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 September 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 12g 3-2(b).

Not applicable.

TABLE OF CONTENTS

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 September 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 October 11, 2006, we announced our results of operations for the quarter ended September 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 October 11, 2006, we held a press conference to announce our results, which was followed by a question and answer session with those attending the press conference. The transcript of this press conference is attached to this Form 6-K as Exhibit 99.3.

In our press conference, we used a presentation entitled "Performance of the Infosys group for the Second Quarter ended September 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 quarter and half-year ended September 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 October 11, 2006, we also held two teleconferences with investors and analysts to discuss our results. Transcripts of those two teleconferences are attached to this Form 6-K as Exhibits 99.6 and 99.7, respectively.

Our officers held a question and answer session with analysts from CNBC India on October 11, 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 September 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 September 30, 2006; Indian GAAP Balance Sheet, Profit & Loss Account, Cash Flow statement, Schedules, Notes on Accounts and Auditors Report for the quarter and half-year ended September 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 and half-year ended September 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: October 17, 2006

INDEX TO EXHIBITS

No.	Exhibits
99.1	U.S. GAAP Press Release
99.2	Indian GAAP Press Release
99.3	Transcript of October 11, 2006 Press Conference
99.4	Presentation: Performance of the Infosys group for the Second Quarter ended September 30, 2006
99.5	Fact Sheet regarding Registrant's Profit and Loss Account Summary for the quarter and half-year ended September 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 October 11, 2006 2:00 p.m. IST Earnings Call
99.7	Transcript of October 11, 2006 6:00 p.m. IST Earnings Call
99.8	Transcript of October 11, 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 September 30, 2006
99.11	Indian GAAP Balance Sheet, Profit & Loss Account, Cash Flow statement, Schedules, Notes on Accounts and Auditors Report for the quarter and half-year ended September 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 and half-year ended September 30, 2006

EX-99.1

EXHIBIT 99.1
U.S. GAAP Press Release

Infosys Technologies Limited - Financial Release September 30, 2006

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

Q2 revenues grew sequentially by 13%

Guidance revised upwards. Revenues expected to cross $ 3 billion in fiscal 2007 - To grow between 40.6% - 41.1%

Bangalore, India - October 11, 2006

Highlights

Consolidated results for the quarter ended September 30, 2006

• Second quarter revenues at $ 746 million, up 42.4% from the corresponding quarter last fiscal
• Earnings per American Depositary Share (ADS)* increased to $ 0.36 from $ 0.25 in the corresponding quarter last fiscal
• 45 new clients were added during the quarter
• Gross addition of 10,795 employees (net 7,741) for the quarter
• 66,150 employees as on September 30, 2006

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

• Consolidated revenues expected to be between $ 790 million and $ 795 million for the quarter ending December 31, 2006 (YoY growth of 41.3% - 42.2%) and between $ 3.03 billion and $ 3.04 billion for the fiscal year ending March 31, 2007 (YoY growth of 40.6% - 41.1%)
• Consolidated earnings per ADS* expected to be $ 0.37 for the quarter ending December 31, 2006; (YoY growth of 42.3%) and $ 1.44 for the fiscal year ending March 31, 2007; (YoY growth of 41.1%)

Infosys Technologies Limited ('Infosys' or 'the company') today announced financial results for its second quarter ended September 30, 2006. Revenues for the quarter aggregated $ 746 million, up 42.4% from $ 524 million for the quarter ended September 30, 2005.

"Our business model provides a compelling value proposition to clients in a flat world," said Nandan M. Nilekani, CEO and Managing Director. "Our robust organic growth coupled with investments in various strategic areas helped us to grow faster in this environment. We have revised our guidance to cross $ 3 billion in revenues this fiscal."

Infosys is enabling a leading US cable provider offering cable TV, Internet, telephony and wireless servicesto launch and test time-critical services with a focus on creating new revenue streams.

Enterprise services are enabling companies to become nimbler and more competitive. In a long-term engagement with a large US airline company, Infosys is implementing organization-wide Oracle Financials to transform its finance function in addition to incorporating best practices and operating procedures for enhanced effectiveness.

* Adjusted for stock split

Infosys' Independent Validation Services (IVS) are gaining traction with clients across industry verticals. Infosys is establishing a Testing Center of Excellence (TCoE) to streamline Quality Assurance (QA) for a North American brokerage firm and developing enterprise QA strategy for a leading global insurance company. Infosys is also engaged in assessment and redesign of QA and testing processes, and performance validation for another insurance firm with global operations.

Infosys Consulting Inc. added nine new clients including an asset maintenance & servicing company in Australia and a recognized market leader in smartphones, handhelds, software and accessory solutions.

"The rupee depreciated marginally during the quarter with consequent benefit to us," said V. Balakrishnan, Chief Financial Officer. "Our operating margins also improved despite absorbing wage increases and other strategic investments."

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 66,000 employees in over 39 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 segm ent 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 and our quarterly report on Form 6-K for the quarter ended June 30, 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 (646) 254 3133 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 except per share data)
	As of
	March 31, 2006	September 30, 2006
	(1)	(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$ 889	$ 328
Investments in liquid mutual fund units	170	615
Trade accounts receivable, net of allowances	361	454
Unbilled revenue	48	74
Prepaid expenses and other current assets	40	49
Deferred tax assets	1	2
Total current assets	1,509	1,522
Property, plant and equipment, net	491	540
Goodwill	8	91
Intangible assets, net	-	18
Deferred tax assets	13	13
Advance income taxes	18	5
Other assets	27	31
Total Assets	$2,066	$ 2,220
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable	$ 3	$ 4
Income taxes payable	-	2
Client deposits	2	2
Unearned revenue	44	67
Other accrued liabilities	160	183
Total current liabilities	209	258
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 - 551,109,960 and 555,785,001 as of March 31, 2006 and September 30, 2006, respectively	31	62
Additional paid-in capital	410	477
Accumulated other comprehensive income	9	(49)
Retained earnings	1,387	1,465
Total stockholders' equity	1,837	1,955
Total Liabilities And Stockholders' Equity	$ 2,066	$ 2,220

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

Unaudited Consolidated Statements of Income

			(Dollars in millions except per share data)
	Three months ended September 30,		Six months ended September 30
	2005	2006	2005 (audited)	2006
Revenues	$ 524	$ 746	$ 1,000	$ 1,406
Cost of revenues	297	423	571	812
Gross profit	227	323	429	594
Operating Expenses:
Selling and marketing expenses	35	48	67	93
General and administrative expenses	46	63	83	119
Amortization of intangible assets	-	1	-	1
Total operating expenses	81	112	150	213
Operating income	146	211	279	381
Gain on sale of long-term investment	-	-	-	1
Other income, net	9	14	16	42
Income before income taxes and minority interest	155	225	295	424
Provision for income taxes	16	26	34	49
Income before minority interest	139	199	261	375
Minority interest	1	-	1	2
Net income	$ 138	$ 199	$ 260	$ 373
Earnings per equity share*
Basic	$ 0.25	$ 0.36	$ 0.48	$ 0.68
Diluted	$ 0.25	$ 0.35	$ 0.47	$ 0.66
Weighted average equity shares used in computing earnings per equity share*
Basic	541,375,238	551,938,696	540,269,462	550,964,911
Diluted	556,608,116	564,858,570	555,390,222	563,832,673

* Adjusted for stock split

EX-99.2

EXHIBIT 99.2
Indian GAAP Press Release

Q2 revenues grew sequentially by 14.5%

Guidance revised upwards. Revenues expected to cross $ 3 billion in fiscal 2007 - To grow between 45.5% - 46.0%

Bangalore, India - October 11, 2006

Highlights
Consolidated results for the quarter ended September 30, 2006

• Income was Rs. 3,451 crore for the second quarter ended September 30, 2006; YoY growth was 50.4%
• Net profit after tax and before exceptional items was Rs. 930 crore for the quarter ended September 30, 2006; YoY growth was 52.0%
• Earnings per share* before exceptional items increased to Rs. 16.75 from Rs. 11.13 for the corresponding quarter in the previous year; YoY growth was 50.5%
• Interim dividend of Rs. 5 per share (100% on par value of Rs. 5 per share) compared to Rs. 3.25 (65% on par value of Rs. 5 per share) for the corresponding period in the previous year

Others

• 45 new clients were added during the quarter by Infosys and subsidiaries
• Gross addition of 10,795 employees (net 7,741) for the quarter by Infosys and subsidiaries
• 66,150 employees as on September 30, 2006 for Infosys and subsidiaries

"Our business model provides a compelling value proposition to clients in a flat world," said Nandan M. Nilekani, CEO and Managing Director. "Our robust organic growth coupled with investments in various strategic areas helped us to grow faster in this environment. We have revised our guidance to cross $ 3 billion in revenues this fiscal."

Business outlook
The company's outlook (consolidated) for the quarter ending December 31, 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 December 31, 2006**

• Income is expected to be in the range of Rs. 3,602 crore and Rs. 3,625 crore; YoY growth of 42.3% - 43.2%
• Earnings per share* are expected to be Rs. 16.84; YoY growth of 42.2%

Fiscal year ending March 31, 2007**

• Income is expected to be in the range of Rs. 13,853 crore and Rs. 13,899 crore; YoY growth of 45.5 % - 46.0%
• Earnings per share* are expected to be Rs. 66; YoY growth of 46.6%

Outlook under US GAAP

Quarter ending December 31, 2006

• Consolidated revenues are expected to be in the range of $ 790 million and $ 795 million; YoY growth of 41.3% - 42.2%
• Consolidated earnings per American Depositary Share* are expected to be $ 0.37; YoY growth of 42.3%

Fiscal year ending March 31, 2007

• Consolidated revenues are expected to be in the range of $ 3.03 billion and $ 3.04 billion; YoY growth of 40.6% - 41.1%
• Consolidated earnings per American Depositary Share* are expected to be $ 1.44; YoY growth of 41.1%

* Adjusted for the issue of bonus shares in the ratio of 1:1 allotted on July 15, 2006
** conversion 1 $ = Rs. 45.60

"We saw strong double-digit sequential growth during the quarter," said S. Gopalakrishnan, COO, President and Joint Managing Director. "Package Implementation, Testing, Consulting and Business Process Management services are growing fast. We have built the necessary scale and momentum into these services for rapid growth."

Dividend Declaration
The company has declared an interim dividend of Rs. 5 per share (100% on an equity share of par value of Rs. 5 each) at the board meeting held today. An interim dividend of Rs. 3.25 (65% on an equity share of par value of Rs. 5 each) was declared for the corresponding period in the previous year. The record date for payment of dividend will be October 20, 2006.

Expansion of services and significant projects
As the business world is 'flattened' by a confluence of disruptive trends, Infosys helped companies across industries to compete effectively. Faster innovation is a key shift that companies must make to win in the flat world.

Infosys is enabling a leading US cable provider offering cable TV, Internet, telephony and wireless services to launch and test time-critical services with a focus on creating new revenue streams.

The world's premier measurement company, providing core bio-analytical and electronic measurement solutions to multiple industries, engaged Infosys to rewrite its life sciences and chemical analysis website into .NET architecture.

Infosys has commenced a multi-year, multimillion-dollar infrastructure services engagement with a $2 billion company that designs and sells Internet Protocol (IP) routers for private and public access networks.

Infosys' legacy modernization services are helping a large insurance company to improve business capabilities, introduce products to the market faster, increase IT flexibility and reduce operational costs.

Enterprise services are enabling companies to become nimbler and more competitive. In a long-term engagement with a large US airline company, Infosys is implementing organization-wide Oracle Financials to transform its finance function in addition to incorporating best practices and operating procedures for enhanced effectiveness.

In Europe, Infosys is developing and upgrading a global SAP template for a leading Finnish sports equipment manufacturer. A global electronics giant based in the Netherlands engaged Infosys to rationalize its software infrastructure, particularly its business-critical content management system.

In the United Arab Emirates, Infosys is undertaking an initial scoping study to implement Oracle enterprise planning and budgeting systems for a leading government-owned petroleum company. Infosys helped a leading airline in the Middle East launch the first phase of its full-function, multi-language corporate website.

Infosys' Independent Validation Services (IVS) are gaining traction with clients across industry verticals. Infosys is establishing a Testing Center of Excellence (TCoE) to streamline Quality Assurance (QA) for a North American brokerage firm and developing enterprise QA strategy for a leading global insurance company. Infosys is also engaged in assessment and redesign of QA and testing processes, and performance validation for another insurance firm with global operations. Other wins include end-to-end test automation and business process validation for two leading utility companies in North America.

Infosys Consulting Inc. added nine new clients including an asset maintenance & servicing company in Australia and a recognized market leader in smartphones, handhelds, software and accessory solutions.

"The pricing environment continues to be stable with an upward bias," said S. D. Shibulal, Member of the Board and Group Head - Worldwide Sales & Customer Delivery. "Our continued focus on offering multiple services and our end-to-end capability in delivering solutions is giving us a strategic advantage in growing client accounts."

Finacle®
Finacle®, Infosys' universal banking solution, registered key wins in the Middle East, Africa and South Asia, including two banks in Nigeria and a leading bank headquartered in Bangladesh. Finacle® was rolled out at DBS Bank's Indian operations, HPB, Croatia, and Dunbar Bank, a part of Zurich Financial Services, UK. Two Indian banks - UCO Bank and Bank of Baroda - also went live on Finacle® during the quarter.

Process innovation at Infosys
During the quarter, Infosys filed for 14 patents in India and the US for process innovation in IT services. As of September 30, 2006, Infosys has filed for 58 patents in India and the US.

Liquidity and capital expenditure
Cash and cash equivalents, including investments in liquid mutual funds, as on September 30, 2006 was Rs. 4,327 crore (Rs. 3,793 crore as on September 30, 2005). During the quarter, Infosys incurred capital expenditure of Rs. 330 crore. Operating cash flows during the quarter ended September 30, 2006 were Rs. 961 crore (Rs. 629 crore for the quarter ended September 30, 2005).

"The rupee depreciated marginally during the quarter with consequent benefit to us," said V. Balakrishnan, Chief Financial Officer. "Our operating margins also improved despite absorbing wage increases and other strategic investments."

Human resources
Infosys won the coveted 2006 SHRM (Society for Human Resource Management) Human Capital Leadership Award under the Innovative Business Solutions Category. The SHRM Human Capital Leadership Awards recognize human resource leaders who serve as essential partners in developing and executing organizational strategy. SHRM is the world's largest association devoted to Human Resource Management, representing more than 210,000 individual members across the world.

"We hired 10,795 employees (gross), which is the highest employee addition in any quarter," said T. V. Mohandas Pai, Member of the Board and Head - HRD and Education & Research. "We are increasing our investments in education and training, and improving the knowledge base of entry-level talent through the Infosys Campus Connect program. We have also put in place a long-term retention bonus plan for senior employees during the quarter."

Infosys BPO Limited
Progeon Limited, the business process outsourcing subsidiary of Infosys Technologies Limited., has been renamed Infosys BPO Limited effective August 29, 2006.

Infosys BPO Limited, ranked among the 'World's Top BPO Companies' by the International Association of Outsourcing Professionals (IAOP), added three customers, including one of the world's largest telecom carriers and a leading US-based global provider of property, casualty and specialty insurance.

Infosys China Limited
Infosys Technologies (Shanghai) Co. Limited was renamed as Infosys Technologies (China) Co. Limited during the quarter.

In China, Infosys is partnering with a leading global provider of integrated communications solutions and embedded electronic solutions to manage its marketing investments and trade promotions through the global Retail Channel Management (RCM) initiative. A leading bank in Taiwan is using Infosys' expertise to build a robust knowledge management platform for its worldwide multi-channel banking operations. Infosys is also helping the bank in rationalizing and maintaining its customer service platform.

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 66,000 employees in over 39 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, industr y segment concentration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks or system failures, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which Infosys has made strategic investments, withdrawal of governmental fiscal incentives, political instability and regional conflicts, legal restrictions on raising capital or acquiring companies outside India, and unauthorized use of our intellectual property and general economic conditions affecting our industry.

Additional risks that could affect our future operating results are more fully described in our United States Securities and Exchange Commission filings including our Annual Report on Form 20-F for the fiscal year ended March 31, 2006 and our quarterly report on Form 6-K for the quarter ended June 30, 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 (646) 254 3133 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	September 30, 2006	March 31, 2006
SOURCES OF FUNDS
SHAREHOLDERS' FUNDS
Share capital	278	138
Reserves and surplus	8,273	6,759
	8,551	6,897
APPLICATION OF FUNDS
FIXED ASSETS
Original cost	3,417	2,837
Less: Accumulated Depreciation	1,481	1,275
Net book value	1,936	1,562
Add: Capital work-in-progress	481	571
	2,417	2,133
INVESTMENTS	3,442	876
DEFERRED TAX ASSETS	68	56
CURRENT ASSETS, LOANS AND ADVANCES
Sundry debtors	1,957	1,518
Cash and bank balances	804	3,279
Loans and advances	1,478	1,252
	4,239	6,049
LESS: CURRENT LIABILITIES AND PROVISIONS
Current liabilities	1,000	808
Provisions	615	1,409
NET CURRENT ASSETS	2,624	3,832
	8,551	6,897

NOTE:
The audited Balance Sheet as at September 30, 2006 has been taken on record at the board meeting held on October 11, 2006

In Rs. crore, except per share data
Profit and Loss Account for the	Quarter ended September 30,		Half year ended September 30,
	2006	2005	2006	2005
INCOME
Software services and products	3,273	2,170	6,140	4,137
Software development expenses	1,796	1,167	3,411	2,231
GROSS PROFIT	1,477	1,003	2,729	1,906
Selling and marketing expenses	180	125	348	244
General and administration expenses	243	173	453	310
	423	298	801	554
OPERATING PROFIT BEFORE INTEREST AND DEPRECIATION	1,054	705	1,928	1,352
Interest	-	-	-	-
Depreciation	110	90	207	165
OPERATING PROFIT BEFORE TAX AND EXCEPTIONAL ITEMS	944	615	1,721	1,187
Other income	66	45	195	76
Provision for investments	-	1	3	1
NET PROFIT BEFORE TAX AND EXCEPTIONAL ITEMS	1,010	659	1,913	1,262
Provision for taxation	114	67	218	146
NET PROFIT AFTER TAX AND BEFORE EXCEPTIONAL ITEMS	896	592	1,695	1,116
Income from sale of investments, net of taxes	-	-	6	-
Net Profit after Tax and Exceptional Items	896	592	1,701	1,116
Balance Brought Forward	2,995	1,952	2,195	1,428
Less: Residual dividend paid	-	-	4	-
Additional dividend tax	-	-	1	-
	2,995	1,952	2,190	1,428
AMOUNT AVAILABLE FOR APPROPRIATION	3,891	2,544	3,891	2,544
DIVIDEND
Interim	278	177	278	177
Final	-	-	-	-
Total dividend	278	177	278	177
Dividend tax	39	25	39	25
Balance in Profit and Loss Account	3,574	2,342	3,574	2,342
	3,891	2,544	3,891	2,544
EARNINGS PER SHARE* (Equity shares, par value Rs. 5/- each)
Before Exceptional Items     Basic	16.15	10.87	30.61	20.54
Diluted	15.79	10.57	29.90	19.96
After Exceptional Items
Basic	16.15	10.87	30.72	20.54
Diluted	15.79	10.57	30.01	19.96
Number of shares used in computing earnings per share
Basic	55,47,72,296	54,42,02,438	55,37,98,511	54,30,96,662
Diluted	56,77,46,039	56,00,61,300	56,69,42,396	55,88,90,590

* Adjusted for the issue of bonus shares in the ratio of 1:1 allotted on July 15, 2006

NOTE:
The audited Profit & Loss Account for the quarter ended September 30, 2006 has been taken on record at the board meeting held on October 11, 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	September 30, 2006	March 31, 2006
SOURCES OF FUNDS
SHAREHOLDERS' FUNDS
Share capital	278	138
Reserves and surplus	8,321	6,828
	8,599	6,966
MINORITY INTEREST	10	68
	8,609	7,034
APPLICATION OF FUNDS
FIXED ASSETS
Original cost	4,004	2,983
Less: Accumulated Depreciation	1,555	1,328
Net book value	2,449	1,655
Add: Capital work-in-progress	483	571
	2,932	2,226
INVESTMENTS	2,819	755
DEFERRED TAX ASSETS	79	65
CURRENT ASSETS, LOANS AND ADVANCES
Sundry debtors	2,085	1,608
Cash and bank balances	982	3,429
Loans and advances	1,514	1,297
	4,581	6,334
LESS: CURRENT LIABILITIES AND PROVISIONS
Current liabilities	1,177	934
Provisions	625	1,412
NET CURRENT ASSETS	2,779	3,988
	8,609	7,034

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 September 30,		Half-year ended September 30,
	2006	2005	2006	2005
INCOME - Software services, products and business process management	3,451	2,294	6,466	4,366
Software development and business process management expenses	1,833	1,212	3,499	2,316
GROSS PROFIT	1,618	1,082	2,967	2,050
Selling and marketing expenses	221	149	425	291
General and administration expenses	288	199	544	361
	509	348	969	652
OPERATING PROFIT BEFORE INTEREST, DEPRECIATION AND MINORITY INTEREST	1,109	734	1,998	1,398
Interest	-	-	-	-
Depreciation	122	96	228	176
OPERATING PROFIT BEFORE TAX , MINORITY INTEREST AND EXCEPTIONAL ITEMS	987	638	1,770	1,222
Other income, net	66	44	194	72
Provision for investments	-	1	3	1
NET PROFIT BEFORE TAX, MINORITY INTEREST AND EXCEPTIONAL ITEMS	1,053	681	1,961	1,293
Provision for taxation	123	69	229	150
NET PROFIT AFTER TAX AND BEFORE MINORITY INTEREST	930	612	1,732	1,143
Income from sale of investments	-	-	6	-
NET PROFIT AFTER TAX AND BEFORE MINORITY INTEREST AND EXCEPTIONAL ITEMS	930	612	1,738	1,143
Minority Interest	1	6	9	6
NET PROFIT AFTER TAX, EXCEPTIONAL ITEMS AND MINORITY INTEREST	929	606	1,729	1,137
Balance brought forward	3,014	1,946	2,219	1,415
Less: Residual dividend paid	-	-	4	-
Additional dividend tax	-	-	1	-
	3,014	1,946	2,214	1,415
AMOUNT AVAILABLE FOR APPROPRIATION	3,943	2,552	3,943	2,552
DIVIDEND
Interim	278	177	278	177
Final	-	-	-	-
Total dividend	278	177	278	177
Dividend tax	39	25	39	25
Balance in Profit and Loss Account	3,626	2,350	3,626	2,350
	3,943	2,552	3,943	2,552
EARNINGS PER SHARE* (Equity shares, par value Rs. 5/- each)
Before Exceptional Items       Basic	16.75	11.13	31.11	20.94
Diluted	16.37	10.82	30.39	20.35
After Exceptional Items
Basic	16.75	11.13	31.23	20.94
Diluted	16.37	10.82	30.50	20.35
Number of shares used in computing earnings per share
Basic	55,47,72,296	54,42,02,438	55,37,98,511	54,30,96,662
Diluted	56,77,46,039	56,00,61,300	56,69,42,396	55,88,90,590

* Adjusted for the issue of bonus shares in the ratio of 1:1 allotted on July 15, 2006

EX-99.3

EXHIBIT 99.3
Press Conference Transcript

INFOSYS TECHNOLOGIES LIMITED
Q2 07 PRESS CONFERENCE
OCTOBER 11, 2006

CORPORATE PARTICIPANTS

Nandan Nilekani
Infosys Technologies - CEO and MD

Kris
Infosys Technologies - COO, President and Joint MD

Mohandas Pai
Infosys Technologies - Member of the Board

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

V. Balakrishnan
Infosys Technologies - CFO

Amitabh Chaudhry
Infosys BPO - CEO and MD

PRESS CONFERENCE PARTICIPANTS

Balaji
Rediff

Arun
ET

Sumeet
Reuters

Vijay
DNS Delhi

Chitra
Bloomberg

Meera
New Indian Express

Bani

Hello everybody. Welcome to Infosys' Q2 results announcement. It is my pleasure to welcome you all to the MC hall again. As always, we shall start the proceedings with a presentation by Mr. Nandan Nilekani on the company's financial performance. This will be followed by a presentation by Mr. Kris on the company's operational performance. Nandan will come back and provide an overview on the outlook for the future. We will get into the Q&A thereafter. Please press the red button in the panel in front of you to ask the question. Please release after you have asked the question. I would also request you to give your name and the name of your publication. Over to Nandan.

Nandan

Thank you Bani and I would like to welcome all of you to this gathering to discuss the performance of Infosys group for the second quarter ended September 30 th 2006. This is the safe harbor clause, which we normally have preceding any presentations that we make.

As I have said, I will talk about the financial performance and then I will request Kris to talk about the other aspects of the business and I will come back for the outlook and the summary.

On the financial performance, as you can see, the income on Indian GAAP for the year has grown at 50.4% and the PAT has grown at 52%. On the US GAAP, the revenues have grown at 42.4% with net income of 44.2%.

This quarter we have added 45 new clients of which 10 of them are Fortune 500 kind of clients. Even on the headcount side, this has been a very good quarter. We have added on a gross basis, as you can see, 10,795 employees. On a net basis it is about 7,741 employees. So the total number of employees in the Infosys group has grown from 58,409 to 66,150. So you can see that there is a good allround growth and repeat business continues at 95%.

On the Indian GAAP on the highlights, the total income for the group is Rs. 3,451 crores, and as you see the operating profit is Rs. 1,109 crores. The profit after tax is Rs. 930 crores which on a sequential basis is a growth of 16% over Q1 and on an annual basis it is a 52% growth in net profit. That is the status as far as the Indian GAAP is concerned. For the half year of course, you will see that the total income is Rs. 6,466 crores and the PAT of Rs. 1,729 crores after all exceptional items and minority interest. Again this growth in percentage terms on the income side is 48% and on the PAT side is 52%. So it is a fairly good number.

This is the total balance sheet. The total balance sheet is at Rs. 8,609 crores, which includes cash and cash equivalents of Rs. 4,327 crores, an AR of Rs. 2,000 crores and therefore a total net current assets of Rs. 5,598 crores.

With that I will request my colleague Kris, President to speak about the operational performance and other detail.

Kris

Thanks Nandan and good afternoon to every one of you. Let me take you through some of the performance metrics. Europe is about 25.8% of our revenues. If you look at the last 12 months, Europe has grown, in the last quarter it has come down, but it is temporary. Overall we are seeing good growth in Europe. Across the geographies there is growth, Rest of the World, North America, overall there is a good growth with Europe kind of standing out at this point.

Utilization wise, excluding trainees, for the entire group, currently stands at 77.5%. For services alone the utilization is 80.3%. We want the utilization to be somewhere between 77-80% and it is in that range. Including trainees utilization is 67.4%, obviously because we have added significant number of people in this quarter.

There are no material differences in the split between fixed price and time and material projects. Fixed price is 26.2% of overall total and time and material is 73.8%.

Onsite/offshore is not much different. Onsite is 50.3%, offshore is 49.7%. In terms of effort, onsite has slightly gone up because we have seen accelerated growth and new project starts always increase the onsite slightly, because projects typically start onsite and then move to offshore.

We have seen growth across all the categories here. We have 232 million dollar clients. We have 61 ten million dollar clients compared to 56 last quarter. We have 12 fifty million dollar clients compared to 11 last quarter. We have three ninety million dollar clients compared to two last quarter and one accounting for more than 5% of our revenues. The top client is 6.6% of revenues. Overall the top 25 clients have grown very well this quarter.

Giving you more details of client acquisition, where the growth is coming from, we added 45 new clients this quarter, clearly one of the highest in the last few quarters. The growth is coming from if you look at the industry sectors, it is coming from banking and capital markets, telecom, energy and utilities etc. This is where the growth is faster than the company average. Here are some examples of the type of work that we are doing. For a leading US cable provider, we are looking at services which allow them to offer internet, telephony, wireless. As you know there is convergence of services over the cable and we are helping them provide these services to their customers, their consumers. For a premier measurement company we are looking at providing core bioanalytical and electrical measurement solution. It is again to multiple of their clients. For a large US airline company, we are looking at implementing Oracle Financials across the company and this will help the company transform its finance funct ion to incorporate the best practices. In UAE, we are helping a leading government owned petroleum company. We are also helping the leading airline in the Middle East to launch the first phase of full function multi-language corporate website. In Australia, we are helping an asset maintenance services company. For a North American brokerage firm, we are doing the testing center of excellence at this point. Testing is again one of the fastest growing services for Infosys. An example is also for an insurance company, for their global operations we are redesign of their QA and testing processes.

Finacle continues to make inroads. Finacle was rolled out for DBS Bank's Indian operation. SPB, Croatia, Denver Bank. Two Indian banks - UCO Bank and Bank of Baroda also went live on Finacle this quarter.

From a HR perspective, this quarter has seen the highest addition of employees. We added 10,795 employees of which 2,560 employees had prior experience, the lateral additions.

From a capex perspective, Rs. 330 crores was the expense incurred this quarter and the company had about 11 million square feet, almost 11.2 million square feet of space, capable of accommodating 57,000 professionals and we are adding another 7 million square feet under construction right now and this will increase the capacity by another 13,400 professionals. Now let me hand it over back to Nandan for outlook for the future.

Nandan

Let me give you the guidance for the quarter. For the quarter, we expect income to be between Rs. 3,602 crores to Rs. 3,625 crores, which on a year-to-year growth is 42.3 to 43.2% growth. Earning per share is expected to be between Rs. 16.84, which is a year-to-year growth of 42.2%. For the fiscal year ending March 31, 2007, we expect the revenue growth between 45.5% to 46%, between Rs. 13,853 crores to Rs. 13,899 crores and the earnings per share is expected to be Rs. 66, which is a year-to-year growth of 46.6%. This is the guidance that we have revised. Last time we had given a guidance of about $2.91 billion in dollar terms and now we are saying the guidance for the year has been revised to over $3 billion, which as we saw in rupee terms is a growth rate of 45.5% to 46%. In dollar terms it is between 40% and 41%.

So to summarize, I think we have been saying for quite some time now that our business model is a very important part of the driver because we have essentially created a business model which is faster, better, cheaper and more innovative than the legacy companies in this industry. We have been able to demonstrate a compelling value proposition. We believe that our clients are going through a whole set of seminal changes due to the impact of demographics, technology, emerging economies and regulations and we think that we have the ability to be the partner for them in their transformation in this new flat world and that is driving our business.

Pricing environment continues to be stable with an upward bias. This quarter we got on a blended basis, 1.2% improvement in our billing productivity. We have focused on expanding our services. We have a wide range of services, more than 40% of revenues come from services we have added in the last 5-6 years. We are increasingly building a much stronger end-to-end capability, thanks to our investments in Infosys BPO, in Infosys Consulting, in our Enterprise Solutions and all our new services like Validation and Testing and so forth and we think that this investment in expanding our services, combined with our investment in capability building for our people, combined with the investment in building new solutions for our customers, combined with our investments in building intellectual property. All these things, we believe, are a source of competitive long-term strategic advantage in growing our client accounts and as Kris mentioned, that is reflected in the fact that we are seeing significant growth in o ur top 10 clients, significant growth in our top 25 clients.

Our operating margins have also improved. This quarter our operating margins have improved by 2.5% in US GAAP. Out of that 1.1% has come from the reduction in the visa cost in Q2 over Q1, 0.9% has come from rupee depreciation and 0.5% has come from economy of scale benefits which is the reduction in SG&A cost. So the combined effect of visa cost reduction, rupee depreciation and scale benefits has given us a 2.5% improvement in operating margin and all our wage increases that we gave in Q1 have been absorbed in this.

In terms of employees, as we mentioned, this quarter we added 10,795 employees on a gross basis, 7741 on a net basis, which is the highest in the history of any quarter. We have also put in a plan which Mohan will give you more details later which is a long-term retention bonus plan for our senior employees and we think that is an important part of our strategy to create a stronger enthusiastic long-term leadership for us to achieve what we want to achieve in this market.

Thank you very much. We will be happy to take questions from all of you.

Balaji

Nilekani sir, maine aapse April mein kaha tha, so apne uski to majak udayi, lekin che mahine mein aapne phir revise kar diya dubara, aur $3 billion kaha. Now the serious question is, what is this turn around that you are seeing this kind of scorching growth, what exactly and there are reports about slowdown in the US economy, would it actually benefit you? Thank you.

Nandan

The growth is happening because we are seeing all round growth. Many customers, I think the important thing is that when you look at the growth of the top 10 customers, almost 17% is the growth, sequential growth, of our top 10 customers. Our top 25 customers are growing at the company average. So what is really happening is that a number of the top customers are growing at the same time. I think that is what is really kicking in, and these are in different industries like financial services, telecommunication, they are in different parts of the world. So all-round, broad based growth of our large accounts has been a significant factor in the growth.

On the issue of slowdown, we have done a dipstick survey talking to all our global clients and we don't have any evidence at this point of a slowdown. We believe that while IT spending will be generally flat or small increase, we think that the trend towards the globalization of IT services will continue and I think Infosys is strategically well placed to benefit from that trend. As I explained on the margin side, we have seen an improvement in margin, thanks to visa cost reduction, rupees depreciation and scale benefits of SG&A. So I guess, both top line and bottom line improvements have come for these reasons and I think we believe that we are comfortable with this guidance of $3.026 billion to $3.036 billion for the year which in dollar terms is about 41-42% growth and in rupee terms is 45-46% growth.

Male speaker

_____.

Nandan

I think we are seeing on new contracts a 3-4% improvement in prices, but new business is only 5% of the revenue. In existing businesses in some cases we are seeing 1 or 2% increment prices when we do contract renegotiation. Overall, for the quarter we have seen a 1.2% improvement in the blended revenue productivity over Q1.

Arun

Hi, this is Arun from ET. I just wanted to check with you, you said 1.1% reduction because of visa costs in Q2, right? Now, would this become kind of a regular feature for the company in the sense that you will incur this expense only in Q1 or is this only something restricted to this current fiscal?

Bala

A major portion of our visa expense relates to US Visas. As you know, the window opens somewhere in the beginning of the year and that is when we have to accelerate the investment. So if you take the trend, if the window is going to be closed when it is opened, we need to spend more money in the first quarter of any fiscal year. So that will be a trend going forward if the demand for visa continues to be very strong.

Lady speaker

I would like to know whether the cable service, TV, internet, telephony, wireless services, these will all be provided in a single device for your US customer? And secondly, what is the retention bonus for the senior employees?

Kris

Different technologies are used to provide these services and right now the challenge is to look at a convergent billing solution. So what technology is used and how it is provided is evolving and we are helping more in terms of the back-end systems and things like that rather than on the front- end box. I hope that answers the question.

Mohandas Pai

We have instituted a deferred bonus scheme for the senior management of the corporation i.e. the level of the AVP, VP and SVP (Associate Vice President, Vice President and Senior Vice President) under which Senior Vice Presidents in India will get $100,000 a year, they are entitled to $100,000 a year based upon performance and the same rank outside will get $125,000 to make up the differential in taxation. The next level $62,500 and $50,000, third level $25,000 and $20,000. The differential obviously for tax purposes on a cost to company basis. This has been introduced just to make sure, yes.

Male speaker

______.

Mohandas Pai

SVP abroad is $ 125,000, SVP in India is $ 100,000. VP abroad is $ 62,500 and VP in India is $ 50,000, and AVP abroad is $ 25,000 and AVP in India is $ 20,000. We have introduced this but an appraisal needs to be done. This is the maximum cap. An appraisal needs to be done and based upon appraisal they will be paid up to this limit and it is up to a particular level only for three levels based upon a particular matrix that we have and there is a deferred bonus in the sense that you get the first year payout at the end of the second year and one year will always be there. It is both the retention and the deferred. So we have put in this as an incentive for the senior management. It has been introduced for the first time, applicable from 1 st of April.

Male speaker

How many employees are covered under this?

Mohandas Pai

Across the group, may be 170 employees.

Sumeet

Sumeet from Reuters. If you could give us a sense of how your consulting business and business in China is growing? And secondly, with the business in Europe growing faster than North America, is there any plan to expand your presence there either through setting up a near shore development center or through acquisition? Thanks.

Kris

Consulting is going as per plan. Consulting is still in investment mode. We hope that over the next few quarters it will become profitable. Consulting is allowing us to look at larger transformation deals. Over the last 12 months, Consulting has helped us to break into 19 new clients. Combined with our Enterprise Solution which has significant growth opportunities today, we are able to provide large transformation type of project capability to our clients. It allows us to look at global roll outs. It allows us to do SAP or Oracle enabled business transformation for our clients and that is helping us win larger deals at this point. Now let me hand it over to Shibu for Europe and China.

Shibulal

China today has about 748 employees. It is slightly behind plan. China consists of two kinds of business. One is local, one is global. On the local business we are tracking close to the plan and this quarter we have won probably one of the first million dollar deals, actually more than a million dollars deal in China this quarter. On the global side, we are talking to our customers. There are serious concerns within our customer base regarding doing work in China in areas of intellectual property, in the relevance of moving work to China etc. We have been having this conversation, so we are starting to get some traction now. So China continues to be in an investment mode, and this quarter we have made approximately a million plus dollars in loss.

Sumeet

You haven't answered my Europe part of the question sir.

Kris

Europe is growing faster, if you take the last 12 months perspective, than rest of the company. We are proactively investing in Europe. We are opening up new sales and marketing offices. We are always open for acquisition. We have been saying that when the appropriate candidate company is available for acquisition and it meets our parameters which we have set for acquisitions and of course if they want to be acquired then we will look at it. Acquisition is always an option, but we have had strong organic growth this year, we have given a guidance of about 40-41% according to US GAAP. It is not at this point an imperative for us but definitely it is a vehicle which we can use to accelerate or add capability to our service mix or capabilities.

Lady speaker

______ to the top five clients, have you added any new top clients in the top five client list? And what is make up of the 45 new customers that you have added, as in what business domain they chiefly belong to? Thank you.

Kris

These 45 clients are across multiple business domains. We are seeing all round growth. They consist of clients in telecom, in energy and utilities, in health care, in insurance, banking and capital markets and things like that. Out of 45, I think 10 would be classified as Fortune 500, so large enterprise type of clients in which typically we go after. We are seeing growth in package implementation, in the infrastructure management services, in independent validation, in consulting, in business process management, we are seeing across verticals like banking capital markets, telecom. We are seeing Europe growth. So across the board there is growth. I do not know whether I have addressed all the questions.

Vijay

Vijay from DNS Dehi. Mr. Pai I have a question for you. What is the value addition by employees? To my knowledge TMC is 5%, ES is less than 0.75%.

Mohandas Pai

Okay let me answer this. We have a value added in the business of about 78%. That means if you earn $100, 78% is consumed within to pay salaries to employees, retain in the business as depreciation or profits, 22% is paid outside for use of outside services. For example, travel services, subcontractors, infrastructure service providers, telephone expenses etc. This industry has the highest value added across any industry in this country, and out of this 78%, 52% possibly goes to employees. Unlike manufacturing when you have cost of goods at about may be 60-70%, here the value adds you are essentially selling time. So employee cost is the highest and the value added is the highest.

Arun

Arun from ET again. Just two questions, one is relating to China. In the light of the nuclear explosion in North Korea, I mean are you expecting to see some kind of a customer diffidence because there have been peace parleys between both China and the Japanese governments. So getting work into China is going to become more difficult? That is first question. Seconvd question relates to the fall in revenue contribution across a few of your verticals, like for instance retail year-on-year you have dipped by about 1.5%, transportation and logistic you have dipped by about 2.9%. So is this a kind of shift in strategy?

Kris

See you need to understand that China is a small part of the business, we are encouraging clients to go there. There is some diffidence because of concerns about IP but we are able to overcome. In fact if you look at what Infosys brings with it is that, we are able to use the same processes and techniques which we have used in India in China also, in that sense we reassure the client saying that your IP will be protected if you work with a company like Infosys in China. Now the issue related in North Korea is actually too soon to say whether it will have an impact, but the business is small at this point. Now for the second part of the question, in absolute terms, we are seeing growth all around. Now some of them are growing faster some industries are growing slower because when you look at percentages you will see differences, but in absolute terms, all the industry verticals, by and large most of the industry verticals are currently growing for us, some faster some slower.

Sumeet

Could you give us a sense of the Infosys BPO margins in the past quarter and how the business is growing there?

Amitabh Chaudhry

We actually grew by about 20% quarter-on-quarter growth, Rs. 157 crores of revenue. Our margins if you take out we also paid the silver jubilee bonus this quarter and it went through our P&L, if you kind of take that out our margins have also improved, we have recorded margins of about 23.3% this quarter.

Lady speaker

A significant growth in terms of number of employees, you have added over 10,000. So what is the kind of breakup between India, China, Europe in terms of employees in this last quarter?

Male speaker

I can just add to that question also the issue of attrition. What is the kind of attrition that you are seeing, net highest addition ever, attrition what is the kind of number you are looking at in the coming quarters?

Mohandas Pai

If you look at people that we have added on in this quarter, we added about 10,795 gross employees. Out of which the services business added 7,900. In Australia we had 22 new employees, China 214, Consulting 17, in the BPO business 2,628. Now many people travel to and fro to Europe, to US and all that so we do not carry numbers of how many you hire specifically because the numbers keeps changing. If you look at the attrition, attrition is 12.9% this quarter, it has gone up by 1% compared to previous quarter when it was 11.9 and Q1 of this year was up by 0.7% from Q4 of last year. Obviously attrition has gone up. If you analyze attrition, 2.9% of the attrition, that is 2.9 out of 12.9 is due to sort of involuntary in the sense that we have seen attrition at the bottom of the ladder, for people for whom there have been performance challenges and we have also seen some attrition in our trainee workforce, because we have tightened on the performance requirements for conformation into the workforce and there we are seeing some attrition. We have seen attrition in the 1-year plus experience, that is people after joining and working for a year, in that 1 to 2 year band the attrition is the highest followed by the 5 to 6 years band, people who worked in the system for 5 years, 5 to 6, and beyond 6 most people do not leave, they love the company more. So these are the two age groups, experienced groups, where we are seeing higher increases. The attrition is due to many reasons. One, the attrition is also due to the fact that the market is very buoyant, the demand for the people is very high and it is true. The two, the demand for people in the overseas market has picked up, so we are seeing an uptick in attrition in overseas.

Chitra

Chitra from Bloomberg news. I wanted to ask Nandan why is the company doing a sponsored ADR sale? Will this help in making acquisitions overseas? Kris has said earlier today that you are interested in joining a major index. What does that achieve for the company?

Nandan

This morning Infosys announced that it had got board approval to do a sponsored ADS. The ADS offering is up to 30 millions shares. We have said we have a long-term goal to be in one of the major indices and this is part of that journey. Beyond that I am constrained by SEC laws and regulations. I cannot say anything more at this stage.

Balaji

______.

Nandan

I cannot add anything more what I have just said Balaji.

Meera

This is Meera from New Indian Express. I have two questions. How many employees are you looking to add in the next quarter? Do have any specific plans for Karnataka?

Mohandas Pai

We are adding gross 5,700 in this quarter and 3,800 because that is the residue left, total number for the year is up to 28,300 as against 25,000 and this is a gross number. So we do not know what the attrition is going to be, we do not build in attrition. As far as Karnataka goes, we are nearly full up in Bangalore. We have no built up space in Bangalore. We have space in Mysore. And in Mangalore the new SEZ work has started. So we have no space in Mangalore. So a bulk of the hiring for this quarter, next quarter will be outside Karnataka because we do not have any space left in Karnataka to fill up this hiring.

Lady speaker

I wanted to ask in terms of the rupee depreciation, if you look at the beginning of the quarter to the end of the quarter it looks like it is actually a small appreciation. So how does Infosys get the rupee depreciation against major currencies?

Bala

If you look at the average rupee dollar rate, it was 46.29 for September quarter as compared to 45.65 for the June quarter, so there was a depreciation of 1.4%. In the end of the quarter I think rupee has slightly appreciated, but it is still at 45.95, and for the guidance we assumed 45.60. So average rate for the quarter is 46.29, that has depreciated by 1.4%, that impact is felt in the operating margins. 1.4% for the quarter on an average-to-average basis.

Male speaker

What is the hedge?

Bala

We have a hedged position of $373 million as of September end. All of that has been marked to market at 45.95, which was the closing rate for the quarter.

Lady speaker

Sir where has these new investments being made in the last quarter, second quarter?

Mohandas Pai

The new investment is being made in Mysore, our global education centre. That is what you are asking right? Mysore the global eduction center where we are going to spend Rs. 650 crores. When completed it will have a total investment of approximately Rs. 1,200 crores. It will probably be the largest investment in education in this country in Indian history; Rs. 1200 crores of investment in education and training in a single location has not happened anywhere in this country in our history. So that is one. We are investing in Pune. Pune-Bangalore we have completed the building of 4000 sq feet another center. So it is going on all over the place.

Moderator

Thank you everybody we will break for lunch now. We will take question from Balaji and then....

Balaji

____. What is Mr. Murthy's role as additional director, and what are his emoluments or whatever? Since he retired what has been his activity?

Nandan

Mr. Murthy retired as an Executive Director. He has joined the board as an Additional Director from August 20 th and he is also the Non-Executive Chairman and Chief Mentor of the company. He does not draw any salary from Infosys, but he is eligible for all the compensation that a Non-Executive Director is eligible for. He continues to be a strong source of support for Infosys. He is traveling a lot. He is on many global boards and educational institutions and I think we always go to him for any help and support and mentoring that we want.

Bala

He gets commission as a non-Executive Director. He does not draw any salary. It is between $45,000 to $50,000, pro rata for the year.

Balaji

Mr. Nandan, I am seeing your onsite offsite revenue is more or less equal, is it in line with your Global Delivery Model?

Kris

If you look at the mix of effort, efforts mix is around 30:70, actually the numbers at this point are 33% onsite and 67% offshore. As I said in my presentation we want to keep the onsite between 30% and 35% and offshore between 65% and 70%. So it is in that range. Because the rate onsite is much higher than the offshore rate, when it translates to revenue it almost flips to 50:50. Right now, onsite revenue is 54.4% and offshore revenue 45.6%, and it is in line with our target at this point.

Male speaker

One last question to Mr. Pai. You had made a mention that highest attrition was in the 1- 2 year category as well as the 5-6 year category. 1-2 year, does it mean to say to that brand Infosys is losing its charm with the campus recruitees or what is the reason why you are seeing this kind of an attrition?

Mohandas Pai

Attrition has always been high in the last three years in the 1-2 years experience with Infosys category and the 5-6 years experience with Infosys category because in one to three years we have obviously people completing 1 year of training and then they may go for higher education. In the first half of the year, I think about 600 odd people have gone for higher education. They do their MBA or go abroad. So that is one area. 1-2 years is also that after working for one year possibly when people come from outside, some of them when they look at the rating that we give them and the fitment and all that, possibly some of them leave because they may not get the fitment that they want. So these are the 2 major reasons that we have. In the 5-6 years, obviously we are working on a pyramid, so that is time when people get promoted to the higher levels and we see that if some people do not get promoted, some of them leave. So there we see some attrition.

Lady speaker

In you Mysore campus like you mentioned in terms of the amount of investment, is there any figure that you could give us in terms of employees who are being trained in Mysore campus and who are then joining Infosys but are leaving, I mean do you have any sort of comparison that gives us an idea that how many are staying after this training for more than 2 years and how many are leaving?

Mohandas Pai

No, I do not have the data that you want because people after they join, after they finish the training they go join and after one year like I said, some of them leave for higher education and some of them leave because they want to go somewhere else in the sense they want a different location and some of them get married. There are personal reasons. So some of them go abroad and they leave. So there are many reasons. So there is no discernible trend or a single reason to say what it is. This is just a piece of data that we have, we analyze that and see what needs to be done on a continuous basis. I mean this is across three years, so we do not have any pinpointed figure and say this is one single thing.

Speaker

_____.

Mohandas Pai

About 2.9%. That is 2.9% because this consists of people who have joined for training, who do not make the grades and there are also people whose performance is challenge and in the lowest rank we have a very high attrition because they go outside they may get more, but these are the two areas. So the rest is all voluntary. Involuntary in the sense that they do not make the grade, that is involuntary and then the lowest rank and they leave, so to that extent we classify under that head.

Male speaker

_____.

Mohandas Pai

Yes.

Moderator

The spokespeople are available for one on one interviews, but we will break for lunch now. Thank you.

Nandan

Next time we will ask guidance from Balaji on our guidance.

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Transcript Evening Earning Call

INFOSYS TECHNOLOGIES LIMITED
Q2 07 EVENING EARNINGS CALL
OCTOBER 11, 2006

CORPORATE PARTICIPANTS

Nandan Nilekani
Infosys Technologies - CEO and MD

Kris
Infosys Technologies - COO, President and Joint MD

Mohandas Pai
Infosys Technologies - Member of the Board

V. Balakrishnan
Infosys Technologies - CFO

CONFERENCE CALL PARTICIPANTS

Moshe Khatri
Cowen and Company

Bryan Keane
Prudential

Joseph Foresi
Janney Montgomery Scott

Trip Chowdhry
Global Equities Research

James Friedman
Susquehanna

Alan Hellawell
Lehman Brothers

Julio Quinteros
Goldman Sachs

Rod Bourgeois
Bernstein

George Price
Stifel Nicolaus

Rama Rao
RR Capital Management 

Operator:

Good morning. My name is Wes and I will be your conference operator today. At this time, I would like to welcome everyone to the Second Quarter Results for Fiscal 2007 for Infosys Technologies Ltd. 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. Thank you. Mr. Mahindroo, you may begin your conference.

Sandeep

Good morning and thank you for joining us today to discuss the financial results for the quarter ended September 30, 2006. I am Sandeep from the Investor Relations Team in the US. Joining us today on this conference call is CEO and MD, Mr. Nandan Nilekani, COO and President and joint MD, Mr. Kris Gopalakrishnan and CFO, Mr. Bala along with other members of the senior management. We will start with a brief statement of the performance of the company for the recently completely quarter, followed by the outlook for the quarter ended December 31, 2006 and the year ending March 31, 2007. Afterwards we'll open up the discussion for the 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 of the future is a forward looking statement and must be compared in conjunction with the risks that the company faces. A full statement and explanation of details is available with our filings with the SEC, which can be found on www.sec.gov. I would now like to pass it on to Mr. Nilekani.

Nandan

Thanks Sandeep and I'd like to welcome all of you to this call. Let me give you some highlights. As you have noticed that the revenue for the quarter improved 13% in dollar terms and thanks to the strong performance, we have been able to revise our guidance for the year. We have revised it to exceed $3 billion and basically with that we should be between 40.6 to 41.1% growth. What you're seeing here is really a confirmation of many trends that we've been talking about for the last several years. As you know, we have been postulating for some time that what you see here is not really just a business, but a fundamentally new business model, a fundamentally disruptive business model, a business model which delivers faster, better, cheaper and more innovative solutions to our customers and I think that is reflected in the kind of growth that Infosys has been able to demonstrate in the last six years. As you're aware, we went public in the NASDAQ first in March 1999. We had revenues of $121 million and now with the latest guidance for the year ending March of '07, we anticipate revenues to grow in excess of $3 billion. In other words, this company would have grown from $121 million in 1999 to over $3 billion by March of '07.

Another way of looking at it is, it took us 23 years to do the first billion dollars. It took us 23 months to do the second billion dollars and in effect we've gone from $2 billion to $3 billion in one year. So I think you can see the kind of growth that's happening and I think this clearly demonstrates that there is a fundamentally new business model here which is taking away market share from the legacy players in this industry which is creating a whole new compelling value proposition and I believe this is a model that's here to stay. And this model is not just about what we do as a company but what is the impact and consequences of this model on existing legacy players. What does this mean for their revenue streams, what does it mean for their prices, what does it mean for their global re-arrangement of their workforce. These are all large structural challenges that will be faced and we think that we are essentially driving the agenda in this space and other people essentially are following the agen da that we have worked out.

I think the other important thing, we are increasingly saying is that, we are increasingly convinced that the world is being bucketed by some major mega trends. We have identified emerging economies as one mega trend, economies like India and China, which used to be 50% of global GDP and went down to 7% in 1970, are slowly inching back to take a larger and larger part of global GDP which has a very important impact on markets. We are also seeing the impact of demography with the rise of a young workforce in the Asian countries as opposed to aging workforce in Europe, which has its implications on healthcare, on dependency ratios, on pension benefits and the need to get a high return on capital in the emerging market. We also see a huge impact of regulations whether it is financial regulation, health regulations, privacy regulations, alls kind of regulations, which have a huge impact on companies. And, finally we find a huge impact of technology on businesses and in a sense, Infosys is a child of technol ogical change, because we're able to have, thousands of people sitting across the world using one network to deliver value.

So, clearly these 4 mega trends - emerging markets, demographics, regulations and technology, we think are flattening the world and I think it is effecting each and every company because every company that is in the business of selling to customers is finding that whom they sell to is changing, what they sell to is changing, how they sell is changing, where they produce is changing, where they service it from is changing, where are the employees to provide the value is changing. In other words, everything is really up for grabs and we think that this transformation is going to affect every industry, whether it's banking or retailing or telecommunications or insurance and we think that Infosys is uniquely placed to be of service in this change because we ourselves are (a) a creature of these changes and (b) we ourselves being what we call as a flat company, we are in the best position to tell our customer, advise our customers on what they should be doing because we have gone through these changes oursel ves or we have been constructed on the basis of these fundamental changes happening in the global world.

So we find that this message is resonating extremely well with our customers. Our customers believe that the world is flattening. Our customers believe that they have to go through transformation. Our customers believe that Infosys is the right partner for this transformation and this is contributing to a huge impact in terms of mindshare, in terms of global awareness of the Infosys brand, in terms of what we can do for them and I all these things which you would may think are supplemental or not really directly relevant, actually play a huge role in the strategic positioning of Infosys. And it's that strategic positioning which provides essentially the wind power in the sense that drives this whole thing. I think with that context, you'll notice that we have had tremendous growth and another important facet of this growth is that unlike maybe even a couple of years back, when growth was due to 3 or 4 large customers, what you'll find is that this time the growth is coming due to a whole constellation o f large customers who span industries, who span geographies and I think this broadening of large customers and creating of multiple engines of account growth, I think is one of the reasons for the robust growth that you have seen.

Now, there are many, many other aspects to this. I think the other important thing which we have been emphasizing for quite some time, is that our growth is fundamentally based on robust organic growth and I think, we re growing at 40% this year entirely on an organic basis and the reason that this is happening because we are focused on building client value. We are focused on building a broad range of the capability to deal with our clients. We are focused on expanding our relationships. We are focused on delivering value. These are all old-fashioned concepts, but that's how you get growth and I think we have demonstrated that the business model is very important for this growth and organic model that is customer focused is very important for this growth.

So I think when we look at the results, of course at one level, we should look at it in terms of quarterly performance. But, I think it is equally important to understand how strategically it fits in to the global scheme of things and how major changes are happening in the industry and how Infosys is leading that charge. With that, I'll request my colleague, Kris, to continue with the discussions.

Kris

Thanks Nandan and good morning or good evening to all of you. Let me give you some more details. If you look at the geographical distribution of revenues, almost all the major geographies have contributed to this growth, the USA grew by 12.6% quarter on quarter, UK grew by 14.2%; France 27.4%. So these are major countries in Europe. Japan grew by 12.7%. Australia grew by 28.7%. So it is all-around growth from a geographical perspective. If you look at services, we had again growth in all the services, some of course, better than others, like packaging implementation, consulting, testing, business process management etc grew faster than company average. Products also, that has seen lots of growth.

From an industry perspective, the industry segment which was strong was banking and capital markets, telecom, energy and utilities. So again, we had all round growth from an industry perspective. Our revenue per employee on a blended basis grew 1.2%, 1.4% onsite and 1.1% offshore. And, for the past three quarters, we have seen that the revenue per employee has been growing. We have seen a 3 to 4% increase in rates for new clients and about 1 to 2% increase in some of the contracts renewals and now it's starting to get reflected on the revenue productivity.

We had 232 million clients this quarter. We have 61 ten million dollar clients, 12 fifty million dollar clients and 2 hundred million dollar clients. The largest client is 6.6% of revenues. So, again we saw faster growth in our top ten, top twenty clients.

And from a scalability perspective, this quarter we have added the largest number of employees. 10,795 employees of which 2,560 are experienced hires. Attrition has inched up to 12.9%, but we had also been much more rigorous in looking at performance and encouraging people to leave. Out of this 12.9% about 2.9% is involuntary attrition or attrition which is encouraged.

Utilization excluding trainees is 80.3%. Last quarter was 77.3%. It's partly because of the faster growth experienced this quarter. Including trainees it is 68.7%, which is a result of the huge addition at the entry level. Most of those people are undergoing training. We have absorbed salary increases. This quarter, we have also announced long-term bonus for some of the senior people within the company and including all of that, we are able to maintain the margins. We continue to invest in infrastructure building, 7 million square foot of space is under construction which will give us capacity for an additional 13,400 employees. With this, let me hand it over to Bala to give you more details on finances.

Bala

Good morning everybody. This quarter the revenues were $746 million which is a sequential growth of 13%. Of that 11.2% of volume growth, 1.2% is price growth. Onsite per capita revenue went up by 1.4%, offshore went up by 1.1%. On a blended business, it went up by 1.2%. Gross profit was 43.3%. We had a benefit of lesser visa cost during the quarter. It impacted the margin positively by 1.1%. We also had the currency in our favour. The rupee depreciated by something around 1.4% during the quarter. It impacted the operating margin positively by 90 business points. The sales and marketing costs were 6.4%. It was 6.8% last quarter. G&A is 8.4% similar to what it was last quarter. Overall, we got a benefit of 50 business points on the SG&A because of the scale. Non-operating income was lesser during this quarter because we didn't have the benefit of large forex gain which was there in the first quarter.

Income tax is 3.5%. Effective tax rate was 11.7%, similar to last quarter. Overall net profit was 26.6%. This quarter has come back to 26.4% last quarter.

So overall we had the benefit of visa costs, the currency and the leverage what we saw in the SG&A because of scale which has improved the operating margin by something around 2.5%. Going forward, we have given a guidance of 5.9% to 6.6% growth in revenue for next quarter. Revenue being $790 to $795 million. EPADS to be $0.37 for next quarter which is 3% growth because we are assuming, the currency to appreciate next quarter, Our guidance is based on a rupee dollar rate of 45.6 for next quarter and for the full year.

For the full year, we have given a guidance up 40.6% to 41.1% growth in revenues with an EPADS of $1.44 which is 41.2% growth. Our balance sheet size today is $2.2 billion. We have around $943 million in cash, account receivable is around 65 days.

I think overall this was a good quarter. We have seen the margin improvement. For the full year, we are assuming the operating margins to be stable similar to what it was last year. Last full year, our operating margin was a 27.8%. We believe we should be similar to that even this year within a narrow band of 40-50 basis points. I think with this I conclude the financial presentation. Now the floor is open for questions and answers. Thank you.

Kris

We are ready for questions. Please go ahead.

Operator

At this time, I would like to remind everyone in order to ask your question, please press star, then the number 1 on your telephone keypad. We'll pause for just a moment to compile the Q & A roster.

Your first question comes from Moshe Katri of Cowen and Company.

Moshe Katri

Hey thanks. And congratulations on a very, very strong quarter. On the pricing front, what in your view has been contributing for the recent pricing strength especially on the base of existing clients?

Kris

Moshe, for the past three quarters, we have been saying that we are able to get slightly better prices. It is primarily driven from the clients appreciating and understanding that the costs in India are going up and at some point it will have to get reflected. It is a small increase but it is happening now. And in Infosys' case, we are also quite clear that below a certain price, we will not take up work. So that is also helping us with new contacts to try and push up our price points.

Moshe Katri

Okay. And then on the attrition rates, you've indicated that if you looked at voluntary turnover, it was probably about 10% for the quarter. For comparison purposes can you just give us a feel of what was the voluntary turnover level during the past two quarters? Was it flat, was it higher, was it lower?

Mohandas Pai

Moshe, the voluntary turnover last quarter was approximately 9.2% and the quarter before that, was about maybe 9%. So there are three kinds of issues here. First, our gating for training has increased in the sense that you have to get at a minimum level of accomplishment to get through training. So there we are seeing people not getting through, so they don't get in. Two, very importantly this quarter we had about 450 people or so leaving for higher studies because this is a quarter in which it happened, next quarter it may not happen. And three, is of course the people at the bottom level of performance who left. And these are the three things that drive up the largest part of attrition. And in the voluntary part we are not seeing an appreciable increase. There is a marginal increase, and that is because of the fact that the markets are buoyant and the US markets too are buoyant. And that is the main reason.

Moshe Katri

Great, and then finally after we have seen decelerating revenue growth last year, it seems that we're headed towards accelerating growth. Can you comment on this trend? Do you think, is there anything unusual here? Because obviously this is a pretty positive trend for the industry.

Kris

See as Nandan was saying Moshe, it shows that, this model is better for the clients. They are able to get better quality deliverables at very good price points. So, clearly this is a better model and really that is the reason. As companies become larger, clients are more and more comfortable working with us on larger projects. For instance willing to increase their revenue or increase their services with us. So today we have 2 hundred million dollar relationships. And all the parameters from a customer perspective are growing. We have a very diversified portfolio of services. If you include BPO, the footprint is very large. So, it's a combination of all these things and all the things we have been doing in the past 5 years in terms of starting new services, starting consulting, starting BPO, creating the brand equity, enabling our company to scale up, creating the capacity to recruit, train. All these things are paying off at this point. And the market conditions are right, and so we are able to take a dvantage of that.

Moshe Katri

Thanks

Operator

Your next question comes from Bryan Keane of Prudential.

Bryan Keane

Hi, good morning. Just when you look at your guidance for the first quarter and then the second quarter, you guys have obviously blown through those numbers especially on the top line. I guess can you pinpoint what surprised you, why the outperformance?

Kris

Clearly, the environment is conducive. We got the benefit of better market conditions. Our services were appropriate for the market. We executed well. So customers were able to give us more business. And, the surprise was the volumes and of course we were able to take advantage of that in terms of capturing that business. So volumes were where the surprise was and we took advantage of that.

Bryan Keane

And then you mentioned in your opening comments about taking some share from legacy players. Has that been a change over the last couple of quarters that you're seeing now, where work used to go to the multinationals now that Infosys is taking some of that work?

Kris

Yes, and we believe that as companies become larger, this will enable our clients to actually work with us on larger relationships and larger projects. And that's also we're seeing, the size of the deals is going up. If you look at some of the fastest growing services like package implementation, consulting, etc, the total number of people who are able to deliver consulting type of services is almost 3,000 today. And that is helping us do transformation projects, consulting assignments, end-to-end solutions, BPO driven business transformation. So it is what is I think driving the replacement which is happening from the legacy players to companies which are more global delivery oriented.

Bryan Keane

Okay. And then just finally on the metrics I just noticed that repeat business was down to 95%. Usually that number is usually 97% or so. Any down tick? Did some clients, move away? What explains that down tick?

Kris

The way we compute this is, it is reset every financial year, Q1 is higher, Q2 is lower. At the end of the fiscal year, it will come down to 90%. On an average it is 90%. It gives us better visibility into the pipeline. It allows us to build a deeper relationship with our client, increases the predictability. And new customers are also ramping up at this point of time.

Bryan Keane

Right, okay. Great. Thanks a lot and congratulations on a great quarter.

Operator

Your next question comes from Joseph Foresi of Janney Montgomery Scott.

Joseph Foresi

Hi gentlemen. Congratulations on some good results here. I just had a couple quick questions for you. The first one is that it sort of appears here that the off shore movement continues to evolve sort of with the Indian vendors moving into different geographies, verticals and offerings. Can you comment on any specific areas of growth that you feel you guys are focusing on? Anything new on that front? Obviously the movement towards package implementation is there, but anything new on that front?

Kris

So from a geography perspective proactively, we are investing in Europe. Europe has gone from 9% revenue some years back to 25% of our revenues. From a services perspective, it's more business solution driven rather than technology solutions. Combining our consulting, package implementations, BPO, today we are able to offer clients transformation project, transformation solutions. We have also come out with our point of view on what is the landscape today from a business perspective and what companies need to do in today's world. Nandan in his opening remarks talked about the four major shifts which we see. And we are able to help out clients with how they need to respond, how they need to compete in today's world.

Joseph Foresi

Thanks, actually the second question here obviously it looks like demand is sort of pulling the market and putting pressure on the labor supply. If you can give us some idea where maybe you expect attrition to be in the future? And also on the wage front, if you could give us a lateral fresher mix for recruits this quarter? I think you gave it in the earlier call.

Mohandas Pai

Attrition for the rest of the year should be in the same range sitting where we are, seeing what we are doing. Even salary increases for the next year should be in the range of 12% to 15% sitting where we are today. The reason is we don't see any perceptible shift there. The key challenge you face when you grow up is getting enough middle level people in to meet our growth requirements. Otherwise the wage pressure is there but there is no perceptible shift or change. We are also seeing that for the big MNCs who came into India who used to raise wages and pay much more than what we pay for people who joined them, they are becoming more cautious and more discriminating. And the indiscriminating increase in salaries has come down and the benchmarking against large Indian companies. So I think, there is some stabilization going on there because people are very conscious that competitive pressure on wages is not going to help anybody. So on both fronts I think, there is some stability but it all depends on the growth rate. The growth rates go up, obviously opportunities open up and attrition will be slightly higher. I think attrition is not a great cause of risk or worry for us at this point in time. We want to bring down attrition of course but it's not something that is giving us very sleepless nights.

Joseph Foresi

And just sort of staying with the labor question, as far as middle managers, any rough idea what the attrition rate is at that level? And could you give us sort of a ball park number what salaries are at that level?

Mohandas Pai

Middle level is something from three to seven years of experience. And attrition at the middle management level is around 12.5%, if you take the entire basket of people. The wages at the middle management level, I would estimate is something around $20,000 to $25,000.

Joseph Foresi

Thank you. And just...

Mohandas Pai

Per year. Per year, not month.

Joseph Foresi

Per year, of course. And just one last question here sort of on the BPO front. Any growth drivers in that business? And if you could just give me the attrition rate this quarter that would be great.

Mohandas Pai

Well the growth drivers in the BPO business is the F&A business. F&A is growing, more customers are coming in. We have about 1,500 engaged in F&A. And we've got a lot more inquiries in that particular area. In the knowledge processing area, the research area is opening up and we are seeing much more inquiries. These are two large areas which are growing pretty fast along with the rest of the business.

The attrition in the BPO business is about 38% for the quarter. And it's come down about 2 percentage points. And if you de-construct the attrition, 25% of attrition is in the 0 to 3 months category. That is very strange in this industry because when people join they have to go to night shifts and some of them don't adjust and some of them leave. And about 40% of attrition leaves in the 1 year to 1-1/2 years category because after 1 year people get trained and the demand for them is much greater than the people below 1 year. And these are the two categories. And in the category 1-1/2 year plus the attrition comes down.

So there are two lumps that happen in attrition and there is a very particular reason. But we are trying to push it down and I think in the future attrition rates in BPO will come down.

Joseph Foresi

Great. Thanks guys, and again congratulations on some good numbers.

Operator

Your next question comes from Trip Chowdhry of Global Equities Research.

Trip Chowdhry

Thank you. And again congratulations on phenomenal execution. First question is for Bala. You did mention that the visa costs have gone down. I believe that the H1 visa cap has been reached in the month of April. Is that one of the reasons or is there something else you are seeing there?

Bala

Of course, you are right, because we accelerated the visa investments in the first quarter because we knew that the window is going to get closed. We spent close to $11.5 million in the first quarter. That impact is not there in the second quarter and that is one of the reasons why the margin went up.

Trip Chowdhry

Beautiful. Now other question I have is the consulting team that is led by Steve Pratt. That seems to be doing very well. I was wondering when will you feel comfortable telling us how many engagements for the consulting, how many customers did they engage in? And among these customers, how many we have in $1 million, $5, $10, $100 million kind of segments. Among them, where do you see Infosys Consulting having the maximum traction?

Kris

Infosys Consulting will have the best value right now for the large transformation projects. It is helping clients figure out what they need to do to compete in today's world and what they need to do in order to transform themselves to compete in this flat world. So we are doing client workshops regarding what it means, what are the drivers. We do assessments and come up with a program for them to look at the transformation itself. Quite a bit of the work of course involves changing the technology platform. Again, because of the large Enterprise Solution practice we have and in many cases the transformation is led by implementing SAP or Oracle or something like that. Again we are able to help our clients make this transformation.

So today the focus is really in helping our clients transform themselves to compete in this world. We have frameworks, we have methodologies, we have tool sets to help our clients do this.

Trip Chowdhry

The last question is on insurance, banking and financial vertical. It seems like all of the companies I follow, including those software vendors, they seem to be doing very, very well in this vertical. I was wondering, is there something really endemic to this vertical which is giving a lot of business to almost the whole software industry? Thank you again and congratulations on phenomenal execution.

Kris

This industry always, especially the banking and capital markets, not so much the insurance side, has been a high spender. They love technology. It's driven by innovation and use of latest technology and things like that. And as a percentage of revenue, typically these companies spend higher than other sectors. For example, manufacturing would typically spend 1% to 2% on technology, whereas a financial services company will typically spend maybe close to 5% or sometimes up to 10%. And some services firms are completely technology driven actually. So that's the reason why this sector is a very good sector for software companies, IT service companies, hardware companies, etc

Operator

Your next question comes from James Friedman of SIG.

Jamie Friedman

Hi, thank you. It's Jamie Friedman at Susquehanna. My first question is regarding Progeon. Did you disclose the operating margin at Progeon or what's now called Infosys BPO?

Mohandas Pai

Yes. Let me give you the operating margin for Progeon as per US GAAP. The operating profit is about 20%. Net income is 21.3% because of non-operating income.

Jamie Friedman

Next question is regard to headcount. I believe that your prior fiscal year '07 headcount guidance was 25,000. Did you update that number?

Mohandas Pai

Yes, increased it to 28,300. This is gross, gross of attrition

Jamie Friedman

Yes. Thank you. And then the final question is regarding the ADR issuance. Could you help us walk through the prospective calendar? It sounds like you're going to meet in November to tentatively approve an offering, but can you remind us based on the prior schedules how we should think about the mechanics of the offering again. Thank you.

Bala

Well, the board just approved the offering. We are working on the timeframe. We have not finalized that. The board approved that we will issue up to 30 million shares through a Sponsored Secondary ADR program. It will include a part of Public Offer Without Listing (POWL) in Japan. We can't share any more details on this offering because we are constrained by the regulations of SEC.

Jamie Friedman

Very good. Thank you very much.

Operator

Your next question comes from Alan Hellawell of Lehman Brothers.

Alan Hellawell

Hi gentlemen. I guess I was just hoping to get a little more clarity on your US market strategy. I know that you've invested significantly in large account chase teams. Can you talk about any capabilities that you've developed to entertain larger contracts and whether that is going to be a thrust that we'll see in your contract size in the United States?

Kris

See there are two ways you can have large relationships. One through large contracts, another through a master services agreement under which you execute multiple projects. Our traditional model, which is very different from the legacy players, has been to have a master services agreement under which you execute multiple projects. It gives the client flexibility. It gives them the option to work with a company for long term so that you can take advantage of knowledge retention, you can take advantage of best practices sharing and things like that. But still, keep the partner on their toes because there's always a threat that if you don't deliver the last project well, I can shift or I can switch. So that is bulk of our contract. It is helpful for us also because of the long-term nature there. The master services agreement we get visibility into the budgets. We are part of the budget process etc.

Having said that, we are now bidding for larger and larger transformation projects, outsourcing projects. You may have read about the ABN Amro deal in Europe there. We got share of application outsourcing from them. And we are seeing more of those opportunities. What is happening is that these large outsourcing deals are getting split between two or three vendors. And in almost all cases, we make the short list and some of them we win. It's not all going to one company. It's going to two or three companies.

Alan Hellawell

Great. Well thank you very much.

Operator

Your next question comes from Julio Quinteros of Goldman Sachs.

Julio Quinteros

Hey guys, good afternoon. Wanted to touch on real quickly, go back to the consulting practice real quick. Can you give us a little bit more color on how many folks you have in the consulting practice today, profitability, and if it's not profitable, when you actually expect it to go profitable?

Kris

So the consulting subsidiary has 220 people. Consulting as a service spans multiple units within the company. We have solution consulting in each of the business units. These are the people who look at industry trends, proactively come up with solutions which have some IP built into it, which have some maybe code, designs and proactively take it to clients and to projects. Then there is the whole area of package implementation where we start with the package selection, business process reengineering, helping customers create a template for their business, help them with change management, global rollouts and things like that. And today we have about 2,000-odd people doing this type of work. Traditionally you would have classified all of these as consulting. So if I include all these people, we have approximately 2,600 people today doing consulting-type of work. Now again, consulting subsidiary standalone is making loss today because are still investing in that. We hope that in the next two or three qua rters, it'll turn around and start making profit. Consulting as a service is very lucrative especially when it drives downstream, it is giving us the required margins to justify, us continuing to invest in that. In fact, the transformation-type of projects require us to do program management, change management, business process reengineering, etc, which are really consulting type of services.

Julio Quinteros

Understood. And a lot of the descriptions that you've just given on the consulting business, the lucrative nature of it, the kind of work that you're having to do there for your clients and when I relate that back to the profile of the folks that you're currently hiring, 77% freshers, I guess, I struggle with understanding how the current mix, which is very weighted towards freshers, will allow you to truly move into some of this higher-end consulting work given that those folks are probably not going to be the guys that you're going to need for consulting engagements. I guess so if you are going to be sort of looking at this business over the long term, why aren't you hiring more MBA types or more folks from outside of industry that can help you truly ramp up this business, just to get a sense for where you want to take this business.

Kris

So just to give you some numbers, we hired 600 MBAs this year. We are recruiting more MBAs as we speak. We have recruited 2,560 experienced folks this quarter, in this just one quarter 2,560 experienced folks. We have recruited 600 CPAs in the last 12 months, especially for our BPO business. They're helping our clients with more of the analytics and more of the research kind of work and things like that, account reconciliation, closing of books and things like that. So there are a lot of initiatives within the company, and of course we are recruiting in the market also. For example, in the US universities, we have recruited 130 people who are undergoing training in India today. So there is a combination of multiple initiatives where we believe that we are recruiting the right people for us to participate in these large transformation projects.

Now you also need to realize that these large transformation projects require a few consultants at the front end. They require a strong technical team to do the architecture, the design and things like that, a very large number of people to do the programming, testing, the development-type of work. And we have looked at the composition of large transformation projects and structured the company, the pyramid for the company based on what we see as the requirements. Now we don't want to be a pure consulting firm. That is not our objective. We want to be a company which can help a client do end-to-end transformation, which includes and in fact probably that is what is unique about it. We will help implement and run the business operations which is required today to be competitive. So we will help implement and operate. So that's the direction in which we are moving.

Julio Quinteros

Okay, that's really good. And then I guess related to the transformation engagement work that you're doing, what percentage of that work can actually be done offshore? So if you take a sort of a standalone transformation engagement, how much of that can you actually do? So if you could break that up between onsite and offshore?

Kris

Again, we will have to take examples and illustrate this. When we started package implementation, 80% of the effort was being delivered onsite. Today only 35% of their product is being delivered onsite. So we have been able to change our processes and methodologies to move a significant amount of work offshore. Even in consulting, which is considered primarily an onsite type of service, over time, we are trying to do now secondary research, documentation, preparation, analytics etc again from offshore. And in some cases we are able to deliver 20% of the effort from offshore. So overall our hope is that entire life cycle if you look at it, the effort will be 30% onsite, 70% offshore, on a blended basis. And that's what we are driving toward.

Julio Quinteros

Okay, great. And one quick question for Bala on the sales and marketing percentage of expenses. We're down to a level now I think you said roughly 6.4% on a US GAAP basis. How much more scale benefits should we expect to see in sales and marketing as we go forward? So as a percentage of revenue, what's the band that you think this number will sort of bounce around at? And then also related to that, what was the depreciation impact in the quarter? How much did depreciation benefit the expense items? Thanks.

Bala

I think we may not get major benefits on the sales and marketing side. Most of the leverage may come on the G&A side. Last quarter, the sales and marketing costs went up by 1.0% because we hired more people. This quarter it got normalized, so we got 40 basis points benefit there. Overall I think on the SG&A side, we can get another 40 to 50 basis points here and there. Now coming to depreciation, we did similar to last quarter. We are not seeing any incremental benefit or impact because of depreciation

Operator

Your next question comes from Rod Bourgeois of Bernstein.

Rod Bourgeois

Hi there guys. Nice growth, particularly since it appears you haven't been as aggressive in winning large single contracts as some of your Indian competitors. So my initial question is this accurate that you haven't been as aggressive in winning large single contracts? And if so, are you able to hit your growth targets going forward with below average reliance on these really large deals that are out there?

Kris

So in our guidance for the balance of this fiscal year, we have not considered any large deals to be won. And our philosophy at this point is that in a market which is buoyant, we don't want to lock up our resources on deals which don't give us the required margin. So we are reluctant to compete on price on these large deals and lock up our resources. So we look at where the client is willing to structure the deal the way we would like it to be structured. We still believe that we are very competitive when we deliver good value to our clients, better than our competition. But the deal has to be structured such that it makes sense for both of us, for the client as well as for us to take up. And that's the philosophy of the company. So we are not that aggressive, you are right. We have certain parameters by which we will evaluate this deal and go forward.

Rod Bourgeois

Great. That sounds good. Now a couple questions on the margin side. In terms of margins going forward, are you expecting operating margins to decline sequentially in the December quarter and then follow that by an increase in operating margin in the March quarter? Is that the outlook?

Bala

If we look last year, the full year, we had operating margin of something around 27.8%. In the first half of this year, our operating margin is closer to 27.2%. We believe that it will be stable at around 27.5% in the next two quarters. That's why we said, on a year on year basis, the operating margin will be stable, except for a narrow band of some 40-50 basis point here and there.

Rod Bourgeois

Okay, but are you expecting more strength in the March quarter on margins than in the December quarter or is it going to be pretty balanced?

Bala

Well, it's going to be pretty balanced because in the current quarter, the operating margin is 28.3%. It includes a 90 basis point impact because of currency. Going forward we are assuming the currency to strengthen by 1.4%. It should be within a band - 27-27.5%.

Rod Bourgeois

Okay great. And then a couple on the margin driver front. Are you planning sort of mid-year wage hikes this year when we watch the turnover rates kind of moving up and some of the supply challenges in the market, is it possible that you will employ some mid-year wage hikes beyond the wage hikes given in the June quarter?

Bala

Sitting where we are sitting, seeing what we are seeing, we don't believe that we will be increasing wages mid-term this year.

Rod Bourgeois

Okay and when you talk about wages, are you talking about bonuses and other sort of related compensation on the stock front etc? Are you broadly defining wages?

Bala

No, I think the long term bonus is different. That is more of a retention plan and the impact of it is not material. But wage hike comes only once a year in April. We don't believe that we will be increasing that mid-way sometime.

Rod Bourgeois

Okay, so you may give some additional compensation incentives, but they will not be in the wage category?

Mohandas Pai

You see, our variable compensation depends upon the profitability and the revenues. And that is variable. But the base level of salaries will not be increased. Variable is a percentage of the base. And the variable may increase if we do much better or come down if we don't do well. But the base won't go up. And what we did in this quarter, second quarter is, for one particular sector we gave an interim hike. The reason is that we wanted to do it in the first quarter, we could not do it because of the fact that beginning of the quarter, we felt there was not enough money in the kitty. So since we saw things go much better, it was a unfulfilled agenda of the compensation structure which was done in this quarter. But it's not going to happen in the next two quarters.

Rod Bourgeois

Okay, is that Mohan?

Mohandas Pai

Yes.

Rod Bourgeois

Okay. Good to hear from you Mohan. Thanks for the explanation on that. And then just one quick follow-up on the pricing front. Can you define whether price on like for like deals is going up? Or is the increase in price that you're experiencing more due to business mix shifts than pricing on like for like deals?

Kris

Both. We are playing around with the business mix so that we can optimize our margins and do the right thing. We are also seeing increase of about 3% to 4% on new client deals and about 1% to 2% in some cases where we are able to renegotiate. So both are applicable. Those are two levers we have. We also have the onsite offshore mix levers where when the growth rate accelerates, we have more project starts which is what happened in the last two quarters when onsite went up. But then proactively, we bring down onsite. And that also helps to improve margins.

Rod Bourgeois

Okay great. Thanks guys.

Operator

Your next question comes from George Price of Stifel Nicolaus.

George Price

Hi. Thanks very much for taking my questions and congratulations on very strong numbers. First question is I wanted to ask about the top account growth really seemed to - the year over year growth in your top accounts really seemed to accelerate materially. And I'm wondering if there's any particular trend that we can take away from that?

Kris

Clearly, we have worked very hard in creating a basket of services which are relevant. We made sure that we service the clients, make sure that the satisfaction is very high. And the size also helps because as offshore becomes very strategic, clients would like to work with larger partners. Again size helps in that regard. So it's a combination of having the right services, executing very well, making sure that the clients are happy and satisfied and taking advantages of opportunities. There's a trend we see is that companies are looking at increasing offshore. It has become mainstream. They're confident about the quality of their services and things like that.

George Price

And is there any change to the trend? I mean certainly at one point it seemed like there was a trend too, as companies embrace offshore on a broader basis, they look to possibly add to their list of strategic offshore vendors to diversify that incremental business. Is there any change do you see to that trend or is it just the sheer volume of business moving offshore is kind of offsetting that?

Kris

Some of the companies are choosing two, three strategic partners. That trend continues. Some of the companies are looking at setting up their own captive units. That trend also continues. But as it becomes mainstream, this will reflect what is there in let's say US or Europe etc. companies will do some work in-house. They will have some work outsourced in outsourcing. They will look at 2-3 strategic partners to work with. Very rarely would a company look at giving their entire IT -- hardware, software, infrastructure, people, applications, everything to one vendor. There's few, very few cases. The trend is towards two, three strategic partners, maybe sometimes a captive, significant drive towards offshore. Even visibility from the board on what is India strategy. And especially combining IT and operations from the same vendor offshore. So all this we have anticipated and we've tried to create the relevant services, the relevant client relationship structure to manage this.

George Price

Okay, just a couple other questions, one on utilization excluding trainees, obviously up significantly quarter over quarter, the highest level we've seen in some time, I think since back in sometime in fiscal '05. Obviously it looks like there was pretty strong demand in the quarter even surprising you. Is that just simply the answer on that strong utilization or was there anything else driving it? And in terms of expectations going forward, do you think that that level of utilization you're running hot, is that going to come down or is it sustainable?

Kris

The way we manage this is we shoot for about 77% as the utilization excluding trainees. This gives us the slack required if the demand is better than we expected as it was in this quarter. Utilization can go up to 80%. We tried to keep it between 77% and 80%. Beyond 80%, customer service starts suffering. And so this quarter, the utilization went upto 80.3%. So this is actually part of our plan and strategy.

George Price

Okay and last question, on the comment that you made on being able to be selective on deals based on your targeted pricing and margins and being able to do that given the strong demand. For the work that you don't take on because it doesn't meet your criteria, can you give us a sense maybe of who is then coming into take on that work? Would it be tier two firms who are being a little bit more aggressive on price or any color on that would be great? Thank you.

Kris

It's typically tier one. It is a small set of companies today who are getting a higher share of the demand which is out there. It is seen from the first quarter results, second quarter results, we are the first. So we have to wait and see what happens from the other companies. But if we look at the results of other companies for the first quarter, the larger companies have grown faster than the mid-sized and the smaller companies. So typically it is the larger tier one companies who are benefiting from this.

George Price

Thank you very much.

Operator

Your next question comes from Rama Rao of RR Capital Management.

Rama Rao

Good morning guys. It's very impressive growth. You guys are almost like defying the gravity. The law of large numbers says that when you become bigger you slow down. But you guys keep on growing. How do you see that you will be able to maintain the growth rate that you have at this time or at a point will come when you're going to hit the ceiling?

Nandan

Well I think that's a good question and we also think about that question often. I don't think we have a clear answer because clearly there is a lot of scalability in our model. The market for the rebalancing of the global workforce in IT services is still not mature yet. And there is huge customer demand. So I think it's difficult to say when this whole thing will reach the equilibrium stage. So I wouldn't like to venture a guess. The fact is that we have been able to demonstrate scalability in services and we have been able to ramp up our people from a few hundred to 60,000 odd. And in this business, there are companies who in terms of employees have a much large base. So I think all these things are open questions. But we are trying to build as scalable an engine as possible. I think our investments in recruitment, in training, in systems and processes, have all contributed to be scalability.

We need to come to the end of this. I'd like to thank everyone for participating for a very enthusiastic and very interesting set of questions. Please feel free to email us and ask us any more questions about the business performance, the direction. Let me once again state that we believe that we are at a whole new disruptive point in this business, that our model is proving to be increasingly the sustainable model and is having a huge impact on global players. So I would urge you to study this industry not just as what's happening in India but what is the global impact on other forms and the consequences thereof. Thank you very much.

Operator

Ladies and gentlemen, that concludes the second quarter results for fiscal 2007 for Infosys Technologies Limited conference call. We appreciate your time. You may now disconnect.

EX-99.8

EXHIBIT 99.8
Transcrip CNBC QnA

INFOSYS TECHNOLOGIES LIMITED
CNBC BOARDROOM
OCTOBER 11, 2006

CORPORATE PARTICIPANTS

Nandan Nilekani
Infosys Technologies - CEO and MD

Kris
Infosys Technologies - COO, President and Joint MD

V. Balakrishnan
Infosys Technologies - CFO

Mohandas Pai
Infosys Technologies - Member of the Board

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

Chandrashekar Kakal
Infosys Technologies -Head - Enterprise Solutions

Eric Paternoster
Infosys Technologies -Head - Insurance, Healthcare and Life Sciences

Udayan

Nandan Nilekani, Kris Gopalakrishnan and V. Bala Krishnan join us, the first few members of the Infosys top management. in a bit of course more members will trickle in, but first let us start with them. Gentlemen, morning, and thanks very much for joining.

Nandan, the street is very happy with the numbers. There were apprehensions that because of all the talk of US slowdown you may choose to be a little bit more circumspect this time, but your guidance is even stronger.

Nandan

I think we had a good quarter. We grew sequentially in dollar terms at 13% and in rupee terms at 14.5%. We also had a 2.5% improvement in our operating margins through visas, SG&A and rupee depreciation. Right now the business is good. We did check, all our customers are making the commitments. So we are able to revise our annual guidance to over $3 billion which comes to about 40-41% annual growth rate in dollar terms.

Udayan

Are you assuming any uptake in pricing at all? Because in this quarter we are seeing....

Nandan

This quarter there has a been a 1.2% uptake in blended revenue productivity, but basically we are not assuming anything much different, in the sense that its slight upward bias but nothing more than that.

Udayan

There is no worry at all, because your guidance is now at Rs. 66 for the full year. There is no worry that you are picking up from your clients at this stage about a possible slowdown and its impact?

Nandan

We did do a dipstick, because we had heard about the fact that there was this concern about a global slowdown, but our conversations with the clients have not indicated that. We believe that our clients continue to believe that they will invest in us as they have done before, and that is why we are able to give a 40% plus guidance.

Mitali

Bala, the margins have come out quite strong and this is despite the fact that your other income has fallen a little bit. Can you see stability in terms of margins and a 30+ kind matrix for the next few quarters?

Bala

I think so. We have clearly said that we will be able to maintain the operating margins on a year-on-year basis. The first quarter it went down for a couple of reasons. One is the visa cost had increased and second the wage increases taken in the first quarter. But second quarter we have got the benefit of visa cost and the rupee has also been in our favor. Even though it is marginal, it has been in our favor. So overall I think we are comfortable with achieving the margin target for the whole year, which will be stable as compared to last year.

Mitali

In terms of volume addition, besides from your existing clients, did you see a lot of traction with new clients and are you getting these new services in at higher billing rates?

Kris

We added 45 new clients, 10 Fortune 500 type companies. So very strong client additions. We are seeing 3-4% increase in business coming in from new clients and about 2-3%, a similar number from existing clients when it comes for revision. Over the last three quarters we have seen revenue productivity going up slowly. It seem it is inching up, so that reflects it.

Udayan

Nandan I believe that your $ 70 million clients have gone up from 3 to 6 between the last quarter and this quarter. Have you seen some serious ramp up happening for the large clients?

Nandan

I think the good thing is that if you look at our top 10 clients and if you look at our top 25 clients, I think we are seeing good growth and that has contributed to what is happening here. Also I think now we have a broader constellation of top clients in the sense that, we have many more in different industries, in different parts of world who are growing with us. They could be in financial services, telecom or whatever. So I think that is contributing to the growth.

Udayan

Do you see yourself tightening your belt on the SG&A some more, because in this quarter you have done some of that?

Nandan

Well, we have already got a 0.5% improvement in the operating margin this quarter with the SG&A but I think I wouldn't say it is tightening. I think we are seeing it as economy of scale. What we have to spend on marketing, what we have to spend on sales, we will do that but just the growth of the company and the size allows us to get that economy of scale.

Mitali

This time Nandan it has been ticks on almost every count, your top and bottom line growth, your operating margin as well. As you look into the next few quarters what do you see as the biggest challenge? Maintaining the volume growth, getting the sort of bottom line growth or maintaining your margins itself?

Nandan

I think on the volume growth we are comfortable with the revised guidance of over $3 billion. On the operating margin, I think this quarter we have seen a significant improvement of 2.5%, but on an annual basis, as Bala mentioned, it would be comparable to last year. I think on the net margin side we have seen improvement this quarter. Again, if you look at the improvement this quarter, we had given a guidance of $ 0.33 and we have done $ 0.36 cents out of which 1 cent has come from rupee depreciation and 2 cents from the growth. So I don't see any specific concerns. I think we hope to be able to deliver on all the various dimensions.

Mitali

Tell us a little bit about your sponsored ADS and when you plan to offer that?

Nandan

Well, I am limited by what I can speak about the Sponsored ADS. It has been approved by the board. It is up to 30 million shares. We have articulated a long-term goal in being in one of the global indices. So this is part of that journey. Beyond that we can't really talk about the ADS due to SEC laws and other constraints.

Udayan

Is that being offered only to the Japanese investors?

Nandan

What I have said is all that I can say.

Udayan

Okay. Bala can you just split up this 250 basis points improvement in margins between where it came from, the different components?

Bala

We got 1.1% improvement because of visa cost, because last quarter it was $11.5 million or so, this quarter it was $3.5 million. Rupee depreciated by something around 1.4%, that impacted the operating margin by 90 basis points. We had 50 basis point benefit on the SG&A because of the scale. So overall if you add up all that it was around 2.5% improvement in the operating margin for the quarter.

Udayan

Kris anything notable that you want to speak about in terms of some verticals which outshone others in this quarter?

Kris

All around there has been good performance, but if you want to pick out some verticals, our banking and capital markets, telecom, energy and utilities, these are some of the verticals. Europe of course continues to be strong. From a services perspective package implementation, consulting, BPO, testing, these services stand out as above average growth. But overall I think all parts of the organization have come together to do a very good job.

Udayan

Nandan tell us a little bit more about this dipstick that you spoke about. What are they saying? For the moment no worries or are they saying as long they can see there is no problem?

Nandan

Nobody can give a definitive commitment for the next umpteen years but I think what they are saying at this point in time, they do see an increase in spending, particularly that part of the spending which goes towards offshore. I mean that is important point. And we have been saying this for several years now that it is not the quantum of IT spending going up which is the issue, that is not going up that much after the bubble, but it is actually the fact that it is being reallocated in a way that there is more productivity for that money, which is how we benefit and that is why we take market share away from the legacy players. So I think in that context they are saying that they will continue the spending the way they have been and that is reflected and articulated in our guidance.

Mitali

Bala the rupee has strengthened quite a bit ever since Q2 began. Have you changed at all your hedging strategy for the next few quarters?

Bala

Our hedging strategy remains same. We are taking hedging positions for the near future, may be next one to two quarters. That has not changed. We are using options more today than it was earlier to hedge our exposures. Today we have a hedging portion of $373 million, which is equivalent to may be around 50% net inflow cover for the next two quarters. I don't think we have changed our hedging position but all over the world the currency market has become very volatile. We have to focus on that and make sure the impact is minimal on us. We don't want to take any long-term bet and at the same time we don't speculate. We want to hedge our positions for the short term and try to manage it.

Mitali

Nandan just as a snapshot how have the subsidiaries performed and are you seeing margin improvement across your subsidiaries as well in this quarter?

Nandan

Overall the subsidiaries have contributed totally about $5 million to our bottom line. So our bottom line of Infosys is $193 million and consolidated is $198 million. But among that clearly Progeon and Australia have been profitable. China and Consulting continue to be in investment mode. But I think the fundamental drivers of strategy are all in place. In Consulting, we are seeing a lot of new customers being added. We are seeing a lot of assignments that are transformational in nature. In China, we are seeing some improvement in the local business. So I think whatever we had planned is on target.

Udayan

Kris are you seeing any visible signs that pricing finally will be beginning to ease up a little bit, because there is some apprehension that in a market which might be slowing down it will be even more difficult to push through aggressive pricing. What are you seeing that this quarter's pricing improvement?

Kris

Definitely it is not an aggressive pricing kind of environment. What we are seeing is a slight uptake in pricing, about 3-4%. And it is consistent, that has been happening for the past three four quarters. Our clients also know that the costs in India are going up. So there is an acceptance. The climate is that they are willing to accept that at this point.

Udayan

Would you say Nandan or would it be unfair to say that you are probably going a little bit easy on the spending curve now because last three or four quarters you have been aggressively spending both on SG&A and on infrastructure. Is that likely to ease off a bit in the next few quarters?

Nandan

No, I think as I said we are not going to compromise on what we have to spend on infrastructure or on SG&A, because that is the lifeline of the business. In fact as the Bala said, one of the big reasons why we had an improvement in operating margin actually was reduction in visa cost, 1.1% was the contribution of the visa cost reduction to the margin. So I think we are not going to compromise on what we need to do. For example, on training, and Mohan will talk more about it, we are spending a $140 million this year. So I think where we have to invest in the business, whether it is on people or whether it is on the market side, we will not compromise.

Mitali

How are you feeling about business generally Nandan from where you started off this financial year with and where you are at this point. Do you think things might be a little more tame because of this overall concerns in the US or there is no reason to?

Nandan

Well I think as you can see in the fact that we have revised our guidance on both occasions that we began the year with a certain perception of what the growth will be and in both times we have been able to revise it upwards. I think the fact that in this environment, we can get 40-41% growth in dollar terms, grow from $2.15 billion to over $3 billion, one of course it confirms that the market is still robust for our value proposition and I think it is important to understand it is not a overall market scenario. It is not that every IT company will have these benefit. This benefit comes because we offer a superior compelling value proposition. I think the second point is that I think at Infosys in last several years, the huge investments we have done in training, in infrastructure, in creating a performance work ethic for our employees, in investing in solution building, domain capability building, they are all mundane things, they are not exciting things, but these are the things that are really makin g this company achieve this kind of growth.

Udayan

Three or four years back you had a period of slowdown in the industry Nandan. At this point can you see something like that looming ahead, not two quarters ahead, because you have been through one such down cycle three or fours years back.

Nandan

I think in business there are always cycles. There are always times of ups and downs. It is partly to do with the external environment, it is partly your ability to manage the scale and there are many reasons for that. So I really can't comment too much into the future on those things. I think, at this point we have a good business environment and we hope to do 40% growth for the year.

Udayan

Okay that is fine. Kris, now we ask the question and it is still I was going to say what the analysts would say that in a tame environment if they get 40% plus, then this is fine. Kris, any concerns on attrition? That is what one of the analysts pointed out that it has just notched up a little bit this quarter.

Kris

It is a reflection of the market in India for this business. Clearly there is lot more activity happening in India. It has inched up to 12.9%. We have tried to address this by looking at salary increases, compensation increases. We still retain our position as a best employer in India and we are definitely are trying to address that at this point. It has inched up.

Udayan

Bala, in that guidance that you are holding out for the full year what you are assuming in terms of volume and prices?

Bala

I think we are assuming a stable pricing environment and this is mainly going to come because of volume growth. We are saying that we will be growing at 6.6% in dollar terms in the third quarter, and our full year guidance assumes a 5% growth in the fourth quarter. So it will be mainly coming because of volume growth.

Udayan

And assumed margins for the full year would be about?

Bala

Margins, we are saying stable as compared to last year. So in India the operating profit may be around 31.5% to 32% EBIDT.

Mitali

Are you seeing the change in revenue split as well Bala across geographies?

Bala

I think Europe is growing faster, but if you look at the quarter, it is more or less stable in terms of percentages, but definitely Europe is growing faster than US.

Udayan

Okay Nandan we will let you go now. The rest of the team will remain with us. Congratulations and thanks very much. Good luck for the rest of the year.

We will take a break now. Nandan will step out but the rest of the team members from ______ after this break. Keep watching the Infosys Boardroom is still on.

Welcome back. The market is still up. Infosys is just hovering around that Rs. 2,000 mark. Two new members of the Infosys top management team have joined in. They are T.V. Mohandas Pai, member of the board and who overseas HR in the company right now, he is with us. And S.D. Shibulal who heads sales and customer delivery also joins in. Of course Bala and Kris continue with us now for the next leg.

Gentlemen morning. Mohan from an HR perspective what have you done this quarter and would you talk a little bit about the attrition point which Kris was talking about which has gone up a bit?

Mohandas Pai

Well the first thing we have done is to solve the supply problem, in the sense that we have got in 10,795 people, last quarter we had got in 8,097 and we are upping our numbers to 28,000 for this year from 25,000. So we have got in about 4,500 laterals across the corporation in the two quarters, which is a great achievement compared to where we were last year. So they have come in. Attrition has gone up by one percentage point compared to the previous quarter. Last quarter went up by 0.7%. When you analyze attrition, the largest increase has been in the one year plus category, in the sense that people who come out of training, we see an increase in people who have gone for higher studies, we see an increase in people who have joined after one year they leave for whatever reason, may be the fitment etc. So we are working on a series of measures to make sure that we reduce the attrition. Out of 12.9% involuntary attrition is about 2.9%. That is people whose performance is not very good, and people who jo ined the training but could not complete the training. In the training process we also upped our requirement for quality, in the sense that after you have joined you undergo training, you have to get a high level of marks to get confirmed to make sure that quality is maintained at the entry level and we pay more. So I think, this tightening up has happened. But overall the market is buoyant. There is a greater demand for people. So we are seeing an uptake in attrition.

Udayan

You have been aggressive on the recruitment front, yet I believe your utilization ratio has gone up this quarter?

Mohandas Pai

Yes because the recruitment of people excluding the laterals, means that they need to be trained. So we have a large number of people in training, about 6,000 odd people in training right now and they will be coming out of training in large numbers this quarter. So we will see a larger number of people coming into delivery and that means hopefully that we will come back to may be 77-78% utilization and give us flexibility. But overall if you see two quarters of double-digit growth which has happened after a long time and we see utilization at 79-80%, it is an ____ that we have done well in HR.

Mitali

Shibu what has been your experience in terms of sales and which client sizes have you seen the greatest growth in?

Shibulal

This has been a good quarter for growth. We have seen 13% growth all around. Almost all the geographies have grown. Europe has dipped marginally but that is just seasonal, I don't think there is any materiality.

On the vertical side, we have seen higher growth on banking and capital market segment. As a percentage of our revenue, it has gone up from 29.4% last quarter to 30.7% this quarter. We have seen good growth in telecommunication, communication service provider space. We have also seen good growth in energy and utilities space. That is on the vertical side.

On the service side, we have seen good growth in package implementation. It has gone up from 16.5% last quarter to 17% this quarter. I think our story of consulting plus package implementation is really getting traction in the market. We are seeing a pretty strong pipeline on large deals which consists of package led business transformation kind of deals and we are seeing good traction in that space.

Mitali

Is there any space at all in which you are getting the sense that may be demand is slacking a bit or because of the concerns of a slowdown in the US, they are easing off the pedal a little bit.

Shibulal

Actually we have recently done a customer dipstick survey, it is in progress. What we have found is three things. One is most of them telling us that the budgets will remain stable or with a slight increase possibly. There is no serious reduction which they are seeing in the IT spend and they continue to prefer offshore. These are the three points which we are seeing in the short dipstick survey which we have done in the last month or so.

Udayan

Mohan can you give us an update on Progeon as well and what has been the picture and what kind of recruitments have happened in this quarter there?

Mohandas Pai

Progeon has done revenues of $33.8 million and has done well, about 16% sequential growth. They are bang on target. They have got 24 clients, 3 new clients this quarter. They hired about 2,200 people in this quarter itself. Attrition is about 38%. And they have got about 23% net margin. So Progeon is doing very well in terms of growth, putting investment back into the business. Their F&A practice is growing. Their ability to deliver on the order management side has made them one of the top three providers in the world. Their knowledge management service is growing at the rate of $1 million plus per month, which is very good. They have 300 extraordinary consultants. So I think the business is doing very well and growing up to plan and the fact that we have a large number of client conversations going on simultaneously means that. And today working with the rest of the business in terms of getting end-to-end integration is obviously the strong selling point, and that is a big change we have seen in t he last one and half years.

Udayan

Bala, Mohan spoke about lateral hiring. With that kind of aggressive lateral hiring are you seeing any kind of wage pressures, cost pressures building up which could pressurize your margins in the coming quarters?

Bala

Not really. I think our guidance factored in those hiring and we have a good pyramid structure, it works. Because hiring 28,300 employees when the freshers comes in the average per capita cost comes down. That gives us a benefit on the margin side. Our guidance factors in the increased lateral hiring and we believe that we will able to maintain the margin despite of that.

Mitali

Mohan, Kris was alluding to salary hikes as well. By which quarter do you expect that to happen and across which lateral really?

Mohandas Pai

Well this quarter we had a small hike for people in the category where they have spend more than one year in the company, because we found that there is a mismatch. We wanted to do it in the first quarter. We could not do it because we had to spend an enormous amount of money on the visas. So we think the next hike of course will come in April, because April is the time when the hike is going to come. But if you look at the scenario, it is very clear that 12-15% wage hike which is what has been there for the last 3 years will continue to be the theme in the future because we don't see any change and industry growing means that at the middle level there is going to be a greater demand for people. I think that will make sure that there is some kind of consolidation in the industry. We have already seen that happening. The big five in India are going pretty fast, the next level the growth rates are lower and there is a scramble for people. So I think the success of this industry will depend upon the capac ity to hire a lot of people, train the people, enable people and get in the middle level, and to maintain attrition at reasonable levels.

Mitali

Have you increased your capex plans as well for this financial year and the next one?

Mohandas Pai

We have Rs. 1,600 crores of capex and we stick to it. We have spent about Rs. 522 crores in the first two quarters and we have to spend the Rs. 1,000 crores in the next two quarters. But the challenge about capex is the capacity of the system to come up to speed is limited. Today with environment approval takes 6-9 months. We have requested the Prime Minister of this country to intervene because you should have norms whereby you comply, there should be self-compliance, but here is an approval process. The license quota raj is coming back, and that is hurting growth, because if you grow at 30% a year and that means you grow at may be 6-7% a quarter, you cannot afford even 2 months delay. And here, for example, building should come up, the road should improve, the capacity. I think this whole country is massing out in capacity and that is becoming a challenge for this industry. It is a very big challenge.

Udayan

Kris, a quick word on onsite/offshore mix. Any changes in this quarter and going forward do you expect any changes?

Kris

Onsite has slightly gone up this quarter and that is primarily because we have more project starts. As growth ramps up, project start onsite and it is reflected in the percentage. We expect the percentage to be in the range between 30-35% and it is well within that range today and it is managed. It is managed by looking at the business mix, it is managed by looking at proactively shifting work. Every service we offer looks at what is the optimum percentage. In package implementation, for example, about 37% is the onsite. When we started about 3-4 years back, 80% was onsite. So we look at proactively shifting work offshore which benefits the clients and benefits us.

Udayan

Let us take a break. When we come back of course much more. We are half way through the Infosys Boardroom for this quarter. We will be back with more. The stocks still very strong at Rs. 1993, seven rupees short of Rs. 2,000, and the Sensex is up 140 points at 12,500 plus. We will be back.

Welcome back. It is a good morning for the markets, 137 points up, 12,500 more or less, and technology is powering ahead led by Infosys of course, which is a big winner with TCS, Satyam, Wipro. All of those stocks have sort of ____ that. We have got a few other sectors which are coming through. Now, HPCL is not looking too bad and a few power stocks are also up and about. So it is a good morning of trade, no question about that with the good news from Infosys. Two members from the Infosys top management have also joined in now. Chandrashekar Kakal is head of the Enterprise Solutions. He is VP - Enterprise Solutions. And Eric Paternoster heads Insurance, Healthcare and Life Sciences vertical for Infosys. Gentlemen thanks for joining in.

Chandra big vertical for you, Enterprise Solutions, what has the performance been this quarter?

Kakal

We have grown very well in this quarter, about 17-18% of growth quarter-on-quarter, 53% growth year-on-year. Generally the spending in the package implementation space is going up and then we have done very well in this quarter.

Udayan

Big volume growth or are you seeing some pricing improvements?

Kakal

We have seen a mix of both, volume growth is about 50% of the real growth and then price growth and mix growth. The onsite percentage has gone up by a couple of percentage point, so which has also added for the price growth. So it is a mix of both, volume growth and then the price growth.

Mitali

What are you factoring for the next few quarters Chandrashekar, the same volume growth and holding this sort of pricing improvement as well?

Kakal

Generally the package implementation spending is going up everywhere. We are seeing very good growth in Europe happening. The outsourcing and offshoring is picking up in package implementation space in the European customers very well. It is not only that traditional UK and Germany, but we are also seeing growth coming from other countries like Norway, Finland and all of that. So there is a general spending growth happening very well. There is a lot of spending happening on globalization, standardization of their package implementations, consolidations, standardization of the different ERP systems what they had earlier and then brining all of them together and doing a global roll out. So a lot of spending is happening in the ERP space and generally the epicenter of the ERP ecosystem has shifted offshore to India and we have started making waves and our profile has also gone up. We have been invited now for larger multi-million dollar implementation deals, larger global roll outs and we are also doing a lot of audits on the implementation which have not gone well in the past done by somebody else and then we are being invited for that now. Our profile is going up.

Mitali

Eric, what about health care and insurance, what sort of sequential growth have you seen in? Are you managing to get new clients at better prices?

Eric

Yes we are. We have had 21% growth this quarter year-on-year and one of the real exciting things is that a lot of the old insurance companies that were early adopters of offshoring are actually taking another look at how they do go resourcing and it is opening up opportunities with some of the absolute largest players in the North American markets. We have signed up a large global P&C company for a global BPO deal. We have also opened up three of the largest P&C companies in the US, three of the top 10, just in the last quarter. So even though there were early into offshoring, they are actually taking another look at how they have done it and looking at new ways to implement it, looking for companies that have greater scale than may be who they have held it with initially and looking for people that actually can bring a whole range of solutions and not just application development.

Udayan

Could you give us some examples of healthcare deals particularly which you might have cracked this quarter?

Eric

One that we opened up in healthcare this quarter was at one of existing clients, we competed against two of the multinational competitors and defeated them for a claims integration project. That company has grown rapidly through M&A activity and they had multiplicity of claim systems and we are engaged in an effort to weld together and rationalize all their claim systems in North America and come onto a common platform. So that will be in double digit million dollars over multiple years.

Udayan

How much of this work can you also spin off to Infosys BPO? Are there any synergies between the insurance and healthcare, work that you are getting which you can pass down some of it to Infosys BPO?

Eric

Well the way we do it is that we look at the total solution that the client is looking for and we come in right upfront and together rather than we opening it up and then spinning it off. We are actually going to market together. So in the insurance space, for example, we are working for a client in the employee benefit outsourcing area and we are actually working together where I am doing the data conversion and the technology work to bring on near client base and then the BPO is actually doing all the back office processing through the benefits outsourcing.

Mitali

Shibu from a couple of quarters back to now, are you getting the sense that those concerns or those worries on offshoring have abated a little bit?

Shibulal

Yes, I think during the election period and other times there were some concern about offshoring and outsourcing in the US. It seems to have come down. It is not in the forefront as any of the newspapers. It is not being discussed. There are a number of large deals which are in the pipeline, some of them which we are pursuing. It shows that those concerns have come down.

Udayan

Haven't heard big deals we mentioned for 3-4 months now Shibu. Are they slowing down? Because last quarter we had lot of headline grabbing bid deal news. This quarter has been fairly quiet in comparison.

Shibulal

First of all let me give an update on one of the big deals which we won. Last year we had announced that September 1 st of last year, we had announced the ABN deal, one of the largest deal which we won multiyear global support. We have completed the transition on time within budget, this is a big milestone for us because this is by far the largest transition we have done so far. It is also very important for ABN because it will allow them to get the efficiencies and the productivity increases they were ultimately planning for. Now on the big deals, we pursue about a dozen of them at any point in time and then they vary from probably $50 million up to large deals and we have to qualify them very diligently because these are non-incubation deals and a lot of investment. So even at this point in time we are probably pursuing about a dozen of them.

Mitali

Mohan you want to comment on that? Is that not priority for you right now?

Mohandas Pai

Well I think it is. Because big deals obviously have a place in the market place, but big deals cannot drag the business. Big deals are lumpy, they are very competitive, but big deals are transformational. They indicate your capability to help a customer to transform, but if you keep depending on the big deals and they become a very large part of your revenue source, then obviously the risk in your revenue profile changes. So I think big deals have a role and we have a practice set up specifically for that.

Udayan

Mohan have you re-looked at your recruitment plan and staffing plan over the last three quarters? It seems you have become more aggressive. You are willing to keep a slight higher bench so that you are not caught short. Because last two three quarters you have been adding on significantly more people than last year.

Mohandas Pai

Yes, strategically we want to have a higher bench. We want to work at 76-77% utilization. We are planning much better in advance. We are getting people in through the door. The business requirements have become much more complex and we need more people and we have to take the risk. If you notice that last year, our growth was trimmed because of the fact that we could not get the people in the door in time and we did not have a strategic bench and people were totally stretched out. Remember we have 17 different units today. Each unit works at different level of utilization. Some could be at 85-86%, some could be at may be 72% and people are not fungible. So earlier we were in assumption that people can go from one unit to another when there is a need, but today people have got very specific skills. They are specialists in the particular vertical and their capability to move across is also limited. We also have 17 very strong leaders, and these leaders want to grow their business, and they are not very h appy about letting people go to some other unit. So this complexity has made sure that we have a utilization of 76-77% and that works well for us and if you look at what we have done, last quarter and this quarter both times we have grown double digits, and we could do it only because Shibu drove down the utilization to say we need more people and we are working at safe levels. So we have the flexibility of 4% in a system at any point of time to take advantage of what the market offers and that I think is making sure that we can grow at the maximum rate possible for anybody in this industry.

Udayan

Fair point. We will take another break. When we come back much more from our top management. We have got a few other questions to ask about those big deals and our last shot at the management indeed what they see for the second half of this year, when we come back after this break.

Welcome back. Our last bit with the Infosys top management for this quarter. The markets holding remarkably well, around 12,500, and the Nifty is still holding very solid at 3,600 plus.

Chandra, there have been a few reports floating around that if there is a US investing slowdown and a cut back then may be enterprise solutions, ERP, package implementation could be hit the most. Is that a valid concern? Do you see any signs of that in the foreseeable future?

Kakal

I don't see that as a concern. In the first place while the US spending on the IT sector may be flattish but the package implementation space spending is picking up again. Because to compete in the flat world, they are all spending money on standardizing their ERP systems and they are also spending money on top of their ERP investment in the space of business intelligence, CRM and all of that. So a lot of globalization and then standardization is happening. So I don't see that coming down. Secondly, for us Europe is picking up. Even if the US comes down, Europe is picking up. Ours is a very diversified portfolio that way. So we operate in US and Europe and Asia Pacific and the package implementation dependence on US is lesser compared to Infosys average. So our revenue comes from US about 50%, about 33% from Europe and then about 15% from rest of Asia Pacific and Rest of the World. So it is a very diversified portfolio. Secondly, in terms of industry verticals also we are very diversified. So, if the m anufacturing spending goes up, if retail goes up, wherever it goes up so we will be able to pull out the resource and then add them to that. So it is a very diversified portfolio and I don't see a slowdown in the package implementation space growth.

Mitali

Mohan, we were talking to Nandan about this as well. As we look out into the next few quarters what do you see really is the biggest challenge at this point?

Mohandas Pai

I think the biggest challenge we see is obviously in the HR area. I mean you would expect me to say that because if you look at companies which work like we do in this part of the world and we want to grow and be among the top 2 or top 5 or whatever it is, the biggest challenge is going to be are we able to generate the kind of leaders that we need, are we able to get the domain experts and specialists that we need, are we able to drive productivity and meet the needs of growth? The top 3 companies in this country today are close to 200,000 people and each of them is growing may be 30% plus and they have to add 75,000 to 80,000 people in the next 12 months if the growth projections remain, and even if there is a recession in the west or there is a slowdown in the west, we have seen in the 2004 that the impact is felt the least in the outsourcing industry offshore because here we are able to drive benefits in the form of lower costs and higher productivity in technology which other destinations cannot. So to me, more than the market place at this point of time, it is the HR challenge which is the biggest challenge and those companies which can solve it and do it better are obviously next three years are going to be the winners.

Mitali

Eric for your vertical in specific, what sort of deal sizes are you pitching for at this point and just specific to your business, what is the big challenge?

Eric

The deals size varies. We have actually won one large deal this past quarter. It is under nondisclosure but it is in the life insurance area and the finalist was a multinational and it will be in the $75 million range over 5 years. We have also though come down and we enter strategic new accounts through our solutions program and that might be down to as well as $500,000 to a million dollar. So the new clients that we have added this year which we have added 12 clients this year, are varying from over that extreme. I have three large deals in the pipeline right now, one in each of my three sectors. Like Shibu said we go through a rigorous qualification process and to do a large deal, it has to be strategic. So I have right now just happens so I have one in each sector. Last quarter, I just had the one in insurance that we were chasing and we were fortunate to win it. So we still look at large deals but we are looking to make sure that the relationship that we go into with the client is strategic and no t just coming in as a commodity provider.

Udayan

What do you classify as a large deal, 50 million plus?

Eric

Yeah, $ 50 million plus. And there is an element of re-badging. We have a set of rules for especially large deal you need to get engaged. So if there is a possibility of re-badging exists if you have your SLAs over multiple years that guarantee productivity improvements and a certain deal size, then it qualifies as a large deal.

Udayan

So would you have closure on those three deals either way plus positive or negative in this quarter?

Eric

Two would close in the coming quarter and the third would close in Q4, one way or the other.

Udayan

Shibu likewise for the other 12 that you were talking about, could you give us what is coming as ____.

Shibulal

Actually we completed the ____ deal closer last quarter.

Udayan

Which you were not happy.

Shibulal

Some of them were not under nondisclosure. These deals close in 6-9 months. So these three, if ___ is right I don't expect too many more closures next quarter, it will be further quarters out.

Udayan

But all 12 come up for closure in the next 6-9 months?

Shibulal

Yeah, 6-9 months.

Mitali

Mohan you were talking about Infosys BPO, but one update on the Chinese subsidiary, and how things are shaping up there?

Mohandas Pai

Well I think the Chinese subsidiary the things have been slower than what we wanted primarily because we do see some concerns from clients in the western world about moving work to China on accounts of IP and other areas. We are working with the few clients. Local business is now picking up. We are about 780 people there. We wanted to be higher. So I think we have slowed down a little bit compared to what we wanted to do and it has been a tougher market to crack than we anticipated, but we are strongly committed to being in China. In the BPO area we have won two clients. We have got about 40 people working and we are going to add another 30-40 people to a second client and we are seeing greater traction there. And over a period of time we hope to bring a wider array of services and once this discomfort gets lesser we will see a rapid growth.

Udayan

Mohan just a quick word on SEZ, I mean lot of has been written and spoken about SEZs. You have made an investment. I mean you have already made a commitment to Mahindra but how do things stand with your clients there given though hue and cry?

Mohandas Pai

Well I think we are ahead of our plan. For example, we have got an SEZ sanctioned in Mangalore. We have got an SEZ sanctioned and working in Chandigarh. We have a large SEZ working in Chennai. We have got a SEZ that is sanctioned in Pune. We have got a SEZ sanctioned in Mysore. In other locations we are looking at how to get them sanctioned. SEZ as a concept, is very good for this country. So I think all the SEZs where we are, it is land which is already with the government or lands which is barrens. We don't have this challenge of wet land and crops and all that because we were very clear about what we want to do and the quantum of land that we need is very small. But SEZ concept is good. But I think in the software industry the biggest challenge is what will small players do after 2009? If you are starting a company in your backyard Udayan and you want to hire five people and you want to grow a product and you want to export and you want a million dollars and you are going to pay tax, then you are at disadvantage compared to guys like us, who can invest and who can plan ahead of requirements, and the great majority of the companies in the industry are smaller companies and we have to look after them. We were small company who become big companies and we must not choke them. So the policy requires a relook and we have been working with NASSCOM to ask the government to relook at it, because this is an entrepreneurial driven, individual driven, innovative, creative industry which we have to foster at all cost.

Mitali

Shibu, when you speak to all your clients abroad across geographies really, what is it that they want to hear from you as a management or see more from domestic technology companies even now?

Shibulal

I think they expect us to understand their business better and better and better as times goes by and that is why our transformation stood out. Consulting plus ES story is getting better and better traction. Because today they see us not the transit providers, they see us as business solution creators for them. They expect us to participate in their transformation journey which means that we need to understand their business better and better as times goes by. That comes through in conversations, in our customer satisfaction surveys very clearly that they expect us to be thought leaders in the business space in which they operate.

Udayan

Just one final word Shibu, not asking for any specific guidance or anything like that, but when you did your dipstick survey did you hear anything about beyond two quarters, or was it specifically for this quarter and the next quarter or did any thought come up for 2008 at all?

Shibulal

Actually our dipstick survey was more about next year budgets, 2007 budgets because we were already into the planning stage of 2007-2008. So the survey was more related to how your budgets will do next year? How will your spend go next year and things like that? And the results say that budgets remain flat with some minor increase or small increases. They don't expect too much slowdown in the IT spend and offshore will remain favorable.

Udayan

So you are saying for 2008 you don't have too much reason to be concerned at the end of your dipstick survey?

Shibulal

At this point looking at what all we have completed, we don't see too much concern for 2008.

Udayan

Okay on that note we will say thank you to all of you, always a pleasure, thanks very much, good luck for the rest of the year. That is it from the Infosys top management. It has been a very good quarter. Once again their guidance is robust and as we ended the dipstick survey was for 2008. If you had concerns that may be next year things will slowdown, at this point Infosys says they have no reason to believe so. This is not to say that they are holding out a 50% guidance for FY08. They are simply saying that offshoring will continue to be the robust from their clients from them to hear for 2008 and not the next quarter. On that optimistic note, we shall say goodbye to you from Bangalore but we will be back to place the market from the Infosys headquarters at this time around. So 2:30 on India Market Wrap we will be live from the Infosys headquarters once again. Lets us see if we can pull one member of the management aside in the afternoon as well. See you them.

EX-99.9

EXHIBIT 99.9
Form of AD

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

Audited financial results for the quarter and half-year ended September 30, 2006

(in Rs. crore, except per share data)
	Quarter ended		Half-year ended		Year ended
	September 30,		September 30,		March 31,
	2006	2005	2006	2005	2006
Income from software services and products	3,273	2,170	6,140	4,137	9,028
Software development expenses	1,796	1,167	3,411	2,231	4,887
Gross profit	1,477	1,003	2,729	1,906	4,141
Selling and marketing expenses	180	125	348	244	499
General and administration expenses	243	173	453	310	653
Operating profit before interest and depreciation	1,054	705	1,928	1,352	2,989
Interest	-	-	-	-	-
Depreciation	110	90	207	165	409
Operating profit before tax and exceptional items	944	615	1,721	1,187	2,580
Other income, net	66	45	195	76	144
Provision for investments	-	1	3	1	-
Net profit before tax and exceptional items	1,010	659	1,913	1,262	2,724
Provision for taxation	114	67	218	146	303
Net profit after tax and before exceptional items	896	592	1,695	1,116	2,421
Income from sale of Investments	-	-	6	-	-
Net profit after tax and exceptional items	896	592	1,701	1,116	2,421
Paid-up equity share capital (par value Rs. 5/- each, fully paid) (see note 4)	278	136	278	136	138
Reserves and surplus	8,273	6,269	8,273	6,269	6,759
Earnings per share (par value Rs. 5/- each) *
Before Exceptional items
Basic*	16.15	10.87	30.61	20.54	44.34
Diluted*	15.79	10.57	29.90	19.96	43.10
After Exceptional items
Basic*	16.15	10.87	30.72	20.54	44.34
Diluted*	15.79	10.57	30.01	19.96	43.10
Dividend per share (par value Rs. 5/- each)
Interim dividend*	5.00	3.25	5.00	3.25	3.25
Final dividend*	-	-	-	-	4.25
Silver Jubilee special dividend*	-	-	-	-	15.00
Total dividend*	5.00	3.25	5.00	3.25	22.50
Total dividend percentage (%)*	100	65	100	65	450
Total Public Shareholding # (unaudited)
Number of shares*	37,08,18,552	36,17,96,090	37,08,18,552	36,17,96,090	36,67,83,082
Percentage of shareholding	66.72	66.36	66.72	66.36	66.55

* Adjusted for the issue of bonus shares in the ratio of 1:1 allotted on July 15, 2006 as per Accounting Standard 20 (AS 20) on Earnings Per Share.

# Total public shareholding as defined under the clause 40A of the listing agreement (excludes shares held by founders and American Depository Receipt holders).

Other information:

(in Rs. crore)
	Quarter ended		Half-year ended		Year ended
	September 30,		September 30,		March 31,
	2006	2005	2006	2005	2006
Staff costs	1,574	1,004	2,977	1,918	4,273
Items exceeding 10% of aggregate expenditure	-	-	-	-	-
Details of other income:
Interest on deposits with banks and others	21	23	70	47	132
Dividends on investment in liquid mutual funds	30	18	47	31	71
Miscellaneous income	4	4	14	7	18
Exchange differences	11	-	64	(9)	(77)
Total	66	45	195	76	144

Audited consolidated financial results of Infosys Technologies Limited and its subsidiaries for the quarter and half-year ended September 30, 2006

(in Rs. crore, except per share data)
	Quarter ended		Half-year ended		Year ended
	September 30,		September 30,		March 31,
	2006	2005	2006	2005	2006
Income from software services, products and business process management	3,451	2,294	6,466	4,366	9,521
Software development and business process management expenses	1,833	1,212	3,499	2,316	5,066
Gross profit	1,618	1,082	2,967	2,050	4,455
Selling and marketing expenses	221	149	425	291	600
General and administration expenses	288	199	544	361	764
Operating profit before interest, depreciation, amortization and minority interest	1,109	734	1,998	1,398	3,091
Interest	-	-	-	-	-
Depreciation	122	96	228	176	437
Operating profit after interest, depreciation, amortization and before minority interest	987	638	1,770	1,222	2,654
Other income	66	44	194	72	139
Provision for investments	-	1	3	1	1
Net profit before tax, exceptional items and minority interest	1,053	681	1,961	1,293	2,792
Provision for taxation	123	69	229	150	313
Net profit after tax, before exceptional items and minority interest	930	612	1,732	1,143	2,479
Income from sale of Investments	-	-	6	-	-
Net profit after tax, exceptional items and before minority interest	930	612	1,738	1,143	2,479
Minority interest	1	6	9	6	21
Net profit after tax, exceptional items and minority interest	929	606	1,729	1,137	2,458
Paid-up equity share capital (par value Rs. 5/- each, fully paid) (see note 4)	278	136	278	136	138
Reserves & surplus	8,321	6,323	8,321	6,323	6,828
Preference shares issued by subsidiary	-	-	-	-	-
Earnings per share (par value Rs. 5/- each) *
Before Exceptional items
Basic*	16.75	11.13	31.11	20.94	45.03
Diluted*	16.37	10.82	30.39	20.35	43.78
After Exceptional items
Basic*	16.75	11.13	31.23	20.94	45.03
Diluted*	16.37	10.82	30.50	20.35	43.78
Dividend per share (par value Rs. 5/- each)
Interim dividend*	5.00	3.25	5.00	3.25	3.25
Final dividend*	-	-	-	-	4.25
Silver Jubilee special dividend*	-	-	-	-	15.00
Total dividend*	5.00	3.25	5.00	3.25	22.50
Total dividend percentage (%)*	100	65	100	65	450
Total Public Shareholding # (unaudited)
Number of shares*	37,08,18,552	36,17,96,090	37,08,18,552	36,17,96,090	36,67,83,082
Percentage of shareholding	66.72	66.36	66.72	66.36	66.55

* Adjusted for the issue of bonus shares in the ratio of 1:1 allotted on July 15, 2006 as per Accounting Standard 20 (AS 20) on Earnings Per Share.
# Total public shareholding as defined under the clause 40A of the listing agreement (excludes shares held by founders and American Depository Receipt holders).

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 October 11, 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. An interim dividend of Rs. 5 per share (100% on an equity share of par value of Rs. 5/-) has been declared at the above board meeting. The record date for the payment of the dividend will be October 20, 2006. The interim dividend declared in the previous year was Rs. 3.25 per share (65% on an equity share of par value Rs. 5/-).

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

Nature of complaints received	Opening balance	Additions	Disposal	Closing balance
Dividend / Annual report related	-	274	274	-

4. During the half-year ended September 30, 2006 and 2005 and the year ended March 31, 2006 the company issued 46,75,041; 41,77,926 and 99,68,862 equity shares respectively, pursuant to the exercise of stock options by certain employees under the 1998 and 1999 stock option plans.

5. At the Annual General Meeting held on June 10, 2006, the 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 was July 14, 2006.

6. The final dividend of Rs. 4.25/- per share for fiscal 2006 and the Silver Jubilee special dividend of Rs. 15/- per share was approved by the shareholders at the Annual General Meeting held on June 10, 2006 and the same was paid on June 12, 2006.

7. 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:

8. On August 29, 2006, Progeon Limited was renamed as Infosys BPO Ltd., and on July 21, 2006, Infosys Technologies (Shanghai) Co. Limited was renamed as Infosys Technologies (China) Co. Limited.

9. During the half-year ended September 30, 2006, the company invested US$ 2 million (Rs. 9 crore) as capital and disbursed a loan of US$ 2 million (Rs. 9 crore) to its wholly owned subsidiary, Infosys Technologies (China) Co. Limited. The loan is repayable within five years from the date of disbursement at the discretion of the subsidiary. As of September 30, 2006 the company has invested US$ 7 million (Rs. 32 crore) as equity capital and US$ 5 million (Rs. 24 crore) as loan in the subsidiary.

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

11. 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 Infosys BPO Limited ("Infosys BPO") 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.

Changes to Board of Directors:

12. Sen. 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.

13. Mr. Jeffrey Lehman was appointed as an additional director of the company effective April 14, 2006. The appointment was approved by the shareholders of the company at the Annual General Meeting held on June 10, 2006.

14. Mr. N. R. Narayana Murthy, Chairman and Chief Mentor, turned 60 on August 20, 2006 and as per the service rules of the company, he retired from the services of the company on that date. In this connection the Board, at its meeting held on July 12, 2006, appointed Mr. Murthy as an Additional Director of the company. Further the Board also appointed Mr. Murthy as the Non-Executive Chairman of the Board and Chief Mentor with effect from August 21, 2006.

15. The Board, at its meeting held on July 12, 2006, re-designated Mr. Nandan M. Nilekani as the Chief Executive Officer and Managing Director and Mr. S. Gopalakrishnan as President, Chief Operating Officer and Joint Managing Director with effect from August 21, 2006.

Investments:

16. During the half-year ended September 30, 2006, the company received an amount of US$ 1 million (Rs. 5 crore) being the balance held in escrow account released on fulfillment of the escrow obligations on the sale of investment in Yantra Corporation. The income is disclosed separately as an exceptional item in the profit and loss account.

17. During the half-year ended September 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:

18. 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		Half-year ended		Year ended
	September 30,		September 30,		March 31,
	2006	2005	2006	2005	2006
Revenue by industry segment
Financial services	1,293	819	2,402	1,571	3,427
Manufacturing	485	309	921	585	1,324
Telecom	651	383	1,182	739	1,566
Retail	312	241	605	439	968
Others	710	542	1,356	1,032	2,236
Total	3,451	2,294	6,466	4,366	9,521
Less: Inter-segment revenue	-	-	-	-	-
Net revenue from operations	3,451	2,294	6,466	4,366	9,521
Segment profit before tax, interest, depreciation and amortization:
Financial services	393	255	689	494	1,074
Manufacturing	148	93	279	174	402
Telecom	229	148	417	279	601
Retail	94	76	180	138	311
Others	245	162	433	313	703
Total	1,109	734	1,998	1,398	3,091
Less: Interest	-	-	-	-	-
Other un-allocable expenditure	122	96	228	176	437
(excluding un-allocable income)
Operating profit before interest, depreciation, amortization and minority interest	987	638	1,770	1,222	2,654

Notes on segment information

Principal segments

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

Segmental capital employed

Fixed assets used in the company's business or liabilities contracted have not been identified to any of the reportable segments, as the fixed assets and support services are used interchangeably between segments. Accordingly, no disclosure relating to total segment assets and liabilities has been made.

By order of the Board for Infosys Technologies Limited
Bangalore , India	S. Gopalakrishnan	Nandan M. Nilekani
October 11, 2006	President, Chief Operating Officer and Joint Managing Director	Chief Executive Officer 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 September 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		Half-year ended		Year ended
	September 30,		September 30,		March 31,
	2006	2005	2006	2005 (audited)	2006 (audited)
Revenues	746	524	1,406	1,000	2,152
Cost of revenues	423	297	812	571	1,244
Gross profit	323	227	594	429	908
Net income	199	138	373	260	555
Earnings per American Depositary Share (ADS)
Basic	0.36	0.25	0.68	0.48	1.02
Diluted	0.35	0.25	0.66	0.47	0.99
Total assets	2,220	1,734	2,220	1,734	2,066
Cash and cash equivalents	328	334	328	334	889
Liquid mutual funds	615	531	615	531	170

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

	Quarter ended		Half-year ended		Year ended
	September 30,		September 30,		March 31,
	2006	2005	2006	2005	2006
Consolidated net profit as per Indian GAAP	201	138	376	260	555
Amortization of stock compensation expenses (SFAS 123R)	(1)	-	(2)	-	-
Amortization of intangible assets	(1)	-	(1)	-	-
Consolidated net income as per US GAAP	199	138	373	260	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 segm ent 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 and our Quarterly Report on Form 6-K for the quarter ended June 30, 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
U.S. GAAP Unaudited

Infosys Technologies Limited and subsidiaries

Consolidated Balance Sheets

(Dollars in millions except per share data)

	As of
	March 31, 2006	September 30, 2006
	(1)	(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$889	$328
Investments in liquid mutual fund units	170	615
Trade accounts receivable, net of allowances	361	454
Unbilled revenue	48	74
Prepaid expenses and other current assets	40	49
Deferred tax assets	1	2
Total current assets	1,509	1,522
Property, plant and equipment, net	491	540
Goodwill	8	91
Intangible assets, net		18
Deferred tax assets	13	13
Advance income taxes	18	5
Other assets	27	31
Total Assets	$2,066	$2,220
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable	$3	$4
Income taxes payable		2
Client deposits	2	2
Unearned revenue	44	67
Other accrued liabilities	160	183
Total current liabilities	209	258
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 - 551,109,960 and 555,785,001 as of March 31, 2006 and September 30, 2006, respectively	31	62
Additional paid-in capital	410	477
Accumulated other comprehensive income	9	(49)
Retained earnings	1,387	1,465
Total stockholders' equity	1,837	1,955
Total Liabilities And Stockholders' Equity	$2,066	$2,220

(1) March 31, 2006 balances were obtained from audited financial statements
See accompanying notes to the unaudited consolidated financial statements

Unaudited Consolidated Statements of Income

(Dollars in millions except per share data)

	Three months ended September 30,		Six months ended September 30
	2005	2006	2005 (audited)	2006
Revenues	$524	$746	$1,000	$1,406
Cost of revenues	297	423	571	812
Gross profit	227	323	429	594
Operating Expenses:
Selling and marketing expenses	35	48	67	93
General and administrative expenses	46	63	83	119
Amortization of intangible assets	-	1	-	1
Total operating expenses	81	112	150	213
Operating income	146	211	279	381
Gain on sale of long term investment	-	-	-	1
Other income, net	9	14	16	42
Income before income taxes and minority interest	155	225	295	424
Provision for income taxes	16	26	34	49
Income before minority interest	139	199	261	375
Minority interest	1	-	1	2
Net income	$138	$199	$260	$373
Earnings per equity share
Basic	$0.25	$0.36	$0.48	$0.68
Diluted	$0.25	$0.35	$0.47	$0.66
Weighted average equity shares used in computing earnings per equity share
Basic	541,375,238	551,938,696	540,269,462	550,964,911
Diluted	556,608,116	564,858,570	555,390,222	563,832,673

See accompanying notes to the unaudited consolidated financial statements

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	541,141,098	$31	$266		$33	$923	$1,253
Common stock issued (audited)	4,177,926		57				57
Cash dividends (audited)						(46)	(46)
Change in proportionate share of subsidiary resulting from issuance of stock by subsidiary (audited)			12				12
Comprehensive income (audited)
Net income (audited)				$ 260		260	260
Other comprehensive income (audited)
Unrealized gain on mutual fund investments, net of taxes (audited)				1	1		1
Translation adjustment (audited)				(9)	(9)		(9)
Comprehensive income (audited)				$252
Balance as of September 30, 2005	545,319,024	$31	$335		$25	$1,137	$1,528
Balance as of March 31, 2006	551,109,960	$31	$410		$9	$1,387	$1,837
Common stock issued	4,675,041	1	62				63
Cash dividends						(265)	(265)
Amortization of stock compensation expenses			2				2
Income tax benefit arising on exercise of stock options			3				3
Stock split effected in the form of a stock dividend		30				(30)
Comprehensive income
Net income				$373		373	373
Other comprehensive income
Translation adjustment				(58)	(58)		(58)
Comprehensive income				$315
Balance as of September 30, 2006	555,785,001	$62	$477		$(49)	$1,465	$1,955

See accompanying notes to the unaudited consolidated financial statements

Consolidated Statements of Cash Flows

	(Dollars in millions)
	Six months ended September 30,
	2005	2006 (unaudited)
OPERATING ACTIVITIES:
Net income	$260	$373
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	40	50
Minority interest		2
Amortization of stock compensation expenses		2
Deferred taxes	(2)	(3)
Others		(2)
Changes in assets and liabilities
Trade accounts receivable	(3)	(104)
Prepaid expenses and other current assets	(1)	(10)
Unbilled revenue	(9)	(27)
Accounts payable		1
Income taxes	(2)	16
Client deposits	(4)
Unearned revenue	20	24
Other accrued liabilities	5	27
Net cash provided by operating activities	304	349
Investing Activities:
Expenditure on property, plant and equipment	(127)	(114)
Loans to employees	(1)	2
Non-current deposits placed with corporations	(9)	(11)
Withdrawal of non-current deposits placed with corporations	1	2
Acquisition of minority interest in subsidiary		(116)
Investment in liquid mutual fund units	(371)	(651)
Redemption of liquid mutual fund units	115	201
Others		1
Net cash used in investing activities	(392)	(686)
Financing Activities:
Proceeds from issuance of common stock on exercise of employee stock options	57	63
Payment of dividends	(46)	(265)
Others		2
Net cash provided by / (used in) financing activities	11	(200)
Effect of exchange rate changes on cash	1	(24)
Net decrease in cash and cash equivalents during the period	(76)	(561)
Cash and cash equivalents at the beginning of the period	410	889
Cash and cash equivalents at the end of the period	$334	$328
Supplementary information:
Cash paid towards taxes	$38	$37

See accompanying notes to the unaudited consolidated financial statements

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, Infosys BPO Limited (Infosys BPO), formerly Progeon limited and wholly-owned subsidiaries Infosys Technologies (Australia) Pty. Limited (Infosys Australia), Infosys Technologies ( China) Co. Limited (Infosys China), formerly Infosys Technologies (Shanghai) Co. Limited 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 e stimates 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 unearne d 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 arrange ment 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.

The company accounts for volume discounts and pricing incentives to customers using the guidance in EITF Issue 01-09, Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor's Products). The discount terms in the company's arrangements with customers generally entitle the customer to discounts if the customer completes a specified cumulative level of revenue transactions. In some arrangements, the level of discount varies with increases in the levels of revenue transactions. The discounts are passed on to the customer either as check payments or as a reduction of payments due from the customer. The company recognizes discount obligations as a reduction of revenue based on the ratable allocation of the discount to each of the underlying revenue transactions that result in progress by the customer toward earning the discount. The company recognizes the liability based on its estimate of the customer's future purchases. Also, when the level of discount varies with in creases in levels of revenue transactions, the company recognizes the liability based on its estimate of the customer's future purchases. If the company cannot reasonably estimate the customer's future purchases, then the liability is recorded based on the maximum potential level of discount. The company recognizes changes in the estimated amount of obligations for discounts using a cumulative catch-up adjustment. Furthermore, the company does not recognize any revenue up front for breakages immediately on the inception of an arrangement.

1.5 Cash and cash equivalents

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

1.6 Investments

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

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

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

1.7 Property, plant and equipment

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

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

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

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

1.8 Business combinations

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

1.9 Goodwill

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

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 wher e 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 September 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 as 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 Infosys BPO, contributions are made to the Infosys BPO's 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 Infosys BPO Ltd are also eligible for superannuation benefit. Infosys BPO makes monthly provisions under the superannuation plan based on a specified percentage of each covered employee's salary. Infosys BPO 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 trus ts.

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 Infosys BPO, eligible employees receive benefits from a provident fund, which is a defined contribution plan. Both the employee and Infosys BPO 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 Stockholders' equity

Infosys has only one class of capital stock referred to as equity shares. 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. The change in the capital structure of the company has been given retroactive effect in the balance sheet as of September 30, 2006. The computations of basic and diluted EPS have also been adjusted retroactively for all periods presented to reflect the change in capital structure. All references in these financial statements to number of shares, per share amounts and exercise price of stock option grants are retroactively restated to reflect stock splits made.

1.20 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 - Transition and Disclosure, an amendment of FASB Statement No. 123. All stock options issued to date have been accounted as a fixed stock option plan.

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)

Six months ended September 30, 2005
Net income, as reported	$260
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects	(7)
Pro forma net income	$253
Earnings per share:
Basic - as reported	$0.48
Basic - pro forma	$0.47
Diluted - as reported	$0.47
Diluted - pro forma	$0.46

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 $2 million during the six months ended September 30, 2006.

1.21 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.

1.22 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 September 30, 2006, net of allowance for doubtful accounts of $2 million and $5 million, amounted to $361 million and $454 million. The age profile of trade accounts receivable, net of allowances, is given below.

In %

	As of
	March 31, 2006	September 30, 2006
Period (in days)
0 - 30	60.9	80.2
31 - 60	31.2	6.8
61 - 90	3.5	8.9
More than 90	4.4	4.1
	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 $25 million were outstanding as of March 31, 2006 and September 30, 2006.

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

(Dollars in millions)

Repayment in the 12 months ending September 30,	Repayment
2007	$20
2008	3
2009	1
2010	1
2011	-
	$25

The estimated fair values of the loan to employee's receivables amounted to $24 million as of March 31, 2006 and $22 million as of September 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 six months ended September 30, 2006 resulting in a gain of $1 million for the period.

Other income, net, consists of the following:

(Dollars in millions)

	Six months ended September 30,
	2005	2006
Interest income	$11	$16
Income from mutual fund investments	7	11
Foreign exchange gains/(losses), net	(2)	14
Others	-	1
	$16	$42

2.4 Income taxes

The provision for income taxes in the income statement comprises:

(Dollars in millions)

	Six months ended September 30,
	2005	2006
Current taxes
Domestic taxes	$13	$15
Foreign taxes	23	37
	36	52
Deferred taxes
Domestic taxes	(1)	(1)
Foreign taxes	(1)	(2)
	(2)	(3)
Aggregate taxes	$34	$49

All components of the aggregate taxes of $34 million and $49 million for the six months ended September 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	September 30, 2006
Deferred tax assets
Property, plant and equipment	$13	$15
Investments	1	1
Compensated absences and other accruals	1	2
	15	18
Less: Valuation allowance	(1)	(1)
	14	17
Deferred tax liabilities
Intangible asset	-	(2)
	-	(2)
Net deferred tax assets	$14	$15

In assessing the realisability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. Management considers the scheduled reversals of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes that it is more likely than not the company will realize the benefits of those deductible differences, net of the existing valuation allowance at September 30, 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 designa ted 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. As of September 30, 2006, 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:

	Six months ended September 30,
	2005	2006
Basic earnings per equity share - weighted average number of common shares outstanding excluding unallocated shares of ESOP	540,269,462	550,964,911
Effect of dilutive common equivalent shares - stock options outstanding	15,120,760	12,867,762
Diluted earnings per equity share - weighted average number of common shares and common equivalent shares outstanding	555,390,222	563,832,673

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 September 30, 2006, Infosys held foreign exchange forward contracts of $ 98 million and United Kingdom Pound Sterling
1 million. The foreign exchange forward contracts mature between 1 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 September 30, 2006, the company held range barrier options of $240 million, Euro 10 million and United Kingdom Pound Sterling 11 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 revenue and expenditure in individual segments, and are as set out in the summary of significant accounting policies.

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

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

Six months ended September 30, 2005			(Dollars in millions)
	Financial services	Manufacturing	Telecom	Retail	Others	Total
Revenues	$360	$134	$169	$101	$236	$1,000
Identifiable operating expenses	151	60	64	42	97	414
Allocated expenses	97	34	41	27	69	268
Segmental operating income	112	40	64	32	70	318
Unallocable expenses						39
Operating income						279
Other income, net						16
Income before income taxes and minority interest						295
Provision for income taxes						34
Income before minority interest						261
Minority Interest						1
Net income						$260

Six months ended September 30, 2006
	Financial services	Manufacturing	Telecom	Retail	Others	Total
Revenues	$520	$200	$258	$132	$296	$1,406
Identifiable operating expenses	229	85	97	57	120	588
Allocated expenses	143	55	70	36	82	386
Segmental operating income	148	60	91	39	94	432
Unallocable expenses						51
Operating income						381
Gain on sale of long term investment						1
Other income, net						42
Income before income taxes and minority interest						424
Provision for income taxes						49
Income before minority interest						375
Minority interest						2
Net income						$373

2.7.2 Geographic segments

(Dollars in millions)

Six months ended September 30, 2005
	North America	Europe	India	Rest of the World	Total
Revenues	$646	$238	$19	$97	$1,000
Identifiable operating expenses	272	96	9	37	414
Allocated expenses	168	58	5	37	268
Segmental operating income	206	84	5	23	318
Unallocable expenses					39
Operating income					279
Other income, net					16
Income before income taxes and minority interest					295
Provision for income taxes					34
Income before minority interest					261
Minority interest					1
Net income					$260

Six months ended September 30, 2006
	North America	Europe	India	Rest of the World	Total
Revenues	$897	$366	$21	$122	$1,406
Identifiable operating expenses	391	145	7	45	588
Allocated expenses	247	100	5	34	386
Segmental operating income	259	121	9	43	432
Unallocable expenses					51
Operating income					381
Gain on sale of long term investment					1
Other income, net					42
Income before income taxes and minority interest					424
Provision for income taxes					49
Income before minority interest					375
Minority interest					2
Net income					$373

2.7.3 Significant clients

No client individually accounted for more than 10% of the revenues in the six months ended September 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 Tax contingencies

During fiscal 2006, the company received a demand from the Indian tax authorities for payment of additional tax of $30 million, including interest of $7 million, upon completion of their tax review for fiscal 2002 and fiscal 2003. The tax demand is mainly on account of disallowance of a portion of the deduction to its taxable income under Indian law claimed by the company under Section 10A of the Income-tax Act. Deduction under Section 10A of the Income-tax Act is determined by the ratio of 'Export Turnover' to 'Total Turnover'. The disallowance arose from certain expenses incurred in foreign currency being reduced from Export Turnover but not also reduced from Total Turnover.

The company is contesting the demand and management, including its tax advisers, 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. For the demand pertaining to fiscal 2002 and fiscal 2003, the position of the Company has been substantially upheld by the appellate authority.

2.10 Acquisition of minority interest in Infosys BPO

On June 30, 2006, Infosys acquired 8,750,000 equity shares of Infosys BPO Limited from Citicorp International Finance Corporation for a consideration of $116 million. As of September 30, 2006, Infosys holds 96.70% of the outstanding equity shares of Infosys BPO 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.

EX-99.11

EXHIBIT 99.11
Indian GAAP Standalone

AUDITORS' REPORT TO THE MEMBERS OF INFOSYS TECHNOLOGIES LIMITED

We have audited the attached Balance Sheet of Infosys Technologies Limited (the Company) as at 30 September 2006, the Profit and Loss Account of the Company for the quarter and half year ended on that date and Cash Flow Statement of the Company for the half year ended on that date, annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

We report that:

(a)   we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;

(b)   in our opinion, proper books of account have been kept by the Company so far as appears from our examination of those books;

(c)   the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account;

(d)   in our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report comply with the Accounting Standards issued by the Institute of Chartered Accountants of India,
        to the extent applicable; and

(e)   in our opinion and to the best of our information and according to the explanations given to us, the said accounts give a true and fair view in conformity with the accounting principles generally accepted in India:

(i)   in the case of the Balance Sheet, of the state of affairs of the Company as at 30 September 2006;
(ii)   in the case of the Profit and Loss Account, of the profit of the Company for the quarter and half year ended on that date; and
(iii)   in the case of the Cash Flow Statement, of the cash flows of the Company for the half year ended on that date.

for BSR & Co.
Chartered Accountants

Natrajan Ramkrishna
Partner
Membership No. 32815

Bangalore
11 October 2006

in Rs. crore
Balance Sheet as at	Schedule	September 30, 2006	March 31, 2006
SOURCES OF FUNDS
SHAREHOLDERS' FUNDS
Share capital	1	278	138
Reserves and surplus	2	8,273	6,759
		8,551	6,897
APPLICATION OF FUNDS
FIXED ASSETS	3
Original cost		3,417	2,837
Less: Accumulated depreciation		1,481	1,275
Net book value		1,936	1,562
Add: Capital work-in-progress		481	571
		2,417	2,133
INVESTMENTS	4	3,442	876
DEFERRED TAX ASSETS	5	68	56
CURRENT ASSETS, LOANS AND ADVANCES
Sundry debtors	6	1,957	1,518
Cash and bank balances	7	804	3,279
Loans and advances	8	1,478	1,252
		4,239	6,049
LESS: CURRENT LIABILITIES AND PROVISIONS
Current liabilities	9	1,000	808
Provisions	10	615	1,409
NET CURRENT ASSETS		2,624	3,832
		8,551	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

Natrajan Ramkrishna	N. R. Narayana Murthy	Nandan M. Nilekani	S. Gopalakrishnan	Deepak M. Satwalekar
Partner	Chairman	Chief Executive Officer	President,	Director
Membership No. 32815	and Chief Mentor	and Managing Director	Chief Operating Officer and
			Joint 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.
October 11, 2006	Company Secretary

in Rs. crore, except per share data
Profit and Loss Account for the		Quarter ended		Half-year ended
	Schedule	September 30,		September 30,
		2006	2005	2006	2005
Income from software services and products		3,273	2,170	6,140	4,137
Software development expenses	11	1,796	1,167	3,411	2,231
GROSS PROFIT		1,477	1,003	2,729	1,906
Selling and marketing expenses	12	180	125	348	244
General and administration expenses	13	243	173	453	310
		423	298	801	554
OPERATING PROFIT BEFORE INTEREST AND DEPRECIATION		1,054	705	1,928	1,352
Interest		-	-	-	-
Depreciation		110	90	207	165
OPERATING PROFIT BEFORE TAX AND EXCEPTIONAL ITEMS		944	615	1,721	1,187
Other income, net	14	66	45	195	76
Provision for investments		-	1	3	1
NET PROFIT BEFORE TAX AND EXCEPTIONAL ITEMS		1,010	659	1,913	1,262
Provision for taxation	15	114	67	218	146
NET PROFIT AFTER TAX BEFORE EXCEPTIONAL ITEMS		896	592	1,695	1,116
Income on sale of Investments, net of taxes (refer to note 22.2.21)		-	-	6	-
NET PROFIT AFTER TAX AND EXCEPTIONAL ITEMS		896	592	1,701	1,116
Balance Brought Forward		2,995	1,952	2,195	1,428
Less: Residual dividend paid		-	-	4	-
Dividend tax on the above		-	-	1	-
		2,995	1,952	2,190	1,428
AMOUNT AVAILABLE FOR APPROPRIATION		3,891	2,544	3,891	2,544
Dividend
Interim		278	177	278	177
Final		-	-	-	-
Total dividend		278	177	278	177
Dividend tax		39	25	39	25
Amount transferred to general reserve		-	-	-	-
Balance in profit and loss account		3,574	2,342	3,574	2,342
		3,891	2,544	3,891	2,544
EARNINGS PER SHARE *
Equity shares of par value Rs. 5/- each
Before exceptional Items
Basic		16.15	10.87	30.61	20.54
Diluted		15.79	10.57	29.90	19.96
After exceptional Items
Basic		16.15	10.87	30.72	20.54
Diluted		15.79	10.57	30.01	19.96
Number of shares used in computing earnings per share
Basic		55,47,72,296	54,42,02,438	55,37,98,511	54,30,96,662
Diluted		56,77,46,039	56,00,61,300	56,69,42,396	55,88,90,590
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

Natrajan Ramkrishna	N. R. Narayana Murthy	Nandan M. Nilekani	S. Gopalakrishnan	Deepak M. Satwalekar
Partner	Chairman	Chief Executive Officer	President,	Director
Membership No. 32815	and Chief Mentor	and Managing Director	Chief Operating Officer and
			Joint 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.
October 11, 2006	Company Secretary

in Rs. crore
Cash Flow Statement for the		Half-year ended
		September 30,
	Schedule	2006	2005
CASH FLOWS FROM OPERATING ACTIVITIES
Net profit before tax and exceptional items		1,913	1,262
Adjustments to reconcile net profit before tax to cash provided by operating activities
(Profit)/ loss on sale of fixed assets		-	-
Depreciation		207	165
Interest and dividend income		(117)	(78)
Profit on sale of liquid mutual funds		(6)	-
Provision for investments		3	1
Effect of exchange differences on translation of foreign currency cash and cash equivalents		25	(7)
Changes in current assets and liabilities
Sundry debtors		(439)	9
Loans and advances	16	(211)	34
Current liabilities and provisions	17	198	57
Income taxes paid	18	(163)	(161)
NET CASH GENERATED BY OPERATING ACTIVITIES		1,410	1,282
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of fixed assets and change in capital work-in-progress	19	(491)	(539)
Proceeds on disposal of fixed assets		-	-
Investment in subsidiaries (refer to note 22.2.16)		(553)	(22)
Investments in securities (refer to note 22.2.16)	20	(2,010)	(1,088)
Interest and dividend income		117	78
Cash flow from investing activities before exceptional items		(2,937)	(1,571)
Proceeds on sale of Long Term Investments (Net of taxes)		6	-
NET CASH USED IN INVESTING ACTIVITIES		(2,931)	(1,571)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of share capital on exercise of stock options		288	249
Dividends paid during the period		(1,065)	(176)
Dividend Tax paid during the period		(150)	(25)
NET CASH USED IN FINANCING ACTIVITIES		(927)	48
Effect of exchange differences on translation of foreign currency cash and cash equivalents		(25)	7
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS		(2,473)	(234)
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	1,306	1,449
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

Natrajan Ramkrishna	N. R. Narayana Murthy	Nandan M. Nilekani	S. Gopalakrishnan	Deepak M. Satwalekar
Partner	Chairman	Chief Executive Officer	President,	Director
Membership No. 32815	and Chief Mentor	and Managing Director	Chief Operating Officer and
			Joint 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.
October 11, 2006	Company Secretary

in Rs. crore, except as otherwise stated
Schedules to the Balance Sheet as at		September 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*	278	138
	55,57,85,001 ( 27,55,54,980) equity shares fully paid up
	[Of the above, 53,53,35,478 ( 25,84,92,302) equity shares, fully paid up have been issued as bonus shares by capitalization of the general reserve]
		278	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
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	286	571
	Income tax benefit arising from exercise of stock options	-	72
		1,829	1,543
	General reserve - As at April 1,	3,015	2,773
	Less: Gratuity transitional liability (refer to note 22.2.22)	13	-
	Less: Capitalized on issue of bonus shares	138	-
	Add: Transferred from the Profit and Loss Account	-	242
		2,864	3,015
	Balance in Profit and Loss Account	3,574	2,195
		8,273	6,759

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	September 30,	April 1,	Period	Retirement	September 30,	September 30,	March 31,
		2006			2006	2006			2006	2006	2006
	Land : free-hold *	34	4	-	38	-	-	-	-	38	34
	leasehold	104	16	4	116	-	-	-	-	116	104
	Buildings*	1,022	276	-	1,298	179	38	-	217	1,081	843
	Plant and machinery*	559	106	-	665	305	47	-	352	313	254
	Computer equipment*	700	121	1	820	516	93	1	608	212	184
	Furniture and fixtures*	417	61	-	478	275	28	-	303	175	142
	Vehicles	1	1	-	2	-	1	-	1	1	1
		2,837	585	5	3,417	1,275	207	1	1,481	1,936	1,562
	Previous Period	2,183	462	6	2,639	1,006	165	6	1,165	1,474
	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 Infosys BPO , a subsidiary. Please refer to note 22.2.6 for details

in Rs. crore
Schedules to the Balance Sheet as at		September 30, 2006	March 31, 2006
4	INVESTMENTS
	Trade (unquoted) - at cost
	Long- term investments
	In subsidiaries
	Infosys BPO Ltd, India
	3,32,49,993 (2,44,99,993) equity shares of Rs. 10/- each, fully paid	555	25
	Infosys Technologies ( China) Co. Limited	32	23
	Infosys Technologies ( Australia) Pty Limited
	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
		743	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 *	2,699	684
		3,442	876
	Aggregate amount of unquoted investments	3,442	876
	* Refer to note 22.2.16 for details of investments
5	DEFERRED TAX ASSETS
	Fixed assets	65	54
	Sundry debtors	3	2
		68	56
6	SUNDRY DEBTORS*
	Debts outstanding for a period exceeding six months
	Unsecured
	considered doubtful	21	8
	Other debts
	Unsecured
	considered good	1,957	1,518
	considered doubtful	1	2
		1,979	1,528
	Less: Provision for doubtful debts	22	10
		1,957	1,518
	* Includes dues from companies where directors are interested	3	2
7	CASH AND BANK BALANCES
	Cash on hand	-	-
	Balances with scheduled banks in Indian Rupees
	In current accounts *	171	169
	In deposit accounts	348	2,735
	Balances with non-scheduled banks in foreign currency **
	In current accounts	285	375
		804	3,279
	*Includes balance in unclaimed dividend account	3	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)	24	14
	Advances
	prepaid expenses	28	27
	for supply of goods and rendering of services *	16	9
	advance to gratuity trust	8	-
	others	24	14
		100	64
	Unbilled revenues	330	203
	Advance income tax	293	267
	Loans and advances to employees
	housing and other loans	43	49
	salary advances	55	61
	Electricity and other deposits	18	16
	Rental deposits	12	12
	Deposits with financial institution and body corporate (refer to note 22.2.14)	623	580
	Mark to Market on options/ forward contracts	4	-
		1,478	1,252
	Unsecured, considered doubtful
	Loans and advances to employees	1	-
		1,479	1,252
	Less: Provision for doubtful loans and advances to employees	1	-
		1,478	1,252
	* Includes advances to subsidiary company	2	6
9	CURRENT LIABILITIES
	Sundry creditors
	goods and services	13	6
	accrued salaries and benefits
	salaries	13	6
	bonus and incentives	184	233
	unavailed leave	96	80
	for other liabilities
	provision for expenses	220	166
	retention monies	12	13
	withholding and other taxes payable	127	82
	for purchase of intellectual property rights	20	19
	Mark to market on options/ forward contracts	-	2
	others	4	3
		689	610
	Advances received from clients	8	7
	Unearned revenue	300	188
	Unclaimed dividend	3	3
		1,000	808
10	PROVISIONS
	Proposed dividend	278	1,061
	Provision for
	tax on dividend	39	149
	income taxes *	280	187
	post-sales client support and warranties	18	12
		615	1,409
	* Refer to note 22.2.12

in Rs. crore
Schedules to Profit and Loss Account for the		Quarter ended		Half-year ended
		September 30,		September 30,
		2006	2005	2006	2005
11	SOFTWARE DEVELOPMENT EXPENSES
	Salaries and bonus including overseas staff expenses	1,343	865	2,543	1,645
	Overseas group health insurance	23	12	40	23
	Contribution to provident and other funds	38	21	68	40
	Staff welfare	10	6	18	11
	Technical sub-contractors - subsidiaries	165	94	287	174
	Technical sub-contractors - others	54	24	97	55
	Overseas travel expenses	65	57	135	111
	Visa charges and others	15	29	64	47
	Software packages
	for own use	49	33	83	65
	for service delivery to clients	1	8	15	18
	Communication expenses	13	12	26	25
	Computer maintenance	5	3	10	7
	Consumables	7	4	12	7
	Rent	4	3	7	6
	Provision for post-sales client support and warranties	4	(4)	6	(3)
		1,796	1,167	3,411	2,231
12	SELLING AND MARKETING EXPENSES
	Salaries and bonus including overseas staff expenses	111	68	217	135
	Overseas group health insurance	1	1	1	2
	Contribution to provident and other funds	-	-	1	-
	Staff welfare	1	-	1	-
	Overseas travel expenses	21	16	45	29
	Visa charges and others	1	1	1	4
	Traveling and conveyance	1	1	2	2
	Commission and earnout charges	11	8	19	18
	Brand building	15	12	27	22
	Professional charges	6	10	11	15
	Rent	4	3	8	7
	Marketing expenses	5	3	8	6
	Telephone charges	1	1	2	2
	Communication expenses	-	-	-	-
	Printing and stationery	-	1	1	1
	Advertisements	1	-	2	1
	Office maintenance	-	-	-	-
	Sales promotion expenses	1	-	1	-
	Consumables	-	-	-	-
	Software packages
	for own use	-	-	1	-
	Computer maintenance	-	-	-	-
	Power and fuel	-	-	-	-
	Insurance charges	-	-	-	-
	Rates and taxes	-	-	-	-
	Bank charges and commission	-	-	-	-
	Miscellaneous expenses	-	-	-	-
		180	125	348	244
13	GENERAL AND ADMINISTRATION EXPENSES
	Salaries and bonus including overseas staff expenses	44	29	82	58
	Overseas group health insurance	-	-	-	-
	Contribution to provident and other funds	3	2	6	4
	Professional charges	38	25	66	40
	Telephone charges	28	21	53	36
	Power and fuel	23	16	44	30
	Traveling and conveyance	21	16	40	29
	Overseas travel expenses	6	2	9	6
	Visa charges and others	-	1	1	2
	Office maintenance	25	16	46	29
	Guest house maintenance*	-	-	1	1
	Insurance charges	7	5	12	11
	Printing and stationery	3	2	6	5
	Donations	5	5	9	8
	Rent	4	2	8	5
	Advertisements	3	4	3	7
	Repairs to building	7	5	10	8
	Repairs to plant and machinery	3	3	6	5
	Rates and taxes	3	3	12	5
	Professional membership and seminar participation fees	3	2	4	4
	Postage and courier	2	1	5	3
	Books and periodicals	1	1	2	2
	Provision for bad and doubtful debts	8	9	19	9
	Provision for doubtful loans and advances	-	-	-	-
	Commission to non-whole time directors	1	1	1	1
	Freight charges	-	-	-	-
	Bank charges and commission	1	1	1	1
	Research grants	3	-	5	-
	Auditor's remuneration
	statutory audit fees	-	-	-	-
	certification charges	-	-	-	-
	others	-	-	-	-
	out-of-pocket expenses	-	-	-	-
	Miscellaneous expenses (refer to note 22.2.15)	1	1	2	1
		243	173	453	310
	*For non training purposes
14	OTHER INCOME, NET
	Interest received on deposits with banks and others*	21	23	70	47
	Dividend received on investment in liquid mutual funds (non-trade unquoted)	30	18	47	31
	Miscellaneous income (refer to note 22.2.15)	4	4	14	7
	Exchange differences	11	-	64	(9)
		66	45	195	76
	*Tax deducted at source	5	5	18	10
15	PROVISION FOR TAXATION
	Income taxes*	119	70	230	152
	Deferred taxes	(5)	(3)	(12)	(6)
		114	67	218	146
	*Refer to note 22.2.12

in Rs. crore
Schedules to Cash Flow Statements for the		Half-year ended
		September 30,
		2006	2005
16	CHANGE IN LOANS AND ADVANCES
	As per the Balance Sheet*	1,478	1,007
	Add: Gratutity transitional liability (refer to Note 22.2.22)	13	-
	Less: Deposits with financial institutions and body corporates
	included in cash and cash equivalents	(502)	(157)
	Advance income taxes separately considered	(293)	(493)
		696	357
	Less: Opening balance considered	(485)	(391)
		211	(34)
	* includes loans to subsidiary
17	CHANGE IN CURRENT LIABILITIES AND PROVISIONS
	As per the Balance Sheet	1,615	1,485
	Less: Provisions separately considered in the cash flow statement
	Income taxes	(280)	(627)
	Dividends	(278)	(177)
	Dividend tax	(39)	(25)
		1,018	656
	Less: Opening balance considered	(820)	(599)
		198	57
18	INCOME TAXES PAID
	Charge as per the Profit and Loss Account	218	146
	Add: Increase in advance income taxes	26	90
	Increase/(Decrease) in deferred taxes	12	6
	Less: (Increase)/Decrease in income tax provision	(93)	(81)
		163	161
19	PURCHASE OF FIXED ASSETS AND CHANGE IN CAPITAL
	WORK-IN-PROGRESS
	As per the Balance Sheet*	581	462
	Less: Opening Capital work-in-progress	(571)	(318)
	Add: Closing Capital work-in-progress	481	395
		491	539
	* Excludes Rs 4 crore (Rs 4 crore) towards movement of land from Leasehold to Freehold
20	INVESTMENTS IN SECURITIES *
	As per the Balance Sheet	3,442	2,438
	Add: Provisions on investments	3	1
		3,445	2,439
	Less: Investment in subsidiaries	(553)	(22)
	Profit on sale of liquid mutual funds	(6)	-
	Opening balance considered	(876)	(1,329)
		2,010	1,088
	* 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	804	1,292
	Add: Deposits with financial institutions, included herein	502	157
		1,306	1,449

Schedules to the Financial Statements for the quarter and half-year ended September 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, Infosys BPO Limited, India ("Infosys BPO") formerly known as Progeon Limited, and wholly owned subsidiaries, Infosys Technologies (Australia) Pty. Limited ("Infosys Australia"), Infosys Technologies (China) Co. Limited ("Infosys China"), formerly known as Infosys Technologies (Shanghai) Co. Limited 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 completion method.

Profit on sale of investments is recorded on transfer of title from the company and is determined as the difference between the sales price and the then carrying value of the investment. Lease rentals are recognized ratably on a straight line basis over the lease term. Interest is recognized using the time-proportion method, based on rates implicit in the transaction. Dividend income is recognized when the company's right to receive dividend is established.

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

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

22.1.6 Depreciation and amortization
Depreciation on fixed assets is applied on the straight-line basis over the useful lives of assets estimated by the Management. Depreciation for assets purchased / sold during a period is proportionately charged. Individual low cost assets (acquired for less than Rs.5,000/-) are 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 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 company considers the net profit after tax and includes the post tax effect of any extra-ordinary/exceptional item. The number of shares used in computing basic earnings per share is the weighted average number of shares outstanding during the period. The number of shares used in computing diluted earnings per share comprises the weighted average shares considered for deriving basic earnings per share, and also the weighted average number of equity shares that could have been issued on the conversion of all dilutive potential equity shares. The diluted potential equity shares are adjusted for the proceeds receivable, had the shares been actually issued at fair value (i.e. the average market value of the outstanding shares). Dilutive potential equity shares are deemed converted as of the beginning of the period, unless issued at a later date. The number of shares and potentially dilutive equity shares are adjusted for any stock splits and bonus shares issues effected prior to the approval of the financial statements by the board of directors.

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

22.1.14. Cash flow statement
Cash flows are reported using the indirect method, whereby net profit before tax is adjusted for the effects of transactions of a non-cash nature and any deferrals or accruals of past or future cash receipts or payments. The cash flows from regular revenue generating, investing and financing activities of the company are segregated.

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 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		Half-year ended
Particulars	September 30,		September 30,
	2006	2005	2006	2005
Salaries and bonus including overseas staff expenses	1,498	962	2,842	1,838
Contribution to provident and other funds	41	23	75	44
Staff welfare
Staff welfare	11	6	19	11
Group health insurance and others	-	-	-	-
Overseas group health insurance	24	13	41	25
Overseas travel expenses	92	75	189	146
Visa charges and others	16	31	66	53
Traveling and conveyance	22	17	42	31
Technical sub-contractors - subsidiaries	165	94	287	174
Technical sub-contractors - others	54	24	97	55
Software packages
for own use	49	33	84	65
for service delivery to clients	1	8	15	18
Professional charges	44	35	77	55
Telephone charges	29	22	55	38
Communication expenses	13	12	26	25
Power and fuel	23	16	44	30
Office maintenance	25	16	46	29
Guest house maintenance*	-	-	1	1
Commission and earnout charges	11	8	19	18
Brand building	15	12	27	22
Rent	12	8	23	18
Insurance charges	7	5	12	11
Computer maintenance	5	3	10	7
Printing and stationery	3	3	7	6
Consumables	7	4	12	7
Donations	5	5	9	8
Advertisements	4	4	5	8
Marketing expenses	5	3	8	6
Other miscellaneous expenses	-	-	-	-
Repairs to building	7	5	10	8
Repairs to plant and machinery	3	3	6	5
Rates and taxes	3	3	12	5
Professional membership and seminar participation fees	3	2	4	4
Postage and courier	2	1	5	3
Provision for post-sales client support and warranties	4	(4)	6	(3)
Books and periodicals	1	1	2	2
Provision for bad and doubtful debts	8	9	19	9
Provision for doubtful loans and advances	-	-	-	-
Commission to non-whole time directors	1	1	1	1
Sales promotion expenses	1	-	1	-
Freight charges	-	-	-	-
Bank charges and commission	1	1	1	1
Auditor's remuneration
statutory audit fees	-	-	-	-
certification charges	-	-	-	-
others	-	-	-	-
out-of-pocket expenses	-	-	-	-
Research grants	3	-	5	-
Miscellaneous expenses (refer to note 22.2.15)	1	1	2	1
	2,219	1,465	4,212	2,785
Fringe Benefit Tax (FBT) in India included in the above	4	3	8	6
*for non training purposes

22.2.2. Capital commitments and contingent liabilities

in Rs. Crore
	As at
Particulars	September 30, 2006	March 31, 2006
Estimated amount of unexecuted capital contracts
(net of advances and deposits)	514	509
Outstanding guarantees and counter guarantees to various banks, in respect of the guarantees given by those banks in favour of various government authorities and others	25	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 $ 80,000,000	US $ 100,000,000
(Equivalent approximate in Rs. crore)	368	445
Range barrier options in US $	US $ 240,000,000	US $ 210,000,000
(Equivalent approximate in Rs. crore)	1,103	934
Range barrier options in Euro	Euro 10,000,000	Euro 3,000,000
(Equivalent approximate in Rs. crore)	58	16
Range barrier options in GBP	GBP 10,000,000	GBP 3,000,000
(Equivalent approximate in Rs. crore)	86	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.

"The company received the order of the appellate authority, the Commissioner of Income Tax (Appeals), Bangalore for the demand pertaining to fiscal 2002 and fiscal 2003 in April 2006 and August 2006 respectively. 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		Half-year ended
Particulars	September 30,		September 30,
	2006	2005	2006	2005
Capital goods	95	70	148	116
Software packages	2	4	3	4
	97	74	151	120

22.2.5. Activity in foreign currency

in Rs. Crore
	Quarter ended		Half-year ended
Particulars	September 30,		September 30,
	2006	2005	2006	2005
Earnings in foreign currency (on receipts basis)
Income from software services and products	3,037	2,079	5,575	4,125
Interest received on deposits with banks	4	2	7	2
Expenditure in foreign currency (on payments basis)
Travel expenses	86	83	189	156
Professional charges	20	12	32	18
Technical Sub-Contractors - Subsidiaries	160	87	275	158
Other expenditure incurred overseas for software development	938	611	1,870	1,243
Net earnings in foreign currency (on the receipts and payments basis)
Net earnings in foreign exchange	1,837	1,289	3,216	2,553

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		Half-year ended
Particulars	September 30,		September 30,
	2006	2005	2006	2005
Lease rentals recognized during the period	12	8	23	18
in Rs. Crore
Lease obligations		As at
		September 30, 2006		March 31, 2006
Within one year of the balance sheet date		33		24
Due in a period between one year and five years		103		100
Due after five years		57		61
		193		185

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 the lease agreements have a price escalation clause.

Fixed assets provided on operating lease to Infosys BPO, a subsidiary company, as at September 30, 2006 and March 31, 2006 :

in Rs. Crore
Particulars	Cost	Accumulated depreciation	Net book value
Building	40	7	33
	33	5	28
Plant and machinery	19	9	10
	16	7	9
Computers	2	2	-
	2	2	-
Furniture & fixtures	11	9	2
	11	8	3
Total	72	27	45
	62	22	40

The aggregate depreciation charged on the above for the quarter and half year ended September 30, 2006 amounted to Rs. 2 crore and Rs. 5 crore respectively (Rs 1 crore and Rs 1 crore for the quarter and half year ended September 30, 2005 respectively).

The company has non-cancelable operating leases on equipped premises leased to Infosys BPO. The leases extend for periods between 36 months and 58 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 Infosys BPO:

in Rs. Crore
Lease rentals	As at
	September 30, 2006	March 31, 2006
Within one year of the balance sheet date	12	11
Due in a period between one year and five years	10	17
Due after five years	-	-
	22	28

The rental income from Infosys BPO for the quarter and half year ended September 30, 2006 amounted to Rs. 4 crore and Rs. 8 crore respectively (Rs 3 crore and Rs 5 crore for the quarter and half year ended September 30, 2005 respectively).

22.2.7. Related party transactions

List of related parties:
Name of the related party	Country	Holding, as at
		September 30, 2006	March 31, 2006
Infosys BPO Ltd	India	96.70%	71.74%
Infosys Technologies ( Australia), Pty Limited	Australia	100%	100%
Infosys Technologies ( China) Co. Limited	China	100%	100%
Infosys Consulting, Inc.	USA	100%	100%
Progeon s. r. o *	Czech Republic	96.70%	71.74%

* Progeon s.r.o is a wholly owned subsidiary of Infosys BPO Ltd.

The details of the related party transactions entered into by the company, in addition to the lease commitments described in note 22.2.6, for the quarter and half year ended September 30, 2006 and 2005 are as follows:

in Rs. Crore
Particulars	Quarter ended		Half-year ended
	September 30,		September 30,
	2006	2005	2006	2005
Capital transactions:
Financing transactions
Infosys China	9	-	9	-
Infosys Consulting	-	22	14	22
Rental deposit repaid
Infosys BPO	-	2	-	2
Loans
Infosys China	-	-	9	-
Revenue transactions:
Purchase of services
Infosys BPO (Including Progeon s.r.o)	3	-	5	1
Infosys Australia	103	61	174	119
Infosys China	10	2	16	3
Infosys Consulting	47	30	89	51
Interest Income
Infosys China	-	-	1	-
Sale of services
Infosys Australia	1	1	2	3
Infosys China	1	-	2	1
Infosys Consulting	-	1	-	-
Sale of shared services including facilities and personnel
Infosys BPO (Including Progeon s.r.o)	7	4	15	9
Infosys Consulting	1	1	2	2

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

in Rs. Crore
Particulars	As at
	September 30, 2006	March 31, 2006
Loans and advances
Infosys China	25	20
Maximum balances of loans and advances
Infosys BPO (Including Progeon s.r.o)	1	3
Infosys Australia	24	28
Infosys China	25	20
Infosys Consulting	14	-

During the quarter and half year ended September 30, 2006, an amount of Rs. 5 crore and Rs 9 crore respectively (Rs 4 crore and Rs 7 crore for the quarter and half year ended September 30, 2005 respectively ) 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 and half year ended September 30, 2006 and September 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		Half-year ended
Particulars	September 30,		September 30,
	2006	2005	2006	2005
Revenue	41	25	73	51
	41	25	73	51

22.2.10. Dues to small-scale industrial undertakings

As at September 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 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 1,17,60,000 ADSs representing 1,17,60,000 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		Half-year ended
	September 30,		September 30,
	2006	2005	2006	2005
Options outstanding, beginning of period	42,49,610	59,08,936	45,46,480	61,08,580
Granted	-	-	-	-
Less: exercised	(495,021)	(376,496)	(675,571)	(547,460)
forfeited	(21,040)	(38,976)	(137,360)	(67,656)
Options outstanding, end of period	37,33,549	54,93,464	37,33,549	54,93,464

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 5,28,00,000 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		Half-year ended
	September 30,		September 30,
	2006	2005	2006	2005
Options outstanding, beginning of period	1,67,52,788	2,64,62,242	1,91,79,074	2,81,09,874
Granted	-	-	-	-
Less: exercised	(1,603,628)	(2,096,794)	(3,999,470)	(3,630,466)
forfeited	(22,821)	(117,072)	(53,265)	(231,032)
Options outstanding, end of period	1,51,26,339	2,42,48,376	1,51,26,339	2,42,48,376

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 with non-scheduled banks:-

in Rs. crore
Balances with non-scheduled banks	As at
	September 30, 2006	March 31, 2006
In current accounts
ABN Amro Bank , Taipei, Taiwan	1	1
Bank of America, Palo Alto, USA	139	229
Bank of China, Beijing, China	-	-
Citibank NA, Melbourne, Australia	52	39
Citibank NA, Hongkong	-	-
Citibank NA, Singapore	-	-
Citibank NA, Tokyo, Japan	-	1
Citibank NA, Sharjah, UAE	-	-
Deutsche Bank, Brussels, Belgium	9	8
Deutsche Bank, Frankfurt, Germany	4	21
Deutsche Bank, Amsterdam, Netherlands	1	4
Deutsche Bank, Paris, France	1	1
Deutsche Bank, Spain	1	-
Deutsche Bank, Zurich, Switzerland	1	6
HSBC Bank PLC, Croydon, UK	69	60
ICICI Bank UK Ltd., London, UK	-	-
Nordbanken, Stockholm, Sweden	1	-
Nova Scotia Bank, Toronto, Canada	-	-
Royal Bank of Canada, Toronto, Canada	6	4
Svenska Handels Bank, Stockholm, Sweden	-	1
UFJ Bank, Tokyo, Japan	-	-
ICICI Bank - Toronto, Canada	-	-
	285	375

in Rs. crore
Maximum balance with non-scheduled banks during the period	Quarter ended		Half-year ended
	September 30,		September 30,
	2006	2005	2006	2005
In current accounts
ABN Amro Bank , Taipei, Taiwan	1	1	1	1
Bank of America, Palo Alto, USA	614	264	614	271
Bank of China, Beijing, China	-	-	-	-
Citibank NA, Melbourne, Australia	52	37	52	54
Citibank NA, Hongkong	-	-	-	-
Citibank NA, Singapore	-	-	-	-
Citibank NA, Tokyo, Japan	9	36	13	36
Citibank NA, Sharjah, UAE	-	-	-	-
Deutsche Bank, Brussels, Belgium	23	22	24	31
Deutsche Bank, Frankfurt, Germany	31	33	31	33
Deutsche Bank, Amsterdam, Netherlands	4	1	5	1
Deutsche Bank, Paris, France	5	5	6	5
Deutsche Bank, Spain	1	-	1	-
Deutsche Bank, Zurich, Switzerland	26	13	26	13
HSBC Bank PLC, Croydon, UK	237	41	237	41
ICICI Bank UK Ltd., London, UK	-	14	-	33
Nordbanken, Stockholm, Sweden	1	-	1	-
Nova Scotia Bank, Toronto, Canada	-	-	-	-
Royal Bank of Canada, Toronto, Canada	37	9	37	13
Svenska Handels Bank, Stockholm, Sweden	1	1	1	1
UFJ Bank, Tokyo, Japan	34	28	34	28
ICICI Bank - Toronto, Canada	-	5	-	7

The cash and bank balances include interest accrued but not due on fixed deposits amounting to Rs. 5 crore as at September 30, 2006 (as at March 31, 2006 Rs. 25 crore).

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
Particulars	As at
	September 30, 2006	March 31, 2006
Deposits with financial institutions:
Housing Development Finance Corporation Limited ("HDFC")	502	500
Life Insurance Corporation of India	121	80
	623	580
Interest accrued but not due (included above)	2	-

Maximum balance held as deposits with financial institutions:-

in Rs. crore
	Quarter ended		Half-year ended
	September 30,		September 30,
	2006	2005	2006	2005
Deposits with financial institutions:
Housing Development Finance Corporation Limited ("HDFC")	502	201	502	201
Life Insurance Corporation of India	130	105	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 during the quarter and half year ended September 30, 2006 and September 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		Half-year ended
	September 30,		September 30,
	2006	2005	2006	2005
Charged during the period	5	8	6	9

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

22.2.16. Details of Investments

in Rs. crore
Particulars	As at
	September 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 (25,641) , Series A preferred stock par value US$0.001	-	-
OnMobile Systems Inc., (formerly Onscan Inc.) USA
1,00,000 (1,00,000) common stock at US$ 0.4348 each, fully paid, par value US$ 0.001 each	-	-
1,00,000 (1,00,000) Series A voting convertible preferred stock at US$ 0.4348 each, fully paid, par value US$ 0.001 each	-	-
44,00,000 (44,00,000) Series A non-voting convertible preferred stock at US$ 0.4348 each, fully paid, par value US$ 0.001 each	9	9
M-Commerce Ventures Pte Ltd, Singapore
100 (100) ordinary shares of Singapore $ 1 each, fully paid, par value Singapore $ 1 each	-	-
684 (684) redeemable preference shares of Singapore $ 1, fully paid, at a premium of Singapore $ 1,110 per redeemable preferred stock	2	2
216 (216) redeemable preference shares of Singapore $ 1, fully paid, par value Singapore $ 1 each	-	-
Illumina Inc.
Nil (758) common stock at USD 0.01 per share	-	-
	11	16
Less: Provision for investment	11	14
	-	2

Current investments - Liquid Mutual Funds

in Rs. crore
Particulars	Number of units as at		Amount as at
	September 30, 2006	March 31, 2006	September 30, 2006	March 31, 2006
Birla Cash Plus - Institutional Premium - Fortnightly Dividend Payout	14,90,89,761	9,94,77,727	150	100
CanLiquid Fund - Institutional Weekly Dividend	14,43,13,867	5,97,28,831	145	60
DBS Chola Liquid Institutional Plus - Weekly Dividend	42,187,329	4,63,08,937	50	54
DWS Insta Cash Plus Fund - Institutional Plan - Monthly Dividend	10,94,19,305	-	110	-
DSP Merill Lynch Liquidity Fund Weekly - Institutional Plan - Dividend	14,98,166	-	150	-
HDFC Liquid Fund - Premium Plus Plan - Dividend	121,089,913	-	150	-
HSBC Cash Fund - Institutional Plus - Monthly Dividend	149,701,909	-	150	-
ING Vysya Liquid Fund Institutional - Weekly Dividend Option	148,276,228	7,88,74,225	149	79
Kotak Liquid (Institutional) - Weekly Dividend	149,384,077	-	150	-
Principal Cash Management Fund Liquid Option - Institutional Plan - Dividend Payout - Monthly	149,908,556	-	150	-
Prudential ICICI Institutional Liquid Plan - Super Institutional Monthly Dividend	-	-	-	-
Sundaram BNP Paribas Money Fund Super Institutional Monthly Dividend	49,260,113	2,96,83,287	50	30
UTI Liquid Cash Plan Institutional - Monthly Income Option - Payout	1,464,979	14,77,424	150	150
TATA Liquid Super High Investment Fund - Monthly Dividend	1,309,379	13,31,587	150	150
ABN Amro Cash Fund - Institutional Monthly Dividend	35,000,000	-	35	-
DWS Money Plus Fund Regular Plan Monthly Dividend	39,641,247	-	40	-
Templeton India Treasury Management Account Super Institutional Plan Weekly Dividend Payout	1,475,293	-	150	-
Prudential ICICI Institutional Liquid Plan - Super Institutional Monthly Dividend	149,552,344	-	150	-
JM High Liquidity Fund - Super Institutional Plan - Weekly Dividend	24,776,516	-	25	-
Reliance Liquidity Fund - Monthly Dividend Option	140,952,815	-	150	-
SBI Mangnum Institutional Income - Savings - Weekly Dividend	137,238,413	-	145	-
Standard Chartered Liquidity Manager - Plus - Monthly Dividend	1,495,898	-	150	-
LICMF Liquid Fund - Dividend Plan	137,520,214	5,54,51,349	151	61
			2,699	684
At cost			1,955	624
At fair value			744	60
			2,699	684

Details of investments in and disposal of securities during the quarter and half year ended September 30, 2006 and 2005:-

in Rs. crore
	Quarter ended		Half-year ended
Particulars	September 30,		September 30,
	2006	2005	2006	2005
Investment in securities
Subsidiaries	9	22	553	22
Long-term investments	-	-	-	-
Liquid Mutual funds	1,240	1,320	2,890	1,558
	1,249	1,342	3,443	1,580
Redemption / Disposal of Investment in securities
Subsidiaries	-	-	-	-
Long-term investments	-	-	6	-
Liquid Mutual funds	75	330	880	470
	75	330	886	470
Net movement in investments	1,174	1,012	2,557	1,110

Investment purchased and sold during the half year ended September 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	95,103,550	95
Kotak Liquid - Institutional Premium	10	74,717,568	75
HDFC Liquid Fund - Premium Plus Plan	10	20,148,779	25
Reliance Liquidity Fund	10	142,248,023	150

Particulars of investments made during the quarter and half year ended September 30, 2006 and 2005:-

in Rs. crore
Particulars of investee companies	Quarter ended		Half-year ended
	September 30,		September 30,
	2006	2005	2006	2005
Infosys Consulting Inc., USA	-	22	14	22
Infosys China	9	-	9	-
Infosys BPO Ltd	-	-	530	-
	9	22	553	22

Conversion of Cumulative Preference shares in Infosys BPO Ltd
Infosys BPO 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 Infosys BPO 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 Infosys BPO 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.

Provisions for investments
The Company evaluates all investments for any diminution in their carrying values that is other than temporary. The amount of provision made on trade investments during the quarter and half year ended September 30, 2006 amounted to Rs. Nil and Rs. 2 crore respectively (for the quarter and half year ended September 30, 2005 Rs. Nil and Rs. Nil respectively).

The company provided Rs. 0.03 crore and Rs. 1 crore during the quarter and half year ended on September 30, 2006 (Rs. 1 crore and and Rs. 1 crore for the quarter and half year ended September 30, 2005) on revision of the carrying amount of non-trade current investments to fair value.

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 September 30, 2006 and 2005:-

in Rs. crore
	Financial services	Manufacturing	Telecom	Retail	Others	Total
Revenues	1,230	465	592	312	674	3,273
	762	303	345	238	522	2,170
Identifiable operating expenses	529	201	251	142	281	1,404
	318	134	139	97	229	917
Allocated expenses	306	116	147	78	168	815
	193	76	87	60	132	548
Segmental operating income	395	148	194	92	225	1,054
	251	93	119	81	161	705
Unallocable expenses						110
						90
Operating income						944
						615
Other income (expense), net						66
						44
Net profit before taxes and exceptional items						1,010
						659
Income taxes						114
						67
Net profit after taxes and before exceptional items						896
						592
Income on sale of investments (net of taxes)						-
						-
Net profit after taxes and exceptional items						896
						592

Half-year ended September 30, 2006 and 2005:-

in Rs. crore
	Financial services	Manufacturing	Telecom	Retail	Others	Total
Revenues	2,278	879	1,075	604	1,304	6,140
	1,465	575	666	435	996	4,137
Identifiable operating expenses	1,014	380	446	271	557	2,668
	617	260	277	182	431	1,767
Allocated expenses	573	221	270	152	328	1,544
	361	141	163	107	246	1,018
Segmental operating income	691	278	359	181	419	1,928
	487	174	226	146	319	1,352
Unallocable expenses						207
						165
Operating income						1,721
						1,187
Other income (expense), net						192
						75
Net profit before taxes and exceptional items						1,913
						1,262
Income taxes						218
						146
Net profit after taxes and before exceptional items						1,695
						1,116
Income on sale of investments (net of taxes)						6
						-
Net profit after taxes and exceptional items						1,701
						1,116

Geographic segments

Quarter ended September 30, 2006 and 2005:-

in Rs. crore
	North America	Europe	India	Rest of the World	Total
Revenues	2,103	828	53	289	3,273
	1,437	510	33	190	2,170
Identifiable operating expenses	908	327	9	160	1,404
	602	201	18	96	917
Allocated expenses	524	206	13	72	815
	363	129	8	48	548
Segmental operating income	671	295	31	57	1,054
	472	180	7	46	705
Unallocable expenses					110
					90
Operating income					944
					615
Other income (expense), net					66
					44
Net profit before taxes and exceptional items					1,010
					659
Income taxes					114
					67
Net profit after taxes and before exceptional items					896
					592
Income on sale of investments (net of taxes)					-
					-
Net profit after taxes and exceptional items					896
					592

Half-year ended September 30, 2006 and 2005:-

in Rs. crore
	North America	Europe	India	Rest of the World	Total
Revenues	3,953	1,566	94	527	6,140
	2,703	975	82	377	4,137
Identifiable operating expenses	1,730	623	32	283	2,668
	1,155	389	38	185	1,767
Allocated expenses	995	394	23	132	1,544
	665	240	20	93	1,018
Segmental operating income	1,228	549	39	112	1,928
	883	346	24	99	1,352
Unallocable expenses					207
					165
Operating income					1,721
					1,187
Other income (expense), net					192
					75
Net profit before taxes and exceptional items					1,913
					1,262
Income taxes					218
					146
Net profit after taxes and before exceptional items					1,695
					1,116
Income on sale of investments (net of taxes)					6
					-
Net profit after taxes and exceptional items					1,701
					1,116

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 September 30, 2006 the company has provided for doubtful debts of Rs. 1 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		Half-year ended
		September 30,		September 30,
		2006	2005	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
At the annual general meeting held on June 10, 2006, the shareholders approved a 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 was July 14, 2006 and shares were allotted on July 15, 2006. All basic and diluted shares used in determining earnings per share are after considering the effect of bonus issue.

	Quarter ended		Half-year ended
Particulars	September 30,		September 30,
	2006	2005	2006	2005
Number of shares considered as basic weighted average shares outstanding	55,47,72,296	54,42,02,438	55,37,98,511	54,30,96,662
Add: Effect of dilutive issues of shares/stock options	1,29,73,744	1,58,58,862	1,31,43,886	1,57,93,928
Number of shares considered as weighted average shares and potential shares outstanding	56,77,46,039	56,00,61,300	56,69,42,396	55,88,90,590

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 half year ended Sep 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 half year ended Sep 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 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. crores
Particulars	As at
	September 30, 2006
Obligations at period beginning	180
Service Cost	22
Interest cost	7
Actuarial (gain)/loss	(1)
Benefits paid	(6)
Obligations at period end	202
Defined benefit obligation liability as at the balance sheet is wholly funded by the company
Change in plan assets
Plans assets at period beginning, at fair value	167
Expected return on plan assets	7
Actuarial gain/(loss)	2
Contributions	40
Benefits paid	(6)
Plans assets at period end, at fair value	210
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	210
Present value of the defined benefit obligations at the end of the period	202
Asset recognized in the balance sheet	8
Gratuity cost for the period
Service cost	22
Interest cost	7
Expected return on plan assets	(7)
Actuarial (gain)/loss	(2)
Net gratuity cost	19
Investment details of plan assets
100% of the plan assets are invested in debt instruments.
Actual return on plan assets:	9
Assumptions
Interest rate	7.62%
Estimated rate of return on plan assets	7.62%

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. 3 crore as at September 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 September 30, 2006 include an amount of Rs. 121 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. crores
Schedule	Description	As at
		September 30, 2006	March 31, 2006
3	Fixed assets
	Additions
	Vehicles	-	0.75
	Deductions/retirements
	Land - free-hold	-	0.01
	Plant and Machinery	0.06	-
	Furniture and fixtures	0.05	-
	Buildings	-	0.80
	Depreciation & Amortization
	For the period
	Vehicles	-	0.19
	Deductions/retirements
	Plant and Machinery	0.04	-
	Furniture and fixtures	0.05	-
8	Unsecured, considered doubtful
	Loans and advances to employees
	Provision for doubtful loans and advances to employees	0.53	0.44
22.2.6	Computers on operating lease to Infosys BPO
	- Net Book Value	0.17	0.17
22.2.13	Balances with non-scheduled banks
	- Bank of China, Beijing, China	-	0.02
	- Citibank NA, Singapore	0.14	0.19
	- Citibank NA, Tokyo, Japan	0.07	1.19
	- Citibank NA, Sharjah, UAE	0.08	0.04
	- Nordbanken, Stockholm, Sweden	0.60	0.09
	- Svenska Handels Bank, Stockholm, Sweden	0.18	0.51
	- UFJ Bank, Tokyo, Japan	0.26	0.09
22.2.14	Loans & Advances
	Interest accrued but not due - Deposits with Financial Institutions	1.75	0.10
22.2.16	Long- term investments
	Onmobile (common stock)	0.19	0.19
	Onmobile (Series A - voting)	0.19	0.19

	Profit & Loss Items
in Rs. crores
		Quarter ended		Half-year ended
Schedule	Description	September 30,		September 30,
		2006	2005	2006	2005
	Profit & Loss account
	Provision for investments	0.02	0.57	2.79	0.63
	Residual Dividend Paid	-	-	4.23	0.25
	Additional Dividend Tax	-	-	0.60	0.03
12	Selling & Marketing expenses
	Contribution to Provident and other funds	0.48	0.35	0.93	0.47
	Staff welfare	-	0.31	-	0.41
	Consumables	0.09	0.07	0.18	0.13
	Software packages for own use	0.42	-	0.42	0.06
	Communication expenses	0.17	0.20	0.32	0.26
	Printing and stationery	0.30	0.44	0.70	0.92
	Advertisements	1.22	0.32	2.02	0.80
	Office maintenance	0.01	0.06	0.12	0.29
	Computer Maintenance	0.05	-	0.05	-
	Sales promotion expenses	0.61	0.22	0.91	0.45
13	General and Administration expenses
	Provision for doubtful loans and advances	(0.08)	0.07	0.07	0.11
	Overseas group health insurance	(0.05)	0.06	(0.18)	0.19
	Visa Charges Others	0.49	30.23	1.15	52.87
	Guest house maintenance	0.43	0.49	1.02	0.99
	Commission to non-whole time directors	0.51	0.32	0.98	0.63
	Freight charges	0.23	0.23	0.45	0.41
	Bank charges and commission	0.58	0.40	0.87	0.56
	Research grants	3.29	0.12	4.98	0.21
	Auditor's remuneration
	Statutory audit fees	0.16	0.09	0.26	0.18
	Others	-	0.84	-	1.22
	Out of Pocket Expenses	0.02	-	0.04	0.01
14	Other Income, Net
	Exchange differences	10.71	0.46	63.72	(8.99)
22.2.1	Aggregate expenses
	Provision for doubtful loans and advances	(0.08)	0.07	0.07	0.11
	Commission to non-whole time directors	0.51	0.32	0.98	0.63
	Sales promotion expenses	0.61	0.22	0.91	0.45
	Guesthouse maintenance	0.43	0.49	1.02	0.99
	Freight charges	0.23	0.23	0.45	0.41
	Bank charges and commission	0.58	0.40	0.87	0.56
	Auditor's remuneration
	Statutory audit fees	0.16	0.09	0.26	0.18
	Others	-	0.84	-	1.22
	Out of Pocket Expenses	0.02	-	0.04	0.01
	Research grants	3.29	0.12	4.98	0.21
22.2.7	Related party transactions
	Revenue transactions:
	Interest Income -Infosys China	0.33	-	0.60	-
	Sale of services - Infosys Consulting	(0.25)	-	0.22	-
22.2.13.	Maximum balance with non-scheduled banks
	- Bank of China, Beijing China	0.02	0.04	0.02	0.08
	- Citibank NA, Hong Kong	-	0.30	-	0.30
	- Citibank NA, Singapore	0.17	0.30	0.19	0.37
	- Citibank NA, Sharjah, UAE	0.12	0.14	0.18	0.15
	- Deutsche Bank, Amsterdam, Netherlands	3.77	1.30	5.20	1.30
	- Nordbanken, Stockholm, Sweden	0.64	0.10	0.64	0.12
	-Nova Scotia Bank, Canada	0.01	0.01	0.02	0.02
	- UFJ Bank, Tokyo, Japan	33.79	28.15	33.79	28.15
22.2.15.	Profit / (loss) on disposal of fixed assets
	Profit on disposal of fixed assets, included in miscellaneous income	0.04	0.18	0.07	0.23
	Loss on disposal of fixed assets, included in miscellaneous expenses	(0.01)	(0.03)	(0.02)	(0.03)
	Profit/(Loss) on disposal of fixed assets,net	0.03	0.15	0.05	0.20

Cash Flow Statment Items

in Rs. crores
Schedule	Description	For the Period Ended
		September 30, 2006	September 30, 2005
Cash flow	(Profit)/ loss on sale of fixed assets	(0.05)	(0.02)
statement	Provision for investments	2.79	0.63
	Proceeds on disposal of fixed assets	0.16	0.25

Transactions with key management personnel

Key management personnel comprise our directors and statutory officers.

Particulars of remuneration and other benefits paid to key management personnel during the quarter and half year ended September 30, 2006 and September 30,2005 ( figures in italics are corresponding to the quarter and half year ended September 30, 2005) :

in Rs. crores
Name	Salary	Contributions to provident and other funds	Perquisites and incentives	Total Remuneration
Chairman and Chief Mentor
N R Narayana Murthy *	0.02	0.01	0.10	0.13
	0.03	0.01	0.05	0.09
	0.06	0.02	0.21	0.29
	0.06	0.02	0.11	0.19
Chief Executive Officer and Managing Director
Nandan M Nilekani	0.04	0.01	0.08	0.13
	0.03	0.01	0.05	0.09
	0.08	0.02	0.19	0.29
	0.06	0.02	0.11	0.19
President, Chief Operating Officer and Joint Managing Director
S Gopalakrishnan	0.04	0.01	0.08	0.13
	0.03	0.01	0.05	0.09
	0.08	0.02	0.20	0.30
	0.06	0.02	0.12	0.20
Whole-time Directors
K Dinesh	0.03	0.01	0.08	0.12
	0.03	0.01	0.05	0.09
	0.06	0.02	0.19	0.27
	0.06	0.02	0.10	0.18
S D Shibulal
	0.04	0.01	0.08	0.13
	0.23	-	0.14	0.37
	0.07	0.02	0.16	0.25
	0.45	-	0.14	0.59
T V Mohandas Pai
	0.06	0.01	0.14	0.21
	0.05	0.02	0.11	0.18
	0.12	0.04	0.35	0.51
	0.10	0.04	0.22	0.36
Srinath Batni
	0.05	0.01	0.12	0.18
	0.04	0.02	0.10	0.16
	0.10	0.02	0.30	0.42
	0.08	0.03	0.19	0.30
Chief Financial Officer
V Balakrishnan	0.05	0.01	0.09	0.15
	0.03	0.01	0.08	0.12
	0.09	0.02	0.27	0.38
	0.06	0.02	0.22	0.30
* Wholetime director till August 20, 2006

Name	Commission	Sitting fees	Reimbursement of expenses	Total remuneration
Non-Whole time Directors
Deepak M Satwalekar	0.06	-	-	0.06
	0.05	-	-	0.05
	0.12	-	-	0.12
	0.09	0.01	-	0.10
Prof.Marti G Subrahmanyam	0.06	-	0.02	0.08
	0.04	-	0.02	0.06
	0.12	-	0.05	0.17
	0.08	-	0.07	0.15
Philip Yeo	-	-	-	-
	-	-	-	-
	-	-	-	-
	0.03	-	-	0.03
David L Boyles	0.06	-	-	0.06
	0.03	-	-	0.03
	0.12	-	-	0.12
	0.03	-	-	0.03
Dr.Omkar Goswami	0.05	-	0.01	0.06
	0.04	0.01	0.01	0.06
	0.10	-	0.01	0.11
	0.08	0.01	0.02	0.11
Sen. Larry Pressler	0.02	-	-	0.02
	0.04	-	-	0.04
	0.03	-	0.03	0.06
	0.08	-	-	0.08
Rama Bijapurkar	0.06	-	-	0.06
	0.04	-	-	0.04
	0.12	-	0.01	0.13
	0.08	-	-	0.08
Claude Smadja	0.06	-	0.04	0.10
	0.04	-	0.05	0.09
	0.12	-	0.13	0.25
	0.08	-	0.08	0.16
Sridar A Iyengar	0.06	-	0.01	0.07
	0.04	-	0.04	0.08
	0.12	-	0.08	0.20
	0.08	-	0.11	0.19
Jeffrey Lehman	0.05	-	-	0.05
	-	-	-	-
	0.10	-	-	0.10
	-	-	-	-
N R Narayana Murthy *	0.03	-	-	0.03
	-	-	-	-
	0.03	-	-	0.03
	-	-	-	-

* Appointed as Additional Director effective August 21, 2006

EX-99.12

EXHIBIT 99.12
Indian GAAP Consol

AUDITORS' REPORT TO THE BOARD OF DIRECTORS ON THE CONSOLIDATED FINANCIAL STATEMENTS OF INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES

We have audited the attached consolidated balance sheet of Infosys Technologies Limited (the Company) and subsidiaries (collectively called the 'the Infosys Group') as at 30 September 2006, the consolidated profit and loss account for the quarter and half year ended on that date and the consolidated cash flow statement for the half year ended on that date, annexed thereto. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material 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 30 September 2006;

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

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

for BSR & Co.
Chartered Accountants

Natrajan Ramkrishna
Partner
Membership No. 32815

Bangalore
11 October 2006

CONSOLIDATED FINANCIAL STATEMENTS OF INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES

in Rs. crore
Consolidated Balance Sheet as at	Schedule	September 30, 2006	March 31, 2006
SOURCES OF FUNDS
SHAREHOLDERS' FUNDS
Share capital	1	278	138
Reserves and surplus	2	8,321	6,828
		8,599	6,966
MINORITY INTEREST		10	68
		8,609	7,034
APPLICATION OF FUNDS
FIXED ASSETS	3
Original cost		4,004	2,983
Less: Accumulated depreciation and amortization		1,555	1,328
Net book value		2,449	1,655
Add: Capital work-in-progress		483	571
		2,932	2,226
INVESTMENTS	4	2,819	755
DEFERRED TAX ASSETS	5	79	65
CURRENT ASSETS, LOANS AND ADVANCES
Sundry debtors	6	2,085	1,608
Cash and bank balances	7	982	3,429
Loans and advances	8	1,514	1,297
		4,581	6,334
LESS: CURRENT LIABILITIES AND PROVISIONS
Current liabilities	9	1,177	934
Provisions	10	625	1,412
NET CURRENT ASSETS		2,779	3,988
		8,609	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

Natrajan Ramkrishna	N. R. Narayana Murthy	Nandan M. Nilekani	S. Gopalakrishnan	Deepak M. Satwalekar
Partner	Chairman	Chief Executive Officer	President,	Director
Membership No. 32815	and Chief Mentor	and Managing Director	Chief Operating Officer and
			Joint 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.
October 11, 2006	Company Secretary

in Rs. crore, except per share data
Consolidated Profit and Loss Account for the	Schedule	Quarter ended		Half-year ended
		September 30,		September 30,
		2006	2005	2006	2005
Income from software services, products and business process management		3,451	2,294	6,466	4,366
Software development and business process management expenses	11	1,833	1,212	3,499	2,316
GROSS PROFIT		1,618	1,082	2,967	2,050
Selling and marketing expenses	12	221	149	425	291
General and administration expenses	13	288	199	544	361
		509	348	969	652
OPERATING PROFIT BEFORE INTEREST, DEPRECIATION AND MINORITY INTEREST		1,109	734	1,998	1,398
Interest		-	-	-	-
Depreciation		122	96	228	176
OPERATING PROFIT BEFORE TAX MINORITY INTEREST AND EXCEPTIONAL ITEMS		987	638	1,770	1,222
Other income, net	14	66	44	194	72
Provision for investments		-	1	3	1
NET PROFIT BEFORE TAX, MINORITY INTEREST AND EXCEPTIONAL ITEMS		1,053	681	1,961	1,293
Provision for taxation on the above	15	123	69	229	150
NET PROFIT AFTER TAX AND BEFORE MINORITY INTEREST AND EXCEPTIONAL ITEMS		930	612	1,732	1,143
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		930	612	1,738	1,143
Minority interest		1	6	9	6
NET PROFIT AFTER TAX, EXCEPTIONAL ITEMS AND MINORITY INTEREST		929	606	1,729	1,137
Balance Brought Forward		3,014	1,946	2,219	1,415
Less: Residual dividend paid		-	-	4	-
Additional dividend tax		-	-	1	-
		3,014	1,946	2,214	1,415
AMOUNT AVAILABLE FOR APPROPRIATION		3,943	2,552	3,943	2,552
Dividend
Interim		278	177	278	177
Final		-	-	-	-
Total dividend		278	177	278	177
Dividend tax		39	25	39	25
Balance in profit and loss account		3,626	2,350	3,626	2,350
		3,943	2,552	3,943	2,552
EARNINGS PER SHARE *
Equity shares of par value Rs. 5/- each
Before Exceptional items
Basic		16.75	11.13	31.11	20.94
Diluted		16.37	10.82	30.39	20.35
After Exceptional items
Basic		16.75	11.13	31.23	20.94
Diluted		16.37	10.82	30.50	20.35
Number of shares used in computing earnings per share
Basic		55,47,72,296	54,42,02,438	55,37,98,511	54,30,96,662
Diluted		56,77,46,039	56,00,61,300	56,69,42,396	55,88,90,590
SIGNIFICANT ACCOUNTING POLICIES AND NOTES ON ACCOUNTS	22

* Refer to note 22.2.18

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

As per our report attached

for BSR & Co.
Chartered Accountants

Natrajan Ramkrishna	N. R. Narayana Murthy	Nandan M. Nilekani	S. Gopalakrishnan	Deepak M. Satwalekar
Partner	Chairman	Chief Executive Officer	President,	Director
Membership No. 32815	and Chief Mentor	and Managing Director	Chief Operating Officer and
			Joint 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.
October 11, 2006	Company Secretary

in Rs. crore
Consolidated Cash Flow Statement for the	Schedule	Half-year ended
		September 30,
		2006	2005
CASH FLOWS FROM OPERATING ACTIVITIES
Net profit before tax, minority interest and exceptional items		1,961	1,293
Adjustments to reconcile net profit before tax to cash provided by operating activities
(Profit)/ loss on sale of fixed assets		-	-
Depreciation		228	176
Interest and dividend income		(124)	(81)
Profit on sale of liquid mutual funds		(6)	-
Provisions for investments		3	1
Effect of exchange differences on translation of foreign currency cash and cash equivalents		(34)	(12)
Changes in current assets and liabilities
Sundry debtors		(477)	(12)
Loans and advances	16	(205)	(81)
Current liabilities and provisions	17	251	87
Income taxes paid	18	(170)	(164)
NET CASH GENERATED BY OPERATING ACTIVITIES		1,427	1,207
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of fixed assets and change in capital work-in-progress	19	(523)	(555)
Proceeds on disposal of fixed assets		-	-
Investments in securities	20	(2,060)	(1,119)
Acquisition of minority interest in Subsidiary		(530)	-
Interest and dividend income		124	81
Cash flow from investing activities before exceptional items		(2,989)	(1,593)
Proceeds on sale of long term Investments (net of taxes)		6	-
NET CASH USED IN INVESTING ACTIVITIES		(2,983)	(1,593)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of share capital on exercise of stock options		289	249
Dividends paid during the period, including dividend tax		(1,215)	(201)
NET CASH USED IN FINANCING ACTIVITIES		(926)	48
Effect of exchange differences on translation of foreign currency cash and cash equivalents		34	14
NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS		(2,448)	(324)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD		3,956	1,790
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD	21	1,508	1,466
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

Natrajan Ramkrishna	N. R. Narayana Murthy	Nandan M. Nilekani	S. Gopalakrishnan	Deepak M. Satwalekar
Partner	Chairman	Chief Executive Officer	President,	Director
Membership No. 32815	and Chief Mentor	and Managing Director	Chief Operating Officer and
			Joint 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.
October 11, 2006	Company Secretary

in Rs. crore, except per share data
Schedules to the Consolidated Balance Sheet as at		September 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*	278	138
	55,57,85,001 ( 27,55,54,980) equity shares fully paid up
	[Of the above, 53,53,35,478 ( 25,84,92,302) equity shares, fully paid up have been issued as bonus shares by capitalization of the general reserve]
		278	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
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	286	571
	Income Tax benefit arising from exercise of stock options	-	72
		1,829	1,543
	General reserve - As at April 1,	3,012	2,770
	Less: Capitalized on issue of bonus shares	138	-
	Gratuity transitional liability (refer to note 22.2.20)	13	-
	Add: Transfer from the Profit and Loss Account	-	242
		2,861	3,012
	Balance in Profit and Loss Account	3,626	2,219
		8,321	6,828

3	FIXED ASSETS
	Particulars	Original cost				Depreciation and amortization				Net book value
		As at April 1, 2006	Additions	Deletions/ Retirement	As at  September 30,  2006	As at April 1, 2006	For the period	Deletions/ Retirement	As at   September 30,  2006	As at September 30, 2006	As at March 31, 2006
	Goodwill	41	411	-	452	-	-	-	-	452	41
	Land: free-hold	34	4	-	38	-	-	-	-	38	34
	leasehold	104	16	4	116	-	-	-	-	116	104
	Buildings	1,022	276	-	1,298	180	38	-	218	1,080	842
	Plant and machinery	569	112	-	681	309	49	-	358	323	260
	Computer equipment	757	139	1	895	552	103	1	654	241	205
	Furniture and fixtures	443	64	-	507	283	33	-	316	191	160
	Leasehold improvements	11	3	-	14	4	4	-	8	6	7
	Vehicles	2	1	-	3	-	1	-	1	2	2
		2,983	1,026	5	4,004	1,328	228	1	1,555	2,449	1,655
	Previous Period	2,287	475	5	2,757	1,031	176	5	1,202	1,555	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
		September 30, 2006	March 31, 2006
4	INVESTMENTS
	Trade (unquoted) - at cost
	Long- term investments	12	17
	Less: Provision made for investments	12	15
		-	2
	Non-trade (unquoted), current investments, at the lower of cost and fair value
	Liquid mutual funds	2,819	753
		2,819	755
	Aggregate amount of unquoted investments	2,819	755
5	DEFERRED TAX ASSETS
	Fixed assets	69	57
	Sundry debtors	3	2
	Leave provisions and others	7	6
		79	65
6	SUNDRY DEBTORS
	Debts outstanding for a period exceeding six months
	Unsecured
	considered good	-	-
	considered doubtful	22	8
	Other debts
	Unsecured
	considered good*	2,085	1,608
	considered doubtful	1	2
		2,108	1,618
	Less: Provision for doubtful debts	23	10
		2,085	1,608
	* Includes dues from companies where directors are interested	3	2
7	CASH AND BANK BALANCES
	Cash on hand	-	-
	Balances with scheduled banks
	In current accounts *	265	224
	In deposit accounts in Indian Rupees	405	2,800
	Balances with non-scheduled banks
	In deposit accounts in foreign currency	-	-
	In current accounts in foreign currency	312	405
		982	3,429
	*Includes balance in unclaimed dividend account	3	3
8	LOANS AND ADVANCES
	Unsecured, considered good
	Advances	1	1
	prepaid expenses	34	32
	for supply of goods and rendering of services	18	10
	advance to gratuity trust	8	-
	others	22	14
		83	57
	Unbilled revenues	338	211
	Advance income tax	293	267
	Loans and advances to employees
	housing and other loans	43	49
	salary advances	64	63
	Electricity and other deposits	18	16
	Rental deposits	17	16
	Deposits with financial institution and body corporate (refer note 22.2.9)	647	607
	Deposits with government authorities	-	-
	Mark to Market forward contract & option - asset	4	-
	Other assets	7	11
		1,514	1,297
	Unsecured, considered doubtful
	Loans and advances to employees	1	1
		1,515	1,298
	Less: Provision for doubtful loans and advances to employees	1	1
		1,514	1,297
9	CURRENT LIABILITIES
	Sundry creditors
	capital goods	-	-
	goods and services	17	12
	accrued salaries and benefits
	salaries	24	9
	bonus and incentives	214	260
	unavailed leave	120	101
	long service leave provision	2	-
	for other liabilities
	accrual for expenses	304	218
	retention monies	12	13
	withholding and other taxes payable	135	89
	for purchase of intellectual property rights	20	20
	others	11	3
		859	725
	Advances received from clients	8	7
	Unearned revenue	307	194
	Unclaimed dividend	3	3
	Mark to Market on options/due on forward contracts	-	5
		1,177	934
10	PROVISIONS
	Proposed dividend	278	1,061
	Provision for
	tax on dividend	39	149
	income taxes*	289	190
	post-sales client support and warranties	19	12
		625	1,412
	* Refer to note 22.2.8

in Rs. crore
Schedules to Consolidated Profit and Loss Account for the		Quarter ended		Half-year ended
		September 30,		September 30,
		2006	2005	2006	2005
11	SOFTWARE DEVELOPMENT AND BUSINESS PROCESS MANAGEMENT EXPENSES
	Salaries and bonus including overseas staff expenses	1,506	978	2,844	1,858
	Contribution to provident and other funds	41	22	73	43
	Staff welfare	11	7	20	13
	Overseas travel expenses	99	99	235	180
	Technical sub-contractors	69	35	126	71
	Software packages
	for own use	52	34	87	67
	for service delivery to clients	1	8	15	19
	Communication expenses	18	16	35	32
	Rent	8	6	16	12
	Computer maintenance	6	4	11	8
	Consumables	7	4	11	8
	Provision for post-sales client support and warranties	4	(7)	6	(6)
	Miscellaneous expenses	11	6	20	11
		1,833	1,212	3,499	2,316
12	SELLING AND MARKETING EXPENSES
	Salaries and bonus including overseas staff expenses	139	88	275	174
	Contribution to provident and other funds	1	-	2	1
	Staff welfare	1	-	1	-
	Overseas travel expenses	24	18	50	38
	Traveling and conveyance	2	1	5	2
	Brand building	15	12	27	22
	Commission and earnout charges	19	8	27	18
	Professional charges	7	11	12	15
	Rent	4	4	9	8
	Marketing expenses	5	3	8	6
	Telephone charges	1	1	3	3
	Printing and stationery	-	1	-	1
	Advertisements	1	1	2	1
	Sales promotion expenses	1	-	1	1
	Office maintenance	-	-	1	-
	Communication Expenses	-	-	-	-
	Insurance charges	-	-	-	-
	Consumables	-	-	-	-
	Software packages
	for own use	-	-	-	-
	Computer maintenance	-	-	-	-
	Rates and taxes	-	-	-	-
	Miscellaneous expenses	1	1	2	1
		221	149	425	291
13	GENERAL AND ADMINISTRATION EXPENSES
	Salaries and bonus including overseas staff expenses	67	39	129	79
	Contribution to provident and other funds	3	2	6	4
	Staff welfare	-	-	-	-
	Telephone charges	31	24	59	41
	Professional charges	40	26	71	43
	Power and fuel	25	17	48	32
	Office maintenance	27	18	52	33
	Traveling and conveyance	23	16	45	31
	Overseas travel expenses	7	4	12	11
	Insurance charges	8	6	15	13
	Printing and stationery	4	2	7	5
	Rates and taxes	3	3	12	6
	Donations	5	5	9	8
	Rent	5	3	10	6
	Advertisements	3	4	4	7
	Professional membership and seminar participation fees	3	2	5	5
	Repairs to building	7	5	10	8
	Repairs to plant and machinery	3	3	6	4
	Postage and courier	2	1	5	3
	Books and periodicals	2	1	2	2
	Recruitment and training	3	3	5	4
	Provision for bad and doubtful debts	10	9	20	9
	Provision for doubtful loans and advances	-	-	-	-
	Commission to non-whole time directors	1	1	1	1
	Auditor's remuneration
	statutory audit fees	-	-	1	1
	certification charges	-	-	-	-
	others	-	-	-	-
	out-of-pocket expenses	-	-	-	-
	Bank charges and commission	1	1	1	1
	Freight charges	-	1	-	-
	Research grants	3	-	5	-
	Software packages				-
	for own use	-	-	-	-
	Miscellaneous expenses	2	3	4	4
		288	199	544	361
14	OTHER INCOME, NET
	Interest received on deposits with banks and others*	23	24	75	49
	Dividend received on investment in liquid mutual funds (non-trade unquoted)	31	18	49	32
	Miscellaneous income, net (Refer to note 22.2.10)	1	2	7	2
	Exchange differences	11	-	63	(11)
		66	44	194	72
	*Tax deducted at source	5	5	19	10
15	PROVISION FOR TAXATION
	Income taxes*	128	72	242	157
	Deferred taxes	(5)	(3)	(13)	(7)
		123	69	229	150
	* Refer to note 22.2.8

in Rs. crore
Schedules to Consolidated Cashflow Statements for the		Half-year ended
		September 30,
		2006	2005
16	CHANGE IN LOANS AND ADVANCES
	As per the Balance Sheet	1,514	1,050
	Add: Gratuity transitional liability (Refer to note 22.2.20)	13	-
	Less: Deposits with financial institutions,
	included in cash and cash equivalents	(526)	(70)
	Advance income taxes separately considered	(293)	(493)
		708	487
	Less: Opening balance considered	(503)	(406)
		205	81
17	CHANGE IN CURRENT LIABILITIES AND PROVISIONS
	As per the Balance Sheet	1,802	1,603
	Add/ (Less): Provisions separately considered in the cash flow Statement
	Income taxes	(289)	(628)
	Dividends	(278)	(177)
	Dividend tax	(39)	(25)
		1,196	773
	Less: Opening balance considered	(945)	(686)
		251	87
18	INCOME TAXES PAID
	Charge as per the Profit and Loss Account	229	150
	Add: Increase/ decrease in advance income taxes	26	89
	Increase / decrease in deferred taxes	14	7
	Less: Increase in income tax provision	(99)	(82)
		170	164
19	PURCHASE OF FIXED ASSETS AND CHANGE IN CAPITAL WORK-IN-PROGRESS
	As per Balance Sheet*	611	475
	Less: Opening Capital work-in-progress	(571)	(318)
	Add: Closing Capital work-in-progress	483	398
		523	555
	* Excludes Rs 4 crore towards movement of land from Leasehold to Freehold
	* Excludes goodwill on buyback of Infosys BPO Ltd shares
20	INVESTMENTS IN / (DISPOSAL OF) SECURITIES *
	As per the Balance Sheet	2,819	2,329
	Add: Provisions made on investments	3	1
		2,822	2,330
	Less: Profit on sale of liquid mutual funds	(6)	-
	Opening balance considered	(756)	(1,211)
		2,060	1,119
	* 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	982	1,396
	Add: Deposits with financial institutions, included herein	526	70
		1,508	1,466

CONSOLIDATED FINANCIAL STATEMENTS OF INFOSYS TECHNOLOGIES LIMITED AND SUBSIDIARIES

Schedules to the Consolidated Financial Statements for the quarter and half year ended September 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, Infosys BPO Limited, India ("Infosys BPO") formerly known as Progeon Limited and,wholly owned subsidiaries, Infosys Technologies (Australia) Pty. Limited ("Infosys Australia"), Infosys Technologies (China) Co. Limited ("Infosys China") formerly known as Infosys Technologies (Shanghai) Co. Limited 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 cons ulting 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, Infosys BPO, 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 co mpletion 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. Leasehold improvements are written off over the lower of the remaining primary period of lease or the life of the asset. 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 Infosys BPO. 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 Infosys BPO respectively. Infosys fully contributes all ascertained liabilities to the Infosys Technologies Limited Employees' Gratuity Fund Trust (the "Trust"). Infosys BPO fully contributes all ascertained liabilities to the Infosys BPO 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 Infosys BPO were also eligible for superannuation benefit. Infosys BPO made monthly provisions under the superannuation plan based on a specified percentage of each covered employee's salary. Infosys BPO 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 Infosys BPO, eligible employees receive benefits from a provident fund, which is a defined contribution plan. Both the employee and Infosys BPO 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. Infosys BPO 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 emplo yee 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 ef fected 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 period's presentation.

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

22.2.1 Aggregate expenses
The aggregate amounts incurred on certain specific expenses:

in Rs. Crore
	Quarter ended		Half-year ended
	September 30,		September 30,
	2006	2005	2006	2005
Salaries and bonus including overseas staff expenses	1,712	1,105	3,248	2,111
Contribution to provident and other funds	45	24	81	48
Staff welfare	12	7	21	13
Overseas travel expenses	130	121	297	229
Traveling and conveyance	25	17	50	33
Technical sub-contractors	69	35	126	71
Software packages		-		-
for own use	52	34	87	67
for service delivery to clients	1	8	15	19
Professional charges	47	37	83	58
Telephone charges	32	25	62	44
Communication expenses	18	16	35	32
Power and fuel	25	17	48	32
Office maintenance	27	18	53	33
Rent	17	13	35	26
Brand building	15	12	27	22
Commission and earnout charges	19	8	27	18
Insurance charges	8	6	15	13
Printing and stationery	4	3	7	6
Computer maintenance	6	4	11	8
Consumables	7	4	11	8
Rates and taxes	3	3	12	6
Advertisements	4	5	6	8
Donations	5	5	9	8
Marketing expenses	5	3	8	6
Professional membership and seminar participation fees	3	2	5	5
Repairs to building	7	5	10	8
Repairs to plant and machinery	3	3	6	4
Postage and courier	2	1	5	3
Provision for post-sales client support and warranties	4	(7)	6	(6)
Books and periodicals	2	1	2	2
Recruitment and training	3	3	5	4
Provision for bad and doubtful debts	10	9	20	9
Provision for doubtful loans and advances	-	-	-	-
Commission to non-whole time directors	1	1	1	1
Sales promotion expenses	1	-	1	1
Auditor's remuneration		-		-
statutory audit fees	-	-	1	1
certification charges	-	-	-	-
others	-	-	-	-
out-of-pocket expenses	-	-	-	-
Bank charges and commission	1	1	1	1
Freight charges	-	1	-	-
Research grants	3	-	5	-
Miscellaneous expenses	14	10	26	16
	2,342	1,560	4,468	2,968
Fringe Benefit Tax (FBT) in India included in the above	4	4	9	7

22.2.2. Capital commitments and contingent liabilities

in Rs. Crore
Particulars	As at
	September 30, 2006	March 31, 2006
Estimated amount of unexecuted capital contracts
(net of advances and deposits)	532	519
Outstanding guarantees and counter guarantees to various banks, in respect of the guarantees given by those banks in favour of various government authorities and others	31	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$ 98,000,000	US$ 119,000,000
(Equivalent approximate in Rs. crore)	450.00	529
In GBP	GBP 500,000.00	GBP 0.00
(Equivalent approximate in Rs. crore)	4	-
Options contracts outstanding
Common Strike Ratio Option	-	US$ 8,000,000
(Equivalent approximate in Rs. crore)	-	36
Range barrier options in US $	US$ 240,000,000	US$ 210,000,000
(Equivalent approximate in Rs. crore)	1,103	934
Range barrier options in Euro	Euro 10,000,000	Euro 3,000,000.00
(Equivalent approximate in Rs. crore)	58	16
Range barrier options in GBP	GBP 11,250,000	GBP 3,000,000.00
(Equivalent approximate in Rs. crore)	97	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.

The company received the order of the appellate authority, the Commissioner of Income Tax (Appeals), Bangalore for the demand pertaining to fiscal 2002 and fiscal 2003 in April 2006 and August 2006 respectively. 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 and half year ended September 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 ended		Half-year ended
Particulars	September 30,		September 30,
	2006	2005	2006	2005
Lease rentals recognized during the period	17	13	35	26

in Rs. Crore
Lease obligations	As at
	September 30, 2006	March 31, 2006
Within one year of the balance sheet date	44	32
Due in a period between one year and five years	121	114
Due after five years	57	61
	222	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 and half year ended September 30, 2006, an amount of Rs. 5 crore and Rs.9 crore (for the quarter and half year ended September 30, 2005 Rs. 4 crore and Rs. 7 crore) 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 and half year ended September 30, 2006 and September 30, 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		Half-year ended
Particulars	September 30,		September 30,
	2006	2005	2006	2005
Capital	-	-	-	-
Revenue	41	25	72	51
	41	25	72	51

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

1998 Stock Option Plan ("the 1998 Plan")
The 1998 Plan was approved by the Board of Directors in December 1997 and by the shareholders in January 1998, and is for issue of 1,17,60,000 ADSs representing 1,17,60,000 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		Half-year ended
	September 30,		September 30,
	2006	2005	2006	2005
Options outstanding, beginning of period	42,49,610	59,08,936	45,46,480	61,08,580
Granted	-	-	-	-
Less: exercised	(495,021)	(376,496)	(675,571)	(547,460)
forfeited	(21,040)	(38,976)	(137,360)	(67,656)
Options outstanding, end of period	37,33,549	54,93,464	37,33,549	54,93,464

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 5,28,00,000 equity shares to the employees. The compensation committee administers the 1999 Plan. Options will be issued to employees at an exercise price that is not less than the fair market value.

Number of options granted, exercised and forfeited during the	Quarter ended		Half-year ended
	September 30,		September 30,
	2006	2005	2006	2005
Options outstanding, beginning of period	1,67,52,788	2,64,62,242	1,91,79,074	2,81,09,874
Granted	-	-	-	-
Less: exercised	(1,603,628)	(2,096,794)	(3,999,470)	(3,630,466)
forfeited	(22,821)	(117,072)	(53,265)	(231,032)
Options outstanding, end of period	1,51,26,339	2,42,48,376	1,51,26,339	2,42,48,376

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

Infosys BPO's 2002 Plan
Infosys BPO's 2002 Plan provides for the grant of stock options to employees of Infosys BPO 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 Infosys BPO. 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 Infosys BPO's 2002 Plan during the quarter and half year ended September 2006 and 2005 :-

Number of options granted, exercised and forfeited	Quarter ended		Half-year ended
	September 30,		September 30,
	2006	2005	2006	2005
Options outstanding, beginning of period	28,70,230	37,62,775	24,52,330	31,16,518
Granted	-	1,05,000	5,93,300	8,08,300
Less: exercised	(91,929)	(358,762)	(234,029)	(365,512)
forfeited	(208,562)	(240,913)	(241,862)	(291,206)
Options outstanding, end of period	25,69,739	32,68,100	25,69,739	32,68,100

Proforma Accounting for Infosys BPO 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, Infosys BPO 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 Infosys BPO'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		Half-year ended
Particulars	September 30,		September 30,
	2006	2005	2006	2005
Net Profit:
As Reported	929	606	1,729	1,137
Less: Stock-based employee compensation expense	2	1	3	2
Adjusted Proforma	927	605	1,726	1,135
Basic Earnings per share as reported	16.75	11.13	31.11	20.94
Proforma Basic Earnings per share	16.37	11.11	30.39	20.87
Diluted Earnings per share as reported	16.75	10.82	31.23	20.35
Proforma Earnings per share as reported	16.37	10.80	30.50	20.27

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

	Quarter ended		Half-year ended
Particulars	September 30,		September 30,
	2006*	2005	2006	2005
Dividend yield %	-	0.00%	0.00%	0.00%
Expected life	-	1-6 years	1-6 years	1-6 years
Risk free interest rate	-	7.06%	8.11%	6.90%-7.06%
Volatility	-	50.00%	50.00%	50.00%

* No grants were made during the quarter

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 Infosys BPO's operations are conducted through Software Technology Parks ("STPs"). Income from STPs are tax exempt for the earlier of 10 years commencing from the fiscal year in which the unit commences software development, or March 31, 2009.

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

22.2.9 Loans and advances

in Rs. Crore
	As at
Particulars	September 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	8	16
Life Insurance Corporation of India	121	80
	647	607
Interest accrued but not due (included above)	2	-

Mr. Deepak M. Satwalekar, Director, is also a Director of HDFC Limited. Except as director in this financial institution, he has no direct interest in any transactions.

Deposit with Life Insurance Corporation of India represents amount deposited 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 September 30, 2006 and September 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 September 30, 2006.

22.2.11. Details of Investments
Details of investments in and disposal of securities during the quarter and half year ended September 30, 2006 and 2005:-

in Rs crore
	Quarter ended		Half-year ended
Particulars	September 30,		September 30,
	2006	2005	2006	2005
Investment in securities
Liquid Mutual funds	1,284	1,341	2,996	1,621
	1,284	1,341	2,996	1,621
Redemption / Disposal of Investment in securities
Liquid Mutual funds	104	347	936	502
	104	347	936	502
Net movement in investment	1,180	994	2,060	1,119

22.2.12. Holding of Infosys in its subsidiaries

Name of the subsidiary	Country of	Holding as at
	incorporation	September 30, 2006	March 31, 2006
Infosys BPO Ltd	India	96.70%	71.74%
Infosys Technologies ( Australia) Pty Ltd.	Australia	100%	100%
Infosys Technologies ( China) Co. Ltd.	China	100%	100%
Infosys Consulting Inc.	USA	100%	100%
Progeon s.r.o.*	Czech Republic	96.70%	71.74%

* Progeon s.r.o is a wholly owned subsidiary of Infosys BPO Ltd.

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 September 30, 2006, the company has provided for doubtful debts of Rs. 1 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 IT services and Business Process Management, delivered to customers globally operating in various industry segments. Accordingly, revenues represented along industry classes comprise the primary basis of segmental information set out in these financial statements. Secondary segmental reporting is performed on the basis of the geographical location of customers.

The accounting principles consistently used in the preparation of the financial statements are also consistently applied to record income and expenditure in individual segments. These are as set out in the note on significant accounting policies.

Industry segments at the Group are primarily financial services comprising customers providing banking, finance and insurance services; manufacturing companies; companies in the telecommunications and the retail industries; and others such as utilities, transportation and logistics companies.

Income and direct expenses in relation to segments is categorized based on items that are individually identifiable to that segment, while the remainder of the costs are categorized in relation to the associated turnover of the segment. Certain expenses such as depreciation, which form a significant component of total expenses, are not specifically allocable to specific segments as the underlying services are used interchangeably. The Group believes that it is not practical to provide segment disclosures relating to those costs and expenses, and accordingly these expenses are separately disclosed as "unallocated" and directly charged against total income.

Fixed assets used in the business or liabilities contracted have not been identified to any of the reportable segments, as the fixed assets and services are used interchangeably between segments. Accordingly, no disclosure relating to total segment assets and liabilities are made.

Customer relationships are driven based on the location of the respective client. North America comprises the United States of America, Canada and Mexico; Europe includes continental Europe (both the east and the west), Ireland and the United Kingdom; and the Rest of the World comprising all other places except, those mentioned above and India.

Geographical revenues are segregated based on the location of the customer who is invoiced or in relation to which the revenue is otherwise recognized.

Industry segments
Quarter ended September 30, 2006 and 2005:

in Rs. Crore
	Financial services	Manufacturing	Telecom	Retail	Others	Total
Revenues	1,293	485	651	312	710	3,451
	819	309	383	241	542	2,294
Identifiable operating expenses	552	207	247	134	274	1,414
	343	135	140	96	222	936
Allocated expenses	348	130	175	84	191	928
	221	81	95	69	158	624
Segmental operating income	393	148	229	94	245	1,109
	255	93	148	76	162	734
Unallocable expenses						122
						96
Operating income						987
						638
Other income (expense), net						66
						43
Net profit before taxes and exceptional items						1,053
						681
Income taxes						123
						69
Net profit after taxes and before exceptional items						930
						612
Income from sale of investments (net of taxes)						6
						-
Net profit after taxes, exceptional items and before minority interest						936
612

Half-year ended September 30, 2006 and 2005:

in Rs. Crore
	Financial services	Manufacturing	Telecom	Retail	Others	Total
Revenues	2,402	921	1,182	605	1,356	6,466
	1,571	585	739	439	1,032	4,366
Identifiable operating expenses	1,057	391	442	260	553	2,703
	661	262	279	183	417	1,802
Allocated expenses	656	251	323	165	370	1,765
	416	149	181	118	302	1,166
Segmental operating income	689	279	417	180	433	1,998
	494	174	279	138	313	1,398
Unallocable expenses						228
						176
Operating income						1,770
						1,222
Other income (expense), net						191
						71
Net profit before taxes and exceptional items						1,961
						1,293
Income taxes						229
						150
Net profit after taxes and before exceptional items						1,732
						1,143
Income from sale of investments (net of taxes)						6
						-
Net profit after taxes, exceptional items and before minority interest						1,738
1,143

Geographic segments

Quarter ended September 30, 2006 and 2005:

in Rs. Crore
	North America	Europe	India	Rest of the World	Total
Revenues	2,200	892	53	306	3,451
	1,501	542	34	217	2,294
Identifiable operating expenses	941	355	12	106	1,414
	618	220	17	81	936
Allocated expenses	592	240	14	82	928
	398	134	8	84	624
Segmental operating income	667	297	27	118	1,109
	485	188	9	52	734
Unallocable expenses					122
					96
Operating income					987
					638
Other income (expense), net					66
					43
Net profit before taxes and exceptional items					1,053
					681
Income taxes					123
					69
Net profit after taxes and before exceptional items					930
					612
Income from sale of investments (net of taxes)					6
					-
Net profit after taxes, exceptional items and before minority interest					936
612

Half-year ended September 30, 2006 and 2005:

in Rs. Crore
	North America	Europe	India	Rest of the World	Total
Revenues	4,131	1,681	94	560	6,466
	2,818	1,037	83	428	4,366
Identifiable operating expenses	1,794	673	32	204	2,703
	1,187	421	36	158	1,802
Allocated expenses	1,128	459	25	153	1,765
	730	252	20	164	1,166
Segmental operating income	1,209	549	37	203	1,998
	901	364	27	106	1,398
Unallocable expenses					228
					176
Operating income					1,770
					1,222
Other income (expense), net					191
					71
Net profit before taxes and exceptional items					1,961
					1,293
Income taxes					229
					150
Net profit after taxes and before exceptional items					1,732
					1,143
Income from sale of investments (net of taxes)					6
					-
Net profit after taxes, exceptional items and before minority interest					1,738
1,143

22.2.15. Dividends remitted in foreign currencies
Infosys does not make any direct remittances of dividends in foreign currency. The company remits the equivalent of the dividends payable to the holders of ADS ("ADS holders") in Indian Rupees to the depositary bank, which is the registered shareholder on record for all owners of the company's ADSs. The depositary bank purchases the foreign currencies and remits dividends to the ADS holders.

Particulars of dividends remitted:-

in Rs. crore
Particulars	Number of shares to which the dividends relate	Quarter ended		Half-year ended
		September 30,		September 30,
		2006	2005	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	-

22.2.16. Conversion of cumulative preference shares in Infosys BPO
Infosys BPO 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 Infosys BPO 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 Infosys BPO 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.

22.2.17. Provisions for investments
The Company evaluates all investments for any diminution in their carrying values that is other than temporary. The company made a provision of Rs.nil and Rs. 2 crore during the quarter and half year ended September 30, 2006 (for the quarter and half year ended September 30, 2005 NIL ) on trade investments.

The company provided Rs. 0.03 crore and Rs. 1 crore during the quarter and half year ended September 30, 2006 (for the quarter and half year ended September 30, 2005 Rs.1 crore and Rs.1 crore respectively) on revision of the carrying amount of non-trade current investments to fair value.

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

At the annual general meeting held on June 10, 2006, the shareholders approved a 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 was July 14, 2006 and shares were allotted on July 15, 2006. All basic and diluted shares used in determining earnings per share are after considering the effect of bonus issue.

in Rs. crore
	Quarter ended		Half-year ended
	September 30,		September 30,
	2006	2005	2006	2005
Number of shares considered as basic weighted average shares outstanding	55,47,72,296	54,42,02,438	55,37,98,511	54,30,96,662
Add: Effect of dilutive issues of shares/stock options	1,29,73,744	1,58,58,862	1,31,43,886	1,57,93,928
Number of shares considered as weighted average shares and potential shares outstanding	56,77,46,039	56,00,61,300	56,69,42,396	55,88,90,590

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 half year ended September 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 half year ended September 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
Particulars	Half year ended
	September 30, 2006
Obligations at period beginning	183
Service Cost	23
Interest cost	7
Actuarial (gain)/loss	(1)
Benefits paid	(7)
Obligations at period end	205
Defined benefit obligation liability as at the balance sheet is wholly funded by the company
Change in plan assets
Plans assets at period beginning, at fair value	170
Expected return on plan assets	7
Actuarial gain/(loss)	2
Contributions	41
Benefits paid	(7)
Plans assets at period end, at fair value	213
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	213
Present value of the defined benefit obligations at the end of the period	205
Asset recognized in the balance sheet	8
Gratuity cost for the period
Service cost	23
Interest cost	7
Expected return on plan assets	(7)
Actuarial (gain)/loss	(2)
Net gratuity cost	21
Investment details of plan assets
100% of the plan assets are invested in debt instruments.
Assumptions
Interest rate	7.62%
Estimated rate of return on plan assets	7.62%

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. 3 crore as at September 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 September 30, 2006 include an amount of Rs. 121 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
		September 30, 2006	March 31, 2006
3	Fixed assets
	Deductions/retirements
	Land: free-hold	-	0.01
	Plant and machinery	0.06	-
	Furniture and fixtures	0.05	-
	Depreciation
	Vehicles	1.00	0.19
7	Cash on hand	0.05	0.04
8	Unsecured, considered doubtful
	Advance to gratuity trust	-	-
	Loans and advances to employees	-	0.50
	Provision for doubtful loans and advances to employees	-	0.50
22.2.9	Loans & Advances
	Interest accrued but not due - Deposits with Financial Institutions and Body Corporates	-	0.10

Profit & Loss Items

in Rs. Crore
		Quarter ended		Half-year ended
Schedule	Description	September 30,		September 30,
		2006	2005	2006	2005
Profit & Loss	Provision for investments	0.22	-	3.02	-
12	Selling and Marketing expenses
	Contribution to provident and other funds	0.76	0.42	1.45	0.57
	Advertisements	1.22	0.43	2.03	0.92
	Printing & Stationery	0.34	0.47	0.83	1.03
	Sales promotion expenses	0.61	0.38	0.91	0.64
	Office maintenance	0.02	0.05	0.13	0.29
	Insurance charges	0.08	0.11	0.10	0.22
	Computer maintenance	0.05	0.00	0.05	0.00
	Staff welfare	0.58	0.33	1.38	0.44
	Software Packages
	for Own Use	0.42	0.01	0.42	0.07
	Communication Expenses	0.29	0.29	0.56	0.42
	Consumables	0.10	0.06	0.19	0.13
13	General and Administrative expenses
	Provision for doubtful loans and advances	(0.06)	0.08	0.10	0.15
	Commission to non-whole time directors	0.57	0.38	1.10	0.78
	Auditor's remuneration :
	statutory audit fees	0.37	0.27	0.64	0.53
	out-of-pocket expenses	0.02	0.01	0.04	0.01
	Freight charges	0.23	0.23	0.45	0.41
	Research grants	3.29	0.12	4.98	0.21
	Software packages
	for own use	-	0.30	-	0.30
	Bank charges and commission	0.67	0.46	1.01	0.65
20	Provision for investments	0.22	0.51	3.02	0.57
22.2.1	Aggregate expenses
	Provision for doubtful loans and advances	(0.06)	0.08	0.10	0.15
	Commission to non-whole time directors	0.57	0.38	1.10	0.69
	Sales promotion expenses
	Auditor's remuneration
	statutory audit fees	0.37	0.27	0.64	0.53
	out-of-pocket expenses	0.02	0.01	0.04	0.01
	Bank charges and commission	0.67	0.46	1.01	0.65
	Freight charges	0.23	0.23	0.45	0.41
	Research grants	3.29	0.12	4.98	0.21
22.2.10	Profit on disposal of fixed assets, included in miscellaneous income	-	0.18	0.04	0.23
	Loss on disposal of fixed assets, included in miscellaneous expenses	-	(0.03)	(0.01)	(0.03)
22.2.17	Provision for investments	0.22	0.51	3.02	0.57

Cash Flow Statement Items

Schedule	Description		For the Half year ended
			September 30,
		2006	2005
Cash Flow	Profit/ loss on sale of fixed assets	-	0.20
Statement	Provisions for investments	3.02	0.57
	Proceeds on disposal of fixed assets	3.92	0.25

Transactions with key management personnel

Key management personnel comprise our directors and statutory officers.

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

( figures in italics are corresponding to the quarter and half year ended September 30, 2005)

Name	Salary	Contributions to provident and other funds	Perquisites and incentives	Total Remuneration
Chairman and Chief Mentor
N R Narayana Murthy*	0.02	0.01	0.10	0.13
	0.03	0.01	0.05	0.09
	0.06	0.02	0.21	0.29
	0.06	0.02	0.11	0.19
Chief Executive Officer and Managing Director
Nandan M Nilekani	0.04	0.01	0.08	0.13
	0.03	0.01	0.05	0.09
	0.08	0.02	0.19	0.29
	0.06	0.02	0.11	0.19
President , Chief Operating Officer and Joint Managing Director
S Gopalakrishnan	0.04	0.01	0.08	0.13
	0.03	0.01	0.05	0.09
	0.08	0.02	0.20	0.30
	0.06	0.02	0.12	0.20
Whole-time Directors
K Dinesh	0.03	0.01	0.08	0.12
	0.03	0.01	0.05	0.09
	0.06	0.02	0.19	0.27
	0.06	0.02	0.10	0.18
S D Shibulal	0.04	0.01	0.08	0.13
	0.23	-	0.14	0.37
	0.07	0.02	0.16	0.25
	0.45	-	0.14	0.59
T V Mohandas Pai	0.06	0.01	0.14	0.21
	0.05	0.02	0.11	0.18
	0.12	0.04	0.35	0.51
	0.10	0.04	0.22	0.36
Srinath Batni	0.05	0.01	0.12	0.18
	0.04	0.02	0.10	0.16
	0.10	0.02	0.30	0.42
	0.08	0.03	0.19	0.30
Chief Financial Officer
V Balakrishnan	0.05	0.01	0.09	0.15
	0.03	0.01	0.08	0.12
	0.09	0.02	0.27	0.38
	0.06	0.02	0.22	0.30

* Wholetime director till August 20, 2006

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

Name	Commission	Sitting fees	Reimbursement of expenses	Total remuneration
Non-Whole time Directors
Deepak M Satwalekar	0.06	-	-	0.06
	0.05	-	-	0.05
	0.12	-	-	0.12
	0.09	0.01	-	0.10
Prof. Marti G Subrahmanyam	0.06	-	0.02	0.08
	0.04	-	0.02	0.06
	0.12	-	0.05	0.17
	0.08	-	0.07	0.15
Philip Yeo	-	-	-	-
	-	-	-	-
	-	-	-	-
	0.03	-	-	0.03
Dr. Omkar Goswami	0.05	-	0.01	0.06
	0.04	0.01	0.01	0.06
	0.10	-	0.01	0.11
	0.08	0.01	0.02	0.11
Sen.Larry Pressler	0.02	-	-	0.02
	0.04	-	-	0.04
	0.03	-	0.03	0.06
	0.08	-	-	0.08
Rama Bijapurkar	0.06	-	-	0.06
	0.04	-	-	0.04
	0.12	-	0.01	0.13
	0.08	-	-	0.08
Claude Smadja	0.06	-	0.04	0.10
	0.04	-	0.05	0.09
	0.12	-	0.13	0.25
	0.08	-	0.08	0.16
Sridar A Iyengar	0.09	-	0.01	0.10
	0.07	-	0.04	0.11
	0.17	-	0.08	0.25
	0.14	-	0.11	0.25
Jeffrey Lehman	0.05	-	-	0.05
	-	-	-	-
	0.10	-	-	0.10
	-	-	-	-
David Boyles	0.06	-	-	0.06
	0.03	-	-	0.03
	0.12	-	-	0.12
	0.03	-	-	0.03
N R Narayana Murthy*	0.03	-	-	0.03
	-	-	-	-
	0.03	-	-	0.03
	-	-	-	-

* Appointed as Additional Director effective August 21, 2006.