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 March 31, 2016
Commission File Number 001-35754
Infosys Limited
(Exact name of Registrant as specified in its charter)
Not Applicable
(Translation of Registrant's name into English)
Electronics City, Hosur Road, Bangalore - 560 100, Karnataka, India. +91-80-2852-0261
(Address of principal executive offices)
Indicate by check mark whether the 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 if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1) : o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7) : o
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 and year ended March 31, 2016.
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 April 15, 2016, we announced our results of operations for the quarter and year ended March 31, 2016. We issued press releases announcing our results under International Financial Reporting Standards (“IFRS”) in U.S. dollars and Indian rupees, copies of which are attached to this Form 6-K as Exhibits 99.1 and 99.2, respectively.
On April 15, 2016, we held a press conference to announce our results, which was followed by a question and answer session. The transcript of this press conference is attached to this Form 6-K as Exhibit 99.3.
On April 15, 2016, the leadership team were part of a common television interaction in which they answered questions from the media. The transcript of this interaction is attached to this Form 6-K as Exhibit 99.4.
We have also made available to the public on our web site, www.infosys.com, a fact sheet that provides details on our profit and loss account summary for the quarters and years ended March 31, 2016 and 2015 (as per IFRS); revenue by geographical segment, service offering, project type, and industry classification; information regarding our client concentration; employee information and metrics; infrastructure information; and consolidated IT services information. We have attached this fact sheet to this Form 6-K as Exhibit 99.5.
On April 15, 2016, 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.
We placed form of releases to stock exchanges and advertisements in certain Indian newspapers concerning our results of operations for the quarter and year ended March 31, 2016, under IFRS and IGAAP. A copy of these releases to Stock Exchanges and advertisement is attached to this Form 6-K as Exhibit 99.8.
We have made available to the public on our web site, www.infosys.com, the following: Unaudited Condensed Financial Statements in compliance with IFRS; Audited Financial Statements in compliance with IFRS in Indian Rupees and the Auditors Report; Indian GAAP Standalone Balance Sheet, Standalone Statement of Profit and Loss, Standalone Cash Flow Statement, Notes on Accounts and Auditors Report for the year ended March 31, 2016 ; Indian GAAP Consolidated Balance Sheet, Consolidated Statement of Profit and Loss, Consolidated Cash Flow Statement, Consolidated Notes on Accounts and Auditors Report for the year ended March 31, 2016. We have attached these documents to this Form 6-K as Exhibits 99.9, 99.10, 99.11 and 99.12 respectively.
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 Limited /s/ David D. Kennedy | |
Date: April 20, 2016 | David D. Kennedy Executive Vice President - General Counsel and Chief Compliance Officer |
Exhibit No. | Description of Document |
99.1 | IFRS USD Press Release |
99.2 | IFRS INR Press Release |
99.3 | Transcript of April 15, 2016 Press Conference |
99.4 | Transcript of April 15, 2016 television interaction |
99.5 | Fact Sheet regarding Registrant's Profit and Loss Account Summary for the quarters and years ended March 31, 2016 and 2015 (as per IFRS); Revenue by Geographical Segment, Service Offering, Project Type, and Industry Classification; Information regarding Client Concentration; Employee Information and Metrics; Infrastructure Information; and Consolidated IT Services Information |
99.6 | Transcript of April 15, 2016 11:30 a.m. IST Earnings Call |
99.7 | Transcript of April 15, 2016 6:00 p.m. IST Earnings Call |
99.8 | Form of releases to Stock Exchanges and advertisement placed in Indian newspapers |
99.9 | Unaudited Condensed Financial Statements in compliance with IFRS |
99.10 | Audited Financial Statements in compliance with IFRS in Indian Rupees and the Auditors Report |
99.11 | Indian GAAP Standalone Balance Sheet, Standalone Statement of Profit and Loss, Standalone Cash Flow statement, Notes on Accounts and Auditors Report for the quarter and year ended March 31, 2016 |
99.12 | Indian GAAP Consolidated Balance Sheet, Consolidated Statement of Profit and Loss, Consolidated Cash Flow Statement, Consolidated Notes to Accounts and Auditors Report for the year ended March 31, 2016. |
Exhibit 99.1
IFRS USD Press Release
Infosys (NYSE: INFY) Announces Results for the Quarter and Year ended March 31, 2016
Q4 Revenue growth at 1.6% qoq in USD terms; 1.9% in constant currency terms
Q4 operating margin at 25.5%; increase of 0.6% from Q3 operating margin of 24.9%
FY 16 Revenue growth at 9.1% in USD terms; 13.3% in constant currency terms
FY 17 revenue guidance at 11.5%-13.5% in constant currency and 11.8%-13.8% in USD terms at March 31, 2016 exchange rates
Board recommended a final dividend of 14.25 per share
Bangalore, India – April 15, 2016
Financial Highlights
Consolidated results under International Financial Reporting Standards (IFRS) for the quarter and year ended March 31, 2016
Quarter ended March 31, 2016
· | Revenues were $ 2,446 million for the quarter ended March 31, 2016 QoQ growth was 1.6% in reported terms; 1.9% in constant currency terms YoY growth was 13.3% in reported terms; 15.0% in constant currency terms |
· | Operating profit was $ 625 million for the quarter ended March 31, 2016 QoQ growth was 4.3% YoY growth was 12.6% |
· | Net profit was $ 533 million for the quarter ended March 31, 2016 QoQ growth was 1.7% YoY growth was 7.0% |
· | Earnings per share (EPS) was $ 0.23 for the quarter ended March 31, 2016 QoQ growth was 1.7% YoY growth was 7.0% |
Year ended March 31, 2016 | |
· | Revenues were $ 9,501 million for the year ended March 31, 2016 YoY growth was 9.1% in reported terms; 13.3% in constant currency terms |
· | Operating profit was $ 2,375 million for the year ended March 31, 2016 YoY growth was 5.2% |
· | Net profit was $ 2,052 million for the year ended March 31, 2016 YoY growth was 1.9% |
· | Earnings per share (EPS) was $ 0.90 for the year ended March 31, 2016 YoY growth was 1.9% |
· | Liquid assets including cash and cash equivalents, available-for-sale financial assets and government bonds were $ 5,202 million as on March 31, 2016 as compared to $ 4,765 million as on December 31, 2015 and $ 5,214 million as on March 31, 2015 |
· | The Board of Directors recommended a final dividend of 14.25 per share for fiscal 2016. This translates to a final dividend of $ 0.22 per share (at USD-INR rate of 66.26). |
“I am proud of our company’s achievements in my first fiscal year as CEO of Infosys. At the same time, I am humbled by the task that is still in front of us. We started the year just two quarters into a strategy to completely reimagine the notion of services and to transform Infosys. Over the course of this year, we saw this strategy, of bringing automation and innovation to our clients, on a foundation of learning and education, start to show results in the organic growth of our client relationships, in our win rates in large deals, and in the types of projects we are seeing in strategic areas where we never participated before. I am proud of what our teams have achieved this quarter and in the year," said Dr. Vishal Sikka, CEO. "And yet despite these heartening results, they are still based on metrics of the past, of the way the industry has been. The world of our future looks entirely different – it is a world that is being fundamentally reshaped by digital technologies, and it is our endeavor to create great value for every business through solutions built on our AI technology and open, cloud platforms, to have Infoscions amplified by intelligent technology, to bring purposeful innovation to life, and in that sense, we are still very much at the beginning of this journey.”
“Employee attrition reduced further in Q4, and is reflective of increased engagement with our people all through the year, and our steps to make Infosys an exciting place for the world’s best talent. We continue to reimagine our internal processes to increase organizational agility.” said U B Pravin Rao, COO. “The momentum of large deal wins continued this quarter and bookings were strong.”
“Our growth trajectory improved in FY 16 and we navigated the external business environment well. We will continue to focus on leveraging operational efficiency levers for consistent profitable growth.” said M.D. Ranganath, CFO. “During the quarter, cash generation was strong. We managed a volatile currency environment effectively.”
Outlook*
The Company’s outlook (consolidated) for the fiscal year ending March 31, 2017, under IFRS is as follows:
· | Revenues are expected to grow 11.5%-13.5% in constant currency*; |
· | Revenues are expected to grow 11.8%-13.8% in USD terms based on the exchange rates as of March 31, 2016** |
*AUD/USD – 0.73; Euro/USD – 1.10; GBP/USD – 1.51
**AUD/USD – 0.77; Euro/USD – 1.14; GBP/USD – 1.44
Management Changes
The Company announced that Mr. Mohit Joshi, Mr. Ravi Kumar S and Mr. Sandeep Dadlani have been appointed as Presidents of the company effective immediately.
Business Highlights
This quarter we made significant advances in our strategy to deliver automation and innovation through our traditional and new service offerings, our platforms and tools, and through investments in the broader ecosystem – enabling us to create more depth in existing client relationships, win more deals and specifically large deals, and open up entirely new types of strategic projects for Infosys.
Driving depth in client relationships, and winning large deals
· | ConAgra Foods, Inc., one of North America’s leading packaged food companies, chose us as a strategic partner for a multi-year managed services deal that will support ConAgra’s Application, Infrastructure and Information Security systems. The design-thinking led solution will leverage Panaya and the Infosys Automation Platform (IAP) to help the client reduce total effort in support, upgrade and testing and will drive innovation, improve service levels, and reduce operating costs. |
· | For Welsh Water, a large utilities company, we will be responsible for the setup, migration and execution of data center facilities and services, managing over 400 critical network links, business applications, server and storage management. We will also transform and manage the client’s internal network communications and IP telephony services and infrastructure. The deal includes managing all projects in the client’s IT ecosystem including virtualization, operating system strategy, database platforms and more. |
Growing momentum in new services, platforms and tools
We continued to see new strategic projects coming to Infosys based on our Aikido service offerings as well as our platforms and tools.
IIP – Completed more than 220 engagements leveraging IIP; announced availability of IIP on AWS.
This quarter we announced the availability of IIP on Amazon Web Services Marketplace (AWS Marketplace). Businesses will now be able to gain robust data insights quickly, while tapping into the flexibility and the lower cost of a cloud-based platform.
Hershey’s LLC, North America’s largest chocolate manufacturer, recently used IIP on AWS to analyze retail store data. The company wanted to gain valuable, revenue-generating insight faster than a traditional analytics implementation could deliver.
Hershey needed to establish its Hadoop landscape and extend its analytics and big data capabilities quickly. Partnering with the client, we had the landscape up and the data lake seeded for their analysts in less than a week. Using the Infosys Information Platform on AWS accelerated the deployment by weeks
IAP – More than 125 engagements in IAP across segments; 21 additional deployments in this quarter across key accounts.
Johnson Controls (JCI) is transforming the role IT plays in accelerating growth and delivering value to the business. One of JCI’s goals for this transformation is to drive and improve efficiency across the enterprise through Automation. Infosys is helping JCI in this journey to delivery leading edge Enterprise Automation capabilities. JCI will automate business processes, with the help of Infosys’s industry leading tools and services including Self-service, Robotic and Assisted Automation, Predictive Diagnostics, and Self-Healing capabilities.
Panaya, Skava & EdgeVerve
Panaya and Skava continued to gain traction both as part of large client engagements where these products were central to the value proposition, and as standalone deals.
· | Cummins, a global power leader that designs, manufactures, sells and services diesel engines and related technology globally, chose us as a partner to execute its Brazilian Oracle upgrade program. Rosane Rodrigues, CIO, Cummins Brazil commented, “Our Brazilian oracle instance has all the complexities needed to support our local business, with more than 5000+ objects, catering to different product lines and supporting 2500+ users in South America. Risk of disruption to our business was a major concern. We wanted to make sure we partnered with a service provider who has in depth Oracle knowledge, understanding of localization requirements and more importantly someone who could demonstrate their ability to de-risk the upgrade project by using advanced tools. The Panaya based detailed impact analysis that Infosys presented to us prior to start of the project gave us the confidence that they exactly knew what was going to break and how to fix it. With their upgrade methodology and cloud based impact assessment tools like Panaya, Infosys is leading the way in minimizing risk involved in software changes.” |
· | Aimia Inc., a global leader in data-driven marketing and loyalty analytics, has chosen us as strategic partner for a multi-year managed services deal to deliver product engineering, maintenance and support services of various Aimia platforms and solutions. Liz Graham, EVP Operations and Strategic Initiatives at Aimia said, “We have chosen Infosys’ Skava platform to implement Omni-channel Digital marketing solution for its nimbleness and ability to work in a test-and-learn manner. We look forward for a great partnership with Infosys and leveraging Skava platform in other digital initiatives.” |
This quarter the EdgeVerve business sustained momentum with 18 wins and 24 go-lives for both the Finacle and Edge suite of solutions across various market regions.
· | Lesley Secretan Director and COO of Bank Leumi (UK) plc said, “Finacle Corporate e-banking will provide us with a complete and modern e-banking solution for our changing corporate banking requirements. We chose Finacle for its out-of-the box capabilities, enhanced functionality, agile implementation approach, and the ability to work on multiple platforms. Over the years, Infosys Finacle has demonstrated extensive experience in the market, having worked on complex projects with leading banks globally. Perhaps more importantly, we chose Finacle because we liked its look and feel and felt it will be appreciated by our customers once the solution is deployed.” |
Design-led services – Now in every engagement and rapidly reaching all our clients.
In the last quarter, we saw a significant increase in the adoption of Design Thinking by our clients globally. More than 225 Design Thinking workshops have been conducted to date, with more than 10 design led transformation programs this quarter from across industry segments. A very significant development is that our clients are increasingly engaging with our consultants to develop and execute strategic business transformation ideas and initiatives.
Building a Culture of Innovators
Zero Distance – Covers more than 95% of the projects base lined and managed by Infosys.
Zero Distance, our program to drive innovation in every project, empowering all employees to be innovators, now covers almost all projects and is establishing a new way to achieve project management excellence.
Jeroen Korstanje, IT Change Manager Enterprise Content Management, ABN AMRO, said, “We have been partnering with Infosys over 10 years. In the last 3 years our partnership has reached a higher maturity and we are truly acting as partners. The Zero Distance and Design Thinking movement within the Infosys organization is adding additional value to the partnership. Looking pro-actively at opportunities to make the work easier and automate as much as possible we already implemented a number of improvements. To strengthen the partnership even more we jointly trained all staff in the Enterprise Content Management area in Zero Distance and Design Thinking. I am confident that this will bring even more value to the bank as a whole.”
Extending the Reach through our Ecosystem
This quarter we announced an investment of USD 4 million in Waterline Data Science, a leading provider of data discovery and data governance software. This investment is testimony to our efforts to bring innovative data science solutions across our platforms and offerings, and commitment to deliver greater business value for our clients from their Big Data assets.
Awards and Recognition
· | Ranked a “Leader in the Winner’s Circle – Excellent at Innovation and Execution,” in HfS’s Research Blueprint: Design Thinking in the As-A-service Economy. |
· | Infosys ReachOut solution selected by The American Council for Technology - Industry Advisory Council (ACT-IAC) as one of the top 40 finalists for its Igniting Innovation 2016 Awards. . Infosys ReachOut is a device agnostic web-based application that connects people-in-need with assistance and resources in real-time. |
· | Infosys Finacle rated as a Market Leader in Ovum’s Core Banking Decision Matrix for Europe. |
· | Infosys Finacle positioned as one of the top selling solution in IBS Sales League 2016. |
· | Infosys Finacle recognized for Best Innovations in Digital Initiative – Middle and Back Office and the Best Islamic Banking Technology Provider in the Middle East at the 2016 Private Banking Middle East Awards. |
· | Awarded Tableau GSI partner of the year; Hitachi Data Systems Innovation Partner of the Year. |
Beyond Business
In fiscal 2016 over 216 crore ($ 33 million) contributed by Infosys has been utilized across projects related to healthcare, education, culture, destitute care and rural development. In addition, the company has spent 86 crore ($ 13 million) on multiple initiatives including Chennai flood disaster relief, environment sustainability and conservation of natural resources aimed at long term sustainability of eco system.
As part of its mission to better prepare all students for an increasingly digital future, Infosys Foundation USA continued to engage with local communities and invest in computer science related programs. The Foundation announced a grant of $1M in partnership with NSF to support Computer Science (CS) professional development for teachers. This collaboration will provide opportunities for as many as 2,000 school teachers to deepen their understanding of CS.
About Infosys Ltd
Infosys is a global leader in consulting, technology, outsourcing and next-generation services. We enable clients, in more than 50 countries, to stay a step ahead of emerging business trends and outperform the competition. We help them transform and thrive in a changing world by co-creating breakthrough solutions that combine strategic insights and execution excellence.
Visit www.infosys.com to see how Infosys (NYSE: INFY), with US$ 9.5 billion in LTM revenues and 194,000+ employees, is helping enterprises renew themselves while also creating new avenues to generate value.
Safe Harbor
Certain statements in this press release concerning our future growth prospects are forward-looking statements regarding our future business expectations intended to qualify for the 'safe harbor' under the Private Securities Litigation Reform Act of 1995, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, fluctuations in foreign exchange rates, our ability to manage growth, intense competition in IT services including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, industry segment concentration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks or system failures, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which Infosys has made strategic investments, withdrawal or expiration 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, 2015. 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. In addition, please note that the date of this press release is April 15, 2016, and any forward-looking statements contained herein are based on assumptions that we believe to be reasonable as of this date. 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 unless it is required by law.
Contact
Investor Relations |
Sandeep Mahindroo +91 80 3980 1018 Sandeep_Mahindroo@infosys.com |
|
Media Relations |
Sarah Vanita Gideon, India Sarah_Gideon@infosys.com |
Pilar Elvira Wolfsteller +1 510 944 4596 Pilar.Wolfsteller@infosys.com |
Infosys Limited and subsidiaries
Unaudited Condensed Consolidated Interim Balance Sheets as of
(Dollars in millions except equity share data)
March 31, 2016 | March 31, 2015 | |
ASSETS | ||
Current assets | ||
Cash and cash equivalents | 4,935 | 4,859 |
Available-for-sale financial assets | 11 | 140 |
Trade receivables | 1,710 | 1,554 |
Unbilled revenue | 457 | 455 |
Prepayments and other current assets | 672 | 527 |
Derivative financial instruments | 17 | 16 |
Total current assets | 7,802 | 7,551 |
Non-current assets | ||
Property, plant and equipment | 1,589 | 1,460 |
Goodwill | 568 | 495 |
Intangible assets | 149 | 102 |
Investment in Associates | 16 | 15 |
Available-for-sale financial assets | 273 | 215 |
Deferred income tax assets | 81 | 85 |
Income tax assets | 789 | 654 |
Other non-current assets | 111 | 38 |
Total non-current assets | 3,576 | 3,064 |
Total assets | 11,378 | 10,615 |
LIABILITIES AND EQUITY | ||
Current liabilities | ||
Trade payables | 58 | 22 |
Derivative Financial Instruments | 1 | – |
Current income tax liabilities | 515 | 451 |
Client deposits | 4 | 4 |
Unearned revenue | 201 | 168 |
Employee benefit obligations | 202 | 171 |
Provisions | 77 | 77 |
Other current liabilities | 940 | 927 |
Total current liabilities | 1,998 | 1,820 |
Non-current liabilities | ||
Deferred income tax liabilities | 39 | 25 |
Other non-current liabilities | 17 | 8 |
Total liabilities | 2,054 | 1,853 |
Equity | ||
Share capital- 5 ($0.16) par value 2,400,000,000 (1,200,000,000) equity shares authorized, issued and outstanding 2,285,621,088 (1,142,805,132), net of 11,323,576 (5,667,200) treasury shares as of March 31, 2016 (March 31, 2015), respectively | 199 | 109 |
Share premium | 570 | 659 |
Retained earnings | 11,083 | 10,090 |
Other reserves | – | – |
Other components of equity | (2,528) | (2,096) |
Total equity attributable to equity holders of the company | 9,324 | 8,762 |
Non-controlling interests | – | – |
Total equity | 9,324 | 8,762 |
Total liabilities and equity | 11,378 | 10,615 |
Infosys Limited and subsidiaries
Unaudited Condensed Consolidated Interim Statements of Comprehensive Income
(Dollars in millions except share and per equity share data)
Three months ended March 31, 2016 | Three months ended March 31, 2015 | Year ended March 31, 2016 | Year ended March 31, 2015 | |
Revenues | 2,446 | 2,159 | 9,501 | 8,711 |
Cost of sales | 1,516 | 1,317 | 5,950 | 5,374 |
Gross profit | 930 | 842 | 3,551 | 3,337 |
Operating expenses: | ||||
Selling and marketing expenses | 134 | 118 | 522 | 480 |
Administrative expenses | 171 | 169 | 654 | 599 |
Total operating expenses | 305 | 287 | 1,176 | 1,079 |
Operating profit | 625 | 555 | 2,375 | 2,258 |
Other income, net | 114 | 141 | 476 | 560 |
Share in associate's profit / (loss) | – | – | – | – |
Profit before income taxes | 739 | 696 | 2,851 | 2,818 |
Income tax expense | 206 | 198 | 799 | 805 |
Net profit | 533 | 498 | 2,052 | 2,013 |
Other comprehensive income | ||||
Items that will not be reclassified to profit or loss: | ||||
Re-measurement of the net defined benefit liability/(asset) | – | (2) | (2) | (8) |
Items that may be reclassified subsequently to profit or loss: | ||||
Fair value changes on available-for-sale financial asset | 3 | (2) | 6 | 14 |
Exchange differences on translation of foreign operations | 11 | 53 | (436) | (375) |
Total other comprehensive income, net of tax | 14 | 49 | (432) | (369) |
Total comprehensive income | 547 | 547 | 1,620 | 1,644 |
Profit attributable to: | ||||
Owners of the company | 533 | 498 | 2,052 | 2,013 |
Non-controlling interests | – | – | – | – |
533 | 498 | 2,052 | 2,013 | |
Total comprehensive income attributable to: | ||||
Owners of the company | 547 | 547 | 1,620 | 1,644 |
Non-controlling interests | – | – | – | – |
547 | 547 | 1,620 | 1,644 | |
Earnings per equity share | ||||
Basic ($) | 0.23 | 0.22 | 0.90 | 0.88 |
Diluted ($) | 0.23 | 0.22 | 0.90 | 0.88 |
Weighted average equity shares used in computing earnings per equity share | ||||
Basic | 2,285,620,957 | 2,285,610,264 | 2,285,616,160 | 2,285,610,264 |
Diluted | 2,285,750,316 | 2,285,667,252 | 2,285,718,894 | 2,285,642,940 |
NOTE:
1. | The unaudited Condensed Consolidated interim Balance sheets and Condensed Consolidated interim Statements of Comprehensive Income for the three months and year ended March 31, 2016 have been taken on record at the Board meeting held on April 15, 2016 |
2. | A Fact Sheet providing the operating metrics of the company can be downloaded from www.infosys.com |
3. | Previous period share count and EPS has been restated due to issue of bonus shares in Jun-15 |
Exhibit 99.2
IFRS INR Press Release
Infosys (NSE, BSE: INFY) Announces Results for the Quarter and Year ended March 31, 2016
Q4 Revenue growth at 4.1% qoq in INR terms; 1.9% in constant currency terms
Q4 operating margin at 25.5%; increase of 0.6% from Q3 operating margin of 24.9%
FY 16 Revenue growth at 17.1% in INR terms; 13.3% in constant currency terms
FY 17 revenue guidance at 11.5%-13.5% in constant currency and 12.7%-14.7% in INR terms at March 31, 2016 exchange rates
Board recommended a final dividend of 14.25 per share
Bangalore, India – April 15, 2016
Financial Highlights
Consolidated results under International Financial Reporting Standards (IFRS) for the quarter and year ended March 31, 2016
Quarter ended March 31, 2016
· | Revenues were 16,550 crore for the quarter ended March 31, 2016 YoY growth was 23.4% |
· | Operating profit was 4,220 crore for the quarter ended March 31, 2016 YoY growth was 22.4% |
· | Net profit was 3,597 crore for the quarter ended March 31, 2016 QoQ growth was 3.8% YoY growth was 16.2% |
· | Earnings per share (EPS) was 15.74 for the quarter ended March 31, 2016 YoY growth was 16.2% |
Year ended March 31, 2016 | |
· | Revenues were 62,441 crore for the year ended March 31, 2016 YoY growth was 17.1% |
· | Operating profit was 15,620 crore for the year ended March 31, 2016 YoY growth was 12.9% |
· | Net profit was 13,491 crore for the year ended March 31, 2016 YoY growth was 9.4% |
· | Earnings per share (EPS) was 59.03 for the year ended March 31, 2016 YoY growth was 9.4% |
· | Liquid assets including cash and cash equivalents, available-for-sale financial assets and government bonds were 34,468 crore as on March 31, 2016 as compared to 31,526 crore as on December 31, 2015 and 32,585 crore as on March 31, 2015 |
· | The Board of Directors recommended a final dividend of 14.25 per share for fiscal 2016 |
“I am proud of our company’s achievements in my first fiscal year as CEO of Infosys. At the same time, I am humbled by the task that is still in front of us. We started the year just two quarters into a strategy to completely reimagine the notion of services and to transform Infosys. Over the course of this year, we saw this strategy, of bringing automation and innovation to our clients, on a foundation of learning and education, start to show results in the organic growth of our client relationships, in our win rates in large deals, and in the types of projects we are seeing in strategic areas where we never participated before. I am proud of what our teams have achieved this quarter and in the year," said Dr. Vishal Sikka, CEO. "And yet despite these heartening results, they are still based on metrics of the past, of the way the industry has been. The world of our future looks entirely different – it is a world that is being fundamentally reshaped by digital technologies, and it is our endeavor to create great value for every business through solutions built on our AI technology and open, cloud platforms, to have Infoscions amplified by intelligent technology, to bring purposeful innovation to life, and in that sense, we are still very much at the beginning of this journey.”
“Employee attrition reduced further in Q4, and is reflective of increased engagement with our people all through the year, and our steps to make Infosys an exciting place for the world’s best talent. We continue to reimagine our internal processes to increase organizational agility.” said U B Pravin Rao, COO. “The momentum of large deal wins continued this quarter and bookings were strong.”
“Our growth trajectory improved in FY 16 and we navigated the external business environment well. We will continue to focus on leveraging operational efficiency levers for consistent profitable growth.” said M.D. Ranganath, CFO. “During the quarter, cash generation was strong. We managed a volatile currency environment effectively.”
Outlook*
The Company’s outlook (consolidated) for the fiscal year ending March 31, 2017, under IFRS is as follows:
· | Revenues are expected to grow 11.5%-13.5% in constant currency*; |
· | Revenues are expected to grow 12.7%-14.7% in INR terms based on the exchange rates as of March 31, 2016** |
*AUD/USD – 0.73; Euro/USD – 1.10; GBP/USD – 1.51
**Conversion: 1 US$ = 66.26
Management Changes
The Company announced that Mr. Mohit Joshi, Mr. Ravi Kumar S and Mr. Sandeep Dadlani have been appointed as Presidents of the company effective immediately.
Business Highlights
This quarter we made significant advances in our strategy to deliver automation and innovation through our traditional and new service offerings, our platforms and tools, and through investments in the broader ecosystem – enabling us to create more depth in existing client relationships, win more deals and specifically large deals, and open up entirely new types of strategic projects for Infosys.
Driving depth in client relationships, and winning large deals
· | ConAgra Foods, Inc., one of North America’s leading packaged food companies, chose us as a strategic partner for a multi-year managed services deal that will support ConAgra’s Application, Infrastructure and Information Security systems. The design-thinking led solution will leverage Panaya and the Infosys Automation Platform (IAP) to help the client reduce total effort in support, upgrade and testing and will drive innovation, improve service levels, and reduce operating costs. |
· | For Welsh Water, a large utilities company, we will be responsible for the setup, migration and execution of data center facilities and services, managing over 400 critical network links, business applications, server and storage management. We will also transform and manage the client’s internal network communications and IP telephony services and infrastructure. The deal includes managing all projects in the client’s IT ecosystem including virtualization, operating system strategy, database platforms and more. |
Growing momentum in new services, platforms and tools
We continued to see new strategic projects coming to Infosys based on our Aikido service offerings as well as our platforms and tools.
IIP – Completed more than 220 engagements leveraging IIP; announced availability of IIP on AWS.
This quarter we announced the availability of IIP on Amazon Web Services Marketplace (AWS Marketplace). Businesses will now be able to gain robust data insights quickly, while tapping into the flexibility and the lower cost of a cloud-based platform.
Hershey’s LLC, North America’s largest chocolate manufacturer, recently used IIP on AWS to analyze retail store data. The company wanted to gain valuable, revenue-generating insight faster than a traditional analytics implementation could deliver.
Hershey needed to establish its Hadoop landscape and extend its analytics and big data capabilities quickly. Partnering with the client, we had the landscape up and the data lake seeded for their analysts in less than a week. Using the Infosys Information Platform on AWS accelerated the deployment by weeks
IAP – More than 125 engagements in IAP across segments; 21 additional deployments in this quarter across key accounts.
Johnson Controls (JCI) is transforming the role IT plays in accelerating growth and delivering value to the business. One of JCI’s goals for this transformation is to drive and improve efficiency across the enterprise through Automation. Infosys is helping JCI in this journey to delivery leading edge Enterprise Automation capabilities. JCI will automate business processes, with the help of Infosys’s industry leading tools and services including Self-service, Robotic and Assisted Automation, Predictive Diagnostics, and Self-Healing capabilities.
Panaya, Skava & EdgeVerve
Panaya and Skava continued to gain traction both as part of large client engagements where these products were central to the value proposition, and as standalone deals.
· | Cummins, a global power leader that designs, manufactures, sells and services diesel engines and related technology globally, chose us as a partner to execute its Brazilian Oracle upgrade program. Rosane Rodrigues, CIO, Cummins Brazil commented, “Our Brazilian oracle instance has all the complexities needed to support our local business, with more than 5000+ objects, catering to different product lines and supporting 2500+ users in South America. Risk of disruption to our business was a major concern. We wanted to make sure we partnered with a service provider who has in depth Oracle knowledge, understanding of localization requirements and more importantly someone who could demonstrate their ability to de-risk the upgrade project by using advanced tools. The Panaya based detailed impact analysis that Infosys presented to us prior to start of the project gave us the confidence that they exactly knew what was going to break and how to fix it. With their upgrade methodology and cloud based impact assessment tools like Panaya, Infosys is leading the way in minimizing risk involved in software changes.” |
· | Aimia Inc., a global leader in data-driven marketing and loyalty analytics, has chosen us as strategic partner for a multi-year managed services deal to deliver product engineering, maintenance and support services of various Aimia platforms and solutions. Liz Graham, EVP Operations and Strategic Initiatives at Aimia said, “We have chosen Infosys’ Skava platform to implement Omni-channel Digital marketing solution for its nimbleness and ability to work in a test-and-learn manner. We look forward for a great partnership with Infosys and leveraging Skava platform in other digital initiatives.” |
This quarter the EdgeVerve business sustained momentum with 18 wins and 24 go-lives for both the Finacle and Edge suite of solutions across various market regions.
· | Lesley Secretan Director and COO of Bank Leumi (UK) plc said, “Finacle Corporate e-banking will provide us with a complete and modern e-banking solution for our changing corporate banking requirements. We chose Finacle for its out-of-the box capabilities, enhanced functionality, agile implementation approach, and the ability to work on multiple platforms. Over the years, Infosys Finacle has demonstrated extensive experience in the market, having worked on complex projects with leading banks globally. Perhaps more importantly, we chose Finacle because we liked its look and feel and felt it will be appreciated by our customers once the solution is deployed.” |
Design-led services – Now in every engagement and rapidly reaching all our clients.
In the last quarter, we saw a significant increase in the adoption of Design Thinking by our clients globally. More than 225 Design Thinking workshops have been conducted to date, with more than 10 design led transformation programs this quarter from across industry segments. A very significant development is that our clients are increasingly engaging with our consultants to develop and execute strategic business transformation ideas and initiatives.
Building a Culture of Innovators
Zero Distance – Covers more than 95% of the projects base lined and managed by Infosys.
Zero Distance, our program to drive innovation in every project, empowering all employees to be innovators, now covers almost all projects and is establishing a new way to achieve project management excellence.
Jeroen Korstanje, IT Change Manager Enterprise Content Management, ABN AMRO, said, “We have been partnering with Infosys over 10 years. In the last 3 years our partnership has reached a higher maturity and we are truly acting as partners. The Zero Distance and Design Thinking movement within the Infosys organization is adding additional value to the partnership. Looking pro-actively at opportunities to make the work easier and automate as much as possible we already implemented a number of improvements. To strengthen the partnership even more we jointly trained all staff in the Enterprise Content Management area in Zero Distance and Design Thinking. I am confident that this will bring even more value to the bank as a whole.”
Extending the Reach through our Ecosystem
This quarter we announced an investment of USD 4 million in Waterline Data Science, a leading provider of data discovery and data governance software. This investment is testimony to our efforts to bring innovative data science solutions across our platforms and offerings, and commitment to deliver greater business value for our clients from their Big Data assets.
Awards and Recognition
· | Ranked a “Leader in the Winner’s Circle – Excellent at Innovation and Execution,” in HfS’s Research Blueprint: Design Thinking in the As-A-service Economy. |
· | Infosys ReachOut solution selected by The American Council for Technology - Industry Advisory Council (ACT-IAC) as one of the top 40 finalists for its Igniting Innovation 2016 Awards. Infosys ReachOut is a device agnostic web-based application that connects people-in-need with assistance and resources in real-time. |
· | Infosys Finacle rated as a Market Leader in Ovum’s Core Banking Decision Matrix for Europe. |
· | Infosys Finacle positioned as one of the top selling solution in IBS Sales League 2016. |
· | Infosys Finacle recognized for Best Innovations in Digital Initiative – Middle and Back Office and the Best Islamic Banking Technology Provider in the Middle East at the 2016 Private Banking Middle East Awards. |
· | Awarded Tableau GSI partner of the year; Hitachi Data Systems Innovation Partner of the Year. |
Beyond Business
In fiscal 2016 over 216 crore contributed by Infosys has been utilized across projects related to healthcare, education, culture, destitute care and rural development. In addition, the company has spent 86 crore on multiple initiatives including Chennai flood disaster relief, environment sustainability and conservation of natural resources aimed at long term sustainability of eco system.
As part of its mission to better prepare all students for an increasingly digital future, Infosys Foundation USA continued to engage with local communities and invest in computer science related programs. The Foundation announced a grant of $1M in partnership with NSF to support Computer Science (CS) professional development for teachers. This collaboration will provide opportunities for as many as 2,000 school teachers to deepen their understanding of CS.
About Infosys Ltd
Infosys is a global leader in consulting, technology, outsourcing and next-generation services. We enable clients, in more than 50 countries, to stay a step ahead of emerging business trends and outperform the competition. We help them transform and thrive in a changing world by co-creating breakthrough solutions that combine strategic insights and execution excellence.
Visit www.infosys.com to see how Infosys (NYSE: INFY), with US$ 9.5 billion in LTM revenues and 194,000+ employees, is helping enterprises renew themselves while also creating new avenues to generate value.
Safe Harbor
Certain statements in this press release concerning our future growth prospects are forward-looking statements regarding our future business expectations intended to qualify for the 'safe harbor' under the Private Securities Litigation Reform Act of 1995, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, fluctuations in foreign exchange rates, our ability to manage growth, intense competition in IT services including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, industry segment concentration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks or system failures, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which Infosys has made strategic investments, withdrawal or expiration 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, 2015. 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. In addition, please note that the date of this press release is April 15, 2016, and any forward-looking statements contained herein are based on assumptions that we believe to be reasonable as of this date. 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 unless it is required by law.
Contact
Investor Relations |
Sandeep Mahindroo +91 80 3980 1018 Sandeep_Mahindroo@infosys.com |
|
Media Relations |
Sarah Vanita Gideon, India Sarah_Gideon@infosys.com |
Pilar Elvira Wolfsteller +1 510 944 4596 Pilar.Wolfsteller@infosys.com |
Infosys Limited and subsidiaries
Consolidated Balance Sheets as of
(In crore except share data)
March 31, 2016 | March 31, 2015 | |
ASSETS | ||
Current assets | ||
Cash and cash equivalents | 32,697 | 30,367 |
Available-for-sale financial assets | 75 | 874 |
Trade receivables | 11,330 | 9,713 |
Unbilled revenue | 3,029 | 2,845 |
Prepayments and other current assets | 4,448 | 3,296 |
Derivative financial instruments | 116 | 101 |
Total current assets | 51,695 | 47,196 |
Non-current assets | ||
Property, plant and equipment | 10,530 | 9,125 |
Goodwill | 3,764 | 3,091 |
Intangible assets | 985 | 638 |
Investment in associate | 103 | 93 |
Available-for-sale financial assets | 1,811 | 1,345 |
Deferred income tax assets | 536 | 537 |
Income tax assets | 5,230 | 4,089 |
Other non-current assets | 735 | 238 |
Total non-current assets | 23,694 | 19,156 |
Total assets | 75,389 | 66,352 |
LIABILITIES AND EQUITY | ||
Current liabilities | ||
Trade payables | 386 | 140 |
Derivative financial instruments | 5 | 3 |
Current income tax liabilities | 3,410 | 2,818 |
Client deposits | 28 | 27 |
Unearned revenue | 1,332 | 1,052 |
Employee benefit obligations | 1,341 | 1,069 |
Provisions | 512 | 478 |
Other current liabilities | 6,225 | 5,796 |
Total current liabilities | 13,239 | 11,383 |
Non-current liabilities | ||
Deferred income tax liabilities | 256 | 160 |
Other non-current liabilities | 115 | 46 |
Total liabilities | 13,610 | 11,589 |
Equity | ||
Share capital- 5 par value 240,00,00,000 (120,00,00,000) equity shares authorized, issued and outstanding 228,56,21,088 (114,28,05,132), net of 1,13,23,576 (56,67,200) treasury shares, as of March 31, 2016 (March 31, 2015), respectively | 1,144 | 572 |
Share premium | 2,241 | 2,806 |
Retained earnings | 57,655 | 50,978 |
Cash flow hedge reserves | – | – |
Other components of equity | 739 | 407 |
Total equity attributable to equity holders of the company | 61,779 | 54,763 |
Non-controlling interests | – | – |
Total equity | 61,779 | 54,763 |
Total liabilities and equity | 75,389 | 66,352 |
Infosys Limited and subsidiaries
Consolidated Statements of Comprehensive Income
(In crore except share and per equity share data)
Three months ended March 31, 2016 |
Three months ended March 31, 2015 |
Year ended March 31, 2016 |
Year ended March 31, 2015 | |
Revenues | 16,550 | 13,411 | 62,441 | 53,319 |
Cost of sales | 10,262 | 8,174 | 39,098 | 32,883 |
Gross profit | 6,288 | 5,237 | 23,343 | 20,436 |
Operating expenses: | ||||
Selling and marketing expenses | 909 | 736 | 3,431 | 2,941 |
Administrative expenses | 1,159 | 1,052 | 4,292 | 3,663 |
Total operating expenses | 2,068 | 1,788 | 7,723 | 6,604 |
Operating profit | 4,220 | 3,449 | 15,620 | 13,832 |
Other income, net | 772 | 881 | 3,125 | 3,427 |
Share in associate’s profit/(loss) | (1) | (1) | (3) | (1) |
Profit before income taxes | 4,991 | 4,329 | 18,742 | 17,258 |
Income tax expense | 1,394 | 1,232 | 5,251 | 4,929 |
Net profit | 3,597 | 3,097 | 13,491 | 12,329 |
Other comprehensive income | ||||
Items that will not be reclassified to profit or loss: | ||||
Re-measurement of the net defined benefit liability/(asset) | (3) | (12) | (12) | (47) |
Items that may be reclassified subsequently to profit or loss: | ||||
Fair value changes on available-for-sale financial asset | 19 | (22) | 41 | 79 |
Exchange differences on translation of foreign operations | 96 | (89) | 303 |
(195) |
Fair value changes on cash flow hedges | – | – | – | – |
Total other comprehensive income, net of tax | 112 | (123) | 332 | (163) |
Total comprehensive income | 3,709 | 2,974 | 13,823 | 12,166 |
Profit attributable to: | ||||
Owners of the company | 3,597 | 3,097 | 13,491 | 12,329 |
Non-controlling interests | – | – | – | – |
3,597 | 3,097 | 13,491 | 12,329 | |
Total comprehensive income attributable to: | ||||
Owners of the company | 3,709 | 2,974 | 13,823 | 12,166 |
Non-controlling interests | – | – | – | – |
3,709 | 2,974 | 13,823 | 12,166 | |
Earnings per equity share | ||||
Basic () | 15.74 | 13.55 | 59.03 | 53.94 |
Diluted () | 15.74 | 13.55 | 59.02 | 53.94 |
Weighted average equity shares used in computing earnings per equity share | ||||
Basic | 228,56,20,957 | 228,56,10,264 | 228,56,16,160 | 228,56,10,264 |
Diluted | 228,57,50,316 | 228,56,67,252 | 228,57,18,894 | 228,56,42,940 |
NOTE:
1. | The audited Consolidated interim Balance sheets and Consolidated interim Statements of Comprehensive Income for the three months and year ended March 31, 2016 have been taken on record at the Board meeting held on April 15, 2016 |
2. | A Fact Sheet providing the operating metrics of the company can be downloaded from www.infosys.com |
3. | Previous period share count and EPS has been restated due to issue of bonus shares in Jun-15 |
Exhibit 99.3
Press Conference
PRESS CONFERENCE
Q4 & FY 2016 RESULTS
April 15, 2016
CORPORATE PARTICIPANTs
Vishal Sikka
Chief Executive Officer & Managing Director
Pravin Rao
Chief Operating Officer
Ranganath D Mavinakere
Executive Vice President and Chief Financial Officer
Krishnamurthy Shankar
Executive Vice President, Group Head, Human Resource Development
Binod Hampapur Rangadore
Executive Vice President, Global Head, Talent and Technology Operations
Mohit Joshi
President & Head – Financial Services, Head – Infosys Brazil and Infosys Mexico
PRESS
Chandra
ET Now
Rukmani
Ayushman
Business World
Bibhu
Anya
Reuters
Varun
Mint
Kunal
FORTUNE Magazine
Balaji
Vishal Sikka
Welcome, everyone. We are very excited about our quarter. Had a great quarter. We are excited about the year that is ahead of us. And with that would love to get you to ask us some questions.
Chandra
Hi Vishal, Chandra here. Vishal, just want to start by asking you, from the time you took charge to now, I know you do not want to say that bellwether but would you say you sort of rebuilt a desirable Infosys? Are you there yet or what other metrics would you be looking for going forward? You clearly are very happy with the numbers today, with the guidance, but anything else that you would watch out for closely over the next few quarters? And one question for the head of HR, I think on the increments they usually go out 1st April, all people are wondering why it has not yet gone out. The call mentioned the hikes but if you can give us some more details on that. Thank you.
Vishal Sikka
Sure. I think in terms of the bellwether and all of these things, these are all things for others to characterize. We keep working on our mission, on our paths, our strategy. I do believe that there is a strong need in the world that is ahead of us for a new kind of a services company, a company that is based on innovation where every human has an opportunity to deliver to their human potential where we bring the power of technology automation to dramatically improve our productivity, our bandwidth and we constantly learn and collaborate. And that journey has barely just begun. I would not say that we are anywhere close to getting there. But we are very excited about what the team has been able to achieve so far and excited about the year that is in front of us. I mentioned also in the earnings call with the financial analysts that we need to create additional metrics that we used to measure the performance of the companies like us going forward and so on. But by and large we are quite excited about the quarter that has just ended, about the year that has just ended and looking ahead to the year that is in front of us.
Krishnamurthy Shankar
Your question was these things go out earlier and why now, is that the question? We are starting with the process for our engineers and the leads and there again it will be based on performance, a majority of them would be in the range of between 6% and 12% based on performance, that is the kind of thing that we are looking at. As you also know we are looking at also introducing equity which would be launched during the quarter. That will be also announced in due course in terms of what we are doing. Our objective is to really ensure that it is a plan which really appeals to retain and attract good people. We are going to cover a select percentage of high potential people, higher performers, about 20% - 25% of people in the managerial level, that would be our intention.
Chandra
Vishal, just one more question, three of your executives have been elevated to President’s today. Take us through the rationale and how will their roles differ because each one was handling different responsibilities. Why now, I am sure it adds a lot of the management bandwidth but just why now?
Vishal Sikka
I think first of all just to add to Krish’s point, so we are also excited about the RSU option plan that we are rolling out to our employees. Obviously 6% to 12% is the range applying to most of the employees as Krish said, but the high performers can get even significantly higher than that. We are looking forward to that. In terms of the three gentleman here behind me, look the three of us, myself, Pravin and Ranga, in addition to all the strategic aspects of the company we are also consumed by all the operational aspects of the company. Since I started here as CEO we have undertaken 54 significant initiatives and it is a lot. This journey is a long journey, it is a tough journey and there is a lot on our plates. So we need more bandwidth and we need additional leadership bandwidth. We are very proud of our leadership team. Our entire leadership team is here and we felt that it is appropriate to elevate three of them to the President title, share additional executive bandwidth, so for example some of the operational tasks in the delivery area that Ravi can do in addition and operational task in the sales area that Mohit can do in addition and operational task in the new areas of software and innovation oriented sales that Sandeep can do. So Sandeep, Mohit and Ravi are three Presidents. However, their operational responsibility continues to be what it is, as does for Rajesh and Manish. So there is no change in reporting in that sense. Rajesh and Manish continue to do an excellent job, we continue to count on their incredible leadership. They are both here, I am told that the colors they are wearing are the camel colors. I will not make any camel jokes. Where I grew up there used to be a saying in Saurashtra that one cannot buy camel for the price of sheep. This is a motto that we live by in monetizing our new, right Sandeep. So in one word it is simply executive bandwidth but everything else continues as is and we are extremely proud of our leadership teams.
Rukmani
Vishal, I wanted to understand the realization, because in the concall you clarified that there has been a little bit of drop in realization, but you are expecting that to stabilize. So could you tell me across FY17 what is the trajectory and what is the reason why there has been pressure on realization?
Vishal Sikka
We do not know. Generally there is a downward pricing pressure and in the industry that continues to be the case. Ranga has shared the numbers today, we continue to see that. Some of the margin decline that you see is attributable to that over the course of the year, some that we executed on several initiatives to improve the margins over the course of last quarter but it was also negatively impacted by pricing. So look this is somewhat, what is the fancy word, ‘secular’, this is a secular trend in the industry. Of course next generation thing, new things carry tremendous value and there the traditional cost based metrics do not apply. We have to ensure that we are continuing to bring additional next generation kinds of offerings and bringing more productivity improvement because of automation. But it is not possible for us to look over the course of the year and share any kind of insights on how this will change. Our long-term revenue per employee aspiration continues to be $80,000 by 2020 and we are continuing to work on that even though over the last 12 months, this has actually gone in the other direction.
Rukmani
Vishal, till date there was the important strategy of ploughing back of market share, of maintaining attrition, so on and so forth. Now that you have reached a position where you are at a comfort level, what is the next challenge that you are foreseeing immediately especially given the fact that coming year is expected to have some amount of seasonal headwinds, some amount of headwinds. So keeping that in mind what is the next level of growth that you are targeting?
Vishal Sikka
I think that bringing automation, bringing artificial intelligence to more complex areas in business, in automation of our work, this is something that I am really excited about. We will share more about this as we go forward. Earlier today we were discussing at lunch some of the new ways in which physical, very-very traditional legacy physical institutions are becoming digitized and becoming transformed by software, that is an area that is of tremendous interest. Going into new experiences in the human interaction area, virtual reality technology is becoming quite exciting. This week we shared with our Board some of the virtual reality innovations that our team is working on. Our team is actually doing some pioneering work in VR technology that is very exciting, the work on conversational interfaces and chat and so forth is extremely exciting. There is a lot going on in the world around us that is very exciting. The things is that generally when times are bad you need innovation and when times are good you need innovation. So there are always headwinds, things going on at individual clients that can impact us and so forth, but by and large we are extremely positive about the atmosphere and the opportunity that is ahead of us.
Participant
Vishal, the India business has done exceptionally well this quarter, so what kind of traction are you seeing, are these basically private sector deals or e-governance sort of transactions that you are chasing?
Binod Hampapur Rangadore
Most of the growth is coming from the private sector. Of course we still have our long-term contracts with the Income Tax Department and with various other departments that we are working with, that are still going on.
Participant
Can you give us a sense of the capital expenditure plan for the current fiscal, how many new seats are you planning to add?
Ranganath D. Mavinakere
Capital expenditure always we have spent about limited to about 20% of the operating cash flow. By and large that is the band that we are looking.
Ayushman
Ayushman here from Business World. Vishal, what are the key drivers of growth for this quarter and what was the rationale for the optimistic guidance?
Vishal Sikka
I think the adoption of the new areas that we have been working on has continued and we continue to improve that. The adoption of automation has improved significantly and the deal wins that we had in the last several quarters started to produce results in the course of this quarter. Operational rigor led by Ranga, Ravi and Pravin of course led to a lot of improvements. We bucked their trend, the sort of ‘curse of the bambino’ that we have had in Q4 in the last three years that is gone now and is behind us. So a lot contributed to the performance in this quarter that has gone by. In terms of the optimism for the year ahead, there are several factors to that, continued adoption of the new areas is obviously the big one, the renewal initiatives around zero distance, around automation, around bringing innovation into everything that we do continues to pick more and more momentum. That is becoming more widely adopted in our ongoing projects and all the new deals that we have won and so forth. The new areas that we have been working on, in particular Skava, Panaya, the work on our platforms, the information and the automation platform, the Edge products, these continue to get traction. So we expect to see that continue and gain even more momentum. Most importantly the deals that we have won and the large deals that we continue to win, give us an additional kind of a tailwind to feel more optimistic about the future. So therefore based on the visibility that we have right now that myself, Pravin and Ranga have, we are looking at an 11.5% to 13.5% constant currency growth over the course of this year. Obviously this is something that we track on a daily basis and as our visibility improves we will continue to revisit this.
Rukmani
Vishal, is there a number you can give on the hiring outlook or the exact number and break it up into… not yet?
Vishal Sikka
No, we cannot. Some parts of the broad hiring, for example the campus hiring have a yearly kind of a trajectory and the others are Just In Time and over the course of the year. I think now that the fiscal 2016 reporting work is behind us we will get into that in more detail and see where we are.
Participant
Just in time hiring in that…
Pravin Rao
For freshers we have already made a call because we have already started going to campus, making offers and so on. So we have planned for about 20,000 joins for freshers, but laterally is mostly just in time basis on the demand.
Bibhu
This 661 net addition this quarter I think this is one of the lowest in the recent quarter cycle, previous quarter also you had added some 5,407 employees. What it indicates, usually you mention about the old and new and this has been one of the metrics when we people visualize predictability about the business based on the hiring one makes. Now that you are aggressively driving non-linearity with increasing automation and all, will it see lesser and lesser number of hiring or net additions? And also one question that just came to my mind, by 2020 vision, what could be the employee number by that time when you achieve the vision of 20 bn?
Vishal Sikka
See, in terms of the 2020 vision, if you look at 80,000 revenue per employee and $ 20 billion in revenue, that adds up to 250,000 people. We are right now at around 195,000, so it would grow somehow like that, that would be the aspiration. I think again 2020 is still too far to come up with a concrete operational plan for something like that. However as time goes by we continue to feel better about being able to get there. In terms of the small growth this quarter, I would not read anything specific to that, perhaps Pravin you can add something on that.
Pravin Rao
I do not think we should read too much into it, partly the hiring has been lower because some of the automation benefits have started kicking in. But it is too early, we still have to do much more on it. And the other factor also is in our transition from people only to people plus software, it is also picking up. This quarter in particular we have seen good tractions particularly in the retail around most of our platforms like Skava, Panaya, Edge and so on. So it is a combination of things, but again I would caution that these are still early days and not a secular trend.
Bibhu
How is your visibility at this point of time, you have given a guidance in constant currency 11.5 to 13.5, still there is a broad range of 2%. Your performance last year also was in the similar range. So are you factoring based on the current understanding of the market at current level you are giving this guidance or how is the visibility.
Vishal Sikka
I think that obviously the currency environment has changed over the course of the year. But when we look at the constant currency which is the FY16 average we see a visibility of 11.5% to 13.5%. This number is not anything more than our guidance, our advising the markets on what we see right now and this is what we see right now.
Participant
Sir, this quarter was great for deal wins, my question is, just looking forward to the next quarter what kind of deals, how does the pipeline look in terms of 50 million plus deals?
Vishal Sikka
The pipeline looks good.
Participant
Would you care to elaborate?
Vishal Sikka
It looks somewhere between reasonably good and very good.
Anya
Anya from Reuters I just want to know what kind of deal sizes and product mix are you seeing in the BFSI segment?
Mohit Joshi
I think in the BFSI segment we are seeing the deals that we have traditionally seen but we are trying to infuse our AI and automation pieces into it and then we are seeing the software plus services deal, the new deals that Vishal spoke about. So it is a mix of the old traditional business that we are trying to automate and the new business. The growth for the year was 12.9% year-on-year, and for the whole year it was 15.3% excluding insurance, this is very healthy. We did see a little bit of slowdown Insurance but we believe it is only temporary.
Varun
Varun here from Mint. A couple of questions and clarifications. Firstly, what was the total number of large TCV wins for this quarter?
Vishal Sikka
It was $757 million.
Varun
The repeat business used to be like about 97%-98% but for this year end if I am not wrong it came down to 95 point some odd, so is there a trend which is there for all IT service or was this an aberration, sir?
Vishal Sikka
I think that repeat business going down is actually a good thing because you want a good influx of new business. So it is like me complaining about continuing to lose weight.
Varun
Sir another question over here, the Insurance in the conference call or the call with the analysts it was said that Insurance seems to be a little bit of wrinkle for the company and just now Mohit also clarified it is temporary. By next quarter say in two quarters will this pain be done with?
Vishal Sikka
As Mohit said and Manish is here as well, we believe that we had a decline in the quarter but this is because of certain situations happening at individual companies which ramped downs and so forth because of the nature of the business, in particular one of the large clients that we had. But we do not see anything particular about Insurance that we are worried about. In fact, when we look at Insurance companies rethinking themselves to offer better value to consumers, that is a tremendous need in new kind of services and in particular Insurances companies are among the largest consumers of extremely old legacy software where there is tremendous opportunities for modernization. So we continue to be excited about Insurance.
Varun
Sir this 2020, $ 20 bn aspirational target, is this calendar year March 2020, is it…?
Vishal Sikka
When I said that I was not aware that fiscal year and calendar year are not the same thing in Infosys, so it was the calendar year 2020, that is three quarters of fiscal 2021.
Varun
The BPO business and BPO especially growth has not been there. What are you trying to do to revive this as a part of the 2020, because 2 billion needs to come from new platforms, BPO just grew at 0.8% - 0.9%. Is there a secular trend again or is it just something which is limited to Infosys and what is the way forward?
Vishal Sikka
The wave of innovations have not yet reached the BPO business because of the nature of the work in BPO because of the very front-line oriented low revenue per employee work that happens in BPOs. It is naturally the one that takes the longest where innovation adoption takes the longest. We believe that BPO will be one of the biggest beneficiaries of innovation and of automation. The opportunity to transform the business processes of customers, not just operate the business processes, the opportunity to look inside the business processes and deliver more valuable insights with forecasting and analytics, the opportunity to automate the work that people in shared service centers including our own employees do through the process of end user automation like we do with our AssistEdge product. Finally the opportunity to consolidate across stacks by bringing together the BPO work with L1, L2 and L3 operations support which we are working on to transform through great use of AI Technology. These are opportunities that will help us totally transform and grow the BPO business. I am extremely optimistic about the BPO business.
Varun
Just last two questions here. Revenue FTE is being going down you yourself said over the past 12 months. Why is it so sir?
Vishal Sikka
The automation has not taken so long to adopt, the hiring cycles are still longer and therefore the number of employees we are adding to the company is significantly higher. There is also a secular downward pricing pressure in the industry that affects everybody. So those three things are continuing to dwarf the effect of automation and the effect of innovation which will overtime take over. So I continue to be confident that over the 2020 horizon we will get to that inspirational goal of 80,000 but for the last four quarters or so this number is actually going in the other direction and one of our endeavors this year is to ensure that we work to reverse this trend and then it starts to change for the upwards.
Ranganath D. Mavinakere
Just to add to what Vishal said, if you look at this financial year some of the drop is also because of the currency and on constant currency basis it is flat.
Varun
Sir, just last clarification. Consulting Package Implementation and others this seems to have recorded the maximum growth. Can you help us what is this others? Is this more of the Data Analytics, more of the Cloud Computing and if you can give some visibility how big is this business? Because this helps analysts at least understand, how is Infosys making itself future ready? Or is it just all Enterprise Application rollout and maintenance work?
Vishal Sikka
No, it is the Consulting and Package System oriented work.
Pravin Rao
See ‘others’ is a very small thing so we should ignore that. But on the Consulting System Integration, this quarter it has been flat but for the year it has grown significantly 16% or so on a year-on-year basis. This is where we are looking at Package Implementation Digital, Analytics and so on. Most of the growth has been driven in Digital and Analytics space.
Vishal Sikka
And the Consulting, no I would not agree with the characterization. Yes, of course Package Implementation is a part of it but over the last many years that has been decreasing. It is around Consulting and brining innovation into that and every one of these chain management and implementation projects now we bring Panaya and our own organically grown innovations from Infosys into that so,. To characterize that as mundane work would not be right.
Varun
Sir, just a follow-up here, but all the IT companies are increasingly talking about digital technologies. How do we really know about the so-called New and Renew? How is it really showing in the numbers? Because all of these are traditional service offerings, what is like say if I have to ask you the growth in Analytics or Cloud Computing?
Vishal Sikka
Analytics is a clearly isolated unit with its own charter of doing analytics-oriented work, machine learning, business intelligence and things of this nature. You can tell that this is a different category of work. The other similarly cloud-oriented work whether it is brining cloud infrastructure underneath, the new kinds of analytical applications, Internet of Things, machine learning and so forth or moving traditional legacy landscapes to the cloud infrastructure this is all about the cloud. So these are all things that are easy to measure. The ‘Renew-New’ split is more nuanced. The important thing to remember there is, it is not that there is a ‘New’ department in Infosys and there is a ‘Renew’ department in Infosys. Every one of us, every team, indeed every Infoscion does both ‘renew’ and ‘new’. In fact inside the work of an individual Infoscion there is both ‘Renew’ and ‘New’. So the fact that there is no distinction between the ‘Renew’ and ‘New’ actually is a good thing. We want that every one of us and everything that we do bring both the dimension of continuously doing new things as well as renewing the things that we have done before. The difference between the two is indeed a perspective on time. New is the things that we did not do before, Renew is the improvement of things that we always did.
Participant
Hi, I have another just regarding the operating margin guidance. So you reiterated a 24% to 26% guidance for FY17, if I am correct? Is this slightly conservative considering you had 25.5% in Q4 or is there increased pricing pressure?
Ranganath D Mavinakere
Yes, I think we had given a medium-term guidance of 24% to 26% last year and if you look at FY15 we closed exactly at the mid-point - 25%. Of course we have couple of levers in margin. Certainly the utilization which use to be in late 70’s is consistently in above 80% in the last four quarters. We do believe that there is an element of scope there as well. If you look at the onsite mix, it used to be 27% now it has moved to 29.6%. Our endeavor is to move it back. We have got some levers there. Third of course the sub-con expenses. Last quarter if you recollect we talked about how to moderate the sub-con expenses. If you look at this quarter, it has come down from 6.3% of revenue last quarter to 5.6%. These levers we will continue to deploy very closely in FY17 and of course Vishal always challenges us to go beyond the guidance. However, I think in the short-term we will be relaying on these. We want to maximize these operating levers at the same time while working on the automation-led benefits. In terms of FY17, we continue to reiterate 24% to 26%. You should also remember that in Q1 we also have a compensation hike cost, the H1 visa cost, so all of them will have some impact. Given where we are today, given the levers that we know we will continue to work on this.
Bibhu
So this is one last question from me. What is your vision for about visa independent Infosys? Recently Mr. Murthy spoke in one seminar where he spoke about how the initiative was taken earlier and was later discontinued. Unfortunately the industry is heavily dependent on H1 visa. Now that is presidential the elections year in the US and this issue has again resurfaced and it will continue to do so. In the long term how do you visualize the industry. When you carry forward your vision, can one be independent of visa or do we plan to do it by increasing offshore hiring or increasingly using automation tools?
Vishal Sikka
That is a very important question Bibhu. Of course this being the presidential election year in the US, there is a lot of rhetoric around this and it is rhetoric. Obviously we continue to be influenced in the near-term by the visa situation. Ranga already mentioned this. Our view is to become independent of visas, to hire locally. I, myself a local hire in the US. We have thousands of people who are locally hired working in US, in Europe, in Australia and other places. So our endeavor is to get independent of this visa matter as much as possible. I believe it is possible for us to achieve that and VGDM and V does not for me, the V is virtual or visa independent GDM is one of the very fundamental parts of this. We believe that this idea of a location independent experience of delivery is something that is in our reach because of technology. We are sitting here in a large room that is technologically-enabled with Virtual Reality technology and with other collaboration technology. It is becoming possible to deliver more and more seamless experience no matter where we are and we are actually doing a lot of innovation in this area. Sanjay was here, he just left to catch the flight but he is working on this. Binod is working on this and this we believe is a key part of our approach in the future. Again, the important thing is to not look at VGDM or collaboration technology as a way to deliver the same thing for a lower cost but indeed to build the right kind of talent. I mean recently one of Ravi’s teams was building a unique kind of a mobile application and we found a person in Poland or somewhere who has the expertise for this thing. We want to be able to bring the right talent wherever that is to bear and these technologies will help us get there. The whole visa thing over the last many decades has brought us to a point where there is too much dependency on this and the answer to that is a combination of local hiring, better solutioning and this next generation technology collaboration and VGDM and so forth. That will help us deliver the best value no matter where the people are.
Kunal
Mr. Sikka, hi, my name is Kunal, I write for FORTUNE Magazine the Indian edition. I have three questions on ‘AiKiDo’ Program which in the last fiscal year you introduced in August last year. What is the buy in been the client side? Second question is how does it roll back into how employees at Infosys respond to those requirements? And finally, how did that name emanate in Infosys?
Vishal Sikka
The ‘AiKiDo’ refers to the next generation services that we deliver but that does not mean that there is an ‘AiKiDo’ department somewhere. The ‘AiKiDo’ department at Infosys is Infosys. ‘Ai’ is the software services the next generation platform-oriented services and the work that we do in, work around Skava, to implement Skava, to integrate Skava; the work on our platforms, on our automation and innovation platform, information platform for big data, the work that we doing in Internet of Things, building digital trends and things like this, where we leverage our platform and the services around our platform; that work is ‘Ai’. The ‘Ki’ work is extremely important to our future. This is around the capturing the knowledge that sits inside the legacy environments of our clients. We started this project with Boeing, the great manufacturer of Aircraft. We work with them to knowledge based engineering where we captured the engineering of these complex systems into explicit ‘Ai’ knowledge bases and we use that over time to improve the operations to lower the maintenance cost and things like that. So with ‘Ki’, we are working to deliver the knowledge-based services that lower the cost of operating land escapes, maintenance, capturing the know-how explicit into an ‘Ai’ system and so on both in the engineering industry but especially also in the IT industry around legacy system and things like that. Ravi is also working on brining the ‘Ki’ services into the way we manage the transitions when we take over these large deals like the ones that we talked about that we have won earlier. ‘Do’ is Design Thinking, it is around working with clients on their next generation problems. Sanjay Purohit has an ambitious program to bring commercial design services to our clients. From a sales perspective under the leadership of our four sales leaders who are sitting behind me, we have basically brought Design Thinking into every client. I have stopped reporting the number of Design Thinking engagement because now in our company every engagement is a Design Thinking engagement. Every project, every renewal, every deal, every proposal that we work on is done using Design Thinking, so that is ‘Do’. The point of that is to help the clients uncover their most important problems or more precisely articulate the problems so that then a solution can be built for it. Usually, problem finding is actually an extremely important part of the work that we do, problem solving then follows that. As to the origin of this, most of us think about ‘AiKiDo’ as this Martial Art from the Far East. The word ‘Ai’ means to unify to bring together to integrate, the word ‘Ki’ means the knowledge, the morale, the energy that is inside a system, the Chinese word ‘Qi’ (chee) is the same word actually in Japanese it is called Ki and in Chinese it is called Qi (chee). The word ‘Do’ means the path forward, the way forward, like the schools in Japan are called Dojo’s because they are the places where you learn to find the path forward. So ‘AiKiDo’ is three beautiful words combined together on unifying our energy to find our path forward and even though it is three services in Infosys, it is actually one integrated idea.
Kunal
Is it planted as such outset, that is what I wanted to clarify, are you branding it as AiKiDo or is it just an internal?
Vishal Sikka
No, we are branding it. We are bringing into our complex engagements, branding itself is one area that we plan to focus on in the course of this year this would be a good idea at Infosys but yes, it is an externally branded.
Balaji
Sir, I am sorry, I was late. So I just wanted on quote on you because it is not there. You have not given your quote on the projection made this year. The guidance which seems to be apparently, lower why is it so? It is in double-digits no doubt. It is a relief even in dollar terms double-digit, though it was 9% you achieved. Now you are confidently in double-digit so, what is outlook? Is it again a conservative estimate based on your near estimates and what is really the outlook because you are based in the US you know your market better.
Vishal Sikka
No, it is not conservative or liberal, it is not managing any expectations this is the visibility that we have right now. Before you came in sir we talked about this. The outlook that we see, we are quite excited about. The deal wins that we have had in the large deals as well as the adoption of the innovation work that we have done continues to excite us and on the basis of all of these things, currently my, Pravin and Ranga’s visibility is to grow 11.5% to 13.5% in constant currency which is based on March 31st reported number that comes to within 0.3% so, 11.8% to 13.8% in March 31st reported currency. So we feel good about that and we will continue to monitor as the atmosphere evolves. We will continue to revisit this if necessary and if it is necessary we will let you know.
Balaji
Second quarter or third quarter?
Vishal Sikka
Every day.
Balaji
Fair enough, sir. But this is okay. You have talked about technologies in line with the industry and then your clients all are adapting to digital technologies? So in that case is the revenue and the billings are being relooked because the old conventional approach has gone. There is a lot of value addition happening what is happening to billing rates?
Vishal Sikka
There are many questions in that one I thought. If I miss one, Pravin then maybe you can answer this. The digital technology adoption, yes, we are excited about it. Our team has been heavily on this obviously. There is a lot going on in the industry in this area. Actually I have always said, people ask me how much digital work do you do? Last I looked all we do is write software for digital computer so 100% of our work is digital. I do not know why these guys talk about only 20% of their work as digital, may be they are writing software for Analog Computers or something. I think the clients are looking at digital technologies in more and more formerly erstwhile physical areas, powered systems, automation systems, trucks, machines, things that have stores, things that have been in the physical domain which are now becoming digitized. So there is a great set of opportunities there. In terms of the billing rates and so forth on the traditional services for the last many years, there has been a steady downward pricing pressures. This is something that is not new we have known this, this continues to be the case and there are only two ways to address that. One is to bring automation into our work faster than the rate of decline in the pricing and the second one is to take advantage of that automation to free-up more bandwidth, to free up the creativity of our people so that people can become more innovative. In a nutshell the strategy that we are executing on is to bring ‘AI’ and automation to the work that we do, to improve our abilities, improve our productivity, ‘do more with less for more’ like Professor Mashelkar said, to take the advantage of that bandwidth to become more innovative, become more creative both in our regular work and in the new next-generation innovation that we bring in, to power this transformation of automation and innovation using our ability to educate, using the great learning infrastructure that Infosys has. So this is in a nutshell what we are doing. Our aspiration continues to be the $ 20 bn, a 30% and $80 thousand revenue per employee by 2020.
Balaji
Sir, last question, I do not know if anyone asked or not because if I was to ask they would have said silent period so I did not want to make a noise regarding this the sympathy and concern. Raghavendran Ganeshan, we did not hear after the sympathy, condolence and all. Is there any specific fund in your Company which compensates for victims of this kind of terror? And then he was travelling, though he was four years why was he traveling actually in local anybody is wiser to ask this kind of question. Regarding compensation is there any policy, unfortunately he has become victim for no reason. Of all Infosys employee everywhere he is there, wherever trouble spots Infosys something or other happens?
Vishal Sikka
Raghav was a very dear employee. Even though we are close to 200,000 employees, everyday our endeavor is to work like a family, to treat our employees as our family members. Pravin and I actually talked about when we first started to hear the news we might have lost Raghav in Brussels. Our first request to our HR Team was to treat him like he was our own brother, that is the way that we work and the way that we think. Rajesh who is here was quite close to this account and to this team that Raghav was a part of. We take these things very personally and very seriously. It was a completely senseless thing that happened. He was going in a train to work and we lost him and we are treating this with tremendous dignity and the financial value part of it is one part of it. Perhaps Kris?
Ranganath D Mavinakere
As Vishal said, for all our employees we have extensive coverage one is that part. Also on compassionate grounds from our employee trust we also had certain contribution and our employee trust clearly looks at such unique cases which really deserves all our support. Unfortunately, we will not be able to disclose those amounts but you be rest assured that the company has gone out of its way. Also since he was on line of employment, we fully supported in whatever way both monetarily and otherwise.
Balaji
Not the figure, whether in service period time that means you do not have any kind of budget god forbid for terror victims, we do not want that kind of thing. But if you said you have compensated means compensated enough with respect to say taking care of his service as it is done by the government with respect to others like in Army and Security Forces, gone out of the way?
Ranganath D Mavinakere
Of course we have our internal policies how to address it but we will not be able to disclose. But all we can say is that whatever monetary and non-monetary support that is required in such a unique and very demanding circumstances, we have done it.
Participant
One question, is it too early to quantify the games around automation or are there some milestones it around already?
Vishal Sikka
If you look at last quarter we released 1,700 or so people worth of effort due to automation. The quarter before was 1,100 and before that I think Ravi it was 600 or so. So it has been steadily growing but if you look 1,700 this is still a little bit more than 1% of our delivery force. So the numbers are still small. If you look at 80% utilization on a base of 200,000 employees or so, it will take another few quarters for these numbers to become meaningful enough to be measureable in the P&L. We continue to track it very diligently down to the service line, even 1% of the effort saved and so on. So we are tracking it however, it is not yet material enough to reflect in the P&L.
Exhibit 99.4
Common TV Address
COMMON TV ADDRESS
Q4 & FY 2016 RESULTS
April 15, 2016
CORPORATE PARTICIPANTs
Vishal Sikka
Chief Executive Officer & Managing Director
Pravin Rao
Chief Operating Officer
Ranganath D Mavinakere
Executive Vice President & Chief Financial Officer
PRESS
Rukmini Rao
Bloomberg TV India
Kritika Saxena
CNBC
Chandra
ET NOW
Vishal Sikka
Good morning everyone. We are really pleased with the results that we have just announced. We are bullish on the year ahead and yet we feel that there is a lot more still needs to be done. Myself, Pravin and Ranga, we are here, relaxed today. It is a holiday, looking forward to some questions from all of you.
Rukmini Rao
Good Morning, Gentlemen. Rukmini Rao from Bloomberg TV India. Vishal, the revenue guidance that you have given, want to understand from you where are you getting this confidence for this strong dollar revenue guidance that you have given? Also, Pravin and Ranga, want to understand from you, the BFSI vertical has seen a little bit of softness and also repeat business side we have seen almost 1% repeat business being down. Also on the top-5 client side we are seeing a little bit of softness. If you can help us understand what is really happening?
Vishal Sikka
We are quite happy about our team’s performance. The initiatives that we have started around renewing our existing services using Automation and grassroots innovation in everything we do, they are really getting adopted very well. I am very proud of what our team led by Ravi has done in the renewal of services. We had a great performance in Automation in the last quarter. We have got 1,700 people equivalent of effort saved because of Automation. Design Thinking has become an integral part of the work that we do and so forth. I am really happy that the new things that we have been working on, the platform work, the work on Skava and Panaya, which are our acquisitions as well as the new initiatives that we have started around Design Thinking and doing extraordinary new kinds of projects have also been kicking in. We had great performance in the large deals area. We did about $757 mn in Q4. That is not including two additional large what we call “framed deals” that we are not counting in there. If you look at the year, we had significantly higher; we had $1.9 bn in FY15 and we did more than $2.7 bn in FY16. So we are really happy with the large deal performance there and obviously that sets a good base for the future. When you look at the trajectory of the innovation and automation initiatives and the large deal wins and the pipeline that we see, we feel good about the future. Obviously, as our visibility improves, we will keep taking a look at it and seeing how we are doing.
Pravin Rao
Coming to your question on BFSI, we are seeing some softness in the Insurance segment. So this quarter BFSI grew at 0.2% on a constant currency basis. But if you ignore Insurance piece, the rest of the business grew at about 1.6% on a constant currency basis. Similarly, if you look at on a yearly basis, including Insurance it grew over 12% but if you exclude Insurance it was over 15% on a yearly basis. So we are seeing tremendous amount of traction and momentum in the BFSI space excluding Insurance. Out of the 6 large deals that Vishal talked about, 1 of them was in this space. In addition to that, we have 2 Frame deals where we have TCV of $470 mn, but since it is not committed, we are not counting it as part of large deals. So barring Insurance, we are very optimistic about the BFSI space, we are seeing good traction, good discretionary spend and so on.
Vishal Sikka
Even in Insurance, Pravin, we have seen quite good results that we are just starting to see and that will take some more time to develop. So we are not worried in the BFSI at all.
Ranganath D. Mavinakere
I think as both Vishal and Pravin said, Q4 has been a very satisfying quarter. Traditionally, if you look at last couple of years for us, Q4 has been seasonally very soft quarter. In fact, as recent as last year of Q4 degrew by 2.6%. So Q4 is also very important for the following year. Every 1% higher growth in Q4 improves the prospects for the following year by 1 full percentage point. So the good exit rate is always good. Coming back to the question on the guidance, we always believe that based on the visibility that we have, given the fact that we have had a good exit rate in Q4 as compared to the earlier years, so that is what the guidance is really about. Coming back to the top account growth that you mentioned, if you look at the top-10 accounts they have grown 12.3% in constant currency year-on-year and if I were to compare the same number last year it was about 1.3%. So if you look at quarter-on-quarter basis there will be seasonalities, certain accounts will have certain typical patterns. But probably the more secular number is really the year-on-year growth. We will continue to focus on the top account growth and as Vishal mentioned, on the deal wins. The deal trajectory used to be close to about $450-500 mn per quarter. So the trajectory is improving. More importantly, other element of Q4 has been the operating margin improvement. It is not just rupee. Rupee probably helped to some extent, but there has been improvement in the subcontractor cost as a percentage of revenue. If you remember last quarter we had discussed about it. That has come down as a percentage from 6.3% to 5.6%, that did help. Also, utilization including trainees also moved up during the quarter. That plus rupee overall helped and we also gave a higher variable payout this quarter as compared to last quarter.
Kritika Saxena
Hi Gentlemen, Congratulations. Kritika Saxena from CNBC. As always first question to Vishal. In terms of the deal pipeline, the guidance is very strong yes, but there are headwinds around the corner that most analysts have adhered to or spoken about. So what according to Infosys based on the deal pipeline are the immediate headwinds that you are seeing? Pravin, attrition has gone down significantly and you are now at your comfort level. How much more can attrition go down and what is the range that you are looking at for the next one year? Ranga, ever since you have come on board, there has been an outperformance in terms of margins. I know you cannot give specific guidance; you have guided to 24-26% with QoQ being stronger. Could it inch higher?
Vishal Sikka
The growth that we see ahead, obviously, there are always headwinds in certain industries - Energy continues to be under stress, Telecom, also parts of Retail. So there is always that stress. Then in our business, declines or ramp downs always have immediate impact in terms of a downturn and we had some accounts this last quarter that degrew as it happens all the time. There are always those headwinds. I do not subscribe to this idea around the big, secular forces and so forth. Obviously, there are massive forces that impact everybody. But by and large what we see is that the world around us, every industry around us is going through a very deep-rooted transformation based on the power of Digital Technologies, based on the power of Computing, Cloud and especially Artificial Intelligence. We are extremely well suited in this area, on the one hand optimize the existing business operations of our client, we are starting to work on some extremely exciting projects in areas around IT optimization using Artificial Intelligence and so forth. So I am quite positive that regardless of the challenges, by and large the atmosphere is one where a well-equipped services company like the Infosys that we are working hard to create, can have great success and the best is still in front of us.
Pravin Rao
On the attrition front, as you rightly said that 12.6% is probably one of the lowest in recent times. It has come down from 13.4% in the previous quarter and it has been a significant one. Historically, in the industry in the past we have seen attrition in the range of 11-13% and that is definitely the comfort zone. But having said that, we do not look at it saying that the job is done. We need to continue to engage people, we will continue to create an environment where we make it a very easy place for people to work, an exciting place for people to work. So there are many initiatives that are in progress. Some of the initiatives like Zero Distance, Zero Bench, apart from the other outcomes of driving growth, creating innovative culture in the company. But it is also doing a lot in terms of improving the employee engagement. Even last quarter as well, we launched a few more programs to improve the engagement. We have launched a portal called ‘COMPASS’ where people can share their profile, it is similar to Facebook kind of thing. They can do it in a very creative and funny way. At the same time they have visibility to all opportunities that are available in the company for them to bid for and so on. So there are multiple things, there is apprenticeship program that we again launched last quarter on a pilot basis. We will continue to look at newer ways of engaging people and making it an exciting place to work and driving more productivity. We are right now in the comfort zone but there is definitely no target saying that this is it or anything, but right now we are fairly comfortable where we are.
Ranganath D. Mavinakere
Coming to the operating margins point that you raised, in Q4 it has improved to 25.5% as compared to 24.9%. It had a combination of rupee, combination of improvement of utilization, included improvement in the sub-con expenses part and also we had a pricing decline as well. If you look at the 0.6% growth, the math is very simple. Utilization helped us 0.2% and the sub-con expenses helped 0.2% and the pricing decline brought it back by -0.4% and the rupee 60 basis points. So that is a simple math. I think the operational efficiency parameters, we need to continue to improve. Coming to our margin guidance, we continue to state 24%-26% band. We have lot of work to do there. For example, we still have scope for improving the utilization. This quarter was 80.1% and we believe that consistently we have kept above 80% this year and we do believe that we have certain levers to improve it further; likewise the onsite effort mix this quarter was 29.6% which has gone up actually over the last two years and we do believe that we need to focus on it and bring it down gradually. If you look at the onsite roll ratios, another one which we have started to more focus on. Of course, there are multiple levers that we have. We will continue to work on those. Right now, we do believe that the band of 24-26% is where our comfort level is.
Chandra
Chandra from ET NOW. Vishal, I have a two-part question to you; first one is yes/no. Would you say you have reclaimed the bellwether tag based on the last four quarters and your guidance? Secondly, sometimes during this quarter, the next quarter you will cross the $10 bn milestone and you have guided to double that over the next 3-years as per your 2020 target. Give us the concrete plan on how you will do this? Are you happy/unhappy with where you are in terms of the $20 bn revenue, 30% margin and the revenue per employee? Pravin, if you can take us through the TCV for the last quarter and also the ideal TCV that you will see in FY17? Ranga, 24%-26%, you reiterated that, but analysts are worried because they feel that Infosys is perhaps banking too much on the Automation gains and its price-to-win approach. So how would you really assuage these concerns that beyond utilization, some of these gains will help you maintain that margin trajectory going forward?
Vishal Sikka
That is a great question. Unfortunately, it is not a question for me to answer, the others outside of our system have to do things like ‘bellwether, market leading’ and all this is for outside. For us I deeply believe in this idea that a great services company, for the times that we are living in, the times that we are entering in, can really help the world with this massive challenge that is showing up in every industry, in every business, where incumbents fear for their very existence around what digital technology means for them. We are a company with 170,000 people who can write code. That is such a tremendous opportunity. The ability that we have to teach our employees, the ability that our employees have to deliver value to our clients, it is so amazing that I see indeed a next-generation leading IT company that can come in and help every business, every major company, go through this great transformation that is in front of it, whether it is in simplifying and renewing the existing systems or going into these incredible new areas where information technology, where digital technology can have such a massive impact, create new business models, create new simplifications, new experiences. We are incredibly excited about technologies, like virtual reality, AI, having such a profound impact on the business that we have. I always like to think of the revenue, the margin achievements that we get as consequences of the work that we do, not as goals of what we do. The kind of Infosys that I am committed to building, that our team Pravin, Ranga, myself, Ravi, Mohit, Sandeep and our entire leadership team is committed to building is one where the power of automation, is in fact, still a massive power that is in front of us, that is by no means something that we are overemphasizing and I think the potential of that is much higher than what we are seeing right now. The bandwidth that people fear from the automation that creates an opportunity for them to innovate, if we execute on that sort of opportunities, we will not only have achieved our 2020 goals, I think we will have ended up creating a completely new kind of an IT services company and that is our endeavor.
Chandra
In terms of the concrete plan towards that both in terms of margin, revenue for employee?
Vishal Sikka
Steve Jobs also said that you only connect the dots looking backwards. So I think when we are sitting in 2021 we will look back on how we got there. I would love to have a great conversation about it. For now, what we see is that we look at a mix of Renew, New and Inorganic and when we look at December 2020 achievement of this $20 bn number, our goal, our aspiration, our endeavor is to get to $16.5 bn out of the $20 bn through the renewal of our existing, $2 bn through the new services that we are working on and $1.5 through inorganic. Every day that goes by, I continue to feel comfortable that we will get there. Yet, here and now we have to focus on what we are seeing and head towards that kind of a path. So it would be wrong for me to tell you that here is a set of things that will happen in the next 14-15-16 quarters or whatever remains between now and then. But as time goes by, we continue to feel confident about that long-term aspiration and yet we are giving guidance and the visibility based on what we see right now.
Pravin Rao
On the large deal space, we have won 6 large deals this quarter, $757 mn in TCV. Apart from that, as I said earlier, there were two other deals where there is no committed value but we know that over the deal term we will win about for $470 mn incremental. For the year we have won 21 large deals, $2.8 bn and which is about 45% more than what we did the previous year. So in terms of trend, it is turning in the right direction. The pipeline is healthy. More importantly, of the 6 deals we won, we won 3 in Europe and 3 in North America, that is a good mix. Across industries, we won 2 in Retail, 1 in Services, 1 in Financial Services, 1 in Life Sciences and 1 in ECS space. Even when we look at the pipeline, it is broad-based both in Europe and Americas as well as across sectors. So we are fairly comfortable. At the beginning of the year, we wanted to move the average win rate to close to $1 bn per quarter, we are almost there. We were close in Q2 and now we are almost close in Q4 as well if you ignore the ‘framework’ deal. So, our expectation is we will continue to push in that direction and anything upward of $1 bn plus for the quarter is what we would aim for and continue to push.
Ranganath D. Mavinakere
On the question on margin, while we have given the band range of 24-26%, Vishal continues to challenge us towards the trajectory. What I was saying earlier was that there are operating efficiency parameters which we do feel that there is a significant scope for improvement. We will continue to focus on that, but we will not limit ourselves to only that. For example, Automation and the new services also have to kick in in terms of operating margin improvement. But in the near-term to medium-term, while we continue to focus on the Automation and the new services benefits, but if we look at this quarter for example the subcontractor and the utilization piece is where a lot of focus went in, so we will continue to focus on those four or five levers which is onsite mix, roll ratios, utilizations, subcontractor expenses plus the kick in benefits of automation. But in the short-term, I think the relative emphasis in terms of outcomes that you see would be on the first set. That is the point that we are trying to make.
Exhibit 99.5
Fact Sheet
Exhibit 99.6
Earnings Call 1
EARNINGS CALL 1
Q4 & FY 2016 RESULTS
April 15, 2016
CORPORATE PARTICIPANTs
Vishal Sikka
Chief Executive Officer & Managing Director
Pravin Rao
Chief Operating Officer
Ranganath D Mavinakere
Executive Vice President & Chief Financial Officer
Sandeep Dadlani
President & Head -- Retail, CPG, Logistics, Automotive, Aerospace, Core and Industrial Manufacturing, Head of Americas
Ravi Kumar S
President, Chief Delivery Officer
Mohit Joshi
President & Head – Financial Services, Head – Infosys Brazil and Infosys Mexico
ANALYSTS
Sandeep Muthangi
IIFL
James Friedman
Susquehanna Financial Group
Yogesh Agarwal
HSBC Securities
Edward Caso
Wells Fargo
Parag Gupta
Morgan Stanley
Nitin Mohta
Macquarie
Ankur Rudra
CLSA
Ashish Chopra
Motilal Oswal
Moderator
Ladies and Gentlemen, Good Day and Welcome to the Infosys Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing ‘*’ then ‘0’ on your touchtone telephone. Please note that this conference is being recorded. I now hand the conference over to Sandeep Mahindroo. Thank you and over to you sir.
Sandeep Mahindroo
Thanks, Karuna. Hello! Everyone and Welcome to Infosys Earnings Call to Discuss Q4 & FY 16 Results. This is Sandeep from the Investor Relations Team in Bangalore. Joining us today on this call is CEO and MD – Dr. Vishal Sikka; COO – Mr. Pravin Rao; CFO – Mr. M.D. Ranganath, along with other members of the senior management team. We will start the call with some remarks on the performance of the company by Dr. Sikka followed by comments by the leadership team. Subsequently, we will open up the call for questions.
Before I pass it on I would like to remind you that anything which we say which refers to our outlook for the future is a forward-looking statement which must be read in conjunction with the risk that the company faces. A full statement explanation of these risks is available in our filings with the SEC which can be found on www.sec.gov.
I would now like to pass it on to Vishal Sikka.
Vishal Sikka
Thanks, Sandeep. Good Morning and Good Afternoon. Thanks for joining our Earnings Call.
Let me start by saying that I am very proud of our company’s achievements in my first fiscal year as the CEO of Infosys. We started the year just two quarters into our strategy to reimagine services and to transform Infosys and over the course of this year we saw our endeavor to bring Automation, Innovation, Education and Operational Excellence relying on our human potential that is amplified by technology, rather than delivering the same work for less, start to show some concrete results. In the organic growth of our client relationships, in our win rates in large deals, and in the types of projects that we are seeing in strategic areas where we never participated before. I am proud of what our teams have achieved this quarter and in the year.
Despite these heartening results, they are still based on metrics that the way the industry has been in the past. The world of our future looks entirely different, it is a world that is being fundamentally reshaped by digital technologies by computing and by software and it is our endeavor to create great value for every business through solutions built using AI technology and Open Cloud platforms, to have Infoscions amplified by intelligent technology, to bring purposeful innovation to life to drive collaboration and an entrepreneurial spirit from within, to transform our relationship with clients. And in that sense we still are very much at the beginning of this journey.
With this in mind let me turn to the numbers: We ended Q4 of FY 16 with revenue of INR16,550 crores or US$2.446 bn and grew in Q4 for the first time in the last 3 years. This translates to a quarter-on-quarter growth of 4.1% in rupee terms, 1.6% in US dollar terms and 1.9% in Q3 constant currency. For the full year, our revenue has grown 13.3% in constant currency and 9.1% in reported terms, ahead of the guidance we provided In January of this year. Volumes in Q4 FY 16 grew 2.4% indicating a healthy momentum in the underlying business and setting us up well for FY 17. Utilization including trainees was 74.7% and excluding trainees was 80.1%. Blended per capita revenue decreased 1.1%. Our operating margin for the quarter was 25.5% compared to 24.9% in the previous quarter. On a full year basis, operating margin was 25% compared to 25.9% for FY 15. While still within our band of 24% to 26%, we believe the results of our initiatives in Automation and tighter control of operating metrics, will help us improve profitability in the coming years. We reported EPS of INR15.74 for the quarter, up 3.8% and in US dollar terms Earnings Per Share was 23 cents. For the full year, Earnings Per Share is Rs.59.03 or US$0.90. Attrition for the quarter decreased further to 12.6% and the total employee strength in the company is now 194,044 employees.
Let me now turn to Client Relationships and Large Deals. Once again in Q4 FY 16 we had a record quarter in large deal wins We signed six large deals with a TCV of $757 mn. Additionally, we signed another two large deals in Financial Services in Americas where based on the present volume of business we can get another $470 mn in revenues. We saw a 45% increase in Total Contract Value of large deal signing in FY 16 compared to FY 15, 2.79 bn versus 1.927 bn. This actually excludes other large frame contract that were signed but not included in our reporting. Our large deal win rate has also gone up significantly for the whole year thanks to our focus on better solutioning, leveraging automation and innovation, better articulation of our value proposition and focusing more on the client’s point of view to bring Design Thinking as a framework in understanding the true nature of the challenges that our clients face and bringing this to how we create our proposals. These bookings will help secure our revenue for future years. The number of $50 mn plus clients grew to 52 and the number of $10 mn plus clients grew to 177. We added 47 net new clients during the quarter, our top-10 clients grew 12.3% for the full year and the top-25 grew 9.3% in constant currency terms.
Our Financial Services segment led by Mohit Joshi saw strong traction in the year along with Finacle. Our Financial Services portfolio grew 15.3% for the full year. In our Retail and CPG portfolio led by Sandeep Dadlani, we saw a strong traction for our new Software plus Services business. In delivery, our global delivery engine under the leadership of Ravi has had an exceptional year. The renewal of our existing service lines has shown tremendous momentum. Our Data Analytics, Testing and Enterprise System Practices grew especially well. Zero Distance, our program to spur grass roots innovation in every project is establishing a new way to achieve Project Management Excellence. Nearly 100% of our projects are proactively proposed incremental innovative ideas to clients. In addition to the opportunity to expand the scope of these projects, this program has instilled confidence in our teams and help drive a culture of innovators.
In Platforms and Tools, our IIP Platform completed more than 220 engagements and we are announcing the availability of IIP on Amazon Web Services. On IAP, our Automation Platform we have more than 125 engagements across all the segments, 21 additional deployments went live this quarter across key accounts. In Q4 we released 1,710 full-time employee equivalents across service lines using our Automation platform which brought us to 3,900 FTEs released over the course of the year due to Automation. These numbers have been relatively small in FY-’16 but will rise as the deployment widens and the tools themselves evolve to handle more complex activities. In addition, we did our first major project to bring the power of Automation and Information Platform capabilities internally under Ranga’s leadership to renew our own financial processes. We identified and then massively automated the things that caused latency in our own systems due to batch processes and we have created a much better user experience across systems. This quarter we focus on Automation. For example, we went from 4-hours to 1-hour in revenue accounting, from 2 days to completely automating project attribute changes, from 36 hours to 12 hours for accounting at the project level, etc., really excited about these numbers and these improvements going forward leveraging IIP. Panaya and Skava continue to gain traction both as a part of large client engagements where these products were central to the value proposition as well as standalone deals. This quarter the EdgeVerve business sustained momentum with 18 wins and 24 go-lives for both Finacle and Edge suite of solutions across various market regions.
We continue to focus on Consulting as our tip of the spear, an integrated part of our engagement in strategic initiatives with clients and in growing client relationships. Specifically, in Design-led services, I am pleased to see Design Thinking as a key fabric of our work, making its way into every engagement and rapidly reaching all our clients.
In our ecosystem, we are extending the reach of our own work and we continue to make investments. This quarter we invested in Waterline Data Science to extend what we offer clients in Automated Data Discovery and Governance.
With regard to investing in employees, I am personally very excited to announce an RSU and an Option Plan for our employees. We are starting with managers to drive retention of our highest performing leaders and attract the very best leaders in the world to Infosys. Over time my endeavor is to extend this program to all Infoscions as we use to before.
With regard to wages, we are providing for a 6 to 12% compensation increase offshore. It will be towards the high end of this range at junior level and at senior levels towards the lower end of the range. Of course, for high performers, these numbers would be significantly higher. For onsite similarly, we are providing 1.5% to 2% average comp increase, this will vary across geographies based on prevailing market conditions.
In Q4, the Infosys Foundation continue to invest and support programs in the areas of Sanitation, Healthcare and Rural Development. During the quarter, the foundation signed a Memorandum of Understanding with the Asia Heart Foundation to enable the adoption of Robotics in Healthcare through a grant of Rs. 8 crores and provided Rs.5 crores to Sahakara Mitra Samstha, (Center for Collective Development) to enhance the livelihood of the farming community in Andhra Pradesh and Telangana. It also successfully completed the construction of 365 toilets in 110 Schools of Odisha to support the Prime Minister’s Swachh Bharat, Swachh Vidyalaya Abhiyan Mission. In Karnataka, it launched the Jaldhara Project in drought hit villages of Dharwad, Haveri and Gadag Districts by deploying tankers to provide drinking water.
The Infosys Foundation USA continues to engage with local communities and to invest in Computer Science Related Programs. The Foundation announced a grant of a million dollars in partnership with the (NSF) National Science Foundation to Support Computer Science Professional Development for Teachers. This collaboration will provide opportunities to as many as 2,000 school teachers and therefore tens of thousands of students to deepen their understanding of computer science.
Our revenue growth guidance for fiscal ’17 is 11.5% to 13.5% in constant currency terms. This is based on our visibility at this time. As the year evolves and our visibility improves, we will continue to revisit this.
To close, I am proud of what we have accomplished this year. Our strategy is starting to show concrete results and we will accelerate this in fiscal ’17 and beyond. More importantly, what we have seen is that our strategy gives us a new path forward for Infosys and brings purpose and passion to our work. It creates a space for a new type of a services company, a human company, where our humanity is amplified by technology to deliver a great value and a great experience for all, the services company that we aspire to be.
Thank you very much. Now my friend and colleague -- Ranga will take you through more details of the financials before Q&A.
Ranganath D Mavinakere
Thank you, Vishal. Hello! Everyone. This is Ranga here.
Let me first start with Q4 Revenue Performance: Our revenues in Q4 were Rs.16,550 crores, this is a quarter-on-quarter growth of 4.1% sequentially in rupee terms; on a year-on-year basis when compared to Q4 15 our Q4 ’16 revenues have grown by 23.4% in rupee terms. In dollar terms revenues grew sequentially in Q4 16 by 1.6% in reported basis and 1.9% in constant currency basis. On a year-on-year basis when compared to Q4 15 revenues have grown 13.3% in dollar terms and 15% in constant currency terms.
Coming to Full Year Revenue Performance: our FY 16 revenues were Rs.62,441 crores as compared to Rs.53,319 crores in FY 15 which is a growth of 17.1%. In dollar terms, our full year FY 16 reported revenues were at $9.5 bn, a growth of 9.1%. In constant currency terms we grew by 13.3% and at 31st March 2015 rates growth was 9.3%.
Coming to Volumes: Volumes grew by 2.4% during the quarter as compared to 3.1% in Q3 of 16. On quarter-on-quarter basis onsite volume grew by 2.7% and offshore volume grew by 2.3%. On a full year basis volume growth for FY 16 was 14.5% compared to FY 15. Onsite volumes grew by 16.8% and offshore volumes grew by 13.6% year-on-year for the full year.
Realization for the quarter declined by 1.1% on reported basis and 0.9% on constant currency basis compared to Q3 16. Realization drop for FY 16 full year compared to FY 15 was 4.7% on reported basis and 1.1% in constant currency basis. Our utilization including trainees increased by 50 basis points to 74.7%. However, excluding trainee’s utilization declined by 50 basis points to 80.1%, onsite mix increased marginally to 29.6% in Q4.
Our operating margin for the quarter was at 25.5%, increase of 60 basis points during the quarter. Operating margin in Q3 was 24.9%. Margin for the quarter increased 20 basis points due to increase in utilization, 20 basis points due to drop in subcontractor cost and 60 basis points due to rupee depreciation, this was offset by 40 basis drop in margins due to realization decline. Operating margin for the full year FY 16 was 25% as against FY 15 of 25.9%.
Operating cash flow generation was very strong during this quarter. We generated operating cash flow of Rs.3,785 crores as compared to Rs.3,126 crores last quarter. CAPEX during the quarter was Rs. 780 crores. Our cash and cash equivalents as of 31st March was Rs.34,468 crores as compared to Rs.31,526 crores last quarter.
At the group level, we added 9,034 gross employees during the quarter with net addition of 661 employees. Attrition continues to be on a declining trend; at the group level annualized attrition was 17.3% as against 18.1% last quarter. The quarterly annualized attrition on standalone basis has declined to 12.6% from 13.4% last quarter.
DSO for the quarter was 66-days as compared to 65 days in Q3 16. As you know we had a very volatile currency environment in Q4. We managed to navigate the volatility effectively. Rupee depreciated against the dollar by 2.5% on an average basis and 0.2% on period end basis. US dollar appreciated 6% against GBP; however, against Euro and Australian dollar, USD depreciated by 1.4% and 1.2% respectively. Our hedge position as on March 31, 2016 was $910 mn. Yield on other income was 8% in Q4 16 compared to 8.6% in Q3 16 which is a reflection of softening interest rates in India. We expect yield for FY 17 to be approximately 7.5% compared to 8.6% in FY 16.
The effective tax rate for the quarter was low at 27.9% on account of write-back of tax provisions on closure of audits in certain jurisdictions. Effective tax rate for FY 16 was 28% on reported basis. However, normalized for provision reversals the effective tax rate for FY- 16 was 29.7%. Full year effective tax rate projection for FY 17 is expected to be in the range of 29% to 30%. This is on account of certain SEZ unit that will move from 100% exemption to 50% exemption during FY-’17.
Our net margins for the quarter were 21.8% and remained unchanged quarter-on-quarter. Our EPS for the quarter was 15.74 compared to 15.16 in Q3. EPS grew 3.8% on a sequential basis and 16.2% on a year-on-year basis.
Our revenues from top 5 clients increased by 0.2% quarter-on-quarter in reported terms and 1% in constant currency terms. Revenues from top 10 client’s revenues declined by 1.7% sequentially in reported terms and 1.3% in constant currency terms. However, on a full year basis our revenues from top-5 clients grew by 11.4% in reported terms and 12.8% in constant currency. For top-10 client’s full year, year-on-year revenues grew by 8.3% in reported terms and 12.3% in constant currency terms.
Coming to segment performance Q4 16, amongst verticals: ECS grew by 4.6%, RCL grew by 2.4%, Manufacturing grew by 1% while FSI declined by 0.3% due to seasonal softness in Insurance sector. Overall growth in Q4 was backed by all geographies, Rest of the World grew by 4%, Europe grew by 2.4%, North America 0.5% and India grew by 9.1%.
During the quarter, number of $100 mn clients increased to 14 from 13 clients in previous quarter, number of $75 mn clients increased to 31 from 28 clients in the previous quarter.
We are guiding for a constant currency growth of 11.5% to 13.5% for FY 17. On operating margins, we expect our medium term band to be within 24% to 26%. As in every financial year, Q1 margins would be impacted by compensation increases and visa cost. We expect these costs to play out this year’s Q1 as well.
With that we will open the floor for Questions.
Moderator
Thank you very much, sir. Ladies and Gentlemen, we will now begin the Question-and-Answer-Session. We have first question from the line of Sandeep Muthangi from IIFL. Please go ahead.
Sandeep Muthangi
I had two questions; my first question is on the margins. Your earlier commentary seemed to indicate that 2H may be slightly softer for the margins but it has played out fabulously; 2H margins are actually slightly better than even 1H. I want to see if this means anything for your outlook of 24% to 26% margins it is actually fairly old now? Does it make you more optimistic of getting towards the top end of that outlook?
Ranganath D. Mavinakere
Ranga here. Yes, we reiterate our margin band of 24% to 26%. If you look at this Q4, I think apart from the rupee benefit that we got, we also had subcontractor expenses as a percentage of revenue go down from 6.3% to 5.6% as well as the utilization including trainees went up by half a percent, and of course there was also a pricing decline kind of offset, some of the other benefits. So we do believe that we have operating efficiency levers that we need to leverage during the course of the year whether it is utilization, utilization last four quarters consistently is about 80%. If you recollect earlier it used to be in late 70s, we do believe that we have some efficiency improvement possibilities there. Likewise, onsite effort mix is 29.6% and we are focusing on how to improve that further down, barely 2-years ago that number used to be close to 27%. Likewise, in onsite role ratios there are possibilities. So we will continue to focus on these operating efficiency levers during the current year and we reiterate that 24% to 26% the Automation and other benefits of course we would like to see them kicking in but in the near-term we are more at 24% to 26% band. When we gave the last year guidance also we had given 24% to 26% and if you look at the entire full year we ended exactly at the midpoint at 25%.
Sandeep Muthangi
Second question is a specific question for Vishal, Vishal in the past couple of months or may be a quarter or so we have seen these Cloud providers launching accelerators like Database Migration Services, etc., How do you think that changes the market opportunities for the services folks, does it reduce in any way or these things only accelerate the shift towards the Cloud?
Vishal Sikka
It actually dramatically accelerates it for the services companies that have their act together in face of this tremendous opportunity. If I look at our own work with both Amazon and Microsoft Azure Clouds as well as other Clouds, we see a tremendous opportunity here, on the one hand all the new workloads whether it is in the IIP, Big Data, Machine Learning, complex applications areas, the work that we are doing in the Internet of Things and next generation manufacturing area, these are all things that are running on the Cloud and are driving a tremendous growth for the Cloud. This is work being done by us on open platforms, custom complex solutions built on those platforms that drive tremendous Cloud adoption. On the other hand, if you look at Legacy Migration and Renewals, whether it is Mainframe Renewals or Legacy ERP System Renewals or even Legacy Business Intelligent System Renewals, we have a tremendous opportunity. So later this month at our confluence event we will have more to say on this together with our partners Amazon and Microsoft. We have a very strategic partnership with both Microsoft and Amazon and we are very excited about this opportunity. I think that this idea that Cloud somehow means something negative for services company is completely wrong and I see this as a great opportunity for growth. I would like to ask Sandeep who is the head of our MRCL but also alliances to comment on it, also Ravi who has personally been overseeing some of these Cloud-related work.
Sandeep Dadlani
Hi! This is Sandeep. Actually never before have we seen so much excitement from all our enterprise clients to start doing not just proof of values but many more migrations at scale of large legacy enterprise workloads. We probably saw more of that in this past quarter than ever before and the momentum continues into the future as well. New services like the Infosys Information Platform or new e-Commerce services like even things like Skava that we brought on board, start Cloud first and mobile first by definition. So Cloud Migrations have so far meant great sources of new revenue for us all around.
Ravi Kumar S
This is Ravi here. Sandeep has pretty much covered everything. The one big shift we are seeing is the workloads migration has been lot more on the legacy side, it used to be skewed towards the digital workloads and the next generation applications workloads but now I think it has literally progressed towards real legacy applications like Mainframes.
Moderator
Thank you. We have next question from the line of James Friedman from Susquehanna Financial Group. Please go ahead.
James Friedman
Vishal, I am just curious as to what you are seeing in terms of client budgets, how has that moved since the calendar year commenced?
Vishal Sikka
Frankly, I do not see any significant decline. Several people have asked me this question also before. I see that our ability to grow in clients where the budget is growing is very good. We have even grown in some client where the budget has not been growing. So I do not subscribe much to that idea, but then specifically on the budget situation and our clients perhaps Pravin, you can comment.
Pravin Rao
Overall, the budget remains more or less flat. Obviously it varies from industry to industry and clients to clients. But more important in the budget what we are seeing in the last year or two and what will continue as well as clients where continuously looking at any opportunity to cut down cost and repurpose the spend in newer areas. That is the kind of behavior we will see this year as well. So budget is less important, in the sense, it is more about how proactively you can take ideas to the client on cost cutting as well as on some newer areas to invest.
James Friedman
I just have one housekeeping question perhaps for Ranga, with regard to the 45% increase in total contract value, is that reported on a constant currency basis?
Ranganath D. Mavinakere
No, large deal value that $757 mn we talked about is on a reported basis.
Moderator
Thank you. Next question is from the line of Yogesh Agarwal from HSBC Securities. Please go ahead.
Yogesh Agarwal
Hi, just have one question for Vishal. Vishal, usually conventional wisdom suggests that we automate stuff which is standardized more like BPO and while genesis of IT services is need for customization, so as Infy automates more unstructured IT services work it is kind of creating a new paradigm. So is this journey more volatile, is delivery risk and therefore margin predictability less today than the past specially in the coming year?
Vishal Sikka
A massive embrace of automation is a very good thing for us. See, when we look at the nature of the work that we do anything that can be done mechanically, that can be done by capturing it in a system should be done that way. We have to free up with bandwidth, the capacity, the creativity of people to do the more imaginative things that we do not yet have intelligent system for. That is basically the idea that we have been trying to execute on. If you look at now the tiers of IT operations work that we do, clearly in L1 operations this is the easiest one to achieve and a bulk of the savings that we have achieved so far are in that area. If you look them at L2, and by the way this whole L1, L2, and L3 categorization is more or less for our convenience that industry has invented, there is not any particular structural reason for this terminology to be there. But nonetheless L2 operations is a little bit more sophisticated, a little bit more complex, involves tinkering with system, reconfiguring them, things like that, and that is also amenable to automation but you need more sophisticated automation. Then when you get further up the chain towards what we call L3 or maintenance work where system changes and code changes are involved and so forth, then in order to amplify the work of the L3 engineers much more sophisticated technology is needed and we are actually building that and when we are ready, when we have more to say on that, I am really looking forward to sharing that. And then BPO which is in some sense at the lowest end of this rung, sometimes it is mixed with L1, sometimes it is not is really about operating the screen. At all four levels, I believe that it is possible for us to bring not only automation but tremendous automation and in fixed price projects and in time and material projects which we are able to convert to fixed price or value-based projects, this will mean an improvement in margin as well as if we are able to couple it with the process improvements also a new kind of a business and in new area that makes us far more productive in being able to do this work. The equation works as long as you can redeploy the people that we have freed up to do more of these kinds of projects, to more of the new kinds of projects by taking advantage of our ability to train people at a massive scale. That is why we have been working on this triple storm, this triple idea of bringing massive automation, bringing massive innovation, that is why we have zero distance, that is why we have trained 90,000 people on design thinking, so that the creativity that we free up because of automation can be unleashed on being more innovative and solving new kinds of problems and fueling both of those moves by using education. So the Automation, Innovation, and Education triplet is the driving force behind this great change that we are working on building.
Moderator
Thank you. Our next question is from the line of Edward Caso from Wells Fargo. Please go ahead.
Edward Caso
Congratulations on your numbers. I was looking for some more color on your Financial Services vertical, it looks like continued steady improvement on a year-over-year basis, try and understand how to interpret the quarter-over-quarter numbers. Is that just seasonality or you are seeing slowdown and hesitation, I mean what can you tell us about sort of what is happening right now in Financial Services. Thank you.
Vishal Sikka
We had a record year in Financial Services, we see tremendous growth in front of us there, we have an amazing leadership of Mohit. In Insurance, we saw a decline in Q4, that is Ranga said earlier that is somewhat seasonal. We are actually seeing very good traction in many Insurance clients and I am hopeful to show significantly improved results as we move forward. By the way I was reading from an old version of my script. I want to make two additional points. I want to congratulate Mohit Joshi and Sandeep Dadlani on being appointed Presidents of our company and my friends and colleagues, Manish and Rajesh, will continue to lead their respective businesses, but Mohit and Sandeep become Presidents in our sales area. And I earlier mentioned Ravi’s exceptional leadership, his leadership this year has been instrumental in our growth and in our embrace of innovation and I want to congratulate him on also being appointed President of our company. So thanks guys. And Mohit, perhaps you can add more to it.
Mohit Joshi
Yes, thanks Vishal. So despite the headwinds in the sector, we have had a good quarter and a great year. I think despite the headwinds there are always opportunities, on the Renew side with all our propositions around innovation, on the Renew side everything we are doing around automation and AI. And on the New side everything we are doing around innovation, everything we are doing around Design Thinking, around Skava. So I think all of it is coming together for us. I think the whole People plus Software sort of angle that Vishal has extensively spoken about is something that is taking a hold in the industry as well. So obviously we remain concerned about the industry headwinds and about the volatility that we are seeing in the business. But having said that we remain cautiously optimistic about our own potential in the sector and I think we have had one year in which we have demonstrated tremendous growth despite all the challenges in the sector.
Vishal Sikka
I was wondering Mohit if you will finish that sentence without saying cautiously optimistic.
Edward Caso
My other question is on your strong awards activity, can you dissect both what you have done recently and maybe the pipeline as it breaks down to renewals, greenfield work, and takeaways. Thanks.
Vishal Sikka
I think that these are things that of course we analyze and dissect looking backwards always. Perhaps any of the other leaders here can add, my sense of it is that we have completely revamped our large deal process. I personally look at the 50 mn+ deals and we have a dedicated team of great experts who look at all the 20 mn+ deals. We spent a significant amount of energy deeply understanding the point of view of the customer, the situation, the nature of the challenge that they are facing and articulating their problem very precisely by using Design Thinking. I am very happy that Design Thinking as a way of problem finding of articulating the problem has become a very fundamental part of the way that we approach these large deals. Then once we have articulated the problem, we bring the best of our ability to solution that, to bring a great solution to define and architect a great solution to that problem. Then the overall experience of articulating this, narrating this to the client in a very engaging way that dramatically improves the experience of the client, I believe the combination of these has been at the heart of what we have done. Then following the closure of the large deals then the beginning of the process itself, the transition and the engagement that we do, we have also been rethinking that using a combination of Design Thinking and technology to dramatically improve that. So my sense is if you look over the last four quarters our performance in large deals has improved substantially. We did 45% more this year than we did last year and I think it is a direct result of this kind of strong focus.
Moderator
Thank you. Our next question is from the line of Parag Gupta from Morgan Stanley. Please go ahead.
Parag Gupta
Just two questions, primarily with respect to automation, and I know that is a subject that Vishal you have been propagating for quite some time now. Just want to understand, we have seen some softer net headcount addition in this quarter, obviously it is on the back of some strong quarters in the past but just want to understand, does automation have a role to play in this and if not then what are some of the other variables in that? And the second is, could you help us get a better sense of how do you see automation playing out into your margins over the next couple of quarters, so do you see that more as a medium-to long-term initiative or do you think this is something that can start coming up within Fiscal 2017 itself? Thank you.
Vishal Sikka
We released about 1,700 people equivalent work in the last quarter, the quarter before was around 1,100 and so on. So for the year we have done more than 3,000. Now when you look at for example the total size of the workforce, the 1,700 people is around 1% of the delivery workforce, even if you assume 1,700 for the entire quarter which is actually built up over the course of the quarter. So these numbers are still not that large. As encouraged as we are that we are growing in such a significant way, these numbers are still not quite large enough. I mean if you look at our utilization, it went up beyond 80.1% again this quarter which is great and for the whole year we were ahead of 80% which is also something to be happy about. But that still leaves so much room for improvement that the automation benefits would kind of get lost inside the movement of the utilization and so on. So probably it will take another few quarters at this rate that we are growing with the embrace of automation for this to become a meaningful part of the P&L. In the meantime, we have numbers that we have deeply analyzed in our teams. For example in our Infrastructure team, Sam runs that, we have actually done deeper analysis of the people released reduction in the hiring as a result of it and things like that. So we believe that the operational levers that Pravin and Ranga talked about, are going to create an impact on our margins in the near term. But clearly over the medium-to long-term automation is the mechanism that takes a big slice out of that. Ravi, you want to add something?
Ravi Kumar
Thanks Vishal. Three things I would say, one is, the Software plus People story is also adding up in Q4, to a large extent that has been contributing to the non-linearity. Automaton, as Vishal said we had 1,700-odd people released, that is a starting point. I would say the value chain of Software Services is still only parts of that value chain are impacted by automation. We have a long way to go on making the full value chain get impacted on automation, that is the second thing. And the third is, obviously it is deal specific in the way we build our headcount in a quarter. So these three things in my view were the reason why there was a little bit of non-linearity between people and revenues in Q4.
Parag Gupta
And maybe if I can just push in another question on that, revenue per FTE, we have seen some marginal improvements, how do you feel about that number going forward?
Vishal Sikka
Well, right now for this last year it has been going in the wrong direction. I mean if you look at again the reasons that I mentioned earlier, the primary thing is that the hiring cycle has a much longer time horizon than the project cycle and other factors. So for example when we recruit from our campuses, the train leaves the station on this thing more than a year ahead of time and then it kind of once it has left the station then you are done for that year. So when we were looking at this stuff last year we were not nearly at the point of accuracy in forecasting of what kind of demand there would be and so forth. So when you hire tens or thousands of people from campuses, the impact on the cost is not so much because the offshore costs are significantly lower, but the revenue per employee takes a dramatic hit with the massive number of hiring that has to be done. Similarly, the onsite employee cost is a significant contributor to the cost, as employee cost as a percentage of the revenue. So when we look at what Ranga was talking about, the reshaping of the cost curve, we want to do that in a purposeful way where we do not just look at it as reduction of people and reduction of cost but we look at it as unleashing the potential that is inside the people that we can bring more innovation per person through zero distance, through the bench initiatives and marketplace that we are working on and so forth and we increase the revenue per employee. But in parallel we address that with a very focused way, a very purposeful way of reshaping the costs both onsite as well as from a utilization point of view so that the revenue per employee also improves. I mean even though we are declining, we are somewhere between $ 50,000 and $ 51,000 this year I think and this is going backwards over the course of the year, our goal is to get to 80,000 by calendar 2020. I feel good that the trajectory that we see in Software plus Services and the innovation coming out of each individual, I am not abandoning that goal if that is what you are after.
Moderator
Thank you. We have the next question from the line of Nitin Mohta from Macquarie. Please go ahead.
Nitin Mohta
Firstly, Vishal if I can understand on revenue productivity, that has been one of your key goals for 2020. How should we think about enhancing revenue productivity, would it be gradual or are we looking for an inflection point in the sense that is there going to be a catalyst in terms of automation, releasing certain number of employees or X% of the employees being completely trained on Design Thinking. So in short, when do we see it moving upwards and what is going to be the catalyst for it?
Vishal Sikka
The catalyst of it will primarily be automation, secondarily innovation and at the third level the operational excellence. In the near-term the margin impact of this will be in the reverse order. See if you look at Skava in our world and if you look at Panaya, these are two very illustrative examples of how Software plus People makes a fundamental impact on the equation that you are talking about. In the case of Panaya, when we bring Panaya in to a large deal, for example we have won several $ 100 mn+ deals where Panaya itself is a relatively small part of the equation but it leads to a massive improvement in productivity of the project as well as a massive differentiation in our ability to win that project. So what happens is that a bulk of the work that was being done inside the project is now replaced by software. Of course there are people who are maintaining and building their software and evolving their software but that number is far smaller than the number that you would do across dozens of complex projects. So that is the impact that it has and the net impact is that the revenue per employee improves, the margin improves, our differentiation improves and yet the cost for the customer can come down. If you look at Skava, it is again the same story but it is actually in a way quite different because with Skava we do not do a project that we have brought Skava into, we do a project around Skava. It is the implementation of the Skava platform, it is the work around integrating the Skava platform where the people are involved, otherwise the rest of the economics is simply coming from Skava itself. So both of these will happen and as the software products and there are other platforms in this area, IIP for example, our Information Platform or especially our Automation Platform, as these kick in into dozens of complex projects you will start to see this kind of a differentiated move towards $ 80,000, it will have a non-linear impact as the number of projects and the monetization of the value delivered from the projects starts to improve.
Nitin Mohta
So would it be fair to assume it be more like an FY18 thing so I am just trying to understand, so will there be a linear improvement in revenue productivity or we will see actually an inflection point sometime in future?
Vishal Sikka
It is hard to say, in certain service lines I mean if you look at our Infrastructure Management we have already reached close to 100% in the fixed price projects and the remaining ones we have to transform towards fixed price or value based projects and increase the complexity of the kind of activities that we automate. If you look at verification, our testing practice, again there is a heavy opportunity from automation where we can bring more complex automation for the specification related work and things like that. So the timeline on how the impact will happen will depend on service lines. I think it would be premature to put a timeline on it at this point, but many service lines are far ahead of it than the others. The automation platform adoption, we have done now more than 125 of these engagements. 20+ of these platform deployments went out over this last quarter. So we are quite excited about how this thing is developing and in particular how we can bring AI technology to more complex kinds of tasks on maintenance and things of this nature. So that is something I continue to be really excited about. I think that there is a huge potential to transform the way that we work in there. So that is basically the way we see automation taking shape. It depends on the evaluation and adoption of our platform Skava, Panaya, IIP, IAP, also AssistEdge which is an Edge product which is around this process automation and simplifying the work done by the end user and so on. So that is how I see it.
Nitin Mohta
That is helpful. And if I can ask a second one to Pravin, after strong couple of hiring quarters we have seen a big step down, so do you think it is just seasonal or this is the kind of run rate that we should be modeling in and was that good enough to meet the guidance that you guys have laid out?
Pravin Rao
No, there are two parts to hiring. One is, when you look at fresher hiring we would have made the decision about a year in advance. So for this year we have made enough offers and we expect about 20,000 freshers to join. They will start joining sometime in June, July of this year and they will be available in a phased manner or in production in January of next year. So that is a decision which we have already made. Then the lateral hiring is where on an average last year we had hired about 2,500 to 3,000 hiring every quarter (for Infosys Limited standalone) but with more and more of FTEs being released through automation, automation benefits kicking in we would expect to see some part of reduction in the hiring numbers. But obviously there is a seasonality as well because the growth over quarter-on-quarter will be different, quarter two will be the highest quarter, quarter one will be slightly lower and so on. So that will also have an impact on your hiring counts. But the endeavor is to leveraging the benefits of automation particularly at a lateral level and over a period of time trying to figure out how to do more of just in time hiring on the fresher level.
Moderator
Thank you. Our next question is from the line of Ankur Rudra from CLSA. Please go ahead.
Ankur Rudra
First question, Vishal you have commented earlier that, you said a lot of the reporting is on legacy metrics. Perhaps if you can elaborate what sort of metric you would like to go in to future? Maybe on the same lines I noticed that a lot of the growth in the last few quarters has been led by more legacy or commoditized services where we cannot really see the success you have been achieving on the next generation services side. So maybe you can elaborate where we can see that. Thanks.
Vishal Sikka
I think the new numbers are still small and are relatively insignificant. So they do not have an impact yet on the P&L and you do not see them. But the metrics of the future are around things like the number of people whose work we were able to replace by automation, the amount of software related services sales and things of this nature. So the value created from the bench for example would be another one that I would be very excited about. We report 80.1% utilization but on our zero bench marketplace, we have more than 14,000 jobs and basically 70% of the bench was touched by that. So from a financial point of view the utilization is still 80.1% and that is a number that we want to improve but it is not like the people who are not on that 80.1% are wasting their time. We are actually doing some incredibly exciting things for the company. Ravi has also instilled some themes around the zero bench where they actually work on great ideas which help the company tremendously, roughly one-third of the zero distance proposals and plans that we make on the zero distance initiative actually come from people who are on the bench and things like that. So there are many metrics for the future of the services industry - the amount of efforts automated, the work, the complexity of the work that artificial intelligence has been able to do, the new kind of complex high value projects, these would be some of the metrics that we should be tracking going forward. And not only we at Infosys, we have already started to track this inside but I think the entire industry would be well-served to go after things like that rather than going over things that we have basically had for the last 20 years.
Moderator
Thank you. Our next question is from the line of Ashish Chopra from Motilal Oswal Securities. Please go ahead.
Ashish Chopra
I just had a question on the margins too. So Vishal you do have an aspiration on margins which is significantly higher than where the margins stand today and FY17 is probably yet another year when the band would be 24% to 26% with more headwinds upfront than tailwinds. So just wanted to pick your thoughts on the roadmap on this margins going up. While you have explained in detail with regards to automation still sometime away in terms of having an impact but some of the other levers that we have been discussing like cost optimization, role ratios, sub-contractor expenses, etc, should we expect those to kind of prelude and contribute to an expansion on the margins before the automation and the revenue productivity levers kind of kick in at a later point of time or do we think that it will really be a function of some of those Software plus People kind of work that will really lead to an elevated margin and these would be more to contain amid the pressures that we see in terms of wage hikes and some of the other competitive intensity?
Vishal Sikka
There are two parts to the margin impact, the long-term big one is automation, the short-term big one is the operational metrics that Ranga has talked about - the onsite mix and the utilization, sub-con expense and things of this nature. So it is a tale of these two cities that has to co-exist, in the near-term the latter will have a bigger impact and the former will continue to have small impact. But it is like the exponential impact that picks up on us and over time suddenly it starts to dominate but that will be still in our future, that is still a few quarters out. So that is how I see this margin picture evolving. I am convinced that if we are able to get this Software plus People approach going at a massive scale that we will see the benefits of the margin, we will see the achievement of the aspiration that we have set of 30%. But in the near-term the pricing decline that we see sort of more or less a secular downward pressure on the price that we see is eating into these benefits that we achieve. And therefore the near-term benefits that you will see will come from the operational metrics that Ranga was talking about. Perhaps Ranga or Pravin you can add to that.
Ranganath D. Mavinakere
Just to add up what Vishal just reiterated, near to medium term we are looking at 24% to 26%, last year we also reiterated the same band. If you look at FY16 we are exactly at the midpoint of the band at 25%. If you look at Q4, while rupee did help us to some extent, sub-con expenses as a percentage of revenue came down from 6.3% to 5.6%, that did help us, likewise the other lever of utilization. So by and large in FY17 we do believe that the operating levers that we have whether it is utilization at 80%, can it move up, can onsite efforts mix at 29.6%, barely two years ago we were at 27% and consistently utilization has been in early 80s as compared to late 70s. So these are the levers certainly we would want to fully deploy. As Vishal said, the automation and other pieces certainly would have to kick in, but I think the relative emphasis during the year would be on the first bucket as we continue to work on the second bucket of automation. More importantly I think the pricing decline, for example as I was mentioning earlier there has been a pricing decline of 1.1% in constant currency terms on full year to full year basis. So some of these measures have to counter that present decline in an effective manner. That is the reason we have continued to reiterate the band of 24% to 26%.
Ashish Chopra
And if I could squeeze in just last one, with regards to some weakness that we saw in the top 10 accounts this quarter barring the top client, should we assume that to be as purely seasonal or would it have been a function of also maybe a client or two ramping down because of their own problems or anything of that nature?
Vishal Sikka
Yes, it was the latter. In one of the clients we had a significant ramp down in this last quarter because of their particular situation which we knew about a few months before. But they were reacting to certain unique situation in their business and we had another one out of top 10 that had a small decline. But other than that, in fact the top 10, top 25, top 50 clients have seen a significant growth. Despite these two declines in our largest accounts in this last quarter, we grew by more than 12% over the course of the year and you have to compare that to the previous year where we did something like 1%. So there we have seen a significant improvement in the relationship strength with the large clients not only in the top 10 but also the others.
Moderator
Thank you. Thank you, ladies and gentlemen, that was our last question. I now hand the floor back to Mr. Sandeep Mahindroo for closing comments.
Sandeep Mahindroo
Thanks everyone for joining us on this call. We look forward to interacting with you again. Have a good day.
Exhibit 99.7
Earnings Call 2
EARNINGS CALL 2
Q4 2016 RESULTS
April 15, 2016
CORPORATE PARTICIPANTs
Vishal Sikka
Chief Executive Officer& Managing Director
Pravin Rao
Chief Operating Officer
Ranganath D Mavinakere
Executive Vice President & Chief Financial Officer
Mohit Joshi
President & Head – Financial Services, Head – Infosys Brazil and Infosys Mexico
Ravi Kumar S.
President & Chief Delivery Officer
ANALYSTS
Keith Bachman
Bank of Montreal
Rod Bourgeois
DeepDive
Moshe Katri
Cowen & Co.
Rishi Jhunjhunwala
Goldman Sachs
James Freidman
Susquehanna International Group
Joseph Foresi
Cantor Fitzgerald
Arvind Ramnani
Gordon Haskett
Moderator
Ladies and Gentlemen, Good Day and Welcome to the Infosys Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing ‘*’ then ‘0’ on your touchtone telephone. Please note that this conference is being recorded. I would now hand the conference over to Sandeep Mahindroo. Thank you and over to you sir.
Sandeep Mahindroo
Thanks, Karuna. Hello! Everyone and Welcome to Infosys Earnings Call to Discuss Q4 & FY-’16 Earnings Release. This is Sandeep from the Investor Relations Team. Joining us today on this earning call is CEO and MD – Dr. Vishal Sikka; COO – Mr. Pravin Rao; CFO – Mr. M.D. Ranganath along with other members of the senior management team. We will start the call with some remarks on the performance of the company by Dr. Sikka followed by comments by M.D. Ranganath, subsequently, we will open up the call for questions.
Before I pass it on to the management team, I would like to remind you that anything which we say which refers to our outlook for the future is a forward-looking statement which must be read in conjunction with the risk that the company faces. A full statement and explanation of these risks is available in our filings with the SEC which can be found on www.sec.gov.
I would now like to pass it on to Dr. Vishal Sikka.
Vishal Sikka
Thank you, Sandeep. Good Morning and Good Afternoon, Folks. Thanks for joining our Earnings Call. Let me start by saying that I am really proud of our company’s achievement in my first fiscal year as the CEO of Infosys. We started the year just two quarters into our strategy to reimagine services and to transform Infosys and over the course of this year we saw our endeavor which is to bring Automation, Innovation, Education and Operational Excellence relying on our human potential that is amplified by technology rather than delivering the same work for less, starting to show some concrete results. In the organic growth of our client relationships, in our win rates in large deals, and in the types of projects that we are seeing in strategic areas where we never participated before, I am proud of what our teams have achieved this quarter and in the year. And yet despite these heartening results, they are still based on metrics of the past in many ways, of the way the industry has been. The world of our future looks entirely different, it is a world that is being fundamentally reshaped by Digital Technologies and it is our endeavor to create great value for every business through solutions built on our AI technology and Open Cloud platforms to have Infoscions amplified by intelligent technology to bring purposeful innovation to life to drive collaboration and an entrepreneurial spirit from within to transform our relationship with clients and in that sense we are still very much at the beginning of this journey.
With this in mind, let me turn to the numbers: We ended Q4 of Fiscal ’16 with revenue of INR 16,550 crores or US $2.446 bn and grew in Q4 for the first time in the last 3-years. This translates to a quarter-on-quarter growth of 4.1% in rupee terms, 1.6% in US dollar terms and 1.9% in Q3 constant currency. For the full year, our revenue has grown 13.3% in constant currency and 9.1% in reported terms ahead of the guidance that we provided in January of this year. Volumes in Q4 FY ’16 grew by 2.4% indicating a healthy momentum in the underlying business and setting us up well for Fiscal ‘17. Utilization including trainees was 74.7% and 80.1% excluding trainees. Blended per capita revenue decreased 1.1% and our operating margin for the quarter was 25.5% compared to 24.9% in the previous quarter. On a full year basis, operating margin was 25% compared to 25.9% for Fiscal ’15. While still within our band of 24% to 26%, we believe the results of our initiatives in Automation and tighter control of the operating metrics will help us improve profitability in the coming year. We reported earnings per share of INR 15.74 for the quarter, up 3.8% and in US dollar terms earnings per share was 23 cents. For the full year, earnings per share is INR 59.03 or US $0.90. Attrition for the quarter decreased further to 12.6% and total employee strength is now 194,044 employees.
Let me now turn to client relationships and large deals: Once again in Q4 of FY ’16 we had a record quarter in large deal wins; we signed six large deals with a TCV of $757 mn; additionally, we signed another two large deals in Financial Services in Americas where based on the present volume of business we can get another $470 mn in revenues. We saw a 45% increase in TCV of large deal signings in FY ’16 compared to Fiscal ’15, i.e., 2.79 bn vs 1.927 bn. This actually excludes other large frame contract that were signed but not included in our reporting. Our large deal win rate has gone up significantly for the whole year - thanks to our focus on better solutioning that leverages automation and innovation, and our AiKiDo services, better articulation of value proposition and focusing more on the clients point of view, the challenges that the client face using Design Thinking as a framework in how we create our proposals. These bookings will help secure our revenue base for future years. The number of $50 mn plus clients grew to 52 and the number of $10 mn plus clients grew to 177. We added 47 net new clients during the quarter, our top-10 clients grew by 12.3% for the full year and the top-25 grew 9.3% in constant currency terms.
Our Financial Services segment led by Mohit Joshi saw a stronger traction in the year along with Finacle, our Financial Services Portfolio grew 15.3% for the full year.
In our Retail and CPG portfolio led by Sandeep, we saw strong traction for our new Software and Services business. With this, I wish to congratulate Mohit and Sandeep on being appointed presidents of our company.
My friends and colleagues, Manish and Rajesh, continue to lead their respective businesses in Healthcare, Life Insurance and Hi-Tech for Manish and Energy, Communication and Services for Rajesh.
In delivery, our global delivery engine under the leadership of Ravi has had an exceptional year. The renewal of our existing service lines has shown tremendous momentum. Our Data Analytics, Testing and Enterprise System Practices grew especially well. Zero Distance - our program to spur grassroots innovation in every project is establishing a new way to achieve Project Management Excellence. Nearly 100% of our projects are proactively proposed incremental innovative ideas. In addition to the opportunity to expand the scope of these projects, this program has instilled confidence in our teams and help drive a culture of innovators, a culture of innovation across the company. Ravi’s extraordinary leadership this year has been instrumental in our growth and our embrace of innovation and I wish to congratulate Ravi on being appointed a president of our company.
On IIP, we completed more than 220 engagements and announced availability of our (IIP) Infosys Information Platform on AWS. On IAP, our Infosys Automation Platform, more than 125 engagements in IAP have now happened across our segments and 21 additional deployments went out this quarter across our key accounts.
In Q4 we released 1,710 full-time employees equivalent worth of work across service lines using our Automation platform which brings us to 3,900 FTEs released over the course of FY’16 due to Automation. These numbers are still small in Fiscal ’16 but will continue to rise as the deployment widens and the tools themselves evolve to handle more complex activities that are today performed manually. In addition, we did our first major project to bring the power of Automation and Information Platform capabilities internally to review our own financial processes under Ranga’s leadership. We identified and then massively automated the things that caused latency in our systems due to batch processes and we have created a much better user experience across our systems. This focus on Automation, for example, we went from 4-hours to 1-hour in revenue accounting from 2-days to completely automating project attribute changes from 36-hours to 12-hours for accounting at the project level, and many other dramatic simplifications. Congratulations, Ranga and your team. In the coming quarter, we will focus on even more on reconciliation and instant reporting leveraging our Infosys Information Platform.
Panaya and Skava continue to gain traction both as a part of the large client engagements where these products were central to the value proposition as well as standalone deals. This quarter the EdgeVerve business sustained momentum with 18 wins and 24 go-lives for both the Finacle and Edge suite of solutions across various market regions.
In Consulting, under Sanjay’s leadership, we continue to focus on Consulting as our tip of the spear, an integrated part of our engagements in strategic initiatives with clients and in growing client relationships. Specifically, in Design-led Services, I am pleased to see Design Thinking as a key fabric of our work, making it way into every engagement and rapidly reaching all our clients.
Extending the reach of our own work, we continue to make investments in the ecosystem. This quarter we invested in Waterline Data Science to extend what we offer clients in Automated Data Discovery and Governance areas.
I am personally very excited to announce an RSU and Options Plan for employees. We are starting with managers to drive retention of our highest performing leaders and also to attract the best leaders in the world to Infosys. Over time my endeavor is to extend this to all Infoscions as we used to do before. Additionally, we are providing 6% to 12% compensation increase offshore, it will be towards the higher end of the range at junior levels and at senior levels it will be towards the lower end of this range. Of course, for higher performers, these numbers will be significantly higher. For onsite similarly, we are providing 1.5% to 2% average compensation increase, this will vary across geographies based on prevailing market conditions.
In Q4, the Infosys Foundation continued to invest and support programs in the areas of Sanitation, Healthcare and Rural Development. During the quarter, the Foundation signed a Memorandum of Understanding with the Asia Heart Foundation to enable the adoption of Robotics in Healthcare through a grant of INR 8 crores and provided INR 5 crores to Sahakara Mitra Samstha, Center for Collective Development to enhance the livelihood of the farming community in the Indian States of Andhra Pradesh and Telangana. It also successfully completed the construction of 365 Toilets in 110 Schools of Odisha to support the Indian Prime Minister’s Swachh Bharat, Swachh Vidyalaya Abhiyan Mission. In the State of Karnataka, it launched the Jaldhara Project in drought hit villages of Dharwad, Haveri and Gadag Districts by deploying tankers to provide drinking water.
In the US, the Infosys Foundation USA continue to engage with the local communities and invest in Computer Science-related Programs that are fundamental to our future. The Foundation announced a grant of a million dollars in partnership with the National Science Foundation to support Computer Science Professional Development for Teachers. This collaboration will provide opportunities to as many as 2,000 school teachers and bring value to tens of thousands of students to deepen their understanding of computer science.
Finally, our revenue growth guidance for Fiscal ’17 is 11.5% to 13.5% in constant currency terms based on our visibility at this time. As the year evolves and our visibility improves, we will continue to revisit this.
To close, I am proud of what we have accomplished this year. Our strategy is starting to show concrete results and we will accelerate this in Fiscal ’17 and beyond. More importantly, what we have seen is that our strategy gives us a new path forward for Infosys and brings purpose and passion to our work. It creates a space for a new type of a services company, a human company, where our humanity is amplified by technology to deliver a great value and a great experience for all, the services company that we aspire to be.
Thank you very much. Now my friend and colleague, Ranga, will take you through more details of the Financial before Q&A.
Ranganath D. Mavinakere
Thank you, Vishal. Hello! Everyone. This is Ranga here. Let me first start with Q4 Revenue Performance: In dollar terms, revenues grew sequentially in Q4’16 by 1.6% on reported basis and 1.9% in constant currency basis. On a year-on-year basis when compared to Q4 ’15 revenues have grown 13.3% in dollar terms and 15% in constant currency terms.
Coming to Full Year Performance: Our Full Year FY ’16 reported revenues were $9.5 bn, a growth of 9.1%. In constant currency terms, we grew by 13.3% and at 31st March 2015 rates growth was 9.3%.
Coming to Volumes: Volumes grew by 2.4% during the quarter as compared to 3.1% in Q3 ’16. On quarter-on-quarter basis, onsite volume grew by 2.7% and offshore volume grew by 2.3%. On a full year basis volume growth for FY ’16 was 14.5% compared to FY ’15. On a yearly basis onsite volume grew by 16.8% and offshore volumes grew by 13.6%.
On Realizations, our realization for the quarter declined by 1.1% on reported basis and 0.9% on constant currency basis compared to Q3 ’16. Realization drop for the full year FY ’16 as compared to full year FY ’15 was 4.7% on reported basis and 1.1% in constant currency basis. Our utilization including trainees increased by 50 basis points to 74.7%; however, excluding trainees utilization declined by 50 basis points to 80.1%, Onsite mix increased marginally to 29.6%.
Our operating margin for the quarter was 25.5%, increase of 60 basis points during the quarter, you would recall that operating margin in Q3 was 24.9%. Margins for the quarter increased 20 basis points due to increase in utilization, which I mentioned earlier; 20 basis points due to drop in sub-con cost and 60 basis points due to rupee depreciation, this was offset by 40 basis drop in margins due to realization decline. Operating margin for full year FY ’16 was 25% as against previous year’s 25.9%.
Operating cash flow generation was very strong during the quarter; we generated operating cash flow of $562 mn in Q4 as compared to $474 mn last quarter. Capital expenditure during the quarter was $115 mn. Our cash and cash equivalents as of March 31st March were $5.202 bn as compared to $4.765 bn last quarter.
At the group level, we added 9,034 gross employees during the quarter with net addition of 661 employees. Attrition continues to be on a declining trend; at the group level annualized attrition was 17.3% as compared to 18.1% last quarter. The quarterly annualized attrition on a standalone basis has declined to 12.6% from 13.4% last quarter.
DSO for the quarter was 66 days as compared to 65-days in previous quarter. As you know we had a very volatile currency environment in Q4; we managed to navigate the volatility effectively; rupee depreciated against the dollar by 2.5% on an average basis and 0.2% on period-end basis. US dollar appreciated 6% against GBP; however, against Euro and Australian dollar, USD depreciated by 1.4% and 1.2% respectively. Our hedge position as on March 31st 2016 was $910 mn.
Yield on other income was 8% this quarter as compared to 8.6% in Q3, this drop is a reflection of softening interest rates in India, we expect yield for FY ’17 to be approximately 7.5% as compared to 8.6% in FY ’16, which is a drop of 110 basis points.
The effective tax rate for the quarter was low at 27.9% on account of write-back of tax provisions on closure of audits in certain jurisdictions. Effective tax rate for FY ’16 was 28% on reported basis; however, normalized for provision reversals the effective tax rate for FY ’16 was 29.7%. Full year effective tax rate projection for FY ’17 is expected to be in the range of 29% to 30%; this is on account of certain Software Export Zone units that will move from 100% exemption to 50% exemption during FY ’17.
Our net margins during the quarter was 21.8% and remained unchanged quarter-on-quarter. Our EPS for the quarter was $0.23, EPS grew 1.7% on a sequential basis and 7% on a year-on-year basis.
Coming to our Top Account Growth: Our revenues from top-5 clients increased by 0.2% quarter-on-quarter in reported terms and 1% in constant currency terms. From top-10 clients revenues declined 1.7% quarter-on-quarter in reported terms and 1.3% in constant currency terms. However, on a full year basis our revenues from top-5 clients grew 11.4% in reported and 12.8% in constant currency. Similarly, for our top-10 clients full year, year-on-year revenues grew by 8.3% in reported terms and 12.3% in constant currency terms, these numbers are significantly higher than the previous year.
Coming to Segments Performance for Q4 ’16: amongst Verticals, ECS grew 4.6%, RCL grew by 2.4%, Manufacturing grew by 1% while Financial Services and Insurance declined 0.3% due to seasonal softness in Insurance sector.
Overall growth in Q4 was backed by all geographies, rest of the world grew by 4%, Europe grew 2.4%, North America grew 0.5% and India grew 9.1%. Growth in India should be seen in the context of smaller base which is changes due to ramp-up and ramp-downs of several projects.
During the quarter, number of $100 mn accounts increased to 14 from 13 clients in the previous quarter, number of $75 mn plus clients increased to 31 from 28 clients in the previous quarter.
We are guiding for a constant currency growth of 11.5% to 13.5% for FY ’17. On operating margins, we expect our medium term band to be within 24% to 26%. As in every financial year in Q1 margins would be impacted by compensation increases, salary increases and visa cost. We expect it to play out this year’s Q1 as well.
With that we open the floor for Questions.
Moderator
Thank you very much, sir. Ladies and Gentlemen, we will now begin the Question-and-Answer-Session. The first question is from the line of Keith Bachman from Bank of Montreal. Please go ahead.
Keith Bachman
I wanted to ask if I could on you highlighted that you have won a large number of deals over the really past two-three quarters. I was hoping that you could talk about what part of those deals came from share take away from your competitors versus deals that might be renewals?
Vishal Sikka
We do not include renewals in this number, these are deals that we win new. The kind of work that is covered to a large degree comes at the expense of somebody else but in many cases it is also new work that was being done by the clients themselves. This is generally the background. Obviously, we win these deals within an intensely competitive environment so that is why we are particularly proud of this particular statistic. It also gives us a good base for future. As Ranga mentioned in the press release, every once in a while we hear this thing about winning because of low prices and this is something that is absolutely not true. When we look back on the deals that we have won, we talk to our clients, we find that every deal that we win is because of superior value that we offer and a great experience, great articulation of the value and most importantly, a great solution that we bring to the table, using our innovation and for no other reasons.
Pravin Rao
I just wanted to correct; we do include renewals here as well, at this stage we do not have the exact data of how much is the renewals. But majority of the cases of renewals, it will come with incremental share at the expense of other competitors as well.
Keith Bachman
It seems like Infosys is certainly doing better over the course of the last few quarters, if not the last year. As your win rate against the competitors particularly taking business away from your competitors that they had previously…I want to say ‘own’ but certainly enjoyed the benefits of existing relationships which categorize that your win rates take business away from competitors has improved over the last few quarters?
Pravin Rao
Absolutely, in FY’16 we won 21-large deals with a total TCV of $2.8 bn as compared to FY’15 it was $1.9 bn, 45% growth over FY’15. In majority of the cases, we are definitely taking away business from the competition.
Keith Bachman
If I look at sequentially, Financial Services was a little bit weaker than the rest of your business. How should we think about Financial Services as we think about the constant currency guidance of 11.5%-13.5% for this fiscal year, would you think that Financial Services would be in line with that guidance better or worse than the overall guidance for the year?
Vishal Sikka
Financial Services had in fact a record year under Mohit’s leadership. I just give a high level answer, Mohit and then you can add. We are actually very bullish on the Financial Services even though we continue to see a challenging environment in some banks because of the nature of the offerings and value propositions that we bring. We did see some slowdown in the Insurance area in the last quarter but I am not concerned about that, I believe that was a short-lived and a transient thing in certain clients and so forth. Our work is resonating quite well with a bunch of new engagements that we are involved in and working on.
Mohit Joshi
As Vishal mentioned, look, I think we had a very good year overall. The sort of weakness that you are attributing to the particular quarter is partly because of seasonality and partly because of some slowdown in Insurance for the quarter which we believe is typical to this quarter only. As Vishal mentioned, while there are obviously headwinds in the sector, we continue to be cautiously optimistic and the fact is that we have won in Q4 itself fairly significant component of the large deal wins that Vishal alluded to, came from Financial Services. I believe that our story of ‘Renew’ which is built around Automation and Artificial Intelligence resonates with the need for banks to cut down cost and to industrialize operations. I believe that our story around ‘New’ which is around design thinking, around innovation, around digital, is resonating with banks as banks need to dramatically transform their operations. Obviously, there continues to be significant spend in the industry around the risk and compliance area which is an area of strength for us. There are certain areas in the Banking sector which are transforming themselves, right, if you take the payments portion of the business, that is transforming itself and it is an opportunity. On the whole, banks today despite headwinds and despite cuts are spending significant amounts on technology and therefore with the strategy like ours I do believe that there is an opportunity for us.
Moderator
Thank you. The next question is from the line of Rod Bourgeois from DeepDive Equity Research. Please go ahead.
Rod Bourgeois
Wanted to ask about the operating margin outlook for Fiscal ’17. To achieve your 25% operating margin midpoint of your guidance, I wanted to ask, what this assume in terms of the impact of pricing on your margin, in other words, can you quantify the impact pricing is expected to have on your margin in Fiscal ‘17?
Ranganath D. Mavinakere
Yes, we guided 24% to 26% last year as well and we are exactly at the midpoint as we close FY ’16. In FY ’16 we had a year-on-year full year pricing decline of 1.1% in constant currency and we do not see any significant either upward or downward change at this point in time, we do not see much of a difference in terms of the trend line. Second, as you know, in terms of operating levers, there were a couple of operating levers that started this quarter beginning to show some especially the sub-con expenses as a percentage of revenue which was 6.3% last quarter, came down to 5.6% which gave us a benefit of over 20 basis points this quarter will continue as likewise on utilization. If you look at utilization consistently in the last four quarters is about 80% and we do believe that we need to work on that a bit more and see what could be the trajectory of utilization in FY 17. Likewise, onsite effort mix was 29.6% this quarter and this number used to be around 27%, I would say about two years ago. So these are some of the operating levers, we will continue to leverage and optimize in the coming years. In addition, of course we have to see how much of automation benefits would kick in during this particular year. So to answer your question, yes last year that was -1.1% in constant currency terms, we do not see a significant change in the secular pricing decline.
Rod Bourgeois
Right, I mean that 1.1%, that is a blended average price, but what I am enquiring about is what you expect the impact of pricing to be on your actual operating margin that you are going to realize, can you quantify that?
Ranganath D. Mavinakere
Yes, typically for every 1% decline we do see about 40 basis points.
Rod Bourgeois
Okay, got it. And then in order to offset assuming pricing remains somewhat negative, what is your biggest remaining operating margin lever to offset that?
Ranganath D. Mavinakere
There are three principles, one of course is the onsite effort mix is one that I talked about which is currently 29.6% and we have seen in some of the earlier quarters that is 27% and every 1% drop gives us about 35 to 40 basis points. Then utilization, utilization is 80.1%, there again in earlier quarters we have seen as high as 83.7%, so we need to see how much of that needle we need to move. Likewise, onsite role ratios is another one that we are focusing on and the sub-contractor expenses and sub-contractor expenses are straight away about 20 to 25 basis points and right now this quarter it came down from 6.3% of revenue which was an all-time high to about 5.6%. So these are the three principle levers. Automation benefits, it is too early to quantify for this financial year but we will see how that plays in.
Moderator
Thank you. Our next question is from the line of Moshe Katri from Sterne Agee. Please go ahead.
Moshe Katri
Can you quantify the pluses and minuses that actually impacted or benefited margins for the quarter?
Ranganath D. Mavinakere
If you look at the operating margin for the quarter, the net increase was about 60 basis points of which 20 basis points due to increase in utilization, 20 basis points due to drop in sub-contractor cost and 60 basis points due to rupee depreciation and this was offset by 40 basis points drop in margins due to realization decline. So that is the math.
Moshe Katri
And then looking at your margin assumption for fiscal year 2017 are we factoring any sort of moves in FX?
Ranganath D. Mavinakere
See at this point in time it is very difficult to predict the rupee movement, if you look at recent months the rupee has started to strengthen at least in the last three weeks, at this point in time it is difficult for us to predict, I think the key assumptions would really be around our pricing decline and volume growth as well as some of the operating levers that I talked about. So at this point in time it is extremely difficult to assume which way the rupee would move.
Moshe Katri
And then final question and this is also for Vishal, you have done a really good job in terms of expanding or improving your quarterly booking numbers for the past two years, I think you went from $400 mn per quarter in 2015 to about $716 mn and then what sort of assumptions do we have for fiscal year 2017? And then can you talk a bit about the quality of the new business which is coming onboard in terms of the blended EBIT margin contribution for the overall business? Thank you.
Vishal Sikka
The quality of the business is actually getting better because when we go into this deals we bring a lot of innovation areas into these, the ‘Aikido’ services, the software and so forth. As we realize these projects and start to bring them to life we are going to deploy more and more of that over the course of the projects. There do continue to be many aspects of these projects that are more traditional in nature involving transition of resources and onsite hiring and so forth. So as much as possible we are bringing innovative ideas to these but I expect to see that the contribution of the innovation to these projects will continue to improve as we go forward. In terms of the visibility, we have a pretty healthy pipeline as we look ahead and the pipeline has improved significantly compared the pipeline that we had one year ago and perhaps Pravin can comment a little bit more on that. We do not yet have a forecast on the bookings per quarter over the course of the next four quarters but when we look all the way these projects ramp up and the revenue gets realized over the course of this quarter all that is factored into the overall guidance. Pravin do you want to add anything?
Pravin Rao
Yes, I think as Vishal said in FY16 we have won 21 large deals, TCV of $2.79 bn and this quarter itself we won six large deals and in addition we have won two deals where we believe we will add about another $470 mn TCV of revenues over the deal period which we are not reflecting in the large deals, it is not a fully committed revenue. Overall, this year we have seen good growth in large deals, good conversion of large deals, our pipeline has increased, our conversion rate has increased, the pipeline is also pretty strong getting into the coming year. And more importantly the pipeline is broad based, we are seeing good pipeline across both Europe and Americas as well as across various industries.
Moderator
Thank you. Our next question is from the line of Rishi Jhunjhunwala from Goldman Sachs. Please go ahead.
Rishi Jhunjhunwala
Vishal, you talked about eliminating almost 1,700 employees as part or effort equivalent to that many number of employees in this quarter, can you just talk about basically what is the nature of the work in which we actually had these automation benefits both in terms of service lines and verticals?
Vishal Sikka
So we did 1,710 this last quarter, about 1,100 a quarter before and about 600 the year before that and so forth, so more than 3,000 over the course of the year. Beyond the BPO, the biggest contributor is the CIS, our Infrastructure Management Service. The nature of the work there is limited for now to fixed price projects so that the value realized is something that goes in to our automation and in T&M it is a disruptive thing, so one of the things we are working on is the strategic initiative to proactively transform the T&M projects into fixed price projects so that the benefits of that can be achieved and also to a certain degree shared with the clients so that there we create a win-win situation. Now when you look at the nature of the work beyond a fixed price, so far it has been dominated by L1 in Infrastructure Operations as well as some L2 that we have started to see in the last two quarters, so that is something also that we are working on.
We have a very exciting initiative that we are working on, I am personally working on that around bringing Artificial Intelligence techniques to the more advanced forms of support, the L3 automation areas where we have more than 10,000 developers who work in application maintenance and work on source code maintenance and changing systems and things of this nature. And by using AI to simplify some of that work we believe that we can have a dramatic impact on this. If you look at the 1,700, it is not a meaningful part of the P&L yet. 1,700 is a large number and we are incredibly proud of it, we have been tracking this closely, myself, Ravi, Pravin, Ranga we all track this very carefully but in the overall P&L this is still a kind of a drop in the bucket because it is a little bit more than 1% of the delivery force, so it kind of gets lost in the big movements around utilization and things of that nature and the number of hirings that we do and so forth. But as this number becomes bigger by making the automation wider in terms of the areas that it comes to and deeper this number will continue to become more and more significant over the next several quarters and it will take a big bite out of both the margins as well as the revenue per employee.
Currently for now the operational metrics that Ranga talked about will have the lion's share of the effect on margin and RPE, but over time there is no doubt that this will be far dwarfed by automation as automation becomes more sophisticated. And finally to your question about the distribution, perhaps Ravi you can add to that. CIS obviously was one of the biggest ones but also in application development and maintenance in BI and back-end services and especially in verification also we saw significant contribution towards the 1,700. Ravi, you want to add anything?
Ravi Kumar S.
I think you have covered pretty much Vishal. The infrastructure business has been leading the show in automation. We have fairly good momentum on ADM, the Application Development and Maintenance Space and Testing Services historically had a lot of automation pegged into the model and now we have actually found new ways to add more to it. And we use our own software which is Panaya to look at automating the Enterprise Application space.
Rishi Jhunjhunwala
And any vertical skew?
Ravi Kumar S.
There is no vertical skew, it is applicable pretty much in all service lines across the industries. Of course the ones which have more infrastructure and more application development have more amenability to it from a standpoint of automation and from a standpoint of using software to derive automation which is primarily the Panaya suite of products which we have, that is more on the Enterprise Application space.
Rishi Jhunjhunwala
Second is, recently the Board and the shareholders approved the compensation structure for you Vishal and there it seems like it has been linked with revenue margin and revenue per employee targets to be achieved every year. Can you share us the targets for FY 17?
Vishal Sikka
No we cannot, this is not a question for the management of the company, this is more for the Board. Generally, as has been shared it is in that direction of the 2020 target where some kind of a curve that gets up there and I guess that is something for you to ask the Board.
Moderator
Thank you. Our next question is from the line of James Freidman from Susquehanna International Group. Please go ahead.
James Freidman
When we look forward to the guidance, I was wondering how should we think about the contribution from the top clients, it seems a great portion of your success has been from mining those clients, is that pattern getting continuously moved into this fiscal?
Vishal Sikka
Yes, I mean if you look back over the last year, the contribution of the large clients to the growth of the company has been significant, we did about 12.3% constant currency growth in the top 10 clients and similarly the top 25 as well as the top 50 clients grew significantly. Last year in FY 15 for instance the growth in the top 10 client was only 1.5% or something like that, perhaps Ranga can correct me. So that number has been increasing significantly and we expect to continue to deliver tremendous value to the large clients.
In terms of the depth of knowhow, the depth of the relationship both in the client account engagement side as well as the delivery side and consulting is quite significant in the bigger client, we have deeper understanding of their business, I engage with them as well as Pravin and our management team. So this is an area that we have addressed well and I am happy with where we are, I think there is still room for more improvement, being more proactive, becoming more strategic to these clients and we expect to continue to do that.
But at the same time we are a company operating now at a scale where we should be able to walk and chew gum at the same time. So this is not to say that there is any dilution in the focus towards new account openings, that is incredibly important and it continues to be in fact. If you look at the percentage of the revenue coming from the new accounts or new projects versus renewals that has improved which is a good thing and we want to continue to see it go that way. And we are also excited about opening certain new market segments, in particular the smaller businesses and we have been doing great work with Ritika's team on the startup engagement and venture investing and Ravi is also working together with Sandeep on building alliances towards the mid-market and we expect to share more about that at our confluence event later this month.
Moderator
Thank you. Our next question is from the line of Joseph Foresi from Cantor Fitzgerald. Please go ahead.
Joseph Foresi
First on financial services, you mentioned winning some deals, I was wondering where in financial services you are winning those deals and how would you describe large bank budgets overall?
Mohit Joshi
So I think the deals that we won, one of them is basically to look at the bank's entire suite of applications and do L2 support across them using our Infosys automation platform. We have also won a couple of large frame agreements with large global banks, so I think that is where we are seeing the opportunity. On the capital market side we are seeing some volatility but overall the wins have come from across the board.
Joseph Foresi
And then my second question is just on pricing, given that some of the business has matured over the years and there is some level of commoditization and we are talking about maybe a little bit of caution around the banks and this is more of a hypothetical thing, but how disciplined do you feel like the industry is right now around pricing and if there was a downturn could we see dramatic price decreases?
Mohit Joshi
I think look, as far as the banking deals are concerned I think banks have realized that there is a limit to how much you can squeeze out on a per unit basis right, in any case that is not something that they are looking at, so all of the deals that we have, have a very significant component of software in them. So you have got people plus software that allows you to give that leverage whether it is automation or it is Artificial Intelligence, the use of frameworks and tools, that is what is allowing us to give those long-term cost advantages to our clients rather than just per unit rate reduction, because that will not accomplish what the banks are looking for nor does it serve our own purpose.
Vishal Sikka
Let me add to Mohit's great observations, the banks, especially many of the large banks in certain geographies are under such severe pressure from a regulatory perspective, from an economic perspective that simply doing the same thing that they have been doing cheaper is no longer enough. A vendor in order to succeed in this climate has to bring capabilities and technologies and innovations that not only others are not able to but the bank themselves is not able to. So you have to be able to do things in new ways that were not there before, so if you look at the large deal as Mohit mentioned the automation in this case of maintenance, this was a maintenance, IT operations support project that we won one of the large deals out of the $757 mn, this would not be possible by simply doing the same management and maintenance cheaper but you need to bring the capabilities of artificial intelligence to be able to bring a dramatic automation based economic improvement as well as a quality improvement in the process with the visibility, with the regulatory reporting aspects and so forth. So in order for a vendor to be able to successful in this climate with the banks we have to have innovation in the story, we have to have a deep understanding of what is going on at the clients. And that is what it takes and it turns out that if you have those then the fact that the banks under tremendous pressure does not matter, in fact it is a good thing and it allows us to win more business. So the deal that Mohit mentioned in addition two frame deals that we did not include in the $757 mn are also both in the financial services industry.
Mohit Joshi
And I just want to add one final point which is if you take a US specific perspective then obviously there has been over times banks have been working with us for many, many years. But we serve a larger market, if I look at Europe or if I look at Australia for instance or if I look at parts of the Asia Pacific there still several areas where banks are still struggling with technology, where they are still investing sort of fairly heavily to make sure that their core applications, their entire environment is up to spec and that also gives us significant opportunity, right. So while there is the industrialization piece which is focused on cost reduction, which is focused on efficiencies, which is focused on automation, on platforms, there is also the entire piece around the renewal of the banking landscape by making a new sort of digital footprint for banks around the opportunities that the new digital technologies allow us. So while there is a focus on cost reduction in certain parts of the industry specifically in the capital market space, there is a huge growth opportunity in parts of retail and corporate banking, in the asset management business which are now getting increasingly impacted by technology and therefore the need to invest to make the change.
Joseph Foresi
And then just the last thing from me, we talked about automation, then you gave some headcount numbers which are obviously on the smaller side. How do you see that playing out over the next couple of years, do we hit the next inflection point where those numbers become meaningful and short over a long period of time? And what is that impact on margins, I know you have given color in the past so I just want to get an update on how you see it playing out?
Vishal Sikka
I think in order for this number to start impacting the margin it will still take some more time, if you look at the utilization as Ranga mentioned 80%, I mean 80% to 83% is what a few thousand people, so it has the same impact for now as it does in the world of automation. But on the other hand if we are able to get automation into a much larger percentage of our employee population, the nature of the work that the employees do, let us say one-third of the employees or 40% - 50% of the employees work activities can be more and more automated then we will see a dramatically larger impact of automation to the bottom-line then through any of the traditional operational measures. It is somehow like you can feed the horse better and you can whip the horses and get better horses and so forth than at some point you need an automobile and that is sort of, it is horrible analogy probably but this is what comes to my mind.
The other part of it that we quickly realize is that as we bring more intelligence to the operational processes actually the cost simplification from automation becomes dwarfed by the value improvement because of automation, more straight through processing, more integrated processes, better improvement of the experience, trying to understand the point of a business process and improving that and then that becomes much more about innovation and then creating much larger value and so forth. So that has its own unexpected and significantly larger benefit. So all of this, I am really excited about all of this playing out, I mean one thing that gets lost in the middle of all these large deal wins is that a lot of that has been happening because of the automation and so forth as well. So it is in my view a very fundamental part of the future of our industry and certainly the future of our company and there is only one way forward and that is full speed ahead.
Moderator
Thank you. Our next question is from the line of Arvind Ramnani from Gordon Haskett. Please go ahead.
Arvind Ramnan
There is a question for Vishal, it has been almost two years since you have joined Infosys, can you provide a color on the nature of your conversations you have with your clients, specifically when you started you spoke to probably a number of your current and prospective clients and they would have given you feedback on their perception of Infosys and I am sure you are continuing those conversations now. So can you kind of elaborate how is the perception of Infosys changed among clients and possibly like some of the underlying reasons for change in perception?
Vishal Sikka
First of all, two years, has it really been that long, it feels like yesterday. I think frankly my answer to this would be somewhat not objective and perhaps even self-serving, so it is a little bit awkward for me to answer that especially because I see a distinct sense in which the conversations have improved dramatically, the relationships have become much more elevated and more importantly the nature of the work that we do has become more elevated. There are the kinds of strategic projects that we are starting to do now with clients is just extra ordinary, we work on their digital future, we work on bringing AI to their most complex problems, we recently had a huge company from Europe that was going through a very structural change and they actually did their entire rebranding exercise in our office in Palo Alto. The entire leadership team of this huge company was locked in our office and working on deep existential questions about their future and their identity and it was just an unbelievable experience.
We recently had the entire management team of a massive industrial company visiting our office and they were shocked to find small team, one of the design teams that we have growing little plants inside the office and they were like what is the story with these plants. Actually these were plants that we were growing for an agriculture company, one of Sandeep's clients in an heavily instrumented atmosphere where the entire plant, the soil that it was in and all of that had tons of sensors inside and these people from this giant industrial company were absolutely shocked to see that. So I mean those were just two random examples that came to my mind at the end of a 14-hour long day, but the nature of the relationship, the nature of engagements, we are designing actually a workspace if you can believe it, we are designing an entire building for one of the large companies in the United States because they saw our space, they were very impressed by our ability to build green and highly open collaborative work spaces and so forth. So there has been an absolutely marked change in the nature of the relationships with the clients, certainly not with all of them but with an increasing number of deals, I would say it is still a traction the ones that we have been able to touch with our strategic message and the strategic levels and I certainly expect to and at any rate I wish to see this is certainly our goal and our aspiration to see more and more of that.
Arvind Ramnan
And just a quick follow-up, has the competitive scene has also changed and has the number of deals that you kind of get preapproved for….. has that also changed?
Vishal Sikka
I have no idea, is your question that are we winning more deals at the expense of competitors or are they also changing their story, what was it?
Arvind Ramnan
So are you basically entering situations where say your clients basically preselect you where they do not even open up some of those projects for bids to competitors, I mean are you winning projects where you are really ling kind of seeing selected versus going through like entire RFP process?
Vishal Sikka
I do not have the statistics on this but informally I would say that the sole sourced or the non-RFV deals number has at least from where I see and this is certainly a fraction of the client base, this number to me seems to have increased dramatically.
Moderator
Thank you. Ladies and Gentlemen, that was the last question. I would now like to hand over the floor back to Mr. Sandeep Mahindroo for closing comments. Over to you sir.
Sandeep Mahindroo
Thanks everyone for joining us on this call. We look forward to talking to you again. Have a good day
Exhibit 99.8
Form of Advertisement
Infosys Limited Regd. office: Electronics City, Hosur Road, Bangalore – 560 100, India |
CIN : L85110KA1981PLC013115 Website: www.infosys.com email: investors@infosys.com T: 91 80 2852 0261, F: 91 80 2852 0362 |
Audited consolidated financial results of Infosys Limited and its subsidiaries for the quarter and year ended March 31, 2016, prepared in compliance with the International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board.
(in crore, except equity share and per equity share data)
Particulars | Quarter ended March 31, | Quarter ended December 31, | Quarter ended March 31, | Year ended March 31, | |
2016 | 2015 | 2015 | 2016 | 2015 | |
Revenues | 16,550 | 15,902 | 13,411 | 62,441 | 53,319 |
Cost of sales(1) | 10,262 | 9,990 | 8,174 | 39,098 | 32,883 |
Gross profit | 6,288 | 5,912 | 5,237 | 23,343 | 20,436 |
Selling and marketing expenses | 909 | 859 | 736 | 3,431 | 2,941 |
Administrative expenses | 1,159 | 1,094 | 1,052 | 4,292 | 3,663 |
Operating profit | 4,220 | 3,959 | 3,449 | 15,620 | 13,832 |
Other income, net | 772 | 802 | 881 | 3,125 | 3,427 |
Share in associate's profit /(loss) | (1) | – | (1) | (3) | (1) |
Profit before income taxes | 4,991 | 4,761 | 4,329 | 18,742 | 17,258 |
Income tax expense | 1,394 | 1,296 | 1,232 | 5,251 | 4,929 |
Net profit | 3,597 | 3,465 | 3,097 | 13,491 | 12,329 |
Paid-up equity share capital (par value 5/- each, fully paid) | 1,144 | 1,144 | 572 | 1,144 | 572 |
Share premium, retained earnings and other components of equity | 60,635 | 54,191 | 54,191 | 60,635 | 54,191 |
Earnings per share (par value 5/- each) (2) | |||||
Basic | 15.74 | 15.16 | 13.55 | 59.03 | 53.94 |
Diluted | 15.74 | 15.16 | 13.55 | 59.02 | 53.94 |
(1) | Includes Depreciation and amortization expense of 419 crore and 1,459 crore for the quarter ended and year ended March 31, 2016 |
(2) | adjusted for bonus issues wherever applicable |
1. | The audited consolidated financial statements for the quarter and year ended March 31, 2016 have been taken on record by the Board of Directors at its meeting held on April 15, 2016. The statutory auditors have expressed an unqualified audit opinion. The information presented above is extracted from the audited consolidated financial statements. The consolidated financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. |
2. | On November 6, 2015, the Securities and Exchange Board of India (SEBI) relaxed the requirements of Regulations 33(1)(c) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 for the quarter ending December 31, 2015 and quarter and financial year ending March 31, 2016 for all such listed entities which had exercised the option of preparing consolidated financial statements under IFRS for the earlier quarters of FY 2015-16. The company had earlier availed the option of publishing consolidated financial results under IFRS as per the press release issued by SEBI on November 9, 2009 and continues to do so for the quarter ending March 31, 2016 pursuant to the relaxation provided by the aforesaid November 6, 2015 circular. |
3. | i) | The shareholders of the company have approved, through postal ballot, the reappointment of Prof. Jeffrey S. Lehman with effect from April 14, 2016 to April 13, 2018. |
ii) | The shareholders of the company have approved, through postal ballot, the appointment of Dr. Punita Kumar-Sinha up to January 13, 2021. |
4. | Vide postal ballot, the shareholders of the company have approved the reappointment and remuneration of Dr. Vishal Sikka, CEO and Managing Director with effect from April 1, 2016 to March 31, 2021. |
5. | Pursuant to the approval by the shareholders through postal ballot which ended on March 31, 2016, the Board of Directors have been authorised to introduce, offer, issue and allot share-based incentives to eligible employees of the Company and its subsidiaries under the 2015 Stock Incentive Compensation Plan (2015 Plan). The maximum number of shares under the 2015 plan shall not exceed 2,40,38,883 equity shares (this includes 1,12,23,576 equity shares which are currently held by Infosys Limited Employees Welfare Trust towards the 2011 RSU Plan). 1,70,38,883 equity shares will be issued as RSUs at par value and 70,00,000 equity shares will be issued as stock options at market price. These instruments will vest over a period of 4 years and the Company expects to grant the instruments under the 2015 Plan over the period of 4 to 7 years. |
6. | Information on dividends for the quarter and year ended March 31, 2016 |
An interim dividend of 10/- (par value 5/- each) per equity share was declared on October 12, 2015 and paid on October 21, 2015. The interim dividend declared in the previous year was 30/- (not adjusted for bonus issues) per equity share. The Board of Directors recommended a final dividend of 14.25 per equity share for the financial year ended March 31, 2016. The payment is subject to the approval of the shareholders in the ensuing Annual General Meeting of the Company, being held on June 18, 2016. The book closure date for the purpose of the Annual General Meeting and payment of final dividend is June 11, 2016. |
(in )
Particulars | Quarter ended March 31, | Quarter ended December 31, | Quarter ended March 31, | Year ended March 31, | |
2016 | 2015 | 2015 | 2016 | 2015 | |
Dividend per share (par value 5/- each) | |||||
Interim dividend | – | – | – | 10.00 | 30.00(1) |
Final dividend | 14.25 | – | 29.50(2) | 14.25 | 29.50(2) |
(1) | not adjusted for bonus issues on December 3, 2014 and June 17, 2015 |
(2) | not adjusted for bonus issue on June 17, 2015 |
7. Other information
(in crore)
Particulars | Quarter ended March 31, | Quarter ended December 31, | Quarter ended March 31, | Year ended March 31, | |
2016 | 2015 | 2015 | 2016 | 2015 | |
Staff costs | 9,024 | 8,772 | 7,319 | 34,406 | 29,742 |
Items exceeding 10% of aggregate expenditure | – | – | – | – | – |
8. Audited financial results of Infosys Limited (Standalone Information)
(in crore)
Particulars | Quarter ended March 31, | Quarter ended December 31, | Quarter ended March 31, | Year ended March 31, | |
2016 | 2015 | 2015 | 2016 | 2015 | |
Revenues | 14,158 | 13,562 | 11,926 | 53,983 | 47,300 |
Profit before exceptional item and tax | 4,712 | 4,376 | 4,170 | 17,657 | 16,386 |
Profit on transfer of business* | – | – | – | 3,036 | 412 |
Profit before tax | 4,712 | 4,376 | 4,170 | 20,693 | 16,798 |
Profit for the period | 3,399 | 3,183 | 3,024 | 15,786 | 12,164 |
* | Exceptional item pertains to profit on transfer of business to EdgeVerve Systems Limited, a wholly owned subsidiary. |
Note: | The audited results of Infosys Limited for the above mentioned periods are available on our website, www.infosys.com and on the Stock Exchange website www.nseindia.com and www.bseindia.com. The information above has been extracted from the audited financial statements as stated. |
9. Consolidated statement of Assets and Liabilities (IFRS Consolidated – Audited)
(in crore)
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
EQUITY AND LIABILITIES | ||
Shareholders’ funds | ||
Share capital | 1,144 | 572 |
Reserves and surplus | 60,635 | 54,191 |
Sub-total- Shareholders' Fund | 61,779 | 54,763 |
Minority interests | – | – |
Non-current liabilities | ||
Deferred tax liabilities (net) | 256 | 160 |
Other long-term liabilities | 115 | 46 |
Sub-total: Non-current liabilities | 371 | 206 |
Current liabilities | ||
Trade payables | 386 | 140 |
Other current liabilities | 12,341 | 10,765 |
Short-term provisions | 512 | 478 |
Sub-total- Current liabilities | 13,239 | 11,383 |
TOTAL - EQUITY AND LIABILITIES | 75,389 | 66,352 |
ASSETS | ||
Non-current assets | ||
Fixed assets | 11,515 | 9,763 |
Goodwill | 3,764 | 3,091 |
Non-current investments | 1,914 | 1,438 |
Deferred tax assets (net) | 536 | 537 |
Other non-current assets | 5,965 | 4,327 |
Sub-total- Non-current assets | 23,694 | 19,156 |
Current assets | ||
Current investments | 75 | 874 |
Trade receivables | 11,330 | 9,713 |
Cash and cash equivalents | 32,697 | 30,367 |
Other current assets | 7,593 | 6,242 |
Sub-total Current assets | 51,695 | 47,196 |
TOTAL - ASSETS | 75,389 | 66,352 |
The above disclosure is in compliance with Regulation 33(3) (f) read with Annexure IX of circular CIR/CFD/CMD/15/2015 dated November 30, 2015 issued by SEBI in this regard. The disclosure is an extract of the audited IFRS Consolidated Balance Sheet as at March 31, 2016.
10. Segment reporting (IFRS Consolidated – Audited)
(in crore)
Particulars | Quarter ended March 31, | Quarter ended December 31, | Quarter ended March 31, | Year ended March 31, | |
2016 | 2015 | 2015 | 2016 | 2015 | |
Revenue by business segment | |||||
Financial Services (FS) | 4,522 | 4,377 | 3,628 | 17,024 | 14,394 |
Manufacturing (MFG) | 1,748 | 1,756 | 1,522 | 6,948 | 6,172 |
Energy & utilities, Communication and Services (ECS) | 3,635 | 3,410 | 2,926 | 13,547 | 12,005 |
Retail, Consumer packaged goods and Logistics (RCL) | 2,727 | 2,576 | 2,219 | 10,226 | 8,864 |
Life Sciences, Healthcare and Insurance (HILIFE) | 2,083 | 2,102 | 1,720 | 8,090 | 6,702 |
Hi-Tech | 1,327 | 1,198 | 1,056 | 4,891 | 3,918 |
All other segments | 508 | 483 | 340 | 1,715 | 1,264 |
Total | 16,550 | 15,902 | 13,411 | 62,441 | 53,319 |
Less: Inter-segment revenue | – | – | – | – | – |
Net revenue from operations | 16,550 | 15,902 | 13,411 | 62,441 | 53,319 |
Segment profit before tax, depreciation and non-controlling interests: | |||||
Financial Services (FS) | 1,249 | 1,250 | 1,096 | 4,839 | 4,262 |
Manufacturing (MFG) | 426 | 425 | 331 | 1,560 | 1,406 |
Energy & utilities, Communication and Services (ECS) | 1,108 | 969 | 844 | 4,029 | 3,608 |
Retail, Consumer packaged goods and Logistics (RCL) | 767 | 699 | 669 | 2,840 | 2,678 |
Life Sciences, Healthcare and Insurance (HILIFE) | 626 | 581 | 465 | 2,265 | 1,883 |
HiTech | 364 | 314 | 266 | 1,301 | 1,045 |
All other segments | 105 | 95 | 61 | 259 | 19 |
Total | 4,645 | 4,333 | 3,732 | 17,093 | 14,901 |
Less: Other unallocable expenditure | 425 | 374 | 283 | 1,473 | 1,069 |
Add: Unallocable other income | 772 | 802 | 881 | 3,125 | 3,427 |
Add: Share in Associate's profit / (loss) | (1) | – | (1) | (3) | (1) |
Profit before tax and non-controlling interests | 4,991 | 4,761 | 4,329 | 18,742 | 17,258 |
Notes on segment information
Business segments
During the quarter ended March 31, 2016, the Company reorganized some of its segments to enhance executive customer relationships, improve focus of sales investments and increase management oversight consequent to which,the erstwhile manufacturing segment is now being reviewed as Hi-Tech, Manufacturing and others included in ECS. Further, Infosys Public Services is also being reviewed seperately by the Chief Operating Decision maker. Consequent to the internal reorganizations, there were changes effected in the reportable business segments based on the "management approach" as defined in IFRS 8, Operating Segments. The previous period figures, extracted from the audited consolidated financial statements, have been presented after incorporating necessary reclassification adjustments pursuant to changes in the reportable segments.
Segmental capital employed
Assets and liabilities used in the Company's business are not identified to any of the reportable segments, as these are used interchangeably between segments. The Management believes that it is not practicable to provide segment disclosures relating to total assets and liabilities since a meaningful segregation of the available data is onerous.
By order of the Board | |
for Infosys Limited | |
Bangalore, India | Dr. Vishal Sikka |
April 15, 2016 | Chief Executive Officer and Managing Director |
The Board has also taken on record the unaudited condensed consolidated results of Infosys Limited and its subsidiaries for the quarter and year ended March 31, 2016, prepared as per International Financial Reporting Standards (IFRS) and reported in US Dollars. A summary of the financial statements is as follows:
(in US$ million, except per equity share data)
Particulars | Quarter ended March 31, | Quarter ended December 31, | Quarter ended March 31, | Year ended March 31, | |
2016 | 2015 | 2015 | 2016 | 2015 | |
Revenues | 2,446 | 2,407 | 2,159 | 9,501 | 8,711 |
Cost of sales | 1,516 | 1,512 | 1,317 | 5,950 | 5,374 |
Gross profit | 930 | 895 | 842 | 3,551 | 3,337 |
Net profit | 533 | 524 | 498 | 2,052 | 2,013 |
Earnings per Equity Share # | |||||
Basic | 0.23 | 0.23 | 0.22 | 0.90 | 0.88 |
Diluted | 0.23 | 0.23 | 0.22 | 0.90 | 0.88 |
Total assets | 11,378 | 10,771 | 10,615 | 11,378 | 10,615 |
Cash and cash equivalents including available-for-sale financial assets (current) and certificates of deposit | 4,946 | 4,523 | 4,999 | 4,946 | 4,999 |
# | adjusted for bonus issues wherever applicable |
Certain statements in this advertisement concerning our future growth prospects are forward-looking statements regarding our future business expectations intended to qualify for the 'safe harbor' under the Private Securities Litigation Reform Act of 1995, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, fluctuations in foreign exchange rates, our ability to manage growth, intense competition in IT services including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, industry segment concentration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks or system failures, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which Infosys has made strategic investments, withdrawal or expiration 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, 2015. 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. In addition, please note that the date of this advertisement is April 15, 2016, and any forward-looking statements contained herein are based on assumptions that we believe to be reasonable as of this date. 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 unless it is required by law.
Infosys Limited Regd. office: Electronics City, Hosur Road, Bangalore – 560 100, India |
CIN : L85110KA1981PLC013115 Website: www.infosys.com email: investors@infosys.com T: 91 80 2852 0261, F: 91 80 2852 0362 |
Extract of Audited consolidated financial results of Infosys Limited and its subsidiaries for the quarter and year ended March 31, 2016, prepared in compliance with the International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board.
( in crore)
Particulars | Quarter ending March 31, | Year ending March 31, | Quarter ending March 31, |
2016 | 2016 | 2015 | |
Revenues | 16,550 | 62,441 | 13,411 |
Net profit | 3,597 | 13,491 | 3,097 |
Paid-up equity share capital (par value 5/- each, fully paid) | 1,144 | 1,144 | 572 |
Share premium, retained earnings and other components of equity | 60,635 | 60,635 | 54,191 |
Earnings per share (par value 5/- each) # | |||
Basic | 15.74 | 59.03 | 13.55 |
Diluted | 15.74 | 59.02 | 13.55 |
# | adjusted for bonus issues wherever applicable |
1. | The audited consolidated financial statements for the quarter and year ended March 31, 2016 have been taken on record by the Board of Directors at its meeting held on April 15, 2016. The statutory auditors have expressed an unqualified audit opinion. The information presented above is extracted from the audited consolidated financial statements. The consolidated financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board. |
2. | i) | The shareholders of the company have approved, through postal ballot, the reappointment of Prof. Jeffrey S. Lehman with effect from April 14, 2016 to April 13, 2018. |
ii) | The shareholders of the company have approved, through postal ballot, the appointment of Dr. Punita Kumar- Sinha up to January 13, 2021. |
3. | Vide postal ballot, the shareholders of the company have approved the reappointment and remuneration of Dr. Vishal Sikka, CEO and Managing Director with effect from April 1, 2016 to March 31, 2021. |
4. | The Board of Directors recommended a final dividend of 14.25 per equity share for the financial year ended March 31, 2016. The payment is subject to the approval of the shareholders in the ensuing Annual General Meeting of the Company, being held on June 18, 2016. The book closure date for the purpose of the Annual General Meeting and payment of final dividend is June 11, 2016. |
5. | Pursuant to the approval by the shareholders through postal ballot which ended on March 31, 2016, the Board of Directors have been authorised to introduce, offer, issue and allot share-based incentives to eligible employees of the Company and its subsidiaries under the 2015 Stock Incentive Compensation Plan (2015 Plan). The maximum number of shares under the 2015 plan shall not exceed 2,40,38,883 equity shares ( this includes 1,12,23,576 equity shares which are currently held by Infosys Limited Employees Welfare Trust towards the 2011 RSU Plan). 1,70,38,883 equity shares will be issued as RSUs at par value and 70,00,000 equity shares will be issued as stock options at market price. These instruments will vest over a period of 4 years and the Company expects to grant the instruments under the 2015 Plan over the period of 4 to 7 years. |
6. | Audited financial results of Infosys Limited (Standalone Information) |
(in crore)
Particulars | Quarter ending March 31, | Year ending March 31, | Quarter ending March 31, |
2016 | 2016 | 2015 | |
Revenues | 14,158 | 53,983 | 11,926 |
Profit before exceptional item and tax | 4,712 | 17,657 | 4,170 |
Profit on transfer of business* | – | 3,036 | – |
Profit before tax | 4,712 | 20,693 | 4,170 |
Profit for the period | 3,399 | 15,786 | 3,024 |
* | Exceptional item pertains to profit on transfer of business to EdgeVerve Systems Limited, a wholly owned subsidiary. |
The above is an extract of the detailed format of Quarterly Financial Results filed with Stock Exchanges under Regulation 33 of the SEBI (Listing and Other Disclosure Requirements) Regulations, 2015. The full format of the Quarterly Financial Results are available on the Stock Exchange websites, www.nseindia.com and www.bseindia.com, and on the Company's website, www.infosys.com.
Certain statements in this advertisement concerning our future growth prospects are forward-looking statements regarding our future business expectations intended to qualify for the 'safe harbor' under the Private Securities Litigation Reform Act of 1995, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, fluctuations in foreign exchange rates, our ability to manage growth, intense competition in IT services including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, industry segment concentration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks or system failures, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which Infosys has made strategic investments, withdrawal or expiration 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, 2015. 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. In addition, please note that the date of this advertisement is April 15, 2016, and any forward-looking statements contained herein are based on assumptions that we believe to be reasonable as of this date. 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 unless it is required by law.
Infosys Limited Regd. office: Electronics City, Hosur Road, Bangalore – 560 100, India |
CIN : L85110KA1981PLC013115 Website: www.infosys.com email: investors@infosys.com T: 91 80 2852 0261, F: 91 80 2852 0362 |
Audited financial results of Infosys Limited for the quarter and year ended March 31, 2016.
(in crore, except equity share and per equity share data)
Particulars | Quarter ended March 31, | Quarter ended December 31, | Quarter ended March 31, | Year ended March 31, | |
2016 | 2015 | 2015 | 2016 | 2015 | |
Income from software services and products | 14,158 | 13,562 | 11,926 | 53,983 | 47,300 |
Expenses: | |||||
Employee benefit expenses | 7,300 | 7,103 | 6,183 | 28,206 | 25,115 |
Deferred consideration pertaining to acquisition | – | 18 | 51 | 110 | 219 |
Cost of technical sub-contractors | 1,191 | 1,226 | 836 | 4,417 | 2,909 |
Travel expenses | 438 | 360 | 325 | 1,655 | 1,360 |
Cost of software packages and others | 223 | 200 | 223 | 1,049 | 979 |
Communication expenses | 79 | 73 | 90 | 311 | 384 |
Consultancy and professional charges | 155 | 153 | 148 | 563 | 396 |
Depreciation and amortization expense | 315 | 275 | 241 | 1,115 | 913 |
Other expenses | 523 | 515 | 550 | 1,909 | 1,976 |
Total expenses | 10,224 | 9,923 | 8,647 | 39,335 | 34,251 |
Profit from operations before other income | 3,934 | 3,639 | 3,279 | 14,648 | 13,049 |
Other income | 778 | 737 | 891 | 3,009 | 3,337 |
Profit before exceptional item and tax | 4,712 | 4,376 | 4,170 | 17,657 | 16,386 |
Profit on transfer of business (1) | – | – | – | 3,036 | 412 |
Profit before tax | 4,712 | 4,376 | 4,170 | 20,693 | 16,798 |
Tax expense | 1,313 | 1,193 | 1,146 | 4,907 | 4,634 |
Net Profit for the period | 3,399 | 3,183 | 3,024 | 15,786 | 12,164 |
Paid-up equity share capital (par value 5/- each fully paid) | 1,148 | 1,148 | 574 | 1,148 | 574 |
Reserves and surplus | 56,009 | 47,494 | 47,494 | 56,009 | 47,494 |
Earnings per share (par value 5/- each) (2) | |||||
Before exceptional item | |||||
Basic | 14.80 | 13.86 | 13.16 | 55.51 | 51.17 |
Diluted | 14.80 | 13.86 | 13.16 | 55.51 | 51.17 |
After exceptional item | |||||
Basic | 14.80 | 13.86 | 13.16 | 68.73 | 52.96 |
Diluted | 14.80 | 13.86 | 13.16 | 68.73 | 52.96 |
(1) | Exceptional item pertains to profit on transfer of business to EdgeVerve, a wholly owned subsidiary. |
(2) | adjusted for bonus issues wherever applicable |
1. | The audited financial statements for the quarter and year ended March 31, 2016 have been taken on record by the Board of Directors at its meeting held on April 15, 2016. The statutory auditors have expressed an unqualified audit opinion. The information presented above is extracted from the audited standalone financial statements. |
2. | i) | The shareholders of the company have approved, through postal ballot, the reappointment of Prof. Jeffrey S. Lehman with effect from April 14, 2016 to April 13, 2018. |
ii) | The shareholders of the company have approved, through postal ballot, the appointment of Dr. Punita Kumar- Sinha up to January 13, 2021. |
3. | Vide postal ballot, the shareholders of the company have approved the reappointment and remuneration of Dr. Vishal Sikka, CEO and Managing Director with effect from April 1, 2016 to March 31, 2021. |
4. | Pursuant to the approval by the shareholders through postal ballot which ended on March 31, 2016, the Board of Directors have been authorised to introduce,offer, issue and allot share-based incentives to eligible employees of the Company and its subsidiaries under the 2015 Stock Incentive Compensation Plan (2015 Plan). The maximum number of shares under the 2015 plan shall not exceed 2,40,38,883 equity shares (this includes 1,12,23,576 equity shares which are currently held by Infosys Limited Employees Welfare Trust towards the 2011 RSU Plan). 1,70,38,883 equity shares will be issued as RSUs at par value and 70,00,000 equity shares will be issued as stock options at market price. These instruments will vest over a period of 4 years and the Company expects to grant the instruments under the 2015 Plan over the period of 4 to 7 years. |
5. | Information on dividends for the quarter and year ended March 31, 2016 |
An interim dividend of 10/- ( par value 5/- each) per equity share was declared on October 12, 2015 and paid on October 21, 2015. The interim dividend declared in the previous year was 30/- (not adjusted for bonus issues) per equity share. The Board of Directors recommended a final dividend of 14.25 per equity share for the financial year ended March 31, 2016. The payment is subject to the approval of the shareholders in the ensuing Annual General Meeting of the Company, being held on June 18, 2016. The book closure date for the purpose of the Annual General Meeting and payment of final dividend is June 11, 2016. |
(in )
Particulars | Quarter ended March 31, | Quarter ended December 31, | Quarter ended March 31, | Year ended March 31, | |
2016 | 2015 | 2015 | 2016 | 2015 | |
Dividend per share (par value 5/- each) | |||||
Interim dividend | – | – | – | 10.00 | 30.00(1) |
Final dividend | 14.25 | – | 29.50(2) | 14.25 | 29.50(2) |
(1) | not adjusted for bonus issues on December 3, 2014 and June 17, 2015 |
(2) | not adjusted for bonus issue on June 17, 2015 |
6. | Statement of assets and liabilities (Standalone – Audited) |
(in crore)
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
EQUITY AND LIABILITIES | ||
Shareholders’ funds | ||
Share capital | 1,148 | 574 |
Reserves and surplus | 56,009 | 47,494 |
Sub-total-Shareholders' funds | 57,157 | 48,068 |
Non-current liabilities | ||
Deferred tax liabilities (net) | – | – |
Other long-term liabilities | 73 | 30 |
Sub-total Non-current liabilities | 73 | 30 |
Current liabilities | ||
Trade payables | 623 | 124 |
Other current liabilities | 6,105 | 5,546 |
Short-term provisions | 8,809 | 8,045 |
Sub-total Current liabilities | 15,537 | 13,715 |
TOTAL - EQUITY AND LIABILITIES | 72,767 | 61,813 |
ASSETS | ||
Non-current assets | ||
Fixed assets | 9,182 | 8,116 |
Non-current investments | 11,111 | 6,108 |
Deferred tax assets (net) | 405 | 433 |
Long-term loans and advances | 5,970 | 4,378 |
Other non-current assets | 2 | 26 |
Sub-total Non-current assets | 26,670 | 19,061 |
Current assets | ||
Current investments | 2 | 749 |
Trade receivables | 9,798 | 8,627 |
Cash and cash equivalents | 29,176 | 27,722 |
Short-term loans and advances | 7,121 | 5,654 |
Sub-total Current assets | 46,097 | 42,752 |
TOTAL - ASSETS | 72,767 | 61,813 |
The above disclosure is in compliance with Regulation 33(3)(f) read with Annexure IX of circular CIR/CFD/CMD/15/2015 dated November 30, 2015 issued by SEBI in this regard. The disclosure is an extract of the audited Standalone Balance Sheet of Infosys Limited as at March 31, 2016.
The Central Government in consultation with National Advisory Committee on Accounting Standards has amended Companies (Accounting Standards) Rules, 2006 (‘principal rules’), vide notification issued by Ministry of Corporate Affairs dated March 30, 2016. The Companies (Accounting Standards) Rules, 2016 is effective March 30, 2016. According to the amended rules, the proposed final dividend mentioned above in note 5 will not be recorded as a liability as at March 31, 2016. (Refer Para 8.5 of AS-4 – Contingencies and Events occurring after Balance Sheet date). The Company believes, based on a legal opinion, that the Rule 3(2) of the principal rules has not been withdrawn or replaced and accordingly, the Companies (Accounting Standards) Rule, 2016 will apply for the accounting periods commencing on or after March 30, 2016. Therefore the Company has recorded 3,939 crore as liability for proposed dividends (including corporate dividend tax) as at March 31, 2016.
7. | Segment reporting (Standalone – Audited) |
(in crore)
Particulars | Quarter ended March 31, | Quarter ended December 31, | Quarter ended March 31, | Year ended March 31, | |
2016 | 2015 | 2015 | 2016 | 2015 | |
Revenue by industry segment | |||||
Financial Services and Insurance (FSI) | 4,552 | 4,468 | 4,126 | 17,791 | 16,175 |
Manufacturing and Hi - Tech (MFG & Hi-Tech) | 3,127 | 2,990 | 2,634 | 12,087 | 10,230 |
Energy & utilities, Communication and Services (ECS) | 3,030 | 2,803 | 2,377 | 10,997 | 9,756 |
Retail, Consumer Packaged Goods and Logistics (RCL) | 2,525 | 2,379 | 2,097 | 9,501 | 8,369 |
Life Sciences and Healthcare (LSH) | 924 | 922 | 692 | 3,607 | 2,770 |
Total | 14,158 | 13,562 | 11,926 | 53,983 | 47,300 |
Less: Inter-segment revenue | – | – | – | – | – |
Net revenue from operations | 14,158 | 13,562 | 11,926 | 53,983 | 47,300 |
Segment profit before tax and depreciation | |||||
Financial Services and Insurance (FSI) | 1,265 | 1,251 | 1,268 | 5,068 | 4,905 |
Manufacturing and Hi - Tech (MFG & Hi-Tech) | 923 | 870 | 695 | 3,424 | 2,798 |
Energy & utilities, Communication and Services (ECS) | 1,010 | 847 | 733 | 3,425 | 2,920 |
Retail, Consumer Packaged Goods and Logistics (RCL) | 762 | 715 | 656 | 2,835 | 2,620 |
Life Sciences and Healthcare (LSH) | 289 | 231 | 172 | 1,011 | 723 |
Total | 4,249 | 3,914 | 3,524 | 15,763 | 13,966 |
Less: Other unallocable expenditure | 315 | 275 | 245 | 1,115 | 917 |
Add: Unallocable other income | 778 | 737 | 891 | 3,009 | 3,337 |
Profit before exceptional item and tax | 4,712 | 4,376 | 4,170 | 17,657 | 16,386 |
Exceptional item(1) | – | – | – | 3,036 | 412 |
Profit before tax | 4,712 | 4,376 | 4,170 | 20,693 | 16,798 |
(1) | Exceptional item pertains to profit on transfer of business to EdgeVerve, a wholly owned subsidiary. |
Notes on segment information:
Primary segments
The Company's operations predominantly relate to providing end-to-end business solutions to enable clients to enhance business performance. Revenues represented along industries served constitute the primary basis of the segmental information set out above. During the year ended March 31, 2016, the Company reorganized its segments to enhance executive customer relationships, improve focus of sales investments and increase management oversight. However the reorganizations did not have any impact in the reportable segments as per AS 17 'Segment reporting' apart from Manufacturing being named as Manufacturing and Hi-Tech.
Segmental capital employed
Assets and liabilities used in the company's business are not identified to any of the reportable segments, as these are used interchangeably between segments. The Management believes that it is not practicable to provide segment disclosures relating to total assets and liabilities since a meaningful segregation of the available data is onerous.
By order of the Board | |
for Infosys Limited | |
Bangalore, India | Dr. Vishal Sikka |
April 15, 2016 | Chief Executive Officer and Managing Director |
Certain statements in this release concerning our future growth prospects are forward-looking statements regarding our future business expectations intended to qualify for the 'safe harbor' under the Private Securities Litigation Reform Act of 1995, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, fluctuations in foreign exchange rates, our ability to manage growth, intense competition in IT services including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, industry segment concentration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks or system failures, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which Infosys has made strategic investments, withdrawal or expiration 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, 2015. 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. In addition, please note that the date of this release is April 15, 2016, and any forward-looking statements contained herein are based on assumptions that we believe to be reasonable as of this date. 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 unless it is required by law.
Exhibit 99.9
IFRS USD Earning Release
Infosys Limited and Subsidiaries
Unaudited Condensed Consolidated Interim Statements of Comprehensive Income for the three months ended March 31,
(Dollars in millions except equity share and per equity share data)
2016 | 2015 | |
Revenues | 2,446 | 2,159 |
Cost of sales | 1,516 | 1,317 |
Gross profit | 930 | 842 |
Operating expenses: | ||
Selling and marketing expenses | 134 | 118 |
Administrative expenses | 171 | 169 |
Total operating expenses | 305 | 287 |
Operating profit | 625 | 555 |
Other income, net | 114 | 141 |
Share in associate's profit/ (loss) | – | – |
Profit before income taxes | 739 | 696 |
Income tax expense | 206 | 198 |
Net profit | 533 | 498 |
Other comprehensive income | ||
Items that will not be reclassified to profit or loss: | ||
Re-measurements of the net defined benefit liability/asset | – | (2) |
– | (2) | |
Items that may be reclassified subsequently to profit or loss: | ||
Fair value changes on available-for-sale financial assets | 3 | (2) |
Exchange differences on translation of foreign operations | 11 | 53 |
14 | 51 | |
Total other comprehensive income, net of tax | 14 | 49 |
Total comprehensive income | 547 | 547 |
Profit attributable to: | ||
Owners of the company | 533 | 498 |
Non-controlling interests | – | – |
533 | 498 | |
Total comprehensive income attributable to: | ||
Owners of the company | 547 | 547 |
Non-controlling interests | – | – |
547 | 547 | |
Earnings per equity share (*) | ||
Basic ($) | 0.23 | 0.22 |
Diluted ($) | 0.23 | 0.22 |
Weighted average equity shares used in computing earnings per equity share (*) | ||
Basic | 2,285,620,957 | 2,285,610,264 |
Diluted | 2,285,750,316 | 2,285,667,252 |
* | Adjusted for 1:1 bonus issue effected in the form of stock dividend in June 2015 |
Infosys Limited and Subsidiaries
Unaudited Condensed Consolidated Interim Balance Sheets as on
(Dollars in millions except equity share)
Note | March 31, 2016 | March 31, 2015 | |
ASSETS | |||
Current assets | |||
Cash and cash equivalents | 2.1 | 4,935 | 4,859 |
Available-for-sale financial assets | 2.2 | 11 | 140 |
Trade receivables | 1,710 | 1,554 | |
Unbilled revenue | 457 | 455 | |
Prepayments and other current assets | 2.4 | 672 | 527 |
Derivative financial instruments | 2.7 | 17 | 16 |
Total current assets | 7,802 | 7,551 | |
Non-current assets | |||
Property, plant and equipment | 2.5 | 1,589 | 1,460 |
Goodwill | 2.6 | 568 | 495 |
Intangible assets | 149 | 102 | |
Investment in associate | 16 | 15 | |
Available-for-sale financial assets | 2.2 | 273 | 215 |
Deferred income tax assets | 81 | 85 | |
Income tax assets | 789 | 654 | |
Other non-current assets | 2.4 | 111 | 38 |
Total Non-current assets | 3,576 | 3,064 | |
Total assets | 11,378 | 10,615 | |
LIABILITIES AND EQUITY | |||
Current liabilities | |||
Trade payables | 58 | 22 | |
Derivative financial instruments | 2.7 | 1 | – |
Current income tax liabilities | 515 | 451 | |
Client deposits | 4 | 4 | |
Unearned revenue | 201 | 168 | |
Employee benefit obligations | 202 | 171 | |
Provisions | 2.8 | 77 | 77 |
Other current liabilities | 2.9 | 940 | 927 |
Total current liabilities | 1,998 | 1,820 | |
Non-current liabilities | |||
Deferred income tax liabilities | 39 | 25 | |
Other non-current liabilities | 2.9 | 17 | 8 |
Total liabilities | 2,054 | 1,853 | |
Equity | |||
Share capital - 5 ($0.16) par value 2,400,000,000 (1,200,000,000) equity shares authorized, issued and outstanding 2,285,621,088 (1,142,805,132) net of 11,323,576 (5,667,200) treasury shares, as of March 31, 2016 (March 31, 2015), respectively | 199 | 109 | |
Share premium | 570 | 659 | |
Retained earnings | 11,083 | 10,090 | |
Other reserves | – | – | |
Other components of equity | (2,528) | (2,096) | |
Total equity attributable to equity holders of the company | 9,324 | 8,762 | |
Non-controlling interests | – | – | |
Total equity | 9,324 | 8,762 | |
Total liabilities and equity | 11,378 | 10,615 |
The accompanying notes form an integral part of the unaudited condensed consolidated interim financial statements | |
for and on behalf of the Board of Directors of Infosys Limited |
R.Seshasayee Chairman |
Dr. Vishal Sikka Chief Executive Officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director | |
Bangalore April 15, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer and Executive Vice President |
A.G.S Manikantha Company Secretary |
Infosys Limited and Subsidiaries
Unaudited Condensed Consolidated Interim Statements of Comprehensive Income
(Dollars in millions except equity share and per equity share data)
Note | Year ended March 31, | ||
2016 | 2015 | ||
Revenues | 9,501 | 8,711 | |
Cost of sales | 2.15 | 5,950 | 5,374 |
Gross profit | 3,551 | 3,337 | |
Operating expenses: | |||
Selling and marketing expenses | 2.15 | 522 | 480 |
Administrative expenses | 2.15 | 654 | 599 |
Total operating expenses | 1,176 | 1,079 | |
Operating profit | 2,375 | 2,258 | |
Other income, net | 476 | 560 | |
Share in associate's profit / (loss) | – | – | |
Profit before income taxes | 2,851 | 2,818 | |
Income tax expense | 2.11 | 799 | 805 |
Net profit | 2,052 | 2,013 | |
Other comprehensive income | |||
Items that will not be reclassified to profit or loss: | |||
Re-measurements of the net defined benefit liability/asset | (2) | (8) | |
(2) | (8) | ||
Items that may be reclassified subsequently to profit or loss: | |||
Fair value changes on available-for-sale financial assets | 2.2 & 2.11 | 6 | 14 |
Exchange differences on translation of foreign operations | (436) | (375) | |
(430) | (361) | ||
Total other comprehensive income, net of tax | (432) | (369) | |
Total comprehensive income | 1,620 | 1,644 | |
Profit attributable to: | |||
Owners of the company | 2,052 | 2,013 | |
Non-controlling interests | – | – | |
2,052 | 2,013 | ||
Total comprehensive income attributable to: | |||
Owners of the company | 1,620 | 1,644 | |
Non-controlling interests | – | – | |
1,620 | 1,644 | ||
Earnings per equity share | |||
Basic ($) | 0.90 | 0.88 | |
Diluted ($) | 0.90 | 0.88 | |
Weighted average equity shares used in computing earnings per equity share | 2.12 | ||
Basic | 2,285,616,160 | 2,285,610,264 | |
Diluted | 2,285,718,894 | 2,285,642,940 |
The accompanying notes form an integral part of the unaudited condensed consolidated interim financial statements | |
for and on behalf of the Board of Directors of Infosys Limited |
R.Seshasayee Chairman |
Dr. Vishal Sikka Chief Executive Officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director | |
Bangalore April 15, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer and Executive Vice President |
A.G.S Manikantha Company Secretary |
Infosys Limited and Subsidiaries
Unaudited Condensed Consolidated Interim Statements of Changes in Equity
(Dollars in millions except equity share data)
|
Shares(2) | Share capital | Share premium | Retained earnings | Other reserves (3) | Other components of equity | Total equity attributable to equity holders of the company |
Balance as of April 1, 2014 | 571,402,566 | 64 | 704 | 8,892 | – | (1,727) | 7,933 |
Changes in equity for the year ended March 31, 2015 | |||||||
Increase in share capital on account of bonus issue(1) | 571,402,566 | 45 | – | – | – | – | 45 |
Amount utilized for bonus issue(1) (Refer Note 2.17) | – | – | (45) | – | – | – | (45) |
Remeasurement of the net defined benefit liability/asset, net of tax effect | – | – | – | – | – | (8) | (8) |
Dividends (including corporate dividend tax) | – | – | – | (815) | – | – | (815) |
Fair value changes on available-for-sale financial assets, net of tax effect (Refer Note 2.2 and 2.11) | – | – | – | – | – | 14 | 14 |
Net profit | – | – | – | 2,013 | – | – | 2,013 |
Exchange differences on translation of foreign operations | – | – | – | – | – | (375) | (375) |
Balance as of March 31, 2015 | 1,142,805,132 | 109 | 659 | 10,090 | – | (2,096) | 8,762 |
Changes in equity for the year ended March 31, 2016 | |||||||
Shares issued on exercise of employee stock options | 10,824 | – | – | – | – | – | – |
Increase in share capital on account of bonus issue(1) (Refer Note 2.17) | 1,142,805,132 | 90 | – | – | – | – | 90 |
Amount utilized for bonus issue(1) (Refer Note 2.17) | – | – | (90) | – | – | – | (90) |
Transfer to other reserves | – | – | – | (89) | 89 | – | – |
Transfer from other reserves on utilization | – | – | – | 89 | (89) | – | – |
Employee stock compensation expense (refer to note 2.10) | – | – | 1 | – | – | – | 1 |
Remeasurement of the net defined benefit liability/asset, net of tax effect | – | – | – | – | – | (2) | (2) |
Dividends (including corporate dividend tax) | – | – | – | (1,059) | – | – | (1,059) |
Fair value changes on available-for-sale financial assets, net of tax effect (Refer Note 2.2 and 2.11) | – | – | – | – | – | 6 | 6 |
Net profit | – | – | – | 2,052 | – | – | 2,052 |
Exchange differences on translation of foreign operations | – | – | – | – | – | (436) | (436) |
Balance as of March 31, 2016 (4) | 2,285,621,088 | 199 | 570 | 11,083 | – | (2,528) | 9,324 |
The accompanying notes form an integral part of the unaudited condensed consolidated interim financial statements.
(1) | net of treasury shares |
(2) | excludes treasury shares of 11,323,576 as of March 31, 2016, 5,667,200 as of March 31, 2015 and 2,833,600 as of April 1, 2014, held by consolidated trust. |
(3) | Represents the Special Economic Zone Re-investment reserve created out of the profit of the eligible SEZ unit in terms of the provisions of Sec 10AA(1)(ii) of Income Tax Act,1961. The reserve should be utilized by the Company for acquiring new plant and machinery for the purpose of its business in terms of the provisions of the Sec 10AA(2) of the Income Tax Act, 1961. |
(4) | Balance in cashflow hedging reserve as on March 31, 2016 is Nil |
for and on behalf of the Board of Directors of Infosys Limited |
R.Seshasayee Chairman |
Dr. Vishal Sikka Chief Executive Officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director | |
Bangalore April 15, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer and Executive Vice President |
A.G.S Manikantha Company Secretary |
Infosys Limited and Subsidiaries
Unaudited Condensed Consolidated Interim Statements of Cash Flows
(Dollars in millions)
Year ended March 31, | ||
2016 | 2015 | |
Operating activities: | ||
Net Profit | 2,052 | 2,013 |
Adjustments to reconcile net profit to net cash provided by operating activities : | ||
Depreciation and amortisation | 222 | 175 |
Income from available-for-sale financial assets and certificates of deposit | (27) | (48) |
Income tax expense | 799 | 805 |
Effect of exchange rate changes on assets and liabilities | 10 | 15 |
Deferred purchase price | 23 | 41 |
Provisions for doubtful trade receivable | (7) | 29 |
Other adjustments | 26 | 12 |
Changes in Working Capital | ||
Trade receivables | (225) | (240) |
Prepayments and other assets | (220) | (81) |
Unbilled revenue | (27) | (6) |
Trade payables | 37 | (3) |
Client deposits | – | (2) |
Unearned revenue | 43 | 45 |
Other liabilities and provisions | 48 | 103 |
Cash generated from operations | 2,754 | 2,858 |
Income taxes paid | (892) | (1,102) |
Net cash provided by operating activities | 1,862 | 1,756 |
Investing activities: | ||
Expenditure on property, plant and equipment including intangible assets, net of sale proceeds, including changes in retention money and capital creditors | (413) | (367) |
Loans to employees | (11) | (1) |
Deposits placed with corporation | (22) | (22) |
Income from available-for-sale financial assets and certificates of deposit | 26 | 54 |
Investment in associate | – | (15) |
Payment for acquisition of business, net of cash acquired | (117) | (206) |
Investment in preference securities | (12) | – |
Investment in other available-for-sale financial assets | (3) | – |
Investment in quoted debt securities | (46) | – |
Redemption of certificates of deposit | – | 135 |
Investment in liquid mutual funds | (3,676) | (3,901) |
Redemption of liquid mutual funds | 3,795 | 4,098 |
Investment in fixed maturity plan securities | – | (5) |
Redemption of fixed maturity plan securities | 5 | 25 |
Net cash used in investing activities | (474) | (205) |
Financing activities: | ||
Payment of dividend (including corporate dividend tax) | (1,059) | (815) |
Net cash used in financing activities | (1,059) | (815) |
Effect of exchange rate changes on cash and cash equivalents | (253) | (208) |
Net increase/(decrease) in cash and cash equivalents | 329 | 736 |
Cash and cash equivalents at the beginning | 4,859 | 4,331 |
Cash and cash equivalents at the end | 4,935 | 4,859 |
Supplementary information: | ||
Restricted cash balance | 74 | 58 |
The accompanying notes form an integral part of the unaudited condensed consolidated interim financial statements | |
for and on behalf of the Board of Directors of Infosys Limited |
R.Seshasayee Chairman |
Dr. Vishal Sikka Chief Executive Officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director | |
Bangalore April 15, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer and Executive Vice President |
A.G.S Manikantha Company Secretary |
Notes to the Unaudited Condensed Consolidated Interim Financial Statements
1. Company Overview and Significant Accounting Policies
1.1 Company overview
Infosys is a global leader in consulting, technology, outsourcing and next-generation services. Along with its subsidiaries, Infosys provides Business IT services (comprising application development and maintenance, independent validation, infrastructure management, engineering services comprising product engineering and life cycle solutions and business process management); Consulting and systems integration services (comprising consulting, enterprise solutions, systems integration and advanced technologies); Products, business platforms and solutions to accelerate intellectual property-led innovation including Finacle, our banking solution; and offerings in the areas of Analytics, Cloud, and Digital Transformation.
Infosys together with its subsidiaries and controlled trusts is herein after referred to as the "Group".
The company is a public limited company incorporated and domiciled in India and has its registered office at Bangalore, Karnataka, India. The company has its primary listings on the BSE Ltd. and National Stock Exchange in India. The company’s American Depositary Shares representing equity shares are also listed on the New York Stock Exchange (NYSE), Euronext London and Euronext Paris.
The Group's unaudited condensed consolidated interim financial statements are authorized for issue by the company's Board of Directors on April 15, 2016.
1.2 Basis of preparation of financial statements
These condensed consolidated interim financial statements have been prepared in compliance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS) and in accordance with IAS 34, Interim Financial Reporting, under the historical cost convention on the accrual basis except for certain financial instruments and prepaid gratuity benefits which have been measured at fair values. Accordingly, these condensed consolidated interim financial statements do not include all the information required for a complete set of financial statements. These condensed consolidated interim 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 year ended March 31, 2016. Accounting policies have been applied consistently to all periods presented in these unaudited condensed consolidated interim financial statements.
As the quarter and year figures are taken from the source and rounded to the nearest digits, the figures reported for all the quarters during the year might not always add up to the year figures reported in this statement.
1.3 Basis of consolidation
Infosys consolidates entities which it owns or controls. Control exists when the parent has power over the entity, is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns by using its power over the entity. Power is demonstrated through existing rights that give the ability to direct relevant activities, those which significantly affect the entity's returns. Subsidiaries are consolidated from the date control commences until the date control ceases.
The financial statements of the Group companies are consolidated on a line-by-line basis and intra-group balances and transactions including unrealized gain / loss from such transactions are eliminated upon consolidation. These financial statements are prepared by applying uniform accounting policies in use at the Group. Non-controlling interests which represent part of the net profit or loss and net assets of subsidiaries that are not, directly or indirectly, owned or controlled by the company, are excluded.
Associates are entities over which the group has significant influence but not control. Investments in associates are accounted for using the equity method. The investment is initially recognized at cost, and the carrying amount is increased or decreased to recognize the investor’s share of the profit or loss of the investee after the acquisition date. The group’s investment in associates includes goodwill identified on acquisition.
1.4 Use of estimates
The preparation of the financial statements in conformity with IFRS requires management to make estimates, judgments and assumptions. These estimates, judgments and assumptions affect the application of accounting policies and the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the period. Application of accounting policies that require critical accounting estimates involving complex and subjective judgments and the use of assumptions in these financial statements have been disclosed in Note 1.5. Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes in estimates are made as management becomes aware of changes in circumstances surrounding the estimates. Changes in estimates are reflected in the financial statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the consolidated interim financial statements.
1.5 Critical accounting estimates
a. Revenue recognition
The company uses the percentage-of-completion method in accounting for its fixed-price contracts. Use of the percentage-of-completion method requires the company to estimate the efforts or costs expended to date as a proportion of the total efforts or costs to be expended. Efforts or costs expended have 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 expected contract estimates at the reporting date.
b. Income taxes
The company's two major tax jurisdictions are India and the U.S., though the company also files tax returns in other overseas jurisdictions. Significant judgments are involved in determining the provision for income taxes, including amount expected to be paid/recovered for uncertain tax positions (also refer to note 2.11).
c. Business combinations and intangible assets
Business combinations are accounted for using IFRS 3 (Revised), Business Combinations. IFRS 3 requires the identifiable intangible assets and contingent consideration to be fair valued in order to ascertain the net fair value of identifiable assets, liabilities and contingent liabilities of the acquiree. Significant estimates are required to be made in determining the value of contingent consideration and intangible assets. These valuations are conducted by independent valuation experts.
d. Property, plant and equipment
Property, plant and equipment represent a significant proportion of the asset base of the Group. The charge in respect of periodic depreciation is derived after determining an estimate of an asset’s expected useful life and the expected residual value at the end of its life. The useful lives and residual values of Group's assets are determined by management at the time the asset is acquired and reviewed periodically, including at each financial year end. The lives are based on historical experience with similar assets as well as anticipation of future events, which may impact their life, such as changes in technology.
e. Impairment of Goodwill
Goodwill is tested for impairment on an annual basis and whenever there is an indication that the recoverable amount of a cash generating unit is less than its carrying amount based on a number of factors including operating results, business plans, future cash flows and economic conditions. The recoverable amount of cash generating units is determined based on higher of value-in-use and fair value less cost to sell. The goodwill impairment test is performed at the level of the cash-generating unit or groups of cash-generating units which are benefitting from the synergies of the acquisition and which represents the lowest level at which goodwill is monitored for internal management purposes
Market related information and estimates are used to determine the recoverable amount. Key assumptions on which management has based its determination of recoverable amount include estimated long term growth rates, weighted average cost of capital and estimated operating margins. Cash flow projections take into account past experience and represent management’s best estimate about future developments.
1.6 Revenue recognition
The company derives revenues primarily from software development and related services and from the licensing of software products. Arrangements with customers for software related services are either on a fixed-price, fixed-timeframe or on a time-and-material basis.
Revenue on time-and-material contracts are 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, where there is no uncertainty as to measurement or collectability of consideration, is recognized as per the percentage-of-completion method. When there is uncertainty as to measurement or ultimate collectability, revenue recognition is postponed until such uncertainty is resolved. Efforts or costs expended have been used to measure progress towards completion as there is a direct relationship between input and productivity. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the current contract estimates. Costs and earnings in excess of billings are classified as unbilled revenue while billings in excess of costs and earnings are classified as unearned revenue. Deferred contract costs are amortized over the term of the contract. Maintenance revenue is recognized ratably over the term of the underlying maintenance arrangement.
In arrangements for software development and related services and maintenance services, the company has applied the guidance in IAS 18, Revenue, by applying the revenue recognition criteria for each separately identifiable component of a single transaction. The arrangements generally meet the criteria for considering software development and related services as separately identifiable components. For allocating the consideration, the company has measured the revenue in respect of each separable component of a transaction at its fair value, in accordance with principles given in IAS 18. The price that is regularly charged for an item when sold separately is the best evidence of its fair value. In cases where the company is unable to establish objective and reliable evidence of fair value for the software development and related services, the company has used a residual method to allocate the arrangement consideration. In these cases the balance of the consideration, after allocating the fair values of undelivered components of a transaction has been allocated to the delivered components for which specific fair values do not exist.
License fee revenues are recognized when the general revenue recognition criteria given in IAS 18 are met. Arrangements to deliver software products generally have three elements: license, implementation and Annual Technical Services (ATS). The company has applied the principles given in IAS 18 to account for revenues from these multiple element arrangements. Objective and reliable evidence of fair value has been established for ATS. Objective and reliable evidence of fair value is the price charged when the element is sold separately. When other services are provided in conjunction with the licensing arrangement and objective and reliable evidence of their fair values have been established, the revenue from such contracts are allocated to each component of the contract in a manner, whereby revenue is deferred for the undelivered services and the residual amounts are recognized as revenue for delivered elements. In the absence of objective and reliable evidence of fair value for implementation, the entire arrangement fee for license and implementation is recognized using the percentage-of-completion method 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.
Advances received for services and products are reported as client deposits until all conditions for revenue recognition are met.
The company accounts for volume discounts and pricing incentives to customers as a reduction of revenue based on the ratable allocation of the discounts/ incentives amount to each of the underlying revenue transaction that results in progress by the customer towards earning the discount/ incentive. Also, when the level of discount varies with increases in levels of revenue transactions, the company recognizes the liability based on its estimate of the customer's future purchases. If it is probable that the criteria for the discount will not be met, or if the amount thereof cannot be estimated reliably, then discount is not recognized until the payment is probable and the amount can be estimated reliably. The company recognizes changes in the estimated amount of obligations for discounts in the period in which the change occurs. The discounts are passed on to the customer either as direct payments or as a reduction of payments due from the customer.
The company presents revenues net of value-added taxes in its statement of comprehensive income.
1.7 Property, plant and equipment
Property, plant and equipment are stated at cost, less accumulated depreciation and impairment, if any. Costs directly attributable to acquisition are capitalized until the property, plant and equipment are ready for use, as intended by management. The group depreciates property, plant and equipment over their estimated useful lives using the straight-line method. The estimated useful lives of assets are as follows:
Building | 22-25 years |
Plant and machinery | 5 years |
Computer equipment | 3-5 years |
Furniture and fixtures | 5 years |
Vehicles | 5 years |
Depreciation methods, useful lives and residual values are reviewed periodically, including at each financial year end. (Refer note 2.5)
Advances paid towards the acquisition of property, plant and equipment 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’. Subsequent expenditures relating to property, plant and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to the Group and the cost of the item can be measured reliably. Repairs and maintenance costs are recognized in net profit in the statement of comprehensive income when incurred. The cost and related accumulated depreciation are eliminated from the financial statements upon sale or retirement of the asset and the resultant gains or losses are recognized in net profit in the statement of comprehensive income. Assets to be disposed off are reported at the lower of the carrying value or the fair value less cost to sell.
1.8 Business combinations
Business combinations have been accounted for using the acquisition method under the provisions of IFRS 3 (Revised), Business Combinations.
The cost of an acquisition is measured at the fair value of the assets transferred, equity instruments issued and liabilities incurred or assumed at the date of acquisition, which is the date on which control is transferred to the Group. The cost of acquisition also includes the fair value of any contingent consideration. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value on the date of acquisition.
Business combinations between entities under common control is outside the scope of IFRS 3 (Revised), Business Combinations and is accounted for at carrying value.
Transaction costs that the Group incurs in connection with a business combination such as finders’ fees, legal fees, due diligence fees, and other professional and consulting fees are expensed as incurred.
1.9 Employee benefits
1.9.1 Gratuity
The Group provides for gratuity, a defined benefit retirement plan ('the Gratuity Plan') covering eligible employees of Infosys and its Indian subsidiaries. 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 with the group
Liabilities with regard to the Gratuity Plan are determined by actuarial valuation, performed by an independent actuary, at each balance sheet date using the projected unit credit method. The company fully contributes all ascertained liabilities to the Infosys Limited Employees' Gratuity Fund Trust (the Trust). In case of Infosys BPO and EdgeVerve, contributions are made to the Infosys BPO's Employees' Gratuity Fund Trust and EdgeVerve Systems Limited Employees' Gratuity Fund Trust, respectively. Trustees administer contributions made to the Trusts and contributions are invested in a scheme with Life Insurance Corporation of India as permitted by law of India.
The Group recognizes the net obligation of a defined benefit plan in its balance sheet as an asset or liability. Gains and losses through re-measurements of the net defined benefit liability/asset are recognized in other comprehensive income. The actual return of the portfolio of plan assets, in excess of the yields computed by applying the discount rate used to measure the defined benefit obligation is recognized in other comprehensive income. The effect of any plan amendments are recognized in net profits in the statement of comprehensive income.
1.9.2 Superannuation
Certain employees of Infosys, Infosys BPO and EdgeVerve are participants in a defined contribution plan. The Group has no further obligations to the Plan beyond its monthly contributions which are periodically contributed to a trust fund, the corpus of which is invested with the Life Insurance Corporation of India.
1.9.3 Provident fund
Eligible employees of Infosys receive benefits from a provident fund, which is a defined benefit plan. Both the eligible 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 portion to the Infosys Limited Employees' Provident Fund Trust. The trust invests in specific designated instruments as permitted by Indian law. 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 make good the shortfall, if any, between the return from the investments of the Trust and the notified interest rate.
In respect of Indian subsidiaries, eligible employees receive benefits from a provident fund, which is a defined contribution plan. Both the eligible employee and the respective companies 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. The companies have no further obligation to the plan beyond its monthly contributions.
1.9.4 Compensated absences
The Group has a policy on compensated absences which are both accumulating and non-accumulating in nature. The expected cost of accumulating compensated absences is determined by actuarial valuation performed by an independent actuary at each balance sheet date using projected unit credit method on the additional amount expected to be paid/availed as a result of the unused entitlement that has accumulated at the balance sheet date. Expense on non-accumulating compensated absences is recognized in the period in which the absences occur.
1.10 Share - based compensation
The Group recognizes compensation expense relating to share-based payments in net profit using fair-value in accordance with IFRS 2, Share-Based Payment. The estimated fair value of awards is charged to income on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was in-substance, multiple awards with a corresponding increase to share premium.
1.11 Earnings per equity share
Basic earnings per equity share is computed by dividing the net profit attributable to the equity holders of the company by the weighted average number of equity shares outstanding during the period. Diluted earnings per equity share is computed by dividing the net profit attributable to the equity holders of the company by the weighted average number of equity shares considered for deriving basic earnings per equity share and also the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares. The dilutive potential equity shares are adjusted for the proceeds receivable had the equity shares been actually issued at fair value (i.e. the average market value of the outstanding equity shares). Dilutive potential equity shares are deemed converted as of the beginning of the period, unless issued at a later date. Dilutive potential equity shares are determined independently for each period presented.
The number of equity shares and potentially dilutive equity shares are adjusted retrospectively for all periods presented for any share splits and bonus shares issues including for changes effected prior to the approval of the financial statements by the Board of Directors.
1.12 Recent accounting pronouncements
1.12.1 Standards issued but not yet effective
IFRS 9 Financial instruments: In July 2014, the International Accounting Standards Board issued the final version of IFRS 9, Financial Instruments. The standard reduces the complexity of the current rules on financial instruments as mandated in IAS 39. IFRS 9 has fewer classification and measurement categories as compared to IAS 39 and has eliminated the categories of held to maturity, available for sale and loans and receivables. Further it eliminates the rule-based requirement of segregating embedded derivatives and tainting rules pertaining to held to maturity investments. For an investment in an equity instrument which is not held for trading, IFRS 9 permits an irrevocable election, on initial recognition, on an individual share-by-share basis, to present all fair value changes from the investment in other comprehensive income. No amount recognized in other comprehensive income would ever be reclassified to profit or loss. It requires the entity, which chooses to measure a liability at fair value, to present the portion of the fair value change attributable to the entity’s own credit risk in the other comprehensive income.
IFRS 9 replaces the ‘incurred loss model’ in IAS 39 with an ‘expected credit loss’ model. The measurement uses a dual measurement approach, under which the loss allowance is measured as either 12 month expected credit losses or lifetime expected credit losses. The standard also introduces new presentation and disclosure requirements.
The effective date for adoption of IFRS 9 is annual periods beginning on or after January 1, 2018, though early adoption is permitted. The Group has elected to early adopt the standard effective April 1, 2016 and the impact on the consolidated financial statements is not material.
IFRS 15 Revenue from Contract with Customers: In May 2014, the International Accounting Standards Board (IASB) issued IFRS 15, Revenue from Contract with Customers. The core principle of the new standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Further the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts with customers. The standard permits the use of either the retrospective or cumulative effect transition method. The effective date for adoption of IFRS 15 is annual periods beginning on or after January 1, 2017, though early adoption is permitted. In September 2015, the IASB issued an amendment to IFRS 15, deferring the adoption of the standard to periods beginning on or after January 1, 2018 instead of January 1, 2017.
The Group is evaluating the effect of IFRS 15 on the consolidated financial statements including the transition method to be adopted and the related disclosures. The group continues to evaluate the effect of the standard on ongoing financial reporting.
IFRS 16 Leases : On January 13, 2016, the International Accounting Standards Board issued the final version of IFRS 16, Leases. IFRS 16 will replace the existing leases Standard, IAS 17 Leases, and related Interpretations. The Standard sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract i.e., the lessee and the lessor. IFRS 16 introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. Currently, operating lease expenses are charged to the statement of comprehensive income. The Standard also contains enhanced disclosure requirements for lessees. IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17.
The effective date for adoption of IFRS 16 is annual periods beginning on or after January 1, 2019, though early adoption is permitted for companies applying IFRS 15 Revenue from Contracts with Customers. The Group is yet to evaluate the requirements of IFRS 16 and the impact on the consolidated financial statements.
2. Notes to the Unaudited Condensed Consolidated Interim Financial Statements
2.1 Cash and cash equivalents
Cash and cash equivalents consist of the following:
(Dollars in millions)
As of | ||
March 31, 2016 | March 31, 2015 | |
Cash and bank deposits | 4,139 | 4,192 |
Deposits with financial institutions | 796 | 667 |
4,935 | 4,859 |
Cash and cash equivalents as of March 31, 2016 and March 31, 2015 include restricted cash and bank balances of $74 million and $58 million, respectively. The restrictions are primarily on account of cash and bank balances held by irrevocable trusts controlled by the company, bank balances held as margin money deposits against guarantees and balances held in unpaid dividend bank accounts.
The deposits maintained by the Group with banks and financial institutions comprise of time deposits, which can be withdrawn by the Group at any point without prior notice or penalty on the principal.
The table below provides details of cash and cash equivalents :
(Dollars in millions)
As of | ||
March 31, 2016 | March 31, 2015 | |
Current accounts | ||
ANZ Bank, Taiwan | 2 | 1 |
Banamex Bank, Mexico | 1 | 2 |
Bank of America, Mexico | 3 | 4 |
Bank of America, USA | 103 | 115 |
Bank Zachodni WBK S.A, Poland | 1 | 1 |
Barclays Bank, UK | 3 | 2 |
Bank Leumi, Israel (US Dollar account) | 3 | 1 |
Bank Leumi, Israel (Israeli Sheqel account) | 2 | 2 |
China Merchants Bank, China | 1 | 1 |
Citibank N.A, China | 10 | 3 |
Citibank N.A., China (U.S. Dollar account) | 11 | 4 |
Citibank N.A., Costa Rica | – | 1 |
Citibank N.A., Czech Republic | – | 1 |
Citibank N.A., Australia | 11 | 4 |
Citibank N.A., Brazil | 1 | 4 |
Citibank N.A., India | – | 1 |
Citibank N.A., Japan | 2 | 3 |
Citibank N.A., New Zealand | 1 | 1 |
Citibank N.A., South Africa | 1 | 1 |
CitiBank N.A., USA | 9 | – |
Commerzbank, Germany | 3 | 3 |
Crédit Industriel et Commercial Bank, France | 1 | – |
Deutsche Bank, India | 1 | 1 |
Deutsche Bank, Philippines | 2 | 1 |
Deutsche Bank, Philippines (U.S. Dollar account) | – | 1 |
Deutsche Bank, Poland | 1 | 3 |
Deutsche Bank, EEFC (Euro account) | 5 | 1 |
Deutsche Bank, EEFC (Swiss Franc account) | 1 | 1 |
Deutsche Bank, EEFC (U.S. Dollar account) | 15 | 1 |
Deutsche Bank, EEFC (United Kingdom Pound Sterling account) | 1 | 1 |
Deutsche Bank, Belgium | 9 | 2 |
Deutsche Bank, Malaysia | 1 | – |
Deutsche Bank, Czech Republic | 2 | 1 |
Deutsche Bank, Czech Republic (U.S. Dollar account) | 4 | 3 |
Deutsche Bank, France | 2 | – |
Deutsche Bank, Germany | 3 | 1 |
Deutsche Bank, Netherlands | 1 | – |
Deutsche Bank, Singapore | 1 | 1 |
Deutsche Bank, United Kingdom | 26 | 4 |
HSBC Bank, Brazil | 1 | 1 |
HSBC Bank, Hong Kong | – | 7 |
ICICI Bank, India | 11 | 5 |
ICICI Bank, EEFC (U.S. Dollar account) | 2 | 2 |
Nordbanken, Sweden | 2 | 1 |
Punjab National Bank, India | 1 | 1 |
Raiffeisen Bank, Czech Republic | 1 | – |
Raiffeisen Bank, Romania | 1 | – |
Royal Bank of Scotland, China | – | 7 |
Royal Bank of Scotland, China (U.S. Dollar account) | – | 7 |
Royal Bank of Canada, Canada | 12 | 3 |
State Bank of India, India | 1 | – |
Silicon Valley Bank, USA | 1 | 11 |
Silicon Valley Bank, (Euro account) | 10 | 3 |
Silicon Valley Bank, (United Kingdom Pound Sterling account) | 3 | 1 |
Union Bank of Switzerland AG | 2 | 2 |
Union Bank of Switzerland AG, (Euro account) | 2 | 1 |
Union Bank of Switzerland AG, (U.S. Dollar account) | 4 | – |
Union Bank of Switzerland AG, (United Kingdom Pound Sterling account) | 1 | – |
Wells Fargo Bank N.A., USA | 3 | 6 |
Westpac, Australia | 1 | 1 |
303 | 236 | |
Deposit accounts | ||
Allahabad Bank | – | 32 |
Andhra Bank | 143 | 27 |
Axis Bank | 202 | 239 |
Bank of Baroda | – | 383 |
Bank of India | 11 | 431 |
Canara Bank | 339 | 501 |
Central Bank of India | 232 | 221 |
Citibank | 19 | – |
Corporation Bank | 194 | 204 |
Deutsche Bank, Poland | 36 | 19 |
Development Bank of Singapore | – | 6 |
HDFC Bank Ltd. | 400 | 336 |
ICICI Bank | 634 | 507 |
IDBI Bank | 287 | 137 |
Indian Overseas Bank | 189 | 104 |
Indusind Bank | 38 | 12 |
ING Vysya Bank | – | 16 |
Jammu & Kashmir Bank | 4 | – |
Kotak Mahindra Bank Limited | 81 | 1 |
National Australia Bank Limited | – | 14 |
Oriental Bank of Commerce | 297 | 253 |
Punjab National Bank | 3 | 95 |
South Indian Bank | 3 | 4 |
State Bank of India | 357 | 9 |
Syndicate Bank | 191 | 65 |
Union Bank of India | 21 | 168 |
Vijaya Bank | 46 | 75 |
Yes Bank | 109 | 97 |
3,836 | 3,956 | |
Deposits with financial institutions | ||
HDFC Limited, India | 796 | 667 |
796 | 667 | |
Total | 4,935 | 4,859 |
2.2 Available-for-sale financial assets
Primarily investments in mutual fund units, quoted debt securities, unquoted equity and preference securities are classified as available-for-sale financial assets.
Cost and fair value of these investments are as follows:
(Dollars in millions)
As of | ||
March 31, 2016 | March 31, 2015 | |
Current | ||
Mutual fund units: | ||
Liquid mutual fund units | ||
Cost and fair value | 10 | 135 |
Quoted debt securities: | ||
Cost | 1 | – |
Gross unrealized holding gains/(losses) | – | – |
Fair value | 1 | – |
Fixed Maturity Plan Securities | ||
Cost | – | 5 |
Gross unrealized holding gains | – | – |
Fair value | – | 5 |
11 | 140 | |
Non-current | ||
Quoted debt securities: | ||
Cost | 250 | 216 |
Gross unrealized holding gains/(losses) | 6 | (1) |
Fair value | 256 | 215 |
Unquoted equity and preference securities: | ||
Cost | 14 | – |
Gross unrealized holding gains | – | – |
Fair value | 14 | – |
Others: | ||
Cost | 3 | – |
Gross unrealized holding gains | – | – |
Fair value | 3 | – |
273 | 215 | |
Total available-for-sale financial assets | 284 | 355 |
Mutual fund units:
Liquid mutual funds:
The fair value of liquid mutual funds as of March 31, 2016 and March 31, 2015 was $10 million and $135 million, respectively. The fair value is based on quoted prices.
Fixed maturity plan securities:
During the year ended March 31, 2016, the company redeemed fixed maturity plans securities of $5 million. On redemption, the unrealised gain of less than $1 million pertaining to these securities has been reclassified from other comprehensive income to profit or loss.
The fair value of fixed maturity plan securities as of March 31, 2015 is $5 million. The fair value is based on quotes reflected in actual transactions in similar instruments as available on March 31, 2015. The net unrealized gain of less than $1 million, net of taxes has been recognized in other comprehensive income for the year ended March 31, 2015. (Refer to note 2.11).
During the year ended March 31, 2015, the company redeemed fixed maturity plans securities of $19 million. On redemption, the unrealised gain of $1 million, net of taxes of $1 million, pertaining to these securities has been reclassified from other comprehensive income to profit or loss during the year ended March 31, 2015.
Quoted debt securities:
The fair value of quoted debt securities as on March 31, 2016 and March 31, 2015 was $257 million and $215 million, respectively. The net unrealized gain of $6 million, net of taxes of $1 million, has been recognized in other comprehensive income for the year ended March 31, 2016. The net unrealized gain of $15 million, net of taxes of $2 million, has been recognized in other comprehensive income for the year ended March 31, 2015. The fair value is based on the quoted prices and market observable inputs (Refer note 2.11).
2.3 Business combination
Noah Consulting LLC
On November 16, 2015, Infosys has acquired 100% membership interest in Noah Consulting, LLC (Noah), a leading provider of advanced information management consulting services for the oil and gas industry. The business acquisition was conducted by entering into a share purchase agreement for cash consideration of $33 million, contingent consideration of upto $5 million and an additional consideration of upto $32 million, referred to as retention bonus payable to the employees of Noah at each anniversary year following the acquisition date for the next three years, subject to their continuous employment with the group at each anniversary.
This acquisition combines Noah’s industry knowledge, information strategy planning, data governance and architecture capabilities with Infosys’ ability to provide technology and outsourcing services on a global scale to oil and gas clients. The excess of the purchase consideration paid over the fair value of assets acquired has been attributed to goodwill.
The purchase price has been allocated based on management’s estimates and independent appraisal of fair values as follows:
(Dollars in millions)
Component | Acquiree's carrying amount | Fair value adjustments |
Purchase price allocated |
Net assets(*) | 6 | – | 6 |
Intangible assets – technical knowhow | – | 4 | 4 |
Intangible assets – trade name | – | 4 | 4 |
Intangible assets - customer contracts and relationships | – | 18 | 18 |
6 | 26 | 32 | |
Goodwill | 5 | ||
Total purchase price | 37 |
* | Includes cash and cash equivalents acquired of $3 million. |
Goodwill of $1 million is tax deductible. The remaining goodwill is tax deductible over the tax life on payment of contingent consideration.
The gross amount of trade receivables acquired and its fair value is $4 million and the amounts have been largely collected.
The acquisition date fair value of each major class of consideration as of the acquisition date is as follows:
(Dollars in millions)
Component | Consideration settled |
Cash paid | 33 |
Fair value of contingent consideration | 4 |
Total purchase price | 37 |
The fair value of contingent consideration is determined by discounting the estimated amount payable to the sellers of Noah on achievement of certain financial targets. At acquisition date, the key inputs used in determination of the fair value of contingent consideration are the discount rate of 32% and the probabilities of achievement of the financial targets. During year ending March 31, 2016, based on an assessment of Noah achieving the targets for the year ending December 31, 2015 and December 31, 2016, the entire contingent consideration has been reversed in the statement of comprehensive income
The retention bonus is treated as a post-acquisition employee remuneration expense as per IFRS 3R. For the period from the closing of the acquisition to March 31, 2016, a post-acquisition employee remuneration expense of $8 million has been recorded in the statement of comprehensive income.
The transaction costs of $2 million related to the acquisition have been included under administrative expenses in the statement of comprehensive income for the year ended March 31, 2016.
Finacle and Edge Services
On April 24, 2015, the Board of Directors of Infosys has authorized the Company to execute a Business Transfer Agreement and related documents with EdgeVerve, a wholly owned subsidiary, to transfer the business of Finacle and Edge Services. Post the requisite approval from shareholders through postal ballot on June 4, 2015, a Business Transfer Agreement and other related documents were executed with EdgeVerve to transfer the business with effect from August 1, 2015. The company has undertaken an enterprise valuation by an independent valuer and accordingly the business were transferred for a consideration of 3,222 crore (approximately $491 million) and 177 crore (approximately $27 million) for Finacle and Edge Services, respectively.
The consideration was settled through issue of 85,00,00,000 equity shares amounting to 850 crore (approximately $129 million) and 25,49,00,000 non-convertible redeemable debentures amounting to 2,549 crore (approximately $389 million) in EdgeVerve, post the requisite approval from shareholders on December 11, 2015.
The transfer of assets and liabilities was accounted for at carrying values and did not have any impact on the consolidated financial statements.
Kallidus Inc. (d.b.a Skava)
On June 2, 2015, Infosys acquired 100% of the voting interests in Kallidus Inc., US (Kallidus), a leading provider of digital experience solutions, including mobile commerce and in-store shopping experiences to large retail clients and 100% of the voting interests of Skava Systems Private Limited, an affiliate of Kallidus. The business acquisition was conducted by entering into a share purchase agreement for cash consideration of $91 million and a contingent consideration of up to $20 million.
Infosys expects to help its clients bring new digital experiences to their customers through IP-led technology offerings, new automation tools and skill and expertise in these new emerging areas. The excess of the purchase consideration paid over the fair value of assets acquired has been attributed to goodwill.
The purchase price has been allocated based on management’s estimates and independent appraisal of fair values as follows:
(Dollars in millions)
Component | Acquiree's carrying amount | Fair value adjustments |
Purchase price allocated |
Net assets(*) | 6 | – | 6 |
Intangible assets – technology | – | 21 | 21 |
Intangible assets – trade name | – | 2 | 2 |
Intangible assets - customer contracts and relationships | – | 27 | 27 |
Deferred tax liabilities on Intangible assets | – | (20) | (20) |
6 | 30 | 36 | |
Goodwill | 71 | ||
Total purchase price | 107 |
* | Includes cash and cash equivalents acquired of $4 million. |
The goodwill is not tax deductible.
The gross amount of trade receivables acquired and its fair value is $9 million and the amounts have been fully collected.
The acquisition date fair value of each major class of consideration as of the acquisition date is as follows:
(Dollars in millions)
Component | Consideration settled |
Cash paid | 91 |
Fair value of contingent consideration | 16 |
Total purchase price | 107 |
The payment of contingent consideration to sellers of Kallidus is dependent upon the achievement of certain financial targets by Kallidus over a period of 3 years ending on December 31, 2017.
The fair value of contingent consideration is determined by discounting the estimated amount payable to the sellers of Kallidus on achievement of certain financial targets. At the acquisition date, the key inputs used in determination of the fair value of contingent consideration are the discount rate of 14% and the probabilities of achievement of the financial targets.
The transaction costs of $2 million related to the acquisition have been included under administrative expenses in the statement of comprehensive income for the year ended March 31, 2016
Panaya
On March 5, 2015, Infosys acquired 100% of the voting interests in Panaya Inc. (Panaya), a Delaware Corporation in the United States. Panaya is a leading provider of automation technology for large scale enterprise and software management. The business acquisition was conducted by entering into a share purchase agreement for cash consideration of $225 million.
Panaya’s CloudQuality™ suite positions Infosys to bring automation to several of its service lines via an agile SaaS model, and helps mitigate risk, reduce costs and shorten time to market for clients. This will help free Infosys from many repetitive tasks allowing it to focus on important, strategic challenges faced by clients. Panaya’s proven technology would help to simplify the costs and complexities faced by businesses in managing their enterprise application landscapes. The excess of the purchase consideration paid over the fair value of net assets acquired has been attributed to goodwill.
The purchase price has been allocated based on Management’s estimates and independent appraisal of fair values as follows:
(Dollars in millions)
Component | Acquiree's carrying amount | Fair value adjustments | Purchase price allocated |
Property, plant and equipment | 2 | – | 2 |
Net current assets* | 6 | – | 6 |
Intangible assets – technology | – | 39 | 39 |
Intangible assets – trade name | – | 3 | 3 |
Intangible assets - customer contracts and relationships | – | 13 | 13 |
Intangible assets – non compete agreements | – | 4 | 4 |
Deferred tax liabilities on intangible assets | – | (16) | (16) |
8 | 43 | 51 | |
Goodwill | 174 | ||
Total purchase price | 225 |
* | Includes cash and cash equivalents acquired of $19 million. |
The goodwill is not tax deductible.
The gross amount of trade receivables acquired and its fair value is $9 million and the amounts have been largely collected.
The fair value of total cash consideration as at the acquisition date was $225 million.
The transaction costs of $4 million related to the acquisition have been included under administrative expenses in the statement of comprehensive income for year ended March 31, 2015.
EdgeVerve System Limited
EdgeVerve was created as a wholly owned subsidiary to focus on developing and selling products and platforms. On April 15, 2014, the Board of Directors of Infosys has authorized the Company to execute a Business Transfer Agreement and related documents with EdgeVerve, subject to securing the requisite approval from shareholders in the Annual General Meeting. Subsequently, at the AGM held on June 14, 2014, the shareholders authorised the Board to enter into a Business Transfer Agreement and related documents with EdgeVerve, with effect from July 1, 2014 or such other date as may be decided by the Board of Directors. The company had undertaken an enterprise valuation by an independent valuer and accordingly the business was transferred for a consideration of $70 million with effect from July 1, 2014 which was settled through the issue of fully paid up equity shares.
The transfer of assets and liabilities was accounted for at carrying values and did not have any impact on the consolidated financial statements.
2.4 Prepayments and other assets
Prepayments and other assets consist of the following:
(Dollars in millions)
As of | ||
March 31, 2016 | March 31, 2015 | |
Current | ||
Rental deposits | 2 | 4 |
Security deposits | 1 | 1 |
Loans and advances to employees | 46 | 35 |
Prepaid expenses (1) | 30 | 16 |
Interest accrued and not due | 106 | 63 |
Withholding taxes (1) | 272 | 218 |
Deposit with corporation | 187 | 176 |
Deferred contract cost(1) | 7 | – |
Advance payments to vendors for supply of goods (1) | 17 | 13 |
Other assets | 4 | 1 |
672 | 527 | |
Non-Current | ||
Loans and advances to employees | 4 | 5 |
Security deposits | 12 | 11 |
Deposit with corporation | 9 | 9 |
Prepaid gratuity(1) | 1 | 4 |
Prepaid expenses(1) | 13 | 1 |
Deferred contract cost(1) | 50 | – |
Rental Deposits | 22 | 8 |
111 | 38 | |
783 | 565 | |
Financial assets in prepayments and other assets | 393 | 313 |
(1) | Non financial assets |
Withholding taxes primarily consist of input tax credits. Other assets primarily represent travel advances and other recoverables. Security deposits relate principally to leased telephone lines and electricity supplies.
Deposit with corporation represents amounts deposited to settle certain employee-related obligations as and when they arise during the normal course of business.
2.5 Property, plant and equipment
Following are the changes in the carrying value of property, plant and equipment for the year ended March 31, 2016:
(Dollars in millions)
Land | Buildings | Plant and machinery | Computer equipment | Furniture and fixtures | Vehicles | Total | |
Gross carrying value as of April 1, 2015 | 250 | 940 | 337 | 535 | 189 | 6 | 2,257 |
Acquisitions through business combination (Refer Note 2.3) |
– | – | – | – | – | – | – |
Additions | 9 | 68 | 76 | 168 | 40 | 1 | 362 |
Deletions | – | – | (1) | (60) | (1) | (2) | (64) |
Translation difference | (15) | (53) | (20) | (28) | (10) | (1) | (127) |
Gross carrying value as of March 31, 2016 | 244 | 955 | 392 | 615 | 218 | 4 | 2,428 |
Accumulated depreciation as of April 1, 2015 | (3) | (317) | (207) | (365) | (132) | (3) | (1,027) |
Acquisitions through business combination (Refer Note 2.3) |
– | – | – | – | – | – | – |
Depreciation | (1) | (33) | (49) | (84) | (24) | (1) | (192) |
Accumulated depreciation on deletions | – | – | 1 | 36 | 1 | 1 | 39 |
Translation difference | 1 | 18 | 12 | 18 | 6 | – | 55 |
Accumulated depreciation as of March, 2016 | (3) | (332) | (243) | (395) | (149) | (3) | (1,125) |
Capital work-in progress as of March 31, 2016 | 286 | ||||||
Carrying value as of March 31, 2016 | 241 | 623 | 149 | 220 | 69 | 1 | 1,589 |
Capital work-in progress as of April 1, 2015 | 230 | ||||||
Carrying value as of April 1, 2015 | 247 | 623 | 130 | 170 | 57 | 3 | 1,460 |
Following are the changes in the carrying value of property, plant and equipment for the year ended March 31, 2015:
(Dollars in millions)
Land | Buildings | Plant and machinery | Computer equipment | Furniture and fixtures | Vehicles | Total | |
Gross carrying value as of April 1, 2014 | 190 | 839 | 284 | 444 | 170 | 6 | 1,933 |
Acquisitions through business combination (Refer Note 2.3) |
– | – | – | 2 | 1 | – | 3 |
Additions | 69 | 139 | 69 | 124 | 30 | 1 | 432 |
Deletions | – | – | (3) | (13) | (3) | (1) | (20) |
Translation difference | (9) | (38) | (13) | (22) | (9) | – | (91) |
Gross carrying value as of March 31, 2015 | 250 | 940 | 337 | 535 | 189 | 6 | 2,257 |
Accumulated depreciation as of April 1, 2014 | – | (300) | (175) | (328) | (117) | (2) | (922) |
Accumulated Depreciation on acquired assets | – | – | – | (1) | – | – | (1) |
Depreciation | (3) | (31) | (42) | (63) | (24) | (1) | (164) |
Accumulated depreciation on deletions | – | – | 2 | 11 | 3 | 1 | 17 |
Translation difference | – | 14 | 8 | 16 | 6 | (1) | 43 |
Accumulated depreciation as of March 31, 2015 | (3) | (317) | (207) | (365) | (132) | (3) | (1,027) |
Capital work-in progress as of March 31, 2015 | 230 | ||||||
Carrying value as of March 31, 2015 | 247 | 623 | 130 | 170 | 57 | 3 | 1,460 |
Capital work-in progress as of April 1, 2014 | 305 | ||||||
Carrying value as of April 1, 2014 | 190 | 539 | 109 | 116 | 53 | 4 | 1,316 |
During the three months ended June 30, 2014, the management based on internal and external technical evaluation had changed the useful life of certain assets primarily consisting of buildings and computers with effect from April 1, 2014. Accordingly, the useful lives of certain assets required a change from previous estimate.
The depreciation expense is included in cost of sales in the statement of comprehensive income.
Carrying value of land includes $95 million and $99 million as of March 31, 2016 and March 31, 2015, respectively, towards deposits paid under certain lease-cum-sale agreements to acquire land, including agreements where the company has an option to purchase or renew the properties on expiry of the lease period.
The contractual commitments for capital expenditure were $224 million and $252 million as of March 31, 2016 and March 31, 2015, respectively.
2.6 Goodwill
Following is a summary of changes in the carrying amount of goodwill:
(Dollars in millions)
As of | ||
March 31, 2016 | March 31, 2015 | |
Carrying value at the beginning | 495 | 360 |
Goodwill on Panaya acquisition (Refer note 2.3) | – | 174 |
Goodwill on Kallidus d.b.a Skava acquisition (Refer note 2.3) | 71 | – |
Goodwill on Noah acquisition (Refer note 2.3) | 5 | – |
Translation differences | (3) | (39) |
Carrying value at the end | 568 | 495 |
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to the cash generating units (CGU) or groups of CGU’s, which benefit from the synergies of the acquisition. The chief operating decision maker reviews the goodwill for any impairment at the operating segment level, which is represented through groups of CGU’s.
During the year ended March 31, 2016, the Company reorganized some of its segments to enhance executive customer relationships, improve focus of sales investments and increase management oversight. Consequent to these internal reorganizations there were changes effected in the segments based on the “management approach” as defined in IFRS 8, Operating Segments. (Refer Note 2.14). Accordingly the goodwill has been allocated to the new operating segments as at March 31, 2016.
(Dollars in millions)
Segment | As of |
March 31, 2016 | |
Financial services | 128 |
Manufacturing | 64 |
Retail, Consumer packaged goods and Logistics | 87 |
Life Sciences, Healthcare and Insurance | 99 |
Energy & utilities, Communication and Services | 119 |
497 | |
Operating segments without significant goodwill | 71 |
Total | 568 |
The entire goodwill relating to Infosys BPO’s acquisition of McCamish has been allocated to the group of CGU’s which is represented by the Life Sciences, Healthcare and Insurance segment.
The goodwill relating to Infosys Lodestone, Portland, Panaya and Kallidus d.b.a Skava acquisitions has been allocated to the groups of CGU’s which are represented by the entity’s operating segment.
The entire goodwill relating to Noah acquisition has been allocated to the group of CGU's which is represented by the Energy & utilities, Communication and Services segment.
The following table gives the break-up of allocation of goodwill to operating segments as at March 31, 2015:
(Dollars in millions)
Segment | As of |
March 31, 2015 | |
Financial services | 106 |
Manufacturing | 105 |
Energy, communication and services | 51 |
Resources & utilities | 23 |
Life sciences and Healthcare | 31 |
Insurance | 58 |
Retail, consumer packaged goods and logistics | 76 |
Growth markets | 45 |
Total | 495 |
The recoverable amount of a CGU is the higher of its fair value less cost to sell and its value-in-use. The fair value of a CGU is determined based on the market capitalization. The value-in-use is determined based on specific calculations. These calculations use pre-tax cash flow projections over a period of five years, based on financial budgets approved by management and an average of the range of each assumption mentioned below. As of March 31, 2015, the estimated recoverable amount of the CGU exceeded its carrying amount. The recoverable amount was computed based on the fair value being higher than value-in-use and the carrying amount of the CGU was computed by allocating the net assets to operating segments for the purpose of impairment testing. The key assumptions used for the calculations are as follows:
In % | |
Long term growth rate | 9-11 |
Operating margins | 19-20 |
Discount rate | 14.2 |
The above discount rate is based on the Weighted Average Cost of Capital (WACC) of the Company. These estimates are likely to differ from future actual results of operations and cash flows.
2.7 Financial instruments
Financial instruments by category
The carrying value and fair value of financial instruments by categories as of March 31, 2016 were as follows:
(Dollars in millions)
Loans and receivables | Financial assets/liabilities at fair value through profit and loss | Derivatives- Hedging instruments | Available for sale | Trade and other payables | Total carrying value/fair value | |
Assets: | ||||||
Cash and cash equivalents (Refer to Note 2.1) | 4,935 | – | – | – | – | 4,935 |
Available-for-sale financial assets (Refer to Note 2.2) | – | – | – | 284 | – | 284 |
Trade receivables | 1,710 | – | – | – | – | 1,710 |
Unbilled revenue | 457 | – | – | – | – | 457 |
Prepayments and other assets (Refer to Note 2.4) | 393 | – | – | – | – | 393 |
Derivative financial instruments | – | 17 | – | – | – | 17 |
Total | 7,495 | 17 | – | 284 | – | 7,796 |
Liabilities: | ||||||
Trade payables | – | – | – | – | 58 | 58 |
Derivative financial instruments | – | 1 | – | – | – | 1 |
Client deposits | – | – | – | – | 4 | 4 |
Employee benefit obligation | – | – | – | – | 202 | 202 |
Other liabilities including contingent consideration (Refer note 2.9) | – | 17 | – | – | 737 | 754 |
Total | – | 18 | – | – | 1,001 | 1,019 |
The carrying value and fair value of financial instruments by categories as of March 31, 2015 were as follows:
(Dollars in millions)
Loans and receivables | Financial assets/liabilities at fair value through profit and loss | Available for sale | Trade and other payables | Total carrying value/fair value | ||
Assets: | ||||||
Cash and cash equivalents (Refer to Note 2.1) | 4,859 | – | – | – | 4,859 | |
Available-for-sale financial assets (Refer to Note 2.2) | – | – | 355 | – | 355 | |
Trade receivables | 1,554 | – | – | – | 1,554 | |
Unbilled revenue | 455 | – | – | – | 455 | |
Prepayments and other assets | 313 | – | – | – | 313 | |
Derivative financial instruments | – | 16 | – | – | 16 | |
Total | 7,181 | 16 | 355 | – | 7,552 | |
Liabilities: | ||||||
Trade payables | – | – | – | 22 | 22 | |
Derivative financial instruments | – | – | – | – | – | |
Client deposits | – | – | – | 4 | 4 | |
Employee benefit obligation | – | – | – | 171 | 171 | |
Other liabilities (Refer note 2.9) | – | – | – | 782 | 782 | |
Total | – | – | – | 979 | 979 |
Fair value hierarchy
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
The following table presents fair value hierarchy of assets and liabilities measured at fair value on a recurring basis as of March 31, 2016:
(Dollars in millions)
As of March 31, 2016 | Fair value measurement at end of the reporting period using | |||
Level 1 | Level 2 | Level 3 | ||
Assets | ||||
Available- for- sale financial asset- Investments in liquid mutual fund units (Refer to Note 2.2) |
10 | 10 | – | – |
Available- for- sale financial asset- Investments in quoted debt securities (Refer to Note 2.2) |
257 | 57 | 200 | – |
Available- for- sale financial asset- Investments in equity and preference securities (Refer to Note 2.2) |
14 | – | – | 14 |
Available- for- sale financial asset- others (Refer Note 2.2) | 3 | – | – | 3 |
Derivative financial instruments- gain on outstanding foreign exchange forward and option contracts | 17 | – | 17 | – |
Liabilities | – | |||
Derivative financial instruments- loss on outstanding foreign exchange forward and option contracts | 1 | – | 1 | – |
Liability towards contingent consideration (Refer note 2.3)* | 17 | – | – | 17 |
During the year ended March 31, 2016, quoted debt securities of $50 million were transferred from Level 1 to Level 2 of fair value hierarchy, since these were valued based on market observable inputs.
*Discounted $20 million at 13.7%.
A one percentage point change in the unobservable inputs used in fair valuation of the contingent consideration does not have a significant impact in its value.
The following table presents fair value hierarchy of assets and liabilities measured at fair value on a recurring basis as of March 31, 2015:
(Dollars in millions)
As of March 31, 2015 | Fair value measurement at end of the reporting period using | |||||
Level 1 | Level 2 | Level 3 | ||||
Assets | ||||||
Available- for- sale financial asset- Investments in liquid mutual fund units (Refer to Note 2.2) |
135 | 135 | – | – | ||
Available- for- sale financial asset- Investments in fixed maturity plan securities (Refer to Note 2.2) |
5 | – | 5 | – | ||
Available- for- sale financial asset- Investments in quoted debt securities (Refer to Note 2.2) |
215 | 97 | 118 | – | ||
Derivative financial instruments- gain on outstanding foreign exchange forward and option contracts | 16 | – | 16 | – | ||
Liabilities | ||||||
Derivative financial instruments- loss on outstanding foreign exchange forward and option contracts | – | – | – | – |
Income from financial assets or liabilities that are not at fair value through profit or loss is as follows:
(Dollars in millions)
Year ended March 31, | ||
2016 | 2015 | |
Interest income on deposits and certificates of deposit | 385 | 430 |
Income from available-for-sale financial assets | 27 | 43 |
412 | 473 |
Derivative financial instruments
The Group's holds derivative financial instruments such as foreign exchange forward and option contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The counterparty for these contracts is generally a bank or a financial institution. These derivative financial instruments are valued based on quoted prices for similar assets and liabilities in active markets or inputs that are directly or indirectly observable in the marketplace. The following table gives details in respect of outstanding foreign exchange forward and options contracts:
(In millions)
As of | ||
March 31, 2016 | March 31, 2015 | |
Forward contracts | ||
In U.S. dollars | 510 | 716 |
In Euro | 100 | 67 |
In United Kingdom Pound Sterling | 65 | 73 |
In Australian dollars | 55 | 98 |
In Canadian dollars | – | 12 |
In Singapore dollars | – | 25 |
In Swiss Franc | 25 | – |
Options Contracts | ||
In U.S. dollars | 125 | – |
The Group recognized a net gain on derivative financial instruments of $4 million and a net gain of $85 million for the year ended March 31, 2016 and March 31, 2015, respectively, which is included under other income.
The foreign exchange forward and option contracts mature within 12 months. The table below analyses the derivative financial instruments into relevant maturity groupings based on the remaining period as of the balance sheet date:
(Dollars in millions)
As of | ||
March 31, 2016 | March 31, 2015 | |
Not later than one month | 238 | 237 |
Later than one month and not later than three months | 516 | 605 |
Later than three months and not later than one year | 157 | 155 |
911 | 997 |
Financial risk management
Financial risk factors
The Group's activities expose it to a variety of financial risks - market risk, credit risk and liquidity risk. The Group's primary focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance. The primary market risk to the Group is foreign exchange risk. The Group uses derivative financial instruments to mitigate foreign exchange related risk exposures. The Group's exposure to credit risk is influenced mainly by the individual characteristic of each customer and the concentration of risk from the top few customers. The demographics of the customer including the default risk of the industry and country in which the customer operates also has an influence on credit risk assessment.
Market risk
The Group operates internationally and a major portion of the business is transacted in several currencies and consequently the Group is exposed to foreign exchange risk through its sales and services in the United States and elsewhere, and purchases from overseas suppliers in various foreign currencies. The Group uses derivative financial instruments such as foreign exchange forward and option contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The exchange rate between the rupee and foreign currencies has changed substantially in recent years and may fluctuate substantially in the future. Consequently, the results of the Group’s operations are adversely affected as the Indian rupee appreciates / depreciates against these currencies.
The following table gives details in respect of the outstanding foreign exchange forward and option contracts:
(Dollars in millions)
As of | ||
March 31, 2016 | March 31, 2015 | |
Aggregate amount of outstanding forward and option contracts | 911 | 997 |
Gain on outstanding forward and option contracts | 17 | 16 |
Loss on outstanding forward and option contracts | 1 | – |
The following table analyses foreign currency risk from financial instruments as of March 31, 2016:
(Dollars in millions)
U.S. dollars | Euro | United Kingdom Pound Sterling | Australian dollars | Other currencies | Total | |
Cash and cash equivalents | 170 | 25 | 30 | 26 | 91 | 342 |
Trade receivables | 1,141 | 193 | 109 | 90 | 105 | 1,638 |
Unbilled revenue | 282 | 56 | 29 | 17 | 38 | 422 |
Other assets | 14 | 6 | 4 | 2 | 12 | 38 |
Trade payables | (19) | (11) | (11) | (1) | (11) | (53) |
Client deposits | (3) | – | – | – | (1) | (4) |
Accrued expenses | (119) | (23) | (18) | (5) | (33) | (198) |
Employee benefit obligation | (87) | (12) | (7) | (25) | (19) | (150) |
Other liabilities | (159) | (20) | (5) | (6) | (32) | (222) |
Net assets / (liabilities) | 1,220 | 214 | 131 | 98 | 150 | 1,813 |
The following table analyses foreign currency risk from financial instruments as of March 31, 2015:
(Dollars in millions)
U.S. dollars | Euro | United Kingdom Pound Sterling | Australian dollars | Other currencies | Total | |
Cash and cash equivalents | 159 | 9 | 7 | 19 | 66 | 260 |
Trade receivables | 1,075 | 166 | 87 | 75 | 96 | 1,499 |
Unbilled revenue | 274 | 53 | 20 | 16 | 40 | 403 |
Other assets | 13 | 5 | 3 | 1 | 10 | 32 |
Trade payables | (9) | (2) | – | – | (10) | (21) |
Client deposits | (3) | – | – | – | (1) | (4) |
Accrued expenses | (120) | (23) | (13) | (4) | (26) | (186) |
Employee benefit obligation | (70) | (9) | (6) | (21) | (17) | (123) |
Other liabilities | (122) | (19) | (4) | (3) | (101) | (249) |
Net assets / (liabilities) | 1,197 | 180 | 94 | 83 | 57 | 1,611 |
For the year ended March 31, 2016 and March 31, 2015, every percentage point depreciation / appreciation in the exchange rate between the Indian rupee and the U.S. dollar has affected the company's incremental operating margins by approximately 0.50% and 0.52%, respectively.
Sensitivity analysis is computed based on the changes in the income and expenses in foreign currency upon conversion into functional currency, due to exchange rate fluctuations between the previous reporting period and the current reporting period.
Credit risk
Credit risk refers to the risk of default on its obligation by the counterparty resulting in a financial loss. The maximum exposure to the credit risk at the reporting date is primarily from trade receivables amounting to $1,710 million and $1,554 million as of March 31, 2016 and March 31, 2015, respectively and unbilled revenue amounting to $457 million and $455 million as of March 31, 2016 and March 31, 2015, respectively. Trade receivables and unbilled revenue are typically unsecured and are derived from revenue earned from customers primarily located in the United States. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Group grants credit terms in the normal course of business.
The following table gives details in respect of percentage of revenues generated from top customer and top five customers:
(In %)
Year ended March 31, | ||
2016 | 2015 | |
Revenue from top customer | 3.6 | 3.3 |
Revenue from top five customers | 13.8 | 13.5 |
Financial assets that are neither past due nor impaired
Cash and cash equivalents and available-for-sale financial assets and investments in certificates of deposit are neither past due nor impaired. Cash and cash equivalents include deposits with banks and corporations with high credit-ratings assigned by international and domestic credit-rating agencies. Available-for-sale financial assets include primarily investment in liquid mutual fund units, quoted debt securities and unquoted equity and preference securities. Certificates of deposit represent funds deposited at a bank or other eligible financial institution for a specified time period. Investment in quoted debt securities represents the investments made in debt securities issued by government and quasi government organizations. Of the total trade receivables, $1,258 million and $1,174 million as of March 31, 2016 and March 31, 2015, were neither past due nor impaired.
There is no other class of financial assets that is not past due but impaired except for trade receivables of $2 million and $4 million as of March 31, 2016 and March 31, 2015, respectively.
Financial assets that are past due but not impaired
The Group's credit period generally ranges from 30-60 days. The age analysis of the trade receivables have been considered from the due date. The age wise break up of trade receivables, net of allowances of $42 million and $55 million as of March 31, 2016 and March 31, 2015, respectively, that are past due, is given below:
(Dollars in millions)
As of | ||
Period (in days) | March 31, 2016 | March 31, 2015 |
Less than 30 | 314 | 263 |
31 – 60 | 71 | 55 |
61 – 90 | 46 | 14 |
More than 90 | 21 | 48 |
452 | 380 |
The reversal of provision for doubtful trade receivables for the year ended March 31, 2016 is $7 million.
The provision for doubtful trade receivables for the year ended March 31, 2015 was $29 million.
The movement in the provisions for doubtful trade receivable is as follows:
(Dollars in millions)
Year ended March 31, | ||
2016 | 2015 | |
Balance at the beginning | 59 | 36 |
Translation differences | (3) | (4) |
Provisions for doubtful trade receivable | (7) | 29 |
Trade receivables written off | (5) | (2) |
Balance at the end | 44 | 59 |
Liquidity risk
As of March 31, 2016, the Group had a working capital of $5,804 million including cash and cash equivalents of $4,935 million and current available-for-sale financial assets of $11 million. As of March 31, 2015, the Group had a working capital of $5,731 million including cash and cash equivalents of $4,859 million and current available-for-sale financial assets of $140 million.
As of March 31, 2016 and March 31, 2015, the outstanding employee benefit obligations were $202 million and $171 million, respectively, which have been substantially funded. Further, as of March 31, 2016 and March 31, 2015, the Group had no outstanding bank borrowings. Accordingly, no liquidity risk is perceived.
The table below provides details regarding the contractual maturities of significant financial liabilities as of March 31, 2016:
(Dollars in millions)
Particulars | Less than 1 year | 1-2 years | 2-4 years | 4-7 years | Total |
Trade payables | 58 | – | – | – | 58 |
Client deposits | 4 | – | – | – | 4 |
Other liabilities (excluding liability towards acquisition - Refer Note 2.9) | 732 | 4 | 1 | – | 737 |
Liability towards acquisitions on an undiscounted basis (including contingent consideration) -Refer Note 2.9 | 13 | 7 | – | – | 20 |
The table below provides details regarding the contractual maturities of significant financial liabilities as of March 31, 2015:
(Dollars in millions)
Particulars | Less than 1 year | 1-2 years | 2-4 years | 4-7 years | Total |
Trade payables | 22 | – | – | – | 22 |
Client deposits | 4 | – | – | – | 4 |
Other liabilities (excluding liabilities towards acquisition and incentive accruals - Refer Note 2.9) | 704 | – | – | – | 704 |
Liability towards acquisitions on an undiscounted basis (Refer Note 2.9) | 84 | – | – | – | 84 |
As of March 31, 2016 and March 31, 2015, the Group had outstanding financial guarantees of $8 million and $7 million, respectively towards leased premises. These financial guarantees can be invoked upon breach of any term of the lease agreement. To the Group’s knowledge there has been no breach of any term of the lease agreement as of March 31, 2016 and March 31, 2015.
Offsetting of financial assets and financial liabilities:
The group offsets a financial asset and a financial liability when it currently has a legally enforceable right to set off the recognized amounts and the group intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
The following table provides quantitative information about offsetting of derivative financial assets and derivative financial liabilities:
(Dollars in millions)
As of | As of | |||
March 31, 2016 | March 31, 2015 | |||
Derivative financial asset | Derivative financial liability | Derivative financial asset |
Derivative financial liability | |
Gross amount of recognized financial asset/liability | 18 | (2) | 17 | (1) |
Amount set off | (1) | 1 | (1) | 1 |
Net amount presented in balance sheet | 17 | (1) | 16 | – |
2.8 Provisions
Provisions comprise the following:
(Dollars in millions)
As of | ||
March 31, 2016 | March 31, 2015 | |
Provision for post sales client support and other provisions | 77 | 77 |
77 | 77 |
Provision for post sales client support and other provisions represents costs associated with providing sales support services which are accrued at the time of recognition of revenues and are expected to be utilized over a period of 6 months to 1 year. The movement in the provision for post sales client support and other provisions is as follows:
(Dollars in millions)
Year ended March 31, 2016 | |
Balance at the beginning | 77 |
Translation differences | 1 |
Provision recognized/(reversed) | 16 |
Provision utilized | (17) |
Balance at the end | 77 |
Provision for post sales client support and other provisions is included in cost of sales in the statement of comprehensive income.
As of March 31, 2016 and March 31, 2015, claims against the company, not acknowledged as debts, net of amounts paid (excluding demands from Indian income tax authorities- Refer to Note 2.11) amounted to $42 million (277 crore) and $42 million (261 crore), respectively.
The company is subject to legal proceedings and claims, which have arisen in the ordinary course of business. The company’s management does not reasonably expect that these legal actions, when ultimately concluded and determined, will have a material and adverse effect on the company’s results of operations or financial condition.
2.9 Other liabilities
Other liabilities comprise the following:
(Dollars in millions)
As of | ||
March 31, 2016 | March 31, 2015 | |
Current | ||
Accrued compensation to employees | 342 | 337 |
Accrued expenses | 331 | 318 |
Withholding taxes payable (1) | 196 | 145 |
Retainage | 12 | 8 |
Liabilities of controlled trusts | 25 | 28 |
Accrued gratuity | – | 1 |
Liability towards acquisition of business | – | 78 |
Liability towards contingent consideration (Refer note 2.3) | 12 | – |
Others | 22 | 12 |
940 | 927 | |
Non-Current | ||
Liability towards contingent consideration (Refer note 2.3) | 5 | – |
Accrued compensation to employees | 5 | – |
Deferred income - government grant on land use rights (1) | 7 | 8 |
17 | 8 | |
957 | 935 | |
Financial liabilities included in other liabilities | 754 | 782 |
Financial liability towards acquisitions on an undiscounted basis (including contingent consideration)- Refer note 2.3 | 20 | 84 |
(1) | Non financial liabilities |
Accrued expenses primarily relate to cost of technical sub-contractors, telecommunication charges, legal and professional charges, brand building expenses, overseas travel expenses and office maintenance. Others include unpaid dividend balances and capital creditors.
2.10 Employees' Stock Option Plans (ESOP)
2015 Stock Incentive Compensation Plan (the 2015 Plan): SEBI issued the Securities and Exchange Board of India (Share based Employee Benefits) Regulations, 2014 (‘SEBI Regulations’) which replaced the SEBI ESOP Guidelines, 1999. The 2011 Plan (as explained below) was required to be amended and restated in accordance with the SEBI Regulations. Consequently, to effect this change and to further introduce stock options/ADR’s and other stock incentives, the Company put forth the 2015 Stock Incentive Compensation Plan (the 2015 Plan) for approval to the shareholders of the Company. Pursuant to the approval by the shareholders through postal ballot which ended on March 31, 2016, the Board of Directors have been authorised to introduce, offer, issue and allot share-based incentives to eligible employees of the Company and its subsidiaries under the 2015 Plan. The maximum number of shares under the 2015 plan shall not exceed 2,40,38,883 equity shares(this includes 1,12,23,576 equity shares which are currently held by the Trust towards the 2011 Plan). 1,70,38,883 equity shares will be issued as RSUs at par value and 70,00,000 equity shares will be issued as stock options at market price. These instruments will vest over a period of 4 years and the Company expects to grant the instruments under the 2015 Plan over the period of 4 to 7 years.
2011 RSU Plan (the 2011 Plan): The Company had a 2011 RSU Plan which provided for the grant of restricted stock units (RSUs) to eligible employees of the Company. The Board of Directors recommended the establishment of the 2011 Plan to the shareholders on August 30, 2011 and the shareholders approved the recommendation of the Board of Directors on October 17, 2011 through a postal ballot. The maximum aggregate number of shares that may be awarded under the plan was 1,13,34,400 and the plan was expected to continue in effect for a term of 10 years from the date of initial grant under the plan. During the year ended March 31, 2015, the company made a grant of 108,268 restricted stock units (adjusted for bonus issues) to Dr. Vishal Sikka, Chief Executive Office and Managing Director. The Board in its meeting held on June 22, 2015, on recommendation of Nomination and Remuneration Committee, further granted 1,24,061 RSUs to Dr. Vishal Sikka. These RSUs are vesting over a period of four years from the date of the grant in the proportions specified in the award agreement. The RSUs will vest subject to achievement of certain key performance indicators as set forth in the award agreement for each applicable year of the vesting tranche and continued employment through each vesting date. Further the Company has earmarked 100,000 equity shares for welfare activities of the employees, approved by the shareholders vide postal ballot which ended on March 31, 2016. The equity shares currently held under this plan, i.e. 1,12,23,576 equity shares (this includes the aggregate number of equity shares that may be awarded under the 2011 Plan as reduced by 10,824 equity shares already exercised by Dr. Vishal Sikka and 100,000 equity shares which have been earmarked for welfare activities of the employees) have been subsumed under the 2015 Plan
Further , the award granted to Dr. Vishal Sikka on June 22, 2015 was modified by the Nomination and remuneration committee on April 14, 2016. There is no modification or change in the total number of RSUs granted or the vesting period (which is four years). The modifications relate to the criteria of vesting for each of the years. Based on the modification, the first tranche of the RSUs will vest subject to achievement of certain key performance indicators for the year ended March 31, 2016. Subsequent vesting of RSU's for each of the remaining years would be subject to continued employment.
The activity in the 2011 Plan during the year ended March 31, 2016 and March 31, 2015, respectively is set out below:
Particulars | Year ended March 31, 2016 | Year ended March 31, 2015 | ||
Shares arising out of options | Weighted average exercise price ($) | Shares arising out of options | Weighted average exercise price ($) | |
2011 Plan: | ||||
Outstanding at the beginning* | 108,268 | 0.08 | – | – |
Granted | 124,061 | 0.08 | 108,268 | 0.08 |
Forfeited and expired | – | – | – | – |
Exercised | 10,824 | 0.08 | – | – |
Outstanding at the end | 2,21,505 | 0.08 | 1,08,268 | 0.08 |
Exercisable at the end | – | – | – | – |
* | adjusted for bonus issues (Refer note 2.17) |
The weighted average share price of options exercised under the 2011 Plan on the date of exercise was $16.
The weighted average remaining contractual life of RSUs outstanding as of March 31, 2016 and March 31, 2015 under the 2011 Plan was 1.98 years and 2.39 years, respectively.
The expected term of the RSU is estimated based on the vesting term and contractual term of the RSU, as well as expected exercise behaviour of the employee who receives the RSU. Expected volatility during the expected term of the RSU is based on historical volatility of the observed market prices of the company's publicly traded equity shares during a period equivalent to the expected term of the RSU.
The fair value of each RSU is estimated on the date of grant using the Black-Scholes-Merton model with the following assumptions:
Options granted during | Fiscal 2016 | Fiscal 2015 |
Grant date | 22-Jun-15 | 21-Aug-14 |
Weighted average share price ($) * | 16 | 58 |
Exercise price ($)* | 0.08 | 0.08 |
Expected volatility (%) | 28 - 36 | 30-37 |
Expected life of the option (years) | 1 - 4 | 1 - 4 |
Expected dividends (%) | 2.43 | 1.84 |
Risk-free interest rate (%) | 7- 8 | 8 - 9 |
Weighted average fair value as on grant date ($) * | 15 | 55 |
* | Data for Fiscal 2015 is not adjusted for bonus issues |
During the year ended March 31, 2016 and March 31, 2015, the company recorded an employee stock compensation expense of $1 million and less than $1 million, respectively, in the statement of comprehensive income.
2.11 Income taxes
Income tax expense in the consolidated statement of comprehensive income comprises:
(Dollars in millions)
Year ended March 31, | ||
2016 | 2015 | |
Current taxes | ||
Domestic taxes | 642 | 511 |
Foreign taxes | 167 | 282 |
809 | 793 | |
Deferred taxes | ||
Domestic taxes | 3 | 6 |
Foreign taxes | (13) | 6 |
(10) | 12 | |
Income tax expense | 799 | 805 |
Income tax expense for the year ended March 31, 2016 and March 31, 2015 includes reversals (net of provisions) of $47 million and $26 millions, respectively pertaining to earlier periods.
Entire deferred income tax for the year ended March 31, 2016 and March 31, 2015 relates to origination and reversal of temporary differences.
For the year ended March 31, 2016, a deferred tax liability of $1 million, relating to available-for-sale financial assets has been recognized in other comprehensive income.
For the year ended March 31, 2015, a reversal of deferred tax asset of $2 million, relating to available-for-sale financial assets has been recognized in other comprehensive income.
A reconciliation of the income tax provision to the amount computed by applying the statutory income tax rate to the income before income taxes is summarized below:
(Dollars in millions)
Year ended March 31, | ||
2016 | 2015 | |
Profit before income taxes | 2,851 | 2,818 |
Enacted tax rates in India | 34.61% | 33.99% |
Computed expected tax expense | 987 | 958 |
Tax effect due to non-taxable income for Indian tax purposes | (268) | (273) |
Overseas taxes | 109 | 134 |
Tax reversals, overseas and domestic | (47) | (26) |
Effect of differential overseas tax rates | 1 | (6) |
Effect of exempt non operating income | (13) | (15) |
Effect of unrecognized deferred tax assets | 9 | 7 |
Effect of non-deductible expenses | 30 | 34 |
Additional deduction on research and development expense | (9) | (9) |
Others | – | 1 |
Income tax expense | 799 | 805 |
The applicable Indian statutory tax rate for fiscal 2016 is 34.61% and fiscal 2015 is 33.99%, respectively. The change in the tax rate is consequent to the changes made in Finance Act 2015.
During the year ended March 31, 2016 and March 31, 2015, the group has claimed weighted tax deduction on eligible research and development expenditures based on the approval received from Department of Scientific and Industrial Research (DSIR) on November 23, 2011 which has been renewed effective April 2014. The weighted tax deduction is equal to 200% of such expenditures incurred.
The foreign tax expense is due to income taxes payable overseas, principally in the United States. In India, the company has benefited from certain tax incentives that the Government of India had provided to the export of software from the specifically designated units registered under the Software Technology Parks Scheme (STP) in India and the company continues to benefit from certain tax incentives for the units registered under the Special Economic Zones Act, 2005 (SEZ). However, the income tax incentives provided by the Government of India for STP units have expired, and all the STP units are now taxable. SEZ units which began providing services on or after April 1, 2005 are eligible for a deduction of 100 percent of profits or gains derived from the export of services for the first five years from the financial year in which the unit commenced the 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 period of five years subject to the unit meeting defined conditions.
As of March 31, 2016, claims against the group not acknowledged as debts from the Indian Income tax authorities net of amount paid to statutory authorities of $662 million (4,383 crore) amounted to $1 million (7 crore).
As of March 31, 2015, claims against the group not acknowledged as debts from the Indian Income tax authorities net of amount paid to statutory authorities of $571 million (3,568 crore) amounted to less than $1 million (3 crore).
Payment of $662 million (4,383 crore) includes demands from the Indian Income tax authorities of $624 million (4,135 crore), including interest of $185 million (1,224 crore) upon completion of their tax assessment for fiscal 2007, fiscal 2008, fiscal 2009, fiscal 2010 and fiscal 2011. $138 million ( 913 crores) paid during the year ended 31st March 2016 consequent to demand from tax authorities in India for fiscal 2011 towards denial of certain tax benefits. The company has filed an appeal with the income tax appellate authorities.
Demand for fiscal 2007, fiscal 2008 and fiscal 2009 includes disallowance of a portion of the deduction claimed by the company under Section 10A of the income Tax Act as 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. Demand for fiscal 2007, fiscal 2008, fiscal 2009, fiscal 2010 and fiscal 2011 also includes disallowance of portion of profit earned outside India from the STP units under section 10A of the Income Tax Act and disallowance of profits earned from SEZ units under section 10AA of the Income Tax Act. The matters for fiscal 2007, fiscal 2008 and fiscal 2009 are pending before the Commissioner of Income Tax (Appeals) Bangalore. The matter for fiscal 2010 and fiscal 2011 is pending before Hon’ble Income Tax Appellate Tribunal (ITAT) Bangalore. The company is contesting the demand and the management including its tax advisors believes that its position will likely be upheld in the appellate process. The management believes that the ultimate outcome of these proceedings will not have a material adverse effect on the Company's financial position and results of operations.
2.12 Earnings per equity share
The following is a reconciliation of the equity shares used in the computation of basic and diluted earnings per equity share:
Year ended March 31, | ||
2016 | 2015 | |
Basic earnings per equity share - weighted average number of equity shares outstanding(1)(2) | 2,285,616,160 | 2,285,610,264 |
Effect of dilutive common equivalent shares | 102,734 | 32,676 |
Diluted earnings per equity share - weighted average number of equity shares and common equivalent shares outstanding | 2,285,718,894 | 2,285,642,940 |
(1) | Excludes treasury shares |
(2) | adjusted for bonus issues. Refer Note 2.17 |
For the year ended March 31, 2016 and March 31, 2015, there were no outstanding options to purchase equity shares which had an anti-dilutive effect.
2.13 Related party transactions
Infosys has provided guarantee for performance of certain contracts entered into by its subsidiaries.
Transaction to acquire associate's stake:
(Dollars in millions)
Particulars | Year ended March 31, 2015 |
Financing transactions | |
Investment in DWA Nova LLC* | 15 |
15 |
* | During the year ended March 31, 2015, the group acquired 20% of the equity interests in DWA Nova LLC for a cash consideration of $15 million. The Company has made this investment to form a new company alongwith Dream Works Animation (DWA). The new company, DWA Nova LLC, will develop and commercialize image generation technology in order to provide end-to-end digital manufacturing capabilities for companies involved in the design, manufacturing, marketing or distribution of physical consumer products. As of March 31, 2016, Infosys Nova holds 16% of the equity interest in DWA Nova LLC. |
Transactions with key management personnel
The table below describes the compensation to key management personnel which comprise directors and executive officers:
(Dollars in millions)
Year ended March 31, | ||
2016 | 2015 | |
Salaries and other employee benefits to whole-time directors and executive officers(1)(2)(3)(4) | 15 | 5 |
Commission and other benefits to non-executive/ independent directors | 2 | 2 |
Total | 17 | 7 |
(1) | Includes employee stock compensation expense of $1 million and less than $1 million for the year ended March 31, 2016 and March 31, 2015, respectively to CEO in line with the compensation plan approved by the shareholders. |
(2) | Includes payables to CFO who stepped down w.e.f October 12, 2015. |
(3) | Includes payment of variable pay amounting to $2.1 million for the year ended March 31, 2015 to CEO as decided by the Nomination and Remuneration committee in line with the compensation plan approved by the shareholders. |
(4) | Includes provision for variable pay amounting to $4.33 million for the year ended March 31, 2016 to CEO. The shareholders in the EGM dated July 30, 2014 had approved a variable pay of $4.18 million at a target level and also authorized the Board to alter and vary the terms of remuneration. Accordingly , the Board based on the recommendations of the Nominations committee approved on April 15, 2016, $4.33 million as variable pay for the year ended March 31, 2016. |
2.14 Segment Reporting
IFRS 8 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 end-to-end business solutions to enable clients to enhance business performance. During the year ended March 31, 2016, the Company reorganized some of its segments to enhance executive customer relationships, improve focus of sales investments and increase management oversight. Consequent to the internal reorganization, Growth Markets (GMU) comprising enterprises in APAC (Asia Pacific) and Africa have been subsumed across the other verticals and businesses in India, Japan and China are run as standalone regional business units and Infosys Public services (IPS) is reviewed seperately by the Chief Operating Decision Maker (CODM). Further, the erstwhile manufacturing segment is now being reviewed as Hi-Tech, Manufacturing and others included in ECS. Consequent to the internal reorganizations, there were changes effected in the reportable business segments based on the "management approach" as defined in IFRS 8, Operating Segments. The CODM evaluates the Company's performance and allocates resources based on an analysis of various performance indicators by business segments and geographic segments. Accordingly, information has been presented both along business segments and geographic segments. 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 significant accounting policies.
Business segments of the Company are primarily enterprises in Financial Services (FS), enterprises in Manufacturing (MFG), enterprises in Retail, Consumer packaged goods and Logistics (RCL), enterprises in the Energy & utilities, Communication and Services (ECS), enterprises in Hi-Tech (Hi-TECH), enterprises in Life Sciences, Healthcare and Insurance (HILIFE) and all other segments. The FS reportable segments has been aggregated to include the Financial Services operating segment and the Finacle operating segment. All other segments represents the operating segments of businesses in India, Japan and China and IPS. Geographic segmentation is based on business sourced from that geographic region and delivered from both on-site and off-shore locations. 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. Consequent to the above changes in the composition of reportable business segments, the prior period comparatives have been restated.
Revenue and identifiable operating expenses in relation to segments are categorized based on items that are individually identifiable to that segment. Revenue for “all other segments” represents revenue generated by IPS and revenue generated from customers located in India, Japan and China. Allocated expenses of segments include expenses incurred for rendering services from the Company's offshore software development centres and on-site expenses, which 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 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 against the total income of the Company.
Assets and liabilities 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 business segment revenue information is collated based on individual customers invoiced or in relation to which the revenue is otherwise recognized.
2.14.1 Business Segments
Year ended March 31, 2016 and March 31, 2015
(Dollars in millions)
FS | MFG | ECS | RCL | HILIFE | Hi-TECH | All other segments | Total | |
Revenues | 2,590 | 1,047 | 2,061 | 1,556 | 1,231 | 756 | 260 | 9,501 |
2,352 | 1,008 | 1,962 | 1,449 | 1,094 | 640 | 206 | 8,711 | |
Identifiable operating expenses | 1,248 | 555 | 944 | 742 | 585 | 371 | 156 | 4,601 |
1,115 | 533 | 895 | 658 | 521 | 313 | 154 | 4,189 | |
Allocated expenses | 606 | 257 | 505 | 381 | 302 | 185 | 65 | 2,301 |
541 | 245 | 478 | 353 | 266 | 156 | 50 | 2,089 | |
Segment profit | 736 | 235 | 612 | 433 | 344 | 200 | 39 | 2,599 |
696 | 230 | 589 | 438 | 307 | 171 | 2 | 2,433 | |
Unallocable expenses | 224 | |||||||
175 | ||||||||
Operating profit | 2,375 | |||||||
2,258 | ||||||||
Other income, net | 476 | |||||||
560 | ||||||||
Share in associate's profit / (loss) | – | |||||||
– | ||||||||
Profit before Income taxes | 2,851 | |||||||
2,818 | ||||||||
Income tax expense | 799 | |||||||
805 | ||||||||
Net profit | 2,052 | |||||||
2,013 | ||||||||
Depreciation and amortisation | 222 | |||||||
175 | ||||||||
Non-cash expenses other than depreciation and amortisation | 2 | |||||||
– |
2.14.2 Geographic Segments
Year ended March 31, 2016 and March 31, 2015
(Dollars in millions)
North America | Europe | India | Rest of the World | Total | |
Revenues | 5,957 | 2,186 | 246 | 1,112 | 9,501 |
5,357 | 2,097 | 209 | 1,048 | 8,711 | |
Identifiable operating expenses | 2,936 | 1,060 | 109 | 496 | 4,601 |
2,558 | 1,028 | 115 | 488 | 4,189 | |
Allocated expenses | 1,459 | 534 | 51 | 257 | 2,301 |
1,303 | 508 | 44 | 234 | 2,089 | |
Segment profit | 1,562 | 592 | 86 | 359 | 2,599 |
1,496 | 561 | 50 | 326 | 2,433 | |
Unallocable expenses | 224 | ||||
175 | |||||
Operating profit | 2,375 | ||||
2,258 | |||||
Other income, net | 476 | ||||
560 | |||||
Share in associate's profit / (loss) | – | ||||
– | |||||
Profit before Income taxes | 2,851 | ||||
2,818 | |||||
Income Tax expense | 799 | ||||
805 | |||||
Net profit | 2,052 | ||||
2,013 | |||||
Depreciation and amortisation | 222 | ||||
175 | |||||
Non-cash expenses other than depreciation and amortisation | 2 | ||||
– |
2.14.3 Significant clients
No client individually accounted for more than 10% of the revenues for the year ended March 31, 2016 and March 31, 2015.
2.15 Break-up of expenses
Cost of sales
(Dollars in millions)
Year ended March 31, | ||
2016 | 2015 | |
Employee benefit costs | 4,627 | 4,299 |
Deferred purchase price pertaining to acquisition | 23 | 41 |
Depreciation and amortisation | 222 | 175 |
Travelling costs | 250 | 219 |
Cost of technical sub-contractors | 537 | 354 |
Cost of software packages for own use | 111 | 139 |
Third party items bought for service delivery to clients | 81 | 31 |
Operating lease payments | 37 | 35 |
Communication costs | 27 | 34 |
Repairs and maintenance | 28 | 27 |
Provision for post-sales client support | 1 | 6 |
Other expenses | 6 | 14 |
Total | 5,950 | 5,374 |
Sales and marketing expenses
(Dollars in millions)
Year ended March 31, | ||
2016 | 2015 | |
Employee benefit costs | 403 | 389 |
Travelling costs | 54 | 43 |
Branding and marketing | 44 | 26 |
Operating lease payments | 7 | 6 |
Consultancy and professional charges | 7 | 3 |
Communication costs | 3 | 4 |
Other expenses | 4 | 9 |
Total | 522 | 480 |
Administrative expenses
(Dollars in millions)
Year ended March 31, | ||
2016 | 2015 | |
Employee benefit costs | 206 | 174 |
Consultancy and professional charges | 107 | 65 |
Repairs and maintenance | 131 | 97 |
Power and fuel | 33 | 36 |
Communication costs | 38 | 44 |
Travelling costs | 41 | 35 |
Rates and taxes | 17 | 21 |
Operating lease payments | 11 | 9 |
Insurance charges | 9 | 9 |
Provisions for doubtful trade receivable | (7) | 29 |
Commission to non-whole time directors | 1 | |
Contributions towards Corporate Social Responsibility | 33 | 42 |
Other expenses | 34 | 38 |
Total | 654 | 599 |
2.16 Dividends
The Board has increased dividend pay-out ratio from up to 40% to upto 50% of post-tax consolidated profits effective fiscal 2015.
The amount of per share dividend recognized as distributions to equity shareholders for the year ended March 31, 2016 includes final divided of 29.50/- per equity share ($0.47 per equity share) (not adjusted for June 17, 2015 bonus issue) and an interim dividend of 10/- per equity share ($0.15 per equity share).
The Board of Directors, in their meeting on October 12, 2015, declared an interim dividend of 10/- per equity share ($0.15 per equity share), which resulted in a net cash outflow of $423 million, (excluding dividend paid on treasury shares) inclusive of corporate dividend tax.
The Board of Directors, in their meeting on April 15, 2016, proposed a final dividend of 14.25 per equity share (approximately $0.22 per equity share). The proposal is subject to approval of the shareholders at the Annual General Meeting to be held on June 18, 2016 and if approved, would result in a cash outflow of approximately $592 million (excluding dividend paid on treasury shares), including corporate dividend tax
2.17 Share capital and share premium
The Company has only one class of shares referred to as equity shares having a par value of 5/-. The Company has allotted 1,148,472,332 fully paid up equity shares of face value 5/- each during the three months ended June 30, 2015 pursuant to a bonus issue approved by the shareholders through postal ballot. Book closure date fixed by the Board was June 17, 2015. Bonus share of one equity share for every equity share held, and a stock dividend of one American Depositary Share (ADS) for every ADS held, respectively, has been allotted. Consequently, the ratio of equity shares underlying the ADSs held by an American Depositary Receipt holder remains unchanged. Options granted under the restricted stock unit plan have been adjusted for bonus shares. 11,323,576 and 56,67,200 shares were held by controlled trust, as of March 31, 2016 and March 31, 2015, respectively.
The amount received in excess of the par value has been classified as share premium. Additionally, share-based compensation recognized in net profit in the consolidated statement of comprehensive income is credited to share premium. Amounts have been utilised for bonus issue from share premium account.
Exhibit 99.10
IFRS INR Earning Release
Independent Auditors’ Report
To the Board of Directors of Infosys Limited
Report on the Consolidated Interim Financial Statements
We have audited the accompanying consolidated interim financial statements of Infosys Limited (“the Company”) and its subsidiaries (collectively referred to as ‘the Group’), which comprise the consolidated balance sheet as at March 31, 2016, the consolidated statement of comprehensive income for the three months and year then ended, consolidated statements of changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Consolidated Interim Financial Statements
Management is responsible for the preparation and presentation of these consolidated interim financial statements that give a true and fair view of the consolidated financial position, consolidated financial performance and consolidated cash flows of the Group in accordance with International Accounting Standard (IAS) 34, Interim Financial Reporting as issued by International Accounting Standards Board (“IFRS”). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the consolidated interim financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated interim financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated interim financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated interim financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated interim financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Group’s preparation and presentation of the consolidated interim financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Group has in place an adequate internal financial controls system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by the Management, as well as evaluating the overall presentation of the consolidated interim financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the consolidated interim financial statements.
Opinion
In our opinion and to the best of our information and according to the explanations given to us, the consolidated interim financial statements give a true and fair view in conformity with IFRS:
(a) | in the case of the consolidated balance sheet, of the consolidated interim financial position of the Group as at March 31, 2016; |
(b) | in the case of the consolidated statement of comprehensive income, of the consolidated interim financial performance for the three months and year ended on that date; |
(c) | in the case of the consolidated statement of changes in equity, of the consolidated changes in equity for the year ended on that date; and |
(d) | in the case of the consolidated statement of cash flows, of the consolidated cash flows for the year ended on that date. |
for B S R & Co. LLP
Chartered Accountants
Firm’s Registration Number: 101248W/W-100022
Supreet Sachdev
Partner
Membership Number: 205385
Bangalore
April 15, 2016
Infosys Limited and subsidiaries
(In crore except equity share data)
Consolidated Balance Sheets as of | Note | March 31, 2016 | March 31, 2015 |
ASSETS | |||
Current assets | |||
Cash and cash equivalents | 2.1 | 32,697 | 30,367 |
Available-for-sale financial assets | 2.2 | 75 | 874 |
Trade receivables | 11,330 | 9,713 | |
Unbilled revenue | 3,029 | 2,845 | |
Prepayments and other current assets | 2.4 | 4,448 | 3,296 |
Derivative financial instruments | 2.7 | 116 | 101 |
Total current assets | 51,695 | 47,196 | |
Non-current assets | |||
Property, plant and equipment | 2.5 | 10,530 | 9,125 |
Goodwill | 2.6 | 3,764 | 3,091 |
Intangible assets | 2.6 | 985 | 638 |
Investment in associate | 2.18 | 103 | 93 |
Available-for-sale financial assets | 2.2 | 1,811 | 1,345 |
Deferred income tax assets | 2.16 | 536 | 537 |
Income tax assets | 2.16 | 5,230 | 4,089 |
Other non-current assets | 2.4 | 735 | 238 |
Total non-current assets | 23,694 | 19,156 | |
Total assets | 75,389 | 66,352 | |
LIABILITIES AND EQUITY | |||
Current liabilities | |||
Trade payables | 386 | 140 | |
Derivative financial instruments | 2.7 | 5 | 3 |
Current income tax liabilities | 2.16 | 3,410 | 2,818 |
Client deposits | 28 | 27 | |
Unearned revenue | 1,332 | 1,052 | |
Employee benefit obligations | 1,341 | 1,069 | |
Provisions | 2.8 | 512 | 478 |
Other current liabilities | 2.9 | 6,225 | 5,796 |
Total current liabilities | 13,239 | 11,383 | |
Non-current liabilities | |||
Deferred income tax liabilities | 2.16 | 256 | 160 |
Other non-current liabilities | 2.9 | 115 | 46 |
Total liabilities | 13,610 | 11,589 | |
Equity | |||
Share capital- 5 par value 240,00,00,000 (120,00,00,000) equity shares authorized, issued and outstanding 228,56,21,088 (114,28,05,132) net of 1,13,23,576 (56,67,200) treasury shares as of March 31, 2016 (March 31, 2015), respectively | 1,144 | 572 | |
Share premium | 2,241 | 2,806 | |
Retained earnings | 57,655 | 50,978 | |
Cash flow hedge reserve | – | – | |
Other reserves | – | – | |
Other components of equity | 739 | 407 | |
Total equity attributable to equity holders of the Company | 61,779 | 54,763 | |
Non-controlling interests | – | – | |
Total equity | 61,779 | 54,763 | |
Total liabilities and equity | 75,389 | 66,352 |
The accompanying notes form an integral part of the consolidated interim financial statements
As per our report of even date attached
for B S R & Co. LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants | |
Firm's Registration Number:101248W/W-100022 |
Supreet Sachdev Partner Membership No. 205385 |
R.Seshasayee Chairman |
Dr. Vishal Sikka Chief Executive Officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bangalore April 15, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer and Executive Vice President |
A.G.S Manikantha Company Secretary |
Infosys Limited and subsidiaries
(In crore except equity share and per equity share data)
Consolidated Statements of Comprehensive Income | Note | Three months ended March 31, | Year ended March 31, | ||
2016 | 2015 | 2016 | 2015 | ||
Revenues | 16,550 | 13,411 | 62,441 | 53,319 | |
Cost of sales | 2.10 | 10,262 | 8,174 | 39,098 | 32,883 |
Gross profit | 6,288 | 5,237 | 23,343 | 20,436 | |
Operating expenses: | |||||
Selling and marketing expenses | 2.10 | 909 | 736 | 3,431 | 2,941 |
Administrative expenses | 2.10 | 1,159 | 1,052 | 4,292 | 3,663 |
Total operating expenses | 2,068 | 1,788 | 7,723 | 6,604 | |
Operating profit | 4,220 | 3,449 | 15,620 | 13,832 | |
Other income, net | 2.13 | 772 | 881 | 3,125 | 3,427 |
Share in associate's profit / (loss) | (1) | (1) | (3) | (1) | |
Profit before income taxes | 4,991 | 4,329 | 18,742 | 17,258 | |
Income tax expense | 2.16 | 1,394 | 1,232 | 5,251 | 4,929 |
Net profit | 3,597 | 3,097 | 13,491 | 12,329 | |
Other comprehensive income | |||||
Items that will not be reclassified to profit or loss | |||||
Remeasurement of the net defined benefit liability/asset | 2.11 & 2.16 | (3) | (12) | (12) | (47) |
(3) | (12) | (12) | (47) | ||
Items that may be reclassified subsequently to profit or loss | |||||
Fair value changes on available-for-sale financial asset | 2.2 & 2.16 | 19 | (22) | 41 | 79 |
Exchange differences on translation of foreign operations | 96 | (89) | 303 | (195) | |
Fair value changes on cash flow hedges | – | – | – | – | |
115 | (111) | 344 | (116) | ||
Total other comprehensive income, net of tax | 112 | (123) | 332 | (163) | |
Total comprehensive income | 3,709 | 2,974 | 13,823 | 12,166 | |
Profit attributable to: | |||||
Owners of the company | 3,597 | 3,097 | 13,491 | 12,329 | |
Non-controlling interests | – | – | – | – | |
3,597 | 3,097 | 13,491 | 12,329 | ||
Total comprehensive income attributable to: | |||||
Owners of the company | 3,709 | 2,974 | 13,823 | 12,166 | |
Non-controlling interests | – | – | – | – | |
3,709 | 2,974 | 13,823 | 12,166 | ||
Earnings per equity share | |||||
Basic () | 15.74 | 13.55 | 59.03 | 53.94 | |
Diluted () | 15.74 | 13.55 | 59.02 | 53.94 | |
Weighted average equity shares used in computing earnings per equity share | 2.17 | ||||
Basic | 228,56,20,957 | 228,56,10,264 | 228,56,16,160 | 228,56,10,264 | |
Diluted | 228,57,50,316 | 228,56,67,252 | 228,57,18,894 | 228,56,42,940 |
The accompanying notes form an integral part of the consolidated interim financial statements
As per our report of even date attached
for B S R & Co. LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants | |
Firm's Registration Number:101248W/W-100022 |
Supreet Sachdev Partner Membership No. 205385 |
R.Seshasayee Chairman |
Dr. Vishal Sikka Chief Executive Officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bangalore April 15, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer and Executive Vice President |
A.G.S Manikantha Company Secretary |
Infosys Limited and subsidiaries
Consolidated Statements of Changes in Equity
(In crore except equity share data)
Shares(*) | Share capital | Share premium | Retained earnings | Other reserves | Other components of equity | Cash Flow Hedge Reserve | Total equity attributable to equity holders of the Company | |
Balance as of April 1, 2014 |
57,14,02,566 | 286 | 3,090 | 43,584 | – | 570 | – | 47,530 |
Changes in equity for the year ended March 31, 2015 | ||||||||
Increase in share capital on account of bonus issue# (refer to note 2.12) | 57,14,02,566 | 286 | – | – | – | – | – | 286 |
Amounts utilized for bonus issue (refer note 2.12)# | – | – | (286) | – | – | – | – | (286) |
Employee stock compensation expense (refer to note 2.15) | – | – | 2 | – | – | – | – | 2 |
Remeasurement of the net defined benefit liability/asset, net of tax effect ( refer note 2.11 and 2.16) | – | – | – | – | – | (47) | – | (47) |
Dividends (including corporate dividend tax) | – | – | – | (4,935) | – | – | – | (4,935) |
Fair value changes on available-for-sale financial assets, net of tax effect (refer note 2.2 and 2.16) | – | – | – | – | – | 79 | – | 79 |
Net profit | – | – | – | 12,329 | – | – | – | 12,329 |
Exchange differences on translation of foreign operations | – | – | – | – | – | (195) | – | (195) |
Balance as of March 31, 2015 |
114,28,05,132 | 572 | 2,806 | 50,978 | – | 407 | – | 54,763 |
Changes in equity for the year ended March 31, 2016 | ||||||||
Increase in share capital on account of bonus issue# (refer to note 2.12) | 114,28,05,132 | 572 | – | – | – | – | – | 572 |
Amounts utilized for bonus issue (refer note 2.12)# | – | – | (572) | – | – | – | – | (572) |
Shares issued on exercise of employee stock options (Refer note 2.15) | 10,824 | – | – | – | – | – | – | – |
Transferred to other reserves (refer note 2.12) | – | – | – | (591) | 591 | – | – | – |
Transferred from other reserves (refer note 2.12) | – | – | – | 591 | (591) | – | – | – |
Employee stock compensation expense (refer to note 2.15) | – | – | 7 | – | – | – | – | 7 |
Remeasurement of the net defined benefit liability/asset, net of tax effect (refer note 2.11 and 2.16) | – | – | – | – | – | (12) | – | (12) |
Dividends (including corporate dividend tax) | – | – | – | (6,814) | – | – | – | (6,814) |
Fair value changes on available-for-sale financial assets, net of tax effect (refer note 2.2 and 2.16) | – | – | – | – | – | 41 | – | 41 |
Fair value changes on derivatives designated as cash flow hedge | – | – | – | – | – | – | – | – |
Net profit | – | – | – | 13,491 | – | – | – | 13,491 |
Exchange differences on translation of foreign operations | – | – | – | – | – | 303 | – | 303 |
Balance as of March 31, 2016 | 228,56,21,088 | 1,144 | 2,241 | 57,655 | – | 739 | – | 61,779 |
The accompanying notes form an integral part of the consolidated interim financial statements
# | net of treasury shares |
* | excludes treasury shares of 1,13,23,576 as of March 31, 2016, 56,67,200 as of March 31, 2015 and 28,33,600 as of April 1, 2014, held by consolidated trust. |
As per our report of even date attached
for B S R & Co. LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants | |
Firm's Registration Number:101248W/W-100022 |
Supreet Sachdev Partner Membership No. 205385 |
R.Seshasayee Chairman |
Dr. Vishal Sikka Chief Executive Officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bangalore April 15, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer and Executive Vice President |
A.G.S Manikantha Company Secretary |
Infosys Limited and subsidiaries
(In crore)
Consolidated Statements of Cash Flows | Note | Year ended March 31, | |
2016 | 2015 | ||
Operating activities: | |||
Net profit | 13,491 | 12,329 | |
Adjustments to reconcile net profit to net cash provided by operating activities: | |||
Depreciation and amortization | 2.5 and 2.6 | 1,459 | 1,069 |
Income tax expense | 2.16 | 5,251 | 4,929 |
Income on available-for-sale financial assets and certificates of deposits | (176) | (292) | |
Effect of exchange rate changes on assets and liabilities | 71 | 97 | |
Deferred purchase price | 149 | 252 | |
Provision for doubtful account receivables | (52) | 171 | |
Other adjustments | 169 | 79 | |
Changes in working capital | |||
Trade receivables | (1,479) | (1,475) | |
Prepayments and other assets | (1,442) | (495) | |
Unbilled revenue | (175) | (34) | |
Trade payables | 242 | (17) | |
Client deposits | 1 | (13) | |
Unearned revenue | 280 | 272 | |
Other liabilities and provisions | 319 | 631 | |
Cash generated from operations | 18,108 | 17,503 | |
Income taxes paid | 2.16 | (5,865) | (6,751) |
Net cash provided by operating activities | 12,243 | 10,752 | |
Investing activities: | |||
Expenditure on property, plant and equipment including intangible assets net of sale proceeds, including changes in retention money and capital creditors | 2.5 and 2.9 | (2,723) | (2,247) |
Loans to employees | (75) | (8) | |
Deposits placed with corporation | (142) | (135) | |
Income on available-for-sale financial assets and certificates of deposit | 168 | 327 | |
Investment in associate | – | (94) | |
Payment for acquisition of business, net of cash acquired | 2.3 | (747) | (1,282) |
Investment in preference securities | (82) | – | |
Investment in other available-for-sale financial assets | (22) | – | |
Investment in quoted debt securities | (302) | (1) | |
Redemption of certificates of deposit | – | 830 | |
Investment in liquid mutual fund units | (24,171) | (23,892) | |
Redemption of liquid mutual fund units | 24,947 | 25,096 | |
Investment in fixed maturity plan securities | – | (30) | |
Redemption of fixed maturity plan securities | 33 | 157 | |
Net cash used in investing activities | (3,116) | (1,279) | |
Financing activities: | |||
Payment of dividends (including corporate dividend tax) | (6,813) | (4,935) | |
Net cash used in financing activities | (6,813) | (4,935) | |
Effect of exchange rate changes on cash and cash equivalents | 16 | (121) | |
Net decrease in cash and cash equivalents | 2,314 | 4,538 | |
Cash and cash equivalents at the beginning | 2.1 | 30,367 | 25,950 |
Cash and cash equivalents at the end | 2.1 | 32,697 | 30,367 |
Supplementary information: | |||
Restricted cash balance | 2.1 | 492 | 364 |
The accompanying notes form an integral part of the consolidated interim financial statements
for B S R & Co. LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants | |
Firm's Registration Number:101248W/W-100022 |
Supreet Sachdev Partner Membership No. 205385 |
R.Seshasayee Chairman |
Dr. Vishal Sikka Chief Executive Officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bangalore April 15, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer and Executive Vice President |
A.G.S Manikantha Company Secretary |
Notes to the Consolidated Interim Financial Statements
1. Company Overview and Significant Accounting Policies
1.1 Company overview
Infosys is a global leader in consulting, technology, outsourcing and next-generation services. Along with its subsidiaries, Infosys provides Business IT services (comprising application development and maintenance, independent validation, infrastructure management, engineering services comprising product engineering and life cycle solutions and business process management); Consulting and systems integration services (comprising consulting, enterprise solutions, systems integration and advanced technologies); Products, business platforms and solutions to accelerate intellectual property-led innovation including Finacle, our banking solution; and offerings in the areas of Analytics, Cloud, and Digital Transformation.
Infosys together with its subsidiaries and controlled trusts is herein after referred to as the "Group".
The company is a public limited company incorporated and domiciled in India and has its registered office at Bangalore, Karnataka, India. The company has its primary listings on the BSE Limited and National Stock Exchange in India. The company’s American Depositary Shares representing equity shares are also listed on the New York Stock Exchange (NYSE), Euronext London and Euronext Paris.
The Group's consolidated financial statements are authorized for issue by the company's Board of Directors on April 15, 2016.
1.2 Basis of preparation of financial statements
These consolidated financial statements have been prepared in compliance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS), under the historical cost convention on the accrual basis except for certain financial instruments and prepaid gratuity benefits which have been measured at fair values. Accounting policies have been applied consistently to all periods presented in these consolidated financial statements.
As the quarter and year figures are taken from the source and rounded to the nearest digits, the quarter figures in this statement added up to the figures reported for the previous quarters might not always add up to the year figures reported in this statement.
1.3 Basis of consolidation
Infosys consolidates entities which it owns or controls. The consolidated financial statements comprise the financial statements of the company, its controlled trusts and its subsidiaries as disclosed in Note 2.18. Control exists when the parent has power over the entity, is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns by using its power over the entity. Power is demonstrated through existing rights that give the ability to direct relevant activities, those which significantly affect the entity's returns. Subsidiaries are consolidated from the date control commences until the date control ceases.
The financial statements of the Group companies are consolidated on a line-by-line basis and intra-group balances and transactions including unrealized gain / loss from such transactions are eliminated upon consolidation. These financial statements are prepared by applying uniform accounting policies in use at the Group. Non-controlling interests which represent part of the net profit or loss and net assets of subsidiaries that are not, directly or indirectly, owned or controlled by the company, are excluded.
Associates are entities over which the group has significant influence but not control. Investments in associates are accounted for using the equity method of accounting. The investment is initially recognized at cost, and the carrying amount is increased or decreased to recognize the investor’s share of the profit or loss of the investee after the acquisition date. The group’s investment in associates includes goodwill identified on acquisition.
1.4 Use of estimates
The preparation of the financial statements in conformity with IFRS requires management to make estimates, judgments and assumptions. These estimates, judgments and assumptions affect the application of accounting policies and the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the period. Application of accounting policies that require critical accounting estimates involving complex and subjective judgments and the use of assumptions in these financial statements have been disclosed in Note 1.5. Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes in estimates are made as management becomes aware of changes in circumstances surrounding the estimates. Changes in estimates are reflected in the financial statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the consolidated financial statements.
1.5 Critical accounting estimates
a. Revenue recognition
The group uses the percentage-of-completion method in accounting for its fixed-price contracts. Use of the percentage-of-completion method requires the group to estimate the efforts or costs expended to date as a proportion of the total efforts or costs to be expended. Efforts or costs expended have 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 expected contract estimates at the reporting date.
b. Income taxes
The company's two major tax jurisdictions are India and the U.S., though the company also files tax returns in other overseas jurisdictions. Significant judgments are involved in determining the provision for income taxes, including amount expected to be paid/recovered for uncertain tax positions. Also refer to Note 2.16.
c. Business combinations and intangible assets
Business combinations are accounted for using IFRS 3 (Revised), Business Combinations. IFRS 3 requires the identifiable intangible assets and contingent consideration to be fair valued in order to ascertain the net fair value of identifiable assets, liabilities and contingent liabilities of the acquiree. Significant estimates are required to be made in determining the value of contingent consideration and intangible assets. These valuations are conducted by independent valuation experts.
d. Property, plant and equipment
Property, plant and equipment represent a significant proportion of the asset base of the Group. The charge in respect of periodic depreciation is derived after determining an estimate of an asset’s expected useful life and the expected residual value at the end of its life. The useful lives and residual values of Group's assets are determined by management at the time the asset is acquired and reviewed periodically, including at each financial year end. The lives are based on historical experience with similar assets as well as anticipation of future events, which may impact their life, such as changes in technology.
e. Impairment of Goodwill
Goodwill is tested for impairment on an annual basis and whenever there is an indication that the recoverable amount of a cash generating unit is less than its carrying amount based on a number of factors including operating results, business plans, future cash flows and economic conditions. The recoverable amount of cash generating units is determined based on higher of value-in-use and fair value less cost to sell. The goodwill impairment test is performed at the level of the cash-generating unit or groups of cash-generating units which are benefitting from the synergies of the acquisition and which represents the lowest level at which goodwill is monitored for internal management purposes.
Market related information and estimates are used to determine the recoverable amount. Key assumptions on which management has based its determination of recoverable amount include estimated long term growth rates, weighted average cost of capital and estimated operating margins. Cash flow projections take into account past experience and represent management’s best estimate about future developments.
1.6 Revenue recognition
The company derives revenues primarily from software development and related services and from the licensing of software products. Arrangements with customers for software related services are either on a fixed-price, fixed-timeframe or on a time-and-material basis.
Revenue on time-and-material contracts are 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, where there is no uncertainty as to measurement or collectability of consideration, is recognized as per the percentage-of-completion method. When there is uncertainty as to measurement or ultimate collectability, revenue recognition is postponed until such uncertainty is resolved. Efforts or costs expended have been used to measure progress towards completion as there is a direct relationship between input and productivity. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the current contract estimates. Costs and earnings in excess of billings are classified as unbilled revenue while billings in excess of costs and earnings are classified as unearned revenue. Deferred contract costs are amortized over the term of the contract. Maintenance revenue is recognized ratably over the term of the underlying maintenance arrangement.
In arrangements for software development and related services and maintenance services, the company has applied the guidance in IAS 18, Revenue, by applying the revenue recognition criteria for each separately identifiable component of a single transaction. The arrangements generally meet the criteria for considering software development and related services as separately identifiable components. For allocating the consideration, the company has measured the revenue in respect of each separable component of a transaction at its fair value, in accordance with principles given in IAS 18. The price that is regularly charged for an item when sold separately is the best evidence of its fair value. In cases where the company is unable to establish objective and reliable evidence of fair value for the software development and related services, the company has used a residual method to allocate the arrangement consideration. In these cases the balance of the consideration, after allocating the fair values of undelivered components of a transaction has been allocated to the delivered components for which specific fair values do not exist.
License fee revenues are recognized when the general revenue recognition criteria given in IAS 18 are met. Arrangements to deliver software products generally have three elements: license, implementation and Annual Technical Services (ATS). The company has applied the principles given in IAS 18 to account for revenues from these multiple element arrangements. Objective and reliable evidence of fair value has been established for ATS. Objective and reliable evidence of fair value is the price charged when the element is sold separately. When other services are provided in conjunction with the licensing arrangement and objective and reliable evidence of their fair values have been established, the revenue from such contracts are allocated to each component of the contract in a manner, whereby revenue is deferred for the undelivered services and the residual amounts are recognized as revenue for delivered elements. In the absence of objective and reliable evidence of fair value for implementation, the entire arrangement fee for license and implementation is recognized using the percentage-of-completion method 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.
Advances received for services and products are reported as client deposits until all conditions for revenue recognition are met.
The company accounts for volume discounts and pricing incentives to customers as a reduction of revenue based on the ratable allocation of the discounts/ incentives amount to each of the underlying revenue transaction that results in progress by the customer towards earning the discount/ incentive. Also, when the level of discount varies with increases in levels of revenue transactions, the company recognizes the liability based on its estimate of the customer's future purchases. If it is probable that the criteria for the discount will not be met, or if the amount thereof cannot be estimated reliably, then discount is not recognized until the payment is probable and the amount can be estimated reliably. The company recognizes changes in the estimated amount of obligations for discounts in the period in which the change occurs. The discounts are passed on to the customer either as direct payments or as a reduction of payments due from the customer.
The company presents revenues net of value-added taxes in its statement of comprehensive income.
1.7 Property, plant and equipment
Property, plant and equipment are stated at cost, less accumulated depreciation and impairment, if any. Costs directly attributable to acquisition are capitalized until the property, plant and equipment are ready for use, as intended by management. The group depreciates property, plant and equipment over their estimated useful lives using the straight-line method. The estimated useful lives of assets are as follows:
Building | 22–25 years |
Plant and machinery | 5 years |
Computer equipment | 3–5 years |
Furniture and fixtures | 5 years |
Vehicles | 5 years |
Depreciation methods, useful lives and residual values are reviewed periodically, including at each financial year end. (Refer note 2.5)
Advances paid towards the acquisition of property, plant and equipment 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’. Subsequent expenditures relating to property, plant and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to the Group and the cost of the item can be measured reliably. Repairs and maintenance costs are recognized in net profit in the statement of comprehensive income when incurred. The cost and related accumulated depreciation are eliminated from the financial statements upon sale or retirement of the asset and the resultant gains or losses are recognized in net profit in the statement of comprehensive income. Assets to be disposed off are reported at the lower of the carrying value or the fair value less cost to sell.
1.8 Business combinations
Business combinations have been accounted for using the acquisition method under the provisions of IFRS 3 (Revised), Business Combinations.
The cost of an acquisition is measured at the fair value of the assets transferred, equity instruments issued and liabilities incurred or assumed at the date of acquisition, which is the date on which control is transferred to the Group. The cost of acquisition also includes the fair value of any contingent consideration. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value on the date of acquisition.
Business combinations between entities under common control is outside the scope of IFRS 3 (Revised), Business Combinations and is accounted for at carrying value.
Transaction costs that the Group incurs in connection with a business combination such as finders’ fees, legal fees, due diligence fees, and other professional and consulting fees are expensed as incurred.
1.9 Goodwill
Goodwill represents the cost of business acquisition in excess of the Group's interest in the net fair value of identifiable assets, liabilities and contingent liabilities of the acquiree. When the net fair value of the identifiable assets, liabilities and contingent liabilities acquired exceeds the cost of business acquisition, a gain is recognized immediately in net profit in the statement of comprehensive income. Goodwill is measured at cost less accumulated impairment losses.
1.10 Intangible assets
Intangible assets are stated at cost less accumulated amortization and impairment. Intangible assets are amortized over their respective individual estimated useful lives on a straight-line basis, from the date that they are available for use. 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. Amortization methods and useful lives are reviewed periodically including at each financial year end.
Research costs are expensed as incurred. Software product development costs are expensed as incurred unless technical and commercial feasibility of the project is demonstrated, future economic benefits are probable, the company has an intention and ability to complete and use or sell the software and the costs can be measured reliably. The costs which can be capitalized include the cost of material, direct labour, overhead costs that are directly attributable to preparing the asset for its intended use. Research and development costs and software development costs incurred under contractual arrangements with customers are accounted as cost of sales.
1.11 Financial instruments
Financial instruments of the Group are classified in the following categories: non-derivative financial instruments comprising of loans and receivables, available-for-sale financial assets and trade and other payables; derivative financial instruments, share capital and treasury shares. The classification of financial instruments depends on the purpose for which those were acquired. Management determines the classification of its financial instruments at initial recognition. Regular way purchase and sale of financial assets are accounted for at trade date.
a. Non-derivative financial instruments
(i) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are presented as current assets, except for those maturing later than 12 months after the balance sheet date which are presented as non-current assets. Loans and receivables are measured initially at fair value plus transaction costs and subsequently carried at amortized cost using the effective interest method, less any impairment loss or provisions for doubtful accounts. Loans and receivables are represented by trade receivables, net of allowances for impairment, unbilled revenue, cash and cash equivalents, prepayments, certificates of deposit, and other assets. Cash and cash equivalents comprise cash and bank deposits and deposits with corporations. The company considers all highly liquid investments with a remaining maturity at the date of purchase of three months or less and that are readily convertible to known amounts of cash to be cash equivalents. Certificates of deposit is a negotiable money market instrument for funds deposited at a bank or other eligible financial institution for a specified time period. For these financial instruments, the carrying amounts approximate fair value due to the short maturity of these instruments. Loans and receivables are reclassified to available-for-sale financial assets when the financial asset becomes quoted in an active market.
(ii) Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated in this category or are not classified in any of the other categories. Available-for-sale financial assets are recognized initially at fair value plus transactions costs. Subsequent to initial recognition these are measured at fair value and changes therein, other than impairment losses and foreign exchange gains and losses on available-for-sale monetary items are recognized directly in other comprehensive income. When an investment is derecognized, the cumulative gain or loss in other comprehensive income is transferred to net profit in the statement of comprehensive income. These are presented as current assets unless management intends to dispose off the assets after 12 months from the balance sheet date.
(iii) Trade and other payables
Trade and other payables are initially recognized at fair value, and subsequently carried at amortized cost using the effective interest method. For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
b. Derivative financial instruments
The group holds derivative financial instruments such as foreign exchange forward and option contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The counterparty for these contracts is generally a bank or a financial institution.
(i) Financial assets or financial liabilities, at fair value through profit or loss.
This category has derivative financial assets or liabilities which are not designated as hedges.
Although the group believes that these derivatives constitute hedges from an economic perspective, they may not qualify for hedge accounting under IAS 39, Financial Instruments: Recognition and Measurement. Any derivative that is either not designated a hedge, or is so designated but is ineffective as per IAS 39, is categorized as a financial asset or financial liability, at fair value through profit or loss.
Derivatives not designated as hedges are recognized initially at fair value and attributable transaction costs are recognized in net profit in the statement of comprehensive income when incurred. Subsequent to initial recognition, these derivatives are measured at fair value through profit or loss and the resulting exchange gains or losses are included in other income. Assets/ liabilities in this category are presented as current assets/current liabilities if they are either held for trading or are expected to be realized within 12 months after the balance sheet date.
(ii) Cash flow hedge
The group designates certain foreign exchange forward and options contracts as cash flow hedges to mitigate the risk of foreign exchange exposure on highly probable forecast cash transactions.
When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income and accumulated in the cash flow hedging reserve. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in the net profit in the statement of comprehensive income. If the hedging instrument no longer meets the criteria for hedge accounting, then hedge accounting is discontinued prospectively. If the hedging instrument expires or is sold, terminated or exercised, the cumulative gain or loss on the hedging instrument recognized in cash flow hedging reserve till the period the hedge was effective remains in cash flow hedging reserve until the forecasted transaction occurs. The cumulative gain or loss previously recognized in the cash flow hedging reserve is transferred to the net profit in the statement of comprehensive income upon the occurrence of the related forecasted transaction. If the forecasted transaction is no longer expected to occur, then the amount accumulated in cash flow hedging reserve is reclassified to net profit in the statement of comprehensive income.
c. Share capital and treasury shares
Ordinary Shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares and share options are recognized as a deduction from equity, net of any tax effects.
Treasury Shares
When any entity within the Group purchases the company's ordinary shares, the consideration paid including any directly attributable incremental cost is presented as a deduction from total equity, until they are cancelled, sold or reissued. When treasury shares are sold or reissued subsequently, the amount received is recognized as an increase in equity, and the resulting surplus or deficit on the transaction is transferred to/ from share premium.
1.12 Impairment
a. Financial assets
The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset is considered impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.
(i) Loans and receivables
Impairment loss in respect of loans and receivables measured at amortized cost are calculated as the difference between their carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. Such impairment loss is recognized in net profit in the statement of comprehensive income.
(ii) Available-for-sale financial assets
Significant or prolonged decline in the fair value of the security below its cost and the disappearance of an active trading market for the security are objective evidence that the security is impaired. An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its fair value and is recognized in net profit in the statement of comprehensive income. The cumulative loss that was recognized in other comprehensive income is transferred to net profit in the statement of comprehensive income upon impairment.
b. Non-financial assets
(i) Goodwill
Goodwill is tested for impairment on an annual basis and whenever there is an indication that goodwill may be impaired, relying on a number of factors including operating results, business plans and future cash flows. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to the Group's cash generating units (CGU) or groups of CGU’s expected to benefit from the synergies arising from the business combination. A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or group of assets. Impairment occurs when the carrying amount of a CGU including the goodwill, exceeds the estimated recoverable amount of the CGU. The recoverable amount of a CGU is the higher of its fair value less cost to sell and its value-in-use. Value-in-use is the present value of future cash flows expected to be derived from the CGU.
Total impairment loss of a CGU is allocated first to reduce the carrying amount of goodwill allocated to the CGU and then to the other assets of the CGU pro-rata on the basis of the carrying amount of each asset in the CGU. An impairment loss on goodwill is recognized in net profit in the statement of comprehensive income and is not reversed in the subsequent period.
(ii) Intangible assets and property, plant and equipment
Intangible assets and property, plant and equipment are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the CGU to which the asset belongs.
If such assets are considered to be impaired, the impairment to be recognized in net profit in the statement of comprehensive income is measured by the amount by which the carrying value of the assets exceeds the estimated recoverable amount of the asset.
c. Reversal of impairment loss
An impairment loss for financial assets is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognized. An impairment loss in respect of goodwill is not reversed. In respect of other assets, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. The carrying amount of an asset other than goodwill is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortization or depreciation) had no impairment loss been recognized for the asset in prior years. A reversal of impairment loss for an asset other than goodwill and available- for-sale financial assets that are equity securities is recognized in net profit in the statement of comprehensive income. For available-for-sale financial assets that are equity securities, the reversal is recognized in other comprehensive income.
1.13 Fair value of financial instruments
In determining the fair value of its financial instruments, the group uses a variety of methods and assumptions that are based on market conditions and risks existing at each reporting date. The methods used to determine fair value include discounted cash flow analysis, available quoted market prices and dealer quotes. All methods of assessing fair value result in general approximation of value, and such value may never actually be realized.
For all other financial instruments the carrying amounts approximate fair value due to the short maturity of those instruments. The fair value of securities, which do not have an active market and where it is not practicable to determine the fair values with sufficient reliability, are carried at cost less impairment.
1.14 Provisions
A provision is recognized if, as a result of a past event, the Group has a present legal or constructive obligation that is reasonably estimable, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.
a. Post sales client support
The group provides its clients with a fixed-period post sales support for corrections of errors and 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 sales. The group 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.
b. Onerous contracts
Provisions for onerous contracts are recognized when the expected benefits to be derived by the Group from a contract are lower than the unavoidable costs of meeting the future obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established the Group recognizes any impairment loss on the assets associated with that contract.
1.15 Foreign currency
Functional currency
The functional currency of Infosys, Infosys BPO, controlled trusts, EdgeVerve and Skava is the Indian rupee. The functional currencies for Infosys Australia, Infosys China, Infosys Mexico, Infosys Sweden, Infosys Brasil, Infosys Public Services, Infosys Shanghai, Infosys Lodestone, Infosys Americas, Infosys Nova, Panaya, Kallidus and Noah are the respective local currencies. These financial statements are presented in Indian rupees (rounded off to crore; one crore equals ten million).
Transactions and translations
Foreign-currency denominated monetary assets and liabilities are translated into the relevant functional currency at exchange rates in effect at the balance sheet date. The gains or losses resulting from such translations are included in net profit in the statement of comprehensive income. Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at fair value are translated at the exchange rate prevalent at the date when the fair value was determined. Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at historical cost are translated at the exchange rate prevalent at the date of transaction.
Transaction gains or losses realized upon settlement of foreign currency transactions are included in determining net profit for the period in which the transaction is settled. Revenue, expense and cash-flow items denominated in foreign currencies are translated into the relevant functional currencies using the exchange rate in effect on the date of the transaction.
The translation of financial statements of the foreign subsidiaries to the functional currency of the company is performed for assets and liabilities using the exchange rate in effect at the balance sheet date and for revenue, expense and cash-flow items using the average exchange rate for the respective periods. The gains or losses resulting from such translation are included in currency translation reserves under other components of equity. When a subsidiary is disposed off, in full, the relevant amount is transferred to net profit in the statement of comprehensive income. However when a change in the parent's ownership does not result in loss of control of a subsidiary, such changes are recorded through equity.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the exchange rate in effect at the balance sheet date.
1.16 Earnings per equity share
Basic earnings per equity share is computed by dividing the net profit attributable to the equity holders of the company by the weighted average number of equity shares outstanding during the period. Diluted earnings per equity share is computed by dividing the net profit attributable to the equity holders of the company by the weighted average number of equity shares considered for deriving basic earnings per equity share and also the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares. The dilutive potential equity shares are adjusted for the proceeds receivable had the equity shares been actually issued at fair value (i.e. the average market value of the outstanding equity shares). Dilutive potential equity shares are deemed converted as of the beginning of the period, unless issued at a later date. Dilutive potential equity shares are determined independently for each period presented.
The number of equity shares and potentially dilutive equity shares are adjusted retrospectively for all periods presented for any share splits and bonus shares issues including for changes effected prior to the approval of the financial statements by the Board of Directors.
1.17 Income taxes
Income tax expense comprises current and deferred income tax. Income tax expense is recognized in net profit in the statement of comprehensive income except to the extent that it relates to items recognized directly in equity, in which case it is recognized in other comprehensive income. Current income tax for current and prior periods is recognized at the amount expected to be paid to or recovered from the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. Deferred income tax assets and liabilities are recognized for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements except when the deferred income tax arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of the transaction. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
Deferred income tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date and are 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 income tax assets and liabilities is recognized as income or expense in the period that includes the enactment or the substantive enactment date. A deferred income tax asset is recognized to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can be utilized. Deferred income taxes are not provided on the undistributed earnings of subsidiaries and branches where it is expected that the earnings of the subsidiary or branch will not be distributed in the foreseeable future. The group offsets current tax assets and current tax liabilities, where it has a legally enforceable right to set off the recognized amounts and where it intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously. Tax benefits of deductions earned on exercise of employee share options in excess of compensation charged to income are credited to share premium.
1.18 Employee benefits
1.18.1 Gratuity
The Group provides for gratuity, a defined benefit retirement plan ('the Gratuity Plan') covering eligible employees of Infosys and its Indian subsidiaries. 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 with the Group.
Liabilities with regard to the Gratuity Plan are determined by actuarial valuation, performed by an independent actuary, at each balance sheet date using the projected unit credit method. The company fully contributes all ascertained liabilities to the Infosys Limited Employees' Gratuity Fund Trust (the Trust). In case of Infosys BPO and EdgeVerve, contributions are made to the Infosys BPO's Employees' Gratuity Fund Trust and EdgeVerve Systems Limited Employees' Gratuity Fund Trust, respectively. Trustees administer contributions made to the Trusts and contributions are invested in a scheme with Life Insurance Corporation of India as permitted by law of India.
The Group recognizes the net obligation of a defined benefit plan in its balance sheet as an asset or liability. Gains and losses through re-measurements of the net defined benefit liability/(asset) are recognized in other comprehensive income. The actual return of the portfolio of plan assets, in excess of the yields computed by applying the discount rate used to measure the defined benefit obligation is recognized in other comprehensive income. The effect of any plan amendments are recognized in net profits in the statement of comprehensive income.
1.18.2 Superannuation
Certain employees of Infosys, Infosys BPO and EdgeVerve are participants in a defined contribution plan. The Group has no further obligations to the Plan beyond its monthly contributions which are periodically contributed to a trust fund, the corpus of which is invested with the Life Insurance Corporation of India.
1.18.3 Provident fund
Eligible employees of Infosys receive benefits from a provident fund, which is a defined benefit plan. Both the eligible 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 portion to the Infosys Limited Employees' Provident Fund Trust. The trust invests in specific designated instruments as permitted by Indian law. 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 make good the shortfall, if any, between the return from the investments of the Trust and the notified interest rate.
In respect of Indian subsidiaries, eligible employees receive benefits from a provident fund, which is a defined contribution plan. Both the eligible employee and the respective companies 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. The companies have no further obligation to the plan beyond its monthly contributions.
1.18.4 Compensated absences
The Group has a policy on compensated absences which are both accumulating and non-accumulating in nature. The expected cost of accumulating compensated absences is determined by actuarial valuation performed by an independent actuary at each balance sheet date using projected unit credit method on the additional amount expected to be paid/availed as a result of the unused entitlement that has accumulated at the balance sheet date. Expense on non-accumulating compensated absences is recognized in the period in which the absences occur.
1.19 Share-based compensation
The Group recognizes compensation expense relating to share-based payments in net profit using fair-value in accordance with IFRS 2, Share-Based Payment. The estimated fair value of awards is charged to income on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was in-substance, multiple awards with a corresponding increase to share premium.
1.20 Dividends
Final dividends on shares are recorded as a liability on the date of approval by the shareholders and interim dividends are recorded as a liability on the date of declaration by the company's Board of Directors.
1.21 Operating profit
Operating profit for the Group is computed considering the revenues, net of cost of sales, selling and marketing expenses and administrative expenses.
1.22 Other income
Other income is comprised primarily of interest income, dividend income and exchange gain/loss on forward and options contracts and on translation of other assets and liabilities. Interest income is recognized using the effective interest method. Dividend income is recognized when the right to receive payment is established.
1.23 Leases
Leases under which the group assumes substantially all the risks and rewards of ownership are classified as finance leases. When acquired, such assets are capitalized at fair value or present value of the minimum lease payments at the inception of the lease, whichever is lower. Lease payments under operating leases are recognized as an expense on a straight line basis in net profit in the statement of comprehensive income over the lease term.
1.24 Government grants
The Group recognizes government grants only when there is reasonable assurance that the conditions attached to them shall be complied with, and the grants will be received. Government grants related to assets are treated as deferred income and are recognized in net profit in the statement of comprehensive income on a systematic and rational basis over the useful life of the asset. Government grants related to revenue are recognized on a systematic basis in net profit in the statement of comprehensive income over the periods necessary to match them with the related costs which they are intended to compensate.
1.25 Recent accounting pronouncements
1.25.1 Standards issued but not yet effective
IFRS 9 Financial instruments: In July 2014, the International Accounting Standards Board issued the final version of IFRS 9, Financial Instruments. The standard reduces the complexity of the current rules on financial instruments as mandated in IAS 39. IFRS 9 has fewer classification and measurement categories as compared to IAS 39 and has eliminated the categories of held to maturity, available for sale and loans and receivables. Further it eliminates the rule-based requirement of segregating embedded derivatives and tainting rules pertaining to held to maturity investments. For an investment in an equity instrument which is not held for trading, IFRS 9 permits an irrevocable election, on initial recognition, on an individual share-by-share basis, to present all fair value changes from the investment in other comprehensive income. No amount recognized in other comprehensive income would ever be reclassified to profit or loss. It requires the entity, which chooses to measure a liability at fair value, to present the portion of the fair value change attributable to the entity’s own credit risk in the other comprehensive income.
IFRS 9 replaces the ‘incurred loss model’ in IAS 39 with an ‘expected credit loss’ model. The measurement uses a dual measurement approach, under which the loss allowance is measured as either 12 month expected credit losses or lifetime expected credit losses. The standard also introduces new presentation and disclosure requirements.
The effective date for adoption of IFRS 9 is annual periods beginning on or after January 1, 2018, though early adoption is permitted. The Group has elected to early adopt the standard effective April 1, 2016 and the impact on the consolidated financial statements is not material.
IFRS 15 Revenue from Contract with Customers: In May 2014, the International Accounting Standards Board (IASB) issued IFRS 15, Revenue from Contract with Customers. The core principle of the new standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Further the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts with customers. The standard permits the use of either the retrospective or cumulative effect transition method. The effective date for adoption of IFRS 15 is annual periods beginning on or after January 1, 2017, though early adoption is permitted. In September 2015, the IASB issued an amendment to IFRS 15, deferring the adoption of the standard to periods beginning on or after January 1, 2018 instead of January 1, 2017.
The Group is evaluating the effect of IFRS 15 on the consolidated financial statements including the transition method to be adopted and the related disclosures. The group continues to evaluate the effect of the standard on ongoing financial reporting.
IFRS 16 Leases : On January 13, 2016, the International Accounting Standards Board issued the final version of IFRS 16, Leases. IFRS 16 will replace the existing leases Standard, IAS 17 Leases, and related Interpretations. The Standard sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract i.e., the lessee and the lessor. IFRS 16 introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. Currently, operating lease expenses are charged to the statement of comprehensive income. The Standard also contains enhanced disclosure requirements for lessees. IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17.
The effective date for adoption of IFRS 16 is annual periods beginning on or after January 1, 2019, though early adoption is permitted for companies applying IFRS 15 Revenue from Contracts with Customers. The Group is yet to evaluate the requirements of IFRS 16 and the impact on the consolidated financial statements.
2. Notes to the consolidated interim financial statements
2.1 Cash and cash equivalents
Cash and cash equivalents consist of the following:
(In crore)
As of | ||
March 31, 2016 | March 31, 2015 | |
Cash and bank deposits | 27,420 | 26,195 |
Deposits with financial institution | 5,277 | 4,172 |
32,697 | 30,367 |
Cash and cash equivalents as of March 31, 2016 and March 31, 2015 include restricted cash and bank balances of 492 crore and 364 crore, respectively. The restrictions are primarily on account of cash and bank balances held by irrevocable trusts controlled by the Company, bank balances held as margin money deposits against guarantees and balances held in unpaid dividend bank accounts.
The deposits maintained by the Group with banks and financial institution comprise of time deposits, which can be withdrawn by the Group at any point without prior notice or penalty on the principal.
The table below provides details of cash and cash equivalents:
(In crore)
As of | ||
March 31, 2016 | March 31, 2015 | |
Current Accounts | ||
ANZ Bank, Taiwan | 13 | 4 |
Axis Bank account, India | 1 | – |
Axis Bank - Unpaid Dividend Account | 2 | – |
Banamex Bank, Mexico | 5 | 10 |
Banamex Bank, Mexico (U.S. Dollar account) | 3 | 1 |
Bank of America, Mexico | 21 | 26 |
Bank of America, USA | 681 | 716 |
Bank Zachodni WBK S.A, Poland | 3 | 4 |
Bank of Tokyo-Mitsubishi UFJ, Ltd., Japan | 1 | 1 |
Barclays Bank, UK | 19 | 10 |
Bank Leumi, Israel (US Dollar account) | 17 | 7 |
Bank Leumi, Israel | 10 | 15 |
Bank Leumi, Israel (Euro account) | – | 3 |
China Merchants Bank, China | 8 | 4 |
Citibank N.A, China | 65 | 20 |
Citibank N.A., China (U.S. Dollar account) | 72 | 24 |
Citibank N.A., Costa Rica | 2 | 5 |
Citibank N.A., Czech Republic | – | 6 |
Citibank N.A., Australia | 72 | 25 |
Citibank N.A., Brazil | 5 | 27 |
Citibank N.A., Dubai | 1 | 1 |
Citibank N.A., India | 1 | 7 |
Citibank N.A., Japan | 15 | 20 |
Citibank N.A., New Zealand | 6 | 6 |
Citibank N.A., Portugal | 2 | – |
Citibank N.A., Singapore | 3 | 2 |
Citibank N.A., South Africa | 5 | 3 |
CitiBank N.A., South Africa (Euro account) | 1 | – |
Citibank N.A., Philippines, (U.S. Dollar account) | 1 | 1 |
CitiBank N.A., USA | 60 | – |
CitiBank N.A., EEFC (U.S. Dollar account) | – | 2 |
Commerzbank, Germany | 19 | 19 |
Crédit Industriel et Commercial Bank, France | 4 | 1 |
Deutsche Bank, India | 8 | 5 |
Deutsche Bank, Philippines | 13 | 3 |
Deutsche Bank, Philippines (U.S. Dollar account) | 1 | 3 |
Deutsche Bank, Poland | 5 | 19 |
Deutsche Bank, Poland (Euro account) | – | 1 |
Deutsche Bank, EEFC (Australian Dollar account) | 2 | – |
Deutsche Bank, EEFC (Euro account) | 32 | 3 |
Deutsche Bank, EEFC (Swiss Franc account) | 5 | 5 |
Deutsche Bank, EEFC (U.S. Dollar account) | 96 | 8 |
Deutsche Bank, EEFC (United Kingdom Pound Sterling account) | 9 | 5 |
Deutsche Bank, Belgium | 59 | 13 |
Deutsche Bank, Malaysia | 9 | – |
Deutsche Bank, Czech Republic | 14 | 6 |
Deutsche Bank, Czech Republic (Euro account) | 1 | 2 |
Deutsche Bank, Czech Republic (U.S. Dollar account) | 28 | 20 |
Deutsche Bank, France | 10 | 2 |
Deutsche Bank, Germany | 17 | 8 |
Deutsche Bank, Netherlands | 6 | 2 |
Deutsche Bank, Russia | 2 | – |
Deutsche Bank, Russia (U.S. Dollar account) | 1 | – |
Deutsche Bank, Singapore | 4 | 5 |
Deutsche Bank, Spain | 1 | 1 |
Deutsche Bank, Switzerland | 1 | – |
Deutsche Bank, United Kingdom | 170 | 25 |
HDFC Bank-Unpaid dividend account | 1 | 1 |
HSBC Bank, Brazil | 5 | 3 |
HSBC Bank, Hong Kong | 1 | 44 |
ICICI Bank, India | 72 | 30 |
ICICI Bank, EEFC (U.S. Dollar account) | 10 | 14 |
ICICI Bank-Unpaid dividend account | 2 | 2 |
ING Bank, Belgium | 3 | – |
Nordbanken, Sweden | 15 | 3 |
Punjab National Bank, India | 4 | 7 |
Raiffeisen Bank, Czech Republic | 5 | – |
Raiffeisen Bank, Romania | 4 | – |
Royal Bank of Scotland, China | – | 45 |
Royal Bank of Scotland, China (U.S. Dollar account) | – | 47 |
Royal Bank of Canada, Canada | 78 | 16 |
Santander Bank, Argentina | – | 2 |
Santander Bank, Spain | – | 1 |
State Bank of India, India | 8 | 2 |
Silicon Valley Bank, USA | 5 | 66 |
Silicon Valley Bank, (Euro account) | 65 | 16 |
Silicon Valley Bank, (United Kingdom Pound Sterling account) | 19 | 5 |
Union Bank of Switzerland AG | 15 | 12 |
Union Bank of Switzerland AG, (Euro account) | 12 | 4 |
Union Bank of Switzerland AG, (Australian Dollar account) | 2 | – |
Union Bank of Switzerland AG, (U.S. Dollar account) | 28 | 2 |
Union Bank of Switzerland AG, (United Kingdom Pound Sterling account) | 4 | 1 |
Wells Fargo Bank N.A., USA | 23 | 38 |
Westpac, Australia | 6 | 6 |
1,999 | 1,473 | |
Deposit Accounts | ||
Allahabad Bank | – | 200 |
Andhra Bank | 948 | 171 |
Axis Bank | 1,340 | 1,495 |
Bank of Baroda | – | 2,394 |
Bank of India | 77 | 2,691 |
Canara Bank | 2,247 | 3,134 |
Central Bank of India | 1,538 | 1,383 |
Citibank | 128 | – |
Corporation Bank | 1,285 | 1,277 |
Deutsche Bank, Poland | 237 | 121 |
Development Bank of Singapore | – | 35 |
HDFC Bank Ltd. | 2,650 | 2,097 |
ICICI Bank | 4,199 | 3,166 |
IDBI Bank | 1,900 | 856 |
Indian Overseas Bank | 1,250 | 651 |
Indusind Bank | 250 | 75 |
ING Vysya Bank | – | 100 |
Jammu & Kashmir Bank | 25 | – |
Kotak Mahindra Bank Limited | 537 | 5 |
National Australia Bank Limited | 1 | 87 |
Oriental Bank of Commerce | 1,967 | 1,580 |
Punjab National Bank | 18 | 592 |
South Indian Bank | 23 | 27 |
State Bank of India | 2,367 | 57 |
Syndicate Bank | 1,266 | 407 |
Union Bank of India | 140 | 1,051 |
Vijaya Bank | 304 | 466 |
Yes Bank | 724 | 604 |
25,421 | 24,722 | |
Deposits with financial institution | ||
HDFC Limited | 5,277 | 4,172 |
5,277 | 4,172 | |
Total | 32,697 | 30,367 |
2.2 Available-for-sale financial assets
Primarily investments in mutual fund units, quoted debt securities, unquoted equity and preference securities are classified as available-for-sale financial assets.
Cost and fair value of the above investments are as follows:
(In crore)
As of | ||
March 31, 2016 | March 31, 2015 | |
Current | ||
Mutual fund units: | ||
Liquid mutual funds | ||
Cost and fair value | 68 | 842 |
Fixed maturity plan securities | ||
Cost | – | 30 |
Gross unrealized holding gain / (loss) | – | 2 |
Fair value | – | 32 |
Quoted debt securities: | ||
Cost | 7 | – |
Gross unrealized holding gain/ (loss) | – | – |
Fair value | 7 | – |
75 | 874 | |
Non-current | ||
Quoted debt securities: | ||
Cost | 1,657 | 1,352 |
Gross unrealized holding gain/ (loss) | 39 | (8) |
Fair value | 1,696 | 1,344 |
Unquoted equity and preference securities: | ||
Cost | 93 | 1 |
Gross unrealized holding gain/ (loss) | – | – |
Fair value | 93 | 1 |
Others: | ||
Cost | 22 | – |
Gross unrealized holding gain / (loss) | – | – |
Fair value | 22 | – |
1,811 | 1,345 | |
Total available-for-sale financial assets | 1,886 | 2,219 |
Mutual fund units:
Liquid mutual funds
The fair value of liquid mutual funds as of March 31, 2016 and March 31, 2015 is 68 crore and 842 crore, respectively. The fair value is based on quoted price.
Fixed maturity plan securities:
During the year ended March 31, 2016, the company redeemed fixed maturity plans securities of 30 crore. On redemption, the net unrealized gain of 1 crore, net of taxes of 1 crore, pertaining to these securities has been reclassified from other comprehensive income to profit or loss.
The fair value of fixed maturity plan securities as of March 31, 2015 is 32 crore. The fair value is based on quotes reflected in actual transactions in similar instruments as available on March 31, 2015. The net unrealized gain of less than 1 crore and 1crore, net of taxes of 1 crore each, respectively, has been recognized in other comprehensive income for the three months and year ended March 31, 2015. (Refer to note 2.16).
During the year ended March 31, 2015, the company redeemed fixed maturity plans securities of 113 crore. On redemption, the unrealised gain of 6 crore and 9 crore, net of taxes of 4 crore each, pertaining to these securities has been reclassified from other comprehensive income to profit or loss during the three months and year ended March 31, 2015, respectively.
Quoted debt securities:
The fair value of quoted debt securities as of March 31, 2016 and March 31, 2015 is 1,703 crore and 1,344 crore, respectively. The net unrealized gain of 19 crore and 42 crore, net of taxes of 2 crore and 5 crore, has been recognized in the other comprehensive income for the three months and year ended March 31, 2016, respectively. The net unrealized loss of 9 crore and unrealized gain of 87 crore, net of taxes of 1 crore and 11 crore, has been recognized in the other comprehensive income for the three months and year ended March 31, 2015, respectively (Refer to note 2.16). The fair value is based on quoted prices and market observable inputs.
2.3 Business combinations
Noah Consulting LLC
On November 16, 2015, Infosys has acquired 100% membership interest in Noah Consulting, LLC (Noah), a leading provider of advanced information management consulting services for the oil and gas industry. The business acquisition was conducted by entering into a share purchase agreement for cash consideration of $33 million (approximately 216 crore), contingent consideration of upto $5 million (approximately 33 crore on acquisition date) and an additional consideration of upto $32 million (approximately 212 crore on acquisition date), referred to as retention bonus, payable to the employees of Noah at each anniversary year following the acquisition date for the next three years, subject to their continuous employment with the group at each anniversary.
This acquisition combines Noah’s industry knowledge, information strategy planning, data governance and architecture capabilities with Infosys’ ability to provide technology and outsourcing services on a global scale to oil and gas clients. The excess of the purchase consideration paid over the fair value of assets acquired has been attributed to goodwill.
The purchase price has been allocated based on management’s estimates and independent appraisal of fair values as follows:
(in crore)
Component | Acquiree's carrying amount | Fair value adjustments |
Purchase price allocated |
Net assets(*) | 39 | – | 39 |
Intangible assets - technical know-how | – | 27 | 27 |
Intangible assets - trade name | – | 27 | 27 |
Intangible assets - customer contracts and relationships | – | 119 | 119 |
39 | 173 | 212 | |
Goodwill | 30 | ||
Total purchase price | 242 |
* Includes cash and cash equivalents acquired of 18 crore
Goodwill of 4 crore is tax deductible. The remaining goodwill is tax deductible over the tax life on payment of contingent consideration.
The gross amount of trade receivables acquired and its fair value is 29 crore and the amounts have been largely collected.
The acquisition date fair value of each major class of consideration as of the acquisition date is as follows:
(in crore)
Component | Consideration settled |
Cash paid | 216 |
Fair value of contingent consideration | 26 |
Total purchase price | 242 |
The fair value of contingent consideration is determined by discounting the estimated amount payable to the sellers of Noah on achievement of certain financial targets. At acquisition date, the key inputs used in determination of the fair value of contingent consideration are the discount rate of 32% and the probabilities of achievement of the financial targets. During three months ended March 31, 2016, based on an assessment of Noah achieving the targets for the year ending December 31, 2015 and December 31, 2016, the entire contingent consideration has been reversed in the statement of comprehensive income.
The retention bonus is treated as a post-acquisition employee remuneration expense as per IFRS 3R. For the period from the closing of the acquisition to March 31, 2016, a post-acquisition employee remuneration expense of 52 crore, has been recorded in the statement of comprehensive income.
The transaction costs of 11 crore related to the acquisition have been included under administrative expenses in the statement of comprehensive income for the year ended March 31, 2016.
Finacle and Edge Services
On April 24, 2015, the Board of Directors of Infosys has authorized the Company to execute a Business Transfer Agreement and related documents with EdgeVerve, a wholly owned subsidiary, to transfer the business of Finacle and Edge Services. Post the requisite approval from shareholders through postal ballot on June 4, 2015, a Business Transfer Agreement and other related documents were executed with EdgeVerve to transfer the business with effect from August 1, 2015. The company has undertaken an enterprise valuation by an independent valuer and accordingly the business were transferred for a consideration of 3,222 crore and 177 crore for Finacle and Edge Services, respectively.
The consideration was settled through issue of 85,00,00,000 equity shares amounting to 850 crore and 25,49,00,000 non-convertible redeemable debentures amounting to 2,549 crore in EdgeVerve, post the requisite approval from shareholders on December 11, 2015.
The transfer of assets and liabilities was accounted for at carrying values and did not have any impact on the consolidated financial statements.
Kallidus Inc. (d.b.a Skava)
On June 2, 2015, Infosys acquired 100% of the voting interests in Kallidus Inc., US (Kallidus), a leading provider of digital experience solutions, including mobile commerce and in-store shopping experiences to large retail clients and 100% of the voting interests of Skava Systems Private Limited, India, an affiliate of Kallidus. The business acquisition was conducted by entering into a share purchase agreement for cash consideration of $91 million (approximately 578 crore) and a contingent consideration of up to $20 million (approximately 128 crore on acquisition date).
Infosys expects to help its clients bring new digital experiences to their customers through IP-led technology offerings, new automation tools and skill and expertise in these new emerging areas. The excess of the purchase consideration paid over the fair value of assets acquired has been attributed to goodwill.
The purchase price has been allocated based on management’s estimates and independent appraisal of fair values as follows:
(in crore)
Component | Acquiree's carrying amount | Fair value adjustments |
Purchase price allocated |
Net assets(*) | 35 | – | 35 |
Intangible assets – technology | – | 130 | 130 |
Intangible assets – trade name | – | 14 | 14 |
Intangible assets - customer contracts and relationships | – | 175 | 175 |
Deferred tax liabilities on intangible assets | – | (128) | (128) |
35 | 191 | 226 | |
Goodwill | 452 | ||
Total purchase price | 678 |
* Includes cash and cash equivalents acquired of 29 crore
The goodwill is not tax deductible.
The gross amount of trade receivables acquired and its fair value is 57 crore and the amounts has been fully collected.
The acquisition date fair value of each major class of consideration as of the acquisition date is as follows:
(in crore)
Component | Consideration settled |
Cash paid | 578 |
Fair value of contingent consideration | 100 |
Total purchase price | 678 |
The undiscounted value of contingent consideration as of March 31, 2016 is 132 crore. The payment of contingent consideration to sellers of Kallidus is dependent upon the achievement of certain financial targets by Kallidus over a period of 3 years ending on December 31, 2017.
The fair value of contingent consideration is determined by discounting the estimated amount payable to the sellers of Kallidus on achievement of certain financial targets. At acquisition date, the key inputs used in determination of the fair value of contingent consideration are the discount rate of 14% and the probabilities of achievement of the financial targets.
The transaction costs of 12 crore related to the acquisition have been included under administrative expenses in the statement of comprehensive income for the year ended March 31, 2016.
Panaya
On March 5, 2015, Infosys acquired 100% of the voting interests in Panaya Inc. (Panaya), a Delaware Corporation in the United States. Panaya is a leading provider of automation technology for large scale enterprise and software management. The business acquisition was conducted by entering into a share purchase agreement for cash consideration of 1,398 crore.
Panaya’s CloudQuality™ suite positions Infosys to bring automation to several of its service lines via an agile SaaS model, and helps mitigate risk, reduce costs and shorten time to market for clients. This will help free Infosys from many repetitive tasks allowing it to focus on important, strategic challenges faced by clients. Panaya’s proven technology would help to simplify the costs and complexities faced by businesses in managing their enterprise application landscapes. The excess of the purchase consideration paid over the fair value of net assets acquired has been attributed to goodwill.
The purchase price has been allocated based on Management’s estimates and independent appraisal of fair values as follows:
(In crore)
Component | Acquiree's carrying amount | Fair value adjustments | Purchase price allocated |
Property, plant and equipment | 9 | – | 9 |
Net current assets * | 38 | – | 38 |
Intangible assets – technology | – | 243 | 243 |
Intangible assets – trade name | – | 21 | 21 |
Intangible assets - customer contracts and relationships | – | 82 | 82 |
Intangible assets – non compete agreements | – | 26 | 26 |
Deferred tax liabilities on intangible assets | – | (99) | (99) |
47 | 273 | 320 | |
Goodwill | 1,078 | ||
Total purchase price | 1,398 |
* Includes cash and cash equivalents acquired of 116 crore.
The goodwill is not tax deductible.
The gross amount of trade receivables acquired and its fair value is 58 crore and the amounts have been largely collected.
The fair value of total cash consideration as at the acquisition date was 1,398 crore.
The transaction costs of 22 crore related to the acquisition have been included under administrative expenses in the statement of comprehensive income for the year ended March 31, 2015.
EdgeVerve Systems Limited
EdgeVerve was created as a wholly owned subsidiary to focus on developing and selling products and platforms. On April 15, 2014, the Board of Directors of Infosys authorized the Company to execute a Business Transfer Agreement and related documents with EdgeVerve, subject to securing the requisite approval from shareholders in the Annual General Meeting. Subsequently, at the AGM held on June 14, 2014, the shareholders authorized the Board to enter into a Business Transfer Agreement and related documents with EdgeVerve, with effect from July 1, 2014 or such other date as may be decided by the Board of Directors. The company had undertaken an enterprise valuation by an independent valuer and accordingly the business was transferred for a consideration of 421 crore with effect from July 1, 2014 which was settled through the issue of fully paid up equity shares.
The transfer of assets and liabilities was accounted for at carrying values and did not have any impact on the consolidated financial statements.
Infosys Consulting Holding AG (formerly Lodestone Holding AG)
On October 22, 2012, Infosys acquired 100% of the voting interests in Lodestone Holding AG, a global management consultancy firm headquartered in Zurich. The business acquisition was conducted by entering into a share purchase agreement for a cash consideration of 1,187 crore and an additional consideration of upto 608 crore, which the company refers to as deferred purchase price, estimated on the date of acquisition, payable to the selling shareholders of Lodestone Holding AG who are continuously employed or otherwise engaged by the Group during the three year period following the date of the acquisition.
This transaction is treated as post acquisition employee remuneration expense as per IFRS 3R. During the three months ended December 31, 2015, the liability towards post-acquisition employee remuneration expense was settled.
For the three months and year ended March 31, 2016 and March 31, 2015, a post-acquisition employee remuneration expense of Nil and 73 crore, 149 crore and 252 crore respectively, is recorded in cost of sales in the statement of comprehensive income.
2.4 Prepayments and other assets
Prepayments and other assets consist of the following:
(In crore)
As of | ||
March 31, 2016 | March 31, 2015 | |
Current | ||
Rental deposits | 13 | 24 |
Security deposits | 7 | 4 |
Loans and advances to employees | 303 | 222 |
Prepaid expenses(1) | 201 | 98 |
Interest accrued and not due | 704 | 396 |
Withholding taxes(1) | 1,799 | 1,364 |
Advance payments to vendors for supply of goods(1) | 110 | 79 |
Deposit with corporations | 1,238 | 1,100 |
Deferred contract cost(1) | 48 | – |
Other assets | 25 | 9 |
4,448 | 3,296 | |
Non-current | ||
Loans and advances to employees | 25 | 31 |
Deposit with corporations | 62 | 58 |
Rental deposits | 146 | 47 |
Security deposits | 78 | 68 |
Deferred contract cost(1) | 333 | – |
Prepaid expenses(1) | 87 | 7 |
Prepaid gratuity(1) | 4 | 27 |
735 | 238 | |
5,183 | 3,534 | |
Financial assets in prepayments and other assets | 2,601 | 1,959 |
(1) Non financial assets
Withholding taxes primarily consist of input tax credits. Other assets primarily represent travel advances and other recoverables. Security deposits relate principally to leased telephone lines and electricity supplies.
Deposit with corporations represents amounts deposited to settle certain employee-related obligations as and when they arise during the normal course of business.
2.5 Property, plant and equipment
Following are the changes in the carrying value of property, plant and equipment for the three months ended March 31, 2016:
(In crore)
Land | Buildings | Plant and machinery | Computer equipment | Furniture and fixtures | Vehicles | Total | |
Gross carrying value as of January 1, 2016 | 1,607 | 6,241 | 2,477 | 3,865 | 1,324 | 33 | 15,547 |
Additions | 13 | 84 | 121 | 328 | 117 | 2 | 665 |
Deletions | – | – | (2) | (127) | – | (7) | (136) |
Translation difference | – | – | 2 | 6 | 3 | 1 | 12 |
Gross carrying value as of March 31, 2016 | 1,620 | 6,325 | 2,598 | 4,072 | 1,444 | 29 | 16,088 |
Accumulated depreciation as of January 1, 2016 | (20) | (2,144) | (1,520) | (2,577) | (939) | (19) | (7,219) |
Depreciation | (2) | (57) | (88) | (161) | (45) | (1) | (354) |
Accumulated depreciation on deletions | – | – | 2 | 126 | – | 3 | 131 |
Translation difference | – | – | (2) | (5) | (2) | – | (9) |
Accumulated depreciation as of March 31, 2016 | (22) | (2,201) | (1,608) | (2,617) | (986) | (17) | (7,451) |
Capital work-in progress as of March 31,2016 | 1,893 | ||||||
Carrying value as of March 31, 2016 | 1,598 | 4,124 | 990 | 1,455 | 458 | 12 | 10,530 |
Capital work-in progress as of January 1, 2016 | 1,711 | ||||||
Carrying value as of January 1, 2016 | 1,587 | 4,097 | 957 | 1,288 | 385 | 14 | 10,039 |
Following are the changes in the carrying value of property, plant and equipment for the three months ended March 31, 2015:
(In crore)
Land | Buildings | Plant and machinery | Computer equipment | Furniture and fixtures | Vehicles | Total | |
Gross carrying value as of January 1, 2015 | 1,550 | 5,556 | 1,979 | 3,159 | 1,104 | 34 | 13,382 |
Acquisitions through business Combination (Refer note 2.3) | – | – | – | 13 | 9 | – | 22 |
Additions | 12 | 325 | 131 | 222 | 75 | 1 | 766 |
Deletions | – | – | (3) | (36) | (1) | (1) | (41) |
Translation difference | – | – | (3) | (11) | (8) | – | (22) |
Gross carrying value as of March 31, 2015 | 1,562 | 5,881 | 2,104 | 3,347 | 1,179 | 34 | 14,107 |
Accumulated depreciation as of January 1, 2015 | (16) | (1,932) | (1,233) | (2,205) | (792) | (17) | (6,195) |
Acquisitions through business Combination (Refer note 2.3) | – | – | – | (9) | (4) | – | (13) |
Depreciation | – | (50) | (65) | (116) | (36) | (2) | (269) |
Accumulated depreciation on deletions | – | – | 3 | 35 | 1 | – | 39 |
Translation difference | – | – | 2 | 8 | 6 | – | 16 |
Accumulated depreciation as of March 31, 2015 | (16) | (1,982) | (1,293) | (2,287) | (825) | (19) | (6,422) |
Capital work-in progress as of March 31,2015 | 1,440 | ||||||
Carrying value as of March 31, 2015 | 1,546 | 3,899 | 811 | 1,060 | 354 | 15 | 9,125 |
Capital work-in progress as of January 1, 2015 | 1,545 | ||||||
Carrying value as of January 1, 2015 | 1,534 | 3,624 | 746 | 954 | 312 | 17 | 8,732 |
Following are the changes in the carrying value of property, plant and equipment for the year ended March 31, 2016:
(In crore)
Land | Buildings | Plant and machinery | Computer equipment | Furniture and fixtures | Vehicles | Total | |
Gross carrying value as of April 1, 2015 | 1,562 | 5,881 | 2,104 | 3,347 | 1,179 | 34 | 14,107 |
Acquisition through Business Combination (Refer note 2.3) | – | – | 1 | 2 | 1 | – | 4 |
Additions | 58 | 444 | 499 | 1,103 | 265 | 6 | 2,375 |
Deletions | – | – | (8) | (396) | (7) | (12) | (423) |
Translation difference | – | – | 2 | 16 | 6 | 1 | 25 |
Gross carrying value as of March 31, 2016 | 1,620 | 6,325 | 2,598 | 4,072 | 1,444 | 29 | 16,088 |
Accumulated depreciation as of April 1, 2015 | (16) | (1,982) | (1,293) | (2,287) | (825) | (19) | (6,422) |
Accumulated Depreciation on acquired assets (Refer note 2.3) | – | – | (1) | (1) | – | – | (2) |
Depreciation | (6) | (219) | (320) | (553) | (161) | (5) | (1,264) |
Accumulated depreciation on deletions | – | – | 7 | 237 | 4 | 7 | 255 |
Translation difference | – | – | (1) | (13) | (4) | – | (18) |
Accumulated depreciation as of March 31, 2016 | (22) | (2,201) | (1,608) | (2,617) | (986) | (17) | (7,451) |
Capital work-in progress as of March 31, 2016 | 1,893 | ||||||
Carrying value as of March 31, 2016 | 1,598 | 4,124 | 990 | 1,455 | 458 | 12 | 10,530 |
Capital work-in progress as of April 1, 2015 | 1,440 | ||||||
Carrying value as of April 1, 2015 | 1,546 | 3,899 | 811 | 1,060 | 354 | 15 | 9,125 |
Following are the changes in the carrying value of property, plant and equipment for the year ended March 31, 2015:
(In crore)
Land | Buildings | Plant and machinery | Computer equipment | Furniture and fixtures | Vehicles | Total | |
Gross carrying value as of April 1, 2014 | 1,140 | 5,026 | 1,702 | 2,659 | 1,017 | 36 | 11,580 |
Acquisitions through business combination (Refer note 2.3) | – | – | – | 13 | 9 | – | 22 |
Additions | 422 | 855 | 421 | 765 | 182 | 6 | 2,651 |
Deletions | – | – | (17) | (82) | (20) | (6) | (125) |
Translation difference | – | – | (2) | (8) | (9) | (2) | (21) |
Gross carrying value as of March 31, 2015 | 1,562 | 5,881 | 2,104 | 3,347 | 1,179 | 34 | 14,107 |
Accumulated depreciation as of April 1, 2014 | – | (1,794) | (1,048) | (1,965) | (700) | (18) | (5,525) |
Accumulated Depreciation on acquired assets (Refer note 2.3) | – | – | – | (9) | (4) | – | (13) |
Depreciation | (16) | (188) | (262) | (387) | (144) | (6) | (1,003) |
Accumulated depreciation on deletions | – | – | 15 | 70 | 18 | 4 | 107 |
Translation difference | – | – | 2 | 4 | 5 | 1 | 12 |
Accumulated depreciation as of March 31, 2015 | (16) | (1,982) | (1,293) | (2,287) | (825) | (19) | (6,422) |
Capital work-in progress as of March 31, 2015 | 1,440 | ||||||
Carrying value as of March 31, 2015 | 1,546 | 3,899 | 811 | 1,060 | 354 | 15 | 9,125 |
Capital work-in progress as of April 1, 2014 | 1,832 | ||||||
Carrying value as of April 1, 2014 | 1,140 | 3,232 | 654 | 694 | 317 | 18 | 7,887 |
During the three months ended June 30, 2014, the management based on internal and external technical evaluation had changed the useful life of certain assets primarily consisting of buildings and computers with effect from April 1, 2014. Accordingly, the useful lives of certain assets required a change from previous estimate.
The depreciation expense is included in cost of sales in the consolidated statement of comprehensive income.
Carrying value of land includes 628 crore and 617 crore as of March 31, 2016 and March 31, 2015, respectively, towards deposits paid under certain lease-cum-sale agreements to acquire land including agreements where the Company has an option to purchase or renew the properties on expiry of the lease period. The contractual commitments for capital expenditure were 1,486 crore and 1,574 crore, as of March 31, 2016 and March 31, 2015, respectively.
2.6 Goodwill and intangible assets
Following is a summary of changes in the carrying amount of goodwill:
(In crore)
As of | ||
March 31, 2016 | March 31, 2015 | |
Carrying value at the beginning | 3,091 | 2,157 |
Goodwill on Panaya acquisition | – | 1,078 |
Goodwill on Kallidus d.b.a Skava acquisition (Refer note 2.3) | 452 | – |
Goodwill on Noah acquisition (Refer note 2.3) | 30 | – |
Translation differences | 191 | (144) |
Carrying value at the end | 3,764 | 3,091 |
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to the cash generate units (CGU) or groups of CGU’s, which benefit from the synergies of the acquisition. The chief operating decision maker reviews the goodwill for any impairment at the operating segment level, which is represented through groups of CGU’s.
During the year ended March 31, 2016, the Company reorganized some of its segments to enhance executive customer relationships, improve focus of sales investments and increase management oversight. Consequent to these internal reorganizations there were changes effected in the segments based on the “management approach” as defined in IFRS 8, Operating Segments. (Refer Note 2.19). Accordingly the goodwill has been allocated to the new operating segments as at March 31, 2016.
(In crore)
Segment | As of |
March 31, 2016 | |
Financial services | 851 |
Manufacturing | 423 |
Retail, Consumer packaged goods and Logistics | 573 |
Life Sciences, Healthcare and Insurance | 656 |
Energy & Utilities, Communication and Services | 789 |
3,292 | |
Operating segments without significant goodwill | 472 |
Total | 3,764 |
The entire goodwill relating to Infosys BPO’s acquisition of McCamish has been allocated to the groups of CGU’s which are represented by the Life Sciences, Healthcare and Insurance segment.
The goodwill relating to Infosys Lodestone, Portland, Panaya and Kallidus d.b.a Skava has been allocated to the groups of CGU’s which are represented by the entity’s operating segment.
The entire goodwill relating to Noah acquisition has been allocated to the group of CGU's which is represented by the Energy & Utilities, Communication and Services segment.
The following table gives the break-up of allocation of goodwill to operating segments as at March 31, 2015:
(In crore)
Segment | As of |
March 31, 2015 | |
Financial services | 663 |
Insurance | 367 |
Manufacturing | 656 |
Energy, Communication and services | 318 |
Resources & utilities | 141 |
Retail, Consumer packaged goods and logistics | 473 |
Life Sciences and Healthcare | 193 |
Growth Markets | 280 |
Total | 3,091 |
The recoverable amount of a CGU is the higher of its fair value less cost to sell and its value-in-use. The fair value of a CGU is determined based on the market capitalization. The value-in-use is determined based on specific calculations. These calculations use pre-tax cash flow projections for a CGU / groups of CGU's over a period of five years. An average of the range of each assumption used is mentioned below. As of March 31, 2016, the estimated recoverable amount of the CGU exceeded its carrying amount. The recoverable amount was computed based on the fair value being higher than value-in-use and the carrying amount of the CGU was computed by allocating the net assets to operating segments for the purpose of impairment testing. The key assumptions used for the calculations are as follows:
(in %)
March 31, 2016 | March 31, 2015 | |
Long term growth rate | 8–10 | 8–10 |
Operating margins | 17–20 | 17–20 |
Discount rate | 14.2 | 13.9 |
The above discount rate is based on the Weighted Average Cost of Capital (WACC) of the Company. These estimates are likely to differ from future actual results of operations and cash flows.
Following are the changes in the carrying value of acquired intangible assets for the three months ended March 31, 2016:
(In crore)
Customer related | Software related | Sub-contracting rights related | Intellectual property rights related | Land use- rights related | Marketing Related | Others | Total | |
Gross carrying value as of January 1, 2016 | 764 | 411 | 21 | 1 | 72 | 92 | 63 | 1,424 |
Additions | – | 2 | – | – | – | – | – | 2 |
Deletion | – | – | – | – | – | – | – | – |
Translation differences | 11 | 1 | – | – | – | 1 | – | 13 |
Gross carrying value as of March 31, 2016 | 775 | 414 | 21 | 1 | 72 | 93 | 63 | 1,439 |
Accumulated amortization as of January 1, 2016 | (253) | (50) | (21) | (1) | (6) | (34) | (19) | (384) |
Amortization expense | (47) | (11) | – | – | – | (3) | (4) | (65) |
Deletion | – | – | – | – | – | – | – | – |
Translation differences | (3) | (1) | – | – | – | (1) | – | (5) |
Accumulated amortization as of March 31, 2016 | (303) | (62) | (21) | (1) | (6) | (38) | (23) | (454) |
Carrying value as of January 1, 2016 | 511 | 361 | – | – | 66 | 58 | 44 | 1,040 |
Carrying value as of March 31, 2016 | 472 | 352 | – | – | 66 | 55 | 40 | 985 |
Following are the changes in the carrying value of acquired intangible assets for the three months ended March 31, 2015:
(In crore)
Customer related | Software related | Sub-contracting rights related | Intellectual property rights related | Land use- rights related | Marketing related | Others | Total | |
Gross carrying value as of January 1, 2015 | 368 | 19 | 21 | 11 | 72 | 27 | 9 | 527 |
Additions through business combination (Refer note 2.3) | 82 | 243 | – | – | – | 22 | 26 | 373 |
Additions | – | – | – | – | – | – | – | – |
Deletions | – | – | – | – | – | – | – | – |
Translation differences | (2) | (1) | – | – | (1) | – | (1) | (5) |
Gross carrying value as of March 31, 2015 | 448 | 261 | 21 | 11 | 71 | 49 | 34 | 895 |
Accumulated amortization as of January 1, 2015 | (153) | (19) | (21) | (11) | (5) | (27) | (9) | (245) |
Additions through business combination (Refer note 2.3) | – | – | – | – | – | (1) | – | (1) |
Amortization expense | (11) | (3) | – | – | – | – | – | (14) |
Deletions | – | – | – | – | – | – | – | – |
Translation differences | 2 | 1 | – | – | – | – | – | 3 |
Accumulated amortization as of March 31, 2015 | (162) | (21) | (21) | (11) | (5) | (28) | (9) | (257) |
Carrying value as of January 1, 2015 | 215 | – | – | – | 67 | – | – | 282 |
Carrying value as of March 31, 2015 | 286 | 240 | – | – | 66 | 21 | 25 | 638 |
Following are the changes in the carrying value of acquired intangible assets for the year ended March 31, 2016:
(In crore)
Customer related | Software related | Sub-contracting rights related | Intellectual property rights related | Land use- rights related | Marketing Related | Others | Total | |
Gross carrying value as of April 1, 2015 | 448 | 261 | 21 | 11 | 71 | 49 | 34 | 895 |
Addition through business combination (Refer note 2.3) | 294 | 130 | – | – | – | 41 | 27 | 492 |
Additions | – | 2 | – | – | – | – | – | 2 |
Deletion | – | – | – | (10) | – | – | – | (10) |
Translation differences | 33 | 21 | – | – | 1 | 3 | 2 | 60 |
Gross carrying value as of March 31, 2016 | 775 | 414 | 21 | 1 | 72 | 93 | 63 | 1,439 |
Accumulated amortization as of April 1, 2015 | (162) | (21) | (21) | (11) | (5) | (28) | (9) | (257) |
Amortization expense | (132) | (40) | – | – | (1) | (9) | (13) | (195) |
Deletion | – | – | – | 10 | – | – | – | 10 |
Translation differences | (9) | (1) | – | – | – | (1) | (1) | (12) |
Accumulated amortization as of March 31, 2016 | (303) | (62) | (21) | (1) | (6) | (38) | (23) | (454) |
Carrying value as of April 1, 2015 | 286 | 240 | – | – | 66 | 21 | 25 | 638 |
Carrying value as of March 31, 2016 | 472 | 352 | – | – | 66 | 55 | 40 | 985 |
Estimated Useful Life (in years) | 3–10 | 8–10 | – | – | 50 | 3–10 | 3–5 | |
Estimated Remaining Useful Life (in years) | 1–7 | 7–9 | – | – | 45 | 2–9 | 2–5 |
Following are the changes in the carrying value of acquired intangible assets for the year ended March 31, 2015:
(In crore)
Customer related | Software related | Sub-contracting rights related | Intellectual property rights related | Land use- rights related | Marketing Related | Others | Total | |
Gross carrying value as of April 1, 2014 | 381 | 35 | 21 | 11 | 68 | 28 | 9 | 553 |
Additions through business combination (Refer note 2.3) | 82 | 243 | – | – | – | 22 | 26 | 373 |
Deletion | – | (17) | – | – | – | – | – | (17) |
Translation differences | (15) | – | – | – | 3 | (1) | (1) | (14) |
Gross carrying value as of March 31, 2015 | 448 | 261 | 21 | 11 | 71 | 49 | 34 | 895 |
Accumulated amortization as of April 1, 2014 | (125) | (26) | (19) | (11) | (3) | (20) | (7) | (211) |
Additions through business combination (Refer note 2.3) | – | – | – | – | – | (1) | – | (1) |
Amortization expense | (41) | (12) | (2) | – | (1) | (8) | (2) | (66) |
Deletion | – | 17 | – | – | – | – | – | 17 |
Translation differences | 4 | – | – | – | (1) | 1 | – | 4 |
Accumulated amortization as of March 31, 2015 | (162) | (21) | (21) | (11) | (5) | (28) | (9) | (257) |
Carrying value as of April 1, 2014 | 256 | 9 | 2 | – | 65 | 8 | 2 | 342 |
Carrying value as of March 31, 2015 | 286 | 240 | – | – | 66 | 21 | 25 | 638 |
Estimated Useful Life (in years) | 3–10 | 10 | 3 | – | 50 | 2–10 | 3 | |
Estimated Remaining Useful Life (in years) | 2–8 | 10 | – | – | 46 | 10 | 3 |
The amortization expense is included in cost of sales in the consolidated statement of comprehensive income.
Research and development expense recognized in net profit in the consolidated statement of comprehensive income, for the three months and year ended March 31, 2016 and March 31, 2015 was 202 crore and 164 crore and 712 crore and 673 crore, respectively.
2.7 Financial instruments
Financial instruments by category
The carrying value and fair value of financial instruments by categories as of March 31, 2016 were as follows:
(In crore)
Loans and receivables | Financial assets/ liabilities at fair value through profit and loss |
Derivatives- Hedging instruments | Available for sale | Trade and other payables | Total carrying value/fair value | |
Assets: | ||||||
Cash and cash equivalents (Refer Note 2.1) | 32,697 | – | – | – | – | 32,697 |
Available-for-sale financial assets (Refer Note 2.2) | – | – | – | 1,886 | – | 1,886 |
Trade receivables | 11,330 | – | – | – | – | 11,330 |
Unbilled revenue | 3,029 | – | – | – | – | 3,029 |
Prepayments and other assets (Refer Note 2.4) | 2,601 | – | – | – | – | 2,601 |
Derivative financial instruments | – | 116 | – | – | – | 116 |
Total | 49,657 | 116 | – | 1,886 | – | 51,659 |
Liabilities: | ||||||
Trade payables | – | – | – | – | 386 | 386 |
Derivative financial instruments | – | 5 | – | – | – | 5 |
Client deposits | – | – | – | – | 28 | 28 |
Employee benefit obligations | – | – | – | – | 1,341 | 1,341 |
Other liabilities including contingent consideration (Refer Note 2.9) | – | 117 | – | – | 4,880 | 4,997 |
Total | – | 122 | – | – | 6,635 | 6,757 |
The carrying value and fair value of financial instruments by categories as of March 31, 2015 were as follows:
(In crore)
Loans and receivables | Financial assets/ liabilities at fair value through profit and loss |
Available for sale | Trade and other payables | Total carrying value/fair value | |
Assets: | |||||
Cash and cash equivalents (Refer Note 2.1) | 30,367 | – | – | – | 30,367 |
Available-for-sale financial assets (Refer Note 2.2) | – | – | 2,219 | – | 2,219 |
Trade receivables | 9,713 | – | – | – | 9,713 |
Unbilled revenue | 2,845 | – | – | – | 2,845 |
Prepayments and other assets (Refer Note 2.4) | 1,959 | – | – | – | 1,959 |
Derivative financial instruments | – | 101 | – | – | 101 |
Total | 44,884 | 101 | 2,219 | – | 47,204 |
Liabilities: | |||||
Trade payables | – | – | – | 140 | 140 |
Derivative financial instruments | – | 3 | – | – | 3 |
Client deposits | – | – | – | 27 | 27 |
Employee benefit obligations | – | – | – | 1,069 | 1,069 |
Other liabilities (Refer Note 2.9) | – | – | – | 4,891 | 4,891 |
Total | – | 3 | – | 6,127 | 6,130 |
Fair value hierarchy
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
The following table presents fair value hierarchy of assets and liabilities measured at fair value on a recurring basis as of March 31, 2016:
(In crore)
As of March 31, 2016 | Fair value measurement at end of the reporting period/year using | |||
Level 1 | Level 2 | Level 3 | ||
Assets | ||||
Available- for- sale financial asset- Investments in liquid mutual fund units (Refer Note 2.2) | 68 | 68 | – | – |
Available- for- sale financial asset- Investments in quoted debt securities (Refer Note 2.2) | 1,703 | 376 | 1,327 | – |
Available- for- sale financial asset- Investments in equity and preference securities (Refer Note 2.2) | 93 | – | – | 93 |
Available- for- sale financial asset- others (Refer Note 2.2) | 22 | – | – | 22 |
Derivative financial instruments - gain on outstanding foreign exchange forward and option contracts | 116 | – | 116 | – |
Liabilities | ||||
Derivative financial instruments - loss on outstanding foreign exchange forward and option contracts | 5 | – | 5 | – |
Liability towards contingent consideration (Refer note 2.9)* | 117 | – | – | 117 |
During the three months and year ended March 31, 2016, quoted debt securities of 43 crore and 313 crore, respectively were transferred from Level 1 to Level 2 of fair value hierarchy, since these were valued based on market observable inputs.
* Discounted $20 million (approximately 132 crore) at 13.7%
A one percentage point change in the unobservable inputs used in fair valuation of the contingent consideration does not have a significant impact in its value.
The following table presents fair value hierarchy of assets and liabilities measured at fair value on a recurring basis as of March 31, 2015:
(In crore)
As of March 31, 2015
|
Fair value measurement at end of the reporting period/year using | |||
Level 1 | Level 2 | Level 3 | ||
Assets | ||||
Available- for- sale financial asset- Investments in liquid mutual fund units (Refer Note 2.2) | 842 | 842 | – | – |
Available- for- sale financial asset- Investments in fixed maturity plan securities (Refer Note 2.2) | 32 | – | 32 | – |
Available- for- sale financial asset- Investments in quoted debt securities (Refer Note 2.2) | 1,344 | 608 | 736 | – |
Available- for- sale financial asset- Investments in equity securities (Refer Note 2.2) | 1 | – | – | 1 |
Derivative financial instruments- gain on outstanding foreign exchange forward and option contracts | 101 | – | 101 | – |
Liabilities | ||||
Derivative financial instruments- loss on outstanding foreign exchange forward and option contracts | 3 | – | 3 | – |
Income from financial assets or liabilities that are not at fair value through profit or loss is as follows:
(In crore)
Three months ended March 31, | Year ended March 31, | |||
2016 | 2015 | 2016 | 2015 | |
Interest income on deposits and certificates of deposit (Refer Note 2.13) | 609 | 696 | 2,523 | 2,631 |
Income from available-for-sale financial assets (Refer Note 2.13) | 40 | 51 | 176 | 261 |
649 | 747 | 2,699 | 2,892 |
Derivative financial instruments
The Group holds derivative financial instruments such as foreign exchange forward and option contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The counterparty for these contracts is generally a bank or a financial institution. These derivative financial instruments are valued based on quoted prices for similar assets and liabilities in active markets or inputs that are directly or indirectly observable in the marketplace.
The following table gives details in respect of outstanding foreign exchange forward and option contracts:
As of | As of | |||
March 31, 2016 | March 31, 2015 | |||
In million | In crore | In million | In crore | |
Forward contracts | ||||
In U.S. dollars | 510 | 3,379 | 716 | 4,475 |
In Euro | 100 | 750 | 67 | 447 |
In United Kingdom Pound Sterling | 65 | 623 | 73 | 671 |
In Australian dollars | 55 | 281 | 98 | 466 |
In Canadian dollars | – | – | 12 | 59 |
In Singapore dollars | – | – | 25 | 114 |
In Swiss Franc | 25 | 173 | – | – |
– | – | |||
Option Contracts | ||||
In U.S. dollars | 125 | 828 | – | – |
Total forwards & options | 6,034 | 6,232 |
The Group recognized a net gain of 58 crore and 29 crore on derivative financial instruments during the three months and year ended March 31, 2016 as against a net gain on derivative financial instruments of 303 crore and 514 crore during the three months and year ended March 31, 2015, which are included in other income.
The foreign exchange forward and option contracts mature within twelve months. The table below analyzes the derivative financial instruments into relevant maturity groupings based on the remaining period as of the balance sheet date:
(In crore)
As of | ||
March 31, 2016 | March 31, 2015 | |
Not later than one month | 1,577 | 1,484 |
Later than one month and not later than three months | 3,420 | 3,781 |
Later than three months and not later than one year | 1,037 | 967 |
6,034 | 6,232 |
Financial risk management
Financial risk factors
The Group's activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Group's primary focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance. The primary market risk to the Group is foreign exchange risk. The Group uses derivative financial instruments to mitigate foreign exchange related risk exposures. The Group's exposure to credit risk is influenced mainly by the individual characteristic of each customer and the concentration of risk from the top few customers. The demographics of the customer including the default risk of the industry and country in which the customer operates also has an influence on credit risk assessment.
Market risk
The Group operates internationally and a major portion of the business is transacted in several currencies and consequently the Group is exposed to foreign exchange risk through its sales and services in the United States and elsewhere, and purchases from overseas suppliers in various foreign currencies. The Group holds derivative financial instruments such as foreign exchange forward and option contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The exchange rate between the rupee and foreign currencies has changed substantially in recent years and may fluctuate substantially in the future. Consequently, the results of the Group’s operations are adversely affected as the rupee appreciates/ depreciates against these currencies.
The following table gives details in respect of the outstanding foreign exchange forward and option contracts:
(In crore)
As of | ||
March 31, 2016 | March 31, 2015 | |
Aggregate amount of outstanding forward and option contracts | 6,034 | 6,232 |
Gain on outstanding forward and option contracts | 116 | 101 |
Loss on outstanding forward and option contracts | 5 | 3 |
The following table analyzes foreign currency risk from financial instruments as of March 31, 2016:
(In crore)
U.S. dollars | Euro | United Kingdom Pound Sterling | Australian dollars | Other currencies | Total | |
Cash and cash equivalents | 1,124 | 167 | 202 | 171 | 601 | 2,265 |
Trade receivables | 7,558 | 1,280 | 721 | 598 | 696 | 10,853 |
Unbilled revenue | 1,871 | 368 | 190 | 114 | 253 | 2,796 |
Other assets | 96 | 37 | 26 | 10 | 84 | 253 |
Trade payables | (126) | (75) | (73) | (4) | (76) | (354) |
Client deposits | (20) | (2) | – | – | (6) | (28) |
Accrued Expenses | (788) | (152) | (116) | (35) | (219) | (1,310) |
Employee benefit obligations | (573) | (80) | (49) | (166) | (125) | (993) |
Other liabilities | (1,049) | (135) | (32) | (42) | (208) | (1,466) |
Net assets / (liabilities) | 8,093 | 1,408 | 869 | 646 | 1,000 | 12,016 |
The following table analyzes foreign currency risk from financial instruments as of March 31, 2015:
(In crore)
U.S. dollars | Euro | United Kingdom Pound Sterling | Australian dollars | Other currencies | Total | |
Cash and cash equivalents | 994 | 59 | 41 | 119 | 413 | 1,626 |
Trade receivables | 6,719 | 1,040 | 540 | 469 | 600 | 9,368 |
Unbilled revenue | 1,714 | 330 | 126 | 100 | 250 | 2,520 |
Other assets | 81 | 28 | 19 | 9 | 61 | 198 |
Trade payables | (59) | (14) | – | (2) | (56) | (131) |
Client deposits | (20) | – | (1) | – | (6) | (27) |
Accrued expenses | (749) | (143) | (78) | (25) | (165) | (1,160) |
Employee benefit obligations | (436) | (59) | (37) | (130) | (105) | (767) |
Other liabilities | (761) | (116) | (23) | (22) | (637) | (1,559) |
Net assets / (liabilities) | 7,483 | 1,125 | 587 | 518 | 355 | 10,068 |
For the three months ended March 31, 2016 and March 31, 2015, every percentage point depreciation / appreciation in the exchange rate between the Indian rupee and U.S. dollar, has affected the Company's incremental operating margins by approximately 0.49% and 0.51%, respectively.
For the year ended March 31, 2016 and March 31, 2015, every percentage point depreciation / appreciation in the exchange rate between the Indian rupee and U.S. dollar, has affected the Company's incremental operating margins by approximately 0.50% and 0.52%, respectively.
Sensitivity analysis is computed based on the changes in the income and expenses in foreign currency upon conversion into functional currency, due to exchange rate fluctuations between the previous reporting period and the current reporting period.
Credit risk
Credit risk refers to the risk of default on its obligation by the counterparty resulting in a financial loss. The maximum exposure to the credit risk at the reporting date is primarily from trade receivables amounting to 11,330 crore and 9,713 crore as of March 31, 2016 and March 31, 2015, respectively and unbilled revenue amounting to 3,029 crore and 2,845 crore as of March 31, 2016 and March 31, 2015, respectively. Trade receivables and unbilled revenue are typically unsecured and are derived from revenue earned from customers primarily located in the United States. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Group grants credit terms in the normal course of business.
The following table gives details in respect of percentage of revenues generated from top customer and top five customers:
(In %)
Three months ended March 31, | Year ended March 31, | |||
2016 | 2015 | 2016 | 2015 | |
Revenue from top customer | 3.6 | 3.5 | 3.6 | 3.3 |
Revenue from top five customers | 13.7 | 13.9 | 13.8 | 13.5 |
Financial assets that are neither past due nor impaired
Cash and cash equivalents, available-for-sale financial assets and investment in certificates of deposit are neither past due nor impaired. Cash and cash equivalents include deposits with banks and financial institutions with high credit-ratings assigned by international and domestic credit-rating agencies. Available-for-sale financial assets include primarily investment in liquid mutual fund units, quoted debt securities and unquoted equity and preference securities. Certificates of deposit represent funds deposited at a bank or other eligible financial institution for a specified time period. Investment in quoted debt securities represents the investments made in debt securities issued by government and quasi government organizations. Of the total trade receivables 8,335 crore and 7,336 crore as of March 31, 2016 and March 31, 2015, respectively, were neither past due nor impaired.
There is no other class of financial assets that is not past due but impaired except for trade receivables of 15 crore and 23 crore as of March 31, 2016 and March 31, 2015, respectively.
Financial assets that are past due but not impaired
The Group’s credit period generally ranges from 30-60 days. The age analysis of the trade receivables have been considered from the due date. The age wise break up of trade receivables, net of allowances of 274 crore and 343 crore as of March 31, 2016 and March 31, 2015, respectively, that are past due, is given below:
(In crore)
Period (in days) | As of | |
March 31, 2016 | March 31, 2015 | |
Less than 30 | 2,080 | 1,641 |
31 – 60 | 471 | 345 |
61 – 90 | 304 | 89 |
More than 90 | 140 | 302 |
2,995 | 2,377 |
The reversal of provision for doubtful trade receivable for the three months and year ended March 31, 2016 was 27 crore and 52 crore, respectively. The provision for doubtful trade receivable for the three months and year ended March 31, 2015 was a 44 crore and 171 crore, respectively.
(In crore)
Three months ended March 31, | Year ended March 31, | |||
2016 | 2015 | 2016 | 2015 | |
Balance at the beginning | 326 | 338 | 366 | 214 |
Translation differences | 3 | (9) | 8 | (7) |
Provisions for doubtful accounts receivable (refer note 2.10) | (27) | 44 | (52) | 171 |
Trade receivables written off | (13) | (7) | (33) | (12) |
Balance at the end | 289 | 366 | 289 | 366 |
Liquidity risk
As of March 31, 2016, the Group had a working capital of 38,456 crore including cash and cash equivalents of 32,697 crore and current available-for-sale financial assets of 75 crore. As of March 31, 2015, the Group had a working capital of 35,813 crore including cash and cash equivalents of 30,367 crore and current available-for-sale financial assets of 874 crore.
As of March 31, 2016 and March 31, 2015, the outstanding employee benefit obligations were 1,341 crore and 1,069 crore, respectively, which have been substantially funded. Further, as of March 31, 2016 and March 31, 2015, the Group had no outstanding bank borrowings. Accordingly, no liquidity risk is perceived.
The table below provides details regarding the contractual maturities of significant financial liabilities as of March 31, 2016:
(In crore)
Particulars | Less than 1 year | 1-2 years | 2-4 years | 4-7 years | Total |
Trade payables | 386 | – | – | – | 386 |
Client deposits | 28 | – | – | – | 28 |
Other liabilities (excluding liability towards acquisition) (Refer Note 2.9) | 4,847 | 25 | 9 | – | 4,881 |
Liability towards acquisitions on an undiscounted basis (including contingent consideration) - Refer Note 2.9 | 86 | 46 | – | – | 132 |
The table below provides details regarding the contractual maturities of significant financial liabilities as of March 31, 2015:
(In crore)
Particulars | Less than 1 year | 1-2 years | 2-4 years | 4-7 years | Total |
Trade payables | 140 | – | – | – | 140 |
Client deposits | 27 | – | – | – | 27 |
Other liabilities ( excluding liabilities towards acquisition ) (Refer Note 2.9) | 4,891 | – | – | – | 4,891 |
Liability towards acquisitions on an undiscounted basis (Refer Note 2.9) | 525 | – | – | – | 525 |
As of March 31, 2016 and March 31, 2015, the group had outstanding financial guarantees of 56 crore and 43 crore, respectively, towards leased premises. These financial guarantees can be invoked upon breach of any term of the lease agreement. To the group’s knowledge there has been no breach of any term of the lease agreement as of March 31, 2016 and March 31, 2015.
Offsetting of financial assets and financial liabilities:
The group offsets a financial asset and a financial liability when it currently has a legally enforceable right to set off the recognized amounts and the group intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
The following table provides quantitative information about offsetting of derivative financial assets and derivative financial liabilities:
(In crore)
As of | As of | |||
March 31, 2016 | March 31, 2015 | |||
Derivative financial asset | Derivative financial liability | Derivative financial asset |
Derivative financial liability | |
Gross amount of recognized financial asset/liability | 124 | (13) | 105 | (7) |
Amount set off | (8) | 8 | (4) | 4 |
Net amount presented in balance sheet | 116 | (5) | 101 | (3) |
2.8 Provisions
Provisions comprise the following:
(In crore)
As of | ||
March 31, 2016 | March 31, 2015 | |
Provision for post sales client support and other provisions | 512 | 478 |
512 | 478 |
Provision for post sales client support and other provisions represents cost associated with providing post sales support services which are accrued at the time of recognition of revenues and are expected to be utilized over a period of 6 months to 1 year. The movement in the provision for post sales client support and other provisions is as follows:
(In crore)
Three months ended March 31, 2016 | Year ended March 31, 2016 | |
Balance at the beginning | 482 | 478 |
Provision recognized/ (reversed) | 33 | 106 |
Provision utilized | (5) | (103) |
Translation difference | 2 | 31 |
Balance at the end | 512 | 512 |
Provision for post sales client support and other provisions is included in cost of sales in the statement of comprehensive income.
As of March 31, 2016 and March 31, 2015, claims against the company, not acknowledged as debts, net of amounts paid (excluding demands from Indian Income tax authorities- Refer note 2.16) amounted to 277 crore and 261 crore, respectively.
The company is subject to legal proceedings and claims, which have arisen in the ordinary course of business. The company’s management does not reasonably expect that these legal actions, when ultimately concluded and determined, will have a material and adverse effect on the company’s results of operations or financial condition.
2.9 Other liabilities
Other liabilities comprise the following :
(In crore)
As of | ||
March 31, 2016 | March 31, 2015 | |
Current | ||
Accrued compensation to employees | 2,265 | 2,106 |
Accrued expenses | 2,189 | 1,984 |
Withholding taxes payable(1) | 1,296 | 904 |
Retainage | 80 | 53 |
Liabilities of controlled trusts | 167 | 177 |
Deferred income - government grant on land use rights(1) (Refer Note 2.6) | 1 | 1 |
Accrued gratuity | 1 | 7 |
Liability towards contingent consideration (Refer note 2.3) | 81 | – |
Liability towards acquisition of business (Refer note 2.3) | – | 487 |
Others | 145 | 77 |
6,225 | 5,796 | |
Non-current | ||
Liability towards contingent consideration (Refer note 2.3) | 36 | – |
Accrued compensation to employees | 33 | – |
Deferred income - government grant on land use rights(1) (Refer Note 2.6) | 46 | 46 |
115 | 46 | |
6,340 | 5,842 | |
Financial liabilities included in other liabilities | 4,997 | 4,891 |
Financial liability towards acquisitions on an undiscounted basis (including contingent consideration) - Refer note 2.3 | 132 | 525 |
(1) Non financial liabilities
Accrued expenses primarily relates to cost of technical sub-contractors, telecommunication charges, legal and professional charges, brand building expenses, overseas travel expenses and office maintenance. Others include unpaid dividend balances and capital creditors.
2.10 Expenses by nature
(In crore)
Three months ended March 31, | Year ended March 31, | |||
2016 | 2015 | 2016 | 2015 | |
Employee benefit costs (Refer Note 2.11.4) | 9,024 | 7,319 | 34,406 | 29,742 |
Deferred purchase price pertaining to acquisition (Refer Note 2.3) | – | 73 | 149 | 252 |
Depreciation and amortization charges (Refer Note 2.5 and 2.6) | 419 | 283 | 1,459 | 1,069 |
Travelling costs | 595 | 431 | 2,263 | 1,818 |
Consultancy and professional charges | 213 | 168 | 779 | 422 |
Cost of Software packages for own use | 196 | 178 | 740 | 855 |
Third party items bought for service delivery to clients | 134 | 62 | 534 | 189 |
Communication costs | 117 | 119 | 449 | 495 |
Cost of technical sub-contractors | 925 | 630 | 3,531 | 2,171 |
Power and fuel | 52 | 47 | 217 | 219 |
Repairs and maintenance | 311 | 239 | 1,054 | 764 |
Rates and taxes | 29 | 26 | 109 | 126 |
Insurance charges | 17 | 13 | 60 | 53 |
Commission to non-whole time directors | 2 | 3 | 9 | 9 |
Branding and marketing expenses | 75 | 42 | 288 | 158 |
Provision for post-sales client support | 22 | (5) | 8 | 39 |
Provision for doubtful account receivables (Refer Note 2.7) | (27) | 44 | (52) | 171 |
Contribution towards Corporate Social Responsibility | 45 | 66 | 216 | 254 |
Operating lease payments (Refer Note 2.14) | 98 | 73 | 360 | 309 |
Others | 83 | 151 | 242 | 372 |
Total cost of sales, selling and marketing expenses and administrative expenses | 12,330 | 9,962 | 46,821 | 39,487 |
2.10.1 Break-up of expenses
Cost of sales
(In crore)
Three months ended March 31, | Year ended March 31, | |||
2016 | 2015 | 2016 | 2015 | |
Employee benefit costs | 7,960 | 6,480 | 30,405 | 26,296 |
Deferred purchase price pertaining to acquisition (Refer Note 2.3) | 0 | 73 | 149 | 252 |
Depreciation and amortization | 419 | 283 | 1,459 | 1,069 |
Travelling costs | 425 | 301 | 1,637 | 1,337 |
Cost of Software packages for own use | 195 | 178 | 726 | 855 |
Third party items bought for service delivery to clients | 134 | 62 | 534 | 189 |
Cost of technical sub-contractors | 925 | 629 | 3,530 | 2,170 |
Operating lease payments | 66 | 52 | 242 | 215 |
Communication costs | 46 | 53 | 179 | 206 |
Repairs and maintenance | 58 | 58 | 187 | 167 |
Provision for post-sales client support | 22 | (5) | 8 | 39 |
Others | 12 | 10 | 42 | 88 |
Total | 10,262 | 8,174 | 39,098 | 32,883 |
Selling and marketing expenses
(In crore)
Three months ended March 31, | Year ended March 31, | |||
2016 | 2015 | 2016 | 2015 | |
Employee benefit costs | 695 | 577 | 2,645 | 2,380 |
Travelling costs | 99 | 70 | 356 | 265 |
Branding and marketing | 75 | 41 | 286 | 157 |
Operating lease payments | 11 | 8 | 44 | 37 |
Communication costs | 6 | 5 | 19 | 22 |
Consultancy and professional charges | 9 | 7 | 49 | 22 |
Others | 14 | 28 | 32 | 58 |
Total | 909 | 736 | 3,431 | 2,941 |
Administrative expenses
(In crore)
Three months ended March 31, | Year ended March 31, | |||
2016 | 2015 | 2016 | 2015 | |
Employee benefit costs | 369 | 262 | 1,356 | 1,066 |
Consultancy and professional charges | 198 | 161 | 706 | 400 |
Repairs and maintenance | 252 | 180 | 863 | 596 |
Power and fuel | 52 | 47 | 217 | 219 |
Communication costs | 65 | 61 | 251 | 267 |
Travelling costs | 71 | 60 | 270 | 216 |
Provision for doubtful accounts receivable | (27) | 44 | (52) | 171 |
Rates and taxes | 29 | 26 | 109 | 126 |
Insurance charges | 17 | 13 | 60 | 53 |
Operating lease payments | 21 | 13 | 74 | 57 |
Commission to non-whole time directors | 2 | 3 | 9 | 9 |
Contribution towards Corporate Social Responsibility | 45 | 66 | 216 | 254 |
Others | 65 | 116 | 213 | 229 |
Total | 1,159 | 1,052 | 4,292 | 3,663 |
2.11 Employee benefits
2.11.1 Gratuity
The following tables set out the funded status of the gratuity plans and the amounts recognized in the Group's financial statements as of March 31, 2016 and March 31, 2015:
(In crore)
As of | ||
March 31, 2016 | March 31, 2015 | |
Change in benefit obligations | ||
Benefit obligations at the beginning | 816 | 707 |
Service cost | 118 | 95 |
Interest expense | 61 | 60 |
Addition through business combination | 1 | – |
Remeasurements - Actuarial (gains)/ losses | 23 | 70 |
Benefits paid | (75) | (116) |
Benefit obligations at the end | 944 | 816 |
Change in plan assets | ||
Fair value of plan assets at the beginning | 836 | 717 |
Interest income | 66 | 67 |
Remeasurements- Return on plan assets excluding amounts included in interest income | 9 | 6 |
Contributions | 111 | 162 |
Benefits paid | (75) | (116) |
Fair value of plan assets at the end | 947 | 836 |
Funded status | 3 | 20 |
Prepaid gratuity benefit | 4 | 27 |
Accrued gratuity | (1) | (7) |
Amount for the three months and year ended March 31, 2016 and March 31, 2015 recognized in net profit in the statement of comprehensive income:
(In crore)
Three months ended March 31, | Year ended March 31, | |||
2016 | 2015 | 2016 | 2015 | |
Service cost | 29 | 23 | 118 | 95 |
Net interest on the net defined benefit liability/asset | (1) | (2) | (5) | (7) |
Net gratuity cost | 28 | 21 | 113 | 88 |
Amount for the three months and year ended March 31, 2016 and March 31, 2015 recognized in statement of other comprehensive income:
(In crore)
Three months ended March 31, | Year ended March 31, | |||
2016 | 2015 | 2016 | 2015 | |
Remeasurements of the net defined benefit liability/ (asset) | ||||
Actuarial (gains) / losses | 6 | 22 | 23 | 70 |
(Return) / loss on plan assets excluding amounts included in the net interest on the net defined benefit liability/(asset) | (3) | (4) | (9) | (6) |
3 | 18 | 14 | 64 |
(In crore)
Three months ended March 31, | Year ended March 31, | |||
2016 | 2015 | 2016 | 2015 | |
(Gain)/loss from change in demographic assumptions | – | – | – | – |
(Gain)/loss from change in financial assumptions | 5 | 14 | – | 55 |
5 | 14 | – | 55 |
Amounts recognized in statement of comprehensive income has been apportioned between cost of sales, selling and marketing expenses and administrative expenses on the basis of direct employee cost as follows:
(In crore)
Three months ended March 31, | Year ended March 31, | |||
2016 | 2015 | 2016 | 2015 | |
Cost of sales | 25 | 18 | 100 | 78 |
Selling and marketing expenses | 2 | 2 | 9 | 7 |
Administrative expenses | 1 | 1 | 4 | 3 |
28 | 21 | 113 | 88 |
The weigted-average assumptions used to determine benefit obligations as of March 31, 2016 and March 31, 2015 are set out below:
As of | ||
March 31, 2016 | March 31, 2015 | |
Discount rate | 7.8% | 7.8% |
Weighted average rate of increase in compensation levels | 8.0% | 8.0% |
The weighted-average assumptions used to determine net periodic benefit cost for the three months and year ended March 31, 2016 and March 31, 2015 are set out below:
Three months ended March 31, | Year ended March 31, | |||
2016 | 2015 | 2016 | 2015 | |
Discount rate | 7.8% | 9.2% | 7.8% | 9.2% |
Weighted average rate of increase in compensation levels | 8.0% | 8.0% | 8.0% | 8.0% |
Weighted average duration of defined benefit obligation | 6.4 years | 6.4 years | 6.4 years | 6.4 years |
Gratuity is applicable only to employees drawing a salary in Indian rupees and there are no other foreign defined benefit gratuity plans.
The Company contributes all ascertained liabilities towards gratuity to the Infosys Limited Employees' Gratuity Fund Trust. In case of Infosys BPO and EdgeVerve, contributions are made to the Infosys BPO Employees' Gratuity Fund Trust and EdgeVerve Systems Limited Employees Gratuity Fund Trust, respectively. Trustees administer contributions made to the trust. As of March 31, 2016 and March 31, 2015, the plan assets have been primarily invested in insurer managed funds.
Actual return on assets for the three months and year ended March 31, 2016 and March 31, 2015 were 19 crore and 21 crore and 75 crore and 73 crore, respectively.
The Company assesses these assumptions with its projected long-term plans of growth and prevalent industry standards. The discount rate is based on the government securities yield.
As of March 31, 2016, every percentage point increase / decrease in discount rate will affect our gratuity benefit obligation by approximately 46 crore.
As of March 31, 2016, every percentage point increase / decrease in weighted average rate of increase in compensation levels will affect our gratuity benefit obligation by approximately 39 crore.
The Group expects to contribute 98 crore to the gratuity trusts during the fiscal 2017.
Maturity profile of defined benefit obligation:
(in crore)
Within 1 year | 143 |
1-2 year | 148 |
2-3 year | 156 |
3-4 year | 165 |
4-5 year | 180 |
5-10 years | 909 |
Sensitivity for significant actuarial assumptions is computed by varying one actuarial assumption used for the valuation of the defined benefit obligation by one percentage, keeping all other actuarial assumptions constant.
Assumptions regarding future mortality experience are set in accordance with the published statistics by the Life Insurance Corporation of India.
2.11.2 Superannuation
The Company contributed 61 crore and 54 crore and 234 crore and 215 crore to the superannuation plan during the three months and year ended March 31, 2016 and March 31, 2015, respectively.
Superannuation contributions have been apportioned between cost of sales, selling and marketing expenses and administrative expenses on the basis of direct employee cost as follows:
(In crore)
Three months ended March 31, | Year ended March 31, | |||
2016 | 2015 | 2016 | 2015 | |
Cost of sales | 54 | 48 | 207 | 190 |
Selling and marketing expenses | 5 | 4 | 18 | 17 |
Administrative expenses | 2 | 2 | 9 | 8 |
61 | 54 | 234 | 215 |
2.11.3 Provident fund
Infosys has an obligation to fund any shortfall on the yield of the trust’s investments over the administered interest rates on an annual basis. These administered rates are determined annually predominantly considering the social rather than economic factors and in most cases the actual return earned by the Company has been higher in the past years. The actuary has provided a valuation for provident fund liabilities on the basis of guidance issued by Actuarial Society of India and based on the below provided assumptions there is no shortfall as at March 31, 2016 and March 31, 2015, respectively.
The details of fund and plan asset position are given below:
(In crore)
As of | ||
March 31, 2016 | March 31, 2015 | |
Plan assets at period end, at fair value | 3,808 | 2,912 |
Present value of benefit obligation at period end | 3,808 | 2,912 |
Asset recognized in balance sheet | – | – |
The plan assets have been primarily invested in government securities.
Assumptions used in determining the present value obligation of the interest rate guarantee under the Deterministic Approach:
As of | ||
March 31, 2016 | March 31, 2015 | |
Government of India (GOI) bond yield | 7.80% | 7.80% |
Remaining term to maturity of portfolio | 7 years | 7 years |
Expected guaranteed interest rate- First year: | 8.75% | 8.75% |
- Thereafter: | 8.60% | 8.60% |
The Group contributed 105 crore and 95 crore and 413 crore and 345 crore to the provident fund during the three months and year ended March 31, 2016 and March 31, 2015, respectively.
Provident fund contributions have been apportioned between cost of sales, selling and marketing expenses and administrative expenses on the basis of direct employee cost as follows:
(In crore)
Three months ended March 31, | Year ended March 31, | |||
2016 | 2015 | 2016 | 2015 | |
Cost of sales | 93 | 84 | 365 | 305 |
Selling and marketing expenses | 8 | 8 | 32 | 28 |
Administrative expenses | 4 | 3 | 16 | 12 |
105 | 95 | 413 | 345 |
2.11.4 Employee benefit costs include:
(In crore)
Three months ended March 31, | Year ended March 31, | |||
2016 | 2015 | 2016 | 2015 | |
Salaries and bonus* | 8,830 | 7,150 | 33,646 | 29,094 |
Defined contribution plans | 78 | 68 | 302 | 265 |
Defined benefit plans | 116 | 101 | 458 | 383 |
9,024 | 7,319 | 34,406 | 29,742 |
* | Includes stock compensation expense of 2 crore and 1 crore, and 7 crore and 2 crore for the three months and year ended March 31, 2016 and March 31, 2015, respectively. |
The gratuity and provident plans are applicable only to employees drawing a salary in Indian rupees and there are no other significant foreign defined benefit plans.
The employee benefit cost is recognized in the following line items in the statement of comprehensive income:
(In crore)
Three months ended March 31, | Year ended March 31, | |||
2016 | 2015 | 2016 | 2015 | |
Cost of sales | 7,960 | 6,480 | 30,405 | 26,296 |
Selling and marketing expenses | 695 | 577 | 2,645 | 2,380 |
Administrative expenses | 369 | 262 | 1,356 | 1,066 |
9,024 | 7,319 | 34,406 | 29,742 |
2.12 Equity
Share capital and share premium
The Company has allotted 114,84,72,332 fully paid-up shares of face value 5/- each during the quarter ended June 30, 2015, pursuant to bonus issue approved by the shareholders through postal ballot. The book closure date fixed by the Board was June 17, 2015. Bonus share of one equity share for every equity share held, and a stock dividend of one American Depositary Share (ADS) for every ADS held, respectively, has been allotted. Consequently, the ratio of equity shares underlying the ADSs held by an American Depositary Receipt holder remains unchanged. Options granted under the restricted stock unit plan have been adjusted for bonus shares. 11,323,576 and 56,67,200 shares were held by controlled trust as of March 31, 2016 and March 31, 2015, respectively .
The amount received in excess of the par value has been classified as share premium. Additionally, share-based compensation recognized in net profit in the consolidated statement of comprehensive income is credited to share premium. Amounts have been utilized for bonus issue from share premium account.
Retained earnings
Retained earnings represent the amount of accumulated earnings of the Group.
Other Reserves
The Special Economic Zone Re-investment reserve has been created out of the profit of the eligible SEZ unit in terms of the provisions of Sec 10AA(1)(ii) of Income Tax Act,1961. The reserve should be utilized by the Company for acquiring new plant and machinery for the purpose of its business in terms of the provisions of the Sec 10AA(2) of the Income Tax Act, 1961.
Other components of equity
Other components of equity consist of currency translation, fair value changes on available-for-sale financial assets, remeasurement of net defined benefit liability/asset and changes in fair value of derivatives designated as cash flow hedges.
The Company’s objective when managing capital is to safeguard its ability to continue as a going concern and to maintain an optimal capital structure so as to maximize shareholder value. In order to maintain or achieve an optimal capital structure, the Company may adjust the amount of dividend payment, return capital to shareholders, issue new shares or buy back issued shares. As of March 31, 2016, the Company has only one class of equity shares and has no debt. Consequent to the above capital structure there are no externally imposed capital requirements.
The rights of equity shareholders are set out below.
2.12.1 Voting
Each holder of equity shares is entitled to one vote per share. The equity shares represented by American Depositary Shares (ADS) carry similar rights to voting and dividends as the other equity shares. Each ADS represents one underlying equity share.
2.12.2 Dividends
The Company declares and pays dividends in Indian rupees. The remittance of dividends outside India is governed by Indian law on foreign exchange and is subject to applicable distribution taxes.
The Board increased dividend pay-out ratio from up to 40% to up to 50% of post-tax consolidated profits effective fiscal 2015.
The amount of per share dividend recognized as distributions to equity shareholders for the year ended March 31, 2016 includes final divided of 29.50/- per equity share (not adjusted for June 17, 2015 bonus issue) and an interim dividend of 10/- per equity share. The amount of per share dividend recognized as distribution to equity shareholders for the year ended March 31, 2015 was 73.00/- per equity share (not adjusted for bonus issues).
The Board of Directors, in its meeting on April 15, 2016, have proposed a final dividend of 14.25/- per equity share for the financial year ended March 31, 2016. The proposal is subject to the approval of shareholders at the Annual General Meeting to be held on June 18, 2016 and if approved would result in a cash outflow of approximately 3,923 crore (excluding dividend paid on treasury shares), including corporate dividend tax.
2.12.3 Liquidation
In the event of liquidation of the Company, the holders of shares shall be entitled to receive any of the remaining assets of the Company, after distribution of all preferential amounts. However, no such preferential amounts exist currently, other than the amounts held by irrevocable controlled trusts. The amount distributed will be in proportion to the number of equity shares held by the shareholders. For irrevocable controlled trusts, the corpus would be settled in favour of the beneficiaries.
2.12.4 Share options
There are no voting, dividend or liquidation rights to the holders of options issued under the Company's share option plans.
2.13 Other income
Other income consists of the following:
(In crore)
Three month ended March 31, | Year ended March 31, | |||
2016 | 2015 | 2016 | 2015 | |
Interest income on deposits and certificates of deposit | 609 | 696 | 2,523 | 2,631 |
Exchange gains/ (losses) on forward and options contracts | 58 | 303 | 29 | 514 |
Exchange gains/ (losses) on translation of other assets and liabilities | 16 | (188) | 140 | (39) |
Income from available-for-sale financial assets | 40 | 51 | 176 | 261 |
Others | 49 | 19 | 257 | 60 |
772 | 881 | 3,125 | 3,427 |
2.14 Operating leases
The Group has various operating leases, mainly for office buildings, that are renewable on a periodic basis. Rental expense for operating leases for the three months and year ended March 31, 2016 and March 31, 2015 was 98 crore and 73 crore and 360 crore and 309 crore, respectively.
The schedule of future minimum rental payments in respect of non-cancellable operating leases is set out below:
(In crore)
As of | ||
March 31, 2016 | March 31, 2015 | |
Within one year of the balance sheet date | 372 | 168 |
Due in a period between one year and five years | 873 | 395 |
Due after five years | 442 | 168 |
A majority of the Group’s operating lease arrangements extend up to a maximum of ten years from their respective dates of inception, and relates to rented overseas premises. Some of these lease agreements have a price escalation clause.
2.15 Employees' Stock Option Plans (ESOP)
2015 Stock Incentive Compensation Plan (the 2015 Plan): SEBI issued the Securities and Exchange Board of India (Share based Employee Benefits) Regulations, 2014 (‘SEBI Regulations’) which replaced the SEBI ESOP Guidelines, 1999. The 2011 Plan (as explained below) was required to be amended and restated in accordance with the SEBI Regulations. Consequently, to effect this change and to further introduce stock options/ADR’s and other stock incentives, the Company put forth the 2015 Stock Incentive Compensation Plan (the 2015 Plan) for approval to the shareholders of the Company. Pursuant to the approval by the shareholders through postal ballot which ended on March 31, 2016, the Board of Directors have been authorised to introduce, offer, issue and allot share-based incentives to eligible employees of the Company and its subsidiaries under the 2015 Plan. The maximum number of shares under the 2015 plan shall not exceed 2,40,38,883 equity shares(this includes 1,12,23,576 equity shares which are currently held by the Trust towards the 2011 Plan). 1,70,38,883 equity shares will be issued as RSUs at par value and 70,00,000 equity shares will be issued as stock options at market price. These instruments will vest over a period of 4 years and the Company expects to grant the instruments under the 2015 Plan over the period of 4 to 7 years.
2011 RSU Plan (the 2011 Plan): The Company had a 2011 RSU Plan which provided for the grant of restricted stock units (RSUs) to eligible employees of the Company. The Board of Directors recommended the establishment of the 2011 Plan to the shareholders on August 30, 2011 and the shareholders approved the recommendation of the Board of Directors on October 17, 2011 through a postal ballot. The maximum aggregate number of shares that may be awarded under the plan was 1,13,34,400 and the plan was expected to continue in effect for a term of 10 years from the date of initial grant under the plan. During the year ended March 31, 2015, the company made a grant of 108,268 restricted stock units (adjusted for bonus issues) to Dr. Vishal Sikka, Chief Executive Office and Managing Director. The Board in its meeting held on June 22, 2015, on recommendation of Nomination and Remuneration Committee, further granted 1,24,061 RSUs to Dr. Vishal Sikka. These RSUs are vesting over a period of four years from the date of the grant in the proportions specified in the award agreement. The RSUs will vest subject to achievement of certain key performance indicators as set forth in the award agreement for each applicable year of the vesting tranche and continued employment through each vesting date. Further the Company has earmarked 100,000 equity shares for welfare activities of the employees, approved by the shareholders vide postal ballot which ended on March 31, 2016. The equity shares currently held under this plan, i.e. 1,12,23,576 equity shares (this includes the aggregate number of equity shares that may be awarded under the 2011 Plan as reduced by 10,824 equity shares already exercised by Dr. Vishal Sikka and 100,000 equity shares which have been earmarked for welfare activities of the employees) have been subsumed under the 2015 Plan.Further , the award granted to Dr. Vishal Sikka on June 22, 2015 was modified by the Nomination and remuneration committee on April 14, 2016. There is no modification or change in the total number of RSUs granted or the vesting period (which is four years). The modifications relate to the criteria of vesting for each of the years. Based on the modification, the first tranche of the RSUs will vest subject to achievement of certain key performance indicators for the year ended March 31, 2016. Subsequent vesting of RSU's for each of the remaining years would be subject to continued employment.
The activity in the 2011 Plan during the three months and year ended March 31, 2016
Particulars | Three months ended March 31, 2016 | Year ended March 31, 2016 | ||
Shares arising out of options | Weighted average exercise price | Shares arising out of options | Weighted average exercise price | |
2011 Plan: | ||||
Outstanding at the beginning | 223,213 | 5 | 108,268 | 5 |
Granted | – | – | 124,061 | 5 |
Forfeited and expired | – | – | – | – |
Exercised* | 1,708 | 5 | 10,824 | 5 |
Outstanding at the end | 221,505 | 5 | 221,505 | 5 |
Exercisable at the end | – | – | – | – |
*Adjusted for bonus issues. (Refer note 2.12)
The weighted average share price of options exercised under the 2011 Plan on the date of exercise was 1,088/-.
The activity in the 2011 Plan during the three months and year ended March 31, 2015 is set out below:
Particulars | Three months ended March 31, 2015 | Year ended March 31, 2015 | ||
Shares arising out of options | Weighted average exercise price | Shares arising out of options | Weighted average exercise price | |
2011 Plan: | ||||
Outstanding at the beginning * | 108,268 | 5 | – | – |
Granted* | – | – | 108,268 | 5 |
Forfeited and expired | – | – | – | – |
Exercised | – | – | – | – |
Outstanding at the end | 108,268 | 5 | 108,268 | 5 |
Exercisable at the end | – | – | – | – |
*Adjusted for bonus issues (Refer note 2.12)
The weighted average remaining contractual life of RSUs outstanding as of March 31, 2016 and March 31, 2015 under the 2011 Plan was 1.98 years and 2.39 years, respectively.
The expected term of an RSU is estimated based on the vesting term and contractual term of the RSU, as well as expected exercise behaviour of the employee who receives the RSU. Expected volatility during the expected term of the RSU is based on historical volatility of the observed market prices of the company's publicly traded equity shares during a period equivalent to the expected term of the RSU.
The fair value of each RSU is estimated on the date of grant using the Black-Scholes-Merton model with the following assumptions:
Option granted during | Fiscal 2016 | Fiscal 2015 |
Grant date | 22–Jun–15 | 21–Aug–14 |
Weighted average share price ()* | 1,024 | 3,549 |
Exercise price () * | 5 | 5 |
Expected volatility (%) | 28–36 | 30 – 37 |
Expected life of the option (years) | 1 – 4 | 1 – 4 |
Expected dividends (%) | 2.43 | 1.84 |
Risk-free interest rate (%) | 7– 8 | 8 – 9 |
Weighted average fair value as on grant date ()* | 948 | 3,355 |
* Data for Fiscal 2015 is not adjusted for bonus issues
During the three months and year ended March 31, 2016 and March 31, 2015, the company recorded an employee stock compensation expense of 2 crore and 1 crore, and 7 crore and 2 crore, respectively in the statement of comprehensive income.
2.16 Income taxes
Income tax expense in the consolidated statement of comprehensive income comprises:
(In crore)
Three month ended March 31, | Year ended March 31, | |||
2016 | 2015 | 2016 | 2015 | |
Current taxes | ||||
Domestic taxes | 1,083 | 206 | 4,215 | 3,115 |
Overseas taxes | 343 | 930 | 1,103 | 1,736 |
1,426 | 1,136 | 5,318 | 4,851 | |
Deferred taxes | ||||
Domestic taxes | (6) | 16 | 21 | 32 |
Overseas taxes | (26) | 80 | (88) | 46 |
(32) | 96 | (67) | 78 | |
Income tax expense | 1,394 | 1,232 | 5,251 | 4,929 |
Income tax expense for the three months ended March 31, 2016 and March 31, 2015 includes reversals (net of provisions) of 69 crore and 47 crore, respectively, pertaining to earlier periods. Income tax expense for the year ended March 31, 2016 and March 31, 2015 includes reversal (net of provisions) of 309 crore and 158 crore, respectively, pertaining to earlier periods.
Entire deferred income tax for the three months and year ended March 31, 2016 and March 31, 2015 relates to origination and reversal of temporary differences.
A deferred tax liability of 2 crore relating to available-for-sale financial assets has been recognized in other comprehensive income for the three months ended March 31, 2016. A deferred tax liability of 4 crore relating to available-for-sale financial assets has been recognized in other comprehensive income for the year ended March 31, 2016. A deferred tax asset of 5 crore relating to available-for-sale financial assets has been recognized in other comprehensive income for the three months ended March 31, 2015. A reversal of deferred tax asset of 11 crore has been recognized in other comprehensive income for the year ended March 31, 2015.
A reconciliation of the income tax provision to the amount computed by applying the statutory income tax rate to the income before income taxes is summarized below:
(In crore)
Three months ended March 31, | Year ended March 31, | |||
2016 | 2015 | 2016 | 2015 | |
Profit before income taxes | 4,991 | 4,329 | 18,742 | 17,258 |
Enacted tax rates in India | 34.61% | 33.99% | 34.61% | 33.99% |
Computed expected tax expense | 1,727 | 1,471 | 6,486 | 5,866 |
Tax effect due to non-taxable income for Indian tax purposes | (496) | (438) | (1,758) | (1,672) |
Overseas taxes | 205 | 199 | 715 | 817 |
Tax reversals, overseas and domestic | (69) | (47) | (309) | (158) |
Effect of exempt non-operating income | (32) | (15) | (83) | (89) |
Effect of unrecognized deferred tax assets | 42 | 19 | 62 | 43 |
Effect of differential overseas tax rates | 1 | (10) | 3 | (39) |
Effect of non-deductible expenses | 18 | 65 | 194 | 211 |
Tax on dividend received from subsidiaries | – | 4 | – | 4 |
Additional deduction on research and development expense | (7) | (12) | (60) | (54) |
Others | 5 | (4) | 1 | – |
Income tax expense | 1,394 | 1,232 | 5,251 | 4,929 |
The applicable Indian statutory tax rates for fiscal 2016 and fiscal 2015 is 34.61% and 33.99%, respectively. The change in the tax rate is consequent to the changes made in Finance Act 2015.
During the year ended March 31, 2016 and March 31, 2015, the group has claimed weighted tax deduction on eligible research and development expenditures based on the approval received from Department of Scientific and Industrial Research (DSIR) on November 23, 2011 which has been renewed effective April 2014. The weighted tax deduction is equal to 200% of such expenditures incurred.
The foreign tax expense is due to income taxes payable overseas, principally in the United States. In India, the company has benefited from certain tax incentives that the Government of India had provided to the export of software from the specifically designated units registered under the Software Technology Parks Scheme (STP) in India and the company continues to benefit from certain tax incentives for the units registered under the Special Economic Zones Act, 2005 (SEZ). However, the income tax incentives provided by the Government of India for STP units have expired, and all the STP units are now taxable. SEZ units which began providing services on or after April 1, 2005 are eligible for a deduction of 100 percent of profits or gains derived from the export of services for the first five years from the financial year in which the unit commenced the 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 period of 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 year, computed in accordance with the Internal Revenue Code. As of March 31, 2016, Infosys' U.S. branch net assets amounted to approximately 5,109 crore. As of March 31, 2016, the Company has provided for branch profit tax of 334 crore for its U.S branch, as the Company estimates that these branch profits are expected to be distributed in the foreseeable future. The change in provision for branch profit tax includes 18 crore movement on account of exchange rate during the year ended March 31, 2016.
Deferred income tax liabilities have not been recognized on temporary differences amounting to 4,195 crore and 3,291 crore as of March 31, 2016 and March 31, 2015, respectively, associated with investments in subsidiaries and branches as it is probable that the temporary differences will not reverse in the foreseeable future.
The following table provides the details of income tax assets and income tax liabilities as of March 31, 2016 and March 31, 2015:
(In crore)
As at | ||
March 31, 2016 | March 31, 2015 | |
Income tax assets | 5,230 | 4,089 |
Current income tax liabilities | 3,410 | 2,818 |
Net current income tax asset/ (liability) at the end | 1,820 | 1,271 |
The gross movement in the current income tax asset/ (liability) for the three months and year ended March 31, 2016 and March 31, 2015 is as follows:
(In crore)
Three months ended March 31, | Year ended March 31, | |||
2016 | 2015 | 2016 | 2015 | |
Net current income tax asset/ (liability) at the beginning | 1,783 | (1,057) | 1,271 | (665) |
Translation differences | (12) | 13 | – | 20 |
Income tax paid | 1,475 | 3,446 | 5,865 | 6,751 |
Current income tax expense (Refer Note 2.16) | (1,426) | (1,136) | (5,318) | (4,851) |
Income tax on other comprehensive income | – | 5 | 2 | 16 |
Net current income tax asset/ (liability) at the end | 1,820 | 1,271 | 1,820 | 1,271 |
The tax effects of significant temporary differences that resulted in deferred income tax assets and liabilities are as follows:
(In crore)
As of | ||
March 31, 2016 | March 31, 2015 | |
Deferred income tax assets | ||
Property, plant and equipment | 178 | 241 |
Computer software | 50 | 51 |
Accrued compensation to employees | 68 | 48 |
Trade receivables | 89 | 111 |
Compensated absences | 389 | 299 |
Available-for-sale financial asset | – | 1 |
Post sales client support | 77 | 74 |
Intangibles | 4 | – |
Others | 55 | 31 |
Total deferred income tax assets | 910 | 856 |
Deferred income tax liabilities | ||
Intangible asset | (252) | (159) |
Temporary difference related to branch profits | (334) | (316) |
Property, plant and equipment | (2) | – |
Available-for-sale financial asset | (4) | (1) |
Others | (38) | (3) |
Total deferred income tax liabilities | (630) | (479) |
Deferred income tax assets after set off | 536 | 537 |
Deferred income tax liabilities after set off | (256) | (160) |
Deferred tax assets and deferred tax liabilities have been offset wherever the Group has a legally enforceable right to set off current tax assets against current tax liabilities and where the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority.
The deferred income tax assets and deferred income tax liabilities recoverable within and after 12 months are as follows:
(In crore)
As of | ||
March 31, 2016 | March 31, 2015 | |
Deferred income tax assets to be recovered after 12 months | 409 | 354 |
Deferred income tax assets to be recovered within 12 months | 501 | 502 |
Total deferred income tax assets | 910 | 856 |
Deferred income tax liabilities to be settled after 12 months | (450) | (374) |
Deferred income tax liabilities to be settled within 12 months | (180) | (105) |
Total deferred income tax liabilities | (630) | (479) |
In assessing the realizability of deferred income tax assets, management considers whether some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income 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 income 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 income tax assets are deductible, management believes that the Group will realize the benefits of those deductible differences. The amount of the deferred income 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 gross movement in the deferred income tax account for the three months and year ended March 31, 2016 and March 31, 2015, is as follows:
(In crore)
Three months ended March 31, | Year ended March 31, | |||
2016 | 2015 | 2016 | 2015 | |
Net deferred income tax asset at the beginning | 251 | 572 | 377 | 592 |
Addition through business combination (Refer note 2.3) | – | (99) | (128) | (99) |
Translation differences | (1) | (5) | (32) | (27) |
Credits / (charge) relating to temporary differences (Refer Note 2.16) | 32 | (96) | 67 | (78) |
Temporary difference on available-for-sale financial asset | (2) | 5 | (4) | (11) |
Net deferred income tax asset at the end | 280 | 377 | 280 | 377 |
The credits relating to temporary differences during the year ended March 31, 2016 are primarily on account of accrued compensation to employees and compensated absences partially offset by reversal of credits pertaining to property plant and equipment and trade receivables.The charge relating to temporary differences during the year ended March 31, 2015 are primarily on account of property, plant and equipment, post sales client support, available for sale financial assets, minimum alternate tax partially offset by compensated absences and trade receivables.
As of March 31, 2016 and March 31, 2015, claims against the group not acknowledged as debts from the Indian Income tax authorities (net of amount paid to statutory authorities of 4,383 crore and 3,568 crore) amounted to 7 crore and 3 crore, respectively.
Payment of 4,383 crore includes demands from the Indian Income tax authorities of 4,135 crore (3,337 crore), including interest of 1,224 crore (964 crore) upon completion of their tax assessment for fiscal 2007, fiscal 2008, fiscal 2009, fiscal 2010 and fiscal 2011 (For the year ended March 31, 2015 - upon completion of their tax assessment for fiscal 2006, fiscal 2007, fiscal 2008, fiscal 2009 and fiscal 2010). These demands were paid to statutory tax authorities which includes 913 crores paid during the year ended 31st March 2016 consequent to demand from tax authorities in India for fiscal 2011 towards denial of certain tax benefits. The company has filed an appeal with the income tax appellate authorities.
Demand for fiscal 2007, fiscal 2008 and fiscal 2009 includes disallowance of a portion of the deduction claimed by the company under Section 10A of the income Tax Act as 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. Demand for fiscal 2007, fiscal 2008, fiscal 2009, fiscal 2010 and fiscal 2011 also includes disallowance of portion of profit earned outside India from the STP units under section 10A of the Income Tax Act and disallowance of profits earned from SEZ units under section 10AA of the Income Tax Act. The matters for fiscal 2007, fiscal 2008 and fiscal 2009 are pending before the Commissioner of Income Tax (Appeals) Bangalore. The matter for fiscal 2010 and fiscal 2011 is pending before Hon’ble Income Tax Appellate Tribunal (ITAT) Bangalore. The company is contesting the demand and the management including its tax advisors believes that its position will likely be upheld in the appellate process. The management believes that the ultimate outcome of these proceedings will not have a material adverse effect on the Company's financial position and results of operations.
2.17 Earnings per equity share
The following is a reconciliation of the equity shares used in the computation of basic and diluted earnings per equity share:
Three months ended March 31, | Year ended March 31, | |||
2016 | 2015' | 2016 | 2015 | |
Basic earnings per equity share - weighted average number of equity shares outstanding(1)(2) | 228,56,20,957 | 228,56,10,264 | 228,56,16,160 | 228,56,10,264 |
Effect of dilutive common equivalent shares - share options outstanding | 129,359 | 56,988 | 102,734 | 32,676 |
Diluted earnings per equity share - weighted average number of equity shares and common equivalent shares outstanding | 228,57,50,316 | 228,56,67,252 | 228,57,18,894 | 228,56,42,940 |
(1) Excludes treasury shares
(2) adjusted for bonus issue. Refer Note 2.12
For the three months and year ended March 31, 2016 and March 31, 2015, respectively, there were no outstanding options to purchase equity shares which had an anti-dilutive effect.
2.18 Related party transactions
List of subsidiaries:
Particulars | Country | Holding as of | |
March 31, 2016 | March 31, 2015 | ||
Infosys BPO Limited (Infosys BPO) | India | 99.98% | 99.98% |
Infosys Technologies (China) Co. Limited (Infosys China) | China | 100% | 100% |
Infosys Technologies S. de R. L. de C. V. (Infosys Mexico) | Mexico | 100% | 100% |
Infosys Technologies (Sweden) AB. (Infosys Sweden) | Sweden | 100% | 100% |
Infosys Technologies (Shanghai) Company Limited (Infosys Shanghai) | China | 100% | 100% |
Infosys Tecnologia DO Brasil LTDA. (Infosys Brasil) | Brazil | 100% | 100% |
Infosys Public Services, Inc. USA (Infosys Public Services) | U.S. | 100% | 100% |
Infosys Americas Inc., (Infosys Americas) | U.S. | 100% | 100% |
Infosys (Czech Republic) Limited s.r.o.(formerly Infosys BPO s. r. o) (1) | Czech Republic | 99.98% | 99.98% |
Infosys Poland Sp Z.o.o (formerly Infosys BPO (Poland) Sp Z.o.o)(1) | Poland | 99.98% | 99.98% |
Infosys BPO S.DE R.L. DE.C.V (1)(17) | Mexico | – | – |
Infosys McCamish Systems LLC (1) | U.S. | 99.98% | 99.98% |
Portland Group Pty Ltd(1) | Australia | 99.98% | 99.98% |
Portland Procurement Services Pty Ltd(5) | Australia | – | – |
Infosys BPO Americas LLC.(1)(16) | U.S. | – | – |
Infosys Technologies (Australia) Pty. Limited (Infosys Australia) (2) | Australia | 100% | 100% |
EdgeVerve Systems Limited (EdgeVerve) (7) | India | 100% | 100% |
Infosys Consulting Holding AG (Infosys Lodestone) (formerly Lodestone Holding AG) | Switzerland | 100% | 100% |
Lodestone Management Consultants Inc. (3) | U.S. | 100% | 100% |
Infosys Management Consulting Pty Limited (formerly Lodestone Management Consultants Pty Limited) (3) | Australia | 100% | 100% |
Infosys Consulting AG (formerly Lodestone Management Consultants AG) (3) | Switzerland | 100% | 100% |
Lodestone Augmentis AG (2)(6) | Switzerland | 100% | 100% |
Lodestone GmbH (formerly Hafner Bauer & Ödman GmbH) (2)(3) | Switzerland | 100% | 100% |
Lodestone Management Consultants (Belgium) S.A. (4) | Belgium | 99.90% | 99.90% |
Infosys Consulting GmbH (formerly Lodestone Management Consultants GmbH) (3) | Germany | 100% | 100% |
Infosys Consulting Pte Ltd. (formerly Lodestone Management Consultants Pte Ltd) (3) | Singapore | 100% | 100% |
Infosys Consulting SAS (formerly Lodestone Management Consultants SAS) (3) | France | 100% | 100% |
Infosys Consulting s.r.o.(formerly Lodestone Management Consultants s.r.o.) (3) | Czech Republic | 100% | 100% |
Lodestone Management Consultants GmbH (3) | Austria | 100% | 100% |
Lodestone Management Consultants Co., Ltd. (3) | China | 100% | 100% |
Infy Consulting Company Ltd. (formerly Lodestone Management Consultants Ltd.) (3) | U.K. | 100% | 100% |
Infosys Consulting B.V. (formerly Lodestone Management Consultants B.V.) (3) | Netherlands | 100% | 100% |
Infosys Consulting Ltda. (formerly Lodestone Management Consultants Ltda.) (4) | Brazil | 99.99% | 99.99% |
Infosys Consulting Sp. Z.o.o (formerly Lodestone Management Consultants Sp. z.o.o.) (3) | Poland | 100% | 100% |
Lodestone Management Consultants Portugal, Unipessoal, Lda. (3) | Portugal | 100% | 100% |
S.C. Infosys Consulting S.R.L.(formerly S.C. Lodestone Management Consultants S.R.L.) (3) | Romania | 100% | 100% |
Infosys Consulting S.R.L. (formerly Lodestone Management Consultants S.R.L.) (3) | Argentina | 100% | 100% |
Infosys Canada Public Services Ltd.(8) | Canada | – | – |
Infosys Nova Holdings LLC. (Infosys Nova) (9) | U.S. | 100% | 100% |
Panaya Inc. (Panaya)(10) | U.S. | 100% | 100% |
Panaya Ltd.(11) | Israel | 100% | 100% |
Panaya GmbH(11) | Germany | 100% | 100% |
Panaya Pty Ltd.(11) | Australia | – | – |
Panaya Japan Co. Ltd.(11) | Japan | 100% | 100% |
Skava Systems Pvt. Ltd. (Skava Systems)(12) | India | 100% | – |
Kallidus Inc.(Kallidus)(13) | U.S. | 100% | – |
Noah Consulting LLC (Noah)(14) | U.S. | 100% | – |
Noah Information Management Consulting Inc. ( Noah Canada)(15) | Canada | 100% | – |
(1) | Wholly owned subsidiary of Infosys BPO. |
(2) | Under liquidation |
(3) | Wholly owned subsidiaries of Infosys Consulting Holding AG (formerly Lodestone Holding AG) |
(4) | Majority owned and controlled subsidiaries of Infosys Consulting Holding AG (formerly Lodestone Holding AG) |
(5) | Wholly owned subsidiary of Portland Group Pty Ltd. Liquidated effective May 14, 2014 |
(6) | Wholly owned subsidiary of Infosys Consulting AG (formerly Lodestone Management Consultants AG) |
(7) | Incorporated effective February 14, 2014. (Refer note 2.3) |
(8) | Wholly owned subsidiary of Infosys Public Services, Inc. Incorporated effective December 19, 2014 |
(9) | Incorporated effective January 23, 2015 |
(10) | On March 5, 2015, Infosys acquired 100% of the voting interest in Panaya Inc. (Refer note 2.3) |
(11) | Wholly owned subsidiary of Panaya Inc. |
(12) | On June 2, 2015, Infosys acquired 100% of the voting interest in Skava Systems (Refer note 2.3) |
(13) | On June 2, 2015, Infosys acquired 100% of the voting interest in Kallidus Inc. (Refer note 2.3) |
(14) | On November 16, 2015, Infosys acquired 100% of the membership interest in Noah (Refer note 2.3) |
(15) | Wholly owned subsidiary of Noah (Refer note 2.3) |
(16) | Incorporated effective November 20, 2015 |
(17) | Liquidated effective March 15, 2016 |
Infosys has provided guarantee for performance of certain contracts entered into by its subsidiaries.
List of Associates:
Name of Associates | Country | Holding as at | |
March 31, 2016 | March 31, 2015 | ||
DWA Nova LLC(1)
|
U.S. | 16% |
20% |
(1) | Associate of Infosys Nova Holdings LLC. During the year ended March 31, 2015, the group acquired 20% of the equity interests in DWA Nova LLC for a cash consideration of 94 crore. The Company has made this investment to form a new company along with Dream Works Animation (DWA). The new company ,DWA Nova LLC, will develop and commercialize image generation technology in order to provide end-to-end digital manufacturing capabilities for companies involved in the design, manufacturing, marketing or distribution of physical consumer products. As of March 31, 2016, Infosys Nova holds 16% of the equity interest in DWA Nova LLC. |
List of other related parties:
Particulars | Country | Nature of relationship |
Infosys Limited Employees' Gratuity Fund Trust | India | Post–employment benefit plan of Infosys |
Infosys Limited Employees' Provident Fund Trust | India | Post–employment benefit plan of Infosys |
Infosys Limited Employees' Superannuation Fund Trust | India | Post–employment benefit plan of Infosys |
Infosys BPO Limited Employees’ Superannuation Fund Trust | India | Post–employment benefit plan of Infosys BPO |
Infosys BPO Limited Employees’ Gratuity Fund Trust | India | Post–employment benefit plan of Infosys BPO |
EdgeVerve Systems Limited Employees' Gratuity Fund Trust | India | Post–employment benefit plan of EdgeVerve |
EdgeVerve Systems Limited Employees' Superannuation Fund Trust | India | Post–employment benefit plan of EdgeVerve |
Infosys Limited Employees’ Welfare Trust | India | Controlled trust |
Infosys Employee Welfare Trust | India | Controlled trust |
Infosys Science Foundation | India | Controlled trust |
Refer Note 2.11 for information on transactions with post-employment benefit plans mentioned above.
Transactions with key management personnel
The table below describes the compensation to key management personnel which comprise directors and executive officers:
(In crore)
Three months ended March 31, | Year ended March 31, | |||
2016 | 2015 | 2016 | 2015 | |
Salaries and other employee benefits to whole-time directors and executive officers(1)(2)(3)(4) | 40 | 9 | 101 | 30 |
Commission and other benefits to non-executive/independent directors | 2 | 2 | 10 | 9 |
Total | 42 | 11 | 111 | 39 |
(1) | Includes stock compensation expense of 2 crore and 1 crore, and 7 crore and 2 crore for the three months and year ended March 31, 2016 and March 31, 2015, respectively to CEO in line with the compensation plan approved by the shareholders. |
(2) | Includes payables to CFO who stepped down w.e.f October 12, 2015. |
(3) | Includes payment of variable pay amounting to 14 crore for the year ended March 31, 2015 to CEO as decided by the Nomination and Remuneration committee in line with the compensation plan approved by the shareholders. |
(4) | Includes provision for variable pay amounting to $4.33 million (approximately 29 crore) for the year ended March 31, 2016 to CEO. The shareholders in the EGM dated July 30, 2014 had approved a variable pay of $4.18 million (approximately28 crore at current exchange rate) at a target level and also authorized the Board to alter and vary the terms of remuneration. Accordingly , the Board based on the recommendations of the Nominations committee approved on April 15, 2016, $4.33 million ( approximately 29 crore) as variable pay for the year ended March 31, 2016. |
2.19 Segment reporting
IFRS 8 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 end-to-end business solutions to enable clients to enhance business performance. Effective April 1, 2015, the Company reorganized its segments to support its objective of delivery innovation. Consequent to the internal reorganization, Growth Markets (GMU) comprising enterprises in APAC (Asia Pacific) and Africa have been subsumed across the other verticals and businesses in India, Japan and China are run as standalone regional business units. Further, during the quarter ended March 31, 2016 the Company reorganized some of its segments to enhance executive customer relationships, improve focus of sales investments and increase management oversight consequent to which, erstwhile manufacturing segment is now being reviewed as Hi-Tech, Manufacturing and others included in ECS. Additionally, Infosys Public services (IPS) is being reviewed seperately by the Chief Operating Decision Maker (CODM). Consequent to the internal reorganizations, there were changes effected in the reportable business segments based on the "management approach" as defined in IFRS 8, Operating Segments. The CODM evaluates the Company's performance and allocates resources based on an analysis of various performance indicators by business segments and geographic segments. Accordingly, information has been presented both along business segments and geographic segments. 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 significant accounting policies.
Business segments of the Company are primarily enterprises in Financial Services (FS), enterprises in Manufacturing (MFG), enterprises in Retail, Consumer packaged goods and Logistics (RCL), enterprises in the Energy & utilities, Communication and Services (ECS), enterprises in Hi-tech (Hi-TECH), enterprises in Life Sciences, Healthcare and Insurance (HILIFE) and all other segments. The FS reportable segments has been aggregated to include the Financial Services operating segment and the Finacle operating segment. All other segments represents the operating segments of businesses in India, Japan and China and IPS. Geographic segmentation is based on business sourced from that geographic region and delivered from both on-site and off-shore locations. 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. Consequent to the above changes in the composition of reportable business segments, the prior period comparatives have been restated.
Revenue and identifiable operating expenses in relation to segments are categorized based on items that are individually identifiable to that segment. Revenue for “all other segments” represents revenue generated by IPS and revenue generated from customers located in India, Japan and China. Allocated expenses of segments include expenses incurred for rendering services from the Company's offshore software development centres and on-site expenses, which 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 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 against the total income of the Company.
Assets and liabilities 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 business segment revenue information is collated based on individual customers invoiced or in relation to which the revenue is otherwise recognized.
2.19.1 Business segments
Three months ended March 31, 2016 and March 31, 2015
(In crore)
Particulars | FS | MFG | ECS | RCL | HILIFE | Hi-TECH | All other segments | Total |
Revenues | 4,522 | 1,748 | 3,635 | 2,727 | 2,083 | 1,327 | 508 | 16,550 |
3,628 | 1,522 | 2,926 | 2,219 | 1,720 | 1,056 | 340 | 13,411 | |
Identifiable operating expenses | 2,215 | 891 | 1,631 | 1,288 | 943 | 636 | 278 | 7,882 |
1,682 | 807 | 1,343 | 990 | 821 | 523 | 193 | 6,359 | |
Allocated expenses | 1,058 | 431 | 896 | 672 | 514 | 327 | 125 | 4,023 |
850 | 384 | 739 | 560 | 434 | 267 | 86 | 3,320 | |
Segment profit | 1,249 | 426 | 1,108 | 767 | 626 | 364 | 105 | 4,645 |
1,096 | 331 | 844 | 669 | 465 | 266 | 61 | 3,732 | |
Unallocable expenses | 425 | |||||||
283 | ||||||||
Operating profit | 4,220 | |||||||
3,449 | ||||||||
Other income, net | 772 | |||||||
881 | ||||||||
Share in Associate's profit / (loss) | (1) | |||||||
(1) | ||||||||
Profit before income taxes | 4,991 | |||||||
4,329 | ||||||||
Income tax expense | 1,394 | |||||||
1,232 | ||||||||
Net profit | 3,597 | |||||||
3,097 | ||||||||
Depreciation and amortization | 419 | |||||||
283 | ||||||||
Non-cash expenses other than depreciation and amortization | 6 | |||||||
– |
Year ended March 31, 2016 and March 31, 2015
(In crore)
Particulars | FS | MFG | ECS | RCL | HILIFE | Hi-TECH | All other segments | Total |
Revenues | 17,024 | 6,948 | 13,547 | 10,226 | 8,090 | 4,891 | 1,715 | 62,441 |
14,394 | 6,172 | 12,005 | 8,864 | 6,702 | 3,918 | 1,264 | 53,319 | |
Identifiable operating expenses | 8,199 | 3,684 | 6,196 | 4,878 | 3,841 | 2,391 | 1,035 | 30,224 |
6,820 | 3,263 | 5,474 | 4,027 | 3,185 | 1,918 | 937 | 25,624 | |
Allocated expenses | 3,986 | 1,704 | 3,322 | 2,508 | 1,984 | 1,199 | 421 | 15,124 |
3,312 | 1,503 | 2,923 | 2,159 | 1,634 | 955 | 308 | 12,794 | |
Segment profit | 4,839 | 1,560 | 4,029 | 2,840 | 2,265 | 1,301 | 259 | 17,093 |
4,262 | 1,406 | 3,608 | 2,678 | 1,883 | 1,045 | 19 | 14,901 | |
Unallocable expenses | 1,473 | |||||||
1,069 | ||||||||
Operating profit | 15,620 | |||||||
13,832 | ||||||||
Other income, net | 3,125 | |||||||
3,427 | ||||||||
Share in Associate's profit / (loss) | (3) | |||||||
(1) | ||||||||
Profit before income taxes | 18,742 | |||||||
17,258 | ||||||||
Income tax expense | 5,251 | |||||||
4,929 | ||||||||
Net profit | 13,491 | |||||||
12,329 | ||||||||
Depreciation and amortization | 1,459 | |||||||
1,069 | ||||||||
Non-cash expenses other than depreciation and amortization | 14 | |||||||
– |
2.19.2 Geographic segments
Three months ended March 31, 2016 and March 31, 2015
(In crore)
Particulars | North America | Europe | India | Rest of the World | Total |
Revenues | 10,235 | 3,878 | 498 | 1,939 | 16,550 |
8,426 | 3,104 | 332 | 1,549 | 13,411 | |
Identifiable operating expenses | 4,954 | 1,845 | 207 | 876 | 7,882 |
3,946 | 1,548 | 146 | 719 | 6,359 | |
Allocated expenses | 2,521 | 952 | 103 | 447 | 4,023 |
2,124 | 776 | 70 | 350 | 3,320 | |
Segment profit | 2,760 | 1,081 | 188 | 616 | 4,645 |
2,356 | 780 | 116 | 480 | 3,732 | |
Unallocable expenses | 425 | ||||
283 | |||||
Operating profit | 4,220 | ||||
3,449 | |||||
Other income, net | 772 | ||||
881 | |||||
Share in Associate's profit / (loss) | (1) | ||||
(1) | |||||
Profit before income taxes | 4,991 | ||||
4,329 | |||||
Income tax expense | 1,394 | ||||
1,232 | |||||
Net profit | 3,597 | ||||
3,097 | |||||
Depreciation and amortization | 419 | ||||
283 | |||||
Non-cash expenses other than depreciation and amortization | 6 | ||||
– |
2.19.2 Geographic segments
Year ended March 31, 2016 and March 31, 2015
(In crore)
Particulars | North America | Europe | India | Rest of the World | Total |
Revenues | 39,139 | 14,373 | 1,623 | 7,306 | 62,441 |
32,794 | 12,829 | 1,284 | 6,412 | 53,319 | |
Identifiable operating expenses | 19,283 | 6,966 | 711 | 3,264 | 30,224 |
15,650 | 6,287 | 704 | 2,983 | 25,624 | |
Allocated expenses | 9,591 | 3,510 | 338 | 1,685 | 15,124 |
7,982 | 3,105 | 267 | 1,440 | 12,794 | |
Segment profit | 10,265 | 3,897 | 574 | 2,357 | 17,093 |
9,162 | 3,437 | 313 | 1,989 | 14,901 | |
Unallocable expenses | 1,473 | ||||
1,069 | |||||
Operating profit | 15,620 | ||||
13,832 | |||||
Other income, net | 3,125 | ||||
3,427 | |||||
Share in Associate's profit / (loss) | (3) | ||||
(1) | |||||
Profit before income taxes | 18,742 | ||||
17,258 | |||||
Income tax expense | 5,251 | ||||
4,929 | |||||
Net profit | 13,491 | ||||
12,329 | |||||
Depreciation and amortization | 1,459 | ||||
1,069 | |||||
Non-cash expenses other than depreciation and amortization | 14 | ||||
– |
2.19.3 Significant clients
No client individually accounted for more than 10% of the revenues in the three months and year ended March 31, 2016 and March 31, 2015.
As per our report of even date attached
for B S R & Co. LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants | |
Firm's Registration Number:101248W/W-100022 |
Supreet Sachdev Partner Membership No. 205385 |
R.Seshasayee Chairman |
Dr. Vishal Sikka Chief Executive Officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bangalore April 15, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer and Executive Vice President |
A.G.S Manikantha Company Secretary |
Auditor’s Report on Quarterly Consolidated Financial Results and Consolidated Year to Date Results of Infosys Limited Pursuant to the Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015
To
The Board of Directors of Infosys Limited
We have audited the quarterly consolidated financial results of Infosys Limited (‘the Company’) and subsidiaries (collectively referred to as ‘the Group’) for the quarter ended March 31, 2016 and the consolidated year to date financial results for the period from April 1, 2015 to March 31, 2016, attached herewith, being submitted by the Company pursuant to the requirement of Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. These quarterly consolidated financial results and consolidated year to date financial results have been prepared from consolidated interim financial statements, which are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial results based on our audit of such consolidated interim financial statements, which have been prepared in accordance with the recognition and measurement principles laid down in the International Accounting Standard (IAS) 34, Interim Financial Reporting, as issued by International Accounting Standards Board.
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 results are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts disclosed as financial results. An audit also includes assessing the accounting principles used and significant estimates made by management. We believe that our audit provides a reasonable basis for our opinion.
In our opinion and to the best of our information and according to the explanations given to us, these quarterly and year to date consolidated financial results:
(i) | include the quarterly and year to date financial results of the following entities: | |
(a) | Infosys Limited; | |
(b) | Infosys BPO Limited; | |
(c) | Infosys (Czech Republic) Limited s.r.o; | |
(d) | Infosys Technologia Do Brasil LTDA; | |
(e) | Infosys Technologies (Australia) Pty Limited; | |
(f) | Infosys Technologies (China) Co. Limited; | |
(g) | Infosys McCamish Systems, LLC; | |
(h) | Infosys Public Services, Inc.; | |
(i) | Infosys Technologies S. de R.L.de C.V; | |
(j) | Infosys Technologies (Sweden) AB; | |
(k) | Infosys Poland Sp z.o.o.; | |
(l) | Infosys Technologies (Shanghai) Company Limited; | |
(m) | Infosys Americas Inc.; | |
(n) | Portland Group Pty Ltd; | |
(o) | Edgeverve Systems Limited; | |
(p) | Infosys Conulting Holding AG; | |
(q) | Lodestone Management Consultants Inc.; | |
(r) | Lodestone Management Consulting Pty Limited; | |
(s) | Infosys Consulting AG; | |
(t) | Lodestone Augmentis AG; | |
(u) | Lodestone GmbH; | |
(v) | Lodestone Management Consultants (Belgium) S.A.; | |
(w) | Infosys Consulting GmbH ; | |
(x) | Infy Consulting Company Ltd.; | |
(y) | Infosys Consulting B.V.; | |
(z) | Infosys Consulting Ltda.; | |
(aa) | Infosys Consulting Sp. z.o.o.; | |
(ab) | Lodestone Management Consultants Portugal, Unipessoal, Lda.; | |
(ac) | S.C. Infosys Consulting S.R.L.; | |
(ad) | Infosys Consulting Pte Ltd.; | |
(ae) | Infosys Consulting SAS; | |
(af) | Infosys Consulting s.r.o.; | |
(ag) | Lodestone Management Consultants Co., Ltd. (China); | |
(ah) | Lodestone Management Consultants GmbH (Austria); | |
(ai) | Infosys Consulting S. R. L.; | |
(aj) | Infosys BPO, S de R.L. de C.V.; | |
(ak) | Infosys Limited Employees’ Welfare Trust; | |
(al) | Infosys Science Foundation; | |
(am) | Panaya Inc.; | |
(an) | Panaya Ltd.; | |
(ao) | Panaya Gmbh; | |
(ap) | Panaya Pty Ltd. | |
(aq) | Panaya Japan Co. Ltd.; | |
(ar) | Infosys Nova Holdings LLC.; | |
(as) | DWA Nova LLC.; | |
(at) | Kallidus Inc.; | |
(au) | Skava Systems Private Limited | |
(av) | Noah Consulting LLC | |
(aw) | Noah Information Management Consulting, Inc.; and | |
(ax) | Infosys Employee Welfare Trust | |
(ii) | have been presented in accordance with the requirements of Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 in this regard; and | |
(iii) | give a true and fair view of the consolidated net profit and other financial information for the quarter ended March 31, 2016 as well as the consolidated year to date results for the period from April 1, 2015 to March 31, 2016. |
for B S R & Co. LLP
Chartered Accountants
Firm’s registration number: 101248W/ W-100022
Supreet Sachdev
Partner
Membership number: 205385
Bangalore
April 15, 2016
Independent Auditors’ Report
To the Board of Directors of Infosys Limited
We have audited the accompanying consolidated financial statements of Infosys Limited (“the Company”) and subsidiaries (collectively referred to as ‘the Group’), which comprise the consolidated balance sheet as at March 31, 2016, the consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation of these consolidated financial statements that give a true and fair view of the consolidated financial position, consolidated financial performance and consolidated cash flows of the Group in accordance with the International Financial Reporting Standards as issued by International Accounting Standards Board (“IFRS”). This responsibility includes the design, implementation and maintenance of internal control relevant to the preparation and presentation of the consolidated financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Group’s preparation and presentation of the consolidated financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Group has in place an adequate internal financial controls system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
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 IFRS:
(a) | in the case of the consolidated balance sheet, of the financial position of the Group as at March 31, 2016; |
(b) | in the case of the consolidated statement of comprehensive income, of the financial performance for year ended on that date; |
(c) | in the case of the consolidated statement of changes in equity, of the changes in equity for the year ended on that date; and |
(d) | in the case of the consolidated statement of cash flows, of the cash flows for the year ended on that date. |
for B S R & Co. LLP
Chartered Accountants
Firm’s Registration Number: 101248W/W - 100022
Supreet Sachdev
Partner
Membership Number: 205385
Bangalore
April 15, 2016
Infosys Limited and subsidiaries
(In crore except equity share data)
Consolidated Balance Sheets as of | Note | March 31, 2016 | March 31, 2015 |
ASSETS | |||
Current assets | |||
Cash and cash equivalents | 2.1 | 32,697 | 30,367 |
Available-for-sale financial assets | 2.2 | 75 | 874 |
Trade receivables | 11,330 | 9,713 | |
Unbilled revenue | 3,029 | 2,845 | |
Prepayments and other current assets | 2.4 | 4,448 | 3,296 |
Derivative financial instruments | 2.7 | 116 | 101 |
Total current assets | 51,695 | 47,196 | |
Non-current assets | |||
Property, plant and equipment | 2.5 | 10,530 | 9,125 |
Goodwill | 2.6 | 3,764 | 3,091 |
Intangible assets | 2.6 | 985 | 638 |
Investment in associate | 2.18 | 103 | 93 |
Available-for-sale financial assets | 2.2 | 1,811 | 1,345 |
Deferred income tax assets | 2.16 | 536 | 537 |
Income tax assets | 2.16 | 5,230 | 4,089 |
Other non-current assets | 2.4 | 735 | 238 |
Total non-current assets | 23,694 | 19,156 | |
Total assets | 75,389 | 66,352 | |
LIABILITIES AND EQUITY | |||
Current liabilities | |||
Trade payables | 386 | 140 | |
Derivative financial instruments | 2.7 | 5 | 3 |
Current income tax liabilities | 2.16 | 3,410 | 2,818 |
Client deposits | 28 | 27 | |
Unearned revenue | 1,332 | 1,052 | |
Employee benefit obligations | 1,341 | 1,069 | |
Provisions | 2.8 | 512 | 478 |
Other current liabilities | 2.9 | 6,225 | 5,796 |
Total current liabilities | 13,239 | 11,383 | |
Non-current liabilities | |||
Deferred income tax liabilities | 2.16 | 256 | 160 |
Other non-current liabilities | 2.9 | 115 | 46 |
Total liabilities | 13,610 | 11,589 | |
Equity | |||
Share capital- 5 par value 240,00,00,000 (120,00,00,000) equity shares authorized, issued and outstanding 228,56,21,088 (114,28,05,132) net of 1,13,23,576 (56,67,200) treasury shares as of March 31, 2016 (March 31, 2015), respectively | 1,144 | 572 | |
Share premium | 2,241 | 2,806 | |
Retained earnings | 57,655 | 50,978 | |
Cash flow hedge reserve | – | – | |
Other reserves | – | – | |
Other components of equity | 739 | 407 | |
Total equity attributable to equity holders of the Company | 61,779 | 54,763 | |
Non-controlling interests | – | – | |
Total equity | 61,779 | 54,763 | |
Total liabilities and equity | 75,389 | 66,352 |
The accompanying notes form an integral part of the consolidated financial statements
As per our report of even date attached
for B S R & Co. LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants
Firm’s Registration No : 101248W/W-100022
Supreet Sachdev Partner Membership No. 205385 |
R.Seshasayee Chairman |
Dr. Vishal Sikka Chief Executive Officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bangalore April 15, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer and Executive Vice President |
A.G.S Manikantha Company Secretary |
Infosys Limited and subsidiaries
(In crore except equity share and per equity share data)
Consolidated Statements of Comprehensive Income | Note | Year ended March 31, | |
2016 | 2015 | ||
Revenues | 62,441 | 53,319 | |
Cost of sales | 2.10 | 39,098 | 32,883 |
Gross profit | 23,343 | 20,436 | |
Operating expenses: | |||
Selling and marketing expenses | 2.10 | 3,431 | 2,941 |
Administrative expenses | 2.10 | 4,292 | 3,663 |
Total operating expenses | 7,723 | 6,604 | |
Operating profit | 15,620 | 13,832 | |
Other income, net | 2.13 | 3,125 | 3,427 |
Share in associate's profit / (loss) | (3) | (1) | |
Profit before income taxes | 18,742 | 17,258 | |
Income tax expense | 2.16 | 5,251 | 4,929 |
Net profit | 13,491 | 12,329 | |
Other comprehensive income | |||
Items that will not be reclassified to profit or loss | |||
Remeasurement of the net defined benefit liability/asset | 2.11 & 2.16 | (12) | (47) |
(12) | (47) | ||
Items that may be reclassified subsequently to profit or loss | |||
Fair value changes on available-for-sale financial asset | 2.2 & 2.16 | 41 | 79 |
Exchange differences on translation of foreign operations | 303 | (195) | |
Fair value changes on cash flow hedges | – | – | |
344 | (116) | ||
Total other comprehensive income, net of tax | 332 | (163) | |
Total comprehensive income | 13,823 | 12,166 | |
Profit attributable to: | |||
Owners of the company | 13,491 | 12,329 | |
Non-controlling interests | – | – | |
13,491 | 12,329 | ||
Total comprehensive income attributable to: | |||
Owners of the company | 13,823 | 12,166 | |
Non-controlling interests | – | – | |
13,823 | 12,166 | ||
Earnings per equity share | |||
Basic () | 59.03 | 53.94 | |
Diluted () | 59.02 | 53.94 | |
Weighted average equity shares used in computing earnings per equity share | 2.17 | ||
Basic | 228,56,16,160 | 228,56,10,264 | |
Diluted | 228,57,18,894 | 228,56,42,940 |
The accompanying notes form an integral part of the consolidated financial statements
As per our report of even date attached
for B S R & Co. LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants
Firm’s Registration No : 101248W/W-100022
Supreet Sachdev Partner Membership No. 205385 |
R.Seshasayee Chairman |
Dr. Vishal Sikka Chief Executive Officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bangalore April 15, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer and Executive Vice President |
A.G.S Manikantha Company Secretary |
Infosys Limited and subsidiaries
Consolidated Statements of Changes in Equity
(In crore except equity share data)
Shares(*) | Share capital | Share premium | Retained earnings | Other reserves | Other components of equity | Cash Flow Hedge Reserve | Total equity attributable to equity holders of the Company | |
Balance as of April 1, 2014 | 57,14,02,566 | 286 | 3,090 | 43,584 | – | 570 | – | 47,530 |
Changes in equity for the year ended March 31, 2015 |
||||||||
Increase in share capital on account of bonus issue# (refer to note 2.12) | 57,14,02,566 | 286 | – | – | – | – | – | 286 |
Amounts utilized for bonus issue (refer note 2.12)# | – | – | (286) | – | – | – | – | (286) |
Employee stock compensation expense (refer to note 2.15) | – | – | 2 | – | – | – | – | 2 |
Remeasurement of the net defined benefit liability/asset, net of tax effect ( refer note 2.11 and 2.16) | – | – | – | – | – | (47) | – | (47) |
Dividends (including corporate dividend tax) | – | – | – | (4,935) | – | – | – | (4,935) |
Fair value changes on available-for-sale financial assets, net of tax effect (refer note 2.2 and 2.16) | – | – | – | – | – | 79 | – | 79 |
Net profit | – | – | – | 12,329 | – | – | – | 12,329 |
Exchange differences on translation of foreign operations | – | – | – | – | – | (195) | – | (195) |
Balance as of March 31, 2015 | 114,28,05,132 | 572 | 2,806 | 50,978 | – | 407 | – | 54,763 |
Changes in equity for the year ended March 31, 2016 |
||||||||
Increase in share capital on account of bonus issue# (refer to note 2.12) | 114,28,05,132 | 572 | – | – | – | – | – | 572 |
Amounts utilized for bonus issue (refer note 2.12)# | – | – | (572) | – | – | – | – | (572) |
Shares issued on exercise of employee stock options (Refer note 2.15) | 10,824 | – | – | – | – | – | – | – |
Transferred to other reserves (refer note 2.12) | – | – | – | (591) | 591 | – | – | – |
Transferred from other reserves (refer note 2.12) | – | – | – | 591 | (591) | – | – | – |
Employee stock compensation expense (refer to note 2.15) | – | – | 7 | – | – | – | – | 7 |
Remeasurement of the net defined benefit liability/asset, net of tax effect (refer note 2.11 and 2.16) | – | – | – | – | – | (12) | – | (12) |
Dividends (including corporate dividend tax) | – | – | – | (6,814) | – | – | – | (6,814) |
Fair value changes on available-for-sale financial assets, net of tax effect (refer note 2.2 and 2.16) | – | – | – | – | – | 41 | – | 41 |
Fair value changes on derivatives designated as cash flow hedge | – | – | – | – | – | – | – | – |
Net profit | – | – | – | 13,491 | – | – | – | 13,491 |
Exchange differences on translation of foreign operations | – | – | – | – | – | 303 | – | 303 |
Balance as of March 31, 2016 | 228,56,21,088 | 1,144 | 2,241 | 57,655 | – | 739 | – | 61,779 |
The accompanying notes form an integral part of the consolidated financial statements.
# | net of treasury shares |
* | excludes treasury shares of 1,13,23,576 as of March 31, 2016, 56,67,200 as of March 31, 2015 and 28,33,600 as of April 1, 2014, held by consolidated trust. |
As per our report of even date attached
for B S R & Co. LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants
Firm’s Registration No : 101248W/W-100022
Supreet Sachdev Partner Membership No. 205385 |
R.Seshasayee Chairman |
Dr. Vishal Sikka Chief Executive Officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bangalore April 15, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer and Executive Vice President |
A.G.S Manikantha Company Secretary |
Infosys Limited and subsidiaries
(In crore)
Consolidated Statements of Cash Flows | Note | Year ended March 31, | |
2016 | 2015 | ||
Operating activities: | |||
Net profit | 13,491 | 12,329 | |
Adjustments to reconcile net profit to net cash provided by operating activities: | |||
Depreciation and amortization | 2.5 and 2.6 | 1,459 | 1,069 |
Income tax expense | 2.16 | 5,251 | 4,929 |
Income on available-for-sale financial assets and certificates of deposits | (176) | (292) | |
Effect of exchange rate changes on assets and liabilities | 71 | 97 | |
Deferred purchase price | 149 | 252 | |
Provision for doubtful account receivables | (52) | 171 | |
Other adjustments | 169 | 79 | |
Changes in working capital | |||
Trade receivables | (1,479) | (1,475) | |
Prepayments and other assets | (1,442) | (495) | |
Unbilled revenue | (175) | (34) | |
Trade payables | 242 | (17) | |
Client deposits | 1 | (13) | |
Unearned revenue | 280 | 272 | |
Other liabilities and provisions | 319 | 631 | |
Cash generated from operations | 18,108 | 17,503 | |
Income taxes paid | 2.16 | (5,865) | (6,751) |
Net cash provided by operating activities | 12,243 | 10,752 | |
Investing activities: | |||
Expenditure on property, plant and equipment including intangible assets net of sale proceeds, including changes in retention money and capital creditors | 2.5 and 2.9 | (2,723) | (2,247) |
Loans to employees | (75) | (8) | |
Deposits placed with corporation | (142) | (135) | |
Income on available-for-sale financial assets and certificates of deposit | 168 | 327 | |
Investment in associate | – | (94) | |
Payment for acquisition of business, net of cash acquired | 2.3 | (747) | (1,282) |
Investment in preference securities | (82) | – | |
Investment in other available-for-sale financial assets | (22) | – | |
Investment in quoted debt securities | (302) | (1) | |
Redemption of certificates of deposit | – | 830 | |
Investment in liquid mutual fund units | (24,171) | (23,892) | |
Redemption of liquid mutual fund units | 24,947 | 25,096 | |
Investment in fixed maturity plan securities | – | (30) | |
Redemption of fixed maturity plan securities | 33 | 157 | |
Net cash used in investing activities | (3,116) | (1,279) | |
Financing activities: | |||
Payment of dividends (including corporate dividend tax) | (6,813) | (4,935) | |
Net cash used in financing activities | (6,813) | (4,935) | |
Effect of exchange rate changes on cash and cash equivalents | 16 | (121) | |
Net decrease in cash and cash equivalents | 2,314 | 4,538 | |
Cash and cash equivalents at the beginning | 2.1 | 30,367 | 25,950 |
Cash and cash equivalents at the end | 2.1 | 32,697 | 30,367 |
Supplementary information: | |||
Restricted cash balance | 2.1 | 492 | 364 |
The accompanying notes form an integral part of the consolidated financial statements.
As per our report of even date attached
for B S R & Co. LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants
Firm’s Registration No : 101248W/W-100022
Supreet Sachdev Partner Membership No. 205385 |
R.Seshasayee Chairman |
Dr. Vishal Sikka Chief Executive Officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bangalore April 15, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer and Executive Vice President |
A.G.S Manikantha Company Secretary |
Notes to the Consolidated Financial Statements
1. Company Overview and Significant Accounting Policies
1.1 | Company overview |
Infosys is a global leader in consulting, technology, outsourcing and next-generation services. Along with its subsidiaries, Infosys provides Business IT services (comprising application development and maintenance, independent validation, infrastructure management, engineering services comprising product engineering and life cycle solutions and business process management); Consulting and systems integration services (comprising consulting, enterprise solutions, systems integration and advanced technologies); Products, business platforms and solutions to accelerate intellectual property-led innovation including Finacle, our banking solution; and offerings in the areas of Analytics, Cloud, and Digital Transformation.
Infosys together with its subsidiaries and controlled trusts is herein after referred to as the "Group".
The company is a public limited company incorporated and domiciled in India and has its registered office at Bangalore, Karnataka, India. The company has its primary listings on the BSE Limited and National Stock Exchange in India. The company’s American Depositary Shares representing equity shares are also listed on the New York Stock Exchange (NYSE), Euronext London and Euronext Paris.
The Group's consolidated financial statements are authorized for issue by the company's Board of Directors on April 15, 2016.
1.2 Basis of preparation of financial statements
These consolidated financial statements have been prepared in compliance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS), under the historical cost convention on the accrual basis except for certain financial instruments and prepaid gratuity benefits which have been measured at fair values. Accounting policies have been applied consistently to all periods presented in these consolidated financial statements.
1.3 Basis of consolidation
Infosys consolidates entities which it owns or controls. The consolidated financial statements comprise the financial statements of the company, its controlled trusts and its subsidiaries as disclosed in Note 2.18. Control exists when the parent has power over the entity, is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns by using its power over the entity. Power is demonstrated through existing rights that give the ability to direct relevant activities, those which significantly affect the entity's returns. Subsidiaries are consolidated from the date control commences until the date control ceases.
The financial statements of the Group companies are consolidated on a line-by-line basis and intra-group balances and transactions including unrealized gain / loss from such transactions are eliminated upon consolidation. These financial statements are prepared by applying uniform accounting policies in use at the Group. Non-controlling interests which represent part of the net profit or loss and net assets of subsidiaries that are not, directly or indirectly, owned or controlled by the company, are excluded.
Associates are entities over which the group has significant influence but not control. Investments in associates are accounted for using the equity method of accounting. The investment is initially recognized at cost, and the carrying amount is increased or decreased to recognize the investor’s share of the profit or loss of the investee after the acquisition date. The group’s investment in associates includes goodwill identified on acquisition.
1.4 Use of estimates
The preparation of the financial statements in conformity with IFRS requires management to make estimates, judgments and assumptions. These estimates, judgments and assumptions affect the application of accounting policies and the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the period. Application of accounting policies that require critical accounting estimates involving complex and subjective judgments and the use of assumptions in these financial statements have been disclosed in Note 1.5. Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes in estimates are made as management becomes aware of changes in circumstances surrounding the estimates. Changes in estimates are reflected in the financial statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the consolidated financial statements.
1.5 Critical accounting estimates
a. Revenue recognition
The group uses the percentage-of-completion method in accounting for its fixed-price contracts. Use of the percentage-of-completion method requires the group to estimate the efforts or costs expended to date as a proportion of the total efforts or costs to be expended. Efforts or costs expended have 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 expected contract estimates at the reporting date.
b. Income taxes
The company's two major tax jurisdictions are India and the U.S., though the company also files tax returns in other overseas jurisdictions. Significant judgments are involved in determining the provision for income taxes, including amount expected to be paid/recovered for uncertain tax positions. Also refer to Note 2.16.
c. Business combinations and intangible assets
Business combinations are accounted for using IFRS 3 (Revised), Business Combinations. IFRS 3 requires the identifiable intangible assets and contingent consideration to be fair valued in order to ascertain the net fair value of identifiable assets, liabilities and contingent liabilities of the acquiree. Significant estimates are required to be made in determining the value of contingent consideration and intangible assets. These valuations are conducted by independent valuation experts.
d. Property, plant and equipment
Property, plant and equipment represent a significant proportion of the asset base of the Group. The charge in respect of periodic depreciation is derived after determining an estimate of an asset’s expected useful life and the expected residual value at the end of its life. The useful lives and residual values of Group's assets are determined by management at the time the asset is acquired and reviewed periodically, including at each financial year end. The lives are based on historical experience with similar assets as well as anticipation of future events, which may impact their life, such as changes in technology.
e. Impairment of Goodwill
"Goodwill is tested for impairment on an annual basis and whenever there is an indication that the recoverable amount of a cash generating unit is less than its carrying amount based on a number of factors including operating results, business plans, future cash flows and economic conditions. The recoverable amount of cash generating units is determined based on higher of value-in-use and fair value less cost to sell. The goodwill impairment test is performed at the level of the cash-generating unit or groups of cash-generating units which are benefitting from the synergies of the acquisition and which represents the lowest level at which goodwill is monitored for internal management purposes.
Market related information and estimates are used to determine the recoverable amount. Key assumptions on which management has based its determination of recoverable amount include estimated long term growth rates, weighted average cost of capital and estimated operating margins. Cash flow projections take into account past experience and represent management’s best estimate about future developments."
1.6 Revenue recognition
The company derives revenues primarily from software development and related services and from the licensing of software products. Arrangements with customers for software related services are either on a fixed-price, fixed-timeframe or on a time-and-material basis.
Revenue on time-and-material contracts are 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, where there is no uncertainty as to measurement or collectability of consideration, is recognized as per the percentage-of-completion method. When there is uncertainty as to measurement or ultimate collectability, revenue recognition is postponed until such uncertainty is resolved. Efforts or costs expended have been used to measure progress towards completion as there is a direct relationship between input and productivity. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the current contract estimates. Costs and earnings in excess of billings are classified as unbilled revenue while billings in excess of costs and earnings are classified as unearned revenue. Deferred contract costs are amortized over the term of the contract. Maintenance revenue is recognized ratably over the term of the underlying maintenance arrangement.
In arrangements for software development and related services and maintenance services, the company has applied the guidance in IAS 18, Revenue, by applying the revenue recognition criteria for each separately identifiable component of a single transaction. The arrangements generally meet the criteria for considering software development and related services as separately identifiable components. For allocating the consideration, the company has measured the revenue in respect of each separable component of a transaction at its fair value, in accordance with principles given in IAS 18. The price that is regularly charged for an item when sold separately is the best evidence of its fair value. In cases where the company is unable to establish objective and reliable evidence of fair value for the software development and related services, the company has used a residual method to allocate the arrangement consideration. In these cases the balance of the consideration, after allocating the fair values of undelivered components of a transaction has been allocated to the delivered components for which specific fair values do not exist.
License fee revenues are recognized when the general revenue recognition criteria given in IAS 18 are met. Arrangements to deliver software products generally have three elements: license, implementation and Annual Technical Services (ATS). The company has applied the principles given in IAS 18 to account for revenues from these multiple element arrangements. Objective and reliable evidence of fair value has been established for ATS. Objective and reliable evidence of fair value is the price charged when the element is sold separately. When other services are provided in conjunction with the licensing arrangement and objective and reliable evidence of their fair values have been established, the revenue from such contracts are allocated to each component of the contract in a manner, whereby revenue is deferred for the undelivered services and the residual amounts are recognized as revenue for delivered elements. In the absence of objective and reliable evidence of fair value for implementation, the entire arrangement fee for license and implementation is recognized using the percentage-of-completion method 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.
Advances received for services and products are reported as client deposits until all conditions for revenue recognition are met.
The company accounts for volume discounts and pricing incentives to customers as a reduction of revenue based on the ratable allocation of the discounts/ incentives amount to each of the underlying revenue transaction that results in progress by the customer towards earning the discount/ incentive. Also, when the level of discount varies with increases in levels of revenue transactions, the company recognizes the liability based on its estimate of the customer's future purchases. If it is probable that the criteria for the discount will not be met, or if the amount thereof cannot be estimated reliably, then discount is not recognized until the payment is probable and the amount can be estimated reliably. The company recognizes changes in the estimated amount of obligations for discounts in the period in which the change occurs. The discounts are passed on to the customer either as direct payments or as a reduction of payments due from the customer.
The company presents revenues net of value-added taxes in its statement of comprehensive income.
1.7 Property, plant and equipment
Property, plant and equipment are stated at cost, less accumulated depreciation and impairment, if any. Costs directly attributable to acquisition are capitalized until the property, plant and equipment are ready for use, as intended by management. The group depreciates property, plant and equipment over their estimated useful lives using the straight-line method. The estimated useful lives of assets are as follows:
Building | 22-25 years |
Plant and machinery | 5 years |
Computer equipment | 3-5 years |
Furniture and fixtures | 5 years |
Vehicles | 5 years |
Depreciation methods, useful lives and residual values are reviewed periodically, including at each financial year end. (Refer note 2.5)
Advances paid towards the acquisition of property, plant and equipment 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’. Subsequent expenditures relating to property, plant and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to the Group and the cost of the item can be measured reliably. Repairs and maintenance costs are recognized in net profit in the statement of comprehensive income when incurred. The cost and related accumulated depreciation are eliminated from the financial statements upon sale or retirement of the asset and the resultant gains or losses are recognized in net profit in the statement of comprehensive income. Assets to be disposed off are reported at the lower of the carrying value or the fair value less cost to sell.
1.8 Business combinations
Business combinations have been accounted for using the acquisition method under the provisions of IFRS 3 (Revised), Business Combinations.
The cost of an acquisition is measured at the fair value of the assets transferred, equity instruments issued and liabilities incurred or assumed at the date of acquisition, which is the date on which control is transferred to the Group. The cost of acquisition also includes the fair value of any contingent consideration. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value on the date of acquisition.
Business combinations between entities under common control is outside the scope of IFRS 3 (Revised), Business Combinations and is accounted for at carrying value.
Transaction costs that the Group incurs in connection with a business combination such as finders’ fees, legal fees, due diligence fees, and other professional and consulting fees are expensed as incurred.
1.9 Goodwill
Goodwill represents the cost of business acquisition in excess of the Group's interest in the net fair value of identifiable assets, liabilities and contingent liabilities of the acquiree. When the net fair value of the identifiable assets, liabilities and contingent liabilities acquired exceeds the cost of business acquisition, a gain is recognized immediately in net profit in the statement of comprehensive income. Goodwill is measured at cost less accumulated impairment losses.
1.10 Intangible assets
Intangible assets are stated at cost less accumulated amortization and impairment. Intangible assets are amortized over their respective individual estimated useful lives on a straight-line basis, from the date that they are available for use. 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. Amortization methods and useful lives are reviewed periodically including at each financial year end.
Research costs are expensed as incurred. Software product development costs are expensed as incurred unless technical and commercial feasibility of the project is demonstrated, future economic benefits are probable, the company has an intention and ability to complete and use or sell the software and the costs can be measured reliably. The costs which can be capitalized include the cost of material, direct labour, overhead costs that are directly attributable to preparing the asset for its intended use. Research and development costs and software development costs incurred under contractual arrangements with customers are accounted as cost of sales.
1.11 Financial instruments
Financial instruments of the Group are classified in the following categories: non-derivative financial instruments comprising of loans and receivables, available-for-sale financial assets and trade and other payables; derivative financial instruments, share capital and treasury shares. The classification of financial instruments depends on the purpose for which those were acquired. Management determines the classification of its financial instruments at initial recognition. Regular way purchase and sale of financial assets are accounted for at trade date.
a. Non-derivative financial instruments
(i) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are presented as current assets, except for those maturing later than 12 months after the balance sheet date which are presented as non-current assets. Loans and receivables are measured initially at fair value plus transaction costs and subsequently carried at amortized cost using the effective interest method, less any impairment loss or provisions for doubtful accounts. Loans and receivables are represented by trade receivables, net of allowances for impairment, unbilled revenue, cash and cash equivalents, prepayments, certificates of deposit, and other assets. Cash and cash equivalents comprise cash and bank deposits and deposits with corporations. The company considers all highly liquid investments with a remaining maturity at the date of purchase of three months or less and that are readily convertible to known amounts of cash to be cash equivalents. Certificates of deposit is a negotiable money market instrument for funds deposited at a bank or other eligible financial institution for a specified time period. For these financial instruments, the carrying amounts approximate fair value due to the short maturity of these instruments. Loans and receivables are reclassified to available-for-sale financial assets when the financial asset becomes quoted in an active market.
(ii) Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated in this category or are not classified in any of the other categories. Available-for-sale financial assets are recognized initially at fair value plus transactions costs. Subsequent to initial recognition these are measured at fair value and changes therein, other than impairment losses and foreign exchange gains and losses on available-for-sale monetary items are recognized directly in other comprehensive income. When an investment is derecognized, the cumulative gain or loss in other comprehensive income is transferred to net profit in the statement of comprehensive income. These are presented as current assets unless management intends to dispose off the assets after 12 months from the balance sheet date.
(iii) Trade and other payables
Trade and other payables are initially recognized at fair value, and subsequently carried at amortized cost using the effective interest method. For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
b. Derivative financial instruments
The group holds derivative financial instruments such as foreign exchange forward and option contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The counterparty for these contracts is generally a bank or a financial institution.
(i) Financial assets or financial liabilities, at fair value through profit or loss.
This category has derivative financial assets or liabilities which are not designated as hedges.
Although the group believes that these derivatives constitute hedges from an economic perspective, they may not qualify for hedge accounting under IAS 39, Financial Instruments: Recognition and Measurement. Any derivative that is either not designated a hedge, or is so designated but is ineffective as per IAS 39, is categorized as a financial asset or financial liability, at fair value through profit or loss.
Derivatives not designated as hedges are recognized initially at fair value and attributable transaction costs are recognized in net profit in the statement of comprehensive income when incurred. Subsequent to initial recognition, these derivatives are measured at fair value through profit or loss and the resulting exchange gains or losses are included in other income. Assets/ liabilities in this category are presented as current assets/current liabilities if they are either held for trading or are expected to be realized within 12 months after the balance sheet date.
(ii) Cash flow hedge
The group designates certain foreign exchange forward and options contracts as cash flow hedges to mitigate the risk of foreign exchange exposure on highly probable forecast cash transactions.
When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income and accumulated in the cash flow hedging reserve. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in the net profit in the statement of comprehensive income. If the hedging instrument no longer meets the criteria for hedge accounting, then hedge accounting is discontinued prospectively. If the hedging instrument expires or is sold, terminated or exercised, the cumulative gain or loss on the hedging instrument recognized in cash flow hedging reserve till the period the hedge was effective remains in cash flow hedging reserve until the forecasted transaction occurs. The cumulative gain or loss previously recognized in the cash flow hedging reserve is transferred to the net profit in the statement of comprehensive income upon the occurrence of the related forecasted transaction. If the forecasted transaction is no longer expected to occur, then the amount accumulated in cash flow hedging reserve is reclassified to net profit in the statement of comprehensive income.
c. Share capital and treasury shares
Ordinary Shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares and share options are recognized as a deduction from equity, net of any tax effects.
Treasury Shares
When any entity within the Group purchases the company's ordinary shares, the consideration paid including any directly attributable incremental cost is presented as a deduction from total equity, until they are cancelled, sold or reissued. When treasury shares are sold or reissued subsequently, the amount received is recognized as an increase in equity, and the resulting surplus or deficit on the transaction is transferred to/ from share premium.
1.12 Impairment
a. Financial assets
The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired. A financial asset is considered impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.
(i) Loans and receivables
Impairment loss in respect of loans and receivables measured at amortized cost are calculated as the difference between their carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. Such impairment loss is recognized in net profit in the statement of comprehensive income.
(ii) Available-for-sale financial assets
Significant or prolonged decline in the fair value of the security below its cost and the disappearance of an active trading market for the security are objective evidence that the security is impaired. An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its fair value and is recognized in net profit in the statement of comprehensive income. The cumulative loss that was recognized in other comprehensive income is transferred to net profit in the statement of comprehensive income upon impairment.
b. Non-financial assets
(i) Goodwill
Goodwill is tested for impairment on an annual basis and whenever there is an indication that goodwill may be impaired, relying on a number of factors including operating results, business plans and future cash flows. For the purpose of impairment testing, goodwill acquired in a business combination is allocated to the Group's cash generating units (CGU) or groups of CGU’s expected to benefit from the synergies arising from the business combination. A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or group of assets. Impairment occurs when the carrying amount of a CGU including the goodwill, exceeds the estimated recoverable amount of the CGU. The recoverable amount of a CGU is the higher of its fair value less cost to sell and its value-in-use. Value-in-use is the present value of future cash flows expected to be derived from the CGU.
Total impairment loss of a CGU is allocated first to reduce the carrying amount of goodwill allocated to the CGU and then to the other assets of the CGU pro-rata on the basis of the carrying amount of each asset in the CGU. An impairment loss on goodwill is recognized in net profit in the statement of comprehensive income and is not reversed in the subsequent period.
(ii) Intangible assets and property, plant and equipment
Intangible assets and property, plant and equipment are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the CGU to which the asset belongs.
If such assets are considered to be impaired, the impairment to be recognized in net profit in the statement of comprehensive income is measured by the amount by which the carrying value of the assets exceeds the estimated recoverable amount of the asset.
c. Reversal of impairment loss
An impairment loss for financial assets is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognized. An impairment loss in respect of goodwill is not reversed. In respect of other assets, an impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. The carrying amount of an asset other than goodwill is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortization or depreciation) had no impairment loss been recognized for the asset in prior years. A reversal of impairment loss for an asset other than goodwill and available- for-sale financial assets that are equity securities is recognized in net profit in the statement of comprehensive income. For available-for-sale financial assets that are equity securities, the reversal is recognized in other comprehensive income.
1.13 Fair value of financial instruments
In determining the fair value of its financial instruments, the group uses a variety of methods and assumptions that are based on market conditions and risks existing at each reporting date. The methods used to determine fair value include discounted cash flow analysis, available quoted market prices and dealer quotes. All methods of assessing fair value result in general approximation of value, and such value may never actually be realized.
For all other financial instruments the carrying amounts approximate fair value due to the short maturity of those instruments. The fair value of securities, which do not have an active market and where it is not practicable to determine the fair values with sufficient reliability, are carried at cost less impairment.
1.14 Provisions
A provision is recognized if, as a result of a past event, the Group has a present legal or constructive obligation that is reasonably estimable, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.
a. Post sales client support
The group provides its clients with a fixed-period post sales support for corrections of errors and 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 sales. The group 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.
b. Onerous contracts
Provisions for onerous contracts are recognized when the expected benefits to be derived by the Group from a contract are lower than the unavoidable costs of meeting the future obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established the Group recognizes any impairment loss on the assets associated with that contract.
1.15 Foreign currency
Functional currency
The functional currency of Infosys, Infosys BPO, controlled trusts, EdgeVerve and Skava is the Indian rupee. The functional currencies for Infosys Australia, Infosys China, Infosys Mexico, Infosys Sweden, Infosys Brasil, Infosys Public Services, Infosys Shanghai, Infosys Lodestone, Infosys Americas, Infosys Nova, Panaya, Kallidus and Noah are the respective local currencies. These financial statements are presented in Indian rupees (rounded off to crore; one crore equals ten million).
Transactions and translations
Foreign-currency denominated monetary assets and liabilities are translated into the relevant functional currency at exchange rates in effect at the balance sheet date. The gains or losses resulting from such translations are included in net profit in the statement of comprehensive income. Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at fair value are translated at the exchange rate prevalent at the date when the fair value was determined. Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at historical cost are translated at the exchange rate prevalent at the date of transaction.
Transaction gains or losses realized upon settlement of foreign currency transactions are included in determining net profit for the period in which the transaction is settled. Revenue, expense and cash-flow items denominated in foreign currencies are translated into the relevant functional currencies using the exchange rate in effect on the date of the transaction.
The translation of financial statements of the foreign subsidiaries to the functional currency of the company is performed for assets and liabilities using the exchange rate in effect at the balance sheet date and for revenue, expense and cash-flow items using the average exchange rate for the respective periods. The gains or losses resulting from such translation are included in currency translation reserves under other components of equity. When a subsidiary is disposed off, in full, the relevant amount is transferred to net profit in the statement of comprehensive income. However when a change in the parent's ownership does not result in loss of control of a subsidiary, such changes are recorded through equity.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the exchange rate in effect at the balance sheet date.
1.16 Earnings per equity share
Basic earnings per equity share is computed by dividing the net profit attributable to the equity holders of the company by the weighted average number of equity shares outstanding during the period. Diluted earnings per equity share is computed by dividing the net profit attributable to the equity holders of the company by the weighted average number of equity shares considered for deriving basic earnings per equity share and also the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares. The dilutive potential equity shares are adjusted for the proceeds receivable had the equity shares been actually issued at fair value (i.e. the average market value of the outstanding equity shares). Dilutive potential equity shares are deemed converted as of the beginning of the period, unless issued at a later date. Dilutive potential equity shares are determined independently for each period presented.
The number of equity shares and potentially dilutive equity shares are adjusted retrospectively for all periods presented for any share splits and bonus shares issues including for changes effected prior to the approval of the financial statements by the Board of Directors.
1.17 Income taxes
Income tax expense comprises current and deferred income tax. Income tax expense is recognized in net profit in the statement of comprehensive income except to the extent that it relates to items recognized directly in equity, in which case it is recognized in other comprehensive income. Current income tax for current and prior periods is recognized at the amount expected to be paid to or recovered from the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date. Deferred income tax assets and liabilities are recognized for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements except when the deferred income tax arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of the transaction. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
Deferred income tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date and are 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 income tax assets and liabilities is recognized as income or expense in the period that includes the enactment or the substantive enactment date. A deferred income tax asset is recognized to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can be utilized. Deferred income taxes are not provided on the undistributed earnings of subsidiaries and branches where it is expected that the earnings of the subsidiary or branch will not be distributed in the foreseeable future. The group offsets current tax assets and current tax liabilities, where it has a legally enforceable right to set off the recognized amounts and where it intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously. Tax benefits of deductions earned on exercise of employee share options in excess of compensation charged to income are credited to share premium.
1.18 Employee benefits
1.18.1 Gratuity
The Group provides for gratuity, a defined benefit retirement plan ('the Gratuity Plan') covering eligible employees of Infosys and its Indian subsidiaries. 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 with the Group.
Liabilities with regard to the Gratuity Plan are determined by actuarial valuation, performed by an independent actuary, at each balance sheet date using the projected unit credit method. The company fully contributes all ascertained liabilities to the Infosys Limited Employees' Gratuity Fund Trust (the Trust). In case of Infosys BPO and EdgeVerve, contributions are made to the Infosys BPO's Employees' Gratuity Fund Trust and EdgeVerve Systems Limited Employees' Gratuity Fund Trust, respectively. Trustees administer contributions made to the Trusts and contributions are invested in a scheme with Life Insurance Corporation of India as permitted by law of India.
The Group recognizes the net obligation of a defined benefit plan in its balance sheet as an asset or liability. Gains and losses through re-measurements of the net defined benefit liability/(asset) are recognized in other comprehensive income. The actual return of the portfolio of plan assets, in excess of the yields computed by applying the discount rate used to measure the defined benefit obligation is recognized in other comprehensive income. The effect of any plan amendments are recognized in net profits in the statement of comprehensive income.
1.18.2 Superannuation
Certain employees of Infosys, Infosys BPO and EdgeVerve are participants in a defined contribution plan. The Group has no further obligations to the Plan beyond its monthly contributions which are periodically contributed to a trust fund, the corpus of which is invested with the Life Insurance Corporation of India.
1.18.3 Provident fund
Eligible employees of Infosys receive benefits from a provident fund, which is a defined benefit plan. Both the eligible 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 portion to the Infosys Limited Employees' Provident Fund Trust. The trust invests in specific designated instruments as permitted by Indian law. 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 make good the shortfall, if any, between the return from the investments of the Trust and the notified interest rate.
In respect of Indian subsidiaries, eligible employees receive benefits from a provident fund, which is a defined contribution plan. Both the eligible employee and the respective companies 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. The companies have no further obligation to the plan beyond its monthly contributions.
1.18.4 Compensated absences
The Group has a policy on compensated absences which are both accumulating and non-accumulating in nature. The expected cost of accumulating compensated absences is determined by actuarial valuation performed by an independent actuary at each balance sheet date using projected unit credit method on the additional amount expected to be paid/availed as a result of the unused entitlement that has accumulated at the balance sheet date. Expense on non-accumulating compensated absences is recognized in the period in which the absences occur.
1.19 Share-based compensation
The Group recognizes compensation expense relating to share-based payments in net profit using fair-value in accordance with IFRS 2, Share-Based Payment. The estimated fair value of awards is charged to income on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was in-substance, multiple awards with a corresponding increase to share premium.
1.20 Dividends
Final dividends on shares are recorded as a liability on the date of approval by the shareholders and interim dividends are recorded as a liability on the date of declaration by the company's Board of Directors.
1.21 Operating profit
Operating profit for the Group is computed considering the revenues, net of cost of sales, selling and marketing expenses and administrative expenses.
1.22 Other income
Other income is comprised primarily of interest income, dividend income and exchange gain/loss on forward and options contracts and on translation of other assets and liabilities. Interest income is recognized using the effective interest method. Dividend income is recognized when the right to receive payment is established.
1.23 Leases
Leases under which the group assumes substantially all the risks and rewards of ownership are classified as finance leases. When acquired, such assets are capitalized at fair value or present value of the minimum lease payments at the inception of the lease, whichever is lower. Lease payments under operating leases are recognized as an expense on a straight line basis in net profit in the statement of comprehensive income over the lease term.
1.24 Government grants
The Group recognizes government grants only when there is reasonable assurance that the conditions attached to them shall be complied with, and the grants will be received. Government grants related to assets are treated as deferred income and are recognized in net profit in the statement of comprehensive income on a systematic and rational basis over the useful life of the asset. Government grants related to revenue are recognized on a systematic basis in net profit in the statement of comprehensive income over the periods necessary to match them with the related costs which they are intended to compensate.
1.25 Recent accounting pronouncements
1.25.1 Standards issued but not yet effective
"IFRS 9 Financial instruments: In July 2014, the International Accounting Standards Board issued the final version of IFRS 9, Financial Instruments. The standard reduces the complexity of the current rules on financial instruments as mandated in IAS 39. IFRS 9 has fewer classification and measurement categories as compared to IAS 39 and has eliminated the categories of held to maturity, available for sale and loans and receivables. Further it eliminates the rule-based requirement of segregating embedded derivatives and tainting rules pertaining to held to maturity investments. For an investment in an equity instrument which is not held for trading, IFRS 9 permits an irrevocable election, on initial recognition, on an individual share-by-share basis, to present all fair value changes from the investment in other comprehensive income. No amount recognized in other comprehensive income would ever be reclassified to profit or loss. It requires the entity, which chooses to measure a liability at fair value, to present the portion of the fair value change attributable to the entity’s own credit risk in the other comprehensive income.
IFRS 9 replaces the ‘incurred loss model’ in IAS 39 with an ‘expected credit loss’ model. The measurement uses a dual measurement approach, under which the loss allowance is measured as either 12 month expected credit losses or lifetime expected credit losses. The standard also introduces new presentation and disclosure requirements.
The effective date for adoption of IFRS 9 is annual periods beginning on or after January 1, 2018, though early adoption is permitted. The Group has elected to early adopt the standard effective April 1, 2016 and the impact on the consolidated financial statements is not material.
IFRS 15 Revenue from Contract with Customers: In May 2014, the International Accounting Standards Board (IASB) issued IFRS 15, Revenue from Contract with Customers. The core principle of the new standard is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Further the new standard requires enhanced disclosures about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts with customers. The standard permits the use of either the retrospective or cumulative effect transition method. The effective date for adoption of IFRS 15 is annual periods beginning on or after January 1, 2017, though early adoption is permitted. In September 2015, the IASB issued an amendment to IFRS 15, deferring the adoption of the standard to periods beginning on or after January 1, 2018 instead of January 1, 2017.
The Group is evaluating the effect of IFRS 15 on the consolidated financial statements including the transition method to be adopted and the related disclosures. The group continues to evaluate the effect of the standard on ongoing financial reporting.
IFRS 16 Leases : On January 13, 2016, the International Accounting Standards Board issued the final version of IFRS 16, Leases. IFRS 16 will replace the existing leases Standard, IAS 17 Leases, and related Interpretations. The Standard sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract i.e., the lessee and the lessor. IFRS 16 introduces a single lessee accounting model and requires a lessee to recognise assets and liabilities for all leases with a term of more than 12 months, unless the underlying asset is of low value. Currently, operating lease expenses are charged to the statement of comprehensive income. The Standard also contains enhanced disclosure requirements for lessees. IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17.
The effective date for adoption of IFRS 16 is annual periods beginning on or after January 1, 2019, though early adoption is permitted for companies applying IFRS 15 Revenue from Contracts with Customers. The Group is yet to evaluate the requirements of IFRS 16 and the impact on the consolidated financial statements.
2. Notes to the consolidated financial statements
2.1 Cash and cash equivalents
Cash and cash equivalents consist of the following:
(In crore)
As of | ||
March 31, 2016 | March 31, 2015 | |
Cash and bank deposits | 27,420 | 26,195 |
Deposits with financial institution | 5,277 | 4,172 |
32,697 | 30,367 |
Cash and cash equivalents as of March 31, 2016 and March 31, 2015 include restricted cash and bank balances of 492 crore and 364 crore, respectively. The restrictions are primarily on account of cash and bank balances held by irrevocable trusts controlled by the Company, bank balances held as margin money deposits against guarantees and balances held in unpaid dividend bank accounts.
The deposits maintained by the Group with banks and financial institution comprise of time deposits, which can be withdrawn by the Group at any point without prior notice or penalty on the principal.
The table below provides details of cash and cash equivalents:
(In crore)
As of | ||
March 31, 2016 | March 31, 2015 | |
Current Accounts | ||
ANZ Bank, Taiwan | 13 | 4 |
Axis Bank account, India | 1 | – |
Axis Bank - Unpaid Dividend Account | 2 | – |
Banamex Bank, Mexico | 5 | 10 |
Banamex Bank, Mexico (U.S. Dollar account) | 3 | 1 |
Bank of America, Mexico | 21 | 26 |
Bank of America, USA | 681 | 716 |
Bank Zachodni WBK S.A, Poland | 3 | 4 |
Bank of Tokyo-Mitsubishi UFJ, Ltd., Japan | 1 | 1 |
Barclays Bank, UK | 19 | 10 |
Bank Leumi, Israel (US Dollar account) | 17 | 7 |
Bank Leumi, Israel | 10 | 15 |
Bank Leumi, Israel (Euro account) | – | 3 |
China Merchants Bank, China | 8 | 4 |
Citibank N.A, China | 65 | 20 |
Citibank N.A., China (U.S. Dollar account) | 72 | 24 |
Citibank N.A., Costa Rica | 2 | 5 |
Citibank N.A., Czech Republic | – | 6 |
Citibank N.A., Australia | 72 | 25 |
Citibank N.A., Brazil | 5 | 27 |
Citibank N.A., Dubai | 1 | 1 |
Citibank N.A., India | 1 | 7 |
Citibank N.A., Japan | 15 | 20 |
Citibank N.A., New Zealand | 6 | 6 |
Citibank N.A., Portugal | 2 | – |
Citibank N.A., Singapore | 3 | 2 |
Citibank N.A., South Africa | 5 | 3 |
CitiBank N.A., South Africa (Euro account) | 1 | – |
Citibank N.A., Philippines, (U.S. Dollar account) | 1 | 1 |
CitiBank N.A., USA | 60 | – |
CitiBank N.A., EEFC (U.S. Dollar account) | – | 2 |
Commerzbank, Germany | 19 | 19 |
Crédit Industriel et Commercial Bank, France | 4 | 1 |
Deutsche Bank, India | 8 | 5 |
Deutsche Bank, Philippines | 13 | 3 |
Deutsche Bank, Philippines (U.S. Dollar account) | 1 | 3 |
Deutsche Bank, Poland | 5 | 19 |
Deutsche Bank, Poland (Euro account) | – | 1 |
Deutsche Bank, EEFC (Australian Dollar account) | 2 | – |
Deutsche Bank, EEFC (Euro account) | 32 | 3 |
Deutsche Bank, EEFC (Swiss Franc account) | 5 | 5 |
Deutsche Bank, EEFC (U.S. Dollar account) | 96 | 8 |
Deutsche Bank, EEFC (United Kingdom Pound Sterling account) | 9 | 5 |
Deutsche Bank, Belgium | 59 | 13 |
Deutsche Bank, Malaysia | 9 | – |
Deutsche Bank, Czech Republic | 14 | 6 |
Deutsche Bank, Czech Republic (Euro account) | 1 | 2 |
Deutsche Bank, Czech Republic (U.S. Dollar account) | 28 | 20 |
Deutsche Bank, France | 10 | 2 |
Deutsche Bank, Germany | 17 | 8 |
Deutsche Bank, Netherlands | 6 | 2 |
Deutsche Bank, Russia | 2 | – |
Deutsche Bank, Russia (U.S. Dollar account) | 1 | – |
Deutsche Bank, Singapore | 4 | 5 |
Deutsche Bank, Spain | 1 | 1 |
Deutsche Bank, Switzerland | 1 | – |
Deutsche Bank, United Kingdom | 170 | 25 |
HDFC Bank-Unpaid dividend account | 1 | 1 |
HSBC Bank, Brazil | 5 | 3 |
HSBC Bank, Hong Kong | 1 | 44 |
ICICI Bank, India | 72 | 30 |
ICICI Bank, EEFC (U.S. Dollar account) | 10 | 14 |
ICICI Bank-Unpaid dividend account | 2 | 2 |
ING Bank, Belgium | 3 | – |
Nordbanken, Sweden | 15 | 3 |
Punjab National Bank, India | 4 | 7 |
Raiffeisen Bank, Czech Republic | 5 | – |
Raiffeisen Bank, Romania | 4 | – |
Royal Bank of Scotland, China | – | 45 |
Royal Bank of Scotland, China (U.S. Dollar account) | – | 47 |
Royal Bank of Canada, Canada | 78 | 16 |
Santander Bank, Argentina | – | 2 |
Santander Bank, Spain | – | 1 |
State Bank of India, India | 8 | 2 |
Silicon Valley Bank, USA | 5 | 66 |
Silicon Valley Bank, (Euro account) | 65 | 16 |
Silicon Valley Bank, (United Kingdom Pound Sterling account) | 19 | 5 |
Union Bank of Switzerland AG | 15 | 12 |
Union Bank of Switzerland AG, (Euro account) | 12 | 4 |
Union Bank of Switzerland AG, (Australian Dollar account) | 2 | – |
Union Bank of Switzerland AG, (U.S. Dollar account) | 28 | 2 |
Union Bank of Switzerland AG, (United Kingdom Pound Sterling account) | 4 | 1 |
Wells Fargo Bank N.A., USA | 23 | 38 |
Westpac, Australia | 6 | 6 |
1,999 | 1,473 | |
Deposit Accounts | ||
Allahabad Bank | – | 200 |
Andhra Bank | 948 | 171 |
Axis Bank | 1,340 | 1,495 |
Bank of Baroda | – | 2,394 |
Bank of India | 77 | 2,691 |
Canara Bank | 2,247 | 3,134 |
Central Bank of India | 1,538 | 1,383 |
Citibank | 128 | – |
Corporation Bank | 1,285 | 1,277 |
Deutsche Bank, Poland | 237 | 121 |
Development Bank of Singapore | – | 35 |
HDFC Bank Ltd. | 2,650 | 2,097 |
ICICI Bank | 4,199 | 3,166 |
IDBI Bank | 1,900 | 856 |
Indian Overseas Bank | 1,250 | 651 |
Indusind Bank | 250 | 75 |
ING Vysya Bank | – | 100 |
Jammu & Kashmir Bank | 25 | – |
Kotak Mahindra Bank Limited | 537 | 5 |
National Australia Bank Limited | 1 | 87 |
Oriental Bank of Commerce | 1,967 | 1,580 |
Punjab National Bank | 18 | 592 |
South Indian Bank | 23 | 27 |
State Bank of India | 2,367 | 57 |
Syndicate Bank | 1,266 | 407 |
Union Bank of India | 140 | 1,051 |
Vijaya Bank | 304 | 466 |
Yes Bank | 724 | 604 |
25,421 | 24,722 | |
Deposits with financial institution | ||
HDFC Limited | 5,277 | 4,172 |
5,277 | 4,172 | |
Total | 32,697 | 30,367 |
2.2 Available-for-sale financial assets
Primarily investments in mutual fund units, quoted debt securities, unquoted equity and preference securities are classified as available-for-sale financial assets.
Cost and fair value of the above investments are as follows:
(In crore)
As of | ||
March 31, 2016 | March 31, 2015 | |
Current | ||
Mutual fund units: | ||
Liquid mutual funds | ||
Cost and fair value | 68 | 842 |
Fixed maturity plan securities | ||
Cost | – | 30 |
Gross unrealized holding gain / (loss) | – | 2 |
Fair value | – | 32 |
Quoted debt securities: | ||
Cost | 7 | – |
Gross unrealized holding gain/ (loss) | – | – |
Fair value | 7 | – |
75 | 874 | |
Non-current | ||
Quoted debt securities: | ||
Cost | 1,657 | 1,352 |
Gross unrealized holding gain/ (loss) | 39 | (8) |
Fair value | 1,696 | 1,344 |
Unquoted equity and preference securities: | ||
Cost | 93 | 1 |
Gross unrealized holding gain/ (loss) | – | – |
Fair value | 93 | 1 |
Others: | ||
Cost | 22 | – |
Gross unrealized holding gain/(loss) | – | – |
Fair value | 22 | – |
1,811 | 1,345 | |
Total available-for-sale financial assets | 1,886 | 2,219 |
Mutual fund units:
Liquid mutual funds
The fair value of liquid mutual funds as of March 31, 2016 and March 31, 2015 is 68 crore and 842 crore, respectively. The fair value is based on quoted price.
Fixed maturity plan securities:
During the year ended March 31, 2016, the company redeemed fixed maturity plans securities of 30 crore. On redemption, the net unrealized gain of 1 crore, net of taxes of 1 crore, pertaining to these securities has been reclassified from other comprehensive income to profit or loss.
The fair value of fixed maturity plan securities as of March 31, 2015 is 32 crore. The fair value is based on quotes reflected in actual transactions in similar instruments as available on March 31, 2015. The net unrealized gain of less than 1 crore, net of taxes of 1 crore, has been recognized in other comprehensive income for the year ended March 31, 2015. (Refer to note 2.16).
During the year ended March 31 2015, the company redeemed fixed maturity plans securities of 113 crore. On redemption, the unrealised gain of 9 crore, net of taxes of 4 crore, pertaining to these securities has been reclassified from other comprehensive income to profit or loss during the year ended March 31, 2015.
Quoted debt securities:
The fair value of quoted debt securities as of March 31, 2016 and March 31, 2015 is 1,703 crore and 1,344 crore, respectively. The net unrealized gain of 42 crore, net of taxes of 5 crore, has been recognized in the other comprehensive income for the year ended March 31, 2016. The net unrealized gain of 87 crore, net of taxes of 11 crore, has been recognized in the other comprehensive income for the year ended March 31, 2015 (Refer to note 2.16). The fair value is based on quoted prices and market observable inputs.
2.3 Business combinations
Noah Consulting LLC
On November 16, 2015, Infosys has acquired 100% membership interest in Noah Consulting, LLC (Noah), a leading provider of advanced information management consulting services for the oil and gas industry. The business acquisition was conducted by entering into a share purchase agreement for cash consideration of $33 million (approximately 216 crore), contingent consideration of upto $5 million (approximately 33 crore on acquisition date) and an additional consideration of upto $32 million (approximately 212 crore on acquisition date), referred to as retention bonus, payable to the employees of Noah at each anniversary year following the acquisition date for the next three years, subject to their continuous employment with the group at each anniversary.
This acquisition combines Noah’s industry knowledge, information strategy planning, data governance and architecture capabilities with Infosys’ ability to provide technology and outsourcing services on a global scale to oil and gas clients. The excess of the purchase consideration paid over the fair value of assets acquired has been attributed to goodwill.
The purchase price has been allocated based on management’s estimates and independent appraisal of fair values as follows:
(in crore)
Component | Acquiree's carrying amount | Fair value adjustments | Purchase price allocated |
Net assets(*) | 39 | – | 39 |
Intangible assets – technical know-how | – | 27 | 27 |
Intangible assets – trade name | – | 27 | 27 |
Intangible assets - customer contracts and relationships | – | 119 | 119 |
39 | 173 | 212 | |
Goodwill | 30 | ||
Total purchase price | 242 |
* | Includes cash and cash equivalents acquired of 18 crore |
Goodwill of 4 crore is tax deductible. The remaining goodwill is tax deductible over the tax life on payment of contingent consideration.
The gross amount of trade receivables acquired and its fair value is 29 crore and the amounts have been largely collected.
The acquisition date fair value of each major class of consideration as of the acquisition date is as follows:
(in crore)
Component | Consideration settled |
Cash paid | 216 |
Fair value of contingent consideration | 26 |
Total purchase price | 242 |
"The fair value of contingent consideration is determined by discounting the estimated amount payable to the sellers of Noah on achievement of certain financial targets. At acquisition date, the key inputs used in determination of the fair value of contingent consideration are the discount rate of 32% and the probabilities of achievement of the financial targets. During the three months ended March 31, 2016, based on an assessment of Noah achieving the targets for the year ending December 31, 2015 and December 31, 2016, the entire contingent consideration has been reversed in the statement of comprehensive income
The retention bonus is treated as a post-acquisition employee remuneration expense as per IFRS 3R. For the period from the closing of the acquisition to March 31, 2016, a post-acquisition employee remuneration expense of 52 crore, has been recorded in the statement of comprehensive income.
The transaction costs of 11 crore related to the acquisition have been included under administrative expenses in the statement of comprehensive income for the year ended March 31, 2016.
Finacle and Edge Services
On April 24, 2015, the Board of Directors of Infosys has authorized the Company to execute a Business Transfer Agreement and related documents with EdgeVerve, a wholly owned subsidiary, to transfer the business of Finacle and Edge Services. Post the requisite approval from shareholders through postal ballot on June 4, 2015, a Business Transfer Agreement and other related documents were executed with EdgeVerve to transfer the business with effect from August 1, 2015. The company has undertaken an enterprise valuation by an independent valuer and accordingly the business were transferred for a consideration of 3,222 crore and 177 crore for Finacle and Edge Services, respectively.
The consideration was settled through issue of 85,00,00,000 equity shares amounting to 850 crore and 25,49,00,000 non-convertible redeemable debentures amounting to 2,549 crore in EdgeVerve, post the requisite approval from shareholders on December 11, 2015.
The transfer of assets and liabilities was accounted for at carrying values and did not have any impact on the consolidated financial statements
Kallidus Inc. (d.b.a Skava)
On June 2, 2015, Infosys acquired 100% of the voting interests in Kallidus Inc., US (Kallidus), a leading provider of digital experience solutions, including mobile commerce and in-store shopping experiences to large retail clients and 100% of the voting interests of Skava Systems Private Limited, India, an affiliate of Kallidus. The business acquisition was conducted by entering into a share purchase agreement for cash consideration of $91 million (approximately 578 crore) and a contingent consideration of up to $20 million (approximately 128 crore on acquisition date).
Infosys expects to help its clients bring new digital experiences to their customers through IP-led technology offerings, new automation tools and skill and expertise in these new emerging areas. The excess of the purchase consideration paid over the fair value of assets acquired has been attributed to goodwill.
The purchase price has been allocated based on management’s estimates and independent appraisal of fair values as follows:
(in crore)
Component | Acquiree's carrying amount | Fair value adjustments | Purchase price allocated |
Net assets(*) | 35 | – | 35 |
Intangible assets – technology | – | 130 | 130 |
Intangible assets – trade name | – | 14 | 14 |
Intangible assets - customer contracts and relationships | – | 175 | 175 |
Deferred tax liabilities on intangible assets | – | (128) | (128) |
35 | 191 | 226 | |
Goodwill | 452 | ||
Total purchase price | 678 |
* | Includes cash and cash equivalents acquired of 29 crore |
The goodwill is not tax deductible.
The gross amount of trade receivables acquired and its fair value is 57 crore and the amounts has been fully collected.
The acquisition date fair value of each major class of consideration as of the acquisition date is as follows:
(in crore)
Component | Consideration settled |
Cash paid | 578 |
Fair value of contingent consideration | 100 |
Total purchase price | 678 |
The undiscounted value of contingent consideration as of March 31, 2016 is 132 crore. The payment of contingent consideration to sellers of Kallidus is dependent upon the achievement of certain financial targets by Kallidus over a period of 3 years ending on December 31, 2017.
The fair value of contingent consideration is determined by discounting the estimated amount payable to the sellers of Kallidus on achievement of certain financial targets. At acquisition date, the key inputs used in determination of the fair value of contingent consideration are the discount rate of 14% and the probabilities of achievement of the financial targets.
The transaction costs of 12 crore related to the acquisition have been included under administrative expenses in the statement of comprehensive income for the year ended March 31, 2016.
Panaya
On March 5, 2015, Infosys acquired 100% of the voting interests in Panaya Inc. (Panaya), a Delaware Corporation in the United States. Panaya is a leading provider of automation technology for large scale enterprise and software management. The business acquisition was conducted by entering into a share purchase agreement for cash consideration of 1,398 crore.
Panaya’s CloudQuality™ suite positions Infosys to bring automation to several of its service lines via an agile SaaS model, and helps mitigate risk, reduce costs and shorten time to market for clients. This will help free Infosys from many repetitive tasks allowing it to focus on important, strategic challenges faced by clients. Panaya’s proven technology would help to simplify the costs and complexities faced by businesses in managing their enterprise application landscapes. The excess of the purchase consideration paid over the fair value of net assets acquired has been attributed to goodwill.
The purchase price has been allocated based on Management’s estimates and independent appraisal of fair values as follows:
(In crore)
Component | Acquiree's carrying amount | Fair value adjustments | Purchase price allocated |
Property, plant and equipment | 9 | – | 9 |
Net current assets * | 38 | – | 38 |
Intangible assets – technology | – | 243 | 243 |
Intangible assets – trade name | – | 21 | 21 |
Intangible assets - customer contracts and relationships | – | 82 | 82 |
Intangible assets – non compete agreements | – | 26 | 26 |
Deferred tax liabilities on intangible assets | – | (99) | -99 |
47 | 273 | 320 | |
Goodwill | 1,078 | ||
Total purchase price | 1,398 |
* | Includes cash and cash equivalents acquired of 116 crore. |
The goodwill is not tax deductible.
The gross amount of trade receivables acquired and its fair value is 58 crore and the amounts have been largely collected.
The fair value of total cash consideration as at the acquisition date was 1,398 crore.
The transaction costs of 22 crore related to the acquisition have been included under administrative expenses in the statement of comprehensive income for the year ended March 31, 2015.
EdgeVerve Systems Limited
EdgeVerve was created as a wholly owned subsidiary to focus on developing and selling products and platforms. On April 15, 2014, the Board of Directors of Infosys authorized the Company to execute a Business Transfer Agreement and related documents with EdgeVerve, subject to securing the requisite approval from shareholders in the Annual General Meeting. Subsequently, at the AGM held on June 14, 2014, the shareholders authorized the Board to enter into a Business Transfer Agreement and related documents with EdgeVerve, with effect from July 1, 2014 or such other date as may be decided by the Board of Directors. The company had undertaken an enterprise valuation by an independent valuer and accordingly the business was transferred for a consideration of 421 crore with effect from July 1, 2014 which was settled through the issue of fully paid up equity shares. The transfer of assets and liabilities was accounted for at carrying values and did not have any impact on the consolidated financial statements.
Infosys Consulting Holding AG (formerly Lodestone Holding AG)
On October 22, 2012, Infosys acquired 100% of the voting interests in Lodestone Holding AG, a global management consultancy firm headquartered in Zurich. The business acquisition was conducted by entering into a share purchase agreement for a cash consideration of 1,187 crore and an additional consideration of upto 608 crore, which the company refers to as deferred purchase price, estimated on the date of acquisition, payable to the selling shareholders of Lodestone Holding AG who are continuously employed or otherwise engaged by the Group during the three year period following the date of the acquisition.
This transaction is treated as post acquisition employee remuneration expense as per IFRS 3R. During the three months ended December 31, 2015, the liability towards post-acquisition employee remuneration expense was settled. For the year ended March 31, 2016 and March 31, 2015, a post-acquisition employee remuneration expense of 149 crore and 252 crore respectively, is recorded in cost of sales in the statement of comprehensive income.
2.4 Prepayments and other assets
Prepayments and other assets consist of the following:
(In crore)
As of | ||
March 31, 2016 | March 31, 2015 | |
Current | ||
Rental deposits | 13 | 24 |
Security deposits | 7 | 4 |
Loans and advances to employees | 303 | 222 |
Prepaid expenses(1) | 201 | 98 |
Interest accrued and not due | 704 | 396 |
Withholding taxes(1) | 1,799 | 1,364 |
Advance payments to vendors for supply of goods(1) | 110 | 79 |
Deposit with corporations | 1,238 | 1,100 |
Deferred contract cost(1) | 48 | – |
Other assets | 25 | 9 |
4,448 | 3,296 | |
Non-current | ||
Loans and advances to employees | 25 | 31 |
Deposit with corporations | 62 | 58 |
Rental deposits | 146 | 47 |
Security deposits | 78 | 68 |
Deferred contract cost(1) | 333 | – |
Prepaid expenses(1) | 87 | 7 |
Prepaid gratuity(1) | 4 | 27 |
735 | 238 | |
5,183 | 3,534 | |
Financial assets in prepayments and other assets | 2,601 | 1,959 |
(1) | Non financial assets |
Withholding taxes primarily consist of input tax credits. Other assets primarily represent travel advances and other recoverables. Security deposits relate principally to leased telephone lines and electricity supplies.
Deposit with corporations represents amounts deposited to settle certain employee-related obligations as and when they arise during the normal course of business.
2.5 Property, plant and equipment
Following are the changes in the carrying value of property, plant and equipment for the year ended March 31, 2016:
(In crore)
Land | Buildings | Plant and machinery | Computer equipment | Furniture and fixtures | Vehicles | Total | |
Gross carrying value as of April 1, 2015 | 1,562 | 5,881 | 2,104 | 3,347 | 1,179 | 34 | 14,107 |
Acquisition through Business Combination (Refer note 2.3) | – | – | 1 | 2 | 1 | – | 4 |
Additions | 58 | 444 | 499 | 1,103 | 265 | 6 | 2,375 |
Deletions | – | – | (8) | (396) | (7) | (12) | (423) |
Translation difference | – | – | 2 | 16 | 6 | 1 | 25 |
Gross carrying value as of March 31, 2016 | 1,620 | 6,325 | 2,598 | 4,072 | 1,444 | 29 | 16,088 |
Accumulated depreciation as of April 1, 2015 | (16) | (1,982) | (1,293) | (2,287) | (825) | (19) | (6,422) |
Accumulated Depreciation on acquired assets (Refer note 2.3) | – | – | (1) | (1) | – | – | (2) |
Depreciation | (6) | (219) | (320) | (553) | (161) | (5) | (1,264) |
Accumulated depreciation on deletions | – | – | 7 | 237 | 4 | 7 | 255 |
Translation difference | – | – | (1) | (13) | (4) | – | (18) |
Accumulated depreciation as of March 31, 2016 | (22) | (2,201) | (1,608) | (2,617) | (986) | (17) | (7,451) |
Capital work-in progress as of March 31, 2016 | 1,893 | ||||||
Carrying value as of March 31, 2016 | 1,598 | 4,124 | 990 | 1,455 | 458 | 12 | 10,530 |
Capital work-in progress as of April 1, 2015 | 1,440 | ||||||
Carrying value as of April 1, 2015 | 1,546 | 3,899 | 811 | 1,060 | 354 | 15 | 9,125 |
Following are the changes in the carrying value of property, plant and equipment for the year ended March 31, 2015
(In crore)
Land | Buildings | Plant and machinery | Computer equipment | Furniture and fixtures | Vehicles | Total | |
Gross carrying value as of April 1, 2014 | 1,140 | 5,026 | 1,702 | 2,659 | 1,017 | 36 | 11,580 |
Acquisitions through business combination (Refer note 2.3) | – | – | – | 13 | 9 | – | 22 |
Additions | 422 | 855 | 421 | 765 | 182 | 6 | 2,651 |
Deletions | – | – | (17) | (82) | (20) | (6) | (125) |
Translation difference | – | – | (2) | (8) | (9) | (2) | (21) |
Gross carrying value as of March 31, 2015 | 1,562 | 5,881 | 2,104 | 3,347 | 1,179 | 34 | 14,107 |
Accumulated depreciation as of April 1, 2014 | – | (1,794) | (1,048) | (1,965) | (700) | (18) | (5,525) |
Accumulated Depreciation on acquired assets (Refer note 2.3) | – | – | – | (9) | (4) | – | (13) |
Depreciation | (16) | (188) | (262) | (387) | (144) | (6) | (1,003) |
Accumulated depreciation on deletions | – | – | 15 | 70 | 18 | 4 | 107 |
Translation difference | – | – | 2 | 4 | 5 | 1 | 12 |
Accumulated depreciation as of March 31, 2015 | (16) | (1,982) | (1,293) | (2,287) | (825) | (19) | (6,422) |
Capital work-in progress as of March 31, 2015 | 1,440 | ||||||
Carrying value as of March 31, 2015 | 1,546 | 3,899 | 811 | 1,060 | 354 | 15 | 9,125 |
Capital work-in progress as of April 1, 2014 | 1,832 | ||||||
Carrying value as of April 1, 2014 | 1,140 | 3,232 | 654 | 694 | 317 | 18 | 7,887 |
During the three months ended June 30, 2014, the management based on internal and external technical evaluation had changed the useful life of certain assets primarily consisting of buildings and computers with effect from April 1, 2014. Accordingly, the useful lives of certain assets required a change from previous estimate.
The depreciation expense is included in cost of sales in the consolidated statement of comprehensive income.
Carrying value of land includes 628 crore and 617 crore as of March 31, 2016 and March 31, 2015, respectively, towards deposits paid under certain lease-cum-sale agreements to acquire land including agreements where the Company has an option to purchase or renew the properties on expiry of the lease period. The contractual commitments for capital expenditure were 1,486 crore and 1,574 crore, as of March 31, 2016 and March 31, 2015, respectively.
2.6 Goodwill and intangible assets
Following is a summary of changes in the carrying amount of goodwill:
(In crore)
As of | ||
March 31, 2016 | March 31, 2015 | |
Carrying value at the beginning | 3,091 | 2,157 |
Goodwill on Panaya acquisition | – | 1,078 |
Goodwill on Kallidus d.b.a Skava acquisition (Refer note 2.3) | 452 | – |
Goodwill on Noah acquisition (Refer note 2.3) | 30 | – |
Translation differences | 191 | (144) |
Carrying value at the end | 3,764 | 3,091 |
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to the cash generate units (CGU) or groups of CGU’s, which benefit from the synergies of the acquisition. The chief operating decision maker reviews the goodwill for any impairment at the operating segment level, which is represented through groups of CGU’s.
During the year ended March 31, 2016, the Company reorganized some of its segments to enhance executive customer relationships, improve focus of sales investments and increase management oversight. Consequent to these internal reorganizations there were changes effected in the segments based on the “management approach” as defined in IFRS 8, Operating Segments. (Refer Note 2.19). Accordingly the goodwill has been allocated to the new operating segments as at March 31, 2016.
(In crore)
Segment | As of |
March 31, 2016 | |
Financial services | 851 |
Manufacturing | 423 |
Retail, Consumer packaged goods and Logistics | 573 |
Life Sciences, Healthcare and Insurance | 656 |
Energy & Utilities, Communication and Services | 789 |
3,292 | |
Operating segments without significant goodwill | 472 |
Total | 3,764 |
The entire goodwill relating to Infosys BPO’s acquisition of McCamish has been allocated to the groups of CGU’s which are represented by the Life Sciences, Healthcare and Insurance segment.
The goodwill relating to Infosys Lodestone, Portland, Panaya and Kallidus d.b.a Skava has been allocated to the groups of CGU’s which are represented by the entity’s operating segment.
The entire goodwill relating to Noah acquisition has been allocated to the group of CGU's which is represented by the Energy & Utilities, Communication and Services segment.
The following table gives the break-up of allocation of goodwill to operating segments as at March 31, 2015:
(In crore)
Segment | As of |
March 31, 2015 | |
Financial services | 663 |
Insurance | 367 |
Manufacturing | 656 |
Energy, Communication and services | 318 |
Resources & utilities | 141 |
Retail, Consumer packaged goods and logistics | 473 |
Life Sciences and Healthcare | 193 |
Growth Markets | 280 |
Total | 3,091 |
The recoverable amount of a CGU is the higher of its fair value less cost to sell and its value-in-use. The fair value of a CGU is determined based on the market capitalization. The value-in-use is determined based on specific calculations. These calculations use pre-tax cash flow projections for a CGU / groups of CGU's over a period of five years. An average of the range of each assumption used is mentioned below. As of March 31, 2016, the estimated recoverable amount of the CGU exceeded its carrying amount. The recoverable amount was computed based on the fair value being higher than value-in-use and the carrying amount of the CGU was computed by allocating the net assets to operating segments for the purpose of impairment testing. The key assumptions used for the calculations are as follows:
(in %)
March 31, 2016 | March 31, 2015 | |
Long term growth rate | 8-10 | 8-10 |
Operating margins | 17-20 | 17-20 |
Discount rate | 14.2 | 13.9 |
The above discount rate is based on the Weighted Average Cost of Capital (WACC) of the Company. These estimates are likely to differ from future actual results of operations and cash flows.
Following are the changes in the carrying value of acquired intangible assets for the year ended March 31, 2016:
(In crore)
Customer related | Software related | Sub-contracting rights related | Intellectual property rights related | Land use- rights related | Marketing Related | Others | Total | |
Gross carrying value as of April 1, 2015 | 448 | 261 | 21 | 11 | 71 | 49 | 34 | 895 |
Addition through business combination (Refer note 2.3) | 294 | 130 | – | – | – | 41 | 27 | 492 |
Additions | – | 2 | – | – | – | – | – | 2 |
Deletion | – | – | – | (10) | – | – | – | (10) |
Translation differences | 33 | 21 | – | – | 1 | 3 | 2 | 60 |
Gross carrying value as of March 31, 2016 | 775 | 414 | 21 | 1 | 72 | 93 | 63 | 1,439 |
Accumulated amortization as of April 1, 2015 | (162) | (21) | (21) | (11) | (5) | (28) | (9) | (257) |
Amortization expense | (132) | (40) | – | – | (1) | (9) | (13) | (195) |
Deletion | – | – | – | 10 | – | – | – | 10 |
Translation differences | (9) | (1) | – | – | – | (1) | (1) | (12) |
Accumulated amortization as of March 31, 2016 | (303) | (62) | (21) | (1) | (6) | (38) | (23) | (454) |
Carrying value as of April 1, 2015 | 286 | 240 | – | – | 66 | 21 | 25 | 638 |
Carrying value as of March 31, 2016 | 472 | 352 | – | – | 66 | 55 | 40 | 985 |
Estimated Useful Life (in years) | 3-10 | 8-10 | – | – | 50 | 3-10 | 3-5 | |
Estimated Remaining Useful Life (in years) | 1-7 | 7-9 | – | – | 45 | 2-9 | 2-5 |
Following are the changes in the carrying value of acquired intangible assets for the year ended March 31, 2015:
(In crore)
Customer related | Software related | Sub-contracting rights related | Intellectual property rights related | Land use- rights related | Marketing Related | Others | Total | |
Gross carrying value as of April 1, 2014 | 381 | 35 | 21 | 11 | 68 | 28 | 9 | 553 |
Additions through business combination (Refer note 2.3) | 82 | 243 | – | – | – | 22 | 26 | 373 |
Deletion | – | (17) | – | – | – | – | – | (17) |
Translation differences | (15) | – | – | – | 3 | (1) | (1) | (14) |
Gross carrying value as of March 31, 2015 | 448 | 261 | 21 | 11 | 71 | 49 | 34 | 895 |
Accumulated amortization as of April 1, 2014 | (125) | (26) | (19) | (11) | (3) | (20) | (7) | (211) |
Additions through business combination (Refer note 2.3) | – | – | – | – | – | (1) | – | (1) |
Amortization expense | (41) | (12) | (2) | – | (1) | (8) | (2) | (66) |
Deletion | – | 17 | – | – | – | – | – | 17 |
Translation differences | 4 | – | – | – | (1) | 1 | – | 4 |
Accumulated amortization as of March 31, 2015 | (162) | (21) | (21) | (11) | (5) | (28) | (9) | (257) |
Carrying value as of April 1, 2014 | 256 | 9 | 2 | – | 65 | 8 | 2 | 342 |
Carrying value as of March 31, 2015 | 286 | 240 | – | – | 66 | 21 | 25 | 638 |
Estimated Useful Life (in years) | 3-10 | 10 | 3 | – | 50 | 2-10 | 3 | |
Estimated Remaining Useful Life (in years) | 2-8 | 10 | – | – | 46 | 10 | 3 |
The amortization expense is included in cost of sales in the consolidated statement of comprehensive income.
Research and development expense recognized in net profit in the consolidated statement of comprehensive income, for the year ended March 31, 2016 and March 31, 2015 was 712 crore and 673 crore, respectively.
2.7 Financial instruments
Financial instruments by category
The carrying value and fair value of financial instruments by categories as of March 31, 2016 were as follows:
(In crore)
Loans and receivables | Financial assets/ liabilities at fair value through profit and loss |
Derivatives- Hedging instruments | Available for sale | Trade and other payables | Total carrying value/fair value | |
Assets: | ||||||
Cash and cash equivalents (Refer Note 2.1) | 32,697 | – | – | – | – | 32,697 |
Available-for-sale financial assets (Refer Note 2.2) | – | – | – | 1,886 | – | 1,886 |
Trade receivables | 11,330 | – | – | – | – | 11,330 |
Unbilled revenue | 3,029 | – | – | – | – | 3,029 |
Prepayments and other assets (Refer Note 2.4) | 2,601 | – | – | – | – | 2,601 |
Derivative financial instruments | – | 116 | – | – | – | 116 |
Total | 49,657 | 116 | – | 1,886 | – | 51,659 |
Liabilities: | ||||||
Trade payables | – | – | – | – | 386 | 386 |
Derivative financial instruments | – | 5 | – | – | – | 5 |
Client deposits | – | – | – | – | 28 | 28 |
Employee benefit obligations | – | – | – | – | 1,341 | 1,341 |
Other liabilities including contingent consideration (Refer Note 2.9) | – | 117 | – | – | 4,880 | 4,997 |
Total | – | 122 | – | – | 6,635 | 6,757 |
The carrying value and fair value of financial instruments by categories as of March 31, 2015 were as follows
(In crore)
Loans and receivables | Financial assets/ liabilities at fair value through profit and loss |
Available for sale | Trade and other payables | Total carrying value/fair value | |
Assets: | |||||
Cash and cash equivalents (Refer Note 2.1) | 30,367 | – | – | – | 30,367 |
Available-for-sale financial assets (Refer Note 2.2) | – | – | 2,219 | – | 2,219 |
Trade receivables | 9,713 | – | – | – | 9,713 |
Unbilled revenue | 2,845 | – | – | – | 2,845 |
Prepayments and other assets (Refer Note 2.4) | 1,959 | – | – | – | 1,959 |
Derivative financial instruments | – | 101 | – | – | 101 |
Total | 44,884 | 101 | 2,219 | – | 47,204 |
Liabilities: | |||||
Trade payables | – | – | – | 140 | 140 |
Derivative financial instruments | – | 3 | – | – | 3 |
Client deposits | – | – | – | 27 | 27 |
Employee benefit obligations | – | – | – | 1,069 | 1,069 |
Other liabilities (Refer Note 2.9) | – | – | – | 4,891 | 4,891 |
Total | – | 3 | – | 6,127 | 6,130 |
Fair value hierarchy
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).
The following table presents fair value hierarchy of assets and liabilities measured at fair value on a recurring basis as of March 31, 2016:
(In crore)
As of March 31, 2016 | Fair value measurement at end of the reporting period/year using | |||
Level 1 | Level 2 | Level 3 | ||
Assets | ||||
Available- for- sale financial asset- Investments in liquid mutual fund units (Refer Note 2.2) | 68 | 68 | – | – |
Available- for- sale financial asset- Investments in quoted debt securities (Refer Note 2.2) | 1,703 | 376 | 1,327 | – |
Available- for- sale financial asset- Investments in equity and preference securities (Refer Note 2.2) | 93 | – | – | 93 |
Available- for- sale financial asset- others (Refer Note 2.2) | 22 | – | – | 22 |
Derivative financial instruments - gain on outstanding foreign exchange forward and option contracts | 116 | – | 116 | – |
Liabilities | ||||
Derivative financial instruments - loss on outstanding foreign exchange forward and option contracts | 5 | – | 5 | – |
Liability towards contingent consideration (Refer note 2.9)* | 117 | – | – | 117 |
During the year ended March 31, 2016, quoted debt securities of 313 crore were transferred from Level 1 to Level 2 of fair value hierarchy, since these were valued based on market observable inputs.
* Discounted $20 million (approximately 132 crore) at 13.7%
A one percentage point change in the unobservable inputs used in fair valuation of the contingent consideration does not have a significant impact in its value
The following table presents fair value hierarchy of assets and liabilities measured at fair value on a recurring basis as of March 31, 2015:
(In crore)
As of March 31, 2015 | Fair value measurement at end of the reporting period/year using | |||
Level 1 | Level 2 | Level 3 | ||
Assets | ||||
Available- for- sale financial asset- Investments in liquid mutual fund units (Refer Note 2.2) | 842 | 842 | – | – |
Available- for- sale financial asset- Investments in fixed maturity plan securities (Refer Note 2.2) | 32 | – | 32 | – |
Available- for- sale financial asset- Investments in quoted debt securities (Refer Note 2.2) | 1,344 | 608 | 736 | – |
Available- for- sale financial asset- Investments in equity securities (Refer Note 2.2) | 1 | – | – | 1 |
Derivative financial instruments- gain on outstanding foreign exchange forward and option contracts | 101 | – | 101 | – |
Liabilities | ||||
Derivative financial instruments- loss on outstanding foreign exchange forward and option contracts | 3 | – | 3 | – |
Income from financial assets or liabilities that are not at fair value through profit or loss is as follows:
(In crore)
Year ended March 31, | ||
2016 | 2015 | |
Interest income on deposits and certificates of deposit (Refer Note 2.13) | 2,523 | 2,631 |
Income from available-for-sale financial assets (Refer Note 2.13) | 176 | 261 |
2,699 | 2,892 |
Derivative financial instruments
The Group holds derivative financial instruments such as foreign exchange forward and option contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The counterparty for these contracts is generally a bank or a financial institution. These derivative financial instruments are valued based on quoted prices for similar assets and liabilities in active markets or inputs that are directly or indirectly observable in the marketplace
The following table gives details in respect of outstanding foreign exchange forward and option contracts
As of | As of | |||
March 31, 2016 | March 31, 2015 | |||
In million | In crore | In million | In crore | |
Forward contracts | ||||
In U.S. dollars | 510 | 3,379 | 716 | 4,475 |
In Euro | 100 | 750 | 67 | 447 |
In United Kingdom Pound Sterling | 65 | 623 | 73 | 671 |
In Australian dollars | 55 | 281 | 98 | 466 |
In Canadian dollars | – | – | 12 | 59 |
In Singapore dollars | – | – | 25 | 114 |
In Swiss Franc | 25 | 173 | – | – |
Option Contracts | ||||
In U.S. dollars | 125 | 828 | – | – |
Total forwards and options | 6,034 | 6,232 |
The Group recognized a net gain of 29 crore on derivative financial instruments during the year ended March 31, 2016 as against a net gain on derivative financial instruments of 514 crore during the year ended March 31, 2015, which are included in other income.
The foreign exchange forward and option contracts mature within twelve months. The table below analyzes the derivative financial instruments into relevant maturity groupings based on the remaining period as of the balance sheet date:
(In crore)
As of | ||
March 31, 2016 | March 31, 2015 | |
Not later than one month | 1,577 | 1,484 |
Later than one month and not later than three months | 3,420 | 3,781 |
Later than three months and not later than one year | 1,037 | 967 |
6,034 | 6,232 |
Financial risk management
Financial risk factors
The Group's activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Group's primary focus is to foresee the unpredictability of financial markets and seek to minimize potential adverse effects on its financial performance. The primary market risk to the Group is foreign exchange risk. The Group uses derivative financial instruments to mitigate foreign exchange related risk exposures. The Group's exposure to credit risk is influenced mainly by the individual characteristic of each customer and the concentration of risk from the top few customers. The demographics of the customer including the default risk of the industry and country in which the customer operates also has an influence on credit risk assessment.
Market risk
The Group operates internationally and a major portion of the business is transacted in several currencies and consequently the Group is exposed to foreign exchange risk through its sales and services in the United States and elsewhere, and purchases from overseas suppliers in various foreign currencies. The Group holds derivative financial instruments such as foreign exchange forward and option contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The exchange rate between the rupee and foreign currencies has changed substantially in recent years and may fluctuate substantially in the future. Consequently, the results of the Group’s operations are adversely affected as the rupee appreciates/ depreciates against these currencies.
The following table gives details in respect of the outstanding foreign exchange forward and option contracts:
(In crore)
As of | ||
March 31, 2016 | March 31, 2015 | |
Aggregate amount of outstanding forward and option contracts | 6,034 | 6,232 |
Gain on outstanding forward and option contracts | 116 | 101 |
Loss on outstanding forward and option contracts | 5 | 3 |
The following table analyzes foreign currency risk from financial instruments as of March 31, 2016
(In crore)
U.S. dollars | Euro | United Kingdom Pound Sterling | Australian dollars | Other currencies | Total | |
Cash and cash equivalents | 1,124 | 167 | 202 | 171 | 601 | 2,265 |
Trade receivables | 7,558 | 1,280 | 721 | 598 | 696 | 10,853 |
Unbilled revenue | 1,871 | 368 | 190 | 114 | 253 | 2,796 |
Other assets | 96 | 37 | 26 | 10 | 84 | 253 |
Trade payables | (126) | (75) | (73) | (4) | (76) | (354) |
Client deposits | (20) | (2) | – | – | (6) | (28) |
Accrued expenses | (788) | (152) | (116) | (35) | (219) | (1,310) |
Employee benefit obligations | (573) | (80) | (49) | (166) | (125) | (993) |
Other liabilities | (1,049) | (135) | (32) | (42) | (208) | (1,466) |
Net assets / (liabilities) | 8,093 | 1,408 | 869 | 646 | 1,000 | 12,016 |
The following table analyzes foreign currency risk from financial instruments as of March 31, 2015:
(In crore)
U.S. dollars | Euro | United Kingdom Pound Sterling | Australian dollars | Other currencies | Total | |
Cash and cash equivalents | 994 | 59 | 41 | 119 | 413 | 1,626 |
Trade receivables | 6,719 | 1,040 | 540 | 469 | 600 | 9,368 |
Unbilled revenue | 1,714 | 330 | 126 | 100 | 250 | 2,520 |
Other assets | 81 | 28 | 19 | 9 | 61 | 198 |
Trade payables | (59) | (14) | – | (2) | (56) | (131) |
Client deposits | (20) | – | (1) | – | (6) | (27) |
Accrued expenses | (749) | (143) | (78) | (25) | (165) | (1,160) |
Employee benefit obligations | (436) | (59) | (37) | (130) | (105) | (767) |
Other liabilities | (761) | (116) | (23) | (22) | (637) | (1,559) |
Net assets / (liabilities) | 7,483 | 1,125 | 587 | 518 | 355 | 10,068 |
For the year ended March 31, 2016 and March 31, 2015, every percentage point depreciation / appreciation in the exchange rate between the Indian rupee and U.S. dollar, has affected the Company's incremental operating margins by approximately 0.50% and 0.52%, respectively
Sensitivity analysis is computed based on the changes in the income and expenses in foreign currency upon conversion into functional currency, due to exchange rate fluctuations between the previous reporting period and the current reporting period.
Credit risk
Credit risk refers to the risk of default on its obligation by the counterparty resulting in a financial loss. The maximum exposure to the credit risk at the reporting date is primarily from trade receivables amounting to 11,330 crore and 9,713 crore as of March 31, 2016 and March 31, 2015, respectively and unbilled revenue amounting to 3,029 crore and 2,845 crore as of March 31, 2016 and March 31, 2015, respectively. Trade receivables and unbilled revenue are typically unsecured and are derived from revenue earned from customers primarily located in the United States. Credit risk is managed through credit approvals, establishing credit limits and continuously monitoring the creditworthiness of customers to which the Group grants credit terms in the normal course of business.
The following table gives details in respect of percentage of revenues generated from top customer and top five customers:
(In %)
Year ended March 31, | ||
2016 | 2015 | |
Revenue from top customer | 3.6 | 3.3 |
Revenue from top five customers | 13.8 | 13.5 |
Financial assets that are neither past due nor impaired
Cash and cash equivalents, available-for-sale financial assets and investment in certificates of deposit are neither past due nor impaired. Cash and cash equivalents include deposits with banks and financial institutions with high credit-ratings assigned by international and domestic credit-rating agencies. Available-for-sale financial assets include primarily investment in liquid mutual fund units, quoted debt securities and unquoted equity and preference securities. Certificates of deposit represent funds deposited at a bank or other eligible financial institution for a specified time period. Investment in quoted debt securities represents the investments made in debt securities issued by government and quasi government organizations. Of the total trade receivables 8,335 crore and 7,336 crore as of March 31, 2016 and March 31, 2015, respectively, were neither past due nor impaired.
There is no other class of financial assets that is not past due but impaired except for trade receivables of 15 crore and 23 crore as of March 31, 2016 and March 31, 2015, respectively.
Financial assets that are past due but not impaired
The Group’s credit period generally ranges from 30-60 days. The age analysis of the trade receivables have been considered from the due date. The age wise break up of trade receivables, net of allowances of 274 crore and 343 crore as of March 31, 2016 and March 31, 2015, respectively, that are past due, is given below:
(In crore)
Period (in days) | As of | |
March 31, 2016 | March 31, 2015 | |
Less than 30 | 2,080 | 1,641 |
31 – 60 | 471 | 345 |
61 – 90 | 304 | 89 |
More than 90 | 140 | 302 |
2,995 | 2,377 |
The reversal of provision for doubtful trade receivable for the year ended March 31, 2016 was 52 crore. The provision for doubtful trade receivable for the year ended March 31, 2015 was 171 crore.
(In crore)
Year ended March 31, | ||
2016 | 2015 | |
Balance at the beginning | 366 | 214 |
Translation differences | 8 | (7) |
Provisions for doubtful accounts receivable (refer note 2.10) | (52) | 171 |
Trade receivables written off | (33) | (12) |
Balance at the end | 289 | 366 |
Liquidity risk
As of March 31, 2016, the Group had a working capital of 38,456 crore including cash and cash equivalents of 32,697 crore and current available-for-sale financial assets of 75 crore. As of March 31, 2015, the Group had a working capital of 35,813 crore including cash and cash equivalents of 30,367 crore and current available-for-sale financial assets of 874 crore.
As of March 31, 2016 and March 31, 2015, the outstanding employee benefit obligations were 1,341 crore and 1,069 crore, respectively, which have been substantially funded. Further, as of March 31, 2016 and March 31, 2015, the Group had no outstanding bank borrowings. Accordingly, no liquidity risk is perceived.
The table below provides details regarding the contractual maturities of significant financial liabilities as of March 31, 2016:
(In crore)
Particulars | Less than 1 year | 1-2 years | 2-4 years | 4-7 years | Total |
Trade payables | 386 | – | – | – | 386 |
Client deposits | 28 | – | – | – | 28 |
Other liabilities (excluding liability towards acquisition) (Refer Note 2.9) | 4,847 | 25 | 9 | – | 4,881 |
Liability towards acquisitions on an undiscounted basis (including contingent consideration) -Refer Note 2.9 | 86 | 46 | – | – | 132 |
The table below provides details regarding the contractual maturities of significant financial liabilities as of March 31, 2015:
(In crore)
Particulars | Less than 1 year | 1-2 years | 2-4 years | 4-7 years | Total |
Trade payables | 140 | – | – | – | 140 |
Client deposits | 27 | – | – | – | 27 |
Other liabilities ( excluding liabilities towards acquisition ) (Refer Note 2.9) | 4,891 | – | – | – | 4,891 |
Liability towards acquisitions on an undiscounted basis (Refer Note 2.9) | 525 | – | – | – | 525 |
As of March 31, 2016 and March 31, 2015, the group had outstanding financial guarantees of 56 crore and 43 crore, respectively, towards leased premises. These financial guarantees can be invoked upon breach of any term of the lease agreement. To the group’s knowledge there has been no breach of any term of the lease agreement as of March 31, 2016 and March 31, 2015
Offsetting of financial assets and financial liabilities:
The group offsets a financial asset and a financial liability when it currently has a legally enforceable right to set off the recognized amounts and the group intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
The following table provides quantitative information about offsetting of derivative financial assets and derivative financial liabilities:
(In crore)
As of | As of | |||
March 31, 2016 | March 31, 2015 | |||
Derivative financial asset | Derivative financial liability | Derivative financial asset | Derivative financial liability | |
Gross amount of recognized financial asset/liability | 124 | (13) | 105 | (7) |
Amount set off | (8) | 8 | (4) | 4 |
Net amount presented in balance sheet | 116 | (5) | 101 | (3) |
2.8 Provisions
Provisions comprise the following:
(In crore)
As of | ||
March 31, 2016 | March 31, 2015 | |
Provision for post sales client support and other provisions | 512 | 478 |
512 | 478 |
Provision for post sales client support and other provisions represents cost associated with providing post sales support services which are accrued at the time of recognition of revenues and are expected to be utilized over a period of 6 months to 1 year. The movement in the provision for post sales client support and other provisions is as follows:
(In crore)
Year ended March 31, 2016 | |
Balance at the beginning | 478 |
Provision recognized/ (reversed) | 106 |
Provision utilized | (103) |
Translation difference | 31 |
Balance at the end | 512 |
Provision for post sales client support and other provisions is included in cost of sales in the statement of comprehensive income.
As of March 31, 2016 and March 31, 2015, claims against the company, not acknowledged as debts, net of amounts paid (excluding demands from Indian Income tax authorities- Refer note 2.16) amounted to 277 crore and 261 crore, respectively.
The company is subject to legal proceedings and claims, which have arisen in the ordinary course of business. The company’s management does not reasonably expect that these legal actions, when ultimately concluded and determined, will have a material and adverse effect on the company’s results of operations or financial condition.
2.9 Other liabilities
Other liabilities comprise the following :
(In crore)
As of | ||
March 31, 2016 | March 31, 2015 | |
Current | ||
Accrued compensation to employees | 2,265 | 2,106 |
Accrued expenses | 2,189 | 1,984 |
Withholding taxes payable (1) | 1,296 | 904 |
Retainage | 80 | 53 |
Liabilities of controlled trusts | 167 | 177 |
Deferred income - government grant on land use rights (1) (Refer Note 2.6) | 1 | 1 |
Accrued gratuity | 1 | 7 |
Liability towards contingent consideration (Refer note 2.3) | 81 | – |
Liability towards acquisition of business (Refer note 2.3) | – | 487 |
Others | 145 | 77 |
6,225 | 5,796 | |
Non-current | ||
Liability towards contingent consideration (Refer note 2.3) | 36 | – |
Accrued compensation to employees | 33 | – |
Deferred income - government grant on land use rights (1) (Refer Note 2.6) | 46 | 46 |
115 | 46 | |
6,340 | 5,842 | |
Financial liabilities included in other liabilities | 4,997 | 4,891 |
Financial liability towards acquisitions on an undiscounted basis (including contingent consideration) - Refer note 2.3 | 132 | 525 |
(1) Non financial liabilities
Accrued expenses primarily relates to cost of technical sub-contractors, telecommunication charges, legal and professional charges, brand building expenses, overseas travel expenses and office maintenance. Others include unpaid dividend balances and capital creditors.
2.10 Expenses by nature
(In crore)
Year ended March 31, | ||
2016 | 2015 | |
Employee benefit costs (Refer Note 2.11.4) | 34,406 | 29,742 |
Deferred purchase price pertaining to acquisition (Refer Note 2.3) | 149 | 252 |
Depreciation and amortization charges (Refer Note 2.5 and 2.6) | 1,459 | 1,069 |
Travelling costs | 2,263 | 1,818 |
Consultancy and professional charges | 779 | 422 |
Cost of Software packages for own use | 740 | 855 |
Third party items bought for service delivery to clients | 534 | 189 |
Communication costs | 449 | 495 |
Cost of technical sub-contractors | 3,531 | 2,171 |
Power and fuel | 217 | 219 |
Repairs and maintenance | 1,054 | 764 |
Rates and taxes | 109 | 126 |
Insurance charges | 60 | 53 |
Commission to non-whole time directors | 9 | 9 |
Branding and marketing expenses | 288 | 158 |
Provision for post-sales client support | 8 | 39 |
Provision for doubtful account receivables (Refer Note 2.7) | (52) | 171 |
Contribution towards Corporate Social Responsibility | 216 | 254 |
Operating lease payments (Refer Note 2.14) | 360 | 309 |
Others | 242 | 372 |
Total cost of sales, selling and marketing expenses and administrative expenses | 46,821 | 39,487 |
2.10.1 Break-up of expenses
Cost of sales
(In crore)
Year ended March 31, | ||
2016 | 2015 | |
Employee benefit costs | 30,405 | 26,296 |
Deferred purchase price pertaining to acquisition (Refer Note 2.3) | 149 | 252 |
Depreciation and amortization | 1,459 | 1,069 |
Travelling costs | 1,637 | 1,337 |
Cost of Software packages for own use | 726 | 855 |
Third party items bought for service delivery to clients | 534 | 189 |
Cost of technical sub-contractors | 3,530 | 2,170 |
Operating lease payments | 242 | 215 |
Communication costs | 179 | 206 |
Repairs and maintenance | 187 | 167 |
Provision for post-sales client support | 8 | 39 |
Others | 42 | 88 |
Total | 39,098 | 32,883 |
Selling and marketing expenses
(In crore)
Year ended March 31, | ||
2016 | 2015 | |
Employee benefit costs | 2,645 | 2,380 |
Travelling costs | 356 | 265 |
Branding and marketing | 286 | 157 |
Operating lease payments | 44 | 37 |
Communication costs | 19 | 22 |
Consultancy and professional charges | 49 | 22 |
Others | 32 | 58 |
Total | 3,431 | 2,941 |
Administrative expenses
(In crore)
Year ended March 31, | ||
2016 | 2015 | |
Employee benefit costs | 1,356 | 1,066 |
Consultancy and professional charges | 706 | 400 |
Repairs and maintenance | 863 | 596 |
Power and fuel | 217 | 219 |
Communication costs | 251 | 267 |
Travelling costs | 270 | 216 |
Provision for doubtful accounts receivable | (52) | 171 |
Rates and taxes | 109 | 126 |
Insurance charges | 60 | 53 |
Operating lease payments | 74 | 57 |
Commission to non-whole time directors | 9 | 9 |
Contribution towards Corporate Social Responsibility | 216 | 254 |
Others | 213 | 229 |
Total | 4,292 | 3,663 |
2.11 Employee benefits
2.11.1 Gratuity
The following tables set out the funded status of the gratuity plans and the amounts recognized in the Group's financial statements as of March 31, 2016 and March 31, 2015:
(In crore)
As of | ||
March 31, 2016 | March 31, 2015 | |
Change in benefit obligations | ||
Benefit obligations at the beginning | 816 | 707 |
Service cost | 118 | 95 |
Interest expense | 61 | 60 |
Addition through business combination | 1 | – |
Remeasurements - Actuarial (gains)/ losses | 23 | 70 |
Benefits paid | (75) | (116) |
Benefit obligations at the end | 944 | 816 |
Change in plan assets | ||
Fair value of plan assets at the beginning | 836 | 717 |
Interest income | 66 | 67 |
Remeasurements- Return on plan assets excluding amounts included in interest income | 9 | 6 |
Contributions | 111 | 162 |
Benefits paid | (75) | (116) |
Fair value of plan assets at the end | 947 | 836 |
Funded status | 3 | 20 |
Prepaid gratuity benefit | 4 | 27 |
Accrued gratuity | (1) | (7) |
Amount for the year ended March 31, 2016 and March 31, 2015 recognized in net profit in the statement of comprehensive income:
(In crore)
Year ended March 31, | ||
2016 | 2015 | |
Service cost | 118 | 95 |
Net interest on the net defined benefit liability/asset | (5) | (7) |
Net gratuity cost | 113 | 88 |
Amount for the year ended March 31, 2016 and March 31, 2015 recognized in statement of other comprehensive income:
(In crore)
Year ended March 31, | ||
2016 | 2015 | |
Remeasurements of the net defined benefit liability/ (asset) | ||
Actuarial (gains) / losses | 23 | 70 |
(Return) / loss on plan assets excluding amounts included in the net interest on the net defined benefit liability/(asset) | (9) | (6) |
14 | 64 |
(In crore)
Year ended March 31, | ||
2016 | 2015 | |
(Gain)/loss from change in demographic assumptions | – | – |
(Gain)/loss from change in financial assumptions | – | 55 |
– | 55 |
Amounts recognized in statement of comprehensive income has been apportioned between cost of sales, selling and marketing expenses and administrative expenses on the basis of direct employee cost as follows
(In crore)
Year ended March 31, | ||
2016 | 2015 | |
Cost of sales | 100 | 78 |
Selling and marketing expenses | 9 | 7 |
Administrative expenses | 4 | 3 |
113 | 88 |
The weighted-average assumptions used to determine benefit obligations as of March 31, 2016 and March 31, 2015 are set out below:
As of | ||
March 31, 2016 | March 31, 2015 | |
Discount rate | 7.8% | 7.8% |
Weighted average rate of increase in compensation levels | 8.0% | 8.0% |
The weighted-average assumptions used to determine net periodic benefit cost for the year ended March 31, 2016 and March 31, 2015 are set out below:
Year ended March 31, | ||
2016 | 2015 | |
Discount rate | 7.8% | 9.2% |
Weighted average rate of increase in compensation levels | 8.0% | 8.0% |
Weighted average duration of defined benefit obligation | 6.4 years | 6.4 years |
Gratuity is applicable only to employees drawing a salary in Indian rupees and there are no other foreign defined benefit gratuity plans.
The Company contributes all ascertained liabilities towards gratuity to the Infosys Limited Employees' Gratuity Fund Trust. In case of Infosys BPO and EdgeVerve, contributions are made to the Infosys BPO Employees' Gratuity Fund Trust and EdgeVerve Systems Limited Employees Gratuity Fund Trust, respectively. Trustees administer contributions made to the trust. As of March 31, 2016 and March 31, 2015, the plan assets have been primarily invested in insurer managed funds.
Actual return on assets for the year ended March 31, 2016 and March 31, 2015 were 75 crore and 73 crore, respectively.
The Company assesses these assumptions with its projected long-term plans of growth and prevalent industry standards. The discount rate is based on the government securities yield.
As of March 31, 2016, every percentage point increase / decrease in discount rate will affect our gratuity benefit obligation by approximately 46 crore.
As of March 31, 2016, every percentage point increase / decrease in weighted average rate of increase in compensation levels will affect our gratuity benefit obligation by approximately 39 crore.
The Group expects to contribute 98 crore to the gratuity trusts during the fiscal 2017.
Maturity profile of defined benefit obligation:
(in crore)
Within 1 year | 143 |
1-2 year | 148 |
2-3 year | 156 |
3-4 year | 165 |
4-5 year | 180 |
5-10 years | 909 |
Sensitivity for significant actuarial assumptions is computed by varying one actuarial assumption used for the valuation of the defined benefit obligation by one percentage, keeping all other actuarial assumptions constant.
Assumptions regarding future mortality experience are set in accordance with the published statistics by the Life Insurance Corporation of India.
2.11.2 Superannuation
The Company contributed 234 crore and 215 crore to the superannuation plan during the year ended March 31, 2016 and March 31, 2015, respectively.
Superannuation contributions have been apportioned between cost of sales, selling and marketing expenses and administrative expenses on the basis of direct employee cost as follows:
(In crore)
Year ended March 31, | ||
2016 | 2015 | |
Cost of sales | 207 | 190 |
Selling and marketing expenses | 18 | 17 |
Administrative expenses | 9 | 8 |
234 | 215 |
2.11.3 Provident fund
Infosys has an obligation to fund any shortfall on the yield of the trust’s investments over the administered interest rates on an annual basis. These administered rates are determined annually predominantly considering the social rather than economic factors and in most cases the actual return earned by the Company has been higher in the past years. The actuary has provided a valuation for provident fund liabilities on the basis of guidance issued by Actuarial Society of India and based on the below provided assumptions there is no shortfall as at March 31, 2016 and March 31, 2015, respectively.
The details of fund and plan asset position are given below:
(In crore)
As of | ||
March 31, 2016 | March 31, 2015 | |
Plan assets at period end, at fair value | 3,808 | 2,912 |
Present value of benefit obligation at period end | 3,808 | 2,912 |
Asset recognized in balance sheet | – | – |
The plan assets have been primarily invested in government securities.
Assumptions used in determining the present value obligation of the interest rate guarantee under the Deterministic Approach:
As of | ||
March 31, 2016 | March 31, 2015 | |
Government of India (GOI) bond yield | 7.80% | 7.80% |
Remaining term to maturity of portfolio | 7 years | 7 years |
Expected guaranteed interest rate- First year: | 8.75% | 8.75% |
- Thereafter: | 8.60% | 8.60% |
The Group contributed 413 crore and 345 crore to the provident fund during the year ended March 31, 2016 and March 31, 2015, respectively.
Provident fund contributions have been apportioned between cost of sales, selling and marketing expenses and administrative expenses on the basis of direct employee cost as follows:
(In crore)
Year ended March 31, | ||
2016 | 2015 | |
Cost of sales | 365 | 305 |
Selling and marketing expenses | 32 | 28 |
Administrative expenses | 16 | 12 |
413 | 345 |
2.11.4 Employee benefit costs include:
(In crore)
Year ended March 31, | ||
2016 | 2015 | |
Salaries and bonus* | 33,646 | 29,094 |
Defined contribution plans | 302 | 265 |
Defined benefit plans | 458 | 383 |
34,406 | 29,742 |
* | Includes stock compensation expense of 7crore and 2 crore for the year ended March 31, 2016 and March 31, 2015, respectively. |
The gratuity and provident plans are applicable only to employees drawing a salary in Indian rupees and there are no other significant foreign defined benefit plans.
The employee benefit cost is recognized in the following line items in the statement of comprehensive income:
(In crore)
Year ended March 31, | ||
2016 | 2015 | |
Cost of sales | 30,405 | 26,296 |
Selling and marketing expenses | 2,645 | 2,380 |
Administrative expenses | 1,356 | 1,066 |
34,406 | 29,742 |
2.12 Equity
Share capital and share premium
The Company has allotted 114,84,72,332 fully paid-up shares of face value 5/- each during the quarter ended June 30, 2015, pursuant to bonus issue approved by the shareholders through postal ballot. The book closure date fixed by the Board was June 17, 2015. Bonus share of one equity share for every equity share held, and a stock dividend of one American Depositary Share (ADS) for every ADS held, respectively, has been allotted. Consequently, the ratio of equity shares underlying the ADSs held by an American Depositary Receipt holder remains unchanged. Options granted under the restricted stock unit plan have been adjusted for bonus shares. 11,323,576 and 56,67,200 shares were held by controlled trust as of March 31, 2016 and March 31, 2015, respectively .
The amount received in excess of the par value has been classified as share premium. Additionally, share-based compensation recognized in net profit in the consolidated statement of comprehensive income is credited to share premium. Amounts have been utilized for bonus issue from share premium account.
Retained earnings
Retained earnings represent the amount of accumulated earnings of the Group.
Other Reserves
The Special Economic Zone Re-investment reserve has been created out of the profit of the eligible SEZ unit in terms of the provisions of Sec 10AA(1)(ii) of Income Tax Act,1961. The reserve should be utilized by the Company for acquiring new plant and machinery for the purpose of its business in terms of the provisions of the Sec 10AA(2) of the Income Tax Act, 1961.
Other components of equity
Other components of equity consist of currency translation, fair value changes on available-for-sale financial assets, remeasurement of net defined benefit liability/asset and changes in fair value of derivatives designated as cash flow hedges.
The Company’s objective when managing capital is to safeguard its ability to continue as a going concern and to maintain an optimal capital structure so as to maximize shareholder value. In order to maintain or achieve an optimal capital structure, the Company may adjust the amount of dividend payment, return capital to shareholders, issue new shares or buy back issued shares. As of March 31, 2016, the Company has only one class of equity shares and has no debt. Consequent to the above capital structure there are no externally imposed capital requirements.
The rights of equity shareholders are set out below.
2.12.1 Voting
Each holder of equity shares is entitled to one vote per share. The equity shares represented by American Depositary Shares (ADS) carry similar rights to voting and dividends as the other equity shares. Each ADS represents one underlying equity share.
2.12.2 Dividends
The Company declares and pays dividends in Indian rupees. The remittance of dividends outside India is governed by Indian law on foreign exchange and is subject to applicable distribution taxes.
The Board increased dividend pay-out ratio from up to 40% to up to 50% of post-tax consolidated profits effective fiscal 2015.
The amount of per share dividend recognized as distributions to equity shareholders for the year ended March 31, 2016 includes final divided of 29.50/- per equity share (not adjusted for June 17, 2015 bonus issue) and an interim dividend of 10/- per equity share. The amount of per share dividend recognized as distribution to equity shareholders for the year ended March 31, 2015 was 73.00/- per equity share (not adjusted for bonus issues).
The Board of Directors, in its meeting on April 15, 2016, have proposed a final dividend of 14.25/- per equity share for the financial year ended March 31, 2016. The proposal is subject to the approval of shareholders at the Annual General Meeting to be held on June 18, 2016 and if approved would result in a cash outflow of approximately 3,923 crore (excluding dividend paid on treasury shares), including corporate dividend tax.
2.12.3 Liquidation
In the event of liquidation of the Company, the holders of shares shall be entitled to receive any of the remaining assets of the Company, after distribution of all preferential amounts. However, no such preferential amounts exist currently, other than the amounts held by irrevocable controlled trusts. The amount distributed will be in proportion to the number of equity shares held by the shareholders. For irrevocable controlled trusts, the corpus would be settled in favour of the beneficiaries.
2.12.4 Share options
There are no voting, dividend or liquidation rights to the holders of options issued under the Company's share option plans.
2.13 Other income
Other income consists of the following:
(In crore)
Year ended March 31, | ||
2016 | 2015 | |
Interest income on deposits and certificates of deposit | 2,523 | 2,631 |
Exchange gains/ (losses) on forward and options contracts | 29 | 514 |
Exchange gains/ (losses) on translation of other assets and liabilities | 140 | (39) |
Income from available-for-sale financial assets | 176 | 261 |
Others | 257 | 60 |
3,125 | 3,427 |
2.14 Operating leases
The Group has various operating leases, mainly for office buildings, that are renewable on a periodic basis. Rental expense for operating leases for the year ended March 31, 2016 and March 31, 2015 was 360 crore and 309 crore, respectively.
The schedule of future minimum rental payments in respect of non-cancellable operating leases is set out below:
(In crore)
As of | ||
March 31, 2016 | March 31, 2015 | |
Within one year of the balance sheet date | 372 | 168 |
Due in a period between one year and five years | 873 | 395 |
Due after five years | 442 | 168 |
A majority of the Group’s operating lease arrangements extend up to a maximum of ten years from their respective dates of inception, and relates to rented overseas premises. Some of these lease agreements have a price escalation clause.
2.15 Employees' Stock Option Plans (ESOP)
2015 Stock Incentive Compensation Plan (the 2015 Plan): SEBI issued the Securities and Exchange Board of India (Share based Employee Benefits) Regulations, 2014 (‘SEBI Regulations’) which replaced the SEBI ESOP Guidelines, 1999. The 2011 Plan (as explained below) was required to be amended and restated in accordance with the SEBI Regulations. Consequently, to effect this change and to further introduce stock options/ADR’s and other stock incentives, the Company put forth the 2015 Stock Incentive Compensation Plan (the 2015 Plan) for approval to the shareholders of the Company. Pursuant to the approval by the shareholders through postal ballot which ended on March 31, 2016, the Board of Directors have been authorised to introduce, offer, issue and allot share-based incentives to eligible employees of the Company and its subsidiaries under the 2015 Plan. The maximum number of shares under the 2015 plan shall not exceed 2,40,38,883 equity shares(this includes 1,12,23,576 equity shares which are currently held by the Trust towards the 2011 Plan). 1,70,38,883 equity shares will be issued as RSUs at par value and 70,00,000 equity shares will be issued as stock options at market price. These instruments will vest over a period of 4 years and the Company expects to grant the instruments under the 2015 Plan over the period of 4 to 7 years.
2011 RSU Plan (the 2011 Plan): The Company had a 2011 RSU Plan which provided for the grant of restricted stock units (RSUs) to eligible employees of the Company. The Board of Directors recommended the establishment of the 2011 Plan to the shareholders on August 30, 2011 and the shareholders approved the recommendation of the Board of Directors on October 17, 2011 through a postal ballot. The maximum aggregate number of shares that may be awarded under the plan was 1,13,34,400 and the plan was expected to continue in effect for a term of 10 years from the date of initial grant under the plan. During the year ended March 31, 2015, the company made a grant of 108,268 restricted stock units (adjusted for bonus issues) to Dr. Vishal Sikka, Chief Executive Office and Managing Director. The Board in its meeting held on June 22, 2015, on recommendation of Nomination and Remuneration Committee, further granted 1,24,061 RSUs to Dr. Vishal Sikka. These RSUs are vesting over a period of four years from the date of the grant in the proportions specified in the award agreement. The RSUs will vest subject to achievement of certain key performance indicators as set forth in the award agreement for each applicable year of the vesting tranche and continued employment through each vesting date. Further the Company has earmarked 100,000 equity shares for welfare activities of the employees, approved by the shareholders vide postal ballot which ended on March 31, 2016. The equity shares currently held under this plan, i.e. 1,12,23,576 equity shares (this includes the aggregate number of equity shares that may be awarded under the 2011 Plan as reduced by 10,824 equity shares already exercised by Dr. Vishal Sikka and 100,000 equity shares which have been earmarked for welfare activities of the employees) have been subsumed under the 2015 Plan.
Further , the award granted to Dr. Vishal Sikka on June 22, 2015 was modified by the Nomination and remuneration committee on April 14, 2016. There is no modification or change in the total number of RSUs granted or the vesting period (which is four years). The modifications relate to the criteria of vesting for each of the years. Based on the modification, the first tranche of the RSUs will vest subject to achievement of certain key performance indicators for the year ended March 31, 2016. Subsequent vesting of RSU's for each of the remaining years would be subject to continued employment.
The activity in the 2011 Plan during the year ended March 31, 2016:
Particulars | Year ended March 31, 2016 | |
Shares arising out of options | Weighted average exercise price | |
2011 Plan: | ||
Outstanding at the beginning | 108,268 | 5 |
Granted | 124,061 | 5 |
Forfeited and expired | – | – |
Exercised* | 10,824 | 5 |
Outstanding at the end | 221,505 | 5 |
Exercisable at the end | – | – |
*Adjusted for bonus issues. (Refer note 2.12)
The weighted average share price of options exercised under the 2011 Plan on the date of exercise was 1,088/-.
The activity in the 2011 Plan during the year ended March 31, 2015 is set out below:
Particulars | Year ended March 31, 2015 | |
Shares arising out of options | Weighted average exercise price | |
2011 Plan: | ||
Outstanding at the beginning | – | – |
Granted* | 108,268 | 5 |
Forfeited and expired | – | – |
Exercised | – | – |
Outstanding at the end | 108,268 | 5 |
Exercisable at the end | – | – |
* | Adjusted for bonus issues (Refer note 2.12) |
The weighted average remaining contractual life of RSUs outstanding as of March 31, 2016 and March 31, 2015 under the 2011 Plan was 1.98 years and 2.39 years, respectively.
The expected term of an RSU is estimated based on the vesting term and contractual term of the RSU, as well as expected exercise behaviour of the employee who receives the RSU. Expected volatility during the expected term of the RSU is based on historical volatility of the observed market prices of the company's publicly traded equity shares during a period equivalent to the expected term of the RSU.
The fair value of each RSU is estimated on the date of grant using the Black-Scholes-Merton model with the following assumptions:
Option granted during | Fiscal 2016 | Fiscal 2015 |
Grant date | 22-Jun-15 | 21-Aug-14 |
Weighted average share price ()* | 1,024 | 3,549 |
Exercise price ()* | 5 | 5 |
Expected volatility (%) | 28-36 | 30 - 37 |
Expected life of the option (years) | 1 - 4 | 1 - 4 |
Expected dividends (%) | 2.43 | 1.84 |
Risk-free interest rate (%) | 7- 8 | 8 - 9 |
Weighted average fair value as on grant date ()* | 948 | 3,355 |
* | Data for Fiscal 2015 is not adjusted for bonus issues |
During the year ended March 31, 2016 and March 31, 2015, the company recorded an employee stock compensation expense of 7crore and 2 crore, respectively in the statement of comprehensive income.
2.16 Income taxes
Income tax expense in the consolidated statement of comprehensive income comprises:
(In crore)
Year ended March 31, | ||
2016 | 2015 | |
Current taxes | ||
Domestic taxes | 4,215 | 3,115 |
Overseas taxes | 1,103 | 1,736 |
5,318 | 4,851 | |
Deferred taxes | ||
Domestic taxes | 21 | 32 |
Overseas taxes | (88) | 46 |
(67) | 78 | |
Income tax expense | 5,251 | 4,929 |
Income tax expense for the year ended March 31, 2016 and March 31, 2015 includes reversal (net of provisions) of 309 crore and 158 crore, respectively, pertaining to earlier periods.
Entire deferred income tax for the year ended March 31, 2016 and March 31, 2015 relates to origination and reversal of temporary differences.
A deferred tax liability of 4 crore relating to available-for-sale financial assets has been recognized in other comprehensive income for the year ended March 31, 2016. A reversal of deferred tax asset of 11 crore has been recognized in other comprehensive income for the year ended March 31, 2015.
A reconciliation of the income tax provision to the amount computed by applying the statutory income tax rate to the income before income taxes is summarized below:
(In crore)
Year ended March 31, | ||
2016 | 2015 | |
Profit before income taxes | 18,742 | 17,258 |
Enacted tax rates in India | 34.61% | 33.99% |
Computed expected tax expense | 6,486 | 5,866 |
Tax effect due to non-taxable income for Indian tax purposes | (1,758) | (1,672) |
Overseas taxes | 715 | 817 |
Tax reversals, overseas and domestic | (309) | (158) |
Effect of exempt non-operating income | (83) | (89) |
Effect of unrecognized deferred tax assets | 62 | 43 |
Effect of differential overseas tax rates | 3 | (39) |
Effect of non-deductible expenses | 194 | 211 |
Tax on dividend received from subsidiaries | – | 4 |
Additional deduction on research and development expense | (60) | (54) |
Others | 1 | – |
Income tax expense | 5,251 | 4,929 |
The applicable Indian statutory tax rates for fiscal 2016 and fiscal 2015 is 34.61% and 33.99%, respectively. The change in the tax rate is consequent to the changes made in Finance Act 2015.
During the year ended March 31, 2016 and March 31, 2015, the group has claimed weighted tax deduction on eligible research and development expenditures based on the approval received from Department of Scientific and Industrial Research (DSIR) on November 23, 2011 which has been renewed effective April 2014. The weighted tax deduction is equal to 200% of such expenditures incurred.
The foreign tax expense is due to income taxes payable overseas, principally in the United States. In India, the company has benefited from certain tax incentives that the Government of India had provided to the export of software from the specifically designated units registered under the Software Technology Parks Scheme (STP) in India and the company continues to benefit from certain tax incentives for the units registered under the Special Economic Zones Act, 2005 (SEZ). However, the income tax incentives provided by the Government of India for STP units have expired, and all the STP units are now taxable. SEZ units which began providing services on or after April 1, 2005 are eligible for a deduction of 100 percent of profits or gains derived from the export of services for the first five years from the financial year in which the unit commenced the 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 period of 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 year, computed in accordance with the Internal Revenue Code. As of March 31, 2016, Infosys' U.S. branch net assets amounted to approximately 5,109 crore. As of March 31, 2016, the Company has provided for branch profit tax of 334 crore for its U.S branch, as the Company estimates that these branch profits are expected to be distributed in the foreseeable future. The change in provision for branch profit tax includes 18 crore movement on account of exchange rate during the year ended March 31, 2016.
Deferred income tax liabilities have not been recognized on temporary differences amounting to 4,195 crore and 3,291 crore as of March 31, 2016 and March 31, 2015, respectively, associated with investments in subsidiaries and branches as it is probable that the temporary differences will not reverse in the foreseeable future.
The following table provides the details of income tax assets and income tax liabilities as of March 31, 2016 and March 31, 2015:
(In crore)
As at | ||
March 31, 2016 | March 31, 2015 | |
Income tax assets | 5,230 | 4,089 |
Current income tax liabilities | 3,410 | 2,818 |
Net current income tax asset/ (liability) at the end | 1,820 | 1,271 |
The gross movement in the current income tax asset/ (liability) for the year ended March 31, 2016 and March 31, 2015 is as follows:
(In crore)
Year ended March 31, | ||
2016 | 2015 | |
Net current income tax asset/ (liability) at the beginning | 1,271 | (665) |
Translation differences | – | 20 |
Income tax paid | 5,865 | 6,751 |
Current income tax expense (Refer Note 2.16) | (5,318) | (4,851) |
Income tax on other comprehensive income | 2 | 16 |
Net current income tax asset/ (liability) at the end | 1,820 | 1,271 |
The tax effects of significant temporary differences that resulted in deferred income tax assets and liabilities are as follows:
(In crore)
As of | ||
March 31, 2016 | March 31, 2015 | |
Deferred income tax assets | ||
Property, plant and equipment | 178 | 241 |
Computer software | 50 | 51 |
Accrued compensation to employees | 68 | 48 |
Trade receivables | 89 | 111 |
Compensated absences | 389 | 299 |
Available-for-sale financial asset | – | 1 |
Post sales client support | 77 | 74 |
Intangibles | 4 | – |
Others | 55 | 31 |
Total deferred income tax assets | 910 | 856 |
Deferred income tax liabilities | ||
Intangible asset | (252) | (159) |
Temporary difference related to branch profits | (334) | (316) |
Property, plant and equipment | (2) | – |
Available-for-sale financial asset | (4) | (1) |
Others | (38) | (3) |
Total deferred income tax liabilities | (630) | (479) |
Deferred income tax assets after set off | 536 | 537 |
Deferred income tax liabilities after set off | (256) | (160) |
Deferred tax assets and deferred tax liabilities have been offset wherever the Group has a legally enforceable right to set off current tax assets against current tax liabilities and where the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority.
The deferred income tax assets and deferred income tax liabilities recoverable within and after 12 months are as follows:
(In crore)
As of | ||
March 31, 2016 | March 31, 2015 | |
Deferred income tax assets to be recovered after 12 months | 409 | 354 |
Deferred income tax assets to be recovered within 12 months | 501 | 502 |
Total deferred income tax assets | 910 | 856 |
Deferred income tax liabilities to be settled after 12 months | (450) | (374) |
Deferred income tax liabilities to be settled within 12 months | (180) | (105) |
Total deferred income tax liabilities | (630) | (479) |
In assessing the realizability of deferred income tax assets, management considers whether some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income 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 income 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 income tax assets are deductible, management believes that the Group will realize the benefits of those deductible differences. The amount of the deferred income 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 gross movement in the deferred income tax account for the year ended March 31, 2016 and March 31, 2015, is as follows:
(In crore)
Year ended March 31, | ||
2016 | 2015 | |
Net deferred income tax asset at the beginning | 377 | 592 |
Addition through business combination (Refer note 2.3) | (128) | (99) |
Translation differences | (32) | (27) |
Credits / (charge) relating to temporary differences (Refer Note 2.16) | 67 | (78) |
Temporary difference on available-for-sale financial asset | (4) | (11) |
Net deferred income tax asset at the end | 280 | 377 |
The credits relating to temporary differences during the year ended March 31, 2016 are primarily on account of acrrued compensation to employees and compensated absences partially offset by reversal of credits pertaining to property plant and equipment and trade receivabes.The charge relating to temporary differences during the year ended March 31, 2015 are primarily on account of property, plant and equipment, post sales client support, available for sale financial assets, minimum alternate tax partially offset by compensated absences and trade receivables.
As of March 31, 2016 and March 31, 2015, claims against the group not acknowledged as debts from the Indian Income tax authorities (net of amount paid to statutory authorities of 4383 crore and 3,568 crore) amounted to 7 crore and 3 crore, respectively.
Payment of 4,383 crore includes demands from the Indian Income tax authorities of 4,135 crore (3,337 crore), including interest of 1,224 crore (964 crore) upon completion of their tax assessment for fiscal 2007, fiscal 2008, fiscal 2009, fiscal 2010 and fiscal 2011 (For the year ended March 31, 2015 - upon completion of their tax assessment for fiscal 2006, fiscal 2007, fiscal 2008, fiscal 2009 and fiscal 2010). These demands were paid to statutory tax authorities which includes 913 crores paid during the year ended 31st March 2016 consequent to demand from tax authorities in India for fiscal 2011 towards denial of certain tax benefits. The company has filed an appeal with the income tax appellate authorities.
Demand for fiscal 2007, fiscal 2008 and fiscal 2009 includes disallowance of a portion of the deduction claimed by the company under Section 10A of the income Tax Act as 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. Demand for fiscal 2007, fiscal 2008, fiscal 2009, fiscal 2010 and fiscal 2011 also includes disallowance of portion of profit earned outside India from the STP units under section 10A of the Income Tax Act and disallowance of profits earned from SEZ units under section 10AA of the Income Tax Act. The matters for fiscal 2007, fiscal 2008 and fiscal 2009 are pending before the Commissioner of Income Tax (Appeals) Bangalore. The matter for fiscal 2010 and fiscal 2011 is pending before Hon’ble Income Tax Appellate Tribunal (ITAT) Bangalore. The company is contesting the demand and the management including its tax advisors believes that its position will likely be upheld in the appellate process. The management believes that the ultimate outcome of these proceedings will not have a material adverse effect on the Company's financial position and results of operations.
2.17 Earnings per equity share
The following is a reconciliation of the equity shares used in the computation of basic and diluted earnings per equity share:
Year ended March 31, | ||
2016 | 2015 | |
Basic earnings per equity share - weighted average number of equity shares outstanding(1)(2) | 228,56,16,160 | 228,56,10,264 |
Effect of dilutive common equivalent shares - share options outstanding | 102,734 | 32,676 |
Diluted earnings per equity share - weighted average number of equity shares and common equivalent shares outstanding | 228,57,18,894 | 228,56,42,940 |
(1) | Excludes treasury shares |
(2) | adjusted for bonus issues. Refer Note 2.12 |
For the year ended March 31, 2016 and March 31, 2015, respectively, there were no outstanding options to purchase equity shares which had an anti-dilutive effect.
2.18 Related party transactions
List of subsidiaries:
Particulars | Country | Holding as of | |
March 31, 2016 | March 31, 2015 | ||
Infosys BPO Limited (Infosys BPO) | India | 99.98% | 99.98% |
Infosys Technologies (China) Co. Limited (Infosys China) | China | 100% | 100% |
Infosys Technologies S. de R. L. de C. V. (Infosys Mexico) | Mexico | 100% | 100% |
Infosys Technologies (Sweden) AB. (Infosys Sweden) | Sweden | 100% | 100% |
Infosys Technologies (Shanghai) Company Limited (Infosys Shanghai) | China | 100% | 100% |
Infosys Tecnologia DO Brasil LTDA. (Infosys Brasil) | Brazil | 100% | 100% |
Infosys Public Services, Inc. USA (Infosys Public Services) | U.S. | 100% | 100% |
Infosys Americas Inc., (Infosys Americas) | U.S. | 100% | 100% |
Infosys (Czech Republic) Limited s.r.o.(formerly Infosys BPO s. r. o) (1) | Czech Republic | 99.98% | 99.98% |
Infosys Poland Sp Z.o.o (formerly Infosys BPO (Poland) Sp Z.o.o)(1) | Poland | 99.98% | 99.98% |
Infosys BPO S.DE R.L. DE.C.V (1)(17) | Mexico | – | – |
Infosys McCamish Systems LLC (1) | U.S. | 99.98% | 99.98% |
Portland Group Pty Ltd(1) | Australia | 99.98% | 99.98% |
Portland Procurement Services Pty Ltd(5) | Australia | – | – |
Infosys BPO Americas LLC.(1)(16) | U.S. | – | – |
Infosys Technologies (Australia) Pty. Limited (Infosys Australia) (2) | Australia | 100% | 100% |
EdgeVerve Systems Limited (EdgeVerve) (7) | India | 100% | 100% |
Infosys Consulting Holding AG (Infosys Lodestone) (formerly Lodestone Holding AG) | Switzerland | 100% | 100% |
Lodestone Management Consultants Inc. (3) | U.S. | 100% | 100% |
Infosys Management Consulting Pty Limited (formerly Lodestone Management Consultants Pty Limited) (3) | Australia | 100% | 100% |
Infosys Consulting AG (formerly Lodestone Management Consultants AG) (3) | Switzerland | 100% | 100% |
Lodestone Augmentis AG (2)(6) | Switzerland | 100% | 100% |
Lodestone GmbH (formerly Hafner Bauer & Ödman GmbH) (2)(3) | Switzerland | 100% | 100% |
Lodestone Management Consultants (Belgium) S.A. (4) | Belgium | 99.90% | 99.90% |
Infosys Consulting GmbH (formerly Lodestone Management Consultants GmbH) (3) | Germany | 100% | 100% |
Infosys Consulting Pte Ltd. (formerly Lodestone Management Consultants Pte Ltd) (3) | Singapore | 100% | 100% |
Infosys Consulting SAS (formerly Lodestone Management Consultants SAS) (3) | France | 100% | 100% |
Infosys Consulting s.r.o.(formerly Lodestone Management Consultants s.r.o.) (3) | Czech Republic | 100% | 100% |
Lodestone Management Consultants GmbH (3) | Austria | 100% | 100% |
Lodestone Management Consultants Co., Ltd. (3) | China | 100% | 100% |
Infy Consulting Company Ltd. (formerly Lodestone Management Consultants Ltd.) (3) | U.K. | 100% | 100% |
Infosys Consulting B.V. (formerly Lodestone Management Consultants B.V.) (3) | Netherlands | 100% | 100% |
Infosys Consulting Ltda. (formerly Lodestone Management Consultants Ltda.) (4) | Brazil | 99.99% | 99.99% |
Infosys Consulting Sp. Z.o.o (formerly Lodestone Management Consultants Sp. z.o.o.) (3) | Poland | 100% | 100% |
Lodestone Management Consultants Portugal, Unipessoal, Lda. (3) | Portugal | 100% | 100% |
S.C. Infosys Consulting S.R.L.(formerly S.C. Lodestone Management Consultants S.R.L.) (3) | Romania | 100% | 100% |
Infosys Consulting S.R.L. (formerly Lodestone Management Consultants S.R.L.) (3) | Argentina | 100% | 100% |
Infosys Canada Public Services Ltd.(8) | Canada | – | – |
Infosys Nova Holdings LLC. (Infosys Nova) (9) | U.S. | 100% | 100% |
Panaya Inc. (Panaya)(10) | U.S. | 100% | 100% |
Panaya Ltd.(11) | Israel | 100% | 100% |
Panaya GmbH(11) | Germany | 100% | 100% |
Panaya Pty Ltd.(11) | Australia | – | – |
Panaya Japan Co. Ltd.(11) | Japan | 100% | 100% |
Skava Systems Pvt. Ltd. (Skava Systems)(12) | India | 100% | – |
Kallidus Inc.(Kallidus)(13) | U.S. | 100% | – |
Noah Consulting LLC (Noah)(14) | U.S. | 100% | – |
Noah Information Management Consulting Inc. ( Noah Canada)(15) | Canada | 100% | – |
(1) | Wholly owned subsidiary of Infosys BPO. |
(2) | Under liquidation |
(3) | Wholly owned subsidiaries of Infosys Consulting Holding AG (formerly Lodestone Holding AG) |
(4) | Majority owned and controlled subsidiaries of Infosys Consulting Holding AG (formerly Lodestone Holding AG) |
(5) | Wholly owned subsidiary of Portland Group Pty Ltd. Liquidated effective May 14, 2014 |
(6) | Wholly owned subsidiary of Infosys Consulting AG (formerly Lodestone Management Consultants AG) |
(7) | Incorporated effective February 14, 2014. (Refer note 2.3) |
(8) | Wholly owned subsidiary of Infosys Public Services, Inc. Incorporated effective December 19, 2014 |
(9) | Incorporated effective January 23, 2015 |
(10) | On March 5, 2015, Infosys acquired 100% of the voting interest in Panaya Inc. (Refer note 2.3) |
(11) | Wholly owned subsidiary of Panaya Inc. |
(12) | On June 2, 2015, Infosys acquired 100% of the voting interest in Skava Systems (Refer note 2.3) |
(13) | On June 2, 2015, Infosys acquired 100% of the voting interest in Kallidus Inc. (Refer note 2.3) |
(14) | On November 16, 2015, Infosys acquired 100% of the membership interest in Noah (Refer note 2.3) |
(15) | Wholly owned subsidiary of Noah (Refer note 2.3) |
(16) | Incorporated effective November 20, 2015 |
(17) | Liquidated effective March 15, 2016 |
Infosys has provided guarantee for performance of certain contracts entered into by its subsidiaries.
List of Associates:
Name of Associates | Country | Holding as at | |
March 31, 2016 | March 31, 2015 | ||
DWA Nova LLC(1) | U.S. | 16% | 20% |
(1) | Associate of Infosys Nova Holdings LLC. During the year ended March 31, 2015, the group acquired 20% of the equity interests in DWA Nova LLC for a cash consideration of 94 crore. The Company has made this investment to form a new company along with Dream Works Animation (DWA). The new company ,DWA Nova LLC, will develop and commercialize image generation technology in order to provide end-to-end digital manufacturing capabilities for companies involved in the design, manufacturing, marketing or distribution of physical consumer products. As of March 31, 2016, Infosys Nova holds 16% of the equity interest in DWA Nova LLC. |
List of other related parties:
Particulars | Country | Nature of relationship |
Infosys Limited Employees' Gratuity Fund Trust | India | Post-employment benefit plan of Infosys |
Infosys Limited Employees' Provident Fund Trust | India | Post-employment benefit plan of Infosys |
Infosys Limited Employees' Superannuation Fund Trust | India | Post-employment benefit plan of Infosys |
Infosys BPO Limited Employees’ Superannuation Fund Trust | India | Post-employment benefit plan of Infosys BPO |
Infosys BPO Limited Employees’ Gratuity Fund Trust | India | Post-employment benefit plan of Infosys BPO |
EdgeVerve Systems Limited Employees' Gratuity Fund Trust | India | Post-employment benefit plan of EdgeVerve |
EdgeVerve Systems Limited Employees' Superannuation Fund Trust | India | Post-employment benefit plan of EdgeVerve |
Infosys Limited Employees’ Welfare Trust | India | Controlled trust |
Infosys Employee Welfare Trust | India | Controlled trust |
Infosys Science Foundation | India | Controlled trust |
Refer Note 2.11 for information on transactions with post-employment benefit plans mentioned above.
Transactions with key management personnel
The table below describes the compensation to key management personnel which comprise directors and executive officers:
(In crore)
Year ended March 31, | ||
2016 | 2015 | |
Salaries and other employee benefits to whole-time directors and executive officers(1)(2)(3)(4) | 101 | 30 |
Commission and other benefits to non-executive/independent directors | 10 | 9 |
Total | 111 | 39 |
(1) | Includes stock compensation expense of 7 crore and 2 crore for the year ended March 31, 2016 and March 31, 2015, respectively to CEO in line with the compensation plan approved by the shareholders. |
(2) | Includes payables to CFO who stepped down w.e.f October 12, 2015. |
(3) | Includes payment of variable pay amounting to 14 crore for the year ended March 31, 2015 to CEO as decided by the Nomination and Remuneration committee in line with the compensation plan approved by the shareholders. |
(4) | Includes provision for variable pay amounting to $4.33 million (approximately 29 crore) for the year ended March 31, 2016 to CEO. The shareholders in the EGM dated July 30, 2014 had approved a variable pay of $4.18 million (approximately28 crore at current exchange rate) at a target level and also authorized the Board to alter and vary the terms of remuneration. Accordingly , the Board based on the recommendations of the Nominations committee approved on April 15, 2016, $4.33 million ( approximately 29 crore) as variable pay for the year ended March 31, 2016. |
2.19 Segment reporting
IFRS 8 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 end-to-end business solutions to enable clients to enhance business performance. During the year ended March 31, 2016, the Company reorganized some of its segments to enhance executive customer relationships, improve focus of sales investments and increase management oversight. Consequent to the internal reorganization, Growth Markets (GMU) comprising enterprises in APAC (Asia Pacific) and Africa have been subsumed across the other verticals and businesses in India, Japan and China are run as standalone regional business units and Infosys Public services (IPS) is reviewed seperately by the Chief Operating Decision Maker (CODM). Further, the erstwhile manufacturing segment is now being reviewed as Hi-Tech, Manufacturing and others included in ECS. Consequent to the internal reorganizations, there were changes effected in the reportable business segments based on the "management approach" as defined in IFRS 8, Operating Segments. The CODM evaluates the Company's performance and allocates resources based on an analysis of various performance indicators by business segments and geographic segments. Accordingly, information has been presented both along business segments and geographic segments. 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 significant accounting policies.
Business segments of the Company are primarily enterprises in Financial Services (FS), enterprises in Manufacturing (MFG), enterprises in Retail, Consumer packaged goods and Logistics (RCL), enterprises in the Energy & utilities, Communication and Services (ECS), enterprises in Hi-tech (Hi-TECH), enterprises in Life Sciences, Healthcare and Insurance (HILIFE) and all other segments. The FS reportable segments has been aggregated to include the Financial Services operating segment and the Finacle operating segment. All other segments represents the operating segments of businesses in India, Japan and China and IPS. Geographic segmentation is based on business sourced from that geographic region and delivered from both on-site and off-shore locations. 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. Consequent to the above changes in the composition of reportable business segments, the prior period comparatives have been restated.
Revenue and identifiable operating expenses in relation to segments are categorized based on items that are individually identifiable to that segment. Revenue for “all other segments” represents revenue generated by IPS and revenue generated from customers located in India, Japan and China. Allocated expenses of segments include expenses incurred for rendering services from the Company's offshore software development centres and on-site expenses, which 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 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 against the total income of the Company.
Assets and liabilities 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 business segment revenue information is collated based on individual customers invoiced or in relation to which the revenue is otherwise recognized.
2.19.1 Business segments
Year ended March 31, 2016 and March 31, 2015
(In crore)
Particulars | FS | MFG | ECS | RCL | HILIFE | Hi-TECH | All other segments | Total |
Revenues | 17,024 | 6,948 | 13,547 | 10,226 | 8,090 | 4,891 | 1,715 | 62,441 |
14,394 | 6,172 | 12,005 | 8,864 | 6,702 | 3,918 | 1,264 | 53,319 | |
Identifiable operating expenses | 8,199 | 3,684 | 6,196 | 4,878 | 3,841 | 2,391 | 1,035 | 30,224 |
6,820 | 3,263 | 5,474 | 4,027 | 3,185 | 1,918 | 937 | 25,624 | |
Allocated expenses | 3,986 | 1,704 | 3,322 | 2,508 | 1,984 | 1,199 | 421 | 15,124 |
3,312 | 1,503 | 2,923 | 2,159 | 1,634 | 955 | 308 | 12,794 | |
Segment profit | 4,839 | 1,560 | 4,029 | 2,840 | 2,265 | 1,301 | 259 | 17,093 |
4,262 | 1,406 | 3,608 | 2,678 | 1,883 | 1,045 | 19 | 14,901 | |
Unallocable expenses | 1,473 | |||||||
1,069 | ||||||||
Operating profit | 15,620 | |||||||
13,832 | ||||||||
Other income, net | 3,125 | |||||||
3,427 | ||||||||
Share in Associate's profit / (loss) | (3) | |||||||
(1) | ||||||||
Profit before income taxes | 18,742 | |||||||
17,258 | ||||||||
Income tax expense | 5,251 | |||||||
4,929 | ||||||||
Net profit | 13,491 | |||||||
12,329 | ||||||||
Depreciation and amortization | 1,459 | |||||||
1,069 | ||||||||
Non-cash expenses other than depreciation and amortization | 14 | |||||||
– |
2.19.2 Geographic segments
Year ended March 31, 2016 and March 31, 2015
(In crore)
Particulars | North America | Europe | India | Rest of the World | Total |
Revenues | 39,139 | 14,373 | 1623 | 7,306 | 62,441 |
32,794 | 12,829 | 1,284 | 6,412 | 53,319 | |
Identifiable operating expenses | 19,283 | 6,966 | 711 | 3,264 | 30,224 |
15,650 | 6,287 | 704 | 2983 | 25,624 | |
Allocated expenses | 9,591 | 3,510 | 338 | 1,685 | 15,124 |
7,982 | 3,105 | 267 | 1440 | 12,794 | |
Segment profit | 10,265 | 3,897 | 574 | 2,357 | 17,093 |
9,162 | 3,437 | 313 | 1,989 | 14,901 | |
Unallocable expenses | 1,473 | ||||
1,069 | |||||
Operating profit | 15,620 | ||||
13,832 | |||||
Other income, net | 3,125 | ||||
3,427 | |||||
Share in Associate's profit / (loss) | (3) | ||||
(1) | |||||
Profit before income taxes | 18,742 | ||||
17,258 | |||||
Income tax expense | 5,251 | ||||
4,929 | |||||
Net profit | 13,491 | ||||
12,329 | |||||
Depreciation and amortization | 1,459 | ||||
1,069 | |||||
Non-cash expenses other than depreciation and amortization | 14 | ||||
– |
2.19.3 Significant clients
No client individually accounted for more than 10% of the revenues in the year ended March 31, 2016 and March 31, 2015.
As per our report of even date attached
for B S R & Co. LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants
Firm’s Registration No : 101248W/W-100022
Supreet Sachdev Partner Membership No. 205385 |
R.Seshasayee Chairman |
Dr. Vishal Sikka Chief Executive Officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bangalore April 15, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer and Executive Vice President |
A.G.S Manikantha Company Secretary |
Exhibit 99.11
Indian GAAP Standalone
Independent Auditor’s Report
To the Board of Directors of Infosys Limited
Report on the Financial Statements
We have audited the accompanying financial statements of Infosys Limited (“the Company”), which comprise the balance sheet as at 31 March 2016, the statement of profit and loss for the quarter and year then ended and the cash flow statement of the Company for the year then ended and a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Financial Statements
The Company’s Board of Directors is responsible for the preparation and presentation of these financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under section 133 of the Companies Act, 2013 (‘the Act’), read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal control, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Standards on Auditing issued by the Institute of Chartered Accountants of India. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company’s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on whether the Company has in place an adequate internal financial controls system over financial reporting and the operating effectiveness of such controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of the accounting estimates made by Management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the financial statements.
Opinion
In our opinion and to the best of our information and according to the explanations given to us, the financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India:
(i) | in the case of the balance sheet, of the state of affairs of the Company as at 31 March 2016; |
(ii) | in the case of the statement of profit and loss, of the profit for the quarter and year ended on that date; and |
(iii) | in the case of the cash flow statement, of the cash flows for the year ended on that date. |
for B S R & Co. LLP
Chartered Accountants
Firm’s Registration Number: 101248W/W-100022
Supreet Sachdev
Partner
Membership Number: 205385
Bangalore
15 April 2016
INFOSYS LIMITED
In crore
Balance Sheet as at | Note | March 31, 2016 | March 31, 2015 |
EQUITY AND LIABILITIES | |||
SHAREHOLDERS' FUNDS | |||
Share capital | 2.1 | 1,148 | 574 |
Reserves and surplus | 2.2 | 56,009 | 47,494 |
57,157 | 48,068 | ||
NON-CURRENT LIABILITIES | |||
Deferred tax liabilities (net) | 2.3 | – | – |
Other long-term liabilities | 2.4 | 73 | 30 |
73 | 30 | ||
CURRENT LIABILITIES | |||
Trade payables | 2.5 | 623 | 124 |
Other current liabilities | 2.6 | 6,105 | 5,546 |
Short-term provisions | 2.7 | 8,809 | 8,045 |
15,537 | 13,715 | ||
72,767 | 61,813 | ||
ASSETS | |||
NON-CURRENT ASSETS | |||
Fixed assets | |||
Tangible assets | 2.8 | 8,248 | 7,347 |
Capital work-in-progress | 934 | 769 | |
9,182 | 8,116 | ||
Non-current investments | 2.10 | 11,111 | 6,108 |
Deferred tax assets (net) | 2.3 | 405 | 433 |
Long-term loans and advances | 2.11 | 5,970 | 4,378 |
Other non-current assets | 2.12 | 2 | 26 |
26,670 | 19,061 | ||
CURRENT ASSETS | |||
Current investments | 2.10 | 2 | 749 |
Trade receivables | 2.13 | 9,798 | 8,627 |
Cash and cash equivalents | 2.14 | 29,176 | 27,722 |
Short-term loans and advances | 2.15 | 7,121 | 5,654 |
46,097 | 42,752 | ||
72,767 | 61,813 | ||
SIGNIFICANT ACCOUNTING POLICIES | 1 |
The accompanying notes form an integral part of the standalone interim financial statements | |
As per our report of even date attached | |
for B S R & Co. LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants | |
Firm's Registration Number:101248W/W-100022 |
Supreet Sachdev Partner Membership No. 205385 |
R.Seshasayee Chairman |
Dr. Vishal Sikka Chief Executive Officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bangalore April 15, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer and Executive Vice President |
A.G.S Manikantha Company Secretary |
INFOSYS LIMITED
In crore, except equity share and per equity share data
Statement of Profit and Loss for the | Note | Quarter ended March 31, | Year ended March 31, | ||
2016 | 2015 | 2016 | 2015 | ||
Income from software services and products | 2.16 | 14,158 | 11,926 | 53,983 | 47,300 |
Other income | 2.17 | 778 | 891 | 3,009 | 3,337 |
Total revenue | 14,936 | 12,817 | 56,992 | 50,637 | |
Expenses | |||||
Employee benefit expenses | 2.18 | 7,300 | 6,183 | 28,206 | 25,115 |
Deferred consideration pertaining to acquisition | 2.10.6 | – | 51 | 110 | 219 |
Cost of technical sub-contractors | 2.18 | 1,191 | 836 | 4,417 | 2,909 |
Travel expenses | 2.18 | 438 | 325 | 1,655 | 1,360 |
Cost of software packages and others | 2.18 | 223 | 223 | 1,049 | 979 |
Communication expenses | 2.18 | 79 | 90 | 311 | 384 |
Consultancy and professional charges | 155 | 148 | 563 | 396 | |
Depreciation and amortization expense | 2.8 | 315 | 241 | 1,115 | 913 |
Other expenses | 2.18 | 523 | 550 | 1,909 | 1,976 |
Total expenses | 10,224 | 8,647 | 39,335 | 34,251 | |
PROFIT BEFORE EXCEPTIONAL ITEM AND TAX | 4,712 | 4,170 | 17,657 | 16,386 | |
Profit on transfer of business | 2.10.5 | – | – | 3,036 | 412 |
PROFIT BEFORE TAX | 4,712 | 4,170 | 20,693 | 16,798 | |
Tax expense: | |||||
Current tax | 2.19 | 1,308 | 1,046 | 4,898 | 4,537 |
Deferred tax | 2.19 | 5 | 100 | 9 | 97 |
PROFIT FOR THE PERIOD | 3,399 | 3,024 | 15,786 | 12,164 | |
EARNINGS PER EQUITY SHARE | |||||
Equity shares of par value 5/- each | |||||
Before Exceptional item | |||||
Basic | 14.80 | 13.16 | 55.51 | 51.17 | |
Diluted | 14.80 | 13.16 | 55.51 | 51.17 | |
After Exceptional item | |||||
Basic | 14.80 | 13.16 | 68.73 | 52.96 | |
Diluted | 14.80 | 13.16 | 68.73 | 52.96 | |
Number of shares used in computing earnings per share | 2.32 | ||||
Basic | 229,69,44,664 | 229,69,44,664 | 229,69,44,664 | 229,69,44,664 | |
Diluted | 229,69,44,664 | 229,69,98,600 | 229,69,44,664 | 229,69,75,348 | |
SIGNIFICANT ACCOUNTING POLICIES | 1 |
The accompanying notes form an integral part of the standalone interim financial statements | |
As per our report of even date attached | |
for B S R & Co. LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants | |
Firm's Registration Number:101248W/W-100022 |
Supreet Sachdev Partner Membership No. 205385 |
R.Seshasayee Chairman |
Dr. Vishal Sikka Chief Executive Officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bangalore April 15, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer and Executive Vice President |
A.G.S Manikantha Company Secretary |
INFOSYS LIMITED
In crore
Cash Flow Statement for the | Year ended March 31, | |
2016 | 2015 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Profit before tax | 20,693 | 16,798 |
Adjustments to reconcile profit before tax to cash generated by operating activities | ||
Depreciation and amortization expense | 1,115 | 913 |
Provision for bad and doubtful debts | (48) | 142 |
Deferred purchase price | 110 | 219 |
Interest and dividend income | (2,563) | (2,738) |
Profit on transfer of business (Refer to Note 2.10.5) | (3,036) | (412) |
Other adjustments | 122 | 52 |
Effect of exchange differences on translation of assets and liabilities | 32 | 54 |
Changes in assets and liabilities | ||
Trade receivables | (1,123) | (1,433) |
Loans and advances and other assets | (1,615) | (326) |
Liabilities and provisions | 1,062 | 1,175 |
14,749 | 14,444 | |
Income taxes paid | (5,350) | (6,489) |
NET CASH GENERATED BY OPERATING ACTIVITIES | 9,399 | 7,955 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Payment towards capital expenditure, net of sale proceeds | (2,308) | (1,986) |
Investment in subsidiaries | (258) | (1,748) |
Payment towards acquisition (refer note 2.10.1 & 2.10.2) | (794) | – |
Payment arising out of business transfer | (335) | – |
Redemption of fixed maturity plans | – | 110 |
Investment in preferred stock | (82) | – |
Investment in liquid mutual fund units | (22,797) | (23,184) |
Disposal of liquid mutual fund units | 23,545 | 24,296 |
Investment in tax free bond | (299) | – |
Investment in Government bond | (2) | |
Redemption of certificates of deposit | – | 783 |
Interest and dividend received | 2,302 | 2,394 |
NET CASH GENERATED BY INVESTING ACTIVITIES | (1,028) | 665 |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Loan given to subsidiaries | (193) | (73) |
Loan repaid by subsidiaries | 126 | 47 |
Dividends paid (including corporate dividend tax) | (6,841) | (4,935) |
NET CASH USED IN FINANCING ACTIVITIES | (6,908) | (4,961) |
Effect of exchange differences on translation of foreign currency cash and cash equivalents | (9) | (37) |
NET (DECREASE)/ INCREASE IN CASH AND CASH EQUIVALENTS | 1,454 | 3,622 |
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD | 27,722 | 24,100 |
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD | 29,176 | 27,722 |
SIGNIFICANT ACCOUNTING POLICIES |
The accompanying notes form an integral part of the standalone interim financial statements | |
As per our report of even date attached | |
for B S R & Co. LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants | |
Firm's Registration Number:101248W/W-100022 |
Supreet Sachdev Partner Membership No. 205385 |
R. Seshasayee Chairman |
Dr. Vishal Sikka Chief Executive Officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bangalore April 15, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer and Executive Vice President |
A. G. S Manikantha Company Secretary |
Significant accounting policies
Company overview
Infosys is a global leader in consulting, technology, outsourcing and next-generation services. Along with its subsidiaries, Infosys provides Business IT services (comprising application development and maintenance, independent validation, infrastructure management, engineering services comprising product engineering and life cycle solutions and business process management); Consulting and systems integration services (comprising consulting, enterprise solutions, systems integration and advanced technologies); Products, business platforms and solutions to accelerate intellectual property-led innovation including Finacle, our banking solution; and offerings in the areas of Analytics, Cloud, and Digital Transformation.
The company is a public limited company incorporated and domiciled in India and has its registered office at Bangalore, Karnataka, India. The company has its primary listings on the BSE Limited and National Stock Exchange in India. The company’s American Depositary Shares representing equity shares are also listed on the New York Stock Exchange (NYSE), Euronext London and Euronext Paris.
1 Significant accounting policies
1.1 Basis of preparation of financial statements
These financial statements are prepared in accordance with Indian Generally Accepted Accounting Principles (GAAP) under the historical cost convention on the accrual basis except for certain financial instruments which are measured at fair values. GAAP comprises mandatory accounting standards as prescribed under Section 133 of the Companies Act, 2013 (‘Act’) read with Rule 7 of the Companies (Accounts) Rules, 2014, the provisions of the Act (to the extent notified) and guidelines issued by the Securities and Exchange Board of India (SEBI). 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.
As the quarter and year figures are taken from the source and rounded to the nearest digits, the quarter figures in this statement added up to the figures reported for the previous quarters might not always add up to the year figures reported in this statement.
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 liabilities as at the date of the financial statements and reported amounts of income and expenses during the period. Examples of such estimates include computation of percentage of completion which requires the Company to estimate the efforts or costs expended to date as a proportion of the total efforts or costs to be expended, provisions for doubtful debts, future obligations under employee retirement benefit plans, income taxes, post-sales customer support and the useful lives of fixed tangible assets and intangible assets.
Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes in estimates are made as the Management becomes aware of changes in circumstances surrounding the estimates. Changes in estimates are reflected in the financial statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the financial statements.
1.3 Revenue recognition
Revenue is primarily derived from software development and related services and from the licensing of software products. 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 are 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 and fixed-timeframe contracts, where there is no uncertainty as to measurement or collectability of consideration, is recognized based upon the percentage of completion method. When there is uncertainty as to measurement or ultimate collectability revenue recognition is postponed until such uncertainty is resolved. Cost and earnings in excess of billings are classified as unbilled revenue while billings in excess of cost and earnings is classified as unearned revenue. Deferred contract costs are amortized over the term of the contract. 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 ratably 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 case of multiple element contracts, which require significant implementation services, where revenue for the entire arrangement is recognized over the implementation period based upon the percentage-of-completion method. Revenue from client training, support and other services arising due to the sale of software products is recognized as the related services are performed.
The Company accounts for volume discounts and pricing incentives to customers as a reduction of revenue based on the ratable allocation of the discount / incentive amount to each of the underlying revenue transactions that result in progress by the customer towards earning the discount / incentive. Also, when the level of discount varies with increases in levels of revenue transactions, the Company recognizes the liability based on its estimate of the customer's future purchases. If it is probable that the criteria for the discount will not be met, or if the amount thereof cannot be estimated reliably, then discount is not recognized until the payment is probable and the amount can be estimated reliably. The Company recognizes changes in the estimated amount of obligations for discounts in the period in which change occurs. The discounts are passed on to the customer either as direct payments or as a reduction of payments due from the customer.
The Company presents revenues net of indirect taxes in its statement of profit and loss.
Profit on sale of investments is recorded on transfer of title from the Company and is determined as the difference between the sale price and 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.
1.4 Provisions and contingent liabilities
A provision is recognized if, as a result of a past event, the Company has a present legal obligation that is reasonably estimable and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by the best estimate of the outflow of economic benefits required to settle the obligation at the reporting date. Where no reliable estimate can be made, a disclosure is made as contingent liability. A disclosure for a contingent liability is also made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. Where there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.
1.5 Post-sales client support and warranties
The Company provides its clients with a fixed-period post-sales support for corrections of errors and support on all its fixed-price, fixed-timeframe contracts. Costs associated with such support services are accrued at the time when related revenues are recorded and included in statement of profit and loss. The Company estimates such costs based on historical experience and the estimates are reviewed annually for any material changes in assumptions and likelihood of occurrence.
1.6 Onerous contracts
Provisions for onerous contracts are recognized when the expected benefits to be derived by the Company from a contract are lower than the unavoidable costs of meeting the future obligations under the contract. The provision is measured at lower of the expected cost of terminating the contract and the expected net cost of fulfilling the contract.
1.7 Tangible assets and capital work-in-progress
Tangible assets are stated at cost, less accumulated depreciation and impairment, if any. Direct costs are capitalized until such assets are ready for use. Capital work-in-progress comprises of the cost of fixed assets that are not yet ready for their intended use at the reporting date.
1.8 Intangible assets
Intangible assets are recorded at the consideration paid for acquisition of such assets and are carried at cost less accumulated amortization and impairment.
Research costs are expensed as incurred. Software product development costs are expensed as incurred unless technical and commercial feasibility of the project is demonstrated, future economic benefits are probable, the Company has an intention and ability to complete and use or sell the software and the costs can be measured reliably. The cost which can be capitalised include the cost of materials, direct labour, overhead cost that are directly attributable to preparing the asset for intended use.
1.9 Depreciation and amortization
Depreciation on tangible assets is provided on the straight-line method over the useful lives of assets estimated by the Management. Depreciation for assets purchased / sold during a period is proportionately charged. Intangible assets are amortized over their respective individual estimated useful lives on a straight-line basis, commencing from the date the asset is available to the Company for its use. The Management estimates the useful lives for the other fixed assets as follows:
Buildings (1) | 22-25 years |
Plant and Machinery (1) | 5 years |
Office equipment | 5 years |
Computer equipment (1) | 3-5 years |
Furniture and fixtures (1) | 5 years |
Vehicles (1) | 5 years |
(1) | Based on technical evaluation, the management believes that the useful lives as given above best represent the period over which management expects to use these assets. Hence, the useful lives for these assets is different from the useful lives as prescribed under Part C of Schedule II of the Companies Act 2013. |
Depreciation and amortization methods, useful lives and residual values are reviewed periodically, including at each financial year end. (Refer note 2.8)
1.10 Impairment
The Management periodically assesses using, external and internal sources, whether there is an indication that an asset may be impaired. An impairment loss is recognized wherever the carrying value of an asset exceeds its recoverable amount. The recoverable amount is higher of the asset's net selling price or value in use, which means the present value of future cash flows expected to arise from the continuing use of the asset and its eventual disposal. An impairment loss for an asset is reversed if, and only if, the reversal can be related objectively to an event occurring after the impairment loss was recognized. The carrying amount of an asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortization or depreciation) had no impairment loss been recognized for the asset in prior years.
1.11 Retirement benefits to employees
a Gratuity
The Company 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 with the Company.
Liabilities with regard to the Gratuity Plan are determined by actuarial valuation, performed by an independent actuary, at each Balance Sheet date using the projected unit credit method. The Company fully contributes all ascertained liabilities to the Infosys Limited Employees' Gratuity Fund Trust (the Trust). Trustees administer contributions made to the Trust and contributions are invested in a scheme with Life Insurance Corporation of India as permitted by law of India. The Company recognizes the net obligation of the gratuity plan in the Balance Sheet as an asset or liability, respectively in accordance with Accounting Standard (AS) 15, 'Employee Benefits'. The Company's overall expected long-term rate-of-return on assets has been determined based on consideration of available market information, current provisions of Indian law specifying the instruments in which investments can be made, and historical returns. The discount rate is based on the Government securities yield. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in the statement of profit and loss in the period in which they arise.
b Superannuation
Certain employees are also participants in the superannuation plan ('the Plan') which is a defined contribution plan. The Company has no obligations to the Plan beyond its monthly contributions which are periodically contributed to a trust fund, the corpus of which is invested with the Life Insurance Corporation of India.
c Provident fund
Eligible employees receive benefits from a provident fund, which is a defined benefit plan. Both the eligible 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 portion to the Infosys Limited Employees’ Provident Fund Trust. The trust invests in specific designated instruments as permitted by Indian law. 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 make good the shortfall, if any, between the return from the investments of the trust and the notified interest rate.
d Compensated absences
The employees of the Company are entitled to compensated absences which are both accumulating and non-accumulating in nature. The expected cost of accumulating compensated absences is determined by actuarial valuation using projected unit credit method on the additional amount expected to be paid/availed as a result of the unused entitlement that has accumulated at the Balance Sheet date. Expense on non-accumulating compensated absences is recognized in the period in which the absences occur.
1.12 Share-based payments
The company accounts for equity settled stock options as per the accounting treatment prescribed by Securities and Exchange Board of India ( share based employee benefits) Regulations, 2014 and the Guidance Note on Employee Share-based Payments issued by the Institute of Chartered Accountants of India using the intrinsic value method.
1.13 Foreign currency transactions
Foreign-currency denominated monetary assets and liabilities are translated at exchange rates in effect at the Balance Sheet date. The gains or losses resulting from such translations are included in the Statement of profit and loss. Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at fair value are translated at the exchange rate prevalent at the date when the fair value was determined. Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at historical cost are translated at the exchange rate prevalent at the date of transaction.
Revenue, expense and cash-flow items denominated in foreign currencies are translated using the exchange rate in effect on the date of the transaction. Transaction gains or losses realized upon settlement of foreign currency transactions are included in determining net profit for the period in which the transaction is settled.
1.14 Forward and options contracts in foreign currencies
The Company uses foreign exchange forward and options contracts to hedge its exposure to movements in foreign exchange rates. The use of these foreign exchange forward and options contracts reduce the risk or cost to the Company and the Company does not use those for trading or speculation purposes.
Effective April 1, 2008, the Company adopted AS 30, 'Financial Instruments: Recognition and Measurement', to the extent that the adoption did not conflict with existing accounting standards and other authoritative pronouncements of the Company Law and other regulatory requirements.
Forward and options contracts are fair valued at each reporting date. The Company designates certain foreign exchange forward and options contracts as cash flow hedges to mitigate the risk of foreign exchange exposure on highly probable forecast transactions. The Company records the gain or loss on effective hedges, if any, in the hedging reserve until the transactions are complete. On completion, the gain or loss is transferred to the statement of profit and loss of that period. To designate a forward or options contract as an effective hedge, the Management objectively evaluates and evidences with appropriate supporting documents at the inception of each contract and subsequently whether the contract is effective in achieving offsetting cash flows attributable to the hedged risk. Changes in the fair value relating to the ineffective portion of the hedges and derivative instruments that do not qualify or have not been designated for hedge accounting are recognised in the statement of profit and loss.
1.15 Income taxes
Income taxes are accrued in the same period that the related revenue and expenses arise. A provision is made for income tax, 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. Minimum alternate tax (MAT) paid in accordance with the tax laws, which gives rise to future economic benefits in the form of tax credit against future income tax liability, is recognized as an asset in the Balance Sheet if there is convincing evidence that the Company will pay normal tax after the tax holiday period and the resultant asset can be measured reliably. The Company offsets, on a year on year basis, the current tax assets and liabilities, where it has a legally enforceable right and where it intends to settle such assets and liabilities on a net basis.
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 of timing difference. The tax effect is calculated on the accumulated timing differences at the end of an accounting period based on enacted or substantively enacted regulations. Deferred tax assets in situation where unabsorbed depreciation and carry forward business loss exists, are recognized only if there is virtual certainty supported by convincing evidence that sufficient future taxable income will be available against which such deferred tax asset can be realized. Deferred tax assets, other than in situation of unabsorbed depreciation and carry forward business loss, are recognized only if there is reasonable certainty that they will be realized. Deferred tax assets are reviewed for the appropriateness of their respective carrying values at each reporting date. Deferred tax assets and deferred tax liabilities have been offset wherever the Company has a legally enforceable right to set off current tax assets against current tax liabilities and where the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority. 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 financial year. Tax benefits of deductions earned on exercise of employee share options in excess of compensation charged to statement of profit and loss are credited to the securities premium reserve.
1.16 Earnings per share
Basic earnings per share is computed by dividing the net profit after tax by the weighted average number of equity shares outstanding during the period. Diluted earnings per share is computed by dividing the profit after tax by the weighted average number of equity shares considered for deriving basic earnings per share and also the weighted average number of equity shares that could have been issued upon 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 which is 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. Dilutive potential equity shares are determined independently for each period presented.
The number of shares and potentially dilutive equity shares are adjusted retrospectively for all periods presented for any share splits and bonus shares issues including for changes effected prior to the approval of the financial statements by the Board of Directors.
1.17 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 Management’s intention. Current investments are carried at the lower of cost and fair value of each investment individually. Cost for overseas investments comprises the Indian Rupee value of the consideration paid for the investment translated at the exchange rate prevalent at the date of investment. Long term investments are carried at cost less provisions recorded to recognize any decline, other than temporary, in the carrying value of each investment.
1.18 Cash and cash equivalents
Cash and cash equivalents comprise cash and cash on deposit with banks and financial institutions. The Company considers all highly liquid investments with a remaining maturity at the date of purchase of three months or less and that are readily convertible to known amounts of cash to be cash equivalents.
1.19 Cash flow statement
Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated.
1.20 Leases
Lease under which the Company assumes substantially all the risks and rewards of ownership are classified as finance leases. Such assets acquired are capitalized at fair value of the asset or present value of the minimum lease payments at the inception of the lease, whichever is lower. Lease payments under operating leases are recognized as an expense on a straight line basis in the statement of profit and loss over the lease term.
2 NOTES TO ACCOUNTS FOR THE QUARTER AND YEAR ENDED MARCH 31, 2016
Amounts in the financial statements are presented in crore, except for per equity share data and as otherwise stated. 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 period presentation.
2.1 SHARE CAPITAL
in crore, except as otherwise stated
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
Authorized | ||
Equity shares, 5/- par value | ||
240,00,00,000 (120,00,00,000) equity shares | 1,200 | 600 |
Issued, Subscribed and Paid-Up | ||
Equity shares, 5/- par value (1) | 1,148 | 574 |
229,69,44,664 (114,84,72,332) equity shares fully paid-up | ||
1,148 | 574 |
Forfeited shares amounted to 1,500/- (1,500/-)
(1) | Refer note 2.32 for details of basic and diluted shares |
Effective January 1, 2015, Infosys Limited Employees' Welfare Trust ('The Trust') has been deconsolidated consequent to SEBI (Share Based Employee Benefits) Regulations, 2014 issued on October 28, 2014.
The Company has only one class of shares referred to as equity shares having a par value of 5/-. Each holder of equity shares is entitled to one vote per share.
The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.
In the period of five years immediately preceding March 31, 2016:
The Company has allotted 114,84,72,332 fully paid-up shares of face value 5/- each during the quarter ended June 30, 2015, pursuant to bonus issue approved by the shareholders through postal ballot. The book closure date fixed by the Board was June 17, 2015.
The Company has allotted 57,42,36,166 fully paid up equity shares of face value 5/- each during the quarter ended December 31, 2014 pursuant to a bonus issue approved by the shareholders through a postal ballot. The record date fixed by the Board of Directors was December 3, 2014.
For both the bonus issues, bonus share of one equity share for every equity share held, and a stock dividend of one American Depositary Share (ADS) for every ADS held, respectively, has been allotted. Consequently, the ratio of equity shares underlying the ADSs held by an American Depositary Receipt holder remains unchanged. Options granted under the restricted stock unit plan have been adjusted for bonus shares.
During the year ended March 31, 2015, the amount of dividend per share recognised as distribution to equity shareholder includes 29.50/- per share of final dividend (not adjusted for bonus shares on June 17, 2015) and 30/- per share of interim dividend (not adjusted for bonus shares of June 17, 2015 and December 3, 2014). The total dividend appropriation for the year ended March 31, 2015 amounted to 6,145 crore including corporate dividend tax of 1,034 crore.
The Board has increased dividend pay-out ratio from up to 40% to up to 50% of post-tax consolidated profits effective fiscal 2015.
The Board of Directors, in their meeting on October 12, 2015, declared an interim dividend of 10/- per equity share. Further the Board of Directors, in its meeting on April 15, 2016, have proposed a final dividend of 14.25/- per equity share for the financial year ended March 31, 2016. The proposal is subject to the approval of shareholders at the Annual General Meeting to be held on June 18, 2016. The total dividend appropriation for the year ended March 31, 2016 amounted to 6,704 crore including corporate dividend tax of 1,134 crore.
The Central Government in consultation with National Advisory Committee on Accounting Standards has amended Companies (Accounting Standards) Rules, 2006 (‘principal rules’), vide notification issued by Ministry of Corporate Affairs dated March 30, 2016. The Companies (Accounting Standards) Rules, 2016 is effective March 30, 2016. According to the amended rules, the above mentioned proposed dividend will not be recorded as a liability as at March 31, 2016. (Refer Para 8.5 of AS-4 – Contingencies and Events occurring after Balance Sheet date). The Company believes, based on a legal opinion, that the Rule 3(2) of the principal rules has not been withdrawn or replaced and accordingly, the Companies (Accounting Standards) Rule, 2016 will apply for the accounting periods commencing on or after March 30, 2016. Therefore the Company has recorded 3,939 crore as liability for proposed dividends (including corporate dividend tax) as at March 31, 2016.
In the event of liquidation of the Company, the holders of equity shares will be entitled to receive any of the remaining assets of the Company in proportion to the number of equity shares held by the shareholders, after distribution of all preferential amounts.
The details of shareholder holding more than 5% shares as at March 31, 2016 and March 31, 2015 are set out below :
Name of the shareholder | As at March 31, 2016 | As at March 31, 2015 | ||
No. of shares | % held | No. of shares | % held | |
Deutsche Bank Trust Company Americas (Depository of ADR's - legal ownership) | 38,53,17,937 | 16.78 | 18,60,73,981 | 16.20 |
Life Insurance Corporation of India | 13,22,74,300 | 5.76 | 5,52,74,758 | 4.81 |
The reconciliation of the number of shares outstanding and the amount of share capital as at March 31, 2016 and March 31, 2015 is set out below:
Particulars | As at March 31, 2016 | As at March 31, 2015 | ||
Number of shares | Amount ( crore) | Number of shares | Amount ( crore) | |
Number of shares at the beginning of the period | 114,84,72,332 | 574 | 57,14,02,566 | 286 |
Add: Bonus shares issued (Including bonus on treasury shares) | 114,84,72,332 | 574 | 57,42,36,166 | 287 |
Add: Treasury shares on account of deconsolidation of trust | – | – | 28,33,600 | 1 |
Number of shares at the end of the period | 229,69,44,664 | 1,148 | 114,84,72,332 | 574 |
Stock Option Plan:
2015 Stock Incentive Compensation Plan (the 2015 Plan): SEBI issued the Securities and Exchange Board of India (Share based Employee Benefits) Regulations, 2014 (‘SEBI Regulations’) which replaced the SEBI ESOP Guidelines, 1999. The 2011 Plan (as explained below) was required to be amended and restated in accordance with the SEBI Regulations. Consequently, to effect this change and to further introduce stock options/ADR’s and other stock incentives, the Company put forth the 2015 Stock Incentive Compensation Plan (the 2015 Plan) for approval to the shareholders of the Company. Pursuant to the approval by the shareholders through postal ballot which ended on March 31, 2016, the Board of Directors have been authorised to introduce, offer, issue and allot share-based incentives to eligible employees of the Company and its subsidiaries under the 2015 Plan. The maximum number of shares under the 2015 plan shall not exceed 2,40,38,883 equity shares(this includes 1,12,23,576 equity shares which are currently held by the Trust towards the 2011 Plan). 1,70,38,883 equity shares will be issued as RSUs at par value and 70,00,000 equity shares will be issued as stock options at market price. These instruments will vest over a period of 4 years and the Company expects to grant the instruments under the 2015 Plan over the period of 4 to 7 years.
2011 RSU Plan (the 2011 Plan): The Company had a 2011 RSU Plan which provided for the grant of restricted stock units (RSUs) to eligible employees of the Company. The Board of Directors recommended the establishment of the 2011 Plan to the shareholders on August 30, 2011 and the shareholders approved the recommendation of the Board of Directors on October 17, 2011 through a postal ballot. The maximum aggregate number of shares that may be awarded under the plan was 1,13,34,400 and the plan was expected to continue in effect for a term of 10 years from the date of initial grant under the plan. During the year ended March 31, 2015, the company made a grant of 108,268 restricted stock units (adjusted for bonus issues) to Dr. Vishal Sikka, Chief Executive Office and Managing Director. The Board in its meeting held on June 22, 2015, on recommendation of Nomination and Remuneration Committee, further granted 1,24,061 RSUs to Dr. Vishal Sikka. These RSUs are vesting over a period of four years from the date of the grant in the proportions specified in the award agreement. The RSUs will vest subject to achievement of certain key performance indicators as set forth in the award agreement for each applicable year of the vesting tranche and continued employment through each vesting date. Further the Company has earmarked 100,000 equity shares for welfare activities of the employees, approved by the shareholders vide postal ballot which ended on March 31, 2016. The equity shares currently held under this plan, i.e. 1,12,23,576 equity shares (this includes the aggregate number of equity shares that may be awarded under the 2011 Plan as reduced by 10,824 equity shares already exercised by Dr. Vishal Sikka and 100,000 equity shares which have been earmarked for welfare activities of the employees) have been subsumed under the 2015 Plan.
Further, the award granted to Dr. Vishal Sikka on June 22, 2015 was modified by the Nomination and remuneration committee on April 14, 2016. There is no modification or change in the total number of RSUs granted or the vesting period (which is four years). The modifications relate to the criteria of vesting for each of the years. Based on the modification, the first tranche of the RSUs will vest subject to achievement of certain key performance indicators for the year ended March 31, 2016. Subsequent vesting of RSU's for each of the remaining years would be subject to continued employment.
In accordance with the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014, the excess of the closing market price on the grant date of the RSUs over the exercise price is amortized on a straight-line basis over the vesting period.
The activity in the 2011 Plan during the quarter and year ended March 31, 2016 is set out below:
Particulars | Quarter ended March 31, 2016 | Year ended March 31, 2016 | ||
Shares arising out of options | Weighted average exercise price () | Shares arising out of options | Weighted average exercise price () | |
2011 Plan: | ||||
Outstanding at the beginning | 2,23,213 | 5 | 1,08,268 | 5 |
Granted | – | – | 1,24,061 | 5 |
Forfeited and expired | – | – | – | – |
Exercised* | 1,708 | 5 | 10,824 | 5 |
Outstanding at the end | 2,21,505 | 5 | 2,21,505 | 5 |
Exercisable at the end | – | – | – | – |
* | adjusted for bonus issues |
The weighted average share price of options exercised under the 2011 Plan on the date of exercise was 1,088/-
The activity in the 2011 Plan during quarter and year ended March 31, 2015 is set out below:
Particulars | Quarter ended March 31, 2015 | Year ended March 31, 2015 | ||
Shares arising out of options | Weighted average exercise price () | Shares arising out of options | Weighted average exercise price () | |
2011 Plan: | ||||
Outstanding at the beginning | 1,08,268 | 5 | – | – |
Granted* | – | – | 1,08,268 | 5 |
Forfeited and expired | – | – | – | – |
Exercised | – | – | – | – |
Outstanding at the end | 1,08,268 | 5 | 1,08,268 | 5 |
Exercisable at the end | – | – | – | – |
* | Adjusted for bonus issues |
The weighted average remaining contractual life of RSUs outstanding as of March 31, 2016 and March 31, 2015 under the 2011 Plan was 1.98 years and 2.39 years.
The differential on stock compensation expense if the ‘fair value’ of the RSU's on the date of the grant were considered instead of the ‘intrinsic value’ is less than 1 crore for each of the quarter and year ended March 31, 2016 and March 31, 2015. Consequently, there is no impact on earnings per share.
The fair value for the above impact analysis is estimated on the date of grant using the Black-Scholes-Merton model with the following assumptions:
Options granted during | Fiscal 2016 | Fiscal 2015 |
Grant date | 22-Jun-15 | 21-Aug-14 |
Weighted average share price ()* | 1,024 | 3,549 |
Exercise price ()* | 5 | 5 |
Expected volatility (%) | 28-36 | 30 - 37 |
Expected life of the option (years) | 1 - 4 | 1 - 4 |
Expected dividends (%) | 2.43 | 1.84 |
Risk-free interest rate (%) | 7- 8 | 8 - 9 |
Weighted average fair value as on grant date ()* | 948 | 3,355 |
* Data for Fiscal 2015 is not adjusted for bonus issues
The expected term of an RSU is estimated based on the vesting term and contractual term of the RSU, as well as expected exercise behaviour of the employee who receives the RSU. Expected volatility during the expected term of the RSU is based on historical volatility of the observed market prices of the Company's publicly traded equity shares during a period equivalent to the expected term of the RSU.
During the quarter and year ended March 31, 2016, the Company recorded an employee compensation expense of 2 crore and 7 crore respectively in the statement of profit and loss (1 crore and 2 crore during the quarter and year ended March 31, 2015 respectively)
2.2 RESERVES AND SURPLUS
in crore
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
Capital reserve - Opening balance | 54 | 54 |
Add: Transferred from Surplus | – | – |
54 | 54 | |
Securities premium account - Opening balance | 2,778 | 3,069 |
Less: Deconsolidation of trust (Refer note 2.1) | – | 4 |
Less: Amount utilized for issuance of bonus shares (Refer note 2.1) | 574 | 287 |
Add: Exercise of stock options | 1 | – |
2,205 | 2,778 | |
Stock Options Outstanding- Opening balance (Refer note 2.1) | 2 | – |
Additions during the period | 7 | 2 |
Less: Exercise of stock options | 1 | – |
8 | 2 | |
General reserve - Opening balance | 9,508 | 8,291 |
Add: Transferred from Surplus | 1,579 | 1,217 |
11,087 | 9,508 | |
Special Economic Zone Re-investment Reserve- Opening balance (1) | – | – |
Add: Transferred from Surplus | 591 | – |
Less: Transferred to Surplus on utilization | 591 | – |
Special Economic Zone Re-investment Reserve- Closing balance | – | – |
Surplus - Opening balance | 35,152 | 30,392 |
Add: Net profit after tax transferred from Statement of Profit and Loss | 15,786 | 12,164 |
Less: Deconsolidation of trust, net (Refer note 2.1) | – | 42 |
Add: Transfer from Special Economic Zone Re-investment Reserve on utilization | 591 | – |
Amount available for appropriation | 51,529 | 42,514 |
Appropriations: | ||
Interim dividend | 2,297 | 1,723 |
Final dividend | 3,273 | 3,388 |
Total dividend | 5,570 | 5,111 |
Dividend tax | 1,134 | 1,034 |
Amount transferred to general reserve | 1,579 | 1,217 |
Amount transferred to Special Economic Zone Re-investment Reserve | 591 | – |
Surplus- Closing Balance | 42,655 | 35,152 |
56,009 | 47,494 |
(1) | The Special Economic Zone Re-investment Reserve has been created out of the profit of eligible SEZ units in terms of the provisions of Sec 10AA(1)(ii) of Income Tax Act,1961. The reserve should be utilized by the Company for acquiring new plant and machinery for the purpose of its business in the terms of the Sec 10AA(2) of the Income Tax Act, 1961. |
2.3 DEFERRED TAXES
in crore
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
Deferred tax assets | ||
Fixed assets | 146 | 210 |
Trade receivables | 79 | 100 |
Compensated absences | 359 | 280 |
Computer software | 50 | 51 |
Accrued compensation to employees | 46 | 29 |
Post sales client support | 76 | 72 |
Others | 21 | 7 |
777 | 749 | |
Deferred tax liabilities | ||
Branch profit tax | 334 | 316 |
Others | 38 | – |
372 | 316 | |
Deferred tax assets after set-off | 405 | 433 |
Deferred tax liabilities after set-off | – | – |
Deferred tax assets and deferred tax liabilities have been offset wherever the Company has a legally enforceable right to set-off current tax assets against current tax liabilities and where the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority.
As at March 31, 2016 and March 31, 2015, the Company has provided for branch profit tax of 334 crore and 316 crore, respectively, for its overseas branches, as the Company estimates that these branch profits would be distributed in the foreseeable future. The change in provision for branch profit tax includes 18 crore movement on account of exchange rate during the year ended March 31, 2016.
2.4 OTHER LONG-TERM LIABILITIES
in crore
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
Others | ||
Gratuity obligation - unamortized amount relating to plan amendment (refer note 2.29) | – | 3 |
Payable for acquisition of business (refer note 2.10.1 & 2.10.2) | 46 | – |
Rental deposits received from subsidiary (refer note 2.26) | 27 | 27 |
73 | 30 |
2.5 TRADE PAYABLES
in crore
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
Trade payables | 623 | 124 |
623 | 124 | |
*Includes dues to subsidiaries (refer note 2.26) | 145 | 102 |
2.6 OTHER CURRENT LIABILITIES
in crore
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
Accrued salaries and benefits | ||
Salaries and benefits | 992 | 1,144 |
Bonus and incentives | 772 | 575 |
Unearned revenue | 1,025 | 831 |
Unpaid dividends | 5 | 3 |
Other liabilities | ||
Provision for expenses(1) | 1,707 | 1,582 |
Retention monies | 58 | 50 |
Withholding and other taxes payable | 1,068 | 733 |
Gratuity obligation - unamortized amount relating to plan amendment, current (refer note 2.29) | 4 | 4 |
Other payables(2) | 370 | 79 |
Advances received from clients | 16 | 20 |
Mark-to-market forward and options contracts | 2 | – |
Payable for acquisition of business (refer note 2.10.1 and 2.10.2) | 86 | 525 |
6,105 | 5,546 | |
(1) Includes dues to subsidiaries (refer note 2.26) | 29 | 36 |
(2) Includes dues to subsidiaries (refer note 2.26) | 38 | 33 |
2.7 SHORT-TERM PROVISIONS
in crore
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
Provision for employee benefits | ||
Compensated absences | 1,130 | 907 |
Other Provisions | ||
Proposed dividend | 3,273 | 3,388 |
Tax on dividend | 666 | 690 |
Income taxes (net of advance tax and Tax Deducted at Source) | 3,304 | 2,678 |
Post-sales client support and warranties and others | 436 | 382 |
8,809 | 8,045 |
Provision for post-sales client support and warranties and other provisions
The movement in the provision for post-sales client support and warranties and other provisions is as follows
:in crore
Particulars | Quarter ended | Year ended | ||
March 31, 2016 | March 31, 2015 | March 31, 2016 | March 31, 2015 | |
Balance at the beginning | 411 | 374 | 382 | 325 |
Provision recognized/(reversed) | 25 | 44 | 82 | 134 |
Provision utilised | (1) | (32) | (49) | (78) |
Exchange difference during the period | 1 | (4) | 21 | 1 |
Balance at the end | 436 | 382 | 436 | 382 |
Provision for post-sales client support and other provisions are expected to be utilized over a period of 6 months to 1 year.
2.8 FIXED ASSETS
Following are the changes in the carrying value of fixed assets for the year ended March 31, 2016:
in crore, except as otherwise stated
Tangible assets | Intangible assets | Total | ||||||||||
Particulars | Land-Freehold | Land- Leasehold | Buildings (1)(2) | Plant and Machinery (2) | Office equipment (2) | Computer equipment (2)(3) | Furniture and fixtures (2) | Vehicles | Total | Intellectual property rights | Total | |
Original cost | ||||||||||||
As at April 1, 2015 | 929 | 621 | 5,733 | 1,361 | 525 | 2,812 | 832 | 14 | 12,827 | 42 | 42 | 12,869 |
Additions/Adjustments during the period | 41 | 17 | 440 | 319 | 155 | 945 | 241 | 5 | 2,163 | – | – | 2,163 |
Deductions/ Retirement during the period | – | – | – | (1) | (1) | (276) | (3) | – | (281) | (12) | (12) | (293) |
As at March 31, 2016 | 970 | 638 | 6,173 | 1,679 | 679 | 3,481 | 1,070 | 19 | 14,709 | 30 | 30 | 14,739 |
Depreciation and amortization | ||||||||||||
As at April 1, 2015 | – | 16 | 1,937 | 838 | 280 | 1,852 | 549 | 8 | 5,480 | 42 | 42 | 5,522 |
For the period | – | 5 | 213 | 207 | 90 | 472 | 125 | 3 | 1,115 | – | – | 1,115 |
Deductions/Adjustments during the period | – | – | – | (1) | (1) | (129) | (3) | – | (134) | (12) | (12) | (146) |
As at March 31, 2016 | – | 21 | 2,150 | 1,044 | 369 | 2,195 | 671 | 11 | 6,461 | 30 | 30 | 6,491 |
Net book value | ||||||||||||
As at March 31, 2016 | 970 | 617 | 4,023 | 635 | 310 | 1,286 | 399 | 8 | 8,248 | – | – | 8,248 |
Notes: | (1) | Buildings include 250/- being the value of 5 shares of 50/- each in Mittal Towers Premises Co-operative Society Limited. |
(2) | Includes certain assets provided on cancellable operating lease to subsidiaries | |
(3) | During the year ended March 31, 2016, computer equipment having net book value of 20 crore was transferred to EdgeVerve (Refer note 2.10.5) |
Following are the changes in the carrying value of fixed assets for the year ended March 31, 2015:
in crore, except as otherwise stated
Tangible assets | Intangible assets | Total | ||||||||||
Particulars | Land-Freehold | Land- Leasehold | Buildings (1)(2) | Plant and Machinery (2) | Office equipment (2) | Computer equipment (2) (3) | Furniture and fixtures (2) | Vehicles | Total | Intellectual property rights | Total | |
Original cost | ||||||||||||
As at April 1, 2014 | 781 | 349 | 4,878 | 1,090 | 393 | 2,178 | 679 | 13 | 10,361 | 59 | 59 | 10,420 |
Additions/Adjustments during the year | 148 | 272 | 855 | 274 | 134 | 694 | 160 | 3 | 2,540 | – | – | 2,540 |
Deductions/ Retirement during the year | – | – | – | (3) | (2) | (60) | (7) | (2) | (74) | (17) | (17) | (91) |
As at March 31, 2015 | 929 | 621 | 5,733 | 1,361 | 525 | 2,812 | 832 | 14 | 12,827 | 42 | 42 | 12,869 |
Depreciation and amortization | ||||||||||||
As at April 1, 2014 | – | – | 1,754 | 671 | 215 | 1,554 | 441 | 7 | 4,642 | 46 | 46 | 4,688 |
For the period | – | 16 | 183 | 169 | 67 | 350 | 113 | 2 | 900 | 13 | 13 | 913 |
Deductions/ Adjustments during the year | – | – | – | (2) | (2) | (52) | (5) | (1) | (62) | (17) | (17) | (79) |
As at March 31, 2015 | – | 16 | 1,937 | 838 | 280 | 1,852 | 549 | 8 | 5,480 | 42 | 42 | 5,522 |
Net book value | ||||||||||||
As at March 31, 2015 | 929 | 605 | 3,796 | 523 | 245 | 960 | 283 | 6 | 7,347 | – | – | 7,347 |
Notes: | (1) | Buildings include 250/- being the value of 5 shares of 50/- each in Mittal Towers Premises Co-operative Society Limited. |
(2) | Includes certain assets provided on cancellable operating lease to subsidiaries | |
(3) | During the year ended March 31, 2015, computer equipment having net book value of 8 crore was transferred to EdgeVerve (Refer note 2.10.5) |
During the quarter ended June 30, 2014, the management based on internal and external technical evaluation had changed the useful life of certain assets primarily consisting of buildings and computers with effect from April 1, 2014. Accordingly, the useful lives of certain assets required a change from previous estimate.
The Company has entered into lease-cum-sale agreements to acquire certain properties. In accordance with the terms of some of these agreements, the Company has the option to purchase or renew the properties on expiry of the lease period.
Tangible assets provided on operating lease to subsidiaries as at March 31, 2016 and March 31, 2015 are as follows:
in crore
Particulars | Cost | Accumulated depreciation | Net book value |
Buildings | 197 | 75 | 122 |
98 | 35 | 63 | |
Plant and machinery | 33 | 14 | 19 |
12 | 3 | 9 | |
Furniture and fixtures | 25 | 12 | 13 |
11 | 2 | 9 | |
Computer equipment | 3 | 2 | 1 |
– | – | – | |
Office equipment | 18 | 7 | 11 |
6 | 1 | 5 |
The aggregate depreciation charged on the above assets during the quarter and year ended March 31, 2016 amounted to 6 crore and 19 crore respectively(5 crore and 9 crore for the quarter and year ended March 31, 2015 respectively).
The rental income from subsidiaries for the quarter and year ended March 31, 2016 amounted to 16 crore and 51 crore respectively (11 crore and 40 crore for the quarter and year ended March 31, 2015 respectively).
2.9 LEASES
Obligations on long-term, non-cancellable operating leases
The lease rentals charged during the period and the obligations on long-term, non-cancellable operating leases payable as per the rentals stated in the respective agreements are as follows:
in crore
Particulars | Quarter ended March 31, | Year ended March 31, | ||
2016 | 2015 | 2016 | 2015 | |
Lease rentals recognized during the period | 48 | 35 | 175 | 158 |
in crore
Lease obligations payable | As at | |
March 31, 2016 | March 31, 2015 | |
Within one year of the balance sheet date | 170 | 101 |
Due in a period between one year and five years | 417 | 284 |
Due after five years | 315 | 158 |
The operating lease arrangements, are renewable on a periodic basis and for most of the leases extend upto a maximum of ten years from their respective dates of inception and relates to rented premises. Some of these lease agreements have price escalation clauses.
2.10 INVESTMENTS
in crore, except as otherwise stated
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
Non-current investments | ||
Long term investments - at cost | ||
Trade (unquoted) | ||
Investments in equity instruments of subsidiaries | ||
Infosys BPO Limited | ||
3,38,22,319 (3,38,22,319) equity shares of 10/- each, fully paid | 659 | 659 |
Infosys Technologies (China) Co. Limited | 169 | 169 |
Infosys Technologies (Australia) Pty Limited | ||
1,01,08,869 (1,01,08,869) equity shares of AUD 0.11 par value, fully paid | 66 | 66 |
Infosys Technologies, S. de R.L. de C.V., Mexico | ||
17,49,99,990 (17,49,99,990) equity shares of MXN 1 par value, fully paid up | 65 | 65 |
Infosys Technologies (Sweden) AB | ||
1,000 (1,000) equity shares of SEK 100 par value, fully paid | – | – |
Infosys Technologia do Brasil Ltda | ||
5,91,24,348 (5,91,24,348) shares of BRL 1.00 par value, fully paid | 149 | 149 |
Infosys Technologies (Shanghai) Company Limited | 646 | 388 |
Infosys Public Services, Inc. | ||
3,50,00,000 (3,50,00,000) shares of USD 0.50 par value, fully paid | 99 | 99 |
Infosys Consulting Holding AG (formerly Lodestone Holding AG) (refer note 2.10.6) | ||
23,350 (23,350) - Class A shares of CHF 1,000 each and 29,400 | 1,323 | 1,323 |
(29,400) - Class B Shares of CHF 100 each, fully paid up | ||
Infosys Americas Inc. | ||
10,000 (10,000) shares of USD 10 per share, fully paid up | 1 | 1 |
EdgeVerve Systems Limited (refer note 2.10.5) | ||
131,18,40,000 (46,18,39,994) equity shares of 10/- each, fully paid | 1,312 | 462 |
Panaya Inc. (refer note 2.10.4) | ||
2 (2) shares of USD 0.01 per share, fully paid up | 1,398 | 1,398 |
Infosys Nova Holdings LLC (refer note 2.10.3) | 94 | 94 |
Kallidus Inc. (refer note 2.10.2) | ||
10,21,35,416 (Nil) shares | 647 | – |
Skava Systems Private Limited (refer note 2.10.2) | ||
25,000 (Nil) shares of 10 per share, fully paid up | 59 | – |
Noah Consulting LLC ( refer note 2.10.1) | 249 | – |
6,936 | 4,873 | |
Investment in debentures | ||
EdgeVerve Systems Limited (refer note 2.10.5) | ||
25,49,00,000 (Nil) Unsecured redeemable, non-convertible debentures of 100 each fully paid up | 2,549 | – |
9,485 | 4,873 | |
Others (unquoted) (refer note 2.10.7) | ||
Investments in preferred stock | 92 | – |
Investments in equity instruments | 7 | 7 |
Less: Provision for investments | 6 | 6 |
93 | 1 | |
Others (quoted) | ||
Investments in tax free bonds (refer note 2.10.8) | 1,533 | 1,234 |
1,533 | 1,234 | |
Total non-current investments | 11,111 | 6,108 |
Current investments – at the lower of cost and fair value | ||
Other current investments | ||
Unquoted | ||
Liquid mutual fund units (refer note 2.10.9) | – | 749 |
– | 749 | |
Quoted | ||
Investments in government bonds (refer note 2.10.8) | 2 | – |
2 | – | |
Total current investments | 2 | 749 |
Total investments | 11,113 | 6,857 |
Aggregate amount of quoted investments excluding interest accrued but not due of 55 crore as at March 31, 2016 (46 crore as at March 31, 2015) included under Note 2.15 Short term Loans and advances. | 1,535 | 1,234 |
Market value of quoted investments | 1,627 | 1,269 |
Aggregate amount of unquoted investments | 9,584 | 5,629 |
Aggregate amount of provision made for non-current unquoted investments | 6 | 6 |
2.10.1 Investment in Noah Consulting LLC
On November 16, 2015, Infosys acquired 100% membership interest in Noah Consulting , LLC , a leading provider of advanced information management consulting services for the oil and gas industry. The business acquisition was conducted by entering into a share purchase agreement for cash consideration of $33 million ( approximately 216 crore), contingent consideration up to $5 million (approximately 33 crore on acquisition date) and retention bonus up to $32 million (approximately 212 crore on acquisition date). The payment of contingent consideration to the sellers of Noah was dependent upon certain financial targets by Noah for the year ended December 31, 2015 and December 31, 2016. During the quarter ended March 31, 2016 based on the assessment of Noah achieving the targets for the respective periods, the entire contingent consideration was reversed.
2.10.2 Investment in Kallidus Inc. & Skava Systems Pvt. Ltd.
On June 2, 2015, Infosys acquired 100% of the voting interests in Kallidus Inc., (d.b.a Skava) (Kallidus), a leading provider of digital experience solutions, including mobile commerce and in-store shopping experiences to large retail clients and 100% of the voting interests of Skava Systems Private Limited, India, an affiliate of Kallidus. The business acquisition was conducted by entering into a share purchase agreement for cash consideration of $91 million (approximately 578 crore) and a contingent consideration of upto $20 million (approximately 128 crore on acquisition date), the payment of which is dependent upon the achievement of certain financial targets by Kallidus over a period of 3 years ending on December 31, 2017.
2.10.3 Investment in DWA Nova LLC
During the year ended March 31, 2015, Infosys Nova Holdings LLC acquired 20% of the equity interests in DWA Nova LLC for a cash consideration of 94 crore. The Company has made this investment to form a new company along with Dream Works Animation (DWA). The new company, DWA Nova LLC, will develop and commercialize image generation technology in order to provide end-to-end digital manufacturing capabilities for companies involved in the design, manufacturing, marketing or distribution of physical consumer products.
As of March 31, 2016, Infosys Nova Holdings holds 16% of the equity interest in DWA Nova LLC.
2.10.4 Investment in Panaya Inc.
On March 5, 2015, Infosys acquired 100% of the voting interests in Panaya Inc. (Panaya), a Delaware Corporation in the United States. Panaya is a leading provider of automation technology for large scale enterprise and software management. The business acquisition was conducted by entering into a share purchase agreement for cash consideration of 1,398 crore.
2.10.5 Investment in EdgeVerve Systems Limited
On February 14, 2014, a wholly owned subsidiary EdgeVerve Systems Limited (EdgeVerve) was incorporated. EdgeVerve was created to focus on developing and selling products and platforms. The Company has undertaken an enterprise valuation by an independent valuer and accordingly the business has been transferred for a consideration of 421 crore with effect from July 1, 2014. Net assets amounting to 9 crore have also been transferred and accordingly a gain of 412 crore has been recorded as an exceptional item. The consideration has been settled through the issue of fully paid up equity shares in EdgeVerve.
On April 24, 2015, the Board of Directors of Infosys authorized the Company to execute a Business Transfer Agreement and related documents with EdgeVerve, to transfer the business of Finacle and Edge Services. Post the requisite approval from shareholders through postal ballot on June 4, 2015, a Business Transfer Agreement and other related documents were executed with EdgeVerve to transfer the business with effect from August 1, 2015. The Company has undertaken an enterprise valuation by an independent valuer and accordingly the business were transferred for a consideration of 3,222 crore and 177 crore for Finacle and Edge Services, respectively. Net assets amounting to 363 crore, (including working capital amounting to 337 crore) have been transferred and accordingly a gain of 3,036 crore has been recorded as an exceptional item. The consideration was settled through issue of 85,00,00,000 equity shares amounting to 850 crore and 25,49,00,000 non-convertible redeemable debentures amounting to 2,549 crore in EdgeVerve, post the requisite approval from shareholders on December 11, 2015.
2.10.6 Investment in Infosys Consulting Holding AG (Formerly Lodestone Holding AG)
On October 22, 2012, Infosys acquired 100% of the outstanding share capital of Infosys Consulting Holding AG, a global management consultancy firm headquartered in Zurich, Switzerland. The acquisition was executed through a share purchase agreement for an upfront cash consideration of 1,187 crore and a deferred consideration of upto 608 crore.
The deferred consideration was payable to the selling shareholders of Lodestone on the third anniversary of the acquisition date and is contingent upon their continued employment for a period of three years. The investment in Lodestone has been recorded at the acquisition cost and the deferred consideration was recognised on a proportionate basis over a period of three years from the date of acquisition. During the quarter ended December 31, 2015, the liability towards deferred consideration was settled.
An amount of 110 crore and 219 crore, representing the proportionate charge of the deferred consideration has been recognised as an expense during the year ended March 31, 2016 and March 31, 2015 respectively.
2.10.7 Details of Investments
The details of non-current other investments in preferred stock and equity instruments as at March 31, 2016 and March 31, 2015 are as follows:
in crore
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
Preferred Stock | ||
Airviz Inc. | ||
2,82,279 (Nil) Series A Preferred Stock, fully paid up, par value USD 0.001 each | 13 | – |
ANSR Consulting | ||
52,631 (Nil) Series A Preferred Stock, fully paid up, par value USD 0.001 each | 9 | – |
Whoop Inc | ||
16,48,352 (Nil) Series B Preferred Stock, fully paid up, par value USD 0.0001 each | 20 | – |
CloudEndure Ltd. | ||
12,79,645 (Nil) Preferred Series B Shares, fully paid up, par value ILS 0.01 each | 13 | – |
Nivetti Systems Private Limited | ||
2,28,501 (Nil) Preferred Stock, fully paid up, par value 1 each | 10 | – |
Waterline Data Science, Inc | ||
39,33,910 (Nil) Preferred Series B Shares, fully paid up, par value USD 0.00001 each | 27 | – |
Equity Instrument | ||
OnMobile Systems Inc., USA | ||
21,54,100 (21,54,100) common stock at USD 0.4348 each, fully paid up, par value USD 0.001 each | 4 | 4 |
Merasport Technologies Private Limited | ||
2,420 (2,420) equity shares at 8,052/- each, fully paid up, par value 10/- each | 2 | 2 |
Global Innovation and Technology Alliance | ||
15,000 (10,000) equity shares at 1,000/- each, fully paid up, par value 1,000/- each | 1 | 1 |
99 | 7 | |
Less: Provision for investment | 6 | 6 |
93 | 1 |
2.10.8 Details of Investments in tax free bonds
The balances held in tax free bonds as at March 31, 2016 and March 31, 2015 is as follows:
in crore
Particulars | Face Value | As at March 31, 2016 | As at March 31, 2015 | ||
Units | Amount | Units | Amount | ||
7.18% Indian Railway Finance Corporation Limited Bonds 19FEB2023 | 1,000/- | 20,00,000 | 201 | 20,00,000 | 201 |
7.34% Indian Railway Finance Corporation Limited Bonds 19FEB2028 | 1,000/- | 21,00,000 | 211 | 21,00,000 | 211 |
7.93% Rural Electrification Corporation Limited Bonds 27MAR2022 | 1,000/- | 2,00,000 | 21 | 2,00,000 | 21 |
8.26% India Infrastructure Finance Company Limited Bonds 23AUG28 | 10,00,000/- | 1,000 | 100 | 1,000 | 100 |
8.30% National Highways Authority of India Bonds 25JAN2027 | 1,000/- | 5,00,000 | 53 | 5,00,000 | 53 |
8.35% National Highways Authority of India Bonds 22NOV2023 | 10,00,000/- | 1,500 | 150 | 1,500 | 150 |
8.46% India Infrastructure Finance Company Limited Bonds 30AUG2028 | 10,00,000/- | 2,000 | 200 | 2,000 | 200 |
8.46% Power Finance Corporation Limited Bonds 30AUG2028 | 10,00,000/- | 1,500 | 150 | 1,500 | 150 |
8.48% India Infrastructure Finance Company Limited Bonds 05SEP2028 | 10,00,000/- | 450 | 45 | 450 | 45 |
8.54% Power Finance Corporation Limited Bonds 16NOV2028 | 1,000/- | 5,00,000 | 50 | 5,00,000 | 50 |
7.28% National Highways Authority of India Bonds 18SEP30 | 10,00,000/- | 2,000 | 200 | – | – |
8.10% Indian Railway Finance Corporation Limited Bonds 23FEB2027 | 1,000/- | 5,00,000 | 53 | 5,00,000 | 53 |
7.28% Indian Railway Finance Corporation Limited 21DEC30 | 1,000/- | 4,22,800 | 42 | – | – |
7.35% National Highways Authority of India Bonds 11JAN31 | 1,000/- | 5,71,396 | 57 | – | – |
68,02,646 | 1,533 | 58,06,450 | 1,234 |
The balances held in government bonds as at March 31, 2016 and March 31, 2015 is as follows:
in crore
Particulars | Face Value PHP | As at March 31, 2016 | As at March 31, 2015 | ||
Units | Amount | Units | Amount | ||
Fixed Rate Treasury Notes 7.00 PCT PIBD0716A488 MAT Date 27 Jan 2016 | 100 | – | – | 10,000 | – |
Fixed Rate Treasury Notes 1.70 PCT PHY6972FW G18 MAT Date 22 Feb 2017 | 100 | 150,000 | 2 | – | – |
150,000 | 2 | 10,000 | – |
2.10.9 Details of Investments in liquid mutual fund units
The balances held in liquid mutual fund units as at March 31, 2015 is as follows:
in crore
Particulars | Units | Amount |
IDFC Cash Fund - Direct Plan Daily Dividend | 29,30,197 | 293 |
Reliance Liquid Fund - Treasury Plan - Direct Plan Daily Dividend Option | 9,81,551 | 150 |
SBI Premier Liquid Fund - Direct Plan Daily Dividend | 9,97,094 | 100 |
ICICI Liquid Plan - Direct Plan Daily Dividend | 2,05,44,807 | 206 |
2,54,53,649 | 749 |
2.11 LONG-TERM LOANS AND ADVANCES
in crore
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
Unsecured, considered good | ||
Capital advances | 333 | 316 |
Security deposits | 73 | 65 |
Rental deposits (1) | 119 | 45 |
Other loans and advances | ||
Advance income taxes (net of provisions) | 5,020 | 3,941 |
Prepaid expenses | 87 | 7 |
Deferred Contract Cost | 333 | – |
Loans and advances to employees | 5 | 4 |
5,970 | 4,378 | |
Unsecured, considered doubtful | ||
Loans and advances to employees | 13 | 10 |
5,983 | 4,388 | |
Less: Provision for doubtful loans and advances to employees | 13 | 10 |
5,970 | 4,378 | |
(1) Includes deposits with subsidiaries (refer note 2.26) | 21 | 21 |
2.12 OTHER NON-CURRENT ASSETS
in crore
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
Others | ||
Advance to gratuity trust (refer note 2.29) | 2 | 26 |
2 | 26 |
2.13 TRADE RECEIVABLES (1)
in crore
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
Debts outstanding for a period exceeding six months | ||
Unsecured | ||
Considered doubtful | 176 | 162 |
Less: Provision for doubtful debts | 176 | 162 |
– | – | |
Other debts | ||
Unsecured | ||
Considered good(2) | 9,798 | 8,627 |
Considered doubtful | 73 | 160 |
9,871 | 8,787 | |
Less: Provision for doubtful debts | 73 | 160 |
9,798 | 8,627 | |
9,798 | 8,627 | |
(1) Includes dues from companies where directors are interested | 1 | 6 |
(2) Includes dues from subsidiaries (refer note 2.26) | 244 | 309 |
2.14 CASH AND CASH EQUIVALENTS
in crore
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
Cash on hand | – | – |
Balances with banks | ||
In current and deposit accounts | 24,276 | 23,722 |
Others | ||
Deposits with financial institution | 4,900 | 4,000 |
29,176 | 27,722 | |
Balances with banks in unpaid dividend accounts | 5 | 3 |
Deposit accounts with more than 12 months maturity | 237 | 182 |
Balances with banks held as margin money deposits against guarantees | 336 | 185 |
Cash and cash equivalents as of March 31, 2016 and March 31, 2015 include restricted cash and bank balances of 341 crore and 188 crore, respectively. The restrictions are primarily on account of cash and bank balances held as margin money deposits against guarantees and unpaid dividends.
The deposits maintained by the Company with banks and financial institutions comprise of time deposits, which can be withdrawn by the Company at any point without prior notice or penalty on the principal.
The details of balances as on Balance Sheet dates with banks are as follows:
in crore
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
In current accounts | ||
ANZ Bank, Taiwan | 13 | 4 |
Bank of America, USA | 563 | 498 |
Citibank N.A., Australia | 24 | 10 |
Citibank N.A., India | 1 | 6 |
Citibank N.A., Dubai | 1 | 1 |
Citibank N.A., EEFC (U.S. Dollar account) | – | 2 |
Citibank N.A., Japan | 15 | 20 |
Citibank N.A., New Zealand | 2 | 3 |
Citibank N.A., South Africa | 4 | 2 |
Deutsche Bank, Philippines | 11 | 2 |
Deutsche Bank, India | 4 | 4 |
Deutsche Bank, EEFC (Euro account) | 17 | 2 |
Deutsche Bank, EEFC (GBP account) | 8 | 5 |
Deutsche Bank, EEFC (AUD account) | 2 | – |
Deutsche Bank, EEFC (U.S. Dollar account) | 95 | 7 |
Deutsche Bank, EEFC (CHF account) | 2 | 4 |
Deutsche Bank, Belgium | 59 | 13 |
Deutsche Bank, France | 10 | 2 |
Deutsche Bank, Germany | 17 | 8 |
Deutsche Bank, Netherlands | 4 | 1 |
Deutsche Bank, Russia (U.S. Dollar account) | 1 | – |
Deutsche Bank, Russia (Russian Ruble account) | 2 | – |
Deutsche Bank, Singapore | 4 | 5 |
Deutsche Bank, Spain | – | 1 |
Deutsche Bank, Switzerland | 1 | – |
Deutsche Bank, UK | 170 | 24 |
Deutsche Bank, Malaysia | 9 | – |
HSBC, Hong Kong | 1 | 44 |
ICICI Bank, India | 57 | 18 |
ICICI Bank, EEFC (U.S. Dollar account) | 10 | 9 |
Nordbanken, Sweden | 5 | 1 |
Punjab National Bank, India | 4 | 7 |
Royal Bank of Canada, Canada | 24 | 11 |
State Bank of India | 7 | 1 |
1,147 | 715 | |
In deposit accounts | ||
Allahabad Bank | – | 200 |
Andhra Bank | 848 | 97 |
Axis Bank | 1,170 | 1,415 |
Bank of Baroda | – | 2,314 |
Bank of India | – | 2,691 |
Canara Bank | 1,861 | 2,841 |
Central Bank of India | 1,518 | 1,303 |
Corporation Bank | 1,185 | 1,197 |
Development Bank of Singapore | – | 35 |
HDFC Bank | 2,500 | 2,017 |
ICICI Bank | 3,755 | 3,059 |
IDBI Bank | 1,750 | 706 |
Indusind Bank | 250 | 75 |
ING Vysya Bank | – | 100 |
Indian Overseas Bank | 1,000 | 573 |
Jammu & Kashmir Bank | 25 | – |
Kotak Mahindra Bank Limited | 492 | – |
Oriental Bank of Commerce | 1,967 | 1,500 |
Punjab National Bank | – | 512 |
State Bank of India | 2,310 | – |
Syndicate Bank | 1,250 | 327 |
Union Bank of India | 7 | 971 |
Vijaya Bank | 200 | 386 |
Yes Bank | 700 | 500 |
22,788 | 22,819 | |
In unpaid dividend accounts | ||
Axis Bank -Unpaid dividend account | 2 | – |
HDFC Bank - Unpaid dividend account | 1 | 1 |
ICICI bank - Unpaid dividend account | 2 | 2 |
5 | 3 | |
In margin money deposits against guarantees | ||
Canara Bank | 132 | 128 |
ICICI Bank | 147 | – |
State Bank of India | 57 | 57 |
336 | 185 | |
Deposits with financial institution | ||
HDFC Limited | 4,900 | 4,000 |
4,900 | 4,000 | |
Total cash and cash equivalents as per Balance Sheet | 29,176 | 27,722 |
2.15 SHORT-TERM LOANS AND ADVANCES
in crore
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
Unsecured, considered good | ||
Loans to subsidiaries (refer note 2.26) | 91 | 24 |
Others | ||
Advances | ||
Prepaid expenses(3) | 209 | 71 |
Deferred Contract Cost | 48 | – |
For supply of goods and rendering of services | 58 | 60 |
Withholding and other taxes receivable | 1,650 | 1,253 |
Others(1) | 166 | 49 |
2,222 | 1,457 | |
Restricted deposits (refer note 2.33) | 1,154 | 1,039 |
Unbilled revenues(2) | 2,673 | 2,423 |
Interest accrued but not due | 696 | 433 |
Loans and advances to employees | ||
Housing and other loans | 54 | 53 |
Salary advances | 210 | 148 |
Security deposits | 1 | 1 |
Mark-to-market forward and options contracts | 109 | 94 |
Rental deposits | 2 | 6 |
7,121 | 5,654 | |
(1) Includes dues from subsidiaries (refer note 2.26) | 24 | 43 |
(2) Includes dues from subsidiaries (refer note 2.26) | 20 | 6 |
(3) Includes dues from subsidiaries (refer note 2.26) | 43 | – |
2.16 INCOME FROM SOFTWARE SERVICES AND PRODUCTS
in crore
Particulars | Quarter ended March 31, | Year ended March 31, | ||
2016 | 2015 | 2016 | 2015 | |
Income from software services | 14,152 | 11,472 | 53,334 | 45,658 |
Income from software products | 6 | 454 | 649 | 1,642 |
14,158 | 11,926 | 53,983 | 47,300 |
2.17 OTHER INCOME
in crore
Particulars | Quarter ended March 31, | Year ended March 31, | ||
2016 | 2015 | 2016 | 2015 | |
Interest received on deposits with banks and others | 644 | 680 | 2,506 | 2,592 |
Dividend received on investment in mutual fund units | 8 | 25 | 57 | 146 |
Gain on sale of investments | – | 10 | – | 10 |
Miscellaneous income, net | 65 | 15 | 276 | 64 |
Gains / (losses) on foreign currency, net | 61 | 161 | 170 | 525 |
778 | 891 | 3,009 | 3,337 |
2.18 EXPENSES
in crore
Particulars | Quarter ended March 31, | Year ended March 31, | ||
2016 | 2015 | 2016 | 2015 | |
Employee benefit expenses | ||||
Salaries and bonus including overseas staff expenses | 7,127 | 6,020 | 27,551 | 24,509 |
Contribution to provident and other funds | 140 | 140 | 547 | 519 |
Employee stock compensation expense (Refer note 2.1) | 2 | 1 | 7 | 2 |
Staff welfare | 31 | 22 | 101 | 85 |
7,300 | 6,183 | 28,206 | 25,115 | |
Cost of technical sub-contractors | ||||
Technical sub-contractors - subsidiaries | 508 | 383 | 1,801 | 1,385 |
Technical sub-contractors - others | 683 | 453 | 2,616 | 1,524 |
1,191 | 836 | 4,417 | 2,909 | |
Travel expenses | ||||
Overseas travel expenses | 400 | 290 | 1,510 | 1,235 |
Travelling and conveyance | 38 | 35 | 145 | 125 |
438 | 325 | 1,655 | 1,360 | |
Cost of software packages and others | ||||
For own use | 171 | 165 | 663 | 797 |
Third party items bought for service delivery to clients | 52 | 58 | 386 | 182 |
223 | 223 | 1,049 | 979 | |
Communication expenses | ||||
Telephone charges | 54 | 56 | 214 | 247 |
Communication expenses | 25 | 34 | 97 | 137 |
79 | 90 | 311 | 384 |
in crore
Particulars | Quarter ended March 31, | Year ended March 31, | ||
2016 | 2015 | 2016 | 2015 | |
Other expenses | ||||
Office maintenance | 122 | 98 | 480 | 361 |
Power and fuel | 42 | 40 | 179 | 185 |
Brand building | 42 | 24 | 178 | 94 |
Rent | 48 | 35 | 175 | 158 |
Rates and taxes, excluding taxes on income | 24 | 22 | 99 | 108 |
Repairs to building | 71 | 40 | 188 | 99 |
Repairs to plant and machinery | 29 | 23 | 85 | 70 |
Computer maintenance | 41 | 35 | 120 | 104 |
Consumables | 6 | 17 | 28 | 39 |
Insurance charges | 15 | 10 | 48 | 42 |
Provision for post-sales client support and warranties | 18 | (11) | 18 | 17 |
Commission to non-whole time directors | 2 | 2 | 8 | 8 |
Provision for bad and doubtful debts and advances | (23) | 29 | (45) | 145 |
Auditor's remuneration | ||||
Statutory audit fees | – | 1 | 2 | 2 |
Other services | – | – | – | – |
Reimbursement of expenses | – | – | – | – |
Bank charges and commission | 1 | 4 | 4 | 8 |
Contributions towards Corporate Social Responsibility | 40 | 64 | 202 | 243 |
Others | 45 | 117 | 140 | 293 |
523 | 550 | 1,909 | 1,976 |
2.19 TAX EXPENSE
in crore
Quarter ended March 31, | Year ended March 31, | |||
2016 | 2015 | 2016 | 2015 | |
Current tax | ||||
Income tax | 1,308 | 1,046 | 4,898 | 4,537 |
Deferred tax | 5 | 100 | 9 | 97 |
1,313 | 1,146 | 4,907 | 4,634 |
During the quarter ended March 31, 2016 and March 31, 2015, the Company had reversal (net of provisions) of 67 crore and 48 crore, respectively, pertaining to tax relating to prior years.
During the year ended March 31, 2016 and March 31, 2015, the Company had reversal (net of provisions) of 331 crore and 161 crore, respectively, pertaining to tax relating to prior years.
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 as per Indian Income Tax Act, 1961. Infosys' operations are conducted through Software Technology Parks('STPs') and Special Economic Zones ('SEZs'). Income from STPs were tax exempt for the first 10 years from the fiscal year in which the unit commences software development, or March 31, 2011 which ever is earlier. Income from SEZs Unit 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.
2.20 CONTINGENT LIABILITIES AND COMMITMENTS (TO THE EXTENT NOT PROVIDED FOR)
in crore
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
Contingent liabilities : | ||
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 | 29 | 22 |
Claims against the Company, not acknowledged as debts(1) | 188 | 167 |
[Net of amount paid to statutory authorities 4,386 crore (3,572 crore)] | ||
Commitments : | ||
Estimated amount of unexecuted capital contracts | 1,295 | 1,272 |
(net of advances and deposits) |
(1) | Claims against the company not acknowledged as debts for the year ended March 31, 2016 include demand from the Indian Income tax authorities for payment of tax of 4,135 crore (3,337 crore), including interest of 1,224 crore (964 crore) upon completion of their tax assessment for fiscal 2007, fiscal 2008, fiscal 2009, fiscal 2010 and fiscal 2011 (For the year ended March 31, 2015 - upon completion of their tax assessment for fiscal 2006, fiscal 2007, fiscal 2008, fiscal 2009 and fiscal 2010). These demands were paid to statutory tax authorities which includes 913 crore paid during the year ended March 31, 2016 consequent to demand from tax authorities in India for fiscal 2011 towards denial of certain tax benefits. The company has filed an appeal with the income tax appellate authorities. |
Demand for fiscal 2007, fiscal 2008 and fiscal 2009 includes disallowance of a portion of the deduction claimed by the company under Section 10A of the income Tax Act as 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. Demand for fiscal 2007, fiscal 2008, fiscal 2009, fiscal 2010 and fiscal 2011 also includes disallowance of portion of profit earned outside India from the STP units under section 10A of the Income Tax Act and disallowance of profits earned from SEZ units under section 10AA of the Income Tax Act. The matters for fiscal 2007, fiscal 2008 and fiscal 2009 are pending before the Commissioner of Income Tax (Appeals) Bangalore. The matter for fiscal 2010 and fiscal 2011 is pending before Hon’ble Income Tax Appellate Tribunal (ITAT) Bangalore. |
The company is contesting the demand and the management including its tax advisors believes that its position will likely be upheld in the appellate process. The management believes that the ultimate outcome of these proceedings will not have a material adverse effect on the Company's financial position and results of operations. |
2.21 DERIVATIVE INSTRUMENTS
The following table gives details in respect of outstanding foreign exchange forward and option contracts:
As at | ||||
March 31, 2016 | March 31, 2015 | |||
in million | in crore | in million | in crore | |
Forward contracts outstanding | ||||
In USD | 467 | 3,094 | 664 | 4,150 |
In Euro | 84 | 633 | 59 | 396 |
In GBP | 60 | 573 | 68 | 632 |
In AUD | 50 | 255 | 95 | 452 |
In CAD | – | – | 12 | 59 |
In SGD | – | – | 25 | 114 |
In CHF | 25 | 173 | – | – |
Options Outstanding | ||||
In USD | 125 | 828 | – | – |
5,556 | 5,803 |
As of March 31, 2016 and March 31, 2015, there were no net foreign currency exposures that are not hedged by a derivative instrument or otherwise.
The foreign exchange forward & option contracts mature within 12 months. The table below analyzes the derivative financial instruments into relevant maturity groupings based on the remaining period as of the balance sheet date:
in crore
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
Not later than one month | 1,468 | 1,382 |
Later than one month and not later than three months | 3,260 | 3,608 |
Later than three months and not later than one year | 828 | 813 |
5,556 | 5,803 |
The Company recognized a gain of 57 crore and 289 crore on derivative instruments during the quarter ended March 31, 2016 and March 31, 2015, respectively, which is included in other income.
The Company recognized a gain of 29 crore and gain of 499 crore on derivative instruments during the year ended March 31, 2016 and March 31, 2015, respectively, which is included in other income.
2.22 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 5 (viii)(c) of general instructions for preparation of the statement of profit and loss as per Schedule III to the Companies Act, 2013.
2.23 IMPORTS (VALUED ON THE COST, INSURANCE AND FREIGHT BASIS)
in crore
Particulars | Quarter ended March 31, | Year ended March 31, | ||
2016 | 2015 | 2016 | 2015 | |
Capital goods | 137 | 113 | 391 | 415 |
Software packages | 3 | 3 | 3 | 3 |
140 | 116 | 394 | 418 |
2.24 ACTIVITY IN FOREIGN CURRENCY
in crore
Particulars | Quarter ended March 31, | Year ended March 31, | ||
2016 | 2015 | 2016 | 2015 | |
Earnings in foreign currency | ||||
Income from software services and products | 13,836 | 11,624 | 52,860 | 46,153 |
Interest received from banks and others | 2 | 1 | 6 | 5 |
13,838 | 11,625 | 52,866 | 46,158 | |
Expenditure in foreign currency | ||||
Overseas travel expenses (including visa charges) | 343 | 227 | 1,305 | 992 |
Professional charges | 87 | 90 | 405 | 222 |
Technical sub-contractors - subsidiaries | 425 | 319 | 1,477 | 1,168 |
Overseas salaries and incentives | 5,109 | 4,090 | 19,041 | 15,967 |
Other expenditure incurred overseas for software development | 490 | 974 | 3,910 | 3,278 |
6,454 | 5,700 | 26,138 | 21,627 | |
Net earnings in foreign currency | 7,384 | 5,925 | 26,728 | 24,531 |
2.25 DIVIDENDS REMITTED IN FOREIGN CURRENCIES
The Company remits the equivalent of the dividends payable to equity shareholders and holders of ADS. For ADS holders the dividend is remitted 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.
The particulars of dividends remitted are as follows:
in crore
Particulars | Number of Non–resident share holders | Number of shares to which the dividends relate | Year ended March 31, | |
2016 | 2015 | |||
Interim dividend for fiscal 2016 | 2 | 38,53,33,537 | 385 | – |
Final dividend for fiscal 2015 | 2 | 19,22,58,436 | 567 | – |
Interim dividend for fiscal 2015 | 2 | 8,23,17,281 | – | 247 |
Final dividend for fiscal 2014 | 2 | 9,30,32,691 | – | 400 |
2.26 RELATED PARTY TRANSACTIONS
List of related parties:
Name of subsidiaries | Country | Holding as at | |
March 31, 2016 | March 31, 2015 | ||
Infosys BPO Limited (Infosys BPO) | India | 99.98% | 99.98% |
Infosys Technologies (China) Co. Limited (Infosys China) | China | 100% | 100% |
Infosys Technologies S. de R. L. de C. V. (Infosys Mexico) | Mexico | 100% | 100% |
Infosys Technologies (Sweden) AB. (Infosys Sweden) | Sweden | 100% | 100% |
Infosys Technologies (Shanghai) Company Limited (Infosys Shanghai) | China | 100% | 100% |
Infosys Tecnologia DO Brasil LTDA. (Infosys Brasil) | Brazil | 100% | 100% |
Infosys Public Services, Inc. USA (Infosys Public Services) | U.S. | 100% | 100% |
Infosys Americas Inc., (Infosys Americas) | U.S. | 100% | 100% |
Infosys (Czech Republic) Limited s.r.o. (formerly Infosys BPO s. r. o) (1) | Czech Republic | 99.98% | 99.98% |
Infosys Poland, Sp z.o.o (formerly Infosys BPO Poland, Sp z.o.o)(1) | Poland | 99.98% | 99.98% |
Infosys BPO S.de.r.l.De.C.V(1)(17) | Mexico | – | – |
Infosys McCamish Systems LLC (1) | U.S. | 99.98% | 99.98% |
Portland Group Pty Ltd(1) | Australia | 99.98% | 99.98% |
Portland Procurement Services Pty Ltd(5) | Australia | – | – |
Infosys BPO Americas LLC.(1)(16) | U.S. | – | – |
Infosys Technologies (Australia) Pty. Limited (Infosys Australia) (2) | Australia | 100% | 100% |
EdgeVerve Systems Limited (EdgeVerve) (7) | India | 100% | 100% |
Infosys Consulting Holding AG (Infosys Lodestone) (formerly Lodestone Holding AG) | Switzerland | 100% | 100% |
Lodestone Management Consultants Inc. (3) | U.S. | 100% | 100% |
Infosys Management Consulting Pty Limited ( formerly Lodestone Management Consultants Pty Limited)(3) | Australia | 100% | 100% |
Infosys Consulting AG (formerly Lodestone Management Consultants AG) (3) | Switzerland | 100% | 100% |
Lodestone Augmentis AG (2)(6) | Switzerland | 100% | 100% |
Lodestone GmbH (formerly Hafner Bauer & Ödman GmbH) (2)(3) | Switzerland | 100% | 100% |
Lodestone Management Consultants (Belgium) S.A. (4) | Belgium | 99.90% | 99.90% |
Infosys Consulting GmbH (formerly Lodestone Management Consultants GmbH) (3) | Germany | 100% | 100% |
Infosys Consulting Pte Ltd. (formerly Lodestone Management Consultants Pte Ltd) (3) | Singapore | 100% | 100% |
Infosys Consulting SAS (formerly Lodestone Management Consultants SAS) (3) | France | 100% | 100% |
Infosys Consulting s.r.o.(formerly Lodestone Management Consultants s.r.o.) (3) | Czech Republic | 100% | 100% |
Lodestone Management Consultants GmbH (3) | Austria | 100% | 100% |
Lodestone Management Consultants Co., Ltd. (3) | China | 100% | 100% |
Infy Consulting Company Limited (formerly Lodestone Management Consultants Ltd.) (3) | UK | 100% | 100% |
Infosys Consulting B.V.(formerly Lodestone Management Consultants B.V) (3) | Netherlands | 100% | 100% |
Infosys Consulting Ltda. (formerly Lodestone Management Consultants Ltda.) (4) | Brazil | 99.99% | 99.99% |
Infosys Consulting Sp. Z.o.o. (formerly Lodestone Management Consultants Sp. z o.o.) (3) | Poland | 100% | 100% |
Lodestone Management Consultants Portugal, Unipessoal, Lda. (3) | Portugal | 100% | 100% |
S.C. Infosys Consulting S.R.L.(formerly S.C. Lodestone Management Consultants S.R.L.) (3) | Romania | 100% | 100% |
Infosys Consulting S.R.L. (formerly Lodestone Management Consultants S.R.L.) (3) | Argentina | 100% | 100% |
Infosys Canada Public Services Ltd.(8) | Canada | – | – |
Infosys Nova Holdings LLC. (Infosys Nova)(9) | U.S. | 100% | 100% |
Panaya Inc. (Panaya) (10) | U.S. | 100% | 100% |
Panaya Ltd.(11) | Israel | 100% | 100% |
Panaya GmbH(11) | Germany | 100% | 100% |
Panaya Pty Ltd.(11) | Australia | – | – |
Panaya Japan Co. Ltd.(11) | Japan | 100% | 100% |
Skava Systems Pvt. Ltd. (Skava Systems)(12) | India | 100% | – |
Kallidus Inc. (Kallidus)(13) | U.S. | 100% | – |
Noah Consulting LLC (Noah) (14) | U.S. | 100% | – |
Noah Information Management Consulting Inc (Noah Canada) (15) | Canada | 100% | – |
(1) | Wholly owned subsidiary of Infosys BPO. |
(2) | Under liquidation |
(3) | Wholly owned subsidiaries of Infosys Consulting Holding AG (formerly Lodestone Holding AG) |
(4) | Majority owned and controlled subsidiaries of Infosys Consulting Holding AG (formerly Lodestone Holding AG) |
(5) | Wholly owned subsidiary of Portland Group Pty Ltd. Liquidated effective May 14, 2014. |
(6) | Wholly owned subsidiary of Infosys Consulting AG (formerly Lodestone Management Consultants AG) |
(7) | Incorporated effective February 14, 2014 (Refer note 2.10.5) |
(8) | Wholly owned subsidiary of Infosys Public Services, Inc. Incorporated effective December 19, 2014 |
(9) | Incorporated effective January 23, 2015 |
(10) | On March 5, 2015, Infosys acquired 100% of the voting interest in Panaya Inc. (Refer note 2.10.4) |
(11) | Wholly owned subsidiary of Panaya Inc. |
(12) | On June 2, 2015, Infosys acquired 100% of the voting interest in Skava Systems (Refer note 2.10.2) |
(13) | On June 2, 2015, Infosys acquired 100% of the voting interest in Kallidus Inc. (Refer note 2.10.2) |
(14) | On November 16, 2015, Infosys acquired 100% of the membership interests in Noah (Refer Note 2.10.1) |
(15) | Wholly owned subsidiary of Noah |
(16) | Incorporated effective November 20, 2015 |
(17) | Liquidated effective March 15, 2016 |
Infosys has provided guarantee for performance of certain contracts entered into by its subsidiaries.
Name of Associates | Country | Holding as at | |
March 31, 2016 | March 31, 2015 | ||
DWA Nova LLC(1) | U.S. | 16% | 20% |
(1) | Associate of Infosys Nova Holdings LLC. |
List of other related parties
Particulars | Country | Nature of relationship |
Infosys Limited Employees' Gratuity Fund Trust | India | Post-employment benefit plan of Infosys |
Infosys Limited Employees' Provident Fund Trust | India | Post-employment benefit plan of Infosys |
Infosys Limited Employees' Superannuation Fund Trust | India | Post-employment benefit plan of Infosys |
Infosys Science Foundation | India | Controlled trust |
Infosys Limited Employees' Welfare Trust | India | Controlled trust |
Infosys Employee Welfare Trust | India | Controlled trust |
Refer Notes 2.29 and 2.30 for information on transactions with post-employment benefit plans mentioned above.
List of key management personnel
Whole time directors
S. D. Shibulal (resigned effective July 31, 2014)
Srinath Batni (resigned effective July 31, 2014)
B. G. Srinivas (resigned effective June 10, 2014)
U. B. Pravin Rao
Dr. Vishal Sikka (appointed effective June 14, 2014)
Non-whole-time directors
N. R. Narayana Murthy (resigned effective October 10, 2014)
S. Gopalakrishnan (resigned effective October 10, 2014)
K. V. Kamath ( resigned effective June 5, 2015)
Dr. Omkar Goswami (retired effective December 31, 2014)
Prof. Jeffrey S. Lehman
R. Seshasayee
Ann M. Fudge (retired effective June 14, 2014)
Ravi Venkatesan
Kiran Mazumdar Shaw
Carol M. Browner (resigned effective November 23, 2015)
Prof. John W. Etchemendy (appointed effective December 4, 2014)
Roopa Kudva (appointed effective February 4, 2015)
Dr. Punita Kumar-Sinha (appointed effective January 14, 2016)
Executive Officers
M. D. Ranganath, Chief Financial Officer and Executive Vice President (effective October 12, 2015)
David D. Kennedy, Executive Vice President, General Counsel and Chief Compliance Officer (effective November 1, 2014)
Rajiv Bansal, Chief Financial Officer (till October 12, 2015)
Srikantan Moorthy, Group Head of Human Resource Development (till March 31, 2015)
Parvatheesam K, Company Secretary (resigned effective January 10, 2015)
Company Secretary
A. G. S. Manikantha (appointed effective June 22, 2015)
The details of amounts due to or due from related parties as at March 31, 2016 and March 31, 2015 are as follows:
in crore
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
Investment in Debentures | ||
EdgeVerve | 2,549 | – |
Trade Receivables | ||
Infosys China | 29 | 16 |
Infosys Mexico | 6 | 1 |
Infosys Brasil | 1 | 5 |
Infosys BPO | 5 | 1 |
Infosys Consulting Ltd. | 8 | 26 |
EdgeVerve | – | 14 |
Infosys Public Services | 153 | 246 |
Infosys Sweden | 28 | – |
Panaya Ltd | 14 | – |
244 | 309 | |
Loans(1) | ||
Infosys Consulting Ltd. | – | 6 |
Infosys Sweden | 24 | – |
Infosys Technologies China | 67 | – |
EdgeVerve | – | 18 |
91 | 24 | |
Other receivables | ||
Infosys BPO | 5 | 1 |
Infosys Public Services | 8 | 4 |
EdgeVerve | 3 | 14 |
Panaya | 43 | – |
Infosys Consulting SAS | 6 | 3 |
Infosys Consulting GmbH | 1 | 1 |
Infosys Consulting Ltd. | 1 | 20 |
67 | 43 | |
Unbilled revenues | ||
Infosys Consulting SAS | – | 1 |
EdgeVerve | 20 | – |
Infosys McCamish Systems LLC | – | 5 |
Trade payables | 20 | 6 |
Infosys China | 10 | 10 |
Infosys BPO | 6 | – |
Infosys BPO s.r.o | 2 | – |
Portland Group Pty Ltd | – | 1 |
Infosys Mexico | 2 | 1 |
Infosys Sweden | 8 | 5 |
Lodestone Management Consultants Pty Limited | 16 | 10 |
Infosys Consulting Pte Ltd. | 7 | 8 |
Infosys Consulting Ltd. | 83 | 65 |
Infosys Brasil | – | 2 |
EdgeVerve | – | – |
Panaya Ltd | 9 | – |
Infosys Public Services | 2 | – |
145 | 102 | |
Other payables | ||
Infosys BPO | 27 | 16 |
Infosys McCamish Systems LLC | – | 2 |
Infosys Consulting AG | 1 | 1 |
Infosys Consulting Ltd. | 1 | 1 |
EdgeVerve | – | 9 |
Panaya Ltd. | – | – |
Panaya Inc. | 1 | – |
Infosys Public Services | 7 | 4 |
Infosys Mexico | 1 | – |
38 | 33 | |
Provision for expenses | ||
Infosys BPO | 1 | (1) |
Kallidus Inc | 18 | – |
Noah Consulting, LLC | 10 | – |
EdgeVerve | – | 37 |
29 | 36 | |
Rental Deposit given for shared services | ||
Infosys BPO | 21 | 21 |
Rental Deposit taken for shared services | ||
Infosys BPO | 27 | 27 |
(1) | The above loans were given in accordance with the terms and conditions of the loan agreement and carries an interest rate of 6% each and is repayable within a period of one year and at anytime within four years from the date of grant for Infosys China and Infosys Sweden respectively. |
in crore
Particulars | Maximum amount outstanding during | |
2016 | 2015 | |
Loans and advances in the nature of loans given to subsidiaries : | ||
Infosys China | 68 | – |
EdgeVerve(2) | 110 | 18 |
Infosys Brasil | – | 40 |
Kallidus Inc | 10 | – |
Infosys Sweden | 24 | – |
Infosys Consulting Ltd. | 6 | 66 |
The details of the related parties transactions entered into by the Company, in addition to the lease commitments described in note 2.9, for the quarter and year ended March 31, 2016 and March 31, 2015 are as follows:
in crore
Particulars | Quarter ended March 31, | Year ended March 31, | ||
2016 | 2015 | 2016 | 2015 | |
Capital transactions: | ||||
Financing transactions | ||||
Debetures | ||||
EdgeVerve | – | – | 2,549 | – |
Equity | ||||
Infosys China | – | 62 | – | 62 |
Infosys Nova | – | 94 | – | 94 |
Infosys Brasil(3) | – | 40 | – | 40 |
EdgeVerve | – | – | 850 | 461 |
Infosys Shanghai | – | 62 | 258 | 154 |
– | 258 | 3,657 | 811 | |
Loans (net of repayment) | ||||
Infosys Consulting Holding AG | – | (49) | – | 6 |
Infosys Consulting Ltd. | – | – | (6) | – |
Kallidus (1) | – | – | – | – |
Infosys Sweden | – | – | 23 | – |
Infosys Brasil | – | (40) | – | (40) |
Infosys Technologies China | 68 | – | 68 | – |
EdgeVerve (2) | – | 18 | (18) | 18 |
68 | (71) | 67 | (16) | |
Revenue transactions: | ||||
Purchase of services | ||||
Infosys China | 31 | 31 | 126 | 139 |
Lodestone Management Consultants Pty Limited | 37 | 27 | 130 | 121 |
Infosys Consulting Ltd. | 254 | 168 | 882 | 653 |
Infosys Consulting Pte Ltd. | 19 | 17 | 104 | 45 |
Portland Group Pty Ltd | – | 1 | 2 | 3 |
Infosys (Czech Republic) Limited s.r.o. | 6 | 3 | 17 | 10 |
Infosys BPO Ltd. | 93 | 64 | 341 | 217 |
Infosys Sweden | 22 | 12 | 79 | 44 |
Infosys Mexico | 3 | 2 | 11 | 10 |
EdgeVerve | – | 56 | – | 136 |
Infosys Public Services | 4 | – | 11 | – |
Panaya Ltd. | 9 | – | 20 | – |
Kallidus Inc | 18 | – | 18 | – |
Noah Consulting, LLC | 10 | – | 10 | – |
Infosys Brasil | 2 | 2 | 10 | 7 |
508 | 383 | 1,761 | 1,385 | |
Purchase of shared services including facilities and personnel | ||||
Infosys BPO | 6 | 9 | 18 | 68 |
6 | 9 | 18 | 68 | |
Interest income | ||||
Infosys Consulting Ltd. | – | – | – | 1 |
EdgeVerve | 56 | – | 62 | – |
Infosys Sweden | – | – | 1 | – |
Infosys Brasil | – | 1 | – | 3 |
56 | 1 | 63 | 4 | |
Sale of services | ||||
Infosys China | 3 | 1 | 11 | 8 |
Infosys Mexico | 10 | 3 | 37 | 11 |
Infosys Consulting Ltd. | 11 | 5 | 30 | 23 |
Infosys Brasil | 3 | 2 | 7 | 8 |
Infosys BPO | 16 | 17 | 69 | 80 |
Infosys McCamish Systems LLC | 1 | 2 | 3 | 6 |
Infosys Sweden | 6 | – | 27 | – |
EdgeVerve | – | 19 | – | 50 |
Infosys Public Services | 234 | 181 | 900 | 735 |
284 | 230 | 1,084 | 921 | |
Sale of shared services including facilities and personnel | ||||
EdgeVerve | 58 | 6 | 143 | 22 |
Panaya Ltd. | 10 | – | 15 | – |
Infosys BPO | 11 | 9 | 42 | 38 |
Infosys Consulting SAS | – | – | 1 | 3 |
Infosys Consulting Ltd. | 1 | 1 | 5 | 3 |
Infosys Consulting GmbH | – | – | – | 1 |
80 | 16 | 206 | 67 | |
Profit on transfer of business | ||||
EdgeVerve | – | – | 3,036 | 412 |
– | – | 3,036 | 412 | |
Cash paid under business transfer | ||||
EdgeVerve | 49 | – | 335 | – |
49 | – | 335 | – |
(1) | During the year, loan of 10 crore was given and repaid. |
(2) | During the year, loan of 92 crore was given and the amount including the balance as of March 31, 2015 was repaid. |
(3) | Loan outstanding (including accrued interest) given to Infosys Brazil is converted to equity during the quarter ended March 31, 2015. |
The table below describes the compensation to key managerial personnel which comprise directors and executive officers:
in crore
Particulars | Quarter ended March 31, | Year ended March 31, | ||
2016 | 2015 | 2016 | 2015 | |
Salaries and other employee benefits to whole-time directors and executive officers (1)(2)(3)(4) | 40 | 9 | 101 | 30 |
Commission and other benefits to non-executive/independent directors | 2 | 1 | 9 | 8 |
Total | 42 | 10 | 110 | 38 |
(1) | Includes stock compensation expense of 2 crore and 7 crore for the three months and year ended March 31, 2016 respectively (1 crore and 2 crore for the three months and year ended March 31, 2015 respectively) to CEO in line with the compensation plan approved by the shareholders. |
(2) | Includes payables to CFO who stepped down w.e.f October 12, 2015. |
(3) | Includes payment of variable pay amounting to 14 crore for the year ended March 31, 2015 to CEO as decided by the Nomination and Remuneration committee in line with the compensation plan approved by the shareholders. |
(4) | Includes provision for variable pay amounting to $4.33 million (approximately 29 crore) for the year ended March 31, 2016 to CEO. The shareholders in the EGM dated July 30, 2014 had approved a variable pay of $4.18 million (approximately28 crore at current exchange rate) at a target level and also authorized the Board to alter and vary the terms of remuneration. Accordingly , the Board based on the recommendations of the Nominations committee approved on April 15, 2016, $4.33 million (approximately 29 crore) as variable pay for the year ended March 31, 2016. |
2.27 RESEARCH AND DEVELOPMENT EXPENDITURE
in crore
Particulars | Quarter ended March 31, | Year ended March 31, | ||
2016 | 2015 | 2016 | 2015 | |
Expenditure at Department of Scientific and Industrial Research (DSIR) approved R&D centers (eligible for weighted deduction) (1) | ||||
Capital Expenditure | – | – | – | – |
Revenue Expenditure | – | 36 | 54 | 160 |
Other R&D Expenditure | ||||
Capital Expenditure | 15 | 2 | 31 | 15 |
Revenue Expenditure | 92 | 101 | 330 | 430 |
Total R&D Expenditure | ||||
Capital Expenditure | 15 | 2 | 31 | 15 |
Revenue Expenditure | 92 | 137 | 384 | 590 |
(1) | During year ended March 31, 2016 the Company has claimed weighted tax deduction on eligible research and development till 31st July, 2015 based on the approval received from Department of Scientific and Industrial Research (DSIR) with effect from November 23, 2011 which has been renewed effective April 2014. With effect from 1st August 2015 the business of Finacle, including the R&D activities, is transferred to its wholly owned subsidiary Edgeverve Systems Limited, hence from that date, Edgeverve Systems Limited has claimed the weighted tax deduction on eligible research and development expenditures u/s 35(2AB) of the Income Tax Act 1961. The weighted tax deduction is equal to 200% of such expenditure incurred. |
The eligible R&D revenue and capital expenditure are Nil for the quarter ended March 31, 2016 and 36 crore and Nil for the quarter ended March 31, 2015. The eligible R&D revenue and capital expenditure are 54 crore and Nil respectively for the year ended March 31, 2016 and 160 crore and Nil towards revenue and capital expenditure respectively for the year ended March 31, 2015
2.28 SEGMENT REPORTING
The Company's operations predominantly relate to providing end-to-end business solutions to enable clients to enhance business performance. During the quarter ended March 31, 2016, the Company reorganized its segments to enhance executive customer relationships, improve focus of sales investments and increase management oversight. However the reorganizations did not have any impact in the reportable segments as per AS 17 'Segment reporting' apart from Manufacturing being named as Manufacturing and Hi-TECH. Segment information has been presented both along industry classes and geographic segmentation of customers, industry being the primary segment. 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 significant accounting policies.
Industry segments for the Company are primarily enterprises in Financial Services and Insurance (FSI) , enterprises in Manufacturing and Hi-tech (MFG & Hi-TECH), enterprises in the Energy & utilities, Communication and Services (ECS), enterprises in Retail, Consumer packaged goods and Logistics (RCL) and enterprises in Life Sciences and Healthcare (LSH). Geographic segmentation is based on business sourced from that geographic region and delivered from both on-site and off-shore locations. 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 and identifiable operating expenses in relation to segments are categorized based on items that are individually identifiable to that segment. Allocated expenses of segments include expenses incurred for rendering services from the company's offshore software development centers and on-site expenses, which 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 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 against the total income of the Company.
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. 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.
Industry Segments
Quarter ended March 31, 2016 and March 31, 2015:
in crore
Particulars | FSI | MFG & Hi-TECH |
ECS | RCL | LSH | Total |
Income from software services and products | 4,552 | 3,127 | 3,030 | 2,525 | 924 | 14,158 |
4,126 | 2,634 | 2,377 | 2,097 | 692 | 11,926 | |
Identifiable operating expenses | 2,341 | 1,554 | 1,389 | 1,238 | 443 | 6,965 |
1,969 | 1,338 | 1,105 | 963 | 362 | 5,737 | |
Allocated expenses | 946 | 650 | 631 | 525 | 192 | 2,944 |
889 | 601 | 539 | 478 | 158 | 2,665 | |
Segmental operating income | 1,265 | 923 | 1,010 | 762 | 289 | 4,249 |
1,268 | 695 | 733 | 656 | 172 | 3,524 | |
Unallocable expenses | 315 | |||||
245 | ||||||
Other income, net | 778 | |||||
891 | ||||||
Profit before exceptional item and tax | 4,712 | |||||
4,170 | ||||||
Exceptional item | – | |||||
– | ||||||
Profit before tax | 4,712 | |||||
4,170 | ||||||
Tax expense | 1,313 | |||||
1,146 | ||||||
Profit after taxes and exceptional item | 3,399 | |||||
3,024 |
Year ended March 31, 2016 and March 31, 2015:
in crore
Particulars | FSI | MFG & Hi-TECH |
ECS | RCL | LSH | Total |
Income from software services and products | 17,791 | 12,087 | 10,997 | 9,501 | 3,607 | 53,983 |
16,175 | 10,230 | 9,756 | 8,369 | 2,770 | 47,300 | |
Identifiable operating expenses | 9,037 | 6,130 | 5,269 | 4,675 | 1,840 | 26,951 |
7,874 | 5,191 | 4,706 | 3,917 | 1,440 | 23,128 | |
Allocated expenses | 3,686 | 2,533 | 2,303 | 1,991 | 756 | 11,269 |
3,396 | 2,241 | 2,130 | 1,832 | 607 | 10,206 | |
Segmental operating income | 5,068 | 3,424 | 3,425 | 2,835 | 1,011 | 15,763 |
4,905 | 2,798 | 2,920 | 2,620 | 723 | 13,966 | |
Unallocable expenses | 1,115 | |||||
917 | ||||||
Other income, net | 3,009 | |||||
3,337 | ||||||
Profit before exceptional item and tax | 17,657 | |||||
16,386 | ||||||
Exceptional item | 3,036 | |||||
412 | ||||||
Profit before tax | 20,693 | |||||
16,798 | ||||||
Tax expense | 4,907 | |||||
4,634 | ||||||
Profit after taxes and exceptional item | 15,786 | |||||
12,164 |
Geographic Segments
Quarter ended March 31, 2016 and March 31, 2015:
in crore
Particulars | North America | Europe | India | Rest of the World | Total |
Income from software services and products | 9,258 | 3,216 | 360 | 1,324 | 14,158 |
7,733 | 2,526 | 341 | 1,326 | 11,926 | |
Identifiable operating expenses | 4,619 | 1,598 | 123 | 625 | 6,965 |
3,749 | 1,256 | 140 | 592 | 5,737 | |
Allocated expenses | 1,925 | 669 | 75 | 275 | 2,944 |
1,762 | 571 | 67 | 265 | 2,665 | |
Segmental operating income | 2,714 | 949 | 162 | 424 | 4,249 |
2,222 | 699 | 134 | 469 | 3,524 | |
Unallocable expenses | 315 | ||||
245 | |||||
Other income, net | 778 | ||||
891 | |||||
Profit before exceptional items and tax | 4,712 | ||||
4,170 | |||||
Exceptional item | – | ||||
– | |||||
Profit before tax | 4,712 | ||||
4,170 | |||||
Tax expense | 1,313 | ||||
1,146 | |||||
Profit after taxes and exceptional items | 3,399 | ||||
3,024 |
Year ended March 31, 2016 and March 31, 2015:
in crore
Particulars | North America | Europe | India | Rest of the World | Total |
Income from software services and products | 35,638 | 11,775 | 1,274 | 5,296 | 53,983 |
30,273 | 10,300 | 1,307 | 5,420 | 47,300 | |
Identifiable operating expenses | 18,052 | 5,868 | 568 | 2,463 | 26,951 |
14,806 | 5,131 | 678 | 2,513 | 23,128 | |
Allocated expenses | 7,467 | 2,462 | 254 | 1,086 | 11,269 |
6,625 | 2,240 | 251 | 1,090 | 10,206 | |
Segmental operating income | 10,119 | 3,445 | 452 | 1,747 | 15,763 |
8,842 | 2,929 | 378 | 1,817 | 13,966 | |
Unallocable expenses | 1,115 | ||||
917 | |||||
Other income, net | 3,009 | ||||
3,337 | |||||
Profit before exceptional items and tax | 17,657 | ||||
16,386 | |||||
Exceptional item | 3,036 | ||||
412 | |||||
Profit before tax | 20,693 | ||||
16,798 | |||||
Tax expense | 4,907 | ||||
4,634 | |||||
Profit after taxes and exceptional items | 15,786 | ||||
12,164 |
2.29 GRATUITY PLAN
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 and plan assets:
in crore
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
Obligations at year/ period beginning | 755 | 668 |
Service cost | 106 | 89 |
Interest cost | 55 | 56 |
Transfer of obligation* | (34) | (5) |
Actuarial (gain)/loss | 10 | 58 |
Benefits paid | (66) | (111) |
Obligations at year/ period end | 826 | 755 |
Defined benefit obligation liability as at the balance sheet date is fully funded by the Company. | ||
Change in plan assets | ||
Plan assets at year/ period beginning, at fair value | 781 | 677 |
Expected return on plan assets | 72 | 65 |
Transfer of assets* | (43) | – |
Actuarial gain/(loss) | (6) | 5 |
Contributions | 90 | 145 |
Benefits paid | (66) | (111) |
Plan assets at year/ period end, at fair value | 828 | 781 |
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/ period | 828 | 781 |
Present value of the defined benefit obligations at the end of the year/ period | 826 | 755 |
Re-imbursement (obligation)/asset* | – | (6) |
Asset recognized in the balance sheet | 2 | 20 |
Assumptions | ||
Interest rate | 7.80% | 7.80% |
Estimated rate of return on plan assets | 9.50% | 9.50% |
Weighted expected rate of salary increase | 8.00% | 8.00% |
* | from/to between group companies |
in crore
Particulars | As at | ||||
March 31, 2016 | March 31, 2015 | March 31, 2014 | March 31, 2013 | March 31, 2012 | |
Obligations at year/ period end | 826 | 755 | 668 | 612 | 569 |
Plan assets at year/ period end, at fair value | 828 | 781 | 677 | 643 | 582 |
Funded Status | 2 | 26 | 9 | 31 | 13 |
Experience adjustments: | |||||
(Gain)/loss: | |||||
Experience adjustments on plan liabilities | 10 | 4 | 14 | (49) | 13 |
Experience adjustments on plan assets | 6 | (5) | 3 | – | – |
Net gratuity cost for the quarter ended and year ended March 31, 2016 and March 31, 2015 comprises of the following components:
in crore
Particulars | Quarter ended March 31, | Year ended March 31, | ||
2016 | 2015 | 2016 | 2015 | |
Gratuity cost for the period | ||||
Service cost | 26 | 22 | 106 | 89 |
Interest cost | 14 | 13 | 55 | 56 |
Expected return on plan assets | (18) | (17) | (72) | (65) |
Actuarial (gain)/loss | 7 | 17 | 16 | 53 |
Plan amendment amortization | (1) | (1) | (4) | (4) |
Net gratuity cost | 28 | 34 | 101 | 129 |
Actual return on plan assets | 17 | 21 | 66 | 70 |
As at March 31, 2016 and March 31, 2015, the plan assets have been primarily invested in insurer managed funds. 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. The Company expects to contribute 74 crore to the gratuity trust during the fiscal 2017.
Effective July 1, 2007, the Company revised the employee death benefits provided under the gratuity plan, and included all eligible employees under a consolidated term insurance cover. Accordingly, the obligations under the gratuity plan reduced by 37 crore, which is being amortized on a straight line basis to the statement of profit and loss over 10 years representing the average future service period of the employees. The unamortized liability as at March 31, 2016 and March 31, 2015 amounts to 4 crore and 7 crore, respectively and disclosed under 'Other long-term liabilities' and 'other current liabilities'.
2.30 PROVIDENT FUND
The Company contributed 88 crore and 345 crore during the quarter and year ended March 31, 2016 respectively (81 crore and 295 crore during the quarter and year ended March 31, 2015 respectively).
The Guidance on Implementing AS 15, Employee Benefits (revised 2005) issued by Accounting Standards Board (ASB) states that benefits involving employer established provident funds, which require interest shortfalls to be recompensed are to be considered as defined benefit plans. The actuary has provided a valuation for provident fund liabilities on the basis of guidance issued by Actuarial Society of India during the quarter ended December 31, 2011 and based on the below provided assumptions there is no shortfall as at March 31, 2016, 2015, 2014, 2013 and 2012, respectively.
The details of fund and plan asset position are given below:
in crore
Particulars | As at | ||||
March 31, 2016 | March 31, 2015 | March 31, 2014 | March 31, 2013 | March 31, 2012 | |
Plan assets at period end, at fair value | 3,808 | 2,912 | 2,817 | 2,399 | 1,816 |
Present value of benefit obligation at period end | 3,808 | 2,912 | 2,817 | 2,399 | 1,816 |
Asset recognized in balance sheet | – | – | – | – | – |
Assumptions used in determining the present value obligation of the interest rate guarantee under the Deterministic Approach:
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
Government of India (GOI) bond yield | 7.80% | 7.80% |
Remaining term of maturity of portfolio | 7 years | 7 years |
Expected guaranteed interest rate - First year | 8.75% | 8.75% |
- Thereafter | 8.60% | 8.60% |
2.31 SUPERANNUATION
The Company contributed 58 crore and 227 crore to the Superannuation trust during the quarter and year ended March 31, 2016 respectively (53 crore and 213 crore during the quarter and year ended March 31, 2015 respectively).
2.32 RECONCILIATION OF BASIC AND DILUTED SHARES USED IN COMPUTING EARNINGS PER SHARE
Particulars | Quarter ended March 31, | Year ended March 31, | ||
2016 | 2015 | 2016 | 2015 | |
Number of shares considered as basic weighted average shares outstanding* | 229,69,44,664 | 229,69,44,664 | 229,69,44,664 | 229,69,44,664 |
Effect of dilutive common equivalent shares | – | 53,936 | – | 30,684 |
Number of shares considered as weighted average shares and potential shares outstanding | 229,69,44,664 | 229,69,98,600 | 229,69,44,664 | 229,69,75,348 |
* | adjusted for bonus issue.(refer Note 2.1) |
2.33 RESTRICTED DEPOSITS
Restricted deposits as at March 31, 2016 comprises 1,154 crore (1,039 crore as at March 31, 2015) deposited with financial institutions to settle employee-related obligations as and when they arise during the normal course of business.
2.34 DUES TO MICRO SMALL AND MEDIUM ENTERPRISES
As at March 31, 2016, there are no outstanding dues to micro and small enterprises (less than 1 crore as at March 31, 2015). There are no interests due or outstanding on the same.
2.35 INDIAN ACCOUNTING STANDARDS
The Ministry of Corporate Affairs (MCA) vide its notification in the Official Gazette dated February 16, 2015 notified the Indian Accounting Standards (Ind AS) applicable to certain classes of companies. Ind AS would replace the existing Indian GAAP prescribed under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014. For Infosys and its subsidiaries, Ind AS would be applicable for the accounting periods beginning April 1, 2016, with a transition date of April 1, 2015.
The company has evaluated the effect of transition from Indian GAAP to Ind AS and the following are the areas which would have an impact on account of the transition on the company:
• Fair valuation of certain financial instruments
• Employee costs pertaining to defined benefit obligations
• Discounting of certain long-term liabilities
• Share based payments
Further , there would be a change in the presentation of financial statements including some additional disclosures.
2.36 FUNCTION WISE CLASSIFICATION OF STATEMENT OF PROFIT AND LOSS
In crore
Particulars | Quarter ended March 31, | Year ended March 31, | ||
2016 | 2015 | 2016 | 2015 | |
Income from software services and products | 14,158 | 11,926 | 53,983 | 47,300 |
Software development expenses | 8,354 | 6,933 | 32,255 | 27,828 |
GROSS PROFIT | 5,804 | 4,993 | 21,728 | 19,472 |
Selling and marketing expenses | 688 | 633 | 2,694 | 2,549 |
General and administration expenses | 867 | 840 | 3,271 | 2,961 |
1,555 | 1,473 | 5,965 | 5,510 | |
OPERATING PROFIT BEFORE DEPRECIATION | 4,249 | 3,520 | 15,763 | 13,962 |
Depreciation and amortization | 315 | 241 | 1,115 | 913 |
OPERATING PROFIT | 3,934 | 3,279 | 14,648 | 13,049 |
Other income | 778 | 891 | 3,009 | 3,337 |
PROFIT BEFORE EXCEPTIONAL ITEM AND TAX | 4,712 | 4,170 | 17,657 | 16,386 |
Profit on transfer on business (refer to note 2.10.5) | – | – | 3,036 | 412 |
PROFIT BEFORE TAX | 4,712 | 4,170 | 20,693 | 16,798 |
Tax expense: | ||||
Current tax | 1,308 | 1,046 | 4,898 | 4,537 |
Deferred tax | 5 | 100 | 9 | 97 |
PROFIT FOR THE PERIOD | 3,399 | 3,024 | 15,786 | 12,164 |
The accompanying notes form an integral part of the standalone interim financial statements | |
As per our report of even date attached | |
for B S R & Co. LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants | |
Firm's Registration Number:101248W/W-100022 |
Supreet Sachdev Partner Membership No. 205385 |
R.Seshasayee Chairman |
Dr. Vishal Sikka Chief Executive Officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bangalore April 15, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer and Executive Vice President |
A.G.S Manikantha Company Secretary |
Auditor’s Report on Quarterly Financial Results and Year to Date Results of Infosys Limited Pursuant to the Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015
To
The Board of Directors of Infosys Limited
We have audited the quarterly financial results of Infosys Limited (‘the Company’) for the quarter ended March 31, 2016 and the year to date financial results for the period from April 1, 2015 to March 31, 2016, attached herewith, being submitted by the Company pursuant to the requirement of Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. These quarterly financial results as well as year to date financial results have been prepared on the basis of the interim financial statements, which are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial results based on our audit of such interim financial statements, which have been prepared in accordance with the recognition and measurement principles laid down in Accounting Standard for Interim Financial Reporting (AS) 25, prescribed under Section 133 of the Companies Act, 2013 read with relevant rules issued thereunder and other accounting principles generally accepted in India.
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 results are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts disclosed as financial results. An audit also includes assessing the accounting principles used and significant estimates made by the management. We believe that our audit provides a reasonable basis for our opinion.
In our opinion and to the best of our information and according to the explanations given to us, these quarterly and year to date financial results:
(i) | have been presented in accordance with the requirements of Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 in this regard; and |
(ii) | give a true and fair view of the net profit and other financial information for the quarter ended March 31, 2016 as well as the year to date results for the period from April 1, 2015 to March 31, 2016. |
for B S R & Co. LLP
Chartered Accountants
Firm’s registration number: 101248W/ W-100022
Supreet Sachdev
Partner
Membership number: 205385
Bangalore
April 15, 2016
Independent Auditor’s Report
To the Members of Infosys Limited
Report on the Standalone Financial Statements
We have audited the accompanying standalone financial statements of Infosys Limited (‘the Company’), which comprise the balance sheet as at 31 March 2016, the statement of profit and loss and the cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Standalone Financial Statements
The Company’s Board of Directors is responsible for the matters stated in Section 134(5) of the Companies Act, 2013 (“the Act”) with respect to the preparation and presentation of these standalone financial statements that give a true and fair view of the financial position, financial performance and cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on these standalone financial statements based on our audit.
We have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder.
We conducted our audit in accordance with the Standards on Auditing specified under Section 143(10) of the Act. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Company’s preparation of the financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Company’s Directors, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.
Opinion
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the state of affairs of the Company as at 31 March 2016 and its profit and its cash flows for the year ended on that date.
Report on Other Legal and Regulatory Requirements
1. | As required by the Companies (Auditor’s
Report) Order, 2016 (“the Order”) issued by the Central Government of India in terms of sub-section (11) of section
143 of the Act, we give in the Annexure A, a statement on the matters specified in the paragraph 3 and 4 of the order. |
2. As required by Section 143 (3) of the Act, we report that:
(a) | we have sought and 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 as required by law have been kept by the Company so far as it appears from our examination of those books; |
(c) | the balance sheet, the statement of profit and loss and the cash flow statement dealt with by this Report are in agreement with the books of account; |
(d) | in our opinion, the aforesaid standalone financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014; |
(e) | on the basis of the written representations received from the directors as on 31 March 2016 taken on record by the Board of Directors, none of the directors is disqualified as on 31 March 2016 from being appointed as a director in terms of Section 164 (2) of the Act; |
(f) | with respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate report in “Annexure B”; and |
(g) | with respect to the other matters to be included in the Auditor’s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us: |
i | the Company has disclosed the impact of pending litigations on its financial position in its financial statements – Refer Note 2.20 to the financial statements; |
ii | the Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts – Refer Note 2.7 to the financial statements; |
iii | There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company. |
for B S R & Co. LLP
Chartered Accountants
Firm’s registration number: 101248W/W-100022
Supreet Sachdev
Partner
Membership number: 205385
Bangalore
15 April 2016
Annexure - A to the Auditors’ Report
The Annexure referred to in Independent Auditors’ Report to the members of the Company on the standalone financial statements for the year ended 31 March 2016, we report that:
(i) (a) | The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets |
(b) | The Company has a regular programme of physical verification of its fixed assets by which fixed assets are verified in a phased manner over a period of three years. In accordance with this programme, certain fixed assets were verified during the year and no material discrepancies were noticed on such verification. In our opinion, this periodicity of physical verification is reasonable having regard to the size of the Company and the nature of its assets. |
(c) | According to the information and explanations given to us and on the basis of our examination of the records of the Company, the title deeds of immovable properties are held in the name of the Company. |
(ii) | The Company is a service company, primarily rendering software services. Accordingly, it does not hold any physical inventories. Thus, paragraph 3(ii) of the Order is not applicable to the Company. |
(iii) | The Company has granted loans to five bodies corporate covered in the register maintained under section 189 of the Companies Act, 2013 (‘the Act’). |
(a) | In our opinion, the rate of interest and other terms and conditions on which the loans had been granted to the bodies corporate listed in the register maintained under Section 189 of the Act were not, prima facie, prejudicial to the interest of the Company |
(b) | In the case of the loans granted to the bodies corporate listed in the register maintained under section 189 of the Act, the borrowers have been regular in the payment of the principal and interest as stipulated. |
(c) | There are no overdue amounts in respect of the loan granted to a body corporate listed in the register maintained under section 189 of the Act. |
(iv) | In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of section 185 and 186 of the Act, with respect to the loans and investments made. |
(v) | The Company has not accepted any deposits from the public. |
(vi) | The Central Government has not prescribed the maintenance of cost records under section 148(1) of the Act, for any of the services rendered by the Company. |
(vii) (a) | According to the information and explanations given to us and on the basis of our examination of the records of the Company, amounts deducted/ accrued in the books of account in respect of undisputed statutory dues including provident fund, income-tax, sales tax, value added tax, duty of customs, service tax, cess and other material statutory dues have been regularly deposited during the year by the Company with the appropriate authorities. As explained to us, the Company did not have any dues on account of employees’ state insurance and duty of excise. |
According to the information and explanations given to us, no undisputed amounts payable in respect of provident fund, income tax, sales tax, value added tax, duty of customs, service tax, cess and other material statutory dues were in arrears as at 31 March 2016 for a period of more than six months from the date they became payable.
(b) | According to the information and explanations given to us, there are no material dues of duty of customs which have not been deposited with the appropriate authorities on account of any dispute. However, according to information and explanations given to us, the following dues of income tax, sales tax, duty of excise, service tax and value added tax have not been deposited by the Company on account of disputes: |
Name of the statute | Nature of dues | Amount
(in Rs) |
Period to which the amount relates | Forum where dispute is pending |
Service tax | Service tax and penalty | 57,563,973 # | July 2004 to October 2005 | CESTAT, Bangalore |
Service tax | Service tax | 25,784,864 # | January 2005 to March 2009 | CESTAT-Bangalore |
Service tax | Service tax and penalty | 231,521,178 # | February 2007 to March 2009 | CESTAT-Bangalore |
Service tax | Service tax | 41,972,658 # | April 2009 to March 2010 | CESTAT, Bangalore |
Service tax | Service tax | 64,654,051 # | April 2010 to March 2011 | CESTAT-Bangalore |
APVAT Act, 2005 | Sales tax | 3,112,450 *# | April 2007 to March 2008 | High Court of Andhra Pradesh |
MVAT Act, 2005 | Sales tax | 935,455 *# | April 2006 to December 2007 | Joint Commissioner (Appeals) |
MVAT Act, 2005 | Sales tax | 45,250,506 | September 2008 to October 2011 | Specified Officer of SEZ |
Central Excise Act, 1944 | Excise duty & penalty | 386,148,018 # | March 2006 to December 2009 | CESTAT, Bangalore |
Central Excise Act, 1944 | Excise duty & penalty | 26,746,497 # | January 2010 to December 2010 | CESTAT, Bangalore |
Central Excise Act, 1944 | Excise duty & penalty | 45,132,885 | January 2011 to June 2011 | CESTAT, Bangalore |
Central Excise Act, 1944 | Excise duty & penalty | 32,344,749 # | July 2011 to December 2011 | CESTAT, Bangalore |
Central Excise Act, 1944 | Excise duty & penalty | 42,003,700 # | January 2012 to November 2012 | CESTAT, Bangalore |
KVAT Act, 2003 | Sales tax, interest and penalty | 481,045,876 *# | April 2005 to March 2009 | Joint commissioner (Appeals) |
MVAT Act, 2005 | Sales tax, interest and penalty | 699,250 | January 2008 to March 2008 | Joint Commissioner (Appeals) |
MVAT Act, 2005 | Sales tax, interest | 2,201,534*# | April 2008 to March 2009 | Joint Commissioner (Appeals) |
MVAT Act, 2005 | Sales tax, interest | 3,132,547# | April 2009 to March 2010 | Joint Commissioner (Appeals) |
Central Excise Act, 1944 | Excise duty & penalty | 48,139,052# | December 2012 to September 2013 | CESTAT, Bangalore |
Central Excise Act, 1944 | Excise duty & penalty | 56,400,395 | October 2013 to September 2014 | CESTAT, Bangalore |
Service tax | Service tax and penalty | 119,451,864* | April 2009 to March 2012 | CESTAT, Bangalore |
Service tax | Service tax and penalty | 6,493,657* | April 2009 to September 2011 | Commissioner (Appeals) |
Service tax | Service tax and penalty | 6,123,280* | October 2008 to September 2013 | Commissioner (Appeals) |
Service tax | Service tax and penalty | 47,580,094* | April 2012 to March 2013 | CESTAT, Bangalore |
Service tax | Service tax and penalty | 98,194* | October 2011 to December 2011 | Commissioner (Appeals), Bangalore |
Service tax | Service tax and penalty | 42,106,232 | October 2014 to June 2015 | ** |
MVAT Act, 2005 | Sales tax, interest | 9,801,056*# | April 2010 to March 2011 | Joint Commissioner (Appeals) |
Income tax Act, 1961 | Interest | 38,154,376 | Assessment year 2009 - 2010 | CIT(Appeals) |
The Rajasthan VAT Act, 2003 | Sales tax | 6,784 | April 2012 to March 2013 and August 2015 | Commercial tax officer |
* net of amounts paid under protest.
# a stay order has been received against the amount disputed and not deposited.
** The Company is in process of filing an appeal before the CESTAT, Bangalore.
(viii) | The Company does not have any loans or borrowings from any financial institution, banks, government or debenture holders during the year. Accordingly, paragraph 3(viii) of the Order is not applicable. |
(ix) | The Company did not raise any money by way of initial public offer or further public offer (including debt instruments) and term loans during the year. Accordingly, paragraph 3 (ix) of the Order is not applicable. |
(x) | According to the information and explanations given to us, no material fraud by the Company or on the Company by its officers or employees has been noticed or reported during the course of our audit. |
(xi) | According to the information and explanations give to us and based on our examination of the records of the Company, the Company has paid/provided for managerial remuneration in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Act. |
(xii) | In our opinion and according to the information and explanations given to us, the Company is not a nidhi company. Accordingly, paragraph 3(xii) of the Order is not applicable. |
(xiii) | According to the information and explanations given to us and based on our examination of the records of the Company, transactions with the related parties are in compliance with sections 177 and 188 of the Act where applicable and details of such transactions have been disclosed in the financial statements as required by the applicable accounting standards. |
(xiv) | According to the information and explanations give to us and based on our examination of the records of the Company, the Company has not made any preferential allotment or private placement of shares or fully or partly convertible debentures during the year. |
(xv) | According to the information and explanations given to us and based on our examination of the records of the Company, the Company has not entered into non-cash transactions with directors or persons connected with him. Accordingly, paragraph 3(xv) of the Order is not applicable. |
(xvi) | The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act 1934. |
for B S R & Co. LLP
Chartered Accountants
Firm’s registration number: 101248W/W-100022
Supreet Sachdev
Partner
Membership number: 205385
Bangalore
15 April 2016
Annexure - B to the Auditors’ Report
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act”)
We have audited the internal financial controls over financial reporting of Infosys Limited (“the Company”) as of 31 March 2016 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.
Management’s Responsibility for Internal Financial Controls
The Company’s management is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India (‘ICAI’). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.
Auditors’ Responsibility
Our responsibility is to express an opinion on the Company's internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls over Financial Reporting (the “Guidance Note”) and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both applicable to an audit of Internal Financial Controls and, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company’s internal financial controls system over financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A company's internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Opinion
In our opinion, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at 31 March 2016, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.
for B S R & Co. LLP
Chartered Accountants
Firm’s Registration Number: 101248W/W-100022
Supreet Sachdev
Partner
Membership Number: 205385
Bangalore
15 April 2016
INFOSYS LIMITED
In crore
Balance Sheet as at | Note | March 31, 2016 | March 31, 2015 |
EQUITY AND LIABILITIES | |||
SHAREHOLDERS' FUNDS | |||
Share capital | 2.1 | 1,148 | 574 |
Reserves and surplus | 2.2 | 56,009 | 47,494 |
57,157 | 48,068 | ||
NON-CURRENT LIABILITIES | |||
Deferred tax liabilities (net) | 2.3 | – | – |
Other long-term liabilities | 2.4 | 73 | 30 |
73 | 30 | ||
CURRENT LIABILITIES | |||
Trade payables | 2.5 | ||
Total outstanding dues of micro enterprises and small enterprises | – | – | |
Total outstanding dues of creditors other than micro enterprises and small enterprises | 623 | 124 | |
Other current liabilities | 2.6 | 6,105 | 5,546 |
Short-term provisions | 2.7 | 8,809 | 8,045 |
15,537 | 13,715 | ||
72,767 | 61,813 | ||
ASSETS | |||
NON-CURRENT ASSETS | |||
Fixed assets | |||
Tangible assets | 2.8 | 8,248 | 7,347 |
Capital work-in-progress | 934 | 769 | |
9,182 | 8,116 | ||
Non-current investments | 2.10 | 11,111 | 6,108 |
Deferred tax assets (net) | 2.3 | 405 | 433 |
Long-term loans and advances | 2.11 | 5,970 | 4,378 |
Other non-current assets | 2.12 | 2 | 26 |
26,670 | 19,061 | ||
CURRENT ASSETS | |||
Current investments | 2.10 | 2 | 749 |
Trade receivables | 2.13 | 9,798 | 8,627 |
Cash and cash equivalents | 2.14 | 29,176 | 27,722 |
Short-term loans and advances | 2.15 | 7,121 | 5,654 |
46,097 | 42,752 | ||
72,767 | 61,813 | ||
SIGNIFICANT ACCOUNTING POLICIES | 1 |
The accompanying notes form an integral part of the standalone financial statements
As per our report of even date attached | |
for B S R & Co. LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants | |
Firm's Registration Number:101248W/W-100022 |
Supreet Sachdev Partner Membership No. 205385 |
R.Seshasayee Chairman |
Dr. Vishal Sikka Chief Executive Officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bangalore April 15, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer and Executive Vice President |
A.G.S Manikantha Company Secretary |
INFOSYS LIMITED
In crore, except equity share and per equity share data
Statement of Profit and Loss for the | Note | Year ended March 31, | |
2016 | 2015 | ||
Income from software services and products | 2.16 | 53,983 | 47,300 |
Other income | 2.17 | 3,009 | 3,337 |
Total revenue | 56,992 | 50,637 | |
Expenses | |||
Employee benefit expenses | 2.18 | 28,206 | 25,115 |
Deferred consideration pertaining to acquisition | 2.10.6 | 110 | 219 |
Cost of technical sub-contractors | 2.18 | 4,417 | 2,909 |
Travel expenses | 2.18 | 1,655 | 1,360 |
Cost of software packages and others | 2.18 | 1,049 | 979 |
Communication expenses | 2.18 | 311 | 384 |
Consultancy and professional charges | 563 | 396 | |
Depreciation and amortization expense | 2.8 | 1,115 | 913 |
Other expenses | 2.18 | 1,909 | 1,976 |
Total expenses | 39,335 | 34,251 | |
PROFIT BEFORE EXCEPTIONAL ITEM AND TAX | 17,657 | 16,386 | |
Profit on transfer of business | 2.10.5 | 3,036 | 412 |
PROFIT BEFORE TAX | 20,693 | 16,798 | |
Tax expense: | |||
Current tax | 2.19 | 4,898 | 4,537 |
Deferred tax | 2.19 | 9 | 97 |
PROFIT FOR THE PERIOD | 15,786 | 12,164 | |
EARNINGS PER EQUITY SHARE | |||
Equity shares of par value 5/- each | |||
Before Exceptional item | |||
Basic | 55.51 | 51.17 | |
Diluted | 55.51 | 51.17 | |
After Exceptional item | |||
Basic | 68.73 | 52.96 | |
Diluted | 68.73 | 52.96 | |
Number of shares used in computing earnings per share | 2.32 | ||
Basic | 229,69,44,664 | 229,69,44,664 | |
Diluted | 229,69,44,664 | 229,69,75,348 | |
SIGNIFICANT ACCOUNTING POLICIES | 1 |
The accompanying notes form an integral part of the standalone financial statements
As per our report of even date attached | |
for B S R & Co. LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants | |
Firm's Registration Number:101248W/W-100022 |
Supreet Sachdev Partner Membership No. 205385 |
R. Seshasayee Chairman |
Dr. Vishal Sikka Chief Executive Officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bangalore April 15, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer and Executive Vice President |
A. G. S Manikantha Company Secretary |
INFOSYS LIMITED
In crore
Cash Flow Statement for the | Note | Year ended March 31, | |
2016 | 2015 | ||
CASH FLOWS FROM OPERATING ACTIVITIES | |||
Profit before tax | 20,693 | 16,798 | |
Adjustments to reconcile profit before tax to cash generated by operating activities | |||
Depreciation and amortization expense | 1,115 | 913 | |
Provision for bad and doubtful debts | (48) | 142 | |
Deferred purchase price | 110 | 219 | |
Interest and dividend income | (2,563) | (2,738) | |
Profit on transfer of business (Refer to Note 2.10.5) | (3,036) | (412) | |
Other adjustments | 122 | 52 | |
Effect of exchange differences on translation of assets and liabilities | 32 | 54 | |
Changes in assets and liabilities | |||
Trade receivables | (1,123) | (1,433) | |
Loans and advances and other assets | (1,615) | (326) | |
Liabilities and provisions | 1,062 | 1,175 | |
14,749 | 14,444 | ||
Income taxes paid | (5,350) | (6,489) | |
NET CASH GENERATED BY OPERATING ACTIVITIES | 9,399 | 7,955 | |
CASH FLOWS FROM INVESTING ACTIVITIES | |||
Payment towards capital expenditure, net of sale proceeds | (2,308) | (1,986) | |
Investment in subsidiaries | (258) | (1,748) | |
Payment towards acquisition (refer note 2.10.1 & 2.10.2) | (794) | – | |
Payment arising out of business transfer | (335) | – | |
Redemption of fixed maturity plans | 110 | ||
Investment in preferred stock | (82) | – | |
Investment in liquid mutual fund units | (22,797) | (23,184) | |
Disposal of liquid mutual fund units | 23,545 | 24,296 | |
Investment in tax free bond | (299) | – | |
Investment in Government Bond | (2) | ||
Redemption of certificates of deposit | – | 783 | |
Interest and dividend received | 2,302 | 2,394 | |
NET CASH USED IN INVESTING ACTIVITIES | (1,028) | 665 | |
CASH FLOWS FROM FINANCING ACTIVITIES | |||
Loan given to subsidiaries | (193) | (73) | |
Loan repaid by subsidiaries | 126 | 47 | |
Dividends paid (including corporate dividend tax) | (6,841) | (4,935) | |
NET CASH USED IN FINANCING ACTIVITIES | (6,908) | (4,961) | |
Effect of exchange differences on translation of foreign currency cash and cash equivalents | (9) | (37) | |
NET (DECREASE)/ INCREASE IN CASH AND CASH EQUIVALENTS | 1,454 | 3,622 | |
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD | 2.14 | 27,722 | 24,100 |
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD | 29,176 | 27,722 | |
SIGNIFICANT ACCOUNTING POLICIES | 1 |
The accompanying notes form an integral part of the standalone financial statements
As per our report of even date attached | |
for B S R & Co. LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants | |
Firm's Registration Number:101248W/W-100022 |
Supreet Sachdev Partner Membership No. 205385 |
R. Seshasayee Chairman |
Dr. Vishal Sikka Chief Executive Officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bangalore April 15, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer and Executive Vice President |
A. G. S Manikantha Company Secretary |
Significant accounting policies
Company overview
Infosys is a global leader in consulting, technology, outsourcing and next-generation services. Along with its subsidiaries, Infosys provides Business IT services (comprising application development and maintenance, independent validation, infrastructure management, engineering services comprising product engineering and life cycle solutions and business process management); Consulting and systems integration services (comprising consulting, enterprise solutions, systems integration and advanced technologies); Products, business platforms and solutions to accelerate intellectual property-led innovation including Finacle, our banking solution; and offerings in the areas of Analytics, Cloud, and Digital Transformation.
The company is a public limited company incorporated and domiciled in India and has its registered office at Bangalore, Karnataka, India. The company has its primary listings on the BSE Limited and National Stock Exchange in India. The company’s American Depositary Shares representing equity shares are also listed on the New York Stock Exchange (NYSE), Euronext London and Euronext Paris.
1 Significant accounting policies
1.1 Basis of preparation of financial statements
These financial statements are prepared in accordance with Indian Generally Accepted Accounting Principles (GAAP) under the historical cost convention on the accrual basis except for certain financial instruments which are measured at fair values. GAAP comprises mandatory accounting standards as prescribed under Section 133 of the Companies Act, 2013 (‘Act’) read with Rule 7 of the Companies (Accounts) Rules, 2014, the provisions of the Act (to the extent notified) and guidelines issued by the Securities and Exchange Board of India (SEBI). 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.
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 liabilities as at the date of the financial statements and reported amounts of income and expenses during the period. Examples of such estimates include computation of percentage of completion which requires the Company to estimate the efforts or costs expended to date as a proportion of the total efforts or costs to be expended, provisions for doubtful debts, future obligations under employee retirement benefit plans, income taxes, post-sales customer support and the useful lives of fixed tangible assets and intangible assets.
Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes in estimates are made as the Management becomes aware of changes in circumstances surrounding the estimates. Changes in estimates are reflected in the financial statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the financial statements.
1.3 Revenue recognition
Revenue is primarily derived from software development and related services and from the licensing of software products. 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 are 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 and fixed-timeframe contracts, where there is no uncertainty as to measurement or collectability of consideration, is recognized based upon the percentage of completion method. When there is uncertainty as to measurement or ultimate collectability revenue recognition is postponed until such uncertainty is resolved. Cost and earnings in excess of billings are classified as unbilled revenue while billings in excess of cost and earnings is classified as unearned revenue. Deferred contract costs are amortized over the term of the contract. 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 ratably 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 case of multiple element contracts, which require significant implementation services, where revenue for the entire arrangement is recognized over the implementation period based upon the percentage-of-completion method. Revenue from client training, support and other services arising due to the sale of software products is recognized as the related services are performed.
The Company accounts for volume discounts and pricing incentives to customers as a reduction of revenue based on the ratable allocation of the discount / incentive amount to each of the underlying revenue transactions that result in progress by the customer towards earning the discount / incentive. Also, when the level of discount varies with increases in levels of revenue transactions, the Company recognizes the liability based on its estimate of the customer's future purchases. If it is probable that the criteria for the discount will not be met, or if the amount thereof cannot be estimated reliably, then discount is not recognized until the payment is probable and the amount can be estimated reliably. The Company recognizes changes in the estimated amount of obligations for discounts in the period in which change occurs. The discounts are passed on to the customer either as direct payments or as a reduction of payments due from the customer.
The Company presents revenues net of indirect taxes in its statement of profit and loss.
Profit on sale of investments is recorded on transfer of title from the Company and is determined as the difference between the sale price and 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.
1.4 Provisions and contingent liabilities
A provision is recognized if, as a result of a past event, the Company has a present legal obligation that is reasonably estimable and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by the best estimate of the outflow of economic benefits required to settle the obligation at the reporting date. Where no reliable estimate can be made, a disclosure is made as contingent liability. A disclosure for a contingent liability is also made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. Where there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.
1.5 Post-sales client support and warranties
The Company provides its clients with a fixed-period post-sales support for corrections of errors and support on all its fixed-price, fixed-timeframe contracts. Costs associated with such support services are accrued at the time when related revenues are recorded and included in statement of profit and loss. The Company estimates such costs based on historical experience and the estimates are reviewed annually for any material changes in assumptions and likelihood of occurrence.
1.6 Onerous contracts
Provisions for onerous contracts are recognized when the expected benefits to be derived by the Company from a contract are lower than the unavoidable costs of meeting the future obligations under the contract. The provision is measured at lower of the expected cost of terminating the contract and the expected net cost of fulfilling the contract.
1.7 Tangible assets and capital work-in-progress
Tangible assets are stated at cost, less accumulated depreciation and impairment, if any. Direct costs are capitalized until such assets are ready for use. Capital work-in-progress comprises of the cost of fixed assets that are not yet ready for their intended use at the reporting date.
1.8 Intangible assets
Intangible assets are recorded at the consideration paid for acquisition of such assets and are carried at cost less accumulated amortization and impairment.
Research costs are expensed as incurred. Software product development costs are expensed as incurred unless technical and commercial feasibility of the project is demonstrated, future economic benefits are probable, the Company has an intention and ability to complete and use or sell the software and the costs can be measured reliably. The cost which can be capitalised include the cost of materials, direct labour, overhead cost that are directly attributable to preparing the asset for intended use.
1.9 Depreciation and amortization
Depreciation on tangible assets is provided on the straight-line method over the useful lives of assets estimated by the Management. Depreciation for assets purchased / sold during a period is proportionately charged. Intangible assets are amortized over their respective individual estimated useful lives on a straight-line basis, commencing from the date the asset is available to the Company for its use. The Management estimates the useful lives for the other fixed assets as follows:
Buildings (1) | 22-25 years |
Plant and Machinery(1) | 5 years |
Office equipment | 5 years |
Computer equipment (1) | 3-5 years |
Furniture and fixtures (1) | 5 years |
Vehicles (1) | 5 years |
(1) | Based on technical evaluation, the management believes that the useful lives as given above best represent the period over which management expects to use these assets. Hence, the useful lives for these assets is different from the useful lives as prescribed under Part C of Schedule II of the Companies Act 2013. |
Depreciation and amortization methods, useful lives and residual values are reviewed periodically, including at each financial year end. (Refer note 2.8)
1.10 Impairment
The Management periodically assesses using, external and internal sources, whether there is an indication that an asset may be impaired. An impairment loss is recognized wherever the carrying value of an asset exceeds its recoverable amount. The recoverable amount is higher of the asset's net selling price or value in use, which means the present value of future cash flows expected to arise from the continuing use of the asset and its eventual disposal. An impairment loss for an asset is reversed if, and only if, the reversal can be related objectively to an event occurring after the impairment loss was recognized. The carrying amount of an asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortization or depreciation) had no impairment loss been recognized for the asset in prior years.
1.11 Retirement benefits to employees
a Gratuity
The Company 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 with the Company.
Liabilities with regard to the Gratuity Plan are determined by actuarial valuation, performed by an independent actuary, at each Balance Sheet date using the projected unit credit method. The Company fully contributes all ascertained liabilities to the Infosys Limited Employees' Gratuity Fund Trust (the Trust). Trustees administer contributions made to the Trust and contributions are invested in a scheme with Life Insurance Corporation of India as permitted by law of India. The Company recognizes the net obligation of the gratuity plan in the Balance Sheet as an asset or liability, respectively in accordance with Accounting Standard (AS) 15, 'Employee Benefits'. The Company's overall expected long-term rate-of-return on assets has been determined based on consideration of available market information, current provisions of Indian law specifying the instruments in which investments can be made, and historical returns. The discount rate is based on the Government securities yield. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in the statement of profit and loss in the period in which they arise.
b Superannuation
Certain employees are also participants in the superannuation plan ('the Plan') which is a defined contribution plan. The Company has no obligations to the Plan beyond its monthly contributions which are periodically contributed to a trust fund, the corpus of which is invested with the Life Insurance Corporation of India.
c Provident fund
Eligible employees receive benefits from a provident fund, which is a defined benefit plan. Both the eligible 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 portion to the Infosys Limited Employees’ Provident Fund Trust. The trust invests in specific designated instruments as permitted by Indian law. 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 make good the shortfall, if any, between the return from the investments of the trust and the notified interest rate.
d Compensated absences
The employees of the Company are entitled to compensated absences which are both accumulating and non-accumulating in nature. The expected cost of accumulating compensated absences is determined by actuarial valuation using projected unit credit method on the additional amount expected to be paid/availed as a result of the unused entitlement that has accumulated at the Balance Sheet date. Expense on non-accumulating compensated absences is recognized in the period in which the absences occur.
1.12 Share-based payments
The company accounts for equity settled stock options as per the accounting treatment prescribed by Securities and Exchange Board of India ( share based employee benefits) Regulations, 2014 and the Guidance Note on Employee Share-based Payments issued by the Institute of Chartered Accountants of India using the intrinsic value method.
1.13 Foreign currency transactions
Foreign-currency denominated monetary assets and liabilities are translated at exchange rates in effect at the Balance Sheet date. The gains or losses resulting from such translations are included in the Statement of profit and loss. Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at fair value are translated at the exchange rate prevalent at the date when the fair value was determined. Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at historical cost are translated at the exchange rate prevalent at the date of transaction.
Revenue, expense and cash-flow items denominated in foreign currencies are translated using the exchange rate in effect on the date of the transaction. Transaction gains or losses realized upon settlement of foreign currency transactions are included in determining net profit for the period in which the transaction is settled.
1.14 Forward and options contracts in foreign currencies
The Company uses foreign exchange forward and options contracts to hedge its exposure to movements in foreign exchange rates. The use of these foreign exchange forward and options contracts reduce the risk or cost to the Company and the Company does not use those for trading or speculation purposes.
Effective April 1, 2008, the Company adopted AS 30, 'Financial Instruments: Recognition and Measurement', to the extent that the adoption did not conflict with existing accounting standards and other authoritative pronouncements of the Company Law and other regulatory requirements.
Forward and options contracts are fair valued at each reporting date. The Company designates certain foreign exchange forward and options contracts as cash flow hedges to mitigate the risk of foreign exchange exposure on highly probable forecast transactions. The Company records the gain or loss on effective hedges, if any, in the hedging reserve until the transactions are complete. On completion, the gain or loss is transferred to the statement of profit and loss of that period. To designate a forward or options contract as an effective hedge, the Management objectively evaluates and evidences with appropriate supporting documents at the inception of each contract and subsequently whether the contract is effective in achieving offsetting cash flows attributable to the hedged risk. Changes in the fair value relating to the ineffective portion of the hedges and derivative instruments that do not qualify or have not been designated for hedge accounting are recognised in the statement of profit and loss.
1.15 Income taxes
Income taxes are accrued in the same period that the related revenue and expenses arise. A provision is made for income tax, 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. Minimum alternate tax (MAT) paid in accordance with the tax laws, which gives rise to future economic benefits in the form of tax credit against future income tax liability, is recognized as an asset in the Balance Sheet if there is convincing evidence that the Company will pay normal tax after the tax holiday period and the resultant asset can be measured reliably. The Company offsets, on a year on year basis, the current tax assets and liabilities, where it has a legally enforceable right and where it intends to settle such assets and liabilities on a net basis.
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 of timing difference. The tax effect is calculated on the accumulated timing differences at the end of an accounting period based on enacted or substantively enacted regulations. Deferred tax assets in situation where unabsorbed depreciation and carry forward business loss exists, are recognized only if there is virtual certainty supported by convincing evidence that sufficient future taxable income will be available against which such deferred tax asset can be realized. Deferred tax assets, other than in situation of unabsorbed depreciation and carry forward business loss, are recognized only if there is reasonable certainty that they will be realized. Deferred tax assets are reviewed for the appropriateness of their respective carrying values at each reporting date. Deferred tax assets and deferred tax liabilities have been offset wherever the Company has a legally enforceable right to set off current tax assets against current tax liabilities and where the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority. 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 financial year. Tax benefits of deductions earned on exercise of employee share options in excess of compensation charged to statement of profit and loss are credited to the securities premium reserve.
1.16 Earnings per share
Basic earnings per share is computed by dividing the net profit after tax by the weighted average number of equity shares outstanding during the period. Diluted earnings per share is computed by dividing the profit after tax by the weighted average number of equity shares considered for deriving basic earnings per share and also the weighted average number of equity shares that could have been issued upon 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 which is 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. Dilutive potential equity shares are determined independently for each period presented.
The number of shares and potentially dilutive equity shares are adjusted retrospectively for all periods presented for any share splits and bonus shares issues including for changes effected prior to the approval of the financial statements by the Board of Directors.
1.17 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 Management’s intention. Current investments are carried at the lower of cost and fair value of each investment individually. Cost for overseas investments comprises the Indian Rupee value of the consideration paid for the investment translated at the exchange rate prevalent at the date of investment. Long term investments are carried at cost less provisions recorded to recognize any decline, other than temporary, in the carrying value of each investment.
1.18 Cash and cash equivalents
Cash and cash equivalents comprise cash and cash on deposit with banks and financial institutions. The Company considers all highly liquid investments with a remaining maturity at the date of purchase of three months or less and that are readily convertible to known amounts of cash to be cash equivalents.
1.19 Cash flow statement
Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Company are segregated.
1.20 Leases
Lease under which the Company assumes substantially all the risks and rewards of ownership are classified as finance leases. Such assets acquired are capitalized at fair value of the asset or present value of the minimum lease payments at the inception of the lease, whichever is lower. Lease payments under operating leases are recognized as an expense on a straight line basis in the statement of profit and loss over the lease term.
2 NOTES TO ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2016
Amounts in the financial statements are presented in crore, except for per equity share data and as otherwise stated. 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 period presentation.
2.1 SHARE CAPITAL
in crore, except as otherwise stated
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
Authorized | ||
Equity shares, 5/- par value | ||
240,00,00,000 (120,00,00,000) equity shares | 1,200 | 600 |
Issued, Subscribed and Paid-Up | ||
Equity shares, 5/- par value (1) | 1,148 | 574 |
229,69,44,664 (114,84,72,332) equity shares fully paid-up | ||
1,148 | 574 |
Forfeited shares amounted to 1,500/- (1,500/-)
(1) | Refer note 2.32 for details of basic and diluted shares |
Effective January 1, 2015, Infosys Limited Employees' Welfare Trust ('The Trust') has been deconsolidated consequent to SEBI (Share Based Employee Benefits) Regulations, 2014 issued on October 28, 2014.
The Company has only one class of shares referred to as equity shares having a par value of 5/-. Each holder of equity shares is entitled to one vote per share.
The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.
In the period of five years immediately preceding March 31, 2016:
The Company has allotted 114,84,72,332 fully paid-up shares of face value 5/- each during the quarter ended June 30, 2015, pursuant to bonus issue approved by the shareholders through postal ballot. The book closure date fixed by the Board was June 17, 2015.
The Company has allotted 57,42,36,166 fully paid up equity shares of face value 5/- each during the quarter ended December 31, 2014 pursuant to a bonus issue approved by the shareholders through a postal ballot. The record date fixed by the Board of Directors was December 3, 2014.
For both the bonus issues, bonus share of one equity share for every equity share held, and a stock dividend of one American Depositary Share (ADS) for every ADS held, respectively, has been allotted. Consequently, the ratio of equity shares underlying the ADSs held by an American Depositary Receipt holder remains unchanged. Options granted under the restricted stock unit plan have been adjusted for bonus shares.
During the year ended March 31, 2015, the amount of dividend per share recognised as distribution to equity shareholder includes 29.50/- per share of final dividend (not adjusted for bonus shares on June 17, 2015) and 30/- per share of interim dividend (not adjusted for bonus shares of June 17, 2015 and December 3, 2014). The total dividend appropriation for the year ended March 31, 2015 amounted to 6,145 crore including corporate dividend tax of 1,034 crore.
The Board has increased dividend pay-out ratio from up to 40% to up to 50% of post-tax consolidated profits effective fiscal 2015.
The Board of Directors, in their meeting on October 12, 2015, declared an interim dividend of 10/- per equity share. Further the Board of Directors, in its meeting on April 15, 2016, have proposed a final dividend of 14.25/- per equity share for the financial year ended March 31, 2016. The proposal is subject to the approval of shareholders at the Annual General Meeting to be held on June 18, 2016. The total dividend appropriation for the year ended March 31, 2016 amounted to 6,704 crore including corporate dividend tax of 1,134 crore.
The Central Government in consultation with National Advisory Committee on Accounting Standards has amended Companies (Accounting Standards) Rules, 2006 (‘principal rules’), vide notification issued by Ministry of Corporate Affairs dated March 30, 2016. The Companies (Accounting Standards) Rules, 2016 is effective March 30, 2016. According to the amended rules, the above mentioned proposed dividend will not be recorded as a liability as at March 31, 2016. (Refer Para 8.5 of AS-4 – Contingencies and Events occurring after Balance Sheet date). The Company believes, based on a legal opinion, that the Rule 3(2) of the principal rules has not been withdrawn or replaced and accordingly, the Companies (Accounting Standards) Rule, 2016 will apply for the accounting periods commencing on or after March 30, 2016. Therefore the Company has recorded 3,939 crore as liability for proposed dividends (including corporate dividend tax) as at March 31, 2016.
In the event of liquidation of the Company, the holders of equity shares will be entitled to receive any of the remaining assets of the Company in proportion to the number of equity shares held by the shareholders, after distribution of all preferential amounts.
The details of shareholder holding more than 5% shares as at March 31, 2016 and March 31, 2015 are set out below :
Name of the shareholder | As at March 31, 2016 | As at March 31, 2015 | ||
No. of shares | % held | No. of shares | % held | |
Deutsche Bank Trust Company Americas (Depository of ADR's - legal ownership) | 38,53,17,937 | 16.78 | 18,60,73,981 | 16.20 |
Life Insurance Corporation of India | 13,22,74,300 | 5.76 | 5,52,74,758 | 4.81 |
The reconciliation of the number of shares outstanding and the amount of share capital as at March 31, 2016 and March 31, 2015 is set out below:
Particulars | As at March 31, 2016 | As at March 31, 2015 | ||
Number of shares | Amount ( crore) | Number of shares | Amount ( crore) | |
Number of shares at the beginning of the period | 114,84,72,332 | 574 | 57,14,02,566 | 286 |
Add: Bonus shares issued (Including bonus on treasury shares) | 114,84,72,332 | 574 | 57,42,36,166 | 287 |
Add: Treasury shares on account of deconsolidation of trust | – | – | 28,33,600 | 1 |
Number of shares at the end of the period | 229,69,44,664 | 1,148 | 114,84,72,332 | 574 |
Stock Option Plan:
2015 Stock Incentive Compensation Plan (the 2015 Plan): SEBI issued the Securities and Exchange Board of India (Share based Employee Benefits) Regulations, 2014 (‘SEBI Regulations’) which replaced the SEBI ESOP Guidelines, 1999. The 2011 Plan (as explained below) was required to be amended and restated in accordance with the SEBI Regulations. Consequently, to effect this change and to further introduce stock options/ADR’s and other stock incentives, the Company put forth the 2015 Stock Incentive Compensation Plan (the 2015 Plan) for approval to the shareholders of the Company. Pursuant to the approval by the shareholders through postal ballot which ended on March 31, 2016, the Board of Directors have been authorised to introduce, offer, issue and allot share-based incentives to eligible employees of the Company and its subsidiaries under the 2015 Plan. The maximum number of shares under the 2015 plan shall not exceed 2,40,38,883 equity shares(this includes 1,12,23,576 equity shares which are currently held by the Trust towards the 2011 Plan). 1,70,38,883 equity shares will be issued as RSUs at par value and 70,00,000 equity shares will be issued as stock options at market price. These instruments will vest over a period of 4 years and the Company expects to grant the instruments under the 2015 Plan over the period of 4 to 7 years.
2011 RSU Plan (the 2011 Plan): The Company had a 2011 RSU Plan which provided for the grant of restricted stock units (RSUs) to eligible employees of the Company. The Board of Directors recommended the establishment of the 2011 Plan to the shareholders on August 30, 2011 and the shareholders approved the recommendation of the Board of Directors on October 17, 2011 through a postal ballot. The maximum aggregate number of shares that may be awarded under the plan was 1,13,34,400 and the plan was expected to continue in effect for a term of 10 years from the date of initial grant under the plan. During the year ended March 31, 2015, the company made a grant of 108,268 restricted stock units (adjusted for bonus issues) to Dr. Vishal Sikka, Chief Executive Office and Managing Director. The Board in its meeting held on June 22, 2015, on recommendation of Nomination and Remuneration Committee, further granted 1,24,061 RSUs to Dr. Vishal Sikka. These RSUs are vesting over a period of four years from the date of the grant in the proportions specified in the award agreement. The RSUs will vest subject to achievement of certain key performance indicators as set forth in the award agreement for each applicable year of the vesting tranche and continued employment through each vesting date. Further the Company has earmarked 100,000 equity shares for welfare activities of the employees, approved by the shareholders vide postal ballot which ended on March 31, 2016. The equity shares currently held under this plan, i.e. 1,12,23,576 equity shares (this includes the aggregate number of equity shares that may be awarded under the 2011 Plan as reduced by 10,824 equity shares already exercised by Dr. Vishal Sikka and 100,000 equity shares which have been earmarked for welfare activities of the employees) have been subsumed under the 2015 Plan.
Further , the award granted to Dr. Vishal Sikka on June 22, 2015 was modified by the Nomination and remuneration committee on April 14, 2016. There is no modification or change in the total number of RSUs granted or the vesting period (which is four years). The modifications relate to the criteria of vesting for each of the years. Based on the modification, the first tranche of the RSUs will vest subject to achievement of certain key performance indicators for the year ended March 31, 2016. Subsequent vesting of RSU's for each of the remaining years would be subject to continued employment.
In accordance with the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014, the excess of the closing market price on the grant date of the RSUs over the exercise price is amortized on a straight-line basis over the vesting period.
The activity in the 2011 Plan during the quarter and year ended March 31, 2016 is set out below:
Particulars | Year ended March 31, 2016 | Year ended March 31, 2015 | ||
Shares arising out of options | Weighted average exercise price () | Shares arising out of options | Weighted average exercise price () | |
2011 Plan: | ||||
Outstanding at the beginning | 1,08,268 | 5 | – | – |
Granted* | 1,24,061 | 5 | 1,08,268 | 5 |
Forfeited and expired | – | – | – | – |
Exercised* | 10,824 | 5 | – | – |
Outstanding at the end | 2,21,505 | 5 | 1,08,268 | 5 |
Exercisable at the end | – | – | – | – |
* | adjusted for bonus issues |
The weighted average share price of options exercised under the 2011 Plan on the date of exercise was 1,088/-
The weighted average remaining contractual life of RSUs outstanding as of March 31, 2016 and March 31, 2015 under the 2011 Plan was 1.98 years and 2.39 years.
The differential on stock compensation expense if the ‘fair value’ of the RSU's on the date of the grant were considered instead of the ‘intrinsic value’ is less than 1 crore for each of the year ended March 31, 2016 and March 31, 2015. Consequently, there is no impact on earnings per share.
The fair value for the above impact analysis is estimated on the date of grant using the Black-Scholes-Merton model with the following assumptions:
Options granted during | Fiscal 2016 | Fiscal 2015 |
Grant date | 22-Jun-15 | 21-Aug-14 |
Weighted average share price ()* | 1,024 | 3,549 |
Exercise price ()* | 5 | 5 |
Expected volatility (%) | 28-36 | 30 - 37 |
Expected life of the option (years) | 1 - 4 | 1 - 4 |
Expected dividends (%) | 2.43 | 1.84 |
Risk-free interest rate (%) | 7- 8 | 8 - 9 |
Weighted average fair value as on grant date ()* | 948 | 3,355 |
* | Data for Fiscal 2015 is not adjusted for bonus issues |
The expected term of an RSU is estimated based on the vesting term and contractual term of the RSU, as well as expected exercise behaviour of the employee who receives the RSU. Expected volatility during the expected term of the RSU is based on historical volatility of the observed market prices of the Company's publicly traded equity shares during a period equivalent to the expected term of the RSU.
During the year ended March 31, 2016, the Company recorded an employee compensation expense of 7 crore in the statement of profit and loss (2 crore during the year ended March 31, 2015)
2.2 RESERVES AND SURPLUS
in crore
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
Capital reserve - Opening balance | 54 | 54 |
Add: Transferred from Surplus | – | – |
54 | 54 | |
Securities premium account - Opening balance | 2,778 | 3,069 |
Less: Deconsolidation of trust (Refer note 2.1) | – | 4 |
Less: Amount utilized for issuance of bonus shares (Refer note 2.1) | 574 | 287 |
Add: Exercise of stock options | 1 | – |
2,205 | 2,778 | |
Stock Options Outstanding- Opening balance (Refer note 2.1) | 2 | – |
Additions during the period | 7 | 2 |
Less: Exercise of stock options | 1 | – |
8 | 2 | |
General reserve - Opening balance | 9,508 | 8,291 |
Add: Transferred from Surplus | 1,579 | 1,217 |
11,087 | 9,508 | |
Special Economic Zone Re-investment Reserve- Opening balance (1) | – | – |
Add: Transferred from Surplus | 591 | – |
Less: Transferred to Surplus on utilization | 591 | – |
Special Economic Zone Re-investment Reserve- Closing balance | – | – |
Surplus - Opening balance | 35,152 | 30,392 |
Add: Net profit after tax transferred from Statement of Profit and Loss | 15,786 | 12,164 |
Less: Deconsolidation of trust, net (Refer note 2.1) | – | 42 |
Add: Transfer from Special Economic Zone Re-investment Reserve on utilization | 591 | – |
Amount available for appropriation | 51,529 | 42,514 |
Appropriations: | ||
Interim dividend | 2,297 | 1,723 |
Final dividend | 3,273 | 3,388 |
Total dividend | 5,570 | 5,111 |
Dividend tax | 1,134 | 1,034 |
Amount transferred to general reserve | 1,579 | 1,217 |
Amount transferred to Special Economic Zone Re-investment Reserve | 591 | – |
Surplus- Closing Balance | 42,655 | 35,152 |
56,009 | 47,494 |
(1) | The Special Economic Zone Re-investment Reserve has been created out of the profit of eligible SEZ units in terms of the provisions of Sec 10AA(1)(ii) of Income Tax Act,1961. The reserve should be utilized by the Company for acquiring new plant and machinery for the purpose of its business in the terms of the Sec 10AA(2) of the Income Tax Act, 1961. |
2.3 DEFERRED TAXES
in crore
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
Deferred tax assets | ||
Fixed assets | 146 | 210 |
Trade receivables | 79 | 100 |
Compensated absences | 359 | 280 |
Computer software | 50 | 51 |
Accrued compensation to employees | 46 | 29 |
Post sales client support | 76 | 72 |
Others | 21 | 7 |
777 | 749 | |
Deferred tax liabilities | ||
Branch profit tax | 334 | 316 |
Others | 38 | – |
372 | 316 | |
Deferred tax assets after set-off | 405 | 433 |
Deferred tax liabilities after set-off | – | – |
Deferred tax assets and deferred tax liabilities have been offset wherever the Company has a legally enforceable right to set-off current tax assets against current tax liabilities and where the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority.
As at March 31, 2016 and March 31, 2015, the Company has provided for branch profit tax of 334 crore and 316 crore, respectively, for its overseas branches, as the Company estimates that these branch profits would be distributed in the foreseeable future. The change in provision for branch profit tax includes 18 crore movement on account of exchange rate during the year ended March 31, 2016.
2.4 OTHER LONG-TERM LIABILITIES
in crore
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
Others | ||
Gratuity obligation - unamortized amount relating to plan amendment (refer note 2.29) | – | 3 |
Payable for acquisition of business (refer note 2.10.1 & 2.10.2) | 46 | – |
Rental deposits received from subsidiary (refer note 2.26) | 27 | 27 |
73 | 30 |
2.5 TRADE PAYABLES
in crore
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
Trade payables | ||
Total outstanding dues of micro enterprises and small enterprises | – | – |
Total outstanding dues of creditors other than micro enterprises and small enterprises* | 623 | 124 |
623 | 124 | |
*Includes dues to subsidiaries (refer note 2.26) | 145 | 102 |
As at March 31, 2016, there are no outstanding dues to micro and small enterprises (less than 1 crore as at March 31, 2015). There are no interests due or outstanding on the same.
2.6 OTHER CURRENT LIABILITIES
in crore
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
Accrued salaries and benefits | ||
Salaries and benefits | 992 | 1,144 |
Bonus and incentives | 772 | 575 |
Unearned revenue | 1,025 | 831 |
Unpaid dividends | 5 | 3 |
Other liabilities | ||
Provision for expenses(1) | 1,707 | 1,582 |
Retention monies | 58 | 50 |
Withholding and other taxes payable | 1,068 | 733 |
Gratuity obligation - unamortized amount relating to plan amendment, current (refer note 2.29) | 4 | 4 |
Other payables(2) | 370 | 79 |
Advances received from clients | 16 | 20 |
Mark-to-market forward and options contracts | 2 | – |
Payable for acquisition of business (refer note 2.10.1 and 2.10.2) | 86 | 525 |
6,105 | 5,546 | |
(1) Includes dues to subsidiaries (refer note 2.26) | 29 | 36 |
(2) Includes dues to subsidiaries (refer note 2.26) | 38 | 33 |
2.7 SHORT-TERM PROVISIONS
in crore
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
Provision for employee benefits | ||
Compensated absences | 1,130 | 907 |
Other Provisions | ||
Proposed dividend | 3,273 | 3,388 |
Tax on dividend | 666 | 690 |
Income taxes (net of advance tax and Tax Deducted at Source) | 3,304 | 2,678 |
Post-sales client support and warranties and others | 436 | 382 |
8,809 | 8,045 |
Provision for post-sales client support and warranties and other provisions
The movement in the provision for post-sales client support and warranties and other provisions is as follows :
in crore
Particulars | Year ended | |
March 31, 2016 | March 31, 2015 | |
Balance at the beginning | 382 | 325 |
Provision recognized/(reversed) | 82 | 134 |
Provision utilised | (49) | (78) |
Exchange difference during the period | 21 | 1 |
Balance at the end | 436 | 382 |
Provision for post-sales client support and other provisions are expected to be utilized over a period of 6 months to 1 year.
2.8 FIXED ASSETS
Following are the changes in the carrying value of fixed assets for the year ended March 31, 2016:
in crore, except as otherwise stated
Tangible assets | Intangible assets | Total | ||||||||||
Particulars | Land-Freehold | Land- Leasehold | Buildings (1)(2) | Plant and Machinery (2) | Office equipment (2) | Computer equipment (2)(3) | Furniture and fixtures (2) | Vehicles | Total | Intellectual property rights | Total | |
Original cost | ||||||||||||
As at April 1, 2015 | 929 | 621 | 5,733 | 1,361 | 525 | 2,812 | 832 | 14 | 12,827 | 42 | 42 | 12,869 |
Additions/Adjustments during the period | 41 | 17 | 440 | 319 | 155 | 945 | 241 | 5 | 2,163 | – | – | 2,163 |
Deductions/ Retirement during the period | – | – | – | (1) | (1) | (276) | (3) | – | (281) | (12) | (12) | (293) |
As at March 31, 2016 | 970 | 638 | 6,173 | 1,679 | 679 | 3,481 | 1,070 | 19 | 14,709 | 30 | 30 | 14,739 |
Depreciation and amortization | ||||||||||||
As at April 1, 2015 | – | 16 | 1,937 | 838 | 280 | 1,852 | 549 | 8 | 5,480 | 42 | 42 | 5,522 |
For the period | – | 5 | 213 | 207 | 90 | 472 | 125 | 3 | 1,115 | – | – | 1,115 |
Deductions/ Adjustments during the period+B35 |
– | – | – | (1) | (1) | (129) | (3) | – | (134) | (12) | (12) | (146) |
As at March 31, 2016 | – | 21 | 2,150 | 1,044 | 369 | 2,195 | 671 | 11 | 6,461 | 30 | 30 | 6,491 |
Net book value | ||||||||||||
As at March 31, 2016 | 970 | 617 | 4,023 | 635 | 310 | 1,286 | 399 | 8 | 8,248 | – | – | 8,248 |
Notes: | (1) | Buildings include 250/- being the value of 5 shares of 50/- each in Mittal Towers Premises Co-operative Society Limited. |
(2) | Includes certain assets provided on cancellable operating lease to subsidiaries | |
(3) | During the year ended March 31, 2016, computer equipment having net book value of 20 crore was transferred to EdgeVerve (Refer note 2.10.5 |
Following are the changes in the carrying value of fixed assets for the year ended March 31, 2015:
in crore, except as otherwise stated
Tangible assets | Intangible assets | Total | ||||||||||
Particulars | Land-Freehold | Land- Leasehold | Buildings (1)(2) | Plant and Machinery (2) | Office equipment (2) | Computer equipment (2) (3) | Furniture and fixtures (2) | Vehicles | Total | Intellectual property rights | Total | |
Original cost | ||||||||||||
As at April 1, 2014 | 781 | 349 | 4,878 | 1,090 | 393 | 2,178 | 679 | 13 | 10,361 | 59 | 59 | 10,420 |
Additions/ Adjustments during the year |
148 | 272 | 855 | 274 | 134 | 694 | 160 | 3 | 2,540 | – | – | 2,540 |
Deductions/ Retirement during the year | – | – | – | (3) | (2) | (60) | (7) | (2) | (74) | (17) | (17) | (91) |
As at March 31, 2015 | 929 | 621 | 5,733 | 1,361 | 525 | 2,812 | 832 | 14 | 12,827 | 42 | 42 | 12,869 |
Depreciation and amortization | ||||||||||||
As at April 1, 2014 | – | – | 1,754 | 671 | 215 | 1,554 | 441 | 7 | 4,642 | 46 | 46 | 4,688 |
For the period | – | 16 | 183 | 169 | 67 | 350 | 113 | 2 | 900 | 13 | 13 | 913 |
Deductions/ Adjustments during the year | – | – | – | (2) | (2) | (52) | (5) | (1) | (62) | (17) | (17) | (79) |
As at March 31, 2015 | – | 16 | 1,937 | 838 | 280 | 1,852 | 549 | 8 | 5,480 | 42 | 42 | 5,522 |
Net book value | ||||||||||||
As at March 31, 2015 | 929 | 605 | 3,796 | 523 | 245 | 960 | 283 | 6 | 7,347 | – | – | 7,347 |
Notes: | (1) | Buildings include 250/- being the value of 5 shares of 50/- each in Mittal Towers Premises Co-operative Society Limited. |
(2) | Includes certain assets provided on cancellable operating lease to subsidiaries | |
(3) | During the year ended March 31, 2015, computer equipment having net book value of 8 crore was transferred to EdgeVerve (Refer note 2.10.5) |
During the quarter ended June 30, 2014, the management based on internal and external technical evaluation had changed the useful life of certain assets primarily consisting of buildings and computers with effect from April 1, 2014. Accordingly, the useful lives of certain assets required a change from previous estimate.
The Company has entered into lease-cum-sale agreements to acquire certain properties. In accordance with the terms of some of these agreements, the Company has the option to purchase or renew the properties on expiry of the lease period.
Tangible assets provided on operating lease to subsidiaries as at March 31, 2016 and March 31, 2015 are as follows:
in crore
Particulars | Cost | Accumulated depreciation | Net book value |
Buildings | 197 | 75 | 122 |
98 | 35 | 63 | |
Plant and machinery | 33 | 14 | 19 |
12 | 3 | 9 | |
Furniture and fixtures | 25 | 12 | 13 |
11 | 2 | 9 | |
Computer Equipment | 3 | 2 | 1 |
– | – | – | |
Office equipment | 18 | 7 | 11 |
6 | 1 | 5 |
The aggregate depreciation charged on the above assets during the year ended March 31, 2016 amounted to 19 crore (9 crore for the year ended March 31, 2015).
The rental income from subsidiaries for the year ended March 31, 2016 amounted to 51 crore ( 40 crore for the year ended March 31, 2015).
2.9 LEASES
Obligations on long-term, non-cancellable operating leases
The lease rentals charged during the period and the obligations on long-term, non-cancellable operating leases payable as per the rentals stated in the respective agreements are as follows:
in crore
Particulars | Year ended March 31, | |
2016 | 2015 | |
Lease rentals recognized during the period | 175 | 158 |
in crore
As at | ||
Lease obligations payable | March 31, 2016 | March 31, 2015 |
Within one year of the balance sheet date | 170 | 101 |
Due in a period between one year and five years | 417 | 284 |
Due after five years | 315 | 158 |
The operating lease arrangements, are renewable on a periodic basis and for most of the leases extend upto a maximum of ten years from their respective dates of inception and relates to rented premises. Some of these lease agreements have price escalation clauses.
2.10 INVESTMENTS
in crore, except as otherwise stated
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
Non-current investments | ||
Long term investments - at cost | ||
Trade (unquoted) | ||
Investments in equity instruments of subsidiaries | ||
Infosys BPO Limited | ||
3,38,22,319 (3,38,22,319) equity shares of 10/- each, fully paid | 659 | 659 |
Infosys Technologies (China) Co. Limited | 169 | 169 |
Infosys Technologies (Australia) Pty Limited | ||
1,01,08,869 (1,01,08,869) equity shares of AUD 0.11 par value, fully paid | 66 | 66 |
Infosys Technologies, S. de R.L. de C.V., Mexico | ||
17,49,99,990 (17,49,99,990) equity shares of MXN 1 par value, fully paid up | 65 | 65 |
Infosys Technologies (Sweden) AB | ||
1,000 (1,000) equity shares of SEK 100 par value, fully paid | – | – |
Infosys Technologia do Brasil Ltda | ||
5,91,24,348 (5,91,24,348) shares of BRL 1.00 par value, fully paid | 149 | 149 |
Infosys Technologies (Shanghai) Company Limited | 646 | 388 |
Infosys Public Services, Inc. | ||
3,50,00,000 (3,50,00,000) shares of USD 0.50 par value, fully paid | 99 | 99 |
Infosys Consulting Holding AG (formerly Lodestone Holding AG) (refer note 2.10.6) | ||
23,350 (23,350) - Class A shares of CHF 1,000 each and 29,400 | 1,323 | 1,323 |
(29,400) - Class B Shares of CHF 100 each, fully paid up | ||
Infosys Americas Inc. | ||
10,000 (10,000) shares of USD 10 per share, fully paid up | 1 | 1 |
EdgeVerve Systems Limited (refer note 2.10.5) | ||
131,18,40,000 (46,18,39,994) equity shares of 10/- each, fully paid | 1,312 | 462 |
Panaya Inc. (refer note 2.10.4) | ||
2 (2) shares of USD 0.01 per share, fully paid up | 1,398 | 1,398 |
Infosys Nova Holdings LLC (refer note 2.10.3) | 94 | 94 |
Kallidus Inc. (refer note 2.10.2) | ||
10,21,35,416 (Nil) shares | 647 | – |
Skava Systems Private Limited (refer note 2.10.2) | ||
25,000 (Nil) shares of 10 per share, fully paid up | 59 | – |
Noah Consulting LLC ( refer note 2.10.1) | 249 | – |
6,936 | 4,873 | |
Investment in debentures | ||
EdgeVerve Systems Limited (refer note 2.10.5) | ||
25,49,00,000 (Nil) Unsecured redeemable, non-convertible debentures of 100 each fully paid up | 2,549 | – |
9,485 | 4,873 | |
Others (unquoted) (refer note 2.10.7) | ||
Investments in preferred stock | 92 | – |
Investments in equity instruments | 7 | 7 |
Less: Provision for investments | 6 | 6 |
93 | 1 | |
Others (quoted) | ||
Investments in tax free bonds (refer note 2.10.8) | 1,533 | 1,234 |
1,533 | 1,234 | |
Total non-current investments | 11,111 | 6,108 |
Current investments – at the lower of cost and fair value | ||
Other current investments | ||
Unquoted | ||
Liquid mutual fund units (refer note 2.10.9) | – | 749 |
– | 749 | |
Quoted | ||
Investments in government bonds (refer note 2.10.8) | 2 | – |
2 | – | |
Total current investments | 2 | 749 |
Total investments | 11,113 | 6,857 |
Aggregate amount of quoted investments excluding interest accrued but not due of 55 crore as at March 31, 2016 (46 crore as at March 31, 2015) included under Note 2.15 Short term Loans and advances. | 1,535 | 1,234 |
Market value of quoted investments | 1,627 | 1,269 |
Aggregate amount of unquoted investments | 9,584 | 5,629 |
Aggregate amount of provision made for non-current unquoted investments | 6 | 6 |
2.10.1 Investment in Noah Consulting LLC
On November 16, 2015, Infosys has acquired 100% membership interest in Noah Consulting , LLC , a leading provider of advanced information management consulting services for the oil and gas industry. The business acquisition was conducted by entering into a share purchase agreement for cash consideration of $33 million ( approximately 216 crore), contingent consideration up to $5 million (approximately 33 crore on acquisition date) and retention bonus up to $32 million (approximately 212 crore on acquisition date). The payment of contingent consideration to the sellers of Noah was dependent upon the achievement of certain financial targets by Noah for the year ended December 31, 2015 and December 31, 2016. During the quarter ended March 31, 2016 based on the assessment of Noah achieving the targets for the respective periods, the entire contingent consideration was reversed.
2.10.2 Investment in Kallidus Inc. & Skava Systems Pvt. Ltd.
On June 2, 2015, Infosys acquired 100% of the voting interests in Kallidus Inc., (d.b.a Skava) (Kallidus), a leading provider of digital experience solutions, including mobile commerce and in-store shopping experiences to large retail clients and 100% of the voting interests of Skava Systems Private Limited, India, an affiliate of Kallidus. The business acquisition was conducted by entering into a share purchase agreement for cash consideration of $91 million (approximately 578 crore) and a contingent consideration of upto $20 million (approximately 128 crore on acquisition date), the payment of which is dependent upon the achievement of certain financial targets by Kallidus over a period of 3 years ending on December 31, 2017.
2.10.3 Investment in DWA Nova LLC
During the year ended March 31, 2015, Infosys Nova Holdings LLC acquired 20% of the equity interests in DWA Nova LLC for a cash consideration of 94 crore. The Company has made this investment to form a new company along with Dream Works Animation (DWA). The new company, DWA Nova LLC, will develop and commercialize image generation technology in order to provide end-to-end digital manufacturing capabilities for companies involved in the design, manufacturing, marketing or distribution of physical consumer products.
As of March 31, 2016, Infosys Nova Holdings holds 16% of the equity interest in DWA Nova LLC.
2.10.4 Investment in Panaya Inc.
On March 5, 2015, Infosys acquired 100% of the voting interests in Panaya Inc. (Panaya), a Delaware Corporation in the United States. Panaya is a leading provider of automation technology for large scale enterprise and software management. The business acquisition was conducted by entering into a share purchase agreement for cash consideration of 1,398 crore.
2.10.5 Investment in EdgeVerve Systems Limited
On February 14, 2014, a wholly owned subsidiary EdgeVerve Systems Limited (EdgeVerve) was incorporated. EdgeVerve was created to focus on developing and selling products and platforms. The Company has undertaken an enterprise valuation by an independent valuer and accordingly the business has been transferred for a consideration of 421 crore with effect from July 1, 2014. Net assets amounting to 9 crore have also been transferred and accordingly a gain of 412 crore has been recorded as an exceptional item. The consideration has been settled through the issue of fully paid up equity shares in EdgeVerve.
On April 24, 2015, the Board of Directors of Infosys has authorized the Company to execute a Business Transfer Agreement and related documents with EdgeVerve, to transfer the business of Finacle and Edge Services. Post the requisite approval from shareholders through postal ballot on June 4, 2015, a Business Transfer Agreement and other related documents were executed with EdgeVerve to transfer the business with effect from August 1, 2015. The Company has undertaken an enterprise valuation by an independent valuer and accordingly the business were transferred for a consideration of 3,222 crore and 177 crore for Finacle and Edge Services, respectively. Net assets amounting to 363 crore, (including working capital amounting to 337 crore) have been transferred and accordingly a gain of 3,036 crore has been recorded as an exceptional item. The consideration was settled through issue of 85,00,00,000 equity shares amounting to 850 crore and 25,49,00,000 non-convertible redeemable debentures amounting to 2,549 crore in EdgeVerve, post the requisite approval from shareholders on December 11, 2015.
2.10.6 Investment in Infosys Consulting Holding AG (Formerly Lodestone Holding AG)
On October 22, 2012, Infosys acquired 100% of the outstanding share capital of Infosys Consulting Holding AG, a global management consultancy firm headquartered in Zurich, Switzerland. The acquisition was executed through a share purchase agreement for an upfront cash consideration of 1,187 crore and a deferred consideration of upto 608 crore.
The deferred consideration is payable to the selling shareholders of Lodestone on the third anniversary of the acquisition date and is contingent upon their continued employment for a period of three years. The investment in Lodestone has been recorded at the acquisition cost and the deferred consideration is being recognised on a proportionate basis over a period of three years from the date of acquisition. During the quarter ended December 31, 2015, the liability towards deferred consideration was settled.
An amount of 110 crore and 219 crore, representing the proportionate charge of the deferred consideration has been recognised as an expense during the year ended March 31, 2016 and March 31, 2015 respectively.
2.10.7 Details of Investments
The details of non-current other investments in preferred stock and equity instruments as at March 31, 2016 and March 31, 2015 are as follows:
in crore
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
Preferred Stock | ||
Airviz Inc. | ||
2,82,279 (Nil) Series A Preferred Stock, fully paid up, par value USD 0.001 each | 13 | – |
ANSR Consulting | ||
52,631 (Nil) Series A Preferred Stock, fully paid up, par value USD 0.001 each | 9 | – |
Whoop Inc | ||
16,48,352 (Nil) Series B Preferred Stock, fully paid up, par value USD 0.0001 each | 20 | – |
CloudEndure Ltd. | ||
12,79,645 (Nil) Preferred Series B Shares, fully paid up, par value ILS 0.01 each | 13 | – |
Nivetti Systems Private Limited | ||
2,28,501 (Nil) Preferred Stock, fully paid up, par value 1 each | 10 | – |
Waterline Data Science, Inc | ||
39,33,910 (Nil) Preferred Series B Shares, fully paid up, par value USD 0.00001 each | 27 | – |
Equity Instrument | ||
OnMobile Systems Inc., USA | ||
21,54,100 (21,54,100) common stock at USD 0.4348 each\, fully paid up, par value USD 0.001 each | 4 | 4 |
Merasport Technologies Private Limited | ||
2,420 (2,420) equity shares at 8,052/- each, fully paid up, par value 10/- each | 2 | 2 |
Global Innovation and Technology Alliance | ||
15,000 (10,000) equity shares at 1,000/- each, fully paid up, par value 1,000/- each | 1 | 1 |
99 | 7 | |
Less: Provision for investment | 6 | 6 |
93 | 1 |
2.10.8 Details of Investments in tax free bonds
The balances held in tax free bonds as at March 31, 2016 and March 31, 2015 is as follows:
in crore
Particulars | Face Value | As at March 31, 2016 | As at March 31, 2015 | ||
Units | Amount | Units | Amount | ||
7.18% Indian Railway Finance Corporation Limited Bonds 19FEB2023 | 1,000/- | 20,00,000 | 201 | 20,00,000 | 201 |
7.34% Indian Railway Finance Corporation Limited Bonds 19FEB2028 | 1,000/- | 21,00,000 | 211 | 21,00,000 | 211 |
7.93% Rural Electrification Corporation Limited Bonds 27MAR2022 | 1,000/- | 2,00,000 | 21 | 2,00,000 | 21 |
8.26% India Infrastructure Finance Company Limited Bonds 23AUG28 | 10,00,000/- | 1,000 | 100 | 1,000 | 100 |
8.30% National Highways Authority of India Bonds 25JAN2027 | 1,000/- | 5,00,000 | 53 | 5,00,000 | 53 |
8.35% National Highways Authority of India Bonds 22NOV2023 | 10,00,000/- | 1,500 | 150 | 1,500 | 150 |
8.46% India Infrastructure Finance Company Limited Bonds 30AUG2028 | 10,00,000/- | 2,000 | 200 | 2,000 | 200 |
8.46% Power Finance Corporation Limited Bonds 30AUG2028 | 10,00,000/- | 1,500 | 150 | 1,500 | 150 |
8.48% India Infrastructure Finance Company Limited Bonds 05SEP2028 | 10,00,000/- | 450 | 45 | 450 | 45 |
8.54% Power Finance Corporation Limited Bonds 16NOV2028 | 1,000/- | 5,00,000 | 50 | 5,00,000 | 50 |
7.28% National Highways Authority of India Bonds 18SEP30 | 10,00,000/- | 2,000 | 200 | – | – |
8.10% Indian Railway Finance Corporation Limited Bonds 23FEB2027 | 1,000/- | 5,00,000 | 53 | 5,00,000 | 53 |
7.28% Indian Railway Finance Corporation Limited 21DEC30 | 1,000/- | 4,22,800 | 42 | – | – |
7.35% National Highways Authority of India Bonds 11JAN31 | 1,000/- | 5,71,396 | 57 | – | – |
68,02,646 | 1,533 | 58,06,450 | 1,234 |
The balances held in government bonds as at March 31, 2016 and March 31, 2015 is as follows:
in crore
Particulars | Face Value PHP | As at March 31, 2016 | As at March 31, 2015 | ||
Units | Amount | Units | Amount | ||
Fixed Rate Treasury Notes 7.00 PCT PIBD0716A488 MAT Date 27 Jan 2016 | 100 | – | – | 10,000 | – |
Fixed Rate Treasury Notes 1.70 PCT PHY6972FW G18 MAT Date 22 Feb 2017 | 100 | 1,50,000 | 2 | – | – |
1,50,000 | 2 | 10,000 | – |
2.10.9 Details of Investments in liquid mutual fund units
The balances held in liquid mutual fund units as at March 31, 2015 is as follows:
in crore
Particulars | Units | Amount | |
IDFC Cash Fund - Direct Plan Daily Dividend | 29,30,197 | 293 | |
Reliance Liquid Fund - Treasury Plan - Direct Plan Daily Dividend Option | 9,81,551 | 150 | |
SBI Premier Liquid Fund - Direct Plan Daily Dividend | 9,97,094 | 100 | |
ICICI Liquid Plan - Direct Plan Daily Dividend | 2,05,44,807 | 206 | |
2,54,53,649 | 749 |
2.11 LONG-TERM LOANS AND ADVANCES
in crore
Particulars | As at | ||
|
March 31, 2016 | March 31, 2015 | |
Unsecured, considered good | |||
Capital advances | 333 | 316 | |
Security deposits | 73 | 65 | |
Rental deposits (1) | 119 | 45 | |
Other loans and advances | |||
Advance income taxes (net of provisions) | 5,020 | 3,941 | |
Prepaid expenses | 87 | 7 | |
Deferred Contract Cost | 333 | – | |
Loans and advances to employees | 5 | 4 | |
5,970 | 4,378 | ||
Unsecured, considered doubtful | |||
Loans and advances to employees | 13 | 10 | |
5,983 | 4,388 | ||
Less: Provision for doubtful loans and advances to employees | 13 | 10 | |
5,970 | 4,378 | ||
(1) Includes deposits with subsidiaries (refer note 2.26) | 21 | 21 |
2.12 OTHER NON-CURRENT ASSETS
in crore
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
Others | ||
Advance to gratuity trust (refer note 2.29) | 2 | 26 |
2 | 26 |
2.13 TRADE RECEIVABLES (1)
in crore
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
Debts outstanding for a period exceeding six months | ||
Unsecured | ||
Considered doubtful | 176 | 162 |
Less: Provision for doubtful debts | 176 | 162 |
– | – | |
Other debts | ||
Unsecured | ||
Considered good(2) | 9,798 | 8,627 |
Considered doubtful | 73 | 160 |
9,871 | 8,787 | |
Less: Provision for doubtful debts | 73 | 160 |
9,798 | 8,627 | |
9,798 | 8,627 | |
(1) Includes dues from companies where directors are interested | 1 | 6 |
(2) Includes dues from subsidiaries (refer note 2.26) | 244 | 309 |
2.14 CASH AND CASH EQUIVALENTS
in crore
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
Cash on hand | – | – |
Balances with banks | ||
In current and deposit accounts | 24,276 | 23,722 |
Others | ||
Deposits with financial institution | 4,900 | 4,000 |
29,176 | 27,722 | |
Balances with banks in unpaid dividend accounts | 5 | 3 |
Deposit accounts with more than 12 months maturity | 237 | 182 |
Balances with banks held as margin money deposits against guarantees | 336 | 185 |
Cash and cash equivalents as of March 31, 2016 and March 31, 2015 include restricted cash and bank balances of 341 crore and 188 crore, respectively. The restrictions are primarily on account of cash and bank balances held as margin money deposits against guarantees and unpaid dividends.
The deposits maintained by the Company with banks and financial institutions comprise of time deposits, which can be withdrawn by the Company at any point without prior notice or penalty on the principal.
The details of balances as on Balance Sheet dates with banks are as follows:
in crore
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
In current accounts | ||
ANZ Bank, Taiwan | 13 | 4 |
Bank of America, USA | 563 | 498 |
Citibank N.A., Australia | 24 | 10 |
Citibank N.A., India | 1 | 6 |
Citibank N.A., Dubai | 1 | 1 |
Citibank N.A., EEFC (U.S. Dollar account) | – | 2 |
Citibank N.A., Japan | 15 | 20 |
Citibank N.A., New Zealand | 2 | 3 |
Citibank N.A., South Africa | 4 | 2 |
Deutsche Bank, Philippines | 11 | 2 |
Deutsche Bank, India | 4 | 4 |
Deutsche Bank, EEFC (Euro account) | 17 | 2 |
Deutsche Bank, EEFC (GBP account) | 8 | 5 |
Deutsche Bank, EEFC (AUD account) | 2 | – |
Deutsche Bank, EEFC (U.S. Dollar account) | 95 | 7 |
Deutsche Bank, EEFC (CHF account) | 2 | 4 |
Deutsche Bank, Belgium | 59 | 13 |
Deutsche Bank, France | 10 | 2 |
Deutsche Bank, Germany | 17 | 8 |
Deutsche Bank, Netherlands | 4 | 1 |
Deutsche Bank, Russia (U.S. Dollar account) | 1 | – |
Deutsche Bank, Russia (Russian Ruble account) | 2 | – |
Deutsche Bank, Singapore | 4 | 5 |
Deutsche Bank, Spain | – | 1 |
Deutsche Bank, Switzerland | 1 | – |
Deutsche Bank, UK | 170 | 24 |
Deutsche Bank, Malaysia | 9 | – |
HSBC, Hong Kong | 1 | 44 |
ICICI Bank, India | 57 | 18 |
ICICI Bank, EEFC (U.S. Dollar account) | 10 | 9 |
Nordbanken, Sweden | 5 | 1 |
Punjab National Bank, India | 4 | 7 |
Royal Bank of Canada, Canada | 24 | 11 |
State Bank of India | 7 | 1 |
1,147 | 715 | |
In deposit accounts | ||
Allahabad Bank | – | 200 |
Andhra Bank | 848 | 97 |
Axis Bank | 1,170 | 1,415 |
Bank of Baroda | – | 2,314 |
Bank of India | – | 2,691 |
Canara Bank | 1,861 | 2,841 |
Central Bank of India | 1,518 | 1,303 |
Corporation Bank | 1,185 | 1,197 |
Development Bank of Singapore | – | 35 |
HDFC Bank | 2,500 | 2,017 |
ICICI Bank | 3,755 | 3,059 |
IDBI Bank | 1,750 | 706 |
Indusind Bank | 250 | 75 |
ING Vysya Bank | – | 100 |
Indian Overseas Bank | 1,000 | 573 |
Jammu & Kashmir Bank | 25 | – |
Kotak Mahindra Bank Limited | 492 | – |
Oriental Bank of Commerce | 1,967 | 1,500 |
Punjab National Bank | – | 512 |
State Bank of India | 2,310 | – |
Syndicate Bank | 1,250 | 327 |
Union Bank of India | 7 | 971 |
Vijaya Bank | 200 | 386 |
Yes Bank | 700 | 500 |
22,788 | 22,819 | |
In unpaid dividend accounts | ||
Axis Bank Limited-Unpaid Dividend Account | 2 | – |
HDFC Bank - Unpaid dividend account | 1 | 1 |
ICICI bank - Unpaid dividend account | 2 | 2 |
5 | 3 | |
In margin money deposits against guarantees | ||
Canara Bank | 132 | 128 |
ICICI Bank | 147 | – |
State Bank of India | 57 | 57 |
336 | 185 | |
Deposits with financial institution | ||
HDFC Limited | 4,900 | 4,000 |
4,900 | 4,000 | |
Total cash and cash equivalents as per Balance Sheet | 29,176 | 27,722 |
2.15 SHORT-TERM LOANS AND ADVANCES
in crore
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
Unsecured, considered good | ||
Loans to subsidiaries (refer note 2.26) | 91 | 24 |
Others | ||
Advances | ||
Prepaid expenses(3) | 209 | 71 |
Deferred Contract Cost | 48 | – |
For supply of goods and rendering of services | 58 | 60 |
Withholding and other taxes receivable | 1,650 | 1,253 |
Others(1) | 166 | 49 |
2,222 | 1,457 | |
Restricted deposits (refer note 2.33) | 1,154 | 1,039 |
Unbilled revenues(2) | 2,673 | 2,423 |
Interest accrued but not due | 696 | 433 |
Loans and advances to employees | ||
Housing and other loans | 54 | 53 |
Salary advances | 210 | 148 |
Security deposits | 1 | 1 |
Mark-to-market forward and options contracts | 109 | 94 |
Rental deposits | 2 | 6 |
7,121 | 5,654 | |
(1) Includes dues from subsidiaries (refer note 2.26) | 24 | 43 |
(2) Includes dues from subsidiaries (refer note 2.26) | 20 | 6 |
(3) Includes dues from subsidiaries (refer note 2.26) | 43 | – |
2.16 INCOME FROM SOFTWARE SERVICES AND PRODUCTS
in crore
Particulars | Year ended March 31, | |
2016 | 2015 | |
Income from software services | 53,334 | 45,658 |
Income from software products | 649 | 1,642 |
53,983 | 47,300 |
2.17 OTHER INCOME
in crore
Particulars | Year ended March 31, | |
2016 | 2015 | |
Interest received on deposits with banks and others | 2,506 | 2,592 |
Dividend received on investment in mutual fund units | 57 | 146 |
Gain on sale of investments | – | 10 |
Miscellaneous income, net | 276 | 64 |
Gains / (losses) on foreign currency, net | 170 | 525 |
3,009 | 3,337 |
2.18 EXPENSES
in crore
Particulars | Year ended March 31, | ||
2016 | 2015 | ||
Employee benefit expenses | |||
Salaries and bonus including overseas staff expenses | 27,551 | 24,509 | |
Contribution to provident and other funds | 547 | 519 | |
Employee stock compensation expense (Refer note 2.1) | 7 | 2 | |
Staff welfare | 101 | 85 | |
28,206 | 25,115 | ||
Cost of technical sub-contractors | |||
Technical sub-contractors - subsidiaries | 1,801 | 1,385 | |
Technical sub-contractors - others | 2,616 | 1,524 | |
4,417 | 2,909 | ||
Travel expenses | |||
Overseas travel expenses | 1,510 | 1,235 | |
Travelling and conveyance | 145 | 125 | |
1,655 | 1,360 | ||
Cost of software packages and others | |||
For own use | 663 | 797 | |
Third party items bought for service delivery to clients | 386 | 182 | |
1,049 | 979 | ||
Communication expenses | |||
Telephone charges | 214 | 247 | |
Communication expenses | 97 | 137 | |
311 | 384 |
in crore
Particulars | Year ended March 31, | |
2016 | 2015 | |
Other expenses | ||
Office maintenance | 480 | 361 |
Power and fuel | 179 | 185 |
Brand building | 178 | 94 |
Rent | 175 | 158 |
Rates and taxes, excluding taxes on income | 99 | 108 |
Repairs to building | 188 | 99 |
Repairs to plant and machinery | 85 | 70 |
Computer maintenance | 120 | 104 |
Consumables | 28 | 39 |
Insurance charges | 48 | 42 |
Provision for post-sales client support and warranties | 18 | 17 |
Commission to non-whole time directors | 8 | 8 |
Provision for bad and doubtful debts and advances | (45) | 145 |
Auditor's remuneration | ||
Statutory audit fees | 2 | 2 |
Other services | – | – |
Reimbursement of expenses | – | – |
Bank charges and commission | 4 | 8 |
Contributions towards Corporate Social Responsibility (refer note 2.34) | 202 | 243 |
Others | 140 | 293 |
1,909 | 1,976 |
2.19 TAX EXPENSE
in crore
Year ended March 31, | ||
2016 | 2015 | |
Current tax | ||
Income tax | 4,898 | 4,537 |
Deferred tax | 9 | 97 |
4,907 | 4,634 |
During the year ended March 31, 2016 and March 31, 2015, the Company had reversal (net of provisions) of 331 crore and 161 crore, respectively, pertaining to tax relating to prior years.
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 as per Indian Income Tax Act, 1961. Infosys' operations are conducted through Software Technology Parks('STPs') and Special Economic Zones ('SEZs'). Income from STPs were tax exempt for the first 10 years from the fiscal year in which the unit commences software development, or March 31, 2011 which ever is earlier. Income from SEZs Unit 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.
2.20 CONTINGENT LIABILITIES AND COMMITMENTS (TO THE EXTENT NOT PROVIDED FOR)
in crore
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
Contingent liabilities : | ||
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 | 29 | 22 |
Claims against the Company, not acknowledged as debts(1) | 188 | 167 |
[Net of amount paid to statutory authorities 4,386 crore (3,572 crore)] | ||
Commitments : | ||
Estimated amount of unexecuted capital contracts | 1,295 | 1,272 |
(net of advances and deposits) | ||
(1) | Claims against the company not acknowledged as debts for the year ended March 31, 2016 include demand from the Indian Income tax authorities for payment of tax of 4,135 crore (3,337 crore), including interest of 1,224 crore (964 crore) upon completion of their tax assessment for fiscal 2007, fiscal 2008, fiscal 2009, fiscal 2010 and fiscal 2011 (For the year ended March 31, 2015 - upon completion of their tax assessment for fiscal 2006, fiscal 2007, fiscal 2008, fiscal 2009 and fiscal 2010). These demands were paid to statutory tax authorities which includes 913 crore paid during the year ended March 31, 2016 consequent to demand from tax authorities in India for fiscal 2011 towards denial of certain tax benefits. The company has filed an appeal with the income tax appellate authorities. |
Demand for fiscal 2007, fiscal 2008 and fiscal 2009 includes disallowance of a portion of the deduction claimed by the company under Section 10A of the income Tax Act as 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. Demand for fiscal 2007, fiscal 2008, fiscal 2009, fiscal 2010 and fiscal 2011 also includes disallowance of portion of profit earned outside India from the STP units under section 10A of the Income Tax Act and disallowance of profits earned from SEZ units under section 10AA of the Income Tax Act. The matters for fiscal 2007, fiscal 2008 and fiscal 2009 are pending before the Commissioner of Income Tax (Appeals) Bangalore. The matter for fiscal 2010 and fiscal 2011 is pending before Hon’ble Income Tax Appellate Tribunal (ITAT) Bangalore. |
The company is contesting the demand and the management including its tax advisors believes that its position will likely be upheld in the appellate process. The management believes that the ultimate outcome of these proceedings will not have a material adverse effect on the Company's financial position and results of operations. |
2.21 DERIVATIVE INSTRUMENTS
The following table gives details in respect of outstanding foreign exchange forward and option contracts:
As at | ||||
March 31, 2016 | March 31, 2015 | |||
in million | in crore | in million | in crore | |
Forward contracts outstanding | ||||
In USD | 467 | 3,094 | 664 | 4,150 |
In Euro | 84 | 633 | 59 | 396 |
In GBP | 60 | 573 | 68 | 632 |
In AUD | 50 | 255 | 95 | 452 |
In CAD | – | – | 12 | 59 |
In SGD | – | – | 25 | 114 |
In CHF | 25 | 173 | – | – |
Options Outstanding | ||||
In USD | 125 | 828 | – | – |
In Euro | – | – | – | – |
5,556 | 5,803 |
As of March 31, 2016 and March 31, 2015, there were no net foreign currency exposures that are not hedged by a derivative instrument or otherwise.
The foreign exchange forward & option contracts mature within 12 months. The table below analyzes the derivative financial instruments into relevant maturity groupings based on the remaining period as of the balance sheet date:
in crore
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
Not later than one month | 1,468 | 1,382 |
Later than one month and not later than three months | 3,260 | 3,608 |
Later than three months and not later than one year | 828 | 813 |
5,556 | 5,803 |
The Company recognized a gain of 29 crore and gain of 499 crore on derivative instruments during the year ended March 31, 2016 and March 31, 2015, respectively, which is included in other income.
2.22 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 5 (viii)(c) of general instructions for preparation of the statement of profit and loss as per Schedule III to the Companies Act, 2013.
2.23 IMPORTS (VALUED ON THE COST, INSURANCE AND FREIGHT BASIS)
in crore
Particulars | Year ended March 31, | |
2016 | 2015 | |
Capital goods | 391 | 415 |
Software packages | 3 | 3 |
394 | 418 |
2.24 ACTIVITY IN FOREIGN CURRENCY
in crore
Particulars | Year ended March 31, | |
2016 | 2015 | |
Earnings in foreign currency | ||
Income from software services and products | 52,860 | 46,153 |
Interest received from banks and others | 6 | 5 |
52,866 | 46,158 | |
Expenditure in foreign currency | ||
Overseas travel expenses (including visa charges) | 1,305 | 992 |
Professional charges | 405 | 222 |
Technical sub-contractors - subsidiaries | 1,477 | 1,168 |
Overseas salaries and incentives | 19,041 | 15,967 |
Other expenditure incurred overseas for software development | 3,910 | 3,278 |
26,138 | 21,627 | |
Net earnings in foreign currency | 26,728 | 24,531 |
2.25 DIVIDENDS REMITTED IN FOREIGN CURRENCIES
The Company remits the equivalent of the dividends payable to equity shareholders and holders of ADS. For ADS holders the dividend is remitted 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.
The particulars of dividends remitted are as follows:
in crore
Particulars | Number of Non-resident share holders | Number of shares to which the dividends relate | Year ended March 31, | |
2016 | 2015 | |||
Interim dividend for fiscal 2016 | 2 | 38,53,33,537 | 385 | – |
Final dividend for fiscal 2015 | 2 | 19,22,58,436 | 567 | – |
Interim dividend for fiscal 2015 | 2 | 8,23,17,281 | – | 247 |
Final dividend for fiscal 2014 | 2 | 9,30,32,691 | – | 400 |
2.26 RELATED PARTY TRANSACTIONS
List of related parties:
Name of subsidiaries | Country | Holding as at | |
March 31, 2016 | March 31, 2015 | ||
Infosys BPO Limited (Infosys BPO) | India | 99.98% | 99.98% |
Infosys Technologies (China) Co. Limited (Infosys China) | China | 100% | 100% |
Infosys Technologies S. de R. L. de C. V. (Infosys Mexico) | Mexico | 100% | 100% |
Infosys Technologies (Sweden) AB. (Infosys Sweden) | Sweden | 100% | 100% |
Infosys Technologies (Shanghai) Company Limited (Infosys Shanghai) | China | 100% | 100% |
Infosys Tecnologia DO Brasil LTDA. (Infosys Brasil) | Brazil | 100% | 100% |
Infosys Public Services, Inc. USA (Infosys Public Services) | U.S. | 100% | 100% |
Infosys Americas Inc., (Infosys Americas) | U.S. | 100% | 100% |
Infosys (Czech Republic) Limited s.r.o. (formerly Infosys BPO s. r. o) (1) | Czech Republic | 99.98% | 99.98% |
Infosys Poland Sp Z.o.o (formerly Infosys BPO (Poland) Sp Z.o.o)(1) | Poland | 99.98% | 99.98% |
Infosys BPO S.DE R.L. DE.C.V (1)(17) | Mexico | – | – |
Infosys McCamish Systems LLC (1) | U.S. | 99.98% | 99.98% |
Portland Group Pty Ltd(1) | Australia | 99.98% | 99.98% |
Portland Procurement Services Pty Ltd(5) | Australia | – | – |
Infosys BPO Americas LLC.(1)(16) | U.S. | – | – |
Infosys Technologies (Australia) Pty. Limited (Infosys Australia) (2) | Australia | 100% | 100% |
EdgeVerve Systems Limited (EdgeVerve) (7) | India | 100% | 100% |
Infosys Consulting Holding AG (Infosys Lodestone) (formerly Lodestone Holding AG) | Switzerland | 100% | 100% |
Lodestone Management Consultants Inc. (3) | U.S. | 100% | 100% |
Infosys Management Consulting Pty Limited ( formerly Lodestone Management Consultants Pty Limited)(3) | Australia | 100% | 100% |
Infosys Consulting AG (formerly Lodestone Management Consultants AG) (3) | Switzerland | 100% | 100% |
Lodestone Augmentis AG (2)(6) | Switzerland | 100% | 100% |
Lodestone GmbH (formerly Hafner Bauer & Ödman GmbH) (2)(3) | Switzerland | 100% | 100% |
Lodestone Management Consultants (Belgium) S.A. (4) | Belgium | 99.90% | 99.90% |
Infosys Consulting GmbH (formerly Lodestone Management Consultants GmbH) (3) | Germany | 100% | 100% |
Infosys Consulting Pte Ltd. (formerly Lodestone Management Consultants Pte Ltd) (3) | Singapore | 100% | 100% |
Infosys Consulting SAS (formerly Lodestone Management Consultants SAS) (3) | France | 100% | 100% |
Infosys Consulting s.r.o.(formerly Lodestone Management Consultants s.r.o.) (3) | Czech Republic | 100% | 100% |
Lodestone Management Consultants GmbH (3) | Austria | 100% | 100% |
Lodestone Management Consultants Co., Ltd. (3) | China | 100% | 100% |
Infy Consulting Company Limited (formerly Lodestone Management Consultants Ltd.) (3) | U.K. | 100% | 100% |
Infosys Consulting B.V. (Lodestone Management Consultants B.V.) (3) | Netherlands | 100% | 100% |
Infosys Consulting Ltda. (formerly Lodestone Management Consultants Ltda.) (4) | Brazil | 99.99% | 99.99% |
Infosys Consulting Sp. Z.o.o. (formerly Lodestone Management Consultants Sp. z o.o.) (3) | Poland | 100% | 100% |
Lodestone Management Consultants Portugal, Unipessoal, Lda. (3) | Portugal | 100% | 100% |
S.C. Infosys Consulting S.R.L.(formerly S.C. Lodestone Management Consultants S.R.L.) (3) | Romania | 100% | 100% |
Infosys Consulting S.R.L. (formerly Lodestone Management Consultants S.R.L.) (3) | Argentina | 100% | 100% |
Infosys Canada Public Services Ltd.(8) | Canada | – | – |
Infosys Nova Holdings LLC. (Infosys Nova)(9) | U.S. | 100% | 100% |
Panaya Inc. (Panaya) (10) | U.S. | 100% | 100% |
Panaya Ltd.(11) | Israel | 100% | 100% |
Panaya GmbH(11) | Germany | 100% | 100% |
Panaya Pty Ltd.(11) | Australia | – | – |
Panaya Japan Co. Ltd.(11) | Japan | 100% | 100% |
Skava Systems Pvt. Ltd. (Skava Systems)(12) | India | 100% | – |
Kallidus Inc. (Kallidus)(13) | U.S. | 100% | – |
Noah Consulting LLC (Noah) (14) | U.S. | 100% | – |
Noah Information Management Consulting Inc. (Noah Canada) (15) | Canada | 100% | – |
(1) | Wholly owned subsidiary of Infosys BPO. |
(2) | Under liquidation |
(3) | Wholly owned subsidiaries of Infosys Consulting Holding AG (formerly Lodestone Holding AG) |
(4) | Majority owned and controlled subsidiaries of Infosys Consulting Holding AG (formerly Lodestone Holding AG) |
(5) | Wholly owned subsidiary of Portland Group Pty Ltd. Liquidated effective May 14, 2014. |
(6) | Wholly owned subsidiary of Infosys Consulting AG (formerly Lodestone Management Consultants AG) |
(7) | Incorporated effective February 14, 2014 (Refer note 2.10.5) |
(8) | Wholly owned subsidiary of Infosys Public Services, Inc. Incorporated effective December 19, 2014 |
(9) | Incorporated effective January 23, 2015 |
(10) | On March 5, 2015, Infosys acquired 100% of the voting interest in Panaya Inc. (Refer note 2.10.4) |
(11) | Wholly owned subsidiary of Panaya Inc. |
(12) | On June 2, 2015, Infosys acquired 100% of the voting interest in Skava Systems (Refer note 2.10.2) |
(13) | On June 2, 2015, Infosys acquired 100% of the voting interest in Kallidus Inc. (Refer note 2.10.2) |
(14) | On November 16, 2015, Infosys acquired 100% of the membership interests in Noah (Refer Note 2.10.1) |
(15) | Wholly owned subsidiary of Noah |
(16) | Incorporated effective November 20, 2015 |
(17) | Liquidated effective March 15, 2016 |
Infosys has provided guarantee for performance of certain contracts entered into by its subsidiaries.
Name of Associates | Country | Holding as at | |
March 31, 2016 | March 31, 2015 | ||
DWA Nova LLC(1) | U.S. | 16% | 20% |
(1) | Associate of Infosys Nova Holdings LLC. |
List of other related parties
Particulars
|
Country | Nature of relationship |
Infosys Limited Employees' Gratuity Fund Trust | India | Post-employment benefit plan of Infosys |
Infosys Limited Employees' Provident Fund Trust | India | Post-employment benefit plan of Infosys |
Infosys Limited Employees' Superannuation Fund Trust | India | Post-employment benefit plan of Infosys |
Infosys Science Foundation | India | Controlled trust |
Infosys Limited Employees' Welfare Trust | India | Controlled trust |
Infosys Employee Welfare Trust | India | Controlled trust |
Refer Notes 2.29 and 2.30 for information on transactions with post-employment benefit plans mentioned above.
List of key management personnel
Whole time directors
S. D. Shibulal (resigned effective July 31, 2014)
Srinath Batni (resigned effective July 31, 2014)
B. G. Srinivas (resigned effective June 10, 2014)
U. B. Pravin Rao
Dr. Vishal Sikka (appointed effective June 14, 2014)
Non-whole-time directors
N. R. Narayana Murthy (resigned effective October 10, 2014)
S. Gopalakrishnan (resigned effective October 10, 2014)
K. V.Kamath ( resigned effective June 5, 2015)
Dr. Omkar Goswami (retired effective December 31, 2014)
Prof. Jeffrey S. Lehman
R. Seshasayee
Ann M. Fudge (retired effective June 14, 2014)
Ravi Venkatesan
Kiran Mazumdar Shaw
Carol M. Browner (resigned effective November 23, 2015)
Prof. John W. Etchemendy (appointed effective December 4, 2014)
Roopa Kudva (appointed effective February 4, 2015)
Dr. Punita Kumar-Sinha (appointed effective January 14, 2016)
Executive Officers
M. D. Ranganath, Chief Financial Officer and Executive Vice President (effective October 12, 2015)
David D. Kennedy, Executive Vice President, General Counsel and Chief Compliance Officer (effective November 1, 2014)
Rajiv Bansal, Chief Financial Officer ( till October 12, 2015)
Srikantan Moorthy, Group Head of Human Resource Development (till March 31, 2015)
Parvatheesam K, Company Secretary (resigned effective January 10, 2015)
Company Secretary
A. G. S. Manikantha, (appointed effective June 22, 2015)
The details of amounts due to or due from related parties as at March 31, 2016 and March 31, 2015 are as follows:
in crore
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
Investment in Debentures | ||
EdgeVerve | 2,549 | – |
Trade Receivables | ||
Infosys China | 29 | 16 |
Infosys Mexico | 6 | 1 |
Infosys Brasil | 1 | 5 |
Infosys BPO | 5 | 1 |
Infosys Consulting Ltd. | 8 | 26 |
EdgeVerve | – | 14 |
Infosys Public Services | 153 | 246 |
Infosys Sweden | 28 | – |
Panaya Ltd | 14 | – |
244 | 309 | |
Loans(1) | ||
Infosys Consulting Ltd. | – | 6 |
Infosys Sweden | 24 | – |
Infosys Technologies China | 67 | – |
EdgeVerve | – | 18 |
91 | 24 | |
Other receivables | ||
Infosys BPO | 5 | 1 |
Infosys Public Services | 8 | 4 |
EdgeVerve | 3 | 14 |
Panaya | 43 | – |
Infosys Consulting SAS | 6 | 3 |
Infosys Consulting GmbH | 1 | 1 |
Infosys Consulting Ltd. | 1 | 20 |
67 | 43 | |
Unbilled revenues | ||
Infosys Consulting SAS | – | 1 |
EdgeVerve | 20 | – |
Infosys McCamish Systems LLC | – | 5 |
20 | 6 | |
Trade payables | ||
Infosys China | 10 | 10 |
Infosys BPO | 6 | – |
Infosys BPO s.r.o | 2 | – |
Portland Group Pty Ltd | – | 1 |
Infosys Mexico | 2 | 1 |
Infosys Sweden | 8 | 5 |
Lodestone Management Consultants Pty Limited | 16 | 10 |
Infosys Consulting Pte Ltd. | 7 | 8 |
Infosys Consulting Ltd. | 83 | 65 |
Infosys Brasil | – | 2 |
EdgeVerve | – | – |
Panaya Ltd. | 9 | – |
Infosys Public Services | 2 | – |
145 | 102 | |
Other payables | ||
Infosys BPO | 27 | 16 |
Infosys McCamish Systems LLC | – | 2 |
Infosys Consulting AG | 1 | 1 |
Infosys Consulting Ltd. | 1 | 1 |
EdgeVerve | – | 9 |
Panaya Ltd. | – | – |
Infosys Public Services | 1 | 4 |
Infosys Sweden | 7 | – |
Infosys Mexico | 1 | – |
38 | 33 | |
Provision for expenses | ||
Infosys BPO | 1 | (1) |
Kallidus Inc | 18 | – |
Noah Consulting, LLC | 10 | – |
EdgeVerve | – | 37 |
29 | 36 | |
Rental Deposit given for shared services | ||
Infosys BPO | 21 | 21 |
Rental Deposit taken for shared services | ||
Infosys BPO | 27 | 27 |
(1) | The above loans were given in accordance with the terms and conditions of the loan agreement and carries an interest rate of 6% each and is repayable within a period of one year and at anytime within four years from the date of grant for Infosys China and Infosys Sweden respectively. |
in crore
Particulars | Maximum amount outstanding during | |
2016 | 2015 | |
Loans and advances in the nature of loans given to subsidiaries : | ||
Infosys China | 68 | – |
EdgeVerve(2) | 110 | 18 |
Infosys Brasil | – | 40 |
Kallidus Inc | 10 | – |
Infosys Sweden | 24 | – |
Infosys Consulting Holding AG | 6 | 66 |
The details of the related parties transactions entered into by the Company, in addition to the lease commitments described in note 2.9, for the year ended March 31, 2016 and March 31, 2015 are as follows:
in crore
Particulars | Year ended March 31, | |
2016 | 2015 | |
Capital transactions: | ||
Financing transactions | ||
Debentures | ||
EdgeVerve | 2,549 | – |
Equity | ||
Infosys China | – | 62 |
Infosys Nova | – | 94 |
Infosys Brasil(3) | – | 40 |
EdgeVerve | 850 | 461 |
Infosys Shanghai | 258 | 154 |
3,657 | 811 | |
Loans (net of repayment) | ||
Infosys Consulting Holding AG (1) | – | 6 |
Infosys Consulting Ltd. | (6) | – |
Kallidus (1) | – | – |
Infosys Sweden | 23 | – |
Infosys Brasil | – | (40) |
Infosys Technologies China | 68 | – |
EdgeVerve (2) | (18) | 18 |
67 | (16) | |
Revenue transactions: | ||
Purchase of services | ||
Infosys China | 126 | 139 |
Infosys Management Consulting Pty Limited |
130 | 121 |
Infosys Consulting Ltd. | 882 | 653 |
Infosys Consulting Pte Ltd. | 104 | 45 |
Portland Group Pty Ltd | 2 | 3 |
Infosys (Czech Republic) Limited s.r.o. | 17 | 10 |
Infosys BPO Ltd. | 341 | 217 |
Infosys Sweden | 79 | 44 |
Infosys Mexico | 11 | 10 |
EdgeVerve | – | 136 |
Infosys Public Services | 11 | – |
Panaya Ltd. | 20 | – |
Kallidus Inc | 18 | – |
Noah Consulting, LLC | 10 | – |
Infosys Brasil | 10 | 7 |
1,761 | 1,385 | |
Purchase of shared services including facilities and personnel | ||
Infosys BPO | 18 | 68 |
18 | 68 | |
Interest Income | ||
Infosys Consulting Ltd. | – | 1 |
EdgeVerve | 62 | – |
Infosys Sweden | 1 | – |
Infosys Brasil | – | 3 |
63 | 4 | |
Sale of services | ||
Infosys China | 11 | 8 |
Infosys Mexico | 37 | 11 |
Infosys Consulting Ltd. | 30 | 23 |
Infosys Brasil | 7 | 8 |
Infosys BPO | 69 | 80 |
Infosys McCamish Systems LLC | 3 | 6 |
Infosys Sweden | 27 | – |
EdgeVerve | – | 50 |
Infosys Public Services | 900 | 735 |
1,084 | 921 | |
Sale of shared services including facilities and personnel | ||
EdgeVerve | 143 | 22 |
Panaya Ltd. | 15 | – |
Infosys BPO | 42 | 38 |
Infosys Consulting SAS | 1 | 3 |
Infosys Consulting Ltd. | 5 | 3 |
Infosys Consulting GmbH | – | 1 |
206 | 67 | |
Profit on transfer of business | ||
EdgeVerve | 3,036 | 412 |
3,036 | 412 | |
Cash paid under business transfer | ||
EdgeVerve | 335 | – |
335 | – |
(1) | During the year, loan of 10 crore was given and repaid. |
(2) | During the year, loan of 92 crore was given and the amount including the balance as of March 31, 2015 was repaid. |
(3) | Loan outstanding (including accrued interest) given to Infosys Brazil is converted to equity during the year ended March 31, 2015. |
The table below describes the compensation to key managerial personnel which comprise directors and executive officers:
in crore
Particulars | Year ended March 31, | |
2016 | 2015 | |
Salaries and other employee benefits to whole-time directors and executive officers (1)(2)(3)(4) | 101 | 30 |
Commission and other benefits to non-executive/independent directors | 9 | 8 |
Total | 110 | 38 |
(1) | Includes stock compensation expense of 7 crore for the year ended March 31, 2016 (2 crore for the year ended March 31, 2015) to CEO in line with the compensation plan approved by the shareholders. |
(2) | Includes payables to CFO who stepped down w.e.f October 12, 2015. |
(3) | Includes payment of variable pay amounting to 14 crore for the year ended March 31, 2015 to CEO as decided by the Nomination and Remuneration committee in line with the compensation plan approved by the shareholders. |
(4) | Includes provision for variable pay amounting to $4.33 million (approximately 29 crore) for the year ended March 31, 2016 to CEO. The shareholders in the EGM dated July 30, 2014 had approved a variable pay of $4.18 million (approximately28 crore at current exchange rate) at a target level and also authorized the Board to alter and vary the terms of remuneration. Accordingly , the Board based on the recommendations of the Nominations committee approved on April 15, 2016, $4.33 million ( approximately 29 crore) as variable pay for the year ended March 31, 2016. |
2.27 RESEARCH AND DEVELOPMENT EXPENDITURE
in crore
Particulars | Year ended March 31, | |
2016 | 2015 | |
Expenditure at Department of Scientific and Industrial Research (DSIR) approved R&D centers (eligible for weighted deduction) (1) | ||
Capital Expenditure | – | – |
Revenue Expenditure | 54 | 160 |
Other R&D Expenditure | ||
Capital Expenditure | 31 | 15 |
Revenue Expenditure | 330 | 430 |
Total R&D Expenditure | ||
Capital Expenditure | 31 | 15 |
Revenue Expenditure | 384 | 590 |
(1) | During year ended March 31, 2016 the Company has claimed weighted tax deduction on eligible research and development till 31 st July , 2015 based on the approval received from Department of Scientific and Industrial Research (DSIR) with effect from November 23, 2011 which has been renewed effective April 2014. With effect from 1st August 2015 the business of Finacle, including the R&D activities, is transferred to its wholly owned subsidiary Edgeverve Systems Limited, hence from that date, Edgeverve Systems Limited has claimed the weighted tax deduction on eligible research and development expenditures u/s 35(2AB) of the Income Tax Act 1961. The weighted tax deduction is equal to 200% of such expenditure incurred. |
The eligible R&D revenue and capital expenditure are 54 crore and Nil for the year ended March 31, 2016 respectively and 160 crore and Nil towards revenue and capital expenditure respectively for the year ended March 31, 2015
2.28 SEGMENT REPORTING
The Company's operations predominantly relate to providing end-to-end business solutions to enable clients to enhance business performance. During the year ended March 31, 2016, the Company reorganized its segments to enhance executive customer relationships, improve focus of sales investments and increase management oversight. However the reorganizations did not have any impact in the reportable segments as per AS 17 'Segment reporting' apart from Manufacturing being named as Manufacturing and Hi-TECH. Segment information has been presented both along industry classes and geographic segmentation of customers, industry being the primary segment. 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 significant accounting policies.
Industry segments for the Company are primarily enterprises in Financial Services and Insurance (FSI) , enterprises in Manufacturing and Hi-tech (MFG & Hi-TECH), enterprises in the Energy & utilities, Communication and Services (ECS), enterprises in Retail, Consumer packaged goods and Logistics (RCL) and enterprises in Life Sciences and Healthcare (LSH). Geographic segmentation is based on business sourced from that geographic region and delivered from both on-site and off-shore locations. 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 and identifiable operating expenses in relation to segments are categorized based on items that are individually identifiable to that segment. Allocated expenses of segments include expenses incurred for rendering services from the company's offshore software development centers and on-site expenses, which 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 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 against the total income of the Company.
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. 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.
Industry Segments
Year ended March 31, 2016 and March 31, 2015:
in crore
Particulars | FSI | MFG & Hi-TECH | ECS | RCL | LSH | Total |
Income from software services and products | 17,791 | 12,087 | 10,997 | 9,501 | 3,607 | 53,983 |
16,175 | 10,230 | 9,756 | 8,369 | 2,770 | 47,300 | |
Identifiable operating expenses | 9,037 | 6,130 | 5,269 | 4,675 | 1,840 | 26,951 |
7,874 | 5,191 | 4,706 | 3,917 | 1,440 | 23,128 | |
Allocated expenses | 3,686 | 2,533 | 2,303 | 1,991 | 756 | 11,269 |
3,396 | 2,241 | 2,130 | 1,832 | 607 | 10,206 | |
Segmental operating income | 5,068 | 3,424 | 3,425 | 2,835 | 1,011 | 15,763 |
4,905 | 2,798 | 2,920 | 2,620 | 723 | 13,966 | |
Unallocable expenses | 1,115 | |||||
917 | ||||||
Other income, net | 3,009 | |||||
3,337 | ||||||
Profit before exceptional item and tax | 17,657 | |||||
16,386 | ||||||
Exceptional item | 3,036 | |||||
412 | ||||||
Profit before tax | 20,693 | |||||
16,798 | ||||||
Tax expense | 4,907 | |||||
4,634 | ||||||
Profit after taxes and exceptional item | 15,786 | |||||
12,164 |
Geographic Segments
Year ended March 31, 2016 and March 31, 2015:
in crore
Particulars | North America | Europe | India | Rest of the World | Total |
Income from software services and products | 35,638 | 11,775 | 1,274 | 5,296 | 53,983 |
30,273 | 10,300 | 1,307 | 5,420 | 47,300 | |
Identifiable operating expenses | 18,052 | 5,868 | 568 | 2,463 | 26,951 |
14,806 | 5,131 | 678 | 2,513 | 23,128 | |
Allocated expenses | 7,467 | 2,462 | 254 | 1,086 | 11,269 |
6,625 | 2,240 | 251 | 1,090 | 10,206 | |
Segmental operating income | 10,119 | 3,445 | 452 | 1,747 | 15,763 |
8,842 | 2,929 | 378 | 1,817 | 13,966 | |
Unallocable expenses | 1,115 | ||||
917 | |||||
Other income, net | 3,009 | ||||
3,337 | |||||
Profit before exceptional items and tax | 17,657 | ||||
16,386 | |||||
Exceptional item | 3,036 | ||||
412 | |||||
Profit before tax | 20,693 | ||||
16,798 | |||||
Tax expense | 4,907 | ||||
4,634 | |||||
Profit after taxes and exceptional items | 15,786 | ||||
12,164 |
2.29 GRATUITY PLAN
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 and plan assets :
in crore
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
Obligations at year beginning | 755 | 668 |
Service cost | 106 | 89 |
Interest cost | 55 | 56 |
Transfer of obligation* | (34) | (5) |
Actuarial (gain)/loss | 10 | 58 |
Benefits paid | (66) | (111) |
Obligations at year end | 826 | 755 |
Defined benefit obligation liability as at the balance sheet date is fully funded by the Company. | ||
Change in plan assets | ||
Plan assets at year beginning, at fair value | 781 | 677 |
Expected return on plan assets | 72 | 65 |
Transfer of assets* | (43) | – |
Actuarial gain/(loss) | (6) | 5 |
Contributions | 90 | 145 |
Benefits paid | (66) | (111) |
Plan assets at year end, at fair value | 828 | 781 |
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 | 828 | 781 |
Present value of the defined benefit obligations at the end of the year | 826 | 755 |
Re-imbursement (obligation)/asset* | – | (6) |
Asset recognized in the balance sheet | 2 | 20 |
Assumptions | ||
Interest rate | 7.80% | 7.80% |
Estimated rate of return on plan assets | 9.50% | 9.50% |
Weighted expected rate of salary increase | 8.00% | 8.00% |
* | from/to between group companies |
in crore
Particulars | As at | ||||
March 31, 2016 | March 31, 2015 | March 31, 2014 | March 31, 2013 | March 31, 2012 | |
Obligations at year end | 826 | 755 | 668 | 612 | 569 |
Plan assets at year end, at fair value | 828 | 781 | 677 | 643 | 582 |
Funded Status | 2 | 26 | 9 | 31 | 13 |
Experience adjustments: | |||||
(Gain)/loss: | |||||
Experience adjustments on plan liabilities | 10 | 4 | 14 | (49) | 13 |
Experience adjustments on plan assets | 6 | (5) | 3 | – | – |
Net gratuity cost for the year ended March 31, 2016 and March 31, 2015 comprises of the following components:
in crore
Particulars | Year ended March 31, | |
2016 | 2015 | |
Gratuity cost for the period | ||
Service cost | 106 | 89 |
Interest cost | 55 | 56 |
Expected return on plan assets | (72) | (65) |
Actuarial (gain)/loss | 16 | 53 |
Plan amendment amortization | (4) | (4) |
Net gratuity cost | 101 | 129 |
Actual return on plan assets | 66 | 70 |
As at March 31, 2016 and March 31, 2015, the plan assets have been primarily invested in insurer managed funds. 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. The Company expects to contribute 74 crore to the gratuity trust during the fiscal 2017.
Effective July 1, 2007, the Company revised the employee death benefits provided under the gratuity plan, and included all eligible employees under a consolidated term insurance cover. Accordingly, the obligations under the gratuity plan reduced by 37 crore, which is being amortized on a straight line basis to the statement of profit and loss over 10 years representing the average future service period of the employees. The unamortized liability as at March 31, 2016 and March 31, 2015 amounts to 4 crore and 7 crore, respectively and disclosed under 'Other long-term liabilities' and 'other current liabilities'.
2.30 PROVIDENT FUND
The Company contributed 345 crore during the year ended March 31, 2016 ( 295 crore during the year ended March 31, 2015).
The Guidance on Implementing AS 15, Employee Benefits (revised 2005) issued by Accounting Standards Board (ASB) states that benefits involving employer established provident funds, which require interest shortfalls to be recompensed are to be considered as defined benefit plans. The actuary has provided a valuation for provident fund liabilities on the basis of guidance issued by Actuarial Society of India during the quarter ended December 31, 2011 and based on the below provided assumptions there is no shortfall as at March 31, 2016, 2015, 2014, 2013 and 2012, respectively.
The details of fund and plan asset position are given below:
in crore
Particulars | As at | ||||
March 31, 2016 | March 31, 2015 | March 31, 2014 | March 31, 2013 | March 31, 2012 | |
Plan assets at period end, at fair value | 3,808 | 2,912 | 2,817 | 2,399 | 1,816 |
Present value of benefit obligation at period end | 3,808 | 2,912 | 2,817 | 2,399 | 1,816 |
Asset recognized in balance sheet | – | – | – | – | – |
Assumptions used in determining the present value obligation of the interest rate guarantee under the Deterministic Approach:
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
Government of India (GOI) bond yield | 7.80% | 7.80% |
Remaining term of maturity of portfolio | 7 years | 7 years |
Expected guaranteed interest rate - First year | 8.75% | 8.75% |
- Thereafter | 8.60% | 8.60% |
2.31 SUPERANNUATION
The Company contributed 227 crore to the Superannuation trust during the year ended March 31, 2016 (213 crore during the year ended March 31, 2015).
2.32 RECONCILIATION OF BASIC AND DILUTED SHARES USED IN COMPUTING EARNINGS PER SHARE
Particulars | Year ended March 31, | |
2016 | 2015 | |
Number of shares considered as basic weighted average shares outstanding* | 229,69,44,664 | 229,69,44,664 |
Effect of dilutive common equivalent shares | – | 30,684 |
Number of shares considered as weighted average shares and potential shares outstanding | 229,69,44,664 | 229,69,75,348 |
* | adjusted for bonus issue.(refer Note 2.1) |
2.33 RESTRICTED DEPOSITS
Restricted deposits as at March 31, 2016 comprises 1,154 crore (1,039 crore as at March 31, 2015) deposited with financial institutions to settle employee-related obligations as and when they arise during the normal course of business.
2.34 CORPORATE SOCIAL RESPONSIBILITY
As per Section 135 of the Companies Act, 2013, a company, meeting the applicability threshold, needs to spend at least 2% of its average net profit for the immediately preceding three financial years on corporate social responsibility (CSR) activities. The areas for CSR activities are eradication of hunger and malnutrition, promoting education, art and culture, healthcare, destitute care and rehabilitation, environment sustainability, disaster relief and rural development projects. A CSR committee has been formed by the company as per the Act. The funds were primarily allocated to a corpus and utilized through the year on these activities which are specified in Schedule VII of the Companies Act, 2013.
a) Gross amount required to be spent by the company during the year is 256 crore.
b) Amount spent during the year on:
in crore
Sl. No. | Particulars | In Cash | Yet to be paid in Cash | Total |
(i) | Construction / acquisition of any asset | – | – | – |
(ii) | On purposes other than (i) above | 202 | – | 202 |
In addition to the activities mentioned above, the company has spent 86 crore on multiple initiatives including Chennai flood disaster relief, environment sustainability and conservation of natural resources aimed at long term sustainability of eco system.
2.35 INDIAN ACCOUNTING STANDARDS
The Ministry of Corporate Affairs (MCA) vide its notification in the Official Gazette dated February 16, 2015 notified the Indian Accounting Standards (Ind AS) applicable to certain classes of companies. Ind AS would replace the existing Indian GAAP prescribed under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014. For Infosys and its subsidiaries, Ind AS would be applicable for the accounting periods beginning April 1, 2016, with a transition date of April 1, 2015.
The company has evaluated the effect of transition from Indian GAAP to Ind AS and the following are the areas which would have an impact on account of the transition on the company:
• Fair valuation of certain financial instruments
• Employee costs pertaining to defined benefit obligations
• Discounting of certain long-term liabilities
• Share based payments
Further , there would be a change in the presentation of financial statements including some additional disclosures.
2.36 FUNCTION WISE CLASSIFICATION OF STATEMENT OF PROFIT AND LOSS
In crore
Particulars | Year ended March 31, | |
2016 | 2015 | |
Income from software services and products | 53,983 | 47,300 |
Software development expenses | 32,255 | 27,828 |
GROSS PROFIT | 21,728 | 19,472 |
Selling and marketing expenses | 2,694 | 2,549 |
General and administration expenses | 3,271 | 2,961 |
5,965 | 5,510 | |
OPERATING PROFIT BEFORE DEPRECIATION | 15,763 | 13,962 |
Depreciation and amortization | 1,115 | 913 |
OPERATING PROFIT | 14,648 | 13,049 |
Other income | 3,009 | 3,337 |
PROFIT BEFORE EXCEPTIONAL ITEM AND TAX | 17,657 | 16,386 |
Profit on transfer on business (refer to note 2.10.5) | 3,036 | 412 |
PROFIT BEFORE TAX | 20,693 | 16,798 |
Tax expense: | ||
Current tax | 4,898 | 4,537 |
Deferred tax | 9 | 97 |
PROFIT FOR THE YEAR | 15,786 | 12,164 |
As per our report of even date attached | |
for B S R & Co. LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants | |
Firm's Registration Number:101248W/W-100022 |
Supreet Sachdev Partner Membership No. 205385 |
R. Seshasayee Chairman |
Dr. Vishal Sikka Chief Executive Officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bangalore April 15, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer and Executive Vice President |
A. G. S Manikantha Company Secretary |
Exhibit 99.12
Indian GAAP Consolidated
Independent Auditors’ Report on Consolidated Financial Statements
To the Members of Infosys Limited
Report on the Consolidated Financial Statements
We have audited the accompanying consolidated financial statements of Infosys Limited (“the Holding Company”) and its subsidiaries and associate (collectively referred to as “the Company” or “the Group”), comprising of the consolidated balance sheet as at 31 March 2016, the consolidated statement of profit and loss, the consolidated cash flow statement for the year then ended, and a summary of the significant accounting policies and other explanatory information (hereinafter referred to as “the consolidated financial statements”).
Management’s Responsibility for the Consolidated Financial Statements
The Holding Company’s Board of Directors is responsible for the preparation of the consolidated financial statements in terms of the requirements of the Companies Act, 2013 (“the Act”) that give a true and fair view of the consolidated financial position, consolidated financial performance and consolidated cash flows of the Company in accordance with the accounting principles generally accepted in India, including the Accounting Standards specified under Section 133 of the Companies Act, 2013 (hereinafter referred to as “the Act”) read with Rule 7 of the Companies (Accounts) Rules, 2014. The Board of Directors of the Company are responsible for maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding of the assets of the Company and for preventing and detecting frauds and other irregularities; the selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and the design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error, which have been used for the purpose of preparation of the consolidated financial statements by the Directors of the Holding Company, as aforesaid.
Auditors’ Responsibility
Our responsibility is to express an opinion on the consolidated financial statements based on our audit. While conducting the audit, we have taken into account the provisions of the Act, the accounting and auditing standards and matters which are required to be included in the audit report under the provisions of the Act and the Rules made thereunder.
We conducted our audit in accordance with the Standards on Auditing specified under section 143(10) of the Act. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial control relevant to the Holding Company’s preparation of the consolidated financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Holding Company’s Board of Directors, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence obtained by us is sufficient and appropriate to provide a basis for our audit opinion on the consolidated financial statements.
Opinion
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid consolidated financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the consolidated state of affairs of the Company, as at 31 March 2016, and their consolidated profit and their consolidated cash flows for the year ended on that date.
Report on Other Legal and Regulatory Requirements
1. As required by sub-section 3 of Section 143 of the Act, we report, to the extent applicable, that:
(a) | We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit of the aforesaid consolidated financial statements. |
(b) | In our opinion, proper books of account as required by law relating to preparation of the aforesaid consolidated financial statements have been kept so far as it appears from our examination of those books. |
(c) | The consolidated balance sheet, the consolidated statement of profit and loss, and the consolidated cash flow statement dealt with by this Report are in agreement with the relevant books of account maintained for the purpose of preparation of the consolidated financial statements. |
(d) | In our opinion, the aforesaid consolidated financial statements comply with the Accounting Standards specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. |
(e) | On the basis of the written representations received from the directors of the Holding Company as on 31 March 2016 taken on record by the Board of Directors of the Holding Company and the report of the statutory auditors of its subsidiary companies incorporated in India, none of the Directors of the Group companies incorporated in India is disqualified as on 31 March 2016 from being appointed as a Director of that company in terms of sub-section 2 of Section 164 of the Act. |
(f) | With respect to the adequacy of the internal financial controls over financial reporting of the Group and the operating effectiveness of such controls, refer to our separate report in “Annexure A”; and |
(g) | With respect to the other matters to be included in the Auditor’s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, in our opinion and to the best of our information and according to the explanations given to us: |
i. | The consolidated financial statements disclose the impact of pending litigations on the consolidated financial position of the Group. Refer Note 2.19 to the consolidated financial statements; |
ii. | Provision has been made in the consolidated financial statements, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long term contracts including derivatives contracts. Refer Note 2.6 to the consolidated financial statements; and |
iii. | There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Holding Company and subsidiary companies incorporated in India. |
for B S R & Co. LLP
Chartered Accountants
Firm’s registration number: 101248W/W-100022
Supreet Sachdev
Partner
Membership number: 205385
Bangalore
15 April 2016
Annexure - A to the Auditors’ Report
Report on the Internal Financial Controls under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act”)
In conjunction with our audit of the consolidated financial statements of the Company as of and for the year ended 31 March 2016, we have audited the internal financial controls over financial reporting of Infosys Limited (“the Holding Company”) and its subsidiary companies which are companies incorporated in India, as of that date.
Management’s Responsibility for Internal Financial Controls
The Respective Board of Directors of the Holding Company and its subsidiary companies, which are companies incorporated in India, are responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls over Financial Reporting issued by the Institute of Chartered Accountants of India (‘‘ICAI’’). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.
Auditors’ Responsibility
Our responsibility is to express an opinion on the Company's internal financial controls over financial reporting based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls over Financial Reporting (the “Guidance Note”) issued by ICAI and the Standards on Auditing, issued by ICAI and deemed to be prescribed under section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls, both issued by the Institute of Chartered Accountants of India. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the Company’s internal financial controls system over financial reporting.
Meaning of Internal Financial Controls over Financial Reporting
A company's internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Opinion
In our opinion, the Holding Company and its subsidiary companies, which are companies incorporated in India, have, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at 31 March 2016, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the ICAI.
for B S R & Co. LLP
Chartered Accountants
Firm’s Registration Number: 101248W/W-100022
Supreet Sachdev
Partner
Membership Number: 205385
Bangalore
15 April 2016
INFOSYS LIMITED AND SUBSIDIARIES
in crore
Consolidated Balance Sheet as at March 31, | Note | 2016 | 2015 |
EQUITY AND LIABILITIES | |||
SHAREHOLDERS' FUNDS | |||
Share capital | 2.1 | 1,144 | 572 |
Reserves and surplus | 2.2 | 56,682 | 50,164 |
57,826 | 50,736 | ||
Minority Interests | – | – | |
NON-CURRENT LIABILITIES | |||
Deferred tax liabilities (net) | 2.3 | – | – |
Other long-term liabilities | 2.4 | 126 | 50 |
126 | 50 | ||
CURRENT LIABILITIES | |||
Trade payables | |||
Total outstanding dues of micro enterprises and small enterprises | 2.31 | – | – |
Total outstanding dues of creditors other than micro enterprises and small enterprises | 386 | 140 | |
Other current liabilities | 2.5 | 7,601 | 6,920 |
Short-term provisions | 2.6 | 9,202 | 8,443 |
17,189 | 15,503 | ||
75,141 | 66,289 | ||
ASSETS | |||
NON-CURRENT ASSETS | |||
Fixed assets | |||
Tangible assets | 2.7 | 8,637 | 7,685 |
Intangible assets | 2.7 | 4,543 | 3,661 |
Capital work-in-progress | 960 | 776 | |
14,140 | 12,122 | ||
Non-current investments | 2.9 | 1,817 | 1,398 |
Deferred tax assets (net) | 2.3 | 533 | 536 |
Long-term loans and advances | 2.10 | 6,832 | 4,906 |
Other non-current assets | 2.11 | 66 | 85 |
23,388 | 19,047 | ||
CURRENT ASSETS | |||
Current investments | 2.9 | 75 | 872 |
Trade receivables | 2.12 | 11,330 | 9,713 |
Cash and cash equivalents | 2.13 | 32,697 | 30,367 |
Short-term loans and advances | 2.14 | 7,651 | 6,290 |
51,753 | 47,242 | ||
75,141 | 66,289 | ||
SIGNIFICANT ACCOUNTING POLICIES | 1 |
The accompanying notes form an integral part of the consolidated financial statements | |
As per our report of even date attached | |
for B S R & Co. LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants | |
Firm's Registration Number:101248W/W-100022 |
Supreet Sachdev Partner Membership No. 205385 |
R.Seshasayee Chairman |
Dr. Vishal Sikka Chief Executive Officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bangalore April 15, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer and Executive Vice President |
A.G.S Manikantha Company Secretary |
INFOSYS LIMITED AND SUBSIDIARIES
in crore, except per equity share data
Consolidated Statement of Profit and Loss for the year ended March 31, | Note | 2016 | 2015 |
Income from software services and products | 2.15 | 62,441 | 53,319 |
Other income | 2.16 | 3,128 | 3,430 |
Total revenue | 65,569 | 56,749 | |
Expenses | |||
Employee benefit expenses | 2.17 | 34,418 | 29,802 |
Deferred consideration pertaining to acquisition | 2.29.1 | 110 | 219 |
Cost of technical sub-contractors | 3,531 | 2,171 | |
Travel expenses | 2,263 | 1,818 | |
Cost of software packages and others | 2.17 | 1,274 | 1,044 |
Communication expenses | 449 | 495 | |
Consultancy and professional charges | 779 | 421 | |
Depreciation and amortisation expenses | 2.7 | 1,266 | 1,017 |
Other expenses | 2.17 | 2,497 | 2,478 |
Total expenses | 46,587 | 39,465 | |
PROFIT BEFORE TAX | 18,982 | 17,284 | |
Tax expense: | |||
Current tax | 2.18 | 5,315 | 4,835 |
Deferred tax | 2.18 | (14) | 76 |
PROFIT BEFORE MINORITY INTEREST/SHARE IN NET PROFIT/(LOSS) OF ASSOCIATE | 13,681 | 12,373 | |
Share in net profit/(loss) of associate | 2.29.3 | (3) | (1) |
PROFIT FOR THE YEAR | 13,678 | 12,372 | |
Profit attributable to: | |||
Owners of the company | 13,678 | 12,372 | |
Minority Interests | – | – | |
13,678 | 12,372 | ||
EARNINGS PER EQUITY SHARE | |||
Equity shares of par value 5/- each | |||
Basic | 59.85 | 54.13 | |
Diluted | 59.84 | 54.13 | |
Number of shares used in computing earnings per share | 2.27 | ||
Basic | 228,56,16,160 | 228,56,10,264 | |
Diluted | 228,57,11,583 | 228,56,40,948 | |
SIGNIFICANT ACCOUNTING POLICIES | 1 |
The accompanying notes form an integral part of the consolidated financial statements | |
As per our report of even date attached | |
for B S R & Co. LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants | |
Firm's Registration Number:101248W/W-100022 |
Supreet Sachdev Partner Membership No. 205385 |
R.Seshasayee Chairman |
Dr. Vishal Sikka Chief Executive Officer |
U. B. Pravin Rao Chief Operating Officer |
Bangalore April 15, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer and Executive Vice President |
A.G.S Manikantha Company Secretary |
INFOSYS LIMITED AND SUBSIDIARIES
in crore
Consolidated Cash Flow Statement for the year ended March 31, | 2016 | 2015 |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Profit before tax and after share in associate's profit | 18,979 | 17,283 |
Adjustments to reconcile profit before tax to cash provided by operating activities | ||
Depreciation and amortisation expenses | 1,266 | 1,017 |
Deferred purchase price | 110 | 219 |
Interest and dividend income | (2,698) | (2,892) |
Provision for bad and doubtful debts | (52) | 171 |
Other adjustments | 147 | 82 |
Effect of exchange differences on translation of assets and liabilities | 122 | 66 |
Changes in assets and liabilities | ||
Trade receivables | (1,479) | (1,475) |
Loans and advances and other assets | (1,523) | (221) |
Liabilities and provisions | 856 | 854 |
15,728 | 15,104 | |
Income taxes paid (Refer note 2.19) | (5,865) | (6,751) |
NET CASH GENERATED BY OPERATING ACTIVITIES | 9,863 | 8,353 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Payment towards capital expenditure (including intangible assets), net of sale proceeds | (2,723) | (2,247) |
Payment for acquisition of business, net of cash acquired | (747) | (1,282) |
Payment for acquisition of interests in associate | – | (94) |
Investments in liquid mutual fund units | (24,171) | (23,892) |
Investments in preferred stock | (82) | – |
Investments in other investments | (22) | – |
Disposal of liquid mutual fund units | 24,947 | 25,096 |
Disposal of certificates of deposit | – | 830 |
Investments in tax-free bond | (295) | – |
Investments in government bonds | (7) | (1) |
Investment in fixed maturity plan securities | – | (30) |
Redemption of fixed maturity plan securities | 33 | 157 |
Interest and dividend received | 2,381 | 2,551 |
NET CASH USED/ (PROVIDED) IN INVESTING ACTIVITIES | (686) | 1,088 |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Dividends paid net of intercompany dividend (including corporate dividend tax) | (6,813) | (4,935) |
NET CASH PROVIDED IN FINANCING ACTIVITIES | (6,813) | (4,935) |
Effect of exchange differences on translation of foreign currency cash and cash equivalents | (34) | (89) |
NET INCREASE IN CASH AND CASH EQUIVALENTS | 2,330 | 4,417 |
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR | 30,367 | 25,950 |
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR | 32,697 | 30,367 |
SIGNIFICANT ACCOUNTING POLICIES |
The accompanying notes form an integral part of the consolidated financial statements | |
As per our report of even date attached | |
for B S R & Co. LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants | |
Firm's Registration Number:101248W/W-100022 |
Supreet Sachdev Partner Membership No. 205385 |
R.Seshasayee Chairman |
Dr. Vishal Sikka Chief Executive Officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bangalore April 15, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer and Executive Vice President |
A.G.S Manikantha Company Secretary |
Significant accounting policies and notes on accounts
Company overview
Infosys is a global leader in consulting, technology, outsourcing and next-generation services. Along with its subsidiaries, Infosys provides Business IT services (comprising application development and maintenance, independent validation, infrastructure management, engineering services comprising product engineering and life cycle solutions and business process management); Consulting and systems integration services (comprising consulting, enterprise solutions, systems integration and advanced technologies); Products, business platforms and solutions to accelerate intellectual property-led innovation including Finacle, our banking solution; and offerings in the areas of Analytics, Cloud, and Digital Transformation.
Infosys together with its subsidiaries and controlled trusts is herein after referred to as the "Group".
The company is a public limited company incorporated and domiciled in India and has its registered office at Bangalore, Karnataka, India. The company has its primary listings on the BSE Limited and National Stock Exchange in India. The company’s American Depositary Shares representing equity shares are also listed on the New York Stock Exchange (NYSE), Euronext London and Euronext Paris.
1. Significant accounting policies
1.1 Basis of preparation of financial statements
These financial statements are prepared in accordance with Indian Generally Accepted Accounting Principles (GAAP) under the historical cost convention on the accrual basis except for certain financial instruments which are measured at fair values. GAAP comprises mandatory accounting standards as prescribed under Section 133 of the Companies Act, 2013 (‘Act’) read with Rule 7 of the Companies (Accounts) Rules, 2014, the provisions of the act (to the extend notified) and guidelines issued by the Securities and Exchange Board of India (SEBI). 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.
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 (AS) 21, “Consolidated Financial Statements”. The consolidated financial statements comprise the financial statements of the company, its controlled trusts and its subsidiaries as disclosed in Note 2.21, 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 unrealised 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.
Associates are entities over which the group has significant influence but not control. Investments in associates are accounted for using the equity method of accounting as laid down under Accounting standard (AS) 23, “Accounting for Investment in Associate in Consolidated Financial Statements” The investment is initially recognized at cost, and the carrying amount is increased or decreased to recognize the investor’s share of the profit or loss of the investee after the acquisition date. The group’s investment in associates includes goodwill identified on acquisition.
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 liabilities as at the date of the financial statements and reported amounts of income and expenses during the period. Examples of such estimates include computation of percentage of completion which requires the Group to estimate the efforts or costs expended to date as a proportion of the total efforts or costs to be expended, provisions for doubtful debts, future obligations under employee retirement benefit plans, income taxes, post-sales customer support and the useful lives of tangible assets and intangible assets.
Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes in estimates are made as the Management becomes aware of changes in circumstances surrounding the estimates. Changes in estimates are reflected in the consolidated financial statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the consolidated financial statements.
1.3 Revenue recognition
Revenue is primarily derived from software development and related services and from the licensing of software products. 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 are 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 and fixed-timeframe contracts, where there is no uncertainty as to measurement or collectability of consideration, is recognized based upon the percentage of completion method. When there is uncertainty as to measurement or ultimate collectability revenue recognition is postponed until such uncertainty is resolved. Cost and earnings in excess of billings are classified as unbilled revenue while billings in excess of cost and earnings is classified as unearned revenue. Deferred contract costs are amortized over the term of the contract. 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 ratably 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 case of multiple element contracts, which require significant implementation services, where revenue for the entire arrangement is recognized over the implementation period based upon the percentage-of-completion method. Revenue from client training, support and other services arising due to the sale of software products is recognized as the related services are performed.
The Group accounts for volume discounts and pricing incentives to customers as a reduction of revenue based on the ratable allocation of the discount / incentive amount to each of the underlying revenue transactions that result in progress by the customer towards earning the discount / incentive. Also, when the level of discount varies with increases in levels of revenue transactions, the Group recognizes the liability based on its estimate of the customer's future purchases. If it is probable that the criteria for the discount will not be met, or if the amount thereof cannot be estimated reliably, then discount is not recognized until the payment is probable and the amount can be estimated reliably. The Group recognizes changes in the estimated amount of obligations for discounts in the period in which the change occurs. The discounts are passed on to the customer either as direct payments or as a reduction of payments due from the customer.
The Group presents revenues net of indirect taxes in its consolidated statement of profit and loss.
Profit on sale of investments is recorded on transfer of title from the Group and is determined as the difference between the sale price and 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 Group's right to receive dividend is established.
1.4 Provisions and contingent liabilities
A provision is recognized if, as a result of a past event, the Group has a present legal obligation that is reasonably estimable, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by the best estimate of the outflow of economic benefits required to settle the obligation at the reporting date. Where no reliable estimate can be made, a disclosure is made as contingent liability. A disclosure for a contingent liability is also made when there is a possible obligation or a present obligation that may, but probably will not, require an outflow of resources. Where there is a possible obligation or a present obligation in respect of which the likelihood of outflow of resources is remote, no provision or disclosure is made.
1.5 Post-sales client support and warranties
The Group provides its clients with a fixed-period post sales support for corrections of errors and support on all its fixed-price, fixed-timeframe contracts. Costs associated with such support services are accrued at the time when related revenues are recorded and included in consolidated statement of profit and loss. The Group estimates such costs based on historical experience and the estimates are reviewed annually for any material changes in assumptions and likelihood of occurrence.
1.6 Onerous contracts
Provisions for onerous contracts are recognized when the expected benefits to be derived by the Group from a contract are lower than the unavoidable costs of meeting the future obligations under the contract. The provision is measured at lower of the expected cost of terminating the contract and the expected net cost of fulfilling the contract.
1.7 Tangible assets and capital work-in-progress
Tangible assets are stated at cost, less accumulated depreciation and impairment, if any. Direct costs are capitalized until such assets are ready for use. Capital work-in-progress comprises of the cost of fixed assets that are not yet ready for their intended use at the reporting date.
1.8 Intangible assets including goodwill
Intangible assets are recorded at the consideration paid for acquisition of such assets and are carried at cost less accumulated amortisation and impairment. Goodwill comprises the excess of purchase consideration over the parent’s portion of equity of the subsidiary at the date on which investment in the subsidiary is made. Goodwill arising on consolidation or acquisition is not amortized but is tested for impairment.
Research costs are expensed as incurred. Software product development costs are expensed as incurred unless technical and commercial feasibility of the project is demonstrated, future economic benefits are probable, the Group has an intention and ability to complete and use or sell the software and the costs can be measured reliably. The costs which can be capitalized include the cost of material, direct labour, overhead costs that are directly attributable to preparing the asset for its intended use.
1.9 Depreciation and amortisation
Depreciation on tangible assets is provided on the straight-line method over the useful lives of assets estimated by the Management. Depreciation for assets purchased / sold during a period is proportionately charged. 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 Group for its use. Leasehold improvements are written off over the lower of the remaining primary period of lease or the life of the asset. The Management estimates the useful lives for the other fixed assets as follows :
Buildings (1) | 22-25 years |
Plant and machinery (1) | 5 years |
Office equipment | 5 years |
Computer equipment (1) | 3-5 years |
Furniture and fixtures (1) | 5 years |
Vehicles (1) | 5 years |
(1) | Based on technical evaluation, the management believes that the useful lives as given above best represent the period over which management expects to use these assets. Hence the useful lives for these assets is different from the useful lives as prescribed under Part C of Schedule II of the Companies Act 2013. |
Depreciation and amortization methods, useful lives and residual values are reviewed periodically, including at each financial year end. (Refer note 2.7)
1.10 Impairment
The Management periodically assesses using, external and internal sources, whether there is an indication that an asset may be impaired. An impairment loss is recognized wherever the carrying value of an asset exceeds its recoverable amount. The recoverable amount is higher of the asset's net selling price or value in use, which means the present value of future cash flows expected to arise from the continuing use of the asset and its eventual disposal. An impairment loss for an asset other than goodwill is reversed if, and only if, the reversal can be related objectively to an event occurring after the impairment loss was recognized. The carrying amount of an asset other than goodwill is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortisation or depreciation) had no impairment loss been recognized for the asset in prior years.
1.11 Retirement benefits to employees
a Gratuity
The Group provides for gratuity, a defined benefit retirement plan ('the Gratuity Plan') covering eligible employees of Infosys and its Indian subsidiaries 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 with the Group.
Liabilities with regard to the Gratuity Plan are determined by actuarial valuation, performed by an independent actuary, at each Balance Sheet date using the projected unit credit method. The Company fully contributes all ascertained liabilities to the Infosys Limited Employees' Gratuity Fund Trust (the Trust). In case of Infosys BPO and Edgeverve, contributions are made to the Infosys BPO's Employees' Gratuity Fund Trust and Edgeverve Systems Limited Employees' Gratuity Fund Trust, respectively. Trustees administer contributions made to the Trusts and contributions are invested in a scheme with Life Insurance Corporation of India as permitted by law of India.
The Group recognizes the net obligation of the gratuity plan in the Balance Sheet as an asset or liability, respectively in accordance with Accounting Standard (AS) 15, 'Employee Benefits'. The Group's overall expected long-term rate-of-return on assets has been determined based on consideration of available market information, current provisions of Indian law specifying the instruments in which investments can be made, and historical returns. The discount rate is based on the Government securities yield. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are recognized in the consolidated statement of profit and loss in the period in which they arise.
b Superannuation
Certain employees of Infosys, Infosys BPO and Edgeverve are participants in a defined contribution plan. The Group has no further obligations to the Plan beyond its monthly contributions which are periodically contributed to a trust fund, the corpus of which is invested with the Life Insurance Corporation of India.
c Provident fund
Eligible employees of Infosys receive benefits from a provident fund, which is a defined benefit plan. Both the eligible 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 Limited Employees’ Provident Fund Trust. The trust invests in specific designated instruments as permitted by Indian law. 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 make good the shortfall, if any, between the return from the investments of the trust and the notified interest rate.
In respect of Indian subsidiaries, eligible employees receive benefits from a provident fund, which is a defined contribution plan. Both the eligible employee and the respective Company 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. The Companies have no further obligations under the provident fund plan beyond its monthly contributions.
d Compensated absences
The employees of the Group are entitled to compensated absences which are both accumulating and non-accumulating in nature. The expected cost of accumulating compensated absences is determined by actuarial valuation using projected unit credit method on the additional amount expected to be paid/availed as a result of the unused entitlement that has accumulated at the Balance Sheet date. Expense on non-accumulating compensated absences is recognized in the period in which the absences occur.
1.12 Share-based payments
The Group accounts for equity settled stock options as per the accounting treatment prescribed by Securities and Exchange Board of India ( share based employee benefits) Regulations, 2014 and the Guidance Note on Employee Share-based Payments issued by the Institute of Chartered Accountants of India using the intrinsic value method.
1.13 Foreign currency transactions
Foreign-currency denominated monetary assets and liabilities are translated at exchange rates in effect at the Balance Sheet date. The gains or losses resulting from such translations are included in the Statement of profit and loss. Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at fair value are translated at the exchange rate prevalent at the date when the fair value was determined. Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at historical cost are translated at the exchange rate prevalent at the date of transaction.
Revenue, expense and cash-flow items denominated in foreign currencies are translated using the exchange rate in effect on the date of the transaction. Transaction gains or losses realised upon settlement of foreign currency transactions are included in determining net profit for the period in which the transaction is settled.
The translation of financial statements of the foreign subsidiaries from the local currency to the reporting currency of the Company 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 and the resulting difference is presented as foreign currency translation reserve included in “Reserves and Surplus”. When a subsidiary is disposed off, in part or in full, the relevant amount is transferred to statement of profit or loss.
1.14 Forward and options contracts in foreign currencies
The Company uses foreign exchange forward and options contracts to hedge its exposure to movements in foreign exchange rates. The use of these foreign exchange forward and options contracts reduce the risk or cost to the Company and the Company does not use those for trading or speculation purposes.
Effective April 1, 2008, the Company adopted AS 30, 'Financial Instruments: Recognition and Measurement', to the extent that the adoption did not conflict with existing accounting standards and other authoritative pronouncements of the Company Law and other regulatory requirements.
Forward and options contracts are fair valued at each reporting date. The Company designates certain foreign exchange forward and options contracts as cash flow hedges to mitigate the risk of foreign exchange exposure on highly probable forecast transactions. The Company records the gain or loss on effective hedges, if any, in the hedging reserve until the transactions are complete. On completion, the gain or loss is transferred to the statement of profit and loss of that period. To designate a forward or options contract as an effective hedge, the Management objectively evaluates and evidences with appropriate supporting documents at the inception of each contract and subsequently whether the contract is effective in achieving offsetting cash flows attributable to the hedged risk. Changes in the fair value relating to the ineffective portion of the hedges and derivative instruments that do not qualify or have not been designated for hedge accounting are recognised in the statement of profit and loss.
1.15 Income taxes
Income taxes are accrued in the same period that the related revenue and expenses arise. A provision is made for income tax, 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. Minimum alternate tax (MAT) paid in accordance with the tax laws, which gives rise to future economic benefits in the form of tax credit against future income tax liability, is recognized as an asset in the Consolidated Balance Sheet if there is convincing evidence that the Group will pay normal tax after the tax holiday period and the resultant asset can be measured reliably. The Group offsets, on a year on year basis, the current tax assets and liabilities, where it has a legally enforceable right and where it intends to settle such assets and liabilities on a net basis.
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 of timing difference. The tax effect is calculated on the accumulated timing differences at the end of an accounting period based on enacted or substantively enacted regulations. Deferred tax assets in situation where unabsorbed depreciation and carry forward business loss exists, are recognized only if there is virtual certainty supported by convincing evidence that sufficient future taxable income will be available against which such deferred tax asset can be realised. Deferred tax assets, other than in situation of unabsorbed depreciation and carry forward business loss, are recognized only if there is reasonable certainty that they will be realised. Deferred tax assets are reviewed for the appropriateness of their respective carrying values at each reporting date. Deferred tax assets and deferred tax liabilities have been offset wherever the Group has a legally enforceable right to set off current tax assets against current tax liabilities and where the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority. Tax benefits of deductions earned on exercise of employee share options in excess of compensation charged to consolidated statement of profit and loss are credited to the securities premium account.
1.16 Earnings per share
Basic earnings per share is computed by dividing the net profit after tax by the weighted average number of equity shares outstanding during the period. Diluted earnings per share is computed by dividing the profit after tax by the weighted average number of equity shares considered for deriving basic earnings per share and also the weighted average number of equity shares that could have been issued upon 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 which is 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. Dilutive potential equity shares are determined independently for each period presented.
The number of shares and potentially dilutive equity shares are adjusted retrospectively for all periods presented for any share splits and bonus shares issues including for changes effected prior to the approval of the consolidated financial statements by the Board of Directors.
1.17 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. Current investments are carried at the lower of cost and fair value of each investment individually. Cost for overseas investments comprises the Indian Rupee value of the consideration paid for the investment translated at the exchange rate prevalent at the date of investment. Long term investments are carried at cost less provisions recorded to recognize any decline, other than temporary, in the carrying value of each investment.
1.18 Cash and cash equivalents
Cash and cash equivalents comprise cash and cash on deposit with banks and financial institutions. The Group considers all highly liquid investments with a remaining maturity at the date of purchase of three months or less and that are readily convertible to known amounts of cash to be cash equivalents.
1.19 Cash flow statement
Cash flows are reported using the indirect method, whereby profit before tax is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Group are segregated.
1.20 Leases
Lease under which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Such assets acquired are capitalized at fair value of the asset or present value of the minimum lease payments at the inception of the lease, whichever is lower. Lease payments under operating leases are recognised as an expense on a straight line basis in the consolidated statement of profit and loss over the lease term.
1.21 Government grants
The Group recognizes government grants only when there is reasonable assurance that the conditions attached to them shall be complied with, and the grants will be received. Government grants related to depreciable assets are treated as deferred income and are recognized in the consolidated statement of profit and loss on a systematic and rational basis over the useful life of the asset. Government grants related to revenue are recognized on a systematic basis in the consolidated statement of profit and loss over the periods necessary to match them with the related costs which they are intended to compensate.
2 NOTES ON ACCOUNTS FOR THE YEAR ENDED MARCH 31, 2016
Amounts in the financial statements are presented in crore, except for per equity share data and as otherwise stated. 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 period presentation.
2.1 SHARE CAPITAL
in crore, except as otherwise stated
Particulars | As at March 31, | |
2016 | 2015 | |
Authorized | ||
Equity shares, 5/- par value | ||
240,00,00,000 (120,00,00,000) equity shares | 1,200 | 600 |
Issued, Subscribed and Paid-Up | ||
Equity shares, 5/- par value (1) | 1,144 | 572 |
228,56,21,088 (114,28,05,132) equity shares fully paid-up(2) | ||
1,144 | 572 |
Forfeited shares amounted to 1,500/- (1,500/-)
(1) Refer note 2.27 for details of basic and diluted shares
(2) Net of treasury shares 113,23,576 (56,67,200)
The Company has only one class of shares referred to as equity shares having a par value of 5/-. Each holder of equity shares is entitled to one vote per share.
The Company declares and pays dividends in Indian rupees. The dividend proposed by the Board of Directors is subject to the approval of the shareholders in the ensuing Annual General Meeting.
In the period of five years immediately preceding March 31, 2016:
The Company has allotted 114,84,72,332 fully paid-up shares of face value 5/- each during the quarter ended June 30, 2015, pursuant to bonus issue approved by the shareholders through postal ballot. The book closure date fixed by the Board was June 17, 2015.
The Company has allotted 57,42,36,166 fully paid up equity shares of face value 5/- each during the quarter ended December 31, 2014 pursuant to a bonus issue approved by the shareholders through a postal ballot. The record date fixed by the Board of Directors was December 3, 2014.
For both the bonus issues, bonus share of one equity share for every equity share held, and a stock dividend of one American Depositary Share (ADS) for every ADS held, respectively, has been allotted. Consequently, the ratio of equity shares underlying the ADSs held by an American Depositary Receipt holder remains unchanged. Options granted under the restricted stock unit plan have been adjusted for bonus shares.
The Board has increased dividend pay-out ratio from up to 40% to up to 50% of post-tax consolidated profits effective fiscal 2015.
During the year ended March 31, 2015, the amount of dividend per share recognised as distribution to equity shareholder includes 30/- per share of interim dividend (not adjusted for bonus shares of June 17, 2015 and December 3, 2014) and 29.50/- per share of final dividend (not adjusted for bonus shares on June 17, 2015) The total dividend appropriation for the year ended March 31, 2015 amounted to 6,145 crore including corporate dividend tax of 1,034 crore.
The Board of Directors, in their meeting on October 12, 2015, declared an interim dividend of 10/- per equity share. Further the Board of Directors, in its meeting on April 15, 2016, have proposed a final dividend of 14.25/- per equity share for the financial year ended March 31, 2016. The proposal is subject to the approval of shareholders at the Annual General Meeting to be held on June 18, 2016. The total dividend appropriation for the year ended March 31, 2016 amounted to 6,704 crore including corporate dividend tax of 1,134 crore.
The Central Government in consultation with National Advisory Committee on Accounting Standards has amended Companies (Accounting Standards) Rules, 2006 ( principal rules’), vide notification issued by Ministry of Corporate Affairs dated March 30, 2016. The Companies (Accounting Standards) Rules, 2016 is effective March 30, 2016. According to the amended rules, the above mentioned proposed dividend will not be recorded as a liability as at March 31, 2016. (Refer Para 8.5 of AS-4 – Contingencies and Events occurring after Balance Sheet date). The Company believes, based on a legal opinion, that the Rule 3(2) of the principal rules has not been withdrawn or replaced and accordingly, the Companies (Accounting Standards) Rule, 2016 will apply for the accounting periods commencing on or after March 30, 2016. Therefore the Company has recorded 3,939 crore as liability for proposed dividends (including corporate dividend tax) as at March 31, 2016.
In the event of liquidation of the Company, the holders of equity shares will be entitled to receive any of the remaining assets of the company in proportion to the number of equity shares held by the shareholders, after distribution of all preferential amounts.
The details of shareholder holding more than 5% shares as at March 31, 2016 and March 31, 2015 are set out below :
Name of the shareholder | As at March 31, 2016 | As at March 31, 2015 | ||
No. of shares | % held | No. of shares | % held | |
Deutsche Bank Trust Company Americas (Depository of ADR's - legal ownership) | 38,53,17,937 | 16.78 | 18,60,73,981 | 16.20 |
Life Insurance Corporation of India | 13,22,74,300 | 5.76 | 5,52,74,758 | 4.81 |
The reconciliation of the number of shares outstanding and the amount of share capital as at March 31, 2016 and March 31, 2015 is set out below:
Particulars | As at March 31, 2016 | As at March 31, 2015 | ||
Number of shares | Amount | Number of shares | Amount | |
Number of shares at the beginning of the year | 114,28,05,132 | 572 | 57,14,02,566 | 286 |
Add: Bonus shares issued (including bonus on treasury shares) | 114,84,72,332 | 574 | 57,42,36,166 | 287 |
Less: Increase in treasury shares consequent to bonus issue | 56,67,200 | 2 | 28,33,600 | 1 |
Add: Shares issued on exercise of employee stock options | 10,824 | – | – | – |
Number of shares at the end of the year | 2,285,621,088 | 1,144 | 1,142,805,132 | 572 |
Stock Option Plan:
2015 Stock Incentive Compensation Plan (the 2015 Plan): SEBI issued the Securities and Exchange Board of India (Share based Employee Benefits) Regulations, 2014 (‘SEBI Regulations’) which replaced the SEBI ESOP Guidelines, 1999. The 2011 Plan (as explained below) was required to be amended and restated in accordance with the SEBI Regulations. Consequently, to effect this change and to further introduce stock options/ADR’s and other stock incentives, the Company put forth the 2015 Stock Incentive Compensation Plan (the 2015 Plan) for approval to the shareholders of the Company. Pursuant to the approval by the shareholders through postal ballot which ended on March 31, 2016, the Board of Directors have been authorised to introduce, offer, issue and allot share-based incentives to eligible employees of the Company and its subsidiaries under the 2015 Plan. The maximum number of shares under the 2015 plan shall not exceed 2,40,38,883 equity shares(this includes 1,12,23,576 equity shares which are currently held by the Trust towards the 2011 Plan). 1,70,38,883 equity shares will be issued as RSUs at par value and 70,00,000 equity shares will be issued as stock options at market price. These instruments will vest over a period of 4 years and the Company expects to grant the instruments under the 2015 Plan over the period of 4 to 7 years.
2011 RSU Plan (the 2011 Plan): The Company had a 2011 RSU Plan which provided for the grant of restricted stock units (RSUs) to eligible employees of the Company. The Board of Directors recommended the establishment of the 2011 Plan to the shareholders on August 30, 2011 and the shareholders approved the recommendation of the Board of Directors on October 17, 2011 through a postal ballot. The maximum aggregate number of shares that may be awarded under the plan was 1,13,34,400 and the plan was expected to continue in effect for a term of 10 years from the date of initial grant under the plan. During the year ended March 31, 2015, the company made a grant of 108,268 restricted stock units (adjusted for bonus issues) to Dr. Vishal Sikka, Chief Executive Office and Managing Director. The Board in its meeting held on June 22, 2015, on recommendation of Nomination and Remuneration Committee, further granted 1,24,061 RSUs to Dr. Vishal Sikka. These RSUs are vesting over a period of four years from the date of the grant in the proportions specified in the award agreement. The RSUs will vest subject to achievement of certain key performance indicators as set forth in the award agreement for each applicable year of the vesting tranche and continued employment through each vesting date. Further the Company has earmarked 100,000 equity shares for welfare activities of the employees, approved by the shareholders vide postal ballot which ended on March 31, 2016. The equity shares currently held under this plan, i.e. 1,12,23,576 equity shares (this includes the aggregate number of equity shares that may be awarded under the 2011 Plan as reduced by 10,824 equity shares already exercised by Dr. Vishal Sikka and 100,000 equity shares which have been earmarked for welfare activities of the employees) have been subsumed under the 2015 Plan.
Further, the award granted to Dr. Vishal Sikka on June 22, 2015 was modified by the Nomination and remuneration committee on April 14, 2016. There is no modification or change in the total number of RSUs granted or the vesting period (which is four years). The modifications relate to the criteria of vesting for each of the years. Based on the modification, the first tranche of the RSUs will vest subject to achievement of certain key performance indicators for the year ended March 31, 2016. Subsequent vesting of RSU's for each of the remaining years would be subject to continued employment.
In accordance with the Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014, the excess of the closing market price on the grant date of the RSUs over the exercise price is amortized on a straight-line basis over the vesting period.
The activity in the 2011 Plan during the year ended March 31, 2016 and March 31, 2015 is set out below:
Particulars | Year ended March 31, 2016 | Year ended March 31, 2015 | ||
Shares arising out of options | Weighted average exercise price | Shares arising out of options | Weighted average exercise price | |
2011 Plan: | ||||
Outstanding at the beginning* | 108,268 | 5 | – | – |
Granted | 124,061 | 5 | 108,268 | 5 |
Forfeited and expired | – | – | – | – |
Exercised * | 10,824 | 5 | – | – |
Outstanding at the end | 221,505 | 5 | 108,268 | 5 |
Exercisable at the end | – | – | – | – |
* adjusted for bonus issues
The weighted average remaining contractual life of RSUs outstanding as of March 31, 2016 and March 31, 2015 under the 2011 Plan was 1.98 years and 2.39 years respectively.
The weighted average share price of options exercised under the 2011 Plan on the date of exercise was 1,088/-
The differential on stock compensation expense if the ‘fair value’ of the RSU's on the date of the grant were considered instead of the ‘intrinsic value’ during the year ended March 31, 2016 and March 31, 2015 is less than 1 crore. Consequently, there is no impact on earnings per share.
The fair value for the above impact analysis is estimated on the date of grant using the Black-Scholes-Merton model with the following assumptions:
Particulars | For options granted in | |
Fiscal 2016 | Fiscal 2015 | |
Grant date | 22-Jun-15 | 21-Aug-14 |
Weighted average share price ()* | 1,024 | 3,549 |
Exercise price ()* | 5 | 5 |
Expected volatility (%) | 28-36 | 30 - 37 |
Expected life of the option (years) | 1 - 4 | 1 - 4 |
Expected dividends (%) | 2.43 | 1.84 |
Risk-free interest rate (%) | 7- 8 | 8 - 9 |
Weighted average fair value as on grant date ()* | 948 | 3,355 |
* Data for Fiscal 2015 is not adjusted for bonus issues
The expected term of an RSU is estimated based on the vesting term and contractual term of the RSU, as well as expected exercise behaviour of the employee who receives the RSU. Expected volatility during the expected term of the RSU is based on historical volatility of the observed market prices of the company's publicly traded equity shares during a period equivalent to the expected term of the RSU.
During the year ended March 31, 2016 and March 31, 2015, the company recorded an employee compensation expense of 7 crore and 2 crore in the consolidated statement of profit and loss.
2.2 RESERVES AND SURPLUS
Particulars | As at March 31, | |
2016 | 2015 | |
Capital reserves - Opening balance | 54 | 54 |
Add: Transferred from Surplus | – | – |
54 | 54 | |
Foreign currency translation reserve - Opening balance | 332 | 376 |
Add: Foreign currency translation during the year | 81 | (44) |
Foreign currency translation reserve - Closing balance | 413 | 332 |
Securities premium account - Opening balance | 2,784 | 3,070 |
Less: Amount utilized for issuance of bonus shares (Refer note 2.1) | 572 | 286 |
Add: Exercise of stock options | 1 | – |
2,213 | 2,784 | |
Stock Options Outstanding- Opening balance (Refer note 2.1) | 2 | – |
Additions during the year | 7 | 2 |
Less: Exercise of stock options | 1 | – |
8 | 2 | |
General reserve - Opening balance | 10,505 | 9,288 |
Add: Transferred from Surplus | 1,579 | 1,217 |
12,084 | 10,505 | |
Other reserve - Opening balance(1) | 4 | 3 |
Add: Transferred from Surplus | 1 | 1 |
5 | 4 | |
Cashflow Hedge reserve- Opening balance | – | – |
Add: Unrealised gains/ (loss) from effective hedges | 1 | – |
Less: Reclassification to statement of profit and loss | 1 | – |
– | – | |
Special Economic Zone Re-investment Reserve- Opening balance (2) | – | – |
Add: Transferred from Surplus | 591 | – |
Less: Transferred to Surplus on utilization | 591 | – |
Special Economic Zone Re-investment Reserve- Closing balance | – | – |
Surplus- Opening Balance | 36,483 | 31,453 |
Add: Intercompany dividend | 28 | 21 |
Add: Net profit after tax transferred from Statement of Profit and Loss | 13,678 | 12,372 |
Add: Transfer from Special Economic Zone Re-investment Reserve on utilization | 591 | – |
Amount available for appropriation | 50,780 | 43,846 |
Appropriations: | ||
Interim dividend | 2,297 | 1,723 |
Final dividend | 3,273 | 3,388 |
Total dividend | 5,570 | 5,111 |
Dividend tax | 1,134 | 1,034 |
Amount transferred to other reserve | 1 | 1 |
Amount transferred to Special Economic Zone Re-investment Reserve | 591 | – |
Amount transferred to general reserve | 1,579 | 1,217 |
Surplus- Closing Balance | 41,905 | 36,483 |
56,682 | 50,164 |
(1) | Under the Swiss Code of Obligation, few subsidiaries of Lodestone are required to appropriate 5% of the annual profit to legal reserve until this equals 20% of the paid up share capital. To the extent it does not exceed one-half of the share capital, the general reserve may be used only to cover losses or for measures designed to sustain the company through difficult times, to prevent unemployment or to mitigate its consequences. |
(2) | The Special Economic Zone Re-investment Reserve has been created out of the profit of eligible SEZ units in terms of the provisions of Sec 10AA(1)(ii) of Income Tax Act,1961. The reserve should be utilized by the Company for acquiring new plant and machinery for the purpose of its business in the terms of the Sec 10AA(2) of the Income Tax Act, 1961. |
2.3 DEFERRED TAXES
in crore
Particulars | As at March 31, | |
2016 | 2015 | |
Deferred tax assets | ||
Fixed assets | 178 | 241 |
Trade receivables | 89 | 111 |
Compensated absences | 389 | 299 |
Computer software | 50 | 51 |
Accrued compensation to employees | 68 | 48 |
Post sales client support | 77 | 74 |
Others | 55 | 30 |
906 | 854 | |
Deferred tax liabilities | ||
Branch profit tax | 334 | 316 |
Others | 39 | 2 |
373 | 318 | |
Deferred tax assets after set off | 533 | 536 |
Deferred tax liabilities after set off | – | – |
Deferred tax assets and deferred tax liabilities have been offset wherever the Group has a legally enforceable right to set off current tax assets against current tax liabilities and where the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority.
As at March 31, 2016 and March 31, 2015, the Group has provided for branch profit tax of 334 crore and 316 crore, respectively, for its overseas branches, as the Group estimates that these branch profits would be distributed in the foreseeable future. The change in provision for branch profit tax includes 18 crore movement on account of exchange rate during the year ended March 31, 2016.
2.4 OTHER LONG-TERM LIABILITIES
in crore
Particulars | As at March 31, | |
2016 | 2015 | |
Others | ||
Gratuity obligation - unamortized amount relating to plan amendment (refer note 2.24) | – | 3 |
Deferred income - government grant on land use rights | 47 | 47 |
Payable for acquisition of business (refer note 2.29.3 & 2.29.4) | 46 | – |
Accrued salaries and benefits | ||
Bonus and incentives | 33 | – |
126 | 50 |
2.5 OTHER CURRENT LIABILITIES
in crore
Particulars | As at March 31, | |
2016 | 2015 | |
Accrued salaries and benefits | ||
Salaries and benefits | 1,104 | 1,237 |
Bonus and incentives | 1,162 | 869 |
Unearned revenue | 1,332 | 1,052 |
Unpaid dividends | 5 | 3 |
Other liabilities | ||
Provision for expenses | 2,189 | 1,984 |
Retention monies | 80 | 53 |
Withholding and other taxes payable | 1,296 | 904 |
Gratuity obligation - unamortized amount relating to plan amendment, current (refer note 2.24) | 4 | 4 |
Payable for acquisition of business (refer note 2.29.3 and note 2.29.4) | 86 | 525 |
Advances received from clients | 28 | 27 |
Payable by controlled trusts | 167 | 177 |
Deferred income - government grant on land use rights | 1 | 1 |
Accrued gratuity (refer note 2.24) | 1 | 7 |
Other payables | 141 | 74 |
Mark-to-market forward and options contracts | 5 | 3 |
7,601 | 6,920 |
2.6 SHORT-TERM PROVISIONS
in crore
Particulars | As at March 31, | |
2016 | 2015 | |
Provision for employee benefits | ||
Compensated absences | 1,341 | 1,069 |
Others | ||
Proposed dividend | 3,273 | 3,388 |
Provision for | ||
Tax on dividend | 666 | 690 |
Income taxes (net of advance tax and tax deducted at source) | 3,410 | 2,818 |
Post-sales client support and warranties and others | 512 | 478 |
9,202 | 8,443 |
Provision for post-sales client support and warranties and others
The movement in the provision for post-sales client support and warranties and others is as follows :
in crore
Particulars | Year ended March 31, | |
2016 | 2015 | |
Balance at the beginning | 478 | 379 |
Provision recognized/(reversed) | 106 | 172 |
Provision utilized | (103) | (84) |
Exchange difference | 31 | 11 |
Balance at the end | 512 | 478 |
Provision for post-sales client support and warranties and other provisions are expected to be utilized over a period of 6 months to 1 year.
2.7 FIXED ASSETS
Following are the changes in the carrying value of fixed assets for the year ended March 31, 2016:
in crore, except as otherwise stated
Tangible assets | Intangible assets | Total | |||||||||||||
Particulars | Land-Freehold | Land- Leasehold | Buildings (1) | Plant and equipment | Office equipment (3) | Computer equipment (3) | Furniture and fixtures (3) | Leasehold improvements | Vehicles | Total | Goodwill | Intellectual property rights and others | Land use rights | Total | |
Original cost | |||||||||||||||
As at April 1, 2015 | 931 | 633 | 5,881 | 1,427 | 676 | 3,347 | 958 | 221 | 34 | 14,108 | 3,595 | 42 | 71 | 3,708 | 17,816 |
Additions through acquisitions (3) | – | – | – | – | 1 | 2 | 1 | – | – | 4 | 881 | – | – | 881 | 885 |
Additions during the year | 41 | 17 | 444 | 333 | 166 | 1,103 | 256 | 9 | 6 | 2,375 | – | 2 | – | 2 | 2,377 |
Deductions/ Retirement during the year | – | – | – | (1) | (6) | (396) | (7) | (1) | (12) | (423) | – | (10) | – | (10) | (433) |
Foreign exchange difference | – | – | – | – | 2 | 16 | 1 | 6 | 1 | 26 | – | (2) | 1 | (1) | 25 |
As at March 31, 2016 | 972 | 650 | 6,325 | 1,759 | 839 | 4,072 | 1,209 | 235 | 29 | 16,090 | 4,476 | 32 | 72 | 4,580 | 20,670 |
Depreciation and amortization | |||||||||||||||
As at April 1, 2015 | – | 16 | 1,982 | 881 | 412 | 2,287 | 647 | 179 | 19 | 6,423 | – | 42 | 5 | 47 | 6,470 |
Accumulated depreciation on acquired assets(3) | – | – | – | – | 1 | 1 | – | – | – | 2 | – | – | – | – | 2 |
For the year | – | 6 | 219 | 220 | 100 | 553 | 139 | 22 | 5 | 1,264 | – | 1 | 1 | 2 | 1,266 |
Deductions/ Adjustments during the year (3) |
– | – | – | (1) | (5) | (237) | (6) | 2 | (7) | (254) | – | (10) | – | (10) | (264) |
Foreign exchange difference | – | – | – | – | 1 | 14 | 1 | 2 | – | 18 | – | (2) | – | (2) | 16 |
As at March 31, 2016 | – | 22 | 2,201 | 1,100 | 509 | 2,618 | 781 | 205 | 17 | 7,453 | – | 31 | 6 | 37 | 7,490 |
Net book value | |||||||||||||||
As at March 31, 2016 | 972 | 628 | 4,124 | 659 | 330 | 1,454 | 428 | 30 | 12 | 8,637 | 4,476 | 1 | 66 | 4,543 | 13,180 |
Following are the changes in the carrying value of fixed assets for the year ended March 31, 2015:
in crore, except as otherwise stated
Tangible assets | Intangible assets | Total | |||||||||||||
Particulars | Land-Freehold | Land- Leasehold | Buildings (1) | Plant and equipment | Office equipment | Computer equipment (2) | Furniture and fixtures (2) | Leasehold improvements (2) | Vehicles | Total | Goodwill | Intellectual property rights (2) | Land use rights | Total | |
Original cost | |||||||||||||||
As at April 1, 2014 | 782 | 360 | 5,026 | 1,150 | 551 | 2,659 | 805 | 212 | 35 | 11,580 | 2,244 | 58 | 68 | 2,370 | 13,950 |
Additions through acquisitions (2) | – | – | – | – | – | 13 | 9 | – | – | 22 | 1,351 | 1 | – | 1,352 | 1,374 |
Additions during the year | 149 | 273 | 855 | 280 | 140 | 765 | 161 | 22 | 6 | 2,651 | – | – | – | – | 2,651 |
Deductions/ Retirement during the year | – | – | – | (3) | (14) | (82) | (10) | (10) | (6) | (125) | – | (17) | – | (17) | (142) |
Foreign exchange difference | – | – | – | – | (1) | (8) | (7) | (3) | (1) | (20) | – | – | 3 | 3 | (17) |
As at March 31, 2015 | 931 | 633 | 5,881 | 1,427 | 676 | 3,347 | 958 | 221 | 34 | 14,108 | 3,595 | 42 | 71 | 3,708 | 17,816 |
Depreciation and amortization | |||||||||||||||
As at April 1, 2014 | – | – | 1,794 | 703 | 345 | 1,965 | 530 | 169 | 18 | 5,524 | – | 45 | 3 | 48 | 5,572 |
Accumulated depreciation on acquired assets(2) | – | – | – | – | – | (9) | (4) | – | – | (13) | – | – | – | – | (13) |
For the year | – | 16 | 188 | 181 | 81 | 387 | 128 | 16 | 6 | 1,003 | – | 13 | 1 | 14 | 1,017 |
Deductions/ Adjustments during the year(2) |
– | – | – | (2) | (13) | (52) | (2) | (8) | (4) | (81) | – | (16) | – | (16) | (97) |
Foreign exchange difference | – | – | – | (1) | (1) | (4) | (5) | 2 | (1) | (10) | – | – | 1 | 1 | (9) |
As at March 31, 2015 | – | 16 | 1,982 | 881 | 412 | 2,287 | 647 | 179 | 19 | 6,423 | – | 42 | 5 | 47 | 6,470 |
Net book value | |||||||||||||||
As at March 31, 2015 | 931 | 617 | 3,899 | 546 | 264 | 1,060 | 311 | 42 | 15 | 7,685 | 3,595 | – | 66 | 3,661 | 11,346 |
Notes: | (1) | Buildings include 250/- being the value of 5 shares of 50/- each in Mittal Towers Premises Co-operative Society Limited. |
(2) | Includes certain assets having gross book value of 23 crore, accumulated depreciation of 14 crore and net book value of 9 crore taken over on acquisition of Panaya effective March 5, 2015 | |
(3) | Includes certain assets having gross book value of 4 crore, accumulated depreciation of 2 crore and net book value of 2 crore taken over on acquisition of Kalidus, Skava and Noah |
During the quarter ended June 30, 2014, the management based on internal and external technical evaluation had changed the useful life of certain assets primarily consisting of buildings and computers with effect from April 1, 2014. Accordingly, the useful lives of certain assets required a change from previous estimate.
The Company has entered into lease-cum-sale agreements to acquire certain properties. In accordance with the terms of some of these agreements, the Company has the option to purchase or renew the properties on expiry of the lease period.
2.8 LEASES
Obligations on long-term, non-cancelable operating leases
The lease rentals charged during the year and the future minimum rental payments in respect of non-cancelable operating leases is set out below:
in crore
Particulars | Year ended March 31, | |
2016 | 2015 | |
Lease rentals recognized during the year | 360 | 309 |
in crore
Lease obligations payable | As at March 31, | |
2016 | 2015 | |
Within one year of the balance sheet date | 372 | 168 |
Due in a period between one year and five years | 873 | 395 |
Due after five years | 442 | 168 |
Majority of the group's operating lease arrangements extend up to a maximum of ten years from their respective dates of inception and relate to rented overseas premises. Some of these lease agreements have price escalation clauses.
2.9 INVESTMENTS
in crore, except as otherwise stated
Particulars | As at March 31, | |
2016 | 2015 | |
Non-current investments | ||
Long term investments - at cost | ||
Others (unquoted) | ||
Investments in preferred stock and equity instruments (refer note 2.9.1) | 99 | 7 |
Less: Provision for equity investments | 6 | 6 |
93 | 1 | |
Others (refer note 2.9.1) | 22 | – |
115 | 1 | |
Others (quoted) | ||
Investments in Tax Free Bonds (refer note 2.9.2) | 1,599 | 1,300 |
Investment in Government Bonds (refer note 2.9.2) | – | 4 |
1,599 | 1,304 | |
Long term investments - equity method | ||
Trade (unquoted) | ||
Investment in Associate | ||
DWA Nova LLC (refer note 2.21) | 103 | 93 |
103 | 93 | |
Total Non-current investments | 1,817 | 1,398 |
Current investments | ||
Current portion of Long term investments | ||
Quoted | ||
Fixed Maturity Plans (refer note 2.9.3) | – | 30 |
Investment in Government Bonds (refer note 2.9.2) | 5 | – |
5 | 30 | |
Current investments – at the lower of cost and fair value | ||
Unquoted | ||
Liquid mutual fund units (refer note 2.9.4) | 68 | 842 |
68 | 842 | |
Quoted | ||
Investment in Government Bonds (refer note 2.9.2) | 2 | – |
2 | – | |
Total Current investments | 75 | 872 |
Total Investments | 1,892 | 2,270 |
Aggregate amount of quoted investments excluding interest accrued but not due of 58 crore included under Note 2.14 Short term Loans and advances | 1,606 | 1,334 |
Market value of quoted investments | 1,703 | 1,376 |
Aggregate amount of unquoted investments | 292 | 942 |
Aggregate amount of provision made for non-current unquoted investments | 6 | 6 |
2.9.1 Details of Investments
The details of non-current other investments in preferred stock, equity instruments and others as at March 31, 2016 and March 31, 2015 are as follows:
in crore
Particulars | As at | |
March 31, 2016 | March 31, 2015 | |
Preferred Stock | ||
Airviz Inc. | ||
2,82,279 (Nil) Series A Preferred Stock, fully paid up, par value USD 0.001 each | 13 | – |
ANSR Consulting | ||
52,631 (Nil) Series A Preferred Stock, fully paid up, par value USD 0.001 each | 9 | – |
Whoop Inc. | ||
16,48,352 (Nil) Series B Preferred Stock, fully paid up, par value USD 0.0001 each | 20 | – |
CloudEndure Ltd. | ||
12,79,645 (Nil) Preferred Series B Shares, fully paid up, par value ILS 0.01 each | 13 | – |
Nivetti Systems Private Limited | ||
2,28,501 (Nil) Preferred Stock, fully paid up, par value 1 each | 10 | – |
Waterline Data Science Inc. | ||
39,33,910 (Nil) Series B Preferred Stock, fully paid up, par value USD 0.00001 each | 27 | – |
Equity Instrument | ||
OnMobile Systems Inc., (formerly Onscan Inc.) USA | ||
21,54,100 (21,54,100) common stock at USD 0.4348 each, fully paid up, par value USD 0.001 each | 4 | 4 |
Merasport Technologies Private Limited | ||
2,420 (2,420) equity shares at 8,052/- each, fully paid up, par value 10/- each | 2 | 2 |
Global Innovation and Technology Alliance | ||
15,000 (10,000) equity shares at 1,000/- each, fully paid up, par value 1,000/- each | 1 | 1 |
Others | ||
Vertex Ventures US Fund I, L.P | 22 | – |
121 | 7 | |
Less: Provision for investment | 6 | 6 |
115 | 1 |
2.9.2 Details of Investments in Tax Free Bonds & Government Security Bond
The balances held in tax free bonds as at March 31, 2016 and March 31, 2015 is as follows:
in crore
Particulars | Face Value | As at March 31, 2016 | As at March 31, 2015 | ||
Units | Amount | Units | Amount | ||
7.34% Indian Railway Finance Corporation Limited Bonds 19FEB2028 | 1,000/- | 21,00,000 | 211 | 21,00,000 | 211 |
8.30% National Highways Authority of India Bonds 25JAN2027 | 1,000/- | 5,00,000 | 53 | 5,00,000 | 53 |
7.18% Indian Railway Finance Corporation Limited Bonds 19FEB2023 | 1,000/- | 20,00,000 | 201 | 20,00,000 | 201 |
8.46% India Infrastructure Finance Company Limited Bonds 30AUG2028 | 10,00,000/- | 2,000 | 200 | 2,000 | 200 |
8.46% Power Finance Corporation Limited Bonds 30AUG2028 | 10,00,000/- | 1,500 | 150 | 1,500 | 150 |
8.35% National Highways Authority of India Bonds 22NOV2023 | 10,00,000/- | 1,500 | 150 | 1,500 | 150 |
8.26% India Infrastructure Finance Company Limited Bonds 23AUG28 | 10,00,000/- | 1,000 | 100 | 1,000 | 100 |
8.10% Indian Railway Finance Corporation Limited Bonds 23FEB2027 | 1,000/- | 5,00,000 | 53 | 5,00,000 | 53 |
8.54% Power Finance Corporation Limited Bonds 16NOV2028 | 1,000/- | 5,00,000 | 50 | 5,00,000 | 50 |
8.48% India Infrastructure Finance Company Limited Bonds 05SEP2028 | 10,00,000/- | 450 | 45 | 450 | 45 |
7.93% Rural Electrification Corporation Limited Bonds 27MAR2022 | 1,000/- | 2,00,000 | 21 | 2,00,000 | 21 |
8.20% Power Finance Corporation Limited Bonds 2022 | 1,000/- | 5,00,000 | 51 | 5,00,000 | 51 |
8.00% Indian Railway Finance Corporation Limited Bonds 2022 | 1,000/- | 1,50,000 | 15 | 1,50,000 | 15 |
7.28% National Highways Authority of India Bonds 18SEP30 | 10,00,000/- | 2,000 | 200 | – | – |
7.28% Indian Railway Finance Corporation Limited 21DEC30 | 1,000/- | 422,800 | 42 | – | – |
7.35% National Highways Authority of India Bonds 11JAN31 | 1,000/- | 571,396 | 57 | – | – |
74,52,646 | 1,599 | 64,56,450 | 1,300 |
The balance held in Government Bonds as at March 31, 2016 and March 31, 2015 is as follows:
in crore
Particulars | Face Value PHP | As at March 31, 2016 | As at March 31, 2015 | ||
Units | Amount | Units | Amount | ||
Fixed Rate Treasury Notes 1.62 PCT MAT DATE 7 SEPT 2016 | 100 | 50,000 | 1 | – | – |
Fixed Rate Treasury Notes 2.20 PCT MAT DATE 25 APR 2016 | 100 | 60,000 | 1 | 60,000 | 1 |
Fixed Rate Treasury Notes 1.00 PCT MAT DATE 25 APR 2016 | 100 | 200,000 | 3 | 200,000 | 3 |
Fixed Rate Treasury Notes 1.70 PCT MAT DATE 22 FEB 2017 | 100 | 10,000 | – | – | – |
Fixed Rate Treasury Notes 1.70 PCT PHY6972FW G18 MAT Date 22 FEB 2017 | 100 | 150,000 | 2 | – | – |
Fixed Rate Treasury Notes 1.96 PCT MAT DATE 27 JAN 2016 | 100 | – | – | 10,000 | – |
Fixed Rate Treasury Notes 7.00 PCT PIBD0716A488 MAT DATE 27 JAN 2016 | 100 | – | – | 10,000 | – |
470,000 | 7 | 280,000 | 4 |
2.9.3 Details of Investments in Fixed Maturity Plans
The balances held in Fixed Maturity Plan as at March 31, 2015 is as follows:
in crore
Particulars | Face Value | Units | Amount |
SBI debt Fund series A-28-Growth -direct-367 days | 10 | 1,25,00,000 | 13 |
SBI debt Fund series A-31-Growth -direct-367 days | 10 | 75,00,000 | 7 |
UTI Fixed Term Income Fund Series XIX - III (368 days) | 10 | 1,00,00,000 | 10 |
3,00,00,000 | 30 |
2.9.4 Details of Investments in liquid mutual fund units and certificates of deposit
The balances held in liquid mutual fund units as at March 31, 2016 is as follows:
in crore
Particulars | Units | Amount |
Reliance Money Manage Fund | 32,925 | 7 |
Reliance Liquid Fund Cash Plan | 2 | – |
ICICI Prudential Liquid - Direct Plan | 16,07,064 | 16 |
Reliance Liquid Fund Treasury Plan | 2,07,283 | 31 |
BSL Cash Manager - Growth | 3,89,089 | 14 |
22,36,363 | 68 |
The balances held in liquid mutual fund units as at March 31, 2015 is as follows:
in crore
Particulars | Units | Amount |
SBI Premier Liquid Fund - Direct Plan Daily Dividend | 9,97,094 | 100 |
IDFC Cash Fund - Direct Plan Daily Dividend | 29,30,197 | 293 |
Reliance Liquid Fund - Treasury Plan - Direct Plan Daily Dividend Option | 9,81,551 | 150 |
Reliance Mutual Fund- Liquid | 4,08,049 | 45 |
Birla Sunlife Mutual Fund.- Liquid | 47,37,327 | 48 |
ICICI Liquid Plan - Direct Plan Daily Dividend | 2,05,44,807 | 206 |
3,05,99,026 | 842 |
2.10 LONG-TERM LOANS AND ADVANCES
in crore
Particulars | As at March 31, | |
2016 | 2015 | |
Unsecured, considered good | ||
Capital advances | 933 | 664 |
Security deposits | 78 | 68 |
Rental deposits | 146 | 47 |
Other loans and advances | ||
Advance income taxes (net of provisions) | 5,230 | 4,089 |
Prepaid expenses | 87 | 7 |
Deferred Contract Cost | 333 | – |
Loans and advances to employees | ||
Housing and other loans | 25 | 31 |
6,832 | 4,906 | |
Unsecured, considered doubtful | ||
Loans and advances to employees | 19 | 12 |
6,851 | 4,918 | |
Less: Provision for doubtful loans and advances to employees | 19 | 12 |
6,832 | 4,906 |
2.11 OTHER NON-CURRENT ASSETS
in crore
Particulars | As at March 31, | |
2016 | 2015 | |
Others | ||
Advance to gratuity trust (refer note 2.24) | 4 | 27 |
Restricted deposits (refer note 2.28) | 62 | 58 |
66 | 85 |
2.12 TRADE RECEIVABLES
in crore
Particulars | As at March 31, | |
2016 | 2015 | |
Debts outstanding for a period exceeding six months | ||
Unsecured | ||
Considered doubtful | 200 | 182 |
Less: Provision for doubtful debts | 200 | 182 |
– | – | |
Other debts | ||
Unsecured | ||
Considered good | 11,330 | 9,713 |
Considered doubtful | 89 | 184 |
11,419 | 9,897 | |
Less: Provision for doubtful debts | 89 | 184 |
11,330 | 9,713 | |
11,330 | 9,713 |
2.13 CASH AND CASH EQUIVALENTS
in crore
Particulars | As at March 31, | |
2016 | 2015 | |
Cash on hand | – | – |
Balances with banks | ||
In current and deposit accounts | 27,420 | 26,195 |
Others | ||
Deposits with financial institutions | 5,277 | 4,172 |
32,697 | 30,367 | |
Balances with banks in unpaid dividend accounts | 5 | 3 |
Deposit accounts with more than 12 months maturity | 404 | 311 |
Balances with banks held as margin money deposits against guarantees | 342 | 185 |
Cash and cash equivalents as of March 31, 2016 and March 31, 2015 include restricted cash and bank balances of 492 crore and 364 crore, respectively. The restrictions are primarily on account of cash and bank balances held by irrevocable trusts controlled by the Company, bank balances held as margin money deposits against guarantees and balances held in unpaid dividend bank accounts.
The deposits maintained by the Group with banks and financial institutions comprise of time deposits, which can be withdrawn by the Group at any point without prior notice or penalty on the principal.
The details of balances as on Balance Sheet dates with banks are as follows:
in crore
Particulars | As at March 31, | |
2016 | 2015 | |
In current accounts | ||
ANZ Bank, Taiwan | 13 | 4 |
Axis Bank account, India | 1 | – |
Banamex Bank, Mexico | 5 | 10 |
Banamex Bank, Mexico (U.S. Dollar account) | 3 | 1 |
Bank of America, Mexico | 21 | 26 |
Bank of America, USA | 681 | 716 |
Bank Zachodni WBK S.A, Poland | 3 | 4 |
Bank of Tokyo-Mitsubishi UFJ, Ltd., Japan | 1 | 1 |
Barclays Bank, UK | 19 | 10 |
Bank Leumi, Israel (US Dollar account) | 17 | 7 |
Bank Leumi, Israel (Israeli Sheqel account) | 10 | 15 |
Bank Leumi, Israel (Euro account) | – | 3 |
China Merchants Bank, China | 8 | 4 |
Citibank N.A, China | 65 | 20 |
Citibank N.A., China (U.S. Dollar account) | 72 | 24 |
Citibank N.A., Costa Rica | 2 | 5 |
Citibank N.A., Czech Republic | – | 6 |
Citibank N.A., Australia | 72 | 25 |
Citibank N.A., Brazil | 5 | 27 |
Citibank N.A., Dubai | 1 | 1 |
Citibank N.A., India | 1 | 7 |
Citibank N.A., Japan | 15 | 20 |
Citibank N.A., New Zealand | 6 | 6 |
Citibank N.A., Portugal | 2 | – |
Citibank N.A., Singapore | 3 | 2 |
Citibank N.A., South Africa | 5 | 3 |
CitiBank N.A., South Africa (Euro account) | 1 | – |
Citibank N.A., Philippines, (U.S. Dollar account) | 1 | 1 |
CitiBank N.A., USA | 60 | – |
CitiBank N.A., EEFC (U.S. Dollar account) | – | 2 |
Commerzbank, Germany | 19 | 19 |
Crédit Industriel et Commercial Bank, France | 4 | 1 |
Deutsche Bank, India | 8 | 5 |
Deutsche Bank, Philippines | 13 | 3 |
Deutsche Bank, Philippines (U.S. Dollar account) | 1 | 3 |
Deutsche Bank, Poland | 5 | 19 |
Deutsche Bank, Poland (Euro account) | – | 1 |
Deutsche Bank, EEFC (Australian Dollar account) | 2 | – |
Deutsche Bank, EEFC (Euro account) | 32 | 3 |
Deutsche Bank, EEFC (Swiss Franc account) | 5 | 5 |
Deutsche Bank, EEFC (U.S. Dollar account) | 96 | 8 |
Deutsche Bank, EEFC (United Kingdom Pound Sterling account) | 9 | 5 |
Deutsche Bank, Belgium | 59 | 13 |
Deutsche Bank, Malaysia | 9 | – |
Deutsche Bank, Czech Republic | 14 | 6 |
Deutsche Bank, Czech Republic (Euro account) | 1 | 2 |
Deutsche Bank, Czech Republic (U.S. Dollar account) | 28 | 20 |
Deutsche Bank, France | 10 | 2 |
Deutsche Bank, Germany | 17 | 8 |
Deutsche Bank, Netherlands | 6 | 2 |
Deutsche Bank, Russia | 2 | – |
Deutsche Bank, Russia (U.S. Dollar account) | 1 | – |
Deutsche Bank, Singapore | 4 | 5 |
Deutsche Bank, Spain | 1 | 1 |
Deutsche Bank, Switzerland | 1 | – |
Deutsche Bank, United Kingdom | 170 | 25 |
HSBC Bank, Brazil | 5 | 3 |
HSBC Bank, Hong Kong | 1 | 44 |
ICICI Bank, India | 72 | 30 |
ICICI Bank, EEFC (U.S. Dollar account) | 10 | 14 |
ING Bank, Belgium | 3 | – |
Nordbanken, Sweden | 15 | 3 |
Punjab National Bank, India | 4 | 7 |
Raiffeisen Bank, Czech Republic | 5 | – |
Raiffeisen Bank, Romania | 4 | – |
Royal Bank of Scotland, China | – | 45 |
Royal Bank of Scotland, China (U.S. Dollar account) | – | 47 |
Royal Bank of Canada, Canada | 78 | 16 |
Santander Bank, Argentina | – | 2 |
Santander Bank, Spain | – | 1 |
State Bank of India, India | 8 | 2 |
Silicon Valley Bank, USA | 5 | 66 |
Silicon Valley Bank, (Euro account) | 65 | 16 |
Silicon Valley Bank, (United Kingdom Pound Sterling account) | 19 | 5 |
Union Bank of Switzerland AG | 15 | 12 |
Union Bank of Switzerland AG, (Euro account) | 12 | 4 |
Union Bank of Switzerland AG, (Australian Dollar account) | 2 | – |
Union Bank of Switzerland AG, (U.S. Dollar account) | 28 | 2 |
Union Bank of Switzerland AG, (United Kingdom Pound Sterling account) | 4 | 1 |
Wells Fargo Bank N.A., USA | 23 | 38 |
Westpac, Australia | 6 | 6 |
1,994 | 1,470 |
in crore
Particulars | As at March 31, | |
2016 | 2015 | |
In deposit accounts | ||
Allahabad Bank | – | 200 |
Andhra Bank | 948 | 171 |
Axis Bank | 1,340 | 1,495 |
Bank of Baroda | – | 2,394 |
Bank of India | 77 | 2,691 |
Canara Bank | 2,115 | 3,006 |
Central Bank of India | 1,538 | 1,383 |
Citibank | 125 | – |
Corporation Bank | 1,285 | 1,277 |
Deutsche Bank, Poland | 237 | 121 |
Development Bank of Singapore | – | 35 |
HDFC Bank Ltd. | 2,650 | 2,097 |
ICICI Bank | 4,049 | 3,166 |
IDBI Bank | 1,900 | 856 |
Indian Overseas Bank | 1,250 | 651 |
Indusind Bank | 250 | 75 |
ING Vysya Bank | – | 100 |
Jammu & Kashmir Bank | 25 | – |
Kotak Mahindra Bank Limited | 537 | 5 |
National Australia Bank Limited | 1 | 87 |
Oriental Bank of Commerce | 1,967 | 1,580 |
Punjab National Bank | 18 | 592 |
South Indian Bank | 23 | 27 |
State Bank of India | 2,310 | – |
Syndicate Bank | 1,266 | 407 |
Union Bank of India | 140 | 1,051 |
Vijaya Bank | 304 | 466 |
Yes Bank | 724 | 604 |
25,079 | 24,537 | |
In unpaid dividend accounts | ||
Axis Bank - Unpaid Dividend Account | 2 | – |
HDFC Bank - Unpaid Dividend account | 1 | 1 |
ICICI bank - Unpaid Dividend account | 2 | 2 |
5 | 3 | |
In margin money deposits against guarantees | ||
Canara Bank | 132 | 128 |
Citibank | 3 | – |
ICICI Bank | 150 | – |
State Bank of India | 57 | 57 |
342 | 185 | |
Deposits with financial institutions | ||
HDFC Limited | 5,277 | 4,172 |
5,277 | 4,172 | |
Total cash and cash equivalents as per Balance Sheet | 32,697 | 30,367 |
2.14 SHORT-TERM LOANS AND ADVANCES
in crore
Particulars | As at March 31, | |
2016 | 2015 | |
Unsecured, considered good | ||
Others | ||
Advances | ||
Prepaid expenses | 201 | 98 |
Deferred Contract Cost | 48 | – |
For supply of goods and rendering of services | 110 | 79 |
Withholding and other taxes receivable | 1,799 | 1,364 |
Others | 25 | 9 |
2,183 | 1,550 | |
Restricted deposits (refer note 2.28) | 1,238 | 1,100 |
Unbilled revenues | 3,029 | 2,845 |
MAT credit entitlement | – | – |
Interest accrued but not due | 762 | 444 |
Loans and advances to employees | ||
Salary advances | 229 | 64 |
Housing and other loans | 74 | 158 |
Security deposits | 7 | 4 |
Rental deposits | 13 | 24 |
Mark-to-market forward and options contracts | 116 | 101 |
7,651 | 6,290 |
2.15 INCOME FROM SOFTWARE SERVICES AND PRODUCTS
in crore
Particulars | Year ended March 31, | |
2016 | 2015 | |
Income from software services | 60,528 | 51,666 |
Income from software products | 1,913 | 1,653 |
62,441 | 53,319 |
2.16 OTHER INCOME
in crore
Particulars | Year ended March 31, | |
2016 | 2015 | |
Interest received on deposits with banks and others | 2,634 | 2,734 |
Dividend received on investment in mutual fund units | 64 | 158 |
Gain on sale of Investments | 3 | 14 |
Gains / (losses) on foreign currency, net | 165 | 480 |
Miscellaneous income, net | 262 | 44 |
3,128 | 3,430 |
2.17 EXPENSES
in crore
Particulars | Year ended March 31, | |
2016 | 2015 | |
Employee benefit expenses | ||
Salaries and bonus including overseas staff expenses | 33,549 | 29,022 |
Contribution to provident and other funds | 660 | 646 |
Employee compensation expense (Refer note 2.1) | 7 | 2 |
Staff welfare | 202 | 132 |
34,418 | 29,802 | |
Cost of software packages and others | ||
For own use | 740 | 855 |
Third party items bought for service delivery to clients | 534 | 189 |
1,274 | 1,044 |
in crore
Particulars | Year ended March 31, | |
2016 | 2015 | |
Other expenses | ||
Office maintenance | 581 | 420 |
Power and fuel | 217 | 219 |
Brand building | 198 | 158 |
Rent | 360 | 309 |
Rates and taxes, excluding taxes on income | 109 | 126 |
Repairs to building | 190 | 99 |
Repairs to plant and machinery | 92 | 76 |
Computer maintenance | 151 | 125 |
Consumables | 41 | 44 |
Insurance charges | 60 | 53 |
Provision for post-sales client support and warranties | 8 | 39 |
Commission to non-whole time directors | 9 | 9 |
Provision for bad and doubtful debts and advances | (46) | 175 |
Auditor's remuneration | ||
Statutory audit fees | 7 | 5 |
Taxation matters | – | – |
Other services | – | – |
Reimbursement of expenses | – | – |
Bank charges and commission | 9 | 12 |
Contributions towards CSR (Refer note 2.30) | 216 | 254 |
Others | 295 | 355 |
2,497 | 2,478 |
2.18 TAX EXPENSE
in crore
Particulars | Year ended March 31, | |
2016 | 2015 | |
Current tax | ||
Income taxes | 5,315 | 4,835 |
Deferred taxes | (14) | 76 |
5,301 | 4,911 |
Income tax expense for the year ended March 31, 2016 and March 31, 2015 is reversals (net of provisions) of 309 crore and 158 crore pertaining to earlier periods.
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 as per Indian Income Tax Act, 1961. Infosys' operations are conducted through Software Technology Parks ('STPs') and Special Economic Zones ('SEZs'). Income from STPs were tax exempt for the first 10 years from the fiscal year in which the unit commences software development, or March 31, 2011 which ever is earlier. Income from SEZs Unit 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.
2.19 CONTINGENT LIABILITIES AND COMMITMENTS (TO THE EXTENT NOT PROVIDED FOR)
in crore
Particulars | As at March 31, | |
2016 | 2015 | |
Contingent liabilities : | ||
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 | 56 | 43 |
Claims against the Company, not acknowledged as debts(1) | 284 | 264 |
[Net of amount paid to statutory authorities 4,409 crore (3,598 crore)] | ||
Commitments : | ||
Estimated amount of unexecuted capital contracts | ||
(net of advances and deposits) | 1,486 | 1,574 |
Other Commitment * | 79 | – |
* | Uncalled capital pertaining to investment in Vertex Ventures US Fund I, L.P |
(1) | Claims against the company not acknowledged as debts for the year ended March 31, 2016 include demand from the Indian Income tax authorities for payment of tax of 4,135 crore (3,337 crore), including interest of 1,224 crore (964 crore) upon completion of their tax assessment for fiscal 2007, fiscal 2008, fiscal 2009, fiscal 2010 and fiscal 2011 (For the year ended March 31, 2015 - upon completion of their tax assessment for fiscal 2006, fiscal 2007, fiscal 2008, fiscal 2009 and fiscal 2010). These demands were paid to statutory tax authorities which includes 913 crore paid during the year ended March 31, 2016 consequent to demand from tax authorities in India for fiscal 2011 towards denial of certain tax benefits. The company has filed an appeal with the income tax appellate authorities. |
Demand for fiscal 2007, fiscal 2008 and fiscal 2009 includes disallowance of a portion of the deduction claimed by the company under Section 10A of the income Tax Act as 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. Demand for fiscal 2007, fiscal 2008, fiscal 2009, fiscal 2010 and fiscal 2011 also includes disallowance of portion of profit earned outside India from the STP units under section 10A of the Income Tax Act and disallowance of profits earned from SEZ units under section 10AA of the Income Tax Act. The matters for fiscal 2007, fiscal 2008 and fiscal 2009 are pending before the Commissioner of Income Tax (Appeals) Bangalore. The matter for fiscal 2010 and fiscal 2011 is pending before Hon’ble Income Tax Appellate Tribunal (ITAT) Bangalore. The company is contesting the demand and the management including its tax advisors believes that its position will likely be upheld in the appellate process. The management believes that the ultimate outcome of these proceedings will not have a material adverse effect on the Company's financial position and results of operations. |
The company is subject to legal proceedings and claims, which have arisen in the ordinary course of business. The company’s management does not reasonably expect that these legal actions, when ultimately concluded and determined, will have a material and adverse effect on the company’s results of operations or financial condition.
2.20 DERIVATIVE INSTRUMENTS
The following table gives details in respect of outstanding foreign exchange forward and option contracts:
Particulars | As at March 31, | |||
2016 | 2015 | |||
in million | in crore | in million | in crore | |
Forward contracts outstanding | ||||
In USD | 510 | 3,379 | 716 | 4,475 |
In Euro | 100 | 750 | 67 | 447 |
In GBP | 65 | 623 | 73 | 671 |
In AUD | 55 | 281 | 98 | 466 |
In CAD | – | – | 12 | 59 |
In SGD | – | – | 25 | 114 |
In CHF | 25 | 173 | – | – |
Options outstanding | ||||
In USD | 125 | 828 | – | – |
In Euro | – | – | – | – |
6,034 | 6,232 |
As of the Balance Sheet date, the Group's net foreign currency exposures that are not hedged by a derivative instrument or otherwise is 1,506 crore (568 crore as at March 31, 2015).
The foreign exchange forward and option contracts mature within 12 months. The table below analyzes the derivative financial instruments into relevant maturity groupings based on the remaining period as of the balance sheet date:
in crore
Particulars | As at March 31, | |
2016 | 2015 | |
Not later than one month | 1,577 | 1,484 |
Later than one month and not later than three months | 3,420 | 3,781 |
Later than three months and not later than one year | 1,037 | 967 |
6,034 | 6,232 |
The Group recognized a gain on derivative financial instruments of 29 crore and gain of 514 crore during the year ended March 31, 2016 and March 31, 2015, respectively, which is included in other income.
2.21 RELATED PARTY TRANSACTIONS
Name of subsidiaries | Country | Holding as at March 31, | |
2016 | 2015 | ||
Infosys BPO Limited (Infosys BPO) | India | 99.98% | 99.98% |
Infosys Technologies (China) Co. Limited (Infosys China) | China | 100% | 100% |
Infosys Technologies S. de R. L. de C. V. (Infosys Mexico) | Mexico | 100% | 100% |
Infosys Technologies (Sweden) AB. (Infosys Sweden) | Sweden | 100% | 100% |
Infosys Technologies (Shanghai) Company Limited (Infosys Shanghai) | China | 100% | 100% |
Infosys Tecnologia DO Brasil LTDA. (Infosys Brasil) | Brazil | 100% | 100% |
Infosys Public Services, Inc. USA (Infosys Public Services) | U.S. | 100% | 100% |
Infosys Americas Inc., (Infosys Americas) | U.S. | 100% | 100% |
Infosys (Czech Republic) Limited s.r.o. (formerly Infosys BPO s. r. o) (1) | Czech Republic | 99.98% | 99.98% |
Infosys Poland, Sp z.o.o (formerly Infosys BPO Poland, Sp z.o.o)(1) | Poland | 99.98% | 99.98% |
Infosys BPO S.de.r.l.De.C.V(1)(17) | Mexico | – | – |
Infosys McCamish Systems LLC (1) | U.S. | 99.98% | 99.98% |
Portland Group Pty Ltd(1) | Australia | 99.98% | 99.98% |
Portland Procurement Services Pty Ltd(5) | Australia | – | – |
Infosys BPO Americas LLC.(1)(16) | U.S. | – | – |
Infosys Technologies (Australia) Pty. Limited (Infosys Australia) (2) | Australia | 100% | 100% |
EdgeVerve Systems Limited (EdgeVerve) (7) | India | 100% | 100% |
Infosys Consulting Holding AG (Infosys Lodestone) (formerly Lodestone Holding AG) | Switzerland | 100% | 100% |
Lodestone Management Consultants Inc. (3) | U.S. | 100% | 100% |
Infosys Management Consulting Pty Limited (formerly Lodestone Management Consultants Pty Limited) (3) | Australia | 100% | 100% |
Infosys Consulting AG (formerly Lodestone Management Consultants AG) (3) | Switzerland | 100% | 100% |
Lodestone Augmentis AG (2)(6) | Switzerland | 100% | 100% |
Lodestone GmbH (formerly Hafner Bauer & Ödman GmbH) (2)(3) | Switzerland | 100% | 100% |
Lodestone Management Consultants (Belgium) S.A. (4) | Belgium | 99.90% | 99.90% |
Infosys Consulting GmbH (formerly Lodestone Management Consultants GmbH) (3) | Germany | 100% | 100% |
Infosys Consulting Pte Ltd. (formerly Lodestone Management Consultants Pte Ltd) (3) | Singapore | 100% | 100% |
Infosys Consulting SAS (formerly Lodestone Management Consultants SAS) (3) | France | 100% | 100% |
Infosys Consulting s.r.o.(formerly Lodestone Management Consultants s.r.o.) (3) | Czech Republic | 100% | 100% |
Lodestone Management Consultants GmbH (3) | Austria | 100% | 100% |
Lodestone Management Consultants Co., Ltd. (3) | China | 100% | 100% |
Infy Consulting Company Ltd. (formerly Lodestone Management Consultants Ltd.) (3) | U.K. | 100% | 100% |
Infosys Consulting B.V. (Lodestone Management Consultants B.V.) (3) | Netherlands | 100% | 100% |
Infosys Consulting Ltda. (formerly Lodestone Management Consultants Ltda.) (4) | Brazil | 99.99% | 99.99% |
Infosys Consulting Sp. z.o.o (formerly Lodestone Management Consultants Sp. z o.o.) (3) | Poland | 100% | 100% |
Lodestone Management Consultants Portugal, Unipessoal, Lda. (3) | Portugal | 100% | 100% |
S.C. Infosys Consulting S.R.L.(formerly S.C. Lodestone Management Consultants S.R.L.) (3) | Romania | 100% | 100% |
Infosys Consulting S.R.L. (formerly Lodestone Management Consultants S.R.L.) (3) | Argentina | 100% | 100% |
Infosys Canada Public Services Ltd.(8) | Canada | – | – |
Infosys Nova Holdings LLC. (Infosys Nova)(9) | U.S. | 100% | 100% |
Panaya Inc. (Panaya) (10) | U.S. | 100% | 100% |
Panaya Ltd.(11) | Israel | 100% | 100% |
Panaya GmbH(11) | Germany | 100% | 100% |
Panaya Pty Ltd.(11) | Australia | – | – |
Panaya Japan Co. Ltd.(11) | Japan | 100% | 100% |
Skava Systems Pvt. Ltd. (Skava Systems)(12) | India | 100% | – |
Kallidus Inc. (Kallidus)(13) | U.S. | 100% | – |
Noah Consulting LLC (Noah) (14) | U.S. | 100% | – |
Noah Information Management Consulting Inc. (Noah Canada) (15) | Canada | 100% | – |
(1) | Wholly owned subsidiary of Infosys BPO. |
(2) | Under liquidation |
(3) | Wholly owned subsidiaries of Infosys Consulting Holding AG (formerly Lodestone Holding AG) |
(4) | Majority owned and controlled subsidiaries of Infosys Consulting Holding AG (formerly Lodestone Holding AG) |
(5) | Wholly owned subsidiary of Portland Group Pty Ltd. Liquidated effective May 14, 2014. |
(6) | Wholly owned subsidiary of Infosys Consulting AG (formerly Lodestone Management Consultants AG) |
(7) | Incorporated effective February 14, 2014 (Refer note 2.29.5) |
(8) | Wholly owned subsidiary of Infosys Public Services, Inc. Incorporated effective December 19, 2014 |
(9) | Incorporated effective January 23, 2015 |
(10) | On March 5, 2015, Infosys acquired 100% of the voting interest in Panaya Inc. (Refer note 2.29.2) |
(11) | Wholly owned subsidiary of Panaya Inc. |
(12) | On June 2, 2015, Infosys acquired 100% of the voting interest in Skava Systems (Refer note 2.29.3) |
(13) | On June 2, 2015, Infosys acquired 100% of the voting interest in Kallidus Inc. (Refer note 2.29.3) |
(14) | On November 16, 2015, Infosys acquired 100% of the membership interests in Noah (Refer Note 2.29.4) |
(15) | Wholly owned subsidiary of Noah |
(16) | Incorporated effective November 20, 2015 |
(17) | Liquidated effective March 15, 2016 |
Infosys has provided guarantee for performance of certain contracts entered into by its subsidiaries.
Name of Associates | Country | Holding as at March 31, | |
2016 | 2015 | ||
DWA Nova LLC(1) | U.S. | 16% | 20% |
(1) | Associate of Infosys Nova Holdings LLC. During the year ended March 31, 2015, the group acquired 20% of the equity interests in DWA Nova LLC for a cash consideration of 94 crore. The Company has made this investment to form a new company along with Dream Works Animation (DWA). The new company ,DWA Nova LLC, will develop and commercialize image generation technology in order to provide end-to-end digital manufacturing capabilities for companies involved in the design, manufacturing, marketing or distribution of physical consumer products. As of March 31, 2016, Infosys Nova holds 16% of the equity interest in DWA Nova LLC. |
List of other related party
Particulars | Country | Nature of relationship |
Infosys Limited Employees' Gratuity Fund Trust | India | Post-employment benefit plan of Infosys |
Infosys Limited Employees' Provident Fund Trust | India | Post-employment benefit plan of Infosys |
Infosys Limited Employees' Superannuation Fund Trust | India | Post-employment benefit plan of Infosys |
Infosys BPO Limited Employees' Superannuation Fund Trust | India | Post-employment benefit plan of Infosys BPO |
Infosys BPO Limited Employees' Gratuity Fund Trust | India | Post-employment benefit plan of Infosys BPO |
Edgeverve Systems Limited EmployeesGratuity Fund Trust | India | Post-employment benefit plan of Edgeverve |
Edgeverve Systems Limited EmployeesSuperannuation Fund Trust | India | Post-employment benefit plan of Edgeverve |
Infosys Limited Employees’ Welfare Trust | India | Controlled trust |
Infosys Employee Welfare Trust | India | Controlled trust |
Infosys Science Foundation | India | Controlled trust |
Refer Notes 2.24, 2.25 and 2.26 for information on transactions with post-employment benefit plans mentioned above.
List of key management personnel
Whole time directors
S. D. Shibulal (resigned effective July 31, 2014)
Srinath Batni (resigned effective July 31, 2014)
B. G. Srinivas (resigned effective June 10, 2014)
U B Pravin Rao
Dr. Vishal Sikka (appointed effective June 14, 2014)
Non-whole-time directors
N. R. Narayana Murthy (resigned effective October 10, 2014)
S. Gopalakrishnan (resigned effective October 10, 2014)
K.V.Kamath ( resigned effective June 5, 2015)
Dr. Omkar Goswami (retired effective December 31, 2014)
Prof. Jeffrey S. Lehman
R. Seshasayee
Ann M. Fudge (retired effective June 14, 2014)
Ravi Venkatesan
Kiran Mazumdar Shaw
Carol M. Browner (resigned effective November 23, 2015)
Prof. John W. Etchemendy (appointed effective December 4, 2014)
Roopa Kudva (appointed effective February 4, 2015)
Dr. Punita Kumar-Sinha (appointed effective January 14, 2016)
Executive Officers
M. D. Ranganath, Chief Financial Officer and Executive Vice President (effective October 12, 2015)
David D. Kennedy, Executive Vice President, General Counsel and Chief Compliance Officer (effective November 1, 2014)
Rajiv Bansal, Chief Financial Officer (till October 12, 2015)
Srikantan Moorthy, Group Head of Human Resource Development (till March 31, 2015)
Parvatheesam K, Company Secretary (resigned effective January 10, 2015)
Company Secretary
A.G.S. Manikantha (appointed effective June 22, 2015)
Related party transactions:
Transaction with key management personnel:
The table below describes the compensation to key managerial personnel which comprise directors and members of executive officers:
in crore
Particulars | Year ended March 31, | |
2016 | 2015 | |
Salaries and other employee benefits to whole-time directors and members of executive officers (1)(2)(3)(4) | 101 | 30 |
Commission and other benefits to non-executive/independent directors | 10 | 9 |
Total |
111 | 39 |
(1) | Includes stock compensation expense of 7 crore for the year ended March 31, 2016 (2 crore for the year ended March 31, 2015) to CEO in line with the compensation plan approved by the shareholders. |
(2) | Includes payables to CFO who stepped down w.e.f October 12, 2015. |
(3) | Includes payment of variable pay amounting to 14 crore for the year ended March 31, 2015 to CEO as decided by the Nomination and Remuneration committee in line with the compensation plan approved by the shareholders. |
(4) | Includes provision for variable pay amounting to $4.33 million (approximately 29 crore) for the year ended March 31, 2016 to CEO. The shareholders in the EGM dated July 30, 2014 had approved a variable pay of $4.18 million (approximately28 crore at current exchange rate) at a target level and also authorized the Board to alter and vary the terms of remuneration. Accordingly, the Board based on the recommendations of the Nominations committee approved on April 15, 2016, $4.33 million ( approximately 29 crore) as variable pay for the year ended March 31, 2016. |
Additional information pursuant to para 2 of general instructions for the preparation of Consolidated Financial Statements
in crore
Name of entity | Net Assets | Share in profit or loss | ||
as %age of consolidated net assets | Amount | as %age of consolidated profit or loss | Amount | |
Infosys Ltd. | 89.2% | 57,157 | 96.0% | 15,786 |
Indian Subsidiaries | ||||
Infosys BPO | 5.4% | 3,475 | 3.5% | 570 |
EdgeVerve | 1.8% | 1,151 | -0.5% | (90) |
Skava Systems | 0.0% | 15 | 0.0% | 5 |
Foreign Subsidiaries | ||||
Infosys China | 0.2% | 107 | -0.5% | (86) |
Infosys Mexico | 0.1% | 96 | 0.1% | 15 |
Infosys Sweden | -0.1% | (40) | -0.1% | (17) |
Infosys Shanghai | 1.1% | 677 | 0.0% | (1) |
Infosys Brasil | 0.1% | 90 | 0.2% | 29 |
Infosys Public Services | 0.4% | 271 | 0.7% | 111 |
Infosys Americas | 0.0% | 1 | 0.0% | – |
Infosys (Czech Republic) Limited s.r.o. (formerly Infosys BPO s. r. o) | 0.1% | 51 | 0.0% | 4 |
Infosys BPO (Poland) Sp Z.o.o | 0.6% | 358 | 0.6% | 95 |
Infosys McCamish Systems LLC | 0.1% | 53 | 0.2% | 25 |
Portland Group Pty Ltd | 0.2% | 103 | 0.2% | 31 |
Infosys Australia | 0.1% | 37 | 0.0% | 1 |
Infosys Lodestone | 0.5% | 301 | 0.0% | 6 |
Lodestone Management Consultants Inc | 0.0% | 18 | 0.1% | 22 |
Lodestone Management Consultants Pty Limited | 0.0% | (20) | 0.0% | (6) |
Infosys Consulting AG | 0.1% | 88 | 0.3% | 43 |
Lodestone Augmentis AG | 0.0% | 2 | 0.0% | – |
Hafner Bauer & Ödman GmbH | 0.0% | – | 0.0% | – |
Lodestone Management Consultants (Belgium) S.A. | 0.0% | (22) | 0.0% | (4) |
Infosys Consulting GmbH | 0.1% | 33 | -0.1% | (11) |
Infosys Consulting Pte Ltd. | -0.1% | (45) | -0.1% | (9) |
Infosys Consulting SAS | 0.0% | (9) | 0.0% | (7) |
Infosys Consulting s.r.o. | 0.0% | 4 | 0.0% | 3 |
Lodestone Management Consultants GmbH | 0.0% | (2) | 0.0% | – |
Lodestone Management Consultants Co., Ltd | -0.1% | (33) | -0.1% | (19) |
Infosys Consulting Ltd. | 0.1% | 44 | 0.0% | 6 |
Infosys Consulting B.V. | 0.0% | 15 | 0.1% | 12 |
Infosys Consulting Ltda. | 0.0% | 23 | -0.1% | (10) |
Infosys Consulting Sp. Z.o.o | 0.0% | 7 | 0.0% | 7 |
Lodestone Management Consultants Portugal, Unipessoal, Lda. | 0.0% | (2) | 0.0% | – |
S.C. Infosys Consulting S.R.L. | 0.0% | 6 | 0.0% | 1 |
Infosys Consulting S.R.L. | 0.0% | 3 | 0.0% | 1 |
Infosys Nova | 0.2% | 99 | 0.0% | – |
Panaya | 0.1% | 66 | 0.0% | 7 |
Panaya Ltd. | -0.2% | (129) | -0.4% | (71) |
Panaya Gmbh | 0.0% | (4) | 0.0% | (3) |
Panaya Japan Co. Ltd. | 0.0% | (2) | 0.0% | 1 |
Kallidus | 0.1% | 77 | 0.3% | 51 |
Noah | 0.0% | (6) | -0.3% | (57) |
Noah Canada | 0.0% | (12) | 0.0% | (2) |
Subtotal | 100% | 64,102 | 100% | 16,439 |
Adjustment arising out of consolidation | (6,382) | (2,779) | ||
Minority interest in subsidiaries | – | – | ||
Associates | ||||
DWA Nova LLC | 3 | (3) | ||
Controlled Trusts | 103 | 21 | ||
Total | 57,826 | 13,678 |
2.22 RESEARCH AND DEVELOPMENT EXPENDITURE
in crore
Particulars | Year ended March 31, | |
2016 | 2015 | |
Expenditure at Department of Scientific and Industrial Research (DSIR) approved R&D centres (eligible for weighted deduction) (1) |
||
Capital Expenditure | – | – |
Revenue Expenditure | 174 | 160 |
Other R&D Expenditure | ||
Capital Expenditure | 31 | 15 |
Revenue Expenditure | 538 | 513 |
Total R&D Expenditure | ||
Capital Expenditure | 31 | 15 |
Revenue Expenditure | 712 | 673 |
(1) | During year ended March 31, 2016 and March 31, 2015 the Group has claimed weighted tax deduction on eligible research and development expenditure based on the approval received from Department of Scientific and Industrial Research (DSIR) on November 23, 2011 which has been renewed effective April 2014. The weighted tax deduction is equal to 200% of such expenditure incurred. |
The eligible R&D revenue and capital expenditure are 174 crore and Nil for the year ended March 31, 2016 and 160 crore and Nil for the year ended March 31, 2015.
2.23 SEGMENT REPORTING
The group's operations predominantly relate to providing end-to-end business solutions to enable clients to enhance business performance. During the year ended March 31, 2016, the group reorganized its segments to enhance executive customer relationships, improve focus of sales investments and increase management oversight. However the reorganizations did not have any impact in the reportable segments as per AS 17 'Segment reporting' apart from Manufacturing being named as Manufacturing and Hi-TECH. Segment information has been presented both along industry classes and geographic segmentation of customers, industry being the primary segment. 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 significant accounting policies.
Industry segments for the Company are primarily enterprises in Financial Services and Insurance (FSI) , enterprises in Manufacturing and Hi-TECH (MFG & Hi-TECH), enterprises in the Energy & utilities, Communication and Services (ECS),enterprises in Retail, Consumer packaged goods and Logistics (RCL) and enterprises in Life Sciences and Healthcare (LSH). Geographic segmentation is based on business sourced from that geographic region and delivered from both on-site and off-shore locations. 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 and identifiable operating expenses in relation to segments are categorized based on items that are individually identifiable to that segment. Allocated expenses of segments include expenses incurred for rendering services from the company's offshore software development centers and on-site expenses, which 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 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 against the total income of the Company.
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. 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.
Industry Segments
Year ended March 31, 2016 and March 31, 2015:
in crore
Particulars | FSI | MFG
& Hi-TECH |
ECS | RCL | LSH | Total |
Income from software services and products | 20,624 | 14,559 | 12,031 | 10,421 | 4,806 | 62,441 |
17,721 | 12,470 | 10,562 | 8,966 | 3,600 | 53,319 | |
Identifiable operating expenses | 9,991 | 7,350 | 5,601 | 5,016 | 2,226 | 30,184 |
8,384 | 6,322 | 5,011 | 4,083 | 1,791 | 25,591 | |
Allocated expenses | 4,876 | 3,574 | 2,949 | 2,558 | 1,180 | 15,137 |
4,147 | 3,053 | 2,578 | 2,194 | 881 | 12,853 | |
Segmental operating income | 5,757 | 3,635 | 3,481 | 2,847 | 1,400 | 17,120 |
5,190 | 3,095 | 2,973 | 2,689 | 928 | 14,875 | |
Unallocable expenses | 1,266 | |||||
1,021 | ||||||
Other income | 3,128 | |||||
3,430 | ||||||
Profit before tax | 18,982 | |||||
17,284 | ||||||
Tax expense | 5,301 | |||||
4,911 | ||||||
Share in net profit/(loss) of associate | (3) | |||||
(1) | ||||||
Profit for the year | 13,678 | |||||
12,372 |
Geographic Segments
Year ended March 31, 2016 and March 31, 2015:
in crore
Particulars | North America | Europe | India | Rest of the World | Total |
Income from software services and products | 39,139 | 14,373 | 1,623 | 7,306 | 62,441 |
32,794 | 12,829 | 1,284 | 6,412 | 53,319 | |
Identifiable operating expenses | 19,278 | 6,938 | 711 | 3,257 | 30,184 |
15,647 | 6,260 | 704 | 2,980 | 25,591 | |
Allocated expenses | 9,599 | 3,512 | 338 | 1,688 | 15,137 |
8,021 | 3,120 | 268 | 1,444 | 12,853 | |
Segmental operating income | 10,262 | 3,923 | 574 | 2,361 | 17,120 |
9,126 | 3,449 | 312 | 1,988 | 14,875 | |
Unallocable expenses | 1,266 | ||||
1,021 | |||||
Other income, net | 3,128 | ||||
3,430 | |||||
Profit before tax | 18,982 | ||||
17,284 | |||||
Tax expense | 5,301 | ||||
4,911 | |||||
Share in net profit/(loss) of associate | (3) | ||||
(1) | |||||
Profit for the year | 13,678 | ||||
12,372 |
2.24 GRATUITY PLAN
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 and plan assets :
in crore
Particulars | As at March 31, | |
2016 | 2015 | |
Obligations at year beginning | 816 | 707 |
Service cost | 118 | 95 |
Interest cost | 61 | 60 |
Addition through business acquisition | 1 | – |
Actuarial (gain)/ loss | 23 | 70 |
Benefits paid | (75) | (116) |
Obligations at year end | 944 | 816 |
Change in plan assets | ||
Plan assets at year beginning, at fair value | 836 | 717 |
Expected return on plan assets | 81 | 69 |
Actuarial gain/(loss) | (6) | 4 |
Contributions | 111 | 162 |
Benefits paid | (75) | (116) |
Plan assets at year end, at fair value | 947 | 836 |
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 | 947 | 836 |
Present value of the defined benefit obligations at the end of the year | 944 | 816 |
Asset recognized in the balance sheet | 4 | 27 |
Liability recognized in the balance sheet | (1) | (7) |
Assumptions | ||
Interest rate | 7.80% | 7.80% |
Estimated rate of return on plan assets | 9.50% | 9.50% |
Weighted expected rate of salary increase | 8.00% | 8.00% |
in crore
Particulars | As at March 31, | ||||
2016 | 2015 | 2014 | 2013 | 2012 | |
Obligations at year end | 944 | 816 | 707 | 652 | 600 |
Plan assets at year end, at fair value | 947 | 836 | 717 | 681 | 613 |
Funded Status Surplus | 4 | 27 | 10 | 29 | 13 |
Funded Status Deficit | (1) | (7) | – | – | – |
Experience adjustments: | |||||
(Gain)/loss: | |||||
Experience adjustment on plan liabilities | 23 | 15 | 16 | (50) | 14 |
Experience adjustment on plan assets | 6 | (4) | 3 | – | – |
Net gratuity cost for the year ended March 31, 2016 and March 31, 2015 comprises of the following components:
in crore
Particulars | Year ended March 31, | |
2016 | 2015 | |
Gratuity cost for the year | ||
Service cost | 118 | 95 |
Interest cost | 61 | 60 |
Expected return on plan assets | (81) | (69) |
Actuarial (gain)/loss | 29 | 66 |
Plan amendment amortisation | (4) | (4) |
Net gratuity cost | 123 | 148 |
Actual return on plan assets | 75 | 73 |
As at March 31, 2016 and March 31, 2015, the plan assets have been primarily invested in insurer managed funds. 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. The Group expects to contribute approximately 98 crore to the gratuity trust during fiscal 2017.
Effective July 1, 2007, the Company revised the employee death benefits provided under the gratuity plan, and included all eligible employees under a consolidated term insurance cover. Accordingly, the obligations under the gratuity plan reduced by 37 crore, which is being amortized on a straight line basis to the statement of profit and loss over 10 years representing the average future service period of the employees. The unamortized liability as at March 31, 2016 and March 31, 2015 amounted to 4 crore and 7 crore, respectively and disclosed under 'Other long-term liabilities and 'other current liabilities'.
2.25 PROVIDENT FUND
The Group contributed 413 crore and 345 crore towards provident fund during the year ended March 31, 2016 and March 31, 2015, respectively.
The Guidance on Implementing AS 15, Employee Benefits (revised 2005) issued by Accounting Standards Board (ASB) states that benefits involving employer established provident funds, which require interest shortfalls to be recompensed are to be considered as defined benefit plans. The actuary has provided a valuation for provident fund liabilities on the basis of guidance issued by Actuarial Society of India and based on the below provided assumptions there is no shortfall as at March 31, 2016, 2015, 2014, 2013 and 2012, respectively.
The details of fund and plan asset position are given below:
in crore
Particulars | As at March 31, | ||||
2016 | 2015 | 2014 | 2013 | 2012 | |
Plan assets at year end, at fair value | 3,808 | 2,912 | 2,817 | 2,399 | 1,816 |
Present value of benefit obligation at year end | 3,808 | 2,912 | 2,817 | 2,399 | 1,816 |
Asset recognized in balance sheet | – | – | – | – | – |
Assumptions used in determining the present value obligation of the interest rate guarantee under the Deterministic Approach:
Particulars | As at March 31, | |
2016 | 2015 | |
Government of India (GOI) bond yield | 7.80% | 7.80% |
Remaining term to maturity of portfolio (in years) | 7 | 7 |
Expected guaranteed interest rate: First year | 8.75% | 8.75% |
:Thereafter | 8.60% | 8.60% |
2.26 SUPERANNUATION
The Company contributed 234 crore and 215 crore to the superannuation trust during the year ended March 31, 2016 and March 31, 2015, respectively.
2.27 RECONCILIATION OF BASIC AND DILUTED SHARES USED IN COMPUTING EARNINGS PER SHARE
Particulars | Year ended March 31, | |
2016 | 2015 | |
Number of shares considered as basic weighted average shares outstanding* | 228,56,16,160 | 228,56,10,264 |
Add: Effect of dilutive issues of shares/stock options | 95,423 | 30,684 |
Number of shares considered as weighted average shares and potential shares outstanding | 228,57,11,583 | 228,56,40,948 |
* adjusted for bonus issues. Refer Note 2.1
2.28 RESTRICTED DEPOSITS
Deposits with financial institutions as at March 31, 2016 include 1,300 crore (1,158 crore as at March 31, 2015) deposited with financial institutions to settle employee-related obligations as and when they arise during the normal course of business.
2.29 INVESTMENT IN SUBSIDIARIES
2.29.1 INVESTMENT IN LODESTONE HOLDING AG
On October 22, 2012, Infosys acquired 100% of the outstanding share capital of Lodestone Holding AG, a global management consultancy firm headquartered in Zurich, Switzerland. The acquisition was executed through a share purchase agreement for an upfront cash consideration of 1,187 crore and a deferred consideration of upto 608 crore.
The deferred consideration is payable to the selling shareholders of Lodestone on the third anniversary of the acquisition date and is contingent upon their continued employment for a period of three years. The investment in Lodestone has been recorded at the acquisition cost and the deferred consideration was recognized on a proportionate basis over a period of three years from the date of acquisition. During the three months ended December 31, 2015, the liability towards deferred consideration was settled.
An amount of 110 crore and 219 crore, representing the proportionate charge of the deferred consideration has been recognized as an expense during the year ended March 31, 2016 and March 31, 2015, respectively.
2.29.2 INVESTMENT IN PANAYA INC.
On March 5, 2015, Infosys acquired 100% of the voting interests in Panaya Inc. (Panaya), a Delaware Corporation in the United States. Panaya is a leading provider of automation technology for large scale enterprise and software management. The business acquisition was conducted by entering into a share purchase agreement for cash consideration of approximately 1,398 crore.
Panaya’s CloudQuality™ suite positions Infosys to bring automation to several of its service lines via an agile SaaS model, and helps mitigate risk, reduce costs and shorten time to market for clients. This will help free Infosys from many repetitive tasks allowing it to focus on important, strategic challenges faced by clients. Panaya’s proven technology would help to simplify the costs and complexities faced by businesses in managing their enterprise application landscapes.
The excess of the purchase consideration paid over the parent's portion of equity has been attributed to goodwill.
The following are the assets and liabilities taken over on acquisition of Panaya:
in crore
Component | Purchase price allocated |
Fixed assets | 9 |
Net current assets | 38 |
47 | |
Goodwill | 1,351 |
Total consideration | 1,398 |
2.29.3 INVESTMENT IN KALIDUS INC. & SKAVA SYSTEM PVT. LTD.
On June 2, 2015, Infosys acquired 100% of the voting interests in Kallidus Inc., (d.b.a Skava) (Kallidus), a leading provider of digital experience solutions, including mobile commerce and in-store shopping experiences to large retail clients and 100% of the voting interests of Skava Systems Private Limited, India, an affiliate of Kallidus. The business acquisition was conducted by entering into a share purchase agreement for cash consideration of $91 million (approximately 578 crore) and a contingent consideration of upto $20 million (approximately 128 crore on acquisition date), the payment of which is dependent upon the achievement of certain financial targets by Kallidus over a period of 3 years ending on December 31, 2017.
The excess of the purchase consideration paid over the parent's portion of equity has been attributed to goodwill.
The following are the assets and liabilities taken over on acquisition of Kalidus and Skava:
in crore
Component | Purchase price allocated |
Net current assets (*) | 35 |
35 | |
Goodwill | 671 |
Total consideration | 706 |
* Includes cash and cash equivalents acquired of 29 crore
2.29.4 INVESTMENT IN NOAH CONSULTING LLC
On November 16, 2015, Infosys has acquired 100% membership interest in Noah Consulting , LLC , a leading provider of advanced information management consulting services for the oil and gas industry. The business acquisition was conducted by entering into a share purchase agreement for cash consideration of $33 million ( approximately 216 crore), contingent consideration up to $5 million (approximately 33 crore on acquisition date) and retention bonus up to $32 million (approximately 212 crore on acquisition date). The payment of contingent consideration to the sellers of Noah was dependant upon the acheivement of certain financial targets by Noah for the year ended December 31, 2015 and December 31, 2016. During the quarter ended March 31, 2016 based on the assessment of Noah acheiving the targets for the respective periods, the entire contingent consideration was reversed.
The excess of purchase consideration paid over the parent's portion equity have been attributed to goodwill.
The following are the assets and liabilities taken over on acquisition of Noah:
in crore
Component | Purchase price allocated |
Net current assets (*) | 39 |
39 | |
Goodwill | 210 |
Total consideration | 249 |
* Includes cash and cash equivalents acquired of 18 crore
2.29.5 INVESTMENT IN EDGEVERVE SYSTEMS LIMITED
EdgeVerve was created as a wholly owned subsidiary to focus on developing and selling products and platforms. On April 15, 2014, the Board of Directors of Infosys authorized the Company to execute a Business Transfer Agreement and related documents with EdgeVerve, subject to securing the requisite approval from shareholders in the Annual General Meeting. Subsequently, at the AGM held on June 14, 2014, the shareholders authorized the Board to enter into a Business Transfer Agreement and related documents with EdgeVerve, with effect from July 1, 2014 or such other date as may be decided by the Board of Directors. The company had undertaken an enterprise valuation by an independent valuer and accordingly the business was transferred for a consideration of 421 crore with effect from July 1, 2014 which was settled through the issue of fully paid up equity shares.
On April 24, 2015, the Board of Directors of Infosys has authorized the Company to execute a Business Transfer Agreement and related documents with EdgeVerve, a wholly owned subsidiary, to transfer the business of Finacle and Edge Services. Post the requisite approval from shareholders through postal ballot on June 4, 2015, a Business Transfer Agreement and other related documents were executed with EdgeVerve to transfer the business with effect from August 1, 2015. The company has undertaken an enterprise valuation by an independent valuer and accordingly the business were transferred for a consideration of 3,222 crore and 177 crore for Finacle and Edge Services, respectively.
The consideration was settled through issue of 85,00,00,000 equity shares amounting to 850 crore and 25,49,00,000 non-convertible redeemable debentures amounting to 2,549 crore in EdgeVerve, post the requisite approval from shareholders on December 11, 2015.
The transfer of assets and liabilities was accounted for at carrying values and did not have any impact on the consolidated financial statements.
2.30 CORPORATE SOCIAL RESPONISBILITY
As per Section 135 of the Companies Act, 2013, a company, meeting the applicability threshold, needs to spend at least 2% of its average net profit for the immediately preceding three financial years on corporate social responsibility (CSR) activities. The areas for CSR activities are eradication of hunger and malnutrition, promoting education, art and culture, healthcare, destitute care and rehabilitation, environment sustainability, disaster relief and rural development projects. A CSR committee has been formed by the company as per the act. The funds were primarily allocated to a corpus and utilized through the year on these activities which are specified in Schedule VII of the Companies Act, 2013.
a) | Gross amount required to be spent by the company during the year is 270 crore. |
b) | Amount spent during the year on: |
in crore
Sl. No. | Particulars | In Cash | Yet to be paid in Cash | Total |
(i) | Construction / acquisition of any asset | – | – | – |
(ii) | On purposes other than (i) above | 216 | – | 216 |
In addition to the activities mentioned above, the company has spent 86 crore on multiple initiatives including Chennai flood disaster relief, environment sustainability and conservation of natural resources aimed at long term sustainability of eco system.
2.31 DUES TO MICRO ENTERPRISES AND SMALL ENTERPRISES
As at March 31, 2016, there are no outstanding dues to micro and small enterprises (less than 1 crore as at March 31, 2015). There are no interests due or outstanding on the same.
2.32 INDIAN ACCOUNTING STANDARDS
The Ministry of Corporate Affairs (MCA) vide its notification in the Official Gazette dated February 16, 2015 notified the Indian Accounting Standards (Ind AS) applicable to certain classes of companies. Ind AS would replace the existing Indian GAAP prescribed under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014. For Infosys and its subsidiaries, Ind AS would be applicable for the accounting periods beginning April 1, 2016, with a transition date of April 1, 2015.
The company has evaluated the effect of transition from Indian GAAP to Ind AS and the following are the areas which would have an impact on account of the transition on the group:
• Business Combinations including recording of intangibles and deferred taxes
• Fair valuation of certain financial instruments
• Employee costs pertaining to defined benefit obligations
• Discounting of certain long-term liabilities
• | Share based payments |
Further, there would be a change in the presentation of financial statements including some additional disclosures.
2.33 FUNCTION WISE CLASSIFICATION OF STATEMENT OF PROFIT AND LOSS
in crore
Statement of Profit and Loss for the | Year ended March 31, | |
2016 | 2015 | |
Income from software services and products | 62,441 | 53,319 |
Software development expenses | 37,609 | 31,834 |
GROSS PROFIT | 24,832 | 21,485 |
Selling and marketing expenses | 3,431 | 2,946 |
General and administration expenses | 4,281 | 3,668 |
7,712 | 6,614 | |
OPERATING PROFIT BEFORE DEPRECIATION | 17,120 | 14,871 |
Depreciation and amortisation | 1,266 | 1,017 |
OPERATING PROFIT | 15,854 | 13,854 |
Other income | 3,128 | 3,430 |
PROFIT BEFORE TAX | 18,982 | 17,284 |
Tax expense: | ||
Current tax | 5,315 | 4,835 |
Deferred tax | (14) | 76 |
PROFIT BEFORE MINORITY INTEREST/SHARE IN NET PROFIT/(LOSS) OF ASSOCIATE | 13,681 | 12,373 |
Share in net profit/(loss) of associate | (3) | (1) |
PROFIT FOR THE YEAR | 13,678 | 12,372 |
Profit attributable to: | ||
Owners of the company | 13,678 | 12,372 |
Minority Interests | – | – |
13,678 | 12,372 |
As per our report of even date attached | |
for B S R & Co. LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants | |
Firm's Registration Number:101248W/W-100022 |
Supreet Sachdev Partner Membership No. 205385 |
R.Seshasayee Chairman |
Dr. Vishal Sikka Chief Executive Officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bangalore April 15, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer and Executive Vice President |
A.G.S Manikantha Company Secretary |
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