UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934
For the quarter ended September 30, 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 ended September 30, 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 October 14, 2016, we announced our results of operations for the quarter ended September 30, 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 October 14, 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 99.3.
We have also made available to the public on our web site, www.infosys.com, a fact sheet that provides details on our profit and loss account summary for the quarters ended September 30, 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 99.4.
On October 14, 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 99.5 and 99.6, respectively.
We placed form of releases to stock exchanges and advertisements in certain Indian newspapers concerning our results of operations for the quarter ended September 30, 2016, under Ind AS. A copy of these releases to Stock Exchanges and advertisement is attached to this Form 6-K as Exhibit 99.7.
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 Condensed Financial Statements in compliance with IFRS in Indian Rupees and the Auditors Report; Audited Ind AS Standalone Balance Sheet, Standalone Statement of Profit and Loss, Standalone Cash Flow Statement, Notes on Accounts and Auditors Report; Audited Ind AS Consolidated Balance Sheet, Consolidated Statement of Profit and Loss, Consolidated Cash Flow Statement, Consolidated Notes on Accounts and Auditors Report for the quarter and half year ended September 30, 2016. We have attached these documents to this Form 6-K as Exhibits 99.8, 99.9 and 99.10 and 99.11 respectively.
On October 19, 2016, we released to the Stock Exchanges in India a disclosure relating to the revised annual compensation of U.B. Pravin Rao (subject to approval of the shareholders), M.D. Ranganath, David Kennedy, Krishnamurthy Shankar, Mohit Joshi, Rajesh K. Murthy, Ravi Kumar S., Sandeep Dadlani and Manikantha A.G.S. which is attached to this Form 6-K as Exhibit 99.12.
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: October 19, 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 October 14, 2016 television interaction |
99.4 | Fact Sheet regarding Registrant's Profit and Loss Account Summary for the quarters ended September 30, 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 |
99.5 | Transcript of October 14, 2016 11:30 a.m. IST Earnings Call |
99.6 | Transcript of October 14, 2016 6:00 p.m. IST Earnings Call |
99.7 | Form of releases to stock exchanges and advertisement placed in Indian newspapers |
99.8 | Unaudited Condensed Financial Statements in compliance with IFRS |
99.9 | Audited Condensed Financial Statements in compliance with IFRS in Indian Rupees and the Auditors Report |
99.10 | Ind AS Standalone Balance Sheet, Standalone Statement of Profit and Loss, Standalone Cash Flow statement, Notes on Accounts and Auditors Report for the quarter and half year ended September 30, 2016 |
99.11 | Ind AS Consolidated Balance Sheet, Consolidated Statement of Profit and Loss, Consolidated Cash Flow Statement, Consolidated Notes to Accounts and Auditors Report for the quarter and half year ended September 30, 2016. |
99.12 | Form of release to stock exchanges dated October 19, 2016 |
Exhibit 99.1
IFRS USD Press Release
Infosys (NYSE: INFY) Announces Results for the Quarter ended September 30, 2016
Q2 sequential revenue growth at 3.5% in USD terms; 3.9% in constant currency terms
Q2 year on year revenue growth at 8.2% in USD terms; 8.9% in constant currency terms
H1 year on year revenue growth at 9.5% in reported terms; 10.5% in constant currency terms
Operating margins expanded 80 bps sequentially to 24.9%
Volume growth at 4.0% during the quarter
Q2 Utilization excluding trainees up by 200 bps sequentially to 82.5%
FY 17 revenue guidance revised to 8.0% - 9.0% in constant currency
Bangalore, India – October 14, 2016
Financial Highlights
Consolidated results under International Financial Reporting Standards (IFRS) for the quarter ended September 30, 2016
Quarter ended September 30, 2016
· | Revenues were $2,587 million for the quarter ended September 30, 2016 QoQ growth of 3.5% in reported terms; 3.9% in constant currency terms YoY growth of 8.2% in reported terms; 8.9% in constant currency terms |
· | Operating profit was $644 million for the quarter ended September 30, 2016 QoQ growth of 7.0% YoY growth of 5.6% |
· | Net profit was $539 million for the quarter ended September 30, 2016 QoQ growth of 5.5% YoY growth of 3.8% |
· | Earnings per share (EPS) was $0.24 for the quarter ended September 30, 2016 QoQ growth of 5.5% YoY growth of 3.8% |
· | Liquid assets including cash and cash equivalents and investments were $5,349 million as on September 30, 2016 as compared to $4,918 million as on June 30, 2016 and $4,894 million as on September 30, 2015. |
· | The Board of Directors declared an interim dividend of ![]() |
“We focused on strong execution in Q2 with our core IT services business showing good progress on the strength of our innovation and operational initiatives. While we continue to navigate an uncertain external environment, we remain focused on executing our strategy and increasing momentum of our software plus services model. Considering our performance in the first half of the year and the near-term uncertain business outlook, we are revising our revenue guidance.” said Dr. Vishal Sikka, CEO. “Longer-term, I believe it’s increasingly clear that our industry’s future lies in evolving from a cost-based, people-only model, to one in which people are amplified by software and AI, and are freed to innovate in areas that are strategic to our clients’ future. And in this all-important transformation, I am glad to see us make continued progress."
“We had well-rounded growth during the quarter in our market segments. Our delivery and support teams executed well on their plans for resource management during the quarter, leading to an uptick in utilization.” said U B Pravin Rao, COO. “I am also pleased that the changes we made to employee engagement, policies and rewarding high performers continue to help retain our high quality workforce.”
“Our margins expanded during the quarter on the back of further improvement in operational efficiency.” said M.D. Ranganath, CFO. “Operating cash flows for the quarter were healthy and we effectively navigated a volatile currency environment through prudent hedging.”
Outlook*
The Company’s revenue outlook (consolidated) for the fiscal year ending March 31, 2017, under IFRS is as follows:
· | Revenues are expected to grow 8.0% - 9.0% in constant currency* |
· | The above constant currency guidance translates to 8.2% - 9.2% in USD terms based on March 31st rates, 7.5% - 8.5% based on June 30th rates and 7.5% - 8.5% based on September 30th rates |
*FY 16 constant Currency rates - AUD/USD – 0.73; Euro/USD – 1.10; GBP/USD – 1.51
Currency rates as of March 31, 2016 - AUD/USD – 0.77; Euro/USD – 1.14; GBP/USD – 1.44
Currency rates as of June 30, 2016 - AUD/USD – 0.75; Euro/USD – 1.11; GBP/USD – 1.35
Currency rates as of September 30, 2016 - AUD/USD – 0.76; Euro/USD – 1.12; GBP/USD – 1.30
Board Changes
On the recommendations of the Nomination and Remuneration Committee, the Board of Directors inducted Mr. D.N. Prahlad as an Independent Director of the Board effective October 14, 2016
D. N. Prahlad is the founder and CEO of Surya Software Systems Private Limited, Bangalore. Surya focuses on products for financial risk management of financial institutions in general and banks in particular. He is on the advisory board of Computer Science and Automation Department of Indian Institute of Science, Bangalore. Prahlad is a B.Sc. with honours in mathematics from Bangalore University and B.E. (Electrical technology and Electronics) from Indian Institute of Science, Bangalore.
Prior to founding Surya, Prahlad played a key role in the rapid growth of Infosys, being associated with the company during its formative years.
Welcoming D.N. Prahlad, Mr. Seshasayee, Chairman of the Board said, “We are delighted to welcome Prahlad, a distinguished technologist to the Board. Prahlad brings with him, not only his deep knowledge of the Company, but also sharp insights into the Industry”.
Nomination and Remuneration Committee
The Board of Directors in their meeting
held on October 14, 2016, on recommendation of Nomination and Remuneration Committee, have approved the revised annual compensation
of Pravin Rao, Chief Operating Officer and Whole Time Director of the Company, with effect from November 1, 2016, subject to the
approval of the shareholders. The compensation includes fixed compensation of 4.62 crores per annum and a variable compensation
of up to
3.88 crores per annum. Additionally, based on fiscal 2016 performance, 27,250 restricted stock units (RSU) and 43,000
stock options would be granted under 2015 Stock Incentive Compensation Plan ( 2015 plan) approved by the shareholders in the postal
ballot dated March 31, 2016. These RSU and stock options would vest over a period of 4 years which shall be exercisable within
the period as approved by the committee. The exercise price of the RSUs will be equal to the par value of the shares and the exercise
price of the stock options would be market price as on the date of grant as approved by the shareholders. RSU and stock options,
in future periods, will be granted on achievement of performance conditions, as may be decided by the Nomination and Remuneration
Committee.
The Board of Directors in their meeting
held on October 14, 2016, on recommendation of Nomination and Remuneration Committee, have approved the revised compensation structure
of M.D. Ranganath, Mohit Joshi, Sandeep Dadlani, Rajesh K Murthy, Ravikumar S., David Kennedy, Krishnamurthy Shankar and Manikantha
AGS with effect from November 1, 2016. The revised aggregate compensation of the above individuals includes fixed compensation
of 24 crores and variable compensation of upto
20 crores. Additionally, based on fiscal 2016 performance, restricted
stock units (RSU) of 245,750 and stock options of 502,550 will be granted on November 1, 2016 under 2015 Stock Incentive Compensation
Plan (2015 plan) approved by the shareholders in the postal ballot dated March 31, 2016. These RSU and stock options would vest
over a period of 4 years which shall be exercisable within the period as approved by the committee. The exercise price of RSU will
be equal to the par value of the shares and the exercise price of the stock options would be market price as on the date of grant.
The Audit committee in their meeting held on October 13, 2016, resolved to include Mohit Joshi, Sandeep Dadlani, Rajesh K Murthy,
RaviKumar S., Krishnamurthy Shankar and David Kennedy as key managerial personnel as defined under IndAS 24 – Related Party
Disclosures effective from the date of the meeting. Vishal Sikka, Pravin Rao, M.D. Ranganath and Manikantha AGS are key managerial
personnel as defined under Section 2 (51) of the Companies Act, 2013.
The Nomination and Remuneration Committee of the Board of Directors of Infosys Limited at its meeting held on October 13, 2016, based on fiscal 2016 performance, approved the grant of upto 906,275 RSU and upto 943,810 stock options which shall be made on November 1, 2016, to a total of upto 425 eligible and identified high-performing executives of the Company and its subsidiaries under 2015 Stock Incentive Compensation Plan (2015 plan) approved by the shareholders in the postal ballot dated March 31, 2016. The RSUs and stock options shall vest over a period of 4 years from the date of grant, which shall be exercisable within the period as approved by the committee. The exercise price of the RSUs will be equal to the par value of the shares and the exercise price of the stock options would be market price as on the date of grant.
Business Highlights
We continued to execute on our Renew-New strategy through automation and innovation, fueling this through our culture of learning and education.
RENEW
In Q2, we deepened existing client relationships in core services, won large traditional deals, and focused on driving automation and grassroots innovation into every aspect of our service offerings through Infosys Mana and our Zero Distance initiative.
“Data volumes continue to grow exponentially, and humankind now converts data into knowledge at unprecedented rates, making it impossible to codify such expertise and intelligence in software. Our systems need to learn. Those that do also need to be put to some practical use. It seems that Infosys Mana is doing just that.” - Report title: Infosys Mana uses AI to extract knowledge from processes and control business outcomes, Authors: Carl Lehmann, Katy Ring, 451 Research, Date: October 4, 2016
"Infosys is a preferred partner for development and support across our portfolio of off-the-shelf and custom applications, including our most critical business applications. We’re keen to create an enterprise for the future by leveraging AI and machine learning to solve business issues. We’ve selected Infosys Mana to help optimize these business processes and provide a better experience for our users by driving automation, improving efficiencies, increasing productivity, and reducing business process level disruptions, while at the same time reducing the total cost of our IT operations.” - Andy Bynum, Corporate Vice President – IT, AMD
“We are very pleased to award Infosys the GPS L2 Application Maintenance & Support Vendor Consolidation engagement. Infosys impressed us with the overall depth of the solution and commitment to service transformation through use of its Mana platform which covers automation, analytics and knowledge management. We believe that this deal will help us achieve our objectives of driving significant productivity improvements and optimizing and enhancing the services. This is a major step forwards in the strategic relationship between our organisations and we look forward to a successful journey in delivering the program together.” - Hans-Juergen Rieder, UBS Managing Director - Global Production Services
“Beyond the millions of dollars that we're going to be saving here at APS, the benefit is truly with our end customers in having a system that's going to be flexible and nimble and meet all of their needs. Through our partnership with Infosys and with this Zero Distance initiative we were able to solve complex problems that the utility’s been facing for some time.” - Christine Gonzales, Program Management Office Lead, Arizona Public Service
“What we're trying to do with world-class customer service is really reinvent, completely transform and turn inside out the way we deliver customer service here at Cisco. We're looking to use digitization to be able to simplify, standardize, and automate many of the processes that drive work, so that we can change the investment we have in people, so that they are then able to have better conversations with a customer. Our largest savings has been 80% of savings in terms of dollar spend, we’ve removed 2 million hours of customer wait time in one particular process alone. It’s been a great ride, we really appreciate Infosys’ flexibility and ability to change with us - I hope we continue this partnership for the next 20 years.” - Steve Power, Senior Director, Global Service Offerings, CISCO
Gap Inc., a leading global specialty retailer, has chosen Infosys as its primary technology services provider supporting its entire applications and infrastructure portfolio. This critical milestone strengthens the 18 year relationship between the two organizations even further.
NEW
In Q2, we continued to work with clients and partners on new areas, and new frontiers. And we made Design Thinking central to every engagement.
“GE and Infosys have a shared vision for the merging of our physical and digital worlds. As an early adopter of our Predix platform, we are partnering with Infosys to foster co-innovation of new applications with advanced concepts in digital twin, brilliant factory and AI. Our joint innovations will deliver a range of services to customers, including Industrial Internet solutions and applications to help companies simplify, automate and transform their businesses.” - Bill Ruh, Chief Executive Officer, GE Digital & Chief Digital Officer, GE
“I have just returned from our recent visit with the Infosys design team in Palo Alto along with 15 heads of marketing and customer experience from Australian superannuation funds. Infosys delivered an incredible session of learning around the theory and practice of design led thinking to develop a leading customer experience strategy. The group thoroughly enjoyed the time we spent with the team and have a framework they can take back into their business and start to employ immediately.” - Theresa Hoogland, Executive Manager Strategy and Marketing, Australian Institute of Superannuation Trustees (AIST)
“Design Thinking helped bring the teams together for reimagining the collaboration experience at USG Boral. It also helped them to think big and then bring these thoughts together to achieve actionable insights in a really short amount of time. Moreover, it was fun and engaging at the same time.” - Paul Monzella, Chief Financial Officer – USG Boral
“Infosys and Kohls are working together, using Design Thinking, and the Skava digital platform to enhance experiences from the customers, associates and overall Kohls perspective.” - Ratnakar Lavu, Chief Digital Officer, Kohls
Skava, Panaya & EdgeVerve
This quarter we launched Skava Commerce, a new standard for modern, mobile-first and modular e-commerce platforms to provide businesses a future-ready architecture that will enable next generation shopping experiences. Skava, an e-commerce startup acquired by Infosys, developed the platform to help retailers to quickly launch new offerings, improve conversion rates of digital channels, amongst other benefits, by leveraging flexible cloud-based microservices and white label applications, along with artificial intelligence (AI) and machine learning, natural language processing and virtual reality (VR).
Infosys and TOMS Shoes are working together, to implement an omni-channel platform leveraging Skava Commerce.
“In just 8 weeks, Skava and Vantiv worked collaboratively to launch the newly improved Vantiv Advantage Program App. We extended and simplified the digital engagement experience so Vantiv’s partners could sell and grow their businesses faster. Rather than converting an existing partner portal into the mobile app, the Skava team took a step further and re-authored the entire application in SkavaSTUDIO, which allowed the Vantiv team to take full ownership and control of the app to publish updates and changes. The Skava team did a great job to get us to the launch. We are now looking forward to getting this published in the app stores and seeing the adoption. Stay tuned for mobile transformation at Vantiv.” - Balaji Devarasetty, Chief Technology Officer - Integrated Payments, Vantiv LLC
Panaya
The COOP Group, one of the biggest Swiss retail trade and wholesale companies, selected Panaya for a seamless migration to SAP HANA with its upgrade from EHP5 to EHP7. “With the support of Panaya’s solution, we were able to import many references into the system. We haven’t done anything like that before. We were able to ensure an overall better quality of the SAP system – even beyond the upgrade. After the go live, there were no more critical errors. Our development department was excited because they were able to start with the corrections even after the first modification adjustment. For further upgrades we will definitely cooperate with Panaya again.” - Davyd Däppen, Manager IT Processes Product Management ACES at COOP
EdgeVerve
This quarter the EdgeVerve business delivered a strong performance with 48 wins and 23 go-lives from both the Finacle and Edge suite of solutions across various markets.
Finacle continues to be the solution of choice for new-generation digital banking businesses. Building upon its success in the payments bank space, the Finacle solution suite was chosen by Aditya Birla group for their upcoming payments bank. EdgeVerve continued to gain strong traction for Edge products with several new clients added this quarter across various solutions such as AssistEdge, BrandEdge and TradeEdge.
This quarter Infosys Finacle also announced the global availability of its industry leading Finacle Universal Banking Solution Suite on Huawei’s FusionCloud based cloud platform.
CULTURE
We continue to invest in education to help our employees maximize their potential. We are enhancing our capabilities at the Infosys Global Education Center and through partnerships with organizations such as Udacity.
“Udacity and Infosys share a similar vision for lifelong learning, that education is no longer about years-long course work with a singular end goal, but rather, learning is a lifelong endeavor in which we continuously renew ourselves and expand the knowledge we already have, and learn entirely new kinds of skills. With Nanodegrees in particular, we can drive rapid acquisition of new skills when needed, for the most in-demand skills. As part of this effort, we are excited to launch the Udacity FastTrack program exclusively for Infosys, making available Udacity's online Nanodegree certifications for all Infosys new-hires. We will complement Infosys' world class Mysore training programs with Nanodegrees in several high demand and constantly evolving areas such as user experience, mobile and web development to rapidly scale the skills and expertise in these areas, and more. We are also excited to leverage the deep expertise of Infosys to bring the critical hands-on course work to our Nanodegrees through projects based on real-world experiences in the most sought after skills in the industry.” - Sebastian Thrun, Founder & President, Udacity
AWARDS & RECOGNITION
· | Winner, Seven 2016 Oracle Excellence Awards |
· | Leader, Infosys Finacle - ‘The Forrester Wave™: Customer-Centric Global Banking Platforms, Q3 2016’ report |
· | Winner, Infosys Finacle Omnichannel Hub – “Digital Banking 2016, Best System Solution”, Juniper Research |
· | A Leader, IDC MarketScape: Worldwide Oracle Implementation Services 2016 Vendor Assessment |
· | Winner, 2016 European ISG Paragon award |
· | Leader, Software Testing NelsonHall Vendor Evaluation & Assessment Tool (NEAT) |
· | First Runner-Up, “Best Use of CEM Technology” for AssistEdge at the Customer Experience Asia Excellence Awards, 2016 Singapore |
· | A Leader, IDC MarketScape: WW Oil & Gas Professional Services 2016 Vendor Assessment |
· | Winner’s Circle, HfS Blueprint Report: Energy Operations |
· | Winner’s Circle, HfS Blueprint Report: ServiceNow Services |
· | Leader, OVUM Decision Matrix (ODM) – Selecting a Distributed Agile Delivery Model for ADM Services, 2016–17 |
· | Leader and Star Performer, Everest Group Global Banking AO Service Provider PEAK Matrix™ Assessment 2016 |
· | Leader, Everest Group IT Outsourcing Global Capital Markets PEAK Matrix™ Assessment 2016 |
· | A Challenger in Gartner Magic Quadrant for IT Services for Communications Service Providers, Worldwide |
BEYOND BUSINESS
We continue to contribute back to the communities in which we are present. In India, through the Infosys Foundation, we have made several investments in the areas of rehabilitation, healthcare, education and arts & culture. Some of the initiatives this quarter include handing over a residential enclave of 200 houses to families that were rendered homeless in the aftermath of cyclone HudHud in 2014, launching an Institute of Robotic Surgery in partnership with Narayana Health, and funding travel stipends for top researchers at IIT Kharagpur, as well as sponsoring a study about the antiquity of Indus Valley undertaken by the institute.
Infosys Foundation USA supported quality computer science and Maker professional development for teachers via CS PD Week, the CS for All Community Giving program, and commitments announced at the White House Summit on #CSforAll. Additionally, the Foundation announced new grants to support the largest CS teacher organization (CSTA), recognize excellence in CS teaching through Awards, and assist New York Academy of Sciences (NYAS).
About Infosys Ltd
Infosys is a global leader in technology services and consulting. We enable clients in more than 50 countries to create and execute strategies for their digital transformation. From engineering to application development, knowledge management and business process management, we help our clients find the right problems to solve, and to solve these effectively. Our team of 199,000+ innovators, across the globe, is differentiated by the imagination, knowledge and experience, across industries and technologies that we bring to every project we undertake.
Visit www.infosys.com to see how Infosys (NYSE: INFY) can help your enterprise thrive in the digital age.
Safe Harbor
Certain statements in these results 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 and inability to accurately predict economic or industry trends, 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, 2016. 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 October 14, 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)
September 30, 2016 | March 31, 2016 | |
ASSETS | ||
Current assets | ||
Cash and cash equivalents | 4,763 | 4,935 |
Current investments | 323 | 11 |
Trade receivables | 1,737 | 1,710 |
Unbilled revenue | 584 | 457 |
Prepayments and other current assets | 777 | 672 |
Derivative financial instruments | 13 | 17 |
Total current assets | 8,197 | 7,802 |
Non-current assets | ||
Property, plant and equipment | 1,681 | 1,589 |
Goodwill | 566 | 568 |
Intangible assets | 136 | 149 |
Investment in associates | 15 | 16 |
Non-current investments | 289 | 273 |
Deferred income tax assets | 95 | 81 |
Income tax assets | 788 | 789 |
Other non-current assets | 108 | 111 |
Total non-current assets | 3,678 | 3,576 |
Total assets | 11,875 | 11,378 |
LIABILITIES AND EQUITY | ||
Current liabilities | ||
Trade payables | 46 | 58 |
Derivative financial instruments | – | 1 |
Current income tax liabilities | 578 | 515 |
Client deposits | 2 | 4 |
Unearned revenue | 222 | 201 |
Employee benefit obligations | 216 | 202 |
Provisions | 93 | 77 |
Other current liabilities | 929 | 940 |
Total current liabilities | 2,086 | 1,998 |
Non-current liabilities | ||
Deferred income tax liabilities | 36 | 39 |
Other non-current liabilities | 23 | 17 |
Total liabilities | 2,145 | 2,054 |
Equity | ||
Share capital- ![]() |
199 | 199 |
Share premium | 574 | 570 |
Retained earnings | 11,553 | 11,083 |
Other reserves | – | – |
Other components of equity | (2,596) | (2,528) |
Total equity attributable to equity holders of the company | 9,730 | 9,324 |
Non-controlling interests | – | – |
Total equity | 9,730 | 9,324 |
Total liabilities and equity | 11,875 | 11,378 |
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 September 30, 2016 | Three months ended September 30, 2015 | Six months ended September 30, 2016 | Six months ended September 30, 2015 | |
Revenues | 2,587 | 2,392 | 5,088 | 4,647 |
Cost of sales | 1,638 | 1,488 | 3,231 | 2,922 |
Gross profit | 949 | 904 | 1,857 | 1,725 |
Operating expenses: | ||||
Selling and marketing expenses | 134 | 129 | 271 | 258 |
Administrative expenses | 171 | 165 | 340 | 316 |
Total operating expenses | 305 | 294 | 611 | 574 |
Operating profit | 644 | 610 | 1,246 | 1,151 |
Other income, net | 114 | 121 | 226 | 240 |
Share in associate's profit / (loss) | (1) | – | (1) | – |
Profit before income taxes | 757 | 731 | 1,471 | 1,391 |
Income tax expense | 218 | 212 | 421 | 396 |
Net profit | 539 | 519 | 1,050 | 995 |
Other comprehensive income | ||||
Items that will not be reclassified subsequently to profit or loss: | ||||
Re-measurement of the net defined benefit liability/(asset) | (6) | (1) | (9) | (2) |
Cumulative impact on reversal of unrealized gain on quoted debt securities on adoption of IFRS 9 | – | – | (5) | – |
Equity instruments through other comprehensive income | – | – | – | – |
Items that will be reclassified subsequently to profit or loss: | ||||
Fair valuation of investments | – | 5 | – | 3 |
Exchange differences on translation of foreign operations | 119 | (242) | (54) | (379) |
Total other comprehensive income, net of tax | 113 | (238) | (68) | (378) |
Total comprehensive income | 652 | 281 | 982 | 617 |
Profit attributable to: | ||||
Owners of the company | 539 | 519 | 1,050 | 995 |
Non-controlling interests | – | – | – | – |
539 | 519 | 1050 | 995 | |
Total comprehensive income attributable to: | ||||
Owners of the company | 652 | 281 | 982 | 617 |
Non-controlling interests | – | – | – | – |
652 | 281 | 982 | 617 | |
Earnings per equity share | ||||
Basic ($) | 0.24 | 0.23 | 0.46 | 0.44 |
Diluted ($) | 0.24 | 0.23 | 0.46 | 0.44 |
Weighted average equity shares used in computing earnings per equity share | ||||
Basic | 2,285,641,710 | 2,285,614,029 | 2,285,632,081 | 2,285,612,157 |
Diluted | 2,285,949,303 | 2,285,713,042 | 2,285,875,988 | 2,285,696,678 |
NOTE:
1. | The unaudited Condensed Consolidated Interim Balance sheet and Condensed Consolidated Interim Statement of Comprehensive Income for the three months and six months ended September 30, 2016 have been taken on record at the Board meeting held on October 14, 2016 |
2. | A Fact Sheet providing the operating metrics of the company can be downloaded from www.infosys.com |
Exhibit 99.2
IFRS INR Press Release
Infosys (NSE, BSE: INFY) Announces Results for the Quarter ended September 30, 2016
Q2 sequential revenue growth at 3.1% in INR terms; 3.9% in constant currency terms
Q2 year on year revenue growth at 10.7% in INR terms; 8.9% in constant currency terms
H1 year on year revenue growth at 13.7% in reported terms; 10.5% in constant currency terms
Operating margins expanded 80 bps sequentially to 24.9%
Volume Growth 4.0% during the quarter
Q2 Utilization excluding trainees up by 200 bps sequentially to 82.5%
FY 17 revenue guidance revised to 8.0% - 9.0% in constant currency
Bangalore, India – October 14, 2016
Financial Highlights
Consolidated results under International Financial Reporting Standards (IFRS) for the quarter ended September 30, 2016
Quarter ended September 30, 2016
· | Revenues were ![]() QoQ growth of 3.1% YoY growth of 10.7% |
· | Operating profit was ![]() QoQ growth of 6.5% YoY growth of 7.9% |
· | Net profit was ![]() QoQ growth of 4.9% YoY growth of 6.1% |
· | Earnings per share (EPS) was ![]() QoQ growth of 4.9% YoY growth of 6.1% |
· | Liquid assets including cash and cash equivalents and investments were ![]() ![]() ![]() |
· | The Board of Directors declared an interim dividend of ![]() |
“We focused on strong execution in Q2 with our core IT services business showing good progress on the strength of our innovation and operational initiatives. While we continue to navigate an uncertain external environment, we remain focused on executing our strategy and increasing momentum of our software plus services model. Considering our performance in the first half of the year and the near-term uncertain business outlook, we are revising our revenue guidance.” said Dr. Vishal Sikka, CEO. “Longer-term, I believe it’s increasingly clear that our industry’s future lies in evolving from a cost-based, people-only model, to one in which people are amplified by software and AI, and are freed to innovate in areas that are strategic to our clients’ future. And in this all-important transformation, I am glad to see us make continued progress."
“We had well-rounded growth during the quarter in our market segments. Our delivery and support teams executed well on their plans for resource management during the quarter, leading to an uptick in utilization.” said U B Pravin Rao, COO. “I am also pleased that the changes we made to employee engagement, policies and rewarding high performers continue to help retain our high quality workforce.”
“Our margins expanded during the quarter on the back of further improvement in operational efficiency.” said M.D. Ranganath, CFO. “Operating cash flows for the quarter were healthy and we effectively navigated a volatile currency environment through prudent hedging.”
Outlook*
The Company’s revenue outlook (consolidated) for the fiscal year ending March 31, 2017, under IFRS is as follows:
· | Revenues are expected to grow 8.0% - 9.0% in constant currency*; |
· | The above constant currency guidance translates to 9.2% - 10.2% in INR terms based on March 31st rates, 11.2% - 12.2% based on June 30th rates and 10.9% - 11.9% based on September 30th rates |
*FY 16 constant currency rates - AUD/USD – 0.73; Euro/USD – 1.10; GBP/USD – 1.51
Currency
rates as of March 31, 2016 - 1 US$ = 66.26
Currency
rates as of June 30, 2016 - 1 US$ = 67.53
Currency
rates as of September 30, 2016 - 1 US$ = 66.62
Board Changes
On the recommendations of the Nomination and Remuneration Committee, the Board of Directors inducted Mr. D.N. Prahlad as an Independent Director of the Board effective October 14, 2016
D. N. Prahlad is the founder and CEO of Surya Software Systems Private Limited, Bangalore. Surya focuses on products for financial risk management of financial institutions in general and banks in particular. He is on the advisory board of Computer Science and Automation Department of Indian Institute of Science, Bangalore. Prahlad is a B.Sc. with honours in mathematics from Bangalore University and B.E. (Electrical technology and Electronics) from Indian Institute of Science, Bangalore.
Prior to founding Surya, Prahlad played a key role in the rapid growth of Infosys, being associated with the company during its formative years.
Welcoming D.N. Prahlad, Mr. Seshasayee, Chairman of the Board said, “We are delighted to welcome Prahlad, a distinguished technologist to the Board. Prahlad brings with him, not only his deep knowledge of the Company, but also sharp insights into the Industry”.
Nomination and Remuneration Committee
The Board of Directors in their meeting
held on October 14, 2016, on recommendation of Nomination and Remuneration Committee, have approved the revised annual compensation
of Pravin Rao, Chief Operating Officer and Whole Time Director of the Company, with effect from November 1, 2016, subject to the
approval of the shareholders. The compensation includes fixed compensation of 4.62 crores per annum and a variable compensation
of up to
3.88 crores per annum. Additionally, based on fiscal 2016 performance, 27,250 restricted stock units (RSU) and 43,000
stock options would be granted under 2015 Stock Incentive Compensation Plan ( 2015 plan) approved by the shareholders in the postal
ballot dated March 31, 2016. These RSU and stock options would vest over a period of 4 years which shall be exercisable within
the period as approved by the committee. The exercise price of the RSUs will be equal to the par value of the shares and the exercise
price of the stock options would be market price as on the date of grant as approved by the shareholders. RSU and stock options,
in future periods, will be granted on achievement of performance conditions, as may be decided by the Nomination and Remuneration
Committee.
The Board of Directors in their meeting
held on October 14, 2016, on recommendation of Nomination and Remuneration Committee, have approved the revised compensation structure
of M.D. Ranganath, Mohit Joshi, Sandeep Dadlani, Rajesh K Murthy, Ravikumar S., David Kennedy, Krishnamurthy Shankar and Manikantha
AGS with effect from November 1, 2016. The revised aggregate compensation of the above individuals includes fixed compensation
of 24 crores and variable compensation of upto
20 crores. Additionally, based on fiscal 2016 performance, restricted
stock units (RSU) of 245,750 and stock options of 502,550 will be granted on November 1, 2016 under 2015 Stock Incentive Compensation
Plan (2015 plan) approved by the shareholders in the postal ballot dated March 31, 2016. These RSU and stock options would vest
over a period of 4 years which shall be exercisable within the period as approved by the committee. The exercise price of RSU will
be equal to the par value of the shares and the exercise price of the stock options would be market price as on the date of grant.
The Audit committee in their meeting held on October 13, 2016, resolved to include Mohit Joshi, Sandeep Dadlani, Rajesh K Murthy,
RaviKumar S., Krishnamurthy Shankar and David Kennedy as key managerial personnel as defined under IndAS 24 – Related Party
Disclosures effective from the date of the meeting. Vishal Sikka, Pravin Rao, M.D. Ranganath and Manikantha AGS are key managerial
personnel as defined under Section 2 (51) of the Companies Act, 2013.
The Nomination and Remuneration Committee of the Board of Directors of Infosys Limited at its meeting held on October 13, 2016, based on fiscal 2016 performance, approved the grant of upto 906,275 RSU and upto 943,810 stock options which shall be made on November 1, 2016, to a total of upto 425 eligible and identified high-performing executives of the Company and its subsidiaries under 2015 Stock Incentive Compensation Plan (2015 plan) approved by the shareholders in the postal ballot dated March 31, 2016. The RSUs and stock options shall vest over a period of 4 years from the date of grant, which shall be exercisable within the period as approved by the committee. The exercise price of the RSUs will be equal to the par value of the shares and the exercise price of the stock options would be market price as on the date of grant.
Business Highlights
We continued to execute on our Renew-New strategy through automation and innovation, fueling this through our culture of learning and education.
RENEW
In Q2, we deepened existing client relationships in core services, won large traditional deals, and focused on driving automation and grassroots innovation into every aspect of our service offerings through Infosys Mana and our Zero Distance initiative.
“Data volumes continue to grow exponentially, and humankind now converts data into knowledge at unprecedented rates, making it impossible to codify such expertise and intelligence in software. Our systems need to learn. Those that do also need to be put to some practical use. It seems that Infosys Mana is doing just that.” - Report title: Infosys Mana uses AI to extract knowledge from processes and control business outcomes, Authors: Carl Lehmann, Katy Ring, 451 Research, Date: October 4, 2016
"Infosys is a preferred partner for development and support across our portfolio of off-the-shelf and custom applications, including our most critical business applications. We’re keen to create an enterprise for the future by leveraging AI and machine learning to solve business issues. We’ve selected Infosys Mana to help optimize these business processes and provide a better experience for our users by driving automation, improving efficiencies, increasing productivity, and reducing business process level disruptions, while at the same time reducing the total cost of our IT operations.” - Andy Bynum, Corporate Vice President – IT, AMD
“We are very pleased to award Infosys the GPS L2 Application Maintenance & Support Vendor Consolidation engagement. Infosys impressed us with the overall depth of the solution and commitment to service transformation through use of its Mana platform which covers automation, analytics and knowledge management. We believe that this deal will help us achieve our objectives of driving significant productivity improvements and optimizing and enhancing the services. This is a major step forwards in the strategic relationship between our organisations and we look forward to a successful journey in delivering the program together.” - Hans-Juergen Rieder, UBS Managing Director - Global Production Services
“Beyond the millions of dollars that we're going to be saving here at APS, the benefit is truly with our end customers in having a system that's going to be flexible and nimble and meet all of their needs. Through our partnership with Infosys and with this Zero Distance initiative we were able to solve complex problems that the utility’s been facing for some time.” - Christine Gonzales, Program Management Office Lead, Arizona Public Service
“What we're trying to do with world-class customer service is really reinvent, completely transform and turn inside out the way we deliver customer service here at Cisco. We're looking to use digitization to be able to simplify, standardize, and automate many of the processes that drive work, so that we can change the investment we have in people, so that they are then able to have better conversations with a customer. Our largest savings has been 80% of savings in terms of dollar spend, we’ve removed 2 million hours of customer wait time in one particular process alone. It’s been a great ride, we really appreciate Infosys’ flexibility and ability to change with us - I hope we continue this partnership for the next 20 years.” - Steve Power, Senior Director, Global Service Offerings, CISCO
Gap Inc., a leading global specialty retailer, has chosen Infosys as its primary technology services provider supporting its entire applications and infrastructure portfolio. This critical milestone strengthens the 18 year relationship between the two organizations even further.
NEW
In Q2, we continued to work with clients and partners on new areas, and new frontiers. And we made Design Thinking central to every engagement.
“GE and Infosys have a shared vision for the merging of our physical and digital worlds. As an early adopter of our Predix platform, we are partnering with Infosys to foster co-innovation of new applications with advanced concepts in digital twin, brilliant factory and AI. Our joint innovations will deliver a range of services to customers, including Industrial Internet solutions and applications to help companies simplify, automate and transform their businesses.” - Bill Ruh, Chief Executive Officer, GE Digital & Chief Digital Officer, GE
“I have just returned from our recent visit with the Infosys design team in Palo Alto along with 15 heads of marketing and customer experience from Australian superannuation funds. Infosys delivered an incredible session of learning around the theory and practice of design led thinking to develop a leading customer experience strategy. The group thoroughly enjoyed the time we spent with the team and have a framework they can take back into their business and start to employ immediately.” - Theresa Hoogland, Executive Manager Strategy and Marketing, Australian Institute of Superannuation Trustees (AIST)
“Design Thinking helped bring the teams together for reimagining the collaboration experience at USG Boral. It also helped them to think big and then bring these thoughts together to achieve actionable insights in a really short amount of time. Moreover, it was fun and engaging at the same time.” - Paul Monzella, Chief Financial Officer – USG Boral
“Infosys and Kohls are working together, using Design Thinking, and the Skava digital platform to enhance experiences from the customers, associates and overall Kohls perspective.” - Ratnakar Lavu, Chief Digital Officer, Kohls
Skava, Panaya & EdgeVerve
This quarter we launched Skava Commerce, a new standard for modern, mobile-first and modular e-commerce platforms to provide businesses a future-ready architecture that will enable next generation shopping experiences. Skava, an e-commerce startup acquired by Infosys, developed the platform to help retailers to quickly launch new offerings, improve conversion rates of digital channels, amongst other benefits, by leveraging flexible cloud-based microservices and white label applications, along with artificial intelligence (AI) and machine learning, natural language processing and virtual reality (VR).
Infosys and TOMS Shoes are working together, to implement an omni-channel platform leveraging Skava Commerce.
“In just 8 weeks, Skava and Vantiv worked collaboratively to launch the newly improved Vantiv Advantage Program App. We extended and simplified the digital engagement experience so Vantiv’s partners could sell and grow their businesses faster. Rather than converting an existing partner portal into the mobile app, the Skava team took a step further and re-authored the entire application in SkavaSTUDIO, which allowed the Vantiv team to take full ownership and control of the app to publish updates and changes. The Skava team did a great job to get us to the launch. We are now looking forward to getting this published in the app stores and seeing the adoption. Stay tuned for mobile transformation at Vantiv.” - Balaji Devarasetty, Chief Technology Officer - Integrated Payments, Vantiv LLC
Panaya
The COOP Group, one of the biggest Swiss retail trade and wholesale companies, selected Panaya for a seamless migration to SAP HANA with its upgrade from EHP5 to EHP7. “With the support of Panaya’s solution, we were able to import many references into the system. We haven’t done anything like that before. We were able to ensure an overall better quality of the SAP system – even beyond the upgrade. After the go live, there were no more critical errors. Our development department was excited because they were able to start with the corrections even after the first modification adjustment. For further upgrades we will definitely cooperate with Panaya again.” - Davyd Däppen, Manager IT Processes Product Management ACES at COOP
EdgeVerve
This quarter the EdgeVerve business delivered a strong performance with 48 wins and 23 go-lives from both the Finacle and Edge suite of solutions across various markets.
Finacle continues to be the solution of choice for new-generation digital banking businesses. Building upon its success in the payments bank space, the Finacle solution suite was chosen by Aditya Birla group for their upcoming payments bank. EdgeVerve continued to gain strong traction for Edge products with several new clients added this quarter across various solutions such as AssistEdge, BrandEdge and TradeEdge.
This quarter Infosys Finacle also announced the global availability of its industry leading Finacle Universal Banking Solution Suite on Huawei’s FusionCloud based cloud platform.
CULTURE
We continue to invest in education to help our employees maximize their potential. We are enhancing our capabilities at the Infosys Global Education Center and through partnerships with organizations such as Udacity.
“Udacity and Infosys share a similar vision for lifelong learning, that education is no longer about years-long course work with a singular end goal, but rather, learning is a lifelong endeavor in which we continuously renew ourselves and expand the knowledge we already have, and learn entirely new kinds of skills. With Nanodegrees in particular, we can drive rapid acquisition of new skills when needed, for the most in-demand skills. As part of this effort, we are excited to launch the Udacity FastTrack program exclusively for Infosys, making available Udacity's online Nanodegree certifications for all Infosys new-hires. We will complement Infosys' world class Mysore training programs with Nanodegrees in several high demand and constantly evolving areas such as user experience, mobile and web development to rapidly scale the skills and expertise in these areas, and more. We are also excited to leverage the deep expertise of Infosys to bring the critical hands-on course work to our Nanodegrees through projects based on real-world experiences in the most sought after skills in the industry.” - Sebastian Thrun, Founder & President, Udacity
AWARDS & RECOGNITION
· | Winner, Seven 2016 Oracle Excellence Awards |
· | Leader, Infosys Finacle - ‘The Forrester Wave™: Customer-Centric Global Banking Platforms, Q3 2016’ report |
· | Winner, Infosys Finacle Omnichannel Hub – “Digital Banking 2016, Best System Solution”, Juniper Research |
· | A Leader, IDC MarketScape: Worldwide Oracle Implementation Services 2016 Vendor Assessment |
· | Winner, 2016 European ISG Paragon award |
· | Leader, Software Testing NelsonHall Vendor Evaluation & Assessment Tool (NEAT) |
· | First Runner-Up, “Best Use of CEM Technology” for AssistEdge at the Customer Experience Asia Excellence Awards, 2016 Singapore |
· | A Leader, IDC MarketScape: WW Oil & Gas Professional Services 2016 Vendor Assessment |
· | Winner’s Circle, HfS Blueprint Report: Energy Operations |
· | Winner’s Circle, HfS Blueprint Report: ServiceNow Services |
· | Leader, OVUM Decision Matrix (ODM) – Selecting a Distributed Agile Delivery Model for ADM Services, 2016–17 |
· | Leader and Star Performer, Everest Group Global Banking AO Service Provider PEAK Matrix™ Assessment 2016 |
· | Leader, Everest Group IT Outsourcing Global Capital Markets PEAK Matrix™ Assessment 2016 |
· | A Challenger in Gartner Magic Quadrant for IT Services for Communications Service Providers, Worldwide |
BEYOND BUSINESS
We continue to contribute back to the communities in which we are present. In India, through the Infosys Foundation, we have made several investments in the areas of rehabilitation, healthcare, education and arts & culture. Some of the initiatives this quarter include handing over a residential enclave of 200 houses to families that were rendered homeless in the aftermath of cyclone HudHud in 2014, launching an Institute of Robotic Surgery in partnership with Narayana Health, and funding travel stipends for top researchers at IIT Kharagpur, as well as sponsoring a study about the antiquity of Indus Valley undertaken by the institute.
Infosys Foundation USA supported quality computer science and Maker professional development for teachers via CS PD Week, the CS for All Community Giving program, and commitments announced at the White House Summit on #CSforAll. Additionally, the Foundation announced new grants to support the largest CS teacher organization (CSTA), recognize excellence in CS teaching through Awards, and assist New York Academy of Sciences (NYAS).
About Infosys Ltd
Infosys is a global leader in technology services and consulting. We enable clients in more than 50 countries to create and execute strategies for their digital transformation. From engineering to application development, knowledge management and business process management, we help our clients find the right problems to solve, and to solve these effectively. Our team of 199,000+ innovators, across the globe, is differentiated by the imagination, knowledge and experience, across industries and technologies that we bring to every project we undertake.
Visit www.infosys.com to see how Infosys (NYSE: INFY) can help your enterprise thrive in the digital age.
Safe Harbor
Certain statements in these results 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 and inability to accurately predict economic or industry trends, 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, 2016. 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 October 14, 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
Condensed Consolidated Interim Balance Sheets as of
(In crore
except equity share data)
September 30, 2016 | March 31, 2016 | |
ASSETS | ||
Current assets | ||
Cash and cash equivalents | 31,732 | 32,697 |
Current investments | 2,154 | 75 |
Trade receivables | 11,571 | 11,330 |
Unbilled revenue | 3,892 | 3,029 |
Prepayments and other current assets | 5,171 | 4,448 |
Derivative financial instruments | 89 | 116 |
Total current assets | 54,609 | 51,695 |
Non-current assets | ||
Property, plant and equipment | 11,197 | 10,530 |
Goodwill | 3,771 | 3,764 |
Intangible assets | 904 | 985 |
Investment in associate | 99 | 103 |
Non-current investments | 1,931 | 1,811 |
Deferred income tax assets | 628 | 536 |
Income tax assets | 5,248 | 5,230 |
Other non-current assets | 719 | 735 |
Total non-current assets | 24,497 | 23,694 |
Total assets | 79,106 | 75,389 |
LIABILITIES AND EQUITY | ||
Current liabilities | ||
Trade payables | 307 | 386 |
Derivative financial instruments | 2 | 5 |
Current income tax liabilities | 3,851 | 3,410 |
Client deposits | 11 | 28 |
Unearned revenue | 1,478 | 1,332 |
Employee benefit obligations | 1,440 | 1,341 |
Provisions | 621 | 512 |
Other current liabilities | 6,185 | 6,225 |
Total current liabilities | 13,895 | 13,239 |
Non-current liabilities | ||
Deferred income tax liabilities | 235 | 256 |
Other non-current liabilities | 151 | 115 |
Total liabilities | 14,281 | 13,610 |
Equity | ||
Share capital- ![]() |
1,144 | 1,144 |
Share premium | 2,272 | 2,241 |
Retained earnings | 60,773 | 57,655 |
Cash flow hedge reserve | 2 | – |
Other reserves | – | – |
Other components of equity | 634 | 739 |
Total equity attributable to equity holders of the company | 64,825 | 61,779 |
Non-controlling interests | – | – |
Total equity | 64,825 | 61,779 |
Total liabilities and equity | 79,106 | 75,389 |
Infosys Limited and subsidiaries
Condensed Consolidated Interim Statements of Comprehensive Income
(In crore except share and per equity
share data)
Three months ended September 30, 2016 |
Three months ended September 30, 2015 |
Six months ended September 30, 2016 | Six months ended September 30, 2015 | |
Revenues | 17,310 | 15,635 | 34,091 | 29,989 |
Cost of sales | 10,962 | 9,724 | 21,643 | 18,847 |
Gross profit | 6,348 | 5,911 | 12,448 | 11,142 |
Operating expenses: | ||||
Selling and marketing expenses | 897 | 843 | 1,817 | 1,663 |
Administrative expenses | 1,142 | 1,075 | 2,276 | 2,038 |
Total operating expenses | 2,039 | 1,918 | 4,093 | 3,701 |
Operating profit | 4,309 | 3,993 | 8,355 | 7,441 |
Other income, net | 760 | 793 | 1,513 | 1,551 |
Share in associate’s profit/(loss) | (3) | (1) | (5) | (1) |
Profit before income taxes | 5,066 | 4,785 | 9,863 | 8,991 |
Income tax expense | 1,460 | 1,387 | 2,822 | 2,562 |
Net profit | 3,606 | 3,398 | 7,041 | 6,429 |
Other comprehensive income | ||||
Items that will not be reclassified subsequently to profit or loss: | ||||
Re-measurement of the net defined benefit liability/(asset) | (40) | (7) | (57) | (14) |
Cumulative impact on reversal of unrealized gains on quoted debt securities on adoption of IFRS 9 | – | – | (35) | – |
Equity instruments through other comprehensive income | – | – | – | – |
Items that will be reclassified subsequently to profit or loss: | ||||
Fair value changes on cash flow hedges | 2 | – | 2 | – |
Fair value changes on investments | – | 30 | – | 18 |
Exchange differences on translation of foreign operations | (51) | 62 | (13) | 206 |
Total other comprehensive income, net of tax | (89) | 85 | (103) | 210 |
Total comprehensive income | 3,517 | 3,483 | 6,938 | 6,639 |
Profit attributable to: | ||||
Owners of the company | 3,606 | 3,398 | 7,041 | 6,429 |
Non-controlling interests | – | – | – | – |
3,606 | 3,398 | 7,041 | 6,429 | |
Total comprehensive income attributable to: | ||||
Owners of the company | 3,517 | 3,483 | 6,938 | 6,639 |
Non-controlling interests | – | – | – | – |
3,517 | 3,483 | 6,938 | 6,639 | |
Earnings per equity share | ||||
Basic (![]() |
15.77 | 14.87 | 30.81 | 28.13 |
Diluted (![]() |
15.77 | 14.87 | 30.80 | 28.13 |
Weighted average equity shares used in computing earnings per equity share | ||||
Basic | 228,56,41,710 | 228,56,14,029 | 228,56,32,081 | 228,56,12,157 |
Diluted | 228,59,49,303 | 228,57,13,042 | 228,58,75,988 | 228,56,96,678 |
NOTE:
1. | The unaudited Consolidated Interim Balance Sheet and Consolidated Interim Statement of Comprehensive Income for the three months and six months ended September 30, 2016 have been taken on record at the Board meeting held on October 14, 2016 |
2. | A Fact Sheet providing the operating metrics of the company can be downloaded from www.infosys.com |
Exhibit 99.3
Common TV Call
COMMON TV CALL
Q2 FY 2017 RESULTS
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
Sandeep Dadlani
President & Head – Manufacturing, Retail, CPG and Logistics; Head – Infosys Americas
Ravi Kumar S.
President & Chief Delivery Officer
Rajesh Krishnamurthy
President & Head - Energy, Utilities, Telecommunications and Services; Head—Infosys Consulting; Head of Europe
ANALYSTS
Chandra Srikanth
ET NOW
Sajeet Manghat
Bloomberg-Quint
Rukmini Rao
CNBC TV18
Madhur
BTVI
Adith Charlie
CNBC-TV18
Vishal Sikka
Hi, good morning. We have entered Q2 with a strong focus on execution. I am very happy with the progress that we have made and the results that we have achieved. We delivered on reported basis a growth of 3.5% to $2,587 mn and on constant currency a growth of little bit short of 4%. So I am happy with that. Margins we grew by 80 basis points to 24.9%. Our utilization went up to 82.5% which is high for us over the last several years. The key factors that had contributed to the less than desirable performance that we had in Q1, we have managed to arrest those, which is Consulting, BPO as well as Finacle and parts of our India business. So I am quite happy with the progress that we achieved. Also, other operational parameters like in various aspects of operational efficiency, subcon deduction, the onsite role ratios and things of this nature. Also, in large deals we crossed 1 bn dollars, we did little bit more than 1.2 bn in large deals, large percentage of that was in the framework deals. In large accounts as well as in the addition of $ 50+ mn and $ 100+ mn accounts we continue to make progress. So I am happy with the performance that our team delivered in this Q2.
While there are quarterly ups and downs based on a variety of factors, what matters really in our industry is the structural change that is going on in our industry. I have talked about this for the last two years. The signs of this change are very visible, very abundantly clear as we look around. I believe that our strategy is quite distinctively different than strategy of many of our competitors. I think that you can start to see the strategy differences play out in the results that we are achieving. The key part of the evolution of our industry is going to be to evolve from a people-only model towards people-plus-software where people are amplified by software and by automation and that improved productivity and automation is then leveraged towards innovation, towards people becoming innovative both in top-down innovation, structural areas like strategy and consulting as well as grassroots, grounds-up innovation coming from the people. On these all important fronts, we are continuing to make progress. That is what will change the overall equation for us as we evolve towards a next-generation company and away from the model of the past that we had. Also, to help us set ourselves up for this, about 18-months ago we established a single defragmented delivery organization under Ravi’s leadership and that has showed tremendous results in the last 18-months with the increased focus, improved bandwidth, defragmentation and ability to focus on client needs. We are similarly now doing the same on the sales side. We have three presidents – Sandeep, Mohit and Rajesh. Under their leadership, we are establishing 13 or so industry heads who have sharp accountability, sharp focus and sharp agility to be able to respond to market needs and bring the best of the entire Infosys to bear on the growth that we endeavor to achieve in the next several quarters.
So overall a good quarter, great focus on operational execution parameters and broad overall good result in a difficult time, in a structurally challenging time for our industry. So I am quite satisfied with the result. Beyond the quarterly results I am quite happy with the progress that we are making on reinventing ourselves for the future.
So with that, I think we can take some questions.
Chandra Srikanth
Hi, Good Morning. Chandra Srikanth here from ET NOW. Questions for the three of you, I will start with Vishal. Vishal, this is second time you are cutting guidance this fiscal year. So how are you really going to repose confidence in investors about the predictability of your earnings? Are you fairly confident that you will stick with 8% to 9% for the rest of the fiscal year based on the demand that you are seeing? Secondly, at this rate, do you see a need to relook your 2020 targets; you said that you will look at this by the end of the year? Thirdly, if you can take us through the restructuring that you just mentioned in terms of 13 industry heads, would that not be a distraction in the current environment where growth is becoming difficult? Pravin, just to understand, in terms of how you performed on large deal wins and what really helped you in terms of geography, sectors in this environment? Ranga, margin expansion, but how sustainable is this given that you do not have growth to support margin expansion and going by the trend that is what it looks like in the coming quarters, so what other levers do you have to continue this margin expansion?
Vishal Sikka
Hey Chandra! On guidance, our belief is to ensure that there is as little as possible asymmetry of information between what the management sees and what we share with the market and we have always endeavored to do that. We operate our business in a dually volatile atmosphere – one is based on the transformation of the company based on what is going on in our industry and the other one is what happens in the outside atmosphere. Both of these contribute to our ability to forecast over the course of a year and so forth. So based on the visibility that we have as you see over the course of the last quarter, we mentioned some of the client behavior related matter such as the RBS decline that we had and some client-specific things. Those have contributed to our outlook on the remainder of the year and that is what we see right now and that is what we have shared. As far as 2020, that has always been an aspiration. What is the point of an aspiration if it is not something that we can aspire to? We are sticking to that - $ 20 bn, 30%, $80,000 revenue per employee. Look, the yearly and quarterly guidance and the forecast and the plans are based on what we see currently in the present atmosphere, but the future cannot simply be an increment of the present. The future is something that we have to set a target that if we are able to execute on our transformation, then what is the number that we should aspire to and that is the number. So obviously, we are sticking to that. In terms of the organization, we operate by verticals, our go-to-market is based on industries and being able to deliver compelling value propositions of both the ‘Renew’ and the ‘New’, not only our ‘Renew’ and our ‘New’ but also our clients renew and new. We need a sharp focus, accountability and agility in being able to get there and therefore we have organized under the leadership of our three sales presidents – Sandeep, Mohit and Rajesh. We must keep in mind that beyond their responsibilities in verticals, they also carry global responsibilities. For example, Mohit runs all the sales operations for the company globally, so all the operational efforts of sales are his, not only in the vertical area that he is directly responsible for. Similarly Sandeep is responsible for bringing all the new services and software across the company. Rajesh is responsible for ensuring that the strategy and consulting part of the work that we do is global in nature. So they will continue to be responsible for those global functions as well as their industries, but now with the 13 industry heads we will achieve that accountability and that agility. So I think that will go hand-in-hand with amazing job that Ravi is doing, running a defragmented delivery organization where we can bring the power of automation as well as grassroots innovation to bear and you see the results that is delivering.
Pravin Rao
Just to add on Vishal’s thing in the sales restructuring, in Delivery also under Ravi we already have about 13 leaders. We did this about 18-months back and it has worked well and so we have now extended on the sales side, on the market side. Now coming back to the large deals, we won 6 deals - 2 of them with committed revenues totaling to about $138 mn and 4 framework deals, $1.069 bn. So total of slightly over $1.2 bn, this has compared to about $800 mn we did in previous quarter. So large deal win continues to be good, the pipeline continues to be healthy. In terms of the overall commentary on services and the segments, it has been a broad-based growth. From a geography perspective, we had good growth in Rest of the World. In India we had a good growth; it was on the back of GST project. In Europe on reported basis it was just about 1.1% quarter-on-quarter growth but on a constant currency it was 3.7%, almost close to Infosys growth. Only Americas was a slightly moderate growth; it was about 2.7% or so. Barring that I think by and large the growth has been uniform across sectors. From Services perspective, we continue to see our core IT Services doing extremely well. They have grown much faster than the organization. We had a 4.7% constant currency growth on the core IT Services side, led by good growth in the Engineering Services, Testing Services, Infrastructure Management Services and Application Development. On the industry side, we have seen good growth in ECS; over 6% quarter-on-quarter growth. All three segments – Energy, Utilities as well as Telecom have done extremely well. Despite all the challenges we have seen good growth in Financial Services as well as Insurance. Manufacturing has been moderate. Retail has seen marginal growth. But having said that, while from a growth perspective, while it has been marginal, on an incremental revenue perspective we have done well on Retail. In terms of the market share capture, I think we have done reasonably well, capturing market share in the space from our competition as well. Overall net-net I think it has been a fairly decent growth across segments, across service lines.
Ranganath D. Mavinakere
On the margin front, we have expanded the margins by 80 basis points. I think I would certainly attribute this to our very sharp focus over the last couple of quarters on the operational efficiency parameters which we have been focusing on. On utilization, it used to be in late 70s as recent as about FY’15. We said we will focus it to keep it consistently about 80% and last six quarters it has been above 80% and this quarter 82.5%. Other indicator as you know is the onsite effort mix. It was 29.9% last quarter and we have seen that declining to 29.7% which is again a positive movement for us. Of course, the onsite employee cost optimization continues, that has helped us. More importantly, even the subcontractor expenses which used to be 6.3% of the revenue in Q3 of last year, we said, we would bring it down, moderate it, without hurting the growth. So it has come down to 5.6% and now 5.4%. So overall I think in this quarter, there has been a continuation of our sharp focus on operational efficiency which helped us in improving the margins by 80 basis points. Margin is an outcome of three key pieces – one, of course, is the revenue growth, the second one is the pricing and the third one is to what extent the pricing declines we could offset through operational efficiency indicators, whether it is subcon, utilization, onsite mix, onsite role ratios and so on and so forth which are all internal factors that we have which we do believe we have those levers. If you look at for the first half, we had average operating margin of 24.5%. If you look at the last couple of years, we have always said that our medium-term focus on operating margin is 24% to 26%. In fiscal ’16, we ended up at exactly mid-point 25%. In the first half of this year, we have had 24.5%. So given the revenue trajectory for the balance of the year, we expect it to be in the range of 24% to 25%. Having said that, our focus on the operational efficiency levers, we have consistently demonstrated over the last couple of quarters. We will continue to focus on that. There could be quarter-to-quarter volatility but the trajectory of those operational efficiency indicators are extremely important for us. We do believe that we will leverage them including some onsite optimization and so on and so forth.
Sajeet Manghat
This is Sajeet here from Bloomberg-Quint. Vishal, I just want you to elaborate a little more on the guidance part because you had 10.5% to 12% as guided in Q1, you brought it down to 7.5% to 8.5% in dollar terms. So there is a 300 basis points dip on the low band. Is it entirely because of RBS or there are other headwinds which is forcing you to bring it down by 300 basis points because the market was looking at somewhere around 150-200 basis points impact on your guidance because of this? Second question was on value compression on large deals as you go for automation. Are you seeing that happening in the market?
For Pravin, one question is on impact, how do you see the Retail and the BFSI space working because industry's IT players are talking about Retail suddenly going off the growth path and BFSI is going to be a challenge there. When do we see the ramp down of RBS order happening, is it going to be in second half and spread over how many quarters will that be?
And for Ranga, can you just give a little more color, you said that the target is 24% to 25% and you expanded your margins by 80 bps in Q2, can you just break it down for us, where is it coming from?
Vishal Sikka
So on guidance again, it depends on what is going on in the present situation. So RBS is one part of it but there are other aspects of it, some of them are internal, some parts of some service lines not growing as fast as we had expected and so forth. But generally when you look at a guidance, it is overall situation and there are three major factors there, the client specific situations, the structural situation in the industry which is related to your second question which is around the price compression and the impact of automation and so forth and this downward spiral that I have talked about over the last two years and that contributes to lowered economics. Then the third one is internal factor around some of our service lines where the need for our transformation and renewal is higher than in other areas. So all those bring us to the point where in the near term we see what we see that gets us to this 8% to 9% constant currency for the year. So that is how we see the remainder of the year developing.
In terms of automation, I think that this is a very fundamental part of the work that we do going forward. I am very happy with the adoption of Mana that we have seen. The revenue growth from Mana is close to almost negligible. However, the adoption of it by clients and the successes that we are seeing are very encouraging. We added a large number of additional Mana clients that went into production over the course of Q2 and the productivity improvement this year as a result of that are starting to show results. So even though we are still in the early stages of automation, we are quite encouraged by the progress that it is marking. My sense is that as Ranga and Pravin talked about the operational efficiency parameters, those continue to help us but the structural impact that we will see in the work that we do in the industry will come from automation, from AI technology helping to improve the productivity of our people dramatically and that is going to be crucial for our future.
Pravin Rao
In the BFSI, in the last several quarters we have had very good performance despite the challenging environment. What we are seeing has been there for the last few quarters as well but we have been helped with our diverse portfolio across regions and across markets, that has helped us in good stead. Having said that, in quarter two we had this slip on RBS. The ramp down will happen in quarter three onwards on the particular piece of work we have done with RBS and we are also seeing some headwinds in couple of accounts on the BFSI side. So while we have good performance in BFSI over several quarters, we expect it to be a little bit muted over the next couple of quarters till we recover from the headwinds that we are seeing today. From a client perspective there continues to be, apart from the cost pressures there continues to be a lot of investments in terms of adoption of cloud, in terms of improving customer experience through digital. There is a lot of investment in Blockchain, crypto currency and so on. We continue to see investment along the operation side, we continue to see a lot of pressure on the cost side. In the long run we are definitely very comfortable on the BFSI space. In fact of the six large deals win that I talked about, three were in the BFSI space. So barring softer probably one or two quarters, we are fairly comfortable on BFSI.
On the Retail space, it continues to be volatile, the consumer spending is very choppy. In the US also it has slowed down in some sense because of uncertainty around elections, Brexit and so on. There continues to be some amount of volatility and softness in the system. Clients continue to spend on digital, on some of the newer areas like virtual reality, multi-channel and so on. Some of the investments we have made in Mana or investments in Skava and other things, Panaya and all are finding lot of resonance in this space. What we are seeing is increased spend on the capex side but a lot of pressure on the opex side and we are seeing lot more traction on our product side of the business.
On the CPG side, they are more global in nature and because of the strengthening dollar they are facing challenges in markets outside US. So there also there is a lot more focus on efficiencies, there are also investments in direct-to-consumer and so on. We expect the Retail vertical to be a bit choppy over the next few quarters. But having said that, as I said earlier, while growth has been very moderate for us in Retail, from a market share perspective in the last few quarters we seem to have done relatively well when compared with competition.
Ranganath D. Mavinakere
Yes, I think we are very happy with our margin improvement this quarter. As you know, margin improved on the back of lot of improvements in the operational efficiency parameters. For example, the utilization increasing to 82.5% and onset mix coming down by 0.2% helped us overall improvement of operating margin by 1%. On the negative side, we had higher third party software cost which reduced margins by 60 bps, so net 40 bps. In addition, we had onsite cost optimization measures and so on which was partially offset by higher variable pay that we paid this quarter and also some of the compensation that we announced for the senior management and so on. All put together, net-net impact of the margin was improvement by 80 basis points.
I think primarily what we are seeing is that, we have been saying this for the last couple of quarters. There are levers in the company which we need to fully optimize whether it is utilization, whether it is onsite mix, whether it is role ratio onsite, subcon expenses again have held and it has come down from 6.3% of revenue about four quarters ago, it has come down. So I think we have these levers and we have always said that in the medium term the operating margin, our expectation is 24% to 26%. In fiscal 2016 we had ended exactly at the mid-point which his 25%. If you look at the first half of this year we are at 24.5%. As I was saying earlier, operating margin is a derivative of three pieces - one of course is the revenue growth and the second one is pricing and the third one is how efficiently we can offset the pricing declines through operational efficiency parameters that I talked about. So given the revenue guidance that we expect overall for fiscal 2017, the operating margin to be in the range of 24% to 25%.
Rukmini Rao
Gentlemen, Rukmini Rao from CNBC TV18. A question to all of you. Vishal, one, want to understand from you the lowering of guidance that we see, is this very conservative guidance from Infosys, have you left a safety net for yourself? And also in terms of the lowered guidance, in terms of your visibility for Q3 and Q4, what is it looking like and where are you seeing these headwinds that has compelled you to lower your guidance?
Pravin, in terms of the impact of RBS and also the ramping up of other deals, if I remember right in the last investor call you were talking about better sense of it by the end of September or so. Want to understand from you what exactly has been the impact of RBS? And also in terms of ramping up of large deals what is that looking like?
And Ranga, if you could break up the margins expansion that has happened, how the 80 basis points come about? Thank you.
Vishal Sikka
So, Q3 traditionally is a weak quarter because of the less number of working days, furloughs and so forth. So beyond that they had a compounding effect of couple of days declines like the clients that we have talked about. So that contributes to a large degree to what we see happening. Again, as for the conservative or not and managing expectations, etc, I have always said that our approach is to minimize the asymmetry between what the three of us see and what we share with the markets. This is what we see presently based on the situation that we have. We will continue to focus obviously on strong performance. In particular, as Pravin said earlier with the capex improving and the ability to sell new products, some of these will compensate for some of the headwinds that we see. But based on the visibility that we have presently, we are comfortable with the 8% to 9% for the year on constant currency. So, that is fundamentally the situation.
Beyond the 90 days cycle, the underlying pattern in the work that we see is governed by bringing in automation into the work that we do using our AI technology, our platform Mana as well as doing completely new kinds of things both by innovation coming from our employees and the new structural things that we are doing with our software platforms and so forth. Accelerating those is something that is crucial to our success. I think all of these will add up to performance as we going forward, but presently based on what we see this is our guidance.
Pravin Rao
On the RBS we had about 3,000 people ramp down starting this quarter and these people are predominantly in India. This is what we said earlier as well. From a ramp up perspective, as and when we win new projects, as and when we see ramp up of existing large deals, some of these people will start getting absorbed. We have considered the RBS ramp down, we have considered the headwinds that we are seeing, we have considered the large deal ramp ups that is happening today, we have considered the large deal pipeline as well arriving at the guidance. So, all these are already reflected in the guidance.
Rukmini Rao
I was listening to you and you went on to saying that you get a better sense that how is the ramping up is happening? If you could give us a sense of in which vertical are you seeing the ramping up happening?
Pravin Rao
From overall perspective, we are facing some softness, as I said earlier in the Financial Services, but in the ECS space both in energy and utilities as well as in telecom we are seeing better traction. In healthcare, obviously we had a good quarter two and we will continue to see a good ramp up in quarter three as well. Insurance, while BFSI overall we may see some softness, we are seeing better traction in insurance as well.
Ranganath D. Mavinakere
As I said earlier I think the operating margin improved this quarter by 80 basis points on the back of several operating efficiency indicators whether it is utilization, onsite effort mix, subcon, employee cost and some of the onsite optimizations that we did which helped us. For example, improvement in utilization and onsite effort mix improved the margin by 100 basis points which was partially offset by higher third party software cost of 60 basis points and the balance 40 basis points came through the onsite optimization that we did and lower visa charges as well. The other thing that I need to really emphasize here is that we have a very healthy operating cash flow generation in this quarter touched $ 550 mn. And for the first half of this year the operating cash flow crossed $1 bn. At the same time we have seen better collection of our receivables. Our DSO came down to 64 days as compared to 66 days. As you know we have also announced an interim dividend of Rs. 11 per share. I think we have leveraged all our operational efficiency indicators quite well in this quarter and if you look at the trajectory of these indicators over the last couple of quarters, we have said that we want to focus on them, there is need for improvement here and we have done that. While there could be quarter-to-quarter volatility, we do continue to focus on these indicators.
Rukmini Rao
Vishal, finally analysts have kind of based some questions around kind of exit of your top management that we are seeing if you can share your thoughts, is this is the end of exit that everybody talks about, so what is being done to stop attrition at the top management level?
Vishal Sikka
Well, I am actually quite comfortable with our leadership team. If you think about the situation that our industry is in at present, we need to go through a dual transformation - both of the work that we do and what is happening in world around us and the world of our clients, this is not an easy transformation. If you just look at in the last 10 years the number of Fortune 500 companies, something like 168 of the Fortune 500 companies are not there anymore in the Fortune 500. All of them had innovation departments, all of them worked with big time consultants and so forth. When you think about the nature of innovation in the times that we are living in, it calls for a complete rethinking. Even the companies that manage to transform themselves through this time do it on the basis of an existing cash cow business by leveraging that to fund the new areas and so forth. We do not have that in our industry because the cash cow business itself is the one that is under margin pressure.
So, this is a time that we are in our industry that requires a deep sense of understanding the nature of our transformation and the ability to execute on the transformation without disrupting the business on a day-to-day or a quarter-on-quarter basis. Most of this management comes from within, every once in a while, we hire from the outside and it is essential to maintain this kind of a balance and not everyone manages to make it through this.
We are an extremely dignified company and we wish the employees who have left us very well but we have to continue the execution of our business, the execution of our strategy. I am extremely happy with the management team that we have, myself, Pravin and Ranga as well as our four Presidents - Mohit, Sandeep, Ravi and Rajesh. Now with the establishment of the industry heads on the sales side to further scale and decentralize and improve the focus on accountability on the sales side just as we did 18 months ago in defragmenting and establishing accountability on the delivery side. I am quite satisfied with the work that we have done. Also, perhaps Pravin or Ranga can talk about the stock options and RSU plans that we have put together, that we have rolled it out to the executives a quarter ago and now we have added an additional few layers of management. These are all signs of a company that is dealing with this dual transformation in a very purposeful way. If you look at our overall attrition that has come down further. If you look at our high performer attrition, last quarter I mentioned that the higher performer attrition was 11.5% and now it has come down to single-digits (to 8.9%) because of a very dedicated focus on the retaining, the top performers across the company.
So on all of these signs we are making great progress. I am extremely proud of the leadership team that we have presently and I am confident that we will continue to be able to execute on our strategy. We will continue to obviously hire outside talent, Sangeeta is joining us on Monday, she brings great experience in healthcare as well as in global execution. Sanath just joined us last week to run our Finacle business. Similarly Robin joined us in our leadership team from GE. So, we have to continually expand our management bandwidth, enrich ourselves with new talent from the outside which brings in different perspective and I am one of those myself, I am here now for two years and a quarter. So, we will continue to do that but overall I am extremely satisfied with the way our management team is taking shape for the times ahead.
Madhur
Madhur from BTVI. Segmentally what is expected to outperform in second half and what is the outlook on client addition?
Pravin Rao
On the second half I had responded earlier, I will repeat. We will see some good traction in insurance space, we will see some good traction in the healthcare vertical, we will see good traction in ECS across energy & utilities as well as telecom. These are the segments where we expect to see good traction. Rest of BFSI will probably be muted over the next couple of quarters because of RBS and other headwinds. Retail, difficult to predict, it continues to be volatile. The first quarter was good, second quarter was a bit choppy, so Retail will be a bit volatile. Manufacturing, quarter three is traditionally a weak quarter because of the furloughs but we expect it to pick up in quarter four.
Mohit Joshi
Sure. So I think look for BFS chandra, we had a very good quarter right. We grew at about 5% quarter-on-quarter and we had significant client additions. We had significant large deal wins. Now growth was also pretty much across the board right, we grew across geographies and like we mentioned, we see some potential headwinds in the second half of the year, but growth was consistent across geographies and across clients. Did I answer your question?
Participant
Sandeep, last quarter we spoke about challenges the Retail is facing especially US based retailers are going to see and we are seeing that panning out in second quarter. What is the kind of outlook you have for the Retail sector and for the moment in the BFSI space RBS has been a bit low and you also spoke about some headwinds that are coming in. Can you just elaborate on those headwinds?
Sandeep Dadlani
So in Retail, we continue to see very choppy consumer spending. If you look at consumer spending for August, it was flat, but now early report from September looks like it is coming back and if we have a good holiday season, obviously that changes everything, but fundamentally Retail as an industry is getting disrupted. We saw large retailers come out very publically and say that they are changing their business model fundamentally. They are going to look more like e-commerce companies. So the nature of spending is going through a big disruption. If you look at consumer goods which is very closely linked to Retail and counted in the same vertical, these companies are adopting Automation and reducing their employee size dramatically, the top 3 consumer goods companies in the world have never had a smaller employee base than ever before. So these two industries and then in Transportation, we saw large shipping liner in Korea just collapsed because of overcapacity. So Transportation and Shipping is also not going through a great time. These are choppy industries. What is Infosys doing about it if you looked at quarter one, we grew these industries by more than 5.5% and perhaps captured more market share than anybody else in the market that showed tremendous investments that we have made especially in Digital along with Ravi and in acquisitions like Skava etc. These industries have been the first to adopt Automation. They have been the first to adopt new software as well. If you look at Q2 this quarter as well, while the headline reads it is almost flattish sort of quarter for Retail, CPG. I think if you look at the market, many other market players are shrunk. So in terms of capturing market share, in terms of capturing incremental revenue over Q1 and Q2 and scrapping it out for revenue in a tough market, I think we have done well. I think Q3 is a seasonally weak quarter for all of Retail, Logistics, CPG in general because of the holiday season, but I continue to believe that the way we are leveraging our investments in the market, we will continue to gain and capture market share in these industries.
Participant
Are you also facing value compression in the sector because as you take up Automation and Artificial Intelligence, the value of large deals are going to shrink and discretionary spending is almost nil or very minimum. So are you seeing that kind of challenge apart from these economic headwinds which are coming and hitting you this kind of headwind as well?
Sandeep Dadlani
I think discretionary spending in Retail, CPG, Logistics, and for that matter Manufacturing, I do not believe that it is going to get tight as such, but the nature is going to fundamentally change. So if I approach these discretionary spend buckets with the traditional IT services mindset, my reaction will be oh, it becoming tight, it is going nowhere etc. but if I approach it with a people plus software mindset, then I would like to believe that these industries will spend in a very select manner in a very different mix of CAPEX and OPEX in differentiated software surrounded which is amplifying the services model in a unique way. Our attempt is going to be to capture that second type of discretionary spend more than anything else. So it is not as much in terms of discretionary spend shrinking versus discretionary spends changing in its fundamental nature.
Mohit Joshi
I think on the Financial Services side as well, look again everything is relative right, performance is relative and you have seen the numbers coming from our competitors and you have seen the outlook that they have given for the quarter and for the whole year. So from that perspective, we have really had a sterling first half of the year right in Financial Services. If you look at like I mentioned in Q2 itself, we had 5.2% constant currency growth which equates to I think double digit year-on-year growth. If you look at the number of client additions, we added 13 clients. Pravin spoke about the fact that if you look at the large deals and we have really had a remarkable quarter this year in terms of large deal wins, something like 60% of that came from Financial Services. So obviously in the first half of the year the message that we have for our clients like Sandeep mentioned right the Software plus Services message is really resonating well even in a challenging environment. So on the renew side with all the work we are doing in Automation and Industrialization and on the new side all the work that we are doing on Digital, on Design Thinking, on Transformation, that is really resonating with our clients. Obviously as we look to Q3 and Q4, there are couple of things that are happening. We have already spoken about the headwinds that are coming from the ramp-downs that we announced earlier in the year at RBS. There are also challenges because of the very low interest rate regime that you are seeing across the world right and what this really means is that it challenges the revenue for banks, it challenges the ability to give long-term forecast and therefore there is something that we considering when we are presenting our perspective for the second half of the year. Underneath I just wanted to stress that there are three things, one is our competitive position is extremely strong and you have seen that in the results this quarter. Second that the Software plus Services message is really resonating well. So our key message of new and renew is very much in line with the challenges and the opportunities that banks see and finally that there is turbulence in the environment, but I think the turbulence does not detract from our fundamental competitive strength in BFSI.
Adith Charlie
Hi gentlemen, this is Adith Charlie from CNBC-TV18, couple of quick questions if can I start with you Sandeep. Could you give us some clarity on what to expect in Q3 from the Americas region especially because Q3 is seasonally a weak quarter you have furloughs, you have holidays and also you have the US elections coming up. So are you bracing for any unexpected slowdown compared to say Q3 of last year. Secondly on the consulting front, Vishal talked about strategic shift really. So I wanted to understand what is the nature of the shift? Are you moving from a technology-led consulting approach to a management-led consulting approach or is it more of Design Thinking sort of an interplay and finally..
Participant
And finally essentially Vishal was talking about having problems on the Consulting side, the execution problems really. Wanted to understand from you where exactly has this been sorted and what kind of issues have been addressed on the execution part of Consulting as well?
Adith Charlie
And one final question on the geography front, we have seen India and Europe. Europe has been relatively stable despite Brexit. India I think there has been 28%-29% year-on-year growth. So is it a one-off? Are we finally seeing India business ramping up better than expect? Thank you.
Sandeep Dadlani
So you take the Consulting, I will take the Americas one and then India may be you can take.
Rajesh Krishnamurthy
So on the Consulting side, we have had some structural challenges and structural issues. We have taken action to address some of that. So you would have seen in the results this quarter we have stabilized the revenue situation, we did have a decline last quarter, we have arrested that; however, I believe that this is work-in-progress. I think we still have some time to go before we can announce victory on this. We are working on making sure that the changes we are making are in alignment with the broader Infosys strategy. I think the conversation which Vishal is having and message Vishal is giving, if you step back and look at the Consulting profession as it has evolved, it has primarily evolved around 3 axis. So typically Consulting professionals have built their careers either on a domain or building a domain capability or building capabilities in a functional area or building on technology. I think given the state of the industry given the pace at which technology changes coming at us, a true consultant today actually has to bring a combination of these. You have to bring the right functional expertise, you have to understand the domain, but you also have to come armed with the right tool sets and the technology which will allow you to accelerate the consultation which you provide to your clients and I think that is the journey we are on and given the direction of Infosys as well with the focus on Automation on our AI platforms, the focus on Innovation, Consulting will be a key part on this journey and all our investments are going to be around that. We will ensure that our Consulting division in some ways becomes the tip of the spear for the services which we take to markets.
Participant
We should say another 2 or 4 quarters really to stem the entire problems in terms of execution in Consulting and look at that timeline essentially?
Rajesh Krishnamurthy
That is right. I think we are talking about anywhere between 2 to 4 quarters to really stabilize this. We will probably see some challenges because we talked about declines in some key clients in Mohit's portfolio. Consulting also will be impacted by that because Consulting was also a key part of that transformation program. But that is a one-off transaction, but I do believe that we will require anywhere between 2-3 quarters to stabilize this and ensure that it is on a firm footing to accompany Infosys on its journey towards the high growth ambition we set for ourselves.
Sandeep Dadlani
Thanks Rajesh. Americas the election rhetoric and the noise has never been louder as you have seen. So it does create some uncertainty in the business environment, in the consumer spending environment. Headwinds are in Financial Services, the industry has talked about it, but of course we have Mohit's leadership to counter that in Q3. We also have seasonally weak quarters in sectors like Retail, Manufacturing, Hi-Tech where there are furloughs, but then the global semiconductor index showed the highest sales ever in September than ever before. So there are headwinds which are usual for Q3, but again I feel Infosys is armed with the right leadership, the right assets for example the robotic process automation market is booming and Infosys has a very powerful product called AssistEdge to take advantage of that market. Software assets like Skava which is now relevant across Rajesh's industry, Mohit's industry and my industries are unique, other competitors do not have that. So our goal will always be that in a seasonally weak quarter to counter it with a unique Software plus Services strategy, our unique leadership strategy and then of course Ravi being the head of delivery, delivering very well with initiatives like Zero Distance and Zero Bench successfully.
Participant
Just to add to answer which you said, Mana or Skava, are they replacing existing services which you are providing or are they bringing in incremental revenue to your stream?
Sandeep Dadlani
They are doing both right. So look at all our Automation platforms that we have, they are helping Ravi and team deliver massive automation to existing programs. If you look at Skava however, it is an ecommerce platform which was in fact launched as a full blown ecommerce platform just last month and has already taken on some of the largest ecommerce players in the world and won successfully. If you look at our press release today, there are two or three clients across industries, not just in retail talking and endorsing Skava in a big way. These are absolutely new type of revenues that Infosys or the rest of our competitors have never seen before.
If you look at EdgeVerve, and in particular AssistEdge, the robotic process automation software, that market size IDC estimated it to be about $5 billion last year looking out to 2020, that market size has suddenly exploded to $16 billion in 2020, that market automates business processes, that market did not exist earlier. Now, we are going out and exploiting that market with what we think is a world leading product.
So, in many ways some of these new platforms are helping Ravi automate his services, improve productivity, share productivity savings of the clients but they are also driving new streams of revenues for us.
Ravi Kumar S.
The India geography has been very stable for us, there was one large program for the government which has contributed to the growth this quarter and that will continue for the next few quarters.
Rahul Daima
Hi, gentlemen. This is Rahul Daima from ET Now. Ravi, firstly coming to you, how have you been improving this Zero Distance initiative? And as far as take us through the tangible benefits in the conversations that you have had with clients. And also, a bit on the new organization structure, breaking down, I assume it is to about 10 to 15 units, how will that pan out?
And Rajesh, if you could just give us sense of the Brexit impact and also in the backdrop of the Pound depreciation. And also a general trend as far as client spending in the Europe is concerned, how does it pan out.
And probably Mohit, you could add, we are seeing a drop in the revenues from the top clients, be it top 5 or top 10, of course it talks about the larger consumer sentiment but how do you see it pan out in the coming two quarters? Thank you.
Ravi Kumar S.
Sure. So, we have started Zero Distance pretty much almost a year ago. The idea was to look for incremental innovation, adjacent innovation and repeatable assets which we could build on projects which we do, and it is a grounds-up innovation process. Never before a grounds-up innovation of this size and this scale has been attempted in a corporation of this size. So, that was the biggest attempt on bringing innovation grass roots, we do not believe that innovation should be done in a department, it should be in every project that we do.
The initial focus was on coverage, the initial focus was on building great content on innovation and that is what we have focused for the last few quarters. And in the last one or two quarters, including this quarter, we have had significant monetization of Zero Distance. The idea was to look for these innovation templates which all our project teams have written, take it to clients, show and tell of what our teams think about, either by a prototype or a rapid proof of concept and then convert them into projects. So, a lot of those projects are measured on value, value for our clients, value for Infosys and we have incentivized our teams, our project teams based on the value that we actually delivered for clients. So, this is possibly the most unique model of looking at innovation. We used a bench to build those prototypes, one of the reasons why our utilization went up this quarter, structurally we looked at ways to get a fresher utilization up, our fresher utilization went up because they got experience on these templates and this proof of concepts. And thereafter they got into projects which actually got created from Zero Distance. So, in a way it did help our offshore utilization to go up and Zero Distance is some sense the most unique way of looking at innovation at the grass roots.
Rahul Daima
The way we are structured?
Ravi Kumar S.
Yes, on structure we always had a consolidated delivery structure with service lines spanning across the world across the industries. So, that structure has been in place for the last 18 months. What we have done now on the sales side under Rajesh, Mohit and Sandeep, we have created industry segments and sub-segments and those are self-contained units for propelling growth in the market. So, the idea was to give agility in the market on the sale side, on delivery we always had a consolidated structure. Though the structure on delivery remains the same, on the sale side we have created those integrated industry segment so that we could focus in the market on specific industry sub-segments.
Rajesh Krishnamurthy
On the impact of Brexit, I think if you look at this quarter Europe actually grew 3.3% in constant currency terms, in real terms it has grown a lot less because of currency impact. I think while Brexit is still being, we are still going to look at the impact of it coming through over the next few quarters and maybe even longer than that, I think clearly it has shaken the confidence in the European market, while there may not be a direct correlation of a potential Brexit versus what is going to happen in the industries, clearly we are seeing early signs of that. While you cannot be able to directly correlate the decision of Brexit, for example a project cancellation, clearly it has impacted the long-term projections of growth in certain key markets, it has questioned the viability of certain projects and therefore we are clearly seeing a slowdown there, I think Mohit's industries probably has the biggest immediate impact and we are seeing that. I think RBS, while may not be a direct impact of that decision, I think there is definitely a secondary impact. The other industries too are going to see some of this, there is overall, if you look at the projections in terms of the growth rates of the key markets has been lowered in the last few months and that will have potential impact in the long-term. But I think it is a bit too early to really quantify the impact, from our perspective the way we look at it is our revenues in Europe are only about 24% - 25%, we have a lot of headroom to grow, there are a lot of industries where we are under penetrated, so we are continuing to chug along, continue to make investments in our key markets and we believe that for us there is still a lot of headroom to grow.
Participant
Mohit, would you want to chip in as far as the dip in the top lines are concerned?
Mohit Joshi
Sure. So, on the Brexit piece, like Rajesh mentioned, I think it is maybe too early to tell but we are seeing some degree of uncertainty in client spends and we are seeing some client concern about what the long-term direction of the economy will be. But equally it could also throw up opportunities for us if there is separation, if there is new regulation, if there is a transfer of certain entities from UK to Europe, it could throw opportunities for us as well. As far as the question on large client growth is concerned, I think it is simply a one quarter thing, you have seen the previous few quarters that our large clients have grown faster than the rest of the organization and that remains our aspiration and we are fairly confident that we will come back to that. This is to my mind a one-off aberration.
Participant
Rajesh, you have mentioned that RBS had an impact on you, can you elaborate on that what kind of impact in terms of revenues you had? Because Vishal spoke about the fact that there are a couple of service lines which need a lot of transformation, which includes consulting and BPO and if someone can speak on BPO as well, what you are doing to transform the entire service line of BPO?
And one for Ravi, you mentioned that the GST revenues would be going for next couple of quarters…
Ravi Kumar S.
No, I did not mention that. I actually said the project will go along for the next few quarters.
Participant
So, have the revenues come in entirely in this quarter or will the revenues be..
Ravi Kumar S.
So, I cannot comment on the revenues for the program…
Participant
India revenues grew by 1% in terms of overall revenues.
Ravi Kumar S.
No, so I cannot comment on the revenues for GSTN but the project will continue, as you are aware. And that is a big program for us in India and that is one of our largest program, that is one of the reasons why the India geography had a uptick in this quarter.
Mohit Joshi
I think, I do not think I can disclose too much information about the program or where the various components of revenue came from. In the analyst meet as well as in the official disclosure we have mentioned that this was a large program, that we saw about 3000 people who will ramp down as a result of their decision and that the ramp down will start from Q3 and carry on. I do not think we can give service line wise distribution, however as Rajesh mentioned, this does have an impact beyond just our traditional application development and maintenance service line to include other service lines also.
Participant
Rajesh, how much of ramp down will be there in consulting because of that or is it included in the 3000?
Rajesh Krishnamurthy
So, the overall impact is across different service lines, consulting had a significant share in that business as well in the range of 25% - 30%, so there will be that impact.
Participant
In BPO?
Rajesh Krishnamurthy
Yes. So, BPO we have started a transformation process, you have seen the growth this quarter, this has been a good healthy quarter for BPO, if you look at it for the last four or five quarters you would see that. Traditionally BPO services which focuses on outsourcing a process, in my view does not have a lot of growth in the market, the growth really in the future comes from digitizing the process, innovating the process and automating the process. So, our ability to bring technology to BPO so that we could digitize, automate and innovate a process will be our biggest differentiator in the market and that is what we are making an attempt on. There are rather new interesting areas in BPO, we could create insights and analytics on top of business process, we could bundle Mana into BPO services, we could create digital media operations on BPO services. So, our endeavor of BPO is to create a new paradigm, a new league of BPO services in the market and that is the transformation we have started, this quarter is the first one in a way and it has given us some initial runway and we will see momentum as we go forward. But it will really not come from traditional services, it will come from new services of BPO which will be the next big thing in BPO.
Participant
Is there a timeline for that?
Rajesh Krishnamurthy
So, all these new services always come with a ramp and you need to go through that ramp. We strongly believe these services are very relevant to clients, these services are going to transform our BPO business, this is the first quarter where we have done well in BPO and I am quite sure the trajectory will continue this way.
Moderator
Thanks, gentlemen.
Exhibit 99.4
Fact Sheet
Exhibit 99.5
Earnings Call 1
EARNINGS CALL 1
Q2-FY 2017 RESULTS
October 14, 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
Sandeep Dadlani
President & Head – Manufacturing, Retail, CPG and Logistics; Head – Infosys Americas
Ravi Kumar S.
President & Chief Delivery Officer
Rajesh Krishnamurthy
President & Head - Energy, Utilities, Telecommunications and Services; Head—Infosys Consulting; Head of Europe
ANALYSTS
Sandeep Muthangi
India Infoline
Ankur Rudra
CLSA
Edward Caso
Wells Fargo
Viju George
JP Morgan
Diviya Nagrajan
UBS
Ashish Chopra
Motilal Oswal Securities
Anantha Narayan
Credit Suisse
Moderator
Ladies and Gentlemen, Good Day and Welcome to the Infosys Earning 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 like to 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 Q2 FY17 Earnings Release. I am Sandeep from the Investor Relations team in Bangalore. Joining us today on this call is CEO & M.D. – Vishal Sikka; COO – Pravin Rao; CFO – 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 and Ranganath. Subsequently, we will open up the call for questions. Please note that anything that we say which refers to our outlook for the future is a forward-looking statement which must be read in conjunction with the risks 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 now like to pass it on to Dr. Sikka.
Vishal Sikka
Thanks, Sandeep. Hi Everyone! And Welcome to our Q2 Earnings Call.
We had a good overall performance in Q2. You will recall that during our Analyst Day in Pune in August, we had outlined certain expectations on Q2 performance. We had mentioned that we would focus strongly on execution in Q2 and expected Q2 revenue growth to be better than Q1. We had also mentioned that we would focus on certain drag factors from Q1 such as Consulting, Finacle and India.
I am happy to report that as a result of our strong focus on execution in Q2, our sequential revenue growth was 3.5% in reported terms and 3.9% in constant currency terms. This compares to Q1 in which we had 2.2% growth in reported and 1.7% in constant currency terms. Consulting, India and Finacle have all performed better in Q2 compared to Q1. We will continue to monitor the performance of Consulting closely in the coming quarters as it still faces headwinds.
Our Core IT Services had robust growth of 4.7% in constant currency terms in Q2; volume growth was 4%. We continue to see adoption of our new services by our clients and are focusing on building a healthy pipeline for our new services. I am particularly excited about the interest from clients in our knowledge-based AI platform - Infosys Mana, both in helping them renew their core businesses and especially in helping them explore and define new areas. I will talk more about this in a little bit.
Coming to strategy execution, we have been sharing with you certain key indicators that we track to assess the trajectory of these parameters. During the quarter, we had large deal wins of $1.209 bn. This includes committed value deal wins of 138 mn and Framework deals of $1,071 mn.
In terms of client metrics, our top-10 clients grew year-over-year 3.7%, our top-25 clients grew 4.3% while non-top-25 clients grew 10.6% in reported terms. The number of $50 mn clients increased by 2 to 54 and the number of $100 mn clients increased by 1 to 18.
We continued our strong focus on improvement in operational efficiency parameters such as utilization. I will talk more about our Zero Bench and Zero Distance initiatives as they pertain to this in a little bit, also on onsite/offshore mix, subcon expenses and cost optimization. Ranga will provide more details on these in his remarks.
Our operating margins improved 80 basis points from 24.1% in Q1 to 24.9% in Q2. Among large verticals, growth was led by Financial Services and Insurance which grew 5.2% on constant currency and Energy, Utilities, Communications and Services which grew 7.3% on constant currency. We had robust all around growth across all geographies.
We added 12,717 employees on a gross basis and 2,779 on net basis. Headcount at the end of the quarter was 199,829, so just a little shy of 200,000. Attrition for the quarter declined further to 15.7% for Infosys Limited standalone and 20.0% for the entire group. The high performer attrition, an area of special focus for us, continue to decline.
We will continue to seek opportunities in M&A and investments. In this quarter we invested in Cloudyn, a cloud spend optimization startup in Israel.
In Pune, we had also announced that in order to further enhance client focus and our agility in the market, we would create smaller industry segments in sale. We have completed this exercise and the new structure is effective as of today. Similarly, we reorganized our delivery organization in April 2015 wherein we consolidated and defragmented our various service lines under Ravi’s leadership. We have seen significant benefits out of the delivery organization, as seen in stronger service line focus and improved operational efficiencies and stronger ownership by the leaders. We see a similar opportunity in sales through the smaller, more agile, more focused and more accountable industry segments.
Coming to the Business Outlook for FY17, you will recall that in Pune, we said we will be in a better position to provide the business outlook for FY17 after delivering Q2 and assessing the business environment for Q3 and Q4. We had indicated that we see more headwinds than when we entered Q2. During the course of Q2, we have seen signs of cautious client behavior. Our announcement on RBS ramp-down is an example of this. Over the last couple of weeks, several of our peers have also indicated a softer business environment leading to a more cautious outlook for FY17. After considering our H1 performance and the near-term business outlook based on the visibility and our assessment, at this point in time we expect our revenue growth for FY17 to be 8% to 9% in constant currency terms.
Now, let me share a few thoughts on the execution of our Renew and New strategy through automation and innovation and how we are fueling this through a culture of education and learning: In Renew, in Q2, we made good progress on our strategy to renew our core services and help our clients renew their core businesses through automation and through grass-roots innovation. We are accelerating this by monetizing Zero Distance, bringing our Knowledge-based AI platform, Mana to all aspects of our service offerings including leveraging Mana internally and continuing to drive value from the bench.
Our traditional services of Application Development, Infrastructure Management and Product Engineering, all grew above the company average. Zero Distance, our program to bring innovation to every project is enabling us to deepen our existing client relationships, show differentiation to help us win new opportunities and provide tangible examples of Infosys as a strategic partner for our clients for grass-roots ongoing innovation. Zero Distance continues to cover more than 95% of all our projects and it is truly a grass-roots innovation movement across entire Infosys. We are now elevating this further to drive greater value for our clients and converting ideas into solutions. Hundreds of Zero Distance ideas are being implemented in client projects with many of them converted into new business opportunities generating commercial value for Infosys.
Regarding Mana, I am really excited to see the growing interest from client and in the industry and we are in the process of building a strong pipeline. While we are in the early stages and revenue impact is insignificant for the quarter, we saw continued adoption in client successes. Internally, we are leveraging our own automation solutions to drive greater efficiency into all parts of our service line.
In Q2, Ravi estimates that we saved close to 2,400 FTEs worth of effort across service lines primarily in Application Maintenance, Package System Maintenance, BPO and Infrastructure Management. Going forward, we will go beyond automation and apply the Knowledge-based AI capabilities of Mana to more complex scenarios with the focus on increasing productivity.
Zero Bench, which is our program to engage employees in value creation while they are between projects has created more than 26,000 work packets already with many of these being generated by Zero Distance ideas and nearly 12,000 work packets have been completed. This has ensured that almost all of our bench capacity is engaged and we are already seeing benefits in terms of additional revenue as well as margin improvements through the solution created. As a result of gaining valuable experience on these Zero Bench assignments, more than 1,000 additional freshers went directly into client projects in the first half of fiscal ’17 versus first half of fiscal ’16 and you also see this contribute to the improved utilization. In new areas, we continue to grow our new services and products in Q2 and help our clients drive breakthrough innovation. In particular, we are working with a number of clients and partners on leveraging new technologies, especially AI technologies including Machine Learning to drive large scale transformations. Our AI platform Mana is key to this and we will accelerate our work in new areas with Mana.
We also announced in September our new ‘Incubation as a Service’, a dedicated Infosys team that will be the innovation engine for our clients leveraging our learning experiences across industries and our work in emerging technologies. We will run this model with co-creation and collaboration with clients at the heart of what we offer, founded on the principles of Design Thinking.
Skava continue to help clients create new kinds of customer engagement across channel, for example, Infosys and TOMS Shoes are working together to implement an Omni Channel platform leveraging Skava Commerce. In Q2, we launched Java Commerce, a new standard for Modern Mobile-First Modular eCommerce Platform.
EdgeVerve delivered a strong performance this quarter with 48 wins, 23 Go Lives from both Finacle and Edge suite of solutions across various markets. Edge products added several new clients this quarter across various solutions with AssistEdge leading with 8 new wins.
We continue to bring Design Thinking into every client engagement, for example, we are working with Kohl’s, the large US retailer to leverage Design Thinking together with our Skava platform on how to enhance customer experience, sales associates and the overall Kohl’s experience.
In Culture, we continue to invest in our employees and in learning and education. In education and in training, this quarter we added focus on collaboration to every class offered in Mysore. This is based on learning from our data scientist class in which we saw the code quality was significantly improved through collaboration. Specifically, we reduced the number of code issues to 35% for individuals and down to 12% in a group of 10 people. We are also introducing new kinds of programs including Udacity in Nanodegree and Coursera for rapid upscaling when needed for the most in demand niche skills. We continue to roll out the equity program with the first phase to mid and junior level high performers already complete. We will be extending this to the leadership levels as we look at programs to retain our best leaders and attract new leaders to our company.
Looking beyond business, at Infosys, we are deeply aware of our role in society which is beyond business. In India, through the Infosys Foundation, we made several investments in the areas of Rehabilitation, Healthcare, Education and Arts and Culture including handing over the Residential Enclave of 200 Houses to families that were ended homeless in the aftermath of the Hudhud Cyclone in 2014. We launched an Institute of Robotic Surgery to support the Narayana Hrudayalaya and funding travel stipends for top researchers at IIT, Kharagpur as well as sponsoring an IIT Kharagpur Study about the Antiquity of the Indus Valley. Infosys Foundation USA supported Quality Computer Science and maker professional development for teachers via the Computer Science Professional Development Week, the CS for All Community Giving Program and commitments announced at the US White House Summit on Computer Science for All. Additionally, the foundation announced new grants to support the Largest Computer Science Teacher Organization recognize excellence in Computer Science Teaching for Awards and assist the New York Academy of Sciences. All of these are things that we continue to be proud of.
I will now hand it over and closing to Ranga to provide more details on financials before coming back to Q&A. Thank you.
Ranganath D. Mavinakere
Thanks, Vishal. Hello, Everyone
Let me start by saying that in Q2 we focus sharply on improving further the operational efficiency of our business and continue to focus on healthy cash generation. I am happy to report that we have seen further improvement on both these fronts.
Our revenues in Q2 were Rs.17,310 crores, this is a growth of 3.1% sequentially in rupee terms. On a year-on-year basis, when compared to Q2 fiscal ’16, our Q2 ’17 revenues have grown by 10.7% in rupee terms. In dollar terms, revenues grew sequentially by 3.5% on reported basis and 3.9% in constant currency basis. On a year-on-year basis, when compared to Q2 fiscal ’16, revenues have grown 8.2% in dollar terms and 8.9% in constant currency terms. H1’17 revenue growth as compared to H1’16 was 9.5% in reported terms and 10.5% in constant currency terms.
Volumes grew healthily by 4.0% during the quarter as compared to 2.2% in Q1’17. On quarter-on-quarter basis, Onsite volume grew by 3.1% and offshore volume grew by 4.4%. Realization for the quarter increased 0.2% on reported basis and 0.7% in constant currency basis compared to Q1’17. On year-on-year basis, realization declined by 3.6% and on reported basis 3% in constant currency.
Several operational efficiency parameters improved during the quarter. Our utilization excluding trainees increased 200 basis points to 82.5%. Similarly, utilization including trainees went up to 77.7%. Over the last six quarters, utilization excluding trainees has been consistently above 80%. Onsite mix reduced to 29.7% during the quarter and we are focusing on bringing this down gradually; however, there could be quarter-on-quarter volatility.
Subcontractor expenses again were at 5.4% of revenues, similar to Q1’17 level but still lower than 5.5% that we saw in Q2’16. Employee benefit cost as a percentage of revenue was 55.7% as compared to 55.3% in Q1’17, primarily on account of compensation increases as well as higher variable pay that we paid to our employees this quarter offset by better utilization. On a comparable basis, Q2’16 employee benefit cost as a percentage of revenues were 54.7%.
On the collections front, our account receivable collections have been very healthy. DSO for the quarter was 64-days as compared to 66-days, a decline of 2-days as compared to Q1’17.
As Vishal said, our operating margins for the quarter was 24.9%, increase of 80 basis points over Q1’17. Improvement in utilization and onsite mix contributed to 100 basis points to margin improvement. This was offset by increase in third-party software cost which negatively impacted margins by 60 basis points. The benefit of cost optimization initiatives onsite and lower visa charges offset the impact of higher variable pay that we paid to employees this quarter and compensation increases by 40 basis points, thus leading to a net increase of 80 basis points expansion in margin.
Our emphasis on healthy operating cash flow generation continued in this quarter; operating cash flow generation was strong during the quarter, partly helped by tax refunds of about Rs.350 crores. We generated operating cash flow of Rs.3,698 crores in Q2 as compared to Rs.3,130 crores in last year same quarter. Our cash and cash equivalents as of September 30th was Rs.35,640 crores as compared to Rs.33,212 crores last quarter.
We added 12,717 gross employees during the quarter with a net addition of 2,779 employees. The quarterly annualized attrition on a standalone basis has also decreased marginally to 15.7% from 15.8% last quarter. At the group level, annualized attrition was 20% as against 21% last quarter.
As you know, Q2 saw volatility in currency especially in the backdrop of Brexit. We managed to navigate the volatility effectively during the quarter. On a period, end basis, USD appreciated by 3.6% against GBP and depreciated by 0.3% against Euro and 2.2% against Australian Dollar. Our hedge position as of September 30, 2016 was $1,037 mn. We expect near-term volatility in cross-currency and rupee and we continue to manage the same through appropriate hedges.
Yield on cash balances was 7.77% in Q2’17 compared to 7.82% in Q1’17. We expect the yield for FY’17 to be approximately 7.5% as compared to 8.6% in FY’16 due to interest rate environment in India.
The Effective Tax Rate for the quarter was 28.8%; full year Effective Tax Rate projection at this point in time is expected to be around 29%.
Our net margins during the quarter were 20.8% compared to 20.5%, an increase of 30 basis points over Q1’17. Our EPS for the quarter was Rs.15.77, EPS grew 6.1% on year-on-year basis and 4.9% on sequential basis.
Coming to Clients and Business Segments: Our number of $100 mn clients further increased by 1 to 18, it was 17 last quarter and $50 mn clients increased to 54, an expansion by 2. Active clients count now stands at 1,136 as compared to 1,126 last quarter.
Coming to Margin Expectations: We will continue to optimize the operational efficiency levers on an ongoing basis. We have said that in the medium-term our operating margin expectation is in the range of 24% to 26%. However, considering the expectations on growth trajectory for the second half of the year and as revenue growth is one of the key determinants of margins, we expect the fiscal 2017 margins to be in the range of 24% to 25%.
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. Our first question is from the line of Sandeep Muthangi from India Infoline.
Sandeep Muthangi
Good quarter. Congrats. I have a question on the implied outlook for the second half. Vishal, when you look at your customers, the sense that you get is it primarily stoppage of some near-term discretionary work that is going to impact a lot in 3Q or is it even pull back of some of these medium term plans because of which you think the low growth could carry on for some time?
Vishal Sikka
No, it is not that. It is specific to a few clients and some of the seasonality that you see in Q3 in certain industries with less working days and furloughs and so forth. So, it is a combination of those things and a couple of our own internal work and service lines that we are working to renew which has been going slower than we expected. But by and large in some segments there is certain weakness. So, it is a combination of those things but I would not say it is anything particularly structural that is having such an impact on the near-term. What is having an impact at a structural level is the decline in the overall pricing environment and the sort of the downward spiral that I have talked about for the last two years, and Ranga mentioned again we have continued to see that pricing pressure. My sense is that it is only going to intensify and that is a structural thing that we must address through a combination of automation and innovation and this is a much more fundamental transformation. On that front, which is a long-term structural front, I am very happy with the progress that we are making and we continue to accelerate our progress both on embracing automation in our existing services with our platform as well as in deploying that same platform for new kinds of problems and in bringing in a very deep rooted sense of a culture of innovation at the grass roots level in every project which we call Zero Distance. All of these have started to produce very noticeable results now and I am very encouraged by that. Although that is a more structural thing, the rest of it, things that impact the numbers on quarterly basis are more tactical and near-term and it is a combination of a couple of clients and some of the seasonality and things of this nature.
Sandeep Muthangi
Just one question on the RBS thing. In case like this where you would have invested time and money and resources on ramping up such projects and they abruptly ramp down, would you have any recourse to getting a compensatory payment from RBS?
Vishal Sikka
Maybe Pravin can comment on that. It depends on client specific situation and contracts and so forth. Generally, in our business the ramp ups take a while and ramp downs are immediate, so that is just the nature of the business and how our revenue generation works. Having said that, we can have various mitigating measures depending on the situation in contracts and things like that. Perhaps Pravin can comment on that.
Pravin Rao
See, typically it depends on the nature of the project. In a fixed project or in projects where we made upfront investment, we have a termination cost. Like last year in the second quarter in one of the clients we had an unfortunate end of a project and client paid the termination cost which you are probably familiar with. Now, similarly in the case of RBS it is more of T&M project, so there we have a notice period that is typical practice. In RBS also we got the notice period that was contractually given. The idea is that with the notice period we should be able to have enough time to ramp down and find alternate opportunities for the people.
Moderator
Thank you. We have the next question from the line of Ankur Rudra from CLSA. Please go ahead.
Ankur Rudra
First, Vishal, over the last two years under your leadership, we have seen the philosophy of guidance very straightforward, you say it as you see it. And this time we have seen a 250 basis points cut to the guidance. I am guessing this bakes in RBS. But has there been any change in our philosophy. Are you baking in anything beyond what you see this time compared to before? That is my first question.
Vishal Sikka
No, we are not baking anything. I love the way you said it, say as you see it. I am going to use that in the future if you allow me to. What I have said is somewhat more exotic thing about minimizing the asymmetry of information between management and market and all that which sounds like some kind of rocket science. The bottom-line is that we want to share with you what we see and we see an atmosphere where there is a dual compounding of the forecast and stuff that we see. One is the atmosphere outside, factors such as Brexit, RBS or these kind of things which can have volatile impact on what we do. The other is our own internal parameters like what we had with our work in consulting and so forth that we are working on. Our competition has also indicated softness in their outlook and things of this nature. So there is a certain sense of that. But we are baking in all the information that we see presently including RBS and all of these things, but there is no change in philosophy.
Ankur Rudra
So, just going from there, given the very sharp cut to guidance, basically we are baking in between a decline of 0.6% for the next two quarters to a growth of 0.5% sequentially, Infosys growth was 13% constant currency in FY16, 15% in fact in the March quarter. Basically, you are guiding to a very-very sharp slowdown to 8.5% which is probably in line with peers but given your progress on clients on deal wins, it just does not stack up with the whole thing. So where do you explain this very sharp deceleration despite all the other initiatives being taking place?
Vishal Sikka
See compared to what we say at the beginning of the year and then what we saw at the beginning of the quarter, as we said when we were in Pune, even though we had lowered the guidance at the beginning of Q2, the atmosphere that we saw over the course of Q2 continued and became worse and we shared this in Pune already in late August. So that is contributing to what we see. I do not believe that there is anything fundamental or structural that is contributing to the lowering of the guidance other than the fact that the change that is happening in the industry around the pricing pressure and so forth. When we sum total all of that based on what we see, this is the guidance that we get to.
Ankur Rudra
Just if you could clarify this thing about frame deals and non-frame deals, because historically we have not seen this consistently. Is there any change in the definition because the mix appears to have changed, it is almost 90% non-frame deals. Any sort of guidance what is happening there and does it indicate softness because your non-frame deals which is what you used to track earlier primarily appears to have fallen to just about $100 mn - $200 mn?
Pravin Rao
I do not think so. It is too early to read anything into it. It varies from quarter-to-quarter. Essentially the frame deal is where we are pretty confident that we will get the kind of revenues we are talking about, total TCV over three to five years or whatever the timeframe is, but contractually client has not committed to that. But by and large based on our past experience, based on what client says, barring contractually signing it we are comfortable with that and that is what we are calling out. The other category is where client has contractually committed. But I think it is too early to read anything into it, it varies from quarter-to-quarter.
Moderator
Thank you. We have the next question from the line of Edward Caso from Wells Fargo. Please go ahead.
Edward Caso
My question is around the willingness of clients to change the way they contract to allow you to share all your automation efforts. How willing maybe, a new engagement to move away from the typical time and materials model to a more fixed price or fixed outcome model?
Vishal Sikka
Ed, this is a great question. How we deal with that transformation is one of the fundamental pillars on which the transformation of the company is going to be based as we look over the next several years. Of course in our case our automation endeavor is Infosys Mana, our platform. Now, when you look at the fixed price projects where we bring this to our existing ongoing effort, obviously as a part of the ongoing effort, Mana would produce certain productivity improvement. In a fixed price case we would be able to utilize the benefits of that. In T&M cases one of the things that we do is we proactively engage in conversations where Mana, while it applies to the work that we do in the T&M case is a separate tool kit that brings additional economics which allows us to improve the T&M economics while keeping T&M wherever that is and transforming that into fixed price or outcome based project is not an option. So, this is generally how that works. It is extremely important that Mana be a standalone AI platform on which customers and other partners can continue to build amazing applications of Artificial Intelligence and that is one of the key reasons that we have adopted this strategy of not just a AI platform for our own use but also one that is honest, it is exposed to the light of the outside world and continues to help clients imagine new kinds of application from digital farming to reimagining the physical-digital retail experiences to compliance, to internet of things, asset efficiency and areas that are completely unrelated to the kind of services that we bring. Of course, when it applies to our services it is based on the approach that I shared with you. So, this is something that is extremely important to our future and while this is still an early time, this is the second quarter that we have had of bringing Mana to our clients and we have seen very healthy adoption and successes already of clients and some of those we have shared in our press release and in other places. Of course, the revenue contribution from Mana itself is very insignificant. However, the adoption that we are seeing in the market and the results that we are achieving, both for our own operational improvement as well as a standalone tool kit are quite encouraging.
Edward Caso
I think I heard that you had a good quarter in banks and insurance, I was just curious if you had some more macro commentary in those two areas as far as pace of new business or has the movement in the growth rates been more clients’ specific? Thank you.
Vishal Sikka
So, let me start and then perhaps Mohit can add. Under Mohit's leadership we have had very strong performance in Financial Services in recent quarters and that has continued to be the case. Of course, there are a couple of cases as you see we have talked about RBS before and so forth. In general, we see a continued strength in Financial Services across the world and with a few exceptions here and there and so forth. In that sense we do not particularly share the negative sentiment that others have shared. But Mohit being an expert on this, he can add more.
Mohit Joshi
So, I think if we look at from a Q2 perspective we really had a stellar Q2. 5.2% constant currency growth in banking and insurance, very significant new client addition, very significant large deal wins. But as we go into Q3 and Q4, there are three things I want to point out. First is that the negative or the low interest rate regime across the world for both insurance and for banking it does mean that spend visibility is getting a little bit lower. The second piece is that our story though of the New and the Renew as Vishal also mentioned is resonating with our clients. What this means is that while the environment is volatile, our competitive position is very strong. As you would have seen in this quarter, I think our growth has outpaced that of the competition if you see the results announced as well as the guidance that has been given. Obviously, one of the headwinds that we have mentioned in the past as well is the very large contract ramp down at RBS.
Moderator
Thank you. Our next question is from the line of Viju George from JP Morgan. Please go ahead.
Viju George
Congratulations to management on a solid Q2. This is just regards the outlook for H2. When you said you are seeing extra softness in the business environment, besides RBS are there any notable instances of clients ramping down or it is just clients being slow to ramp up?
Vishal Sikka
No, it is not additional big clients ramping down in a big way like RBS but just a general slowdown that some of the clients are seeing in our existing business depending on certain segments and a couple of cases of slower ramp up than me are expected. And a couple of our service lines which continue to see some headwinds. We arrested the de-growth, maybe the colleague earlier who had said this thing about ‘say it like you see it’ could come up with a better phrase than arresting de-growth. But nonetheless we have managed to arrest the de-growth in consulting. However we still continue to see some headwinds in consulting and that is largely because of our own execution related issues and Rajesh is dealing with these. So, it is a combination of those kinds of things and not anything else.
Viju Geogre
And on Mana, just want to understand, your earlier IIP and IIP platforms how are they now structured, are they part of Mana? That is question one. A sub-part of this is that when you look at growth over the coming quarters for Mana, when do you think that the growth can be robust enough in achieving incremental revenues so as to compensate for what we might be losing in the traditional core, how much time away are we from that?
Vishal Sikka
So Viju, it is a great question. The revenue depends on the three categories that I mentioned earlier in response to Ed's question. There is the bringing Mana to our existing work in fixed price cases and there it is absorbed in the economics of the project. There is bringing Mana to the existing T&M projects where while Mana might improve the overall economics from our point of view, it does have a corresponding lowering of the time and materials effort on the ongoing project and the benefit of Mana is accrued over the duration of the project. So, there is that thing that we have to weigh in. Of course Mana being a standalone product has its own economics. Then the third case which is a particularly exciting one which is where we use Mana for building new kinds of applications which are unprecedented and this is obviously a very high value, high margin and exciting area but where we do not yet have large scale. So, that is sort of the situation. It is early days. I launched this thing on the 27th of April and it has been less than six months since it is in market but we are incredibly excited by the kind of client validation that we have seen. In terms of packaging, what used to be IIP (the Information Platform and IAP (the Automation Platform), as well knowledge management and knowledge-based engineering components are all a part of Mana now. And perhaps Sandeep and Naveen who are both here can talk about that.
Sandeep Dadlani
The way we have taken Mana to market right now is really focusing on client adoption, driving new use cases and imagining new ways of leveraging AI along with our clients. Since it has been only a couple of quarters, the focus is not on trying to identify standalone revenue of any kind, focus is on driving the brand, the product, the use cases, the features out in the market. The early sign of adoption is very encouraging, you can see some of the clients endorsing us publicly. As we go along, we will establish separate values for Mana as we go along but right now the focus is on adoption and use cases.
Moderator
Thank you. We have the next question from the line of Diviya Nagrajan from UBS. Please go ahead.
Diviya Nagrajan
Congrats on the strong execution during the quarter. Vishal, a couple of questions. You have been talking about transition in the industry and how this transition you have put in place through different means, but there is this ongoing concern and I think you addressed it in your press conference this morning on how this is impacting your legacy cash cow. How much of the structural challenges today are about right sizing your legacy cash cow in terms of proportion of revenue and how far away do you think are in this transition into that effort?
Vishal Sikka
See, these two things are independent of each other. You asked a complicated question, so I have to take a little bit of time to answer this. When you look at the general transformation of any company, the typical approach that we follow and you can look at innovator’s dilemma or disruption or whatever is that you transformed the existing generally a cash cow business which is high margin and you simplify the savings and optimize that and use that savings to drive the new areas which are next generation which are low margins, but have high revenue potential. So this is generally how the script works no matter which industry you look at and tons of books about it and stuff like that. However in our case, the complicating factor is that the core business is actually under margin pressure which is generally not the case when you look at the disruption script, if you will. Therefore, our approach has been slightly different one. We believe that the revival of our core business is not only about optimizing it for profit, but especially about transforming it on the basis of innovation and on the basis of automation. So this is exactly what we have been doing and under Ravi's leadership, we have seen significant success in this area by bringing in this dual approach of automation impacting the service lines and unleashing the ground swell of grassroots innovation through Zero Distance kinds of programs where our teams are directly engaging with clients to work on this. In parallel to this different kind of revival of the core services business, we have this additional burden of introducing new software and new services that can complement is that are going to help us for the next generation in particular in the software area. Also recently this additional burden that we had further from there around some of the weaker service line like Consulting and BPO that we have had to put additional focus on to revive those. So when you look at the sum total of this, we are talking about a very large scale and complex transformation that we are engaged in here and this means that not everybody who is in the leadership is right for this kind of a massive transformation. So I am extremely happy and proud of the team that we have in place now with myself, Pravin and Ranga as well as our other executive core function and with the 4 Presidents responsible for our business. Today, just as we did with delivery 18 months ago, we have now established this additional scale in our go-to-market functions by introducing 13 new industry heads who are going to be sharply focused on very specific well-encapsulated industry sub-segments who are going to be accountable for that. It will introduce a tremendous agility and scale in how we go-to-market in having them become greater bringing the tip of the spear with consulting as well as the entire power of all the delivery services and our new services. That also gives additional bandwidth to especially to our 3 sales Presidents – Mohit, Sandeep and Rajesh who are in addition to carrying their own vertical responsibilities who also have company wise responsibilities, like Mohit in the area of overall sales execution and Sandeep in the area of bringing new software and services company wide and Rajesh in the area of bringing Consulting and the tip of the spear Design Thinking likes across the company. So this is how I see it. The media gets excited about an executive here and there leaving, but in the overall scheme of things I am very satisfied with the way this thing has been going.
Divya Nagarajan
This is very, helpful So just a follow-up to that, one is that should we then if you add in your concerns on increased pricing pressure, should we then look at your margin target of 30% kind of be much more back-ended than it has been in the last couple of years, that is one? Second follow-up is that again in terms of the transition being complete, how far out are we?
Vishal Sikka
So Divya, when it comes to margin, I cannot say that. While 30% is our target, on a quarterly basis or yearly basis, we will guide on our margin based on what we see. The main thing impacting the margin are the operational efficiency levers where we believe we still have a room to improve. Most importantly the Automation which is the big structural opportunity and there we have the downward force of the pricing pressure but if we do really advance Artificial Intelligence, we can bring automation not only to the more mechanizable simple kinds of areas, but also to the much more complex areas of the business including software development and design were something of this nature. The new services that we are launching which are all high margin services and how quickly can we bring them to scale and how much go-to-market investment we need to bring into that, all of those things impact the margin situation. So I would not assume that this is back-ended. But rather we have to see how these three competing forces evolve over the next quarters. Presently we see like Ranga said earlier 24%-25% for the rest of the year and we will continue to ‘say it like we see it’ as other gentleman said and share more information on that. If it gets to the point where these 3 vectors that I talked about intersect in different ways and we need to relook at how the margin works, we will let you know. But for now we feel comfortable with this.
Divya Nagarajan
Thanks for your time and all the best for the rest of the year.
Moderator
Thank you. Next question is from the line of Ashish Chopra from Motilal Oswal Securities. Please go ahead.
Ashish Chopra
Thanks for the opportunity. Vishal, you did mention about the couple of service lines which continued to be work-in-progress in terms of BPM and Consulting, just a couple of questions that I had on Consulting. Firstly if you could elaborate as to what exactly are the pain points that you would be looking to address within that segment in order to revive it. Secondly also from a demand perspective, would you actually see Consulting as one of the more tougher areas in terms of the demand environment today.
Vishal Sikka
No, the demand environment for Consulting is not tough at all. Rajesh can talk more about this. We have inherited a mixed bag of where our Consulting effort comes from and we are in the middle of transforming that. When we step back and think about Consulting in the large, you realize that the opportunity to help businesses transform themselves for this massive digital disruption that is happening in the world for the adoption of AI, for the complete transformation of the economic models around pervasive connectivity and digital experiences and so forth. There is actually a tremendous opportunity for strategy and design-oriented consulting and helping our clients imagine their future and then bringing in the services of our company to life in order to do that. In that sense that opportunity of what we have found the tip of the spear and transcending package systems towards becoming true design partner for our clients, it still continues to be a huge opportunity. The challenges that we see with our very complex challenges and difficult ones that Rajesh has inherited are they are more operational ones now owing to our own situation. So Rajesh perhaps you can add a few things.
Rajesh Krishnamurthy
Sure thanks Vishal. So I think in Consulting, if you look at the structure we had in Europe, we were running this business pretty much standalone kind of basis, doing a lot of work around business transformation. I think for the journey forward in alignment with the vision of automation on the one hand and innovation the other, I think it is very important that Consulting works ‘hands in glove’ with our go-to-market themes and becomes an integrated part of the journey of Infosys as we transform ourselves. While of course the regular business transformation and large scale package implementation work has dramatically shifted over the years, the large ERP-led transformation work which used to be the backbone on which we have built these large consulting organizations, that kind of work has now changed. It is much more nimble, it is much more agile. The product vendors themselves have gone through a dramatic change in terms of the products they are now selling. So we have to be a much more adapted and nimble in the way we build new capabilities and implement these products for our clients. So I think the investments which we need to make in this organization to bring them closer to the way our go-to-market teams are aligned and of course become the tip of the spear to become the frontline conversation entity which is dealing with our client conversations is something which we are working on today.
Ashish Chopra
Sure, that is helpful. So Rajesh how far out do you think would we be in completing this transformation?
Rajesh Krishnamurthy
Vishal would like me to respond “in the next 15 days” but the answer is slightly different. I think we have made some good move. I think last quarter we have rebuilt a part of the changes which we wanted to make in the US business and I am happy to report that business has already started showing the results. In Europe, we are in the journey and we have made some changes. I think it probably take a little bit longer in Europe because of the structural changes which we need to make and the realities of the European market. My estimate is that it would probably take up about between 2-4 quarters for us to really get through the full transformation which we wanted to make and I am very confident that this is very something which we will be able to do. We have the full backing of the management team. Vishal has made his full commitment very clear that Consulting is an extremely critical component of Infosys and the journey which we are going to undertake. So I have the support of all the Presidents and Vishal. More importantly, we have also inducted my ‘partner in crime’ Ravi Kumar who is the Global Head of Delivery on the board of Infosys Consulting to ensure that the integration between the delivery organization and consulting is more seamless.
Ashish Chopra
Sure, that is helpful. And just lastly Vishal in terms of the guidance. So we do see RBS having an impact, and then Pravin alluded to couple of other BFSI clients as well who are undergoing challenges. So BFSI clearly seems to be the factor that would be driving this, but apart from that any other verticals that we should expect or be watchful of, come the second half?
Mohit Joshi
This is Mohit. Just wanted to stress that in BFSI, we had actually a breakthrough Q2. So just please keep in mind that whenever we talking about volatility or lack of visibility, it is from position of a very significant competitive strength that you have seen in this quarter and the past couple of quarters as well. As I mentioned in response to previous questions, there are a couple of things happening - low interest rates environment means that spend visibility is lower. But there is no significant client ramp down apart from the one that we have already reported on RBS. I think the key takeaway over here is the very strong competitive positioning that we have demonstrated in this quarter and the very strong level of engagement that we are seeing both on our traditional and our new services which resulted in 5.2% constant currency growth, 13 new clients, 60% of the TCV of the reported large deals.
Sandeep Dadlani
And this is Sandeep, just to add to that. I think if you look at industries like Hi-Tech, Retail, Manufacturing, you will notice that Retail and Manufacturing came of a very good first quarter, almost 5.5% growth in Q1 which was perhaps better than many of the peers in the market. Even in Q2 while Retail, CPG, Transportation, Logistics, Manufacturing etc. generally are flattish, if you compare it with the peers etc., it has actually gained market share in terms of incremental revenue. So Q1 and Q2, we have actually gained market share, gained incremental revenue in these segments. As we go into Q3, Q3 is a seasonally weak quarter for these segments because of furloughs, ramp-downs, etc., but if I were to look at it with our new set of capabilities, our people plus software capabilities, capabilities like Edge and Skava and the New Renewed offerings that Ravi is driving as well, we seem more confident about Q3 and Q4 to continue to capture market share in general on relative basis.
Rajesh Murthy
Just to complete the picture on the ECS side also, we have had a very strong quarter. In fact we grew more than 7% in this quarter, the fastest growth vertical in the quarter. We came back as well on a pretty strong growth in Q1. The momentum into Q3 and Q4 is also looking very positive primarily driven by massive opportunities which we are seeing especially in the utility sector and telecom has also done quite well for us.
Moderator
Thank you. We will take the next question from the line of Anantha Narayan from Credit Suisse. Please go ahead.
Anantha Narayan
Thank you and congratulations on the good quarter and wish you all a happy festive season. Just one thing, Is it possible to get some color on the timeline of the RBS’ ramp-down that is when does this start and when does it end?
Ranganath D. Mavinakere
This is Ranga here. We publically announced earlier during the quarter of Q2 that RBS is ramping down close to 3000 people predominantly in India. We also said subsequently when we met in Pune that primarily it was not much of an impact in Q2, but most of the impact would be in the subsequent quarters and we had also said that a lead time is provided to us by RBS as Pravin was clarifying earlier for an orderly ramp-down and either to look at opportunities elsewhere, etc., but predominantly it was offshore. So that is the timeline that we are looking at. This is in the line whatever they have publically announced.
Anantha Narayan
Ranga just to clarify, does the process get over in FY17 or could this even spill into next financial year?
Mohit Joshi
No, it does not extend to FY18 Anantha, to the next financial year. It will get completed in FY17.
Moderator
Thank you. Ladies and gentlemen that was the last question for today. I would now like to hand over the floor back to Mr. Sandeep Mahindroo for his closing comments. Over to you sir.
Sandeep Mahindroo
We would like to thank everyone for joining us on this call and talking to us. We look forward to talking to you again over the course of the quarter. Thanks and have a good day.
Moderator
Thank you very much sir. Ladies and gentlemen on behalf of Infosys that concludes this Conference Call. Thank you for joining us and you may now disconnect your lines.
Exhibit 99.6
Earnings Call 2
EARNINGS CALL 2
Q2 FY2017 RESULTS
October 14, 2016
CORPORATE PARTICIPANTs
Vishal Sikka
Chief Executive Officer & Managing Director
Pravin Rao
Chief Operating Officer
Ranganath D. Mavinakere
Chief Financial Officer
Mohit Joshi
President & Head - Financial Services; Head - Infosys Brazil and Infosys Mexico
Sandeep Dadlani
President & Head – Manufacturing, Retail, CPG and Logistics; Head – Infosys Americas
Rajesh Krishnamurthy
President & Head - Energy, Utilities, Telecommunications and Services; Head—Infosys Consulting; Head of Europe
ANALYSTS
Joseph Foresi
Cantor Fitzgerald
Keith Bachman
Bank of Montreal
Moshe Katri
Wedbush Securities
James Friedman
Susquehanna International Group
Ravi Menon
Elara Securities
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 like to hand the conference over to Sandeep Mahindroo. Thank you and over to you.
Sandeep Mahindroo
Hello everyone and welcome to Infosys Earnings Call to Discuss Q2 FY17 Results. I am Sandeep from the Investor Relations team in Bangalore. Joining us today on this call is CEO & M.D. – Vishal Sikka; COO – Pravin Rao; CFO – 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 Sikka and Ranganath. Subsequently, we will open up the call for questions. Please note 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 risks 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 Sikka.
Vishal Sikka
Thanks, Sandeep. Hi everyone and welcome to our Q2 Earnings Call.
We had good overall performance in Q2. You will recall that during our ‘Analyst Day’ in Pune in India in August, we had outlined certain expectations on Q2 performance. We had mentioned then that we would focus strongly on execution in Q2 and expected revenue growth in Q2 to be better than Q1. We had also mentioned that we would focus on certain drag factors of Q1 like Consulting, Finacle, BPO and our India business. I am happy to report that as a result of our strong focus on execution in Q2, our sequential revenue growth was 3.5% in reported terms and 3.9% in constant currency terms. This compares to Q1 in which we had 2.2% growth in reported terms and 1.7% growth in constant currency terms. Consulting, India and Finacle have all performed better in Q2 compared to Q1. We will continue to monitor performance of Consulting closely in the coming quarters as it still faces headwinds.
Our Core IT services had robust growth of 4.7% in constant currency in Q2; volume growth was 4%. We continue to see adoption of our new services by our clients and are focusing on building a healthy pipeline of our new services. I am particularly excited about the interest from clients in our knowledge-based AI platform - Infosys Mana, both in helping them renew their core businesses and especially in helping them to explore and define new areas. I will talk more about this in a little bit.
Coming to strategy execution, we have been sharing with you certain key indicators that we track. During the quarter, we had large deal wins of $1.209 bn, this includes committed value deal wins of $138 mn and Framework deals of $1,071 mn.
In terms of client metrics, our top-10 clients grew year-on-year 3.7%. Our top-25 clients grew 4.3% while non-top 25 clients grew 10.6% on reported terms. The number of $50 mn clients increased by 2 to 54 while the number of $100 mn plus clients increased by 1 to 18.
We continued our strong focus on improvement in operational efficiency parameters such as utilization, onsite-offshore mix, sub-con expenses and cost optimization. Ranga will provide more details on these in his remarks.
Our operating margins improved 80 basis points from 24.1% in Q1 to 24.9% in Q2. Amongst large verticals, growth was led by Financial Services and Insurance which grew 5.2% on constant currency and Energy, Utilities, Communications and Services which grew 7.3% on constant currency. We had robust all around growth across all geographies.
We added 12,717 employees on a gross basis and 2,779 on net basis. Headcount at the end of the quarter was close to 200,000 at 199,829. Attrition for the quarter declined to 15.7% for Infosys Limited standalone and 20% for the entire group with high performer attrition, a particular focus for us continuing to decline.
We will continue to seek opportunities in M&A and investments and in this quarter we invested in Cloudyn, a cloud spend optimization startup in Israel.
In Pune, we had also announced that in order to further enhance client focus and our agility in the market, we would create smaller industry segments in sales. We have completed this exercise and the new structure is effective as of today. Similarly, we reorganized our delivery organization in April-2015, wherein we consolidated and defragmented our various service lines under Ravi’s leadership. We have seen significant benefits out of the delivery organization, as seen in stronger service line focus, and improved operational efficiencies and stronger ownership by the leaders. We see a similar opportunity in sale through the smaller, more agile, more focused and more accountable industry segments under the leadership of Mohit, Sandeep and Rajesh.
Coming to the business outlook for FY17, you will recall that in Pune, we said that we will be in a better position to provide the business outlook after delivering Q2 and assessing the business environment for Q3 and Q4. We had indicated then that we see more headwinds than when we entered Q2. During the course of Q2, we have seen signs of cautious client behavior. Our announcement on RBS ramp-down is an example of this. Over the last couple of weeks, several of our peers have also indicated a softer business environment leading to a more cautious outlook for FY17. After considering our H1 performance and the near-term business outlook based on the visibility and our assessment, at this point in time we expect our revenue for FY17 to be between 8% to 9% in constant currency terms.
Now, let me share a few thoughts on the Execution of our ‘Renew’ and ‘New’ Strategy through Automation and Innovation and how we are fueling this through a culture of education and learning. In Renew, in Q2, we made good progress on our strategy to renew our core services and help our clients renew their core businesses through automation and grass-roots innovation. We are accelerating this by monetizing Zero Distance, bringing our Knowledge-based AI Platform Mana to all aspects of our service offerings including leveraging Mana internally and continuing to drive value from the bench. Our traditional services of Application Development, Infrastructure Management and Product Engineering, all grew above the company average. Zero Distance, which is our program to bring innovation to every project is enabling us to deepen our existing client relationships, show differentiation to help us win new opportunities and provide tangible examples of Infosys as a strategic partner for grass-roots ongoing innovation. Zero Distance continues to cover more than 95% of all projects and it is truly grass-roots innovation movement across Infosys. We are now elevating this further to drive greater value for our clients and converting these ideas into solutions. Hundreds of Zero Distance ideas are being implemented in client projects with many of these converted into new business opportunities generating commercial value for Infosys.
Regarding Mana, I am really excited to see the growing interest from clients and in the industry and we are in the process of building a strong pipeline. While we are in the early stages, with revenue impact insignificant for the quarter, we saw continued adoption in client successes. Internally, we are leveraging our own automation solutions to drive greater efficiencies into all of our service lines.
In Q2, Ravi estimates that we saved 2,387 FTEs worth of effort across service lines, primarily in Application Maintenance, Package System Maintenance, BPO and Infrastructure Management. Going forward, we will go beyond automation and apply the Knowledge-based AI capabilities of Mana to more complex scenarios with the focus on increasing productivity.
Zero Bench, which is our program to engage employees in value creation while they are between projects has created more than 26,000 work packets with many of these being generated by Zero Distance ideas and nearly 12,000 work packets already completed by folks on the bench. This has ensured that almost all of our bench capacity is engaged and we are already seeing benefits in terms of additional revenue as well as margin improvements through the solutions created. As a result of gaining valuable experience on these Zero Bench assignments, more than 1,000 additional freshers went directly to client projects in the first half of fiscal ’17 versus fiscal ’16 first half and you also see this contribute to the improved utilization.
Coming to new areas, we continue to grow in our new services and products in Q2 and help our clients drive breakthrough innovation. In particular, we are working with a number of clients and partners on leveraging new technologies especially AI technologies including Machine Learning to drive large scale transformations. Our AI platform Mana is key to this and we will accelerate our work in new areas with Mana.
We also announced in September our new ‘Incubation as a Service’, a dedicated Infosys team that will be the innovation engine for our clients, leveraging our learning experiences across industries and our work in emerging technologies. We will run this model with co-creation and collaboration with clients at the heart of what we offer, founded on the principles of Design Thinking.
Skava continue to help clients create new kinds of customer engagements across channel. In Q2 we launched Skava Commerce, a new standard for Modern Mobile-First Modular Ecommerce Platform. For example, Infosys and TOMS Shoes are working together to implement an Omni Channel platform leveraging Skava Commerce.
EdgeVerve delivered a strong performance this quarter with 48 wins and 23 go-lives from both Finacle and Edge suite of solutions across various markets. Edge products added several new clients this quarter across various solutions with AssistEdge leading with 8 new wins.
In Design Thinking, we continue to bring Design Thinking into every client engagement. For example, we are working with Kohl’s, the large US retailer to leverage Design Thinking together with our Skava platform on how to enhance customers’ sales associate and the overall Kohl’s experience.
Coming to culture, we continue to invest in our employees and in learning and education. In education this quarter, we added focus on collaboration to every class that we offer in our university in Mysore. This is based on learning from our data sciences class in which we saw the in which we saw the code quality was significantly improved through collaboration. Specifically, we reduced the number of code issues at 35% for individuals, down to 12% in a group of 10. We are also introducing new kinds of programs including Udacity in Nanodegree and Courcera for rapid up-skilling when needed for the most in-demand niche skills. For employees, we continue to roll out the equity program with the first phase to mid and junior level high performers already complete. We will be extending this to the leadership levels as we look at programs to retain our best leaders and attract new leaders to our company.
Looking beyond business, at Infosys, we are deeply aware of our role in society which is beyond business. In India through the Infosys Foundation, we made several investments in the areas of Rehabilitation, Healthcare, Education and Arts & Culture, including handing over the Residential Enclave of 200 Houses to families that were ended homeless in the aftermath of the Cyclone Hudhud in 2014. We launched an Institute of Robotic Surgery to support Narayana Health and Funding travel stipends for top researchers at IIT, Kharagpur as well as sponsoring an IIT Kharagpur study about the Antiquity of the Indus Valley. Infosys Foundation USA supports Quality Computer Science and maker professional development for teachers via the Computer Science Professional Development Week, the CS for All Community Giving Program and the commitments recently announced at the White House Summit on Computer Science for all. Additionally, the foundation announced new grants to support the largest CS Teacher Organization. The Computer Science Teacher Association recognize excellence in CS Teaching for Awards and to support the New York Academy of Sciences. We continue to be very proud of our work in our community.
In closing, I would like to hand it over to Ranga to provide more details on the financials before coming back for Q&A. Thank you.
Ranganath D. Mavinakere
Thank you Vishal. Hello everyone
Let me start by saying that in Q2, we focus further on improving the operational efficiency of our business and we continued our emphasis on healthy cash generation. I am happy to report that we have seen an improvement on both these fronts during the quarter.
Our revenues in Q2 were $2,587 mn, which is a growth of 3.5% on reported basis and 3.9% on constant currency basis. On a year-on-year basis when compared to Q2 of fiscal ’16, revenues have grown 8.2% in dollar terms and 8.9% in constant currency terms. H1’17 revenue growth as compared to H1’16 was 9.5% in reported terms and 10.5% in constant currency terms. Volumes grew by 4% during the quarter as compared to 2.2% in Q1’17. On quarter-on-quarter basis, onsite volume grew by 3.1% and offshore volume grew by 4.4%. Realization for the quarter increased by 0.2% on reported basis and 0.7% on constant currency basis compared to Q1 of FY’17. On year-on-year basis, realization declined by 3.6% on reported basis and 3.0% on constant currency basis as compared to Q2 of ‘16.
Several of the operational efficiency parameters improved during the quarter. Our utilization excluding trainees increased by 2% to 82.5%. Similarly, utilization including trainees went up to 77.7%. Over the last six quarters, utilization excluding trainees has been consistently above 80%. Onsite mix reduced to 29.7% during the quarter and we are focusing on bringing this down gradually, though there could be quarter-on-quarter volatility.
Subcon expenses were 5.4% of revenues in Q2 similar to Q1’17 levels, but lower than 5.5% in Q2’16.
Employee benefit cost as a percentage of revenue was 55.7% as compared to 55.3% in Q1’17, primarily on account of compensation increase and higher variable pay that we paid to our employees this quarter, offset by better utilization. On a comparable basis to Q2’16, employee benefit cost as a percentage of revenues were 54.7%.
Our collections were healthy and DSO for the quarter was healthy at 64-days as compared to 66 days in Q1’17, a reduction of 2 days.
Our operating margins for the quarter was 24.9%, increase of 80 basis points over Q1’17. Improvement in utilization and onsite mix contributed to 100 basis points of margin improvement. This was partially offset by increase in third-party software cost which negatively impacted margins by 60 basis points. The benefit of onsite cost optimization initiatives and lower visa charges were slightly offset by impact of higher variable pay and compensation increases resulting in net positive impact of 40 basis points. So overall it led to 80 basis expansion in margin.
Our emphasis on healthy operating cash flow generation continued this quarter. Operating cash generation was strong during the quarter, partly held by tax refunds of about $50 mn. We generated operating cash flow of $553 mn in Q2 as compared to $481 mn last year same quarter. Our cash and cash equivalents as of September 30th was $ 5,349 mn as compared to $ 4,918 mn last quarter.
We added 12,717 gross employees during the quarter with a net addition of 2,779 employees. The quarterly annualized attrition on a standalone basis has also decreased marginally to 15.7% from 15.8% last quarter. At a group level, annualized attrition was 20% as against 21% last quarter.
As you know, Q2 saw currency volatility especially in the backdrop of Brexit. We managed to navigate the volatility effectively. On a period end basis, USD appreciated by 3.6% against GBP and depreciated by 0.3% against Euro and 2.2% against Australian Dollar. Our hedge position as of September 30, 2016 was $1,037 mn. We expect near-term volatility in cross-currency and rupee and we continue to manage the same through appropriate hedges.
Yield on cash balances was 7.77% in Q2’17 compared to 7.82% in Q1’17. We expect the yield for FY’17 to be approximately 7.5% compared to 8.6% in FY’16 due to interest rate environment in India.
The effective tax rate for the quarter was 28.8%. Full year effective tax rate projection is expected to be around 29% for fiscal ‘17.
Our net margins during the quarter were 20.8% as compared to 20.5% in Q1, an expansion of 30 basis points. Our EPS for the quarter was 24 cents; EPS grew 3.8% year-on-year basis and 5.5% on sequential basis.
Coming to clients and business Segments, our number of $100 mn clients increased to 18 from 17 last quarter, likewise $50 mn clients increased by 2 to 54 clients. Active clients now stands at 1,136 as compared to 1,126 last quarter.
Coming to Margin Expectations, we will continue to optimize the operational efficiency levers on an ongoing basis. We have said in the medium-term, our operating margin expectation is in the range of 24% - 26%. Considering the expectations on growth trajectory for the second half of the year and as revenue growth is one of the key determinants of margin, we expect fiscal ’17 margins to be in the range of 24% to 25%.
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 Joseph Foresi from Cantor Fitzgerald. Please go ahead.
Joseph Foresi
I was wondering could you just talk about the change in the outlook, is that more economic or structural? I know this came up at one of your competitors. I want to get your view on it, maybe you could describe why?
Vishal Sikka
It is largely based on a couple of client-specific headwinds as well as couple of service lines like Consulting and BPO where we expect the growth to be lower than what we had anticipated at the beginning of the year. I would not say it is structural. The structural change that is happening in our industry is widely known. I have been talking about this for the last two years and that has to do with this very pervasive and fundamental downward spiral that the industry as it has been is going through which is based on the pricing pressure, the rapid acceleration of the rate cuts, decline in pricing realization and so forth which is being fueled by a variety of reasons and so forth. That is one structural thing but otherwise this quarterly fluctuation that we see is nothing to do with the structural thing.
Joseph Foresi
Then my second question is I appreciate the color on the margins for this year. Just given some of the structural things you just talked about, what do you expect from a margin or profitability standpoint over the long-term, I know you have given some color about perhaps innovation helping the margins but I was wondering what you thought about the margin profile over the long-term?
Ranganath D. Mavinakere
Let me first take that question. Yes, in the medium-term, as you rightly said, we continue to reiterate 24% to 26%. As you know the margin is a derivative of three principle components – one is of course the revenue growth itself, the second one is the pricing decline and the third one is to what extent the pricing decline could be offset through operational efficiency. Another one of course is the Automation piece. As we have seen in this particular fiscal as we have said several times, our primary focus has been on how do we look at all our operational efficiency levers which could be levers for margin improvement in the short-term to medium-term. But in the long-term, the real lever that we have is really Automation. We need to look at the two pieces of the spectrum that we have for improving the operating margins. Near-to-medium-term spectrum is really the operational efficiency and so on and also in some of the projects how do we get productivity improvements to improve margin given in ongoing projects. But in the longer-term, it is really the Automation. Let me first address the first part; as we have been saying over the last four quarters, we have continued our sharp focus on the levers that we have on operational efficiency, whether it is utilization…it used to be in the late 70s as recent as over 6-quarters ago. Then consistently over the last 6-quarters we have kept it above 80%, this quarter it has further improved by 2.5%. Likewise subcontractor expenses used to be 6.3% and we brought it down to 5.6%, then 5.4% and likewise the onsite employee cost as a percentage of revenue and so on. We do believe that the trajectory of this operational efficiency indicators over the last 3-4-quarters have been moving in the right direction and we do believe we have some more levers. But as you said, this is for the short-term to-medium-term. For the longer-term, Automation is one which can give us a more sustainable margin improvement and Vishal has been focusing and the company over the last couple of quarters has been focusing. Even there if you look at the Automation, the first phase of Automation typically focuses on offshore at the lower end of the pyramid kind of jobs. You will not really see significant impact on P&L if it is only offshore at the lower end of the pyramid. For meaningful impact on operating margins through Automation, we need to really see across the pyramid both onsite and offshore reduction in the effort through Automation. That is where the current focus is. I think Vishal wants to add a few more thoughts on this.
Vishal Sikka
The longer-term when you look at the margin situation, there are two key things that are going to have a structural impact. Ranga already talked about Automation. The key there is to ensure that the productivity improvement that we can achieve through our Mana platform outperform the downward trend in the pricing. If we are able to do that we will improve the margin, if we are not then margin will continue to decline. It is as simple as that and I think it obviously points to a very clear picture
So Joe, this is Vishal again. Just to answer your question, again, longer term when it comes to margin, the one key thing as Ranga talked about is automation and there we have to ensure that the improvement in productivity because of automation, because of our AI platform Mana outpaces the downward pressure, the downward curve of the rising pressure that we see. If you are able to outpace that we will improve our profitability, if we are not, we will not. And this is something that is I believe the most fundamental issue that is facing the industry and I believe on this measure we are continuing to make good progress because of expanding the sophistication of our AI platform and so on.
The other longer aspect of margin is to ensure that our new services and our software based offerings continue to gain scale and continue to gain traction because these are high value, high margin kinds of offerings. The more of those that we can embrace and that includes in some cases opening up new go-to-market channels and so forth, the better off we will be on the margins. So, our margin thesis is based on these three observations as Ranga talked about, one is that the industry is under a structural decline or margin pressure which impacts our core business. Number two, automation and AI can help us dramatically improve our productivity and if we are able to outpace the downward pricing pressure as a result of that, then that much the better. And number three, our ability to offer new services that are high value and high margin that can help us improve margins over the long-term. Thanks.
Joseph Foresi
And then just on pricing, have you seen any change in pricing and could pricing become a bigger problem if the demand environment stays depressed obviously for the extended period of time? Thank you.
Vishal Sikka
Yes, we have in fact we mentioned in our press release the downward pricing pressure has continued to intensify over the course of the last two years. And perhaps Ranga, you can provide the numbers of how the pricing decline has happened over the course of the year.
Ranganath D. Mavinakere
Yes. I think in our opinion the relevant indicator would be really the year-on-year pricing for a longer period because there could be quarter-to-quarter volatility in pricing which may not sometimes could not be the ideal indicator. So for example last year if you look at entire FY16 over FY15, the pricing decline in constant currency was close to 1.5%. Now likewise if you look at on a half year basis this year, H1 2017 over H1 2016 in constant currency basis we have seen a pricing decline of 1.6%. So, we are seeing in this range of 1.5% to 1.6% even this quarter. That is something that we have seen in the first half of this year.
Moderator
Thank you. We have the next question from the line of Keith Bachman from Bank of Montreal. Please go ahead.
Keith Bachman
I had two, if I could. The first one is growth dynamics for the industry. If you thought about the combination of leading Indian based IT service providers such as yourselves, TCS and Cognizant, what do you think their growth rate would be for the industry as reflected by those participants in calendar year 2017? You guys are guiding to call 8% to 9% year-over-year growth, TCS if you take constant currency was closer to 7% recently. Is that the right range you think for calendar year 2017 for the industry?
Vishal Sikka
I have absolutely no idea. We can tell you what we see in our situation and everyone will have their own situations and guidance based on that. We have shared our outlook. What I can say broadly is that the entire industry is under this structural change that is going on, the downward pricing pressure. I have been talking about this from the last two plus years and it has only become more intensified, more accelerated, more steep. I think we are all seeing the results of that play out in various ways across the industry. It is going to be a very difficult transformation for the entire industry. If you look at our performance in Q2, of course we did extremely well in our core services and that core service improvement is a direct reflection of the fact that we are able to bring in automation which is still in the very early stages but we are also bringing a culture of innovation. I think that dual transformation is going to be absolutely essential for the IT services companies to be able to be relevant in the times ahead. We have to improve our productivity through the power of automation and AI and we have to, in parallel, be able to take that freed up capacity because of AI and deploy that towards innovation and creativity. If we do not do this then we are going to be a victim of this downward pricing pressure. It is as simple as that.
Keith Bachman
Okay. Well, my follow-up actually relates to that, thank you. In terms of pricing pressure when we listen to the other providers, the leading providers, the comments are pricing pressure is fairly consistent. You are suggesting that pricing pressure is actually increasing, is A) there a reason you think in different perspectives, and B) is the pricing pressure mostly in what we would characterize as legacy areas of ADM, outsourcing and BPO? Is that where the pricing pressure areas are showing up or is it even in the new areas that we would simply characterize as with digital areas?
Vishal Sikka
What I mean by that is not in terms of the amount of pressure or any of that, I think we can do the analysis on that and we can all see what that has been like and perhaps it is increasing, perhaps it is not. But it is certainly becoming much more pervasive and the rate cuts and so forth are becoming much more frequent, that is what I see. Exactly as you said the new service areas around digital experiences, the adoption of AI and AI solutions and clients, these are the areas where there are the high value opportunities which we have to go after and build the capabilities and the skill for it.
Moderator
Thank you. Our next question is from the line of Moshe Katri from Wedbush Securities. Please go ahead.
Moshe Katri
I wanted to get some color looking at your TCV for the quarter that was very significant, I think it was north of $1.2 bn, last quarter you were north of about $800 mn. May be talk a bit about, if you look at some of the deal flows that is coming through, which part is renewals, maybe we can get some sort of an average, which part is new logos? And then you also mentioned a framework agreement, maybe you can kind of explain what that actually entails? Thank you.
Pravin Rao
We have won six deals worth about $1.2 bn plus. Two of the deals are traditional committed deals and four are framework deals. By framework we mean there is a very clear expectation and in some sense informal agreement from the customers, those are kind of revenues that we will make over the deal duration but there is no contractual commitment, so that is why we have separated it out. In terms of the deal, out of the six deals, two deals have been from new logos and four of the deals have been from existing clients. But this varies from quarter-to-quarter, for instance we reported $ 800 mn plus last quarter, we had 10 deals and there also split between new and existing varied. It varies from quarter-to-quarter so we cannot conclude on a quarterly basis.
Moshe Katri
Which part of the $1.2 bn in terms of percentage was renewal this quarter last quarter?
Pravin Rao
We actually do not report the renewal versus net new because sometimes it is a mix, in some of the existing accounts as well part of it could be renewal because even when we renew we will get incremental revenue, it becomes a bit complicated. All we say what is new logo and what is existing customers, but we typically do not get into how much is renewal and how much is new.
Mohit Joshi
Yes, just to add to what Pravin has said, as Pravin mentioned at times we may have what we qualify as a framework contract. So for instance for a large Financial Services company they signed a deal close to $0.5 bn. But basically this is revenue, we have been doing multiple projects with them and this is a commitment from their side to add a $0.5 bn over the next five years. So while this is not really renew because existing projects that have been extended projects, this is the expectation of business volumes the clients give to us over the next five years.
Moshe Katri
And then as a follow-up, looking at the discussion about margins that we had, in the past we spoke about a cushion of about 500 bps to 700 bps that can actually help us sustain the EBIT margin range that we kind of focused on, utilization is at about 82.5%. The real question here is how comfortable are we that that cushion is still there and how badly do we need automation to come through to help us kind of sustain that EBIT margin range that we focused out in the past? Thank you.
Ranganath D. Mavinakere
I think there are multiple levers that we talked about earlier. For example, if you look at utilization at 82.5% that is overall number including onsite and offshore, while onsite is higher offshore is still lower at below 80%. So, we have some levers there. But of course we need to really, there could be quarter-to-quarter volatility as I said earlier but that is something that we are focusing on. We have seen onsite mix in the range of 27% as recent as about 1.5 to 2 years ago. Every 1% decline in onsite can give a 50 basis points straight away in operating margin but of course currently where it is 29%, it marginally came down from 29.9%. So that is a much more gradual one, but of course 27% is something that we have done recently. So that is the trajectory that we will watching very closely.
Likewise, if you look at our onsite employee cost and subcon expenses. For example, 6.3% of revenues was the high and it has come down by almost 1% in the last eight quarters. Why do we need to expect that some of the subcontractor expenses are required to make the short-term demands where we do not have our talent, at the same time we do believe that there are pockets which can be addressed through better talent supply chain planning and more importantly looking in to margin of subcontractors which we did this quarter, for example.
Likewise, we have the onsite employee cost structure, the onsite pyramid. Onsite pyramid is something which we are focusing on, the pyramid has to reflect a con-committed building rate for the pyramid that is there. We are seeing especially on the fixed priced projects onsite they are saying, Hey how we could in fixed projects in a particular project is there, how do we make sure that we have an optimal onsite pyramid. Can somebody senior there or mid-level, we really tend to redeploy in other new project essentially giving us that much additional flexibility onsite because once the person is out on the fixed price project on the cost side, while it will come down on the revenue side there is no impact, can they be redeployed elsewhere onsite in a new project.
Also we are looking for the higher end of the pyramid, whether the current bidding rates are adequate, should may we now move to different projects. So, there are many other elements that we have been doing over the last couple of quarters because our onsite employee cost as a percentage of revenue, you would notice on a comparable basis to some of our offshore players is on the higher side. So we are looking at it in a way that would not hurt growth but at the same time gives us flexibility to work on it. In some substance over the last three, four quarters this has been our focus and the trajectory of these indicators has been helping us in the last four quarters. We continue to do so in the short to medium term.
Vishal Sikka
And then on the capability issue that you raised, the crucial aspect of this is to ensure in order to stay ahead of the pricing downward curve is to ensure that the AI platform is able to bring automation lead productivity improvements to even the more complex kinds of work that people perform, not just the L1 and L2 support task which are easier to mechanize and easier to automate but to the more complex, the more imagination requiring task, the more cognitive tasks such as application maintenance, L3 or even application development and product engineering and those kinds of things. Certainly of course more complex forms of end-to-end testing and things like that. That is one of our endeavor is to continue to develop those capabilities in Mana
Moderator
Thank you. We have the next question from the line of James Friedman from Susquehanna International Group. Please go ahead.
James Friedman
I was wondering in terms of your forward guidance, are there any verticals that are contemplated to decelerate or accelerate, if you can give some color? And I realize you do not guide on a vertical basis but if you can give us some decent color about what you are contemplating in second half on a vertical basis, that will be helpful.
Vishal Sikka
So, maybe our three presidents of sales who are here, perhaps they can comment on this.
Sandeep Dadlani
I can give color on high tech, manufacturing, retail, CPG and logistics. I think if you look at retail, CPG and logistics, they are broadly trending together. They are volatile, we had a great Q1, we had a flattish Q2 but if you look at the incremental revenue and market share captured, it is perhaps higher than most industry peers as retail goes through disruptive times. Q3 for these industries is usually weak because of the holiday season and most of these companies are focused internally towards getting the holiday season right. But as consumer spending picks up, at least the early signs are that we will have a good holiday season then I think Q4 is going to be much better for them. Manufacturing and high tech have furloughs and ramp downs in Q3, this is also seasonal and the parts of manufacturing that are usually trending towards servicing oil and gas, energy clients, etc., have had trouble. But industrial manufacturing has lots of M&A going on and therefore there is good uptick in M&A work. Across all these industries, if we approach them as traditional IT services providers then discretionary spend will be tight and we will have some trouble. However, we are seeing especially in these sectors a big uptick in our people plus software strategy. They are far more amenable to more powerful, more disruptive capex led spending, offerings like Skava, Mana, Edge, etc., there have been most uptick in these areas. So I am very optimistic as we move into Q3 and Q4, other than seasonal trends that these new models will pick-up and drive growth in these industries. I will pass it on to Mohit now
Mohit Joshi
I will cover Financial Services and then Healthcare Insurance and Life Sciences. So, Financial Services, as you would have noticed for the past few quarters, we have had really a very strong performance, for the current quarter also. Even if you strip out the Insurance pace, Financial Services quarter-on-quarter grew at 4.9%. Growth for us was very broad based, so this was across industry sub-segments, this was across geographies and across service lines. I think our key message of industrialization which matches with the ‘renew’ agenda for our clients and the message of ‘new’ which is around digital disruption, around design thinking, around new AI used cases, that is resonating very strongly and a competitive position is very strong. So in a number of consolidation deals for instance we have won large pieces of work. On the flip side, in terms of the headwinds we had spoken about a large project ramp down. As has been happening over the past few quarters, the low interest rate or the negative interest rate regime has meant that clients spending has been more on a start-stop basis. But I do want to underscore the very strong performances we have had in the past few quarters and a very strong competitive positioning that we have developed in this industry as very strong modes for us, so that is on Financial Services.
Insurance, again like I mentioned we have done extremely well. Growth has been over 5%. There is a lot of focus among our clients on digital distribution, on claims and policy, admin, modernization, on customer acquisition. Insurance is a sector where we are leading with client acquisitions, so we have an existing portfolio of clients globally but the new account acquisition in the sector has been particularly strong and that leads me to be optimistic about the outlook for our business in the sector for the next half year.
In Healthcare we have done exceedingly well, we had double-digit quarter-on-quarter growth. In Healthcare as well growth is backed by very strong new client acquisition, a huge amount of interest in our clients on our innovation and automation agenda. In Healthcare we are seeing significant opportunities in care management, Medicare, Medicaid expansion, international expansion and obviously compliance. So we have a very strong team and a strong client franchise in Healthcare which is also reacting very well to some of the things that Sandeep spoke about in terms of robotic process automation and in terms of AI.
Life sciences is a business where if you recollect in Q1 we had spoken about a very large consulting led program coming to an end and we had a little bit of an overhang of that in this quarter as well. We are seeing some amount of in-sourcing by some of our key clients but again, and there is the spend in this industry itself which is challenged, but again life sciences over the past two years has been one of our highest performing businesses with strong double-digit growth in both the years. Again, a strong client franchise, so I do expect that in the next half year this will perform well above industry average.
Rajesh Krishnamurthy
I will give a quick commentary on the industries I look after. I manage resources, energy utilities, telecom and services business for Infosys. The resources and energy industries are clearly still reeling under the impact of low commodity prices and low oil prices. On the oil side, this morning the price has gone marginally above $50 but overall the industry is actually craving stability and I think you have seen a series of ups and downs, that is not really a good sign for companies to open up their wallets and make investments. So, in these two industries it is really about operational efficiency and looking at cost takeout. I think a lot of that has been done, at least the oil industry has been practicing this how companies can still continue and to be profitable at $40 a barrel. But I think overall with the demand being what it is and the gap between supply and demand still quite significant, I think this is something which will probably continue for some time.
The best performing sector for us is the utilities industry, this is where we have had our maximum growth. Overall, the ECS segment recorded a 7% plus growth this quarter and it was primarily driven to a large extent by the utilities industry. This is where we are seeing opportunities on two fronts, one of course utilities are also trying to get liner and get more efficient and that is where we are seeing a lot of uptake. But we are also seeing utilities spending a lot in transformation of how they are engaged with their clients and one of the big investment areas for utilities is a huge opportunity for us is how customers who have legacy systems and operate their back end systems for long periods of time are now having to create front end layer which are more nimble, more agile so that they can respond to the client needs. So we are looking at a disambiguation of the systems which is creating a lot of opportunities for us.
On the telecom side, again a huge pressure on both top-line and bottom-line because of the nature of the industry, because of the competition. And here it has been quite cyclical, last quarter we had a bumper quarter in telecom, this quarter was relatively muted. So, overall the ECS segment has done very well this quarter and we expect momentum to continue in Q3-Q4 as well.
Moderator
Thank you. We have the next question from the line of Ravi Menon from Elara Securities. Please go ahead.
Ravi Menon
I would just like to ask you, if you find certain parts of the service line more receptive to improving win rates and doing your proposition with the new areas or the new way of thinking where you are bringing about and some parts may be less so, like for us the infrastructure management services perhaps being less or separate to that versus application development.
Vishal Sikka
Perhaps Ravi, you can provide this answer to Ravi. Overall, what we see Ravi is the growth across all the service lines and of course they have different characteristics and different value propositions. But generally we are seeing strong growth in all the service lines driven by different parameters in application development and maintenance, it is driven by improving the productivity through automation and bringing experience improvement through design thinking. Infrastructure management is all about automation and so forth. Perhaps Ravi you can talk about, the question was around which service lines are more prone to innovation and higher margin and attractiveness.
Ravi Kumar
So, all service lines have some way of looking at automation and innovation. The ones which are more amenable for automation are application development and maintenance, enterprise package applications, infrastructure services. But having said that, each and every other service line does have an opportunity because we are looking at the complete value chain of the services spectrum. Each of them has a ‘new’ part of it. Just to give an example, in engineering services the ‘digital twin’ is the ‘new’ of what we could do in engineering services. In application development and maintenance, we are seeing quite a bit of work on legacy modernization. In digital experience, taking a process and digitizing it. In BPO services we have a lot of new offerings in digital media, optimization and creating insights and analytics. So, each of the service lines I believe do have opportunity to innovate or an opportunity to automate which is how we look for it.
Moderator
Thank you. Ladies and Gentlemen, that was our last question for today. I would now like to hand over the floor to Sandeep Mahindroo for his closing comments. Over to you, sir.
Vishal Sikka
Hi, this is Vishal. Just to close, we had a great Q2, we are proud of our execution. As we said both in August and at the end of Q1, largely internal factors had got us to the point of our performance in Q1 and we focused on those, we overcame that, we had strong performance, a 4.7% constant currency performance in our core services as well as improvements in all the operational parameters and continued strength in our new areas. So, I am really satisfied with the way the team has performed and the results that we have achieved. While we see some headwinds as we look at the next two quarters which has got us to the revision in our guidance downwards to 8% to 9% constant currency for this year, obviously, we will strive to ensure that we deliver a great performance in these two quarters. When we look beyond that, what we see is that our industry is going through a fairly structural transformation and when I look around, I find that our company both in terms of renewing our core services with automation and grass-root innovation as well as bringing new services that are the defining areas for our business for our clients, in that all important parameter we are doing very well and that gives me more than anything else, the comfort for the future. So thank you very much and we look forward to seeing many of you over the course of the quarter and then at the next earnings.
Moderator
Thank you very much, sir. Ladies and Gentlemen, with this we conclude today's conference call. Thank you for joining us and you may now disconnect your lines.
Exhibit 99.7
Form of Releases to Stock Exchanges and Advertisement
![]() |
Infosys Limited Regd. office: Electronics City, Hosur Road, Bengaluru – 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 half-year ended September 30, 2016 prepared in compliance with the Indian Accounting Standard (Ind-AS)
(in crore, except per equity share data)
Particulars | Quarter ended September 30, | Quarter ended June 30, | Quarter ended September 30, | Half-year ended September 30, | Year ended March 31, | |
2016 | 2016 | 2015 | 2016 | 2015 | 2016 | |
Audited | Audited | Audited | Audited | Audited | Audited | |
Revenue from operations | 17,310 | 16,782 | 15,635 | 34,091 | 29,989 | 62,441 |
Other Income, net | 760 | 75 | 793 | 1,513 | 1,549 | 3,123 |
Total Income | 18,070 | 17,535 | 16,428 | 35,604 | 31,538 | 65,564 |
Expenses | ||||||
Employee benefit expenses | 9,648 | 9,282 | 8,558 | 18,930 | 16,612 | 34,406 |
Deferred consideration pertaining to acquisition | – | – | 64 | – | 124 | 149 |
Cost of technical sub-contractors | 940 | 917 | 858 | 1,857 | 1,608 | 3,531 |
Travel expenses | 520 | 740 | 582 | 1,260 | 1,137 | 2,263 |
Cost of software packages and others | 381 | 276 | 354 | 657 | 666 | 1,274 |
Communication expenses | 136 | 120 | 111 | 256 | 223 | 449 |
Consultancy and professional charges | 165 | 175 | 184 | 340 | 353 | 779 |
Depreciation and amortisation expenses | 424 | 400 | 358 | 824 | 671 | 1,459 |
Other expenses | 787 | 825 | 573 | 1,612 | 1,154 | 2,511 |
Total expenses | 13,001 | 12,735 | 11,642 | 25,736 | 22,548 | 46,821 |
Profit before minority interest / share in net profit / (loss) of associate | 5,069 | 4,800 | 4,786 | 9,868 | 8,990 | 18,743 |
Share in net profit/(loss) of associate | (3) | (2) | (1) | (5) | (1) | (3) |
Profit before tax | 5,066 | 4,798 | 4,785 | 9,863 | 8,989 | 18,740 |
Tax expense: | ||||||
Current tax | 1,469 | 1,467 | 1,441 | 2,936 | 2,574 | 5,318 |
Deferred tax | (9) | (105) | (54) | (114) | (12) | (67) |
Profit for the period | 3,606 | 3,436 | 3,398 | 7,041 | 6,427 | 13,489 |
Other comprehensive income | ||||||
Items that will not be reclassified subsequently to profit or loss | ||||||
Remeasurement of the net defined benefit liability/asset | (40) | (17) | (7) | (57) | (14) | (12) |
Equity instruments through other comprehensive income | – | – | – | – | – | – |
(40) | (17) | (7) | (57) | (14) | (12) | |
Items that will be reclassified subsequently to profit or loss | ||||||
Fair value changes on cash flow hedges | 2 | – | – | 2 | – | – |
Exchange differences on translation of foreign operations | (51) | 38 | 62 | (13) | 206 | 303 |
(49) | 38 | 62 | (11) | 206 | 303 | |
Total other comprehensive income, net of tax | (89) | 21 | 55 | (68) | 192 | 291 |
Total comprehensive income for the period | 3,517 | 3,457 | 3,453 | 6,973 | 6,619 | 13,780 |
Paid up share capital (par value ![]() |
1,144 | 1,144 | 1,144 | 1,144 | 1,144 | 1,144 |
Other equity | 60,600 | 60,600 | 54,198 | 60,600 | 54,198 | 60,600 |
Earnings per equity share (par value ![]() |
||||||
Basic (![]() |
15.77 | 15.03 | 14.87 | 30.81 | 28.12 | 59.02 |
Diluted (![]() |
15.77 | 15.03 | 14.87 | 30.80 | 28.12 | 59.02 |
Notes:
1. | The audited consolidated financial statements for the quarter and the half-year ended September 30, 2016 have been taken on record by the Board of Directors at its meeting held on October 14, 2016. The statutory auditors have expressed an unqualified audit opinion. The information presented above is extracted from the audited consolidated financial statements. The financial statements are prepared in accordance with the Indian Accounting Standard (Ind-AS) as prescribed under Section 133 of the Companies Act, 2013 read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016. |
2. | The Group has adopted all the Ind-AS on April 1, 2016 with the transition date as April 1, 2015, and the adoption was carried out in accordance with Ind-AS 101-First time adoption of Indian Accounting Standards. The transition was carried out from Indian Accounting Principles generally accepted in India as prescribed under Sec 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014 (IGAAP), which was the previous GAAP. |
3. | The Board, at the meeting held on October 14, 2016 appointed D. N. Prahlad as an Independent Director effective from that date. |
4. | The Board of Directors in their meeting held on October 14, 2016, on recommendation
of Nomination and Remuneration Committee, have approved the revised annual compensation of U.B. Pravin Rao, Chief Operating Officer
and Whole Time Director of the Company, with effect from November 1, 2016, subject to the approval of the shareholders. The compensation
includes fixed compensation of ![]() ![]() |
5. | The Board of Directors in their meeting held on October 14, 2016, on recommendation
of the Nomination and Remuneration Committee, have approved the revised compensation structure of M.D. Ranganath, Mohit Joshi,
Sandeep Dadlani, Rajesh K Murthy, Ravikumar S, David Kennedy, Krishnamurthy Shankar and Manikantha AGS with effect from November
1, 2016. The revised aggregate compensation of the above individuals includes fixed compensation of ![]() ![]() |
6. | The Nomination and Remuneration Committee of the Board of Directors of Infosys Limited at its meeting held on October 13, 2016, based on fiscal 2016 performance, approved the grant of upto 906,275 RSU and upto 943,810 stock options with effect from November 1, 2016, to a total of upto 425 eligible and identified high-performing executives of the Company and its subsidiaries under the 2015 Stock Incentive Compensation Plan (2015 plan), as approved by the shareholders vide postal ballot dated March 31, 2016. These RSUs and stock options shall vest over a period of 4 years from the date of grant and shall be exercisable within the period as approved by the committee. The exercise price of the RSUs will be equal to the par value of the shares and the exercise price of the stock options would be the market price as on the date of grant. |
7. | Information on dividends for the quarter and half-year ended September 30, 2016 |
The Board declared an interim dividend of 11/-
per equity share. The record date for the payment of interim dividend is October 24, 2016. The interim dividend will be paid on
October 26, 2016. The interim dividend declared in the previous year was
10/- per equity share.
(in )
Particulars | Quarter ended September 30, | Quarter ended June 30, | Quarter ended September 30, | Half-year ended September 30, | Year ended March 31, | |
2016 | 2016 | 2015 | 2016 | 2015 | 2016 | |
Dividend per share (par value ![]() |
||||||
Interim dividend | 11.00 | – | 10.00 | 11.00 | 10.00 | 10.00 |
Final dividend | – | – | – | – | – | 14.25 |
8. Consolidated statement of assets and liabilities
(in crore)
Particulars | As at | |
September 30, 2016 | March 31, 2016 | |
ASSETS | ||
Non-current assets | ||
Property, plant and equipment | 8,901 | 8,637 |
Capital work-in-progress | 1,067 | 960 |
Goodwill | 3,771 | 3,764 |
Other Intangible assets | 904 | 985 |
Investment in associate | 99 | 103 |
Financial assets: | ||
Investments | 1,931 | 1,714 |
Loans | 26 | 25 |
Other financial assets | 302 | 286 |
Deferred tax assets (net) | 628 | 536 |
Income tax assets (net) | 5,248 | 5,230 |
Other non-current assets | 1,620 | 1,357 |
Total non-current assets | 24,497 | 23,597 |
Current assets | ||
Financial assets | ||
Investments | 2,154 | 75 |
Trade receivables | 11,571 | 11,330 |
Cash and cash equivalents | 31,732 | 32,697 |
Loans | 264 | 303 |
Other financial assets | 6,883 | 5,190 |
Other current assets | 2,005 | 2,158 |
Total current assets | 54,609 | 51,753 |
Total assets | 79,106 | 75,350 |
EQUITY AND LIABILITIES | ||
Equity | ||
Equity share capital | 1,144 | 1,144 |
Other equity | 63,681 | 60,600 |
Total equity attributable to equity holders of the Company | 64,825 | 61,744 |
Non-controlling interests | – | – |
Total equity | 64,825 | 61,744 |
Liabilities | ||
Non-current liabilities | ||
Financial liabilities | ||
Other financial liabilities | 106 | 69 |
Deferred tax liabilities (net) | 235 | 252 |
Other non-current liabilities | 45 | 46 |
Total non-current liabilities | 386 | 367 |
Current liabilities | ||
Financial liabilities | ||
Trade payables | 307 | 386 |
Others financial liabilities | 6,356 | 6,302 |
Other current liabilities | 2,760 | 2,629 |
Provisions | 621 | 512 |
Income tax liabilities (net) | 3,851 | 3,410 |
Total current liabilities | 13,895 | 13,239 |
Total equity and liabilities | 79,106 | 75,350 |
The disclosure is an extract of the audited Consolidated Balance Sheet as at September 30, 2016 and March 31, 2016 prepared in compliance with the Indian Accounting Standards (Ind-AS).
9. Reconciliation of the Consolidated Statement of Profit and Loss as previously reported under IGAAP to Ind-AS
(in crore)
Particulars | Note | Quarter ended September 30, 2015 | ||
IGAAP | Effects of transition to Ind- AS | Ind-AS | ||
Revenue from operations | 15,635 | – | 15,635 | |
Other income, net | 792 | 1 | 793 | |
Total Income | 16,427 | 1 | 16,428 | |
Expenses | ||||
Employee benefit expenses | 1.1 | 8,567 | (9) | 8,558 |
Deferred consideration pertaining to acquisition | 1.2 | 46 | 18 | 64 |
Cost of technical sub-contractors | 858 | – | 858 | |
Travel expenses | 582 | – | 582 | |
Cost of software packages and others | 354 | – | 354 | |
Communication expenses | 111 | – | 111 | |
Consultancy and professional charges | 184 | – | 184 | |
Depreciation and amortisation expenses | 1.3 | 313 | 45 | 358 |
Other expenses | 1.2 | 569 | 4 | 573 |
Total expenses | 11,584 | 58 | 11,642 | |
Profit before minority interest/ share in profit/(loss) of associate | 4,843 | (57) | 4,786 | |
Share in net profit/(loss) of associate | (1) | – | (1) | |
Profit before tax | 4,842 | (57) | 4,785 | |
Tax expense: |
||||
Current tax |
1.4 | 1,439 | 2 | 1,441 |
Deferred tax |
1.5 | (41) | (13) | (54) |
Profit for the period | 3,444 | (46) | 3,398 | |
Other comprehensive income |
||||
Items that will not be reclassified subsequently to profit or loss |
||||
Remeasurement of the net defined benefit liability/asset |
1.1 | – | (7) | (7) |
Equity instruments through other comprehensive income |
– | – | – | |
– | (7) | (7) | ||
Items that will be reclassified subsequently to profit or loss |
||||
Exchange differences on translation of foreign operations |
1.6 | 18 | 44 | 62 |
Total other comprehensive income, net of tax |
18 | 37 | 55 | |
Total comprehensive income for the period |
3,462 | (9) | 3,453 |
This reconciliation statement has been provided in accordance with circular CIR/CFD/FAC/62/2016 issued by SEBI dated July 05, 2016 on account of implementation of Ind-AS by listed companies.
Explanations for reconciliation of Consolidated Statement of Profit and Loss as previously reported under IGAAP to Ind-AS
(1.1) | a. | As per Ind-AS 19 Employee Benefits, actuarial gain and losses are recognized in other comprehensive income and not reclassified to profit and loss in a subsequent period. |
b. | Adjustments reflect unamortized negative past service cost arising on modification of the gratuity plan in an earlier period. Ind-AS 19 requires such gains and losses to be adjusted to retained earnings. | |
(1.2) | Adjustments reflect the impact of discounting pertaining to deferred and contingent consideration payable for business combinations. | |
(1.3) | Adjustment reflects the impact of amortization of intangible assets included within goodwill under the IGAAP, separately recognized under Ind-AS. | |
(1.4) | Tax component on actuarial gains and losses which was transferred to other comprehensive income under Ind-AS. | |
1.5) | The reduction in deferred tax expense is on account of the reversal of deferred tax liabilities recorded on intangible assets acquired in business combination. | |
(1.6) | Under Ind-AS, exchange differences on translation of foreign operations are recorded in other comprehensive income. |
10. Reconciliation of equity as previously reported under IGAAP to Ind-AS
(in crore)
Particulars | Note | Balance Sheet as at March 31, 2016 | ||
IGAAP | Effects of transition to Ind-AS | Ind-AS | ||
ASSETS | ||||
Non-current assets | ||||
Property, plant and equipment | 8,637 | – | 8,637 | |
Capital work-in-progress | 960 | – | 960 | |
Goodwill | 1.1 | 4,476 | (712) | 3,764 |
Other intangible assets | 1.1 | 67 | 918 | 985 |
Investment in associate | 103 | – | 103 | |
Financial assets | ||||
Investments | 1.2 | 1,714 | – | 1,714 |
Loans | 25 | – | 25 | |
Other financial assets | 286 | – | 286 | |
Deferred tax assets (net) | 1.3 | 533 | 3 | 536 |
Income tax assets (net) | 5,230 | – | 5,230 | |
Other non-current assets | 1,357 | – | 1,357 | |
Total non-current assets | 23,388 | 209 | 23,597 | |
Current assets | ||||
Financial assets | ||||
Investments | 1.2 | 75 | – | 75 |
Trade receivables | 11,330 | – | 11,330 | |
Cash and cash equivalents | 32,697 | – | 32,697 | |
Loans | 303 | – | 303 | |
Other financial assets | 5,190 | – | 5,190 | |
Other current assets | 2,158 | – | 2,158 | |
Total current assets | 51,753 | – | 51,753 | |
Total assets | 75,141 | 209 | 75,350 | |
EQUITY AND LIABILITIES | ||||
Equity | ||||
Equity share capital | 1,144 | – | 1,144 | |
Other equity | 1.7 | 56,682 | 3,918 | 60,600 |
Total equity attributable to equity holders of the Company | 57,826 | 3,918 | 61,744 | |
Non-controlling interests | – | – | – | |
Total equity | 57,826 | 3,918 | 61,744 | |
Non-current liabilities | ||||
Financial liabilities | ||||
Other financial liabilities | 1.4 | 80 | (11) | 69 |
Deferred tax liabilities (net) | 1.3 | – | 252 | 252 |
Other non-current liabilities | 46 | – | 46 | |
Total non-current liabilities | 126 | 241 | 367 | |
Current liabilities | ||||
Financial liabilities | ||||
Trade payables | 386 | – | 386 | |
Other financial liabilities | 1.4 | 6,309 | (7) | 6,302 |
Other current liabilities | 1.5 | 2,633 | (4) | 2,629 |
Provisions | 1.6 | 4,451 | (3,939) | 512 |
Income tax liabilities (net) | 3,410 | – | 3,410 | |
Total current liabilities | 17,189 | (3,950) | 13,239 | |
Total equity and liabilities | 75,141 | 209 | 75,350 |
This reconciliation statement has been provided in accordance with circular CIR/CFD/FAC/62/2016 issued by SEBI dated July 05, 2016 on account of implementation of Ind-AS by listed companies.
Explanations for the reconciliation of Consolidated Balance Sheet as previously reported under IGAAP to Ind-AS
(1.1) | Goodwill and Intangible assets | |
Intangible assets and deferred tax asset/liabilities in relation to business combinations which were included within Goodwill under IGAAP, have been recognized separately under Ind-AS with corresponding adjustments to retained earnings and other comprehensive income for giving effect to amortization expenses and exchange gains and losses. | ||
(1.2) | Investments | |
Tax free bonds are carried at amortized cost both under Ind-AS and IGAAP. Investment in equity instruments are carried at fair value through OCI in Ind-AS compared to being carried at cost under IGAAP. | ||
(1.3) | Deferred taxes | |
Deferred taxes in relation to business combinations have been recognised under Ind-AS. | ||
(1.4) | Other financial liabilities | |
Adjustments include the impact of discounting the deferred and contingent consideration payable for acquisitions under Ind-AS. | ||
(1.5) | Other liabilities | |
Adjustments that reflect unamortized negative past service cost arising on modification of the gratuity plan in an earlier period. Ind-AS 19 - Employee Benefits require such gains and losses to be adjusted to retained earnings. | ||
(1.6) | Provisions | |
Adjustments reflect final dividend (including corporate dividend tax), declared and approved post reporting period. | ||
(1.7) | Other equity | |
a. | Adjustments to retained earnings and other comprehensive income have been made in accordance with Ind-AS, for the above mentioned line items. | |
b. | In addition, as per Ind-AS 19, actuarial gain and losses are recognized in other comprehensive income as compared to being recognized in the Statement of Profit and Loss under IGAAP. |
11. Audited financial results of Infosys Limited (Standalone Information)
(in crore)
Particulars | Quarter ended September 30, | Quarter ended June 30, | Quarter ended September 30, | Half-year ended September 30, | Year ended March 31, | |
2016 | 2016 | 2015 | 2016 | 2015 | 2016 | |
Revenue from operations | 15,000 | 14,420 | 13,525 | 29,420 | 26,263 | 53,983 |
Profit before tax | 4,812 | 4,460 | 4,553 | 9,271 | 8,543 | 17,600 |
Profit for the period | 3,476 | 3,180 | 3,248 | 6,656 | 6,139 | 12,693 |
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 standalone financial statements as stated. |
12. Segment reporting (Consolidated - Audited)
(in crore)
Particulars | Quarter ended September 30, | Quarter ended June 30, | Quarter ended September 30, | Half-year ended September 30, | Year ended March 31, | |
2016 | 2016 | 2015 | 2016 | 2015 | 2016 | |
Revenue by business segment | ||||||
Financial Services (FS) | 4,686 | 4,551 | 4,243 | 9,237 | 8,125 | 17,024 |
Manufacturing (MFG) | 1,853 | 1,844 | 1,827 | 3,696 | 3,444 | 6,948 |
Energy & utilities, Communication and Services (ECS) | 3,864 | 3,719 | 3,336 | 7,583 | 6,502 | 13,547 |
Retail, Consumer packaged goods and Logistics (RCL) | 2,833 | 2,861 | 2,582 | 5,694 | 4,923 | 10,226 |
Life Sciences, Healthcare and Insurance (HILIFE) | 2,089 | 2,004 | 2,036 | 4,093 | 3,906 | 8,090 |
Hi-Tech | 1,339 | 1,322 | 1,214 | 2,661 | 2,365 | 4,891 |
All other segments | 646 | 481 | 397 | 1,127 | 724 | 1,715 |
Total | 17,310 | 16,782 | 15,635 | 34,091 | 29,989 | 62,441 |
Less: Inter-segment revenue | – | – | – | – | – | – |
Net revenue from operations | 17,310 | 16,782 | 15,635 | 34,091 | 29,989 | 62,441 |
Segment profit before tax, depreciation and non-controlling interests: | ||||||
Financial Services (FS) | 1,295 | 1,267 | 1,267 | 2,561 | 2,340 | 4,839 |
Manufacturing (MFG) | 469 | 451 | 364 | 920 | 709 | 1,560 |
Energy & utilities, Communication and Services (ECS) | 1,122 | 1,066 | 998 | 2,189 | 1,951 | 4,029 |
Retail, Consumer packaged goods and Logistics (RCL) | 826 | 802 | 726 | 1,628 | 1,375 | 2,840 |
Life Sciences, Healthcare and Insurance (HILIFE) | 558 | 522 | 580 | 1,080 | 1,058 | 2,265 |
Hi-Tech | 342 | 321 | 353 | 662 | 623 | 1,301 |
All other segments | 123 | 21 | 66 | 144 | 60 | 259 |
Total | 4,735 | 4,450 | 4,354 | 9,184 | 8,116 | 17,093 |
Less: Other unallocable expenditure | 426 | 403 | 361 | 829 | 675 | 1,473 |
Add: Unallocable other income | 760 | 753 | 793 | 1,513 | 1,549 | 3,123 |
Add: Share in net profit/(loss) of associate | (3) | (2) | (1) | (5) | (1) | (3) |
Profit before tax and non-controlling interests | 5,066 | 4,798 | 4,785 | 9,863 | 8,989 | 18,740 |
Notes on segment information
Business segments
Based on the "management approach" as defined in Ind-AS 108 - Operating Segments, the Chief Operating Decision Maker evaluates the Company's performance and allocates resources based on an analysis of various performance indicators by business segments. Accordingly, information has been presented along these business segments. The accounting principles used in the preparation of the financial statements are consistently applied to record revenue and expenditure in individual 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 |
October 14, 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 half-year ended September 30, 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 September 30, | Quarter ended June 30, | Quarter ended September 30, | Half-year ended September 30, | Year ended March 31, | |
2016 | 2016 | 2015 | 2016 | 2015 | 2016 | |
Revenues | 2,587 | 2,501 | 2,392 | 5,088 | 4,647 | 9,501 |
Cost of sales | 1,638 | 1,592 | 1,488 | 3,231 | 2,922 | 5,950 |
Gross profit | 949 | 909 | 904 | 1,857 | 1,725 | 3,551 |
Net profit | 539 | 511 | 519 | 1,050 | 995 | 2,052 |
Earnings per equity share | ||||||
Basic | 0.24 | 0.22 | 0.23 | 0.46 | 0.44 | 0.90 |
Diluted | 0.24 | 0.22 | 0.23 | 0.46 | 0.44 | 0.90 |
Total assets | 11,875 | 11,317 | 10,810 | 11,875 | 10,810 | 11,378 |
Cash and cash equivalents including current investments | 5,086 | 4,681 | 4,655 | 5,086 | 4,655 | 4,946 |
Certain statements in these results 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, an inability to accurately predict economic or industry trends, 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, 2016. 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 result is October 14, 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, Bengaluru – 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 half-year ended September 30, 2016, prepared in compliance with the Indian Accounting Standard (Ind-AS)
( in crore except equity share data)
Particulars | Quarter ended September 30, | Half-year ended September 30 | Quarter ended September 30, |
2016 | 2016 | 2015 | |
Revenue from operations | 17,310 | 34,091 | 15,635 |
Profit before tax | 5,066 | 9,863 | 4,785 |
Net profit after tax | 3,606 | 7,041 | 3,398 |
Total comprehensive income for the period (comprising profit for the period after tax and other comprehensive income after tax) | 3,517 | 6,973 | 3,453 |
Paid-up equity share capital (par value ![]() |
1,144 | 1,144 | 1,144 |
Other equity | 60,600 | 60,600 | 54,198 |
Earnings per share (par value ![]() |
|||
Basic | 15.77 | 30.81 | 14.87 |
Diluted | 15.77 | 30.80 | 14.87 |
Notes:
1. | The audited consolidated financial statements for the quarter and half-year ended September 30, 2016 have been taken on record by the Board of Directors at its meeting held on October 14, 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 Indian Accounting Standard (Ind-AS) as prescribed under Section 133 of the Companies Act, 2013 read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016. |
2. | The Group has adopted all the Ind-AS on April 1, 2016 with April 1, 2015 as the transition date, and the adoptions were carried out in accordance with Ind-AS 101-First time adoption of Indian Accounting Standards. The transition was carried out from Indian Accounting Principles generally accepted in India as prescribed under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014 (IGAAP), which was the previous GAAP. |
3. | The Board, at the meeting held on October 14, 2016 appointed D. N. Prahlad as an Independent Director effective from that date. |
4. | The Board of Directors in their meeting held on October 14, 2016, on recommendation
of the Nomination and Remuneration Committee, have approved the revised annual compensation of U.B. Pravin Rao, Chief Operating
Officer and Whole Time Director of the Company, with effect from November 1, 2016, subject to the approval of the shareholders.
The compensation includes fixed compensation of ![]() ![]() |
5. | The Board of Directors in their meeting held on October 14, 2016, on recommendation
of the Nomination and Remuneration Committee, have approved the revised compensation structure of M.D. Ranganath, Mohit Joshi,
Sandeep Dadlani, Rajesh K Murthy, Ravikumar S, David Kennedy, Krishnamurthy Shankar and Manikantha AGS with effect from November
1, 2016. The revised aggregate compensation of the above individuals includes fixed compensation of ![]() ![]() |
6. | The Nomination and Remuneration Committee of the Board of Directors of Infosys Limited at its meeting held on October 13, 2016, based on fiscal 2016 performance approved the grant of upto 906,275 RSUs and upto 943,810 stock options with effect from November 1, 2016, to a total of upto 425 eligible and identified high-performing executives of the Company and its subsidiaries under the 2015 Stock Incentive Compensation Plan (2015 plan), as approved by the shareholders vide postal ballot dated March 31, 2016. These RSUs and stock options shall vest over a period of 4 years from the date of grant and shall be exercisable within the period as approved by the committee. The exercise price of the RSUs will be equal to the par value of the shares and the exercise price of the stock options would be the market price as on the date of grant. |
7. | Information on dividends for the quarter and half-year ended September 30, 2016 |
The Board declared an interim dividend of 11/-
per equity share. The record date for the payment of interim dividend is October 24, 2016. The interim dividend will be paid on
October 26, 2016. The interim dividend declared in the previous year was
10/- per equity share.
(in )
Particulars | Quarter ended September 30, | Half-year ended September 30 | Quarter ended September 30, |
2016 | 2016 | 2015 | |
Dividend per share (par value ![]() |
|||
Interim dividend | 11.00 | 11.00 | 10.00 |
Final dividend | – | – | – |
8. Reconciliation of the Consolidated Statement of Profit and Loss as previously reported under IGAAP to Ind-AS
( in crore)
Particulars | Note | Quarter ended September 30, 2015 | ||
IGAAP | Effects of transition to Ind-AS | Ind-AS | ||
Revenue from operations | 15,635 | – | 15,635 | |
Other income, net | 792 | 1 | 793 | |
Total income | 16,427 | 1 | 16,428 | |
Expenses | ||||
Employee benefit expenses | 1.1 | 8,567 | (9) | 8,558 |
Deferred consideration pertaining to acquisition | 1.2 | 46 | 18 | 64 |
Cost of technical sub-contractors | 858 | – | 858 | |
Travel expenses | 582 | – | 582 | |
Cost of software packages and others | 354 | – | 354 | |
Communication expenses | 111 | – | 111 | |
Consultancy and professional charges | 184 | – | 184 | |
Depreciation and amortization expenses | 1.3 | 313 | 45 | 358 |
Other expenses | 1.2 | 569 | 4 | 573 |
Total expenses | 11,584 | 58 | 11,642 | |
Profit before minority interest/ share in net profit/(loss) of associate | 4,843 | (57) | 4,786 | |
Share in net profit/(loss) of associate | (1) | – | (1) | |
Profit before tax | 4,842 | (57) | 4,785 | |
Tax expense: | ||||
Current tax | 1.4 | 1,439 | 2 | 1,441 |
Deferred tax | 1.5 | (41) | (13) | (54) |
Profit for the period | 3,444 | (46) | 3,398 | |
Other comprehensive income | ||||
Items that will not be reclassified subsequently to profit or loss | ||||
Remeasurement of the net defined benefit liability/asset | 1.1 | – | (7) | (7) |
Equity instruments through other comprehensive income | – | – | – | |
– | (7) | (7) | ||
Items that will be reclassified subsequently to profit or loss | ||||
Exchange differences on translation of foreign operations | 1.6 | 18 | 44 | 62 |
18 | 44 | 62 | ||
Total other comprehensive income, net of tax | 18 | 37 | 55 | |
Total comprehensive income for the period | 3,462 | (9) | 3,453 |
Explanations for reconciliation of Consolidated Statement of Profit and Loss as previously reported under IGAAP to Ind-AS
(1.1) | a. | As per Ind-AS 19 Employee Benefits, actuarial gain and losses are recognized in other comprehensive income and not reclassified to profit and loss in a subsequent period. |
b. | Adjustments reflect unamortized negative past service cost arising on modification of the gratuity plan in an earlier period. Ind AS 19 requires such gains and losses to be adjusted to retained earnings. | |
(1.2) | Adjustments reflect the impact of discounting pertaining to deferred and contingent consideration payable for business combinations. | |
(1.3) | Adjustment reflects the impact of amortisation of intangible assets included within goodwill under the IGAAP, separately recognized under Ind-AS. | |
(1.4) | Tax component on actuarial gains and losses which was transferred to other comprehensive income under Ind AS. | |
(1.5) | The reduction in deferred tax expense is on account of the reversal of deferred tax liabilities recorded on intangible assets acquired in business combination. | |
(1.7) | Under Ind-AS, exchange differences on translation of foreign operations are recorded in other comprehensive income. |
9. Reconciliation of equity as previously reported under IGAAP to Ind AS
( in crore)
Particulars | Note | Balance Sheet as at March 31, 2016 | ||
IGAAP | Effects of transition to Ind-AS | Ind-AS | ||
ASSETS | ||||
Non-current assets | ||||
Property, plant and equipment | 8,637 | – | 8,637 | |
Capital work-in-progress | 960 | – | 960 | |
Goodwill | 1.1 | 4,476 | (712) | 3,764 |
Other intangible assets | 1.1 | 67 | 918 | 985 |
Investment in associate | 103 | – | 103 | |
Financial assets | ||||
Investments | 1.2 | 1,714 | – | 1,714 |
Loans | 25 | – | 25 | |
Other financial assets | 286 | – | 286 | |
Deferred tax assets (net) | 1.3 | 533 | 3 | 536 |
Income tax assets (net) | 5,230 | – | 5,230 | |
Other non-current assets | 1,357 | – | 1,357 | |
Total non-current assets | 23,388 | 209 | 23,597 | |
Current assets | ||||
Financial assets | ||||
Investments | 1.2 | 75 | – | 75 |
Trade receivables | 11,330 | – | 11,330 | |
Cash and cash equivalents | 32,697 | – | 32,697 | |
Loans | 303 | – | 303 | |
Other financial assets | 5,190 | – | 5,190 | |
Other current assets | 2,158 | – | 2,158 | |
Total current assets | 51,753 | – | 51,753 | |
Total assets | 75,141 | 209 | 75,350 | |
EQUITY AND LIABILITIES | ||||
Equity | ||||
Equity share capital | 1,144 | – | 1,144 | |
Other equity | 1.7 | 56,682 | 3,918 | 60,600 |
Total equity attributable to equity holders of the Company | 57,826 | 3,918 | 61,744 | |
Non-controlling interests | – | – | – | |
Total equity | 57,826 | 3,918 | 61,744 | |
Non-current liabilities | ||||
Financial liabilities | ||||
Other financial liabilities | 1.4 | 80 | (11) | 69 |
Deferred tax liabilities (net) | 1.3 | – | 252 | 252 |
Other non-current liabilities | 46 | – | 46 | |
Total non-current liabilities | 126 | 241 | 367 | |
Current liabilities | ||||
Financial liabilities | ||||
Trade payables | 386 | – | 386 | |
Other financial liabilities | 1.4 | 6,309 | (7) | 6,302 |
Other current liabilities | 1.5 | 2,633 | (4) | 2,629 |
Provisions | 1.6 | 4,451 | (3,939) | 512 |
Income tax liabilities (net) | 3,410 | – | 3,410 | |
Total current liabilities | 17,189 | (3,950) | 13,239 | |
Total equity and liabilities | 75,141 | 209 | 75,350 |
Explanations for the reconciliation of Consolidated Balance Sheet as previously reported under IGAAP to Ind-AS
(1.1) | Goodwill and Intangible assets | |
Intangible assets and deferred tax asset/liabilities in relation to business combinations which were included within Goodwill under IGAAP, have been recognized separately under Ind-AS with corresponding adjustments to retained earnings and other comprehensive income for giving effect to amortization expenses and exchange gains and losses. | ||
(1.2) | Investments | |
Tax free bonds are carried at amortized cost both under Ind-AS and IGAAP. Investment in equity instruments are carried at fair value through OCI in Ind AS compared to being carried at cost under IGAAP. | ||
(1.3) | Deferred taxes | |
Deferred taxes in relation to business combinations have been recognised under Ind-AS | ||
(1.4) | Other financial liabilities | |
Adjustments include the impact of discounting the deferred and contingent consideration payable for acquisitions under Ind AS | ||
(1.5) | Other liabilities | |
Adjustments that reflect unamortized negative past service cost arising on modification of the gratuity plan in an earlier period. Ind AS 19 - Employee Benefits require such gains and losses to be adjusted to retained earnings. | ||
(1.6) | Provisions | |
Adjustments reflect final dividend (including corporate dividend tax), declared and approved post reporting period. | ||
(1.7) | Other equity | |
a. | Adjustments to retained earnings and other comprehensive income have been made in accordance with Ind-AS, for the above mentioned line items. | |
b. | In addition, as per Ind-AS 19, actuarial gain and losses are recognized in other comprehensive income as compared to being recognized in the Statement of Profit and Loss under IGAAP. |
10. Audited financial results of Infosys Limited (Standalone information)
(in crore)
Particulars | Quarter ended September 30, | Half-year ended September 30 | Quarter ended September 30, |
2016 | 2016 | 2015 | |
Revenue from operations | 15,000 | 29,420 | 13,525 |
Profit before tax | 4,812 | 9,271 | 4,553 |
Profit for the period | 3,476 | 6,656 | 3,248 |
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, an inability to accurately predict economic or industry trends 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, 2016. 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 October 14, 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, Bengaluru – 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 half-year ended September 30, 2016 prepared in compliance with the Indian Accounting Standard (Ind-AS)
(in
crore, except per equity share data)
Particulars | Quarter
ended September 30, |
Quarter
ended June 30, |
Quarter
ended September 30, |
Half-year
ended September 30, |
Year
ended March 31, | |
2016 | 2016 | 2015 | 2016 | 2015 | 2016 | |
Audited | Audited | Audited | Audited | Audited | Audited | |
Revenue from operations | 15,000 | 14,420 | 13,525 | 29,420 | 26,263 | 53,983 |
Other income, net | 763 | 761 | 775 | 1,525 | 1,496 | 3,006 |
Total income | 15,763 | 15,181 | 14,300 | 30,945 | 27,759 | 56,989 |
Expenses | ||||||
Employee benefit expenses | 7,939 | 7,605 | 6,987 | 15,544 | 13,794 | 28,207 |
Deferred consideration pertaining to acquisition | – | – | 64 | – | 124 | 149 |
Cost of technical sub-contractors | 1,183 | 1,135 | 1,035 | 2,319 | 2,000 | 4,417 |
Travel expenses | 364 | 576 | 425 | 940 | 857 | 1,655 |
Cost of software packages and others | 312 | 224 | 335 | 536 | 626 | 1,049 |
Communication expenses | 90 | 82 | 80 | 172 | 160 | 311 |
Consultancy and professional charges | 119 | 119 | 123 | 238 | 255 | 563 |
Depreciation and amortisation expense | 338 | 319 | 272 | 657 | 524 | 1,115 |
Other expenses | 606 | 661 | 426 | 1,268 | 876 | 1,923 |
Total expenses | 10,951 | 10,721 | 9,747 | 21,674 | 19,216 | 39,389 |
Profit before tax | 4,812 | 4,460 | 4,553 | 9,271 | 8,543 | 17,600 |
Tax expense: | ||||||
Current tax | 1,327 | 1,314 | 1,333 | 2,640 | 2,385 | 4,898 |
Deferred tax | 9 | (34) | (28) | (25) | 19 | 9 |
Profit for the period | 3,476 | 3,180 | 3,248 | 6,656 | 6,139 | 12,693 |
Other comprehensive income | ||||||
Items that will not be reclassified subsequently to profit or loss | ||||||
Remeasurement of the net defined benefit liability/asset | (35) | (17) | 1 | (52) | (7) | (2) |
Equity instruments through other comprehensive income | – | – | – | – | – | – |
Fair value changes on cash flow hedges | 2 | – | – | 2 | – | – |
Items that will be reclassified subsequently to profit or loss | – | – | – | – | – | – |
Total other comprehensive income, net of tax | (33) | (17) | 1 | (50) | (7) | (2) |
Total comprehensive income, for the period | 3,443 | 3,163 | 3,249 | 6,606 | 6,132 | 12,691 |
Paid-up
share capital (par value ![]() |
1,148 | 1,148 | 1,148 | 1,148 | 1,148 | 1,148 |
Other Equity | 59,934 | 59,934 | 51,617 | 59,934 | 51,617 | 59,934 |
Earnings
per equity share ( par value ![]() |
||||||
Basic
(![]() |
15.13 | 13.85 | 14.14 | 28.98 | 26.73 | 55.26 |
Diluted
(![]() |
15.13 | 13.85 | 14.14 | 28.98 | 26.73 | 55.26 |
Notes:
1. | The audited financial statements for the quarter and half-year ended September 30, 2016 have been taken on record by the Board of Directors at its meeting held on October 14, 2016. The statutory auditors have expressed an unqualified audit opinion. The information presented above is extracted from the audited standalone financial statements. The financial statements are prepared in accordance with the Indian Accounting Standard (Ind-AS) as prescribed under Section 133 of the Companies Act, 2013 read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016. |
2. | The Company has adopted all the Ind-AS standards on April 1, 2016 with April 1, 2015 as the transition date, and the adoptions were carried out in accordance with Ind-AS 101-First time adoption of Indian Accounting Standards. The transition was carried out from Indian Accounting Principles generally accepted in India as prescribed under Section 133 of the Companies Act, 2013 read with Rule 7 of the Companies (Accounts) Rules, 2014 (IGAAP), which was the previous GAAP. |
3. | The Board, at the meeting held on October 14, 2016 appointed D. N. Prahlad as Independent Director effective from that date. |
4. | The Board
of Directors in their meeting held on October 14, 2016, on recommendation of the Nomination and Remuneration Committee, have approved
the revised annual compensation of U.B. Pravin Rao, Chief Operating Officer and Whole Time Director of the Company, with effect
from November 1, 2016, subject to the approval of the shareholders. The compensation includes fixed compensation of ![]() ![]() |
5. | The Board
of Directors in their meeting held on October 14, 2016, on recommendation of the Nomination and Remuneration Committee, have approved
the revised compensation structure of M.D Ranganath, Mohit Joshi, Sandeep Dadlani, Rajesh K Murthy, Ravikumar S, David Kennedy,
Krishnamurthy Shankar and Manikantha AGS with effect from November 1, 2016. The revised aggregate compensation of the above individuals
includes fixed compensation of ![]() ![]() |
6. | The Nomination and Remuneration Committee of the Board of Directors of Infosys Limited at its meeting held on October 13, 2016, based on fiscal 2016 performance approved the grant of upto 906,275 RSUs and upto 943,810 stock options with effect from November 1, 2016, to a total of upto 425 eligible and identified high-performing executives of the Company and its subsidiaries under the 2015 Stock Incentive Compensation Plan (2015 plan), as approved by the shareholders vide postal ballot dated March 31, 2016. These RSUs and stock options shall vest over a period of 4 years from the date of grant, and shall be exercisable within the period as approved by the committee. The exercise price of the RSUs will be equal to the par value of the shares and the exercise price of the stock options would be the market price as on the date of grant. |
7. | Information on dividends for the quarter and half-year ended September 30, 2016 |
The
Board declared an interim dividend of 11/- per equity share . The record date for the payment of interim dividend is October
24, 2016. The interim dividend will be paid on October 26, 2016. The interim dividend declared in the previous year was
10/-
(not adjusted for bonus issue) per equity share.
(in
)
Particulars | Quarter ended September 30, | Quarter ended June 30, | Quarter ended September 30, | Half-year ended September 30, | Year ended March 31, | |
2016 | 2016 | 2015 | 2016 | 2015 | 2016 | |
Dividend
per share (par value ![]() |
||||||
Interim dividend | 11.00 | – | 10.00 | 11.00 | 10.00 | 10.00 |
Final dividend | – | – | – | – | – | 14.25 |
8. Statement of assets and liabilities (Standalone-Audited)
(in
crore)
Particulars | As at | |
September 30, 2016 | March 31, 2016 | |
ASSETS | ||
Non-current assets | ||
Property, plant and equipment | 8,470 | 8,248 |
Capital work-in-progress | 1,053 | 934 |
Intangible assets | – | – |
Financial assets | ||
Investments | 11,253 | 11,076 |
Loans | 5 | 5 |
Other financial assets | 206 | 192 |
Deferred tax assets (net) | 428 | 405 |
Other non-current assets | 834 | 755 |
Income tax assets (net) | 4,981 | 5,020 |
Total non - current assets | 27,230 | 26,635 |
Current assets | ||
Financial assets | ||
Investments | 1,905 | 2 |
Trade receivables | 10,168 | 9,798 |
Cash and cash equivalents | 27,967 | 29,176 |
Loans | 321 | 355 |
Other financial assets | 6,286 | 4,801 |
Other current assets | 1,800 | 1,965 |
Total current assets | 48,447 | 46,097 |
Total assets | 75,677 | 72,732 |
EQUITY AND LIABILITIES | ||
Equity | ||
Equity share capital | 1,148 | 1,148 |
Other equity | 62,632 | 59,934 |
Total equity | 63,780 | 61,082 |
LIABILITIES | ||
Non-current liabilities | ||
Financial liabilities | ||
Other financial liabilities | 39 | 62 |
Deferred tax liabilities (net) | – | – |
Total non - current liabilities | 39 | 62 |
Current liabilities | ||
Financial liabilities | ||
Trade payables | 272 | 623 |
Other financial liabilities | 5,128 | 5,132 |
Other current liabilities | 2,178 | 2,093 |
Provisions | 556 | 436 |
Income tax liabilities (net) | 3,724 | 3,304 |
Total current liabilities | 11,858 | 11,588 |
Total equity and liabilities | 75,677 | 72,732 |
The disclosure is an extract of the audited Balance Sheet as at September 30, 2016 and March 31, 2016 prepared in compliance with the Indian Accounting Standards (Ind-AS).
9. Reconciliation of Statement of Profit and Loss as previously reported under IGAAP to Ind-AS
(in
crore)
Particulars | Note | Three months ended September 30, 2015 | ||
IGAAP | Effects of transition to Ind-AS | Ind-AS | ||
Revenue from operations | 13,525 | – | 13,525 | |
Other income, net | 1.2 | 774 | 1 | 775 |
Total income | 14,299 | 1 | 14,300 | |
Expenses | ||||
Employee benefit expenses | 1.1 | 6,985 | 2 | 6,987 |
Deferred consideration pertaining to acquisition | 1.2 | 46 | 18 | 64 |
Cost of technical sub-contractors | 1,035 | – | 1,035 | |
Travel expenses | 425 | – | 425 | |
Cost of software packages and others | 335 | – | 335 | |
Communication expenses | 80 | – | 80 | |
Consultancy and professional charges | 123 | – | 123 | |
Depreciation and amortization expenses | 272 | – | 272 | |
Other expenses | 1.2 | 423 | 3 | 426 |
Total expenses | 9,724 | 23 | 9,747 | |
Profit before exceptional items and tax | 4,575 | (22) | 4,553 | |
Profit on transfer of business | 1.3 | 3,036 | (3,036) | – |
Profit before tax | 7,611 | (3,058) | 4,553 | |
Tax expense: | ||||
Current tax | 1,333 | – | 1,333 | |
Deferred tax | (28) | – | (28) | |
Profit for the period | 6,306 | (3,058) | 3,248 | |
Other comprehensive income | ||||
Items that will not be reclassified subsequently to profit or loss | ||||
Remeasurement of the net defined benefit liability/asset | 1.1 | – | 1 | 1 |
Equity instruments through other comprehensive income | – | – | – | |
– | 1 | 1 | ||
Items that will be reclassified subsequently to profit or loss | – | – | – | |
Total other comprehensive income, net of tax | – | 1 | 1 | |
Total comprehensive income for the period | 6,306 | (3,057) | 3,249 |
This reconciliation statement has been provided in accordance with circular CIR/CFD/FAC/62/2016 issued by SEBI dated July 05, 2016 on account of implementation of Ind-AS by listed companies.
Explanations for reconciliation of profit and loss as previously reported under IGAAP to Ind-AS
1.1 | a) | As per Ind-AS 19 - Employee Benefits, actuarial gains and losses are recognized in other comprehensive income and not reclassified to profit and loss in a subsequent period. |
b) | Adjustments reflect unamortized negative past service cost arising on modification of the gratuity plan in an earlier period. Ind-AS 19 requires such gains and losses to be adjusted to retained earnings. | |
1.2. | Adjustments reflect impact of discounting pertaining to deferred consideration and contingent consideration payable for business combinations. | |
1.3. | Profit on transfer of business between entities under common control has been reversed and taken to business transfer reserve on account of transition to Ind-AS. |
10. Reconciliation of equity as previously reported under IGAAP to Ind-AS
(in
crore)
Particulars | Note | Balance Sheet as at March 31, 2016 | ||
IGAAP | Effects of transition to Ind-AS | Ind-AS | ||
ASSETS | ||||
Non-current assets | ||||
Property, plant and equipment | 8,248 | – | 8,248 | |
Capital work-in-progress | 934 | – | 934 | |
Intangible assets | – | – | – | |
Financial assets | ||||
Investments | 1.1 | 11,111 | (35) | 11,076 |
Loans | 5 | – | 5 | |
Other financial assets | 192 | – | 192 | |
Deferred tax assets (net) | 405 | – | 405 | |
Other non-current assets | 755 | – | 755 | |
Income tax assets (net) | 5,020 | – | 5,020 | |
Total non-current assets | 26,670 | (35) | 26,635 | |
Current assets | ||||
Financial assets: | ||||
Investments | 1.1 | 2 | – | 2 |
Trade receivables | 9,798 | – | 9,798 | |
Cash and cash equivalents | 29,176 | – | 29,176 | |
Loans | 355 | – | 355 | |
Other financial assets | 4,801 | – | 4,801 | |
Other current assets | 1,965 | – | 1,965 | |
Total current assets | 46,097 | – | 46,097 | |
Total assets | 72,767 | (35) | 72,732 | |
EQUITY AND LIABILITIES | ||||
Equity | ||||
Equity share capital | 1,148 | – | 1,148 | |
Other equity | 1.5 | 56,009 | 3,925 | 59,934 |
Total equity | 57,157 | 3,925 | 61,082 | |
Non-current liabilities | ||||
Financial liabilities | ||||
Other financial liabilities | 1.2 | 73 | (11) | 62 |
Deferred tax liabilities (net) | – | – | – | |
Other non-current liabilities | – | – | – | |
Total non-current liabilities | 73 | (11) | 62 | |
Current liabilities | ||||
Financial liabilities | ||||
Trade payables | 623 | – | 623 | |
Other financial liabilities | 1.2 | 5,138 | (6) | 5,132 |
Other current liabilities | 1.3 | 2,097 | (4) | 2,093 |
Provisions | 1.4 | 4,375 | (3,939) | 436 |
Other current liabilities | 3,304 | – | 3,304 | |
Total current liabilities | 15,537 | (3,949) | 11,588 | |
Total liabilities and equity | 72,767 | (35) | 72,732 |
This reconciliation statement has been provided in accordance with circular CIR/CFD/FAC/62/2016 issued by SEBI dated July 05, 2016 on account of implementation of Ind-AS by listed companies.
Explanations for reconciliation of balance sheet as previously reported under IGAAP to IND-AS
1.1. | Investment | |
a) | Tax free bonds are carried at amortized cost both under Ind-AS and IGAAP. Investment in equity instruments are carried at fair value through OCI in Ind-AS compared to being carried at cost under IGAAP. | |
b) | Investments include discounted value of contingent consideration payable on acquisition of business under Ind-AS as compared to undiscounted value of contingent consideration under IGAAP. | |
1.2. | Other financial liabilities | |
Other financial liabilities - adjustments includes impact of discounting the deferred and contingent consideration payable for acquisitions under Ind-AS. | ||
1.3. | Other current liabilities | |
Adjustments that reflect unamortised negative past service cost arising on modification of the gratuity plan in an earlier period. Ind-AS 19 requires such gains and losses to be adjusted to retained earnings. | ||
1.4. | Provisions | |
Adjustments reflect final dividend (including corporate dividend tax), declared and approved post reporting period. | ||
1.5. | Other equity | |
a) | Adjustments to retained earnings and other comprehensive income has been made in accordance with Ind-AS, for the above mentioned line items. | |
b) | In addition, as per Ind-AS 19, actuarial gain and losses are recognized in other comprehensive income as compared to being recognized in the statement of profit and loss under IGAAP. | |
c) | Profit on transfer of business between entities under common control which were earlier recognized in statement of profit and loss under IGAAP are adjusted to reserves on transition to Ind-AS. |
11. Segment reporting (Standalone-Audited)
(in
crore)
Particulars | Quarter ended September 30, | Quarter ended June 30, | Quarter ended September 30, | Half-year ended September 30, | Year ended March 31, | |
2016 | 2016 | 2015 | 2016 | 2015 | 2016 | |
Revenue by business segment | ||||||
Financial services (FS) | 3,998 | 3,873 | 3,692 | 7,871 | 7,343 | 14,846 |
Manufacturing (MFG) | 1,506 | 1,472 | 1,445 | 2,978 | 2,693 | 5,434 |
Energy & utilities, communication and services (ECS) | 3,510 | 3,341 | 2,981 | 6,851 | 5,824 | 12,124 |
Retail, consumer packaged goods and logistics (RCL) | 2,598 | 2,583 | 2,377 | 5,181 | 4,556 | 9,411 |
Life sciences, healthcare and insurance (HILIFE) | 1,736 | 1,627 | 1,611 | 3,364 | 3,119 | 6,392 |
Hi-Tech | 1,275 | 1,270 | 1,184 | 2,545 | 2,302 | 4,736 |
All Other Segments | 377 | 254 | 235 | 630 | 426 | 1,040 |
Total | 15,000 | 14,420 | 13,525 | 29,420 | 26,263 | 53,983 |
Less: Inter-segment revenue | – | – | – | – | – | – |
Net revenue from operations | 15,000 | 14,420 | 13,525 | 29,420 | 26,263 | 53,983 |
Segment profit before tax | ||||||
Financial services (FS) | 1,064 | 1,026 | 1,093 | 2,090 | 2,145 | 4,185 |
Manufacturing (MFG) | 449 | 410 | 349 | 859 | 673 | 1,436 |
Energy & utilities, communication and services (ECS) | 1,114 | 1,022 | 959 | 2,136 | 1,815 | 3,829 |
Retail, consumer packaged goods and logistics (RCL) | 816 | 771 | 727 | 1,586 | 1,367 | 2,817 |
Life sciences, healthcare and insurance (HILIFE) | 500 | 451 | 480 | 951 | 876 | 1,844 |
Hi-Tech | 365 | 341 | 377 | 706 | 655 | 1,373 |
All other segments | 81 | – | 68 | 80 | 44 | 239 |
Total | 4,389 | 4,021 | 4,053 | 8,408 | 7,575 | 15,723 |
Less: Other unallocable expenditure | 340 | 322 | 275 | 662 | 528 | 1,129 |
Add: Unallocable other income | 763 | 761 | 775 | 1,525 | 1,496 | 3,006 |
Profit before tax | 4,812 | 4,460 | 4,553 | 9,271 | 8,543 | 17,600 |
Notes on segment information:
Business segments
Based on the "management approach" as defined in Ind-AS 108 - Operating Segments, the Chief Operating Decision Marker evaluates the Company's performance and allocates resources based on an analysis of various performance indicators by business segments. Accordingly, information has been presented along these business segments. The accounting principles used in the preparation of the financial statements are consistently applied to record revenue and expenditure in individual segments
Segment Assets / Liabilities
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 |
October 14, 2016 | Chief Executive Officer and Managing Director |
Certain statements in these results 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, an inability to accurately predict economic or industry trends, 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, 2016. 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 October 14, 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 99.8
IFRS USD Earning Release
Infosys Limited and Subsidiaries
Unaudited Condensed Consolidated Balance Sheets as of
(Dollars in millions except equity share)
Note | September 30, 2016 | March 31, 2016 | |
ASSETS | |||
Current assets | |||
Cash and cash equivalents | 2.1 | 4,763 | 4,935 |
Current investments | 2.2 | 323 | 11 |
Trade receivables | 1,737 | 1,710 | |
Unbilled revenue | 584 | 457 | |
Prepayments and other current assets | 2.4 | 777 | 672 |
Derivative financial instruments | 2.3 | 13 | 17 |
Total current assets | 8,197 | 7,802 | |
Non-current assets | |||
Property, plant and equipment | 2.7 | 1,681 | 1,589 |
Goodwill | 2.8 | 566 | 568 |
Intangible assets | 136 | 149 | |
Investment in associate | 15 | 16 | |
Non-current investments | 2.2 | 289 | 273 |
Deferred income tax assets | 95 | 81 | |
Income tax assets | 788 | 789 | |
Other non-current assets | 2.4 | 108 | 111 |
Total Non-current assets | 3,678 | 3,576 | |
Total assets | 11,875 | 11,378 | |
LIABILITIES AND EQUITY | |||
Current liabilities | |||
Trade payables | 46 | 58 | |
Derivative financial instruments | 2.3 | – | 1 |
Current income tax liabilities | 578 | 515 | |
Client deposits | 2 | 4 | |
Unearned revenue | 222 | 201 | |
Employee benefit obligations | 216 | 202 | |
Provisions | 2.6 | 93 | 77 |
Other current liabilities | 2.5 | 929 | 940 |
Total current liabilities | 2,086 | 1,998 | |
Non-current liabilities | |||
Deferred income tax liabilities | 36 | 39 | |
Other non-current liabilities | 2.5 | 23 | 17 |
Total liabilities | 2,145 | 2,054 | |
Equity | |||
Share capital - ![]() |
199 | 199 | |
Share premium | 574 | 570 | |
Retained earnings | 11,553 | 11,083 | |
Other reserves | – | – | |
Other components of equity | (2,596) | (2,528) | |
Total equity attributable to equity holders of the company | 9,730 | 9,324 | |
Non-controlling interests | – | – | |
Total equity | 9,730 | 9,324 | |
Total liabilities and equity | 11,875 | 11,378 |
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 October 14, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer |
A. G. S. Manikantha Company Secretary |
Infosys Limited and Subsidiaries
Unaudited Condensed Consolidated Statements of Comprehensive Income
(Dollars in millions except equity share and per equity share data)
Note | Three months ended September 30, | Six months ended September 30, | |||
2016 | 2015 | 2016 | 2015 | ||
Revenues | 2,587 | 2,392 | 5,088 | 4,647 | |
Cost of sales | 2.15 | 1,638 | 1,488 | 3,231 | 2,922 |
Gross profit | 949 | 904 | 1,857 | 1,725 | |
Operating expenses: | |||||
Selling and marketing expenses | 2.15 | 134 | 129 | 271 | 258 |
Administrative expenses | 2.15 | 171 | 165 | 340 | 316 |
Total operating expenses | 305 | 294 | 611 | 574 | |
Operating profit | 644 | 610 | 1,246 | 1,151 | |
Other income, net | 114 | 121 | 226 | 240 | |
Share in associate's profit / (loss) | (1) | – | (1) | – | |
Profit before income taxes | 757 | 731 | 1,471 | 1,391 | |
Income tax expense | 2.11 | 218 | 212 | 421 | 396 |
Net profit | 539 | 519 | 1,050 | 995 | |
Other comprehensive income | |||||
Items that will not be reclassified subsequently to profit or loss: | |||||
Re-measurements of the net defined benefit liability/asset | (6) | (1) | (9) | (2) | |
Cumulative impact on reversal of unrealised gain on quoted debt securities on adoption of IFRS 9 | 2.2 | – | – | (5) | – |
Equity instruments through other comprehensive income | – | – | – | – | |
(6) | (1) | (14) | (2) | ||
Items that will be reclassified subsequently to profit or loss: | |||||
Fair valuation of investments | 2.2 | – | 5 | – | 3 |
Exchange differences on translation of foreign operations | 119 | (242) | (54) | (379) | |
119 | (237) | (54) | (376) | ||
Total other comprehensive income, net of tax | 113 | (238) | (68) | (378) | |
Total comprehensive income | 652 | 281 | 982 | 617 | |
Profit attributable to: | |||||
Owners of the company | 539 | 519 | 1,050 | 995 | |
Non-controlling interests | – | – | – | – | |
539 | 519 | 1,050 | 995 | ||
Total comprehensive income attributable to: | |||||
Owners of the company | 652 | 281 | 982 | 617 | |
Non-controlling interests | – | – | – | – | |
652 | 281 | 982 | 617 | ||
Earnings per equity share | |||||
Basic ($) | 0.24 | 0.23 | 0.46 | 0.44 | |
Diluted ($) | 0.24 | 0.23 | 0.46 | 0.44 | |
Weighted average equity shares used in computing earnings per equity share | 2.12 | ||||
Basic | 2,285,641,710 | 2,285,614,029 | 2,285,632,081 | 2,285,612,157 | |
Diluted | 2,285,949,303 | 2,285,713,042 | 2,285,875,988 | 2,285,696,678 |
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 October 14, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer |
A. G. S. Manikantha Company Secretary |
Infosys Limited and Subsidiaries
Unaudited Condensed Consolidated 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 (4) | Total equity attributable to equity holders of the company | |
Balance as of April 1, 2015 | 1,142,805,132 | 109 | 659 | 10,090 | – | (2,096) | 8,762 |
Changes in equity for the six months ended September 30, 2015 | |||||||
Shares issued on exercise of employee stock options | 9,116 | – | – | – | – | – | – |
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 | – | – | – | (40) | 40 | – | – |
Transfer from other reserves on utilization | – | – | – | 40 | (40) | – | – |
Employee stock compensation expense (refer to note 2.10) | – | – | – | – | – | – | – |
Fair value of investments (Refer note 2.2) | – | – | – | – | – | 3 | 3 |
Remeasurement of the net defined benefit liability/asset, net of tax effect | – | – | – | – | – | (2) | (2) |
Dividends (including corporate dividend tax) | – | – | – | (636) | – | – | (636) |
Net profit | – | – | – | 995 | – | – | 995 |
Exchange differences on translation of foreign operations | – | – | – | – | – | (379) | (379) |
Balance as of September 30, 2015 | 2,285,619,380 | 199 | 569 | 10,449 | – | (2,474) | 8,743 |
Balance as of April 1, 2016 | 2,285,621,088 | 199 | 570 | 11,083 | – | (2,528) | 9,324 |
Changes in equity for the six months ended September 30, 2016 | |||||||
Cumulative impact of Reversal of unrealized gain on quoted debt securities on adoption of IFRS 9 (Refer note 2.2) | – | – | – | – | – | (5) | (5) |
Shares issued on exercise of employee stock options (refer to note 2.10) | 30,642 | – | – | – | – | – | – |
Transfer to other reserves | – | – | – | (82) | 82 | – | – |
Transfer from other reserves on utilization | – | – | – | 82 | (82) | – | – |
Employee stock compensation expense (refer to note 2.10) | – | – | 4 | – | – | – | 4 |
Remeasurement of the net defined benefit liability/asset, net of tax effect | – | – | – | – | – | (9) | (9) |
Dividends (including corporate dividend tax) | – | – | – | (580) | – | – | (580) |
Net profit | – | – | – | 1,050 | – | – | 1,050 |
Exchange differences on translation of foreign operations | – | – | – | – | – | (54) | (54) |
Balance as of September 30, 2016 | 2,285,651,730 | 199 | 574 | 11,553 | – | (2,596) | 9,730 |
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 11,292,934 as of September 30, 2016, 11,323,576 as of April 1, 2016, 11,325,284 as of September 30, 2015 and 5,667,200 as of April 1, 2015, 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 cash flow hedging reserve as of September 30, 2016 is less than $1 million. Refer note 2.3 |
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 October 14, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer |
A. G. S. Manikantha Company Secretary |
Infosys Limited and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
(Dollars in millions)
Note | Six months ended September 30, | ||
2016 | 2015 | ||
Operating activities: | |||
Net Profit | 1,050 | 995 | |
Adjustments to reconcile net profit to net cash provided by operating activities : | |||
Depreciation and amortisation | 2.15 | 123 | 104 |
Income on investments | (14) | (15) | |
Income tax expense | 2.11 | 421 | 396 |
Effect of exchange rate changes on assets and liabilities | 4 | 8 | |
Deferred purchase price | – | 19 | |
Impairment loss on financial assets | 6 | 1 | |
Other adjustments | 31 | 12 | |
Changes in Working Capital | |||
Trade receivables and unbilled revenue | (170) | (190) | |
Prepayments and other assets | (94) | (262) | |
Trade payables | (12) | (5) | |
Client deposits | (3) | (1) | |
Unearned revenue | 22 | 9 | |
Other liabilities and provisions | 14 | 198 | |
Cash generated from operations | 1,378 | 1,269 | |
Income taxes paid | (373) | (443) | |
Net cash provided by operating activities | 1,005 | 826 | |
Investing activities: | |||
Expenditure on property, plant and equipment, net of sale proceeds, including changes in retention money and capital creditors | (219) | (195) | |
Loans to employees | 6 | (1) | |
Deposits placed with corporation | (13) | (4) | |
Income on investments | 12 | 14 | |
Payment for acquisition of business, net of cash acquired | 2.9 | – | (87) |
Payment of contingent consideration pertaining to acquisition of business | (5) | – | |
Investment in preference securities | (8) | (3) | |
Investment in other available-for-sale financial assets | (1) | (2) | |
Investment in quoted debt securities | (25) | (31) | |
Redemption of quoted debt securities | 1 | – | |
Investment in mutual fund units | (3,015) | (2,115) | |
Redemption of mutual fund units | 2,708 | 2,156 | |
Redemption of fixed maturity plan securities | – | 5 | |
Net cash used in investing activities | (559) | (263) | |
Financing activities: | |||
Payment of dividend (includes corporate dividend tax) | (579) | (636) | |
Net cash used in financing activities | (579) | (636) | |
Effect of exchange rate changes on cash and cash equivalents | (39) | (220) | |
Net (decrease) in cash and cash equivalents | (133) | (73) | |
Cash and cash equivalents at the beginning | 2.1 | 4,935 | 4,859 |
Cash and cash equivalents at the end | 2.1 | 4,763 | 4,566 |
Supplementary information: | |||
Restricted cash balance | 2.1 | 78 | 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 October 14, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer |
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 leading provider 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 October 14, 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 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-to-date 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-to-date 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. 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 interim 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 2.11).
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.
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 Financial instruments
Effective April 1, 2016, the group has elected to early adopt IFRS 9 - Financial Instruments considering April 1, 2015 as the date of initial application of the standard even though the stipulated effective date for adoption is April 1, 2018.
As per IFRS 9, the group has classified its financial assets into the following categories based on the business model for managing those assets and the contractual cash flow characteristics:
- Financial assets carried at amortised cost
- Financial assets fair valued through other comprehensive income
- Financial assets fair valued through profit and loss
The adoption of IFRS 9 did not have any other material impact on the consolidated financial statements, hence prior period figures have not been restated. The impact on account of adoption of IFRS 9 is given in Note 2.2.
1.9.1 Initial recognition
The group recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of the instrument. All financial assets and liabilities are recognized at fair value on initial recognition, except for trade receivables which are initially measured at transaction price. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities, that are not at fair value through profit or loss, are added to the fair value on initial recognition. Regular way purchase and sale of financial assets are accounted for at trade date.
1.9.2 Subsequent measurement
a. Non-derivative financial instruments
(i) Financial assets carried at amortised cost
A financial asset is subsequently measured at amortised cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
(ii) Financial assets at fair value through other comprehensive income
A financial asset is subsequently measured at fair value through other comprehensive income if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Further, in cases where the Group has made an irrevocable election based on its business model, for its investments which are classified as equity instruments, the subsequent changes in fair value are recognized in other comprehensive income.
(iii) Financial assets at fair value through profit or loss
A financial asset which is not classified in any of the above categories are subsequently fair valued through profit or loss.
(iv) Financial liabilities
Financial liabilities are subsequently carried at amortized cost using the effective interest method, except for contingent consideration recognized in a business combination which is subsequently measured at fair value through profit and loss. 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.
(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 IFRS 9, Financial Instruments. Any derivative that is either not designated a hedge, or is so designated but is ineffective as per IFRS 9, 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
(i) 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.
(ii) 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.
1.9.3 Derecognition of financial instruments
The group derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset and the transfer qualifies for derecognition under IFRS 9. A financial liability (or a part of a financial liability) is derecognized from the group's balance sheet when the obligation specified in the contract is discharged or cancelled or expires.
1.10 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 the fair value due to the short maturity of those instruments.
1.11 Impairment
a. Financial assets
The group recognizes loss allowances using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. Loss allowance for trade receivables with no significant financing component is measured at an amount equal to lifetime ECL. For all other financial assets, expected credit losses are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised is recognized as an impairment gain or loss in profit or loss
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. An impairment loss is reversed in net profit in the statement of comprehensive income if there has been a change in the estimates used to determine the recoverable amount. The carrying amount of the 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.
1.12 Employee benefits
1.12.1 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 FundTrust, 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.
1.12.2 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.
1.12.3 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.
1.12.4 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.
1.13 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.
1.14 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.
1.15 Recent accounting pronouncements
1.15.1 Standards issued but not yet effective
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 | ||
September 30, 2016 | March 31, 2016 | |
Cash and bank deposits | 3,942 | 4,139 |
Deposits with financial institutions | 821 | 796 |
4,763 | 4,935 |
Cash and cash equivalents as of September 30, 2016 and March 31, 2016 include restricted cash and bank balances of $78 million and $74 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 | ||
September 30, 2016 | March 31, 2016 | |
Current accounts | ||
ANZ Bank, Taiwan | 3 | 2 |
Banamex Bank, Mexico | – | 1 |
Banamex Bank, Mexico (U.S. Dollar account) | 1 | – |
Bank of America, Mexico | 4 | 3 |
Bank of America, USA | 130 | 103 |
Bank Zachodni WBK S.A, Poland | 2 | 1 |
Barclays Bank, UK | 2 | 3 |
Bank Leumi, Israel (US Dollar account) | 2 | 3 |
Bank Leumi, Israel | 1 | 2 |
China Merchants Bank, China | 1 | 1 |
Citibank N.A, China | 9 | 10 |
Citibank N.A., China (U.S. Dollar account) | 7 | 11 |
Citibank N.A., Costa Rica | 1 | – |
Citibank N.A., Australia | 19 | 11 |
Citibank N.A., Brazil | 4 | 1 |
Citibank N.A., Japan | 3 | 2 |
Citibank N.A., New Zealand | 1 | 1 |
Citibank N.A., South Africa | 1 | 1 |
CitiBank N.A., USA | 16 | 9 |
Commerzbank, Germany | 1 | 3 |
Crédit Industriel et Commercial Bank, France | – | 1 |
Deutsche Bank, India | 1 | 1 |
Deutsche Bank, Philippines | 2 | 2 |
Deutsche Bank, Poland | 2 | 1 |
Deutsche Bank, Poland (Euro account) | 1 | – |
Deutsche Bank, EEFC (Australian Dollar account) | 8 | – |
Deutsche Bank, EEFC (Euro account) | 4 | 5 |
Deutsche Bank, EEFC (Swiss Franc account) | – | 1 |
Deutsche Bank, EEFC (U.S. Dollar account) | 6 | 15 |
Deutsche Bank, EEFC (United Kingdom Pound Sterling account) | 1 | 1 |
Deutsche Bank, Belgium | 8 | 9 |
Deutsche Bank, Malaysia | – | 1 |
Deutsche Bank, Czech Republic | 3 | 2 |
Deutsche Bank, Czech Republic (U.S. Dollar account) | 4 | 4 |
Deutsche Bank, France | 2 | 2 |
Deutsche Bank, Germany | 3 | 3 |
Deutsche Bank, Netherlands | 1 | 1 |
Deutsche Bank, Russia (U.S. Dollar account) | 1 | – |
Deutsche Bank, Singapore | – | 1 |
Deutsche Bank, Switzerland | 1 | – |
Deutsche Bank, United Kingdom | 5 | 26 |
Deutsche Bank, USA | 1 | – |
HSBC Bank, Brazil | – | 1 |
HSBC Bank, Hong Kong | 1 | – |
ICICI Bank, India | 7 | 11 |
ICICI Bank, EEFC (Euro account) | 1 | – |
ICICI Bank, EEFC (U.S. Dollar account) | 2 | 2 |
ICICI Bank - Unpaid dividend account | 2 | – |
Nordbanken, Sweden | 3 | 2 |
Punjab National Bank, India | 1 | 1 |
Raiffeisen Bank, Czech Republic | 1 | 1 |
Raiffeisen Bank, Romania | 1 | 1 |
Royal Bank of Canada, Canada | 6 | 12 |
Santander Bank, Argentina | 1 | – |
State Bank of India, India | 1 | 1 |
Silicon Valley Bank, USA | 1 | 1 |
Silicon Valley Bank, (Euro account) | 5 | 10 |
Silicon Valley Bank, (United Kingdom Pound Sterling account) | 1 | 3 |
Union Bank of Switzerland AG | 1 | 2 |
Union Bank of Switzerland AG, (Euro account) | – | 2 |
Union Bank of Switzerland AG, (U.S. Dollar account) | 1 | 4 |
Union Bank of Switzerland AG, (United Kingdom Pound Sterling account) | – | 1 |
Wells Fargo Bank N.A., USA | 4 | 3 |
Westpac, Australia | – | 1 |
302 | 303 | |
Deposit accounts | ||
Andhra Bank | 130 | 143 |
Axis Bank | 275 | 202 |
Bank BGZ BNP Paribas S.A | 29 | – |
Bank of India | – | 11 |
Canara Bank | 341 | 339 |
Central Bank of India | 228 | 232 |
Citibank | 14 | 19 |
Corporation Bank | 193 | 194 |
Deutsche Bank, Poland | 8 | 36 |
HDFC Bank | 298 | 400 |
ICICI Bank | 564 | 634 |
IDBI Bank | 285 | 287 |
Indian Overseas Bank | 188 | 189 |
Indusind Bank | 37 | 38 |
Jammu & Kashmir Bank | 4 | 4 |
Kotak Mahindra Bank Limited | 63 | 81 |
Oriental Bank of Commerce | 295 | 297 |
Punjab National Bank | – | 3 |
South Indian Bank | 15 | 3 |
State Bank of India | 353 | 357 |
Syndicate Bank | 142 | 191 |
Union Bank of India | 11 | 21 |
Vijaya Bank | 46 | 46 |
Yes Bank | 121 | 109 |
3,640 | 3,836 | |
Deposits with financial institutions | ||
HDFC Limited, India | 817 | 796 |
Bajaj Finance Limited, India | 4 | – |
821 | 796 | |
Total | 4,763 | 4,935 |
2.2 Investments
The carrying value of investments are as follows:
(Dollars in millions)
As of | ||
September 30, 2016 | March 31, 2016 | |
(i) Current | ||
Amortised cost | ||
Quoted debt securities: | ||
Cost | 1 | 1 |
Fair value through profit and loss | ||
Mutual funds | ||
Fair value | 322 | 10 |
323 | 11 | |
(ii) Non-current | ||
Amortised cost | ||
Quoted debt securities: | ||
Cost | 240 | 256 |
Fair value through Other comprehensive income | ||
Quoted debt securities: | ||
Fair value | 23 | – |
Fair value through Other comprehensive income | ||
Unquoted equity and preference securities: | ||
Fair value | 22 | 14 |
Others: | ||
Fair value | 4 | 3 |
289 | 273 | |
Total investments | 612 | 284 |
Investment carried at amortized cost | 241 | 257 |
Investments carried at fair value through other comprehensive income | 49 | 17 |
Investments carried at fair value through profit and loss | 322 | 10 |
Liquid Mutual fund:
The cost and fair value of liquid mutual funds as of September 30, 2016 was $321 million and $322 million, respectively and as of March 31, 2016 was $10 million, respectively. The fair value is based on quoted prices.
Quoted debt securities carried at amortised cost:
Investment in quoted debt securities represents the investments made in debt securities issued by government and quasi government organisations. The fair value of quoted debt securities (including interest accrued) as on September 30, 2016 and March 31, 2016 was $278 million and $257 million, respectively. The fair value is based on the quoted prices and market observable inputs.
Quoted debt securities fair valued through other comprehensive income:
Represents investments in non-convertible debentures issued by government aided institutions. The fair value of non-convertible debentures (including interest accrued) as of September 30, 2016 is $23 million. The fair value is based on the quoted prices.
Impact on account of adoption of IFRS 9
Certain investments which were earlier carried at fair value through other comprehensive income under IAS 39, Financial Instruments: Recognition and measurement are now carried at amortised cost under IFRS 9, where the business model is to hold the asset, in order to collect contractual cash flows and the contractual terms of the financial asset give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal amount. The impact of such change in measurement did not have a material impact on the financial statements. Hence, the company has not restated the prior period figures and the cumulative impact has been recorded in other comprehensive income for the six months ended September 30, 2016.
Accordingly, for the six months ended September 30, 2016, the company has recorded, in its other comprehensive income, a reversal of unrealised gain, net of taxes, of $5 million (recorded on quoted debt securities as on April, 1, 2016), with a corresponding change in investment and deferred taxes.
Further, under IFRS 9, the impairment of financial assets is measured under the 'Expected Credit Loss' (ECL) model, which 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 change in the impairment model did not have a material impact on the financial statements.
Details showing the changes in the classification and the corresponding differences on transition, in carrying value as of April 1, 2016:
(Dollars in millions)
As per IAS 39 | As per IFRS 9 | |||
Instrument | Category | Carrying value | Category | Carrying value |
(i) Current | ||||
Liquid mutual funds | Available for sale financial assets (1) | 10 | Fair value through profit or loss | 10 |
Quoted debt securities: | Available for sale financial assets (1) | 1 | Amortized cost | 1 |
Total | 11 | 11 | ||
(ii) Non current | ||||
Quoted debt securities: | Available for sale financial assets (1) | 256 | Amortized cost | 241 |
Unquoted equity and preference securities | Available for sale financial assets (1) | 17 | Fair value through other comprehensive income | 17 |
Total | 273 | 258 | ||
Total investments | 284 | 269 | ||
(1) Fair value changes through other comprehensive income
Details showing the changes in the classification and the corresponding differences on transition, in carrying value as of April 1, 2015:
(Dollars in millions)
As per IAS 39 | As per IFRS 9 | |||
Instrument | Category | Carrying value | Category | Carrying value |
(i) Current | ||||
Liquid mutual funds | Available for sale financial assets (1) | 135 | Fair value through profit or loss | 135 |
Fixed maturity plan securities: | Available for sale financial assets (1) | 5 | Fair value through profit or loss | 5 |
Total | 140 | 140 | ||
(ii) Non current | ||||
Quoted debt securities: | Available for sale financial assets (1) | 215 | Amortized cost | 208 |
Unquoted equity and preference securities | Available for sale financial assets (1) | – | Fair value through other comprehensive income | – |
Total | 215 | 208 | ||
Total investments | 355 | 348 |
(1) Fair value changes through other comprehensive income
2.3 Financial instruments
Financial instruments by category
The carrying value and fair value of financial instruments by categories as of September 30, 2016 were as follows:
(Dollars in millions)
Amortised cost | Financial assets/ liabilities at fair value through profit or loss | Financial assets/liabilities at fair value through OCI | Total carrying value | Total fair value | |||
Designated upon initial recognition | Mandatory | Equity instruments designated upon initial recognition | Mandatory | ||||
Assets: | |||||||
Cash and cash equivalents (Refer to Note 2.1) | 4,763 | – | – | – | – | 4,763 | 4,763 |
Investments (Refer Note 2.2) | |||||||
Liquid mutual funds | – | – | 322 | – | – | 322 | 322 |
Quoted debt securities | 241 | – | – | – | 23 | 264 | 301(1) |
Unquoted equity and preference securities: | – | – | – | 26 | – | 26 | 26 |
Trade receivables | 1,737 | – | – | – | – | 1,737 | 1,737 |
Unbilled revenue | 584 | – | – | – | – | 584 | 584 |
Prepayments and other assets (Refer to Note 2.4) | 524 | – | – | – | – | 524 | 524 |
Derivative financial instruments | – | – | 13 | – | – | 13 | 13 |
Total | 7,849 | – | 335 | 26 | 23 | 8,233 | 8,270 |
Liabilities: | |||||||
Trade payables | 46 | – | – | – | – | 46 | 46 |
Derivative financial instruments | – | – | – | – | – | – | – |
Client deposits | 2 | – | – | – | – | 2 | 2 |
Other liabilities including contingent consideration (Refer note 2.5) | 740 | – | 13 | – | – | 753 | 753 |
Total | 788 | – | 13 | – | – | 801 | 801 |
The carrying value and fair value of financial instruments by categories as of March 31, 2016 were as follows:
(Dollars in millions)
Amortised cost | Financial assets/ liabilities at fair value through profit or loss | Financial assets/liabilities at fair value through OCI | Total carrying value | Total fair value | |||
Designated upon initial recognition | Mandatory | Equity instruments designated upon initial recognition | Mandatory | ||||
Assets: | |||||||
Cash and cash equivalents (Refer to Note 2.1) | 4,935 | – | – | – | – | 4,935 | 4,935 |
Investments (Refer Note 2.2) | |||||||
Liquid mutual funds | – | – | 10 | – | – | 10 | 10 |
Quoted debt securities | 257 | – | – | – | – | 257 | 257(1) |
Unquoted equity and preference securities: | – | – | – | 17 | – | 17 | 17 |
Trade receivables | 1,710 | – | – | – | – | 1,710 | 1,710 |
Unbilled revenue | 457 | – | – | – | – | 457 | 457 |
Prepayments and other assets (Refer to Note 2.4) | 393 | – | – | – | – | 393 | 393 |
Derivative financial instruments | – | – | 17 | – | – | 17 | 17 |
Total | 7,752 | – | 27 | 17 | – | 7,796 | 7,796 |
Liabilities: | |||||||
Trade payables | 58 | – | – | – | – | 58 | 58 |
Derivative financial instruments | – | – | 1 | – | – | 1 | 1 |
Client deposits | 4 | – | – | – | – | 4 | 4 |
Other liabilities including contingent consideration (Refer note 2.5) | 737 | – | 17 | – | – | 754 | 754 |
Total | 799 | – | 18 | – | – | 817 | 817 |
(1) On account of fair value changes including interest accrued
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).
Fair value hierarchy of assets and liabilities as of September 30, 2016:
(Dollars in millions)
As of September 30, 2016 | Fair value measurement at end of the reporting period / year using | |||
Level 1 | Level 2 | Level 3 | ||
Assets | ||||
Investments in liquid mutual fund units (Refer to Note 2.2) | 322 | 322 | – | – |
Investments in quoted debt securities (Refer to Note 2.2) | 301 | 66 | 235 | – |
Investments in equity and preference securities (Refer to Note 2.2) | 22 | – | – | 22 |
Others (Refer Note 2.2) | 4 | – | – | 4 |
Derivative financial instruments- gain on outstanding foreign exchange forward and option contracts | 13 | – | 13 | – |
Liabilities | ||||
Liability towards contingent consideration (Refer note 2.5)* | 13 | – | – | 13 |
During the six months ended September 30, 2016,
quoted debt securities of 17 million were transferred from Level 1 to Level 2 of fair value hierarchy, since these were valued
based on market observable inputs.
*Discounted $14 million at 13.4%.
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.
Fair value hierarchy of assets and liabilities as of March 31, 2016:
(Dollars in millions)
As of March 31, 2016 | Fair value measurement at end of the reporting period / year using | |||
Level 1 | Level 2 | Level 3 | ||
Assets | ||||
Investments in liquid mutual fund units (Refer to Note 2.2) | 10 | 10 | – | – |
Investments in quoted debt securities (Refer to Note 2.2) | 257 | 57 | 200 | – |
Investments in equity and preference securities (Refer to Note 2.2) | 14 | – | – | 14 |
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 2.5)* | 17 | – | – | 17 |
*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 movement in contingent consideration as of September 30, 2016 from March 31, 2016 is on account of settlement of contingent consideration of $6 million and change in discount rates and passage of time.
Income from financial assets or liabilities is as follows:
(Dollars in millions)
Three months ended September 30, | Six months ended September 30, | |||
2016 | 2015 | 2016 | 2015 | |
Interest income on investments carried at amortized cost | 96 | 99 | 193 | 207 |
Dividend income on investments carried at fair value through profit or loss | 1 | 3 | 4 | 7 |
97 | 102 | 197 | 214 |
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.
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 Indian rupee appreciates / depreciates against these currencies.
The following table analyses foreign currency risk from financial instruments as of September 30, 2016:
(Dollars in millions)
U.S. dollars | Euro | United Kingdom Pound Sterling | Australian dollars | Other currencies | Total | |
Cash and cash equivalents | 185 | 20 | 9 | 35 | 91 | 340 |
Trade receivables | 1,199 | 197 | 87 | 95 | 105 | 1,683 |
Unbilled revenue | 359 | 70 | 66 | 20 | 45 | 560 |
Other assets | 51 | 7 | 4 | 2 | 13 | 77 |
Trade payables | (15) | (3) | (3) | (3) | (18) | (42) |
Client deposits | (1) | – | – | – | (1) | (2) |
Accrued expenses | (126) | (30) | (23) | (6) | (31) | (216) |
Employee benefit obligation | (91) | (13) | (6) | (28) | (20) | (158) |
Other liabilities | (107) | (18) | (5) | (3) | (30) | (163) |
Net assets / (liabilities) | 1,454 | 230 | 129 | 112 | 154 | 2,079 |
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 |
For the three months ended September 30, 2016 and September 30, 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 0.51% and 0.51%, respectively.
For the six months ended September 30, 2016 and September 30, 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 0.50%, 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.
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. 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 | ||
September 30, 2016 | March 31, 2016 | |
Forward contracts | ||
In U.S. dollars | 551 | 510 |
In Euro | 99 | 100 |
In United Kingdom Pound Sterling | 55 | 65 |
In Australian dollars | 35 | 55 |
In Swiss Franc | 19 | 25 |
Options contracts | ||
In U.S. dollars | 150 | 125 |
In GBP | 25 | – |
In Euro | 25 | – |
The Group recognized a net gain on derivative financial instruments of $26 million for the three months ended September 30, 2016 and a net loss of $3 million for the three months ended September 30, 2015, which is included under other income.
The Group recognized a net gain on derivative financial instruments of $33 million for the six months ended September 30, 2016 and a net loss of $14 million for the six months ended September 30, 2015, 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 | ||
September 30, 2016 | March 31, 2016 | |
Not later than one month | 177 | 238 |
Later than one month and not later than three months | 479 | 516 |
Later than three months and not later than one year | 334 | 157 |
990 | 911 |
During the three months ended September 30, 2016, the group has designated certain foreign exchange forward contracts as cash flow hedges to mitigate the risk of foreign exchange exposure on highly probable forecast cash transactions. Accordingly, the fair value changes of less than $1 million was recorded in the other comprehensive income for the three months and six months ended September 30, 2016. The related hedge transactions for balance in cash flow hedging reserve are expected to occur and reclassified to the statement of comprehensive income within 3 months.
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 | ||||
September 30, 2016 | March 31, 2016 | |||
Derivative financial asset | Derivative financial liability | Derivative financial asset |
Derivative financial liability | |
Gross amount of recognized financial asset/liability | 13 | – | 18 | (2) |
Amount set off | – | – | (1) | 1 |
Net amount presented in balance sheet | 13 | – | 17 | (1) |
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 $1,737 million and $1,710 million as of September 30, 2016 and March 31, 2016, respectively and unbilled revenue amounting to $584 million and $457 million as of September 30, 2016 and March 31, 2016, 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 group uses a provision matrix to compute the expected credit loss allowance for trade receivables and unbilled revenues. The provision matrix takes into account available external and internal credit risk factors such as credit default swap quotes, credit ratings from international credit rating agencies and the Group's historical experience for customers.
The following table gives details in respect of percentage of revenues generated from top customer and top five customers:
(In %)
Three months ended September 30, | Six months ended September 30, | |||
2016 | 2015 | 2016 | 2015 | |
Revenue from top customer | 3.5 | 3.7 | 3.5 | 3.7 |
Revenue from top five customers | 13.1 | 14.0 | 13.4 | 14.0 |
Credit risk exposure
The allowance for lifetime expected credit loss on customer balances for the three months ended September 30, 2016 was $4 million. The allowance for lifetime expected credit loss on customer balances for the three months ended September 30, 2015 was $2 million. The allowance for lifetime expected credit loss on customer balances for the six months ended September 30, 2016 was $6 million. The allowance for lifetime expected credit loss on customer balances for the six months ended September 30, 2015 was $1 million.
(Dollars in millions)
Three months ended September 30, | Six months ended September 30, | Year ended March 31, | |||
2016 | 2015 | 2016 | 2015 | 2016 | |
Balance at the beginning | 45 | 58 | 44 | 59 | 59 |
Translation differences | – | (2) | (1) | (2) | (3) |
Impairment loss recognized/(reversed) (refer note 2.15) | 4 | 2 | 6 | 1 | (7) |
Write offs | – | – | – | – | (5) |
Balance at the end | 49 | 58 | 49 | 58 | 44 |
The Company’s credit period generally ranges from 30-60 days.
(Dollars in millions except as otherwise stated)
As of | ||
September 30, 2016 | March 31, 2016 | |
Trade receivables | 1,737 | 1,710 |
Unbilled revenues | 584 | 457 |
Days Sales Outstanding- DSO (days) | 64 | 66 |
Credit risk on cash and cash equivalents is limited as we generally invest in deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units, quoted bonds issued by government and quasi government organizations, non convertible debentures issued by government aided institutions and certificates of deposit which are funds deposited at a bank for a specified time period.
Liquidity risk
The Group's principal sources of liquidity are cash and cash equivalents and the cash flow that is generated from operations. The Group has no outstanding bank borrowings. The Group believes that the working capital is sufficient to meet its current requirements.
As of September 30, 2016, the Group had a working capital of $6,111 million including cash and cash equivalents of $4,763 million and current investments of $323 million. 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 investments of $11 million.
As of September 30, 2016 and March 31, 2016, the outstanding employee benefit obligations were $216 million and $202 million, respectively, which have been substantially funded. Accordingly, no liquidity risk is perceived.
The table below provides details regarding the contractual maturities of significant financial liabilities as of September 30, 2016:
(Dollars in millions)
Particulars | Less than 1 year | 1-2 years | 2-4 years | 4-7 years | Total |
Trade payables | 46 | – | – | – | 46 |
Client deposits | 2 | – | – | – | 2 |
Other liabilities (excluding liability towards contingent consideration - Refer Note 2.5) | 730 | 7 | 3 | – | 740 |
Liability towards contingent consideration on an undiscounted basis -Refer Note 2.5 | 7 | 7 | – | – | 14 |
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 2.5) | 732 | 4 | 1 | – | 737 |
Liability towards acquisitions on an undiscounted basis (Refer Note 2.5) | 13 | 7 | – | – | 20 |
2.4 Prepayments and other assets
Prepayments and other assets consist of the following:
(Dollars in millions)
As of | ||
September 30, 2016 | March 31, 2016 | |
Current | ||
Rental deposits | 3 | 2 |
Security deposits | 1 | 1 |
Loans to employees | 40 | 46 |
Prepaid expenses (1) | 38 | 30 |
Interest accrued and not due | 225 | 106 |
Withholding taxes and others(1) | 243 | 272 |
Advance payments to vendors for supply of goods (1) | 11 | 17 |
Deposit with corporations | 200 | 187 |
Deferred contract cost(1) | 10 | 7 |
Other assets | 6 | 4 |
777 | 672 | |
Non-current | ||
Loans to employees | 4 | 4 |
Security deposits | 12 | 12 |
Deposit with corporations | 8 | 9 |
Prepaid gratuity (1) | 1 | 1 |
Prepaid expenses (1) | 11 | 13 |
Deferred contract cost (1) | 47 | 50 |
Rental Deposits | 25 | 22 |
108 | 111 | |
885 | 783 | |
Financial assets in prepayments and other assets | 524 | 393 |
(1) Non financial assets
Withholding taxes and others primarily consist of input tax credits. Other assets primarily represent travel advances and other recoverable. Security deposits relate principally to leased telephone lines and electricity supplies. Deferred contract costs are upfront costs incurred for the contract and are amortised over the term of the contract.
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 Other liabilities
Other liabilities comprise the following:
(Dollars in millions)
As of | ||
September 30, 2016 | March 31, 2016 | |
Current | ||
Accrued compensation to employees | 307 | 342 |
Accrued expenses | 373 | 331 |
Withholding taxes and others (1) | 192 | 196 |
Retainage | 12 | 12 |
Liabilities of controlled trusts | 22 | 25 |
Liability towards contingent consideration (Refer note 2.9) | 7 | 12 |
Tax on dividend (1) | – | – |
Others | 16 | 22 |
929 | 940 | |
Non-Current | ||
Liability towards contingent consideration (Refer note 2.9) | 6 | 5 |
Accrued compensation to employees | 10 | 5 |
Deferred income - government grant on land use rights (1) | 7 | 7 |
23 | 17 | |
952 | 957 | |
Financial liabilities included in other liabilities | 753 | 754 |
Contingent consideration on undiscounted basis | 14 | 20 |
(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.
2.6 Provisions
Provisions comprise the following:
(Dollars in millions)
As of | ||
September 30, 2016 | March 31, 2016 | |
Provision for post sales client support and other provisions | 93 | 77 |
93 | 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)
Three months ended September 30, 2016 | Six months ended September 30, 2016 | |
Balance at the beginning | 79 | 77 |
Translation differences | – | – |
Provision recognized/(reversed) | 17 | 22 |
Provision utilized | (3) | (6) |
Balance at the end | 93 | 93 |
Provision for post sales client support and other provisions is included in cost of sales in the statement of comprehensive income.
As of September 30, 2016 and March 31, 2016,
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 (280 crore) and $42 million (
277 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.
2.7 Property, plant and equipment
Following are the changes in the carrying value of property, plant and equipment for the three months ended September 30, 2016:
(Dollars in millions)
Land | Buildings | Plant and machinery | Computer equipment | Furniture and fixtures | Vehicles | Total | |
Gross carrying value as of July 1, 2016 | 241 | 942 | 408 | 628 | 221 | 5 | 2,445 |
Additions | 2 | 10 | 19 | 41 | 13 | 1 | 86 |
Deletions | – | – | (2) | (3) | (1) | – | (6) |
Translation difference | 3 | 13 | 6 | 8 | 4 | (1) | 33 |
Gross carrying value as of September 30, 2016 | 246 | 965 | 431 | 674 | 237 | 5 | 2,558 |
Accumulated depreciation as of July 1, 2016 | (3) | (334) | (251) | (410) | (152) | (3) | (1,153) |
Depreciation | – | (9) | (15) | (27) | (7) | – | (58) |
Accumulated depreciation on deletions | – | – | 2 | 3 | 1 | – | 6 |
Translation difference | (1) | (5) | (3) | (5) | (3) | – | (17) |
Accumulated depreciation as of September 30, 2016 | (4) | (348) | (267) | (439) | (161) | (3) | (1,222) |
Capital work-in progress as of September 30, 2016 | 345 | ||||||
Carrying value as of September 30, 2016 | 242 | 617 | 164 | 235 | 76 | 2 | 1,681 |
Capital work-in progress as of July 1, 2016 | 332 | ||||||
Carrying value as of July 1, 2016 | 238 | 608 | 157 | 218 | 69 | 2 | 1,624 |
Following are the changes in the carrying value of property, plant and equipment for the three months ended September 30, 2015:
(Dollars in millions)
Land | Buildings | Plant and machinery | Computer equipment | Furniture and fixtures | Vehicles | Total | |
Gross carrying value as of July 1, 2015 | 248 | 936 | 345 | 573 | 193 | 5 | 2,300 |
Additions | 1 | 8 | 15 | 29 | 5 | – | 58 |
Deletions | – | – | (1) | (37) | – | – | (38) |
Translation difference | (7) | (27) | (10) | (16) | (6) | – | (66) |
Gross carrying value as of September 30, 2015 | 242 | 917 | 349 | 549 | 192 | 5 | 2,254 |
Accumulated depreciation as of July 1, 2015 | (3) | (320) | (214) | (377) | (136) | (3) | (1,053) |
Depreciation | – | (9) | (11) | (22) | (6) | – | (48) |
Accumulated depreciation on deletions | – | – | 1 | 15 | – | – | 16 |
Translation difference | 1 | 10 | 5 | 10 | 4 | – | 30 |
Accumulated depreciation as of September 30, 2015 | (2) | (319) | (219) | (374) | (138) | (3) | (1,055) |
Capital work-in progress as of September 30, 2015 | 278 | ||||||
Carrying value as of September 30, 2015 | 240 | 598 | 130 | 175 | 54 | 2 | 1,477 |
Capital work-in progress as of July 1, 2015 | 247 | ||||||
Carrying value as of July 1, 2015 | 245 | 616 | 131 | 196 | 57 | 2 | 1,494 |
Following are the changes in the carrying value of property, plant and equipment for the six months ended September 30, 2016:
(Dollars in millions)
Land | Buildings | Plant and machinery | Computer equipment | Furniture and fixtures | Vehicles | Total | |
Gross carrying value as of April 1, 2016 | 244 | 955 | 392 | 615 | 218 | 4 | 2,428 |
Additions | 3 | 15 | 43 | 68 | 21 | 1 | 151 |
Deletions | – | – | (2) | (5) | (1) | – | (8) |
Translation difference | (1) | (5) | (2) | (4) | (1) | – | (13) |
Gross carrying value as of September 30, 2016 | 246 | 965 | 431 | 674 | 237 | 5 | 2,558 |
Accumulated depreciation as of April 1, 2016 | (3) | (332) | (243) | (395) | (149) | (3) | (1,125) |
Depreciation | – | (17) | (28) | (51) | (14) | – | (110) |
Accumulated depreciation on deletions | – | – | 2 | 5 | 1 | – | 8 |
Translation difference | (1) | 1 | 2 | 2 | 1 | – | 5 |
Accumulated depreciation as of September 30, 2016 | (4) | (348) | (267) | (439) | (161) | (3) | (1,222) |
Capital work-in progress as of September 30, 2016 | 345 | ||||||
Carrying value as of September 30, 2016 | 242 | 617 | 164 | 235 | 76 | 2 | 1,681 |
Capital work-in progress as of April 1, 2016 | 286 | ||||||
Carrying value as of April 1, 2016 | 241 | 623 | 149 | 220 | 69 | 1 | 1,589 |
Following are the changes in the carrying value of property, plant and equipment for the six months ended September 30, 2015:
(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 |
Additions | 4 | 20 | 29 | 77 | 12 | – | 142 |
Deletions | – | – | (1) | (39) | – | – | (40) |
Translation difference | (12) | (43) | (16) | (24) | (9) | (1) | (105) |
Gross carrying value as of September 30, 2015 | 242 | 917 | 349 | 549 | 192 | 5 | 2,254 |
Accumulated depreciation as of April 1, 2015 | (3) | (317) | (207) | (365) | (132) | (3) | (1,027) |
Depreciation | – | (17) | (23) | (40) | (12) | – | (92) |
Accumulated depreciation on deletions | – | – | 1 | 16 | – | – | 17 |
Translation difference | 1 | 15 | 10 | 15 | 6 | – | 47 |
Accumulated depreciation as of September 30, 2015 | (2) | (319) | (219) | (374) | (138) | (3) | (1,055) |
Capital work-in progress as of September 30, 2015 | 278 | ||||||
Carrying value as of September 30, 2015 | 240 | 598 | 130 | 175 | 54 | 2 | 1,477 |
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, 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 |
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) |
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 31, 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 |
The depreciation expense is included in cost of sales in the statement of comprehensive income.
Carrying value of land includes $95 million and $95 million as of September 30, 2016 and March 31, 2016, respectively, towards amounts 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 $215 million and $224 million as of September 30, 2016 and March 31, 2016, respectively.
2.8 Goodwill
Following is a summary of changes in the carrying amount of goodwill:
(Dollars in millions)
As of | ||
September 30, 2016 | March 31, 2016 | |
Carrying value at the beginning | 568 | 495 |
Goodwill on Kallidus d.b.a Skava acquisition (Refer note 2.9) | – | 71 |
Goodwill on Noah acquisition (Refer note 2.9) | – | 5 |
Translation differences | (2) | (3) |
Carrying value at the end | 566 | 568 |
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 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. 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 %
As of March 31, 2016 | |
Long term growth rate | 8-10 |
Operating margins | 17-20 |
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.
2.9 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 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 |
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 three months and six months ended September 30, 2016, a post-acquisition employee remuneration expense of $4 million and $9 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 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 had undertaken an enterprise valuation by an independent valuer and accordingly the business was
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. During the six months ended September 30, 2016, EdgeVerve has repaid
270 crore (approximately $41 million)
by redeeming proportionate number of debentures.
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 |
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.
During the six months ended September 30, 2016 contingent consideration of $6 million was paid to the sellers of Kallidus on the achievement of certain financial targets. The balance contingent consideration as of September 30, 2016 and March 31, 2016 is $14 million and $20 million on an undiscounted basis.
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.
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 24,038,883 equity shares (this includes 11,223,576 equity shares which were held by the Trust towards the 2011 Plan as at March 31, 2016). 17,038,883 equity shares will be issued as RSUs at par value and 7,000,000 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.
On August 1, 2016, the company granted 1,783,615 RSUs (includes equity shares and equity shares represented by ADS) at par value, to employees upto mid management (excluding grants made to Dr. Vishal Sikka). Further, the company granted 73,020 Incentive Units (cash-settled) to eligible employees. These instruments will vest equally over a period of 4 years and are subject to continued service. As of September 30, 2016, 11,192,934 shares are held by the trust towards 2015 Plan. As of September 30, 2016, 72,795 Incentive Units were outstanding (net of forfeitures) and the carrying value of the cash liability is less than $1 million.
Pursuant to the approval from the shareholders through postal ballot on March 31, 2016, Dr. Vishal Sikka is eligible to receive under the 2015 Plan, an annual grant of RSU's of fair value $2,000,000 which vest over time, subject to continued service, and an annual grant of performance based equity and stock options of $5,000,000, subject to achievement of performance targets set by the Board or its committee, which vest over time. $2,000,000 of fair value in RSUs for financial year 2017 was granted on August 1, 2016 amounting to 120,700 RSUs in equity shares represented by ADS. The performance based RSU and Options pertaining to financial year 2017 has not yet been granted as of September 30, 2016. Though the performance based RSU and Options for fiscal 2017 and time based RSU’s for the remaining employment term have not been granted as of September 30, 2016, in accordance with IFRS 2 Share-based Payment, the company has recorded employee stock based compensation expense. The company has recorded employee stock based compensation expense of $1 million and $2 million during the three months and six months ended September 30, 2016 respectively, towards CEO compensation. The CEO employee stock compensation expense during each of the three months and six months ended September 30, 2015 was less than $1 million.
2011 RSU Plan (the 2011 Plan) now called 2015 Stock Incentive Compensation Plan ( the 2015 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 11,334,400 as on date of approval of plan adjusted for bonus shares and the plan was expected to continue in effect for a term of 10 years from the date of initial grant under the plan. Awards have been granted to the Dr. Vishal Sikka under the 2011 RSU plan as detailed below. Further the Company has earmarked 1,00,000 equity shares for welfare activities of the employees, approved by the shareholders vide postal ballot which ended on March 31, 2016. The equity shares as of March 31, 2016 held under this plan, i.e. 11,223,576 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 1,00,000 equity shares which have been earmarked for welfare activities of the employees) have been subsumed under the 2015 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 Officer and Managing Director. The Board in its meeting held on June 22, 2015, on recommendation of Nomination and Remuneration Committee, further granted 124,061 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.
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 2015 Plan (formerly 2011 RSU Plan) for equity-settled share based payment transactions during the three months and six months ended September 30, 2016 is set out below:
Particulars | Three months ended September 30, 2016 | Six months ended September 30, 2016 | ||
Shares arising out of options | Weighted average exercise price (![]() |
Shares arising out of options | Weighted average exercise price (![]() | |
2015 Plan (Formerly 2011 Plan): Indian equity shares (IES) | ||||
Outstanding at the beginning* | 209,099 | 5 | 221,505 | 5 |
Granted | 1,512,895 | 5 | 1,512,895 | 5 |
Forfeited and expired | 12,650 | 5 | 12,650 | 5 |
Exercised | 18,236 | 5 | 30,642 | 5 |
Outstanding at the end | 1,691,108 | 5 | 1,691,108 | 5 |
Exercisable at the end | – | – | – | – |
* adjusted for bonus issues (Refer note 2.17)
Particulars | Three months ended September 30, 2016 | Six months ended September 30, 2016 | ||
Shares arising out of options | Weighted average exercise price ($) | Shares arising out of options | Weighted average exercise price ($) | |
2015 Plan (Formerly 2011 Plan): American Depository Shares (ADS) | ||||
Outstanding at the beginning | – | – | – | – |
Granted | 391,420 | 0.07 | 391,420 | 0.07 |
Forfeited and expired | 10,120 | 0.07 | 10,120 | 0.07 |
Exercised | – | – | – | – |
Outstanding at the end | 381,300 | 0.07 | 381,300 | 0.07 |
Exercisable at the end | – | – | – | – |
The activity in the 2015 Plan (formerly 2011 RSU Plan) for equity-settled share based payment transactions during the three months and six months ended September 30, 2015 is set out below:
Particulars | Three months ended September 30, 2015 | Six months ended September 30, 2015 | ||
Shares arising out of options | Weighted average exercise
price (![]() |
Shares arising out of options | Weighted average exercise
price (![]() | |
2015 Plan (Formerly 2011 Plan): Indian equity shares (IES) | ||||
Outstanding at the beginning* | 232,329 | 5 | 108,268 | 5 |
Granted | – | – | 124,061 | 5 |
Forfeited and expired | – | – | – | – |
Exercised* | 9,116 | 5 | 9,116 | 5 |
Outstanding at the end | 223,213 | 5 | 223,213 | 5 |
Exercisable at the end | – | – | – | – |
* adjusted for bonus issues (Refer note 2.17)
During the three months and six months ended September 30, 2016, the weighted average share price of options exercised under the 2015 Plan on the date of exercise was $15/- and $16/- respectively.
During the three months and six months ended September 30, 2015, the weighted average share price of options exercised under the 2015 Plan on the date of exercise was $16/-
The weighted average remaining contractual life of RSUs outstanding as of September 30, 2016 and March 31, 2016 under the 2015 Plan was 2.27 years and 1.98 years, respectively.
The fair value of each equity settled RSU is estimated on the date of grant using the Black-Scholes-Merton model with the following assumptions:
Particulars | For options granted in | |||
Fiscal 2017- Equity Shares |
Fiscal 2017- ADS |
Fiscal 2016- Equity Shares |
Fiscal 2015- Equity Shares | |
Grant date | 1-Aug-16 | 1-Aug-16 | 22-Jun-15 | 21-Aug-14 |
Weighted average share price (![]() |
1,085 | 16.57 | 1,024 | 3,549 |
Exercise price (![]() |
5.00 | 0.07 | 5.00 | 5.00 |
Expected volatility (%) | 25-29 | 26-30 | 28-36 | 30-37 |
Expected life of the option (years) | 1 - 4 | 1 - 4 | 1 - 4 | 1 - 4 |
Expected dividends (%) | 2.37 | 2.29 | 2.43 | 1.84 |
Risk-free interest rate (%) | 6- 7 | 0.5 - 1 | 7- 8 | 8- 9 |
Weighted average fair value as on grant date (![]() |
1,019 | 15.59 | 948 | 3,355 |
* Data for Fiscal 2015 is not adjusted for bonus issues
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.
During the three months and six months ended September 30, 2016 and September 30, 2015, the company recorded an employee stock compensation expense of $3 million and less than $1 million and $4 million and less than $1 million, respectively in the statement of comprehensive income. The cash settled stock compensation expense during each of the three months and six months ended September 30, 2016 was less than $1 million.
2.11 Income taxes
Income tax expense in the consolidated statement of comprehensive income comprises:
(Dollars in millions)
Three months ended September 30, Six months ended September 30, | ||||
2016 | 2015 | 2016 | 2015 | |
Current taxes | ||||
Domestic taxes | 165 | 172 | 328 | 314 |
Foreign taxes | 54 | 48 | 110 | 84 |
219 | 220 | 438 | 398 | |
Deferred taxes | ||||
Domestic taxes | – | (1) | (5) | 6 |
Foreign taxes | (1) | (7) | (12) | (8) |
(1) | (8) | (17) | (2) | |
Income tax expense | 218 | 212 | 421 | 396 |
Income tax expense for the three months ended September 30, 2016 and September 30, 2015 includes reversal (net of provisions) of $2 million and $5 million, respectively, pertaining to earlier periods.
Income tax expense for the six months ended September 30, 2016 and September 30, 2015 includes reversal (net of provisions) of $1 million and $18 million, respectively, pertaining to earlier periods.
Entire deferred income tax for the three months and six months ended September 30, 2016 and September 30, 2015 relates to origination and reversal of temporary differences.
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)
Three months ended September 30, | Six months ended September 30, | |||
2016 | 2015 | 2016 | 2015 | |
Profit before income taxes | 757 | 731 | 1,471 | 1,391 |
Enacted tax rates in India | 34.61% | 34.61% | 34.61% | 34.61% |
Computed expected tax expense | 262 | 253 | 509 | 482 |
Tax effect due to non-taxable income for Indian tax purposes | (78) | (74) | (150) | (136) |
Overseas taxes | 34 | 28 | 62 | 51 |
Tax provision (reversals), overseas and domestic | (2) | (5) | (1) | (18) |
Effect of differential overseas tax rates | 2 | 2 | 2 | 1 |
Effect of exempt non operating income | (3) | (2) | (7) | (5) |
Effect of unrecognized deferred tax assets | 8 | – | 8 | 2 |
Effect of non-deductible expenses | (1) | 11 | 4 | 22 |
Additional deduction on research and development expense | (2) | (2) | (4) | (4) |
Others | (2) | 1 | (2) | 1 |
Income tax expense | 218 | 212 | 421 | 396 |
The applicable Indian statutory tax rate for fiscal 2017 and fiscal 2016 is 34.61%.
During the six months ended September 30, 2016 and September 30, 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) which is valid upto March 31, 2017. The weighted tax deduction is equal to 200% of such expenditure incurred.
The foreign 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 for export of software from the units registered under the Special Economic Zones Act, 2005 (SEZ). SEZ units which began the provision of 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 further five years. Up to 50% of such profits or gains is also available for a further five years subject to creation of a Special Economic Zone re-Investment Reserve out of the profit of the eligible SEZ units and utilization of such reserve by the Company for acquiring new plant and machinery for the purpose of its business as per the provisions of the Income Tax Act, 1961.
As of September 30, 2016, claims against the
group not acknowledged as debts from the Indian Income tax authorities net of amount paid to statutory authorities of $658 million
(4,383 crore) amounted to $1 million (
7 crore).
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).
Payment of $658 million (4,383 crore) includes
demands from the Indian Income tax authorities of $621 million (
4,135 crore), including interest of $184 million (
1,224 crore)
upon completion of their tax assessment for fiscal 2007, fiscal 2008, fiscal 2009, fiscal 2010 and fiscal 2011. These demands were
paid to statutory tax authorities. 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 Reconciliation of basic and diluted shares used in computing earnings per share
The following is a reconciliation of the equity shares used in the computation of basic and diluted earnings per equity share:
Three months ended September 30, | Six months ended September 30, | |||
2016 | 2015 | 2016 | 2015 | |
Basic earnings per equity share - weighted average number of equity shares outstanding(1)(2) | 2,285,641,710 | 2,285,614,029 | 2,285,632,081 | 2,285,612,157 |
Effect of dilutive common equivalent shares | 307,593 | 99,013 | 243,907 | 84,521 |
Diluted earnings per equity share - weighted average number of equity shares and common equivalent shares outstanding | 2,285,949,303 | 2,285,713,042 | 2,285,875,988 | 2,285,696,678 |
(1) excludes treasury shares
(2) adjusted for bonus issues (Refer note 2.17)
For the three months and six months ended September 30, 2016 and September 30, 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.
Transactions with key management personnel
The table below describes the compensation to key management personnel which comprise directors and executive officers:
(Dollars in millions)
Three months ended September 30, | Six months ended September 30, | |||
2016 | 2015 | 2016 | 2015 | |
Salaries and other employee benefits to whole-time directors and executive officers(1) | 2 | 1 | 5 | 5 |
Commission and other benefits to non-executive/ independent directors | 1 | – | 1 | – |
Total | 3 | 1 | 6 | 5 |
(1) | Includes employee stock compensation expense of $4 million and less than $1 million for the six months ended September 30, 2016 and September 30, 2015, respectively towards CEO compensation. Refer to note 2.10 |
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 group'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 Group 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 separately 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 Group 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 Group.
Assets and liabilities used in the Group'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
Three months ended September 30, 2016 and September 30, 2015
(Dollars in millions)
FS | MFG | ECS | RCL | HILIFE | Hi-Tech | All other segments | Total | |
Revenues | 700 | 277 | 578 | 423 | 312 | 200 | 97 | 2,587 |
649 | 275 | 510 | 395 | 311 | 191 | 61 | 2,392 | |
Identifiable operating expenses | 355 | 144 | 278 | 203 | 158 | 103 | 56 | 1,297 |
301 | 153 | 233 | 186 | 146 | 87 | 35 | 1,141 | |
Allocated expenses | 152 | 63 | 132 | 97 | 71 | 46 | 22 | 583 |
155 | 68 | 126 | 98 | 77 | 47 | 15 | 586 | |
Segment profit | 193 | 70 | 168 | 123 | 83 | 51 | 19 | 707 |
193 | 54 | 151 | 111 | 88 | 57 | 11 | 665 | |
Unallocable expenses | 63 | |||||||
55 | ||||||||
Operating profit | 644 | |||||||
610 | ||||||||
Other income, net | 114 | |||||||
121 | ||||||||
Share in associate's profit / (loss) | (1) | |||||||
– | ||||||||
Profit before Income taxes | 757 | |||||||
731 | ||||||||
Income tax expense | 218 | |||||||
212 | ||||||||
Net profit | 539 | |||||||
519 | ||||||||
Depreciation and amortisation | 63 | |||||||
55 | ||||||||
Non– cash expenses other than depreciation and amortisation | – | |||||||
– |
Six months ended September 30, 2016 and September 30, 2015
(Dollars in millions)
FS | MFG | ECS | RCL | HILIFE | Hi-Tech | All other segments | Total | |
Revenues | 1,378 | 552 | 1,132 | 850 | 611 | 397 | 168 | 5,088 |
1,259 | 527 | 1,008 | 763 | 605 | 373 | 112 | 4,647 | |
Identifiable operating expenses | 688 | 285 | 540 | 408 | 307 | 205 | 108 | 2,541 |
602 | 288 | 460 | 363 | 293 | 185 | 75 | 2,266 | |
Allocated expenses | 308 | 130 | 266 | 199 | 143 | 93 | 39 | 1,178 |
295 | 130 | 247 | 187 | 148 | 91 | 27 | 1,125 | |
Segment profit | 382 | 137 | 326 | 243 | 161 | 99 | 21 | 1,369 |
362 | 109 | 301 | 213 | 164 | 97 | 10 | 1,256 | |
Unallocable expenses | 123 | |||||||
105 | ||||||||
Operating profit | 1,246 | |||||||
1,151 | ||||||||
Other income, net | 226 | |||||||
240 | ||||||||
Share in associate's profit / (loss) | (1) | |||||||
– | ||||||||
Profit before Income taxes | 1,471 | |||||||
1,391 | ||||||||
Income tax expense | 421 | |||||||
396 | ||||||||
Net profit | 1,050 | |||||||
995 | ||||||||
Depreciation and amortisation | 123 | |||||||
104 | ||||||||
Non-cash expenses other than depreciation and amortisation | – | |||||||
1 |
2.14.2 Geographic Segments
Three months ended September 30, 2016 and September 30, 2015
(Dollars in millions)
North America | Europe | India | Rest of the World | Total | |
Revenues | 1,590 | 582 | 88 | 327 | 2,587 |
1,513 | 548 | 55 | 276 | 2,392 | |
Identifiable operating expenses | 814 | 292 | 37 | 154 | 1,297 |
735 | 267 | 13 | 126 | 1,141 | |
Allocated expenses | 362 | 132 | 19 | 70 | 583 |
374 | 135 | 12 | 65 | 586 | |
Segment profit | 414 | 158 | 32 | 103 | 707 |
404 | 146 | 30 | 85 | 665 | |
Unallocable expenses | 63 | ||||
55 | |||||
Operating profit | 644 | ||||
610 | |||||
Other income, net | 114 | ||||
121 | |||||
Share in associate's profit / (loss) | (1) | ||||
– | |||||
Profit before Income taxes | 757 | ||||
731 | |||||
Income Tax expense | 218 | ||||
212 | |||||
Net profit | 539 | ||||
519 | |||||
Depreciation and amortisation | 63 | ||||
55 | |||||
Non-cash expenses other than depreciation and amortisation | – | ||||
– |
Six months ended September 30, 2016 and September 30, 2015
(Dollars in millions)
North America | Europe | India | Rest of the World | Total | |
Revenues | 3,140 | 1,159 | 156 | 633 | 5,088 |
2,939 | 1,053 | 105 | 550 | 4,647 | |
Identifiable operating expenses | 1,609 | 568 | 74 | 290 | 2,541 |
1,457 | 519 | 51 | 239 | 2,266 | |
Allocated expenses | 735 | 271 | 33 | 139 | 1,178 |
719 | 257 | 22 | 127 | 1,125 | |
Segment profit | 796 | 320 | 49 | 204 | 1,369 |
763 | 277 | 32 | 184 | 1,256 | |
Unallocable expenses | 123 | ||||
105 | |||||
Operating profit | 1,246 | ||||
1,151 | |||||
Other income, net | 226 | ||||
240 | |||||
Share in associate's profit / (loss) | (1) | ||||
– | |||||
Profit before Income taxes | 1,471 | ||||
1,391 | |||||
Income Tax expense | 421 | ||||
396 | |||||
Net profit | 1,050 | ||||
995 | |||||
Depreciation and amortisation | 123 | ||||
104 | |||||
Non-cash expenses other than depreciation and amortisation | – | ||||
1 |
2.14.3 Significant clients
No client individually accounted for more than 10% of the revenues for the three months and six months ended September 30, 2016 and September 30, 2015.
2.15 Break-up of expenses
Cost of sales
(Dollars in millions)
Three months ended September 30, | Six months ended September 30, | |||
2016 | 2015 | 2016 | 2015 | |
Employee benefit costs | 1,280 | 1,155 | 2,515 | 2,277 |
Deferred purchase price pertaining to acquisition | – | 10 | – | 19 |
Depreciation and amortisation charges | 63 | 55 | 123 | 104 |
Travelling costs | 58 | 66 | 142 | 130 |
Cost of technical sub-contractors | 140 | 131 | 277 | 249 |
Cost of software packages for own use | 28 | 27 | 55 | 57 |
Third party items bought for service delivery to clients | 29 | 26 | 43 | 44 |
Operating lease payments | 12 | 9 | 23 | 18 |
Consultancy and professional charges | 1 | 1 | 2 | 2 |
Communication costs | 9 | 7 | 17 | 14 |
Repairs and maintenance | 13 | 5 | 24 | 14 |
Provision for post-sales client support | 4 | (5) | 8 | (7) |
Others | 1 | 1 | 2 | 1 |
Total | 1,638 | 1,488 | 3,231 | 2,922 |
Sales and marketing expenses
(Dollars in millions)
Three months ended September 30, | Six months ended September 30, | |||
2016 | 2015 | 2016 | 2015 | |
Employee benefit costs | 103 | 103 | 202 | 201 |
Travelling costs | 12 | 13 | 27 | 26 |
Branding and marketing | 12 | 9 | 30 | 21 |
Operating lease payments | 3 | 2 | 5 | 3 |
Consultancy and professional charges | 2 | 2 | 4 | 4 |
Communication costs | 1 | 1 | 1 | 1 |
Others | 1 | (1) | 2 | 2 |
Total | 134 | 129 | 271 | 258 |
Administrative expenses
(Dollars in millions)
Three months ended September 30, | Six months ended September 30, | |||
2016 | 2015 | 2016 | 2015 | |
Employee benefit costs | 59 | 53 | 109 | 97 |
Consultancy and professional charges | 23 | 25 | 48 | 48 |
Repairs and maintenance | 33 | 31 | 70 | 59 |
Power and fuel | 9 | 9 | 18 | 17 |
Communication costs | 10 | 10 | 20 | 19 |
Travelling costs | 8 | 9 | 18 | 21 |
Rates and taxes | 6 | 5 | 12 | 10 |
Operating lease payments | 4 | 3 | 7 | 5 |
Insurance charges | 2 | 2 | 4 | 4 |
Impairment loss recognised/(reversed) on financial assets | 4 | 2 | 7 | 1 |
Commission to non-whole time directors | 1 | – | 1 | 1 |
Contributions towards Corporate Social Responsibility | 8 | 9 | 15 | 16 |
Others | 4 | 7 | 11 | 18 |
Total | 171 | 165 | 340 | 316 |
2.16 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 amount of per share dividend recognized
as distributions to equity shareholders for the six months ended September 30, 2016 and September 30, 2015 was 14.25/- per equity
share ($0.22 per equity share) and
29.50/- per equity share ($0.47 per equity share) (not adjusted for June 17, 2015 bonus issue).
The Board of Directors, in their meeting on
October 14, 2016, declared an interim dividend of approximately $0.17 per equity share (11/- per equity share), which would result
in a net cash outflow of approximately $455 million, (excluding dividend paid on treasury shares) inclusive of 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. 11,292,934 and 11,323,576 shares were held by controlled trust, as of September
30, 2016 and March 31, 2016, 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.
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 October 14, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer |
A. G. S. Manikantha Company Secretary |
Exhibit 99.9
IFRS INR Earning Release
Infosys Limited and subsidiaries
(In crore except equity share data)
Condensed Consolidated Balance Sheets as of | Note | September 30, 2016 | March 31, 2016 |
ASSETS | |||
Current assets | |||
Cash and cash equivalents | 2.1 | 31,732 | 32,697 |
Current investments | 2.2 | 2,154 | 75 |
Trade receivables | 11,571 | 11,330 | |
Unbilled revenue | 3,892 | 3,029 | |
Prepayments and other current assets | 2.4 | 5,171 | 4,448 |
Derivative financial instruments | 2.3 | 89 | 116 |
Total current assets | 54,609 | 51,695 | |
Non-current assets | |||
Property, plant and equipment | 2.7 | 11,197 | 10,530 |
Goodwill | 2.8 | 3,771 | 3,764 |
Intangible assets | 904 | 985 | |
Investment in associate | 99 | 103 | |
Non-current investments | 2.2 | 1,931 | 1,811 |
Deferred income tax assets | 628 | 536 | |
Income tax assets | 5,248 | 5,230 | |
Other non-current assets | 2.4 | 719 | 735 |
Total non-current assets | 24,497 | 23,694 | |
Total assets | 79,106 | 75,389 | |
LIABILITIES AND EQUITY | |||
Current liabilities | |||
Trade payables | 307 | 386 | |
Derivative financial instruments | 2.3 | 2 | 5 |
Current income tax liabilities | 3,851 | 3,410 | |
Client deposits | 11 | 28 | |
Unearned revenue | 1,478 | 1,332 | |
Employee benefit obligations | 1,440 | 1,341 | |
Provisions | 2.6 | 621 | 512 |
Other current liabilities | 2.5 | 6,185 | 6,225 |
Total current liabilities | 13,895 | 13,239 | |
Non-current liabilities | |||
Deferred income tax liabilities | 235 | 256 | |
Other non-current liabilities | 2.5 | 151 | 115 |
Total liabilities | 14,281 | 13,610 | |
Equity | |||
Share capital- ![]() |
1,144 | 1,144 | |
Share premium | 2,272 | 2,241 | |
Retained earnings | 60,773 | 57,655 | |
Cash flow hedge reserve | 2 | – | |
Other reserves | – | – | |
Other components of equity | 634 | 739 | |
Total equity attributable to equity holders of the Company | 64,825 | 61,779 | |
Non-controlling interests | – | – | |
Total equity | 64,825 | 61,779 | |
Total liabilities and equity | 79,106 | 75,389 |
The accompanying notes form an integral part of the condensed 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 |
U. B. Pravin Rao Chief Operating Officer and |
Bangalore October 14, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer |
A.G.S Manikantha Company Secretary |
Infosys Limited and subsidiaries
(In crore except equity
share and per equity share data)
Condensed Consolidated Statements of Comprehensive Income | Note | Three months ended September 30, | Six months ended September 30, | ||
2016 | 2015 | 2016 | 2015 | ||
Revenues | 17,310 | 15,635 | 34,091 | 29,989 | |
Cost of sales | 2.15 | 10,962 | 9,724 | 21,643 | 18,847 |
Gross profit | 6,348 | 5,911 | 12,448 | 11,142 | |
Operating expenses: | |||||
Selling and marketing expenses | 2.15 | 897 | 843 | 1,817 | 1,663 |
Administrative expenses | 2.15 | 1,142 | 1,075 | 2,276 | 2,038 |
Total operating expenses | 2,039 | 1,918 | 4,093 | 3,701 | |
Operating profit | 4,309 | 3,993 | 8,355 | 7,441 | |
Other income, net | 760 | 793 | 1,513 | 1,551 | |
Share in associate's profit / (loss) | (3) | (1) | (5) | (1) | |
Profit before income taxes | 5,066 | 4,785 | 9,863 | 8,991 | |
Income tax expense | 2.11 | 1,460 | 1,387 | 2,822 | 2,562 |
Net profit | 3,606 | 3,398 | 7,041 | 6,429 | |
Other comprehensive income | |||||
Items that will not be reclassified subsequently to profit or loss | |||||
Remeasurement of the net defined benefit liability/asset | (40) | (7) | (57) | (14) | |
Cumulative impact on reversal of unrealised gain on quoted debt securities on adoption of IFRS 9 | 2.2 | – | – | (35) | – |
Equity instruments through other comprehensive income | – | – | – | ||
(40) | (7) | (92) | (14) | ||
Items that will be reclassified subsequently to profit or loss | |||||
Fair value changes on cash flow hedges | 2.3 | 2 | – | 2 | – |
Exchange differences on translation of foreign operations | (51) | 62 | (13) | 206 | |
Fair value changes on investments | 2.2 | – | 30 | – | 18 |
(49) | 92 | (11) | 224 | ||
Total other comprehensive income, net of tax | (89) | 85 | (103) | 210 | |
Total comprehensive income | 3,517 | 3,483 | 6,938 | 6,639 | |
Profit attributable to: | |||||
Owners of the company | 3,606 | 3,398 | 7,041 | 6,429 | |
Non-controlling interests | – | – | – | – | |
3,606 | 3,398 | 7,041 | 6,429 | ||
Total comprehensive income attributable to: | |||||
Owners of the company | 3,517 | 3,483 | 6,938 | 6,639 | |
Non-controlling interests | – | – | – | – | |
3,517 | 3,483 | 6,938 | 6,639 | ||
Earnings per equity share | |||||
Basic (![]() |
15.77 | 14.87 | 30.81 | 28.13 | |
Diluted (![]() |
15.77 | 14.87 | 30.80 | 28.13 | |
Weighted average equity shares used in computing earnings per equity share | 2.12 | ||||
Basic | 228,56,41,710 | 228,56,14,029 | 228,56,32,081 | 228,56,12,157 | |
Diluted | 228,59,49,303 | 228,57,13,042 | 228,58,75,988 | 228,56,96,678 |
The accompanying notes form an integral part of the condensed 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 |
U. B. Pravin Rao Chief Operating Officer and |
Bangalore October 14, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer |
A.G.S Manikantha Company Secretary |
Infosys Limited and subsidiaries
Condensed Consolidated Statements of Changes in Equity
(In crore except equity share data)
Shares(2) | Share capital | Share premium | Retained earnings | Other reserves(3) | Other components of equity | Cash flow hedge reserve | Total equity attributable to equity holders of the Company | |
Balance as of April 1, 2015
|
114,28,05,132 | 572 | 2,806 | 50,978 | – | 407 | – | 54,763 |
Changes in equity for the six months ended September 30, 2015 | ||||||||
Increase in share capital on account of bonus issue (1) (refer to note 2.17) | 114,28,05,132 | 572 | – | – | – | – | – | 572 |
Amounts utilized for bonus issue (refer note 2.17)(1) | – | – | (572) | – | – | – | – | (572) |
Shares issued on exercise of employee stock options (Refer note 2.10) | 9,116 | – | – | – | – | – | – | – |
Transferred to other reserves | – | – | – | (265) | 265 | – | – | – |
Transferred from other reserves on utilisation | – | – | – | 265 | (265) | – | – | – |
Fair value changes on investments (Refer note 2.2) | – | – | – | – | – | 18 | – | 18 |
Employee stock compensation expense (refer to note 2.10) | – | – | 4 | – | – | – | – | 4 |
Remeasurement of the net defined benefit liability/asset, net of tax effect | – | – | – | – | – | (14) | – | (14) |
Dividends (including corporate dividend tax) | – | – | – | (4,061) | – | – | – | (4,061) |
Net profit | – | – | – | 6,429 | – | – | – | 6,429 |
Exchange differences on translation of foreign operations | – | – | – | – | – | 206 | – | 206 |
Balance as of September 30, 2015 | 228,56,19,380 | 1,144 | 2,238 | 53,346 | – | 617 | – | 57,345 |
Balance as of April 1, 2016
|
228,56,21,088 | 1,144 | 2,241 | 57,655 | – | 739 | – | 61,779 |
Changes in equity for the six months ended September 30, 2016 | ||||||||
Cumulative impact on reversal of unrealised gain on quoted debt securities on adoption of IFRS 9 (Refer note 2.2) | – | – | – | – | – | (35) | – | (35) |
Shares issued on exercise of employee stock options (Refer note 2.10) | 30,642 | – | – | – | – | – | – | – |
Income tax benefit arising on exercise of stock options | – | – | 1 | – | – | – | – | 1 |
Employee stock compensation expense (refer to note 2.10) | 30 | – | – | – | – | 30 | ||
Transferred to other reserves | – | – | – | (551) | 551 | – | – | – |
Transferred from other reserves on utilisation | – | – | – | 551 | (551) | – | – | – |
Fair value changes on cash flow hedge (Refer note 2.3) | – | – | – | – | – | – | 2 | 2 |
Remeasurement of the net defined benefit liability/asset, net of tax effect | – | – | – | – | – | (57) | – | (57) |
Dividends | – | – | – | (3,923) | – | – | – | (3,923) |
Net profit | – | – | – | 7,041 | – | – | – | 7,041 |
Exchange differences on translation of foreign operations | – | – | – | – | – | (13) | – | (13) |
Balance as of September 30, 2016
|
2,285,651,730 | 1,144 | 2,272 | 60,773 | – | 634 | 2 | 64,825 |
The accompanying notes form an integral part of the condensed consolidated interim financial statements.
(1) | net of treasury shares |
(2) | excludes treasury shares of 1,12,92,934 as of September 30, 2016, 1,13,23,576 as of April 1, 2016, 1,13,25,284 as of September 30, 2015 and 56,67,200 as of April 1, 2015, 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. |
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 |
U. B. Pravin Rao Chief Operating Officer and |
Bangalore October 14, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer |
A.G.S Manikantha Company Secretary |
Infosys Limited and subsidiaries
(In crore)
Condensed Consolidated Statements of Cash Flows | Note | Six months ended September 30, | |
2016 | 2015 | ||
Operating activities: | |||
Net Profit | 7,041 | 6,429 | |
Adjustments to reconcile net profit to net cash provided by operating activities: | |||
Depreciation and amortization | 2.15 | 824 | 671 |
Income tax expense | 2.11 | 2,822 | 2,562 |
Income on investments | (90) | (96) | |
Effect of exchange rate changes on assets and liabilities | 27 | 50 | |
Deferred purchase price | – | 124 | |
Impairment loss on financial assets | 40 | 7 | |
Other adjustments | 205 | 79 | |
Changes in working capital | |||
Trade receivables and unbilled revenue | (1,145) | (1,231) | |
Prepayments and other assets | (633) | (1,693) | |
Trade payables | (78) | (33) | |
Client deposits | (17) | (5) | |
Unearned revenue | 146 | 55 | |
Other liabilities and provisions | 94 | 1,275 | |
Cash generated from operations | 9,236 | 8,194 | |
Income taxes paid | (2,499) | (2,862) | |
Net cash provided by operating activities | 6,737 | 5,332 | |
Investing activities: | |||
Expenditure on property, plant and equipment net of sale proceeds, including changes in retention money and capital creditors | (1,469) | (1,268) | |
Loans to employees | 38 | (6) | |
Deposits placed with corporation | (85) | (24) | |
Income on investments | 79 | 86 | |
Payment for acquisition of business, net of cash acquired | 2.9 | – | (549) |
Payment of contingent consideration pertaining to acquisition of business | 2.9 | (36) | – |
Investment in preference securities | (54) | (22) | |
Investment in others | (8) | (15) | |
Investment in quoted debt securities | (159) | (201) | |
Redemption of quoted debt securities | 4 | – | |
Investment in liquid mutual fund units | (20,217) | (13,664) | |
Redemption of liquid mutual fund units | 18,159 | 13,932 | |
Redemption of fixed maturity plan securities | – | 33 | |
Net cash used in investing activities | (3,748) | (1,698) | |
Financing activities: | |||
Payment of dividends (includes corporate dividend tax) | (3,910) | (4,061) | |
Net cash used in financing activities | (3,910) | (4,061) | |
Effect of exchange rate changes on cash and cash equivalents | (44) | 6 | |
Net decrease in cash and cash equivalents | (921) | (427) | |
Cash and cash equivalents at the beginning | 2.1 | 32,697 | 30,367 |
Cash and cash equivalents at the end | 2.1 | 31,732 | 29,946 |
Supplementary information: | |||
Restricted cash balance | 2.1 | 522 | 382 |
The accompanying notes form an integral part of the condensed 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 |
U. B. Pravin Rao Chief Operating Officer and |
Bangalore October 14, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer |
A.G.S Manikantha Company Secretary |
Notes to the Condensed Consolidated Interim Financial Statements
1. Company Overview and Significant Accounting Policies
1.1 Company overview
Infosys is a leading provider 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 condensed consolidated interim financial statements are authorized for issue by the company's Board of Directors on October 14, 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 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 consolidated financial statements for the year ended March 31, 2016. Accounting policies have been applied consistently to all periods presented in these condensed consolidated interim financial statements.
As the quarter and year-to-date 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-to-date 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. 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 interim 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 2.11.
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 2.7)
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 Financial instruments
Effective April 1, 2016, the group has elected to early adopt IFRS 9 - Financial Instruments considering April 1, 2015 as the date of initial application of the standard even though the stipulated effective date for adoption is April 1, 2018. As per IFRS 9, the group has classified its financial assets into the following categories based on the business model for managing those assets and the contractual cash flow characteristics:- Financial assets carried at amortised cost- Financial assets fair valued through other comprehensive income- Financial assets fair valued through profit and lossThe adoption of IFRS 9 did not have any other material impact on the consolidated financial statements, hence prior period figures have not been restated. The impact on account of adoption of IFRS 9 is given in Note 2.2.
1.9.1 Initial recognition
The group recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of the instrument. All financial assets and liabilities are recognized at fair value on initial recognition, except for trade receivables which are initially measured at transaction price. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities, that are not at fair value through profit or loss, are added to the fair value on initial recognition. Regular way purchase and sale of financial assets are accounted for at trade date.
1.9.2 Subsequent measurement
a. | Non-derivative financial instruments |
(i) | Financial assets carried at amortised cost |
A financial asset is subsequently measured at amortised cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
(ii) Financial assets at fair value through other comprehensive income
A financial asset is subsequently measured at fair value through other comprehensive income if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Further, in cases where the Group has made an irrevocable election based on its business model, for its investments which are classified as equity instruments, the subsequent changes in fair value are recognized in other comprehensive income.
(ii) | Financial assets at fair value through profit or loss |
A financial asset which is not classified in any of the above categories are subsequently fair valued through profit or loss.
(iii) | Financial liabilities |
Financial liabilities are subsequently carried at amortized cost using the effective interest method, except for contingent consideration recognized in a business combination which is subsequently measured at fair value through profit and loss. 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.
(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 IFRS 9, Financial Instruments. Any derivative that is either not designated a hedge, or is so designated but is ineffective as per IFRS 9, 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
(i) 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.
(ii) 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.
1.9.3 Derecognition of financial instruments
The group derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset and the transfer qualifies for derecognition under IFRS 9. A financial liability (or a part of a financial liability) is derecognized from the group's balance sheet when the obligation specified in the contract is discharged or cancelled or expires.
1.10 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.
1.11 Impairment
a. Financial assets
The group recognizes loss allowances using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. Loss allowance for trade receivables with no significant financing component is measured at an amount equal to lifetime ECL. For all other financial assets, expected credit losses are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized is recognized as an impairment gain or loss in profit or loss.
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. An impairment loss is reversed in net profit in the statement of comprehensive income if there has been a change in the estimates used to determine the recoverable amount. The carrying amount of the 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.
1.12 Employee benefits
1.12.1 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.
1.12.2 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.
1.12.3 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.
1.12.4 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.
1.13 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.
1.14 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.
1.15 Recent accounting pronouncements
1.15.1 Standards issued but not yet effective
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, 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 condensed consolidated interim financial statements
2.1 Cash and cash equivalents
Cash and cash equivalents consist of the following:
(In crore)
As of | ||
September 30, 2016 | March 31, 2016 | |
Cash and bank deposits | 26,261 | 27,420 |
Deposits with financial institution | 5,471 | 5,277 |
31,732 | 32,697 |
Cash and cash equivalents as of September 30,
2016 and March 31, 2016 include restricted cash and bank balances of 522 crore and
492 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 | ||
September 30, 2016 | March 31, 2016 | |
Current Accounts | ||
ANZ Bank, Taiwan | 18 | 13 |
Axis Bank, India | 1 | 1 |
Axis Bank - Unpaid dividend account | 2 | 2 |
Banamex Bank, Mexico | – | 5 |
Banamex Bank, Mexico (U.S. Dollar account) | 3 | 3 |
Bank of America, Mexico | 23 | 21 |
Bank of America, USA | 857 | 681 |
Bank Zachodni WBK S.A, Poland | 10 | 3 |
Bank of Tokyo-Mitsubishi UFJ, Ltd., Japan | 1 | 1 |
Barclays Bank, UK | 12 | 19 |
Bank Leumi, Israel (US Dollar account) | 10 | 17 |
Bank Leumi, Israel | 8 | 10 |
BNP Paribas Bank, Norway | 2 | – |
China Merchants Bank, China | 9 | 8 |
Citibank N.A, China | 63 | 65 |
Citibank N.A., China (U.S. Dollar account) | 47 | 72 |
Citibank N.A., Costa Rica | 4 | 2 |
Citibank N.A., Australia | 126 | 72 |
Citibank N.A., Brazil | 24 | 5 |
Citibank N.A., Dubai | 1 | 1 |
Citibank N.A., India | 1 | 1 |
Citibank N.A., Japan | 18 | 15 |
Citibank N.A., New Zealand | 9 | 6 |
Citibank N.A., Portugal | 1 | 2 |
Citibank N.A., Singapore | – | 3 |
Citibank N.A., South Africa | 6 | 5 |
CitiBank N.A., South Africa (Euro account) | 1 | 1 |
Citibank N.A., Philippines, (U.S. Dollar account) | 1 | 1 |
CitiBank N.A., USA | 109 | 60 |
CitiBank N.A., EEFC (U.S. Dollar account) | 1 | – |
Commerzbank, Germany | 10 | 19 |
Crédit Industriel et Commercial Bank, France | – | 4 |
Deutsche Bank, India | 9 | 8 |
Deutsche Bank, Philippines | 10 | 13 |
Deutsche Bank, Philippines (U.S. Dollar account) | 3 | 1 |
Deutsche Bank, Poland | 12 | 5 |
Deutsche Bank, Poland (Euro account) | 4 | – |
Deutsche Bank, EEFC (Australian Dollar account) | 51 | 2 |
Deutsche Bank, EEFC (Euro account) | 28 | 32 |
Deutsche Bank, EEFC (Swiss Franc account) | 1 | 5 |
Deutsche Bank, EEFC (U.S. Dollar account) | 43 | 96 |
Deutsche Bank, EEFC (United Kingdom Pound Sterling account) | 7 | 9 |
Deutsche Bank, Belgium | 51 | 59 |
Deutsche Bank, Malaysia | – | 9 |
Deutsche Bank, Czech Republic | 22 | 14 |
Deutsche Bank, Czech Republic (Euro account) | – | 1 |
Deutsche Bank, Czech Republic (U.S. Dollar account) | 27 | 28 |
Deutsche Bank, France | 16 | 10 |
Deutsche Bank, Germany | 19 | 17 |
Deutsche Bank, Netherlands | 8 | 6 |
Deutsche Bank, Russia | 2 | 2 |
Deutsche Bank, Russia (U.S. Dollar account) | 4 | 1 |
Deutsche Bank, Singapore | 1 | 4 |
Deutsche Bank, Spain | – | 1 |
Deutsche Bank, Switzerland | 6 | 1 |
Deutsche Bank, United Kingdom | 37 | 170 |
Deutsche Bank, USA | 6 | – |
HDFC Bank - Unpaid dividend account | 3 | 1 |
HSBC Bank, Brazil | 3 | 5 |
HSBC Bank, Hong Kong | 5 | 1 |
ICICI Bank, India | 46 | 72 |
ICICI Bank, EEFC (Euro account) | 4 | – |
ICICI Bank, EEFC (U.S. Dollar account) | 15 | 10 |
ICICI Bank, EEFC (United Kingdom Pound Sterling account) | 2 | – |
ICICI Bank - Unpaid dividend account | 13 | 2 |
ING Bank, Belgium | 3 | 3 |
Nordbanken, Sweden | 20 | 15 |
Punjab National Bank, India | 3 | 4 |
Raiffeisen Bank, Czech Republic | 4 | 5 |
Raiffeisen Bank, Romania | 3 | 4 |
Royal Bank of Canada, Canada | 38 | 78 |
Santander Bank, Argentina | 6 | – |
State Bank of India, India | 7 | 8 |
Silicon Valley Bank, USA | 4 | 5 |
Silicon Valley Bank, (Euro account) | 33 | 65 |
Silicon Valley Bank, (United Kingdom Pound Sterling account) | 9 | 19 |
Union Bank of Switzerland AG | 5 | 15 |
Union Bank of Switzerland AG, (Euro account) | – | 12 |
Union Bank of Switzerland AG, (Australian Dollar account) | – | 2 |
Union Bank of Switzerland AG, (U.S. Dollar account) | 9 | 28 |
Union Bank of Switzerland AG, (United Kingdom Pound Sterling account) | – | 4 |
Wells Fargo Bank N.A., USA | 28 | 23 |
Westpac, Australia | 1 | 6 |
2,009 | 1,999 | |
Deposit Accounts | ||
Andhra Bank | 868 | 948 |
Axis Bank | 1,830 | 1,340 |
Bank BGZ BNP Paribas S.A | 193 | – |
Bank of India | – | 77 |
Canara Bank | 2,274 | 2,247 |
Central Bank of India | 1,518 | 1,538 |
Citibank | 93 | 128 |
Corporation Bank | 1,285 | 1,285 |
Deutsche Bank, Poland | 54 | 237 |
HDFC Bank | 1,985 | 2,650 |
ICICI Bank | 3,758 | 4,199 |
IDBI Bank | 1,900 | 1,900 |
Indian Overseas Bank | 1,250 | 1,250 |
Indusind Bank | 250 | 250 |
Jammu & Kashmir Bank | 25 | 25 |
Kotak Mahindra Bank Limited | 420 | 537 |
National Australia Bank Limited | – | 1 |
Oriental Bank of Commerce | 1,967 | 1,967 |
Punjab National Bank | – | 18 |
South Indian Bank | 100 | 23 |
State Bank of India | 2,350 | 2,367 |
Syndicate Bank | 949 | 1,266 |
Union Bank of India | 72 | 140 |
Vijaya Bank | 304 | 304 |
Yes Bank | 807 | 724 |
24,252 | 25,421 | |
Deposits with financial institution | ||
HDFC Limited | 5,446 | 5,277 |
Bajaj Finance Limited | 25 | – |
5,471 | 5,277 | |
Total | 31,732 | 32,697 |
2.2 Investments
The carrying value of the investments are as follows:
(In crore)
As of | ||
September 30, 2016 | March 31, 2016 | |
(i) Current | ||
Amortised Cost | ||
Quoted debt securities: | ||
Cost | 7 | 7 |
Fair Value through profit and loss | ||
Liquid mutual funds | ||
Fair Value | 2,147 | 68 |
2,154 | 75 | |
Non-current | ||
Amortised Cost | ||
Quoted debt securities: | ||
Cost | 1,599 | 1,696 |
Fair Value through Other comprehensive income | ||
Quoted debt securities: | 155 | – |
Fair value | ||
Fair Value through Other comprehensive income | ||
Unquoted equity and preference securities: | ||
Fair value | 147 | 93 |
Others: | ||
Fair value | 30 | 22 |
1,931 | 1,811 | |
Total investments | 4,085 | 1,886 |
Investments carried at amortised cost | 1,606 | 1,703 |
Investments carried at fair value through other comprehensive income | 332 | 115 |
Investments carried at fair value through profit and loss | 2,147 | 68 |
Liquid mutual funds
The cost and fair value of liquid mutual funds
as of September 30, 2016 was 2,142 crore and
2,147 crore, respectively. The cost and fair value of liquid mutual funds as of
March 31, 2016 was
68 crore. The fair value is based on quoted price.
Quoted debt securities carried at amortized cost:
Investment in quoted debt securities represents
the investments made in debt securities issued by government and quasi government organisations. The fair value of quoted debt
securities (including interest accrued) as of September 30, 2016 and March 31, 2016 is 1,848 crore and
1,703 crore, respectively.
The fair value is based on quoted prices and market observable inputs.
Quoted debt securities fair valued through other comprehensive income:
Represents investment in non-convertible debentures
issued by government aided institutions. The cost and fair value of non-convertible debentures (including interest accrued) as
of September 30, 2016 is 155 crore. The fair value is based on quoted prices.
Impact on account of adoption of IFRS 9
Certain investments which were earlier carried at fair value through other comprehensive income under IAS 39, Financial Instruments: Recognition and measurement are now carried at amortised cost under IFRS 9, where the business model is to hold the asset, in order to collect contractual cash flows and the contractual terms of the financial asset give rise, on specified dates, to cash flows that are solely payments of principal and interest on the principal amount. The impact of such change in measurement did not have a material impact on the financial statements. Hence, the company has not restated the prior period figures and the cumulative impact has been recorded in other comprehensive income for the six months ended September 30, 2016.
Accordingly, for the six months ended September 30, 2016, the company has recorded,
in its other comprehensive income, a reversal of unrealised gain, net of taxes, of 35 crore (recorded on quoted debt securities
as on April, 1, 2016), with a corresponding change in investment and deferred taxes.
Further, under IFRS 9, the impairment of financial assets is measured under the 'Expected Credit Loss' (ECL) model, which 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 change in the impairment model did not have a material impact on the financial statements.
Details showing the changes in the classification and the corresponding differences in carrying amounts as of the transition date April 1, 2016
(In crore)
As per IAS 39 | As per IFRS 9 | |||
Instrument | Category | Carrying value | Category | Carrying value |
(i) Current | ||||
Liquid mutual funds | Available for sale financial assets (1) | 68 | Fair value through profit or loss | 68 |
Quoted debt securities: | Available for sale financial assets (1) | 7 | Amortized cost | 7 |
Total | 75 | 75 | ||
(ii) Non current | ||||
Quoted debt securities: | Available for sale financial assets (1) | 1,696 | Amortized cost | 1,599 |
Unquoted equity and preference securities | Available for sale financial assets (1) | 115 | Fair value through other comprehensive income | 115 |
Total | 1,811 | 1,714 | ||
Total investments | 1,886 | 1,789 |
(1) Fair value changes through other comprehensive income
Details showing the changes in the classification and the corresponding differences in carrying amounts as of the transition date April 1, 2015
(In crore)
As per IAS 39 | As per IFRS 9 | |||
Instrument | Category | Carrying value | Category | Carrying value |
(i) Current | ||||
Liquid mutual funds | Available for sale financial assets (1) | 842 | Fair value through profit or loss | 842 |
Fixed maturity plan securities: | Available for sale financial assets (1) | 32 | Fair value through profit or loss | 32 |
Total | 874 | 874 | ||
(ii) Non current | ||||
Quoted debt securities: | Available for sale financial assets (1) | 1,344 | Amortized cost | 1,304 |
Unquoted equity and preference securities | Available for sale financial assets (1) | 1 | Fair value through other comprehensive income | 1 |
Total | 1,345 | 1,305 | ||
Total investments | 2,219 | 2,179 |
(1) Fair value changes through other comprehensive income
2.3 Financial instruments
Financial instruments by category
The carrying value and fair value of financial instruments by categories as of September 30, 2016 were as follows:
(In crore)
Amortised cost | Financial assets/ liabilities at fair value through profit or loss | Financial assets/liabilities at fair value through OCI | Total carrying value | Total fair value | |||
Designated upon initial recognition | Mandatory | Equity instruments designated upon initial recognition | Mandatory | ||||
Assets: | |||||||
Cash and cash equivalents (Refer Note 2.1) | 31,732 | – | – | – | – | 31,732 | 31,732 |
Investments (Refer Note 2.2) | |||||||
Liquid mutual funds | – | – | 2,147 | – | – | 2,147 | 2,147 |
Quoted debt securities | 1,606 | – | – | – | 155 | 1,761 | 2,003* |
Unquoted equity and preference securities | – | – | – | 177 | – | 177 | 177 |
Trade receivables | 11,571 | – | – | – | – | 11,571 | 11,571 |
Unbilled revenue | 3,892 | – | – | – | – | 3,892 | 3,892 |
Prepayments and other assets (Refer Note 2.4) | 3,494 | – | – | – | – | 3,494 | 3,494 |
Derivative financial instruments | – | – | 87 | – | 2 | 89 | 89 |
Total | 52,295 | – | 2,234 | 177 | 157 | 54,863 | 55,105 |
Liabilities: | |||||||
Trade payables | 307 | – | – | – | – | 307 | 307 |
Derivative financial instruments | – | – | 2 | – | – | 2 | 2 |
Client deposits | 11 | – | – | – | – | 11 | 11 |
Other liabilities including contingent consideration (Refer Note 2.5) | 4,926 | – | 83 | – | – | 5,009 | 5,009 |
Total | 5,244 | – | 85 | – | – | 5,329 | 5,329 |
The carrying value and fair value of financial instruments by categories as of March 31, 2016 were as follows:
(In crore)
Amortised cost | Financial assets/ liabilities at fair value through profit or loss | Financial assets/liabilities at fair value through OCI | Total carrying value | Total fair value | |||
Designated upon initial recognition | Mandatory | Equity instruments designated upon initial recognition | Mandatory | ||||
Assets: | |||||||
Cash and cash equivalents (Refer Note 2.1) | 32,697 | – | – | – | – | 32,697 | 32,697 |
Investments (Refer Note 2.2) | |||||||
Liquid mutual funds | – | – | 68 | – | – | 68 | 68 |
Quoted debt securities | 1,703 | – | – | – | – | 1,703 | 1,703* |
Unquoted equity and preference securities: | – | – | – | 115 | – | 115 | 115 |
Trade receivables | 11,330 | – | – | – | – | 11,330 | 11,330 |
Unbilled revenue | 3,029 | – | – | – | – | 3,029 | 3,029 |
Prepayments and other assets (Refer Note 2.4) | 2,601 | – | – | – | – | 2,601 | 2,601 |
Derivative financial instruments | – | – | 116 | – | – | 116 | 116 |
Total | 51,360 | – | 184 | 115 | – | 51,659 | 51,659 |
Liabilities: | |||||||
Trade payables | 386 | – | – | – | – | 386 | 386 |
Derivative financial instruments | – | – | 5 | – | – | 5 | 5 |
Client deposits | 28 | – | – | – | – | 28 | 28 |
Other liabilities including contingent consideration (Refer Note 2.5) | 4,880 | – | 117 | – | – | 4,997 | 4,997 |
Total | 5,294 | – | 122 | – | – | 5,416 | 5,416 |
* On account of fair value changes including interest accrued
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).
Fair value hierarchy of assets and liabilities as of September 30, 2016:
(In crore)
As of September 30, 2016 | Fair value measurement at end of the reporting period/year using | |||
Level 1 | Level 2 | Level 3 | ||
Assets | ||||
Investments in liquid mutual fund units (Refer Note 2.2) | 2,147 | 2,147 | – | – |
Investments in quoted debt securities (Refer Note 2.2) | 2,003 | 438 | 1,565 | – |
Investments in equity and preference securities (Refer Note 2.2) | 147 | – | – | 147 |
Others (Refer Note 2.2) | 30 | – | – | 30 |
Derivative financial instruments - gain on outstanding foreign exchange forward and option contracts | 89 | – | 89 | – |
Liabilities | ||||
Derivative financial instruments - loss on outstanding foreign exchange forward and option contracts | 2 | – | 2 | – |
Liability towards contingent consideration (Refer note 2.5)* | 83 | – | – | 83 |
During the six months ended September 30, 2016,
quoted debt securities of 115 crore were transferred from Level
1 to Level 2 of fair value hierarchy, since these were valued based on market observable inputs.
*Discounted $14 million (approximately 93
crore) at 13.4%
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.
Fair value hierarchy of assets and liabilities measured 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 | ||||
Investments in liquid mutual fund units (Refer Note 2.2) | 68 | 68 | – | – |
Investments in quoted debt securities (Refer Note 2.2) | 1,703 | 376 | 1,327 | – |
Investments in equity securities and preference securities(Refer Note 2.2) | 93 | – | – | 93 |
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 2.5)* | 117 | – | – | 117 |
*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 movement in contingent consideration as
of September 30, 2016 from March 31, 2016 is on account of settlement of contingent consideration of 40 crore and change in discount
rates and passage of time.
Income from financial assets or liabilities is as follows:
(In crore)
Three months ended September 30, | Six months ended September 30, | |||
2016 | 2015 | 2016 | 2015 | |
Interest income from investments carried at amortised cost | 645 | 651 | 1,296 | 1,333 |
Dividend income from investments carried at fair value through profit or loss | 8 | 20 | 27 | 44 |
653 | 671 | 1,323 | 1,377 |
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.
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 Indian 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 analyzes foreign currency risk from financial instruments as of September 30, 2016:
(In crore)
U.S. dollars | Euro | United Kingdom Pound Sterling | Australian dollars | Other currencies | Total | |
Cash and cash equivalents | 1,232 | 136 | 57 | 231 | 609 | 2,265 |
Trade receivables | 7,985 | 1,310 | 581 | 630 | 699 | 11,205 |
Unbilled revenue | 2,391 | 467 | 440 | 134 | 298 | 3,730 |
Other assets | 339 | 49 | 29 | 12 | 87 | 516 |
Trade payables | (98) | (21) | (22) | (23) | (118) | (282) |
Client deposits | (5) | (3) | – | – | (3) | (11) |
Accrued Expenses | (839) | (201) | (153) | (38) | (209) | (1,440) |
Employee benefit obligations | (604) | (89) | (36) | (185) | (131) | (1,045) |
Other liabilities | (715) | (118) | (33) | (17) | (203) | (1,086) |
Net assets / (liabilities) | 9,686 | 1,530 | 863 | 744 | 1,029 | 13,852 |
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 |
For each of the three months ended September 30, 2016 and September 30, 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 0.51%.
For each of the six months ended September 30, 2016 and September 30, 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%.
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.
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. 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 | |||
September 30, 2016 | March 31, 2016 | |||
In million | In![]() |
In million | In![]() | |
Forward contracts | ||||
In U.S. dollars | 551 | 3,671 | 510 | 3,379 |
In Euro | 99 | 733 | 100 | 750 |
In United Kingdom Pound Sterling | 55 | 478 | 65 | 623 |
In Australian dollars | 35 | 177 | 55 | 281 |
In Swiss Franc | 19 | 133 | 25 | 173 |
Option Contracts | ||||
In U.S. dollars | 150 | 1,000 | 125 | 828 |
In United Kingdom Pound Sterling | 25 | 216 | – | – |
In Euro | 25 | 186 | – | – |
Total forwards & options | 6,594 | 6,034 |
The Group recognized a net gain on derivative
financial instruments of 177 crore and
224 crore during the three months and six months ended September 30, 2016 as against a
net loss on derivative financial instruments of
18 crore and
92 crore during the three months and six months ended September
30, 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 | ||
September 30, 2016 | March 31, 2016 | |
Not later than one month | 1,178 | 1,577 |
Later than one month and not later than three months | 3,191 | 3,420 |
Later than three months and not later than one year | 2,225 | 1,037 |
6,594 | 6,034 |
During the three months ended September 30,
2016, the group has designated certain foreign exchange forward contracts as cash flow hedges to mitigate the risk of foreign exchange
exposure on highly probable forecast cash transactions. Accordingly, the fair value changes of 2 crore was recorded in the other
comprehensive income for the three months and six months ended September 30, 2016. The related hedge transactions for balance in
cash flow hedging reserve are expected to occur and reclassified to the statement of comprehensive income within 3 months.
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 | |||
September 30, 2016 | March 31, 2016 | |||
Derivative financial asset | Derivative financial liability | Derivative financial asset |
Derivative financial liability | |
Gross amount of recognized financial asset/liability | 90 | (3) | 124 | (13) |
Amount set off | (1) | 1 | (8) | 8 |
Net amount presented in balance sheet | 89 | (2) | 116 | (5) |
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 11,571 crore and
11,330 crore as of September 30, 2016 and March 31, 2016, respectively
and unbilled revenue amounting to
3,892 crore and
3,029 crore as of September 30, 2016 and March 31, 2016, 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 has always been managed by the group 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. On account
of adoption of IFRS 9, the group uses expected credit loss model to assess the impairment loss or gain. The group uses a provision
matrix to compute the expected credit loss allowance for trade receivables and unbilled revenues. The provision matrix takes into
account available external and internal credit risk factors such as credit default swap quotes, credit ratings from international
credit rating agencies and the Group's historical experience for customers.
The following table gives details in respect of percentage of revenues generated from top customer and top five customers:
(In %)
Three months ended September 30, | Six months ended September 30, | |||
2016 | 2015 | 2016 | 2015 | |
Revenue from top customer | 3.5 | 3.7 | 3.5 | 3.7 |
Revenue from top five customers | 13.1 | 14.0 | 13.4 | 14.0 |
Credit risk exposure
The allowance for lifetime expected credit loss
on customer balances for the three months and six months ended September 30, 2016 was 25 crore and
40 crore, respectively. The
allowance for lifetime expected credit losses on customer balances for the three months and six months ended September 30, 2016
was
11 crore and
7 crore, respectively
(In crore)
Three months ended September 30, | Six months ended September 30, | |||
2016 | 2015 | 2016 | 2015 | |
Balance at the beginning | 305 | 367 | 289 | 366 |
Translation differences | (3) | 2 | (2) | 7 |
Impairment loss recognised/(reversed) | 25 | 11 | 40 | 7 |
Write–offs | (1) | – | (1) | – |
Balance at the end | 326 | 380 | 326 | 380 |
The Company’s credit period generally ranges from 30-60 days.
(In crore except otherwise stated)
As of | ||
September 30, 2016 | March 31, 2016 | |
Trade receivables | 11,571 | 11,330 |
Unbilled revenues | 3,892 | 3,029 |
Days Sales Outstanding- DSO (days) | 64 | 66 |
Credit risk on cash and cash equivalents is limited as we generally invest in deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units, quoted bonds issued by government and quasi government organizations, non convertible debentures issued by government aided institutions and certificates of deposit which are funds deposited at a bank for a specified time period.
Liquidity risk
The Group's principal sources of liquidity are cash and cash equivalents and the cash flow that is generated from operations. The group has no outstanding bank borrowings. The group believes that the working capital is sufficient to meet its current requirements.
As of September 30, 2016, the Group had a working
capital of 40,714 crore including cash and cash equivalents of
31,732 crore and current investments of
2,154 crore. 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 investments
of
75 crore.
As of September 30, 2016 and March 31, 2016,
the outstanding employee benefit obligations were 1,440 crore and
1,341 crore, respectively, which have been substantially funded.
Accordingly, no liquidity risk is perceived.
The table below provides details regarding the contractual maturities of significant financial liabilities as of September 30, 2016:
(In crore)
Particulars | Less than 1 year | 1-2 years | 2-4 years | 4-7 years | Total |
Trade payables | 307 | – | – | – | 307 |
Client deposits | 11 | – | – | – | 11 |
Other liabilities (excluding liability towards acquisition) (Refer Note 2.5) | 4,859 | 48 | 21 | – | 4,928 |
Liability towards acquisitions on an undiscounted basis (including contingent consideration) -Refer Note 2.5 | 46 | 47 | – | – | 93 |
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 liabilities towards acquisition ) (Refer Note 2.5) | 4,847 | 25 | 9 | – | 4,881 |
Liability towards acquisitions on an undiscounted basis (Refer Note 2.5) | 86 | 46 | – | – | 132 |
2.4 Prepayments and other assets
Prepayments and other assets consist of the following:
(In crore)
As of | ||
September 30, 2016 | March 31, 2016 | |
Current | ||
Rental deposits | 19 | 13 |
Security deposits | 10 | 7 |
Loans to employees | 264 | 303 |
Prepaid expenses(1) | 253 | 201 |
Interest accrued and not due | 1,501 | 704 |
Withholding taxes and others(1) | 1,621 | 1,799 |
Advance payments to vendors for supply of goods(1) | 68 | 110 |
Deposit with corporations | 1,333 | 1,238 |
Deferred contract cost(1) | 63 | 48 |
Other assets | 39 | 25 |
5,171 | 4,448 | |
Non-current | ||
Loans to employees | 26 | 25 |
Deposit with corporations | 52 | 62 |
Rental deposits | 168 | 146 |
Security deposits | 81 | 78 |
Deferred contract cost(1) | 310 | 333 |
Prepaid expenses(1) | 73 | 87 |
Prepaid gratuity(1) | 8 | 4 |
Other assets | 1 | – |
719 | 735 | |
5,890 | 5,183 | |
Financial assets in prepayments and other assets | 3,494 | 2,601 |
(1) Non financial assets
Withholding taxes and others 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. Deferred contract costs are upfront cost incurred for the contract and are amortised over the term of the contract.
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 Other liabilities
Other liabilities comprise the following :
(In crore)
As of | ||
September 30, 2016 | March 31, 2016 | |
Current | ||
Accrued compensation to employees | 2,047 | 2,265 |
Accrued expenses | 2,487 | 2,189 |
Withholding taxes and others(1) | 1,280 | 1,296 |
Retainage | 81 | 80 |
Liabilities of controlled trusts | 148 | 167 |
Deferred income - government grant on land use rights(1) | 1 | 1 |
Accrued gratuity(1) | 1 | – |
Liability towards contingent consideration (Refer note 2.9) | 44 | 81 |
Others | 96 | 146 |
6,185 | 6,225 | |
Non-current | ||
Liability towards contingent consideration (Refer note 2.9) | 39 | 36 |
Accrued compensation to employees | 67 | 33 |
Deferred income - government grant on land use rights(1) | 45 | 46 |
151 | 115 | |
6,336 | 6,340 | |
Financial liabilities included in other liabilities | 5,009 | 4,997 |
Financial liability towards acquisitions on an undiscounted basis (including contingent consideration) - Refer note 2.9 | 93 | 132 |
(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.
2.6 Provisions
Provisions comprise the following:
(In crore)
As of | ||
September 30, 2016 | March 31, 2016 | |
Provision for post sales client support and other provisions | 621 | 512 |
621 | 512 |
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 September 30, 2016 | Six months ended September 30, 2016 | |
Balance at the beginning | 536 | 512 |
Provision recognized/ (reversed) | 110 | 146 |
Provision utilized | (18) | (39) |
Translation difference | (7) | 2 |
Balance at the end | 621 | 621 |
Provision for post sales client support and other provisions is included in cost of sales in the statement of comprehensive income.
As of September 30, 2016 and March 31, 2016,
claims against the company, not acknowledged as debts, net of amounts paid (excluding demands from Indian Income tax authorities-
Refer note 2.11) amounted to 280 crore and
277 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.
2.7 Property, plant and equipment
Following are the changes in the carrying value of property, plant and equipment for the three months ended September 30, 2016:
(In crore)
Land | Buildings | Plant and machinery | Computer equipment | Furniture and fixtures | Vehicles | Total | |
Gross carrying value as of July 1, 2016 | 1,629 | 6,361 | 2,757 | 4,241 | 1,494 | 31 | 16,513 |
Additions | 9 | 63 | 123 | 273 | 91 | 2 | 561 |
Deletions | – | – | (9) | (20) | (3) | (1) | (33) |
Translation difference | – | – | (2) | (4) | (4) | – | (10) |
Gross carrying value as of September 30, 2016 | 1,638 | 6,424 | 2,869 | 4,490 | 1,578 | 32 | 17,031 |
Accumulated depreciation as of July 1, 2016 | (23) | (2,258) | (1,695) | (2,766) | (1,029) | (18) | (7,789) |
Depreciation | (1) | (58) | (95) | (179) | (48) | (2) | (383) |
Accumulated depreciation on deletions | – | – | 9 | 20 | 3 | 1 | 33 |
Translation difference | – | – | 1 | 3 | 4 | 1 | 9 |
Accumulated depreciation as of September 30, 2016 | (24) | (2,316) | (1,780) | (2,922) | (1,070) | (18) | (8,130) |
Capital work-in progress as of September 30, 2016 | 2,296 | ||||||
Carrying value as of September 30, 2016 | 1,614 | 4,108 | 1,089 | 1,568 | 508 | 14 | 11,197 |
Capital work-in progress as of July 1, 2016 | 2,241 | ||||||
Carrying value as of July 1, 2016 | 1,606 | 4,103 | 1,062 | 1,475 | 465 | 13 | 10,965 |
Following are the changes in the carrying value of property, plant and equipment for the three months ended September 30, 2015:
(In crore)
Land | Buildings | Plant and machinery | Computer equipment | Furniture and fixtures | Vehicles | Total | |
Gross carrying value as of July 1, 2015 | 1,580 | 5,955 | 2,196 | 3,647 | 1,232 | 35 | 14,645 |
Additions | 9 | 56 | 94 | 191 | 32 | 2 | 384 |
Deletions | – | – | (2) | (241) | (2) | (1) | (246) |
Translation difference | – | – | (1) | 3 | (1) | – | 1 |
Gross carrying value as of September 30, 2015 | 1,589 | 6,011 | 2,287 | 3,600 | 1,261 | 36 | 14,784 |
Accumulated depreciation as of July 1, 2015 | (17) | (2,035) | (1,365) | (2,402) | (868) | (20) | (6,707) |
Depreciation | (2) | (54) | (76) | (142) | (37) | (2) | (313) |
Accumulated depreciation on deletions | – | – | 1 | 93 | – | – | 94 |
Translation difference | – | – | 1 | (2) | 3 | 1 | 3 |
Accumulated depreciation as of September 30, 2015 | (19) | (2,089) | (1,439) | (2,453) | (902) | (21) | (6,923) |
Capital work-in progress as of September 30, 2015 | 1,825 | ||||||
Carrying value as of September 30, 2015 | 1,570 | 3,922 | 848 | 1,147 | 359 | 15 | 9,686 |
Capital work-in progress as of July 1, 2015 | 1,573 | ||||||
Carrying value as of July 1, 2015 | 1,563 | 3,920 | 831 | 1,245 | 364 | 15 | 9,511 |
Following are the changes in the carrying value of property, plant and equipment for the six months ended September 30, 2016:
(In crore)
Land | Buildings | Plant and machinery | Computer equipment | Furniture and fixtures | Vehicles | Total | |
Gross carrying value as of April 1, 2016 | 1,620 | 6,325 | 2,598 | 4,072 | 1,444 | 29 | 16,088 |
Additions | 18 | 99 | 285 | 457 | 143 | 5 | 1,007 |
Deletions | – | – | (12) | (35) | (4) | (2) | (53) |
Translation difference | – | – | (2) | (4) | (5) | – | (11) |
Gross carrying value as of September 30, 2016 | 1,638 | 6,424 | 2,869 | 4,490 | 1,578 | 32 | 17,031 |
Accumulated depreciation as of April 1, 2016 | (22) | (2,201) | (1,608) | (2,617) | (986) | (17) | (7,451) |
Depreciation | (2) | (115) | (185) | (343) | (93) | (3) | (741) |
Accumulated depreciation on deletions | – | – | 12 | 35 | 4 | 2 | 53 |
Translation difference | – | – | 1 | 3 | 5 | – | 9 |
Accumulated depreciation as of September 30, 2016 | (24) | (2,316) | (1,780) | (2,922) | (1,070) | (18) | (8,130) |
Capital work-in progress as of September 30, 2016 | 2,296 | ||||||
Carrying value as of September 30, 2016 | 1,614 | 4,108 | 1,089 | 1,568 | 508 | 14 | 11,197 |
Capital work-in progress as of April 1, 2016 | 1,893 | ||||||
Carrying value as of April 1, 2016 | 1,598 | 4,124 | 990 | 1,455 | 458 | 12 | 10,530 |
Following are the changes in the carrying value of property, plant and equipment for the six months ended September 30, 2015:
(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 |
Acquisitions through business combination (Refer note 2.9) | – | – | 1 | 2 | 1 | – | 4 |
Additions | 27 | 130 | 186 | 494 | 79 | 3 | 919 |
Deletions | – | – | (5) | (254) | (3) | (2) | (264) |
Translation difference | – | – | 1 | 11 | 5 | 1 | 18 |
Gross carrying value as of September 30, 2015 | 1,589 | 6,011 | 2,287 | 3,600 | 1,261 | 36 | 14,784 |
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 2.9) | – | – | (1) | (1) | – | – | (2) |
Depreciation | (3) | (107) | (148) | (256) | (77) | (3) | (594) |
Accumulated depreciation on deletions | – | – | 4 | 100 | 1 | 1 | 106 |
Translation difference | – | – | (1) | (9) | (1) | – | (11) |
Accumulated depreciation as of September 30, 2015 | (19) | (2,089) | (1,439) | (2,453) | (902) | (21) | (6,923) |
Capital work-in progress as of September 30, 2015 | 1,825 | ||||||
Carrying value as of September 30, 2015 | 1,570 | 3,922 | 848 | 1,147 | 359 | 15 | 9,686 |
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, 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 2.9) | – | – | 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 2.9) | – | – | (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 |
The depreciation expense is included in cost of sales in the consolidated statement of comprehensive income.
Carrying value of land includes 631 crore and
628 crore as of September 30, 2016 and March 31, 2016, respectively, towards amounts 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
1,433 crore and
1,486 crore, as of September 30, 2016 and March
31, 2016, respectively.
2.8 Goodwill
Following is a summary of changes in the carrying amount of goodwill:
(In
crore)
As of | ||
September 30, 2016 | March 31, 2016 | |
Carrying value at the beginning | 3,764 | 3,091 |
Goodwill on Kallidus d.b.a Skava acquisition (Refer note 2.9) | – | 452 |
Goodwill on Noah acquisition (Refer note 2.9) | – | 30 |
Translation differences | 7 | 191 |
Carrying value at the end | 3,771 | 3,764 |
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 2.14). 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 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 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. 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 | |
Long term growth rate | 8-10 |
Operating margins | 17-20 |
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.
2.9 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 over 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 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 |
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 year end 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 three months and six months ended September 30, 2016, a post-acquisition employee remuneration expense of 30 crore and
61
crore respectively, 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.
During the six months ended September 30, 2016 EdgeVerve had repaid
270 crore by redeeming proportionate number of debentures.
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 |
Cash paid | 578 |
Fair value of contingent consideration | 100 |
Total purchase price | 678 |
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.
During the six months ended September 30, 2016
contingent consideration of 40 crore was paid to the sellers of
Kallidus on the achievement of the certain financial targets. The balance contingent consideration as of September 30, 2016 and
March 31, 2016 is
93 crore and
132 crore respectively, on an undiscounted basis.
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.
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 were held by the Trust towards the 2011 Plan as at March 31, 2016). 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.
On August 1, 2016, the company granted 17,83,615 RSUs (includes equity shares and equity shares
represented by ADS) at par value, to employees upto mid management (excluding grants made to Dr. Vishal Sikka). Further, the company
granted 73,020 Incentive Units (cash-settled) to eligible employees. These instruments will vest equally over a period of 4 years
and are subject to continued service. As of September 30, 2016, 1,11,92,934 shares are held by the trust towards 2015 Plan. As
of September 30, 2016, 72,795 Incentive Units were outstanding (net of forfeitures) and the carrying value of the cash liability
is less than 1 crore.
Pursuant to the approval from the shareholders through postal ballot on March 31, 2016, Dr. Vishal Sikka
is eligible to receive under the 2015 Plan, an annual grant of RSU's of fair value $2,000,000 which vest over time, subject to
continued service, and an annual grant of performance based equity and stock options of $5,000,000, subject to achievement of
performance targets set by the Board or its committee, which vest over time. $2,000,000 of fair value in RSUs for financial year
2017 was granted on August 1, 2016 amounting to 120,700 RSUs in equity shares represented by ADS. The performance based RSU and
Options pertaining to financial year 2017 has not yet been granted as of September 30, 2016. Though the performance based RSU and
Options for fiscal 2017 and time based RSU’s for the remaining employment term have not been granted as of September 30,
2016, in accordance with IFRS 2 Share-based Payment, the company has recorded employee stock based compensation expense. The company
has recorded employee stock based compensation expense of 5 crore and
2 crore and
14 crore and
4 crore during the three months
and six months ended September 30, 2016 and September 30, 2015 respectively, towards CEO compensation.
2011 RSU Plan (the 2011 Plan) now called 2015 Stock Incentive Compensation Plan (the 2015 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 as on date of approval of plan adjusted for bonus shares and the plan was expected to continue in effect for a term of 10 years from the date of initial grant under the plan. Awards have been granted to Dr. Vishal Sikka under the 2011 RSU plan as detailed below. Further the Company has earmarked 1,00,000 equity shares for welfare activities of the employees, approved by the shareholders vide postal ballot which ended on March 31, 2016. The equity shares as of March 31, 2016 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 1,00,000 equity shares which have been earmarked for welfare activities of the employees) have been subsumed under the 2015 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 Officer 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.
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 2015 Plan (formerly 2011 RSU Plan) for equity-settled share based payment transactions during the three months and six months ended September 30, 2016 is set out below:
Particulars | Three months ended September 30, 2016 | Six months ended September 30, 2016 | ||
Shares arising out of options | Weighted average exercise price (![]() |
Shares arising out of options | Weighted average exercise price (![]() | |
2015 Plan (Formerly 2011 Plan): Indian Equity Shares (IES) | ||||
Outstanding at the beginning* | 209,099 | 5 | 221,505 | 5 |
Granted | 1,512,895 | 5 | 1,512,895 | 5 |
Forfeited and expired | 12,650 | 5 | 12,650 | 5 |
Exercised | 18,236 | 5 | 30,642 | 5 |
Outstanding at the end | 1,691,108 | 5 | 1,691,108 | 5 |
Exercisable at the end | – | – | – | – |
*adjusted for bonus issues (Refer note 2.17)
Particulars | Three months ended September 30, 2016 | Six months ended September 30, 2016 | ||
Shares arising out of options | Weighted average exercise price ($) | Shares arising out of options | Weighted average exercise price ($) | |
2015 Plan (Formerly 2011 Plan): American Depository Shares (ADS) | ||||
Outstanding at the beginning | – | – | – | – |
Granted | 391,420 | 0.07 | 391,420 | 0.07 |
Forfeited and expired | 10,120 | 0.07 | 10,120 | 0.07 |
Exercised | – | – | – | – |
Outstanding at the end | 381,300 | 0.07 | 381,300 | 0.07 |
Exercisable at the end | – | – | – | – |
The activity in the 2015 Plan (formerly 2011 RSU Plan) for equity-settled share based payment transactions during the three months and six months ended September 30, 2015 is set out below:
Particulars | Three months ended September 30, 2015 | Six months ended September 30, 2015 | ||
Shares arising out of options | Weighted average exercise price (![]() |
Shares arising out of options | Weighted average exercise price (![]() | |
2015 Plan (Formerly 2011 Plan): Indian Equity Shares (IES) | ||||
Outstanding at the beginning* | 232,329 | 5 | 108,268 | 5 |
Granted | – | – | 124,061 | 5 |
Forfeited and expired | – | – | – | – |
Exercised* | 9,116 | 5 | 9,116 | 5 |
Outstanding at the end | 223,213 | 5 | 223,213 | 5 |
Exercisable at the end
*adjusted for bonus issues (Refer note 2.17)
During the three months and six months ended September
30, 2016, the weighted average share price of options exercised under the 2015 Plan on the date of exercise was 1,021/- and
1,096/-
During the three months and six months ended September
30, 2015, the weighted average share price of options exercised under the 2015 Plan on the date of exercise was 1,092/-
The weighted average remaining contractual life of RSUs outstanding as of September 30, 2016 and March 31, 2016 under the 2015 Plan was 2.27 years and 1.98 years respectively.
The fair value of each equity settled RSU is estimated on the date of grant using the Black-Scholes-Merton model with the following assumptions:
Particulars | For options granted in | |||
Fiscal 2017- Equity Shares |
Fiscal 2017- ADS |
Fiscal 2016- Equity Shares |
Fiscal 2015- Equity Shares | |
Grant date | 1-Aug-16 | 1-Aug-16 | 22-Jun-15 | 21-Aug-14 |
Weighted average share price (![]() |
1,085 | 16.57 | 1,024 | 3,549 |
Exercise price (![]() |
5.00 | 0.07 | 5.00 | 5.00 |
Expected volatility (%) | 25-29 | 26-30 | 28-36 | 30-37 |
Expected life of the option (years) | 1 - 4 | 1 - 4 | 1 - 4 | 1 - 4 |
Expected dividends (%) | 2.37 | 2.29 | 2.43 | 1.84 |
Risk-free interest rate (%) | 6-7 | 0.5 - 1 | 7- 8 | 8 - 9 |
Weighted average fair value as on grant date (![]() |
1,019 | 15.59 | 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 three months and six months ended
September 30, 2016 and September 30, 2015, the company recorded an employee stock compensation expense of 21 crore and
2 crore
and
30 crore and
4 crore, respectively in the statement of comprehensive income. The cash settled stock compensation expense during
each of the three months and six months ended September 30, 2016 was less than
1 crore.
2.11 Income taxes
Income tax expense in the consolidated statement of comprehensive income comprises:
(In crore)
Three month ended September 30, | Six month ended September 30, | |||
2016 | 2015 | 2016 | 2015 | |
Current taxes | ||||
Domestic taxes | 1,106 | 1,124 | 2,201 | 2,025 |
Foreign taxes | 363 | 317 | 735 | 549 |
1,469 | 1,441 | 2,936 | 2,574 | |
Deferred taxes | ||||
Domestic taxes | (2) | (4) | (31) | 41 |
Foreign taxes | (7) | (50) | (83) | (53) |
(9) | (54) | (114) | (12) | |
Income tax expense | 1,460 | 1,387 | 2,822 | 2,562 |
Income tax expense for the three months ended
September 30, 2016 and September 30, 2015 includes reversals (net of provisions) of 17 crore and
30 crore, respectively, pertaining to earlier periods. Income tax expense for the six months ended September 30, 2016 and September
30, 2015 includes reversal (net of provisions) of
9 crore and
113 crore, respectively, pertaining
to earlier periods.
Entire deferred income tax for the three months and six months ended September 30, 2016 and September 30, 2015 relates to origination and reversal of temporary differences.
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 September 30, | Six months ended September 30, | |||
2016 | 2015 | 2016 | 2015 | |
Profit before income taxes | 5,066 | 4,785 | 9,863 | 8,991 |
Enacted tax rates in India | 34.61% | 34.61% | 34.61% | 34.61% |
Computed expected tax expense | 1,753 | 1,656 | 3,414 | 3,111 |
Tax effect due to non-taxable income for Indian tax purposes | (523) | (483) | (1,007) | (877) |
Overseas taxes | 225 | 183 | 415 | 332 |
Tax provision (reversals), overseas and domestic | (17) | (30) | (9) | (113) |
Effect of exempt non-operating income | (17) | (16) | (45) | (34) |
Effect of unrecognized deferred tax assets | 56 | 3 | 53 | 13 |
Effect of differential overseas tax rates | 14 | 14 | 16 | 8 |
Effect of non-deductible expenses | (8) | 65 | 24 | 140 |
Additional deduction on research and development expense | (16) | (12) | (30) | (26) |
Others | (7) | 7 | (9) | 8 |
Income tax expense | 1,460 | 1,387 | 2,822 | 2,562 |
The applicable Indian statutory tax rates for fiscal 2017 and fiscal 2016 is 34.61%.
During the six months ended September 30, 2016 and September 30, 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) which is valid upto 31st March 2017. The weighted tax deduction is equal to 200% of such expenditure 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 has provided to the export of software for the units registered under the Special Economic Zones Act, 2005 (SEZ). SEZ units which began the provision of 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 further five years. Up to 50% of such profits or gains is also available for a further five years subject to creation of a Special Economic Zone Reinvestment Reserve out of the profit for the eligible SEZ units and utilization of such reserve by the Company for acquiring new plant and machinery for the purpose of its business as per the provisions of the Income Tax Act, 1961.
As of September 30, 2016 and 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 4,383 crore and
4,383 crore) amounted to
7 crore and
7 crore, respectively.
Payment of 4,383 crore (
4,383 crore) includes
demands from the Indian Income tax authorities of
4,135 crore (
4,135 crore), including interest of
1,224 crore (
1,224 crore)
upon completion of their tax assessment for fiscal 2007, fiscal 2008, fiscal 2009, fiscal 2010 and fiscal 2011. These demands were
paid to statutory tax authorities. 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 Reconciliation of basic and diluted shares used in computing earnings per share
The following is a reconciliation of the equity shares used in the computation of basic and diluted earnings per equity share:
Three months ended September 30, | Six months ended September 30, | |||
2016 | 2015 | 2016 | 2015 | |
Basic earnings per equity share - weighted average number of equity shares outstanding(1) & (2) | 228,56,41,710 | 228,56,14,029 | 228,56,32,081 | 228,56,12,157 |
Effect of dilutive common equivalent shares - share options outstanding | 307,593 | 99,013 | 243,907 | 84,521 |
Diluted earnings per equity share - weighted average number of equity shares and common equivalent shares outstanding | 228,59,49,303 | 228,57,13,042 | 228,58,75,988 | 228,56,96,678 |
(1) Excludes treasury shares
(2) adjusted for bonus issues. Refer note 2.17
For the three months and six months ended September 30, 2016 and September 30, 2015, respectively, 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.
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 September 30, | Six months ended September 30, | |||
2016 | 2015 | 2016 | 2015 | |
Salaries and other employee benefits to whole-time directors and executive officers(1) | 14 | 6 | 35 | 28 |
Commission and other benefits to non-executive/independent directors | 3 | 3 | 6 | 5 |
Total | 17 | 9 | 41 | 33 |
(1) | Includes stock compensation expense of ![]() ![]() ![]() ![]() |
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 Group'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 Group 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 separately 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 Group'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 Group 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 Group.
Assets and liabilities used in the Group'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
Three months ended September 30, 2016 and September 30, 2015
(In crore)
Particulars | FS | MFG | ECS | RCL | HILIFE | Hi-TECH | All other segments | Total |
Revenues | 4,686 | 1,853 | 3,864 | 2,833 | 2,089 | 1,339 | 646 | 17,310 |
4,243 | 1,827 | 3,336 | 2,582 | 2,036 | 1,214 | 397 | 15,635 | |
Identifiable operating expenses | 2,373 | 961 | 1,861 | 1,361 | 1,055 | 692 | 375 | 8,678 |
1,965 | 1,012 | 1,514 | 1,218 | 953 | 561 | 232 | 7,455 | |
Allocated expenses | 1,018 | 423 | 881 | 646 | 476 | 305 | 148 | 3,897 |
1,011 | 451 | 824 | 638 | 503 | 300 | 99 | 3,826 | |
Segment profit | 1,295 | 469 | 1,122 | 826 | 558 | 342 | 123 | 4,735 |
1,267 | 364 | 998 | 726 | 580 | 353 | 66 | 4,354 | |
Unallocable expenses | 426 | |||||||
361 | ||||||||
Operating profit | 4,309 | |||||||
3,993 | ||||||||
Other income, net | 760 | |||||||
793 | ||||||||
Share in Associate's profit / (loss) | (3) | |||||||
(1) | ||||||||
Profit before income taxes | 5,066 | |||||||
4,785 | ||||||||
Income tax expense | 1,460 | |||||||
1,387 | ||||||||
Net profit | 3,606 | |||||||
3,398 | ||||||||
Depreciation and amortization | 424 | |||||||
358 | ||||||||
Non-cash expenses other than depreciation and amortization | 2 | |||||||
3 |
Six months ended September 30, 2016 and September 30, 2015
(In crore)
Particulars | FS | MFG | ECS | RCL | HILIFE | Hi-TECH | All other segments | Total |
Revenues | 9,237 | 3,696 | 7,583 | 5,694 | 4,093 | 2,661 | 1,127 | 34,091 |
8,125 | 3,444 | 6,502 | 4,923 | 3,906 | 2,365 | 724 | 29,989 | |
Identifiable operating expenses | 4,611 | 1,910 | 3,618 | 2,731 | 2,054 | 1,375 | 720 | 17,019 |
3,878 | 1,891 | 2,958 | 2,342 | 1,891 | 1,163 | 487 | 14,610 | |
Allocated expenses | 2,065 | 866 | 1,776 | 1,335 | 959 | 624 | 263 | 7,888 |
1,907 | 844 | 1,593 | 1,206 | 957 | 579 | 177 | 7,263 | |
Segment profit | 2,561 | 920 | 2,189 | 1,628 | 1,080 | 662 | 144 | 9,184 |
2,340 | 709 | 1,951 | 1,375 | 1,058 | 623 | 60 | 8,116 | |
Unallocable expenses | 829 | |||||||
675 | ||||||||
Operating profit | 8,355 | |||||||
7,441 | ||||||||
Other income, net | 1,513 | |||||||
1,551 | ||||||||
Share in Associate's profit / (loss) | (5) | |||||||
(1) | ||||||||
Profit before income taxes | 9,863 | |||||||
8,991 | ||||||||
Income tax expense | 2,822 | |||||||
2,562 | ||||||||
Net profit | 7,041 | |||||||
6,429 | ||||||||
Depreciation and amortization | 824 | |||||||
671 | ||||||||
Non-cash expenses other than depreciation and amortization | 5 | |||||||
4 |
2.14.2 Geographic segments
Three months ended September 30, 2016 and September 30, 2015
(In crore)
Particulars | North America | Europe | India | Rest of the World | Total |
Revenues | 10,641 | 3,896 | 587 | 2,186 | 17,310 |
9,891 | 3,580 | 360 | 1,804 | 15,635 | |
Identifiable operating expenses | 5,444 | 1,956 | 250 | 1,028 | 8,678 |
4,803 | 1,742 | 87 | 823 | 7,455 | |
Allocated expenses | 2,423 | 885 | 123 | 466 | 3,897 |
2,442 | 881 | 79 | 424 | 3,826 | |
Segment profit | 2,774 | 1,055 | 214 | 692 | 4,735 |
2,646 | 957 | 194 | 557 | 4,354 | |
Unallocable expenses | 426 | ||||
361 | |||||
Operating profit | 4,309 | ||||
3,993 | |||||
Other income, net | 760 | ||||
793 | |||||
Share in Associate's profit / (loss) | (3) | ||||
(1) | |||||
Profit before income taxes | 5,066 | ||||
4,785 | |||||
Income tax expense | 1,460 | ||||
1,387 | |||||
Net profit | 3,606 | ||||
3,398 | |||||
Depreciation and amortization | 424 | ||||
358 | |||||
Non-cash expenses other than depreciation and amortization | 2 | ||||
3 |
Six months ended September 30, 2016 and September 30, 2015
(In crore)
Particulars | North America | Europe | India | Rest of the World | Total |
Revenues | 21,041 | 7,764 | 1,045 | 4,241 | 34,091 |
18,965 | 6,800 | 678 | 3,546 | 29,989 | |
Identifiable operating expenses | 10,780 | 3,801 | 498 | 1,940 | 17,019 |
9,392 | 3,351 | 323 | 1,544 | 14,610 | |
Allocated expenses | 4,926 | 1,813 | 217 | 932 | 7,888 |
4,643 | 1,659 | 142 | 819 | 7,263 | |
Segment profit | 5,335 | 2,150 | 330 | 1,369 | 9,184 |
4,930 | 1,790 | 213 | 1,183 | 8,116 | |
Unallocable expenses | 829 | ||||
675 | |||||
Operating profit | 8,355 | ||||
7,441 | |||||
Other income, net | 1,513 | ||||
1,551 | |||||
Share in Associate's profit / (loss) | (5) | ||||
(1) | |||||
Profit before income taxes | 9,863 | ||||
8,991 | |||||
Income tax expense | 2,822 | ||||
2,562 | |||||
Net profit | 7,041 | ||||
6,429 | |||||
Depreciation and amortization | 824 | ||||
671 | |||||
Non-cash expenses other than depreciation and amortization | 5 | ||||
4 |
2.14.3 Significant clients
No client individually accounted for more than 10% of the revenues in the three months and six months ended September 30, 2016 and September 30, 2015.
2.15 Break-up of expenses
Cost of sales
(In crore)
Three months ended September 30, | Six months ended September 30, | |||
2016 | 2015 | 2016 | 2015 | |
Employee benefit costs | 8,564 | 7,544 | 16,850 | 14,689 |
Deferred purchase price pertaining to acquisition | – | 64 | – | 124 |
Depreciation and amortization | 424 | 358 | 824 | 671 |
Travelling costs | 386 | 434 | 952 | 835 |
Cost of Software packages for own use | 187 | 179 | 370 | 367 |
Consultancy and professional charges | 7 | 8 | 14 | 12 |
Third party items bought for service delivery to clients | 194 | 174 | 287 | 287 |
Cost of technical sub-contractors | 940 | 858 | 1,857 | 1,607 |
Operating lease payments | 78 | 59 | 151 | 113 |
Communication costs | 61 | 42 | 115 | 90 |
Repairs and maintenance | 85 | 33 | 162 | 86 |
Provision for post-sales client support | 30 | (34) | 51 | (43) |
Others | 6 | 5 | 10 | 9 |
Total | 10,962 | 9,724 | 21,643 | 18,847 |
Selling and marketing expenses
(In crore)
Three months ended September 30, | Six months ended September 30, | |||
2016 | 2015 | 2016 | 2015 | |
Employee benefit costs | 692 | 670 | 1,353 | 1,295 |
Travelling costs | 82 | 86 | 184 | 169 |
Branding and marketing | 81 | 61 | 197 | 135 |
Operating lease payments | 17 | 11 | 31 | 21 |
Communication costs | 5 | 5 | 9 | 9 |
Consultancy and professional charges | 12 | 13 | 24 | 27 |
Others | 8 | (3) | 19 | 7 |
Total | 897 | 843 | 1,817 | 1,663 |
Administrative expenses
(In crore)
Three months ended September 30, | Six months ended September 30, | |||
2016 | 2015 | 2016 | 2015 | |
Employee benefit costs | 392 | 344 | 727 | 628 |
Consultancy and professional charges | 155 | 163 | 320 | 314 |
Repairs and maintenance | 219 | 203 | 471 | 380 |
Power and fuel | 61 | 59 | 124 | 112 |
Communication costs | 70 | 64 | 132 | 124 |
Travelling costs | 52 | 62 | 124 | 133 |
Impairment loss recognised/(reversed) on financial assets | 27 | 11 | 44 | 7 |
Rates and taxes | 40 | 30 | 80 | 62 |
Insurance charges | 10 | 13 | 24 | 28 |
Operating lease payments | 26 | 17 | 49 | 34 |
Commission to non-whole time directors | 3 | 2 | 6 | 5 |
Contribution towards Corporate Social Responsibility | 53 | 59 | 102 | 104 |
Others | 34 | 48 | 73 | 107 |
Total | 1,142 | 1,075 | 2,276 | 2,038 |
2.16 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 amount of per share dividend
recognized as distributions to equity shareholders for the six months ended September 30, 2016 and September 30, 2015 was 14.25/-
and
29.50/-(not adjusted for June 17, 2015 bonus issue) respectively.
The Board of Directors in their meeting
on October 14, 2016 declared an interim dividend of 11/- per equity share which would result in a net cash outflow of approximately
3,029 crore, (excluding dividend paid on treasury shares) inclusive of 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 114,84,72,332 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. 1,12,92,934 and 1,13,23,576 shares were held by controlled
trust, as of September 30, 2016 and March 31, 2016, 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.
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 and |
Bangalore October 14, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer |
A.G.S Manikantha Company Secretary |
Independent Auditor’s Report
To the Board of Directors of Infosys Limited
Report on the Condensed Consolidated Interim Financial Statements
We have audited the accompanying condensed consolidated interim financial statements of Infosys Limited (“the Company”) and its subsidiaries (collectively referred to as “the Group”), which comprise the condensed consolidated balance sheet as at September 30, 2016, the condensed consolidated statement of comprehensive income for the three months and six months then ended, condensed consolidated statements of changes in equity and cash flows for the six months then ended, and a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Condensed Consolidated Interim Financial Statements
Management is responsible for the preparation of these condensed 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 financial control relevant to the preparation and presentation of the condensed 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 condensed 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 condensed 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 condensed consolidated interim financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the condensed consolidated interim 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 condensed 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 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 the Management, as well as evaluating the overall presentation of the condensed 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 condensed consolidated interim financial statements.
Opinion
In our opinion and to the best of our information and according to the explanations given to us, the condensed consolidated interim financial statements give a true and fair view in conformity with IFRS:
(a) | in the case of the condensed consolidated balance sheet, of the consolidated interim financial position as at September 30, 2016; |
(b) | in the case of the condensed consolidated statement of comprehensive income, of the consolidated interim financial performance for the three months and six months ended on that date; |
(c) | in the case of the condensed consolidated statement of changes in equity, of the consolidated changes in equity for the six months ended on that date; and |
(d) | in the case of the condensed consolidated statement of cash flows, of the consolidated cash flows for the six months 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
October 14, 2016
Exhibit 99.10
Ind AS Standalone
Independent Auditor’s Report
To the Board of Directors of Infosys Limited
Report on the Standalone Interim Financial Statements
We have audited the accompanying standalone interim financial statements of Infosys Limited (“the Company”), which comprise the balance sheet as at 30 September 2016, the statement of profit and loss (including other comprehensive income) for the three months and six months then ended, the statement of cash flows and the statement of changes in equity for the six months then ended and a summary of the significant accounting policies and other explanatory information.
Management’s Responsibility for the Standalone Interim Financial Statements
The Company’s Board of Directors is responsible for the preparation of these standalone interim financial statements that give a true and fair view of the financial position, financial performance including other comprehensive income, cash flows and changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) 34, Interim Financial Reporting as specified under section 133 of the Companies Act, 2013 (‘the Act’) read with relevant rules issued thereunder.
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 financial control, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the 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 standalone interim 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 of the standalone interim financial statements 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 standalone interim financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the standalone interim financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the standalone interim 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 standalone 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 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 the Company’s Directors, as well as evaluating the overall presentation of the standalone 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 standalone interim financial statements.
Opinion
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone interim 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 including the Ind AS, of the financial position of the Company as at 30 September 2016 and its financial performance including other comprehensive income for the three months and six months then ended, its cash flows and the changes in equity for the six months then ended.
for B S R & Co. LLP
Chartered Accountants
Firm’s Registration Number: 101248W/W-100022
Supreet Sachdev
Partner
Membership Number: 205385
Bangalore
14 October 2016
INFOSYS LIMITED
(In crore)
Balance Sheet as at | Note | September 30, 2016 | March 31, 2016 | April 1, 2015 |
ASSETS | ||||
Non-current assets | ||||
Property, plant and equipment | 2.3 | 8,470 | 8,248 | 7,347 |
Capital work-in-progress | 1,053 | 934 | 769 | |
Intangible assets | 2.4 | – | – | – |
Financial assets | ||||
Investments | 2.5 | 11,253 | 11,076 | 6,108 |
Loans | 2.6 | 5 | 5 | 4 |
Other financial assets | 2.7 | 206 | 192 | 110 |
Deferred tax assets (net) | 2.17 | 428 | 405 | 433 |
Other non-current assets | 2.10 | 834 | 755 | 349 |
Income tax assets (net) | 2.17 | 4,981 | 5,020 | 3,941 |
Total non - current Assets | 27,230 | 26,635 | 19,061 | |
Current assets | ||||
Financial assets | ||||
Investments | 2.5 | 1,905 | 2 | 749 |
Trade receivables | 2.8 | 10,168 | 9,798 | 8,627 |
Cash and cash equivalents | 2.9 | 27,967 | 29,176 | 27,722 |
Loans | 2.6 | 321 | 355 | 225 |
Other financial assets | 2.7 | 6,286 | 4,801 | 4,045 |
Other current assets | 2.10 | 1,800 | 1,965 | 1,384 |
Total current assets | 48,447 | 46,097 | 42,752 | |
Total Assets | 75,677 | 72,732 | 61,813 | |
EQUITY AND LIABILITIES | ||||
Equity | ||||
Equity share capital | 2.12 | 1,148 | 1,148 | 574 |
Other equity | 62,632 | 59,934 | 51,617 | |
Total equity | 63,780 | 61,082 | 52,191 | |
LIABILITIES | ||||
Non-current liabilities | ||||
Financial liabilities | ||||
Other financial liabilities | 2.13 | 39 | 62 | 27 |
Deferred tax liabilities (net) | 2.17 | – | – | – |
Total non - current liabilities | 39 | 62 | 27 | |
Current liabilities | ||||
Financial liabilities | ||||
Trade payables | 2.14 | 272 | 623 | 124 |
Other financial liabilities | 2.13 | 5,128 | 5,132 | 4,847 |
Other current liabilities | 2.15 | 2,178 | 2,093 | 1,564 |
Provisions | 2.16 | 556 | 436 | 382 |
Income tax liabilities (net) | 2.17 | 3,724 | 3,304 | 2,678 |
Total current liabilities | 11,858 | 11,588 | 9,595 | |
Total equity and liabilities | 75,677 | 72,732 | 61,813 |
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 |
U. B. Pravin Rao Chief Operating Officer and |
Bangalore October 14, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer |
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 | Three months ended September 30, |
Six months ended September 30, | ||
2016 | 2015 | 2016 | 2015 | ||
Revenue from operations | 2.18 | 15,000 | 13,525 | 29,420 | 26,263 |
Other income, net | 2.19 | 763 | 775 | 1,525 | 1,496 |
Total income | 15,763 | 14,300 | 30,945 | 27,759 | |
Expenses | |||||
Employee benefit expenses | 2.20 | 7,939 | 6,987 | 15,544 | 13,794 |
Deferred consideration pertaining to acquisition | – | 64 | – | 124 | |
Cost of technical sub-contractors | 1,183 | 1,035 | 2,319 | 2,000 | |
Travel expenses | 364 | 425 | 940 | 857 | |
Cost of software packages and others | 2.20 | 312 | 335 | 536 | 626 |
Communication expenses | 90 | 80 | 172 | 160 | |
Consultancy and professional charges | 119 | 123 | 238 | 255 | |
Depreciation and amortisation expense | 2.3 & 2.4 | 338 | 272 | 657 | 524 |
Other expenses | 2.20 | 606 | 426 | 1,268 | 876 |
Total expenses | 10,951 | 9,747 | 21,674 | 19,216 | |
Profit before tax | 4,812 | 4,553 | 9,271 | 8,543 | |
Tax expense: | |||||
Current tax | 2.17 | 1,327 | 1,333 | 2,640 | 2,385 |
Deferred tax | 2.17 | 9 | (28) | (25) | 19 |
Profit for the period | 3,476 | 3,248 | 6,656 | 6,139 | |
Other comprehensive income | |||||
Items that will not be reclassified subsequently to profit or loss | |||||
Remeasurement of the net defined benefit liability/asset | (35) | 1 | (52) | (7) | |
Equity instruments through other comprehensive income | – | – | – | – | |
Fair value changes on cash flow hedges | 2 | – | 2 | – | |
Items that will be reclassified subsequently to profit or loss | |||||
Total other comprehensive income, net of tax | (33) | 1 | (50) | (7) | |
Total comprehensive income for the period | 3,443 | 3,249 | 6,606 | 6,132 | |
Earnings per equity share | |||||
Equity shares of par value ![]() |
|||||
Basic (![]() |
15.13 | 14.14 | 28.98 | 26.73 | |
Diluted (![]() |
15.13 | 14.14 | 28.98 | 26.73 | |
Weighted average equity shares used in computing earnings per equity share | |||||
Basic | 2.23 | 2,29,69,44,664 | 2,29,69,44,664 | 2,29,69,44,664 | 2,29,69,44,664 |
Diluted | 2.23 | 2,29,70,25,587 | 2,29,69,44,664 | 2,29,69,90,357 | 2,29,69,44,664 |
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 |
U. B. Pravin Rao Chief Operating Officer and |
Bangalore October 14, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer |
A.G.S Manikantha Company Secretary |
INFOSYS LIMITED
Statement of changes in Equity
In crore
Particulars | Equity Share Capital | Other Equity | Total equity attributable to equity holders of the Company | |||||||||
Reserves & Surplus | Other comprehensive income | |||||||||||
Securities premium reserve |
Retained earnings | Capital reserve | General reserve | Share Options Outstanding Account | Special Economic Zone Re-investment reserve(1) | Business transfer adjustment reserve(2) | Equity Instruments through other comprehensive income | Cash flow hedge reserve | Other items of other comprehensive income | |||
Balance as of April 1, 2015 | 574 | 2,778 | 40,065 | 54 | 8,291 | 2 | – | 412 | – | – | 15 | 52,191 |
Changes in equity for the six months ended September 30, 2015 | ||||||||||||
Increase in share capital on account of bonus issue (refer to note 2.12) | 574 | – | – | – | – | – | – | – | – | – | – | 574 |
Transfer to general reserve | – | – | (1,217) | – | 1,217 | – | – | – | – | – | – | – |
Amounts utilized for bonus issue (refer note 2.12) | – | (574) | – | – | – | – | – | – | – | – | – | (574) |
Transferred to Special Economic Zone Re-investment reserve | – | – | (265) | – | – | – | 265 | – | – | – | – | – |
Transferred from Special Economic Zone Re-investment reserve on utilization | – | – | 265 | – | – | – | (265) | – | – | – | – | – |
Share based payment to employees (refer to note 2.12) | – | – | – | – | – | 4 | – | – | – | – | – | 4 |
Transfer to securities premium on exercise | – | 1 | – | – | – | (1) | – | – | – | – | – | – |
Remeasurement of the net defined benefit liability/asset, net of tax effect (refer note 2.22 and 2.17) | – | – | – | – | – | – | – | – | – | – | (7) | (7) |
Equity instruments through other comprehensive income | – | – | – | – | – | – | – | – | – | – | – | – |
Dividends (including corporate dividend tax) | – | – | (4,078) | – | – | – | – | – | – | – | – | (4,078) |
Profit on transfer of business (2) | – | – | – | – | – | – | – | 3,036 | – | – | – | 3,036 |
Profit for the period | – | – | 6,139 | – | – | – | – | – | – | – | – | 6,139 |
Balance as of September 30, 2015 | 1,148 | 2,205 | 40,909 | 54 | 9,508 | 5 | – | 3,448 | – | – | 8 | 57,285 |
INFOSYS LIMITED
Statement of changes in Equity
In crore
Particulars | Equity Share Capital | Other Equity | Total equity attributable to equity holders of the Company | |||||||||
Reserves & Surplus | Other comprehensive income | |||||||||||
Securities premium reserve |
Retained earnings | Capital reserve | General reserve | Share Options Outstanding Account | Special Economic Zone Re-investment reserve(1) | Business transfer adjustment reserve(2) | Equity Instruments through other comprehensive income | Cash flow hedge reserve | Other items of other comprehensive income | |||
Balance as of April 1, 2016 | 1,148 | 2,204 | 44,698 | 54 | 9,508 | 9 | – | 3,448 | – | – | 13 | 61,082 |
Changes in equity for the six months ended September 30, 2016 | ||||||||||||
Transfer to general reserve | – | – | (1,579) | – | 1,579 | – | – | – | – | – | – | – |
Transferred to Special Economic Zone Re-investment reserve | – | – | (551) | – | – | – | 551 | – | – | – | – | – |
Transferred from Special Economic Zone Re-investment reserve on utilization | – | – | 551 | – | – | – | (551) | – | – | – | – | – |
Excersice of stock options (refer to note 2.12) | – | 3 | – | – | – | (3) | – | – | – | – | – | – |
Income tax benefit arising on exercise of stock options | – | 1 | – | – | – | – | – | – | – | – | – | 1 |
Share based payment to employees of the group (refer to note 2.12 and note 2.25) | – | – | – | – | – | 30 | – | – | – | – | – | 30 |
Remeasurement of the net defined benefit liability/asset, net of tax effect (refer note 2.22 and 2.17) | – | – | – | – | – | – | – | – | – | – | (52) | (52) |
Equity instruments through other comprehensive income | – | – | – | – | – | – | – | – | – | – | – | – |
Fair value changes on cash flow hedge (Refer note 2.11) | – | – | – | – | – | – | – | – | – | 2 | – | 2 |
Dividends (including corporate dividend tax) | – | – | (3,939) | – | – | – | – | – | – | – | – | (3,939) |
Profit for the period | – | – | 6,656 | – | – | – | – | – | – | – | – | 6,656 |
Balance as of September 30, 2016 | 1,148 | 2,208 | 45,836 | 54 | 11,087 | 36 | – | 3,448 | – | 2 | (39) | 63,780 |
(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) | Profit on transfer of business between entities under common control taken to reserve on account of transition to Indian Accounting Standards (Ind AS) |
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 |
U. B. Pravin Rao Chief Operating Officer and |
Bangalore October 14, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer |
A.G.S Manikantha Company Secretary |
INFOSYS LIMITED
(In crore)
Statements of Cash Flows | Six months ended September 30, | |
2016 | 2015 | |
Cash flow from operating activities: | ||
Profit for the period | 6,656 | 6,139 |
Adjustments to reconcile net profit to net cash provided by operating activities: | ||
Depreciation and amortization | 657 | 524 |
Income tax expense | 2,615 | 2,404 |
Allowance for credit losses on financial assets | 44 | (13) |
Deferred purchase price | – | 124 |
Interest and dividend income | (1,318) | (1,286) |
Other adjustments | 129 | 81 |
Exchange differences on translation of assets and liabilities | 25 | 24 |
Changes in assets and liabilities | ||
Trade receivables and unbilled revenue | (1,215) | (1,149) |
Loans and other financial assets and other assets | 227 | (767) |
Trade payables | (351) | 151 |
Other financial liabilities, other liabilities and provisions | 111 | 1,380 |
Cash generated from operations | 7,580 | 7,612 |
Income taxes paid | (2,168) | (2,665) |
Net cash generated by operating activities | 5,412 | 4,947 |
Cash flow from investing activities: | ||
Expenditure on property, plant and equipment net of sale proceeds, including changes in retention money and capital creditors | (1,142) | (1,057) |
Deposits with corporations | (86) | (13) |
Loans to employees | 36 | 12 |
Repayment of debentures | 270 | – |
Investment in subsidiaries | (252) | (191) |
Payment towards contingent consideration pertaining to acquisition | (36) | (578) |
Payment arising out of business transfer | – | (250) |
Payments to acquire financial assets | ||
Preference securities | (40) | (22) |
Liquid mutual fund | (18,524) | (13,320) |
Tax free bonds | – | (200) |
Non-convertible debentures | (154) | – |
Proceeds on sale of financial assets | ||
Liquid mutual fund | 16,640 | 13,532 |
Interest and dividend received on investments | 614 | 365 |
Net cash used in investing activities | (2,674) | (1,722) |
Cash flow from financing activities: | ||
Loan given to subsidiaries | – | (116) |
Loan repaid by subsidiary | – | 115 |
Payment of dividends | (3,926) | (4,078) |
Net cash used in financing activities | (3,926) | (4,079) |
Effect of exchange differences on translation of foreign currency cash and cash equivalents | (21) | (5) |
Net decrease in cash and cash equivalents | (1,188) | (859) |
Cash and cash equivalents at the beginning | 29,176 | 27,722 |
Cash and cash equivalents at the end | 27,967 | 26,863 |
Supplementary information: | ||
Restricted cash balance | 370 | 201 |
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 |
U. B. Pravin Rao Chief Operating Officer and |
Bangalore October 14, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer |
A.G.S Manikantha Company Secretary |
INFOSYS LIMITED
Notes to the Financial Statements
1. Company Overview and Significant Accounting Policies
1.1 | Company overview |
Infosys ('the Company') is a leading provider 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.
The interim financial statements are approved for issue by the Company's Board of Directors on October 14, 2016.
1.2 Basis of preparation of financial statements
These financial statements are prepared in accordance
with Indian Accounting Standards (Ind AS) under the historical cost convention on the accrual basis except for certain financial
instruments which are measured at fair values, the provisions of the Companies Act 2013 (Act') (to the extent notified) and
guidelines issued by the Securities and Exchange Board of India (SEBI). The Ind AS are prescribed under Section 133 of the Act
read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies ( Indian Accounting Standards) Amendment
Rules, 2016.
The company has adopted all the Ind AS standards and the adoptions was carried out in accordance with Ind AS 101 First time adoption of Indian Accounting Standards. The transition was carried out from Indian Accounting Principles generally accepted in India as prescribed under Sec 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 (IGAAP), which was the previous GAAP. Reconciliations and descriptions of the effect of the transition has been summarized in Note 2.1.
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-to-date 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-to-date figures reported in this statement.
1.3 Use of estimates
The preparation of the financial statements in conformity with Ind AS 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 1.4. 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 financial statements.
1.4 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 judgements are involved in determining the provision for income taxes, including amount expected to be paid/recovered for uncertain tax positions. Also refer to Note 2.17 and Note 2.24.
c. Property, plant and equipment
Property, plant and equipment represent a significant proportion of the asset base of the company. 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 company'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.
1.5 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 Ind AS 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 Ind AS 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 Ind AS 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 Ind AS 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 profit and loss.
1.6 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 company depreciates property, plant and equipment over their estimated useful lives using the straight-line method. The estimated useful lives of assets are as follows:
Building | 22-25 years |
Plant and machinery | 5 years |
Office equipment | 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.
Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date is classified as capital advances under other non-current assets 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 company and the cost of the item can be measured reliably. Repairs and maintenance costs are recognized in net profit in the statement of profit and loss 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 the statement of profit and loss. Assets to be disposed off are reported at the lower of the carrying value or the fair value less cost to sell.
1.7 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 expenses in the statement of profit and loss.
1.8 Financial instruments
1.8.1 Initial recognition
The company recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of the instrument. All financial assets and liabilities are recognized at fair value on initial recognition, except for trade receivables which are initially measured at transaction price. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities, that are not at fair value through profit or loss, are added to the fair value on initial recognition. Regular way purchase and sale of financial assets are accounted for at trade date.
1.8.2 Subsequent measurement
a. Non-derivative financial instruments
(i) | Financial assets carried at amortised cost |
A financial asset is subsequently measured at amortised cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
(ii) | Financial assets at fair value through other comprehensive income |
A financial asset is subsequently measured at fair value through other comprehensive income if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The Company has made an irrevocable election for its investments which are classified as equity instruments to present the subsequent changes in fair value in other comprehensive income based on its business model. Further, in cases where the company has made an irrevocable election based on its business model, for its investments which are classified as equity instruments, the subsequent changes in fair value are recognized in other comprehensive income.
(iii) Financial assets at fair value through profit or loss
A financial asset which is not classified in any of the above categories are subsequently fair valued through profit or loss.
(iv) Financial liabilities
Financial liabilities are subsequently carried at amortized cost using the effective interest method, except for contingent consideration recognized in a business combination which is subsequently measured at fair value through profit and loss. 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.
(v) Investment in subsidiaries
Investment in subsidiaries is carried at cost in the separate financial statements.
b. Derivative financial instruments
The company 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.
(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 company believes that these derivatives constitute hedges from an economic perspective, they may not qualify for hedge accounting under Ind AS 109, Financial Instruments. Any derivative that is either not designated a hedge, or is so designated but is ineffective as per Ind AS 109, 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 profit and loss. 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.
(iii) | Cash flow hedge |
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 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 profit and loss. 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 profit and loss 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 profit and loss.
c. Share capital
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.
1.8.3 Derecognition of financial instruments
The company derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset and the transfer qualifies for derecognition under Ind AS 109. A financial liability (or a part of a financial liability) is derecognized from the company's balance sheet when the obligation specified in the contract is discharged or cancelled or expires.
1.9 Fair value of financial instruments
In determining the fair value of its financial instruments, the company uses a variety of methods and assumptions that are based on market conditions and risks existing at each 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.
1.10 Impairment
a. Financial assets
The company recognizes loss allowances using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. Loss allowance for trade receivables with no significant financing component is measured at an amount equal to lifetime ECL. For all other financial assets, expected credit losses are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised is recognized as an impairment gain or loss in profit or loss.
b. Non-financial assets
(i) 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 the statement of profit and loss is measured by the amount by which the carrying value of the assets exceeds the estimated recoverable amount of the asset. An impairment loss is reversed in the statement of profit and loss if there has been a change in the estimates used to determine the recoverable amount. The carrying amount of the 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 Provisions
A provision is recognized if, as a result of a past event, the company 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 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 related revenues are recorded in the statement of profit and loss. The company estimates such costs based on historical experience and estimates are reviewed on a periodic basis for any material changes in assumptions and likelihood of occurrence.
b. 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 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 company recognizes any impairment loss on the assets associated with that contract.
1.12 Foreign currency
Functional currency
The functional currency of the company is the Indian rupee. 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 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 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. 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.
1.13 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.
1.14 Income taxes
Income tax expense comprises current and deferred income tax. Income tax expense is recognized in net profit in the statement of profit and loss 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. 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 company 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.
1.15 Employee benefits
1.15.1 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 Trusts and contributions are invested in a scheme with Life Insurance Corporation of India as permitted by laws of India.
The company 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 profit and loss.
1.15.2 Superannuation
Certain employees of Infosys are participants in a defined contribution plan. The company 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.
1.15.3 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.
1.15.4 Compensated absences
The company 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.
1.16 Share-based compensation
The company recognizes compensation expense relating to share-based payments in net profit using fair-value in accordance with Ind AS 102, 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 options outstanding account.
1.17 Cash Flow Statement
Cash flows are reported using the indirect method, whereby profit for the period 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.
1.18 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.
1.19 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.
1.20 Leases
Leases under which the company 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 profit and loss over the lease term.
2 Notes to the standalone financial statements for the three months and six months ended September 30, 2016
2.1First-time adoption of Ind-AS
These standalone interim financial statements of Infosys Limited for the three months and six months ended September 30, 2016 have been prepared in accordance with Ind AS. For the purposes of transition to Ind AS, the Company has followed the guidance prescribed in Ind AS 101 - First Time adoption of Indian Accounting Standard, with April 1, 2015 as the transition date and IGAAP as the previous GAAP.
The transition to Ind AS has resulted in changes in the presentation of the financial statements, disclosures in the notes thereto and accounting policies and principles. The accounting policies set out in note 1 have been applied in preparing the standalone financial statements for the three months and six months ended September 30, 2016 and the comparative information. An explanation of how the transition from previous GAAP to Ind AS has affected the Company’s balance sheet statement of profit and loss, is set out in note 2.2 and 2.2.2. Exemptions on first time adoption of Ind AS availed in accordance with Ind AS 101 have been set out in note 2.1.1.
2.1.1 Exemptions availed on first time adoption of Ind-AS 101
Ind-AS 101 allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS. The company has accordingly applied the following exemptions.
(a) Share-based payment
The Company is allowed to apply Ind AS 102 Share-based payment to equity instruments that remain unvested as of transition date. The Company has elected to avail this exemption and apply the requirements of Ind AS 102 to all such grants under the 2015 plan (formerly 2011 plan). Accordingly, these options have been measured at fair value as against intrinsic value previously under IGAAP.
The excess of stock compensation expense measured using fair value over the cost recognized under IGAAP using intrinsic value has been adjusted in 'Share Option Outstanding Account', with the corresponding impact taken to the retained earnings as on the transition date.
(b) Designation of previously recognized financial instruments
Under Ind AS 109, at initial recognition of a financial asset, an entity may make an irrevocable election to present subsequent changes in the fair value of an investment in an equity instrument in other comprehensive income. Ind AS 101 allows such designation of previously recognized financial assets, as ' fair value through other comprehensive income' on the basis of the facts and circumstances that existed at the date of transition to Ind AS.
Accordingly, the Company has designated its investments in certain equity instruments at fair value through other comprehensive income on the basis of the facts and circumstances that existed at the date of transition to Ind AS.
2.2 Reconciliations
The following reconciliations provides the effect of transition to Ind AS from IGAAP in accordance with Ind AS 101
1. Equity as at April 1, 2015, September 30, 2015 and March 31, 2016
2. Net profit for the three months and six months ended September 30, 2015 and year ended March 31, 2016
2.2.1 Reconciliation of equity as previously reported under IGAAP to Ind AS
(In crore)
Particulars | Note | Opening Balance Sheet as at April 1, 2015 | Balance Sheet as at September 30, 2015 | Balance Sheet as at March 31, 2016 | ||||||
IGAAP | Effects of transition to Ind-AS | Ind AS | IGAAP | Effects of transition to Ind-AS | Ind AS | IGAAP | Effects of transition to Ind-AS | Ind AS | ||
ASSETS | ||||||||||
Non-current assets | ||||||||||
Property, plant and equipment | 7,347 | – | 7,347 | 7,504 | – | 7,504 | 8,248 | – | 8,248 | |
Capital work-in-progress | 769 | – | 769 | 998 | – | 998 | 934 | – | 934 | |
Intangible assets | – | – | – | – | – | – | – | – | – | |
Financial Assets: | ||||||||||
Investments | A | 6,108 | – | 6,108 | 7,227 | (28) | 7,199 | 11,111 | (35) | 11,076 |
Loans | 4 | – | 4 | 4 | – | 4 | 5 | – | 5 | |
Other financial assets | 110 | – | 110 | 146 | – | 146 | 192 | – | 192 | |
Deferred tax assets (net) | 433 | – | 433 | 399 | – | 399 | 405 | – | 405 | |
Other non-current assets | 349 | – | 349 | 692 | – | 692 | 755 | – | 755 | |
Income tax assets (net) | 3,941 | – | 3,941 | 4,428 | – | 4,428 | 5,020 | – | 5,020 | |
Total non-current assets | 19,061 | – | 19,061 | 21,398 | (28) | 21,370 | 26,670 | (35) | 26,635 | |
Current assets | ||||||||||
Financial Assets: | ||||||||||
Investments | A | 749 | – | 749 | 537 | – | 537 | 2 | – | 2 |
Trade Receivables | 8,627 | – | 8,627 | 9,256 | – | 9,256 | 9,798 | – | 9,798 | |
Cash and cash equivalents | 27,722 | – | 27,722 | 26,863 | – | 26,863 | 29,176 | – | 29,176 | |
Loans | 225 | – | 225 | 212 | – | 212 | 355 | – | 355 | |
Other financial assets | 4,045 | – | 4,045 | 9,034 | – | 9,034 | 4,801 | – | 4,801 | |
Other Current Assets | 1,384 | – | 1,384 | 1,630 | – | 1,630 | 1,965 | – | 1,965 | |
Total current assets | 42,752 | – | 42,752 | 47,532 | – | 47,532 | 46,097 | – | 46,097 | |
Total assets | 61,813 | – | 61,813 | 68,930 | (28) | 68,902 | 72,767 | (35) | 72,732 | |
EQUITY AND LIABILITIES | ||||||||||
Equity | ||||||||||
Equity share capital | 574 | – | 574 | 1,148 | – | 1,148 | 1,148 | – | 1,148 | |
Other equity | E | 47,494 | 4,123 | 51,617 | 53,363 | 2,774 | 56,137 | 56,009 | 3,925 | 59,934 |
Total equity | 48,068 | 4,123 | 52,191 | 54,511 | 2,774 | 57,285 | 57,157 | 3,925 | 61,082 | |
Non-current liabilities | ||||||||||
Financial Liabilities | ||||||||||
Other financial liabilities | B | 27 | – | 27 | 119 | (22) | 97 | 73 | (11) | 62 |
Deferred tax liabilities (net) | – | – | – | – | – | – | – | – | – | |
Other non-current liabilities | C | 3 | (3) | – | 2 | (2) | – | – | – | – |
Total non-current liabilities | 30 | (3) | 27 | 121 | (24) | 97 | 73 | (11) | 62 | |
Current liabilities | ||||||||||
Financial Liabilities | ||||||||||
Trade Payables | 124 | – | 124 | 275 | – | 275 | 623 | – | 623 | |
Other financial liabilities | B | 4,885 | (38) | 4,847 | 6,096 | (9) | 6,087 | 5,138 | (6) | 5,132 |
Other current liabilities | C | 1,568 | (4) | 1,564 | 4,694 | (2,769) | 1,925 | 2,097 | (4) | 2,093 |
Provisions | D | 4,460 | (4,078) | 382 | 351 | – | 351 | 4,375 | (3,939) | 436 |
Income Tax Liabilities (Net) | 2,678 | – | 2,678 | 2,882 | – | 2,882 | 3,304 | – | 3,304 | |
Total current liabilities | 13,715 | (4,120) | 9,595 | 14,298 | (2,778) | 11,520 | 15,537 | (3,949) | 11,588 | |
Total liabilities and equity | 61,813 | – | 61,813 | 68,930 | (28) | 68,902 | 72,767 | (35) | 72,732 |
Explanations for Reconciliation of Balance Sheet as previously reported under IGAAP to INDAS
A. | Investment |
a) | Tax free bonds are carried at amortized cost under Ind AS and IGAAP. Investment in equity instruments are carried at fair value through OCI in Ind AS compared to being carried at cost under IGAAP. |
b) | Investments include discounted value of contingent consideration payable on acquisition of business under IndAS as compared to undiscounted value of contingent consideration under IGAAP |
B. | Other financial liabilities |
Adjustments includes impact of discounting the deferred and contingent consideration payable for acquisitions under Ind AS | |
C. | Other liabilities – |
Adjustments that reflect unamortised negative past service cost arising on modification of the gratuity plan in an earlier period. Ind AS 19 requires such gains and losses to be adjusted to retained earnings. | |
D. | Provisions |
Adjustments reflect dividend (including corporate dividend tax), declared and approved post reporting period. | |
E. | Other equity |
a) | Adjustments to retained earnings and other comprehensive income has been made in accordance with Ind AS, for the above mentioned line items. |
b) | In addition, as per Ind-AS 19, actuarial gain and losses are recognized in other comprehensive income as compared to being recognized in the statement of profit and loss under IGAAP. |
c) | Profit on transfer of business between entities under common control which were earlier recognized in statement of profit and loss under IGAAP are adjusted to reserves on transition to Ind AS. |
2.2.2 Reconciliation Statement of Profit and loss as previously reported under IGAAP to Ind AS
(In crore)
Particulars | Note | Three months ended September 30, 2015 | Six months ended September 30, 2015 | Year ended March 31 2016 | ||||||
IGAAP | Effects of transition to Ind-AS | Ind AS | IGAAP | Effects of transition to Ind-AS | Ind AS | IGAAP | Effects of transition to Ind-AS | Ind AS | ||
Revenue from operations | 13,525 | – | 13,525 | 26,263 | – | 26,263 | 53,983 | – | 53,983 | |
Other income, net | G | 774 | 1 | 775 | 1,493 | 3 | 1,496 | 3,009 | (3) | 3,006 |
Total Income | 14,299 | 1 | 14,300 | 27,756 | 3 | 27,759 | 56,992 | (3) | 56,989 | |
Expenses | ||||||||||
Employee benefit expenses | F | 6,985 | 2 | 6,987 | 13,802 | (8) | 13,794 | 28,206 | 1 | 28,207 |
Deferred consideration pertaining to acquisition | G | 46 | 18 | 64 | 91 | 33 | 124 | 110 | 39 | 149 |
Cost of technical sub-contractors | 1,035 | – | 1,035 | 2,000 | – | 2,000 | 4,417 | – | 4,417 | |
Travel expenses | 425 | – | 425 | 857 | – | 857 | 1,655 | – | 1,655 | |
Cost of software packages and others | 335 | – | 335 | 626 | – | 626 | 1,049 | – | 1,049 | |
Communication expenses | 80 | – | 80 | 160 | – | 160 | 311 | – | 311 | |
Consultancy and professional charges | 123 | – | 123 | 255 | – | 255 | 563 | – | 563 | |
Depreciation and amortisation expenses | 272 | – | 272 | 524 | – | 524 | 1,115 | – | 1,115 | |
Other expenses | G | 423 | 3 | 426 | 872 | 4 | 876 | 1,909 | 14 | 1,923 |
Total expenses | 9,724 | 23 | 9,747 | 19,187 | 29 | 19,216 | 39,335 | 54 | 39,389 | |
Profit before exceptional items and tax | 4,575 | (22) | 4,553 | 8,569 | (26) | 8,543 | 17,657 | (57) | 17,600 | |
Profit on transfer of business | H | 3,036 | (3,036) | – | 3,036 | (3,036) | – | 3,036 | (3,036) | – |
Profit before tax | 7,611 | (3,058) | 4,553 | 11,605 | (3,062) | 8,543 | 20,693 | (3,093) | 17,600 | |
Tax expense: | ||||||||||
Current tax | I | 1,333 | – | 1,333 | 2,382 | 3 | 2,385 | 4,898 | – | 4,898 |
Deferred tax | (28) | – | (28) | 19 | – | 19 | 9 | – | 9 | |
Profit for the period | 6,306 | (3,058) | 3,248 | 9,204 | (3,065) | 6,139 | 15,786 | (3,093) | 12,693 | |
Other comprehensive income | ||||||||||
Items that will not be reclassified subsequently to profit or loss | ||||||||||
Remeasurement of the net defined benefit liability/asset | F | – | 1 | 1 | – | (7) | (7) | – | (2) | (2) |
– | 1 | 1 | – | (7) | (7) | – | (2) | (2) | ||
Items that will be reclassified subsequently to profit or loss | ||||||||||
– | – | – | – | – | – | – | – | – | ||
Total other comprehensive income, net of tax | – | 1 | 1 | – | (7) | (7) | – | (2) | (2) | |
Total comprehensive income, for the period | 6,306 | (3,057) | 3,249 | 9,204 | (3,072) | 6,132 | 15,786 | (3,095) | 12,691 |
Explanations for reconciliation of Statement of Profit and loss as previously reported under IGAAP to Ind AS
F. | Employee Benefit expenses |
a) | As per Ind-AS 19, actuarial gain and losses are recognized in other comprehensive income and not reclassified to profit and loss in a subsequent period. |
b) | Adjustments reflect unamortised negative past service cost arising on modification of the gratuity plan in an earlier period. Ind AS 19 requires such gains and losses to be adjusted to retained earnings. |
G. | Deferred and contingent consideration pertaining to acquisition |
Adjustments reflect impact of discounting pertaining to deferred consideration and contingent consideration payable for business combinations | |
H. | Reversal of exceptional item |
Profit on transfer of business between entities under common control has been reversed and taken to business transfer reserve on account of transition to Ind AS | |
I. | Current tax |
Tax component on actuarial gains and losses which is transferred to other comprehensive income under Ind AS |
2.2.3 Cash Flow Statement
There were no significant reconciliation items between cash flows prepared under Indian GAAP and those prepared under Ind AS.
2.3 PROPERTY, PLANT AND EQUIPMENT
Following are the changes in the carrying value of property, plant and equipment for the three months ended September 30, 2016:
(In crore)
Particulars | Land- Freehold | Land- Leasehold | Buildings (1)(2) | Plant and machinery(2) | Office Equipment (2) | Computer equipment (2) | Furniture and fixtures (2) | Vehicles | Total |
Gross carrying value as of July 1, 2016 | 974 | 643 | 6,208 | 1,791 | 727 | 3,617 | 1,118 | 21 | 15,099 |
Additions | 9 | – | 62 | 73 | 38 | 234 | 64 | 2 | 482 |
Deletions | – | – | – | – | (2) | (15) | – | (1) | (18) |
Gross carrying value as of September 30, 2016 | 983 | 643 | 6,270 | 1,864 | 763 | 3,836 | 1,182 | 22 | 15,563 |
Accumulated depreciation as of July 1, 2016 | – | (22) | (2,206) | (1,102) | (395) | (2,330) | (706) | (12) | (6,773) |
Depreciation | – | (1) | (56) | (61) | (29) | (151) | (39) | (1) | (338) |
Accumulated depreciation on deletions | – | – | – | – | 2 | 15 | – | 1 | 18 |
Accumulated depreciation as of September 30, 2016 | – | (23) | (2,262) | (1,163) | (422) | (2,466) | (745) | (12) | (7,093) |
Carrying value as of September 30, 2016 | 983 | 620 | 4,008 | 701 | 341 | 1,370 | 437 | 10 | 8,470 |
Following are the changes in the carrying value of property, plant and equipment for the three months ended September 30, 2015:
(In crore)
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 |
Gross carrying value as of July 1, 2015 | 947 | 621 | 5,807 | 1,425 | 551 | 3,089 | 876 | 15 | 13,331 |
Additions | 10 | – | 56 | 52 | 39 | 127 | 30 | 2 | 316 |
Deletions | – | – | – | – | – | (230) | (1) | – | (231) |
Gross carrying value as of September 30, 2015 | 957 | 621 | 5,863 | 1,477 | 590 | 2,986 | 905 | 17 | 13,416 |
Accumulated depreciation as of July 1, 2015 | – | (17) | (1,988) | (885) | (300) | (1,950) | (579) | (9) | (5,728) |
Depreciation | – | (1) | (53) | (47) | (23) | (122) | (26) | – | (272) |
Accumulated depreciation on deletions | – | – | – | – | – | 88 | – | – | 88 |
Accumulated depreciation as of September 30, 2015 | – | (18) | (2,041) | (932) | (323) | (1,984) | (605) | (9) | (5,912) |
Carrying value as of September 30, 2015 | 957 | 603 | 3,822 | 545 | 267 | 1,002 | 300 | 8 | 7,504 |
Following are the changes in the carrying value of property, plant and equipment for the six months ended September 30, 2016:
(In crore)
Particulars | Land- Freehold | Land- Leasehold | Buildings (1)(2) | Plant and machinery(2) | Office Equipment (2) | Computer equipment (2) | Furniture and fixtures (2) | Vehicles | Total |
Gross carrying value as of April 1, 2016 | 970 | 638 | 6,173 | 1,679 | 679 | 3,481 | 1,070 | 19 | 14,709 |
Additions | 13 | 5 | 97 | 186 | 86 | 375 | 113 | 4 | 879 |
Deletions | – | – | – | (1) | (2) | (20) | (1) | (1) | (25) |
Gross carrying value as of September 30, 2016 | 983 | 643 | 6,270 | 1,864 | 763 | 3,836 | 1,182 | 22 | 15,563 |
Accumulated depreciation as of April 1, 2016 | – | (21) | (2,150) | (1,044) | (369) | (2,195) | (671) | (11) | (6,461) |
Depreciation | – | (2) | (112) | (120) | (55) | (291) | (75) | (2) | (657) |
Accumulated depreciation on deletions | – | – | – | 1 | 2 | 20 | 1 | 1 | 25 |
Accumulated depreciation as of September 30, 2016 | – | (23) | (2,262) | (1,163) | (422) | (2,466) | (745) | (12) | (7,093) |
Carrying value as of September 30, 2016 | 983 | 620 | 4,008 | 701 | 341 | 1,370 | 437 | 10 | 8,470 |
Following are the changes in the carrying value of property, plant and equipment for the six months ended September 30, 2015:
(In crore)
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 |
Gross carrying value as of April 1, 2015 | 929 | 621 | 5,733 | 1,361 | 525 | 2,812 | 832 | 14 | 12,827 |
Additions | 28 | – | 130 | 116 | 65 | 408 | 75 | 3 | 825 |
Deletions | – | – | – | – | – | (234) | (2) | – | (236) |
Gross carrying value as of September 30, 2015 | 957 | 621 | 5,863 | 1,477 | 590 | 2,986 | 905 | 17 | 13,416 |
Accumulated depreciation as of April 1, 2015 | – | (16) | (1,937) | (838) | (280) | (1,852) | (549) | (8) | (5,480) |
Depreciation | – | (2) | (104) | (94) | (43) | (223) | (57) | (1) | (524) |
Accumulated depreciation on deletions | – | – | – | – | – | 91 | 1 | – | 92 |
Accumulated depreciation as of September 30, 2015 | – | (18) | (2,041) | (932) | (323) | (1,984) | (605) | (9) | (5,912) |
Carrying value as of September 30, 2015 | 957 | 603 | 3,822 | 545 | 267 | 1,002 | 300 | 8 | 7,504 |
Following are the changes in the carrying value of property, plant and equipment for the year ended March 31, 2016:
(In crore)
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 |
Gross carrying value as of April 1, 2015 | 929 | 621 | 5,733 | 1,361 | 525 | 2,812 | 832 | 14 | 12,827 |
Additions | 41 | 17 | 440 | 319 | 155 | 945 | 241 | 5 | 2,163 |
Deletions | – | – | – | (1) | (1) | (276) | (3) | – | (281) |
Gross carrying value as of March 31, 2016 | 970 | 638 | 6,173 | 1,679 | 679 | 3,481 | 1,070 | 19 | 14,709 |
Accumulated depreciation as of April 1, 2015 | – | (16) | (1,937) | (838) | (280) | (1,852) | (549) | (8) | (5,480) |
For the period | – | (5) | (213) | (207) | (90) | (472) | (125) | (3) | (1,115) |
Deduction / Adjustments during the period | – | – | – | 1 | 1 | 129 | 3 | – | 134 |
Accumulated depreciation as of March 31, 2016 | – | (21) | (2,150) | (1,044) | (369) | (2,195) | (671) | (11) | (6,461) |
Carrying value as of March 31, 2016 | 970 | 617 | 4,023 | 635 | 310 | 1,286 | 399 | 8 | 8,248 |
Carrying value as of April 1, 2015 | 929 | 605 | 3,796 | 523 | 245 | 960 | 283 | 6 | 7,347 |
(1) | Buildings include ![]() ![]() |
(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 ![]() |
Gross carrying of leasehold land represents amounts 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 aggregate depreciation has been included under depreciation and amortisation expense in the statement of profit and loss.
Tangible assets provided on operating lease to subsidiaries as at September 30, 2016 and March 31, 2016 are as follows:
(In crore)
Particulars | Cost | Accumulated depreciation | Net book value |
Buildings | 197 | 79 | 118 |
197 | 75 | 122 | |
Plant and machinery | 32 | 16 | 16 |
33 | 14 | 19 | |
Furniture and fixtures | 25 | 14 | 11 |
25 | 12 | 13 | |
Computer Equipment | 3 | 2 | 1 |
3 | 2 | 1 | |
Office equipment | 18 | 8 | 10 |
18 | 7 | 11 |
The aggregate depreciation charged on the above
assets during the three months and six months ended September 30, 2016 amounted to 5 crore and
11 crore (
3 crore and
5 crore
for three months and six months ended September 30, 2015 respectively).
The rental income from subsidiaries for the
three months and six months ended September 30, 2016 amounted to 16 crore and
32 crore respectively (
12 crore and
20 crore
for the three months and six months ended September 30, 2015 respectively).
2.4 Intangible assets
Following are the changes in the carrying value of acquired intangible assets for the three months ended September 30, 2016:
(In crore)
Particulars | Sub-contracting rights related | Others | Total |
Gross carrying value as of July 1, 2016 | 21 | 9 | 30 |
Additions | – | – | – |
Deletion | – | – | – |
Gross carrying value as of September 30, 2016 | 21 | 9 | 30 |
Accumulated amortization as of July 1, 2016 | (21) | (9) | (30) |
Amortization expense | – | – | – |
Deletion | – | – | – |
Accumulated amortization as of September 30, 2016 | (21) | (9) | (30) |
Carrying value as of September 30, 2016 | – | – | – |
Following are the changes in the carrying value of acquired intangible assets for the three months ended September 30, 2015:
(In crore)
Particulars | Intellectual property rights related | Sub-contracting rights related | Others | Total |
Gross carrying value as of July 1, 2015 | 12 | 21 | 9 | 42 |
Additions | – | – | – | – |
Deletion | (12) | – | – | (12) |
Gross carrying value as of September 30, 2015 | – | 21 | 9 | 30 |
Accumulated amortization as of July 1, 2015 | (12) | (21) | (9) | (42) |
Amortization expense | – | – | – | – |
Deletion | 12 | – | – | 12 |
Accumulated amortization as of September 30, 2015 | – | (21) | (9) | (30) |
Carrying value as of September 30, 2015 | – | – | – | – |
Following are the changes in the carrying value of acquired intangible assets for the six months ended September 30, 2016:
(In crore)
Particulars | Sub-contracting rights related | Others | Total |
Gross carrying value as of April 1, 2016 | 21 | 9 | 30 |
Additions | – | – | – |
Deletion | – | – | – |
Gross carrying value as of September 30, 2016 | 21 | 9 | 30 |
Accumulated amortization as of April 1, 2016 | (21) | (9) | (30) |
Amortization expense | – | – | – |
Deletion | – | – | – |
Accumulated amortization as of September 30, 2016 | (21) | (9) | (30) |
Carrying value as of September 30, 2016 | – | – | – |
Following are the changes in the carrying value of acquired intangible assets for the six months ended September 30, 2015:
(In crore)
Particulars | Intellectual property rights related | Sub-contracting rights related | Others | Total |
Gross carrying value as of April 1, 2015 | 12 | 21 | 9 | 42 |
Additions | – | – | – | – |
Deletion | (12) | – | – | (12) |
Gross carrying value as of September 30, 2015 | – | 21 | 9 | 30 |
Accumulated amortization as of April 1, 2015 | (12) | (21) | (9) | (42) |
Amortization expense | – | – | – | – |
Deletion | 12 | – | – | 12 |
Accumulated amortization as of September 30, 2015 | – | (21) | (9) | (30) |
Carrying value as of September 30, 2015 | – | – | – | – |
Following are the changes in the carrying value of acquired intangible assets for the year ended March 31, 2016:
(In crore)
Particulars | Intellectual property rights related | Sub-contracting rights related | Others | Total |
Gross carrying value as of April 1, 2015 | 12 | 21 | 9 | 42 |
Additions | – | – | – | – |
Deletion/Retirement | (12) | – | – | (12) |
Gross carrying value as of March 31, 2016 | – | 21 | 9 | 30 |
Accumulated amortization as of April 1, 2015 | (12) | (21) | (9) | (42) |
Amortization expense | – | – | – | – |
Deletion/Retirement | 12 | – | – | 12 |
Accumulated amortization as of March 31, 2016 | – | (21) | (9) | (30) |
Carrying value as of March 31, 2016 | – | – | – | – |
Carrying value as of April 1, 2015 | – | – | – | – |
Research and development expense recognized
in net profit in the statement of profit and loss for the three months and six months ended September 30, 2016 is 89 crore and
168 crore (
89 crore and
223 crore for the three months and six months ended September 30, 2015)
2.5 INVESTMENTS
(In crore)
Particulars | As at | ||
September 30, 2016 | March 31, 2016 | April 1, 2015 | |
Non-current investments | |||
Equity instruments of subsidiaries | 7,153 | 6,901 | 4,873 |
Debentures of subsidiary | 2,279 | 2,549 | – |
Preference securities and equity investments | 133 | 93 | 1 |
Tax free bonds | 1,533 | 1,533 | 1,234 |
Non convertible debentures | 155 | – | – |
11,253 | 11,076 | 6,108 | |
Current investments | |||
Liquid mutual fund units | 1,903 | – | 749 |
Government bonds | 2 | 2 | – |
1,905 | 2 | 749 | |
Total carrying value | 13,158 | 11,078 | 6,857 |
in crore, except as otherwise stated
Particulars | As at | |
September 30, 2016 | March 31, 2016 | |
Non-current investments | ||
Unquoted | ||
Investment carried at cost | ||
Investments in equity instruments of subsidiaries | ||
Infosys BPO Limited | 659 | 659 |
3,38,22,319 (3,38,22,319) equity shares of ![]() |
||
Infosys Technologies (China) Co. Limited | 236 | 169 |
Infosys Technologies (Australia) Pty Limited | 66 | 66 |
1,01,08,869 (1,01,08,869) equity shares of AUD 0.11 par value, fully paid | ||
Infosys Technologies, S. de R.L. de C.V., Mexico | 65 | 65 |
17,49,99,990 (17,49,99,990) equity shares of MXN 1 par value, fully paid up | ||
Infosys Technologies (Sweden) AB | 51 | – |
1,000 (1,000) equity shares of SEK 100 par value, fully paid | ||
Infosys Technologia do Brasil Ltda | 149 | 149 |
5,91,24,348 (5,91,24,348) shares of BRL 1.00 par value, fully paid | ||
Infosys Technologies (Shanghai) Company Limited | 780 | 646 |
Infosys Public Services, Inc. | 99 | 99 |
3,50,00,000 (3,50,00,000) shares of USD 0.50 par value, fully paid | ||
Infosys Consulting Holding AG (formerly Lodestone Holding AG) | 1,323 | 1,323 |
23,350 (23,350) - Class A shares of CHF 1,000 each and 29,400 | ||
(29,400) - Class B Shares of CHF 100 each, fully paid up | ||
Infosys Americas Inc. | 1 | 1 |
10,000 (10,000) shares of USD 10 per share, fully paid up | ||
EdgeVerve Systems Limited (refer note 2.5.3) | 1,312 | 1,312 |
131,18,40,000 (131,18,40,000) equity shares of ![]() |
||
Panaya Inc. | 1,398 | 1,398 |
2 (2) shares of USD 0.01 per share, fully paid up | ||
Infosys Nova Holdings LLC | 94 | 94 |
Kallidus Inc. (refer note 2.5.2) | 619 | 619 |
10,21,35,416 (10,21,35,416) shares | ||
Skava Systems Private Limited (refer note 2.5.2) | 59 | 59 |
25,000 (25,000) shares of ![]() |
||
Noah Consulting LLC ( refer note 2.5.1) | 242 | 242 |
7,153 | 6,901 | |
Investment carried at amortised cost | ||
Investment in debentures of subsidiary | ||
EdgeVerve Systems Limited (refer note 2.5.3) | ||
22,79,00,000 (25,49,00,000) Unsecured redeemable, non-convertible debentures of ![]() |
2,279 | 2,549 |
2,279 | 2,549 | |
9,432 | 9,450 | |
Investment carried at fair value through other comprehensive income (FVOCI)(refer note 2.5.5) | ||
Preference securities | 132 | 92 |
Equity instruments | 1 | 1 |
133 | 93 | |
Quoted | ||
Investments carried at amortized cost | ||
Tax free bonds (refer note 2.5.6) | 1,533 | 1,533 |
1,533 | 1,533 | |
Investments carried at fair value through other comprehensive income(refer note 2.5.8) | ||
Non convertible debentures | 155 | – |
Total non-current investments | 11,253 | 11,076 |
Current investments | ||
Unquoted | ||
Investments carried at fair value through profit or loss | ||
Liquid mutual fund units (refer note 2.5.7) | 1,903 | – |
1,903 | – | |
Quoted | ||
Investments carried at amortized cost | ||
Government bonds (refer note 2.5.6) | 2 | 2 |
2 | 2 | |
Total current investments | 1,905 | 2 |
Total investments | 13,158 | 11,078 |
Aggregate amount of quoted investments | 1,690 | 1,535 |
Market value of quoted investments (including interest accrued) | 1,922 | 1,627 |
Aggregate amount of unquoted investments | 11,468 | 9,543 |
Aggregate amount of impairment in value of investments | 6 | 6 |
Investments carried at cost | 7,153 | 6,901 |
Investments carried at amortised cost | 3,814 | 4,084 |
Investments carried at fair value through other comprehensive income | 288 | 93 |
Investments carried at fair value through profit or loss | 1,903 | – |
2.5.1 Investment in 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 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 three months ended March 31, 2016 based on the assessment of Noah achieving the targets for the
respective periods, the entire contingent consideration was reversed.
2.5.2 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. During the six months ended September 30, 2016 contingent consideration of
40 crore was paid to the
sellers of Kallidus on the acheivement of certain financial targets.
2.5.3 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 were transferred and accordingly
a gain of
412 crore had been recorded as an exceptional item had been recorded as an exceptional item under previous GAAP. On
adoption of Ind AS, the same has been reversed from retained earnings and transferred to 'Business Transfer Adjustment Reserve',
in accordance with Ind AS 103 which requires common control transactions to be recorded at book values. . 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) were transferred and accordingly a gain of
3,036 crore had been recorded as an exceptional item
under previous GAAP. On adoption of Ind AS, the same has been reversed from retained earnings and transferred to 'Business Transfer
Adjustment Reserve' under retained earnings, in accordance with Ind AS 103 which requires common control transactions to be recorded
at book values.
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. During the six months ended September 30,
2016 EdgeVerve had repaid
270 crore by redeeming proportionate number of debentures.
2.5.4 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 was contingent upon their continued employment for a period of three years. The investment in Lodestone was recorded at the acquisition cost and the deferred consideration was being recognized on a proportionate basis over a period of three years from the date of acquisition. During the year ended March 31, 2016, the liability towards deferred consideration was settled.
2.5.5 Details of Investments
The details of investments in preference and equity instruments as at September 30, 2016 and March 31, 2016 are as follows:
(In crore)
Particulars | As at | |
September 30, 2016 | March 31, 2016 | |
Preference Securities | ||
Airviz Inc. | ||
2,82,279 (2,82,279) Series A Preferred Stock, fully paid up, par value USD 0.001 each | 13 | 13 |
ANSR Consulting | ||
52,631 (52,631) Series A Preferred Stock, fully paid up, par value USD 0.001 each | 9 | 9 |
Whoop Inc | ||
16,48,352 (16,48,352) Series B Preferred Stock, fully paid up, par value USD 0.0001 each | 20 | 20 |
CloudEndure Ltd. | ||
25,59,290 (12,79,645) Preferred Series B Shares, fully paid up, par value ILS 0.01 each | 27 | 13 |
Nivetti Systems Private Limited | ||
2,28,501 (2,28,501) Preferred Stock, fully paid up, par value ![]() |
10 | 10 |
Waterline Data Science, Inc | ||
39,33,910 (39,33,910) Preferred Series B Shares, fully paid up, par value USD 0.00001 each | 27 | 27 |
Trifacta Inc. | ||
11,80,358 (Nil) Preferred Stock | 26 | – |
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 | – | – |
Merasport Technologies Private Limited | ||
2,420 (2,420) equity shares at ![]() ![]() |
– | – |
Global Innovation and Technology Alliance | ||
15,000 (15,000) equity shares at ![]() ![]() |
1 | 1 |
133 | 93 |
2.5.6 Details of Investments in tax free bonds and government bonds
The balances held in tax free bonds as at September 30, 2016 and March 31, 2016 is as follows:
(In crore)
Particulars | As at September 30, 2016 | As at March 31, 2016 | |||
Face Value | 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 | 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 | 4,22,800 | 42 |
7.35% National Highways Authority of India Bonds 11JAN31 | 1,000/- | 5,71,396 | 57 | 5,71,396 | 57 |
68,02,646 | 1,533 | 68,02,646 | 1,533 |
The balances held in government bonds as at September 30, 2016 and March 31, 2016 is as follows:
(In crore)
Particulars | Face Value PHP | As at September 30, 2016 | As at March 31, 2016 | ||
Units | Amount | Units | Amount | ||
Treasury Notes PHY6972FW G18 MAT Date 22 Feb 2017 | 100 | 1,50,000 | 2 | 1,50,000 | 2 |
1,50,000 | 2 | 1,50,000 | 2 |
2.5.7 Details of investments in liquid mutual fund units
The balances held in liquid mutual fund as at September 30, 2016 is as follows
in crore
Particulars | As at September 30, 2016 | |
Units | Amount | |
HDFC Liquid Fund - Direct Plan - Growth Option | 13,18,178 | 409 |
ICICI Prudential Liquid Plan – Direct - Growth | 1,90,05,913 | 443 |
Reliance Liquid Fund - Treasury Plan - Direct Growth Plan - Growth Option | 11,76,385 | 451 |
IDFC Cash Fund - Growth - (Direct Plan) | 31,39,444 | 600 |
2,46,39,919 | 1,903 |
2.5.8 Details of investments in Non convertible debetures
The balances held in non convertible debenture as at September 30, 2016 is as follows
in crore, except as otherwise stated
Particulars | As at September 30, 2016 | |
Units | Amount | |
7.79 Life Insurance Corporation Housing Finance Limited 19JUNE2020 | 50,00,000 | 50 |
8.37 Life Insurance Corporation Housing Finance Limited 10MAY2021 | 50,00,000 | 53 |
8.46 Housing Development Finance Corporation Limited 11MARCH2019 | 50,00,000 | 52 |
1,50,00,000 | 155 |
2.6 LOANS
(In crore)
Particulars | As at | ||
September 30, 2016 | March 31, 2016 | April 1, 2015 | |
Non- Current | |||
Unsecured, considered good | |||
Other Loans | |||
Loans to employees | 5 | 5 | 4 |
5 | 5 | 4 | |
Unsecured, considered doubtful | |||
Loans to employees | 15 | 13 | 10 |
20 | 18 | 14 | |
Less: Allowance for doubtful loans to employees | 15 | 13 | 10 |
5 | 5 | 4 | |
Current | |||
Unsecured, considered good | |||
Loans to subsidiary (Refer to note 2.25) | 93 | 91 | 24 |
Other Loans | |||
Loans to employees | 228 | 264 | 201 |
321 | 355 | 225 | |
Total Loans | 326 | 360 | 229 |
2.7 OTHER FINANCIAL ASSETS
(In crore)
Particulars | As at | ||
September 30, 2016 | March 31, 2016 | April 1, 2015 | |
Non-current | |||
Security deposits (1) | 77 | 73 | 65 |
Rental deposits (1)(4) | 129 | 119 | 45 |
206 | 192 | 110 | |
Current | |||
Security deposits (1) | 1 | 1 | 1 |
Rental deposits (1) | 2 | 2 | 6 |
Restricted deposits (1) | 1,240 | 1,154 | 1,039 |
Unbilled revenues (1)(5) | 3,474 | 2,673 | 2,423 |
Interest accrued but not due (1) | 1,398 | 696 | 433 |
Foreign currency forward and options contracts (2)(3) | 82 | 109 | 94 |
Others (1)(6) | 89 | 166 | 49 |
6,286 | 4,801 | 4,045 | |
Total | 6,492 | 4,993 | 4,155 |
(1) Financial assets carried at amortized cost | 6,410 | 4,884 | 4,061 |
(2) Financial assets carried at fair value through other comprehensive income | 2 | – | – |
(3) Financial assets carried at fair value through Profit or Loss | 80 | 109 | 94 |
(4) Includes dues from subsidiaries (Refer note 2.25) | – | 21 | 21 |
(5) Includes dues from subsidiaries (Refer note 2.25) | 27 | 20 | 6 |
(6) Includes dues from subsidiaries (Refer note 2.25) | 16 | 24 | 43 |
Restricted deposits represent deposit with financial institutions to settle employee related obligations as and when they arise during the normal course of business
2.8 TRADE RECEIVABLES (1)
(In crore)
Particulars | As at | ||
September 30, 2016 | March 31, 2016 | April 1, 2015 | |
Current | |||
Unsecured | |||
Considered good(2) | 10,168 | 9,798 | 8,627 |
Considered doubtful | 175 | 249 | 322 |
10,343 | 10,047 | 8,949 | |
Less: Allowances for credit losses | 175 | 249 | 322 |
10,168 | 9,798 | 8,627 | |
(1) Includes dues from companies where directors are interested | – | 1 | 6 |
(2) Includes dues from subsidiaries (refer note 2.25) | 291 | 244 | 309 |
2.9 CASH AND CASH EQUIVALENTS
(In crore)
Particulars | As at | ||
September 30, 2016 | March 31, 2016 | April 1, 2015 | |
Balances with banks | |||
In current and deposit accounts | 23,067 | 24,276 | 23,722 |
Cash on hand | – | – | – |
Others | |||
Deposits with financial institution | 4,900 | 4,900 | 4,000 |
27,967 | 29,176 | 27,722 | |
Balances with banks in unpaid dividend accounts | 18 | 5 | 3 |
Deposit with more than 12 months maturity | 267 | 237 | 182 |
Balances with banks held as margin money deposits against guarantees | 352 | 336 | 185 |
Cash and cash equivalents as of September 30,
2016, March 31, 2016 and April 1, 2015 include restricted cash and bank balances of 370 crore,
341 crore,
188 crore, respectively.
The restrictions are primarily on account of bank balances held as margin money deposits against guarantees and balances held in
unpaid dividends bank accounts.
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)
Particular | As at | |
September 30, 2016 | March 31, 2016 | |
In current accounts | ||
ANZ Bank, Taiwan | 18 | 13 |
Bank of America, USA | 585 | 563 |
Citibank N.A., Australia | 51 | 24 |
Citibank N.A., India | 1 | 1 |
Citibank N.A., Dubai | 1 | 1 |
Citibank N.A., EEFC (U.S. Dollar account) | 1 | - |
Citibank N.A., Japan | 18 | 15 |
Citibank N.A., New Zealand | 6 | 2 |
Citibank N.A., South Africa | 6 | 4 |
Deutsche Bank, Philippines | 9 | 11 |
Deutsche Bank, India | 8 | 4 |
Deutsche Bank, EEFC (Euro account) | 13 | 17 |
Deutsche Bank, EEFC (United Kingdom Pound Sterling account) | 6 | 8 |
Deutsche Bank, EEFC (Australian Dollar account) | 50 | 2 |
Deutsche Bank, EEFC (U.S. Dollar account) | 38 | 95 |
Deutsche Bank, EEFC (Swiss Franc account) | 1 | 2 |
Deutsche Bank, Belgium | 50 | 59 |
Deutsche Bank, France | 7 | 10 |
Deutsche Bank, Germany | 19 | 17 |
Deutsche Bank, Netherlands | 5 | 4 |
Deutsche Bank, Russia (U.S. Dollar account) | 4 | 1 |
Deutsche Bank, Russia (Russian Ruble account) | 2 | 2 |
Deutsche Bank, Singapore | 1 | 4 |
Deutsche Bank, Switzerland | 6 | 1 |
Deutsche Bank, United Kingdom | 34 | 170 |
Deutsche Bank, Malaysia | – | 9 |
HSBC Bank, Hong Kong | 5 | 1 |
ICICI Bank, India | 35 | 57 |
ICICI Bank, EEFC (U.S. Dollar account) | 7 | 10 |
Nordbanken, Sweden | 3 | 5 |
Punjab National Bank, India | 3 | 4 |
Royal Bank of Canada, Canada | 14 | 24 |
State Bank of India | 6 | 7 |
1,013 | 1,147 |
(In crore)
Particulars | As at | |
September 30, 2016 | March 31, 2016 | |
In deposit accounts | ||
Andhra Bank | 848 | 848 |
Axis Bank | 1,500 | 1,170 |
Canara Bank | 1,861 | 1,861 |
Central Bank of India | 1,518 | 1,518 |
Corporation Bank | 1,185 | 1,185 |
HDFC Bank | 1,877 | 2,500 |
ICICI Bank | 3,361 | 3,755 |
IDBI Bank | 1,750 | 1,750 |
Indusind Bank | 250 | 250 |
Indian Overseas Bank | 1,000 | 1,000 |
Jammu & Kashmir Bank | 25 | 25 |
Kotak Mahindra Bank Limited | 375 | 492 |
Oriental Bank of Commerce | 1,967 | 1,967 |
State Bank of India | 2,311 | 2,310 |
Syndicate Bank | 949 | 1,250 |
Union Bank of India | 7 | 7 |
Vijaya Bank | 200 | 200 |
Yes Bank | 700 | 700 |
21,684 | 22,788 | |
In unpaid dividend accounts | ||
Axis Bank - Unpaid dividend account | 2 | 2 |
HDFC Bank - Unpaid dividend account | 3 | 1 |
ICICI Bank - Unpaid dividend account | 13 | 2 |
18 | 5 | |
In margin money deposits against guarantees | ||
Canara Bank | 159 | 132 |
ICICI Bank | 154 | 147 |
State Bank of India | 39 | 57 |
352 | 336 | |
Deposits with financial institution | ||
HDFC Limited | 4,900 | 4,900 |
4,900 | 4,900 | |
Total cash and cash equivalents as per Balance Sheet | 27,967 | 29,176 |
2.10 OTHER ASSETS
(In crore)
Particulars | As at | ||
September 30, 2016 | March 31, 2016 | April 1, 2015 | |
Non-current | |||
Capital advances | 445 | 333 | 316 |
Advances other than capital advance | |||
Prepaid gratuity (Refer note 2.22) | 6 | 2 | 26 |
Others | |||
Prepaid expenses | 73 | 87 | 7 |
Deferred contract cost | 310 | 333 | – |
834 | 755 | 349 | |
Current | |||
Advances other than capital advance | |||
Payment to vendors for supply of goods | 49 | 58 | 60 |
Others | |||
Prepaid expenses (1) | 257 | 209 | 71 |
Deferred contract cost | 59 | 48 | – |
Withholding taxes and others | 1,435 | 1,650 | 1,253 |
1,800 | 1,965 | 1,384 | |
Total other assets | 2,634 | 2,720 | 1,733 |
(1) Includes dues from subsidiaries (Refer note 2.25) | 55 | 43 | – |
Deferred contract costs are upfront costs incurred for the contract and are amortized over the term of the contract. Withholding taxes and others primarily consist of input tax credits.
2.11 FINANCIAL INSTRUMENTS
Financial instruments by category
The carrying value and fair value of financial instruments by categories as of September 30, 2016 were as follows:
(In crore)
Particulars | Amortised cost | Financial assets/ liabilities at fair value through profit or loss | Financial assets/liabilities at fair value through OCI | Total carrying value | Total fair value | ||
Designated upon initial recognition | Mandatory | Equity instruments designated upon initial recognition | Mandatory | ||||
Assets: | |||||||
Cash and cash equivalents (Refer Note 2.9) | 27,967 | – | – | – | – | 27,967 | 27,967 |
Investments (Refer note 2.5) | |||||||
Equity and preference securities | – | – | – | 133 | – | 133 | 133 |
Tax free bonds and government bonds | 1,535 | – | – | – | – | 1,535 | 1,767* |
Liquid mutual fund units | – | – | 1,903 | – | – | 1,903 | 1,903 |
Redeemable, non-convertible debentures (1) | 2,279 | – | – | – | – | 2,279 | 2,279 |
Non convertible debentures | – | – | – | – | 155 | 155 | 155 |
Trade receivables (Refer Note 2.8) | 10,168 | – | – | – | – | 10,168 | 10,168 |
Loans (Refer note 2.6) | 326 | – | – | – | – | 326 | 326 |
Other financial assets (Refer Note 2.7) | 6,410 | – | 80 | – | 2 | 6,492 | 6,492 |
Total | 48,685 | – | 1,983 | 133 | 157 | 50,958 | 51,190 |
Liabilities: | |||||||
Trade payables (Refer Note 2.14) | 272 | – | – | – | – | 272 | 272 |
Other financial liabilities (Refer Note 2.13) | 3,859 | – | 85 | – | – | 3,944 | 3,944 |
Total | 4,131 | – | 85 | – | – | 4,216 | 4,216 |
The carrying value and fair value of financial instruments by categories as of March 31, 2016 were as follows:
(In crore)
Particulars | Amortised cost | Financial assets/ liabilities at fair value through profit or loss | Financial assets/liabilities at fair value through OCI | Total carrying value | Total fair value | ||
Designated upon initial recognition | Mandatory | Equity instruments designated upon initial recognition | Mandatory | ||||
Assets: | |||||||
Cash and cash equivalents (Refer Note 2.9) | 29,176 | – | – | – | – | 29,176 | 29,176 |
Investments (Refer Note 2.5) | |||||||
Equity and preference securities | – | – | – | 93 | – | 93 | 93 |
Tax free bonds and government bonds | 1,535 | – | – | – | – | 1,535 | 1,627* |
Redeemable, non-convertible debentures (1) | 2,549 | – | – | – | – | 2,549 | 2,549 |
Trade receivables (Refer Note 2.8) | 9,798 | – | – | – | – | 9,798 | 9,798 |
Loans (Refer note 2.6) | 360 | – | – | – | – | 360 | 360 |
Other financial assets (Refer Note 2.7) | 4,884 | – | 109 | – | – | 4,993 | 4,993 |
Total | 48,302 | – | 109 | 93 | – | 48,504 | 48,596 |
Liabilities: | |||||||
Trade payables (Refer note 2.14) | 623 | – | – | – | – | 623 | 623 |
Other financial liabilities (Refer Note 2.13) | 3,947 | – | 117 | – | – | 4,064 | 4,064 |
Total | 4,570 | – | 117 | – | – | 4,687 | 4,687 |
(1) | The carrying value of debentures approximates fair value as the instruments are at prevailing market rates |
The carrying value and fair value of financial instruments by categories as of April 1, 2015 were as follows:
(In crore)
Particulars | Amortised cost | Financial assets/ liabilities at fair value through profit or loss | Financial assets/liabilities at fair value through OCI | Total carrying value | Total fair value | ||
Designated upon initial recognition | Mandatory | Equity instruments designated upon initial recognition | Mandatory | ||||
Assets: | |||||||
Cash and cash equivalents (Refer Note 2.9) | 27,722 | – | – | – | – | 27,722 | 27,722 |
Investments (Refer Note 2.5) | |||||||
Equity, preference and other securities | – | – | – | 1 | – | 1 | 1 |
Bonds and government bonds | 1,234 | – | – | – | – | 1,234 | 1,269* |
Liquid mutual fund units | – | – | 749 | – | – | 749 | 749 |
Trade receivables (Refer Note 2.8) | 8,627 | – | – | – | – | 8,627 | 8,627 |
Loans (Refer note 2.6) | 229 | – | – | – | – | 229 | 229 |
Other financial assets (Refer Note 2.7) | 4,061 | – | 94 | – | – | 4,155 | 4,155 |
Total | 41,873 | – | 843 | 1 | – | 42,717 | 42,752 |
Liabilities: | |||||||
Trade payables (Refer note 2.14) | 124 | – | – | – | – | 124 | 124 |
Other financial liabilities (Refer Note 2.13) | 3,967 | – | – | – | – | 3,967 | 3,967 |
Total | 4,091 | – | – | – | – | 4,091 | 4,091 |
* On account of fair value changes including interest accrued
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 September 30, 2016:
(In crore)
Particulars | As of September 30, 2016 | Fair value measurement at end of the reporting period/year using | ||
Level 1 | Level 2 | Level 3 | ||
Assets | ||||
Investments in liquid mutual fund units (Refer Note 2.5) | 1,903 | 1,903 | – | – |
Investments in tax free bonds (Refer Note 2.5) | 1,765 | 200 | 1,565 | – |
Investments in government bonds (Refer Note 2.5) | 2 | 2 | – | – |
Investments in equity instruments (Refer Note 2.5) | 1 | – | – | 1 |
Investments in preference securities (Refer Note 2.5) | 132 | – | – | 132 |
Investments in non convertible debentures (Refer Note 2.5) | 155 | 155 | – | – |
Derivative financial instruments - foreign currency forward and option contracts (Refer Note 2.7) | 82 | – | 82 | – |
Liabilities | ||||
Derivative financial instruments - foreign currency forward and option contracts (Refer Note 2.13) | 2 | – | 2 | – |
Liability towards contingent consideration (Refer note 2.13)* | 83 | – | – | 83 |
* Discounted $14 million (approximately 93
crore) at 13.4%
During the six months ended September 30, 2016,
tax free bonds of 115 crore were transferred from Level 1 to Level 2 of fair value hierarchy, since these were valued based on
market observable 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)
Particulars | As of March 31, 2016 | Fair value measurement at end of the reporting period/year using | ||
Level 1 | Level 2 | Level 3 | ||
Assets | ||||
Investments in tax free bonds (Refer Note 2.5) | 1,625 | 298 | 1,327 | – |
Investments in government bonds (Refer Note 2.5) | 2 | 2 | – | – |
Investments in equity instruments (Refer Note 2.5) | 1 | – | – | 1 |
Investments in preference securities (Refer Note 2.5) | 92 | – | – | 92 |
Derivative financial instruments - foreign currency forward and option contracts (Refer note 2.7) | 109 | – | 109 | – |
Liabilities | ||||
Derivative financial instruments - foreign currency forward and option contracts (Refer note 2.13) | 2 | – | 2 | – |
Liability towards contingent consideration (Refer note 2.13)* | 115 | – | – | 115 |
*Discounted $20 million (approximately 132
crore) at 13.7%
The following table presents fair value hierarchy of assets and liabilities measured at fair value on a recurring basis as of April 1, 2015:
(In crore)
Particulars | As of April 1, 2015 | Fair value measurement at end of the reporting period/year using | ||
Level 1 | Level 2 | Level 3 | ||
Assets | ||||
Investments in liquid mutual fund units (Refer Note 2.5) | 749 | 749 | – | – |
Investments in tax free bonds (Refer Note 2.5) | 1,269 | 533 | 736 | – |
Investments in equity instruments (Refer Note 2.5) | 1 | – | – | 1 |
Derivative financial instruments - foreign currency forward and option contracts (Refer note 2.7) | 94 | – | 94 | – |
Liabilities | ||||
Derivative financial instruments - foreign currency forward and option contracts (Refer note 2.13) | – | – | – | – |
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 movement in contingent consideration as
of September 30, 2016 from March 31, 2016 is on account of settlement of contingent consideration of 40 crore and change in discount
rates and passage of time.
The fair value of liquid mutual funds is based on quoted price. The fair value of tax free bonds and government bonds is based on quoted prices and market observable inputs. The fair value is of non-convertible debentures is based on quoted prices. 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.
Financial risk management
Financial risk factors
The Company's activities expose it to a variety of financial risks: market risk, credit risk and liquidity risk. The Company'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 Company is foreign exchange risk. The Company uses derivative financial instruments to mitigate foreign exchange related risk exposures. The Company'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.
Market risk
The Company operates internationally and a major portion of the business is transacted in several currencies and consequently the Company 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 Company 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 Company’s operations are adversely affected as the rupee appreciates/ depreciates against these currencies.
The following table analyzes foreign currency risk from financial instruments as of September 30, 2016:
(In crore)
Particulars | U.S. dollars | Euro | United Kingdom Pound Sterling | Australian dollars | Other currencies | Total |
Cash and cash equivalents | 636 | 95 | 40 | 101 | 89 | 961 |
Trade receivables | 7,212 | 1,100 | 575 | 590 | 339 | 9,816 |
Other financials assets ( including loans) | 2,482 | 427 | 455 | 142 | 145 | 3,651 |
Trade payables | (116) | (19) | (72) | (29) | (17) | (253) |
Other financial liabilities | (1,881) | (247) | (172) | (210) | (149) | (2,659) |
Net assets / (liabilities) | 8,333 | 1,356 | 826 | 594 | 407 | 11,516 |
The following table analyzes foreign currency risk from financial instruments as of March 31, 2016
(In crore)
Particulars | U.S. dollars | Euro | United Kingdom Pound Sterling | Australian dollars | Other currencies | Total |
Cash and cash equivalents | 670 | 107 | 178 | 26 | 93 | 1,074 |
Trade Receivables | 6,875 | 973 | 664 | 539 | 296 | 9,347 |
Other financials assets ( including loans) | 2,005 | 370 | 210 | 108 | 125 | 2,818 |
Trade payables | (199) | (42) | (133) | (32) | (39) | (445) |
Other financial liabilities | (2,241) | (232) | (139) | (200) | (146) | (2,958) |
Net assets / (liabilities) | 7,110 | 1,176 | 780 | 441 | 329 | 9,836 |
For the three month ended September 30, 2016 and September 30, 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 0.53% and 0.54%, respectively.
For the six month ended September 30, 2016 and September 30, 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 0.51% and 0.53%, 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.
Derivative financial instruments
The Company holds derivative financial instruments such as foreign currency 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:
(In crore)
Particulars | As of | As of | ||
September 30, 2016 | March 31, 2016 | |||
In million | In![]() |
In million | In![]() | |
Forward contracts | ||||
In U.S. dollars | 505 | 3,365 | 467 | 3,094 |
In Euro | 91 | 677 | 84 | 633 |
In United Kingdom Pound Sterling | 50 | 432 | 60 | 573 |
In Australian dollars | 30 | 152 | 50 | 255 |
In Swiss Franc | 19 | 133 | 25 | 173 |
Option Contracts | ||||
In U.S. dollars | 150 | 1,000 | 125 | 828 |
In GBP | 25 | 216 | – | – |
In Euro | 25 | 186 | – | – |
Total forwards and options | 6,161 | 5,556 |
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)
Particulars | As of | |
September 30, 2016 | March 31, 2016 | |
Not later than one month | 1,092 | 1,468 |
Later than one month and not later than three months | 2,984 | 3,260 |
Later than three months and not later than one year | 2,085 | 828 |
6,161 | 5,556 |
During the three months ended September 30,
2016, the company has designated certain foreign exchange forward contracts as cash flow hedges to mitigate the risk of foreign
exchange exposure on highly probable forecast cash transactions. Accordingly, the fair value changes of 2 crore was recorded in
the other comprehensive income for the three months and six months ended September 30, 2016. The related hedge transactions for
balance in cash flow hedging reserve are expected to occur and reclassified to the statement of profit and loss within 3 months.
The company offsets a financial asset and a financial liability when it currently has a legally enforceable right to set off the recognized amounts and the company 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)
Particulars | As of | As of | ||
September 30, 2016 | March 31, 2016 | |||
Derivative financial asset | Derivative financial liability | Derivative financial asset |
Derivative financial liability | |
Gross amount of recognized financial asset/liability | 83 | (3) | 117 | (10) |
Amount set off | (1) | 1 | (8) | 8 |
Net amount presented in balance sheet | 82 | (2) | 109 | (2) |
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 10,168 crore and
9,798 crore as of September 30, 2016 and March 31, 2016, respectively
and unbilled revenue amounting to
3,474 crore and
2,673 crore as of September 30, 2016 and March 31, 2016, 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 has always been managed by the group 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. On account
of adoption of Ind AS 109, the group uses expected credit loss model to assess the impairment loss or gain. The group uses a provision
matrix to compute the expected credit loss allowance for trade receivables and unbilled revenues. The provision matrix takes into
account available external and internal credit risk factors such as credit default swap quotes, credit ratings from international
credit rating agencies and the Group's historical experience for customers.
The following table gives details in respect of percentage of revenues generated from top customer and top five customers:
(In %)
Particulars | Three months ended September 30, | Six months ended September 30, | ||
2016 | 2015 | 2016 | 2015 | |
Revenue from top customer | 4.0 | 4.3 | 4.1 | 4.2 |
Revenue from top five customers | 14.7 | 15.9 | 15.1 | 15.7 |
Credit risk exposure
The allowance for lifetime expected credit loss
on customer balances for the three months and six months ended September 30, 2016 was 21 crore and
44 crore. The allowance for
lifetime expected credit loss on customer balances for the three months ended September 30, 2015 was
5 crore. The reversal of
allowance for lifetime expected credit loss on customer balances for the six months ended September 30, 2015 was
14 crore.
(In crore)
Particulars | Three months ended September 30, | Six months ended September 30, | ||
2016 | 2015 | 2016 | 2015 | |
Balance at the beginning | 275 | 307 | 249 | 322 |
Impairment loss recognised/ reversed (Refer note 2.20) | 21 | 5 | 44 | (14) |
Amounts written off | (1) | – | (1) | – |
Translation differences | (2) | – | 1 | 4 |
Balance at the end | 293 | 312 | 293 | 312 |
Credit risk on cash and cash equivalents is limited as we generally invest in deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units, quoted bonds issued by government and quasi government organizations, non convertible debentures issued by government aided institutions and certificates of deposit which are funds deposited at a bank for a specified time period.
Liquidity risk
The company's principal sources of liquidity are cash and cash equivalents and the cash flow that is generated from operations. The company has no outstanding bank borrowings. The company believes that the working capital is sufficient to meet its current requirements. Accordingly, no liquidity risk is perceived.
As of September 30, 2016, the Company had a
working capital of 36,589 crore including cash and cash equivalents of
27,967 crore and current investments of
1,905 crore.
As of March 31, 2016, the Company had a working capital of
34,509 crore including cash and cash equivalents of
29,176 crore and
current investments of
2 crore.
As of September 30, 2016 and March 31, 2016,
the outstanding employee benefit obligations were 1,223 crore and
1,130 crore, respectively, which have been substantially funded.
Accordingly, no liquidity risk is perceived.
The table below provides details regarding the contractual maturities of significant financial liabilities as of September 30, 2016:
(In crore)
Particulars | Less than 1 year | 1-2 years | 2-4 years | 4-7 years | Total |
Trade payables | 272 | – | – | – | 272 |
Other financial liabilities (excluding liability towards acquisition) (Refer Note 2.13) | 3,861 | – | – | – | 3,861 |
Liability towards acquisitions on an undiscounted basis (including contingent consideration) | 46 | 47 | – | – | 93 |
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 | 623 | – | – | – | 623 |
Other liabilities (excluding liability towards acquisition) (Refer Note 2.13) | 3,922 | 27 | – | – | 3,949 |
Liability towards acquisitions on an undiscounted basis (including contingent consideration) | 86 | 46 | – | – | 132 |
2.12 EQUITY
EQUITY SHARE CAPITAL
in crore, except as otherwise stated
Particulars | As at | ||
September 30, 2016 | March 31, 2016 | April 1, 2015 | |
Authorized | |||
Equity shares, ![]() |
|||
240,00,00,000 (240,00,00,000(2)) equity shares | 1,200 | 1,200 | 600 |
Issued, Subscribed and Paid-Up | |||
Equity shares, ![]() |
1,148 | 1,148 | 574 |
229,69,44,664 (229,69,44,664(2)) equity shares fully paid-up | |||
1,148 | 1,148 | 574 |
(1) Refer note 2.23 for details of basic and diluted shares
(2) Represents number of shares as of March 31, 2016
The authorised equity shares were 120,00,00,000 and the issued, subscribed and paid-up shares were 114,84,72,332 as of April 1, 2015.
Forfeited shares amounted to 1,500/- (
1,500/-)
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 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.
In the period of five years immediately preceding September 30, 2016:
The Company has allotted 114,84,72,332 and 57,42,36,166
fully paid-up shares of face value 5/- each during the quarter ended June 30, 2015 and December 31, 2014, pursuant to bonus issue
approved by the shareholders through postal ballot. 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.
The Board of Directors, in its meeting on April
15, 2016, proposed a final dividend of 14.25/- per equity share and the same was approved by the shareholders at the Annual General
Meeting held on June 18, 2016. The amount was recognized as distributions to equity shareholders during the six months ended September
30, 2016 and the total appropriation was
3,939 crore including corporate dividend tax. (Refer note 2.2.1 for impact on transition
to Ind AS)
The amount of per share dividend recognized
as distributions to equity shareholders during the six month ended September 30, 2015 was 29.50/- per equity share (not adjusted
for June 17, 2015 bonus issue).
The Board of Directors, in their meeting on
October 14, 2016, declared an interim dividend of 11/- per equity share, which would result in a cash outflow of approximately
3,041 crore, inclusive of corporate dividend tax.
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 September 30, 2016 and March 31, 2016 are set out below :
in crore, except as stated otherwise
Name of the shareholder | As at September 30, 2016 | As at March 31, 2016 | ||
Number of shares | % held | Number of shares | % held | |
Deutsche Bank Trust Company Americas (Depository of ADR's - legal ownership) | 38,53,17,937 | 16.78 | 38,53,17,937 | 16.78 |
Life Insurance Corporation of India | 14,83,67,646 | 6.46 | 13,22,74,300 | 5.76 |
The reconciliation of the number of shares outstanding and the amount of share capital as at September 30, 2016 and March 31, 2016 is set out below:
in crore, except as stated otherwise
Particulars | As at September 30, 2016 | As at March 31, 2016 | ||
Number of shares | Amount | Number of shares | Amount | |
Number of shares at the beginning of the period | 2,29,69,44,664 | 1,148 | 1,14,84,72,332 | 574 |
Add: Bonus shares issued (including bonus on treasury shares) | – | – | 1,14,84,72,332 | 574 |
Number of shares at the end of the period | 2,29,69,44,664 | 1,148 | 2,29,69,44,664 | 1,148 |
Employee Stock Option Plan (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 were held by the Trust towards the 2011 Plan as at March 31, 2016). 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.
On August 1, 2016, the company granted 17,83,615
RSUs (includes equity shares and equity shares represented by ADS) at par value, to employees upto mid management (excluding grants
made to Dr. Vishal Sikka). Further, the company granted 73,020 Incentive Units (cash-settled) to eligible employees. These instruments
will vest equally over a period of 4 years and are subject to continued service. As of September 30, 2016, 1,11,92,934 shares are
held by the trust towards 2015 Plan. As of September 30, 2016, 72,795 Incentive Units were outstanding (net of forfeitures) and
the carrying value of the cash liability is less than 1 crore.
Pursuant to the approval from the shareholders
through postal ballot on March 31, 2016, Dr. Vishal Sikka is eligible to receive under the 2015 Plan, an annual grant of RSU's
of fair value $2,000,000 which vest over time, subject to continued service, and an annual grant of performance based equity and
stock options of $5,000,000 subject to achievement of performance targets set by the Board or its committee, which vest over
time. $2,000,000 of fair value in RSUs for financial year 2017 was granted on August 1, 2016 amounting to 120,700 RSUs in equity
shares represented by ADS. The performance based RSU and Options pertaining to financial year 2017 has not yet been granted as
of September 30, 2016. Though the performance based RSU and Options for fiscal 2017 and time based RSU’s for the remaining
employment term have not been granted as of September 30, 2016, in accordance with Ind AS 102 Share-based Payment, the company
has recorded employee stock based compensation expense.The company has recorded employee stock based compensation expense of 5
crore and
2 crore and
14 crore and
4 crore during the three months and six months ended September 30, 2016 and September 30,
2015 respectively, towards CEO compensation.
2011 RSU Plan (the 2011 Plan) now called 2015 Stock Incentive Compensation Plan ( the 2015 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 as on date of approval of plan adjusted for bonus shares and the plan was expected to continue in effect for a term of 10 years from the date of initial grant under the plan. Awards have been granted to Dr. Vishal Sikka under the 2011 RSU plan as detailed below. Further the Company has earmarked 1,00,000 equity shares for welfare activities of the employees, approved by the shareholders vide postal ballot which ended on March 31, 2016. The equity shares as of March 31, 2016 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 1,00,000 equity shares which have been earmarked for welfare activities of the employees) have been subsumed under the 2015 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 Officer 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.
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 2015 Plan (formerly 2011 RSU Plan) for equity-settled share based payment transactions during the three months and six months ended September 30, 2016 is set out below:
Particulars | Three months ended September 30, 2016 |
Six months ended September 30, 2016 | ||
Shares arising out of options | Weighted average exercise price (![]() |
Shares arising out of options | Weighted average exercise price (![]() | |
2015 Plan (Formerly 2011 Plan): Indian equity shares (IES) | ||||
Outstanding at the beginning* | 2,09,099 | 5 | 2,21,505 | 5 |
Granted | 15,12,895 | 5 | 15,12,895 | 5 |
Forfeited and expired | 12,650 | 5 | 12,650 | 5 |
Exercised | 18,236 | 5 | 30,642 | 5 |
Outstanding at the end | 16,91,108 | 5 | 16,91,108 | 5 |
Exercisable at the end | – | – | – | – |
*adjusted for bonus issues (Refer above note 2.12)
Particulars | Three months ended September 30, 2016 |
Six months ended September 30, 2016 | ||
Shares arising out of options | Weighted average exercise price ($) | Shares arising out of options | Weighted average exercise price ($) | |
2015 Plan (Formerly 2011 Plan): American Depository Shares (ADS) | ||||
Outstanding at the beginning | – | – | – | – |
Granted | 3,91,420 | 0.07 | 3,91,420 | 0.07 |
Forfeited and expired | 10,120 | 0.07 | 10,120 | 0.07 |
Exercised | – | – | – | – |
Outstanding at the end | 3,81,300 | 0.07 | 3,81,300 | 0.07 |
Exercisable at the end | – | – | – | – |
The activity in the 2015 Plan (formerly 2011 RSU Plan) for equity-settled share based payment transactions during the three months and six months ended September 30, 2015 is set out below:
Particulars | Three months ended September 30, 2015 |
Six months ended September 30, 2015 | ||
Shares arising out of options | Weighted average exercise price ![]() |
Shares arising out of options | Weighted average exercise price ![]() | |
2015 Plan (Formerly 2011 Plan): Indian equity shares (IES) | ||||
Outstanding at the beginning* | 2,32,329 | 5 | 1,08,268 | 5 |
Granted | – | – | 1,24,061 | 5 |
Forfeited and expired | – | – | – | – |
Exercised* | 9,116 | 5 | 9,116 | 5 |
Outstanding at the end | 2,23,213 | 5 | 2,23,213 | 5 |
Exercisable at the end | – | – | – | – |
* adjusted for bonus issues (Refer above note 2.12)
During the three months and six months ended
September 30, 2016, the weighted average share price of options exercised under the 2015 Plan on the date of exercise was 1,021/-
and
1,096/-
During the three months and six months ended
September 30, 2015, the weighted average share price of options exercised under the 2015 Plan on the date of exercise was 1,092/-
The weighted average remaining contractual life of RSUs outstanding as of September 30, 2016 and March 31, 2016 under the 2015 Plan was 2.27 years and 1.98 years respectively.
The fair value of each equity settled RSU is estimated on the date of grant using the Black-Scholes-Merton model with the following assumptions:
Particulars | For options granted in | |||
Fiscal 2017- Equity Shares |
Fiscal 2017- ADS |
Fiscal 2016- Equity Shares |
Fiscal 2015- Equity Shares | |
Grant date | 1-Aug-16 | 1-Aug-16 | 22-Jun-15 | 21-Aug-14 |
Weighted average share price (![]() |
1,085 | 16.57 | 1,024 | 3,549 |
Exercise price (![]() |
5.00 | 0.07 | 5.00 | 5.00 |
Expected volatility (%) | 25-29 | 26-30 | 28-36 | 30-37 |
Expected life of the option (years) | 1 - 4 | 1 - 4 | 1 - 4 | 1 - 4 |
Expected dividends (%) | 2.37 | 2.29 | 2.43 | 1.84 |
Risk-free interest rate (%) | 6- 7 | 0.5 - 1 | 7- 8 | 8- 9 |
Weighted average fair value as on grant date (![]() |
1,019 | 15.59 | 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 three months and six months ended
September 30, 2016 and September 30, 2015, the company recorded an employee stock compensation expense of 20 crore and
2 crore
and
29 crore and
4 crore, respectively in the statement of profit and loss. The cash settled stock compensation expense during
each of the three months and six months ended September 30, 2016 was less than
1 crore.
2.13 OTHER FINANCIAL LIABLITIES
(In crore)
Particulars | As at | ||
September 30, 2016 | March 31, 2016 | April 1, 2015 | |
Non-current | |||
Rental deposits (1) | – | 27 | 27 |
Payable for acquisition of business (refer Note 2.5.1 and 2.5.2) | 39 | 35 | – |
39 | 62 | 27 | |
Current | |||
Unpaid dividends | 18 | 5 | 3 |
Others | |||
Accrued compensation to employees | 1,558 | 1,764 | 1,719 |
Accrued expenses (2) | 1,953 | 1,707 | 1,582 |
Retention monies | 56 | 58 | 50 |
Payable for acquisition of business (refer Note 2.5.1 and Note 2.5.2) | |||
- Deferred consideration | – | – | 487 |
- Contingent consideration | 44 | 80 | – |
Client deposits | 4 | 16 | 20 |
Capital creditors | 35 | 66 | 37 |
Compensated absences | 1,223 | 1,130 | 907 |
Other payables (3) | 235 | 304 | 42 |
Foreign currency forward and options contracts | 2 | 2 | – |
5,128 | 5,132 | 4,847 | |
Total financial liabilities | 5,167 | 5,194 | 4,874 |
Financial liability carried at amortized cost | 3,859 | 3,947 | 3,967 |
Financial liability carried at fair value through profit or loss | 85 | 117 | – |
Liability towards acquisition of business on undiscounted basis | 93 | 132 | – |
(1) Includes dues to subsidiaries (Refer note 2.25) | – | 27 | 27 |
(2) Includes dues to subsidiaries (Refer note 2.25) | 13 | 29 | 36 |
(3) Includes dues to subsidiaries (Refer note 2.25) | 26 | 38 | 33 |
2.14 TRADE PAYABLES
(In crore)
Particulars | As at | ||
September 30, 2016 | March 31, 2016 | April 1, 2015 | |
Trade payables * | 272 | 623 | 124 |
272 | 623 | 124 | |
*Includes dues to subsidiaries (refer note 2.25) | 143 | 145 | 102 |
2.15 OTHER LIABILITIES
(In crore)
Particulars | As at | ||
September 30, 2016 | March 31, 2016 | April 1, 2015 | |
Current | |||
Unearned revenue | 1,088 | 1,025 | 831 |
Others | |||
Withholding taxes and others | 1,089 | 1,068 | 733 |
Deferred rent | 1 | – | – |
2,178 | 2,093 | 1,564 |
2.16 PROVISIONS
(In crore)
Particulars | As at | ||
September 30, 2016 | March 31, 2016 | April 1, 2015 | |
Current | |||
Others | |||
Post-sales client support and warranties and others | 556 | 436 | 382 |
556 | 436 | 382 |
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 | Three months ended September 30, 2016 | Six months ended September 30, 2016 |
Balance at the beginning | 462 | 436 |
Provision recognized/(reversed) | 109 | 145 |
Provision utilized | (8) | (26) |
Exchange difference | (7) | 1 |
Balance at the end | 556 | 556 |
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.
2.17 INCOME TAXES
Income tax expense in the statement of profit and loss comprises:
(In crore)
Particulars | Three months ended September 30, |
Six months ended September 30, | ||
2016 | 2015 | 2016 | 2015 | |
Current taxes | 1,327 | 1,333 | 2,640 | 2,385 |
Deferred taxes | 9 | (28) | (25) | 19 |
Income tax expense | 1,336 | 1,305 | 2,615 | 2,404 |
Current tax expense for the three months period
ended September 30, 2016 and September 30, 2015 includes reversals (net of provisions) amounting to 19 crore and
29 crore respectively
pertaining to prior periods
Current tax expense for the six months period
ended September 30, 2016 and September 30, 2015 includes reversals (net of provisions) amounting to 19 crore and
117 crore respectively
pertaining to prior periods
Entire deferred income tax for the three months and six months ended September 30, 2016 and September 30, 2015 relates to origination and reversal of temporary differences.
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)
Particulars | Three months ended September 30, |
Six months ended September 30, | ||
2016 | 2015 | 2016 | 2015 | |
Profit before income taxes | 4,812 | 4,553 | 9,271 | 8,543 |
Enacted tax rates in India | 34.61% | 34.61% | 34.61% | 34.61% |
Computed expected tax expense | 1,665 | 1,576 | 3,209 | 2,957 |
Tax effect due to non-taxable income for Indian tax purposes | (509) | (464) | (974) | (843) |
Overseas taxes | 223 | 181 | 410 | 327 |
Tax reversals, overseas and domestic | (19) | (29) | (19) | (117) |
Effect of exempt non-operating income | (13) | (16) | (29) | (31) |
Effect of unrecognized deferred tax assets | – | – | – | – |
Effect of differential overseas tax rates | (6) | 1 | (9) | – |
Effect of non-deductible expenses | (5) | 61 | 27 | 130 |
Additional deduction on research and development expense | – | (5) | – | (19) |
Others | – | – | – | – |
Income tax expense | 1,336 | 1,305 | 2,615 | 2,404 |
The applicable Indian statutory tax rate for fiscal 2017 and fiscal 2016 is 34.61%.
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 has provided to the export of software for the units registered under the Special Economic Zones Act, 2005 (SEZ). SEZ units which began the provision of 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 further five years. Up to 50% of such profits or gains is also available for a further five years subject to creation of a Special Economic Zone re-Investment Reserve out of the profit of the eligible SEZ units and utilization of such reserve by the Company for acquiring new plant and machinery for the purpose of its business as per the provisions of the Income Tax Act, 1961.
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 September 30, 2016, the Company has provided for branch profit tax of
336 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
2 crore movement on account of exchange rate during the six months
ended September 30, 2016.
Deferred income tax liabilities have not been
recognized on temporary differences amounting to 4,701 crore and
4,195 crore as of September 30, 2016 and March 31, 2016, 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 September 30, 2016, March 31, 2016 and April 1, 2015
(In crore)
As at | |||
September 30, 2016 | March 31, 2016 | April 1, 2015 | |
Income tax assets | 4,981 | 5,020 | 3,941 |
Current income tax liabilities | 3,724 | 3,304 | 2,678 |
Net current income tax assets/ (liability) at the end | 1,257 | 1,716 | 1,263 |
The gross movement in the current income tax asset/ (liability) for the three months and six months ended September 30, 2016 and September 30, 2015 is as follows:
(In crore)
Three months ended September 30, |
Six months ended September 30, | |||
2016 | 2015 | 2016 | 2015 | |
Net current income tax asset/ (liability) at the beginning | 976 | 1,455 | 1,716 | 1,263 |
Income tax paid | 1,599 | 1,424 | 2,168 | 2,665 |
Current income tax expense (Refer Note 2.17) | (1,327) | (1,333) | (2,640) | (2,385) |
Income tax on other comprehensive income | 7 | – | 12 | 3 |
Tax benefit on exercise of share based payments | 1 | – | 1 | – |
Translation difference | 1 | – | – | – |
Net current income tax asset/ (liability) at the end | 1,257 | 1,546 | 1,257 | 1,546 |
The tax effects of significant temporary differences that resulted in deferred income tax assets and liabilities are as follows:
(In crore)
Particulars | As at | ||
September 30, 2016 | March 31, 2016 | April 1, 2015 | |
Deferred income tax assets | |||
Property, plant and equipment | 102 | 146 | 210 |
Computer software | 53 | 50 | 51 |
Accrued compensation to employees | 45 | 46 | 29 |
Trade receivables | 96 | 79 | 100 |
Compensated absences | 382 | 359 | 280 |
Post sales client support | 92 | 76 | 72 |
Others | 24 | 21 | 7 |
Total deferred income tax assets | 794 | 777 | 749 |
Deferred income tax liabilities | |||
Branch profit tax | 336 | 334 | 316 |
Others | 30 | 38 | – |
Total deferred income tax liabilities | 366 | 372 | 316 |
Deferred income tax assets after set off | 428 | 405 | 433 |
Deferred income 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.
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 six months ended September 30, 2016 and September 30, 2015, is as follows:
(In crore)
Particulars | Three months ended September 30, |
Six months ended September 30, | ||
2016 | 2015 | 2016 | 2015 | |
Net deferred income tax asset at the beginning | 432 | 405 | 405 | 433 |
Translation differences | 5 | (34) | (2) | (15) |
Credits / (charge) relating to temporary differences (Refer Note 2.17) | (9) | 28 | 25 | (19) |
Temporary differences on other comprehensive income | – | – | – | – |
Net deferred income tax asset at the end | 428 | 399 | 428 | 399 |
The credits relating to temporary differences during the six months ended September 30, 2016 are primarily on account of trade receivable, accrued compensation to employees and compensated absences partially offset by reversal of credits pertaining to property plant and equipment. The charge relating to temporary differences during the six months ended September 30, 2015 are primarily on account of property plant and equipment, trade receivables, accrued compensation to employees partially offset by compensated absences.
2.18 REVENUE FROM OPERATIONS
(In crore)
Particulars | Three months ended September 30, | Six months ended September 30, | ||
2016 | 2015 | 2016 | 2015 | |
Income from software services | 14,996 | 13,366 | 29,412 | 25,626 |
Income from software products | 4 | 159 | 8 | 637 |
15,000 | 13,525 | 29,420 | 26,263 |
2.19 OTHER INCOME
(In crore)
Particulars | Three months ended September 30, | Six months ended September 30, | ||
2016 | 2015 | 2016 | 2015 | |
Interest received on financial assets- Carried at amortised cost | ||||
Tax free bonds, government bonds and debentures | 81 | 25 | 165 | 49 |
Deposit with Bank and others | 560 | 580 | 1,130 | 1,196 |
Dividend received on investments carried at fair value through profit or loss | ||||
Mutual fund units | 6 | 19 | 23 | 41 |
Exchange gains/(losses) on foreign currency forward and options contracts | 161 | (14) | 207 | (85) |
Exchange gains/(losses) on translation of other assets and liabilities | (93) | 85 | (89) | 134 |
Miscellaneous income, net | 48 | 80 | 89 | 161 |
763 | 775 | 1,525 | 1,496 |
2.20 EXPENSES
(In crore)
Particulars | Three months ended September 30, | Six months ended September 30, | ||
2016 | 2015 | 2016 | 2015 | |
Employee benefit expenses | ||||
Salaries including bonus | 7,741 | 6,825 | 15,158 | 13,473 |
Contribution to provident and other funds | 163 | 134 | 319 | 273 |
Share based payments to employees ( Refer note 2.12 ) | 20 | 2 | 29 | 4 |
Staff welfare | 15 | 26 | 38 | 44 |
7,939 | 6,987 | 15,544 | 13,794 | |
Cost of software packages and others | ||||
For own use | 168 | 163 | 339 | 347 |
Third party items bought for service delivery to clients | 144 | 172 | 197 | 279 |
312 | 335 | 536 | 626 |
(In crore)
Particulars | Three months ended September 30, | Six months ended September 30, | ||
2016 | 2015 | 2016 | 2015 | |
Other expenses | ||||
Power and fuel | 48 | 49 | 100 | 95 |
Brand and Marketing | 64 | 49 | 161 | 114 |
Operating lease payments | 67 | 43 | 124 | 84 |
Rates and taxes | 34 | 24 | 65 | 51 |
Repairs and Maintenance | 248 | 194 | 532 | 382 |
Consumables | 10 | 8 | 17 | 15 |
Insurance | 8 | 11 | 19 | 22 |
Provision for post-sales client support and warranties | 26 | (37) | 55 | (32) |
Commission to non-whole time directors | 3 | 2 | 5 | 4 |
Allowances for credit losses on financial assets | 22 | 5 | 47 | (13) |
Auditor's remuneration | – | – | ||
Statutory audit fees | 1 | – | 1 | 1 |
Other services | – | – | – | – |
Reimbursement of expenses | – | – | – | – |
Contributions towards Corporate Social Responsibility | 53 | 59 | 98 | 101 |
Others | 22 | 19 | 44 | 52 |
606 | 426 | 1,268 | 876 |
2.21 LEASES
Obligations on long-term, non-cancellable operating leases
The lease rentals charged during the period is as under:
(In crore)
Particulars | Three months ended September 30, | Six months ended September 30, | ||
2016 | 2015 | 2016 | 2015 | |
Lease rentals recognized during the period | 67 | 43 | 124 | 84 |
The obligations on long-term, non-cancellable operating leases payable as per the rentals stated in the respective agreements are as follows:
(In crore)
Future minimum lease payable | As at | ||
September 30, 2016 | March 31, 2016 | April 1, 2015 | |
Not later than 1 year | 219 | 170 | 101 |
Later than 1 year and not later than 5 years | 640 | 417 | 284 |
Later than 5 years | 702 | 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.
2.22 EMPLOYEE BENEFITS
a. | Gratuity |
The following tables set out the funded status of the gratuity plans and the amounts recognized in the Company's financial statements as at September 30, 2016 and March 31, 2016:
(In crore)
Particulars | As at | |
September 30, 2016 | March 31, 2016 | |
Change in benefit obligations | ||
Benefit obligations at the beginning | 826 | 755 |
Service cost | 56 | 106 |
Interest expense | 31 | 55 |
Curtailment gain | (3) | – |
Transfer of obligation | – | (34) |
Remeasurements - Actuarial (gains)/ losses | 67 | 10 |
Benefits paid | (39) | (66) |
Benefit obligations at the end | 938 | 826 |
Change in plan assets | ||
Fair value of plan assets at the beginning | 828 | 781 |
Interest income | 33 | 59 |
Transfer of assets | 1 | (43) |
Remeasurements- Return on plan assets excluding amounts included in interest income | 3 | 7 |
Contributions | 118 | 90 |
Benefits paid | (39) | (66) |
Fair value of plan assets at the end | 944 | 828 |
Funded status | 6 | 2 |
Amount for the three months and six months ended September 30, 2016 and September 30, 2015 recognized in the statement of profit and loss under employee benefit expenses.
(In crore)
Particulars | Three months ended September 30, | Six months ended September 30, | ||
2016 | 2015 | 2016 | 2015 | |
Service cost | 28 | 27 | 56 | 54 |
Net interest on the net defined benefit liability/asset | (2) | (1) | (2) | (2) |
Curtailment gain | – | – | (3) | - |
Net gratuity cost | 26 | 26 | 51 | 52 |
Amount for the three months and six months ended September 30, 2016 and September 30, 2015 recognized in statement of other comprehensive income:
(In crore)
Particulars | Three months ended September 30, | Six months ended September 30, | ||
2016 | 2015 | 2016 | 2015 | |
Remeasurements of the net defined benefit liability/ (asset) | ||||
Actuarial (gains) / losses | 42 | (1) | 67 | 12 |
(Return) / loss on plan assets excluding amounts included in the net interest on the net defined benefit liability/(asset) | – | (1) | (3) | (3) |
42 | (2) | 64 | 9 |
(In crore)
Particulars | Three months ended September 30, |
Six months ended September 30, | ||
2016 | 2015 | 2016 | 2015 | |
(Gain)/loss from change in demographic assumptions | – | – | – | – |
(Gain)/loss from change in financial assumptions | 37 | (4) | 47 | (9) |
37 | (4) | 47 | (9) |
The weighted-average assumptions used to determine benefit obligations as at September 30, 2016, March 31, 2016 and April 1, 2015 are set out below:
Particulars | As of | ||
September 30, 2016 | March 31, 2016 | April 1, 2015 | |
Discount rate | 6.9% | 7.8% | 7.8% |
Weighted average rate of increase in compensation levels | 8.0% | 8.0% | 8.0% |
The weighted-average assumptions used to determine net periodic benefit cost for the three months and six months ended September 30, 2016 and September 30, 2015 are set out below:
Particulars | Three months ended September 30, | Six months ended September 30, | ||
2016 | 2015 | 2016 | 2015 | |
Discount rate | 7.8% | 7.8% | 7.8% | 7.8% |
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 | 6.5 years | 6.4 years | 6.5 years |
Assumptions regarding future mortality experience are set in accordance with the published statistics by the Life Insurance Corporation of India.
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 September 30, 2016, every percentage point
increase / decrease in discount rate will affect our gratuity benefit obligation by approximately 55 crore.
As of September 30, 2016, every percentage point
increase / decrease in weighted average rate of increase in compensation levels will affect our gratuity benefit obligation by
approximately 46 crore.
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.
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. Trustees administer contributions made to the trust. As of September 30, 2016 and March 31, 2016, the plan assets have been primarily invested in insurer managed funds.
Actual return on assets for the three months
and six months ended September 30, 2016 and September 30, 2015 were 17 crore and
15 crore and
36 crore and
32 crore respectively.
The Company expects to contribute 50 crore
to the gratuity trusts during the remainder of fiscal 2017.
Maturity profile of defined benefit obligation:
(In crore)
Within 1 year | 128 |
1-2 year | 135 |
2-3 year | 143 |
3-4 year | 155 |
4-5 year | 168 |
5-10 years | 845 |
b. | Superannuation |
The Company contributed 39 crore and
75 crore
to the Superannuation trust during the three months and six months ended September 30, 2016 (
55 crore and
112 crore during the
three months and six months ended September 30, 2015).
c. 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 September 30, 2016 and March 31, 2016 and April 1, 2015, respectively.
The details of fund and plan asset position are given below:
(In crore)
Particulars | As of | ||
September 30, 2016 | March 31, 2016 | April 1, 2015 | |
Plan assets at period end, at fair value | 3,939 | 3,808 | 2,912 |
Present value of benefit obligation at period end | 3,939 | 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:
Particulars | As at | ||
September 30, 2016 | March 31, 2016 | April 1, 2015 | |
Government of India (GOI) bond yield | 6.90% | 7.80% | 7.80% |
Remaining term to maturity of portfolio | 7 years | 7 years | 7 years |
Expected guaranteed interest rate- First year: | 8.75% | 8.75% | 8.75% |
- Thereafter: | 8.60% | 8.60% | 8.60% |
The Company contributed 95 crore and
188 crore
during the three months and six months ended September 30, 2016 (
84 crore and
170 crore during the three months and six months
ended September 30, 2015 ).
The provident plans are applicable only to employees drawing a salary in Indian rupees and there are no other significant foreign defined benefit plans.
Employee benefits cost include:
(In crore)
Particulars | Three months ended September 30, | Six months ended September 30, | ||
2016 | 2015 | 2016 | 2015 | |
Salaries and bonus* | 7,779 | 6,822 | 15,230 | 13,460 |
Defined contribution plans | 39 | 55 | 75 | 112 |
Defined benefit plans | 121 | 110 | 239 | 222 |
7,939 | 6,987 | 15,544 | 13,794 |
* | Includes stock compensation expense of ![]() ![]() ![]() ![]() |
2.23 RECONCILIATION OF BASIC AND DILUTED SHARES USED IN COMPUTING EARNING PER SHARE
The following is a reconciliation of the equity shares used in the computation of basic and diluted earnings per equity share:
Three months ended September 30, |
Six months ended September 30, | |||
2016 | 2015 | 2016 | 2015 | |
Basic earnings per equity share - weighted average number of equity shares outstanding | 229,69,44,664 | 229,69,44,664 | 229,69,44,664 | 229,69,44,664 |
Effect of dilutive common equivalent shares - share options outstanding | 80,923 | – | 45,693 | – |
Diluted earnings per equity share - weighted average number of equity shares and common equivalent shares outstanding | 229,70,25,587 | 229,69,44,664 | 229,69,90,357 | 229,69,44,664 |
2.24 CONTINGENT LIABILITIES AND COMMITMENTS (TO THE EXTENT NOT PROVIDED FOR)
(In crore)
Particulars | As at | ||
September 30, 2016 | March 31, 2016 | April 1, 2015 | |
Contingent liabilities : | |||
Claims against the Company, not acknowledged as debts(1) | 191 | 188 | 167 |
[Net of amount paid to statutory authorities ![]() ![]() |
|||
Commitments : | |||
Estimated amount of contracts remaining to be executed on capital contracts and not provided for | 1,164 | 1,295 | 1,272 |
(net of advances and deposits) |
(1) | Claims against the company not acknowledged as debts as on September 30, 2016 include
demand from the Indian Income tax authorities for payment of tax of ![]() ![]() ![]() ![]() |
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.
2.25 RELATED PARTY TRANSACTIONS
List of related parties:
Name of subsidiaries | Country | Holding as at | ||
September 30, 2016 | March 31, 2016 | April 1, 2015 | ||
Infosys BPO Limited (Infosys BPO) | India | 99.98% | 99.98% | 99.98% |
Infosys Technologies (China) Co. Limited (Infosys China) | China | 100% | 100% | 100% |
Infosys Technologies S. de R. L. de C. V. (Infosys Mexico) | Mexico | 100% | 100% | 100% |
Infosys Technologies (Sweden) AB. (Infosys Sweden) | Sweden | 100% | 100% | 100% |
Infosys Technologies (Shanghai) Company Limited (Infosys Shanghai) | China | 100% | 100% | 100% |
Infosys Tecnologia DO Brasil LTDA. (Infosys Brasil) | Brazil | 100% | 100% | 100% |
Infosys Public Services, Inc. USA (Infosys Public Services) | U.S. | 100% | 100% | 100% |
Infosys Americas Inc., (Infosys Americas) | U.S. | 100% | 100% | 100% |
Infosys (Czech Republic) Limited s.r.o. (formerly Infosys BPO s. r. o) (1) | Czech Republic | 99.98% | 99.98% | 99.98% |
Infosys Poland Sp Z.o.o (formerly Infosys BPO (Poland) Sp Z.o.o)(1) | Poland | 99.98% | 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% | 99.98% |
Portland Group Pty Ltd(1) | Australia | 99.98% | 99.98% | 99.98% |
Portland Procurement Services Pty Ltd(5) | Australia | – | – | – |
Infosys BPO Americas LLC.(1)(16) | U.S. | 99.98% | – | – |
Infosys Technologies (Australia) Pty. Limited (Infosys Australia) (2) | Australia | 100% | 100% | 100% |
EdgeVerve Systems Limited (EdgeVerve) (7) | India | 100% | 100% | 100% |
Infosys Consulting Holding AG (Infosys Lodestone) (formerly Lodestone Holding AG) | Switzerland | 100% | 100% | 100% |
Lodestone Management Consultants Inc. (3) | U.S. | 100% | 100% | 100% |
Infosys Management Consulting Pty Limited ( formerly Lodestone Management Consultants Pty Limited)(3) | Australia | 100% | 100% | 100% |
Infosys Consulting AG (formerly Lodestone Management Consultants AG) (3) | Switzerland | 100% | 100% | 100% |
Lodestone Augmentis AG (2)(6) | Switzerland | 100% | 100% | 100% |
Lodestone GmbH (formerly Hafner Bauer & Ödman GmbH) (2)(3) | Switzerland | 100% | 100% | 100% |
Lodestone Management Consultants (Belgium) S.A. (4) | Belgium | 99.90% | 99.90% | 99.90% |
Infosys Consulting GmbH (formerly Lodestone Management Consultants GmbH) (3) | Germany | 100% | 100% | 100% |
Infosys Consulting Pte Ltd. (formerly Lodestone Management Consultants Pte Ltd) (3) | Singapore | 100% | 100% | 100% |
Infosys Consulting SAS (formerly Lodestone Management Consultants SAS) (3) | France | 100% | 100% | 100% |
Infosys Consulting s.r.o.(formerly Lodestone Management Consultants s.r.o.) (3) | Czech Republic | 100% | 100% | 100% |
Lodestone Management Consultants GmbH (3) | Austria | 100% | 100% | 100% |
Lodestone Management Consultants Co., Ltd. (3) | China | 100% | 100% | 100% |
Infy Consulting Company Limited (formerly Lodestone Management Consultants Ltd.) (3) | U.K. | 100% | 100% | 100% |
Infy Consulting B.V. (Lodestone Management Consultants B.V.) (3) | Netherlands | 100% | 100% | 100% |
Infosys Consulting Ltda. (formerly Lodestone Management Consultants Ltda.) (4) | Brazil | 99.99% | 99.99% | 99.99% |
Infosys Consulting Sp. Z.o.o. (formerly Lodestone Management Consultants Sp. z o.o.) (3) | Poland | 100% | 100% | 100% |
Lodestone Management Consultants Portugal, Unipessoal, Lda. (3) | Portugal | 100% | 100% | 100% |
S.C. Infosys Consulting S.R.L.(formerly S.C. Lodestone Management Consultants S.R.L.) (3) | Romania | 100% | 100% | 100% |
Infosys Consulting S.R.L. (formerly Lodestone Management Consultants S.R.L.) (3) | Argentina | 100% | 100% | 100% |
Infosys Canada Public Services Ltd.(8) | Canada | – | – | – |
Infosys Nova Holdings LLC. (Infosys Nova)(9) | U.S. | 100% | 100% | 100% |
Panaya Inc. (Panaya) (10) | U.S. | 100% | 100% | 100% |
Panaya Ltd.(11) | Israel | 100% | 100% | 100% |
Panaya GmbH(11) | Germany | 100% | 100% | 100% |
Panaya Pty Ltd(2)(11) | Australia | – | – | – |
Panaya Japan Co. Ltd.(11) | Japan | 100% | 100% | 100% |
Skava Systems Pvt. Ltd. (Skava Systems)(12) | India | 100% | 100% | – |
Kallidus Inc. (Kallidus)(13) | U.S. | 100% | 100% | – |
Noah Consulting LLC (Noah) (14) | U.S. | 100% | 100% | – |
Noah Information Management Consulting Inc. (Noah Canada) (15) | Canada | 100% | 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 2.5.3) |
(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. |
(11) Wholly owned subsidiary of Panaya Inc. |
(12) On June 2, 2015, Infosys acquired 100% of the voting interest in Skava Systems (Refer note 2.5.2) |
(13) On June 2, 2015, Infosys acquired 100% of the voting interest in Kallidus Inc. (Refer note 2.5.2) |
(14) On November 16, 2015, Infosys acquired 100% of the membership interests in Noah (Refer Note 2.5.1) |
(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 | ||
September 30, 2016 | March 31, 2016 | April 1, 2015 | ||
DWA Nova LLC(1) | U.S. | 16% | 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 Benefits Trust | India | Controlled trust |
Refer notes 2.22 for information on transactions with post-employment benefit plans mentioned above.
List of key management personnel
Whole time directors
U B Pravin Rao
Dr. Vishal Sikka
Non-whole-time directors
K.V.Kamath ( resigned effective June 5, 2015)
Prof. Jeffrey S. Lehman
R. Seshasayee
Ravi Venkatesan
Kiran Mazumdar Shaw
Carol M. Browner (resigned effective November 23, 2015)
Prof. John W. Etchemendy
Roopa Kudva
Dr. Punita Kumar-Sinha (appointed effective January 14, 2016)
Executive Officers
M. D. Ranganath, Chief Financial Officer (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)
Company Secretary
A.G.S. Manikantha, (appointed effective June 22, 2015)
The details of amounts due to or due from related parties as at September 30, 2016, March 31, 2016 and April 1, 2015 are as follows:
(In crore)
Particulars | As at | |||
September 30, 2016 | March 31, 2016 | April 1, 2015 | ||
Investment in debentures | ||||
EdgeVerve(2) | 2,279 | 2,549 | – | |
Trade receivables | ||||
Infosys China | 35 | 29 | 16 | |
Infosys Mexico | 5 | 6 | 1 | |
Infosys Brasil | 1 | 1 | 5 | |
Infosys BPO | 3 | 5 | 1 | |
Infy Consulting Company Ltd. | 46 | 8 | 26 | |
EdgeVerve | 8 | – | 14 | |
Infosys Public Services | 159 | 153 | 246 | |
Infosys Sweden | 7 | 28 | – | |
Panaya Ltd | 27 | 14 | – | |
291 | 244 | 309 | ||
Loans(1) | ||||
Infy Consulting Company Ltd. | – | – | 6 | |
Infosys Sweden | 24 | 24 | – | |
Infosys Technologies China | 69 | 67 | – | |
EdgeVerve | – | – | 18 | |
93 | 91 | 24 | ||
Prepaid and other financial assets (3) | ||||
Infosys BPO | 6 | 5 | 1 | |
Infosys Public Services | – | 8 | 4 | |
EdgeVerve | – | 3 | 14 | |
Panaya | 55 | 43 | – | |
Infosys Consulting SAS | 7 | 6 | 3 | |
Infosys Consulting GmbH | – | 1 | 1 | |
Infy Consulting Company Ltd. | 1 | 1 | 20 | |
Lodestone Management Consultants Inc. | 2 | – | – | |
71 | 67 | 43 | ||
Unbilled revenues | ||||
Infosys Consulting SAS | – | – | 1 | |
EdgeVerve | 26 | 20 | – | |
Kallidus | 1 | – | – | |
Infosys McCamish Systems LLC | – | – | 5 | |
27 | 20 | 6 | ||
Trade payables | ||||
Infosys China | 10 | 10 | 10 | |
Infosys BPO | 7 | 6 | – | |
Infosys (Czech Republic) Limited s.r.o. | 3 | 2 | – | |
Portland Group Pty Ltd | 1 | – | 1 | |
Infosys Mexico | 4 | 2 | 1 | |
Infosys Sweden | 9 | 8 | 5 | |
Infosys Management Consulting Pty Limited | 7 | 16 | 10 | |
Infosys Consulting Pte Ltd. | 4 | 7 | 8 | |
Infy Consulting Company Ltd. | 62 | 83 | 65 | |
Infosys Brasil | 2 | – | 2 | |
Noah Consulting LLC | 12 | – | – | |
Panaya Ltd. | 17 | 9 | – | |
Infosys Public Services | 4 | 2 | – | |
Kallidus | 1 | – | – | |
143 | 145 | 102 | ||
Other financial liabilities | ||||
Infosys BPO | 24 | 27 | 16 | |
Infosys McCamish Systems LLC | – | – | 2 | |
Infosys Consulting AG | – | 1 | 1 | |
Infy Consulting Company Ltd. | 1 | 1 | 1 | |
EdgeVerve | – | – | 9 | |
Panaya Ltd. | – | 1 | – | |
Infosys Public Services | – | 7 | 4 | |
Infosys Sweden | – | – | – | |
Infosys Mexico | 1 | 1 | – | |
26 | 38 | 33 | ||
Accrued expenses | ||||
Infosys BPO | – | 1 | (1) | |
Kallidus Inc | 11 | 18 | – | |
Noah Consulting, LLC | – | 10 | – | |
Noah Information Management Consulting Inc. | 2 | – | – | |
EdgeVerve | – | – | 37 | |
13 | 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. |
(2) | At an interest rate of 8.5% per annum. |
(3) | Includes cross charge of ![]() |
The details of the related parties transactions entered into by the Company, in addition to the lease commitments described in note 2.21, for the three months and six months ended September 30, 2016 and September 30, 2015 are as follows:
(In crore)
Particulars | Three months ended September 30, |
Six months ended September 30, | |||
2016 | 2015 | 2016 | 2015 | ||
Capital transactions: | |||||
Financing transactions | |||||
Equity | |||||
Infosys China | – | – | 67 | – | |
Infosys Sweden | – | – | 51 | – | |
Infosys Shanghai | 67 | – | 134 | 191 | |
67 | – | 252 | 191 | ||
Debenture | |||||
EdgeVerve | (270) | – | (270) | – | |
(270) | – | (270) | – | ||
Loans (net of repayment) | |||||
Lodestone Management Consultants Ltd. | – | 1 | – | (6) | |
Kallidus | – | – | – | 10 | |
Infosys Sweden | (1) | – | (1) | 13 | |
Infosys China | 1 | – | 3 | – | |
EdgeVerve | – | 44 | – | (18) | |
– | 45 | 2 | (1) | ||
Cash paid under business transfer | |||||
EdgeVerve | – | 250 | – | 250 | |
– | 250 | – | 250 | ||
Revenue transactions: | |||||
Purchase of services | |||||
Infosys China | 30 | 32 | 59 | 63 | |
Infosys Management Consulting Pty Limited | 31 | 25 | 63 | 54 | |
Infy Consulting Company Limited | 190 | 190 | 377 | 364 | |
Infosys Consulting Pte Ltd. | 9 | 28 | 17 | 59 | |
Portland Group Pty Ltd | 1 | 1 | 1 | 2 | |
Infosys BPO s.r.o | 8 | 3 | 15 | 6 | |
Infosys BPO | 91 | 85 | 183 | 158 | |
Infosys Sweden | 15 | 18 | 39 | 37 | |
Infosys Mexico | 6 | 3 | 11 | 6 | |
EdgeVerve | – | – | – | – | |
Infosys Public Services | 5 | 2 | 9 | 5 | |
Panaya Ltd. | 12 | 4 | 21 | 5 | |
Infosys Brasil | 2 | 3 | 3 | 4 | |
Infosys Poland Sp Z.o.o | 1 | – | 2 | – | |
Kallidus | 10 | – | 11 | – | |
Noah Consulting, LLC | 35 | – | 64 | – | |
Noah Information Management Consulting Inc. | 1 | – | 2 | – | |
447 | 394 | 877 | 763 | ||
Purchase of shared services including facilities and personnel | |||||
Panaya Ltd. | 1 | – | 2 | – | |
Infosys BPO | 8 | 3 | 11 | 5 | |
9 | 3 | 13 | 5 | ||
Interest income | |||||
Infosys China | 1 | – | 2 | – | |
EdgeVerve | 51 | 1 | 105 | 2 | |
52 | 1 | 107 | 2 | ||
Sale of services | |||||
Infosys China | 3 | 2 | 7 | 5 | |
Infosys Mexico | 7 | 10 | 15 | 17 | |
Infy Consulting Company Limited | 30 | 7 | 47 | 11 | |
Infosys Brasil | 2 | 1 | 4 | 3 | |
Infosys BPO | 14 | 17 | 28 | 35 | |
McCamish Systems LLC | – | 1 | – | 2 | |
Infosys Sweden | 4 | 7 | 8 | 14 | |
EdgeVerve | 77 | – | 135 | – | |
Infosys Public Services | 236 | 219 | 471 | 433 | |
373 | 264 | 715 | 520 | ||
Sale of shared services including facilities and personnel | |||||
EdgeVerve | 10 | 12 | 20 | 15 | |
Panaya Ltd. | 8 | 2 | 14 | 2 | |
Infosys BPO | 13 | 5 | 24 | 10 | |
31 | 19 | 58 | 27 |
The table below describes the compensation to key managerial personnel which comprise directors and executive officers:
(In crore)
Particulars | Three months ended September 30, |
Six months ended September 30, | ||
2016 | 2015 | 2016 | 2015 | |
Salaries and other employee benefits to whole-time directors and executive officers (1) | 14 | 6 | 35 | 28 |
Commission and other benefits to non-executive/independent directors | 3 | 3 | 5 | 5 |
Total | 17 | 9 | 40 | 33 |
(1) | Includes stock compensation expense of ![]() ![]() ![]() ![]() |
2.26 SEGMENT REPORTING
Ind AS 108 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. Based on the "management approach" as defined in Ind AS 108, the Chief Operating Decision Maker (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. All other segments represents the operating segments of businesses in India, Japan and China. 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. Revenue for “all other segments” represents 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.
Business segments
Three months ended September 30, 2016 and September 30, 2015
(In crore)
Particulars | FS | MFG | ECS | RCL | HILIFE | Hi-tech | All other segments | Total |
Revenue from operations | 3,998 | 1,506 | 3,510 | 2,598 | 1,736 | 1,275 | 377 | 15,000 |
3,692 | 1,445 | 2,981 | 2,377 | 1,611 | 1,184 | 235 | 13,525 | |
Identifiable operating expenses | 2,180 | 772 | 1,732 | 1,291 | 908 | 669 | 225 | 7,777 |
1,829 | 791 | 1,393 | 1,149 | 791 | 557 | 118 | 6,628 | |
Allocated expenses | 754 | 285 | 664 | 491 | 328 | 241 | 71 | 2,834 |
770 | 305 | 629 | 501 | 340 | 250 | 49 | 2,844 | |
Segment operating income | 1,064 | 449 | 1,114 | 816 | 500 | 365 | 81 | 4,389 |
1,093 | 349 | 959 | 727 | 480 | 377 | 68 | 4,053 | |
Unallocable expenses | 340 | |||||||
275 | ||||||||
Operating profit | 4,049 | |||||||
3,778 | ||||||||
Other income, net | 763 | |||||||
775 | ||||||||
Profit before income taxes | 4,812 | |||||||
4,553 | ||||||||
Income tax expense | 1,336 | |||||||
1,305 | ||||||||
Net profit | 3,476 | |||||||
3,248 | ||||||||
Depreciation and amortization | 338 | |||||||
272 | ||||||||
Non-cash expenses other than depreciation and amortization | 2 | |||||||
3 |
Six months ended September 30, 2016 and September 30, 2015
(In crore)
Particulars | FS | MFG | ECS | RCL | HILIFE | Hi-tech | All other segments | Total |
Revenue from operations | 7,871 | 2,978 | 6,851 | 5,181 | 3,364 | 2,545 | 630 | 29,420 |
7,343 | 2,693 | 5,824 | 4,556 | 3,119 | 2,302 | 426 | 26,263 | |
Identifiable operating expenses | 4,236 | 1,533 | 3,368 | 2,575 | 1,752 | 1,338 | 427 | 15,229 |
3,673 | 1,445 | 2,766 | 2,217 | 1,577 | 1,156 | 291 | 13,125 | |
Allocated expenses | 1,545 | 586 | 1,347 | 1,020 | 661 | 501 | 123 | 5,783 |
1,525 | 575 | 1,243 | 972 | 666 | 491 | 91 | 5,563 | |
Segment operating income | 2,090 | 859 | 2,136 | 1,586 | 951 | 706 | 80 | 8,408 |
2,145 | 673 | 1,815 | 1,367 | 876 | 655 | 44 | 7,575 | |
Unallocable expenses | 662 | |||||||
528 | ||||||||
Operating profit | 7,746 | |||||||
7,047 | ||||||||
Other income, net | 1,525 | |||||||
1,496 | ||||||||
Profit before income taxes | 9,271 | |||||||
8,543 | ||||||||
Income tax expense | 2,615 | |||||||
2,404 | ||||||||
Net profit | 6,656 | |||||||
6,139 | ||||||||
Depreciation and amortization | 657 | |||||||
524 | ||||||||
Non-cash expenses other than depreciation and amortization | 5 | |||||||
4 |
Geographic segments
Three months ended September 30, 2016 and September 30, 2015
(In crore)
Particulars | North America | Europe | India | Rest of the World | Total |
Revenue from operations | 9,668 | 3,297 | 518 | 1,517 | 15,000 |
9,012 | 2,931 | 278 | 1,304 | 13,525 | |
Identifiable operating expenses | 5,105 | 1,711 | 217 | 744 | 7,777 |
4,495 | 1,440 | 80 | 613 | 6,628 | |
Allocated expenses | 1,828 | 623 | 98 | 285 | 2,834 |
1,900 | 618 | 56 | 270 | 2,844 | |
Segment profit | 2,735 | 963 | 203 | 488 | 4,389 |
2,617 | 873 | 142 | 421 | 4,053 | |
Unallocable expenses | 340 | ||||
275 | |||||
Operating profit | 4,049 | ||||
3,778 | |||||
Other income, net | 763 | ||||
775 | |||||
Profit before income taxes | 4,812 | ||||
4,553 | |||||
Income tax expense | 1,336 | ||||
1,305 | |||||
Net profit | 3,476 | ||||
3,248 | |||||
Depreciation and amortization | 338 | ||||
272 | |||||
Non-cash expenses other than depreciation and amortization | 2 | ||||
3 |
Six months ended September 30, 2016 and September 30, 2015
(In crore)
Particulars | North America | Europe | India | Rest of the World | Total |
Revenue from operations | 19,077 | 6,541 | 854 | 2,948 | 29,420 |
17,367 | 5,544 | 607 | 2,745 | 26,263 | |
Identifiable operating expenses | 10,107 | 3,303 | 404 | 1,415 | 15,229 |
8,817 | 2,771 | 314 | 1,223 | 13,125 | |
Allocated expenses | 3,753 | 1,287 | 166 | 577 | 5,783 |
3,705 | 1,179 | 117 | 562 | 5,563 | |
Segment profit | 5,217 | 1,951 | 284 | 956 | 8,408 |
4,845 | 1,594 | 176 | 960 | 7,575 | |
Unallocable expenses | 662 | ||||
528 | |||||
Operating profit | 7,746 | ||||
7,047 | |||||
Other income, net | 1,525 | ||||
1,496 | |||||
Profit before income taxes | 9,271 | ||||
8,543 | |||||
Income tax expense | 2,615 | ||||
2,404 | |||||
Net profit | 6,656 | ||||
6,139 | |||||
Depreciation and amortization | 657 | ||||
524 | |||||
Non-cash expenses other than depreciation and amortization | 5 | ||||
4 |
Significant clients
No client individually accounted for more than 10% of the revenues in the three months and six months ended September 30, 2016 and September 30, 2015.
2.27 FUNCTION WISE CLASSIFICATION OF STATEMENT OF PROFIT AND LOSS
(In crore)
Particulars | Three months ended September 30, | Six months ended September 30, | ||
2016 | 2015 | 2016 | 2015 | |
Revenue from operations | 15,000 | 13,525 | 29,420 | 26,263 |
Cost of sales | 9,393 | 7,996 | 18,561 | 15,770 |
Gross Profit | 5,607 | 5,529 | 10,859 | 10,493 |
Operating expenses | ||||
Selling and marketing expenses | 680 | 657 | 1,379 | 1,346 |
General and administration expenses | 878 | 1,094 | 1,734 | 2,100 |
Total operating expenses | 1,558 | 1,751 | 3,113 | 3,446 |
Operating profit | 4,049 | 3,778 | 7,746 | 7,047 |
Other income, net | 763 | 775 | 1,525 | 1,496 |
Profit before tax | 4,812 | 4,553 | 9,271 | 8,543 |
Tax expense: | ||||
Current tax | 1,327 | 1,333 | 2,640 | 2,385 |
Deferred tax | 9 | (28) | (25) | 19 |
Profit for the period | 3,476 | 3,248 | 6,656 | 6,139 |
Other comprehensive income | ||||
Items that will not be reclassified subsequently to profit or loss | ||||
Remeasurement of the net defined benefit liability/asset | (35) | 1 | (52) | (7) |
Equity instruments through other comprehensive income | – | – | – | – |
Fair value changes on cash flow hedges | 2 | – | 2 | – |
Items that will be reclassified subsequently to profit or loss | ||||
Total other comprehensive income, net of tax | (33) | 1 | (50) | (7) |
Total comprehensive income for the period | 3,443 | 3,249 | 6,606 | 6,132 |
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 |
U. B. Pravin Rao Chief Operating Officer and |
Bangalore October 14, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer |
A.G.S Manikantha Company Secretary |
Auditor’s Report on Quarterly and Year to Date Standalone Financial 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 standalone
financial results of Infosys Limited (‘the Company’) for the quarter ended 30 September 2016 and the year to date standalone
financial results for the period from
1 April 2016 to 30 September 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 standalone quarterly 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 standalone financial statements, which have been prepared in accordance with the recognition and measurement principles laid down in Indian Accounting Standard, Interim Financial Reporting (Ind AS 34), 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 standalone financial results:
(i) | have been presented in accordance with the requirements of Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and SEBI circular dated 5 July 2016 in this regard; and |
(ii) | give a true and fair view of the financial performance including other comprehensive income and other financial information for the quarter ended 30 September 2016 as well as the year to date results for the period from 1 April 2016 to 30 September 2016. |
for B S R & Co. LLP
Chartered Accountants
Firm’s registration number: 101248W/ W-100022
Supreet Sachdev
Partner
Membership number: 205385
Bangalore
October 14, 2016
Exhibit 99.11
Ind AS Consolidated
Independent Auditor’s 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 30 September 2016, the consolidated statement of profit and loss (including other comprehensive income) for the three months and six months then ended, the consolidated statement of cash flows and the consolidated statement of changes in equity for the six months then ended and a summary of the significant accounting policies and other explanatory information.
Management’s Responsibility for the Consolidated Interim Financial Statements
The Company’s Board of Directors is responsible for the preparation of these consolidated interim financial statements that give a true and fair view of the consolidated financial position, consolidated financial performance including other comprehensive income, consolidated cash flows and consolidated changes in equity of the Company in accordance with the accounting principles generally accepted in India, including the Indian Accounting Standards (Ind AS) 34, Interim Financial Reporting as specified under section 133 of the Companies Act, 2013 (‘the Act’) read with relevant rules issued thereunder.
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 financial control, that were operating effectively for ensuring the accuracy and completeness of the accounting records, 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 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 of the consolidated interim financial statements 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 financial control relevant to the Company’s preparation 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 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 the Company’s Directors, 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 aforesaid consolidated interim 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 including the Ind AS, of the consolidated financial position of the Company as at 30 September 2016 and its consolidated financial performance including other comprehensive income for the three months and six months then ended, its consolidated cash flows and the consolidated changes in equity for the six months then ended.
for B S R & Co. LLP
Chartered Accountants
Firm’s Registration Number: 101248W/W-100022
Supreet Sachdev
Partner
Membership Number: 205385
Bangalore
14 October 2016
INFOSYS LIMITED AND SUBSIDIARIES
In
crore
Consolidated Balance Sheets as at | Note | September 30, 2016 | March 31, 2016 | April 1, 2015 |
ASSETS | ||||
Non-current assets | ||||
Property, plant and equipment | 2.4 | 8,901 | 8,637 | 7,685 |
Capital work-in-progress | 1,067 | 960 | 776 | |
Goodwill | 2.5 | 3,771 | 3,764 | 3,091 |
Other intangible assets | 2.5 | 904 | 985 | 638 |
Investment in associate | 2.25 | 99 | 103 | 93 |
Financial Assets: | ||||
Investments | 2.6 | 1,931 | 1,714 | 1,305 |
Loans | 2.7 | 26 | 25 | 31 |
Other financial assets | 2.8 | 302 | 286 | 173 |
Deferred tax assets (net) | 2.17 | 628 | 536 | 536 |
Income tax assets (net) | 2.17 | 5,248 | 5,230 | 4,089 |
Other non-current assets | 2.11 | 1,620 | 1,357 | 698 |
Total non-current assets | 24,497 | 23,597 | 19,115 | |
Current assets | ||||
Financial Assets: | ||||
Investments | 2.6 | 2,154 | 75 | 874 |
Trade receivables | 2.9 | 11,571 | 11,330 | 9,713 |
Cash and cash equivalents | 2.10 | 31,732 | 32,697 | 30,367 |
Loans | 2.7 | 264 | 303 | 222 |
Other financial assets | 2.8 | 6,883 | 5,190 | 4,527 |
Other Current Assets | 2.11 | 2,005 | 2,158 | 1,541 |
Total current assets | 54,609 | 51,753 | 47,244 | |
Total assets | 79,106 | 75,350 | 66,359 | |
EQUITY AND LIABILITIES | ||||
Equity | ||||
Equity share capital | 2.13 | 1,144 | 1,144 | 572 |
Other equity | 63,681 | 60,600 | 54,198 | |
Total equity attributable to equity holders of the Company | 64,825 | 61,744 | 54,770 | |
Non-controlling interests | – | – | – | |
Total equity | 64,825 | 61,744 | 54,770 | |
Liabilities | ||||
Non-current liabilities | ||||
Financial Liabilities | ||||
Other financial liabilities | 2.14 | 106 | 69 | – |
Deferred tax liabilities (net) | 2.17 | 235 | 252 | 159 |
Other non–current liabilities | 2.15 | 45 | 46 | 47 |
Total non-current liabilities | 386 | 367 | 206 | |
Current liabilities | ||||
Financial Liabilities | ||||
Trade payables | 307 | 386 | 140 | |
Other financial liabilities | 2.14 | 6,356 | 6,302 | 5,983 |
Other current liabilities | 2.15 | 2,760 | 2,629 | 1,964 |
Provisions | 2.16 | 621 | 512 | 478 |
Income tax liabilities (net) | 2.17 | 3,851 | 3,410 | 2,818 |
Total current liabilities | 13,895 | 13,239 | 11,383 | |
Total equity and liabilities | 79,106 | 75,350 | 66,359 |
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 October 14, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer |
A.G.S Manikantha Company Secretary |
INFOSYS LIMITED AND SUBSIDIARIES
in
crore, except equity share and per equity share data
Consolidated Statement of Profit and Loss | Note | Three months ended September 30, | Six months ended September 30, | ||
2016 | 2015 | 2016 | 2015 | ||
Revenue from operations | 2.18 | 17,310 | 15,635 | 34,091 | 29,989 |
Other income, net | 2.19 | 760 | 793 | 1,513 | 1,549 |
Total income | 18,070 | 16,428 | 35,604 | 31,538 | |
Expenses | |||||
Employee benefit expenses | 2.20 | 9,648 | 8,558 | 18,930 | 16,612 |
Deferred consideration pertaining to acquisition | – | 64 | – | 124 | |
Cost of technical sub-contractors | 940 | 858 | 1,857 | 1,608 | |
Travel expenses | 520 | 582 | 1,260 | 1,137 | |
Cost of software packages and others | 2.20 | 381 | 354 | 657 | 666 |
Communication expenses | 136 | 111 | 256 | 223 | |
Consultancy and professional charges | 165 | 184 | 340 | 353 | |
Depreciation and amortisation expenses | 2.4 and 2.5 | 424 | 358 | 824 | 671 |
Other expenses | 2.20 | 787 | 573 | 1,612 | 1,154 |
Total expenses | 13,001 | 11,642 | 25,736 | 22,548 | |
PROFIT BEFORE MINORITY INTEREST / SHARE IN NET PROFIT / (LOSS) OF ASSOCIATE | 5,069 | 4,786 | 9,868 | 8,990 | |
Share in net profit/(loss) of associate | (3) | (1) | (5) | (1) | |
PROFIT BEFORE TAX | 5,066 | 4,785 | 9,863 | 8,989 | |
Tax expense: | |||||
Current tax | 2.17 | 1,469 | 1,441 | 2,936 | 2,574 |
Deferred tax | 2.17 | (9) | (54) | (114) | (12) |
PROFIT FOR THE PERIOD | 3,606 | 3,398 | 7,041 | 6,427 | |
Other comprehensive income | |||||
Items that will not be reclassified subsequently to profit or loss | |||||
Remeasurement of the net defined benefit liability/asset | (40) | (7) | (57) | (14) | |
(40) | (7) | (57) | (14) | ||
Items that will be reclassified subsequently to profit or loss | |||||
Fair value changes on cash flow hedges | 2.12 | 2 | – | 2 | – |
Exchange differences on translation of foreign operations | (51) | 62 | (13) | 206 | |
(49) | 62 | (11) | 206 | ||
Total other comprehensive income, net of tax | (89) | 55 | (68) | 192 | |
Total comprehensive income for the period | 3,517 | 3,453 | 6,973 | 6,619 | |
Profit attributable to: | |||||
Owners of the company | 3,606 | 3,398 | 7,041 | 6,427 | |
Non-controlling interests | – | – | – | – | |
3,606 | 3,398 | 7,041 | 6,427 | ||
Total comprehensive income attributable to: | |||||
Owners of the company | 3,517 | 3,453 | 6,973 | 6,619 | |
Non-controlling interests | – | – | – | – | |
3,517 | 3,453 | 6,973 | 6,619 | ||
EARNINGS PER EQUITY SHARE | |||||
Equity shares of par value ![]() |
|||||
Basic (![]() |
15.77 | 14.87 | 30.81 | 28.12 | |
Diluted (![]() |
15.77 | 14.87 | 30.80 | 28.12 | |
Weighted average equity shares used in computing earnings per equity share | 2.23 | ||||
Basic | 228,56,41,710 | 228,56,14,029 | 228,56,32,081 | 228,56,12,157 | |
Diluted | 228,59,49,303 | 228,57,13,042 | 228,58,75,988 | 228,56,96,678 |
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 October 14, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer |
A.G.S Manikantha Company Secretary |
INFOSYS LIMITED AND SUBSIDIARIES
Consolidated Statements of Changes in Equity
In crore
Particulars | Equity Share capital # | OTHER EQUITY | Total equity attributable to equity holders of the Company | ||||||||||
RESERVES & SURPLUS | Other comprehensive income | ||||||||||||
Securities
premium reserve |
Retained earnings | Capital reserve | General reserve | Share Options Outstanding Account | Special Economic Zone Re-investment reserve (1) | Other reserves(2) | Equity instruments through Other comprehensive income | Exchange differences on translating the financial statements of a foreign operation | Cash flow hedge reserve | Other items of other comprehensive income | |||
Balance as of April 1, 2015 | 572 | 2,784 | 41,606 | 54 | 9,336 | 2 | – | 4 | – | 411 | – | 1 | 54,770 |
Changes in equity for the six months ended September 30, 2015 |
|||||||||||||
Increase in share capital on account of bonus issue# (refer to note 2.13) | 572 | – | – | – | – | – | – | – | – | – | – | – | 572 |
Amounts utilized for bonus issue (refer note 2.13)# | – | (572) | – | – | – | – | – | – | – | – | – | – | (572) |
Transfer to general reserve | – | – | (1,217) | – | 1,217 | – | – | – | – | – | – | – | – |
Transferred to Special Economic Zone Re-investment reserve | – | – | (265) | – | – | – | 265 | – | – | – | – | – | – |
Transferred from Special Economic Zone Re-investment reserve on utilization | – | – | 265 | – | – | – | (265) | – | – | – | – | – | – |
Share based payments to employees (refer to note 2.13) | – | – | – | – | – | 4 | – | – | – | – | – | – | 4 |
Remeasurement of the net defined benefit liability/asset, net of tax effect (refer note 2.22.1 and 2.17) | – | – | – | – | – | – | – | – | – | – | – | (14) | (14) |
Equity instruments through other comprehensive income | – | – | – | – | – | – | – | – | – | – | – | – | – |
Dividends (including corporate dividend tax) | – | – | (4,061) | – | – | – | – | – | – | – | – | – | (4,061) |
Fair value changes on derivatives designated as cash flow hedge | – | – | – | – | – | – | – | – | – | – | – | – | – |
Profit for the period | – | – | 6,427 | – | – | – | – | – | – | – | – | – | 6,427 |
Exchange differences on translation of foreign operations | – | – | – | – | – | – | – | – | – | 207 | – | – | 207 |
Balance as of September 30, 2015 | 1,144 | 2,212 | 42,755 | 54 | 10,553 | 6 | – | 4 | – | 618 | – | (13) | 57,333 |
Consolidated Statements of Changes in Equity (contd.)
In crore
Particulars | Equity Share capital # | OTHER EQUITY | Total equity attributable to equity holders of the Company | ||||||||||
RESERVES & SURPLUS | Other comprehensive income | ||||||||||||
Securities
premium reserve |
Retained earnings | Capital reserve | General reserve | Share Options Outstanding Account | Special Economic Zone Re-investment reserve (1) | Other reserves(2) | Equity instruments through Other comprehensive income | Exchange differences on translating the financial statements of a foreign operation | Cash flow hedge reserve | Other items of other comprehensive income | |||
Balance as of April 1, 2016 | 1,144 | 2,213 | 47,063 | 54 | 10,553 | 8 | – | 5 | – | 715 | – | (11) | 61,744 |
Changes in equity for the six months ended September 30, 2016 | |||||||||||||
Share based payments to employees (refer to note 2.13) | – | – | – | – | – | 30 | – | – | – | – | – | – | 30 |
Income tax benefit arising on exercise of stock options | – | 1 | – | – | – | – | – | – | – | – | – | – | 1 |
Excersice of stock options (refer to note 2.13) | – | 3 | – | – | – | (3) | – | – | – | – | – | – | – |
Dividends (including corporate dividend tax) | – | – | (3,923) | – | – | – | – | – | – | – | – | – | (3,923) |
Transfer to general reserve | – | – | (1,579) | – | 1,579 | – | – | – | – | – | – | – | – |
Transferred to Special Economic Zone Re-investment reserve | – | – | (551) | – | – | – | 551 | – | – | – | – | – | – |
Transferred from Special Economic Zone Re-investment reserve on utilization | – | – | 551 | – | – | – | (551) | – | – | – | – | – | – |
Remeasurement of the net defined benefit liability/asset, net of tax effect (refer note 2.22.1 and 2.17) | – | – | – | – | – | – | – | – | – | – | – | (57) | (57) |
Equity instruments through other comprehensive income | – | – | – | – | – | – | – | – | – | – | – | – | – |
Fair value changes on derivatives designated as cash flow hedge | – | – | – | – | – | – | – | – | – | – | 2 | – | 2 |
Profit for the period | – | – | 7,041 | – | – | – | – | – | – | – | – | – | 7,041 |
Exchange differences on translation of foreign operations | – | – | – | – | – | – | – | – | – | (13) | – | – | (13) |
Balance as of September 30, 2016 | 1,144 | 2,217 | 48,602 | 54 | 12,132 | 35 | – | 5 | – | 702 | 2 | (68) | 64,825 |
# net of treasury shares
The non controlling interest for each of
the above periods is less than 1 crore
(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) | Under the Swiss Code of Obligation, few subsidiaries of Infosys Lodestone are required to appropriate a certain percentage of the annual profit to legal reserve which 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. |
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 October 14, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer |
A.G.S Manikantha Company Secretary |
INFOSYS LIMITED AND SUBSIDIARIES
In crore
Consolidated Statements of Cash Flows | Six months ended September 30, | |
2016 | 2015 | |
Cash flow from operating activities | ||
Profit for the period | 7,041 | 6,427 |
Adjustments to reconcile net profit to net cash provided by operating activities: | ||
Income tax expense | 2,822 | 2,562 |
Depreciation and amortization | 824 | 671 |
Interest and dividend income | (1,324) | (1,375) |
Allowances for credit losses on financial assets | 40 | 7 |
Exchange differences on translation of assets and liabilities | 27 | 50 |
Deferred purchase price | – | 124 |
Other adjustments | 205 | 79 |
Changes in assets and liabilities | ||
Trade receivables and unbilled revenue | (1,145) | (1,231) |
Loans, other financial assets and other assets | 95 | (717) |
Trade payables | (78) | (33) |
Other financial liabilities, other liabilities and provisions | 223 | 1,325 |
Cash generated from operations | 8,730 | 7,889 |
Income taxes paid | (2,499) | (2,862) |
Net cash generated by operating activities | 6,231 | 5,027 |
Cash flows from investing activities | ||
Expenditure on property, plant and equipment net of sale proceeds, including changes in retention money and capital creditors | (1,469) | (1,268) |
Loans to employees | 38 | (6) |
Deposits placed with corporation | (85) | (24) |
Interest and dividend received on investments | 585 | 391 |
Payment for acquisition of business, net of cash acquired | – | (549) |
Payment of contingent consideration for acquisition of business | (36) | – |
Payments to acquire financial assets | ||
Preference securities | (54) | (22) |
Tax free bonds and government bonds | (5) | (201) |
Liquid mutual fund units | (20,217) | (13,664) |
Non convertible debentures | (154) | – |
Others | (8) | (15) |
Proceeds on sale of financial assets | ||
Tax free bonds and government bonds | 4 | – |
Liquid mutual fund units | 18,159 | 13,932 |
Fixed maturity plan securities | – | 33 |
Net cash used in investing activities | (3,242) | (1,393) |
Cash flows from financing activities: | ||
Payment of dividends (including corporate dividend tax) | (3,910) | (4,061) |
Net cash used in financing activities | (3,910) | (4,061) |
Net decrease in cash and cash equivalents | (921) | (427) |
Cash and cash equivalents at the beginning | 32,697 | 30,367 |
Effect of exchange rate changes on cash and cash equivalents | (44) | 6 |
Cash and cash equivalents at the end | 31,732 | 29,946 |
Supplementary information: | ||
Restricted cash balance | 522 | 382 |
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 October 14, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer |
A.G.S Manikantha Company Secretary |
INFOSYS LIMITED AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
1. Company Overview and Significant Accounting Policies
1.1 Company overview
Infosys is a leading provider 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 approved for issue by the company's Board of Directors on October 14, 2016
1.2 Basis of preparation of financial statements
These consolidated financial statements are prepared in accordance with Indian Accounting Standards (Ind AS) under the historical cost convention on the accrual basis except for certain financial instruments which are measured at fair values, the provisions of the Companies Act, 2013 ('Act') (to the extent notified) and guidelines issued by the Securities and Exchange Board of India (SEBI). The Ind AS are prescribed under Section 133 of the Act read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016.
The Group has adopted all the Ind AS standards and the adoptions was carried out in accordance with Ind AS 101 - First time adoption of Indian Accounting Standards. The transition was carried out from Indian Accounting Principles generally accepted in India as prescribed under Sec 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014 (IGAAP), which was the previous GAAP. Reconciliations and descriptions of the effect of the transition has been summarized in Note 2.1 and 2.2.
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-to-date 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-to-date 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 2.25. 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 Ind AS 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 2.17.
c. Business combinations and intangible assets
Business combinations are accounted for using Ind AS 103, Business Combinations. Ind AS 103 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 Ind AS 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 Ind AS 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 Ind AS 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 Ind AS 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 group 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 profit and loss
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 |
Office equipment | 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.
Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date is classified as capital advances under other non-current assets 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 profit and loss 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 the statement of profit and loss. 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 Ind AS 103, 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 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 profit and loss. 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
1.11.1 Initial recognition
The group recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of the instrument. All financial assets and liabilities are recognized at fair value on initial recognition, except for trade receivables which are initially measured at transaction price. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities, that are not at fair value through profit or loss, are added to the fair value on initial recognition. Regular way purchase and sale of financial assets are accounted for at trade date.
1.11.2 Subsequent measurement
a. Non-derivative financial instruments
(i) Financial assets carried at amortised cost
A financial asset is subsequently measured at amortised cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.
(ii) Financial assets at fair value through other comprehensive income
A financial asset is subsequently measured at fair value through other comprehensive income if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. Further, in cases where the Group has made an irrevocable election based on its business model, for its investments which are classified as equity instruments, the subsequent changes in fair value are recognized in other comprehensive income.
(iii) Financial assets at fair value through profit or loss
A financial asset which is not classified in any of the above categories are subsequently fair valued through profit or loss.
(iv) Financial liabilities
Financial liabilities are subsequently carried at amortized cost using the effective interest method, except for contingent consideration recognized in a business combination which is subsequently measured at fair value through profit and loss. For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate the 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
(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 Ind AS 109, Financial Instruments. Any derivative that is either not designated a hedge, or is so designated but is ineffective as per Ind AS 109, 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 profit and loss 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 profit and loss. 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 profit and loss 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 profit and loss.
c. Share capital and treasury shares
(i) 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.
(ii) 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.
1.11.3 Derecognition of financial instruments
The group derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset and the transfer qualifies for derecognition under Ind AS 109. A financial liability (or a part of a financial liability) is derecognized from the group's balance sheet when the obligation specified in the contract is discharged or cancelled or expires.
1.12 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.
1.13 Impairment
a. Financial assets
The group recognizes loss allowances using the expected credit loss (ECL) model for the financial assets which are not fair valued through profit or loss. Loss allowance for trade receivables with no significant financing component is measured at an amount equal to lifetime ECL. For all other financial assets, expected credit losses are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised is recognized as an impairment gain or loss in statement of profit or loss.
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 profit and loss 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 the statement of profit and loss is measured by the amount by which the carrying value of the assets exceeds the estimated recoverable amount of the asset. An impairment loss is reversed in the statement of profit and loss if there has been a change in the estimates used to determine the recoverable amount. The carrying amount of the 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.
1.14 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 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.
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 presentation currency 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 profit and loss. 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 profit and loss 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 profit and loss.
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 Ind AS 102, 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 options outstanding account.
1.20 Cash Flow Statement
Cash flows are reported using the indirect method, whereby profit for the period 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.
1.21 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.
1.22 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 profit and loss 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 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 net profit in the statement of profit and loss over the periods necessary to match them with the related costs which they are intended to compensate.
INFOSYS LIMITED AND SUBSIDIARIES
2 Notes to the consolidated financial statements for the three months and six months ended September 30, 2016
2.1 First-time adoption of Ind-AS
These consolidated interim financial statements of Infosys Limited and its subsidiaries for the three months and six months ended September 30, 2016 have been prepared in accordance with Ind AS. For the purposes of transition to Ind AS, the company has followed the guidance prescribed in Ind AS 101 - First Time adoption of Indian Accounting Standard, with April 1, 2015 as the transition date and IGAAP as the previous GAAP.
The transition to Ind AS has resulted in changes in the presentation of the consolidated financial statements, disclosures in the notes thereto and accounting policies and principles. The accounting policies set out in note 1 have been applied in preparing the consolidated financial statements for the three months and six months ended September 30, 2016 and the comparative information. An explanation of how the transition from previous GAAP to Ind AS has affected the Group’s Balance sheet, Consolidated Statement of profit and loss, is set out in note 2.2.1 and 2.2.2. Exemptions on first time adoption of Ind AS availed in accordance with Ind AS 101 have been set out in note 2.1.1
2.1.1 Exemptions availed on first time adoption of Ind-AS 101
Ind-AS 101 allows first-time adopters certain exemptions from the retrospective application of certain requirements under Ind AS. The Group has accordingly applied the following exemptions
(a) Business Combination
The Group is allowed to choose any date in the past from which it wants to account for the business combinations under Ind AS 103, without having to restate business combinations prior to such date. Accordingly, the group has applied the standard for all acquisitions completed after April 1, 2007, which coincides with the group's date of transition to IFRS.
For all such acquisitions,
· | Intangible assets previously included within goodwill under IGAAP have been recognized separately in the opening Balance Sheet in accordance with Ind AS 103 |
· | deferred taxes have been recorded on intangible assets, wherever applicable |
· | goodwill has been restated in accordance with Ind AS 21, with the corresponding impact in the other comprehensive income in equity |
· | retained earnings has been adjusted to include the amortization on identified intangibles, net of taxes, that would have been recorded from the date of acquisition till the transition date. |
(b) Share-based payment transaction
The group is allowed to apply Ind AS 102 Share-based payment to equity instruments that remain unvested as of transition date. The group has elected to avail this exemption and apply the requirements of Ind AS 102 to all such grants under the 2015 plan (Formerly 2011 plan). Accordingly, these options have been measured at fair value as against intrinsic value, previously under IGAAP.
The excess of stock compensation expense measured using fair value over the cost recognized under IGAAP using intrinsic value has been adjusted in 'Share Options Outstanding Account', with the corresponding impact taken to the retained earnings as on the transition date.
(c) Designation of previously recognized financial instruments
Under Ind AS 109, at initial recognition of a financial asset, an entity may make an irrevocable election to present subsequent changes in the fair value of an investment in an equity instrument in other comprehensive income. Ind AS 101 allows such designation of previously recognized financial assets, as 'FVOCI' on the basis of the facts and circumstances that existed at the date of transition to Ind AS.
Accordingly, the Group has designated its investments in certain equity instruments at fair value through other comprehensive income on the basis of the facts and circumstances that existed at the date of transition to Ind AS.
INFOSYS LIMITED AND SUBSIDIARIES
2.2 Reconciliations
The following reconciliations provides the effect of transition to Ind AS from IGAAP in accordance with Ind AS 101
1. Equity as at April 1, 2015, September 30, 2015 and March 31, 2016
2. Net profit for the three months and six months ended September 30, 2015 and year ended March 31, 2016
2.2.1 Reconciliation of equity as previously reported under IGAAP to Ind AS
In crore
Particulars | Note | Opening Balance Sheet as at April 1, 2015 | Balance Sheet as at September 30, 2015 | Balance Sheet as at March 31, 2016 | ||||||
IGAAP | Effects of transition to Ind-AS | Ind AS | IGAAP | Effects of transition to Ind-AS | Ind AS | IGAAP | Effects of transition to Ind-AS | Ind AS | ||
ASSETS | ||||||||||
Non-current assets | ||||||||||
Property, plant and equipment | 7,685 | – | 7,685 | 7,861 | – | 7,861 | 8,637 | – | 8,637 | |
Capital work-in-progress | 776 | – | 776 | 1,008 | – | 1,008 | 960 | – | 960 | |
Goodwill | (a) | 3,595 | (504) | 3,091 | 4,265 | (597) | 3,668 | 4,476 | (712) | 3,764 |
Other Intangible assets | (a) | 66 | 572 | 638 | 67 | 850 | 917 | 67 | 918 | 985 |
Investment in associate | 93 | – | 93 | 96 | – | 96 | 103 | – | 103 | |
Financial Assets: | – | |||||||||
Investments | (b) | 1,305 | – | 1,305 | 1,538 | – | 1,538 | 1,714 | – | 1,714 |
Loans | 31 | – | 31 | 42 | – | 42 | 25 | – | 25 | |
Other financial assets | 173 | – | 173 | 222 | – | 222 | 286 | – | 286 | |
Deferred tax assets (net) | (c) | 536 | – | 536 | 513 | – | 513 | 533 | 3 | 536 |
Income Tax assets (net) | 4,089 | – | 4,089 | 4,693 | – | 4,693 | 5,230 | – | 5,230 | |
Other non-current assets | 698 | – | 698 | 1,200 | – | 1,200 | 1,357 | – | 1,357 | |
Total non-current assets | 19,047 | 68 | 19,115 | 21,505 | 253 | 21,758 | 23,388 | 209 | 23,597 | |
Current assets | ||||||||||
Financial Assets: | ||||||||||
Investments | (b) | 872 | 2 | 874 | 582 | – | 582 | 75 | – | 75 |
Trade Receivables | 9,713 | – | 9,713 | 10,397 | – | 10,397 | 11,330 | – | 11,330 | |
Cash and cash equivalents | 30,367 | – | 30,367 | 29,946 | – | 29,946 | 32,697 | – | 32,697 | |
Loans | 222 | – | 222 | 217 | – | 217 | 303 | – | 303 | |
Other financial assets | 4,527 | – | 4,527 | 6,219 | – | 6,219 | 5,190 | – | 5,190 | |
Other Current Assets | 1,541 | – | 1,541 | 1,774 | – | 1,774 | 2,158 | – | 2,158 | |
Total current assets | 47,242 | 2 | 47,244 | 49,135 | – | 49,135 | 51,753 | – | 51,753 | |
Total assets | 66,289 | 70 | 66,359 | 70,640 | 253 | 70,893 | 75,141 | 209 | 75,350 | |
EQUITY AND LIABILITIES | ||||||||||
Equity | ||||||||||
Equity Share capital | 572 | – | 572 | 1,144 | – | 1,144 | 1,144 | – | 1,144 | |
Other equity | (g) | 50,164 | 4,034 | 54,198 | 53,411 | 2,778 | 56,189 | 56,682 | 3,918 | 60,600 |
Total equity attributable to equity holders of the Company | 50,736 | 4,034 | 54,770 | 54,555 | 2,778 | 57,333 | 57,826 | 3,918 | 61,744 | |
Non–controlling interests | – | – | – | – | – | – | – | – | – | |
Total equity | 50,736 | 4,034 | 54,770 | 54,555 | 2,778 | 57,333 | 57,826 | 3,918 | 61,744 | |
Non–current liabilities | ||||||||||
Financial Liabilities | ||||||||||
Other financial liabilities | (d) | – | – | – | 102 | (22) | 80 | 80 | (11) | 69 |
Deferred tax liabilities (net) | (c) | – | 159 | 159 | – | 277 | 277 | – | 252 | 252 |
Other non-current liabilities | (e) | 50 | (3) | 47 | 49 | (2) | 47 | 46 | – | 46 |
Total non–current liabilities | 50 | 156 | 206 | 151 | 253 | 404 | 126 | 241 | 367 | |
Current liabilities | ||||||||||
Financial Liabilities | ||||||||||
Trade Payables | 140 | – | 140 | 110 | – | 110 | 386 | – | 386 | |
Other financial liabilities | (d) | 6,021 | (38) | 5,983 | 7,171 | (9) | 7,162 | 6,309 | (7) | 6,302 |
Other current liabilities | (e) | 1,968 | (4) | 1,964 | 5,100 | (2,769) | 2,331 | 2,633 | (4) | 2,629 |
Provisions | (f) | 4,556 | (4,078) | 478 | 435 | – | 435 | 4,451 | (3,939) | 512 |
Income tax liabilities (net) | 2,818 | – | 2,818 | 3,118 | – | 3,118 | 3,410 | – | 3,410 | |
Total current liabilities | 15,503 | (4,120) | 11,383 | 15,934 | (2,778) | 13,156 | 17,189 | (3,950) | 13,239 | |
Total equity and liabilities | 66,289 | 70 | 66,359 | 70,640 | 253 | 70,893 | 75,141 | 209 | 75,350 |
Explanations for Reconciliation of Balance Sheet as previously reported under IGAAP to IND AS
(a) Goodwill and Intangible assets
Intangible assets and deferred tax asset/liabilities in relation to business combinations which were included within Goodwill under IGAAP, have been recognized separately under Ind–AS with corresponding adjustments to retained earnings and other comprehensive income for giving effect of amortisation expenses and exchange gains and losses.
(b) Investments
Tax free bonds are carried at amortised cost both under Ind AS and IGAAP. Investment in equity instruments are carried at fair value through OCI in Ind AS compared to being carried at cost under IGAAP.
(c) Deferred taxes
Deferred taxes in relation to business combinations have been recognised under Ind-AS
(d) Other financial Liabilities
Adjustments includes impact of discounting the deferred and contingent consideration payable for acquisitions under Ind AS
(e) Other liabilities
Adjustments that reflect unamortised negative past service cost arising on modification of the gratuity plan in an earlier period. Ind AS 19 - Employee Benefits requires such gains and losses to be adjusted to retained earnings. Also reflects adjustments for interim dividend (including corporate dividend tax), declared and approved by the board, post reporting period.
(f) Provisions
Adjustments reflect final dividend (including corporate dividend tax), declared and approved post reporting period.
(g) Other Equity
1. | Adjustments to retained earnings and other comprehensive income has been made in accordance with Ind AS, for the above mentioned line items. |
2. | In addition, as per Ind-AS 19, actuarial gain and losses are recognized in other comprehensive income as compared to being recognized in the Statement of Profit and Loss under IGAAP. |
INFOSYS LIMITED AND SUBSIDIARIES
2.2.2 Reconciliation Statement of Profit and loss as previously reported under IGAAP to IND AS
in
crore
Particulars | Note | Three months ended September 30, 2015 | Six months ended September 30, 2015 | Year ended March 31, 2016 | ||||||
IGAAP | Effects of transition to Ind-AS | Ind AS | IGAAP | Effects of transition to Ind-AS | Ind AS | IGAAP | Effects of transition to Ind-AS | Ind AS | ||
Revenue from operations | 15,635 | – | 15,635 | 29,989 | – | 29,989 | 62,441 | – | 62,441 | |
Other income, net | 792 | 1 | 793 | 1,548 | 1 | 1,549 | 3,128 | (5) | 3,123 | |
Total Income | 16,427 | 1 | 16,428 | 31,537 | 1 | 31,538 | 65,569 | (5) | 65,564 | |
Expenses | ||||||||||
Employee benefit expenses | (h) | 8,567 | (9) | 8,558 | 16,629 | (17) | 16,612 | 34,418 | (12) | 34,406 |
Deferred consideration pertaining to acquisition | (i) | 46 | 18 | 64 | 91 | 33 | 124 | 110 | 39 | 149 |
Cost of technical sub-contractors | 858 | – | 858 | 1,608 | – | 1,608 | 3,531 | – | 3,531 | |
Travel expenses | 582 | – | 582 | 1,137 | – | 1,137 | 2,263 | – | 2,263 | |
Cost of software packages and others | 354 | – | 354 | 666 | – | 666 | 1,274 | – | 1,274 | |
Communication expenses | 111 | – | 111 | 223 | – | 223 | 449 | – | 449 | |
Consultancy and professional charges | 184 | – | 184 | 353 | – | 353 | 779 | – | 779 | |
Depreciation and amortisation expenses | (j) | 313 | 45 | 358 | 595 | 76 | 671 | 1,266 | 193 | 1,459 |
Other expenses | (i) | 569 | 4 | 573 | 1,150 | 4 | 1,154 | 2,497 | 14 | 2,511 |
Total expenses | 11,584 | 58 | 11,642 | 22,452 | 96 | 22,548 | 46,587 | 234 | 46,821 | |
PROFIT BEFORE MINORITY INTEREST / SHARE IN NET PROFIT / (LOSS) OF ASSOCIATE | 4,843 | (57) | 4,786 | 9,085 | (95) | 8,990 | 18,982 | (239) | 18,743 | |
Share in net profit/(loss) of associate | (1) | – | (1) | (1) | – | (1) | (3) | – | (3) | |
PROFIT BEFORE TAX | 4,842 | (57) | 4,785 | 9,084 | (95) | 8,989 | 18,979 | (239) | 18,740 | |
Tax expense: | ||||||||||
Current tax | (k) | 1,439 | 2 | 1,441 | 2,570 | 4 | 2,574 | 5,315 | 3 | 5,318 |
Deferred tax | (l) | (41) | (13) | (54) | 9 | (21) | (12) | (14) | (53) | (67) |
PROFIT FOR THE PERIOD | 3,444 | (46) | 3,398 | 6,505 | (78) | 6,427 | 13,678 | (189) | 13,489 | |
Other comprehensive income | ||||||||||
Items that will not be reclassified subsequently to profit or loss | ||||||||||
Remeasurement of the net defined benefit liability/asset | (h) | – | (7) | (7) | – | (14) | (14) | – | (12) | (12) |
Equity instruments through other comprehensive income | – | – | – | – | – | – | – | – | – | |
– | (7) | (7) | – | (14) | (14) | – | (12) | (12) | ||
Items that will be reclassified subsequently to profit or loss | ||||||||||
Exchange differences on translation of foreign operations | (m) | 18 | 44 | 62 | 57 | 149 | 206 | 81 | 222 | 303 |
18 | 44 | 62 | 57 | 149 | 206 | 81 | 222 | 303 | ||
Total other comprehensive income, net of tax | 18 | 37 | 55 | 57 | 135 | 192 | 81 | 210 | 291 | |
Total comprehensive income for the period | 3,462 | (9) | 3,453 | 6,562 | 57 | 6,619 | 13,759 | 21 | 13,780 | |
Profit attributable to: | ||||||||||
Owners of the company | 3,444 | (46) | 3,398 | 6,505 | (78) | 6,427 | 13,678 | (189) | 13,489 | |
Non-controlling interests | – | – | – | – | – | – | – | – | – | |
3,444 | (46) | 3,398 | 6,505 | (78) | 6,427 | 13,678 | (189) | 13,489 | ||
Total comprehensive income attributable to: | ||||||||||
Owners of the company | 3,462 | (9) | 3,453 | 6,562 | 57 | 6,619 | 13,759 | 21 | 13,780 | |
Non–controlling interests | – | – | – | – | – | – | – | – | – | |
3,462 | (9) | 3,453 | 6,562 | 57 | 6,619 | 13,759 | 21 | 13,780 |
Explanations for Reconciliation of Profit and loss as previously reported under IGAAP to IND AS
(h) | 1. | As per Ind-AS 19, actuarial gain and losses are recognized in other comprehensive income and not reclassified to profit and loss in a subsequent period. |
2. | Adjustments reflect unamortised negative past service cost arising on modification of the gratuity plan in an earlier period. Ind AS 19 requires such gains and losses to be adjusted to retained earnings. |
(i) | Adjustments reflect impact of discounting pertaining to deferred and contingent consideration payable for business combinations |
(j) | Adjustment reflects impact of amortisation of intangible assets included within goodwill under the IGAAP, separately recognized under Ind-AS |
(k) | Tax component on actuarial gains and losses which was transferred to other comprehensive income under Ind AS |
(l) | The reduction in deferred tax expense is on account of reversal of deferred tax liabilities recorded on intangible assets acquired in business combination. |
(m) | Under Ind-AS, exchange differences on translation of foreign operations are recorded in other comprehensive income. |
2.2.3 Cash flow statement
There were no significant reconciliation items between cash flows prepared under IGAAP and those prepared under Ind AS.
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 over 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 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 |
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 year ended March 31, 2016, based on an assessment of Noah achieving the targets for the year ended December 31, 2015 and year ending December 31, 2016, the entire contingent consideration was reversed in the statement of profit and loss.
The retention bonus is treated as a post-acquisition
employee remuneration expense as per Ind AS 103. Post-acquisition employee remuneration expense of 30 crore and
61 crore has
been recorded in the statement of profit and loss for the three months and six months ended September 30, 2016.
The transaction costs of 11 crore related to
the acquisition was recognised under consultancy and professional charges and employee benefit costs in the statement of profit
and loss for the year ended March 31, 2016.
Finacle and Edge Services
On April 24, 2015, the Board of Directors of
Infosys 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 had 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. During the six months ended September 30,
2016, EdgeVerve had repaid
270 crore by redeeming proportionate number of debentures.
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 have 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 |
Cash paid | 578 |
Fair value of contingent consideration | 100 |
Total purchase price | 678 |
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.
During the six months ended September 30, 2016
contingent consideration of 40 crore was paid to the sellers of Kallidus on the achievement of certain financial targets. The
balance contingent consideration as of September 30, 2016 and March 31, 2016 is
93 crore and
132 crore, respectively, on an undiscounted
basis.
The transaction costs of 12 crore related to
the acquisition have been included under consultancy and professional charges and employee benefit costs in the statement of profit
and loss 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. 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 consultancy and professional charges and employee benefit costs in the statement of profit
and loss for the year ended March 31, 2015.
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 was treated as post
acquisition employee remuneration expense as per Ind AS 103. For the three months and six months ended September 30, 2015, a
post-acquisition employee remuneration expense of 64 crore and
124
crore, respectively is recorded in the statement of profit and loss. The liability towards post-acquisition employee remuneration
expense was settled during the year ended March 31, 2016.
2.4 PROPERTY, PLANT AND EQUIPMENT
Following are the changes in the carrying value of property, plant and equipment for the three months ended September 30, 2016:
In crore, except as otherwise stated
Land- Freehold | Land- Leasehold | Buildings (1) | Plant and machinery | Office Equipment | Computer equipment | Furniture and fixtures | Vehicles | Total | |
Gross carrying value as of July 1, 2016 | 976 | 655 | 6,361 | 1,872 | 885 | 4,240 | 1,494 | 31 | 16,514 |
Additions | 9 | – | 63 | 74 | 49 | 273 | 91 | 2 | 561 |
Deletions | – | – | – | – | (9) | (20) | (3) | (1) | (33) |
Translation difference | – | – | – | (1) | (2) | (4) | (4) | – | (11) |
Gross carrying value as of September 30, 2016 | 985 | 655 | 6,424 | 1,945 | 923 | 4,489 | 1,578 | 32 | 17,031 |
Accumulated depreciation as of July 1, 2016 | – | (23) | (2,258) | (1,161) | (535) | (2,767) | (1,029) | (17) | (7,790) |
Depreciation | – | (1) | (58) | (64) | (31) | (179) | (48) | (2) | (383) |
Accumulated depreciation on deletions | – | – | – | – | 9 | 20 | 3 | 1 | 33 |
Translation difference | – | – | – | 1 | 1 | 4 | 4 | – | 10 |
Accumulated depreciation as of September 30, 2016 | – | (24) | (2,316) | (1,224) | (556) | (2,922) | (1,070) | (18) | (8,130) |
Carrying value as of September 30, 2016 | 985 | 631 | 4,108 | 721 | 367 | 1,567 | 508 | 14 | 8,901 |
Carrying value as of July 1, 2016 | 976 | 632 | 4,103 | 711 | 350 | 1,473 | 465 | 14 | 8,724 |
Following are the changes in the carrying value of property, plant and equipment for the three months ended September 30, 2015:
In crore, except as otherwise stated
Land- Freehold | Land- Leasehold | Buildings (1) | Plant and machinery | Office Equipment | Computer equipment | Furniture and fixtures | Vehicles | Total | |
Gross carrying value as of July 1, 2015 | 949 | 633 | 5,955 | 1,492 | 703 | 3,647 | 1,229 | 35 | 14,643 |
Additions | 9 | – | 56 | 53 | 41 | 191 | 32 | 2 | 384 |
Deletions | – | – | – | – | (2) | (241) | (2) | (1) | (246) |
Translation difference | – | – | – | (1) | – | 3 | 2 | – | 4 |
Gross carrying value as of September 30, 2015 | 958 | 633 | 6,011 | 1,544 | 742 | 3,600 | 1,261 | 36 | 14,785 |
Accumulated depreciation as of July 1, 2015 | – | (17) | (2,035) | (932) | (432) | (2,402) | (867) | (20) | (6,705) |
Depreciation | – | (2) | (54) | (51) | (25) | (142) | (37) | (2) | (313) |
Accumulated depreciation on deletions | – | – | – | – | 1 | 93 | – | – | 94 |
Translation difference | – | – | – | 1 | (1) | (2) | 1 | 1 | – |
Accumulated depreciation as of September 30, 2015 | – | (19) | (2,089) | (982) | (457) | (2,453) | (903) | (21) | (6,924) |
Carrying value as of September 30, 2015 | 958 | 614 | 3,922 | 562 | 285 | 1,147 | 358 | 15 | 7,861 |
Carrying value as of July 1, 2015 | 949 | 616 | 3,920 | 560 | 271 | 1,245 | 362 | 15 | 7,938 |
Following are the changes in the carrying value of property, plant and equipment for the six months ended September 30, 2016:
In crore, except as otherwise stated
Land- Freehold | Land- Leasehold | Buildings (1) | Plant and machinery | Office Equipment | Computer equipment | Furniture and fixtures | Vehicles | Total | |
Gross carrying value as of April 1, 2016 | 972 | 650 | 6,325 | 1,759 | 839 | 4,072 | 1,444 | 29 | 16,090 |
Additions | 13 | 5 | 99 | 188 | 97 | 457 | 143 | 5 | 1,007 |
Deletions | – | – | – | (1) | (11) | (35) | (4) | (2) | (53) |
Translation difference | – | – | – | (1) | (2) | (5) | (5) | – | (13) |
Gross carrying value as of September 30, 2016 | 985 | 655 | 6,424 | 1,945 | 923 | 4,489 | 1,578 | 32 | 17,031 |
Accumulated depreciation as of April 1, 2016 | – | (22) | (2,201) | (1,100) | (509) | (2,618) | (986) | (17) | (7,453) |
Depreciation | – | (2) | (115) | (126) | (59) | (343) | (93) | (3) | (741) |
Accumulated depreciation on deletions | – | – | – | 1 | 11 | 35 | 4 | 2 | 53 |
Translation difference | – | – | – | 1 | 1 | 4 | 5 | – | 11 |
Accumulated depreciation as of September 30, 2016 | – | (24) | (2,316) | (1,224) | (556) | (2,922) | (1,070) | (18) | (8,130) |
Carrying value as of September 30, 2016 | 985 | 631 | 4,108 | 721 | 367 | 1,567 | 508 | 14 | 8,901 |
Carrying value as of April 1, 2016 | 972 | 628 | 4,124 | 659 | 330 | 1,454 | 458 | 12 | 8,637 |
Following are the changes in the carrying value of property, plant and equipment for the six months ended September 30, 2015:
In crore, except as otherwise stated
Land– Freehold | Land– Leasehold | Buildings (1) | Plant and machinery | Office Equipment | Computer equipment | Furniture and fixtures | Vehicles | Total | |
Gross carrying value as of April 1, 2015 | 931 | 633 | 5,881 | 1,427 | 676 | 3,347 | 1,179 | 34 | 14,108 |
Acquisitions through business combinations | – | – | – | – | 1 | 2 | 1 | – | 4 |
Additions | 27 | – | 130 | 117 | 69 | 494 | 79 | 3 | 919 |
Deletions | – | – | – | – | (5) | (254) | (3) | (2) | (264) |
Translation difference | – | – | – | – | 1 | 11 | 5 | 1 | 18 |
Gross carrying value as of September 30, 2015 | 958 | 633 | 6,011 | 1,544 | 742 | 3,600 | 1,261 | 36 | 14,785 |
Accumulated depreciation as of April 1, 2015 | – | (16) | (1,982) | (881) | (412) | (2,287) | (826) | (19) | (6,423) |
Acquisitions through business combinations | – | – | – | – | (1) | (1) | – | – | (2) |
Depreciation | – | (3) | (107) | (101) | (47) | (256) | (77) | (3) | (594) |
Accumulated depreciation on deletions | – | – | – | – | 4 | 100 | 1 | 1 | 106 |
Translation difference | – | – | – | – | (1) | (9) | (1) | – | (11) |
Accumulated depreciation as of September 30, 2015 | – | (19) | (2,089) | (982) | (457) | (2,453) | (903) | (21) | (6,924) |
Carrying value as of September 30, 2015 | 958 | 614 | 3,922 | 562 | 285 | 1,147 | 358 | 15 | 7,861 |
Carrying value as of April 1, 2015 | 931 | 617 | 3,899 | 546 | 264 | 1,060 | 353 | 15 | 7,685 |
Following are the changes in the carrying value of property, plant and equipment for the year ended March 31, 2016:
In crore, except as otherwise stated
Land- Freehold | Land- Leasehold | Buildings (1) | Plant and machinery | Office Equipment | Computer equipment | Furniture and fixtures | Vehicles | Total | |
Gross carrying value as of April 1, 2015 | 931 | 633 | 5,881 | 1,427 | 676 | 3,347 | 1,179 | 34 | 14,108 |
Acquisitions through business combinations | – | – | – | – | 1 | 2 | 1 | – | 4 |
Additions | 41 | 17 | 444 | 333 | 166 | 1,103 | 265 | 6 | 2,375 |
Deletions | – | – | – | (1) | (6) | (396) | (8) | (12) | (423) |
Translation difference | – | – | – | – | 2 | 16 | 7 | 1 | 26 |
Gross carrying value as of March 31, 2016 | 972 | 650 | 6,325 | 1,759 | 839 | 4,072 | 1,444 | 29 | 16,090 |
Accumulated depreciation as of April 1, 2015 | – | (16) | (1,982) | (881) | (412) | (2,287) | (826) | (19) | (6,423) |
Acquisitions through business combinations | – | – | – | – | (1) | (1) | – | – | (2) |
Depreciation | – | (6) | (219) | (220) | (100) | (553) | (161) | (5) | (1,264) |
Accumulated depreciation on deletions | – | – | – | 1 | 5 | 237 | 4 | 7 | 254 |
Translation difference | – | – | – | – | (1) | (14) | (3) | – | (18) |
Accumulated depreciation as of March 31, 2016 | – | (22) | (2,201) | (1,100) | (509) | (2,618) | (986) | (17) | (7,453) |
Carrying value as of March 31, 2016 | 972 | 628 | 4,124 | 659 | 330 | 1,454 | 458 | 12 | 8,637 |
Carrying value as of April 1, 2015 | 931 | 617 | 3,899 | 546 | 264 | 1,060 | 353 | 15 | 7,685 |
Notes | (1) | Buildings include ![]() ![]() |
Gross carrying value of lease hold land represents amounts 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 aggregate depreciation has been included under depreciation and amortisation expense in the consolidated statement of profit and loss.
2.5 GOODWILL AND OTHER INTANGIBLE ASSETS
Following is a summary of changes in the carrying amount of goodwill:
In crore
As of | ||
September 30, 2016 | March 31, 2016 | |
Carrying value at the beginning | 3,764 | 3,091 |
Goodwill on Panaya acquisition | – | – |
Goodwill on Kallidus d.b.a Skava acquisition (Refer note 2.3) | – | 452 |
Goodwill on Noah acquisition (Refer note 2.3) | – | 30 |
Translation differences | 7 | 191 |
Carrying value at the end | 3,771 | 3,764 |
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.
The following table gives the break up of allocation of goodwill to operating segments as at April 1, 2015
In crore
Segment | As at |
April 1, 2015 | |
Financial services | 663 |
Insurance | 367 |
Manufacturing | 656 |
Energy, Communication and Services | 318 |
Resources and utilities | 141 |
Retail, Consumer packaged goods and Logistics | 473 |
Life Sciences and Healthcare | 193 |
Growth Markets | 280 |
Total | 3,091 |
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 Ind AS 108, Operating Segments. 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 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 and April 1, 2015 the estimated recoverable amount of the CGU exceeded its carrying amount. The recoverable amount was computed based on the fair value less cost to sell being higher than value-in-use. 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 %)
As of | ||
March 31, 2016 | April 1, 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 September 30, 2016:
In crore
Customer related | Software related | Sub-contracting rights related | Intellectual property rights related | Land use- rights related | Brand or Trademark Related | Others | Total | |
Gross carrying value as of July 1, 2016 | 784 | 422 | 21 | 1 | 72 | 94 | 64 | 1,458 |
Additions during the period | – | – | – | – | – | – | – | – |
Deletions during the period | – | – | – | – | – | – | – | – |
Translation difference | (9) | (6) | – | – | (1) | (1) | (1) | (18) |
Gross carrying value as of September 30, 2016 | 775 | 416 | 21 | 1 | 71 | 93 | 63 | 1,440 |
Accumulated amortization as of July 1, 2016 | (329) | (74) | (21) | (1) | (6) | (42) | (27) | (500) |
Amortization expense | (22) | (11) | – | – | (1) | (3) | (4) | (41) |
Deletion during the period | – | – | – | – | – | – | – | – |
Translation differences | 3 | 2 | – | – | – | – | – | 5 |
Accumulated amortization as of September 30, 2016 | (348) | (83) | (21) | (1) | (7) | (45) | (31) | (536) |
Carrying value as of July 1, 2016 | 455 | 348 | – | – | 66 | 52 | 37 | 958 |
Carrying value as of September 30, 2016 | 427 | 333 | – | – | 64 | 48 | 32 | 904 |
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 three months ended September 30, 2015:
In crore
Customer related | Software related | Sub-contracting rights related | Intellectual property rights related | Land use- rights related | Brand or Trademark Related | Others | Total | |
Gross carrying value as of July 1, 2015 | 640 | 396 | 21 | 11 | 72 | 66 | 35 | 1,241 |
Additions during the period | – | – | – | – | – | – | – | – |
Deletions during the period | – | – | – | (10) | – | – | – | (10) |
Translation difference | 4 | 12 | – | – | 1 | (1) | 1 | 17 |
Gross carrying value as of September 30, 2015 | 644 | 408 | 21 | 1 | 73 | 65 | 36 | 1,248 |
Accumulated amortization as of July 1, 2015 | (187) | (29) | (21) | (11) | (5) | (32) | (12) | (297) |
Amortization expense | (30) | (10) | – | – | (1) | (1) | (3) | (45) |
Deletions during the period | – | – | – | 10 | – | – | – | 10 |
Translation differences | – | (1) | – | – | – | 2 | – | 1 |
Accumulated amortization as of September 30, 2015 | (217) | (40) | (21) | (1) | (6) | (31) | (15) | (331) |
Carrying value as of July 1, 2015 | 453 | 367 | – | – | 67 | 34 | 23 | 944 |
Carrying value as of September 30, 2015 | 427 | 368 | – | – | 67 | 34 | 21 | 917 |
Following are the changes in the carrying value of acquired intangible assets for the six months ended September 30, 2016:
In crore
Customer related | Software related | Sub-contracting rights related | Intellectual property rights related | Land use- rights related | Brand or Trademark Related | Others | Total | |
Gross carrying value as of April 1, 2016 | 775 | 414 | 21 | 1 | 72 | 93 | 63 | 1,439 |
Additions during the period | – | – | – | – | – | – | – | – |
Deletions during the period | – | – | – | – | – | – | – | – |
Translation difference | – | 2 | – | – | (1) | – | – | 1 |
Gross carrying value as of September 30, 2016 | 775 | 416 | 21 | 1 | 71 | 93 | 63 | 1,440 |
Accumulated amortization as of April 1, 2016 | (303) | (62) | (21) | (1) | (6) | (38) | (23) | (454) |
Amortization expense | (45) | (22) | – | – | (1) | (7) | (8) | (83) |
Deletion during the period | – | – | – | – | – | – | – | – |
Translation differences | – | 1 | – | – | – | – | – | 1 |
Accumulated amortization as of September 30, 2016 | (348) | (83) | (21) | (1) | (7) | (45) | (31) | (536) |
Carrying value as of April 1, 2016 | 472 | 352 | – | – | 66 | 55 | 40 | 985 |
Carrying value as of September 30, 2016 | 427 | 333 | – | – | 64 | 48 | 32 | 904 |
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 six months ended September 30, 2015:
In crore
Customer related | Software related | Sub-contracting rights related | Intellectual property rights related | Land use- rights related | Brand or Trademark Related | Others | Total | |
Gross carrying value as of April 1, 2015 | 448 | 261 | 21 | 11 | 71 | 49 | 34 | 895 |
Additions through business combinations (Refer Note 2.3) | 175 | 130 | – | – | – | 14 | – | 319 |
Deletions during the period | – | – | – | (10) | – | – | – | (10) |
Translation difference | 21 | 17 | – | – | 2 | 2 | 2 | 44 |
Gross carrying value as of September 30, 2015 | 644 | 408 | 21 | 1 | 73 | 65 | 36 | 1,248 |
Accumulated amortization as of April 1, 2015 | (162) | (21) | (21) | (11) | (5) | (28) | (9) | (257) |
Amortization expense | (50) | (18) | – | – | (1) | (2) | (6) | (77) |
Deletions during the period | – | – | – | 10 | – | – | – | 10 |
Translation differences | (5) | (1) | – | – | – | (1) | – | (7) |
Accumulated amortization as of September 30, 2015 | (217) | (40) | (21) | (1) | (6) | (31) | (15) | (331) |
Carrying value as of April 1, 2015 | 286 | 240 | – | – | 66 | 21 | 25 | 638 |
Carrying value as of September 30, 2015 | 427 | 368 | – | – | 67 | 34 | 21 | 917 |
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 | Brand or Trademark Related | Others | Total | |
Gross carrying value as of April 1, 2015 | 448 | 261 | 21 | 11 | 71 | 49 | 34 | 895 |
Additions through business combinations (Refer Note 2.3) | 294 | 130 | – | – | – | 41 | 27 | 492 |
Additions | – | 2 | – | – | – | – | – | 2 |
Deletions | – | – | – | (10) | – | – | – | (10) |
Translation difference | 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) |
Deletions during the period | – | – | – | 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 |
The amortization expense has been included under depreciation and amortisation expense in the consolidated statement of profit and loss.
Research and development expense recognized in
net profit in the consolidated statement of profit and loss for the three months and six months ended September 30, 2016
and September 30, 2015 is 198 crore and
173 crore and
382 crore and
333 crore, respectively.
2.6 INVESTMENTS
in crore
Particulars | As at | ||
September 30, 2016 | March 31, 2016 | April 1, 2015 | |
Non-current | |||
Unquoted | |||
Investments carried at fair value through other comprehensive income (refer note 2.6.1) | |||
Preference securities | 146 | 92 | – |
Equity instruments | 1 | 1 | 1 |
Others | 30 | 22 | – |
177 | 115 | 1 | |
Quoted | |||
Investment carried at amortized cost (refer note 2.6.2) | |||
Tax free bonds | 1,599 | 1,599 | 1,300 |
Government Bonds | – | – | 4 |
1,599 | 1,599 | 1,304 | |
Investments carried at fair value through other comprehensive income (refer note 2.6.4) | |||
Non convertible debentures | 155 | – | – |
155 | – | – | |
Total non-current investments | 1,931 | 1,714 | 1,305 |
Current | |||
Unquoted | |||
Investments carried at fair value through profit or loss (refer note 2.6.3) | |||
Liquid mutual fund units | 2,147 | 68 | 842 |
2,147 | 68 | 842 | |
Quoted | |||
Investment carried at amortized cost (refer note 2.6.2) | |||
Government Bonds | 7 | 7 | – |
7 | 7 | – | |
Investments carried at fair value through profit or loss | |||
Fixed maturity plans | – | – | 32 |
– | – | 32 | |
Total current investments | 2,154 | 75 | 874 |
Total investments | 4,085 | 1,789 | 2,179 |
Aggregate amount of quoted investments | 1,761 | 1,606 | 1,336 |
Market value of quoted investments (including interest accrued) | 2,003 | 1,703 | 1,376 |
Aggregate amount of unquoted investments (including investment in associates) | 2,423 | 286 | 936 |
Aggregate amount of impairment made for non-current unquoted investments | 6 | 6 | 6 |
Investment carried at amortized cost | 1,606 | 1,606 | 1,304 |
Investments carried at fair value through other comprehensive income | 332 | 115 | 1 |
Investments carried at fair value through profit or loss | 2,147 | 68 | 874 |
2.6.1 Details of Investments
The details of investments in preference, equity and other instruments at September 30, 2016 and March 31, 2016 are as follows:
in crore, unless otherwise stated
Particulars | As at | |
September 30, 2016 | March 31, 2016 | |
Preference securities | ||
Airviz Inc. | 13 | 13 |
2,82,279 (2,82,279) Series A Preferred Stock, fully paid up, par value USD 0.001 each | ||
ANSR Consulting | 9 | 9 |
52,631 (52,631) Series A Preferred Stock, fully paid up, par value USD 0.001 each | ||
Whoop Inc | 20 | 20 |
16,48,352 (16,48,352) Series B Preferred Stock, fully paid up, par value USD 0.0001 each | ||
CloudEndure Ltd. | 27 | 13 |
12,79,645 (12,79,645) Preferred Series B Shares, fully paid up, par value ILS 0.01 each | ||
Nivetti Systems Private Limited | 10 | 10 |
2,28,501 (2,28,501) Preferred Stock, fully paid up, par value ![]() |
||
Waterline Data Science, Inc | 27 | 27 |
39,33,910 (39,33,910) Preferred Series B Shares, fully paid up, par value USD 0.00001 each | ||
Trifacta Inc. | 26 | – |
11,80,358 (Nil) Preferred Stock | ||
Cloudyn Software Ltd | 14 | – |
27,022 (Nil) Preferred Series B-3 shares, fully paid up, par value ILS 0.01 each | ||
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 | ||
Merasport Technologies Private Limited | – | – |
2,420 (2,420) equity shares at ![]() ![]() |
||
Global Innovation and Technology Alliance | 1 | 1 |
15,000 (15,000) equity shares at ![]() ![]() |
||
Others | ||
Vertex Ventures US Fund L.L.P | 30 | 22 |
177 | 115 |
2.6.2 Details of Investments in tax free bonds and government bonds
The balances held in tax free bonds as at September 30, 2016 and March 31, 2016 is as follows:
in crore, except as otherwise stated
Particulars | Face Value ![]() |
As at September 30, 2016 | As at March 31, 2016 | ||
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 | 2,000 | 200 |
7.28% Indian Railway Finance Corporation Limited 21DEC30 | 1,000/- | 4,22,800 | 42 | 4,22,800 | 42 |
7.35% National Highways Authority of India Bonds 11JAN31 | 1,000/- | 5,71,396 | 57 | 5,71,396 | 57 |
74,52,646 | 1,599 | 74,52,646 | 1,599 |
The balances held in government bonds as at September 30, 2016 and March 31, 2016 is as follows:
in crore, except as otherwise stated
Particulars | Face Value PHP | As at September 30, 2016 | As at March 31, 2016 | ||
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 |
Fixed Rate Treasury Notes 1.00 PCT MAT DATE 25 APR 2016 | 100 | – | – | 2,00,000 | 3 |
Treasury Notes PHY6972FWG18 MAT Date 22 Feb 2017 | 100 | 10,000 | – | 10,000 | – |
Treasury Notes PHY6972FWQ99 MAT Date 07 June 2017 | 100 | 3,40,000 | 5 | – | – |
Treasury Notes PHY6972FWG18 MAT Date 22 Feb 2017 | 100 | 1,50,000 | 2 | 1,50,000 | 2 |
5,00,000 | 7 | 4,70,000 | 7 |
2.6.3 Details of Investments in liquid mutual fund units
The balances held in liquid mutual fund units as at September 30, 2016 and March 31, 2016 is as follows:
in
crore, except as otherwise stated
Particulars | As at September 30, 2016 | As at March 31, 2016 | ||
Units | Amount | Units | Amount | |
Reliance Money Manage Fund | – | – | 32,925 | 7 |
Reliance Liquid Fund Cash Plan | – | – | 2 | – |
Reliance Liquid Fund - Cash Plan - Direct Growth Plan | 28,305 | 7 | – | – |
Reliance Liquid Fund - Treasury Plan - Direct Daily Dividend Option | 7,39,597 | 113 | – | – |
Birla Sun Life Cash Plus - Daily Dividend Direct - Reinvestment | 74,27,927 | 75 | – | – |
IDFC Cash Fund - Growth - (Direct Plan) | 31,39,444 | 600 | – | – |
HDFC Liquid Fund - Direct Plan - Growth Option | 13,18,178 | 409 | – | – |
Reliance Liquid Fund - Treasury Plan – Direct Growth Plan | 11,76,385 | 451 | – | – |
ICICI Prudential Liquid - Direct Plan - Daily Dividend | 39,98,589 | 40 | 16,07,064 | 16 |
Reliance Liquid Fund Treasury Plan | – | – | 2,07,283 | 31 |
ICICI Prudential Liquid Plan – Direct - Growth | 1,90,05,913 | 443 | – | – |
Birla Sun Life Cash Manager- Regular Plan | 2,48,825 | 9 | 3,89,089 | 14 |
3,70,83,163 | 2,147 | 22,36,363 | 68 |
2.6.4 Details of Investments in Non convertible debentures
The balances held in non convertible debenture units as at September 30, 2016 and March 31, 2016 is as follows:
in crore, except as otherwise
stated
Particulars | As at September 30, 2016 | As at March 31, 2016 | ||
Units | Amount | Units | Amount | |
7.79 Life Insurance Corporation Housing Finance Limited 19JUNE2020 | 50,00,000 | 50 | – | – |
8.37 Life Insurance Corporation Housing Finance Limited 10MAY2021 | 50,00,000 | 53 | – | – |
8.46 Housing Development Finance Corporation Limited 11MARCH2019 | 50,00,000 | 52 | – | – |
1,50,00,000 | 155 | – | – |
2.7 LOANS
in crore
Particulars | As at | ||
September 30, 2016 | March 31, 2016 | April 1, 2015 | |
Non Current | |||
Unsecured, considered good | |||
Other loans | |||
Loans to employees | 26 | 25 | 31 |
26 | 25 | 31 | |
Unsecured, considered doubtful | |||
Loans to employees | 22 | 19 | 12 |
48 | 44 | 43 | |
Less: Allowance for doubtful loans to employees | 22 | 19 | 12 |
26 | 25 | 31 | |
Current | |||
Unsecured, considered good | |||
Other loans | |||
Loans to employees | 264 | 303 | 222 |
264 | 303 | 222 | |
Total Loans | 290 | 328 | 253 |
2.8 OTHER FINANCIAL ASSETS
in crore
Particulars | As at | ||
September 30, 2016 | March 31, 2016 | April 1, 2015 | |
Non Current | |||
Security deposits (1) | 81 | 78 | 68 |
Rental deposits (1) | 168 | 146 | 47 |
Restricted deposits(1) | 52 | 62 | 58 |
Others (1) | 1 | – | – |
302 | 286 | 173 | |
Current | |||
Security deposits (1) | 10 | 7 | 4 |
Rental deposits (1) | 19 | 13 | 24 |
Restricted deposits (1) | 1,333 | 1,238 | 1,100 |
Unbilled revenues (1) | 3,892 | 3,029 | 2,845 |
Interest accrued but not due (1) | 1,501 | 762 | 444 |
Foreign currency forward and options contracts (2) (3) | 89 | 116 | 101 |
Others (1) | 39 | 25 | 9 |
6,883 | 5,190 | 4,527 | |
Total Financial Assets | 7,185 | 5,476 | 4,700 |
(1) Financial assets carried at amortized cost | 7,096 | 5,360 | 4,599 |
(2) Financial assets carried at fair value through other comprehensive income | 2 | – | – |
(3) Financial assets carried at fair value through profit or loss | 87 | 116 | 101 |
Restricted deposits represents deposits with financial institutions to settle employee-related obligations as and when they arise during the normal course of business.
Other assets primarily represent travel advances and other recoverables.
2.9 TRADE RECEIVABLES
in crore
As at | |||
Particulars | September 30, 2016 | March 31, 2016 | April 1, 2015 |
Current | |||
Unsecured | |||
Considered good | 11,571 | 11,330 | 9,713 |
Considered doubtful | 203 | 289 | 366 |
11,774 | 11,619 | 10,079 | |
Less: Allowances for credit loss | 203 | 289 | 366 |
11,571 | 11,330 | 9,713 |
2.10 CASH AND CASH EQUIVALENTS
in crore
Particulars | As at | ||
September 30, 2016 | March 31, 2016 | April 1, 2015 | |
Balances with banks | |||
In current and deposit accounts | 26,261 | 27,420 | 26,195 |
Cash on hand | – | – | – |
Others | |||
Deposits with financial institutions | 5,471 | 5,277 | 4,172 |
31,732 | 32,697 | 30,367 | |
Balances with banks in unpaid dividend accounts | 18 | 5 | 3 |
Deposit with more than 12 months maturity | 436 | 404 | 311 |
Balances with banks held as margin money deposits against guarantees | 359 | 342 | 185 |
Cash and cash equivalents as of September 30,
2016, March 31, 2016 and April 1, 2015 include restricted cash and bank balances of 522 crore,
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
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 | |
September 30, 2016 | March 31, 2016 | |
Current accounts | ||
ANZ Bank, Taiwan | 18 | 13 |
Axis Bank, India | 1 | 1 |
Banamex Bank, Mexico | – | 5 |
Banamex Bank, Mexico (U.S. Dollar account) | 3 | 3 |
Bank of America, Mexico | 23 | 21 |
Bank of America, USA | 857 | 681 |
Bank Zachodni WBK S.A, Poland | 10 | 3 |
Bank of Tokyo-Mitsubishi UFJ, Ltd., Japan | 1 | 1 |
Barclays Bank, UK | 12 | 19 |
Bank Leumi, Israel (US Dollar account) | 10 | 17 |
Bank Leumi, Israel | 8 | 10 |
BNP Paribas Bank, Norway | 2 | – |
China Merchants Bank, China | 9 | 8 |
Citibank N.A, China | 63 | 65 |
Citibank N.A., China (U.S. Dollar account) | 47 | 72 |
Citibank N.A., Costa Rica | 4 | 2 |
Citibank N.A., Australia | 126 | 72 |
Citibank N.A., Brazil | 24 | 5 |
Citibank N.A., Dubai | 1 | 1 |
Citibank N.A., India | 1 | 1 |
Citibank N.A., Japan | 18 | 15 |
Citibank N.A., New Zealand | 9 | 6 |
Citibank N.A., Portugal | 1 | 2 |
Citibank N.A., Singapore | – | 3 |
Citibank N.A., South Africa | 6 | 5 |
Citibank N.A., South Africa (Euro account) | 1 | 1 |
Citibank N.A., Philippines, (U.S. Dollar account) | 1 | 1 |
Citibank N.A., USA | 109 | 60 |
Citibank N.A., EEFC (U.S. Dollar account) | 1 | – |
Commerzbank, Germany | 10 | 19 |
Crédit Industriel et Commercial Bank, France | – | 4 |
Deutsche Bank, India | 9 | 8 |
Deutsche Bank, Philippines | 10 | 13 |
Deutsche Bank, Philippines (U.S. Dollar account) | 3 | 1 |
Deutsche Bank, Poland | 12 | 5 |
Deutsche Bank, Poland (Euro account) | 4 | – |
Deutsche Bank, EEFC (Australian Dollar account) | 51 | 2 |
Deutsche Bank, EEFC (Euro account) | 28 | 32 |
Deutsche Bank, EEFC (Swiss Franc account) | 1 | 5 |
Deutsche Bank, EEFC (U.S. Dollar account) | 43 | 96 |
Deutsche Bank, EEFC (United Kingdom Pound Sterling account) | 7 | 9 |
Deutsche Bank, Belgium | 51 | 59 |
Deutsche Bank, Malaysia | – | 9 |
Deutsche Bank, Czech Republic | 22 | 14 |
Deutsche Bank, Czech Republic (Euro account) | – | 1 |
Deutsche Bank, Czech Republic (U.S. Dollar account) | 27 | 28 |
Deutsche Bank, France | 16 | 10 |
Deutsche Bank, Germany | 19 | 17 |
Deutsche Bank, Netherlands | 8 | 6 |
Deutsche Bank, Russia | 2 | 2 |
Deutsche Bank, Russia (U.S. Dollar account) | 4 | 1 |
Deutsche Bank, Singapore | 1 | 4 |
Deutsche Bank, Spain | – | 1 |
Deutsche Bank, Switzerland | 6 | 1 |
Deutsche Bank, United Kingdom | 37 | 170 |
Deutsche Bank, USA | 6 | – |
HSBC Bank, Brazil | 3 | 5 |
HSBC Bank, Hong Kong | 5 | 1 |
ICICI Bank, India | 46 | 72 |
ICICI Bank, EEFC (Euro account) | 4 | – |
ICICI Bank, EEFC (U.S. Dollar account) | 15 | 10 |
ICICI Bank, EEFC (United Kingdom Pound Sterling account) | 2 | – |
ING Bank, Belgium | 3 | 3 |
Nordbanken, Sweden | 20 | 15 |
Punjab National Bank, India | 3 | 4 |
Raiffeisen Bank, Czech Republic | 4 | 5 |
Raiffeisen Bank, Romania | 3 | 4 |
Royal Bank of Canada, Canada | 38 | 78 |
Santander Bank, Argentina | 6 | – |
State Bank of India, India | 7 | 8 |
Silicon Valley Bank, USA | 4 | 5 |
Silicon Valley Bank, (Euro account) | 33 | 65 |
Silicon Valley Bank, (United Kingdom Pound Sterling account) | 9 | 19 |
Union Bank of Switzerland AG | 5 | 15 |
Union Bank of Switzerland AG, (Euro account) | – | 12 |
Union Bank of Switzerland AG, (Australian Dollar account) | – | 2 |
Union Bank of Switzerland AG, (U.S. Dollar account) | 9 | 28 |
Union Bank of Switzerland AG, (United Kingdom Pound Sterling account) | – | 4 |
Wells Fargo Bank N.A., USA | 28 | 23 |
Westpac, Australia | 1 | 6 |
1,991 | 1,994 |
in crore
Particulars | As at | |
September 30, 2016 | March 31, 2016 | |
Deposit accounts | ||
Andhra Bank | 868 | 948 |
Axis Bank | 1,830 | 1,340 |
Bank BGZ BNP Paribas S.A | 193 | – |
Bank of India | – | 77 |
Canara Bank | 2,115 | 2,115 |
Central Bank of India | 1,518 | 1,538 |
Citibank | 90 | 125 |
Corporation Bank | 1,285 | 1,285 |
Deutsche Bank, Poland | 54 | 237 |
HDFC Bank | 1,985 | 2,650 |
ICICI Bank | 3,600 | 4,049 |
IDBI Bank | 1,900 | 1,900 |
Indian Overseas Bank | 1,250 | 1,250 |
Indusind Bank | 250 | 250 |
Jammu & Kashmir Bank | 25 | 25 |
Kotak Mahindra Bank Limited | 420 | 537 |
National Australia Bank Limited | – | 1 |
Oriental Bank of Commerce | 1,967 | 1,967 |
Punjab National Bank | – | 18 |
South Indian Bank | 100 | 23 |
State Bank of India | 2,311 | 2,310 |
Syndicate Bank | 949 | 1,266 |
Union Bank of India | 72 | 140 |
Vijaya Bank | 304 | 304 |
Yes Bank | 807 | 724 |
23,893 | 25,079 | |
Unpaid dividend accounts | ||
Axis Bank - Unpaid dividend account | 2 | 2 |
HDFC Bank - Unpaid dividend account | 3 | 1 |
ICICI Bank - Unpaid dividend account | 13 | 2 |
18 | 5 | |
Margin money deposits against guarantees | ||
Canara Bank | 159 | 132 |
Citibank | 3 | 3 |
ICICI Bank | 158 | 150 |
State Bank of India | 39 | 57 |
359 | 342 | |
Deposits with financial institutions | ||
HDFC Limited | 5,446 | 5,277 |
Bajaj Finance Limited | 25 | – |
5,471 | 5,277 | |
Total cash and cash equivalents | 31,732 | 32,697 |
2.11 OTHER ASSETS
in crore
Particulars | As at | ||
September 30, 2016 | March 31, 2016 | April 1, 2015 | |
Non Current | |||
Capital advances | 1,229 | 933 | 664 |
Advances other than capital advances | |||
Prepaid gratuity (refer note 2.22.1) | 8 | 4 | 27 |
Deferred Contract Cost | 310 | 333 | – |
Prepaid expenses | 73 | 87 | 7 |
1,620 | 1,357 | 698 | |
Current | |||
Advances other than capital advances | |||
Payment to vendors for supply of goods | 68 | 110 | 79 |
Others | |||
Withholding taxes and others | 1,621 | 1,799 | 1,364 |
Prepaid expenses | 253 | 201 | 98 |
Deferred Contract Cost | 63 | 48 | – |
2,005 | 2,158 | 1,541 | |
Total Other Assets | 3,625 | 3,515 | 2,239 |
Deferred contract costs are upfront costs incurred for the contract and are amortized over the term of the contract. Withholding taxes and others primarily consist of input tax credits.
2.12 FINANCIAL INSTRUMENTS
Financial instruments by category
The carrying value and fair value of financial instruments by categories as of September 30, 2016 were as follows:
(In crore)
Amortised cost | Financial assets/ liabilities at fair value through profit or loss | Financial assets/liabilities at fair value through OCI | Total carrying value | Total fair value | |||
Designated upon initial recognition | Mandatory | Equity instruments designated upon initial recognition | Mandatory | ||||
Assets: | |||||||
Cash and cash equivalents (Refer Note 2.10) | 31,732 | – | – | – | – | 31,732 | 31,732 |
Investments (Refer Note 2.6) | |||||||
Equity, preference and other securities | – | – | – | 177 | – | 177 | 177 |
Tax free bonds and government bonds | 1,606 | – | – | – | – | 1,606 | 1,848* |
Liquid mutual fund units | – | – | 2,147 | – | – | 2,147 | 2,147 |
Non convertible debentures | – | – | – | – | 155 | 155 | 155 |
Trade receivables (Refer Note 2.9) | 11,571 | – | – | – | – | 11,571 | 11,571 |
Loans (Refer Note 2.7) | 290 | – | – | – | – | 290 | 290 |
Other financials assets (Refer Note 2.8) | 7,096 | – | 87 | – | 2 | 7,185 | 7,185 |
Total | 52,295 | – | 2,234 | 177 | 157 | 54,863 | 55,105 |
Liabilities: | |||||||
Trade payables | 307 | – | – | – | – | 307 | 307 |
Other financial liabilities (Refer Note 2.14) | 4,937 | – | 85 | – | – | 5,022 | 5,022 |
Total | 5,244 | – | 85 | – | – | 5,329 | 5,329 |
The carrying value and fair value of financial instruments by categories as of March 31, 2016 were as follows:
(In
crore)
Amortised cost | Financial assets/ liabilities at fair value through profit or loss | Financial assets/liabilities at fair value through OCI | Total carrying value | Total fair value | |||
Designated upon initial recognition | Mandatory | Equity instruments designated upon initial recognition | Mandatory | ||||
Assets: | |||||||
Cash and cash equivalents (Refer Note 2.10) | 32,697 | – | – | – | – | 32,697 | 32,697 |
Investments (Refer Note 2.6) | |||||||
Equity,preference and other securities | – | – | – | 115 | – | 115 | 115 |
Tax free bonds and government bonds | 1,606 | – | – | – | – | 1,606 | 1,703* |
Liquid mutual fund units | – | – | 68 | – | – | 68 | 68 |
Trade receivables (Refer Note 2.9) | 11,330 | – | – | – | – | 11,330 | 11,330 |
Loans (Refer Note 2.7) | 328 | – | – | – | – | 328 | 328 |
Other financials assets (Refer Note 2.8) | 5,360 | – | 116 | – | – | 5,476 | 5,476 |
Total | 51,321 | – | 184 | 115 | – | 51,620 | 51,717 |
Liabilities: | |||||||
Trade payables | 386 | – | – | – | – | 386 | 386 |
Other financial liabilities (Refer Note 2.14) | 4,908 | – | 122 | – | – | 5,030 | 5,030 |
Total | 5,294 | – | 122 | – | – | 5,416 | 5,416 |
The carrying value and fair value of financial instruments by categories as of April 1, 2015 were as follows:
(In
crore)
Amortised cost | Financial assets/ liabilities at fair value through profit or loss | Financial assets/liabilities at fair value through OCI | Total carrying value | Total fair value | |||
Designated upon initial recognition | Mandatory | Equity instruments designated upon initial recognition | Mandatory | ||||
Assets: | |||||||
Cash and cash equivalents (Refer Note 2.10) | 30,367 | – | – | – | – | 30,367 | 30,367 |
Investments (Refer Note 2.6) | |||||||
Equity, preference and other securities | – | – | – | 1 | – | 1 | 1 |
Tax free bonds and government bonds | 1,304 | – | – | – | – | 1,304 | 1,344* |
Liquid mutual fund units | – | – | 842 | – | – | 842 | 842 |
Fixed maturity plans | – | – | 32 | – | – | 32 | 32 |
Trade receivables (Refer Note 2.9) | 9,713 | – | – | – | – | 9,713 | 9,713 |
Loans (Refer Note 2.7) | 253 | – | – | – | – | 253 | 253 |
Other financials assets (Refer Note 2.8) | 4,599 | – | 101 | – | – | 4,700 | 4,700 |
Total | 46,236 | – | 975 | 1 | – | 47,212 | 47,252 |
Liabilities: | |||||||
Trade payables | 140 | – | – | – | – | 140 | 140 |
Other financial liabilities (Refer Note 2.14) | 4,911 | – | 3 | – | – | 4,914 | 4,914 |
Total | 5,051 | – | 3 | – | – | 5,054 | 5,054 |
* Changes in fair values including interest accrued
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 September 30, 2016:
(In crore)
As of September 30, 2016 | Fair value measurement at end of the reporting period/year using | |||
Level 1 | Level 2 | Level 3 | ||
Assets | ||||
Investments in liquid mutual fund units (Refer Note 2.6) | 2,147 | 2,147 | – | – |
Investments in tax free bonds (Refer Note 2.6) | 1,841 | 276 | 1,565 | – |
Investments in government bonds (Refer Note 2.6) | 7 | 7 | – | – |
Investments in equity instruments (Refer Note 2.6) | 1 | – | – | 1 |
Investments in preference securities (Refer Note 2.6) | 146 | – | – | 146 |
Investments in non convertible debentures (Refer Note 2.6) | 155 | 155 | – | – |
Others (Refer Note 2.6) | 30 | – | – | 30 |
Derivative financial instruments - foreign currency forward and option contracts (Refer Note 2.8) | 89 | – | 89 | – |
Liabilities | ||||
Derivative financial instruments - foreign currency forward and option contracts (Refer Note 2.14) | 2 | – | 2 | – |
Liability towards contingent consideration (Refer note 2.14)* | 83 | – | – | 83 |
* Discounted $14 million (approximately 93
crore) at 13.4%
During the six months ended September 30, 2016,
tax free bonds of 115 crore were transferred from Level 1 to Level 2 of fair value hierarchy, since these were valued based on
market observable 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 | ||||
Investments in liquid mutual fund units (Refer Note 2.6) | 68 | 68 | – | – |
Investments in bonds (Refer Note 2.6) | 1,696 | 369 | 1,327 | – |
Investments in government bonds (Refer Note 2.6) | 7 | 7 | – | – |
Investments in equity instruments (Refer Note 2.6) | 1 | – | – | 1 |
Investments in preference securities (Refer Note 2.6) | 92 | – | – | 92 |
Others (Refer Note 2.6) | 22 | – | – | 22 |
Derivative financial instruments - foreign currency forward and option contracts (Refer Note 2.8) | 116 | – | 116 | – |
Liabilities | ||||
Derivative financial instruments - foreign currency forward and option contracts (Refer Note 2.14) | 5 | – | 5 | – |
Liability towards contingent consideration (Refer note 2.14)* | 117 | – | – | 117 |
* Discounted $20 million (approximately 132
crore) at 13.7%
The following table presents fair value hierarchy of assets and liabilities measured at fair value on a recurring basis as of April 1, 2015:
(In crore)
As of April 1, 2015 | Fair value measurement at end of the reporting period/year using | |||
Level 1 | Level 2 | Level 3 | ||
Assets | ||||
Investments in liquid mutual fund units (Refer Note 2.6) | 842 | 842 | – | – |
Investments in fixed maturity plan securities (Refer Note 2.6) | 32 | – | 32 | – |
Investments in bonds (Refer Note 2.6) | 1,340 | 604 | 736 | – |
Investments in government bonds (Refer Note 2.6) | 4 | 4 | – | – |
Investments in equity instruments (Refer Note 2.6) | 1 | – | – | 1 |
Derivative financial instruments – foreign currency forward and option contracts (Refer Note 2.8) | 101 | – | 101 | – |
Liabilities | ||||
Derivative financial instruments - foreign currency forward and option contracts (Refer Note 2.14) | 3 | – | 3 | – |
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 movement in contingent consideration as
of September 30, 2016 from March 31, 2016 is on account of settlement of contingent consideration of 40 crore and change in discount
rate and passage of time.
The fair value of liquid mutual funds is based on quoted price. The fair value of tax free bonds and government bonds is based on quoted prices and market observable inputs. The fair value is of non-convertible debentures is based on quoted prices. 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.
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.
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 Indian 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 analyzes foreign currency risk from financial instruments as of September 30, 2016:
(In crore)
U.S. dollars | Euro | United Kingdom Pound Sterling | Australian dollars | Other currencies | Total | |
Cash and cash equivalents | 1,232 | 136 | 57 | 231 | 609 | 2,265 |
Trade receivables | 7,985 | 1,310 | 581 | 630 | 699 | 11,205 |
Other financial assets (including loans) | 2,730 | 516 | 469 | 146 | 385 | 4,246 |
Trade payables | (98) | (21) | (22) | (23) | (118) | (282) |
Other financial liabilities | (2,163) | (411) | (222) | (240) | (546) | (3,582) |
Net assets / (liabilities) | 9,686 | 1,530 | 863 | 744 | 1,029 | 13,852 |
The following table analyzes foreign exchange 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 |
Other financial assets (including loans) | 1,967 | 405 | 216 | 124 | 337 | 3,049 |
Trade payables | (126) | (75) | (73) | (4) | (76) | (354) |
Other financial liabilities | (2,430) | (369) | (197) | (243) | (558) | (3,797) |
Net assets / (liabilities) | 8,093 | 1,408 | 869 | 646 | 1,000 | 12,016 |
For each of the three months ended September 30, 2016 and September 30, 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 0.51%.
For each of the six months ended September 30, 2016 and September 30, 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%.
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.
Derivative financial instruments
The Group holds derivative financial instruments such as foreign currency 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. 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 currency forward and option contracts:
As of | ||||
September 30, 2016 | March 31, 2016 | |||
In million | In ![]() |
In million | In ![]() | |
Forward contracts | ||||
In U.S. dollars | 551 | 3,671 | 510 | 3,379 |
In Euro | 99 | 733 | 100 | 750 |
In United Kingdom Pound Sterling | 55 | 478 | 65 | 623 |
In Australian dollars | 35 | 177 | 55 | 281 |
In Swiss Franc | 19 | 133 | 25 | 173 |
Option Contracts | ||||
In U.S. dollars | 150 | 1000 | 125 | 828 |
In United Kingdom Pound Sterling | 25 | 216 | – | – |
In Euro | 25 | 186 | – | – |
Total forwards and options | 6,594 | 6,034 |
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 | ||
September 30, 2016 | March 31, 2016 | |
Not later than one month | 1,178 | 1,577 |
Later than one month and not later than three months | 3,191 | 3,420 |
Later than three months and not later than one year | 2,225 | 1,037 |
6,594 | 6,034 |
Duri.ng the three months ended September
30, 2016, the group has designated certain foreign exchange forward contracts as cash flow hedges to mitigate the risk of foreign
exchange exposure on highly probable forecast cash transactions. Accordingly, the fair value changes of 2 crore was recorded in
the other comprehensive income for the three months and six months ended September 30, 2016. The related hedge transactions for
balance in cash flow hedging reserve are expected to occur and reclassified to the statement of profit or loss within 3 months.
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 | ||||
September 30, 2016 | March 31, 2016 | |||
Derivative financial asset | Derivative financial liability | Derivative financial asset |
Derivative financial liability | |
Gross amount of recognized financial asset/liability | 90 | (3) | 124 | (13) |
Amount set off | (1) | 1 | (8) | 8 |
Net amount presented in balance sheet | 89 | (2) | 116 | (5) |
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 11,571 crore and
11,330 crore as of September 30, 2016 and March 31, 2016, respectively
and unbilled revenue amounting to
3,892 crore and
3,029 crore as of September 30, 2016 and March 31, 2016, 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 has always been managed by the group 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. On account
of adoption of Ind AS 109, the group uses expected credit loss model to assess the impairment loss or gain. The group uses a provision
matrix to compute the expected credit loss allowance for trade receivables and unbilled revenues. The provision matrix takes into
account available external and internal credit risk factors such as credit default swap quotes, credit ratings from international
credit rating agencies and the Group's historical experience for customers.
The following table gives details in respect of percentage of revenues generated from top customer and top five customers:
(In %)
Three months ended September 30, | Six months ended September 30, | |||
2016 | 2015 | 2016 | 2015 | |
Revenue from top customer | 3.5 | 3.7 | 3.5 | 3.7 |
Revenue from top five customers | 13.1 | 14.0 | 13.4 | 14.0 |
Credit risk exposure
The allowance for lifetime expected credit loss
on customer balances for the three months and six months ended September 30, 2016 was 25 crore and
40 crore, respectively. The allowance for lifetime expected credit loss on customer balances for the three months and six months ended September
30, 2015 was
11 crore and
7 crore, respectively.
(In
crore)
Three months ended September 30, | Six months ended September 30, | |||
2016 | 2015 | 2016 | 2015 | |
Balance at the beginning | 305 | 367 | 289 | 366 |
Impairment loss recognized / (reversed) (refer note 2.20) | 25 | 11 | 40 | 7 |
Amounts written off | (1) | – | (1) | – |
Translation differences | (3) | 2 | (2) | 7 |
Balance at the end | 326 | 380 | 326 | 380 |
The Company’s credit period generally ranges from 30-60 days.
(In crore except otherwise stated)
As of | ||
September 30, 2016 | March 31, 2016 | |
Trade receivables | 11,571 | 11,330 |
Unbilled revenues | 3,892 | 3,029 |
Days Sales Outstanding- DSO (days) | 64 | 66 |
Credit risk on cash and cash equivalents is limited as we generally invest in deposits with banks and financial institutions with high credit ratings assigned by international and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units, quoted bonds issued by government and quasi government organizations, non convertible debentures issued by government aided institutions and certificates of deposit which are funds deposited at a bank for a specified time period.
Liquidity risk
The Group's principal sources of liquidity are cash and cash equivalents and the cash flow that is generated from operations. The Group has no outstanding bank borrowings. The Group believes that the working capital is sufficient to meet its current requirements. Accordingly, no liquidity risk is perceived.
As of September 30, 2016, the Group had a working
capital of 40,714 crore including cash and cash equivalents of
31,732 crore and current investments of
2,154 crore. As of March
31, 2016, the Group had a working capital of
38,514 crore including cash and cash equivalents of
32,697 crore and current investments
of
75 crore.
As of September 30, 2016 and March 31, 2016,
the outstanding employee benefit obligations were 1,440 crore and
1,341 crore, respectively, which have been substantially funded.
Accordingly no liquidity risk is perceived.
The table below provides details regarding the contractual maturities of significant financial liabilities as of September 30, 2016:
(In crore)
Particulars | Less than 1 year | 1-2 years | 2-4 years | 4-7 years | Total |
Trade payables | 307 | – | – | – | 307 |
Other financial liabilities (excluding liability towards acquisition) (Refer Note 2.14) | 4,870 | 48 | 21 | – | 4,939 |
Liability towards acquisitions on an undiscounted basis (including contingent consideration) -Refer Note 2.14 | 46 | 47 | – | – | 93 |
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 |
Other financial liabilities (excluding liability towards acquisition) (Refer Note 2.14) | 4,875 | 25 | 9 | – | 4,909 |
Liability towards acquisitions on an undiscounted basis (including contingent consideration) -Refer Note 2.14 | 86 | 46 | – | – | 132 |
2.13 EQUITY
SHARE CAPITAL
in crore, except as otherwise stated
As at | |||
Particulars | September 30, 2016 | March 31, 2016 | April 1, 2015 |
Authorized | |||
Equity shares, ![]() |
|||
240,00,00,000 (240,00,00,000(3)) equity shares | 1,200 | 1,200 | 600 |
Issued, Subscribed and Paid-Up | |||
Equity shares, ![]() |
1,144 | 1,144 | 572 |
228,56,51,730 (228,56,21,088(3)) equity shares fully paid-up(2) | |||
1,144 | 1,144 | 572 |
Forfeited shares amounted to 1,500/- (
1,500/-)
(1) | Refer note 2.23 for details of basic and diluted shares |
(2) | Net of treasury shares 112,92,934 (113,23,576) |
(3) | Represents number of shares as of March 31, 2016 |
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 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.
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. The remittance of dividends outside India is governed by Indian law on foreign exchange and is subject to applicable distribution taxes.
In the period of five years immediately preceding September 30, 2016:
The Company has allotted 114,84,72,332 and 57,42,36,166
fully paid-up shares of face value 5/- each during the quarter ended June 30, 2015 and December 31, 2014, pursuant to bonus issue
approved by the shareholders through postal ballot. 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.
The Board of Directors, in its meeting on April
15, 2016, proposed a final dividend of 14.25/- per equity share and the same was approved by the shareholders at the Annual General
Meeting held on June 18, 2016. The amount was recognized as distributions to equity shareholders during the six months ended September
30, 2016 and the total appropriation was
3,923 crore (excluding dividend on treasury shares), including corporate dividend tax.
(Refer note 2.2.1 for impact on transition to Ind AS)
The amount of per share dividend recognized
as distributions to equity shareholders during the six months ended September 30, 2015 was 29.50/- per equity share (not adjusted
for June 17, 2015 bonus issue).
The board of directors in their meeting on October
14, 2016 declared an interim dividend of 11/- per equity share which would result in a net cash outflow of approximately
3,029
crore, (excluding dividend paid on treasury shares) inclusive of corporate dividend tax
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. However, no such preferential amounts exist currently, other than the amounts held by irrevocable controlled trusts. For irrevocable controlled trusts, the corpus would be settled in favour of the beneficiaries.
The details of shareholder holding more than 5% shares as at September 30, 2016 and March 31, 2016 are set out below :
Name of the shareholder | As at September 30, 2016 | As at March 31, 2016 | ||
Number of shares | % held | Number of shares | % held | |
Deutsche Bank Trust Company Americas (Depository of ADR's - legal ownership) | 38,53,17,937 | 16.78 | 38,53,17,937 | 16.78 |
Life Insurance Corporation of India | 14,83,67,646 | 6.46 | 13,22,74,300 | 5.76 |
The reconciliation of the number of shares outstanding and the amount of share capital as at September 30, 2016 and March 31, 2016 is set out below:
in
crore, except as stated otherwise
Particulars | As at September 30, 2016 | As at March 31, 2016 | ||
Number of shares | Amount | Number of shares | Amount | |
Number of shares at the beginning of the period | 2,28,56,21,088 | 1,144 | 1,14,28,05,132 | 572 |
Add: Bonus shares issued (including bonus on treasury shares) | – | – | 1,14,84,72,332 | 574 |
Add: Shares issued on exercise of employee stock options | 30,642 | – | 10,824 | – |
Less: Increase in treasury shares consequent to bonus issue | – | – | 56,67,200 | 2 |
Number of shares at the end of the period | 2,28,56,51,730 | 1,144 | 2,28,56,21,088 | 1,144 |
Employee Stock Option Plan (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 were held by the Trust towards the 2011 Plan as at March 31, 2016). 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.
On August 1, 2016, the company granted 17,83,615
RSUs (includes equity shares and equity shares represented by ADS) at par value, to employees upto mid management (excluding grants
made to Dr. Vishal Sikka). Further, the company granted 73,020 Incentive Units (cash-settled) to eligible employees. These instruments
will vest equally over a period of 4 years and are subject to continued service. As of September 30, 2016, 1,11,92,934 shares are
held by the trust towards 2015 Plan. As of September 30, 2016, 72,795 Incentive Units were outstanding (net of forfeitures) and
the carrying value of the cash liability is less than 1 crore.
Pursuant to the approval from the shareholders
through postal ballot on March 31, 2016, Dr. Vishal Sikka is eligible to receive under the 2015 Plan, an annual grant of RSU's
of fair value $2,000,000 which vest over time, subject to continued service, and an annual grant of performance based equity and
stock options of $5,000,000, subject to achievement of performance targets set by the Board or its committee, which vest over
time. $2,000,000 of fair value in RSUs for financial year 2017 was granted on August 1, 2016 amounting to 120,700 RSUs in equity
shares represented by ADS. The performance based RSU and Options pertaining to financial year 2017 has not yet been granted as
of September 30, 2016. Though the performance based RSU and Options for fiscal 2017 and time based RSU’s for the remaining
employment term have not been granted as of September 30, 2016, in accordance with Ind AS 102 Share-based Payment, the company
has recorded employee stock based compensation expense. The company has recorded employee stock based compensation expense of 5
crore and
2 crore and
14 crore and
4 crore during the three months and six months ended September 30, 2016 and September 30,
2015 respectively, towards CEO compensation.
2011 RSU Plan (the 2011 Plan) now called 2015 Stock Incentive Compensation Plan ( the 2015 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 as on date of approval of plan adjusted for bonus shares and the plan was expected to continue in effect for a term of 10 years from the date of initial grant under the plan. Awards have been granted to Dr. Vishal Sikka under the 2011 RSU plan as detailed below. Further the Company has earmarked 1,00,000 equity shares for welfare activities of the employees, approved by the shareholders vide postal ballot which ended on March 31, 2016. The equity shares as of March 31, 2016 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 1,00,000 equity shares which have been earmarked for welfare activities of the employees) have been subsumed under the 2015 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 Officer 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.
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 2015 Plan (formerly 2011 RSU Plan) for equity-settled share based payment transactions during the three months and six months ended September 30, 2016 is set out below:
Particulars | Three months ended September 30, 2016 |
Six months ended September 30, 2016 | ||
Shares arising out of options | Weighted average exercise price (![]() |
Shares arising out of options | Weighted average exercise price (![]() | |
2015 Plan (Formerly 2011 Plan): Indian equity shares (IES) | ||||
Outstanding at the beginning* | 2,09,099 | 5 | 2,21,505 | 5 |
Granted | 15,12,895 | 5 | 15,12,895 | 5 |
Forfeited and expired | 12,650 | 5 | 12,650 | 5 |
Exercised | 18,236 | 5 | 30,642 | 5 |
Outstanding at the end | 16,91,108 | 5 | 16,91,108 | 5 |
Exercisable at the end | – | – | – | – |
* adjusted for bonus issues (Refer above note 2.13)
Particulars | Three months ended September 30, 2016 |
Six months ended September 30, 2016 | ||
Shares arising out of options | Weighted average exercise price ($) | Shares arising out of options | Weighted average exercise price ($) | |
2015 Plan (Formerly 2011 Plan): American Depository Shares (ADS) | ||||
Outstanding at the beginning | – | – | – | – |
Granted | 3,91,420 | 0.07 | 3,91,420 | 0.07 |
Forfeited and expired | 10,120 | 0.07 | 10,120 | 0.07 |
Exercised | – | – | – | – |
Outstanding at the end | 3,81,300 | 0.07 | 3,81,300 | 0.07 |
Exercisable at the end | – | – | – | – |
The activity in the 2015 Plan (formerly 2011 RSU Plan) for equity-settled share based payment transactions during the three months and six months ended September 30, 2015 is set out below:
Particulars | Three months ended September 30, 2015 |
Six months ended September 30, 2015 | ||
Shares arising out of options | Weighted average exercise price ![]() |
Shares arising out of options | Weighted average exercise price ![]() | |
2015 Plan (Formerly 2011 Plan): Indian equity shares (IES) | ||||
Outstanding at the beginning* | 2,32,329 | 5 | 1,08,268 | 5 |
Granted | – | – | 1,24,061 | 5 |
Forfeited and expired | – | – | – | – |
Exercised* | 9,116 | 5 | 9,116 | 5 |
Outstanding at the end | 2,23,213 | 5 | 2,23,213 | 5 |
Exercisable at the end | – | – | – | – |
* adjusted for bonus issues (Refer above note 2.13)
During the three months and six months
ended September 30, 2016, the weighted average share price of options exercised under the 2015 Plan on the date of exercise
was 1,021/- and
1,096/-, respectively. During the three months and
six months ended September 30, 2015, the weighted average share price of options exercised under the 2015 Plan on the date of
exercise was
1,092/-
The weighted average remaining contractual life of RSUs outstanding as of September 30, 2016 and March 31, 2016 under the 2015 Plan was 2.27 years and 1.98 years respectively.
The fair value of each equity settled RSU is estimated on the date of grant using the Black-Scholes-Merton model with the following assumptions:
Particulars | For options granted in | |||
Fiscal 2017- Equity Shares |
Fiscal 2017- ADS |
Fiscal 2016- Equity Shares |
Fiscal 2015- Equity Shares | |
Grant date | 01-Aug-16 | 01-Aug-16 | 22-Jun-15 | 21-Aug-14 |
Weighted average share price (![]() |
1,085 | 16.57 | 1,024 | 3,549 |
Exercise price (![]() |
5.00 | 0.07 | 5.00 | 5.00 |
Expected volatility (%) | 25-29 | 26-30 | 28-36 | 30-37 |
Expected life of the option (years) | 1 - 4 | 1 - 4 | 1 - 4 | 1 - 4 |
Expected dividends (%) | 2.37 | 2.29 | 2.43 | 1.84 |
Risk-free interest rate (%) | 6- 7 | 0.5 - 1 | 7- 8 | 8- 9 |
Weighted average fair value as on grant date (![]() |
1,019 | 15.59 | 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 three months and six months ended
September 30, 2016 and September 30, 2015, the company recorded an employee stock compensation expense of 21 crore and
2 crore
and
30 crore and
4 crore, respectively in the statement of profit and loss. The cash settled stock compensation expense during
each of the three months and six months ended September 30, 2016 was less than
1 crore.
2.14 OTHER FINANCIAL LIABILITIES
in crore
Particulars | As at | ||
September 30, 2016 | March 31, 2016 | April 1, 2015 | |
Non-current | |||
Others | |||
Accrued compensation to employees (1) | 67 | 33 | – |
Payable for acquisition of business (refer note 2.3) (2) | |||
Contingent consideration | 39 | 36 | – |
106 | 69 | – | |
Current | |||
Unpaid dividends (1) | 18 | 5 | 3 |
Others | |||
Accrued compensation to employees (1) | 2,047 | 2,265 | 2,106 |
Accrued expenses (1) | 2,487 | 2,189 | 1,984 |
Retention monies (1) | 81 | 80 | 53 |
Payable for acquisition of business | |||
Deferred consideration (refer note 2.3) (1) | – | – | 487 |
Contingent consideration (refer note 2.3) (2) | 44 | 81 | – |
Client deposits (1) | 11 | 28 | 27 |
Payable by controlled trusts (1) | 148 | 167 | 177 |
Compensated absences | 1,440 | 1,341 | 1,069 |
Foreign currency forward and options contracts (2) | 2 | 5 | 3 |
Capital creditors (1) | 40 | 81 | 43 |
Other payables (1) | 38 | 60 | 31 |
6,356 | 6,302 | 5,983 | |
Total Financial Liabilities | 6,462 | 6,371 | 5,983 |
(1) Financial liability carried at amortized cost | 4,937 | 4,908 | 4,911 |
(2) Financial liability carried at fair value through profit and loss | 85 | 122 | 3 |
Contingent consideration on undiscounted basis | 93 | 132 | – |
2.15 OTHER LIABILITIES
in crore
Particulars | As at | ||
September 30, 2016 | March 31, 2016 | April 1, 2015 | |
Non-current | |||
Others | |||
Deferred income - government grant on land use rights | 45 | 46 | 47 |
45 | 46 | 47 | |
Current | |||
Unearned revenue | 1,478 | 1,332 | 1,052 |
Other | |||
Withholding taxes and others | 1,280 | 1,296 | 904 |
Accrued gratuity (refer note 2.22.1) | 1 | – | 7 |
Tax on dividend | – | – | – |
Deferred rent | – | – | – |
Deferred income - government grant on land use rights | 1 | 1 | 1 |
2,760 | 2,629 | 1,964 | |
2.16 PROVISIONS
in crore
Particulars | As at | ||
September 30, 2016 | March 31, 2016 | April 1, 2015 | |
Current | |||
Others | |||
Post-sales client support and warranties and others | 621 | 512 | 478 |
Total | 621 | 512 | 478 |
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 |
Three months ended September 30, 2016 |
Six months ended September 30, 2016 |
Balance at the beginning | 536 | 512 |
Provision recognized/(reversed) | 110 | 146 |
Provision utilized | (18) | (39) |
Exchange difference | (7) | 2 |
Balance at the end | 621 | 621 |
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.
2.17 INCOME TAXES
Income tax expense in the consolidated statement of Profit and loss comprises:
In crore
Three months ended September 30, | Six months ended September 30, | |||
2016 | 2015 | 2016 | 2015 | |
Current taxes | 1,469 | 1,441 | 2,936 | 2,574 |
Deferred taxes | (9) | (54) | (114) | (12) |
Income tax expense | 1,460 | 1,387 | 2,822 | 2,562 |
Income tax expense for the three months ended September
30, 2016 and September 30, 2015 includes reversals (net of provisions) of 17 crore and
30 crore, respectively, pertaining to
prior periods.
Income tax expense for the six months ended September
30, 2016 and September 30, 2015 includes reversals (net of provisions) of 9 crore
113 crore, respectively, pertaining to prior
periods.
Entire deferred income tax for the three months and six months ended September 30, 2016 and September 30, 2015 relates to origination and reversal of temporary differences.
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 September 30, | Six months ended September 30, | |||
2016 | 2015 | 2016 | 2015 | |
Profit before income taxes | 5,066 | 4,785 | 9,863 | 8,989 |
Enacted tax rates in India | 34.61% | 34.61% | 34.61% | 34.61% |
Computed expected tax expense | 1,753 | 1,656 | 3,414 | 3,111 |
Tax effect due to non-taxable income for Indian tax purposes | (523) | (483) | (1,007) | (877) |
Overseas taxes | 225 | 183 | 415 | 332 |
Tax provision (reversals), overseas and domestic | (17) | (30) | (9) | (113) |
Effect of exempt non-operating income | (17) | (16) | (45) | (34) |
Effect of unrecognized deferred tax assets | 56 | 3 | 53 | 13 |
Effect of differential overseas tax rates | 14 | 14 | 16 | 8 |
Effect of non-deductible expenses | (8) | 65 | 24 | 140 |
Additional deduction on research and development expense | (16) | (12) | (30) | (26) |
Others | (7) | 7 | (9) | 8 |
Income tax expense | 1,460 | 1,387 | 2,822 | 2,562 |
The applicable Indian statutory tax rates for fiscal 2017 and fiscal 2016 is 34.61%.
During the six months ended September 30, 2016 and September 30, 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) which is valid upto March 31, 2017. The weighted tax deduction is equal to 200% of such expenditure incurred.
The foreign 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 for export of software from the units registered under the Special Economic Zones Act, 2005 (SEZ). SEZ units which began the provision of 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 further five years. Up to 50% of such profits or gains is also available for a further five years subject to creation of a Special Economic Zone re-Investment Reserve out of the profit of the eligible SEZ units and utilization of such reserve by the Company for acquiring new plant and machinery for the purpose of its business as per the provisions of the Income Tax Act, 1961.
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 September 30, 2016, the Company has provided for branch profit tax of
336 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
2 crore movement on account of exchange rate during the six months
ended September 30, 2016.
Deferred income tax liabilities have not been
recognized on temporary differences amounting to 4,701 crore and
4,195 crore as of September 30, 2016 and March 31, 2016, 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 September 30, 2016, March 31, 2016 and April 1, 2015:
In crore
As at | |||
September 30, 2016 | March 31, 2016 | April 1, 2015 | |
Income tax assets | 5,248 | 5,230 | 4,089 |
Current income tax liabilities | 3,851 | 3,410 | 2,818 |
Net current income tax asset/ (liability) at the end | 1,397 | 1,820 | 1,271 |
The gross movement in the current income tax asset/ (liability) for the three months and six months ended September 30, 2016 and September 30, 2015 is as follows:
In crore
Three months ended September 30, | Six months ended September 30, | |||
2016 | 2015 | 2016 | 2015 | |
Net current income tax asset/ (liability) at the beginning | 1,102 | 1,450 | 1,820 | 1,271 |
Translation differences | – | 6 | – | 11 |
Income tax paid | 1,755 | 1,557 | 2,499 | 2,862 |
Current income tax expense (Refer Note 2.17) | (1,469) | (1,441) | (2,936) | (2,574) |
Income tax benefit arising on exercise of stock options | 1 | – | 1 | – |
Income tax on other comprehensive income | 8 | 3 | 13 | 5 |
Net current income tax asset/ (liability) at the end | 1,397 | 1,575 | 1,397 | 1,575 |
The tax effects of significant temporary differences that resulted in deferred income tax assets and liabilities are as follows:
In crore
As at | |||
September 30, 2016 | March 31, 2016 | April 1, 2015 | |
Deferred income tax assets | |||
Property, plant and equipment | 133 | 178 | 241 |
Computer software | 52 | 50 | 51 |
Accrued compensation to employees | 74 | 68 | 48 |
Trade receivables | 108 | 89 | 111 |
Compensated absences | 426 | 389 | 299 |
Post sales client support | 97 | 77 | 74 |
Intangibles | 7 | 4 | – |
Others | 128 | 55 | 31 |
Total deferred income tax assets | 1,025 | 910 | 855 |
Deferred income tax liabilities | |||
Intangible asset | (235) | (252) | (159) |
Temporary difference related to branch profits | (336) | (334) | (316) |
Others | (61) | (40) | (3) |
Total deferred income tax liabilities | (632) | (626) | (478) |
Deferred income tax assets after set off | 628 | 536 | 536 |
Deferred income tax liabilities after set off | (235) | (252) | (159) |
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 | ||
September 30, 2016 | March 31, 2016 | |
Deferred income tax assets to be recovered after 12 months | 361 | 409 |
Deferred income tax assets to be recovered within 12 months | 664 | 501 |
Total deferred income tax assets | 1,025 | 910 |
Deferred income tax liabilities to be settled after 12 months | (402) | (446) |
Deferred income tax liabilities to be settled within 12 months | (230) | (180) |
Total deferred income tax liabilities | (632) | (626) |
In assessing the reliability 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 six months ended September 30, 2016 and September 30, 2015, is as follows:
In crore
Three months ended September 30, | Six months ended September 30, | |||
2016 | 2015 | 2016 | 2015 | |
Net deferred income tax asset at the beginning | 378 | 200 | 284 | 377 |
Addition through business combination (Refer note 2.3) | – | – | – | (128) |
Translation differences | 6 | (16) | (5) | (25) |
Credits / (charge) relating to temporary differences (Refer Note 2.17 above) | 9 | 54 | 114 | 12 |
Temporary differences on other comprehensive income | – | (4) | – | (2) |
Net deferred income tax asset at the end | 393 | 234 | 393 | 234 |
The credits relating to temporary differences during the six months ended September 30, 2016 are primarily on account of trade receivables, accrued compensation to employees, compensated absences and post sales client support partially offset by property, plant and equipments. The credits relating to temporary differences during the six months ended September 30, 2015 are primarily on account of trade receivables, compensated absences, accrued compensation to employees, partially offset by property, plant and equipment, computer software amortization and post sales customer support.
2.18 REVENUE FROM OPERATIONS
in
crore
Particulars | Three months ended September 30, | Six months ended September 30, | ||
2016 | 2015 | 2016 | 2015 | |
Income from software services | 16,784 | 15,188 | 33,062 | 29,039 |
Income from software products | 526 | 447 | 1,029 | 950 |
17,310 | 15,635 | 34,091 | 29,989 |
2.19 OTHER INCOME
in
crore
Particulars | Three months ended September 30, | Six months ended September 30, | ||
2016 | 2015 | 2016 | 2015 | |
Interest received on financial assets: | ||||
Bonds and government bonds | 31 | 27 | 62 | 52 |
Deposit with Bank and others | 614 | 624 | 1,234 | 1,281 |
Non convertible debentures | – | – | – | – |
Dividend received on investment carried at Fair Value through Profit or Loss | ||||
Liquid mutual fund units | 8 | 20 | 27 | 44 |
Exchange gains/ (losses) on foreign currency forward and options contracts | 177 | (18) | 224 | (92) |
Exchange gains/ (losses) on translation of other assets and liabilities | (109) | 70 | (100) | 119 |
Others | 39 | 70 | 66 | 145 |
760 | 793 | 1,513 | 1,549 |
2.20 EXPENSES
in
crore
Particulars | Three months ended September 30, | Six months ended September 30, | ||
2016 | 2015 | 2016 | 2015 | |
Employee benefit expenses | ||||
Salaries including bonus | 9,385 | 8,345 | 18,415 | 16,201 |
Contribution to provident and other funds | 193 | 160 | 379 | 320 |
Share based payments to employees (Refer note 2.13) | 21 | 2 | 30 | 4 |
Staff welfare | 49 | 51 | 106 | 87 |
9,648 | 8,558 | 18,930 | 16,612 | |
Cost of software packages and others | ||||
For own use | 187 | 180 | 370 | 379 |
Third party items bought for service delivery to clients | 194 | 174 | 287 | 287 |
381 | 354 | 657 | 666 | |
Other expenses | ||||
Repairs and maintenance | 292 | 226 | 614 | 448 |
Power and fuel | 61 | 59 | 124 | 112 |
Brand and marketing | 81 | 61 | 198 | 137 |
Operating lease payments | 121 | 87 | 231 | 168 |
Rates and taxes | 40 | 30 | 80 | 62 |
Consumables | 13 | 11 | 22 | 20 |
Insurance | 11 | 13 | 25 | 28 |
Provision for post-sales client support and warranties | 30 | (34) | 51 | (43) |
Commission to non-whole time directors | 3 | 2 | 6 | 5 |
Impairment loss recognized / (reversed) on financial assets | 27 | 11 | 44 | 7 |
Auditor's remuneration | ||||
Statutory audit fees | 2 | 2 | 4 | 3 |
Taxation matters | – | – | – | – |
Other services | – | – | – | – |
Reimbursement of expenses | – | – | – | – |
Contributions towards Corporate Social responsibility | 53 | 59 | 102 | 104 |
Others | 53 | 46 | 111 | 103 |
787 | 573 | 1,612 | 1,154 |
2.21 LEASES
The lease rentals charged during the period is as under:
in crore
Particulars | Three months ended September 30, | Six months ended September 30, | ||
2016 | 2015 | 2016 | 2015 | |
Lease rentals recognized during the period | 121 | 87 | 231 | 168 |
The obligations on long-term, non-cancellable operating leases payable as per the rentals stated in the respective agreements are as follows:
In
crore
As at | |||
Future minimum lease payable | September 30, 2016 | March 31, 2016 | April 1, 2015 |
Not later than 1 year | 414 | 372 | 168 |
Later than 1 year and not later than 5 years | 1,079 | 873 | 395 |
Later than 5 years | 840 | 442 | 168 |
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.
2.22 EMPLOYEE BENEFITS
2.22.1 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 September 30, 2016 and March 31, 2016:
(In crore)
Particulars | As of | |
September 30, 2016 | March 31, 2016 | |
Change in benefit obligations | ||
Benefit obligations at the beginning | 944 | 816 |
Service cost | 64 | 118 |
Interest expense | 36 | 61 |
Addition through business combination | – | 1 |
Remeasurements - Actuarial (gains)/ losses | 74 | 23 |
Curtailment gain | (3) | – |
Benefits paid | (46) | (75) |
Benefit obligations at the end | 1,069 | 944 |
Change in plan assets | ||
Fair value of plan assets at the beginning | 947 | 836 |
Interest income | 37 | 66 |
Remeasurements- Return on plan assets excluding amounts included in interest income | 4 | 9 |
Contributions | 134 | 111 |
Benefits paid | (46) | (75) |
Fair value of plan assets at the end | 1,076 | 947 |
Funded status | 7 | 3 |
Prepaid gratuity benefit | 8 | 4 |
Accrued gratuity | (1) | (1) |
Amount for the three months and six months ended September 30, 2016 and September 30, 2015 recognized in the statement of profit and loss under employee benefit expense:
(In crore)
Particulars | Three months ended September 30, | Six months ended September 30, | ||
2016 | 2015 | 2016 | 2015 | |
Service cost | 32 | 30 | 64 | 59 |
Net interest on the net defined benefit liability/asset | (1) | (2) | (1) | (2) |
Curtailment gain | – | – | (3) | – |
Net gratuity cost | 31 | 28 | 60 | 57 |
Amount for the three months and six months ended September 30, 2016 and September 30, 2015 recognized in the statement of other comprehensive income:
(In crore)
Particulars | Three months ended September 30, | Six months ended September 30, | ||
2016 | 2015 | 2016 | 2015 | |
Remeasurements of the net defined benefit liability/ (asset) | ||||
Actuarial (gains) / losses | 49 | 12 | 74 | 23 |
(Return) / loss on plan assets excluding amounts included in the net interest on the net defined benefit liability/(asset) | (1) | (2) | (4) | (4) |
48 | 10 | 70 | 19 |
(In crore)
Particulars | Three months ended September 30, | Six months ended September 30, | ||
2016 | 2015 | 2016 | 2015 | |
(Gain)/loss from change in demographic assumptions | – | – | – | – |
(Gain)/loss from change in financial assumptions | 43 | 4 | 54 | (10) |
43 | 4 | 54 | (10) |
The weighted-average assumptions used to determine benefit obligations as of September 30, 2016, March 31, 2016 and April 1, 2015 are set out below:
Particulars | As of | ||
September 30, 2016 | March 31, 2016 | April 1, 2015 | |
Discount rate | 6.9% | 7.8% | 7.8% |
Weighted average rate of increase in compensation levels | 8.0% | 8.0% | 8.0% |
The weighted-average assumptions used to determine net periodic benefit cost for the three months and six months ended September 30, 2016 and September 30, 2015 are set out below:
Particulars | Three months ended September 30, | Six months ended September 30, | ||
2016 | 2015 | 2016 | 2015 | |
Discount rate | 7.8% | 7.8% | 7.8% | 7.8% |
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 | 6.5 years | 6.4 years | 6.5 years |
Assumptions regarding future mortality experience are set in accordance with the published statistics by the Life Insurance Corporation of India.
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 September 30, 2016, every percentage point
increase / decrease in discount rate will affect our gratuity benefit obligation by approximately 55 crore.
As of September 30, 2016, every percentage point
increase / decrease in weighted average rate of increase in compensation levels will affect our gratuity benefit obligation by
approximately 46 crore.
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.
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 September 30, 2016 and March 31, 2016, the plan assets have been primarily invested in insurer managed funds.
Actual return on assets for the three months
and six months ended September 30, 2016 and September 30, 2015 were 20 crore and
19 crore and
41 crore and
37 crore, respectively.
The Group expects to contribute 66 crore to
the gratuity trusts during the remainder of fiscal 2017.
Maturity profile of defined benefit obligation:
(in
crore)
Within 1 year | 152 |
1-2 year | 157 |
2-3 year | 164 |
3-4 year | 177 |
4-5 year | 191 |
5-10 years | 940 |
2.22.2 Superannuation
The group contributed 42 crore and
56 crore
and
83 crore and
114 crore to the superannuation plan during the three months and six months ended September 30, 2016 and September
30, 2015, respectively and the same has been recognized in the Statement of profit and loss account under the head employee benefit
expense.
2.22.3 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 September 30, 2016, March 31, 2016 and April 1, 2015, respectively.
The details of fund and plan asset position are given below:
(in crore)
Particulars | As of | ||
September 30, 2016 | March 31, 2016 | April 1, 2015 | |
Plan assets at period end, at fair value | 3,939 | 3,808 | 2,912 |
Present value of benefit obligation at period end | 3,939 | 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:
Particulars | As of | ||
September 30, 2016 | March 31, 2016 | April 1, 2015 | |
Government of India (GOI) bond yield | 6.90% | 7.80% | 7.80% |
Remaining term to maturity of portfolio | 7 years | 7 years | 7 years |
Expected guaranteed interest rate - First year: | 8.75% | 8.75% | 8.75% |
- Thereafter: | 8.60% | 8.60% | 8.60% |
The Group contributed 116 crore and
102 crore and
230 crore and
203 crore to the provident fund during the three months and six months ended September 30, 2016
and September 30, 2015, respectively and the same has been recognized in the statement of profit and loss under the head employee
benefit expense.
The provident plans are applicable only to employees drawing a salary in Indian rupees and there are no other significant foreign defined benefit plans.
2.22.4 Employee benefit costs include:
(in crore)
Particulars | Three months ended September 30, | Six months ended September 30, | ||
2016 | 2015 | 2016 | 2015 | |
Salaries and bonus* | 9,459 | 8,371 | 18,557 | 16,237 |
Defined contribution plans | 63 | 74 | 125 | 147 |
Defined benefit plans | 126 | 113 | 248 | 228 |
9,648 | 8,558 | 18,930 | 16,612 |
* | Includes stock compensation expense of ![]() ![]() ![]() ![]() |
2.23 RECONCILIATION OF BASIC AND DILUTED SHARES USED IN COMPUTING EARNINGS PER SHARE
Particulars | Three months ended September 30, | Six months ended September 30, | ||
2016 | 2015 | 2016 | 2015 | |
Basic earnings per equity share - weighted average number of equity shares outstanding | 228,56,41,710 | 228,56,14,029 | 228,56,32,081 | 228,56,12,157 |
Effect of dilutive common equivalent shares - share options outstanding | 3,07,593 | 99,013 | 2,43,907 | 84,521 |
Diluted earnings per equity share - weighted average number of equity shares and common equivalent shares outstanding | 228,59,49,303 | 228,57,13,042 | 228,58,75,988 | 228,56,96,678 |
2.24 CONTINGENT LIABILITIES AND COMMITMENTS (TO THE EXTENT NOT PROVIDED FOR)
in
crore
Particulars | As at | ||
September 30, 2016 | March 31, 2016 | April 1, 2015 | |
Contingent liabilities : | |||
Claims against the Company, not acknowledged as debts(1) | 287 | 284 | 264 |
[Net of amount paid to statutory authorities ![]() ![]() |
|||
Commitments : | |||
Estimated amount of contracts remaining to be executed on capital contracts and not provided for | 1,433 | 1,486 | 1,574 |
(net of advances and deposits) | |||
Other Commitment* | 84 | 79 | – |
* | Uncalled capital pertaining to investments in Vertex Ventures US Fund L.L.P and Cloudyn Software Ltd |
(1) | Claims against the company not acknowledged as debts as on September 30, 2016 include
demand from the Indian Income tax authorities for payment of tax of ![]() ![]() ![]() ![]() |
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.
2.25 RELATED PARTY TRANSACTIONS
List of related parties:
Name of subsidiaries | Country | Holdings as at | |
September 30, 2016 | March 31, 2016 | ||
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)(13) | Mexico | – | – |
Infosys McCamish Systems LLC (1) | U.S. | 99.98% | 99.98% |
Portland Group Pty Ltd(1) | Australia | 99.98% | 99.98% |
Infosys BPO Americas LLC.(1)(12) | U.S. | 99.98% | – |
Infosys Technologies (Australia) Pty. Limited (Infosys Australia) (2) | Australia | 100% | 100% |
EdgeVerve Systems Limited (EdgeVerve) | 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)(5) | 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% |
Infy 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.(6) | Canada | – | – |
Infosys Nova Holdings LLC. (Infosys Nova) | U.S. | 100% | 100% |
Panaya Inc. (Panaya) | U.S. | 100% | 100% |
Panaya Ltd.(7) | Israel | 100% | 100% |
Panaya GmbH (7) | Germany | 100% | 100% |
Panaya Pty Ltd.(2)(7) | Australia | – | – |
Panaya Japan Co. Ltd.(7) | Japan | 100% | 100% |
Skava Systems Pvt. Ltd. (Skava Systems) (8) | India | 100% | 100% |
Kallidus Inc. (Kallidus) (9) | U.S. | 100% | 100% |
Noah Consulting LLC (Noah) (10) | U.S. | 100% | 100% |
Noah Information Management Consulting Inc. (Noah Canada) (11) | Canada | 100% | 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 Infosys Consulting AG (formerly Lodestone Management Consultants AG) |
(6) | Wholly owned subsidiary of Infosys Public Services, Inc. |
(7) | Wholly owned subsidiary of Panaya Inc. |
(8) | On June 2, 2015, Infosys acquired 100% of the voting interest in Skava Systems |
(9) | On June 2, 2015, Infosys acquired 100% of the voting interest in Kallidus Inc. |
(10) | On November 16, 2015, Infosys acquired 100% of the membership interests in Noah |
(11) | Wholly owned subsidiary of Noah |
(12) | Incorporated effective November 20, 2015 |
(13) | Liquidated effective March 15, 2016 |
Infosys has provided guarantee for performance of certain contracts entered into by its subsidiaries.
Name of Associates | Country | Holdings as at | |
September 30, 2016 | March 31, 2016 | ||
DWA Nova LLC(1) | U.S. | 16% | 16% |
(1) Associate of Infosys Nova Holding 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 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 Benefits Trust | India | Controlled trust |
Infosys Science Foundation | India | Controlled trust |
Refer Notes 2.22 for information on transactions with post-employment benefit plans mentioned above.
List of key management personnel
Whole time directors
U B Pravin Rao
Dr. Vishal Sikka
Non-whole-time directors
K.V.Kamath ( resigned effective June 5, 2015)
Prof. Jeffrey S. Lehman
R. Seshasayee
Ravi Venkatesan
Kiran Mazumdar Shaw
Carol M. Browner (resigned effective November 23, 2015)
Prof. John W. Etchemendy
Roopa Kudva
Dr. Punita Kumar-Sinha (appointed effective January 14, 2016)
Executive Officers
M. D. Ranganath, Chief Financial Officer (effective October 12, 2015)
David D. Kennedy, Executive Vice President, General Counsel and Chief Compliance Officer
Rajiv Bansal, Chief Financial Officer (till October 12, 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 executive officers:
in
crore
Particulars | Three months ended September 30, | Six months ended September 30, | ||
2016 | 2015 | 2016 | 2015 | |
Salaries and other employee benefits to whole-time directors and executive officers (1) | 14 | 6 | 35 | 28 |
Commission and other benefits to non-executive/independent directors | 3 | 3 | 6 | 5 |
Total | 17 | 9 | 41 | 33 |
(1) | Includes stock compensation expense of ![]() ![]() ![]() ![]() |
2.26 SEGMENT REPORTING
Ind AS 108 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 group's operations predominantly relate to providing end-to-end business solutions to enable clients to enhance business performance. Based on the "management approach" as defined in INDAS 108, the Chief Operating Decision Marker (CODM) evaluates the group'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 group 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 because of the similarity of the economic characteristics. 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.
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 group'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 group.
Assets and liabilities used in the group'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.
Business Segments
Three months ended September 30, 2016 and September 30, 2015:
in
crore
Particulars | FS | MFG | ECS | RCL | HILIFE | Hi-Tech | All other segments | Total |
Revenue from operations | 4,686 | 1,853 | 3,864 | 2,833 | 2,089 | 1,339 | 646 | 17,310 |
4,243 | 1,827 | 3,336 | 2,582 | 2,036 | 1,214 | 397 | 15,635 | |
Identifiable operating expenses | 2,373 | 961 | 1,861 | 1,361 | 1,055 | 692 | 375 | 8,678 |
1,965 | 1,012 | 1,514 | 1,218 | 953 | 561 | 232 | 7,455 | |
Allocated expenses | 1,018 | 423 | 881 | 646 | 476 | 305 | 148 | 3,897 |
1,011 | 451 | 824 | 638 | 503 | 300 | 99 | 3,826 | |
Segmental profit | 1,295 | 469 | 1,122 | 826 | 558 | 342 | 123 | 4,735 |
1,267 | 364 | 998 | 726 | 580 | 353 | 66 | 4,354 | |
Unallocable expenses | 426 | |||||||
361 | ||||||||
Other income, net | 760 | |||||||
793 | ||||||||
Share in net profit/(loss) of associate | (3) | |||||||
(1) | ||||||||
Profit before tax | 5,066 | |||||||
4,785 | ||||||||
Tax expense | 1,460 | |||||||
1,387 | ||||||||
Profit for the period | 3,606 | |||||||
3,398 | ||||||||
Depreciation and amortization | 424 | |||||||
358 | ||||||||
Non-cash expenses other than depreciation and amortization | 2 | |||||||
3 |
Six months ended September 30, 2016 and September 30, 2015:
in
crore
Particulars | FS | MFG | ECS | RCL | HILIFE | Hi-Tech | All other segments | Total |
Revenue from operations | 9,237 | 3,696 | 7,583 | 5,694 | 4,093 | 2,661 | 1,127 | 34,091 |
8,125 | 3,444 | 6,502 | 4,923 | 3,906 | 2,365 | 724 | 29,989 | |
Identifiable operating expenses | 4,611 | 1,910 | 3,618 | 2,731 | 2,054 | 1,375 | 720 | 17,019 |
3,878 | 1,891 | 2,958 | 2,342 | 1,891 | 1,163 | 487 | 14,610 | |
Allocated expenses | 2,065 | 866 | 1,776 | 1,335 | 959 | 624 | 263 | 7,888 |
1,907 | 844 | 1,593 | 1,206 | 957 | 579 | 177 | 7,263 | |
Segmental profit | 2,561 | 920 | 2,189 | 1,628 | 1,080 | 662 | 144 | 9,184 |
2,340 | 709 | 1,951 | 1,375 | 1,058 | 623 | 60 | 8,116 | |
Unallocable expenses | 829 | |||||||
675 | ||||||||
Other income, net | 1,513 | |||||||
1,549 | ||||||||
Share in net profit/(loss) of associate | (5) | |||||||
(1) | ||||||||
Profit before tax | 9,863 | |||||||
8,989 | ||||||||
Tax expense | 2,822 | |||||||
2,562 | ||||||||
Profit for the period | 7,041 | |||||||
6,427 | ||||||||
Depreciation and amortization | 824 | |||||||
671 | ||||||||
Non-cash expenses other than depreciation and amortization | 5 | |||||||
4 |
Geographic Segments
Three months ended September 30, 2016 and September 30, 2015:
in crore
Particulars | North America | Europe | India | Rest of the World | Total |
Revenue from operations | 10,641 | 3,896 | 587 | 2,186 | 17,310 |
9,891 | 3,580 | 360 | 1,804 | 15,635 | |
Identifiable operating expenses | 5,444 | 1,956 | 250 | 1,028 | 8,678 |
4,803 | 1,742 | 87 | 823 | 7,455 | |
Allocated expenses | 2,423 | 885 | 123 | 466 | 3,897 |
2,442 | 881 | 79 | 424 | 3,826 | |
Segmental operating income | 2,774 | 1,055 | 214 | 692 | 4,735 |
2,646 | 957 | 194 | 557 | 4,354 | |
Unallocable expenses | 426 | ||||
361 | |||||
Other income, net | 760 | ||||
793 | |||||
Share in net profit/(loss) of associate | (3) | ||||
(1) | |||||
Profit before tax | 5,066 | ||||
4,785 | |||||
Tax expense | 1,460 | ||||
1,387 | |||||
Profit for the period | 3,606 | ||||
3,398 | |||||
Depreciation and amortization | 424 | ||||
358 | |||||
Non-cash expenses other than depreciation and amortization | 2 | ||||
3 |
Six months ended September 30, 2016 and September 30, 2015:
in crore
Particulars | North America | Europe | India | Rest of the World | Total |
Revenue from operations | 21,041 | 7,764 | 1,045 | 4,241 | 34,091 |
18,965 | 6,800 | 678 | 3,546 | 29,989 | |
Identifiable operating expenses | 10,780 | 3,801 | 498 | 1,940 | 17,019 |
9,392 | 3,351 | 323 | 1,544 | 14,610 | |
Allocated expenses | 4,926 | 1,813 | 217 | 932 | 7,888 |
4,643 | 1,659 | 142 | 819 | 7,263 | |
Segmental operating income | 5,335 | 2,150 | 330 | 1,369 | 9,184 |
4,930 | 1,790 | 213 | 1,183 | 8,116 | |
Unallocable expenses | 829 | ||||
675 | |||||
Other income, net | 1,513 | ||||
1,549 | |||||
Share in net profit/(loss) of associate | (5) | ||||
(1) | |||||
Profit before tax | 9,863 | ||||
8,989 | |||||
Tax expense | 2,822 | ||||
2,562 | |||||
Profit for the period | 7,041 | ||||
6,427 | |||||
Depreciation and amortization | 824 | ||||
671 | |||||
Non-cash expenses other than depreciation and amortization | 5 | ||||
4 |
Significant clients
No client individually accounted for more than 10% of the revenues for the three months and six months ended September 30, 2016 and September 30, 2015.
2.27 FUNCTION WISE CLASSIFICATION OF CONSOLIDATED STATEMENT OF PROFIT AND LOSS
in
crore
Particulars | Three months ended September 30, | Six months ended September 30, | ||
2016 | 2015 | 2016 | 2015 | |
Revenue from operations | 17,310 | 15,635 | 34,091 | 29,989 |
Cost of Sales | 10,962 | 9,724 | 21,643 | 18,847 |
GROSS PROFIT | 6,348 | 5,911 | 12,448 | 11,142 |
Operating expenses | ||||
Selling and marketing expenses | 897 | 843 | 1,817 | 1,663 |
General and administration expenses | 1,142 | 1,075 | 2,276 | 2,038 |
Total operating expenses | 2,039 | 1,918 | 4,093 | 3,701 |
OPERATING PROFIT | 4,309 | 3,993 | 8,355 | 7,441 |
Other income | 760 | 793 | 1,513 | 1,549 |
PROFIT BEFORE MINORITY INTEREST / SHARE IN NET PROFIT / (LOSS) OF ASSOCIATE | 5,069 | 4,786 | 9,868 | 8,990 |
Share in net profit/(loss) of associate | (3) | (1) | (5) | (1) |
PROFIT BEFORE TAX | 5,066 | 4,785 | 9,863 | 8,989 |
Tax expense: | ||||
Current tax | 1,469 | 1,441 | 2,936 | 2,574 |
Deferred tax | (9) | (54) | (114) | (12) |
PROFIT FOR THE PERIOD | 3,606 | 3,398 | 7,041 | 6,427 |
Other comprehensive income | ||||
Items that will not be reclassified subsequently to profit or loss | ||||
Remeasurement of the net defined benefit liability/asset | (40) | (7) | (57) | (14) |
Equity instruments through other comprehensive income | – | – | – | – |
(40) | (7) | (57) | (14) | |
Items that will be reclassified subsequently to profit or loss | ||||
Fair value changes on cash flow hedges | 2 | – | 2 | – |
Exchange differences on translation of foreign operations | (51) | 62 | (13) | 206 |
(49) | 62 | (11) | 206 | |
Total other comprehensive income, net of tax | (89) | 55 | (68) | 192 |
Total comprehensive income for the period | 3,517 | 3,453 | 6,973 | 6,619 |
Profit attributable to: | ||||
Owners of the company | 3,606 | 3,398 | 7,041 | 6,427 |
Non-controlling interests | – | – | – | – |
3,606 | 3,398 | 7,041 | 6,427 | |
Total comprehensive income attributable to: | ||||
Owners of the company | 3,517 | 3,453 | 6,973 | 6,619 |
Non-controlling interests | – | – | – | – |
3,517 | 3,453 | 6,973 | 6,619 |
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 October 14, 2016 |
Roopa Kudva Director |
M. D. Ranganath Chief Financial Officer |
A.G.S Manikantha Company Secretary |
Auditor’s Report on Quarterly and Year to Date Consolidated Financial 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 its subsidiaries (collectively referred to as ‘the Group’) for the quarter ended 30 September 2016 and the year to date consolidated financial results for the period from 1 April 2016 to 30 September 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 consolidated quarterly as well as 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 Indian Accounting Standard, Interim Financial Reporting (Ind AS 34), 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 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) | Infosys 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) | Infy 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.; | |
(ah) | Lodestone Management Consultants GmbH ; | |
(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.; | |
(at) | Kallidus Inc.; | |
(au) | Skava Systems Private Limited; | |
(av) | Noah Consulting LLC; | |
(aw) | Noah Information Management Consulting, Inc.; | |
(ax) | Infosys Canada Public Services Lid.; | |
(ay) | Infosys Employee Benefits Trust; and | |
(az) | Infosys BPO Americas LLC. | |
(ii) | have been presented in accordance with the requirements of Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and SEBI circular dated 5 July 2016 in this regard; and | |
(iii) | give a true and fair view of the consolidated financial performance including other comprehensive income and other financial information for the quarter ended 30 September 2016 as well as the year to date results for the period from 1 April 2016 to 30 September 2016. |
for B S R & Co. LLP
Chartered Accountants
Firm’s registration number: 101248W/ W-100022
Supreet Sachdev
Partner
Membership number: 205385
Bangalore
October 14, 2016
Exhibit 99.12
FORM OF RELEASE TO STOCK EXCHANGES DATED
OCTOBER 19, 2016
STOCK EXCHANGE INTIMATION
The Board of Directors in their meeting held on October 14, 2016, on the recommendation of Nomination and Remuneration Committee, have approved the revised annual compensation of U.B. Pravin Rao, Chief Operating Officer and Whole Time Director of the Company, with effect from November 1, 2016, subject to the approval of the shareholders.
Key Management Personnel (KMP) | Designation | Fixed Salary in INR p.a | Variable Salary in INR p.a # |
U.B. Pravin Rao* | Chief Operating Officer | 4,62,50,000 | 3,87,50,000 |
* | revised salary and Restricted stock units (RSU) / Employee Stock Option (ESOP) grants is subject to shareholders approval |
# | on achievement of targets set by the Board. |
Based on fiscal 2016 performance, 27,250 restricted stock units (RSU) and 43,000 stock options (ESOP) would be granted once approved by Shareholders. This grant will be under the 2015 Stock Incentive Compensation Plan (2015 plan), approved by the shareholders vide postal ballot dated March 31, 2016. These RSUs and stock options would vest over a period of 4 years and shall be exercisable within the period as approved by the Nomination and Remuneration Committee. The exercise price of the RSUs will be equal to the par value of the shares and the exercise price of the stock options would be the market price as on the date of grant, as approved by the shareholders. RSUs and stock options, in future periods, will be granted on achievement of performance conditions, as may be decided by the Nomination and Remuneration Committee.
The Board of Directors in their meeting held on October 14, 2016, on the recommendation of the Nomination and Remuneration Committee, have approved the revised compensation structure of Mohit Joshi, Rajesh K Murthy, Ravikumar S, Sandeep Dadlani, David Kennedy, M.D. Ranganath, Krishnamurthy Shankar and Manikantha AGS with effect from November 1, 2016. The Audit committee in their meeting held on October 13, 2016, resolved to include Mohit Joshi, Sandeep Dadlani, Rajesh K Murthy, RaviKumar S., Krishnamurthy Shankar and David Kennedy as key managerial personnel (KMP) as defined under Ind-AS 24 – Related Party Disclosures effective from the date of the meeting. Dr. Vishal Sikka, U.B. Pravin Rao, M.D. Ranganath and Manikantha AGS are key managerial personnel as defined under Section 2 (51) of the Companies Act, 2013.
KMP | Designation | Fixed Salary in US $ p.a |
Variable Salary in US $ p.a # |
David Kennedy | General Counsel & Chief Compliance Officer | 557,500 | 472,500 |
Mohit Joshi | President | 625,000 | 500,000 |
Rajesh K. Murthy | President | 540,000 | 450,000 |
Ravi Kumar S. | President | 625,000 | 500,000 |
Sandeep Dadlani | President | 625,000 | 500,000 |
TOTAL in US $ per annum | 2,972,500 | 2,422,500 | |
Total in INR ^ per annum (A) | 197,671,250 | 161,096,250 |
^ converted @ 66.50 per US$
KMP | Designation | Fixed Salary in INR p.a |
Variable
Salary in INR p.a # |
M.D. Ranganath | Chief Financial Officer | 2,00,00,000 | 2,00,00,000 |
Krishnamurthy Shankar | Group Head - Human Resources | 2,34,30,204 | 1,86,15,000 |
Manikantha A G S | Company Secretary | 37,18,781 | 12,71,566 |
Total in INR per annum (B) | 4,71,48,985 | 3,98,86,566 | |
GRAND TOTAL (A+B) | 24,48,20,235 | 20,09,82,816 | |
Rounded off (In crore) | 24 | 20 |
# on achievement of targets set by the Company.
Based on fiscal 2016 performance, aggregate RSU's of 245,750 and ESOP's of 502,550 will be granted to the KMP as mentioned below with effect from November 1, 2016 under the 2015 Stock Incentive Compensation Plan (2015 plan), approved by the shareholders vide postal ballot dated March 31, 2016. These RSUs and stock options would vest over a period of 4 years and shall be exercisable within the period as approved by the committee. The exercise price of RSUs will be equal to the par value of the shares and the exercise price of the stock options would be the market price as on the date of grant or the price as determined under the applicable law in respective jurisdictions. The details of the Stock incentive units to be granted is as under:
Number of Stock Incentive units to be granted | ||
KMP | Number of RSUs | Number of ESOPs |
Mohit Joshi | 52,350 | 1,12,750 |
Rajesh K. Murthy | 45,000 | 96,900 |
Ravi Kumar S. | 52,350 | 1,12,750 |
Sandeep Dadlani | 52,350 | 1,12,750 |
M.D. Ranganath | 30,650 | 48,400 |
Manikantha A G S | 1,000 | – |
Krishnamurthy Shankar | 12,050 | 19,000 |
TOTAL | 2,45,750 | 5,02,550 |
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