about 2,100 people are people with prior experience. The remaining including the additions in Progeon, Progeon has added 1,000 people. So about 4,500 people are part of the Infosys training program now and most of them will undergo training for about 16 weeks and some with Computer Science background may undergo training for about 6 weeks. They will be absorbed into the project as and when they come off the training. The utilization including training is about 71% and excluding training is about 77%. Now all the salary costs of these people are already factored into our model. We have given 14% to 15% salary increase in India and 3% salary increase outside India. That's also factored in. We've already announced that for the next fiscal year that is starting April 1, 2007, we plan to increase the salary to Rs. 2.7 lakhs, which is about Rs. 270,000, from Rs. 240,000 which is an increase of approximately 12%. And what normally happens is when these people come in, that's when we give the salary increase because every year we have been giving the salary increases. This year we pre-announced it so that we have a better opportunity to recruit the best and the brightest from the campuses. In fact, we have been that this has had a positive impact in our ability to recruit. We have already gone to a few engineering colleges. We plan to go to about 240 engineering colleges. This year our target is about 25,000 people of which 8,000 joined in the first quarter. So second quarter we're looking at 7,000 and second half we're looking at 10,000. So considering all this, we said that we must announce the increase right away. And we are seeing it has a positive impact. Does that answer your question?

Alan Hellawell
Yeah, I guess one very small add-on question. So as a result of all these innovations and development, I mean, can you talk about what you think, where you think it might take attrition and things like that? Because the profiling of your investment and training is - at least you've better profiled it of recent, but can you help us think about how that investment might translate into attrition rates and whatnot?

Kris
Currently our attrition is 11.9%. It has gone up from 11.3%, a slight increase. We believe that all this will help us maintain attrition. The competition for resources is severe. But our objective is to maintain our best employer status. Our objective is to give competitive salaries. Our objective is to make sure that we have a very good learning and working environment for our employees. And hopefully this will keep our attrition one of the lowest in the industry which is what it is currently. And our objective clearly is to you know keep the attrition low.

Alan Hellawell
Thank you very much. And congratulations on the very strong growth.

Kris
Thank you.

Operator
Your next question comes from Moshe Katri with Cowen and Company.

Moshe Katri
Hey let me also add my congratulations. The question is for Bala. Bala can you give us an update on the ABN AMRO contract? Specifically where we are in terms of ramp up and in terms of the impact from ABN AMRO on earnings so far?

Bala
Well the ABN AMRO contract is still in the KT stage - Knowledge Transfer stage. It has not come to the steady stage yet. The impact of that on the margins is very much limited because our basis (unintelligible). And as I said earlier over the whole period of the deal, the margins will be similar to what we earn in the rest of the business. So ABN AMRO deal does not impact the margins significantly on the numbers what we have today.

Moshe Katri
Okay. And then the various investment initiatives - North America Consulting, China, Australia, is there anyway also to quantify these investments in terms of their impact on EBIT margins? And also get an update on when are we going to get or are we getting to a breakeven level in each one of these three investments?

Bala
Sure. China and Consulting are still in the investment stage. We had a loss of $ 2.2 million in Infy China. And $ 4 million in Infosys Consulting. Both are still in the investment stage. Consulting may break even in the next three to four quarters. China will take some more time because we are just starting up. It will take some time for it to come to steady state. Progeon and Australia are positive to the earnings. So overall if you look at the numbers, the numbers included an impact of $6 million in investment both in China and Consulting. And going forward for the whole year, we will be absorbing something around $ 15 to $16 million due to Infy China and consulting.

Moshe Katri
Okay. And then just finally just a general big picture question. Any comment on IBM's plans to invest about $6 billion in India? Have you seen IBM in the market? Have you seen them recruiting aggressively? Because we're scratching our heads here trying to understand exactly what you can do with $6 billion in India in three years.

Nandan
Well it's a very mixed (unintelligible) also. But I think we welcome it. I think IBM coming to India and committing $ 6 billion dollars. That's a big vote of confidence in India and we welcome that. So we have absolutely no issue in terms of competitive pressure and so forth. So we can't really say we have seen any impact on the attrition side because of that specific factor. And as we have said for a long time, the fundamental thing which is happening in this industry is that we have a disruptive model. Now whenever you have a deceptive model in any industry, there's a predictable behavior of the incumbent. First the incumbent ignores this disruption. And then over time, the incumbents tend to rubbish this model and then grudgingly acknowledge. And then finally they embrace the disruptive model. So in a sense you're seeing that kind of solution happening in the marketplace. Also I think, frankly my view is if any company really wants to grow this business and really transform to our model, they wil l have to make investments in training. I think you know it cannot be a model where you establish your operations and then just take a lot of people from other companies. That's not a scalable model. I think what distinguishes Infosys is a huge, huge investment in training. We're investing $100 million this year in training. I think the corporate university that we are building in Mysore is the world's largest. And I think the fact that we can take close to a million and a half applications a year and identify 25,000 people, bring them to Mysore and train them. That is a tedious and strategic and competitive position that we have. And I don't think that's replicable by any body in a jiffy. So I think we welcome competition. We've been facing competition for the last 25 years. So in many senses this is nothing but a validation and confirmation that our business model is the model of the future. And it has had absolutely no impact on either our recruitment or on our attrition.

Moshe Katri
All right. Thanks a lot.

Operator
Your next question comes from Rod Bourgeois with Bernstein.

Rod Bourgeois
Hey guys. Our thoughts and prayers go out to all those that were affected by the Mumbai bombing. And I guess I should ask quickly if these bombings seem prone to have any impact on the business?

Nandan
Actually I think this is a very, very terrible act and a very shameful act. And our hearts have gone out to all the people who were innocently killed and injured here. But also, we don't really have that many operations in Mumbai. What we do have is people who support our various banking clients and we've not had any impact due to the bombing. And we don't believe that this really has an overall impact on the business. Because today you know we have seen terrorism in New York, we have seen terrorism in London we have seen terrorism in Madrid. So I think there's no part of the world, which is insulated from these kinds of dastardly acts. So I think people understand that and I think the India story - the India outsourcing story is as strong as ever. And I think the impact that the people of Mumbai have gone back to work and gone back to business today shows their courage and resilience.

Rod Bourgeois
Okay. Great. Two other quick topics. What caused the mix shift towards onsite revenues and to what extent will this mix shift towards onsite potentially continue in upcoming periods?

Kris
So onsite percentage has gone up to 36%. And this is due to an acceleration of the growth. When growth accelerates, clearly we have more project starts and this is a reflection of that. Our target onsite percentage is somewhere between 30 to 33-34% and it's well within that range. We believe that Infosys has managed this percentage very well. And it is one of the levers we have in order to manage our margins and we manage this very well.

Rod Bourgeois
Okay. So is the onsite revenue percentage likely to accentuate in upcoming quarters or should the mix shift towards onsite continue?

Kris
It will be in a narrow band. The reason why I'm saying this is that if growth continues then onsite will be slightly on the higher side of this band. And as we achieve steady-state growth, then it comes back to 31, 32%.

Rod Bourgeois
Okay. All right. And then turnover was up and you're clearly increasing wages for freshers, the competition for talent is definitely severe as you characterized it. The question is whether you're seeing more pressure from wage inflation and supply challenges than what you expected earlier this year. In other words when you entered the year, you were seeing a set of trends. The question is are those trends intensifying versus where you started the year or is this about what you expected?

Mohan
I am Mohan here. I think in this year, we sat back to relook at the strategy after we spoke to you in April. And we said one, we ought to get the best people, young minds in the business to walk inside the door and stay here. And two, we also had to make sure that we retain people who have spent a year or a year and a half with us and we have the highest attrition in the 1-3 year band. We improved our compensation structure over the last 4 to 5 years. Over the last 4 years, the compensation has been restructured for people who are in the higher levels - people with 6 to 7 years experience and this is reflected in the lesser attrition whereas people in the 1 to 3 years have not seen such a big increase in compensation. And that is the sweet spot. And these are people who are required to fill in project positions and we need them in larger numbers. We have built up an adequate cadre of senior people but we need people at the bottom and people who come up fresh. So we said we'd do three things. First, we made sure that we restructured compensation for freshers so that we get the best, we get the largest numbers that we want. And we are not forced to hire in the marketplace. Earlier we used to get about 40 to 50% of the people at entry level from the colleges and the balance through the marketplace during the course of the year. We said that the strategy is good but what we get in the course of the year is not the same quality as the colleges. And we ought to increase in the colleges. To get the intake from the colleges, we said we'll pay slightly more.

Two, when we went out to the marketplace and the colleges and told them that we want to be the top paymaster for people from colleges because everybody is in a narrow band. And normally what we used to offer was a salary for freshers joining this year or next year. And when they join next year, they got a hike. So we said, we will take the next year's hike and make the offer right now for next year. And when they join, not hike it further. So make an offer for more and we got about 8,000 people who have signed up for fiscal '08. Third, we said in the 1-3 year band we ought to restructure compensation. So in the first instance in the month of April we gave a 13% hike. From the 1 st of July for this sweet spot, we gave a further 8%. As the revenues have gone up, this 8% is just going to cost us $2.5 million a quarter which is not very significant. And we feel we have a very competitive wage structure. There's a great demand for work, the demand from customers. And we also have all the people possible to me et it. We accelerated hiring in the first quarter to 8,000 people. So in quarter 3 and quarter 4, we'll have adequate number of people to meet demand. Last year we had a great growth in quarter two. So our people strategy has been reoriented. We don't think all this will lead to any wage increases because we are essentially reconfiguring salary in the 1 to 4 year band and pay more in the beginning and lesser jump as they go higher up.

Rod Bourgeois
All right. That is very clear. Thanks for that explanation. Would you guys expect wage inflation and turnover issues for your peer group? So the other Indian IT services firms. Would you expect wage inflation and turnover trends to continue to worsen as the year progresses? Or do you see anything happening in the market that would cause the aggregate of the Indian players to see less pressure from those factors as the year progresses?

Mohan
Well obviously at the entry level, that will be slightly higher as the wages go up the best people walk inside doors at Infosys. And hopefully it will result in a better pricing behaviour. So wage increase for us is both strategic and tactical. Strategic because the competitiveness in the marketplace goes up and the people have to have a better pricing behavior hopefully. And two, tactical to meet the requirements right now to make sure we meet the needs of tomorrow. I think for other companies they have to look deeply and reorient what they do.

Rod Bourgeois
Okay. So they're playing catch up and sort of replicate the model that you have?

Mohan
Oh yeah. They are playing catch up and creating a pyramidical structure which allows wage inflation ease itself out as it goes up the pyramid. So the average wage will increase the full year will be maybe 40% of the increase in the beginning of the year.

Rod Bourgeois
Got it. All right. Thanks guys very much.

Nandan
I think it is important to understand is that what is happening here is that systematic barriers of entry are climbing up on different facets of our business. First of all I think the size, brand and scale is creating one barrier of entry. Second the $100 million a year investment in training is creating another barrier for entry. Third the compensation package is creating a barrier of entry. Fourth the growth rate is creating a barrier of entry because what happens when you have high growth rate is that you're able to essentially spread the cost of compensation over a pyramid. When a company's growth rate slows down, then it ends up becoming top heavy and it raises per capita employee cost. So you have to have a high growth rate to pay for all these things. So I think essentially we are trying to create a virtuous cycle which we believe will lead to further consolidation from the pack.

Operator
Your next question comes from Joseph Foresi with Janney Montgomery Scott.

Joseph Foresi
Hi gentlemen. Good quarter. And I'd like to concur with the sentiments that our thoughts are with you given the tragedy in Mumbai. My first question is around the other income line. Can you guys give us a break up of how much of that is foreign currency gain and sort of how that breaks out?

Bala
Well if you look at the revenue growth, it grew by 11.3% sequentially. 8.5% came because of volume.

Joseph Foresi
No. I was actually looking at the other income line itself.

Bala
Oh other income. Okay.

Joseph Foresi
Yeah. Other income. I wanted to know the break out of the foreign exchange gain.

Bala
Sure. Sure. On other income side, we had a benefit because of the rupee depreciation. And also the impact of hedging which came in. And because of the translation of the foreign currency assets we have in balance sheet, we had a benefit of $17.4 million. Hedging we had close to $300 million of forward contracts and option contracts outstanding as of the end of last quarter, which gave a negative impact of $ 5.8 million. So net net we had a positive benefit of close to $12 million because of the rupee. But that gave around 3 cents because initially the focus was around 57 cents. We ended up at 63. 3 cents is because of the non-operating benefit we saw because of the rupee dollar rate.

Joseph Foresi
Okay, thank you. That's helpful. Just two more quick questions. Given your change in the recruiting and the what you've been saying sort of about wage inflation, do you expect wage inflation to rise as a percentage of revenue or can we expect that to stay stable?

Bala
I think it happens every year. Every year in the initial few quarters, we see the impact. For the period of the whole year, it gets normalized. So in the last two years, we have given 13% to 15% increase. So nothing new. It's a manageable issue as of now.

Joseph Foresi
Okay. And my last question's sort of around margins. Given what you guys said about the onsite revenue ticking up, just sort of looking at the other levers that you guys have in place, utilization and SG&A spending - where do you see those sort of headed throughout the back half of the year? And do you plan on sort of maybe ticking up utilization or using SG&A to offset any work or impact from an increase in onsite work?

Bala
Well, we always said are comfortable of utilization between 76 to 80. We want to keep it at the lower end of the range. This quarter it was 77.3. So we have some levers left there. And on the SG&A side, in the first quarter we are seeing the sales and marketing costs slightly going up because we accelerated our investment by adding some 50 people more. So on the SG&A, we may get some benefits in the next few quarters. I think we are comfortable in saying that on the year on year basis, the operating margin will be similar to what it was last year. So we have some levers left over there which we will effectively use in the next few quarters.

Joseph Foresi
Great. Thank you gentlemen.

Operator
Your next question comes from Bryan Keane with Prudential.

Bryan Keane
Yes hi. Just a question on the development revenue, sequentially that looked like that popped almost 18%. And it hasn't done that in quite a while. Anything happened there? Any color on what happened to development?

Shibulal
This is Shibulal. As you can see, this quarter we have seen growth in development revenue. And some of that has come from discretionary spending from our customers. And discretionary spending is mostly application development. So that is why you are seeing a growth in the development revenue.

Bryan Keane
And do you expect that to be strong because the discretionary spending looks higher for you guys going forward? To me that's a little bit of surprise. Is that a surprise number to you guys or did you expect that kind of strength?

Shibulal
If you look at the growth itself, it is a surprise. But it all plays together - discretionary spending, application development, increase in on site, all these work together. So in that sense, I am not surprised. I don't expect it to go materially high over the next couple of quarters. It will fluctuate within the percentage range of probably 1 or 2.

Bryan Keane
Okay and just a question on the number of clients. I saw specifically the $5 million clients ramped pretty nicely to 94. It looks like it's up 13 sequentially. Is that you're gaining market share and wallet share inside of customers that are only a million or is that just a size thing that they just happened to tick over to 5 million? But that looks like a good sign that you're gaining on the wallet share.

Kris
Over the last few quarters, we have been investing in our client facing people, investing in account management, investing in mining these accounts. We have increased our services footprint to make sure that we have the right and relevant services for our clients. So it is a result of a program we had launched in terms of growing our existing accounts. And that has reflected this quarter. We had started Infosys Consulting, started our Strategic Global Sourcing Group which looks at larger relationships and larger deals. Infrastructure Management, Business Process Outsourcing, cross-selling these things. Testing which has become a very very important service in today's world where every business exposes its internal IT system on the internet. And to make sure that each of those systems is thoroughly tested. And it is as an important service we offer to our clients now. I think this is a result of things which you have been doing for the past several quarters.

Bryan Keane
Okay. And then just finally on the other income line, obviously that spiked up due to some of the gains of the depreciating rupee. What are you guys expecting or how should we model the other income line going forward in the next couple of quarters?

Bala
Well in the guidance we are not factoring in any impacts of rupee dollar rate for the next three quarters. It's very difficult to predict which way the rupee will go. The biggest factor for a country like India is oil price. In the short term we believe that rupee will be under pressure. In the long term, if the economy grows at 8% to 10%, it will attract lot of capital that will put some pressure on the rupee to appreciate. It is very difficult to model. We have taken a hedging of $ 318 million dollars. Our policy is to hedge for next 3 to 6 months, not to bet on the long term. So we have to manage that. It is very difficult to model. In the guidance we have not factored in any impact of rupee dollar on the non-operating income for next three quarters.

Bryan Keane
Right. And I guess last year that number was about, well I guess $ 9 million. But I guess mostly we just think about that number being just a pure interest income on the cash?

Bala
Yes, the interest income on the cash may slightly come down because we made a payout of $ 260 m cash as a one-time dividend. Otherwise more or less, interest income will be stable for next three quarters.

Bryan Keane
Okay. All right great. Thanks and congratulations on the quarter.

Bala
Thank you.

Operator
Your next question comes from James Friedman with SIG.

James Friedman
Congratulations on the quarter. I just had a quick question about the customer metrics. It looks like you did 97% repeat business yet you added 38 new active customers. I think that's the highest level since September of '04. Could you comment on the type of work being done at those new customers and how that work should ramp?

Shibulal
This is Shibulal. Some of them are opened through our consulting practice, some are opened through our application development space. So we are doing a wide variety of work for our new customers we are opening. There is nothing special this quarter which would change that demographic.

James Friedman
Thank you.

Operator
Your next question comes from Rama Rao with RR Capital Management.

Rama Rao
Good morning gentlemen. I have one comment and two questions. Number one, in your conference call, mostly analysts participate and we are investors. Investors go through the same kind of a risk/reward as the management and employee go through. So if you can keep some slot for the investors, we'll appreciate that. Now my question, your operating margins are slowly decreasing. Any concern that you have that you'll be able to maintain this margin on a going forward basis in future?

Bala
See the operating margin normally comes down in the first one or two quarters because of the impact of the wages. And that gets normalized when we start adding freshers over the year. That's why we are confidently saying that we'll be able to maintain the operating margins on a year on year basis even though we have seen a slight decrease in the first quarter because of the investments we make. So we don't have any significant concerns there. We have several levers on the cost side to effective use to hedge against the wage increase. So our guidance assumes that the margin will be stable for the full year.

Rama Rao
Okay, number two question. There is some anticipation that the consumer in the US will slow down and the US economy may slow down. What strategy are you adopting to maintain the present growth rate in case the US slows down? Will it have a material impact on a going forward basis on your future growth patterns?

Nandan
I think to answer that question you have to understand the dynamics of this industry. We agree with you that the economists talk about global imbalances and they believe there'll be a slowdown. But what is happening in the industry is that while IT spending is not going up significantly, the proportion of IT spending that the customer is reserving for the global approach is going up. In other words, the off shoring is going up and the Global Delivery Model is becoming more and more acceptable, more mainstream. And large corporations are now willing to make major bets and major commitments to really have thousands of people in a global facility say in India. So to that extent, the customer has separately bought into our business model for the simple reason that the value proposition that we view is faster, better and cheaper for our customers. So what's going to happen in the slowdown is that we believe that in a slowdown, different criteria will start coming into play. But customers will want to con tinue to get more value for money. They want a better value proposition. So we believe that even when the economy slows down, the pressure on customers to deliver, get more value for their money, it goes up. To that extent we think we are in a defensive situation where we continue to get business even when the market is slowing down. In some cases it could even accelerate the moment towards offshore. To that extent I think there's a natural hedge in our business where when times are good, we can take advantage of the investments of our clients. When times are bad, we can play into the cost-cutting initiatives.

Rama Rao
Now if US slows down, can you improve your penetration and the marketshare in the Europe and Japan to maintain the present growth rate?

Kris
So proactively we are investing in sales and marketing in Europe. We have invested in Australia. So we are slowly trying to shift our revenues from North American and reduce the dependence. Having said that, we also need to say that North America continues to be the largest market.

Nandan
Also I think the world is so inter-dependent that it is difficult to argue that one part of the world will slow down and others won't. So it probably will be a global phenomenon. I think we can go on to the next question.

Rama Rao
Thank you.

Operator
Your next question comes from Julio Quinteros with Goldman Sachs.

Julio Quinteros
Good evening guys. I guess I wanted to sort of stay on a similar point with regards to the environment. And part of this is because everything seemed to have worked in your favor this quarter. Obviously the demand environment was there. The rupee helped. And based on their last conversations with Bala when we were down there, we talked a lot about how growth essentially trumps a lot of the issues that you would have to sort of face in the normal course of business in the interim. Having said that, if you look at everything sort of going right today but then you sort of assume going out that things actually do slow down and things actually say, deccelerate, how are you positioned to deal with that in an environment where clearly your expectations right now are for relatively flat pricing, wages are going up, attrition is staying at levels? So I guess I'm trying to sort of play kind of devil's advocate more than anything else and understand what you would do in an environment where essentially the pac e of growth would decelerate? Can you just sort of walk us through the mechanics or how you guys would think of the world in that sort of vein?

Kris
So clearly you're painting a picture of doomsday. First of all as Nandan said, there is an element there which plays to our advantage which is clients are trying to cut costs. And they would be looking at off shoring because of that. Second, wages have been going up for several years now. If you look at the last few years, we have been increasing salaries by 13% to 15% at least in a year. And our objective is to be the last man standing. And Nandan, do you want to add something?

Nandan
Yes, I think to look at the wage issue, I think we have to look from the prism of Infosys and the prism of a global player. See Indian go up by at 14% to 15% a year. Let's assume they go up by 15% a year. Now in an organically built Indian company like Infosys, the contribution of Indian salaries to total revenues would be about 12%. If you look at the whole thing, the impact of that is 1.8%. What that really means is that in the Infosys business model, we need to combat a 1.8% impact on revenues because of wage increases in India. If you are a global company, you will see the Indian operations as a captive and therefore you will see wage increase as 15%. So fundamentally, the prism through which we look at the wage increase and the prism through which a global company looks at wage increase is fundamentally different. And you must understand that they will understand what is the implication of that.

Julio Quinteros
And then I guess just specifically to the bench that you are building. Obviously you're bringing in a lot of folks and you're putting them into training and facilities. How would you manage in a slowing environment, sort of the bench that's being built? I mean is it manageable in a sense that if you do see a slowdown, those folks don't necessarily create a significant drag or how should we think about that?

Mohan
Well, when you hire people, you naturally have great visibility for two quarters at least. This quarter we have great visibility. It means that we hired people against potential demand one quarter down the line. And if you see a potential slowdown, you're probably hire less in quarter three, quarter four, where you have not made any commitments to hire and there is a pipeline and it (unintelligible) itself. It is a matter of two or three quarters.

Julio Quinteros
Got it. Okay. Perfect. Maybe if I can just switch gears to something that's a little bit innocuous and on the last page of your disclosures as it relates to your upcoming stock split. And I asked you guys this overnight, I just wanted to sort of reiterate this and make sure I understand. The one-for-one bonus issue that you guys are getting ready to enact or to effect here will have, according to the notes here, an impact of essentially doubling your share count and cutting in half your EPS based on the note on the last page of your disclosure for U.S. GAAP here. So essentially, when we look at the USADR stock price, the sense is that that would also be cut in half to reflect the new sort of capital structure. Is that correct? And I guess if that is the case, how should we think about sort of the net impact to shareholders as it relates to that stock split because that would essentially mean there's no net change to the holdings of the shareholder?

Bala
Bonus issue in the ratio of 1:1 is similar to a stock dividend of 2 for 1. Basically we are capitalizing the shareholder's reserves and issuing additional equity. So technically, what you are saying is right. The share price has to come to half after the stock split is effected.

Julio Quinteros
Okay. Okay. Well, that makes sense. And then just finally for me, with the large client ramp-ups that we saw, can you just sort of characterize a type of work? Is it recurring? Was there anything that was sort of one-time in nature that would not recur in the next quarter?

Kris
No. This is a continuous thing. We have been systematically working to increase our client base as well as increase our penetration rates in existing accounts, building long-term relationships is fundamental to our business, cross-selling, up-selling, having the right services which they would demand in the future. All these are a part of our strategy. So this is a this is how we grow. In any quarter you look at, 90% plus of business is repeat business. So we have to build our existing accounts. And that's why we have $221 million relationship and we have approximately 127 $ 1 million to $5 million clients. So it is something we proactively build.

Julio Quinteros
Okay. I guess just in the past, we had seen at least one of your largest clients had a material ramp-up and then a material ramp down and in hindsight, I guess a lot of that incremental growth was associated with some major M&A integration work that you guys were working on for some specific platform. I'm just worried that in this ramp-up that we're seeing something similar or is this more consistent with the sustainable recurring revenue model that you guys have been sighting on learning?

Kris
Yes. Yeah, that is of course that is the only way we can reduce the impact is to broad-base the clients and the largest client is only 5.8% for revenues. And we work hard to reduce and keep on reducing that.

Julio Quinteros
Okay. Great. Thank you very much.

Operator
Your next question comes from Joseph Vafi with Jefferies and Company.

Joseph Vafi
Hi, gentlemen. Good evening and great revenue growth. I was wondering if we could focus a little bit on pricing. I know in your prepared comments you talked a little bit about some incremental price increases for new work. I was wondering if you could make some commentary on pricing within your base business change year-over-year or how you see pricing in existing business, the dynamics there playing out over the remainder of the year.

Shibulal
This is Shibulal. Pricing is stable with an upward bias in our existing as well as our new business. The new MSAs we are signing, are being signed at 2-3% increase. On the old work which we have been negotiating as and when the contracts come up for re-negotiation, we're renegotiating the terms. In many of them, we have got 2-3% increase. And given that fact, some of it is going back to revenue productivity. On the other end, because repeat business is so high, it takes time for it to show up. Also, as clients become larger and larger, some of the discount arrangements that we have had are kicking in which is withholding the price increase. So now we have become more diligent in our discounting arrangements with customers.

Joseph Vafi
Okay. That's helpful. And if we look at the growth here in the quarter by customer size, clearly, impressive in growing your largest customers here to $90 to $100 million annual run rate level on I guess four customers now. And if we look at the outlook for the rest of the fiscal year, clearly, growth comes from all categories of size companies. But can these largest customers continue to grow from this level or do you actually think there might be risk that the volume size where they're at now on a run rate basis could actually decrease for these very large customers?

Shibulal
I think for some of the large customers we will continue to grow but it is again a portfolio, right because today's large customers were not large customers in the past. And it is possible that new customers will catch up with them as we go forward. So we believe that there is enough head-room for our customer base to grow.

Joseph Vafi
Okay and then one final question on attrition which did kind of spike up here a little bit sequentially. Could you provide some commentary on attrition rates on onsite and offshore and if you're seeing any increase on the on-site employee pool relative to attrition levels?

Shibulal
There is no material change onsite and attrition is 11.9% but at the same time, we have recruited record no. of laterals this quarter 2,140 laterals compared with 1,600 laterals last quarter. So we have also been able to hold back the high-performers. If you look at our attrition across performance metrics, you will find that there is more attrition at the lowest performance criteria and less attrition at the high-end performance.

Joseph Vafi
Okay. Thank you very much, gentlemen.

Operator
Your next question comes from Anthony Miller with Arete Research.

Anthony Miller
Hello again, gentlemen. I've got a follow-on question on attrition and on pricing. On the attrition, reported an increase from 11.2% to 11.9% but of course, that's on a parent company last 12 months basis. If you actually look at the quarterly annualized attrition for the whole company, on my calculation, that went up from 14.7% last quarter to 17.3% this quarter. If that's right, then it kind of indicates that attrition went up at Progeon much higher than the rest of the company. I wonder if you could comment on that please and also give us the Progeon headcount at the end of period.

Mohan
You're perfectly right. We give attrition separately for Progeon and for Infosys because both are in different business models. Progeon has a business model based upon a much higher attrition level than Infosys. But the attrition for Progeon is high, it is at 39% for the quarter. Progeon hired 1,700 people and added slightly more than 1,000 people net. And attrition for Progeon arises because of two reasons. One, 22% of that addition is in 0-3 months band, where people come in, they undergo training but they don't adjust to the night shifts and they leave. And 44% is in the 12 months plus band where they complete 12 months training and after that, they expect to get a promotion because this is a nascent industry. So these are the two bands. In between the attrition is less but it has come down this quarter for Progeon and the spike is essentially in Progeon. At the Infosys level, it has gone up from 11.2% to 11.9% and like Shibu said that attrition is different at different points. And at the experi ence level, attrition is highest in 1-3 year band. The 1-3 year band is where people come out of training, they're getting to work and some of them leave to do their MBA. 22% attrition in the band is because people leave to do MBA. Only 45% is because they go to other companies or go elsewhere. And the other percentage is the drop-outs that do something else. So 1-3 year is the critical layer and after that, it comes down to something like 7.5% to 8% which is very very reasonable.

Anthony Miller
And are you still there happy with 25,000 hiring number for FY '07 even though the attrition is on the increase?

Mohan
Well, when you do budgeting and when you do our numbers for the year, we built in a slack factor. We're well within the tolerance limits.

Anthony Miller
All right. And, sir, can you just give that period and headcount number for Progeon as of 30th of June?

Amitabh
Progeon ended this quarter with 8,012 current employees against 7,021 employees last year.

Anthony Miller
Okay. My second question is following - really following on the pricing. You say that you are able to get some pricing up with some contract renewals albeit it's 95% or 97% of your business. Can you tell us then what percentage of your contracts are actually up for renewal this year and whether you would, therefore, expect to get that 2% or 3% increase on those contracts?

Kris
This is Kris here. Almost every contract has a clause to re-look at pricing on an annual basis. Only some of them of course are willing for rate increases. Typically, given the nature of the relationship and the relationship is continuing to grow, what happens is that the impact will be neutralized because volume is going up. And I would say that about 10% to 15% of these would throw into the system to show a real impact. Now this is complicated because different services are thrown at different price points and that's why I'm not able to give you an analysis and I don't have that

Anthony Miller
Right. I guess just my last point to this question, can you give me an idea what your average contract length is with your clients then? I understand this would vary by project. But is there a working average that we can use?

Kris
So there are two three types of contracts; we have MSAs which look at 3-5 year horizon, defines the terms and conditions, defines the rate, defines the periodicity for review of this rate and then defines which services will be delivered under this Master Service Agreement. So each of the projects becomes a work order under a MSA. And each of the projects will be maybe six months, nine months etc. The second type of contract is a maintenance contract for a fixed period fixed service level defined. So here, the term could be 3 years, 5 years, sometimes 7 years. The third type of contract are the ones which are recently being won and negotiated which are like fixed price contracts for 5 years or 7 years where the increase on an annual basis is predetermined in the contract and the productivity improvements also are a part of the contract. And these are like the older outsourcing contracts but much more . They are typically negotiated across multiple vendors, like ABN Amro type of deal which we won rec ently. And these are the three types of contracts.

Operator
Thank you. Ladies and gentlemen, we have reached the end of the allotted time for questions and answers. I will turn it back over to management for closing remarks.

Kris
So thank you very much for participating in this call and the excellent questions. I hope as Nandan said, we have been able to answer your questions. If there are more questions, please write to us or contact us through out Investor Relation managers and we will definitely try and answer those questions. Thank you again for participating. See you all next quarter.

Operator
Thank you, ladies and gentlemen. This concludes today's conference. You may now disconnect.

EX-99.8

EXHIBIT 99.8

INFOSYS TECHNOLOGIES, LTD
CNBC - Board Room
July 12, 2006

Udayan
Welcome back. Thanks heaven for Infosys everybody in the market would be saying that if after last evening events we would have started with a big rally down, but thanks for the Infosys come out and pull the rabbit out of its hat. It is the biggest quarterly surprise and the biggest guidance surprise that you heard from the company for a very, very long time. Every analyst is surprised, the whole IT sector is rallying, Infosys itself is up about Rs. 162, and the market, thanks to that, is still very flat after, and probably looks like it is digesting last night's events.

We have got the Infosys top brass with us, some members of the top management are here and some will join us in the course of the next one hour. Nandan Nilekani, V. Balakrishnan, S. Gopalakrishnan, and Deepak Satwalekar who also sits on the board and has turned up will talk about the an interesting change of guard which has happened at Infosys. Gentlemen thanks very much all of you.

Nandan, every analyst, almost fell off the chair this morning when you said 125 per share, what happened for you to change your guidance so dramatically?

Nandan Nilekani
Well, I think definitely there have been improvement in the business performance and you know the outlook is looking better, our performance is, almost 15% rupee growth, so I think we have been able to revise our dollar guidance from 28-30% to something like 34.5-34.9%, so we have increment in that, and I think on the rupee side the depreciation of the rupee has also contributed, that is why we have revised our rupee guidance to 40%. So I think overall business performance improvement plus the rupee side depreciation has contributed to this big change in the guidance.

Udayan
<Inaudible> in dollar terms.

Nandan Nilekani
Yeah, actually dollar terms we had said 28-30%, now we are saying 34.5-34.9%, so there is a significant real increase in the business, and that is reflected in the first quarter results where even in dollar terms we have grown over 11%.

Udayan
<Inaudible>Do you see that contribute a significant volume growth <inaudible> so you had to change your guidance so dramatically?

Nandan Nilekani
Well I think, you know, one is the first quarter itself has done much better than what we had anticipated, so that creates a base for the future growth, so when you look at the growth for the second quarter, we look at the incremental growth we expect in third quarter and fourth quarter, and factored all that in the guidance.

Udayan
Just come back to the other members, Deepak first time that you are joining us on the Infosys Board room, you have come to tell us that there has been a change of guard with Mr. Narayana Murthy.

Deepak
Yeah, Mr. Narayana Murthy is to retire as the Executive Director on the 20 th of August, and at the board meeting yesterday it was decided that from 21 st August that he will take on a new role as a Non-Executive Chairman of the company, and the Board also felt it was important that he continues in his role as the Chief Mentor and now with a little less of the executive responsibilities that he would have more time to groom the future leaders of Infosys. So he will continue from August 21 st to be Non-Executive Chairman and Chief Mentor.

Udayan
Given his reputation and the stature is there an inclination to rein him back despite the fact that he is 60 now?

Deepak
Rein_ him back, I don't know in what sense we are reining him back?

Udayan
In an executive capacity.

Deepak
I don't think so, because anyone who knows anything about Infosys knows that they are very, very firm till date they have not made an exception, and so if you turn 60 you retire, but I think the Board was pretty insistent that he would continue and make available his experience of the past years to the company and therefore as a Non-Executive Chairman.

<inaudible> for many years and attended several board meetings, so how is he feeling today, restful or happy to go?

Deepak
In the morning he was looking a little <inaudible>. Now it is for these two young gentlemen to take on that role, but I think the Company would benefit significantly from his continuing as the chief mentor and so on without the executive responsibilities.

Udayan
Thanks very much Deepak for that. Bala now - of course we have seen a very good first quarter, but what is your sense, how much has the rupee contributed and how much of the revised guidance is because of the rupee?

Bala
No I think if you look at this quarter - rupee has depreciated by something around 2.2% in the quarter, it depreciated by something around 8-9% against euro and GBP, so everything came together this quarter. We had an impact of 3.3% due to salary increase, which are effective from April 1 st on the operating margin. We also increased our investment on visas, because this year we expected the visa window will close early so we accelerated our investment, and we invested around $9 million as compared to some $3 million last quarter, and that had a impact of something around 1.2% on our margin. So overall we had a impact of 4.6% on the operating margin because of visa cost and salary cost which was more than offset by the depreciation of rupee which is around 2.2% positive benefit on operating margin, whereas the depreciation came down by 2% this quarter, because last quarter we had a one off amortization due to <inaudible> in UK, so net-net on the operating margin after depreciation is stable t his quarter. We had a benefit and we incrementally invested in visa, sales & marketing to secure our future. So this quarter it is all about growth and our investments.

Nandan Nilekani
We had one more change which is really important is that Kris has been promoted, he will be the President, Chief Operating Officer and Joint Managing Director.

Udayan
<inaudible> last year around in Q1, at the end of Q1, in fact after your guidance <inaudible> traditionally the best quarter Q2, what gives you the confidence Kris from a volume and client perspective that you can see such growth further in the year?

Kris
Even at the beginning of the quarter we have been saying that the environment is much better than what it was 12 months back. Last year at the same time we had a few client issues, we had slowed down in the financial sector with Sarbanes Oxley implementation and things like that, whereas this quarter if you look at, you know, we have strong growth in financial services, we have strong growth in Europe, we have growth in some other services like package implementation, testing, Progeon has done well. So all around actually you know it is a better business environment. We also feel that even if there is a slowdown in the economy, the offshore IT spending will continue to be buoyant, you know, we are seeing that actually, and of course our guidance is based on feedback from the markets, our clients, and they are all saying that you know we are very positive on offshore at this point.

Udayan
Nandan what has changed from last quarter to this quarter aside from the rupee because you started off at 115 and then you are up to 125, if you just keep the rupee aside have things changed so significantly?

Nandan Nilekani
Yeah I think you know we have selected largely an organic model of growth. Infosys certainly has been much less acquisitive than other firms, and I think all that is beginning to pay off, because I think we believe that the <inaudible> are behind us, we believe that the trend is at stages, we think that our investment in the brand building, our investment in client acquisition, our investment in strategic account planning to ensure that we do what we can coupled with the fact that we have extended our services, brought in new services, made it end-to-end, our investment in consulting, you know, knowledge, things that we do on the ground, you know, all these things are , so I think that is one of the reasons why it is all coming together. Then we are seeing strong growth in telecom and -_ Subhash will be on the channel- we have seen some growth in financial services, Ashok will talk about it, we are seeing strong growth in manufacturing, we are seeing strong growth in Europe. So I think it is just that all of it came together this quarter.

Udayan
Are you saying that you get surer visibility, because you don't have to depend on companies which you have acquired, since it is an organic model you have a better feel of what your own engines of growth are growing at?

Nandan Nilekani
Partly that but I think more importantly I think, you know, our strength comes from our business model, because our business model is innovative, it is a new way of doing thing, it is faster, better and cheaper than the legacy guys, and in that model I think how well you fine tune the execution engine is a very important criteria, and one of the advantages you have of organic growth is that the entire <inaudible>,is entirely in your hands so that you can fine tune it much better.

Udayan
Bala just another quick word on what you see for the rest of the year, what kind of operative margins are you assuming now given this new guidance, will it be around the current levels or you are <inaudible> some improvement there?

Bala
Like I said last quarter, we are assuming the operating margins to be stable for the whole year. First quarter we had a impact of salaries and the visa cost, to some extent that was offset by negative depreciation, and the next few quarters we will get the leverage moment the new additions comes in from the employees because the per capita cost will go down and therefore we will have some benefit on the SG&A side. So overall we are assuming the guidance to stable margin for the year, and also we are assuming the pricing to be stable, because we are seeing the pricing environment today stable with upward bias. We are seeing new customers coming at a slightly higher price point, 3-4%. So overall we are factoring a stable margin for the whole year in the guidance, and stable pricing environment.

Udayan
Kris is that what your guiding then from a volume perspective you expect this year volume <inaudible> to be at 34-35% and pricing to be absolutely flat?

Kris
Yes, we are assuming that pricing to be flat and volumes, you know, as we said about 35%.

Udayan
What gives you the confidence most confidence from the volume front, which vertical do you think?

Kris
So currently if you look at the verticals telecom, financial services, manufacturing, so these are our core verticals and all of them are showing signs of improving growth. Some of the larger clients have grown faster in this quarter. If you take the top 5 clients, they have grown almost 20% this quarter. We have two clients who are contributing to more than $100 million this quarter and 11 clients contributing more than $50 million, last quarter it was 9. So growth in top clients which gives a visibility into, you know, overall business, growth in some of the verticals which again are the strong verticals for us which gives us the confidence.

Udayan
Some people have been a bit apprehensive Nandan about how the sector will turn out, because there is a lot of talk about US economic slow down, how that will translate to <inaudible>, but your guidance is diametrically opposite from those kind of signals, so what <inaudible>?

Nandan Nilekani
Well I think you are right in saying that at the business level, when you talk to business leaders, they are extremely buoyant and bullish about the future, you know, I talk to a lot of them. When you talk to economists, they sort of have some worries about the future because they think a fundamental imbalance in the global economy is not sustainable, so there is a disconnect there. Having said that I think, remember that our business is defensive because while there is, you know, we get the benefit of increased spending when there is buoyancy, even when things slow down <inaudible> client comes to reduce cost and improve productivity, and therefore we have a edge there because there is a defensive play even when the US economy slows down. And all the reports indicate that the proportion of spending of global companies on offshore model is going to go up, so even if the total budget comes down. So I think it is a transition shift, so when you have a transition shift in a sense you are less vu lnerable to cyclical behavior economy.

Udayan
So you are saying that even if there is a bit of a slow down in the US, IT spending will not suffer.

Nandan Nilekani
Right, even if IT spending suffers, the IT spending on people like us won't suffer

Udayan

Okay. Bala, how are you <inaudible>now, because I am just <inaudible> how have you changed your rupee strategy in this quarter?

Bala
Yeah I think all over the world the currency market is going to be quite volatile whether it is Indian Rupee, or Euro or GBP. So we have to take that and try to hedge ourselves in the short term, that is what we are doing, our policy is always to hedge for the next 3-6 months our net position, we continue to do that. As of June end we have around $381 million of options outstanding. All of them have been marked to market at 45.87. So we have to keep looking at the market, try to hedge ourselves in the short term and manage the rupee-dollar. We are not God, we cant predict the market, but we have to manage going forward on a proactive basis, and that is what we are doing.

Udayan
Your guidance is positive but somewhat conservative, and Q2 is your best quarter, do you think again there will be surprises.

Nandan
Whatever we do, you know, they want us to do better than that.

Udayan
No, That would be expected when your best quarter having come out for a total like this to give a more <inaudible> guidance.

Nandan Nilekani
It means that the base has gone up, so you have to grow on that base, keep that in mind.

Udayan
But Q2 seems to be like again be the prime quarter for this year?

Nandan Nilekani
No I think whatever guidance we are giving for Q2 is what we abide by, and whatever guidance we are giving for the year is what we have to abide by.

Udayan
<inaudible> for you as a company from what you said 3 months backs and where you find yourself now?

Nandan Nilekani
No obviously, I think the performance has been better than what we anticipated, otherwise we wouldn't have given a higher guidance, obviously the performance has been better, and I think that also I think as Bala mentioned is everything came together, you know the rupee movement came not only against the dollar but pound and euro, the growth happened in many verticals as well as in Europe, so the multiple engines of growth all of them fired together, so I think in that sense also I think, and I think frankly now the Infosys brand is now so strong in terms of what we do that large companies are very, very comfortable with giving a significant part of their spend to us, and that is a strategy thing but that is now paying off.

Udayan
40% rupee growth in revenues, shaping up as a good way?

Nandan Nilekani
Well, I mean you know the company which stood last year at 2.15 billion and we are looking at something like 2.9 billion, yeah I think it is decent.

Udayan
Okay decent. Thanks very much Nandan as always for joining, and well of course with the rest of the management pack Bala and Kris, and new members of Infosys top management will join us on the other side of the break. Market is down 38 points, that is <inaudible>, Infosys still holding 5% up about 3300. We will be back.

Welcome back, you are still watching the Boardroom with Infosys. A new set of members of the board have joined us. A quick update on the market, it is flat today SENSEX and Nifty, it has been a difficult morning with what has happened overnight in Mumbai, we are still flat and SENSEX down barely 22 points. Tech stocks are up - Infosys are 5%, HCL Tech 4%, TCS 2.5%, and Satyam up 2%. So all the tech stocks have benefited and had a rub off from what Infosys had to say this morning. And the stocks which are down, there we have got ACC and some of the cement companies are bit soft, we have got Bajaj Auto, BHEL, Bharti, Cipla, Dr. Reddy's, Grasim and Gujarat Ambuja looking just a bit soft, and Hero Honda after lack luster numbers on the margin front continues to slide, it has gone another 1.5% this morning, _<inaudible> onto 710. That sort of sums up what has happened in the market, it is a tech showing for sure this Wednesday morning.

S.D. Shibulal, Head of Global Delivery, also with us now joining Bala and Kris. Shibu morning to you.

Shibulal
Good morning.

Udayan
From a delivery perspective, how is this optimism translating, especially given all the talk in the market about you being in the run up for <inaudible> large deals?

Shibulal
...we are doing very well, we have been able to improve the number of projects, we today run about 5000 projects at any point in time, we have been able to control the number of high-risk critical risk projects, they have been very very low, so while the complexity of projects have gone down we have added <inaudible> people last quarter we have been able to deliver promise to our customers. So our delivery of around 90% within time and within budget where the industry average is probably between 40-50%.

Udayan
Specifically would you like to talk about some of these large deals which the market is excited about?

Shibulal
At any point in time we are pursuing there may be about a dozen set of deals and we categorise large deals anywhere between $50 million and above, and you know we are in different stages, we have a very strict computation criteria in place because that is required, each of these deals are expensive to run and also we are <inaudible>. In our guidance we generally don't consider these large deals, we consider normal organic growth, so when we give our guidance for this quarter we have not considered any of the large deals coming in .....

Udayan
Is it likely that you will strike any $50 million or $100 million plus deal in this quarter?

Shibulal
<inaudible> deals on a daily basis, like some of them $50 million, but whereas they are configured as the large deals, because when we talk about large deals it is also other criteria like <inaudible> or different kind of business models, so we <inaudible> but some of them we may not categorize as large deals, and which deals we will win in this quarter, is very difficult to say at this point.

Udayan
Kris would you like to talk a little about that, on where that large deal flows are happening on the..., whether some of this, 34-35% <inaudible> have some visibility on these large deals which have gone into the guidance?

Kris
We only consider deals where we are already working like, for example, in Europe where we have already disclosed, now these are really ones which are factored in because those are already running and on going. Any new deal which we are pursuing today, you know, the chances of closing them within a specified amount of time is very difficult to predict today. As Shibu said, these are deals which take sometimes 9 months to 12 months to close; the likelihood of us getting the entire deal sometimes is also in question, for example, the ABN deal, you know, went to multiple vendors. So because of that we don't factor them in. We only factor them in once we have got the deal.

Udayan
What is this enhanced guidance then predicated on, do you see better visibility for ramp up with some of the existing clients or there is a big IT spend there that are saying that we want to spend more this year, because something must have changed for you to up the guidance.

Kris
One is you know that we have done very well in the first quarter, so you have to factor that in for the rest of the year. Second is the visibility into our existing accounts and clearly they are saying that they are going to increase the spending through offshore. Third there is, you know, all around there is buoyancy in different verticals, in Europe, in US, some of our services are doing very well, small engines of growth, right, Progeon if you look at is small, so these can grow actually more than the company, right. So all this is factored in, and you know we are in a better position today than we were in, you know, if you look at the last 12 months in terms of visibility and things like that, so that is what is factored into our guidance.

Udayan
Bala just one word on how these large deals etc. stock up from a margin perspective, because you have told that the first few quarters <inaudible>significant deal is probably not very much - what do you see in the next three to four quarters from this large deal perspective contributing to your margin?

Bala
In the ABN AMRO deal there the margins are stable over the period of the contract, initially probably the margins are lower than the company average, but during the deal period I think the margins will come back to the normal, same thing will be for other deals. We are not going to just get the revenue and dilute the margin, we are focused on margin and at the same time we are focused on growth, so we balance between those two and try to get deals at acceptable margin for us.

Udayan
And what about SG&A, if you take next 9 months where this cost escalate as you would actually get robust <inaudible> from SG&A?

Bala
No I think we should get the benefit of scale going forward on the SG&A side, but whenever see incremental benefit coming out of margin we will try to reinvest in the business in terms of increased spending on marketing to secure our future, so we will balance that.

Udayan
Shibu one thing from the pricing perspective - is it the same situation where it is only on new deals that you are getting some improvement, but on existing customers you are still reluctant to do the better prices.

Shibulal
On the pricing side what we have said the first time that the pricing is stable with an upward bias, it is not only on the new customers where we are getting 2-3% increase, even when we go for MSA negotiations we are getting some increase at the same time the number of contracts which come for negotiation every quarter is very low, the percentage of business <inaudible> that is also very low because we are very a large <inaudible>_ business, so given that <inaudible> into the system that takes time, and also there is a slight <inaudible> larger and larger discount structure -and say we have now become very diligent regarding our discount structure, so as soon as they are having <inaudible> they may go into, not that they are, may go in ____ discount structure, so all these plays out in getting the results, but new contracts and negotiations, renegotiations we are getting 2-3% increase.

Udayan
Right, Kris just one word on <inaudible> because you are benefiting from the rupee, <inaudible> our contract structure <inaudible>?

Kris
See contracts typically look at cost of living and things like that, but you know you also need to remember that and we can clearly see it that salary cost in India are going up, you know, year on year it is going up by 15% actually, and ultimately that will have an impact on our cost and it is having an impact on our cost, itself you know overall 3.3% is the impact.

Udayan
Bala you have been quoted that you are looking at acquisitions in the small ring between $100 million and $200 million, anything specific, because the numbers seems quite specific, 100-200 million?

Balal
That is the range we gave, because we are looking at smaller acquisitions, we are not looking at larger acquisitions, but acquisitions like falling in love, we keep looking for acquisition, if something materializes, something comes which is more strategic for us we will do, that is a continuous process, we don't have anything on the table right now.

Udayan
So it is a broad statement of intent or direction or is there anything?

Bala
Broad statement of intent.

Udayan
Not looking at any company of that size right now?

Bala
We keep looking at companies in that range, but doesn't know when we are going to do and when it is going to materialize, the continuous process is keep going on.

Udayan
Kris, before you leave us a quick word on the subsidiaries, so if you can just tell us more on Consulting, China, and Australia as well as Progeon for this quarter.

Kris
So clearly we are still in a investment mode for Consulting and China, you know, we felt that both are strategic and it is a important addition to our overall strategy of the services foot print as well as delivery capabilities, so Consulting from a services perspective and value addition perspective, and China from a overall delivery capability perspective. Infosys Australia is doing very well. We have had significant client additions in Australia. Finacle is doing well in Australia. So overall Australia is looking very positive.

Udayan
Bala from a margin perspective how is the picture from the subsidiaries, from Progeon and the other subsidiaries, are you getting into a stage where the drag on margins from the subsidiaries is lessening every quarter?

Bala
I think it will happen a period of time, China and Consulting like Kris said are still in the investment phase, so there may be interim losses in the next few quarters, but Progeon and Australia are doing extremely well. Overall, the subsidiaries should net within themselves, they should not hurt the current company's overall margin. So I think as soon as the investment phase is over for Consulting and China, probably it will be attributive of margins.

Udayan
Just one last word, do you still discuss finance with Mohan or it is not so, he is HR and you are Finance?

Bala
Well we keep discussing on the corridors not mainly on numbers but more general topics, not specific.

Udayan
Lets leave it there Bala, so thanks very much both of you for joining, and Shibu ____ and Mohandas Pai who has just joins us in his new avatar as Head of HR We will focus on and Shibu when we come back after the break.

Welcome back, you are still watching the Infosys Boardroom at the end of Q1 where they have upped their guidance for the year significantly. First <inaudible> and this EPS guidance is now up to Rs. 125 a share roughly and now they are saying that they will grow revenue by 40% on rupee terms and 34-35% in dollar terms, that is much much higher than what they started at the year with. We have been talking to the top brass at Infosys, S.D. Shibulal, and now we have got Mohandas Pai in his new avatar as Head of Human Resources and Director on the Board of course joining in now. Ashok Vemuri heads the largest vertical at Infosys, which is BFSI, Banking Financial Services & Insurance, and Amitabh Chaudhry who heads Progeon are with us right now. Thanks gentlemen for joining in. Mohan good to see you in.

Mohandas Pai
Thank you.

Udayan
Enjoying your new role as HR boss?

Mohandas Pai
Well it is a different role, but very enjoyable you got deal with people - I dealt with the result of dealing with people, now you have got to deal with the people themselves.

Udayan
<inaudible> when the utilization level start building up on such aggressive recruitment.

Mohandas Pai
It takes about 14 to 16 weeks for us to train people and additional 4 weeks for them to become productive, so I guess utilization will pick up in the third and fourth quarter. What we have done this year is accelerated hiring, if you look at last year we had about 8056 people gross in the second quarter, that we brought them up to the first quarter, we hired obviously in the fourth quarter of last year, so in the first quarter when the growth took off we had adequate people in Infosys, even though we were very stretched to get enough people to deliver, so for the second quarter we are opening with a better balance than we did last year and for the third and fourth quarter if business continues to be good, which I am sure it will, we will have enough people in the company. So I think we are cracked the problem of the human capital supply chain by enhancing the recruitment effort.

Udayan
But it means the recruitment is more front ended this year earlier in the year, what implications that will have on the margins that you are starting with a much larger bench early in the year?

Mohandas Pai
Yeah the margin of course - <inaudible> has an impact on the margin, but we are seeing the results in the first quarter and Bala has said that margins will be flat, I mean being as per what we did last year, so again we have made sure that in the financial model it doesn't have a large impact on the margin.

Udayan
Shibu that is <inaudible> to have a strong bench ready as new business <inaudible> new orders start kicking in rather than worry about margins and <inaudible>?

Shibulal
Absolutely, I think the more number of people we have in the system that allows us to ramp up much faster and it also allows us to take the right skill to the right place at the right time, so our utilization target is in high 70s, and this quarter we were around 76.1. Also remember the remaining people are the people whom we have to ramp up Q2, and the people who have joined in today will only be available somewhere in Q3, so it overall helps us to manage the business.

Udayan
Are wages going up when you recruit as well.

Mohandas Pai
Yes, wages are going up for new recruits, slightly higher than inflation. We have made an offer of 2.7 lakhs in the next year, and we are looking at very large numbers for the next year, and we believe that we are among the top in the sweepstakes very good interest in people joining us, and right now we have increased the small part of the wage for people in certain category in the corporation from 1 st of July because this is a very hot market for talent and we have restructured our compensation to make sure that we don't lose people of some critical areas and I think going forward for the whole of the IT industry we have to create a pyramid, we have to create a role based organization and we have to pay the kind of wages that allows us to grow at the fastest possible speed. Today it is not a demand constrained market, it is a resource constraint market, so more people who have a better qualified like Shibu said have the right skill is the right time, you can create and dominate the market.

Udayan
<inaudible> after the improvement in Q1, some of the wage inflation will kick in Q2 as well because you have raised certain salaries?

Mohandas Pai
Yeah, it is a very small amount, just about $2.5 million. For $2.5 million in about about 500 million is something that we can afford very easily, but we sent the right signal that we take care of people and we are focused on making sure that people get well compensated, we invest heavily in people, we are a people-oriented company, and there is very strong message in the market place that come home to mama, come to Infosys and you make your career.

Udayan
Infosys is mama, okay, it is interesting. I wonder what Mr. Murthy would have to say about that, but Amitabh how many people have you added at Progeon and how are you going about ramping up?

Amitabh
We have added about 1000 people in this particular quarter, so based on this quarter we had done quite well, we are very very happy about what we delivered, we have gained 16%, as I said we added 1000 people. Today I think we are one of the largest third party BPO players in banking and capital market space, especially mortgage and securities operations. space we have more than 2000 people to work for us, another <inaudible> we are the largest player, we have 300 people doing equity research etc.. Out sales pipeline is very very strong, <inaudible> sales side quite significantly. So from our perspective we are quite delighted at this quarter and we are going to be looking at contributing in growth in Infosys.

Udayan
16% of revenue growth?

Amitabh
Yes revenue growth quarter-on-quarter, yes. <inaudible> growth in the last three or four quarters, we are growing in <inaudible> I think there is an uptick in terms of what revenue growth we are delivering, so that is obviously making us very very happy.

Udayan
What kind of operating margins have you seen in this quarter?

Amitabh
We have maintained operating margins, they are steady - we also went for salary increases as Mohan mentioned in Infosys that had an impact with the Citi Bank transaction there is an impact of that because we had to had to avail small stock compensation back on this, but overall our margins remain steady and we are the most profitable BPO company in India, you know, we have been there for quite some time, for almost eight quarters we have delivered 23-25% net margin, which makes us the most profitable BPO company, and I think we have a model that is robust enough and see lot of other players trying to copy what we have done in the last 3-4 years.

Udayan
Do you see margins inching up closer to the Infosys average?

Amitabh
We have to get there, there is no choice, when you are part of Infosys we need to work out of those margins. So yes, as we reach scale we believe that our SG&A expenses will come down and we will start meeting those numbers. I should add that we are going live in China also in July, which is again a feather in our cap now we have gone live in July in China in Hangzhou, so we are spreading globally also in terms of what we can deliver to our clients.

Udayan
Ashok morning.

Udayan
You run the biggest vertical in Infosys, what kind of sequential growth have you registered in BFSI this quarter?

Ashok
This quarter we have grown at about 12.5% and talking about about 36.5% in the top line of the company, so it is actually being a very good and consistent with what we had set out to do

Udayan
Where does it come from - the banks or?

Ashok
It comes from across the board, essentially earlier it used to be commercial banks, but it is now spread out to security, spread out to asset management companies, custody companies, so the entire range of services companies out there in the financial space we are working with.

Udayan
<inaudible> this deal, you can talk about how does ABM Amro which has been spoken about quite a bit?

Ashok
Yeah, we have had many deals, I think the important thing that we have done an end to end transaction from a transformation perspective for example, and we did for a large consumer <inaudible> organization, we actually did an end to end, enterprise service solution consulting , implementing those recommendations from a technology perspective, and the consequent business and customer services that arose from it we have outsourced to Progeon, ...

Udayan
You are getting a lot of <inaudible> Amitabh, from the BFSI space particularly, in transaction?

Amitabh
Oh yes, the BFSI space is the largest space <inaudible> if you look at Progeon data base, and I think the direction in the future when we bring IT and BPO together and we can actually provide a solution an end to end solution that we talked about, I think our ability to provide that and deliver a business benefit to the client which can be measured will perhaps be the most in space in India, and as we are <inaudible> lot together to kind of bring point solutions to our clients where we are measured in the business outcome, where we are measured in business benefit, and what you just mentioned is <inaudible> which we are already heading on, we have identified a number of areas where potentially we can capitalize on some of these points.

Udayan
Shibu aside this BFSI where do you see the very strong growth, I mean 12-14% plus kind of volume growth kicking in from?

Shibulal
I think this quarter we have seen from the communication service provider, I think the percentage of about16-17% flat, as percentage in revenue. We are also seeing some growth in <inaudible> practice, that is the sector which we started couple of years back and I think we are seeing robust growth, and we are also seeing growth in Europe, because the percentage of revenues in Europe has gone to 26.2% this quarter compared with 25.5% last quarter. So the vertical wise we are seeing BFSI, <inaudible> utilities, geographically we are seeing Europe.

Udayan
Okay, we take a break on that note. We have still got 15 minutes left or thereabouts with the Infosys top management. In fact the markets have bounced back as well, Infosys has moved up <inaudible> again up 6%, and <inaudible> company, but some of the other heavy weights like Reliance are beginning to move as well, the markets up 64 points <inaudible>. So after what seemed like a flattish kind of opening it is beginning to lighten up a bit more on that, and of course we will talk about a few issues that we haven't touched upon like BFSI, pricing, and the kind of investment Mohan is making on the training side, that is when we come back after the break.

Welcome back. Last shot at the Infosys management for this quarter, a quarter which has beaten street expectations and certainly has delivered and more on the guidance for the full year. We came here looking for 117-118 rupees a share, we would have been happy with that, but the market turned out to be 125 rupees per share. This morning we needed it because of all the gloom in Mumbai and Infosys certainly has delivered on that promise. Besides the markets up 75 points, surprisingly after that dastardly act last evening <inaudible> had it not been for this guidance.

Last 15 minutes with the Infosys top management, S.D. Shibulal, Mohandas Pai, Ashok Vemuri, and Amitabh Chaudhry with us right now. Mohan just a couple of quick takes, a on attrition, - hawk's market market, attrition pressure still remains which is <inaudible> careful about increment?

Mohandas Pai
Yes attrition pressures remain because the industry is going to hire about 360,000 people including BPO this year, and the services industry could hire anywhere between 160,000 to 200,000. We see MNCs come here as some of them have gone into a big size, so attrition is a challenge and the market is hot for the people.

Udayan
Also about the investment Infosys making in Chennai, the details of that.

Mohandas Pai
Well I think we have an investment commitment of 1250 crores in Chennai. Mr. Karunanidhi came here and reiterated our commitment to Chennai, the campus can take about 25,000 people. We already have space for about 3700 people with 2750 actually working. We are investing heavily there. We will probably spend about 250-300 crores there, we have already spent about 150 crores in the campus and that is part of SEZ strategy, we have a SEZ in Chandigarh, we have just got the final approval and the last bit of paper yesterday, so we are going to start ramping up there, we will have a capacity of 8000 seats. We have an approval for SEZ in Mangalore, and in another places we are looking at SEZ, because after the STP goes the new story is SEZ.

Udayan
How many would you have you think by the time that you are through with thetax shelter?

Mohandas Pai
Well believe that in fiscal 08 a substantial part of the additional capacity we build will be in SEZ, and fiscal 09 we hope that the total additional capacity will be in SEZ, so that when we open in fiscal 2010 where the tax holiday under 10 A is gone we will have a large chunk of our total workforce coming from the SEZ.

Udayan
And you think <inaudible>?

Mohandas Pai
Well you have got to ask Bala.

Udayan
Till last quarter you were there in Bala's place.

Mohandas Pai
Yeah I know, but you know Bala has to calculate, I don't have the number right now.

Udayan
Ball park even, what the percentage of work force could be there?

Mohandas Pai
Well I think by 2009 may be about 25% of work force or 30% of the work force could hopefully be there, this is a conservative estimate it goes according to plan, but you must remember that to create a SEZ today the approval process is very onerous and long, there is an environment approval that needs to come which takes an enormous amount of time, I think the environment approval is probably the greatest drawback in the entire process, because it takes too long and that is holding up the growth for the industry. We have represented to the government that a industry which hires 30,000 people every month should not be subject to anything that holdsup growth, and it is a big challenge.

Udayan
Okay, just one word from you Amitabh on attrition level, are you seeing this <inaudible> in terms of they have been for the industry?

Amitabh
I think as far as the industry is concerned the<inaudible> remain has intense, because the demand remains very very strong. We have seen our attrition levels come down by a couple of percentage points, but we are not satisfied, because we are still running at about 37-38% attrition. We are looking at ways and means of brining it down, I think the industry is operating at a much higher levels, but we are not satisfied with the levels that we are at, so that will be an area of focus for us and we believe that in the next 12 months we will see it coming down, because we don't think that is just the supply issue which is driving it, there are some specific concerns of the employees which also need to be addressed as possible.

Udayan
What about pricing issues in Progeon, have you seen any improvement there?

Amitabh
Yes there is, the pricing has an upward bias the new clients, we are seeing that the pricing is higher and we are getting the price which is two reasons, one is that our ____ which we are doing _____ create these point solutions, we trying to talk about the business benefits the clients are willing to sign up for higher prices, and secondly the overall cost structure has gone up, I think the overall competition there in the market place also is creating in general some of the higher prices, at least that is what we have seen, but I also <inaudible> there are desperate people who are <inaudible> so called not doing very well and quoting some very ridiculous prices, so we are seeing that, but really in Progeon we are seeing <inaudible> price.

Udayan
Ashok are you seeing any improvement on pricing from BFSI, because that is really material for Infosys overall?

Ashok
Yeah absolutely, Udayan, in fact our market we have newer clients actually coming in with slightly upward pricing, renegotiations that we are doing with the existing clients that are actually a stable pricing or a slightly higher pricing, but the renegotiations are actually giving us <inaudible> volume discounts <inaudible>, obviously this is a reflection of the track record that we have with our clients with the value that we have got to them and they realize that, and I think also from a pricing perspective if we continue to sell services that are tending to be commoditized ____ given our solutions and point focused solutions, and enterprise by end to end kind of approach We are definitely seeing a lot more conversations move away from a cost perspective, and I think the real proof of the pudding is fact that you not only but we are also able to capture IT cost and IT pricing, I think that is an indicative that you know the value that we are providing to our clients is actually <in audible> appreciate, and that the conversations are moving away from a cost base.

Udayan
How much of your growth, and BFSI specifically, will come from large deals like ABN Amro which you cracked recently, going forward?

Ashok
Well, you know, from a large deal perspective we had some wins that are large in size definitely a large deal. At this point of time <inaudible> range, I mean it is hard to put a range, because our client base is actually expanding, we are expanding in various lines of business, but I think in our existing client base and <inaudible> really restricted to be geographies that were earlier good for us but also new geographies as well.

Udayan
We come to end of this round, well run completely out of time, _we leave just with one last word on Narayana Murthy because he is stepping down as Executive Chairman. Mohan, any wistful eyes in the Infosys board today?

Mohandas Pai
Yes of course, because you know he is such a great figure, such an inspiration, a role model for all of us, a father figure, a very tough man, extremely tough man, you have to perform under him, and he demands a lot from you, he used to drive us, make us work, and not to have him come to the office everyday, and not having the ability to go meet him and argue with him and debate with him and fight with him and ask him and make him ask you questions and engage with him and see him, you know, I personally feel empty, because he is such a large part of our lives here for all of us, all of us have grown up under him and to see the day when he is going to retire and not come to office everyday, but I know for sure that his heart is here, his mind is here, this is his baby, he made all of us, and he is going to be around and he is always available to us to speak and he has <inaudible> all of us to carry on the dream that he had, the dream that Shibu and other founders had that we have to carry on a nd he has told us that if all of us succeed it is his success, our success is his success. So I think it is a very good moment for us, a great moment for the industry and the country because he is a great icon, and for me specially too because he is my mentor and He's taught me so many things. So there will be feelings of emptiness, lot of tearful eyes, but hope in our heart because we have to succeed, now we have to make thing happen, he may not be there directly but he is there, he will always guide us. So I think you know it is mixed emotions

Udayan
Shibu, as a co-founder will miss him <inaudible>?

Shibulal
<inaudible> missing because he has shown us the leadership raised our aspirations, he has been the driving force. whenever we want because olden days we could just walk in to his room and talk about things, we will definitely miss that. But at the same time in his new role he will be mentoring some of us and he will always be with us.

Udayan
On that note thank you gentlemen very much all of you for joining in. It has been a terrific quarter at Infosys and the market is up 100 points as we say goodbye from Bangalore for this quarter. Q2 has traditionally been the best quarter, so fasten your seat belts for action jn when we come back here next quarter. Thanks very much for watching.

EX-99.9

EXHIBIT 99.9

	INFOSYS TECHNOLOGIES LIMITED
	Regd. Office : Electronics City, Hosur Road, Bangalore - 560 100, India.

Audited financial results for the quarter ended June 30, 2006

(in Rs. crore, except per share data)

	Quarter ended		Year ended
	June 30,		March 31,
	2006	2005	2006
Income from software services and products	2,867	1,967	9,028
Software development expenses	1,615	1,064	4,887
Gross profit	1,252	903	4,141
Selling and marketing expenses	167	119	499
General and administration expenses	211	137	653
Operating profit before interest and depreciation	874	647	2,989
Interest	-	-	-
Depreciation	97	75	409
Operating profit before tax and exceptional items	777	572	2,580
Other income	129	30	144
Provision for investments	3	-	-
Net profit before tax and exceptional items	903	602	2,724
Provision for taxation	104	79	303
Net profit after tax and before exceptional items	799	523	2,421
Income on sale of Investments	6	-	-
Net profit after tax and exceptional items	805	523	2,421
Paid-up equity share capital (par value Rs. 5/- each, fully paid) (see note 3)	138	136	138
Reserves and surplus	7,690	5,729	6,759
Earnings per share (par value Rs. 5/- each) *
Before Exceptional items
Basic	28.89	19.33	88.67
Diluted	28.22	18.79	86.20
After Exceptional items
Basic	29.13	19.33	88.67
Diluted	28.45	18.79	86.20
Dividend per share (par value Rs. 5/- each)
Interim dividend	NA	NA	6.50
Final dividend	NA	NA	8.50
Silver Jubilee special dividend	NA	NA	30.00
Total dividend	NA	NA	45.00
Total dividend percentage (%)	NA	NA	900.00
Aggregate of non-promoters' shareholding (unaudited)
Number of shares	22,31,22,459	21,76,82,150	22,18,24,263
Percentage of shareholding	80.60	80.20	80.50

* Not adjusted for issue of 1:1 bonus shares, as the record date for issue of bonus shares is July 14, 2006.

Other information:

(in Rs. crore, except per share data)

	Quarter ended		Year ended
	June 30,		March 31,
	2006	2005	2006
Staff costs	1,403	914	4,273
Items exceeding 10% of aggregate expenditure	-	-	-
Details of other income:
Interest on deposits with banks and others	49	24	132
Dividends on investment in liquid mutual funds	17	13	71
Miscellaneous income	10	2	18
Exchange differences	53	(9)	(77)
Total	129	30	144

Audited consolidated financial results of Infosys Technologies Limited and its subsidiaries for the quarter ended June 30, 2006

(in Rs. crore, except per share data)

	Quarter ended		Year ended
	June 30,		March 31,
	2006	2005	2006
Income from software services, products and business process management	3,015	2,071	9,521
Software development and business process management expenses	1,666	1,104	5,066
Gross profit	1,349	967	4,455
Selling and marketing expenses	204	141	600
General and administration expenses	256	162	764
Operating profit before interest, depreciation, and minority interest	889	664	3,091
Interest	-	-	-
Depreciation	106	80	437
Operating profit before tax, minority interest and exceptional items	783	584	2,654
Other income	128	28	139
Provision for investments	3	-	1
Net profit before tax, minority interest and exceptional items	908	612	2,792
Provision for taxation	106	80	313
Net profit after tax, and before minority interest and exceptional items	802	532	2,479
Income from sale of Investments	6	-	-
Net profit after tax, exceptional items and before minority interest	808	532	2,479
Minority interest	8	-	21
Net profit after tax, exceptional items and minority interest	800	532	2,458
Paid-up equity share capital (par value Rs. 5/- each, fully paid) (see note 3)	138	136	138
Reserves & surplus	7,705	5,771	6,828
Preference shares issued by subsidiary	-	-	-
Earnings per share (par value Rs. 5/- each) *
Before Exceptional items
Basic	28.71	19.63	90.06
Diluted	28.04	19.08	87.55
After Exceptional items
Basic	28.95	19.63	90.06
Diluted	28.27	19.08	87.55
Dividend per share (par value Rs. 5/- each)
Interim dividend	NA	NA	6.50
Final dividend	NA	NA	8.50
Silver Jubilee special dividend	NA	NA	30.00
Total dividend	NA	NA	45.00
Total dividend percentage (%)	NA	NA	900.00
Aggregate of non-promoters' shareholding (unaudited)
Number of shares	22,31,22,459	21,76,82,150	22,18,24,263
Percentage of shareholding	80.60	80.20	80.50

* Not adjusted for issue of 1:1 bonus shares, as the record date for issue of bonus shares is July 14, 2006.

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.

Note:

1. The audited quarterly financials have been taken on record by the Board of Directors at its meeting held on July 12, 2006. There are no qualifications in the auditors' reports for these periods. The information presented above is extracted from the audited financial statements as stated.

2. Information on investor complaints pursuant to Clause 41 of the Listing Agreement for the quarter ended June 30, 2006

Nature of complaints received	Opening balance	Additions	Disposal	Closing balance
Dividend / Bonus shares related	-	151	151	-

3. During the quarter ended June 30, 2006 and 2005 and the year ended March 31, 2006 the company issued 12,88,196; 8,52,318 and 49,84,431 equity shares respectively, pursuant to the exercise of stock options by certain employees under the 1998 and 1999 stock option plans.

4. In the Annual General Meeting held on June 10, 2006, shareholders approved 1:1 bonus issue (stock dividend) for all shareholders including the ADR holders, i.e. one additional equity share for every one existing share held by the members by capitalizing a part of the reserves. The record date for the bonus issue would be July 14, 2006.

5. The final dividend of Rs. 8.50/- per share for fiscal 2006 and the Silver Jubilee special dividend of Rs. 30/- per share was approved by the shareholders in the Annual General Meeting held on June 10, 2006 and the same was paid on June 14, 2006.

6. Effective April 1, 2006 the company adopted the revised accounting standard on employee benefits. Pursuant to the adoption, the additional obligations of the company amounted to Rs. 13 crore. As required by the standard, the obligation has been recorded with the transfer of Rs. 13 crore to general reserves.

Matters relating to subsidiaries:

7. During the period ended June 30, 2006, 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. As of June 30, 2006 the company has invested US$ 5 million (Rs. 23 crore) as equity capital and US$ 5 million (Rs. 23 crore) as loan in the subsidiary.

8. During the period ended June 30, 2006, the company invested US$ 3 million (Rs. 14 crore) in its wholly owned subsidiary, Infosys Consulting Inc. As of June 30, 2006 the company has invested an aggregate of US$ 20 million (Rs. 90 crore) in the subsidiary.

9. On June 30, 2006, the company completed the acquisition of the entire holdings (87,50,000 shares amounting to 23% of the equity on a fully diluted basis) of Citicorp International Finance Corporation ("CIFC") in Progeon Limited ("Progeon") for a consideration amounting to Rs. 530 crore (US$ 115.13 million). The net consideration of Rs. 309 crore, after withholding taxes of Rs. 221 crore was remitted to CIFC on the same date. Consequent to this, the company's holding in Progeon as of June 30, 2006 is 96.96%.

Changes to Board of Directors:

10. Mr. Larry Pressler retired by rotation as a director of the company at the Annual General Meeting held on June 10, 2006 and did not seek re-election.

11. Mr. N. R. Narayana Murthy, Chairman and Chief Mentor, turns 60 on August 20, 2006 and as per the service rules of the company, he will retire from the services of the company on that date. In this connection, the Board resolved to appoint Mr. Murthy as an Additional Director of the company with effect from August 21, 2006 and further resolved that Mr. Murthy will serve as the Non-Executive Chairman of the Board and Chief Mentor with effect from August 21, 2006.

12. The Board also resolved that Mr. Nandan M. Nilekani, currently the Chief Executive Officer, President and Managing Director of the company, be re-designated as the Chief Executive Officer and Managing Director with effect from August 21, 2006 and that Mr. S. Gopalakrishnan, currently the Chief Operating Officer and Deputy Managing Director, be promoted and re-designated as the President, Chief Operating Officer and Joint Managing Director with effect from August 21, 2006.

Investments:

13. During the quarter ended June 30, 2006, the company received an amount of US$ 1.29 million (Rs. 5 crore) being the balance held in escrow account released on fulfillment of the escrow obligations on account of sale of investment in Yantra Corporation. The income is disclosed separately as an exceptional item in the profit and loss account.

14. During the quarter ended June 30, 2006, the company received Rs. 1 crore from CiDRA corporation towards redemption of shares on recapitalization. The remainder of investment was written off against the provision made earlier.

Others:

15. Infosys was included in the new NASDAQ Global Select Market on July 3, 2006. The NASDAQ Global Select Market has the highest initial listing standards of any exchange in the world based on financial and liquidity requirements.

Segment reporting (Consolidated - Audited)

(in Rs. crore)

	Quarter ended		Year ended
	June 30,		March 31,
	2006	2005	2006
Revenue by industry segment
Financial services	1,109	752	3,427
Manufacturing	436	276	1,324
Telecom	531	355	1,566
Retail	293	198	968
Others	646	490	2,236
Total	3,015	2,071	9,521
Less : Inter-segment revenue	-	-	-
Net revenue from operations	3,015	2,071	9,521
Segment profit before tax, interest, depreciation and amortization:
Financial services	296	240	1,074
Manufacturing	131	81	402
Telecom	188	130	601
Retail	86	63	311
Others	188	150	703
Total	889	664	3,091
Less : Interest	-	-	-
Less : Other un-allocable expenditure	106	80	437
(excluding un-allocable income)
Operating profit before tax	783	584	2,654

Notes on segment information

Principal segments

The company's operations predominantly relate to providing technology services, delivered globally to clients 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
July 12, 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 ended June 30, 2006, prepared as per US GAAP. A summary of the financial statements is as follows:

(in US$ million, except per ADS data)

	Quarter ended		Year ended
	June 30,		March 31,
	2006	2005	2006
Revenues	660	476	2,152
Cost of revenues	389	274	1,244
Gross profit	271	202	908
Net income	174	122	555
Earnings per American Depositary Share (ADS)
Basic	0.63	0.45	2.04
Diluted	0.62	0.43	1.99
Total assets	1,938	1,557	2,066
Cash and cash equivalents	392	444	889
Liquid mutual funds	358	307	170

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

(in US$ million)

	Quarter ended		Year ended
	June 30,		March 31,
	2006	2005	2006
Consolidated net profit as per Indian GAAP	175	122	555
Stock Compensation Expenses (SFAS 123R)	(1)	-	-
Consolidated net income as per US GAAP	174	122	555

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 segme nt 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, 2006. These filings are available at www.sec.gov. Infosys may, from time to time, make additional written and oral forward-looking statements, including statements contained in the company's filings with the Securities and Exchange Commission and our reports to shareholders. The company does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of the company.

EX-99.10

EXHIBIT 99.10

Infosys Technologies Limited and Subsidiaries

Consolidated Balance Sheets

(Dollars in millions except per share data)

	As of
	March 31, 2006	June 30, 2006
	(1)	(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$889	$392
Investments in liquid mutual fund units	170	358
Trade accounts receivable, net of allowances	361	408
Unbilled revenue	48	57
Prepaid expenses and other current assets	40	51
Deferred tax assets	1	2
Total current assets	1,509	1,268
Property, plant and equipment, net	491	496
Goodwill	8	91
Intangible assets, net	-	19
Deferred tax assets	13	12
Advance income taxes	18	19
Other assets	27	33
Total Assets	$2,066	$1,938
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable	$3	$2
Income taxes payable	-	1
Client deposits	2	2
Unearned revenue	44	54
Other accrued liabilities	160	147
Total current liabilities	209	206
Non-current liabilities
Other non-current liabilities	5	5
Minority interests	15	2
Stockholders' Equity
Common stock, $0.16 par value 600,000,000 equity shares authorized, Issued and outstanding -275,554,980 and 276,843,176 as of March 31, 2006 and June 30, 2006, respectively	31	31
Additional paid-in capital	410	444
Accumulated other comprehensive income	9	(46)
Retained earnings	1,387	1,296
Total stockholders' equity	1,837	1,725
Total Liabilities And Stockholders' Equity	$2,066	$1,938

(1) March 31, 2006 balances were obtained from audited financial statements

See accompanying notes to the unaudited consolidated financial statements

Infosys Technologies Limited and Subsidiaries

Unaudited Consolidated Statements of Income

(Dollars in millions except per share data)

	Three months ended June 30,
	2005	2006
Revenues	$476	$660
Cost of revenues	274	389
Gross profit	202	271
Operating Expenses:
Selling and marketing expenses	32	45
General and administrative expenses	37	56
Total operating expenses	69	101
Operating income	133	170
Gain on sale of long term investment	-	1
Other income, net	7	28
Income before income taxes and minority interest	140	199
Provision for income taxes	18	23
Income before minority interest	$122	$176
Minority interest	-	2
Net income	$122	$174
Earnings per equity share
Basic	$ 0.45	$ 0.63
Diluted	$ 0.43	$ 0.62
Weighted average equity shares used in computing earnings per equity share
Basic	269,581,842	274,995,563
Diluted	277,086,163	281,403,388

See accompanying notes to the unaudited consolidated financial statements

Infosys Technologies Limited and Subsidiaries

Unaudited Consolidated Statements of Stockholders' Equity and Comprehensive Income

(Dollars in millions)

	Common stock Shares	Common stock Par value	Additional paid-in capital	Comprehensive income	Accumulated other comprehensive income	Retained earnings	Total stockholders' equity
Balance as of March 31, 2005	270,570,549	$31	$266		$33	$923	$1,253
Common stock issued	852,318	-	23		-	-	23
Cash dividends	-	-	-		-	(46)	(46)
Change in proportionate share of subsidiary resulting from issuance of stock by subsidiary	-	-	12	-	-	-	12
Comprehensive income
Net income	-	-	-	$ 122	-	122	122
Other comprehensive income
Unrealized gain on mutual fund investments, net of taxes				1	1		1
Translation adjustment	-	-	-	4	4	-	4
Comprehensive income				$1 27
Balance as of June 30, 2005	271,422,867	$31	$301		$38	$999	$1,369
Balance as of March 31, 2006	275,554,980	$31	$410		$9	$1,387	$1,837
Common stock issued	1,288,196	-	31	-	-	-	31
Cash dividends	-	-	-	-	-	(265)	(265)
Amortization of stock compensation expenses	-	-	1	-	-	-	1
Income tax benefit arising on exercise of stock options			2	-	-	-	2
Comprehensive income
Net income	-	-	-	$174	-	174	174
Other comprehensive income
Translation adjustment	-		-	$(55)	$(55)		(55)
Comprehensive income		-	-	$119
Balance as of June 30, 2006	276,843,176	$31	$444		$(46)	$1,296	$1,725

See accompanying notes to the unaudited consolidated financial statements

Infosys Technologies Limited and Subsidiaries

Unaudited Consolidated Statements of Cash Flows

(Dollars in millions)

	Three months ended June 30,
	2005	2006
OPERATING ACTIVITIES:
Net income	$122	$174
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization	18	23
Minority interest	-	2
Amortization of stock compensation expenses	-	1
Deferred taxes	(1)	(2)
Others	-	(2)
Changes in assets and liabilities
Trade accounts receivable	20	(57)
Prepaid expenses and other current assets	(5)	(10)
Unbilled revenue	(3)	(11)
Income taxes	11	-
Client deposits	(1)	-
Unearned revenue	8	12
Other accrued liabilities	(18)	(9)
Net cash provided by operating activities	151	121
Investing Activities:
Expenditure on property, plant and equipment	(58)	(42)
Acquisition of minority interest in subsidiary	-	(116)
Investments in liquid mutual fund units	(64)	(375)
Redemption of liquid mutual fund units	36	180
Non-current deposits placed with corporations	(9)	(11)
Others	(1)	1
Net cash used in investing activities	(96)	(363)
Financing Activities:
Proceeds from issuance of common stock on exercise of employee stock options and income tax benefits	23	33
Payment of dividends	(46)	(264)
Net cash used in financing activities	(23)	(231)
Effect of exchange rate changes on cash	2	(24)
Net increase/(decrease) in cash and cash equivalents during the period	34	(497)
Cash and cash equivalents at the beginning of the period	410	889
Cash and cash equivalents at the end of the period	$444	$392
Supplementary information:
Cash paid towards taxes	$ 9	$25

See accompanying notes to the unaudited consolidated financial statements

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. The company provides solutions that span the entire software life cycle encompassing consulting, design, development, software re-engineering, maintenance, systems integration, package evaluation and implementation and infrastructure management services. In addition, the company offers software products for the banking industry and business process management services.

1.2 Basis of preparation of financial statements and consolidation

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.

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, 2006.

1.3 Use of estimates

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

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 un earned 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 amounts are recognized as revenue for delivered elements. In the absence of an established VSOE for implementation, the entire ar rangement 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 report ing unit below its carrying amount.

1.10 Intangible assets

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

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

1.11 Research and development

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

1.12 Foreign currency

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

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

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 reflect 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 securiti es.

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 as income in the period that includes the enactment date. The measurement of deferred tax assets is reduced, if necessary, by a valuation allowance for any tax benefits of which future realization is not more likely than not. Changes in valuation allowance from period to period are reflected in the income statement of the period of change. Deferred taxes are not provided on the undistributed earnings of subsidiaries outside India where it is expected that the earnings of the foreign subsidiary will be permanently reinvested. Tax benefits 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 .

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, 2006 and June 30, 2006 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 factors which affect the fluctuations in the company's provisions for bad debts and write offs of uncollectible accounts include the financial health and economic environment of the clients. The company specifically identifies the credit loss and then makes the provision. The company's cash resourc es 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 and included in other income, net.

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 Trusts 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 has no further obligations to the Plan beyond its monthly contributions. Certain employees of Progeon are also eligible for superannuation benefit. Progeon makes monthly provisions under the superannuation plan based on a specified percentage of each covered employee's salary. Progeon has no further obligations to the superannuation plan beyond its monthly provisions which are periodically contributed to a trust fund, the corpus of which is invested with the Life Insurance Corporation of India. Effective April 1, 2005, a portion of the monthly contribution amount was paid directly to the employees as an allowance and the balance amount was 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

Till March 31, 2006, the company applied 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 elected to continue to apply the intrinsic value-based method of accounting described above, and adopted the disclosure requirements of SFAS 148, Accounting for Stock-Based Compensation - Transi tion and Disclosure, an amendment of FASB Statement No. 123. All stock options issued to date have been accounted as a fixed stock option plan.

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)

	Three months ended June 30, 2005
Net income, as reported	$122
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects	(4)
Pro forma net income	$118
Earnings per share:
Basic - as reported	$0.45
Basic - pro forma	$0.44
Diluted - as reported	$0.43
Diluted - pro forma	$0.42

From April 1, 2006, the company adopted FASB Statement No.123(revised 2004), Share-Based Payment using the modified prospective approach. The company recorded amortization of stock compensation expense of $1 million during the three months ended June 30, 2006.

1.20 Dividends

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

1.21 Equity issued by subsidiaries

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.

2 Notes to the unaudited consolidated financial statements

2.1 Trade accounts receivable

Trade accounts receivable as of March 31, 2006 and June 30, 2006, net of allowance for doubtful accounts of $2 million and $4 million, amounted to $361 million and $ 408 million. The age profile of trade accounts receivable, net of allowances, is given below.

In %

	As of
	March 31, 2006	June 30, 2006
Period (in days)
0 - 30	60.9	82.7
31 - 60	31.2	5.6
61 - 90	3.5	7.2
More than 90	4.4	4.5
	100.0	100.0

2.2 Loans to employees

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 $28 million and $27 million were outstanding as of March 31, 2006 and June 30, 2006.

The required repayments of employee loans outstanding as of June 30, 2006 are as detailed below.

(Dollars in millions)

Repayment in the 12 months ending June 30,	Repayment
2007	$21
2008	3
2009	1
2010	1
2011	1
	$27

The estimated fair values of the loan to employee's receivables amounted to $24 million as of March 31, 2006 and $25 million as of June 30, 2006. These amounts have been determined using available market information and appropriate valuation methodologies. Considerable judgment is required to develop these estimates of fair value. Consequently, these estimates are not necessarily indicative of the amounts that the company could realize in the market.

2.3 Non-Operating income

In fiscal 2005, the Company sold its investment in Yantra Corporation. The carrying value of the investment in Yantra Corporation was completely written down in fiscal 1999. Consideration received from the sale resulted in a gain of $11 million during fiscal 2005. Further consideration of $1 million was received during the three months ended June 30, 2006 resulting in a gain of $1 million for the period.

Other income, net, consists of the following:

(Dollars in millions)

	Three months ended June 30,
	2005	2006
Interest income	$6	$11
Income from mutual fund investments	3	4
Foreign exchange gains/(losses), net	(2)	12
Others	-	1
	$7	$28

2.4 Income taxes

The provision for income taxes in the income statement comprises:

(Dollars in millions)

	Three months ended June 30,
	2005	2006
Current taxes
Domestic taxes	$6	$9
Foreign taxes	13	16
	19	25
Deferred taxes
Domestic taxes	(1)	(1)
Foreign taxes	-	(1)
	(1)	(2)
Aggregate taxes	$18	$23

All components of the aggregate taxes of $18 million and $23 million for the three months ended June 30, 2005 and 2006 are allocated to the continuing operations of the company. 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, 2006	June 30, 2006
Deferred tax assets
Property, plant and equipment	$13	$14
Investments	1	1
Compensated absences and other accruals	1	2
	15	17
Less: Valuation allowance	(1)	(1)
	14	16
Deferred tax liabilities
Intangible asset	-	(2)
	-	(2)
Net deferred tax assets	14	14

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. Management considers the scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes that it is more likely than not the company will realize the benefits of those deductible differences, net of the existing valuation allowance at June 30, 2006. The valuation allowance relates to investments. The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carry forward period are reduced.

The provision for foreign taxes is due to income taxes payable overseas, principally in the United States of America. The company benefits from certain significant tax incentives provided to software firms under Indian tax laws. These incentives presently include those for facilities set up under the Special Economic Zones Act, 2005 and an exemption from payment of Indian corporate income taxes for a period of ten consecutive years of operation of software development facilities designated as "Software Technology Parks" (the STP Tax Holiday). The Government of India has amended the tax incentives available to companies set up in designated STPs. The period of the STP Tax Holiday available to such companies is restricted to ten consecutive years, beginning from the financial year when the unit started producing computer software or April 1, 1999, whichever is earlier. The tax holidays on all facilities under STPs expire in stages by 2009. Under the Special Economic Zones Act, 2005 scheme, units in de signated special economic zones which begin providing services on or after April 1, 2005 will be eligible for a deduction of 100 percent of profits or gains derived from the export of services for the first five years from commencement of provision of services and 50 percent of such profits or gains for a further five years. Certain tax benefits are also available for a further five years subject to the unit meeting defined conditions.

Infosys is subject to a 15% Branch Profit Tax (BPT) in the U.S. to the extent its U.S. branch's net profit during the year is greater than the increase in the net assets of the U.S. branch during the fiscal year, computed in accordance with the Internal Revenue Code. At March 31, 2006, Infosys' US branch net assets amounted to approximately $261 million. The company has not triggered the BPT and intends to maintain the current level of its net assets in the US, as it is consistent with its business plan. Accordingly, a BPT provision has not been recorded.

2.5 Earnings per share

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

	Three months ended June 30,
	2005	2006
Basic earnings per equity share - weighted average number of common shares outstanding excluding unallocated shares of ESOP	269,581,842	274,995,563
Effect of dilutive common equivalent shares - stock options outstanding	7,504,321	6,407,825
Diluted earnings per equity share - weighted average number of common shares and common equivalent shares outstanding	277,086,163	281,403,388

 2.6 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 $119 million as of March 31, 2006. As of June 30, 2006, Infosys held foreign exchange forward contracts of $160 million and United Kingdom Pound Sterling 2 million. The foreign exchange forward contracts mature between one to 12 months. As of March 31, 2006, the company held put options of $4 million, call options of $8 million and range barrier options of $210 million, Euro 3 million and United Kingdom Pound Sterling 3 million. As of June 30, 2006, the company held common strike ratio options of $1 million, target profit forward options of Euro 34 million and range barrier options of $173 million.

 2.7 Segment reporting

SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, establishes standards for the way that public business enterprises report information about operating segments and related disclosures about products and services, geographic areas, and major customers. The company's operations predominantly relate to providing IT solutions, delivered to customers located globally, across various industry segments. The Chief Operating Decision Maker evaluates the company's performance and allocates resources based on an analysis of various performance indicators by industry classes and geographic segmentation of customers. Accordingly, revenues represented along industry classes comprise the principal basis of segmental information set out in these financial statements. Secondary segmental reporting is performed on the basis of the geographical location of customers. The accounting principles used in the preparation of the financial statements are consistently applied to record revenu e and expenditure in individual segments, and are as set out in the summary of significant accounting policies.

Industry segments for the company are primarily financial services comprising enterprises providing banking, finance and insurance services, manufacturing enterprises, enterprises in the telecommunications (telecom) and retail industries, and others such as utilities, transportation and logistics companies. Geographic segmentation is based on business sourced from that geographic region and delivered from both on-site and off-shore. North America comprises the United States of America, Canada and Mexico; Europe includes continental Europe (both the east and the west), Ireland and the United Kingdom; and the Rest of the World comprising all other places except those mentioned above and India.

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

2.7.1 Industry segments

(Dollars in millions)

Three months ended June 30, 2005
	Financial services	Manufacturing	Telecom	Retail	Others	Total
Revenues	$173	$63	$82	$46	$112	$476
Identifiable operating expenses	73	29	32	20	46	200
Allocated expenses	46	15	20	11	33	125
Segmental operating income	54	19	30	15	33	151
Unallocable expenses						18
Operating income						133
Other income, net						7
Income before income taxes						140
Provision for income taxes						18
Net income						$122

Three months ended June 30, 2006
	Financial services	Manufacturing	Telecom	Retail	Others	Total
Revenues	$241	$95	$117	$64	$143	$660
Identifiable operating expenses	110	40	43	28	61	282
Allocated expenses	67	27	32	18	40	184
Segmental operating income	64	28	42	18	42	194
Unallocable expenses						24
Operating income						170
Gain on sale of long term investment						1
Other income, net						28
Income before income taxes and minority interest						199
Provision for income taxes						23
Income before minority interest						176
Minority interest						2
Net income						$174

2.7.2 Geographic segments

(Dollars in millions)

Three months ended June 30, 2005
	North America	Europe	India	Rest of the World	Total
Revenues	$303	$114	$11	$48	$476
Identifiable operating expenses	131	46	5	18	200
Allocated expenses	77	27	3	18	125
Segmental operating income	95	41	3	12	151
Unallocable expenses					18
Operating income					133
Other income, net					7
Income before income taxes					140
Provision for income taxes					18
Net income					$122

Three months ended June 30, 2006
	North America	Europe	India	Rest of the World	Total
Revenues	$422	$173	$9	$56	$660
Identifiable operating expenses	188	68	4	22	282
Allocated expenses	118	48	2	16	184
Segmental operating income	116	57	3	18	194
Unallocable expenses					24
Operating income					170
Gain on sale of long term investment					1
Other income, net					28
Income before income taxes and minority interest					199
Provision for income taxes					23
Income before minority interest					176
Minority interest					2
Net income					$174

2.7.3 Significant clients

No client individually accounted for more than 10% of the revenues in the three months ended June 30, 2005 and 2006.

2.8 Litigation

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

2.9 Acquisition of minority interest in Progeon

On June 30, 2006, Infosys acquired 8,750,000 equity shares of Progeon Limited from Citicorp International Finance Corporation for a consideration of $116 million. As of June 30, 2006, Infosys holds 96.96% of the outstanding equity shares of Progeon Limited.

The purchase price has been allocated based on management's preliminary estimates and independent appraisals of fair values as follows:

(Dollars in millions)

Component	Purchase price allocated
Property, plant and equipment	$2
Net current assets	13
Deferred tax liabilities	(2)
Customer contracts	19
Goodwill	84
Total purchase price	$116

The identified customer contracts intangible is being amortized over a period of four years, being management's estimate of the useful life of the asset. The company believes that the acquisition resulted in recognition of goodwill primarily because of the acquired company's market position, skilled employees, management strength and potential to serve as a platform for enhancing business opportunities in the business process management area.

2.10 Stock split

On June 10, 2006, the members of the company approved a 1:1 bonus issue on the equity shares of the company. The bonus issue has the nature of a stock split effected in the form of a stock dividend with 1 additional share being issued for every share held. As the change in the capital structure of the company has not been effected before the date of issuance of these financial statements, the change in the capital structure has not been given retroactive effect in the balance sheet as of June 30, 2006. The computations of basic and diluted EPS have also not been adjusted retroactively for all periods presented to reflect the change in capital structure. Financial statements issued after the date of change in capital structure will reflect retrospective application of the change in the balance sheet and computations of basic and diluted EPS.

The pro-forma information presented below reflects retrospective application of the stock split.

	Three months ended June 30,
Earnings per equity share (Pro-forma)	2005	2006
Basic	$ 0.23	$ 0.32
Diluted	$ 0.22	$ 0.31
Weighted average equity shares used in computing earnings per equity share(Pro-forma)
Basic	539,163,684	549,991,126
Diluted	554,172,326	562,806,776

EX-99.11

EXHIBIT 99.11

AUDITORS'REPORT TO THE MEMBERS OF INFOSYS TECHNOLOGIES LIMITED

We have audited the attached Balance Sheet of Infosys Technologies Limited (the Company) as at June 30, 2006, the Profit and Loss Account and Cash Flow Statement of the Company for the quarter 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 June 30, 2006;
(ii)  in the case of the Profit and Loss Account, of the profit of the Company for the quarter ended on that date; and
(iii) in the case of the Cash Flow Statement, of the cash flows of the Company for the quarter ended on that date.

for BSR & Co
Chartered Accountants

Subramanian Suresh
Partner
Membership No. 83673

Bangalore
July 12, 2006

INFOSYS TECHNOLOGIES LIMITED

in Rs. crore

Balance Sheet as at	Schedule	June 30, 2006	March 31, 2006
SOURCES OF FUNDS
SHAREHOLDERS' FUNDS
Share capital	1	138	138
Reserves and surplus	2	7,690	6,759
		7,828	6,897
APPLICATION OF FUNDS
FIXED ASSETS	3
Original cost		3,075	2,837
Less: Accumulated depreciation		1,371	1,275
Net book value		1,704	1,562
Add: Capital work-in-progress		510	571
		2,214	2,133
INVESTMENTS	4	2,268	876
DEFERRED TAX ASSETS	5	63	56
CURRENT ASSETS, LOANS AND ADVANCES
Sundry debtors	6	1,765	1,518
Cash and bank balances	7	1,124	3,279
Loans and advances	8	1,400	1,252
		4,289	6,049
LESS: CURRENT LIABILITIES AND PROVISIONS
Current liabilities	9	804	808
Provisions	10	202	1,409
NET CURRENT ASSETS		3,283	3,832
		7,828	6,897
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 Director	and Deputy Managing Director
	Marti G. Subrahmanyam	Omkar Goswami	Rama Bijapurkar	Claude Smadja
	Director	Director	Director	Director
	Sridar A. Iyengar	David L Boyles	Jeffrey Lehman	S. D. Shibulal
	Director	Director	Director	Director
	K. Dinesh	T. V. Mohandas Pai	Srinath Batni	V. Balakrishnan
	Director	Director	Director	Chief Financial Officer
Bangalore	Parvatheesam K.
July 12, 2006	Company Secretary

INFOSYS TECHNOLOGIES LIMITED

in Rs. crore, except per share data

Profit and Loss Account for the		Quarter ended
	Schedule	June 30,
		2006	2005
Income from software services and products		2,867	1,967
Software development expenses	11	1,615	1,064
GROSS PROFIT		1,252	903
Selling and marketing expenses	12	167	119
General and administration expenses	13	211	137
		378	256
OPERATING PROFIT BEFORE INTEREST AND DEPRECIATION		874	647
Interest		-	-
Depreciation		97	75
OPERATING PROFIT BEFORE TAX AND EXCEPTIONAL ITEMS		777	572
Other income, net	14	129	30
Provision for investments		3	-
NET PROFIT BEFORE TAX AND EXCEPTIONAL ITEMS		903	602
Provision for taxation	15	104	79
NET PROFIT AFTER TAX BEFORE EXCEPTIONAL ITEMS		799	523
Income on sale of Investments, net of taxes (refer to note 22.2.21)		6	-
NET PROFIT AFTER TAX AND EXCEPTIONAL ITEMS		805	523
Balance Brought Forward		2,195	1,428
Less: Residual dividend paid		4	-
Dividend tax on the above		1	-
		2,190	1,428
AMOUNT AVAILABLE FOR APPROPRIATION		2,995	1,951
Dividend
Interim		-	-
Final		-	-
Total dividend		-	-
Dividend tax		-	-
Amount transferred to general reserve		-	-
Balance in profit and loss account		2,995	1,951
		2,995	1,951
EARNINGS PER SHARE *
Equity shares of par value Rs. 5/- each
Before exceptional Items
Basic		28.89	19.33
Diluted		28.22	18.79
After exceptional Items
Basic		29.13	19.33
Diluted		28.45	18.79
Number of shares used in computing earnings per share
Basic		27,64,12,363	27,09,95,442
Diluted		28,30,19,236	27,88,25,223
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 Director	and Deputy Managing Director
	Marti G. Subrahmanyam	Omkar Goswami	Rama Bijapurkar	Claude Smadja
	Director	Director	Director	Director
	Sridar A. Iyengar	David L Boyles	Jeffrey Lehman	S. D. Shibulal
	Director	Director	Director	Director
	K. Dinesh	T. V. Mohandas Pai	Srinath Batni	V. Balakrishnan
	Director	Director	Director	Chief Financial Officer
Bangalore	Parvatheesam K.
July 12, 2006	Company Secretary

INFOSYS TECHNOLOGIES LIMITED

in Rs. crore

Cash Flow Statement for the		Quarter ended
		June 30,
	Schedule	2006	2005
CASH FLOWS FROM OPERATING ACTIVITIES
Net profit before tax and exceptional items		903	602
Adjustments to reconcile net profit before tax to cash provided by operating activities
(Profit)/ loss on sale of fixed assets		-	-
Depreciation		97	75
Interest and dividend income		(66)	(37)
Profit on sale of liquid mutual funds		(6)	-
Provision for investments		3	-
Effect of exchange differences on translation of foreign currency cash and cash equivalents		24	(4)
Changes in current assets and liabilities
Sundry debtors		(247)	93
Loans and advances	16	(159)	(64)
Current liabilities and provisions	17	(2)	(63)
Income taxes paid	18	(110)	(37)
NET CASH GENERATED BY OPERATING ACTIVITIES		437	565
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets and change in capital work-in-progress	19	(178)	(248)
Proceeds on disposal of fixed assets		-	-
Investment in subsidiaries (refer to note 22.2.16)		(544)	-
Investments in securities	20	(845)	(98)
Interest and dividend income		66	37
Cash flow from investing activities before exceptional items		(1,501)	(309)
Proceeds on sale of investments (Net of taxes)		6	-
NET CASH USED IN INVESTING ACTIVITIES		(1,495)	(309)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of share capital on exercise of stock options		144	100
Dividends paid during the period		(1,065)	(176)
Dividend Tax paid during the period		(150)	(25)
NET CASH USED IN FINANCING ACTIVITIES		(1,071)	(101)
Effect of exchange differences on translation of foreign currency cash and cash equivalents		(24)	4
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS		(2,153)	159
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD		3,779	1,683
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD	21	1,626	1,842
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 Director	and Deputy Managing Director
	Marti G. Subrahmanyam	Omkar Goswami	Rama Bijapurkar	Claude Smadja
	Director	Director	Director	Director
	Sridar A. Iyengar	David L Boyles	Jeffrey Lehman	S. D. Shibulal
	Director	Director	Director	Director
	K. Dinesh	T. V. Mohandas Pai	Srinath Batni	V. Balakrishnan
	Director	Director	Director	Chief Financial Officer
Bangalore	Parvatheesam K.
July 12, 2006	Company Secretary

in Rs. crore, except as otherwise stated

Schedules to the Balance Sheet as at		June 30, 2006	March 31, 2006
1	SHARE CAPITAL
	Authorized
	Equity shares, Rs. 5/- par value
	60,00,00,000 (30,00,00,000) equity shares	300	150
	Issued, Subscribed and Paid Up
	Equity shares, Rs. 5/- par value*	138	138
	27,68,43,176 ( 27,55,54,980) 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]**
		138	138
	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
	** Does not reflect effect of bonus issue (refer to note 22.2 20)
2	RESERVES AND SURPLUS
	Capital reserve	6	6
	Share premium account - As at April 1,	1,543	900
	Add: Receipts on exercise of employee stock options	144	571
	Income tax benefit arising from exercise of stock options	-	72
		1,687	1,543
	General reserve - As at April 1,	3,015	2,773
	Less: Gratuity transitional liability (refer to note 22.2.22)	(13)	-
	Add: Transferred from the Profit and Loss Account	-	242
		3,002	3,015
	Balance in Profit and Loss Account	2,995	2,195
		7,690	6,759

in Rs. crore except as otherwise stated

Schedules to the Balance Sheet
3	FIXED ASSETS
		Original cost				Depreciation and amortization				Net book value
		As at	Additions	Deductions/	As at	As at	For the	Deductions/	As at	As at	As at
		April 1,		Retirement	June 30,	April 1,	Period	Retirement	June 30,	June 30,	March 31,
		2006			2006	2006			2006	2006	2006
	Land : free-hold *	34	4	-	38	-	-	-	-	38	34
	leasehold	104	6	4	106	-	-	-	-	106	104
	Buildings*	1,022	108	-	1,130	179	18	-	197	933	843
	Plant and machinery*	559	46	-	605	305	21	-	326	279	254
	Computer equipment*	700	53	1	752	516	45	1	560	192	184
	Furniture and fixtures*	417	25	-	442	275	13	-	288	154	142
	Vehicles	1	1	-	2	-	-	-	-	2	1
		2,837	243	5	3,075	1,275	97	1	1,371	1,704	1,562
	Previous Period	2,183	209	2	2,390	1,006	75	2	1,079	1,311
	Previous year	2,183	799	145	2,837	1,006	409	140	1,275	1,562

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. Please refer to note 22.2.6 for details

in Rs. crore

Schedules to the Balance Sheet as at		June 30, 2006	March 31, 2006
4	INVESTMENTS
	Trade (unquoted) - at cost
	Long- term investments
	In subsidiaries
	Progeon Limited, India
	3,32,49,993 (2,44,99,993) equity shares of Rs. 10/- each, fully paid	555	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
	2,00,00,000 (1,70,00,000) common stock of US $1.00 par value, fully paid	90	76
		734	190
	In other investments*	11	16
	Less: Provision for investments	11	14
		-	2
	Non-trade (unquoted), current investments, at the lower of cost and fair value
	Liquid mutual fund units *	1,534	684
		2,268	876
	Aggregate amount of unquoted investments	2,268	876
	* Refer to note 22.2.16 for details of investments
5	DEFERRED TAX ASSETS
	Fixed assets	61	54
	Sundry debtors	2	2
		63	56
6	SUNDRY DEBTORS
	Debts outstanding for a period exceeding six months
	Unsecured
	considered doubtful	15	8
	Other debts
	Unsecured
	considered good	1,765	1,518
	considered doubtful	4	2
		1,784	1,528
	Less: Provision for doubtful debts	19	10
		1,765	1,518
	Includes dues from companies where directors are interested	5	2
7	CASH AND BANK BALANCES
	Cash on hand	-	-
	Balances with scheduled banks in Indian Rupees
	In current accounts *	238	169
	In deposit accounts	559	2,735
	Balances with non-scheduled banks in foreign currency **
	In current accounts	327	375
		1,124	3,279
	*Includes balance in unclaimed dividend account	5	3
	**Refer to note 22.2.13 for details of balances in non-scheduled banks
8	LOANS AND ADVANCES
	Unsecured, considered good
	Loans to subsidiary (refer to note 22.2.7)	23	14
	Advances
	prepaid expenses	29	27
	for supply of goods and rendering of services *	15	9
	advance to gratuity trust	21	-
	others	17	14
		105	64
	Unbilled revenues	251	203
	Advance income tax	267	267
	Loans and advances to employees
	housing and other loans	47	49
	salary advances	62	61
	Electricity and other deposits	23	16
	Rental deposits	13	12
	Deposits with financial institution and body corporate (refer to note 22.2.14)	632	580
	Unsecured, considered doubtful	1,400	1,252
	Loans and advances to employees	1	-
		1,401	1,252
	Less: Provision for doubtful loans and advances to employees	1	-
		1,400	1,252
	* Includes advances to subsidiary company	11	6
9	CURRENT LIABILITIES
	Sundry creditors
	goods and services	5	6
	accrued salaries and benefits
	salaries	10	6
	bonus and incentives	83	233
	unavailed leave	81	80
	for other liabilities
	provision for expenses	198	166
	retention monies	13	13
	withholding and other taxes payable	116	82
	for purchase of intellectual property rights	20	19
	Mark to market on options/ forward contracts	19	2
	others	3	3
		548	610
	Advances received from clients	7	7
	Unearned revenue	244	188
	Unclaimed dividend	5	3
		804	808
10	PROVISIONS
	Proposed dividend	-	1,061
	Provision for
	tax on dividend	-	149
	income taxes *	188	187
	post-sales client support and warranties	14	12
		202	1,409

* Refer to note 22.2.12

in Rs. crore

Schedules to Profit and Loss Account for the		Quarter ended
		June 30,
		2006	2005
11	SOFTWARE DEVELOPMENT EXPENSES
	Salaries and bonus including overseas staff expenses	1,200	780
	Overseas group health insurance	17	11
	Contribution to provident and other funds	30	19
	Staff welfare	8	5
	Technical sub-contractors - subsidiaries	121	80
	Technical sub-contractors - others	43	30
	Overseas travel expenses	71	55
	Visa charges and others	49	17
	Software packages
	for own use	34	32
	for service delivery to clients	14	11
	Communication expenses	13	13
	Computer maintenance	5	4
	Consumables	4	3
	Rent	4	3
	Provision for post-sales client support and warranties	2	1
		1,615	1,064
12	SELLING AND MARKETING EXPENSES
	Salaries and bonus including overseas staff expenses	106	66
	Overseas group health insurance	-	2
	Contribution to provident and other funds	-	-
	Staff welfare	1	-
	Overseas travel expenses	24	12
	Visa charges and others	-	4
	Traveling and conveyance	2	1
	Commission and earnout charges	8	10
	Brand building	12	10
	Professional charges	5	5
	Rent	4	3
	Marketing expenses	3	2
	Telephone charges	1	1
	Communication expenses	-	-
	Printing and stationery	-	1
	Advertisements	1	1
	Office maintenance	-	-
	Sales promotion expenses	-	-
	Consumables	-	-
	Software packages	-
	for own use	-	-
	Computer maintenance	-	-
	Power and fuel	-	-
	Insurance charges	-	-
	Rates and taxes	-	-
	Bank charges and commission	-	-
	Miscellaneous expenses	-	1
		167	119
13	GENERAL AND ADMINISTRATION EXPENSES
	Salaries and bonus including overseas staff expenses	38	29
	Overseas group health insurance	-	-
	Contribution to provident and other funds	3	2
	Professional charges	28	15
	Telephone charges	25	15
	Power and fuel	21	14
	Traveling and conveyance	19	14
	Overseas travel expenses	4	4
	Visa charges and others	1	1
	Office maintenance	21	13
	Guest house maintenance*	1	1
	Insurance charges	6	6
	Printing and stationery	3	3
	Donations	4	3
	Rent	4	3
	Advertisements	1	3
	Repairs to building	3	2
	Repairs to plant and machinery	3	2
	Rates and taxes	8	2
	Professional membership and seminar participation fees	2	2
	Postage and courier	3	2
	Books and periodicals	-	1
	Provision for bad and doubtful debts	10	-
	Provision for doubtful loans and advances	-	-
	Commission to non-whole time directors	-	-
	Freight charges	-	-
	Bank charges and commission	-	-
	Research grants	2	-
	Auditors' remuneration	-	-
	statutory audit fees	-	-
	certification charges	-	-
	others	-	-
	out-of-pocket expenses	-	-
	Miscellaneous expenses (refer to note 22.2.15)	1	-
		211	137
	*For non-training purposes
14	OTHER INCOME, NET
	Interest received on deposits with banks and others*	49	24
	Dividend received on investment in liquid mutual funds (non-trade unquoted)	17	13
	Profit on sale of liquid mutual funds	6	-
	Miscellaneous income (refer to note 22.2.15)	4	2
	Exchange differences, net	53	(9)
		129	30
	*Tax deducted at source	13	5
15	PROVISION FOR TAXATION
	Income taxes*	111	82
	Deferred taxes	(7)	(3)
		104	79

* Refer to note 22.2.12

in Rs. crore

Schedules to Cash Flow Statements for the		Quarter ended
		June 30,
		2006	2005
16	CHANGE IN LOANS AND ADVANCES
	As per the Balance Sheet *	1,400	1,071
	Add: Gratuity transitional liability ( refer to Note 22.2.22)	13	-
	Less: Deposits with financial institutions and body corporate,
	included in cash and cash equivalents	(502)	(201)
	Advance income taxes separately considered	(267)	(414)
		644	456
	Less: Opening balance considered	(485)	(392)
		159	64
	* includes loans to subsidiary
17	CHANGE IN CURRENT LIABILITIES AND PROVISIONS
	As per the Balance Sheet	1,006	1,138
	Less: Provisions separately considered in the cash flow statement
	Income taxes	(188)	(602)
		818	536
	Less: Opening balance considered	(820)	(599)
		(2)	(63)
18	INCOME TAXES PAID
	Charge as per the Profit and Loss Account	104	79
	Add: Increase in advance income taxes	-	11
	Increase in deferred taxes	7	3
	Less: Increase in income tax provision	(1)	(56)
		110	37
19	PURCHASE OF FIXED ASSETS AND CHANGE IN CAPITAL
	WORK-IN-PROGRESS
	As per the Balance Sheet*	239	209
	Less: Opening capital work-in-progress	(571)	(318)
	Add: Closing capital work-in-progress	510	357
		178	248
* Excludes Rs 4 crore (Rs 4 crore) towards movement of land from Leasehold to Freehold
20	INVESTMENTS IN SECURITIES *
	As per the Balance Sheet	2,268	1,427
	Add: Provisions made on investments	3	-
		2,271	1,427
	Less: Investment made in subsidiaries	(544)	-
	Profit on sale of liquid mutual funds	(6)	-
	Opening balance considered	(876)	(1,329)
		845	98
	* 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	1,124	1,641
	Add: Deposits with financial institutions, included herein	502	201
		1,626	1,842

Schedules to the Financial Statements for the quarter ended June 30, 2006

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 thereby enabling 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 comple tion 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 depreciated within a 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 other 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

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. Until March 2005, the company made contributions under the superannuation plan (the Plan) to the Infosys Technologies Limited Employees' Superannuation Fund Trust. The company had no further obligations to the Plan beyond its monthly contributions. From April 1 2005, a portion of the monthly contribution amount was paid directly to the employees as an allowance and the balance amount was 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. Tax benefits of deductions earned on exercise of employee stock options in excess of c ompensation charged to profit and loss account are credited to the share premium account.

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 eff ected 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.

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

in Rs. crore

	Quarter ended June 30
	2006	2005
Salaries and bonus including overseas staff expenses	1,344	875
Overseas group health insurance	17	13
Contribution to provident and other funds	33	21
Staff welfare	9	5
Overseas travel expenses	99	71
Visa charges and others	50	22
Traveling and conveyance	21	15
Technical sub-contractors - others	43	30
Technical sub-contractors - subsidiaries	121	80
Software packages
For own use	34	32
For service delivery to clients	14	11
Professional charges	33	20
Telephone charges	26	16
Communication expenses	13	13
Power and fuel	21	14
Office maintenance	21	13
Guest house maintenance*	1	1
Commission and earn out charges	8	10
Brand building	12	10
Rent	12	9
Insurance charges	6	6
Computer maintenance	5	4
Printing and stationery	3	4
Consumables	4	3
Donations	4	3
Advertisements	2	4
Marketing expenses	3	2
Repairs to building	3	2
Repairs to plant and machinery	3	2
Rates and taxes	8	2
Professional membership and seminar participation fees	2	2
Postage and courier	3	2
Provision for post-sales client support and warranties	2	1
Books and periodicals	-	1
Provision for bad and doubtful debts	10	-
Provision for doubtful loans and advances	-	-
Commission to non-whole time directors	-	-
Sales promotion expenses	-	-
Freight charges	-	-
Bank charges and commission	-	-
Auditor's remuneration
Statutory audit fees	-	-
Certification charges	-	-
Others	-	-
Out-of-pocket expenses	-	-
Research grants	2	-
Miscellaneous expenses (refer to note 22.2.15)	1	1
	1,993	1,320

*for non-training purposes

The above expenses include Fringe Benefit Tax (FBT) in India amounting to Rs. 4 crore and Rs. 3 crore for the period ended June 30, 2006 and June 30, 2005 wherever applicable.

22.2.2 Capital commitments and contingent liabilities

in Rs. Crore

	As at
	June 30, 2006	March 31, 2006
Estimated amount of unexecuted capital contracts
(net of advances and deposits)	502	509
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	19	20
Claims against the company, not acknowledged as debts*	19	14
(Net of Amount Rs. 138 (Rs. 138) crore paid to statutory authorities)
Forward contracts outstanding
In US$	US $ 125,000,000	US $ 100,000,000
(Equivalent approximate in Rs. crore)	573	445
Range barrier options in US $	US $ 172,500,000	US $ 210,000,000
(Equivalent approximate in Rs. crore)	791	934
Target Profit Forward Option in Euro	Euro 34,000,000	-
(Equivalent approximate in Rs. crore)	199	-
Range barrier options in Euro	-	Euro 3,000,000
(Equivalent approximate in Rs. crore)	-	16
Range barrier options in GBP	-	GBP 3,000,000
(Equivalent approximate in Rs. crore)	-	23

* Claims against the Company not acknowledged as debts include demands from Indian tax authorities for payment of additional tax of Rs.135 crore (135 crore), including interest of Rs 33 crore (Rs 33 crore), upon completion of their tax review for fiscal 2002 and 2003. The tax demand is mainly on account of disallowance of a portion of the deduction claimed by the company under Section 10A of the Income-tax Act. The deductible amount is determined by the ratio of "Export Turnover" to "Total Turnover". The disallowance arose from certain expenses incurred in foreign currency being reduced from Export Turnover but not reduced from Total Turnover.

The 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. In April 2006, the company received the order of the appellate authority, the Commissioner of Income Tax (appeals), Bangalore for the demand pertaining to fiscal 2002. The position of the company has been substantially upheld by the appellate authority.

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 June 30,
	2006	2005
Capital goods	53	47
Software packages	1	-
	54	47

22.2.5. Activity in foreign currency

in Rs. Crore

	Quarter ended June 30,
	2006	2005
Earnings in foreign currency (on receipts basis)
Income from software services and products	2,537	2,046
Interest received on deposits with banks	3	-
Expenditure in foreign currency (on payments basis)
Travel expenses	103	73
Professional charges	12	6
Technical Sub-Contractors - Subsidiaries	116	71
Other expenditure incurred overseas for software development	932	632
Net earnings in foreign currency (on the receipts and payments basis)
Net earnings in foreign exchange	1,377	1,264

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

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

in Rs. Crore

	Quarter ended June 30,
	2006	2005
Lease rentals recognized during the period	12	9

Lease obligations

in Rs. Crore

	As at
	June 30, 2006	March 31, 2006
Within one year of the balance sheet date	31	24
Due in a period between one year and five years	102	100
Due after five years	59	61
	192	185

The operating lease arrangements extend up to a maximum of ten years from their respective dates of inception and relates to rented overseas premises and car rentals. Some of the lease agreements have a price escalation clause.

Fixed assets provided on operating lease to Progeon, a subsidiary company, as at June 30, 2006 and March 31, 2006:

in Rs. Crore

Particulars	Cost	Accumulated depreciation	"Net book value"
Buildings	39	6	33
	33	5	28
Plant and machinery	19	9	10
	16	7	9
Computer equipment	2	2	-
	2	2	-
Furniture and fixtures	11	9	2
	11	8	3
Total	71	26	45
	62	22	40

The aggregate depreciation charged on the above during the quarter ended June 30, 2006 amounted to Rs. 4 crore (Rs 1 crore for the quarter ended June 30, 2005).

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 sale of shared services (Refer Note 22.2.7). Lease Rental commitments from Progeon:

in Rs. Crore

Lease rentals	As at
	June 30, 2006	March 31,2006
Within one year of the balance sheet date	11	11
Due in a period between one year and five years	13	17
Due after five years	-	-
	24	28

The rental income from Progeon for the quarter ended June 30, 2006 amounted to Rs. 5 crore (Rs. 3 crore for the quarter ended June 30, 2005).

22.2.7. Related party transactions

List of the related parties:

Name of the related party	Country	Holding, as at
		June 30, 2006	March 31, 2006
Progeon Limited	India	96.96%	71.74%
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	96.96%	71.74%

* 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 ended June 30, 2006 and 2005 are as follows:

in Rs. Crore

Particulars		Quarter ended June 30,
		2006	2005
Capital transactions:
Financing transactions
	Infosys Consulting	14	-
Loans
	Infosys China	9	-
Revenue transactions:
Purchase of services
	Progeon (Including Progeon s.r.o)	2	-
	Infosys Australia	71	57
	Infosys China	6	2
	Infosys Consulting	42	21
Interest income - Infosys China		-	-
Sale of services
	Infosys Australia	1	2
	Infosys China	1	-
	Infosys Consulting	-	-
Sale of shared services including facilities and personnel
	Progeon (Including Progeon s.r.o)	7	4
	Infosys Consulting	1	1

Details of amounts due to or due from and maximum dues from subsidiaries for the quarter ended June 30, 2006 and year ended March 31, 2006:

in Rs. Crore

Particulars		As at
		June 30, 2006	March 31, 2006
Loans and advances
	Infosys China	34	20
Maximum balances of loans and advances
	Progeon (Including Progeon s.r.o)	2	3
	Infosys Australia	19	28
	Infosys China	34	20
	Infosys Consulting	2	-

During the quarter ended June 30, 2006, an amount of Rs. 4 crore (for the quarter ended June 30, 2005 Rs. 3 crore) was 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

Key Management personnel comprise directors and statutory officers.

Particulars of remuneration and other benefits paid to key management personnel during the quarter ended June 30, 2006 and June 30, 2005 have been detailed in Schedule 22.3 since the amounts are less than a crore.

22.2.9. Research and development expenditure

in Rs. crore

	Quarter ended June 30,
	2006	2005
Revenue	31	26
	31	26

22.2.10. Dues to small-scale industrial undertakings

As at June 30, 2006 and March 31, 2006, the company has no outstanding dues to small-scale industrial undertaking.

22.2.11. Stock option plans

The company currently 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.

Number of options granted, exercised and forfeited during the

	Quarter ended June 30,
	2006	2005
Options outstanding, beginning of period	22,73,240	30,54,290
Granted	-	-
Less: exercised	(90,275)	(85,482)
forfeited	(58,160)	(14,340)
Options outstanding, end of period	21,24,805	29,54,468

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.

Number of options granted, exercised and forfeited during the

	Quarter ended June 30,
	2006	2005
Options outstanding, beginning of period	95,89,537	1,40,54,937
Granted	-	-
Less: exercised	(11,97,921)	(766,836)
forfeited	(15,222)	(56,980)
Options outstanding, end of period	83,76,394	1,32,31,121

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

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 is 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 ("SEZ"). Income from SEZs is 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.

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

Balances with non-scheduled banks	As at
	June 30, 2006	March 31, 2006
In current accounts
ABN Amro Bank , Taipei, Taiwan	1	1
Bank of America, Palo Alto, USA	220	229
Bank of China, Beijing, China	-	-
Citibank NA, Melbourne, Australia	13	39
Citibank NA, Singapore	-	-
Citibank NA, Tokyo, Japan	2	1
Citibank NA, Sharjah, UAE	-	-
Deutsche Bank, Brussels, Belgium	4	8
Deutsche Bank, Frankfurt, Germany	6	21
Deutsche Bank, Amsterdam, Netherlands	3	4
Deutsche Bank, Paris, France	5	1
Deutsche Bank, Zurich, Switzerland	-	6
HSBC Bank PLC, Croydon, UK	65	60
ICICI Bank UK Ltd., London, UK	-	-
ICICI Bank - Toronto, Canada	-	-
Nordbanken, Stockholm, Sweden	-	-
Royal Bank of Canada, Toronto, Canada	7	4
UFJ Bank, Tokyo, Japan	-	-
Svenska Handels Bank, Stockholm, Sweden	1	1
	327	375

in Rs. crore

Maximum balance with non-scheduled banks during the	Quarter ended
	June 30, 2006	March 31, 2006
In current accounts
ABN Amro Bank, Taipei, Taiwan	1	-
Bank of America, Palo Alto, USA	508	271
Bank of China, Beijing China	-	-
Citibank NA, Melbourne, Australia	42	54
Citibank NA, Hong Kong	-	-
Citibank NA, Singapore	-	-
Citibank NA, Sydney, Australia	-	-
Citibank NA, Tokyo, Japan	13	12
Citibank NA, Sharjah, UAE	-	-
Deutsche Bank, Brussels, Belgium	24	31
Deutsche Bank, Frankfurt, Germany	23	26
Deutsche Bank, Amsterdam, Netherlands	5	1
Deutsche Bank, Paris, France	6	4
Deutsche Bank, Zurich, Switzerland	13	8
HSBC Bank PLC, Croydon, UK	169	59
ICICI Bank, UK Limited, London, UK	-	33
ICICI Bank - Toronto, Canada	-	7
Merrill Lynch Esop A/c	-	-
Nordbanken, Stockholm, Sweden	-	-
Royal Bank of Canada, Toronto, Canada	9	11
Svenska Handels Bank, Stockholm, Sweden	1	1
UFJ Bank, Tokyo, Japan	1	4

The cash and bank balances include interest accrued but not due on fixed deposits amounting to Rs. 9 crore for the year ended June 30, 2006 (Rs.11 crore for the quarter ended June 30, 2005)

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
	June 30, 2006	March 31, 2006
Deposits with financial institutions:
Housing Development Finance Corporation Limited ("HDFC")	502	500
Life Insurance Corporation of India ("LIC")	130	80
	632	580
Interest accrued but not due (included above)	2	-

Maximum balance held as deposits with financial institutions:

in Rs. crore

	Quarter ended June 30,
	2006	2005
Deposits with financial institutions:
Housing Development Finance Corporation Limited ("HDFC")	502	202
Life Insurance Corporation of India ("LIC")	130	105

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

Profit / (loss) on disposal of fixed assets during the quarter ended June 30, 2006 and June 30, 2005 are less than Rs. 1 crore and accordingly disclosed in note 22.3

Depreciation charged to the profit and loss account relating to assets costing less than Rs. 5,000/- each and other low value assets.

in Rs. crore

	Quarter ended June 30,
	2006	2005
Charged during the period	1	2

The company has entered into lease-cum-sale agreements to acquire certain properties. In accordance with the terms of these agreements, the company has the option to purchase the properties on expiry of the lease period. The company has already paid 99% of the value of the properties at the time of entering into the lease-cum-sale agreements. These amounts are disclosed as "Land - leasehold" under "Fixed assets" in the financial statements. Additionally, certain land has been purchased for which the company has possession certificate for which sale deeds are yet to be executed as at June 30, 2006.

22.2.16 Details of Investments

in Rs. crore

	As at
	June 30, 2006	March 31, 2006
Long- term investments
CiDRA Corporation, USA
Nil (14,124) Series D convertible preferred stock at US$ 90 each, fully paid, par value US$ 0.01 each	-	5
Nil (72,539) Class A common stock, par value US$ 0.001 each	-	-
Nil (2,139) Non voting redeemable preferred stock, par value US$ 0.01 each	-	-
CyVera Corporation, USA		-
Nil (Nil) , 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 (Nil) equity share of Rs. 10 each, fully paid, par value Rs. 10	-	-
Illumina Inc.
Nil (758) common stock at USD 0.01 per share	-	-
The Saraswat Co-operative Bank Limited, India
Nil (Nil) equity shares of Rs. 10 each, fully paid, par value Rs. 10	-	-
	11	16
Less: Provision for investment	11	14
	-	2

Current investments - Liquid Mutual Funds, India

in Rs. crore

	Number of units		Amount
	as at		as at
	June 30,2006	March 31, 2006	June 30,2006	March 31, 2006
Birla Cash Plus Institutional Premium Fund	14,90,89,761	9,94,77,727	150	100
CanLiquid Institutional Fund	14,43,13,867	5,97,28,831	145	60
Chola Liquid Fund Institutional Plus	-	4,63,08,937	-	54
Deutsche Bank Insta-Cash Plus Fund	10,94,19,305	-	110	-
DSP Merrill Lynch Liquidity Fund	14,98,166	-	150	-
Grindlays Cash Fund - Super Institutional Plan C	14,99,08,556	-	125	-
HDFC Liquid Fund - Premium Plus	6,06,28,597	-	75	-
HSBC Cash Fund - Institutional Plus	9,95,60,936	-	100	-
HSBC Cash Fund - Institutional Plus - Reinvestment	5,01,52,995		50
ING Vysya Liquid Fund - Super Institutional	10,36,60,813	7,88,74,225	104	79
Kotak Mahindra Liquid Fund- Institutional Premium	7,46,54,598	-	75	-
Principal Cash Management Fund	14,99,08,556	-	150	-
Prudential ICICI Liquid Plan - Institutional Plus	14,95,52,344	-	150	-
Sundaram Money Fund - Institutional	-	2,96,83,287	-	30
UTI Liquid Cash Plan - Institutional	-	14,77,424	-	150
TLSM Tata Liquid Super High Inv Fund	-	13,31,587	-	150
LICMF Liquid Fund - Dividend Plan	13,75,20,214	5,54,51,349	150	61
			1,534	684
At cost			820	624
At fair value			714	60
			1,534	684

Details of investments in and disposal of securities during the quarter ended June 30, 2006 and 2005:

in Rs. crore

	Quarter ended June 30,
	2006	2005
Investment in securities
Subsidiaries	544	-
Long-term investments	-	-
Liquid Mutual funds	1,650	238
	2,194	238
Redemption / Disposal of Investment in securities
Subsidiaries	-	-
Long-term investments	6	-
Liquid Mutual funds	805	140
	811	140
Net movement in investments	1,383	98

Investment purchased and sold during the quarter ended June 30, 2006:

in Rs. crore

Name of the fund	Face value Rs /-	Units	Cost
Templeton India Treasury Management Fund, Super IP	1000	1,186,698	121
HSBC Cash Fund - Institutional Plus	10	44,950,555	45
Kotak Liquid - Institutional Premium	10	74,717,568	75
Reliance Liquidity Fund	10	142,248,023	150

Particulars of investments made during the quarter ended June 30, 2006 and 2005 :

in Rs. crore

Particulars of investee companies	Quarter ended June 30,
	2006	2005
Infosys Consulting Inc., USA	14	-
Progeon	530	-
	544	-

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. On June 30, 2006, the company completed the acquisition of the entire holdings (87,50,000 shares amounting to 23% of the equity on a fully diluted basis) of CIFC in Progeon for a consideration amounting to Rs. 530 crore (US$ 115.13 million). The net consideration of Rs. 309 crore, after withholding taxes of Rs. 221 crore was remitted to CIFC on the same d ate. Consequent to this, the company's holding in Progeon increased to 96.96% as of June 30, 2006.

22.2.17. Segment reporting

The Group's operations predominantly relate to providing end-to-end business solutions that leverage technology thereby enabling clients to enhance business performance, 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 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 June 30, 2006 and 2005:

in Rs. crore

	Financial services	Manufacturing	Telecom	Retail	Others	Total
Revenues	1,048	414	483	292	630	2,867
	703	272	321	198	473	1,967
Identifiable operating expenses	485	179	195	129	276	1,264
	299	126	138	85	202	850
Allocated expenses	266	106	123	74	160	729
	168	65	77	47	113	470
Segmental operating income	297	129	165	89	194	874
	236	81	106	66	158	647
Unallocable expenses						97
						75
Operating income						777
						572
Other income (expense), net						126
						30
Net profit before taxes and exceptional items						903
						602
Income taxes						104
						79
Net profit after taxes and before exceptional items						799
						523
Income on sale of investments (net of taxes)						6
						-
Net profit after taxes and exceptional items						805
						523

Geographic Segments

Quarter ended June 30, 2006 and 2005:

in Rs. crore

	North America	Europe	India	Rest of the World	Total
Revenues	1,850	738	41	238	2,867
	1,266	465	49	187	1,967
Identifiable operating expenses	822	296	23	123	1,264
	553	187	20	89	849
Allocated expenses	471	188	10	60	729
	303	111	12	45	471
Segmental operating income	557	254	8	55	874
	410	167	17	53	647
Unallocable expenses					97
					75
Operating income					777
					572
Other income (expense), net					126
					30
Net profit before taxes and exceptional items					903
					602
Income taxes					104
					79
Net profit after taxes and before exceptional items					799
					523
Income on sale of investments (net of taxes)					6
					-
Net profit after taxes and exceptional items					805
					523

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 June 30, 2006 the company has provided for doubtful debts of Rs. 4 crore (Rs 2 crore as at March 31, 2006 ) 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

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

Particulars	Number of shares to which the dividends relate	Quarter ended June 30,
		2006	2005
Final dividend for fiscal 2005	3,77,66,327	-	25
Final dividend for fiscal 2006	3,85,47,135	33	-
Silver Jubilee special dividend	3,85,47,135	116	-

22.2.20. Reconciliation of basic and diluted shares used in computing earnings per share

	Quarter ended June 30,
	2006	2005
Number of shares considered as basic weighted average shares outstanding	27,64,12,363	27,09,95,442
Add: Effect of dilutive issues of shares/stock options	66,06,873	78,29,781
Number of shares considered as weighted average shares and potential shares outstanding	28,30,19,236	27,88,25,223

Proforma accounting for effect of bonus share issue:

In the annual general meeting held on June 10, 2006, shareholders approved a 1:1 bonus issue (stock dividend) for all shareholders including the ADS holders i.e. one additional equity share for every one existing share held by the members by capitalizing a part of the general reserves. The record date for the bonus issue is July 14, 2006.

Had the bonus issue been effected for the quarter ended June 30, 2006; the earnings per share would have been reduced to the proforma amounts given below:

	Quarter ended June 30,
	2006	2005
EARNINGS PER SHARE
Equity shares of par value Rs. 5/- each
Before exceptional Items
Basic	14.45	9.67
Diluted	14.11	9.39
After exceptional Items
Basic	14.56	9.67
Diluted	14.22	9.39
Number of shares used in computing earnings per share
Basic	55,28,24,726	54,19,90,884
Diluted	56,60,38,472	55,76,50,446

22.2.21 Exceptional items

During the year ended March 31, 2005 the company sold its entire investment in Yantra Corporation, USA (Yantra) for a total consideration of US $12.57 million. An amount of Rs. 49 crore representing 90% of the consideration was received by the company and the balance amount was deposited in Escrow to indemnify any contractual contingencies.

During the quarter ended June 30, 2006, the company received the balance amount of Rs. 5 crore on fulfillment of the Escrow obligations. Since the carrying value of the investment is nil, the entire proceeds of Rs. 5 crore (net of taxes, as applicable) has been recognized in the profit and loss account as an exceptional item.

During the quarter ended June 30, 2006, the company received Rs. 1 crore from CiDRA Corporation towards redemption of shares on recapitalisation. The remainder of investment was written off against provision made earlier.

22.2.22 Gratuity Plan

Effective April 1, 2006 the company adopted the revised accounting standard on employee benefits. Pursuant to the adoption, the transitional obligations of the company amounted to Rs. 13 crore. As required by the standard, the obligation has been recorded with the transfer of Rs.13 crore to general reserves.

The following table sets out the status of the gratuity plan as required under AS 15.

Reconciliation of opening and closing balances of the present value of the defined benefit obligation:

in Rs. crores

	Quarter ended
	June 30, 2006
Obligations at period beginning	180
Service Cost	8
Interest cost	3
Actuarial (gain)/loss	(1)
Benefits paid	(3)
Obligations at period end	187
Defined benefit obligation liability as at the balance sheet date is wholly funded by the company
Change in plan assets
Plan assets at period beginning, at fair value	167
Expected return on plan assets	3
Actuarial gain/(loss)	1
Contributions	40
Benefits paid	(3)
Plan assets at period end, at fair value	208
Reconciliation of present value of the obligation and the fair value of the plan assets:
Fair value of plan assets at the end of the year	208
Present value of the defined benefit obligations at the end of the period	187
Asset recognized in the balance sheet	21
Gratuity cost for the period
Service cost	8
Interest cost	3
Expected return on plan assets	(3)
Actuarial (gain)/loss	(2)
Net gratuity cost	6
Investment details of plan assets
100% of the plan assets are invested in debt instruments.
Assumptions
Interest rate	8.11%
Estimated rate of return on plan assets	8.11%

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors such as supply and demand factors in the employment market.

22.2.23 Cash flow statement

22.2.23.a

The balance of cash and cash equivalents includes Rs. 5 crore as at June 30, 2006 (Rs. 3 crore as at March 31, 2006) set aside for payment of dividends.

22.2.23.b Restricted Cash

Deposits with financial institutions and body corporate as at June 30, 2006 include an amount of Rs. 130 crore (Rs. 80 crore as at March 31, 2006) deposited with Life Insurance Corporation of India to settle employee benefit/ leave obligations as and when they arise during the normal course of business. This amount is considered as restricted cash and is hence not considered "cash and cash equivalents".

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		As at
			June 30, 2006	March 31, 2006
3	Fixed assets
	Additions
	Vehicles		-	0.75
	Deductions/retirements
	Land - free-hold		-	0.01
	Plant and Machinery		0.03	-
	Computer equipment		-	-
	Furniture and fixtures		0.05	-
	Vehicles		-	-
	Buildings		-	0.80
	Depreciation & Amortization
	For the period
	Vehicles		0.07	0.19
	Deductions/retirements
	Plant and Machinery		0.01	-
	Computer equipment		-	-
	Furniture and fixtures		0.05	-
8	Unsecured, considered doubtful
	Loans and advances to employees		0.60	0.44
	Provision for doubtful loans and advances to employees		0.60	0.44
22.2.6	Computers on operating lease to Progeon
		- Net Book Value	0.18	0.17
22.2.13	Balances with non-scheduled banks
		- ABN Amro Bank , Taipei, Taiwan	0.97	0.94
		- Bank of China, Beijing, China	0.02	0.02
		- Citibank NA, Singapore	0.17	0.19
		- Citibank NA, Sharjah, UAE	0.05	0.04
		- Deutsche Bank, Zurich, Switzerland	0.43	6.34
		- Nordbanken, Stockholm, Sweden	0.07	0.09
		- Svenska Handels Bank, Stockholm, Sweden	0.74	0.51
		- UFJ Bank, Tokyo, Japan	0.06	0.09
22.2.14	Loans & Advances
		Interest accrued but not due - Deposits with Financial Institutions	1.64	0.10
22.2.16	Long- term investments
		Onmobile (common stock)	0.20	0.19
		Onmobile (Series A - voting)	0.19	0.19

Profit & Loss Items

in Rs. crore

Schedule	Description	Quarter ended June 30,
		2006	2005
Profit & Loss account
	Provision for Investments	2.76	0.06
	Residual Dividend paid	4.23	0.25
	Additional Dividend Tax	0.60	0.03
12	Selling & Marketing expenses
	Overseas group health insurance	0.42	1.68
	Contribution to Provident and other funds	0.46	0.12
	Visa charges and others	0.48	3.91
	Communication expenses	0.15	0.06
	Printing and Stationary	0.40	-
	Office maintenance	0.11	0.23
	Sales Promotion Expenses	0.30	0.23
	Consumables	0.08	0.06
	Software packages for own use	-	0.06
13	General and Administration expenses
	Overseas group health insurance	(0.13)	0.13
	Provision for bad and doubtful debts	-	0.35
	Provision for doubtful loans and advances	0.14	0.04
	Commission to non whole-time directors	0.49	0.31
	Books and Periodicals	0.60	0.70
	Freight Charges	0.22	0.18
	Bank Charges and Commission	0.29	0.16
	Guest house maintenance	-	1.00
	Auditor's remuneration
	statutory audit fees	0.10	0.09
	Certification charges	-	-
	Others	-	-
	Out of Pocket Expenses	0.02	0.01

in Rs. crore

Schedule	Description	Quarter ended June 30,
		2006	2005
22.2.1	Aggregate expenses
	Guest house maintenance	-	1.00
	Provision for doubtful loans and advances	0.14	0.04
	Commission to non whole-time directors	0.49	0.31
	Sales Promotion Expenses	0.30	0.23
	Freight Charges	0.22	0.18
	Bank Charges and Commission	0.29	0.16
	Research Grants	1.69	0.09
	Auditor's remuneration
	statutory audit fees	0.10	0.09
	Certification charges	-	-
	Others	-	-
	Out of Pocket Expenses	0.02	0.01
22.2.4	Imports (valued on the cost, insurance and freight basis)
	Software Packages	1.23	0.19
22.2.5	Activity in foreign currency
	Interest received on deposits with banks
22.2.7	Related party transactions
	Revenue transactions:
	Purchase of Services - Progeon	2.00	0.42
	Purchase of shared services - Progeon	-	0.28
	Interest Income -Infosys China	0.27	-
	Sale of services - Infosys China	1.00	0.48
	Sale of services - Infosys Consulting	0.48	0.44
22.2.13	Maximum Balance with non-scheduled banks
	- ABN Amro Bank, Taiwan	0.99	0.02
	- Bank of China, Beijing China	0.02	0.08
	- Citibank NA, Hong Kong	-	0.25
	- Citibank NA, Singapore	0.19	0.37
	- Citibank NA, Sharjah, UAE	0.18	0.15
	- Nordbanken, Stockholm, Sweden	0.15	0.12
	- Nova Scotia, Canada	-	0.01
22.2.15	Profit / (loss) on disposal of fixed assets
	Profit on disposal of fixed assets, included in miscellaneous income	0.04	0.05
	Loss on disposal of fixed assets, included in miscellaneous expenses	(0.01)	-
	Profit / (loss) on disposal of fixed assets, net	0.03	0.05

Cash Flow Statement Items

in Rs. crore

Schedule	Description	Quarter ended June 30,
		2006	2005
Cash flow statement	(Profit)/ loss on sale of fixed assets	0.03	(0.05)
	Proceeds on disposal of fixed assets	0.09	0.05

Transactions with key management personnel

Key management personnel comprise directors and statutory officers.

Particulars of remuneration and other benefits paid to key management personnel during the quarter ended June 30, 2006 and 2005 :

in Rs. crore

Name	Salary	Contributions to provident and other funds	Perquisites and incentives	Total Remuneration
Chairman and Chief Mentor
N. R. Narayana Murthy	0.04	0.01	0.11	0.16
	0.03	0.01	0.06	0.10
Chief Executive Officer, President and Managing Director
Nandan M. Nilekani	0.04	0.01	0.11	0.16
	0.03	0.01	0.06	0.10
Chief Operating Officer and Deputy Managing Director
S. Gopalakrishnan	0.04	0.01	0.11	0.16
	0.03	0.01	0.07	0.11
Whole-time Directors
K. Dinesh	0.04	0.01	0.11	0.16
	0.03	0.01	0.05	0.09
S. D. Shibulal	0.04	0.01	0.08	0.13
	0.22	-	-	0.22
T. V. Mohandas Pai	0.06	0.02	0.21	0.29
	0.05	0.02	0.11	0.18
Srinath Batni	0.05	0.02	0.18	0.25
	0.04	0.01	0.09	0.14
Chief Financial Officer
V. Balakrishnan	0.04	0.01	0.18	0.23
	0.03	0.01	0.14	0.18

Name	Commission	Sitting fees	Reimbursement of expenses	Total remuneration
Non-Whole time Directors
Deepak M. Satwalekar	0.06	-	-	0.06
	0.04	0.01	-	0.05
Marti G. Subrahmanyam	0.06	-	0.03	0.09
	0.04	-	0.05	0.09
Philip Yeo	-	-	-	-
	0.03	-	-	0.03
David L. Boyles	0.06	-	-	0.06
	-	-	-	-
Omkar Goswami	0.05	-	-	0.05
	0.04	-	0.01	0.05
Larry Pressler	0.03	-	0.03	0.06
	0.04	-	-	0.04
Rama Bijapurkar	0.06	-	0.01	0.07
	0.04	-	-	0.04
Claude Smadja	0.06	-	0.09	0.15
	0.04	-	0.03	0.07
Sridar A. Iyengar	0.06	-	0.07	0.13
	0.04	-	0.07	0.11
Jeffrey Lehman	0.05	-	-	0.05
	0.04	-	0.07	0.11

EX-99.12

EXHIBIT 99.12

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 June 30, 2006, the consolidated profit and loss account and the consolidated cash flow statement for the quarter 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 misstatements. 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 June 30, 2006;

(b) in the case of the consolidated profit and loss account, of the profit of the Infosys Group for the quarter ended on that date; and

(c) in the case of the consolidated cash flow statement, of the cash flows of the Infosys Group for the quarter ended on that date.

for BSR & Co.
Chartered Accountants

Subramanian Suresh
Partner
Membership No. 83673

Bangalore
July 12, 2006

CONSOLIDATED FINANCIAL STATEMENTS OF INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES

in Rs. crore

Consolidated Balance Sheet as at	Schedule	June 30, 2006	March 31, 2006
SOURCES OF FUNDS
SHAREHOLDERS' FUNDS
Share capital	1	138	138
Reserves and surplus	2	7,705	6,828
		7,843	6,966
MINORITY INTEREST		8	68
		7,851	7,034
APPLICATION OF FUNDS
FIXED ASSETS	3
Original cost		3,647	2,983
Less: Accumulated depreciation and amortization		1,433	1,328
Net book value		2,214	1,655
Add: Capital work-in-progress		510	571
		2,724	2,226
INVESTMENTS	4	1,638	755
DEFERRED TAX ASSETS	5	73	65
CURRENT ASSETS, LOANS AND ADVANCES
Sundry debtors	6	1,870	1,608
Cash and bank balances	7	1,272	3,429
Loans and advances	8	1,427	1,297
		4,569	6,334
LESS: CURRENT LIABILITIES AND PROVISIONS
Current liabilities	9	949	934
Provisions	10	204	1,412
NET CURRENT ASSETS		3,416	3,988
		7,851	7,034
SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS	22

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	Chairman	Chief Executive Officer,	Chief Operating Officer	Director
Membership No. 83673	and Chief Mentor	President and Managing Director	and Deputy Managing Director
	Marti G. Subrahmanyam	Omkar Goswami	Rama Bijapurkar	Claude Smadja
	Director	Director	Director	Director
	Sridar A. Iyengar	David L Boyles	Jeffrey Lehman	S. D. Shibulal
	Director	Director	Director	Director
	K. Dinesh	T. V. Mohandas Pai	Srinath Batni	V. Balakrishnan
	Director	Director	Director	Chief Financial Officer
Bangalore	Parvatheesam K.
July 12, 2006	Company Secretary

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 June 30
		2006	2005
Income from software services, products and business process management		3,015	2,071
Software development and business process management expenses	11	1,666	1,104
GROSS PROFIT		1,349	967
Selling and marketing expenses	12	204	141
General and administration expenses	13	256	162
		460	303
OPERATING PROFIT BEFORE INTEREST, DEPRECIATION AND MINORITY INTEREST		889	664
Interest		-	-
Depreciation		106	80
OPERATING PROFIT BEFORE TAX, MINORITY INTEREST AND EXCEPTIONAL ITEMS		783	584
Other income, net	14	128	28
Provision for investments		3	-
NET PROFIT BEFORE TAX, MINORITY INTEREST AND EXCEPTIONAL ITEMS		908	612
Provision for taxation	15	106	80
NET PROFIT AFTER TAX AND BEFORE MINORITY INTEREST AND EXCEPTIONAL ITEMS		802	532
Income on sale of investments, net of taxes (refer to note 22.2.19)		6	-
NET PROFIT AFTER TAX, EXCEPTIONAL ITEMS AND BEFORE MINORITY INTEREST		808	532
Minority interest		8	-
NET PROFIT AFTER TAX, EXCEPTIONAL ITEMS AND MINORITY INTEREST		800	532
Balance Brought Forward		2,219	1,415
Less: Residual dividend paid		4	-
Dividend tax on the above		1	-
		2,214	1,415
AMOUNT AVAILABLE FOR APPROPRIATION		3,014	1,947
Dividend
Interim		-	-
Final		-	-
Total dividend		-	-
Dividend tax		-	-
Amount transferred to general reserve		-	-
Balance in profit and loss account		3,014	1,947
		3,014	1,947
EARNINGS PER SHARE*
Equity shares of par value Rs. 5/- each
Before Exceptional Items
Basic		28.71	19.63
Diluted		28.04	19.08
After Exceptional Items
Basic		28.95	19.63
Diluted		28.27	19.08
Number of shares used in computing earnings per share
Basic		27,64,12,363	27,09,95,442
Diluted		28,30,19,236	27,88,25,223
SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS	22

*Refer to note 22.2.18

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	Chairman	Chief Executive Officer,	Chief Operating Officer	Director
Membership No. 83673	and Chief Mentor	President and Managing Director	and Deputy Managing Director
	Marti G. Subrahmanyam	Omkar Goswami	Rama Bijapurkar	Claude Smadja
	Director	Director	Director	Director
	Sridar A. Iyengar	David L Boyles	Jeffrey Lehman	S. D. Shibulal
	Director	Director	Director	Director
	K. Dinesh	T. V. Mohandas Pai	Srinath Batni	V. Balakrishnan
	Director	Director	Director	Chief Financial Officer
Bangalore	Parvatheesam K.
July 12, 2006	Company Secretary

CONSOLIDATED FINANCIAL STATEMENTS OF INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES

in Rs. crore

Consolidated Cash Flow Statement for the	Schedule	Quarter ended June 30
		2006	2005
CASH FLOWS FROM OPERATING ACTIVITIES
Net profit before tax, minority interest and exceptional items		908	612
Adjustments to reconcile net profit before tax to cash provided by operating activities
(Profit)/ loss on sale of fixed assets		-	-
Depreciation		106	80
Interest and dividend income		(70)	(38)
Profit on sale of liquid mutual funds		(6)	-
Provisions for investments		3	-
Effect of exchange differences on translation of foreign currency cash and cash equivalents		28	(4)
Changes in current assets and liabilities			-
Sundry debtors		(262)	86
Loans and advances	16	(145)	(74)
Current liabilities and provisions	17	18	(46)
Income taxes paid	18	(114)	(38)
NET CASH GENERATED BY OPERATING ACTIVITIES		466	578
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of fixed assets and change in capital work-in-progress	19	(193)	(252)
Proceeds on disposal of fixed assets		-	-
Investments in securities	20	(880)	(125)
Acquisition of minority interest in Subsidiary		(530)	-
Interest and dividend income		70	38
Cash flow from investing activities before exceptional items		(1,533)	(339)
Proceeds on sale of Investments (net of taxes)		6	-
NET CASH USED IN INVESTING ACTIVITIES		(1,527)	(339)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of share capital on exercise of stock options		144	100
Dividends paid during the period, including dividend tax		(1,215)	(201)
NET CASH USED IN FINANCING ACTIVITIES		(1,071)	(101)
Effect of exchange differences on translation of foreign currency cash and cash equivalents		(28)	4
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS		(2,160)	142
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD		3,956	1,789
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD	21	1,796	1,931
SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS	22

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	Chairman	Chief Executive Officer,	Chief Operating Officer	Director
Membership No. 83673	and Chief Mentor	President and Managing Director	and Deputy Managing Director
	Marti G. Subrahmanyam	Omkar Goswami	Rama Bijapurkar	Claude Smadja
	Director	Director	Director	Director
	Sridar A. Iyengar	David L Boyles	Jeffrey Lehman	S. D. Shibulal
	Director	Director	Director	Director
	K. Dinesh	T. V. Mohandas Pai	Srinath Batni	V. Balakrishnan
	Director	Director	Director	Chief Financial Officer
Bangalore	Parvatheesam K.
July 12, 2006	Company Secretary

in Rs. crore, except per share data

Schedules to the Consolidated Balance Sheet as at		June30, 2006	March31, 2006
1	SHARE CAPITAL
	Authorized
	Equity shares, Rs. 5/- par value
	60,00,00,000 (30,00,00,000) equity shares	300	150
	Issued, Subscribed and Paid Up
	Equity shares, Rs. 5/- par value*	138	138
	27,68,43,176 (27,55,54,980) 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] **
		138	138
	Forfeited shares amounted to Rs. 1,500/- (Rs 1,500/-)
	* For details of options in respect of equity shares, refer to note 22.2.7
	* Refer to note 22.2.18 for details of basic and diluted shares
	** Does not reflect effect of bonus issue (refer to note 22.2.18)
2	RESERVES AND SURPLUS
	Capital reserve	5	5
	Capital reserve on consolidation	-	49
	Share premium account - As at April 1,	1,543	900
	Add: Receipts on exercise of employee stock options	144	571
	Income Tax benefit arising from exercise of stock options	-	72
		1687	1543
	Foreign currency translation adjustment	-	-
	General reserve - As at April 1,	3,012	2,770
	Less: Gratuity transitional liability (refer to note 22.2.20)	13	-
	Add: Transfer from the Profit and Loss Account	-	242
		2,999	3,012
	Balance in Profit and Loss Account	3,014	2,219
		7,705	6,828

Schedules to the Consolidated Balance Sheet

3. FIXED ASSETS

Particulars	Original cost				Depreciation and amortization				Net book value
	As at April 1, 2006	Additions	Deletions/ Retirement	As at June 30, 2006	As at April 1, 2006	For the period	Deletions/ Retirement	As at June 30, 2006	As at June 30, 2006	As at March 31, 2006
Goodwill	41	411	-	452	-	-	-	-	452	41
Land: free-hold	34	4	-	38	-	-	-	-	38	34
leasehold	104	6	4	106	-	-	-	-	106	104
Buildings	1,022	108	-	1,130	180	18	-	198	932	842
Plant and machinery	569	49	-	618	309	22	-	331	287	260
Computer equipment	757	61	1	817	552	50	1	601	216	205
Furniture and fixtures	443	27	-	470	283	15	-	298	172	160
Leasehold improvements	11	3	-	14	4	1	-	5	9	7
Vehicles	2	-	-	2	-	-	-	-	2	2
	2,983	669	5	3,647	1,328	106	1	1,433	2,214	1,655
Previous Period	2,287	214	2	2,499	1,031	80	2	1,109	1,390	1,256
Previous year	2,287	841	145	2,983	1,031	437	140	1,328	1,655

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

in Rs. crore

Schedules to the Consolidated Balance Sheet as at		June30, 2006	March31, 2006
4	INVESTMENTS
	Trade (unquoted) - at cost
	Long- term investments	11	17
	Less: Provision made for investments	11	15
		-	2
	Non-trade (unquoted), current investments, at the lower of cost and fair value
	Liquid mutual funds	1,638	753
		1,638	755
	Aggregate amount of unquoted investments	1,638	755
5	DEFERRED TAX ASSETS
	Fixed assets	64	57
	Sundry debtors	2	2
	Leave provisions and others	7	6
		73	65
6	SUNDRY DEBTORS
	Debts outstanding for a period exceeding six months
	Unsecured
	considered good	-	-
	considered doubtful	15	8
	Other debts
	Unsecured
	considered good*	1,870	1,608
	considered doubtful	4	2
		1,889	1,618
	Less: Provision for doubtful debts	19	10
		1,870	1,608
	* Includes dues from companies where directors are interested	5	2
7	CASH AND BANK BALANCES
	Cash on hand	-	-
	Balances with scheduled banks
	In current accounts *	300	224
	In deposit accounts in Indian Rupees	614	2,800
	Balances with non-scheduled banks
	In deposit accounts in foreign currency	-	-
	In current accounts in foreign currency	358	405
		1,272	3,429
	*includes balance in unclaimed dividend account	5	3
8	LOANS AND ADVANCES
	Unsecured, considered good
	Advances	1	1
	prepaid expenses	34	32
	for supply of goods and rendering of services	17	10
	advance to gratuity trust	21	-
	others	7	14
		80	57
	Unbilled revenues	260	211
	Advance income tax	267	267
	Loans and advances to employees
	housing and other loans	47	49
	salary advances	78	63
	Electricity and other deposits	23	16
	Rental deposits	18	16
	Deposits with financial institution and body corporate (refer note 22.2.9)	654	607
	Deposits with government authorities	-	-
	Other assets	-	11
		1,427	1,297
	Unsecured, considered doubtful
	Loans and advances to employees	1	1
		1,428	1,298
	Less: Provision for doubtful loans and advances to employees	1	1
		1,427	1,297
9	CURRENT LIABILITIES
	Sundry creditors
	capital goods	-	-
	goods and services	11	12
	accrued salaries and benefits
	salaries	19	9
	bonus and incentives	107	260
	unavailed leave	103	101
	long service leave provision	2	-
	for other liabilities
	accrual for expenses	262	218
	retention monies	13	13
	withholding and other taxes payable	123	89
	for purchase of intellectual property rights	20	20
	others	6	3
		666	725
	Advances received from clients	7	7
	Unearned revenue	249	194
	Unclaimed dividend	5	3
	Mark to Market on options/due on forward contracts	22	5
		949	934
10	PROVISIONS
	Proposed dividend	-	1,061
	Provision for
	tax on dividend	-	149
	income taxes*	190	190
	post-sales client support and warranties	14	12
		204	1,412

*refer to note 22.2.8

in Rs. crore

Schedules to Consolidated Profit and Loss Account for the		Quarter ended June 30,
		2006	2005
11	SOFTWARE DEVELOPMENT AND BUSINESS PROCESS MANAGEMENT EXPENSES
	Salaries and bonus including overseas staff expenses	1,338	880
	Contribution to provident and other funds	32	20
	Staff welfare	9	6
	Overseas travel expenses	136	81
	Technical sub-contractors	57	37
	Software packages
	for own use	35	33
	for service delivery to clients	14	11
	Communication expenses	17	16
	Rent	8	6
	Computer maintenance	5	4
	Consumables	4	4
	Provision for post-sales client support and warranties	2	1
	Miscellaneous expenses	9	5
		1,666	1,104
12	SELLING AND MARKETING EXPENSES
	Salaries and bonus including overseas staff expenses	136	86
	Contribution to provident and other funds	1	-
	Staff welfare	1	-
	Overseas travel expenses	26	19
	Traveling and conveyance	3	1
	Brand building	12	10
	Commission and earnout charges	8	10
	Professional charges	5	4
	Rent	5	4
	Marketing expenses	3	3
	Telephone charges	2	2
	Communication Expenses	-	-
	Printing and stationery	-	1
	Advertisements	1	-
	Sales promotion expenses	-	-
	Office maintenance	-	-
	Insurance charges	-	-
	Consumables	-	-
	Software packages
	for own use	-	-
	Computer maintenance	-	-
	Rates and taxes	-	-
	Miscellaneous expenses	1	1
		204	141
13	GENERAL AND ADMINISTRATION EXPENSES
	Salaries and bonus including overseas staff expenses	62	40
	Contribution to provident and other funds	3	2
	Staff welfare	-	-
	Telephone charges	28	17
	Professional charges	31	17
	Power and fuel	23	16
	Office maintenance	25	15
	Traveling and conveyance	22	14
	Overseas travel expenses	5	7
	Insurance charges	7	6
	Printing and stationery	3	4
	Rates and taxes	9	3
	Donations	4	3
	Rent	5	3
	Advertisements	1	3
	Professional membership and seminar participation fees	2	2
	Repairs to building	3	2
	Repairs to plant and machinery	3	2
	Postage and courier	3	2
	Books and periodicals	1	1
	Recruitment and training	2	1
	Provision for bad and doubtful debts	10	-
	Provision for doubtful loans and advances	-	-
	Commission to non-whole time directors	-	-
	Auditors' remuneration		-
	statutory audit fees	-	-
	certification charges	-	-
	others	-	-
	out-of-pocket expenses	-	-
	Bank charges and commission	-	-
	Freight charges	-	-
	Research grants	2	-
	Software packages		-
	for own use	-	-
	Miscellaneous expenses	2	2
		256	162
14	OTHER INCOME, NET
	Interest received on deposits with banks and others*	52	25
	Dividend received on investment in liquid mutual funds (non-trade unquoted)	18	13
	Profit on sale of liquid mutual funds	6	-
	Miscellaneous income, net (Refer to note 22.2.10)	-	-
	Exchange differences	52	(10)
		128	28
	*Tax deducted at source	14	5
15	PROVISION FOR TAXATION
	Income taxes*	114	84
	Deferred taxes	(8)	(4)
		106	80

*Refer to note 22.2.8

in Rs. crore

Schedules to Consolidated Cash flow Statements for the		Quarter ended June 30,
		2006	2005
16	CHANGE IN LOANS AND ADVANCES
	As per the Balance Sheet	1,427	1,108
	Add: Gratuity transitional liability (Refer to note 22.2.20)	13	-
	Less: Deposits with financial institutions and body corporate,
	included in cash and cash equivalents	(524)	(213)
	Advance income taxes separately considered	(267)	(414)
		649	481
	Less: Opening balance considered	(504)	(407)
		145	74
17	CHANGE IN CURRENT LIABILITIES AND PROVISIONS
	As per the Balance Sheet	1,153	1,242
	Add/ (Less): Provisions separately considered in the cash flow statement
	Income taxes	(190)	(602)
	Dividends	-	-
	Dividend tax	-	-
		963	640
	Less: Opening balance considered	(945)	(686)
		18	(46)
18	INCOME TAXES PAID
	Charge as per the Profit and Loss Account	106	80
	Add: Increase/decrease in advance income taxes	-	10
	Increase/decrease in deferred taxes	8	4
	Less: Increase in income tax provision	-	(56)
		114	38
19	PURCHASE OF FIXED ASSETS AND CHANGE IN CAPITAL WORK-IN-PROGRESS
	As per the Balance Sheet*	254	214
	Less: Opening capital work-in-progress	(571)	(318)
	Add: Closing capital work-in-progress	510	356
		193	252
	*Excludes Rs 4 crore towards movement of land from Leasehold to Freehold
	* Excludes goodwill on buyback of Progeon shares
20	INVESTMENTS IN SECURITIES*
	As per the Balance Sheet	1,638	1,336
	Add: Provisions made on investments	3	-
		1,641	1,336
	Less: Profit on sale of liquid mutual funds	(6)	-
	: Opening balance considered	(755)	(1,211)
		880	125
*refer to note 22.2.11 for details of investments and redemptions
21	CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD
	As per the Balance Sheet	1,272	1,718
	Add: Deposits with financial institutions, included herein	524	213
		1,796	1,931

Schedules to the Consolidated Financial Statements for the quarter ended June 30, 2006

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 group of companies ("the Group") provide end-to-end business solutions that leverage technology thereby 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, business consulting and business process management services.

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") 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.

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 comple tion 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.

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 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 depreciated within a 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 other 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

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 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.

22.1.7.b Superannuation

Certain employees of Infosys are also participants in a defined contribution plan. Until March 2005, the company made contributions under the superannuation plan (the Plan) to the Infosys Technologies Limited Employees' Superannuation Fund Trust. 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 portion of the monthly contribution amount was paid directly to the employees as an allowance and the balance amount was contributed to the trust.

22.1.7.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.

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 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.

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 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.

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 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. Tax benefits of deductions earned on exercise of emp loyee stock options in excess of compensation charged to profit and loss account are credited to the share premium account.

22.1.12 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 effect ed 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 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.

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 Group are segregated.

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:

in Rs. crore

	Quarter ended June 30,
	2006	2005
Salaries and bonus including overseas staff expenses	1,536	1,006
Contribution to provident and other funds	36	22
Staff welfare	10	6
Overseas travel expenses	167	107
Traveling and conveyance	25	15
Technical sub-contractors	57	37
Software packages	-	-
for own use	35	33
for service delivery to clients	14	11
Professional charges	36	21
Telephone charges	30	19
Communication expenses	17	16
Power and fuel	23	16
Office maintenance	25	15
Rent	18	13
Brand building	12	10
Commission and earnout charges	8	10
Insurance charges	7	6
Printing and stationery	3	5
Computer maintenance	5	4
Consumables	4	4
Rates and taxes	9	3
Advertisements	2	3
Donations	4	3
Marketing expenses	3	3
Professional membership and seminar participation fees	2	2
Repairs to building	3	2
Repairs to plant and machinery	3	2
Postage and courier	3	2
Provision for post-sales client support and warranties	2	1
Books and periodicals	1	1
Recruitment and training	2	1
Provision for bad and doubtful debts	10	-
Provision for doubtful loans and advances	-	-
Commission to non-whole time directors	-	-
Sales promotion expenses	-	-
Auditor's remuneration	-	-
statutory audit fees	-	-
certification charges	-	-
others	-	-
out-of-pocket expenses	-	-
Bank charges and commission	-	-
Freight charges	-	-
Research grants	2	-
Miscellaneous expenses	12	8
	2,126	1,407

The above expenses include Fringe Benefit Tax (FBT) in India amounting to Rs. 4 crore and Rs. 4 crore for the period ended June 30, 2006 and Jun 30, 2005 wherever applicable.

22.2.2 Capital commitments and contingent liabilities

in Rs. crore

	As at
	June 30, 2006	March 31, 2006
Estimated amount of unexecuted capital contracts
(net of advances and deposits)	512	519
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	25	26
Claims against the company, not acknowledged as debts*
(Net of Amount paid to statutory authorities of Rs. 138 crore (Rs. 138 crore)	19	14
Forward contracts outstanding
In US $	US$ 159,500,000	US$ 119,000,000
(Equivalent approximate in Rs. crore)	732	529
In GBP	GBP 2,250,000	$0.00
(Equivalent approximate in Rs. crore)	19	-
Options contracts outstanding
Common Strike Ratio Option	US$ 1,000,000	US$ 8,000,000
(Equivalent approximate in Rs. crore)	5	36
Range barrier options in US $	US$ 172,500,000	US$ 210,000,000
(Equivalent approximate in Rs. crore)	791	934
Target Profit Forward Option in Euro	Euro 34,000,000	-
(Equivalent approximate in Rs. crore)	199	-
Range barrier options in Euro	-	Euro 3,000,000
(Equivalent approximate in Rs. crore)	-	16
Range barrier options in GBP	-	GBP 3,000,000
(Equivalent approximate in Rs. crore)	-	23

* Claims against the Company not acknowledged as debts include demands from Indian tax authorities for payment of additional tax of Rs.135 crore (135 crore), including interest of Rs 33 crore (Rs 33 crore), upon completion of their tax review for fiscal 2002 and 2003. The tax demand is mainly on account of disallowance of a portion of the deduction claimed by the company under Section 10A of the Income-tax Act. The deductible amount is determined by the ratio of "Export Turnover' to "Total Turnover'. The disallowance arose from certain expenses incurred in foreign currency being reduced from Export Turnover but not reduced from Total Turnover.

The company is contesting the demand and management, including its tax advisers, believes 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.

In April 2006, the company received the order of the appellate authority, the Commissioner of Income Tax (appeals), Bangalore for the demand pertaining to fiscal 2002. The position of the company has been substantially upheld by the appellate authority.

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

The lease rentals charged during the quarter June 30, 2006 and 2005 and maximum obligations on long-term non-cancelable operating leases payable as per the rentals stated in the respective agreements:

in Rs. crore

	Quarter endedJune 30,
	2006	2005
Lease rentals recognized during the period	18	13

Lease obligations	As at
	June 30, 2006	March 31, 2006
Within one year of the balance sheet date	42	32
Due in a period between one year and five years	120	114
Due after five years	59	61
	221	207

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.

22.2.4 Related party transactions

During the quarter ended June 30, 2006, an amount of Rs 4 crore (Rs. 3 crore for the quarter ended June 30, 2005) has been donated to Infosys Foundation, a not-for-profit foundation, in which certain directors of the company are trustees.

22.2.5 Transactions with key management personnel

Particulars of remuneration and other benefits paid to key management personnel during the quarter ended June 30, 2006 and 2005 have been detailed in Schedule 22.3, since the amounts are less than a crore.

22.2.6 Research and development expenditure

in Rs. crore

	Quarter ended June 30,
	2006	2005
Capital	-	-
Revenue	31	26
	31	26

22.2.7 Stock option plans

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

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.

Number of options granted, exercised and forfeited during the	Quarter ended June 30,
	2006	2005
Options outstanding, beginning of period	22,73,240	30,54,290
Granted	-	-
Less: exercised	(90,275)	(85,482)
forfeited	(58,160)	(14,340)
Options outstanding, end of period	21,24,805	29,54,468

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.

Number of options granted, exercised and forfeited during the	Quarter ended June 30,
	2006	2005
Options outstanding, beginning of period	95,89,537	1,40,54,937
Granted	-	-
Less: exercised	(11,97,921)	(7,66,836)
forfeited	(15,222)	(56,980)
Options outstanding, end of period	83,76,394	1,32,31,121

The aggregate options considered for dilution are set out in note 22.2.18

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 ended June 30, 2006 and Jun 30, 2005 :

Number of options granted, exercised and forfeited during the	Quarter ended June 30,
	2006	2005
Options outstanding, beginning of year	24,52,330	31,16,518
Granted	5,93,300	7,03,300
Less: exercised	(142,100)	(6,750)
forfeited	(33,300)	(50,293)
Options outstanding, end of period	28,70,230	37,62,775

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 June 30,
	2006	2005
Net Profit after tax and exceptional items:
As Reported	800	532
Less: Stock-based employee compensation expense	1	1
Adjusted Proforma	799	531
Basic Earnings per share as reported	28.95	19.63
Proforma Basic Earnings per share	28.91	19.60
Diluted Earnings per share as reported	28.27	19.08
Proforma Earnings per share as reported	28.23	19.05

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%	0.00%
Expected life	1 through 6 years	1 through 6 years
Risk free interest rate	8.11%	6.90%
Volatility	50.00%	50.00%

22.2.8 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 is 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 is 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.

22.2.9 Loans and advances

in Rs. crore

	As at
	June 30, 2006	March 31, 2006
Deposits with financial institutions and body corporate:
Housing Development Finance Corporation Limited ("HDFC")	518	511
GE Capital Services India Limited	6	16
Life Insurance Corporation of India ("LIC")	130	80
	654	607
Interest accrued but not due (included above)	11	-

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.

22.2.10 Fixed assets

Profit / loss on disposal of fixed assets during the quarter ended June 30, 2006 and June 30, 2005 are less than Rs.1 crore and accordingly disclosed in note 22.3

The company has entered into lease-cum-sale agreements to acquire certain properties. In accordance with the terms of these agreements, the company has the option to purchase the properties on expiry of the lease period. The company has already paid 99% of the value of the properties at the time of entering into the lease-cum-sale agreements. These amounts are disclosed as "Land - leasehold" under "Fixed assets" in the financial statements. Additionally, certain land has been purchased for which the company has possession certificate for which sale deeds are yet to be executed as at June 30, 2006.

22.2.11 Details of Investments

Details of investments in and disposal of securities during the quarter ended June 30, 2006 and 2005 :

in Rs. crore

	Quarter ended June 30,
	2006	2005
Investment in securities
Liquid Mutual funds	1,713	280
	1,713	280
Redemption / Disposal of Investment in securities
Liquid Mutual funds	833	155
Proceeds on sales of investments (net of taxes)	6	-
	839	155
Net movement in investment	874	125

22.2.12 Holding of Infosys in its subsidiaries

Name of the subsidiary	Country of	Holding as at
	incorporation	June 30, 2006	March 31, 2006
Progeon Limited	India	96.96%	71.74%
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	96.96%	71.74%

* 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 June 30, 2006, the company has provided for doubtful debts of Rs. 4 crore (as at March 31, 2006 Rs. 2 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.

22.2.14 Segment reporting

The Group's operations predominantly relate to providing end-to-end business solutions that leverage technology thereby enabling clients to enhance business performance, 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 June 30, 2006 and 2005:

in Rs. crore

	Financial services	Manufacturing	Telecom	Retail	Others	Total
Revenues	1,109	436	531	293	646	3,015
	752	276	355	198	490	2,071
Identifiable operating expenses	505	184	195	126	279	1,289
	317	127	139	86	196	865
Allocated expenses	308	121	148	81	179	837
	195	68	86	49	144	542
Segmental operating income	296	131	188	86	188	889
	240	81	130	63	150	664
Unallocable expenses						106
						80
Operating income						783
						584
Other income (expense), net						125
						28
Net profit before taxes and exceptional items						908
						612
Income taxes						106
						80
Net profit after taxes and before exceptional items						802
						532
Income from sale of investments (net of taxes)						6
						-
Net profit after taxes, exceptional items and before minority interest						808
						532

Geographic segments

Quarter ended June 30, 2006 and 2005:

in Rs. crore

	North America	Europe	India	Rest of the World	Total
Revenues	1,931	789	41	254	3,015
	1,317	495	49	210	2,071
Identifiable operating expenses	853	318	20	98	1,289
	569	201	20	76	866
Allocated expenses	536	219	11	71	837
	332	118	12	79	541
Segmental operating income	542	252	10	85	889
	416	176	17	55	664
Unallocable expenses					106
					80
Operating income					783
					584
Other income (expense), net					125
					28
Net profit before taxes and exceptional items					908
					612
Income taxes					106
					80
Net profit after taxes and before exceptional items					802
					532
Income from sale of investments (net of taxes)					6
					-
Net profit after taxes, exceptional items and before minority interest					808
					532

22.2.15 Dividends remitted in foreign currencies

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

Particulars	Number of shares to which the dividends relate	Quarter ended June 30,
		2006	2005
Final dividend for Fiscal 2005	3,77,66,327	-	25
Final dividend for Fiscal 2006	3,85,47,135	33	-
Silver Jubilee Special Dividend	3,85,47,135	115	-

22.2.16 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. 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 shareholders' 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. On June 30, 2006, the company completed the acquisition of the entire holdings (87,50,000 shares amounting to 23% of the equity on a fully diluted basis) of CIFC in Progeon for a consideration of Rs 530 crore ( US $ 115.13 Mn). The net consideration of Rs 309 crore, after withholding taxes of Rs 221 crore was remitted to CIFC on the same date. Infosys' equity holding in Progeon, as of June 30, 2006, was 96.96%.

22.2.17 Provision for Investments

The company evaluates all Investments for any dimunition in their carrying values that is other than temporary and made a provision of Rs. 3 (Rs.Nil ) crore during the quarter ended June 30, 2006 and June 30, 2005 on trade investments.

22.2.18 Reconciliation of basic and diluted shares used in computing earnings per share

	Quarter ended June 30,
	2006	2005
Number of shares considered as basic weighted average shares outstanding	27,64,12,363	27,09,95,442
Add: Effect of dilutive issues of shares/stock options	66,06,873	78,29,781
Number of shares considered as weighted average shares and potential shares outstanding	28,30,19,236	27,88,25,223

Proforma accounting for effect of bonus share issue:

In the annual general meeting held on June 10, 2006, shareholders approved 1:1 bonus issue (stock dividend) for all shareholders including the ADR holders i.e. one additional equity share for every one existing share held by the members by capitalizing a part of the general reserves. The record date for the bonus issue is July 14, 2006.

Had the bonus issue been effected for the quarter ended June 30, 2006; the earnings per share would have been reduced to the proforma amounts given below:

	Quarter ended June 30,
	2006	2005
EARNINGS PER SHARE
Equity shares of par value Rs. 5/- each
Before exceptional Items
Basic	14.36	9.82
Diluted	14.02	9.54
After exceptional Items
Basic	14.47	9.82
Diluted	14.14	9.54
Number of shares used in computing earnings per share
Basic	55,28,24,726	54,19,90,884
Diluted	56,60,38,472	55,76,50,446

22.2.19 Exceptional item

During the year ended March 31, 2005 the company sold its entire investment in Yantra Corporation, USA (Yantra) for a total consideration of US $12.57 million. An amount of Rs. 49 crore representing 90% of the consideration was received by the company and the balance amount was deposited in Escrow to indemnify any contractual contingencies.

During the quarter ended June 30, 2006, the company received the balance amount of Rs. 5 crore on fulfillment of the Escrow obligations. Since the carrying value of the investment is nil, the entire proceeds of Rs. 5 crore (net of taxes, as applicable) has been recognized in the profit and loss account as an exceptional item.

During the quarter ended June 30, 2006, the company received Rs. 1 crore from CiDRA Corporation towards redemption of shares on recapitalisation. The remainder of investment was written off against provision made earlier.

22.2.20 Gratuity Plan

Effective April 1, 2006 the company adopted the revised accounting standard on employee benefits. Pursuant to the adoption, the transitional obligations of the company amounted to Rs. 13 crore. As required by the standard, the obligation has been recorded with the transfer of Rs.13 crore to general reserves.

The following table set out the status of the gratuity plan as required under AS 15.

Reconciliation of opening and closing balances of the present value of the defined benefit obligation:

in Rs. Crore

	Quarter ended
	June 30, 2006
Obligations at period beginning	183
Service Cost	9
Interest cost	3
Actuarial (gain)/loss	(1)
Benefits paid	(3)
Obligations at period end	191

Defined benefit obligation liability as at the balance sheet date is wholly funded by the company

Change in plan assets
Plans assets at period beginning, at fair value	170
Expected return on plan assets	3
Actuarial gain/(loss)	1
Contributions	41
Benefits paid	(3)
Plans assets at period end, at fair value	212

Reconciliation of present value of the obligation and the fair value of the plan assets:

Fair value of plan assets at the end of the year	212
Present value of the defined benefit obligations at the end of the period	191
Asset recognized in the balance sheet	21

Gratuity cost for the period

Service cost	9
Interest cost	3
Expected return on plan assets	(3)
Actuarial (gain)/loss	(2)
Net gratuity cost	7

Investment details of plan assets

100% of the plan assets are invested in debt instruments.

Assumptions

Interest rate	8.11%
Estimated rate of return on plan assets	8.11%

The estimates of future salary increases, considered in actuarial valuation, take account of inflation, seniority, promotion and other relevant factors such as supply and demand factors in the employment market.

22.2.21 Cash flow statement

22.2.21.a

The balance of cash and cash equivalents includes Rs. 5 crore as at June 30, 2006 (Rs. 3 crore as at March 31, 2006 ) set aside for payment of dividends.

22.2.21.b Restricted Cash

Deposits with financial institutions and body corporate as at June 30, 2006 include an amount of Rs. 130 crore (Rs. 80 crore as at March 31, 2006) deposited with Life Insurance Corporation of India to settle employee benefit/ leave obligations as and when they arise during the normal course of business. This amount is considered as restricted cash and is hence not considered "cash and cash equivalents".

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

		As at
Schedule	Description	June 30, 2006	March 31, 2006
3	Fixed assets
	Additions
	Vehicles	0.25	0.82
	Deductions/retirements
	Buildings	-	0.80
	Land: free-hold	-	0.01
	Plant and machinery	0.03	-
	Furniture and fixtures	0.05	-
	Depreciation & Amortization
	Vehicles	0.07	0.19
	Plant and machinery	0.01	-
	Furniture and fixtures	0.05	-
7	Cash on hand	0.03	0.04
8	Unsecured, considered doubtful
	Advance to gratuity trust	21.00	-
	Loans and advances to employees	0.67	0.50
	Provision for doubtful loans and advances to employees	0.67	0.50
22.2.9	Loans & Advances
	Interest accrued but not due - Deposits with Financial Institutions and Body Corporates	1.64	0.10

Profit & Loss Items

Schedule	Description	Quarter ended June 30,
		2006	2005
Profit & Loss
	Provision for investments	2.79	0.06
	Minority Interest	8.13	0.15
	Residual dividend paid	4.23	0.25
	Additional dividend tax	0.59	0.03
12	Selling and Marketing expenses
	Contribution to provident and other funds	0.69	0.14
	Staff welfare	0.80	0.11
	Traveling and conveyance	2.51	0.77
	Communication Expenses	0.27	-
	Printing & Stationery	0.49	0.56
	Advertisements	0.80	0.50
	Sales promotion expenses	0.30	0.27
	Office maintenance	0.11	0.25
	Insurance charges	0.03	0.11
	Consumables	0.08	0.06
	Software packages
	for own use	-	0.06
	Miscellaneous Expenses	0.74	0.70
13	General and Administrative expenses
	Books and Periodicals	0.60	0.70
	Recruitment and training	2.47	0.64
	Provision for bad & doubtful debts	10.05	0.35
	Provision for doubtful loans and advances	0.15	0.07
	Commission to non-whole time directors	0.53	0.37
	Auditor's remuneration :
	statutory audit fees	0.27	0.25
	certification charges	-	-
	others	-	-
	out-of-pocket expenses	0.02	0.01
	Bank charges and commission	0.34	0.20
	Freight charges	0.22	0.18
	Research grants	1.69	0.09
14	Other Income
	Miscellaneous Income (net)	0.25	(0.11)
	Prior Period / Years	-	0.06
22.2.1	Aggregate expenses
	Provision for bad & doubtful debts	10.05	0.35
	Provision for doubtful loans and advances	0.15	0.07
	Commission to non-whole time directors	0.53	0.37
	Sales promotion expenses	0.30	0.27
	Auditor's remuneration
	statutory audit fees	0.27	0.25
	Certification charges	-	-
	out-of-pocket expenses	0.02	-
	Bank charges and commission	0.34	0.01
	Freight charges	0.22	0.18
	Research grants	1.69	0.09
22.2.10	Profit on disposal of fixed assets, included in miscellaneous income	0.04	0.05
	(Loss) on disposal of fixed assets, included in miscellaneous expenses	(0.01)	-

Cash Flow Statement Items

		Quarter ended June 30,
Schedule	Description	2006	2005
Cash Flow
Statement	Profit/Loss on sale of fixed assets	0.03	0.05
	Provisions for investments	2.79	0.06
	Proceeds on disposal of Assets	0.09	0.10

Transactions with key management personnel

Key management personnel comprise directors and statutory officers.

Particulars of remuneration and other benefits provided to key management personnel during the quarter ended June 30, 2006 and 2005 are as follows:

in Rs. crore

Name	Salary	Contributions to provident and other funds	Perquisites and incentives	Total Remuneration
Chairman and Chief Mentor
N. R. Narayana Murthy	0.04	0.01	0.11	0.16
	0.03	0.01	0.06	0.10
Chief Executive Officer, President and Managing Director
Nandan M. Nilekani	0.04	0.01	0.11	0.16
	0.03	0.01	0.06	0.10
Chief Operating Officer and Deputy Managing Director
S. Gopalakrishnan	0.04	0.01	0.11	0.16
	0.03	0.01	0.07	0.11
Whole-time Directors
K. Dinesh	0.04	0.01	0.11	0.16
	0.03	0.01	0.05	0.09
S. D. Shibulal	0.04	0.01	0.08	0.13
	0.22	-	-	0.22
T. V. Mohandas Pai	0.06	0.02	0.21	0.29
	0.05	0.02	0.11	0.18
Srinath Batni	0.05	0.02	0.18	0.25
	0.04	0.01	0.09	0.14
Chief Financial Officer
V. Balakrishnan	0.04	0.01	0.18	0.23
	0.03	0.01	0.14	0.18

Particulars of remuneration and other benefits paid to key management personnel during the quarter ended June 30, 2006 and 2005:

Name	Commission	Sitting fees	Reimbursement of expenses	Total
Remuneration
Non-Whole time Directors
Deepak M. Satwalekar	0.06	-	-	0.06
	0.04	0.01	-	0.05
Prof. Marti G. Subrahmanyam	0.06	-	0.03	0.09
	0.04	-	0.05	0.09
Philip Yeo	-	-	-	-
	0.03	-	-	0.03
Dr. Omkar Goswami	0.05	-	-	0.05
	0.04	-	0.01	0.05
Sen. Larry Pressler	0.03	-	-	0.03
	0.04	-	-	0.04
Rama Bijapurkar	0.06	-	0.01	0.07
	0.04	-	-	0.04
Claude Smadja	0.06	-	0.09	0.15
	0.04	-	0.03	0.07
Sridar A. Iyengar	0.08	-	0.07	0.15
	0.07	-	0.07	0.14
Jeffrey Lehman	0.05	-	-	0.05
	0.07	-	0.07	0.14
David L. Boyles	0.06	-	-	0.06
	-	-	-	-

EX-99.1

EXHIBIT 99.1

US GAAP Press Release

Infosys Technologies Limited - Financial Release June 30, 2006

Infosys Technologies (NASDAQ: INFY) Announces Results for the Quarter ended June 30, 2006

Q1 revenues grew sequentially by 11%

Guidance revised upwards. Revenues expected to grow 35.4% - 35.9% in fiscal 2007

Bangalore , India - July 12, 2006

Highlights

Consolidated results for the quarter ended June 30, 2006

• First quarter revenues at $ 660 million, up 38.7% from the corresponding quarter last fiscal
• Earnings per American Depositary Share (ADS)* increased to $ 0.63 from $ 0.45 in the corresponding quarter last fiscal
• 38 new clients were added during the quarter.
• Gross addition of 8,097 employees (net 5,694) for the quarter
• 58,409 employees as on June 30, 2006

Outlook for the quarter ending September 30, 2006 and the fiscal year ending March 31, 2007

• Consolidated revenues expected to be between $ 710 million and $ 715 million for the quarter ending September 30, 2006 (YoY growth of 35.5% - 36.5%) and between $ 2.91 billion and $ 2.92 billion for the fiscal year ending March 31, 2007 (YoY growth of 35.4% - 35.9%)
• Consolidated earnings per ADS* expected to be between $ 0.64 and $ 0.65 for the quarter ending September 30, 2006; (YoY growth of 25.5% - 27.5%) and between $ 2.70 and $ 2.73 for the fiscal year ending March 31, 2007; (YoY growth of 32.4% - 33.8%)

Infosys Technologies Limited ("Infosys" or "the company") today announced financial results for its first quarter ended June 30, 2006. Revenues for the quarter aggregated $ 660 million, up 38.7% from $ 476 million for the quarter ended June 30, 2005.

"Our efforts in building the brand, developing the client base, and expanding strategic accounts have fueled our robust organic model," said Nandan M. Nilekani, CEO, President and Managing Director.

Infosys is helping a large semiconductor company address its operational challenges through effective customer data management. A leading hi-tech distributor has lowered its IT support costs by adopting an Infosys shared-services model to provide Oracle ERP support for its multiple operating subsidiaries.

Infosys is working with a large specialty retailer in the US to develop a merchandise planning application that will permit planners to model the sales and inventory plans in real-time for improved decision-making and forecasting.

A Fortune 100 pharmaceutical and medical devices manufacturer is using Infosys' expertise in strategic business transformation initiatives to achieve an efficient world-class IT services sourcing model.

Infosys is defining the product roadmap for corporate actions for a leading US financial services conglomerate. Infosys is also helping the company with a buy-or-build analysis.

"We benefited from the depreciation of the rupee against all major currencies during the quarter," said V. Balakrishnan, Chief Financial Officer. "Our margins have been maintained, despite increase in salaries and visa costs. We continue to focus on margins without compromising on investments needed to meet our growth objectives."

* Not adjusted for stock split

Changes to Board of Directors

Mr. N. R. Narayana Murthy, Chairman and Chief Mentor, turns 60 on August 20, 2006 and as per the service rules of the company, he will retire from the services of the company on that date. In this connection, the Board resolved to appoint Mr. Murthy as an Additional Director of the company with effect from August 21, 2006 and further resolved that Mr. Murthy will serve as the Non-Executive Chairman of the Board and Chief Mentor with effect from August 21, 2006.

The Board also resolved that Mr. Nandan M. Nilekani, currently the Chief Executive Officer, President and Managing Director of the company, be re-designated as the Chief Executive Officer and Managing Director with effect from August 21, 2006 and that Mr. S. Gopalakrishnan, currently the Chief Operating Officer and Deputy Managing Director, be promoted and re-designated as the President, Chief Operating Officer and Joint Managing Director with effect from August 21, 2006.

About the company

Infosys (NASDAQ: INFY) defines, designs and delivers IT-enabled business solutions. These provide our clients with strategic differentiation and operational superiority, thereby increasing their competitiveness. Each solution we provide is delivered with the industry-benchmark "Infosys Predictability" that gives our clients peace of mind. With Infosys, they are assured of a transparent business partner, business-IT alignment with flexibility, world-class processes, speed of execution and the power to stretch their IT budget by leveraging the Global Delivery Model that Infosys pioneered. Infosys has over 58,000 employees in over 35 offices worldwide. For more information, visit 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 se gment 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, 2006. These filings are available at www.sec.gov. Infosys may, from time to time, make additional written and oral forward-looking statements, including statements contained in the company's filings with the Securities and Exchange Commission and our reports to shareholders. The company does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of the company.

Contact

Investor Relations	Shekar Narayanan, India +91 (80) 4116 7744 shekarn@infosys.com	Sandeep Mahindroo, USA +1 (510) 402 3563 sandeep_mahindroo@infosys.com
Media Relations	Bani Paintal Dhawan, India +91 (80) 2852 2408 Bani_Dhawan@infosys.com	Peter Mclaughlin, USA +1 (213) 268 9363 Peter_Mclaughlin@infosys.com

Infosys Technologies Limited and Subsidiaries

Consolidated Balance Sheets

	(Dollars in millions )
	As of
	March 31, 2006	June 30, 2006
	(1)	(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$889	$392
Investments in liquid mutual fund units	170	358
Trade accounts receivable, net of allowances	361	408
Unbilled revenue	48	57
Prepaid expenses and other current assets	40	51
Deferred tax assets	1	2
Total current assets	1,509	1,268
Property, plant and equipment, net	491	496
Goodwill	8	91
Intangible assets, net	-	19
Deferred tax assets	13	12
Advance income taxes	18	19
Other assets	27	33
Total Assets	$2,066	$1,938
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable	$3	$2
Income taxes payable	-	1
Client deposits	2	2
Unearned revenue	44	54
Other accrued liabilities	160	147
Total current liabilities	209	206
Non-current liabilities
Other non-current liabilities	5	5
Minority interests	15	2
Stockholders' Equity
Common stock, $0.16 par value    600,000,000 equity shares authorized,    Issued and outstanding -275,554,980 and 276,843,176 as of    March 31, 2006 and June 30, 2006, respectively	31	31
Additional paid-in capital	410	444
Accumulated other comprehensive income	9	(46)
Retained earnings	1,387	1,296
Total stockholders' equity	1,837	1,725
Total Liabilities And Stockholders' Equity	$2,066	$1,938

⁽¹⁾ March 31, 2006 balances were obtained from audited financial statements

Infosys Technologies Limited and subsidiaries

Unaudited Consolidated Statements of Income

	(Dollars in millions except per share data)
	Three months ended June 30,
	2005	2006
Revenues	$476	$660
Cost of revenues	274	389
Gross profit	202	271
Operating Expenses:
Selling and marketing expenses	32	45
General and administrative expenses	37	56
Total operating expenses	69	101
Operating income	133	170
Gain on sale of long term investment	-	1
Other income, net	7	28
Income before income taxes and minority interest	140	199
Provision for income taxes	18	23
Income before minority interest	$122	$176
Minority interest	-	2
Net income	$122	$174
Earnings per equity share*
Basic	$ 0.45	$ 0.63
Diluted	$ 0.43	$ 0.62
Weighted average equity shares used in computing earnings per equity share*
Basic	269,581,842	274,995,563
Diluted	277,086,163	281,403,388

* Not adjusted for stock split