UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934
For the quarter ended March 31, 2019
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
Infosys Limited (“Infosys” or “the Company” or “we”) hereby furnishes the United States Securities and Exchange Commission with copies of the following information concerning our public disclosures regarding our results of operations and financial condition for the quarter and year ended March 31, 2019.
The following information shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
On April 12, 2019, we announced our results of operations for the quarter and year ended March 31, 2019. We issued press releases announcing our results under International Financial Reporting Standards (“IFRS”) in U.S. dollars and Indian rupees, copies of which are attached to this Form 6-K as Exhibits 99.1 and 99.2, respectively.
On April 12, 2019, we held a press conference to announce our results, which was followed by a question and answer session. The transcript of this press conference is attached to this Form 6-K as Exhibit 99.3.
We have also made available to the public on our web site, www.infosys.com, a fact sheet that provides details on our profit and loss account summary for the quarters and year ended March 31, 2019 and 2018 (as per IFRS); revenue by client geography offering, contract type, business segment; information regarding our client concentration; employee information and metrics; and consolidated IT services information. We have attached this fact sheet to this Form 6-K as Exhibit 99.4.
On April 12, 2019, we also held a teleconference with investors and analysts to discuss our results. The transcripts of the teleconference are attached to this Form 6-K as Exhibit 99.5.
We placed form of releases to stock exchanges and advertisements in certain Indian newspapers concerning our results of operations for the quarter and year ended March 31, 2019, under Ind AS. A copy of the release to the stock exchanges and the advertisement is attached to this Form 6-K as Exhibit 99.6.
We have made available to the public on our web site, www.infosys.com, the following: Audited Condensed Financial Statements in compliance with IFRS in US dollars and the Auditors Report; Audited Condensed Financial Statements in compliance with IFRS in Indian Rupees and the Auditors Report; Audited Ind AS Condensed Standalone Financial Statements and Auditors Report; Audited Ind AS Consolidated Financial Statements and Auditors Report for the quarter and year ended March 31, 2019. We have attached these documents to this Form 6-K as Exhibits 99.7, 99.8,99.9 and 99.10 respectively.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized
Infosys Limited /s/ Inderpreet Sawhney | |
Date: April 17, 2019 |
Inderpreet Sawhney General Counsel and Chief Compliance Officer |
Exhibit No. | Description of Document |
99.1 | IFRS USD press release |
99.2 | IFRS INR press release |
99.3 | Transcript of April 12, 2019 press conference |
99.4 | Fact Sheet regarding Registrant's Statement of Profit and Loss for the quarter and year ended March 31, 2019 and 2018 (as per IFRS); revenue by Business Segment, revenue by Offering, Client Geography, Contract type, information regarding Client Concentration; Employee Information and Metrics and Consolidated IT Services Information |
99.5 | Transcript of April 12, 2019 05:30 p.m. IST Earnings Call |
99.6 | Form of release to stock exchanges and advertisement placed in Indian newspapers |
99.7 | Audited Condensed Consolidated Financial Statements of Infosys Limited and its Subsidiaries in compliance with International Financial Reporting Standards (IFRS) in US Dollars and the Auditors Report thereon |
99.8 | Audited Interim Consolidated Financial Statements of Infosys Limited and its Subsidiaries in compliance with IFRS in Indian Rupees and the Auditors Report thereon |
99.9 | Audited Interim Condensed Financial Statements of Infosys Limited for the quarter and year ended March 31, 2019 in compliance with Indian Accounting Standards (INDAS) and Auditors Report thereon and Audited Financial Statements of Infosys Limited for the year ended March 31, 2019 in compliance with INDAS and Auditors Report thereon |
99.10 | Audited Interim Consolidated Financial Statements of Infosys Limited and its subsidiaries in compliance with INDAS for the quarter and year ended March 31, 2019 and Auditors Report thereon and Audited Consolidated Financial Statements for Infosys Limited and its subsidiaries for the year ended March 31, 2019 in compliance with INDAS and Auditors Report thereon |
Exhibit 99.1
IFRS USD Press Release
Second consecutive quarter of double digit growth in constant currency
Bengaluru, India – April 12, 2019
“We have completed the first year of our transformation journey with strong results on multiple dimensions including revenue growth, performance of our digital portfolio, large deal wins, and client metrics. This is a reflection of our increased client relevance stemming from our focus on digital, positioning, and long-standing client relationships”, said Salil Parekh, CEO and MD. “Our planned investments have started yielding benefits. As we look ahead into fiscal 2020, we plan to deploy various measures of operational efficiencies across the business.”
· | FY 19 revenues grew by 7.9% in USD; 9.0% in constant currency |
· | FY 19 operating margin at 22.8% |
· | Q4 19 revenues grew year-on-year by 9.1% in USD; 11.7% in constant currency |
· | Q4 19 revenues grew sequentially by 2.4% in USD; 2.1% in constant currency |
· | Q4 19 Digital revenues at $1,035 million (33.8% of total revenues), year-on-year growth of 41.1% and sequential growth of 9.7% in constant currency |
· | Announces final dividend of ![]() |
· | FY 20 revenue guidance in the range of 7.5%-9.5% in constant currency |
· | FY 20 Operating margin guidance in the range of 21%-23% |
1. | Financial Highlights- Consolidated results under International Financial Reporting Standards (IFRS) |
For the Quarter ended March 31, 2019 Revenues were $3,060 million, growth of 9.1% YoY and 2.4% QoQ
Operating profit was $658 million, decline of 5.1% YoY and 2.6% QoQ#
Basic EPS was $0.13, growth of 1.6% YoY and 15.5% QoQ |
For the Year ended March 31, 2019 Revenues were $11,799 million, growth of 7.9% YoY
Operating profit was $2,696 million, growth of 1.4% YoY
Basic EPS was $0.51, decline of 8.2% YoY*@ |
# | Includes additional depreciation and amortization expenses of $12 million for Panaya and Skava for the quarter ended December 31, 2018. |
* | Includes reduction in fair value and carrying value of Panaya and Skava, respectively which resulted in reduction in EPS by $0.02 |
@ | Includes impact on account of conclusion of an APA with the US IRS which has led to increase in EPS of $0.05 for the year ended March 31, 2018. |
“We had another quarter of over $1.5 bn large deal TCV in Q4, as a result of which FY 19 TCV doubled over FY 18. Realization per billed employee was steady which reflects increasing usage of automation in core services and faster growth in newer digital services”, said Pravin Rao, COO. “Overall attrition remains high and we are continuing our focus on arresting the same.”
“Cash generation in FY 19 was strong and Dividend Per Share increased by 4.5%. During the quarter, we completed the payout of special dividend in January and initiated the share buyback program,” said Nilanjan Roy, CFO. “We had another quarter of forex gains thanks to our proactive hedging strategy.”
2. | Capital Allocation |
· | During Q4 19, completed
payment of special dividend of ![]() |
· | Initiated buyback from
March 20, 2019 after receiving all requisite approvals. Out of total buyback size of ![]() ![]() |
· | For the Financial Year
2019, the Board has recommended a final dividend of ![]() ![]() ![]() |
*US$1
= 69.16 as at March 31, 2019
3. | Client wins & Testimonials |
· | Siemens Gamesa Renewable Energy (SGRE), a world leader and a pioneer in the renewable energy industry, has signed a seven-year global partnership with Infosys to enable an end-to-end IT Transformation program towards a digital future and industry leadership. |
Alan Feeley, SGRE CIO, said, “Infrastructure & applications outsourcing deals are the norm in our business worlds already today. When considering our (SGRE) desired IT operating model for the future, we were looking for a partner that brings a careful balance of innovation, operational excellence and sustainable commercial viability. With Infosys, we are very confident that these attributes were at the core of their operating culture. We are very excited to partner with Infosys on this journey of modernization and were impressed by Infosys Next Generation Application & Infrastructure Management Framework, their agility & focus on delivery excellence, and a clear understanding of our business strategy.”
· | With a vision to provide safe and reliable utility services and improve the customer service of about 800,000 people in the Indianapolis area, Citizens will transform its customer service by leveraging ‘Infosys Preconfigured Accelerator for Customer Experience (PACE)’, an industry leading framework tuned for Oracle Utilities Customer to Meter (C2M) platform. |
Curtis Popp, Vice President of Customer Operations at Citizens Energy Group, said, “At Citizens Energy Group, we’re excited to be working with Infosys and Oracle to implement a new CIS and accomplish our strategic goals, including improved customer satisfaction and employee engagement. The experience and expertise of Infosys employees is paramount to the success of this complex project.”
· | Kraft Heinz has selected Infosys to deliver rich digital experience for their recipes and brands to their consumers. |
“Kraft Heinz has partnered with Infosys to launch new capabilities delivering rich consumer experience. We are becoming more relevant to our consumers by enabling capabilities like Shoppable Recipes, Rich Brand Experience, Personalized Recommendations, Seamless Social Media Integration. We are just getting started.,” said, Leandro Balbinot, CIO Global Digital Growth, Kraft Heinz Company.
· | “Movement Mortgage is committed to providing loan officers, real estate agents and our borrowers with technology and a digital infrastructure that delivers an innovative, user-friendly experience on every platform and in every channel, both today and in the future. We’re pleased to have selected Infosys as our strategic partner across these key business functions. Infosys’ expertise in Digital Transformation, Cloud Technologies and Mortgage and Retail Lending will help Movement continue to spearhead industrywide transformation that improves the mortgage experience for everyone and makes the dream of homeownership more accessible than ever before,” said Casey Crawford, CEO, Movement Mortgage |
· | “In partnership with Infosys, we are modernizing our collection processes with real-time insights into delinquency rates, better risk segmentations and customized contact & calling strategies.” said Julie Signorille, Consumer Banking, Chief Operating Officer, Citizens Bank |
Recognition:
· | Infosys positioned in HFS Top 10 Healthcare Services 2019 |
· | Infosys positioned as a leader in SAP HANA and S/4 HANA Services – NEAT 2019 |
· | Infosys positioned as a leader in RPA & AI in Banking – NEAT 2019 |
· | Infosys positioned in Customer Experience (CX) Shortlist (Constellation ShortList™ Global Customer Experience (CX) Services) |
· | Infosys positioned as a leader in Gartner’s Magic Quadrant for Public Cloud Infrastructure Professional and Managed Services, Worldwide |
· | Infosys positioned as a leader in Advanced Digital Workplace Services – NEAT 2019 |
· | Infosys Lex Wingspan shortlisted in Constellation ShortList™ Learning Marketplaces for Q1 2019 |
· | Infosys positioned as a leader in IDC MarketScape: Worldwide IT Service Management Implementation Services 2019 Vendor Assessment |
· | Infosys positioned in HFS Top 10 High-tech sector service providers |
· | Infosys positioned in HFS Top 10 Microsoft AI Services 2019 |
· | Infosys positioned in HFS Top 10 Enterprise Blockchain Services 2018 |
About Infosys
Infosys is a global leader in next-generation digital services and consulting. We enable clients in 45 countries to navigate their digital transformation. With over three decades of experience in managing the systems and workings of global enterprises, we expertly steer our clients through their digital journey. We do it by enabling the enterprise with an AI-powered core that helps prioritize the execution of change. We also empower the business with agile digital at scale to deliver unprecedented levels of performance and customer delight. Our always-on learning agenda drives their continuous improvement through building and transferring digital skills, expertise, and ideas from our innovation ecosystem.
Visit www.infosys.com to see how Infosys (NYSE: INFY) can help your enterprise navigate your next.
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Safe Harbor
Certain statements mentioned in this release concerning our future growth prospects and our future business expectations are forward-looking statements intended to qualify for the 'safe harbor' under the Private Securities Litigation Reform Act of 1995. Such statements involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, fluctuations in foreign exchange rates, our ability to manage growth, intense competition in IT services including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, industry segment concentration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks or system failures, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which Infosys has made strategic investments, withdrawal or expiration of governmental fiscal incentives, political instability and regional conflicts, legal restrictions on raising capital or acquiring companies outside India, and unauthorized use of our intellectual property and general economic conditions affecting our industry. Additional risks that could affect our future operating results are more fully described in our United States Securities and Exchange Commission filings including our Annual Report on Form 20-F for the fiscal year ended March 31, 2018. These filings are available at www.sec.gov. Infosys may, from time to time, make additional written and oral forward-looking statements, including statements contained in the company's filings with the Securities and Exchange Commission and our reports to shareholders. The company does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of the company unless it is required by law.
Contact
Investor Relations |
Sandeep Mahindroo +91 80 3980 1018 Sandeep_Mahindroo@infosys.com |
|
Media Relations |
Sarah Vanita Gideon Sarah_Gideon@infosys.com |
Chiku Somaiya Chiku.Somaiya@infosys.com |
Infosys Limited and subsidiaries
Audited Condensed Consolidated Balance Sheet as at
(Dollars in millions except equity share data)
March 31, 2019 | March 31, 2018 | |
ASSETS | ||
Current assets | ||
Cash and cash equivalents | 2,829 | 3,041 |
Current investments | 958 | 982 |
Trade receivables | 2,144 | 2,016 |
Unbilled revenue | 777 | 654 |
Prepayments and other current assets | 827 | 662 |
Income tax assets | 61 | – |
Derivative financial instruments | 48 | 2 |
7,644 | 7,357 | |
Assets held for sale(A3)(A4) | – | 316 |
Total current assets | 7,644 | 7,673 |
Non-current assets | ||
Property, plant and equipment | 1,931 | 1,863 |
Goodwill | 512 | 339 |
Intangible assets | 100 | 38 |
Investment in associate | – | – |
Non-current investments | 670 | 883 |
Deferred income tax assets | 199 | 196 |
Income tax assets | 914 | 931 |
Other non-current assets | 282 | 332 |
Total non-current assets | 4,608 | 4,582 |
Total assets | 12,252 | 12,255 |
LIABILITIES AND EQUITY | ||
Current liabilities | ||
Trade payables | 239 | 107 |
Derivative financial instruments | 2 | 6 |
Current income tax liabilities | 227 | 314 |
Client deposits | 4 | 6 |
Unearned revenue | 406 | 352 |
Employee benefit obligations | 234 | 218 |
Provisions | 83 | 75 |
Other current liabilities | 1,498 | 1,036 |
2,693 | 2,114 | |
Liabilities directly associated with assets held for sale(A3)(A4) | – | 50 |
Total current liabilities | 2,693 | 2,164 |
Non-current liabilities | ||
Deferred income tax liabilities | 98 | 82 |
Employee benefit obligations | 6 | 7 |
Other non-current liabilities | 55 | 42 |
Total liabilities | 2,852 | 2,295 |
Equity | ||
Share
capital- ![]() |
339 | 190 |
Share premium | 277 | 247 |
Retained earnings | 11,248 | 11,587 |
Cash flow hedge reserve | 3 | – |
Other reserves | 384 | 244 |
Capital redemption reserve | 10 | 9 |
Other components of equity | (2,870) | (2,317) |
Total equity attributable to equity holders of the company | 9,391 | 9,960 |
Non-controlling interests | 9 | – |
Total equity | 9,400 | 9,960 |
Total liabilities and equity | 12,252 | 12,255 |
Infosys Limited and subsidiaries
Audited Condensed Consolidated Statement of Comprehensive Income for the
(Dollars in millions except equity share and per equity share data)
Three months ended March 31, 2019 | Three months ended March 31, 2018 | Year ended March 31, 2019 | Year ended March 31, 2018 | |
Revenues | 3,060 | 2,805 | 11,799 | 10,939 |
Cost of sales | 2,028 | 1,793 | 7,687 | 7,001 |
Gross profit | 1,032 | 1,012 | 4,112 | 3,938 |
Operating expenses | ||||
Selling and marketing expenses | 174 | 147 | 638 | 552 |
Administrative expenses | 200 | 172 | 778 | 727 |
Total operating expenses | 374 | 319 | 1,416 | 1,279 |
Operating profit | 658 | 693 | 2,696 | 2,659 |
Other income, net(B3) | 94 | 100 | 411 | 513 |
Reduction in the fair value of Disposal Group held for sale(A3) |
– |
(18) |
(39) |
(18) |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from “Held for Sale”(A4) |
– |
– |
(65) |
– |
Share in net profit/(loss) of associate, including impairment(A2) |
– |
– |
– |
(11) |
Profit before income taxes | 752 | 775 | 3,003 | 3,143 |
Income tax expense(A1)(B4) | 171 | 204 | 803 | 657 |
Net profit | 581 | 571 | 2,200 | 2,486 |
Other comprehensive income | ||||
Items that will not be reclassified subsequently to profit or loss: | ||||
Re-measurements of the net defined benefit liability/asset, net |
– |
6 |
(3) |
9 |
Equity instruments through other comprehensive income, net |
– |
1 |
10 |
1 |
Items that will be reclassified subsequently to profit or loss: | ||||
Fair valuation of investments, net | 3 | (2) | – | – |
Fair value changes on derivatives designated as cash flow hedge, net |
(2) |
– |
3 |
(6) |
Foreign currency translation | 74 | (164) | (560) | 18 |
Total other comprehensive income/(loss), net of tax |
75 |
(159) |
(550) |
22 |
Total comprehensive income | 656 | 412 | 1,650 | 2,508 |
Profit attributable to: | ||||
Owners of the Company | 580 | 571 | 2,199 | 2,486 |
Non-controlling interests | 1 | – | 1 | – |
581 | 571 | 2,200 | 2,486 | |
Total comprehensive income attributable to: | ||||
Owners of the Company | 655 | 412 | 1,649 | 2,508 |
Non-controlling interests | 1 | – | 1 | – |
656 | 412 | 1,650 | 2,508 | |
Earnings per equity share(A1) (A5) | ||||
Basic ($) | 0.13 | 0.13 | 0.51 | 0.55 |
Diluted ($) | 0.13 | 0.13 | 0.51 | 0.55 |
Weighted average equity shares used in computing earnings per equity share(A5) | ||||
Basic | 4,347,129,592 | 4,346,554,120 | 4,347,130,157 | 4,510,664,644 |
Diluted | 4,353,023,863 | 4,349,617,024 | 4,353,420,772 | 4,515,147,740 |
NOTES:
A. | Notes pertaining to previous quarters / periods |
1. | During the quarter ended December 31, 2017, on account of the conclusion of an Advance Pricing Agreement (“APA”) with the U.S. Internal Revenue Service (“IRS”), the Company has reversed income tax expense provision of $225 million which pertains to previous periods. |
2. | During the year ended March 31, 2018, the Company has written down the entire carrying value of $11 million in its associate DWA Nova LLC. |
3. | In the three months ended March 2018, Kallidus and Skava (together referred to as "Skava”) and Panaya, were classified as “Held for Sale” resulting in a reduction in the fair value amounting to $18 million and $39 million in respect of Panaya for the year ended March 31, 2018 and three months ended June 30, 2018, respectively. |
4. | During the three months ended December 31, 2018, the Company declassified Panaya and Skava from “Held for Sale” and recognized an adjustment in respect of excess of carrying amount over recoverable amount of $65 million in respect of Skava during the year ended March 31, 2019. |
5. | Share numbers and EPS have been adjusted for September 2018 bonus issue. |
B. | Notes pertaining to the current quarter |
1. | The audited condensed consolidated Balance sheet and Statement of Comprehensive Income for the three months and year ended March 31, 2019 have been taken on record at the Board meeting held on April 12, 2019. |
2. | A Fact Sheet providing the operating metrics of the Company can be downloaded from www.infosys.com. |
3. | Other income includes $7 million for each of the quarter and year ended March 31, 2019, and $41 million for the year ended March 31, 2018 towards interest on income tax refund. |
4. | During the quarter ended March 31, 2019, on account of the conclusion of an Advance Pricing Agreement (“APA”) in an overseas jurisdiction, the Company has reversed income tax expense provision of $14 million which pertains to previous periods. |
Exhibit 99.2
IFRS INR Press Release
Second consecutive quarter of double digit growth in constant currency
Bengaluru, India – April 12, 2019
“We have completed the first year of our transformation journey with strong results on multiple dimensions including revenue growth, performance of our digital portfolio, large deal wins, and client metrics. This is a reflection of our increased client relevance stemming from our focus on digital, positioning, and long-standing client relationships”, said Salil Parekh, CEO and MD. “Our planned investments have started yielding benefits. As we look ahead into fiscal 2020, we plan to deploy various measures of operational efficiencies across the business.”
· | FY 19 revenues grew by 17.2% in INR; 9.0% in constant currency |
· | FY 19 operating margin at 22.8% |
· | Q4 19 revenues grew year-on-year by 19.1% in INR; 11.7% in constant currency |
· | Q4 19 revenues grew sequentially by 0.6% in INR; 2.1% in constant currency |
· | Q4 19 Digital revenues at $1,035 million (33.8% of total revenues), year-on-year growth of 41.1% and sequential growth of 9.7% in constant currency |
· | Announces final dividend
of ![]() |
· | FY 20 revenue guidance in the range of 7.5%-9.5% in constant currency |
· | FY 20 Operating margin guidance in the range of 21%-23% |
1. | Financial Highlights- Consolidated results under International Financial Reporting Standards (IFRS) |
For the Quarter ended March 31, 2019 Revenues
were
Operating
profit was
Basic
EPS was |
For the Year ended March 31, 2019 Revenues
were
Operating
profit was
Basic
EPS was |
# | Includes additional depreciation and amortization expenses of ![]() |
* | Includes reduction in fair value and carrying value of Panaya and Skava, respectively
which resulted in reduction in EPS by ![]() |
@ | Includes impact on account of conclusion of an APA with the US IRS which has led
to an increase in EPS of ![]() |
“We had another quarter of over $1.5 bn large deal TCV in Q4, as a result of which FY 19 TCV doubled over FY 18. Realization per billed employee was steady which reflects increasing usage of automation in core services and faster growth in newer digital services”, said Pravin Rao, COO. “Overall attrition remains high and we are continuing our focus on arresting the same.”
“Cash generation in FY 19 was strong and Dividend Per Share increased by 4.5%. During the quarter, we completed the payout of special dividend in January and initiated the share buyback program,” said Nilanjan Roy, CFO. “We had another quarter of forex gains thanks to our proactive hedging strategy.”
2. | Capital Allocation |
· | During
Q4 19, completed payment of special dividend of ![]() |
· | Initiated
buyback from March 20, 2019 after receiving all requisite approvals. Out of total buyback size of ![]() ![]() |
· | For
the Financial Year 2019, the Board has recommended a final dividend of ![]() ![]() ![]() | |
* | US$1 = ![]() |
3. | Client wins & Testimonials |
· | Siemens Gamesa Renewable Energy (SGRE), a world leader and a pioneer in the renewable energy industry, has signed a seven-year global partnership with Infosys to enable an end-to-end IT Transformation program towards a digital future and industry leadership. | |
Alan Feeley, SGRE CIO, said, “Infrastructure & applications outsourcing deals are the norm in our business worlds already today. When considering our (SGRE) desired IT operating model for the future, we were looking for a partner that brings a careful balance of innovation, operational excellence and sustainable commercial viability. With Infosys, we are very confident that these attributes were at the core of their operating culture. We are very excited to partner with Infosys on this journey of modernization and were impressed by Infosys Next Generation Application & Infrastructure Management Framework, their agility & focus on delivery excellence, and a clear understanding of our business strategy.” | ||
With a vision to provide safe and reliable utility services and improve the customer service of about 800,000 people in the Indianapolis area, Citizens will transform its customer service by leveraging ‘Infosys Preconfigured Accelerator for Customer Experience (PACE)’, an industry leading framework tuned for Oracle Utilities Customer to Meter (C2M) platform. | ||
Curtis Popp, Vice President of Customer Operations at Citizens Energy Group, said, “At Citizens Energy Group, we’re excited to be working with Infosys and Oracle to implement a new CIS and accomplish our strategic goals, including improved customer satisfaction and employee engagement. The experience and expertise of Infosys employees is paramount to the success of this complex project.” | ||
Kraft Heinz has selected Infosys to deliver rich digital experience for their recipes and brands to their consumers. | ||
“Kraft Heinz has partnered with Infosys to launch new capabilities delivering rich consumer experience. We are becoming more relevant to our consumers by enabling capabilities like Shoppable Recipes, Rich Brand Experience, Personalized Recommendations, Seamless Social Media Integration. We are just getting started.,” said, Leandro Balbinot, CIO Global Digital Growth, Kraft Heinz Company. | ||
“Movement Mortgage is committed to providing loan officers, real estate agents and our borrowers with technology and a digital infrastructure that delivers an innovative, user-friendly experience on every platform and in every channel, both today and in the future. We’re pleased to have selected Infosys as our strategic partner across these key business functions. Infosys’ expertise in Digital Transformation, Cloud Technologies and Mortgage and Retail Lending will help Movement continue to spearhead industrywide transformation that improves the mortgage experience for everyone and makes the dream of homeownership more accessible than ever before,” said Casey Crawford, CEO, Movement Mortgage | ||
“In partnership with Infosys, we are modernizing our collection processes with real-time insights into delinquency rates, better risk segmentations and customized contact & calling strategies.” said Julie Signorille, Consumer Banking, Chief Operating Officer, Citizens Bank |
Recognition:
· | Infosys positioned in HFS Top 10 Healthcare Services 2019 |
· | Infosys positioned as a leader in SAP HANA and S/4 HANA Services – NEAT 2019 |
· | Infosys positioned as a leader in RPA & AI in Banking – NEAT 2019 |
· | Infosys positioned in Customer Experience (CX) Shortlist (Constellation ShortList™ Global Customer Experience (CX) Services) |
· | Infosys positioned as a leader in Gartner’s Magic Quadrant for Public Cloud Infrastructure Professional and Managed Services, Worldwide |
· | Infosys positioned as a leader in Advanced Digital Workplace Services – NEAT 2019 |
· | Infosys Lex Wingspan shortlisted in Constellation ShortList™ Learning Marketplaces for Q1 2019 |
· | Infosys positioned as a leader in IDC MarketScape: Worldwide IT Service Management Implementation Services 2019 Vendor Assessment |
· | Infosys positioned in HFS Top 10 High-tech sector service providers |
· | Infosys positioned in HFS Top 10 Microsoft AI Services 2019 |
· | Infosys positioned in HFS Top 10 Enterprise Blockchain Services 2018 |
About Infosys
Infosys is a global leader in next-generation digital services and consulting. We enable clients in 45 countries to navigate their digital transformation. With over three decades of experience in managing the systems and workings of global enterprises, we expertly steer our clients through their digital journey. We do it by enabling the enterprise with an AI-powered core that helps prioritize the execution of change. We also empower the business with agile digital at scale to deliver unprecedented levels of performance and customer delight. Our always-on learning agenda drives their continuous improvement through building and transferring digital skills, expertise, and ideas from our innovation ecosystem.
Visit www.infosys.com to see how Infosys (NYSE: INFY) can help your enterprise navigate your next.
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Safe Harbor
Certain statements mentioned in this release concerning our future growth prospects and our future business expectations are forward-looking statements intended to qualify for the 'safe harbor' under the Private Securities Litigation Reform Act of 1995. Such statements involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, fluctuations in foreign exchange rates, our ability to manage growth, intense competition in IT services including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, industry segment concentration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks or system failures, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which Infosys has made strategic investments, withdrawal or expiration of governmental fiscal incentives, political instability and regional conflicts, legal restrictions on raising capital or acquiring companies outside India, and unauthorized use of our intellectual property and general economic conditions affecting our industry. Additional risks that could affect our future operating results are more fully described in our United States Securities and Exchange Commission filings including our Annual Report on Form 20-F for the fiscal year ended March 31, 2018. These filings are available at www.sec.gov. Infosys may, from time to time, make additional written and oral forward-looking statements, including statements contained in the company's filings with the Securities and Exchange Commission and our reports to shareholders. The company does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of the company unless it is required by law.
Contact
Investor Relations |
Sandeep Mahindroo +91 80 3980 1018 Sandeep_Mahindroo@infosys.com |
|
Media Relations |
Sarah Vanita Gideon Sarah_Gideon@infosys.com |
Chiku Somaiya Chiku.Somaiya@infosys.com |
Infosys Limited and subsidiaries
Audited Consolidated Balance Sheet as at
(In
crore except share data)
March 31, 2019 | March 31, 2018 | |
ASSETS | ||
Current assets | ||
Cash and cash equivalents | 19,568 | 19,818 |
Current investments | 6,627 | 6,407 |
Trade receivables | 14,827 | 13,142 |
Unbilled revenue | 5,374 | 4,261 |
Prepayments and other current assets | 5,723 | 4,313 |
Income tax assets | 423 | – |
Derivative financial instruments | 336 | 16 |
52,878 | 47,957 | |
Assets held for sale(A3)(A4) | – | 2,060 |
Total current assets | 52,878 | 50,017 |
Non-current assets | ||
Property, plant and equipment | 13,356 | 12,143 |
Goodwill | 3,540 | 2,211 |
Intangible assets | 691 | 247 |
Investment in associate | – | – |
Non-current investments | 4,634 | 5,756 |
Deferred income tax assets | 1,372 | 1,282 |
Income tax assets | 6,320 | 6,070 |
Other non-current assets | 1,947 | 2,164 |
Total non-current assets | 31,860 | 29,873 |
Total assets | 84,738 | 79,890 |
LIABILITIES AND EQUITY | ||
Current liabilities | ||
Trade payables | 1,655 | 694 |
Derivative financial instruments | 15 | 42 |
Current income tax liabilities | 1,567 | 2,043 |
Client deposits | 26 | 38 |
Unearned revenue | 2,809 | 2,295 |
Employee benefit obligations | 1,619 | 1,421 |
Provisions | 576 | 492 |
Other current liabilities | 10,371 | 6,756 |
18,638 | 13,781 | |
Liabilities directly associated with assets held for sale(A3)(A4) | – | 324 |
Total current liabilities | 18,638 | 14,105 |
Non-current liabilities | ||
Deferred income tax liabilities | 672 | 541 |
Employee benefit obligations | 44 | 48 |
Other non-current liabilities | 378 | 272 |
Total liabilities | 19,732 | 14,966 |
Equity | ||
Share capital- ![]() |
2,170 | 1,088 |
Share premium | 396 | 186 |
Retained earnings | 58,848 | 61,241 |
Cash flow hedge reserves | 21 | – |
Other reserves | 2,570 | 1,583 |
Capital redemption reserve | 61 | 56 |
Other components of equity | 882 | 769 |
Total equity attributable to equity holders of the company | 64,948 | 64,923 |
Non-controlling interests | 58 | 1 |
Total equity | 65,006 | 64,924 |
Total liabilities and equity | 84,738 | 79,890 |
Infosys Limited and subsidiaries
Audited Consolidated Statement of Comprehensive Income for the
(In crore except equity share
and per equity share data)
Three months ended March 31, 2019 |
Three months ended March 31, 2018 |
Year ended March 31, 2019 | Year ended March 31, 2018 | |
Revenues | 21,539 | 18,083 | 82,675 | 70,522 |
Cost of sales | 14,283 | 11,554 | 53,867 | 45,130 |
Gross profit | 7,256 | 6,529 | 28,808 | 25,392 |
Operating expenses | ||||
Selling and marketing expenses | 1,226 | 947 | 4,473 | 3,560 |
Administrative expenses | 1,412 | 1,110 | 5,455 | 4,684 |
Total operating expenses | 2,638 | 2,057 | 9,928 | 8,244 |
Operating profit | 4,618 | 4,472 | 18,880 | 17,148 |
Other income, net(B3) | 665 | 652 | 2,882 | 3,311 |
Reduction in the fair value of Disposal Group held for sale (A3) |
– |
(118) |
(270) |
(118) |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from “Held from Sale”(A4) |
– |
– |
(451) |
– |
Share in net profit/(loss) of associate, including impairment(A2) |
– |
– |
– |
(71) |
Profit before income taxes | 5,283 | 5,006 | 21,041 | 20,270 |
Income tax expense(A1)(B4) | 1,205 | 1,316 | 5,631 | 4,241 |
Net profit | 4,078 | 3,690 | 15,410 | 16,029 |
Other comprehensive income | ||||
Items that will not be reclassified subsequently to profit or loss: | ||||
Re-measurement of the net defined benefit liability/asset, net |
(3) |
34 |
(22) |
55 |
Equity instruments through other comprehensive income, net |
1 |
9 |
70 |
7 |
Items that will be reclassified subsequently to profit or loss: | ||||
Fair value changes on derivatives designated as cash flow hedge, net |
(15) |
2 |
21 |
(39) |
Exchange differences on translation of foreign operations |
(70) |
200 |
63 |
321 |
Fair value changes on investments, net | 25 | (15) | 2 | (1) |
Total other comprehensive income/(loss), net of tax |
(62) |
230 |
134 |
343 |
Total comprehensive income | 4,016 | 3,920 | 15,544 | 16,372 |
Profit attributable to: | ||||
Owners of the Company | 4,074 | 3,690 | 15,404 | 16,029 |
Non-controlling interests | 4 | – | 6 | – |
4,078 | 3,690 | 15,410 | 16,029 | |
Total comprehensive income attributable to: | ||||
Owners of the Company | 4,012 | 3,920 | 15,538 | 16,372 |
Non-controlling interests | 4 | – | 6 | – |
4,016 | 3,920 | 15,544 | 16,372 | |
Earnings per equity share(A1) (A5) | ||||
Basic (![]() |
9.37 | 8.49 | 35.44 | 35.53 |
Diluted (![]() |
9.36 | 8.48 | 35.38 | 35.50 |
Weighted average equity shares used in computing earnings per equity share(A5) | ||||
Basic | 434,71,29,592 | 434,65,54,120 | 434,71,30,157 | 451,06,64,644 |
Diluted | 435,30,23,863 | 434,96,17,024 | 435,34,20,722 | 451,51,47,740 |
NOTES:
A. | Notes pertaining to previous quarters / periods | |
1. | During the quarter ended December 31, 2017,
on account of the conclusion of an Advance Pricing Agreement (“APA”) with the U.S. Internal Revenue Service (“IRS”),
the Company has reversed income tax expense provision of ![]() |
2. | During the year ended March 31, 2018, the Company has written
down the entire carrying value of ![]() |
3. | In the three months ended March 2018, Kallidus and Skava (together
referred to as "Skava”) and Panaya, were classified as “Held for Sale” resulting in a reduction in the fair
value amounting to ![]() ![]() |
4. | During the three months ended December 31, 2018, the Company declassified
Panaya and Skava from “Held for Sale” and recognized an adjustment in respect of excess of carrying amount over recoverable
amount of ![]() |
5. | Share numbers and EPS have been adjusted for September 2018 bonus issue. |
B. | Notes pertaining to the current quarter | |
1. | The audited condensed consolidated Balance sheet and Statement of Comprehensive Income for the three months and year ended March 31, 2019 have been taken on record at the Board meeting held on April 12, 2019. |
2. | A Fact Sheet providing the operating metrics of the Company can be downloaded from www.infosys.com. |
3. | Other income includes
![]() ![]() |
4. | During the quarter ended March 31, 2019,
on account of the conclusion of an Advance Pricing Agreement (“APA”) in an overseas jurisdiction, the Company has reversed
income tax expense provision of ![]() |
Exhibit 99.3
Press Conference
“Infosys-MediaCall-April12-2019”
CORPORATE PARTICIPANTS:
Salil Parekh
Chief Executive Officer & Managing Director
Pravin Rao
Chief Operating Officer
Nilanjan Roy
Chief Financial Officer
MEDIA PARTICIPANTS
Mugdha Variyar
CNBC
Rahul Dayama
ET Now
Shivani Saxena
BloombergQuint
Swati Kulkarni
Moneycontrol
Debashish Mohapatra
Business Standard
Bapu Narayankar
PTI
Rukmini Rao
Business Today
Jochelle Mendonca
Economic Times
Furquan Moharkan
Deccan Herald
Anirudhha Ghosh
Financial Express
Shilpa Phadnis
Times of India
Sonia Parveen
Good evening ladies and gentlemen. Thank you for joining us for the fourth quarter results press conference. We will open with opening remarks from our CEO, Mr. Salil Parekh followed by the Q&A for the media. I would also request you to limit the question to one question per publication. Over to you Salil!
Salil Parekh
Good afternoon everyone and thank you for being here today. It is really an exciting day and announcement evening for us and me. It is a first full year for me and from my perspective it has been really an incredible year that we had as a company. You would have seen the press release, but I will give you few highlights. I am truly pleased with the sort of results that have come about with the transformation we have driven this year. The results demonstrate some of the first steps of that transformation. We have increased our client relevance and that shows up in our full year growth. Full year growth is 9% in constant currency and for the quarter it is 11.7%, so incredible year for growth and further acceleration in Q4. Our sequential growth constant currency basis is 2.1%, which is yet another strong quarter for us after the first three quarters of the year.
Our clients are seeing more and more value with our digital portfolio. This was driving our full year growth, so full year digital growth is 34% and the Q4 growth for digital is 41%. We see that all of our investments in digital are resonating with our clients and this is further accelerating in Q4. At the end of the year, in Q4, we now have 34%, over a third of our revenue coming from digital.
To give you one example, we are really delighted that our digital banking platform has gained tremendous traction in this fiscal year. We have seven new global logos on our digital banking platform. That is a real achievement with the way we have repositioned that platform, re-architected it and driving the digital agenda. We have seen our clients select us for critical work across data, analytics, cloud, IOT, cyber security - all of the elements of our digital pentagon.
On large deals again we had an exceptional quarter. $1.6 billion in large deal wins, and a total of $6.3 billion for the full year - that is twice the value we had in fiscal 2018. Our investments in sales are starting to help us build the momentum that we need. We can see that in the number of large deals and you will hear some more stats on the net new in a short while.
Our engagement with large clients is also growing well. The number of large clients over $100 million in revenue has increased to 25, it was 20 this time last year. What we see now is our planned investments in sales and in building a business model, which is resilient via localization in all our key markets, is starting to pay dividends and yielding benefits. Our margin for the full year was within our guided band at 22.8% and margins for Q4 was at 21.5%. Going forward, we see the ability to drive operational efficiency into our business.
Overall, we see our business being more stable and better positioned to benefit from the shift to digital in the years to come ahead and also to build business resilience into our model. Our guidance for fiscal 2020 is - Revenue growth in the range of 7.5% to 9.5% in constant currency and operating margin in the range of 21% to 23%.
I will pause here and we will open it up for questions. I also want to welcome Nilanjan for whom it is the first interaction with you in this formal capacity. Pravin, Nilanjan and I will address your questions.
Sonia Parveen
Thank you Salil. Before we open the floor for the Q&A, I would like to reiterate, please ask one question per publication and we will begin with the electronic media.
The first question is from CNBC.
Mugdha Variyar
Firstly, congratulations on a great quarter and a great year. My question to you Salil is why is the guidance so low at 7.5% to 9.5% especially because you have doubled your deal wins. Why is it not reflecting the accelerated growth?
To Nilanjan, I have to ask why have you cut margin guidance by 100 basis points and why was the Q4 margin at 21.5%, which is much lower than expected?
To Pravin, attrition is still high. You have mentioned that in the press release as well. Despite steps being taken by the company, what more are you doing and would this impact margins going forward?
Salil Parekh
Let me start with the guidance. The way we can start guidance is look at what we have done in terms of the full year in the new wins, and also making sure we look at what is going on in the market. We had a very strong acceleration for the full year and, therefore, if you recall, for fiscal 2019, guidance was 6% to 8% and we have now bumped it up to 7.5% to 9.5%. So, from our perspective it is a very strong movement of the guidance reflecting the growth.
We have not actually cut guidance because we had guidance of 6% to 8% for this year and have delivered 9% and this 7.5% to 9.5% fits very well within the range of growth that we anticipate for the next full year.
Nilanjan Roy
On the margin question, I will just step back and go back a year when the new ‘Navigate your Next’ strategy was announced. There were four key pillars, which the company set forth. One was building the digital framework and that has led to the increased growth. But this also called for additional investments, which we had to make including in digital talent throughout the year. So, one of the reasons of the margin impact has been the investments we have made beyond digital in getting new digital talent into the company. If I look at the second framework for ‘Navigate your Next’ was about ‘Energizing the Core’, which is basically how do we get automation and AI and drive efficiencies in the operations during the year. Many of these are costs in our business and passed on to our clients. During the last year we have seen about 70 basis points of margin efficiencies coming through the various levers. Thirdly, a part of the strategy was localization. This is very important for future proofing the company. In the United States we have been setting up innovation hubs - we are ahead of the peer set. We have set up five hubs across the US and also hiring local talent in a global delivery model to de-risk our business in the future. This is an investment, which we believe is much required that puts us to build a much more robust framework for this model for the future years. The last was about reskilling our people and as part of that as well we have made the investments into refactoring our employees.
So, as we guided the market at the beginning of the year, although we ended last year at 24.3%, our margin guidance was between 22% to 24%. We had seen these investments coming and we ended at 22.8% this year. This has been a thought through programme and the guidance for next year actually reflects the margin looking at where we are in Q4 and how we build forward.
Pravin Rao
On the attrition front, attrition is definitely higher than where we anticipated. It has increased slightly from 17.8% to 18.3% at Infosys Limited level. There are multiple interventions we have started in the last quarter or so. We have come up with a new employee value proposition, which is focused on engaging better with employees, enabling them, creating more career opportunities and providing them a very rewarding experience. So there have been many interventions we have done in the last quarter. Some of this will take time to yield results. We are also looking at wherever there are gaps in compensation and trying to fix that as well. When we segment the attrition, the primary areas where we are seeing challenges are people with three to five years of experience and probably two to three years of experience in US. That is a segment we need to address and we are also introducing milestone based increments. We are now encouraging people to get certified, become digital specialist and then we are coming up with incentive scheme for people what we call internally as digital stacks. There are multiple initiatives underway, both addressing any hygiene issues that we have as well as some of the new things. Part of it is also about better narrative about the kind of opportunities we have and kind of investments we are doing in terms of their own career progression, career enrichment and so on. So we expect in the next couple of quarters things should become better. But this is something we constantly focus on and we understand that this is a critical thing. We want to bring it down to 13% to 15% that is where our comfort is going forward.
Sonia Parveen
The next question is from ET Now.
Rahul Dayama
Salil my first question is to you. Are there macroeconomic buzz that is really impacting growth? You said we still need some more time. Could you call out some of those factors, are you seeing some of those factors in client conversations? How the IT budgets have shaped up, you have a lot more clarity now, so is there a macroeconomic headwind so to say?
Salil Parekh
Today we do not see a macro headwind across the business. There is a lot of talk as we went into planning for this fiscal year. There are some areas, for example we see manufacturing in Europe, which is showing us some weakness. We see healthcare, which is showing us some weakness, we see life sciences, which is showing us some weakness. But these are not across the whole business. Overall, we feel there is still robustness in our business and that is what is reflected into our guidance.
Rahul Dayama
One more Salil before I go to Pravin, three-year roadmap - FY2019 stabilizing the business, FY2020 build momentum, so is that on or would it take another year because you have ended this year on a strong note. But, there are some concerns in terms of margin pressures. So would you wait for another year to see how you would want to stabilize the business?
Salil Parekh
I think from my perspective and our perspective, the business is today in a very stable situation. In fact we saw some early acceleration or building momentum already starting to come into Q4. With respect to the margin, as Nilanjan was sharing, our main focus has been to make sure we invest in the areas that need investment for future proofing our business. So that is the way we look at our margin. We also have some levers now, which can drive operational efficiency into fiscal 2020. From a business stability perspective, my feeling today is we are in a much more stable place then we were 12 - 15 months ago. If you look at our digital growth, 41% YoY growth in Q4, that is actually beyond momentum and acceleration. It is taking quite a real position in the market, so we will continue that. The three-year journey for us, the roadmap is well laid out. In fact, some of those things we are starting to hit sooner, but we have given ourselves the journey time of three years to make sure that we become fully functioning in the sense of stability, momentum and acceleration, even if some of the elements start to show up earlier in our trajectory.
Rahul Dayama
Pravin, in terms of financial services, last quarter also you said you are pretty upbeat as far as the demand is concerned. So is this a one-off affair? You had indicated that FY2020 will look better, do you still stand with that statement that retail and BFSI concerns will ease out?
Pravin Rao
We are very comfortable with where we are with respect to Financial Services. This quarter you saw a negative growth in Financial Services. If you look at Banking alone we had a positive growth, but on the Insurance sector we had a negative growth and it brought the overall growth down. On the other hand, in Insurance, if you look at it on a YoY basis we have had a double digit growth. So we feel very optimistic about it. Even in the large deals that Salil talked about, we had about 13 large deals out of which three were from Financial Services. We feel fairly confident on the back of all the large deal wins that we have had in the past as well as the momentum and the pipeline that we are seeing. So we continue to believe that from a performance perspective, FY2020 will be better than what we have seen this year.
Rahul Dayama
Lastly Nilanjan, in terms of margins, Salil also spoke about levers as far as operational efficiencies are concerned. Could you talk a little more about it, because for subcontracting expenses, we have seen the peers also highlighted over the quarter that it is a concern. Also, you have been making investments for quite some time. So, what are the levers that you have?
Nilanjan Roy
So, the first lever we have is on pricing and as you see from our numbers, RPP, which is revenue productivity has actually grown in a constant currency by 0.2%. In our kind of business there are always pricing pressures, but you have other levers to make this up. So digital pricing for instance, where you can command a premium and we have also said that our digital margins are higher than our core margins. Secondly, from an operational efficiency perspective, there are multiple levers, which we continue to use. The use of automation in all our projects and how that can bring in efficiencies, how we use the onshore offshore mix, how we started making an onsite pyramid now and more broad basing that. The localization initiative in the US will be giving us benefits on that. We also have multiple levers which we can use, utilization for instance is something, which we can use. We have seen a slight dip this quarter, but I think that can be ramped up. There are multiple levers, which we will deploy as the year progresses. That gives us confidence in the guidance, which we have given.
Sonia Parveen
Next question is from BloombergQuint
Shivani Saxena
My first question to Mr. Parekh. While factoring the revenue growth which verticals and services lines have you predicted will grow in FY2020? The next question is how are you factoring in the operating leverage and increasing localization against rising wages and potential currency headwinds in your margin guidance?
Salil Parekh
In terms of the growth, we are seeing good traction, specifically in the way we see the Telecom sector developing, the way the Utility sector is developing. We have good traction in Retail, good traction in the Services business overall. So there are several segments, subsectors within our business that show us really strong traction. As Pravin shared, our Financial Services outlook for the full year is still quite strong and that is a large part of our business. So those were some of the components that went in as we built the guidance for fiscal 2020.
Shivani Saxena
The second one is on the margin guidance. How are you factoring the operating leverage and increasing localization against rising wages and potential currency headwinds?
Salil Parekh
Those are exactly the factors that have gone into building the margin and each of those factors has a role to play. There is going to be wage increase within the fiscal 2020 plan. There is also a lot of focus on how we are building localization. We are going to build out a new way of looking at the workforce and that is a part of the approach we are taking. The forex factor has been kept aside and this is based on where we see the spot FX today - so we do not factor into the guidance.
Shivani Saxena
In terms of the free cash flow apart from buybacks and dividends where else do you see the investments, where else are you seeing capex going forward?
Salil Parekh
In terms of what do we do with the cash flow - our policy is up to 70% of free cash flow will be returned to the shareholders and that is the approach we continue to use for fiscal 2020. On where we use the capex - we have a lot of investment going into repurposing buildings, capacity for agile workspaces. We have taken large chunks of our locations, for example, in Pune where we are putting a completely new development focus exclusively on agile. We are doing that in many other locations by buildings or by floors or sometime by projects. There is an overall plan that lays out where that is going to happen. There is some capex towards building some infrastructure in the US as well.
Shivani Saxena
Any key acquisitions and investments?
Salil Parekh
No comments on acquisitions, it is always an active part of our review, but nothing specific to report today.
Sonia Parveen
Next question is from Moneycontrol.
Swati Kulkarni
I have a couple of questions, one is about your geography, so I can see that India’s share is coming down. Could you throw some light on that?
Pravin Rao
On India, I do not think you should read much, it is a very small percentage of our business. There is a lot of government project concentration in that business and these are all large projects. When projects move from a development to a maintenance phase, revenue drops off. But it is really a very small percentage and you will see this quarterly volatility. I do not think you should read much into that.
Swati Kulkarni
What is your localization rate right now, you have been stepping up your localization?
Salil Parekh
We do not share that statistic externally, we have cost tracker internally.
Swati Kulkarni
It is not just in the US. Which other geography are you are stepping up? Recently Australia you promised that you would be hiring more people, 1,200 if I am right. Also how much is the subcontracting cost affecting your margin?
Salil Parekh
So we are looking, for example in Europe, we will have some announcements on what we want to do in the coming quarters. We have already got some thinking on what we are going to do in Eastern Europe. You mentioned Australia, that is already something we have talked about in the past, so nothing new in there.
Nilanjan Roy
Yes, the subcon tracks back to the time when we started the year and we are seeing this ramp up of the growth as the year progressed. We have seen talent crunch and that is where we have actually ramped up subcons. But over a period of time these are taken off the rolls and the new talent, which is coming in from the universities where we are hiring is put to use. So this is a short term thing. I think over a period of time we will stabilize this definitely.
Swati Kulkarni
One part about utilization. So Mr. Pravin had mentioned that utilization had come down. I can see it in the results as well. So Infosys has consciously tried to reduce bench since 2012 with the implementation of zero bench policy. Could you talk about bench utilization and what the company is doing to consciously reduce the bench?
Pravin Rao
Zero Bench is an ongoing initiative. The initiative is more about engaging people who are on the bench to equip themselves with newer skills or do something much more meaningful and contribute to some projects, PoCs and so on. So it is not really related to increasing the utilization. It is more related to keeping them engaged gainfully.
On utilization front, as you are aware till about a year back we were operating between 78% to 80% band. In the last year we have increased it up to, one of the highest one we had about 85% or so. In the last couple of quarters, it has come down primarily because of large influx of trainees. In the coming quarters you will see utilization actually picking up. It is not a cause of concern. It is a planned thing, because at 85% we were really hurting and we wanted to relax and build some flexibility in the system. Now that we have that flexibility, we will probably start looking at increasing it.
Sonia Parveen
Next question is from Business Standard
Debashish
I do have two to three questions. Salil, the whole market was looking towards to your guidance, especially on the margin front and you have again dropped it. I want to understand that whether the business is structurally entering into a low margin phase or it is just a temporary blip of two-three years due to your continuous investment in digital, as you had planned when you took over. Secondly, I want to understand that the revenue has really shown a good momentum; JV and partnership seems to be your kind of model, which Infosys pursuing very highly. But does this kind of model actually impact the margin, is the margin real causality in that?
Salil Parekh
Let us start on the margin. There is no structural issue in the business on the margin front. It is not a low margin business. It is a high margin business and our aspiration is and always will remain to be high margin business. As Nilanjan shared, our digital business, in fact has significantly higher margin than some of the other businesses. That is a business, which is now over one third of our company and is growing at over 30%. So over time, as the digital business becomes bigger and bigger part of our business, it is going to help the underlying margin profile and decide how it is going to look like. You are absolutely right that we do want to make investments. We want to call them out because this is a plan that we have put in place for number of things. One was sales, which is already starting to show us some impact. Another was digital, which is also already starting to show us some impact. We have also talked about the whole approach to building business model resilience through localization because this is a medium term strategic imperative. We believe that this is the right thing to do for us as a company because we are building Infosys for the next 10, 15, 20 years and not for the next quarter. With that in my mind, these are conscious decisions we have taken with the full support of the Board, helping and supporting in driving this strategy. This to me is a real transformation that the company is driving. To us, this transformation is critical because the more successful we are at it, the better Infosys will be built for the next 10, 15 years.
In terms of the growth I think we are starting to see the traction. The two specific joint ventures we announced, which I think are critical, the one with Temasek in Southeast Asia and the one with Hitachi, Panasonic in Japan. Those are again very strategic moves for the medium term. In the next quarter or the next year, they will have an impact, but the real impact is going to come over multiple years because these are partners, which are massive players in their geographies. For them to select Infosys to work as a partner with is a huge difference for us. There is no impact from that partnership in the margin because, first, in the short term is not a huge revenue play. This is a very strategic move because now we have a partner who is a dominant player in each of those geographies and as those geographies develop, we see a real good future for those partnerships. So we are making strategic plays to make sure that Infosys, through the investments, through the partnerships is here for the next 10, 15 years and not just for the next few quarters.
Debashish
We got a little scared when your margin actually fell to 21.5% range as it is below your guided range and the argument seems a little not plausible at this point of time. You are a cash generating business. When you invest you are actually going out and buying out those assets to build up that revenue stack. So, is that a real concern for you or not?
Salil Parekh
So the way we look at the margin, the investments that we have talked about, which is sales or digital or localization, those are investments where we build out capacity or we invest in people or we invest in digital capabilities and all of those come through in our margin. As Nilanjan mentioned RPP actually has gone up. That gives a lot of comfort to us internally that we are driving through what we want to drive in terms of the business with respect to how we go after deals. The real change for us is if you do not put in place some of these investments, our view is, we will have a much different future in 5, 7 and 10 years and that is the reason why we are putting this in plan now.
Debashish
I want to understand, despite all your efforts attrition again stood up close to 20% now. So what actually those specific interventions are yielding at this point of time because Infoscions should be proud to be Infoscions and should stay with you.
Pravin Rao
I already responded to this question. We are really looking at what the issues are, analyzing where the issues are. Issues primarily are in two places where we are seeing higher attrition. As I said earlier, with people between three to five years of experience in India and may be two to four years of experience in US. We are looking at various interventions to address it. It is not only about compensation because that is easy thing to fix. There are multiple things, it is about engagement, it is also about better narrative because we are investing a lot in terms of equipping people with skills, which will do them good in future in their career. So we have to do a much better job in terms of articulating it. We have to do much better job in terms of rotating people out so that they can get opportunities to deploy their skills in projects and so on. There are multiple initiatives, both on their enablement side in terms of enabling them as well as reward and recognition side. So these are ongoing thing and it will probably take may be a couple of quarters to fix it. We expected to come back and as I said earlier we are comfortable with about 13% to 15% range. It is currently slightly on the higher side and it remains a focus area for us and we will continue to work on it.
Sonia Parveen
Next question is from PTI.
Bapu Narayankar
As per CARE Ratings, India’s top 5 tech companies, saw a 49% drop in petitions being approved in 2018 compared to the previous year. So, how many applications Infosys submitted and how many were turned down by the US Citizenship and Immigration Service? This is my first question. And secondly how many Americans have been hired so far in the US? This local hiring means there is a drop in the company’s margins. To address this what alternative measures have you taken apart from negotiating with the Indian and Trump administration?
Pravin Rao
First one, we normally do not comment on how much we have filed or rejection percentage or anything. Secondly, we are now in the last year through our localization effort, to build a very resilient model. So today whether we get approval or rejections, it will probably not impact us in a big way. We have done extremely well on the localization front. About two years back, we said that we will recruit about 10,000 American nationals in 24 months. We have hired about 9,100 American workers in the last two years. If you add people whom we have recruited through re-badging or some of the subsidiaries, it actually crosses the 10,000 mark that we talked about. So, the localization effort has been pretty strong for us. It has been a significant differentiation for us. Our value proposition here is not only about hiring but also about where we are hiring. We are creating new jobs, we are going to the colleges, we are going to the community colleges, we are having partnership with universities, we are creating hubs, we are creating living labs, all these things are a very powerful value proposition for clients and has resonated well. We believe because of this localization effort that we undertook about a year back now we have a much more resilient model, which is far less dependent on visas for talent mobility.
Bapu Narayankar
The question was how would you address this issue of dropping the margin? I would like to make a point, some companies I believe, they have set up near shore centers in neighboring nations like Mexico and Guatemala for example. Any such plans you have to address this issue of dropping margins?
Pravin Rao
We do not anticipate any long-term impact on margin because of localization effort. We are building a pyramid onsite. In the past, you would have only senior people working onsite in client locations and a mix of senior and junior people in offshore. But our model now is to build the pyramid onsite as well. Overall once we have a full localization effort and full scale localization going, we believe that it will be margin neutral.
Sonia Parveen
Next question is from Business Today.
Rukmini Rao
Good evening. I have two questions. Some bit of understanding around the repeat business. On YoY basis it has nearly gone down 2% or so. What is the kind of businesses that are hitting this repeat businesses? What are the kind of clients who are not coming on board and what is happening with that? Other one to you Salil, the Chairman of course had said once the company stabilizes that is when he will be thinking of moving on. Any recent conversations, has Nandan ever indicated to you that how long he is going to stay? Thanks.
Pravin Rao
On the first one, I can answer. We have done extremely well on the growth and if repeat business has come down it means that we have added lot of net new business, which is a huge positive for us. We do not see repeat business coming down as a negative thing. It is about 95%. It still is at a very high level and given that we have growth and in this quarter itself about 69% of the large deal wins were net new and for the whole of last year about 50% of $6.3bn that Salil talked about this year was net new. So this in our mind is a very positive thing because we are increasing our client base, we are becoming much more relevant to a larger thing. We are not losing any clients. In fact we have talked about the number of $100 million clients as well. For the year, it has increased from 20 to 25 and this quarter itself from 23 to 25. In a larger growth, it is always healthy to have a good mix of repeat and net new, because net new is what something which will give you growth in the next three to five years.
Salil Parekh
The question about Nandan, first I don’t want to speak for Nandan. But he seems extremely happy and engaged with the business. I have had no other discussions with him except about the strategic issues of the business.
Sonia Parveen
The next question is from Economic Times.
Rochelle
I have a question on the margins. Last year when the margin was dropped it was because of the four pillars of investments, Localization, Digital and you said that it was to build the future for Infosys. This year it has dropped again. At the same time, you will deploy margins levers to improve operational efficiency. So are investments increasing in certain areas or were the costs not adequately factored in the last margin drop? Continuing with the margin, when is it likely to go back up, because Digital which is higher margin now at 34%, so at some point when do you see that happening?
Salil Parekh
So on the margins, when we looked at how fiscal 2019 has evolved, we started to make some of the investments as the year started and as the year progressed that velocity of investments increased. So the reality is much more question of trajectory than question of long-term play. So in Q4, our margin was much lower than it was in Q1 of this year. That is the trajectory that we now put forward into the next fiscal year. The reason we have talked about operational efficiency is to share with you that we already have levers that can give us some positive view on how we are going to drive the margin for the future. In terms of investments increasing, we have talked about sales, digital, localization and there are several others like compensation etc. On the sales front, we have now completed almost all the investments. However, we have a run rate in Q4 which will be the run rate for fiscal 2020. In terms of localization, a significant part of that has been achieved in fiscal 2019. However, we will have some more in that, but not to the same level as we had in fiscal 2019. There are other investments, which will continue, but which will not at all be at the level of fiscal 2019. So between the trajectory and this reduced intensity of investments we now start to see that the operational levers will also start to benefit us. Regarding when the margins will go above this guided range, we are only talking about fiscal 2020 here. When we are ready with fiscal 2021 and so on we will talk about that.
Rochelle
Sir, can I ask also why the revenue per employee has fallen now for almost two quarters in a row? Can you give me a sense of what may be driving that and when that might start to climb again?
Pravin Rao
Overall, there are two elements. Our RPE has been marginally dropping in the last few quarters. To some extent, it is also reflection on the utilization dropping as well. Because RPE includes all the people. But the other important element is the RPP, the pricing realization that has been mildly positive or fairly flat. Despite all the commoditization we are seeing in the run side of the business, through our efficiency and automation initiatives we have been able to hold the pricing flat in that sense. So that is the positive thing.
Sonia Parveen
Next question is from Deccan Herald.
Furquan Moharkan
I have a couple of questions. Continuing on PTI’s question of H1B visa, so despite the company not disclosing the rejection rate, the rejection rate has been 2nd highest globally for Infosys after Cognizant. 26.1% of your 8,052 visa applications have been rejected in 2018 according to USCIS data. This is despite the fact that in India among the tier 1 Indian IT services companies, Infosys is the primary company which is focusing on the localization in US. So, where is it going wrong for Infosys? Second part of the question is the hiring, because AI and ML are in demand and we have seen lot of IT companies complaining about lack of talent in the market. So, can we have a hiring outlook for next one year at least because there is a dearth of talent in this?
Pravin Rao
I am not sure if I understand your question on where we are going wrong on the rejections or what is impacting us. It is impacting other service providers as well. There is enough material, enough things we talked about, high rate of rejections, that is the reality, and we need to deal with that. The point as I mentioned earlier is we have actually moved away from depending on that because through our localization efforts we have build in lot more resiliency in the business model. So to that extent, whether it goes up or goes down it should impact us lesser. That is what we have achieved in the last one year and we are happy about it. I do not see any negative. It is a hugely positive and despite the localization effort, it is not that we are not hiring. In fact, whole of last year, we have hired over 70,000 people and about 20,000 people from campuses last year. This year also we are looking at about 18,000 to 20,000 people. So hiring in India still continues. It is not that because of localization we have stopped hiring or anything. We have had a huge hiring going on in the last one year and that effort will still continue as well this year.
When we hire we look at the demand and on that basis we hire different skills. Obviously, on the Digital skills there is shortage of talent. Even if you want you will not be able to recruit the number of talents required. Simply there are not enough talent. So, our effort is threefold. One is we are internally re-skilling our people in these technologies. Second is wherever possible we are hiring talent with experience in these technologies. The third area is we are also hiring in adjacent areas and refactoring or re-skilling them. So these are three levers we are using to address the issue of shortage of talent in some of the hot technologies.
Sonia Parveen
Question from Financial Express
Anirudh
Firstly, on the attrition level you mentioned some of the demographics that attrition is particularly high. Can you give us the exact reasons why this is so in those particular demographic ranges and why not others? Also you said that compensation is not the major reason because it is easy to fix, but you know how important is compensation in the whole attrition issue?
Pravin Rao
At this demographic when you look at it, earlier the significant value proposition for this crowd in this industry was onsite opportunities. Now with a lot of restrictions on visa and lack of mobility, that value proposition has gone. So, we have to come with a differentiated value proposition. One of the things we are doing, as I said earlier, we are trying to change the narrative. We are trying to articulate that this is a great time to be in, does not matter whether they have onsite opportunities or not. We get an opportunity to work in cutting edge technologies, there is a lot of disruptions happening, perhaps the pace at which disruption is happening is fundamentally different from what we have seen in the past. So it is a huge opportunity for people to work on transformation journey of their clients. That is something we are doing and we are also telling people that we are skilling them. Now with our LEX platform people have the ability, we have world class content available to people, they have ability to learn at anytime at their own pace, so people are future-proofing themselves from skill perspective. We are investing in all this and now we will also start looking at much more aggressive rotation so that people also get opportunity to work on some of this cutting edge projects. So it is a combination of things. It is not one single lever that will address it. We have to do multiple things. These are some things we have started of in the last three to six months, but it is an ongoing effort. So over a period of time we should have the necessary impact and we are confident that the attrition will come down.
Anirudh
One last thing, on the visa denial issues, this is something your peers are also facing, so how much will the localization initiatives go by? Will that also lead to the company reducing the number of applications for extension of visas or applying for initial visas and would you be open to any near shore strategies to combat this issue, given the shortage of talent?
Pravin Rao
Once again I said I do not want to comment on the exact numbers or anything. I want to once again repeat that through our localization we have built a very resilient model and it is not coming at the cost of less hiring in India. I gave those numbers as well. Today we have good number of talent, we have built a good engine. We need to continue to recruit people onsite to meet the demand. We also have near shore centers in Mexico, Brazil, Canada and so on. But having near shore will not address shortage of skills because there is a shortage of talent globally. The only way to address shortage of talent is to reskill people and that is what we are trying to do.
Sonia Parveen
The next question is from Times of India.
Shilpa
At the beginning of last year, your commentary on Banking and Financial Services was muted and the overhang continued for the remaining quarters. Just wanted to understand from you, is it because of cost reduction in some of the key accounts? Is it in-sourcing? Have you got some sort of an indication from the top US banks that the technology spends are going to be under pressure? Also for the fact that you see more business coming from regional banks and fund management? What are the concerns in banking and financial services?
Pravin Rao
In the beginning of this year, we were little bit more optimistic on Financial Services. The growth is probably much lesser than the overall company growth. On the year-on-year basis, it has grown about 6% odd, but again if you look within BFSI, Insurance has had a double-digit growth. If I look at it from this quarter perspective while overall growth has been negative, growth on the Banking side has been better. In the early part of the year, we have not seen growth in the US side of the business and I think in Q3 we saw the growth coming back in US as well. So right now we are seeing some pockets of slowness in some parts of business in US mainly in the capital market side whereas on the retail banking and on the payments side, we are not seeing any issues. We are seeing strong growth in Europe and in Rest of the World. In the last one year a big percentage of our $6.3 bn TCV wins that we had came from BFSI space. So the pipeline is strong, we have a strong momentum. We are much more diversified across geographies. We have a strong presence in Australia, US, Europe, even within US we have strong presence both in regional as well as large banks. So we believe that, in the coming year, we are much more optimistic. We believe that the coming year FY2020’s performance of BFSI will be much better than what we have seen in FY2019.
Shilpa
When it comes to large deals, average TCVs doubled more than $760 mn to $1.6 bn. What is the margin difference in some of these large transformational deals? How can they actually offset large people takeover costs and onsite hiring, if you can take us through that?
Pravin Rao
From a margin perspective, we look at it from at portfolio level. There are margins pressures, but to a large extent we are able to counter through productivity, automation. As we said, in one part of the business you may face pressure, but on the digital side of the business we are getting better margin. As a portfolio, we are trying to manage that. From a re-badging perspective, initially the costs may be higher, but when we do the large deal and we re-badge we also plan onsite offshore. We also plan redeploying these resources to other projects because we always have demand. We are always recruiting. This year itself we recruited close to 8,000 to 10,000 people, onsite. There is always need for talent. So over a period of time, when we re-badge people, we redeploy them into other accounts where there is need and then we will replace them with maybe either low cost resources or we will do lot of work offshore. We are able to manage all those and build into the model when we bid for a large deal. So it is all baked into the model.
Shilpa
Also can you give us some color on the wage hikes, the variable payouts and the promotions? Last time you also floated a million dollar special incentive to employees. Are you going to do repeat of that this year as well?
Pravin Rao
On the wage hike, we are repeating what we did last year. For about 85% of the population, wage hike will be effective April 1. This is up to junior to middle management level. At the senior level it will be from July and October similar to last cycle. The average wage hike in India will be about 6%. Average wage hike outside India will be about 1% to 1.5%. Again there will be a stronger bias to giving higher increases at lower level and lower increases at higher level and again we will differentiate significantly. High performance will have a significant higher compensation.
Sonia Parveen
Thank you, Shilpa. Thank you gentlemen. We will have to end the Q&A as we have to move for the next session.
Exhibit 99.4
Fact Sheet
Exhibit 99.5
Earnings Call
“Infosys Earnings Call”
Q4 FY 2019
April 12, 2019
CORPORATE PARTICIPANTS:
Salil Parekh
Chief Executive Officer & Managing Director
Pravin Rao
Chief Operating Officer and Whole-time Director
Nilanjan Roy
Chief Financial Officer
Ravi Kumar
President, Deputy Chief Operating Officer
Mohit Joshi
President, Head - Banking, Financial Services & Insurance (BFSI), Healthcare and Life Sciences, Head - Infosys Brazil and Infosys Mexico
ANALYSTS:
Edward Caso
Wells Fargo
Kawaljeet Saluja
Kotak Securities
Moshe Katri
Wedbush Securities
Bryan Bergin
Cowen
Ankur Rudra
CLSA
Diviya Nagarajan
UBS
Viju George
JP Morgan
Yogesh Aggarwal
HSBC
Rod Bourgeois
DeepDive Equity
Sandip Agarwal
Edelweiss
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. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing “*” then “0” on your touchtone telephone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sandeep Mahindroo. Thank you, and over to you, Sir!
Sandeep Mahindroo
Hello everyone and welcome to Infosys’ earnings call to discuss Q4 and FY2019 earnings release. This is Sandeep from the Investor Relations team in Bengaluru. Joining us today on this conference call is CEO and MD, Salil Parekh; COO, Pravin Rao, CFO, Nilanjan Roy, and the other members of the senior management team.
We will start the call with some remarks on the performance of the company during the quarter by Salil followed by comments from Pravin and Nilanjan, subsequent to which 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 Mr. Salil.
Salil Parekh
Good evening and good morning to everyone on the call. I am really delighted to be hosting this call with all of you today. We are extremely pleased with the progress we have made during fiscal 2019 and our results demonstrate that.
Our increased client relevance led to a strong full year growth of 9% (CC) and further acceleration in Q4 to 11.7% (CC). Our QoQ sequential growth in constant currency was 2.1%. Our clients see the value of our digital portfolio – driving full year growth in digital to 34% and Q4 to 41%. With those growth numbers we end the year with 34%, just over a third of our business revenue coming from digital. To give you an example, we are really delighted to see our Digital Banking platform gaining increased traction in the market with seven new global majors adopting this digital platform in fiscal 2019.
Across the board, we have seen our client select us for critical work in the areas of data and analytics, cloud, SaaS, user experience, security and IoT among several other areas of digital. Some examples of these are shared in the press statement earlier today.
Our large deal wins were also impressive at $ 1.6 bn for the quarter and $ 6.3 bn for the full year, which is twice the value of what we did in fiscal 2018. Our engagement with large clients continues to grow. The number of clients with $100 mn of revenue increased to 25 from 20 at this time last year.
Our planned investments in sales and in building business model resilience via localization in our key markets constitutes a strategic part of our transformation program and are yielding results. Our margin for the full year was 22.8% and for Q4 was at 21.5%. Going forward, we see the ability to drive operational efficiencies more and more into our business.
Overall, we now see our business as being more stable and better positioned to benefit from the shift to digital in the years to come and taking the first steps to build business model resilience.
With that, our guidance for fiscal 2020 is revenue growth of 7.5% to 9.5% in constant currencyand operating margins in the range between 21% and 23%.
Thank you and let me hand it over to Pravin.
Pravin Rao
Hello everyone. We finished fiscal 2019 on a strong note with good growth across verticals and geographies. Q4 sequential revenue growth in constant currency was a healthy 2.1% in a seasonally weak quarter. On a YoY basis, Q4 marks the second consecutive quarter of double-digit constant currency growth at 11.7%, helped by ramp up of deal wins in the recent quarters. Four of our segments; Retail, Energy Utility Resources & Services, Manufacturing and HiTech clocked double-digit growth in constant currency in FY2019.
Digital revenue crossed $ 1 bn in quarterly run rate and now constitutes one-third of our total portfolio at 33.8%.
In Q4, we won 13 large deals totaling about $1.6 bn. 3 deals each were in Financial Services, Manufacturing and Life Sciences, 2 in Hi Tech and 1 each in Retail and Others segment. Geography wise 7 were from the Americas, 5 from Europe and 1 from India. Total large deal wins in FY2019 was about $ 6.3 bn, more than double of FY2018. The share of new deals in overall large deal TCV was 3.4 times compared to FY2018 levels.
We are giving compensation increase to our employees per our normal timeline. 85% of our workforce will get compensation increase of approximately 6% offshore and 1.5% onsite effective April 1, 2019; with the increases for high performing employees being higher than average. Balance 15% of the workforce will get compensation increases in the subsequent quarters.
Gross addition of employees was about 14,200 in Q4 and over 70,000 for FY2019. We are in the final stretches of our localization effort with over 9,100 American workers hired till March 2019 vis-à-vis our target of 10,000. Our approach to US hiring is very differentiated. Our deep investments and inclusive approach by engaging with local colleges, partnering with universities and the administration in US, is making us a vital part of the local ecosystem. We have already announced our localization plans in Australia and are planning to expand that to Europe as well.
Attrition has picked up slightly by 0.5% to 18.3% at standalone level and to 20.4% at group level. We are continuing with our recent focus and initiatives towards bringing it down.
We are seeing signs of macro concerns in certain pockets of our business, including few clients in US Financial Services, Europe Manufacturing and Healthcare & Life Sciences vertical globally. Clients are monitoring the global situation closely and any negative development may lead to curtailed spends. However, this also opens up opportunities for us to help clients in accelerating their transformation agenda and further strengthening our relationship. Our deal pipeline remains strong across verticals with a good share of digital and large deals.
Let me give some colour on the business segments.
Financial Services vertical declined sequentially in a seasonally weak quarter due to some US clients seeing early year weakness driven by budget constraints. However, our deal wins in Europe enabled us to have growth in Q4. I should also mention that we have had very strong Q3 and Q4 exit rates. As we entered FY2019, in Q1 our YoY growth was less than 5% (CC), but as we exited in Q4 it is 8.5% (CC); which gives us good comfort on the prospects of Financial Services going forward.
Our scaling Agile Digital and Integrated Software / Platform / Services strategy is resonating extremely well. Customer acquisition, digital banking, cyber security and lending are expected to be key areas of strategic focus and spending in the current year. The recently announced Stater deal will help in strengthening our mortgage servicing capabilities through digital platforms and enhance our presence in Europe.
In Retail, we continue to see significant pickup in Digital, Cloud, Analytics, Modernization and M&A related business and IT integration. 2018 saw a significant number of new store openings aimed at providing different and immersive experience to customers. CPG industry is seeing higher consolidation as channels are becoming more price competitive and we see more demand for post-merger integration capabilities.
Growth in Communication segments was as expected due to ramp up in previous deal wins. Despite the structural issues affecting the sector, we expect steady performance in fiscal 2020. Most investments in the sector is around adoption and deployment of 5G leading to advancement in enterprise IoT. Ongoing M&A in the industry is leading to integration opportunities.
Energy, Utility, Resources and Services growth were supported mainly by Utilities segment. It is seeing strong demand with investments in grid, pipeline modernization initiatives and digitization of legacy stacks. Growth in Services sector was driven by ramp up of large deal wins.
Strong growth continued in Manufacturing segment despite some concerns amongst Automotive and Industrial Manufacturing clients due to macro issues, especially in Europe. Aerospace and Defense clients are enjoying good order book and are focusing on core areas such as engineering, system integration, MRO and the ERP backbone.
Hi Tech vertical had a strong performance with increased client spend from past deal wins. We are seeing pick up in areas like Automation, Analytics, BPM, Cloud, ERP implementation etc.
Performance of Life Sciences segment remained muted as clients are facing slowing growth and increased cost pressures.
Finally, on Digital, we see especially strong interest for our offerings in Cloud area, in data and analytics, in IoT and in the area of experience. Digital demand remains strong across regions and especially in client segments like telco, energy, utilities, retail, insurance and manufacturing. Clients are investing in modernization of the core, digital transformation, artificial intelligence, and automation to drive new sources of customer value and to future-proof their business against economic downturns as well as the competition. Our focused approach and investments in Agile Digital is helping us win more client mindshare which is evident in the superior growth profile of this portfolio.
With this I will hand over to Nilanjan.
Nilanjan Roy
Good evening and welcome to Q4 and full year FY2019 earnings call.
I feel privileged and honored to talk to you all in my new role as CFO of Infosys, which truly is an iconic company. At the same time, I am excited to be part of this journey on transforming the company by helping our clients ‘Navigate their Next’. I look forward to interacting with you all in the coming weeks and months.
Let me start by talking about our Q4 performance.
Our revenues in Q4 crossed $ 3 bn. Revenues grew sequentially by 2.1% in constant currency terms which is the highest constant currency growth in Q4 in last 9 years. On a year on year basis, Q4 revenues grew 11.7% constant currency which is our second consecutive quarter of double digit growth. This is also our highest year on year growth in constant currency in the last 11 quarters.
Operating margins in Q4 were 21.5% compared to 22.6% in Q3. During the quarter, operating margins were impacted by 70 bps on account of lower utilization, 40 bps due to impact of ramp up of recently won large deals, 30 bps due to continued strategic investments in sales and localization and 30 bps due to rupee appreciation. This was partly offset by lower bad debt provisioning of 40 bps and other one-offs in Q3 which helped margins by another 30 bps, resulting in overall 1.1 % decline in Q4 operating margins.
Our revenue productivity per employee was sequentially flat in constant currency terms and up by 0.7% on a year on year basis, despite pricing headwinds. This is due to our relentless efforts on automation and improving digital mix which comes at better price points.
Utilization excluding trainees was 82.3% compared to 83.8% in Q3 in anticipation of conversion of our robust deal pipeline.
Q4 witnessed a rupee appreciation of 1.7% on quarter average basis. However, our effective hedging program ensured that we had our 15th consecutive quarter of gains in non-operating income. We had a hedge book of $2.2 bn at the end of Q4. Yield on other income was 7.91% in Q4 as compared to 7.81% in Q3.
DSO for the quarter improved to 66 days, compared to 67 days in Q3 19 and similar level for Q4 18
Operating cash flows in Q4 was $583 mn and free cash flow was $467 mn. Capex for the quarter was $116 mn, an increase from prior quarters due to additional capacity being created largely in new SEZs and overseas hubs. Hence, we expect capex to remain at these elevated levels for FY 20 as well.
Effective Tax rate for the quarter was 22.7% vs 29.7% in Q3 19. Tax rate was lower on account of benefits received due to signing of an Advanced Pricing Agreement with an overseas jurisdiction and reversals of tax provisions as a result of completion of assessments in certain overseas jurisdictions. We expect the tax rate for FY 20 to be within 27%-28%.
With that let me summarize our performance for the full financial year 2019.
Our strong revenue performance through FY 19 led to 9% growth in constant currency terms, which was the upper end of our higher revised guidance of 8.5%-9% and well above the 6%-8% that we provided at the start of the year.
As we had mentioned at the start of FY 19, that operating margin for the year will be within 22%-24% due to targeted investments in sales and marketing, near shore localization, employee reskilling and agile digital. We believe these investments are necessary to build a robust and sustainable business model. The impact of these investments is visible in acceleration in our revenue trajectory and also our overseas local hiring. We now have opened 5 innovation and technology hubs in the US and 2 in Europe as we embark on our journey of intimacy with our clients. Consequently, operating margins for FY 19 was 22.8%, near the midpoint of the guided margin band of 22%-24%.
Operating cash flows for fiscal 2019 was $2,262 mn and Free cash flows were $1,913 mn.
FY 19 EPS stood at Rs. 35.44 and $ 0.51. EPS for FY 19 vs. FY 18 normalized for write-offs and APA has increased 12% in INR terms and 3% in dollar terms.
We are well on our way towards successful execution of our capital allocation program announced in April 2018. During Q1, we completed payment of special dividend of Rs. 5 per share for Rs 2,606 crore and in Q4 we completed special dividend payment of Rs. 4 per share for Rs 2,098 crore. We initiated the buyback from March 20th after receiving all requisite approvals. Out of total buyback of Rs. 8,260 crores, we have bought back shares worth Rs. 1,546 crores equivalent to approx. 20% of the size.
For fiscal 2019, the Board has announced a final dividend of Rs 10.50 per share. After including the interim dividend of Rs 7 per share, the aggregate dividend for FY 19 stands at Rs 17.50 per share, compared to Rs. 16.75 in fiscal 2018.
Coming to FY2020 guidance. Driven by robust revenue momentum and guidance upgrade in FY 19, our FY 20 revenue guidance stands at 7.5% to 9.5% in constant currency terms. The operating margin guidance for FY2020 stands at 21% to 23%.
While our margin band reflects the already made investments in various initiatives, we are also focused on deploying various cost optimization levers like onsite-offshore mix, utilization, onsite pyramid mix, automation and better digital pricing for our differentiated offerings.
To conclude, in line with our ‘Navigate your Next’ roadmap, FY 19 has been a year of stability, return to accelerated growth and making necessary investments for building a sustainable future proof organization, thereby creating value for our shareholders, augmented further through our capital allocation policy.
With that we can open up the floor for questions.
Moderator
Ladies and gentlemen we will now begin the question and answer session. The first question is from the line of Edward Caso from Wells Fargo. Please go ahead.
Edward Caso
I was hoping to drill down a little bit on your very strong award activity. Could you talk a little bit about how much is traditional work? How much is sort of digital-related work? And then could you also talk about the margin impact – both the margins over time and how much of a drag on the upfront these are? So trying to sort of understand the award impact and also understand the impact on your margin guidance.
Salil Parekh
If I understand well, you are asking about our new large deal wins. The way a lot of these have been constructed today, there is a significant large component of digital in most of the wins that we have. What I mean is our digital approach consists of doing work across the five dimensions that we have previously defined. There is also a huge aspect of IT landscape modernization that comes into many of these digital programmes and that is the basis across most of the large deal wins that we have reported. In terms of the margin profile of our current business, our digital portfolio is higher margin than the average margin of the company and we see that continuing into the large deal wins that we report for the digital component of our business.
Edward Caso
My other question is your attrition is up a little bit. Curious if some of that is related to your efforts in United States and elsewhere to localize. Maybe you can talk about the attrition in those localization areas?
Pravin Rao
As you said, attrition has marginally gone up from 17.8% to 18.3% on a standalone basis. A big part of the attrition is for people with three to five years’ experience and to this set of people the earlier value proposition was onsite opportunity, that was a big thing. But given all the mobility challenges due to restrictive visa regimes, the opportunities are fewer. So that is probably one of the reasons why they look forward to move to other opportunities, where either they are able to get higher compensation or different kind of jobs. So from our perspective to address this, we have looked at new employee value propositions, which really focuses on engaging with people better, enabling them, equipping with the new skills and providing them and giving them a very good experience. There are many initiatives on the ground to address this. We had some white spaces on the compensation which we are addressing for this the set of people as well. And for people who are equipped with digital skills we are rolling out an incentive scheme in this coming year and we are also looking at a much more aggressive redeployment in projects so that people also get an opportunity to work on new technologies. Some of these initiatives obviously will take time to bear fruit but we are confident that over a period of time, the attrition rate should come down to a manageable 13% to 15% level. So this remains a focus area for us and we will continue to invest in some of these initiatives and hope that over a period of time this will come down. Our localization efforts on the other hand is something that we had to do to bring resilience in the business and reduce the dependence on visa and this is something we have done fairly successfully in the last one year. To that extent our business is probably much more resilient and less susceptible to the visa regime than in the past. This is an effort we need to continue till we get to the 50% mark.
Moderator
Thank you. The next question is from the line of Kawaljeet Saluja from Kotak. Please go ahead.
Kawaljeet Saluja
My question is on profitability. Infosys margins have been declining now for the last 10 years, and every year there will be a different reason. How should one think about the current margin band of 21% to 23%? Is it just a FY2020 band or is it something more dependable in the medium-term? Second is that at the end of the day every business would have certain investment plans but there are ways and means of generating operational efficiencies or having some pricing power to fund those investments. Does Infosys have any of those levers or should one would expect the margin degradation to continue to the medium-term?
Salil Parekh
The question on what is our view with respect to this margin band and going forward I suspect beyond fiscal 2020. Our thinking is first our objective is to build a high margin business and that is really the drive we have. We have taken a step in fiscal 2019 to build something with Infosys which is really for the next several years. We made investments which are very specific on sales, we have called that out the start of the fiscal year 2019, on Digital, and on localization; and we make some adjustments on compensation which was a catch up in fiscal 2019. In terms of what we do with investments, our investments with sales are now complete. The way we have our positioning in Q4, that is how we will run the business in fiscal 2020, and any future investments there will be funded, as you rightly predicted, through operational efficiencies. There were some investments in localization which were of significant focus in fiscal 2019 – most of those are behind us and complete. However, there will be some small ones in that which we will drive through fiscal 2020.
Beyond that our objective now is, in addition to driving growth which we start to see with double-digit growth in Q4 and Q3 and a strong pipeline coming back into play for us in fiscal 2020, we will now start to focus on operational efficiencies and operational levers to drive what we want to be as an aspiration of our margins. So we do not have a view today of what we will be driving in fiscal 2021 or 2022. So this is the approach that we are putting in place to help us secure and drive an operational strengthening as we go through fiscal 2020.
Kawaljeet Saluja
The second question that I have is, if I look at your revenue guidance, what is the contribution included from the Stater acquisition and second is that there are fears of possible economic downturn. Did that have any role to play into the guidance, and if yes, can you just detail out whether we have built up any additional buffer into the guidance number relative to what you had done in the past?
Salil Parekh
The first part I could follow is which is I think what is the composition of our guidance with respect to acquisition. The second part I could not follow. So let me address the first part. The way we put our guidance today is it includes everything as we have announced. However, there is one that requires regulatory approval, which is not in place today as we speak. So we made an estimate of that and it is built into our guidance. If we have anything which changes on that and we do not anticipate it, we will come back to you. But our guidance is for our full revenue with everything that we announced so far.
Kawaljeet Saluja
The second part of the question is that there are fears of an economic slowdown. Did that have any role to play in the guidance, and if yes can you detail out that whether you have built in any additional buffer into the revenue guidance relative to what you have done in the past?
Salil Parekh
If there are any economic slowdowns, is that being factored in with the guidance if that is the question, we see overall a very robust environment from what we are doing. Our Q4 YoY growth was faster than our full year YoY growth. We see a good traction in the business. However, we do see, for example, our Manufacturing business in Europe, which sees some headwinds, we do see some concerns in Healthcare and in Life Sciences. There are then some specific elements which we do not call out as a macro event at all. All of that has been factored into the guidance. Of course, we do not see any macro slowdown that has been discussed broadly in the economic environment. If that starts to show up in the second half of the year, we will see how that plays out. Our guidance remains with what we see in the environment today.
Moderator
Thank you. The next question is from the line of Moshe Katri from Wedbush Securities. Please go ahead.
Moshe Katri
Going back to the margin question, I guess the real concern that people have is that this is going to be another reset in margins down the road. Maybe you can address that concern. And then from a long-term perspective, what do you aspire in terms of the company's EBIT margins hypothetically once you're done with this investment cycle that you're saying – once you've scaled up your digital business and once you're done going through the onsite kind of expansion that you're going through? And then as a follow-up, there are some concerns that the guidance seemed to be a bit lighter. And internally, what do you think about getting to that double-digit top line growth down the road in terms of again aspiration et cetera?
Salil Parekh
We certainly have a view in terms of doing a high margin business and internally we have clear targets to driving through that. We have not shared them outside beyond the guidance for fiscal 2020. To be clear, as I was sharing earlier on the investments that we have started to talk about in fiscal 2019, some of those, for example, what we have done with sales, we closed that investment cycle. From Q4 we run the business going ahead, and anything more we look through, will not be calling out as an investment. There are some material ones that are being concluded for localization and there will be some smaller ones which will come through as a flow through in fiscal 2020 and now we start to look to much more at the operational levers. So we do not have a view today to share what do we look at in fiscal 2021 and how do we see the margins there but we are very clear that, majority of our investments are behind us and we now start to put real focus on operational levers. On the revenue side you had a question, our guidance was perceived as light. Our view is that we will drive the business with the changes we are making as rapidly as we can and to drive that growth as aggressively as we can. However, the guidance puts into picture everything that we see in our business and the growth outlook. As you saw in fiscal 2019 we started with 6-8% and as the year progressed we were fortunate enough to increase the guidance through the middle of the year.
Moderator
Thank you. The next question is from the line of Bryan Bergin from Cowen. Please go ahead.
Bryan Bergin
I was hoping if you could quantify the categories of margin changes on a YoY basis during the quarter?
Nilanjan Roy
For full fiscal year we had given a guidance of 22% to 24%. We ended fiscal 2018 with 24.3% and we ended fiscal 2019 with 22.8% so that was 150 basis points decline. So if I start one by one, the investment areas which Salil talked about, we were largely on three buckets. One was entire sales and GTM and we have already seen the impact of that in terms of our large deal wins through the year. The second investment was localization, which had three buckets under that, global talent, the hub structure and reskilling our employees. The third one of that was the sub-contractor cost which as the revenues ramped up and volumes filled up, we had to temporarily take subcons on. So the total investments in these three was 140 basis points, out of which 90 was on the sales and the localization front. We got about 70bps on a YoY basis on operational efficiencies, through automation, the onshore offshore mix, utilization, onsite pyramid and digital pricing. The currency benefit for the year was about 210bps which we passed on largely with salary increases to our employees, and for stemming attrition where we had targeted for certain high talents, and other corrections we made through the year. So, that was about 270bps. All in all these are the five real buckets with a decline of 150-basis points on a YoY basis.
Bryan Bergin
Also can you talk about the type of pricing fluctuations that you are experiencing in infrastructure related areas versus application development and product engineering work? Any notable differences in realization there?
Pravin Rao
Pricing on the infrastructure services continues to be very competitive. There is a lot of commoditization in that space and from our perspective we have been able to defend by primarily focusing on investing in automation and other efficiencies. So we have been able to counter that impact and if you notice from a realization perspective we have been flat YoY. So that is the reflection that we have been able to handle the pricing pressure through automation and other efficiencies.
Moderator
Thank you. The next question is from the line of Ankur Rudra from CLSA. Please go ahead.
Ankur Rudra
So your fourth quarter growth was about close to 12% in constant currency, your full year growth in FY2019 was about 9%. However, at the midpoint of your guidance, you are pointing to a slow down both on the full year 2019 number and the fourth quarter number, even though I feel it bakes in a higher inorganic component. So could you may be elaborate where the difference in your feeling that this is a better year versus your guidance comes from?
Salil Parekh
For us the way we have seen the year developing is, we see a lot of traction in the way the large deals have flowed, we see a lot of traction in the way many of our sectors have performed. We also see there are ongoing discussions with clients on the way the contracts are evolving. We also see that there are changes sometimes in the scope of some of the contracts and work and we also see, as I have shared earlier, some areas of concern, which was on Manufacturing in Europe and Healthcare and Life Sciences. Taking all that into account, we built a guidance which gives a range between 7.5% and 9.5% and that is how we see the business evolving today. Of course, we started the year in fiscal 2019 with a view of what we could see then and as the year evolved and as we had more clarity, we are more comfortable to do things with improving our guidance.
Ankur Rudra
Fair enough and the slow down we would see this in the first half of the year because the momentum is stronger than where you are pointing it to. Do you think this year from a trajectory might be different from what we saw last year?
Salil Parekh
What we see in the first half is we see a fairly clear way to grow in Q1, Q2. In terms of trajectory it is difficult to say. We had a very strong Q4 in fiscal 2019 which traditionally has not been the case with us over the past few years. It is difficult to say how that will look specifically in the Q4 of next year.
Pravin Rao
Just wanted to add that from a guidance perspective, we expect the normal seasonality which we typically see both in H1 and H2.
Ankur Rudra
Just had another question on the margins, your margins are down YoY over 300 basis points and I know you have been highlighting what the reasons were but it would help if you could articulate the definition of a high margin business or what your long terms aspirations are. Also on the same note if you feel that Infosys was previously structurally higher than what it is sustainable and hence the investments you need to make to stay relevant over the next decade, is higher than what you expected before you began these investments because it seems that the investments are taking a bit longer to wind out for the business to stabilize.
Salil Parekh
In terms of what we see structurally in terms of aspiration and what we mean by higher margins, we clearly have these definitions internally. We have not articulated them because we have not given any guidance beyond fiscal 2020 at this stage. In terms of investments in fiscal 2019, as we started to make many of those investments across the quarters, several of them came more back-ended in Q3 and Q4 and that trajectory play out from Q4 into fiscal 2020. The idea for us is to make sure that we are building eventually a high margin business and that is something that we are driving through a medium term, long term sustainable business model and that is really the objective with which we are working.
Ankur Rudra
Among the multiple levers you mentioned, localization I think was a cost center last year, would this be a potential operating margin lever in FY2020 or is it too early for that?
Ravi Kumar
In localization, as we mentioned, in the medium term, we actually see this as a cost lever as we get at the lower end of the pyramid. We are creating an onsite pyramid and the localization, which is hiring freshers at the lower levels and then we are staffing them onsite nearshore. I think that will help margins. We do see this as a lever going forward.
Ankur Rudra
So this could help the margins in FY2020?
Ravi Kumar
It is a bit early now. We will have to see it play out because now they are going through training programs, etc., so the utilization is still lower but as the year progresses later on, probably towards the end of the year or the year after we will see the benefits.
Moderator
Thank you. The next question is from the line of Diviya Nagarajan from UBS. Please go ahead.
Diviya Nagarajan
Could you run me through what really went through the banking and financial services vertical this quarter and what your outlook is for this sector for fiscal 2020 and ditto for the retail CPG segment as well please?
Mohit Joshi
On banking and financial services perspective, it was a mixed quarter. I think though the quarterly momentum was weaker, this is a seasonally weak quarter. We had a very robust Q3. In banking and capital markets specifically we have done well. We saw some weakness on the insurance side of the business. We saw growth in the US specifically and in our rest of the world portfolio. Finacle as we had mentioned last time, had an exceptionally strong Q3, like a double-digit growth and we had already pointed out that it is likely to see some slowdown there. Our insurance business had been extremely well for the past three quarters and there was a little bit of a slowdown in Q4. So overall as I look at it from a FY2020 perspective, we got to keep in mind that we are exiting Q4 much more strongly than we entered the year. So when we entered the year, we had a YoY growth of sub 5%, we are exiting at the growth rate of 8.5%. This is a very large global business and there are always pockets of strengths and weakness. We see strength on the retail banking side, in cards and payments business, in pockets of insurance but on the other hand, some of our regional banking clients where there have been some M&A activities or where there has been some leadership change we have seen a little bit of a slowdown. Our Finacle product business is doing extremely well and we expect that to continue through the next year. On the insurance side, on the back of some M&A, some leaderships changes, some large projects running down, we do see that it will be slower than it was in FY2019. But overall with the deal activity we have had, with the strength that we are seeing in large portions of the US portfolio, we are optimistic that the trends that we have seen this year of entering at sub 5% in the year and exiting at 8.5%, we see that trend of increasing strength continue.
Pravin Rao
In the retail segment, we continue to see a good pickup in the digital area. There is lot of investment in cloud, analytics, modernization and so on. In fact, in 2018 we saw a significant number of new store openings as retailers are now trying to provide different and immersive experience to the customers. While in Q4 we saw a degrowth but for the year in retail we had a double-digit growth. We have had a very strong first half and second half is where the things have tapered down. Retail by its very nature is a volatile business. So we remain optimistic about this business in the coming year.
Diviya Nagarajan
And Salil going back to your earlier commentary, you did talk about how this year versus the initial guidance we were able to raise the guidance and deliver it at the higher end of that raised guidance. What are the preconditions under which we can expect a similar performance in fiscal 2020?
Salil Parekh
At this stage, there are no preconditions in my mind. My comment was more about giving a guidance as we did last year based on where we see the business today. But as we see things changing in the business, as we did in fiscal 2019, we will make those sort of changes in the guidance as we go through the year.
Moderator
Thank you. The next question is from the line of Viju George from JP Morgan. Please go ahead.
Viju George
Thank you for the opportunity. I just had this question on margins. For Q4 margins you are probably telling us not to take that as the base going forward but in Q1 you certainly going to see a little bit of hit because of wage hikes. So can you just walk us through how do you expect the trajectory to improve to get to comfortably to your guidance band of 21% to 23% because I would assume that one should look at significant Y-o-Y improvement to get there in Q4 2020 versus Q4 2019. So could you help us with that direction please.
Nilanjan Roy
As we mentioned earlier, when we looked at our guidance for next year of 21% to 23%, we have also seen where are we exiting the year, which is at 21.5% and like you rightly said that Q1 is going to be slightly slower from the margin perspective because of the compensation hikes but that is well factored into our margin guidance for the year. And therefore as the year accelerates and we go through the year, we should see that improvement in margins within the guidance range. So I think Q1 is soft as we mentioned but we should see the robustness of our margin levers increasing. Also we will see some headwinds as we see today in terms of the rupee appreciation versus the dollars from Q4 to Q1 perspective. So, that is also something, which is staring at us. But all in all, like I said, we are quite confident within this.
Viju George
Your attrition is still quite high and certainly attrition management is a fairly reasonable expense and that explains one part of the margin dip if you will in FY2019. Your sales investment cycle is done but if your attrition does not come down in line with expectation then would you expect that there could be an extra expense management towards that.
Pravin Rao
Right now we have factored some level of attrition improvement in the guidance that we have given and in general, a part of it we can arrest through some expense management but larger things we believe is more about engaging, about giving them opportunities, about changing the narrative on some of the skilling initiatives and enabling them on their career progression and so on. So there are multiple levers to arrest attrition. The cost is only one element of it. The only direct impact of attrition not coming down could be on sub-con expenses. If attrition is high, sometimes you may have to rely on subcontractors to fulfill some of the immediate demand. That probably is the only area which will have some correlation to attrition but we have made some assumptions and we have factored in the kind of attrition we are seeing today. So we are comfortable and I do not think that should be a great impact from a margin perspective.
Moderator
Thank you. The next question is from the line of Yogesh Agarwal from HSBC. Please go ahead.
Yogesh Agarwal
Mohit talked about the BFS, the reason behind banking slowdown in the quarter but in general were you disappointed with the quality of growth in the quarter specifically because the US telecom broadly contributed almost the entire incremental revenues on a sequential basis. So do you think you were disappointed on the rest of the verticals or this is what you were expecting?
Salil Parekh
In general, I am always disappointed every quarter with the growth that we get because we should be getting more. But having said that the view we have is there are some specific situations in a couple of the segments. We had a good showing in the Telco segment, we have a good showing in what we call SURE (Utility Resources & Energy segment). We had some specific client situations which came in into Q4 and a couple of the other segments. But overall we are extremely happy because the 11.7% growth is double-digit for the second quarter and 2.1% sequentially while for Infosys Q4 traditionally has not been a strong quarter.
Moderator
Thank you. The next question is from the line of Rod Bourgeois from DeepDive Equity. Please go ahead.
Rod Bourgeois
I just want to talk about one specific margin factor, which is the impact of large deals ramping. I think you cited that as one of the margin challenges that you are dealing with. And if I just kind of go back to the past, in the past, you had many large deals ramp-up over time and those deals have either been neutral, and in some cases, even accretive to margins, at least as the levers have been talked about it from a historical perspective. So I guess what I want to ask here is, what has changed with contract structures and contract terms that make large deals ramping now a headwind for margins?
Nilanjan Roy
I think this is only a particular large deal which we won. It had a particular impact because it also came with re-badging of the existing employees and therefore we called it out specifically in this quarter but this is not normal in any of the large deals and actually we have never had this before. So, we just called it out in this particular case. I do not think this is a cause of concern as we go into large deals going forward.
Rod Bourgeois
Then clearly in the US the H1B visa policy is making the availability of those visas more constrained. Can you talk about how that is impacting your growth and/or your margin outlook? Then can you state your assumption about the rupee over the next year as you consider your guidance?
Salil Parekh
From the availability of talent, the overall demand environment is strong and therefore the talent availability is constrained especially in the STEM skills in the US and with some changes in regulations, even more so. Having said that, we have been able to fulfil demand through very aggressive recruitment. We had over 50,000 new hires join us in fiscal 2019. We also had, as you see in our numbers, an increase in sub-contractor costs. So we have ensure that some of these levers that were needed for underlying growth, were put in place. As we put more efficiency into our business, it will help us potentially gain back some margin points as we bring in efficiency in the business
Rod Bourgeois
The rupee assumption for this year?
Nilanjan Roy
We have kept the rupee pretty much where we are today. We do not make any forward projection on the rupee, so the guidance is based on where we are.
Moderator
Thank you. The next question is from the line of Sandip Agarwal from Edelweiss. Please go ahead.
Sandip Agarwal
Salil one question on the digital side; we saw a robust growth in this quarter and we are reaching a billion dollar mark in the Digital Services. So just wanted to know what kind of talent hunt is going on in this space because this is growing at a phenomenal pace and in spite of we reskilling our talent, there will be some mismatch between demand and supply. So is that impacting our cost to some extent right now and secondly are we seeing at least early signs of better pricing in digital? Also on the growth front which particular segments you would say that are growing much faster than the others where digital is concerned?
Salil Parekh
On the first part, I think the talent is clearly a huge constraint. We are also looking in addition to the points I made before on how we are getting digital talent internally through a massive reskilling programme that we called out at the start fiscal 2019 and that is also detailed in some of the comments that Nilanjan made about how that becomes another investment we had in fiscal 2019 and that is something that is proving really beneficial with the reskilling platform we have internally and the approach we have to that reskilling. There is also a refactoring program that is being driven from outside, for adjacent skills, which Ravi is driving in the US and also globally; where we pick skills which are not into traditional areas of tech but slightly adjacent and make those refactored into digital talent. So those are some of the mechanisms but there is a constraint in that talent. In terms of segments which are more digital-oriented today, we certainly see in Banking a huge push in digital, we see that in the Retail, we see more and more in even segments like Utilities, there is a huge shift into that in Manufacturing with more on our definition of IoT. So those are some of the segments where we see more of the digital work into our mix of portfolio.
Moderator
Thank you. Ladies and gentlemen that was the last question for today. I now hand the conference over to the management for their closing comments, over to you.
Sandeep Mahindroo
We would like to thank everyone for joining us today on this earnings call. We look forward to talking to you again and meeting you over the course of the quarter. Have a good weekend ahead.
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
Form of Release to Stock Exchanges and Advertisement
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Infosys Limited
CIN : L85110KA1981PLC013115 Regd.
Office: Electronics City, Hosur Road, Bengaluru 560 100, India.
Website: www.infosys.com; Email: investors@infosys.com; Telephone: 91 80 2852 0261; Fax: 91 80 2852 0362
Statement of Consolidated Audited Results of Infosys Limited and its subsidiaries for the quarter and year ended March 31, 2019 prepared in compliance with the Indian Accounting Standards (Ind-AS)
(in crore, except per equity
share data)
Particulars | Quarter ended March 31, |
Quarter ended December 31, |
Quarter ended March 31, |
Year ended March 31, | |
2019 | 2018 | 2018 | 2019 | 2018 | |
Audited | Audited | Audited | Audited | Audited | |
Revenue from operations | 21,539 | 21,400 | 18,083 | 82,675 | 70,522 |
Other income, net (Refer Note 1(b))# | 665 | 753 | 652 | 2,882 | 3,311 |
Total Income | 22,204 | 22,153 | 18,735 | 85,557 | 73,833 |
Expenses | |||||
Employee benefit expenses | 12,074 | 11,622 | 10,054 | 45,315 | 38,893 |
Cost of technical sub-contractors | 1,601 | 1,618 | 1,107 | 6,033 | 4,297 |
Travel expenses | 603 | 625 | 492 | 2,433 | 1,995 |
Cost of software packages and others | 689 | 712 | 466 | 2,553 | 1,870 |
Communication expenses | 115 | 113 | 113 | 471 | 489 |
Consultancy and professional charges | 376 | 354 | 282 | 1,324 | 1,043 |
Depreciation and amortisation expenses | 531 | 580 | 458 | 2,011 | 1,863 |
Other expenses | 932 | 946 | 639 | 3,655 | 2,924 |
Reduction in the fair value of Disposal Group Held for Sale (Refer Note 1(e)) | – | – | 118 | 270 | 118 |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held For Sale" (Refer Note 1(e)) | – | 451 | – | 451 | – |
Total expenses | 16,921 | 17,021 | 13,729 | 64,516 | 53,492 |
Profit before non-controlling interest / share in net profit / (loss) of associate | 5,283 | 5,132 | 5,006 | 21,041 | 20,341 |
Share in net profit/(loss) of associate, including impairment (Refer Note 1(c )) | – | – | – | – | (71) |
Profit before tax | 5,283 | 5,132 | 5,006 | 21,041 | 20,270 |
Tax expense: (Refer Note 1(a)) | |||||
Current tax | 1,193 | 1,472 | 1,466 | 5,727 | 4,581 |
Deferred tax | 12 | 50 | (150) | (96) | (340) |
Profit for the period | 4,078 | 3,610 | 3,690 | 15,410 | 16,029 |
Other comprehensive income | |||||
Items that will not be reclassified subsequently to profit or loss | |||||
Remeasurement of the net defined benefit liability/asset, net | (3) | (23) | 34 | (22) | 55 |
Equity instruments through other comprehensive income, net | 1 | 57 | 9 | 70 | 7 |
Items that will be reclassified subsequently to profit or loss | |||||
Fair value changes on derivatives designated as cash flow hedges, net | (15) | 56 | 2 | 21 | (39) |
Exchange differences on translation of foreign operations | (70) | (288) | 200 | 63 | 321 |
Fair value changes on investments, net | 25 | 37 | (15) | 2 | (1) |
Total other comprehensive income, net of tax | (62) | (161) | 230 | 134 | 343 |
Total comprehensive income for the period | 4,016 | 3,449 | 3,920 | 15,544 | 16,372 |
Profit attributable to: | |||||
Owners of the company | 4,074 | 3,609 | 3,690 | 15,404 | 16,029 |
Non-controlling interest | 4 | 1 | – | 6 | – |
4,078 | 3,610 | 3,690 | 15,410 | 16,029 | |
Total comprehensive income attributable to: | |||||
Owners of the company | 4,012 | 3,448 | 3,920 | 15,538 | 16,372 |
Non-controlling interest | 4 | 1 | – | 6 | – |
4,016 | 3,449 | 3,920 | 15,544 | 16,372 | |
Paid up share capital (par value ![]() |
2,170 | 2,176 | 1,088 | 2,170 | 1,088 |
Other equity* | 62,778 | 63,835 | 63,835 | 62,778 | 63,835 |
Earnings per equity share (par value ![]() |
|||||
Basic (![]() |
9.37 | 8.30 | 8.49 | 35.44 | 35.53 |
Diluted (![]() |
9.36 | 8.29 | 8.48 | 35.38 | 35.50 |
* | Balances for the quarter ended December 31, 2018 represents balance as per the audited Balance Sheet for the year ended March 31, 2018 as required by SEBI (Listing and Other Disclosure Requirements) Regulations, 2015 | |
** | EPS is not annualized for the quarter ended March 31, 2019, December 31, 2018 and March 31, 2018. | |
# | Other income includes ![]() ![]() |
1. Notes pertaining to the previous quarters / periods
a) | In December 2017, on conclusion of an Advance Pricing Agreement (“APA”)
with the U.S. Internal Revenue Service (“IRS”), the Company had reversed income tax expense provision of $225 million
(![]() |
b) | During the quarter ended June 30, 2017, the Company had written down the entire
carrying value of the investment in its associate DWA Nova LLC amounting to ![]() |
c) | The Company has allotted 2,18,41,91,490 fully paid up equity shares (including
treasury shares) of face value ![]() |
d) | Reclassification of Disposal Group "Held for Sale'' |
In the
three months ended March 31, 2018, the Company had classified its subsidiaries, Kallidus
and Skava (together referred to as "Skava”) and Panaya, collectively referred
to as the “Disposal Group” as "Held for Sale" and recorded a reduction
in the fair value amounting to ![]() ![]() |
||
During the three months ended December 31, 2018, in accordance with Ind AS 105 -" Non current Assets held for Sale and Discontinued Operations", the Company concluded that the Disposal Group did not meet the criteria for "Held for Sale" classification and accordingly the assets and liabilities of Panaya and Skava have been included on a line by line basis in the consolidated financial statements for the period and as at December 31, 2018 and March 31, 2019. | ||
On reclassification from “Held
for Sale”, the Company recorded additional depreciation and amortization expenses
of ![]() ![]() ![]() ![]() |
2. Notes pertaining to the current quarter
a) | The audited interim consolidated financial statements for the quarter and year ended March 31, 2019 and the audited consolidated financial statements for the year ended March 31, 2019 have been taken on record by the Board of Directors at its meeting held on April 12, 2019. The statutory auditors, Deloitte Haskins & Sells LLP have expressed an unqualified audit opinion. The information for the year ended March 31, 2019 presented above is extracted from the audited consolidated financial statements and the information for quarter ended March 31, 2019 are extracted from the audited interim consolidated financial statements. These consolidated financial statements are prepared in accordance with the Indian Accounting Standards (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 relevant amendment rules thereafter. |
b) | Buyback of equity shares of the Company | |
The shareholders approved the proposal of buyback
of Equity Shares recommended by the Board of Directors,in its meeting held on January 11, 2019, through the postal ballot that
concluded on March 12, 2019. At the Maximum buyback price of ![]() ![]() | ||
The buyback was offered to all eligible equity shareholders of the Company (other than the Promoters, the Promoter Group and Persons
in Control of the Company) under the open market route through the stock exchange. The Company will fund the buyback from its free
reserves. The buyback of equity shares through the stock exchange commenced on March 20, 2019 and is expected to be completed by
September, 2019. During the year ended March 31, 2019, 1,26,52,000 equity shares were purchased from the stock exchange which include
18,18,000 shares which have been purchased but not extinguished as of March 31, 2019 and 36,36,000 shares which have been purchased
but have not been settled and therefore not extinguished as of March 31, 2019. In accordance with section 69 of the Companies Act,
2013, during the year ended March 31, 2019, the Company has created ‘Capital Redemption Reserve’ of ![]() ![]() |
c) | Management change |
a. | The Board has appointed Nilanjan Roy as the Chief Financial Officer of the Company effective March 1, 2019. | |
b. | Jayesh Sanghrajka was appointed as the Interim Chief Financial Officer effective November 17, 2018. He resumed his responsibilities as Deputy Chief Financial Officer effective March 1, 2019. |
d) | Grant of Stock options/RSU's | |
The Board, on April 12, 2019, based on the recommendations
of the Nominations and Remuneration Committee approved, the performance based grant of RSUs amounting to ![]() The Board, on April 12, 2019, under the 2015 plan, based on the recommendations of the Nominations and Remuneration Committee approved : |
a) | The grant of annual time based RSU’s of fair value ![]() ![]() |
|
b) | Grant of 12,200 RSU's to an eligible employee of the Company under the 2015 plan. These RSUs shall vest equally over a period of 4 years from the date of grant. The RSUs will be granted w.e.f May 2, 2019. |
e) | Acquisitions |
Hitachi Procurement Service Co. Ltd | ||
On April 1, 2019, Infosys Consulting Pte Limited
(a wholly owned subsidiary of Infosys Limited) acquired 81% of voting interests in Hitachi Procurement Service Co., Ltd., (HIPUS),
Japan, a wholly owned subsidiary of Hitachi Ltd, Japan, for a total cash consideration of JPY 3.29 billion (approximately ![]() | ||
Proposed acquisition - Stater N.V. | ||
On March 28, 2019, Infosys Consulting Pte Limited
(a wholly owned subsidiary of Infosys Limited) entered into a definitive agreement to acquire 75% of the shareholding in Stater
N.V., a wholly-owned subsidiary of ABN AMRO Bank N.V., Netherlands, for a consideration including base purchase price of up to
EUR 127.5 million (approximately ![]() |
f) | As previously disclosed to the Stock exchanges on February 15, 2019, the Securities
and Exchange Board of India (SEBI) has passed a settlement order in respect of a settlement application pertaining to matters
related to the severance agreement entered into with a former CFO of the Company and based on the same, the Company has paid a
settlement amount of ![]() |
3. | Information on dividends for the quarter and year ended March 31, 2019 |
For financial year 2019, the Board recommended a final dividend of ![]() ![]() ![]() ![]() An interim dividend of ![]() |
(in )
Particulars | Quarter ended March 31, |
Quarter ended December 31, |
Quarter ended March 31, |
Year ended March 31, | |
2019 | 2018 | 2018 | 2019 | 2018 | |
Dividend per share (par value ![]() |
|||||
Interim dividend | – | – | – | 7.00 | 6.50 |
Final dividend | 10.50 | – | 10.25 | 10.50 | 10.25 |
Special dividend | – | 4.00 | 5.00 | 4.00 | 5.00 |
Note: Dividend per equity share disclosed for quarter and year ended March 31, 2018 in the above table represents dividends declared previously, retrospectively adjusted for September 2018 bonus issue.
4. Audited Consolidated Balance Sheet
(in crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
ASSETS | ||
Non-current assets | ||
Property, plant and equipment | 11,479 | 10,116 |
Capital work-in-progress | 1,388 | 1,606 |
Goodwill | 3,540 | 2,211 |
Other Intangible assets | 691 | 247 |
Investment in associate | – | – |
Financial assets: | ||
Investments | 4,634 | 5,756 |
Loans | 19 | 36 |
Other financial assets | 312 | 284 |
Deferred tax assets (net) | 1,372 | 1,282 |
Income tax assets (net) | 6,320 | 6,070 |
Other non-current assets | 2,105 | 2,265 |
Total non-current assets | 31,860 | 29,873 |
Current assets | ||
Financial assets | ||
Investments | 6,627 | 6,407 |
Trade receivables | 14,827 | 13,142 |
Cash and cash equivalents | 19,568 | 19,818 |
Loans | 241 | 239 |
Other financial assets | 5,505 | 6,684 |
Income tax assets (net) | 423 | – |
Other current assets | 5,687 | 1,667 |
52,878 | 47,957 | |
Assets held for sale | – | 2,060 |
Total current assets | 52,878 | 50,017 |
Total Assets | 84,738 | 79,890 |
EQUITY AND LIABILITIES | ||
Equity | ||
Equity share capital | 2,170 | 1,088 |
Other equity | 62,778 | 63,835 |
Total equity attributable to equity holders of the Company | 64,948 | 64,923 |
Non-controlling interests | 58 | 1 |
Total equity | 65,006 | 64,924 |
Liabilities | ||
Non-current liabilities | ||
Financial liabilities | ||
Other financial liabilities | 147 | 61 |
Deferred tax liabilities (net) | 672 | 541 |
Other non-current liabilities | 275 | 259 |
Total non-current liabilities | 1,094 | 861 |
Current liabilities | ||
Financial liabilities | ||
Trade payables | 1,655 | 694 |
Other financial liabilities | 10,452 | 6,946 |
Other Current Liabilities | 4,388 | 3,606 |
Provisions | 576 | 492 |
Income tax liabilities (net) | 1,567 | 2,043 |
18,638 | 13,781 | |
Liabilities directly associated with assets held for sale | – | 324 |
Total current liabilities | 18,638 | 14,105 |
Total equity and liabilities | 84,738 | 79,890 |
The disclosure is an extract of the audited Consolidated Balance Sheet as at March 31, 2019 and March 31, 2018 prepared in compliance with the Indian Accounting Standards (Ind-AS).
5. Segment reporting (Consolidated - Audited)
(in crore)
Particulars | Quarter ended March 31, |
Quarter ended December 31, |
Quarter ended March 31, |
Year ended March 31, | |
2019 | 2018 | 2018 | 2019 | 2018 | |
Revenue by business segment | |||||
Financial Services (1) | 6,805 | 6,953 | 5,886 | 26,477 | 23,172 |
Retail (2) | 3,416 | 3,503 | 2,879 | 13,556 | 11,345 |
Communication (3) | 2,921 | 2,547 | 2,334 | 10,426 | 8,883 |
Energy, Utilities, Resources and Services | 2,747 | 2,741 | 2,172 | 10,390 | 8,297 |
Manufacturing | 2,161 | 2,166 | 1,735 | 8,152 | 6,671 |
Hi Tech | 1,650 | 1,569 | 1,335 | 6,177 | 5,131 |
Life Sciences (4) | 1,287 | 1,335 | 1,213 | 5,203 | 4,698 |
All other segments (5) | 552 | 586 | 529 | 2,294 | 2,325 |
Total | 21,539 | 21,400 | 18,083 | 82,675 | 70,522 |
Less: Inter-segment revenue | – | – | – | – | – |
Net revenue from operations | 21,539 | 21,400 | 18,083 | 82,675 | 70,522 |
Segment profit before tax, depreciation and non-controlling interests: | |||||
Financial Services (1) | 1,721 | 1,820 | 1,638 | 6,878 | 6,370 |
Retail (2) | 1,017 | 1,037 | 834 | 4,034 | 3,303 |
Communication (3) | 578 | 607 | 697 | 2,517 | 2,619 |
Energy, Utilities , Resources and Services | 634 | 687 | 635 | 2,542 | 2,411 |
Manufacturing | 471 | 508 | 342 | 1,853 | 1,274 |
Hi-Tech | 376 | 367 | 392 | 1,548 | 1,446 |
Life Sciences (4) | 323 | 365 | 348 | 1,419 | 1,391 |
All other segments (5) | 37 | 26 | 42 | 116 | 199 |
Total | 5,157 | 5,417 | 4,928 | 20,907 | 19,013 |
Less: Other unallocable expenditure | 539 | 587 | 456 | 2,027 | 1,865 |
Add: Unallocable other income | 665 | 753 | 652 | 2,882 | 3,311 |
Less: Reduction in the fair value of Disposal Group Held for Sale | – | – | 118 | 270 | 118 |
Less: Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held For Sale" | – | 451 | – | 451 | – |
Add: Share in net profit/(loss) of associate, including impairment of associate | – | – | – | – | (71) |
Profit before tax and non-controlling interests | 5,283 | 5,132 | 5,006 | 21,041 | 20,270 |
(1) Financial Services include enterprises in Financial Services and Insurance
(2) Retail includes enterprises in Retail, Consumer Packaged Goods and Logistics
(3) Communication includes enterprises in Communication, Telecom OEM and Media
(4) Life Sciences includes enterprises in Life sciences and Health care
(5) | All other segments include operating segments of businesses in India, Japan, China, Infosys Public Services & other enterprises in Public Services |
Notes on segment information
Business segments
During the quarter ended June 30, 2018, the Group internally reorganized some of its business segments to deepen customer relationships, improve focus of sales investments and increase management oversight. Consequent to the internal reorganization, there were changes in the reportable business segments based on “Management approach” as defined under Ind AS 108, Operating Segments. Enterprises in Insurance which was earlier considered under the Life Sciences, Healthcare and Insurance business segment are now considered under the Financial Services business segment and enterprises in Communication, Telecom OEM and Media which was earlier under Energy & Utilities, Communication and Services is now shown as a separate business segment. 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 efforts of the segment. Segmental operating income has changed in line with the internal reorganization as well as changes in the allocation method. The previous period figures, extracted from the audited consolidated financial statements of the respective period/year, have been presented after incorporating necessary reclassification adjustments pursuant to changes in the reportable segments.
Segmental capital employed
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. 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.
6. Audited financial results of Infosys Limited (Standalone Information)
(in crore)
Particulars | Quarter ended March 31, |
Quarter ended December 31, |
Quarter ended March 31, |
Year ended March 31, | |
2019 | 2018 | 2018 | 2019 | 2018 | |
Revenue from operations | 18,935 | 18,819 | 15,984 | 73,107 | 61,941 |
Profit before tax (Refer note below) | 4,953 | 4,942 | 4,390 | 19,927 | 19,908 |
Profit for the period (Refer note below) | 3,820 | 3,501 | 3,157 | 14,702 | 16,155 |
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 interim condensed financial statements as stated.
Note: In the three months ended March
2018, the Company classified and presented investments in subsidiaries Kallidus and Skava (together referred to as "Skava”)
and Panaya separately as “Held for Sale” and recognized a reduction in the fair value of investment amounting to 589
crore during the three months and year ended March 31, 2018 and
265 crore for the three months ended June 30, 2018 in respect
of Panaya in the standalone Statement of Profit and Loss of Infosys. During the three months ended December 31, 2018, the Company,
in accordance with Ind AS 105 -" Non current Assets held for Sale and Discontinued Operations", reclassified the investment
in subsidiaries from“Held for Sale” and recorded an adjustment in respect of excess of carrying amount over recoverable
amount amounting to
469 crore in respect of Skava in the standalone Statement of Profit and Loss.
By order of the Board for Infosys Limited | |
Bengaluru, India April 12, 2019 |
Salil Parekh Chief Executive Officer and Managing Director |
The Board has also taken on record the condensed consolidated results of Infosys Limited and its subsidiaries for the quarter and year ended March 31, 2019, prepared as per International Financial Reporting Standards (IFRS) and reported in US dollars. A summary of the financial statements is as follows:
(in US$ million, except per equity share data)
Particulars | Quarter ended March 31, |
Quarter ended December 31, |
Quarter ended March 31, |
Year ended March 31, | |
2019 | 2018 | 2018 | 2019 | 2018 | |
Unaudited | Audited | Unaudited | Audited | Audited | |
Revenues | 3,060 | 2,987 | 2,805 | 11,799 | 10,939 |
Cost of sales | 2,028 | 1,956 | 1,793 | 7,687 | 7,001 |
Gross profit | 1,032 | 1,031 | 1,012 | 4,112 | 3,938 |
Operating expenses | 374 | 356 | 319 | 1,416 | 1,279 |
Operating profit | 658 | 675 | 693 | 2,696 | 2,659 |
Other income, net | 94 | 105 | 100 | 411 | 513 |
Reduction in the fair value of Disposal Group held for sale (Refer Note a below) | – | – | (18) | (39) | (18) |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" (Refer Note a below) | – | (65) | – | (65) | – |
Share in net profit/(loss) of associate, including impairment | – | – | – | – | (11) |
Profit before income taxes | 752 | 715 | 775 | 3,003 | 3,143 |
Income tax expense | 171 | 213 | 204 | 803 | 657 |
Net profit | 581 | 502 | 571 | 2,200 | 2,486 |
Earnings per equity share * | |||||
Basic | 0.13 | 0.12 | 0.13 | 0.51 | 0.55 |
Diluted | 0.13 | 0.12 | 0.13 | 0.51 | 0.55 |
Total assets | 12,252 | 11,872 | 12,255 | 12,252 | 12,255 |
Cash and cash equivalents and current investments | 3,787 | 3,764 | 4,023 | 3,787 | 4,023 |
* EPS is not annualized for the quarter ended March 31, 2019, December 31, 2018 and March 31, 2018.
Note | a) | In the three months ended March 31, 2018, the Company had classified its subsidiaries, Kallidus and Skava (together referred to as "Skava”) and Panaya, collectively referred to as the “Disposal Group” as "Held for sale" and recorded a reduction in the fair value amounting to $18 million for the three months and year ended March 31, 2018 and $39 million for the three months ended June 30, 2018 in respect of Panaya. |
During the three months ended December 31,
2018, in accordance with IFRS 5 -" Non current Assets held for Sale and Discontinued Operations", the Company concluded
that the Disposal Group does not meet the criteria for "Held for Sale" classification and accordingly the assets and
liabilities of Panaya and Skava have been included on a line by line basis in the consolidated financial statements for the period
and as at December 31, 2018 and March 31, 2019.
On reclassification from “Held for Sale”, the Company recorded additional depreciation and amortization expenses
of $12 million and an adjustment in respect of excess of carrying amount over recoverable amount of $65 million (comprising of
$52 million towards goodwill and $13 million towards value of customer relationships) in respect of Skava in the consolidated Statement
of Comprehensive Income for the three months ended December 31, 2018.
Certain statements mentioned in this release concerning our future growth prospects and our future business expectations are forward-looking statements intended to qualify for the 'safe harbor' under the Private Securities Litigation Reform Act of 1995. Such statements involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, fluctuations in foreign exchange rates, our ability to manage growth, intense competition in IT services including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, industry segment concentration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks or system failures, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which Infosys has made strategic investments, withdrawal or expiration of governmental fiscal incentives, political instability and regional conflicts, legal restrictions on raising capital or acquiring companies outside India, and unauthorized use of our intellectual property and general economic conditions affecting our industry. Additional risks that could affect our future operating results are more fully described in our United States Securities and Exchange Commission filings including our Annual Report on Form 20-F for the fiscal year ended March 31, 2018. These filings are available at www.sec.gov. Infosys may, from time to time, make additional written and oral forward-looking statements, including statements contained in the company's filings with the Securities and Exchange Commission and our reports to shareholders. The company does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of the company unless it is required by law.
![]() |
![]() |
Infosys Limited
CIN : L85110KA1981PLC013115 Regd.
Office: Electronics City, Hosur Road, Bengaluru 560 100, India.
Website: www.infosys.com; Email: investors@infosys.com; Telephone: 91 80 2852 0261; Fax: 91 80 2852 0362
Extract of Consolidated Audited Financial
Results of Infosys Limited and its subsidiaries for the quarter
and year ended March 31, 2019 prepared in compliance with the Indian Accounting Standards (Ind-AS)
( in crore except per equity
share data)
Particulars | Quarter ended March 31, |
Year ended March 31, |
Quarter ended March 31, |
2019 | 2019 | 2018 | |
Revenue from operations | 21,539 | 82,675 | 18,083 |
Profit before tax (Refer Note 1(a) and 1(c)) | 5,283 | 21,041 | 5,006 |
Profit for the period (Refer Note 1(a) and 1(c)) | 4,078 | 15,410 | 3,690 |
Total comprehensive income for the period (comprising profit for the period after tax and other comprehensive income after tax) | 4,016 | 15,544 | 3,920 |
Profit attributable to: | |||
Owners of the company | 4,074 | 15,404 | 3,690 |
Non-controlling interest | 4 | 6 | – |
4,078 | 15,410 | 3,690 | |
Total comprehensive income attributable to: | |||
Owners of the company | 4,012 | 15,538 | 3,920 |
Non-controlling interest | 4 | 6 | – |
4,016 | 15,544 | 3,920 | |
Paid-up equity share capital (par value ![]() |
2,170 | 2,170 | 1,088 |
Other equity | 62,778 | 62,778 | 63,835 |
Earnings per share (par value ![]() |
|||
Basic (![]() |
9.37 | 35.44 | 8.49 |
Diluted (![]() |
9.36 | 35.38 | 8.48 |
* EPS is not annualized for the quarter ended March 31, 2019 and March 31, 2018.
1. Notes pertaining to the previous quarters / periods
a) | In December 2017, on account of the conclusion of an Advance Pricing Agreement
(“APA”) with the U.S. Internal Revenue Service (“IRS”), the Company had reversed income tax expense provision
of $225 million (![]() |
b) | The Company has allotted 2,18,41,91,490 fully paid up equity shares (including
treasury shares) of face value ![]() |
c) | Reclassification of Disposal Group "Held for Sale'' | |
In the three months ended March 31, 2018,
the Company had classified its subsidiaries, Kallidus and Skava (together referred to as "Skava”) and Panaya, collectively
referred to as the “Disposal Group” as "Held for sale" and recorded a reduction in the fair value amounting
to
During the three months ended December 31,
2018, in accordance with Ind AS 105 -" Non current Assets held for Sale and Discontinued Operations", the Company concluded
that the Disposal Group did not meet the criteria for "Held for Sale" classification and accordingly the assets and liabilities
of Panaya and Skava have been included on a line by line basis in the consolidated financial statements for the period and as at
December 31, 2018 and March 31, 2019. |
2. | Notes pertaining to the current quarter |
a) | The audited interim consolidated financial statements for the quarter and year ended March 31, 2019 and the audited consolidated financial statements for the year ended March 31, 2019 have been taken on record by the Board of Directors at its meeting held on April 12, 2019. The statutory auditors, Deloitte Haskins & Sells LLP have expressed an unqualified audit opinion. The information for the year ended March 31, 2019 presented above is extracted from the audited consolidated financial statements and the information for quarter ended March 31, 2019 are extracted from the audited interim consolidated financial statements. These consolidated financial statements are prepared in accordance with the Indian Accounting Standards (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 relevant amendment rules thereafter. |
b) | Buyback of equity shares of the Company | |
The shareholders approved the proposal of buyback
of Equity Shares recommended by the Board of Directors,in its meeting held on January 11, 2019, through the postal ballot that
concluded on March 12, 2019. At the Maximum buyback price of ![]() ![]() The buyback was offered to all eligible equity shareholders of the Company (other than the Promoters, the Promoter Group and Persons in Control of the Company) under the open market route through the stock exchange. The Company will fund the buyback from its free reserves. The buyback of equity shares through the stock exchange commenced on March 20, 2019 and is expected to be completed by September, 2019. During the year ended March 31, 2019, 1,26,52,000 equity shares were purchased from the stock exchange which include 18,18,000 shares which have been purchased but not extinguished as of March 31, 2019 and 36,36,000 shares which have been purchased but have not been settled and therefore not extinguished as of March 31, 2019. In accordance with section 69 of the Companies Act, 2013, during the year ended March 31, 2019 , the Company has created ‘Capital Redemption Reserve’ of ![]() ![]() |
c) | Management change |
a. | The Board has appointed Nilanjan Roy as the Chief Financial Officer of the Company effective March 1, 2019. |
b. | Jayesh Sanghrajka was appointed as the Interim Chief Financial Officer effective November 17, 2018. He resumed his responsibilities as Deputy Chief Financial Officer effective March 1, 2019. |
d) | Grant of Stock options/RSU's | |
The Board, on April 12, 2019, based on the recommendations
of the Nominations and Remuneration Committee approved, the performance based grant of RSUs amounting to ![]() The Board, on April 12, 2019, under the 2015 plan, based on the recommendations of the Nominations and Remuneration Committee approved : |
a) | The grant of annual time based RSU’s of fair value ![]() ![]() |
|
b) Grant of 12,200 RSU's to an eligible employee of the Company under the 2015 plan. These RSUs shall vest equally over a period of 4 years from the date of grant. The RSUs will be granted w.e.f May 2, 2019. |
e) | Acquisitions |
Hitachi Procurement Service Co. Ltd | ||
On April 1, 2019, Infosys Consulting Pte Limited
(a wholly owned subsidiary of Infosys Limited) acquired 81% of voting interests in Hitachi Procurement Service Co., Ltd., (HIPUS),
Japan, a wholly owned subsidiary of Hitachi Ltd, Japan, for a total cash consideration of JPY 3.29 billion (approximately ![]() | ||
Proposed acquisition - Stater N.V. | ||
On March 28, 2019, Infosys Consulting Pte Limited
(a wholly owned subsidiary of Infosys Limited) entered into a definitive agreement to acquire 75% of the shareholding in Stater
N.V., a wholly-owned subsidiary of ABN AMRO Bank N.V., Netherlands, for a consideration including base purchase price of up to
EUR 127.5 million (approximately | ||
f) | As previously disclosed to the Stock exchanges
on February 15, 2019, the Securities and Exchange Board of India (SEBI) has passed a settlement order in respect of a settlement
application pertaining to matters related to the severance agreement entered into with a former CFO of the Company and based on
the same, the company has paid a settlement amount of ![]() | |
3. Information on dividends for the quarter and year ended March 31, 2019
For financial year 2019, the Board recommended
a final dividend of 10.50/- per equity share. The payment is subject to the approval of the shareholders in the ensuing Annual
General Meeting of the Company to be held on June 22, 2019. The book closure date for the purpose of the Annual General Meeting
and payment of final dividend is June 15, 2019. A special dividend of
4/- per equity share was declared on January 11, 2019 and
the same was paid on January 28, 2019. For the financial year ended 2018, the Company declared a special dividend of
5/- per
share (adjusted for September 2018 bonus issue) and a final dividend of
10.25/- per share (adjusted for September 2018 bonus
issue)
An interim dividend of 7/- per equity share was declared on October 16, 2018 and the same was paid on October 30, 2018.
(in
)
Particulars | Quarter ended March 31, |
Year ended March 31, |
Quarter ended March 31, |
2019 | 2019 | 2018 | |
Dividend per share (par value ![]() |
|||
Interim dividend | – | 7.00 | – |
Final dividend | 10.50 | 10.50 | 10.25 |
Special dividend | – | 4.00 | 5.00 |
Note: Dividend per equity share disclosed for quarter ended March 31, 2018 in the above table represents dividend declared previously, retrospectively adjusted for September 2018 bonus issue.
4. Audited financial results of Infosys Limited (Standalone information)
(in crore)
Particulars | Quarter ended March 31, |
Year ended March 31, |
Quarter ended March 31, |
2019 | 2019 | 2018 | |
Revenue from operations | 18,935 | 73,107 | 15,984 |
Profit before tax (Refer note below) | 4,953 | 19,927 | 4,390 |
Profit for the period (Refer note below) | 3,820 | 14,702 | 3,157 |
Note:
In the three months ended March 2018, the
Company classified and presented investments in subsidiaries Kallidus and Skava (together referred to as "Skava”) and
Panaya separately as “Held for Sale” and recognized a reduction in the fair value of investment amounting to 589 crore
during the three months and year ended March 31, 2018 and
265 crore for the three months ended June 30, 2018 in respect of Panaya
in the standalone Statement of Profit and Loss of Infosys. During the three months ended December 31, 2018, the Company, in accordance
with Ind AS 105 -" Non current Assets held for Sale and Discontinued Operations", reclassified the investment in subsidiaries
from“Held for Sale” and recorded an adjustment in respect of excess of carrying amount over recoverable amount amounting
to
469 crore in respect of Skava in the standalone Statement of Profit and Loss.
The above is an extract of the detailed format of Quarterly audited 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 mentioned in this release concerning our future growth prospects and our future business expectations are forward-looking statements intended to qualify for the 'safe harbor' under the Private Securities Litigation Reform Act of 1995. Such statements involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, fluctuations in foreign exchange rates, our ability to manage growth, intense competition in IT services including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, industry segment concentration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks or system failures, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which Infosys has made strategic investments, withdrawal or expiration of governmental fiscal incentives, political instability and regional conflicts, legal restrictions on raising capital or acquiring companies outside India, and unauthorized use of our intellectual property and general economic conditions affecting our industry. Additional risks that could affect our future operating results are more fully described in our United States Securities and Exchange Commission filings including our Annual Report on Form 20-F for the fiscal year ended March 31, 2018. These filings are available at www.sec.gov. Infosys may, from time to time, make additional written and oral forward-looking statements, including statements contained in the company's filings with the Securities and Exchange Commission and our reports to shareholders. The company does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of the company unless it is required by law.
By order of the Board for Infosys Limited | |
Bengaluru, India April 12, 2019 |
Salil Parekh Chief Executive Officer and Managing Director |
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Infosys Limited
CIN : L85110KA1981PLC013115 Regd.
Office: Electronics City, Hosur Road, Bengaluru 560 100, India.
Website: www.infosys.com; Email: investors@infosys.com; Telephone: 91 80 2852 0261; Fax: 91 80 2852 0362
Statement of Audited results of
Infosys Limited for the quarter and year ended March 31, 2019
prepared in compliance with the Indian Accounting Standards (Ind-AS)
(in crore, except per equity
share data)
Particulars | Quarter ended March 31, |
Quarter ended December 31, |
Quarter ended March 31, |
Year ended March 31, | |
2019 | 2018 | 2018 | 2019 | 2018 | |
Audited | Audited | Audited | Audited | Audited | |
Revenue from operations | 18,935 | 18,819 | 15,984 | 73,107 | 61,941 |
Other income, net (Refer note 1(b) and 1(c ))# | 639 | 756 | 636 | 2,852 | 4,019 |
Total income | 19,574 | 19,575 | 16,620 | 75,959 | 65,960 |
Expenses | |||||
Employee benefit expenses | 10,198 | 9,784 | 8,418 | 38,296 | 32,472 |
Cost of technical sub-contractors | 2,040 | 2,037 | 1,434 | 7,646 | 5,494 |
Travel expenses | 486 | 483 | 369 | 1,906 | 1,479 |
Cost of software packages and others | 392 | 392 | 320 | 1,646 | 1,270 |
Communication expenses | 87 | 81 | 75 | 339 | 330 |
Consultancy and professional charges | 312 | 291 | 233 | 1,096 | 826 |
Depreciation and amortisation expense | 429 | 406 | 363 | 1,599 | 1,408 |
Other expenses | 677 | 690 | 429 | 2,770 | 2,184 |
Reduction in the fair value of assets held for sale (Refer Note 1(e)) | – | – | 589 | 265 | 589 |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" (Refer Note 1(e)) | – | 469 | – | 469 | – |
Total expenses | 14,621 | 14,633 | 12,230 | 56,032 | 46,052 |
Profit before tax | 4,953 | 4,942 | 4,390 | 19,927 | 19,908 |
Tax expense: (Refer note 1(a)) | |||||
Current tax | 1,053 | 1,340 | 1,397 | 5,189 | 4,003 |
Deferred tax | 80 | 101 | (164) | 36 | (250) |
Profit for the period | 3,820 | 3,501 | 3,157 | 14,702 | 16,155 |
Other comprehensive income | |||||
Items that will not be reclassified subsequently to profit or loss | |||||
Remeasurement of the net defined benefit liability / asset, net | (3) | (20) | 31 | (21) | 52 |
Equity instruments through other comprehensive income, net | 9 | 57 | 7 | 78 | 7 |
Items that will be reclassified subsequently to profit or loss | |||||
Fair value changes on derivatives designated as cash flow hedges, net | (15) | 56 | 2 | 21 | (39) |
Fair value changes on investments, net | 22 | 33 | (12) | 1 | 1 |
Total other comprehensive income/ (loss), net of tax | 13 | 126 | 28 | 79 | 21 |
Total comprehensive income for the period | 3,833 | 3,627 | 3,185 | 14,781 | 16,176 |
Paid-up share capital (par value ![]() |
2,178 | 2,184 | 1,092 | 2,178 | 1,092 |
Other Equity* | 60,533 | 62,410 | 62,410 | 60,533 | 62,410 |
Earnings per equity share ( par value ![]() |
|||||
Basic (![]() |
8.75 | 8.01 | 7.23 | 33.66 | 35.64 |
Diluted (![]() |
8.74 | 8.01 | 7.22 | 33.64 | 35.62 |
* | Balances for the quarter ended December 31, 2018 represents balance as per the audited Balance Sheet for the year ended March 31, 2018 as required by SEBI (Listing and Other Disclosure Requirements) Regulations, 2015 |
** | EPS is not annualized for the quarter ended March 31, 2019, December 31, 2018 and March 31, 2018. |
# | Other income includes ![]() ![]() |
1. Notes pertaining to the previous quarters / periods
a) | In December 2017, on conclusion of an Advance Pricing Agreement (“APA”)
with the U.S. Internal Revenue Service (“IRS”), the Company had reversed income tax expense provision of $225 million
(![]() |
b) | During the quarter ended June 30, 2017, the Company had written down the entire
carrying value of the investment in its subsidiary Infosys Nova Holding LLC, amounting to ![]() |
c) | The Company has allotted 2,18,41,91,490 fully paid up equity shares (including
treasury shares) of face value ![]() |
d) | Reclassification of assets "Held for Sale'' | |
In the three months ended March 2018, the
Company classified and presented investments in subsidiaries Kallidus and Skava (together referred to as "Skava”) and
Panaya separately as “Held for Sale” and recorded a reduction in the fair value of investment amounting to ![]() ![]() ![]() |
2. | Notes pertaining to the current quarter |
a) | The audited interim condensed standalone financial statements for the quarter and year ended March 31, 2019 and the audited standalone financial statements for the year ended March 31, 2019 have been taken on record by the Board of Directors at its meeting held on April 12, 2019. The statutory auditors,Deloitte Haskins & Sells LLP have expressed an unqualified audit opinion. The information for the year ended March 31, 2019 presented above is extracted from the audited standalone financial statements and the information for quarter ended March 31, 2019 is extracted from the audited interim condensed standalone financial statements. The standalone financial statements are prepared in accordance with the Indian Accounting Standards (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 relevant amendment rules thereafter. | |
b) | Buyback of equity shares of the Company | |
The shareholders approved the proposal of buyback
of Equity Shares recommended by the Board of Directors, in its meeting held on January 11, 2019, through the postal ballot that
concluded on March 12, 2019. At the Maximum buyback price of ![]() ![]() The buyback was offered to all eligible equity shareholders of the Company (other than the Promoters, the Promoter Group and Persons in Control of the Company) under the open market route through the stock exchange. The Company will fund the buyback from its free reserves. The buyback of equity shares through the stock exchange commenced on March 20, 2019 and is expected to be completed by September, 2019. During the year ended March 31, 2019, 1,26,52,000 equity shares were purchased from the stock exchange which include 18,18,000 shares which have been purchased but not extinguished as of March 31, 2019 and 36,36,000 shares which have been purchased but have not been settled and therefore not extinguished as of March 31, 2019. In accordance with section 69 of the Companies Act, 2013, during the year ended March 31, 2019 , the Company has created ‘Capital Redemption Reserve’ of ![]() ![]() | ||
c) | Management change | |
a. The Board has appointed Nilanjan Roy as the Chief Financial Officer of the Company effective March 1, 2019. | ||
b. Jayesh Sanghrajka was appointed as the Interim Chief Financial Officer effective November 17, 2018. He resumed his responsibilities as Deputy Chief Financial Officer effective March 1, 2019. | ||
d) | Grant of Stock options/RSU's | |
The Board, on April 12, 2019, based on the
recommendations of the Nominations and Remuneration Committee approved, the performance based grant of RSUs amounting to ![]() The Board, on April 12, 2019, under the 2015 plan, based on the recommendations of the Nominations and Remuneration Committee approved : | ||
a) The grant of annual time based RSU’s of fair value ![]() ![]() b) Grant of 12,200 RSU's to an eligible employee of the Company under the 2015 plan. These RSUs shall vest equally over a period of 4 years from the date of grant. The RSUs will be granted w.e.f May 2, 2019. |
e) | As previously disclosed to the Stock exchanges on February 15, 2019, the Securities
and Exchange Board of India (SEBI) has passed a settlement order in respect of a settlement application pertaining to matters
related to the severance agreement entered into with a former CFO of the Company and based on the same, the company has paid a
settlement amount of ![]() |
3. Information on dividends for the quarter and year ended March 31, 2019
For financial year 2019, the Board recommended
a final dividend of 10.50/- per equity share. The payment is subject to the approval of the
shareholders in the ensuing Annual General Meeting of the Company to be held on June 22, 2019. The book closure date for the purpose
of the Annual General Meeting and payment of final dividend is June 15, 2019. A special dividend of
4/-
per equity share was declared on January 11, 2019 and the same was paid on January 28, 2019. For the financial year ended 2018,
the Company declared a special dividend of
5/- per share (adjusted for September 2018 bonus
issue) and a final dividend of
10.25/- per share (adjusted for September 2018 bonus issue)
An interim dividend of 7/- per equity share was declared on October 16, 2018 and the same was
paid on October 30, 2018.
(in )
Particulars | Quarter ended March 31, |
Quarter ended December 31, |
Quarter ended March 31, |
Year ended March 31, | |
2019 | 2018 | 2018 | 2019 | 2018 | |
Dividend per share (par value ![]() |
|||||
Interim dividend | – | – | – | 7.00 | 6.50 |
Final dividend | 10.50 | – | 10.25 | 10.50 | 10.25 |
Special dividend | – | 4.00 | 5.00 | 4.00 | 5.00 |
Note: | Dividend per equity share disclosed for quarter and year ended March 31, 2018 in the above table represents dividends declared previously, retrospectively adjusted for September 2018 bonus issue. |
4. Audited Standalone Balance Sheet
(in crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
ASSETS | ||
Non-current assets | ||
Property, plant and equipment | 10,394 | 9,027 |
Capital work-in-progress | 1,212 | 1,442 |
Goodwill | 29 | 29 |
Other Intangible assets | 74 | 101 |
Financial assets | ||
Investments | 12,062 | 11,993 |
Loans | 16 | 19 |
Other financial assets | 196 | 177 |
Deferred tax assets (net) | 1,114 | 1,128 |
Income tax assets (net) | 5,870 | 5,710 |
Other non-current assets | 1,740 | 2,161 |
Total non - current assets | 32,707 | 31,787 |
Current assets | ||
Financial assets | ||
Investments | 6,077 | 5,906 |
Trade receivables | 13,370 | 12,151 |
Cash and cash equivalents | 15,551 | 16,770 |
Loans | 1,048 | 393 |
Other financial assets | 4,834 | 5,906 |
Income tax assets (net) | 423 | – |
Other current assets | 4,920 | 1,439 |
46,223 | 42,565 | |
Assets held for sale | – | 1,525 |
Total current assets | 46,223 | 44,090 |
Total assets | 78,930 | 75,877 |
EQUITY AND LIABILITIES | ||
Equity | ||
Equity share capital | 2,178 | 1,092 |
Other equity | 60,533 | 62,410 |
Total equity | 62,711 | 63,502 |
LIABILITIES | ||
Non-current liabilities | ||
Financial liabilities | ||
Other financial liabilities | 79 | 55 |
Deferred tax liabilities (net) | 541 | 505 |
Other non-current liabilities | 169 | 153 |
Total non - current liabilities | 789 | 713 |
Current liabilities | ||
Financial liabilities | ||
Trade payables | ||
Total outstanding dues of micro enterprises and small enterprises | – | – |
Total outstanding dues of creditors other than micro enterprises and small enterprises | 1,604 | 738 |
Other financial liabilities | 8,528 | 5,540 |
Other current liabilities | 3,335 | 2,972 |
Provisions | 505 | 436 |
Income tax liabilities (net) | 1,458 | 1,976 |
Total current liabilities | 15,430 | 11,662 |
Total equity and liabilities | 78,930 | 75,877 |
The disclosure is an extract of the audited Balance Sheet as at March 31, 2019 and March 31, 2018 prepared in compliance with the Indian Accounting Standards (Ind-AS).
5. Segment Reporting
The Company publishes standalone financial statements along with the consolidated financial statements. In accordance with Ind AS 108, Operating Segments, the company has disclosed the segment information in the audited consolidated financial statements. Accordingly, the segment information is given in the audited consolidated financial results of Infosys Limited and its subsidiaries for the quarter and year ended March 31, 2019.
By order of the Board for Infosys Limited | |
Bengaluru, India April 12, 2019 |
Salil Parekh Chief Executive Officer and Managing Director |
Certain statements mentioned in this release concerning our future growth prospects and our future business expectations are forward-looking statements intended to qualify for the 'safe harbor' under the Private Securities Litigation Reform Act of 1995. Such statements involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, fluctuations in foreign exchange rates, our ability to manage growth, intense competition in IT services including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, industry segment concentration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks or system failures, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which Infosys has made strategic investments, withdrawal or expiration of governmental fiscal incentives, political instability and regional conflicts, legal restrictions on raising capital or acquiring companies outside India, and unauthorized use of our intellectual property and general economic conditions affecting our industry. Additional risks that could affect our future operating results are more fully described in our United States Securities and Exchange Commission filings including our Annual Report on Form 20-F for the fiscal year ended March 31, 2018. These filings are available at www.sec.gov. Infosys may, from time to time, make additional written and oral forward-looking statements, including statements contained in the company's filings with the Securities and Exchange Commission and our reports to shareholders. The company does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of the company unless it is required by law.
Exhibit 99.7
IFRS USD Earning Release
INDEPENDENT AUDITOR’S REPORT
TO THE BOARD OF DIRECTORS OF INFOSYS LIMITED
Report on the Audit of the Condensed Consolidated Financial Statements
Opinion
We have audited the accompanying condensed consolidated financial statements of Infosys Limited (“the Company”) and its subsidiaries (the Company and its subsidiaries together referred to as “the Group”), which comprise the Condensed Consolidated Balance Sheet as at March 31, 2019, the Condensed Consolidated Statement of Comprehensive Income, the Condensed Consolidated Statement of Changes in Equity and the Condensed Consolidated Statement of Cash Flows for the year ended on that date, and a summary of the significant accounting policies and other explanatory information (hereinafter referred to as “the condensed consolidated financial statements”).
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid condensed consolidated financial statements give a true and fair view in conformity with International Accounting Standard 34 “Interim Financial Reporting” (“IAS 34”) as issued by the International Accounting Standards Board (“IASB”), of the consolidated state of affairs of the Group as at March 31, 2019, the consolidated profit and consolidated total comprehensive income, consolidated changes in equity and its consolidated cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit of the condensed consolidated financial statements in accordance with the Standards on Auditing (SAs) issued by the Institute of Chartered Accountants of India (ICAI). Our responsibilities under those Standards are further described in the Auditor’s Responsibilities for the Audit of the condensed Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Code of Ethics issued by the ICAI and we have fulfilled our other ethical responsibilities in accordance with the Code of Ethics. 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 financial statements.
Management’s Responsibility for the Condensed Consolidated Financial Statements
The Company’s Board of Directors is responsible for the preparation and presentation of these condensed consolidated financial statements that give a true and fair view of the consolidated financial position, consolidated financial performance, consolidated total comprehensive income, consolidated changes in equity and consolidated cash flows of the Group in accordance with IAS 34 as issued by the IASB. The respective Board of Directors of the companies included in the Group are responsible for maintenance of adequate accounting records for safeguarding assets of the Group and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the condensed consolidated financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the condensed consolidated financial statements, the respective Board of Directors of the companies included in the Group are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
The respective Board of Directors of the companies included in the Group are responsible for overseeing the financial reporting process of the Group.
Auditor’s Responsibilities for the Audit of the Condensed Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the condensed consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these condensed consolidated financial statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
· | Identify and assess the risks of material misstatement of the condensed consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. |
· | Obtain an understanding of internal financial controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on effectiveness of the Company’s internal financial controls. |
· | Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. |
· | Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the condensed consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. |
· | Evaluate the overall presentation, structure and content of the condensed consolidated financial statements, including the disclosures, and whether the condensed consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. |
· | Obtain sufficient appropriate audit evidence regarding the financial information of the entities within the Group to express an opinion on the condensed consolidated financial statements. We are responsible for the direction, supervision and performance of the audit of the financial statements of such entities included in the condensed consolidated financial statements of which we are independent auditors. |
Materiality is the magnitude of misstatements in the condensed consolidated financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the financial statements.
We communicate with those charged with governance of the Company and such other entities included in the condensed consolidated financial statements of which we are the independent auditors regarding, among other matters, the planned scope and timing of the audit and significant audit findings that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
For DELOITTE HASKINS & SELLS LLP
Chartered Accountants
(Firm Registration No. 117366W/W-100018)
P. r. ramesh
Partner
Bengaluru, April 12, 2019 | (Membership No. 70928) |
INFOSYS LIMITED AND SUBSIDIARIES
Condensed Consolidated Financial Statements under International Financial Reporting Standards (IFRS) in US Dollars for the year ended March 31, 2019
Index | |
Condensed Consolidated Balance Sheet | |
Condensed Consolidated Statements of Comprehensive Income | |
Condensed Consolidated Statements of Changes in Equity | |
Condensed Consolidated Statements of Cash Flows | |
Overview and notes to the financial statements | |
1. Overview | |
1.1 Company Overview | |
1.2 Basis of preparation of financial statements | |
1.3 Basis of consolidation | |
1.4 Use of estimates and judgments | |
1.5 Critical accounting estimates | |
1.6 Recent Accounting pronouncements | |
2. Notes to the Condensed Consolidated Financial Statements | |
2.1 Cash and cash equivalents | |
2.2 Investments | |
2.3 Financial instruments | |
2.4 Prepayments and other assets | |
2.5 Other liabilities | |
2.6 Provisions | |
2.7 Property, plant and equipment. | |
2.8 Goodwill | |
2.9 Business combination and Disposal Group held for sale | |
2.10 Employees' Stock Option Plans (ESOP). | |
2.11 Income taxes | |
2.12 Reconciliation of basic and diluted shares used in computing earnings per share | |
2.13 Related party transactions | |
2.14 Segment Reporting | |
2.15 Revenue from Operations | |
2.16 Break-up of expenses and other income, net | |
2.17 Capital allocation policy | |
2.18 Share capital and share premium |
Infosys Limited and Subsidiaries
(Dollars in millions except equity share data)
Condensed Consolidated Balance Sheet as at | Note | March 31, 2019 | March 31, 2018 |
ASSETS | |||
Current assets | |||
Cash and cash equivalents | 2.1 | 2,829 | 3,041 |
Current investments | 2.2 | 958 | 982 |
Trade receivables | 2,144 | 2,016 | |
Unbilled revenue | 777 | 654 | |
Prepayments and other current assets | 2.4 | 827 | 662 |
Income tax assets | 61 | – | |
Derivative financial instruments | 2.3 | 48 | 2 |
7,644 | 7,357 | ||
Assets held for sale | 2.9 | – | 316 |
Total current assets | 7,644 | 7,673 | |
Non-current assets | |||
Property, plant and equipment | 2.7 | 1,931 | 1,863 |
Goodwill | 2.8 | 512 | 339 |
Intangible assets | 100 | 38 | |
Investment in associate | 2.13 | – | – |
Non-current investments | 2.2 | 670 | 883 |
Deferred income tax assets | 199 | 196 | |
Income tax assets | 914 | 931 | |
Other non-current assets | 2.4 | 282 | 332 |
Total Non-current assets | 4,608 | 4,582 | |
Total assets | 12,252 | 12,255 | |
LIABILITIES AND EQUITY | |||
Current liabilities | |||
Trade payables | 239 | 107 | |
Derivative financial instruments | 2.3 | 2 | 6 |
Current income tax liabilities | 227 | 314 | |
Client deposits | 4 | 6 | |
Unearned revenue | 406 | 352 | |
Employee benefit obligations | 234 | 218 | |
Provisions | 2.6 | 83 | 75 |
Other current liabilities | 2.5 | 1,498 | 1,036 |
2,693 | 2,114 | ||
Liabilities directly associated with assets held for sale | 2.9 | – | 50 |
Total current liabilities | 2,693 | 2,164 | |
Non-current liabilities | |||
Deferred income tax liabilities | 98 | 82 | |
Employee benefit obligations | 6 | 7 | |
Other non-current liabilities | 2.5 | 55 | 42 |
Total liabilities | 2,852 | 2,295 | |
Equity | |||
Share capital - ![]() |
2.17 & 2.18 | 339 | 190 |
Share premium | 277 | 247 | |
Retained earnings | 11,248 | 11,587 | |
Cash flow hedge reserve | 3 | – | |
Other reserves | 384 | 244 | |
Capital redemption reserve | 10 | 9 | |
Other components of equity | (2,870) | (2,317) | |
Total equity attributable to equity holders of the company | 9,391 | 9,960 | |
Non-controlling interests | 9 | – | |
Total equity | 9,400 | 9,960 | |
Total liabilities and equity | 12,252 | 12,255 |
The accompanying notes form an integral part of the condensed consolidated financial statements.
As per our report of even date attached
for Deloitte Haskins & Sells LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants
Firm’s Registration No : 117366W/ W-100018
P. R. Ramesh Partner |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive officer |
U. B. Pravin Rao Chief Operating Officer |
Bengaluru April 12, 2019 |
D. Sundaram Director |
Nilanjan Roy Chief Financial officer |
A. G. S. Manikantha Company Secretary |
Infosys Limited and Subsidiaries
(Dollars in millions except equity share and per equity share data)
Condensed Consolidated Statements of Comprehensive Income | Note | Year ended March 31, | |
2019 | 2018 | ||
Revenues | 2.15 | 11,799 | 10,939 |
Cost of sales | 2.16 | 7,687 | 7,001 |
Gross profit | 4,112 | 3,938 | |
Operating expenses: | |||
Selling and marketing expenses | 2.16 | 638 | 552 |
Administrative expenses | 2.16 | 778 | 727 |
Total operating expenses | 1,416 | 1,279 | |
Operating profit | 2,696 | 2,659 | |
Other income, net | 2.16 | 411 | 513 |
Reduction in the fair value of Disposal Group held for sale | 2.9 | (39) | (18) |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" | 2.9 | (65) | – |
Share in net profit/(loss) of associate, including impairment | – | (11) | |
Profit before income taxes | 3,003 | 3,143 | |
Income tax expense | 2.11 | 803 | 657 |
Net profit | 2,200 | 2,486 | |
Other comprehensive income | |||
Items that will not be reclassified subsequently to profit or loss: | |||
Re-measurements of the net defined benefit liability/asset, net | (3) | 9 | |
Equity instruments through other comprehensive income, net | 10 | 1 | |
7 | 10 | ||
Items that will be reclassified subsequently to profit or loss: | |||
Fair valuation of investments, net | 2.2 | – | – |
Fair value changes on derivatives designated as cash flow hedge, net | 3 | (6) | |
Foreign currency translation | (560) | 18 | |
(557) | 12 | ||
Total other comprehensive income/(loss), net of tax | (550) | 22 | |
Total comprehensive income | 1,650 | 2,508 | |
Profit attributable to: | |||
Owners of the company | 2,199 | 2,486 | |
Non-controlling interests | 1 | – | |
2,200 | 2,486 | ||
Total comprehensive income attributable to: | |||
Owners of the company | 1,649 | 2,508 | |
Non-controlling interests | 1 | – | |
1,650 | 2,508 | ||
Earnings per equity share | |||
Basic ($) | 0.51 | 0.55 | |
Diluted ($) | 0.51 | 0.55 | |
Weighted average equity shares used in computing earnings per equity share | 2.12 | ||
Basic | 4,347,130,157 | 4,510,664,644 | |
Diluted | 4,353,420,772 | 4,515,147,740 |
The accompanying notes form an integral part of the condensed consolidated financial statements.
As per our report of even date attached
for Deloitte Haskins & Sells LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants
Firm’s Registration No : 117366W/ W-100018
P. R. Ramesh Partner |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive officer |
U. B. Pravin Rao Chief Operating Officer |
Bengaluru April 12, 2019 |
D. Sundaram Director |
Nilanjan Roy Chief Financial officer |
A. G. S. Manikantha Company Secretary |
Infosys Limited and Subsidiaries
Condensed Consolidated Statements of Changes in Equity
(Dollars in millions except equity share data)
Shares(1) | Share capital | Share premium | Retained earnings | Other reserves (2) | Capital redemption reserve | Cash flow hedge reserve | Other components of equity | Total equity attributable to equity holders of the company | Non-controlling interest | Total equity | |
Balance as at April 1, 2017 | 2,285,655,150 | 199 | 587 | 12,190 | – | – | 6 | (2,345) | 10,637 | – | 10,637 |
Changes in equity for the year ended March 31, 2018 | |||||||||||
Net profit | – | – | – | 2,486 | – | – | – | – | 2,486 | – | 2,486 |
Fair value changes in investments, net* (Refer to note 2.2) | – | – | – | – | – | – | – | – | – | – | – |
Fair value changes on derivatives designated as cash flow hedge* (Refer to note 2.3) | – | – | – | – | – | – | (6) | – | (6) | – | (6) |
Equity instruments through other comprehensive income* (Refer to note 2.2) | – | – | – | – | – | – | – | 1 | 1 | – | 1 |
Exchange differences on translation of foreign operations | – | – | – | – | – | – | – | 18 | 18 | – | 18 |
Total comprehensive income for the period | – | – | – | 2,486 | – | – | (6) | 19 | 2,499 | – | 2,499 |
Shares issued on exercise of employee stock options (Refer to note 2.10) | 700,629 | – | 1 | – | – | – | – | – | 1 | – | 1 |
Amount paid upon buy back (Refer to note 2.17) | (113,043,478) | (9) | (346) | (1,680) | – | – | – | – | (2,035) | – | (2,035) |
Transaction cost related to buyback (Refer to note 2.17)* | – | – | (7) | – | – | – | – | – | (7) | – | (7) |
Amount transferred to capital redemption reserve upon buyback (Refer to note 2.17) | – | – | – | (9) | – | 9 | – | – | – | – | – |
Transfer to other reserves | – | – | – | (340) | 340 | – | – | – | – | – | – |
Transfer from other reserves on utilization | – | – | – | 96 | (96) | – | – | – | – | – | – |
Employee stock compensation expense (Refer to note 2.10) | – | – | 12 | – | – | – | – | – | 12 | – | 12 |
Remeasurement of the net defined benefit liability/asset* | – | – | – | – | – | – | – | 9 | 9 | – | 9 |
Dividends (including dividend distribution tax) | – | – | – | (1,156) | – | – | – | – | (1,156) | – | (1,156) |
Balance as at March 31, 2018 | 2,173,312,301 | 190 | 247 | 11,587 | 244 | 9 | – | (2,317) | 9,960 | – | 9,960 |
Changes in equity for the year ended March 31, 2019 | |||||||||||
Net profit | – | – | – | 2,199 | – | – | – | – | 2,199 | 1 | 2,200 |
Remeasurement of the net defined benefit liability/asset* | – | – | – | – | – | – | – | (3) | (3) | – | (3) |
Equity instruments through other comprehensive income* (Refer to note 2.2) | – | – | – | – | – | – | – | 10 | 10 | – | 10 |
Fair value changes on investments, net* (Refer to note 2.2) | – | – | – | – | – | – | – | – | – | – | – |
Fair value changes on derivatives designated as cash flow hedge* (Refer to note 2.3) | – | – | – | – | – | – | 3 | – | 3 | – | 3 |
Exchange differences on translation of foreign operations | – | – | – | – | – | – | – | (560) | (560) | – | (560) |
Total comprehensive income for the period | – | – | – | 2,199 | – | – | 3 | (553) | 1,649 | 1 | 1,650 |
Shares issued on exercise of employee stock options - before bonus issue (Refer to note 2.10) | 392,528 | – | – | – | – | – | – | – | – | – | – |
Increase in share capital on account of Bonus issue (Refer to note 2.17.3) | 2,173,704,829 | 150 | – | – | – | – | – | – | 150 | – | 150 |
Amounts utilized for bonus issue (Refer to note 2.17.3) | – | – | – | (150) | – | – | – | – | (150) | – | (150) |
Shares issued on exercise of employee stock options - after bonus issue (Refer to note 2.10) | 1,196,804 | – | 1 | – | – | – | – | – | 1 | – | 1 |
Buyback of equity shares (Refer to note 2.5 and 2.17) | (12,652,000) | (1) | – | (288) | – | – | – | – | (289) | – | (289) |
Transaction cost relating to buyback (Refer to note 2.17)* | – | – | – | (2) | – | – | – | – | (2) | – | (2) |
Amount transferred to capital redemption reserve upon buyback (Refer to note 2.17) | – | – | – | (1) | – | 1 | – | – | – | – | – |
Non-controlling interests on acquisition of subsidiary (Refer to note 2.9) | – | – | – | – | – | – | – | – | – | 8 | 8 |
Transfer to other reserves | – | – | – | (346) | 346 | – | – | – | – | – | |
Transfer from other reserves on utilization | – | – | – | 206 | (206) | – | – | – | – | – | – |
Employee stock compensation expense (Refer to note 2.10) | – | – | 28 | – | – | – | – | – | 28 | – | 28 |
Income tax benefit arising on exercise of stock options | – | – | 1 | – | – | – | – | – | 1 | – | 1 |
Dividends (including dividend distribution tax) | – | – | – | (1,957) | – | – | – | – | (1,957) | – | (1,957) |
Balance as at March 31, 2019 | 4,335,954,462 | 339 | 277 | 11,248 | 384 | 10 | 3 | (2,870) | 9,391 | 9 | 9,400 |
* net of tax
(1) | excludes treasury shares of 20,324,982 as at March 31, 2019, 10,801,956 as at April 1, 2018 and 11,289,514 as at April 1, 2017, held by consolidated trust. The treasury shares as at April 1, 2018 and as at April 1, 2017 have not been adjusted for the September 2018 bonus issue. |
(2) | 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 Group 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. |
The accompanying notes form an integral part of the condensed consolidated financial statements.
As per our report of even date attached
for Deloitte Haskins & Sells LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants
Firm’s Registration No : 117366W/ W-100018
P. R. Ramesh Partner |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive officer |
U. B. Pravin Rao Chief Operating Officer |
Bengaluru April 12, 2019 |
D. Sundaram Director |
Nilanjan Roy Chief Financial officer |
A. G. S. Manikantha Company Secretary |
Infosys Limited and Subsidiaries
Condensed Consolidated Statements of Cash Flows
Accounting Policy
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 Group are segregated. The Group considers all highly liquid investments that are readily convertible to known amounts of cash to be cash equivalents.
(Dollars in millions)
Particulars | Note | Year ended March 31, | |
2019 | 2018 | ||
Operating activities: | |||
Net Profit | 2,200 | 2,486 | |
Adjustments to reconcile net profit to net cash provided by operating activities : | |||
Depreciation and amortization | 2.16 | 287 | 289 |
Interest and dividend income | (130) | (129) | |
Income tax expense | 2.11 | 803 | 657 |
Effect of exchange rate changes on assets and liabilities | 10 | 3 | |
Impairment loss under expected credit loss model | 34 | 5 | |
Share in net profit/(loss) of associate, including impairment | – | 11 | |
Reduction in the fair value of Disposal Group held for sale | 2.9 | 39 | 18 |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" | 2.9 | 65 | – |
Stock compensation expense | 29 | 13 | |
Other adjustments | (15) | (20) | |
Changes in working capital | |||
Trade receivables and unbilled revenue | (411) | (237) | |
Prepayments and other assets | (120) | (58) | |
Trade payables | 131 | 51 | |
Client deposits | (2) | 1 | |
Unearned revenue | 48 | 104 | |
Other liabilities and provisions | 269 | 122 | |
Cash generated from operations | 3,237 | 3,316 | |
Income taxes paid | (975) | (1,059) | |
Net cash provided by operating activities | 2,262 | 2,257 | |
Investing activities: | |||
Expenditure on property, plant and equipment | (349) | (310) | |
Loans to employees | 2 | 4 | |
Deposits placed with corporation | (3) | (20) | |
Interest and dividend received | 79 | 67 | |
Payment towards acquisition of business, net of cash acquired | 2.9 | (77) | (4) |
Payment of contingent consideration pertaining to acquisition of business | (3) | (5) | |
Advance payment towards acquisition of business | (30) | – | |
Investment in equity and preference securities | (3) | (4) | |
Proceeds from sale of equity and preference securities | 16 | 5 | |
Investment in others | (3) | (4) | |
Redemption of other investments | 2 | – | |
Investment in quoted debt securities | (145) | (16) | |
Redemption of quoted debt securities | 123 | 18 | |
Investment in certificate of deposits | (342) | (1,032) | |
Redemption of certificate of deposits | 791 | 1,503 | |
Investment in commercial papers | (70) | (45) | |
Redemption of commercial papers | 43 | – | |
Escrow and other deposits pertaining to Buyback | 2.4 | (37) | – |
Investment in liquid mutual fund units and fixed maturity plan securities | (11,184) | (9,628) | |
Redemption of liquid mutual fund units and fixed maturity plan securities | 10,965 | 9,953 | |
Net cash (used)/generated in investing activities | (225) | 482 | |
Financing activities: | |||
Payment of dividend including corporate dividend tax | (1,956) | (1,156) | |
Shares issued on exercise of employee stock options | 1 | 1 | |
Buy back of equity shares including transaction costs | 2.17 | (118) | (2,042) |
Net cash used in financing activities | (2,073) | (3,197) | |
Effect of exchange rate changes on cash and cash equivalents | (184) | 18 | |
Net increase / (decrease) in cash and cash equivalents | (36) | (458) | |
Cash and cash equivalents at the beginning of the period | 2.1 | 3,049 | 3,489 |
Cash and cash equivalents at the end of the period | 2.1 | 2,829 | 3,049 |
Supplementary information: | |||
Restricted cash balance | 2.1 | 52 | 82 |
The accompanying notes form an integral part of the condensed consolidated financial statements.
As per our report of even date attached
for Deloitte Haskins & Sells LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants
Firm’s Registration No : 117366W/ W-100018
P. R. Ramesh Partner |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive officer |
U. B. Pravin Rao Chief Operating Officer |
Bengaluru April 12, 2019 |
D. Sundaram Director |
Nilanjan Roy Chief Financial officer |
A. G. S. Manikantha Company Secretary |
Notes to the condensed consolidated financial statements
1. Overview
1.1 Company overview
Infosys Limited ('the Company' or Infosys) is a leading provider of consulting, technology, outsourcing and next-generation digital services, enabling clients to execute strategies for their digital transformation. Infosys strategic objective is to build a sustainable organization that remains relevant to the agenda of clients, while creating growth opportunities for employees and generating profitable returns for investors. Infosys strategy is to be a navigator for our clients as they ideate, plan and execute on their journey to a digital future.
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 Bengaluru, Karnataka, India. The company has its primary listings on the BSE Ltd. and National Stock Exchange of India Limited. The company’s American Depositary Shares (ADS) representing equity shares are listed on the New York Stock Exchange (NYSE).
Further, the company's ADS were also listed on the Euronext London and Euronext Paris. On July 5, 2018, the company voluntarily delisted its ADS from the said exchanges due to low average daily trading volume of its ADS on these exchanges.
The Group's condensed consolidated financial statements are authorized for issue by the company's Board of Directors on April 12, 2019.
1.2 Basis of preparation of financial statements
These condensed consolidated financial statements have been prepared in compliance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB), 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 financial statements do not include all the information required for a complete set of financial statements. These condensed consolidated 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, 2018. Accounting policies have been applied consistently to all periods presented in these condensed consolidated financial statements.
As the quarter and year figures are taken from the source and rounded to the nearest digits, the figures reported for previous quarters might not always add up to the year figures reported in this statement.
1.3 Basis of consolidation
Infosys consolidates entities which it owns or controls. The condensed 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.
1.4 Use of estimates and judgments
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 condensed 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.
Further, the Group uses significant judgements while determining the transaction price allocated to performance obligations using the expected cost plus margin approach.
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
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. (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 (Refer to note 2.9)
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.
f. Non-current assets and Disposal Groups held for sale
Assets and liabilities of Disposal Groups held for sale are measured at the lower of carrying amount and fair value less costs to sell. The determination of fair value less costs to sell includes use of management estimates and assumptions. The fair value of the Disposal Groups have been estimated using valuation techniques including income and market approach which includes unobservable inputs.
Non-current assets and Disposal Group that ceases to be classified as held for sale shall be measured at the lower of carrying amount before the Non-current asset and Disposal Group was classified as held for sale adjusted for any depreciation/ amortization and its recoverable amount at the date when the Disposal Group no longer meets the " Held for sale" criteria. Recoverable amounts of assets reclassified from held for sale have been estimated using management’s assumptions which consist of significant unobservable inputs.
1.6 Recent accounting pronouncements
1.6.1 Standards issued but not yet effective
IFRS 16 Leases: On January 13, 2016, the International Accounting Standards Board issued IFRS 16, Leases replacing the existing leases Standard, IAS 17 Leases and related Interpretations. IFRS 16 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 for a lessee and requires the lessee to recognize assets and liabilities for all leases with a term of more than twelve months, unless the underlying asset is low value in nature. 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 standard permits two possible methods of transition:
• | Full retrospective – Retrospectively to each prior period presented applying IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors |
• | Modified retrospective – Retrospectively, with the cumulative effect of initially applying the Standard recognized at the date of initial application |
Under modified retrospective approach, the lessee records the lease liability as the present value of the remaining lease payments, discounted at the incremental borrowing rate and the right of use asset either as:
• | Its carrying amount as if the standard had been applied since the commencement date, but discounted at lessee’s incremental borrowing rate at the date of initial application or |
• | An amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments related to that lease recognized under IAS 17 immediately before the date of initial application. |
Certain practical expedients are available under both the methods.
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.
On completion of evaluation of the effect of adoption of IFRS 16, the Group is proposing to use the ‘Modified Retrospective Approach’ for transitioning to IFRS 16, and take the cumulative adjustment to retained earnings, on the date of initial application (April 1, 2019). Accordingly, comparatives for the year ended March 31, 2019 will not be retrospectively adjusted. The Group has elected certain available practical expedients on transition.
The effect of adoption as on transition date would majorly result in an increase in Right of use asset approximately by $340 million, net investment in sub-lease approximately by $65 million and an increase in lease liability approximately by $440 million.
IFRIC 23, Uncertainty over Income Tax Treatments: The International Accounting Standards Board (IASB) issued IFRS interpretation IFRIC 23 Uncertainty over Income Tax Treatments which is to be applied while performing the determination of taxable profit (or loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under IAS 12. According to IFRIC 23, companies need to determine the probability of the relevant tax authority accepting each tax treatment, or group of tax treatments, that the companies have used or plan to use in their income tax filing which has to be considered to compute the most likely amount or the expected value of the tax treatment when determining taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates.
The standard permits two possible methods of transition - i) Full retrospective approach – Under this approach, IFRIC 23 will be applied retrospectively to each prior reporting period presented in accordance with IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors, without using hindsight and ii) Retrospectively with cumulative effect of initially applying IFRIC 23 recognized by adjusting equity on initial application, without adjusting comparatives.
The effective date for adoption of IFRIC 23 is annual periods beginning on or after January 1, 2019, though early adoption is permitted. The Group will adopt the standard on April 1, 2019 and has decided to adjust the cumulative effect in equity on the date of initial application i.e. April 1, 2019 without adjusting comparatives.
The effect on adoption of IFRIC 23 would be insignificant in the consolidated financial statements.
Amendment to IAS 12 – Income taxes : In December 2017, the IASB issued amendments to the guidance in IAS 12, ‘Income Taxes’, in connection with accounting for dividend distribution taxes.
The amendment clarifies that an entity shall recognise the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognised those past transactions or events.
Effective date for application of this amendment is annual period beginning on or after January 1, 2019, although early application is permitted. The Group is currently evaluating the effect of this amendment on the consolidated financial statements.
Amendment to IAS 19 – plan amendment, curtailment or settlement- On February 7, 2018, the IASB issued amendments to the guidance in IAS 19, ‘Employee Benefits’, in connection with accounting for plan amendments, curtailments and settlements.
The amendments require an entity:
• | to use updated assumptions to determine current service cost and net interest for the remainder of the period after a plan amendment, curtailment or settlement; and |
• | to recognise in profit or loss as part of past service cost, or a gain or loss on settlement, any reduction in a surplus, even if that surplus was not previously recognised because of the impact of the asset ceiling. |
Effective date for application of this amendment is annual period beginning on or after January 1, 2019, although early application is permitted. The Group does not have any impact on account of this amendment.
Amendment to IFRS 3 Business Combinations - On October 22, 2018, the IASB issued amendments to the definition of a business in IFRS 3 Business Combinations. The amendments clarify the definition of a business, with the objective of assisting entities to determine whether a transaction should be accounted for as a business combination or as an asset acquisition. The amendment also introduces an optional concentration test that permits a simplified assessment of whether an acquired set of activities and assets is not a business.
The effective date for adoption of this amendment is annual periods beginning on or after January 1, 2020, although early adoption is permitted. The Group is currently evaluating the effect of this amendment on the consolidated financial statements.
2. Notes to the Condensed Consolidated Financial Statements
2.1 Cash and cash equivalents
Cash and cash equivalents consist of the following:
(Dollars in millions)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Cash and bank deposits | 2,052 | 2,021 |
Deposits with financial institutions | 777 | 1,020 |
Total Cash and cash equivalents | 2,829 | 3,041 |
Cash and cash equivalents included under assets classified under held for sale (Refer note no 2.9) | – | 8 |
2,829 | 3,049 |
Cash and cash equivalents as at March 31, 2019 and March 31, 2018 include restricted cash and bank balances of $52 million and $82 million, respectively. The restrictions are primarily on account of 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)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Current accounts | ||
ANZ Bank, Taiwan | – | 1 |
Axis Bank - Unpaid dividend account | 1 | – |
Banamex Bank, Mexico (U.S. Dollar account) | 4 | 2 |
Banamex Bank, Mexico | 1 | – |
Bank of America, Mexico | 15 | 4 |
Bank of America, USA | 168 | 180 |
Bank of Leumni , Israel | 1 | – |
Bank Zachodni WBK S.A, Poland | – | 3 |
Barclays Bank, UK | 6 | 6 |
BNP Paribas Bank, Norway | 4 | 14 |
China Merchants Bank, China | – | 1 |
Citibank N.A., Australia | 13 | 34 |
Citibank N.A., Brazil | 5 | 2 |
Citibank N.A., China | 10 | 18 |
Citibank N.A., China (U.S. Dollar account) | 2 | 1 |
Citibank N.A., Dubai | 2 | 1 |
Citibank N.A., EEFC (U.S. Dollar account) | – | 1 |
Citibank N.A., Hungary | – | 1 |
Citibank N.A., Japan | 3 | 3 |
Citibank N.A., New Zealand | – | 2 |
Citibank N.A., Portugal | 1 | 1 |
Citibank N.A., Singapore | 11 | 1 |
Citibank N.A., South Africa | 3 | 5 |
Citibank N.A., USA | 1 | 1 |
Citibank N.A., South Korea | 2 | – |
Citibank N.A., Luxembourg | 1 | – |
Deutsche Bank, Belgium | 2 | 4 |
Deutsche Bank, Czech Republic | 3 | 2 |
Deutsche Bank, Czech Republic (Euro account) | 1 | 1 |
Deutsche Bank, Czech Republic (U.S. Dollar account) | 3 | – |
Deutsche Bank, EEFC (Euro account) | 3 | 5 |
Deutsche Bank, EEFC (Swiss Franc account) | 1 | – |
Deutsche Bank, EEFC (U.S. Dollar account) | 31 | 5 |
Deutsche Bank, EEFC (United Kingdom Pound Sterling account) | 1 | 1 |
Deutsche Bank, France | 3 | 3 |
Deutsche Bank, Germany | 16 | 16 |
Deutsche Bank, India | 6 | 7 |
Deutsche Bank, Malaysia | – | 1 |
Deutsche Bank, Netherlands | 5 | 2 |
Deutsche Bank, Philippines | 1 | 4 |
Deutsche Bank, Philippines (U.S. Dollar account) | – | 1 |
Deutsche Bank, Poland | 4 | 3 |
Deutsche Bank, Poland (Euro account) | 1 | 1 |
Deutsche Bank, Russia | 1 | 1 |
Deutsche Bank, Russia (U.S. Dollar account) | – | 1 |
Deutsche Bank, Singapore | 2 | 3 |
Deutsche Bank, Switzerland | 5 | 5 |
Deutsche Bank, United Kingdom | 6 | 12 |
Deutsche Bank, USA | 9 | – |
HSBC Bank, United Kingdom | 3 | 1 |
HSBC Bank, India | 1 | – |
ICICI Bank, EEFC (U.S. Dollar account) | 5 | 6 |
ICICI Bank, EEFC (United Kingdom Pound Sterling account) | 1 | 2 |
ICICI Bank, EEFC (Euro account) | 1 | – |
ICICI Bank, India | 6 | 8 |
Kotak Bank | 1 | – |
ICICI Bank - Unpaid dividend account | 4 | 3 |
Nordea | 3 | – |
Nordbanken, Sweden | 7 | 8 |
Punjab National Bank, India | – | 2 |
Raiffeisen Bank, Czech Republic | – | 1 |
Royal Bank of Canada, Canada | 20 | 26 |
Silicon Valley Bank, USA | 2 | – |
Splitska Banka D.D., Société Générale Group, Croatia | 2 | 1 |
Washington Trust Bank | 7 | – |
421 | 418 | |
Deposit accounts | ||
Axis Bank | 134 | – |
Bank BGZ BNP Paribas S.A. | 34 | 22 |
Barclays Bank | 72 | 31 |
Canara Bank | 19 | 36 |
Citibank | 26 | 35 |
Deutsche Bank, AG | – | 4 |
Deutsche Bank, Poland | 18 | 32 |
HDFC Bank | 7 | 383 |
HSBC Bank | 29 | – |
ICICI Bank | 469 | 568 |
IDBI Bank | – | 38 |
IDFC Bank | 354 | 230 |
IndusInd Bank | 80 | 154 |
Kotak Mahindra Bank | 72 | – |
South Indian Bank | 25 | 69 |
Standard Chartered Bank | 289 | – |
Washington trust bank | 3 | – |
Yes Bank | – | 1 |
1,631 | 1,603 | |
Deposits with financial institutions | ||
HDFC Limited | 600 | 836 |
LIC Housing Finance Limited | 177 | 184 |
777 | 1,020 | |
Total Cash and cash equivalents | 2,829 | 3,041 |
2.2 Investments
The carrying value of investments are as follows:
(Dollars in millions)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
(i) Current | ||
Amortized cost | ||
Quoted debt securities: | ||
Cost | 3 | – |
Fair value through profit and loss | ||
Liquid Mutual funds | ||
Fair value | 258 | 12 |
Fair Value through Other comprehensive income | ||
Quoted debt securities | ||
Fair value | 267 | 117 |
Commercial Paper | ||
Fair value | 72 | 45 |
Certificate of deposits | ||
Fair value | 358 | 808 |
Total current investments | 958 | 982 |
(ii) Non-current | ||
Amortized cost | ||
Quoted debt securities | ||
Cost | 274 | 291 |
Fair value through Other comprehensive income | ||
Quoted debt securities | ||
Fair value | 310 | 493 |
Unquoted equity and preference securities | ||
Fair value | 15 | 21 |
Fair value through profit and loss | ||
Unquoted convertible promissory note | ||
Fair value | – | 2 |
Unquoted Preference securities | ||
Fair value | 3 | – |
Fixed maturity plan securities | ||
Fair Value | 66 | 66 |
Others | ||
Fair value | 2 | 10 |
Total Non-current investments | 670 | 883 |
Total investments | 1,628 | 1,865 |
Investment carried at amortized cost | 277 | 291 |
Investments carried at fair value through other comprehensive income | 1,022 | 1,484 |
Investments carried at fair value through profit and loss | 329 | 90 |
Uncalled capital commitments outstanding as of March 31, 2019 and March 31, 2018 was $12 million and $12 million, respectively.
Details of amounts recorded in other comprehensive income:
(Dollars in millions)
Particulars | Year ended | |||||
March 31, 2019 | March 31, 2018 | |||||
Gross | Tax | Net | Gross | Tax | Net | |
Net Gain/(loss) on | ||||||
Quoted debt securities | 1 | – | 1 | (2) | – | (2) |
Certificate of deposits | (1) | – | (1) | 3 | (1) | 2 |
Unquoted equity and preference securities | 9 | 1 | 10 | 1 | – | 1 |
Method of fair valuation:
(Dollars in millions)
Class of investment | Method | Fair value | |
As at March 31, 2019 |
As at March 31, 2018 | ||
Liquid mutual funds | Quoted price | 258 | 12 |
Fixed maturity plan securities | Market observable inputs | 66 | 66 |
Quoted debt securities- carried at amortized cost | Quoted price and market observable inputs | 307 | 330 |
Quoted debt securities- carried at Fair value through other comprehensive income | Quoted price and market observable inputs | 577 | 610 |
Commercial Paper | Market observable inputs | 72 | 45 |
Certificate of deposits | Market observable inputs | 358 | 808 |
Unquoted equity and preference securities at fair value through other comprehensive income | Discounted cash flows method, Market multiples method, Option pricing model, etc. | 15 | 21 |
Unquoted equity and preference securities - carried at fair value through profit or loss | Discounted cash flows method, Market multiples method, Option pricing model, etc. | 3 | – |
Unquoted convertible promissory note | Discounted cash flows method, Market multiples method, Option pricing model, etc. | – | 2 |
Others | Discounted cash flows method, Market multiples method, Option pricing model, etc. | 2 | 10 |
1,658 | 1,904 |
Certain quoted investments are classified as Level 2 in the absence of active market for such investments.
2.3 Financial instruments
Accounting Policy
2.3.1 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.
2.3.2 Subsequent measurement
a. Non-derivative financial instruments
(i) Financial assets carried at amortized cost
A financial asset is subsequently measured at amortized 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 (FVOCI)
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 Group 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.
(iii) Financial assets at fair value through profit or loss (FVTPL)
A financial asset which is not classified in any of the above categories is 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 as 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 and buy back of ordinary shares 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.
2.3.3 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.
2.3.4 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.
Refer to table ‘Financial instruments by category’ below for the disclosure on carrying value and fair value of financial assets and liabilities. For financial assets and liabilities maturing within one year from the Balance Sheet date and which are not carried at fair value, the carrying amounts approximate fair value due to the short maturity of those instruments.
2.3.5 Impairment
The Group recognizes loss allowances using the expected credit loss (ECL) model for the financial assets and unbilled revenue which are not fair valued through profit or loss. Loss allowance for trade receivables and unbilled revenues 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 statement of comprehensive income.
Financial instruments by category
The carrying value and fair value of financial instruments by categories as at March 31, 2019 were as follows:
(Dollars in millions)
Particulars | Amortized 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) | 2,829 | – | – | – | – | 2,829 | 2,829 |
Investments (Refer to Note 2.2) | |||||||
Liquid mutual funds | – | – | 258 | – | – | 258 | 258 |
Fixed maturity plan securities | – | – | 66 | – | – | 66 | 66 |
Quoted debt securities | 277 | – | – | – | 577 | 854 | 884(1) |
Certificate of deposits | – | – | – | – | 358 | 358 | 358 |
Commercial Paper | – | – | – | – | 72 | 72 | 72 |
Unquoted equity and preference securities |
– | – | 3 | 15 | – | 18 | 18 |
Unquoted investment others | – | – | 2 | – | – | 2 | 2 |
Trade receivables | 2,144 | – | – | – | – | 2,144 | 2,144 |
Unbilled revenues (3) (Refer to Note 2.15) | 303 | – | – | – | – | 303 | 303 |
Prepayments and other assets (Refer to Note 2.4) | 529 | – | – | – | – | 529 | 517(2) |
Derivative financial instruments | – | – | 43 | – | 5 | 48 | 48 |
Total | 6,082 | – | 372 | 15 | 1,012 | 7,481 | 7,499 |
Liabilities: | |||||||
Trade payables | 239 | – | – | – | – | 239 | 239 |
Derivative financial instruments | – | – | – | – | – | 2 | 2 |
Other liabilities including contingent consideration (Refer to note 2.5) | 1,263 | – | 27 | – | – | 1,290 | 1,290 |
Total | 1,502 | – | 29 | – | – | 1,531 | 1,531 |
(1) On account of fair value changes including interest accrued
(2) Excludes interest accrued on quoted debt securities carried at amortized cost
(3) | Excludes unbilled revenue for fixed price development contracts where right to consideration is conditional on factors other than passage of time |
The carrying value and fair value of financial instruments by categories as at March 31, 2018 were as follows:
(Dollars in millions)
Particulars | Amortized 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) | 3,041 | – | – | – | – | 3,041 | 3,041 |
Investments (Refer to Note 2.2) | |||||||
Liquid mutual funds | – | – | 12 | – | – | 12 | 12 |
Fixed maturity plan securities | – | – | 66 | – | – | 66 | 66 |
Quoted debt securities | 291 | – | – | – | 610 | 901 | 940(1) |
Certificate of deposits | – | – | – | – | 808 | 808 | 808 |
Commercial papers | – | – | – | – | 45 | 45 | 45 |
Unquoted equity and preference securities | – | – | – | 21 | – | 21 | 21 |
Unquoted investment others | – | – | 10 | – | – | 10 | 10 |
Unquoted convertible promissory note | – | – | 2 | – | – | 2 | 2 |
Trade receivables | 2,016 | – | – | – | – | 2,016 | 2,016 |
Unbilled revenues | 654 | – | – | – | – | 654 | 654 |
Prepayments and other assets (Refer to Note 2.4) | 456 | – | – | – | – | 456 | 443(2) |
Derivative financial instruments | – | – | – | – | 2 | 2 | 2 |
Total | 6,458 | – | 90 | 21 | 1,465 | 8,034 | 8,060 |
Liabilities: | |||||||
Trade payables | 107 | – | – | – | – | 107 | 107 |
Derivative financial instruments | – | – | 6 | – | – | 6 | 6 |
Other liabilities including contingent consideration (Refer to note 2.5) | 836 | – | 8 | – | – | 844 | 844 |
Total | 943 | – | 14 | – | – | 957 | 957 |
(1) On account of fair value changes including interest accrued
(2) Excludes interest accrued on quoted debt securities carried at amortized cost
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 as at March 31, 2019:
(Dollars in millions)
Particulars | As at March 31, 2019 | Fair value measurement at end of the reporting period using | ||
Level 1 | Level 2 | Level 3 | ||
Assets | ||||
Investments in liquid mutual fund units (Refer to Note 2.2) | 258 | 258 | – | – |
Investments in fixed maturity plan securities (Refer to Note 2.2) | 66 | – | 66 | – |
Investments in quoted debt securities (Refer to Note 2.2) | 884 | 630 | 254 | – |
Investments in certificate of deposit (Refer to Note 2.2) | 358 | – | 358 | – |
Investments in commercial paper (Refer to Note 2.2) | 72 | – | 72 | – |
Investments in unquoted equity and preference securities (Refer to Note 2.2) | 18 | – | – | 18 |
Investments in unquoted investments others (Refer to Note 2.2) | 2 | – | – | 2 |
Derivative financial instruments - gain on outstanding foreign exchange forward and option contracts | 48 | – | 48 | – |
Liabilities | ||||
Derivative financial instruments - loss on outstanding foreign exchange forward and option contracts | 2 | – | 2 | – |
Liability towards contingent consideration (Refer to note 2.5)* | 27 | – | – | 27 |
*Discount rate pertaining to contingent consideration ranges from 9% to 16%
During the year ended March 31, 2019, quoted debt securities of $49 million were transferred from Level 2 to Level 1 of fair value hierarchy, since these were valued based on Quoted price and quoted debt securities of $108 million 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 as at March 31, 2018:
(Dollars in millions)
Particulars | As at March 31, 2018 | Fair value measurement at end of the reporting period using | ||
Level 1 | Level 2 | Level 3 | ||
Assets | ||||
Investments in liquid mutual fund units (Refer to Note 2.2) | 12 | 12 | – | – |
Investments in fixed maturity plan securities (Refer to Note 2.2) | 66 | – | 66 | – |
Investments in quoted debt securities (Refer to Note 2.2) | 940 | 701 | 239 | – |
Investments in certificate of deposit (Refer to Note 2.2) | 808 | – | 808 | – |
Investments in commercial paper (Refer to Note 2.2) | 45 | – | 45 | – |
Investments in unquoted equity and preference securities (Refer to Note 2.2) | 21 | – | – | 21 |
Investments in unquoted investments others (Refer to Note 2.2) | 10 | – | – | 10 |
Investments in unquoted convertible promissory note (Refer to Note 2.2) | 2 | – | – | 2 |
Derivative financial instruments- gain on outstanding foreign exchange forward and option contracts | 2 | – | 2 | – |
Liabilities | ||||
Derivative financial instruments- loss on outstanding foreign exchange forward and option contracts | 6 | – | 6 | – |
Liability towards contingent consideration (Refer to Note 2.5)* | 8 | – | – | 8 |
*Discounted contingent consideration at 10%
During the year ended March 31, 2018, quoted debt securities of $276 million were transferred from Level 2 to Level 1 of fair value hierarchy, since these were valued based on Quoted price and quoted debt securities of $130 million were transferred from Level 1 to Level 2 of fair value hierarchy, since these were valued based on market observable inputs.
A one percentage point change in the unobservable inputs used in fair valuation of Level 3 assets and liabilities does not have a significant impact in its value.
Income from financial assets is as follows:
(Dollars in millions)
Particulars | Year ended March 31, | |
2019 | 2018 | |
Interest income on financial assets carried at amortized cost | 201 | 260 |
Interest income on financial assets fair valued through other comprehensive income | 92 | 106 |
Dividend income on investments carried at fair value through profit or loss | – | 1 |
Gain / (loss) on investments carried at fair value through profit or loss | 24 | 39 |
317 | 406 |
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 monetary assets and liabilities as at March 31, 2019:
(Dollars in millions)
Particulars | U.S. dollars | Euro | United Kingdom Pound Sterling | Australian dollars | Other currencies | Total |
Cash and cash equivalents | 237 | 38 | 16 | 31 | 161 | 483 |
Trade receivables | 1,438 | 267 | 148 | 76 | 140 | 2,069 |
Unbilled revenue | 540 | 111 | 36 | 40 | 63 | 790 |
Other assets | 66 | 15 | 5 | 5 | 45 | 136 |
Trade payables | (102) | (19) | (20) | (12) | (15) | (168) |
Employee benefit obligations | (98) | (15) | (3) | (30) | (24) | (170) |
Other liabilities | (509) | (66) | (28) | (25) | (86) | (714) |
Net assets / (liabilities) | 1,572 | 331 | 154 | 85 | 284 | 2,426 |
The following table analyses foreign currency risk from monetary assets and liabilities as at March 31, 2018:
(Dollars in millions)
Particulars | U.S. dollars | Euro | United Kingdom Pound Sterling | Australian dollars | Other currencies | Total |
Cash and cash equivalents | 197 | 33 | 23 | 54 | 183 | 490 |
Trade receivables | 1,276 | 269 | 129 | 121 | 120 | 1,915 |
Unbilled revenue | 356 | 98 | 46 | 24 | 57 | 581 |
Other assets | 49 | 4 | 4 | 2 | 15 | 74 |
Trade payables | (42) | (12) | (17) | (5) | (9) | (85) |
Accrued expenses | (166) | (29) | (17) | (9) | (23) | (244) |
Employee benefit obligation | (88) | (13) | (4) | (28) | (20) | (153) |
Other liabilities | (97) | (21) | (12) | (5) | (49) | (184) |
Net assets / (liabilities) | 1,485 | 329 | 152 | 154 | 274 | 2,394 |
Sensitivity analysis between Indian Rupees and US Dollar
Particulars |
As at | |
March 31, 2019 | March 31, 2018 | |
Impact on the Group's incremental operating margins | 0.47% | 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's holds derivative financial instruments such as foreign exchange forward and option contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The counterparty for these contracts is generally a bank. 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)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Derivatives designated as cash flow hedges | ||
Options contracts | ||
In Australian dollars | 120 | 60 |
In Euro | 135 | 100 |
In United Kingdom Pound Sterling | 25 | 20 |
Other derivatives | ||
Forward contracts | ||
In Australian dollars | 8 | 5 |
In Canadian dollars | 13 | 20 |
In Euro | 176 | 91 |
In Japanese Yen | 550 | 550 |
In New Zealand dollars | 16 | 16 |
In Norwegian Krone | 40 | 40 |
In Singapore dollars | 140 | 5 |
In South African Rand | – | 25 |
In Swedish Krona | 50 | 50 |
In Swiss Franc | 25 | 21 |
In U.S. Dollars | 955 | 623 |
In United Kingdom Pound Sterling | 80 | 51 |
Options contracts | ||
In Australian dollars | 10 | 20 |
In Canadian dollars | 13 | – |
In Euro | 60 | 45 |
In Swiss Franc | 5 | 5 |
In U.S. Dollars | 433 | 320 |
In United Kingdom Pound Sterling | 10 | 25 |
The group recognized a net gain of $35 million and net gain of less than $1 million for the year ended March 31, 2019 and March 31, 2018 on derivative financial instruments not designated as cash flow hedges, which are included in other income.
The foreign exchange forward and option contracts mature within twelve months. The table below analyses the derivative financial instruments into relevant maturity groupings based on the remaining period as at the balance sheet date:
(Dollars in millions)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Not later than one month | 640 | 434 |
Later than one month and not later than three months | 1,001 | 701 |
Later than three months and not later than one year | 591 | 378 |
Total | 2,232 | 1,513 |
During the year ended March 31, 2019 and March 31, 2018, the Group has designated certain foreign exchange forward and option contracts as cash flow hedges to mitigate the risk of foreign exchange exposure on highly probable forecast cash transactions. The related hedge transactions for balance in cash flow hedging reserve as at March 31, 2019 are expected to occur and reclassified to statement of comprehensive income within 3 months.
Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument, including whether the hedging instrument is expected to offset changes in cash flows of hedged items.
If the hedge ratio for risk management purposes is no longer optimal but the risk management objective remains unchanged and the hedge continues to qualify for hedge accounting, the hedge relationship will be rebalanced by adjusting either the volume of the hedging instrument or the volume of the hedged item so that the hedge ratio aligns with the ratio used for risk management purposes. Any hedge ineffectiveness is calculated and accounted for in profit or loss at the time of the hedge relationship rebalancing.
The following table provides the reconciliation of cash flow hedge reserve for the year ended March 31, 2019 and March 31, 2018.
(Dollars in millions)
Particulars | Year ended March 31, | |
2019 | 2018 | |
Gain / (Loss) | ||
Balance at the beginning of the period | – | 6 |
Gain / (Loss) recognized in other comprehensive income during the period | 17 | (14) |
Amount reclassified to profit and loss during the period | (13) | 6 |
Tax impact on above | (1) | 2 |
Balance at the end of the period | 3 | – |
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 realize 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)
Particulars | As at | |||
March 31, 2019 | March 31, 2018 | |||
Derivative financial asset | Derivative financial liability |
Derivative financial asset |
Derivative financial liability | |
Gross amount of recognized financial asset/liability | 48 | (2) | 3 | (7) |
Amount set off | – | – | (1) | 1 |
Net amount presented in balance sheet | 48 | (2) | 2 | (6) |
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 $2,144 million and $2,016 million as at March 31, 2019 and March 31, 2018, respectively and unbilled revenue amounting to $777 million and $654 million as at March 31, 2019 and March 31, 2018, 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 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 ten customers:
(In %)
Particulars | Year ended March 31, | |
2019 | 2018 | |
Revenue from top customer | 3.6 | 3.4 |
Revenue from top ten customers | 19.0 | 19.3 |
Credit risk exposure
The allowance for lifetime expected credit loss on customer balances for the year ended March 31, 2019 and March 31, 2018 was $34 million and $5 million respectively.
Movement in credit loss allowance
(Dollars in millions)
Particulars | Year ended March 31, | |
2019 | 2018 | |
Balance at the beginning | 69 | 63 |
Translation differences | (2) | 2 |
Impairment loss recognized/(reversed) | 34 | 5 |
Write offs | (10) | (1) |
Balance at the end | 91 | 69 |
The Group’s credit period generally ranges from 30-60 days.
Credit exposure
(Dollars in millions)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Trade receivables | 2,144 | 2,016 |
Unbilled revenues | 777 | 654 |
Days Sales Outstanding (DSO) as of March 31, 2019 and March 31, 2018 was 66 and 67 days respectively.
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, fixed maturity plan securities, quoted bonds issued by government and quasi government organizations, non convertible debentures, certificates of deposits, commercial papers and government securities.
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 borrowings. The Group believes that the working capital is sufficient to meet its current requirements
As at March 31,2019 , the Group had a working capital of $4,951 million including cash and cash equivalents of $2,829 million and current investments of $958 million. As at March 31, 2018, the Group had a working capital of $5,243 million including cash and cash equivalents of $3,041 million and current investments of $982 million.
As at March 31, 2019 and March 31, 2018, the outstanding employee benefit obligations were $240 million and $225 million respectively, which have been substantially funded. Accordingly, no liquidity risk is perceived.
Under the Company's ongoing buyback program,
the maximum buyback size is 8,260 crore (approximately $1,184 million). The company has bought back shares amounting to
797 crore
(approximately $117 million) (including transaction costs) till March 31, 2019. (Refer to note 2.17)
The table below provides details regarding the contractual maturities of significant financial liabilities as at March 31, 2019:
(Dollars in millions)
Particulars | Less than 1 year | 1-2 years | 2-4 years | 4-7 years | Total |
Trade payables | 239 | – | – | – | 239 |
Other liabilities (excluding liability towards contingent consideration - Refer to Note 2.5) | 1,260 | 2 | 1 | – | 1,263 |
Liability towards contingent consideration on an undiscounted basis (Refer to Note 2.5) | 17 | 12 | – | 5 | 34 |
The table below provides details regarding the contractual maturities of significant financial liabilities as at March 31, 2018:
(Dollars in millions)
Particulars | Less than 1 year | 1-2 years | 2-4 years | 4-7 years | Total |
Trade payables | 107 | – | – | – | 107 |
Other liabilities (excluding liability towards acquisition -Refer to Note 2.5) | 836 | – | – | – | 836 |
Liability towards contingent consideration on an undiscounted basis (Refer to Note 2.5) | 6 | 1 | 1 | – | 8 |
2.4 Prepayments and other assets
Prepayments and other assets consist of the following:
(Dollars in millions)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Current | ||
Rental deposits | 2 | 2 |
Security deposits | 1 | 1 |
Loans to employees | 35 | 37 |
Prepaid expenses (1) | 108 | 72 |
Interest accrued and not due | 131 | 117 |
Withholding taxes and others(1) | 215 | 158 |
Advance payments to vendors for supply of goods (1) | 16 | 18 |
Deposit with corporations | 242 | 236 |
Escrow and other deposits pertaining to buyback (Refer to Note No 2.17) | 37 | – |
Deferred contract cost(1) | 8 | 7 |
Other assets | 32 | 14 |
Total Current prepayment and other assets | 827 | 662 |
Non-current | ||
Loans to employees | 3 | 6 |
Security deposits | 8 | 8 |
Deposit with corporations | 10 | 9 |
Prepaid gratuity (1) | 6 | 7 |
Prepaid expenses (1) | 23 | 17 |
Deferred contract cost (1) | 40 | 40 |
Advance towards purchase of business(1) (Refer to Note No 2.9) | 30 | – |
Withholding taxes and others(1) | 134 | 219 |
Rental Deposits | 28 | 26 |
Total Non- current prepayment and other assets | 282 | 332 |
Total prepayment and other assets | 1,109 | 994 |
Financial assets in prepayments and other assets | 529 | 456 |
(1) Non financial assets
Withholding taxes and others primarily consist of input tax credits and Cenvat recoverable from Government of India. Cenvat recoverable includes $76 million which are pending adjudication. The Group expects these amounts to be sustainable on adjudication and recoverable on final resolution.
Security deposits relate principally to leased telephone lines and electricity supplies. Deferred contract costs are upfront costs incurred for the contract and are amortized 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)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Current | ||
Accrued compensation to employees | 372 | 385 |
Accrued expenses | 480 | 376 |
Withholding taxes and others (1) | 215 | 190 |
Retention money | 16 | 20 |
Liabilities of controlled trusts | 24 | 21 |
Liability towards contingent consideration (Refer to note 2.9) | 14 | 6 |
Financial liability on account of buyback (Refer to note 2.17) | 174 | – |
Deferred rent (1) | 9 | 4 |
Capital creditors | 98 | 24 |
Others | 96 | 10 |
Total Current other liabilities | 1,498 | 1,036 |
Non-Current | ||
Liability towards contingent consideration (Refer to note 2.9) | 13 | 2 |
Accrued compensation to employees | 3 | - |
Accrued gratuity(1) | 4 | 4 |
Deferred income - government grant on land use rights (1) | 6 | 7 |
Deferred income (1) | 4 | 5 |
Deferred rent (1) | 25 | 24 |
Total Non-current other liabilities | 55 | 42 |
Total other liabilities | 1,553 | 1,078 |
Financial liabilities included in other liabilities | 1,290 | 844 |
Financial liability towards contingent consideration on an undiscounted basis (Refer to Note 2.9) | 34 | 8 |
(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.
In accordance with IAS 32 Financial Instruments: Presentation, the Company has recorded a financial liability of $174 million for the obligation to acquire its own equity shares to the extent of standing instructions provided to its registered broker for the buyback as of March 31, 2019 (refer to note 2.17). The financial liability is recognised at the present value of the maximum amount that the Company would be required to pay to the registered broker for buy back, with a corresponding debit in general reserve / retained earnings.
2.6 Provisions
Accounting Policy
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.
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.
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.
Provisions comprise the following:
(Dollars in millions)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Provision for post sales client support and other provisions | 83 | 75 |
83 | 75 |
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)
Particulars | Year ended March 31, 2019 |
Balance at the beginning | 75 |
Translation differences | – |
Provision recognized/(reversed) | 24 |
Provision utilized | (16) |
Balance at the end | 83 |
Provision for post sales client support and other provisions is included in cost of sales in the condensed consolidated statement of comprehensive income
As at March 31, 2019 and March 31, 2018, claims
against the company, not acknowledged as debts, (excluding demands from income tax authorities- Refer to Note 2.11) amounted to
230 crore ($33 million) and
260 crore ($40 million), respectively.
The Group 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
Accounting Policy
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(1) | 5 years |
Computer equipment | 3-5 years |
Furniture and fixtures | 5 years |
Vehicles | 5 years |
Leasehold improvements | Over lease term |
(1) includes solar plant with a useful life of 20 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 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 consolidated statement of comprehensive income.
Impairment
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 Cash Generating Unit (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.
Following are the changes in the carrying value of property, plant and equipment for the year ended March 31, 2019:
(Dollars in millions)
Particulars | Land | Buildings | Plant and machinery | Computer equipment | Furniture and fixtures | Vehicles | Total |
Gross carrying value as at April 1, 2018 | 292 | 1,247 | 518 | 749 | 285 | 5 | 3,096 |
Additions | 8 | 132 | 98 | 163 | 56 | 1 | 458 |
Additions- Business Combinations (Refer note 2.9) | – | – | 1 | 4 | 2 | – | 7 |
Deletions | (7) | (17) | (15) | (35) | (9) | – | (83) |
Reclassified from assets held for sale (Refer note 2.9) | – | – | – | 6 | 4 | – | 10 |
Translation difference | (17) | (71) | (30) | (42) | (17) | (1) | (178) |
Gross carrying value as at March 31, 2019 | 276 | 1,291 | 572 | 845 | 321 | 5 | 3,310 |
Accumulated depreciation as at April 1, 2018 | (5) | (417) | (359) | (557) | (203) | (3) | (1,544) |
Depreciation | (1) | (45) | (62) | (109) | (37) | (1) | (255) |
Accumulated depreciation on deletions | – | 15 | 12 | 33 | 8 | – | 68 |
Reclassified from assets held for sale (Refer note 2.9) | – | – | – | (4) | (3) | – | (7) |
Translation difference | 1 | 24 | 19 | 31 | 12 | 1 | 88 |
Accumulated depreciation as at March 31, 2019 | (5) | (423) | (390) | (606) | (223) | (3) | (1,650) |
Capital work-in progress as at March 31, 2019 | 271 | ||||||
Carrying value as at March 31, 2019 | 271 | 868 | 182 | 239 | 98 | 2 | 1,931 |
Capital work-in progress as at April 1, 2018 | 311 | ||||||
Carrying value as at April 1, 2018 | 287 | 830 | 159 | 192 | 82 | 2 | 1,863 |
Following are the changes in the carrying value of property, plant and equipment for the year ended March 31, 2018:
(Dollars in millions)
Particulars | Land | Buildings | Plant and machinery | Computer equipment | Furniture and fixtures | Vehicles | Total |
Gross carrying value as at April 1, 2017 | 272 | 1,123 | 466 | 700 | 261 | 5 | 2,827 |
Additions | 21 | 122 | 56 | 73 | 29 | 1 | 302 |
Deletions | – | – | (3) | (17) | (3) | (1) | (24) |
Reclassified as held for sale (Refer note 2.9) | – | – | – | (6) | (4) | – | (10) |
Translation difference | (1) | 2 | (1) | (1) | 2 | – | 1 |
Gross carrying value as at March 31, 2018 | 292 | 1,247 | 518 | 749 | 285 | 5 | 3,096 |
Accumulated depreciation as at April 1, 2017 | (4) | (376) | (301) | (471) | (168) | (3) | (1,323) |
Depreciation | (1) | (43) | (62) | (107) | (40) | (1) | (254) |
Accumulated depreciation on deletions | – | – | 2 | 17 | 3 | 1 | 23 |
Reclassified as held for sale (Refer note 2.9) | – | – | – | 4 | 3 | – | 7 |
Translation difference | – | 2 | 2 | - | (1) | – | 3 |
Accumulated depreciation as at March 31, 2018 | (5) | (417) | (359) | (557) | (203) | (3) | (1,544) |
Capital work-in progress as at March 31, 2018 | 311 | ||||||
Carrying value as at March 31, 2018 | 287 | 830 | 159 | 192 | 82 | 2 | 1,863 |
Capital work-in progress as at April 1, 2017 | 303 | ||||||
Carrying value as at April 1, 2017 | 268 | 747 | 165 | 229 | 93 | 2 | 1,807 |
The aggregate depreciation expense is included in cost of sales in the statement of comprehensive income.
Carrying value of land includes $83 million and $98 million as at March 31, 2019 and March 31, 2018, respectively, towards amounts paid under certain lease-cum-sale agreements to acquire land, including agreements where the Group has an option to purchase or renew the properties on expiry of the lease period.
The contractual commitments for capital expenditure were $249 million and $223 million as at March 31, 2019 and March 31, 2018, respectively.
2.8 Goodwill
Accounting Policy
Goodwill represents the cost of business acquisition in excess of the Group's interest in the net fair value of identifiable assets, liabilities and contingent liabilities of the acquiree. When the net fair value of the identifiable assets, liabilities and contingent liabilities acquired exceeds the cost of business acquisition, a gain is recognized immediately in net profit in the Statement of Comprehensive Income. Goodwill is measured at cost less accumulated impairment losses.
Impairment
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.
Following is a summary of changes in the carrying amount of goodwill:
(Dollars in millions)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Carrying value at the beginning | 339 | 563 |
Goodwill on Wongdoody acquisition (Refer to note 2.9) | 25 | – |
Goodwill on Brilliant Basics acquisition (Refer to note 2.9) | – | 5 |
Goodwill on Fluido acquisition (Refer to note 2.9) | 32 | – |
Goodwill reclassified from assets held for sale, net of reduction in recoverable amount (Refer note 2.9.2) | 138 | (247) |
Translation differences | (22) | 18 |
Carrying value at the end | 512 | 339 |
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 three months ended June 30, 2018, the Group internally reorganized some of its business segments to deepen customer relationships, improve focus of sales investments and increase management oversight. Consequent to the internal reorganization, there were changes in the business segments based on “Management approach” as defined under IFRS 8, Operating Segments.(Refer Note 2.14). Accordingly the goodwill has been allocated to the new operating segments as at March 31, 2019.
The following table presents the allocation of goodwill to operating segments as at March 31, 2019
(Dollars in millions)
Segment | As
at March 31, 2019 |
Financial services | 108 |
Retail | 63 |
Communication | 56 |
Energy, utilities, Resources and Services | 54 |
Manufacturing | 34 |
315 | |
Operating segments without significant goodwill | 61 |
Total | 376 |
Consequent to reclassification from held for sale (refer note 2.9.2), the goodwill pertaining to Panaya, Kallidus and Skava acquisitions are tested for impairment at the respective entity level, which amounts to $136 million as of March 31, 2019.
The following table presents the allocation of goodwill to operating segments (prior to internal reorganization) as at March 31, 2018:
(Dollars in millions)
Segment | As at March 31, 2018 |
Financial services | 73 |
Manufacturing | 39 |
Retail, Consumer packaged goods and Logistics | 48 |
Life Sciences, Healthcare and Insurance | 68 |
Energy & utilities, Communication and Services | 72 |
300 | |
Operating segments without significant goodwill | 39 |
Total | 339 |
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 cash flow projections over a period of five years. An average of the range of each assumption used is mentioned below. As at March 31, 2019 and March 31, 2018, the estimated recoverable amount of the CGU exceeded its carrying amount. The key assumptions used for the calculations are as follows:
In %
As at | ||
March 31, 2019 | March 31, 2018 | |
Long term growth rate | 8-10 | 8-10 |
Operating margins | 17-20 | 17-20 |
Discount rate | 12.5 | 13.5 |
The above discount rate is based on the Weighted Average Cost of Capital (WACC) of the Company. Management believes that any reasonable possible changes in the key assumptions would not cause the carrying amount to exceed the recoverable amount of the cash generating unit.
2.9 Business combination and Disposal Group held for sale
a. Business Combination
Accounting Policy
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.
The interest of non-controlling shareholders is initially measured either at fair value or at the non-controlling interests’ proportionate share of the acquiree’s identifiable net assets. The choice of measurement basis is made on an acquisition-by-acquisition basis. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests’ share of subsequent changes in equity of subsidiaries.
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.
Brilliant Basics Holdings Limited.
On September 8, 2017, Infosys acquired 100% of the voting interests in Brilliant Basics Holdings Limited., UK, (Brilliant Basics) a product design and customer experience innovator with experience in executing global programs. The business acquisition was conducted by entering into a share purchase agreement for cash consideration of $4 million, contingent consideration of up to $3 million and an additional consideration of $2 million, referred to as retention bonus, payable to the employees of Brilliant Basics at each anniversary year over the next two years, subject to their continuous employment with the group at each anniversary.
The payment of contingent consideration to sellers of Brilliant Basics is dependent upon the achievement of certain financial targets by Brilliant Basics over a period of 3 years ending on March, 2020.
The fair value of contingent consideration is determined by discounting the estimated amount payable to the sellers of Brilliant Basics on achievement of certain financial targets. The key inputs used in determination of the fair value of contingent consideration are the discount rate of 10% and the probabilities of achievement of the financial targets. The undiscounted value of contingent consideration is $2 million as at March 31, 2019.
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(*) | – | –- | – |
Intangible assets - Customer Relationships | – | 2 | 2 |
Deferred tax liabilities on intangible assets | – | – | – |
– | 2 | 2 | |
Goodwill | 5 | ||
Total purchase price | 7 |
*Includes cash and cash equivalents acquired of less than $1 million
The goodwill is not tax deductible.
The gross amount of trade receivables acquired and its fair value is less than $1 million and the amount has been substantially collected.
The fair value of each major class of consideration as of the acquisition date is as follows:
(Dollars in millions)
Component | Consideration settled |
Cash paid | 4 |
Fair value of contingent consideration | 3 |
Total purchase price | 7 |
The transaction costs of less than $1 million related to the acquisition have been included under administrative expenses in the statement of comprehensive income for the year ended March 31, 2018.
Wongdoody Holding Company Inc.
On May 22, 2018, Infosys acquired 100% of the voting interests in WongDoody Holding Company Inc., (WongDoody) an US-based, full-service creative and consumer insights agency. The business acquisition was conducted by entering into a share purchase agreement for a total consideration of up to $75 million, which includes a cash consideration of $38 million, contingent consideration of up to $28 million and an additional consideration of up to $9 million, referred to as retention bonus, payable to the employees of WongDoody over the next three years, subject to their continuous employment with the group.
WongDoody, brings to Infosys the creative talent and marketing and brand engagement expertise. Further the acquisition is expected to strengthen Infosys’ creative, branding and customer experience capabilities to bring innovative thinking, talent and creativity to clients.
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(*) | 5 | – | 5 |
Intangible assets - Customer contracts and relationships | – | 20 | 20 |
Intangible assets - Trade name | – | 1 | 1 |
5 | 21 | 26 | |
Goodwill | 25 | ||
Total purchase price | 51 |
* Includes cash and cash equivalents acquired of $8 million.
Goodwill is tax deductible
The fair value of each major class of consideration as of the acquisition date is as follows:
(Dollars in millions)
Component | Consideration settled |
Cash consideration | 38 |
Fair value of contingent consideration | 13 |
Total purchase price | 51 |
The gross amount of trade receivables acquired and its fair value is $2 million and the amount has been fully collected.
The payment of contingent consideration to sellers of WongDoody is dependent upon the achievement of certain financial targets by WongDoody. At the acquisition date, the key inputs used in determination of the fair value of contingent consideration are the discount rate of 16% and the probabilities of achievement of the financial targets. The undiscounted value of contingent consideration is $17 million.
The transaction costs of less than $1 million related to the acquisition have been included under administrative expenses in the statement of comprehensive income for the year ended March 31, 2019.
Infosys Compaz Pte Limited (formerly known as Trusted Source Pte Ltd)
On November 16, 2018, Infosys Consulting Pte Limited (a wholly owned subsidiary of Infosys Limited) acquired 60% stake in Infosys Compaz Pte. Ltd, a Singapore based IT services company. The business acquisition was conducted by entering into a share purchase agreement for a total consideration of up to SGD 17 million (approximately $13 million on acquisition date), which includes a cash consideration of SGD 10 million (approximately $8 million on acquisition date), contingent consideration of up to SGD 7 million (approximately $5 million on acquisition date).
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(*) | 13 | – | 13 |
Intangible assets - customer contracts and relationships | – | 6 | 6 |
Deferred tax liabilities on intangible assets | – | (1) | (1) |
13 | 5 | 18 | |
Less: Non-controlling interests | (7) | ||
Total purchase price | 11 |
* Includes cash and cash equivalents acquired of $ 9 million.
The fair value of each major class of consideration as at the acquisition date is as follows:
(Dollars in millions)
Component | Consideration settled |
Cash consideration | 8 |
Fair value of contingent consideration | 3 |
Total purchase price | 11 |
The gross amount of trade receivables acquired and its fair value is $7 million and the amount has been substantially collected.
The payment of contingent consideration to sellers of Infosys Compaz Pte. Ltd is dependent upon the achievement of certain revenue targets by Infosys Compaz Pte. Ltd. At the acquisition date, the key inputs used in determination of the fair value of contingent consideration are the discount rate of 9% and the probabilities of achievement of the financial targets. The undiscounted value of contingent consideration is SGD 7 million ($5 million).
The transaction costs of less than $1 million related to the acquisition have been included under administrative expenses in the statement of comprehensive income for the year ended March 31, 2019.
Fluido Oy
On October 11, 2018, Infosys Consulting Pte Limited (a wholly owned subsidiary of Infosys Limited) acquired 100% of voting interests in Fluido Oy (Fluido), a Nordic-based salesforce advisor and consulting partner in cloud consulting, implementation and training services for a total consideration of up to Euro 65 million (approximately $75 million), comprising of cash consideration of Euro 45 million (approximately $52 million), contingent consideration of up to Euro 12 million (approximately $ 14 million) and retention payouts of up to Euro 8 million (approximately $9 million), payable to the employees of Fluido over the next three years, subject to their continuous employment with the group.
Fluido brings to Infosys Salesforce expertise, alongside an agile delivery process that simplifies and scales digital efforts across channels and touchpoints. Further, Fluido strengthens Infosys’ presence across the Nordics region with developed assets and client relationships. 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 $ million)
Component | Acquiree's carrying amount | Fair value adjustments | Purchase price allocated |
Net assets(*) | 2 | – | 2 |
Intangible assets - Customer contracts and relationships | – | 21 | 21 |
Intangible assets - Salesforce Relationships | – | 8 | 8 |
Intangible assets - Brand | – | 4 | 4 |
Deferred tax liabilities on intangible assets | – | (7) | (7) |
2 | 26 | 28 | |
Goodwill | 32 | ||
Total purchase price | 60 |
* Includes cash and cash equivalents acquired of $ 4 million.
Goodwill is not tax deductible
The fair value of each major class of consideration as of the acquisition date is as follows:
(in $ million)
Component | Consideration settled |
Cash consideration | 52 |
Fair value of contingent consideration | 8 |
Total purchase price | 60 |
The gross amount of trade receivables acquired and its fair value is $4 million and the amount is fully collected.
The payment of contingent consideration to sellers of Fluido is dependent upon the achievement of certain financial targets by Fluido. At the acquisition date, the key inputs used in determination of the fair value of contingent consideration are the discount rate of 16% and the probabilities of achievement of the financal targets. The undiscounted value of contingent consideration is EUR 8 million ($9 million).
The transaction costs of $1 million related to the acquisition have been included under administrative expenses in the statement of comprehensive income for the year ended March 31, 2019.
Hitachi Procurement Service Co. Ltd
On April 1, 2019, Infosys Consulting Pte Limited (a wholly owned subsidiary of Infosys Limited) acquired 81% of voting interests in Hitachi Procurement Service Co., Ltd., (HIPUS), Japan, a wholly owned subsidiary of Hitachi Ltd, Japan for a total cash consideration of JPY 3.29 billion (approximately $30 million) on fulfilment of closing conditions. The company has paid an advance of JPY 3.29 billion (approximately $30 million) to Hitachi towards cash consideration on March 29, 2019. HIPUS handles indirect materials purchasing functions for the Hitachi Group.
As of April 12, 2019 (i.e., the date of adoption of financial statements by the Board of Directors), the Company is in the process of finalising the accounting for acquisition of HIPUS, including allocation of purchase consideration to identifiable assets and liabilities.
Proposed acquisition
Stater N.V.
On March 28, 2019, Infosys Consulting Pte Limited (a wholly owned subsidiary of Infosys Limited) entered into a definitive agreement to acquire 75% of the shareholding in Stater N.V., a wholly-owned subsidiary of ABN AMRO Bank N.V., Netherlands, for a consideration including base purchase price of up to EUR 127.5 million (approximately $143 million) and customary closing adjustments, subject to regulatory approvals and fulfilment of closing conditions.
2.9.2 Disposal Group held for sale
Accounting policy
Non-current assets and Disposal Group are classified as held for sale if their carrying amount is intended to be recovered principally through sale rather than through continuing use. The condition for classification of held for sale is met when the non-current asset or the Disposal Group is available for immediate sale and the same is highly probable of being completed within one year from the date of classification as held for sale. Non-current assets and Disposal Group held for sale are measured at the lower of carrying amount and fair value less cost to sell. Non-current assets and Disposal Group that ceases to be classified as held for sale shall be measured at the lower of carrying amount before the non-current asset and Disposal Group was classified as held for sale adjusted for any depreciation/ amortization and its recoverable amount at the date when the Disposal Group no longer meets the "Held for sale" criteria.
In the three months ended March 2018, the Company had initiated identification and evaluation of potential buyers for its subsidiaries, Kallidus and Skava (together referred to as "Skava”) and Panaya, collectively referred to as the “Disposal Group”. The Disposal Group was classified and presented separately as “held for sale” and was carried at the lower of carrying value and fair value. Consequently, a reduction in the fair value of Disposal Group held for sale amounting to $18 million in respect of Panaya had been recognized in the consolidated statement of comprehensive income for the three months and year ended March 31, 2018. During the three months ended June 30, 2018, on remeasurement, including consideration of progress in negotiations on offers from prospective buyers for Panaya, the Company has recorded a reduction in the fair value of Disposal Group held for sale amounting to $39 million in respect of Panaya.
During the three months ended December 31, 2018, based on evaluation of proposals received and progress of negotiations with potential buyers, the Company concluded that the Disposal Group does not meet the criteria for “Held for Sale’ classification because it is no longer highly probable that sale would be consummated by March 31, 2019 ( twelve months from date of initial classification “ as held for sale”) Accordingly, in accordance with IFRS 5 -" Non current Assets held for Sale and Discontinued Operations", the assets and liabilities of Panaya and Skava have been included on a line by line basis in the consolidated financial statements for the period and as at December 31, 2018 and March 31, 2019.
On reclassification from “Held for sale”, the assets of Panaya and Skava have been remeasured in the quarter ended December 31, 2018 at the lower of cost and recoverable amount resulting in recognition of additional depreciation and amortization expenses of $12 million and an adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" of $65 million (comprising of $52 million towards goodwill and $13 million towards value of customer relationships) in respect of Skava in the consolidated statement of comprehensive income for the three months and nine months ended December 31, 2018.
2.10 Employees' Stock Option Plans (ESOP)
Accounting Policy
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.
2015 Stock Incentive Compensation Plan (the 2015 Plan) (formerly 2011 RSU Plan):
On March 31, 2016, pursuant to the approval by the shareholders through postal ballot, the Board has been authorized to introduce, offer, issue and allot share-based incentives to eligible employees of the Company and its subsidiaries under the 2015 Stock Incentive Compensation Plan (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 are held by the trust towards the 2011 Plan as at March 31, 2016). Out of this 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 on the date of the grant. These instruments will generally 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. The plan numbers mentioned above would further be adjusted for the September 2018 bonus issue.
Consequent to the September 2018 bonus issue, all outstanding options granted under the stock option plan have been adjusted for bonus shares. Unless otherwise stated , all the prior period share numbers, share prices and weighted average exercise prices in this note have been adjusted to give effect to the September 2018 bonus issue.
Controlled trust holds 20,324,982 and 10,801,956 shares (not adjusted for September, 2018 bonus issue) as at March 31, 2019 and March 31, 2018, respectively under the 2015 plan. Out of these shares 200,000 and 100,000 (not adjusted for September, 2018 bonus issue) equity shares have been earmarked for welfare activities of the employees as at March 31, 2019 and March 31, 2018, respectively.
The following is the summary of grants during the year ended March 31, 2019 and March 31, 2018 under the 2015 Plan:
Particulars | Year ended March 31 | |
2019 | 2018 | |
RSU | ||
Salil Parekh, CEO and MD - Refer Note 1 below | 260,130 | 226,048 |
U.B. Pravin Rao, COO and WTD | 68,250 | 54,500 |
Dr. Vishal Sikka* | – | 540,448 |
Other KMPs | 347,150 | 546,200 |
Employees other than KMP | 3,665,170 | 3,194,020 |
4,340,700 | 4,561,216 | |
ESOP | ||
U.B. Pravin Rao, COO and WTD | – | 86,000 |
Dr. Vishal Sikka* | – | 661,050 |
Other KMPs | – | 88,900 |
Employees other than KMP | – | 147,200 |
– | 983,150 | |
Incentive units- cash settled | ||
Other employees | 74,090 | 100,080 |
74,090 | 100,080 | |
Total grants | 4,414,790 | 5,644,446 |
Information in the table above is adjusted for September 2018 bonus issue.
* | Upon Dr. Vishal Sikka's resignation from the roles of the company, the unvested RSUs and ESOPs have been forfeited |
1. Stock incentives granted to Salil Parekh, CEO & MD
Pursuant to the approval of the shareholders through a postal ballot on February 20 , 2018, Salil Parekh (CEO & MD) is eligible to receive under the 2015 Plan :
a) | an annual grant of RSUs of fair value ![]() |
b) | a one-time grant of RSUs of fair value ![]() |
c) | annual grant of performance based RSUs of fair value ![]() |
The Board based on the recommendations of the Nomination and Remuneration committee approved on February 27, 2018, the annual time based grant for fiscal 2018 of 56,512 RSUs (adjusted for September 2018 bonus issue) and the one-time time based grant of 169,536 RSUs (adjusted for September 2018 bonus issue). The grants were made effective February 27, 2018
Further, the Board, based on the recommendations of the Nomination and Remuneration Committee, granted 217,200 (adjusted for September 2018 bonus issue) performance based RSUs to Salil Parekh with an effective date of May 2, 2018. The grants would vest upon successful completion of three full fiscal years with the Company concluding on March 31, 2021 and will be determined based on achievement of certain performance targets for the said three-year period.
The Board based on the recommendations of the Nomination and Remuneration committee approved on January 11, 2019, the annual time based grant for fiscal 2019 of 42,930 RSUs. The grant was made effective February 1, 2019.
Though the annual time based grants for the remaining employment term ending on March 31, 2023 have not been granted as at March 31, 2019, since the service commencement date precedes the grant date, the company has recorded employment stock compensation expense in accordance with IFRS 2, Share based payments.
The RSUs and stock options would vest generally over a period of 4 years 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.
As at March 31, 2019 and March 31, 2018, incentive units outstanding (net of forfeitures) were 177,454 and 223,514 (adjusted for September 2018 bonus issue), respectively.
Break-up of employee stock compensation expense
(Dollars in millions)
Particulars | Year ended March 31 | |
2019 | 2018 | |
Granted to: | ||
KMP(2) | 5 | (2) |
Employees other than KMP | 24 | 15 |
Total (1) | 29 | 13 |
(1) Cash settled stock compensation expense included in the above | 1 | 1 |
(2) | Included a reversal of stock compensation cost of $5 million recorded during the three months ended September 30, 2017 towards forfeiture of stock incentives granted to Dr. Vishal Sikka upon his resignation |
The carrying value of liability towards cash settled share based payments was $1 million and $1 million as at March 31, 2019 and March 31, 2018.
The activity in the 2015 Plan (formerly 2011 RSU Plan) for equity-settled share based payment transactions during the year ended March 31, 2019 and March 31, 2018 is set out below:
Particulars | Year ended March 31, 2019 | Year ended March 31, 2018 | ||
Shares arising out of options | Weighted average exercise price ($) | Shares arising out of options | Weighted average exercise price ($) | |
2015 Plan: RSU | ||||
Outstanding at the beginning | 7,500,818 | 0.04 | 5,922,746 | 0.04 |
Granted | 4,340,700 | 0.05 | 4,561,216 | 0.04 |
Exercised | 1,864,510 | 0.04 | 1,296,434 | 0.04 |
Forfeited and expired | 795,810 | 0.04 | 1,686,710 | 0.04 |
Outstanding at the end | 9,181,198 | 0.05 | 7,500,818 | 0.04 |
Exercisable at the end | 235,256 | 0.04 | 48,410 | 0.04 |
2015 Plan: Employee Stock Options (ESOPs) | ||||
Outstanding at the beginning | 1,933,826 | 7.62 | 2,395,300 | 7.63 |
Granted | – | – | 983,150 | 7.31 |
Exercised | 117,350 | 7.35 | 104,824 | 7.63 |
Forfeited and expired | 193,300 | 7.43 | 1,339,800 | 7.42 |
Outstanding at the end | 1,623,176 | 7.46 | 1,933,826 | 7.62 |
Exercisable at the end | 698,500 | 7.46 | 393,824 | 7.63 |
Information in the table above is adjusted for September 2018 bonus issue
During the year ended March 31, 2019 and March 31, 2018, the weighted average share price of options exercised under the 2015 Plan on the date of exercise was $10.01 and $7.74 (adjusted for September 2018 bonus issue) respectively.
The following table summarizes information about equity settled RSUs and ESOPs outstanding as at March 31, 2019:
Options outstanding | |||
Range of exercise prices per share ($) | No. of shares arising out of options | Weighted average remaining contractual life | Weighted average exercise price ($) |
2015 Plan: | |||
0 - 0.07 (RSU) | 9,181,198 | 1.70 | 0.05 |
6 - 8 (ESOP) | 1,623,176 | 5.04 | 7.46 |
10,804,374 | 2.20 | 1.16 |
Information in the table above is adjusted for September 2018 bonus issue
The following table summarizes information about equity settled RSUs and ESOPs outstanding as at March 31, 2018:
Options outstanding | |||
Range of exercise prices per share ($) | No. of shares arising out of options | Weighted average remaining contractual life | Weighted average exercise price ($) |
2015 Plan: | |||
0 - 0.04 (RSU) | 7,500,818 | 1.89 | 0.04 |
6 - 8 (ESOP) | 1,933,826 | 6.60 | 7.62 |
9,434,644 | 2.57 | 1.59 |
Information in the table above is adjusted for September 2018 bonus issue
The fair value of each equity settled award is estimated on the date of grant using the Black-Scholes-Merton model with the following assumptions:
Particulars | For options granted in | |
Fiscal 2019- Equity Shares-RSU |
Fiscal 2019- ADS-RSU | |
Weighted average share price (![]() |
696 | 10.77 |
Exercise price (![]() |
3.31 | 0.06 |
Expected volatility (%) | 21-25 | 22-26 |
Expected life of the option (years) | 1-4 | 1-4 |
Expected dividends (%) | 2.65 | 2.65 |
Risk-free interest rate (%) | 7-8 | 2-3 |
Weighted average fair value as on grant date (![]() |
648 | 10.03 |
Particulars | For options granted in | |||
Fiscal 2018- Equity Shares-RSU |
Fiscal 2018- Equity shares ESOP |
Fiscal 2018- ADS-RSU |
Fiscal 2018- ADS- ESOP | |
Weighted average share price (![]() |
572 | 461 | 8.31 | 7.32 |
Exercise price (![]() |
2.50 | 459 | 0.04 | 7.33 |
Expected volatility (%) | 20-25 | 25-28 | 21-26 | 25-31 |
Expected life of the option (years) | 1 - 4 | 3 - 7 | 1 - 4 | 3 - 7 |
Expected dividends (%) | 2.78 | 2.78 | 2.74 | 2.74 |
Risk-free interest rate (%) | 6 - 7 | 6 - 7 | 1 - 2 | 1 - 2 |
Weighted average fair value as on grant date (![]() |
533 | 127 | 7.74 | 1.47 |
(1) Adjusted for September 2018 bonus issue
The expected life of the RSU / ESOP is estimated based on the vesting term and contractual term of the RSU / ESOP, as well as expected exercise behavior of the employee who receives the RSU / ESOP. Expected volatility during the expected term of the RSU / ESOP 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 / ESOP.
2.11 Income taxes
Accounting policy
Income tax expense comprises current and deferred income tax. Income tax expense is recognized in net profit in the consolidated statement of comprehensive income except to the extent that it relates to items recognized directly in equity, in which case it is recognized in other comprehensive income. Current income tax for current and prior periods is recognized at the amount expected to be paid to or recovered from the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred income tax assets and liabilities are recognized for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements except when the deferred income tax arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of the transaction. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
Deferred income tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date and are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of changes in tax rates on deferred income tax assets and liabilities is recognized as income or expense in the period that includes the enactment or the substantive enactment date. A deferred income tax asset is recognized to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can be utilized. Deferred income taxes are not provided on the undistributed earnings of subsidiaries and branches where it is expected that the earnings of the subsidiary or branch will not be distributed in the foreseeable future. The Group offsets current tax assets and current tax liabilities, where it has a legally enforceable right to set off the recognized amounts and where it intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously. The income tax provision for the interim period is made based on the best estimate of the annual average tax rate expected to be applicable for the full financial year. Tax benefits of deductions earned on exercise of employee share options in excess of compensation charged to income are credited to share premium.
Income tax expense in the consolidated statement of comprehensive income comprises:
(Dollars in millions)
Particulars | Year ended March 31, | |
2019 | 2018 | |
Current taxes | ||
Domestic taxes | 600 | 721 |
Foreign taxes | 217 | (12) |
817 | 709 | |
Deferred taxes | ||
Domestic taxes | 3 | (80) |
Foreign taxes | (17) | 28 |
(14) | (52) | |
Income tax expense | 803 | 657 |
During the quarter ended March 31, 2019, the Company entered into Advance Pricing Agreement (APA) in overseas jurisdictions resulting in a reversal of income tax expense of $14 million which pertained to prior periods.
In December 2017, the Company had concluded an Advance Pricing Agreement (“APA”) with the US Internal Revenue Service ("IRS") for the US branch covering the years ending March 2011 to March 2021. Under the APA, the Company and the IRS have agreed on the methodology to allocate revenues and compute the taxable income of the Company’s US Branch operations. In accordance with the APA, the company had reversed income tax expense provision of $225 million which pertained to previous periods which are no longer required. The Company had to pay an adjusted amount of approximately $223 million due to the difference between the taxes payable for prior periods as per the APA and the actual taxes paid for such periods. The Company has paid $215 million.
Further, the “Tax Cuts and Jobs Act (H.R. 1)” was signed into law on December 22, 2017 (“US Tax Reforms”). The US tax reforms has reduced federal tax rates from 35% to 21% effective January 1, 2018 amongst other measures.
Income tax expense for the year ended March 31, 2019 and March 31, 2018 includes reversal (net of provisions) of $18 million and reversal (net of provisions) of $45 million respectively pertaining to prior periods on account of adjudication of certain disputed matters in favor of the Group across various jurisdictions.
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)
Particulars | Year ended March 31, | |
2019 | 2018 | |
Profit before income taxes | 3,003 | 3,143 |
Enacted tax rates in India | 34.94% | 34.61% |
Computed expected tax expense | 1,049 | 1,088 |
Tax effect due to non-taxable income for Indian tax purposes | (386) | (321) |
Overseas taxes | 102 | 109 |
Tax provision (reversals) | (25) | (253) |
Effect of differential overseas tax rates | – | 8 |
Effect of exempt non operating income | (8) | (10) |
Effect of unrecognized deferred tax assets | 13 | 29 |
Effect of non-deductible expenses | 50 | 9 |
Branch profit tax (net of credits) | 4 | (32) |
Subsidiary dividend distribution tax | – | 27 |
Others | 4 | 3 |
Income tax expense | 803 | 657 |
The applicable Indian corporate statutory tax rate for the year ended March 31, 2019 and March 31, 2018 is 34.94% and 34.61%, respectively. The increase in the corporate statutory tax rate to 34.94% is consequent to changes made in the Finance Act, 2018.
Other income for the year ended March 31, 2019 and March 31, 2018 includes interest on income tax refund of $7 million and $41 million, respectively.
The foreign tax expense is due to income taxes payable overseas, principally in the United States. In India, the Group has benefited from certain income tax incentives that the Government of India had provided for export of software and services from the units registered under the Special Economic Zones Act (SEZs), 2005. SEZ units which began the provision of services on or after April 1, 2005 are eligible for a deduction of 100% 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% 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 for the eligible SEZ units and utilization of such reserve by the Group 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 at March 31, 2019, Infosys' U.S. branch net assets amounted to approximately $751 million. As at March 31, 2019, the Company has a deferred tax liability for branch profit tax of $29 million (net of credits), as the Company estimates that these branch profits are expected to be distributed in the foreseeable future.
Entire deferred income tax for the year ended March 31, 2019 and March 31, 2018 relates to origination and reversal of temporary differences except for a credit of $24 million (on account of US Tax Reforms explained above), for the year ended March 31, 2018.
During the year ended March 31, 2018, the Company received $130 million as dividend from its majority owned subsidiary. Dividend distribution tax paid by the subsidiary on such dividend has been reduced as credit against dividend distribution tax payable by Infosys. Accordingly, the group has recorded a charge of $27 million as income tax expense during the year ended March 31, 2018.
As at March 31, 2018, claims against the Group
not acknowledged as debts from the Indian Income tax authorities amounted to 4,542 crore ($697 million). Amount paid to
statutory authorities against this amounted to
6,540 crore ($1,003 million).
As at March 31, 2019, claims against the Group
not acknowledged as debts from the Income tax authorities amounted to 2,851 crore ($412 million). These matters are pending
before various Appellate Authorities and the management including its tax advisors expect that its position will likely be upheld
on ultimate resolution and will not have a material adverse effect on the Group's financial position and results of operations.
Amount paid to statutory authorities against
the above tax claims amounted to 5,924 crore ($857 million).
Subsequent to March 31, 2018, the Supreme Court of India ruled favorably in respect of certain income tax claims which have been given effect in the above disclosure of claims as of March 31, 2019.
2.12 Reconciliation of basic and diluted shares used in computing earnings per share
Accounting Policy
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.
The following is a reconciliation of the equity shares used in the computation of basic and diluted earnings per equity share:
Particulars | Year ended March 31, | |
2019 | 2018 | |
Basic earnings per equity share - weighted average number of equity shares outstanding(1) | 4,347,130,157 | 4,510,664,644 |
Effect of dilutive common equivalent shares - share options outstanding | 6,290,615 | 4,483,096 |
Diluted earnings per equity share - weighted average number of equity shares and common equivalent shares outstanding | 4,353,420,772 | 4,515,147,740 |
(1) excludes treasury shares
The above table is adjusted for September 2018 bonus issue
For the year ended March 31, 2019, no options to purchase equity shares had an anti-dilutive effect.
For the year ended March 31, 2018, 134,476 (adjusted for September 2018 bonus issue) number of options to purchase equity shares had an anti-dilutive effect.
2.13 Related party transactions
Refer Note 2.19 "Related party transactions" in the Company’s 2018 Annual Report on Form 20-F for the full names and other details of the Company's subsidiaries, associate and controlled trusts.
Infosys has provided guarantee for performance of certain contracts entered into by its subsidiaries.
Changes in Subsidiaries
During the year ended March 31, 2019, the following are the changes in the subsidiaries:
- | Lodestone Management Consultants Inc. has been liquidated effective May 17, 2018 |
- | On May 22, 2018, Infosys acquired 100% voting rights in WongDoody Holding Company Inc., along with its two subsidiaries, WDW Communications, Inc and WongDoody, Inc. (Refer note 2.9) |
- | Lodestone Management Consultants GmbH name changed to Infosys Austria GmbH |
- | On August 6, 2018, Infosys Luxembourg SARL was incorporated as a wholly-owned subsidiary of Infosys Limited |
- | Infosys Consulting Ltda became the majority owned and controlled subsidiary of Infosys Limited |
- | On October 11, 2018, Infosys Consulting Pte Ltd, a wholly-owned subsidiary of Infosys Limited, acquired 100% voting interest in Fluido Oy along with its five subsidiaries Fluido Sweden AB (Extero), Fluido Norway A/S, Fluido Denmark A/S, Fluido Slovakia s.r.o and Fluido Newco AB (Refer to note 2.9) |
- | On November 16, 2018, Infosys Consulting Pte Ltd. (Wholly owned Subsidiary of Infosys) acquired 60% voting interest in Infosys Compaz Pte Ltd. (formerly Trusted Source Pte Ltd.) (Refer to note 2.9) |
- | On November 27, 2018, Infosys Canada Public Services Inc is incorporated as a wholly-owned subsidiary of Infosys Public Services Inc which is a wholly-owned subsidiary of Infosys Limited. |
- | On November 29, 2018, Infosys CIS LLC was incorporated as a wholly-owned subsidiary of Infosys Limited |
- | On December 19, 2018, Infosys South Africa (Pty) Ltd is incorporated as a wholly owned subsidiary of Infosys Consulting Pte Ltd which is a wholly-owned subsidiary of Infosys Limited. |
- | S.C. Infosys Consulting S.R.L. became wholly owned subsidiary of Infosys Ltd. |
- | Lodestone Management Consultants Co Ltd name has been changed to “Infosys Consulting (Shanghai) Co. Ltd.” |
Changes in Key management personnel
The following were the changes in key management personnel:-
• | Nilanjan Roy has been appointed as Chief Financial Officer effective March 1, 2019 |
• | Jayesh Sanghrajka was appointed as Interim Chief Financial Officer effective November 17, 2018. He resumed his responsibilities as Deputy Chief Financial Officer effective March 1, 2019 |
• | M.D. Ranganath resigned as Chief Financial Officer effective November 16, 2018 |
• | Michael Nelson Gibbs appointed as an Independent Director effective July 13, 2018 |
• | Ravi Venkatesan, resigned from his position as Co-Chairman effective August 24, 2017 and resigned as member of the Board effective May 11, 2018 |
Transactions with key management personnel
The table below describes the compensation to key management personnel which comprise directors and executive officers:
(Dollars in millions)
Particulars | Year ended March 31, | |
2019 | 2018 | |
Salaries and other employee benefits to whole-time directors and executive officers(1)(2)(3)(4)(5) | 14 | 8 |
Commission and other benefits to non-executive/ independent directors | 1 | 2 |
Total | 15 | 10 |
(1) | Total employee stock compensation expense for the year ended March 31, 2019 includes $5 million towards key managerial personnel. For the year ended March 31, 2018,a reversal of employee stock compensation expense of $2 million was recorded towards key managerial personnel.(Refer to note 2.10) |
(2) | Includes a reversal of stock compensation cost of $5 million recorded during the three months ended September 30, 2017 towards forfeiture of stock incentive granted to Dr. Vishal Sikka upon his resignation (Refer to note 2.10) |
(3) | On December 20, 2018, the Board appointed Nilanjan Roy as the Chief Financial Officer of the Company with effect from March 1, 2019. |
(4) | On December 2, 2017, the Board appointed Salil Parekh as the Chief Executive Officer and Managing Director of the Company with effect from January 2, 2018. |
(5) | On June 16, 2017, the Board appointed Inderpreet Sawhney as the Group General Counsel and Chief Compliance Officer of the Company with effect from July 3, 2017; The Board in their meeting held on July 14, 2017 designated her as an Executive Officer with effect from the date of the meeting. |
Investment in Associate
During the three months ended June 30, 2017, the Company has written down the entire carrying value of the investment in its associate DWA Nova LLC amounting to $11 million.
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 three months ended June 30, 2018, the Group internally reorganized some of its business segments to deepen customer relationships, improve focus of sales investments and increase management oversight. Consequent to the internal reorganization, there were changes in the reportable business segments based on “Management approach” as defined under IFRS 8, Operating Segments. Therefore, enterprises in Insurance which was earlier considered under the Life Sciences, Healthcare and Insurance business segment are now considered under the Financial Services business segment and enterprises in Communication, Telecom OEM and Media which was earlier under Energy & Utilities, Communication and Services is now shown as a separate business segment. Segmental operating income has changed in line with these as well as changes in the allocation method. The CODM evaluates the Group's performance and allocates resources based on an analysis of various performance indicators by business segments. Accordingly, information has been presented along business 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 accounting policies.
Business segments of the Group are primarily enterprises in Financial Services and Insurance, enterprises in Manufacturing, enterprises in Retail, Consumer Packaged Goods and Logistics, enterprises in the Energy, Utilities, Resources and Services, enterprises in Communication, Telecom OEM and Media, enterprises in Hi-Tech, enterprises in Life Sciences and Healthcare and all other segments. The Financial services reportable segments has been aggregated to include the Financial Services operating segment and Finacle operating segment because of the similarity of the economic characteristics. All other segments represent the operating segments of businesses in India, Japan, China, Infosys Public Services & other enterprises in Public Services. Consequent to the above change in the composition of reportable business segments, the prior year comparatives for the year ended March 31, 2018 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 Infosys Public Services and revenue generated from customers located in India, Japan and China and other enterprises in public service. 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 efforts 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. The 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.
Business segment revenue information is collated based on individual customers invoiced or in relation to which the revenue is otherwise recognized.
2.14.1 Business Segments
Year ended March 31, 2019 and March 31, 2018
(Dollars in millions)
Financial Services | Retail | Communication | Energy, Utilities, Resources and Services | Manufacturing | Hi Tech | Life Sciences | All Other segments | Total | |
Revenues | 3,778 | 1,935 | 1,488 | 1,483 | 1,163 | 882 | 743 | 327 | 11,799 |
3,594 | 1,760 | 1,378 | 1,287 | 1,035 | 796 | 729 | 360 | 10,939 | |
Identifiable operating expenses | 2,021 | 974 | 816 | 808 | 644 | 506 | 394 | 202 | 6,365 |
1,876 | 878 | 702 | 652 | 602 | 431 | 378 | 208 | 5,727 | |
Allocated expenses | 775 | 385 | 312 | 312 | 255 | 154 | 147 | 109 | 2,449 |
731 | 371 | 269 | 261 | 235 | 140 | 135 | 122 | 2,264 | |
Segment profit | 982 | 576 | 360 | 363 | 264 | 222 | 202 | 16 | 2,985 |
987 | 511 | 407 | 374 | 198 | 225 | 216 | 30 | 2,948 | |
Unallocable expenses | 289 | ||||||||
289 | |||||||||
Operating profit | 2,696 | ||||||||
2,659 | |||||||||
Other income, net (Refer Note 2.16) | 411 | ||||||||
513 | |||||||||
Reduction in the fair value of Disposal Group held for sale (Refer Note 2.9) | (39) | ||||||||
(18) | |||||||||
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" (Refer Note 2.9) | (65) | ||||||||
– | |||||||||
Share in net profit/(loss) of associate, including impairment | – | ||||||||
(11) | |||||||||
Profit before Income taxes | 3,003 | ||||||||
3,143 | |||||||||
Income tax expense | 803 | ||||||||
657 | |||||||||
Net profit | 2,200 | ||||||||
2,486 | |||||||||
Depreciation and amortization | 287 | ||||||||
289 | |||||||||
Non-cash expenses other than depreciation and amortization | 107 | ||||||||
29 |
2.14.2 The following table sets forth our revenue by Geography for the year ended March 31, 2019 and March 31, 2018
(Dollars in millions)
North America | Europe | India | Rest of the World | Total | |
2019 | 7,141 | 2,847 | 292 | 1,519 | 11,799 |
2018 | 6,605 | 2,596 | 346 | 1,392 | 10,939 |
2.14.3 Significant clients
No client individually accounted for more than 10% of the revenues for the year ended March 31, 2019 and March 31, 2018, respectively.
2.15 Revenue from Operations
Accounting Policy:
The Group derives revenues primarily from business IT services comprising of software development and related services, consulting and package implementation and from the licensing of software products and platforms across our core and digital offerings (“together called as software related services”)
Effective April 1, 2018, the Group adopted IFRS 15 “Revenue from Contracts with Customers” using the cumulative catch-up transition method, applied to contracts that were not completed as of April 1, 2018. In accordance with the cumulative catch-up transition method, the comparatives have not been retrospectively adjusted. The following is a summary of new and/or revised significant accounting policies related to revenue recognition. Refer Note 2.10 "Revenue from operations" in the Company’s 2018 Annual Report on Form 20-F for the policies in effect for revenue prior to April 1, 2018. The effect on adoption of IFRS 15 was insignificant.
Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services.
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 invoicing to the reporting date is recognized as unbilled revenue. Revenue from fixed-price, fixed-timeframe contracts, where the performance obligations are satisfied over time and 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. Maintenance revenue is recognized ratably over the term of the underlying maintenance arrangement.
Revenues in excess of invoicing are classified as contract assets (which we refer as unbilled revenue) while invoicing in excess of revenues are classified as contract liabilities (which we refer to as unearned revenues).
In arrangements for software development and related services and maintenance services, the Group has applied the guidance in IFRS 15, Revenue from contract with customer, by applying the revenue recognition criteria for each distinct performance obligation. The arrangements with customers generally meet the criteria for considering software development and related services as distinct performance obligations. For allocating the transaction price, the Group has measured the revenue in respect of each performance obligation of a contract at its relative standalone selling price. The price that is regularly charged for an item when sold separately is the best evidence of its standalone selling price. In cases where the Group is unable to determine the standalone selling price, the Group uses the expected cost plus margin approach in estimating the standalone selling price. For software development and related services, the performance obligations are satisfied as and when the services are rendered since the customer generally obtains control of the work as it progresses.
Revenue from licenses where the customer obtains a “right to use” the licenses is recognized at the time the license is made available to the customer. Revenue from licenses where the customer obtains a “right to access” is recognized over the access period. Arrangements to deliver software products generally have three elements: license, implementation and Annual Technical Services (ATS). The Group has applied the principles under IFRS 15 to account for revenues from these performance obligations. When implementation services are provided in conjunction with the licensing arrangement and the license and implementation have been identified as two separate performance obligations, the transaction price for such contracts are allocated to each performance obligation of the contract based on their relative standalone selling prices. In the absence of standalone selling price for implementation, the performance obligation is estimated using the expected cost plus margin approach. Where the license is required to be substantially customized as part of the implementation service the entire arrangement fee for license and implementation is considered to be a single performance obligation and the revenue 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 performance obligations are satisfied. ATS revenue is recognized ratably over the period in which the services are rendered.
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 to each of the underlying performance obligation that corresponds to the progress by the customer towards earning the discount/ incentive. Also, when the level of discount varies with increases in levels of revenue transactions, the Group recognizes the liability based on its estimate of the customer's future purchases. If it is probable that the criteria for the discount will not be met, or if the amount thereof cannot be estimated reliably, then discount is not recognized until the payment is probable and the amount can be estimated reliably. The Group recognizes changes in the estimated amount of obligations for discounts in the period in which the change occurs.
Deferred contract costs are incremental costs of obtaining a contract which are recognised as assets and amortized over the term of the contract.
Contract modifications are accounted for when additions, deletions or changes are approved either to the contract scope or contract price. The accounting for modifications of contracts involves assessing whether the services added to an existing contract are distinct and whether the pricing is at the standalone selling price. Services added that are not distinct are accounted for on a cumulative catch up basis, while those that are distinct are accounted for prospectively, either as a separate contract, if the additional services are priced at the standalone selling price, or as a termination of the existing contract and creation of a new contract if not priced at the standalone selling price.
The Group presents revenues net of indirect taxes in its consolidated statement of comprehensive income.
Revenues for the year ended March 31, 2019 and March 31, 2018 is as follows:
(Dollars in millions)
Particulars | Year ended March 31, | |
2019 | 2018 | |
Revenue from software services | 11,184 | 10,371 |
Revenue from products and platforms | 615 | 568 |
Total revenue from operations | 11,799 | 10,939 |
Disaggregate revenue information
The table below presents disaggregated revenues from contracts with customers by geography, offerings and contract-type for each of our business segments. The Group believes this disaggregation best depicts how the nature, amount, timing and uncertainty of revenues and cash flows are affected by industry, market and other economic factors.
Year ended March 31, 2019
(Dollars in millions)
Particulars | Financial Services (1) | Retail(2) | Communication (3) | Energy, Utilities, resources and Services | Manufacturing | Hi Tech | Life Sciences(4) | Others (5) | Total |
Revenues by Geography | |||||||||
North America | 2,290 | 1,255 | 796 | 838 | 619 | 844 | 438 | 61 | 7,141 |
Europe | 698 | 548 | 271 | 507 | 499 | 15 | 287 | 22 | 2,847 |
India | 172 | 3 | 8 | – | 12 | 20 | 2 | 75 | 292 |
Rest of the world | 618 | 129 | 413 | 138 | 33 | 3 | 16 | 169 | 1,519 |
Total | 3,778 | 1,935 | 1,488 | 1,483 | 1,163 | 882 | 743 | 327 | 11,799 |
Revenue by offerings | |||||||||
Services | |||||||||
Digital | 1,076 | 630 | 491 | 427 | 327 | 285 | 156 | 44 | 3,436 |
Core | 2,293 | 1,255 | 971 | 1,026 | 805 | 584 | 539 | 275 | 7,748 |
Subtotal | 3,369 | 1,885 | 1,462 | 1,453 | 1,132 | 869 | 695 | 319 | 11,184 |
Products and platforms | |||||||||
Digital | 104 | 43 | 25 | 10 | 20 | 12 | 29 | 6 | 249 |
Core | 305 | 7 | 1 | 20 | 11 | 1 | 19 | 2 | 366 |
Subtotal | 409 | 50 | 26 | 30 | 31 | 13 | 48 | 8 | 615 |
Total | 3,778 | 1,935 | 1,488 | 1,483 | 1,163 | 882 | 743 | 327 | 11,799 |
Digital | 1,180 | 673 | 516 | 437 | 347 | 297 | 185 | 50 | 3,685 |
Core | 2,598 | 1,262 | 972 | 1,046 | 816 | 585 | 558 | 277 | 8,114 |
Revenues by contract type | |||||||||
Fixed Price | 1,655 | 1,223 | 903 | 861 | 596 | 450 | 347 | 162 | 6,197 |
Time & Materials | 2,123 | 712 | 585 | 622 | 567 | 432 | 396 | 165 | 5,602 |
Total | 3,778 | 1,935 | 1,488 | 1,483 | 1,163 | 882 | 743 | 327 | 11,799 |
(1) Financial Services include enterprises in Financial Services and Insurance
(2) Retail includes enterprises in Retail, Consumer Packaged Goods and Logistics
(3) Communication includes enterprises in Communication, Telecom OEM and Media
(4) Life Sciences includes enterprises in Life sciences and Health care
(5) | Others include operating segments of businesses in India, Japan, China, Infosys Public Services & other enterprises in Public Services |
Digital Services
Digital Services comprise of service and solution offerings of the Group that enable our clients to transform their businesses. These include offerings that enhance customer experience, leverage AI-based analytics and big data, engineer digital products and IoT, modernize legacy technology systems, migrate to cloud applications and implement advanced cyber security systems.
Core Services
Core Services comprise traditional offerings of the Group that have scaled and industrialized over a number of years. These primarily include application management services, proprietary application development services, independent validation solutions, product engineering and management, infrastructure management services, traditional enterprise application implementation, support and integration services.
Products & platforms
The Group also derives revenues from the sale of products and platforms including Finacle – core banking solution, Edge Suite of products, Infosys Nia - Artificial Intelligence (AI) platform which applies next-generation AI and machine learning and Infosys McCamish- insurance platform
Trade Receivables and Contract Balances
The Group classifies the right to consideration in exchange for deliverables as either a receivable or as unbilled revenue
A receivable is a right to consideration that is unconditional upon passage of time. Revenue for time and material contracts are recognised as related service are performed. Revenue for fixed price maintenance contracts is recognized on a straight line basis over the period of the contract. Revenues in excess of billings is recorded as unbilled revenue and is classified as a financial asset for these cases as right to consideration is unconditional upon passage of time.
Revenue recognition for fixed price development contracts is based on percentage of completion method. Invoicing to the clients is based on milestones as defined in the contract. This would result in the timing of revenue recognition being different from the timing of billing the customers. Unbilled revenue for fixed price development contracts is classified as non financial asset as the contractual right to consideration is dependent on completion of contractual milestones.
Invoicing in excess of earnings are classified as unearned revenue.
Trade receivable and unbilled revenues are presented net of impairment in the consolidated Balance Sheet.
During the year ended March 31, 2019 , the company recognized revenue of $319 million arising from opening unearned revenue as of April 1, 2018.
During the year ended March 31, 2019 , $383 million of unbilled revenue pertaining to fixed price development contracts as of April 1, 2018 has been reclassified to Trade receivables upon billing to customers on completion of milestones.
Performance obligations and remaining performance obligations
The remaining performance obligation disclosure provides the aggregate amount of the transaction price yet to be recognized as of the end of the reporting period and an explanation as to when the Group expects to recognize these amounts in revenue. Applying the practical expedient as given in IFRS 15, the Group has not disclosed the remaining performance obligation related disclosures for contracts where the revenue recognized corresponds directly with the value to the customer of the entity's performance completed to date, typically those contracts where invoicing is on time and material basis. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, periodic revalidations, adjustment for revenue that has not materialized and adjustments for currency.
The aggregate value of performance obligations that are completely or partially unsatisfied as of March 31, 2019, other than those meeting the exclusion criteria mentioned above, is $7,414 million. Out of this, the Group expects to recognize revenue of around 50% within the next one year and the remaining thereafter. This includes contracts that can be terminated for convenience without a substantive penalty since, based on current assessment, the occurrence of the same is expected to be remote.
The impact on account of applying the erstwhile IAS 18 - Revenue instead of IFRS 15- Revenue from contract with customers on the financials results of the Group for the year ended and as at March 31, 2019 is insignificant. On account of adoption of IFRS 15, unbilled revenues of $474 million as of March 31, 2019 has been considered as Non financial asset.
2.16 Break-up of expenses and other income, net
Accounting Policy
2.16.1 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 BPM (formerly Infosys BPO) and EdgeVerve, contributions are made to the Infosys BPM 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 and not reclassified to profit or loss in subsequent period. 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.
2.16.2 Superannuation
Certain employees of Infosys, Infosys BPM (formerly 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.
2.16.3 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 of the contributions to the Infosys Limited Employees' Provident Fund Trust. The trust invests in specific designated instruments as permitted by Indian law. The remaining portion is contributed to the government administered pension fund. The rate at which the annual interest is payable to the beneficiaries by the trust is being administered by the government. The company has an obligation to make good the shortfall, if any, between the return from the investments of the Trust and the notified interest rate.
In respect of Indian subsidiaries, eligible employees receive benefits from a provident fund, which is a defined contribution plan. Both the eligible employee and the respective 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.
2.16.4 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.
2.16.5 Other income
Other income is comprised primarily of interest income, dividend income, gain/loss on investment 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.
Effective April 1, 2018, the Group has adopted IFRS interpretation IFRIC 22- Foreign Currency Transactions and Advance Consideration which clarifies the date of transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income when an entity has received or paid advance consideration in a foreign currency. The effect on account of adoption of this amendment was insignificant.
2.16.6 Operating Profits
Operating profit of the Group is computed considering the revenues, net of cost of sales, selling and marketing expenses and administrative expenses.
Cost of sales
(Dollars in millions)
Year ended March 31, | ||
2019 | 2018 | |
Employee benefit costs | 5,780 | 5,379 |
Depreciation and amortization | 287 | 289 |
Travelling costs | 253 | 225 |
Cost of technical sub-contractors | 860 | 666 |
Cost of software packages for own use | 129 | 136 |
Third party items bought for service delivery to clients | 231 | 152 |
Operating lease payments | 52 | 50 |
Consultancy and professional charges | 6 | 8 |
Communication costs | 34 | 35 |
Repairs and maintenance | 53 | 46 |
Provision for post-sales client support | – | 22 |
Others | 2 | (7) |
Total | 7,687 | 7,001 |
Sales and marketing expenses
(Dollars in millions)
Year ended March 31, | ||
2019 | 2018 | |
Employee benefit costs | 462 | 425 |
Travelling costs | 59 | 48 |
Branding and marketing | 69 | 47 |
Operating lease payments | 11 | 12 |
Consultancy and professional charges | 28 | 10 |
Communication costs | 3 | 3 |
Others | 6 | 7 |
Total | 638 | 552 |
Administrative expenses
(Dollars in millions)
Year ended March 31, | ||
2019 | 2018 | |
Employee benefit costs | 226 | 230 |
Consultancy and professional charges | 154 | 144 |
Repairs and maintenance | 134 | 127 |
Power and fuel | 32 | 32 |
Communication costs | 31 | 38 |
Travelling costs | 36 | 37 |
Rates and taxes | 27 | 25 |
Operating lease payments | 20 | 20 |
Insurance charges | 9 | 9 |
Impairment loss recognized/(reversed) under expected credit loss model | 35 | 11 |
Commission to non-whole time directors | 1 | 1 |
Contributions towards Corporate Social Responsibility | 38 | 24 |
Others | 35 | 29 |
Total | 778 | 727 |
Other income, net
(Dollars in millions)
Particulars | Year ended March 31, | |
2019 | 2018 | |
Interest income on financial assets carried at amortized cost | 201 | 260 |
Interest income on financial assets fair valued through other comprehensive income | 92 | 106 |
Dividend income on investments carried at fair value through profit or loss | – | 1 |
Gain/(loss) on investments carried at fair value through profit or loss | 24 | 39 |
Exchange gains / (losses) on forward and options contracts | 27 | - |
Exchange gains / (losses) on translation of other assets and liabilities | 18 | 36 |
Others | 49 | 71 |
411 | 513 |
2.17 Capital allocation policy
2.17.1 Update on capital allocation policy and buyback
In line with the capital allocation policy announced in April 2018, the Board, in its meeting held on January 11, 2019, approved the following :
(a) Declared a special dividend of 4/- per
equity share (approximately $0.06 per share);
(b) Recommended buyback of Equity Shares from
the open market route through Indian stock exchanges of up to 8,260 crore (Maximum Buyback Size) at a price not exceeding
800/-
per share (Maximum Buyback Price) subject to shareholders' approval by way of Postal Ballot.
After the execution of the above, along with
the special dividend of 5/- per share (approximately $0.08 per share) already paid in June 2018, the Company would complete the
distribution of
13,000 crore (approximately $2 billion), which was announced as part of its capital allocation policy in
April 2018
The shareholders approved the proposal of buyback
of Equity Shares recommended by its Board of Directors in its meeting held on January 11, 2019 through the postal ballot that concluded
on March 12, 2019. At the Maximum buyback price of 800/- per share and the Maximum buyback size of
8,260 crore, the indicative
maximum number of Equity shares bought back would be 103,250,000 Equity Shares (Maximum buyback shares) comprising approximately
2.36% of the paid-up equity share capital of the Company as of March 12, 2019 (the date of conclusion of postal ballot for approval
for buyback).
The buyback was offered to all eligible equity shareholders of the Company (other than the Promoters, the Promoter Group and Persons in Control of the Company) under the open market route through the stock exchange. The Company will fund the buyback from its free reserves. The buyback of equity shares through the stock exchange commenced on March 20, 2019 and is expected to be completed by September 2019. During the year ended March 31, 2019, 12,652,000 equity shares were purchased from the stock exchange which includes 1,818,000 shares which have been purchased but not extinguished as of March 31, 2019 and 3,636,000 shares which have been purchased but have not been settled and therefore not extinguished as of March 31, 2019. In accordance with section 69 of the Companies Act, 2013, during the year ended March 31, 2019 , the Company has created ‘Capital Redemption Reserve’ of $1 million equal to the nominal value of the shares bought back as an appropriation from general reserve.
The Board, at its meeting on August 19, 2017,
approved a proposal for the Company to buyback its fully paid-up equity shares of face value of 5/- each from the eligible equity
shareholders of the Company for an amount not exceeding
13,000 crore ($2 billion). The shareholders approved the said proposal
of Buyback of Equity Shares through the postal ballot that concluded on October 7, 2017. The Buyback offer comprised a purchase
of 113,043,478 Equity Shares aggregating 4.92% of the paid-up equity share capital of the Company at a price of
1,150 per Equity
share. The buyback was offered to all eligible equity shareholders (including those who became equity shareholders as on the Record
date by cancelling American Depository Shares and withdrawing underlying Equity shares) of the Company as on the Record Date (i.e.
November 1, 2017) on a proportionate basis through the "Tender offer" route. The Company concluded the buyback procedures
on December 27, 2017 and 113,043,478 equity shares were extinguished. The company utilized its securities premium and general reserve
for the buyback of its shares. In accordance with section 69 of the Companies Act, 2013, the company created ‘Capital Redemption
Reserve’ of $9 million equal to the nominal value of the shares bought back as an appropriation from general reserve during
the year ended March 31, 2018.
The Company’s objective when managing capital is to safeguard its ability to continue as a going concern and to maintain an optimal capital structure so as to maximize shareholder value. In order to maintain or achieve an optimal capital structure, the Company may adjust the amount of dividend payment, return capital to shareholders, issue new shares or buy back issued shares. As of March 31, 2019, the Company has only one class of equity shares and has no debt. Consequent to the above capital structure there are no externally imposed capital requirements
2.17.2 Dividend
The final dividend on shares is 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.
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. Dividend distribution tax paid by subsidiaries may be reduced / available as credit against dividend distribution tax payable by Infosys Limited.
Effective from Financial Year 2018, the Company's policy is to payout up to 70% of the free cash flow of the corresponding Financial Year in such manner (including by way of dividend and / or share buyback) as may be decided by the Board from time to time, subject to applicable laws and requisite approvals, if any. Free cash flow is defined as net cash provided by operating activities less capital expenditure as per the consolidated statement of cash flows prepared under IFRS. Dividend payout includes dividend distribution tax.
Amount of per share dividend recognised as distribution to equity shareholders:
Particulars | Year ended March 31, 2019 | Year ended March 31, 2018 | ||
in ![]() |
in US Dollars | in ![]() |
in US Dollars | |
Final dividend for fiscal 2018 | 10.25 | 0.16 | – | – |
Special dividend for fiscal 2018 | 5.00 | 0.08 | – | – |
Interim dividend for fiscal 2019 | 7.00 | 0.10 | – | – |
Special dividend for fiscal 2019 | 4.00 | 0.06 | – | – |
Final dividend for fiscal 2017 | – | – | 7.38 | 0.12 |
Interim dividend for fiscal 2018 | – | – | 6.50 | 0.10 |
Note: | Dividend per equity share disclosed in the above table represents dividends declared previously, retrospectively adjusted for September 2018 bonus issue. |
During the year ended March 31, 2019 on account of the final dividend for fiscal 2018 , special divided for fiscal 2018 and fiscal 2019 and interim dividend for fiscal 2019 the Company has incurred a net cash outflow of $1,956 million (excluding dividend paid on treasury shares) inclusive of dividend distribution tax.
The Board of Directors in their meeting on April
12, 2019 recommended a final dividend of 10.50/- per equity share (approximately $0.15 per equity share ) for the financial
year ended March 31, 2019. This payment is subject to the approval of shareholders in the ensuing Annual General Meeting of the
Company, to be held on June 22, 2019 and if approved would result in a net cash outflow of approximately $793 million, (excluding
dividend paid on treasury shares) including dividend distribution tax. The final dividend of
10.50/- per equity share (approximately
$0.15 per equity share) and the resultant expected cash outflow is based on the outstanding number of shares after considering
shares bought back by the Company subsequent to the year ended March 31, 2019.
2.17.3 Bonus issue
The Company has allotted 2,18,41,91,490 fully
paid up equity shares (including treasury shares) of face value 5/- each during the three
months ended September 30, 2018 pursuant to a bonus issue approved by the shareholders through postal ballot. Record date fixed
by the Board of Directors was September 5, 2018. The bonus shares were issued by capitalization of profits transferred from general
reserve. Bonus share of one equity share for every equity share held, and a bonus issue, viz., 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 stock option plan have been
adjusted for bonus shares.
The bonus shares allotted ranks pari passu in all respects and carry the same rights as the existing equity shareholders and are entitled to participate in full, in any dividend and other corporate action, recommended and declared after the new equity shares are allotted.
2.18 Share capital and share premium
The Company has only one class of shares referred
to as equity shares having a par value of 5/- each. 20,324,982 shares and 10,801,956 shares(not adjusted for September 2018
bonus issue) were held by controlled trust, as at March 31, 2019 and March 31, 2018, 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.
for and on behalf of the Board of Directors of Infosys Limited
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive Officer and |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
D. Sundaram | Nilanjan Roy | A. G. S. Manikantha |
Director | Chief Financial Officer | Company Secretary |
Bengaluru April 12, 2019 |
Infosys Limited and Subsidiaries
Unaudited Condensed Consolidated Interim Statements of Comprehensive Income for the three months ended March 31,
(Dollars in millions except equity share and per equity share data)
2019 | 2018 | |
Revenues | 3,060 | 2,805 |
Cost of sales | 2,028 | 1,793 |
Gross profit | 1,032 | 1,012 |
Operating expenses: | ||
Selling and marketing expenses | 174 | 147 |
Administrative expenses | 200 | 172 |
Total operating expenses | 374 | 319 |
Operating profit | 658 | 693 |
Other income, net | 94 | 100 |
Reduction in the fair value of Disposal Group held for sale | – | (18) |
Profit before income taxes | 752 | 775 |
Income tax expense | 171 | 204 |
Net profit | 581 | 571 |
Other comprehensive income | ||
Items that will not be reclassified subsequently to profit or loss: | ||
Re-measurements of the net defined benefit liability/asset, net | – | 6 |
Equity instruments through other comprehensive income, net | – | 1 |
– | 7 | |
Items that will be reclassified subsequently to profit or loss: | ||
Fair valuation of investments, net | 3 | (2) |
Fair value changes on derivatives designated as cash flow hedge, net | (2) | – |
Foreign currency translation | 74 | (164) |
75 | (166) | |
Total other comprehensive income/(loss), net of tax | 75 | (159) |
Total comprehensive income | 656 | 412 |
Profit attributable to: | ||
Owners of the company | 580 | 571 |
Non-controlling interests | 1 | – |
581 | 571 | |
Total comprehensive income attributable to: | ||
Owners of the company | 655 | 412 |
Non-controlling interests | 1 | – |
656 | 412 | |
Earnings per equity share | ||
Basic ($) | 0.13 | 0.13 |
Diluted ($) | 0.13 | 0.13 |
Weighted average equity shares used in computing earnings per equity share | ||
Basic | 4,347,129,592 | 4,346,554,120 |
Diluted | 4,353,023,863 | 4,349,617,024 |
In the three months ended March 31, 2018,
the Company had classifed its subsidiaries, Kallidus and Skava (together referred to as "Skava”) and Panaya, collectively
referred to as the “Disposal Group” as "Held for sale" and recorded a reduction in the fair value amounting
to $18 million for the three months and year ended March 31, 2018 and $39 million for the three months ended June 30, 2018 in respect
of Panaya.
During the three months ended December 31, 2018, in accordance with IFRS 5 -" Non current Assets held for Sale and Discontinued
Operations", the Company concluded that the Disposal Group does not meet the criteria for "Held for Sale" classification
and accordingly the assets and liabilities of Panaya and Skava have been included on a line by line basis in the consolidated financial
statements for the period and as at December 31, 2018 and March 31, 2019.
On reclassification from “Held for Sale”, the Company recorded additional depreciation and amortization expenses
of $12 million and an adjustment in respect of excess of carrying amount over recoverable amount of $65 million (comprising of
$52 million towards goodwill and $13 million towards value of customer relationships) in respect of Skava in the consolidated statement
of comprehensive income for the three months ended December 31, 2018.
Exhibit 99.8
IFRS INR Earnings Release
INDEPENDENT AUDITOR’S REPORT
TO THE BOARD OF DIRECTORS OF INFOSYS LIMITED
Report on the Audit of the Interim Consolidated Financial Statements
Opinion
We have audited the accompanying interim consolidated financial statements of Infosys Limited (“the Company”) and its subsidiaries (the Company and its subsidiaries together referred to as “the Group”), which comprise the Consolidated Balance Sheet as at March 31, 2019, the Consolidated Statement of Comprehensive Income for the three months and year ended on that date, the Consolidated Statement of Changes in Equity and the Consolidated Statement of Cash Flows for the year ended on that date, and a summary of the significant accounting policies and other explanatory information (hereinafter referred to as “the interim consolidated financial statements”).
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid interim consolidated financial statements give a true and fair view in conformity with International Accounting Standard 34 “Interim Financial Reporting” (“IAS 34”) as issued by the International Accounting Standards Board (“IASB”),of the consolidated state of affairs of the Group as at March 31, 2019, the consolidated profit and consolidated total comprehensive income for the three months and year ended on that date, consolidated changes in equity and its consolidated cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit of the interim consolidated financial statements in accordance with the Standards on Auditing (SAs) issued by the Institute of Chartered Accountants of India (ICAI). Our responsibilities under those Standards are further described in the Auditor’s Responsibilities for the Audit of the Interim Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Code of Ethics issued by the ICAI, and we have fulfilled our other ethical responsibilities in accordance with the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the interim consolidated financial statements.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the interim consolidated financial statements of the current period. These matters were addressed in the context of our audit of the interim consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.
Sr. No. | Key Audit Matter | Auditor’s Response |
1 |
Accuracy of recognition, measurement, presentation and disclosures of revenues and other related balances in view of adoption of Ind AS 115 “Revenue from Contracts with Customers” (new revenue accounting standard)
The application of the new revenue accounting standard involves certain key judgements relating to identification of distinct performance obligations, determination of transaction price of the identified performance obligations, the appropriateness of the basis used to measure revenue recognized over a period. Additionally, new revenue accounting standard contains disclosures which involves collation of information in respect of disaggregated revenue and periods over which the remaining performance obligations will be satisfied subsequent to the balance sheet date.
Refer Notes 1.5a and 2.10 to the Interim Consolidated Financial Statements |
Principal Audit Procedures
We assessed the Group’s process to identify the impact of adoption of the new revenue accounting standard. Our audit approach consisted testing of the design and operating effectiveness of the internal controls and substantive testing as follows: · Evaluated the design of internal controls relating to implementation of the new revenue accounting standard. · Selected a sample of continuing and new contracts, and tested the operating effectiveness of the internal control, relating to identification of the distinct performance obligations and determination of transaction price. We carried out a combination of procedures involving enquiry and observation, reperformance and inspection of evidence in respect of operation of these controls.
· Tested the relevant information technology systems’ access and change management controls relating to contracts and related information used in recording and disclosing revenue in accordance with the new revenue accounting standard.
· Selected a sample of continuing and new contracts and performed the following procedures:
• Read, analysed and identified the distinct performance obligations in these contracts.
• Compared these performance obligations with that identified and recorded by the Group.
• Considered the terms of the contracts to determine the transaction price including any variable consideration to verify the transaction price used to compute revenue and to test the basis of estimation of the variable consideration.
• Samples in respect of revenue recorded for time and material contracts were tested using a combination of approved time sheets including customer acceptances, subsequent invoicing and historical trend of collections and disputes.
• In respect of samples relating to fixed price contracts, progress towards satisfaction of performance obligation used to compute recorded revenue was verified with actual and estimated efforts from the time recording and budgeting systems. We also tested the access and change management controls relating to these systems.
• Sample of revenues disaggregated by type and service offerings was tested with the performance obligations specified in the underlying contracts.
• Performed analytical procedures for reasonableness of revenues disclosed by type and service offerings.
• We reviewed the collation of information and the logic of the report generated from the budgeting system used to prepare the disclosure relating to the periods over which the remaining performance obligations will be satisfied subsequent to the balance sheet date.
|
2 |
Accuracy of revenues and onerous obligations in respect of fixed price contracts involves critical estimates
Estimated effort is a critical estimate to determine revenues and liability for onerous obligations. This estimate has a high inherent uncertainty as it requires consideration of progress of the contract, efforts incurred till date and efforts required to complete the remaining contract performance obligations.
Refer Notes 1.5a and 2.10 to the Interim Consolidated Financial Statements. |
Principal Audit Procedures
Our audit approach was a combination of test of internal controls and substantive procedures which included the following:
· Evaluated the design of internal controls relating to recording of efforts incurred and estimation of efforts required to complete the performance obligations.
· Tested the access and application controls pertaining to time recording, allocation and budgeting systems which prevents unauthorised changes to recording of efforts incurred.
· Selected a sample of contracts and through inspection of evidence of performance of these controls, tested the operating effectiveness of the internal controls relating to efforts incurred and estimated.
· Selected a sample of contracts and performed a retrospective review of efforts incurred with estimated efforts to identify significant variations and verify whether those variations have been considered in estimating the remaining efforts to complete the contract.
· Reviewed a sample of contracts with unbilled revenues to identify possible delays in achieving milestones, which require change in estimated efforts to complete the remaining performance obligations.
· Performed analytical procedures and test of details for reasonableness of incurred and estimated efforts.
|
3 |
Evaluation of uncertain tax positions
The Group has material uncertain tax positions including matters under dispute which involves significant judgment to determine the possible outcome of these disputes.
Refer Notes 1.5b to the Interim Consolidated Financial Statements |
Principal Audit Procedures
Obtained details of completed tax assessments and demands for the year ended March 31, 2019 from management. We involved our internal experts to challenge the management’s underlying assumptions in estimating the tax provision and the possible outcome of the disputes. Our internal experts also considered legal precedence and other rulings in evaluating management’s position on these uncertain tax positions. Additionally, we considered the effect of new information in respect of uncertain tax positions as at April 1, 2018 to evaluate whether any change was required to management’s position on these uncertainties.
|
4 |
Recoverability of Indirect tax receivables
As
at March 31, 2019, non-current assets in respect of withholding tax and others includes Cenvat recoverable amounting to
Refer Note 2.4 to the Interim Consolidated Financial statements.
|
Principal Audit Procedures
We have involved our internal experts to review the nature of the amounts recoverable, the sustainability and the likelihood of recoverability upon final resolution. |
Management’s Responsibility for the Interim Consolidated Financial Statements
The Company’s Board of Directors is responsible for the preparation and presentation of these interim consolidated financial statements that give a true and fair view of the consolidated financial position, consolidated financial performance, consolidated total comprehensive income, consolidated changes in equity and consolidated cash flows of the Group in accordance with IAS 34 as issued by the IASB. The respective Board of Directors of the companies included in the Group are responsible for maintenance of the adequate accounting records for safeguarding assets of the Group and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the interim consolidated financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the interim consolidated financial statements, the respective Board of Directors of the companies included in the Group are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
The respective Board of Directors of the companies included in the Group are responsible for overseeing the financial reporting process of the Group.
Auditor’s Responsibilities for the Audit of the Interim Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the interim consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these interim consolidated financial statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
· | Identify and assess the risks of material misstatement of the interim consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. |
· | Obtain an understanding of internal financial controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on effectiveness of the Company’s internal financial controls. |
· | Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. |
· | Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the interim consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. |
· | Evaluate the overall presentation, structure and content of the interim consolidated financial statements, including the disclosures, and whether the interim consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. |
· | Obtain sufficient appropriate audit evidence regarding the financial information of the entities within the Group to express an opinion on the interim consolidated financial statements. We are responsible for the direction, supervision and performance of the audit of the financial statements of such entities included in the interim consolidated financial statements of which we are the independent auditors. |
Materiality is the magnitude of misstatements in the interim consolidated financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the financial statements.
We communicate with those charged with governance of the Company and such other entities included in the interim consolidated financial statements of which we are the independent auditors regarding, among other matters, the planned scope and timing of the audit and significant audit findings that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the interim consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
For DELOITTE HASKINS & SELLS LLP
Chartered Accountants
(Firm Registration No. 117366W/W-100018)
P. r. ramesh
Partner
Bengaluru, April 12, 2019 | (Membership No. 70928) |
INFOSYS LIMITED AND SUBSIDIARIES
Consolidated Financial Statements under International Financial Reporting Standards (IFRS) in Indian Rupee for the three months and year ended March 31, 2019
Index |
Consolidated Balance Sheet |
Consolidated Statement of Comprehensive Income |
Consolidated Statement of Changes in Equity |
Consolidated Statement of Cash Flows |
Overview and notes to the financial statements |
1. Overview |
1.1 Company overview |
1.2 Basis of preparation of financial statements |
1.3 Basis of consolidation |
1.4 Use of estimates and judgements |
1.5 Critical accounting estimates |
1.6 Recent accounting pronouncements |
2. Notes to the Consolidated Financial Statements |
2.1 Cash and cash equivalents |
2.2 Investments |
2.3 Financial instruments |
2.4 Prepayments and other assets |
2.5 Other liabilities |
2.6 Provisions |
2.7 Property, plant and equipment |
2.8 Goodwill and other Intangible assets |
2.9 Business combinations and Disposal Group held for sale |
2.10 Revenue from Operations |
2.11 Expense by Nature |
2.12 Employee Benefits |
2.13 Equity |
2.14 Other Income |
2.15 Operating Leases |
2.16 Employees' Stock Option Plans (ESOP) |
2.17 Income Taxes |
2.18 Reconciliation of basic and diluted shares used in computing earnings per share |
2.19 Related party transactions |
2.20 Segment reporting |
Infosys Limited and subsidiaries
(In crore except equity share data)
Consolidated Balance Sheet as at | Note | March 31, 2019 | March 31, 2018 |
ASSETS | |||
Current assets | |||
Cash and cash equivalents | 2.1 | 19,568 | 19,818 |
Current investments | 2.2 | 6,627 | 6,407 |
Trade receivables | 14,827 | 13,142 | |
Unbilled revenue | 5,374 | 4,261 | |
Prepayments and other current assets | 2.4 | 5,723 | 4,313 |
Income tax assets | 423 | – | |
Derivative financial instruments | 2.3 | 336 | 16 |
52,878 | 47,957 | ||
Assets held for sale | 2.9 | – | 2,060 |
Total current assets | 52,878 | 50,017 | |
Non-current assets | |||
Property, plant and equipment | 2.7 | 13,356 | 12,143 |
Goodwill | 2.8 | 3,540 | 2,211 |
Intangible assets | 2.8 | 691 | 247 |
Investment in associate | 2.19 | – | – |
Non-current investments | 2.2 | 4,634 | 5,756 |
Deferred income tax assets | 1,372 | 1,282 | |
Income tax assets | 6,320 | 6,070 | |
Other non-current assets | 2.4 | 1,947 | 2,164 |
Total non-current assets | 31,860 | 29,873 | |
Total assets | 84,738 | 79,890 | |
LIABILITIES AND EQUITY | |||
Current liabilities | |||
Trade payables | 1,655 | 694 | |
Derivative financial instruments | 2.3 | 15 | 42 |
Current income tax liabilities | 1,567 | 2,043 | |
Client deposits | 26 | 38 | |
Unearned revenue | 2,809 | 2,295 | |
Employee benefit obligations | 1,619 | 1,421 | |
Provisions | 2.6 | 576 | 492 |
Other current liabilities | 2.5 | 10,371 | 6,756 |
18,638 | 13,781 | ||
Liabilities directly associated with assets held for sale | 2.9 | – | 324 |
Total current liabilities | 18,638 | 14,105 | |
Non-current liabilities | |||
Deferred income tax liabilities | 672 | 541 | |
Employee benefit obligations | 44 | 48 | |
Other non-current liabilities | 2.5 | 378 | 272 |
Total liabilities | 19,732 | 14,966 | |
Equity | |||
Share capital - ![]() |
2,170 | 1,088 | |
Share premium | 396 | 186 | |
Retained earnings | 58,848 | 61,241 | |
Cash flow hedge reserves | 21 | – | |
Other reserves | 2,570 | 1,583 | |
Capital redemption reserve | 61 | 56 | |
Other components of equity | 882 | 769 | |
Total equity attributable to equity holders of the Company | 64,948 | 64,923 | |
Non-controlling interests | 58 | 1 | |
Total equity | 65,006 | 64,924 | |
Total liabilities and equity | 84,738 | 79,890 |
The accompanying notes form an integral part of the interim consolidated financial statements
As per our report of even date attached
for Deloitte Haskins & Sells LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants Firm’s Registration No : 117366W/ W-100018 |
P. R. Ramesh Partner |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 12, 2019 |
D. Sundaram Director |
Nilanjan Roy 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 Comprehensive Income for the | Three months ended March 31, | Year ended March 31, | |||
Note | 2019 | 2018 | 2019 | 2018 | |
Revenues | 2.10 | 21,539 | 18,083 | 82,675 | 70,522 |
Cost of sales | 2.11 | 14,283 | 11,554 | 53,867 | 45,130 |
Gross profit | 7,256 | 6,529 | 28,808 | 25,392 | |
Operating expenses | |||||
Selling and marketing expenses | 2.11 | 1,226 | 947 | 4,473 | 3,560 |
Administrative expenses | 2.11 | 1,412 | 1,110 | 5,455 | 4,684 |
Total operating expenses | 2,638 | 2,057 | 9,928 | 8,244 | |
Operating profit | 4,618 | 4,472 | 18,880 | 17,148 | |
Other income, net | 2.14 | 665 | 652 | 2,882 | 3,311 |
Reduction in the fair value of Disposal Group held for sale | 2.9 | – | (118) | (270) | (118) |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" | 2.9 | – | – | (451) | – |
Share in net profit/(loss) of associate, including impairment | – | – | – | (71) | |
Profit before income taxes | 5,283 | 5,006 | 21,041 | 20,270 | |
Income tax expense | 2.17 | 1,205 | 1,316 | 5,631 | 4,241 |
Net profit | 4,078 | 3,690 | 15,410 | 16,029 | |
Other comprehensive income | |||||
Items that will not be reclassified subsequently to profit or loss | |||||
Remeasurement of the net defined benefit liability/asset, net | (3) | 34 | (22) | 55 | |
Equity instruments through other comprehensive income, net | 2.2 | 1 | 9 | 70 | 7 |
(2) | 43 | 48 | 62 | ||
Items that will be reclassified subsequently to profit or loss | |||||
Fair value changes on derivatives designated as cash flow hedge, net | 2.3 | (15) | 2 | 21 | (39) |
Exchange differences on translation of foreign operations | (70) | 200 | 63 | 321 | |
Fair value changes on investments, net | 2.2 | 25 | (15) | 2 | (1) |
(60) | 187 | 86 | 281 | ||
Total other comprehensive income/(loss), net of tax | (62) | 230 | 134 | 343 | |
Total comprehensive income | 4,016 | 3,920 | 15,544 | 16,372 | |
Profit attributable to: | |||||
Owners of the Company | 4,074 | 3,690 | 15,404 | 16,029 | |
Non-controlling interests | 4 | – | 6 | – | |
4,078 | 3,690 | 15,410 | 16,029 | ||
Total comprehensive income attributable to: | |||||
Owners of the Company | 4,012 | 3,920 | 15,538 | 16,372 | |
Non-controlling interests | 4 | – | 6 | – | |
4,016 | 3,920 | 15,544 | 16,372 | ||
Earnings per equity share | |||||
Basic (![]() |
9.37 | 8.49 | 35.44 | 35.53 | |
Diluted (![]() |
9.36 | 8.48 | 35.38 | 35.50 | |
Weighted average equity shares used in computing earnings per equity share | 2.18 | ||||
Basic | 434,71,29,592 | 434,65,54,120 | 434,71,30,157 | 451,06,64,644 | |
Diluted | 435,30,23,863 | 434,96,17,024 | 435,34,20,772 | 451,51,47,740 |
The accompanying notes form an integral part of the interim consolidated financial statements
As per our report of even date attached
for Deloitte Haskins & Sells LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants Firm’s Registration No : 117366W/ W-100018 |
P. R. Ramesh Partner |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 12, 2019 |
D. Sundaram Director |
Nilanjan Roy Chief Financial Officer |
A. G. S. Manikantha Company Secretary |
Infosys Limited and subsidiaries
Consolidated Statement of Changes in Equity
(In crore except equity share data)
Shares(1) | Share capital | Share premium | Retained earnings | Other reserves(2) | Capital redemption reserve | Other components of equity | Cash flow hedge reserve | Total equity attributable to equity holders of the Company | Non-controlling interest | Total equity | |
Balance as at April 1, 2017 |
228,56,55,150 | 1,144 | 2,356 | 65,056 | – | – | 387 | 39 | 68,982 | – | 68,982 |
Changes in equity for the year ended March 31, 2018 | |||||||||||
Net profit | – | – | – | 16,029 | – | – | – | – | 16,029 | – | 16,029 |
Remeasurement of the net defined benefit liability/asset* | – | – | – | – | – | – | 55 | – | 55 | – | 55 |
Fair value changes on derivatives designated as Cash flow hedge* (Refer to note 2.3) | – | – | – | – | – | – | – | (39) | (39) | – | (39) |
Exchange differences on translation of foreign operations | – | – | – | – | – | – | 321 | – | 321 | – | 321 |
Equity instruments through other comprehensive income* (Refer to note 2.2) | – | – | – | – | – | – | 7 | – | 7 | – | 7 |
Fair value changes on investments, net* (Refer to note 2.2) | – | – | – | – | – | – | (1) | – | (1) | – | (1) |
Total comprehensive income for the period | – | – | – | 16,029 | – | – | 382 | (39) | 16,372 | – | 16,372 |
Shares issued on exercise of employee stock options (Refer to note 2.16) | 700,629 | – | 5 | – | – | – | – | – | 5 | – | 5 |
Employee stock compensation expense (refer to note 2.16) | – | – | 79 | – | – | – | – | – | 79 | – | 79 |
Transfer on account of options not exercised | – | – | (2) | 2 | – | – | – | – | – | – | – |
Transferred to other reserves | – | – | – | (2,200) | 2,200 | – | – | – | – | – | – |
Transferred from other reserves on utilization | – | – | – | 617 | (617) | – | – | – | – | – | – |
Amount paid upon buyback (refer note 2.13) | (113,043,478) | (56) | (2,206) | (10,738) | – | – | – | – | (13,000) | – | (13,000) |
Transaction costs related to buyback* (refer note 2.13) | – | – | (46) | – | – | – | – | – | (46) | – | (46) |
Amount transferred to capital redemption reserve upon Buyback (refer note 2.13) | – | – | – | (56) | – | 56 | – | – | – | – | – |
Non-controlling interests | – | – | – | – | – | – | – | – | – | 1 | 1 |
Dividends (including dividend distribution tax) | – | – | – | (7,469) | – | – | – | – | (7,469) | – | (7,469) |
Balance as at March 31, 2018 |
217,33,12,301 | 1,088 | 186 | 61,241 | 1,583 | 56 | 769 | – | 64,923 | 1 | 64,924 |
Balance as at April 1, 2018 |
217,33,12,301 | 1,088 | 186 | 61,241 | 1,583 | 56 | 769 | – | 64,923 | – | 64,923 |
Changes in equity for the year ended March 31, 2019 | |||||||||||
Net profit | – | – | – | 15,404 | – | – | – | – | 15,404 | 6 | 15,410 |
Remeasurement of the net defined benefit liability/asset* | – | – | – | – | – | – | (22) | – | (22) | – | (22) |
Equity instruments through other comprehensive income* (Refer to note 2.2) | – | – | – | – | – | – | 70 | – | 70 | – | 70 |
Fair value changes on derivatives designated as cash flow hedge* (Refer to note 2.3) | – | – | – | – | – | – | – | 21 | 21 | – | 21 |
Exchange differences on translation of foreign operations | – | – | – | – | – | – | 63 | – | 63 | – | 63 |
Fair value changes on investments, net* (Refer to note 2.2) | – | – | – | – | – | – | 2 | – | 2 | – | 2 |
Total comprehensive income for the period | – | – | – | 15,404 | – | – | 113 | 21 | 15,538 | 6 | 15,544 |
Shares issued on exercise of employee stock options - before bonus issue (Refer to note 2.16) | 392,528 | – | – | – | – | – | – | – | – | – | – |
Increase in share capital on account of bonus issue (Refer to note 2.13) | 2,173,704,829 | 1,088 | – | – | – | – | – | – | 1,088 | – | 1,088 |
Shares issued on exercise of employee stock options - after bonus issue (Refer to note 2.16) | 1,196,804 | – | 6 | – | – | – | – | – | 6 | – | 6 |
Amounts utilized for bonus issue (Refer to note 2.13) | – | – | – | (1,088) | – | – | – | – | (1,088) | – | (1,088) |
Buyback of equity shares (Refer to note 2.5 and 2.17) | (12,652,000) | (6) | – | (1,994) | – | – | – | – | (2,000) | – | (2,000) |
Transaction cost relating to buyback* (Refer to note 2.17) | – | – | – | (12) | – | – | – | – | (12) | – | (12) |
Amount transferred to capital redemption reserve upon buyback (Refer to note 2.17) | – | – | – | (5) | – | 5 | – | – | – | – | – |
Non-controlling interests on acquisition of subsidiary (Refer to note 2.9) |
– | – | – | – | – | – | – | – | – | 51 | 51 |
Employee stock compensation expense (refer to note 2.16) | – | – | 197 | – | – | – | – | – | 197 | – | 197 |
Income tax benefit arising on exercise of stock options | – | – | 8 | – | – | – | – | – | 8 | – | 8 |
Transfer on account of options not exercised | – | – | (1) | 1 | – | – | – | – | – | – | – |
Transferred to other reserves | – | – | – | (2,417) | 2,417 | – | – | – | – | – | – |
Transferred from other reserves on utilization | – | – | – | 1,430 | (1,430) | – | – | – | – | – | – |
Dividends (including dividend distribution tax) | – | – | – | (13,712) | – | – | – | – | (13,712) | – | (13,712) |
Balance as at March 31, 2019 |
433,59,54,462 | 2,170 | 396 | 58,848 | 2,570 | 61 | 882 | 21 | 64,948 | 58 | 65,006 |
* net of tax
(1) | excludes treasury shares of 20,324,982 as at March 31, 2019, 10,801,956 as at April 1, 2018, and 1,12,89,514 as at April 1, 2017, held by consolidated trust. The treasury shares as at April 1, 2018 and as at April 1, 2017 have not been adjusted for the September 2018 bonus issue. |
(2) | 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 Group 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. |
The accompanying notes form an integral part of the interim consolidated financial statements
As per our report of even date attached
for Deloitte Haskins & Sells LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants Firm’s Registration No : 117366W/ W-100018 |
P. R. Ramesh Partner |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 12, 2019 |
D. Sundaram Director |
Nilanjan Roy Chief Financial Officer |
A. G. S. Manikantha Company Secretary |
Infosys Limited and subsidiaries
Consolidated Statement of Cash Flows
Accounting Policy
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 Group are segregated. The Group considers all highly liquid investments that are readily convertible to known amounts of cash to be cash equivalents.
(In crore)
Particulars | Year ended March 31, | ||
Note | 2019 | 2018 | |
Operating activities: | |||
Net Profit | 15,410 | 16,029 | |
Adjustments to reconcile net profit to net cash provided by operating activities: | |||
Depreciation and amortization | 2.7 | 2,011 | 1,863 |
Income tax expense | 2.17 | 5,631 | 4,241 |
Interest and dividend income | (910) | (829) | |
Effect of exchange rate changes on assets and liabilities | 66 | 16 | |
Impairment loss under expected credit loss model | 239 | 34 | |
Share in net profit/(loss) of associate, including impairment | – | 71 | |
Reduction in the fair value of Disposal Group held for sale | 2.9 | 270 | 118 |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" | 2.9 | 451 | – |
Stock compensation expense | 202 | 84 | |
Other adjustments | (102) | (133) | |
Changes in working capital | |||
Trade receivables and unbilled revenue | (2,881) | (1,523) | |
Prepayments and other assets | (839) | (376) | |
Trade payables | 916 | 328 | |
Client deposits | (11) | 6 | |
Unearned revenue | 334 | 673 | |
Other liabilities and provisions | 1,889 | 786 | |
Cash generated from operations | 22,676 | 21,388 | |
Income taxes paid | (6,832) | (6,829) | |
Net cash provided by operating activities | 15,844 | 14,559 | |
Investing activities: | |||
Expenditure on property, plant and equipment | 2.7 & 2.8 | (2,445) | (1,998) |
Loans to employees | 14 | 28 | |
Deposits placed with corporation | (24) | (130) | |
Interest and dividend received | 554 | 427 | |
Payment of contingent consideration pertaining to acquisition of business | 2.9 | (18) | (33) |
Payment towards acquisition of business, net of cash acquired | 2.9 | (550) | (27) |
Advance payment towards acquisition of business | (206) | - | |
Investment in equity and preference securities | (21) | (23) | |
Investment in others investments | (19) | (23) | |
Sale of others investments | 10 | - | |
Proceeds from sale of equity and preference securities | 115 | 35 | |
Investment in certificates of deposit | (2,393) | (6,653) | |
Redemption of certificates of deposit | 5,540 | 9,690 | |
Investment in quoted debt securities | (1,015) | (106) | |
Redemption of quoted debt securities | 862 | 115 | |
Redemption of commercial paper | 300 | – | |
Investment in commercial paper | (491) | (291) | |
Escrow and other deposits pertaining to Buyback | 2.4 | (257) | – |
Investment in liquid mutual fund units and fixed maturity plan securities | (78,355) | (62,063) | |
Redemption of liquid mutual fund units and fixed maturity plan securities | 76,821 | 64,163 | |
Net cash used in investing activities | (1,578) | 3,111 | |
Financing activities: | |||
Payment of dividends including dividend distribution tax | (13,705) | (7,464) | |
Buyback of equity shares including transaction cost | (813) | (13,046) | |
Shares issued on exercise of employee stock options | 6 | 5 | |
Net cash used in financing activities | (14,512) | (20,505) | |
Effect of exchange rate changes on cash and cash equivalents | (57) | 81 | |
Net increase/(decrease) in cash and cash equivalents | (246) | (2,835) | |
Cash and cash equivalents at the beginning of the period | 2.1 | 19,871 | 22,625 |
Cash and cash equivalents at the end of the period | 2.1 | 19,568 | 19,871 |
Supplementary information: | |||
Restricted cash balance | 2.1 | 358 | 533 |
The accompanying notes form an integral part of the interim consolidated financial statements
As per our report of even date attached
for Deloitte Haskins & Sells LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants Firm’s Registration No : 117366W/ W-100018 |
P. R. Ramesh Partner |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 12, 2019 |
D. Sundaram Director |
Nilanjan Roy Chief Financial Officer |
A. G. S. Manikantha Company Secretary |
Notes to the consolidated financial statements
1. Overview
1.1 Company overview
Infosys Limited ('the Company' or Infosys) is a leading provider of consulting, technology, outsourcing and next-generation digital services, enabling clients to execute strategies for their digital transformation. Infosys strategic objective is to build a sustainable organization that remains relevant to the agenda of clients, while creating growth opportunities for employees and generating profitable returns for investors. Infosys strategy is to be a navigator for our clients as they ideate, plan and execute on their journey to a digital future.
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 Bengaluru, Karnataka, India. The Company has its primary listings on the BSE Ltd. and National Stock Exchange of India Limited. The Company’s American Depositary Shares (ADS) representing equity shares is listed on the New York Stock Exchange (NYSE).
Further, the Company's ADS were also listed on the Euronext London and Euronext Paris. On July 5, 2018, the Company voluntarily delisted its ADS from the said exchanges due to low average daily trading volume of its ADS on these exchanges.
The Group's consolidated financial statements are authorized for issue by the Company's Board of Directors on April 12, 2019.
1.2 Basis of preparation of financial statements
These consolidated financial statements have been prepared in compliance with IAS 34, Interim Financial Reporting as issued by International Accounting Standards Board, under the historical cost convention on the accrual basis except for certain financial instruments which have been measured at fair values. Accounting policies have been applied consistently to all periods presented in these interim consolidated financial statements.
As the quarter and year figures are taken from the source and rounded to the nearest digits, the quarter figures in this statement added up to the figures reported for the previous quarters might not always add up to the year figures reported in this statement.
1.3 Basis of consolidation
Infosys consolidates entities which it owns or controls. The interim 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.
1.4 Use of estimates and judgements
The preparation of the financial statements in conformity with IFRS requires management to make estimates, judgments and assumptions. These estimates, judgments and assumptions affect the application of accounting policies and the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the period. Application of accounting policies that require critical accounting estimates involving complex and subjective judgments and the use of assumptions in these financial statements have been disclosed in Note 1.5. Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes in estimates are made as management becomes aware of changes in circumstances surrounding the estimates. Changes in estimates are reflected in the financial statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the consolidated financial statements.
1.5 Critical accounting estimates
a. Revenue recognition
The group uses the percentage-of-completion method in accounting for its fixed-price contracts. Use of the percentage-of-completion method requires the group to estimate the efforts or costs expended to date as a proportion of the total efforts or costs to be expended. Efforts or costs expended have been used to measure progress towards completion as there is a direct relationship between input and productivity.
Further, the Group uses significant judgements while determining the transaction price allocated to performance obligations using the expected cost plus margin approach.
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.
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. Also refer to Note 2.17.
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. ( Refer to Note. 2.9.2)
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.
f. Non-current assets and Disposal Groups held for sale
Assets and liabilities of Disposal Groups held for sale are measured at the lower of carrying amount and fair value less costs to sell. The determination of fair value less costs to sell includes use of management estimates and assumptions. The fair value of the Disposal Groups have been estimated using valuation techniques including income and market approach which includes unobservable inputs.
Non-current assets and Disposal Group that ceases to be classified as held for sale shall be measured at the lower of carrying amount before the Non-current asset and Disposal Group was classified as held for sale adjusted for any depreciation/ amortization and its recoverable amount at the date when the Disposal Group no longer meets the " Held for sale" criteria. Recoverable amounts of assets reclassified from held for sale have been estimated using management’s assumptions which consist of significant unobservable inputs.
1.6 Recent accounting pronouncements
IFRS 16 Leases : On January 13, 2016, the International Accounting Standards Board issued IFRS 16, Leases replacing the existing leases Standard, IAS 17 Leases and related Interpretations. IFRS 16 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 for a lessee and requires the lessee to recognize assets and liabilities for all leases with a term of more than twelve months, unless the underlying asset is low value in nature. 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 standard permits two possible methods of transition:
• | Full retrospective – Retrospectively to each prior period presented applying IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors |
• | Modified retrospective – Retrospectively, with the cumulative effect of initially applying the Standard recognized at the date of initial application. |
Under modified retrospective approach, the lessee records the lease liability as the present value of the remaining lease payments, discounted at the incremental borrowing rate and the right of use asset either as:
• | Its carrying amount as if the standard had been applied since the commencement date, but discounted at lessee’s incremental borrowing rate at the date of initial application or |
• | An amount equal to the lease liability, adjusted by the amount of any prepaid or accrued
lease payments related to that lease recognized under IAS 17 immediately before the date of initial application Certain practical expedients are available under both the methods. |
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.
On completion of evaluation of the effect of adoption of IFRS 16, the Group is proposing to use the ‘Modified Retrospective Approach’ for transitioning to IFRS 16, and take the cumulative adjustment to retained earnings, on the date of initial application (April 1, 2019). Accordingly, comparatives for the year ended March 31, 2019 will not be retrospectively adjusted. The Group has elected certain available practical expedients on transition.
The effect of adoption as on transition date
would majorly result in an increase in right of use asset approximately by 2,300 crore, net investment in
sub-lease approximately by
440 crore and an increase in lease liability approximately by
3,050 crore.
IFRIC 23, Uncertainty over Income Tax Treatments : The International Accounting Standards Board (IASB) issued IFRS interpretation IFRIC 23 Uncertainty over Income Tax Treatments which is to be applied while performing the determination of taxable profit (or loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under IAS 12. According to IFRIC 23, companies need to determine the probability of the relevant tax authority accepting each tax treatment, or group of tax treatments, that the companies have used or plan to use in their income tax filing which has to be considered to compute the most likely amount or the expected value of the tax treatment when determining taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates.
The standard permits two possible methods of transition - i) Full retrospective approach – Under this approach, IFRIC 23 will be applied retrospectively to each prior reporting period presented in accordance with IAS 8 – Accounting Policies, Changes in Accounting Estimates and Errors, without using hindsight and ii) Retrospectively with cumulative effect of initially applying IFRIC 23 recognized by adjusting equity on initial application, without adjusting comparatives.
The effective date for adoption of IFRIC 23 is annual periods beginning on or after January 1, 2019, though early adoption is permitted. The Group will adopt the standard on April 1, 2019 and has decided to adjust the cumulative effect in equity on the date of initial application i.e. April 1, 2019 without adjusting comparatives.
The effect on adoption of IFRIC 23 would be insignificant in the consolidated financial statements.
Amendment to IAS 12 – Income taxes : In December 2017, the IASB issued amendments to the guidance in IAS 12, ‘Income Taxes’, in connection with accounting for dividend distribution taxes.
The amendment clarifies that an entity shall recognize the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognized those past transactions or events.
Effective date for application of this amendment is annual period beginning on or after January 1, 2019, although early application is permitted. The Group is currently evaluating the effect of this amendment on the consolidated financial statements.
Amendment to IAS 19 – plan amendment, curtailment or settlement : On February 7, 2018, the IASB issued amendments to the guidance in IAS 19, ‘Employee Benefits’, in connection with accounting for plan amendments, curtailments and settlements.
The amendments require an entity:
• | to use updated assumptions to determine current service cost and net interest for the remainder of the period after a plan amendment, curtailment or settlement; and |
• | to recognize in profit or loss as part of past service cost, or a gain or loss on settlement, any reduction in a surplus, even if that surplus was not previously recognized because of the impact of the asset ceiling. |
Effective date for application of this amendment is annual period beginning on or after January 1, 2019, although early application is permitted. The Group does not have any impact on account of this amendment
Amendment to IFRS 3 Business Combinations - On October 22,2018, the IASB issued amendments to the definition of a business in IFRS 3 Business Combinations. The amendments clarify the definition of a business, with the objective of assisting entities to determine whether a transaction should be accounted for as a business combination or as an asset acquisition. The amendment also introduces an optional concentration test that permits a simplified assessment of whether an acquired set of activities and assets is not a business.
The effective date for adoption of this amendment is annual periods beginning on or after January 1, 2020, although early adoption is permitted. The Group is currently evaluating the effect of this amendment on the consolidated financial statements.
2. Notes to the consolidated financial statements
2.1 Cash and cash equivalents
Cash and cash equivalents consist of the following:
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Cash and bank deposits | 14,197 | 13,168 |
Deposits with financial institutions | 5,371 | 6,650 |
Total Cash and cash equivalents | 19,568 | 19,818 |
Cash and cash equivalents included under assets classified under held for sale (Refer note no 2.9) | – | 53 |
19,568 | 19,871 |
Cash and cash equivalents as at March 31, 2019
and March 31, 2018 include restricted cash and bank balances of 358 crore and
533 crore, respectively. The restrictions
are primarily on account of 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:
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Current Accounts | ||
ANZ Bank, Taiwan | 1 | 9 |
Axis Bank - Unpaid Dividend Account | 4 | 1 |
Axis Bank, India | 1 | – |
Banamex Bank, Mexico | 8 | 2 |
Banamex Bank, Mexico (U.S. Dollar account) | 27 | 13 |
Bank of America, Mexico | 102 | 25 |
Bank of America, USA | 1,162 | 1,172 |
Bank of Baroda, Mauritius | 1 | 1 |
Bank of Leumni , Israel | 6 | – |
Bank of Tokyo-Mitsubishi UFJ Ltd., Japan | 1 | 1 |
Bank Zachodni WBK S.A, Poland | – | 17 |
Barclays Bank, UK | 39 | 40 |
BNP Paribas Bank, Norway | 24 | 88 |
China Merchants Bank, China | 2 | 6 |
Citibank N.A., Australia | 91 | 223 |
Citibank N.A., Brazil | 31 | 14 |
Citibank N.A., China | 65 | 116 |
Citibank N.A., China (U.S. Dollar account) | 14 | 9 |
Citibank N.A., Costa Rica | 1 | 1 |
Citibank N.A., Europe | 1 | – |
Citibank N.A., Dubai | 10 | 6 |
Citibank N.A., EEFC (U.S. Dollar account) | 2 | 4 |
Citibank N.A., Hungary | 1 | 6 |
Citibank N.A., India | 2 | 2 |
Citibank N.A., Japan | 22 | 18 |
Citibank N.A., New Zealand | 3 | 11 |
Citibank N.A., Portugal | 10 | 8 |
Citibank N.A., Romania | 1 | 2 |
Citibank N.A., Singapore | 77 | 4 |
Citibank N.A., South Africa | 18 | 33 |
Citibank N.A., South Africa (Euro account) | 1 | 1 |
Citibank N.A., South Korea | 17 | 2 |
Citibank N.A., USA | 8 | 4 |
Citibank N.A., Luxembourg | 4 | – |
Commercial Bank, Germany | 1 | – |
Danske Bank, Sweden | 1 | 1 |
Deutsche Bank, Belgium | 16 | 27 |
Deutsche Bank, Czech Republic | 20 | 16 |
Deutsche Bank, Czech Republic (Euro account) | 6 | 3 |
Deutsche Bank, Czech Republic (U.S. Dollar account) | 24 | 2 |
Deutsche Bank, EEFC (Australian Dollar account) | 3 | 2 |
Deutsche Bank, EEFC (Euro account) | 23 | 34 |
Deutsche Bank, EEFC (Swiss Franc account) | 5 | 2 |
Deutsche Bank, EEFC (U.S. Dollar account) | 217 | 32 |
Deutsche Bank, EEFC (United Kingdom Pound Sterling account) | 8 | 9 |
Deutsche Bank, France | 20 | 19 |
Deutsche Bank, Germany | 111 | 100 |
Deutsche Bank, Hong Kong | 1 | 1 |
Deutsche Bank, India | 45 | 44 |
Deutsche Bank, Malaysia | 1 | 5 |
Deutsche Bank, Netherlands | 34 | 15 |
Deutsche Bank, Philippines | 4 | 25 |
Deutsche Bank, Philippines (U.S. Dollar account) | 1 | 3 |
Deutsche Bank, Poland | 28 | 18 |
Deutsche Bank, Poland (Euro account) | 8 | 8 |
Deutsche Bank, Russia | 3 | 3 |
Deutsche Bank, Russia (U.S. Dollar account) | – | 5 |
Deutsche Bank, Singapore | 15 | 17 |
Deutsche Bank, Spain | 1 | 1 |
Deutsche Bank, Switzerland | 33 | 29 |
Deutsche Bank, Switzerland ( US Dollar account) | 1 | – |
Deutsche Bank, United Kingdom | 42 | 79 |
Deutsche Bank, USA | 61 | 2 |
Hua Xia Bank, RMB | 1 | – |
HDFC Bank - Unpaid dividend account | – | 1 |
HSBC Bank, (U.S. Dollar account) | 1 | – |
HSBC Bank, Dubai | – | 2 |
HSBC Bank, Hong Kong | 1 | 2 |
HSBC Bank, India | 3 | – |
HSBC Bank, United Kingdom | 19 | 6 |
ICICI Bank, EEFC (Euro account) | 7 | 1 |
ICICI Bank, EEFC (U.S. Dollar account) | 34 | 40 |
ICICI Bank, EEFC (United Kingdom Pound Sterling account) | 6 | 11 |
ICICI Bank, India | 42 | 52 |
Kotak Bank | 5 | – |
ICICI Bank - Unpaid dividend account | 25 | 20 |
Nordbanken, Sweden | 45 | 50 |
Nordea | 17 | – |
Punjab National Bank, India | 2 | 12 |
Raiffeisen Bank, Czech Republic | – | 5 |
Raiffeisen Bank, Romania | – | 3 |
Royal Bank of Canada, Canada | 136 | 166 |
Santander Bank, Argentina | – | 1 |
Splitska Banka D.D., Société Générale Group, Croatia | 14 | 8 |
State Bank of India, India | 3 | 1 |
Silicon Valley Bank, USA | 13 | – |
The Saudi British Bank, Saudi Arabia | 3 | 3 |
Washington Trust Bank | 48 | – |
2,915 | 2,725 | |
Deposit Accounts | ||
Axis Bank | 925 | – |
Bank BGZ BNP Paribas S.A. | 235 | 144 |
Barclays Bank | 500 | 200 |
Canara Bank | 130 | 235 |
Citibank | 176 | 227 |
Deutsche Bank, AG | – | 24 |
Deutsche Bank, Poland | 126 | 211 |
HDFC Bank | 50 | 2,498 |
HSBC Bank | 200 | – |
ICICI Bank | 3,246 | 3,699 |
IDBI Bank | – | 250 |
IDFC Bank | 2,450 | 1,500 |
IndusInd Bank | 550 | 1,000 |
Kotak Mahindra Bank | 500 | – |
South Indian Bank | 173 | 450 |
Standard Chartered Bank | 2,000 | – |
Washington trust bank | 21 | – |
Yes Bank | – | 5 |
11,282 | 10,443 | |
Deposits with financial institutions | ||
HDFC Limited | 4,146 | 5,450 |
LIC Housing Finance Limited | 1,225 | 1,200 |
5,371 | 6,650 | |
Total Cash and cash equivalents | 19,568 | 19,818 |
2.2 Investments
The carrying value of the investments are as follows:
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
(i) Current | ||
Amortised Cost | ||
Quoted debt securities | ||
Cost | 18 | 1 |
Fair Value through profit or loss | ||
Liquid mutual fund units | ||
Fair value | 1,786 | 81 |
Fair Value through other comprehensive income | ||
Quoted Debt Securities | ||
Fair value | 1,846 | 763 |
Commercial paper | ||
Fair value | 495 | 293 |
Certificates of deposit | ||
Fair value | 2,482 | 5,269 |
Total current investments | 6,627 | 6,407 |
(ii) Non-current | ||
Amortised Cost | ||
Quoted debt securities | ||
Cost | 1,893 | 1,896 |
Fair Value through other comprehensive income | ||
Quoted debt securities | ||
Fair value | 2,144 | 3,215 |
Unquoted equity and preference securities | ||
Fair value | 100 | 138 |
Fair Value through profit or loss | ||
Unquoted convertible promissory note | ||
Fair value | – | 12 |
Unquoted Preference securities | ||
Fair value | 23 | – |
Fixed Maturity Plan Securities | ||
Fair value | 458 | 429 |
Others | ||
Fair value | 16 | 66 |
Total non-current investments | 4,634 | 5,756 |
Total investments | 11,261 | 12,163 |
Investments carried at amortised cost | 1,911 | 1,897 |
Investments carried at fair value through other comprehensive income | 7,067 | 9,678 |
Investments carried at fair value through profit or loss | 2,283 | 588 |
Uncalled capital commitments outstanding as
at March 31, 2019 and March 31, 2018 was 86 crore and
81 crore, respectively.
Details of amounts recorded in other comprehensive income:
(In crore)
Net Gain/(loss) on | Year ended | |||||
March 31, 2019 | March 31, 2018 | |||||
Gross | Tax | Net | Gross | Tax | Net | |
Quoted debt securities | 6 | (1) | 5 | (13) | 2 | (11) |
Certificates of deposit | (5) | 2 | (3) | 16 | (6) | 10 |
Unquoted equity and preference securities | 63 | 7 | 70 | 4 | 3 | 7 |
Method of fair valuation:
(In crore)
Class of investment | Method | Fair value | |
As at | |||
March 31, 2019 | March 31, 2018 | ||
Liquid mutual fund units | Quoted price | 1,786 | 81 |
Fixed maturity plan securities | Market observable inputs | 458 | 429 |
Quoted debt securities- carried at amortized cost | Quoted price and market observable inputs | 2,125 | 2,151 |
Quoted debt securities- carried at fair value through other comprehensive income | Quoted price and market observable inputs | 3,990 | 3,978 |
Certificates of deposit | Market observable inputs | 2,482 | 5,269 |
Commercial paper | Market observable inputs | 495 | 293 |
Unquoted equity and preference securities - carried at fair value through other comprehensive income | Discounted cash flows method, Market multiples method, Option pricing model, etc. | 100 | 138 |
Unquoted equity and preference securities - carried at fair value through profit or loss | Discounted cash flows method, Market multiples method, Option pricing model, etc. | 23 | – |
Unquoted convertible promissory note | Discounted cash flows method, Market multiples method, Option pricing model, etc. | – | 12 |
Others | Discounted cash flows method, Market multiples method, Option pricing model, etc. | 16 | 66 |
Total | 11,475 | 12,417 |
Certain quoted investments are classified as Level 2 in the absence of active market for such investments.
2.3 Financial instruments
Accounting Policy
2.3.1 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.
2.3.2 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 (FVOCI)
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 Group 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.
(iii) Financial assets at fair value through profit or loss (FVTPL)
A financial asset which is not classified in any of the above categories is 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 as 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 and buy back of ordinary shares 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.
2.3.3 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.
2.3.4 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.
Refer to table 'Financial instruments by category' below for the disclosure on carrying value and fair value of financial assets and liabilities. For financial assets and liabilities maturing within one year from the balance sheet date and which are not carried at fair value, the carrying amounts approximate fair value due to the short maturity of those instruments.
2.3.5 Impairment
The Group recognizes loss allowances using the expected credit loss (ECL) model for the financial assets and unbilled revenue which are not fair valued through profit or loss. Loss allowance for trade receivables and unbilled revenues 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 statement of comprehensive income.
Financial instruments by category
The carrying value and fair value of financial instruments by categories as at March 31, 2019 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 to Note 2.1) | 19,568 | - | – | – | – | 19,568 | 19,568 |
Investments (Refer to Note 2.2) | |||||||
Liquid mutual funds | – | – | 1,786 | – | – | 1,786 | 1,786 |
Fixed maturity plan securities | – | – | 458 | – | – | 458 | 458 |
Quoted debt securities | 1,911 | – | – | – | 3,990 | 5,901 | 6,115(1) |
Certificates of deposit | – | – | – | – | 2,482 | 2,482 | 2,482 |
Commercial paper | – | – | – | – | 495 | 495 | 495 |
Unquoted equity and preference securities | – | – | 23 | 100 | – | 123 | 123 |
Unquoted investment others | – | – | 16 | – | – | 16 | 16 |
Trade receivables | 14,827 | – | – | – | – | 14,827 | 14,827 |
Unbilled revenues (3) (Refer to Note 2.10) | 2,093 | – | – | – | – | 2,093 | 2,093 |
Prepayments and other assets (Refer to Note 2.4) | 3,648 | – | – | – | – | 3,648 | 3,564(2) |
Derivative financial instruments | – | – | 299 | – | 37 | 336 | 336 |
Total | 42,047 | – | 2,582 | 100 | 7,004 | 51,733 | 51,863 |
Liabilities: | |||||||
Trade payables | 1,655 | – | – | – | – | 1,655 | 1,655 |
Derivative financial instruments | – | – | 15 | – | – | 15 | 15 |
Other liabilities including contingent consideration (Refer to Note 2.5) | 8,731 | – | 190 | – | – | 8,921 | 8,921 |
Total | 10,386 | – | 205 | – | – | 10,591 | 10,591 |
(1) On account of fair value changes including interest accrued
(2) Excludes interest accrued on quoted debt securities carried at amortized cost
(3) | Excludes unbilled revenue for fixed price development contracts where right to consideration is conditional on factors other than passage of time |
The carrying value and fair value of financial instruments by categories as at March 31, 2018 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 to Note 2.1) | 19,818 | – | – | – | – | 19,818 | 19,818 |
Investments (Refer to Note 2.2) | |||||||
Liquid mutual funds | – | – | 81 | – | – | 81 | 81 |
Fixed maturity plan securities | – | – | 429 | – | – | 429 | 429 |
Quoted debt securities | 1,897 | – | – | – | 3,978 | 5,875 | 6,129(1) |
Certificates of deposit | – | – | – | – | 5,269 | 5,269 | 5,269 |
Commercial papers | – | – | – | – | 293 | 293 | 293 |
Unquoted equity and preference securities | – | – | – | 138 | – | 138 | 138 |
Unquoted investments others | – | – | 66 | – | – | 66 | 66 |
Unquoted convertible promissory note | – | – | 12 | – | – | 12 | 12 |
Trade receivables | 13,142 | – | – | – | – | 13,142 | 13,142 |
Unbilled revenue (Refer to Note 2.10) | 4,261 | – | – | – | – | 4,261 | 4,261 |
Prepayments and other assets (Refer to Note 2.4) | 2,966 | – | – | – | – | 2,966 | 2,882(2) |
Derivative financial instruments | – | – | 4 | – | 12 | 16 | 16 |
Total | 42,084 | – | 592 | 138 | 9,552 | 52,366 | 52,536 |
Liabilities: | |||||||
Trade payables | 694 | – | – | – | – | 694 | 694 |
Derivative financial instruments | – | – | 39 | – | 3 | 42 | 42 |
Other liabilities including contingent consideration (Refer to Note 2.5) | 5,442 | – | 54 | – | – | 5,496 | 5,496 |
Total | 6,136 | – | 93 | – | 3 | 6,232 | 6,232 |
(1) On account of fair value changes including interest accrued
(2) Excludes interest accrued on quoted debt securities carried at amortized cost
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 as at March 31, 2019:
(In crore)
Particulars | As at March 31, 2019 | Fair value measurement at end of the reporting period using | ||
Level 1 | Level 2 | Level 3 | ||
Assets | ||||
Investments in liquid mutual fund units (Refer to Note 2.2) | 1,786 | 1,786 | – | – |
Investments in fixed maturity plan securities (Refer to Note 2.2) | 458 | – | 458 | – |
Investments in quoted debt securities (Refer to Note 2.2) | 6,115 | 4,358 | 1,757 | – |
Investments in certificates of deposit (Refer to Note 2.2) | 2,482 | – | 2,482 | – |
Investments in commercial paper (Refer to Note 2.2) | 495 | – | 495 | – |
Investments in unquoted equity and preference securities (Refer to Note 2.2) | 123 | – | – | 123 |
Investments in unquoted investments others (Refer to Note 2.2) | 16 | – | – | 16 |
Derivative financial instruments - gain on outstanding foreign exchange forward and option contracts | 336 | – | 336 | – |
Liabilities | ||||
Derivative financial instruments - loss on outstanding foreign exchange forward and option contracts | 15 | – | 15 | – |
Liability towards contingent consideration (Refer to Note 2.5)* | 190 | – | – | 190 |
*Discount rate pertaining to contingent consideration ranges from 9% to 16%.
During the year ended March 31, 2019, quoted
debt securities of 336 crore were transferred from Level 2 to Level 1 of fair value hierarchy, since these were valued based
on quoted price and quoted debt securities of
746 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 as at March 31, 2018:
(In crore)
Particulars | As at March 31, 2018 | Fair value measurement at end of the reporting year using | ||
Level 1 | Level 2 | Level 3 | ||
Assets | ||||
Investments in liquid mutual fund units (Refer to Note 2.2) | 81 | 81 | – | – |
Investments in fixed maturity plan securities (Refer to Note 2.2) | 429 | – | 429 | – |
Investments in quoted debt securities (Refer to Note 2.2) | 6,129 | 4,574 | 1,555 | – |
Investments in certificates of deposit (Refer to Note 2.2) | 5,269 | – | 5,269 | – |
Investments in commercial papers (Refer to Note 2.2) | 293 | – | 293 | – |
Investments in unquoted equity and preference securities(Refer to Note 2.2) | 138 | – | – | 138 |
Investments in unquoted investments others (Refer to Note 2.2) | 66 | – | – | 66 |
Investments in unquoted convertible promissory note (Refer to Note 2.2) | 12 | – | – | 12 |
Derivative financial instruments- gain on outstanding foreign exchange forward and option contracts | 16 | – | 16 | – |
Liabilities | ||||
Derivative financial instruments- loss on outstanding foreign exchange forward and option contracts | 42 | – | 42 | – |
Liability towards contingent consideration (Refer to Note 2.5)* | 54 | – | – | 54 |
*Discounted contingent consideration of 21
crore pertaining to Brilliant Basics at 10%
During the year ended March 31, 2018, tax free
bonds and non-convertible debentures of 1,797 crore were transferred from Level 2 to Level 1 of fair value hierarchy, since
these were valued based on quoted price and
850 crore was transferred from Level 1 to Level 2 of fair value hierarchy, since
these were valued based on market observable inputs.
A one percentage point change in the unobservable inputs used in fair valuation of Level 3 assets and liabilities does not have a significant impact in its value.
Income from financial assets is as follows :
(In crore)
Particulars | Three months ended March 31, | Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Interest income from financial assets carried at amortised cost | 355 | 382 | 1,404 | 1,674 |
Interest income on financial assets fair valued through other comprehensive income | 142 | 133 | 646 | 682 |
Dividend income from investments carried at fair value through profit or loss | 1 | – | 2 | 4 |
Gain / (loss) on investments carried at fair value through profit or loss | 65 | 39 | 170 | 253 |
563 | 554 | 2,222 | 2,613 |
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 analyses foreign currency risk from monetary assets and liabilities as at March 31, 2019:
(In crore)
Particulars | U.S. dollars | Euro | United Kingdom Pound Sterling | Australian dollars | Other currencies | Total |
Cash and cash equivalents | 1,640 | 266 | 110 | 213 | 1,113 | 3,342 |
Trade receivables | 9,950 | 1,844 | 1,025 | 527 | 971 | 14,317 |
Unbilled revenue | 3,733 | 769 | 251 | 276 | 434 | 5,463 |
Other assets | 456 | 104 | 34 | 34 | 314 | 942 |
Trade payables | (708) | (128) | (139) | (80) | (107) | (1,162) |
Employee benefit obligations | (678) | (106) | (25) | (205) | (164) | (1,178) |
Other liabilities | (3,523) | (454) | (192) | (177) | (595) | (4,941) |
Net assets / (liabilities) | 10,870 | 2,295 | 1,064 | 588 | 1,966 | 16,783 |
The following table analyses foreign currency risk from monetary assets and liabilities as at March 31, 2018:
(In crore)
Particulars | U.S. dollars | Euro | United Kingdom Pound Sterling | Australian dollars | Other currencies | Total |
Cash and cash equivalents | 1,287 | 218 | 147 | 353 | 1,192 | 3,197 |
Trade receivables | 8,317 | 1,751 | 845 | 788 | 781 | 12,482 |
Unbilled revenue | 2,318 | 637 | 304 | 159 | 371 | 3,789 |
Other assets | 318 | 26 | 26 | 14 | 99 | 483 |
Trade payables | (273) | (81) | (114) | (30) | (58) | (556) |
Accrued Expenses | (1,082) | (188) | (111) | (61) | (149) | (1,591) |
Employee benefit obligations | (572) | (91) | (25) | (181) | (129) | (998) |
Other liabilities | (635) | (138) | (79) | (31) | (318) | (1,201) |
Net assets / (liabilities) | 9,678 | 2,134 | 993 | 1,011 | 1,789 | 15,605 |
Sensitivity analysis between Indian rupee and U.S. Dollar
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Impact on Group's incremental operating margins | 0.45% | 0.50% | 0.47% | 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:
Particulars | As at | As at | ||
March 31, 2019 | March 31, 2018 | |||
In million | In ![]() |
In million | In ![]() | |
Derivatives designated as cash flow hedges | ||||
Option Contracts | ||||
In Australian dollars | 120 | 588 | 60 | 300 |
In Euro | 135 | 1,049 | 100 | 808 |
In United Kingdom Pound Sterling | 25 | 226 | 20 | 184 |
Other derivatives | ||||
Forward contracts | ||||
In Australian dollars | 8 | 37 | 5 | 25 |
In Canadian dollars | 13 | 68 | 20 | 99 |
In Euro | 176 | 1,367 | 91 | 735 |
In Japanese Yen | 550 | 34 | 550 | 34 |
In New Zealand dollars | 16 | 75 | 16 | 76 |
In Norwegian Krone | 40 | 32 | 40 | 34 |
In South African Rand | – | – | 25 | 14 |
In Singapore dollars | 140 | 716 | 5 | 25 |
In Swedish Krona | 50 | 37 | 50 | 40 |
In Swiss Franc | 25 | 172 | 21 | 146 |
In U.S. dollars | 955 | 6,608 | 623 | 4,061 |
In United Kingdom Pound Sterling | 80 | 724 | 51 | 466 |
Option Contracts | ||||
In Australian dollars | 10 | 49 | 20 | 100 |
In Canadian dollars | 13 | 69 | - | - |
In Euro | 60 | 466 | 45 | 363 |
In Swiss Franc | 5 | 35 | 5 | 33 |
In U.S. dollars | 433 | 2,995 | 320 | 2,086 |
In United Kingdom Pound Sterling | 10 | 91 | 25 | 231 |
Total forwards & options | 15,438 | 9,860 |
The group recognized a net gain of 207
crore and
240 crore during the three months and year ended March 31, 2019 and a net loss of
130 crore and net gain
of
1 crore during the three months and year ended March 31, 2018, respectively, on derivative financial instruments not
designated as cash flow hedges which are included in other income.
The foreign exchange forward and option contracts mature within twelve months. The table below analyses the derivative financial instruments into relevant maturity groupings based on the remaining period as at the balance sheet date:
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Not later than one month | 4,432 | 2,828 |
Later than one month and not later than three months | 6,921 | 4,568 |
Later than three months and not later than one year | 4,085 | 2,464 |
Total | 15,438 | 9,860 |
During the year ended March 31, 2019 and March 31, 2018, the Group has designated certain foreign exchange forward and option contracts as cash flow hedges to mitigate the risk of foreign exchange exposure on highly probable forecast cash transactions. The related hedge transactions for balance in cash flow hedging reserve as at March 31, 2019 are expected to occur and reclassified to statement of comprehensive income within 3 months.
Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument, including whether the hedging instrument is expected to offset changes in cash flows of hedged items.
If the hedge ratio for risk management purposes is no longer optimal but the risk management objective remains unchanged and the hedge continues to qualify for hedge accounting, the hedge relationship will be rebalanced by adjusting either the volume of the hedging instrument or the volume of the hedged item so that the hedge ratio aligns with the ratio used for risk management purposes. Any hedge ineffectiveness is calculated and accounted for in profit or loss at the time of the hedge relationship rebalancing.
The following table provides the reconciliation of cash flow hedge reserve for the three months and year ended March 31, 2019 and March 31, 2018:
(In crore)
Particulars | Three months ended March 31, | Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Gain / (Loss) | ||||
Balance at the beginning of the period | 36 | (2) | – | 39 |
Gain / (loss) recognised in other comprehensive income during the period | 25 | (9) | 118 | (93) |
Amount reclassified to profit and loss during the period | (45) | 11 | (90) | 41 |
Tax impact on above | 5 | – | (7) | 13 |
Balance at the end of the period | 21 | – | 21 | – |
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)
Particulars | As at | |||
March 31, 2019 | March 31, 2018 | |||
Derivative financial asset |
Derivative financial liability | Derivative financial asset |
Derivative financial liability | |
Gross amount of recognized financial asset/liability | 338 | (17) | 20 | (46) |
Amount set off | (2) | 2 | (4) | 4 |
Net amount presented in balance sheet | 336 | (15) | 16 | (42) |
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 14827 crore and
13,142 crore as at March 31, 2019 and March 31,
2018, respectively and unbilled revenue amounting to
5374 crore and
4,261 crore as at March 31, 2019 and March 31,
2018, 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 ten customers:
(In %)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Revenue from top customer | 3.3 | 3.6 | 3.6 | 3.4 |
Revenue from top ten customers | 19.7 | 19.2 | 19.0 | 19.3 |
Credit risk exposure
The allowance of lifetime expected credit loss
on customer balances for the three months and year ended March 31, 2019 was 15 crore and
239 crore, respectively.
Reversal of lifetime expected credit losses
for the three months ended March 31, 2018 was 27 crore and allowance of lifetime expected credit losses for year ended March
31, 2018 was
34 crore.
Movement in credit loss allowance:
(In crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Balance at the beginning | 615 | 470 | 449 | 411 |
Translation differences | (3) | 7 | 12 | 10 |
Impairment loss recognised / (reversed) | 15 | (27) | 239 | 34 |
Reclassified as held for sale (refer note no 2.9) | – | (1) | – | (1) |
Write-offs | – | – | (73) | (5) |
Balance at the end | 627 | 449 | 627 | 449 |
The Group’s credit period generally ranges from 30-60 days.
Credit exposure
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Trade receivables | 14,827 | 13,142 |
Unbilled revenue | 5,374 | 4,261 |
Days Sales Outstanding (DSO) as of March 31, 2019 and March 31, 2018 was 66 days and 67 days, respectively.
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, fixed maturity plan securities, quoted bonds issued by government and quasi government organizations, non convertible debentures, certificates of deposit, commercial papers and government securities.
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 borrowings. The Group believes that the working capital is sufficient to meet its current requirements.
As at March 31, 2019, the Group had a working
capital of 34,240 crore including cash and cash equivalents of
19,568 crore and current investments of
6,627
crore. As at March 31, 2018, the Group had a working capital of
34,176 crore including cash and cash equivalents of
19,818
crore and current investments of
6,407 crore.
As at March 31, 2019 and March 31, 2018, the
outstanding employee benefit obligations were 1,663 crore and
1,469 crore, respectively, which have been substantially
funded. Accordingly, no liquidity risk is perceived.
Under the company's ongoing buyback programme
the maximum buyback size is 8,260 crore. The company has bought back shares amounting to
797 crore (including transaction
costs) till March 31, 2019. Refer to note no. 2.13.
The table below provides details regarding the contractual maturities of significant financial liabilities as at March 31, 2019:
(In crore)
Particulars | Less than 1 year | 1-2 years | 2-4 years | 4-7 years | Total |
Trade payables | 1,655 | – | – | – | 1,655 |
Other liabilities (excluding liability towards contingent consideration) (Refer to Note 2.5) | 8,716 | 11 | 4 | – | 8,731 |
Liability towards contingent consideration on an undiscounted basis (Refer to Note 2.5) | 114 | 83 | – | 36 | 233 |
The table below provides details regarding the contractual maturities of significant financial liabilities as at March 31, 2018:
(In crore)
Particulars | Less than 1 year | 1-2 years | 2-4 years | 4-7 years | Total |
Trade payables | 694 | – | – | – | 694 |
Other liabilities (excluding liability towards contingent consideration) (Refer to Note 2.5) | 5,442 | – | – | – | 5,442 |
Liability towards contingent consideration on an undiscounted basis (Refer to Note 2.5) | 41 | 7 | 7 | – | 55 |
2.4 Prepayments and other assets
Prepayments and other assets consist of the following:
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Current | ||
Rental deposits | 15 | 13 |
Security deposits | 4 | 9 |
Loans to employees | 241 | 239 |
Prepaid expenses(1) | 751 | 472 |
Interest accrued and not due | 905 | 766 |
Withholding taxes and others(1) | 1,488 | 1,032 |
Advance payments to vendors for supply of goods(1) | 109 | 119 |
Deposit with corporations | 1,671 | 1,535 |
Deferred contract cost(1) | 58 | 44 |
Escrow and other deposits pertaining to buyback (refer to note 2.13) | 257 | – |
Other assets | 224 | 84 |
Total Current prepayment and other assets | 5,723 | 4,313 |
Non-current | ||
Loans to employees | 19 | 36 |
Deposit with corporations | 67 | 60 |
Rental deposits | 193 | 171 |
Security deposits | 52 | 53 |
Withholding taxes and others(1) | 929 | 1,428 |
Deferred contract cost(1) | 277 | 262 |
Prepaid expenses(1) | 162 | 111 |
Advance pertaining to business acquisition (Refer note 2.9.1)(1) | 206 | – |
Prepaid gratuity(1) | 42 | 43 |
Total Non- current prepayment and other assets | 1,947 | 2,164 |
Total prepayment and other assets | 7,670 | 6,477 |
Financial assets in prepayments and other assets | 3,648 | 2,966 |
(1) Non financial assets
Withholding taxes and others primarily consist
of input tax credits and Cenvat recoverable from Government of India. Cenvat recoverable includes 523 crore which are pending
adjudication. The Group expects these amounts to be sustainable on adjudication and recoverable on final resolution.
Security deposits relate principally to leased telephone lines and electricity supplies. Deferred contract costs are upfront costs incurred for the contract and are amortized 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)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Current | ||
Accrued compensation to employees | 2,572 | 2,509 |
Accrued expenses | 3,319 | 2,452 |
Withholding taxes and others(1) | 1,487 | 1,240 |
Retention money | 112 | 132 |
Liabilities of controlled trusts | 168 | 139 |
Deferred income - government grant on land use rights(1) | 1 | 1 |
Accrued gratuity (1) | 2 | – |
Liability towards contingent consideration (Refer to Note 2.9) | 102 | 41 |
Deferred rent (1) | 63 | 32 |
Capital Creditors | 676 | 155 |
Financial liability relating to buyback (refer to note 2.13) | 1,202 | – |
Others | 667 | 55 |
Total current other liabilities | 10,371 | 6,756 |
Non-current | ||
Liability towards contingent consideration (Refer to Note 2.9) | 88 | 13 |
Accrued gratuity (1) | 30 | 28 |
Accrued compensation to employees | 15 | – |
Deferred income - government grant on land use rights(1) | 42 | 44 |
Deferred rent (1) | 174 | 151 |
Deferred income(1) | 29 | 36 |
Total non-current other liabilities | 378 | 272 |
Total other liabilities | 10,749 | 7,028 |
Financial liabilities included in other liabilities | 8,921 | 5,496 |
Financial liability towards contingent consideration on an undiscounted basis (Refer to Note 2.9) | 233 | 55 |
(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.
In accordance with IAS 32 Financial Instruments:
Presentation, the Company has recorded a financial liability of 1,202 crore for the obligation to acquire its own equity
shares to the extent of standing instructions provided to its registered broker for the buyback as of March 31, 2019 (refer to
note 2.9). The financial liability is recognised at the present value of the maximum amount that the Company would be required
to pay to the registered broker for buy back, with a corresponding debit in general reserve / retained earnings.
2.6 Provisions
Accounting Policy
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.
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.
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.
Provisions comprise the following:
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Provision for post sales client support and other provisions | 576 | 492 |
576 | 492 |
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)
Particulars | Three months ended March 31, 2019 | Year ended March 31, 2019 |
Balance at the beginning | 582 | 492 |
Provision recognized / (reversed) | 24 | 168 |
Provision utilized | (24) | (112) |
Translation difference | (6) | 28 |
Balance at the end | 576 | 576 |
Provision for post sales client support and other provisions is included in cost of sales in the consolidated statement of comprehensive income.
As at March 31, 2019 and March 31, 2018, claims
against the company, not acknowledged as debts, (excluding demands from income tax authorities- Refer to Note 2.17) amounted to
230 crore and
260 crore respectively.
The Group 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
Accounting Policy
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(1) | 5 years |
Computer equipment | 3-5 years |
Furniture and fixtures | 5 years |
Vehicles | 5 years |
Leasehold improvements | Over lease term |
(1) Includes solar plant with a useful life of 20 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 the consolidated 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 consolidated statement of comprehensive income.
Impairment
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 depreciation) had no impairment loss been recognized for the asset in prior years.
Following are the changes in the carrying value of property, plant and equipment for the three months ended March 31, 2019:
(In crore)
Particulars | Land | Buildings | Plant and machinery | Computer equipment | Furniture and fixtures | Vehicles | Total |
Gross carrying value as at January 1, 2019 | 1,957 | 8,633 | 3,609 | 5,516 | 2,040 | 35 | 21,790 |
Additions/adjustments | 36 | 402 | 427 | 453 | 215 | 3 | 1,536 |
Deletions/adjustments | (83) | (116) | (86) | (122) | (32) | – | (439) |
Translation difference | – | 7 | 1 | (1) | (3) | – | 4 |
Gross carrying value as at March 31, 2019 | 1,910 | 8,926 | 3,951 | 5,846 | 2,220 | 38 | 22,891 |
Accumulated depreciation as at January 1, 2019 | (35) | (2,948) | (2,655) | (4,101) | (1,503) | (21) | (11,263) |
Depreciation | (1) | (81) | (110) | (212) | (68) | (2) | (474) |
Accumulated depreciation on deletions | 3 | 103 | 68 | 122 | 29 | – | 325 |
Translation difference | – | (1) | – | (1) | 1 | 1 | – |
Accumulated depreciation as at March 31, 2019 | (33) | (2,927) | (2,697) | (4,192) | (1,541) | (22) | (11,412) |
Capital work-in progress as at January 1, 2019 | 2,153 | ||||||
Carrying value as at January 1, 2019 | 1,922 | 5,685 | 954 | 1,415 | 537 | 14 | 12,680 |
Capital work-in progress as at March 31, 2019 | 1,877 | ||||||
Carrying value as at March 31, 2019 | 1,877 | 5,999 | 1,254 | 1,654 | 679 | 16 | 13,356 |
Following are the changes in the carrying value of property, plant and equipment for the three months ended March 31, 2018:
(In crore)
Particulars | Land | Buildings | Plant and machinery | Computer equipment | Furniture and fixtures | Vehicles | Total |
Gross carrying value as at January 1, 2018 | 1,806 | 7,680 | 3,248 | 4,820 | 1,821 | 30 | 19,405 |
Additions | 94 | 416 | 128 | 120 | 54 | 2 | 814 |
Deletions | – | (1) | (4) | (30) | (2) | (1) | (38) |
Reclassified as held for sale (refer note no 2.9) | – | – | (3) | (40) | (25) | – | (68) |
Translation difference | – | 35 | 4 | 14 | 13 | – | 66 |
Gross carrying value as at March 31, 2018 | 1,900 | 8,130 | 3,373 | 4,884 | 1,861 | 31 | 20,179 |
Accumulated depreciation as at January 1, 2018 | (30) | (2,645) | (2,242) | (3,498) | (1,269) | (18) | (9,702) |
Depreciation | (1) | (71) | (103) | (175) | (64) | (1) | (415) |
Accumulated depreciation on deletions | – | – | 3 | 29 | 1 | 1 | 34 |
Reclassified as held for sale (refer note no 2.9) | – | – | 2 | 25 | 20 | – | 47 |
Translation difference | – | (3) | (2) | (11) | (11) | – | (27) |
Accumulated depreciation as at March 31, 2018 | (31) | (2,719) | (2,342) | (3,630) | (1,323) | (18) | (10,063) |
Capital work-in progress as at January 1, 2018 | 2,132 | ||||||
Carrying value as at January 1, 2018 | 1,776 | 5,035 | 1,006 | 1,322 | 552 | 12 | 11,835 |
Capital work-in progress as at March 31, 2018 | 2,027 | ||||||
Carrying value as at March 31, 2018 | 1,869 | 5,411 | 1,031 | 1,254 | 538 | 13 | 12,143 |
Following are the changes in the carrying value of property, plant and equipment for the year ended March 31, 2019:
(In crore)
Particulars | Land | Buildings | Plant and machinery | Computer equipment | Furniture and fixtures | Vehicles | Total |
Gross carrying value as at April 1, 2018 | 1,900 | 8,130 | 3,373 | 4,884 | 1,861 | 31 | 20,179 |
Additions | 57 | 916 | 675 | 1,129 | 386 | 9 | 3,172 |
Additions - Business Combination (refer note 2.9) | – | – | 3 | 34 | 10 | – | 47 |
Reclassified from assets held for sale (Refer note 2.9) | – | – | 3 | 40 | 25 | – | 68 |
Deletions | (47) | (116) | (102) | (239) | (59) | (2) | (565) |
Translation difference | – | (4) | (1) | (2) | (3) | – | (10) |
Gross carrying value as at March 31, 2019 | 1,910 | 8,926 | 3,951 | 5,846 | 2,220 | 38 | 22,891 |
Accumulated depreciation as at April 1, 2018 | (31) | (2,719) | (2,342) | (3,630) | (1,323) | (18) | (10,063) |
Depreciation | (5) | (313) | (437) | (766) | (255) | (6) | (1,782) |
Reclassified from assets held for sale (Refer note 2.9) | – | – | (2) | (25) | (20) | – | (47) |
Accumulated depreciation on deletions | 3 | 103 | 83 | 229 | 55 | 2 | 475 |
Translation difference | – | 2 | 1 | – | 2 | – | 5 |
Accumulated depreciation as at March 31, 2019 | (33) | (2,927) | (2,697) | (4,192) | (1,541) | (22) | (11,412) |
Capital work-in progress as at April 1, 2018 | 2,027 | ||||||
Carrying value as at April 1, 2018 | 1,869 | 5,411 | 1,031 | 1,254 | 538 | 13 | 12,143 |
Capital work-in progress as at March 31, 2019 | 1,877 | ||||||
Carrying value as at March 31, 2019 | 1,877 | 5,999 | 1,254 | 1,654 | 679 | 16 | 13,356 |
Following are the changes in the carrying value of property, plant and equipment for the year ended March 31, 2018:
(In crore)
Particulars | Land | Buildings | Plant and machinery | Computer equipment | Furniture and fixtures | Vehicles | Total |
Gross carrying value as at April 1, 2017 | 1,764 | 7,279 | 3,023 | 4,541 | 1,694 | 31 | 18,332 |
Additions | 136 | 789 | 364 | 471 | 190 | 5 | 1,955 |
Deletions | – | (1) | (18) | (110) | (19) | (5) | (153) |
Reclassified as held for sale (refer note no 2.9) | – | – | (3) | (40) | (25) | – | (68) |
Translation difference | – | 63 | 7 | 22 | 21 | – | 113 |
Gross carrying value as at March 31, 2018 | 1,900 | 8,130 | 3,373 | 4,884 | 1,861 | 31 | 20,179 |
Accumulated depreciation as at April 1, 2017 | (27) | (2,440) | (1,952) | (3,052) | (1,093) | (17) | (8,581) |
Depreciation | (4) | (276) | (402) | (693) | (254) | (5) | (1,634) |
Accumulated depreciation on deletions | – | – | 15 | 107 | 18 | 4 | 144 |
Reclassified as held for sale (refer note no 2.9) | – | – | 2 | 25 | 20 | – | 47 |
Translation difference | – | (3) | (5) | (17) | (14) | – | (39) |
Accumulated depreciation as at March 31, 2018 | (31) | (2,719) | (2,342) | (3,630) | (1,323) | (18) | (10,063) |
Capital work-in progress as at April 1, 2017 | 1,965 | ||||||
Carrying value as at April 1, 2017 | 1,737 | 4,839 | 1,071 | 1,489 | 601 | 14 | 11,716 |
Capital work-in progress as at March 31, 2018 | 2,027 | ||||||
Carrying value as at March 31, 2018 | 1,869 | 5,411 | 1,031 | 1,254 | 538 | 13 | 12,143 |
The aggregate depreciation expense is included in cost of sales in the consolidated statement of comprehensive income.
Carrying value of land includes 571 crore
and
642 crore as at March 31, 2019 and March 31, 2018, respectively, towards amounts paid under certain lease-cum-sale agreements
to acquire land including agreements where the Group has an option to either purchase or renew the properties on expiry of the
lease period. The contractual commitments for capital expenditure were
1,724 crore and
1,452 crore, as at March 31,
2019 and March 31, 2018, respectively.
2.8 Goodwill and other intangible assets
2.8.1 Goodwill
Accounting Policy
Goodwill represents the cost of business acquisition in excess of the Group's interest in the net fair value of identifiable assets, liabilities and contingent liabilities of the acquiree. When the net fair value of the identifiable assets, liabilities and contingent liabilities acquired exceeds the cost of business acquisition, a gain is recognized immediately in net profit in the Statement of comprehensive income. Goodwill is measured at cost less accumulated impairment losses.
Impairment
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.
Following is a summary of changes in the carrying amount of goodwill:
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Carrying value at the beginning | 2,211 | 3,652 |
Goodwill on Wongdoody acquisition (Refer to note 2.9.1) | 173 | – |
Goodwill on Brilliant Basics acquisition (Refer to note 2.9.1) | – | 35 |
Goodwill on Fluido acquisition (Refer to note 2.9.1) | 240 | – |
Goodwill reclassified under assets held for sale (Refer note no 2.9.2) | – | (1,609) |
Goodwill reclassified from assets held for sale , net of reduction in recoverable amount (Refer note no 2.9) | 863 | – |
Translation differences | 53 | 133 |
Carrying value at the end | 3,540 | 2,211 |
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 three months ended June 30, 2018, the Group internally reorganized some of its business segments to deepen customer relationships, improve focus of sales investments and increase management oversight. Consequent to the internal reorganization, there were changes in the business segments based on “Management approach” as defined under IFRS 8, Operating Segments.(Refer Note 2.20). Accordingly the goodwill has been allocated to the new operating segments as at March 31, 2019.
The following table presents the allocation of goodwill to operating segments as at March 31, 2019
(In crore)
Segment | As at March 31, 2019 |
Financial services | 743 |
Retail | 437 |
Communication | 389 |
Energy, Utilities, Resources and Services | 374 |
Manufacturing | 239 |
2,182 | |
Operating segments without significant goodwill | 417 |
Total | 2,599 |
Consequent to reclassification from held for
sale (refer note no. 2.9.2 ) the goodwill pertaining to Panaya, Kallidus and Skava acquistions are tested for impairment at the
respective entity Level which amounts to 941 crore as of March 31, 2019.
The following table presents the allocation of goodwill to operating segments (prior to internal reorganization) as at March 31, 2018:
(In crore)
Segment | As at March 31, 2018 |
Financial services | 474 |
Manufacturing | 252 |
Retail, Consumer packaged goods and Logistics | 314 |
Life Sciences, Healthcare and Insurance | 446 |
Energy & Utilities, Communication and Services | 470 |
1,956 | |
Operating segments without significant goodwill | 255 |
Total |
2,211 |
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 cash flow projections over a period of five years. An average of the range of each assumption used is mentioned below. As at March 31, 2019 and March 31, 2018, the estimated recoverable amount of the CGU exceeded its carrying amount. The key assumptions used for the calculations are as follows:
(in %)
As at March 31, | ||
2019 | 2018 | |
Long term growth rate | 8-10 | 8-10 |
Operating margins | 17-20 | 17-20 |
Discount rate | 12.5 | 13.5 |
The above discount rate is based on the Weighted Average Cost of Capital (WACC) of the Company. Management believes that any reasonable possible changes in the key assumptions would not cause the carrying amount to exceed the recoverable amount of the cash generating unit.
2.8.2 Other intangible assets
Accounting Policy
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.
Impairment
Intangible assets 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 amortisation) had no impairment loss been recognized for the asset in prior years.
Following are the changes in the carrying value of acquired intangible assets for the three months ended March 31, 2019:
(In crore)
Particulars | 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 at January 1, 2019 | 950 | 446 | – | 1 | 72 | 100 | 84 | 1,653 |
Additions during the period | – | – | – | – | – | – | – | |
Acquisition through business combination (Refer note no. 2.9) | – | – | – | – | – | – | – | – |
Deletions/retirals during the period | – | – | – | – | – | – | – | |
Reclassified as held for sale (refer note no 2.9) | – | – | – | – | – | – | – | |
Translation differences | (13) | (5) | – | – | 1 | (1) | (1) | (19) |
Gross carrying value as at March 31, 2019 | 937 | 441 | – | 1 | 73 | 99 | 83 | 1,634 |
Accumulated amortization as at January 1, 2019 | (538) | (283) | – | (1) | (11) | (42) | (22) | (897) |
Amortization expense | (25) | (22) | – | – | (1) | (3) | (6) | (57) |
Deletions/retirals during the period | – | – | – | – | – | – | – | – |
Reclassified as held for sale (refer note no 2.9) | – | – | – | – | – | – | – | – |
Translation differences | 6 | 3 | – | – | 1 | 1 | – | 11 |
Accumulated amortization as at March 31, 2019 | (557) | (302) | – | (1) | (11) | (44) | (28) | (943) |
Carrying value as at January 1, 2019 | 412 | 163 | – | – | 61 | 58 | 62 | 756 |
Carrying value as at March 31, 2019 | 380 | 139 | – | – | 62 | 55 | 55 | 691 |
Estimated Useful Life (in years) | 1-10 | 3-8 | – | – | 50 | 5-10 | 3-5 | |
Estimated Remaining Useful Life (in years) | 0-7 | 1 | – | – | 43 | 2-8 | 2-3 |
Following are the changes in the carrying value of acquired intangible assets for the three months ended March 31, 2018:
(In crore)
Particulars | 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 at January 1, 2018 | 756 | 399 | 21 | 1 | 69 | 90 | 62 | 1,398 |
Additions during the period | – | – | – | – | – | – | – | – |
Deletions during the period | (172) | – | (21) | – | – | (29) | (35) | (257) |
Reclassified as held for sale (refer note no 2.9) | (157) | (388) | – | (1) | – | (37) | – | (583) |
Translation differences | 18 | 8 | – | – | 4 | 2 | – | 32 |
Gross carrying value as at March 31, 2018 | 445 | 19 | – | – | 73 | 26 | 27 | 590 |
Accumulated amortization as at January 1, 2018 | (485) | (178) | (21) | (1) | (8) | (59) | (47) | (799) |
Amortization expense | (19) | (20) | – | – | – | (2) | (2) | (43) |
Deletions/retirals during the period | 172 | – | 21 | – | – | 29 | 35 | 257 |
Reclassified as held for sale (refer note no 2.9) | 56 | 182 | – | 1 | – | 21 | – | 260 |
Translation differences | (13) | (3) | – | – | (2) | (1) | 1 | (18) |
Accumulated amortization as at March 31, 2018 | (289) | (19) | – | – | (10) | (12) | (13) | (343) |
Carrying value as at January 1, 2018 | 271 | 221 | – | – | 61 | 31 | 15 | 599 |
Carrying value as at March 31, 2018 | 156 | – | – | – | 63 | 14 | 14 | 247 |
Estimated Useful Life (in years) | 2-10 | – | – | – | 50 | 5 | 5 | |
Estimated Remaining Useful Life (in years) | 0-5 | – | – | – | 43 | 3 | 3 |
Following are the changes in the carrying value of acquired intangible assets for the year ended March 31, 2019:
(In crore)
Particulars | 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 at April 1, 2018 | 445 | 19 | – | – | 73 | 26 | 27 | 590 |
Additions during the period | – | 9 | – | – | – | – | – | 9 |
Acquisition through business combination (Refer note no. 2.9) | 334 | – | – | – | – | 36 | 62 | 432 |
Deletions/retirals during the period | – | – | – | – | – | – | – | – |
Reclassified as held for sale (refer note no 2.9) | 157 | 388 | – | 1 | – | 37 | – | 583 |
Translation differences | 1 | 25 | – | – | – | – | (6) | 20 |
Gross carrying value as at March 31, 2019 | 937 | 441 | – | 1 | 73 | 99 | 83 | 1,634 |
Accumulated amortization as at April 1, 2018 | (289) | (19) | – | – | (10) | (12) | (13) | (343) |
Amortization expense | (112) | (90) | – | – | (2) | (10) | (15) | (229) |
Reduction in value | (93) | – | – | – | – | – | – | (93) |
Deletions/retirals during the period | – | – | – | – | – | – | – | – |
Reclassified as held for sale (refer note no 2.9) | (56) | (182) | – | (1) | – | (21) | – | (260) |
Translation differences | (7) | (11) | – | – | 1 | (1) | – | (18) |
Accumulated amortization as at March 31, 2019 | (557) | (302) | – | (1) | (11) | (44) | (28) | (943) |
Carrying value as at April 1, 2018 | 156 | – | – | – | 63 | 14 | 14 | 247 |
Carrying value as at March 31, 2019 | 380 | 139 | – | – | 62 | 55 | 55 | 691 |
Estimated Useful Life (in years) | 1-10 | 3-8 | – | – | 50 | 5-10 | 3-5 | |
Estimated Remaining Useful Life (in years) | 0-7 | 1 | – | – | 43 | 2-8 | 2-3 |
Following are the changes in the carrying value of acquired intangible assets for the year ended March 31, 2018:
(In crore)
Particulars | 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 at April 1, 2017 | 750 | 405 | 21 | 1 | 66 | 90 | 62 | 1,395 |
Additions during the period | 12 | – | – | – | – | – | – | 12 |
Deletions/retirals during the period | (172) | – | (21) | – | – | (29) | (35) | (257) |
Reclassified as held for sale (refer note no 2.9) | (157) | (388) | – | (1) | – | (37) | – | (583) |
Translation differences | 12 | 2 | – | – | 7 | 2 | – | 23 |
Gross carrying value as at March 31, 2018 | 445 | 19 | – | – | 73 | 26 | 27 | 590 |
Accumulated amortization as at April 1, 2017 | (382) | (121) | (21) | (1) | (7) | (49) | (38) | (619) |
Amortization expense | (127) | (79) | – | – | (1) | (12) | (10) | (229) |
Deletions/retirals during the period | 172 | – | 21 | – | – | 29 | 35 | 257 |
Reclassified as held for sale (refer note no 2.9) | 56 | 182 | – | 1 | – | 21 | – | 260 |
Translation differences | (8) | (1) | – | – | (2) | (1) | – | (12) |
Accumulated amortization as at March 31, 2018 | (289) | (19) | – | – | (10) | (12) | (13) | (343) |
Carrying value as at April 1, 2017 | 368 | 284 | – | – | 59 | 41 | 24 | 776 |
Carrying value as at March 31, 2018 | 156 | – | – | – | 63 | 14 | 14 | 247 |
Estimated Useful Life (in years) | 2-10 | – | – | – | 50 | 5 | 5 | |
Estimated Remaining Useful Life (in years) | 0-5 | – | – | – | 43 | 3 | 3 |
The amortization expense has been included under depreciation and amortization expense in the consolidated statement of comprehensive income.
Research and development expense recognized
in net profit in the consolidated statement of comprehensive income for the three months ended March 31, 2019 and March 31, 2018
was 196 crore and
192 crore respectively, and for the year ended March 31, 2019 and March 31, 2018 was
769 crore and
748 crore
respectively.
2.9 Business combinations and Disposal Group held for sale
2.9.1 Business combinations
Accounting Policy
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.
The interest of non-controlling shareholders is initially measured either at fair value or at the non-controlling interests’ proportionate share of the acquiree’s identifiable net assets. The choice of measurement basis is made on an acquisition-by-acquisition basis. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests’ share of subsequent changes in equity of subsidiaries.
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.
Brilliant Basics Holdings Limited.
On September 8, 2017, Infosys acquired 100%
of the voting interests in Brilliant Basics Holdings Limited., UK, (Brilliant Basics) a product design and customer experience
innovator with experience in executing global programs. The business acquisition was conducted by entering into a share purchase
agreement for cash consideration of 29 crore, a contingent consideration of up to
20 crore and an additional consideration
of upto
13 crore, referred to as retention bonus, payable to the employees of Brilliant Basics at each anniversary year
over the next two years, subject to their continuous employment with the group at each anniversary.
The payment of contingent consideration to sellers of Brilliant Basics is dependent upon the achievement of certain financial targets by Brilliant Basics over a period of 3 years ending on March 2020.
The fair value of contingent consideration is
determined by discounting the estimated amount payable to the sellers of Brilliant Basics on achievement of certain financial targets.
The key inputs used in determination of the fair value of contingent consideration are the discount rate of 10% and the probabilities
of achievement of the financial targets. The undiscounted value of contingent consideration is 14 crore as at March 31,
2019.
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(*) | 1 | – | 1 |
Intangible assets - customer relationships | – | 12 | 12 |
Deferred tax liabilities on intangible assets | – | (2) | (2) |
1 | 10 | 11 | |
Goodwill | 35 | ||
Total purchase price | 46 |
*Includes cash and cash equivalents acquired
of 2 crore
The goodwill is not tax deductible.
The gross amount of trade receivables acquired
and its fair value is 3 crore and the amount has been substantially collected.
The fair value of each major class of consideration as at the acquisition date is as follows:
(in crore)
Component | Consideration settled |
Cash paid | 29 |
Fair value of contingent consideration | 17 |
Total purchase price | 46 |
The transaction costs of 2 crore related
to the acquisition have been included under administrative expenses in the statement of comprehensive income for the year ended
March 31, 2018.
WongDoody Holding Company Inc.
On May 22, 2018, Infosys acquired 100% of the
voting interests in WongDoody Holding Company Inc., (WongDoody) a US-based, full-service creative and consumer insights agency.
The business acquisition was conducted by entering into a share purchase agreement for a total consideration of up to $75 million
(approximately 514 crore on acquisition date), which includes a cash consideration of $38 million (approximately
261
crore), contingent consideration of up to $28 million (approximately
192 crore on acquisition date) and an additional consideration
of up to $9 million (approximately
61 crore on acquisition date), referred to as retention bonus, payable to the employees
of WongDoody over the next three years, subject to their continuous employment with the group.
WongDoody, brings to Infosys the creative talent and marketing and brand engagement expertise. Further the acquisition is expected to strengthen Infosys’ creative, branding and customer experience capabilities to bring innovative thinking, talent and creativity to clients.
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(*) | 37 | – | 37 |
Intangible assets - customer contracts and relationships | – | 132 | 132 |
Intangible assets - trade name | – | 8 | 8 |
37 | 140 | 177 | |
Goodwill | 173 | ||
Total purchase price | 350 |
* Includes cash and cash equivalents acquired
of 51 crore.
Goodwill is tax deductible
The fair value of each major class of consideration as of the acquisition date is as follows:
(in crore)
Component | Consideration settled |
Cash consideration | 261 |
Fair value of contingent consideration | 89 |
Total purchase price | 350 |
The gross amount of trade receivables acquired
and its fair value is 12 crore and the amount has been fully collected.
The payment of contingent consideration to sellers
of WongDoody is dependent upon the achievement of certain financial targets by WongDoody. At the acquisition date, the key inputs
used in determination of the fair value of contingent consideration are the discount rate of 16% and the probabilities of achievement
of the financial targets. The undiscounted value of contingent consideration as at March 31, 2019 is $17 million ( 121 crore)
The transaction costs of 3 crore related
to the acquisition have been included under administrative expenses in the statement of comprehensive income for the year ended
March 31, 2019.
Infosys Compaz Pte Limited (formerly Trusted Source Pte Ltd)
On November 16, 2018, Infosys Consulting Pte
Limited (a wholly owned subsidiary of Infosys Limited) acquired 60% stake in Infosys Compaz Pte. Ltd a Singapore based IT services
company. The business acquisition was conducted by entering into a share purchase agreement for a total consideration of up to
SGD 17 million (approximately 91 crore on acquisition date), which includes a cash consideration of SGD 10 million (approximately
54 crore on acquisition date) and a contingent consideration of up to SGD 7 million (approximately
37 crore on acquisition
date).
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(*) | 92 | – | 92 |
Intangible assets - customer contracts and relationships | – | 44 | 44 |
Deferred tax liabilities on intangible assets | – | (7) | (7) |
92 | 37 | 129 | |
Non-controlling interests | (51) | ||
Total purchase price | 78 |
* Includes cash and cash equivalents acquired
of 65 crore.
The fair value of each major class of consideration as at the acquisition date is as follows:
(in crore)
Component | Consideration settled |
Cash consideration | 54 |
Fair value of contingent consideration | 24 |
Total purchase price | 78 |
The gross amount of trade receivables acquired
and its fair value is 50 crore and the amount has been substantially collected.
The payment of contingent consideration to sellers
of Infosys Compaz Pte. Ltd is dependent upon the achievement of certain revenue targets by Infosys Compaz Pte. Ltd. At the acquisition
date, the key inputs used in determination of the fair value of contingent consideration are the discount rate of 9% and the probabilities
of achievement of the financial targets. The undiscounted value of contingent consideration as at March 31, 2019 is SGD 7 million
( 36 crore).
The transaction costs of 3 crore related
to the acquisition have been included under administrative expenses in the statement of comprehensive income for the year ended
March 31, 2019.
Fluido Oy
On October 11, 2018, Infosys Consulting Pte
Limited (a wholly owned subsidiary of Infosys Limited) acquired 100% of voting interests in Fluido Oy (Fluido), a Nordic-based
salesforce advisor and consulting partner in cloud consulting, implementation and training services for a total consideration of
upto Euro 65 million (approximately 560 crore), comprising of cash consideration of Euro 45 million (approximately
388
crore), contingent consideration of upto Euro 12 million (approximately
103 crore) and retention payouts of upto Euro 8
million (approximately
69 crore), payable to the employees of Fluido over the next three years, subject to their continuous
employment with the group.
Fluido brings to Infosys the Salesforce expertise, alongside an agile delivery process that simplifies and scales digital efforts across channels and touchpoints. Further, Fluido strengthens Infosys’ presence across the Nordics region with developed assets and client relationships. 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(*) | 12 | – | 12 |
Intangible assets - Customer contracts and relationships | – | 158 | 158 |
Intangible assets - Salesforce Relationships | – | 62 | 62 |
Intangible assets - Brand | – | 28 | 28 |
Deferred tax liabilities on intangible assets | – | (52) | (52) |
12 | 196 | 208 | |
Goodwill | 240 | ||
Total purchase price | 448 |
* Includes cash and cash equivalents acquired
of 28 crore.
Goodwill is not tax deductible
The fair value of each major class of consideration as of the acquisition date is as follows:
(in crore)
Component | Consideration settled |
Cash consideration | 388 |
Fair value of contingent consideration | 60 |
Total purchase price | 448 |
The gross amount of trade receivables acquired
and its fair value is 27 crore and the amount has been fully collected.
The payment of contingent consideration to sellers
of Fluido is dependent upon the achievement of certain financial targets by Fluido. At the acquisition date, the key inputs used
in determination of the fair value of contingent consideration are the discount rate of 16% and the probabilities of achievement
of the financial targets. The undiscounted value of contingent consideration as at March 31, 2019 was EUR 8 Million (62
crore)
The transaction costs of 5 crore related
to the acquisition have been included under administrative expenses in the statement of comprehensive income for the year ended
March 31, 2019.
Hitachi Procurement Service Co. Ltd
On April 1, 2019, Infosys Consulting Pte Limited
(a wholly owned subsidiary of Infosys Limited) acquired 81% of voting interests in Hitachi Procurement Service Co., Ltd., (HIPUS),
Japan, a wholly owned subsidiary of Hitachi Ltd, Japan for a total cash consideration of JPY 3.29 billion (approximately 206
crore), on fulfilment of closing conditions. The company has paid an advance of JPY 3.29 billion (approximately
206 crore)
to Hitachi towards cash consideration on March 29, 2019. HIPUS handles indirect materials purchasing functions for the Hitachi
Group.
As of April 12, 2019 (i.e., the date of adoption of financial statements by the Board of Directors), the Company is in the process of finalising the accounting for acquisition of HIPUS, including allocation of purchase consideration to identifiable assets and liabilities.
Proposed Acquisition
Stater N.V.
On March 28, 2019, Infosys Consulting Pte Limited
(a wholly owned subsidiary of Infosys Limited) entered into a definitive agreement to acquire 75% of the shareholding in Stater
N.V., a wholly-owned subsidiary of ABN AMRO Bank N.V., Netherlands, for a consideration including base purchase price of up to
EUR 127.5 million (approximately 990 crore) and customary closing adjustments, subject to regulatory approvals and fulfilment
of closing conditions.
2.9.2 Disposal Group held for sale
Accounting policy
Non-current assets and Disposal Group are classified as held for sale if their carrying amount is intended to be recovered principally through sale rather than through continuing use. The condition for classification of held for sale is met when the non-current asset or the Disposal Group is available for immediate sale and the same is highly probable of being completed within one year from the date of classification as held for sale. Non-current assets and Disposal Group held for sale are measured at the lower of carrying amount and fair value less cost to sell. Non-current assets and Disposal Group that ceases to be classified as held for sale shall be measured at the lower of carrying amount before the non-current asset and Disposal Group was classified as held for sale adjusted for any depreciation/ amortization and its recoverable amount at the date when the Disposal Group no longer meets the "Held for sale" criteria.
In the three months ended March 2018, the Company
had initiated identification and evaluation of potential buyers for its subsidiaries, Kallidus and Skava (together referred to
as "Skava”) and Panaya, collectively referred to as the “Disposal Group”. The Disposal Group was classified
and presented separately as “held for sale” and was carried at the lower of carrying value and fair value. Consequently,
a reduction in the fair value of Disposal Group held for sale amounting to 118 crore in respect of Panaya had been recognized
in the consolidated statement of comprehensive income for the three months and year ended March 31, 2018. During the three months
ended June 30, 2018, on remeasurement, including consideration of progress in negotiations on offers from prospective buyers for
Panaya, the Company has recorded a reduction in the fair value of Disposal Group held for sale amounting to
270 crore in respect
of Panaya.
During the three months ended December 31, 2018, based on evaluation of proposals received and progress of negotiations with potential buyers, the Company concluded that the Disposal Group does not meet the criteria for “Held for Sale” classification because it is no longer highly probable that sale would be consummated by March 31, 2019 ( twelve months from date of initial classification “ as held for sale”) Accordingly, in accordance with IFRS 5 -" Non current Assets held for Sale and Discontinued Operations", the assets and liabilities of Panaya and Skava have been included on a line by line basis in the consolidated financial statements for the period and as at December 31, 2018 and March 31, 2019.
On reclassification from “Held for sale”,
the assets of Panaya and Skava have been remeasured in the quarter ended December 31, 2018 at the lower of cost and recoverable
amount resulting in recognition of additional depreciation and amortization expenses of 88 crore and an adjustment in respect
of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" of
451 crore (comprising
of
358 crore towards goodwill and
93 crore towards value of customer relationships) in respect of Skava in the consolidated statement
of comprehensive income for the three months and nine months ended December 31, 2018.
2.10 Revenue from Operations
Accounting Policy:
The Group derives revenues primarily from business IT services comprising of software development and related services, consulting and package implementation and from the licensing of software products and platforms across our core and digital offerings (“together called as software related services”)
Effective April 1, 2018, the Group adopted IFRS 15 “Revenue from Contracts with Customers” using the cumulative catch-up transition method, applied to contracts that were not completed as of April 1, 2018. In accordance with the cumulative catch-up transition method, the comparatives have not been retrospectively adjusted. The following is a summary of new and/or revised significant accounting policies related to revenue recognition. Refer Note 2.10 "Revenue from operations" in the Company’s 2018 Consolidated financial statements under IFRS for the policies in effect for revenue prior to April 1, 2018. The effect on adoption of IFRS 15 was insignificant.
Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services.
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 invoicing to the reporting date is recognized as unbilled revenue. Revenue from fixed-price, fixed-timeframe contracts, where the performance obligations are satisfied over time and 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. Maintenance revenue is recognized ratably over the term of the underlying maintenance arrangement.
Revenues in excess of invoicing are classified as contract assets (which we refer as unbilled revenue) while invoicing in excess of revenues are classified as contract liabilities (which we refer to as unearned revenues).
In arrangements for software development and related services and maintenance services, the Group has applied the guidance in IFRS 15, Revenue from contract with customer, by applying the revenue recognition criteria for each distinct performance obligation. The arrangements with customers generally meet the criteria for considering software development and related services as distinct performance obligations. For allocating the transaction price, the Group has measured the revenue in respect of each performance obligation of a contract at its relative standalone selling price. The price that is regularly charged for an item when sold separately is the best evidence of its standalone selling price. In cases where the Group is unable to determine the standalone selling price, the Group uses the expected cost plus margin approach in estimating the standalone selling price. For software development and related services, the performance obligations are satisfied as and when the services are rendered since the customer generally obtains control of the work as it progresses.
Revenue from licenses where the customer obtains a “right to use” the licenses is recognized at the time the license is made available to the customer. Revenue from licenses where the customer obtains a “right to access” is recognized over the access period. Arrangements to deliver software products generally have three elements: license, implementation and Annual Technical Services (ATS). The Group has applied the principles under IFRS 15 to account for revenues from these performance obligations. When implementation services are provided in conjunction with the licensing arrangement and the license and implementation have been identified as two separate performance obligations, the transaction price for such contracts are allocated to each performance obligation of the contract based on their relative standalone selling prices. In the absence of standalone selling price for implementation, the performance obligation is estimated using the expected cost plus margin approach. Where the license is required to be substantially customized as part of the implementation service the entire arrangement fee for license and implementation is considered to be a single performance obligation and the revenue 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 performance obligations are satisfied. ATS revenue is recognized ratably over the period in which the services are rendered.
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 to each of the underlying performance obligation that corresponds to the progress by the customer towards earning the discount/ incentive. Also, when the level of discount varies with increases in levels of revenue transactions, the Group recognizes the liability based on its estimate of the customer's future purchases. If it is probable that the criteria for the discount will not be met, or if the amount thereof cannot be estimated reliably, then discount is not recognized until the payment is probable and the amount can be estimated reliably. The Group recognizes changes in the estimated amount of obligations for discounts in the period in which the change occurs.
Deferred contract costs are incremental costs of obtaining a contract which are recognized as assets and amortized over the term of the contract.
Contract modifications are accounted for when additions, deletions or changes are approved either to the contract scope or contract price. The accounting for modifications of contracts involves assessing whether the services added to an existing contract are distinct and whether the pricing is at the standalone selling price. Services added that are not distinct are accounted for on a cumulative catch up basis, while those that are distinct are accounted for prospectively, either as a separate contract, if the additional services are priced at the standalone selling price, or as a termination of the existing contract and creation of a new contract if not priced at the standalone selling price.
The Group presents revenues net of indirect taxes in its consolidated statement of comprehensive income.
Revenues for the three months and year ended March 31, 2019 and March 31, 2018 are as follows:
(In crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Revenue from software services | 20,372 | 17,191 | 78,359 | 66,857 |
Revenue from products and platforms | 1,167 | 892 | 4,316 | 3,665 |
Total revenue from operations | 21,539 | 18,083 | 82,675 | 70,522 |
Disaggregate revenue information
The table below presents disaggregated revenues from contracts with customers by geography, offerings and contract-type for each of our business segments. The Group believes that this disaggregation best depicts how the nature, amount, timing and uncertainty of our revenues and cash flows are affected by industry, market and other economic factors
Three months ended March 31, 2019
(In crore)
Particulars | Financial Services (1) | Retail(2) | Communication (3) | Energy, Utilities, Resources and Services | Manufacturing | Hi Tech | Life Sciences(4) | Others (5) | Total |
Revenues by Geography | |||||||||
North America | 4,093 | 2,206 | 1,763 | 1,513 | 1,150 | 1,575 | 767 | 126 | 13,193 |
Europe | 1,255 | 987 | 464 | 975 | 918 | 35 | 492 | 41 | 5,167 |
India | 296 | 6 | 23 | 1 | 21 | 32 | 4 | 110 | 493 |
Rest of the world | 1,161 | 217 | 671 | 258 | 72 | 8 | 24 | 275 | 2,686 |
Total | 6,805 | 3,416 | 2,921 | 2,747 | 2,161 | 1,650 | 1,287 | 552 | 21,539 |
Revenue by offerings | |||||||||
Services | |||||||||
Digital | 2,083 | 1,229 | 966 | 910 | 683 | 527 | 267 | 100 | 6,765 |
Core | 3,972 | 2,109 | 1,897 | 1,788 | 1,427 | 1,055 | 917 | 442 | 13,607 |
Subtotal | 6,055 | 3,338 | 2,863 | 2,698 | 2,110 | 1,582 | 1,184 | 542 | 20,372 |
Products and platforms | |||||||||
Digital | 205 | 68 | 57 | 15 | 33 | 66 | 66 | 7 | 517 |
Core | 545 | 10 | 1 | 34 | 18 | 2 | 37 | 3 | 650 |
Subtotal | 750 | 78 | 58 | 49 | 51 | 68 | 103 | 10 | 1,167 |
Total | 6,805 | 3,416 | 2,921 | 2,747 | 2,161 | 1,650 | 1,287 | 552 | 21,539 |
Digital | 2,288 | 1,297 | 1,023 | 925 | 716 | 593 | 333 | 107 | 7,282 |
Core | 4,517 | 2,119 | 1,898 | 1,822 | 1,445 | 1,057 | 954 | 445 | 14,257 |
Revenues by contract type | |||||||||
Fixed Price | 3,006 | 2,143 | 1,965 | 1,531 | 1,115 | 814 | 612 | 281 | 11,467 |
Time & Materials | 3,799 | 1,273 | 956 | 1,216 | 1,046 | 836 | 675 | 271 | 10,072 |
Total | 6,805 | 3,416 | 2,921 | 2,747 | 2,161 | 1,650 | 1,287 | 552 | 21,539 |
Year ended March 31, 2019
(In crore)
Particulars | Financial Services (1) | Retail(2) | Communication (3) | Energy, Utilities, Resources and Services | Manufacturing | Hi Tech | Life Sciences(4) | Others (5) | Total |
Revenues by Geography | |||||||||
North America | 16,052 | 8,792 | 5,579 | 5,867 | 4,336 | 5,914 | 3,066 | 432 | 50,038 |
Europe | 4,890 | 3,836 | 1,897 | 3,550 | 3,497 | 106 | 2,011 | 155 | 19,942 |
India | 1,209 | 23 | 56 | 3 | 86 | 137 | 12 | 522 | 2,048 |
Rest of the world | 4,326 | 905 | 2,894 | 970 | 233 | 20 | 114 | 1,185 | 10,647 |
Total | 26,477 | 13,556 | 10,426 | 10,390 | 8,152 | 6,177 | 5,203 | 2,294 | 82,675 |
Revenue by offerings | |||||||||
Services | |||||||||
Digital | 7,543 | 4,410 | 3,421 | 2,993 | 2,291 | 1,998 | 1,085 | 308 | 24,049 |
Core | 16,064 | 8,795 | 6,822 | 7,190 | 5,644 | 4,087 | 3,780 | 1,928 | 54,310 |
Subtotal | 23,607 | 13,205 | 10,243 | 10,183 | 7,935 | 6,085 | 4,865 | 2,236 | 78,359 |
Products and platforms | |||||||||
Digital | 734 | 305 | 177 | 68 | 136 | 86 | 204 | 38 | 1,748 |
Core | 2,136 | 46 | 6 | 139 | 81 | 6 | 134 | 20 | 2,568 |
Subtotal | 2,870 | 351 | 183 | 207 | 217 | 92 | 338 | 58 | 4,316 |
Total | 26,477 | 13,556 | 10,426 | 10,390 | 8,152 | 6,177 | 5,203 | 2,294 | 82,675 |
Digital | 8,277 | 4,715 | 3,598 | 3,061 | 2,427 | 2,084 | 1,289 | 346 | 25,797 |
Core | 18,200 | 8,841 | 6,828 | 7,329 | 5,725 | 4,093 | 3,914 | 1,948 | 56,878 |
Revenues by contract type | |||||||||
Fixed Price | 11,600 | 8,571 | 6,330 | 6,033 | 4,178 | 3,148 | 2,430 | 1,136 | 43,426 |
Time & Materials | 14,877 | 4,985 | 4,096 | 4,357 | 3,974 | 3,029 | 2,773 | 1,158 | 39,249 |
Total | 26,477 | 13,556 | 10,426 | 10,390 | 8,152 | 6,177 | 5,203 | 2,294 | 82,675 |
(1) Financial Services include enterprises in Financial Services and Insurance
(2) Retail includes enterprises in Retail, Consumer Packaged Goods and Logistics
(3) Communication includes enterprises in Communication, Telecom OEM and Media
(4) Life Sciences includes enterprises in Life sciences and Health care
(5) | Others include operating segments of businesses in India, Japan, China, Infosys Public Services & other enterprises in Public Services |
Digital Services
Digital Services comprise of service and solution offerings of the Group that enable our clients to transform their businesses. These include offerings that enhance customer experience, leverage AI-based analytics and big data, engineer digital products and IoT, modernize legacy technology systems, migrate to cloud applications and implement advanced cyber security systems.
Core Services
Core Services comprise traditional offerings of the Group that have scaled and industrialized over a number of years. These primarily include application management services, proprietary application development services, independent validation solutions, product engineering and management, infrastructure management services, traditional enterprise application implementation, support and integration services.
Products & platforms
The Group also derives revenues from the sale of products and platforms including Finacle – core banking solution, Edge Suite of products, Infosys Nia - Artificial Intelligence (AI) platform which applies next-generation AI and machine learning and Infosys McCamish- insurance platform.
Trade Receivables and Contract Balances
The Group classifies the right to consideration in exchange for deliverables as either a receivable or as unbilled revenue.
A receivable is a right to consideration that is unconditional upon passage of time. Revenue for time and material contracts are recognised as related service are performed. Revenue for fixed price maintenance contracts is recognized on a straight line basis over the period of the contract. Revenues in excess of billings is recorded as unbilled revenue and is classified as a financial asset for these cases as right to consideration is unconditional upon passage of time .
Revenue recognition for fixed price development contracts is based on percentage of completion method. Invoicing to the clients is based on milestones as defined in the contract. This would result in the timing of revenue recognition being different from the timing of billing the customers. Unbilled revenue for fixed price development contracts is classified as non financial asset as the contractual right to consideration is dependent on completion of contractual milestones.
Invoicing in excess of earnings are classified as unearned revenue.
Trade receivable and unbilled revenues are presented net of impairment in the Consolidated Balance Sheet.
During the year ended March 31, 2019 , the company
recognized revenue of 2,237 crore arising from opening unearned revenue as of April 1, 2018.
During the year ended March 31, 2019, 2,685
crore of unbilled revenue pertaining to fixed price development contracts as of April 1, 2018 has been reclassified to Trade receivables
upon billing to customers on completion of milestones.
Performance obligations and remaining performance obligations
The remaining performance obligation disclosure provides the aggregate amount of the transaction price yet to be recognized as of the end of the reporting period and an explanation as to when the Group expects to recognize these amounts in revenue. Applying the practical expedient as given in IFRS 15, the Group has not disclosed the remaining performance obligation related disclosures for contracts where the revenue recognized corresponds directly with the value to the customer of the entity's performance completed to date, typically those contracts where invoicing is on time and material basis. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, periodic revalidations, adjustment for revenue that has not materialized and adjustments for currency.
The aggregate value of performance obligations
that are completely or partially unsatisfied as at March 31, 2019, other than those meeting the exclusion criteria mentioned above,
is 51,274 crore. Out of this, the Group expects to recognize revenue of around 50% within the next one year and the remaining
thereafter. This includes contracts that can be terminated for convenience without a substantive penalty since, based on current
assessment, the occurrence of the same is expected to be remote.
The impact on account of applying the erstwhile
IAS 18 - Revenue instead of IFRS 15- Revenue from contract with customers on the financials results of the Group for the three
months and year ended and as at March 31, 2019 is insignificant. On account of adoption of IFRS 15, unbilled revenue of 3,281
crore as at March 31, 2019 has been considered as Non financial asset.
2.11 Expenses by nature
(In
crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Employee benefit costs (Refer Note 2.12.4) | 12,074 | 10,054 | 45,315 | 38,893 |
Depreciation and amortization charges (Refer Note 2.7 and 2.8) | 531 | 458 | 2,011 | 1,863 |
Travelling costs | 603 | 492 | 2,433 | 1,995 |
Consultancy and professional charges | 376 | 282 | 1,324 | 1,043 |
Cost of Software packages for own use | 237 | 216 | 930 | 876 |
Third party items bought for service delivery to clients | 452 | 246 | 1,623 | 983 |
Communication costs | 115 | 113 | 471 | 489 |
Cost of technical sub-contractors | 1,601 | 1,106 | 6,033 | 4,296 |
Power and fuel | 49 | 50 | 221 | 207 |
Repairs and maintenance | 374 | 279 | 1,316 | 1,116 |
Rates and taxes | 52 | 3 | 184 | 166 |
Insurance charges | 19 | 16 | 67 | 55 |
Commission to non-whole time directors | 2 | 2 | 8 | 9 |
Branding and marketing expenses | 135 | 72 | 489 | 304 |
Provision for post-sales client support | (24) | 60 | 1 | 142 |
Impairment loss recognised / (reversed) on financial assets (Refer Note 2.3) | 18 | 2 | 248 | 71 |
Contribution towards Corporate Social Responsibility | 66 | 22 | 266 | 156 |
Operating lease payments (Refer Note 2.15) | 165 | 130 | 585 | 528 |
Others | 76 | 8 | 270 | 182 |
Total cost of sales, selling and marketing expenses and administrative expenses | 16,921 | 13,611 | 63,795 | 53,374 |
The table below provides details of break-up of expenses:
Cost of sales
(In crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Employee benefit costs | 10,770 | 8,947 | 40,498 | 34,670 |
Depreciation and amortization | 531 | 458 | 2,011 | 1,863 |
Travelling costs | 436 | 347 | 1,769 | 1,451 |
Cost of technical sub-contractors | 1,598 | 1,106 | 6,031 | 4,296 |
Cost of Software packages for own use | 231 | 216 | 906 | 876 |
Third party items bought for service delivery to clients | 452 | 246 | 1,623 | 983 |
Operating lease payments | 103 | 79 | 362 | 319 |
Consultancy and professional charges | 9 | 15 | 46 | 50 |
Communication costs | 64 | 53 | 238 | 225 |
Repairs and maintenance | 106 | 77 | 370 | 300 |
Provision for post-sales client support | (24) | 60 | 1 | 142 |
Others | 7 | (50) | 12 | (45) |
Total | 14,283 | 11,554 | 53,867 | 45,130 |
Selling and marketing expenses
(In crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Employee benefit costs | 882 | 742 | 3,236 | 2,741 |
Travelling costs | 102 | 79 | 409 | 306 |
Branding and marketing | 135 | 72 | 489 | 304 |
Operating lease payments | 22 | 19 | 80 | 78 |
Communication costs | 4 | 5 | 18 | 22 |
Consultancy and professional charges | 66 | 17 | 200 | 66 |
Others | 15 | 13 | 41 | 43 |
Total | 1,226 | 947 | 4,473 | 3,560 |
Administrative expenses
(In crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Employee benefit costs | 422 | 365 | 1,581 | 1,482 |
Consultancy and professional charges | 301 | 250 | 1,078 | 927 |
Repairs and maintenance | 266 | 202 | 940 | 816 |
Power and fuel | 49 | 50 | 221 | 207 |
Communication costs | 47 | 55 | 215 | 242 |
Travelling costs | 65 | 66 | 255 | 238 |
Impairment loss recognised/(reversed) under expected credit loss model | 18 | 2 | 248 | 71 |
Rates and taxes | 52 | 3 | 184 | 166 |
Insurance charges | 19 | 16 | 67 | 55 |
Operating lease payments | 40 | 32 | 143 | 131 |
Commission to non-whole time directors | 2 | 2 | 8 | 9 |
Contribution towards Corporate Social Responsibility | 66 | 22 | 266 | 156 |
Others | 65 | 45 | 249 | 184 |
Total | 1,412 | 1,110 | 5,455 | 4,684 |
2.12 Employee Benefits
Accounting policy
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 BPM and EdgeVerve, contributions are made to the Infosys BPM 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 the Life Insurance Corporation of India as permitted by Indian law.
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 and are not reclassified to profit or loss in subsequent periods. 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 is recognized in the Consolidated Statement of Comprehensive income.
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.
Superannuation
Certain employees of Infosys, Infosys BPM 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.
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.
2.12.1 Gratuity
The following tables set out the funded status of the gratuity plans and the amounts recognized in the Group's financial statements as at March 31, 2019 and March 31, 2018:
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Change in benefit obligations | ||
Benefit obligations at the beginning | 1,201 | 1,117 |
Service cost | 157 | 150 |
Interest expense | 85 | 73 |
Remeasurements - Actuarial (gains) / losses | 32 | (59) |
Transfer in | – | 28 |
Curtailment gain | – | – |
Benefits paid | (128) | (107) |
Translation difference | 2 | – |
Reclassified under held for sale (refer note no 2.9.2) | – | (1) |
Reclassified from held for sale (refer note no 2.9.2) | 2 | |
Benefit obligations at the end | 1,351 | 1,201 |
Change in plan assets | ||
Fair value of plan assets at the beginning | 1,216 | 1,195 |
Interest income | 90 | 80 |
Remeasurements- Return on plan assets excluding amounts included in interest income | 4 | 13 |
Contributions | 174 | 35 |
Benefits paid | (123) | (107) |
Fair value of plan assets at the end | 1,361 | 1,216 |
Funded status | 10 | 15 |
Prepaid gratuity benefit | 42 | 43 |
Accrued gratuity | (32) | (28) |
Amount for the three months and year ended March 31, 2019 and March 31, 2018 recognized in the Consolidated Statement of Comprehensive income under employee benefit expense:
(In crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Service cost | 39 | 38 | 157 | 150 |
Net interest on the net defined benefit liability/asset | (2) | (3) | (5) | (7) |
Net gratuity cost | 37 | 35 | 152 | 143 |
Amount for the three months and year ended March 31, 2019 and March 31, 2018 recognized in the Consolidated Statement of other comprehensive income:
(In crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Remeasurements of the net defined benefit liability/ (asset) | ||||
Actuarial (gains) / losses | 5 | (41) | 32 | (59) |
(Return) / loss on plan assets excluding amounts included in the net interest on the net defined benefit liability/(asset) | 1 | (3) | (4) | (13) |
6 | (44) | 28 | (72) |
(In crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
(Gain)/loss from change in demographic assumptions | – | – | (4) | – |
(Gain)/loss from change in financial assumptions | 9 | (27) | 30 | (41) |
(Gain)/loss from experience adjustment | (4) | (14) | 6 | (18) |
5 | (41) | 32 | (59) |
Amount recognised in statement of comprehensive income has been apportioned between cost of sales, selling and marketing expenses and administrative expenses on the basis of direct employee cost as follows: -
(In crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Cost of sales | 33 | 32 | 136 | 128 |
Selling and marketing expenses | 3 | 2 | 11 | 10 |
Administrative expenses | 1 | 1 | 5 | 5 |
37 | 35 | 152 | 143 |
The weighted-average assumptions used to determine benefit obligations as at March 31, 2019 and March 31, 2018 are set out below:
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Discount rate | 7.1% | 7.5% |
Weighted average rate of increase in compensation levels | 8.0% | 8.0% |
The weighted-average assumptions used to determine net periodic benefit cost for the three months and year ended March 31, 2019 and March 31, 2018 are set out below:
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Discount rate(%) | 7.5 | 6.9 | 7.5 | 6.9 |
Weighted average rate of increase in compensation levels(%) | 8.0 | 8.0 | 8.0 | 8.0 |
Weighted average duration of defined benefit obligation (years) | 5.9 years | 6.1 years | 5.9 years | 6.1 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.
Sensitivity of significant assumptions used for valuation of defined benefit obligation:
(in crore)
Impact from percentage point increase / decrease in | As at March 31, 2019 |
Discount rate | 67 |
Weighted average rate of increase in compensation levels | 59 |
Sensitivity to 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. In practice, this is not probable, and changes in some of the assumptions may be correlated.
Gratuity is applicable only to employees drawing a salary in Indian rupees and there are no other significant 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 BPM and EdgeVerve, contributions are made to the Infosys BPM Employees' Gratuity Fund Trust and EdgeVerve Systems Limited Employees Gratuity Fund Trust, respectively. Trustees administer contributions made to the trust as at March 31, 2019 and March 31, 2018, the plan assets have been primarily invested in insurer managed funds.
Actual return on assets for the three months
ended March 31, 2019, and March 31, 2018 were 23 crore and
23 crore, respectively.
Actual return on assets for the year ended March
31, 2019, and March 31, 2018 were 95 crore and
93 crore, respectively.
The Group expects to contribute 162 crore
to the gratuity trusts during the remainder of fiscal 2020.
Maturity profile of defined benefit obligation:
(In crore)
Within 1 year | 198 |
1-2 year | 207 |
2-3 year | 216 |
3-4 year | 223 |
4-5 year | 235 |
5-10 years | 1,163 |
2.12.2 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 assumptions provided below there is no shortfall as at March 31, 2019 and March 31, 2018, respectively.
The details of fund and plan asset position are as follows:
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Benefit obligation at the period end | 5,989 | 5,160 |
Net liability 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 | |
March 31, 2019 | March 31, 2018 | |
Government of India (GOI) bond yield | 7.1% | 7.50% |
Remaining term to maturity of portfolio | 5.47 years | 5.9 years |
Expected guaranteed interest rate | ||
First year | 8.65% | 8.55% |
Thereafter | 8.60% | 8.55% |
The Group contributed 142 crore and
127
crore to the provident fund during the three months ended March 31, 2019 and March 31, 2018, respectively. The Group contributed
543 crore and
484 crore to the provident fund during the year ended March 31, 2019 and March 31, 2018, respectively.
The same has been recognized in the Consolidated Statement of Comprehensive income under the head employee benefit expense.
Provident Fund contribution have been apportioned between cost of sales, selling and marketing expenses and administrative expenses on the basis of direct employee cost as follows: -
(In crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Cost of sales | 126 | 113 | 485 | 431 |
Selling and marketing expenses | 11 | 9 | 39 | 34 |
Administrative expenses | 5 | 5 | 19 | 19 |
142 | 127 | 543 | 484 |
The provident plans are applicable only to employees drawing a salary in Indian rupees and there are no other significant foreign defined benefit plans.
2.12.3 Superannuation
The group contributed 57 crore and
44
crore to the superannuation plan during the three months ended March 31, 2019 and March 31, 2018, respectively.
The group contributed 215 crore and
173
crore to the superannuation plan during the year ended March 31, 2019 and March 31, 2018, respectively and the same has been recognized
in the Consolidated Statement of comprehensive income 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.
Superannuation contribution have been apportioned between cost of sales, selling and marketing expenses and administrative expenses on the basis of direct employee cost as follows: -
(In crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Cost of sales | 51 | 39 | 192 | 154 |
Selling and marketing expenses | 4 | 3 | 15 | 12 |
Administrative expenses | 2 | 2 | 8 | 7 |
57 | 44 | 215 | 173 |
2.12.4 Employee benefit costs include:
(In crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Salaries and bonus(1)(2) | 11,838 | 9,848 | 44,405 | 38,093 |
Defined contribution plans | 81 | 68 | 307 | 260 |
Defined benefit plans | 155 | 138 | 603 | 540 |
12,074 | 10,054 | 45,315 | 38,893 |
(1) | Includes an employee stock compensation expense of ![]() ![]() ![]() ![]() |
(2) | Included in the above is a reversal of stock compensation cost of ![]() |
The employee benefit cost is recognised in the following line items in the consolidated statement of comprehensive income:
(In crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Cost of sales | 10,770 | 8,947 | 40,498 | 34,670 |
Selling and marketing expenses | 882 | 742 | 3,236 | 2,741 |
Administrative expenses | 422 | 365 | 1,581 | 1,482 |
12,074 | 10,054 | 45,315 | 38,893 |
2.13 Equity
Share capital and share premium
The Company has only one class of shares referred
to as equity shares having a par value of 5/- each. 20,324,982 and 10,801,956 shares were held by controlled trust, as at
March 31, 2019 and March 31, 2018, 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.
Retained Earnings
Retained earnings represent the amount of accumulated earnings of the Group.
Other Reserves
The Special Economic Zone Re-investment reserve has been created out of the profit of the eligible SEZ unit in terms of the provisions of Sec 10AA(1)(ii) of Income Tax Act,1961. The reserve should be utilized by the Company for acquiring new plant and machinery for the purpose of its business in terms of the provisions of the Sec 10AA(2) of the Income Tax Act, 1961.
Other components of equity
Other components of equity consist of currency translation, re-measurement of net defined benefit liability / asset, cumulative impact on reversal of unrealized gain on quoted debt securities on adoption of IFRS 9, equity instruments fair valued through other comprehensive income, changes on fair valuation of investments and changes in fair value of derivatives designated as cash flow hedges, net of taxes.
Update on capital allocation policy and buyback
In line with the capital allocation policy announced in April 2018, the Board, in its meeting held on January 11, 2019, approved the following :
(a) Declared a special dividend of 4/- per
equity share;
(b) Recommended buyback of Equity Shares from
the open market route through Indian stock exchanges of up to 8,260 crore (Maximum Buyback Size) at a price not exceeding
800
per share (Maximum Buyback Price) subject to shareholders' approval by way of Postal Ballot.
After the execution of the above, along with
the special dividend of 2,633 crore ($386 million) already paid in June 2018, the Company would complete the distribution of
13,000
crore, which was announced as part of its capital allocation policy in April 2018.
The shareholders approved the proposal of buyback
of Equity Shares recommended by its Board of Directors in its meeting held on January 11, 2019 through the postal ballot that concluded
on March 12, 2019. At the Maximum buyback price of 800/- per equity share and the Maximum buyback size of
8,260 crore the indicative
maximum number of equity shares bought back would be 103,250,000 Equity Shares (Maximum buyback shares) comprising approximately
2.36% of the paid-up equity share capital of the Company as of March 12, 2019 (the date of conclusion of postal ballot for approval
for buyback).
The buyback was offered to all eligible equity
shareholders of the Company (other than the Promoters, the Promoter Group and Persons in Control of the Company) under the open
market route through the stock exchange. The Company will fund the buyback from its free reserves. The buyback of equity shares
through the stock exchange commenced on March 20, 2019 and is expected to be completed by September 2019. During the year ended
March 31, 2019, 12,652,000 equity shares were purchased from the stock exchange which includes 1,818,000 shares which have been
purchased but not extinguished as of March 31, 2019 and 3,636,000 shares which have been purchased but have not been settled and
therefore not extinguished as of March 31, 2019. In accordance with section 69 of the Companies Act, 2013, during the year ended
March 31, 2019 , the Company has created ‘Capital Redemption Reserve’ of 6 crore equal to the nominal value
of the shares bought back as an appropriation from general reserve.
The Board, at its meeting on August 19, 2017,
approved a proposal for the Company to buyback its fully paid-up equity shares of face value of 5 each from the eligible
equity shareholders of the Company for an amount not exceeding
13,000 crore. The shareholders approved the said proposal
of buyback of Equity Shares through the postal ballot that concluded on October 7, 2017. The Buyback offer comprised a purchase
of 11,30,43,478 Equity Shares aggregating 4.92% of the paid-up equity share capital of the Company at a price of
1,150 per
Equity share. The buyback was offered to all eligible equity shareholders (including those who became equity shareholders as on
the Record date by cancelling American Depository Shares and withdrawing underlying Equity shares) of the Company as on the Record
Date (i.e. November 1, 2017) on a proportionate basis through the "Tender offer" route. The Company concluded the buyback
procedures on December 27, 2017 and 11,30,43,478 equity shares were extinguished. The company utilized its securities premium and
general reserve for the buyback of its shares. In accordance with section 69 of the Companies Act, 2013, the company has created
‘Capital Redemption Reserve’ of
56 crore equal to the nominal value of the shares bought back as an appropriation
from general reserve during the year ended March 31, 2018.
The Company’s objective when managing capital is to safeguard its ability to continue as a going concern and to maintain an optimal capital structure so as to maximize shareholder value. In order to maintain or achieve an optimal capital structure, the Company may adjust the amount of dividend payment, return capital to shareholders, issue new shares or buy back issued shares. As of March 31, 2019, the Company has only one class of equity shares and has no debt. Consequent to the above capital structure there are no externally imposed capital requirements
Dividends
The final dividend on shares is 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.
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. Dividend distribution tax paid by subsidiaries may be reduced / available as credit against dividend distribution tax payable by Infosys Limited.
Effective from Financial Year 2018, the Company's policy is to payout up to 70% of the free cash flow of the corresponding Financial Year in such manner (including by way of dividend and / or share buyback) as may be decided by the Board from time to time, subject to applicable laws and requisite approvals, if any. Free cash flow is defined as net cash provided by operating activities less capital expenditure as per the consolidated statement of cash flows prepared under IFRS. Dividend payout includes dividend distribution tax.
Amount of per share dividend recognized as distribution to equity shareholders:-
(In )
Particulars | Year ended March 31, | |
2019 | 2018 | |
Final dividend for fiscal 2018 | 10.25 | – |
Special dividend for fiscal 2018 | 5.00 | – |
Interim dividend for fiscal 2019 | 7.00 | – |
Special dividend for fiscal 2019 | 4.00 | – |
Interim dividend for fiscal 2018 | – | 6.50 |
Final dividend for fiscal 2017 | – | 7.38 |
Note: Dividend per equity share disclosed in the above table represents dividends declared previously, retrospectively adjusted for September 2018 bonus issue.
During the year ended March 31, 2019 on account
of the final dividend for fiscal 2018 , special divided for fiscal 2018 and fiscal 2019 and interim dividend for fiscal 2019 the
Company has incurred a net cash outflow of 13,705 crore (excluding dividend paid on treasury shares) inclusive of dividend distribution
tax.
The Board of Directors in their meeting on April
12, 2019 recommended a final dividend of 10.50/- per equity share for the financial year ended March 31, 2019. This payment
is subject to the approval of shareholders in the ensuing Annual General Meeting of the Company, to be held on June 22, 2019 and
if approved would result in a net cash outflow of approximately
5,483 crore, (excluding dividend paid on treasury shares)
including dividend distribution tax. The final dividend of
10.50/- per equity share and the resultant expected cash outflow is
based on the outstanding number of shares after considering shares bought back by the Company subsequent to the year ended March
31, 2019.
Bonus issue
The Company has allotted 2,18,41,91,490 fully
paid up equity shares (including treasury shares) of face value 5/- each during the three months ended September 30, 2018
pursuant to a bonus issue approved by the shareholders through postal ballot. Record date fixed by the Board of Directors was September
5, 2018. The bonus shares were issued by capitalization of profits transferred from general reserve. Bonus share of one equity
share for every equity share held, and a bonus issue, viz., 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 stock option plan have been adjusted for bonus shares.
The bonus shares once allotted ranks pari passu in all respects and carry the same rights as the existing equity shareholders and entitled to participate in full, in any dividend and other corporate action, recommended and declared after the new equity shares are allotted.
Voting
Each holder of equity shares is entitled to one vote per share. The equity shares represented by American Depositary Shares (ADS) carry similar rights to voting and dividends as the other equity shares. Each ADS represents one underlying equity share.
Liquidation
In the event of liquidation of the Company, the holders of shares shall be entitled to receive any of the remaining assets of the Company, after distribution of all preferential amounts. However, no such preferential amounts exist currently, other than the amounts held by irrevocable controlled trusts. The amount distributed will be in proportion to the number of equity shares held by the shareholders. For irrevocable controlled trusts, the corpus would be settled in favour of the beneficiaries.
Share Options
There are no voting, dividend or liquidation rights to the holders of options issued under the Company's share option plans.
2.14 Other income, net
a. Accounting Policy
Other income, net
Other income is comprised primarily of interest income, dividend income, gain/loss on investment 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.
Effective April 1, 2018, the Group has adopted IFRS interpretation IFRIC 22- Foreign Currency Transactions and Advance Consideration which clarifies the date of transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income when an entity has received or paid advance consideration in a foreign currency. The effect on account of adoption of this amendment was insignificant.
Foreign currency
Functional currency
The functional currency of Infosys, Infosys BPM, controlled trusts, EdgeVerve and Skava is the Indian rupee. The functional currencies for other subsidiaries are their respective local currencies. These financial statements are presented in Indian rupees (rounded off to crore; one crore equals ten million).
Transactions and translations
Foreign-currency denominated monetary assets and liabilities are translated into the relevant functional currency at exchange rates in effect at the Balance Sheet date. The gains or losses resulting from such translations are included in net profit in the statement of comprehensive income. Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at fair value are translated at the exchange rate prevalent at the date when the fair value was determined. Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at historical cost are translated at the exchange rate prevalent at the date of transaction.
Transaction gains or losses realized upon settlement of foreign currency transactions are included in determining net profit for the period in which the transaction is settled. Revenue, expense and cash-flow items denominated in foreign currencies are translated into the relevant functional currencies using the exchange rate in effect on the date of the transaction.
The translation of financial statements of the foreign subsidiaries to the 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 comprehensive income. However when a change in the parent's ownership does not result in loss of control of a subsidiary, such changes are recorded through equity.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the exchange rate in effect at the Balance Sheet date.
Government grants
The Group recognizes government grants only when there is reasonable assurance that the conditions attached to them shall be complied with, and the grants will be received. Government grants related to assets are treated as deferred income and are recognized in net profit in the statement of comprehensive income on a systematic and rational basis over the useful life of the asset. Government grants related to revenue are recognized on a systematic basis in net profit in the Consolidated Statement of Comprehensive income over the periods necessary to match them with the related costs which they are intended to compensate.
Operating Profits
Operating profit of the Group is computed considering the revenues, net of cost of sales, selling and marketing expenses and administrative expenses.
Other income consists of the following:
(In crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Interest income on financial assets carried at amortized cost | 355 | 382 | 1,404 | 1674 |
Interest income on financial assets fair valued through OCI | 142 | 133 | 646 | 682 |
Dividend income on investments carried at fair value through profit or loss | 1 | – | 2 | 4 |
Gain/(loss) on investments carried at fair value through profit or loss | 65 | 39 | 170 | 253 |
Exchange gains / (losses) on forward and options contracts | 195 | (130) | 185 | 1 |
Exchange gains / (losses) on translation of other assets and liabilities | (139) | 183 | 133 | 233 |
Others | 46 | 45 | 342 | 464 |
Total | 665 | 652 | 2,882 | 3,311 |
2.15 Operating leases
Accounting Policy
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 consolidated statement of comprehensive income over the lease term.
The Group has various operating leases, mainly
for office buildings, that are renewable on a periodic basis. Rental expense for operating leases for the three months ended March
31, 2019 and March 31, 2018 was 165 crore and
130 crore, respectively and
585 crore and
528 crore for the year ended March
31, 2019 and March 31, 2018, respectively.
The schedule of future minimum rental payments in respect of non-cancellable operating leases is set out below:'
(In crore)
As of | ||
March 31, 2019 | March 31, 2018 | |
Within one year of the balance sheet date | 620 | 456 |
Due in a period between one year and five years | 1,794 | 1,388 |
Due after five years | 885 | 874 |
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.
2.16 Employees’ Stock Option Plans (ESOP)
Accounting Policy
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.
2015 Stock Incentive Compensation Plan (the 2015 Plan) (formerly 2011 RSU Plan): On March 31, 2016, pursuant to the approval by the shareholders through postal ballot, the Board has been authorized to introduce, offer, issue and allot share-based incentives to eligible employees of the Company and its subsidiaries under the 2015 Stock Incentive Compensation Plan (the 2015 Plan). The maximum number of shares under the 2015 plan shall not exceed 2,40,38,883 equity shares (this includes 1,12,23,576 equity shares which are held by the trust towards the 2011 Plan as at March 31, 2016). Out of this 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 on the date of the grant. 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. The plan numbers mentioned above would further be adjusted for the September 2018 bonus issue.
Consequent to the September 2018 bonus issue, all outstanding options granted under the stock option plan have been adjusted for bonus shares. Unless otherwise stated, all the prior period share numbers, share prices and weighted average exercise prices in this note have been adjusted to give effect to the September 2018 bonus issue.
Controlled trust holds 2,03,24,982 and 1,08,01,956 (not adjusted for September, 2018 bonus issue) shares as at March 31, 2019 and March 31, 2018, respectively under the 2015 plan. Out of these shares 2,00,000 and 1,00,000 (not adjusted for September, 2018 bonus issue) equity shares have been earmarked for welfare activities of the employees as at March 31, 2019 and March 31, 2018, respectively.
The following is the summary of grants during the three months and year ended March 31, 2019 and March 31, 2018 under the 2015 Plan:
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
RSU | ||||
Salil Parekh, CEO and MD - Refer note 1 below | 42,930 | 226,048 | 260,130 | 226,048 |
U.B. Pravin Rao, COO and WTD | 68,250 | – | 68,250 | 54,500 |
Dr. Vishal Sikka(1) | – | – | – | 540,448 |
Other KMPs | 347,150 | 429,900 | 347,150 | 546,200 |
Employees other than KMP | 1,878,050 | 3,119,840 | 3,665,170 | 3,194,020 |
2,336,380 | 3,775,788 | 4,340,700 | 4,561,216 | |
ESOP | ||||
U.B. Pravin Rao, COO and WTD | – | – | – | 86,000 |
Dr. Vishal Sikka(1) | – | – | – | 661,050 |
Other KMPs | – | – | – | 88,900 |
Employees other than KMP | – | – | – | 147,200 |
– | – | – | 983,150 | |
Incentive units - cash settled | ||||
Other employees | 21,500 | 85,180 | 74,090 | 100,080 |
21,500 | 85,180 | 74,090 | 100,080 | |
Total grants | 2,357,880 | 3,860,968 | 4,414,790 | 5,644,446 |
Information in the above table is adjusted for September, 2018 bonus issue
(1) | Upon Dr. Vishal Sikka's resignation from the roles of the company, the unvested RSUs and ESOPs have been forfeited |
1. Stock incentives granted to Salil Parekh, CEO and MD
Pursuant to the approval of the shareholders through a postal ballot on February 20, 2018, Salil Parekh (CEO & MD) is eligible to receive under the 2015 Plan:
a) | an annual grant of RSUs of fair value ![]() |
b) | a one-time grant of RSUs of fair value ![]() |
c) | annual grant of performance based RSUs of fair value ![]() |
The Board based on the recommendations of the Nomination and Remuneration committee approved on February 27, 2018, the annual time based grant for fiscal 2018 of 56,512 (adjusted for September, 2018 bonus issue) RSUs and the one-time time based grant of 1,69,536 (adjusted for September, 2018 bonus issue) RSUs. The grants were made effective February 27, 2018.
Further, the Board, based on the recommendations of the Nomination and Remuneration Committee, granted 2,17,200 (adjusted for September, 2018 bonus issue) performance based RSUs to Salil Parekh with an effective date of May 2, 2018. The grants would vest upon successful completion of three full fiscal years with the Company concluding on March 31, 2021 and will be determined based on achievement of certain performance targets for the said three-year period.
The Board based on the recommendations of the Nomination and Remuneration committee approved on February 27, 2018, the annual time based grant for fiscal 2019 of 42,930 RSUs. The grant was made effective February 1, 2019.
Though the annual time based grants for the remaining employment term ending on March 31, 2023 have not been granted as of March 31, 2019, since the service commencement date precedes the grant date, the company has recorded employment stock compensation expense in accordance with IFRS 2, Share based payments.
The RSUs and stock options would vest generally over a period of 4 years 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.
As at March 31, 2019 and March 31, 2018, incentive units were outstanding (net of forfeitures) 1,77,454 and 2,23,514 (adjusted for September, 2018 bonus issue), respectively.
Break-up of employee stock compensation expense
(in crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Granted to: | ||||
KMP(2) | 10 | 1 | 33 | (13) |
Employees other than KMP | 49 | 25 | 169 | 97 |
Total (1) | 59 | 26 | 202 | 84 |
(1)Cash settled stock compensation expense included in the above | 1 | 2 | 5 | 5 |
(2) | Includes a reversal of stock compensation cost of ![]() |
The carrying value of liability towards cash
settled share based payments was 9 crore and
6 crore as at March 31, 2019 and March 31, 2018 respectively.
The activity in the 2015 Plan (formerly 2011 RSU Plan) for equity-settled share based payment transactions during the three months ended March 31, 2019 and March 31, 2018 is set out below:
Particulars | Three months ended March 31, 2019 |
Three months ended March 31, 2018 | ||
Shares arising out of options | Weighted average exercise price (![]() |
Shares arising out of options | Weighted average exercise price (![]() | |
2015 Plan: RSU | ||||
Outstanding at the beginning | 7,659,466 | 2.50 | 4,168,568 | 2.50 |
Granted | 2,336,380 | 5.00 | 3,775,788 | 2.50 |
Exercised | 660,078 | 2.50 | 231,992 | 2.50 |
Forfeited and expired | 154,570 | 2.67 | 211,546 | 2.50 |
Outstanding at the end | 9,181,198 | 3.13 | 7,500,818 | 2.50 |
Exercisable at the end | 235,256 | 2.50 | 48,410 | 2.50 |
2015 Plan: Employee Stock Options (ESOPs) | ||||
Outstanding at the beginning | 1,641,600 | 519 | 2,316,800 | 496 |
Granted | – | – | – | – |
Exercised | 8,224 | 499 | 104,824 | 492 |
Forfeited and expired | 10,200 | 499 | 278,150 | 482 |
Outstanding at the end | 1,623,176 | 516 | 1,933,826 | 493 |
Exercisable at the end | 698,500 | 517 | 393,824 | 496 |
Information in the above table is adjusted for September, 2018 bonus issue
The activity in the 2015 Plan (formerly 2011 RSU Plan) for equity-settled share based payment transactions during the year ended March 31, 2019 and March 31, 2018 and is set out below:
Particulars | Year ended March 31, 2019 |
Year ended March 31, 2018 | ||
Shares arising out of options | Weighted average exercise price (![]() |
Shares arising out of options | Weighted average exercise price (![]() | |
2015 Plan: RSU | ||||
Outstanding at the beginning | 7,500,818 | 2.50 | 5,922,746 | 2.50 |
Granted | 4,340,700 | 3.84 | 4,561,216 | 2.50 |
Exercised | 1,864,510 | 2.50 | 1,296,434 | 2.50 |
Forfeited and expired | 795,810 | 2.61 | 1,686,710 | 2.50 |
Outstanding at the end | 9,181,198 | 3.13 | 7,500,818 | 2.50 |
Exercisable at the end | 235,256 | 2.50 | 48,410 | 2.50 |
2015 Plan: Employee Stock Options (ESOPs) | ||||
Outstanding at the beginning | 1,933,826 | 493 | 2,395,300 | 496 |
Granted | – | – | 983,150 | 472 |
Exercised | 117,350 | 515 | 104,824 | 492 |
Forfeited and expired | 193,300 | 521 | 1,339,800 | 481 |
Outstanding at the end | 1,623,176 | 516 | 1,933,826 | 493 |
Exercisable at the end | 698,500 | 517 | 393,824 | 496 |
Information in the above table is adjusted for September, 2018 bonus issue
During the three months ended March 31, 2019
and March 31, 2018 the weighted average share price of options exercised under the 2015 Plan on the date of exercise was 732
and
560 (adjusted for September, 2018 bonus issue) respectively.
During the year ended March 31, 2019 and March
31, 2018 the weighted average share price of options exercised under the 2015 Plan on the date of exercise was 701 and
496
(adjusted for September, 2018 bonus issue) respectively.
The following table summarizes information about equity settled RSUs and ESOPs outstanding as at March 31, 2019
Options outstanding | |||
Range of exercise prices per share (![]() |
No. of shares arising out of options | Weighted average remaining contractual life | Weighted average exercise price (![]() |
2015 Plan: | |||
0 - 5 (RSU) | 9,181,198 | 1.70 | 3.13 |
450 - 600 (ESOP) | 1,623,176 | 5.04 | 516 |
10,804,374 | 2.20 | 80 |
Information in the table above is adjusted for September, 2018 bonus issue
The following table summarizes information about equity settled RSUs and ESOPs outstanding as at March 31, 2018:
Options outstanding | |||
Range of exercise prices per share (![]() |
No. of shares arising out of options | Weighted average remaining contractual life | Weighted average exercise price (![]() |
2015 Plan: | |||
0 - 2.50 (RSU) | 7,500,818 | 1.89 | 2.50 |
450 - 600 (ESOP) | 1,933,826 | 6.60 | 493 |
9,434,644 | 2.57 | 104 |
Information in the table above is adjusted for September, 2018 bonus issue
The fair value of each equity settled award is estimated on the date of grant using the Black-Scholes-Merton model with the following assumptions:
Particulars | For options granted in | |
Fiscal 2019- Equity Shares RSU |
Fiscal 2019- ADS-RSU | |
Weighted average share price (![]() |
696 | 10.77 |
Exercise price (![]() |
3.31 | 0.06 |
Expected volatility (%) | 21-25 | 22-26 |
Expected life of the option (years) | 1-4 | 1-4 |
Expected dividends (%) | 2.65 | 2.65 |
Risk-free interest rate (%) | 7-8 | 2-3 |
Weighted average fair value as on grant date (![]() |
648 | 10.03 |
Particulars | For options granted in | |||
Fiscal 2018- Equity Shares-RSU |
Fiscal 2018- Equity shares ESOP |
Fiscal 2018- ADS-RSU |
Fiscal 2018- ADS- ESOP | |
Weighted average share price (![]() |
572 | 461 | 8.31 | 7.32 |
Exercise price (![]() |
2.50 | 459 | 0.04 | 7.33 |
Expected volatility (%) | 20-25 | 25-28 | 21-26 | 25-31 |
Expected life of the option (years) | 1 - 4 | 3 - 7 | 1 - 4 | 3 - 7 |
Expected dividends (%) | 2.78 | 2.78 | 2.74 | 2.74 |
Risk-free interest rate (%) | 6 - 7 | 6 - 7 | 1 - 2 | 1 - 2 |
Weighted average fair value as on grant date (![]() |
533 | 127 | 7.74 | 1.47 |
(1) adjusted for September, 2018 bonus issue
The expected life of the RSU / ESOP is estimated based on the vesting term and contractual term of the RSU / ESOP, as well as expected exercise behaviour of the employee who receives the RSU / ESOP. Expected volatility during the expected term of the RSU / ESOP 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 / ESOP.
2.17 Income Taxes
Accounting Policy
Income tax expense comprises current and deferred income tax. Income tax expense is recognized in net profit in the consolidated statement of comprehensive income except to the extent that it relates to items recognized directly in equity, in which case it is recognized in other comprehensive income. Current income tax for current and prior periods is recognized at the amount expected to be paid to or recovered from the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred income tax assets and liabilities are recognized for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements except when the deferred income tax arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of the transaction. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.
Deferred income tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date and are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of changes in tax rates on deferred income tax assets and liabilities is recognized as income or expense in the period that includes the enactment or the substantive enactment date. A deferred income tax asset is recognized to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can be utilized. Deferred income taxes are not provided on the undistributed earnings of subsidiaries and branches where it is expected that the earnings of the subsidiary or branch will not be distributed in the foreseeable future. The Group offsets current tax assets and current tax liabilities, where it has a legally enforceable right to set off the recognized amounts and where it intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously. The income tax provision for the interim period is made based on the best estimate of the annual average tax rate expected to be applicable for the full financial year. Tax benefits of deductions earned on exercise of employee share options in excess of compensation charged to income are credited to share premium.
Income tax expense in the consolidated statement of comprehensive income comprises:
(In crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Current taxes | ||||
Domestic taxes | 1,080 | 1,160 | 4,195 | 4,658 |
Foreign taxes | 113 | 306 | 1,532 | (77) |
1,193 | 1,466 | 5,727 | 4,581 | |
Deferred taxes | ||||
Domestic taxes | (120) | (118) | 23 | (518) |
Foreign taxes | 132 | (32) | (119) | 178 |
12 | (150) | (96) | (340) | |
Income tax expense | 1,205 | 1,316 | 5,631 | 4,241 |
During the quarter ended March 31, 2019, the Company
entered into Advance Pricing Agreement (APA) in overseas jurisdictions resulting in a reversal of income tax expense of 94 crore
which pertained to prior periods.
In December 2017, the Company had concluded an
Advance Pricing Agreement (“APA”) with the US Internal Revenue Service ("IRS") for the US branch covering
the years ending March 2011 to March 2021. Under the APA, the Company and the IRS have agreed on the methodology to allocate revenues
and compute the taxable income of the Company’s US Branch operations. In accordance with the APA, the company had reversed
income tax expense provision of $225 million (1,432 crore) which pertained to previous periods which are no longer required.
The Company had to pay an adjusted amount of $223 million (approximately
1,424 crore) due to the difference between the
taxes payable for prior periods as per the APA and the actual taxes paid for such periods. The company has paid $215 million (
1,455
crore).
Further, the “Tax Cuts and Jobs Act (H.R. 1)” was signed into law on December 22, 2017 (“US Tax Reforms”). The US tax reforms has reduced federal tax rates from 35% to 21% effective January 1, 2018 amongst other measures.
Income tax expense for the three months ended March
31, 2019 and March 31, 2018 includes reversal (net of provisions) of 82 crore and reversal (net of provisions)
117
crore respectively. Income tax expense for the year ended March 31, 2019 and March 31, 2018 includes reversals (net of provisions)
of
129 crore and
291 crore respectively. These reversals pertain to prior periods on account of adjudication of certain
disputed matters in favor of the company across various jurisdictions.
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 March 31, |
Year ended March 31, | ||||||
2019 | 2018 | 2019 | 2018 | |||||
Profit before income taxes | 5,283 | 5,006 | 21,041 | 20,270 | ||||
Enacted tax rates in India | 34.94% | 34.61% | 34.94% | 34.61% | ||||
Computed expected tax expense | 1,846 | 1,732 | 7,353 | 7,015 | ||||
Tax effect due to non-taxable income for Indian tax purposes | (755) | (631) | (2,705) | (2,068) | ||||
Overseas taxes | 122 | 247 | 719 | 701 | ||||
Tax provision (reversals) | (176) | (117) | (176) | (1,617) | ||||
Effect of exempt non-operating income | (13) | (6) | (58) | (66) | ||||
Effect of unrecognized deferred tax assets | 17 | 49 | 92 | 188 | ||||
Effect of differential overseas tax rates | 2 | 27 | (1) | 52 | ||||
Effect of non-deductible expenses | 47 | 40 | 353 | 57 | ||||
Branch profit tax (net of credits) | 108 | (55) | 25 | (210) | ||||
Subsidiary dividend distribution tax | – | – | – | 172 | ||||
Others | 7 | 30 | 29 | 17 | ||||
Income tax expense | 1,205 | 1,316 | 5,631 | 4,241 | ||||
The applicable Indian corporate statutory tax rate for the year ended March 31, 2019 and March 31, 2018 is 34.94% and 34.61%, respectively. The increase in the corporate statutory tax rate to 34.94% is consequent to changes made in the Finance Act, 2018.
The foreign tax expense is due to income taxes payable overseas, principally in the United States. In India, the Group has benefited from certain income tax incentives that the Government of India had provided for export of software and services from the units registered under the Special Economic Zones Act (SEZs), 2005. SEZ units which began the provision of services on or after April 1, 2005 are eligible for a deduction of 100% 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% 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 for the eligible SEZ units and utilization of such reserve by the Group for acquiring new plant and machinery for the purpose of its business as per the provisions of the Income Tax Act, 1961.
Entire deferred income tax for the three months
and year ended March 31, 2019 and March 31, 2018 relates to origination and reversal of temporary differences except for a credit
of 155 crore (on account of US Tax Reforms explained above), for the year ended March 31, 2018.
During the year ended March 31, 2018, the Company
received 846 crore as dividend from its majority owned subsidiary. Dividend distribution tax paid by the subsidiary on such dividend
has been reduced as credit against dividend distribution tax payable by Infosys. Accordingly, the Group has recorded a charge of
172 crore as income tax expense during the year ended March 31, 2018.
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 period is greater than the increase in the net assets of
the U.S. branch during the period, computed in accordance with the Internal Revenue Code. As at March 31, 2019, Infosys' U.S. branch
net assets amounted to approximately 5,196 crore. As at March 31, 2019, the Company has a deferred tax liability for branch
profit tax of
201 crore (net of credits), as the Company estimates that these branch profits are expected to be distributed
in the foreseeable future.
Other income for the three months and year ended
March 31, 2019 includes interest on income tax refund of 51 crore each, respectively. Other income for the three months and year
ended March 31, 2018 includes interest on income tax refund of Nil and
262 crore, respectively.
Deferred income tax liabilities have not been
recognized on temporary differences amounting to 6,007 crore and
5,045 crore as at March 31, 2019 and March 31, 2018,
respectively, associated with investments in subsidiaries and branches as it is probable that the temporary differences will not
reverse in the foreseeable future.
Deferred income tax assets have not been recognized
on accumulated losses of 2,624 crore and
1,936 crore as at March 31, 2019 and March 31, 2018, respectively, as it
is probable that future taxable profit will be not available against which the unused tax losses can be utilized in the foreseeable
future. The balance as at March 31, 2018 excludes the accumulated losses of Disposal Groups classified as held for sale. (Refer
note 2.1.2)
The following table provides details of expiration of unused tax losses:
(In crore)
Year | As at March 31, 2019 |
2020 | 173 |
2021 | 80 |
2022 | 142 |
2023 | 198 |
2024 | 187 |
Thereafter | 1,844 |
Total | 2,624 |
The following table provides the details of income tax assets and income tax liabilities as at March 31, 2019 and March 31, 2018:
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Income tax assets | 6,743 | 6,070 |
Current income tax liabilities | 1,567 | 2,043 |
Net current income tax asset / (liability) at the end | 5,176 | 4,027 |
The gross movement in the current income tax asset/ (liability) for the three months and year ended March 31, 2019 and March 31, 2018 is as follows:
(In crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Net current income tax asset/ (liability) at the beginning | 4,783 | 3,515 | 4,027 | 1,831 |
Translation differences | 2 | 11 | (1) | – |
Income tax paid | 1,573 | 2,012 | 6,832 | 6,829 |
Current income tax expense | (1,193) | (1,466) | (5,727) | (4,581) |
Reclassified under assets held for sale (refer note no. 2.9.2) | – | (35) | 23 | (35) |
Reclassified from held for sale (Refer note 2.9.2) | – | – | 13 | – |
Income tax benefit arising on exercise of stock options | 5 | – | 8 | – |
Tax impact on buyback expenses | 4 | – | 4 | – |
Additions through business combination | – | – | (9) | – |
Income tax on other comprehensive income | 2 | (10) | 6 | (17) |
Net current income tax asset/ (liability) at the end | 5,176 | 4,027 | 5,176 | 4,027 |
The movement in gross deferred income tax assets and liabilities (before set off) for the three months ended March 31, 2019 is as follows:
(In crore)
Particulars | Carrying value as at January 1, 2019 | Changes through profit and loss | Addition through business combination | Changes through OCI | Reclassified from Held for Sale, net | Translation difference | Carrying value as at March 31, 2019 |
Deferred income tax assets | |||||||
Property, plant and equipment | 242 | 20 | – | – | – | – | 262 |
Accrued compensation to employees | 25 | 6 | – | – | – | – | 31 |
Trade receivables | 165 | 11 | – | – | – | – | 176 |
Compensated absences | 387 | 10 | – | – | – | – | 397 |
Post sales client support | 111 | (7) | – | – | – | – | 104 |
Derivative financial instruments | 3 | 1 | – | – | – | – | 4 |
Intangibles | 16 | – | – | – | – | – | 16 |
Credits related to branch profits | 261 | 81 | – | – | – | (2) | 340 |
Others | 181 | 43 | – | (2) | – | 4 | 226 |
Total deferred income tax assets | 1,391 | 165 | – | (2) | – | 2 | 1,556 |
Deferred income tax liabilities | |||||||
Intangible asset | (163) | 34 | – | – | – | 1 | (128) |
Branch profit tax | (355) | (189) | – | – | – | 3 | (541) |
Derivative financial instruments | (107) | (8) | – | 5 | – | – | (110) |
Others | (81) | (14) | – | 19 | – | (1) | (77) |
Total Deferred income tax liabilities | (706) | (177) | – | 24 | – | 3 | (856) |
The movement in gross deferred income tax assets and liabilities (before set off) for the three months ended March 31, 2018 is as follows:
(In crore)
Particulars | Carrying value as at January 1, 2018 | Changes through profit and loss | Addition through business combination | Changes through OCI | Reclassified as Held for Sale, net | Translation difference | Carrying value as at March 31, 2018 |
Deferred income tax assets | |||||||
Property, plant and equipment | 189 | 27 | – | – | (1) | – | 215 |
Computer software | – | – | – | – | – | – | – |
Accrued compensation to employees | 27 | (14) | – | – | (2) | 1 | 12 |
Trade receivables | 142 | (2) | – | – | – | 1 | 141 |
Compensated absences | 352 | 15 | – | – | (2) | 1 | 366 |
Post sales client support | 73 | 25 | – | – | – | – | 98 |
Derivative financial instruments | – | 13 | – | – | – | – | 13 |
Intangibles | 22 | (14) | – | – | – | 1 | 9 |
Credits related to branch profits | 293 | 41 | – | – | – | 7 | 341 |
Others | 123 | 21 | – | – | (33) | 6 | 117 |
Total deferred income tax assets | 1,221 | 112 | – | – | (38) | 17 | 1,312 |
Deferred income tax liabilities | |||||||
Intangible asset | (129) | 8 | – | - | 86 | (3) | (38) |
Branch profit tax | (508) | 14 | - | - | - | (11) | (505) |
Derivative financial instruments | (18) | 17 | – | – | – | (1) | (2) |
Others | (27) | (1) | – | 2 | 5 | (5) | (26) |
Total Deferred income tax liabilities | (682) | 38 | – | 2 | 91 | (20) | (571) |
The movement in gross deferred income tax assets and liabilities (before set off) for the year ended March 31, 2019 is as follows:
(In crore)
Particulars | Carrying value as at April 1, 2018 | Changes through profit and loss | Addition through business combination | Changes through OCI | Reclassified from Held for Sale, net | Translation difference | Carrying value as at March 31, 2019 |
Deferred income tax assets | |||||||
Property, plant and equipment | 215 | 46 | – | – | 1 | – | 262 |
Accrued compensation to employees | 12 | 16 | – | – | 2 | 1 | 31 |
Trade receivables | 141 | 35 | – | – | – | – | 176 |
Compensated absences | 366 | 29 | – | – | 2 | – | 397 |
Post sales client support | 98 | 5 | – | – | – | 1 | 104 |
Derivative financial instruments | 13 | (14) | – | 4 | – | 1 | 4 |
Intangibles | 9 | 6 | – | – | – | 1 | 16 |
Credits related to branch profits | 341 | (22) | – | – | – | 21 | 340 |
Others | 117 | 75 | – | 9 | 33 | (8) | 226 |
Total deferred income tax assets | 1,312 | 176 | – | 13 | 38 | 17 | 1,556 |
Deferred income tax liabilities | |||||||
Intangible asset | (38) | 63 | (56) | – | (86) | (11) | (128) |
Branch profit tax | (505) | (3) | – | – | – | (33) | (541) |
Derivative financial instruments | (2) | (97) | – | (11) | – | – | (110) |
Others | (26) | (43) | (8) | (1) | (5) | 6 | (77) |
Total Deferred income tax liabilities | (571) | (80) | (64) | (12) | (91) | (38) | (856) |
The movement in gross deferred income tax assets and liabilities (before set off) for the year ended March 31, 2018 is as follows:
(In crore)
Particulars | Carrying value as at April 1, 2017 | Changes through profit and loss | Addition through business combination | Changes through OCI | Reclassified as Held for Sale, net | Translation difference | Carrying value as at March 31, 2018 |
Deferred income tax assets | |||||||
Property, plant and equipment | 138 | 78 | – | – | (1) | – | 215 |
Computer software | 40 | (41) | – | – | – | 1 | – |
Accrued compensation to employees | 57 | (42) | – | – | (2) | (1) | 12 |
Trade receivables | 136 | 4 | – | – | – | 1 | 141 |
Compensated absences | 374 | (10) | – | – | (2) | 4 | 366 |
Post sales client support | 97 | 2 | – | – | – | (1) | 98 |
Derivative financial instruments | – | 13 | – | – | – | – | 13 |
Intangibles | 22 | (14) | – | – | – | 1 | 9 |
Credits related to branch profits | – | 334 | – | – | – | 7 | 341 |
Others | 229 | (70) | – | (14) | (33) | 5 | 117 |
Total deferred income tax assets | 1,093 | 254 | – | (14) | (38) | 17 | 1,312 |
Deferred income tax liabilities | |||||||
Intangible asset | (206) | 85 | (2) | – | 86 | (1) | (38) |
Branch profit tax | (327) | (172) | – | – | – | (6) | (505) |
Derivative financial instruments | (86) | 72 | – | 13 | – | (1) | (2) |
Others | (141) | 101 | – | 13 | 5 | (4) | (26) |
Total Deferred income tax liabilities | (760) | 86 | (2) | 26 | 91 | (12) | (571) |
The tax effects of significant temporary differences that resulted in deferred income tax assets and liabilities are as follows:
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Deferred income tax assets after set off | 1,372 | 1,282 |
Deferred income tax liabilities after set off | (672) | (541) |
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.
In assessing the reliability of deferred income tax assets, the 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. The 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.
As at March 31, 2018, claims against the Group
not acknowledged as debts from the Indian Income tax authorities amounted to 4,542 crore. Amount paid to statutory authorities
against this amounted to
6,540 crore.
As at March 31, 2019, claims against the Group
not acknowledged as debts from the Income tax authorities amounted to 2,851 crore. These matters are pending before various
Appellate Authorities and the management including its tax advisors expect that its position will likely be upheld on ultimate
resolution and will not have a material adverse effect on the Group's financial position and results of operations.
Amount paid to statutory authorities against
the above tax claims amounted to 5,924 crore.
Subsequent to March 31, 2018, the Supreme Court of India ruled favorably in respect of certain income tax claims which have been given effect in the above disclosure of claims as of March 31, 2019.
2.18 Reconciliation of basic and diluted shares used in computing earnings per share
Accounting Policy
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.
The following is a reconciliation of the equity shares used in the computation of basic and diluted earnings per equity share:
Particulars | Three months ended March 31, | Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Basic earnings per equity share - weighted average number of equity shares outstanding(1) | 4,347,129,592 | 4,346,554,120 | 4,347,130,157 | 4,510,664,644 |
Effect of dilutive common equivalent shares - share options outstanding | 5,894,271 | 3,062,904 | 6,290,615 | 4,483,096 |
Diluted earnings per equity share - weighted average number of equity shares and common equivalent shares outstanding | 4,353,023,863 | 4,349,617,024 | 4,353,420,772 | 4,515,147,740 |
Information in the table above is adjusted for September, 2018 bonus issue
(1) excludes treasury shares
For the three months ended March 31, 2019 and March 31, 2018, Nil and 2,96,798 (adjusted for September 2018 bonus issue) number of option to purchase equity shares had an anti-dilutive effect, respectively.
For the year ended March 31, 2019 and March 31, 2018, Nil and 3,10,372 (adjusted for September 2018 bonus issue) number of options to purchase equity shares had an anti-dilutive effect respectively.
2.19 Related Party Transactions
List of related parties:
Name of subsidiaries | Country | Holdings as at | |
March 31, 2019 | March 31, 2018 | ||
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 Nova Holdings LLC. (Infosys Nova) | U.S. | 100% | 100% |
EdgeVerve Systems Limited (EdgeVerve) | India | 100% | 100% |
Infosys Austria GmbH(1) (formerly Lodestone Management Consultants GmbH) | Austria | 100% | 100% |
Skava Systems Pvt. Ltd. (Skava Systems) | India | 100% | 100% |
Kallidus Inc. (Kallidus) | U.S. | 100% | 100% |
Infosys Chile SpA(2) | Chile | 100% | 100% |
Infosys Arabia Limited(3) | Saudi Arabia | 70% | 70% |
Infosys Consulting Ltda.(3) | Brazil | 99.99% | 99.99% |
Infosys CIS LLC(1)(22) | Russia | – | – |
Infosys Luxembourg S.a.r.l (1)(17) | Luxembourg | 100% | – |
Infosys Americas Inc., (Infosys Americas) | U.S. | 100% | 100% |
Infosys Technologies (Australia) Pty. Limited (Infosys Australia)(4) | Australia | 100% | 100% |
Infosys Public Services, Inc. USA (Infosys Public Services) | U.S. | 100% | 100% |
Infosys Canada Public Services Inc(23) | Canada | – | – |
Infosys Canada Public Services Ltd(24) | Canada | – | – |
Infosys BPM Limited (formerly Infosys BPO Limited) | India | 99.98% | 99.98% |
Infosys (Czech Republic) Limited s.r.o.(5) | Czech Republic | 99.98% | 99.98% |
Infosys Poland, Sp z.o.o(5) | Poland | 99.98% | 99.98% |
Infosys McCamish Systems LLC (5) | U.S. | 99.98% | 99.98% |
Portland Group Pty Ltd(5) | Australia | 99.98% | 99.98% |
Infosys BPO Americas LLC.(5) | U.S. | 99.98% | 99.98% |
Infosys Consulting Holding AG (Infosys Lodestone) | Switzerland | 100% | 100% |
Lodestone Management Consultants Inc.(6)(15) | U.S. | – | 100% |
Infosys Management Consulting Pty Limited(6) | Australia | 100% | 100% |
Infosys Consulting AG(6) | Switzerland | 100% | 100% |
Infosys Consulting GmbH(6) | Germany | 100% | 100% |
Infosys Consulting SAS(6) | France | 100% | 100% |
Infosys Consulting s.r.o.(6) | Czech Republic | 100% | 100% |
Infosys Consulting (Shanghai) Co., Ltd.(formerly Lodestone Management Consultants Co., Ltd)(6) | China | 100% | 100% |
Infy Consulting Company Ltd(6) | U.K. | 100% | 100% |
Infy Consulting B.V.(6) | The Netherlands | 100% | 100% |
Infosys Consulting Sp. z.o.o(6) | Poland | 100% | 100% |
Lodestone Management Consultants Portugal, Unipessoal, Lda. (6) | Portugal | 100% | 100% |
S.C. Infosys Consulting S.R.L.(1) | Romania | 100% | 100% |
Infosys Consulting S.R.L.(6) | Argentina | 100% | 100% |
Infosys Consulting (Belgium) NV (formerly Lodestone Management Consultants (Belgium) S.A.)(7) | Belgium | 99.90% | 99.90% |
Panaya Inc. (Panaya) | U.S. | 100% | 100% |
Panaya Ltd.(8) | Israel | 100% | 100% |
Panaya GmbH(8) | Germany | 100% | 100% |
Panaya Japan Co. Ltd(4)(8) | Japan | 100% | 100% |
Noah Consulting LLC (Noah)(9) | U.S. | – | – |
Noah Information Management Consulting Inc. (Noah Canada)(10) | Canada | – | – |
Brilliant Basics Holdings Limited (Brilliant Basics)(11) | U.K. | 100% | 100% |
Brilliant Basics Limited(12) | U.K. | 100% | 100% |
Brilliant Basics (MENA) DMCC(12) | Dubai | 100% | 100% |
Infosys Consulting Pte Limited (Infosys Singapore)(1) | Singapore | 100% | 100% |
Infosys Middle East FZ LLC(13) | Dubai | 100% | 100% |
Fluido Oy(13)(18) | Finland | 100% | – |
Fluido Sweden AB (Extero)(19) | Sweden | 100% | – |
Fluido Norway A/S(19) | Norway | 100% | – |
Fluido Denmark A/S(19) | Denmark | 100% | – |
Fluido Slovakia s.r.o(19) | Slovakia | 100% | – |
Fluido Newco AB(19) | Sweden | 100% | – |
Infosys Compaz PTE. Ltd (formerly Trusted Source Pte. Ltd) (13)(20) | Singapore | 60% | – |
Infosys South Africa (Pty) Ltd(13)(21) | South Africa | – | – |
WongDoody Holding Company Inc. (WongDoody) (14) | U.S. | 100% | – |
WDW Communications, Inc(16) | U.S. | 100% | – |
WongDoody, Inc(16) | U.S. | 100% | – |
(1) Wholly-owned subsidiary of Infosys Limited
(2) Incorporated effective November 20, 2017
(3) Majority owned and controlled subsidiary of Infosys Limited
(4) Under liquidation
(5) Wholly owned subsidiary of Infosys BPM
(6) Wholly owned subsidiaries of Infosys Consulting Holding AG (formerly Lodestone Holding AG)
(7) Majority owned and controlled subsidiaries of Infosys Consulting Holding AG (formerly Lodestone Holding AG)
(8) Wholly owned subsidiary of Panaya Inc.
(9) Liquidated effective November 9, 2017
(10) Wholly owned subsidiary of Noah. Liquidated effective December 20, 2017
(11) On September 8, 2017, Infosys acquired 100% of the voting interests in Brilliant Basics Holding Limited
(12) Wholly-owned subsidiary of Brilliant Basics Holding Limited.
(13) Wholly-owned subsidiary of Infosys Consulting Pte Ltd
(14) On May 22, 2018, Infosys acquired 100% of the voting interest in WongDoody
(15) Liquidated effective May 17, 2018
(16) Wholly-owned subsidiary of WongDoody
(17) Incorporated effective August 6, 2018
(18) | On October 11, 2018, Infosys Consulting Pte. Ltd, acquired 100% of the voting interests in Fluido Oy and its subsidiaries |
(19) Wholly-owned subsidiary of Fluido Oy
(20) | On November 16, 2018 , Infosys Consulting Pte. Ltd, acquired 60% of the voting interest in Infosys Compaz Pte. Ltd |
(21) Incorporated effective December 19,2018
(22)Incorporated effective November 29, 2018
(23)Incorporated effective November 27, 2018, wholly owned subsidiary Infosys Public Services Inc
(24)Liquidated effective May 9, 2017, wholly owned subsidiary Infosys Public Services Inc
Infosys has provided guarantee for performance of certain contracts entered into by its subsidiaries.
Associate
During the year ended March 31, 2018, the Company
has written down the entire carrying value of the investment in its associate DWA Nova LLC amounting to 71 crore. DWA Nova
LLC has been liquidated w.e.f November 17, 2017
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 BPM Limited Employees' Superannuation Fund Trust (formerly Infosys BPO Limited Employees Superannuation Fund Trust) | India | Post-employment benefit plan of Infosys BPM |
Infosys BPM Limited Employees' Gratuity Fund Trust (formerly Infosys BPO Limited Employees' Gratuity Fund Trust) | India | Post-employment benefit plan of Infosys BPM |
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 Employees Welfare Trust | India | Controlled trust |
Infosys Employee Benefits Trust | India | Controlled trust |
Infosys Science Foundation | India | Controlled trust |
Refer note no. 2.12 for information on transactions with post-employment benefit plans mentioned above.
List of key management personnel
Whole-time directors
Salil Parekh appointed as Chief Executive Officer and Managing Director effective January 2, 2018. The appointment is for a term of 5 years with effect from January 2, 2018 to January 1, 2023 and the remuneration is approved by shareholders through postal ballot dated February 20, 2018.
U. B. Pravin Rao, Chief Operating officer appointed as Interim-Chief Executive Officer and Managing Director effective August 18, 2017. Subsequently he stepped down as the interim CEO and Managing Director effective January 2, 2018 and will continue as Chief Operating Officer and a whole-time director of the Company.
Dr. Vishal Sikka resigned as Chief Executive Officer and Managing Director effective August 18, 2017 and as Executive Vice Chairman effective August 24, 2017
Non-whole-time directors
Nandan M. Nilekani (appointed as Non-Executive, Non-Independent Chairman effective August 24, 2017)
Michael Gibbs (appointed as Independent director effective July 13, 2018)
Ravi Venkatesan (resigned from his position as Co-Chairman effective August 24, 2017 and resigned as member of the Board effective May 11, 2018)
Kiran Mazumdar-Shaw
Roopa Kudva
Dr. Punita Kumar-Sinha
D. N. Prahlad
D. Sundaram (appointed effective July 14, 2017)
Prof. Jeffrey Lehman, (resigned effective August 24, 2017)
R. Seshasayee (resigned effective August 24, 2017)
Prof. John Etchemendy (resigned effective August 24, 2017)
Executive Officers
Nilanjan Roy (appointed as Chief Financial Officer effective March 1, 2019)
Jayesh Sanghrajka (appointed as Interim-Chief Financial Officer effective November 17, 2018. He resumed his responsibilities as Deputy Chief Financial Officer effective March 1, 2019)
M.D. Ranganath (resigned as Chief Financial Officer effective November 16, 2018)
Mohit Joshi, President
Rajesh K. Murthy, President (appointed effective October 13, 2016 and resigned effective January 31, 2018)
Ravi Kumar S, President and Deputy Chief Operating Officer
Sandeep Dadlani, President (resigned effective July 14, 2017)
Krishnamurthy Shankar, Group Head - Human Resources
Gopi Krishnan Radhakrishnan - Acting General Counsel (resigned effective June 24, 2017)
Inderpreet Sawhney, Group General Counsel and Chief Compliance Officer (appointed as executive officer effective July 14, 2017)
Company Secretary
A. G. S. Manikantha
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 March 31, |
Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Salaries and other employee benefits to whole-time directors and executive officers (1) (2)(3)(4)(5) | 29 | 19 | 96 | 48 |
Commission and other benefits to non-executive/independent directors | 2 | 2 | 8 | 10 |
Total | 31 | 21 | 104 | 58 |
(1) | Total employee stock compensation expense for the three months ended March 31,
2019 and March 31, 2018 includes a charge of ![]() ![]() ![]() ![]() |
(2) | Includes reversal of stock compensation cost of ![]() |
(3) | On December 20, 2018, the Board appointed Nilanjan Roy as the Chief Financial Officer of the Company with effect from March 1, 2019. |
(4) | On December 2, 2017, the Board appointed Salil Parekh as the Chief Executive Officer and Managing Director of the Company with effect from January 2, 2018. |
(5) | On June 16, 2017, the Board appointed Inderpreet Sawhney as the Group General Counsel and Chief Compliance Officer of the Company with effect from July 3, 2017; The Board in their meeting held on July 14, 2017 designated her as an Executive Officer with effect from the date of the meeting. |
2.20 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 three months ended June 30, 2018, the Group internally reorganized some of its business segments to deepen customer relationships, improve focus of sales investments and increase management oversight. Consequent to the internal reorganization, there were changes in the reportable business segments based on “Management approach” as defined under IFRS 8, Operating Segments. Therefore, enterprises in Insurance which was earlier considered under the Life Sciences, Healthcare and Insurance business segment are now considered under the Financial Services business segment and enterprises in Communication, Telecom OEM and Media which was earlier under Energy & Utilities, Communication and Services is now shown as a separate business segment. Segmental operating income has changed in line with these as well as changes in the allocation method. The CODM evaluates the Group's performance and allocates resources based on an analysis of various performance indicators by business segments. Accordingly, information has been presented along business 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 accounting policies.
Business segments of the Group are primarily enterprises in Financial Services and Insurance, enterprises in Manufacturing, enterprises in Retail, Consumer Packaged Goods and Logistics, enterprises in the Energy, Utilities, Resources and Services, enterprises in Communication, Telecom OEM and Media, enterprises in Hi-Tech, enterprises in Life Sciences and Healthcare and all other segments. The Financial services reportable segments has been aggregated to include the Financial Services operating segment and Finacle operating segment because of the similarity of the economic characteristics. All other segments represents the operating segments of businesses in India, Japan, China, Infosys Public Services & other enterprises in Public Services. Consequent to the above change in the composition of reportable business segments, the prior year comparatives for three months and year ended March 31, 2018 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 Infosys Public services and revenue generated from customers located in India, Japan and China and other enterprises in Public services. 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 efforts 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. The 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.
Business segment revenue information is collated based on individual customers invoiced or in relation to which the revenue is otherwise recognized.
2.20.1 Business segments
Three months ended March 31, 2019 and March 31, 2018
(In crore)
Particulars | Financial Services | Retail | Communication | Energy, Utilities, Resources and Services | Manufacturing | Hi Tech | Life Sciences | All other segments | Total |
Revenues | 6,805 | 3,416 | 2,921 | 2,747 | 2,161 | 1,650 | 1,287 | 552 | 21,539 |
5,886 | 2,879 | 2,334 | 2,172 | 1,735 | 1,335 | 1,213 | 529 | 18,083 | |
Identifiable operating expenses | 3,614 | 1,705 | 1,731 | 1,500 | 1,190 | 984 | 694 | 348 | 11,766 |
3,077 | 1,447 | 1,170 | 1,116 | 1,022 | 709 | 638 | 324 | 9,503 | |
Allocated expenses | 1,470 | 694 | 612 | 613 | 500 | 290 | 270 | 167 | 4,616 |
1,171 | 598 | 467 | 421 | 371 | 234 | 227 | 163 | 3,652 | |
Segment profit | 1,721 | 1,017 | 578 | 634 | 471 | 376 | 323 | 37 | 5,157 |
1,638 | 834 | 697 | 635 | 342 | 392 | 348 | 42 | 4,928 | |
Unallocable expenses | 539 | ||||||||
456 | |||||||||
Operating profit | 4,618 | ||||||||
4,472 | |||||||||
Other income, net (Refer to note 2.14) | 665 | ||||||||
652 | |||||||||
Reduction in the fair value of Disposal Group held for sale (Refer to note 2.9.2) | – | ||||||||
(118) | |||||||||
Profit before income taxes | 5,283 | ||||||||
5,006 | |||||||||
Income tax expense | 1,205 | ||||||||
1,316 | |||||||||
Net profit | 4,078 | ||||||||
3,690 | |||||||||
Depreciation and amortization | 531 | ||||||||
458 | |||||||||
Non-cash expenses other than depreciation and amortization | 8 | ||||||||
116 |
Year ended March 31, 2019 and March 31, 2018
(In crore)
Particulars | Financial Services | Retail | Communication | Energy, Utilities, Resources and Services | Manufacturing | Hi Tech | Life Sciences | All other segments | Total |
Revenues | 26,477 | 13,556 | 10,426 | 10,390 | 8,152 | 6,177 | 5,203 | 2,294 | 82,675 |
23,172 | 11,345 | 8,883 | 8,297 | 6,671 | 5,131 | 4,698 | 2,325 | 70,522 | |
Identifiable operating expenses | 14,164 | 6,823 | 5,720 | 5,661 | 4,513 | 3,546 | 2,756 | 1,415 | 44,598 |
12,107 | 5,668 | 4,527 | 4,204 | 3,881 | 2,774 | 2,447 | 1,342 | 36,950 | |
Allocated expenses | 5,435 | 2,699 | 2,189 | 2,187 | 1,786 | 1,083 | 1,028 | 763 | 17,170 |
4,695 | 2,374 | 1,737 | 1,682 | 1,516 | 911 | 860 | 784 | 14,559 | |
Segment profit | 6,878 | 4,034 | 2,517 | 2,542 | 1,853 | 1,548 | 1,419 | 116 | 20,907 |
6,370 | 3,303 | 2,619 | 2,411 | 1,274 | 1,446 | 1,391 | 199 | 19,013 | |
Unallocable expenses | 2,027 | ||||||||
1,865 | |||||||||
Operating profit | 18,880 | ||||||||
17,148 | |||||||||
Other income, net (Refer to note 2.14) | 2,882 | ||||||||
3,311 | |||||||||
Reduction in the fair value of Disposal Group held for sale (Refer to note 2.9.2) | (270) | ||||||||
(118) | |||||||||
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" (Refer to note 2.9.2) | (451) | ||||||||
– | |||||||||
Share in net profit/(loss) of associate, including impairment | – | ||||||||
(71) | |||||||||
Profit before income taxes | 21,041 | ||||||||
20,270 | |||||||||
Income tax expense | 5,631 | ||||||||
4,241 | |||||||||
Net profit | 15,410 | ||||||||
16,029 | |||||||||
Depreciation and amortization | 2,011 | ||||||||
1,863 | |||||||||
Non-cash expenses other than depreciation and amortization | 740 | ||||||||
191 |
2.20.2 The following table sets forth our revenue by Geography for the three months ended March 31, 2019 and March 31, 2018:
(In crore)
Particulars | North America | Europe | India | Rest of the world | Total |
2019 | 13,193 | 5,167 | 493 | 2,686 | 21,539 |
2018 | 10,741 | 4,485 | 513 | 2,344 | 18,083 |
The following table sets forth our revenue by Geography for the year ended March 31, 2019 and March 31, 2018:
(In crore)
Particulars | North America | Europe | India | Rest of the world | Total |
2019 | 50,038 | 19,942 | 2,048 | 10,647 | 82,675 |
2018 | 42,575 | 16,738 | 2,231 | 8,978 | 70,522 |
2.20.3 Significant clients
No client individually accounted for more than 10% of the revenues in the three months and year ended March 31, 2019 and March 31, 2018.
for and on behalf of the Board of Directors of Infosys Limited
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive office and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
D. Sundaram Director |
Nilanjan Roy Chief Financial Officer |
A. G. S. Manikantha Company Secretary |
Bengaluru April 12, 2019 |
Exhibit 99.9
IND AS Standalone
INDEPENDENT AUDITOR’S REPORT
TO THE BOARD OF DIRECTORS OF INFOSYS LIMITED
Report on the Audit of the Interim Condensed Standalone Financial Statements
Opinion
We have audited the accompanying interim condensed standalone financial statements of Infosys Limited (“the Company”), which comprise the Condensed Balance Sheet as at March 31, 2019, the Condensed Statement of Profit and Loss (including Other Comprehensive Income) for the three months and year ended on that date, the Condensed Statement of Changes in Equity and the Condensed Statement of Cash Flows for the year ended on that date, and a summary of the significant accounting policies and other explanatory information (hereinafter referred to as “the interim condensed standalone financial statements”).
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid interim condensed standalone financial statements give a true and fair view in conformity with Indian Accounting Standard 34 Interim Financial Reporting (“Ind AS 34’) prescribed under section 133 of the Companies Act, 2013 (‘the Act’) and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2019, the profit and total comprehensive income for the three months and year ended on that date, changes in equity and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit of the interim condensed standalone financial statements in accordance with the Standards on Auditing (SAs) issued by the Institute of Chartered Accountants of India (ICAI). Our responsibilities under those Standards are further described in the Auditor’s Responsibilities for the Audit of the Interim Condensed Standalone Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the ICAI together with the independence requirements that are relevant to our audit of the interim condensed standalone financial statements under the provisions of the Act and the Rules made thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the interim condensed standalone financial statements.
Management Responsibility for the Interim Condensed Standalone Financial Statements
The Company’s Board of Directors is responsible for the preparation and presentation of these interim condensed standalone financial statements that give a true and fair view of the financial position, financial performance, total comprehensive income, changes in equity and cash flows of the Company in accordance with Ind AS 34 and other accounting principles generally accepted in India. This responsibility also includes maintenance of adequate accounting records for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the interim condensed standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the interim condensed standalone financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
The Board of Directors are responsible for overseeing the Company’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Interim Condensed Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the interim condensed standalone financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these interim condensed standalone financial statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
· | Identify and assess the risks of material misstatement of the interim condensed standalone financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. |
· | Obtain an understanding of internal financial controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on effectiveness of the Company’s internal financial controls. |
· | Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. |
· | Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the interim condensed standalone financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. |
· | Evaluate the overall presentation, structure and content of the interim condensed standalone financial statements, including the disclosures, and whether the interim condensed standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation. |
Materiality is the magnitude of misstatements in the interim condensed standalone financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the financial statements.
We also communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
For DELOITTE HASKINS & SELLS LLP
Chartered Accountants
(Firm Registration No. 117366W/W-100018)
P. r. ramesh
Partner
Bengaluru, April 12, 2019 | (Membership No. 70928) |
INFOSYS LIMITED
Condensed Standalone Financial Statements under Indian Accounting Standards (Ind AS) for the three months and year ended March 31, 2019
Index |
Condensed Balance Sheet |
Condensed Statement of Profit and Loss |
Condensed Statement of Changes in Equity |
Condensed Statement of Cash Flows |
Overview and notes to the financial statements |
1. Overview |
1.1 Company overview |
1.2 Basis of preparation of financial statements |
1.3 Use of estimates and judgments |
1.4 Critical accounting estimates |
1.5 Recent accounting pronouncements |
2. Notes to financial statements |
2.1 Property, plant and equipment |
2.2 Investments and assets held for sale |
2.3 Loans |
2.4 Other financial assets |
2.5 Trade Receivables |
2.6 Cash and cash equivalents |
2.7 Other assets |
2.8 Financial instruments |
2.9 Equity |
2.10 Other financial liabilities |
2.11 Trade payables |
2.12 Other liabilities |
2.13 Provisions |
2.14 Income taxes |
2.15 Revenue from operations |
2.16 Other income, net |
2.17 Expenses |
2.18 Reconciliation of basic and diluted shares used in computing earning per share |
2.19 Contingent liabilities and commitments |
2.20 Related Party Transactions |
2.21 Segment Reporting |
2.22 Function-wise classification of statement of profit and loss |
INFOSYS LIMITED
(In crore)
Condensed Balance Sheet as at | Note No. | March 31, 2019 | March 31, 2018 |
ASSETS | |||
Non-current assets | |||
Property, plant and equipment | 2.1 | 10,394 | 9,027 |
Capital work-in-progress | 1,212 | 1,442 | |
Goodwill | 29 | 29 | |
Other intangible assets | 74 | 101 | |
Financial assets | |||
Investments | 2.2 | 12,062 | 11,993 |
Loans | 2.3 | 16 | 19 |
Other financial assets | 2.4 | 196 | 177 |
Deferred tax assets (net) | 1,114 | 1,128 | |
Income tax assets (net) | 5,870 | 5,710 | |
Other non-current assets | 2.7 | 1,740 | 2,161 |
Total non - current Assets | 32,707 | 31,787 | |
Current assets | |||
Financial assets | |||
Investments | 2.2 | 6,077 | 5,906 |
Trade receivables | 2.5 | 13,370 | 12,151 |
Cash and cash equivalents | 2.6 | 15,551 | 16,770 |
Loans | 2.3 | 1,048 | 393 |
Other financial assets | 2.4 | 4,834 | 5,906 |
Income tax assets (net) | 423 | - | |
Other current assets | 2.7 | 4,920 | 1,439 |
46,223 | 42,565 | ||
Assets held for sale | 2.2.4 | - | 1,525 |
Total current assets | 46,223 | 44,090 | |
Total Assets | 78,930 | 75,877 | |
EQUITY AND LIABILITIES | |||
Equity | |||
Equity share capital | 2.9 | 2,178 | 1,092 |
Other equity | 60,533 | 62,410 | |
Total equity | 62,711 | 63,502 | |
LIABILITIES | |||
Non-current liabilities | |||
Financial liabilities | |||
Other financial liabilities | 2.10 | 79 | 55 |
Deferred tax liabilities (net) | 541 | 505 | |
Other non-current liabilities | 2.12 | 169 | 153 |
Total non - current liabilities | 789 | 713 | |
Current liabilities | |||
Financial liabilities | |||
Trade payables | 2.11 | ||
Total outstanding dues of micro enterprises and small enterprises | – | – | |
Total outstanding dues of creditors other than micro enterprises and small enterprises | 1,604 | 738 | |
Other financial liabilities | 2.10 | 8,528 | 5,540 |
Other current liabilities | 2.12 | 3,335 | 2,972 |
Provisions | 2.13 | 505 | 436 |
Income tax liabilities (net) | 1,458 | 1,976 | |
Total current liabilities | 15,430 | 11,662 | |
Total equity and liabilities | 78,930 | 75,877 |
The accompanying notes form an integral part of the interim standalone condensed financial statements.
As per our report of even date attached
for Deloitte Haskins & Sells LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants Firm’s Registration No : 117366W/ W-100018 |
P. R. Ramesh Partner Membership No. 70928 |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 12, 2019 |
D. Sundaram Director |
Nilanjan Roy Chief Financial Officer |
A. G. S. Manikantha Company Secretary |
INFOSYS LIMITED
(In crore except equity share and per
equity share data)
Condensed Statement of Profit and Loss for the | Note No. | Three months ended March 31, | Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | ||
Revenue from operations | 2.15 | 18,935 | 15,984 | 73,107 | 61,941 |
Other income, net | 2.16 | 639 | 636 | 2,852 | 4,019 |
Total income | 19,574 | 16,620 | 75,959 | 65,960 | |
Expenses | |||||
Employee benefit expenses | 2.17 | 10,198 | 8,418 | 38,296 | 32,472 |
Cost of technical sub-contractors | 2,040 | 1,434 | 7,646 | 5,494 | |
Travel expenses | 486 | 369 | 1,906 | 1,479 | |
Cost of software packages and others | 2.17 | 392 | 320 | 1,646 | 1,270 |
Communication expenses | 87 | 75 | 339 | 330 | |
Consultancy and professional charges | 312 | 233 | 1,096 | 826 | |
Depreciation and amortization expense | 429 | 363 | 1,599 | 1,408 | |
Other expenses | 2.17 | 677 | 429 | 2,770 | 2,184 |
Reduction in the fair value of assets held for sale | 2.2.4 | – | 589 | 265 | 589 |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" | 2.2.4 | – | – | 469 | – |
Total expenses | 14,621 | 12,230 | 56,032 | 46,052 | |
Profit before tax | 4,953 | 4,390 | 19,927 | 19,908 | |
Tax expense: | |||||
Current tax | 2.14 | 1,053 | 1,397 | 5,189 | 4,003 |
Deferred tax | 2.14 | 80 | (164) | 36 | (250) |
Profit for the period | 3,820 | 3,157 | 14,702 | 16,155 | |
Other comprehensive income | |||||
Items that will not be reclassified subsequently to profit or loss | |||||
Remeasurement of the net defined benefit liability/asset, net | (3) | 31 | (21) | 52 | |
Equity instruments through other comprehensive income, net | 9 | 7 | 78 | 7 | |
Items that will be reclassified subsequently to profit or loss | |||||
Fair value changes on derivatives designated as cash flow hedge, net | (15) | 2 | 21 | (39) | |
Fair value changes on investments, net | 2.2 | 22 | (12) | 1 | 1 |
Total other comprehensive income/ (loss), net of tax | 13 | 28 | 79 | 21 | |
Total comprehensive income for the period | 3,833 | 3,185 | 14,781 | 16,176 | |
Earnings per equity share | |||||
Equity shares of par value ![]() |
|||||
Basic (![]() |
8.75 | 7.23 | 33.66 | 35.64 | |
Diluted (![]() |
8.74 | 7.22 | 33.64 | 35.62 | |
Weighted average equity shares used in computing earnings per equity share | |||||
Basic | 2.18 | 4,36,77,59,601 | 4,36,81,61,336 | 4,36,82,12,119 | 4,53,26,87,604 |
Diluted | 2.18 | 4,36,98,24,380 | 4,36,92,84,588 | 4,37,04,12,348 | 4,53,47,85,242 |
The accompanying notes form an integral part of the interim standalone condensed financial statements.
As per our report of even date attached
for Deloitte Haskins & Sells LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants Firm’s Registration No : 117366W/ W-100018 |
P. R. Ramesh Partner Membership No. 70928 |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 12, 2019 |
D. Sundaram Director |
Nilanjan Roy Chief Financial Officer |
A. G. S. Manikantha Company Secretary |
INFOSYS LIMITED
Condensed 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 | ||||||||||||
Capital reserve | |||||||||||||
Securities Premium | Retained earnings | General reserve | Share Options Outstanding Account | Special Economic Zone Re-investment reserve (1) | Capital reserve | Business transfer adjustment reserve(2) | Capital redemption reserve | Equity Instruments through other comprehensive income | Effective portion of Cash flow hedges | Other items of other comprehensive income / (loss) | |||
Balance as at April 1, 2017 | 1,148 | 2,208 | 49,957 | 11,087 | 120 | – | 54 | 3,448 | – | (5) | 39 | (39) | 68,017 |
Changes in equity for the year ended March 31, 2018 | |||||||||||||
Profit for the year | – | – | 16,155 | – | – | – | – | – | – | – | – | – | 16,155 |
Remeasurement of the net defined benefit liability/asset* | – | – | – | – | – | – | – | – | – | – | – | 52 | 52 |
Equity instruments through other comprehensive income* (Refer note no. 2.2) | – | – | – | – | – | – | – | – | – | 7 | – | – | 7 |
Fair value changes on derivatives designated as cash flow hedge* (Refer note no. 2.8) | – | – | – | – | – | – | – | – | – | – | (39) | – | (39) |
Fair value changes on investments, net* (refer note no. 2.2) | – | – | – | – | – | – | – | – | – | – | – | 1 | 1 |
Total comprehensive income for the year | – | – | 16,155 | – | – | – | – | – | – | 7 | (39) | 53 | 16,176 |
Transfer to general reserve | – | – | (1,382) | 1,382 | – | – | – | – | – | – | – | – | – |
Transferred to Special Economic Zone Re-investment reserve | – | – | (2,141) | – | – | 2,141 | – | – | – | – | – | – | – |
Transferred from Special Economic Zone Re-investment reserve on utilization | – | – | 582 | – | – | (582) | – | – | – | – | – | – | – |
Exercise of stock options (refer note no. 2.9) | – | 67 | – | 2 | (69) | – | – | – | – | – | – | – | – |
Shares issued on exercise of employee stock options (Refer to note 2.9) | – | 5 | – | – | – | – | – | – | – | – | – | – | 5 |
Share based payment to employees of the group (refer note no. 2.9) | – | – | – | – | 79 | – | – | – | – | – | – | – | 79 |
Dividends (including dividend distribution tax) | – | – | (7,500) | – | – | – | – | – | – | – | – | – | (7,500) |
Amount paid upon buyback ( refer note no. 2.9) | (56) | (2,206) | – | (10,738) | – | – | – | – | – | – | – | – | (13,000) |
Transaction costs related to buyback (refer note no. 2.9) | – | (46) | – | – | – | – | – | – | – | – | – | – | (46) |
Amount transferred to capital redemption reserve upon buyback (refer note no. 2.9) | – | – | – | (56) | – | – | – | – | 56 | – | – | – | – |
Loss recorded upon business transfer (refer note 2.2) | – | – | – | – | – | – | – | (229) | – | – | – | – | (229) |
Balance as at March 31, 2018 | 1,092 | 28 | 55,671 | 1,677 | 130 | 1,559 | 54 | 3,219 | 56 | 2 | - | 14 | 63,502 |
INFOSYS LIMITED
Condensed 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 | ||||||||||||
Capital reserve | |||||||||||||
Securities Premium | Retained earnings | General reserve | Share Options Outstanding Account | Special Economic Zone Re-investment reserve (1) | Capital reserve | Business transfer adjustment reserve(2) | Capital redemption reserve | Equity Instruments through other comprehensive income | Effective portion of Cash flow hedges | Other items of other comprehensive income / (loss) | |||
Balance as at April 1, 2018 | 1,092 | 28 | 55,671 | 1,677 | 130 | 1,559 | 54 | 3,219 | 56 | 2 | – | 14 | 63,502 |
Changes in equity for the year ended March 31, 2019 | |||||||||||||
Profit for the year | – | – | 14,702 | – | – | – | – | – | – | – | – | – | 14,702 |
Remeasurement of the net defined benefit liability/asset* | – | – | – | – | – | – | – | – | – | – | – | (21) | (21) |
Equity instruments through other comprehensive income* (refer note no. 2.2) | – | – | – | – | – | – | – | – | – | 78 | – | – | 78 |
Fair value changes on derivatives designated as cash flow hedge* (refer note no. 2.8) | – | – | – | – | – | – | – | – | – | – | 21 | – | 21 |
Fair value changes on investments* (refer note no.2.2) | – | – | – | – | – | – | – | – | – | – | – | 1 | 1 |
Total comprehensive income for the year | – | – | 14,702 | – | – | – | – | – | – | 78 | 21 | (20) | 14,781 |
Transfer to general reserve | – | – | (1,615) | 1,615 | – | – | – | – | – | – | – | – | – |
Transferred to Special Economic Zone Re-investment reserve | – | – | (2,306) | – | – | 2,306 | – | – | – | – | – | – | – |
Transferred from Special Economic Zone Re-investment reserve on utilization | – | – | 1,386 | – | – | (1,386) | – | – | – | – | – | – | – |
Amount transferred to capital redemption reserve upon buyback (refer note no. 2.9) | – | – | – | (5) | – | – | – | – | 5 | – | – | – | – |
Exercise of stock options (refer note no.2.9) | – | 99 | – | – | (99) | – | – | – | – | – | – | – | – |
Transfer on account of options not exercised | – | – | – | 1 | (1) | – | – | – | – | – | – | – | – |
Increase in share capital on account of Bonus issue (refer note no. 2.9) | 1,092 | – | – | – | – | – | – | – | – | – | – | – | 1,092 |
Amount utilized for Bonus issue (refer note no. 2.9) | – | – | – | (1,092) | – | – | – | – | – | – | – | – | (1,092) |
Shares issued on exercise of employee stock options (Refer to note 2.9) | – | 3 | – | – | – | – | – | – | – | – | – | – | 3 |
Share based payments to employees (refer to note no. 2.9) | – | – | – | – | 197 | – | – | – | – | – | – | – | 197 |
Income tax benefit arising on exercise of stock options | – | 8 | – | – | – | – | – | – | – | – | – | – | 8 |
Buyback of equity shares ( refer note no. 2.9 and 2.10) | (6) | – | – | (1,994) | – | – | – | – | – | – | – | – | (2,000) |
Transaction cost relating to buyback* (refer note no 2.9) | – | – | – | (12) | – | – | – | – | – | – | – | – | (12) |
Equity instruments through other comprehensive income* (refer note 2.2) | – | – | – | – | – | – | – | – | – | – | – | – | – |
Dividends (including dividend distribution tax) | – | – | (13,768) | – | – | – | – | – | – | – | – | – | (13,768) |
Balance as at March 31, 2019 | 2,178 | 138 | 54,070 | 190 | 227 | 2,479 | 54 | 3,219 | 61 | 80 | 21 | (6) | 62,711 |
*net of tax
(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. |
The accompanying notes form an integral part of the interim standalone condensed financial statements.
As per our report of even date attached
for Deloitte Haskins & Sells LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants Firm’s Registration No : 117366W/ W-100018 |
P. R. Ramesh Partner Membership No. 70928 |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 12, 2019 |
D. Sundaram Director |
Nilanjan Roy Chief Financial Officer |
A. G. S. Manikantha Company Secretary |
INFOSYS LIMITED
Condensed Statement of Cash Flows
Accounting Policy
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. The Company considers all highly liquid investments that are readily convertible to known amounts of cash to be cash equivalents.
(In crore)
Particulars | Note No. | Year ended March 31, | |
2019 | 2018 | ||
Cash flow from operating activities: | |||
Profit for the period | 14,702 | 16,155 | |
Adjustments to reconcile net profit to net cash provided by operating activities: | |||
Depreciation and amortization | 1,599 | 1,408 | |
Income tax expense | 2.14 | 5,225 | 3,753 |
Impairment loss recognized / (reversed) under expected credit loss model | 176 | 18 | |
Interest and dividend income | (1,996) | (3,169) | |
Other adjustments | 57 | 40 | |
Reduction in the fair value of assets held for sale | 2.2.4 | 265 | 589 |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" | 2.2.4 | 469 | – |
Exchange differences on translation of assets and liabilities | 80 | 3 | |
Changes in assets and liabilities | |||
Trade receivables and unbilled revenue | (2,268) | (1,579) | |
Other financial assets and other assets | (581) | (207) | |
Trade payables | 2.11 | 866 | 466 |
Other financial liabilities, other liabilities and provisions | 1,666 | 1,052 | |
Cash generated from operations | 20,260 | 18,529 | |
Income taxes paid | (6,271) | (6,054) | |
Net cash generated by operating activities | 13,989 | 12,475 | |
Cash flow from investing activities: | |||
Expenditure on property, plant and equipment | (2,306) | (1,842) | |
Deposits placed with corporations | 2.4 | (116) | (106) |
Loans to employees | 2.3 | 4 | 19 |
Loan given to subsidiaries | (678) | (106) | |
Loan repaid by subsidiary | 20 | – | |
Proceeds from redemption of debentures | 2.2 | 335 | 349 |
Investment in subsidiaries | 2.2 | (228) | (212) |
Proceeds from return of investment | 33 | – | |
Proceeds on liquidation of Noah | 2.2 | – | 316 |
Payment towards acquisition of business | 2.2.3 | (261) | (295) |
Payment of contingent consideration pertaining to acquisition | (6) | (33) | |
Escrow and other deposits pertainning to buyback | 2.4 | (257) | – |
Payments to acquire investments | |||
Preference, equity securities and others | (18) | (13) | |
Liquid mutual fund units and fixed maturity plan securities | (72,889) | (57,250) | |
Tax free bonds and Government bonds | (11) | (1) | |
Certificates of deposit | (2,052) | (6,290) | |
Commercial paper | (491) | (291) | |
Non Convertible debentures | (100) | – | |
Government Securities | (838) | – | |
Proceeds on sale of investments | |||
Preference and equity securities | 115 | 10 | |
Liquid mutual fund units and fixed maturity plan securities | 71,337 | 59,364 | |
Tax free bonds and Government bonds | 1 | – | |
Non-convertible debentures | 602 | 100 | |
Certificates of deposit | 5,150 | 9,411 | |
Commercial paper | 300 | – | |
Government Securities | 123 | – | |
Interest and dividend received | 1,644 | 1,708 | |
Dividend received from subsidiary | – | 846 | |
Net cash used in investing activities | (587) | 5,684 | |
Cash flow from financing activities: | |||
Buyback of equity shares including transaction cost | (813) | (13,046) | |
Payment of dividends including dividend distribution tax | (13,761) | (7,495) | |
Shares issued on exercise of employee stock options | 3 | 5 | |
Net cash used in financing activities | (14,571) | (20,536) | |
Effect of exchange differences on translation of foreign currency cash and cash equivalents | (50) | (6) | |
Net increase / (decrease) in cash and cash equivalents | (1,169) | (2,377) | |
Cash and cash equivalents at the beginning of the period | 16,770 | 19,153 | |
Cash and cash equivalents at the end of the period | 15,551 | 16,770 | |
Supplementary information: | |||
Restricted cash balance | 143 | 375 |
The accompanying notes form an integral part of the interim standalone condensed financial statements.
As per our report of even date attached
for Deloitte Haskins & Sells LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants Firm’s Registration No : 117366W/ W-100018 |
P. R. Ramesh Partner Membership No. 70928 |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 12, 2019 |
D. Sundaram Director |
Nilanjan Roy Chief Financial Officer |
A. G. S. Manikantha Company Secretary |
INFOSYS LIMITED
Notes to the interim condensed standalone financial statements
1. Overview
1.1 Company overview
Infosys Limited ('the Company' or Infosys) is a leading provider of consulting, technology, outsourcing and next-generation digital services, enabling clients to execute strategies for their digital transformation. Infosys strategic objective is to build a sustainable organization that remains relevant to the agenda of clients, while creating growth opportunities for employees and generating profitable returns for investors. Infosys strategy is to be a navigator for our clients as they ideate, plan and execute on their journey to a digital future.
The Company is a public limited company incorporated
and domiciled in India and has its registered office at Electronic city, Hosur Road, Bengaluru 560100, Karnataka, India. The company
has its primary listings on the BSE Ltd. and National Stock Exchange of India Limited. The Company’s American Depositary
Shares (ADS) representing equity shares are listed on the New York Stock Exchange (NYSE).
Further, the Company's ADS were also listed on the Euronext London and Euronext Paris. On July 5, 2018, the Company voluntarily
delisted its ADS from the said exchanges due to low average daily trading volume of its ADS on these exchanges.
The interim condensed standalone financial statements are approved for issue by the Company's Board of Directors on April 12, 2019.
1.2 Basis of preparation of financial statements
These interim condensed standalone financial statements are prepared in accordance with Indian Accounting Standard 34 (Ind AS 34), 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 ('the 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 relevant amendment rules issued there after.
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.
Accordingly, these interim condensed standalone financial statements do not include all the information required for a complete set of financial statements. These interim condensed financial statements should be read in conjunction with the complete set of financial statements and related notes included in the Company’s annual financial statements for the year ended March 31, 2019. Accounting policies have been applied consistently to all periods presented in these interim condensed standalone financial statements.
As the quarter and year end figures are taken from the source and rounded to the nearest digits, the figures reported for the previous quarters might not always add up to the year figures reported in this statement.
1.3 Use of estimates and judgments
The preparation of the financial statements in conformity with Ind AS requires the 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. The 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 no. 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.
Further, the Company uses significant judgments while determining the transaction price allocated to performance obligations using the expected cost plus margin approach.
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 note no.2.14 and note no. 2.19.
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 company 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.
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 the 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. Refer note no. 2.1
d. Non-current assets held for sale
Assets held for sale are measured at the lower of carrying amount or fair value less costs to sell. The determination of fair value less costs to sell includes use of management estimates and assumptions. The fair value of the assets held for sale has been estimated using valuation techniques (including income and market approach) which includes unobservable inputs. Non-current assets and Disposal Group that ceases to be classified as held for sale shall be measured at the lower of carrying amount before the non-current asset and Disposal Group was classified as held for sale and its recoverable amount at the date of the subsequent decision not to sell (Refer note no. 2.2.4). Recoverable amounts of assets reclassified from held for sale have been estimated using management’s assumptions which consist of significant unobservable inputs.
1.5 Recent accounting pronouncements
Ind AS 116 Leases : On March 30, 2019,
Ministry of Corporate Affairs has notified Ind AS 116, Leases. Ind AS 116 will replace the existing leases Standard, Ind AS 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. Ind AS 116 introduces a single lessee accounting model
and requires a lessee to recognize assets and liabilities for all leases with a term of more than twelve months, unless the underlying
asset is of low value. Currently, operating lease expenses are charged to the statement of Profit & Loss. The Standard also
contains enhanced disclosure requirements for lessees. Ind AS 116 substantially carries forward the lessor accounting requirements
in Ind AS 17.
The effective date for adoption of Ind AS 116 is annual periods beginning on or after April 1, 2019. The standard permits two possible
methods of transition:
• Full retrospective – Retrospectively to each prior period presented applying Ind AS 8 Accounting Policies, Changes
in Accounting Estimates and Errors
• Modified retrospective – Retrospectively, with the cumulative effect of initially applying the Standard recognized
at the date of initial application
Under modified retrospective approach, the lessee
records the lease liability as the present value of the remaining lease payments, discounted at the incremental borrowing rate
and the right of use asset either as:
• Its carrying amount as if the standard had been applied since the commencement date, but discounted at lessee’s incremental
borrowing rate at the date of initial application or
• An amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments related to that
lease recognized under Ind AS 17 immediately before the date of initial application
Certain practical expedients are available under both the methods.
On completion of evaluation of the effect of adoption of Ind AS 116, the Company is proposing to use the ‘Modified Retrospective
Approach’ for transitioning to Ind AS 116, and take the cumulative adjustment to retained earnings, on the date of initial
application (April 1, 2019). Accordingly, comparatives for the year ending or ended March 31, 2019 will not be retrospectively
adjusted. The Company has elected certain available practical expedients on transition.
The effect of adoption as on transition date would majorly result in an increase in Right of use asset approximately by 1,300
crore, net investment in
sub-lease approximately by
550 Crore and an increase in lease liability approximately
by
2,000 crore.
Ind AS 12 Appendix C, Uncertainty over Income
Tax Treatments : On March 30, 2019, Ministry of Corporate Affairs has notified Ind AS 12 Appendix C, Uncertainty over Income
Tax Treatments which is to be applied while performing the determination of taxable profit (or loss), tax bases, unused tax losses,
unused tax credits and tax rates, when there is uncertainty over income tax treatments under Ind AS 12. According to the appendix,
companies need to determine the probability of the relevant tax authority accepting each tax treatment, or group of tax treatments,
that the companies have used or plan to use in their income tax filing which has to be considered to compute the most likely amount
or the expected value of the tax treatment when determining taxable profit (tax loss), tax bases, unused tax losses, unused tax
credits and tax rates.
The standard permits two possible methods of transition - i) Full retrospective approach – Under this approach, Appendix
C will be applied retrospectively to each prior reporting period presented in accordance with Ind AS 8 – Accounting Policies,
Changes in Accounting Estimates and Errors, without using hindsight and ii) Retrospectively with cumulative effect of initially
applying Appendix C recognized by adjusting equity on initial application, without adjusting comparatives.
The effective date for adoption of Ind AS 12 Appendix C is annual periods beginning on or after April 1, 2019. The Company will
adopt the standard on April 1, 2019 and has decided to adjust the cumulative effect in equity on the date of initial application
i.e. April 1, 2019 without adjusting comparatives.
The effect on adoption of Ind AS 12 Appendix C would be insignificant in the standalone financial statements.
Amendment to Ind AS 12 – Income taxes
: On March 30, 2019, Ministry of Corporate Affairs issued amendments to the guidance in Ind AS 12, ‘Income Taxes’,
in connection with accounting for dividend distribution taxes.
The amendment clarifies that an entity shall recognise the income tax consequences of dividends in profit or loss, other comprehensive
income or equity according to where the entity originally recognised those past transactions or events.
Effective date for application of this amendment is annual period beginning on or after April 1, 2019. The Company is currently
evaluating the effect of this amendment on the standalone financial statements.
Amendment to Ind AS 19 – plan amendment,
curtailment or settlement- On March 30, 2019, Ministry of Corporate Affairs issued amendments to Ind AS 19, ‘Employee
Benefits’, in connection with accounting for plan amendments, curtailments and settlements.
The amendments require an entity:
• to use updated assumptions to determine current service cost and net interest for the remainder of the period after a plan
amendment, curtailment or settlement; and
• to recognise in profit or loss as part of past service cost, or a gain or loss on settlement, any reduction in a surplus,
even if that surplus was not previously recognised because of the impact of the asset ceiling.
Effective date for application of this amendment is annual period beginning on or after April 1, 2019. The Company does not have
any impact on account of this amendment.
2.1 PROPERTY, PLANT AND EQUIPMENT
Accounting Policy
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 the 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(1) | 22-25 years |
Plant and machinery(1)(2) | 5 years |
Office equipment | 5 years |
Computer equipment(1) | 3-5 years |
Furniture and fixtures(1) | 5 years |
Vehicles(1) | 5 years |
Leasehold improvements | Over lease term |
(1) | Based on technical evaluation, the management believes that the useful lives as given above best represent the period over which management expects to use these assets. Hence, the useful lives for these assets is different from the useful lives as prescribed under Part C of Schedule II of the Companies Act 2013. |
(2) Includes Solar plant with a useful life of 20 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 ready 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 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.
Impairment
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 Cash Generating Unit (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 depreciation) had no impairment loss been recognized for the asset in prior years.
The changes in the carrying value of property, plant and equipment for the three months ended March 31, 2019 are as follows:
(In crore)
Particulars | Land- Freehold | Land- Leasehold | Buildings(1)(2) | Plant and machinery(2) | Office Equipment(2) | Computer equipment(2) | Furniture and fixtures(2) | Leasehold Improvements | Vehicles | Total | |||||||
Gross carrying value as at January 1, 2019 | 1,269 | 640 | 7,784 | 2,341 | 908 | 4,746 | 1,344 | 305 | 34 | 19,371 | |||||||
Additions/ adjustments |
36 | – | 402 | 325 | 58 | 419 | 131 | 111 | 3 | 1,485 | |||||||
Deletions/ adjustments |
– | (47) | (116) | (54) | (28) | (113) | (21) | (2) | – | (381) | |||||||
Gross carrying value as at March 31, 2019 | 1,305 | 593 | 8,070 | 2,612 | 938 | 5,052 | 1,454 | 414 | 37 | 20,475 | |||||||
Accumulated depreciation as at January 1, 2019 | – | (34) | (2,827) | (1,739) | (665) | (3,534) | (1,011) | (133) | (20) | (9,963) | |||||||
Depreciation | – | (1) | (73) | (69) | (28) | (184) | (44) | (22) | (1) | (422) | |||||||
Accumulated depreciation on deletions | – | 3 | 103 | 46 | 21 | 113 | 16 | 2 | – | 304 | |||||||
Accumulated depreciation as at March 31, 2019 | – | (32) | (2,797) | (1,762) | (672) | (3,605) | (1,039) | (153) | (21) | (10,081) | |||||||
Carrying value as at March 31, 2019 | 1,305 | 561 | 5,273 | 850 | 266 | 1,447 | 415 | 261 | 16 | 10,394 | |||||||
Carrying value as at January 1, 2019 | 1,269 | 606 | 4,957 | 602 | 243 | 1,212 | 333 | 172 | 14 | 9,408 | |||||||
The changes in the carrying value of property, plant and equipment for the three months ended March 31, 2018 were as follows:
(In crore)
Particulars | Land- Freehold | Land- Leasehold | Buildings(1)(2) | Plant and machinery(2) | Office Equipment(2) | Computer equipment(2) | Furniture and fixtures(2) | Leasehold Improvements | Vehicles | Total |
Gross carrying value as at January 1, 2018 | 1,135 | 659 | 6,856 | 2,116 | 818 | 4,133 | 1,208 | 215 | 27 | 17,167 |
Additions | 92 | 2 | 416 | 95 | 24 | 108 | 40 | 20 | 2 | 799 |
Deletions | – | – | (1) | (2) | (1) | (12) | (1) | – | – | (17) |
Gross carrying value as at March 31, 2018 | 1,227 | 661 | 7,271 | 2,209 | 841 | 4,229 | 1,247 | 235 | 29 | 17,949 |
Accumulated depreciation as at January 1, 2018 | – | (29) | (2,558) | (1,460) | (555) | (3,005) | (860) | (97) | (17) | (8,581) |
Depreciation | – | (1) | (63) | (67) | (28) | (150) | (37) | (10) | – | (356) |
Accumulated depreciation on deletions | – | – | – | 1 | 1 | 12 | 1 | – | – | 15 |
Accumulated depreciation as at March 31, 2018 | – | (30) | (2,621) | (1,526) | (582) | (3,143) | (896) | (107) | (17) | (8,922) |
Carrying value as at March 31, 2018 | 1,227 | 631 | 4,650 | 683 | 259 | 1,086 | 351 | 128 | 12 | 9,027 |
Carrying value as at January 1, 2018 | 1,135 | 630 | 4,298 | 656 | 263 | 1,128 | 348 | 118 | 10 | 8,586 |
The changes in the carrying value of property, plant and equipment for the year ended March 31, 2019 are as follows:
(In crore)
Particulars | Land- Freehold | Land- Leasehold | Buildings(1)(2) | Plant and machinery(2) | Office Equipment(2) | Computer equipment(2) | Furniture and fixtures(2) | Leasehold Improvements | Vehicles | Total |
Gross carrying value as at April 1, 2018 | 1,227 | 661 | 7,271 | 2,209 | 841 | 4,229 | 1,247 | 235 | 29 | 17,949 |
Additions | 78 | – | 915 | 460 | 130 | 1,023 | 238 | 187 | 9 | 3,040 |
Deletions | – | (68) | (116) | (57) | (33) | (200) | (31) | (8) | (1) | (514) |
Gross carrying value as at March 31, 2019 | 1,305 | 593 | 8,070 | 2,612 | 938 | 5,052 | 1,454 | 414 | 37 | 20,475 |
Accumulated depreciation as at April 1, 2018 | – | (30) | (2,621) | (1,526) | (582) | (3,143) | (896) | (107) | (17) | (8,922) |
Depreciation | – | (5) | (278) | (285) | (116) | (660) | (169) | (54) | (5) | (1,572) |
Accumulated depreciation on deletions | – | 3 | 102 | 49 | 26 | 198 | 26 | 8 | 1 | 413 |
Accumulated depreciation as at March 31, 2019 | – | (32) | (2,797) | (1,762) | (672) | (3,605) | (1,039) | (153) | (21) | (10,081) |
Carrying value as at March 31, 2019 | 1,305 | 561 | 5,273 | 850 | 266 | 1,447 | 415 | 261 | 16 | 10,394 |
Carrying value as at April 1, 2018 | 1,227 | 631 | 4,650 | 683 | 259 | 1,086 | 351 | 128 | 12 | 9,027 |
The changes in the carrying value of property, plant and equipment for the year ended March 31, 2018 were as follows:
(In crore)
Particulars | Land- Freehold | Land- Leasehold | Buildings(1)(2) | Plant and machinery(2) | Office Equipment(2) | Computer equipment(2) | Furniture and fixtures(2) | Leasehold Improvements | Vehicles | Total |
Gross carrying value as at April 1, 2017 | 1,093 | 659 | 6,483 | 1,966 | 769 | 3,886 | 1,132 | 198 | 24 | 16,210 |
Additions | 134 | 2 | 789 | 250 | 78 | 396 | 121 | 48 | 5 | 1,823 |
Deletions | – | – | (1) | (7) | (6) | (53) | (6) | (11) | – | (84) |
Gross carrying value as at March 31, 2018 | 1,227 | 661 | 7,271 | 2,209 | 841 | 4,229 | 1,247 | 235 | 29 | 17,949 |
Accumulated depreciation as at April 1, 2017 | – | (26) | (2,377) | (1,274) | (472) | (2,603) | (757) | (82) | (14) | (7,605) |
Depreciation | – | (4) | (244) | (258) | (115) | (592) | (145) | (36) | (3) | (1,397) |
Accumulated depreciation on deletions | – | – | – | 6 | 5 | 52 | 6 | 11 | – | 80 |
Accumulated depreciation as at March 31, 2018 | – | (30) | (2,621) | (1,526) | (582) | (3,143) | (896) | (107) | (17) | (8,922) |
Carrying value as at March 31, 2018 | 1,227 | 631 | 4,650 | 683 | 259 | 1,086 | 351 | 128 | 12 | 9,027 |
Carrying value as at April 1, 2017 | 1,093 | 633 | 4,106 | 692 | 297 | 1,283 | 375 | 116 | 10 | 8,605 |
(1) | Buildings include ![]() ![]() |
(2) Includes certain assets provided on cancellable operating lease to subsidiaries.
Gross carrying value 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 amortization expense in the interim condensed statement of Profit and Loss.
Tangible assets provided on operating lease to subsidiaries as at March 31, 2019 and March 31, 2018 are as follows:
(In crore)
Particulars | Cost | Accumulated depreciation | Net book value |
Buildings | 186 | 84 | 102 |
190 | 82 | 108 | |
Plant and machinery | 30 | 28 | 2 |
33 | 25 | 8 | |
Furniture and fixtures | 24 | 23 | 1 |
25 | 20 | 5 | |
Computer Equipment | 3 | 3 | – |
3 | 2 | 1 | |
Office equipment | 16 | 15 | 1 |
18 | 13 | 5 |
(In crore)
Particulars | Three months ended March 31, | Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Aggregate depreciation charged on above assets | 4 | 5 | 19 | 20 |
Rental income from subsidiaries | 16 | 17 | 63 | 67 |
2.2 INVESTMENTS AND ASSETS HELD FOR SALE
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Non-current investments | ||
Equity instruments of subsidiaries | 6,349 | 5,013 |
Debentures of subsidiary | 1,445 | 1,780 |
Preference securities and equity instruments | 90 | 117 |
Others | 16 | 7 |
Tax free bonds | 1,828 | 1,831 |
Fixed maturity plans securities | 401 | 376 |
Non-convertible debentures | 1,209 | 2,869 |
Government Securities | 724 | – |
Total non-current investments | 12,062 | 11,993 |
Current investments | ||
Liquid mutual fund units | 1,701 | – |
Certificates of deposit | 2,123 | 4,901 |
Government bonds | 12 | 1 |
Non-convertible debentures | 1,746 | 711 |
Commercial paper | 495 | 293 |
Total current investments | 6,077 | 5,906 |
Total carrying value | 18,139 | 17,899 |
(In crore, except as otherwise stated)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Non-current investments | ||
Unquoted | ||
Investment carried at cost | ||
Investments in equity instruments of subsidiaries | ||
Infosys BPM Limited (formerly Infosys BPO Limited) | 659 | 659 |
3,38,22,319 (3,38,22,319) equity shares of ![]() |
||
Infosys Technologies (China) Co. Limited | 333 | 333 |
Infosys Technologies (Australia) Pty Limited (1) | 5 | 38 |
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 | 76 | 76 |
1,000 (1,000) equity shares of SEK 100 par value, fully paid | ||
Infosys Technologia do Brasil Ltda | 276 | 149 |
12,84,20,748 (5,91,24,348) shares of BRL 1.00 par value, fully paid | ||
Infosys Technologies (Shanghai) Company Limited | 900 | 900 |
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 | 1,323 | 1,323 |
23,050 (23,350) - Class A shares of CHF 1,000 each and 26,460 | ||
(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 | 1,312 | 1,312 |
1,31,18,40,000 (1,31,18,40,000) equity shares of ![]() |
||
Infosys Nova Holdings LLC * (1) | – | – |
Noah Consulting LLC (refer note 2.2.1) | – | – |
Infosys Consulting Pte Ltd (formerly Lodestone Management Consultants 'Pte Ltd) | 10 | 10 |
1,09,90,000 (1,09,90,000) shares of SGD 1.00 par value, fully paid | ||
Brilliant Basics Holding Limited (refer note 2.2.2) | 59 | 46 |
1,346 (1,170) shares of GBP 0.005 each, fully paid up | ||
Infosys Arabia Limited | 2 | 2 |
70 (70) shares | ||
Kallidus Inc. (refer note no. 2.2.4) | 150 | – |
10,21,35,416 (10,21,35,416) shares | ||
Skava Systems Private Limited (refer note no. 2.2.4) | 59 | – |
25,000 (25,000) shares of ![]() |
||
Panaya Inc. ( refer note no. 2.2.4) | 582 | – |
2 (2) shares of USD 0.01 per share, fully paid up | ||
Infosys Chile SpA | 7 | – |
100 (Nil) shares | ||
Wongdoody Holding Company Inc (refer note no. 2.2.3) | 350 | – |
2,000 (Nil) shares | ||
Infosys Luxembourg S.a r.l. | 4 | – |
3,700 (Nil) shares | ||
Infosys Austria GmBH ( formerly known as Lodestone Management Consultants GmbH) | – | – |
80,000 (80,000) shares of EUR 1 par value, fully paid up | ||
Infosys Consulting Brazil | 43 | – |
8,26,56,605 (Nil) shares of BRL 1 per share, fully paid up | ||
Infosys Romania | 34 | – |
99,183 (Nil) shares of RON 100 per share, fully paid up | ||
6,349 | 5,013 | |
Investment carried at amortized cost | ||
Investment in debentures of subsidiary | ||
EdgeVerve Systems Limited | ||
14,45,00,000 (17,80,00,000) Unsecured redeemable, non-convertible debentures of ![]() |
1,445 | 1,780 |
1,445 | 1,780 | |
Investments carried at fair value through profit or loss | ||
Others | 16 | 7 |
16 | 7 | |
Investment carried at fair value through other comprehensive income (FVOCI) | ||
Preference securities | 89 | 116 |
Equity instruments | 1 | 1 |
90 | 117 |
(In crore, except as otherwise stated)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Quoted | ||
Investments carried at amortized cost | ||
Tax free bonds | 1,828 | 1,831 |
1,828 | 1,831 | |
Investments carried at fair value through profit or loss | ||
Fixed maturity plans securities | 401 | 376 |
401 | 376 | |
Investments carried at fair value through other comprehensive income | ||
Non-convertible debentures | 1,209 | 2,869 |
Government Securities | 724 | – |
1,933 | 2,869 | |
Total non-current investments | 12,062 | 11,993 |
Current investments | ||
Unquoted | ||
Investments carried at fair value through profit or loss | ||
Liquid mutual fund units | 1,701 | – |
1,701 | – | |
Investments carried at fair value through other comprehensive income | ||
Commercial paper | 495 | 293 |
Certificates of deposit | 2,123 | 4,901 |
2,618 | 5,194 | |
Quoted | ||
Investments carried at amortized cost | ||
Government bonds | 12 | 1 |
12 | 1 | |
Investments carried at fair value through other comprehensive income | ||
Non-convertible debentures | 1,746 | 711 |
1,746 | 711 | |
Total current investments | 6,077 | 5,906 |
Total investments | 18,139 | 17,899 |
Aggregate amount of quoted investments | 5,920 | 5,788 |
Market value of quoted investments (including interest accrued) | 6,131 | 6,045 |
Aggregate amount of unquoted investments | 12,219 | 12,111 |
(1) Aggregate amount of impairment in value of investments | 122 | 122 |
Reduction in the fair value of assets held for sale (refer note no 2.2.4) | 854 | 589 |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" (refer note no 2.2.4) | 469 | – |
Investments carried at cost | 6,349 | 5,013 |
Investments carried at amortized cost | 3,285 | 3,612 |
Investments carried at fair value through other comprehensive income | 6,387 | 8,891 |
Investments carried at fair value through profit or loss | 2,118 | 383 |
Note: Uncalled capital commitments outstanding
as of March 31, 2019 and March 31, 2018 was 17 crore and
36 crore, respectively.
* | During the three months ended June 30, 2017, Infosys Nova Holding LLC, a wholly-owned
subsidiary, has written down the entire carrying value of its investment in its associate DWA Nova LLC. Consequently, the Company
has written down the entire carrying value of the investment in its subsidiary Infosys Nova Holdings LLC, amounting to ![]() |
Refer note no. 2.8 for accounting policies on financial instruments.
Details of amounts recorded in Other comprehensive income:
(In crore)
Year ended | ||||||
March 31, 2019 | March 31, 2018 | |||||
Gross | Tax | Net | Gross | Tax | Net | |
Net Gain/(loss) on | ||||||
Non-convertible debentures | 1 | – | 1 | (11) | 2 | (9) |
Government Securities | 4 | (1) | 3 | – | – | – |
Certificate of deposits | (5) | 2 | (3) | 15 | (5) | 10 |
Equity and preference securities | 73 | 5 | 78 | 4 | 3 | 7 |
Method of fair valuation:
(In crore)
Class of investment | Method | Fair value as at | |
March 31, 2019 | March 31, 2018 | ||
Liquid mutual fund units | Quoted price | 1,701 | – |
Fixed maturity plan securities | Market observable inputs | 401 | 376 |
Tax free bonds and government bonds | Quoted price and market observable inputs | 2,048 | 2,079 |
Non-convertible debentures | Quoted price and market observable inputs | 2,955 | 3,580 |
Government Securities | Quoted price and market observable inputs | 724 | – |
Certificate of deposits | Market observable inputs | 2,123 | 4,901 |
Commercial paper | Market observable inputs | 495 | 293 |
Unquoted equity and preference securities | Discounted cash flows method, Market multiples method, Option pricing model, etc. | 90 | 117 |
Others | Discounted cash flows method, Market multiples method, Option pricing model, etc. | 16 | 7 |
Certain quoted investments are classified as Level 2 in the absence of active market for such investments.
2.2.1 Business transfer- Noah Consulting LLC
On July 14, 2017, the Board of Directors of
Infosys authorized the Company to execute a Business Transfer Agreement and related documents with Noah Consulting LLC, a wholly
owned subsidiary, to transfer the business of Noah Consulting LLC to Infosys Limited, subject to securing the requisite regulatory
approvals for a consideration based on an independent valuation. Subsequently on October 17, 2017 , the company entered into a
business transfer agreement to transfer the business for a consideration of $41 million (266 crore) and the transfer was with
effect from October 25, 2017.
The transaction was between a holding company and a wholly owned subsidiary, the resultant impact on account of business transfer
was recorded in 'Business Transfer Adjustment Reserve' during the year ended March 31, 2018. The table below details out the assets
and liabilities taken over upon business transfer:
(In crore)
Particulars | Amount |
Goodwill | 29 |
Trade name | 16 |
Customer contracts | 80 |
Other intangibles | 16 |
Deferred tax assets | 13 |
Net assets / (liabilities), others | (117) |
Total | 37 |
Less: Consideration paid | 266 |
Business transfer reserve | (229) |
Subsequently, in November 2017, Noah Consulting
LLC has been liquidated and the Company received 316 crore as proceeds on liquidation.
2.2.2 Brilliant Basics Holdings Limited.
On September 8, 2017, Infosys acquired 100%
of the voting interests in Brilliant Basics Holdings Limited., UK, (Brilliant Basics) a product design and customer experience
innovator with experience in executing global programs. The business acquisition was conducted by entering into a share purchase
agreement for cash consideration of 29 crore, contingent consideration of up to
20 crore and an additional consideration of upto
13 crore, referred to as retention bonus, payable to the employees of Brilliant Basics at each anniversary year over the next
two years, subject to their continuous employment with the group at each anniversary. The fair value of contingent consideration
on the date of acquisition is
17 crore.
2.2.3 Wongdoody Holding Company Inc
On May 22, 2018, Infosys acquired 100% of the
voting interests in WongDoody Holding Company Inc., (WongDoody) an US-based, full-service creative and consumer insights agency.
The business acquisition was conducted by entering into a share purchase agreement for a total consideration of up to $75 million
(approximately 514 crore on acquisition date), which includes a cash consideration of $38 million (approximately
261 crore),
contingent consideration of up to $28 million (approximately
192 crore on acquisition date) and an additional consideration of
up to $9 million (approximately
61 crore on acquisition date), referred to as retention bonus, payable to the employees of WongDoody
over the next three years, subject to their continuous employment with the group. The fair value of contingent consideration on
the date of acquisition is
89 crore.
2.2.4 Assets held for sale
Accounting policy
Non-current assets and Disposal Group are classified as held for sale if their carrying amount is intended to be recovered principally through sale rather than through continuing use. The condition for classification of held for sale is met when the non-current asset or the Disposal Group is available for immediate sale and the same is highly probable of being completed within one year from the date of classification as held for sale. Non-current assets and Disposal Group held for sale are measured at the lower of carrying amount and fair value less cost to sell. Non-current assets and Disposal Group that ceases to be classified as held for sale shall be measured at the lower of carrying amount before the non-current asset and Disposal Group was classified as held for sale adjusted for any depreciation/ amortization and its recoverable amount at the date when the Disposal Group no longer meets the "Held for sale" criteria.
In the three months ended March 2018, the Company
had initiated identification and evaluation of potential buyers for the sale of its investment in subsidiaries, Kallidus and Skava
(together referred to as "Skava”) and Panaya. The investment in these subsidiaries was classified and presented separately
as “held for sale” and was carried at the lower of carrying value and fair value. Consequently, the Company has recognized
a reduction in the fair value of investment amounting to 589 crore during the three months and year ended March 31, 2018 in respect
of Panaya in the standalone financial statements of Infosys. During the three months ended June 30, 2018, on remeasurement, including
consideration of progress in negotiations on offers from prospective buyers for Panaya, the Company has recorded a reduction in
the fair value of investment amounting to
265 crore in respect of Panaya.
During the three months ended December 31, 2018, based on evaluation of proposals received and progress of negotiations with potential buyers, the Company concluded that the investments in Panaya and Skava does not meet the criteria for “Held for Sale’ classification because it is no longer highly probable that sale would be consummated by March 31, 2019 ( twelve months from date of initial classification “ as held for sale”) Accordingly, in accordance with Ind AS 105 -" Non current Assets held for Sale and Discontinued Operations", the investment in subsidiaries, Panaya and Skava have been included in non-current investments line item in the standalone financial statements as at December 31, 2018 and March 31, 2019.
On reclassification from “Held for sale”,
the investment in subsidiaries, Panaya and Skava have been remeasured in the quarter ended December 31, 2018 at the lower of cost
and recoverable amount resulting in recognition of an adjustment in respect of excess of carrying amount over recoverable amount
on reclassification from "Held for Sale" of 469 crore in respect of Skava in the standalone statement of profit and
loss for the three months and nine months ended December 31, 2018.
2.3 LOANS
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Non- Current | ||
Unsecured, considered good | ||
Other Loans | ||
Loans to employees | 16 | 19 |
16 | 19 | |
Unsecured, considered doubtful | ||
Loans to employees | 18 | 12 |
34 | 31 | |
Less: Allowance for doubtful loans to employees | 18 | 12 |
Total non - current loans | 16 | 19 |
Current | ||
Loan receivables considered good - Unsecured | ||
Loans to subsidiaries (Refer note no.2.20) | 841 | 185 |
Other Loans | ||
Loans to employees | 207 | 208 |
Total current loans | 1,048 | 393 |
Total Loans | 1,064 | 412 |
2.4 OTHER FINANCIAL ASSETS
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Non-current | ||
Security deposits (1) | 47 | 48 |
Rental deposits (1) | 149 | 129 |
Total non-current other financial assets | 196 | 177 |
Current | ||
Security deposits (1) | 1 | 2 |
Rental deposits (1) | 3 | 6 |
Restricted deposits (1)* | 1,531 | 1,415 |
Unbilled revenues (1)(5)# | 1,541 | 3,573 |
Interest accrued but not due (1) | 865 | 739 |
Foreign currency forward and options contracts (2)(3) | 321 | 16 |
Escrow and other deposits pertainning to buyback (refer to note 2.9)(1) | 257 | - |
Others (1)(4) | 315 | 155 |
Total current other financial assets | 4,834 | 5,906 |
Total other financial assets | 5,030 | 6,083 |
(1) Financial assets carried at amortized cost | 4,709 | 6,067 |
(2)Financial assets carried at fair value through other comprehensive income | 37 | 12 |
(3)Financial assets carried at fair value through Profit or Loss | 284 | 4 |
(4) Includes dues from subsidiaries (Refer note no. 2.20) | 34 | 40 |
(5) Includes dues from subsidiaries (Refer note no. 2.20) | 51 | 32 |
* | Restricted deposits represent deposit with financial institutions to settle employee related obligations as and when they arise during the normal course of business. |
# Classified as financial asset as right to consideration is unconditional upon passage of time.
2.5 TRADE RECEIVABLES
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Current | ||
Unsecured | ||
Considered good(2) | 13,370 | 12,151 |
Considered doubtful | 431 | 315 |
13,801 | 12,466 | |
Less: Allowances for credit losses | 431 | 315 |
Total trade receivables(1) | 13,370 | 12,151 |
(1) Includes dues from companies where directors are interested | – | – |
(2) Includes dues from subsidiaries (refer note no. 2.20) | 325 | 335 |
2.6 CASH AND CASH EQUIVALENTS
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Balances with banks | ||
In current and deposit accounts | 10,957 | 10,789 |
Cash on hand | – | – |
Others | ||
Deposits with financial institutions | 4,594 | 5,981 |
Total Cash and cash equivalents | 15,551 | 16,770 |
Balances with banks in unpaid dividend accounts | 29 | 22 |
Deposit with more than 12 months maturity | 6,048 | 6,187 |
Balances with banks held as margin money deposits against guarantees | 114 | 353 |
Cash and cash equivalents as at March 31, 2019
and March 31, 2018 include restricted cash and bank balances of 143 crore and
375 crore, respectively. The restrictions are primarily
on account of bank balances held as margin money deposits against guarantees and balances held in unpaid dividend 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 table below provides details of cash and cash equivalents:
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
In current accounts | ||
ANZ Bank, Taiwan | 1 | 9 |
Bank of America, USA | 780 | 814 |
Bank of Baroda, Mauritius | 1 | 1 |
BNP Paribas Bank, Norway | 24 | 88 |
Citibank N.A., Australia | 55 | 184 |
Citibank N.A., Dubai | 5 | 5 |
Citibank N.A., EEFC (U.S. Dollar account) | 2 | 4 |
Citibank N.A., Hungary | 1 | 6 |
Citibank N.A., India | 2 | 3 |
Citibank N.A., Japan | 22 | 18 |
Citibank N.A., New Zealand | 3 | 8 |
Citibank N.A., South Africa | 18 | 33 |
Citibank N.A., South Korea | 17 | 2 |
Deutsche Bank, Belgium | 6 | 27 |
Deutsche Bank, EEFC (Australian Dollar account) | 3 | 2 |
Deutsche Bank, EEFC (Euro account) | 19 | 14 |
Deutsche Bank, EEFC (Swiss Franc account) | 5 | 2 |
Deutsche Bank, EEFC (U.S. Dollar account) | 212 | 27 |
Deutsche Bank, EEFC (United Kingdom Pound Sterling account) | 6 | 8 |
Deutsche Bank, France | 11 | 19 |
Deutsche Bank, Germany | 57 | 70 |
Deutsche Bank, India | 40 | 40 |
Deutsche Bank, Malaysia | 1 | 5 |
Deutsche Bank, Netherlands | 8 | 8 |
Deutsche Bank, Philippines | 1 | 14 |
Deutsche Bank, Russia | 3 | 3 |
Deutsche Bank, Russia (U.S. Dollar account) | – | 5 |
Deutsche Bank, Singapore | 15 | 17 |
Deutsche Bank, Spain | 1 | 1 |
Deutsche Bank, Switzerland | 4 | 18 |
Deutsche Bank, Switzerland (U.S. Dollar Account) | 1 | – |
Deutsche Bank, United Kingdom | 17 | 74 |
HSBC Bank, Hong Kong | 1 | 2 |
HSBC, India | 3 | – |
ICICI Bank, EEFC (U.S. Dollar account) | 18 | 5 |
ICICI Bank, India | 24 | 33 |
Nordbanken, Sweden | 21 | 26 |
Punjab National Bank, India | 2 | 12 |
Royal Bank of Canada, Canada | 28 | 9 |
Splitska Banka D.D., Société Générale Group, Croatia | 14 | 8 |
State Bank of India, India | 2 | – |
1,454 | 1,624 |
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
In deposit accounts | ||
Axis Bank | 700 | – |
Barclays Bank | 500 | 200 |
HDFC Bank | – | 2,423 |
HSBC Bank | 200 | – |
ICICI Bank | 3,060 | 3,467 |
IDFC Bank | 2,100 | 1,500 |
IndusInd Bank | 300 | 1,000 |
Kotak Mahindra Bank | 500 | – |
South Indian Bank | – | 200 |
Standard Chartered Bank | 2,000 | – |
9,360 | 8,790 | |
In unpaid dividend accounts | ||
Axis Bank - Unpaid dividend account | 4 | 1 |
HDFC Bank - Unpaid dividend account | – | 1 |
ICICI Bank - Unpaid dividend account | 25 | 20 |
29 | 22 | |
In margin money deposits against guarantees | ||
Canara Bank | 45 | 151 |
ICICI Bank | 69 | 202 |
114 | 353 | |
Deposits with financial institution | ||
HDFC Limited | 3,594 | 4,781 |
LIC Housing Finance Limited | 1,000 | 1,200 |
4,594 | 5,981 | |
Total cash and cash equivalents | 15,551 | 16,770 |
2.7 OTHER ASSETS
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Non-current | ||
Capital advances | 486 | 420 |
Advances other than capital advance | ||
Prepaid gratuity (Refer note 2.17.1) | 25 | 23 |
Others | ||
Prepaid expenses | 95 | 49 |
Deferred contract cost | 226 | 262 |
Withholding taxes and others | 908 | 1,407 |
Total non-current other assets | 1,740 | 2,161 |
Current | ||
Advances other than capital advance | ||
Payment to vendors for supply of goods | 94 | 103 |
Others | ||
Unbilled revenues(2) | 2,904 | – |
Prepaid expenses (1) | 580 | 449 |
Deferred contract cost | 52 | 44 |
Withholding taxes and others | 1,290 | 843 |
Others | – | – |
Total current other assets | 4,920 | 1,439 |
Total other assets | 6,660 | 3,600 |
109 | 115 |
(1) Includes dues from subsidiaries (Refer note no. 2.20)
(2) | Classified as non financial asset as the contractual right to consideration is dependent on completion of contractual milestones. |
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
and Cenvat recoverable from Government of India. Cenvat recoverable includes 503 crore which are pending adjudication. The Company
expects these amounts to be sustainable on adjudication and recoverable on final resolution.
2.8 FINANCIAL INSTRUMENTS
Accounting Policy
2.8.1 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, which 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.
2.8.2 Subsequent measurement
a. Non-derivative financial instruments
(i) Financial assets carried at amortized cost
A financial asset is subsequently measured at amortized 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.
(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 or 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 includes 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 as 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 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 hedge 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 hedge 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 hedge reserve till the period the hedge was effective remains in cash flow hedge reserve until the forecasted transaction
occurs. The cumulative gain or loss previously recognized in the cash flow hedge 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 hedge 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 and buy back of ordinary shares are recognized as a deduction from equity, net of any tax effects.
2.8.3 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.
2.8.4 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.
Refer to financial instruments by category table below for the disclosure on carrying value and fair value of financial assets and liabilities. For financial assets and liabilities maturing within one year from the Balance Sheet date and which are not carried at fair value, the carrying amounts approximate fair value due to the short maturity of these instruments.
2.8.5 Impairment
The Company recognizes loss allowances using the expected credit loss (ECL) model for the financial assets and unbilled revenues which are not fair valued through profit or loss. Loss allowance for trade receivables and unbilled revenues 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 statement of profit or loss.
Financial instruments by category
The carrying value and fair value of financial instruments by categories as at March 31, 2019 are as follows:
(In crore)
Particulars | Amortized 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 no. 2.6) | 15,551 | – | – | – | – | 15,551 | 15,551 |
Investments (Refer note no.2.2) | |||||||
Preference securities, Equity instruments and others | – | – | 16 | 90 | – | 106 | 106 |
Tax free bonds and government bonds | 1,840 | – | – | – | – | 1,840 | 2,048(2) |
Liquid mutual fund units | – | – | 1,701 | – | – | 1,701 | 1,701 |
Redeemable, non-convertible debentures (1) | 1,445 | – | – | – | – | 1,445 | 1,445 |
Fixed maturity plan securities | – | – | 401 | – | – | 401 | 401 |
Commercial Paper | – | – | – | – | 495 | 495 | 495 |
Certificates of deposit | – | – | – | – | 2,123 | 2,123 | 2,123 |
Non convertible debentures | – | – | – | – | 2,955 | 2,955 | 2,955 |
Government Securities | – | – | – | – | 724 | 724 | 724 |
Trade receivables (Refer Note no. 2.5) | 13,370 | – | – | – | – | 13,370 | 13,370 |
Loans (Refer note no. 2.3) | 1,064 | – | – | – | – | 1,064 | 1,064 |
Other financial assets (Refer Note no. 2.4) (4) | 4,709 | – | 284 | – | 37 | 5,030 | 4,948(3) |
Total | 37,979 | – | 2,402 | 90 | 6,334 | 46,805 | 46,931 |
Liabilities: | |||||||
Trade payables (Refer Note no. 2.11) | 1,604 | – | – | – | – | 1,604 | 1,604 |
Other financial liabilities (Refer Note no. 2.10) | 7,067 | – | 128 | – | 1 | 7,196 | 7,196 |
Total | 8,671 | – | 128 | – | 1 | 8,800 | 8,800 |
(1) The carrying value of debentures approximates fair value as the instruments are at prevailing market rates
(2) On account of fair value changes including interest accrued
(3) Excludes interest accrued on tax free bonds
(4) | Excludes unbilled revenue for fixed price development contracts where right to consideration is conditional on factors other than passage of time |
The carrying value and fair value of financial instruments by categories as at March 31, 2018 were as follows:
(In crore)
Particulars | Amortized 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 no. 2.6) | 16,770 | – | – | – | – | 16,770 | 16,770 |
Investments (Refer Note no. 2.2) | |||||||
Preference securities, Equity instruments and others | – | – | 7 | 117 | – | 124 | 124 |
Tax free bonds and government bonds | 1,832 | – | – | – | – | 1,832 | 2,079(2) |
Redeemable, non-convertible debentures (1) | 1,780 | – | – | – | – | 1,780 | 1,780 |
Fixed maturity plan securities | – | – | 376 | – | – | 376 | 376 |
Certificates of deposit | – | – | – | – | 4,901 | 4,901 | 4,901 |
Non convertible debentures | – | – | – | – | 3,580 | 3,580 | 3,580 |
Commercial paper | – | – | – | – | 293 | 293 | 293 |
Trade receivables (Refer Note no. 2.5) | 12,151 | – | – | – | – | 12,151 | 12,151 |
Loans (Refer note no. 2.3) | 412 | – | – | – | – | 412 | 412 |
Other financial assets (Refer Note no. 2.4) | 6,067 | – | 4 | – | 12 | 6,083 | 6,001(3) |
Total | 39,012 | – | 387 | 117 | 8,786 | 48,302 | 48,467 |
Liabilities: | |||||||
Trade payables (Refer note no. 2.11) | 738 | – | – | – | – | 738 | 738 |
Other financial liabilities (Refer Note no. 2.10) | 4,241 | – | 91 | – | 3 | 4,335 | 4,335 |
Total | 4,979 | – | 91 | – | 3 | 5,073 | 5,073 |
(1) The carrying value of debentures approximates fair value as the instruments are at prevailing market rates
(2) On account of fair value changes including interest accrued
(3) Excludes interest accrued on tax free bonds
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 fair value hierarchy of assets and liabilities as at March 31, 2019 is as follows:
(In crore)
Particulars | March 31, 2019 | Fair value measurement at end of the reporting period using | ||
Level 1 | Level 2 | Level 3 | ||
Assets | ||||
Investments in tax free bonds (Refer note no. 2.2) | 2,036 | 1,765 | 271 | – |
Investments in government bonds (Refer note no. 2.2) | 12 | 12 | – | – |
Investments in liquid mutual fund units (Refer note no. 2.2) | 1,701 | 1,701 | – | – |
Investments in equity instruments (Refer note no. 2.2) | 1 | – | – | 1 |
Investments in preference securities (Refer note no. 2.2) | 89 | – | – | 89 |
Investments in fixed maturity plan securities (Refer note no. 2.2) | 401 | – | 401 | – |
Investments in certificates of deposit (Refer note no. 2.2) | 2,123 | – | 2,123 | – |
Investments in non convertible debentures (Refer note no. 2.2) | 2,955 | 1,612 | 1,343 | – |
Investments in government securities (Refer note no. 2.2) | 724 | 724 | – | – |
Investments in commercial paper (Refer note no. 2.2) | 495 | – | 495 | – |
Other investments (Refer note no. 2.2) | 16 | – | – | 16 |
Derivative financial instruments - gain on outstanding foreign currency forward and option contracts (Refer note no. 2.4) | 321 | – | 321 | – |
Liabilities | ||||
Derivative financial instruments - loss on outstanding foreign currency forward and option contracts (Refer note no. 2.10) | 13 | – | 13 | – |
Liability towards contingent consideration (Refer note no. 2.10)(1)(2) | 116 | – | – | 116 |
(1) | Pertains to contingent consideration payable to selling shareholders of Wongdoody and Brilliant Basics Holding Limited as per the share purchase agreement. |
(2) Discount rate pertaining to contingent consideration ranges from 10% to 16%
During the year ended March 31, 2019, tax free
bonds and non-convertible debentures of 336 crore were transferred from Level 2 to Level 1 of fair value hierarchy, since
these were valued based on Quoted price, and
746 crore were transferred from Level 1 to Level 2 of fair value hierarchy,
since these were valued based on market observable inputs.
The fair value hierarchy of assets and liabilities as at March 31, 2018 was as follows:
(In crore)
Particulars | March 31, 2018 | Fair value measurement at end of the reporting period using | ||
Level 1 | Level 2 | Level 3 | ||
Assets | ||||
Investments in tax free bonds (Refer Note no. 2.2) | 2,078 | 1,806 | 272 | – |
Investments in government bonds (Refer Note no. 2.2) | 1 | 1 | – | – |
Investments in equity instruments (Refer Note no. 2.2) | 1 | – | – | 1 |
Investments in preference securities (Refer Note no. 2.2) | 116 | – | – | 116 |
Investments in fixed maturity plan securities (Refer Note no. 2.2) | 376 | – | 376 | – |
Investments in certificates of deposit (Refer Note no. 2.2) | 4,901 | – | 4,901 | – |
Investments in non convertible debentures (Refer Note no. 2.2) | 3,580 | 2,493 | 1,087 | – |
Investments in commercial paper (Refer Note no. 2.2) | 293 | – | 293 | – |
Other investments (Refer Note no. 2.2) | 7 | – | – | 7 |
Derivative financial instruments – gain on outstanding foreign currency forward and option contracts (Refer Note no. 2.4) | 16 | – | 16 | – |
Liabilities | ||||
Derivative financial instruments - loss on outstanding foreign currency forward and option contracts (Refer note 2.10) | 40 | – | 40 | – |
Liability towards contingent consideration (Refer note no. 2.10)(1)(2) | 54 | – | – | 54 |
(1) | Pertains to contingent consideration payable to selling shareholders of Kallidus and Brilliant Basics Holding Limited as per the share purchase agreement. |
(2) Discounted 21 crore at
10%, pertaining to Brilliant Basics.
During the year ended March 31, 2018, tax free
bonds and non-convertible debentures of 1,797 crore were transferred from Level 2 to Level 1 of fair value hierarchy, since
these were valued based on Quoted price, and
743 crore were transferred from Level 1 to Level 2 of fair value hierarchy,
since these were valued based on market observable inputs.
A one percentage point change in the unobservable inputs used in fair valuation of Level 3 assets and liabilities does not have a significant impact in its value.
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 Indian 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 analyses the foreign currency risk from monetary assets and liabilities as at March 31, 2019:
(In crore)
Particulars | U.S. dollars | Euro | United Kingdom Pound Sterling | Australian dollars | Other currencies | Total |
Cash and cash equivalents | 1,013 | 102 | 23 | 58 | 185 | 1,381 |
Trade receivables | 9,009 | 1,688 | 1,005 | 484 | 693 | 12,879 |
Other financial assets , loans and other current assets | 3,617 | 815 | 280 | 259 | 997 | 5,968 |
Trade payables | (645) | (99) | (201) | (77) | (52) | (1,074) |
Other financial liabilities | (3,546) | (364) | (196) | (290) | (257) | (4,653) |
Net assets / (liabilities) | 9,448 | 2,142 | 911 | 434 | 1,566 | 14,501 |
The following table analyses the foreign currency risk from monetary assets and liabilities as at March 31, 2018:
(In crore)
Particulars | U.S. dollars | Euro | United Kingdom Pound Sterling | Australian dollars | Other currencies | Total |
Cash and cash equivalents | 858 | 139 | 82 | 186 | 271 | 1,536 |
Trade Receivables | 7,776 | 1,522 | 871 | 743 | 550 | 11,462 |
Other financials assets ( including loans) | 2,196 | 597 | 335 | 159 | 305 | 3,592 |
Trade payables | (312) | (60) | (168) | (36) | (22) | (598) |
Other financial liabilities | (1,962) | (252) | (148) | (220) | (162) | (2,744) |
Net assets / (liabilities) | 8,556 | 1,946 | 972 | 832 | 942 | 13,248 |
Sensitivity analysis between Indian Rupee and USD
Particulars | Three months ended March 31, | Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Impact on the Company's incremental Operating Margins | 0.47% | 0.52% | 0.48% | 0.52% |
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. 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 details in respect of outstanding foreign currency forward and option contracts are as follows :
Particulars | As at | As at | ||
March 31, 2019 | March 31, 2018 | |||
In million | In ![]() |
In million | In ![]() | |
Derivatives designated as cash flow hedges | ||||
Option Contracts | ||||
In Australian dollars | 120 | 588 | 60 | 300 |
In Euro | 135 | 1,049 | 100 | 808 |
In United Kingdom Pound Sterling | 25 | 226 | 20 | 184 |
Other derivatives | ||||
Forward contracts | ||||
In Canadian dollars | 13 | 68 | 20 | 99 |
In Euro | 166 | 1,289 | 86 | 695 |
In Japanese Yen | 550 | 34 | 550 | 34 |
In New Zealand dollars | 16 | 75 | 16 | 76 |
In Norwegian Krone | 40 | 32 | 40 | 34 |
In South African Rand | – | – | 25 | 14 |
In Singapore dollars | 140 | 716 | 5 | 25 |
In Swedish Krona | 50 | 37 | 50 | 40 |
In Swiss Franc | 25 | 172 | 21 | 146 |
In U.S. dollars | 855 | 5,910 | 556 | 3,624 |
In United Kingdom Pound Sterling | 70 | 634 | 45 | 415 |
Option Contracts | ||||
In Australian dollars | 10 | 49 | 20 | 100 |
In Canadian Dollars | 13 | 69 | – | – |
In Euro | 60 | 466 | 45 | 363 |
In Swiss Franc | 5 | 35 | 5 | 33 |
In U.S. dollars | 433 | 2,995 | 320 | 2,086 |
In United Kingdom Pound Sterling | 10 | 91 | 25 | 231 |
Total forwards and option contracts | 14,535 | 9,307 |
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 at the balance sheet date:
(In crore)
Particulars | As at | As at |
March 31, 2019 | March 31, 2018 | |
Not later than one month | 4,082 | 2,693 |
Later than one month and not later than three months | 6,368 | 4,274 |
Later than three months and not later than one year | 4,085 | 2,340 |
14,535 | 9,307 |
During the year ended March 31, 2019, the Company has designated certain foreign exchange forward and option contracts as cash flow hedges to mitigate the risk of foreign exchange exposure on highly probable forecast cash transactions. The related hedge transactions for balance in cash flow hedge reserve as at March 31, 2019 are expected to occur and reclassified to statement of profit and loss within 3 months.
Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument, including whether the hedging instrument is expected to offset changes in cash flows of hedged items.
If the hedge ratio for risk management purposes is no longer optimal but the risk management objective remains unchanged and the hedge continues to qualify for hedge accounting, the hedge relationship will be rebalanced by adjusting either the volume of the hedging instrument or the volume of the hedged item so that the hedge ratio aligns with the ratio used for risk management purposes. Any hedge ineffectiveness is calculated and accounted for in the Statement of Profit or Loss at the time of the hedge relationship rebalancing.
The following table provides the reconciliation of cash flow hedge reserve for the three months and year ended March 31, 2019 and March 31, 2018 :
(In crore)
Particulars | Three months ended March 31, | Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Gain / (Loss) | ||||
Balance at the beginning of the period | 36 | (2) | – | 39 |
Gain / (Loss) recognized in other comprehensive income during the period | 25 | (9) | 118 | (93) |
Amount reclassified to profit and loss during the period | (45) | 11 | (90) | 41 |
Tax impact on above | 5 | – | (7) | 13 |
Balance at the end of the period | 21 | – | 21 | – |
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 realize the asset and settle the liability simultaneously.
The quantitative information about offsetting of derivative financial assets and derivative financial liabilities is as follows:
(In crore)
Particulars | As at | As at | ||
March 31, 2019 | March 31, 2018 | |||
Derivative financial asset | Derivative financial liability | Derivative financial asset |
Derivative financial liability | |
Gross amount of recognized financial asset / liability | 323 | (15) | 20 | (44) |
Amount set off | (2) | 2 | (4) | 4 |
Net amount presented in Balance Sheet | 321 | (13) | 16 | (40) |
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 13,370 crore and
12,151 crore as at March 31, 2019 and March 31, 2018, respectively
and unbilled revenue amounting to
4,445 crore and
3,573 crore as at March 31, 2019 and March 31, 2018, 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 Company through credit approvals, establishing credit limits and continuously
monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business. As per
Ind AS 109, the Company uses expected credit loss model to assess the impairment loss or gain. The Company 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 Company's historical experience for customers.
The details in respect of percentage of revenues generated from top customer and top 10 customers are as follows:
(In %)
Particulars | Three months ended March 31, | Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Revenue from top customer | 3.7 | 4.1 | 4.0 | 3.9 |
Revenue from top 10 customers | 21.1 | 20.8 | 20.3 | 21.0 |
Credit risk exposure
The allowance for lifetime expected credit loss
on customer balances for the three months ended March 31, 2019 was 9 crore and reversal of allowance of lifetime expected
credit loss on customer balances for the three months ended March 31, 2018 is
23 crore, respectively.
The allowance for lifetime expected credit loss on customer balances for the year ended March 31, 2019 and March 31, 2018 is 176
crore and
18 crore, respectively.
Movement in credit loss allowance:
(In crore)
Particulars | Three months ended March 31, | Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Balance at the beginning | 511 | 418 | 401 | 379 |
Impairment loss recognized/ (reversed) | 9 | (23) | 176 | 18 |
Amounts written off | – | – | (67) | (3) |
Translation differences | 1 | 6 | 11 | 7 |
Balance at the end | 521 | 401 | 521 | 401 |
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, fixed maturity plan securities, quoted bonds issued by government and quasi government organizations, non convertible debentures issued by government aided institutions, certificates of deposit and commercial paper.
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 borrowings. The Company believes that the working capital is sufficient to meet its current requirements.
As at March 31, 2019, the Company had a working
capital of 30,793 crore including cash and cash equivalents of
15,551 crore and current investments of
6,077 crore. As at March
31, 2018, the Company had a working capital of
30,903 crore including cash and cash equivalents of
16,770 crore and current investments
of
5,906 crore.
As at March 31, 2019 and March 31, 2018, the
outstanding compensated absences were 1,411 crore and
1,260 crore, respectively, which have been substantially funded. Accordingly,
no liquidity risk is perceived.
Under the company's ongoing buyback program
the maximum buyback size is 8,260 crore. The company has bought back shares amounting to
797 crore (including transaction
costs) till March 31, 2019. (Refer to note 2.9)
The details regarding the contractual maturities of significant financial liabilities as at March 31, 2019 are as follows:
(In crore)
Particulars | Less than 1 year | 1-2 years | 2-4 years | 4-7 years | Total |
Trade payables | 1,604 | – | – | – | 1,604 |
Other financial liabilities (excluding liability towards acquisition) (Refer Note no. 2.10) | 7,067 | – | – | – | 7,067 |
Liability towards acquisitions on an undiscounted basis (including contingent consideration) |
82 | 53 | – | – | 135 |
The details regarding the contractual maturities of significant financial liabilities as at March 31, 2018 were as follows:
(In crore)
Particulars | Less than 1 year | 1-2 years | 2-4 years | 4-7 years | Total |
Trade payables | 738 | – | – | – | 738 |
Other financial liabilities (excluding liability towards acquisition) (Refer Note no. 2.10) | 4,241 | – | – | – | 4,241 |
Liability towards acquisitions on an undiscounted basis (including contingent consideration) |
41 | 7 | 7 | – | 55 |
2.9 EQUITY
EQUITY SHARE CAPITAL
(In crore, except as otherwise stated)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Authorized | ||
Equity shares, ![]() |
||
4,80,00,00,000 (2,40,00,00,000) equity shares | 2,400 | 1,200 |
Issued, Subscribed and Paid-Up | ||
Equity shares, ![]() |
2,178 | 1,092 |
4,35,62,79,444 (2,18,41,14,257) equity shares fully paid-up | ||
2,178 | 1,092 |
(1) Refer note no. 2.18 for details of basic and diluted shares
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 Depository Shares (ADS) carry similar rights to voting and dividends as the other equity shares. Each ADS
represents one underlying equity share
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.
Update on capital allocation policy and buyback
In line with the capital allocation policy announced in April 2018, the Board, in its meeting held on January 11, 2019, approved the following :
a) Declared a special dividend of 4/- per equity
share;
(b) | Recommended buyback of Equity Shares from the open market route through Indian stock
exchanges of up to ![]() ![]() ![]() ![]() |
The shareholders approved the proposal of buyback
of Equity Shares recommended by its Board of Directors in its meeting held on January 11, 2019 through the postal ballot that concluded
on March 12, 2019. At the Maximum buyback price of 800/- per Equity share and the Maximum buyback size of
8,260 crore,
the indicative maximum number of Equity shares bought back would be 10,32,50,000 Equity Shares (Maximum buyback shares) comprising
approximately 2.36% of the paid-up equity share capital of the Company as of March 12, 2019 (the date of conclusion of postal ballot
for approval for buyback).
The buyback was offered to all eligible equity
shareholders of the Company (other than the Promoters, the Promoter Group and Persons in Control of the Company) under the open
market route through the stock exchange. The Company will fund the buyback from its free reserves. The buyback of equity shares
through the stock exchange commenced on March 20, 2019 and is expected to be completed by September, 2019. During the year ended
March 31, 2019, 1,26,52,000 equity shares were purchased from the stock exchange which includes 18,18,000 shares which have been
purchased but not extinguished as of March 31, 2019 and 36,36,000 shares which have been purchased but have not been settled and
therefore not extinguished as of March 31, 2019. In accordance with section 69 of the Companies Act, 2013, during the year ended
March 31, 2019 , the Company has created ‘Capital Redemption Reserve’ of 5 crore equal to the nominal value of the
shares bought back as an appropriation from general reserve.
The Board, at its meeting on August 19, 2017,
approved a proposal for the Company to buyback its fully paid-up equity shares of face value of 5/- each from the eligible equity
shareholders of the Company for an amount not exceeding
13,000 crore. The shareholders approved the said proposal of buyback of
Equity Shares through the postal ballot that concluded on October 7, 2017. The Buyback offer comprised a purchase of 11,30,43,478
Equity Shares aggregating 4.92% of the paid-up equity share capital of the Company at a price of
1,150/- per Equity share. The
buyback was offered to all eligible equity shareholders (including those who became equity shareholders as on the Record date by
cancelling American Depository Shares and withdrawing underlying Equity shares) of the Company as on the Record Date (i.e. November
1, 2017) on a proportionate basis through the "Tender offer" route. The Company concluded the buyback procedures on December
27, 2017 and 11,30,43,478 equity shares were extinguished. The company has utilized its securities premium and general reserve
for the buyback of its equity shares. In accordance with section 69 of the Companies Act, 2013, the company has created ‘Capital
Redemption Reserve’ of
56 crore equal to the nominal value of the shares bought back as an appropriation from general reserve
during the year ended March 31, 2018.
The Company’s objective when managing capital is to safeguard its ability to continue as a going concern and to maintain an optimal capital structure so as to maximize shareholder value. In order to maintain or achieve an optimal capital structure, the Company may adjust the amount of dividend payment, return capital to shareholders, issue new shares or buy back issued shares. As of March 31, 2019, the Company has only one class of equity shares and has no debt. Consequent to the above capital structure there are no externally imposed capital requirements.
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.
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. Dividend distribution tax paid by subsidiaries may be reduced / available as a credit against dividend distribution tax payable by Infosys Limited.
Effective from Fiscal 2018, the Company's policy is to payout up to 70% of the free cash flow of the corresponding Financial Year in such manner (including by way of dividend and / or share buyback) as may be decided by the Board from time to time, subject to applicable laws and requisite approvals, if any. Free cash flow is defined as net cash provided by operating activities less capital expenditure as per the consolidated statement of cash flows prepared under International Financial Reporting standards(IFRS). Dividend payout includes dividend distribution tax.
The amount of per share dividend recognized as distribution to equity shareholders is as follows:
(in )
Particulars | Year ended March 31, | |
2019 | 2018 | |
Final Dividend for fiscal 2018 | 10.25 | – |
Special dividend for fiscal 2018 | 5.00 | – |
Interim dividend for fiscal 2019 | 7.00 | – |
Special dividend for fiscal 2019 | 4.00 | – |
Final dividend for fiscal 2017 | – | 7.38 |
Interim dividend for fiscal 2018 | – | 6.50 |
Note: Dividend per equity share disclosed in the above table represents dividends declared previously, retrospectively adjusted for September 2018 bonus issue.
During the year ended March 31, 2019 on account
of the final dividend for fiscal 2018, special divided for fiscal 2018 and fiscal 2019 and interim dividend for fiscal 2019 the
Company has incurred a net cash outflow of 13,761 crore inclusive of dividend distribution tax.
The Board of Directors in their meeting on April
12, 2019 recommended a final dividend of 10.50/- per equity share for the financial year ended March 31, 2019. This payment
is subject to the approval of shareholders in the ensuing Annual General Meeting of the Company, to be held on June 22, 2019 and
if approved would result in a net cash outflow of approximately
5,504 crore, including dividend distribution tax. The final
dividend of
10.50/- per equity share and the resultant expected cash outflow is based on the outstanding number of shares after
considering shares bought back by the Company subsequent to the year ended March 31, 2019.
Bonus issue
The Company has allotted 2,18,41,91,490 fully
paid up equity shares of face value 5/- each during the three months ended September 30, 2018 pursuant to a bonus issue
approved by the shareholders through postal ballot. Record date fixed by the Board of Directors was September 5, 2018. The bonus
shares were issued by capitalization of profits transferred from general reserve. Bonus share of one equity share for every equity
share held, and a bonus issue, viz., 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 stock option plan have been adjusted for bonus shares.
The reconciliation of the number of shares outstanding and the amount of share capital as at March 31, 2019 and March 31, 2018 is set out below:
in crore, except as stated otherwise
Particulars | As at March 31, 2019 | As at March 31, 2018 | ||
Number of shares | Amount | Number of shares | Amount | |
Number of shares at the beginning of the period | 2,18,41,14,257 | 1,092 | 2,29,69,44,664 | 1,148 |
Add: Shares issued on exercise of employee stock options -before bonus issue | 77,233 | – | 213,071 | – |
Add: Bonus shares issued | 2,18,41,91,490 | 1,092 | – | – |
Add: Shares issued on exercise of employee stock options - after bonus issue |
548,464 | – | – | – |
Less: Shares bought back(1)(2) | 12,652,000 | 6 | 11,30,43,478 | 56 |
Number of shares at the end of the period | 4,35,62,79,444 | 2,178 | 2,18,41,14,257 | 1,092 |
(1) | Includes 18,18,000 shares which have been purchased on account of buyback during the three months ended March 31, 2019 and have not been extinguished as of March 31, 2019 |
(2) | Includes 36,36,000 shares which have been purchased on account of buyback during the three months ended March 31, 2019 but have not been settled and therefore not extinguished as of March 31, 2019 |
Employee Stock Option Plan (ESOP):
Accounting Policy
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.
2015 Stock Incentive Compensation Plan (the 2015 Plan) (formerly 2011 RSU Plan):
On March 31, 2016, pursuant to the approval by the shareholders through postal ballot, the Board has been authorized to introduce, offer, issue and allot share-based incentives to eligible employees of the Company and its subsidiaries under the 2015 Stock Incentive Compensation Plan (the 2015 Plan). The maximum number of shares under the 2015 plan shall not exceed 2,40,38,883 equity shares (this includes 1,12,23,576 equity shares which are held by the trust towards the 2011 Plan as at March 31, 2016). Out of this 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 on the date of the grant. These instruments will generally 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. The plan numbers mentioned above would further be adjusted for the September 2018 bonus issue.
Consequent to the September 2018 bonus issue, all outstanding options granted under the stock option plan have been adjusted for bonus shares. Unless otherwise stated , all the prior period share numbers, share prices and weighted average exercise prices in this note have been adjusted to give effect to the September 2018 bonus issue.
Controlled trust holds 2,03,24,982 and 1,08,01,956 shares (not adjusted for September 2018 bonus issue) as at March 31, 2019 and March 31, 2018, respectively under the 2015 plan. Out of these shares 2,00,000 and 1,00,000 (not adjusted for September 2018 bonus issue) equity shares have been earmarked for welfare activities of the employees as at March 31, 2019 and March 31, 2018, respectively.
The following is the summary of grants during the three months and year ended March 31, 2019 and March 31, 2018 under the 2015 Plan:
Particulars | Three months ended | Year ended | ||
March 31, 2019 | March 31, 2018 | March 31, 2019 | March 31, 2018 | |
RSU | ||||
Salil Parekh, CEO and MD - Refer note 1 below | 42,930 | 226,048 | 2,60,130 | 226,048 |
U.B. Pravin Rao, COO and WTD | 68,250 | – | 68,250 | 54,500 |
Dr. Vishal Sikka* | – | – | – | 5,40,448 |
Other KMPs | 347,150 | 429,900 | 347,150 | 5,46,200 |
Employees other than KMPs | 1,878,050 | 3,119,840 | 36,65,170 | 31,94,020 |
2,336,380 | 3,775,788 | 4,340,700 | 45,61,216 | |
ESOP | ||||
U.B. Pravin Rao, COO and WTD | – | – | – | 86,000 |
Dr. Vishal Sikka* | – | – | – | 6,61,050 |
Other KMPs | – | – | – | 88,900 |
Employees other than KMPs | – | – | – | 1,47,200 |
– | – | – | 9,83,150 | |
Incentive units - cash settled | ||||
Other employees | 21,500 | 85,180 | 74,090 | 1,00,080 |
21,500 | 85,180 | 74,090 | 1,00,080 | |
Total grants | 2,357,880 | 3,860,968 | 4,414,790 | 56,44,446 |
Information in the table above is adjusted for September 2018 bonus issue.
* | Upon Dr. Vishal Sikka's resignation from the roles of the company, the unvested RSUs and ESOPs have been forfeited |
1. Stock incentives granted to Salil Parekh, CEO and MD
Pursuant to the approval of the shareholders through a postal ballot on February 20, 2018, Salil Parekh (CEO & MD) is eligible to receive under the 2015 Plan:
a) | an annual grant of RSUs of fair value ![]() |
b) | a one-time grant of RSUs of fair value ![]() |
c) | annual grant of performance based RSUs of fair value ![]() |
The Board based on the recommendations of the Nomination and Remuneration committee approved on February 27, 2018, the annual time based grant for fiscal 2018 of 56,512 RSUs (adjusted for September 2018 bonus issue) and the one-time time based grant of 1,69,536 RSUs (adjusted for September 2018 bonus issue). The grants were made effective February 27, 2018.
Further, the Board, based on the recommendations of the Nomination and Remuneration Committee, granted 217,200 (adjusted for September 2018 bonus issue) performance based RSUs to Salil Parekh with an effective date of May 2, 2018. The grants would vest upon successful completion of three full fiscal years with the Company concluding on March 31, 2021 and will be determined based on achievement of certain performance targets for the said three-year period.
The Board based on the recommendations of the Nomination and Remuneration committee approved on January 11, 2019, the annual time based grant for fiscal 2019 of 42,930 RSUs. The grant was made effective February 1, 2019.
Though the annual time based grants for the remaining employment term ending on March 31, 2023 have not been granted as of March 31, 2019, since the service commencement date precedes the grant date, the company has recorded employment stock compensation expense in accordance with Ind AS 102, Share based payments.
The RSUs and stock options would vest generally over a period of 4 years 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.
As at March 31, 2019 and March 31, 2018, incentive units outstanding (net of forfeitures) were 1,77,454 and 2,23,514 (adjusted for September 2018 bonus issue), respectively.
Break-up of employee stock compensation expense
(in crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Granted to: | ||||
KMP(2) | 10 | 1 | 33 | (13) |
Employees other than KMP | 43 | 22 | 149 | 85 |
Total (1) | 53 | 23 | 182 | 72 |
(1) Cash settled stock compensation expense included in the above
(2) | Included a reversal of stock compensation cost of ![]() |
The carrying value of liability towards cash
settled share based payments was 9 crore and
6 crore as at March 31, 2019 and March 31, 2018, respectively.
The activity in the 2015 Plan (formerly 2011 RSU Plan) for equity-settled share based payment transactions during the three months ended March 31, 2019 and March 31, 2018 is set out below:
Particulars | Three months ended March 31, 2019 |
Three months ended March 31, 2018 | ||
Shares arising out of options | Weighted average exercise price (![]() |
Shares arising out of options | Weighted average exercise price (![]() | |
2015 Plan: RSU | ||||
Outstanding at the beginning | 76,59,466 | 2.50 | 41,68,568 | 2.50 |
Granted | 23,36,380 | 5.00 | 37,75,788 | 2.50 |
Exercised | 6,60,078 | 2.50 | 2,31,992 | 2.50 |
Forfeited and expired | 1,54,570 | 2.67 | 2,11,546 | 2.50 |
Outstanding at the end | 9,181,198 | 3.13 | 75,00,818 | 2.50 |
Exercisable at the end | 235,256 | 2.50 | 48,410 | 2.50 |
2015 Plan: Employee Stock Options (ESOPs) | ||||
Outstanding at the beginning | 16,41,600 | 519 | 23,16,800 | 496 |
Granted | – | – | – | – |
Exercised | 8,224 | 499 | 104,824 | 492 |
Forfeited and expired | 10,200 | 499 | 2,78,150 | 482 |
Outstanding at the end | 1,623,176 | 516 | 19,33,826 | 493 |
Exercisable at the end | 6,98,500 | 517 | 393,824 | 496 |
Information in the table above is adjusted for September 2018 bonus issue.
The activity in the 2015 Plan (formerly 2011 RSU Plan) for equity-settled share based payment transactions during the year ended March 31, 2019 and March 31, 2018 is set out below:
Particulars | Year ended March 31, 2019 |
Year ended March 31, 2018 | ||
Shares arising out of options | Weighted average exercise price (![]() |
Shares arising out of options | Weighted average exercise price (![]() | |
2015 Plan: RSU | ||||
Outstanding at the beginning | 75,00,818 | 2.50 | 59,22,746 | 2.50 |
Granted | 43,40,700 | 3.84 | 45,61,216 | 2.50 |
Exercised | 18,64,510 | 2.50 | 12,96,434 | 2.50 |
Forfeited and expired | 7,95,810 | 2.61 | 16,86,710 | 2.50 |
Outstanding at the end | 9,181,198 | 3.13 | 75,00,818 | 2.50 |
Exercisable at the end | 235,256 | 2.50 | 48,410 | 2.50 |
2015 Plan: Employee Stock Options (ESOPs) | ||||
Outstanding at the beginning | 19,33,826 | 493 | 23,95,300 | 496 |
Granted | – | – | 983,150 | 472 |
Exercised | 1,17,350 | 515 | 104,824 | 492 |
Forfeited and expired | 1,93,300 | 521 | 13,39,800 | 481 |
Outstanding at the end | 1,623,176 | 516 | 19,33,826 | 493 |
Exercisable at the end | 6,98,500 | 517 | 3,93,824 | 496 |
Information in the table above is adjusted for September 2018 bonus issue.
During the three months ended March 31, 2019
and March 31, 2018 the weighted average share price of options exercised under the 2015 Plan on the date of exercise was 732
and
560 (adjusted for September 2018 bonus issue) respectively.
During the year ended March 31, 2019 and March
31, 2018 the weighted average share price of options exercised under the 2015 Plan on the date of exercise was 701 and
496
(adjusted for September 2018 bonus issue) respectively.
The following table summarizes information about equity settled RSUs and ESOPs outstanding as at March 31, 2019
Options outstanding | |||
Range of exercise prices per share (![]() |
No. of shares arising out of options | Weighted average remaining contractual life | Weighted average exercise price (![]() |
2015 Plan: | |||
0 - 5 (RSU) | 9,181,198 | 1.70 | 3.13 |
450 - 600 (ESOP) | 1,623,176 | 5.04 | 516 |
10,804,374 | 2.20 | 80 |
Information in the table above is adjusted for September 2018 bonus issue.
The following table summarizes information about equity settled RSUs and ESOPs outstanding as at March 31, 2018:
Options outstanding | |||
Range of exercise prices per share (![]() |
No. of shares arising out of options | Weighted average remaining contractual life | Weighted average exercise price (![]() |
2015 Plan: | |||
0 - 2.50 (RSU) | 75,00,818 | 1.89 | 2.50 |
450 - 600 (ESOP) | 19,33,826 | 6.60 | 493 |
94,34,644 | 2.57 | 104 |
Information in the table above is adjusted for September 2018 bonus issue.
The fair value of each equity settled award is estimated on the date of grant using the Black-Scholes-Merton model with the following assumptions:
Particulars | For options granted in | |
Fiscal 2019- Equity Shares-RSU |
Fiscal 2019- ADS-RSU | |
Weighted average share price (![]() |
696 | 10.77 |
Exercise price (![]() |
3.31 | 0.06 |
Expected volatility (%) | 21-25 | 22-26 |
Expected life of the option (years) | 1-4 | 1-4 |
Expected dividends (%) | 2.65 | 2.65 |
Risk-free interest rate (%) | 7-8 | 2-3 |
Weighted average fair value as on grant date (![]() |
648 | 10.03 |
Particulars | For options granted in | |||
Fiscal 2018- Equity Shares-RSU |
Fiscal 2018- Equity shares ESOP |
Fiscal 2018- ADS-RSU |
Fiscal 2018- ADS- ESOP | |
Weighted average share price (![]() |
572 | 461 | 8.31 | 7.32 |
Exercise price (![]() |
2.50 | 459 | 0.04 | 7.33 |
Expected volatility (%) | 20-25 | 25-28 | 21-26 | 25-31 |
Expected life of the option (years) | 1 - 4 | 3 - 7 | 1 - 4 | 3 - 7 |
Expected dividends (%) | 2.78 | 2.78 | 2.74 | 2.74 |
Risk-free interest rate (%) | 6 - 7 | 6 - 7 | 1 - 2 | 1 - 2 |
Weighted average fair value as on grant date (![]() |
533 | 127 | 7.74 | 1.47 |
(1) Adjusted for September 2018 bonus issue.
The expected life of the RSU / ESOP is estimated based on the vesting term and contractual term of the RSU / ESOP, as well as expected exercise behaviour of the employee who receives the RSU / ESOP. Expected volatility during the expected term of the RSU / ESOP 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 / ESOP.
2.10 OTHER FINANCIAL LIABILITIES
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Non-current | ||
Others | ||
Compensated absences | 38 | 42 |
Payable for acquisition of business- Contingent consideration | 41 | 13 |
Total non-current other financial liabilities | 79 | 55 |
Current | ||
Unpaid dividends | 29 | 22 |
Others | ||
Accrued compensation to employees | 2,006 | 2,048 |
Accrued expenses (1) | 2,310 | 1,776 |
Retention monies | 60 | 63 |
Payable for acquisition of business - Contingent consideration | 75 | 41 |
Capital creditors | 653 | 148 |
Financial liability relating to buyback (refer to note 2.9) | 1,202 | – |
Compensated absences | 1,373 | 1,218 |
Other payables (2) | 807 | 184 |
Foreign currency forward and options contracts | 13 | 40 |
Total current other financial liabilities | 8,528 | 5,540 |
Total other financial liabilities | 8,607 | 5,595 |
Financial liability carried at amortized cost | 7,067 | 4,241 |
Financial liability carried at fair value through profit or loss | 128 | 91 |
Financial liability carried at fair value through other comprehensive income | 1 | 3 |
Contingent consideration on undiscounted basis | 135 | 55 |
(1) Includes dues to subsidiaries (Refer note no. 2.20) | 6 | 9 |
(2) Includes dues to subsidiaries (Refer note no. 2.20) | 13 | 19 |
In accordance with Ind AS 32 Financial Instruments:
Presentation, the Company has recorded a financial liability of 1,202 crore for the obligation to acquire its own equity shares
to the extent of standing instructions provided to its registered broker for the buyback as of March 31, 2019 (refer to note 2.9).
The financial liability is recognised at the present value of the maximum amount that the Company would be required to pay to the
registered broker for buy back, with a corresponding debit in general reserve / retained earnings.
2.11 TRADE PAYABLES
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Trade payables(1) | 1,604 | 738 |
Total trade payables | 1,604 | 738 |
(1)Includes dues to subsidiaries (refer note no. 2.20) | 220 | 178 |
2.12 OTHER LIABILITIES
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Non current | ||
Others | ||
Deferred income | 29 | 36 |
Deferred rent | 140 | 117 |
Total non - current other liabilities | 169 | 153 |
Current | ||
Unearned revenue | 2,094 | 1,887 |
Client deposits | 19 | 32 |
Others | ||
Withholding taxes and others | 1,168 | 1,029 |
Deferred rent | 54 | 24 |
Total current other liabilities | 3,335 | 2,972 |
Total other liabilities | 3,504 | 3,125 |
2.13 PROVISIONS
Accounting Policy
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.
Provision for post-sales client support and others
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Current | ||
Others | ||
Post-sales client support and others | 505 | 436 |
Total provisions | 505 | 436 |
The movement in the provision for post-sales client support and others is as follows :
(In crore)
Particulars | Three months ended March 31, 2019 | Year ended March 31, 2019 |
Balance at the beginning | 522 | 436 |
Provision recognized/(reversed) | 8 | 141 |
Provision utilized | (20) | (97) |
Exchange difference | (5) | 25 |
Balance at the end | 505 | 505 |
Provision for post-sales client support and others are expected to be utilized over a period of 6 months to 1 year.
2.14 INCOME TAXES
Accounting Policy
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. The income tax provision for the interim period is made based on the best estimate of the annual average tax rate expected to be applicable for the full financial year. Tax benefits of deductions earned on exercise of employee share options in excess of compensation charged to income are credited to securities premium.
Income tax expense in the statement of profit and loss comprises:
(In crore)
Particulars | Three months ended March 31, | Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Current taxes | 1,053 | 1,397 | 5,189 | 4,003 |
Deferred taxes | 80 | (164) | 36 | (250) |
Income tax expense | 1,133 | 1,233 | 5,225 | 3,753 |
During the quarter ended March 31, 2019, the
Company entered into Advance Pricing Agreement (APA) in overseas jurisdictions resulting in a reversal of income tax expense of
94 crore which pertained to prior periods.
In December 2017, the Company had concluded
an Advance Pricing Agreement (“APA”) with the US Internal Revenue Service ("IRS") for the US branch covering
the years ending March 2011 to March 2021. Under the APA, the Company and the IRS have agreed on the methodology to allocate revenues
and compute the taxable income of the Company’s US Branch operations. In accordance with the APA, the company had reversed
income tax expense provision of $225 million (1,432 crore) which pertained to previous periods which are no longer required. The
Company had to pay an adjusted amount of $223 million (approximately
1,424 crore) due to the difference between the taxes payable
for prior periods as per the APA and the actual taxes paid for such periods. The Company has paid $215 million (
1,455 crore).
Further, the “Tax Cuts and Jobs Act (H.R. 1)” was signed into law on December 22, 2017 (“US Tax Reforms”). The US tax reforms has reduced federal tax rates from 35% to 21% effective January 1, 2018 amongst other measures.
Income tax expense for the three months ended
March 31, 2019 and March 31, 2018 includes reversal (net of provisions) of 73 crore and
82 crore, respectively. Income tax expense
for the year ended March 31, 2019 and March 31, 2018 includes reversal (net of provisions) of
97 crore and
240 crore, respectively.
These reversals pertain to prior periods on account of adjudication of certain disputed matters in favor of the company across
various jurisdictions.
The foreign tax expense is due to income taxes payable overseas, principally in the United States. In India, the Company has benefited from certain income tax incentives that the Government of India had provided for export of software from the units registered under the Special Economic Zones Act (SEZs), 2005. SEZ units which began the provision of services on or after April 1, 2005 are eligible for a deduction of 100% 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% 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 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.
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 at March 31, 2019, Infosys' U.S. branch
net assets amounted to approximately 5,196 crore. As at March 31, 2019, the Company has a deferred tax liability for branch
profit tax of
201 crore (net of credits), as the Company estimates that these branch profits are expected to be distributed
in the foreseeable future.
Entire deferred income tax for the three months
and year ended March 31, 2019 and March 31, 2018, relates to origination and reversal of temporary differences except for a credit
of 155 crore (on account of US Tax Reforms explained above), for the year ended March 31, 2018.
Other income for the three months and year ended
March 31, 2019 includes interest on income tax refund of 50 crore each, respectively and for the three months and year ended March
31, 2018 includes interest on income tax refund of Nil and
257 crore, respectively.
2.15 REVENUE FROM OPERATIONS
Accounting Policy
The Company derives revenues primarily from business IT services comprising of software development and related services, consulting and package implementation and from the licensing of software products and platforms across our core and digital offerings (“together called as software related services”).
Effective April 1, 2018, the Company adopted Ind AS 115 “Revenue from Contracts with Customers” using the cumulative catch-up transition method, applied to contracts that were not completed as of April 1, 2018. In accordance with the cumulative catch-up transition method , the comparatives have not been retrospectively adjusted. The following is a summary of new and/or revised significant accounting policies related to revenue recognition. Refer Note 1 “Significant Accounting Policies,” in the Company’s 2018 Annual Report for the policies in effect for revenue prior to April 1, 2018. The effect on adoption of Ind AS 115 was insignificant.
Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services.
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 invoicing to the reporting date is recognized as unbilled revenue. Revenue from fixed-price, fixed-timeframe contracts, where the performance obligations are satisfied over time and 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. Maintenance revenue is recognized ratably over the term of the underlying maintenance arrangement.
Revenues in excess of invoicing are classified as contract assets (which we refer as unbilled revenue) while invoicing in excess of revenues are classified as contract liabilities (which we refer to as unearned revenues).
In arrangements for software development and related services and maintenance services, the Company has applied the guidance in Ind AS 115, Revenue from contract with customer, by applying the revenue recognition criteria for each distinct performance obligation. The arrangements with customers generally meet the criteria for considering software development and related services as distinct performance obligations. For allocating the transaction price, the Company has measured the revenue in respect of each performance obligation of a contract at its relative standalone selling price. The price that is regularly charged for an item when sold separately is the best evidence of its standalone selling price. In cases where the company is unable to determine the standalone selling price, the company uses the expected cost plus margin approach in estimating the standalone selling price. For software development and related services, the performance obligations are satisfied as and when the services are rendered since the customer generally obtains control of the work as it progresses.
Revenue from licenses where the customer obtains a “right to use” the licenses is recognized at the time the license is made available to the customer. Revenue from licenses where the customer obtains a “right to access” is recognized over the access period. Arrangements to deliver software products generally have three elements: license, implementation and Annual Technical Services (ATS). The company has applied the principles under Ind AS 115 to account for revenues from these performance obligations. When implementation services are provided in conjunction with the licensing arrangement and the license and implementation have been identified as two separate performance obligations, the transaction price for such contracts are allocated to each performance obligation of the contract based on their relative standalone selling prices. In the absence of standalone selling price for implementation, the performance obligation is estimated using the expected cost plus margin approach. Where the license is required to be substantially customized as part of the implementation service the entire arrangement fee for license and implementation is considered to be a single performance obligation and the revenue 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 performance obligations are satisfied. ATS revenue is recognized ratably over the period in which the services are rendered.
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 to each of the underlying performance obligation that corresponds to the 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.
Deferred contract costs are incremental costs of obtaining a contract which are recognized as assets and amortized over the term of the contract.
Contract modifications are accounted for when additions, deletions or changes are approved either to the contract scope or contract price. The accounting for modifications of contracts involves assessing whether the services added to an existing contract are distinct and whether the pricing is at the standalone selling price. Services added that are not distinct are accounted for on a cumulative catch up basis, while those that are distinct are accounted for prospectively, either as a separate contract, if the additional services are priced at the standalone selling price, or as a termination of the existing contract and creation of a new contract if not priced at the standalone selling price.
The Company presents revenues net of indirect taxes in its condensed statement of Profit and loss.
Revenue from operations for the three months and year ended March 31, 2019 and March 31, 2018 is as follows:
(In crore)
Particulars | Three months ended March 31, | Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Revenue from software services | 18,870 | 15,938 | 72,845 | 61,733 |
Revenue from products and platforms | 65 | 46 | 262 | 208 |
Total revenue from operations | 18,935 | 15,984 | 73,107 | 61,941 |
Disaggregate revenue information
The table below presents disaggregated revenues from contracts with customers for the three months and year ended March 31, 2019 by offerings and contract-type. The Company believe that this disaggregation best depicts how the nature, amount, timing and uncertainty of our revenues and cash flows are affected by industry, market and other economic factors.
(In crore)
Particulars | Three months ended March 31, 2019 | Year ended March 31, 2019 |
Revenue by offerings | ||
Core | 12,386 | 49,463 |
Digital | 6,549 | 23,644 |
Total | 18,935 | 73,107 |
Revenues by contract type | ||
Fixed Price | 10,538 | 39,383 |
Time & Materials | 8,397 | 33,724 |
Total | 18,935 | 73,107 |
Digital Services
Digital Services comprise of service and solution offerings of the company that enable our clients to transform their businesses. These include offerings that enhance customer experience, leverage AI-based analytics and big data, engineer digital products and IoT, modernize legacy technology systems, migrate to cloud applications and implement advanced cyber security systems.
Core Services
Core Services comprise traditional offerings of the company that have scaled and industrialized over a number of years. These primarily include application management services, proprietary application development services, independent validation solutions, product engineering and management, infrastructure management services, traditional enterprise application implementation, support and integration services.
Products & platforms
The Company also derives revenues from the sale of products and platforms including Infosys Nia - Artificial Intelligence (AI) platform which applies next-generation AI and machine learning.
Trade receivables and Contract Balances
The company classifies the right to consideration in exchange for deliverables as either a receivable or as unbilled revenue.
A receivable is a right to consideration that is unconditional upon passage of time. Revenue for time and material contracts are recognized as related service are performed. Revenue for fixed price maintenance contracts is recognized on a straight line basis over the period of the contract. Revenues in excess of billings is recorded as unbilled revenue and is classified as a financial asset for these cases as right to consideration is unconditional upon passage of time .
Revenue recognition for fixed price development contracts is based on percentage of completion method. Invoicing to the clients is based on milestones as defined in the contract. This would result in the timing of revenue recognition being different from the timing of billing the customers. Unbilled revenue for fixed price development contracts is classified as non financial asset as the contractual right to consideration is dependent on completion of contractual milestones.
Invoicing in excess of earnings are classified as unearned revenue.
Trade receivable and unbilled revenues are presented net of impairment in the Balance Sheet.
During the year ended March 31, 2019 , 2,355
crore of unbilled revenue pertaining to fixed price development contracts as of April 1, 2018 has been reclassified to Trade receivables
upon billing to customers on completion of milestones.
During the year ended March 31, 2019 , the company
recognized revenue of 1,776 crore arising from opening unearned revenue as of April 1, 2018.
Performance obligations and remaining performance obligations
The remaining performance obligation disclosure provides the aggregate amount of the transaction price yet to be recognized as at the end of the reporting period and an explanation as to when the Company expects to recognize these amounts in revenue. Applying the practical expedient as given in Ind AS 115, the Company has not disclosed the remaining performance obligation related disclosures for contracts where the revenue recognized corresponds directly with the value to the customer of the entity's performance completed to date, typically those contracts where invoicing is on time and material basis. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, periodic revalidations, adjustment for revenue that has not materialized and adjustments for currency.
The aggregate value of performance obligations
that are completely or partially unsatisfied as at March 31, 2019, other than those meeting the exclusion criteria mentioned above,
is 44,904 crore. Out of this, the Company expects to recognize revenue of around 50% within the next one year and the remaining
thereafter. This includes contracts that can be terminated for convenience without a substantive penalty since, based on current
assessment, the occurrence of the same is expected to be remote.
The impact on account of applying the erstwhile
Ind AS 18 Revenue instead of Ind AS 115 Revenue from contract with customers on the financials results of the Company for the three
months and year ended and as at March 31, 2019 is insignificant. On account of adoption of Ind AS 115, unbilled revenues of 2,904
crore as at March 31, 2019 has been considered as a non financial asset.
2.16 OTHER INCOME, NET
2.16.1 Other income - Accounting Policy
Other income is comprised primarily of interest income, dividend income, gain / loss on investments 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.
2.16.2 Foreign currency - Accounting Policy
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.
Effective April 1, 2018, the company has adopted Appendix B to Ind AS 21- Foreign Currency Transactions and Advance Consideration which clarifies the date of transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income when an entity has received or paid advance consideration in a foreign currency. The effect on account of adoption of this amendment was insignificant.
Other income for the three months and year ended March 31, 2019 and March 31, 2018 is as follows:
(In crore)
Particulars | Three months ended March 31, | Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Interest income on financial assets carried at amortized cost | ||||
Tax free bonds and government bonds | 34 | 34 | 137 | 138 |
Deposit with Bank and others | 317 | 353 | 1,276 | 1,540 |
Interest income on financial assets fair valued through other comprehensive income | ||||
Non-convertible debentures, commercial paper, certificates of deposit and government securities | 128 | 122 | 581 | 642 |
Income on investments carried at fair value through profit or loss | ||||
Dividend income on liquid mutual funds | 1 | – | 2 | 3 |
Gain / (loss) on liquid mutual funds | 57 | 35 | 175 | 227 |
Dividend income from subsidiaries | – | – | – | 846 |
Write down of investment in subsidiary (refer note no 2.2) | – | (28) | – | (122) |
Exchange gains/(losses) on foreign currency forward and options contracts | 185 | (125) | 184 | (12) |
Exchange gains/(losses) on translation of assets and liabilities | (139) | 189 | 144 | 265 |
Miscellaneous income, net | 56 | 56 | 353 | 492 |
Total other income | 639 | 636 | 2,852 | 4,019 |
2.17 EXPENSES
Accounting Policy
2.17.1 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 Indian law.
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 and are not reclassified to profit or loss in subsequent periods. 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 profit in the statement of Profit and Loss.
2.17.2 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.
2.17.3 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.
2.17.4 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.
(In crore)
Particulars | Three months ended March 31, | Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Employee benefit expenses | ||||
Salaries including bonus | 9,896 | 8,185 | 37,185 | 31,618 |
Contribution to provident and other funds | 208 | 179 | 797 | 695 |
Share based payments to employees (Refer note no. 2.9) | 53 | 23 | 182 | 72 |
Staff welfare | 41 | 31 | 132 | 87 |
10,198 | 8,418 | 38,296 | 32,472 | |
Cost of software packages and others | ||||
For own use | 187 | 195 | 793 | 774 |
Third party items bought for service delivery to clients | 205 | 125 | 853 | 496 |
392 | 320 | 1,646 | 1,270 | |
Other expenses | ||||
Power and fuel | 37 | 39 | 171 | 162 |
Brand and Marketing | 114 | 58 | 406 | 247 |
Operating lease payments | 96 | 77 | 339 | 328 |
Rates and taxes | 25 | (12) | 110 | 116 |
Repairs and Maintenance | 295 | 227 | 1,051 | 902 |
Consumables | 10 | 6 | 33 | 22 |
Insurance | 15 | 13 | 55 | 47 |
Provision for post-sales client support and others | (31) | 48 | (6) | 127 |
Commission to non-whole time directors | 2 | 2 | 7 | 9 |
Impairment loss recognized / (reversed) under expected credit loss model | 11 | (21) | 184 | 24 |
Auditor's remuneration | ||||
Statutory audit fees | 1 | 1 | 4 | 3 |
Tax matters | 1 | – | 1 | 1 |
Other services | – | – | – | – |
Contributions towards Corporate Social Responsibility | 61 | 17 | 245 | 142 |
Others | 40 | (26) | 170 | 54 |
677 | 429 | 2,770 | 2,184 |
2.18 RECONCILIATION OF BASIC AND DILUTED SHARES USED IN COMPUTING EARNING PER SHARE
Accounting Policy
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 at 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.
The following is a reconciliation of the equity shares used in the computation of basic and diluted earnings per equity share:
Particulars | Three months ended March 31, | Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Basic earnings per equity share - weighted average number of equity shares outstanding | 4,36,77,59,601 | 4,36,81,61,336 | 4,36,82,12,119 | 4,53,26,87,604 |
Effect of dilutive common equivalent shares - share options outstanding | 20,64,779 | 11,23,252 | 22,00,229 | 20,97,638 |
Diluted earnings per equity share - weighted average number of equity shares and common equivalent shares outstanding | 4,36,98,24,380 | 4,36,92,84,588 | 4,37,04,12,348 | 4,53,47,85,242 |
* Information in above table is adjusted for September 2018 Bonus issue.(refer note no.2.9)
For the three months and year ended March 31, 2019, no options to purchase equity shares that had an anti-dilutive effect.
For the three months and year ended March 31, 2018, 1,148 and 55,752 (adjusted for September 2018 bonus issue) number of options to purchase equity shares that had an anti-dilutive effect respectively.
2.19 CONTINGENT LIABILITIES AND COMMITMENTS
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Contingent liabilities : | ||
Claims against the Company, not acknowledged as debts(1) | 2,947 | 4,627 |
[Amount paid to statutory authorities ![]() ![]() |
||
Commitments : | ||
Estimated amount of contracts remaining to be executed on capital contracts and not provided for | 1,653 | 1,405 |
(net of advances and deposits) | ||
Other Commitments* | 17 | 36 |
*Uncalled capital pertaining to investments
(1) | As at March 31, 2019, claims against the company not acknowledged as debts in respect
of income tax matters amounted to ![]() |
Amount paid to statutory authorities against
the above tax claims amounted to 5,860 crore.
Subsequent to March 31, 2018, the Supreme Court of India ruled favorably in respect of certain income tax claims which have been given effect in the above disclosure of claims as of March 31, 2019.
The Company is subject to legal proceedings and claims, which have arisen in the ordinary course of business. The Company’s management does not reasonably expect that these legal actions, when ultimately concluded and determined, will have a material and adverse effect on the Company’s results of operations or financial condition.
2.20 RELATED PARTY TRANSACTIONS
Refer to the Company's Annual Report for the year ended March 31, 2018 for the full names and other details of the Company's subsidiaries, associate and controlled trusts.
Changes in Subsidiaries
During the year ended March 31, 2019, the following are the changes in the subsidiaries:
- | Lodestone Management Consultants Inc has been liquidated effective May 17, 2018 |
- | On May 22, 2018, Infosys acquired 100% voting rights in WongDoody Holding Company Inc., along with its two subsidiaries, WDW Communications, Inc and WongDoody, Inc. |
- | Lodestone Management Consultants GmbH name changed to Infosys Austria GmbH |
- | On August 6, 2018, Infosys Luxembourg SARL was incorporated as a wholly-owned subsidiary of Infosys Limited |
- | Infosys Consulting Ltda became the majority owned and controlled subsidiary of Infosys Limited. |
- | On October 11, 2018, Infosys Consulting Pte Ltd, a wholly-owned subsidiary of Infosys Limited, acquired 100% voting interest in Fluido Oy along with its five subsidiaries Fluido Sweden AB (Extero), Fluido Norway A/S, Fluido Denmark A/S, Fluido Slovakia s.r.o and Fluido Newco AB. |
- | On November 16, 2018, Infosys Consulting Pte. Ltd, a wholly-owned subsidiary of Infosys Limited, acquired 60% of the voting interest in Infosys Compaz Pte. Ltd (formerly Trusted Source Pte. Ltd) |
- | On November 27, 2018, Infosys Canada Public Services Inc was incorporated as a wholly-owned subsidiary of Infosys Public Services Inc which is a wholly-owned subsidiary of Infosys Limited. |
- | On November 29, 2018, Infosys CIS LLC was incorporated as a wholly-owned subsidiary of Infosys Limited. |
- | On December 19, 2018, Infosys South Africa (Pty) Ltd was incorporated as a wholly owned subsidiary of Infosys Consulting Pte Ltd which is a wholly-owned subsidiary of Infosys Limited. |
- | S.C. Infosys Consulting S.R.L. became wholly owned subsidiary of Infosys Ltd. |
- | Lodestone Management Consultants Co., Ltd, name has been changed to “Infosys Consulting (Shanghai) Co. Ltd.” |
Infosys has provided guarantee for performance of certain contracts entered into by its subsidiaries.
The details of amounts due to or due from related parties as at March 31, 2019 and March 31, 2018 are as follows:
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Investment in debentures | ||
EdgeVerve(1) | 1,445 | 1,780 |
1,445 | 1,780 | |
Trade receivables | ||
EdgeVerve | 3 | – |
Infosys China | 23 | 29 |
Infosys Mexico | 3 | 4 |
Infosys Brasil | 1 | 1 |
Infosys BPM | 10 | 5 |
Infy Consulting Company Ltd. | 13 | 77 |
Infosys Public Services | 57 | 53 |
Infosys Shanghai | 6 | 7 |
Infosys Sweden | – | 1 |
Kallidus | – | 13 |
Infosys McCamish Systems LLC | 89 | 70 |
Panaya Ltd | 115 | 75 |
Infosys Compaz Pte. Ltd | 5 | – |
325 | 335 | |
Loans | ||
Infosys China (2) | 82 | 73 |
Infosys Consulting Holding AG(3) | 89 | 104 |
Brilliant Basics Holdings Limited (4) | 7 | 8 |
Infosys Consulting Pte Ltd(5) | 663 | – |
841 | 185 | |
Prepaid expense and other assets | ||
Panaya Ltd. | 109 | 114 |
Brilliant Basics Limited | – | 1 |
109 | 115 | |
Other financial assets | ||
Infosys BPM | 10 | 10 |
Panaya Ltd. | 3 | 2 |
Infosys Consulting GmbH | 2 | 1 |
Infosys China | 2 | 2 |
Infosys Shanghai | 1 | – |
Infy Consulting Company Ltd. | 3 | 9 |
Infosys Consulting AG | 1 | 1 |
Infosys Public Services | 3 | 6 |
Infosys Consulting Pte Ltd. | – | 1 |
Kallidus | 2 | 1 |
Infosys Consulting Ltda. | 1 | 1 |
Skava Systems Pvt. Ltd. | 1 | 1 |
Lodestone Management Consultants Co., Ltd | – | 1 |
Infosys Brasil | 1 | – |
Edgeverve | – | 3 |
Brilliant Basics Limited | 1 | – |
Infosys Mexico | 1 | 1 |
McCamish Systems LLC | 1 | – |
Infosys Compaz Pte. Ltd | 1 | – |
34 | 40 | |
Unbilled revenues | ||
EdgeVerve | 40 | 32 |
Kallidus | 11 | – |
51 | 32 | |
Trade payables | ||
Infosys China | 8 | 7 |
Infosys BPM | 50 | 54 |
Infosys (Czech Republic) Limited s.r.o. | 6 | 3 |
Infosys Mexico | 6 | 6 |
Infosys Sweden | 3 | 5 |
Infosys Shanghai | 6 | 6 |
Infosys Management Consulting Pty Limited | 9 | 8 |
Infosys Consulting Pte Ltd. | 4 | 2 |
Infy Consulting Company Ltd. | 87 | 67 |
Infosys Brasil | 2 | 2 |
Brilliant Basics Limited | 7 | 7 |
Panaya Ltd. | 4 | 6 |
Infosys Public Services | 4 | 2 |
Kallidus | 2 | – |
Portland Group Pty Ltd | 1 | – |
Infosys Chile SpA | 1 | – |
Infosys Middle East FZ-LLC | 12 | – |
Infosys Poland Sp Z.o.o | 1 | 3 |
McCamish Systems LLC | 1 | – |
WDW Communications, Inc. | 6 | – |
220 | 178 | |
Other financial liabilities | ||
Infosys BPM | 4 | 2 |
Infosys Mexico | 2 | 1 |
Infosys Public Services | – | 5 |
Infosys China | 1 | 1 |
Infosys Consulting GmbH | 5 | 1 |
Infosys Middle East FZ-LLC | – | 8 |
Infosys Consulting AG | 1 | 1 |
13 | 19 | |
Accrued expenses | ||
Infosys BPM | 6 | 9 |
6 | 9 |
(1) At an interest rate of 8.39% per annum.
(2) Interest at the rate of 6% per annum repayable on demand
(3) Interest at the rate of 2.5% per annum repayable on demand
(4) Interest at the rate of 3.5% per annum repayable on demand
(5) Interest at the rate of 3% per annum repayable on demand.
The details of the related parties transactions entered into by the Company for the three months and year ended March 31, 2019 and March 31, 2018 are as follows:
(In crore)
Particulars | Three months ended March 31, | Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Capital transactions: | ||||
Financing transactions | ||||
Equity | ||||
Infosys Consulting Brazil | – | – | 43 | – |
Wongdoody Holding Company Inc(1) | – | – | 261 | – |
Infosys Chile SpA | – | – | 7 | – |
Panaya Inc. | – | – | – | 38 |
Brilliant Basics Holding Limited | – | – | 13 | 29 |
Infosys Arabia Limited | – | – | – | 2 |
Infosys China | – | – | – | 97 |
Infosys Luxembourg S.a r.l. | – | – | 4 | – |
Infosys Australia (3) | – | – | (33) | – |
Infosys Shanghai | – | – | – | 74 |
Infosys Brazil | – | – | 127 | – |
S. C. Infosys Consulting S.R.L | 34 | – | 34 | – |
34 | – | 456 | 240 | |
Debentures (net of repayment) | ||||
Edgeverve | (125) | (170) | (335) | (349) |
(125) | (170) | (335) | (349) | |
Loans (net of repayment) | ||||
Infosys China | – | (2) | – | – |
Infosys Consulting Holding AG | (20) | – | (20) | 99 |
Brilliant Basics Holdings Limited | – | – | – | 7 |
Infosys Consulting Pte Ltd. | 253 | – | 678 | – |
233 | (2) | 658 | 106 | |
Revenue transactions: | ||||
Purchase of services | ||||
Infosys China | 24 | 20 | 85 | 88 |
Infosys Management Consulting Pty Limited | 26 | 22 | 94 | 99 |
Infy Consulting Company Limited | 257 | 189 | 857 | 729 |
Infosys Consulting Pte Ltd. | 10 | 7 | 40 | 41 |
Portland Group Pty Ltd | 4 | – | 16 | 9 |
Infosys (Czech Republic) Limited s.r.o. | 17 | 11 | 56 | 40 |
Infosys BPM | 168 | 137 | 655 | 502 |
Infosys Sweden | 7 | 14 | 52 | 56 |
Infosys Shanghai | 19 | 20 | 74 | 65 |
Infosys Mexico | 18 | 9 | 71 | 27 |
Infosys Public Services | 13 | 4 | 39 | 22 |
Panaya Ltd. | 23 | 21 | 94 | 84 |
Infosys Brasil | 4 | 3 | 13 | 13 |
Infosys Poland Sp Z.o.o | 5 | 6 | 29 | 14 |
Kallidus | 7 | (4) | 51 | 7 |
Brilliant Basics Limited | 19 | 18 | 74 | 24 |
Brilliant Basics (MENA) | – | – | 3 | – |
Infosys Chile SpA | 2 | – | 5 | – |
Infosys Middle East FZ-LLC | 25 | 22 | 95 | 22 |
Noah Consulting, LLC(2) | – | – | – | 91 |
McCamish Systems LLC | 2 | 1 | 7 | 3 |
Noah Canada | – | – | – | 2 |
WDW Communications, Inc. | 9 | – | 11 | – |
WongDoody, Inc. | – | – | 2 | – |
659 | 500 | 2,423 | 1,938 | |
Purchase of shared services including facilities and personnel | ||||
Brilliant Basics Limited | 2 | 1 | 7 | 1 |
Infosys BPM | 1 | 7 | 3 | 21 |
Kallidus Inc | – | 4 | – | 4 |
Infosys Consulting AG | – | 1 | – | 1 |
Infosys Mexico | – | – | – | 2 |
WDW Communications, Inc. | – | – | 1 | – |
3 | 13 | 11 | 29 | |
Interest income | ||||
Infosys China | 1 | 1 | 5 | 4 |
Infosys Consulting Holding AG | – | 1 | 2 | 2 |
Infosys Consulting Pte Ltd. | 3 | – | 6 | – |
EdgeVerve | 32 | 36 | 141 | 156 |
36 | 38 | 154 | 162 | |
Dividend Income | ||||
Infosys BPM | – | – | – | 846 |
– | – | – | 846 | |
Sale of services | ||||
Infosys China | 8 | 7 | 31 | 27 |
Infosys Mexico | 4 | 6 | 20 | 22 |
Infy Consulting Company Limited | 13 | 10 | 54 | 40 |
Infosys Brasil | 3 | 1 | 6 | 5 |
Infosys BPM | 29 | 19 | 101 | 70 |
McCamish Systems LLC | 70 | 37 | 238 | 113 |
Infosys Sweden | – | 2 | 3 | 11 |
Infosys Shanghai | 2 | 3 | 8 | 7 |
EdgeVerve | 129 | 104 | 469 | 407 |
Kallidus Inc | – | – | – | 2 |
Infosys Public Services | 184 | 153 | 766 | 628 |
Infosys Compaz Pte Ltd | 12 | – | 13 | – |
454 | 342 | 1,709 | 1,332 | |
Sale of shared services including facilities and personnel | ||||
EdgeVerve | 9 | 10 | 36 | 40 |
Panaya Ltd. | 8 | 12 | 45 | 48 |
Infosys Consulting SAS | – | 1 | – | 1 |
Infy Consulting Company Limited | – | – | – | 3 |
Infy Consulting B.V | – | – | – | 1 |
Infosys BPM | 7 | 19 | 27 | 67 |
Infosys Public Services | – | – | – | 2 |
24 | 42 | 108 | 162 |
(1) Excludes contingent consideration
(2) Refer note no. 2.2
(3) Represents redemption of investment
Changes in Key Management personnel
The following were the changes in key management personnel:-
• Nilanjan Roy has been appointed as Chief Financial Officer effective March 01, 2019.
• | Jayesh Sanghrajka was appointed as Interim Chief Financial Officer effective November 17, 2018. He resumed his responsibilities as Deputy Chief Financial Officer effective March 1, 2019. |
• M. D. Ranganath resigned as Chief Financial Officer effective November 16, 2018.
• Michael Nelson Gibbs appointed as an Independent Director effective July 13, 2018.
• Ravi Venkatesan, resigned from his position as Co-Chairman effective August 24, 2017 and resigned as member of the Board effective May 11, 2018.
Transactions 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 March 31, | Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Salaries and other employee benefits to whole-time directors and executive officers (1)(2)(3)(4)(5) | 29 | 19 | 96 | 48 |
Commission and other benefits to non-executive/independent directors | 2 | 2 | 7 | 10 |
Total | 31 | 21 | 103 | 58 |
(1) | Total employee stock compensation expense for the three months and year ended March
31, 2019 includes a charge of ![]() ![]() ![]() ![]() |
(2) | Includes reversal of stock compensation cost of ![]() |
(3) | On December 20, 2018, the Board appointed Nilanjan Roy as the Chief Financial Officer of the Company with effect from March 1, 2019. |
(4) | On December 2, 2017, the Board appointed Salil Parekh as the Chief Executive Officer and Managing Director of the Company with effect from January 2, 2018. |
(5) | On June 16, 2017, the Board appointed Inderpreet Sawhney as the Group General Counsel and Chief Compliance Officer of the Company with effect from July 3, 2017; The Board in their meeting held on July 14, 2017 designated her as an Executive Officer with effect from the date of the meeting. |
2.21 SEGMENT REPORTING
The Company publishes this financial statement along with the interim consolidated financial statements. In accordance with Ind AS 108, Operating Segments, the Company has disclosed the segment information in the interim consolidated financial statements.
2.22 FUNCTION-WISE CLASSIFICATION OF CONDENSED STATEMENT OF PROFIT AND LOSS
(In crore)
Particulars | Note No. | Three months ended March 31, |
Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | ||
Revenue from operations | 2.15 | 18,935 | 15,984 | 73,107 | 61,941 |
Cost of sales | 12,530 | 10,074 | 47,412 | 39,138 | |
Gross Profit | 6,405 | 5,910 | 25,695 | 22,803 | |
Operating expenses | |||||
Selling and marketing expenses | 1,004 | 747 | 3,661 | 2,763 | |
General and administration expenses | 1,087 | 820 | 4,225 | 3,562 | |
Total operating expenses | 2,091 | 1,567 | 7,886 | 6,325 | |
Operating profit | 4,314 | 4,343 | 17,809 | 16,478 | |
Reduction in the fair value of assets held for sale | 2.2.4 | – | 589 | 265 | 589 |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" | 2.2.4 | – | – | 469 | – |
Other income, net | 2.16 | 639 | 636 | 2,852 | 4,019 |
Profit before tax | 4,953 | 4,390 | 19,927 | 19,908 | |
Tax expense: | |||||
Current tax | 2.14 | 1,053 | 1,397 | 5,189 | 4,003 |
Deferred tax | 2.14 | 80 | (164) | 36 | (250) |
Profit for the period | 3,820 | 3,157 | 14,702 | 16,155 | |
Other comprehensive income | |||||
Items that will not be reclassified subsequently to profit or loss | |||||
Remeasurement of the net defined benefit liability/asset, net | (3) | 31 | (21) | 52 | |
Equity instruments through other comprehensive income, net | 9 | 7 | 78 | 7 | |
Items that will be reclassified subsequently to profit or loss | |||||
Fair value changes on derivatives designated as cash flow hedge, net | (15) | 2 | 21 | (39) | |
Fair value changes on investments, net | 2.2 | 22 | (12) | 1 | 1 |
Total other comprehensive income/(loss), net of tax | 13 | 28 | 79 | 21 | |
Total comprehensive income for the period | 3,833 | 3,185 | 14,781 | 16,176 |
for and on behalf of the Board of Directors of Infosys Limited
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
D. Sundaram Director |
Nilanjan Roy Chief Financial Officer |
A. G. S. Manikantha Company Secretary |
Bengaluru April 12, 2019 |
INDEPENDENT Auditor’s Report on audit of STANDALONE financial results
To The Board of Directors ofInfosys Limited
1. | We have audited the accompanying Statement of Standalone Financial Results of INFOSYS Limited (“the Company”), for the quarter and year ended March 31, 2019 (“the Statement”), being submitted by the Company pursuant to the requirement of Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 as modified by Circular No. CIR/CFD/FAC/62/2016 dated July 5, 2016. |
2. | This Statement is the responsibility of the Company’s Management and is approved by the Board of Directors. The Statement as it relates to the quarter ended March 31, 2019, has been compiled from the related interim condensed standalone financial statements prepared in accordance with Indian Accounting Standard 34 “Interim Financial Reporting” (“Ind AS 34”) and as it relates to the year ended March 31, 2019, has been complied from the related annual standalone financial statements prepared under Section 133 of the Companies Act, 2013 read with relevant rules issued thereunder and other accounting principles generally accepted in India. Our responsibility is to express an opinion on the Statement based on our audit of such interim condensed standalone financial statements and annual standalone financial statements. |
3. | 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 Statement is free from material misstatement. |
An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the Statement. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the Statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial controls relevant to the Company’s preparation and fair presentation of the Statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal financial control. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Management, as well as evaluating the overall presentation of the Statement.
We believe that the audit evidence obtained by us, is sufficient and appropriate to provide a basis for our audit opinion.
4. | In our opinion and to the best of our information and according to the explanations given to us, the Statement: |
(i) | is presented in accordance with the requirements of Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as modified by Circular No. CIR/CFD/FAC/62/2016 date July 5, 2016; and |
(ii) | gives a true and fair view in conformity with the aforesaid Indian Accounting Standards and other accounting principles generally accepted in India of the profit, total comprehensive income and other financial information of the Company for the quarter and year ended March 31, 2019. |
For DELOITTE HASKINS & SELLS LLP
Chartered Accountants
(Firm Registration No. 117366W/W-100018)
P. r. ramesh
Partner
Bengaluru, April 12, 2019 | (Membership No. 70928) |
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF INFOSYS LIMITED
Report on the Audit of the Standalone Financial Statements
Opinion
We have audited the accompanying standalone financial statements of Infosys Limited (“the Company”), which comprise the Balance Sheet as at March 31, 2019, the Statement of Profit and Loss (including Other Comprehensive Income), the Statement of Changes in Equity and the Statement of Cash Flows for the year ended on that date, and a summary of the significant accounting policies and other explanatory information (hereinafter referred to as “the standalone financial statements”).
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid standalone financial statements give the information required by the Companies Act, 2013 (“the Act”) in the manner so required and give a true and fair view in conformity with the Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended, (“Ind AS”) and other accounting principles generally accepted in India, of the state of affairs of the Company as at March 31, 2019, the profit and total comprehensive income, changes in equity and its cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit of the standalone financial statements in accordance with the Standards on Auditing specified under section 143(10) of the Act (SAs). Our responsibilities under those Standards are further described in the Auditor’s Responsibilities for the Audit of the Standalone Financial Statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (ICAI) together with the independence requirements that are relevant to our audit of the standalone financial statements under the provisions of the Act and the Rules made thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI’s Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the standalone financial statements.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the standalone financial statements of the current period. These matters were addressed in the context of our audit of the standalone financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.
Sr. No. | Key Audit Matter | Auditor’s Response |
1 |
Accuracy of recognition, measurement,
presentation and disclosures of revenues and other related balances in view of adoption of Ind AS 115 “Revenue from Contracts with
Customers” (new revenue accounting standard)
The application of the new revenue accounting standard involves certain key judgements relating to identification of distinct performance obligations, determination of transaction price of the identified performance obligations, the appropriateness of the basis used to measure revenue recognised over a period. Additionally, new revenue accounting standard contains disclosures which involves collation of information in respect of disaggregated revenue and periods over which the remaining performance obligations will be satisfied subsequent to the balance sheet date.
Refer Notes 1.4a and 2.16 to the Standalone Financial Statements |
Principal Audit Procedures
We assessed the Company’s process to identify the impact of adoption of the new revenue accounting standard.
Our audit approach consisted testing of the design and operating effectiveness of the internal controls and substantive testing as follows:
· Evaluated the design of internal controls relating to implementation of the new revenue accounting standard.
· Selected a sample of continuing and new contracts, and tested the operating effectiveness of the internal control, relating to identification of the distinct performance obligations and determination of transaction price. We carried out a combination of procedures involving enquiry and observation, reperformance and inspection of evidence in respect of operation of these controls.
· Tested the relevant information technology systems’ access and change management controls relating to contracts and related information used in recording and disclosing revenue in accordance with the new revenue accounting standard.
· Selected a sample of continuing and new contracts and performed the following procedures:
• Read, analysed and identified the distinct performance obligations in these contracts.
• Compared these performance obligations with that identified and recorded by the Company.
• Considered the terms of the contracts to determine the transaction price including any variable consideration to verify the transaction price used to compute revenue and to test the basis of estimation of the variable consideration.
• Samples in respect of revenue recorded for time and material contracts were tested using a combination of approved time sheets including customer acceptances, subsequent invoicing and historical trend of collections and disputes.
• In respect of samples relating to fixed price contracts, progress towards satisfaction of performance obligation used to compute recorded revenue was verified with actual and estimated efforts from the time recording and budgeting systems. We also tested the access and change management controls relating to these systems.
• Sample of revenues disaggregated by type and service offerings was tested with the performance obligations specified in the underlying contracts.
• Performed analytical procedures for reasonableness of revenues disclosed by type and service offerings.
• We reviewed the collation of information and the logic of the report generated from the budgeting system used to prepare the disclosure relating to the periods over which the remaining performance obligations will be satisfied subsequent to the balance sheet date.
|
2 |
Accuracy of revenues and onerous obligations in respect of fixed price contracts involves critical estimates
Estimated effort is a critical estimate to determine revenues and liability for onerous obligations. This estimate has a high inherent uncertainty as it requires consideration of progress of the contract, efforts incurred till date and efforts required to complete the remaining contract performance obligations.
Refer Notes 1.4a and 2.16 to the Standalone Financial Statements. |
Principal Audit Procedures
Our audit approach was a combination of test of internal controls and substantive procedures which included the following: · Evaluated the design of internal controls relating to recording of efforts incurred and estimation of efforts required to complete the performance obligations.
· Tested the access and application controls pertaining to time recording, allocation and budgeting systems which prevents unauthorised changes to recording of efforts incurred.
· Selected a sample of contracts and through inspection of evidence of performance of these controls, tested the operating effectiveness of the internal controls relating to efforts incurred and estimated.
· Selected a sample of contracts and performed a retrospective review of efforts incurred with estimated efforts to identify significant variations and verify whether those variations have been considered in estimating the remaining efforts to complete the contract.
· Reviewed a sample of contracts with unbilled revenues to identify possible delays in achieving milestones, which require change in estimated efforts to complete the remaining performance obligations.
· Performed analytical procedures and test of details for reasonableness of incurred and estimated efforts.
|
3 |
Evaluation of uncertain tax positions
The Company has material uncertain tax positions including matters under dispute which involves significant judgment to determine the possible outcome of these disputes.
Refer Notes 1.4b and 2.22 to the Standalone Financial Statements |
Principal Audit Procedures
Obtained details of completed tax assessments and demands for the year ended March 31, 2019 from management. We involved our internal experts to challenge the management’s underlying assumptions in estimating the tax provision and the possible outcome of the disputes. Our internal experts also considered legal precedence and other rulings in evaluating management’s position on these uncertain tax positions. Additionally, we considered the effect of new information in respect of uncertain tax positions as at April 1, 2018 to evaluate whether any change was required to management’s position on these uncertainties.
|
4 |
Recoverability of Indirect tax receivables
As
at March 31, 2019, non-current assets in respect of withholding tax and others includes Cenvat recoverable amounting to
Refer Note 2.8 to the Standalone Financial Statements.
|
Principal Audit Procedures
We have involved our internal experts to review the nature of the amounts recoverable, the sustainability and the likelihood of recoverability upon final resolution. |
Information Other than the Standalone Financial Statements and Auditor’s Report Thereon
The Company’s Board of Directors is responsible for the preparation of the other information. The other information comprises the information included in the Management Discussion and Analysis, Board’s Report including Annexures to Board’s Report, Business Responsibility Report, Corporate Governance and Shareholder’s Information, but does not include the standalone financial statements and our auditor’s report thereon.
Our opinion on the standalone financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the standalone financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the standalone financial statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Management’s Responsibility for the Standalone Financial Statements
The Company’s Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to the preparation of these standalone financial statements that give a true and fair view of the financial position, financial performance, total comprehensive income, changes in equity and cash flows of the Company in accordance with the Ind AS and other accounting principles generally accepted in India. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the standalone financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
The Board of Directors are responsible for overseeing the Company’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Standalone Financial Statements
Our objectives are to obtain reasonable assurance about whether the standalone financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
· | Identify and assess the risks of material misstatement of the standalone financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. |
· | Obtain an understanding of internal financial controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company has adequate internal financial controls system in place and the operating effectiveness of such controls. |
· | Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. |
· | Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the standalone financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. |
· | Evaluate the overall presentation, structure and content of the standalone financial statements, including the disclosures, and whether the standalone financial statements represent the underlying transactions and events in a manner that achieves fair presentation. |
Materiality is the magnitude of misstatements in the standalone financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the financial statements. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the standalone financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
1. | As required by Section 143(3) of the Act, based on our audit we report that: |
a) | We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit. |
b) | In our opinion, proper books of account as required by law have been kept by the Company so far as it appears from our examination of those books. |
c) | The Balance Sheet, the Statement of Profit and Loss including Other Comprehensive Income, Statement of Changes in Equity and the Statement of Cash Flow dealt with by this Report are in agreement with the relevant books of account. |
d) | In our opinion, the aforesaid standalone financial statements comply with the Ind AS specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. |
e) | On the basis of the written representations received from the directors as on March 31, 2019 taken on record by the Board of Directors, none of the directors is disqualified as on March 31, 2019 from being appointed as a director in terms of Section 164 (2) of the Act. |
f) | With respect to the adequacy of the internal financial controls over financial reporting of the Company and the operating effectiveness of such controls, refer to our separate Report in “Annexure A”. Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the Company’s internal financial controls over financial reporting. |
g) | With respect to the other matters to be included in the Auditor’s Report in accordance with the requirements of section 197(16) of the Act, as amended: |
In our opinion and to the best of our information and according to the explanations given to us, the remuneration paid by the Company to its directors during the year is in accordance with the provisions of section 197 of the Act.
h) | With respect to the other matters to be included in the Auditor’s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended in our opinion and to the best of our information and according to the explanations given to us: |
i. | The Company has disclosed the impact of pending litigations on its financial position in its standalone financial statements. |
ii. | The Company has made provision, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long-term contracts including derivative contracts. |
iii. | There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company. |
2. | As required by the Companies (Auditor’s Report) Order, 2016 (“the Order”) issued by the Central Government in terms of Section 143(11) of the Act, we give in “Annexure B” a statement on the matters specified in paragraphs 3 and 4 of the Order. |
For DELOITTE HASKINS & SELLS LLP
Chartered Accountants
(Firm Registration No. 117366W/W-100018)
P. r. ramesh
Partner
Bengaluru, April 12, 2019 | (Membership No. 70928) |
ANNEXURE “A” TO THE INDEPENDENT AUDITOR’S REPORT
(Referred to in paragraph 1(f) under ‘Report on Other Legal and Regulatory Requirements’ section of our report to the Members of Infosys Limited of even date)
Report on the Internal Financial Controls Over Financial Reporting under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act”)
We have audited the internal financial controls over financial reporting of INFOSYS LIMITED (“the Company”) as of March 31, 2019 in conjunction with our audit of the standalone financial statements of the Company for the year ended on that date.
Management’s Responsibility for Internal Financial Controls
The Board of Directors of the Company is responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India. These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to respective company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Companies Act, 2013.
Auditor’s Responsibility
Our responsibility is to express an opinion on the internal financial controls over financial reporting of the Company based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the “Guidance Note”) issued by the Institute of Chartered Accountants of India and the Standards on Auditing prescribed under Section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
We believe that the audit evidence we have obtained, is sufficient and appropriate to provide a basis for our audit opinion on the internal financial controls system over financial reporting of the Company.
Meaning of Internal Financial Controls Over Financial Reporting
A company’s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Opinion
In our opinion, to the best of our information and according to the explanations given to us, the Company has, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2019, based on the internal control over financial reporting criteria established by the Company considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.
For DELOITTE HASKINS & SELLS LLP
Chartered Accountants
(Firm Registration No. 117366W/W-100018)
P. r. ramesh
Partner
Bengaluru, April 12, 2019 | (Membership No. 70928) |
ANNEXURE ‘B’ TO THE INDEPENDENT AUDITOR’S REPORT
(Referred to in paragraph 2 under ‘Report on Other Legal and Regulatory Requirements’ section of our report to the Members of Infosys Limited of even date)
i. | In respect of the Company’s fixed assets: |
(a) The Company has maintained proper records showing full particulars, including quantitative details and situation of fixed assets.
(b) The Company has a program of verification to cover all the items of fixed assets in a phased manner which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. Pursuant to the program, certain fixed assets were physically verified by the management during the year. According to the information and explanations given to us, no material discrepancies were noticed on such verification.
(c) According to the information and explanations given to us, the records examined by us and based on the examination of the conveyance deeds / registered sale deed provided to us, we report that, the title deeds, comprising all the immovable properties of land and buildings which are freehold, are held in the name of the Company as at the balance sheet date. In respect of immovable properties of land and building that have been taken on lease and disclosed as fixed assets in the standalone financial statements, the lease agreements are in the name of the Company.
ii. | The Company is in the business of providing software services and does not have any physical inventories. Accordingly, reporting under clause 3 (ii) of the Order is not applicable to the Company. |
iii. | According the information and explanations given to us, the Company has granted unsecured loans to two bodies corporate, covered in the register maintained under section 189 of the Companies Act, 2013, in respect of which: |
(a) The terms and conditions of the grant of such loans are, in our opinion, prima facie, not prejudicial to the Company’s interest.
(b) The schedule of repayment of principal and payment of interest has been stipulated and repayments or receipts of principal amounts and interest have been regular as per stipulations.
(c) There is no overdue amount remaining outstanding as at the year-end.
iv. | In our opinion and according to the information and explanations given to us, the Company has complied with the provisions of Sections 185 and 186 of the Act in respect of grant of loans, making investments and providing guarantees and securities, as applicable. |
v. | The Company has not accepted deposits during the year and does not have any unclaimed deposits as at March 31, 2019 and therefore, the provisions of the clause 3 (v) of the Order are not applicable to the Company. |
vi. | The maintenance of cost records has not been specified by the Central Government under section 148(1) of the Companies Act, 2013 for the business activities carried out by the Company. Thus reporting under clause 3(vi) of the order is not applicable to the Company. |
vii. According to the information and explanations given to us, in respect of statutory dues:
(a) | The Company has generally been regular in depositing undisputed statutory dues, including Provident Fund, Employees’ State Insurance, Income Tax, Goods and Service Tax, Customs Duty, Cess and other material statutory dues applicable to it with the appropriate authorities. |
(b) | There were no undisputed amounts payable in respect of Provident Fund, Employees’ State Insurance, Income Tax, Goods and Service Tax, Customs Duty, Cess and other material statutory dues in arrears as at March 31, 2019 for a period of more than six months from the date they became payable. |
(c) | Details of dues of Income Tax, Sales Tax, Service Tax, Excise Duty and Value Added Tax which have not been deposited as at March 31, 2019 on account of dispute are given below: |
Nature of the statute | Nature of dues | Forum where Dispute is Pending |
Period to which the Amount Relates |
Amount
|
The Income Tax Act, 1961 | Income Tax | Appellate Tribunal (1) | A.Y. 2010-11 to A.Y. 2012-13 | 1,031 |
Income Tax | Appellate Authority upto Commissioner's Level | A.Y. 2008-09 to A.Y. 2016-17 and A.Y. 2018-19 to A.Y. 2019-20 | 4 | |
Finance Act, 1994 | Service Tax | Appellate Tribunal (2) | F.Y. 2004-05 to F.Y.2014-15 | 60 |
Central Excise Act, 1944 | Excise Duty | Supreme Court(2) | F.Y. 2005-06 to F.Y. 2015-16 | 68 |
Excise Duty | Appellate Tribunal | F.Y. 2015-16 | -* | |
Customs Act, 1962 | Custom Duty and Interest | Specified Officer of SEZ | F.Y. 2008 -09 to F.Y. 2011-12 | 5 |
Sales Tax Act and VAT Laws | Sales Tax and interest | High Court | F.Y. 2007-08 | -* |
Sales Tax and interest | Appellate Authority upto Commissioner's Level (2) | F.Y. 2006-07 to F.Y. 2010-11, F.Y. 2014-15 and F.Y. 2016-17 | 2 | |
(1)
In respect of A.Y. 2012-13, stay order has been granted against the amount of (2) Stay order has been granted.
* Less than Rs. 1 crore.
|
viii. | The Company has not taken any loans or borrowings from financial institutions, banks and government or has not issued any debentures. Hence reporting under clause 3 (viii) of the Order is not applicable to the Company. |
ix. | The Company has not raised moneys by way of initial public offer or further public offer (including debt instruments) or term loans and hence reporting under clause 3 (ix) of the Order is not applicable to the Company. |
x. | To the best of our knowledge and according to the information and explanations given to us, no fraud by the Company or no material fraud on the Company by its officers or employees has been noticed or reported during the year. |
xi. | In our opinion and according to the information and explanations given to us, the Company has paid/provided managerial remuneration in accordance with the requisite approvals mandated by the provisions of section 197 read with Schedule V to the Act. |
xii. | The Company is not a Nidhi Company and hence reporting under clause 3 (xii) of the Order is not applicable to the Company. |
xiii. | In our opinion and according to the information and explanations given to us, the Company is in compliance with Section 177 and 188 of the Companies Act, 2013 where applicable, for all transactions with the related parties and the details of related party transactions have been disclosed in the standalone financial statements as required by the applicable accounting standards. |
xiv. | During the year, the Company has not made any preferential allotment or private placement of shares or fully or partly paid convertible debentures and hence reporting under clause 3 (xiv) of the Order is not applicable to the Company. |
xv. | In our opinion and according to the information and explanations given to us, during the year the Company has not entered into any non-cash transactions with its Directors or persons connected to its directors and hence provisions of section 192 of the Companies Act, 2013 are not applicable to the Company. |
xvi. | The Company is not required to be registered under section 45-IA of the Reserve Bank of India Act, 1934. |
For DELOITTE HASKINS & SELLS LLP
Chartered Accountants
(Firm Registration No. 117366W/W-100018)
P. r. ramesh
Partner
Bengaluru, April 12, 2019 | (Membership No. 70928) |
INFOSYS LIMITED
Standalone Financial Statements under Indian Accounting Standards (Ind AS) for the year ended March 31, 2019
Index |
Balance Sheet |
Statement of Profit and Loss |
Statement of Changes in Equity |
Statement of Cash Flows |
Overview and notes to the financial statements |
1. Overview |
1.1 Company overview |
1.2 Basis of preparation of financial statements |
1.3 Use of estimates and judgments |
1.4 Critical accounting estimates |
1.5 Recent accounting pronouncements |
2. Notes to financial statements |
2.1 Property, plant and equipment |
2.2 Goodwill and other intangible assets |
2.3 Investments and Assets held for sale |
2.4 Loans |
2.5 Other financial assets |
2.6 Trade Receivables |
2.7 Cash and cash equivalents |
2.8 Other assets |
2.9 Financial instruments |
2.10 Equity |
2.11 Other financial liabilities |
2.12 Trade payables |
2.13 Other liabilities |
2.14 Provisions |
2.15 Income taxes |
2.16 Revenue from operations |
2.17 Other income, net |
2.18 Expenses |
2.19 Leases |
2.20 Employee Benefits |
2.21 Reconciliation of basic and diluted shares used in computing earning per share |
2.22 Contingent liabilities and commitments |
2.23 Related Party Transactions |
2.24 Corporate social responsibility |
2.25 Segment Reporting |
2.26 Function-wise classification of statement of profit and loss |
INFOSYS LIMITED
(In crore)
Balance Sheet as at | Note No. | March 31, 2019 | March 31, 2018 |
ASSETS | |||
Non-current assets | |||
Property, plant and equipment | 2.1 | 10,394 | 9,027 |
Capital work-in-progress | 1,212 | 1,442 | |
Goodwill | 2.2 | 29 | 29 |
Other intangible assets | 2.2 | 74 | 101 |
Financial assets | |||
Investments | 2.3 | 12,062 | 11,993 |
Loans | 2.4 | 16 | 19 |
Other financial assets | 2.5 | 196 | 177 |
Deferred tax assets (net) | 2.15 | 1,114 | 1,128 |
Income tax assets (net) | 5,870 | 5,710 | |
Other non-current assets | 2.8 | 1,740 | 2,161 |
Total non - current Assets | 32,707 | 31,787 | |
Current assets | |||
Financial assets | |||
Investments | 2.3 | 6,077 | 5,906 |
Trade receivables | 2.6 | 13,370 | 12,151 |
Cash and cash equivalents | 2.7 | 15,551 | 16,770 |
Loans | 2.4 | 1,048 | 393 |
Other financial assets | 2.5 | 4,834 | 5,906 |
Income tax assets (net) | 423 | – | |
Other current assets | 2.8 | 4,920 | 1,439 |
46,223 | 42,565 | ||
Assets held for sale | 2.3.8 | – | 1,525 |
Total current assets | 46,223 | 44,090 | |
Total Assets | 78,930 | 75,877 | |
EQUITY AND LIABILITIES | |||
Equity | |||
Equity share capital | 2.10 | 2,178 | 1,092 |
Other equity | 60,533 | 62,410 | |
Total equity | 62,711 | 63,502 | |
LIABILITIES | |||
Non-current liabilities | |||
Financial liabilities | |||
Other financial liabilities | 2.11 | 79 | 55 |
Deferred tax liabilities (net) | 2.15 | 541 | 505 |
Other non-current liabilities | 2.13 | 169 | 153 |
Total non - current liabilities | 789 | 713 | |
Current liabilities | |||
Financial liabilities | |||
Trade payables | 2.12 | ||
Total outstanding dues of micro enterprises and small enterprises | – | – | |
Total outstanding dues of creditors other than micro enterprises and small enterprises | 1,604 | 738 | |
Other financial liabilities | 2.11 | 8,528 | 5,540 |
Other current liabilities | 2.13 | 3,335 | 2,972 |
Provisions | 2.14 | 505 | 436 |
Income tax liabilities (net) | 1,458 | 1,976 | |
Total current liabilities | 15,430 | 11,662 | |
Total equity and liabilities | 78,930 | 75,877 |
The accompanying notes form an integral part of the standalone financial statements.
As per our report of even date attached
for Deloitte Haskins & Sells LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants
Firm's Registration Number:
117366W/W-100018
P. R. Ramesh Partner |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 12, 2019 |
D. Sundaram Director |
Nilanjan Roy 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 No. | Year ended March 31, | |
2019 | 2018 | ||
Revenue from operations | 2.16 | 73,107 | 61,941 |
Other income, net | 2.17 | 2,852 | 4,019 |
Total income | 75,959 | 65,960 | |
Expenses | |||
Employee benefit expenses | 2.18 | 38,296 | 32,472 |
Cost of technical sub-contractors | 7,646 | 5,494 | |
Travel expenses | 1,906 | 1,479 | |
Cost of software packages and others | 2.18 | 1,646 | 1,270 |
Communication expenses | 339 | 330 | |
Consultancy and professional charges | 1,096 | 826 | |
Depreciation and amortization expense | 1,599 | 1,408 | |
Other expenses | 2.18 | 2,770 | 2,184 |
Reduction in the fair value of assets held for sale | 2.3.8 | 265 | 589 |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" | 2.3.8 | 469 | – |
Total expenses | 56,032 | 46,052 | |
Profit before tax | 19,927 | 19,908 | |
Tax expense: | |||
Current tax | 2.15 | 5,189 | 4,003 |
Deferred tax | 2.15 | 36 | (250) |
Profit for the period | 14,702 | 16,155 | |
Other comprehensive income | |||
Items that will not be reclassified subsequently to profit or loss | |||
Remeasurement of the net defined benefit liability/asset, net | (21) | 52 | |
Equity instruments through other comprehensive income, net | 78 | 7 | |
Items that will be reclassified subsequently to profit or loss | |||
Fair value changes on derivatives designated as cash flow hedge, net | 21 | (39) | |
Fair value changes on investments, net | 2.3 | 1 | 1 |
Total other comprehensive income/ (loss), net of tax | 79 | 21 | |
Total comprehensive income for the period | 14,781 | 16,176 | |
Earnings per equity share | |||
Equity shares of par value ![]() |
|||
Basic (![]() |
33.66 | 35.64 | |
Diluted (![]() |
33.64 | 35.62 | |
Weighted average equity shares used in computing earnings per equity share | |||
Basic | 2.21 | 4,36,82,12,119 | 4,53,26,87,604 |
Diluted | 2.21 | 4,37,04,12,348 | 4,53,47,85,242 |
The accompanying notes form an integral part of the standalone financial statements.
As per our report of even date attached
for Deloitte Haskins & Sells LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants
Firm's Registration Number:
117366W/W-100018
P. R. Ramesh Partner |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 12, 2019 |
D. Sundaram Director |
Nilanjan Roy 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 | ||||||||||||
Capital reserve | |||||||||||||
Securities Premium | Retained earnings | General reserve | Share Options Outstanding Account | Special Economic Zone Re-investment reserve (1) | Capital reserve | Business transfer adjustment reserve(2) | Capital redemption reserve | Equity Instruments through other comprehensive income | Effective portion of Cash flow hedges | Other items of other comprehensive income / (loss) | |||
Balance as at April 1, 2017 | 1,148 | 2,208 | 49,957 | 11,087 | 120 | – | 54 | 3,448 | – | (5) | 39 | (39) | 68,017 |
Changes in equity for the year ended March 31, 2018 | |||||||||||||
Profit for the year | – | – | 16,155 | – | – | – | – | – | – | – | – | – | 16,155 |
Remeasurement of the net defined benefit liability/asset* | – | – | – | – | – | – | – | – | – | – | – | 52 | 52 |
Equity instruments through other comprehensive income* (Refer note no. 2.3) | – | – | – | – | – | – | – | – | – | 7 | – | – | 7 |
Fair value changes on derivatives designated as cash flow hedge* (Refer note no. 2.9) | – | – | – | – | – | – | – | – | – | – | (39) | – | (39) |
Fair value changes on investments* (refer note no. 2.3) | – | – | – | – | – | – | – | – | – | – | – | 1 | 1 |
Total comprehensive income for the year | – | – | 16,155 | – | – | – | – | – | – | 7 | (39) | 53 | 16,176 |
Transfer to general reserve | – | – | (1,382) | 1,382 | – | – | – | – | – | – | – | – | – |
Transferred to Special Economic Zone Re-investment reserve | – | – | (2,141) | – | – | 2,141 | – | – | – | – | – | – | – |
Transferred from Special Economic Zone Re-investment reserve on utilization | – | – | 582 | – | – | (582) | – | – | – | – | – | – | – |
Exercise of stock options (refer note no. 2.10) | – | 67 | – | 2 | (69) | – | – | – | – | – | – | – | – |
Shares issued on exercise of employee stock options (Refer to note 2.10) | – | 5 | – | – | – | – | – | – | – | – | – | – | 5 |
Share based payment to employees of the group (refer note no. 2.10) | – | – | – | – | 79 | – | – | – | – | – | – | – | 79 |
Dividends (including dividend distribution tax) | – | – | (7,500) | – | – | – | – | – | – | – | – | – | (7,500) |
Amount paid upon buyback | (56) | (2,206) | – | (10,738) | – | – | – | – | – | – | – | – | (13,000) |
Transaction costs related to buyback (refer note no. 2.10) | – | (46) | – | – | – | – | – | – | – | – | – | – | (46) |
Amount transferred to capital redemption reserve upon buyback (refer note no. 2.10) | – | – | – | (56) | – | – | – | – | 56 | – | – | – | – |
Loss recorded upon business transfer (refer note 2.3) | – | – | – | – | – | – | – | (229) | – | – | – | – | (229) |
Balance as at March 31, 2018 | 1,092 | 28 | 55,671 | 1,677 | 130 | 1,559 | 54 | 3,219 | 56 | 2 | – | 14 | 63,502 |
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 | ||||||||||||
Capital reserve | |||||||||||||
Securities Premium | Retained earnings | General reserve | Share Options Outstanding Account | Special Economic Zone Re-investment reserve (1) | Capital reserve | Business transfer adjustment reserve(2) | Capital redemption reserve | Equity Instruments through other comprehensive income | Effective portion of Cash flow hedges | Other items of other comprehensive income / (loss) | |||
Balance as at April 1, 2018 | 1,092 | 28 | 55,671 | 1,677 | 130 | 1,559 | 54 | 3,219 | 56 | 2 | – | 14 | 63,502 |
Changes in equity for the year ended March 31, 2019 | |||||||||||||
Profit for the year | – | – | 14,702 | – | – | – | – | – | – | – | – | – | 14,702 |
Remeasurement of the net defined benefit liability/asset* | – | – | – | – | – | – | – | – | – | – | – | (21) | (21) |
Equity instruments through other comprehensive income* (refer note no. 2.3) | – | – | – | – | – | – | – | – | – | 78 | – | – | 78 |
Fair value changes on derivatives designated as cash flow hedge* (refer note no. 2.9) | – | – | – | – | – | – | – | – | – | – | 21 | – | 21 |
Fair value changes on investments* (refer note no.2.3) | – | – | – | – | – | – | – | – | – | – | – | 1 | 1 |
Total comprehensive income for the year | – | – | 14,702 | – | – | – | – | – | – | 78 | 21 | (20) | 14,781 |
Transfer to general reserve | – | – | (1,615) | 1,615 | – | – | – | – | – | – | – | – | – |
Transferred to Special Economic Zone Re-investment reserve | – | – | (2,306) | – | – | 2,306 | – | – | – | – | – | – | – |
Transferred from Special Economic Zone Re-investment reserve on utilization | – | – | 1,386 | – | – | (1,386) | – | – | – | – | – | – | – |
Amount transferred to Capital redemption reserve upon buyback (refer note no. 2.10) | – | – | – | (5) | – | – | – | – | 5 | – | – | – | – |
Exercise of stock options (refer note no.2.10) | – | 99 | – | – | (99) | – | – | – | – | – | – | – | – |
Transfer on account of options not exercised | – | – | – | 1 | (1) | – | – | – | – | – | – | – | – |
Increase in share capital on account of Bonus issue (refer note no. 2.10) | 1,092 | – | – | – | – | – | – | – | – | – | – | – | 1,092 |
Amount utilized for Bonus issue (refer note no. 2.10) | – | – | – | (1,092) | – | – | – | – | – | – | – | – | (1,092) |
Shares issued on exercise of employee stock options (Refer to note 2.10) | – | 3 | – | – | – | – | – | – | – | – | – | – | 3 |
Share based payments to employees (refer to note no. 2.10) | – | – | – | – | 197 | – | – | – | – | – | – | – | 197 |
Income tax benefit arising on exercise of stock options | – | 8 | – | – | – | – | – | – | – | – | – | – | 8 |
Buyback of equity shares (refer note no. 2.10 and 2.11) | (6) | – | – | (1,994) | – | – | – | – | – | – | – | – | (2,000) |
Transaction cost relating to buyback (refer note no 2.10)* | – | – | – | (12) | – | – | – | – | – | – | – | – | (12) |
Equity instruments through other comprehensive income* (refer note 2.3) | – | – | – | – | – | – | – | – | – | – | – | – | – |
Dividends (including dividend distribution tax) | – | – | (13,768) | – | – | – | – | – | – | – | – | – | (13,768) |
Balance as at March 31, 2019 | 2,178 | 138 | 54,070 | 190 | 227 | 2,479 | 54 | 3,219 | 61 | 80 | 21 | (6) | 62,711 |
*net of tax
(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. |
The accompanying notes form an integral part of the standalone financial statements.
As per our report of even date attached
for Deloitte Haskins & Sells LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants
Firm's Registration Number:
117366W/W-100018
P. R. Ramesh Partner |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 12, 2019 |
D. Sundaram Director |
Nilanjan Roy Chief Financial Officer |
A. G. S. Manikantha Company Secretary |
INFOSYS LIMITED
Statement of Cash Flows
Accounting Policy
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. The Company considers all highly liquid investments that are readily convertible to known amounts of cash to be cash equivalents.
(In crore)
Particulars | Note No. | Year ended March 31 | |
2019 | 2018 | ||
Cash flow from operating activities: | |||
Profit for the year | 14,702 | 16,155 | |
Adjustments to reconcile net profit to net cash provided by operating activities: | |||
Depreciation and amortization | 1,599 | 1,408 | |
Income tax expense | 2.15 | 5,225 | 3,753 |
Impairment loss recognized / (reversed) under expected credit loss model | 176 | 18 | |
Interest and dividend income | (1,996) | (3,169) | |
Other adjustments | 57 | 40 | |
Reduction in the fair value of assets held for sale | 2.3.8 | 265 | 589 |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" | 2.3.8 | 469 | – |
Exchange differences on translation of assets and liabilities | 80 | 3 | |
Changes in assets and liabilities | |||
Trade receivables and unbilled revenue | (2,268) | (1,579) | |
Other financial assets and other assets | (581) | (207) | |
Trade payables | 2.12 | 866 | 466 |
Other financial liabilities, other liabilities and provisions | 1,666 | 1,052 | |
Cash generated from operations | 20,260 | 18,529 | |
Income taxes paid | (6,271) | (6,054) | |
Net cash generated by operating activities | 13,989 | 12,475 | |
Cash flow from investing activities: | |||
Expenditure on property, plant and equipment | (2,306) | (1,842) | |
Deposits placed with corporations | (116) | (106) | |
Loans to employees | 4 | 19 | |
Loan given to subsidiaries | (678) | (106) | |
Loan repaid by subsidiary | 20 | – | |
Proceeds from redemption of debentures | 2.3 | 335 | 349 |
Investment in subsidiaries | 2.3 | (228) | (212) |
Proceeds from return of investment | 33 | – | |
Proceeds on liquidation of Noah | – | 316 | |
Payment towards acquisition of business | 2.3 | (261) | (295) |
Payment of contingent consideration pertaining to acquisition | (6) | (33) | |
Escrow and other deposits pertaining to buyback | 2.5 | (257) | – |
Payments to acquire investments | |||
Preference, equity securities and others | (18) | (13) | |
Liquid mutual fund units and fixed maturity plan securities | (72,889) | (57,250) | |
Tax free bonds and Government bonds | (11) | (1) | |
Certificates of deposit | (2,052) | (6,290) | |
Commercial paper | (491) | (291) | |
Non convertible debentures | (100) | – | |
Government securities | (838) | – | |
Proceeds on sale of investments | |||
Preference and equity securities | 115 | 10 | |
Liquid mutual fund units and fixed maturity plan securities | 71,337 | 59,364 | |
Tax free bonds and Government bonds | 1 | – | |
Non-convertible debentures | 602 | 100 | |
Certificates of deposit | 5,150 | 9,411 | |
Commercial paper | 300 | – | |
Government securities | 123 | – | |
Interest and dividend received | 1,644 | 1,708 | |
Dividend received from subsidiary | – | 846 | |
Net cash used in investing activities | (587) | 5,684 | |
Cash flow from financing activities: | |||
Buyback of equity shares including transaction cost | (813) | (13,046) | |
Payment of dividends including dividend distribution tax | (13,761) | (7,495) | |
Shares issued on exercise of employee stock options | 3 | 5 | |
Net cash used in financing activities | (14,571) | (20,536) | |
Effect of exchange differences on translation of foreign currency cash and cash equivalents | (50) | (6) | |
Net increase / (decrease) in cash and cash equivalents | (1,169) | (2,377) | |
Cash and cash equivalents at the beginning of the year | 16,770 | 19,153 | |
Cash and cash equivalents at the end of the year | 15,551 | 16,770 | |
Supplementary information: | |||
Restricted cash balance | 143 | 375 |
The accompanying notes form an integral part of the standalone financial statements.
As per our report of even date attached
for Deloitte Haskins & Sells LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants
Firm's Registration Number:
117366W/W-100018
P. R. Ramesh Partner |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 12, 2019 |
D. Sundaram Director |
Nilanjan Roy Chief Financial Officer |
A. G. S. Manikantha Company Secretary |
INFOSYS LIMITED
Notes to the financial statements
1. Overview
1.1 | Company overview |
Infosys Limited ('the Company' or Infosys) is a leading provider of consulting, technology, outsourcing and next-generation digital services, enabling clients to execute strategies for their digital transformation. Infosys strategic objective is to build a sustainable organization that remains relevant to the agenda of clients, while creating growth opportunities for employees and generating profitable returns for investors. Infosys strategy is to be a navigator for our clients as they ideate, plan and execute on their journey to a digital future.
The Company is a public limited company incorporated and domiciled in India and has its registered office at Electronic city, Hosur Road, Bengaluru 560100, Karnataka, India. The company has its primary listings on the BSE Ltd. and National Stock Exchange of India Limited. The Company’s American Depositary Shares (ADS) representing equity shares are listed on the New York Stock Exchange (NYSE).
Further, the Company's ADS were also listed on the Euronext London and Euronext Paris. On July 5, 2018, the Company voluntarily delisted its ADS from the said exchanges due to low average daily trading volume of its ADS on these exchanges.
The financial statements are approved for issue by the Company's Board of Directors on April 12, 2019.
1.2 | Basis of preparation of financial statements |
These financial statements are prepared in accordance with Indian Accounting Standard (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 ('the 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 relevant amendment rules issued there after.
Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.
As the quarter and year figures are taken from the source and rounded to the nearest digits, the figures reported for the previous quarters might not always add up to the year figures reported in this statement.
1.3 Use of estimates and judgments
The preparation of the financial statements in conformity with Ind AS requires the 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. The 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 no. 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.
Further, the Company uses significant judgments while determining the transaction price allocated to performance obligations using the expected cost plus margin approach.
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 note no.2.15 and note no. 2.22.
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 company 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.
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 the 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. Refer note no. 2.1
d. Non-current assets held for sale
Assets held for sale are measured at the lower of carrying amount or fair value less costs to sell. The determination of fair value less costs to sell includes use of management estimates and assumptions. The fair value of the assets held for sale has been estimated using valuation techniques (including income and market approach) which includes unobservable inputs. Non-current assets and Disposal Group that ceases to be classified as held for sale shall be measured at the lower of carrying amount before the non-current asset and Disposal Group was classified as held for sale and its recoverable amount at the date of the subsequent decision not to sell (Refer note no. 2.3). Recoverable amounts of assets reclassified from held for sale have been estimated using management’s assumptions which consist of significant unobservable inputs.
1.5 Recent accounting pronouncements
Ind AS 116 Leases : On March 30, 2019, Ministry of Corporate Affairs has notified Ind AS 116, Leases. Ind AS 116 will replace the existing leases Standard, Ind AS 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. Ind AS 116 introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term of more than twelve months, unless the underlying asset is of low value. Currently, operating lease expenses are charged to the statement of Profit & Loss. The Standard also contains enhanced disclosure requirements for lessees. Ind AS 116 substantially carries forward the lessor accounting requirements in Ind AS 17.
The effective date for adoption of Ind AS 116 is annual periods beginning on or after April 1, 2019. The standard permits two possible methods of transition:
• | Full retrospective – Retrospectively to each prior period presented applying Ind AS 8 Accounting Policies, Changes in Accounting Estimates and Errors |
• | Modified retrospective – Retrospectively, with the cumulative effect of initially applying the Standard recognized at the date of initial application. |
• | Under modified retrospective approach, the lessee records the lease liability as the present value of the remaining lease payments, discounted at the incremental borrowing rate and the right of use asset either as: |
• | Its carrying amount as if the standard had been applied since the commencement date, but discounted at lessee’s incremental borrowing rate at the date of initial application or |
• | An amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments related to that lease recognized under Ind AS 17 immediately before the date of initial application. |
Certain practical expedients are available under both the methods.
On completion of evaluation of the effect of adoption of Ind AS 116, the Company is proposing to use the ‘Modified Retrospective Approach’ for transitioning to Ind AS 116, and take the cumulative adjustment to retained earnings, on the date of initial application (April 1, 2019). Accordingly, comparatives for the year ended March 31, 2019 will not be retrospectively adjusted. The Company has elected certain available practical expedients on transition.
The effect of adoption as on transition date
would majorly result in an increase in Right of use asset approximately by 1,300 crore, net investment in
sub-lease approximately by
550 crore and an increase in lease liability approximately by
2,000 crore.
Ind AS 12 Appendix C, Uncertainty over Income Tax Treatments : On March 30, 2019, Ministry of Corporate Affairs has notified Ind AS 12 Appendix C, Uncertainty over Income Tax Treatments which is to be applied while performing the determination of taxable profit (or loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under Ind AS 12. According to the appendix, companies need to determine the probability of the relevant tax authority accepting each tax treatment, or group of tax treatments, that the companies have used or plan to use in their income tax filing which has to be considered to compute the most likely amount or the expected value of the tax treatment when determining taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates.
The standard permits two possible methods of transition - i) Full retrospective approach – Under this approach, Appendix C will be applied retrospectively to each prior reporting period presented in accordance with Ind AS 8 – Accounting Policies, Changes in Accounting Estimates and Errors, without using hindsight and ii) Retrospectively with cumulative effect of initially applying Appendix C recognized by adjusting equity on initial application, without adjusting comparatives.
The effective date for adoption of Ind AS 12 Appendix C is annual periods beginning on or after April 1, 2019. The Company will adopt the standard on April 1, 2019 and has decided to adjust the cumulative effect in equity on the date of initial application i.e. April 1, 2019 without adjusting comparatives.
The effect on adoption of Ind AS 12 Appendix C would be insignificant in the standalone financial statements.
Amendment to Ind AS 12 – Income taxes : On March 30, 2019, Ministry of Corporate Affairs issued amendments to the guidance in Ind AS 12, ‘Income Taxes’, in connection with accounting for dividend distribution taxes.
The amendment clarifies that an entity shall recognise the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognised those past transactions or events.
Effective date for application of this amendment is annual period beginning on or after April 1, 2019. The Company is currently evaluating the effect of this amendment on the standalone financial statements.
Amendment to Ind AS 19 – plan amendment, curtailment or settlement- On March 30, 2019, Ministry of Corporate Affairs issued amendments to Ind AS 19, ‘Employee Benefits’, in connection with accounting for plan amendments, curtailments and settlements.
The amendments require an entity:
• | to use updated assumptions to determine current service cost and net interest for the remainder of the period after a plan amendment, curtailment or settlement; and |
• | to recognise in profit or loss as part of past service cost, or a gain or loss on settlement, any reduction in a surplus, even if that surplus was not previously recognised because of the impact of the asset ceiling. |
Effective date for application of this amendment is annual period beginning on or after April 1, 2019. The Company does not have any impact on account of this amendment.
2.1 PROPERTY, PLANT AND EQUIPMENT
Accounting Policy
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 the 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(1) | 22-25 years |
Plant and machinery(1)(2) | 5 years |
Office equipment | 5 years |
Computer equipment(1) | 3-5 years |
Furniture and fixtures(1) | 5 years |
Vehicles(1) | 5 years |
Leasehold improvements | Over lease term |
(1) | Based on technical evaluation, the management believes that the useful lives as given above best represent the period over which management expects to use these assets. Hence, the useful lives for these assets is different from the useful lives as prescribed under Part C of Schedule II of the Companies Act 2013. | |
(2) | Includes solar plant with useful life of 20 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 ready 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 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.
Impairment
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 Cash Generating Unit (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 depreciation) had no impairment loss been recognized for the asset in prior years.
The changes in the carrying value of property, plant and equipment for the year ended March 31, 2019 are as follows:
(In crore)
Particulars | Land- Freehold | Land- Leasehold | Buildings(1)(2) | Plant and machinery(2) | Office Equipment(2) | Computer equipment(2) | Furniture and fixtures(2) | Leasehold Improvements | Vehicles | Total |
Gross carrying value as at April 1, 2018 | 1,227 | 661 | 7,271 | 2,209 | 841 | 4,229 | 1,247 | 235 | 29 | 17,949 |
Additions | 78 | – | 915 | 460 | 130 | 1,023 | 238 | 187 | 9 | 3,040 |
Deletions | – | (68) | (116) | (57) | (33) | (200) | (31) | (8) | (1) | (514) |
Gross carrying value as at March 31, 2019 | 1,305 | 593 | 8,070 | 2,612 | 938 | 5,052 | 1,454 | 414 | 37 | 20,475 |
Accumulated depreciation as at April 1, 2018 | – | (30) | (2,621) | (1,526) | (582) | (3,143) | (896) | (107) | (17) | (8,922) |
Depreciation | – | (5) | (278) | (285) | (116) | (660) | (169) | (54) | (5) | (1,572) |
Accumulated depreciation on deletions | – | 3 | 102 | 49 | 26 | 198 | 26 | 8 | 1 | 413 |
Accumulated depreciation as at March 31, 2019 | – | (32) | (2,797) | (1,762) | (672) | (3,605) | (1,039) | (153) | (21) | (10,081) |
Carrying value as at March 31, 2019 | 1,305 | 561 | 5,273 | 850 | 266 | 1,447 | 415 | 261 | 16 | 10,394 |
Carrying value as at April 1, 2018 | 1,227 | 631 | 4,650 | 683 | 259 | 1,086 | 351 | 128 | 12 | 9,027 |
The changes in the carrying value of property, plant and equipment for the year ended March 31, 2018 were as follows:
(In crore)
Particulars | Land- Freehold | Land- Leasehold | Buildings(1)(2) | Plant and machinery(2) | Office Equipment(2) | Computer equipment(2) | Furniture and fixtures(2) | Leasehold Improvements | Vehicles | Total |
Gross carrying value as at April 1, 2017 | 1,093 | 659 | 6,483 | 1,966 | 769 | 3,886 | 1,132 | 198 | 24 | 16,210 |
Additions | 134 | 2 | 789 | 250 | 78 | 396 | 121 | 48 | 5 | 1,823 |
Deletions | – | – | (1) | (7) | (6) | (53) | (6) | (11) | – | (84) |
Gross carrying value as at March 31, 2018 | 1,227 | 661 | 7,271 | 2,209 | 841 | 4,229 | 1,247 | 235 | 29 | 17,949 |
Accumulated depreciation as at April 1, 2017 | – | (26) | (2,377) | (1,274) | (472) | (2,603) | (757) | (82) | (14) | (7,605) |
Depreciation | – | (4) | (244) | (258) | (115) | (592) | (145) | (36) | (3) | (1,397) |
Accumulated depreciation on deletions | – | – | – | 6 | 5 | 52 | 6 | 11 | – | 80 |
Accumulated depreciation as at March 31, 2018 | – | (30) | (2,621) | (1,526) | (582) | (3,143) | (896) | (107) | (17) | (8,922) |
Carrying value as at March 31, 2018 | 1,227 | 631 | 4,650 | 683 | 259 | 1,086 | 351 | 128 | 12 | 9,027 |
Carrying value as at April 1, 2017 | 1,093 | 633 | 4,106 | 692 | 297 | 1,283 | 375 | 116 | 10 | 8,605 |
(1) | Buildings include ![]() ![]() |
(2) | Includes certain assets provided on cancellable operating lease to subsidiaries. |
Gross carrying value 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 amortization expense in the statement of Profit and Loss.
Tangible assets provided on operating lease to subsidiaries as at March 31, 2019 and March 31, 2018 are as follows:
(In crore)
Particulars | Cost | Accumulated depreciation | Net book value |
Buildings | 186 | 84 | 102 |
190 | 82 | 108 | |
Plant and machinery | 30 | 28 | 2 |
33 | 25 | 8 | |
Furniture and fixtures | 24 | 23 | 1 |
25 | 20 | 5 | |
Computer Equipment | 3 | 3 | – |
3 | 2 | 1 | |
Office equipment | 16 | 15 | 1 |
18 | 13 | 5 |
(In crore)
Particulars | Year ended March 31, | |
2019 | 2018 | |
Aggregate depreciation charged on above assets | 19 | 20 |
Rental income from subsidiaries | 63 | 67 |
2.2 GOODWILL AND OTHER INTANGIBLE ASSETS
2.2.1 Goodwill
Following is a summary of changes in the carrying amount of goodwill:
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Carrying value at the beginning | 29 | – |
Goodwill on business transfer of Noah (refer note 2.3.1) | – | 29 |
Translation differences | – | – |
Carrying value at the end | 29 | 29 |
2.2.2 Other Intangible Assets:
Accounting Policy
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.
Following are the changes in the carrying value of acquired intangible assets for the year ended March 31, 2019:
(In crore)
Particulars | Customer related | Sub-Contracting rights related | Trade name related | Others | Total |
Gross carrying value as at April 1, 2018 | 113 | – | 26 | 26 | 165 |
Transfer of Assets | – | – | – | – | – |
Deletions during the year | – | – | – | – | – |
Gross carrying value as at March 31, 2019 | 113 | – | 26 | 26 | 165 |
Accumulated amortization as at April 1, 2018 | (40) | – | (12) | (12) | (64) |
Transfer of Assets | – | – | – | – | – |
Amortization expense | (16) | – | (6) | (5) | (27) |
Accumulated amortization on deletions | – | – | – | – | – |
Accumulated amortization as at March 31, 2019 | (56) | – | (18) | (17) | (91) |
Carrying value as at March 31, 2019 | 57 | – | 8 | 9 | 74 |
Carrying value as at April 1, 2018 | 73 | – | 14 | 14 | 101 |
Estimated Useful Life (in years) | 7 | – | 5 | 5 | – |
Estimated Remaining Useful Life (in years) | 4 | – | 2 | 2 | – |
Following are the changes in the carrying value of acquired intangible assets for the year ended March 31, 2018:
(In crore)
Particulars | Customer related | Sub-Contracting rights related | Trade name related | Others | Total |
Gross carrying value as at April 1, 2017 | – | 21 | – | 9 | 30 |
Transfer of Assets (refer note 2.3.1) | 113 | – | 26 | 26 | 165 |
Deletions during the period | – | (21) | – | (9) | (30) |
Gross carrying value as at March 31, 2018 | 113 | – | 26 | 26 | 165 |
Accumulated amortization as at April 1, 2017 | – | (21) | – | (9) | (30) |
Transfer of Assets (refer note 2.3.1) | (33) | – | (10) | (10) | (53) |
Amortization expense | (7) | – | (2) | (2) | (11) |
Accumulated amortization on deletions | – | 21 | – | 9 | 30 |
Accumulated amortization as at March 31, 2018 | (40) | – | (12) | (12) | (64) |
Carrying value as at March 31, 2018 | 73 | – | 14 | 14 | 101 |
Carrying value as at April 1, 2017 | – | – | – | – | – |
Estimated Useful Life (in years) | 2 - 10 | – | 5 | 5 | – |
Estimated Remaining Useful Life (in years) | 5 | – | 3 | 3 | – |
Research and Development expense recognized in
net profit in the statement of profit and loss for the year ended March 31, 2019 and March 31, 2018 is 416 crore and
374 crore,
respectively.
2.3 INVESTMENTS AND ASSETS HELD FOR SALE
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Non-current investments | ||
Equity instruments of subsidiaries | 6,349 | 5,013 |
Debentures of subsidiary | 1,445 | 1,780 |
Preference securities and equity instruments | 90 | 117 |
Others | 16 | 7 |
Tax free bonds | 1,828 | 1,831 |
Fixed maturity plans securities | 401 | 376 |
Non-convertible debentures | 1,209 | 2,869 |
Government Securities | 724 | – |
Total non-current investments | 12,062 | 11,993 |
Current investments | ||
Liquid mutual fund units | 1,701 | – |
Certificates of deposit | 2,123 | 4,901 |
Government bonds | 12 | 1 |
Non-convertible debentures | 1,746 | 711 |
Commercial paper | 495 | 293 |
Total current investments | 6,077 | 5,906 |
Total carrying value | 18,139 | 17,899 |
(In crore, except as otherwise
stated)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Non-current investments | ||
Unquoted | ||
Investment carried at cost | ||
Investments in equity instruments of subsidiaries | ||
Infosys BPM Limited (formerly Infosys BPO Limited) | 659 | 659 |
3,38,22,319 (3,38,22,319) equity shares of ![]() |
||
Infosys Technologies (China) Co. Limited | 333 | 333 |
Infosys Technologies (Australia) Pty Limited (1) | 5 | 38 |
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 | 76 | 76 |
1,000 (1,000) equity shares of SEK 100 par value, fully paid | ||
Infosys Technologia do Brasil Ltda | 276 | 149 |
12,84,20,748 (5,91,24,348) shares of BRL 1.00 par value, fully paid | ||
Infosys Technologies (Shanghai) Company Limited | 900 | 900 |
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 | 1,323 | 1,323 |
23,050 (23,350) - Class A shares of CHF 1,000 each and 26,460 | ||
(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 | 1,312 | 1,312 |
1,31,18,40,000 (1,31,18,40,000) equity shares of ![]() |
||
Infosys Nova Holdings LLC * (1) | – | – |
Noah Consulting LLC (refer note 2.3.1) | – | – |
Infosys Consulting Pte Ltd (formerly Lodestone Management Consultants Pte Ltd) | 10 | 10 |
1,09,90,000 (1,09,90,000) shares of SGD 1.00 par value, fully paid | ||
Brilliant Basics Holding Limited (refer note 2.3.2) | 59 | 46 |
1,346 (1,170) shares of GBP 0.005 each, fully paid up | ||
Infosys Arabia Limited | 2 | 2 |
70 (70) shares | ||
Kallidus Inc. (refer note no. 2.3.8) | 150 | – |
10,21,35,416 (10,21,35,416) shares | ||
Skava Systems Private Limited (refer note no. 2.3.8) | 59 | – |
25,000 (25,000) shares of ![]() |
||
Panaya Inc. ( refer note no. 2.3.8) | 582 | – |
2 (2) shares of USD 0.01 per share, fully paid up | ||
Infosys Chile SpA | 7 | – |
100 (Nil) shares | ||
Wongdoody Holding Company Inc (refer note no. 2.3.3) | 350 | – |
2,000 (Nil) shares | ||
Infosys Luxembourg S.a r.l. | 4 | – |
3,700 (Nil) shares | ||
Infosys Austria GmBH ( formerly known as Lodestone Management Consultants GmbH) | – | – |
80,000 (80,000) shares of EUR 1/- par value, fully paid up | ||
Infosys Consulting Brazil | 43 | – |
8,26,56,605 (Nil) shares of BRL 1/- per share, fully paid up | ||
Infosys Romania | 34 | – |
99,183 (Nil) shares of RON 100/- per share, fully paid up | ||
6,349 | 5,013 | |
Investment carried at amortized cost | ||
Investment in debentures of subsidiary | ||
EdgeVerve Systems Limited | ||
14,45,00,000 (17,80,00,000) Unsecured redeemable, non-convertible debentures of ![]() |
1,445 | 1,780 |
1,445 | 1,780 | |
Investments carried at fair value through profit or loss | ||
Others | 16 | 7 |
16 | 7 | |
Investment carried at fair value through other comprehensive income (FVOCI) | ||
Preference securities | 89 | 116 |
Equity instruments | 1 | 1 |
90 | 117 |
(In crore, except as otherwise
stated)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Quoted | ||
Investments carried at amortized cost | ||
Tax free bonds | 1,828 | 1,831 |
1,828 | 1,831 | |
Investments carried at fair value through profit or loss | ||
Fixed maturity plans securities | 401 | 376 |
401 | 376 | |
Investments carried at fair value through other comprehensive income | ||
Non-convertible debentures | 1,209 | 2,869 |
Government Securities | 724 | – |
1,933 | 2,869 | |
Total non-current investments | 12,062 | 11,993 |
Current investments | ||
Unquoted | ||
Investments carried at fair value through profit or loss | ||
Liquid mutual fund units | 1,701 | – |
1,701 | – | |
Investments carried at fair value through other comprehensive income | ||
Commercial paper | 495 | 293 |
Certificates of deposit | 2,123 | 4,901 |
2,618 | 5,194 | |
Quoted | ||
Investments carried at amortized cost | ||
Government bonds | 12 | 1 |
12 | 1 | |
Investments carried at fair value through other comprehensive income | ||
Non-convertible debentures | 1,746 | 711 |
1,746 | 711 | |
Total current investments | 6,077 | 5,906 |
Total investments | 18,139 | 17,899 |
Aggregate amount of quoted investments | 5,920 | 5,788 |
Market value of quoted investments (including interest accrued) | 6,131 | 6,045 |
Aggregate amount of unquoted investments | 12,219 | 12,111 |
(1) Aggregate amount of impairment in value of investments | 122 | 122 |
Reduction in the fair value of assets held for sale (refer note no 2.3.8) | 854 | 589 |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" (refer note no 2.3.8) | 469 | – |
Investments carried at cost | 6,349 | 5,013 |
Investments carried at amortized cost | 3,285 | 3,612 |
Investments carried at fair value through other comprehensive income | 6,387 | 8,891 |
Investments carried at fair value through profit or loss | 2,118 | 383 |
Note: Uncalled capital commitments outstanding
as of March 31, 2019 and March 31, 2018 was 17 crore and
36 crore, respectively.
* | During the three months ended June 30, 2017, Infosys Nova Holding LLC, a wholly-owned
subsidiary, has written down the entire carrying value of its investment in its associate DWA Nova LLC. Consequently, the Company
has written down the entire carrying value of the investment in its subsidiary Infosys Nova Holdings LLC, amounting to ![]() |
Refer note no. 2.9 for accounting policies on financial instruments.
Details of amounts recorded in Other comprehensive income:
(In crore)
Year ended | ||||||
March 31, 2019 | March 31, 2018 | |||||
Gross | Tax | Net | Gross | Tax | Net | |
Net Gain/(loss) on | ||||||
Non-convertible debentures | 1 | – | 1 | (11) | 2 | (9) |
Government Securities | 4 | (1) | 3 | – | – | – |
Certificate of deposits | (5) | 2 | (3) | 15 | (5) | 10 |
Equity and preference securities | 73 | 5 | 78 | 4 | 3 | 7 |
Method of fair valuation:
(In crore)
Class of investment | Method | Fair value as at | |
March 31, 2019 | March 31, 2018 | ||
Liquid mutual fund units | Quoted price | 1,701 | – |
Fixed maturity plan securities | Market observable inputs | 401 | 376 |
Tax free bonds and government bonds | Quoted price and market observable inputs | 2,048 | 2,079 |
Non-convertible debentures | Quoted price and market observable inputs | 2,955 | 3,580 |
Government Securities | Quoted price and market observable inputs | 724 | – |
Certificate of deposits | Market observable inputs | 2,123 | 4,901 |
Commercial paper | Market observable inputs | 495 | 293 |
Unquoted equity and preference securities | Discounted cash flows method, Market multiples method, Option pricing model, etc. | 90 | 117 |
Others | Discounted cash flows method, Market multiples method, Option pricing model, etc. | 16 | 7 |
Certain quoted investments are classified as Level 2 in the absence of active market for such investments.
2.3.1 Business transfer- Noah Consulting LLC
On July 14, 2017, the Board of Directors of
Infosys authorized the Company to execute a Business Transfer Agreement and related documents with Noah Consulting LLC, a wholly
owned subsidiary, to transfer the business of Noah Consulting LLC to Infosys Limited, subject to securing the requisite regulatory
approvals for a consideration based on an independent valuation. Subsequently on October 17, 2017 , the company entered into a
business transfer agreement to transfer the business for a consideration of $41 million (266 crore) and the transfer was with
effect from October 25, 2017.
The transaction was between a holding company and a wholly owned subsidiary, the resultant impact on account of business transfer was recorded in 'Business Transfer Adjustment Reserve' during the year ended March 31, 2018. The table below details out the assets and liabilities taken over upon business transfer:
(In crore)
Particulars | Amount |
Goodwill | 29 |
Trade name | 16 |
Customer contracts | 80 |
Other intangibles | 16 |
Deferred tax assets | 13 |
Net assets / (liabilities), others | (117) |
Total | 37 |
Less: Consideration paid | 266 |
Business transfer reserve | (229) |
Subsequently, in November 2017, Noah Consulting
LLC has been liquidated and the Company received 316 crore as proceeds on liquidation.
2.3.2 Brilliant Basics Holdings Limited.
On September 8, 2017, Infosys acquired 100%
of the voting interests in Brilliant Basics Holdings Limited., UK, (Brilliant Basics) a product design and customer experience
innovator with experience in executing global programs. The business acquisition was conducted by entering into a share purchase
agreement for cash consideration of 29 crore, contingent consideration of up to
20 crore and an additional consideration of upto
13 crore, referred to as retention bonus, payable to the employees of Brilliant Basics at each anniversary year over the next
two years, subject to their continuous employment with the group at each anniversary. The fair value of contingent consideration
on the date of acquisition is
17 crore.
2.3.3 Wongdoody Holding Company Inc
On May 22, 2018, Infosys acquired 100% of the
voting interests in WongDoody Holding Company Inc., (WongDoody) an US-based, full-service creative and consumer insights agency.
The business acquisition was conducted by entering into a share purchase agreement for a total consideration of up to $75 million
(approximately 514 crore on acquisition date), which includes a cash consideration of $38 million (approximately
261 crore),
contingent consideration of up to $28 million (approximately
192 crore on acquisition date) and an additional consideration of
up to $9 million (approximately
61 crore on acquisition date), referred to as retention bonus, payable to the employees of WongDoody
over the next three years, subject to their continuous employment with the group. The fair value of contingent consideration on
the date of acquisition is
89 crore.
2.3.4 Details of Investments
The details of non-current other investments in preferred stock and equity instruments as at March 31, 2019 and March 31, 2018 are as follows:
(in crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Preference Securities | ||
Airviz Inc. | 3 | 6 |
2,82,279 (2,82,279) Series A Preferred Stock, fully paid up, par value USD 0.001 each | ||
Whoop Inc | 14 | 20 |
16,48,352 (16,48,352) Series B Preferred Stock, fully paid up, par value USD 0.0001 each | ||
CloudEndure Ltd. | – | 26 |
Nil (25,59,290) 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 | 25 | 23 |
39,33,910 (39,33,910) Preferred Series B Shares, fully paid up, par value USD 0.00001 each | ||
13,35,707 (Nil) Preferred Series C Shares, fully paid up, par value USD 0.00001 each | ||
Trifacta Inc. | 27 | 21 |
11,80,358 (11,80,358) Preferred Stock | ||
Ideaforge | 10 | 10 |
5,402 (5,402) Series A compulsorily convertible cumulative Preference shares of ![]() |
||
Equity Instrument | ||
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 ![]() ![]() |
||
Ideaforge | – | – |
100 (100) equity shares at ![]() |
||
Others | ||
Stellaris Venture Partners India | 16 | 7 |
106 | 124 |
2.3.5 Details of Investments in tax free bonds and government bonds
The balances held in tax free bonds as at March 31, 2019 and March 31, 2018 is as follows:
(In crore, except as otherwise stated)
Particulars | March 31, 2019 | March 31, 2018 | |||
Face Value ![]() |
Units | Amount | Units | Amount | |
7.04% Indian Railway Finance Corporation Limited Bonds 03MAR2026 | 10,00,000 | 470 | 50 | 470 | 50 |
7.16% Power Finance Corporation Limited Bonds 17JUL2025 | 10,00,000 | 1,000 | 105 | 1,000 | 106 |
7.18% Indian Railway Finance Corporation Limited Bonds 19FEB2023 | 1,000 | 2,000,000 | 201 | 2,000,000 | 201 |
7.28% Indian Railway Finance Corporation Limited Bonds 21DEC2030 | 1,000 | 422,800 | 42 | 422,800 | 42 |
7.28% National Highways Authority of India Limited Bonds 18SEP2030 | 10,00,000 | 3,300 | 342 | 3,300 | 343 |
7.34% Indian Railway Finance Corporation Limited Bonds 19FEB2028 | 1,000 | 2,100,000 | 210 | 2,100,000 | 211 |
7.35% National Highways Authority of India Limited Bonds 11JAN2031 | 1,000 | 571,396 | 57 | 571,396 | 57 |
7.93% Rural Electrification Corporation Limited Bonds 27MAR2022 | 1,000 | 200,000 | 21 | 200,000 | 21 |
8.10% Indian Railway Finance Corporation Limited Bonds 23FEB2027 | 1,000 | 500,000 | 52 | 500,000 | 52 |
8.26% India Infrastructure Finance Company Limited Bonds 23AUG2028 | 10,00,000 | 1,000 | 100 | 1,000 | 100 |
8.30% National Highways Authority of India Limited Bonds 25JAN2027 | 1,000 | 500,000 | 53 | 500,000 | 53 |
8.35% National Highways Authority of India Limited 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 | 500,000 | 50 |
Total investments in tax-free bonds | 68,05,416 | 1,828 | 68,05,416 | 1,831 |
The balances held in government bonds as at March 31, 2019 and March 31, 2018 is as follows:
(In crore, except as otherwise stated)
Particulars | Face Value PHP | March 31, 2019 | March 31, 2018 | ||
Units | Amount | Units | Amount | ||
Treasury Notes Philippines Govt. 09MAY2018 | 100 | – | – | 100,000 | 1 |
Treasury Notes Philippines Govt. 17APRIL2019 | 100 | 90,000 | 12 | – | – |
Total investments in government bonds | 90,000 | 12 | 100,000 | 1 |
2.3.6 Details of investments in liquid mutual fund units and fixed maturity plan securities
The balances held in liquid mutual fund as at March 31, 2019 and March 31, 2018 is as follows:
(In crore, except as otherwise stated)
Particulars | March 31, 2019 | March 31, 2018 | ||
Units | Amount | Units | Amount | |
Aditya Birla Sun life Corporate Bond Fund -Growth -Direct Plan | 19,600,407 | 141 | – | – |
Aditya Birla Sun life Money Manager Fund -Growth -Direct Plan | 7,975,385 | 201 | – | – |
HDFC Money market Fund- Direct Plan- Growth Option | 772,637 | 303 | – | – |
ICICI Prudential Savings Fund- Direct Plan-Growth | 8,340,260 | 301 | – | – |
IDFC Corporate Bond - Fund Direct Plan | 119,581,942 | 154 | – | – |
Kotak Money Market Fund- Direct Plan- Growth Option | 973,751 | 301 | – | – |
SBI Premier Liquid Fund -Direct Plan -Growth | 1,025,678 | 300 | – | – |
Total investments in liquid mutual fund units | 158,270,060 | 1,701 | – | – |
The balances held in fixed maturity plan security as at March 31, 2019 and March 31, 2018 is as follows:
(In crore, except as otherwise stated)
Particulars | March 31, 2019 | March 31, 2018 | ||
Units | Amount | Units | Amount | |
Aditya Birla Sun Life Fixed Term Plan- Series OD 1145 Days- GR Direct | 5,00,00,000 | 58 | 5,00,00,000 | 54 |
Aditya Birla Sun Life Fixed Term Plan- Series OE 1153 days- GR Direct | 2,50,00,000 | 29 | 2,50,00,000 | 27 |
HDFC FMP 1155D Feb 2017- Direct Growth- Series 37 | 2,80,00,000 | 32 | 2,80,00,000 | 30 |
HDFC FMP 1169D Feb 2017- Direct- Quarterly Dividend- Series 37 | 4,50,00,000 | 45 | 4,50,00,000 | 45 |
ICICI FMP Series 80-1194 D Plan F Div | 4,00,00,000 | 46 | 4,00,00,000 | 43 |
ICICI Prudential Fixed Maturity Plan Series 80- 1187 Days Plan G Direct Plan | 4,20,00,000 | 49 | 4,20,00,000 | 45 |
ICICI Prudential Fixed Maturity Plan Series 80- 1253 Days Plan J Direct Plan | 3,00,00,000 | 35 | 3,00,00,000 | 32 |
IDFC Fixed Term Plan Series 129 Direct Plan- Growth 1147 Days | 1,00,00,000 | 12 | 1,00,00,000 | 11 |
IDFC Fixed Term Plan Series 131 Direct Plan- Growth 1139 Days | 1,50,00,000 | 17 | 1,50,00,000 | 16 |
Kotak FMP Series 199 Direct- Growth | 3,50,00,000 | 40 | 3,50,00,000 | 37 |
Reliance Fixed Horizon Fund- XXXII Series 8- Dividend Plan | 3,50,00,000 | 38 | 3,50,00,000 | 36 |
Total investments in fixed maturity plan securities | 35,50,00,000 | 401 | 35,50,00,000 | 376 |
2.3.7 Details of investments in non convertible debentures, government securities, certificates of deposit and commercial paper
The balances held in non convertible debenture units as at March 31, 2019 and March 31, 2018 is as follows:
(in crore, except as otherwise stated)
Particulars | March 31, 2019 | March 31, 2018 | |||
Face Value ![]() |
Units | Amount | Units | Amount | |
7.48% Housing Development Finance Corporation Ltd 18NOV2019 | 1,00,00,000/- | 50 | 51 | 50 | 51 |
7.58% LIC Housing Finance Ltd 28FEB2020 | 10,00,000/- | 1,000 | 101 | 1,000 | 101 |
7.58% LIC Housing Finance Ltd 11JUN2020 | 10,00,000/- | 500 | 51 | 500 | 52 |
7.59% LIC Housing Finance Ltd 14OCT2021 | 10,00,000/- | 3,000 | 306 | 3,000 | 306 |
7.75% LIC Housing Finance Ltd 27AUG2021 | 10,00,000/- | 1,250 | 127 | 1,250 | 129 |
7.79% LIC Housing Finance Ltd 19JUN2020 | 10,00,000/- | 500 | 53 | 500 | 53 |
7.80% Housing Development Finance Corporation Ltd 11NOV2019 | 1,00,00,000/- | 150 | 154 | 150 | 153 |
7.81% LIC Housing Finance Ltd 27APR2020 | 10,00,000/- | 2,000 | 214 | 2,000 | 214 |
7.95% Housing Development Finance Corporation Ltd 23SEP2019 | 1,00,00,000/- | 50 | 52 | 50 | 53 |
8.02% LIC Housing Finance Ltd 18FEB2020 | 10,00,000/- | 500 | 51 | 500 | 50 |
8.26% Housing Development Finance Corporation Ltd 12AUG2019 | 1,00,00,000/- | 100 | 105 | 100 | 105 |
8.34% Housing Development Finance Corporation Ltd 06MAR2019 | 1,00,00,000/- | – | – | 200 | 215 |
8.37% LIC Housing Finance Ltd 03OCT2019 | 10,00,000/- | 2,000 | 216 | 2,000 | 216 |
8.37% LIC Housing Finance Ltd 10MAY2021 | 10,00,000/- | 500 | 54 | 500 | 54 |
8.46% Housing Development Finance Corporation Ltd 11MAR2019 | 1,00,00,000/- | – | – | 50 | 54 |
8.47% LIC Housing Finance Ltd 21JAN2020 | 10,00,000/- | 500 | 51 | 500 | 51 |
8.49% Housing Development Finance Corporation Ltd 27APR2020 | 5,00,000/- | 900 | 49 | – | – |
8.50% Housing Development Finance Corporation Ltd 31AUG2020 | 1,00,00,000/- | 100 | 105 | 50 | 54 |
8.54% IDFC Bank Ltd 30MAY2018 | 10,00,000/- | – | – | 1,500 | 194 |
8.59% Housing Development Finance Corporation Ltd 14JUN2019 | 1,00,00,000/- | 50 | 51 | 50 | 51 |
8.60% LIC Housing Finance Ltd 29JUL2020 | 10,00,000/- | 1,400 | 149 | 1,400 | 151 |
8.61% LIC Housing Finance Ltd 11DEC2019 | 10,00,000/- | 1,000 | 103 | 1,000 | 104 |
8.66% IDFC Bank Ltd 25JUN2018 | 10,00,000/- | – | – | 1,520 | 196 |
8.72% Housing Development Finance Corporation Ltd 15APR2019 | 1,00,00,000/- | 75 | 75 | 75 | 76 |
8.75% Housing Development Finance Corporation Ltd 13JAN2020 | 500,000/- | 5,000 | 256 | 5,000 | 256 |
8.75% LIC Housing Finance Ltd 14JAN2020 | 10,00,000/- | 1,070 | 110 | 1,070 | 112 |
8.75% LIC Housing Finance Ltd 21DEC2020 | 10,00,000/- | 1,000 | 101 | 1,000 | 102 |
8.97% LIC Housing Finance Ltd 29OCT2019 | 10,00,000/- | 500 | 52 | 500 | 52 |
9.45% Housing Development Finance Corporation Ltd 21AUG2019 | 10,00,000/- | 3,000 | 318 | 3,000 | 323 |
9.65% Housing Development Finance Corporation Ltd 19JAN2019 | 10,00,000/- | – | – | 500 | 52 |
Total investments in non-convertible debentures | 26,195 | 2,955 | 29,015 | 3,580 |
The balances held in government securities as at March 31, 2019 and March 31, 2018 are as follows:
(in crore, except as otherwise stated)
Particulars | March 31, 2019 | March 31, 2018 | |||
Face Value ![]() |
Units | Amount | Units | Amount | |
7.17% Government of India 8JAN2028 | 10000/- | 675,000 | 672 | – | – |
7.95% Government of India 28AUG2032 | 10000/- | 50,000 | 52 | – | – |
Total investments in government securities | 725,000 | 724 | – | – |
The balances held in certificate of deposits as at March 31, 2019 and March 31, 2018 is as follows:
(in crore, except as otherwise stated)
Particulars | March 31, 2019 | March 31, 2018 | |||
Face Value ![]() |
Units | Amount | Units | Amount | |
Axis Bank | 1,00,000/- | 80,000 | 774 | 185,000 | 1,767 |
HDFC Bank | 1,00,000/- | – | – | 15,000 | 147 |
ICICI Bank | 1,00,000/- | 75,000 | 738 | 110,000 | 1,035 |
IndusInd Bank | 1,00,000/- | – | – | 135,000 | 1,272 |
Kotak Bank | 1,00,000/- | 50,000 | 486 | 70,000 | 680 |
Vijaya Bank | 1,00,000/- | 12,500 | 125 | – | – |
Total investments in certificates of deposit | 217,500 | 2,123 | 515,000 | 4,901 |
The balances held in commercial paper as at March 31, 2019 and March 31, 2018 is as follows:
(in crore, except as otherwise stated)
Particulars | March 31, 2019 | March 31, 2018 | |||
Face Value ![]() |
Units | Amount | Units | Amount | |
LIC | 5,00,000/- | 10,000 | 495 | 6,000 | 293 |
Total investments in commercial paper | 10,000 | 495 | 6,000 | 293 |
2.3.8 Assets held for sale
Accounting policy
Non-current assets and Disposal Group are classified as held for sale if their carrying amount is intended to be recovered principally through sale rather than through continuing use. The condition for classification of held for sale is met when the non-current asset or the Disposal Group is available for immediate sale and the same is highly probable of being completed within one year from the date of classification as held for sale. Non-current assets and Disposal Group held for sale are measured at the lower of carrying amount and fair value less cost to sell. Non-current assets and Disposal Group that ceases to be classified as held for sale shall be measured at the lower of carrying amount before the non-current asset and Disposal Group was classified as held for sale adjusted for any depreciation/ amortization and its recoverable amount at the date when the Disposal Group no longer meets the "Held for sale" criteria.
In the three months ended March 2018, the Company
had initiated identification and evaluation of potential buyers for the sale of its investment in subsidiaries, Kallidus and Skava
(together referred to as "Skava”) and Panaya. The investment in these subsidiaries was classified and presented separately
as “held for sale” and was carried at the lower of carrying value and fair value. Consequently, the Company has recognized
a reduction in the fair value of investment amounting to 589 crore during the three months and year ended March 31, 2018 in respect
of Panaya in the standalone financial statements of Infosys. During the three months ended June 30, 2018, on remeasurement, including
consideration of progress in negotiations on offers from prospective buyers for Panaya, the Company has recorded a reduction in
the fair value of investment amounting to
265 crore in respect of Panaya.
During the three months ended December 31, 2018, based on evaluation of proposals received and progress of negotiations with potential buyers, the Company concluded that the investments in Panaya and Skava does not meet the criteria for “Held for Sale’ classification because it is no longer highly probable that sale would be consummated by March 31, 2019 ( twelve months from date of initial classification “ as held for sale”) Accordingly, in accordance with Ind AS 105 -" Non current Assets held for Sale and Discontinued Operations", the investment in subsidiaries, Panaya and Skava have been included in non-current investments line item in the standalone financial statements as at December 31, 2018 and March 31, 2019.
On reclassification from “Held for sale”,
the investment in subsidiaries, Panaya and Skava have been remeasured in the quarter ended December 31, 2018 at the lower of cost
and recoverable amount resulting in recognition of an adjustment in respect of excess of carrying amount over recoverable amount
on reclassification from "Held for Sale" of 469 crore in respect of Skava in the standalone statement of profit and
loss for the three months and nine months ended December 31, 2018.
2.4 LOANS
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Non- Current | ||
Unsecured, considered good | ||
Other Loans | ||
Loans to employees | 16 | 19 |
16 | 19 | |
Unsecured, considered doubtful | ||
Other Loans | ||
Loans to employees | 18 | 12 |
34 | 31 | |
Less: Allowance for doubtful loans to employees | 18 | 12 |
Total non - current loans | 16 | 19 |
Current | ||
Loan receivables considered good - Unsecured | ||
Loans to subsidiaries (Refer note no.2.23) | 841 | 185 |
Other Loans | ||
Loans to employees | 207 | 208 |
Total current loans | 1,048 | 393 |
Total Loans | 1,064 | 412 |
2.5 OTHER FINANCIAL ASSETS
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Non-current | ||
Security deposits (1) | 47 | 48 |
Rental deposits (1) | 149 | 129 |
Total non-current other financial assets | 196 | 177 |
Current | ||
Security deposits (1) | 1 | 2 |
Rental deposits (1) | 3 | 6 |
Restricted deposits (1)* | 1,531 | 1,415 |
Unbilled revenues (1)(5)# | 1,541 | 3,573 |
Interest accrued but not due (1) | 865 | 739 |
Foreign currency forward and options contracts (2)(3) | 321 | 16 |
Escrow and other deposits pertaining to buyback (refer to note 2.10) (1) | 257 | – |
Others (1)(4) | 315 | 155 |
Total current other financial assets | 4,834 | 5,906 |
Total other financial assets | 5,030 | 6,083 |
(1) Financial assets carried at amortized cost | 4,709 | 6,067 |
(2)Financial assets carried at fair value through other comprehensive income | 37 | 12 |
(3)Financial assets carried at fair value through Profit or Loss | 284 | 4 |
(4) Includes dues from subsidiaries (Refer note no. 2.23) | 34 | 40 |
(5) Includes dues from subsidiaries (Refer note no. 2.23) | 51 | 32 |
* | Restricted deposits represent deposit with financial institutions to settle employee related obligations as and when they arise during the normal course of business. |
# Classified as financial asset as right to consideration is unconditional upon passage of time.
2.6 TRADE RECEIVABLES
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Current | ||
Unsecured | ||
Considered good(2) | 13,370 | 12,151 |
Considered doubtful | 431 | 315 |
13,801 | 12,466 | |
Less: Allowances for credit losses | 431 | 315 |
Total trade receivables(1) | 13,370 | 12,151 |
(1) Includes dues from companies where directors are interested | – | – |
(2) Includes dues from subsidiaries (refer note no. 2.23) | 325 | 335 |
2.7 CASH AND CASH EQUIVALENTS
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Balances with banks | ||
In current and deposit accounts | 10,957 | 10,789 |
Cash on hand | – | – |
Others | ||
Deposits with financial institutions | 4,594 | 5,981 |
Total Cash and cash equivalents | 15,551 | 16,770 |
Balances with banks in unpaid dividend accounts | 29 | 22 |
Deposit with more than 12 months maturity | 6,048 | 6,187 |
Balances with banks held as margin money deposits against guarantees | 114 | 353 |
Cash and cash equivalents as at March 31, 2019
and March 31, 2018 include restricted cash and bank balances of 143 crore and
375 crore, respectively. The restrictions are primarily
on account of bank balances held as margin money deposits against guarantees and balances held in unpaid dividend 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 table below provides details of cash and cash equivalents:
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
In current accounts | ||
ANZ Bank, Taiwan | 1 | 9 |
Bank of America, USA | 780 | 814 |
Bank of Baroda, Mauritius | 1 | 1 |
BNP Paribas Bank, Norway | 24 | 88 |
Citibank N.A., Australia | 55 | 184 |
Citibank N.A., Dubai | 5 | 5 |
Citibank N.A., EEFC (U.S. Dollar account) | 2 | 4 |
Citibank N.A., Hungary | 1 | 6 |
Citibank N.A., India | 2 | 3 |
Citibank N.A., Japan | 22 | 18 |
Citibank N.A., New Zealand | 3 | 8 |
Citibank N.A., South Africa | 18 | 33 |
Citibank N.A., South Korea | 17 | 2 |
Deutsche Bank, Belgium | 6 | 27 |
Deutsche Bank, EEFC (Australian Dollar account) | 3 | 2 |
Deutsche Bank, EEFC (Euro account) | 19 | 14 |
Deutsche Bank, EEFC (Swiss Franc account) | 5 | 2 |
Deutsche Bank, EEFC (U.S. Dollar account) | 212 | 27 |
Deutsche Bank, EEFC (United Kingdom Pound Sterling account) | 6 | 8 |
Deutsche Bank, France | 11 | 19 |
Deutsche Bank, Germany | 57 | 70 |
Deutsche Bank, India | 40 | 40 |
Deutsche Bank, Malaysia | 1 | 5 |
Deutsche Bank, Netherlands | 8 | 8 |
Deutsche Bank, Philippines | 1 | 14 |
Deutsche Bank, Russia | 3 | 3 |
Deutsche Bank, Russia (U.S. Dollar account) | – | 5 |
Deutsche Bank, Singapore | 15 | 17 |
Deutsche Bank, Spain | 1 | 1 |
Deutsche Bank, Switzerland | 4 | 18 |
Deutsche Bank, Switzerland (U.S. Dollar Account) | 1 | – |
Deutsche Bank, United Kingdom | 17 | 74 |
HSBC Bank, Hong Kong | 1 | 2 |
HSBC, India | 3 | – |
ICICI Bank, EEFC (U.S. Dollar account) | 18 | 5 |
ICICI Bank, India | 24 | 33 |
Nordbanken, Sweden | 21 | 26 |
Punjab National Bank, India | 2 | 12 |
Royal Bank of Canada, Canada | 28 | 9 |
Splitska Banka D.D., Société Générale Group, Croatia | 14 | 8 |
State Bank of India, India | 2 | – |
1,454 | 1,624 |
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
In deposit accounts | ||
Axis Bank | 700 | – |
Barclays Bank | 500 | 200 |
HDFC Bank | – | 2,423 |
HSBC Bank | 200 | – |
ICICI Bank | 3,060 | 3,467 |
IDFC Bank | 2,100 | 1,500 |
IndusInd Bank | 300 | 1,000 |
Kotak Mahindra Bank | 500 | – |
South Indian Bank | – | 200 |
Standard Chartered Bank | 2,000 | – |
9,360 | 8,790 | |
In unpaid dividend accounts | ||
Axis Bank - Unpaid dividend account | 4 | 1 |
HDFC Bank - Unpaid dividend account | – | 1 |
ICICI Bank - Unpaid dividend account | 25 | 20 |
29 | 22 | |
In margin money deposits against guarantees | ||
Canara Bank | 45 | 151 |
ICICI Bank | 69 | 202 |
114 | 353 | |
Deposits with financial institution | ||
HDFC Limited | 3,594 | 4,781 |
LIC Housing Finance Limited | 1,000 | 1,200 |
4,594 | 5,981 | |
Total cash and cash equivalents | 15,551 | 16,770 |
2.8 OTHER ASSETS
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Non-current | ||
Capital advances | 486 | 420 |
Advances other than capital advance | ||
Prepaid gratuity (Refer note 2.20) | 25 | 23 |
Others | ||
Prepaid expenses | 95 | 49 |
Deferred contract cost | 226 | 262 |
Withholding taxes and others | 908 | 1,407 |
Total non-current other assets | 1,740 | 2,161 |
Current | ||
Advances other than capital advance | ||
Payment to vendors for supply of goods | 94 | 103 |
Others | ||
Unbilled revenues(2) | 2,904 | – |
Prepaid expenses (1) | 580 | 449 |
Deferred contract cost | 52 | 44 |
Withholding taxes and others | 1,290 | 843 |
Total current other assets | 4,920 | 1,439 |
Total other assets | 6,660 | 3,600 |
(1) Includes dues from subsidiaries (Refer note no. 2.23) | 109 | 115 |
(2) | Classified as non financial asset as the contractual right to consideration is dependent on completion of contractual milestones. |
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
and Cenvat recoverable from Government of India. Cenvat recoverable includes 503 crore which are pending adjudication. The Company
expects these amounts to be sustainable on adjudication and recoverable on final resolution.
2.9 FINANCIAL INSTRUMENTS
Accounting Policy
2.9.1 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, which 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.
2.9.2 Subsequent measurement
a. Non-derivative financial instruments
(i) Financial assets carried at amortized cost
A financial asset is subsequently measured at amortized 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.
(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 or 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 includes 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 as 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 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 hedge 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 hedge 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 hedge reserve till the period the hedge was effective remains in cash flow hedge reserve until the forecasted transaction occurs. The cumulative gain or loss previously recognized in the cash flow hedge 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 hedge 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 and buy back of ordinary shares are recognized as a deduction from equity, net of any tax effects.
2.9.3 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.
2.9.4 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.
Refer to financial instruments by category table below for the disclosure on carrying value and fair value of financial assets and liabilities. For financial assets and liabilities maturing within one year from the Balance Sheet date and which are not carried at fair value, the carrying amounts approximate fair value due to the short maturity of these instruments.
2.9.5 Impairment
The Company recognizes loss allowances using the expected credit loss (ECL) model for the financial assets and unbilled revenues which are not fair valued through profit or loss. Loss allowance for trade receivables and unbilled revenues 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 statement of profit or loss.
Financial instruments by category
The carrying value and fair value of financial instruments by categories as at March 31, 2019 are as follows:
(In crore)
Particulars | Amortized 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 no. 2.7) | 15,551 | – | – | – | – | 15,551 | 15,551 |
Investments (Refer note no.2.3) | |||||||
Preference securities, Equity instruments and others | – | – | 16 | 90 | – | 106 | 106 |
Tax free bonds and government bonds | 1,840 | – | – | – | – | 1,840 | 2,048(2) |
Liquid mutual fund units | – | – | 1,701 | – | – | 1,701 | 1,701 |
Redeemable, non-convertible debentures (1) | 1,445 | – | – | – | – | 1,445 | 1,445 |
Fixed maturity plan securities | – | – | 401 | – | – | 401 | 401 |
Commercial paper | – | – | – | – | 495 | 495 | 495 |
Certificates of deposit | – | – | – | – | 2,123 | 2,123 | 2,123 |
Non convertible debentures | – | – | – | – | 2,955 | 2,955 | 2,955 |
Government Securities | – | – | – | – | 724 | 724 | 724 |
Trade receivables (Refer Note no. 2.6) | 13,370 | – | – | – | – | 13,370 | 13,370 |
Loans (Refer note no. 2.4) | 1,064 | – | – | – | – | 1,064 | 1,064 |
Other financial assets (Refer Note no. 2.5) (4) | 4,709 | – | 284 | – | 37 | 5,030 | 4,948(3) |
Total | 37,979 | – | 2,402 | 90 | 6,334 | 46,805 | 46,931 |
Liabilities: | |||||||
Trade payables (Refer Note no. 2.12) | 1,604 | – | – | – | – | 1,604 | 1,604 |
Other financial liabilities (Refer Note no. 2.11) | 7,067 | – | 128 | – | 1 | 7,196 | 7,196 |
Total | 8,671 | – | 128 | – | 1 | 8,800 | 8,800 |
(1) The carrying value of debentures approximates fair value as the instruments are at prevailing market rates
(2) On account of fair value changes including interest accrued
(3) Excludes interest accrued on tax free bonds
(4) | Excludes unbilled revenue for fixed price development contracts where right to consideration is conditional on factors other than passage of time |
The carrying value and fair value of financial instruments by categories as at March 31, 2018 were as follows:
(In
crore)
Particulars | Amortized 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 no. 2.7) | 16,770 | – | – | – | – | 16,770 | 16,770 |
Investments (Refer Note no. 2.3) | |||||||
Preference securities, Equity instruments and others | – | – | 7 | 117 | – | 124 | 124 |
Tax free bonds and government bonds | 1,832 | – | – | – | – | 1,832 | 2,079(2) |
Liquid mutual fund units | – | – | – | – | – | – | – |
Redeemable, non-convertible debentures (1) | 1,780 | – | – | – | – | 1,780 | 1,780 |
Fixed maturity plan securities | – | – | 376 | – | – | 376 | 376 |
Certificates of deposit | – | – | – | – | 4,901 | 4,901 | 4,901 |
Non convertible debentures | – | – | – | – | 3,580 | 3,580 | 3,580 |
Commercial paper | – | – | – | – | 293 | 293 | 293 |
Trade receivables (Refer Note no. 2.6) | 12,151 | – | – | – | – | 12,151 | 12,151 |
Loans (Refer note no. 2.4) | 412 | – | – | – | – | 412 | 412 |
Other financial assets (Refer Note no. 2.5) | 6,067 | – | 4 | – | 12 | 6,083 | 6,001(3) |
Total | 39,012 | – | 387 | 117 | 8,786 | 48,302 | 48,467 |
Liabilities: | |||||||
Trade payables (Refer note no. 2.12) | 738 | – | – | – | – | 738 | 738 |
Other financial liabilities (Refer Note no. 2.11) | 4,241 | – | 91 | – | 3 | 4,335 | 4,335 |
Total | 4,979 | – | 91 | – | 3 | 5,073 | 5,073 |
(1) The carrying value of debentures approximates fair value as the instruments are at prevailing market rates
(2) On account of fair value changes including interest accrued
(3) Excludes interest accrued on tax free bonds
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 fair value hierarchy of assets and liabilities as at March 31, 2019 is as follows:
(In crore)
Particulars | March 31, 2019 | Fair value measurement at end of the reporting period using | ||
Level 1 | Level 2 | Level 3 | ||
Assets | ||||
Investments in tax free bonds (Refer note no. 2.3) | 2,036 | 1,765 | 271 | – |
Investments in government bonds (Refer note no. 2.3) | 12 | 12 | – | – |
Investments in liquid mutual fund units (Refer note no. 2.3) | 1,701 | 1,701 | – | – |
Investments in equity instruments (Refer note no. 2.3) | 1 | – | – | 1 |
Investments in preference securities (Refer note no. 2.3) | 89 | – | – | 89 |
Investments in fixed maturity plan securities (Refer note no. 2.3) | 401 | – | 401 | – |
Investments in certificates of deposit (Refer note no. 2.3) | 2,123 | – | 2,123 | – |
Investments in commercial paper (Refer Note no. 2.3) | 495 | – | 495 | – |
Investments in non convertible debentures (Refer note no. 2.3) | 2,955 | 1,612 | 1,343 | – |
Investments in government securities (Refer note no. 2.3) | 724 | 724 | – | – |
Other investments (Refer note no. 2.3) | 16 | – | – | 16 |
Derivative financial instruments - gain on outstanding foreign currency forward and option contracts (Refer note no. 2.5) | 321 | – | 321 | – |
Liabilities | ||||
Derivative financial instruments - loss on outstanding foreign currency forward and option contracts (Refer note no. 2.11) | 13 | – | 13 | – |
Liability towards contingent consideration (Refer note no. 2.11)(1)(2) | 116 | – | – | 116 |
(1) | Pertains to contingent consideration payable to selling shareholders of Wongdoody and Brilliant Basics Holding Limited as per the share purchase agreement. |
(2) | Discount rate pertaining to contingent consideration ranges from 10% to 16% |
During the year ended March 31, 2019, tax free
bonds and non-convertible debentures of 336 crore were transferred from Level 2 to Level 1 of fair value hierarchy, since
these were valued based on Quoted price, and
746 crore were transferred from Level 1 to Level 2 of fair value hierarchy,
since these were valued based on market observable inputs.
The fair value hierarchy of assets and liabilities as at March 31, 2018 was as follows:
(In crore)
Particulars | March 31, 2018 | Fair value measurement at end of the reporting period using | ||
Level 1 | Level 2 | Level 3 | ||
Assets | ||||
Investments in tax free bonds (Refer Note no. 2.3) | 2,078 | 1,806 | 272 | – |
Investments in government bonds (Refer Note no. 2.3) | 1 | 1 | – | – |
Investments in equity instruments (Refer Note no. 2.3) | 1 | – | – | 1 |
Investments in preference securities (Refer Note no. 2.3) | 116 | – | – | 116 |
Investments in fixed maturity plan securities (Refer Note no. 2.3) | 376 | – | 376 | – |
Investments in certificates of deposit (Refer Note no. 2.3) | 4,901 | – | 4,901 | – |
Investments in non convertible debentures (Refer Note no. 2.3) | 3,580 | 2,493 | 1,087 | – |
Investments in commercial paper (Refer Note no. 2.3) | 293 | – | 293 | – |
Other investments (Refer Note no. 2.3) | 7 | – | – | 7 |
Derivative financial instruments - gain on outstanding foreign currency forward and option contracts (Refer Note no. 2.5) | 16 | – | 16 | – |
Liabilities | ||||
Derivative financial instruments - loss on outstanding foreign currency forward and option contracts (Refer note 2.11) | 40 | – | 40 | – |
Liability towards contingent consideration (Refer note no. 2.11)(1)(2) | 54 | – | – | 54 |
(1) | Pertains to contingent consideration payable to selling shareholders of Kallidus and Brilliant Basics Holding Limited as per the share purchase agreement. |
(2) | Discounted ![]() |
During the year ended March 31, 2018, tax free
bonds and non-convertible debentures of 1,797 crore were transferred from Level 2 to Level 1 of fair value hierarchy, since
these were valued based on Quoted price, and
743 crore were transferred from Level 1 to Level 2 of fair value hierarchy,
since these were valued based on market observable inputs.
A one percentage point change in the unobservable inputs used in fair valuation of Level 3 assets and liabilities does not have a significant impact in its value.
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 Indian 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 analyses the foreign currency risk from monetary assets and liabilities as at March 31, 2019:
(In crore)
Particulars | U.S. dollars | Euro | United Kingdom Pound Sterling | Australian dollars | Other currencies | Total |
Cash and cash equivalents | 1,013 | 102 | 23 | 58 | 185 | 1,381 |
Trade receivables | 9,009 | 1,688 | 1,005 | 484 | 693 | 12,879 |
Other financial assets , loans and other current assets | 3,617 | 815 | 280 | 259 | 997 | 5,968 |
Trade payables | (645) | (99) | (201) | (77) | (52) | (1,074) |
Other financial liabilities | (3,546) | (364) | (196) | (290) | (257) | (4,653) |
Net assets / (liabilities) | 9,448 | 2,142 | 911 | 434 | 1,566 | 14,501 |
The following table analyses the foreign currency risk from monetary assets and liabilities as at March 31, 2018:
(In crore)
Particulars | U.S. dollars | Euro | United Kingdom Pound Sterling | Australian dollars | Other currencies | Total |
Cash and cash equivalents | 858 | 139 | 82 | 186 | 271 | 1,536 |
Trade Receivables | 7,776 | 1,522 | 871 | 743 | 550 | 11,462 |
Other financials assets ( including loans) | 2,196 | 597 | 335 | 159 | 305 | 3,592 |
Trade payables | (312) | (60) | (168) | (36) | (22) | (598) |
Other financial liabilities | (1,962) | (252) | (148) | (220) | (162) | (2,744) |
Net assets / (liabilities) | 8,556 | 1,946 | 972 | 832 | 942 | 13,248 |
Sensitivity analysis between Indian Rupee and USD
Particulars | Year ended March 31, | |
2019 | 2018 | |
Impact on the Company's incremental Operating Margins | 0.48% | 0.52% |
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. 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 details in respect of outstanding foreign currency forward and option contracts are as follows :
Particulars | As at | As at | ||
March 31, 2019 | March 31, 2018 | |||
In million | In ![]() |
In million | In ![]() | |
Derivatives designated as cash flow hedges | ||||
Option Contracts | ||||
In Australian dollars | 120 | 588 | 60 | 300 |
In Euro | 135 | 1,049 | 100 | 808 |
In United Kingdom Pound Sterling | 25 | 226 | 20 | 184 |
Other derivatives | ||||
Forward contracts | ||||
In Canadian dollars | 13 | 68 | 20 | 99 |
In Euro | 166 | 1,289 | 86 | 695 |
In Japanese Yen | 550 | 34 | 550 | 34 |
In New Zealand dollars | 16 | 75 | 16 | 76 |
In Norwegian Krone | 40 | 32 | 40 | 34 |
In South African Rand | – | – | 25 | 14 |
In Singapore dollars | 140 | 716 | 5 | 25 |
In Swedish Krona | 50 | 37 | 50 | 40 |
In Swiss Franc | 25 | 172 | 21 | 146 |
In U.S. dollars | 855 | 5,910 | 556 | 3,624 |
In United Kingdom Pound Sterling | 70 | 634 | 45 | 415 |
Option Contracts | ||||
In Australian dollars | 10 | 49 | 20 | 100 |
In Canadian dollars | 13 | 69 | – | – |
In Euro | 60 | 466 | 45 | 363 |
In Swiss Franc | 5 | 35 | 5 | 33 |
In U.S. dollars | 433 | 2,995 | 320 | 2,086 |
In United Kingdom Pound Sterling | 10 | 91 | 25 | 231 |
Total forwards and option contracts | 14,535 | 9,307 |
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 at the balance sheet date:
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Not later than one month | 4,082 | 2,693 |
Later than one month and not later than three months | 6,368 | 4,274 |
Later than three months and not later than one year | 4,085 | 2,340 |
14,535 | 9,307 |
During the year ended March 31, 2019, the Company has designated certain foreign exchange forward and option contracts as cash flow hedges to mitigate the risk of foreign exchange exposure on highly probable forecast cash transactions. The related hedge transactions for balance in cash flow hedge reserve as at March 31, 2019 are expected to occur and reclassified to statement of profit and loss within 3 months.
Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument, including whether the hedging instrument is expected to offset changes in cash flows of hedged items.
If the hedge ratio for risk management purposes is no longer optimal but the risk management objective remains unchanged and the hedge continues to qualify for hedge accounting, the hedge relationship will be rebalanced by adjusting either the volume of the hedging instrument or the volume of the hedged item so that the hedge ratio aligns with the ratio used for risk management purposes. Any hedge ineffectiveness is calculated and accounted for in the Statement of Profit or Loss at the time of the hedge relationship rebalancing.
The following table provides the reconciliation of cash flow hedge reserve for the year ended March 31, 2019 and March 31, 2018 :
(In crore)
Particulars | Year ended March 31, | |
2019 | 2018 | |
Gain / (Loss) | ||
Balance at the beginning of the year | – | 39 |
Gain / (Loss) recognized in other comprehensive income during the year | 118 | (93) |
Amount reclassified to profit and loss during the year | (90) | 41 |
Tax impact on above | (7) | 13 |
Balance at the end of the year | 21 | – |
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 realize the asset and settle the liability simultaneously.
The quantitative information about offsetting of derivative financial assets and derivative financial liabilities is as follows:
(In crore)
Particulars | As at | As at | ||
March 31, 2019 | March 31, 2018 | |||
Derivative financial asset | Derivative financial liability | Derivative financial asset |
Derivative financial liability | |
Gross amount of recognized financial asset / liability | 323 | (15) | 20 | (44) |
Amount set off | (2) | 2 | (4) | 4 |
Net amount presented in Balance Sheet | 321 | (13) | 16 | (40) |
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 13,370 crore and
12,151 crore as at March 31, 2019 and March 31, 2018, respectively
and unbilled revenue amounting to
4,445 crore and
3,573 crore as at March 31, 2019 and March 31, 2018, 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 Company through credit approvals, establishing credit limits and continuously
monitoring the creditworthiness of customers to which the Company grants credit terms in the normal course of business. As per
Ind AS 109, the Company uses expected credit loss model to assess the impairment loss or gain. The Company 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 Company's historical experience for customers.
The details in respect of percentage of revenues generated from top customer and top 10 customers are as follows:
(In %)
Particulars | Year ended March 31, | |
2019 | 2018 | |
Revenue from top customer | 4.0 | 3.9 |
Revenue from top 10 customers | 20.3 | 21.0 |
Credit risk exposure
The allowance for lifetime expected credit loss
on customer balances for the year ended March 31, 2019 and March 31, 2018 is 176 crore and
18 crore, respectively.
Movement in credit loss allowance:
(In crore)
Particulars | Year ended March 31, | |
2019 | 2018 | |
Balance at the beginning | 401 | 379 |
Impairment loss recognized/ (reversed) | 176 | 18 |
Amounts written off | (67) | (3) |
Translation differences | 11 | 7 |
Balance at the end | 521 | 401 |
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, fixed maturity plan securities, quoted bonds issued by government and quasi government organizations, non convertible debentures issued by government aided institutions, certificates of deposit and commercial paper.
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 borrowings. The Company believes that the working capital is sufficient to meet its current requirements.
As at March 31, 2019, the Company had a working
capital of 30,793 crore including cash and cash equivalents of
15,551 crore and current investments of
6,077 crore. As at March
31, 2018, the Company had a working capital of
30,903 crore including cash and cash equivalents of
16,770 crore and current investments
of
5,906 crore.
As at March 31, 2019 and March 31, 2018, the
outstanding compensated absences were 1,411 crore and
1,260 crore, respectively, which have been substantially funded. Accordingly,
no liquidity risk is perceived.
Under the Company's ongoing buyback program
the maximum buyback size is 8,260 crore. The company has bought back shares amounting to
797 crore (including transaction costs)
till March 31, 2019 (Refer to note no 2.10)
The details regarding the contractual maturities of significant financial liabilities as at March 31, 2019 are as follows:
(In crore)
Particulars | Less than 1 year | 1-2 years | 2-4 years | 4-7 years | Total |
Trade payables | 1,604 | – | – | – | 1,604 |
Other financial liabilities (excluding liability towards acquisition) (Refer Note no. 2.11) | 7,067 | – | – | – | 7,067 |
Liability towards acquisitions on an undiscounted basis (including contingent consideration) |
82 | 53 | – | – | 135 |
The details regarding the contractual maturities of significant financial liabilities as at March 31, 2018 were as follows:
(In crore)
Particulars | Less than 1 year | 1-2 years | 2-4 years | 4-7 years | Total |
Trade payables | 738 | – | – | – | 738 |
Other financial liabilities (excluding liability towards acquisition) (Refer Note no. 2.11) | 4,241 | – | – | – | 4,241 |
Liability towards acquisitions on an undiscounted basis (including contingent consideration) |
41 | 7 | 7 | – | 55 |
2.10 EQUITY
EQUITY SHARE CAPITAL
(In crore, except as otherwise stated)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Authorized | ||
Equity shares, ![]() |
||
4,80,00,00,000 (2,40,00,00,000) equity shares | 2,400 | 1,200 |
Issued, Subscribed and Paid-Up | ||
Equity shares, ![]() |
2,178 | 1,092 |
4,35,62,79,444 (2,18,41,14,257) equity shares fully paid-up | ||
2,178 | 1,092 |
(1) Refer note no. 2.21 for details of basic and diluted shares
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 Depository Shares (ADS) carry similar rights to voting and dividends as the other equity shares. Each ADS
represents one underlying equity share
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.
In the period of five years immediately preceding March 31, 2019:
The Company has allotted 2,18,41,91,490 fully
paid up equity shares of face value 5/- each during the three months ended September 30, 2018 pursuant to a bonus issue
approved by the shareholders through postal ballot. Record date fixed by the Board of Directors was September 5, 2018. The bonus
shares were issued by capitalization of profits transferred from general reserve. Bonus share of one equity share for every equity
share held, and a bonus issue, viz., 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 stock option plan have been adjusted for bonus shares.
The Company has allotted 1,14,84,72,332 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 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 (RSU) have been adjusted for bonus shares.
The bonus shares once allotted shall rank pari passu in all respects and carry the same rights as the existing equity shareholders and shall be entitled to participate in full, in any dividend and other corporate action, recommended and declared after the new equity shares are allotted
Update on capital allocation policy and buyback
In line with the capital allocation policy announced in April 2018, the Board, in its meeting held on January 11, 2019, approved the following :
(a) Declared a special dividend of 4/-
per equity share;
(b) | Recommended buyback of Equity Shares from the open market route through Indian stock
exchanges of up to ![]() ![]() ![]() ![]() |
The shareholders approved the proposal of buyback
of Equity Shares recommended by its Board of Directors in its meeting held on January 11, 2019 through the postal ballot that concluded
on March 12, 2019. At the Maximum buyback price of 800/- per Equity share and the Maximum buyback size of
8,260 crore,
the indicative maximum number of Equity shares bought back would be 10,32,50,000 Equity Shares (Maximum buyback shares) comprising
approximately 2.36% of the paid-up equity share capital of the Company as of March 12, 2019 (the date of conclusion of postal ballot
for approval for buyback).
The buyback was offered to all eligible equity
shareholders of the Company (other than the Promoters, the Promoter Group and Persons in Control of the Company) under the open
market route through the stock exchange. The Company will fund the buyback from its free reserves. The buyback of equity shares
through the stock exchange commenced on March 20, 2019 and is expected to be completed by September 2019. During the year ended
March 31, 2019, 1,26,52,000 equity shares were purchased from the stock exchange which includes 18,18,000 shares which have been
purchased but not extinguished as of March 31, 2019 and 36,36,000 shares which have been purchased but have not been settled and
therefore not extinguished as of March 31, 2019. In accordance with section 69 of the Companies Act, 2013, during the year ended
March 31, 2019 , the Company has created ‘Capital Redemption Reserve’ of 5 crore equal to the nominal value
of the shares bought back as an appropriation from general reserve.
The Board, at its meeting on August 19, 2017,
approved a proposal for the Company to buyback its fully paid-up equity shares of face value of 5/- each from the eligible equity
shareholders of the Company for an amount not exceeding
13,000 crore. The shareholders approved the said proposal of buyback of
Equity Shares through the postal ballot that concluded on October 7, 2017. The Buyback offer comprised a purchase of 11,30,43,478
Equity Shares aggregating 4.92% of the paid-up equity share capital of the Company at a price of
1,150/- per Equity share. The
buyback was offered to all eligible equity shareholders (including those who became equity shareholders as on the Record date by
cancelling American Depository Shares and withdrawing underlying Equity shares) of the Company as on the Record Date (i.e. November
1, 2017) on a proportionate basis through the "Tender offer" route. The Company concluded the buyback procedures on December
27, 2017 and 11,30,43,478 equity shares were extinguished. The company has utilized its securities premium and general reserve
for the buyback of its equity shares. In accordance with section 69 of the Companies Act, 2013, the company has created ‘Capital
Redemption Reserve’ of
56 crore equal to the nominal value of the shares bought back as an appropriation from general reserve
during the year ended March 31, 2018.
The Company’s objective when managing capital is to safeguard its ability to continue as a going concern and to maintain an optimal capital structure so as to maximize shareholder value. In order to maintain or achieve an optimal capital structure, the Company may adjust the amount of dividend payment, return capital to shareholders, issue new shares or buy back issued shares. As of March 31, 2019, the Company has only one class of equity shares and has no debt. Consequent to the above capital structure there are no externally imposed capital requirements.
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.
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. Dividend distribution tax paid by subsidiaries may be reduced / available as a credit against dividend distribution tax payable by Infosys Limited.
Effective from Fiscal 2018, the Company's policy is to payout up to 70% of the free cash flow of the corresponding Financial Year in such manner (including by way of dividend and / or share buyback) as may be decided by the Board from time to time, subject to applicable laws and requisite approvals, if any. Free cash flow is defined as net cash provided by operating activities less capital expenditure as per the consolidated statement of cash flows prepared under International Financial Reporting standards(IFRS). Dividend payout includes dividend distribution tax.
The amount of per share dividend recognized as distribution to equity shareholders is as follows:
(in )
Particulars | Year ended March 31, | |
2019 | 2018 | |
Final Dividend for fiscal 2018 | 10.25 | – |
Special dividend for fiscal 2018 | 5.00 | – |
Interim dividend for fiscal 2019 | 7.00 | – |
Special dividend for fiscal 2019 | 4.00 | – |
Final dividend for fiscal 2017 | – | 7.38 |
Interim dividend for fiscal 2018 | – | 6.50 |
Note: | Dividend per equity share disclosed in the above table represents dividends declared previously, retrospectively adjusted for September 2018 bonus issue. |
During the year ended March 31, 2019 on account
of the final dividend for fiscal 2018, special divided for fiscal 2018 and fiscal 2019 and interim dividend for fiscal 2019 the
Company has incurred a net cash outflow of 13,761 crore inclusive of dividend distribution tax.
The Board of Directors in their meeting on April
12, 2019 recommended a final dividend of 10.50/- per equity share for the financial year ended March 31, 2019. This payment
is subject to the approval of shareholders in the ensuing Annual General Meeting of the Company, to be held on June 22, 2019 and
if approved would result in a net cash outflow of approximately
5,504 crore, including dividend distribution tax. The final
dividend of
10.50/- per equity share and the resultant expected cash outflow is based on the outstanding number of shares after
considering shares bought back by the Company subsequent to the year ended March 31, 2019
Bonus issue
The details of shareholder holding more than 5% shares as at March 31, 2019 and March 31, 2018 are set out below :
Name of the shareholder | As at March 31, 2019 | As at March 31, 2018 | ||
Number of shares | % held | Number of shares | % held | |
Deutsche Bank Trust Company Americas (Depository of ADR's - legal ownership) | 74,62,54,648 | 17.11 | 37,99,05,859 | 17.39 |
Life Insurance Corporation of India | 25,43,32,376 | 5.83 | 14,95,14,017 | 6.85 |
The reconciliation of the number of shares outstanding and the amount of share capital as at March 31, 2019 and March 31, 2018 is set out below:
in crore, except as stated otherwise
Particulars | As at March 31, 2019 | As at March 31, 2018 | ||
Number of shares | Amount | Number of shares | Amount | |
Number of shares at the beginning of the year | 2,18,41,14,257 | 1,092 | 2,29,69,44,664 | 1,148 |
Add: Shares issued on exercise of employee stock options -before bonus issue | 77,233 | – | 213,071 | – |
Add: Bonus shares issued | 2,18,41,91,490 | 1,092 | – | – |
Add: Shares issued on exercise of employee stock options after bonus issue |
548,464 | – | – | – |
Less: Shares bought back(1)(2) | 12,652,000 | 6 | 11,30,43,478 | 56 |
Number of shares at the end of the period | 4,35,62,79,444 | 2,178 | 2,18,41,14,257 | 1,092 |
(1) | Includes 18,18,000 shares which have been purchased on account of buyback during the three months ended March 31, 2019 and have not been extinguished as of March 31, 2019 |
(2) | Includes 36,36,000 shares which have been purchased on account of buyback during the three months ended March 31, 2019 but have not been settled and therefore not extinguished as of March 31, 2019 |
Employee Stock Option Plan (ESOP):
Accounting Policy
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.
2015 Stock Incentive Compensation Plan (the 2015 Plan) (formerly 2011 RSU Plan):
On March 31, 2016, pursuant to the approval by the shareholders through postal ballot, the Board has been authorized to introduce, offer, issue and allot share-based incentives to eligible employees of the Company and its subsidiaries under the 2015 Stock Incentive Compensation Plan (the 2015 Plan). The maximum number of shares under the 2015 plan shall not exceed 2,40,38,883 equity shares (this includes 1,12,23,576 equity shares which are held by the trust towards the 2011 Plan as at March 31, 2016). Out of this 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 on the date of the grant. These instruments will generally 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. The plan numbers mentioned above would further be adjusted for the September 2018 bonus issue.
Consequent to the September 2018 bonus issue, all outstanding options granted under the stock option plan have been adjusted for bonus shares. Unless otherwise stated , all the prior period share numbers, share prices and weighted average exercise prices in this note have been adjusted to give effect to the September 2018 bonus issue.
Controlled trust holds 2,03,24,982 and 1,08,01,956 shares (not adjusted for September 2018 bonus issue) as at March 31, 2019 and March 31, 2018, respectively under the 2015 plan. Out of these shares 2,00,000 and 1,00,000 (not adjusted for September 2018 bonus issue) equity shares have been earmarked for welfare activities of the employees as at March 31, 2019 and March 31, 2018, respectively.
The following is the summary of grants for the year ended March 31, 2019 and March 31, 2018 under the 2015 Plan:
Particulars | Year ended | |
March 31, 2019 | March 31, 2018 | |
RSU | ||
Salil Parekh, CEO and MD - Refer note 1 below | 2,60,130 | 226,048 |
U.B. Pravin Rao, COO and WTD | 68,250 | 54,500 |
Dr. Vishal Sikka* | – | 5,40,448 |
Other KMPs | 3,47,150 | 5,46,200 |
Employees other than KMPs | 36,65,170 | 31,94,020 |
4,340,700 | 45,61,216 | |
ESOP | ||
U.B. Pravin Rao, COO and WTD | – | 86,000 |
Dr. Vishal Sikka* | – | 6,61,050 |
Other KMPs | – | 88,900 |
Employees other than KMPs | – | 1,47,200 |
– | 9,83,150 | |
Incentive units - cash settled | ||
Other employees | 74,090 | 1,00,080 |
74,090 | 1,00,080 | |
Total grants | 4,414,790 | 56,44,446 |
Information in the table above is adjusted for September 2018 bonus issue.
* | Upon Dr. Vishal Sikka's resignation from the roles of the company, the unvested RSUs and ESOPs have been forfeited |
1. Stock incentives granted to Salil Parekh, CEO and MD
Pursuant to the approval of the shareholders through a postal ballot on February 20, 2018, Salil Parekh (CEO & MD) is eligible to receive under the 2015 Plan:
a) | an annual grant of RSUs of fair value ![]() |
b) | a one-time grant of RSUs of fair value ![]() |
c) | annual grant of performance based RSUs of fair value ![]() |
The Board based on the recommendations of the Nomination and Remuneration committee approved on February 27, 2018, the annual time based grant for fiscal 2018 of 56,512 RSUs (adjusted for September 2018 bonus issue) and the one-time time based grant of 1,69,536 RSUs (adjusted for September 2018 bonus issue). The grants were made effective February 27, 2018.
Further, the Board, based on the recommendations of the Nomination and Remuneration Committee, granted 217,200 (adjusted for September 2018 bonus issue) performance based RSUs to Salil Parekh with an effective date of May 2, 2018. The grants would vest upon successful completion of three full fiscal years with the Company concluding on March 31, 2021 and will be determined based on achievement of certain performance targets for the said three-year period.
The Board based on the recommendations of the Nomination and Remuneration committee approved on January 11, 2019, the annual time based grant for fiscal 2019 of 42,930 RSUs. The grant was made effective February 1, 2019.
Though the annual time based grants for the remaining employment term ending on March 31, 2023 have not been granted as of March 31, 2019, since the service commencement date precedes the grant date, the company has recorded employment stock compensation expense in accordance with Ind AS 102, Share based payments.
The RSUs and stock options would vest generally over a period of 4 years 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.
As at March 31, 2019 and March 31, 2018, incentive units outstanding (net of forfeitures) were 1,77,454 and 2,23,514 (adjusted for September 2018 bonus issue), respectively.
Break-up of employee stock compensation expense
(in crore)
Year ended March 31, | ||
2019 | 2018 | |
Granted to: | ||
KMP(2) | 33 | (13) |
Employees other than KMP | 149 | 85 |
Total (1) | 182 | 72 |
(1) Cash settled stock compensation expense included in the above | 2 | 1 |
(2) | Included a reversal of stock compensation cost of ![]() |
The carrying value of liability towards cash settled
share based payments was 9 crore and
6 crore as at March 31, 2019 and March 31, 2018, respectively.
The activity in the 2015 Plan (formerly 2011 RSU Plan) for equity-settled share based payment transactions during the year ended March 31, 2019 and March 31, 2018 is set out below:
Particulars | Year ended March 31, 2019 |
Year ended March 31, 2018 | ||
Shares arising out of options | Weighted average exercise price (![]() |
Shares arising out of options | Weighted average exercise price (![]() | |
2015 Plan: RSU | ||||
Outstanding at the beginning | 75,00,818 | 2.50 | 59,22,746 | 2.50 |
Granted | 43,40,700 | 3.84 | 45,61,216 | 2.50 |
Exercised | 18,64,510 | 2.50 | 12,96,434 | 2.50 |
Forfeited and expired | 7,95,810 | 2.61 | 16,86,710 | 2.50 |
Outstanding at the end | 9,181,198 | 3.13 | 75,00,818 | 2.50 |
Exercisable at the end | 235,256 | 2.50 | 48,410 | 2.50 |
2015 Plan: Employee Stock Options (ESOPs) | ||||
Outstanding at the beginning | 19,33,826 | 493 | 23,95,300 | 496 |
Granted | – | – | 983,150 | 472 |
Exercised | 1,17,350 | 515 | 104,824 | 492 |
Forfeited and expired | 1,93,300 | 521 | 13,39,800 | 481 |
Outstanding at the end | 1,623,176 | 516 | 19,33,826 | 493 |
Exercisable at the end | 6,98,500 | 517 | 3,93,824 | 496 |
Information in the table above is adjusted for September 2018 bonus issue.
During the year ended March 31, 2019 and March
31, 2018 the weighted average share price of options exercised under the 2015 Plan on the date of exercise was 701 and
496.
(adjusted for September 2018 bonus issue) respectively.
The following table summarizes information about equity settled RSUs and ESOPs outstanding as at March 31, 2019
Options outstanding | |||
Range of exercise prices per share (![]() |
No. of shares arising out of options | Weighted average remaining contractual life | Weighted average exercise price (![]() |
2015 Plan: | |||
0 - 5 (RSU) | 9,181,198 | 1.70 | 3.13 |
450 - 600 (ESOP) | 1,623,176 | 5.04 | 516 |
10,804,374 | 2.20 | 80 |
Information in the table above is adjusted for September 2018 bonus issue.
The following table summarizes information about equity settled RSUs and ESOPs outstanding as at March 31, 2018:
Options outstanding | |||
Range of exercise prices per share (![]() |
No. of shares arising out of options | Weighted average remaining contractual life | Weighted average exercise price (![]() |
2015 Plan: | |||
0 - 2.50 (RSU) | 75,00,818 | 1.89 | 2.50 |
450 - 600 (ESOP) | 19,33,826 | 6.60 | 493 |
94,34,644 | 2.57 | 104 |
Information in the table above is adjusted for September 2018 bonus issue.
The fair value of each equity settled award is estimated on the date of grant using the Black-Scholes-Merton model with the following assumptions:
Particulars | For options granted in | |
Fiscal 2019- Equity Shares-RSU |
Fiscal 2019- ADS-RSU | |
Weighted average share price (![]() |
696 | 10.77 |
Exercise price (![]() |
3.31 | 0.06 |
Expected volatility (%) | 21-25 | 22-26 |
Expected life of the option (years) | 1-4 | 1-4 |
Expected dividends (%) | 2.65 | 2.65 |
Risk-free interest rate (%) | 7-8 | 2-3 |
Weighted average fair value as on grant date (![]() |
648 | 10.03 |
Particulars | For options granted in | |||
Fiscal 2018- Equity Shares-RSU |
Fiscal 2018- Equity shares ESOP |
Fiscal 2018- ADS-RSU |
Fiscal 2018- ADS- ESOP | |
Weighted average share price (![]() |
572 | 461 | 8.31 | 7.32 |
Exercise price (![]() |
2.50 | 459 | 0.04 | 7.33 |
Expected volatility (%) | 20-25 | 25-28 | 21-26 | 25-31 |
Expected life of the option (years) | 1 - 4 | 3 - 7 | 1 - 4 | 3 - 7 |
Expected dividends (%) | 2.78 | 2.78 | 2.74 | 2.74 |
Risk-free interest rate (%) | 6 - 7 | 6 - 7 | 1 - 2 | 1 - 2 |
Weighted average fair value as on grant date (![]() |
533 | 127 | 7.74 | 1.47 |
(1) Adjusted for September 2018 bonus issue.
The expected life of the RSU / ESOP is estimated based on the vesting term and contractual term of the RSU / ESOP, as well as expected exercise behaviour of the employee who receives the RSU / ESOP. Expected volatility during the expected term of the RSU / ESOP 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 / ESOP.
2.11 OTHER FINANCIAL LIABILITIES
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Non-current | ||
Others | ||
Compensated absences | 38 | 42 |
Payable for acquisition of business- Contingent consideration | 41 | 13 |
Total non-current other financial liabilities | 79 | 55 |
Current | ||
Unpaid dividends | 29 | 22 |
Others | ||
Accrued compensation to employees | 2,006 | 2,048 |
Accrued expenses (1) | 2,310 | 1,776 |
Retention monies | 60 | 63 |
Payable for acquisition of business - Contingent consideration | 75 | 41 |
Capital creditors | 653 | 148 |
Financial liability relating to buyback (refer note 2.10) | 1,202 | – |
Compensated absences | 1,373 | 1,218 |
Other payables (2) | 807 | 184 |
Foreign currency forward and options contracts | 13 | 40 |
Total current other financial liabilities | 8,528 | 5,540 |
Total other financial liabilities | 8,607 | 5,595 |
Financial liability carried at amortized cost | 7,067 | 4,241 |
Financial liability carried at fair value through profit or loss | 128 | 91 |
Financial liability carried at fair value through other comprehensive income | 1 | 3 |
Contingent consideration on undiscounted basis | 135 | 55 |
(1) Includes dues to subsidiaries (Refer note no. 2.23) | 6 | 9 |
(2) Includes dues to subsidiaries (Refer note no. 2.23) | 13 | 19 |
In accordance with Ind AS 32 Financial Instruments:
Presentation, the Company has recorded a financial liability of 1,202 crore for the obligation to acquire its own equity shares
to the extent of standing instructions provided to its registered broker for the buyback as of March 31, 2019 (refer to note 2.10).
The financial liability is recognised at the present value of the maximum amount that the Company would be required to pay to the
registered broker for buy back, with a corresponding debit in general reserve / retained earnings.
2.12 TRADE PAYABLES
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Trade payables(1) | 1,604 | 738 |
Total trade payables | 1,604 | 738 |
(1)Includes dues to subsidiaries (refer note no. 2.23) | 220 | 178 |
As at March 31, 2019 and March 31, 2018, there
are no outstanding dues to Micro, Small and Medium Enterprises. There is no interest due or outstanding on the same. During the
year ended March 31, 2019, an amount of 30 crore was paid beyond the appointed day as defined in the Micro, Small and Medium
Enterprises Development Act 2006, which has been paid as of March 31, 2019.
2.13 OTHER LIABILITIES
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Non current | ||
Others | ||
Deferred income | 29 | 36 |
Deferred rent | 140 | 117 |
Total non - current other liabilities | 169 | 153 |
Current | ||
Unearned revenue | 2,094 | 1,887 |
Client deposits | 19 | 32 |
Others | ||
Withholding taxes and others | 1,168 | 1,029 |
Deferred rent | 54 | 24 |
Total current other liabilities | 3,335 | 2,972 |
Total other liabilities | 3,504 | 3,125 |
2.14 PROVISIONS
Accounting Policy
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.
Provision for post-sales client support and others
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Current | ||
Others | ||
Post-sales client support and others | 505 | 436 |
Total provisions | 505 | 436 |
The movement in the provision for post-sales client support and others is as follows :
(In crore)
Particulars | Year ended March 31, 2019 |
Balance at the beginning | 436 |
Provision recognized/(reversed) | 141 |
Provision utilized | (97) |
Exchange difference | 25 |
Balance at the end | 505 |
Provision for post-sales client support and others are expected to be utilized over a period of 6 months to 1 year.
2.15 INCOME TAXES
Accounting Policy
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 securities premium.
Income tax expense in the statement of profit and loss comprises:
(In crore)
Particulars | Year ended March 31, | |
2019 | 2018 | |
Current taxes | 5,189 | 4,003 |
Deferred taxes | 36 | (250) |
Income tax expense | 5,225 | 3,753 |
During the quarter ended March 31, 2019, the
Company entered into Advance Pricing Agreement (APA) in overseas jurisdictions resulting in a reversal of income tax expense of
94 crore which pertained to prior periods.
In December 2017, the Company had concluded
an Advance Pricing Agreement (“APA”) with the US Internal Revenue Service ("IRS") for the US branch covering
the years ending March 2011 to March 2021. Under the APA, the Company and the IRS have agreed on the methodology to allocate revenues
and compute the taxable income of the Company’s US Branch operations. In accordance with the APA, the company had reversed
income tax expense provision of $225 million (1,432 crore) which pertained to previous periods which are no longer required. The
Company had to pay an adjusted amount of $223 million (approximately
1,424 crore) due to the difference between the taxes payable
for prior periods as per the APA and the actual taxes paid for such periods. The Company has paid $215 million (
1,455 crore).
Further, the “Tax Cuts and Jobs Act (H.R. 1)” was signed into law on December 22, 2017 (“US Tax Reforms”). The US tax reforms has reduced federal tax rates from 35% to 21% effective January 1, 2018 amongst other measures.
Income tax expense for the year ended March
31, 2019 and March 31, 2018 includes reversal (net of provisions) of 97 crore and
240 crore, respectively. These reversals
pertain to prior periods on account of adjudication of certain disputed matters in favor of the company across various jurisdictions.
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 | Year ended March 31, | |
2019 | 2018 | |
Profit before income taxes | 19,927 | 19,908 |
Enacted tax rates in India | 34.94% | 34.61% |
Computed expected tax expense | 6,963 | 6,890 |
Tax effect due to non-taxable income for Indian tax purposes | (2,628) | (2,008) |
Overseas taxes | 643 | 678 |
Tax reversals, overseas and domestic | (144) | (1,566) |
Effect of exempt non-operating income | (62) | (385) |
Effect of non-deductible expenses | 376 | 299 |
Branch profit tax | 25 | (209) |
Others | 52 | 54 |
Income tax expense | 5,225 | 3,753 |
The applicable Indian corporate statutory tax rate for the year ended March 31, 2019 and March 31, 2018 is 34.94% and 34.61%, respectively. The increase in the corporate statutory tax rate to 34.94% is consequent to changes made in the Finance Act, 2018.
The foreign tax expense is due to income taxes payable overseas, principally in the United States. In India, the Company has benefited from certain income tax incentives that the Government of India had provided for export of software from the units registered under the Special Economic Zones Act (SEZs), 2005. SEZ units which began the provision of services on or after April 1, 2005 are eligible for a deduction of 100% 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% 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 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.
Entire deferred income tax for the year ended
March 31, 2019 and March 31, 2018, relates to origination and reversal of temporary differences except for a credit of 155 crore
(on account of US Tax Reforms explained above), for the year ended March 31, 2018.
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 at March 31, 2019, Infosys' U.S. branch
net assets amounted to approximately 5,196 crore. As at March 31, 2019, the Company has a deferred tax liability for branch
profit tax of
201 crore (net of credits), as the Company estimates that these branch profits are expected to be distributed
in the foreseeable future.
Other income for the year ended March 31, 2019
and March 31, 2018 includes interest on income tax refund of 50 crore and
257 crore respectively.
Deferred income tax liabilities have not been
recognized on temporary differences amounting to 6,007 crore and
5,045 crore as at March 31, 2019 and March 31, 2018, respectively,
associated with investments in subsidiaries and branches as it is probable that the temporary differences will not reverse in the
foreseeable future.
Deferred income tax assets have not been recognized
on accumulated losses of 146 crore as at March 31, 2019 as it is probable that future taxable profit will be not available
against which the unused tax losses can be utilized in the foreseeable future.
The following table provides details of expiration of unused tax losses:
(In crore)
Year | As at |
March 31, 2019 | |
2020 | 144 |
2021 | 2 |
Total | 146 |
The following table provides the details of income tax assets and income tax liabilities as at March 31, 2019 and March 31, 2018:
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Income tax assets | 6,293 | 5,710 |
Current income tax liabilities | 1,458 | 1,976 |
Net current income tax asset/ (liability) at the end | 4,835 | 3,734 |
The gross movement in the current income tax asset/ (liability) for the year ended March 31, 2019 and March 31, 2018 is as follows:
(In crore)
As at | ||
March 31, 2019 | March 31, 2018 | |
Net current income tax asset/ (liability) at the beginning | 3,734 | 1,692 |
Income tax paid | 6,271 | 6,054 |
Current income tax expense | (5,189) | (4,003) |
Income tax benefit arising on exercise of stock options | 8 | – |
Income tax on other comprehensive income | 6 | (16) |
Tax impact on buyback expenses | 4 | – |
Translation differences | 1 | 7 |
Net current income tax asset/ (liability) at the end | 4,835 | 3,734 |
The movement in gross deferred income tax assets and liabilities (before set off) for the year ended March 31, 2019 is as follows:
(In crore)
Particulars | Carrying value as of April 1, 2018 | Changes through profit and loss | Changes through OCI | Addition on account of business combination | Translation difference | Carrying value as of March 31, 2019 |
Deferred income tax assets | ||||||
Property, plant and equipment | 181 | 43 | – | – | (1) | 223 |
Trade receivables | 129 | 35 | – | – | – | 164 |
Compensated absences | 325 | 24 | – | – | – | 349 |
Post sales client support | 92 | 3 | – | – | – | 95 |
Derivative financial instruments | 13 | (8) | – | – | (1) | 4 |
Credits related to branch profits | 341 | (22) | – | – | 21 | 340 |
Others | 55 | 29 | 7 | – | 2 | 93 |
Total Deferred income tax assets | 1,136 | 104 | 7 | – | 21 | 1,268 |
Deferred income tax liabilities | ||||||
Intangibles | – | – | – | |||
Branch profit tax | (505) | (3) | – | – | (33) | (541) |
Derivative financial instruments | (1) | (98) | (7) | – | – | (106) |
Others | (7) | (39) | (3) | – | 1 | (48) |
Total Deferred income tax liabilities | (513) | (140) | (10) | – | (32) | (695) |
The movement in gross deferred income tax assets and liabilities (before set off) for the year ended March 31, 2018 is as follows:
(In crore)
Particulars | Carrying value as of April 1, 2017 | Changes through profit and loss | Changes through OCI | Addition on account of business combination | Translation difference | Carrying value as of March 31, 2018 |
Deferred income tax assets | ||||||
Property, plant and equipment | 107 | 75 | – | – | (1) | 181 |
Computer software | 40 | (40) | – | – | – | – |
Accrued compensation to employees | 35 | (35) | – | – | – | – |
Trade receivables | 123 | 6 | – | – | – | 129 |
Compensated absences | 336 | (11) | – | – | – | 325 |
Post sales client support | 93 | (1) | – | – | – | 92 |
Derivative financial instruments | – | 13 | – | – | – | 13 |
Intangibles | – | (13) | – | 13 | – | – |
Credits related to branch profits | – | 334 | – | – | 7 | 341 |
Others | 32 | 23 | – | – | – | 55 |
Total Deferred income tax assets | 766 | 351 | – | 13 | 6 | 1,136 |
Deferred income tax liabilities | ||||||
Branch profit tax | (327) | (172) | – | – | (6) | (505) |
Derivative financial instruments | (88) | 73 | 13 | – | 1 | (1) |
Others | (5) | (2) | – | – | – | (7) |
Total Deferred income tax liabilities | (420) | (101) | 13 | – | (5) | (513) |
The tax effects of significant temporary differences that resulted in deferred income tax assets and liabilities are as follows:
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Deferred income tax assets after set off | 1,114 | 1,128 |
Deferred income tax liabilities after set off | 541 | 505 |
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 reliability of deferred income tax assets, the 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. The 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 Company 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.
2.16 REVENUE FROM OPERATIONS
Accounting Policy
The Company derives revenues primarily from business IT services comprising of software development and related services, consulting and package implementation and from the licensing of software products and platforms across our core and digital offerings (“together called as software related services”).
Effective April 1, 2018, the Company adopted Ind AS 115 “Revenue from Contracts with Customers” using the cumulative catch-up transition method, applied to contracts that were not completed as of April 1, 2018. In accordance with the cumulative catch-up transition method , the comparatives have not been retrospectively adjusted. The following is a summary of new and/or revised significant accounting policies related to revenue recognition. Refer Note 1 “Significant Accounting Policies,” in the Company’s 2018 Annual Report for the policies in effect for revenue prior to April 1, 2018. The effect on adoption of Ind AS 115 was insignificant.
Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services.
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 invoicing to the reporting date is recognized as unbilled revenue. Revenue from fixed-price, fixed-timeframe contracts, where the performance obligations are satisfied over time and 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. Maintenance revenue is recognized ratably over the term of the underlying maintenance arrangement.
Revenues in excess of invoicing are classified as contract assets (which we refer as unbilled revenue) while invoicing in excess of revenues are classified as contract liabilities (which we refer to as unearned revenues).
In arrangements for software development and related services and maintenance services, the Company has applied the guidance in Ind AS 115, Revenue from contract with customer, by applying the revenue recognition criteria for each distinct performance obligation. The arrangements with customers generally meet the criteria for considering software development and related services as distinct performance obligations. For allocating the transaction price, the Company has measured the revenue in respect of each performance obligation of a contract at its relative standalone selling price. The price that is regularly charged for an item when sold separately is the best evidence of its standalone selling price. In cases where the company is unable to determine the standalone selling price, the company uses the expected cost plus margin approach in estimating the standalone selling price. For software development and related services, the performance obligations are satisfied as and when the services are rendered since the customer generally obtains control of the work as it progresses.
Revenue from licenses where the customer obtains a “right to use” the licenses is recognized at the time the license is made available to the customer. Revenue from licenses where the customer obtains a “right to access” is recognized over the access period. Arrangements to deliver software products generally have three elements: license, implementation and Annual Technical Services (ATS). The company has applied the principles under Ind AS 115 to account for revenues from these performance obligations. When implementation services are provided in conjunction with the licensing arrangement and the license and implementation have been identified as two separate performance obligations, the transaction price for such contracts are allocated to each performance obligation of the contract based on their relative standalone selling prices. In the absence of standalone selling price for implementation, the performance obligation is estimated using the expected cost plus margin approach. Where the license is required to be substantially customized as part of the implementation service the entire arrangement fee for license and implementation is considered to be a single performance obligation and the revenue 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 performance obligations are satisfied. ATS revenue is recognized ratably over the period in which the services are rendered.
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 to each of the underlying performance obligation that corresponds to the 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.
Deferred contract costs are incremental costs of obtaining a contract which are recognized as assets and amortized over the term of the contract.
Contract modifications are accounted for when additions, deletions or changes are approved either to the contract scope or contract price. The accounting for modifications of contracts involves assessing whether the services added to an existing contract are distinct and whether the pricing is at the standalone selling price. Services added that are not distinct are accounted for on a cumulative catch up basis, while those that are distinct are accounted for prospectively, either as a separate contract, if the additional services are priced at the standalone selling price, or as a termination of the existing contract and creation of a new contract if not priced at the standalone selling price.
The Company presents revenues net of indirect taxes in its statement of Profit and loss.
Revenue from operations for the year ended March 31, 2019 and March 31, 2018 is as follows:
(In crore)
Particulars | Year ended March 31, | |
2019 | 2018 | |
Revenue from software services | 72,845 | 61,733 |
Revenue from products and platforms | 262 | 208 |
Total revenue from operations | 73,107 | 61,941 |
Disaggregate revenue information
The table below presents disaggregated revenues from contracts with customers for the year ended March 31, 2019 by offerings and contract-type. The Company believe that this disaggregation best depicts how the nature, amount, timing and uncertainty of our revenues and cash flows are affected by industry, market and other economic factors.
(In crore)
Particulars | Year ended March 31, 2019 |
Revenue by offerings | |
Core | 49,463 |
Digital | 23,644 |
Total | 73,107 |
Revenues by contract type | |
Fixed Price | 39,383 |
Time & Materials | 33,724 |
Total | 73,107 |
Digital Services
Digital Services comprise of service and solution offerings of the company that enable our clients to transform their businesses. These include offerings that enhance customer experience, leverage AI-based analytics and big data, engineer digital products and IoT, modernize legacy technology systems, migrate to cloud applications and implement advanced cyber security systems.
Core Services
Core Services comprise traditional offerings of the company that have scaled and industrialized over a number of years. These primarily include application management services, proprietary application development services, independent validation solutions, product engineering and management, infrastructure management services, traditional enterprise application implementation, support and integration services.
Products & platforms
The Company also derives revenues from the sale of products and platforms including Infosys Nia - Artificial Intelligence (AI) platform which applies next-generation AI and machine learning.
Trade receivables and Contract Balances
The company classifies the right to consideration in exchange for deliverables as either a receivable or as unbilled revenue.
A receivable is a right to consideration that is unconditional upon passage of time. Revenue for time and material contracts are recognized as related service are performed. Revenue for fixed price maintenance contracts is recognized on a straight line basis over the period of the contract. Revenues in excess of billings is recorded as unbilled revenue and is classified as a financial asset for these cases as right to consideration is unconditional upon passage of time .
Revenue recognition for fixed price development contracts is based on percentage of completion method. Invoicing to the clients is based on milestones as defined in the contract. This would result in the timing of revenue recognition being different from the timing of billing the customers. Unbilled revenue for fixed price development contracts is classified as non financial asset as the contractual right to consideration is dependent on completion of contractual milestones.
Invoicing in excess of earnings are classified as unearned revenue.
Trade receivable and unbilled revenues are presented net of impairment in the Balance Sheet.
During the year ended March 31, 2019 , the company
recognized revenue of 1,776 crore arising from opening unearned revenue as of April 1, 2018.
During the year ended March 31, 2019, 2,355
crore of unbilled revenue pertaining to fixed price development contracts as of April 1, 2018 has been reclassified to Trade receivables
upon billing to customers on completion of milestones.
Performance obligations and remaining performance obligations
The remaining performance obligation disclosure provides the aggregate amount of the transaction price yet to be recognized as at the end of the reporting period and an explanation as to when the Company expects to recognize these amounts in revenue. Applying the practical expedient as given in Ind AS 115, the Company has not disclosed the remaining performance obligation related disclosures for contracts where the revenue recognized corresponds directly with the value to the customer of the entity's performance completed to date, typically those contracts where invoicing is on time and material basis. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, periodic revalidations, adjustment for revenue that has not materialized and adjustments for currency.
The aggregate value of performance obligations
that are completely or partially unsatisfied as at March 31, 2019, other than those meeting the exclusion criteria mentioned above,
is 44,904 crore. Out of this, the Company expects to recognize revenue of around 50% within the next one year and the remaining
thereafter. This includes contracts that can be terminated for convenience without a substantive penalty since, based on current
assessment, the occurrence of the same is expected to be remote.
The impact on account of applying the erstwhile
Ind AS 18 Revenue instead of Ind AS 115 Revenue from contract with customers on the financials results of the Company for the year
ended and as at March 31, 2019 is insignificant. On account of adoption of Ind AS 115, unbilled revenues of 2,904 crore as at
March 31, 2019 has been considered as a non financial asset.
2.17 OTHER INCOME, NET
2.17.1 Other income - Accounting Policy
Other income is comprised primarily of interest income, dividend income, gain / loss on investments 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.
2.17.2 Foreign currency - Accounting Policy
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.
Effective April 1 , 2018 the company has adopted Appendix B to Ind AS 21- Foreign Currency Transactions and Advance Consideration which clarifies the date of transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income when an entity has received or paid advance consideration in a foreign currency. The effect on account of adoption of this amendment was insignificant.
Other income for the year ended March 31, 2019 and March 31, 2018 is as follows:
(In crore)
Particulars | Year ended March 31, | |
2019 | 2018 | |
Interest income on financial assets carried at amortized cost | ||
Tax free bonds and government bonds | 137 | 138 |
Deposit with Bank and others | 1,276 | 1,540 |
Interest income on financial assets fair valued through other comprehensive income | ||
Non-convertible debentures, commercial paper and certificates of deposit | 581 | 642 |
Income on investments carried at fair value through profit or loss | ||
Dividend income on liquid mutual funds | 2 | 3 |
Gain / (loss) on liquid mutual funds | 175 | 227 |
Dividend income from subsidiaries | – | 846 |
Write down of investment in subsidiary (refer note no 2.3) | – | (122) |
Exchange gains/(losses) on foreign currency forward and options contracts | 184 | (12) |
Exchange gains/(losses) on translation of assets and liabilities | 144 | 265 |
Miscellaneous income, net | 353 | 492 |
Total other income | 2,852 | 4,019 |
2.18 EXPENSES
(In crore)
Particulars | Year ended March 31, | |
2019 | 2018 | |
Employee benefit expenses | ||
Salaries including bonus | 37,185 | 31,618 |
Contribution to provident and other funds | 797 | 695 |
Share based payments to employees (Refer note no. 2.10) | 182 | 72 |
Staff welfare | 132 | 87 |
38,296 | 32,472 | |
Cost of software packages and others | ||
For own use | 793 | 774 |
Third party items bought for service delivery to clients | 853 | 496 |
1,646 | 1,270 | |
Other expenses | ||
Power and fuel | 171 | 162 |
Brand and Marketing | 406 | 247 |
Operating lease payments | 339 | 328 |
Rates and taxes | 110 | 116 |
Repairs and Maintenance | 1,051 | 902 |
Consumables | 33 | 22 |
Insurance | 55 | 47 |
Provision for post-sales client support and others | (6) | 127 |
Commission to non-whole time directors | 7 | 9 |
Impairment loss recognized / (reversed) under expected credit loss model | 184 | 24 |
Auditor's remuneration | ||
Statutory audit fees | 4 | 3 |
Tax matters | 1 | 1 |
Other services | – | – |
Contributions towards Corporate Social Responsibility | 245 | 142 |
Others | 170 | 54 |
2,770 | 2,184 |
2.19 LEASES
Accounting policy
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.
The lease rentals charged during the period is as follows:
(In crore)
Particulars | Year ended March 31, | |
2019 | 2018 | |
Lease rentals recognized during the period | 339 | 328 |
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 | March 31, 2019 | March 31, 2018 |
Not later than 1 year | 391 | 267 |
Later than 1 year and not later than 5 years | 1,191 | 877 |
Later than 5 years | 800 | 755 |
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.
2.20 EMPLOYEE BENEFITS
Accounting Policy
2.20.1 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 Indian law.
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 and are not reclassified to profit or loss in subsequent periods. 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 profit in the Statement of Profit and Loss.
2.20.2 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.
2.20.3 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.
2.20.4 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.
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 March 31, 2019 and March 31, 2018:
(In crore)
Particulars | As at March 31, | |
2019 | 2018 | |
Change in benefit obligations | ||
Benefit obligations at the beginning | 1,028 | 979 |
Service cost | 135 | 131 |
Interest expense | 73 | 64 |
Curtailment gain | – | – |
Transfer of obligation | 1 | 4 |
Remeasurements - Actuarial (gains)/ losses | 31 | (57) |
Benefits paid | (110) | (93) |
Benefit obligations at the end | 1,158 | 1,028 |
Change in plan assets | ||
Fair value of plan assets at the beginning | 1,051 | 1035 |
Interest income | 78 | 69 |
Transfer of assets | 2 | 4 |
Remeasurements- Return on plan assets excluding amounts included in interest income | 4 | 11 |
Contributions | 158 | 25 |
Benefits paid | (110) | (93) |
Fair value of plan assets at the end | 1,183 | 1,051 |
Funded status | 25 | 23 |
The amount for the year ended March 31, 2019 and March 31, 2018 recognized in the Statement of Profit and Loss under employee benefit expense are as follows:
(In crore)
Particulars | Year ended March 31, | |
2019 | 2018 | |
Service cost | 135 | 131 |
Net interest on the net defined benefit liability/asset | (5) | (5) |
Curtailment gain | – | – |
Net gratuity cost | 130 | 126 |
The amounts for the year ended March 31, 2019 and March 31, 2018 recognized in statement of other comprehensive income are as follows:
(In crore)
Particulars | Year ended March 31, | |
2019 | 2018 | |
Remeasurements of the net defined benefit liability/ (asset) | ||
Actuarial (gains) / losses | 31 | (57) |
(Return) / loss on plan assets excluding amounts included in the net interest on the net defined benefit liability/(asset) | (4) | (11) |
27 | (68) |
(In crore)
Particulars | Year ended March 31, | |
2019 | 2018 | |
(Gain)/loss from change in demographic assumptions | – | – |
(Gain)/loss from change in financial assumptions | 26 | (36) |
(Gain)/loss from change in experience assumptions | 5 | (21) |
31 | (57) |
The weighted-average assumptions used to determine benefit obligations as at March 31, 2019 and March 31, 2018 are set out below:
Particulars | Year ended March 31, | |
2019 | 2018 | |
Discount rate | 7.1% | 7.5% |
Weighted average rate of increase in compensation levels | 8.0% | 8.0% |
The weighted-average assumptions used to determine net periodic benefit cost for the year ended March 31, 2019 and March 31, 2018 are set out below:
Particulars | Year ended March 31, | |
2019 | 2018 | |
Discount rate | 7.5% | 6.9% |
Weighted average rate of increase in compensation levels | 8.0% | 8.0% |
Weighted average duration of defined benefit obligation | 5.9 years | 6.1 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.
Sensitivity of significant assumptions used for valuation of defined benefit obligations
( in crore)
Impact from percentage point increase / decrease in | As at March 31, 2019 |
Discount Rate | 67 |
Weighted average rate of increase in compensation level | 59 |
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. The sensitivity analysis is based on a change in an assumption while holding all other assumptions constant. In practice, this is not probable, and changes in some of the assumptions may be correlated.
Gratuity is applicable only to employees drawing a salary in Indian rupees and there are no other significant 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 at March 31, 2019 and March 31, 2018, the plan assets have been primarily invested in insurer managed funds.
Actual return on assets for each of the year ended
March 31, 2019 and March 31, 2018 was 82 crore and
80 crore respectively.
The Company expects to contribute 140 crore to
the gratuity trusts during the fiscal 2020.
Maturity profile of defined benefit obligation:
(In crore)
Within 1 year | 158 |
1-2 year | 170 |
2-3 year | 181 |
3-4 year | 190 |
4-5 year | 204 |
5-10 years | 1,047 |
b. Superannuation
The Company contributed 199 crore and
158
crore to the Superannuation trust during the year ended March 31, 2019 and March 31, 2018 respectively and the same has been recognized
in the Statement of Profit and Loss account under the head employee benefit expense.
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 March 31, 2019 and March 31, 2018 respectively.
The details of fund and plan asset position are given below:
(In crore)
Particulars | Year ended March 31, | |
2019 | 2018 | |
Benefit obligation at the period end | 5,989 | 5,160 |
Net liability 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 | Year ended March 31, | |
2019 | 2018 | |
Government of India (GOI) bond yield | 7.10% | 7.50% |
Remaining term to maturity of portfolio | 5.47 years | 5.9 years |
Expected guaranteed interest rate | 8.65% | 8.55% |
The Company contributed 451 crore and
397
crore during the year ended March 31, 2019 and March 31, 2018 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.
Employee benefits cost include:
(In crore)
Particulars | Year ended March 31, | |
2019 | 2018 | |
Salaries and bonus(1)(2) | 37,516 | 31,791 |
Defined contribution plans | 199 | 158 |
Defined benefit plans | 581 | 523 |
38,296 | 32,472 |
(1) Includes employee stock compensation
expense of 182 crore and
72 crore for the year ended March 31, 2019 and March 31, 2018, respectively (Refer note 2.10).
(2) Included in the above for the
year ended March 31, 2018 is a reversal of stock compensation cost of 35 crore towards forfeiture of stock incentives granted
to Dr. Vishal Sikka upon his resignation. (Refer note no. 2.10).
2.21 RECONCILIATION OF BASIC AND DILUTED SHARES USED IN COMPUTING EARNING PER SHARE
Accounting Policy
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 at 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.
The following is a reconciliation of the equity shares used in the computation of basic and diluted earnings per equity share:
Particulars | Year ended March 31, | |
2019 | 2018 | |
Basic earnings per equity share - weighted average number of equity shares outstanding | 4,36,82,12,119 | 4,53,26,87,604 |
Effect of dilutive common equivalent shares - share options outstanding | 22,00,229 | 20,97,638 |
Diluted earnings per equity share - weighted average number of equity shares and common equivalent shares outstanding | 4,37,04,12,348 | 4,53,47,85,242 |
* Information in above table is adjusted for September 2018 Bonus issue.(refer note no.2.10)
For the year ended March 31, 2019 and March 31, 2018 number of options to purchase equity shares that had an anti-dilutive effect are Nil and 55,752 (adjusted for September 2018 bonus issue) respectively.
2.22 CONTINGENT LIABILITIES AND COMMITMENTS
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Contingent liabilities : | ||
Claims against the Company, not acknowledged as debts(1) | 2,947 | 4,627 |
[Amount paid to statutory authorities ![]() ![]() |
||
Commitments : | ||
Estimated amount of contracts remaining to be executed on capital contracts and not provided for | 1,653 | 1,405 |
(net of advances and deposits) | ||
Other Commitments* | 17 | 36 |
*Uncalled capital pertaining to investments
(1) | As at March 31, 2019, claims against the company not acknowledged as debts in respect
of income tax matters amounted to ![]() |
Amount paid to statutory authorities against
the above tax claims amounted to 5,860 crore.
Subsequent to March 31, 2018, the Supreme Court of India ruled favorably in respect of certain income tax claims which have been given effect in the above disclosure of claims as of March 31, 2019.
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.
2.23 RELATED PARTY TRANSACTIONS
List of related parties:
Name of subsidiaries | Country | Holdings as at | |
March 31, 2019 | March 31, 2018 | ||
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 Nova Holdings LLC. (Infosys Nova) | U.S. | 100% | 100% |
EdgeVerve Systems Limited (EdgeVerve) | India | 100% | 100% |
Infosys Austria GmbH(1) (formerly Lodestone Management Consultants GmbH) | Austria | 100% | 100% |
Skava Systems Pvt. Ltd. (Skava Systems) | India | 100% | 100% |
Kallidus Inc. (Kallidus) | U.S. | 100% | 100% |
Infosys Chile SpA(2) | Chile | 100% | 100% |
Infosys Arabia Limited(3) | Saudi Arabia | 70% | 70% |
Infosys Consulting Ltda.(3) | Brazil | 99.99% | 99.99% |
Infosys CIS LLC(1)(22) | Russia | – | – |
Infosys Luxembourg S.a.r.l (1)(17) | Luxembourg | 100% | – |
Infosys Americas Inc., (Infosys Americas) | U.S. | 100% | 100% |
Infosys Technologies (Australia) Pty. Limited (Infosys Australia)(4) | Australia | 100% | 100% |
Infosys Public Services, Inc. USA (Infosys Public Services) | U.S. | 100% | 100% |
Infosys Canada Public Services Inc(23) | Canada | – | – |
Infosys Canada Public Services Ltd(24) | Canada | – | – |
Infosys BPM Limited (formerly Infosys BPO Limited) | India | 99.98% | 99.98% |
Infosys (Czech Republic) Limited s.r.o.(5) | Czech Republic | 99.98% | 99.98% |
Infosys Poland, Sp z.o.o(5) | Poland | 99.98% | 99.98% |
Infosys McCamish Systems LLC (5) | U.S. | 99.98% | 99.98% |
Portland Group Pty Ltd(5) | Australia | 99.98% | 99.98% |
Infosys BPO Americas LLC.(5) | U.S. | 99.98% | 99.98% |
Infosys Consulting Holding AG (Infosys Lodestone) | Switzerland | 100% | 100% |
Lodestone Management Consultants Inc.(6)(15) | U.S. | – | 100% |
Infosys Management Consulting Pty Limited(6) | Australia | 100% | 100% |
Infosys Consulting AG(6) | Switzerland | 100% | 100% |
Infosys Consulting GmbH(6) | Germany | 100% | 100% |
Infosys Consulting SAS(6) | France | 100% | 100% |
Infosys Consulting s.r.o.(6) | Czech Republic | 100% | 100% |
Infosys Consulting (Shanghai) Co. Ltd. (formerly Lodestone Management Consultants Co., Ltd.)(6) | China | 100% | 100% |
Infy Consulting Company Ltd(6) | U.K. | 100% | 100% |
Infy Consulting B.V.(6) | The Netherlands | 100% | 100% |
Infosys Consulting Sp. z.o.o(6) | Poland | 100% | 100% |
Lodestone Management Consultants Portugal, Unipessoal, Lda. (6) | Portugal | 100% | 100% |
S.C. Infosys Consulting S.R.L.(1) | Romania | 100% | 100% |
Infosys Consulting S.R.L.(6) | Argentina | 100% | 100% |
Infosys Consulting (Belgium) NV (formerly Lodestone Management Consultants (Belgium) S.A.)(7) | Belgium | 99.90% | 99.90% |
Panaya Inc. (Panaya) | U.S. | 100% | 100% |
Panaya Ltd.(8) | Israel | 100% | 100% |
Panaya GmbH(8) | Germany | 100% | 100% |
Panaya Japan Co. Ltd(4)(8) | Japan | 100% | 100% |
Noah Consulting LLC (Noah)(9) | U.S. | – | – |
Noah Information Management Consulting Inc. (Noah Canada)(10) | Canada | – | – |
Brilliant Basics Holdings Limited (Brilliant Basics)(11) | U.K. | 100% | 100% |
Brilliant Basics Limited(12) | U.K. | 100% | 100% |
Brilliant Basics (MENA) DMCC(12) | Dubai | 100% | 100% |
Infosys Consulting Pte Limited (Infosys Singapore)(1) | Singapore | 100% | 100% |
Infosys Middle East FZ LLC(13) | Dubai | 100% | 100% |
Fluido Oy(13)(18) | Finland | 100% | – |
Fluido Sweden AB (Extero)(19) | Sweden | 100% | – |
Fluido Norway A/S(19) | Norway | 100% | – |
Fluido Denmark A/S(19) | Denmark | 100% | – |
Fluido Slovakia s.r.o(19) | Slovakia | 100% | – |
Fluido Newco AB(19) | Sweden | 100% | – |
Infosys Compaz PTE. Ltd (formerly Trusted Source Pte. Ltd) (13)(20) | Singapore | 60% | – |
Infosys South Africa (Pty) Ltd(13)(21) | South Africa | – | – |
WongDoody Holding Company Inc. (WongDoody) (14) | U.S. | 100% | – |
WDW Communications, Inc(16) | U.S. | 100% | – |
WongDoody, Inc(16) | U.S. | 100% | – |
(1) Wholly-owned subsidiary of Infosys Limited
(2) Incorporated effective November 20, 2017
(3) Majority owned and controlled subsidiary of Infosys Limited
(4) Under liquidation
(5) Wholly owned subsidiary of Infosys BPM
(6) Wholly owned subsidiaries of Infosys Consulting Holding AG (formerly Lodestone Holding AG)
(7) Majority owned and controlled subsidiaries of Infosys Consulting Holding AG (formerly Lodestone Holding AG)
(8) Wholly owned subsidiary of Panaya Inc.
(9) Liquidated effective November 9, 2017
(10) Wholly owned subsidiary of Noah. Liquidated effective December 20, 2017
(11) On September 8, 2017, Infosys acquired 100% of the voting interests in Brilliant Basics Holding Limited
(12) Wholly-owned subsidiary of Brilliant Basics Holding Limited.
(13) Wholly-owned subsidiary of Infosys Consulting Pte Ltd
(14) On May 22, 2018, Infosys acquired 100% of the voting interest in WongDoody
(15) Liquidated effective May 17, 2018
(16) Wholly-owned subsidiary of WongDoody
(17) Incorporated effective August 6, 2018
(18) | On October 11, 2018, Infosys Consulting Pte. Ltd, acquired 100% of the voting interests in Fluido Oy and its subsidiaries |
(19) | Wholly-owned subsidiary of Fluido Oy |
(20) | On November 16, 2018 , Infosys Consulting Pte. Ltd, acquired 60% of the voting interest in Infosys Compaz Pte. Ltd |
(21) | Incorporated effective December 19,2018 |
(22) | Incorporated effective November 29, 2018 |
(23) | Incorporated effective November 27, 2018, wholly owned subsidiary Infosys Public Services Inc |
(24) | Liquidated effective May 9, 2017, wholly owned subsidiary Infosys Public Services Inc |
Infosys has provided guarantee for performance of certain contracts entered into by its subsidiaries.
Associate
During the year ended March 31, 2018, the Company
has written down the entire carrying value of the investment in its associate DWA Nova LLC amounting to 71 crore. DWA Nova
LLC has been liquidated w.e.f November 17, 2017
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 Employees Welfare Trust | India | Controlled trust |
Infosys Employee Benefits Trust | India | Controlled trust |
Infosys Science Foundation | India | Controlled trust |
Refer note no. 2.20 for information on transactions with post-employment benefit plans mentioned above.
List of key management personnel
Whole-time directors
Salil Parekh appointed as Chief Executive Officer and Managing Director effective January 2, 2018. The appointment is for a term of 5 years with effect from January 2, 2018 to January 1, 2023 and the remuneration is approved by shareholders through postal ballot dated February 20, 2018.
U. B. Pravin Rao, Chief Operating officer appointed as Interim-Chief Executive Officer and Managing Director effective August 18, 2017. Subsequently he stepped down as the interim CEO and Managing Director effective January 2, 2018 and will continue as Chief Operating Officer and a whole-time director of the Company.
Dr. Vishal Sikka resigned as Chief Executive Officer and Managing Director effective August 18, 2017 and as Executive Vice Chairman effective August 24, 2017
Non-whole-time directors
Nandan M. Nilekani (appointed as Non-Executive, Non-Independent Chairman effective August 24, 2017)
Micheal Gibbs (appointed as Independent director effective July 13, 2018)
Ravi Venkatesan (resigned from his position as Co-Chairman effective August 24, 2017 and resigned as member of the Board effective May 11, 2018)
Kiran Mazumdar-Shaw
Roopa Kudva
Dr. Punita Kumar-Sinha
D. N. Prahlad
D. Sundaram (appointed effective July 14, 2017)
Prof. Jeffrey Lehman, (resigned effective August 24, 2017)
R. Seshasayee (resigned effective August 24, 2017)
Prof. John Etchemendy (resigned effective August 24, 2017)
Executive Officers
Nilanjan Roy (appointed as Chief Financial Officer effective March 1, 2019)
Jayesh Sanghrajka (appointed as Interim-Chief Financial Officer effective November 17, 2018. He resumed his responsibilities as Deputy Chief Financial Officer effective March 1, 2019)
M.D. Ranganath (resigned as Chief Financial Officer effective November 16, 2018)
Mohit Joshi, President
Rajesh K. Murthy, President (appointed effective October 13, 2016 and resigned effective January 31, 2018)
Ravi Kumar S, President and Deputy Chief Operating Officer
Sandeep Dadlani, President (resigned effective July 14, 2017)
Krishnamurthy Shankar, Group Head - Human Resources
Gopi Krishnan Radhakrishnan - Acting General Counsel (resigned effective June 24, 2017)
Inderpreet Sawhney, Group General Counsel and Chief Compliance Officer (appointed as executive officer effective July 14, 2017)
Company Secretary
A. G. S. Manikantha
The details of amounts due to or due from related parties as at March 31, 2019 and March 31, 2018 are as follows:
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Investment in debentures | ||
EdgeVerve | 1,445 | 1,780 |
1,445 | 1,780 | |
Trade receivables | ||
EdgeVerve | 3 | – |
Infosys China | 23 | 29 |
Infosys Mexico | 3 | 4 |
Infosys Brasil | 1 | 1 |
Infosys BPM | 10 | 5 |
Infy Consulting Company Ltd. | 13 | 77 |
Infosys Public Services | 57 | 53 |
Infosys Shanghai | 6 | 7 |
Infosys Sweden | – | 1 |
Kallidus | – | 13 |
Infosys McCamish Systems LLC | 89 | 70 |
Panaya Ltd | 115 | 75 |
Infosys Compaz Pte. Ltd | 5 | – |
325 | 335 | |
Loans | ||
Infosys China (2) | 82 | 73 |
Infosys Consulting Holding AG(3) | 89 | 104 |
Brilliant Basics Holdings Limited (4) | 7 | 8 |
Infosys Consulting Pte Ltd (5) | 663 | – |
841 | 185 | |
Prepaid expense and other assets | ||
Panaya Ltd. | 109 | 114 |
Brilliant Basics Limited | – | 1 |
109 | 115 | |
Other financial assets | ||
Infosys BPM | 10 | 10 |
Panaya Ltd. | 3 | 2 |
Infosys Consulting GmbH | 2 | 1 |
Infosys China | 2 | 2 |
Infosys Shanghai | 1 | – |
Infy Consulting Company Ltd. | 3 | 9 |
Infosys Consulting AG | 1 | 1 |
Infosys Public Services | 3 | 6 |
Infosys Consulting Pte Ltd. | – | 1 |
Kallidus | 2 | 1 |
Infosys Consulting Ltda. | 1 | 1 |
Skava Systems Pvt. Ltd. | 1 | 1 |
Lodestone Management Consultants Co., Ltd | – | 1 |
Infosys Brasil | 1 | – |
Edgeverve | – | 3 |
Brilliant Basics Limited | 1 | – |
Infosys Mexico | 1 | 1 |
McCamish Systems LLC | 1 | – |
Infosys Compaz Pte. Ltd | 1 | – |
34 | 40 | |
Unbilled revenues | ||
EdgeVerve | 40 | 32 |
Kallidus | 11 | – |
51 | 32 | |
Trade payables | ||
Infosys China | 8 | 7 |
Infosys BPM | 50 | 54 |
Infosys (Czech Republic) Limited s.r.o. | 6 | 3 |
Infosys Mexico | 6 | 6 |
Infosys Sweden | 3 | 5 |
Infosys Shanghai | 6 | 6 |
Infosys Management Consulting Pty Limited | 9 | 8 |
Infosys Consulting Pte Ltd. | 4 | 2 |
Infy Consulting Company Ltd. | 87 | 67 |
Infosys Brasil | 2 | 2 |
Brilliant Basics Limited | 7 | 7 |
Panaya Ltd. | 4 | 6 |
Infosys Public Services | 4 | 2 |
Kallidus | 2 | – |
Portland Group Pty Ltd | 1 | – |
Infosys Chile SpA | 1 | – |
Infosys Middle East FZ-LLC | 12 | – |
Infosys Poland Sp Z.o.o | 1 | 3 |
McCamish Systems LLC | 1 | – |
WDW Communications, Inc. | 6 | – |
220 | 178 | |
Other financial liabilities | ||
Infosys BPM | 4 | 2 |
Infosys Mexico | 2 | 1 |
Infosys Public Services | – | 5 |
Infosys China | 1 | 1 |
Infosys Consulting GmbH | 5 | 1 |
Infosys Middle East FZ-LLC | – | 8 |
Infosys Consulting AG | 1 | 1 |
13 | 19 | |
Accrued expenses | ||
Infosys BPM | 6 | 9 |
6 | 9 |
(1) At an interest rate of 8.39% per annum.
(2) Interest at the rate of 6% per annum repayable on demand
(3) Interest at the rate of 2.5% per annum repayable on demand
(4) Interest at the rate of 3.5% per annum repayable on demand
(5) Interest at the rate of 3% per annum repayable on demand.
Particulars | Maximum amount outstanding during the | |
Year ended March 31, 2019 | Year ended March 31, 2018 | |
Loans and advances in the nature of loans given to Subsidiaries: | ||
Infosys China | 86 | 92 |
Brilliant Basics | 8 | 8 |
Infosys Consulting Pte Ltd | 678 | – |
Infosys Consulting Holding AG | 114 | 105 |
The details of the related parties transactions entered into by the Company for the year ended March 31, 2019 and March 31, 2018 are as follows:
(In crore)
Particulars | Year ended March 31, | |
2019 | 2018 | |
Capital transactions: | ||
Financing transactions | ||
Equity | ||
Infosys Consulting Brazil | 43 | – |
Wongdoody Holding Company Inc(1) | 261 | – |
Infosys Chile SpA | 7 | – |
Panaya Inc. | – | 38 |
Brilliant Basics Holding Limited | 13 | 29 |
Infosys Arabia Limited | – | 2 |
Infosys China | – | 97 |
Infosys Luxembourg S.a r.l. | 4 | – |
Infosys Australia (3) | (33) | – |
Infosys Shanghai | – | 74 |
Infosys Brazil | 127 | – |
S.C. Infosys Consulting S.R.L | 34 | – |
456 | 240 | |
Debentures (net of repayment) | ||
Edgeverve | (335) | (349) |
(335) | (349) | |
Loans (net of repayment) | ||
Infosys Consulting Holding AG | (20) | 99 |
Brilliant Basics Holdings Limited | – | 7 |
Infosys Consulting Pte Ltd. | 678 | – |
658 | 106 | |
Revenue transactions: | ||
Purchase of services | ||
Infosys China | 85 | 88 |
Infosys Management Consulting Pty Limited | 94 | 99 |
Infy Consulting Company Limited | 857 | 729 |
Infosys Consulting Pte Ltd. | 40 | 41 |
Portland Group Pty Ltd | 16 | 9 |
Infosys (Czech Republic) Limited s.r.o. | 56 | 40 |
Infosys BPM | 655 | 502 |
Infosys Sweden | 52 | 56 |
Infosys Shanghai | 74 | 65 |
Infosys Mexico | 71 | 27 |
Infosys Public Services | 39 | 22 |
Panaya Ltd. | 94 | 84 |
Infosys Brasil | 13 | 13 |
Infosys Poland Sp Z.o.o | 29 | 14 |
Kallidus | 51 | 7 |
Brilliant Basics Limited | 74 | 24 |
Brilliant Basics (MENA) | 3 | – |
Infosys Chile SpA | 5 | – |
Infosys Middle East FZ-LLC | 95 | 22 |
Noah Consulting, LLC(2) | – | 91 |
McCamish Systems LLC | 7 | 3 |
Noah Canada | – | 2 |
WDW Communications, Inc. | 11 | – |
WongDoody, Inc. | 2 | – |
2,423 | 1,938 | |
Purchase of shared services including facilities and personnel | ||
Brilliant Basics Limited | 7 | 1 |
Infosys BPM | 3 | 21 |
Kallidus Inc | – | 4 |
Infosys Consulting AG | – | 1 |
Infosys Mexico | – | 2 |
WDW Communications, Inc. | 1 | – |
11 | 29 | |
Interest income | ||
Infosys China | 5 | 4 |
Infosys Consulting Holding AG | 2 | 2 |
Infosys Consulting Pte Ltd. | 6 | – |
EdgeVerve | 141 | 156 |
154 | 162 | |
Dividend Income | ||
Infosys BPM | – | 846 |
– | 846 | |
Sale of services | ||
Infosys China | 31 | 27 |
Infosys Mexico | 20 | 22 |
Infy Consulting Company Limited | 54 | 40 |
Infosys Brasil | 6 | 5 |
Infosys BPM | 101 | 70 |
McCamish Systems LLC | 238 | 113 |
Infosys Sweden | 3 | 11 |
Infosys Shanghai | 8 | 7 |
EdgeVerve | 469 | 407 |
Kallidus Inc | – | 2 |
Infosys Public Services | 766 | 628 |
Infosys Compaz Pte Ltd | 13 | – |
1,709 | 1,332 | |
Sale of shared services including facilities and personnel | ||
EdgeVerve | 36 | 40 |
Panaya Ltd. | 45 | 48 |
Infosys Consulting SAS | – | 1 |
Infy Consulting Company Limited | – | 3 |
Infy Consulting B.V | – | 1 |
Infosys BPM | 27 | 67 |
Infosys Public Services | – | 2 |
108 | 162 |
(1) Excludes contingent consideration
(2) Refer note no. 2.3
(3) Represents redemption of investment
Transactions with key management personnel
The table below describes the compensation to key managerial personnel which comprise directors and executive officers:
(In crore)
Particulars | Year ended March 31, | |
2019 | 2018 | |
Salaries and other employee benefits to whole-time directors and executive officers (1)(2)(3)(4)(5) | 96 | 48 |
Commission and other benefits to non-executive/independent directors | 7 | 10 |
Total | 103 | 58 |
(1) | Total employee stock compensation expense for the year ended March 31, 2019 includes
a charge of ![]() ![]() |
(2) | Includes reversal of stock compensation cost of ![]() |
(3) | On December 20, 2018, the Board appointed Nilanjan Roy as the Chief Financial Officer of the Company with effect from March 1, 2019. |
(4) | On December 2, 2017, the Board appointed Salil Parekh as the Chief Executive Officer and Managing Director of the Company with effect from January 2, 2018. |
(5) | On June 16, 2017, the Board appointed Inderpreet Sawhney as the Group General Counsel and Chief Compliance Officer of the Company with effect from July 3, 2017; The Board in their meeting held on July 14, 2017 designated her as an Executive Officer with effect from the date of the meeting. |
2.24 CORPORATE SOCIAL RESPONSIBILITY
As per Section 135 of the Companies Act, 2013, a company, meeting the applicability threshold, needs to spend at least 2% of its average net profit for the immediately preceding three financial years on corporate social responsibility (CSR) activities. The areas for CSR activities are eradication of hunger and malnutrition, promoting education, art and culture, healthcare, destitute care and rehabilitation, environment sustainability, disaster relief and rural development projects. A CSR committee has been formed by the company as per the Act. The funds were primarily allocated to a corpus and utilized through the year on these activities which are specified in Schedule VII of the Companies Act, 2013.
a) Gross amount required to be spent by the company
during the year is 340 crore.
b) Amount spent during the year on:
in crore
Particulars | In Cash | Yet to be paid in Cash | Total |
1. Construction / acquisition of any asset | 97 | – | 97 |
2. On purposes other than (1) above | 245 | – | 245 |
2.25 SEGMENT REPORTING
The Company publishes this financial statement along with the consolidated financial statements. In accordance with Ind AS 108, Operating Segments, the Company has disclosed the segment information in the consolidated financial statements.
2.27 FUNCTION-WISE CLASSIFICATION OF STATEMENT OF PROFIT AND LOSS
(In crore)
Particulars | Note No. | Year ended March 31, | |
2019 | 2018 | ||
Revenue from operations | 2.16 | 73,107 | 61,941 |
Cost of sales | 47,412 | 39,138 | |
Gross Profit | 25,695 | 22,803 | |
Operating expenses | |||
Selling and marketing expenses | 3,661 | 2,763 | |
General and administration expenses | 4,225 | 3,562 | |
Total operating expenses | 7,886 | 6,325 | |
Operating profit | 17,809 | 16,478 | |
Reduction in the fair value of assets held for sale | 2.3.8 | 265 | 589 |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" | 2.3.8 | 469 | – |
Other income, net | 2.17 | 2,852 | 4,019 |
Profit before tax | 19,927 | 19,908 | |
Tax expense: | |||
Current tax | 2.15 | 5,189 | 4,003 |
Deferred tax | 2.15 | 36 | (250) |
Profit for the period | 14,702 | 16,155 | |
Other comprehensive income | |||
Items that will not be reclassified subsequently to profit or loss | |||
Remeasurement of the net defined benefit liability/asset, net | (21) | 52 | |
Equity instruments through other comprehensive income, net | 78 | 7 | |
Items that will be reclassified subsequently to profit or loss | |||
Fair value changes on derivatives designated as cash flow hedge, net | 21 | (39) | |
Fair value changes on investments, net | 2.2 | 1 | 1 |
Total other comprehensive income/(loss), net of tax | 79 | 21 | |
Total comprehensive income for the year | 14,781 | 16,176 |
for and on behalf of the Board of Directors of Infosys Limited
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
D. Sundaram Director |
Nilanjan Roy Chief Financial Officer |
A. G. S. Manikantha Company Secretary |
Bengaluru April 12, 2019 |
Exhibit 99.10
IND AS Consolidated
INDEPENDENT AUDITOR’S REPORT
TO THE BOARD OF DIRECTORS OF INFOSYS LIMITED
Report on the Audit of the Interim Consolidated Financial Statements
Opinion
We have audited the accompanying interim consolidated financial statements of Infosys Limited (“the Company”) and its subsidiaries (the Company and its subsidiaries together referred to as “the Group”), which comprise the Consolidated Balance Sheet as at March 31, 2019, the Consolidated Statement of Profit and Loss (including Other Comprehensive Income) for the three months and year ended on that date, the Consolidated Statement of Changes in Equity and the Consolidated Statement of Cash Flows for the year ended on that date, and a summary of the significant accounting policies and other explanatory information (hereinafter referred to as “the interim consolidated financial statements”).
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid interim consolidated financial statements give a true and fair view in conformity with Indian Accounting Standard 34 Interim Financial Reporting (“Ind AS 34”) prescribed under section 133 of the Companies Act, 2013 (‘the Act’) and other accounting principles generally accepted in India, of the consolidated state of affairs of the Group as at March 31, 2019, the consolidated profit and consolidated total comprehensive income for the three months and year ended on that date, consolidated changes in equity and the consolidated cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit of the interim consolidated financial statements in accordance with the Standards on Auditing (SAs) issued by the Institute of Chartered Accountants of India (ICAI). Our responsibilities under those Standards are further described in the Auditor’s Responsibilities for the Audit of the Interim Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Code of Ethics issued by the ICAI together with the independence requirements that are relevant to our audit of the interim consolidated financial statements under the provisions of the Act and the Rules made thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the interim consolidated financial statements.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the interim consolidated financial statements of the current period. These matters were addressed in the context of our audit of the interim consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.
Sr. No. | Key Audit Matter | Auditor’s Response |
1 |
Accuracy of recognition, measurement, presentation and disclosures of revenues and other related balances in view of adoption of Ind AS 115 “Revenue from Contracts with
Customers” (new revenue accounting
standard)
The application of the new revenue accounting standard involves certain key judgements relating to identification of distinct performance obligations, determination of transaction price of the identified performance obligations, the appropriateness of the basis used to measure revenue recognized over a period. Additionally, new revenue accounting standard contains disclosures which involves collation of information in respect of disaggregated revenue and periods over which the remaining performance obligations will be satisfied subsequent to the balance sheet date.
Refer Notes 1.5a and 2.16 to the Interim Consolidated Financial Statements |
Principal Audit Procedures
We assessed the Group’s process to identify the impact of adoption of the new revenue accounting standard.
Our audit approach consisted testing of the design and operating effectiveness of the internal controls and substantive testing as follows:
· Evaluated the design of internal controls relating to implementation of the new revenue accounting standard.
· Selected a sample of continuing and new contracts, and tested the operating effectiveness of the internal control, relating to identification of the distinct performance obligations and determination of transaction price. We carried out a combination of procedures involving enquiry and observation, reperformance and inspection of evidence in respect of operation of these controls.
· Tested the relevant information technology systems’ access and change management controls relating to contracts and related information used in recording and disclosing revenue in accordance with the new revenue accounting standard.
· Selected a sample of continuing and new contracts and performed the following procedures:
• Read, analysed and identified the distinct performance obligations in these contracts.
• Compared these performance obligations with that identified and recorded by the Group.
• Considered the terms of the contracts to determine the transaction price including any variable consideration to verify the transaction price used to compute revenue and to test the basis of estimation of the variable consideration.
• Samples in respect of revenue recorded for time and material contracts were tested using a combination of approved time sheets including customer acceptances, subsequent invoicing and historical trend of collections and disputes.
• In respect of samples relating to fixed price contracts, progress towards satisfaction of performance obligation used to compute recorded revenue was verified with actual and estimated efforts from the time recording and budgeting systems. We also tested the access and change management controls relating to these systems.
• Sample of revenues disaggregated by type and service offerings was tested with the performance obligations specified in the underlying contracts.
• Performed analytical procedures for reasonableness of revenues disclosed by type and service offerings.
• We reviewed the collation of information and the logic of the report generated from the budgeting system used to prepare the disclosure relating to the periods over which the remaining performance obligations will be satisfied subsequent to the balance sheet date.
|
2 |
Accuracy of revenues and onerous obligations in respect of fixed price contracts involves critical estimates
Estimated effort is a critical estimate to determine revenues and liability for onerous obligations. This estimate has a high inherent uncertainty as it requires consideration of progress of the contract, efforts incurred till date and efforts required to complete the remaining contract performance obligations.
Refer Notes 1.5a and 2.16 to the Interim Consolidated Financial Statements. |
Principal Audit Procedures
Our audit approach was a combination of test of internal controls and substantive procedures which included the following:
· Evaluated the design of internal controls relating to recording of efforts incurred and estimation of efforts required to complete the performance obligations.
· Tested the access and application controls pertaining to time recording, allocation and budgeting systems which prevents unauthorised changes to recording of efforts incurred.
· Selected a sample of contracts and through inspection of evidence of performance of these controls, tested the operating effectiveness of the internal controls relating to efforts incurred and estimated.
· Selected a sample of contracts and performed a retrospective review of efforts incurred with estimated efforts to identify significant variations and verify whether those variations have been considered in estimating the remaining efforts to complete the contract.
· Reviewed a sample of contracts with unbilled revenues to identify possible delays in achieving milestones, which require change in estimated efforts to complete the remaining performance obligations.
· Performed analytical procedures and test of details for reasonableness of incurred and estimated efforts.
|
3 |
Evaluation of uncertain tax positions
The Group has material uncertain tax positions including matters under dispute which involves significant judgment to determine the possible outcome of these disputes.
Refer Notes 1.5b and 2.22 to the Interim Consolidated Financial Statements |
Principal Audit Procedures
Obtained details of completed tax assessments and demands for the year ended March 31, 2019 from management. We involved our internal experts to challenge the management’s underlying assumptions in estimating the tax provision and the possible outcome of the disputes. Our internal experts also considered legal precedence and other rulings in evaluating management’s position on these uncertain tax positions. Additionally, we considered the effect of new information in respect of uncertain tax positions as at April 1, 2018 to evaluate whether any change was required to management’s position on these uncertainties.
|
4 |
Recoverability of Indirect tax receivables
As
at March 31, 2019, non-current assets in respect of withholding tax and others includes Cenvat recoverable amounting to
Refer Note 2.9 to the Interim Consolidated financial statements.
|
Principal Audit Procedures
We have involved our internal experts to review the nature of the amounts recoverable, the sustainability and the likelihood of recoverability upon final resolution. |
Management Responsibility for the Interim Consolidated Financial Statements
Company’s Board of Directors is responsible for the preparation and presentation of these interim consolidated financial statements that give a true and fair view of the consolidated financial position, consolidated financial performance, consolidated total comprehensive income, consolidated changes in equity and consolidated cash flows of the Group in accordance with the Ind AS 34 and other accounting principles generally accepted in India . The respective Board of Directors of the companies included in the Group are responsible for maintenance of the adequate accounting records for safeguarding the assets of the Group and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the interim consolidated financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the interim consolidated financial statements, the respective Board of Directors of the companies included in the Group are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
The respective Board of Directors of the companies included in the Group are also responsible for overseeing the financial reporting process of the Group.
Auditor’s Responsibilities for the Audit of the Interim Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the interim consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these interim consolidated financial statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
· | Identify and assess the risks of material misstatement of the interim consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. |
· | Obtain an understanding of internal financial controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on effectiveness of the Company’s internal financial controls. |
· | Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. |
· | Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the interim consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. |
· | Evaluate the overall presentation, structure and content of the interim consolidated financial statements, including the disclosures, and whether the interim consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. |
· | Obtain sufficient appropriate audit evidence regarding the financial information of the entities within the Group to express an opinion on the interim consolidated financial statements. We are responsible for the direction, supervision and performance of the audit of the interim consolidated financial statements of such entities included in the interim consolidated financial statements of which we are independent auditors. |
Materiality is the magnitude of misstatements in the interim consolidated financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the financial statements.
We communicate with those charged with governance of the Company and such other entities included in the consolidated financial statements of which we are the independent auditors regarding, among other matters, the planned scope and timing of the audit and significant audit findings that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the interim consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication
For DELOITTE HASKINS & SELLS LLP
Chartered Accountants
(Firm Registration No. 117366W/W-100018)
P. r. ramesh
Partner
Bengaluru, April 12, 2019 | (Membership No. 70928) |
INFOSYS LIMITED AND SUBSIDIARIES
Consolidated Financial Statements under Indian Accounting Standards (Ind AS) for the three months and year ended March 31, 2019
Index |
Consolidated Balance Sheet |
Consolidated Statement of Profit and Loss |
Consolidated Statement of Changes in Equity |
Consolidated Statement of Cash Flows |
Overview and notes to the consolidated financial statements |
1. Overview |
1.1 Company overview |
1.2 Basis of preparation of financial statements |
1.3 Basis of consolidation |
1.4 Use of estimates and judgements |
1.5 Critical accounting estimates |
1.6 Recent accounting pronouncements |
2. Notes to the consolidated financial statements |
2.1 Business combinations and disposal group held for sale |
2.2 Property, plant and equipment |
2.3 Goodwill and other intangible |
2.4 Investments |
2.5 Loans |
2.6 Other financial assets |
2.7 Trade receivables |
2.8 Cash and cash equivalents |
2.9 Other assets |
2.10 Financial instruments |
2.11 Equity |
2.12 Other financial liabilities |
2.13 Other liabilities |
2.14 Provisions |
2.15 Income taxes |
2.16 Revenue from operations |
2.17 Other income, net |
2.18 Expenses |
2.19 Leases |
2.20 Employee benefits |
2.21 Reconciliation of basic and diluted shares used in computing earnings per share |
2.22 Contingent liabilities and commitments |
2.23 Related party transactions |
2.24 Segment reporting |
2.25 Function wise classification of Consolidated Statement Of Profit and Loss |
INFOSYS LIMITED AND SUBSIDIARIES
(In crore )
Consolidated Balance Sheets as at | Note No. | March 31, 2019 | March 31, 2018 |
ASSETS | |||
Non-current assets | |||
Property, plant and equipment | 2.2 | 11,479 | 10,116 |
Capital work-in-progress | 1,388 | 1,606 | |
Goodwill | 2.3.1 and 2.1 | 3,540 | 2,211 |
Other intangible assets | 2.3.2 | 691 | 247 |
Investment in associate | 2.23 | – | – |
Financial assets: | |||
Investments | 2.4 | 4,634 | 5,756 |
Loans | 2.5 | 19 | 36 |
Other financial assets | 2.6 | 312 | 284 |
Deferred tax assets (net) | 2.15 | 1,372 | 1,282 |
Income tax assets (net) | 2.15 | 6,320 | 6,070 |
Other non-current assets | 2.9 | 2,105 | 2,265 |
Total non-current assets | 31,860 | 29,873 | |
Current assets | |||
Financial assets: | |||
Investments | 2.4 | 6,627 | 6,407 |
Trade receivables | 2.7 | 14,827 | 13,142 |
Cash and cash equivalents | 2.8 | 19,568 | 19,818 |
Loans | 2.5 | 241 | 239 |
Other financial assets | 2.6 | 5,505 | 6,684 |
Income tax assets (net) | 2.15 | 423 | – |
Other Current assets | 2.9 | 5,687 | 1,667 |
52,878 | 47,957 | ||
Assets held for sale | 2.1.2 | – | 2,060 |
Total current assets | 52,878 | 50,017 | |
Total assets | 84,738 | 79,890 | |
EQUITY AND LIABILITIES | |||
Equity | |||
Equity share capital | 2.11 | 2,170 | 1,088 |
Other equity | 62,778 | 63,835 | |
Total equity attributable to equity holders of the Company | 64,948 | 64,923 | |
Non-controlling interests | 58 | 1 | |
Total equity | 65,006 | 64,924 | |
Liabilities | |||
Non-current liabilities | |||
Financial Liabilities | |||
Other financial liabilities | 2.12 | 147 | 61 |
Deferred tax liabilities (net) | 2.15 | 672 | 541 |
Other non-current liabilities | 2.13 | 275 | 259 |
Total non-current liabilities | 1,094 | 861 | |
Current liabilities | |||
Financial Liabilities | |||
Trade payables | 1,655 | 694 | |
Other financial liabilities | 2.12 | 10,452 | 6,946 |
Other current liabilities | 2.13 | 4,388 | 3,606 |
Provisions | 2.14 | 576 | 492 |
Income tax liabilities (net) | 2.15 | 1,567 | 2,043 |
18,638 | 13,781 | ||
Liabilities directly associated with assets held for sale | 2.1.2 | – | 324 |
Total current liabilities | 18,638 | 14,105 | |
Total equity and liabilities | 84,738 | 79,890 |
The accompanying notes form an integral part of the interim consolidated financial statements
As per our report of even date attached
for Deloitte Haskins & Sells LLP | for and on behalf of the Board of Directors of Infosys Limited | ||
Chartered Accountants Firm’s Registration No : 117366W/ W-100018 |
P. R. Ramesh Partner Membership No. 70928 |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 12, 2019 |
D. Sundaram Director |
Nilanjan Roy 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 | Three months ended March 31, | Year ended March 31, | |||
Note No. | 2019 | 2018 | 2019 | 2018 | |
Revenue from operations | 2.16 | 21,539 | 18,083 | 82,675 | 70,522 |
Other income, net | 2.17 | 665 | 652 | 2,882 | 3,311 |
Total income | 22,204 | 18,735 | 85,557 | 73,833 | |
Expenses | |||||
Employee benefit expenses | 2.18 | 12,074 | 10,054 | 45,315 | 38,893 |
Cost of technical sub-contractors | 1,601 | 1,107 | 6,033 | 4,297 | |
Travel expenses | 603 | 492 | 2,433 | 1,995 | |
Cost of software packages and others | 2.18 | 689 | 466 | 2,553 | 1,870 |
Communication expenses | 115 | 113 | 471 | 489 | |
Consultancy and professional charges | 376 | 282 | 1,324 | 1,043 | |
Depreciation and amortization expenses | 2.2 and 2.3.2 | 531 | 458 | 2,011 | 1,863 |
Other expenses | 2.18 | 932 | 639 | 3,655 | 2,924 |
Reduction in the fair value of Disposal Group held for sale | 2.1.2 | – | 118 | 270 | 118 |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" | 2.1.2 | – | – | 451 | – |
Total expenses | 16,921 | 13,729 | 64,516 | 53,492 | |
Profit before non-controlling interests/share in net profit/(loss) of associate | 5,283 | 5,006 | 21,041 | 20,341 | |
Share in net profit/(loss) of associate, including impairment | 2.23 | – | – | – | (71) |
Profit before tax | 5,283 | 5,006 | 21,041 | 20,270 | |
Tax expense: | |||||
Current tax | 2.15 | 1,193 | 1,466 | 5,727 | 4,581 |
Deferred tax | 2.15 | 12 | (150) | (96) | (340) |
Profit for the period | 4,078 | 3,690 | 15,410 | 16,029 | |
Other comprehensive income | |||||
Items that will not be reclassified subsequently to profit or loss | |||||
Remeasurement of the net defined benefit liability/asset, net | 2.20 and 2.15 | (3) | 34 | (22) | 55 |
Equity instruments through other comprehensive income, net | 2.4 and 2.15 | 1 | 9 | 70 | 7 |
(2) | 43 | 48 | 62 | ||
Items that will be reclassified subsequently to profit or loss | |||||
Fair value changes on derivatives designated as cash flow hedge, net | 2.10 and 2.15 | (15) | 2 | 21 | (39) |
Exchange differences on translation of foreign operations | (70) | 200 | 63 | 321 | |
Fair value changes on investments, net | 2.4 and 2.15 | 25 | (15) | 2 | (1) |
(60) | 187 | 86 | 281 | ||
Total other comprehensive income /(loss), net of tax | (62) | 230 | 134 | 343 | |
Total comprehensive income for the period | 4,016 | 3,920 | 15,544 | 16,372 | |
Profit attributable to: | |||||
Owners of the Company | 4,074 | 3,690 | 15,404 | 16,029 | |
Non-controlling interests | 4 | – | 6 | – | |
4,078 | 3,690 | 15,410 | 16,029 | ||
Total comprehensive income attributable to: | |||||
Owners of the Company | 4,012 | 3,920 | 15,538 | 16,372 | |
Non-controlling interests | 4 | – | 6 | – | |
4,016 | 3,920 | 15,544 | 16,372 | ||
Earnings per Equity share | |||||
Equity shares of par value ![]() |
|||||
Basic (![]() |
9.37 | 8.49 | 35.44 | 35.53 | |
Diluted (![]() |
9.36 | 8.48 | 35.38 | 35.50 | |
Weighted average equity shares used in computing earnings per equity share | 2.21 | ||||
Basic | 4,347,129,592 | 4,346,554,120 | 4,347,130,157 | 4,510,664,644 | |
Diluted | 4,353,023,863 | 4,349,617,024 | 4,353,420,772 | 4,515,147,740 |
The accompanying notes form an integral part of the interim consolidated financial statements
As per our report of even date attached
for Deloitte Haskins & Sells LLP | for and on behalf of the Board of Directors of Infosys Limited | ||
Chartered Accountants Firm’s Registration No : 117366W/ W-100018 |
P. R. Ramesh Partner Membership No. 70928 |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 12, 2019 |
D. Sundaram Director |
Nilanjan Roy Chief Financial Officer |
A. G. S. Manikantha Company Secretary |
INFOSYS LIMITED AND SUBSIDIARIES
Consolidated Statement of Changes in Equity
(In crore )
Particulars | Equity Share capital (1) | OTHER EQUITY | Total equity attributable to equity holders of the Company | Non-controlling interest | Total equity | ||||||||||||
RESERVES & SURPLUS | Other comprehensive income | ||||||||||||||||
Securities Premium | Retained earnings | Capital reserve | General reserve | Share Options Outstanding Account | Special Economic Zone Re-investment reserve (2) | Other reserves(3) | Capital redemption reserve | Equity instruments through other comprehensive income | Exchange differences on translating the financial statements of a foreign operation | Effective portion of Cash Flow Hedges | Other items of other comprehensive income / (loss) | ||||||
Balance as at April 1, 2017 | 1,144 | 2,216 | 52,882 | 54 | 12,135 | 120 | – | 5 | – | (5) | 458 | 39 | (66) | 68,982 | – | 68,982 | |
Changes in equity for the year ended March 31, 2018 | |||||||||||||||||
Profit for the period | – | – | 16,029 | – | – | – | – | – | – | – | – | – | – | 16,029 | – | 16,029 | |
Remeasurement of the net defined benefit liability/asset* (refer note no. 2.20.1 and 2.15) | – | – | – | – | – | – | – | – | – | – | – | – | 55 | 55 | – | 55 | |
Equity instruments through other comprehensive income* (refer to note no.2.4) | – | – | – | – | – | – | – | – | – | 7 | – | – | – | 7 | – | 7 | |
Fair value changes on derivatives designated as cash flow hedge*(refer note no. 2.10) | – | – | – | – | – | – | – | – | – | – | – | (39) | – | (39) | – | (39) | |
Exchange differences on translation of foreign operations | – | – | – | – | – | – | – | – | – | – | 321 | – | – | 321 | – | 321 | |
Fair value changes on investments, net* (refer to note no.2.4) | – | – | – | – | – | – | – | – | – | – | – | – | (1) | (1) | – | (1) | |
Total Comprehensive income for the period | – | - | 16,029 | – | – | – | – | – | – | 7 | 321 | (39) | 54 | 16,372 | – | 16,372 | |
Exercise of stock options (refer note no. 2.11) | – | 67 | – | – | 2 | (69) | – | – | – | – | – | – | – | – | – | – | |
Dividends (including dividend distribution tax) | – | – | (7,469) | – | – | – | – | – | – | – | – | – | – | (7,469) | – | (7,469) | |
Non-controlling interests | – | – | – | – | – | – | – | – | – | – | – | – | – | – | 1 | 1 | |
Transfer to general reserve | – | – | (1,382) | – | 1,382 | – | – | – | – | – | – | – | – | – | – | – | |
Amount paid upon buyback (refer to note no. 2.11 ) | (56) | (2,206) | – | – | (10,738) | – | – | – | – | – | – | – | – | (13,000) | – | (13,000) | |
Amount transferred to capital redemption reserve upon buyback (refer to note no. 2.11) | – | – | – | – | (56) | – | – | – | 56 | – | – | – | – | – | – | – | |
Transaction costs related to buyback* (refer to note no.2.11 ) | – | (46) | – | – | – | – | – | – | – | – | – | – | – | (46) | – | (46) | |
Transferred to Special Economic Zone Re-investment reserve | – | – | (2,200) | – | – | – | 2,200 | – | – | – | – | – | – | – | – | – | |
Transferred from Special Economic Zone Re-investment reserve on utilization | – | – | 617 | – | – | – | (617) | – | – | – | – | – | – | – | – | – | |
Share issued on exercise of stock options (Refer to 2.11) | – | 5 | – | – | – | – | – | – | – | – | – | – | – | 5 | – | 5 | |
Share based payments to employees (refer note no. 2.11) | – | – | – | – | – | 79 | – | – | – | – | – | – | – | 79 | – | 79 | |
Balance as at March 31, 2018 | 1,088 | 36 | 58,477 | 54 | 2,725 | 130 | 1,583 | 5 | 56 | 2 | 779 | – | (12) | 64,923 | 1 | 64,924 |
Consolidated Statement of Changes in Equity (contd.)
(In crore)
Particulars | Equity Share capital (1) | OTHER EQUITY | Total equity attributable to equity holders of the Company | Non-controlling interest | Total equity | ||||||||||||
RESERVES & SURPLUS | Other comprehensive income | ||||||||||||||||
Securities Premium | Retained earnings | Capital reserve | General reserve | Share Options Outstanding Account | Special Economic Zone Re-investment reserve (2) | Other reserves(3) | Capital redemption reserve | Equity instruments through Other comprehensive income | Exchange differences on translating the financial statements of a foreign operation | Effective portion of Cash Flow Hedges | Other items of other comprehensive income / (loss) | ||||||
Balance as at April 1, 2018 | 1,088 | 36 | 58,477 | 54 | 2,725 | 130 | 1,583 | 5 | 56 | 2 | 779 | – | (12) | 64,923 | 1 | 64,924 | |
Changes in equity for the year ended March 31, 2019 | |||||||||||||||||
Profit for the period | – | – | 15,404 | – | – | – | – | – | – | – | – | – | – | 15,404 | 6 | 15,410 | |
Remeasurement of the net defined benefit liability/asset* (refer note no. 2.20.1 and 2.15) | – | – | – | – | – | – | – | – | – | – | – | – | (22) | (22) | – | (22) | |
Equity instruments through other comprehensive income* (refer to note no.2.4) | – | – | – | – | – | – | – | – | – | 70 | – | – | – | 70 | – | 70 | |
Fair value changes on derivatives designated as cash flow hedge* (refer note no. 2.10) | – | – | – | – | – | – | – | – | – | – | – | 21 | – | 21 | – | 21 | |
Exchange differences on translation of foreign operations | – | – | – | – | – | – | – | – | – | – | 63 | – | – | 63 | – | 63 | |
Fair value changes on investments* (refer to note no.2.4) | – | – | – | – | – | – | – | – | – | – | – | – | 2 | 2 | – | 2 | |
Total Comprehensive income for the period | – | – | 15,404 | – | – | – | – | – | – | 70 | 63 | 21 | (20) | 15,538 | 6 | 15,544 | |
Share based payments to employees (refer to note no. 2.11) | – | – | – | – | – | 197 | – | – | – | – | – | – | – | 197 | – | 197 | |
Increase in Equity share capital on account of bonus issue (refer to note no. 2.11) | 1,088 | – | – | – | – | – | – | – | – | – | – | – | – | 1,088 | – | 1,088 | |
Shares issued on exercise of employee stock options - after bonus issue (Refer to note 2.11) | – | 6 | – | – | – | – | – | – | – | – | – | – | – | 6 | – | 6 | |
Buyback of equity shares (Refer to note 2.11 & 2.12) | (6) | – | – | – | (1,994) | – | – | – | – | – | – | – | – | (2,000) | – | (2,000) | |
Transaction costs relating to buyback* (refer to note no.2.11) | – | – | – | – | (12) | – | – | – | – | – | – | – | – | (12) | – | (12) | |
Amount transferred to capital redemption reserve upon buyback (refer to note no. 2.11) | – | – | – | – | (5) | – | – | – | 5 | – | – | – | – | – | – | – | |
Amounts utilized for bonus issue (refer to note no. 2.11) | – | – | – | – | (1,088) | – | – | – | – | – | – | – | – | (1,088) | – | (1,088) | |
Exercise of stock options (refer to note no. 2.11) | – | 99 | – | – | – | (99) | – | – | – | – | – | – | – | – | – | – | |
Transfer on account of options not exercised | – | – | – | – | 1 | (1) | – | – | – | – | – | – | – | – | – | – | |
Income tax benefit arising on exercise of stock options | – | 8 | – | – | – | – | – | – | – | – | – | – | – | 8 | – | 8 | |
Amount transferred to other reserves | – | – | (1) | – | – | – | – | 1 | – | – | – | – | – | – | – | – | |
Dividends (including dividend distribution tax) | – | – | (13,712) | – | – | – | – | – | – | – | – | – | – | (13,712) | – | (13,712) | |
Non-controlling interests on acquisition of subsidiary (refer to note no.2.11) |
– | – | – | – | – | – | – | – | – | – | – | – | – | – | 51 | 51 | |
Transfer to general reserve | – | – | (1,615) | – | 1,615 | – | – | – | – | – | – | – | – | – | – | – | |
Transferred to Special Economic Zone Re-investment reserve | – | – | (2,417) | – | – | – | 2,417 | – | – | – | – | – | – | – | – | – | |
Transferred from Special Economic Zone Re-investment reserve on utilization | – | – | 1,430 | – | – | – | (1,430) | – | – | – | – | – | – | – | – | – | |
Balance as at March 31, 2019 | 2,170 | 149 | 57,566 | 54 | 1,242 | 227 | 2,570 | 6 | 61 | 72 | 842 | 21 | (32) | 64,948 | 58 | 65,006 |
* Net of tax
(1) | Net of treasury shares |
(2) | The Special Economic Zone Re-investment Reserve has been created out of the profit of eligible SEZ units in terms of the provisions of Sec 10AA(1)(ii) of Income Tax Act,1961. The reserve should be utilized by the Group 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. |
(3) | 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 interim consolidated financial statements
As per our report of even date attached
for Deloitte Haskins & Sells LLP | for and on behalf of the Board of Directors of Infosys Limited | ||
Chartered Accountants Firm’s Registration No : 117366W/ W-100018 |
P. R. Ramesh Partner Membership No. 70928 |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 12, 2019 |
D. Sundaram Director |
Nilanjan Roy Chief Financial Officer |
A. G. S. Manikantha Company Secretary |
INFOSYS LIMITED AND SUBSIDIARIES
Consolidated Statement of Cash Flows
Accounting policy
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 Group are segregated. The Group considers all highly liquid investments that are readily convertible to known amounts of cash to be cash equivalents.
(In crore)
Particulars | Year ended March 31, | ||
Note No. | 2019 | 2018 | |
Cash flow from operating activities | |||
Profit for the period | 15,410 | 16,029 | |
Adjustments to reconcile net profit to net cash provided by operating activities: | |||
Income tax expense | 2.15 | 5,631 | 4,241 |
Depreciation and amortization | 2.2 and 2.3.2 | 2,011 | 1,863 |
Interest and dividend income | (2,052) | (2,360) | |
Impairment loss recognized / (reversed) under expected credit loss model | 239 | 34 | |
Exchange differences on translation of assets and liabilities | 66 | 16 | |
Reduction in the fair value of Disposal Group held for sale | 2.1.2 | 270 | 118 |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" | 2.1.2 | 451 | – |
Share in net profit/(loss) of associate, including impairment | – | 71 | |
Stock compensation expense | 2.11 | 202 | 84 |
Other adjustments | (102) | (133) | |
Changes in assets and liabilities | |||
Trade receivables and unbilled revenue | (2,881) | (1,523) | |
Loans, other financial assets and other assets | (700) | (186) | |
Trade payables | 916 | 328 | |
Other financial liabilities, other liabilities and provisions | 2,212 | 1,465 | |
Cash generated from operations | 21,673 | 20,047 | |
Income taxes paid | (6,832) | (6,829) | |
Net cash generated by operating activities | 14,841 | 13,218 | |
Cash flows from investing activities | |||
Expenditure on property, plant and equipment | (2,445) | (1,998) | |
Loans to employees | 14 | 28 | |
Deposits placed with corporation | (24) | (130) | |
Interest and dividend received | 1,557 | 1,768 | |
Payment towards acquisition of business, net of cash acquired | (550) | (33) | |
Payment of contingent consideration pertaining to acquisition of business | (18) | (27) | |
Advance payment towards acquisition of business | (206) | – | |
Escrow and other deposits pertaining to buyback | 2.6 | (257) | – |
Payments to acquire Investments | |||
Preference and equity securities | (21) | (23) | |
Tax free bonds and government bonds | (17) | (2) | |
Liquid mutual funds and fixed maturity plan securities | (78,355) | (62,063) | |
Non convertible debentures | (160) | (104) | |
Certificates of deposit | (2,393) | (6,653) | |
Government securities | (838) | – | |
Commercial paper | (491) | (291) | |
Others | (19) | (23) | |
Proceeds on sale of financial assets | |||
Tax free bonds and government bonds | 1 | 15 | |
Non-convertible debentures | 738 | 100 | |
Government security | 123 | – | |
Commercial paper | 300 | – | |
Certificates of deposit | 5,540 | 9,690 | |
Liquid mutual funds and fixed maturity plan securities | 76,821 | 64,163 | |
Preference and equity securities | 115 | 35 | |
Others | 10 | – | |
Net cash (used in)/from in investing activities | (575) | 4,452 | |
Cash flows from financing activities: | |||
Payment of dividends (including dividend distribution tax) | (13,705) | (7,464) | |
Shares issued on exercise of employee stock options | 6 | 5 | |
Buyback of equity shares including transaction cost | (813) | (13,046) | |
Net cash used in financing activities | (14,512) | (20,505) | |
Net increase / (decrease) in cash and cash equivalents | (246) | (2,835) | |
Cash and cash equivalents at the beginning of the period | 2.8 | 19,871 | 22,625 |
Effect of exchange rate changes on cash and cash equivalents | (57) | 81 | |
Cash and cash equivalents at the end of the period | 2.8 | 19,568 | 19,871 |
Supplementary information: | |||
Restricted cash balance | 2.8 | 358 | 533 |
The accompanying notes form an integral part of the interim consolidated financial statements
As per our report of even date attached
for Deloitte Haskins & Sells LLP | for and on behalf of the Board of Directors of Infosys Limited | ||
Chartered Accountants Firm’s Registration No : 117366W/ W-100018 |
P. R. Ramesh Partner Membership No. 70928 |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 12, 2019 |
D. Sundaram Director |
Nilanjan Roy Chief Financial Officer |
A. G. S. Manikantha Company Secretary |
INFOSYS LIMITED AND SUBSIDIARIES
Notes to the interim consolidated financial statements
1. Overview
1.1 Company overview
Infosys Limited ('the Company' or Infosys) is a leading provider of consulting, technology, outsourcing and next-generation digital services, enabling clients to execute strategies for their digital transformation. Infosys strategic objective is to build a sustainable organization that remains relevant to the agenda of clients, while creating growth opportunities for employees and generating profitable returns for investors. Infosys strategy is to be a navigator for our clients as they ideate, plan and execute on their journey to a digital future. 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 Electronics city, Hosur Road, Bengaluru 560100, Karnataka, India. The Company has its primary listings on the BSE Ltd. and National Stock Exchange of India Limited. The Company’s American Depositary Shares (ADS) representing equity shares are listed on the New York Stock Exchange (NYSE).
Further, the Company's ADS were also listed on the Euronext London and Euronext Paris. On July 5, 2018, the Company voluntarily delisted its ADS from the said exchanges due to low average daily trading volume of its ADS on these exchanges.
The Group's interim consolidated financial statements are approved for issue by the Company's Board of Directors on April 12, 2019.
1.2 Basis of preparation of financial statements
These interim consolidated financial statements are prepared in accordance with Indian Accounting Standard 34 (Ind AS 34), 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 ('the 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 relevant amendment rules issued thereafter.
Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.
As the quarter and year figures are taken from the source and rounded to the nearest digits, the quarter figures in this statement added up to the figures reported for the previous quarters might not always add up to the year-end figures reported in this statement.
1.3 Basis of consolidation
Infosys consolidates entities which it owns or controls. The interim consolidated financial statements comprise the financial statements of the Company, its controlled trusts and its subsidiaries, as disclosed in Note no. 2.23. 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.
1.4 Use of estimates and judgements
The preparation of the financial statements in conformity with Ind AS requires the management to make estimates, judgements and assumptions. These estimates, judgements 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 judgements and the use of assumptions in these financial statements have been disclosed in Note no. 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.
Further, the Group uses significant judgements while determining the transaction price allocated to performance obligations using the expected cost plus margin approach.
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 no. 2.15 and 2.22
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.
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 (Refer to Note no 2.1 and 2.3).
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 (Refer to Note no 2.2).
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 (CGUs) 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 CGUs 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 CGU or groups of cash-generating units which are benefiting 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 (Refer to Note no 2.3).
f. Non-current assets and Disposal Group held for sale
Assets and liabilities of Disposal Groups held for sale are measured at the lower of carrying amount and fair value less costs to sell. The determination of fair value less costs to sell includes use of management estimates and assumptions. The fair value of the Disposal Groups have been estimated using valuation techniques including income and market approach which includes unobservable inputs.
Non-current assets and Disposal Group that ceases to be classified as held for sale shall be measured at the lower of carrying amount before the Non-current asset and Disposal Group was classified as held for sale adjusted for any depreciation/ amortization and its recoverable amount at the date when the Disposal Group no longer meets the " Held for sale" criteria. Recoverable amounts of assets reclassified from held for sale have been estimated using management’s assumptions which consist of significant unobservable inputs (Refer to Note no 2.1.2).
1.6 Recent accounting pronouncements
Ind AS 116 Leases : On March 30, 2019, Ministry of Corporate Affairs has notified Ind AS 116, Leases. Ind AS 116 will replace the existing leases Standard, Ind AS 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. Ind AS 116 introduces a single lessee accounting model and requires a lessee to recognize assets and liabilities for all leases with a term of more than twelve months, unless the underlying asset is of low value. Currently, operating lease expenses are charged to the statement of Profit & Loss. The Standard also contains enhanced disclosure requirements for lessees. Ind AS 116 substantially carries forward the lessor accounting requirements in Ind AS 17.
The effective date for adoption of Ind AS 116 is annual periods beginning on or after April 1, 2019. The standard permits two possible methods of transition:
• Full retrospective – Retrospectively to each prior period presented applying Ind AS 8 Accounting Policies, Changes in Accounting Estimates and Errors
• Modified retrospective – Retrospectively, with the cumulative effect of initially applying the Standard recognized at the date of initial application. Under modified retrospective approach, the lessee records the lease liability as the present value of the remaining lease payments, discounted at the incremental borrowing rate and the right of use asset either as:
• Its carrying amount as if the standard had been applied since the commencement date, but discounted at lessee’s incremental borrowing rate at the date of initial application or
• An amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments related to that lease recognized under Ind AS 17 immediately before the date of initial application.
Certain practical expedients are available under both the methods.
On completion of evaluation of the effect of adoption of Ind AS 116, the Group is proposing to use the ‘Modified Retrospective Approach’ for transitioning to Ind AS 116, and take the cumulative adjustment to retained earnings, on the date of initial application (April 1, 2019). Accordingly, comparatives for the year ended March 31, 2019 will not be retrospectively adjusted. The Group has elected certain available practical expedients on transition.
The effect of adoption as on transition date
would majorly result in an increase in right of use asset approximately by 2,300 crore, net investment in
sub-lease approximately by
440 crore and an increase in lease liability approximately by
3,050 crore.
Ind AS 12 Appendix C, Uncertainty over Income Tax Treatments : On March 30, 2019, Ministry of Corporate Affairs has notified Ind AS 12 Appendix C, Uncertainty over Income Tax Treatments which is to be applied while performing the determination of taxable profit (or loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under Ind AS 12. According to the appendix, companies need to determine the probability of the relevant tax authority accepting each tax treatment, or group of tax treatments, that the companies have used or plan to use in their income tax filing which has to be considered to compute the most likely amount or the expected value of the tax treatment when determining taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates.
The standard permits two possible methods of transition - i) Full retrospective approach – Under this approach, Appendix C will be applied retrospectively to each prior reporting period presented in accordance with Ind AS 8 – Accounting Policies, Changes in Accounting Estimates and Errors, without using hindsight and ii) Retrospectively with cumulative effect of initially applying Appendix C recognized by adjusting equity on initial application, without adjusting comparatives.
The effective date for adoption of Ind AS 12 Appendix C is annual periods beginning on or after April 1, 2019. The Group will adopt the standard on April 1, 2019 and has decided to adjust the cumulative effect in equity on the date of initial application i.e. April 1, 2019 without adjusting comparatives.
The effect on adoption of Ind AS 12 Appendix C would be insignificant in the consolidated financial statements.
Amendment to Ind AS 12 – Income taxes : On March 30, 2019, Ministry of Corporate Affairs issued amendments to the guidance in Ind AS 12, ‘Income Taxes’, in connection with accounting for dividend distribution taxes.
The amendment clarifies that an entity shall recognize the income tax consequences of dividends in profit or loss, other comprehensive income or equity according to where the entity originally recognized those past transactions or events.
Effective date for application of this amendment is annual period beginning on or after April 1, 2019. The Group is currently evaluating the effect of this amendment on the consolidated financial statements.
Amendment to Ind AS 19 – plan amendment, curtailment or settlement- On March 30, 2019, Ministry of Corporate Affairs issued amendments to Ind AS 19, ‘Employee Benefits’, in connection with accounting for plan amendments, curtailments and settlements.
The amendments require an entity:
• to use updated assumptions to determine current service cost and net interest for the remainder of the period after a plan amendment, curtailment or settlement; and
• to recognize in profit or loss as part of past service cost, or a gain or loss on settlement, any reduction in a surplus, even if that surplus was not previously recognized because of the impact of the asset ceiling.
Effective date for application of this amendment is annual period beginning on or after 1 April 2019. The Group does not have any impact on account of this amendment.
2.1 BUSINESS COMBINATIONS AND DISPOSAL GROUP HELD FOR SALE
2.1.1 Business combinations
Accounting policy
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.
The interest of non-controlling shareholders is initially measured either at fair value or at the non-controlling interests’ proportionate share of the acquiree’s identifiable net assets. The choice of measurement basis is made on an acquisition-by-acquisition basis. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests’ share of subsequent changes in equity of subsidiaries.
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 finder’s fees, legal fees, due diligence fees, and other professional and consulting fees are expensed as incurred.
Brilliant Basics Holdings Limited.
On September 8, 2017, Infosys acquired 100%
of the voting interests in Brilliant Basics Holdings Limited., UK, (Brilliant Basics) a product design and customer experience
innovator with experience in executing global programs. The business acquisition was conducted by entering into a share purchase
agreement for cash consideration of 29 crore, a contingent consideration of up to
20 crore and an additional consideration
of upto
13 crore, referred to as retention bonus, payable to the employees of Brilliant Basics at each anniversary year
over the next two years, subject to their continuous employment with the group at each anniversary.
The payment of contingent consideration to sellers of Brilliant Basics is dependent upon the achievement of certain financial targets by Brilliant Basics over a period of 3 years ending on March 2020.
The fair value of contingent consideration is
determined by discounting the estimated amount payable to the sellers of Brilliant Basics on achievement of certain financial targets.
The key inputs used in determination of the fair value of contingent consideration are the discount rate of 10% and the probabilities
of achievement of the financial targets. The undiscounted value of contingent consideration as at March 31, 2019 is 14 crore.
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 the 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(*) | 1 | – | 1 |
Intangible assets - customer relationships | – | 12 | 12 |
Deferred tax liabilities on intangible assets | – | (2) | (2) |
1 | 10 | 11 | |
Goodwill | 35 | ||
Total purchase price | 46 |
*Includes cash and cash equivalents acquired of
2 crore
The goodwill is not tax deductible.
The gross amount of trade receivables acquired
and its fair value is 3 crore and the amount has been substantially collected.
The fair value of each major class of consideration as at the acquisition date is as follows:
(In crore)
Component | Consideration settled |
Cash paid | 29 |
Fair value of contingent consideration | 17 |
Total purchase price | 46 |
The transaction costs of 2 crore related
to the acquisition have been included in the statement of profit and loss for the year ended March 31, 2018.
Wongdoody Holding Company Inc
On May 22, 2018, Infosys acquired 100% of the
voting interests in WongDoody Holding Company Inc., (WongDoody) an US-based, full-service creative and consumer insights agency.
The business acquisition was conducted by entering into a share purchase agreement for a total consideration of up to $75 million
(approximately 514 crore on acquisition date), which includes a cash consideration of $38 million (approximately
261
crore), contingent consideration of up to $28 million (approximately
192 crore on acquisition date) and an additional consideration
of up to $9 million (approximately
61 crore on acquisition date), referred to as retention bonus, payable to the employees
of WongDoody over the next three years, subject to their continuous employment with the group.
WongDoody, brings to Infosys the creative talent and marketing and brand engagement expertise. Further the acquisition is expected to strengthen Infosys’ creative, branding and customer experience capabilities to bring innovative thinking, talent and creativity to clients.
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(*) | 37 | – | 37 |
Intangible assets - customer relationships | – | 132 | 132 |
Intangible assets - trade name | – | 8 | 8 |
37 | 140 | 177 | |
Goodwill | 173 | ||
Total purchase price | 350 |
* Includes cash and cash equivalents acquired
of 51 crore.
Goodwill is tax deductible
The fair value of each major class of consideration as at the acquisition date is as follows:
(in crore)
Component | Consideration settled |
Cash consideration | 261 |
Fair value of contingent consideration | 89 |
Total purchase price | 350 |
The gross amount of trade receivables acquired
and its fair value is 12 crore and the amount has been fully collected.
The payment of contingent consideration to sellers
of WongDoody is dependent upon the achievement of certain financial targets by WongDoody. At the acquisition date, the key inputs
used in determination of the fair value of contingent consideration are the discount rate of 16% and the probabilities of achievement
of the financial targets. The undiscounted value of contingent consideration as at March 31, 2019 is $17 million (121 crore).
The transaction costs of 3 crore related
to the acquisition have been included in the statement of profit and loss for the year ended March 31, 2019.
Infosys Compaz Pte Limited (formerly Trusted Source Pte Ltd)
On November 16, 2018, Infosys Consulting Pte
Limited (a wholly owned subsidiary of Infosys Limited) acquired 60% stake in Infosys Compaz Pte. Ltd, a Singapore based IT services
company. The business acquisition was conducted by entering into a share purchase agreement for a total consideration of up to
SGD 17 million (approximately 91 crore on acquisition date), which includes a cash consideration of SGD 10 million (approximately
54 crore) and a contingent consideration of up to SGD 7 million (approximately
37 crore on acquisition date).
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(*) | 92 | – | 92 |
Intangible assets - Customer contracts and relationships | – | 44 | 44 |
Deferred tax liabilities on intangible assets | – | (7) | (7) |
92 | 37 | 129 | |
Non-controlling interests | (51) | ||
Total purchase price | 78 |
* Includes cash and cash equivalents acquired
of 65 crore.
The fair value of each major class of consideration as at the acquisition date is as follows:
(in crore)
Component | Consideration settled |
Cash consideration | 54 |
Fair value of contingent consideration | 24 |
Total purchase price | 78 |
The gross amount of trade receivables acquired
and its fair value is 50 crore and the amount has been substantially collected.
The payment of contingent consideration to sellers
of Infosys Compaz Pte. Ltd is dependent upon the achievement of certain revenue targets by Infosys Compaz Pte. Ltd. At the acquisition
date, the key inputs used in determination of the fair value of contingent consideration are the discount rate of 9% and the probabilities
of achievement of the financial targets. The undiscounted value of contingent consideration as at March 31, 2019 is SGD 7 million
(36 crore).
The transaction costs of 3 crore related
to the acquisition have been included in the statement of profit and loss for the year ended March 31, 2019.
Fluido Oy
On October 11, 2018, Infosys Consulting Pte
Limited (a wholly owned subsidiary of Infosys Limited) acquired 100% of voting interests in Fluido Oy (Fluido), a Nordic-based
salesforce advisor and consulting partner in cloud consulting, implementation and training services for a total consideration of
upto Euro 65 million (approximately 560 crore), comprising of cash consideration of Euro 45 million (approximately
388
crore), contingent consideration of upto Euro 12 million (approximately
103 crore) and retention payouts of upto Euro 8
million (approximately
69 crore), payable to the employees of Fluido over the next three years, subject to their continuous
employment with the group.
Fluido brings to Infosys the Salesforce expertise, alongside an agile delivery process that simplifies and scales digital efforts across channels and touchpoints. Further, Fluido strengthens Infosys’ presence across the Nordics region with developed assets and client relationships. 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(*) | 12 | – | 12 |
Intangible assets - Customer contracts and relationships | – | 158 | 158 |
Intangible assets - Salesforce Relationships | – | 62 | 62 |
Intangible assets - Brand | – | 28 | 28 |
Deferred tax liabilities on intangible assets | – | (52) | (52) |
12 | 196 | 208 | |
Goodwill | 240 | ||
Total purchase price | 448 |
* Includes cash and cash equivalents acquired
of 28 crore.
Goodwill is not tax deductible
The fair value of each major class of consideration as of the acquisition date is as follows:
(in crore)
Component | Consideration settled |
Cash consideration | 388 |
Fair value of contingent consideration | 60 |
Total purchase price | 448 |
The gross amount of trade receivables acquired
and its fair value is 27 crore and the amount has been fully collected.
The payment of contingent consideration to sellers
of Fluido is dependent upon the achievement of certain financial targets by Fluido. At the acquisition date, the key inputs used
in determination of the fair value of contingent consideration are the discount rate of 16% and the probabilities of achievement
of the financial targets. The undiscounted value of contingent consideration as at March 31, 2019 was EUR 8 million (62
crore).
The transaction costs of 5 crore related
to the acquisition have been included in the Consolidated Statement of Profit and Loss for the year ended March 31, 2019
Hitachi Procurement Service Co. Ltd
On April 1, 2019, Infosys Consulting Pte Limited
(a wholly owned subsidiary of Infosys Limited) acquired 81% of voting interests in Hitachi Procurement Service Co., Ltd., (HIPUS),
Japan, a wholly owned subsidiary of Hitachi Ltd, Japan for a total cash consideration of JPY 3.29 billion (approximately 206
crore) on fulfilment of closing conditions. The company has paid an advance of JPY 3.29 billion (approximately
206 crore)
to Hitachi towards cash consideration on March 29, 2019. HIPUS handles indirect materials purchasing functions for the Hitachi
Group.
As of April 12, 2019 (i.e., the date of adoption of financial statements by the Board of Directors), the Company is in the process of finalizing the accounting for acquisition of HIPUS, including allocation of purchase consideration to identifiable assets and liabilities.
Proposed acquisition
Stater N.V.
On March 28, 2019, Infosys Consulting Pte Limited
(a wholly owned subsidiary of Infosys Limited) entered into a definitive agreement to acquire 75% of the shareholding in Stater
N.V., a wholly-owned subsidiary of ABN AMRO Bank N.V., Netherlands, for a consideration including base purchase price of up to
EUR 127.5 million (approximately 990 crore) and customary closing adjustments, subject to regulatory approvals and fulfilment
of closing conditions.
2.1.2. Disposal group held for sale
Accounting policy
Non-current assets and Disposal Group are classified as held for sale if their carrying amount is intended to be recovered principally through sale rather than through continuing use. The condition for classification of held for sale is met when the non-current asset or the Disposal Group is available for immediate sale and the same is highly probable of being completed within one year from the date of classification as held for sale. Non-current assets and Disposal Group held for sale are measured at the lower of carrying amount and fair value less cost to sell. Non-current assets and Disposal Group that ceases to be classified as held for sale shall be measured at the lower of carrying amount before the non-current asset and Disposal Group was classified as held for sale adjusted for any depreciation/ amortization and its recoverable amount at the date when the Disposal Group no longer meets the "Held for sale" criteria.
In the three months ended March 2018, the Company
had initiated identification and evaluation of potential buyers for its subsidiaries, Kallidus and Skava (together referred to
as "Skava”) and Panaya, collectively referred to as the “Disposal Group”. The Disposal Group was classified
and presented separately as “held for sale” and was carried at the lower of carrying value and fair value. Consequently,
a reduction in the fair value of Disposal Group held for sale amounting to 118 crore in respect of Panaya had been recognized
in the consolidated statement of profit and loss for the three months and year ended March 31, 2018. During the three months ended
June 30, 2018, on remeasurement, including consideration of progress in negotiations on offers from prospective buyers for Panaya,
the Company has recorded a reduction in the fair value of Disposal Group held for sale amounting to
270 crore in respect of Panaya.
During the three months ended December 31, 2018, based on evaluation of proposals received and progress of negotiations with potential buyers, the Company concluded that the Disposal Group does not meet the criteria for “Held for Sale” classification because it is no longer highly probable that sale would be consummated by March 31, 2019 ( twelve months from date of initial classification as “held for sale”). Accordingly, in accordance with Ind AS 105 -" Non current Assets held for Sale and Discontinued Operations", the assets and liabilities of Panaya and Skava have been included on a line by line basis in the consolidated financial statements for the period and as at December 31, 2018 and March 31, 2019.
On reclassification from “Held for sale”,
the assets of Panaya and Skava have been remeasured in the quarter ended December 31, 2018 at the lower of cost and recoverable
amount resulting in recognition of additional depreciation and amortization expenses of 88 crore and an adjustment in respect
of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" of
451 crore (comprising
of
358 crore towards goodwill and
93 crore towards value of customer relationships) in respect of Skava in the consolidated statement
of profit and loss for the three months and nine months ended December 31, 2018.
2.2 PROPERTY, PLANT AND EQUIPMENT
Accounting policy
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:
Buildings (1) | 22-25 years |
Plant and machinery (1)(2) | 5 years |
Office equipment | 5 years |
Computer equipment (1) | 3-5 years |
Furniture and fixtures (1) | 5 years |
Vehicles(1) | 5 years |
Leasehold improvements | Over lease term |
(1)Based on technical evaluation, the management believes that the useful lives as given above best represent the period over which management expects to use these assets. Hence, the useful lives for these assets is different from the useful lives as prescribed under Part C of Schedule II of the Companies Act 2013.
(2)Includes solar plant with a useful life of 20 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 ready 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 the Consolidated 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 Consolidated
Statement of Profit and Loss.
Impairment
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 Cash Generating Unit (CGU) to which the asset belongs.
If such assets are considered to be impaired, the impairment to be recognized in the Consolidated 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 Consolidated 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 depreciation) had no impairment loss been recognized for the asset in prior years.
Following are the changes in the carrying value of property, plant and equipment for the three months ended March 31, 2019:
(In crore)
Particulars | Land - Freehold | Land - Leasehold | Buildings (1) | Plant and machinery | Office Equipment | Computer equipment | Furniture and fixtures | Leasehold Improvements | Vehicles | Total |
Gross carrying value as at January 1, 2019 | 1,307 | 652 | 8,632 | 2,440 | 1,069 | 5,515 | 1,503 | 636 | 36 | 21,790 |
Additions/adjustments | 36 | – | 402 | 326 | 62 | 453 | 141 | 113 | 3 | 1,536 |
Deletions/adjustments | (36) | (47) | (116) | (56) | (29) | (122) | (24) | (9) | – | (439) |
Translation difference | – | – | 8 | (1) | (1) | – | – | (1) | (1) | 4 |
Gross carrying value as at March 31, 2019 | 1,307 | 605 | 8,926 | 2,709 | 1,101 | 5,846 | 1,620 | 739 | 38 | 22,891 |
Accumulated depreciation as at January 1, 2019 | – | (35) | (2,948) | (1,817) | (804) | (4,101) | (1,142) | (395) | (21) | (11,263) |
Depreciation | – | (1) | (81) | (71) | (31) | (212) | (48) | (28) | (2) | (474) |
Accumulated depreciation on deletions | – | 3 | 103 | 47 | 22 | 121 | 20 | 9 | – | 325 |
Translation difference | – | – | (1) | – | – | – | – | – | 1 | – |
Accumulated depreciation as at March 31, 2019 | – | (33) | (2,927) | (1,841) | (813) | (4,192) | (1,170) | (414) | (22) | (11,412) |
Carrying value as at January 1, 2019 | 1,307 | 617 | 5,684 | 623 | 265 | 1,414 | 361 | 241 | 15 | 10,527 |
Carrying value as at March 31, 2019 | 1,307 | 572 | 5,999 | 868 | 288 | 1,654 | 450 | 325 | 16 | 11,479 |
Following are the changes in the carrying value of property, plant and equipment for the three months ended March 31, 2018:
(In crore)
Particulars | Land - Freehold | Land - Leasehold | Buildings (1) | Plant and machinery | Office Equipment | Computer equipment | Furniture and fixtures | Leasehold Improvements | Vehicles | Total |
Gross carrying value as at January 1, 2018 | 1,137 | 671 | 7,680 | 2,214 | 979 | 4,819 | 1,358 | 517 | 30 | 19,405 |
Additions | 92 | 2 | 416 | 95 | 25 | 120 | 41 | 21 | 2 | 814 |
Deletions | – | – | (1) | (4) | (1) | (29) | (2) | – | (1) | (38) |
Reclassified as assets held for sale (Refer note 2.1.2) | – | – | – | (1) | (2) | (40) | (8) | (17) | – | (68) |
Translation difference | – | – | 35 | 2 | 1 | 14 | 4 | 10 | – | 66 |
Gross carrying value as at March 31, 2018 | 1,229 | 673 | 8,130 | 2,306 | 1,002 | 4,884 | 1,393 | 531 | 31 | 20,179 |
Accumulated depreciation as at January 1, 2018 | – | (30) | (2,645) | (1,531) | (688) | (3,499) | (981) | (310) | (18) | (9,702) |
Depreciation | – | (1) | (71) | (69) | (31) | (175) | (40) | (27) | (1) | (415) |
Accumulated depreciation on deletions | – | – | – | 3 | – | 29 | 1 | – | 1 | 34 |
Reclassified as assets held for sale (Refer note 2.1.2) | – | – | – | 1 | 1 | 25 | 5 | 15 | – | 47 |
Translation difference | – | – | (3) | (1) | (1) | (12) | (2) | (8) | – | (27) |
Accumulated depreciation as at March 31, 2018 | – | (31) | (2,719) | (1,597) | (719) | (3,632) | (1,017) | (330) | (18) | (10,063) |
Carrying value as at January 1, 2018 | 1,137 | 641 | 5,035 | 683 | 291 | 1,320 | 377 | 207 | 12 | 9,703 |
Carrying value as at March 31, 2018 | 1,229 | 642 | 5,411 | 709 | 283 | 1,252 | 376 | 201 | 13 | 10,116 |
Following are the changes in the carrying value of property, plant and equipment for the year ended March 31, 2019:
(In
crore)
Particulars | Land - Freehold | Land - Leasehold | Buildings (1) | Plant and machinery | Office Equipment | Computer equipment | Furniture and fixtures | Leasehold Improvements | Vehicles | Total |
Gross carrying value as at April 1, 2018 | 1,229 | 673 | 8,130 | 2,306 | 1,002 | 4,884 | 1,393 | 531 | 31 | 20,179 |
Additions | 78 | – | 916 | 462 | 136 | 1,129 | 254 | 209 | 9 | 3,193 |
Additions - Business Combination | – | – | – | 1 | 2 | 34 | 7 | 3 | – | 47 |
Deletions | – | (68) | (116) | (60) | (40) | (239) | (40) | (21) | (2) | (586) |
Reclassified from assets held for sale (Refer note 2.1.2) | – | – | – | 1 | 2 | 40 | 8 | 17 | – | 68 |
Translation difference | – | – | (4) | (1) | (1) | (2) | (2) | – | – | (10) |
Gross carrying value as at March 31, 2019 | 1,307 | 605 | 8,926 | 2,709 | 1,101 | 5,846 | 1,620 | 739 | 38 | 22,891 |
Accumulated depreciation as at April 1, 2018 | – | (31) | (2,719) | (1,597) | (719) | (3,632) | (1,017) | (330) | (18) | (10,063) |
Depreciation | – | (5) | (313) | (293) | (125) | (766) | (185) | (89) | (6) | (1,782) |
Accumulated depreciation on deletions | – | 3 | 103 | 50 | 32 | 229 | 36 | 20 | 2 | 475 |
Reclassified from assets held for sale (Refer note 2.1.2) | – | – | – | (1) | (1) | (25) | (5) | (15) | – | (47) |
Translation difference | – | – | 2 | – | – | 2 | 1 | – | – | 5 |
Accumulated depreciation as at March 31, 2019 | – | (33) | (2,927) | (1,841) | (813) | (4,192) | (1,170) | (414) | (22) | (11,412) |
Carrying value as at April 1, 2018 | 1,229 | 642 | 5,411 | 709 | 283 | 1,252 | 376 | 201 | 13 | 10,116 |
Carrying value as at March 31, 2019 | 1,307 | 572 | 5,999 | 868 | 288 | 1,654 | 450 | 325 | 16 | 11,479 |
Following are the changes in the carrying value of property, plant and equipment for the year ended March 31, 2018:
Following are the changes in the carrying value of property, plant and equipment for the year ended March 31, 2018:
(In crore)
Particulars | Land- Freehold | Land- Leasehold | Buildings (1) | Plant and machinery | Office Equipment | Computer equipment | Furniture and fixtures | Leasehold Improvements | Vehicles | Total |
Gross carrying value as at April 1, 2017 | 1,095 | 671 | 7,279 | 2,048 | 922 | 4,540 | 1,277 | 469 | 31 | 18,332 |
Additions | 134 | 2 | 789 | 264 | 86 | 471 | 130 | 74 | 5 | 1,955 |
Deletions | – | – | (1) | (8) | (8) | (109) | (10) | (12) | (5) | (153) |
Reclassified as assets held for sale (Refer to note no. 2.1.2) | – | – | – | (1) | (2) | (40) | (8) | (17) | – | (68) |
Translation difference | – | – | 63 | 3 | 4 | 22 | 4 | 17 | – | 113 |
Gross carrying value as at March 31, 2018 | 1,229 | 673 | 8,130 | 2,306 | 1,002 | 4,884 | 1,393 | 531 | 31 | 20,179 |
Accumulated depreciation as at April 1, 2017 | – | (27) | (2,440) | (1,337) | (599) | (3,053) | (869) | (239) | (17) | (8,581) |
Depreciation | – | (4) | (276) | (266) | (125) | (693) | (160) | (105) | (5) | (1,634) |
Accumulated depreciation on deletions | – | – | – | 7 | 6 | 107 | 9 | 11 | 4 | 144 |
Reclassified as assets held for sale (Refer to note no. 2.1.2) | – | – | – | 1 | 1 | 25 | 5 | 15 | – | 47 |
Translation difference | – | – | (3) | (2) | (2) | (18) | (2) | (12) | – | (39) |
Accumulated depreciation as at March 31, 2018 | – | (31) | (2,719) | (1,597) | (719) | (3,632) | (1,017) | (330) | (18) | (10,063) |
Carrying value as at April 1, 2017 | 1,095 | 644 | 4,839 | 711 | 323 | 1,487 | 408 | 230 | 14 | 9,751 |
Carrying value as at March 31, 2018 | 1,229 | 642 | 5,411 | 709 | 283 | 1,252 | 376 | 201 | 13 | 10,116 |
Notes: (1) Buildings include 250/-
being the value of 5 shares of
50/- each in Mittal Towers Premises Co-operative Society Limited.
Gross carrying value of lease hold land represents amounts paid under certain lease-cum-sale agreements to acquire land including agreements where the Group has an option to purchase or renew the properties on expiry of the lease period.
The aggregate depreciation has been included under depreciation and amortization expense in the consolidated Statement of Profit and Loss.
2.3 GOODWILL AND OTHER INTANGIBLE ASSETS
2.3.1 Goodwill
Accounting policy
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, the bargain purchase excess is recognized after reassessing the fair value of net assets acquired in the capital reserve. Goodwill is measured at cost less accumulated impairment losses.
Impairment
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 Consolidated Statement of Profit and Loss and is not reversed in the subsequent period.
Following is a summary of changes in the carrying amount of goodwill:
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Carrying value at the beginning | 2,211 | 3,652 |
Goodwill on Brilliant Basics acquisition (Refer note no. 2.1) | – | 35 |
Goodwill on Wongdoody acquisition (refer note no. 2.1) | 173 | – |
Goodwill on Fluido Oy acquisition (refer note no. 2.1) | 240 | – |
Goodwill reclassified under assets held for sale (refer note no 2.1.2) | – | (1,609) |
Goodwill reclassified from assets held for sale, net of reduction in recoverable amount (Refer note 2.1.2) | 863 | – |
Translation differences | 53 | 133 |
Carrying value at the end | 3,540 | 2,211 |
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to the CGU or groups of CGUs, 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 CGUs.
During the three months ended June 30, 2018, the Group internally reorganized some of its business segments to deepen customer relationships, improve focus of sales investments and increase management oversight. Consequent to the internal reorganization, there were changes in the business segments based on “Management approach” as defined under Ind AS 108, Operating Segments.(Refer Note 2.24). Accordingly the goodwill has been allocated to the new operating segments as at March 31, 2019.
The following table presents the allocation of goodwill to operating segments as at March 31, 2019 :
(In crore)
Segment | As at March 31, 2019 |
Financial services | 743 |
Retail | 437 |
Communication | 389 |
Energy, Utilities, Resources and Services | 374 |
Manufacturing | 239 |
2,182 | |
Operating segments without significant goodwill | 417 |
Total | 2,599 |
Consequent to reclassification from held for
sale (refer note no. 2.1.2) goodwill pertaining to Panaya, Kallidus and Skava acquisitions are tested for impairment at the respective
entity level which amounts to 941 crore as at March 31, 2019.
The following table presents the allocation of goodwill to operating segments (prior to internal re-organization) as at March 31, 2018:
(In crore)
Segment | As at March 31, 2018 |
Financial services | 474 |
Manufacturing | 252 |
Retail, Consumer packaged goods and Logistics | 314 |
Life Sciences, Healthcare and Insurance | 446 |
Energy & Utilities, Communication and Services | 470 |
1,956 | |
Operating segments without significant goodwill | 255 |
Total | 2,211 |
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 cash flow projections over a period of five years. An average of the range of each assumption used is mentioned below. As at March 31, 2019 and March 31, 2018, the estimated recoverable amount of the CGU exceeded its carrying amount. The key assumptions used for the calculations are as follows:
(in %)
As at March 31, | ||
2019 | 2018 | |
Long term growth rate | 8-10 | 8-10 |
Operating margins | 17-20 | 17-20 |
Discount rate | 12.5 | 13.5 |
The above discount rate is based on the Weighted Average Cost of Capital (WACC) of the Company. Management believes that any reasonable possible changes in the key assumptions would not cause the carrying amount to exceed the recoverable amount of the cash generating unit
2.3.2 Other intangible assets
Accounting policy
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). 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 Group has an intention and ability to complete and use or sell the software and the costs can be measured reliably. The costs which can be capitalized include the cost of material, direct labour, overhead costs that are directly attributable to preparing the asset for its intended use.
Impairment
Intangible assets 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 Consolidated 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 Consolidated 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) had no impairment loss been recognized for the asset in prior years.
Following are the changes in the carrying value of acquired intangible assets for the three months ended March 31, 2019:
In crore)
Particulars | 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 at January 1, 2019 | 950 | 446 | – | 1 | 72 | 100 | 84 | 1,653 |
Reclassified from assets held for sale (Refer note 2.1.2) | – | – | – | – | – | – | – | – |
Additions/adjustments | – | – | – | – | – | – | – | – |
Acquisition through business combination (Refer note no. 2.1.1) | – | – | – | – | – | – | – | – |
Deletions/adjustments during the period | – | – | – | – | – | – | – | – |
Translation difference | (13) | (5) | – | – | 1 | (1) | (1) | (19) |
Gross carrying value as at March 31, 2019 | 937 | 441 | – | 1 | 73 | 99 | 83 | 1,634 |
Accumulated amortization as at January 1, 2019 | (538) | (283) | – | (1) | (11) | (42) | (22) | (897) |
Reclassified from assets held for sale (Refer note 2.1.2) | – | – | – | – | – | – | – | – |
Amortization expense | (25) | (22) | – | – | (1) | (3) | (6) | (57) |
Reduction in value (Refer note 2.1.2) | – | – | – | – | – | – | – | – |
Deletions/adjustments during the period | – | – | – | – | – | – | – | – |
Translation differences | 6 | 3 | – | – | 1 | 1 | – | 11 |
Accumulated amortization as at March 31, 2019 | (557) | (302) | – | (1) | (11) | (44) | (28) | (943) |
Carrying value as at January 1, 2019 | 412 | 163 | – | – | 61 | 58 | 62 | 756 |
Carrying value as at March 31, 2019 | 380 | 139 | – | – | 62 | 55 | 55 | 691 |
Estimated Useful Life (in years) | 1-10 | 3-8 | – | – | 50 | 5-10 | 3-5 | |
Estimated Remaining Useful Life (in years) | 0-7 | 1 | – | – | 43 | 2-8 | 2-3 |
Following are the changes in the carrying value of acquired intangible assets for the three months ended March 31, 2018:
(In crore)
Particulars | 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 at January 1, 2018 | 756 | 399 | 21 | 1 | 69 | 90 | 62 | 1,398 |
Additions | – | – | – | – | – | – | – | – |
Deletions / Retirals during the period | (172) | – | (21) | – | – | (29) | (35) | (257) |
Reclassified as assets held for sale (refer note no 2.1.2) | (157) | (388) | – | (1) | – | (37) | – | (583) |
Translation difference | 18 | 8 | – | – | 4 | 2 | – | 32 |
Gross carrying value as at March 31, 2018 | 445 | 19 | – | – | 73 | 26 | 27 | 590 |
Accumulated amortization as at January 1, 2018 | (485) | (178) | (21) | (1) | (8) | (59) | (47) | (799) |
Amortization expense | (19) | (20) | – | – | – | (2) | (2) | (43) |
Deletions during the period | 172 | – | 21 | – | – | 29 | 35 | 257 |
Reclassified as assets held for sale (refer note no 2.1.2) | 56 | 182 | – | 1 | – | 21 | – | 260 |
Translation differences | (13) | (3) | – | – | (2) | (1) | 1 | (18) |
Accumulated amortization as at March 31, 2018 | (289) | (19) | – | – | (10) | (12) | (13) | (343) |
Carrying value as at January 1, 2018 | 271 | 221 | – | – | 61 | 31 | 15 | 599 |
Carrying value as at March 31, 2018 | 156 | – | – | – | 63 | 14 | 14 | 247 |
Estimated Useful Life (in years) | 2-10 | – | – | – | 50 | 5 | 5 | |
Estimated Remaining Useful Life (in years) | 0-5 | – | – | – | 43 | 3 | 3 |
Following are the changes in the carrying value of acquired intangible assets for the year ended March 31, 2019:
(In crore)
Particulars | 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 at April 1, 2018 | 445 | 19 | – | – | 73 | 26 | 27 | 590 |
Reclassified from assets held for sale (Refer note 2.1.2) | 157 | 388 | – | 1 | – | 37 | – | 583 |
Additions/adjustments | – | 9 | – | – | – | – | – | 9 |
Acquisition through business combination (Refer note no. 2.1.1) | 334 | – | – | – | – | 36 | 62 | 432 |
Deletions/adjustments during the period | – | – | – | – | – | – | – | – |
Translation difference | 1 | 25 | – | – | – | – | (6) | 20 |
Gross carrying value as at March 31, 2019 | 937 | 441 | – | 1 | 73 | 99 | 83 | 1,634 |
Accumulated amortization as at April 1, 2018 | (289) | (19) | – | – | (10) | (12) | (13) | (343) |
Reclassified from assets held for sale (Refer note 2.1.2) | (56) | (182) | – | (1) | – | (21) | – | (260) |
Amortization expense | (112) | (90) | – | – | (2) | (10) | (15) | (229) |
Reduction in value (Refer note 2.1.2) | (93) | – | – | – | – | – | – | (93) |
Deletion/adjustments during the period | – | – | – | – | – | – | – | – |
Translation differences | (7) | (11) | – | – | 1 | (1) | – | (18) |
Accumulated amortization as at March 31, 2019 | (557) | (302) | – | (1) | (11) | (44) | (28) | (943) |
Carrying value as at April 1, 2018 | 156 | – | – | – | 63 | 14 | 14 | 247 |
Carrying value as at March 31, 2019 | 380 | 139 | – | – | 62 | 55 | 55 | 691 |
Estimated Useful Life (in years) | 1-10 | 3-8 | – | – | 50 | 5-10 | 3-5 | |
Estimated Remaining Useful Life (in years) | 0-7 | 1 | – | – | 43 | 2-8 | 2-3 |
Following are the changes in the carrying value of acquired intangible assets for the year ended March 31, 2018:
(In crore)
Particulars | 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 at April 1, 2017 | 750 | 405 | 21 | 1 | 66 | 90 | 62 | 1,395 |
Acquisition through business combination (Refer note no. 2.1.1) | 12 | – | – | – | – | – | – | 12 |
Deletions / Retirals during the period | (172) | – | (21) | – | – | (29) | (35) | (257) |
Reclassified under assets held for sale (Refer note no 2.1.2) | (157) | (388) | – | (1) | – | (37) | – | (583) |
Translation difference | 12 | 2 | – | – | 7 | 2 | – | 23 |
Gross carrying value as at March 31, 2018 | 445 | 19 | – | – | 73 | 26 | 27 | 590 |
Accumulated amortization as at April 1, 2017 | (382) | (121) | (21) | (1) | (7) | (49) | (38) | (619) |
Amortization expense | (127) | (79) | – | – | (1) | (12) | (10) | (229) |
Deletion / Retirals during the period | 172 | – | 21 | – | – | 29 | 35 | 257 |
Reclassified under assets held for sale (Refer note no 2.1.2) | 56 | 182 | – | 1 | – | 21 | – | 260 |
Translation differences | (8) | (1) | – | – | (2) | (1) | – | (12) |
Accumulated amortization as at March 31, 2018 | (289) | (19) | – | – | (10) | (12) | (13) | (343) |
Carrying value as at April 1, 2017 | 368 | 284 | – | – | 59 | 41 | 24 | 776 |
Carrying value as at March 31, 2018 | 156 | – | – | – | 63 | 14 | 14 | 247 |
Estimated Useful Life (in years) | 2-10 | – | – | – | 50 | 5 | 5 | |
Estimated Remaining Useful Life (in years) | 1-5 | – | – | – | 43 | 3 | 3 |
The amortization expense has been included under depreciation and amortization expense in the consolidated statement of profit and loss.
Research and Development Expenditure
Research and development expense recognized
in net profit in the consolidated Statement of Profit and Loss for the three months ended March 31, 2019 and March 31, 2018 was
196 crore and
192 crore respectively, and for the year ended March 31, 2019 and March 31, 2018 was
769 crore
and
748 crore respectively.
2.4 INVESTMENTS
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Non-current | ||
Unquoted | ||
Investments carried at fair value through other comprehensive income (refer note no. 2.4.1) | ||
Preference securities | 89 | 116 |
Equity instruments | 11 | 22 |
100 | 138 | |
Investments carried at fair value through profit and loss (refer note no. 2.4.1) | ||
Convertible promissory note | – | 12 |
Preference securities | 23 | – |
Others | 16 | 66 |
39 | 78 | |
Quoted | ||
Investments carried at amortized cost (refer note no. 2.4.2) | ||
Tax free bonds | 1,893 | 1,896 |
1,893 | 1,896 | |
Investments carried at fair value through profit and loss (refer note no. 2.4.3) | ||
Fixed maturity plan securities | 458 | 429 |
458 | 429 | |
Investments carried at fair value through other comprehensive income (refer note no. 2.4.4) | ||
Non convertible debentures | 1,420 | 3,215 |
Government Securities | 724 | – |
2,144 | 3,215 | |
Total non-current investments | 4,634 | 5,756 |
Current | ||
Unquoted | ||
Investments carried at fair value through profit or loss (refer note no. 2.4.3) | ||
Liquid mutual fund units | 1,786 | 81 |
1,786 | 81 | |
Investments carried at fair value through other comprehensive income | ||
Commercial Paper (refer note no. 2.4.4) | 495 | 293 |
Certificates of deposit (refer note no. 2.4.4) | 2,482 | 5,269 |
2,977 | 5,562 | |
Quoted | ||
Investment carried at amortized cost (refer note no.2.4.2) | ||
Government Bonds | 18 | 1 |
18 | 1 | |
Investments carried at fair value through other comprehensive income (refer note no. 2.4.4) | ||
Non convertible debentures | 1,846 | 763 |
1,846 | 763 | |
Total current investments | 6,627 | 6,407 |
Total investments | 11,261 | 12,163 |
Aggregate amount of quoted investments | 6,359 | 6,304 |
Market value of quoted investments (including interest accrued) | 6,573 | 6,568 |
Aggregate amount of unquoted investments | 4,902 | 5,859 |
Aggregate amount of impairment made for non-current unquoted investments (including investment in associate) | – | 71 |
Investments carried at amortized cost | 1,911 | 1,897 |
Investments carried at fair value through other comprehensive income | 7,067 | 9,678 |
Investments carried at fair value through profit or loss | 2,283 | 588 |
Uncalled capital commitments outstanding as
at March 31, 2019 and March 31, 2018 was 86 crore and
81 crore, respectively.
Refer to Note no 2.10 for Accounting policies on Financial Instruments.
Details of amounts recorded in Other comprehensive income during the year ended March 31, 2019 and March 31, 2018 are as follows:
(In crore)
Year ended March 31, 2019 | Year ended March 31, 2018 | |||||
Gross | Tax | Net | Gross | Tax | Net | |
Net Gain/(loss) on | ||||||
Non-convertible debentures | 1 | – | 1 | (13) | 2 | (11) |
Certificates of deposit | (5) | 2 | (3) | 16 | (6) | 10 |
Government securities | 5 | (1) | 4 | – | – | – |
Equity and preference securities | 63 | 7 | 70 | 4 | 3 | 7 |
Method of fair valuation:
(In crore)
Class of investment | Method | Fair value as at | |
March 31, 2019 | March 31, 2018 | ||
Liquid mutual fund units | Quoted price | 1,786 | 81 |
Fixed maturity plan securities | Market observable inputs | 458 | 429 |
Tax free bonds and government bonds | Quoted price and market observable inputs | 2,125 | 2,151 |
Non-convertible debentures | Quoted price and market observable inputs | 3,266 | 3,978 |
Government securities | Quoted price and market observable inputs | 724 | – |
Commercial Papers | Market observable inputs | 495 | 293 |
Certificate of deposits | Market observable inputs | 2,482 | 5,269 |
Unquoted equity and preference securities - carried at fair value through other comprehensive income | Discounted cash flows method, Market multiples method, Option pricing model, etc. | 100 | 138 |
Unquoted equity and preference securities - carried at fair value through profit and loss | Discounted cash flows method, Market multiples method, Option pricing model, etc. | 23 | – |
Unquoted convertible promissory note | Discounted cash flows method, Market multiples method, Option pricing model, etc. | – | 12 |
Others | Discounted cash flows method, Market multiples method, Option pricing model, etc. | 16 | 66 |
Total | 11,475 | 12,417 |
Note: Certain quoted investments are classified as Level 2 in the absence of active market for such investments
2.4.1 Details of investments
The details of investments in preference, equity and other instruments at March 31, 2019 and March 31, 2018 are as follows:
In crore, except otherwise
stated)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Preference securities | ||
Airviz Inc. | 3 | 6 |
2,82,279 (2,82,279) Series A Preferred Stock, fully paid up, par value USD 0.001 each | ||
Whoop Inc | 14 | 20 |
16,48,352 (16,48,352) Series B Preferred Stock, fully paid up, par value USD 0.0001 each | ||
CloudEndure Ltd. | – | 26 |
Nil (25,59,290) Series B Preferred 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 | 25 | 23 |
39,33,910 (39,33,910) Series B Preferred Shares, fully paid up, par value USD 0.00001 each | ||
13,35,707 (Nil) Series C Preferred Shares, fully paid up, par value USD 0.00001 each | ||
Trifacta Inc. | 27 | 21 |
11,80,358 (11,80,358) Series C-1 Preferred Stock | ||
Tidalscale | 23 | – |
36,74,269 (Nil) Series B Preferred Stock | ||
Ideaforge | 10 | 10 |
5,402 (5,402) Series A compulsorily convertible cumulative Preference shares of ![]() |
||
Total investment in preference securities | 112 | 116 |
Equity Instruments | ||
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 ![]() ![]() |
||
Unsilo A/S | 10 | 21 |
69,894 (69,894) Equity Shares, fully paid up, par value DKK 1 each | ||
Ideaforge | – | – |
100 (100) equity shares at ![]() |
||
Total investment in equity instruments | 11 | 22 |
Others | ||
Stellaris Venture Partners India | 16 | 7 |
Vertex Ventures US Fund L.L.P | – | 59 |
Total investment in others | 16 | 66 |
Convertible promissory note | ||
Tidalscale* | – | 12 |
Total investment in convertible promissory note | – | 12 |
Total | 139 | 216 |
* During the quarter ended September 30, 2018; Investment in Convertible promissory note of Tidalscale was converted into Series B Preferred Stock
2.4.2 Details of investments in tax free bonds and government bonds
The balances held in tax free bonds as at March 31, 2019 and March 31, 2018 are as follows:
(In crore, except as otherwise stated)
Particulars | As at March 31, 2019 | As at March 31, 2018 | |||
Face Value ![]() |
Units | Amount | Units | Amount | |
7.04% Indian Railway Finance Corporation Limited Bonds 03MAR2026 | 1,000,000 | 470 | 50 | 470 | 50 |
7.16% Power Finance Corporation Limited Bonds 17JUL2025 | 1,000,000 | 1,000 | 105 | 1,000 | 106 |
7.18% Indian Railway Finance Corporation Limited Bonds 19FEB2023 | 1,000 | 2,000,000 | 201 | 2,000,000 | 201 |
7.28% Indian Railway Finance Corporation Limited Bonds 21DEC2030 | 1,000 | 422,800 | 42 | 422,800 | 42 |
7.28% National Highways Authority of India Limited Bonds 18SEP2030 | 1,000,000 | 3,300 | 342 | 3,300 | 343 |
7.34% Indian Railway Finance Corporation Limited Bonds 19FEB2028 | 1,000 | 2,100,000 | 210 | 2,100,000 | 211 |
7.35% National Highways Authority of India Limited Bonds 11JAN2031 | 1,000 | 571,396 | 57 | 571,396 | 57 |
7.93% Rural Electrification Corporation Limited Bonds 27MAR2022 | 1,000 | 200,000 | 21 | 200,000 | 21 |
8.00% Indian Railway Finance Corporation Limited Bonds 23FEB2022 | 1,000 | 150,000 | 15 | 150,000 | 15 |
8.10% Indian Railway Finance Corporation Limited Bonds 23FEB2027 | 1,000 | 500,000 | 52 | 500,000 | 52 |
8.20% Power Finance Corporation Limited Bonds 01FEB2022 | 1,000 | 500,000 | 50 | 500,000 | 50 |
8.26% India Infrastructure Finance Company Limited Bonds 23AUG2028 | 1,000,000 | 1,000 | 100 | 1,000 | 100 |
8.30% National Highways Authority of India Limited Bonds 25JAN2027 | 1,000 | 500,000 | 53 | 500,000 | 53 |
8.35% National Highways Authority of India Limited Bonds 22NOV2023 | 1,000,000 | 1,500 | 150 | 1,500 | 150 |
8.46% India Infrastructure Finance Company Limited Bonds 30AUG2028 | 1,000,000 | 2,000 | 200 | 2,000 | 200 |
8.46% Power Finance Corporation Limited Bonds 30AUG2028 | 1,000,000 | 1,500 | 150 | 1,500 | 150 |
8.48% India Infrastructure Finance Company Limited Bonds 05SEP2028 | 1,000,000 | 450 | 45 | 450 | 45 |
8.54% Power Finance Corporation Limited Bonds 16NOV2028 | 1,000 | 500,000 | 50 | 500,000 | 50 |
Total investments in tax-free bonds | 1,893 | 1,896 |
The balances held in government bonds as at March 31, 2019 and March 31, 2018 are as follows:
(In crore, except as otherwise stated)
Particulars | As at March 31, 2019 | As at March 31, 2018 | |||
Face Value PHP | Units | Amount | Units | Amount | |
Treasury Notes Phillippines Govt. 29MAY2019 | 100 | 45,000 | 6 | – | – |
Treasury Notes PIBL1217E082 MAT DATE 09 May 2018 | 100 | – | – | 1,00,000 | 1 |
Treasury Notes Phillippines Govt. 17APRIL2019 | 100 | 90,000 | 12 | – | – |
Total investments in government bonds | 135,000 | 18 | 100,000 | 1 |
2.4.3 Details of investments in liquid mutual fund units and fixed maturity plans
The balances held in liquid mutual fund units as at March 31, 2019 and March 31, 2018 are as follows:
(In crore, except as otherwise stated)
Particulars | As at March 31, 2019 | As at March 31, 2018 | ||
Units | Amount | Units | Amount | |
Aditya Birla Sun liquid fund - Growth-Direct Plan | 1,332,847 | 40 | 1,631,554 | 45 |
Aditya Birla Sun life Corporate Bond Fund -Growth -Direct Plan | 19,600,407 | 141 | – | – |
Aditya Birla Sun life Money Manager Fund -Growth -Direct Plan | 7,975,385 | 201 | – | – |
BSL Cash Manager - Growth | 111,344 | 5 | – | – |
HDFC Money market Fund- Direct Plan- Growth Option | 772,637 | 303 | – | – |
HDFC Liquid fund-Direct Plan growth option | 68,035 | 25 | – | – |
ICICI Prudential Liquid –Direct plan –Growth | – | – | 1,365,687 | 36 |
ICICI Prudential Savings Fund- Direct Plan-Growth | 8,340,260 | 301 | – | – |
IDFC Corporate Bond - Fund Direct Plan | 131,484,437 | 169 | – | – |
Kotak Money Market Fund- Direct Plan- Growth Option | 973,751 | 301 | – | – |
SBI Premier Liquid Fund -Direct Plan -Growth | 1,025,678 | 300 | – | – |
Total investments in liquid mutual fund units | 171,684,781 | 1,786 | 2,997,241 | 81 |
The balances held in fixed maturity plans as at March 31, 2019 and March 31, 2018 are as follows:
(In crore, except as otherwise stated)
Particulars | As at March 31, 2019 | As at March 31, 2018 | ||
Units | Amount | Units | Amount | |
Aditya Birla Sun Life Fixed Term Plan- Series OD 1145 Days- GR Direct | 60,000,000 | 70 | 60,000,000 | 65 |
Aditya Birla Sun Life Fixed Term Plan- Series OE 1153 Days- GR Direct | 25,000,000 | 29 | 25,000,000 | 27 |
HDFC FMP 1155D Feb 2017- Direct Growth- Series 37 | 38,000,000 | 44 | 38,000,000 | 41 |
HDFC FMP 1169D Feb 2017- Direct- Quarterly Dividend- Series 37 | 45,000,000 | 45 | 45,000,000 | 45 |
ICICI FMP Series 80-1194 D Plan F Div | 55,000,000 | 63 | 55,000,000 | 59 |
ICICI Prudential Fixed Maturity Plan Series 80- 1187 Days Plan G Direct Plan | 42,000,000 | 49 | 42,000,000 | 45 |
ICICI Prudential Fixed Maturity Plan Series 80- 1253 Days Plan J Direct Plan | 30,000,000 | 35 | 30,000,000 | 32 |
IDFC Fixed Term Plan Series 129 Direct Plan- Growth 1147 Days | 10,000,000 | 12 | 10,000,000 | 11 |
IDFC Fixed Term Plan Series 131 Direct Plan- Growth 1139 Days | 15,000,000 | 17 | 15,000,000 | 16 |
Kotak FMP Series 199 Direct- Growth | 3,50,00,000 | 40 | 35,000,000 | 37 |
Reliance Fixed Horizon Fund- XXXII Series 8- Dividend Plan | 5,00,00,000 | 54 | 50,000,000 | 51 |
Total investments in fixed maturity plan securities | 40,50,00,000 | 458 | 405,000,000 | 429 |
2.4.4 Details of investments in non convertible debentures, government securities, certificates of deposit and commercial paper
The balances held in non convertible debenture units as at March 31, 2019 and March 31, 2018 is as follows:
(In crore, except as otherwise stated)
Particulars | As at March 31, 2019 | As at March 31, 2018 | |||
Face Value ![]() |
Units | Amount | Units | Amount | |
7.48% Housing Development Finance Corporation Ltd 18NOV2019 | 1,00,00,000/- | 50 | 51 | 50 | 51 |
7.58% LIC Housing Finance Ltd 28FEB2020 | 10,00,000/- | 1,000 | 101 | 1,000 | 101 |
7.58% LIC Housing Finance Ltd 11JUN2020 | 10,00,000/- | 500 | 51 | 500 | 52 |
7.59% LIC Housing Finance Ltd 14OCT2021 | 10,00,000/- | 3,000 | 306 | 3,000 | 306 |
7.75% LIC Housing Finance Ltd 27AUG2021 | 10,00,000/- | 1,250 | 127 | 1,250 | 129 |
7.78% Housing Development Finance Corporation Ltd 24MAR2020 | 1,00,00,000/- | 100 | 100 | 100 | 99 |
7.79% LIC Housing Finance Ltd 19JUN2020 | 10,00,000/- | 500 | 53 | 500 | 53 |
7.80% Housing Development Finance Corporation Ltd 11NOV2019 | 1,00,00,000/- | 150 | 154 | 150 | 153 |
7.81% LIC Housing Finance Ltd 27APR2020 | 10,00,000/- | 2,000 | 214 | 2,000 | 214 |
7.95% Housing Development Finance Corporation Ltd 23SEP2019 | 1,00,00,000/- | 50 | 52 | 50 | 53 |
8.02% LIC Housing Finance Ltd 18FEB2020 | 10,00,000/- | 500 | 51 | 500 | 50 |
8.26% Housing Development Finance Corporation Ltd 12AUG2019 | 1,00,00,000/- | 100 | 105 | 100 | 105 |
8.34% Housing Development Finance Corporation Ltd 06MAR2019 | 1,00,00,000/- | – | – | 200 | 215 |
8.37% LIC Housing Finance Ltd 03OCT2019 | 10,00,000/- | 2,000 | 216 | 2,000 | 216 |
8.37% LIC Housing Finance Ltd 10MAY2021 | 10,00,000/- | 500 | 54 | 500 | 54 |
8.46% Housing Development Finance Corporation Ltd 11MAR2019 | 1,00,00,000/- | – | – | 50 | 54 |
8.47% LIC Housing Finance Ltd 21JAN2020 | 10,00,000/- | 500 | 51 | 500 | 51 |
8.49% Housing Development Finance Corporation Ltd 27APR2020 | 5,00,000/- | 900 | 49 | 900 | 49 |
8.50% Housing Development Finance Corporation Ltd 31AUG2020 | 1,00,00,000/- | 100 | 105 | 100 | 108 |
8.54% IDFC Bank Ltd 30MAY2018 | 10,00,000/- | – | – | 1,500 | 194 |
8.59% Housing Development Finance Corporation Ltd 14JUN2019 | 1,00,00,000/- | 50 | 51 | 50 | 51 |
8.60% LIC Housing Finance Ltd 22JUL2020 | 10,00,000/- | 1,000 | 107 | 1,000 | 107 |
8.60% LIC Housing Finance Ltd 29JUL2020 | 10,00,000/- | 1,750 | 186 | 1,750 | 188 |
8.61% LIC Housing Finance Ltd 11DEC2019 | 10,00,000/- | 1,000 | 103 | 1,000 | 104 |
8.66% IDFC Bank Ltd 25JUN2018 | 10,00,000/- | – | – | 1,520 | 196 |
8.66% IDFC Bank Ltd 27DEC2018 | 10,00,000/- | – | – | 400 | 52 |
8.72% Housing Development Finance Corporation Ltd 15APR2019 | 1,00,00,000/- | 75 | 75 | 75 | 76 |
8.75% Housing Development Finance Corporation Ltd 13JAN2020 | 5,00,000/- | 5,000 | 256 | 5,000 | 256 |
8.75% LIC Housing Finance Ltd 14JAN2020 | 10,00,000/- | 1,070 | 110 | 1,070 | 112 |
8.75% LIC Housing Finance Ltd 21DEC2020 | 10,00,000/- | 1,000 | 101 | 1,000 | 102 |
8.80% LIC Housing Finance Ltd 24Dec2020 | 10,00,000/- | 650 | 67 | – | – |
8.97% LIC Housing Finance Ltd 29OCT2019 | 10,00,000/- | 500 | 52 | 500 | 52 |
9.45% Housing Development Finance Corporation Ltd 21AUG2019 | 10,00,000/- | 3,000 | 318 | 3,000 | 323 |
9.65% Housing Development Finance Corporation Ltd 19JAN2019 | 10,00,000/- | – | – | 500 | 52 |
Total investments in non-convertible debentures | 28,295 | 3,266 | 31,815 | 3,978 |
The balances held in government securities as at March 31, 2019 and March 31, 2018 are as follows:
(In crore, except as otherwise stated)
Particulars | As at March 31, 2019 | As at March 31, 2018 | |||
Face Value ![]() |
Units | Amount | Units | Amount | |
7.17% Government of India 8JAN2028 | 10,000/- | 675,000 | 672 | – | – |
7.95% Government of India 28AUG2032 | 10,000/- | 50,000 | 52 | – | – |
Total investments in government securities | 7,25,000 | 724 | – | - |
The balances held in certificates of deposit as at March 31, 2019 and March 31, 2018 are as follows:
(In crore, except as otherwise stated)
Particulars | As at March 31, 2019 | As at March 31, 2018 | |||
Face Value ![]() |
Units | Amount | Units | Amount | |
Axis Bank | 1,00,000/- | 90,000 | 872 | 208,000 | 1,985 |
HDFC Bank | 1,00,000/- | – | – | 15,000 | 147 |
ICICI Bank | 1,00,000/- | 75,000 | 738 | 126,000 | 1,186 |
IndusInd Bank | 1,00,000/- | – | – | 135,000 | 1,271 |
Kotak Bank | 1,00,000/- | 77,000 | 747 | 70,000 | 680 |
Vijaya Bank | 1,00,000/- | 12,500 | 125 | – | – |
Total investments in certificates of deposit | 2,54,500 | 2,482 | 5,54,000 | 5,269 |
The balances held in commercial paper as at March 31, 2019 and March 31, 2018 are as follows:
(In crore, except as otherwise stated)
Particulars | As at March 31, 2019 | As at March 31, 2018 | |||
Face Value ![]() |
Units | Amount | Units | Amount | |
LIC | 5,00,000/- | 10,000 | 495 | 6,000 | 293 |
Total investments in commercial paper | 10,000 | 495 | 6,000 | 293 |
2.5 LOANS
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Non Current | ||
Unsecured, considered good | ||
Other loans | ||
Loans to employees | 19 | 36 |
19 | 36 | |
Unsecured, considered doubtful | ||
Other loans | ||
Loans to employees | 24 | 17 |
43 | 53 | |
Less: Allowance for doubtful loans to employees | 24 | 17 |
Total non-current loans | 19 | 36 |
Current | ||
Unsecured, considered good | ||
Other loans | ||
Loans to employees | 241 | 239 |
Total current loans | 241 | 239 |
Total loans | 260 | 275 |
2.6 OTHER FINANCIAL ASSETS
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Non Current | ||
Security deposits (1) | 52 | 53 |
Rental deposits (1) | 193 | 171 |
Restricted deposits(1) | 67 | 60 |
Total non-current other financial assets | 312 | 284 |
Current | ||
Security deposits (1) | 4 | 9 |
Rental deposits (1) | 15 | 13 |
Restricted deposits (1) | 1,671 | 1,535 |
Unbilled revenues (1)# | 2,093 | 4,261 |
Interest accrued but not due (1) | 905 | 766 |
Foreign currency forward and options contracts (2) (3) | 336 | 16 |
Escrow and other deposits pertaining to buyback (Refer note 2.11)(1) | 257 | - |
Others (1) | 224 | 84 |
Total current other financial assets | 5,505 | 6,684 |
Total other financial assets | 5,817 | 6,968 |
(1) Financial assets carried at amortized cost | 5,481 | 6,952 |
(2) Financial assets carried at fair value through other comprehensive income | 37 | 12 |
(3) Financial assets carried at fair value through profit or loss | 299 | 4 |
Restricted deposits represent deposits with financial institutions to settle employee-related obligations as and when they arise during the normal course of business.
# Classified as financial asset as right to consideration is unconditional upon passage of time.
2.7 TRADE RECEIVABLES
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Current | ||
Unsecured | ||
Considered good (1) | 14,827 | 13,142 |
Considered doubtful | 483 | 354 |
15,310 | 13,496 | |
Less: Allowance for credit loss | 483 | 354 |
Total trade receivables | 14,827 | 13,142 |
(1) Includes dues from companies where directors are interested | – | – |
2.8 CASH AND CASH EQUIVALENTS
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Balances with banks | ||
In current and deposit accounts | 14,197 | 13,168 |
Cash on hand | – | – |
Others | ||
Deposits with financial institutions | 5,371 | 6,650 |
Total cash and cash equivalents | 19,568 | 19,818 |
Cash and cash equivalents included under assets classified under held for sale (refer note no 2.1.2) | – | 53 |
19,568 | 19,871 | |
Balances with banks in unpaid dividend accounts | 29 | 22 |
Deposit with more than 12 months maturity | 6,582 | 6,332 |
Balances with banks held as margin money deposits against guarantees | 114 | 356 |
Cash and cash equivalents as at March 31, 2019
and March 31, 2018 include restricted cash and bank balances of 358 crore and
533 crore, respectively. The restrictions
are primarily on account of bank balances held by irrevocable trusts controlled by the Company, bank balances held as margin money
deposits against guarantees and balances held in unpaid dividend bank accounts.
The deposits maintained by the Group with banks and financial institutions comprise of time deposits, which can be withdrawn by the Group at any point without prior notice or penalty on the principal.
The details of balances as on Balance Sheet dates with banks are as follows:
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Current accounts | ||
ANZ Bank, Taiwan | 1 | 9 |
Axis Bank, India | 1 | – |
Banamex Bank, Mexico | 8 | 2 |
Banamex Bank, Mexico (U.S. Dollar account) | 27 | 13 |
Bank of America, Mexico | 102 | 25 |
Bank of America, USA | 1,162 | 1,172 |
Bank of Baroda, Mauritius | 1 | 1 |
Bank of Leumni , Israel | 6 | – |
Bank of Tokyo-Mitsubishi UFJ Ltd., Japan | 1 | 1 |
Bank Zachodni WBK S.A, Poland | – | 17 |
Barclays Bank, UK | 39 | 40 |
BNP Paribas Bank, Norway | 24 | 88 |
China Merchants Bank, China | 2 | 6 |
Citibank N.A., Australia | 91 | 223 |
Citibank N.A., Brazil | 31 | 14 |
Citibank N.A., China | 65 | 116 |
Citibank N.A., China (U.S. Dollar account) | 14 | 9 |
Citibank N.A., Costa Rica | 1 | 1 |
Citibank N.A., Dubai | 10 | 6 |
Citibank N.A., EEFC (U.S. Dollar account) | 2 | 4 |
Citibank N.A., Europe | 1 | – |
Citibank N.A., Hungary | 1 | 6 |
Citibank N.A., India | 2 | 2 |
Citibank N.A., Japan | 22 | 18 |
Citibank N.A., New Zealand | 3 | 11 |
Citibank N.A., Portugal | 10 | 8 |
Citibank N.A., Romania | 1 | 2 |
Citibank N.A., Singapore | 77 | 4 |
Citibank N.A., South Africa | 18 | 33 |
Citibank N.A., South Africa (Euro account) | 1 | 1 |
Citibank N.A., South Korea | 17 | 2 |
Citibank N.A., USA | 8 | 4 |
Citibank N.A., Luxemberg | 4 | – |
Commercial Bank, Germany | 1 | – |
Danske Bank, Sweden | 1 | 1 |
Deutsche Bank, Belgium | 16 | 27 |
Deutsche Bank, Czech Republic | 20 | 16 |
Deutsche Bank, Czech Republic (Euro account) | 6 | 3 |
Deutsche Bank, Czech Republic (U.S. Dollar account) | 24 | 2 |
Deutsche Bank, EEFC (Australian Dollar account) | 3 | 2 |
Deutsche Bank, EEFC (Euro account) | 23 | 34 |
Deutsche Bank, EEFC (Swiss Franc account) | 5 | 2 |
Deutsche Bank, EEFC (U.S. Dollar account) | 217 | 32 |
Deutsche Bank, EEFC (United Kingdom Pound Sterling account) | 8 | 9 |
Deutsche Bank, France | 20 | 19 |
Deutsche Bank, Germany | 111 | 100 |
Deutsche Bank, Hong Kong | 1 | 1 |
Deutsche Bank, India | 45 | 44 |
Deutsche Bank, Malaysia | 1 | 5 |
Deutsche Bank, Netherlands | 34 | 15 |
Deutsche Bank, Philippines | 4 | 25 |
Deutsche Bank, Philippines (U.S. Dollar account) | 1 | 3 |
Deutsche Bank, Poland | 28 | 18 |
Deutsche Bank, Poland (Euro account) | 8 | 8 |
Deutsche Bank, Russia | 3 | 3 |
Deutsche Bank, Russia (U.S. Dollar account) | – | 5 |
Deutsche Bank, Singapore | 15 | 17 |
Deutsche Bank, Spain | 1 | 1 |
Deutsche Bank, Switzerland | 33 | 29 |
Deutsche Bank, Switzerland ( US Dollar account) | 1 | – |
Deutsche Bank, United Kingdom | 42 | 79 |
Deutsche Bank, USA | 61 | 2 |
HSBC Bank, (U.S. Dollar account) | 1 | – |
Hua Xia Bank, RMB | 1 | – |
HSBC Bank, Dubai | – | 2 |
HSBC Bank, Hong Kong | 1 | 2 |
HSBC Bank, United Kingdom | 19 | 6 |
HSBC Bank, India | 3 | – |
ICICI Bank, EEFC (Euro account) | 7 | 1 |
ICICI Bank, EEFC (U.S. Dollar account) | 34 | 40 |
ICICI Bank, EEFC (United Kingdom Pound Sterling account) | 6 | 11 |
ICICI Bank, India | 42 | 52 |
Nordbanken, Sweden | 45 | 50 |
Nordea | 17 | – |
Punjab National Bank, India | 2 | 12 |
Kotak Bank | 5 | – |
Raiffeisen Bank, Czech Republic | – | 5 |
Raiffeisen Bank, Romania | – | 3 |
Royal Bank of Canada, Canada | 136 | 166 |
Santander Bank, Argentina | – | 1 |
Silicon Valley Bank, USA | 13 | – |
Splitska Banka D.D., Société Générale Group, Croatia | 14 | 8 |
State Bank of India, India | 3 | 1 |
The Saudi British Bank, Saudi Arabia | 3 | 3 |
Washington Trust Bank | 48 | – |
2,886 | 2,703 |
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Deposit accounts | ||
Axis Bank | 925 | – |
Bank BGZ BNP Paribas S.A. | 235 | 144 |
Barclays Bank | 500 | 200 |
Canara Bank | 85 | 84 |
Citibank | 176 | 224 |
Deutsche Bank, AG | – | 24 |
Deutsche Bank, Poland | 126 | 211 |
HDFC Bank | 50 | 2,498 |
HSBC Bank | 200 | – |
ICICI Bank | 3,177 | 3,497 |
IDBI Bank | – | 250 |
IDFC Bank | 2,450 | 1,500 |
IndusInd Bank | 550 | 1,000 |
Kotak Mahindra Bank | 500 | – |
South Indian Bank | 173 | 450 |
Standard Chartered Bank | 2,000 | – |
Washington trust bank | 21 | – |
Yes Bank | – | 5 |
11,168 | 10,087 | |
Unpaid dividend accounts | ||
Axis Bank - Unpaid dividend account | 4 | 1 |
HDFC Bank - Unpaid dividend account | – | 1 |
ICICI Bank - Unpaid dividend account | 25 | 20 |
29 | 22 | |
Margin money deposits against guarantees | ||
Canara Bank | 45 | 151 |
Citibank | – | 3 |
ICICI Bank | 69 | 202 |
114 | 356 | |
Deposits with financial institutions | ||
HDFC Limited | 4,146 | 5,450 |
LIC Housing Finance Limited | 1,225 | 1,200 |
5,371 | 6,650 | |
Total cash and cash equivalents | 19,568 | 19,818 |
2.9 OTHER ASSETS
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Non Current | ||
Capital advances | 489 | 421 |
Advances other than capital advances | ||
Prepaid gratuity (refer note no. 2.20.1) | 42 | 43 |
Others | ||
Withholding taxes and others | 929 | 1,428 |
Prepaid expenses | 162 | 111 |
Advance for business acquisition (refer note no. 2.1.1) | 206 | – |
Deferred Contract Cost* | 277 | 262 |
Total Non-Current other assets | 2,105 | 2,265 |
Current | ||
Advances other than capital advances | ||
Payment to vendors for supply of goods | 109 | 119 |
Others | ||
Unbilled revenues # | 3,281 | – |
Withholding taxes and others | 1,488 | 1,032 |
Prepaid expenses | 751 | 472 |
Deferred Contract Cost | 58 | 44 |
Total Current other assets | 5,687 | 1,667 |
Total other assets | 7,792 | 3,932 |
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
and Cenvat recoverable from Government of India. Cenvat recoverable includes 523 crore which are pending adjudication. The Group
expects these amounts to be sustainable on adjudication and recoverable on final resolution.
# Classified as non financial asset as the contractual right to consideration is dependent on completion of contractual milestones.
2.10 FINANCIAL INSTRUMENTS
Accounting policy
2.10.1 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.
2.10.2 Subsequent measurement
a. Non-derivative financial instruments
(i) Financial assets carried at amortized cost
A financial asset is subsequently measured at amortized 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 (FVOCI)
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 Group 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.
(iii) Financial assets at fair value through profit or loss
A financial asset which is not classified in any of the above categories is 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 or 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 as 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 consolidated 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 consolidated 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 Consolidated 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 Consolidated 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 and buyback of ordinary shares are recognized as a deduction from equity, net of any tax effects.
(ii) Treasury
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.
2.10.3 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.
2.10.4 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.
Refer to table 'Financial instruments by category' below for the disclosure on carrying value and fair value of financial assets and liabilities. For financial assets and liabilities maturing within one year from the Balance Sheet date and which are not carried at fair value, the carrying amounts approximates fair value due to the short maturity of those instruments.
2.10.5 Impairment
The Group recognizes loss allowances using the expected credit loss (ECL) model for the financial assets and unbilled revenue which are not fair valued through profit or loss. Loss allowance for trade receivables and unbilled revenues with no significant financing component is measured at an amount equal to lifetime ECL. For all other financial assets, ECLs 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 ECLs (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 Consolidated Statement of Profit and Loss.
Financial instruments by category
The carrying value and fair value of financial instruments by categories as at March 31, 2019 are as follows:
(In crore)
Particulars | Amortized 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 no. 2.8) | 19,568 | – | – | – | – | 19,568 | 19,568 |
Investments (Refer Note no. 2.4) | |||||||
Equity and preference securities | – | – | 23 | 100 | – | 123 | 123 |
Tax-free bonds and government bonds | 1,911 | – | – | – | – | 1,911 | 2,125(1) |
Liquid mutual fund units | – | – | 1,786 | – | – | 1,786 | 1,786 |
Non convertible debentures | – | – | – | – | 3,266 | 3,266 | 3,266 |
Government securities | – | – | – | – | 724 | 724 | 724 |
Commercial paper | – | – | – | – | 495 | 495 | 495 |
Certificates of deposit | – | – | – | – | 2,482 | 2,482 | 2,482 |
Other investments | – | – | 16 | – | – | 16 | 16 |
Fixed maturity plan securities | – | – | 458 | – | – | 458 | 458 |
Trade receivables (Refer Note no. 2.7) | 14,827 | – | – | – | – | 14,827 | 14,827 |
Loans (Refer Note no. 2.5) | 260 | – | – | – | – | 260 | 260 |
Other financials assets (Refer Note no. 2.6)(3) | 5,481 | – | 299 | – | 37 | 5,817 | 5,733(2) |
Total | 42,047 | – | 2,582 | 100 | 7,004 | 51,733 | 51,863 |
Liabilities: | |||||||
Trade payables | 1,655 | – | – | – | – | 1,655 | 1,655 |
Other financial liabilities (Refer Note no. 2.12) | 8,731 | – | 205 | – | – | 8,936 | 8,936 |
Total | 10,386 | – | 205 | – | – | 10,591 | 10,591 |
(1) | On account of fair value changes including interest accrued |
(2) | Excludes interest accrued on tax free bonds and government bonds |
(3) | Excludes unbilled revenue for fixed price development contracts where right to consideration is conditional on factors other than passage of time |
The carrying value and fair value of financial instruments by categories as at March 31, 2018 were as follows:
(In crore)
Particulars | Amortized 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 no. 2.8) | 19,818 | – | – | – | – | 19,818 | 19,818 |
Investments (Refer Note no. 2.4) | |||||||
Equity and preference securities | – | – | – | 138 | – | 138 | 138 |
Tax-free bonds and government bonds | 1,897 | – | – | – | – | 1,897 | 2,151(1) |
Liquid mutual fund units | – | – | 81 | – | – | 81 | 81 |
Non convertible debentures | – | – | – | – | 3,978 | 3,978 | 3,978 |
Certificates of deposit | – | – | – | – | 5,269 | 5,269 | 5,269 |
Commercial paper | – | – | – | – | 293 | 293 | 293 |
Convertible promissory note | – | – | 12 | – | – | 12 | 12 |
Other investments | – | – | 66 | – | – | 66 | 66 |
Fixed maturity plan securities | – | – | 429 | – | – | 429 | 429 |
Trade receivables (Refer Note no. 2.7) | 13,142 | – | – | – | – | 13,142 | 13,142 |
Loans (Refer Note no. 2.5) | 275 | – | – | – | – | 275 | 275 |
Other financials assets (Refer Note no. 2.6) | 6,952 | – | 4 | – | 12 | 6,968 | 6,884(2) |
Total | 42,084 | – | 592 | 138 | 9,552 | 52,366 | 52,536 |
Liabilities: | |||||||
Trade payables | 694 | – | – | – | – | 694 | 694 |
Other financial liabilities (Refer Note no. 2.12) | 5,442 | – | 93 | – | 3 | 5,538 | 5,538 |
Total | 6,136 | – | 93 | – | 3 | 6,232 | 6,232 |
(1) On account of fair value changes including interest accrued
(2) Excludes interest accrued on tax free bonds and government bonds
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 at March 31, 2019:
(In crore)
As at March 31, 2019 | Fair value measurement at end of the reporting period using | |||
Level 1 | Level 2 | Level 3 | ||
Assets | ||||
Investments in liquid mutual funds (Refer Note no. 2.4) | 1,786 | 1,786 | – | – |
Investments in tax-free bonds (Refer Note no. 2.4) | 2,107 | 1,836 | 271 | – |
Investments in government bonds (Refer Note no. 2.4) | 18 | 18 | – | – |
Investments in equity instruments (Refer Note no. 2.4) | 11 | – | – | 11 |
Investments in preference securities (Refer Note no. 2.4) | 112 | – | – | 112 |
Investments in non convertible debentures (Refer Note no. 2.4) | 3,266 | 1,780 | 1,486 | – |
Investments in certificates of deposit (Refer Note no. 2.4) | 2,482 | – | 2,482 | – |
Investment in Government securities | 724 | 724 | – | – |
Investment in Commercial paper | 495 | – | 495 | – |
Investments in fixed maturity plan securities (Refer Note no. 2.4) | 458 | – | 458 | – |
Other investments (Refer Note no. 2.4) | 16 | – | – | 16 |
Derivative financial instruments - gain on outstanding foreign currency forward and option contracts (Refer Note no. 2.6) | 336 | – | 336 | – |
Liabilities | ||||
Derivative financial instruments - loss on outstanding foreign currency forward and option contracts (Refer Note no. 2.12) | 15 | – | 15 | – |
Liability towards contingent consideration (Refer note no. 2.12)(1) | 190 | – | – | 190 |
(1) Discount rate pertaining to contingent consideration ranges from 9% to 16%
During the year ended March 31, 2019, tax free
bonds and non-convertible debentures of 336 crore were transferred from Level 2 to Level 1 of fair value hierarchy, since
these were valued based on quoted price and
746 crore was transferred from Level 1 to Level 2 of fair value hierarchy, since
these were valued based on market observable inputs.
The fair value hierarchy of assets and liabilities as at March 31, 2018 was as follows:
(In crore)
As at March 31, 2018 | Fair value measurement at end of the reporting period using | |||
Level 1 | Level 2 | Level 3 | ||
Assets | ||||
Investments in liquid mutual funds (Refer Note no. 2.4) | 81 | 81 | – | – |
Investments in tax free bonds (Refer Note no. 2.4) | 2,150 | 1,878 | 272 | – |
Investments in government bonds (Refer Note no. 2.4) | 1 | 1 | – | – |
Investments in equity instruments (Refer Note no. 2.4) | 22 | – | – | 22 |
Investments in preference securities (Refer Note no. 2.4) | 116 | – | – | 116 |
Investments in non convertible debentures (Refer Note no. 2.4) | 3,978 | 2,695 | 1,283 | – |
Investments in certificates of deposit (Refer Note no. 2.4) | 5,269 | – | 5,269 | – |
Investments in commercial paper (Refer Note no. 2.4) | 293 | – | 293 | – |
Investments in fixed maturity plan securities (Refer Note no. 2.4) | 429 | – | 429 | – |
Investments in convertible promissory note (Refer Note no. 2.4) | 12 | – | – | 12 |
Other investments (Refer Note no. 2.4) | 66 | – | – | 66 |
Derivative financial instruments - gain on outstanding foreign currency forward and option contracts (Refer Note no. 2.6) | 16 | – | 16 | – |
Liabilities | ||||
Derivative financial instruments - loss on outstanding foreign currency forward and option contracts (Refer Note no. 2.12) | 42 | – | 42 | – |
Liability towards contingent consideration (Refer note no. 2.12)(1) | 54 | – | – | 54 |
(1)Discounted contingent consideration at 10%
During the year ended March 31, 2018, tax free
bonds and non-convertible debentures of 1,797 crore were transferred from Level 2 to Level 1 of fair value hierarchy, since
these were valued based on quoted price and
850 crore was transferred from Level 1 to Level 2 of fair value hierarchy, since
these were valued based on market observable inputs.
A one percentage point change in the unobservable inputs used in fair valuation of Level 3 assets and liabilities does not have a significant impact in its value.
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 analyses the foreign currency risk from monetary assets and liabilities as at March 31, 2019:
(In crore)
Particulars | U.S. dollars | Euro | United Kingdom Pound Sterling | Australian dollars | Other currencies | Total |
Cash and cash equivalents | 1,640 | 266 | 110 | 213 | 1,113 | 3,342 |
Trade receivables | 9,950 | 1,844 | 1,025 | 527 | 971 | 14,317 |
Other financial assets , loans and other current assets | 4,189 | 873 | 285 | 310 | 748 | 6,405 |
Trade payables | (708) | (128) | (139) | (80) | (107) | (1,162) |
Other financial liabilities | (4,201) | (560) | (217) | (382) | (759) | (6,119) |
Net assets / (liabilities) | 10,870 | 2,295 | 1,064 | 588 | 1,966 | 16,783 |
The following table analyses the foreign currency risk from monetary assets and liabilities as at March 31, 2018:
(In crore)
Particulars | U.S. dollars | Euro | United Kingdom Pound Sterling | Australian dollars | Other currencies | Total |
Cash and cash equivalents | 1,287 | 218 | 147 | 353 | 1,192 | 3,197 |
Trade receivables | 8,317 | 1,751 | 845 | 788 | 781 | 12,482 |
Other financial assets (including loans) | 2,636 | 663 | 330 | 173 | 470 | 4,272 |
Trade payables | (273) | (81) | (114) | (30) | (58) | (556) |
Other financial liabilities | (2,289) | (417) | (215) | (273) | (596) | (3,790) |
Net assets / (liabilities) | 9,678 | 2,134 | 993 | 1,011 | 1,789 | 15,605 |
Sensitivity analysis between Indian rupee and U.S. Dollar
Particulars | Three months ended March 31, |
Year ended March 31, |
|||
2019 | 2018 | 2019 | 2018 | ||
Impact on the Group's incremental operating margins | 0.45% | 0.50% | 0.47% | 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 details in respect of outstanding foreign currency forward and option contracts are as follows:
As at | As at | |||
March 31, 2019 | March 31, 2018 | |||
In million | In ![]() |
In million | In ![]() | |
Derivatives designated as cash flow hedges | ||||
Option Contracts | ||||
In Australian dollars | 120 | 588 | 60 | 300 |
In Euro | 135 | 1,049 | 100 | 808 |
In United Kingdom Pound Sterling | 25 | 226 | 20 | 184 |
Other derivatives | ||||
Forward contracts | ||||
In Australian dollars | 8 | 37 | 5 | 25 |
In Canadian dollars | 13 | 68 | 20 | 99 |
In Euro | 176 | 1,367 | 91 | 735 |
In Japanese Yen | 550 | 34 | 550 | 34 |
In New Zealand dollars | 16 | 75 | 16 | 76 |
In Norwegian Krone | 40 | 32 | 40 | 34 |
In Singapore dollars | 140 | 716 | 5 | 25 |
In South African Rand | – | – | 25 | 14 |
In Swedish Krona | 50 | 37 | 50 | 40 |
In Swiss Franc | 25 | 172 | 21 | 146 |
In U.S. dollars | 955 | 6,608 | 623 | 4,061 |
In United Kingdom Pound Sterling | 80 | 724 | 51 | 466 |
Option Contracts | ||||
In Australian dollars | 10 | 49 | 20 | 100 |
In Canadian dollars | 13 | 69 | – | – |
In Euro | 60 | 466 | 45 | 363 |
In Swiss Franc | 5 | 35 | 5 | 33 |
In U.S. dollars | 433 | 2,995 | 320 | 2,086 |
In United Kingdom Pound Sterling | 10 | 91 | 25 | 231 |
Total forwards and options contracts | 15,438 | 9,860 |
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 at the Balance Sheet date:
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Not later than one month | 4,432 | 2,828 |
Later than one month and not later than three months | 6,921 | 4,568 |
Later than three months and not later than one year | 4,085 | 2,464 |
15,438 | 9,860 |
During the year ended March 31, 2019, the group has designated certain foreign exchange forward and option contracts as cash flow hedges to mitigate the risk of foreign exchange exposure on highly probable forecast cash transactions. The related hedge transactions for balance in cash flow hedges as at March 31, 2019 are expected to occur and reclassified to the statement of profit or loss within 3 months.
Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument, including whether the hedging instrument is expected to offset changes in cash flows of hedged items.
If the hedge ratio for risk management purposes is no longer optimal but the risk management objective remains unchanged and the hedge continues to qualify for hedge accounting, the hedge relationship will be rebalanced by adjusting either the volume of the hedging instrument or the volume of the hedged item so that the hedge ratio aligns with the ratio used for risk management purposes. Any hedge ineffectiveness is calculated and accounted for in the statement of profit or loss at the time of the hedge relationship rebalancing.
The following table provides the reconciliation of cash flow hedge reserve for the three months and year ended March 31, 2019:
(In crore)
Three months ended March 31, | Year ended March 31, | |||
2019 | 2018 | 2019 | 2018 | |
Gain/(Loss) | ||||
Balance at the beginning of the period | 36 | (2) | – | 39 |
Gain / (Loss) recognized in other comprehensive income during the period | 25 | (9) | 118 | (93) |
Amount reclassified to profit or loss during the period | (45) | 11 | (90) | 41 |
Tax impact on above | 5 | – | (7) | 13 |
Balance at the end of the period | 21 | – | 21 | – |
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 realize the asset and settle the liability simultaneously.
The quantitative information about offsetting of derivative financial assets and derivative financial liabilities is as follows:
(In crore)
As at | As at | |||
March 31, 2019 | March 31, 2018 | |||
Derivative financial asset | Derivative financial liability | Derivative financial asset | Derivative financial liability | |
Gross amount of recognized financial asset/liability | 338 | (17) | 20 | (46) |
Amount set off | (2) | 2 | (4) | 4 |
Net amount presented in Balance Sheet | 336 | (15) | 16 | (42) |
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 14,827 crore and
13,142 crore as at March 31, 2019 and March 31,
2018, respectively and unbilled revenues amounting to
5,374 crore and
4,261 crore as at March 31, 2019 and March
31, 2018, respectively. Trade receivables and unbilled revenues 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. 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 ten customers:
(In %)
Three months ended March 31, | Year ended March 31, | |||
2019 | 2018 | 2019 | 2018 | |
Revenue from top customer | 3.3 | 3.6 | 3.6 | 3.4 |
Revenue from top 10 customers | 19.7 | 19.2 | 19.0 | 19.3 |
Credit risk exposure
The allowance for lifetime ECL on customer balances
for three months ended March 31, 2019 was 15 crore and reversal of allowance for lifetime ECL on customer balances for three
month ended March 31, 2018 was
27 crore respectively and allowances for year ended March 31, 2019 and March 31, 2018 was
239 crore and
34 crore, respectively.
The movement in credit loss allowance on customer balance is as follows:
(In crore)
Three months ended March 31, | Year ended March 31, | |||
2019 | 2018 | 2019 | 2018 | |
Balance at the beginning | 615 | 470 | 449 | 411 |
Impairment loss recognized/(reversal) | 15 | (27) | 239 | 34 |
Write-offs | – | – | (73) | (5) |
Reclassified from held for sale (Refer note 2.1.2) | – | (1) | – | (1) |
Translation differences | (3) | 7 | 12 | 10 |
Balance at the end | 627 | 449 | 627 | 449 |
Credit exposure
The Group’s credit period generally ranges from 30-60 days.
(In crore
except otherwise stated)
As at | ||
March 31, 2019 | March 31, 2018 | |
Trade receivables | 14,827 | 13,142 |
Unbilled revenues | 5,374 | 4,261 |
Days sales outstanding was 66 days and 67 days as at March 31, 2019 and March 31, 2018, respectively.
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, fixed maturity plan securities, certificates of deposit, commercial paper, quoted bonds issued by government and quasi-government organizations and non convertible debentures.
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 borrowings. The Group believes that the working capital is sufficient to meet its current requirements.
As at March 31, 2019, the Group had a working
capital of 34,240 crore including cash and cash equivalents of
19,568 crore and current investments of
6,627
crore. As at March 31, 2018, the Group had a working capital of
34,176 crore including cash and cash equivalents of
19,818
crore and current investments of
6,407 crore.
As at March 31, 2019 and March 31, 2018, the
outstanding compensated absences were 1,663 crore and
1,469 crore, respectively, which have been substantially funded.
Accordingly no liquidity risk is perceived.
Under the company's on going buyback programme
the maximum buyback size is 8,260 crore. The company has bought back shares amounting to
797 crore (including transaction
costs) till March 31, 2019 (Refer note 2.11)
The table below provides details regarding the contractual maturities of significant financial liabilities as at March 31, 2019:
(In crore)
Particulars
|
Less than 1 year | 1-2 years | 2-4 years | 4-7 years | Total |
Trade payables | 1,655 | – | – | – | 1,655 |
Other financial liabilities (excluding liability towards acquisition) (Refer Note no. 2.12) | 8,716 | 11 | 4 | – | 8,731 |
Liability towards acquisitions on an undiscounted basis (including contingent consideration) (Refer Note no. 2.12) | 114 | 83 | – | 36 | 233 |
The table below provides details regarding the contractual maturities of significant financial liabilities as at March 31, 2018:
(In crore)
Particulars
|
Less than 1 year | 1-2 years | 2-4 years | 4-7 years | Total |
Trade payables |
694 | – | – | – | 694 |
Other financial liabilities (excluding liability towards acquisition) (Refer Note no. 2.12) | 5,442 | – | – | – | 5,442 |
Liability towards acquisitions on an undiscounted basis (including contingent consideration) (Refer Note no. 2.12) | 41 | 7 | 7 | – | 55 |
2.11 EQUITY
SHARE CAPITAL
(In crore, except as otherwise stated)
As at | ||
Particulars | March 31, 2019 | March 31, 2018 |
Authorized | ||
Equity shares, ![]() |
||
4,80,00,00,000 (2,40,00,00,000) equity shares | 2,400 | 1,200 |
Issued, Subscribed and Paid-Up | ||
Equity shares, ![]() |
2,170 | 1,088 |
4,33,59,54,462 (2,17,33,12,301) equity shares fully paid-up(2) | ||
2,170 | 1,088 |
Note: Forfeited shares amounted to 1,500 (
1,500)
(1) Refer note no. 2.21 for details of basic and diluted shares
(2) Net of treasury shares 2,03,24,982 (1,08,01,956)
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 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.
In the period of five years immediately preceding March 31, 2019:
Bonus Issue
The Company has allotted 2,18,41,91,490 fully
paid up equity shares (including treasury shares) of face value 5/- each during the three months ended September 30, 2018
pursuant to a bonus issue approved by the shareholders through postal ballot. Record date fixed by the Board of Directors was September
5, 2018. The bonus shares were issued by capitalization of profits transferred from general reserve. Bonus share of one equity
share for every equity share held, and a bonus issue, viz., 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 stock option plan have been adjusted for bonus shares.
The Company has allotted 1,14,84,72,332 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 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 (RSU) have been adjusted for bonus shares.
The bonus shares once allotted shall rank pari passu in all respects and carry the same rights as the existing equity shareholders and shall be entitled to participate in full, in any dividend and other corporate action, recommended and declared after the new equity shares are allotted.
Update on capital allocation policy and buyback
In line with the capital allocation policy announced in April 2018, the Board, in its meeting held on January 11, 2019, approved the following:
a) Declared a special dividend of 4/-
per equity share;
(b) Recommended buyback of Equity Shares from
the open market route through Indian stock exchanges of up to 8,260 crore (Maximum Buyback Size) at a price not exceeding
800/-
per share (Maximum Buyback Price) subject to shareholders' approval by way of Postal Ballot. After the execution of the above,
along with the special dividend (including dividend distribution tax) of
2,633 crore ($386 million) already paid in June
2018, the Company would complete the distribution of
13,000 crore, which was announced as part of its capital allocation
policy in April 2018
The shareholders approved the proposal of buyback
of Equity Shares recommended by its Board of Directors in its meeting held on January 11, 2019 through the postal ballot that concluded
on March 12, 2019. At the Maximum buyback price of 800/- per equity share and the Maximum buyback size of
8,260 crore
the indicative maximum number of Equity shares bought back would be 10,32,50,000 Equity Shares (Maximum buyback shares) comprising
approximately 2.36% of the paid-up equity share capital of the Company as of March 12, 2019 (the date of conclusion of postal ballot
for approval for buyback).
The buyback was offered to all eligible equity
shareholders of the Company (other than the Promoters, the Promoter Group and Persons in Control of the Company) under the open
market route through the stock exchange. The Company will fund the buyback from its free reserves. The buyback of equity shares
through the stock exchange commenced on March 20, 2019 and is expected to be completed by September, 2019. During the year ended
March 31, 2019, 1,26,52,000 equity shares were purchased from the stock exchange which includes 18,18,000 shares which have been
purchased but not extinguished as of March 31, 2019 and 36,36,000 shares which have been purchased but have not been settled and
therefore not extinguished as of March 31, 2019. In accordance with section 69 of the Companies Act, 2013, during the year ended
March 31, 2019 , the Company has created ‘Capital Redemption Reserve’ of 5 crore equal to the nominal value of the
shares bought back as an appropriation from general reserve.
The Board, at its meeting on August 19, 2017,
approved a proposal for the Company to buyback its fully paid-up equity shares of face value of 5/- each from the eligible
equity shareholders of the Company for an amount not exceeding
13,000 crore. The shareholders approved the said proposal
of buyback of Equity Shares through the postal ballot that concluded on October 7, 2017. The Buyback offer comprised a purchase
of 11,30,43,478 Equity Shares aggregating 4.92% of the paid-up equity share capital of the Company at a price of
1,150/- per
Equity share. The buyback was offered to all eligible equity shareholders (including those who became equity shareholders as on
the Record date by cancelling American Depository Shares and withdrawing underlying Equity shares) of the Company as on the Record
Date (i.e. November 1, 2017) on a proportionate basis through the "Tender offer" route. The Company concluded the buyback
procedures on December 27, 2017 and 11,30,43,478 equity shares were extinguished. The Company has utilized its securities premium
and general reserve for the buyback of its shares. In accordance with Section 69 of the Companies Act, 2013, the Company has created
a Capital Redemption Reserve of
56 crore equal to the nominal value of the shares bought back as an appropriation from the
general reserve during the year ended March 31, 2018.
The Company’s objective when managing capital is to safeguard its ability to continue as a going concern and to maintain an optimal capital structure so as to maximize shareholder value. In order to maintain or achieve an optimal capital structure, the Company may adjust the amount of dividend payment, return capital to shareholders, issue new shares or buy back issued shares. As at March 31, 2019, the Company has only one class of equity shares and has no debt. Consequent to the above capital structure there are no externally imposed capital requirements.
Dividend
The final dividend on shares is 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.
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. Dividend distribution tax paid by subsidiaries may be reduced / available as credit against dividend distribution tax payable by Infosys Limited.
Effective from Financial Year 2018, the Company's policy is to payout up to 70% of the free cash flow of the corresponding Financial Year in such manner (including by way of dividend and / or share buyback) as may be decided by the Board from time to time, subject to applicable laws and requisite approvals, if any. Free cash flow is defined as net cash provided by operating activities less capital expenditure as per the consolidated statement of cash flows prepared under IFRS. Dividend payout includes dividend distribution tax.
Amount of per share dividend recognized as distribution to equity shareholders:
(in )
Particulars | Year ended March 31, | |
2019 | 2018 | |
Special dividend fiscal 2019 | 4.00 | – |
Interim dividend fiscal 2019 | 7.00 | – |
Final dividend for fiscal 2018 | 10.25 | – |
Special dividend for fiscal 2018 | 5.00 | – |
Interim dividend for fiscal 2018 | – | 6.50 |
Final Dividend for fiscal 2017 | – | 7.38 |
Note: Dividend per equity share disclosed in the above table represents dividends declared previously, retrospectively adjusted for September 2018 bonus issue.
During the year ended March 31, 2019 on account
of the final dividend for fiscal 2018 , special divided for fiscal 2018 and fiscal 2019 and interim dividend for fiscal 2019 the
Company has incurred a net cash outflow of 13,705 crore (excluding dividend paid on treasury shares) inclusive of dividend
distribution tax.
The Board of Directors in their meeting on April
12, 2019 recommended a final dividend of 10.50/- per equity share for the financial year ended March 31, 2019. This payment
is subject to the approval of shareholders in the ensuing Annual General Meeting of the Company, to be held on June 22, 2019 and
if approved would result in a net cash outflow of approximately
5,483 crore, (excluding dividend paid on treasury shares)
including dividend distribution tax. The final dividend of
10.50/- per equity share and the resultant expected cash outflow is
based on the outstanding number of shares after considering shares bought back by the Company subsequent to the year ended March
31, 2019.
The details of shareholder holding more than 5% shares as at March 31, 2019 and March 31, 2018 are as follows :
Name of the shareholder | As at March 31, 2019 | As at March 31, 2018 | ||
Number of shares | % held | Number of shares | % held | |
Deutsche Bank Trust Company Americas (Depository of ADR's - legal ownership) | 74,62,54,648 | 17.11 | 75,98,11,718 | 17.39 |
Life Insurance Corporation of India | 25,43,32,376 | 5.83 | 29,90,28,034 | 6.85 |
Information in the table above is adjusted for September, 2018 bonus issue
The reconciliation of the number of shares outstanding and the amount of share capital as at March 31, 2019 and March 31, 2018 are as follows:
(In crore, except as
stated otherwise)
Particulars | As at March 31, 2019 | As at March 31, 2018 | ||
Number of shares | Amount | Number of shares | Amount | |
Number of shares at the beginning of the period | 217,33,12,301 | 1,088 | 228,56,55,150 | 1,144 |
Add: Shares issued on exercise of employee stock options - before bonus issue | 3,92,528 | – | 7,00,629 | – |
Add: Bonus shares issued | 217,37,04,829 | 1,088 | – | – |
Add: Shares issued on exercise of employee stock options - after bonus issue | 11,96,804 | – | – | – |
Less: Shares bought back (1)(2) | 1,26,52,000 | 6 | 113,043,478 | 56 |
Number of shares at the end of the period | 433,59,54,462 | 2,170 | 217,33,12,301 | 1,088 |
(1) | Includes 18,18,000 shares which have been purchased on account of buyback during the three months ended March 31, 2019 and have not been extinguished as of March 31, 2019 |
(2) | Includes 36,36,000 shares which have been purchased on account of buyback during the three months ended March 31, 2019 but have not been settled and therefore not extinguished as of March 31, 2019 |
Securities premium
The amount received in excess of the par value has been classified as securities premium. Additionally, share-based compensation recognized in net profit in the consolidated statement of profit and loss is credited to securities premium.
Employee Stock Option Plan (ESOP):
Accounting policy
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.
2015 Stock Incentive Compensation Plan (the 2015 Plan) (Formerly 2011 RSU Plan):
On March 31, 2016, pursuant to the approval by the shareholders through postal ballot, the Board has been authorized to introduce, offer, issue and allot share-based incentives to eligible employees of the Company and its subsidiaries under the 2015 Stock Incentive Compensation Plan (the 2015 Plan). The maximum number of shares under the 2015 plan shall not exceed 2,40,38,883 equity shares (this includes 1,12,23,576 equity shares which are held by the trust towards the 2011 Plan as at March 31, 2016). Out of this 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 on the date of the grant. 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. The plan numbers mentioned above would further be adjusted for the September 2018 bonus issue
Consequent to the September 2018 bonus issue, all outstanding options granted under the stock option plan have been adjusted for bonus shares. Unless otherwise stated, all the prior period share numbers, share prices and weighted average exercise prices in this note have been adjusted to give effect to the September 2018 bonus issue.
Controlled trust holds 2,03,24,982 and 1,08,01,956 shares (not adjusted for September, 2018 bonus issue) as at March 31, 2019 and March 31, 2018, respectively under the 2015 plan. Out of these shares 2,00,000 and 1,00,000 (not adjusted for September, 2018 bonus issue) equity shares have been earmarked for welfare activities of the employees as at March 31, 2019 and March 31, 2018, respectively.
The following is the summary of grants during the three months and year ended March 31, 2019 and March 31, 2018 under the 2015 Plan:
Particulars | Three months ended March 31, | Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
RSU | ||||
Salil Parekh, CEO and MD - Refer note 1 below | 42,930 | 226,048 | 260,130 | 226,048 |
U.B. Pravin Rao, COO and WTD | 68,250 | – | 68,250 | 54,500 |
Dr. Vishal Sikka* | – | – | – | 540,448 |
Other KMPs | 347,150 | 429,900 | 347,150 | 546,200 |
Employees other than KMP | 1,878,050 | 3,119,840 | 3,665,170 | 3,194,020 |
2,336,380 | 3,775,788 | 4,340,700 | 4,561,216 | |
ESOP | ||||
U.B. Pravin Rao, COO and WTD | – | – | – | 86,000 |
Dr. Vishal Sikka* | – | – | – | 661,050 |
Other KMPs | – | – | – | 88,900 |
Employees other than KMP | – | – | – | 147,200 |
– | – | – | 983,150 | |
Incentive units - cash settled | ||||
Other employees | 21,500 | 85,180 | 74,090 | 100,080 |
21,500 | 85,180 | 74,090 | 100,080 | |
Total grants | 2,357,880 | 3,860,968 | 4,414,790 | 5,644,446 |
Information in the table above is adjusted for September, 2018 bonus issue
* | Upon Dr. Vishal Sikka's resignation from the roles of the company, the unvested RSUs and ESOPs have been forfeited |
1. Stock incentives granted to Salil Parekh, CEO and MD
Pursuant to the approval of the shareholders through a postal ballot on February 20, 2018, Salil Parekh (CEO & MD) is eligible to receive under the 2015 Plan:
a) | an annual grant of RSUs of fair value ![]() |
b) | a one-time grant of RSUs of fair value ![]() |
c) | annual grant of performance based RSUs of fair value ![]() |
The Board based on the recommendations of the Nomination and Remuneration committee approved on February 27, 2018, the annual time based grant for fiscal 2018 of 56,512 RSUs (adjusted for September 2018 bonus issue) and the one-time time based grant of 1,69,536 RSUs (adjusted for September 2018 bonus issue). The grants were made effective February 27, 2018.
Further, the Board, based on the recommendations of the Nomination and Remuneration Committee, granted 217,200 (adjusted for September 2018 bonus issue) performance based RSUs to Salil Parekh with an effective date of May 2, 2018. The grants would vest upon successful completion of three full fiscal years with the Company concluding on March 31, 2021 and will be determined based on achievement of certain performance targets for the said three-year period.
The Board based on the recommendations of the Nomination and Remuneration committee approved on January 11, 2019, the annual time based grant for fiscal 2019 of 42,930 RSUs. The grant was made effective February 1, 2019.
Though the annual time based grants for the remaining employment term ending on March 31, 2023 have not been granted as at March 31, 2019, since the service commencement date precedes the grant date, the company has recorded employment stock compensation expense in accordance with Ind AS 102, Share based payments.
The RSUs and stock options would vest generally over a period of 4 years 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.
As at March 31, 2019 and March 31, 2018, incentive units were outstanding (net of forfeitures) 1,77,454 and 2,23,514 (adjusted for September, 2018 bonus issue), respectively.
Break-up of employee stock compensation expense:
(in crore)
Particulars | Three months ended March 31, | Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Granted to: | ||||
KMP(2) | 10 | 1 | 33 | (13) |
Employees other than KMP | 49 | 25 | 169 | 97 |
Total (1) | 59 | 26 | 202 | 84 |
(1) Cash-settled stock compensation expense included above | 1 | 2 | 5 | 5 |
(2) | Included a reversal of stock compensation cost of ![]() |
The carrying value of liability towards cash
settled share based payments was 9 crore and
6 crore as at March 31, 2019 and March 31, 2018 respectively.
The activity in the 2015 Plan (formerly 2011 RSU Plan) for equity-settled share based payment transactions during the three months ended March 31, 2019 and March 31, 2018 is as follows:
Particulars | Three months ended March 31, 2019 |
Three months ended March 31, 2018 | ||
Shares arising out of options | Weighted average exercise price (![]() |
Shares arising out of options | Weighted average exercise price (![]() | |
2015 Plan: RSU | ||||
Outstanding at the beginning | 7,659,466 | 2.50 | 4,168,568 | 2.50 |
Granted | 2,336,380 | 5.00 | 3,775,788 | 2.50 |
Exercised | 660,078 | 2.50 | 231,992 | 2.50 |
Forfeited and expired | 154,570 | 2.67 | 211,546 | 2.50 |
Outstanding at the end | 9,181,198 | 3.13 | 7,500,818 | 2.50 |
Exercisable at the end | 235,256 | 2.50 | 48,410 | 2.50 |
2015 Plan: Employee Stock Options (ESOPs) | ||||
Outstanding at the beginning | 1,641,600 | 519 | 2,316,800 | 496 |
Granted | – | – | – | – |
Exercised | 8,224 | 499 | 104,824 | 492 |
Forfeited and expired | 10,200 | 499 | 278,150 | 482 |
Outstanding at the end | 1,623,176 | 516 | 1,933,826 | 493 |
Exercisable at the end | 698,500 | 517 | 393,824 | 496 |
Information in the table above is adjusted for September 2018 bonus issue
The activity in the 2015 Plan (formerly 2011 RSU Plan) for equity-settled share based payment transactions during the year ended March 31, 2019 and March 31, 2018 is set out below:
Particulars | Year ended March 31, 2019 | Year ended March 31, 2018 | ||
Shares arising out of options | Weighted average exercise price (![]() |
Shares arising out of options | Weighted average exercise price (![]() | |
2015 Plan: RSU | ||||
Outstanding at the beginning | 7,500,818 | 2.50 | 5,922,746 | 2.50 |
Granted | 4,340,700 | 3.84 | 4,561,216 | 2.50 |
Exercised | 1,864,510 | 2.50 | 1,296,434 | 2.50 |
Forfeited and expired | 795,810 | 2.61 | 1,686,710 | 2.50 |
Outstanding at the end | 9,181,198 | 3.13 | 7,500,818 | 2.50 |
Exercisable at the end | 235,256 | 2.50 | 48,410 | 2.50 |
2015 Plan: Employee Stock Options (ESOPs) | ||||
Outstanding at the beginning | 1,933,826 | 493 | 2,395,300 | 496 |
Granted | – | – | 983,150 | 472 |
Exercised | 117,350 | 515 | 104,824 | 492 |
Forfeited and expired | 193,300 | 521 | 1,339,800 | 481 |
Outstanding at the end | 1,623,176 | 516 | 1,933,826 | 493 |
Exercisable at the end | 698,500 | 517 | 393,824 | 496 |
Information in the table above is adjusted for September, 2018 bonus issue
During the three months ended March 31, 2019
and March 31, 2018 the weighted average share price of options exercised under the 2015 Plan on the date of exercise was 732
and
560 (adjusted for September 2018 bonus issue) respectively.
During the year ended March 31, 2019 and March
31, 2018 the weighted average share price of options exercised under the 2015 Plan on the date of exercise was 701 and
496
(adjusted for September 2018 bonus issue) respectively.
The summary of information about equity settled RSUs and ESOPs outstanding as at March 31, 2019 is as follows:
Options outstanding | |||
Range of exercise prices per share (![]() |
No. of shares arising out of options | Weighted average remaining contractual life | Weighted average exercise price (![]() |
2015 Plan: | |||
0 - 5 (RSU) | 9,181,198 | 1.70 | 3.13 |
450 - 600 (ESOP) | 1,623,176 | 5.04 | 516 |
10,804,374 | 2.20 | 80 |
Information in the table above is adjusted for September, 2018 bonus issue
The summary of information about equity settled RSUs and ESOPs outstanding as at March 31, 2018 was as follows:
Options outstanding | |||
Range of exercise prices per share (![]() |
No. of shares arising out of options | Weighted average remaining contractual life | Weighted average exercise price (![]() |
2015 Plan: | |||
0 - 2.50 (RSU) | 7,500,818 | 1.89 | 2.50 |
450 - 600 (ESOP) | 1,933,826 | 6.60 | 493 |
9,434,644 | 2.57 | 104 |
Information in the table above is adjusted for September, 2018 bonus issue
The fair value of each equity settled award is estimated on the date of grant using the Black-Scholes-Merton model with the following assumptions:
Particulars | For options granted in | |
Fiscal 2019- Equity Shares RSU |
Fiscal 2019- ADS RSU | |
Weighted average share price (![]() |
696 | 10.77 |
Exercise price (![]() |
3.31 | 0.06 |
Expected volatility (%) | 21-25 | 22-26 |
Expected life of the option (years) | 1-4 | 1-4 |
Expected dividends (%) | 2.65 | 2.65 |
Risk-free interest rate (%) | 7-8 | 2-3 |
Weighted average fair value as on grant date (![]() |
648 | 10.03 |
Particulars | For options granted in | |||
Fiscal 2018- Equity Shares-RSU |
Fiscal 2018- Equity shares ESOP |
Fiscal 2018- ADS-RSU |
Fiscal 2018- ADS- ESOP | |
Weighted average share price (![]() |
572 | 461 | 8.31 | 7.32 |
Exercise price (![]() |
2.50 | 459 | 0.04 | 7.33 |
Expected volatility (%) | 20-25 | 25-28 | 21-26 | 25-31 |
Expected life of the option (years) | 1 - 4 | 3 - 7 | 1 - 4 | 3 - 7 |
Expected dividends (%) | 2.78 | 2.78 | 2.74 | 2.74 |
Risk-free interest rate (%) | 6 - 7 | 6 - 7 | 1 - 2 | 1 - 2 |
Weighted average fair value as on grant date (![]() |
533 | 127 | 7.74 | 1.47 |
(1)Adjusted for September, 2018 bonus issue
The expected life of the RSU / ESOP is estimated based on the vesting term and contractual term of the RSU / ESOP, as well as expected exercise behaviour of the employee who receives the RSU / ESOP. Expected volatility during the expected term of the RSU / ESOP 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 / ESOP.
2.12 OTHER FINANCIAL LIABILITIES
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Non-current | ||
Others | ||
Accrued compensation to employees (1) | 15 | – |
Compensated absences | 44 | 48 |
Payable for acquisition of business (refer note no. 2.1.1) (2) | ||
Contingent consideration | 88 | 13 |
Total non-current other financial liabilities | 147 | 61 |
Current | ||
Unpaid dividends (1) | 29 | 22 |
Others | ||
Accrued compensation to employees (1) | 2,572 | 2,509 |
Accrued expenses (1) | 3,319 | 2,452 |
Retention monies (1) | 112 | 132 |
Payable for acquisition of business | ||
Contingent consideration (refer note no. 2.1.1) (2) | 102 | 41 |
Payable by controlled trusts (1) | 168 | 139 |
Financial liability relating to buyback (refer to note 2.11)(1) | 1,202 | – |
Compensated absences | 1,619 | 1,421 |
Foreign currency forward and options contracts (2)(3) | 15 | 42 |
Capital creditors (1) | 676 | 155 |
Other payables (1) | 638 | 33 |
Total current other financial liabilities | 10,452 | 6,946 |
Total other financial liabilities | 10,599 | 7,007 |
(1) Financial liability carried at amortized cost | 8,731 | 5,442 |
(2) Financial liability carried at fair value through profit or loss | 205 | 93 |
(3) Financial liability carried at fair value through other comprehensive income | – | 3 |
Contingent consideration on undiscounted basis | 233 | 55 |
In accordance with Ind AS 32, Financial Instruments:
Presentation, the Company has recorded a financial liability of 1,202 crore for the obligation to acquire its own equity shares
to the extent of standing instructions provided to its registered broker for the buyback as of March 31, 2019 (refer to note 2.11).
The financial liability is recognized at the present value of the maximum amount that the Company would be required to pay to the
registered broker for buy back, with a corresponding debit in general reserve / retained earnings.
2.13 OTHER LIABILITIES
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Non-current | ||
Others | ||
Deferred income - government grant on land use rights | 42 | 44 |
Accrued gratuity (Refer to Note No. 2.20.1) | 30 | 28 |
Deferred rent | 174 | 151 |
Deferred income | 29 | 36 |
Total non-current other liabilities | 275 | 259 |
Current | ||
Unearned revenue | 2,809 | 2,295 |
Client deposit | 26 | 38 |
Others | ||
Withholding taxes and others | 1,487 | 1,240 |
Accrued gratuity (refer note no. 2.20.1) | 2 | – |
Deferred rent | 63 | 32 |
Deferred income - government grant on land use rights | 1 | 1 |
Total current other liabilities | 4,388 | 3,606 |
Total other liabilities | 4,663 | 3,865 |
2.14 PROVISIONS
Accounting policy
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 Consolidated Statement of Profit and Loss. 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.
Provision for post-sales client support and other provisions
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Current | ||
Others | ||
Post-sales client support and other provisions | 576 | 492 |
Total provisions | 576 | 492 |
The movement in the provision for post-sales client support and other provisions is as follows :
(In crore)
Particulars | Three months ended | Year ended |
March 31, 2019 | March 31, 2019 | |
Balance at the beginning | 582 | 492 |
Provision recognized/(reversed) | 24 | 168 |
Provision utilized | (24) | (112) |
Exchange difference | (6) | 28 |
Balance at the end | 576 | 576 |
Provision for post-sales client support and other provisions are expected to be utilized over a period of 6 months to 1 year.
2.15 INCOME TAXES
Accounting policy
Income tax expense comprises current and deferred income tax. Income tax expense is recognized in net profit in the Consolidated 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. The income tax provision for the interim period is made based on the best estimate of the annual average tax rate expected to be applicable for the full financial year. Tax benefits of deductions earned on exercise of employee share options in excess of compensation charged to income are credited to securities premium.
Income tax expense in the consolidated Statement of Profit and Loss comprises:
(In crore)
Three months ended March 31, | Year ended March 31, | |||
2019 | 2018 | 2019 | 2018 | |
Current taxes | 1,193 | 1,466 | 5,727 | 4,581 |
Deferred taxes | 12 | (150) | (96) | (340) |
Income tax expense | 1,205 | 1,316 | 5,631 | 4,241 |
During the quarter ended March 31, 2019, the
Company entered into Advance Pricing Agreement (APA) in overseas jurisdictions resulting in a reversal of income tax expense of
94 crore which pertained to prior periods.
In December 2017, the Company had concluded
an Advance Pricing Agreement (“APA”) with the US Internal Revenue Service ("IRS") for the US branch covering
the years ending March 2011 to March 2021. Under the APA, the Company and the IRS have agreed on the methodology to allocate revenues
and compute the taxable income of the Company’s US Branch operations. In accordance with the APA, the company had reversed
income tax expense provision of $225 million (1,432 crore) which pertained to previous periods which are no longer required.
The Company had to pay an adjusted amount of $223 million (approximately
1,424 crore) due to the difference between the
taxes payable for prior periods as per the APA and the actual taxes paid for such periods. The company has paid $215 million (
1,455
crore).
Further, the “Tax Cuts and Jobs Act (H.R. 1)” was signed into law on December 22, 2017 (“US Tax Reforms”). The US tax reforms has reduced federal tax rates from 35% to 21% effective January 1, 2018 amongst other measures.
Income tax expense for the three months ended
March 31, 2019 and March 31, 2018 includes reversal (net of provisions) of 82 crore and reversal (net of provisions)
117
crore respectively. Income tax expense for the year ended March 31, 2019 and March 31, 2018 includes reversals (net of provisions)
of
129 crore and
291 crore respectively. These reversals pertain to prior periods on account of adjudication of certain
disputed matters in favor of the company across various jurisdictions.
A reconciliation of the income tax provision to the amount computed by applying the statutory income tax rate to the income before income taxes is summarized below:
(In crore)
Three months ended March 31, | Year ended March 31, | |||
2019 | 2018 | 2019 | 2018 | |
Profit before income taxes | 5,283 | 5,006 | 21,041 | 20,270 |
Enacted tax rates in India | 34.94% | 34.61% | 34.94% | 34.61% |
Computed expected tax expense | 1,846 | 1,732 | 7,353 | 7,015 |
Tax effect due to non-taxable income for Indian tax purposes | (755) | (631) | (2,705) | (2,068) |
Overseas taxes | 122 | 247 | 719 | 701 |
Tax provision (reversals) | (176) | (117) | (176) | (1,617) |
Effect of exempt non-operating income | (13) | (6) | (58) | (66) |
Effect of unrecognized deferred tax assets | 17 | 49 | 92 | 188 |
Effect of differential overseas tax rates | 2 | 27 | (1) | 52 |
Effect of non-deductible expenses | 47 | 40 | 353 | 57 |
Branch profit tax (net of credits) | 108 | (55) | 25 | (210) |
Subsidiary dividend distribution tax | – | – | – | 172 |
Others | 7 | 30 | 29 | 17 |
Income tax expense | 1,205 | 1,316 | 5,631 | 4,241 |
The applicable Indian corporate statutory tax rate for the year ended March 31, 2019 and March 31, 2018 is 34.94% and 34.61%, respectively. The increase in the corporate statutory tax rate to 34.94% is consequent to changes made in the Finance Act, 2018.
The foreign tax expense is due to income taxes payable overseas principally in the United States. In India, the Group has benefited from certain tax incentives that the Government of India had provided for export of software and services from the units registered under the Special Economic Zones (SEZs) Act, 2005. SEZ units which began the provision of services on or after April 1, 2005 are eligible for a deduction of 100% 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% 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 Group for acquiring new plant and machinery for the purpose of its business as per the provisions of the Income Tax Act, 1961.
Entire deferred income tax for the three months
and year ended March 31, 2019 and March 31, 2018 relates to origination and reversal of temporary differences except for a credit
of 155 crore (on account of US Tax Reforms explained above), for the year ended March 31, 2018.
During the year ended March 31, 2018, the Company
received 846 crore as dividend from its majority owned subsidiary. Dividend distribution tax paid by the subsidiary on such dividend
has been reduced as credit against dividend distribution tax payable by Infosys. Accordingly, the Group has recorded a charge of
172 crore as income tax expense during the year ended March 31, 2018.
Infosys is subject to a 15% 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 at March 31, 2019, Infosys' U.S. branch net assets amounted
to approximately 5,196 crore. As at March 31, 2019, the Company has a deferred tax liability for branch profit tax
of
201 crore (net of credits), as the Company estimates that these branch profits are expected to be distributed
in the foreseeable future.
Other income for the three months and year ended
March 31, 2019 includes interest on income tax refund of 51 crore each, respectively. Other income for the three months and year
ended March 31, 2018 includes interest on income tax refund of Nil and
262 crore, respectively.
Deferred income tax liabilities have not been
recognized on temporary differences amounting to 6,007 crore and
5,045 crore as at March 31, 2019 and March 31, 2018,
respectively, associated with investments in subsidiaries and branches as it is probable that the temporary differences will not
reverse in the foreseeable future.
Deferred income tax assets have not been recognized
on accumulated losses of 2,624 crore and
1,936 crore as at March 31, 2019 and March 31, 2018, respectively, as it
is probable that future taxable profit will be not available against which the unused tax losses can be utilized in the foreseeable
future. The balance as at March 31, 2018 excludes the accumulated losses of Disposal Groups classified as held for sale. (Refer
note 2.1.2)
The following table provides details of expiration of unused tax losses:
(In crore)
Year | As at |
March 31, 2019 | |
2020 | 173 |
2021 | 80 |
2022 | 142 |
2023 | 198 |
2024 | 187 |
Thereafter | 1,844 |
Total | 2,624 |
The following table provides the details of income tax assets and income tax liabilities as at March 31, 2019 and March 31, 2018:
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Income tax assets | 6,743 | 6,070 |
Current income tax liabilities | 1,567 | 2,043 |
Net current income tax asset / (liability) at the end | 5,176 | 4,027 |
The gross movement in the current income tax asset/ (liability) for the three months and year ended March 31, 2019 and March 31, 2018 is as follows:
(In crore)
Particulars | Three months ended March 31, | Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Net current income tax asset/ (liability) at the beginning | 4,783 | 3,515 | 4,027 | 1,831 |
Translation differences | 2 | 11 | (1) | – |
Income tax paid | 1,573 | 2,012 | 6,832 | 6,829 |
Current income tax expense | (1,193) | (1,466) | (5,727) | (4,581) |
Reclassified under assets held for sale (refer note no. 2.1.2) | – | (35) | 23 | (35) |
Reclassified from held for sale (Refer note 2.1.2) | – | – | 13 | – |
Income tax benefit arising on exercise of stock options | 5 | – | 8 | – |
Additions through business combination | – | – | (9) | – |
Tax impact on buyback expenses | 4 | – | 4 | – |
Income tax on other comprehensive income | 2 | (10) | 6 | (17) |
Net current income tax asset/ (liability) at the end | 5,176 | 4,027 | 5,176 | 4,027 |
The movement in gross deferred income tax assets and liabilities (before set off) for the three months ended March 31, 2019 is as follows:
(In crore)
Particulars | Carrying value as at January 1, 2019 | Changes through profit and loss | Addition through business combination | Changes through OCI | Reclassified from Held for Sale, net | Translation difference | Carrying value as at March 31, 2019 |
Deferred income tax assets | |||||||
Property, plant and equipment | 242 | 20 | – | – | – | – | 262 |
Accrued compensation to employees | 25 | 6 | – | – | – | – | 31 |
Trade receivables | 165 | 11 | – | – | – | – | 176 |
Compensated absences | 387 | 10 | – | – | – | – | 397 |
Post sales client support | 111 | (7) | – | – | – | – | 104 |
Derivative financial instruments | 3 | 1 | – | – | – | – | 4 |
Intangibles | 16 | – | – | – | – | – | 16 |
Credits related to branch profits | 261 | 81 | – | – | – | (2) | 340 |
Others | 181 | 43 | – | (2) | – | 4 | 226 |
Total deferred income tax assets | 1,391 | 165 | – | (2) | – | 2 | 1,556 |
Deferred income tax liabilities | |||||||
Intangible asset | (163) | 34 | – | – | – | 1 | (128) |
Branch profit tax | (355) | (189) | – | – | – | 3 | (541) |
Derivative financial instruments | (107) | (8) | – | 5 | – | – | (110) |
Others | (81) | (14) | – | 19 | – | (1) | (77) |
Total Deferred income tax liabilities | (706) | (177) | – | 24 | – | 3 | (856) |
The movement in gross deferred income tax assets and liabilities (before set off) for the three months ended March 31, 2018 is as follows:
(In crore)
Particulars | Carrying value as at January 1, 2018 | Changes through profit and loss | Addition through business combination | Changes through OCI | Reclassified as Held for Sale, net | Translation difference | Carrying value as at March 31, 2018 |
Deferred income tax assets | |||||||
Property, plant and equipment | 189 | 27 | – | – | (1) | – | 215 |
Computer software | – | – | – | – | – | – | – |
Accrued compensation to employees | 27 | (14) | – | – | (2) | 1 | 12 |
Trade receivables | 142 | (2) | – | – | – | 1 | 141 |
Compensated absences | 352 | 15 | – | – | (2) | 1 | 366 |
Post sales client support | 73 | 25 | – | – | – | – | 98 |
Derivative financial instruments | – | 13 | – | – | – | – | 13 |
Intangibles | 22 | (14) | – | – | – | 1 | 9 |
Credits related to branch profits | 293 | 41 | – | – | – | 7 | 341 |
Others | 123 | 21 | – | – | (33) | 6 | 117 |
Total deferred income tax assets | 1,221 | 112 | – | – | (38) | 17 | 1,312 |
Deferred income tax liabilities | |||||||
Intangible asset | (129) | 8 | – | – | 86 | (3) | (38) |
Branch profit tax | (508) | 14 | – | – | – | (11) | (505) |
Derivative financial instruments | (18) | 17 | – | – | – | (1) | (2) |
Others | (27) | (1) | – | 2 | 5 | (5) | (26) |
Total Deferred income tax liabilities | (682) | 38 | – | 2 | 91 | (20) | (571) |
The movement in gross deferred income tax assets and liabilities (before set off) for the year ended March 31, 2019 is as follows:
(In crore)
Particulars | Carrying value as at April 1, 2018 | Changes through profit and loss | Addition through business combination | Changes through OCI | Reclassified from Held for Sale, net | Translation difference | Carrying value as at March 31, 2019 |
Deferred income tax assets | |||||||
Property, plant and equipment | 215 | 46 | – | – | 1 | – | 262 |
Accrued compensation to employees | 12 | 16 | – | – | 2 | 1 | 31 |
Trade receivables | 141 | 35 | – | – | – | – | 176 |
Compensated absences | 366 | 29 | – | – | 2 | – | 397 |
Post sales client support | 98 | 5 | – | – | – | 1 | 104 |
Derivative financial instruments | 13 | (14) | – | 4 | – | 1 | 4 |
Intangibles | 9 | 6 | – | – | – | 1 | 16 |
Credits related to branch profits | 341 | (22) | – | – | – | 21 | 340 |
Others | 117 | 75 | – | 9 | 33 | (8) | 226 |
Total deferred income tax assets | 1,312 | 176 | – | 13 | 38 | 17 | 1,556 |
Deferred income tax liabilities | |||||||
Intangible asset | (38) | 63 | (56) | – | (86) | (11) | (128) |
Branch profit tax | (505) | (3) | – | – | – | (33) | (541) |
Derivative financial instruments | (2) | (97) | – | (11) | – | – | (110) |
Others | (26) | (43) | (8) | (1) | (5) | 6 | (77) |
Total Deferred income tax liabilities | (571) | (80) | (64) | (12) | (91) | (38) | (856) |
The movement in gross deferred income tax assets and liabilities (before set off) for the year ended March 31, 2018 is as follows:
(In crore)
Particulars | Carrying value as at April 1, 2017 | Changes through profit and loss | Addition through business combination | Changes through OCI | Reclassified as Held for Sale, net | Translation difference | Carrying value as at March 31, 2018 |
Deferred income tax assets | |||||||
Property, plant and equipment | 138 | 78 | – | – | (1) | – | 215 |
Computer software | 40 | (41) | – | – | – | 1 | – |
Accrued compensation to employees | 57 | (42) | – | – | (2) | (1) | 12 |
Trade receivables | 136 | 4 | – | – | – | 1 | 141 |
Compensated absences | 374 | (10) | – | – | (2) | 4 | 366 |
Post sales client support | 97 | 2 | – | – | – | (1) | 98 |
Derivative financial instruments | – | 13 | – | – | – | – | 13 |
Intangibles | 22 | (14) | – | – | – | 1 | 9 |
Credits related to branch profits | – | 334 | – | – | – | 7 | 341 |
Others | 229 | (70) | – | (14) | (33) | 5 | 117 |
Total deferred income tax assets | 1,093 | 254 | – | (14) | (38) | 17 | 1,312 |
Deferred income tax liabilities | |||||||
Intangible asset | (206) | 85 | (2) | – | 86 | (1) | (38) |
Branch profit tax | (327) | (172) | – | – | – | (6) | (505) |
Derivative financial instruments | (86) | 72 | – | 13 | – | (1) | (2) |
Others | (141) | 101 | – | 13 | 5 | (4) | (26) |
Total Deferred income tax liabilities | (760) | 86 | (2) | 26 | 91 | (12) | (571) |
The tax effects of significant temporary differences that resulted in deferred income tax assets and liabilities are as follows:
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Deferred income tax assets after set off | 1,372 | 1,282 |
Deferred income tax liabilities after set off | (672) | (541) |
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.
In assessing the reliability of deferred income tax assets, the 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. The 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.
2.16 REVENUE FROM OPERATIONS
Accounting policy
The Group derives revenues primarily from business IT services comprising of software development and related services, consulting and package implementation and from the licensing of software products and platforms across our core and digital offerings (“together called as software related services”).
Effective April 1, 2018, the Group adopted Ind AS 115 “Revenue from Contracts with Customers” using the cumulative catch-up transition method, applied to contracts that were not completed as at April 1, 2018. In accordance with the cumulative catch-up transition method , the comparatives have not been retrospectively adjusted. The following is a summary of new and/or revised significant accounting policies related to revenue recognition. Refer Note 1 “Significant Accounting Policies,” in the Company’s 2018 Annual Report for the policies in effect for revenue prior to April 1, 2018. The effect on adoption of Ind AS 115 was insignificant.
Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. 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 invoicing to the reporting date is recognized as unbilled revenue. Revenue from fixed-price, fixed-timeframe contracts, where the performance obligations are satisfied over time and 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. Maintenance revenue is recognized ratably over the term of the underlying maintenance arrangement.
Revenues in excess of invoicing are classified as contract assets (which we refer as unbilled revenue) while invoicing in excess of revenues are classified as contract liabilities (which we refer to as unearned revenues).
In arrangements for software development and related services and maintenance services, the Group has applied the guidance in Ind AS 115, Revenue from contract with customer, by applying the revenue recognition criteria for each distinct performance obligation. The arrangements with customers generally meet the criteria for considering software development and related services as distinct performance obligations. For allocating the transaction price, the Group has measured the revenue in respect of each performance obligation of a contract at its relative standalone selling price. The price that is regularly charged for an item when sold separately is the best evidence of its standalone selling price. In cases where the Group is unable to determine the standalone selling price, the Group uses the expected cost plus margin approach in estimating the standalone selling price. For software development and related services, the performance obligations are satisfied as and when the services are rendered since the customer generally obtains control of the work as it progresses.
Revenue from licenses where the customer obtains a “right to use” the licenses is recognized at the time the license is made available to the customer. Revenue from licenses where the customer obtains a “right to access” is recognized over the access period. Arrangements to deliver software products generally have three elements: license, implementation and Annual Technical Services (ATS). The Group has applied the principles under Ind AS 115 to account for revenues from these performance obligations. When implementation services are provided in conjunction with the licensing arrangement and the license and implementation have been identified as two separate performance obligations, the transaction price for such contracts are allocated to each performance obligation of the contract based on their relative standalone selling prices. In the absence of standalone selling price for implementation, the performance obligation is estimated using the expected cost plus margin approach. Where the license is required to be substantially customized as part of the implementation service the entire arrangement fee for license and implementation is considered to be a single performance obligation and the revenue 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 performance obligations are satisfied. ATS revenue is recognized ratably over the period in which the services are rendered.
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 to each of the underlying performance obligation that corresponds to the 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 Group recognizes changes in the estimated amount of obligations for discounts in the period in which the change occurs.
Deferred contract costs are incremental costs of obtaining a contract which are recognized as assets and amortized over the term of the contract.
Contract modifications are accounted for when additions, deletions or changes are approved either to the contract scope or contract price. The accounting for modifications of contracts involves assessing whether the services added to an existing contract are distinct and whether the pricing is at the standalone selling price. Services added that are not distinct are accounted for on a cumulative catch up basis, while those that are distinct are accounted for prospectively, either as a separate contract, if the additional services are priced at the standalone selling price, or as a termination of the existing contract and creation of a new contract if not priced at the standalone selling price.
The Group presents revenues net of indirect taxes in its statement of Profit and loss.
Revenues for the three months and year ended March 31, 2019 and March 31, 2018 are as follows:
(In crore)
Particulars | Three months ended March 31, | Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Revenue from software services | 20,372 | 17,191 | 78,359 | 66,857 |
Revenue from products and platforms | 1,167 | 892 | 4,316 | 3,665 |
Total revenue from operations |
21,539 | 18,083 | 82,675 | 70,522 |
Disaggregate revenue information
The table below presents disaggregated revenues from contracts with customers by geography, offerings and contract-type for each of our business segments. The Group believes that this disaggregation best depicts how the nature, amount, timing and uncertainty of our revenues and cash flows are affected by industry, market and other economic factors.
For the three months ended March 31, 2019
(In crore)
Particulars | Financial Services (1) | Retail(2) | Communication (3) | Energy , Utilities, Resources and Services | Manufacturing | Hi Tech | Life Sciences(4) | Others(5) | Total |
Revenues by Geography | |||||||||
North America | 4,093 | 2,206 | 1,763 | 1,513 | 1,150 | 1,575 | 767 | 126 | 13,193 |
Europe | 1,255 | 987 | 464 | 975 | 918 | 35 | 492 | 41 | 5,167 |
India | 296 | 6 | 23 | 1 | 21 | 32 | 4 | 110 | 493 |
Rest of the world | 1,161 | 217 | 671 | 258 | 72 | 8 | 24 | 275 | 2,686 |
Total | 6,805 | 3,416 | 2,921 | 2,747 | 2,161 | 1,650 | 1,287 | 552 | 21,539 |
Revenue by offerings | |||||||||
Services | |||||||||
Digital | 2,083 | 1,229 | 966 | 910 | 683 | 527 | 267 | 100 | 6,765 |
Core | 3,972 | 2,109 | 1,897 | 1,788 | 1,427 | 1,055 | 917 | 442 | 13,607 |
Subtotal | 6,055 | 3,338 | 2,863 | 2,698 | 2,110 | 1,582 | 1,184 | 542 | 20,372 |
Products and platforms | |||||||||
Digital | 205 | 68 | 57 | 15 | 33 | 66 | 66 | 7 | 517 |
Core | 545 | 10 | 1 | 34 | 18 | 2 | 37 | 3 | 650 |
Subtotal | 750 | 78 | 58 | 49 | 51 | 68 | 103 | 10 | 1,167 |
Total | 6,805 | 3,416 | 2,921 | 2,747 | 2,161 | 1,650 | 1,287 | 552 | 21,539 |
Digital | 2,288 | 1,297 | 1,023 | 925 | 716 | 593 | 333 | 107 | 7,282 |
Core | 4,517 | 2,119 | 1,898 | 1,822 | 1,445 | 1,057 | 954 | 445 | 14,257 |
Revenues by contract type | |||||||||
Fixed Price | 3,006 | 2,143 | 1,965 | 1,531 | 1,115 | 814 | 612 | 281 | 11,467 |
Time & Materials | 3,799 | 1,273 | 956 | 1,216 | 1,046 | 836 | 675 | 271 | 10,072 |
Total | 6,805 | 3,416 | 2,921 | 2,747 | 2,161 | 1,650 | 1,287 | 552 | 21,539 |
For the year ended March 31, 2019
(In crore)
Particulars | Financial Services (1) | Retail(2) | Communication (3) | Energy , Utilities, Resources and Services | Manufacturing | Hi Tech | Life Sciences(4) | Others (5) | Total |
Revenues by Geography | |||||||||
North America | 16,052 | 8,792 | 5,579 | 5,867 | 4,336 | 5,914 | 3,066 | 432 | 50,038 |
Europe | 4,890 | 3,836 | 1,897 | 3,550 | 3,497 | 106 | 2,011 | 155 | 19,942 |
India | 1,209 | 23 | 56 | 3 | 86 | 137 | 12 | 522 | 2,048 |
Rest of the world | 4,326 | 905 | 2,894 | 970 | 233 | 20 | 114 | 1,185 | 10,647 |
Total | 26,477 | 13,556 | 10,426 | 10,390 | 8,152 | 6,177 | 5,203 | 2,294 | 82,675 |
Revenue by offerings | |||||||||
Services | |||||||||
Digital | 7,543 | 4,410 | 3,421 | 2,993 | 2,291 | 1,998 | 1,085 | 308 | 24,049 |
Core | 16,064 | 8,795 | 6,822 | 7,190 | 5,644 | 4,087 | 3,780 | 1,928 | 54,310 |
Subtotal | 23,607 | 13,205 | 10,243 | 10,183 | 7,935 | 6,085 | 4,865 | 2,236 | 78,359 |
Products and platforms | |||||||||
Digital | 734 | 305 | 177 | 68 | 136 | 86 | 204 | 38 | 1,748 |
Core | 2,136 | 46 | 6 | 139 | 81 | 6 | 134 | 20 | 2,568 |
Subtotal | 2,870 | 351 | 183 | 207 | 217 | 92 | 338 | 58 | 4,316 |
Total | 26,477 | 13,556 | 10,426 | 10,390 | 8,152 | 6,177 | 5,203 | 2,294 | 82,675 |
Digital | 8,277 | 4,715 | 3,598 | 3,061 | 2,427 | 2,084 | 1,289 | 346 | 25,797 |
Core | 18,200 | 8,841 | 6,828 | 7,329 | 5,725 | 4,093 | 3,914 | 1,948 | 56,878 |
Revenues by contract type | |||||||||
Fixed Price | 11,600 | 8,571 | 6,330 | 6,033 | 4,178 | 3,148 | 2,430 | 1,136 | 43,426 |
Time & Materials | 14,877 | 4,985 | 4,096 | 4,357 | 3,974 | 3,029 | 2,773 | 1,158 | 39,249 |
Total | 26,477 | 13,556 | 10,426 | 10,390 | 8,152 | 6,177 | 5,203 | 2,294 | 82,675 |
(1) Financial Services include enterprises in Financial Services and Insurance
(2) Retail includes enterprises in Retail, Consumer Packaged Goods and Logistics
(3) Communication includes enterprises in Communication, Telecom OEM and Media
(4) Life Sciences includes enterprises in Life sciences and Health care
(5) | Others include operating segments of businesses in India, Japan, China, Infosys Public Services & other enterprises in Public Services |
Digital Services
Digital Services comprise of service and solution offerings of the Group that enable our clients to transform their businesses. These include offerings that enhance customer experience, leverage AI-based analytics and big data, engineer digital products and IoT, modernize legacy technology systems, migrate to cloud applications and implement advanced cyber security systems.
Core Services
Core Services comprise traditional offerings of the Group that have scaled and industrialized over a number of years. These primarily include application management services, proprietary application development services, independent validation solutions, product engineering and management, infrastructure management services, traditional enterprise application implementation, support and integration services.
Products & platforms
The Group also derives revenues from the sale of products and platforms including Finacle – core banking solution, Edge Suite of products, Infosys Nia - Artificial Intelligence (AI) platform which applies next-generation AI and machine learning and Infosys McCamish- insurance platform.
Trade Receivables and Contract Balances
The Group classifies the right to consideration in exchange for deliverables as either a receivable or as unbilled revenue.
A receivable is a right to consideration that is unconditional upon passage of time. Revenue for time and material contracts are recognized as related service are performed. Revenue for fixed price maintenance contracts is recognized on a straight line basis over the period of the contract. Revenues in excess of billings is recorded as unbilled revenue and is classified as a financial asset for these cases as right to consideration is unconditional upon passage of time .
Revenue recognition for fixed price development contracts is based on percentage of completion method. Invoicing to the clients is based on milestones as defined in the contract. This would result in the timing of revenue recognition being different from the timing of billing the customers. Unbilled revenue for fixed price development contracts is classified as non financial asset as the contractual right to consideration is dependent on completion of contractual milestones. Invoicing in excess of earnings are classified as unearned revenue.
Trade receivable and unbilled revenues are presented net of impairment in the Consolidated Balance Sheet.
During the year ended March 31, 2019 , the company
recognized revenue of 2,237 crore arising from opening unearned revenue as of April 1, 2018.
During the year ended March 31, 2019, 2,685
crore of unbilled revenue pertaining to fixed price development contracts as of April 1, 2018 has been reclassified to Trade receivables
upon billing to customers on completion of milestones.
Performance obligations and remaining performance obligations
The remaining performance obligation disclosure provides the aggregate amount of the transaction price yet to be recognized as at the end of the reporting period and an explanation as to when the Group expects to recognize these amounts in revenue. Applying the practical expedient as given in Ind AS 115, the Group has not disclosed the remaining performance obligation related disclosures for contracts where the revenue recognized corresponds directly with the value to the customer of the entity's performance completed to date, typically those contracts where invoicing is on time and material basis. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, periodic revalidations, adjustment for revenue that has not materialized and adjustments for currency.
The aggregate value of performance obligations
that are completely or partially unsatisfied as at March 31, 2019, other than those meeting the exclusion criteria mentioned above,
is 51,274 crore. Out of this, the Group expects to recognize revenue of around 50% within the next one year and the remaining
thereafter. This includes contracts that can be terminated for convenience without a substantive penalty since, based on current
assessment, the occurrence of the same is expected to be remote.
The impact on account of applying the erstwhile
Ind AS 18 Revenue standard instead of Ind AS 115 Revenue from contract with customers on the financials results of the Group for
the three months and year ended March 31, 2019 and as at March 31, 2019 is insignificant. On account of adoption of Ind AS 115,
unbilled revenues of 3,281 crore as at March 31, 2019 has been considered as a Non financial asset.
2.17 OTHER INCOME, NET
Accounting policy
Other income is comprised primarily of interest income, dividend income, gain/loss on investment 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.
Foreign currency
Accounting policy
Functional currency
The functional currency of Infosys, Infosys BPM, controlled trusts, EdgeVerve and Skava is the Indian rupee. The functional currencies for other subsidiaries are their 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 Consolidated 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 Consolidated 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.
Effective April 1, 2018, the Group has adopted Appendix B to Ind AS 21- Foreign Currency Transactions and Advance Consideration which clarifies the date of transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income when an entity has received or paid advance consideration in a foreign currency. The effect on account of adoption of this amendment was insignificant.
Government grant
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 Consolidated Statement of Profit and Loss on a systematic and rational basis over the useful life of the asset. Government grants related to revenue are recognized on a systematic basis in net profit in the Consolidated Statement of Profit and Loss over the periods necessary to match them with the related costs which they are intended to compensate.
Other income for the three months and year ended March 31, 2019 and March 31, 2018 are as follows:
(In crore)
Particulars | Three months ended March 31, | Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Interest income on financial assets carried at amortized cost: | ||||
Tax free bonds and Government bonds | 35 | 35 | 143 | 143 |
Deposit with Bank and others | 320 | 347 | 1,261 | 1,531 |
Interest income on financial assets carried at fair value through other comprehensive income: | ||||
Non-convertible debentures, certificates of deposit, Govt. securities and commercial paper | 142 | 133 | 646 | 682 |
Income on investments carried at fair value through profit or loss | ||||
Dividend income on liquid mutual funds | 1 | – | 2 | 4 |
Gain / (loss) on liquid mutual funds | 63 | 39 | 196 | 253 |
Exchange gains/ (losses) on foreign currency forward and options contracts | 195 | (130) | 185 | 1 |
Exchange gains/ (losses) on translation of assets and liabilities | (139) | 183 | 133 | 233 |
Miscellaneous Income, net | 48 | 45 | 316 | 464 |
Total other income | 665 | 652 | 2,882 | 3,311 |
2.18 EXPENSES
(In crore)
Particulars | Three months ended March 31, | Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Employee benefit expenses | ||||
Salaries including bonus | 11,701 | 9,750 | 43,894 | 37,764 |
Contribution to provident and other funds | 234 | 212 | 946 | 828 |
Share based payments to employees (Refer note no. 2.11) | 59 | 26 | 202 | 84 |
Staff welfare | 80 | 66 | 273 | 217 |
12,074 | 10,054 | 45,315 | 38,893 | |
Cost of software packages and others | ||||
For own use | 237 | 220 | 930 | 887 |
Third party items bought for service delivery to clients | 452 | 246 | 1,623 | 983 |
689 | 466 | 2,553 | 1,870 | |
Other expenses | ||||
Repairs and maintenance | 359 | 272 | 1,269 | 1,089 |
Power and fuel | 49 | 50 | 221 | 207 |
Brand and marketing | 135 | 72 | 489 | 305 |
Operating lease payments (Refer to Note 2.19) | 165 | 130 | 585 | 528 |
Rates and taxes | 52 | 3 | 184 | 166 |
Consumables | 15 | 8 | 47 | 30 |
Insurance | 19 | 16 | 67 | 59 |
Provision for post-sales client support and others | (24) | 60 | 1 | 142 |
Commission to non-whole time directors | 2 | 2 | 8 | 9 |
Impairment loss recognized / (reversed) under expected credit loss model | 18 | 2 | 248 | 71 |
Contributions towards Corporate Social responsibility | 66 | 22 | 266 | 156 |
Others | 76 | 2 | 270 | 162 |
932 | 639 | 3,655 | 2,924 |
2.19 LEASES
Accounting policy
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 Consolidated Statement of Profit and Loss over the lease term.
The lease rentals charged during the period is as follows:
(In crore)
Particulars | Three months ended March 31, |
Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Lease rentals recognized during the period | 165 | 130 | 585 | 528 |
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 | March 31, 2019 | March 31, 2018 |
Not later than 1 year | 620 | 456 |
Later than 1 year and not later than 5 years | 1,794 | 1,388 |
Later than 5 years | 885 | 874 |
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.
2.20 EMPLOYEE BENEFITS
Accounting policy
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 BPM and EdgeVerve, contributions are made to the Infosys BPM 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 the Life Insurance Corporation of India as permitted by Indian law.
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 and are not reclassified to profit or loss in subsequent periods. 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 is recognized in the Consolidated Statement of Profit and Loss.
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.
Superannuation
Certain employees of Infosys, Infosys BPM 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.
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.
2.20.1 Gratuity
The following tables set out the funded status of the gratuity plans and the amounts recognized in the Group's financial statements as at March 31, 2019 and March 31, 2018:
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Change in benefit obligations | ||
Benefit obligations at the beginning | 1,201 | 1,117 |
Service cost | 157 | 150 |
Interest expense | 85 | 73 |
Remeasurements - Actuarial (gains) / losses | 32 | (59) |
Transfer in | – | 28 |
Curtailment gain | – | – |
Benefits paid | (128) | (107) |
Translation difference | 2 | – |
Reclassified under held for sale (refer note no 2.1.2) | – | (1) |
Reclassified from held for sale (refer note no 2.1.2) | 2 | |
Benefit obligations at the end | 1,351 | 1,201 |
Change in plan assets | ||
Fair value of plan assets at the beginning | 1,216 | 1,195 |
Interest income | 90 | 80 |
Remeasurements- Return on plan assets excluding amounts included in interest income | 4 | 13 |
Contributions | 174 | 35 |
Benefits paid | (123) | (107) |
Fair value of plan assets at the end | 1,361 | 1,216 |
Funded status | 10 | 15 |
Prepaid gratuity benefit | 42 | 43 |
Accrued gratuity | (32) | (28) |
Amount for the three months and year ended March 31, 2019 and March 31, 2018 recognized in the Consolidated Statement of Profit and Loss under employee benefit expense:
(In crore)
Particulars | Three months ended March 31, | Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Service cost | 39 | 38 | 157 | 150 |
Net interest on the net defined benefit liability/asset | (2) | (3) | (5) | (7) |
Net gratuity cost | 37 | 35 | 152 | 143 |
Amount for the three months and year ended March 31, 2019 and March 31, 2018 recognized in the Consolidated Statement of other comprehensive income:
(In crore)
Particulars | Three months ended March 31, | Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Remeasurements of the net defined benefit liability/ (asset) | ||||
Actuarial (gains) / losses | 5 | (41) | 32 | (59) |
(Return) / loss on plan assets excluding amounts included in the net interest on the net defined benefit liability/(asset) | 1 | (3) | (4) | (13) |
6 | (44) | 28 | (72) |
(In crore)
Particulars | Three months ended March 31, | Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
(Gain)/loss from change in demographic assumptions | – | – | (4) | – |
(Gain)/loss from change in financial assumptions | 9 | (27) | 30 | (41) |
(Gain)/loss from experience adjustment | (4) | (14) | 6 | (18) |
5 | (41) | 32 | (59) |
The weighted-average assumptions used to determine benefit obligations as at March 31, 2019 and March 31, 2018 are set out below:
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Discount rate | 7.1% | 7.5% |
Weighted average rate of increase in compensation levels | 8.0% | 8.0% |
The weighted-average assumptions used to determine net periodic benefit cost for the three months and year ended March 31, 2019 and March 31, 2018 are set out below:
Particulars | Three months ended March 31, | Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Discount rate(%) | 7.5 | 6.9 | 7.5 | 6.9 |
Weighted average rate of increase in compensation levels(%) | 8.0 | 8.0 | 8.0 | 8.0 |
Weighted average duration of defined benefit obligation (years) | 5.9 years | 6.1 years | 5.9 years | 6.1 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.
Sensitivity of significant assumptions used for valuation of defined benefit obligation:
(in crore)
Impact from percentage point increase / decrease in | As at March 31, 2019 |
Discount rate | 67 |
Weighted average rate of increase in compensation levels | 59 |
Sensitivity to 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. In practice, this is not probable, and changes in some of the assumptions may be correlated.
Gratuity is applicable only to employees drawing a salary in Indian rupees and there are no other significant 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 BPM and EdgeVerve, contributions are made to the Infosys BPM Employees' Gratuity Fund Trust and EdgeVerve Systems Limited Employees Gratuity Fund Trust, respectively. Trustees administer contributions made to the trust as at March 31, 2019 and March 31, 2018, the plan assets have been primarily invested in insurer managed funds.
Actual return on assets for the three months
ended March 31, 2019, and March 31, 2018 were 23 crore and
23 crore, respectively.
Actual return on assets for the year ended March
31, 2019, and March 31, 2018 were 95 crore and
93 crore, respectively.
The Group expects to contribute 162 crore
to the gratuity trusts during the remainder of fiscal 2020. Maturity profile of defined benefit obligation:
(In crore)
Within 1 year | 198 |
1-2 year | 207 |
2-3 year | 216 |
3-4 year | 223 |
4-5 year | 235 |
5-10 years | 1,163 |
2.20.2 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 assumptions provided below there is no shortfall as at March 31, 2019 and March 31, 2018, respectively.
The details of fund and plan asset position are as follows:
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Benefit obligation at period end | 5,989 | 5,160 |
Net liability 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 | |
March 31, 2019 | March 31, 2018 | |
Government of India (GOI) bond yield | 7.1% | 7.50% |
Remaining term to maturity of portfolio | 5.47 years | 5.9 years |
Expected guaranteed interest rate | ||
First year | 8.65% | 8.55% |
Thereafter | 8.60% | 8.55% |
The Group contributed 142 crore and
127
crore to the provident fund during the three months ended March 31, 2019 and March 31, 2018, respectively. The Group contributed
543 crore and
484 crore to the provident fund during the year ended March 31, 2019 and March 31, 2018, respectively.
The same has been recognized in the Consolidated Statement of Profit and Loss under the head employee benefit expense.
2.20.3 Superannuation
The group contributed 57 crore and
44
crore to the superannuation plan during the three months ended March 31, 2019 and March 31, 2018, respectively.
The group contributed 215 crore and
173
crore to the superannuation plan during the year ended March 31, 2019 and March 31, 2018, respectively.
The same has been recognized in the Statement of profit and loss account 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.
2.20.4 Employee benefit costs include:
(In crore)
Particulars | Three months ended March 31, | Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Salaries and bonus(1)(2) | 11,838 | 9,848 | 44,405 | 38,093 |
Defined contribution plans | 81 | 68 | 307 | 260 |
Defined benefit plans | 155 | 138 | 603 | 540 |
12,074 | 10,054 | 45,315 | 38,893 |
(1) Includes employee stock compensation
expense of 59 crore for the three months ended March 31, 2019 and an employee stock compensation cost of
202 crore,
for the year ended March 31, 2019. Similarly, includes employee stock compensation expense of
26 crore and
84 crore
for the three months and year ended March 31, 2018 respectively.
(2) Included in the above is a
reversal of stock compensation cost of 35 crore recorded during the three months ended December 31, 2017 towards forfeiture
of stock incentives granted to Dr. Vishal Sikka upon his resignation. Refer note no. 2.11.
2.21 RECONCILIATION OF BASIC AND DILUTED SHARES USED IN COMPUTING EARNINGS PER SHARE
Accounting policy
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 at 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.
The following is a reconciliation of the equity shares used in the computation of basic and diluted earnings per equity share:
Particulars | Three months ended March 31, | Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Basic earnings per equity share - weighted average number of equity shares outstanding(1) | 4,347,129,592 | 4,346,554,120 | 4,347,130,157 | 4,510,664,644 |
Effect of dilutive common equivalent shares - share options outstanding | 5,894,271 | 3,062,904 | 6,290,615 | 4,483,096 |
Diluted earnings per equity share - weighted average number of equity shares and common equivalent shares outstanding | 435,30,23,863 | 434,96,17,024 | 435,34,20,772 | 451,51,47,740 |
Information in the table above is adjusted for September 2018 bonus issue (Refer note no 2.11)
(1)Excludes treasury shares
For the three months ended March 31, 2019 and
March 31, 2018, Nil and 2,96,798 (adjusted for September 2018 bonus issue) number of option to purchase equity shares had an anti-dilutive
effect, respectively.
For the year ended March 31, 2019 and March 31, 2018, Nil and 3,10,372 (adjusted for September 2018 bonus issue) number of options
to purchase equity shares had an anti-dilutive effect respectively.
2.22 CONTINGENT LIABILITIES AND COMMITMENTS (TO THE EXTENT NOT PROVIDED FOR)
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Contingent liabilities : | ||
Claims against the Company, not acknowledged as debts(1) | 3,081 | 4,802 |
[Amount paid to statutory authorities ![]() ![]() |
||
Commitments : | ||
Estimated amount of contracts remaining to be executed on capital contracts and not provided for (net of advances and deposits) | 1,724 | 1,452 |
Other commitments* | 86 | 81 |
*Uncalled capital pertaining to investments
(1) As at March 31, 2019, claims
against the Group not acknowledged as debts in respect of income tax matters amounted to 2,851 crore. These matters are
pending before various Appellate Authorities and the management including its tax advisors expect that its position will likely
be upheld on ultimate resolution and will not have a material adverse effect on the Group's financial position and results of operations.
Amount paid to statutory authorities against
the above tax claims amounted to 5,924 crore.
Subsequent to March 31, 2018, the Supreme Court of India ruled favorably in respect of certain income tax claims which have been given effect in the above disclosure of claims as at March 31, 2019.
The Group is subject to legal proceedings and claims, which have arisen in the ordinary course of business. The Group’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.
2.23 RELATED PARTY TRANSACTIONS
List of related parties:
Name of subsidiaries | Country | Holdings as at | |
March 31, 2019 | March 31, 2018 | ||
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 Nova Holdings LLC. (Infosys Nova) | U.S. | 100% | 100% |
EdgeVerve Systems Limited (EdgeVerve) | India | 100% | 100% |
Infosys Austria GmbH(1) (formerly Lodestone Management Consultants GmbH) | Austria | 100% | 100% |
Skava Systems Pvt. Ltd. (Skava Systems) | India | 100% | 100% |
Kallidus Inc. (Kallidus) | U.S. | 100% | 100% |
Infosys Chile SpA(2) | Chile | 100% | 100% |
Infosys Arabia Limited(3) | Saudi Arabia | 70% | 70% |
Infosys Consulting Ltda.(3) | Brazil | 99.99% | 99.99% |
Infosys CIS LLC(1)(22) | Russia | – | – |
Infosys Luxembourg S.a.r.l (1)(17) | Luxembourg | 100% | – |
Infosys Americas Inc., (Infosys Americas) | U.S. | 100% | 100% |
Infosys Technologies (Australia) Pty. Limited (Infosys Australia)(4) | Australia | 100% | 100% |
Infosys Public Services, Inc. USA (Infosys Public Services) | U.S. | 100% | 100% |
Infosys Canada Public Services Inc(23) | Canada | – | – |
Infosys Canada Public Services Ltd(24) | Canada | – | – |
Infosys BPM Limited (formerly Infosys BPO Limited) | India | 99.98% | 99.98% |
Infosys (Czech Republic) Limited s.r.o.(5) | Czech Republic | 99.98% | 99.98% |
Infosys Poland, Sp z.o.o(5) | Poland | 99.98% | 99.98% |
Infosys McCamish Systems LLC (5) | U.S. | 99.98% | 99.98% |
Portland Group Pty Ltd(5) | Australia | 99.98% | 99.98% |
Infosys BPO Americas LLC.(5) | U.S. | 99.98% | 99.98% |
Infosys Consulting Holding AG (Infosys Lodestone) | Switzerland | 100% | 100% |
Lodestone Management Consultants Inc.(6)(15) | U.S. | – | 100% |
Infosys Management Consulting Pty Limited(6) | Australia | 100% | 100% |
Infosys Consulting AG(6) | Switzerland | 100% | 100% |
Infosys Consulting GmbH(6) | Germany | 100% | 100% |
Infosys Consulting SAS(6) | France | 100% | 100% |
Infosys Consulting s.r.o.(6) | Czech Republic | 100% | 100% |
Infosys Consulting (Shanghai) Co., Ltd.(formerly Lodestone Management Consultants Co., Ltd)(6) | China | 100% | 100% |
Infy Consulting Company Ltd(6) | U.K. | 100% | 100% |
Infy Consulting B.V.(6) | The Netherlands | 100% | 100% |
Infosys Consulting Sp. z.o.o(6) | Poland | 100% | 100% |
Lodestone Management Consultants Portugal, Unipessoal, Lda. (6) | Portugal | 100% | 100% |
S.C. Infosys Consulting S.R.L.(1) | Romania | 100% | 100% |
Infosys Consulting S.R.L.(6) | Argentina | 100% | 100% |
Infosys Consulting (Belgium) NV (formerly Lodestone Management Consultants (Belgium) S.A.)(7) | Belgium | 99.90% | 99.90% |
Panaya Inc. (Panaya) | U.S. | 100% | 100% |
Panaya Ltd.(8) | Israel | 100% | 100% |
Panaya GmbH(8) | Germany | 100% | 100% |
Panaya Japan Co. Ltd(4)(8) | Japan | 100% | 100% |
Noah Consulting LLC (Noah)(9) | U.S. | – | – |
Noah Information Management Consulting Inc. (Noah Canada)(10) | Canada | – | – |
Brilliant Basics Holdings Limited (Brilliant Basics)(11) | U.K. | 100% | 100% |
Brilliant Basics Limited(12) | U.K. | 100% | 100% |
Brilliant Basics (MENA) DMCC(12) | Dubai | 100% | 100% |
Infosys Consulting Pte Limited (Infosys Singapore)(1) | Singapore | 100% | 100% |
Infosys Middle East FZ LLC(13) | Dubai | 100% | 100% |
Fluido Oy(13)(18) | Finland | 100% | – |
Fluido Sweden AB (Extero)(19) | Sweden | 100% | – |
Fluido Norway A/S(19) | Norway | 100% | – |
Fluido Denmark A/S(19) | Denmark | 100% | – |
Fluido Slovakia s.r.o(19) | Slovakia | 100% | – |
Fluido Newco AB(19) | Sweden | 100% | – |
Infosys Compaz PTE. Ltd (formerly Trusted Source Pte. Ltd) (13)(20) | Singapore | 60% | – |
Infosys South Africa (Pty) Ltd(13)(21) | South Africa | – | – |
WongDoody Holding Company Inc. (WongDoody) (14) | U.S. | 100% | – |
WDW Communications, Inc(16) | U.S. | 100% | – |
WongDoody, Inc(16) | U.S. | 100% | – |
(1) Wholly-owned subsidiary of Infosys Limited
(2) Incorporated effective November 20, 2017
(3) Majority owned and controlled subsidiary of Infosys Limited
(4) Under liquidation
(5) Wholly owned subsidiary of Infosys BPM
(6) Wholly owned subsidiaries of Infosys Consulting Holding AG (formerly Lodestone Holding AG)
(7) Majority owned and controlled subsidiaries of Infosys Consulting Holding AG (formerly Lodestone Holding AG)
(8) Wholly owned subsidiary of Panaya Inc.
(9) Liquidated effective November 9, 2017
(10) Wholly owned subsidiary of Noah. Liquidated effective December 20, 2017
(11) On September 8, 2017, Infosys acquired 100% of the voting interests in Brilliant Basics Holding Limited
(12) Wholly-owned subsidiary of Brilliant Basics Holding Limited.
(13) Wholly-owned subsidiary of Infosys Consulting Pte Ltd
(14) On May 22, 2018, Infosys acquired 100% of the voting interest in WongDoody
(15) Liquidated effective May 17, 2018
(16) Wholly-owned subsidiary of WongDoody
(17) Incorporated effective August 6, 2018
(18)On October 11, 2018, Infosys Consulting Pte. Ltd, acquired 100% of the voting interests in Fluido Oy and its subsidiaries
(19)Wholly-owned subsidiary of Fluido Oy
(20)On November 16, 2018 , Infosys Consulting Pte. Ltd, acquired 60% of the voting interest in Infosys Compaz Pte. Ltd
(21) Incorporated effective December 19,2018
(22)Incorporated effective November 29, 2018
(23)Incorporated effective November 27, 2018, wholly owned subsidiary Infosys Public Services Inc
(24)Liquidated effective May 9, 2017, wholly owned subsidiary Infosys Public Services Inc
Infosys has provided guarantee for performance of certain contracts entered into by its subsidiaries.
Associate
During the year ended March 31, 2018, the Company
has written down the entire carrying value of the investment in its associate DWA Nova LLC amounting to 71 crore. DWA Nova
LLC has been liquidated w.e.f November 17, 2017
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 BPM Limited Employees' Superannuation Fund Trust (formerly Infosys BPO Limited Employees Superannuation Fund Trust) | India | Post-employment benefit plan of Infosys BPM |
Infosys BPM Limited Employees' Gratuity Fund Trust (formerly Infosys BPO Limited Employees' Gratuity Fund Trust) | India | Post-employment benefit plan of Infosys BPM |
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 Employees Welfare Trust | India | Controlled trust |
Infosys Employee Benefits Trust | India | Controlled trust |
Infosys Science Foundation | India | Controlled trust |
Refer note no. 2.20 for information on transactions with post-employment benefit plans mentioned above.
List of key management personnel
Whole-time directors
Salil Parekh appointed as Chief Executive Officer and Managing Director effective January 2, 2018. The appointment is for a term of 5 years with effect from January 2, 2018 to January 1, 2023 and the remuneration is approved by shareholders through postal ballot dated February 20, 2018.
U. B. Pravin Rao, Chief Operating officer appointed as Interim-Chief Executive Officer and Managing Director effective August 18, 2017. Subsequently he stepped down as the interim CEO and Managing Director effective January 2, 2018 and continues as Chief Operating Officer and a whole-time director of the Company.
Dr. Vishal Sikka resigned as Chief Executive Officer and Managing Director effective August 18, 2017 and as Executive Vice Chairman effective August 24, 2017
Non-whole-time directors
Nandan M. Nilekani (appointed as Non-Executive, Non-Independent Chairman effective August 24, 2017)
Micheal Gibbs (appointed as Independent director effective July 13, 2018)
Ravi Venkatesan (resigned from his position as Co-Chairman effective August 24, 2017 and resigned as member of the Board effective May 11, 2018)
Kiran Mazumdar-Shaw
Roopa Kudva
Dr. Punita Kumar-Sinha
D. N. Prahlad
D. Sundaram (appointed effective July 14, 2017)
Prof. Jeffrey Lehman, (resigned effective August 24, 2017)
R. Seshasayee (resigned effective August 24, 2017)
Prof. John Etchemendy (resigned effective August 24, 2017)
Executive Officers
Nilanjan Roy (appointed as Chief Financial Officer effective March 1, 2019)
Jayesh Sanghrajka (appointed as Interim-Chief Financial Officer effective November 17, 2018. He resumed his responsibilities as Deputy Chief Financial Officer effective March 1, 2019)
M.D. Ranganath (resigned as Chief Financial Officer effective November 16, 2018)
Mohit Joshi, President
Rajesh K. Murthy, President (appointed effective October 13, 2016 and resigned effective January 31, 2018)
Ravi Kumar S, President and Deputy Chief Operating Officer
Sandeep Dadlani, President (resigned effective July 14, 2017)
Krishnamurthy Shankar, Group Head - Human Resources
Gopi Krishnan Radhakrishnan - Acting General Counsel (resigned effective June 24, 2017)
Inderpreet Sawhney, Group General Counsel and Chief Compliance Officer (appointed as executive officer effective July 14, 2017)
Company Secretary
A. | G. S. Manikantha |
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 March 31, | Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | |
Salaries and other employee benefits to whole-time directors and executive officers (1) (2)(3)(4)(5) | 29 | 19 | 96 | 48 |
Commission and other benefits to non-executive/independent directors | 2 | 2 | 8 | 10 |
Total | 31 | 21 | 104 | 58 |
(1) | Total employee stock compensation expense for the three months ended March 31,
2019 and March 31, 2018 includes a cost of ![]() ![]() ![]() ![]() |
(2) | Includes reversal of stock compensation cost of ![]() |
(3) | On December 20, 2018, the Board appointed Nilanjan Roy as the Chief Financial Officer of the Company with effect from March 1, 2019. |
(4) | On December 2, 2017, the Board appointed Salil Parekh as the Chief Executive Officer and Managing Director of the Company with effect from January 2, 2018. |
(5) | On June 16, 2017, the Board appointed Inderpreet Sawhney as the Group General Counsel and Chief Compliance Officer of the Company with effect from July 3, 2017; The Board in their meeting held on July 14, 2017 designated her as an Executive Officer with effect from the date of the meeting. |
2.24 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.
During the three months ended June 30, 2018, the Group internally reorganized some of its business segments to deepen customer relationships, improve focus of sales investments and increase management oversight. Consequent to the internal reorganization, there were changes in the reportable business segments based on “Management approach” as defined under Ind AS 108, Operating Segments. Therefore, enterprises in Insurance which was earlier considered under the Life Sciences, Healthcare and Insurance business segment are now considered under the Financial Services business segment and enterprises in Communication, Telecom OEM and Media which was earlier under Energy & Utilities, Communication and Services is now shown as a separate business segment. Segmental operating income has changed in line with these as well as changes in the allocation method. The CODM evaluates the Group's performance and allocates resources based on an analysis of various performance indicators by business segments. Accordingly, information has been presented along business 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 accounting policies.
Business segments of the Group are primarily enterprises in Financial Services and Insurance, enterprises in Manufacturing, enterprises in Retail, Consumer Packaged Goods and Logistics, enterprises in the Energy, Utilities, Resources and Services, enterprises in Communication, Telecom OEM and Media, enterprises in Hi-Tech, enterprises in Life Sciences and Healthcare and all other segments. The Financial services reportable segments has been aggregated to include the Financial Services operating segment and Finacle operating segment because of the similarity of the economic characteristics. All other segments represent the operating segments of businesses in India, Japan, China, Infosys Public Services & other enterprises in Public Services. Consequent to the above change in the composition of reportable business segments, the prior year comparatives for three months and year ended March 31, 2018 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 Infosys Public services and revenue generated from customers located in India, Japan and China and other enterprises in Public services. 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 efforts 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. The 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. The 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.
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 March 31, 2019 and March 31, 2018:
(In crore)
Particulars | Financial Services | Retail | Communication | Energy, Utilities, Resources and Services | Manufacturing | Hi-Tech | Life Sciences | All other segments | Total |
Revenue from operations | 6,805 | 3,416 | 2,921 | 2,747 | 2,161 | 1,650 | 1,287 | 552 | 21,539 |
5,886 | 2,879 | 2,334 | 2,172 | 1,735 | 1,335 | 1,213 | 529 | 18,083 | |
Identifiable operating expenses | 3,614 | 1,705 | 1,731 | 1,500 | 1,190 | 984 | 694 | 348 | 11,766 |
3,077 | 1,447 | 1,170 | 1,116 | 1,022 | 709 | 638 | 324 | 9,503 | |
Allocated expenses | 1,470 | 694 | 612 | 613 | 500 | 290 | 270 | 167 | 4,616 |
1,171 | 598 | 467 | 421 | 371 | 234 | 227 | 163 | 3,652 | |
Segmental operating income | 1,721 | 1,017 | 578 | 634 | 471 | 376 | 323 | 37 | 5,157 |
1,638 | 834 | 697 | 635 | 342 | 392 | 348 | 42 | 4,928 | |
Unallocable expenses | 539 | ||||||||
456 | |||||||||
Other income, net | 665 | ||||||||
652 | |||||||||
Reduction in the fair value of Disposal Group held for sale (Refer to note 2.1.2) | – | ||||||||
118 | |||||||||
Profit before tax | 5,283 | ||||||||
5,006 | |||||||||
Tax expense | 1,205 | ||||||||
1,316 | |||||||||
Profit for the period | 4,078 | ||||||||
3,690 | |||||||||
Depreciation and amortization expense | 531 | ||||||||
458 | |||||||||
Non-cash expenses other than depreciation and amortization | 8 | ||||||||
116 |
Year ended March 31, 2019 and March 31, 2018:
(In crore)
Particulars | Financial Services | Retail | Communication | Energy, Utilities, Resources and Services | Manufacturing | Hi-Tech | Life Sciences | All other segments | Total |
Revenue from operations | 26,477 | 13,556 | 10,426 | 10,390 | 8,152 | 6,177 | 5,203 | 2,294 | 82,675 |
23,172 | 11,345 | 8,883 | 8,297 | 6,671 | 5,131 | 4,698 | 2,325 | 70,522 | |
Identifiable operating expenses | 14,164 | 6,823 | 5,720 | 5,661 | 4,513 | 3,546 | 2,756 | 1,415 | 44,598 |
12,107 | 5,668 | 4,527 | 4,204 | 3,881 | 2,774 | 2,447 | 1,342 | 36,950 | |
Allocated expenses | 5,435 | 2,699 | 2,189 | 2,187 | 1,786 | 1,083 | 1,028 | 763 | 17,170 |
4,695 | 2,374 | 1,737 | 1,682 | 1,516 | 911 | 860 | 784 | 14,559 | |
Segmental operating income | 6,878 | 4,034 | 2,517 | 2,542 | 1,853 | 1,548 | 1,419 | 116 | 20,907 |
6,370 | 3,303 | 2,619 | 2,411 | 1,274 | 1,446 | 1,391 | 199 | 19,013 | |
Unallocable expenses | 2,027 | ||||||||
1,865 | |||||||||
Other income, net | 2,882 | ||||||||
3,311 | |||||||||
Reduction in the fair value of Disposal Group held for sale (Refer to note 2.1.2) | (270) | ||||||||
(118) | |||||||||
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" (Refer to note 2.1.2) | (451) | ||||||||
– | |||||||||
Share in net profit/(loss) of associate, including impairment | – | ||||||||
(71) | |||||||||
Profit before tax | 21,041 | ||||||||
20,270 | |||||||||
Tax expense | 5,631 | ||||||||
4,241 | |||||||||
Profit for the period | 15,410 | ||||||||
16,029 | |||||||||
Depreciation and amortization expense | 2,011 | ||||||||
1,863 | |||||||||
Non-cash expenses other than depreciation and amortization | 740 | ||||||||
191 |
2.14.2 The following table sets forth our revenue by geography for the three months ended March 31, 2019 and March 31, 2018
(In crore)
North America | Europe | India | Rest of the World | Total | |
2019 | 13,193 | 5,167 | 493 | 2,686 | 21,539 |
2018 | 10,741 | 4,485 | 513 | 2,344 | 18,083 |
2.14.3 The following table sets forth our revenue by geography for the year ended March 31, 2019 and March 31, 2018
(In crore)
North America | Europe | India | Rest of the World | Total | |
2019 | 50,038 | 19,942 | 2,048 | 10,647 | 82,675 |
2018 | 42,575 | 16,738 | 2,231 | 8,978 | 70,522 |
Significant clients
No client individually accounted for more than 10% of the revenues in the three months and year ended March 31, 2019 and March 31, 2018.
2.25 FUNCTION WISE CLASSIFICATION OF CONSOLIDATED STATEMENT OF PROFIT AND LOSS
(In crore)
Particulars | Note no | Three months ended March 31, | Year ended March 31, | ||
2019 | 2018 | 2019 | 2018 | ||
Revenue from operations | 2.16 | 21,539 | 18,083 | 82,675 | 70,522 |
Cost of Sales | 14,283 | 11,554 | 53,867 | 45,130 | |
Gross profit | 7,256 | 6,529 | 28,808 | 25,392 | |
Operating expenses | |||||
Selling and marketing expenses | 1,226 | 947 | 4,473 | 3,560 | |
General and administration expenses | 1,412 | 1,110 | 5,455 | 4,684 | |
Total operating expenses | 2,638 | 2,057 | 9,928 | 8,244 | |
Operating profit | 4,618 | 4,472 | 18,880 | 17,148 | |
Reduction in the fair value of Disposal Group held for sale | 2.1.2 | – | (118) | (270) | (118) |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" | 2.1.2 | – | – | (451) | – |
Other income, net | 2.17 and 2.1.2 | 665 | 652 | 2,882 | 3,311 |
Profit before non controlling interest / Share in net profit / (loss) of associate | 5,283 | 5,006 | 21,041 | 20,341 | |
Share in net profit/(loss) of associate, including impairment | 2.23 | – | – | – | (71) |
Profit before tax | 5,283 | 5,006 | 21,041 | 20,270 | |
Tax expense: | |||||
Current tax | 1,193 | 1,466 | 5,727 | 4,581 | |
Deferred tax | 12 | (150) | (96) | (340) | |
Profit for the period | 4,078 | 3,690 | 15,410 | 16,029 | |
Other comprehensive income | |||||
Items that will not be reclassified subsequently to profit or loss | |||||
Remeasurement of the net defined benefit liability/asset | 2.20 and 2.15 | (3) | 34 | (22) | 55 |
Equity instruments through other comprehensive income, net | 2.4 and 2.15 | 1 | 9 | 70 | 7 |
(2) | 43 | 48 | 62 | ||
Items that will be reclassified subsequently to profit or loss | |||||
Fair value changes on derivatives designated as cash flow hedge, net | 2.10 and 2.15 | (15) | 2 | 21 | (39) |
Exchange differences on translation of foreign operations, net | (70) | 200 | 63 | 321 | |
Fair value changes on investments, net | 2.4 and 2.15 | 25 | (15) | 2 | (1) |
(60) | 187 | 86 | 281 | ||
Total other comprehensive income / (loss), net of tax | (62) | 230 | 134 | 343 | |
Total comprehensive income for the period | 4,016 | 3,920 | 15,544 | 16,372 | |
Profit attributable to: | |||||
Owners of the Company | 4,074 | 3,690 | 15,404 | 16,029 | |
Non-controlling interests | 4 | – | 6 | – | |
4,078 | 3,690 | 15,410 | 16,029 | ||
Total comprehensive income attributable to: | |||||
Owners of the Company | 4,012 | 3,920 | 15,538 | 16,372 | |
Non-controlling interests | 4 | – | 6 | – | |
4,016 | 3,920 | 15,544 | 16,372 |
for and on behalf of the Board of Directors of Infosys Limited | ||
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
D. Sundaram Director |
Nilanjan Roy Chief Financial Officer |
A. G. S. Manikantha Company Secretary |
Bengaluru April 12, 2019 |
INdependent Auditor’s Report on audit of consolidated financial results
To The Board of Directors of Infosys Limited
1. | We have audited the accompanying Statement of Consolidated Financial Results of INFOSYS LIMITED (“the Company”) and its subsidiaries (the Company and its subsidiaries together referred to as “the Group”) for the quarter and year ended March 31, 2019 (“the Statement”), being submitted by the Company pursuant to the requirement of Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 as modified by Circular No. CIR/CFD/FAC/62/2016 dated July 5, 2016. |
2. | This Statement is the responsibility of the Company’s Management and is approved by the Board of Directors. The Statement, as it relates to the quarter ended March 31, 2019, has been compiled from the related interim consolidated financial statements prepared in accordance with Indian Accounting Standard 34 “Interim Financial Reporting” (Ind AS 34) and is at relates to the year ended March 31, 2019 , has been compiled from the related annual consolidated financial statements prepared in accordance with Indian Accounting Standards, prescribed under Section 133 of the Companies Act, 2013, read with relevant rules issued thereunder and other accounting principles generally accepted in India. Our responsibility is to express an opinion on the Statement based on our audit of such interim consolidated financial statements and annual consolidated financial statements. |
3. | 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 Statement is free from material misstatement. |
An audit involves performing procedures to obtain audit evidence about the amounts and the disclosures in the Statement. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the Statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal financial controls relevant to the Company’s preparation and fair presentation of the Statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal financial controls. An audit also includes evaluating the appropriateness of the accounting policies used and the reasonableness of the accounting estimates made by the Management, as well as evaluating the overall presentation of the Statement.
We believe that the audit evidence obtained by us, is sufficient and appropriate to provide a basis for our audit opinion.
4. | In our opinion and to the best of our information and according to the explanations given to us, the Statement: |
a. | includes the results of the subsidiaries as given in the Annexure to this report; |
b. | is presented in accordance with the requirements of Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as modified by Circular No. CIR\CFD\FAC\62\2016 dated July 5, 2016; and | |
c. | gives a true and fair view in conformity with the aforesaid Indian Accounting Standards and other accounting principles generally accepted in India of the consolidated profit and total comprehensive income for the period and other financial information of the Group for the quarter and year ended March 31, 2019. |
For DELOITTE HASKINS & SELLS LLP
Chartered Accountants
(Firm Registration No. 117366W/W-100018)
P. r. ramesh
Partner
Bengaluru, April 12, 2019 | (Membership No. 70928) |
Annexure to Auditors’ Report
List of Subsidiaries;
1. | Infosys BPM Limited |
2. | Infosys Technologies (China) Co. Limited |
3. | Infosys Technologies S. de R. L. de C. V. |
4. | Infosys Technologies (Sweden) AB. |
5. | Infosys Technologies (Shanghai) Company Limited |
6. | Infosys Technologia DO Brasil LTDA. |
7. | Infosys Public Services, Inc. |
8. | Infosys Americas Inc., |
9. | Infosys (Czech Republic) Limited s.r.o. |
10. | Infosys Poland Sp z.o.o |
11. | Infosys McCamish Systems LLC |
12. | Portland Group Pty Ltd |
13. | Infosys BPO Americas LLC. |
14. | Infosys Technologies (Australia) Pty. Limited |
15. | EdgeVerve Systems Limited |
16. | Infosys Consulting Holding AG |
17. | Lodestone Management Consultants Inc. (Liquidated on May 17, 2018) |
18. | Lodestone Management Consultants Co., Ltd |
19. | Infosys Management Consulting Pty Limited |
20. | Infosys Consulting AG |
21. | Infosys Consulting (Belgium) NV |
22. | Infosys Consulting GmbH |
23. | Infosys Consulting Pte Ltd. |
24. | Infosys Consulting SAS |
25. | Infosys Consulting s.r.o. |
26. | Infosys Austria GmbH. |
27. | Infy Consulting Company Limited |
28. | Infy Consulting B.V. |
29. | Infosys Consulting Ltda. |
30. | Infosys Consulting Sp. Z.o.o. |
31. | Lodestone Management Consultants Portugal,Unipessoal, Lda |
32. | S.C. Infosys Consulting S.R.L. |
33. | Infosys Consulting S.R.L. |
34. | Infosys Nova Holdings LLC. |
35. | Panaya Inc. |
36. | Panaya Limited. |
37. | Panaya GmbH |
38. | Panaya Japan Co. Ltd. |
39. | Skava Systems Pvt. Ltd. |
40. | Kallidus Inc. |
41. | Infosys Chile SpA |
42. | Brilliant Basics Holdings Limited |
43. | Brilliant Basics Limited |
44. | Brilliant Basics (MENA) DMCC |
45. | Infosys Arabia Limited |
46. | Infosys Middle East FZ LLC |
47. | Infosys Science Foundation |
Annexure to Auditors’ Report
List of Subsidiaries;
48. | Infosys Employees’Welfare Trust |
49. | Infosys Employee Benefits Trust |
50. | Wong Doody Holding Company Inc.(Acquired on May 22, 2018) |
51. | WDW Communications Inc. (Acquired on May 22, 2018) |
52. | Wongdoody Inc. (Acquired on May 22, 2018) |
53. | Infosys Luxembourg SARL (Incorporated on August 6, 2018) |
54. | Infosys CIS LLC (Incorporated on November 29, 2018) |
55. | Infosys Canada Public Services Inc. ( Incorporated on November 27, 2018) |
56. | Fluido Oy (Acquired on October 11, 2018) |
57. | Fluido Sweden AB (Extero) (Acquired on October 11, 2018) |
58. | Fluido Norway A/S (Acquired on October 11, 2018) |
59. | Fluido Denmark A/S (Acquired on October 11, 2018) |
60. | Fluido Slovakia s. r. o (Acquired on October 11, 2018) |
61. | Fluido Newco AB (Acquired on October 11, 2018) |
62. | Infosys Compaz PTE. Ltd (formerly Trusted Source Pte. Ltd) (Acquired on November 16, 2018) |
63. | Infosys South Africa (Pty) Ltd (Incorporated on December 19, 2018) |
INDEPENDENT AUDITOR’S REPORT
TO THE MEMBERS OF INFOSYS LIMITED
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the accompanying consolidated financial statements of Infosys Limited (“the Company”) and its subsidiaries (the Company and its subsidiaries together referred to as “the Group”), which comprise the Consolidated Balance Sheet as at March 31, 2019, the Consolidated Statement of Profit and Loss (including Other Comprehensive Income), the Consolidated Statement of Changes in Equity and the Consolidated Statement of Cash Flows for the year ended on that date, and a summary of the significant accounting policies and other explanatory information (hereinafter referred to as “the consolidated financial statements”).
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid consolidated financial statements give the information required by the Companies Act, 2013 (the “Act”) in the manner so required and give a true and fair view in conformity with Indian Accounting Standards prescribed under section 133 of the Act read with the Companies (Indian Accounting Standards) Rules, 2015, as amended (“Ind AS”) and other accounting principles generally accepted in India, of the consolidated state of affairs of the Group as at March 31, 2019, the consolidated profit, consolidated total comprehensive income, consolidated changes in equity and its consolidated cash flows for the year ended on that date.
Basis for Opinion
We conducted our audit of the consolidated financial statements in accordance with the Standards on Auditing (SAs) specified under section 143(10) of the Act (SAs). Our responsibilities under those Standards are further described in the Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Group in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (ICAI) together with the independence requirements that are relevant to our audit of the consolidated financial statements under the provisions of the Act and the Rules made thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI’s Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the consolidated financial statements.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be the key audit matters to be communicated in our report.
Sr. No. | Key Audit Matter | Auditor’s Response |
1 |
Accuracy of recognition, measurement,
presentation and disclosures of revenues and other related balances in view of adoption of Ind AS 115 “Revenue from Contracts with
Customers” (new revenue accounting
standard)
The application of the new revenue accounting standard involves certain key judgements relating to identification of distinct performance obligations, determination of transaction price of the identified performance obligations, the appropriateness of the basis used to measure revenue recognised over a period. Additionally, new revenue accounting standard contains disclosures which involves collation of information in respect of disaggregated revenue and periods over which the remaining performance obligations will be satisfied subsequent to the balance sheet date.
Refer Notes 1.5a and 2.16 to the Consolidated Financial Statements |
Principal Audit Procedures
We assessed the Group’s process to identify the impact of adoption of the new revenue accounting standard.
Our audit approach consisted testing of the design and operating effectiveness of the internal controls and substantive testing as follows:
· Evaluated the design of internal controls relating to implementation of the new revenue accounting standard.
· Selected a sample of continuing and new contracts, and tested the operating effectiveness of the internal control, relating to identification of the distinct performance obligations and determination of transaction price. We carried out a combination of procedures involving enquiry and observation, reperformance and inspection of evidence in respect of operation of these controls.
· Tested the relevant information technology systems’ access and change management controls relating to contracts and related information used in recording and disclosing revenue in accordance with the new revenue accounting standard.
· Selected a sample of continuing and new contracts and performed the following procedures:
• Read, analysed and identified the distinct performance obligations in these contracts.
• Compared these performance obligations with that identified and recorded by the Group.
• Considered the terms of the contracts to determine the transaction price including any variable consideration to verify the transaction price used to compute revenue and to test the basis of estimation of the variable consideration.
• Samples in respect of revenue recorded for time and material contracts were tested using a combination of approved time sheets including customer acceptances, subsequent invoicing and historical trend of collections and disputes.
• In respect of samples relating to fixed price contracts, progress towards satisfaction of performance obligation used to compute recorded revenue was verified with actual and estimated efforts from the time recording and budgeting systems. We also tested the access and change management controls relating to these systems.
• Sample of revenues disaggregated by type and service offerings was tested with the performance obligations specified in the underlying contracts.
• Performed analytical procedures for reasonableness of revenues disclosed by type and service offerings.
• We reviewed the collation of information and the logic of the report generated from the budgeting system used to prepare the disclosure relating to the periods over which the remaining performance obligations will be satisfied subsequent to the balance sheet date.
|
2 |
Accuracy of revenues and onerous obligations in respect of fixed price contracts involves critical estimates
Estimated effort is a critical estimate to determine revenues and liability for onerous obligations. This estimate has a high inherent uncertainty as it requires consideration of progress of the contract, efforts incurred till date and efforts required to complete the remaining contract performance obligations.
Refer Notes 1.5a and 2.16 to the Consolidated Financial Statements. |
Principal Audit Procedures
Our audit approach was a combination of test of internal controls and substantive procedures which included the following:
· Evaluated the design of internal controls relating to recording of efforts incurred and estimation of efforts required to complete the performance obligations.
· Tested the access and application controls pertaining to time recording, allocation and budgeting systems which prevents unauthorised changes to recording of efforts incurred.
· Selected a sample of contracts and through inspection of evidence of performance of these controls, tested the operating effectiveness of the internal controls relating to efforts incurred and estimated.
· Selected a sample of contracts and performed a retrospective review of efforts incurred with estimated efforts to identify significant variations and verify whether those variations have been considered in estimating the remaining efforts to complete the contract.
· Reviewed a sample of contracts with unbilled revenues to identify possible delays in achieving milestones, which require change in estimated efforts to complete the remaining performance obligations.
· Performed analytical procedures and test of details for reasonableness of incurred and estimated efforts.
|
3 |
Evaluation of uncertain tax positions
The Group has material uncertain tax positions including matters under dispute which involves significant judgment to determine the possible outcome of these disputes.
Refer Notes 1.5b and 2.22 to the Consolidated Financial Statements |
Principal Audit Procedures
Obtained details of completed tax assessments and demands for the year ended March 31, 2019 from management. We involved our internal experts to challenge the management’s underlying assumptions in estimating the tax provision and the possible outcome of the disputes. Our internal experts also considered legal precedence and other rulings in evaluating management’s position on these uncertain tax positions. Additionally, we considered the effect of new information in respect of uncertain tax positions as at April 1, 2018 to evaluate whether any change was required to management’s position on these uncertainties.
|
4 |
Recoverability of Indirect tax receivables
As at March 31, 2019, non-current assets in
respect of withholding tax and others includes Cenvat recoverable amounting to
Refer Note 2.9 to the Consolidated Financial Statements.
|
Principal Audit Procedures
We have involved our internal experts to review the nature of the amounts recoverable, the sustainability and the likelihood of recoverability upon final resolution. |
Information Other than the Consolidated Financial Statements and Auditor’s Report Thereon
The Company’s Board of Directors is responsible for the preparation of the other information. The other information comprises the information included in the Management Discussion and Analysis, Board’s Report including Annexures to Board’s Report, Business Responsibility Report, Corporate Governance and Shareholder’s Information, but does not include the consolidated financial statements and our auditor’s report thereon
Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained during the course of our audit or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Management’s Responsibility for the Consolidated Financial Statements
The Company’s Board of Directors is responsible for the matters stated in section 134(5) of the Act with respect to preparation of these consolidated financial statements that give a true and fair view of the consolidated financial position, consolidated financial performance, consolidated total comprehensive income, consolidated changes in equity and consolidated cash flows of the Group in accordance with the Ind AS and other accounting principles generally accepted in India . The respective Board of Directors of the companies included in the Group are responsible for maintenance of the adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Group and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the consolidated financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error..
In preparing the consolidated financial statements, the respective Board of Directors of the companies included in the Group are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
The respective Board of Directors of the companies included in the Group are also responsible for overseeing the financial reporting process of the Group.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
· | Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. |
· | Obtain an understanding of internal financial controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances. Under section 143(3)(i) of the Act, we are also responsible for expressing our opinion on whether the Company and its subsidiary companies which are companies incorporated in India, has adequate internal financial controls system in place and the operating effectiveness of such controls. |
· | Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. |
· | Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the ability of the Group to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. |
· | Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation. |
· | Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the audit of the financial statements of such entities included in the consolidated financial statements. |
Materiality is the magnitude of misstatements in the consolidated financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the financial statements.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
1. | As required by Section 143(3) of the Act, based on our audit we report that: |
a) | We have sought and obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit of the aforesaid consolidated financial statements. |
b) | In our opinion, proper books of account as required by law relating to preparation of the aforesaid consolidated financial statements have been kept so far as it appears from our examination of those books. |
c) | The Consolidated Balance Sheet, the Consolidated Statement of Profit and Loss including (including Other Comprehensive Income), Consolidated Statement of Changes in Equity and the Consolidated Statement of Cash Flows dealt with by this Report are in agreement with the relevant books of account maintained for the purpose of preparation of the consolidated financial statements. |
d) | In our opinion, the aforesaid consolidated financial statements comply with the Ind AS specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014. |
e) | On the basis of the written representations received from the directors of the Company as on March 31, 2019 taken on record by the Board of Directors of the Company and its subsidiaries incorporated in India and the reports of the statutory auditors of its subsidiary companies incorporated in India, none of the directors of the Group companies incorporated in India is disqualified as on March 31, 2019 from being appointed as a director in terms of Section 164 (2) of the Act. |
f) | With respect to the adequacy of the internal financial controls over financial reporting and the operating effectiveness of such controls, refer to our separate Report in “Annexure A” which is based on the auditor’s reports of the Company and its subsidiary companies incorporated in India. Our report expresses an unmodified opinion on the adequacy and operating effectiveness of the internal financial control over financial reporting of those companies, for reasons stated therein. |
g) | With respect to the other matters to be included in the Auditor’s Report in accordance with the requirements of section 197(16) of the Act, as amended: |
In our opinion and to the best of our information and according to the explanations given to us, the remuneration paid by the Company to its directors during the year is in accordance with the provisions of section 197 of the Act.
h) | With respect to the other matters to be included in the Auditor’s Report in accordance with Rule 11 of the Companies (Audit and Auditors) Rules, 2014, as amended in our opinion and to the best of our information and according to the explanations given to us: |
i. | The consolidated financial statements disclose impact of pending litigations on the consolidated financial position of the Group. |
ii. | Provision has been made in the consolidated financial statements, as required under the applicable law or accounting standards, for material foreseeable losses, if any, on long term contracts including derivative contracts. |
iii. | There has been no delay in transferring amounts, required to be transferred, to the Investor Education and Protection Fund by the Company and its subsidiary companies incorporated in India. |
For DELOITTE HASKINS & SELLS LLP
Chartered Accountants
(Firm Registration No. 117366W/W-100018)
P. r. ramesh
Bengaluru, April 12, 2019 | (Membership No. 70928) |
ANNEXURE “A” TO THE INDEPENDENT AUDITOR’S REPORT
(Referred to in paragraph 1 (f) under ‘Report on Other Legal and Regulatory Requirements’ section of our report to the Members of Infosys Limited of even date)
Report on the Internal Financial Controls Over Financial Reporting under Clause (i) of Sub-section 3 of Section 143 of the Companies Act, 2013 (“the Act”)
In conjunction with our audit of the consolidated financial statements of the Company as of and for the year ended March 31, 2019, we have audited the internal financial controls over financial reporting of INFOSYS LIMITED (hereinafter referred to as “Company”) and its subsidiary companies, which are companies incorporated in India, as of that date.
Management’s Responsibility for Internal Financial Controls
The Board of Directors of the Company and its subsidiary companies, which are companies incorporated in India, are responsible for establishing and maintaining internal financial controls based on the internal control over financial reporting criteria established by the respective Companies considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India (“ the ICAI”). These responsibilities include the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the orderly and efficient conduct of its business, including adherence to the respective company’s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information, as required under the Act.
Auditor’s Responsibility
Our responsibility is to express an opinion on the internal financial controls over financial reporting of the Company and its subsidiary companies, which are companies incorporated in India, based on our audit. We conducted our audit in accordance with the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting (the “Guidance Note”) issued by the Institute of Chartered Accountants of India and the Standards on Auditing, prescribed under Section 143(10) of the Companies Act, 2013, to the extent applicable to an audit of internal financial controls. Those Standards and the Guidance Note require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether adequate internal financial controls over financial reporting was established and maintained and if such controls operated effectively in all material respects.
Our audit involves performing procedures to obtain audit evidence about the adequacy of the internal financial controls system over financial reporting and their operating effectiveness. Our audit of internal financial controls over financial reporting included obtaining an understanding of internal financial controls over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the internal financial controls system over financial reporting of the Company and its subsidiary companies, which are companies incorporated in India.
Meaning of Internal Financial Controls Over Financial Reporting
A company’s internal financial control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal financial control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorisations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Inherent Limitations of Internal Financial Controls Over Financial Reporting
Because of the inherent limitations of internal financial controls over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may occur and not be detected. Also, projections of any evaluation of the internal financial controls over financial reporting to future periods are subject to the risk that the internal financial control over financial reporting may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Opinion
In our opinion and to the best of our information and according to the explanations given to us, the Company and its subsidiary companies, which are companies incorporated in India, have, in all material respects, an adequate internal financial controls system over financial reporting and such internal financial controls over financial reporting were operating effectively as at March 31, 2019, based on the internal control over financial reporting criteria established by the respective companies considering the essential components of internal control stated in the Guidance Note on Audit of Internal Financial Controls Over Financial Reporting issued by the Institute of Chartered Accountants of India.
For DELOITTE HASKINS & SELLS LLP
Chartered Accountants
(Firm Registration No. 117366W/W-100018)
P. r. ramesh
Bengaluru, April 12, 2019 | (Membership No. 70928) |
INFOSYS LIMITED AND SUBSIDIARIES
Consolidated Financial Statements under Indian Accounting Standards (Ind AS) for the year ended March 31, 2019
Index |
Consolidated Balance Sheet |
Consolidated Statement of Profit and Loss |
Consolidated Statement of Changes in Equity |
Consolidated Statement of Cash Flows |
Overview and notes to the consolidated financial statements |
1. Overview |
1.1 Company overview |
1.2 Basis of preparation of financial statements |
1.3 Basis of consolidation |
1.4 Use of estimates and judgements |
1.5 Critical accounting estimates |
1.6 Recent accounting pronouncements |
2. Notes to the consolidated financial statements |
2.1 Business combinations and disposal group held for sale |
2.2 Property, plant and equipment |
2.3 Goodwill and other intangible assets |
2.4 Investments |
2.5 Loans |
2.6 Other financial assets |
2.7 Trade receivables |
2.8 Cash and cash equivalents |
2.9 Other assets |
2.10 Financial instruments |
2.11 Equity |
2.12 Other financial liabilities |
2.13 Other liabilities |
2.14 Provisions |
2.15 Income taxes |
2.16 Revenue from operations |
2.17 Other income, net |
2.18 Expenses |
2.19 Leases |
2.20 Employee benefits |
2.21 Reconciliation of basic and diluted shares used in computing earnings per share |
2.22 Contingent liabilities and commitments |
2.23 Related party transactions |
2.24 Segment reporting |
2.25 Function wise classification of Consolidated Statement Of Profit and Loss |
INFOSYS LIMITED AND SUBSIDIARIES
(In crore )
Consolidated Balance Sheets as at | Note No. | March 31, 2019 | March 31, 2018 |
ASSETS | |||
Non-current assets | |||
Property, plant and equipment | 2.2 | 11,479 | 10,116 |
Capital work-in-progress | 1,388 | 1,606 | |
Goodwill | 2.3.1 and 2.1 | 3,540 | 2,211 |
Other intangible assets | 2.3.2 | 691 | 247 |
Investment in associate | 2.23 | – | – |
Financial assets: | |||
Investments | 2.4 | 4,634 | 5,756 |
Loans | 2.5 | 19 | 36 |
Other financial assets | 2.6 | 312 | 284 |
Deferred tax assets (net) | 2.15 | 1,372 | 1,282 |
Income tax assets (net) | 2.15 | 6,320 | 6,070 |
Other non-current assets | 2.9 | 2,105 | 2,265 |
Total non-current assets | 31,860 | 29,873 | |
Current assets | |||
Financial assets: | |||
Investments | 2.4 | 6,627 | 6,407 |
Trade receivables | 2.7 | 14,827 | 13,142 |
Cash and cash equivalents | 2.8 | 19,568 | 19,818 |
Loans | 2.5 | 241 | 239 |
Other financial assets | 2.6 | 5,505 | 6,684 |
Income tax assets (net) | 2.15 | 423 | – |
Other Current assets | 2.9 | 5,687 | 1,667 |
52,878 | 47,957 | ||
Assets held for sale | 2.1.2 | – | 2,060 |
Total current assets | 52,878 | 50,017 | |
Total assets | 84,738 | 79,890 | |
EQUITY AND LIABILITIES | |||
Equity | |||
Equity share capital | 2.11 | 2,170 | 1,088 |
Other equity | 62,778 | 63,835 | |
Total equity attributable to equity holders of the Company | 64,948 | 64,923 | |
Non-controlling interests | 58 | 1 | |
Total equity | 65,006 | 64,924 | |
Liabilities | |||
Non-current liabilities | |||
Financial Liabilities | |||
Other financial liabilities | 2.12 | 147 | 61 |
Deferred tax liabilities (net) | 2.15 | 672 | 541 |
Other non-current liabilities | 2.13 | 275 | 259 |
Total non-current liabilities | 1,094 | 861 | |
Current liabilities | |||
Financial Liabilities | |||
Trade payables | 1,655 | 694 | |
Other financial liabilities | 2.12 | 10,452 | 6,946 |
Other current liabilities | 2.13 | 4,388 | 3,606 |
Provisions | 2.14 | 576 | 492 |
Income tax liabilities (net) | 2.15 | 1,567 | 2,043 |
18,638 | 13,781 | ||
Liabilities directly associated with assets held for sale | 2.1.2 | – | 324 |
Total current liabilities | 18,638 | 14,105 | |
Total equity and liabilities | 84,738 | 79,890 |
The accompanying notes form an integral part of the consolidated financial statements
As per our report of even date attached
for Deloitte Haskins & Sells LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants Firm’s Registration No : 117366W/ W-100018 |
P. R. Ramesh |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 12, 2019 |
D. Sundaram Director |
Nilanjan Roy 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 No. | Year ended March 31, | |
2019 | 2018 | ||
Revenue from operations | 2.16 | 82,675 | 70,522 |
Other income, net | 2.17 | 2,882 | 3,311 |
Total income | 85,557 | 73,833 | |
Expenses | |||
Employee benefit expenses | 2.18 | 45,315 | 38,893 |
Cost of technical sub-contractors | 6,033 | 4,297 | |
Travel expenses | 2,433 | 1,995 | |
Cost of software packages and others | 2.18 | 2,553 | 1,870 |
Communication expenses | 471 | 489 | |
Consultancy and professional charges | 1,324 | 1,043 | |
Depreciation and amortisation expenses | 2.2 and 2.3.2 | 2,011 | 1,863 |
Other expenses | 2.18 | 3,655 | 2,924 |
Reduction in the fair value of Disposal Group held for sale | 2.1.2 | 270 | 118 |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" | 2.1.2 | 451 | – |
Total expenses | 64,516 | 53,492 | |
Profit before non-controlling interests/share in net profit/(loss) of associate | 21,041 | 20,341 | |
Share in net profit/(loss) of associate, including impairment | 2.23 | – | (71) |
Profit before tax | 21,041 | 20,270 | |
Tax expense: | |||
Current tax | 2.15 | 5,727 | 4,581 |
Deferred tax | 2.15 | (96) | (340) |
Profit for the period | 15,410 | 16,029 | |
Other comprehensive income | |||
Items that will not be reclassified subsequently to profit or loss | |||
Remeasurement of the net defined benefit liability/asset. net | 2.20 and 2.15 | (22) | 55 |
Equity instruments through other comprehensive income, net | 2.4 and 2.15 | 70 | 7 |
48 | 62 | ||
Items that will be reclassified subsequently to profit or loss | |||
Fair value changes on derivatives designated as cash flow hedge, net | 2.10 and 2.15 | 21 | (39) |
Exchange differences on translation of foreign operations | 63 | 321 | |
Fair value changes on investments, net | 2.4 and 2.15 | 2 | (1) |
86 | 281 | ||
Total other comprehensive income /(loss), net of tax | 134 | 343 | |
Total comprehensive income for the period | 15,544 | 16,372 | |
Profit attributable to: | |||
Owners of the Company | 15,404 | 16,029 | |
Non-controlling interests | 6 | – | |
15,410 | 16,029 | ||
Total comprehensive income attributable to: | |||
Owners of the Company | 15,538 | 16,372 | |
Non-controlling interests | 6 | – | |
15,544 | 16,372 | ||
Earnings per Equity share | |||
Equity shares of par value ![]() |
|||
Basic (![]() |
35.44 | 35.53 | |
Diluted (![]() |
35.38 | 35.50 | |
Weighted average equity shares used in computing earnings per equity share | 2.21 | ||
Basic | 4,347,130,157 | 4,510,664,644 | |
Diluted | 4,353,420,772 | 4,515,147,740 |
The accompanying notes form an integral part of the consolidated financial statements
As per our report of even date attached
for Deloitte Haskins & Sells LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants Firm’s Registration No : 117366W/ W-100018 |
P. R. Ramesh |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 12, 2019 |
D. Sundaram Director |
Nilanjan Roy Chief Financial Officer |
A. G. S. Manikantha Company Secretary |
INFOSYS LIMITED AND SUBSIDIARIES
Consolidated Statement of Changes in Equity
(In crore )
Particulars | Equity Share capital (1) | OTHER EQUITY | Total equity attributable to equity holders of the Company | Non-controlling interest | Total equity | |||||||||||
RESERVES & SURPLUS | Other comprehensive income | |||||||||||||||
Securities Premium | Retained earnings | Capital reserve | General reserve | Share Options Outstanding Account | Special Economic Zone Re-investment reserve (2) | Other reserves(3) | Capital redemption reserve | Equity instruments through other comprehensive income | Exchange differences on translating the financial statements of a foreign operation | Effective portion of Cash Flow Hedges | Other items of other comprehensive income / (loss) | |||||
Balance as at April 1, 2017 | 1,144 | 2,216 | 52,882 | 54 | 12,135 | 120 | – | 5 | – | (5) | 458 | 39 | (66) | 68,982 | – | 68,982 |
Changes in equity for the year ended March 31, 2018 | ||||||||||||||||
Profit for the period | – | – | 16,029 | – | – | – | – | – | – | – | – | – | – | 16,029 | – | 16,029 |
Remeasurement of the net defined benefit liability/asset* (refer note no. 2.20.1 and 2.15) | – | – | – | – | – | – | – | – | – | – | – | – | 55 | 55 | – | 55 |
Equity instruments through other comprehensive income* (refer to note no.2.4) | – | – | – | – | – | – | – | – | – | 7 | – | – | – | 7 | – | 7 |
Fair value changes on derivatives designated as cash flow hedge*(refer note no. 2.10) | – | – | – | – | – | – | – | – | – | – | – | (39) | – | (39) | – | (39) |
Exchange differences on translation of foreign operations | – | – | – | – | – | – | – | – | – | – | 321 | – | – | 321 | – | 321 |
Fair value changes on investments* (refer to note no.2.4) | – | – | – | – | – | – | – | – | – | – | – | – | (1) | (1) | – | (1) |
Total Comprehensive income for the period | – | – | 16,029 | – | – | – | – | – | – | 7 | 321 | (39) | 54 | 16,372 | – | 16,372 |
Exercise of stock options (refer note no. 2.11) | – | 67 | – | – | 2 | (69) | – | – | – | – | – | – | – | – | – | – |
Dividends (including dividend distribution tax) | – | – | (7,469) | – | – | – | – | – | – | – | – | – | – | (7,469) | – | (7,469) |
Non-controlling interests | – | – | – | – | – | – | – | – | – | – | – | – | – | – | 1 | 1 |
Transfer to general reserve | – | – | (1,382) | – | 1,382 | – | – | – | – | – | – | – | – | – | – | – |
Amount paid upon buyback (refer to note no. 2.11 ) | (56) | (2,206) | – | – | (10,738) | – | – | – | – | – | – | – | – | (13,000) | – | (13,000) |
Amount transferred to capital redemption reserve upon buyback (refer to note no. 2.11) | – | – | – | – | (56) | – | – | – | 56 | – | – | – | – | – | – | – |
Transaction costs related to buyback* (refer to note no.2.11 ) | – | (46) | – | – | – | – | – | – | – | – | – | – | – | (46) | – | (46) |
Transferred to Special Economic Zone Re-investment reserve | – | – | (2,200) | – | – | – | 2,200 | – | – | – | – | – | – | – | – | – |
Transferred from Special Economic Zone Re-investment reserve on utilization | – | – | 617 | – | – | – | (617) | – | – | – | – | – | – | – | – | – |
Share issued on exercise of stock options (Refer to 2.11) | – | 5 | – | – | – | – | – | – | – | – | – | – | – | 5 | – | 5 |
Share based payments to employees (refer note no. 2.11) | – | – | – | – | – | 79 | – | – | – | – | – | – | – | 79 | – | 79 |
Balance as at March 31, 2018 | 1,088 | 36 | 58,477 | 54 | 2,725 | 130 | 1,583 | 5 | 56 | 2 | 779 | – | (12) | 64,923 | 1 | 64,924 |
Consolidated Statement of Changes in Equity (contd.)
(In crore)
Particulars | Equity Share capital (1) | OTHER EQUITY | Total equity attributable to equity holders of the Company | Non-controlling interest | Total equity | |||||||||||
RESERVES & SURPLUS | Other comprehensive income | |||||||||||||||
Securities Premium | Retained earnings | Capital reserve | General reserve | Share Options Outstanding Account | Special Economic Zone Re-investment reserve (2) | Other reserves(3) | Capital redemption reserve | Equity instruments through Other comprehensive income | Exchange differences on translating the financial statements of a foreign operation | Effective portion of Cash Flow Hedges | Other items of other comprehensive income / (loss) | |||||
Balance as at April 1, 2018 | 1,088 | 36 | 58,477 | 54 | 2,725 | 130 | 1,583 | 5 | 56 | 2 | 779 | – | (12) | 64,923 | 1 | 64,924 |
Changes in equity for the year ended March 31, 2019 | ||||||||||||||||
Profit for the period | – | – | 15,404 | – | – | – | – | – | – | – | – | – | – | 15,404 | 6 | 15,410 |
Remeasurement of the net defined benefit liability/asset* (refer note no. 2.20.1 and 2.15) | – | – | – | – | – | – | – | – | – | – | – | – | (22) | (22) | – | (22) |
Equity instruments through other comprehensive income* (refer to note no.2.4) | – | – | – | – | – | – | – | – | – | 70 | – | – | – | 70 | – | 70 |
Fair value changes on derivatives designated as cash flow hedge* (refer note no. 2.10) | – | – | – | – | – | – | – | – | – | – | – | 21 | – | 21 | – | 21 |
Exchange differences on translation of foreign operations | – | – | – | – | – | – | – | – | – | – | 63 | – | – | 63 | – | 63 |
Fair value changes on investments* (refer to note no.2.4) | – | – | – | – | – | – | – | – | – | – | – | – | 2 | 2 | – | 2 |
Total Comprehensive income for the period | – | – | 15,404 | – | – | – | – | – | – | 70 | 63 | 21 | (20) | 15,538 | 6 | 15,544 |
Share based payments to employees (Refer to note 2.11) | – | – | – | – | – | 197 | – | – | – | – | – | – | – | 197 | – | 197 |
Increase in Equity share capital on account of bonus issue (Refer to note 2.11) | 1,088 | – | – | – | – | – | – | – | – | – | – | – | – | 1,088 | – | 1,088 |
Shares issued on exercise of employee stock options - after bonus issue (Refer to note 2.11) | – | 6 | – | – | – | – | – | – | – | – | – | – | – | 6 | – | 6 |
Buyback of equity shares (Refer to note 2.11 & 2.12) | (6) | – | – | – | (1,994) | – | – | – | – | – | – | – | – | (2,000) | (2,000) | |
Transaction costs relating to buyback * (Refer to note 2.11) | – | – | – | – | (12) | – | – | – | – | – | – | – | – | (12) | (12) | |
Amount transferred to capital redemption reserve upon buyback ( Refer to note 2.11) | – | – | – | – | (5) | – | – | – | 5 | – | – | – | – | – | – | |
Amounts utilized for bonus issue (refer to note no. 2.11) | – | – | – | – | (1,088) | – | – | – | – | – | – | – | – | (1,088) | – | (1,088) |
Exercise of stock options (refer to note no. 2.11) | – | 99 | – | – | – | (99) | – | – | – | – | – | – | – | – | – | – |
Transfer on account of options not exercised | – | – | – | – | 1 | (1) | – | – | – | – | – | – | – | – | – | – |
Income tax benefit arising on exercise of stock options | – | 8 | – | – | – | – | – | – | – | – | – | – | – | 8 | – | 8 |
Amount transferred to other reserves | – | – | (1) | – | – | – | – | 1 | – | – | – | – | – | – | – | – |
Dividends (including dividend distribution tax) | – | – | (13,712) | – | – | – | – | – | – | – | – | – | – | (13,712) | – | (13,712) |
Non-controlling interests on acquisition of subsidiary (refer to note no.2.11) |
– | – | – | – | – | – | – | – | – | – | – | – | – | – | 51 | 51 |
Transfer to general reserve | – | – | (1,615) | – | 1,615 | – | – | – | – | – | – | – | – | – | – | – |
Transferred to Special Economic Zone Re-investment reserve | – | – | (2,417) | – | – | – | 2,417 | – | – | – | – | – | – | – | – | – |
Transferred from Special Economic Zone Re-investment reserve on utilization | – | – | 1,430 | – | – | – | (1,430) | – | – | – | – | – | – | – | – | – |
Balance as at March 31, 2019 | 2,170 | 149 | 57,566 | 54 | 1,242 | 227 | 2,570 | 6 | 61 | 72 | 842 | 21 | (32) | 64,948 | 58 | 65,006 |
* Net of tax
(1) | Net of treasury shares |
(2) | The Special Economic Zone Re-investment Reserve has been created out of the profit of eligible SEZ units in terms of the provisions of Sec 10AA(1)(ii) of Income Tax Act,1961. The reserve should be utilized by the Group 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. |
(3) | 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 financial statements
As per our report of even date attached
for Deloitte Haskins & Sells LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants Firm’s Registration No : 117366W/ W-100018 |
P. R. Ramesh |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 12, 2019 |
D. Sundaram Director |
Nilanjan Roy Chief Financial Officer |
A. G. S. Manikantha Company Secretary |
INFOSYS LIMITED AND SUBSIDIARIES
Consolidated Statement of Cash Flows
Accounting policy
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 Group are segregated. The Group considers all highly liquid investments that are readily convertible to known amounts of cash to be cash equivalents.
(In crore)
Particulars | Year ended March 31, | ||
Note No. | 2019 | 2018 | |
Cash flow from operating activities | |||
Profit for the period | 15,410 | 16,029 | |
Adjustments to reconcile net profit to net cash provided by operating activities: | |||
Income tax expense | 2.15 | 5,631 | 4,241 |
Depreciation and amortization | 2.2 and 2.3.2 | 2,011 | 1,863 |
Interest and dividend income | (2,052) | (2,360) | |
Impairment loss recognized / (reversed) under expected credit loss model | 239 | 34 | |
Exchange differences on translation of assets and liabilities | 66 | 16 | |
Reduction in the fair value of Disposal Group held for sale | 2.1.2 | 270 | 118 |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" | 2.1.2 | 451 | – |
Share in net profit/(loss) of associate, including impairment | – | 71 | |
Stock compensation expense | 2.11 | 202 | 84 |
Other adjustments | (102) | (133) | |
Changes in assets and liabilities | |||
Trade receivables and unbilled revenue | (2,881) | (1,523) | |
Loans, other financial assets and other assets | (700) | (186) | |
Trade payables | 916 | 328 | |
Other financial liabilities, other liabilities and provisions | 2,212 | 1,465 | |
Cash generated from operations | 21,673 | 20,047 | |
Income taxes paid | (6,832) | (6,829) | |
Net cash generated by operating activities | 14,841 | 13,218 | |
Cash flows from investing activities | |||
Expenditure on property, plant and equipment | (2,445) | (1,998) | |
Loans to employees | 14 | 28 | |
Deposits placed with corporation | (24) | (130) | |
Interest and dividend received | 1,557 | 1,768 | |
Payment towards acquisition of business, net of cash acquired | (550) | (33) | |
Payment of contingent consideration pertaining to acquisition of business | (18) | (27) | |
Advance payment towards acquisition of business | (206) | – | |
Escrow and other deposits pertaining to Buyback | 2.6 | (257) | – |
Payments to acquire Investments | |||
Preference and equity securities | (21) | (23) | |
Tax free bonds and government bonds | (17) | (2) | |
Liquid mutual funds and fixed maturity plan securities | (78,355) | (62,063) | |
Non convertible debentures | (160) | (104) | |
Certificates of deposit | (2,393) | (6,653) | |
Government securities | (838) | – | |
Commercial paper | (491) | (291) | |
Others | (19) | (23) | |
Proceeds on sale of financial assets | |||
Tax free bonds and government bonds | 1 | 15 | |
Non-convertible debentures | 738 | 100 | |
Government securities | 123 | – | |
Others | 300 | – | |
Certificates of deposit | 5,540 | 9,690 | |
Liquid mutual funds and fixed maturity plan securities | 76,821 | 64,163 | |
Preference and equity securities | 115 | 35 | |
Others | 10 | – | |
Net cash (used in)/from in investing activities | (575) | 4,452 | |
Cash flows from financing activities: |
|||
Payment of dividends (including dividend distribution tax) | (13,705) | (7,464) | |
Shares issued on exercise of employee stock options | 6 | 5 | |
Buyback of equity shares including transaction cost | (813) | (13,046) | |
Net cash used in financing activities | (14,512) | (20,505) | |
Net increase / (decrease) in cash and cash equivalents | (246) | (2,835) | |
Cash and cash equivalents at the beginning of the period | 2.8 | 19,871 | 22,625 |
Effect of exchange rate changes on cash and cash equivalents | (57) | 81 | |
Cash and cash equivalents at the end of the period | 2.8 | 19,568 | 19,871 |
Supplementary information: | |||
Restricted cash balance | 2.8 | 358 | 533 |
The accompanying notes form an integral part of the consolidated financial statements
As per our report of even date attached
for Deloitte Haskins & Sells LLP | for and on behalf of the Board of Directors of Infosys Limited |
Chartered Accountants Firm’s Registration No : 117366W/ W-100018 |
P. R. Ramesh |
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
Bengaluru April 12, 2019 |
D. Sundaram Director |
Nilanjan Roy Chief Financial Officer |
A. G. S. Manikantha Company Secretary |
INFOSYS LIMITED AND SUBSIDIARIES
Notes to the consolidated financial statements
1. Overview
1.1 Company overview
Infosys Limited ('the Company' or Infosys) is
a leading provider of consulting, technology, outsourcing and next-generation digital services, enabling clients to execute strategies
for their digital transformation. Infosys strategic objective is to build a sustainable organization that remains relevant to the
agenda of clients, while creating growth opportunities for employees and generating profitable returns for investors. Infosys strategy
is to be a navigator for our clients as they ideate, plan and execute on their journey to a digital future.
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 Electronics city, Hosur Road, Bengaluru 560100, Karnataka, India. The Company
has its primary listings on the BSE Ltd. and National Stock Exchange of India Limited. The Company’s American Depositary
Shares (ADS) representing equity shares are listed on the New York Stock Exchange (NYSE).
Further, the Company's ADS were also listed on the Euronext London and Euronext Paris. On July 5, 2018, the Company voluntarily
delisted its ADS from the said exchanges due to low average daily trading volume of its ADS on these exchanges.
The Group's consolidated financial statements are approved for issue by the Company's Board of Directors on April 12, 2019.
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 ('the 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 relevant amendment
rules issued thereafter.
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 year figures are taken from the source and rounded to the nearest digits, the figures reported for the previous quarters might not always add up to the year-end 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 no. 2.23. 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.
1.4 Use of estimates and judgements
The preparation of the financial statements in conformity with Ind AS requires the management to make estimates, judgements and assumptions. These estimates, judgements 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 judgements and the use of assumptions in these financial statements have been disclosed in Note no. 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.
Further, the Group uses significant judgements while determining the transaction price allocated to performance obligations using the expected cost plus margin approach.
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 no. 2.15 and 2.22
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.
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 (Refer to Note no 2.1 and 2.3).
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 (Refer to Note no 2.2).
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 (CGUs) 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 CGUs 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 CGU or groups of cash-generating units which are benefiting 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 (Refer to Note no 2.3).
f. Non-current assets and Disposal Group held for sale
Assets and liabilities of Disposal Groups held
for sale are measured at the lower of carrying amount and fair value less costs to sell. The determination of fair value less costs
to sell includes use of management estimates and assumptions. The fair value of the Disposal Groups have been estimated using valuation
techniques including income and market approach which includes unobservable inputs.
Non-current assets and Disposal Group that ceases to be classified as held for sale shall be measured at the lower of carrying
amount before the Non-current asset and Disposal Group was classified as held for sale adjusted for any depreciation/ amortization
and its recoverable amount at the date when the Disposal Group no longer meets the " Held for sale" criteria. Recoverable
amounts of assets reclassified from held for sale have been estimated using management’s assumptions which consist of significant
unobservable inputs (Refer to Note no 2.1.2).
1.6 Recent accounting pronouncements
Ind AS 116 Leases : On March 30, 2019, Ministry of Corporate Affairs has notified Ind AS 116, Leases. Ind AS 116 will replace
the existing leases Standard, Ind AS 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. Ind AS 116
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 profit & loss. The Standard also contains enhanced disclosure requirements for lessees. Ind AS 116 substantially carries
forward the lessor accounting requirements in Ind AS 17.
The effective date for adoption of Ind AS 116 is annual periods beginning on or after April 1, 2019. The standard permits two
possible methods of transition:
• | Full retrospective – Retrospectively to each prior period presented applying
Ind AS 8 Accounting Policies, Changes in Accounting Estimates and Errors |
|
• | Modified retrospective – Retrospectively, with the cumulative effect of initially applying the Standard recognized at the date of initial application either by: |
Under modified retrospective approach, the lessee records the lease liability as the present value of the remaining lease payments, discounted at the incremental borrowing rate and the right of use asset either as:
• | Its carrying amount as if the standard had been applied since the commencement date, but discounted at lessee’s incremental
borrowing rate at the date of initial application or |
|
• | An amount equal to the lease liability, adjusted by the amount of any prepaid or accrued lease payments related to that
lease recognized under Ind AS 17 immediately before the date of initial application Certain practical expedients are available under both the methods. |
On completion of evaluation of the effect of
adoption of Ind AS 116, the Group is proposing to use the ‘Modified Retrospective Approach’ for transitioning to Ind
AS 116, and take the cumulative adjustment to retained earnings, on the date of initial application (April 1, 2019). Accordingly,
comparatives for the year ended March 31, 2019 will not be retrospectively adjusted. The Group has elected certain available practical
expedients on transition.
The effect of adoption as on transition date would majorly result in an increase in right of use asset approximately by 2,300
crore, net investment in
sub-lease approximately by
440 crore and an increase in lease liability approximately
by
3,050 crore.
Ind AS 12 Appendix C, Uncertainty over Income
Tax Treatments : On March 30, 2019, Ministry of Corporate Affairs has notified Ind AS 12 Appendix C, Uncertainty over Income
Tax Treatments which is to be applied while performing the determination of taxable profit (or loss), tax bases, unused tax losses,
unused tax credits and tax rates, when there is uncertainty over income tax treatments under Ind AS 12. According to the appendix,
companies need to determine the probability of the relevant tax authority accepting each tax treatment, or group of tax treatments,
that the companies have used or plan to use in their income tax filing which has to be considered to compute the most likely amount
or the expected value of the tax treatment when determining taxable profit (tax loss), tax bases, unused tax losses, unused tax
credits and tax rates.
The standard permits two possible methods of transition - i) Full retrospective approach – Under this approach, Appendix
C will be applied retrospectively to each prior reporting period presented in accordance with Ind AS 8 – Accounting Policies,
Changes in Accounting Estimates and Errors, without using hindsight and ii) Retrospectively with cumulative effect of initially
applying Appendix C recognized by adjusting equity on initial application, without adjusting comparatives.
The effective date for adoption of Ind AS 12 Appendix C is annual periods beginning on or after April 1, 2019. The Group will adopt
the standard on April 1, 2019 and has decided to adjust the cumulative effect in equity on the date of initial application i.e.
April 1, 2019 without adjusting comparatives.
The effect on adoption of Ind AS 12 Appendix C would be insignificant in the consolidated financial statements.
Amendment to Ind AS 12 – Income taxes
: On March 30, 2019, Ministry of Corporate Affairs issued amendments to the guidance in Ind AS 12, ‘Income Taxes’,
in connection with accounting for dividend distribution taxes.
The amendment clarifies that an entity shall recognise the income tax consequences of dividends in profit or loss, other comprehensive
income or equity according to where the entity originally recognised those past transactions or events.
Effective date for application of this amendment is annual period beginning on or after April 1, 2019. The Group is currently evaluating
the effect of this amendment on the consolidated financial statements.
Amendment to Ind AS 19 – plan amendment,
curtailment or settlement- On March 30, 2019, Ministry of Corporate Affairs issued amendments to Ind AS 19, ‘Employee
Benefits’, in connection with accounting for plan amendments, curtailments and settlements.
The amendments require an entity:
• | to use updated assumptions to determine current service cost and net interest for the remainder of the period after a plan amendment, curtailment or settlement; and | |
• | to recognise in profit or loss as part of past service cost, or a gain or loss on settlement, any reduction in a surplus, even if that surplus was not previously recognised because of the impact of the asset ceiling. |
Effective date for application of this amendment is annual period beginning on or after 1 April 2019. The Group does not have any
impact on account of this amendment.
2.1 BUSINESS COMBINATIONS AND DISPOSAL GROUP HELD FOR SALE
2.1.1 Business combinations
Accounting policy
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.
The interest of non-controlling shareholders is initially measured either at fair value or at the non-controlling interests’ proportionate share of the acquiree’s identifiable net assets. The choice of measurement basis is made on an acquisition-by-acquisition basis. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests’ share of subsequent changes in equity of subsidiaries.
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 finder’s fees, legal fees, due diligence fees, and other professional and consulting fees are expensed as incurred.
Brilliant Basics Holdings Limited.
On September 8, 2017, Infosys acquired 100%
of the voting interests in Brilliant Basics Holdings Limited., UK, (Brilliant Basics) a product design and customer experience
innovator with experience in executing global programs. The business acquisition was conducted by entering into a share purchase
agreement for cash consideration of 29 crore, a contingent consideration of up to
20 crore and an additional consideration
of upto
13 crore, referred to as retention bonus, payable to the employees of Brilliant Basics at each anniversary year
over the next two years, subject to their continuous employment with the group at each anniversary.
The payment of contingent consideration to sellers of Brilliant Basics is dependent upon the achievement of certain financial targets by Brilliant Basics over a period of 3 years ending on March 2020.
The fair value of contingent consideration is
determined by discounting the estimated amount payable to the sellers of Brilliant Basics on achievement of certain financial targets.
The key inputs used in determination of the fair value of contingent consideration are the discount rate of 10% and the probabilities
of achievement of the financial targets. The undiscounted value of contingent consideration as at March 31, 2019 is 14 crore.
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 the 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(*) | 1 | – | 1 | |
Intangible assets - customer relationships | – | 12 | 12 | |
Deferred tax liabilities on intangible assets | – | (2) | (2) | |
1 | 10 | 11 | ||
Goodwill | 35 | |||
Total purchase price | 46 |
*Includes cash and cash equivalents acquired
of 2 crore
The goodwill is not tax deductible.
The gross amount of trade receivables acquired
and its fair value is 3 crore and the amount has been substantially collected.
The fair value of each major class of consideration as at the acquisition date is as follows:
(In crore)
Component | Consideration settled |
Cash paid | 29 |
Fair value of contingent consideration | 17 |
Total purchase price | 46 |
The transaction costs of 2 crore related
to the acquisition have been included in the statement of profit and loss for the year ended March 31, 2018.
Wongdoody Holding Company Inc
On May 22, 2018, Infosys acquired 100% of the
voting interests in WongDoody Holding Company Inc., (WongDoody) an US-based, full-service creative and consumer insights agency.
The business acquisition was conducted by entering into a share purchase agreement for a total consideration of up to $75 million
(approximately 514 crore on acquisition date), which includes a cash consideration of $38 million (approximately
261
crore), contingent consideration of up to $28 million (approximately
192 crore on acquisition date) and an additional consideration
of up to $9 million (approximately
61 crore on acquisition date), referred to as retention bonus, payable to the employees
of WongDoody over the next three years, subject to their continuous employment with the group.
WongDoody, brings to Infosys the creative talent and marketing and brand engagement expertise. Further the acquisition is expected to strengthen Infosys’ creative, branding and customer experience capabilities to bring innovative thinking, talent and creativity to clients.
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(*) | 37 | – | 37 |
Intangible assets - customer relationships | – | 132 | 132 |
Intangible assets - trade name | – | 8 | 8 |
37 | 140 | 177 | |
Goodwill | 173 | ||
Total purchase price | 350 |
* Includes cash and cash equivalents acquired
of 51 crore.
Goodwill is tax deductible
The fair value of each major class of consideration as at the acquisition date is as follows:
(in crore)
Component | Consideration settled |
Cash consideration | 261 |
Fair value of contingent consideration | 89 |
Total purchase price | 350 |
The gross amount of trade receivables acquired
and its fair value is 12 crore and the amount has been fully collected.
The payment of contingent consideration to sellers
of WondDoody is dependent upon the achievement of certain financial targets by WongDoody. At the acquisition date, the key inputs
used in determination of the fair value of contingent consideration are the discount rate of 16% and the probabilities of achievement
of the financial targets. The undiscounted value of contingent consideration as at March 31, 2019 is $17 million (121 crore).
The transaction costs of 3 crore related
to the acquisition have been included in the statement of profit and loss for the year ended March 31, 2019.
Infosys Compaz Pte Limited (formerly Trusted Source Pte Ltd)
On November 16, 2018, Infosys Consulting Pte
Limited (a wholly owned subsidiary of Infosys Limited) acquired 60% stake in Infosys Compaz Pte. Ltd, a Singapore based IT services
company. The business acquisition was conducted by entering into a share purchase agreement for a total consideration of up to
SGD 17 million (approximately 91 crore on acquisition date), which includes a cash consideration of SGD 10 million (approximately
54 crore) and a contingent consideration of up to SGD 7 million (approximately
37 crore on acquisition date).
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(*) | 92 | – | 92 |
Intangible assets - Customer contracts and relationships | – | 44 | 44 |
Deferred tax liabilities on intangible assets | – | (7) | (7) |
92 | 37 | 129 | |
Non-controlling interests | (51) | ||
Total purchase price | 78 |
* Includes cash and cash equivalents acquired
of 65 crore.
The fair value of each major class of consideration as at the acquisition date is as follows:
(in crore)
Component | Consideration settled |
Cash consideration | 54 |
Fair value of contingent consideration | 24 |
Total purchase price | 78 |
The gross amount of trade receivables acquired
and its fair value is 50 crore and the amount has been substantially collected.
The payment of contingent consideration to sellers
of Infosys Compaz Pte. Ltd is dependent upon the achievement of certain revenue targets by Infosys Compaz Pte. Ltd. At the acquisition
date, the key inputs used in determination of the fair value of contingent consideration are the discount rate of 9% and the probabilities
of achievement of the financial targets. The undiscounted value of contingent consideration as at March 31, 2019 is SGD 7 million
(36 crore).
The transaction costs of 3 crore related
to the acquisition have been included in the statement of profit and loss for the year ended March 31, 2019.
Fluido Oy
On October 11, 2018, Infosys Consulting Pte
Limited (a wholly owned subsidiary of Infosys Limited) acquired 100% of voting interests in Fluido Oy (Fluido), a Nordic-based
salesforce advisor and consulting partner in cloud consulting, implementation and training services for a total consideration of
upto Euro 65 million (approximately 560 crore), comprising of cash consideration of Euro 45 million (approximately
388
crore), contingent consideration of upto Euro 12 million (approximately
103 crore) and retention payouts of upto Euro 8
million (approximately
69 crore), payable to the employees of Fluido over the next three years, subject to their continuous
employment with the group.
Fluido brings to Infosys the Salesforce expertise, alongside an agile delivery process that simplifies and scales digital efforts across channels and touchpoints. Further, Fluido strengthens Infosys’ presence across the Nordics region with developed assets and client relationships. 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(*) | 12 | – | 12 |
Intangible assets - Customer contracts and relationships | – | 158 | 158 |
Intangible assets - Salesforce Relationships | – | 62 | 62 |
Intangible assets - Brand | – | 28 | 28 |
Deferred tax liabilities on intangible assets | – | (52) | (52) |
12 | 196 | 208 | |
Goodwill | 240 | ||
Total purchase price | 448 |
* Includes cash and cash equivalents acquired
of 28 crore.
Goodwill is not tax deductible
The fair value of each major class of consideration as of the acquisition date is as follows:
(in crore)
Component | Consideration settled |
Cash consideration | 388 |
Fair value of contingent consideration | 60 |
Total purchase price | 448 |
The gross amount of trade receivables acquired
and its fair value is 27 crore and the amount has been fully collected.
The payment of contingent consideration to sellers
of Fluido is dependent upon the achievement of certain financial targets by Fluido. At the acquisition date, the key inputs used
in determination of the fair value of contingent consideration are the discount rate of 16% and the probabilities of achievement
of the financial targets. The undiscounted value of contingent consideration as at March 31, 2019 was EUR 8 million (62
crore).
The transaction costs of 5 crore related
to the acquisition have been included in the Consolidated Statement of Profit and Loss for the year ended March 31, 2019
Hitachi Procurement Service Co. Ltd
On April 1, 2019, Infosys Consulting Pte Limited
(a wholly owned subsidiary of Infosys Limited) acquired 81% of voting interests in Hitachi Procurement Service Co., Ltd., (HIPUS),
Japan, a wholly owned subsidiary of Hitachi Ltd, Japan for a total cash consideration of JPY 3.29 billion (approximately 206
crore) on fulfilment of closing conditions. The company has paid an advance of JPY 3.29 billion (approximately
206 crore)
to Hitachi towards cash consideration on March 29, 2019. HIPUS handles indirect materials purchasing functions for the Hitachi
Group.
As of April 12, 2019 (i.e., the date of adoption of financial statements by the Board of Directors), the Company is in the process
of finalising the accounting for acquisition of HIPUS, including allocation of purchase consideration to identifiable assets and
liabilities.
Proposed Acquisition
Stater N.V.
On March 28, 2019, Infosys Consulting Pte Limited
(a wholly owned subsidiary of Infosys Limited) entered into a definitive agreement to acquire 75% of the shareholding in Stater
N.V., a wholly-owned subsidiary of ABN AMRO Bank N.V., Netherlands, for a consideration including base purchase price of up to
EUR 127.5 million (approximately 990 crore) and customary closing adjustments, subject to regulatory approvals and fulfilment
of closing conditions.
2.1.2. Disposal group held for sale
Accounting policy
Non-current assets and Disposal Group are classified as held for sale if their carrying amount is intended to be recovered principally through sale rather than through continuing use. The condition for classification of held for sale is met when the non-current asset or the Disposal Group is available for immediate sale and the same is highly probable of being completed within one year from the date of classification as held for sale. Non-current assets and Disposal Group held for sale are measured at the lower of carrying amount and fair value less cost to sell. Non-current assets and Disposal Group that ceases to be classified as held for sale shall be measured at the lower of carrying amount before the non-current asset and Disposal Group was classified as held for sale adjusted for any depreciation/ amortization and its recoverable amount at the date when the Disposal Group no longer meets the "Held for sale" criteria.
In the three months ended March 2018, the Company
had initiated identification and evaluation of potential buyers for its subsidiaries, Kallidus and Skava (together referred to
as "Skava”) and Panaya, collectively referred to as the “Disposal Group”. The Disposal Group was classified
and presented separately as “held for sale” and was carried at the lower of carrying value and fair value. Consequently,
a reduction in the fair value of Disposal Group held for sale amounting to 118 crore in respect of Panaya had been recognized
in the consolidated statement of profit and loss for the three months and year ended March 31, 2018. During the three months ended
June 30, 2018, on remeasurement, including consideration of progress in negotiations on offers from prospective buyers for Panaya,
the Company has recorded a reduction in the fair value of Disposal Group held for sale amounting to
270 crore in respect of Panaya.
During the three months ended December 31, 2018,
based on evaluation of proposals received and progress of negotiations with potential buyers, the Company concluded that the Disposal
Group does not meet the criteria for “Held for Sale’ classification because it is no longer highly probable that sale
would be consummated by March 31, 2019 ( twelve months from date of initial classification as “held for sale”). Accordingly,
in accordance with Ind AS 105 -" Non current Assets held for Sale and Discontinued Operations", the assets and liabilities
of Panaya and Skava have been included on a line by line basis in the consolidated financial statements for the period and as at
December 31, 2018 and March 31, 2019.
On reclassification from “Held for sale”, the assets of Panaya and Skava have been remeasured in the quarter ended
December 31, 2018 at the lower of cost and recoverable amount resulting in recognition of additional depreciation and amortization
expenses of 88 crore and an adjustment in respect of excess of carrying amount over recoverable amount on reclassification from
"Held for Sale" of
451 crore (comprising of
358 crore towards goodwill and
93 crore towards value of customer relationships)
in respect of Skava in the consolidated statement of profit and loss for the three months and nine months ended December 31, 2018.
2.2 PROPERTY, PLANT AND EQUIPMENT
Accounting policy
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:
Buildings (1) | 22-25 years |
Plant and machinery (1)(2) | 5 years |
Office equipment | 5 years |
Computer equipment (1) | 3-5 years |
Furniture and fixtures (1) | 5 years |
Vehicles(1) | 5 years |
Leasehold improvements | Over lease term |
(1) | Based on technical evaluation, the management believes that the useful lives as given above best represent the period over which management expects to use these assets. Hence, the useful lives for these assets is different from the useful lives as prescribed under Part C of Schedule II of the Companies Act 2013. |
(2) Includes Solar plant with a useful life of 20 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 ready 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 the Consolidated 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 Consolidated Statement of Profit and Loss.
Impairment
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 Cash Generating Unit (CGU) to which the asset belongs.
If such assets are considered to be impaired, the impairment to be recognized in the Consolidated 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 Consolidated 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 depreciation) had no impairment loss been recognized for the asset in prior years.
Following are the changes in the carrying value of property, plant and equipment for the year ended March 31, 2019:
(In crore)
Particulars | Land - Freehold | Land - Leasehold | Buildings (1) | Plant and machinery | Office Equipment | Computer equipment | Furniture and fixtures | Leasehold Improvements | Vehicles | Total |
Gross carrying value as at April 1, 2018 | 1,229 | 673 | 8,130 | 2,306 | 1,002 | 4,884 | 1,393 | 531 | 31 | 20,179 |
Additions | 78 | – | 916 | 462 | 136 | 1,129 | 254 | 209 | 9 | 3,193 |
Additions - Business Combination | – | – | – | 1 | 2 | 34 | 7 | 3 | – | 47 |
Deletions | – | (68) | (116) | (60) | (40) | (239) | (40) | (21) | (2) | (586) |
Reclassified from assets held for sale (Refer note 2.1.2) | – | – | – | 1 | 2 | 40 | 8 | 17 | – | 68 |
Translation difference | – | – | (4) | (1) | (1) | (2) | (2) | – | – | (10) |
Gross carrying value as at March 31, 2019 | 1,307 | 605 | 8,926 | 2,709 | 1,101 | 5,846 | 1,620 | 739 | 38 | 22,891 |
Accumulated depreciation as at April 1, 2018 | – | (31) | (2,719) | (1,597) | (719) | (3,632) | (1,017) | (330) | (18) | (10,063) |
Depreciation | – | (5) | (313) | (293) | (125) | (766) | (185) | (89) | (6) | (1,782) |
Accumulated depreciation on deletions | – | 3 | 103 | 50 | 32 | 229 | 36 | 20 | 2 | 475 |
Reclassified from assets held for sale (Refer note 2.1.2) | – | – | – | (1) | (1) | (25) | (5) | (15) | – | (47) |
Translation difference | – | – | 2 | – | – | 2 | 1 | – | – | 5 |
Accumulated depreciation as at March 31, 2019 | – | (33) | (2,927) | (1,841) | (813) | (4,192) | (1,170) | (414) | (22) | (11,412) |
Carrying value as at April 1, 2018 | 1,229 | 642 | 5,411 | 709 | 283 | 1,252 | 376 | 201 | 13 | 10,116 |
Carrying value as at March 31, 2019 | 1,307 | 572 | 5,999 | 868 | 288 | 1,654 | 450 | 325 | 16 | 11,479 |
Following are the changes in the carrying value of property, plant and equipment for the year ended March 31, 2018:
(In crore)
Land- Freehold | Land- Leasehold | Buildings (1) | Plant and machinery | Office Equipment | Computer equipment | Furniture and fixtures | Leasehold Improvements | Vehicles | Total | |
Gross carrying value as at April 1, 2017 | 1,095 | 671 | 7,279 | 2,048 | 922 | 4,540 | 1,277 | 469 | 31 | 18,332 |
Additions | 134 | 2 | 789 | 264 | 86 | 471 | 130 | 74 | 5 | 1,955 |
Deletions | – | – | (1) | (8) | (8) | (109) | (10) | (12) | (5) | (153) |
Reclassified as assets held for sale (Refer to note no. 2.1.2) | – | – | – | (1) | (2) | (40) | (8) | (17) | – | (68) |
Translation difference | – | – | 63 | 3 | 4 | 22 | 4 | 17 | – | 113 |
Gross carrying value as at March 31, 2018 | 1,229 | 673 | 8,130 | 2,306 | 1,002 | 4,884 | 1,393 | 531 | 31 | 20,179 |
Accumulated depreciation as at April 1, 2017 | – | (27) | (2,440) | (1,337) | (599) | (3,053) | (869) | (239) | (17) | (8,581) |
Depreciation | – | (4) | (276) | (266) | (125) | (693) | (160) | (105) | (5) | (1,634) |
Accumulated depreciation on deletions | – | – | – | 7 | 6 | 107 | 9 | 11 | 4 | 144 |
Reclassified as assets held for sale (Refer to note no. 2.1.2) | – | – | – | 1 | 1 | 25 | 5 | 15 | – | 47 |
Translation difference | – | – | (3) | (2) | (2) | (18) | (2) | (12) | – | (39) |
Accumulated depreciation as at March 31, 2018 | – | (31) | (2,719) | (1,597) | (719) | (3,632) | (1,017) | (330) | (18) | (10,063) |
Carrying value as at April 1, 2017 | 1,095 | 644 | 4,839 | 711 | 323 | 1,487 | 408 | 230 | 14 | 9,751 |
Carrying value as at March 31, 2018 | 1,229 | 642 | 5,411 | 709 | 283 | 1,252 | 376 | 201 | 13 | 10,116 |
Notes: (1) Buildings include
250/- being the value of 5 shares of
50/-
each in Mittal Towers Premises Co-operative Society Limited.
Gross carrying value of lease hold land represents amounts paid under certain lease-cum-sale agreements to acquire land including agreements where the Group 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.
2.3 GOODWILL AND OTHER INTANGIBLE ASSETS
2.3.1 Goodwill
Accounting policy
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, the bargain purchase excess is recognized after reassessing the fair value of net assets acquired in the capital reserve. Goodwill is measured at cost less accumulated impairment losses.
Impairment
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 Consolidated Statement of Profit and Loss and is not reversed in the subsequent period.
Following is a summary of changes in the carrying amount of goodwill:
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Carrying value at the beginning | 2,211 | 3,652 |
Goodwill on Brilliant Basics acquisition (Refer note no. 2.1.1) | – | 35 |
Goodwill on WongDoody acquisition (refer note no. 2.1.1) | 173 | – |
Goodwill on Fluido Oy acquisition (refer note no. 2.1.1) | 240 | – |
Goodwill reclassified under assets held for sale (refer note no 2.1.2) | – | (1,609) |
Goodwill reclassified from assets held for sale, net of reduction in recoverable amount (Refer note 2.1.2) | 863 | – |
Translation differences | 53 | 133 |
Carrying value at the end | 3,540 | 2,211 |
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to the CGU or groups of CGUs, 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 CGUs.
During the three months ended June 30, 2018, the Group internally reorganized some of its business segments to deepen customer relationships, improve focus of sales investments and increase management oversight. Consequent to the internal reorganization, there were changes in the business segments based on “Management approach” as defined under Ind AS 108, Operating Segments.(Refer Note 2.24). Accordingly the goodwill has been allocated to the new operating segments as at March 31, 2019.
The following table presents the allocation of goodwill to operating segments as at March 31, 2019 :
(In crore)
Segment | As at March 31, 2019 |
Financial services | 743 |
Retail | 437 |
Communication | 389 |
Energy, Utilities, Resources and Services | 374 |
Manufacturing | 239 |
2,182 | |
Operating segments without significant goodwill | 417 |
Total | 2,599 |
Consequent to reclassification from held for
sale (refer note no 2.1.2) goodwill pertaining to Panaya, Kallidus and Skava acquistions are tested for impairment at the respective
entity Level which amounts to 941 crore as at March 31, 2019.
The following table presents the allocation of goodwill to operating segments (prior to internal reorganisation) as at March 31, 2018:
(In crore)
Segment | As at March 31, 2018 |
Financial services | 474 |
Manufacturing | 252 |
Retail, Consumer packaged goods and Logistics | 314 |
Life Sciences, Healthcare and Insurance | 446 |
Energy & Utilities, Communication and Services | 470 |
1,956 | |
Operating segments without significant goodwill | 255 |
Total | 2,211 |
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 cash flow projections over a period of five years. An average of the range of each assumption used is mentioned below. As at March 31, 2019 and March 31, 2018, the estimated recoverable amount of the CGU exceeded its carrying amount. The key assumptions used for the calculations are as follows:
(in %)
As at March 31, | ||
2019 | 2018 | |
Long term growth rate | 8-10 | 8-10 |
Operating margins | 17-20 | 17-20 |
Discount rate | 12.5 | 13.5 |
The above discount rate is based on the Weighted Average Cost of Capital (WACC) of the Company. Management believes that any reasonable possible changes in the key assumptions would not cause the carrying amount to exceed the recoverable amount of the cash generating unit.
2.3.2 Other intangible assets
Accounting policy
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). 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 Group has an intention and ability to complete and use or sell the software and the costs can be measured reliably. The costs which can be capitalized include the cost of material, direct labour, overhead costs that are directly attributable to preparing the asset for its intended use.
Impairment
Intangible assets 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 Consolidated 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 Consolidated 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) had no impairment loss been recognized for the asset in prior years.
Following are the changes in the carrying value of acquired intangible assets for the year ended March 31, 2019:
(In crore)
Particulars | 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 at April 1, 2018 | 445 | 19 | – | – | 73 | 26 | 27 | 590 |
Reclassified from assets held for sale (Refer note 2.1.2) | 157 | 388 | – | 1 | – | 37 | – | 583 |
Additions/adjustments | – | 9 | – | – | – | – | – | 9 |
Acquisition through business combination (Refer note no. 2.1.1) | 334 | – | – | – | – | 36 | 62 | 432 |
Deletions/adjustments during the period | – | – | – | – | – | – | – | – |
Translation difference | 1 | 25 | – | – | – | – | (6) | 20 |
Gross carrying value as at March 31, 2019 | 937 | 441 | – | 1 | 73 | 99 | 83 | 1,634 |
Accumulated amortization as at April 1, 2018 | (289) | (19) | – | – | (10) | (12) | (13) | (343) |
Reclassified from assets held for sale (Refer note 2.1.2) | (56) | (182) | – | (1) | – | (21) | – | (260) |
Amortization expense | (112) | (90) | – | – | (2) | (10) | (15) | (229) |
Reduction in value (Refer note 2.1.2) | (93) | – | – | – | – | – | – | (93) |
Deletion/adjustments during the period | – | – | – | – | – | – | – | – |
Translation differences | (7) | (11) | – | – | 1 | (1) | – | (18) |
Accumulated amortization as at March 31, 2019 | (557) | (302) | – | (1) | (11) | (44) | (28) | (943) |
Carrying value as at April 1, 2018 | 156 | – | – | – | 63 | 14 | 14 | 247 |
Carrying value as at March 31, 2019 | 380 | 139 | – | – | 62 | 55 | 55 | 691 |
Estimated Useful Life (in years) | 1-10 | 3-8 | – | – | 50 | 5-10 | 3-5 | |
Estimated Remaining Useful Life (in years) | 0-7 | 1 | – | – | 43 | 2-8 | 2-3 |
Following are the changes in the carrying value of acquired intangible assets for the year ended March 31, 2018:
(In crore)
Particulars | 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 at April 1, 2017 | 750 | 405 | 21 | 1 | 66 | 90 | 62 | 1,395 |
Acquisition through business combination (Refer note no. 2.1.1) | 12 | – | – | – | – | – | – | 12 |
Deletions / retirals during the period | (172) | – | (21) | – | – | (29) | (35) | (257) |
Reclassified under assets held for sale (Refer note no 2.1.2) | (157) | (388) | – | (1) | – | (37) | – | (583) |
Translation difference | 12 | 2 | – | – | 7 | 2 | – | 23 |
Gross carrying value as at March 31, 2018 | 445 | 19 | – | – | 73 | 26 | 27 | 590 |
Accumulated amortization as at April 1, 2017 | (382) | (121) | (21) | (1) | (7) | (49) | (38) | (619) |
Amortization expense | (127) | (79) | – | – | (1) | (12) | (10) | (229) |
Deletion / retirals during the period | 172 | – | 21 | – | – | 29 | 35 | 257 |
Reclassified under assets held for sale (Refer note no 2.1.2) | 56 | 182 | – | 1 | – | 21 | – | 260 |
Translation differences | (8) | (1) | – | – | (2) | (1) | – | (12) |
Accumulated amortization as at March 31, 2018 | (289) | (19) | – | – | (10) | (12) | (13) | (343) |
Carrying value as at April 1, 2017 | 368 | 284 | – | – | 59 | 41 | 24 | 776 |
Carrying value as at March 31, 2018 | 156 | – | – | – | 63 | 14 | 14 | 247 |
Estimated Useful Life (in years) | 2-10 | – | – | – | 50 | 5 | 5 | |
Estimated Remaining Useful Life (in years) | 1-5 | – | – | – | 43 | 3 | 3 |
The amortization expense has been included under depreciation and amortization expense in the consolidated statement of profit and loss.
Research and Development Expenditure
Research and development expense recognized
in net profit in the consolidated Statement of Profit and Loss for the year ended March 31, 2019 and March 31, 2018 was 769
crore and
748 crore respectively.
2.4 INVESTMENTS
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Non-current | ||
Unquoted | ||
Investments carried at fair value through other comprehensive income (refer note no. 2.4.1) | ||
Preference securities | 89 | 116 |
Equity instruments | 11 | 22 |
100 | 138 | |
Investments carried at fair value through profit and loss (refer note no. 2.4.1) | ||
Convertible promissory note | – | 12 |
Preference securities | 23 | – |
Others | 16 | 66 |
39 | 78 | |
Quoted | ||
Investments carried at amortized cost (refer note no. 2.4.2) | ||
Tax free bonds | 1,893 | 1,896 |
1,893 | 1,896 | |
Investments carried at fair value through profit and loss (refer note no. 2.4.3) | ||
Fixed maturity plan securities | 458 | 429 |
458 | 429 | |
Investments carried at fair value through other comprehensive income (refer note no. 2.4.4) | ||
Non convertible debentures | 1,420 | 3,215 |
Government securities | 724 | – |
2,144 | 3,215 | |
Total non-current investments | 4,634 | 5,756 |
Current | ||
Unquoted | ||
Investments carried at fair value through profit or loss (refer note no. 2.4.3) | ||
Liquid mutual fund units | 1,786 | 81 |
1,786 | 81 | |
Investments carried at fair value through other comprehensive income | ||
Commercial Paper (refer note no. 2.4.4) | 495 | 293 |
Certificates of deposit (refer note no. 2.4.4) | 2,482 | 5,269 |
2,977 | 5,562 | |
Quoted | ||
Investment carried at amortized cost (refer note no.2.4.2) | ||
Government Bonds | 18 | 1 |
18 | 1 | |
Investments carried at fair value through other comprehensive income (refer note no. 2.4.4) | ||
Non convertible debentures | 1,846 | 763 |
1,846 | 763 | |
Total current investments | 6,627 | 6,407 |
Total investments | 11,261 | 12,163 |
Aggregate amount of quoted investments | 6,359 | 6,304 |
Market value of quoted investments (including interest accrued) | 6,573 | 6,568 |
Aggregate amount of unquoted investments | 4,902 | 5,859 |
Aggregate amount of impairment made for non-current unquoted investments (including investment in associate) | – | 71 |
Investments carried at amortized cost | 1,911 | 1,897 |
Investments carried at fair value through other comprehensive income | 7,067 | 9,678 |
Investments carried at fair value through profit or loss | 2,283 | 588 |
Uncalled capital commitments outstanding
as at March 31, 2019 and March 31, 2018 was 86 crore and
81 crore, respectively.
Refer to Note no 2.10 for Accounting policies on Financial Instruments.
Details of amounts recorded in Other comprehensive income during the year ended March 31, 2019 and March 31, 2018 are as follows:
(In crore)
Year ended March 31, 2019 | Year ended March 31, 2018 | |||||
Gross | Tax | Net | Gross | Tax | Net | |
Net Gain/(loss) on | ||||||
Non-convertible debentures | 1 | – | 1 | (13) | 2 | (11) |
Certificates of deposit | (5) | 2 | (3) | 16 | (6) | 10 |
Government securities | 5 | (1) | 4 | – | – | – |
Equity and preference securities | 63 | 7 | 70 | 4 | 3 | 7 |
Method of fair valuation:
(In crore)
Class of investment | Method | Fair value as at | |
March 31, 2019 | March 31, 2018 | ||
Liquid mutual fund units | Quoted price | 1,786 | 81 |
Fixed maturity plan securities | Market observable inputs | 458 | 429 |
Tax free bonds and government bonds | Quoted price and market observable inputs | 2,125 | 2,151 |
Non-convertible debentures | Quoted price and market observable inputs | 3,265 | 3,978 |
Government securities | Quoted price and market observable inputs | 724 | – |
Commercial Papers | Market observable inputs | 495 | 293 |
Certificate of deposits | Market observable inputs | 2,482 | 5,269 |
Unquoted equity and preference securities - carried at fair value through other comprehensive income | Discounted cash flows method, Market multiples method, Option pricing model, etc. | 100 | 138 |
Unquoted equity and preference securities - carried at fair value through profit and loss | Discounted cash flows method, Market multiples method, Option pricing model, etc. | 23 | – |
Unquoted convertible promissory note | Discounted cash flows method, Market multiples method, Option pricing model, etc. | – | 12 |
Others | Discounted cash flows method, Market multiples method, Option pricing model, etc. | 16 | 66 |
Total | 11,474 | 12,417 |
Note: Certain quoted investments are classified as Level 2 in the absence of active market for such investments.
2.4.1 Details of investments
The details of investments in preference, equity and other instruments at March 31, 2019 and March 31, 2018 are as follows:
(In crore, except otherwise stated)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Preference securities | ||
Airviz Inc. | 3 | 6 |
2,82,279 (2,82,279) Series A Preferred Stock, fully paid up, par value USD 0.001 each | ||
Whoop Inc | 14 | 20 |
16,48,352 (16,48,352) Series B Preferred Stock, fully paid up, par value USD 0.0001 each | ||
CloudEndure Ltd. | – | 26 |
25,59,290 (25,59,290) Series B Preferred 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 | 25 | 23 |
39,33,910 (39,33,910) Series B Preferred Shares, fully paid up, par value USD 0.00001 each | ||
13,35,707 (Nil) Series C Preferred Shares, fully paid up, par value USD 0.00001 each | ||
Trifacta Inc. | 27 | 21 |
11,80,358 (11,80,358) Series C-1 Preferred Stock | ||
Tidalscale | 23 | – |
36,74,269 (Nil) Series B Preferred Stock | ||
Ideaforge | 10 | 10 |
5,402 (5,402) Series A compulsorily convertible cumulative Preference shares of ![]() |
||
Total investment in preference securities | 112 | 116 |
Equity Instruments | ||
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 ![]() ![]() |
||
Unsilo A/S | 10 | 21 |
69,894 (69,894) Equity Shares, fully paid up, par value DKK 1 each | ||
Ideaforge | – | – |
100 (100) equity shares at ![]() |
||
Total investment in equity instruments | 11 | 22 |
Others | ||
Stellaris Venture Partners India | 16 | 7 |
Vertex Ventures US Fund L.L.P | – | 59 |
Total investment in others | 16 | 66 |
Convertible promissory note | ||
Tidalscale* | – | 12 |
Total investment in convertible promissory note | – | 12 |
Total | 139 | 216 |
* | During the quarter ended September 30, 2018; Investment in Convertible promissory note of Tidalscale was converted into Series B Preferred Stock |
2.4.2 Details of investments in tax free bonds and government bonds
The balances held in tax free bonds as at March 31, 2019 and March 31, 2018 are as follows:
(In crore, except as otherwise stated)
Particulars | As at March 31, 2019 | As at March 31, 2018 | |||
Face Value ![]() |
Units | Amount | Units | Amount | |
7.04% Indian Railway Finance Corporation Limited Bonds 03MAR2026 | 1,000,000 | 470 | 50 | 470 | 50 |
7.16% Power Finance Corporation Limited Bonds 17JUL2025 | 1,000,000 | 1,000 | 105 | 1,000 | 106 |
7.18% Indian Railway Finance Corporation Limited Bonds 19FEB2023 | 1,000 | 2,000,000 | 201 | 2,000,000 | 201 |
7.28% Indian Railway Finance Corporation Limited Bonds 21DEC2030 | 1,000 | 422,800 | 42 | 422,800 | 42 |
7.28% National Highways Authority of India Limited Bonds 18SEP2030 | 1,000,000 | 3,300 | 342 | 3,300 | 343 |
7.34% Indian Railway Finance Corporation Limited Bonds 19FEB2028 | 1,000 | 2,100,000 | 210 | 2,100,000 | 211 |
7.35% National Highways Authority of India Limited Bonds 11JAN2031 | 1,000 | 571,396 | 57 | 571,396 | 57 |
7.93% Rural Electrification Corporation Limited Bonds 27MAR2022 | 1,000 | 200,000 | 21 | 200,000 | 21 |
8.00% Indian Railway Finance Corporation Limited Bonds 23FEB2022 | 1,000 | 150,000 | 15 | 150,000 | 15 |
8.10% Indian Railway Finance Corporation Limited Bonds 23FEB2027 | 1,000 | 500,000 | 52 | 500,000 | 52 |
8.20% Power Finance Corporation Limited Bonds 01FEB2022 | 1,000 | 500,000 | 50 | 500,000 | 50 |
8.26% India Infrastructure Finance Company Limited Bonds 23AUG2028 | 1,000,000 | 1,000 | 100 | 1,000 | 100 |
8.30% National Highways Authority of India Limited Bonds 25JAN2027 | 1,000 | 500,000 | 53 | 500,000 | 53 |
8.35% National Highways Authority of India Limited Bonds 22NOV2023 | 1,000,000 | 1,500 | 150 | 1,500 | 150 |
8.46% India Infrastructure Finance Company Limited Bonds 30AUG2028 | 1,000,000 | 2,000 | 200 | 2,000 | 200 |
8.46% Power Finance Corporation Limited Bonds 30AUG2028 | 1,000,000 | 1,500 | 150 | 1,500 | 150 |
8.48% India Infrastructure Finance Company Limited Bonds 05SEP2028 | 1,000,000 | 450 | 45 | 450 | 45 |
8.54% Power Finance Corporation Limited Bonds 16NOV2028 | 1,000 | 500,000 | 50 | 500,000 | 50 |
Total investments in tax-free bonds | 1,893 | 1,896 |
The balances held in government bonds as at March 31, 2019 and March 31, 2018 are as follows:
(In crore, except as otherwise stated)
Particulars | As at March 31, 2019 | As at March 31, 2018 | |||
Face Value PHP | Units | Amount | Units | Amount | |
Treasury Notes Phillippines Govt. 29MAY2019 | 100 | 45,000 | 6 | – | – |
Treasury Notes PIBL1217E082 MAT DATE 09 May 2018 | 100 | – | – | 1,00,000 | 1 |
Treasury Notes Phillippines Govt. 17APRIL2019 | 100 | 90,000 | 12 | – | – |
Total investments in government bonds | 135,000 | 18 | 100,000 | 1 |
2.4.3 Details of investments in liquid mutual fund units and fixed maturity plans
The balances held in liquid mutual fund units as at March 31, 2019 and March 31, 2018 are as follows:
(In crore, except as otherwise stated)
Particulars | As at March 31, 2019 | As at March 31, 2018 | ||
Units | Amount | Units | Amount | |
Aditya Birla Sun liquid fund - Growth-Direct Plan | 13,32,847 | 40 | 16,31,554 | 45 |
Aditya Birla Sun life Corporate Bond Fund -Growth -Direct Plan | 1,96,00,407 | 141 | – | – |
Aditya Birla Sun life Money Manager Fund -Growth -Direct Plan | 79,75,385 | 201 | – | – |
BSL Cash Manager - Growth | 1,11,344 | 5 | – | – |
HDFC Money market Fund- Direct Plan- Growth Option | 7,72,637 | 303 | – | – |
HDFC Liquid fund-Direct Plan growth option | 68,035 | 25 | – | – |
ICICI Prudential Liquid –Direct plan –Growth | – | – | 13,65,687 | 36 |
ICICI Prudential Savings Fund- Direct Plan-Growth | 83,40,260 | 301 | – | – |
IDFC Corporate Bond - Fund Direct Plan | 13,14,84,437 | 169 | – | – |
Kotak Money Market Fund- Direct Plan- Growth Option | 9,73,751 | 301 | – | – |
SBI Premier Liquid Fund -Direct Plan -Growth | 10,25,678 | 300 | – | – |
Total investments in liquid mutual fund units | 17,16,84,781 | 1,786 | 29,97,241 | 81 |
The balances held in fixed maturity plans as at March 31, 2019 and March 31, 2018 are as follows:
(In crore, except as otherwise stated)
Particulars | As at March 31, 2019 | As at March 31, 2018 | ||
Units | Amount | Units | Amount | |
Aditya Birla Sun Life Fixed Term Plan- Series OD 1145 Days- GR Direct | 6,00,00,000 | 70 | 6,00,00,000 | 65 |
Aditya Birla Sun Life Fixed Term Plan- Series OE 1153 Days- GR Direct | 2,50,00,000 | 29 | 2,50,00,000 | 27 |
HDFC FMP 1155D Feb 2017- Direct Growth- Series 37 | 3,80,00,000 | 44 | 3,80,00,000 | 41 |
HDFC FMP 1169D Feb 2017- Direct- Quarterly Dividend- Series 37 | 4,50,00,000 | 45 | 4,50,00,000 | 45 |
ICICI FMP Series 80-1194 D Plan F Div | 5,50,00,000 | 63 | 5,50,00,000 | 59 |
ICICI Prudential Fixed Maturity Plan Series 80- 1187 Days Plan G Direct Plan | 4,20,00,000 | 49 | 4,20,00,000 | 45 |
ICICI Prudential Fixed Maturity Plan Series 80- 1253 Days Plan J Direct Plan | 3,00,00,000 | 35 | 3,00,00,000 | 32 |
IDFC Fixed Term Plan Series 129 Direct Plan- Growth 1147 Days | 1,00,00,000 | 12 | 1,00,00,000 | 11 |
IDFC Fixed Term Plan Series 131 Direct Plan- Growth 1139 Days | 1,50,00,000 | 17 | 1,50,00,000 | 16 |
Kotak FMP Series 199 Direct- Growth | 3,50,00,000 | 40 | 3,50,00,000 | 37 |
Reliance Fixed Horizon Fund- XXXII Series 8- Dividend Plan | 5,00,00,000 | 54 | 5,00,00,000 | 51 |
Total investments in fixed maturity plan securities | 40,50,00,000 | 458 | 40,50,00,000 | 429 |
2.4.4 Details of investments in non convertible debentures, government securities, certificates of deposit and commercial paper
The balances held in non convertible debenture units as at March 31, 2019 and March 31, 2018 is as follows:
(In crore, except as otherwise stated)
Particulars | As at March 31, 2019 | As at March 31, 2018 | |||
Face Value ![]() |
Units | Amount | Units | Amount | |
7.48% Housing Development Finance Corporation Ltd 18NOV2019 | 1,00,00,000/- | 50 | 51 | 50 | 51 |
7.58% LIC Housing Finance Ltd 28FEB2020 | 10,00,000/- | 1,000 | 101 | 1,000 | 101 |
7.58% LIC Housing Finance Ltd 11JUN2020 | 10,00,000/- | 500 | 51 | 500 | 52 |
7.59% LIC Housing Finance Ltd 14OCT2021 | 10,00,000/- | 3,000 | 306 | 3,000 | 306 |
7.75% LIC Housing Finance Ltd 27AUG2021 | 10,00,000/- | 1,250 | 127 | 1,250 | 129 |
7.78% Housing Development Finance Corporation Ltd 24MAR2020 | 1,00,00,000/- | 100 | 100 | 100 | 99 |
7.79% LIC Housing Finance Ltd 19JUN2020 | 10,00,000/- | 500 | 53 | 500 | 53 |
7.80% Housing Development Finance Corporation Ltd 11NOV2019 | 1,00,00,000/- | 150 | 154 | 150 | 153 |
7.81% LIC Housing Finance Ltd 27APR2020 | 10,00,000/- | 2,000 | 214 | 2,000 | 214 |
7.95% Housing Development Finance Corporation Ltd 23SEP2019 | 1,00,00,000/- | 50 | 52 | 50 | 53 |
8.02% LIC Housing Finance Ltd 18FEB2020 | 10,00,000/- | 500 | 51 | 500 | 50 |
8.26% Housing Development Finance Corporation Ltd 12AUG2019 | 1,00,00,000/- | 100 | 105 | 100 | 105 |
8.34% Housing Development Finance Corporation Ltd 06MAR2019 | 1,00,00,000/- | – | – | 200 | 215 |
8.37% LIC Housing Finance Ltd 03OCT2019 | 10,00,000/- | 2,000 | 216 | 2,000 | 216 |
8.37% LIC Housing Finance Ltd 10MAY2021 | 10,00,000/- | 500 | 54 | 500 | 54 |
8.46% Housing Development Finance Corporation Ltd 11MAR2019 | 1,00,00,000/- | – | – | 50 | 54 |
8.47% LIC Housing Finance Ltd 21JAN2020 | 10,00,000/- | 500 | 51 | 500 | 51 |
8.49% Housing Development Finance Corporation Ltd 27APR2020 | 5,00,000/- | 900 | 49 | 900 | 49 |
8.50% Housing Development Finance Corporation Ltd 31AUG2020 | 1,00,00,000/- | 100 | 105 | 100 | 108 |
8.54% IDFC Bank Ltd 30MAY2018 | 10,00,000/- | – | – | 1,500 | 194 |
8.59% Housing Development Finance Corporation Ltd 14JUN2019 | 1,00,00,000/- | 50 | 51 | 50 | 51 |
8.60% LIC Housing Finance Ltd 22JUL2020 | 10,00,000/- | 1,000 | 107 | 1,000 | 107 |
8.60% LIC Housing Finance Ltd 29JUL2020 | 10,00,000/- | 1,750 | 186 | 1,750 | 188 |
8.61% LIC Housing Finance Ltd 11DEC2019 | 10,00,000/- | 1,000 | 103 | 1,000 | 104 |
8.66% IDFC Bank Ltd 25JUN2018 | 10,00,000/- | – | – | 1,520 | 196 |
8.66% IDFC Bank Ltd 27DEC2018 | 10,00,000/- | – | – | 400 | 52 |
8.72% Housing Development Finance Corporation Ltd 15APR2019 | 1,00,00,000/- | 75 | 75 | 75 | 76 |
8.75% Housing Development Finance Corporation Ltd 13JAN2020 | 5,00,000/- | 5,000 | 256 | 5,000 | 256 |
8.75% LIC Housing Finance Ltd 14JAN2020 | 10,00,000/- | 1,070 | 110 | 1,070 | 112 |
8.75% LIC Housing Finance Ltd 21DEC2020 | 10,00,000/- | 1,000 | 101 | 1,000 | 102 |
8.80% LIC Housing Finance Ltd 24Dec2020 | 10,00,000/- | 650 | 67 | – | – |
8.97% LIC Housing Finance Ltd 29OCT2019 | 10,00,000/- | 500 | 52 | 500 | 52 |
9.45% Housing Development Finance Corporation Ltd 21AUG2019 | 10,00,000/- | 3,000 | 318 | 3,000 | 323 |
9.65% Housing Development Finance Corporation Ltd 19JAN2019 | 10,00,000/- | – | – | 500 | 52 |
Total investments in non-convertible debentures | 28,295 | 3,266 | 31,815 | 3,978 |
The balances held in government securities as at March 31, 2019 and March 31, 2018 are as follows:
(In crore, except as otherwise stated)
Particulars | As at March 31, 2019 | As at March 31, 2018 | |||
Face Value ![]() |
Units | Amount | Units | Amount | |
7.17% Government of India 8JAN2028 | 10,000/- | 6,75,000 | 672 | – | – |
7.95% Government of India 28AUG2032 | 10,000/- | 50,000 | 52 | – | – |
Total investments in government securities | 7,25,000 | 724 | – | – |
The balances held in certificates of deposit as at March 31, 2019 and March 31, 2018 are as follows:
(In crore, except as otherwise stated)
Particulars | As at March 31, 2019 | As at March 31, 2018 | |||
Face Value ![]() |
Units | Amount | Units | Amount | |
Axis Bank | 1,00,000/- | 90,000 | 872 | 2,08,000 | 1,985 |
HDFC Bank | 1,00,000/- | – | – | 15,000 | 147 |
ICICI Bank | 1,00,000/- | 75,000 | 738 | 1,26,000 | 1,186 |
IndusInd Bank | 1,00,000/- | – | – | 1,35,000 | 1,271 |
Kotak Bank | 1,00,000/- | 77,000 | 747 | 70,000 | 680 |
Vijaya Bank | 1,00,000/- | 12,500 | 125 | – | – |
Total investments in certificates of deposit | 2,54,500 | 2,482 | 5,54,000 | 5,269 |
The balances held in commercial paper as at March 31, 2019 and March 31, 2018 are as follows:
(In crore, except as otherwise stated)
Particulars | As at March 31, 2019 | As at March 31, 2018 | |||
Face Value ![]() |
Units | Amount | Units | Amount | |
LIC | 5,00,000/- | 10,000 | 495 | 6,000 | 293 |
Total investments in commercial paper | 10,000 | 495 | 6,000 | 293 |
2.5 LOANS
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Non Current | ||
Unsecured, considered good | ||
Other loans | ||
Loans to employees | 19 | 36 |
19 | 36 | |
Unsecured, considered doubtful | ||
Other loans | ||
Loans to employees | 24 | 17 |
43 | 53 | |
Less: Allowance for doubtful loans to employees | 24 | 17 |
Total non-current loans | 19 | 36 |
Current | ||
Unsecured, considered good | ||
Other loans | ||
Loans to employees | 241 | 239 |
Total current loans | 241 | 239 |
Total loans | 260 | 275 |
2.6 OTHER FINANCIAL ASSETS
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Non Current | ||
Security deposits (1) | 52 | 53 |
Rental deposits (1) | 193 | 171 |
Restricted deposits(1) | 67 | 60 |
Total non-current other financial assets | 312 | 284 |
Current | ||
Security deposits (1) | 4 | 9 |
Rental deposits (1) | 15 | 13 |
Restricted deposits (1) | 1,671 | 1,535 |
Unbilled revenues (1)# | 2,093 | 4,261 |
Interest accrued but not due (1) | 905 | 766 |
Foreign currency forward and options contracts (2) (3) | 336 | 16 |
Escrow and other deposits pertaining to buyback (Refer note 2.11)(1) | 257 | – |
Others (1) | 224 | 84 |
Total current other financial assets | 5,505 | 6,684 |
Total other financial assets | 5,817 | 6,968 |
(1) Financial assets carried at amortized cost | 5,481 | 6,952 |
(2) Financial assets carried at fair value through other comprehensive income | 37 | 12 |
(3) Financial assets carried at fair value through profit or loss | 299 | 4 |
Restricted deposits represent deposits with financial institutions to settle employee-related obligations as and when they arise during the normal course of business.
# Classified as financial asset as right to consideration is unconditional upon passage of time.
2.7 TRADE RECEIVABLES
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Current | ||
Unsecured | ||
Considered good (1) | 14,827 | 13,142 |
Considered doubtful | 483 | 354 |
15,310 | 13,496 | |
Less: Allowance for credit loss | 483 | 354 |
Total trade receivables | 14,827 | 13,142 |
(1) Includes dues from companies where directors are interested | – | – |
2.8 CASH AND CASH EQUIVALENTS
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Balances with banks | ||
In current and deposit accounts | 14,197 | 13,168 |
Cash on hand | – | – |
Others | ||
Deposits with financial institutions | 5,371 | 6,650 |
Total cash and cash equivalents | 19,568 | 19,818 |
Cash and cash equivalents included under assets classified under held for sale (refer note no 2.1.2) | – | 53 |
19,568 | 19,871 | |
Balances with banks in unpaid dividend accounts | 29 | 22 |
Deposit with more than 12 months maturity | 6,582 | 6,332 |
Balances with banks held as margin money deposits against guarantees | 114 | 356 |
Cash and cash equivalents as at March 31, 2019
and March 31, 2018 include restricted cash and bank balances of 358 crore and
533 crore, respectively. The restrictions
are primarily on account of bank balances held by irrevocable trusts controlled by the company, bank balances held as margin money
deposits against guarantees and balances held in unpaid dividend bank accounts.
The deposits maintained by the Group with banks and financial institutions comprise of time deposits, which can be withdrawn by the Group at any point without prior notice or penalty on the principal.
The details of balances as on Balance Sheet dates with banks are as follows:
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Current accounts | ||
ANZ Bank, Taiwan | 1 | 9 |
Axis Bank, India | 1 | – |
Banamex Bank, Mexico | 8 | 2 |
Banamex Bank, Mexico (U.S. Dollar account) | 27 | 13 |
Bank of America, Mexico | 102 | 25 |
Bank of America, USA | 1,162 | 1,172 |
Bank of Baroda, Mauritius | 1 | 1 |
Bank of Leumni , Israel | 6 | – |
Bank of Tokyo-Mitsubishi UFJ Ltd., Japan | 1 | 1 |
Bank Zachodni WBK S.A, Poland | – | 17 |
Barclays Bank, UK | 39 | 40 |
BNP Paribas Bank, Norway | 24 | 88 |
China Merchants Bank, China | 2 | 6 |
Citibank N.A., Australia | 91 | 223 |
Citibank N.A., Brazil | 31 | 14 |
Citibank N.A., China | 65 | 116 |
Citibank N.A., China (U.S. Dollar account) | 14 | 9 |
Citibank N.A., Costa Rica | 1 | 1 |
Citibank N.A., Dubai | 10 | 6 |
Citibank N.A., EEFC (U.S. Dollar account) | 2 | 4 |
Citibank N.A., Europe | 1 | – |
Citibank N.A., Hungary | 1 | 6 |
Citibank N.A., India | 2 | 2 |
Citibank N.A., Japan | 22 | 18 |
Citibank N.A., New Zealand | 3 | 11 |
Citibank N.A., Portugal | 10 | 8 |
Citibank N.A., Romania | 1 | 2 |
Citibank N.A., Singapore | 77 | 4 |
Citibank N.A., South Africa | 18 | 33 |
Citibank N.A., South Africa (Euro account) | 1 | 1 |
Citibank N.A., South Korea | 17 | 2 |
Citibank N.A., USA | 8 | 4 |
Citibank N.A., Luxemberg | 4 | – |
Commercial Bank, Germany | 1 | – |
Danske Bank, Sweden | 1 | 1 |
Deutsche Bank, Belgium | 16 | 27 |
Deutsche Bank, Czech Republic | 20 | 16 |
Deutsche Bank, Czech Republic (Euro account) | 6 | 3 |
Deutsche Bank, Czech Republic (U.S. Dollar account) | 24 | 2 |
Deutsche Bank, EEFC (Australian Dollar account) | 3 | 2 |
Deutsche Bank, EEFC (Euro account) | 23 | 34 |
Deutsche Bank, EEFC (Swiss Franc account) | 5 | 2 |
Deutsche Bank, EEFC (U.S. Dollar account) | 217 | 32 |
Deutsche Bank, EEFC (United Kingdom Pound Sterling account) | 8 | 9 |
Deutsche Bank, France | 20 | 19 |
Deutsche Bank, Germany | 111 | 100 |
Deutsche Bank, Hong Kong | 1 | 1 |
Deutsche Bank, India | 45 | 44 |
Deutsche Bank, Malaysia | 1 | 5 |
Deutsche Bank, Netherlands | 34 | 15 |
Deutsche Bank, Philippines | 4 | 25 |
Deutsche Bank, Philippines (U.S. Dollar account) | 1 | 3 |
Deutsche Bank, Poland | 28 | 18 |
Deutsche Bank, Poland (Euro account) | 8 | 8 |
Deutsche Bank, Russia | 3 | 3 |
Deutsche Bank, Russia (U.S. Dollar account) | – | 5 |
Deutsche Bank, Singapore | 15 | 17 |
Deutsche Bank, Spain | 1 | 1 |
Deutsche Bank, Switzerland | 33 | 29 |
Deutsche Bank, United Kingdom | 42 | 79 |
Deutsche Bank, USA | 61 | 2 |
Deutsche Bank, Switzerland ( US Dollar account) | 1 | – |
HSBC Bank, (U.S. Dollar account) | 1 | – |
Hua Xia Bank, RMB | 1 | – |
HSBC Bank, Dubai | – | 2 |
HSBC Bank, Hong Kong | 1 | 2 |
HSBC Bank, United Kingdom | 19 | 6 |
HSBC Bank, India | 3 | – |
ICICI Bank, EEFC (Euro account) | 7 | 1 |
ICICI Bank, EEFC (U.S. Dollar account) | 34 | 40 |
ICICI Bank, EEFC (United Kingdom Pound Sterling account) | 6 | 11 |
ICICI Bank, India | 42 | 52 |
Nordbanken, Sweden | 45 | 50 |
Nordea | 17 | – |
Punjab National Bank, India | 2 | 12 |
Kotak Bank | 5 | – |
Raiffeisen Bank, Czech Republic | – | 5 |
Raiffeisen Bank, Romania | – | 3 |
Royal Bank of Canada, Canada | 136 | 166 |
Santander Bank, Argentina | – | 1 |
Silicon Valley Bank, USA | 13 | – |
Splitska Banka D.D., Société Générale Group, Croatia | 14 | 8 |
State Bank of India, India | 3 | 1 |
The Saudi British Bank, Saudi Arabia | 3 | 3 |
Washington Trust Bank | 48 | – |
2,886 | 2,703 |
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Deposit accounts | ||
Axis Bank | 925 | – |
Bank BGZ BNP Paribas S.A. | 235 | 144 |
Barclays Bank | 500 | 200 |
Canara Bank | 85 | 84 |
Citibank | 176 | 224 |
Deutsche Bank, AG | – | 24 |
Deutsche Bank, Poland | 126 | 211 |
HDFC Bank | 50 | 2,498 |
HSBC Bank | 200 | – |
ICICI Bank | 3,177 | 3,497 |
IDBI Bank | – | 250 |
IDFC Bank | 2,450 | 1,500 |
IndusInd Bank | 550 | 1,000 |
Kotak Mahindra Bank | 500 | – |
South Indian Bank | 173 | 450 |
Standard Chartered Bank | 2,000 | – |
Washington trust bank | 21 | – |
Yes Bank | – | 5 |
11,168 | 10,087 | |
Unpaid dividend accounts | ||
Axis Bank - Unpaid dividend account | 4 | 1 |
HDFC Bank - Unpaid dividend account | – | 1 |
ICICI Bank - Unpaid dividend account | 25 | 20 |
29 | 22 | |
Margin money deposits against guarantees | ||
Canara Bank | 45 | 151 |
Citibank | – | 3 |
ICICI Bank | 69 | 202 |
114 | 356 | |
Deposits with financial institutions | ||
HDFC Limited | 4,146 | 5,450 |
LIC Housing Finance Limited | 1,225 | 1,200 |
5,371 | 6,650 | |
Total cash and cash equivalents | 19,568 | 19,818 |
2.9 OTHER ASSETS
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Non Current | ||
Capital advances | 489 | 421 |
Advances other than capital advances | ||
Prepaid gratuity (refer note no. 2.20.1) | 42 | 43 |
Others | ||
Withholding taxes and others | 929 | 1,428 |
Prepaid expenses | 162 | 111 |
Deferred Contract Cost | 277 | 262 |
Advance for business acqusition (refer note no. 2.1.1) | 206 | – |
Total Non-Current other assets | 2,105 | 2,265 |
Current | ||
Advances other than capital advances | ||
Payment to vendors for supply of goods | 109 | 119 |
Others | ||
Unbilled revenues # | 3,281 | – |
Withholding taxes and others | 1,488 | 1,032 |
Prepaid expenses | 751 | 472 |
Deferred Contract Cost | 58 | 44 |
Total Current other assets | 5,687 | 1,667 |
Total other assets | 7,792 | 3,932 |
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
and Cenvat recoverable from Government of India. Cenvat recoverable includes 523 crore which are pending adjudication. The Group
expects these amounts to be sustainable on adjudication and recoverable on final resolution.
# | Classified as non financial asset as the contractual right to consideration is dependent on completion of contractual milestones. |
2.10 FINANCIAL INSTRUMENTS
Accounting policy
2.10.1 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.
2.10.2 Subsequent measurement
a. Non-derivative financial instruments
(i) Financial assets carried at amortized cost
A financial asset is subsequently measured at amortized 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 (FVOCI)
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 Group 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.
(iii) Financial assets at fair value through profit or loss
A financial asset which is not classified in any of the above categories is 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 or 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 as 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 consolidated 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 consolidated 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 Consolidated 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 Consolidated 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 and buyback of ordinary shares 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.
2.10.3 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.
2.10.4 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.
Refer to table 'Financial instruments by category' below for the disclosure on carrying value and fair value of financial assets and liabilities. For financial assets and liabilities maturing within one year from the Balance Sheet date and which are not carried at fair value, the carrying amounts approximates fair value due to the short maturity of those instruments.
2.10.5 Impairment
The Group recognizes loss allowances using the expected credit loss (ECL) model for the financial assets and unbilled revenue which are not fair valued through profit or loss. Loss allowance for trade receivables and unbilled revenues with no significant financing component is measured at an amount equal to lifetime ECL. For all other financial assets, ECLs 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 ECLs (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 Consolidated Statement of Profit and Loss.
Financial instruments by category
The carrying value and fair value of financial instruments by categories as at March 31, 2019 are as follows:
(In crore)
Particulars | Amortized 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 no. 2.8) | 19,568 | – | – | – | – | 19,568 | 19,568 |
Investments (Refer Note no. 2.4) | |||||||
Equity and preference securities | – | – | 23 | 100 | – | 123 | 123 |
Tax-free bonds and government bonds | 1,911 | – | – | – | – | 1,911 | 2,125(1) |
Liquid mutual fund units | – | – | 1,786 | – | – | 1,786 | 1,786 |
Non convertible debentures | – | – | – | – | 3,266 | 3,266 | 3,266 |
Government securities | – | – | – | – | 724 | 724 | 724 |
Commercial paper | – | – | – | – | 495 | 495 | 495 |
Certificates of deposit | – | – | – | – | 2,482 | 2,482 | 2,482 |
Other investments | – | – | 16 | – | – | 16 | 16 |
Fixed maturity plan securities | – | – | 458 | – | – | 458 | 458 |
Trade receivables (Refer Note no. 2.7) | 14,827 | – | – | – | – | 14,827 | 14,827 |
Loans (Refer Note no. 2.5) | 260 | – | – | – | – | 260 | 260 |
Other financials assets (Refer Note no. 2.6)(3) | 5,481 | – | 299 | – | 37 | 5,817 | 5,733(2) |
Total | 42,047 | – | 2,582 | 100 | 7,004 | 51,733 | 51,863 |
Liabilities: | |||||||
Trade payables | 1,655 | – | – | – | – | 1,655 | 1,655 |
Other financial liabilities (Refer Note no. 2.12) | 8,731 | – | 205 | – | – | 8,936 | 8,936 |
Total | 10,386 | – | 205 | – | – | 10,591 | 10,591 |
(1) On account of fair value changes including interest accrued
(2) Excludes interest accrued on tax free bonds and government bonds
(3) | Excludes unbilled revenue for fixed price development contracts where right to consideration is conditional on factors other than passage of time |
The carrying value and fair value of financial instruments by categories as at March 31, 2018 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 no. 2.8) | 19,818 | – | – | – | – | 19,818 | 19,818 |
Investments (Refer Note no. 2.4) | |||||||
Equity and preference securities | – | – | – | 138 | – | 138 | 138 |
Tax-free bonds and government bonds | 1,897 | – | – | – | – | 1,897 | 2,151(1) |
Liquid mutual fund units | – | – | 81 | – | – | 81 | 81 |
Non convertible debentures | – | – | – | – | 3,978 | 3,978 | 3,978 |
Certificates of deposit | – | – | – | – | 5,269 | 5,269 | 5,269 |
Commercial paper | – | – | – | – | 293 | 293 | 293 |
Convertible promissory note | – | – | 12 | – | – | 12 | 12 |
Other investments | – | – | 66 | – | – | 66 | 66 |
Fixed maturity plan securities | – | – | 429 | – | – | 429 | 429 |
Trade receivables (Refer Note no. 2.7) | 13,142 | – | – | – | – | 13,142 | 13,142 |
Loans (Refer Note no. 2.5) | 275 | – | – | – | – | 275 | 275 |
Other financials assets (Refer Note no. 2.6) | 6,952 | – | 4 | – | 12 | 6,968 | 6,884(2) |
Total | 42,084 | – | 592 | 138 | 9,552 | 52,366 | 52,536 |
Liabilities: | |||||||
Trade payables | 694 | – | – | – | – | 694 | 694 |
Other financial liabilities (Refer Note no. 2.12) | 5,442 | – | 93 | – | 3 | 5,538 | 5,538 |
Total | 6,136 | – | 93 | – | 3 | 6,232 | 6,232 |
(1) On account of fair value changes including interest accrued
(2) Excludes interest accrued on tax free bonds and government bonds
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 at March 31, 2019:
(In crore)
As at March 31, 2019 | Fair value measurement at end of the reporting period using | |||
Level 1 | Level 2 | Level 3 | ||
Assets | ||||
Investments in liquid mutual funds (Refer Note no. 2.4) | 1,786 | 1,786 | – | – |
Investments in tax-free bonds (Refer Note no. 2.4) | 2,107 | 1,836 | 271 | – |
Investments in government bonds (Refer Note no. 2.4) | 18 | 18 | – | – |
Investments in equity instruments (Refer Note no. 2.4) | 11 | – | – | 11 |
Investments in preference securities (Refer Note no. 2.4) | 112 | – | – | 112 |
Investments in non convertible debentures (Refer Note no. 2.4) | 3,266 | 1,780 | 1,486 | – |
Investments in certificates of deposit (Refer Note no. 2.4) | 2,482 | – | 2,482 | – |
Investment in Government securities | 724 | 724 | – | – |
Investments in fixed maturity plan securities (Refer Note no. 2.4) | 458 | – | 458 | – |
Investment in Commercial paper | 495 | – | 495 | – |
Other investments (Refer Note no. 2.4) | 16 | – | – | 16 |
Derivative financial instruments - gain on outstanding foreign currency forward and option contracts (Refer Note no. 2.6) | 336 | – | 336 | – |
Liabilities | ||||
Derivative financial instruments - loss on outstanding foreign currency forward and option contracts (Refer Note no. 2.12) | 15 | – | 15 | – |
Liability towards contingent consideration (Refer note no. 2.12)(1) | 190 | – | – | 190 |
(1) Discount rate pertaining to contingent consideration ranges from 9% to 16% .
During the year ended March 31, 2019, tax free
bonds and non-convertible debentures of 336 crore were transferred from Level 2 to Level 1 of fair value hierarchy, since
these were valued based on quoted price and
746 crore was transferred from Level 1 to Level 2 of fair value hierarchy, since
these were valued based on market observable inputs.
The fair value hierarchy of assets and liabilities as at March 31, 2018 was as follows:
(In crore)
As at March 31, 2018 | Fair value measurement at end of the reporting period using | |||
Level 1 | Level 2 | Level 3 | ||
Assets | ||||
Investments in liquid mutual funds (Refer Note no. 2.4) | 81 | 81 | – | – |
Investments in tax free bonds (Refer Note no. 2.4) | 2,150 | 1,878 | 272 | – |
Investments in government bonds (Refer Note no. 2.4) | 1 | 1 | – | – |
Investments in equity instruments (Refer Note no. 2.4) | 22 | – | – | 22 |
Investments in preference securities (Refer Note no. 2.4) | 116 | – | – | 116 |
Investments in non convertible debentures (Refer Note no. 2.4) | 3,978 | 2,695 | 1,283 | – |
Investments in certificates of deposit (Refer Note no. 2.4) | 5,269 | – | 5,269 | – |
Investments in commercial paper (Refer Note no. 2.4) | 293 | – | 293 | – |
Investments in fixed maturity plan securities (Refer Note no. 2.4) | 429 | – | 429 | – |
Investments in convertible promissory note (Refer Note no. 2.4) | 12 | – | – | 12 |
Other investments (Refer Note no. 2.4) | 66 | – | – | 66 |
Derivative financial instruments - gain on outstanding foreign currency forward and option contracts (Refer Note no. 2.6) | 16 | – | 16 | – |
Liabilities | ||||
Derivative financial instruments - loss on outstanding foreign currency forward and option contracts (Refer Note no. 2.12) | 42 | – | 42 | – |
Liability towards contingent consideration (Refer note no. 2.12)(1) | 54 | – | – | 54 |
(1)Discounted contingent consideration at 10%
During the year ended March 31, 2018, tax free
bonds and non-convertible debentures of 1,797 crore were transferred from Level 2 to Level 1 of fair value hierarchy, since
these were valued based on quoted price and
850 crore was transferred from Level 1 to Level 2 of fair value hierarchy, since
these were valued based on market observable inputs.
A one percentage point change in the unobservable inputs used in fair valuation of Level 3 assets and liabilities does not have a significant impact in its value.
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 analyses the foreign currency risk from monetary assets and liabilities as at March 31, 2019:
(In crore)
Particulars | U.S. dollars | Euro | United Kingdom Pound Sterling | Australian dollars | Other currencies | Total |
Cash and cash equivalents | 1,640 | 266 | 110 | 213 | 1,113 | 3,342 |
Trade receivables | 9,950 | 1,844 | 1,025 | 527 | 971 | 14,317 |
Other financial assets , loans and other current assets | 4,189 | 873 | 285 | 310 | 748 | 6,405 |
Trade payables | (708) | (128) | (139) | (80) | (107) | (1,162) |
Other financial liabilities | (4,201) | (560) | (217) | (382) | (759) | (6,119) |
Net assets / (liabilities) | 10,870 | 2,295 | 1,064 | 588 | 1,966 | 16,783 |
The following table analyses the foreign currency risk from monetary assets and liabilities as at March 31, 2018:
(In crore)
Particulars | U.S. dollars | Euro | United Kingdom Pound Sterling | Australian dollars | Other currencies | Total |
Cash and cash equivalents | 1,287 | 218 | 147 | 353 | 1,192 | 3,197 |
Trade receivables | 8,317 | 1,751 | 845 | 788 | 781 | 12,482 |
Other financial assets (including loans) | 2,636 | 663 | 330 | 173 | 470 | 4,272 |
Trade payables | (273) | (81) | (114) | (30) | (58) | (556) |
Other financial liabilities | (2,289) | (417) | (215) | (273) | (596) | (3,790) |
Net assets / (liabilities) | 9,678 | 2,134 | 993 | 1,011 | 1,789 | 15,605 |
Sensitivity analysis between Indian rupee and U.S. Dollar
Particulars | Year ended March 31, | |
2019 | 2018 | |
Impact on the Group's incremental operating margins | 0.47% | 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 details in respect of outstanding foreign currency forward and option contracts are as follows:
As at | As at | |||
March 31, 2019 | March 31, 2018 | |||
In million | In ![]() |
In million | In ![]() | |
Derivatives designated as cash flow hedges | ||||
Option Contracts | ||||
In Australian dollars | 120 | 588 | 60 | 300 |
In Euro | 135 | 1,049 | 100 | 808 |
In United Kingdom Pound Sterling | 25 | 226 | 20 | 184 |
Other derivatives | ||||
Forward contracts | ||||
In Australian dollars | 8 | 37 | 5 | 25 |
In Canadian dollars | 13 | 68 | 20 | 99 |
In Euro | 176 | 1,367 | 91 | 735 |
In Japanese Yen | 550 | 34 | 550 | 34 |
In New Zealand dollars | 16 | 75 | 16 | 76 |
In Norwegian Krone | 40 | 32 | 40 | 34 |
In Singapore dollars | 140 | 716 | 5 | 25 |
In South African Rand | – | – | 25 | 14 |
In Swedish Krona | 50 | 37 | 50 | 40 |
In Swiss Franc | 25 | 172 | 21 | 146 |
In U.S. dollars | 955 | 6,608 | 623 | 4,061 |
In United Kingdom Pound Sterling | 80 | 724 | 51 | 466 |
Option Contracts | ||||
In Australian dollars | 10 | 49 | 20 | 100 |
In Canadian Dollars | 13 | 69 | – | – |
In Euro | 60 | 466 | 45 | 363 |
In Swiss Franc | 5 | 35 | 5 | 33 |
In U.S. dollars | 433 | 2,995 | 320 | 2,086 |
In United Kingdom Pound Sterling | 10 | 91 | 25 | 231 |
Total forwards and options contracts | 15,438 | 9,860 |
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 at the Balance Sheet date:
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Not later than one month | 4,432 | 2,828 |
Later than one month and not later than three months | 6,921 | 4,568 |
Later than three months and not later than one year | 4,085 | 2,464 |
15,438 | 9,860 |
During the year ended March 31, 2019, the group has designated certain foreign exchange forward and option contracts as cash flow hedges to mitigate the risk of foreign exchange exposure on highly probable forecast cash transactions. The related hedge transactions for balance in cash flow hedges as at March 31, 2019 are expected to occur and reclassified to the statement of profit or loss within 3 months.
Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists between the hedged item and hedging instrument, including whether the hedging instrument is expected to offset changes in cash flows of hedged items.
If the hedge ratio for risk management purposes is no longer optimal but the risk management objective remains unchanged and the hedge continues to qualify for hedge accounting, the hedge relationship will be rebalanced by adjusting either the volume of the hedging instrument or the volume of the hedged item so that the hedge ratio aligns with the ratio used for risk management purposes. Any hedge ineffectiveness is calculated and accounted for in the statement of profit or loss at the time of the hedge relationship rebalancing.
The following table provides the reconciliation of cash flow hedge reserve for the year ended March 31, 2019:
(In crore)
Year ended March 31, | ||
2019 | 2018 | |
Gain/(Loss) | ||
Balance at the beginning of the period | – | 39 |
Gain / (Loss) recognised in other comprehensive income during the period | 118 | (93) |
Amount reclassified to profit or loss during the period | (90) | 41 |
Tax impact on above | (7) | 13 |
Balance at the end of the period | 21 | – |
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 quantitative information about offsetting of derivative financial assets and derivative financial liabilities is as follows:
(In crore)
As at | As at | |||
March 31, 2019 | March 31, 2018 | |||
Derivative financial asset | Derivative financial liability | Derivative financial asset |
Derivative financial liability | |
Gross amount of recognized financial asset/liability | 338 | (17) | 20 | (46) |
Amount set off | (2) | 2 | (4) | 4 |
Net amount presented in Balance Sheet | 336 | (15) | 16 | (42) |
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 14,827 crore and
13,142 crore as at March 31, 2019 and March 31,
2018, respectively and unbilled revenues amounting to
5,374 crore and
4,261 crore as at March 31, 2019 and March
31, 2018, respectively. Trade receivables and unbilled revenues 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. 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 ten customers:
(In %)
Year ended March 31, | ||
2019 | 2018 | |
Revenue from top customer | 3.6 | 3.4 |
Revenue from top 10 customers | 19.0 | 19.3 |
Credit risk exposure
The allowance for lifetime ECL on customer balances
for year ended March 31, 2019 and March 31, 2018 was 239 crore and
34 crore, respectively.
The movement in credit loss allowance on customer balance is as follows:
(In crore)
Year ended March 31, | ||
2019 | 2018 | |
Balance at the beginning | 449 | 411 |
Impairment loss recognized | 239 | 34 |
Write-offs | (73) | (5) |
Reclassified from held for sale (Refer note 2.1.2) | – | (1) |
Translation differences | 12 | 10 |
Balance at the end | 627 | 449 |
Credit exposure
The Group’s credit period generally ranges from 30-60 days.
(In crore except otherwise stated)
As at | ||
March 31, 2019 | March 31, 2018 | |
Trade receivables | 14,827 | 13,142 |
Unbilled revenues | 5,374 | 4,261 |
Days sales outstanding was 66 days and 67 days as at March 31, 2019 and March 31, 2018, respectively.
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, fixed maturity plan securities, certificates of deposit, commercial paper, quoted bonds issued by government and quasi-government organizations and non convertible debentures.
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 borrowings. The Group believes that the working capital is sufficient to meet its current requirements.
As at March 31, 2019, the Group had a working
capital of 34,240 crore including cash and cash equivalents of
19,568 crore and current investments of
6,627
crore. As at March 31, 2018, the Group had a working capital of
34,176 crore including cash and cash equivalents of
19,818
crore and current investments of
6,407 crore.
As at March 31, 2019 and March 31, 2018, the
outstanding compensated absences were 1,663 crore and
1,469 crore, respectively, which have been substantially funded.
Accordingly no liquidity risk is perceived.
Under the company's ongoing buyback programme
the maximum buy-back size is 8,260 crore. The company has bought back shares amounting to
797 crore (including transaction
costs) till March 31, 2019. (Refer note 2.11)
The table below provides details regarding the contractual maturities of significant financial liabilities as at March 31, 2019:
(In crore)
Particulars | Less than 1 year | 1-2 years | 2-4 years | 4-7 years | Total |
Trade payables | 1,655 | – | – | – | 1,655 |
Other financial liabilities (excluding liability towards acquisition) (Refer Note no. 2.12) | 8,716 | 11 | 4 | – | 8,731 |
Liability towards acquisitions on an undiscounted basis (including contingent consideration) (Refer Note no. 2.12) | 114 | 83 | – | 36 | 233 |
The table below provides details regarding the contractual maturities of significant financial liabilities as at March 31, 2018:
(In crore)
Particulars | Less than 1 year | 1-2 years | 2-4 years | 4-7 years | Total |
Trade payables | 694 | – | – | – | 694 |
Other financial liabilities (excluding liability towards acquisition) (Refer Note no. 2.12) | 5,442 | – | – | – | 5,442 |
Liability towards acquisitions on an undiscounted basis (including contingent consideration) (Refer Note no. 2.12) | 41 | 7 | 7 | – | 55 |
2.11 EQUITY
SHARE CAPITAL
(In crore, except as otherwise stated)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Authorized | ||
Equity shares, ![]() |
||
4,80,00,00,000 (2,40,00,00,000) equity shares | 2,400 | 1,200 |
Issued, Subscribed and Paid-Up | ||
Equity shares, ![]() |
2,170 | 1,088 |
4,33,59,54,462 (2,17,33,12,301) equity shares fully paid-up(2) | ||
2,170 | 1,088 |
Note: Forfeited shares amounted to 1,500
(
1,500)
(1) Refer note no. 2.21 for details of basic and diluted shares
(2) Net of treasury shares 2,03,24,982 (1,08,01,956)
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 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.
In the period of five years immediately preceding March 31, 2019:
Bonus Issue
The Company has allotted 2,18,41,91,490 fully paid up equity shares (including treasury shares) of face value 5/- each during
the three months ended September 30, 2018 pursuant to a bonus issue approved by the shareholders through postal ballot. Record
date fixed by the Board of Directors was September 5, 2018. The bonus shares were issued by capitalization of profits transferred
from general reserve. Bonus share of one equity share for every equity share held, and a bonus issue, viz., 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 stock option plan
have been adjusted for bonus shares.
The Company has allotted 1,14,84,72,332 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 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 (RSU) have been adjusted for bonus shares.
The bonus shares once allotted shall rank pari passu in all respects and carry the same rights as the existing equity shareholders and shall be entitled to participate in full, in any dividend and other corporate action, recommended and declared after the new equity shares are allotted.
Update on capital allocation policy and buyback
In line with the capital allocation policy announced
in April 2018, the Board, in its meeting held on January 11, 2019, approved the following :
(a) Declared a special dividend of 4/- per equity share;
(b) Recommended buyback of Equity Shares from the open market route through Indian stock exchanges of up to 8,260 crore (Maximum
Buyback Size) at a price not exceeding
800/- per share (Maximum Buyback Price) subject to shareholders' approval by way of
Postal Ballot. After the execution of the above, along with the special dividend (including dividend distribution tax) of
2,633
crore ($386 million) already paid in June 2018, the Company would complete the distribution of
13,000 crore, which was announced
as part of its capital allocation policy in April 2018.
The shareholders approved the proposal of buyback
of Equity Shares recommended by its Board of Directors in its meeting held on January 11, 2019 through the postal ballot that concluded
on March 12, 2019. At the Maximum buyback price of 800/- per equity share and the Maximum buyback size of
8,260 crore
the indicative maximum number of Equity shares bought back would be 10,32,50,000 Equity Shares (Maximum buyback shares) comprising
approximately 2.36% of the paid-up equity share capital of the Company as of March 12, 2019 (the date of conclusion of postal ballot
for approval for buyback).
The buyback was offered to all eligible equity shareholders of the Company (other than the Promoters, the Promoter Group and Persons
in Control of the Company) under the open market route through the stock exchange. The Company will fund the buyback from its free
reserves. The buyback of equity shares through the stock exchange commenced on March 20, 2019 and is expected to be completed by
September 2019. During the year ended March 31, 2019, 1,26,52,000 equity shares were purchased from the stock exchange which includes
18,18,000 shares which have been purchased but not extinguished as of March 31, 2019 and 36,36,000 shares which have been purchased
but have not been settled and therefore not extinguished as of March 31, 2019. In accordance with section 69 of the Companies Act,
2013, during the year ended March 31, 2019, the Company has created ‘Capital Redemption Reserve’ of 5 crore equal
to the nominal value of the shares bought back as an appropriation from general reserve.
The Board, at its meeting on August 19, 2017,
approved a proposal for the Company to buyback its fully paid-up equity shares of face value of 5/- each from the eligible
equity shareholders of the Company for an amount not exceeding
13,000 crore. The shareholders approved the said proposal
of buyback of Equity Shares through the postal ballot that concluded on October 7, 2017. The Buyback offer comprised a purchase
of 11,30,43,478 Equity Shares aggregating 4.92% of the paid-up equity share capital of the Company at a price of
1,150/- per
Equity share. The buyback was offered to all eligible equity shareholders (including those who became equity shareholders as on
the Record date by cancelling American Depository Shares and withdrawing underlying Equity shares) of the Company as on the Record
Date (i.e November 1, 2017) on a proportionate basis through the "Tender offer" route. The Company concluded the buyback
procedures on December 27, 2017 and 11,30,43,478 equity shares were extinguished. The Company has utilized its securities premium
and general reserve for the buyback of its shares. In accordance with Section 69 of the Companies Act, 2013, the Company has created
a Capital Redemption Reserve of
56 crore equal to the nominal value of the shares bought back as an appropriation from the
general reserve during the year ended March 31, 2018.
The Company’s objective when managing capital is to safeguard its ability to continue as a going concern and to maintain an optimal capital structure so as to maximize shareholder value. In order to maintain or achieve an optimal capital structure, the Company may adjust the amount of dividend payment, return capital to shareholders, issue new shares or buy back issued shares. As at March 31, 2019, the Company has only one class of equity shares and has no debt. Consequent to the above capital structure there are no externally imposed capital requirements.
Dividend
The final dividend on shares is 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.
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. Dividend distribution tax paid by subsidiaries may be reduced / available as credit against dividend distribution tax payable by Infosys Limited.
Effective from Financial Year 2018, the Company's policy is to payout up to 70% of the free cash flow of the corresponding Financial Year in such manner (including by way of dividend and / or share buyback) as may be decided by the Board from time to time, subject to applicable laws and requisite approvals, if any. Free cash flow is defined as net cash provided by operating activities less capital expenditure as per the consolidated statement of cash flows prepared under IFRS. Dividend payout includes dividend distribution tax.
Amount of per share dividend recognized as distribution to equity shareholders:
(in )
Particulars | Year ended March 31, | |
2019 | 2018 | |
Special dividend for fiscal 2019 | 4.00 | – |
Interim dividend fiscal 2019 | 7.00 | – |
Final dividend for fiscal 2018 | 10.25 | – |
Special dividend for fiscal 2018 | 5.00 | – |
Interim dividend for fiscal 2018 | – | 6.50 |
Final Dividend for fiscal 2017 | – | 7.38 |
Note: | Dividend per equity share disclosed in the above table represents dividends declared previously, retrospectively adjusted for September 2018 bonus issue. |
During the year ended March 31, 2019 on account
of the final dividend for fiscal 2018 , special divided for fiscal 2018 and fiscal 2019 and interim dividend for fiscal 2019 the
Company has incurred a net cash outflow of 13,705 crore (excluding dividend paid on treasury shares) inclusive of dividend
distribution tax.
The Board of Directors in their meeting on April
12, 2019 recommended a final dividend of 10.50/- per equity share for the financial year ended March 31, 2019. This payment
is subject to the approval of shareholders in the ensuing Annual General Meeting of the Company, to be held on June 22, 2019 and
if approved would result in a net cash outflow of approximately
5,483 crore, (excluding dividend paid on treasury shares)
including dividend distribution tax. The final dividend of
10.50/- per equity share and the resultant expected cash outflow is
based on the outstanding number of shares after considering shares bought back by the Company subsequent to the year ended March
31, 2019.
The details of shareholder holding more than 5% shares as at March 31, 2019 and March 31, 2018 are as follows :
Name of the shareholder | As at March 31, 2019 | As at March 31, 2018 | ||
Number of shares | % held | Number of shares | % held | |
Deutsche Bank Trust Company Americas (Depository of ADR's - legal ownership) | 746,254,648 | 17.11 | 75,98,11,718 | 17.39 |
Life Insurance Corporation of India | 254,332,376 | 5.83 | 29,90,28,034 | 6.85 |
Information in the table above is adjusted for September, 2018 bonus issue
The reconciliation of the number of shares outstanding and the amount of share capital as at March 31, 2019 and March 31, 2018 are as follows:
(In crore, except as stated otherwise)
Particulars | As at March 31, 2019 | As at March 31, 2018 | ||
Number of shares | Amount | Number of shares | Amount | |
Number of shares at the beginning of the period | 217,33,12,301 | 1,088 | 228,56,55,150 | 1,144 |
Add: Shares issued on exercise of employee stock options - before bonus issue | 392,528 | – | 7,00,629 | – |
Add: Bonus shares issued | 2,173,704,829 | 1,088 | – | – |
Add: Shares issued on exercise of employee stock options - after bonus issue | 1,196,804 | – | – | – |
Less: Shares bought back (1)(2) | 12,652,000 | 6 | 113,043,478 | 56 |
Number of shares at the end of the period | 433,59,54,462 | 2,170 | 217,33,12,301 | 1,088 |
(1) | Includes 18,18,000 shares which have been purchased on account of buyback during the three months ended March 31, 2019 and have not been extinguished as of March 31, 2019 |
(2) | Includes 36,36,000 shares which have been purchased on account of buyback during the three months ended March 31, 2019 but have not been settled and therefore not extinguished as of March 31, 2019 |
Securities premium
The amount received in excess of the par value has been classified as securities premium. Additionally, share-based compensation recognized in net profit in the consolidated statement of profit and loss is credited to securities premium.
Employee Stock Option Plan (ESOP):
Accounting policy
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.
2015 Stock Incentive Compensation Plan (the 2015 Plan) (Formerly 2011 RSU Plan):
On March 31, 2016, pursuant to the approval by the shareholders through postal ballot, the Board has been authorized to introduce, offer, issue and allot share-based incentives to eligible employees of the Company and its subsidiaries under the 2015 Stock Incentive Compensation Plan (the 2015 Plan). The maximum number of shares under the 2015 plan shall not exceed 2,40,38,883 equity shares (this includes 1,12,23,576 equity shares which are held by the trust towards the 2011 Plan as at March 31, 2016). Out of this 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 on the date of the grant. 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. The plan numbers mentioned above would further be adjusted for the September 2018 bonus issue.
Consequent to the September, 2018 bonus issue, all outstanding options granted under the stock option plan have been adjusted for bonus shares. Unless otherwise stated, all the prior period share numbers, share prices and weighted average exercise prices in this note have been adjusted to give effect to the September 2018 bonus issue.
Controlled trust holds 2,03,24,982 and 1,08,01,956 shares (not adjusted for September, 2018 bonus issue) as at March 31, 2019 and March 31, 2018, respectively under the 2015 plan. Out of these shares 2,00,000 and 1,00,000 (not adjusted for September, 2018 bonus issue) equity shares have been earmarked for welfare activities of the employees as at March 31, 2019 and March 31, 2018, respectively.
The following is the summary of grants during the year ended March 31, 2019 and March 31, 2018 under the 2015 Plan:
Particulars | Year ended March 31, | |
2019 | 2018 | |
RSU | ||
Salil Parekh, CEO and MD - Refer note 1 below | 260,130 | 226,048 |
U.B. Pravin Rao, COO and WTD | 68,250 | 54,500 |
Dr. Vishal Sikka* | – | 540,448 |
Other KMPs | 347,150 | 546,200 |
Employees other than KMP | 3,665,170 | 3,194,020 |
4,340,700 | 4,561,216 | |
ESOP | ||
U.B. Pravin Rao, COO and WTD | – | 86,000 |
Dr. Vishal Sikka* | – | 661,050 |
Other KMPs | – | 88,900 |
Employees other than KMP | – | 147,200 |
– | 983,150 | |
Incentive units - cash settled | ||
Other employees | 74,090 | 100,080 |
74,090 | 100,080 | |
Total grants | 4,414,790 | 5,644,446 |
Information in the table above is adjusted for September, 2018 bonus issue
* | Upon Dr. Vishal Sikka's resignation from the roles of the company, the unvested RSUs and ESOPs have been forfeited |
1. Stock incentives granted to Salil Parekh, CEO and MD
Pursuant to the approval of the shareholders through a postal ballot on February 20, 2018, Salil Parekh (CEO & MD) is eligible to receive under the 2015 Plan:
a) | an annual grant of RSUs of fair value ![]() |
b) | a one-time grant of RSUs of fair value ![]() |
c) | annual grant of performance based RSUs of fair value ![]() |
The Board based on the recommendations of the Nomination and Remuneration committee approved on February 27, 2018, the annual time based grant for fiscal 2018 of 56,512 RSUs (adjusted for September 2018 bonus issue) and the one-time time based grant of 1,69,536 RSUs (adjusted for September 2018 bonus issue) The grants were made effective February 27, 2018.
Further, the Board, based on the recommendations
of the Nomination and Remuneration Committee, granted 217,200 (adjusted for September 2018 bonus issue) performance based RSUs
to Salil Parekh with an effective date of May 2, 2018. The grants would vest upon successful completion of three full fiscal years
with the Company concluding on March 31, 2021 and will be determined based on achievement of certain performance targets for the
said three-year period.
The Board based on the recommendations of the Nomination and Remuneration committee approved on January 11, 2019, the annual
time based grant for fiscal 2019 of 42,930 RSUs. The grants was made effective February 1, 2019.
Though the annual time based grants for the remaining employment term ending on March 31, 2023 have not been granted as at March 31, 2019, since the service commencement date precedes the grant date, the company has recorded employment stock compensation expense in accordance with Ind AS 102, Share based payments.
The RSUs and stock options would vest generally over a period of 4 years 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.
As at March 31, 2019 and March 31, 2018, incentive units were outstanding (net of forfeitures) 1,77,454 and 2,23,514 (adjusted for September, 2018 bonus issue), respectively.
Break-up of employee stock compensation expense:
(in crore)
Particulars | Year ended March 31, | |
2019 | 2018 | |
Granted to: | ||
KMP(2) | 33 | (13) |
Employees other than KMP | 169 | 97 |
Total (1) | 202 | 84 |
(1) Cash-settled stock compensation expense included above | 5 | 5 |
(2) | Included a reversal of stock compensation cost of ![]() |
The carrying value of liability towards cash
settled share based payments was 9 crore and
6 crore as at March 31, 2019 and March 31, 2018 respectively.
The activity in the 2015 Plan (formerly 2011 RSU Plan) for equity-settled share based payment transactions during the year ended March 31, 2019 and March 31, 2018 is set out below:
Particulars | Year ended March 31, 2019 | Year ended March 31, 2018 | ||
Shares arising out of options | Weighted average exercise price (![]() |
Shares arising out of options | Weighted average exercise price (![]() | |
2015 Plan: RSU | ||||
Outstanding at the beginning | 7,500,818 | 2.50 | 5,922,746 | 2.50 |
Granted | 4,340,700 | 3.84 | 4,561,216 | 2.50 |
Exercised | 1,864,510 | 2.50 | 1,296,434 | 2.50 |
Forfeited and expired | 795,810 | 2.61 | 1,686,710 | 2.50 |
Outstanding at the end | 9,181,198 | 3.13 | 7,500,818 | 2.50 |
Exercisable at the end | 235,256 | 2.50 | 48,410 | 2.50 |
2015 Plan: Employee Stock Options (ESOPs) | ||||
Outstanding at the beginning | 1,933,826 | 493 | 2,395,300 | 496 |
Granted | – | – | 983,150 | 472 |
Exercised | 117,350 | 515 | 104,824 | 492 |
Forfeited and expired | 193,300 | 521 | 1,339,800 | 481 |
Outstanding at the end | 1,623,176 | 516 | 1,933,826 | 493 |
Exercisable at the end | 698,500 | 517 | 393,824 | 496 |
Information in the table above is adjusted for September, 2018 bonus issue
During the year ended March 31, 2019 and March
31, 2018 the weighted average share price of options exercised under the 2015 Plan on the date of exercise was 701 and
496
(adjusted for September 2018 bonus issue) respectively
.
The summary of information about equity settled RSUs and ESOPs outstanding as at March 31, 2019 is as follows:
Options outstanding | |||
Range of exercise prices per share (![]() |
No. of shares arising out of options | Weighted average remaining contractual life | Weighted average exercise price (![]() |
2015 Plan: | |||
0 - 5 (RSU) | 9,181,198 | 1.70 | 3.13 |
450 - 600 (ESOP) | 1,623,176 | 5.04 | 516 |
10,804,374 | 2.20 | 80 |
Information in the table above is adjusted for September, 2018 bonus issue
The summary of information about equity settled RSUs and ESOPs outstanding as at March 31, 2018 was as follows:
Options outstanding | |||
Range of exercise prices per share (![]() |
No. of shares arising out of options | Weighted average remaining contractual life | Weighted average exercise price (![]() |
2015 Plan: | |||
0 - 2.50 (RSU) | 7,500,818 | 1.89 | 2.50 |
450 - 600 (ESOP) | 1,933,826 | 6.60 | 493 |
9,434,644 | 2.57 | 104 |
Information in the table above is adjusted for September, 2018 bonus issue
The fair value of each equity settled award is estimated on the date of grant using the Black-Scholes-Merton model with the following assumptions:
Particulars | For options granted in | |
Fiscal 2019- Equity Shares RSU |
Fiscal 2019- ADS RSU | |
Weighted average share price (![]() |
696 | 10.77 |
Exercise price (![]() |
3.31 | 0.06 |
Expected volatility (%) | 21-25 | 22-26 |
Expected life of the option (years) | 1-4 | 1-4 |
Expected dividends (%) | 2.65 | 2.65 |
Risk-free interest rate (%) | 7-8 | 2-3 |
Weighted average fair value as on grant date (![]() |
648 | 10.03 |
Particulars | For options granted in | |||
Fiscal 2018- Equity Shares-RSU |
Fiscal 2018- Equity shares ESOP |
Fiscal 2018- ADS-RSU |
Fiscal 2018- ADS- ESOP | |
Weighted average share price (![]() |
572 | 461 | 8.31 | 7.32 |
Exercise price (![]() |
2.50 | 459 | 0.04 | 7.33 |
Expected volatility (%) | 20-25 | 25-28 | 21-26 | 25-31 |
Expected life of the option (years) | 1 - 4 | 3 - 7 | 1 - 4 | 3 - 7 |
Expected dividends (%) | 2.78 | 2.78 | 2.74 | 2.74 |
Risk-free interest rate (%) | 6 - 7 | 6 - 7 | 1 - 2 | 1 - 2 |
Weighted average fair value as on grant date (![]() |
533 | 127 | 7.74 | 1.47 |
(1)Adjusted for September, 2018 bonus issue
The expected life of the RSU / ESOP is estimated based on the vesting term and contractual term of the RSU / ESOP, as well as expected exercise behavior of the employee who receives the RSU / ESOP. Expected volatility during the expected term of the RSU / ESOP 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 / ESOP.
2.12 OTHER FINANCIAL LIABILITIES
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Non-current | ||
Others | ||
Accrued compensation to employees (1) | 15 | – |
Compensated absences | 44 | 48 |
Payable for acquisition of business (refer note no. 2.1.1) (2) | ||
Contingent consideration | 88 | 13 |
Total non-current other financial liabilities | 147 | 61 |
Current | ||
Unpaid dividends (1) | 29 | 22 |
Others | ||
Accrued compensation to employees (1) | 2,572 | 2,509 |
Accrued expenses (1) | 3,319 | 2,452 |
Retention monies (1) | 112 | 132 |
Payable for acquisition of business | ||
Contingent consideration (refer note no. 2.1.1) (2) | 102 | 41 |
Payable by controlled trusts (1) | 168 | 139 |
Financial liability relating to buyback (refer to note 2.11)(1) | 1,202 | – |
Compensated absences | 1,619 | 1,421 |
Foreign currency forward and options contracts (2)(3) | 15 | 42 |
Capital creditors (1) | 676 | 155 |
Other payables (1) | 638 | 33 |
Total current other financial liabilities | 10,452 | 6,946 |
Total other financial liabilities | 10,599 | 7,007 |
(1) Financial liability carried at amortized cost | 8,731 | 5,442 |
(2) Financial liability carried at fair value through profit or loss | 205 | 93 |
(3) Financial liability carried at fair value through other comprehensive income | – | 3 |
Contingent consideration on undiscounted basis | 233 | 55 |
In accordance with Ind AS 32, Financial Instruments
: Presentation, the Company has recorded a financial liability of 1,202 crore for the obligation to acquire its own equity shares
to the extent of standing instructions provided to its registered broker for the buyback as of March 31, 2019 (refer to note 2.11).
The financial liability is recognised at the present value of the maximum amount that the Company would be required to pay to the
registered broker for buyback, with a corresponding debit in general reserve / retained earnings.
2.13 OTHER LIABILITIES
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Non-current | ||
Others | ||
Deferred income - government grant on land use rights | 42 | 44 |
Accrued gratuity (Refer to Note No. 2.20.1) | 30 | 28 |
Deferred rent | 174 | 151 |
Deferred income | 29 | 36 |
Total non-current other liabilities | 275 | 259 |
Current | ||
Unearned revenue | 2,809 | 2,295 |
Client deposit | 26 | 38 |
Others | ||
Withholding taxes and others | 1,487 | 1,240 |
Accrued gratuity (refer note no. 2.20.1) | 2 | – |
Deferred rent | 63 | 32 |
Deferred income - government grant on land use rights | 1 | 1 |
Total current other liabilities | 4,388 | 3,606 |
Total other liabilities | 4,663 | 3,865 |
2.14 PROVISIONS
Accounting policy
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 Consolidated Statement of Profit and Loss. 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.
Provision for post-sales client support and other provisions
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Current | ||
Others | ||
Post-sales client support and other provisions | 576 | 492 |
Total provisions | 576 | 492 |
The movement in the provision for post-sales client support and other provisions is as follows :
(In crore)
Particulars | Year ended March 31, 2019 |
Balance at the beginning | 492 |
Provision recognized/(reversed) | 168 |
Provision utilized | (112) |
Exchange difference | 28 |
Balance at the end | 576 |
Provision for post-sales client support and other provisions are expected to be utilized over a period of 6 months to 1 year.
2.15 INCOME TAXES
Accounting policy
Income tax expense comprises current and deferred income tax. Income tax expense is recognized in net profit in the Consolidated 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. The income tax provision for the interim period is made based on the best estimate of the annual average tax rate expected to be applicable for the full financial year. Tax benefits of deductions earned on exercise of employee share options in excess of compensation charged to income are credited to securities premium.
Income tax expense in the consolidated Statement of Profit and Loss comprises:
(In crore)
Year ended March 31, | ||
2019 | 2018 | |
Current taxes | 5,727 | 4,581 |
Deferred taxes | (96) | (340) |
Income tax expense | 5,631 | 4,241 |
During the quarter ended March 31, 2019, the
Company entered into Advance Pricing Agreement (APA) in overseas jurisdictions resulting in a reversal of income tax expense of
94 crore which pertained to prior periods.
In December 2017, the Company had concluded
an Advance Pricing Agreement (“APA”) with the US Internal Revenue Service ("IRS") for the US branch covering
the years ending March 2011 to March 2021. Under the APA, the Company and the IRS have agreed on the methodology to allocate revenues
and compute the taxable income of the Company’s US Branch operations. In accordance with the APA, the company had reversed
income tax expense provision of $225 million (1,432 crore) which pertained to previous periods which are no longer required.
The Company had to pay an adjusted amount of $223 million (approximately
1,424 crore) due to the difference between the
taxes payable for prior periods as per the APA and the actual taxes paid for such periods. The company has paid $215 million (
1,455
crore).
Further, the “Tax Cuts and Jobs Act (H.R. 1)” was signed into law on December 22, 2017 (“US Tax Reforms”).
The US tax reforms has reduced federal tax rates from 35% to 21% effective January 1, 2018 amongst other measures.
Income tax expense for the year ended March
31, 2019 and March 31, 2018 includes reversals (net of provisions) of 129 crore and
291 crore respectively. These
reversals pertain to prior periods on account of adjudication of certain disputed matters in favor of the company across various
jurisdictions.
A reconciliation of the income tax provision to the amount computed by applying the statutory income tax rate to the income before income taxes is summarized below:
(In crore)
Year ended March 31, | ||
2019 | 2018 | |
Profit before income taxes | 21,041 | 20,270 |
Enacted tax rates in India | 34.94% | 34.61% |
Computed expected tax expense | 7,353 | 7,015 |
Tax effect due to non-taxable income for Indian tax purposes | (2,705) | (2,068) |
Overseas taxes | 719 | 701 |
Tax provision (reversals) | (176) | (1,617) |
Effect of exempt non-operating income | (58) | (66) |
Effect of unrecognized deferred tax assets | 92 | 188 |
Effect of differential overseas tax rates | (1) | 52 |
Effect of non-deductible expenses | 353 | 57 |
Branch profit tax (net of credits) | 25 | (210) |
Subsidiary dividend distribution tax | – | 172 |
Others | 29 | 17 |
Income tax expense | 5,631 | 4,241 |
The applicable Indian corporate statutory tax rate for the year ended March 31, 2019 and March 31, 2018 is 34.94% and 34.61%, respectively. The increase in the corporate statutory tax rate to 34.94% is consequent to changes made in the Finance Act, 2018.
The foreign tax expense is due to income taxes payable overseas principally in the United States. In India, the Group has benefited from certain tax incentives that the Government of India had provided for export of software and services from the units registered under the Special Economic Zones (SEZs) Act, 2005. SEZ units which began the provision of services on or after April 1, 2005 are eligible for a deduction of 100% 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% 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 Group for acquiring new plant and machinery for the purpose of its business as per the provisions of the Income Tax Act, 1961.
Entire deferred income tax for the year ended
March 31, 2019 and March 31, 2018 relates to origination and reversal of temporary differences except for a credit of 155 crore
(on account of US Tax Reforms explained above), for year ended March 31, 2018.
During the year ended March 31, 2018, the Company
received 846 crore as dividend from its majority owned subsidiary. Dividend distribution tax paid by the subsidiary on such dividend
has been reduced as credit against dividend distribution tax payable by Infosys. Accordingly, the Group has recorded a charge of
172 crore as income tax expense during the year ended March 31, 2018.
Infosys is subject to a 15% 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 at March 31, 2019, Infosys' U.S. branch net assets amounted
to approximately 5,196 crore. As at March 31, 2019, the Company has a deferred tax liability for branch profit tax
of
201 crore (net of credits), as the Company estimates that these branch profits are expected to be distributed
in the foreseeable future.
Other income for the year ended March 31, 2019
and March 31, 2018 includes interest on income tax refund of 51 crore and
262 crore, respectively.
Deferred income tax liabilities have not been
recognized on temporary differences amounting to 6,007 crore and
5,045 crore as at March 31, 2019 and March 31, 2018,
respectively, associated with investments in subsidiaries and branches as it is probable that the temporary differences will not
reverse in the foreseeable future.
Deferred income tax assets have not been recognized
on accumulated losses of 2,624 crore and
1,936 crore as at March 31, 2019 and March 31, 2018, respectively, as it
is probable that future taxable profit will be not available against which the unused tax losses can be utilized in the foreseeable
future. The balance as at March 31, 2018 excludes the accumulated losses of Disposal Groups classified as held for sale. (Refer
note 2.1.2)
The following table provides details of expiration of unused tax losses:
(In crore)
Year | As at March 31, 2019 |
2020 | 173 |
2021 | 80 |
2022 | 142 |
2023 | 198 |
2024 | 187 |
Thereafter | 1,844 |
Total | 2,624 |
The following table provides the details of income tax assets and income tax liabilities as at March 31, 2019 and March 31, 2018:
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Income tax assets | 6,743 | 6,070 |
Current income tax liabilities | 1,567 | 2,043 |
Net current income tax asset / (liability) at the end | 5,176 | 4,027 |
The gross movement in the current income tax asset/ (liability) for the year ended March 31, 2019 and March 31, 2018 is as follows:
(In crore)
Particulars | Year ended March 31, | |
2019 | 2018 | |
Net current income tax asset/ (liability) at the beginning | 4,027 | 1,831 |
Translation differences | (1) | – |
Income tax paid | 6,832 | 6,829 |
Current income tax expense | (5,727) | (4,581) |
Reclassified under assets held for sale (refer note no. 2.1.2) | 23 | (35) |
Reclassified from held for sale (Refer note 2.1.2) | 13 | – |
Income tax benefit arising on exercise of stock options | 8 | – |
Additions through business combination | (9) | – |
Tax impact on buyback expenses | 4 | – |
Income tax on other comprehensive income | 6 | (17) |
Net current income tax asset/ (liability) at the end | 5,176 | 4,027 |
The movement in gross deferred income tax assets and liabilities (before set off) for the year ended March 31, 2019 is as follows:
(In crore)
Particulars | Carrying value as at April 1, 2018 | Changes through profit and loss | Addition through business combination | Changes through OCI | Reclassified from Held for Sale, net | Translation difference | Carrying value as at March 31, 2019 |
Deferred income tax assets | |||||||
Property, plant and equipment | 215 | 46 | – | – | 1 | – | 262 |
Accrued compensation to employees | 12 | 16 | – | – | 2 | 1 | 31 |
Trade receivables | 141 | 35 | – | – | – | – | 176 |
Compensated absences | 366 | 29 | – | – | 2 | – | 397 |
Post sales client support | 98 | 5 | – | – | – | 1 | 104 |
Derivative financial instruments | 13 | (14) | – | 4 | – | 1 | 4 |
Intangibles | 9 | 6 | – | – | – | 1 | 16 |
Credits related to branch profits | 341 | (22) | – | – | – | 21 | 340 |
Others | 117 | 75 | – | 9 | 33 | (8) | 226 |
Total deferred income tax assets | 1,312 | 176 | – | 13 | 38 | 17 | 1,556 |
Deferred income tax liabilities | |||||||
Intangible asset | (38) | 63 | (56) | – | (86) | (11) | (128) |
Branch profit tax | (505) | (3) | – | – | – | (33) | (541) |
Derivative financial instruments | (2) | (97) | – | (11) | – | – | (110) |
Others | (26) | (43) | (8) | (1) | (5) | 6 | (77) |
Total Deferred income tax liabilities | (571) | (80) | (64) | (12) | (91) | (38) | (856) |
The movement in gross deferred income tax assets and liabilities (before set off) for the year ended March 31, 2018 is as follows:
(In crore)
Particulars | Carrying value as at April 1, 2017 | Changes through profit and loss | Addition through business combination | Changes through OCI | Reclassified as Held for Sale, net | Translation difference | Carrying value as at March 31, 2018 |
Deferred income tax assets | |||||||
Property, plant and equipment | 138 | 78 | – | – | (1) | – | 215 |
Computer software | 40 | (41) | – | – | – | 1 | – |
Accrued compensation to employees | 57 | (42) | – | – | (2) | (1) | 12 |
Trade receivables | 136 | 4 | – | – | – | 1 | 141 |
Compensated absences | 374 | (10) | – | – | (2) | 4 | 366 |
Post sales client support | 97 | 2 | – | – | – | (1) | 98 |
Derivative financial instruments | – | 13 | – | – | – | – | 13 |
Intangibles | 22 | (14) | – | – | – | 1 | 9 |
Credits related to branch profits | – | 334 | – | – | – | 7 | 341 |
Others | 229 | (70) | – | (14) | (33) | 5 | 117 |
Total deferred income tax assets | 1,093 | 254 | – | (14) | (38) | 17 | 1,312 |
Deferred income tax liabilities | |||||||
Intangible asset | (206) | 85 | (2) | – | 86 | (1) | (38) |
Branch profit tax | (327) | (172) | – | – | – | (6) | (505) |
Derivative financial instruments | (86) | 72 | – | 13 | – | (1) | (2) |
Others | (141) | 101 | – | 13 | 5 | (4) | (26) |
Total Deferred income tax liabilities | (760) | 86 | (2) | 26 | 91 | (12) | (571) |
The tax effects of significant temporary differences that resulted in deferred income tax assets and liabilities are as follows:
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Deferred income tax assets after set off | 1,372 | 1,282 |
Deferred income tax liabilities after set off | (672) | (541) |
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.
In assessing the reliability of deferred income tax assets, the 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. The 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.
2.16 Revenue from operations
Accounting policy
The Group derives revenues primarily from business IT services comprising of software development and related services, consulting and package implementation and from the licensing of software products and platforms across our core and digital offerings (“together called as software related services”).
Effective April 1, 2018, the Group adopted Ind AS 115 “Revenue from Contracts with Customers” using the cumulative catch-up transition method, applied to contracts that were not completed as at April 1, 2018. In accordance with the cumulative catch-up transition method, the comparatives have not been retrospectively adjusted. The following is a summary of new and/or revised significant accounting policies related to revenue recognition. Refer Note 1 “Significant Accounting Policies,” in the Company’s 2018 Annual Report for the policies in effect for revenue prior to April 1, 2018. The effect on adoption of Ind AS 115 was insignificant.
Revenue is recognized upon transfer of control
of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for
those products or services.
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
invoicing to the reporting date is recognized as unbilled revenue. Revenue from fixed-price, fixed-timeframe contracts, where the
performance obligations are satisfied over time and 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. Maintenance revenue is recognized ratably
over the term of the underlying maintenance arrangement.
Revenues in excess of invoicing are classified as contract assets (which we refer as unbilled revenue) while invoicing in excess of revenues are classified as contract liabilities (which we refer to as unearned revenues).
In arrangements for software development and related services and maintenance services, the Group has applied the guidance in Ind AS 115, Revenue from contract with customer, by applying the revenue recognition criteria for each distinct performance obligation. The arrangements with customers generally meet the criteria for considering software development and related services as distinct performance obligations. For allocating the transaction price, the Group has measured the revenue in respect of each performance obligation of a contract at its relative standalone selling price. The price that is regularly charged for an item when sold separately is the best evidence of its standalone selling price. In cases where the Group is unable to determine the standalone selling price, the Group uses the expected cost plus margin approach in estimating the standalone selling price. For software development and related services, the performance obligations are satisfied as and when the services are rendered since the customer generally obtains control of the work as it progresses.
Revenue from licenses where the customer obtains a “right to use” the licenses is recognized at the time the license is made available to the customer. Revenue from licenses where the customer obtains a “right to access” is recognized over the access period. Arrangements to deliver software products generally have three elements: license, implementation and Annual Technical Services (ATS). The Group has applied the principles under Ind AS 115 to account for revenues from these performance obligations. When implementation services are provided in conjunction with the licensing arrangement and the license and implementation have been identified as two separate performance obligations, the transaction price for such contracts are allocated to each performance obligation of the contract based on their relative standalone selling prices. In the absence of standalone selling price for implementation, the performance obligation is estimated using the expected cost plus margin approach. Where the license is required to be substantially customized as part of the implementation service the entire arrangement fee for license and implementation is considered to be a single performance obligation and the revenue 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 performance obligations are satisfied. ATS revenue is recognized ratably over the period in which the services are rendered.
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 to each of the underlying performance obligation that corresponds to the 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 Group recognizes changes in the estimated amount of obligations for discounts in the period in which the change occurs.
Deferred contract costs are incremental costs of obtaining a contract which are recognised as assets and amortized over the term of the contract.
Contract modifications are accounted for when additions, deletions or changes are approved either to the contract scope or contract price. The accounting for modifications of contracts involves assessing whether the services added to an existing contract are distinct and whether the pricing is at the standalone selling price. Services added that are not distinct are accounted for on a cumulative catch up basis, while those that are distinct are accounted for prospectively, either as a separate contract, if the additional services are priced at the standalone selling price, or as a termination of the existing contract and creation of a new contract if not priced at the standalone selling price.
The Group presents revenues net of indirect taxes in its statement of Profit and loss.
Revenues for the year ended March 31, 2019 and March 31, 2018 are as follows:
(In crore)
Particulars | Year ended March 31, | |
2019 | 2018 | |
Revenue from software services | 78,359 | 66,857 |
Revenue from products and platforms | 4,316 | 3,665 |
Total revenue from operations | 82,675 | 70,522 |
Disaggregate revenue information
The table below presents disaggregated revenues from contracts with customers by geography, offerings and contract-type for each of our business segments. The Group believes that this disaggregation best depicts how the nature, amount, timing and uncertainty of our revenues and cash flows are affected by industry, market and other economic factors.
For the year ended March 31, 2019
(In crore)
Particulars | Financial Services (1) | Retail(2) | Communication (3) | Energy , Utilities, Resources and Services | Manufacturing | Hi Tech | Life Sciences(4) | Others (5) | Total |
Revenues by Geography | |||||||||
North America | 16,052 | 8,792 | 5,579 | 5,867 | 4,336 | 5,914 | 3,066 | 432 | 50,038 |
Europe | 4,890 | 3,836 | 1,897 | 3,550 | 3,497 | 106 | 2,011 | 155 | 19,942 |
India | 1,209 | 23 | 56 | 3 | 86 | 137 | 12 | 522 | 2,048 |
Rest of the world | 4,326 | 905 | 2,894 | 970 | 233 | 20 | 114 | 1,185 | 10,647 |
Total | 26,477 | 13,556 | 10,426 | 10,390 | 8,152 | 6,177 | 5,203 | 2,294 | 82,675 |
Revenue by offerings | |||||||||
Services | |||||||||
Digital | 7,543 | 4,410 | 3,421 | 2,993 | 2,291 | 1,998 | 1,085 | 308 | 24,049 |
Core | 16,064 | 8,795 | 6,822 | 7,190 | 5,644 | 4,087 | 3,780 | 1,928 | 54,310 |
Subtotal | 23,607 | 13,205 | 10,243 | 10,183 | 7,935 | 6,085 | 4,865 | 2,236 | 78,359 |
Products and platforms | |||||||||
Digital | 734 | 305 | 177 | 68 | 136 | 86 | 204 | 38 | 1,748 |
Core | 2,136 | 46 | 6 | 139 | 81 | 6 | 134 | 20 | 2,568 |
Subtotal | 2,870 | 351 | 183 | 207 | 217 | 92 | 338 | 58 | 4,316 |
Total | 26,477 | 13,556 | 10,426 | 10,390 | 8,152 | 6,177 | 5,203 | 2,294 | 82,675 |
Digital | 8,277 | 4,715 | 3,598 | 3,061 | 2,427 | 2,084 | 1,289 | 346 | 25,797 |
Core | 18,200 | 8,841 | 6,828 | 7,329 | 5,725 | 4,093 | 3,914 | 1,948 | 56,878 |
Revenues by contract type | |||||||||
Fixed Price | 11,600 | 8,571 | 6,330 | 6,033 | 4,178 | 3,148 | 2,430 | 1,136 | 43,426 |
Time & Materials | 14,877 | 4,985 | 4,096 | 4,357 | 3,974 | 3,029 | 2,773 | 1,158 | 39,249 |
Total | 26,477 | 13,556 | 10,426 | 10,390 | 8,152 | 6,177 | 5,203 | 2,294 | 82,675 |
(1) Financial Services include enterprises in Financial Services and Insurance
(2) Retail includes enterprises in Retail, Consumer Packaged Goods and Logistics
(3) Communication includes enterprises in Communication, Telecom OEM and Media
(4) Life Sciences includes enterprises in Life sciences and Health care
(5) | Others include operating segments of businesses in India, Japan, China, Infosys Public Services & other enterprises in Public Services |
Digital Services
Digital Services comprise of service and solution offerings of the Group that enable our clients to transform their businesses. These include offerings that enhance customer experience, leverage AI-based analytics and big data, engineer digital products and IoT, modernize legacy technology systems, migrate to cloud applications and implement advanced cyber security systems.
Core Services
Core Services comprise traditional offerings of the Group that have scaled and industrialized over a number of years. These primarily include application management services, proprietary application development services, independent validation solutions, product engineering and management, infrastructure management services, traditional enterprise application implementation, support and integration services.
Products & platforms
The Group also derives revenues from the sale of products and platforms including Finacle – core banking solution, Edge Suite of products, Infosys Nia - Artificial Intelligence (AI) platform which applies next-generation AI and machine learning and Infosys McCamish- insurance platform.
Trade Receivables and Contract Balances
The Group classifies the right to consideration in exchange for deliverables as either a receivable or as unbilled revenue.
A receivable is a right to consideration that
is unconditional upon passage of time. Revenue for time and material contracts are recognised as related service are performed.
Revenue for fixed price maintenance contracts is recognized on a straight line basis over the period of the contract. Revenues
in excess of billings is recorded as unbilled revenue and is classified as a financial asset for these cases as right to consideration
is unconditional upon passage of time.
Revenue recognition for fixed price development contracts is based on percentage of completion method. Invoicing to the clients
is based on milestones as defined in the contract. This would result in the timing of revenue recognition being different from
the timing of billing the customers. Unbilled revenue for fixed price development contracts is classified as non financial asset
as the contractual right to consideration is dependent on completion of contractual milestones.
Invoicing in excess of earnings are classified as unearned revenue.
Trade receivable and unbilled revenues are presented net of impairment in the Consolidated Balance Sheet.
During the year ended March 31, 2019, the company
recognized revenue of 2,237 crore arising from opening unearned revenue as of April 1, 2018.
During the year ended March 31, 2019, 2,685
crore of unbilled revenue pertaining to fixed price development contracts as of April 1, 2018 has been reclassified to Trade receivables
upon billing to customers on completion of milestones.
Performance obligations and remaining performance obligations
The remaining performance obligation disclosure provides the aggregate amount of the transaction price yet to be recognized as at the end of the reporting period and an explanation as to when the Group expects to recognize these amounts in revenue. Applying the practical expedient as given in Ind AS 115, the Group has not disclosed the remaining performance obligation related disclosures for contracts where the revenue recognized corresponds directly with the value to the customer of the entity's performance completed to date, typically those contracts where invoicing is on time and material basis. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations, changes in the scope of contracts, periodic revalidations, adjustment for revenue that has not materialized and adjustments for currency.
The aggregate value of performance obligations
that are completely or partially unsatisfied as at March 31, 2019, other than those meeting the exclusion criteria mentioned above,
is 51,274 crore. Out of this, the Group expects to recognize revenue of around 50% within the next one year and the remaining
thereafter. This includes contracts that can be terminated for convenience without a substantive penalty since, based on current
assessment, the occurrence of the same is expected to be remote.
The impact on account of applying the erstwhile
Ind AS 18 Revenue standard instead of Ind AS 115 Revenue from contract with customers on the financials results of the Group for
the year ended March 31, 2019 and as at March 31, 2019 is insignificant. On account of adoption of Ind AS 115, unbilled revenues
of 3,281 crore as at March 31, 2019 has been considered as a Non financial asset.
2.17 OTHER INCOME, NET
Accounting policy
Other income is comprised primarily of interest income, dividend income, gain/loss on investment 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.
Foreign currency
Accounting policy
Functional currency
The functional currency of Infosys, Infosys BPM, controlled trusts, EdgeVerve and Skava is the Indian rupee. The functional currencies for other subsidiaries are their 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 Consolidated 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 Consolidated 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.
Effective April 1, 2018, the Group has adopted Appendix B to Ind AS 21- Foreign Currency Transactions and Advance Consideration which clarifies the date of transaction for the purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income when an entity has received or paid advance consideration in a foreign currency. The effect on account of adoption of this amendment was insignificant.
Government grant
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 Consolidated Statement of Profit and Loss on a systematic and rational basis over the useful life of the asset. Government grants related to revenue are recognized on a systematic basis in net profit in the Consolidated Statement of Profit and Loss over the periods necessary to match them with the related costs which they are intended to compensate.
Other income for the year ended March 31, 2019 and March 31, 2018 are as follows:
(In crore)
Particulars | Year ended March 31, | |
2019 | 2018 | |
Interest income on financial assets carried at amortized cost: | ||
Tax free bonds and Government bonds | 143 | 143 |
Deposit with Bank and others | 1,261 | 1,531 |
Interest income on financial assets carried at fair value through other comprehensive income: | ||
Non-convertible debentures and certificates of deposit and commercial paper | 646 | 682 |
Income on investments carried at fair value through profit or loss | ||
Dividend income on liquid mutual funds | 2 | 4 |
Gain / (loss) on liquid mutual funds | 196 | 253 |
Exchange gains/ (losses) on foreign currency forward and options contracts | 185 | 1 |
Exchange gains/ (losses) on translation of assets and liabilities | 133 | 233 |
Miscellaneous Income, net | 316 | 464 |
Total other income | 2,882 | 3,311 |
2.18 EXPENSES
(In crore)
Particulars | Year ended March 31, | |
2019 | 2018 | |
Employee benefit expenses | ||
Salaries including bonus | 43,894 | 37,764 |
Contribution to provident and other funds | 946 | 828 |
Share based payments to employees (Refer note no. 2.11) | 202 | 84 |
Staff welfare | 273 | 217 |
45,315 | 38,893 | |
Cost of software packages and others | ||
For own use | 930 | 887 |
Third party items bought for service delivery to clients | 1,623 | 983 |
2,553 | 1,870 | |
Other expenses | ||
Repairs and maintenance | 1,269 | 1,089 |
Power and fuel | 221 | 207 |
Brand and marketing | 489 | 305 |
Operating lease payments (Refer to Note 2.19) | 585 | 528 |
Rates and taxes | 184 | 166 |
Consumables | 47 | 30 |
Insurance | 67 | 59 |
Provision for post-sales client support and others | 1 | 142 |
Commission to non-whole time directors | 8 | 9 |
Impairment loss recognized / (reversed) under expected credit loss model | 248 | 71 |
Contributions towards Corporate Social responsibility | 266 | 156 |
Others | 270 | 162 |
3,655 | 2,924 |
2.19 LEASES
Accounting policy
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 Consolidated Statement of Profit and Loss over the lease term.
The lease rentals charged during the period is as follows:
(In crore)
Particulars | Year ended March 31, | |
2019 | 2018 | |
Lease rentals recognized during the period | 585 | 528 |
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 | March 31, 2019 | March 31, 2018 |
Not later than 1 year | 620 | 456 |
Later than 1 year and not later than 5 years | 1,794 | 1,388 |
Later than 5 years | 885 | 874 |
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.
2.20 EMPLOYEE BENEFITS
Accounting policy
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 BPM and EdgeVerve, contributions are made to the Infosys BPM 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 the Life Insurance Corporation of India as permitted by Indian law.
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 and are not reclassified to profit or loss in subsequent periods. 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 is recognized in the Consolidated Statement of Profit and Loss.
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.
Superannuation
Certain employees of Infosys, Infosys BPM 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.
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.
2.20.1 Gratuity
The following tables set out the funded status of the gratuity plans and the amounts recognized in the Group's financial statements as at March 31, 2019 and March 31, 2018:
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Change in benefit obligations | ||
Benefit obligations at the beginning | 1,201 | 1,117 |
Service cost | 157 | 150 |
Interest expense | 85 | 73 |
Remeasurements - Actuarial (gains) / losses | 32 | (59) |
Transfer in | – | 28 |
Curtailment gain | – | – |
Benefits paid | (128) | (107) |
Translation difference | 2 | – |
Reclassified under held for sale (refer note no 2.1.2) | – | (1) |
Reclassified from held for sale (refer note no 2.1.2) | 2 | – |
Benefit obligations at the end | 1,351 | 1,201 |
Change in plan assets | ||
Fair value of plan assets at the beginning | 1,216 | 1,195 |
Interest income | 90 | 80 |
Remeasurements- Return on plan assets excluding amounts included in interest income | 4 | 13 |
Contributions | 174 | 35 |
Benefits paid | (123) | (107) |
Fair value of plan assets at the end | 1,361 | 1,216 |
Funded status | 10 | 15 |
Prepaid gratuity benefit | 42 | 43 |
Accrued gratuity | (32) | (28) |
Amount for the year ended March 31, 2019 and March 31, 2018 recognized in the Consolidated Statement of Profit and Loss under employee benefit expense:
(In crore)
Particulars | Year ended March 31, | |
2019 | 2018 | |
Service cost | 157 | 150 |
Net interest on the net defined benefit liability/asset | (5) | (7) |
Net gratuity cost | 152 | 143 |
Amount for the year ended March 31, 2019 and March 31, 2018 recognized in the Consolidated Statement of other comprehensive income:
(In crore)
Particulars | Year ended March 31, | |
2019 | 2018 | |
Remeasurements of the net defined benefit liability/ (asset) | ||
Actuarial (gains) / losses | 32 | (59) |
(Return) / loss on plan assets excluding amounts included in the net interest on the net defined benefit liability/(asset) | (4) | (13) |
28 | (72) |
(In crore)
Particulars | Year ended March 31, | |
2019 | 2018 | |
(Gain)/loss from change in demographic assumptions | (4) | – |
(Gain)/loss from change in financial assumptions | 30 | (41) |
(Gain)/loss from experience adjustment | 6 | (18) |
32 | (59) |
The weighted-average assumptions used to determine benefit obligations as at March 31, 2019 and March 31, 2018 are set out below:
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Discount rate | 7.1% | 7.5% |
Weighted average rate of increase in compensation levels | 8.0% | 8.0% |
The weighted-average assumptions used to determine net periodic benefit cost for the year ended March 31, 2019 and March 31, 2018 are set out below:
Particulars | Year ended March 31, | |
2019 | 2018 | |
Discount rate(%) | 7.5 | 6.9 |
Weighted average rate of increase in compensation levels(%) | 8.0 | 8.0 |
Weighted average duration of defined benefit obligation (years) | 5.9 years | 6.1 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.
Sensitivity of significant assumptions used for valuation of defined benefit obligation:
(in crore)
Impact from percentage point increase / decrease in | As at March 31, 2019 |
Discount rate | 67 |
Weighted average rate of increase in compensation levels | 59 |
Sensitivity to 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. In practice, this is not probable, and changes in some of the assumptions may be correlated.
Gratuity is applicable only to employees drawing a salary in Indian rupees and there are no other significant 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 BPM and EdgeVerve, contributions are made to the Infosys BPM Employees' Gratuity Fund Trust and EdgeVerve Systems Limited Employees Gratuity Fund Trust, respectively. Trustees administer contributions made to the trust as at March 31, 2019 and March 31, 2018, the plan assets have been primarily invested in insurer managed funds.
Actual return on assets for the year ended March
31, 2019 and March 31, 2018 were 95 crore and
93 crore, respectively.
The Group expects to contribute 162 crore
to the gratuity trusts during the remainder of fiscal 2020.
Maturity profile of defined benefit obligation:
(In crore)
Within 1 year | 198 |
1-2 year | 207 |
2-3 year | 216 |
3-4 year | 223 |
4-5 year | 235 |
5-10 years | 1,163 |
2.20.2 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 assumptions provided below there is no shortfall as at March 31, 2019 and March 31, 2018, respectively.
The details of fund and plan asset position are as follows:
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Benefit obligation at the period end | 5,989 | 5,160 |
Net liability 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 | |
March 31, 2019 | March 31, 2018 | |
Government of India (GOI) bond yield | 7.1% | 7.50% |
Remaining term to maturity of portfolio | 5.47 years | 5.9 years |
Expected guaranteed interest rate | ||
First year | 8.65% | 8.55% |
Thereafter | 8.60% | 8.55% |
The Group contributed 543 crore and
484
crore to the provident fund during the year ended March 31, 2019 and March 31, 2018, respectively. The same has been recognized
in the Consolidated Statement of Profit and Loss under the head employee benefit expense.
2.20.3 Superannuation
The group contributed 215 crore and
173
crore to the superannuation plan during the year ended March 31, 2019 and March 31, 2018, respectively. The same has been recognized
in the Statement of profit and loss account 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.
2.20.4 Employee benefit costs include:
(In crore)
Particulars | Year ended March 31, | |
2019 | 2018 | |
Salaries and bonus(1)(2) | 44,405 | 38,093 |
Defined contribution plans | 307 | 260 |
Defined benefit plans | 603 | 540 |
45,315 | 38,893 |
(1) | Includes an employee stock compensation cost of ![]() ![]() |
(2) | Included in the above is a reversal of stock compensation cost of ![]() |
2.21 RECONCILIATION OF BASIC AND DILUTED SHARES USED IN COMPUTING EARNINGS PER SHARE
Accounting policy
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 at 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.
The following is a reconciliation of the equity shares used in the computation of basic and diluted earnings per equity share:
Particulars | Year ended March 31, | |
2019 | 2018 | |
Basic earnings per equity share - weighted average number of equity shares outstanding(1) | 4,347,130,157 | 4,510,664,644 |
Effect of dilutive common equivalent shares - share options outstanding | 6,290,615 | 4,483,096 |
Diluted earnings per equity share - weighted average number of equity shares and common equivalent shares outstanding | 435,34,20,772 | 451,51,47,740 |
Information in the table above is adjusted for September 2018 bonus issue (Refer note no 2.11)
(1) Excludes treasury shares
For the year ended March 31, 2019 and March 31, 2018, Nil and 3,10,372 (adjusted for September 2018 bonus issue) number of options
to purchase equity shares had an anti-dilutive effect respectively.
2.22 CONTINGENT LIABILITIES AND COMMITMENTS (TO THE EXTENT NOT PROVIDED FOR)
(In crore)
Particulars | As at | |
March 31, 2019 | March 31, 2018 | |
Contingent liabilities : | ||
Claims against the Company, not acknowledged as debts(1) | 3,081 | 4,802 |
[Amount paid to statutory authorities ![]() ![]() |
||
Commitments : | ||
Estimated amount of contracts remaining to be executed on capital contracts and not provided for (net of advances and deposits) | 1,724 | 1,452 |
Other commitments* | 86 | 81 |
*Uncalled capital pertaining to investments
(1) | As at March 31, 2019, claims against the Group not acknowledged as debts in respect
of income tax matters amounted to ![]() Amount paid to statutory authorities against the above tax claims amounted to ![]() Subsequent to March 31, 2018, the Supreme Court of India ruled favorably in respect of certain income tax claims which have been given effect in the above disclosure of claims as at March 31, 2019. |
The Group is subject to legal proceedings and claims, which have arisen in the ordinary course of business. The Group’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.
2.23 RELATED PARTY TRANSACTIONS
List of related parties:
Name of subsidiaries | Country | Holdings as at | |
March 31, 2019 | March 31, 2018 | ||
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 Nova Holdings LLC. (Infosys Nova) | U.S. | 100% | 100% |
EdgeVerve Systems Limited (EdgeVerve) | India | 100% | 100% |
Infosys Austria GmbH(1) (formerly Lodestone Management Consultants GmbH) | Austria | 100% | 100% |
Skava Systems Pvt. Ltd. (Skava Systems) | India | 100% | 100% |
Kallidus Inc. (Kallidus) | U.S. | 100% | 100% |
Infosys Chile SpA(2) | Chile | 100% | 100% |
Infosys Arabia Limited(3) | Saudi Arabia | 70% | 70% |
Infosys Consulting Ltda.(3) | Brazil | 99.99% | 99.99% |
Infosys CIS LLC(1)(22) | Russia | – | – |
Infosys Luxembourg S.a.r.l (1)(17) | Luxembourg | 100% | – |
Infosys Americas Inc., (Infosys Americas) | U.S. | 100% | 100% |
Infosys Technologies (Australia) Pty. Limited (Infosys Australia)(4) | Australia | 100% | 100% |
Infosys Public Services, Inc. USA (Infosys Public Services) | U.S. | 100% | 100% |
Infosys Canada Public Services Inc(23) | Canada | – | – |
Infosys Canada Public Services Ltd(24) | Canada | – | – |
Infosys BPM Limited (formerly Infosys BPO Limited) | India | 99.98% | 99.98% |
Infosys (Czech Republic) Limited s.r.o.(5) | Czech Republic | 99.98% | 99.98% |
Infosys Poland, Sp z.o.o(5) | Poland | 99.98% | 99.98% |
Infosys McCamish Systems LLC (5) | U.S. | 99.98% | 99.98% |
Portland Group Pty Ltd(5) | Australia | 99.98% | 99.98% |
Infosys BPO Americas LLC.(5) | U.S. | 99.98% | 99.98% |
Infosys Consulting Holding AG (Infosys Lodestone) | Switzerland | 100% | 100% |
Lodestone Management Consultants Inc.(6)(15) | U.S. | – | 100% |
Infosys Management Consulting Pty Limited(6) | Australia | 100% | 100% |
Infosys Consulting AG(6) | Switzerland | 100% | 100% |
Infosys Consulting GmbH(6) | Germany | 100% | 100% |
Infosys Consulting SAS(6) | France | 100% | 100% |
Infosys Consulting s.r.o.(6) | Czech Republic | 100% | 100% |
Infosys Consulting (Shanghai) Co., Ltd.(formerly Lodestone Management Consultants Co., Ltd)(6) | China | 100% | 100% |
Infy Consulting Company Ltd(6) | U.K. | 100% | 100% |
Infy Consulting B.V.(6) | The Netherlands | 100% | 100% |
Infosys Consulting Sp. z.o.o(6) | Poland | 100% | 100% |
Lodestone Management Consultants Portugal, Unipessoal, Lda. (6) | Portugal | 100% | 100% |
S.C. Infosys Consulting S.R.L.(1) | Romania | 100% | 100% |
Infosys Consulting S.R.L.(6) | Argentina | 100% | 100% |
Infosys Consulting (Belgium) NV (formerly Lodestone Management Consultants (Belgium) S.A.)(7) | Belgium | 99.90% | 99.90% |
Panaya Inc. (Panaya) | U.S. | 100% | 100% |
Panaya Ltd.(8) | Israel | 100% | 100% |
Panaya GmbH(8) | Germany | 100% | 100% |
Panaya Japan Co. Ltd(4)(8) | Japan | 100% | 100% |
Noah Consulting LLC (Noah)(9) | U.S. | – | – |
Noah Information Management Consulting Inc. (Noah Canada)(10) | Canada | – | – |
Brilliant Basics Holdings Limited (Brilliant Basics)(11) | U.K. | 100% | 100% |
Brilliant Basics Limited(12) | U.K. | 100% | 100% |
Brilliant Basics (MENA) DMCC(12) | Dubai | 100% | 100% |
Infosys Consulting Pte Limited (Infosys Singapore)(1) | Singapore | 100% | 100% |
Infosys Middle East FZ LLC(13) | Dubai | 100% | 100% |
Fluido Oy(13)(18) | Finland | 100% | – |
Fluido Sweden AB (Extero)(19) | Sweden | 100% | – |
Fluido Norway A/S(19) | Norway | 100% | – |
Fluido Denmark A/S(19) | Denmark | 100% | – |
Fluido Slovakia s.r.o(19) | Slovakia | 100% | – |
Fluido Newco AB(19) | Sweden | 100% | – |
Infosys Compaz PTE. Ltd (formerly Trusted Source Pte. Ltd) (13)(20) | Singapore | 60% | – |
Infosys South Africa (Pty) Ltd(13)(21) | South Africa | – | – |
WongDoody Holding Company Inc. (WongDoody) (14) | U.S. | 100% | – |
WDW Communications, Inc(16) | U.S. | 100% | – |
WongDoody, Inc(16) | U.S. | 100% | – |
(1) Wholly-owned subsidiary of Infosys Limited
(2) Incorporated effective November 20, 2017
(3) Majority owned and controlled subsidiary of Infosys Limited
(4) Under liquidation
(5) Wholly owned subsidiary of Infosys BPM
(6) Wholly owned subsidiaries of Infosys Consulting Holding AG (formerly Lodestone Holding AG)
(7) Majority owned and controlled subsidiaries of Infosys Consulting Holding AG (formerly Lodestone Holding AG)
(8) Wholly owned subsidiary of Panaya Inc.
(9) Liquidated effective November 9, 2017
(10) Wholly owned subsidiary of Noah. Liquidated effective December 20, 2017
(11) On September 8, 2017, Infosys acquired 100% of the voting interests in Brilliant Basics Holding Limited
(12) Wholly-owned subsidiary of Brilliant Basics Holding Limited.
(13) Wholly-owned subsidiary of Infosys Consulting Pte Ltd
(14) On May 22, 2018, Infosys acquired 100% of the voting interest in WongDoody
(15) Liquidated effective May 17, 2018
(16) Wholly-owned subsidiary of WongDoody
(17) Incorporated effective August 6, 2018
(18) | On October 11, 2018, Infosys Consulting Pte. Ltd, acquired 100% of the voting interests in Fluido Oy and its subsidiaries |
(19) Wholly-owned subsidiary of Fluido Oy
(20) | On November 16, 2018 , Infosys Consulting Pte. Ltd, acquired 60% of the voting interest in Infosys Compaz Pte. Ltd |
(21) Incorporated effective December 19,2018
(22)Incorporated effective November 29, 2018
(23)Incorporated effective November 27, 2018, wholly owned subsidiary Infosys Public Services Inc
(24)Liquidated effective May 9, 2017, wholly owned subsidiary Infosys Public Services Inc
Infosys has provided guarantee for performance of certain contracts entered into by its subsidiaries.
Associate
During the year ended March 31, 2018, the Company
has written down the entire carrying value of the investment in its associate DWA Nova LLC amounting to 71 crore. DWA Nova
LLC has been liquidated w.e.f November 17, 2017
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 BPM Limited Employees' Superannuation Fund Trust (formerly Infosys BPO Limited Employees Superannuation Fund Trust) | India | Post-employment benefit plan of Infosys BPM |
Infosys BPM Limited Employees' Gratuity Fund Trust (formerly Infosys BPO Limited Employees' Gratuity Fund Trust) | India | Post-employment benefit plan of Infosys BPM |
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 Employees Welfare Trust | India | Controlled trust |
Infosys Employee Benefits Trust | India | Controlled trust |
Infosys Science Foundation | India | Controlled trust |
Refer note no. 2.20 for information on transactions with post-employment benefit plans mentioned above.
List of key management personnel
Whole-time directors
Salil Parekh appointed as Chief Executive Officer and Managing Director effective January 2, 2018. The appointment is for a term of 5 years with effect from January 2, 2018 to January 1, 2023 and the remuneration is approved by shareholders through postal ballot dated February 20, 2018.
U. B. Pravin Rao, Chief Operating officer appointed as Interim-Chief Executive Officer and Managing Director effective August 18, 2017. Subsequently he stepped down as the interim CEO and Managing Director effective January 2, 2018 and continues as Chief Operating Officer and a whole-time director of the Company.
Dr. Vishal Sikka resigned as Chief Executive Officer and Managing Director effective August 18, 2017 and as Executive Vice Chairman effective August 24, 2017
Non-whole-time directors
Nandan M. Nilekani (appointed as Non-Executive, Non-Independent Chairman effective August 24, 2017)
Micheal Gibbs (appointed as Independent director effective July 13, 2018)
Ravi Venkatesan (resigned from his position as Co-Chairman effective August 24, 2017 and resigned as member of the Board effective May 11, 2018)
Kiran Mazumdar-Shaw
Roopa Kudva
Dr. Punita Kumar-Sinha
D. N. Prahlad
D. Sundaram (appointed effective July 14, 2017)
Prof. Jeffrey Lehman, (resigned effective August 24, 2017)
R. Seshasayee (resigned effective August 24, 2017)
Prof. John Etchemendy (resigned effective August 24, 2017)
Executive Officers
Nilanjan Roy (appointed as Chief Financial Officer effective March 1, 2019)
Jayesh Sanghrajka (appointed as Interim-Chief Financial Officer effective November 17, 2018. He resumed his responsibilities as Deputy Chief Financial Officer effective March 1, 2019)
M.D. Ranganath (resigned as Chief Financial Officer effective November 16, 2018)
Mohit Joshi, President
Rajesh K. Murthy, President (appointed effective October 13, 2016 and resigned effective January 31, 2018)
Ravi Kumar S, President and Deputy Chief Operating Officer
Sandeep Dadlani, President (resigned effective July 14, 2017)
Krishnamurthy Shankar, Group Head - Human Resources
Gopi Krishnan Radhakrishnan - Acting General Counsel (resigned effective June 24, 2017)
Inderpreet Sawhney, Group General Counsel and Chief Compliance Officer (appointed as executive officer effective July 14, 2017)
Company Secretary
A. G. S. Manikantha
Transaction with key management personnel:
The table below describes the compensation to key managerial personnel which comprise directors and executive officers:
(In crore)
Particulars | Year ended March 31, | |
2019 | 2018 | |
Salaries and other employee benefits to whole-time directors and executive officers (1) (2)(3)(4)(5) | 96 | 48 |
Commission and other benefits to non-executive/independent directors | 8 | 10 |
Total | 104 | 58 |
(1) | Total employee stock compensation expense for the year ended March 31, 2019 and
March 31, 2018, an employee stock compensation charge of ![]() ![]() |
(2) | Includes reversal of stock compensation cost of ![]() |
(3) | On December 20, 2018, the Board appointed Nilanjan Roy as the Chief Financial Officer of the Company with effect from March 1, 2019. |
(4) | On December 2, 2017, the Board appointed Salil Parekh as the Chief Executive Officer and Managing Director of the Company with effect from January 2, 2018. |
(5) | On June 16, 2017, the Board appointed Inderpreet Sawhney as the Group General Counsel and Chief Compliance Officer of the Company with effect from July 3, 2017; The Board in their meeting held on July 14, 2017 designated her as an Executive Officer with effect from the date of the meeting. |
Additional information pursuant to para 2 of general instructions for the preparation of Consolidated Financial Statements
In crore
Name of entity | Net Assets | Share in profit or loss | Share in other comprehensive income | Share in total comprehensive income | ||||
as %age of consolidated net assets | Amount | as %age of consolidated profit or loss | Amount | as %age of consolidated other comprehensive income | Amount | as %age of consolidated total comprehensive income | Amount | |
Infosys Ltd. | 91.63% | 62,711 | 94.5% | 14,702 | 109.7% | 79 | 94.6% | 14,781 |
Indian Subsidiaries | ||||||||
Infosys BPM | 5.89% | 4,034 | 3.83% | 596 | (4.17%) | (3) | 3.80% | 593 |
EdgeVerve | (1.44%) | (988) | 2.60% | 405 | 4.17% | 3 | 2.61% | 408 |
Skava Systems | 0.07% | 49 | 0.07% | 11 | 0.00% | – | 0.07% | 11 |
Foreign Subsidiaries | ||||||||
Brilliant Basics (MENA) | 0.00% | 1 | 0.01% | 2 | 0.00% | – | 0.01% | 2 |
Brilliant Basics Holdings | 0.02% | 12 | (0.01%) | (1) | 0.00% | – | (0.01%) | (1) |
Brilliant Basics Limited | (0.00%) | (2) | 0.02% | 3 | 0.00% | – | 0.02% | 3 |
Infosys Middle East FZ - LLC | (0.03%) | (21) | 0.03% | 5 | 1.39% | 1 | 0.04% | 6 |
Infosys BPO (Poland) SpZ.o.o | 0.84% | 575 | 0.18% | 28 | 0.00% | – | 0.18% | 28 |
Fluido Denmark A/S | (0.00%) | (3) | (0.01%) | (1) | 0.00% | – | (0.01%) | (1) |
Fluido Newco AB | 0.00% | – | 0.00% | – | 0.00% | – | 0.00% | – |
Fluido Norway AS | (0.01%) | (7) | (0.06%) | (10) | 0.00% | – | (0.06%) | (10) |
Fluido Oy | 0.06% | 38 | 0.06% | 9 | 0.00% | – | 0.06% | 9 |
Fluido Slovakia s.r.o | 0.00% | 2 | (0.01%) | (1) | 0.00% | – | (0.01%) | (1) |
Fluido Sweden AB | 0.00% | 2 | (0.01%) | (2) | 0.00% | – | (0.01%) | (2) |
Infosys America | 0.00% | 1 | 0.00% | – | 0.00% | – | 0.00% | – |
Infosys Arabia Limited | 0.00% | 3 | 0.00% | – | 0.00% | – | 0.00% | – |
Infosys Australia | 0.01% | 6 | 0.00% | – | 0.00% | – | 0.00% | – |
Infosys BPO Americas | 0.01% | 10 | (0.01%) | (2) | 0.00% | – | (0.01%) | (2) |
Infosys (Czech republic) Limited s.r.o | 0.10% | 68 | 0.03% | 4 | (11.11%) | (8) | (0.03%) | (4) |
Infosys Brasil | 0.23% | 155 | (0.53%) | (82) | 0.00% | – | (0.52%) | (82) |
Infosys China | 0.22% | 149 | (0.01%) | (1) | 0.00% | – | (0.01%) | (1) |
Infosys Chile | 0.01% | 5 | (0.01%) | (1) | 0.00% | – | (0.01%) | (1) |
Infosys Luxembourg S.a.r. | 0.01% | 4 | 0.00% | – | 0.00% | – | 0.00% | – |
Infosys Mexico | 0.28% | 193 | 0.19% | 30 | 0.00% | – | 0.19% | 30 |
Infosys Nova | 0.00% | – | 0.00% | – | 0.00% | – | 0.00% | – |
Infosys Shanghai | 1.05% | 716 | (0.57%) | (89) | 0.00% | – | (0.57%) | (89) |
Infosys Sweden | 0.03% | 23 | 0.00% | – | 0.00% | – | 0.00% | – |
Infosys Public Services | 0.67% | 456 | (0.24%) | (37) | 0.00% | – | (0.24%) | (37) |
Kallidus | (0.04%) | (27) | (0.53%) | (82) | 0.00% | – | (0.52%) | (82) |
Infosys Consulting S.R.L. | (0.00%) | (1) | (0.01%) | (2) | 0.00% | – | (0.01%) | (2) |
Infosys Management Consulting Pty Limited | 0.02% | 17 | 0.04% | 6 | 0.00% | – | 0.04% | 6 |
Lodestone Management GmbH | 0.00% | – | 0.00% | – | 0.00% | – | 0.00% | – |
Infosys Consulting (Belgium) SA | (0.03%) | (21) | 0.02% | 3 | 0.00% | – | 0.02% | 3 |
Infosys Consulting Ltda | (0.18%) | (125) | (0.39%) | (61) | 0.00% | – | (0.39%) | (61) |
Lodestone Management Consultants China Co., Ltd. | (0.25%) | (170) | (0.22%) | (34) | 0.00% | – | (0.22%) | (34) |
Infosys Consulting s.r.o. | 0.00% | 1 | 0.00% | – | 0.00% | – | 0.00% | – |
Infosys Consulting SAS | 0.01% | 7 | 0.01% | 1 | 0.00% | – | 0.01% | 1 |
Infosys Consulting GmbH | (0.00%) | (1) | 0.03% | 5 | 0.00% | – | 0.03% | 5 |
Infosys Lodestone | 0.34% | 234 | 0.01% | 1 | 0.00% | – | 0.01% | 1 |
Infy Consulting B.V. | 0.02% | 15 | 0.04% | 6 | 0.00% | – | 0.04% | 6 |
Infosys Consulting Sp. z o.o. | 0.02% | 14 | 0.05% | 8 | 0.00% | – | 0.05% | 8 |
Lodestone Management Consultants Portugal, Unipessoal LDA | 0.01% | 4 | 0.01% | 1 | 0.00% | – | 0.01% | 1 |
S.C. Infosys Consulting S.R.L. | 0.03% | 22 | 0.02% | 3 | 0.00% | – | 0.02% | 3 |
Infosys Consulting Pte Ltd | (0.01%) | (6) | (0.03%) | (4) | 0.00% | – | (0.03%) | (4) |
Infosys Consulting AG | 0.20% | 137 | 0.37% | 58 | 0.00% | – | 0.37% | 58 |
Infy Consulting Company Ltd. | 0.05% | 33 | 0.16% | 25 | 0.00% | – | 0.16% | 25 |
Lodestone management Consultants Inc | 0.00% | – | 0.00% | – | 0.00% | – | 0.00% | – |
Infosys McCamish Systems LLC | 0.39% | 264 | 0.55% | 86 | 0.00% | – | 0.55% | 86 |
Noah | 0.00% | – | 0.00% | – | 0.00% | – | 0.00% | – |
Noah Canada | 0.00% | – | 0.00% | – | 0.00% | – | 0.00% | – |
Panaya GmbH | (0.00%) | (1) | 0.01% | 1 | 0.00% | – | 0.01% | 1 |
Panaya Inc | 0.18% | 122 | 0.02% | 3 | 0.00% | – | 0.02% | 3 |
Panaya Japan Co Ltd | (0.00%) | (1) | 0.00% | – | 0.00% | – | 0.00% | – |
Panaya Limited | (0.80%) | (546) | (0.54%) | (84) | 0.00% | – | (0.54%) | (84) |
Portland Group Pty Ltd | 0.17% | 114 | 0.05% | 8 | 0.00% | – | 0.05% | 8 |
Infosys Compaz PTE Ltd. | 0.15% | 106 | 0.10% | 16 | 0.00% | – | 0.10% | 16 |
WDW Communications, Inc. | (0.22%) | (153) | (0.11%) | (17) | 0.00% | – | (0.11%) | (17) |
WongDoody Holding Company | (0.00%) | (1) | (0.01%) | (2) | 0.00% | – | (0.01%) | (2) |
WongDoody, Inc. | 0.31% | 210 | 0.24% | 37 | 0.00% | – | 0.24% | 37 |
Subtotal | 100.00% | 68,439 | 100% | 15,550 | 100% | 72 | 100% | 15,622 |
Adjustment arising out of consolidation | (3,648) | (175) | 62 | (113) | ||||
Minority interest in subsidiaries | 58 | (6) | – | (6) | ||||
Controlled Trusts | 157 | 41 | – | 41 | ||||
Total | 65,006 | 15,410 | 134 | 15,544 |
2.24 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.
During the three months ended June 30, 2018, the Group internally reorganized some of its business segments to deepen customer relationships, improve focus of sales investments and increase management oversight. Consequent to the internal reorganization, there were changes in the reportable business segments based on “Management approach” as defined under Ind AS 108, Operating Segments. Therefore, enterprises in Insurance which was earlier considered under the Life Sciences, Healthcare and Insurance business segment are now considered under the Financial Services business segment and enterprises in Communication, Telecom OEM and Media which was earlier under Energy & Utilities, Communication and Services is now shown as a separate business segment. Segmental operating income has changed in line with these as well as changes in the allocation method. The CODM evaluates the Group's performance and allocates resources based on an analysis of various performance indicators by business segments. Accordingly, information has been presented along business 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 accounting policies.
Business segments of the Group are primarily enterprises in Financial Services and Insurance, enterprises in Manufacturing, enterprises in Retail, Consumer Packaged Goods and Logistics, enterprises in the Energy, Utilities, Resources and Services, enterprises in Communication, Telecom OEM and Media, enterprises in Hi-Tech, enterprises in Life Sciences and Healthcare and all other segments. The Financial services reportable segments has been aggregated to include the Financial Services operating segment and Finacle operating segment because of the similarity of the economic characteristics. All other segments represent the operating segments of businesses in India, Japan, China, Infosys Public Services & other enterprises in Public Services. Consequent to the above change in the composition of reportable business segments, the prior year comparatives for the year ended March 31, 2018 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 Infosys Public services and revenue generated from customers located in India, Japan and China and other enterprises in Public services. 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 efforts 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. The 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. The 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.
Business segment revenue information is collated based on individual customers invoiced or in relation to which the revenue is otherwise recognized.
Business Segments
Year ended March 31, 2019 and March 31, 2018:
(In crore)
Particulars | Financial Services | Retail | Communication | Energy, Utilities, Resources and Services | Manufacturing | Hi-Tech | Life Sciences | All other segments | Total |
Revenue from operations | 26,477 | 13,556 | 10,426 | 10,390 | 8,152 | 6,177 | 5,203 | 2,294 | 82,675 |
23,172 | 11,345 | 8,883 | 8,297 | 6,671 | 5,131 | 4,698 | 2,325 | 70,522 | |
Identifiable operating expenses | 14,164 | 6,823 | 5,720 | 5,661 | 4,513 | 3,546 | 2,756 | 1,415 | 44,598 |
12,107 | 5,668 | 4,527 | 4,204 | 3,881 | 2,774 | 2,447 | 1,342 | 36,950 | |
Allocated expenses | 5,435 | 2,699 | 2,189 | 2,187 | 1,786 | 1,083 | 1,028 | 763 | 17,170 |
4,695 | 2,374 | 1,737 | 1,682 | 1,516 | 911 | 860 | 784 | 14,559 | |
Segmental operating income | 6,878 | 4,034 | 2,517 | 2,542 | 1,853 | 1,548 | 1,419 | 116 | 20,907 |
6,370 | 3,303 | 2,619 | 2,411 | 1,274 | 1,446 | 1,391 | 199 | 19,013 | |
Unallocable expenses | 2,027 | ||||||||
1,865 | |||||||||
Other income, net | 2,882 | ||||||||
3,311 | |||||||||
Reduction in the fair value of Disposal Group held for sale (Refer to note 2.1.2) | (270) | ||||||||
(118) | |||||||||
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" (Refer to note 2.1.2) | (451) | ||||||||
– | |||||||||
Share in net profit/(loss) of associate, including impairment | – | ||||||||
(71) | |||||||||
Profit before tax | 21,041 | ||||||||
20,270 | |||||||||
Tax expense | 5,631 | ||||||||
4,241 | |||||||||
Profit for the period | 15,410 | ||||||||
16,029 | |||||||||
Depreciation and amortization expense | 2,011 | ||||||||
1,863 | |||||||||
Non-cash expenses other than depreciation and amortization | 740 | ||||||||
191 |
2.14.3 The following table sets forth our revenue by geography for the year ended March 31, 2019 and March 31, 2018
(In crore)
North America | Europe | India | Rest of the World | Total | |
2019 | 50,038 | 19,942 | 2,048 | 10,647 | 82,675 |
2018 | 42,575 | 16,738 | 2,231 | 8,978 | 70,522 |
Significant clients
No client individually accounted for more than 10% of the revenues in the year ended March 31, 2019 and March 31, 2018.
2.25 FUNCTION WISE CLASSIFICATION OF CONSOLIDATED STATEMENT OF PROFIT AND LOSS
(In crore)
Particulars | Note no | Year ended March 31, | |
2019 | 2018 | ||
Revenue from operations | 2.16 | 82,675 | 70,522 |
Cost of Sales | 53,867 | 45,130 | |
Gross profit | 28,808 | 25,392 | |
Operating expenses | |||
Selling and marketing expenses | 4,473 | 3,560 | |
General and administration expenses | 5,455 | 4,684 | |
Total operating expenses | 9,928 | 8,244 | |
Operating profit | 18,880 | 17,148 | |
Reduction in the fair value of Disposal Group held for sale | 2.1.2 | (270) | (118) |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" | 2.1.2 | (451) | – |
Other income, net | 2.17 and 2.1.2 | 2,882 | 3,311 |
Profit before non controlling interest / Share in net profit / (loss) of associate | 21,041 | 20,341 | |
Share in net profit/(loss) of associate, including impairment | 2.23 | – | (71) |
Profit before tax | 21,041 | 20,270 | |
Tax expense: | |||
Current tax | 5,727 | 4,581 | |
Deferred tax | (96) | (340) | |
Profit for the period | 15,410 | 16,029 | |
Other comprehensive income | |||
Items that will not be reclassified subsequently to profit or loss | |||
Remeasurement of the net defined benefit liability/asset | 2.20 and 2.15 | (22) | 55 |
Equity instruments through other comprehensive income, net | 2.4 and 2.15 | 70 | 7 |
48 | 62 | ||
Items that will be reclassified subsequently to profit or loss | |||
Fair value changes on derivatives designated as cash flow hedge, net | 2.10 and 2.15 | 21 | (39) |
Exchange differences on translation of foreign operations, net | 63 | 321 | |
Fair value changes on investments, net | 2.4 and 2.15 | 2 | (1) |
86 | 281 | ||
Total other comprehensive income / (loss), net of tax | 134 | 343 | |
Total comprehensive income for the period | 15,544 | 16,372 | |
Profit attributable to: | |||
Owners of the Company | 15,404 | 16,029 | |
Non-controlling interests | 6 | – | |
15,410 | 16,029 | ||
Total comprehensive income attributable to: | |||
Owners of the Company | 15,538 | 16,372 | |
Non-controlling interests | 6 | – | |
15,544 | 16,372 |
for and on behalf of the Board of Directors of Infosys Limited
Nandan M. Nilekani Chairman |
Salil Parekh Chief Executive officer and Managing Director |
U. B. Pravin Rao Chief Operating Officer and Whole-time Director |
D. Sundaram Director |
Nilanjan Roy Chief Financial Officer |
A. G. S. Manikantha Company Secretary |
Bengaluru April 12, 2019 |
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