UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934
For the quarter ended September 30, 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 half year ended September 30, 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 October 11, 2019, we announced our results of operations for the quarter and half year ended September 30, 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 October 11, 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 half years ended September 30, 2019 and 2018 (as per IFRS); revenue by geographical segment, service offering, and industry classification; 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 October 11, 2019, we also held a teleconference with investors and analysts to discuss our results. The transcript of the teleconference is 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 half year ended September 30, 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; Ind AS Condensed Standalone Financial Statements and Auditors Report in Indian Rupees; Ind AS Consolidated Financial Statements and Auditors Report in Indian Rupees for the quarter and half year ended September 30, 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: October 16, 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 October 11, 2019 press conference |
99.4 | Fact Sheet regarding Registrant's Profit and Loss Account Summary for the quarters and half years ended September 30, 2019 and 2018 (as per IFRS); Revenue by Geographical Segment, Service Offering, and Industry Classification; Information regarding Client Concentration; Employee Information and Metrics; and Consolidated IT Services Information |
99.5 | Transcript of October 11, 2019 5:30 p.m. IST Earnings Call |
99.6 | Form of release to stock exchanges and advertisement placed in Indian newspapers |
99.7 | Audited Condensed Financial Statements in compliance with IFRS in US Dollars and the Auditors Report |
99.8 | Audited Condensed Financial Statements in compliance with IFRS in Indian Rupees and the Auditors Report |
99.9 | Ind AS Condensed Standalone Financial Statements and Auditors Report in Indian Rupees for the quarter and half year ended September 30, 2019 |
99.10 | Ind AS Consolidated Financial Statements and Auditors Report in Indian Rupees for the quarter and half year ended September 30, 2019 |
Exhibit 99.1
IFRS USD Press Release
Double digit growth for the fourth consecutive quarter, coupled with 1.2% operating margin expansion in Q2
Bengaluru, India – October 11, 2019
“Our performance was robust on multiple dimensions – revenue growth, digital growth, operating margins, operational efficiencies, large deal signings and reduction in attrition”, said Salil Parekh, CEO and MD. “All these are clear signs that we are progressing well in our journey of client-centricity and maximizing value for our stakeholders.”
· | Q2 20 revenues grew year-on-year by 9.9% in USD; 11.4% in constant currency |
· | Q2 20 revenues grew sequentially by 2.5% in USD; 3.3% in constant currency |
· | Q2 20 Digital revenues at $1,230 million (38.3% of total revenues), year-on-year growth of 38.4% and sequential growth of 10.7% in constant currency |
· | Q2 20 operating margin at 21.7%, 1.2% improvement over Q1 20 |
· | H1 revenues grew by 11.9% in constant currency |
· | H1 operating margin at 21.1%, within the margin guidance for the year |
· | Declared interim dividend of ![]() |
· | Increased lower end of FY 20 revenue guidance; revised guidance is 9%-10% in constant currency |
· | Maintained FY 20 operating margin guidance range of 21%-23% |
*USD/INR exchange rate as of September 30, 2019
1. | Financial Highlights – Consolidated results under International Financial Reporting Standards (IFRS) |
For the quarter ended September 30, 2019 Revenues were $3,210 million, growth of 9.9% YoY and 2.5% QoQ
Operating profit was $696 million, increase of 0.5% YoY and 8.3% QoQ. Operating margin was 21.7%.
Basic EPS was $0.13, growth of 0.2% YoY and 5.6% QoQ |
For six months ended September 30, 2019 Revenues were $6,340 million, growth of 10.2% YoY
Operating profit was $1,338 million, decline of 1.8% YoY. Operating margin was 21.1%.
Basic EPS was $0.26, growth of 1.6% YoY |
Q2 witnessed another quarter of all-round growth in industry segments and geographies which is a testimony to our strong credentials and client relevance”, said Pravin Rao, COO. “Large deal wins were $2.8 bn. We are especially pleased by the reduction in attrition driven by our focus on enhanced employee value proposition.”
“We saw expansion in operating margins during the quarter driven by improvement in operational parameters and cost efficiencies”, said Nilanjan Roy, CFO. “We took the first step towards implementation of our new capital allocation policy by increasing interim dividend by over 14% compared to FY 19.”
2. | Capital Allocation |
The Company completed its
share buyback of 8,260 crore on 26th August, 2019. With this the company completed the
additional capital return program of upto
13,000 crore announced in April 2018.
3. | Client wins & Testimonials |
· | We were selected by Toyota Material Handling North America (TMHNA) for a cloud-based IoT telematics product implementation along with application support and development for its SAP Platform. As the development partner for TMHNA Global Telematics Solution (GTS), an industry leading cloud-based IoT offering, Infosys is enabling remote monitoring and diagnostic capabilities including vehicle access control, system maintenance, condition sensing and location tracking. |
· | We were selected as a strategic partner by Movement Mortgage, a fast-growing mortgage bank in the U.S., to lead its digital transformation and accelerate growth. Infosys will support Movement Mortgage’s 650 locations in 47 states to ensure the smooth transition of business models in key projects, with the aim to increase business volume and leverage the company’s fintech services to develop mortgage industry specific solutions for Infosys customers. |
· | In collaboration with Microsoft, we announced a long-term strategic partnership with JG Summit Holdings, Inc., one of the largest and most diversified conglomerates, headquartered in Manila, Philippines. As a technology services partner, Infosys is helping formulate and execute the digital transformation strategy for JG Summit, based on Microsoft Azure, an open, hyper-scale, enterprise-grade cloud platform, along with SAP S/4 HANA. The collaboration will offer JG Summit seamless implementation and migration to Microsoft Azure cloud platform, to develop an agile and robust digital infrastructure for its business processes. |
· | EdgeVerve Systems, a subsidiary of Infosys, was selected by Al Ahli Bank of Kuwait to steer its automation journey using AssistEdge Robotic Process Automation (RPA). We are working the bank in their process automation journey, driving cost efficiencies and streamlining its operations. |
· | We have partnered with one of the largest utility companies to transform its IT Service Management. The program, leveraging ServiceNow, is helping our client significantly improve end-user experience, enhance employee productivity and deliver business agility. Infosys will also deliver a comprehensive solution for organization change management and user training as a part of this program. |
4. | Recognitions |
· | Ranked 3 in the Forbes list of The World’s Best Regarded Companies for 2019 |
· | Won the United Nations Global Climate Action Award in the ‘Climate Neutral Now’ category |
· | Recognized as a leader in Gartner Magic Quadrant for IT Services for Communications Service Providers, Worldwide |
· | Recognized as a leader in Software Product Engineering Services PEAK Matrix™ Assessment 2019 by Everest Group |
· | Recognized as a leader in the DevOps Services PEAK Matrix™ Assessment 2019 by Everest Group |
· | Recognized as a leader in IDC MarketScape: Worldwide Intelligent Automation Services 2019 Vendor Assessment |
· | Recognized in HFS Top 10: Digital Front Office: CX Design, Sales, And Marketing |
· | Recognized in HFS Top 10: Banking and Financial Services (BFS) Sector Service Providers |
· | Recognized in HFS Top 10: Cloud Migration and Management Services 2019 |
· | Recognized as a Leader in NelsonHall’s Smart IT Services in Utilities |
· | Recognized in HFS SAP SuccessFactors Services Top 10 Report |
· | Recognized as 2019 Working Mother & AVTAR Best 100 Companies for Women in India and ‘2019 Champion of Inclusion' in the Most Inclusive Companies in India Index |
· | Won the 2019 Oracle Excellence Award for Global Partner of the Year in CX – Sales Cloud |
· | Won the Oracle Excellence Award for NA partner of the Year for Emerging Technologies |
· | Recognized as the 2019 Global Alliance SI Partner of the Year by Microsoft |
· | Recognized as the Microsoft US Service Partner ACR Winner for the FY20 Microsoft One Commercial Partner Winners Circle program |
About Infosys
Infosys is a global leader in next-generation digital services and consulting. We enable clients to navigate their digital transformation, leveraging our teams from over 46 countries. 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. |
![]() |
Safe Harbor
Certain statements mentioned in this release concerning our future growth prospects are forward-looking statements regarding our future business expectations intended to qualify for the 'safe harbor' under the Private Securities Litigation Reform Act of 1995, whiv ch 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, 2019. 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 |
Mehak Chawla Mehak.Chawla@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)
September 30, 2019 | March 31, 2019 | |
ASSETS | ||
Current assets | ||
Cash and cash equivalents | 2,324 | 2,829 |
Current investments | 496 | 958 |
Trade receivables | 2,265 | 2,144 |
Unbilled revenue | 1,026 | 777 |
Prepayments and other current assets | 761 | 827 |
Income tax assets | 5 | 61 |
Derivative financial instruments | 15 | 48 |
Total current assets | 6,892 | 7,644 |
Non-current assets | ||
Property, plant and equipment | 1,878 | 1,931 |
Right-of-use assets(B3) | 552 | – |
Goodwill | 576 | 512 |
Intangible assets | 191 | 100 |
Non-current investments | 556 | 670 |
Deferred income tax assets | 192 | 199 |
Income tax assets | 904 | 914 |
Other non-current assets | 280 | 282 |
Total non-current assets | 5,129 | 4,608 |
Total assets | 12,021 | 12,252 |
LIABILITIES AND EQUITY | ||
Current liabilities | ||
Trade payables | 301 | 239 |
Lease liabilities(B3) | 73 | – |
Derivative financial instruments | 5 | 2 |
Current income tax liabilities | 216 | 227 |
Client deposits | 2 | 4 |
Unearned revenue | 382 | 406 |
Employee benefit obligations | 258 | 234 |
Provisions | 86 | 83 |
Other current liabilities | 1,388 | 1,498 |
Total current liabilities | 2,711 | 2,693 |
Non-current liabilities | ||
Lease liabilities(B3) | 503 | – |
Deferred income tax liabilities | 99 | 98 |
Employee benefit obligations | 6 | 6 |
Other non-current liabilities | 113 | 55 |
Total liabilities | 3,432 | 2,852 |
Equity | ||
Share
capital- ![]() |
332 | 339 |
Share premium | 295 | 277 |
Retained earnings | 10,510 | 11,248 |
Cash flow hedge reserve | 2 | 3 |
Other reserves | 460 | 384 |
Capital redemption reserve | 17 | 10 |
Other components of equity | (3,079) | (2,870) |
Total equity attributable to equity holders of the company | 8,537 | 9,391 |
Non-controlling interests | 52 | 9 |
Total equity | 8,589 | 9,400 |
Total liabilities and equity | 12,021 | 12,252 |
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 September 30, 2019 | Three months ended September 30, 2018 | Six months ended September 30, 2019 | Six months ended September 30, 2018 | |
Revenues | 3,210 | 2,921 | 6,340 | 5,753 |
Cost of sales | 2,140 | 1,884 | 4,261 | 3,703 |
Gross profit | 1,070 | 1,037 | 2,079 | 2,050 |
Operating expenses | ||||
Selling and marketing expenses | 165 | 154 | 333 | 303 |
Administrative expenses | 209 | 191 | 408 | 384 |
Total operating expenses | 374 | 345 | 741 | 687 |
Operating profit | 696 | 692 | 1,338 | 1,363 |
Other income, net | 89 | 105 | 195 | 212 |
Finance cost(B3) | (6) | – | (12) | – |
Reduction in the fair value of Disposal Group held for sale(A1) | – | – | – | (39) |
Profit before income taxes | 779 | 797 | 1,521 | 1,536 |
Income tax expense | 207 | 216 | 403 | 420 |
Net profit | 572 | 581 | 1,118 | 1,116 |
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) | 1 | (6) | 1 |
Equity instrument through other comprehensive income, net | 1 | 2 | 1 | 2 |
(2) | 3 | (5) | 3 | |
Items that will be reclassified subsequently to profit or loss: | ||||
Fair valuation of investments, net | – | (2) | 2 | (9) |
Fair value changes on derivatives designated as cash flow hedge, net | 2 | (4) | (1) | (3) |
Foreign currency translation | (224) | (461) | (207) | (929) |
(222) | (467) | (206) | (941) | |
Total other comprehensive income/(loss), net of tax | (224) | (464) | (211) | (938) |
Total comprehensive income | 348 | 117 | 907 | 178 |
Profit attributable to: | ||||
Owners of the Company | 569 | 581 | 1,115 | 1,116 |
Non-controlling interests | 3 | – | 3 | – |
572 | 581 | 1,118 | 1,116 | |
Total comprehensive income attributable to: | ||||
Owners of the Company | 346 | 117 | 905 | 178 |
Non-controlling interests | 2 | – | 2 | – |
348 | 117 | 907 | 178 | |
Earnings per equity share | ||||
Basic ($) | 0.13 | 0.13 | 0.26 | 0.26 |
Diluted ($) | 0.13 | 0.13 | 0.26 | 0.26 |
Weighted average equity shares used in computing earnings per equity share | ||||
Basic | 4,249,343,678 | 4,347,055,177 | 4,275,615,916 | 4,346,857,296 |
Diluted | 4,255,822,953 | 4,352,208,472 | 4,282,322,537 | 4,351,915,210 |
NOTES:
A. | Notes pertaining to previous quarters / periods | |
1. | In the six months ended September 30, 2018, the Company had recorded a reduction in the fair value amounting to $39 million in respect of its subsidiary Panaya. | |
B. | Notes pertaining to the current quarter | |
1. | The audited interim condensed consolidated Balance sheet and Statement of Comprehensive Income for the three months and half year ended September 30, 2019 have been taken on record at the Board meeting held on October 11, 2019. |
2. | A Fact Sheet providing the operating metrics of the Company can be downloaded from www.infosys.com. |
3. | On account of adoption of IFRS 16- Leases effective April 1, 2019. |
Exhibit 99.2
IFRS INR Press Release
Double digit growth for the fourth consecutive quarter, coupled with 1.2% operating margin expansion in Q2
Bengaluru, India – October 11, 2019
“Our performance was robust on multiple dimensions – revenue growth, digital growth, operating margins, operational efficiencies, large deal signings and reduction in attrition”, said Salil Parekh, CEO and MD. “All these are clear signs that we are progressing well in our journey of client-centricity and maximizing value for our stakeholders.”
· | Q2 20 revenues grew year-on-year by 9.8% in INR; 11.4% in constant currency |
· | Q2 20 revenues grew sequentially by 3.8% in INR; 3.3% in constant currency |
· | Q2 20 Digital revenues at $1,230 million (38.3% of total revenues), year-on-year growth of 38.4% and sequential growth of 10.7% in constant currency |
· | Q2 20 operating margin at 21.7%, 1.2% improvement over Q1 20 |
· | H1 revenues grew by 11.9% in constant currency |
· | H1 operating margin at 21.1%, within the margin guidance for the year |
· | Declared interim dividend of ![]() |
· | Increased lower end of FY 20 revenue guidance; revised guidance is 9%-10% in constant currency |
· | Maintained FY 20 operating margin guidance range of 21%-23% |
1. | Financial Highlights – Consolidated results under International Financial Reporting Standards (IFRS) |
For the quarter ended September 30, 2019
Revenues were
Operating profit was
Basic EPS was |
For six months ended September 30, 2019
Revenues were
Operating profit was
Basic EPS was |
“Q2 witnessed another quarter of all-round growth in industry segments and geographies which is a testimony to our strong credentials and client relevance”, said Pravin Rao, COO. “Large deal wins were $2.8 bn. We are especially pleased by the reduction in attrition driven by our focus on enhanced employee value proposition.”
“We saw expansion in operating margins during the quarter driven by improvement in operational parameters and cost efficiencies”, said Nilanjan Roy, CFO. “We took the first step towards implementation of our new capital allocation policy by increasing interim dividend by over 14% compared to FY 19.”
2. | Capital Allocation |
The Company completed its
share buyback of 8,260 crore on 26th August, 2019. With this the company completed the
additional capital return program of upto
13,000 crore announced in April 2018.
3. | Client wins & Testimonials |
· | We were selected by Toyota Material Handling North America (TMHNA) for a cloud-based IoT telematics product implementation along with application support and development for its SAP Platform. As the development partner for TMHNA Global Telematics Solution (GTS), an industry leading cloud-based IoT offering, Infosys is enabling remote monitoring and diagnostic capabilities including vehicle access control, system maintenance, condition sensing and location tracking. |
· | We were selected as a strategic partner by Movement Mortgage, a fast-growing mortgage bank in the U.S., to lead its digital transformation and accelerate growth. Infosys will support Movement Mortgage’s 650 locations in 47 states to ensure the smooth transition of business models in key projects, with the aim to increase business volume and leverage the company’s fintech services to develop mortgage industry specific solutions for Infosys customers. |
· | In collaboration with Microsoft, we announced a long-term strategic partnership with JG Summit Holdings, Inc., one of the largest and most diversified conglomerates, headquartered in Manila, Philippines. As a technology services partner, Infosys is helping formulate and execute the digital transformation strategy for JG Summit, based on Microsoft Azure, an open, hyper-scale, enterprise-grade cloud platform, along with SAP S/4 HANA. The collaboration will offer JG Summit seamless implementation and migration to Microsoft Azure cloud platform, to develop an agile and robust digital infrastructure for its business processes. |
· | EdgeVerve Systems, a subsidiary of Infosys, was selected by Al Ahli Bank of Kuwait to steer its automation journey using AssistEdge Robotic Process Automation (RPA). We are working the bank in their process automation journey, driving cost efficiencies and streamlining its operations. |
· | We have partnered with one of the largest utility companies to transform its IT Service Management. The program, leveraging ServiceNow, is helping our client significantly improve end-user experience, enhance employee productivity and deliver business agility. Infosys will also deliver a comprehensive solution for organization change management and user training as a part of this program. |
4. | Recognitions |
· | Ranked 3 in the Forbes list of The World’s Best Regarded Companies for 2019 |
· | Won the United Nations Global Climate Action Award in the ‘Climate Neutral Now’ category |
· | Recognized as a leader in Gartner Magic Quadrant for IT Services for Communications Service Providers, Worldwide |
· | Recognized as a leader in Software Product Engineering Services PEAK Matrix™ Assessment 2019 by Everest Group |
· | Recognized as a leader in the DevOps Services PEAK Matrix™ Assessment 2019 by Everest Group |
· | Recognized as a leader in IDC MarketScape: Worldwide Intelligent Automation Services 2019 Vendor Assessment |
· | Recognized in HFS Top 10: Digital Front Office: CX Design, Sales, And Marketing |
· | Recognized in HFS Top 10: Banking and Financial Services (BFS) Sector Service Providers |
· | Recognized in HFS Top 10: Cloud Migration and Management Services 2019 |
· | Recognized as a Leader in NelsonHall’s Smart IT Services in Utilities |
· | Recognized in HFS SAP SuccessFactors Services Top 10 Report |
· | Recognized as 2019 Working Mother & AVTAR Best 100 Companies for Women in India and ‘2019 Champion of Inclusion' in the Most Inclusive Companies in India Index |
· | Won the 2019 Oracle Excellence Award for Global Partner of the Year in CX – Sales Cloud |
· | Won the Oracle Excellence Award for NA partner of the Year for Emerging Technologies |
· | Recognized as the 2019 Global Alliance SI Partner of the Year by Microsoft |
· | Recognized as the Microsoft US Service Partner ACR Winner for the FY20 Microsoft One Commercial Partner Winners Circle program |
About Infosys
Infosys is a global leader in next-generation digital services and consulting. We enable clients to navigate their digital transformation, leveraging our teams from over 46 countries. 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. |
![]() |
Safe Harbor
Certain statements mentioned in this release concerning our future growth prospects are forward-looking statements regarding our future business expectations intended to qualify for the 'safe harbor' under the Private Securities Litigation Reform Act of 1995, whiv ch 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, 2019. 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 |
Mehak Chawla Mehak.Chawla@infosys.com |
Chiku Somaiya Chiku.Somaiya@infosys.com |
Infosys Limited and subsidiaries
Audited Condensed Consolidated Balance Sheet as at
(In
crore
except equity share data)
September 30, 2019 | March 31, 2019 | |
ASSETS | ||
Current assets | ||
Cash and cash equivalents | 16,473 | 19,568 |
Current investments | 3,518 | 6,627 |
Trade receivables | 16,055 | 14,827 |
Unbilled revenue | 7,269 | 5,374 |
Prepayments and other current assets | 5,392 | 5,723 |
Income tax assets | 34 | 423 |
Derivative financial instruments | 108 | 336 |
Total current assets | 48,849 | 52,878 |
Non-current assets | ||
Property, plant and equipment | 13,313 | 13,356 |
Right-of-use assets(B3) | 3,917 | – |
Goodwill | 4,080 | 3,540 |
Intangible assets | 1,356 | 691 |
Non-current investments | 3,943 | 4,634 |
Deferred income tax assets | 1,363 | 1,372 |
Income tax assets | 6,407 | 6,320 |
Other non-current assets | 1,983 | 1,947 |
Total non-current assets | 36,362 | 31,860 |
Total assets | 85,211 | 84,738 |
LIABILITIES AND EQUITY | ||
Current liabilities | ||
Trade payables | 2,134 | 1,655 |
Lease liabilities(B3) | 515 | – |
Derivative financial instruments | 38 | 15 |
Current income tax liabilities | 1,528 | 1,567 |
Client deposits | 16 | 26 |
Unearned revenue | 2,708 | 2,809 |
Employee benefit obligations | 1,825 | 1,619 |
Provisions | 608 | 576 |
Other current liabilities | 9,839 | 10,371 |
Total current liabilities | 19,211 | 18,638 |
Non-current liabilities | ||
Lease liabilities(B3) | 3,562 | – |
Deferred income tax liabilities | 707 | 672 |
Employee benefit obligations | 45 | 44 |
Other non-current liabilities | 805 | 378 |
Total liabilities | 24,330 | 19,732 |
Equity | ||
Share capital- ![]() |
2,121 | 2,170 |
Share premium | 520 | 396 |
Retained earnings | 53,802 | 58,848 |
Cash flow hedge reserve | 14 | 21 |
Other reserves | 3,099 | 2,570 |
Capital redemption reserve | 111 | 61 |
Other components of equity | 854 | 882 |
Total equity attributable to equity holders of the company | 60,521 | 64,948 |
Non-controlling interests | 360 | 58 |
Total equity | 60,881 | 65,006 |
Total liabilities and equity | 85,211 | 84,738 |
Infosys Limited and subsidiaries
Audited Condensed Consolidated Statement of Comprehensive Income for the
(In
crore
except equity share and per equity share data)
Three months ended September 30, 2019 | Three months ended September 30, 2018 | Six months ended September 30, 2019 | Six months ended September 30, 2018 | |
Revenues | 22,629 | 20,609 | 44,432 | 39,737 |
Cost of sales | 15,079 | 13,281 | 29,858 | 25,569 |
Gross profit | 7,550 | 7,328 | 14,574 | 14,168 |
Operating expenses | ||||
Selling and marketing expenses | 1,162 | 1,088 | 2,336 | 2,092 |
Administrative expenses | 1,476 | 1,346 | 2,855 | 2,645 |
Total operating expenses | 2,638 | 2,434 | 5,191 | 4,737 |
Operating profit | 4,912 | 4,894 | 9,383 | 9,431 |
Other income, net | 626 | 739 | 1,362 | 1,465 |
Finance cost(B3) | (42) | – | (82) | – |
Reduction in the fair value of Disposal Group held for sale(A1) | – | – | – | (270) |
Profit before income taxes | 5,496 | 5,633 | 10,663 | 10,626 |
Income tax expense | 1,459 | 1,523 | 2,824 | 2,905 |
Net profit | 4,037 | 4,110 | 7,839 | 7,721 |
Other comprehensive income | ||||
Items that will not be reclassified subsequently to profit or loss: | ||||
Re-measurements of the net defined benefit liability/asset, net | (22) | 3 | (39) | 4 |
Equity instruments through other comprehensive income, net | 2 | 8 | 5 | 12 |
(20) | 11 | (34) | 16 | |
Items that will be reclassified subsequently to profit or loss: | ||||
Fair value changes on derivatives designated as cash flow hedge, net | 17 | (29) | (7) | (20) |
Exchange differences on translation of foreign operations | (35) | 334 | (10) | 421 |
Fair valuation of investments, net | 2 | (15) | 18 | (60) |
(16) | 290 | 1 | 341 | |
Total other comprehensive income/(loss), net of tax | (36) | 301 | (33) | 357 |
Total comprehensive income | 4,001 | 4,411 | 7,806 | 8,078 |
Profit attributable to: | ||||
Owners of the Company | 4,019 | 4,110 | 7,817 | 7,721 |
Non-controlling interests | 18 | – | 22 | – |
4,037 | 4,110 | 7,839 | 7,721 | |
Total comprehensive income attributable to: | ||||
Owners of the Company | 3,984 | 4,411 | 7,782 | 8,078 |
Non-controlling interests | 17 | – | 24 | – |
4,001 | 4,411 | 7,806 | 8,078 | |
Earnings per equity share | ||||
Basic (![]() |
9.46 | 9.45 | 18.28 | 17.76 |
Diluted (![]() |
9.44 | 9.44 | 18.25 | 17.74 |
Weighted average equity shares used in computing earnings per equity share | ||||
Basic | 424,93,43,678 | 434,70,55,177 | 427,56,15,916 | 434,68,57,296 |
Diluted | 425,58,22,953 | 435,22,08,472 | 428,23,22,537 | 435,19,15,210 |
NOTES:
A. | Notes pertaining to previous quarters / periods | |
1. | In the six months ended September 30, 2018, the Company had recorded a reduction in the fair value amounting to ![]() | |
B. | Notes pertaining to the current quarter | |
1. | The audited interim condensed consolidated Balance sheet and Statement of Comprehensive Income for the three months and half year ended September 30, 2019 have been taken on record at the Board meeting held on October 11, 2019. |
2. | A Fact Sheet providing the operating metrics of the Company can be downloaded from www.infosys.com. |
3. | On account of adoption of IFRS 16- Leases effective April 1, 2019. |
Exhibit 99.3
Press Conference
“Infosys Press Conference”
October 11, 2019
CORPORATE PARTICIPANTS:
Salil Parekh
Chief Executive Officer & Managing Director
U. B. Pravin Rao
Chief Operating Officer
Nilanjan Roy
Chief Financial Officer
MEDIA
Agam Vakil
BloombergQuint
Mugdha Variyar
CNBC
Saritha Rai
Bloomberg
Ayushman Baruah
Mint
Sangeetha Chengappa
The Hindu BusinessLine
Debasis Mohapatra
Business Standard
Nikita Periwal
Cogencis
Rukmini Rao
Business Today
Ayan Pramanik
The Economic Times
Derek Francis
Reuters
Swathi Moorthy
Moneycontrol
Shilpa Phadnis
Times of India
Furquan Moharkan
Deccan Herald
Moderator
Good evening ladies and gentlemen. A warm welcome to the Q2 results FY2020. We will start with the opening remarks from our CEO and Managing Director, Mr. Salil Parekh.
Salil Parekh
Good afternoon and welcome to everyone here. We are really delighted to share with you the results for Q2. You have seen the press release and the fact sheet, just to give you a few points as we kick it off. We had a really strong robust quarter in Q2 with good performance in all of our parameters. First, we had a double digit growth now for the fourth consecutive quarter, 11.4% constant currency growth overall and 38% constant currency growth in our digital portfolio. We also had a very strong operating performance, our operating margin was at 21.7% – 1.2% expansion from Q1. Many of the operating parameters and discipline are kicking in and this is what is being seen in the operating margin performance. Very good strong large deals performance - $2.8 bn in large deals and we have shared that data in the press release and fact sheet. A good movement is seen on attrition it has reduced by 2% QoQ. In fact, the way we look at attrition as we measure it on our tech services business on a voluntary basis that is already starting to be below 18%. So overall we are delighted with the results we have had in Q2. We are also extremely proud, we were awarded by Forbes the ranking number three for the best regarded company globally and this is something all of us at Infosys are extremely proud of – a testimony to all the hard work of our people and the support of our clients. With that I will pause and open it up for questions with Pravin and Nilanjan here with me.
Moderator
Thank you Salil. Before we start the Q&A session, I would you request you to ask one question per publication. The first question is from BloombergQuint.
Agam Vakil
I am sure investors will be relieved to know that you have maintained your upper end of the guidance especially even one of your peers has indicated that they are unlikely to see double digit growth. With that said I wanted to get a better understanding of how you are reading things currently because there is still an indication that large financial institutions in UK, Europe as well as US are under a bit of pressure. There is an understanding that there is a slowdown in demand and that could lead to a delay in the closures but as far as the financial sector is concerned there is a lot of volatility in retail which persists and in communications again there is still a delay in allocation of the 5G spectrum. I believe that a lot of it has pegged on that. I want to know that even when you do see a relatively steady financial year FY20 if you could tells us a little more about how you are reading into things when it comes to things on ground. Pravin, a question for you on the deal signings, if you could actually tells us a little more about the size, the duration of the deals, also in what verticals are the majority of these deals coming as far as this quarter is concerned and Nilanjan for you if you could quantify some of the factors that have come and played in favour of margins and played against?
Salil Parekh
Let me start with a colour on the business, how we see and what is going on in the market. First six of our seven large segments are showing double digit growth for Q2. We see good traction for example if you look at our Energy and Utilities business, you will see an extremely strong environment in that business. If you look at what we are doing in our High-Tech, Telco (Communication) business - again an extremely strong environment in that business. In Financial Services, we had good growth in Q2, we see good demand. As we had pointed out last quarter there is certainly some weakness that we saw in capital markets and in general there is something where the financial institutions overall are looking at spends differently. But we saw a good demand and outcome in Q2 and we will see how that plays out for the rest of the year. In terms of Telco, we see a strong demand so I have no view that it is any difference from what we had shared with you last time. We had shared some weakness, which was specific to Manufacturing last quarter for the European segment. We see Europe as a geography a little bit softer but overall Manufacturing is in a robust place for us today. The view from a macro perspective is that the European market is somewhat slower. We see some impact of Brexit but nonetheless we maintain our guidance, which in fact we increased the lower end of our guidance, so from 8.5% to 10% we increased to 9% to 10% and we remain quite confident about how this year will play out.
U. B. Pravin Rao
On the large deal front, we won 13 large deals $2.8 bn TCV which is the highest ever and when you compare on YoY basis, for the first half our large deal wins TCV has been 75% higher than what we did in the first half of last year. This has been broad-based, four of the wins have been in Financial Services, four in Retail CPG and Logistics, two in Communication and three in other verticals. Then geography wise as well we have seen about six in Americas, five in Europe and two in Rest of the World.
Nilanjan Roy
Coming to the margin question, as we have started the year on a low trough of 20.5%, we were quite clear that our guidance for 21% to 23% would come from the various cost optimization programs we had. The industry faces the usual cost pressures every year, which is of course discounts from clients, which of course come in straightaway on the topline and the compensation hikes but we got the execution machinery right in this quarter. We got the utilization up so that is the first thing which flows to the bottom line. We have got our onsite mix coming down so we are getting more work offshored to India. We are working on other programs, on automation that is a continuous engine we have, we continuously take out 2500 to 3000 people from fixed price projects and plow that back and give that part of that money back to the clients. We are working on other issues like digital pricing, this is a new area we are looking at on how do we price digital services and command a premium from our clients. So we have a strong cost optimization and nearly 18 tracks which we have is run by a senior resource in the company and from a QoQ basis we have gained about 110 bps of margin improvement from operation parameters and cost optimization which we are working on.
Moderator
The next question is from CNBC.
Mugdha Variyar
Firstly great numbers to start off with that, but the Street was estimating that you would also up your upper end of the guidance as well by about 50 basis points, any reasons that you held back on that, are you a little concerned about the second half of the year, Salil that is for you. To Nilanjan, I just wanted to ask you about the margins, the margins have improved but where do you see margins for the whole year ending at in the whole band? Pravin, if you can just tell us about retail, retail looks a little weak, what is the outlook there and of course attrition has come down so if you can just throw some light on that? Salil one more question, if you can break down organic BFSI growth apart from Stater for us?
Salil Parekh
So on the guidance the good news is we have increased the lower end of our guidance so instead of 8.5% to 10%, we are 9% to 10%. We had from the start of the year, a view about the year and every quarter we have strengthened the view that we have for the year so there is no change in that. We know that seasonally the second half is normally weaker in our sector. That is a normal sort of seasonality on the business but overall our deal pipeline remain strong. Our Q2 numbers are very strong with six of our seven sectors recording double digit growth, so we remain quite confident that our clients are looking at what we are providing to them in terms of digital transformation capabilities. The only caveats we mentioned were the ones I shared before specifically with respect to the European market or capital markets or at least in the last quarter some elements in manufacturing. On the Financial Services and others Pravin will address that.
U. B. Pravin Rao
On the Retail front this is one sector which is closely linked with the consumer sentiment. It is on the overhang of macro, talk about trade wars and to some extent some reduced consumption that people are saying in some of the global markets, the spend in Retail has come down. We had a fantastic year last year in Retail but in the last quarter and this quarter we have started seeing some softness and slowdown. So this volatility will probably continue for some time till the macro situation improves. As I said earlier this is a vertical which this probably very closely tied with the macros sentiment and so on. On the Financial Services, as Salil said we have had a decent run so far, we have had last two quarters of double digit YoY growth, but we do continue to see some weakness in some of the European banks and capital markets and we also have to watch out for the seasonal slowdown in the second half. But we have diversified portfolio, we have done well based on the past deals, so we remain optimistic, but we just have to watch out for the seasonality in the Financial Services. On the attrition, attrition has come down, the voluntary attrition is under 18%, it has come down and over the last couple of quarters. We have focused a lot on coming up with the new employee value proposition, several interventions. So, we are really focusing on enabling employees, engaging them better and rewarding them. There are multiple interventions towards this and slowly we have started seeing returns and this is something we will need to continue to work on.
On organic BFSI growth question - normally we do not give that breakup.
Nilanjan Roy
For the margin question as explained, we have 21% to 23% as guidance and in the first half we are at 21.1%. So we have entered the guidance band. I think this is a good platform for us to build as the year progresses and to see progressive growth of margins from here, so we remain committed to the 21%- 23%.
Moderator
The next question is from Bloomberg
Saritha Rai
I want to ask you about the US market where you get almost two-thirds of your revenues from, what is the macro looking like, first question. Second question, I really do want you to give as much more detail about the BFSI deals as you can that accounts for almost a third of your revenue, so these are two real key components of Infosys and I would love for you guys to tell me more.
Salil Parekh
The overall situation in the US market, the GDP growth is still quite good. If you saw the numbers for last quarter. There is obviously an ongoing impact with whatever is going on with the macro in terms of trade discussions and potentially some impact that might have on Manufacturing clients. On the other hand, we see a lot of positive discussions whether it is with Telco client, Hi-Tech clients, or Utility Energy Services clients. So, overall for us we remain optimistic. If you look at growth YoY for the North American market in Q2, it is again well over double digits and we remain quite bullish about the market. In terms of FS and the details I would echo the points that Pravin just shared with you. There are some areas we look at for example, in the European banks where there is some slowing. We have seen this with capital markets. Typically, in Q3, we will end up seeing overall the seasonality which comes from furloughs but there is nothing sort of materially new in that situation that we see. Having said that there is a lot of work that we need to do in making sure we actually secured against all of that and we remain committed to and in fact we are increasing the bottom end of our guidance so that should give an indication of how we see this year playing out.
Moderator
The next question is from Mint.
Ayushman Baruah
Can you give a sense of the digital deals, what are the size of the digital deals and also what kind of deals are these? Are these large scale digital transformation deals or is it just some automation here and there, just give me some sense of that?
Salil Parekh
The digital portfolio again had a good growth in Q2 - 38% overall YoY. It now also comprises just over 38% of our business, so it is looking really robust. A couple of examples, we had a deal which was focused on what we call user experience which is really the front end of our digital thinking. There we work with a large global confectionary company where we have completely redesigned how the experience of their end user is, with how they interact and how e-commerce is done through that and a lot of their design was personalized, intuitive and this is a large platform in which we built this. Another example we have on the Cloud where we work with, one of the large three providers for a large US company where we built public cloud transformation program that their client is going on and here we are partnering with them to bring services which are existing services of the client plus new services which we are helping them develop which are more cloud for services. Many of the deals that we see are large transformation deals which are modernization deals in which digital is a strong component of it. So the good news for us is digital is becoming more and more central to many of the new things that we are doing with clients and we that the investments that we made which were last year are starting to be relevant for how the clients are looking at us from a digital perspective.
Moderator
The next question is from the Hindu Business Line.
Sangeetha Chengappa
I am here after about three-and-a-half years and one thing that I notably find is that your operating margins have gone down substantially. Pravin tell me why is this happening because you used to be the industry bellwether when it came to margins and you prided yourself on profitability of the growth, is it a growth story now more than margins or what?
Salil Parekh
Beginning of last year when we started the navigate your next journey, we had clearly said that there are a lot of opportunities in the digital space but that means that we have to invest, we have to build capability and competency but there is a small window for us to capture that and we also said it is a three-year journey, we are just 18 months into the journey and so we have done significant amount of investment, we have done localization, we have invested in living labs, we have increased the sales spend, we have hired people with different capabilities and so on. So multiple level of investments to build the capability to take advantage of. That is reflecting in the kind of growth that we have seen in the last three, four quarters. We have given the guidance of 21%-23% and that is what we are confident of. We do not want to comment on the future, but at this stage for the rest of the year we are comfortable with what we have said. Obviously growth is very important, but obviously we have to have a purposeful growth and a profitable growth, so we are not really diluting the focus on profitability but we are making sure that we are doing the right level of investment to secure for the future.
Moderator
The next question from Business Standard
Debasis Mohapatra
Hi, great set of numbers, Debashish from Business Standard. I want to understand two three things. Firstly, yesterday there was a commentary from the market here I do not want to compare it but there is a sense in the market that the pace of deal conversion has been slowed down due to the macros. I want to understand that whether Infosys is facing such kind of problem because the TCV is fine but how much of the deals have actually been converting into revenue is also important, and secondly I want to understand, are you facing any client-specific issues in any of your verticals at this point of time or will you face such kind of issues in Q3 and Q4?
Salil Parekh
So on the deal conversion, we have had $2.8 bn in large deals, we have had 11.4% growth in Q2, so we cannot get those sort of outcomes if the deal conversions are not happening well. So for us deal conversion is happening well. Having said that I shared a little bit earlier, what our view on the macro is, which still holds, that is not at least for us anything with deal conversions. In terms of client-specific issues we did not call out anything on Q2. For Q3 and Q4, we will see as the quarters go, there is nothing today that we will call out for Q3 and Q4 as we have not called out anything for Q2.
Debasis Mohapatra
Nilanjan Sir, I want to understand how much has the cross currency helped in your margin improvement and as far as the H1 margin label is concerned it is at the lower end of your guidance, our fellow colleague has also asked that whether 21%-23% band within that will you end up FY2020 within the lower band of the margin or can you give such guidance. Also Pravin sir, last quarter for the first time Infosys threw some kind of light on the involuntary attrition, what exactly happened in Q2 as far as involuntary attrition is concerned.
Nilanjan Roy
So on the cross currency actually we have taken a hit this quarter so while we got about a 30-basis points improvement from the USD INR but we actually got a hit of about 15 bps on cross currency because the pound and Euro depreciated against the dollar so whenever that happens you will also see the top line revenue reported growth for the industry coming down. We had about 15 to 20 bps hit on the cross currencies and about 10 bps on our revenue hedge which we had. So, currency did not benefit us. Coming back to the margin like I said 21%-23% guidance and we are 21.1% in H1, and from here definitely we should see ourself growing. So I do not want to say where we will end up but definitely the platform here is a very robust optimization cost take out plan and we remain confident for rest of the year.
U. B. Pravin Rao
On the attrition front on the tech services we said the attrition is 19.4% as compared to 21.5% in the previous half, it is both voluntary and involuntary and if you look at only voluntary we said it is under 18%. So that is the data point and increasingly we are seeing everyone about tech services and voluntary attrition. So over a period of time we also want to do that so that we are consistent in metrics similar to what others are reporting.
Moderator
The next question is from Cogencis.
Nikita Periwal
Sir, I want to understand if you are seeing the double digit growth momentum sustain in the second half considering it is a softer period and if you could share a little more about how you expect the European region to perform?
Salil Parekh
For the growth on double digit our view is much focused on what our guidance for the full year is, which is 9% to 10% for the full year. We have had 11.4% growth in Q2 and we remain confident that we will meet this guidance that we have given in terms of growth. In terms of the European market what we shared earlier, there is some slowing in the European economies. Overall we see that the macro there a bit slower but there are some segments which are still doing well. We see good strength again for example in the Telco segment or in the Energy Utility segment, we called out on the banking side that Pravin shared with you, we have some concerns on the European banks and that is something that we have shared before as well but that is broadly how we see the European picture playing out.
Moderator
The next question is from Business Today.
Rukmini Rao
I have three questions. One, I just read that you are going to be absorbing the Kallidus back into Infosys if there is a business transfer agreement. So, does it mean that there is absolutely no prospects for those business to be sold out and also some bit of sense that how many people were there in both those companies. Secondly I want to understand since Nilanjan mentioned that some of the onsite work is being brought back that vis-à-vis via localization plans just to understand where is it heading?
Salil Parekh
So on the merger or the absorption, the approach we have taken is as we have shared with you a few quarters ago we have re-purposed what we are doing in that business, focused it very much on where our digital growth is going and where some of our clients especially what we saw in consumer products and retail looking in that and as a consequence of that we made sure that it is combined fully within the Infosys organization. With that, we anyway had stopped any discussion about any transaction a while ago when we had started to re-purpose it and that is what happened. We have not discussed or disclosed the head count in that situation at all.
Nilanjan Roy
The onsite mix is just a percentage of overall so as our volumes grow we will increase numbers in the US as well so this is just a mix in the overall percentage. The second thing is localization also from clients we take out work and put them into our hubs as well, so most of the work today is sitting in client premises, some of that work we will take into the hubs and that is the way we will populate the hubs as well, so it is a combination of both.
So the whole idea of the hub actually was firstly to get the innovation lab center around the hubs where clients can come. We can create a pyramid in the hubs as well so one of the things was to get freshers, looking at the talent scarcity in the US how do we take freshers from community colleges and build a pyramid and that is also helping our cost structure as well as we have seen, so that is one of the key areas. Also getting the local hirers which was one of the issues two years back and which is why we were in the limelight, today we are close to a 50-50 base of a deputees, sort of a mix which is something we are comfortable with and I think the hubs is only going to increase that percentage.
Moderator
The next question from The Economic Times
Ayan Pramanik
Congratulations on good set of numbers. First thing to Nilanjan, you talked about digital pricing and commanding a premium over that. If you can explain how that is going to workout and the second question is to Pravin, how is the India Business going as of now. Do you foresee or see any signs of slow down as of yet?
Nilanjan Roy
So our digital margins even today if we see our overall margins are higher than the core business that is something we already know. The way we repurpose our digital talent and looking at the scarcity, we think there is an opportunity of how to price this scarce talent depending on skills, depending on experience, depending on what sort of clients they work in, and I if we can even get a percentage of margins. So I think that is something what we are looking at, how we can look at this digital skillset which we have and are we actually pricing them correctly and are we leaving any cent on the table?
U. B. Pravin Rao
So in the India Business, it is a very small percentage of the business as we have said we are very selective in what we want to do. So from that perspective we have not really seen any slowdown but we will continue to be a very selective in what we want to bid for and execute.
Moderator
The next Question is from Reuters.
Derek Francis
First of all congratulations on your numbers and I had two questions, one was we are seeing a slowdown in Europe and North America because of the trade war and Brexit and all those things but you have reported better than expected results compared to your rival so I was wondering what was it that helped you achieve this kind of a result this quarter and the second question is I was also wondering if the raise in the lower end of your guidance was because of the strength in the US market that you are seeing as you have pointed out?
Salil Parekh
I think what we are seeing is the focus that we have had on our digital investments, the approach we have taken to localization, the approach we have taken to re-skilling and the real attention to all the automation work that we are doing with our clients. That is making it relevant for how clients are viewing Infosys and that is what is driving this growth that we saw in Q2 for example and also helping us to be confident to raise the lower end of the guidance. As you know from the start of the year we had shared some view on the guidance and we have a view internally of how the quarters evolve and we are comfortable that is how it is playing out at this stage. Of course from a seasonal perspective within the industry typically the second half is slow especially Q3 because of the holiday season and so on, but outside of that we see good large deals win momentum with $2.8bn. So we see our clients really trusting Infosys and making Infosys part of their decision making, very much the first company that they think off when they think off all these digital things and when they think of automation. Also we see that our pipeline today is still quite robust at a large value. So we see those deal conversions and new deals still coming into the pipeline. So the US market what I had shared a little bit earlier of course there is a macro situation, which we need to look at and be cognizant of. There is a trade wars situation. There is a situation where we see some disruption, which are coming in some sectors but equally we see strength as I have shared earlier in Energy Utilities, that sector is really doing well for us again a double digit quarter and we see good momentum there and we see a good momentum in our Hi-Tech, Telco business. So we see lots of areas where we think that the difference that we are making is going to continue to help us as we go through the rest of the year. Keeping in mind the overall macro and some of the comments we have made about Financial Services earlier.
Moderator
The next question is from Moneycontrol.
Swathi Moorthy
Congratulations again on the good numbers. So, I have a couple of questions. Your BFSI has been growing well, but there has been some softness, could you tell me where is the confidence coming from, where is the growth coming from when your competitor has reported quite some business in the BFSI sector? Also I saw that your core has been coming down consistently and your digital has been growing, but has this being offset by the digital or is there a gap in between? Are they both growing in tandem, your reduction in the core is being offset by the increase in the digital business and compared to Q1 your growth in digital has come down, so I think in Q1 the growth was 41%? Now it is at 38.4%, so I would like you to give me some insights on that as well and the other one is on the hiring, if you can give some color on the hiring and involuntary attrition you had mentioned that the voluntary attrition is about 18%, so I would like to know more details about the involuntary attrition and the last one is about the Brexit impact and your recent Irish buy, the contact center in Ireland, there have been some reports on that so your confidence in the telecom is in part aided by this move by where the Eishtec has a good presence in the telecom sector if you can give some inputs on that as well?
Salil Parekh
Let me start through some of the questions as I recall them. I think in Financial Services as Pravin shared there has been a good track record and momentum over the last several quarters. So that is what gives us confidence for the overall guidance that we are giving, part of which is financial services. We think there are some concerns that we see in some components and not in the other components of Financial Services and we see some strength, which are in other sectors. As a composite that is where confidence comes for the company and the guidance that we have increased.
So we are not becoming very specific in terms of which clients or which regions, we have simply called out where we see some concerns. Nonetheless overall we are remaining confident for the overall company guidance that we have given, which is 9% or 10%. As I walk through some of the other questions, I think the question about digital and core, we want to showcase that more because we want to clearly show our investments in digital and how they are performing. I think our story on automation and the capabilities we have are actually helping us to maintain a good presence in the core businesses. While the degrowth is very small, the real story there is the automation that we have is allowing us to become more and more relevant for a client portfolios as we go through the call. In terms of the growth of digital in Q1 versus Q2, we shared our view a year-and-a-half ago this is a very large market about $160 bn market. The market is growing at 15% and our target is to have market share gains in that market, which means anything above 15%, this is also a new business, so some quarters it might be a little bit high, little bit low, but overall as long as we are gaining market share that shows some strength for us in that market. In Ireland it was a business transfer situation where we have taken over some of the work that was going on there that is not the reason for our strength or the confidence of telco, but of course it supports the confidence in telco.
U. B. Pravin Rao
On the attrition front as I said earlier the numbers are 19.4% overall attrition IT services and 18% voluntary, there is nothing more I can talk about. On the hiring front, I think we continue to hire this quarter we added about 14,000 people. We had about 6,000 people trainees join in India and about 700-800 people outside India and rest were both in India and abroad.
Moderator
The next question from Times of India
Shilpa Phadnis
Can you give us a breakup of your TCV, how much of it is renewal and how much of it is new deal and can you also call out the TCV to the revenue ratio?
U. B. Pravin Rao
On the renewal, we do not typically call out the exact number but a good percentage was renewals this quarter.
Salil Parekh
We again do not give out the conversion ratio, I think what you are looking of is how much does the TCV convert, what I can say safely to you is we do not count a lot of 10-year deals in this TCV if that is what you are asking. We have really low duration deals which we put into this and that is why we have some level of confidence of the conversion.
Shilpa Phadnis
There has been momentum on the digital side, but it is not really reflecting in your revenue per employee that has been more or less flat for many quarters now, so how far till we see some sort of a momentum pickup even in your revenue per employee metric?
Salil Parekh
The way I would look at this is the big move we have made is on our operating margin from Q1 to Q2 and we see a huge strength in that because that shows an extreme level of discipline how are we executing our business plus a strong confidence that we are in the guidance range of what we had said at the start of the year. On the RPP there are many pluses and minuses that go into the calculation, but we remain very confident that our digital RPP is looking more and more better. Within the core there are discussions which relate to how the start of the contract looks like, how the discounts look like and that sometimes colors what those numbers look like.
Shilpa Phadnis
If you can also give us a colour on the subcontracting expenses, how that is playing out because in the US there has been a groundswell from all the subcontractors to demand health care benefits on par with other full time employees and there has been a lot of unionizing in the US, will this going forward increase the cost for you not immediately but long term there could be some impact on your cost structures?
Salil Parekh
On subcontractors actually we have had a very good progress on how we look at this subcontracting situation. First, it is an integral part of our business, it is not something that we want to have completely disappear. Second, we have now found a way where we know how we can control some of that spend in the short and medium term. We have also put in place approaches where some of that becomes in time converted to our own employee cost structure base, which again helps us in the margin. Our view is in the medium term and in the short-term we know how the subcontracting cost can be addressed and overall it is what Nilanjan shared earlier, it is part of our operational discipline to ensure that our margin gets all the benefit we can from making these steps.
Shilpa Phadnis
On the margin front how much of it is a currency kicker and secondly would you stand to benefit from the reduction in the corporate tax?
Nilanjan Roy
For the margin one I mentioned from the USD, INR, we got about 30 basis lift but all that was washed away as on the cross currency we lost because of the Euro and GDP depreciation versus dollar and the currency, so at net-net in the quarter we got nothing on currency. Coming to the corporate rates, our India tax rates is marginally below 25%, this is for Infosys standalone of course because that is the way we look at taxation. So we think we will have to watch the space carefully and at what time and space we decide to move over; but at the moment we think we are comfortable with the current tax regime.
Moderator
The Next question is from Deccan Herald.
Furquan Moharkan
Basically a couple of questions, the core has been declining is it a deliberate kind of a move because at the end of day digital offers a lot of premium and higher margins and do we see lesser dependence on the core and reducing dependence on the core over the time and it goes in line with Salil’s vision for Infosys with more dependence on digital revenue. Second part of the question while the streets expected the upper guidance to go up as well, to be revised as well, but you have not done is it the conservative approach or the uncertainty because of the global macros, are you looking at uncertainty in the second quarter. The third question that I wanted to ask is now in 2014 Vishal had set a Vision 2020 in which the revenue per employee was said to be $80,000, but over the time we have seen it is hovering around $54,000 revenue per employee and stagnated and the margins are nowhere near to 30%, it is somewhere 10% down that so do you think that in the hindsight that vision 2020 was basically a hyperpool.
Salil Parekh
On the first question on the core, the core is absolutely a critical part of our business. So what we wanted to do is with digital we really wanted to be a partner with our clients as we go to the digital transformation journey, but we also want to help them on the core because we have extremely strong capabilities in automation, which we believe are better than anyone else in the industry and when those are used with our clients, they can get tremendous benefit from it while they keep part of it, part of it hopefully we get to keep it. So the reason for showing you that stat is just to be very clear about what we are doing in that business, it is not in any way that we are deemphasizing what we are doing in core. On guidance, we are extremely positive and that is why we have raised the lower end of guidance from 8.5% to 9% and we kept the overall guidance from 9% to 10%, which is a strong guidance given what we started in terms of the year and given that typically we see in the second half the seasonality kick in. Of course as the quarters go if things are above that we will see how it goes but that is the guidance that we have for now. In terms of 2020 no comments on that.
Ayan Pramanik
Is there a pain point in retail if you look at Retail?
U. B. Pravin Rao
I think I already responded, Retail is one sector which reacts very quickly on real time to the macro and sentiment, given all the macro concerns and sentiments around trade war and other things there is an impacting consumption and again when you look at some of the global markets there has been a slowdown as well some of the markets like China and other places. This is actually impacting retail and this sector will continue to be volatile, if the consumer sentiment is positive then you will see lot more sales happening in retail and vice versa. Right now given all the macro and other concerns in the last couple of quarters we have seen softness, it is difficult to predict when things will improve.
Moderator
Thank you everyone.
Exhibit 99.4
Fact Sheet
Exhibit 99.5
Earnings Call
“Infosys Earnings Call”
Q2 FY2020
October 11, 2019
CORPORATE PARTICIPANTS:
Salil Parekh
Chief Executive Officer & Managing Director
U. B. Pravin Rao
Chief Operating Officer
Nilanjan Roy
Chief Financial Officer
Mohit Joshi
President, Head, Banking, Financial Services & Insurance (BFSI), Healthcare and Life Sciences Head, Infosys Brazil and Infosys Mexico
Sandeep Mahindroo
Financial Controller and Head-Investor Relations
analysts / INVESTORS
Edward Caso
Wells Fargo
Diviya Nagarajan
UBS
Nitin Padmanabhan
Investec
Vibhor Singhal
PhillipCapital
Joseph Foresi
Cantor Fitzgerald
Viju George
JP Morgan
Apoorva Prasad
HDFC Securities
Moshe Katri
Wedbush Securities
Abhay Moghe
Bajaj Allianz
Ravi Menon
Motilal Oswal AM
Sumeet Jain
Goldman Sachs.
Bryan Bergin
Cowen
Dipesh Mehta
SBICAP Securities
Moderator
Ladies and gentlemen, good day and welcome to the Infosys Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions, after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing “*” then “0” on your touchtone telephone. Please note that this conference is being recorded. I 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 Q2 FY2020 earnings release. I am Sandeep from the Investor Relations team in Bengaluru. Joining us today on this call is CEO and MD, Mr. Salil Parekh, COO, Mr. U. B. Pravin Rao, CFO, Mr. Nilanjan Roy along with other members of the senior management team.
We will start this call with some remarks on the performance of the company for Q2 by Salil followed by comments from Nilanjan and Pravin, subsequent to this 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 Salil.
Salil Parekh
Thank you, Sandeep. Good afternoon and good morning to those on the call and thank you for joining us today. Infosys has delivered another strong quarter. I am happy with our performance in the second quarter which was robust across the multiple dimensions.
One - double digit growth for the fourth consecutive quarter; two - continued a strong growth in digital; three - expansion in operating margins; four - improvement in operational parameters especially on utilization and onsite-offshore mix; five - large deal signings; and six - reduction in attrition.
We grew 11.4% in Q2 YoY in constant currency and 3.3% QoQ [constant currency]. Six of the seven business segments and both US and Europe grew double-digits constant currency YoY. Pravin will provide more color on different industry verticals in just a few minutes.
Digital revenues in Q2 were $1.23 bn constituting 38.3% of overall revenues and witnessed over 38% growth YoY on constant currency.
Operating margin in Q2 saw a healthy improvement at 21.7% compared to 20.5% in Q1. Operating margin improvement was despite compensation increases provided to employees and was driven by significant improvement in utilization, onsite mix, employee pyramid improvement and tight overall cost management. Nilanjan will elaborate on this during his remarks.
Large deal signing in Q2 was extremely strong at $2.8 bn. While a large part of this was renewals, these renewals solidify our position significantly in our existing clients. Large deal TCV is up by 75% in H1 2020 compared to H1 2019.
I am also pleased with the reduction in attrition which declined to 19.4%, a decline of 2% point compared to Q1. Within this attrition, voluntary attrition is lower at below 18%.
With our clients continuing to leverage digitally guided growth, there are three areas within digital transformation that I want to highlight with examples of our growth with clients. These are experience, data analytics and cloud.
A global confectionary company we created Digital Asset management platform that helped them deliver a superior, personalized and intuitive experience for the end-user. Through our digital studios, we developed this platform and ensured faster campaigns and product launches and could also efficiently manage multiple brands in their associated digital assets.
For a global consumer products company, we helped them create data architecture to support the sales team forecast, future orders from retail outlets, the model cluster stores and learns from the better performing stores to suggest assortments for other stores. Such a model minimized subjectivity and brought data science to aid sales teams in order recommendations.
For a material handling company in the US, we are implementing cloud-based IoT Telematics product, to power transformation, while drawing upon its experience and presence in the connected vehicle sales to help them manage data and draw relevant insight for them to provide better service and after sales experience for their customers. These examples, among others, and our strong performance in the quarter demonstrate our increasing relevance to our clients’ agenda.
We continue to make good progress on our localization approach as we strengthen this differentiated model to deliver digital services. During the quarter, we launched the Arizona Digital Center to accelerate the pace of innovation for US Company. We also launched a digital cyber security center in Bucharest, Romania in the last quarter.
I am also delighted to share with you a recognition that each one of us in Infosys is extremely proud of - we were rated number three on the Forbes list of The World’s Best Regarded Companies for 2019.
In closing I would like to share that we are updating our guidance, our revenue growth guidance moves from 8.5% to 10% and 9% to 10% for the full year on constant currency basis. We reconfirm our operating margin guidance from 21% to 23% for the full year.
With that let me hand it over to Pravin.
U. B. Pravin Rao
Hello everyone.
We had another quarter of double-digit YoY growth in constant currency. Growth was broad-based with six business segments - Financial Services, Communication, Energy Utilities, Resources and Services, Manufacturing, and Hi-tech and Life Sciences all clocking double-digit YoY growth in constant currency. Similarly both North America and Europe grew double-digit year-on-year in constant currency.
Utilization excluding trainees during the quarter improved by 180 basis points sequentially to 84.9%. Onsite effort mix reduced further to 28.2%.
The second leg of compensation increase was affected in the last quarter. With this, we have covered the entire employee base except the title holders who will be covered in Q3.
I am also pleased with the reduction in attrition which declined to 19.4%, a decline of 2% compared to Q1. Within this, voluntary attrition it is even lower at below 18%. High performer attrition also continued to be well below company average. The decline in attrition is due to multiple initiatives spanning across more active employee engagement, performance based differentiation, promotion and growth opportunities for employees.
Client metrics remained strong. We added 96 new clients during the quarter, while the number of $50mn clients increased by 2 to 61.
We won 13 large deals with a TCV of $2.85bn which is the highest ever. Four deals each were in Financial Services and Retail, two deals in Communication and one deal each in Energy Utility, Resources and Services, Hi-tech and Life Sciences. Geography wise six were from Americas, five were from Europe and two from Rest of the World. While a large part of this was renewal, these large renewals solidify our position significantly in existing clients. Large deal TCV is up by over 75% in H1 2020 compared to H1 2019.
Let me come to the business segments. Financial Services vertical continued its growth momentum aided by recent Stater acquisition. We expect performance in the vertical to be affected in the next couple of quarters driven by seasonality, sluggishness in capital markets and European banking space. The recent reduction in interest rates in major geographies can have an impact on client revenues, which may also impact their IT spending. Our strong positioning across the digital and core services spectrum along with diversified portfolio is helping up mitigate risks and grow the business. I am happy to share that Infosys was rated number one player in the HFS Top 10 BFS Sector Service Providers 2019. The ranking showcases our maturity across banking, capital markets, risk and compliance and across all BFS cross functions.
Retail segment performance was muted as clients turned cautious due to increase in perceived risks stemming from trade wars and geopolitical developments. Business volatility is causing decision delays in some of our key clients in the sector, we also see this as a clear opportunity in the medium to long term to increase our client relevance. We expect to witness uptick in Consumer Experience, Digital Mmarketing, Insights and investments in platforms, and remain cautiously optimistic, given recent deal wins and steady order pipeline.
Coming to manufacturing, there is stress in the vertical especially in Europe. Impact of trade wars and weakening automobile segment is affecting supply chain. Clients are looking to leverage new technologies to bring the next wave of efficiencies in their supply chain and manufacturing operations through Digital Platforms, Smart Manufacturing and IoT. Despite the sectoral challenge, we have a healthy pipeline of deals as well as New Account Openings, both in Europe and America.
Communication segment remain strong for us due to large deal wins. The traditional business models of communication players are being challenged by digital native and OTT players. These customers are keen to traverse the digital-cost, takeout journey in order to stay relevant in the market. We are seeing increasing pipeline for deals with a strong share of large deals.
The momentum in Energy, Utilities, Resources & Services vertical improved further on the back of continued momentum in top accounts and New Account Openings. The growth is being led by Utilities in Europe and Energy; with Resources seeing challenges due to M&A and divestitures.
The digital portfolio continues to grow strong and it's now over 38% of the total revenue, up from 31% a year ago. In Agile Digital business, we see a strong traction for the work we are doing in the cloud area and data and analytics, in IoT and in the area of experience - user experience, client experience and employee experience. In the last quarter, Infosys was ranked as a leader in six ratings - in the area of Modernization, IoT, Experience and Design, AI services, Cloud services and SAP services, which recognizes our digital capabilities from the market.
At the end, I am very happy to announce that Infosys won the prestigious United Nations Global Climate Action award in the ‘Climate Neutral Now’ category. Infosys is the only corporate from India to earn the recognition for its efforts to combat climate change.
With that I will hand over to Nilanjan.
Nilanjan Roy
Thanks Pravin. Good evening and welcome to our Q2 FY20 earnings call.
Our revenues in Q2 was $3.21bn growing by 11.4% YoY in constant currency terms, which was our fourth consecutive quarter of double digit growth. Sequential revenue growth in constant currency was 3.3% including 90 basis points incremental contribution from Stater.
Operating margins in Q2 was 21.7% compared to 20.5% in Q1. During the quarter, the benefit of rupee depreciation was offset by cross currency impact and revenue hedges. Higher utilization, lower onsite mix and other cost optimization measures helped operating margins by 110 basis points while lower visa and travel cost boosted the margins by 110 basis points. These were partially offset by compensation increases, which impacted margins by 70 basis points and increases in donation and other cost of 30 basis points, leading to an overall 1.2% increase in operating margins compared to Q1.
DSO for the quarter decreased by 2 days to 66 days, due to tight receivables management. Operating cash flow in Q2 was $522mn, which is a YoY growth of 19.2%. Free cash flow in Q2 was $397mn, which is YoY growth of 10.3%. For H1 2020, operating cash conversion to net profit was 103% compared to 96% in H1 2019.
Cash and cash equivalents declined during the quarter due to the completion of buyback and still at a healthy level of $3.35bn. Yield on other income was 7.9% marginally lower than the 8.1% in Q1.
Effective tax rate for H1 '20 was 26.5% versus 27.3% in H1 '19.
We completed the capital allocation program announced in April 2018. The planned buyback of Rs.8,260 crores was completed on August 26, 2019. Completion of buyback and higher shareholder payouts has led to the increase in ROE from 23.1% in Q2 2019 to 25.8% in the current quarter.
Driven by our performance in H1 we have increased the revenue guidance for FY2020 to 9% to 10% in constant currency terms. Q2 operating margin performance puts our H1 operating margin at 21.1% - within our guidance band. Subject to a stable currency environment, we remain confident of the operating margin band guidance for FY20 at 21%-23%. We will continue to deploy various measures to enhance operational efficiencies like rationalizing the pyramid, onsite offshore mix, automation and other overhead efficiency measures.
Consistent with the new capital allocation policy of paying approximately up to 85% of the free cash flows cumulatively over a five-year period to investors, the Board have declared an interim dividend of Rs.8, which is a 14% growth over the interim dividend of FY2019.
With that we open up the floor for questions.
Moderator
Thank you very much Sir. Ladies and gentlemen we will now begin the question and answer session. The first question is from the line of Edward Caso from Wells Fargo. Please go ahead.
Edward Caso
I wanted to drill down a little bit on the banking and capital market sector, which you are clearly doing very well and considering the headwinds. I hope you could break it between digital strength and core strength - is the digital growth still strong there or is there added pressure on the core side and may be couch those comments within the context at North America versus Europe. Thank you.
Mohit Joshi
Clearly on the core side, traditional ADM business and testing business, the focus is very much on consolidation. If you look at digital on the other hand, money is being spend broadly in few areas. The first is transformation of user experience - specifically for the retail and the wealth management businesses. There is a focus on data across the enterprise; and finally we are starting to see the beginnings of fairly significant cloud migration journey. So that is the sort of the positive news. We see these trends clearly more in the US now than we do in Europe even though we are starting to see a fair degree of public cloud migration among the European banks. The other piece I mentioned is we see a lot more strength on the corporate banking side of the house - specifically payment transformation, trade transformation, lending transformation. These continue to remain fairly strong areas across the board - whether you are looking at large global banks or the regional banks. The areas of weakness clearly are in the capital market space.
The second point I had mentioned is that especially in Europe, the way the yield curve is working, especially with the rate cuts - if you look at a bank in Belgium for instance, where we spoke with recently - they are making about negative 80 basis points on their deposits. At the same time they are paying out something between 10 basis points to 15 basis points to their depositors. So we feel that this interest rate regime is going to put pressure on banking revenues and may have a downstream impact. So, hopefully that gives you a broad enough global sense.
Edward Caso
My other question here is given the tax law change around repurchases are we more likely to see special dividends going forward as opposed to repurchase?
Nilanjan Roy
We had announced a new capital allocation issue policy in July that we had increased it to 85%. We think that gives a clear runway for investors to look at a predictable cash back to through dividend and leaving some money aside for tuck-in acquisitions. So I think, the scope of one-off buyback or a special dividend definitely decreases.
Moderator
Thank you. The next question is from the line of Diviya Nagarajan from UBS. Please go ahead.
Diviya Nagarajan
Congrats for the solid quarter. Salil, my question is on the guidance that we have given at the top end. We have had a very robust 12% kind of a first half number. The top end suggest you are kind of looking at 8% in the second half. Could you run us through the assumptions that you have baked in for that kind of a revenue trajectory in the second half? Is this because of what you are seeing in banking and retail? So far any surprises that you had in any of the sectors, either on the upside or the downside in the first half of the year, that would be helpful.
Salil Parekh
On the various segments, if you look in what we did in Q2, we see a lot of strength, for example in Energy Utilities Services segments. We see a lot of strength in Telco (Communication), High-tech. So those are positives as we have gone through this year and also some of the large deal wins over the last few quarters. Mohit shared his colour on Financial Services - both from a European banking perspective and overall capital markets perspective. Our Q3 is the December quarter with furloughs and we typically see some seasonality into that and that is really what we tried to bake into the guidance. We have of course increased the lower end of the guidance and as we progress through the year and we get through the next quarter, we will see where we end up. In the commentary, you heard from Mohit, the positive things we shared with you on some of the other segments, what you heard of our Retail when Pravin shared his remarks. So all of those put together plus the typical seasonality of Q3 and H2 that is what gives us our view on the guidance.
Diviya Nagarajan
I think the margin recovery seems to suggest that you are well on track to reap the benefits and operating leverage from the investments that you have made in the last few quarters. How should we think about the potential for recovery versus revenue growth? What I am trying to understand here is that, is there an opportunity for us to kind of continue to improve on this trajectory and if you are looking at a slight moderation, either because of the base effect or some of the factors that we have discussed, does that allow for that kind of a trajectory to continue?
Salil Parekh
On the margins, you saw what Nilanjan shared is a real focus and attention on cost and operational parameters and Pravin shared with you some of the specific parameters that were improving in the quarter. We also shared in the last quarter that all the investments are complete and behind us. So there is no one off investments that we had launched about a year or so or year and a half ago - those are complete. There are no new investments. There are investments in the ongoing business with no more one-off investments. Having said that we have a high quality franchise and we feel comfortable that as we get the operational efficiency back, we will see those levers kick in. Therefore we remain confident. Again as Nilanjan shared H1 margin is now within the band, 21%-23% and we remain confident as the year progresses, we will be within the band, 21%-23%.
Diviya Nagarajan
My last bookkeeping, as part of the tax rate regime change, what is the thinking on the tax holiday exemptions, what should we be modeling in going forward for that?
Nilanjan Roy
Currently for Infosys standalone, the India effective tax rate is less than 25% - we are close to about 23%-24%. So, I think at the moment we are staying with the current regime. We will start evaluating, as we look ahead through the next few years, about when we make the transition, but for now we are continuing with the existing tax holiday regime.
Moderator
Thank you. The next question is from the line of Nitin Padmanabhan from Investec. Please go ahead.
Nitin Padmanabhan
Just wanted your thoughts on BFSI and Retail put together because if we look at the second quarter in terms of growth excluding Stater it appears that it is relatively weaker than the earlier Q2s that we have seen in the past. So from that perspective do you think that both BFSI and Retail have been relatively weaker versus what you would have thought earlier?
U. B. Pravin Rao
I will talk about Retail and then Mohit will comment on BFSI. On Retail we believe that and this is one sector that is closely linked to consumer sentiment. Given all the macro challenges that we are seeing, or macro talk that is going on as well as the reduction in consumption, trade wars and so on; we see a sense of nervousness in the retailers and we see the spend come down. This segment in general will continue to be volatile. Last year for us Retail was a fantastic year. We had double-digit growth. First quarter was soft and second quarter continued to be soft. It is difficult to predict when the sector will revive because it is purely dependent on the macro as well as the sentiments. This is something we have to wait and watch. At the same time, we also see a lot of opportunities in the sense that retailers are trying to compete aggressively against the likes of Facebook and all the new age companies. They continue to invest while trying to take out cost in other parts of the business. So we continue to stay engaged with them and given our value preposition and strength on the digital. We remain confident that we will be able to capture the spend that is there in the sector. But in terms of the growth it is expected to be volatile till there is some clarity on the macros.
Mohit Joshi
I think while answering Ed's question, I had given you a perspective on the sub sectoral and the geographic distribution that we see. The reality is that there is a lot of volatility and I would add that this is also a sector that is heavily concentrated. So, even if you have a couple of clients for instance that are looking at the discretionary spend more closely or they are looking at reducing the spend on the core, it amplifies the impact on us. We have already identified the areas of weakness in terms of European banking or in terms of the very low spend in the capital market space. So hopefully that gives you a perspective.
Nitin Padmanabhan
Thank you Mohit and Pravin. Just one more, what would the proportion be of net new deals on the total TCV?
U. B. Pravin Rao
The rebid is close to 90%. So the net new will be about 10% this quarter.
Moderator
The next question is from the line of Vibhor Singhal from PhillipCapital. Please go ahead.
Vibhor Singhal
Thanks for taking my question and congrats on a solid quarter. In terms of hiring we have seen a strong hiring in this quarter, adding close to 7000 software professionals. So, just wanted to understand your perspective, I am sure we are looking at a significant growth going ahead given the kind of hiring that we have done. So how do you believe the growth is going to pan out and also what could be the margin impact given that we would have probably hired these guys spread over the quarter. Could we expect some pressure on the margins in the coming quarters or do you think that is all baked in into the guidance?
U. B. Pravin Rao
As we have said, and Nilanjan has reiterated that the margin will remain in the 21% to 23% band. So there is no change to that guidance and we are comfortable with that. In terms of hiring this quarter, we have hired about 14,000 people, roughly about 6,000 freshers in India and about 700 or 800 people in US from colleges. In laterals we hired close to 7,000 again - about 5,000 plus in India and about 1,500 to 2,000 in other parts of the world. It is consistent with what we have done in the past. So I do not see any material change to that. Our hiring will be dependent on the growth and we have already factored that in the guidance.
Vibhor Singhal
Lastly, the attrition has definitely cooled off from the last quarter but we know that first quarter is generally seasonally quite weak in terms of attrition. So, given that we have already taken so much measures to thwart the attrition levels but as it still remains above 21%, any further levers or steps that we intend to take to bring down the sub-20 levels or may be something which we are more comfortable with?
U. B. Pravin Rao
The attrition for tech services is about 19.4% - this is both voluntary and involuntary. If you look at voluntary alone it is about 18% and when we compare with quarter two of last year, it is lower than that. We have definitely seen some marked improvement but at the same time some of the interventions that we have done to address this in the last one or two quarters have helped us. This is something that we have to continue to do on an ongoing basis. This is an area where we will continue to watch out and focus on but at this stage, we are encouraged with the successes that we have seen and we are hopeful that it will continue to turn in the right direction in the coming quarters.
Moderator
The next question is from the line of Joseph Foresi from Cantor. Please go ahead.
Joseph Foresi
My first question is around the revenue growth acceleration, you have seen an uptick in the last couple of quarters. Do you believe that you are taking may be market share from some of your competitors or is it the fact that digital is growing strong as it is right now. I am just trying to get a sense of what seems to be causing the uptick in the numbers and should we be thinking of this as a high single digits, low double digits, or low double-digits business?
Salil Parekh
We have a set of offerings which are really close to what the clients want to spend in their digital transformation journey and these relate specifically to areas we have highlighted in the past. Whether it is data analytics, cloud or experience, IoT or cyber and so on and that is where we have seen growth, which is possibly higher than where the overall market and rest of services are growing. We also see a strong push on automation, which is helping where we have good strong core businesses with clients and they see benefit from this for us to come into their enterprise and display the value of the automation. Having said that we know that all of these things also require an intense focus that we put in into the large deal program and ongoing activity to execute against that. We genuinely believe today that we have a very strong position within the mind of our clients - tech and now sometimes the marketing executive spend - which is helping us to drive our growth. In terms of what this means as an ongoing business, we are not sharing any view at this stage beyond the end of this fiscal year. As we come to the end of the year, obviously, we will start to talk a little bit more on the next fiscal year.
Joseph Foresi
And just a couple of quick followups, are these new engagements or are you taking market share from others, we talked about the digital practice and how much is pricing a factor across both the digital business and your traditional business?
Salil Parekh
In terms of digital work, typically these are new projects or new mid-term, long-term contracts. There are definitely things that we are winning in a very competitive environment. In terms of the pricing, we shared may be in the last quarter’s discussion, the margin for our digital business is higher than the margin for the company overall. So we feel confident as we shift more of our portfolio to digital that should be a benefit to our margin.
Joseph Foresi
Okay, just lastly, the pieces of the business that are not digital, are you seeing pricing pressure on the traditional maintenance stuff and maybe you can give us an update on the non-digital business and how that is performing?
Salil Parekh
There we believe we have an extremely strong set of capabilities across all of our service offerings. That still comprises 62% of our business. It is a strong business, a long foundation there. However, the automation play allows us to ensure that the clients are getting an ongoing productivity benefit. We do see some pressure which comes into play in pricing or discounts on an ongoing basis and especially when we start to see medium term and long-term renewal contract that come up for a discussion.
Moderator
The next question is from the line of Viju George from JP Morgan. Please go ahead.
Viju George
I had a question on your unbilled sales. Last four quarters through FY2019, it was tracking at between 21 and 22 days, it shot up to 27 to 28 days in the first half of this year. I just wanted to try to understand what caused such a massive jump for a company of your size in H1?
Nilanjan Roy
The way we look at revenue, these are based on activity and effort whereas billing milestones are agreed with clients in advance based on delivery dates and that is the way billing actually happens, so there are certain times mismatches between the revenue and the billing milestones. These are largely client specific, so they have their pluses and minuses. Therefore that is one of the reasons we also had because of the Stater and HIPUS acquisitions there was also an increase because their business model had also an increase on the unbilled. So these are the two large reasons for this increase, but if you see our collections overall that is a number to look at. Our collections continue to be strong, our DSO for the quarter was down by two days, so I think that is the key metrics to show the health of the business.
Viju George
But Nilanjan I just think when you look at this in terms of incremental sales, it has jumped to almost 24% to 25% in H1 whereas in the four quarters to FY2019, it was like kind of 10% to 11%, so as a percent of incremental sales annualized, it has doubled. So how is it practically possible for a company as large as Infosys, has there been a change in policy or are you trying to recognize with clients far more often revenue recognition milestones in a way different from what you used to do earlier?
Nilanjan Roy
Nothing like that, in fact we monitor closely in fact all the unbilled of the previous quarter is mostly billed in the next quarter and there are a new set of milestones which comes out. It is not as if it is a legacy which is increasing, we look at the ageing of this carefully and like I said, this is a combination of a few clients where you have a difference in the billing milestones versus the revenue recognition and like I said HIPUS and Stater.
Viju George
Sure, and one more question on your TCV. I think Pravin indicated that may be 10% of the TCV is new which means that 90% is renewals. How does this compare with may be averages of the recent past?
U. B. Pravin Rao
I do not have the exact number but in general this is a metric which is volatile. In some quarters we have lot of net new and in other quarters we have a good percentage coming from the renewals. The way we look at it is, it is important for us to win renewals because it helps in retaining our business and solidifying our presence. At the same time, winning net new will also help in capturing market share. We focus on both, but in general it varies from quarter to quarter and for this half year I think the net new was about 35%. We did 2.7 in Q1 and 2.8 in Q2 and about 35% was net new.
Viju George
Would it be fair to say at least for this quarter the percentage of net news is generally a lot lower than it might have been in the recent past?
U. B. Pravin Rao
Yes, you are right. If you look at the last few quarters probably the 10% net new is on the lower side.
Moderator
The next question is from the line of Apoorva Prasad from HDFC Securities. Please go ahead.
Apoorva Prasad
I wanted to know what is really constraining us to increase the top end of our guidance despite the strong momentum across verticals? Are there any client specific issues that you are looking at? I am looking at the top 2 to 10, it seems like a decline for this quarter. So anything which is incrementally different?
Salil Parekh
As we shared, we have increased our guidance on the lower end from 8.5% to 9%. We think the overall discussion with the segments which you heard from Mohit, in terms of Financial Services, you heard what Pravin shared on Retail, that is something which we have to be watchful about. Then we have strength, which we shared earlier on Energy Utilities, on Telco, Hi-Tech and those are positive. Then the second half, Q3 and Q4 is typically softer than the first half and especially Q3 with the discussions around furloughs and so on. So given all of those factors in mind we took advantage to increase the lower end of the guidance keeping in mind that this is really where we see the rest of the year going and as Q3 progresses, we will see where we end up and come back to you at the end of the quarter on the next steps.
Apoorva Prasad
Thanks for that Salil and Nilanjan on the margins, how do we see the second half trending within the band, any headwinds/tailwinds you are looking at perhaps you can call out the title holder impact which will be coming in the third quarter?
Nilanjan Roy
Like we said, at H1 we are 21.1%, we are within the band and I think this is a good place to grow from here and that is what we are looking at. The title holder is not a material impact, this is probably a percentage of the overall headcount. So it is relatively a small impact. Otherwise, I think we have a very robust cost takeout program, like I said on utilization, pyramid. and I think we are quite confident that this is a machinery which has to literally churn out every quarter. There will continue to be headwinds in terms of discounts or wage hikes but I think we seem to have gone to a rhythm of making sure that we are able to take out these cost and time.
Moderator
Thank you. The next question is from the line of Moshe Katri from Wedbush Securities. Please go ahead.
Moshe Katri
Thanks and congrats on a very strong execution. Going back to BFSI, is there any way to figure out if you are looking at the organic growth numbers. I know you have not disclosed these but organically was the sector up sequentially, YoY, at least some color here would be helpful and then if you do want to disclose that, how much the acquisition adds to the growth during the quarter?
Mohit Joshi
We have not really disclosed the two numbers separately because you also have to keep in mind that Stater was a client of ours prior to the acquisition. So there was certain revenues that accrued to Infosys prior to the joint venture as well. So we are not breaking out the numbers separately.
Moshe Katri
Looking at this on a forward basis, has anything changed since the end of the quarter in terms of sale cycle, pipeline conversion rates, any sort of spending or project in terms of project funding, may be you can talk a bit about those trends since the end of the quarter?
Salil Parekh
When you say end of the quarter, you mean the last couple of weeks right?
Moshe Katri
That is correct.
Salil Parekh
We don't see any change in the last couple of weeks from what we are discussing, which is our quarter end view. Of course, it is only two weeks so we do not expect to see any change in that timeframe.
Moshe Katri
Last question, the renewal number in terms of bookings was pretty high this quarter. On a forward basis during the next two quarters looking at your pipeline, I am assuming that is going to be a trough in terms of mix and during the next two quarters we should see a larger [smaller] mix of renewals in terms of bookings, is that correct?
U. B. Pravin Rao
I do not think we have seen any seasonality in renewals, so it varies from quarter to quarter depending on the context. I do not think there is any seasonality to renewals or net new.
Moderator
The next question is from the line of Abhay Moghe from Bajaj Alliance. Please go ahead.
Abhay Moghe
Congrats on sustaining a good execution. I just have two questions. First is on the revenue growth. If I see over the last four to five quarters, your revenue growth YoY had been increasing, whether it is dollar terms of cc terms, this quarter this is lower than the last quarter and the way you have given the guidance, it is likely to be a couple of percentage points, even lower by the time we reach Q4. Now my question over here is this trend that you are seeing, is it like you have the revenue visibility and you see the trend going down in YoY growth or it is more like a cautiousness or conservativeness because of macro concerns and you want to give a conservative guidance? So what is it like, lower revenue visibility and some conservatism or you have the visibility and you are saying that no it will be trending down? That is question number one. Second is on the margins, like overseas you are running a good cost cutting program and over the next four to six quarters, in a constant currency terms, you know next year also wage hikes, visa cost everything will be there, but over the four to six quarters, you think margin would look up from current levels or do you think that whatever the headwinds are, whatever cost cutting programs you have, it will neutralize? Those are the two questions from my side.
Salil Parekh
On the revenue as we had shared earlier, I think we had a good set of growth over the last four quarters. We know that typically there is some seasonality in the last quarter of the calendar year – our Q3. We also know that there will be some difficult comps for Q3 and Q4 versus previous Q3 and Q4 based on the deal wins and so on, 12 to 18 months ago. Keeping all that in mind we have come with the guidance. Our large deal wins is still robust, it is lumpy of course. On the large deal wins we have had several good quarters, but it is not a predictable view in terms of where the large deals numbers go and the renewals versus the net new component. We see more net new in the coming quarters in the pipeline. So, we have confidence that as we get into the next fiscal year, we are starting to build a base of deals that can help us for that. Beyond that there is no other sort of color on the revenue from our side.
In terms of margin, we have a very clear view which is for Q3 and Q4 and for the full year. We have no view today on the next four to six quarters which is in that sense the next fiscal year. For this year, we believe our operational efficiency approach is working well and will deliver good benefits. We believe we have essentially a high quality franchise and the investments are behind us. So we will see the benefits of that and we will be within our margin guidance. Already for H1, we are within the margin guidance and we will have that for the full year as well.
Moderator
Thank you. The next question is from the line of Ravi Menon from Motilal Oswal. Please go ahead.
Ravi Menon
Congratulations on a good quarter. I have two questions. First is on margin levers. Your utilization is already close to the highest. Do you think we can actually push this any further or what other margin levers are we looking at in the near term? Secondly, related to that, what was the variable payout for the quarter? One more question, I will followup after this.
U. B. Pravin Rao
On the utilization front, we are comfortable where we are, 84.9% that is where we landed. In the past, we have had quarters where the utilization was upwards of 85%. So we typically tend to operate in the range between 83% to 85%. So at this stage, we are comfortable, but whenever there is a need, we have shown the ability to increase the utilization so as not to leave behind the business on the table. At this stage we are comfortable and we are not really planning to increase it further, but we have that flex available in case there is a need.
Ravi Menon
And on the variable payout for the quarter?
U. B. Pravin Rao
Sorry we do not comment on the variable pay.
Ravi Menon
And then just a clarification on why do you think that you should include Stater within the digital? I think that is where the revenue has fallen in. I thought it is primarily a BPO, there was a software platform used for the BPO but why classify this revenue to digital?
Mohit Joshi
Sure if you look at the Pentagon that we have been working on as as our key strategy for digital for the past 18 months, you will see that vertical platforms is clearly called out as one key element in digital. This is very clearly a vertical platform - it is not a BPM offering. This is mortgage origination and mortgage servicing platform. So there is a significant IP in the platform and the pricing like any vertical platform is very clearly outcome linked.
Moderator
The next question is from the line of Sumeet Jain from Goldman Sachs.
Sumeet Jain
Sir firstly I wanted to understand in your revenue growth guidance of 9% to 10%, are we including the recently closed Eishtec, the Irish BPM acquisition and if yes, can you quantify that?
Salil Parekh
That is a business transfer approach - it is very much part of our business going forward and we have not disclosed the specifics on that. Nonetheless it is a very small part of our BPO business.
Sumeet Jain
So it would not have any material impact on your revenue growth trajectory in December quarter?
Salil Parekh
That is right.
Sumeet Jain
Secondly wanted to understand on the subcontracting cost like we are seeing for the last three to four quarters, it has been in the range of 7.3% to 7.5% levels. So going forward do you think that reducing subcontracting cost will be one of the margin levers given that we now have a full strength of local hirers in US?
Nilanjan Roy
I think subcontracting is an integral part of the business model. I think as we look for talent overseas and especially immediate requirements we need subcontractors. But as you see for this quarter we have actually been able to hold down our subcontractor cost. So what we actually do is also rotate many of the subcontractors back onto to our payroll and therefore we continue to get a new set of fresh subcontractors but we have to take them back. So I think if we get this going as a strong model, we will able to keep the costs under control and yet able to hire talent on demand. So that is one of the levers we operated this quarter on margins as well.
Sumeet Jain
Got it. That is it from my end and all the best for the remainder of the year.
Moderator
The next question is from the line of Bryan Bergin from Cowen.
Bryan Bergin
Do you think you are perceived as a strategic partner in your client base. Before you kind of started on this journey, it was a small percentage of the client mix, I'm curious how you perceive that today?
Salil Parekh
We may be a bit optimistic in how we look at it but we absolutely perceive that we are more and more part of this strategic thinking of our clients. One of things we observed in the recent past is many of our clients are looking at us, more than they are looking at some of our competitors and especially with some of the investments we have made in digital, some of the focused areas on automation and the relationships that we have built in terms of the alliances that we have with our strong partners in the tech world, that is helping us to be perceived more and more central to the agenda of our clients.
Bryan Bergin
One last, as far as digital contributing to large deal of TCV, can you give us any matrix there a sense of how digital deals are changing in size and scope?
U. B. Pravin Rao
We do not really breakup the percentage of digital in the large deals. Digital is definitely a part of large deal in the sense that in a very large deal there is business as usual but there is also expectation that we transform and migrate to cloud and so on. So there is definitely a digital element but we do not really breakout what is the percentage of digital in the large deals.
Bryan Bergin
Just last one here, within BFSI can you just comment on how insurance and US regional bank performance is?
Mohit Joshi
Yes look on the whole regional banking continues to be an area of growth for us, clearly where there is some M&A activity going on, there is a little bit of a freeze until legal day one happens; but we feel that regional banks are fairly robust. We feel that there is a lot of technology investment that is going into the sector as they look to compete with the larger universal banks. And finally I feel that with the regional banks we also have a very compelling story in terms of our services, our platforms like the Stater platforms in Europe and the fact that we have the world’s largest banking software platform in Finacle, which is really gaining fairly significant traction. So the regional bank story continues to be a big one for us. What is your question on insurance?
Bryan Bergin
Yes, if you can just touch on how your performance is on that sub-vertical?
Mohit Joshi
Insurance continues to grow steadily. I do not think we have seen any significant acceleration or any significant growth beyond the average in that sector but it remains a strong and stable sector for us. We also feel that the headroom for growth continues and again like in banking, the McCamish platform has been gaining very significant traction and we have a fairly sizeable pipeline of opportunities there.
Moderator
Thank you. The next question is from the line of Dipesh Mehta from SBICAP Securities. Please go ahead.
Dipesh Mehta
Thanks for the opportunity. Couple of questions. First, if one looks at the Rest of World, after couple of years of healthy growth, the growth rate seems to have moderated. So if you can help us what is playing out there and how you expect the Rest of World to grow? Second question is about margin. Earlier Infosys used to have an industry-leading margin. Now considering the specific investment and one-off investment, which we did to return back to industry leading growth - if you can provide some color by when you expect industry leading margin also to be achievable or are we fine now with where we are and the focus would be more on growth than margin?
U. B. Pravin Rao
In the rest of the world, India is the very small part of the business and our focus is on very limited projects. We are very selective on what we bid for India, but we will continue to see volatility there. On Rest of the World we have had a good run over the last few quarters. This quarter we are seeing a slowdown or a negative growth but this is not a secular trend, at least at this stage, we are not seeing anything material. Hopefully the growth should come back in the coming quarters.
Salil Parekh
On margin, our view is that a lot of the operational measures that we have talked about in this call are getting in place and giving us benefits, which gave us a nice improvement in our margin in Q2. We have a clear guideline and then the guidance for this year. Beyond this year, we will come back and have a discussion at the end of the year, when we talk about our guidance for next year.
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.
Sandeep Mahindroo
We would like to thank everyone for joining us on this call and spending time with us. Look forward to talking to you again. Have a good day.
Moderator
Thank you very much sir. Ladies and gentlemen on behalf of Infosys that concludes this conference. Thank you for joining us. You may now disconnect your lines.
Exhibit 99.6
Form of Release to Stock Exchanges and Advertisement
INDEPENDENT Auditor’s Report ON THE AUDIT OF INTERIM CONSOLIDATED FINANCIAL RESULTS
To The Board of Directors of Infosys Limited
Opinion
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 half year ended September 30, 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 amended (“the Listing Regulations”).
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 (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended; and |
c. | gives a true and fair view in conformity with Indian Accounting Standard 34 and other accounting principles generally accepted in India of the consolidated net profit and consolidated total comprehensive income and other financial information of the Group for the quarter and half year ended September 30, 2019. |
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (“SAs”) specified under Section 143 (10) of the Companies Act, 2013 (“Act”). Our responsibilities under those Standards are further described in the Auditor’s Responsibilities for the Audit of the Interim Consolidated Financial Results 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 ethical requirements that are relevant to our audit of the interim consolidated financial results under the provisions of the Act and the Rules 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 obtained by us is sufficient and appropriate to provide a basis for our audit opinion.
Management Responsibilities for the Interim Consolidated Financial Results
This Statement, which is the responsibility of the Company’s Management and approved by the Company’s Board of Directors, has been compiled from the audited interim consolidated financial statements. The Company’s Board of Directors are responsible for the preparation and presentation of these interim consolidated financial results that give a true and fair view of the consolidated net profit and consolidated other comprehensive income and other financial information of the Group in accordance with Indian Accounting Standard 34, ‘Interim Financial Reporting’ (“ Ind AS 34”) prescribed under section 133 of the Act read with relevant rules issued thereunder and other accounting principles generally accepted in India and in compliance with Regulation 33 of the Listing Regulations.
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 respective financial results that give a true and fair view and are free from material misstatement, whether due to fraud or error which have been used for the purpose of preparation of the interim consolidated financial results by the Directors of the Company, as aforesaid.
In preparing the interim consolidated financial results, the respective Board of Directors of the companies included in the Group are responsible for assessing the ability of the respective entities to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the respective Board of Directors either intends to liquidate their respective entities 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 Results
Our objectives are to obtain reasonable assurance about whether the interim consolidated financial results 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 results.
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 results, 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 such controls. |
· | Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Directors. |
· | Conclude on the appropriateness of the Board of Directors 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 interim consolidated financial results 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 results, including the disclosures, and whether the interim consolidated financial results 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 results. We are responsible for the direction, supervision and performance of the audit of financial information of such entities included in the interim consolidated financial results of which we are independent auditors. |
Materiality is the magnitude of misstatements in the interim consolidated financial results that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the interim consolidated financial results 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 interim consolidated financial results.
We communicate with those charged with governance of the Company and such other entities included in the interim consolidated financial results of which we are the independent auditors 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.
For DELOITTE HASKINS & SELLS LLP
Chartered Accountants
(Firm’s Registration No. 117366W/W-100018)
P. R. RAMESH
Partner
(Membership No.70928) | |
Bengaluru, October 11, 2019 | UDIN : 19070928AAAAAM2159 |
Annexure to Auditors’ Report
List of Subsidiaries:
1. | Infosys Technologies (China) Co. Limited |
2. | Infosys Technologies S. de R. L. de C. V. |
3. | Infosys Technologies (Sweden) AB. |
4. | Infosys Technologies (Shanghai) Company Limited |
5. | Infosys Tecnologia DO Brasil LTDA. |
6. | Infosys Nova Holdings LLC. |
7. | EdgeVerve Systems Limited |
8. | Infosys Austria GmbH |
9. | Skava Systems Pvt. Ltd. |
10. | Kallidus Inc. |
11. | Infosys Chile SpA |
12. | Infosys Arabia Limited |
13. | Infosys Consulting Ltda. |
14. | Infosys CIS LLC |
15. | Infosys Luxembourg SARL |
16. | Infosys Americas Inc. |
17. | Infosys Technologies (Australia) Pty. Limited |
18. | Infosys Public Services, Inc. |
19. | Infosys Canada Public Services Inc. |
20. | Infosys BPM Limited |
21. | Infosys (Czech Republic) Limited s.r.o. |
22. | Infosys Poland Sp z.o.o |
23. | Infosys McCamish Systems LLC |
24. | Portland Group Pty Ltd |
25. | Infosys BPO Americas LLC. |
26. | Infosys Consulting Holding AG |
27. | Infosys Management Consulting Pty Limited |
28. | Infosys Consulting AG |
29. | Infosys Consulting GmbH |
30. | Infosys Consulting SAS |
31. | Infosys Consulting s.r.o. |
32. | Infosys Consulting (Shanghai) Co., Ltd. (formerly Lodestone Management Consultants Co., Ltd) |
33. | Infy Consulting Company Limited |
34. | Infy Consulting B.V. |
35. | Infosys Consulting Sp. Z.o.o. |
36. | Lodestone Management Consultants Portugal,Unipessoal, Lda |
37. | S.C. Infosys Consulting S.R.L. |
38. | Infosys Consulting S.R.L. |
39. | Infosys Consulting (Belgium) NV |
40. | Panaya Inc. |
41. | Panaya Limited. |
42. | Panaya GmbH |
43. | Panaya Japan Co. Ltd. |
44. | Brilliant Basics Holdings Limited |
45. | Brilliant Basics Limited |
46. | Brilliant Basics (MENA) DMCC |
47. | Infosys Consulting Pte Ltd. |
48. | Infosys Middle East FZ LLC |
Annexure to Auditors’ Report
List of Subsidiaries:
49. | Fluido Oy |
50. | Fluido Sweden AB (Extero) |
51. | Fluido Norway A/S |
52. | Fluido Denmark A/S |
53. | Fluido Slovakia s. r. o |
54. | Fluido Newco AB |
55. | Infosys Compaz PTE. Ltd |
56. | Infosys South Africa (Pty) Ltd |
57. | Wong Doody Holding Company Inc. |
58. | WDW Communications Inc. |
59. | Wongdoody Inc. |
60. | HIPUS (Acquired on April 1, 2019) |
61. | Stater N.V. (Acquired on May 23, 2019) |
62. | Stater Nederland B.V. (Acquired on May 23, 2019) |
63. | Stater Duitsland B.V. (Acquired on May 23, 2019) |
64. | Stater XXL B.V. (Acquired on May 23, 2019) |
65. | HypoCasso B.V. (Acquired on May 23, 2019) |
66. | Stater Participations B.V. (Acquired on May 23, 2019) |
67. | Stater Deutschland Verwaltungs-GmbH (Acquired on May 23, 2019) |
68. | Stater Deutschland GmbH & Co. KG (Acquired on May 23, 2019) |
69. | Stater Belgium N.V./S.A. (Acquired on May 23, 2019) |
70. | Infosys Employees Welfare Trust |
71. | Infosys Employee Benefits Trust |
72. | Infosys Science Foundation |
73. | Infosys Expanded Stock Ownership Trust |
INDEPENDENT Auditor’s Report ON THE AUDIT OF THE INTERIM STANDALONE FINANCIAL RESULTS
To The Board of Directors of Infosys Limited
Opinion
We have audited the accompanying Statement of Standalone Financial Results of INFOSYS Limited (“the Company”), for the quarter and half year ended September 30, 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 amended (“the Listing Regulations”).
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 amended; and |
(ii) | gives a true and fair view in conformity with Indian Accounting Standard 34 and other accounting principles generally accepted in India of the net profit and total comprehensive income and other financial information of the Company for the quarter and half year ended September 30, 2019. |
Basis for Opinion
We conducted our audit in accordance with the Standards on Auditing (SAs) specified under section 143 (10) of the Companies Act, 2013 (“Act”). Our responsibilities under those Standards are further described in the Auditor’s Responsibilities for the Audit of the Interim Standalone Financial Results 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 ethical requirements that are relevant to our audit of the interim standalone financial results under the provisions of the Act and the Rules 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 obtained by us is sufficient and appropriate to provide a basis for our audit opinion.
Management Responsibilities for the Interim Standalone Financial Results
This Statement, which is the responsibility of the Company’s Management and approved by the Board of Directors, has been compiled from the related audited interim condensed standalone financial statements. The Company’s Board of Directors are responsible for the preparation and presentation of the interim standalone financial results that give a true and fair view of the net profit and other comprehensive income and other financial information in accordance with Indian Accounting Standard 34 “Interim Financial Reporting” (“Ind AS 34”), prescribed under Section 133 of the Act read with relevant rules issued thereunder and other accounting principles generally accepted in India and in compliance with Regulation 33 of the Listing Regulations. 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 interim standalone financial results that give a true and fair view and are free from material misstatement, whether due to fraud or error.
In preparing the interim standalone financial results, the Board of Directors are 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 the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
The Board of Directors are also responsible for overseeing the financial reporting process of the Company.
Auditor’s Responsibilities for the Audit of the Interim Standalone Financial Results
Our objectives are to obtain reasonable assurance about whether the interim standalone financial results 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 standalone financial results.
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 standalone financial results, 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 such controls. |
· | Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Directors. |
· | Conclude on the appropriateness of the Board of Director’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 standalone financial results 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 standalone financial results, including the disclosures, and whether the interim standalone financial results represent the underlying transactions and events in a manner that achieves fair presentation. |
Materiality is the magnitude of misstatements in the interim standalone financial results that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the interim standalone financial results 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 interim standalone financial results.
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.
For DELOITTE HASKINS & SELLS LLP
Chartered Accountants
(Firm’s Registration No. 117366W/W-100018)
P. R. RAMESH
Partner
(Membership No.70928) | |
Bengaluru, October 11, 2019 | UDIN : 19070928AAAAAN4430 |
![]() |
Infosys Limited Regd. office: Electronics City, Hosur Road, |
CIN : L85110KA1981PLC013115 Website: www.infosys.com email: investors@infosys.com T: 91 80 2852 0261, F: 91 80 2852 0362 |
Statement of Consolidated Audited Results of Infosys Limited and its subsidiaries for the quarter and half-year ended September 30, 2019 prepared in compliance with the Indian Accounting Standards (Ind-AS)
(in crore, except per equity share
data)
Particulars | Quarter ended September 30, |
Quarter ended June 30, |
Quarter ended September 30, |
Half-year Ended September 30, |
Year ended March 31, | |
2019 | 2019 | 2018 | 2019 | 2018 | 2019 | |
Audited | Audited | Audited | Audited | Audited | Audited | |
Revenue from operations | 22,629 | 21,803 | 20,609 | 44,432 | 39,737 | 82,675 |
Other income, net | 626 | 736 | 739 | 1,362 | 1,465 | 2,882 |
Total Income | 23,255 | 22,539 | 21,348 | 45,794 | 41,202 | 85,557 |
Expenses | ||||||
Employee benefit expenses | 12,675 | 12,302 | 11,158 | 24,977 | 21,620 | 45,315 |
Cost of technical sub-contractors | 1,651 | 1,640 | 1,523 | 3,291 | 2,814 | 6,033 |
Travel expenses | 599 | 827 | 602 | 1,427 | 1,205 | 2,433 |
Cost of software packages and others | 680 | 617 | 606 | 1,296 | 1,151 | 2,553 |
Communication expenses | 129 | 127 | 121 | 256 | 243 | 471 |
Consultancy and professional charges | 341 | 291 | 289 | 631 | 594 | 1,324 |
Depreciation and amortisation expenses | 727 | 681 | 463 | 1,408 | 900 | 2,011 |
Finance cost | 42 | 40 | – | 82 | – | – |
Other expenses | 915 | 847 | 953 | 1,763 | 1,779 | 3,655 |
Reduction in the fair value of Disposal Group Held for Sale (Refer Note 1(a)) | – | – | – | – | 270 | 270 |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held For Sale" (Refer Note 1(a)) | – | – | – | – | – | 451 |
Total expenses | 17,759 | 17,372 | 15,715 | 35,131 | 30,576 | 64,516 |
Profit before tax | 5,496 | 5,167 | 5,633 | 10,663 | 10,626 | 21,041 |
Tax expense: (Refer Note 1(b)) | ||||||
Current tax | 1,488 | 1,460 | 1,612 | 2,947 | 3,063 | 5,727 |
Deferred tax | (29) | (95) | (89) | (123) | (158) | (96) |
Profit for the period | 4,037 | 3,802 | 4,110 | 7,839 | 7,721 | 15,410 |
Other comprehensive income | ||||||
Items that will not be reclassified subsequently to profit or loss | ||||||
Remeasurement of the net defined benefit liability/asset, net | (22) | (17) | 3 | (39) | 4 | (22) |
Equity instruments through other comprehensive income, net | 2 | 3 | 8 | 5 | 12 | 70 |
Items that will be reclassified subsequently to profit or loss | ||||||
Fair value changes on derivatives designated as cash flow hedges, net | 17 | (24) | (29) | (7) | (20) | 21 |
Exchange differences on translation of foreign operations | (35) | 25 | 334 | (10) | 421 | 63 |
Fair value changes on investments, net | 2 | 16 | (15) | 18 | (60) | 2 |
Total other comprehensive income/(loss), net of tax | (36) | 3 | 301 | (33) | 357 | 134 |
Total comprehensive income for the period | 4,001 | 3,805 | 4,411 | 7,806 | 8,078 | 15,544 |
Profit attributable to: | ||||||
Owners of the company | 4,019 | 3,798 | 4,110 | 7,817 | 7,721 | 15,404 |
Non-controlling interest | 18 | 4 | – | 22 | – | 6 |
4,037 | 3,802 | 4,110 | 7,839 | 7,721 | 15,410 | |
Total comprehensive income attributable to: | ||||||
Owners of the company | 3,984 | 3,798 | 4,411 | 7,782 | 8,078 | 15,538 |
Non-controlling interest | 17 | 7 | – | 24 | – | 6 |
4,001 | 3,805 | 4,411 | 7,806 | 8,078 | 15,544 | |
Paid up share capital (par value ![]() |
2,121 | 2,137 | 2,176 | 2,121 | 2,176 | 2,170 |
Other equity *# | 62,778 | 62,778 | 63,835 | 62,778 | 63,835 | 62,778 |
Earnings per equity share (par value ![]() |
||||||
Basic (![]() |
9.46 | 8.83 | 9.45 | 18.28 | 17.76 | 35.44 |
Diluted (![]() |
9.44 | 8.82 | 9.44 | 18.25 | 17.74 | 35.38 |
* | Represents balance as per the audited Balance Sheet of the previous year as required by SEBI (Listing and Other Disclosure Requirements) Regulations, 2015 |
** | EPS is not annualized for the quarter and half year ended September 30, 2019, quarter ended June 30, 2019 and quarter and half year ended September 30, 2018. |
# | Excludes non-controlling interest |
1. Notes pertaining to the previous quarters / periods
a) | The subsidiaries Kallidus and Skava (together referred to as "Skava”)
and Panaya, are collectively referred to as the “Disposal Group”. In the half-year ended September 30, 2018, the Company
had recorded a reduction in the fair value by ![]() ![]() |
b) | During the year 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 ![]() |
2. Notes pertaining to the current quarter
a) | The audited interim consolidated financial statements for the quarter and half-year ended ended September 30, 2019 have been taken on record by the Board of Directors at its meeting held on October 11, 2019. The statutory auditors, Deloitte Haskins & Sells LLP have expressed an unmodified audit opinion. The information presented above is extracted from the audited interim consolidated financial statements. These interim 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) | Update on Buyback of Equity shares | |
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. 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 buyback of equity shares
through the stock exchange commenced on March 20, 2019 and was completed on August 26, 2019 and the Company bought back and extinguished
a total of 11,05,19,266 equity shares at an average buyback price of
Upon completion of the buy back of equity shares
as detailed above, payment of special dividend (including dividend distribution tax) of |
c) | On October 11, 2019, the Board of Directors of Infosys authorized the Company to execute a Business Transfer Agreement and related documents with its wholly owned subsidiaries , Kallidus Inc and Skava Systems Private Limited (together referred to as Skava), to transfer the business of Skava to Infosys Limited, subject to securing the requisite regulatory approvals for a consideration based on an independent valuation. The transfer between entities under common control would be accounted for at carrying value and will not have any impact on the consolidated financial statements. |
3. | Information on dividends for the quarter and half year ended September 30, 2019 | |
The Board of Directors declared an interim dividend
of ![]() ![]() |
(in )
Particulars | Quarter ended September 30, |
Quarter ended June 30, |
Quarter ended September 30, |
Half-year ended September 30, |
Year ended March 31, | |
2019 | 2019 | 2018 | 2019 | 2018 | 2019 | |
Dividend per share (par value ![]() |
||||||
Interim dividend | 8.00 | – | 7.00 | 8.00 | 7.00 | 7.00 |
Final dividend | – | – | – | – | – | 10.50 |
Special dividend | – | – | – | – | – | 4.00 |
4. Audited Consolidated Balance Sheet
(in crore)
Particulars | As at | |
September 30, 2019 | March 31, 2019 | |
ASSETS | ||
Non-current assets | ||
Property, plant and equipment | 11,825 | 11,479 |
Right of use assets | 3,917 | – |
Capital work-in-progress | 1,059 | 1,388 |
Goodwill | 4,080 | 3,540 |
Other Intangible assets | 1,356 | 691 |
Financial assets: | ||
Investments | 3,943 | 4,634 |
Loans | 16 | 19 |
Other financial assets | 679 | 312 |
Deferred tax assets (net) | 1,363 | 1,372 |
Income tax assets (net) | 6,407 | 6,320 |
Other non-current assets | 1,717 | 2,105 |
Total non-current assets | 36,362 | 31,860 |
Current assets | ||
Financial assets | ||
Investments | 3,518 | 6,627 |
Trade receivables | 16,055 | 14,827 |
Cash and cash equivalents | 16,473 | 19,568 |
Loans | 240 | 241 |
Other financial assets | 5,817 | 5,505 |
Income tax assets (net) | 34 | 423 |
Other current assets | 6,712 | 5,687 |
Total current assets | 48,849 | 52,878 |
Total Assets | 85,211 | 84,738 |
EQUITY AND LIABILITIES | ||
Equity | ||
Equity share capital | 2,121 | 2,170 |
Other equity | 58,400 | 62,778 |
Total equity attributable to equity holders of the Company | 60,521 | 64,948 |
Non-controlling interests | 360 | 58 |
Total equity | 60,881 | 65,006 |
Liabilities | ||
Non-current liabilities | ||
Financial liabilities | ||
Lease liabilities | 3,562 | – |
Other financial liabilities | 747 | 147 |
Deferred tax liabilities (net) | 707 | 672 |
Other non-current liabilities | 103 | 275 |
Total non-current liabilities | 5,119 | 1,094 |
Current liabilities | ||
Financial liabilities | ||
Trade payables | 2,134 | 1,655 |
Lease liabilities | 515 | – |
Other financial liabilities | 10,037 | 10,452 |
Other Current Liabilities | 4,389 | 4,388 |
Provisions | 608 | 576 |
Income tax liabilities (net) | 1,528 | 1,567 |
Total current liabilities | 19,211 | 18,638 |
Total equity and liabilities | 85,211 | 84,738 |
The disclosure is an extract of the audited Consolidated Balance Sheet as at September 30, 2019 and March 31, 2019 prepared in compliance with the Indian Accounting Standards (Ind-AS).
5. Audited Consolidated Statement of Cash Flows
(in crore)
Particulars | Half-year ended September 30, | |
2019 | 2018 | |
Cash flow from operating activities | ||
Profit for the period | 7,839 | 7,721 |
Adjustments to reconcile net profit to net cash provided by operating activities: | ||
Income tax expense | 2,824 | 2,905 |
Depreciation and amortization | 1,408 | 900 |
Interest and dividend income | (861) | (1,028) |
Finance cost | 82 | – |
Impairment loss recognized / (reversed) under expected credit loss model | 82 | 142 |
Exchange differences on translation of assets and liabilities | 54 | 57 |
Reduction in the fair value of Disposal Group held for sale | – | 270 |
Stock compensation expense | 119 | 97 |
Other adjustments | (102) | (65) |
Changes in assets and liabilities | ||
Trade receivables and unbilled revenue | (1,578) | (2,679) |
Loans, other financial assets and other assets | 410 | (155) |
Trade payables | (1,071) | 488 |
Other financial liabilities, other liabilities and provisions | 930 | 1,722 |
Cash generated from operations | 10,136 | 10,375 |
Income taxes paid | (2,705) | (3,653) |
Net cash generated by operating activities | 7,431 | 6,722 |
Cash flows from investing activities | ||
Expenditure on property, plant and equipment | (1,891) | (1,091) |
Loans to employees | 5 | 9 |
Deposits placed with corporation | (7) | (11) |
Interest and dividend received | 841 | 989 |
Payment towards acquisition of business, net of cash acquired | (511) | (210) |
Payment of contingent consideration pertaining to acquisition of business | – | (6) |
Redemption of escrow pertaining to Buyback | 257 | – |
Other receipts | 23 | – |
Payments to acquire Investments | ||
Preference and equity securities | (41) | (21) |
Tax free bonds and government bonds | (19) | (17) |
Liquid mutual funds and fixed maturity plan securities | (18,295) | (39,650) |
Non convertible debentures | (52) | – |
Government securities | (1,561) | – |
Certificates of deposit | – | (1,268) |
Others | (16) | (8) |
Proceeds on sale of financial assets | ||
Tax free bonds and government bonds | 18 | 1 |
Non-convertible debentures | 1,383 | 302 |
Government securities | 1,170 | – |
Commercial paper | 500 | 300 |
Certificates of deposit | 1,995 | 950 |
Liquid mutual funds and fixed maturity plan securities | 18,946 | 38,935 |
Preference and equity securities | 3 | – |
Others | 10 | – |
Net cash (used in) / from investing activities | 2,758 | (796) |
Cash flows from financing activities: | ||
Payment of lease liabilities | (294) | – |
Payment of dividends (including dividend distribution tax) | (5,422) | (7,949) |
Payment of dividend to non-controlling interest of subsidiary | (33) | – |
Shares issued on exercise of employee stock options | 1 | – |
Buyback of equity shares including transaction cost | (7,478) | – |
Net cash used in financing activities | (13,226) | (7,949) |
Net increase / (decrease) in cash and cash equivalents | (3,037) | (2,023) |
Cash and cash equivalents at the beginning of the period | 19,568 | 19,871 |
Effect of exchange rate changes on cash and cash equivalents | (58) | 64 |
Cash and cash equivalents at the end of the period | 16,473 | 17,912 |
Supplementary information: | ||
Restricted cash balance | 375 | 330 |
The disclosure is an extract of the audited Consolidated Statement of Cash flows for the half-year ended September 30, 2019 and September 30, 2018 prepared in compliance with Indian Accounting Standard (Ind AS) 34 Interim Financial Reporting.
6. Segment reporting (Consolidated - Audited)
(in crore)
Particulars | Quarter ended September 30, |
Quarter ended June 30, |
Quarter ended September 30, |
Half-year ended September 30, |
Year ended March 31, | |
2019 | 2019 | 2018 | 2019 | 2018 | 2019 | |
Revenue by business segment | ||||||
Financial Services (1) | 7,213 | 6,856 | 6,644 | 14,069 | 12,719 | 26,477 |
Retail (2) | 3,448 | 3,435 | 3,469 | 6,883 | 6,637 | 13,556 |
Communication (3) | 2,961 | 3,004 | 2,529 | 5,964 | 4,958 | 10,426 |
Energy, Utilities, Resources and Services | 2,962 | 2,833 | 2,527 | 5,796 | 4,901 | 10,390 |
Manufacturing | 2,291 | 2,099 | 1,989 | 4,390 | 3,826 | 8,152 |
Hi-Tech | 1,713 | 1,679 | 1,537 | 3,392 | 2,959 | 6,177 |
Life Sciences (4) | 1,454 | 1,341 | 1,321 | 2,795 | 2,581 | 5,203 |
All other segments (5) | 587 | 556 | 593 | 1,143 | 1,156 | 2,294 |
Total | 22,629 | 21,803 | 20,609 | 44,432 | 39,737 | 82,675 |
Less: Inter-segment revenue | – | – | – | – | – | – |
Net revenue from operations | 22,629 | 21,803 | 20,609 | 44,432 | 39,737 | 82,675 |
Segment profit before tax, depreciation and non-controlling interests: | ||||||
Financial Services (1) | 1,866 | 1,714 | 1,776 | 3,579 | 3,337 | 6,878 |
Retail (2) | 1,038 | 1,032 | 1,034 | 2,070 | 1,979 | 4,034 |
Communication (3) | 623 | 622 | 659 | 1,245 | 1,331 | 2,517 |
Energy, Utilities , Resources and Services | 818 | 724 | 596 | 1,542 | 1,220 | 2,542 |
Manufacturing | 509 | 413 | 465 | 922 | 876 | 1,853 |
Hi-Tech | 392 | 370 | 418 | 762 | 806 | 1,548 |
Life Sciences (4) | 392 | 278 | 376 | 670 | 729 | 1,419 |
All other segments (5) | 7 | 5 | 33 | 12 | 53 | 116 |
Total | 5,645 | 5,158 | 5,357 | 10,802 | 10,331 | 20,907 |
Less: Other unallocable expenditure | 733 | 687 | 463 | 1,419 | 900 | 2,027 |
Add: Unallocable other income | 626 | 736 | 739 | 1,362 | 1,465 | 2,882 |
Less: Finance cost | 42 | 40 | – | 82 | – | – |
Less: Reduction in the fair value of Disposal Group Held for Sale | – | – | – | – | 270 | 270 |
Less: Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held For Sale" | – | – | – | – | – | 451 |
Profit before tax and non-controlling interests | 5,496 | 5,167 | 5,633 | 10,663 | 10,626 | 21,041 |
(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
Based on the "management approach" as defined in Ind-AS 108 - Operating Segments, the Chief Operating Decision Maker 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 these business segments. The accounting principles used in the preparation of the financial statements are consistently applied to record revenue and expenditure in individual segments.
Segmental capital employed
Assets and liabilities used in the 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 segregate of the available data is onerous.
7. Audited financial results of Infosys Limited (Standalone Information)
(in crore)
Particulars | Quarter ended September 30, |
Quarter ended June 30, |
Quarter ended September 30, |
Half-year ended September 30, |
Year ended March 31, | |
2019 | 2019 | 2018 | 2019 | 2018 | 2019 | |
Revenue from operations | 19,666 | 19,131 | 18,297 | 38,797 | 35,353 | 73,107 |
Profit before tax (Refer note below) | 5,123 | 4,821 | 5,251 | 9,943 | 10,032 | 19,927 |
Profit for the period (Refer note below) | 3,829 | 3,569 | 3,879 | 7,398 | 7,381 | 14,702 |
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 standalone condensed financial statements as stated.
Note:
1) | During the year 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 ![]() |
2) | In the half-year ended September 30, 2018, the Company had recorded a reduction
in the fair value of its investments in Panaya, by ![]() ![]() |
By order of the Board for Infosys Limited | |
Bengaluru, India October 11, 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 half year ended September 30, 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 September 30, |
Quarter ended June 30, |
Quarter ended September 30, |
Half-year ended September 30, |
Year ended March 31, | |
2019 | 2019 | 2018 | 2019 | 2018 | 2019 | |
Audited | Audited | Audited | Audited | Audited | Audited | |
Revenues | 3,210 | 3,131 | 2,921 | 6,340 | 5,753 | 11,799 |
Cost of sales | 2,140 | 2,122 | 1,884 | 4,261 | 3,703 | 7,687 |
Gross profit | 1,070 | 1,009 | 1,037 | 2,079 | 2,050 | 4,112 |
Operating expenses | 374 | 367 | 345 | 741 | 687 | 1,416 |
Operating profit | 696 | 642 | 692 | 1,338 | 1,363 | 2,696 |
Other income, net | 89 | 106 | 105 | 195 | 212 | 411 |
Finance cost | (6) | (6) | – | (12) | – | – |
Reduction in the fair value of Disposal Group held for sale (Refer Note 1) | – | – | – | – | (39) | (39) |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" (Refer Note 1) | – | – | – | – | – | (65) |
Profit before income taxes | 779 | 742 | 797 | 1,521 | 1,536 | 3,003 |
Income tax expense (Refer Note 2) | 207 | 196 | 216 | 403 | 420 | 803 |
Net profit | 572 | 546 | 581 | 1,118 | 1,116 | 2,200 |
Earnings per equity share * | ||||||
Basic | 0.13 | 0.13 | 0.13 | 0.26 | 0.26 | 0.51 |
Diluted | 0.13 | 0.13 | 0.13 | 0.26 | 0.26 | 0.51 |
Total assets | 12,021 | 12,417 | 11,288 | 12,021 | 11,288 | 12,252 |
Cash and cash equivalents and current investments | 2,820 | 3,044 | 3,508 | 2,820 | 3,508 | 3,787 |
* | EPS is not annualized for the quarter and half year ended September 30, 2019, quarter ended June 30, 2019 and quarter and half year ended September 30, 2018. |
Note-
1) | The subsidiaries Kallidus and Skava (together referred to as "Skava”) and Panaya, are collectively referred to as the “Disposal Group”. In the half-year ended September 30, 2018, the Company had recorded a reduction in the fair value by $39 million in respect of its subsidiary Panaya. During the year ended March 31, 2019, 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, on such reclassification, the Company recorded an adjustment in respect of excess of carrying amount over recoverable amount of $65 million in respect of Skava in the consolidated statement of Profit and Loss. |
2) | During the year 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 period. |
Certain statements mentioned in this release concerning our future growth prospects are forward-looking statements regarding our future business expectations intended to qualify for the 'safe harbor' under the Private Securities Litigation Reform Act of 1995, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, fluctuations in foreign exchange rates, our ability to manage growth, intense competition in IT services including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, industry segment concentration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks or system failures, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which Infosys has made strategic investments, withdrawal or expiration of governmental fiscal incentives, political instability and regional conflicts, legal restrictions on raising capital or acquiring companies outside India, and unauthorized use of our intellectual property and general economic conditions affecting our industry. Additional risks that could affect our future operating results are more fully described in our United States Securities and Exchange Commission filings including our Annual Report on Form 20-F for the fiscal year ended March 31, 2019. 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 Regd. office: Electronics City, Hosur Road, |
CIN : L85110KA1981PLC013115 Website: www.infosys.com email: investors@infosys.com T: 91 80 2852 0261, F: 91 80 2852 0362 |
Extract of Consolidated Audited Financial Results of Infosys Limited and its subsidiaries for the quarter and half-year ended September 30, 2019 prepared in compliance with the Indian Accounting Standards (Ind-AS)
( in crore except per equity share
data)
Particulars | Quarter ended September 30, |
Half-year ended September 30, | Quarter ended September 30, |
2019 | 2019 | 2018 | |
Revenue from operations | 22,629 | 44,432 | 20,609 |
Profit before tax | 5,496 | 10,663 | 5,633 |
Profit for the period | 4,037 | 7,839 | 4,110 |
Total comprehensive income for the period (comprising profit for the period after tax and other comprehensive income after tax) | 4,001 | 7,806 | 4,411 |
Profit attributable to: | |||
Owners of the company | 4,019 | 7,817 | 4,110 |
Non-controlling interest | 18 | 22 | – |
4,037 | 7,839 | 4,110 | |
Total comprehensive income attributable to: | |||
Owners of the company | 3,984 | 7,782 | 4,411 |
Non-controlling interest | 17 | 24 | – |
4,001 | 7,806 | 4,411 | |
Paid-up share capital (par value ![]() |
2,121 | 2,121 | 2,176 |
Other equity *# | 62,778 | 62,778 | 63,835 |
Earnings per share (par value ![]() |
|||
Basic (![]() |
9.46 | 18.28 | 9.45 |
Diluted (![]() |
9.44 | 18.25 | 9.44 |
* | Represents balance as per the audited Balance Sheet of the previous year as required by SEBI (Listing and Other Disclosure Requirements) Regulations, 2015 |
** | EPS is not annualized for the quarter and half-year ended September 30, 2019 and quarter ended September 30, 2018. |
# | Excludes non-controlling interest |
1. Notes:
a) | The audited interim consolidated financial statements for the quarter and half-year ended September 30, 2019 have been taken on record by the Board of Directors at its meeting held on October 11, 2019. The statutory auditors, Deloitte Haskins & Sells LLP have expressed an unmodified audit opinion. The information presented above is extracted from the audited interim consolidated financial statements. These interim 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) | Update on Buyback of Equity shares | |
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. 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 buyback of equity shares
through the stock exchange commenced on March 20, 2019 and was completed on August 26, 2019 and the Company bought back and extinguished
a total of 11,05,19,266 equity shares at an average buyback price of
Upon completion of the buy back of equity shares
as detailed above, payment of special dividend (including dividend distribution tax) of
c) On October 11, 2019, the Board of Directors of Infosys authorized the Company to execute a Business Transfer Agreement and related documents with its wholly owned subsidiaries , Kallidus Inc and Skava Systems Private Limited (together referred to as Skava), to transfer the business of Skava to Infosys Limited, subject to securing the requisite regulatory approvals for a consideration based on an independent valuation. The transfer between entities under common control would be accounted for at carrying value and will not have any impact on the consolidated financial statements. |
2. Information on dividends for the quarter and half year ended September 30, 2019
The Board of Directors declared an interim dividend
of 8/- per equity share. The record date for the payment is October 24, 2019.The interim dividend will be paid on October
30, 2019.The interim dividend declared in the previous year was
7/- per equity share.
(in )
Particulars | Quarter ended September 30, |
Half-year ended September 30, | Quarter ended September 30, |
2019 | 2019 | 2018 | |
Dividend per share (par value ![]() |
|||
Interim dividend | 8.00 | 8.00 | 7.00 |
Final dividend | – | – | – |
Special dividend | – | – | – |
3. Audited financial results of Infosys Limited (Standalone information)
(in crore)
Particulars | Quarter ended September 30, |
Half-year ended September 30, | Quarter ended September 30, |
2019 | 2019 | 2018 | |
Revenue from operations | 19,666 | 38,797 | 18,297 |
Profit before tax | 5,123 | 9,943 | 5,251 |
Profit for the period | 3,829 | 7,398 | 3,879 |
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 Audited 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 are forward-looking statements regarding our future business expectations intended to qualify for the 'safe harbor' under the Private Securities Litigation Reform Act of 1995, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, fluctuations in foreign exchange rates, our ability to manage growth, intense competition in IT services including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, industry segment concentration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks or system failures, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which Infosys has made strategic investments, withdrawal or expiration of governmental fiscal incentives, political instability and regional conflicts, legal restrictions on raising capital or acquiring companies outside India, and unauthorized use of our intellectual property and general economic conditions affecting our industry. Additional risks that could affect our future operating results are more fully described in our United States Securities and Exchange Commission filings including our Annual Report on Form 20-F for the fiscal year ended March 31, 2019. 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 October 11, 2019 |
Salil Parekh Chief Executive Officer and |
![]() |
Infosys Limited Regd. office: Electronics City, Hosur Road, |
CIN : L85110KA1981PLC013115 Website: www.infosys.com email: investors@infosys.com T: 91 80 2852 0261, F: 91 80 2852 0362 |
Statement of Audited results of Infosys Limited for the quarter and half-year ended September 30, 2019
prepared in compliance with the Indian Accounting Standards (Ind-AS)
(in crore, except per equity share
data)
Particulars | Quarter ended September 30, |
Quarter ended June 30, |
Quarter ended September 30, |
Half-year Ended September 30, |
Year ended March 31, | |
2019 | 2019 | 2018 | 2019 | 2018 | 2019 | |
Audited | Audited | Audited | Audited | Audited | Audited | |
Revenue from operations | 19,666 | 19,131 | 18,297 | 38,797 | 35,353 | 73,107 |
Other income, net | 604 | 713 | 742 | 1,316 | 1,458 | 2,852 |
Total income | 20,270 | 19,844 | 19,039 | 40,113 | 36,811 | 75,959 |
Expenses | ||||||
Employee benefit expenses | 10,604 | 10,380 | 9,489 | 20,985 | 18,315 | 38,296 |
Cost of technical sub-contractors | 2,046 | 2,044 | 1,902 | 4,090 | 3,569 | 7,646 |
Travel expenses | 482 | 700 | 470 | 1,182 | 936 | 1,906 |
Cost of software packages and others | 410 | 363 | 448 | 773 | 863 | 1,646 |
Communication expenses | 94 | 93 | 88 | 187 | 170 | 339 |
Consultancy and professional charges | 253 | 234 | 241 | 486 | 493 | 1,096 |
Depreciation and amortisation expense | 542 | 510 | 390 | 1,052 | 764 | 1,599 |
Finance cost | 28 | 27 | – | 55 | – | – |
Other expenses | 688 | 672 | 760 | 1,360 | 1,404 | 2,770 |
Reduction in the fair value of assets held for sale (Refer Note 1(a)) | – | – | – | – | 265 | 265 |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" (Refer Note 1(a)) | – | – | – | – | – | 469 |
Total expenses | 15,147 | 15,023 | 13,788 | 30,170 | 26,779 | 56,032 |
Profit before tax | 5,123 | 4,821 | 5,251 | 9,943 | 10,032 | 19,927 |
Tax expense: (Refer Note 1(b)) | ||||||
Current tax | 1,316 | 1,316 | 1,467 | 2,632 | 2,796 | 5,189 |
Deferred tax | (22) | (64) | (95) | (87) | (145) | 36 |
Profit for the period | 3,829 | 3,569 | 3,879 | 7,398 | 7,381 | 14,702 |
Other comprehensive income | ||||||
Items that will not be reclassified subsequently to profit or loss | ||||||
Remeasurement of the net defined benefit liability / asset, net | (18) | (17) | 3 | (35) | 2 | (21) |
Equity instruments through other comprehensive income, net | 2 | – | 7 | 2 | 11 | 78 |
Items that will be reclassified subsequently to profit or loss | ||||||
Fair value changes on derivatives designated as cash flow hedges, net | 17 | (24) | (29) | (7) | (20) | 21 |
Fair value changes on investments, net | 1 | 15 | (13) | 16 | (53) | 1 |
Total other comprehensive income/ (loss), net of tax | 2 | (26) | (32) | (24) | (60) | 79 |
Total comprehensive income for the period | 3,831 | 3,543 | 3,847 | 7,374 | 7,321 | 14,781 |
Paid–up share capital (par value ![]() |
2,129 | 2,145 | 2,184 | 2,129 | 2,184 | 2,178 |
Other Equity* | 60,533 | 60,533 | 62,410 | 60,533 | 62,410 | 60,533 |
Earnings per equity share ( par value ![]() |
||||||
Basic (![]() |
8.97 | 8.26 | 8.88 | 17.22 | 16.90 | 33.66 |
Diluted (![]() |
8.96 | 8.25 | 8.88 | 17.21 | 16.89 | 33.64 |
* | Represents balance as per the audited Balance Sheet of the previous year as required by SEBI (Listing and Other Disclosure Requirements) Regulations, 2015 |
** | EPS is not annualized for the quarter and half-year ended September 30, 2019, quarter ended June 30, 2019 and quarter and half-year ended September 30, 2018. |
1. Notes pertaining to the previous quarters / periods
a) | In the half-year ended September 30, 2018, the Company had recorded a reduction
in the fair value of its investments in Panaya by ![]() ![]() |
b) | During the year 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 ![]() |
2. Notes pertaining to the current quarter
a) | The audited interim condensed standalone financial statements for the quarter and half year ended September 30, 2019 have been taken on record by the Board of Directors at its meeting held on October 11, 2019. The statutory auditors, Deloitte Haskins & Sells LLP have expressed an unmodified audit opinion. The information presented above is extracted from the audited interim condensed standalone financial statements. These interim condensed 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) | Update on Buyback of Equity shares | |
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. 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 buyback of equity shares
through the stock exchange commenced on March 20, 2019 and was completed on August 26, 2019 and the Company bought back and extinguished
a total of 11,05,19,266 equity shares at an average buyback price of
Upon the completion of the buy back of equity
shares detailed above, payment of special dividend (including dividend distribution tax) of | ||
c) | On October 11, 2019, the Board of Directors of Infosys authorized the Company to execute a Business Transfer Agreement and related documents with its wholly owned subsidiaries , Kallidus Inc and Skava Systems Private Limited (together referred to as Skava), to transfer the business of Skava to Infosys Limited, subject to securing the requisite regulatory approvals for a consideration based on an independent valuation. |
3. Information on dividends for the quarter and half year ended September 30, 2019
The Board of Directors declared an
interim dividend of 8/- per equity share. The record date for the payment is October 24,
2019. The interim dividend will be paid on October 30, 2019. The interim dividend declared in the previous year was
7/-
per equity share.
(in )
Particulars | Quarter Ended September 30, |
Quarter Ended June 30, |
Quarter Ended September 30, |
Half-year Ended September 30, |
Year Ended March 31, | |
2019 | 2019 | 2018 | 2019 | 2018 | 2019 | |
Dividend per share (par value ![]() |
||||||
Interim dividend | 8.00 | – | 7.00 | 8.00 | 7.00 | 7.00 |
Final dividend | – | – | – | – | – | 10.50 |
Special dividend | – | – | – | – | – | 4.00 |
4. Audited Standalone Balance Sheet
(in crore)
Particulars | As at | |
September 30, 2019 | March 31, 2019 | |
ASSETS | ||
Non-current assets | ||
Property, plant and equipment | 10,564 | 10,394 |
Right of use assets | 2,628 | – |
Capital work-in-progress | 1,048 | 1,212 |
Goodwill | 29 | 29 |
Other Intangible assets | 61 | 74 |
Financial assets | ||
Investments | 11,353 | 12,062 |
Loans | 18 | 16 |
Other financial assets | 592 | 196 |
Deferred tax assets (net) | 1,085 | 1,114 |
Income tax assets (net) | 5,942 | 5,870 |
Other non-current assets | 1,590 | 1,740 |
Total non-current assets | 34,910 | 32,707 |
Current assets | ||
Financial assets | ||
Investments | 3,044 | 6,077 |
Trade receivables | 13,788 | 13,370 |
Cash and cash equivalents | 11,233 | 15,551 |
Loans | 2,012 | 1,048 |
Other financial assets | 4,581 | 4,834 |
Income tax assets (net) | – | 423 |
Other current assets | 5,733 | 4,920 |
Total current assets | 40,391 | 46,223 |
Total assets | 75,301 | 78,930 |
EQUITY AND LIABILITIES | ||
Equity | ||
Equity share capital | 2,129 | 2,178 |
Other equity | 56,346 | 60,533 |
Total equity | 58,475 | 62,711 |
LIABILITIES | ||
Non-current liabilities | ||
Financial liabilities | ||
Lease liabilities | 2,400 | – |
Other financial liabilities | 78 | 79 |
Deferred tax liabilities (net) | 426 | 541 |
Other non-current liabilities | 25 | 169 |
Total non - current liabilities | 2,929 | 789 |
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 | 1,241 | 1,604 |
Lease liabilities | 330 | – |
Other financial liabilities | 7,265 | 8,528 |
Other current liabilities | 3,154 | 3,335 |
Provisions | 543 | 505 |
Income tax liabilities (net) | 1,364 | 1,458 |
Total current liabilities | 13,897 | 15,430 |
Total equity and liabilities | 75,301 | 78,930 |
The disclosure is an extract of the audited Balance Sheet as at September 30, 2019 and March 31, 2019 prepared in compliance with the Indian Accounting Standards (Ind-AS).
5. Audited Standalone Statement of Cash flows
(In crore)
Particulars | Half-year ended September 30, | |
2019 | 2018 | |
Cash flow from operating activities: | ||
Profit for the period | 7,398 | 7,381 |
Adjustments to reconcile net profit to net cash provided by operating activities: | ||
Depreciation and amortization | 1,052 | 764 |
Income tax expense | 2,545 | 2,651 |
Impairment loss recognized / (reversed) under expected credit loss model | 53 | 136 |
Finance cost | 55 | – |
Interest and dividend income | (837) | (1,020) |
Stock compensation expense | 107 | – |
Other adjustments | (66) | 44 |
Reduction in the fair value of assets held for sale | – | 265 |
Exchange differences on translation of assets and liabilities | 28 | 35 |
Changes in assets and liabilities | ||
Trade receivables and unbilled revenue | (1,763) | (2,361) |
Other financial assets and other assets | 478 | 7 |
Trade payables | (363) | 428 |
Other financial liabilities, other liabilities and provisions | 190 | 1,466 |
Cash generated from operations | 8,877 | 9,796 |
Income taxes paid | (2,353) | (3,390) |
Net cash generated by operating activities | 6,524 | 6,406 |
Cash flow from investing activities: | ||
Expenditure on property, plant and equipment | (1,770) | (986) |
Deposits placed with corporations | (54) | (8) |
Loans to employees | 1 | (2) |
Loan given to subsidiary | (1,201) | – |
Loan repaid by subsidiary | 276 | – |
Proceeds from redemption of debentures | 187 | 100 |
Investment in subsidiaries | – | (67) |
Proceeds from return of investment | 6 | 33 |
Payment towards acquisition of business | – | (261) |
Payment of contingent consideration pertaining to acquisition | – | (6) |
Redemption of escrow pertaining to buyback | 257 | – |
Other receipts | 23 | – |
Payments to acquire investments | ||
Preference, equity securities and others | (41) | (10) |
Liquid mutual fund units and fixed maturity plan securities | (15,980) | (37,120) |
Tax free bonds and Government bonds | (12) | (11) |
Certificates of deposit | – | (926) |
Government Securities | (1,561) | – |
Others | – | (3) |
Proceeds on sale of investments | ||
Liquid mutual fund units and fixed maturity plan securities | 16,655 | 36,387 |
Tax free bonds and Government bonds | 13 | 1 |
Non-convertible debentures | 1,383 | 302 |
Certificates of deposit | 1,625 | 950 |
Commercial paper | 500 | 300 |
Government Securities | 1,170 | – |
Interest and dividend received | 836 | 1,005 |
Net cash used in investing activities | 2,313 | (322) |
Cash flow from financing activities: | ||
Payment of lease liabilities | (194) | – |
Buyback of equity shares including transaction cost | (7,478) | – |
Payment of dividends (including dividend distribution tax) | (5,443) | (7,982) |
Net cash used in financing activities | (13,115) | (7,982) |
Effect of exchange differences on translation of foreign currency cash and cash equivalents | (40) | (30) |
Net increase / (decrease) in cash and cash equivalents | (4,278) | (1,898) |
Cash and cash equivalents at the beginning of the period | 15,551 | 16,770 |
Cash and cash equivalents at the end of the period | 11,233 | 14,842 |
Supplementary information: | ||
Restricted cash balance | 134 | 143 |
The disclosure is an extract of the audited Statement of Cash flows for the half-year ended September 30, 2019 and September 30, 2018 prepared in compliance with Indian Accounting Standard (Ind AS) 34 Interim Financial Reporting.
6. 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 half year ended September 30, 2019.
By order of the Board for Infosys Limited | |
Bengaluru, India October 11, 2019 |
Salil Parekh Chief Executive Officer and |
Certain statements mentioned in this release concerning our future growth prospects are forward-looking statements regarding our future business expectations intended to qualify for the 'safe harbor' under the Private Securities Litigation Reform Act of 1995, which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, fluctuations in foreign exchange rates, our ability to manage growth, intense competition in IT services including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, industry segment concentration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks or system failures, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which Infosys has made strategic investments, withdrawal or expiration of governmental fiscal incentives, political instability and regional conflicts, legal restrictions on raising capital or acquiring companies outside India, and unauthorized use of our intellectual property and general economic conditions affecting our industry. Additional risks that could affect our future operating results are more fully described in our United States Securities and Exchange Commission filings including our Annual Report on Form 20-F for the fiscal year ended March 31, 2019. 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 Interim Condensed Consolidated Financial Statements
Opinion
We have audited the accompanying Interim 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 September 30, 2019, the Condensed Consolidated Statement of Comprehensive Income for the three months and six months period ended on that date, the Condensed Consolidated Statement of Changes in Equity and the Condensed Consolidated Statement of Cash Flows for the six months period ended on that date, and a summary of the significant accounting policies and other explanatory information (hereinafter referred to as “the interim condensed consolidated financial statements”).
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid interim 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 September 30, 2019, the consolidated profit and consolidated total comprehensive income for the three months and six months period ended on that date, consolidated changes in equity and its consolidated cash flows for the six months period ended on that date.
Basis for Opinion
We conducted our audit of the interim 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 Interim 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.
Management’s Responsibilities for the Interim Condensed Consolidated Financial Statements
The Company’s Board of Directors is responsible for the preparation and presentation of these interim 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 respective financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error which have been used for the purpose of preparation of the interim condensed consolidated financial statements by the Directors of the Company, as aforesaid.
In preparing the interim condensed consolidated financial statements, the respective Board of Directors of the companies included in the Group are responsible for assessing the ability of the respective entities to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the respective Board of Directors either intends to liquidate their respective entities 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 Condensed Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the interim 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 interim 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 interim 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 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 interim 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 interim condensed consolidated financial statements, including the disclosures, and whether the interim 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 interim 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 interim condensed consolidated financial statements of which we are independent auditors. |
Materiality is the magnitude of misstatements in the interim condensed consolidated financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the interim condensed consolidated 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 interim condensed consolidated financial statements.
We communicate with those charged with governance of the Company and such other entities included in the interim 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, 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.
For DELOITTE HASKINS & SELLS LLP
Chartered Accountants
(Firm’s Registration No. 117366W/W-100018)
P. R. RAMESH
Partner
(Membership No.70928) | |
Bengaluru,October 11, 2019 | UDIN : 19070928AAAAAO3139 |
INFOSYS LIMITED AND SUBSIDIARIES
Condensed Consolidated Financial Statements under International Financial Reporting Standards (IFRS) in US Dollars for three months and six months ended September 30, 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 and judgements |
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 Leases |
2.9 Goodwill |
2.10 Business combination |
2.11 Employees' Stock Option Plans (ESOP |
2.12 Income taxes |
2.13 Reconciliation of basic and diluted shares used in computing earnings per share |
2.14 Related party transactions |
2.15 Segment Reporting |
2.16 Revenue from Operations |
2.17 Unbilled revenue |
2.18 Break-up of expenses and other income, net |
2.19 Equity |
Infosys Limited and Subsidiaries
(Dollars in millions except equity share data)
Condensed Consolidated Balance Sheet as at | Note | September 30, 2019 | March 31, 2019 |
ASSETS | |||
Current assets | |||
Cash and cash equivalents | 2.1 | 2,324 | 2,829 |
Current investments | 2.2 | 496 | 958 |
Trade receivables | 2,265 | 2,144 | |
Unbilled revenue | 2.17 | 1,026 | 777 |
Prepayments and other current assets | 2.4 | 761 | 827 |
Income tax assets | 2.12 | 5 | 61 |
Derivative financial instruments | 2.3 | 15 | 48 |
Total current assets | 6,892 | 7,644 | |
Non-current assets | |||
Property, plant and equipment | 2.7 | 1,878 | 1,931 |
Right-of-use assets | 2.8 | 552 | – |
Goodwill | 2.9 | 576 | 512 |
Intangible assets | 191 | 100 | |
Non-current investments | 2.2 | 556 | 670 |
Deferred income tax assets | 2.12 | 192 | 199 |
Income tax assets | 2.12 | 904 | 914 |
Other non-current assets | 2.4 | 280 | 282 |
Total Non-current assets | 5,129 | 4,608 | |
Total assets | 12,021 | 12,252 | |
LIABILITIES AND EQUITY | |||
Current liabilities | |||
Trade payables | 301 | 239 | |
Lease liabilities | 2.8 | 73 | – |
Derivative financial instruments | 2.3 | 5 | 2 |
Current income tax liabilities | 2.12 | 216 | 227 |
Client deposits | 2 | 4 | |
Unearned revenue | 382 | 406 | |
Employee benefit obligations | 258 | 234 | |
Provisions | 2.6 | 86 | 83 |
Other current liabilities | 2.5 | 1,388 | 1,498 |
Total current liabilities | 2,711 | 2,693 | |
Non-current liabilities | |||
Lease liabilities | 2.8 | 503 | – |
Deferred income tax liabilities | 2.12 | 99 | 98 |
Employee benefit obligations | 6 | 6 | |
Other non-current liabilities | 2.5 | 113 | 55 |
Total liabilities | 3,432 | 2,852 | |
Equity | |||
Share capital -![]() |
2.19 | 332 | 339 |
Share premium | 295 | 277 | |
Retained earnings | 10,510 | 11,248 | |
Cash flow hedge reserve | 2 | 3 | |
Other reserves | 460 | 384 | |
Capital redemption reserve | 17 | 10 | |
Other components of equity | (3,079) | (2,870) | |
Total equity attributable to equity holders of the company | 8,537 | 9,391 | |
Non-controlling interests | 52 | 9 | |
Total equity | 8,589 | 9,400 | |
Total liabilities and equity | 12,021 | 12,252 |
The accompanying notes form an integral part of the interim 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 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 October 11, 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 | Three months ended September 30, | Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | ||
Revenues | 2.16 | 3,210 | 2,921 | 6,340 | 5,753 |
Cost of sales | 2.18 | 2,140 | 1,884 | 4,261 | 3,703 |
Gross profit | 1,070 | 1,037 | 2,079 | 2,050 | |
Operating expenses: | |||||
Selling and marketing expenses | 2.18 | 165 | 154 | 333 | 303 |
Administrative expenses | 2.18 | 209 | 191 | 408 | 384 |
Total operating expenses | 374 | 345 | 741 | 687 | |
Operating profit | 696 | 692 | 1,338 | 1,363 | |
Other income, net | 2.18 | 89 | 105 | 195 | 212 |
Finance cost | 2.8 | (6) | – | (12) | – |
Reduction in the fair value of Disposal Group held for sale | – | – | – | (39) | |
Profit before income taxes | 779 | 797 | 1,521 | 1,536 | |
Income tax expense | 2.12 | 207 | 216 | 403 | 420 |
Net profit |
|
572 | 581 | 1,118 | 1,116 |
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) | 1 | (6) | 1 | |
Equity instrument through other comprehensive income, net | 1 | 2 | 1 | 2 | |
(2) | 3 | (5) | 3 | ||
Items that will be reclassified subsequently to profit or loss: | |||||
Fair valuation of investments, net | – | (2) | 2 | (9) | |
Fair value changes on derivatives designated as cash flow hedge, net | 2 | (4) | (1) | (3) | |
Foreign currency translation | (224) | (461) | (207) | (929) | |
(222) | (467) | (206) | (941) | ||
Total other comprehensive income/(loss), net of tax | (224) | (464) | (211) | (938) | |
Total comprehensive income | 348 | 117 | 907 | 178 | |
Profit attributable to: | |||||
Owners of the company | 569 | 581 | 1,115 | 1,116 | |
Non-controlling interests | 3 | – | 3 | – | |
572 | 581 | 1,118 | 1,116 | ||
Total comprehensive income attributable to: | |||||
Owners of the company | 346 | 117 | 905 | 178 | |
Non-controlling interests | 2 | – | 2 | – | |
348 | 117 | 907 | 178 | ||
Earnings per equity share | |||||
Basic ($) | 0.13 | 0.13 | 0.26 | 0.26 | |
Diluted ($) | 0.13 | 0.13 | 0.26 | 0.26 | |
Weighted average equity shares used in computing earnings per equity share | 2.13 | ||||
Basic | 4,249,343,678 | 4,347,055,177 | 4,275,615,916 | 4,346,857,296 | |
Diluted | 4,255,822,953 | 4,352,208,472 | 4,282,322,537 | 4,351,915,210 |
The accompanying notes form an integral part of the interim 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 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 October 11, 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)
Particulars | 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, 2018 | 2,173,312,301 | 190 | 247 | 11,587 | 244 | 9 | – | (2,317) | 9,960 | – | 9,960 |
Changes in equity for the six months ended September 30, 2018 | |||||||||||
Net profit | – | – | – | 1,116 | – | – | – | – | 1,116 | – | 1,116 |
Fair value changes on investments, net* | – | – | – | – | – | – | – | (9) | (9) | – | (9) |
Fair value changes on derivatives designated as cash flow hedge* | – | – | – | – | – | – | (3) | – | (3) | – | (3) |
Remeasurement of the net defined benefit liability/asset* | – | – | – | – | – | – | – | 1 | 1 | – | 1 |
Equity instruments through other comprehensive income* | – | – | – | – | – | – | – | 2 | 2 | – | 2 |
Foreign currency translation | – | – | – | – | – | – | – | (929) | (929) | – | (929) |
Total comprehensive income for the period | – | – | – | 1,116 | – | – | (3) | (935) | 178 | – | 178 |
Shares issued on exercise of employee stock options - before bonus issue (Refer to note 2.11) | 392,528 | – | – | – | – | – | – | – | – | – | – |
Increase in share capital on account of Bonus issues (Refer to note 2.19) | 2,173,704,829 | 150 | – | (150) | – | – | – | – | – | – | – |
Shares issued on exercise of employee stock options - after bonus issue (Refer to note 2.11) | 42,940 | – | – | – | – | – | – | – | – | – | – |
Transfer to other reserves | – | – | – | (157) | 157 | – | – | – | – | – | – |
Transfer from other reserves on utilization | – | – | – | 53 | (53) | – | – | – | – | – | – |
Employee stock compensation expense (Refer to note 2.11) | – | – | 14 | – | – | – | – | – | 14 | – | 14 |
Dividends (including dividend distribution tax) | – | – | – | (1,164) | – | – | – | – | (1,164) | – | (1,164) |
Balance as at September 30, 2018 | 4,347,452,598 | 340 | 261 | 11,285 | 348 | 9 | (3) | (3,252) | 8,988 | – | 8,988 |
Balance as at April 1, 2019 | 4,335,954,462 | 339 | 277 | 11,248 | 384 | 10 | 3 | (2,870) | 9,391 | 9 | 9,400 |
Impact on account of adoption of IFRS 16 ( refer to note 2.8)* | – | – | – | (6) | – | – | – | – | (6) | – | (6) |
4,335,954,462 | 339 | 277 | 11,242 | 384 | 10 | 3 | (2,870) | 9,385 | 9 | 9,394 | |
Changes in equity for the six months ended September 30, 2019 | |||||||||||
Net profit | – | – | – | 1,115 | – | – | – | – | 1,115 | 3 | 1,118 |
Remeasurement of the net defined benefit liability/asset* | – | – | – | – | – | – | (6) | (6) | – | (6) | |
Equity instruments through other comprehensive income* | – | – | – | – | – | – | – | 1 | 1 | – | 1 |
Fair value changes on investments, net* | – | – | – | – | – | – | – | 2 | 2 | – | 2 |
Fair value changes on derivatives designated as cash flow hedge* | – | – | – | – | – | – | (1) | (1) | – | (1) | |
Foreign currency translation | – | – | – | – | – | – | – | (206) | (206) | (1) | (207) |
Total comprehensive income for the period | – | – | – | 1,115 | – | – | (1) | (209) | 905 | 2 | 907 |
Shares issued on exercise of employee stock options (Refer to note 2.11) | 1,395,470 | – | – | – | – | – | – | – | – | – | – |
Buyback of equity shares (Refer to note 2.5 and 2.19) | (97,867,266) | (7) | – | (895) | – | – | – | – | (902) | – | (902) |
Transaction cost relating to buyback * | – | – | – | (1) | – | – | – | – | (1) | – | (1) |
Amount transferred to capital redemption reserve upon buyback (Refer to note 2.19) | – | – | – | (7) | – | 7 | – | – | – | – | – |
Non-controlling interests on acquisition of subsidiary (Refer to note 2.10) | – | – | – | – | – | – | – | – | – | 46 | 46 |
Transfer to other reserves | – | – | – | (163) | 163 | – | – | – | – | – | |
Transfer from other reserves on utilization | – | – | – | 87 | (87) | – | – | – | – | – | – |
Employee stock compensation expense (Refer to note 2.11) | – | – | 17 | – | – | – | – | – | 17 | – | 17 |
Income tax benefit arising on exercise of stock options | – | – | 1 | – | – | – | – | – | 1 | – | 1 |
Financial liability under option arrangements (Refer to note 2.10) | – | – | – | (86) | – | – | – | – | (86) | – | (86) |
Dividends paid to non controlling interest of subsidiary | – | – | – | – | – | – | – | – | – | (5) | (5) |
Dividends (including dividend distribution tax) | – | – | – | (782) | – | – | – | – | (782) | – | (782) |
Balance as at September 30, 2019 | 4,239,482,666 | 332 | 295 | 10,510 | 460 | 17 | 2 | (3,079) | 8,537 | 52 | 8,589 |
* net of tax
(1) | excludes treasury shares of 18,929,512 as at September 30, 2019, 20,324,982 as at April 1, 2019, 20,930,382 as at September 30, 2018 and 10,801,956 as at April 1, 2018, held by consolidated trust. The treasury shares as at April 1, 2018 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 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 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 October 11, 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 | Six months ended September 30, | |
2019 | 2018 | ||
Operating activities: | |||
Net Profit | 1,118 | 1,116 | |
Adjustments to reconcile net profit to net cash provided by operating activities : | |||
Depreciation and amortization | 2.18 | 201 | 130 |
Interest and dividend income | (40) | (58) | |
Finance cost | 2.8 | 12 | – |
Income tax expense | 2.12 | 403 | 420 |
Effect of exchange rate changes on assets and liabilities | 8 | 8 | |
Impairment loss under expected credit loss model | 12 | 21 | |
Reduction in the fair value of Disposal Group held for sale | – | 39 | |
Stock compensation expense | 2.11 | 17 | 14 |
Other adjustments | (15) | (9) | |
Changes in working capital | |||
Trade receivables and unbilled revenue | (225) | (387) | |
Prepayments and other assets | 68 | (17) | |
Trade payables | (153) | 71 | |
Client deposits | (2) | 7 | |
Unearned revenue | (16) | 13 | |
Other liabilities and provisions | 150 | 229 | |
Cash generated from operations | 1,538 | 1,597 | |
Income taxes paid | (386) | (528) | |
Net cash provided by operating activities | 1,152 | 1,069 | |
Investing activities: | |||
Expenditure on property, plant and equipment | (270) | (157) | |
Loans to employees | 1 | 1 | |
Deposits placed with corporation | (1) | (2) | |
Interest and dividend received | 28 | 46 | |
Payment towards acquisition of business, net of cash acquired | 2.10 | (72) | (30) |
Payment of contingent consideration pertaining to acquisition of business | – | (1) | |
Investment in equity and preference securities | (6) | (3) | |
Proceeds from sale of other investments | 2 | – | |
Investment in others | (2) | (1) | |
Investment in quoted debt securities | (234) | (2) | |
Redemption of quoted debt securities | 367 | 45 | |
Investment in certificate of deposits | – | (183) | |
Redemption of certificate of deposits | 285 | 137 | |
Redemption of commercial papers | 72 | 43 | |
Redemption of escrow pertaining to Buyback | 2.4 | 37 | – |
Other receipts | 3 | – | |
Investment in liquid mutual fund units and fixed maturity plan securities | (2,611) | (5,729) | |
Redemption of liquid mutual fund units and fixed maturity plan securities | 2,703 | 5,626 | |
Net cash (used)/generated in investing activities | 302 | (210) | |
Financing activities: | |||
Payment of lease liabilities | 2.8 | (42) | – |
Payment of dividends including corporate dividend tax | (782) | (1,164) | |
Payment of dividends to non-controlling interests of subsidiary | (5) | – | |
Buy back of equity shares including transaction costs | 2.19.1 | (1,070) | – |
Net cash used in financing activities | (1,899) | (1,164) | |
Effect of exchange rate changes on cash and cash equivalents | (60) | (273) | |
Net increase / (decrease) in cash and cash equivalents | (445) | (305) | |
Cash and cash equivalents at the beginning of the period | 2.1 | 2,829 | 3,049 |
Cash and cash equivalents at the end of the period | 2.1 | 2,324 | 2,471 |
Supplementary information: | |||
Restricted cash balance | 2.1 | 53 | 45 |
The accompanying notes form an integral part of the interim 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 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 October 11, 2019 |
D. Sundaram Director |
Nilanjan Roy Chief Financial officer |
A. G. S. Manikantha Company Secretary |
Notes to the interim 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).
The Group's interim condensed consolidated financial statements are authorized for issue by the company's Board of Directors on October 11, 2019.
1.2 | Basis of preparation of financial statements |
These interim condensed 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. Accordingly, these interim condensed consolidated financial statements do not include all the information required for a complete set of financial statements. These interim 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, 2019. Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.
As the quarter and year-to-date figures are taken from the source and rounded to the nearest digits, the quarter figures in this statement added up to the figures reported for the previous quarters might not always add up to the year-to-date figures reported in this statement.
1.3 Basis of consolidation
Infosys consolidates entities which it owns or controls. The interim 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 and judgements
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 2.12).
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, value of option arrangements and intangible assets. These valuations are conducted by external valuation experts (Refer to note 2.10)
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 2.7).
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. Leases
IFRS 16 requires lessees to determine the lease term as the non-cancellable period of a lease adjusted with any option to extend or terminate the lease, if the use of such option is reasonably certain. The Group makes an assessment on the expected lease term on a lease-by-lease basis and thereby assesses whether it is reasonably certain that any options to extend or terminate the contract will be exercised. In evaluating the lease term, the Company considers factors such as any significant leasehold improvements undertaken over the lease term, costs relating to the termination of the lease and the importance of the underlying asset to Infosys’s operations taking into account the location of the underlying asset and the availability of suitable alternatives. The lease term in future periods is reassessed to ensure that the lease term reflects the current economic circumstances.
1.6 Recent accounting pronouncements
Standards issued but not yet effective
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 interim Condensed Consolidated Financial Statements
2.1 Cash and cash equivalents
Cash and cash equivalents consist of the following:
(Dollars in millions)
Particulars | As at | |
September 30, 2019 | March 31, 2019 | |
Cash and bank deposits | 1,658 | 2,052 |
Deposits with financial institutions | 666 | 777 |
Total Cash and cash equivalents | 2,324 | 2,829 |
Cash and cash equivalents as at September 30, 2019 and March 31, 2019 include restricted cash and bank balances of $53 million and $52 million, respectively. The restrictions are primarily on account of bank balances held by irrevocable trusts controlled by the company and bank balances held as margin money deposits against guarantees.
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.
2.2 Investments
The carrying value of investments are as follows:
(Dollars in millions)
Particulars | As at | |
September 30, 2019 | March 31, 2019 | |
(i) Current | ||
Amortized cost | ||
Quoted debt securities: | ||
Cost | – | 3 |
Fair value through profit and loss | ||
Liquid Mutual fund units | ||
Fair value | 172 | 258 |
Fixed Maturity Plan Securities | ||
Fair value | 67 | – |
Fair Value through Other comprehensive income | ||
Quoted debt securities | ||
Fair value | 180 | 267 |
Commercial Paper | ||
Fair value | – | 72 |
Certificate of deposits | ||
Fair value | 77 | 358 |
Total current investments | 496 | 958 |
(ii) Non-current | ||
Amortized cost | ||
Quoted debt securities | ||
Cost | 270 | 274 |
Fair value through Other comprehensive income | ||
Quoted debt securities | ||
Fair value | 258 | 310 |
Unquoted equity and preference securities | ||
Fair value | 20 | 15 |
Fair value through profit and loss | ||
Unquoted Preference securities | ||
Fair value | 3 | 3 |
Fixed maturity plan securities | ||
Fair Value | – | 66 |
Others | ||
Fair value(1) | 5 | 2 |
Total Non-current investments | 556 | 670 |
Total investments | 1,052 | 1,628 |
Investment carried at amortized cost | 270 | 277 |
Investments carried at fair value through other comprehensive income | 535 | 1,022 |
Investments carried at fair value through profit and loss | 247 | 329 |
(1) | Uncalled capital commitments outstanding as of September 30, 2019 and March 31, 2019 was $10 million and $12 million, respectively. |
Refer note 2.3 for accounting policies on financial instruments.
Method of fair valuation:
(Dollars in millions)
Class of investment | Method | Fair value | |
As at September 30, 2019 |
As at March 31, 2019 | ||
Liquid mutual fund units | Quoted price | 172 | 258 |
Fixed maturity plan securities | Market observable inputs | 67 | 66 |
Quoted debt securities- carried at amortized cost | Quoted price and market observable inputs | 311 | 307 |
Quoted debt securities- carried at Fair value through other comprehensive income | Quoted price and market observable inputs | 438 | 577 |
Commercial Paper | Market observable inputs | – | 72 |
Certificate of deposits | Market observable inputs | 77 | 358 |
Unquoted equity and preference securities at fair value through other comprehensive income | Discounted cash flows method, Market multiples method, Option pricing model, etc. | 20 | 15 |
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 | 3 |
Others | Discounted cash flows method, Market multiples method, Option pricing model, etc. | 5 | 2 |
1,093 | 1,658 |
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 and financial liability under option arrangements 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.
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 September 30, 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) | 2,324 | – | – | – | – | 2,324 | 2,324 |
Investments (Refer to Note 2.2) | |||||||
Liquid mutual funds | – | – | 172 | – | – | 172 | 172 |
Fixed maturity plan securities | – | – | 67 | – | – | 67 | 67 |
Quoted debt securities | 270 | – | – | – | 438 | 708 | 749(1) |
Certificate of deposits | – | – | – | – | 77 | 77 | 77 |
Unquoted equity and preference securities: | – | – | 3 | 20 | – | 23 | 23 |
Unquoted investment others | – | – | 5 | – | – | 5 | 5 |
Trade receivables | 2,265 | – | – | – | – | 2,265 | 2,265 |
Unbilled revenues (3) (Refer to Note 2.17) | 401 | – | – | – | – | 401 | 401 |
Prepayments and other assets (Refer to Note 2.4) | 536 | – | – | – | – | 536 | 525(2) |
Derivative financial instruments | – | – | 11 | – | 4 | 15 | 15 |
Total | 5,796 | – | 258 | 20 | 519 | 6,593 | 6,623 |
Liabilities: | |||||||
Trade payables | 301 | – | – | – | – | 301 | 301 |
Derivative financial instruments | – | – | 5 | – | – | 5 | 5 |
Financial liability under option arrangements (Refer to note 2.10) | – | – | 85 | – | – | 85 | 85 |
Other liabilities including contingent consideration (Refer to note 2.5) | 1,139 | – | 28 | – | – | 1,167 | 1,167 |
Total | 1,440 | – | 118 | – | – | 1,558 | 1,558 |
(1) | On account of fair value changes including interest accrued |
(2) | Excludes interest accrued on quoted debt securities carried at amortized cost of $11 million. |
(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, 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 papers | – | – | – | – | 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 2.17) | 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 | 2 |
Other liabilities (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 of $12 million. |
(3) | Excludes unbilled revenue for fixed price development contracts where right to consideration is conditional on factors other than passage of time |
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 September 30, 2019:
(Dollars in millions)
Particulars | As at September 30, 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) | 172 | 172 | – | – |
Investments in fixed maturity plan securities (Refer to Note 2.2) | 67 | – | 67 | – |
Investments in quoted debt securities (Refer to Note 2.2) | 749 | 452 | 297 | – |
Investments in certificate of deposit (Refer to Note 2.2) | 77 | – | 77 | – |
Investments in unquoted equity and preference securities (Refer to Note 2.2) | 23 | – | – | 23 |
Investments in unquoted investments others (Refer to Note 2.2) | 5 | – | – | 5 |
Derivative financial instruments - gain on outstanding foreign exchange forward and option contracts | 15 | – | 15 | – |
Liabilities | ||||
Derivative financial instruments - loss on outstanding foreign exchange forward and option contracts | 5 | – | 5 | – |
Financial liability under option arrangements (Refer to note 2.10) | 85 | – | – | 85 |
Liability towards contingent consideration (Refer to note 2.5)* | 28 | – | – | 28 |
* Discount rate pertaining to contingent consideration ranges from 9% to 15%
During the six months ended September 30, 2019, quoted debt securities of $39 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 $137 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, 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%
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.
2.4 Prepayments and other assets
Prepayments and other assets consist of the following:
(Dollars in millions)
Particulars | As at | |
September 30, 2019 | March 31, 2019 | |
Current | ||
Rental deposits | 3 | 2 |
Security deposits | 1 | 1 |
Loans to employees | 34 | 35 |
Prepaid expenses (1) | 124 | 108 |
Interest accrued and not due | 118 | 131 |
Withholding taxes and others(1) | 182 | 215 |
Advance payments to vendors for supply of goods (1) | 9 | 16 |
Deposit with corporations* | 244 | 242 |
Escrow and other deposits pertaining to buyback (Refer to Note No 2.19.1) | – | 37 |
Deferred contract cost(1) | 8 | 8 |
Net investment in sublease of right of use asset (Refer to note 2.8) | 5 | – |
Other assets | 33 | 32 |
Total Current prepayment and other assets | 761 | 827 |
Non-current | ||
Loans to employees | 2 | 3 |
Security deposits | 7 | 8 |
Deposit with corporations* | 3 | 10 |
Prepaid gratuity (1) | 3 | 6 |
Prepaid expenses (1) | 21 | 23 |
Deferred contract cost (1) | 35 | 40 |
Advance towards purchase of business(1) | – | 30 |
Withholding taxes and others(1) | 123 | 134 |
Net investment in sublease of right of use asset (Refer to note 2.8) | 55 | – |
Rental Deposits | 29 | 28 |
Other assets | 2 | – |
Total Non- current prepayment and other assets | 280 | 282 |
Total prepayment and other assets | 1,041 | 1,109 |
Financial assets in prepayments and other assets | 536 | 529 |
(1) Non financial assets
Withholding taxes and others primarily consist of input tax credits and Cenvat recoverable from Government of India. Cenvat recoverable includes $66 million which are pending adjudication. The Group expects these amounts to be sustainable on adjudication and recoverable on final resolution.
* | 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 | |
September 30, 2019 | March 31, 2019 | |
Current | ||
Accrued compensation to employees | 371 | 372 |
Accrued expenses | 590 | 480 |
Withholding taxes and others (1) | 234 | 215 |
Retention money | 14 | 16 |
Liabilities of controlled trusts | 22 | 24 |
Liability towards contingent consideration | 16 | 14 |
Financial liability on account of buyback(2) | – | 174 |
Deferred rent (1) | – | 9 |
Capital creditors | 40 | 98 |
Others | 101 | 96 |
Total Current other liabilities | 1,388 | 1,498 |
Non-Current | ||
Liability towards contingent consideration | 12 | 13 |
Accrued compensation to employees | 1 | 3 |
Accrued gratuity(1) | 5 | 4 |
Deferred income - government grant on land use rights (1) | 6 | 6 |
Deferred income (1) | 4 | 4 |
Deferred rent (1) | – | 25 |
Financial liability under option arrangements (Refer to note 2.10) | 85 | – |
Total Non-current other liabilities | 113 | 55 |
Total other liabilities | 1,501 | 1,553 |
Financial liabilities included in other liabilities | 1,252 | 1,290 |
Financial liability towards contingent consideration on an undiscounted basis | 33 | 34 |
(1) Non financial liabilities
(2) | In accordance with IAS 32 Financial Instruments: Presentation, the Company has recorded a financial liability as at March 31, 2019 for the obligation to acquire its own equity shares to the extent of standing instructions provided to its registered broker for the buyback (refer to note 2.19.1). 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. |
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.
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 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 | |
September 30, 2019 | March 31, 2019 | |
Provision for post sales client support and other provisions | 86 | 83 |
86 | 83 |
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 1 year.
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 September 30, 2019 and March 31, 2019,
claims against the Group, not acknowledged as debts, (excluding demands from income tax authorities- Refer to Note 2.12) amounted
to 230 crore ($32 million) and
230 crore ($33 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 three months ended September 30, 2019:
(Dollars in millions)
Particulars | Land | Buildings | Plant and machinery | Computer equipment | Furniture and fixtures | Vehicles | Total |
Gross carrying value as at July 1, 2019 | 189 | 1,315 | 595 | 881 | 350 | 5 | 3,335 |
Additions | 1 | 46 | 46 | 33 | 37 | 1 | 164 |
Deletions | – | – | – | (10) | (1) | – | (11) |
Translation difference | (5) | (36) | (16) | (23) | (11) | – | (91) |
Gross carrying value as at September 30, 2019 | 185 | 1,325 | 625 | 881 | 375 | 6 | 3,397 |
Accumulated depreciation as at July 1, 2019 | – | (436) | (406) | (634) | (234) | (3) | (1,713) |
Depreciation | – | (12) | (17) | (32) | (11) | – | (72) |
Accumulated depreciation on deletions | – | – | – | 10 | 1 | – | 11 |
Translation difference | – | 11 | 11 | 17 | 6 | – | 45 |
Accumulated depreciation as at September 30, 2019 | – | (437) | (412) | (639) | (238) | (3) | (1,729) |
Capital work-in progress as at September 30, 2019 | 210 | ||||||
Carrying value as at September 30, 2019 | 185 | 888 | 213 | 242 | 137 | 3 | 1,878 |
Capital work-in progress as at July 1, 2019 | 281 | ||||||
Carrying value as at July 1, 2019 | 189 | 879 | 189 | 247 | 116 | 2 | 1,903 |
Following are the changes in the carrying value of property, plant and equipment for the three months ended September 30, 2018:
(Dollars in millions)
Particulars | Land | Buildings | Plant and machinery | Computer equipment | Furniture and fixtures | Vehicles | Total |
Gross carrying value as at July 1, 2018 | 284 | 1,201 | 497 | 745 | 277 | 5 | 3,009 |
Additions | – | 6 | 8 | 24 | 6 | 1 | 45 |
Deletions | – | – | – | (6) | – | – | (6) |
Translation difference | (15) | (65) | (28) | (40) | (16) | (1) | (165) |
Gross carrying value as at September 30, 2018 | 269 | 1,142 | 477 | 723 | 267 | 5 | 2,883 |
Accumulated depreciation as at July 1, 2018 | (5) | (408) | (357) | (553) | (201) | (3) | (1,527) |
Depreciation | – | (11) | (16) | (26) | (9) | – | (62) |
Accumulated depreciation on deletions | – | – | – | 6 | – | – | 6 |
Translation difference | – | 23 | 21 | 29 | 11 | – | 84 |
Accumulated depreciation as at September 30, 2018 | (5) | (396) | (352) | (544) | (199) | (3) | (1,499) |
Capital work-in progress as at September 30, 2018 | 323 | ||||||
Carrying value as at September 30, 2018 | 264 | 746 | 125 | 179 | 68 | 2 | 1,707 |
Capital work-in progress as at July 1, 2018 | 299 | ||||||
Carrying value as at July 1, 2018 | 279 | 793 | 140 | 192 | 76 | 2 | 1,781 |
Following are the changes in the carrying value of property, plant and equipment for six months ended September 30, 2019:
(Dollars in millions)
Particulars | Land | Buildings | Plant and machinery | Computer equipment | Furniture and fixtures | Vehicles | Total |
Gross carrying value as at April 1, 2019 | 276 | 1,291 | 572 | 845 | 321 | 5 | 3,310 |
Additions | 1 | 70 | 69 | 63 | 64 | 1 | 268 |
Additions- Business Combinations (Refer note 2.10) | – | – | – | 9 | 1 | – | 10 |
Deletions | – | – | (1) | (14) | (2) | – | (17) |
Reclassified on account of adoption of IFRS 16 (Refer note 2.8) | (87) | – | – | – | – | – | (87) |
Translation difference | (5) | (36) | (15) | (22) | (9) | – | (87) |
Gross carrying value as at September 30, 2019 | 185 | 1,325 | 625 | 881 | 375 | 6 | 3,397 |
Accumulated depreciation as at April 1, 2019 | (5) | (423) | (390) | (606) | (223) | (3) | (1,650) |
Depreciation | – | (25) | (33) | (63) | (22) | – | (143) |
Accumulated depreciation on deletions | – | – | 1 | 14 | 2 | – | 17 |
Reclassified on account of adoption of IFRS 16 (Refer note 2.8) | 5 | – | – | – | – | – | 5 |
Translation difference | – | 11 | 10 | 16 | 5 | – | 42 |
Accumulated depreciation as at September 30, 2019 | – | (437) | (412) | (639) | (238) | (3) | (1,729) |
Capital work-in progress as at September 30, 2019 | 210 | ||||||
Carrying value as at September 30, 2019 | 185 | 888 | 213 | 242 | 137 | 3 | 1,878 |
Capital work-in progress as at April 1, 2019 | 271 | ||||||
Carrying value as at April 1, 2019 | 271 | 868 | 182 | 239 | 98 | 2 | 1,931 |
Following are the changes in the carrying value of property, plant and equipment for six months ended September 30, 2018:
(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 | 10 | 19 | 13 | 58 | 11 | 1 | 112 |
Additions- Business Combinations (Refer note 2.10) | – | – | – | – | 1 | – | 1 |
Deletions | (3) | – | (1) | (8) | (1) | – | (13) |
Translation difference | (30) | (124) | (53) | (76) | (29) | (1) | (313) |
Gross carrying value as at September 30, 2018 | 269 | 1,142 | 477 | 723 | 267 | 5 | 2,883 |
Accumulated depreciation as at April 1, 2018 | (5) | (417) | (359) | (557) | (203) | (3) | (1,544) |
Depreciation | – | (22) | (32) | (52) | (18) | – | (124) |
Accumulated depreciation on deletions | – | – | 1 | 8 | 1 | – | 10 |
Translation difference | – | 43 | 38 | 57 | 21 | – | 159 |
Accumulated depreciation as at September 30, 2018 | (5) | (396) | (352) | (544) | (199) | (3) | (1,499) |
Capital work-in progress as at September 30, 2018 | 323 | ||||||
Carrying value as at September 30, 2018 | 264 | 746 | 125 | 179 | 68 | 2 | 1,707 |
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 |
The aggregate depreciation expense is included in cost of sales in the statement of comprehensive income.
The contractual commitments for capital expenditure were $176 million and $249 million as at September 30, 2019 and March 31, 2019, respectively.
2.8 Leases
Accounting Policy
The Group as a lessee
The Group’s lease asset classes primarily consist of leases for land and buildings. The group assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the group assesses whether: (1) the contract involves the use of an identified asset (2) the group has substantially all of the economic benefits from use of the asset through the period of the lease and (3) the group has the right to direct the use of the asset.
At the date of commencement of the lease, the Group recognizes a right-of-use asset (“ROU”) and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases) and low value leases. For these short-term and low value leases, the Group recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease.
Certain lease arrangements includes the options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised.
The right-of-use assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset.
Right of use 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 Cash Generating Unit (CGU) to which the asset belongs.
The lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates in the country of domicile of these leases. Lease liabilities are remeasured with a corresponding adjustment to the related right of use asset if the group changes its assessment if whether it will exercise an extension or a termination option.
Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.
The Group as a lessor
Leases for which the group is a lessor is classified as a finance or operating lease. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.
When the Group is an intermediate lessor, it accounts for its interests in the head lease and the sublease separately. The sublease is classified as a finance or operating lease by reference to the right-of-use asset arising from the head lease.
For operating leases, rental income is recognized on a straight line basis over the term of the relevant lease.
Transition
Effective April 1, 2019, the Group adopted IFRS 16 “Leases” and applied the standard to all lease contracts existing on April 1, 2019 using the modified retrospective method and has taken the cumulative adjustment to retained earnings, on the date of initial application. Consequently, the group recorded the lease liability at the present value of the lease payments discounted at the incremental borrowing rate and the right of use asset at its carrying amount as if the standard had been applied since the commencement date of the lease, but discounted at the lessee’s incremental borrowing rate at the date of initial application. Comparatives as at and for the year ended March 31, 2019 have not been retrospectively adjusted and therefore will continue to be reported under the accounting policies included as part of our Annual Report for year ended March 31, 2019.
On transition, the adoption of the new standard resulted in recognition of 'Right of Use' asset of $420 million, 'Net investment in sublease of ROU asset' of $62 million and a lease liabilities of $520 million. The cumulative effect of applying the standard, amounting to $6 million was debited to retained earnings, net of taxes. The effect of this adoption is insignificant on the operating profit, net profit for the period and earnings per share. IFRS 16 will result in an increase in cash inflows from operating activities and an increase in cash outflows from financing activities on account of lease payments.
The following is the summary of practical expedients elected on initial application:
1. | Applied a single discount rate to a portfolio of leases of similar assets in similar economic environment with a similar end date |
2. | Applied the exemption not to recognize right-of-use assets and liabilities for leases with less than 12 months of lease term on the date of initial application |
3. | Excluded the initial direct costs from the measurement of the right-of-use asset at the date of initial application. |
4. | Applied the practical expedient to grandfather the assessment of which transactions are leases. Accordingly, IFRS 16 is applied only to contracts that were previously identified as leases under IAS 17. |
The difference between the lease obligation recorded as of March 31, 2019 under IAS 17 disclosed under Note 2.15 of the 2019 Annual Report on Form 20F and the value of the lease liabilities as of April 1, 2019 is primarily on account of inclusion of extension and termination options reasonably certain to be exercised, in measuring the lease liability in accordance with IFRS 16 and discounting the lease liabilities to the present value under IFRS 16.
The weighted average incremental borrowing rate applied to lease liabilities as at April 1, 2019 is 4.5%.
Following are the changes in the carrying value of right of use assets for the three months ended September 30, 2019:
(Dollars in millions)
Particulars | Category of ROU asset | ||||
Land | Buildings | Vehicles | Computers | Total | |
Balance as of July 1, 2019 | 91 | 446 | 3 | – | 540 |
Additions | – | 45 | – | 4 | 49 |
Deletions | – | (1) | – | – | (1) |
Depreciation | (1) | (18) | – | – | (19) |
Translation difference | (2) | (14) | – | (1) | (17) |
Balance as of September 30, 2019 | 88 | 458 | 3 | 3 | 552 |
Following are the changes in the carrying value of right of use assets for the six months ended September 30, 2019:
(Dollars in millions)
Particulars | Category of ROU asset | ||||
Land | Buildings | Vehicles | Computers | Total | |
Balance as of April 1, 2019 | – | 419 | 1 | – | 420 |
Reclassified on account of adoption of IFRS 16 | 92 | – | – | – | 92 |
Additions | – | 62 | – | 4 | 66 |
Additions through business combination (Refer to Note 2.10) | – | 26 | 2 | – | 28 |
Deletions | – | (1) | – | – | (1) |
Depreciation | (1) | (36) | – | – | (37) |
Translation difference | (3) | (12) | – | (1) | (16) |
Balance as of September 30, 2019 | 88 | 458 | 3 | 3 | 552 |
The aggregate depreciation expense on ROU assets is included in cost of sales in the consolidated statement of comprehensive income.
The following is the break-up of current and non-current lease liabilities as of September 30, 2019
(Dollars in millions)
Particulars | Amount |
Current lease liabilities | 73 |
Non-current lease liabilities | 503 |
Total | 576 |
The following is the movement in lease liabilities during the three months ended September 30, 2019:
(Dollars in millions)
Particulars | Amount |
Balance as of July 1, 2019 | 555 |
Additions | 49 |
Finance cost accrued during the period | 6 |
Deletions | (1) |
Payment of lease liabilities | (22) |
Translation difference | (11) |
Balance as of September 30, 2019 | 576 |
The following is the movement in lease liabilities during the six months ended September 30, 2019:
(Dollars in millions)
Particulars | Amount |
Balance as of April 1, 2019 | 520 |
Additions | 66 |
Additions through business combination (Refer to note 2.10) | 32 |
Finance cost accrued during the period | 12 |
Deletions | (1) |
Payment of lease liabilities | (42) |
Translation difference | (11) |
Balance as of September 30, 2019 | 576 |
The table below provides details regarding the contractual maturities of lease liabilities as of September 30, 2019 on an undiscounted basis:
(Dollars in millions)
Particulars | Amount |
Less than one year | 97 |
One to five years | 324 |
More than five years | 262 |
Total | 683 |
The group does not face a significant liquidity risk with regard to its lease liabilities as the current assets are sufficient to meet the obligations related to lease liabilities as and when they fall due.
Rental expense recorded for short-term leases was $3 million and $6 million for the three months and six months ended September 30, 2019.
The following is the movement in the net-investment in sublease during the three months ended September 30, 2019:
(Dollars in millions)
Particulars | Amount |
Balance as of July 1, 2019 | 62 |
Interest income accrued during the period | 1 |
Lease receipts | (3) |
Balance as of September 30, 2019 | 60 |
The following is the movement in the net-investment in sublease of ROU asset during the six months ended September 30, 2019:
(Dollars in millions)
Particulars | Amount |
Balance as of April 1, 2019 | 62 |
Interest income accrued during the period | 1 |
Lease receipts | (3) |
Balance as of September 30, 2019 | 60 |
The table below provides details regarding the contractual maturities of net investment in sublease of ROU asset as of September 30, 2019 on an undiscounted basis:
(Dollars in millions)
Particulars | Amount |
Less than one year | 7 |
One to five years | 28 |
More than five years | 36 |
Total | 71 |
2.9 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 | |
September 30, 2019 | March 31, 2019 | |
Carrying value at the beginning | 512 | 339 |
Goodwill on Wongdoody acquisition | – | 25 |
Goodwill on Fluido acquisition | – | 32 |
Goodwill on HIPUS acquisition (Refer to note 2.10) | 16 | – |
Goodwill on Stater acquisition (Refer to note 2.10) | 57 | – |
Goodwill reclassified from assets held for sale, net of reduction in recoverable amount | – | 138 |
Translation differences | (9) | (22) |
Carrying value at the end | 576 | 512 |
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.
2.10 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 of the assets and liabilities in the Group's consolidated financial statements.
The payments related to options issued by the Group over the non-controlling interests in its subsidiaries are accounted as financial liabilities and initially recognized at the estimated present value of gross obligations. Such options are subsequently measured at fair value in order to reflect the amount payable under the option at the date at which it becomes exercisable. In the event that the option expires unexercised, the liability is derecognised.
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.
HIPUS Co. Ltd. (formerly 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 HIPUS Co Limited (HIPUS), a wholly owned subsidiary of Hitachi Ltd, Japan for a total cash consideration of JPY 3.29 billion (approximately $30 million). The company has recorded a financial liability for the estimated present value of its gross obligation to purchase the non-controlling interest as of the acquisition date in accordance with the share purchase agreement with a corresponding adjustment to equity (refer to note 2.5).
HIPUS handles indirect materials purchasing functions for the Hitachi Group. The entity is expected to provide end-to-end procurement capabilities, through its procurement function expertise, localized team and BPM networks in Japan. 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 Dollar million)
Component | Acquiree's carrying amount | Fair value adjustments | Purchase price allocated |
Net assets(*) | 6 | – | 6 |
Intangible assets - Customer contracts and relationships# | – | 17 | 17 |
Deferred tax liabilities on intangible assets | – | (5) | (5) |
6 | 12 | 18 | |
Goodwill | 16 | ||
Less: Non-controlling interest | (4) | ||
Total purchase price | 30 |
* Includes cash and cash equivalents acquired of $26 million.
# Useful life is in the range of 5 to 15 years
Goodwill is not tax deductible.
The gross amount of trade receivables acquired and its fair value is $202 million and the amount has been fully collected. Trade payables as on the acquisition date amounted to $218 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.
Stater N.V.
On May 23, 2019, Infosys Consulting Pte Limited (a wholly owned subsidiary of Infosys Limited) acquired 75% of voting interests in Stater N.V (Stater), a wholly-owned subsidiary of ABN AMRO Bank N.V., Netherland, for a total cash consideration of Euro 154 million (approximately $171 million). The company has recorded a financial liability for the estimated present value of its gross obligation to purchase the Non-controlling interest as of the acquisition date in accordance with the share purchase agreement with a corresponding adjustment to equity (refer to Note 2.5).
Stater brings European mortgage expertise and a robust digital platform to drive superior customer experience. 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 Dollar million)
Component | Acquiree's carrying amount | Fair value adjustments | Purchase price allocated |
Net assets(*) | 78 | – | 78 |
Intangible assets - Customer contracts and relationships# | – | 79 | 79 |
Intangible assets - Technology# | – | 16 | 16 |
Intangible assets - Brand# | – | 3 | 3 |
Deferred tax liabilities on intangible assets | – | (20) | (20) |
78 | 78 | 156 | |
Goodwill | 57 | ||
Less: Non controlling interest | (42) | ||
Total purchase price | 171 |
* Includes cash and cash equivalents acquired of $73 million.
# Useful lives are in the range of 5 to 15 years
Goodwill is not tax deductible.
The gross amount of trade receivables acquired and its fair value is $11 million and the amount is substantially collected.
The transaction costs of $1 million related to the acquisition have been included under administrative expenses in the statement of comprehensive income for the six months ended September 30, 2019.
Proposed transfer
On October 11, 2019, the Board of Directors of Infosys authorized the Company to execute a Business Transfer Agreement and related documents with its wholly owned subsidiaries, Kallidus Inc and Skava Systems Private Limited (together referred to as Skava), to transfer the business of Skava to Infosys Limited, subject to securing the requisite regulatory approvals for a consideration based on an independent valuation. The transfer between entities under common control would be accounted for at carrying value and would not have any impact on the consolidated financial statements.
2.11 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.
Infosys Expanded Stock Ownership Program 2019 (the 2019 Plan)
On June 22, 2019 pursuant to approval by the shareholders in the Annual General Meeting , the Board has been authorized to introduce, offer, issue and provide share-based incentives to eligible employees of the Company and its subsidiaries under the 2019 Plan. The maximum number of shares under the 2019 plan shall not exceed 50,000,000 equity shares. To implement the 2019 Plan, upto 45,000,000 equity shares may be issued by way of secondary acquisition of shares by Infosys Expanded Stock Ownership Trust. The RSUs granted under the 2019 plan shall vest based on the achievement of defined annual performance parameters as determined by the administrator. The performance parameters will be based on a combination of relative Total Shareholder Return (TSR) and operating performance metrics of the company as decided by administrator. Each of the above performance parameters will be distinct for the purposes of calculation of quantity of shares to vest based on performance. These instruments will generally vest between a minimum of 1 to maximum of 3 years from the grant date.
2015 Stock Incentive Compensation Plan (the 2015 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). 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.
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.
Consequent to the September 2018 bonus issue, all the then 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 18,929,512 and 20,324,982 shares as at September 30, 2019 and March 31, 2019, respectively under the 2015 plan. Out of these shares, 2,00,000 equity shares each have been earmarked for welfare activities of the employees as at September 30, 2019 and March 31, 2019, respectively.
The following is the summary of grants during three months and six months ended September 30, 2019 and September 30, 2018 under the 2015 Plan:
Particulars | Three months ended September 30, | Six months ended September 30, | ||
2019 | 2018* | 2019 | 2018* | |
2015 Plan: RSU | ||||
KMPs | – | – | 212,096 | 217,200 |
Employees other than KMP | 24,650 | 1,787,120 | 36,850 | 1,787,120 |
24,650 | 1,787,120 | 248,946 | 2,004,320 | |
Incentive unit - cash settled | ||||
Employees other than KMP | – | 52,590 | – | 52,590 |
– | 52,590 | – | 52,590 | |
Total Grants | 24,650 | 1,839,710 | 248,946 | 2,056,910 |
* Information is adjusted for September, 2018 bonus issue
Notes on grants to KMP:
CEO & MD
Under the 2015 plan:
The Board, on April 12, 2019, based on the recommendations
of the Nomination and Remuneration Committee, approved the performance-based grant of RSUs amounting to 13 crore (approximately
$2 million) for the financial year 2020 under the 2015 Plan. These RSUs will vest in line with the employment agreement based on
achievement of certain performance targets. Accordingly, 177,887 performance based RSU’s were granted effective May 2, 2019.
In accordance with the shareholders approval in the Annual General meeting held on June 22, 2019, the Board, based on the recommendations of the Nomination and Remuneration Committee, approved to amend the vesting period of the annual performance equity grant from three years to one year. Accordingly the vesting period of 217,200 (adjusted for September 2018 bonus issue) performance based RSUs granted effective May 2, 2018 and 177,887 performance based RSU's granted effective May 2, 2019 have been amended to one year.
In accordance with the employee agreement which
has been approved by the shareholders, the CEO is eligible to receive an annual grant of RSUs of fair value 3.25 crore (approximately
$0.50 million) which will vest overtime in three equal annual installments upon the completion of each year of service from the
respective grant date. Though the annual time based grants for the remaining employment term ending on March 31, 2023 have not
been granted as of September 30, 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.
Under the 2019 plan:
In accordance with the shareholders approval
in Annual General meeting held on June 22, 2019, the Board, based on the recommendations of the Nomination and Remuneration Committee,
approved performance-based grant of RSUs amounting to 10 crore (approximately $1.50 million) for financial year 2020 under
the 2019 Plan to Salil Parekh, CEO and MD. These RSUs will vest in line with the employment agreement based on achievement of certain
performance targets. Accordingly, 134,138 performance based RSU’s were granted effective June 22, 2019.
COO and Whole time director
In accordance with the shareholders approval
in Annual General meeting held on June 22, 2019, the Board, based on the recommendations of the Nomination and Remuneration Committee,
approved performance-based grant of RSUs amounting to 4 crore (approximately $0.50 million) for financial year 2020 under
the 2019 Plan to U. B. Pravin Rao, COO and WTD. These RSUs will vest in line with the employment agreement based on achievement
of certain performance targets. Accordingly, 53,655 performance based RSU’s were granted effective June 22, 2019
Other KMP
Based on the recommendations of the Nomination and Remuneration Committee, the Board , approved performance-based grant of 10,263 RSUs and time based grant of 23,946 RSUs to other KMP under the 2015 Plan during the six months ended September 30, 2019.The grants were made effective May 2, 2019. These RSUs will vest generally over three to four years and additionally the performance based RSUs will vest based on achievement of certain performance targets.
Break-up of employee stock compensation expense
(Dollars in millions)
Particulars | Three months ended September 30, | Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Granted to: | ||||
KMP | 2 | 2 | 4 | 3 |
Employees other than KMP | 6 | 6 | 13 | 11 |
Total (1) | 8 | 8 | 17 | 14 |
(1) Cash settled stock compensation expense included in the above
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 2020- Equity Shares-RSU |
Fiscal
2020- ADS-RSU |
Fiscal
2019- Equity Shares-RSU |
Fiscal
2019- ADS-RSU | |
Weighted average share price (![]() |
732 | 11.00 | 696 | 10.77 |
Exercise price (![]() |
5.00 | 0.07 | 3.31 | 0.06 |
Expected volatility (%) | 22–24 | 22–26 | 21–25 | 22–26 |
Expected life of the option (years) | 1–4 | 1–4 | 1–4 | 1–4 |
Expected dividends (%) | 2–3 | 2–3 | 2.65 | 2.65 |
Risk-free interest rate (%) | 6–7 | 1–3 | 7–8 | 2–3 |
Weighted average fair value as on grant date (![]() |
676 | 10.43 | 648 | 10.03 |
(1) Fiscal 2019 values are adjusted for September 2018 bonus issue wherever applicable
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 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 | Three months ended September 30, | Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Current taxes | ||||
Domestic taxes | 151 | 172 | 309 | 338 |
Foreign taxes | 60 | 56 | 112 | 104 |
211 | 228 | 421 | 442 | |
Deferred taxes | ||||
Domestic taxes | 5 | (5) | 4 | (4) |
Foreign taxes | (9) | (7) | (22) | (18) |
(4) | (12) | (18) | (22) | |
Income tax expense | 207 | 216 | 403 | 420 |
Income tax expense for the three months ended September 30, 2019 and September 30, 2018 includes reversal (net of provisions) of $11 million and reversal (net of provisions) of less than $1 million , respectively. Income tax expense for the six months ended September 30, 2019 and September 30, 2018 includes reversal (net of provisions) of $17 million and reversal (net of provisions) of $9 million respectively. These reversal (net of provisions) pertain 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 | Three months ended September 30, | Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Profit before income taxes | 779 | 797 | 1,521 | 1,536 |
Enacted tax rates in India | 34.94% | 34.94% | 34.94% | 34.94% |
Computed expected tax expense | 273 | 279 | 532 | 537 |
Tax effect due to non-taxable income for Indian tax purposes | (86) | (94) | (168) | (184) |
Overseas taxes | 31 | 32 | 58 | 62 |
Tax provision (reversals) | (11) | - | (17) | (9) |
Effect of differential overseas tax rates | (2) | 1 | (3) | (1) |
Effect of exempt non operating income | (1) | (1) | (3) | (5) |
Effect of unrecognized deferred tax assets | 5 | 3 | 7 | 8 |
Effect of non-deductible expenses | 3 | (2) | 6 | 17 |
Branch profit tax (net of credits) | (4) | (4) | (8) | (8) |
Others | (1) | 2 | (1) | 3 |
Income tax expense | 207 | 216 | 403 | 420 |
The applicable Indian corporate statutory tax rate for the three months and six months ended September 30, 2019 and September 30, 2018 is 34.94% each.
Deferred income tax for the three months and six months ended September 30, 2019 and September 30, 2018 substantially relates to origination and reversal of temporary differences.
As at September 30, 2019, claims against the
Group not acknowledged as debts from the Indian Income tax authorities amounted to 2,866 crore ($404 million). Amount paid
to statutory authorities against this amounted to
5,909 crore ($834 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). Amount paid to statutory
authorities against the above tax claims amounted to
5,924 crore ($857 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.
2.13 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.
2.14 Related party transactions
Refer Note 2.19 "Related party transactions" in the Company’s 2019 Annual Report on Form 20-F for the full names and other details of the Company's subsidiaries and controlled trusts.
Changes in Subsidiaries
During the six months ended September 30, 2019, the following are the changes in the subsidiaries:
- | On April 1, 2019, Infosys Consulting Pte Ltd, a wholly-owned subsidiary of Infosys Limited, acquired 81% of voting interest in HIPUS Co Ltd, Japan, a wholly owned subsidiary of Hitachi Ltd, Japan. (Refer to note 2.10) |
- | On May 23, 2019, Infosys Consulting Pte Ltd, a wholly-owned subsidiary of Infosys Limited, acquired 75% of voting interest in Stater N.V along with its eight subsidiaries Stater Netherland B.V., Stater Duitsland B.V., Stater XXL B.V., HypoCasso B.V., Stater Participations B.V., Stater Deutschland Verwaltungs-GmbH, Stater Deutschland GmbH & Co.KG, Stater Belgium N.V./S.A. (Refer to note 2.10) |
Changes in Controlled trust
The following were the changes in controlled trusts:-
- On May 15, 2019, the Company registered Infosys Expanded Stock Ownership Trust
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 |
Three months ended September 30, |
Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Salaries and other employee benefits to whole-time directors and executive officers(1) | 4 | 4 | 9 | 7 |
Commission and other benefits to non-executive/ independent directors | – | – | 1 | 1 |
Total | 4 | 4 | 10 | 8 |
(1) | Total employee stock compensation expense for the three months ended September 30, 2019 and September 30, 2018 includes a charge of $2 million each, towards key managerial personnel. For the six months ended September 30, 2019 and September 30, 2018, includes a charge of $4 million and $3 million respectively, towards key managerial personnel. (Refer note 2.11) |
2.15 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. The Chief Operating Decision Maker 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.
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.
Disclosure of revenue by geographic locations is given in note 2.16 Revenue from operations
2.15.1 Business Segments
Three months ended September 30, 2019 and September 30, 2018
(Dollars in millions)
Financial Services | Retail | Communication | Energy, Utilities, Resources and Services | Manufacturing | Hi Tech | Life Sciences | All Other segments | Total | |
Revenues | 1,023 | 489 | 420 | 420 | 325 | 243 | 207 | 83 | 3,210 |
942 | 492 | 358 | 358 | 282 | 218 | 187 | 84 | 2,921 | |
Identifiable operating expenses | 528 | 244 | 249 | 222 | 180 | 144 | 109 | 50 | 1,726 |
501 | 251 | 191 | 200 | 157 | 121 | 98 | 51 | 1,570 | |
Allocated expenses | 231 | 98 | 83 | 82 | 73 | 43 | 42 | 32 | 684 |
190 | 94 | 74 | 74 | 59 | 38 | 36 | 28 | 593 | |
Segment profit | 264 | 147 | 88 | 116 | 72 | 56 | 56 | 1 | 800 |
251 | 147 | 93 | 84 | 66 | 59 | 53 | 5 | 758 | |
Unallocable expenses | 104 | ||||||||
66 | |||||||||
Operating profit | 696 | ||||||||
692 | |||||||||
Other income, net (Refer Note 2.18) | 89 | ||||||||
105 | |||||||||
Finance cost (Refer Note 2.8) | (6) | ||||||||
– | |||||||||
Profit before income taxes | 779 | ||||||||
797 | |||||||||
Income tax expense | 207 | ||||||||
216 | |||||||||
Net profit | 572 | ||||||||
581 | |||||||||
Depreciation and amortization | 103 | ||||||||
66 | |||||||||
Non-cash expenses other than depreciation and amortization | 1 | ||||||||
– |
Six months ended September 30, 2019 and September 30, 2018
(Dollars in millions)
Financial Services | Retail | Communication | Energy, Utilities, Resources and Services | Manufacturing | Hi Tech | Life Sciences | All Other segments | Total | |
Revenues | 2,008 | 982 | 851 | 827 | 626 | 484 | 399 | 163 | 6,340 |
1,841 | 961 | 718 | 710 | 554 | 428 | 374 | 167 | 5,753 | |
Identifiable operating expenses | 1,056 | 494 | 505 | 438 | 351 | 291 | 221 | 98 | 3,454 |
983 | 489 | 378 | 387 | 309 | 237 | 197 | 101 | 3,081 | |
Allocated expenses | 441 | 193 | 168 | 169 | 144 | 84 | 83 | 63 | 1,345 |
375 | 187 | 147 | 146 | 119 | 74 | 72 | 59 | 1,179 | |
Segment profit | 511 | 295 | 178 | 220 | 131 | 109 | 95 | 2 | 1,541 |
483 | 285 | 193 | 177 | 126 | 117 | 105 | 7 | 1,493 | |
Unallocable expenses | 203 | ||||||||
130 | |||||||||
Operating profit | 1,338 | ||||||||
1,363 | |||||||||
Other income, net (Refer Note 2.18) | 195 | ||||||||
212 | |||||||||
Finance cost (Refer Note 2.8) | (12) | ||||||||
– | |||||||||
Reduction in the fair value of Disposal Group held for sale | – | ||||||||
(39) | |||||||||
Profit before Income taxes | 1,521 | ||||||||
1,536 | |||||||||
Income tax expense | 403 | ||||||||
420 | |||||||||
Net profit | 1,118 | ||||||||
1,116 | |||||||||
Depreciation and amortization | 201 | ||||||||
130 | |||||||||
Non-cash expenses other than depreciation and amortization | 2 | ||||||||
39 |
2.15.2 Significant clients
No client individually accounted for more than 10% of the revenues for the three months and six months ended September 30, 2019 and September 30, 2018, respectively.
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 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. 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 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 six months ended September 30, 2019 and September 30, 2018 is as follows:
(Dollars in millions)
Particulars | Three months ended September 30, | Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Revenue from software services | 3,004 | 2,773 | 5,957 | 5,468 |
Revenue from products and platforms | 206 | 148 | 383 | 285 |
Total revenue from operations | 3,210 | 2,921 | 6,340 | 5,753 |
Disaggregated revenue information
The table below presents disaggregated revenues from contracts with customers by geography and offerings 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.
Three months ended September 30, 2019 and September 30, 2018
(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 | 589 | 318 | 264 | 233 | 185 | 229 | 134 | 18 | 1,970 |
575 | 317 | 181 | 204 | 151 | 209 | 111 | 14 | 1,762 | |
Europe | 223 | 141 | 62 | 147 | 124 | 6 | 67 | 5 | 775 |
176 | 136 | 66 | 121 | 122 | 4 | 71 | 5 | 701 | |
India | 48 | 2 | 7 | – | 3 | 7 | 2 | 17 | 86 |
42 | 1 | 1 | – | 3 | 4 | 1 | 21 | 73 | |
Rest of the world | 163 | 28 | 87 | 40 | 13 | 1 | 4 | 43 | 379 |
149 | 38 | 110 | 33 | 6 | 1 | 4 | 44 | 385 | |
Total | 1,023 | 489 | 420 | 420 | 325 | 243 | 207 | 83 | 3,210 |
942 | 492 | 358 | 358 | 282 | 218 | 187 | 84 | 2,921 | |
Revenue by offerings | |||||||||
Digital | 401 | 209 | 166 | 158 | 121 | 88 | 64 | 23 | 1,230 |
294 | 169 | 126 | 100 | 81 | 74 | 47 | 14 | 905 | |
Core | 622 | 280 | 254 | 262 | 204 | 155 | 143 | 60 | 1,980 |
648 | 323 | 232 | 258 | 201 | 144 | 140 | 70 | 2,016 | |
Total | 1,023 | 489 | 420 | 420 | 325 | 243 | 207 | 83 | 3,210 |
942 | 492 | 358 | 358 | 282 | 218 | 187 | 84 | 2,921 |
Six months ended September 30, 2019 and September 30, 2018
(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 | 1,168 | 638 | 534 | 457 | 354 | 458 | 254 | 34 | 3,897 |
1,118 | 625 | 358 | 406 | 296 | 411 | 221 | 26 | 3,461 | |
Europe | 415 | 283 | 127 | 290 | 242 | 12 | 135 | 10 | 1,514 |
348 | 267 | 138 | 239 | 240 | 6 | 143 | 10 | 1,391 | |
India | 91 | 3 | 11 | – | 6 | 12 | 3 | 32 | 158 |
82 | 2 | 3 | – | 6 | 10 | 1 | 42 | 146 | |
Rest of the world | 334 | 58 | 179 | 80 | 24 | 2 | 7 | 87 | 771 |
293 | 67 | 219 | 65 | 12 | 1 | 9 | 89 | 755 | |
Total | 2,008 | 982 | 851 | 827 | 626 | 484 | 399 | 163 | 6,340 |
1,841 | 961 | 718 | 710 | 554 | 428 | 374 | 167 | 5,753 | |
Revenue by offerings | |||||||||
Digital | 761 | 413 | 320 | 297 | 231 | 172 | 116 | 39 | 2,349 |
548 | 316 | 238 | 195 | 154 | 141 | 92 | 24 | 1,708 | |
Core | 1,247 | 569 | 531 | 530 | 395 | 312 | 283 | 124 | 3,991 |
1,293 | 645 | 480 | 515 | 400 | 287 | 282 | 143 | 4,045 | |
Total | 2,008 | 982 | 851 | 827 | 626 | 484 | 399 | 163 | 6,340 |
1,841 | 961 | 718 | 710 | 554 | 428 | 374 | 167 | 5,753 |
(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, Stater digital platform 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 (contract asset) 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.
2.17 Unbilled revenue
(Dollars in millions)
Particulars | As at | |
September 30, 2019 | March 31, 2019 | |
Unbilled financial asset (1) | 401 | 303 |
Unbilled non financial asset (2) | 625 | 474 |
Total | 1,026 | 777 |
(1) Right to consideration is unconditional upon passage of time.
(2) Right to consideration is dependent on completion of contractual milestones.
2.18 Break-up of expenses and other income, net
Accounting Policy
2.18.1 Gratuity
The Group provides for gratuity, a defined benefit retirement plan ('the Gratuity Plan') covering eligible employees of Infosys and its Indian subsidiaries. The Gratuity Plan provides a lump-sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee's salary and the tenure of employment with the group.
Liabilities with regard to the Gratuity Plan are determined by actuarial valuation, performed by an independent actuary, at each balance sheet date using the projected unit credit method. The company fully contributes all ascertained liabilities to the Infosys Limited Employees' Gratuity Fund Trust (the Trust). In case of Infosys 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.
2.18.2 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.
2.18.3 Provident fund
Eligible employees of Infosys receive benefits from a provident fund, which is a defined benefit plan. Both the eligible employee and the company make monthly contributions to the provident fund plan equal to a specified percentage of the covered employee's salary. The company contributes a portion 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.
The Hon’ble Supreme Court of India vide its judgment and subsequent review petition has ruled in respect of compensation for the purpose of Provident Fund contribution under the Employee’s Provident Fund Act. The Company has assessed possible outcomes of the judgment on determination of provident fund contributions and based on the Company’s current evaluation, it is not probable that certain allowances paid by the Company will be subject to payment of Provident Fund. The company will continue to monitor and evaluate its position based on future events and developments.
2.18.4 Compensated absences
The Group has a policy on compensated absences which are both accumulating and non-accumulating in nature. The expected cost of accumulating compensated absences is determined by actuarial valuation performed by an independent actuary at each balance sheet date using projected unit credit method on the additional amount expected to be paid/availed as a result of the unused entitlement that has accumulated at the balance sheet date. Expense on non-accumulating compensated absences is recognized in the period in which the absences occur.
2.18.5 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.
2.18.6 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)
Three months ended September 30, | Six months ended September 30, | |||
2019 | 2018 | 2019 | 2018 | |
Employee benefit costs | 1,608 | 1,415 | 3,187 | 2,800 |
Depreciation and amortization | 103 | 66 | 201 | 130 |
Travelling costs | 63 | 62 | 156 | 128 |
Cost of technical sub-contractors | 234 | 216 | 470 | 407 |
Cost of software packages for own use | 37 | 31 | 69 | 62 |
Third party items bought for service delivery to clients | 58 | 53 | 114 | 102 |
Short-term leases (Refer to Note 2.8) | 3 | – | 6 | – |
Operating leases | – | 13 | – | 24 |
Consultancy and professional charges | 2 | 2 | 3 | 3 |
Communication costs | 11 | 9 | 21 | 17 |
Repairs and maintenance | 18 | 13 | 32 | 25 |
Provision for post-sales client support | 3 | 4 | 2 | 4 |
Total | 2,140 | 1,884 | 4,261 | 3,703 |
Sales and marketing expenses
(Dollars in millions)
Three months ended September 30, | Six months ended September 30, | |||
2019 | 2018 | 2019 | 2018 | |
Employee benefit costs | 128 | 111 | 254 | 222 |
Travelling costs | 13 | 14 | 27 | 29 |
Branding and marketing | 17 | 18 | 37 | 32 |
Operating leases | – | 3 | – | 5 |
Consultancy and professional charges | 5 | 6 | 11 | 10 |
Communication costs | 1 | 1 | 1 | 2 |
Others | 1 | 1 | 3 | 3 |
Total | 165 | 154 | 333 | 303 |
Administrative expenses
(Dollars in millions)
Three months ended September 30, | Six months ended September 30, | |||
2019 | 2018 | 2019 | 2018 | |
Employee benefit costs | 62 | 56 | 124 | 110 |
Consultancy and professional charges | 41 | 33 | 76 | 73 |
Repairs and maintenance | 40 | 32 | 79 | 62 |
Power and fuel | 9 | 9 | 17 | 18 |
Communication costs | 7 | 8 | 15 | 17 |
Travelling costs | 10 | 9 | 20 | 18 |
Rates and taxes | 7 | 9 | 12 | 14 |
Operating leases | – | 5 | – | 10 |
Insurance charges | 3 | 2 | 6 | 5 |
Commission to non-whole time directors | – | – | 1 | – |
Impairment loss recognized/(reversed) under expected credit loss model | 5 | 11 | 13 | 21 |
Contributions towards Corporate Social Responsibility | 14 | 8 | 24 | 19 |
Others | 11 | 9 | 21 | 17 |
Total | 209 | 191 | 408 | 384 |
Other income, net
(Dollars in millions)
Particulars | Three months ended September 30, | Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Interest income on financial assets carried at amortized cost | 43 | 47 | 93 | 103 |
Interest income on financial assets fair valued through other comprehensive income | 12 | 23 | 28 | 47 |
Gain/(loss) on investments carried at fair value through profit or loss | 5 | 8 | 15 | 12 |
Gain/(loss) on investments carried at fair value through other comprehensive income | 2 | – | 4 | – |
Exchange gains / (losses) on forward and options contracts | (5) | (58) | 15 | (85) |
Exchange gains / (losses) on translation of other assets and liabilities | 28 | 81 | 21 | 115 |
Others | 4 | 4 | 19 | 20 |
Total | 89 | 105 | 195 | 212 |
2.19 Equity
Accounting policy
Ordinary Shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares, share options and buyback are recognized as a deduction from equity, net of any tax effects.
Treasury Shares
When any entity within the Group purchases the company's ordinary shares, the consideration paid including any directly attributable incremental cost is presented as a deduction from total equity, until they are cancelled, sold or reissued. When treasury shares are sold or reissued subsequently, the amount received is recognized as an increase in equity, and the resulting surplus or deficit on the transaction is transferred to/ from Securities premium.
Retained earnings
Retained earnings represent the amount of accumulated earnings of the Group.
Share premium
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 profit and loss is credited to share premium.
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.
Capital Redemption Reserve
In accordance with section 69 of the Indian Companies Act, 2013, the Company creates capital redemption reserve equal to the nominal value of the shares bought back as an appropriation from general reserve.
Other components of equity
Other components of equity consist of currency translation, remeasurement of net defined benefit liability / asset, 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.
In December 2017, the International Accounting Standard Board issued amendments to IAS 12 – Income Taxes. The amendments clarify that an entity shall recognize the income tax consequences of dividends on financial instruments classified as equity according to where the entity originally recognized those past transactions or events that generated distributable profits were recognized. On April 1, 2019, the Group adopted these amendments and there was no impact of these amendments on the Company’s Consolidated financial statements.
2.19.1 Update on buyback of equity shares
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.
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 buyback of equity shares through the stock exchange commenced on March 20, 2019 and
was completed on August 26, 2019 . During this buyback period the Company had purchased and extinguished a total of 110,519,266
equity shares from the stock exchange at an average buy back price of 747/- per equity share comprising 2.53% of the pre
buyback paid-up equity share capital of the Company. The buyback resulted in a cash outflow of
8,260 crore (excluding transaction
costs). The Company funded the buyback from its free reserves.
In accordance with section 69 of the Companies Act, 2013, as at September 30, 2019, the Company has created ‘Capital Redemption Reserve’ of $8 million equal to the nominal value of the shares bought back as an appropriation from general reserve.
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 September 30, 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
2.19.2 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 fiscal 2018 the Company’s policy was to pay up to 70% of the free cash flow annually by way of dividend and/or buyback.
Effective from fiscal 2020, the company expects to return approximately 85% of the free cash flow cumulatively over a 5-year period through a combination of semi annual dividends and/or share buyback and/or special dividends, 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 and buyback include applicable taxes.
Amount of per share dividend recognised as distribution to equity shareholders:
Particulars | Six months ended September 30, 2019 |
Six months ended September 30, 2018 | ||
in ![]() |
in US Dollars | in ![]() |
in US Dollars | |
Final dividend for fiscal 2019 | 10.50 | 0.15 | – | – |
Final dividend for fiscal 2018* | – | – | 10.25 | 0.16 |
Special dividend for fiscal 2018* | – | – | 5.00 | 0.08 |
*Dividend per share declared previously, retrospectively adjusted for September 2018 bonus issue
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. The same was approved by the Shareholders at the Annual General Meeting held on June 22, 2019 which
resulted in a cash outflow of approximately $782 million, excluding dividend paid on treasury shares and including dividend distribution
tax.
The Board of Directors in their meeting on October
11, 2019 declared a interim dividend of 8/- per equity share (approximately $0.11 per equity share) which would result in
a net cash outflow of approximately
4,092 crore ($577 million) excluding dividend paid on treasury shares and including
dividend distribution tax.
2.19.3 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. 18,929,512 shares and 20,324,982 shares were held by controlled trust,
as at September 30, 2019 and March 31, 2019, respectively.
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 October 11, 2019 |
Exhibit 99.8
IFRS INR Earning Release
INDEPENDENT AUDITOR’S REPORT
TO THE BOARD OF DIRECTORS OF INFOSYS LIMITED
Report on the Audit of the Interim Condensed Consolidated Financial Statements
Opinion
We have audited the accompanying interim 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 September 30, 2019, the Condensed Consolidated Statement of Comprehensive Income for the three months and six months period ended on that date, the Condensed Consolidated Statement of Changes in Equity and the Condensed Consolidated Statement of Cash Flows for the six months period ended on that date, and a summary of the significant accounting policies and other explanatory information (hereinafter referred to as “the interim condensed consolidated financial statements”).
In our opinion and to the best of our information and according to the explanations given to us, the aforesaid interim 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 September 30, 2019, the consolidated profit and consolidated total comprehensive income for the three months and six months period ended on that date, consolidated changes in equity and its consolidated cash flows for the six months period ended on that date.
Basis for Opinion
We conducted our audit of the interim 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 Interim 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 obtained by us is sufficient and appropriate to provide a basis for our audit opinion. on the interim condensed consolidated financial statements.
Management’s Responsibilities for the Interim Condensed Consolidated Financial Statements
The Company’s Board of Directors is responsible for the preparation and presentation of these interim 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 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 respective financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error which have been used for the purpose of preparation of the interim condensed consolidated financial statements by the Directors of the Company, as aforesaid.
In preparing the interim condensed consolidated financial statements, the respective Board of Directors of the companies included in the Group are responsible for assessing the ability of the respective entities to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the respective Board of Directors either intends to liquidate their respective entities 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 Condensed Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the interim 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 interim 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 interim 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 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 interim 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 interim condensed consolidated financial statements, including the disclosures, and whether the interim 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 interim 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 interim condensed consolidated financial statements of which we are the independent auditors. |
Materiality is the magnitude of misstatements in the interim condensed consolidated financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the interim condensed consolidated 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 interim condensed consolidated financial statements.
We communicate with those charged with governance of the Company and such other entities included in the interim 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, 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.
For DELOITTE HASKINS & SELLS LLP
Chartered Accountants
(Firm’s Registration No. 117366W/W-100018)
P. R. RAMESH
Partner
(Membership No.70928) | |
Bengaluru,October 11, 2019 | UDIN : 19070928AAAAAL2112 |
INFOSYS LIMITED AND SUBSIDIARIES
Condensed Consolidated Financial Statements under International Financial Reporting Standards (IFRS) in Indian Rupee for the three months and six months ended September 30, 2019
Index |
Condensed Consolidated Balance Sheet |
Condensed Consolidated Statement of Comprehensive Income |
Condensed Consolidated Statement of Changes in Equity |
Condensed 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 Leases |
2.9 Goodwill |
2.10 Business combinations |
2.11 Employees' Stock Option Plans (ESOP |
2.12 Income Taxes |
2.13 Reconciliation of basic and diluted shares used in computing earnings per share |
2.14 Related party transactions |
2.15 Segment reporting |
2.16 Revenue from Operations |
2.17 Unbilled Revenue |
2.18 Break-up of expenses and other Income, net |
2.19 Equity |
Infosys Limited and subsidiaries
(In crore except equity share
data)
Condensed Consolidated Balance Sheet as at | Note | September 30, 2019 | March 31, 2019 |
ASSETS | |||
Current assets | |||
Cash and cash equivalents | 2.1 | 16,473 | 19,568 |
Current investments | 2.2 | 3,518 | 6,627 |
Trade receivables | 16,055 | 14,827 | |
Unbilled revenue | 2.17 | 7,269 | 5,374 |
Prepayments and other current assets | 2.4 | 5,392 | 5,723 |
Income tax assets | 2.12 | 34 | 423 |
Derivative financial instruments | 2.3 | 108 | 336 |
Total current assets | 48,849 | 52,878 | |
Non-current assets | |||
Property, plant and equipment | 2.7 | 13,313 | 13,356 |
Right-of-use assets | 2.8 | 3,917 | – |
Goodwill | 2.9 | 4,080 | 3,540 |
Intangible assets | 1,356 | 691 | |
Non-current investments | 2.2 | 3,943 | 4,634 |
Deferred income tax assets | 2.12 | 1,363 | 1,372 |
Income tax assets | 2.12 | 6,407 | 6,320 |
Other non-current assets | 2.4 | 1,983 | 1,947 |
Total non-current assets | 36,362 | 31,860 | |
Total assets | 85,211 | 84,738 | |
LIABILITIES AND EQUITY | |||
Current liabilities | |||
Trade payables | 2,134 | 1,655 | |
Lease liabilities | 2.8 | 515 | – |
Derivative financial instruments | 2.3 | 38 | 15 |
Current income tax liabilities | 2.12 | 1,528 | 1,567 |
Client deposits | 16 | 26 | |
Unearned revenue | 2,708 | 2,809 | |
Employee benefit obligations | 1,825 | 1,619 | |
Provisions | 2.6 | 608 | 576 |
Other current liabilities | 2.5 | 9,839 | 10,371 |
Total current liabilities | 19,211 | 18,638 | |
Non-current liabilities | |||
Lease liabilities | 2.8 | 3,562 | – |
Deferred income tax liabilities | 2.12 | 707 | 672 |
Employee benefit obligations | 45 | 44 | |
Other non-current liabilities | 2.5 | 805 | 378 |
Total liabilities | 24,330 | 19,732 | |
Equity | |||
Share capital - ![]() |
2.19 | 2,121 | 2,170 |
Share premium | 520 | 396 | |
Retained earnings | 53,802 | 58,848 | |
Cash flow hedge reserves | 14 | 21 | |
Other reserves | 3,099 | 2,570 | |
Capital redemption reserve | 111 | 61 | |
Other components of equity | 854 | 882 | |
Total equity attributable to equity holders of the Company | 60,521 | 64,948 | |
Non-controlling interests | 360 | 58 | |
Total equity | 60,881 | 65,006 | |
Total liabilities and equity | 85,211 | 84,738 |
The accompanying notes form an integral part of the interim 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 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 October 11, 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)
Condensed Consolidated Statement of Comprehensive Income for the | Three months ended September 30, | Six months ended September 30, | |||
Note | 2019 | 2018 | 2019 | 2018 | |
Revenues | 2.16 | 22,629 | 20,609 | 44,432 | 39,737 |
Cost of sales | 2.18 | 15,079 | 13,281 | 29,858 | 25,569 |
Gross profit | 7,550 | 7,328 | 14,574 | 14,168 | |
Operating expenses | |||||
Selling and marketing expenses | 2.18 | 1,162 | 1,088 | 2,336 | 2,092 |
Administrative expenses | 2.18 | 1,476 | 1,346 | 2,855 | 2,645 |
Total operating expenses | 2,638 | 2,434 | 5,191 | 4,737 | |
Operating profit | 4,912 | 4,894 | 9,383 | 9,431 | |
Other income, net | 2.18 | 626 | 739 | 1,362 | 1,465 |
Finance cost | 2.8 | (42) | – | (82) | – |
Reduction in the fair value of Disposal Group held for sale | – | – | – | (270) | |
Profit before income taxes | 5,496 | 5,633 | 10,663 | 10,626 | |
Income tax expense | 2.12 | 1,459 | 1,523 | 2,824 | 2,905 |
Net profit | 4,037 | 4,110 | 7,839 | 7,721 | |
Other comprehensive income | |||||
Items that will not be reclassified subsequently to profit or loss | |||||
Remeasurement of the net defined benefit liability/asset, net | (22) | 3 | (39) | 4 | |
Equity instruments through other comprehensive income, net | 2 | 8 | 5 | 12 | |
(20) | 11 | (34) | 16 | ||
Items that will be reclassified subsequently to profit or loss | |||||
Fair value changes on derivatives designated as cash flow hedge, net | 17 | (29) | (7) | (20) | |
Exchange differences on translation of foreign operations | (35) | 334 | (10) | 421 | |
Fair value changes on investments, net | 2 | (15) | 18 | (60) | |
(16) | 290 | 1 | 341 | ||
Total other comprehensive income/(loss), net of tax | (36) | 301 | (33) | 357 | |
Total comprehensive income | 4,001 | 4,411 | 7,806 | 8,078 | |
Profit attributable to: | |||||
Owners of the Company | 4,019 | 4,110 | 7,817 | 7,721 | |
Non-controlling interests | 18 | – | 22 | – | |
4,037 | 4,110 | 7,839 | 7,721 | ||
Total comprehensive income attributable to: | |||||
Owners of the Company | 3,984 | 4,411 | 7,782 | 8,078 | |
Non-controlling interests | 17 | – | 24 | – | |
4,001 | 4,411 | 7,806 | 8,078 | ||
Earnings per equity share | |||||
Basic (![]() |
9.46 | 9.45 | 18.28 | 17.76 | |
Diluted (![]() |
9.44 | 9.44 | 18.25 | 17.74 | |
Weighted average equity shares used in computing earnings per equity share | 2.13 | ||||
Basic | 4,249,343,678 | 4,347,055,177 | 4,275,615,916 | 4,346,857,296 | |
Diluted | 4,255,822,953 | 4,352,208,472 | 4,282,322,537 | 4,351,915,210 |
The accompanying notes form an integral part of the interim 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 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 October 11, 2019 |
D. Sundaram Director |
Nilanjan Roy Chief Financial Officer |
A. G. S. Manikantha Company Secretary |
Infosys Limited and subsidiaries
Condensed 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, 2018 | 2,173,312,301 | 1,088 | 186 | 61,241 | 1,583 | 56 | 769 | – | 64,923 | 1 | 64,924 |
Changes in equity for the six months ended September 30, 2018 | |||||||||||
Net profit | – | – | – | 7,721 | – | – | – | – | 7,721 | – | 7,721 |
Remeasurement of the net defined benefit liability/asset* | – | – | – | – | – | – | 4 | – | 4 | – | 4 |
Fair value changes on derivatives designated as Cash flow hedge* | – | – | – | – | – | – | 12 | – | 12 | – | 12 |
Exchange differences on translation of foreign operations | – | – | – | – | – | – | – | (20) | (20) | – | (20) |
Equity instruments through other comprehensive income* | – | – | – | – | – | – | 421 | – | 421 | – | 421 |
Fair value changes on investments, net* | – | – | – | – | – | – | (60) | – | (60) | – | (60) |
Total comprehensive income for the period | – | – | – | 7,721 | – | – | 377 | (20) | 8,078 | – | 8,078 |
Shares issued on exercise of employee stock options - before bonus issue (Refer to note 2.11) | 392,528 | – | – | – | – | – | – | – | – | – | – |
Increase in share capital on account of bonus issue | 2,173,704,829 | 1,088 | – | – | – | – | – | – | 1,088 | – | 1,088 |
Shares issued on exercise of employee stock options - after bonus issue (Refer to note 2.11) | 42,940 | – | – | – | – | – | – | – | – | – | – |
Amount utilized for bonus issue | – | – | – | (1,088) | – | – | – | – | (1,088) | – | (1,088) |
Employee stock compensation expense (refer to note 2.11) | – | – | 94 | – | – | – | – | – | 94 | – | 94 |
Tax effect on exercise of options | – | – | 2 | – | – | – | – | – | 2 | – | 2 |
Transfer on account of options not exercised | – | – | (1) | 1 | – | – | – | – | – | – | – |
Transferred to other reserves | – | – | – | (1,106) | 1,106 | – | – | – | – | – | – |
Transferred from other reserves on utilization | – | – | – | 375 | (375) | – | – | – | – | – | – |
Dividends (including dividend distribution tax) | – | – | – | (7,949) | – | – | – | – | (7,949) | – | (7,949) |
Balance as at September 30, 2018 | 4,347,452,598 | 2,176 | 281 | 59,195 | 2,314 | 56 | 1,146 | (20) | 65,148 | 1 | 65,149 |
Balance as at April 1, 2019 | 4,335,954,462 | 2,170 | 396 | 58,848 | 2,570 | 61 | 882 | 21 | 64,948 | 58 | 65,006 |
Impact on account of adoption of IFRS 16* (refer to note 2.8) | – | – | – | (40) | – | – | – | – | (40) | – | (40) |
4,335,954,462 | 2,170 | 396 | 58,808 | 2,570 | 61 | 882 | 21 | 64,908 | 58 | 64,966 | |
Changes in equity for the six months ended September 30, 2019 | |||||||||||
Net profit | – | – | – | 7,817 | – | – | – | – | 7,817 | 22 | 7,839 |
Remeasurement of the net defined benefit liability/asset* | – | – | – | – | – | – | (39) | – | (39) | – | (39) |
Equity instruments through other comprehensive income* | – | – | – | – | – | – | 5 | – | 5 | – | 5 |
Fair value changes on derivatives designated as cash flow hedge* | – | – | – | – | – | – | – | (7) | (7) | – | (7) |
Exchange differences on translation of foreign operations | – | – | – | – | – | – | (12) | – | (12) | 2 | (10) |
Fair value changes on investments, net* | – | – | – | – | – | – | 18 | – | 18 | – | 18 |
Total comprehensive income for the period | – | – | – | 7,817 | – | – | (28) | (7) | 7,782 | 24 | 7,806 |
Shares issued on exercise of employee stock options (Refer to note 2.11) | 1,395,470 | – | 1 | – | – | – | – | – | 1 | – | 1 |
Buyback of equity shares (Refer to note 2.5 and 2.19) | (97,867,266) | (49) | – | (6,211) | – | – | – | – | (6,260) | – | (6,260) |
Transaction cost relating to buyback* | – | – | – | (11) | – | – | – | – | (11) | – | (11) |
Amount transferred to capital redemption reserve upon buyback (Refer to note 2.19) | – | – | – | (50) | – | 50 | – | – | – | – | – |
Non-controlling interests on acquisition of subsidiary (Refer to note 2.10) | – | – | – | – | – | – | – | – | – | 311 | 311 |
Employee stock compensation expense (refer to note 2.11) | – | – | 117 | – | – | – | – | – | 117 | – | 117 |
Income tax benefit arising on exercise of stock options | – | – | 7 | – | – | – | – | – | 7 | – | 7 |
Transfer on account of options not exercised | – | – | (1) | 1 | – | – | – | – | – | – | – |
Dividends paid to non controlling interest of subsidiary | – | – | – | – | – | – | – | – | – | (33) | (33) |
Financial liability under option arrangements (refer to note 2.10) | – | – | – | (598) | – | – | – | – | (598) | – | (598) |
Transferred to other reserves | – | – | – | (1,145) | 1,145 | – | – | – | – | – | – |
Transferred from other reserves on utilization | – | – | – | 616 | (616) | – | – | – | – | – | – |
Dividends (including dividend distribution tax) | – | – | – | (5,425) | – | – | – | – | (5,425) | – | (5,425) |
Balance as at September 30, 2019 | 4,239,482,666 | 2,121 | 520 | 53,802 | 3,099 | 111 | 854 | 14 | 60,521 | 360 | 60,881 |
* net of tax
(1) | excludes treasury shares of 18,929,512 as at September 30, 2019, 20,324,982 as at April 1, 2019, 20,930,382 as at September 30, 2018 and 10,801,956 as at April 1, 2018, held by consolidated trust. The treasury shares as at April 1, 2018 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 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 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 October 11, 2019 |
D. Sundaram Director |
Nilanjan Roy Chief Financial Officer |
A. G. S. Manikantha Company Secretary |
Infosys Limited and subsidiaries
Condensed 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 | Six months ended September 30, | ||
Note | 2019 | 2018 | |
Operating activities: | |||
Net Profit | 7,839 | 7,721 | |
Adjustments to reconcile net profit to net cash provided by operating activities: | |||
Depreciation and amortization | 2.18 | 1,408 | 900 |
Income tax expense | 2.12 | 2,824 | 2,905 |
Finance cost | 2.8 | 82 | – |
Interest and dividend income | (283) | (398) | |
Effect of exchange rate changes on assets and liabilities | 54 | 57 | |
Impairment loss under expected credit loss model | 82 | 142 | |
Reduction in the fair value of Disposal Group held for sale | – | 270 | |
Stock compensation expense | 2.11 | 119 | 97 |
Other adjustments | (102) | (65) | |
Changes in working capital | |||
Trade receivables and unbilled revenue | (1,578) | (2,679) | |
Prepayments and other assets | 473 | (116) | |
Trade payables | (1,071) | 488 | |
Client deposits | (11) | 52 | |
Unearned revenue | (110) | 89 | |
Other liabilities and provisions | 1,051 | 1,581 | |
Cash generated from operations | 10,777 | 11,044 | |
Income taxes paid | (2,705) | (3,653) | |
Net cash provided by operating activities | 8,072 | 7,391 | |
Investing activities: | |||
Expenditure on property, plant and equipment | (1,891) | (1,091) | |
Loans to employees | 5 | 9 | |
Deposits placed with corporation | (7) | (11) | |
Interest and dividend received | 200 | 320 | |
Payment of contingent consideration pertaining to acquisition of business | – | (6) | |
Payment towards acquisition of business, net of cash acquired | 2.10 | (511) | (210) |
Investment in equity and preference securities | (41) | (21) | |
Investment in others investments | (16) | (8) | |
Proceeds from sale of equity and preference securities | 3 | – | |
Proceeds from sale of other investments | 10 | – | |
Investment in certificates of deposit | – | (1,268) | |
Redemption of certificates of deposit | 1,995 | 950 | |
Investment in quoted debt securities | (1,632) | (17) | |
Redemption of quoted debt securities | 2,571 | 303 | |
Redemption of commercial paper | 500 | 300 | |
Redemption of escrow pertaining to Buyback | 2.4 | 257 | – |
Other receipts | 23 | – | |
Investment in liquid mutual fund units and fixed maturity plan securities | (18,295) | (39,650) | |
Redemption of liquid mutual fund units and fixed maturity plan securities | 18,946 | 38,935 | |
Net cash (used)/generated in investing activities | 2,117 | (1,465) | |
Financing activities: | |||
Payment of lease liabilities | 2.8 | (294) | – |
Payment of dividends including corporate dividend tax | (5,422) | (7,949) | |
Payment of dividends to non-controlling interests of subsidiary | (33) | – | |
Buyback of equity shares including transaction cost | 2.19.1 | (7,478) | – |
Shares issued on exercise of employee stock options | 1 | – | |
Net cash used in financing activities | (13,226) | (7,949) | |
Effect of exchange rate changes on cash and cash equivalents | (58) | 64 | |
Net increase/(decrease) in cash and cash equivalents | (3,037) | (2,023) | |
Cash and cash equivalents at the beginning of the period | 2.1 | 19,568 | 19,871 |
Cash and cash equivalents at the end of the period | 2.1 | 16,473 | 17,912 |
Supplementary information: | |||
Restricted cash balance | 2.1 | 375 | 330 |
The accompanying notes form an integral part of the interim 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 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 October 11, 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).
The Group's consolidated financial statements are authorized for issue by the Company's Board of Directors on October 11, 2019.
1.2 Basis of preparation of financial statements
These interim condensed 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. Accordingly, these interim condensed consolidated financial statements do not include all the information required for a complete set of financial statements. These interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s consolidated financial statements under IFRS in indian rupee for the year ended March 31, 2019. Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.
As the quarter and year-to-date figures are taken from the source and rounded to the nearest digits, the quarter figures in this statement added up to the figures reported for the previous quarters might not always add up to the year-to-date figures reported in this statement.
1.3 Basis of consolidation
Infosys consolidates entities which it owns or controls. The 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 and judgments
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. (Refer to Note 2.12)
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, value of option arrangements and intangible assets. These valuations are conducted by external valuation experts. (Refer to Note. 2.10)
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 2.7).
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. Leases
IFRS 16 requires lessees to determine the lease term as the non-cancellable period of a lease adjusted with any option to extend or terminate the lease, if the use of such option is reasonably certain. The Group makes an assessment on the expected lease term on a lease-by-lease basis and thereby assesses whether it is reasonably certain that any options to extend or terminate the contract will be exercised. In evaluating the lease term, the Company considers factors such as any significant leasehold improvements undertaken over the lease term, costs relating to the termination of the lease and the importance of the underlying asset to Infosys’s operations taking into account the location of the underlying asset and the availability of suitable alternatives. The lease term in future periods is reassessed to ensure that the lease term reflects the current economic circumstances.
1.6 Recent accounting pronouncements
Standards issued but not yet effective
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:
(In crore)
Particulars | As at | |
September 30, 2019 | March 31, 2019 | |
Cash and bank deposits | 11,754 | 14,197 |
Deposits with financial institutions | 4,719 | 5,371 |
Total Cash and cash equivalents | 16,473 | 19,568 |
Cash and cash equivalents as at September 30,
2019 and March 31, 2019 include restricted cash and bank balances of 375 crore and
358 crore, respectively. The restrictions
are primarily on account of bank balances held by irrevocable trusts controlled by the Company and bank balances held as margin
money deposits against guarantees.
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.
2.2 Investments
The carrying value of the investments are as follows:
(In crore)
Particulars | As at | |
September 30, 2019 | March 31, 2019 | |
(i) Current | ||
Amortised Cost | ||
Quoted debt securities | ||
Cost | – | 18 |
Fair Value through profit or loss | ||
Liquid mutual fund units | ||
Fair value | 1,220 | 1,786 |
Fixed Maturity Plan Securities | ||
Fair value | 476 | – |
Fair Value through other comprehensive income | ||
Quoted Debt Securities | ||
Fair value | 1,275 | 1,846 |
Commercial paper | ||
Fair value | – | 495 |
Certificates of deposit | ||
Fair value | 547 | 2,482 |
Total current investments | 3,518 | 6,627 |
(ii) Non-current | ||
Amortised Cost | ||
Quoted debt securities | ||
Cost | 1,910 | 1,893 |
Fair Value through other comprehensive income | ||
Quoted debt securities | ||
Fair value | 1,832 | 2,144 |
Unquoted equity and preference securities | ||
Fair value | 145 | 100 |
Fair Value through profit or loss | ||
Unquoted Preference securities | ||
Fair value | 24 | 23 |
Fixed Maturity Plan Securities | ||
Fair value | – | 458 |
Others | ||
Fair value(1) | 32 | 16 |
Total non-current investments | 3,943 | 4,634 |
Total investments | 7,461 | 11,261 |
Investments carried at amortised cost | 1,910 | 1,911 |
Investments carried at fair value through other comprehensive income | 3,799 | 7,067 |
Investments carried at fair value through profit or loss | 1,752 | 2,283 |
(1) | Uncalled capital commitments outstanding as at September 30, 2019 and March 31, 2019
was ![]() ![]() |
Refer note 2.3 for accounting policies on financial instruments.
Method of fair valuation:
(In crore)
Class of investment | Method | Fair value as at | |
September 30, 2019 | March 31, 2019 | ||
Liquid mutual fund units | Quoted price | 1,220 | 1,786 |
Fixed maturity plan securities | Market observable inputs | 476 | 458 |
Quoted debt securities- carried at amortized cost | Quoted price and market observable inputs | 2,199 | 2,125 |
Quoted debt securities- carried at fair value through other comprehensive income | Quoted price and market observable inputs | 3,107 | 3,990 |
Certificates of deposit | Market observable inputs | 547 | 2,482 |
Commercial paper | Market observable inputs | – | 495 |
Unquoted equity and preference securities - carried at fair value through other comprehensive income | Discounted cash flows method, Market multiples method, Option pricing model, etc. | 145 | 100 |
Unquoted equity and preference securities - carried at fair value through profit or loss | Discounted cash flows method, Market multiples method, Option pricing model, etc. | 24 | 23 |
Others | Discounted cash flows method, Market multiples method, Option pricing model, etc. | 32 | 16 |
Total | 7,750 | 11,475 |
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 and financial liability under option arrangements 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.
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 September 30, 2019 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 to Note 2.1) | 16,473 | – | – | – | – | 16,473 | 16,473 |
Investments (Refer to Note 2.2) | |||||||
Liquid mutual fund units | – | – | 1,220 | – | – | 1,220 | 1,220 |
Fixed maturity plan securities | – | – | 476 | – | – | 476 | 476 |
Quoted debt securities | 1,910 | – | – | – | 3,107 | 5,017 | 5,306(1) |
Certificates of deposit | – | – | – | – | 547 | 547 | 547 |
Unquoted equity and preference securities | – | – | 24 | 145 | – | 169 | 169 |
Unquoted investment others | – | – | 32 | – | – | 32 | 32 |
Trade receivables | 16,055 | – | – | – | – | 16,055 | 16,055 |
Unbilled revenues (3) (Refer to Note 2.17) | 2,843 | – | – | – | – | 2,843 | 2,843 |
Prepayments and other assets (Refer to Note 2.4) | 3,801 | – | – | – | – | 3,801 | 3,723(2) |
Derivative financial instruments | – | – | 77 | – | 31 | 108 | 108 |
Total | 41,082 | – | 1,829 | 145 | 3,685 | 46,741 | 46,952 |
Liabilities: | |||||||
Trade payables | 2,134 | – | – | – | – | 2,134 | 2,134 |
Derivative financial instruments | – | – | 36 | – | 2 | 38 | 38 |
Financial liability under option arrangements (Refer to note 2.10) | – | – | 600 | – | – | 600 | 600 |
Other liabilities including contingent consideration (Refer to Note 2.5) | 8,072 | – | 204 | – | – | 8,276 | 8,276 |
Total | 10,206 | – | 840 | – | 2 | 11,048 | 11,048 |
(1) On account of fair value changes including interest accrued
(2) Excludes interest accrued
on quoted debt securities carried at amortized cost of 78 crore
(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, 2019 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 to Note 2.1) | 19,568 | – | – | – | – | 19,568 | 19,568 |
Investments (Refer to Note 2.2) | |||||||
Liquid mutual fund units | – | – | 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 papers | – | – | – | – | 495 | 495 | 495 |
Unquoted equity and preference securities | – | – | 23 | 100 | – | 123 | 123 |
Unquoted investments others | – | – | 16 | – | – | 16 | 16 |
Trade receivables | 14,827 | – | – | – | – | 14,827 | 14,827 |
Unbilled revenue (3)(Refer to Note 2.17) | 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 of 84 crore.
(3) | Excludes unbilled revenue for fixed price development contracts where right to consideration is conditional on factors other than passage of time |
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 September 30, 2019:
(In crore)
Particulars | As at September 30, 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) | 1,220 | 1,220 | – | – |
Investments in fixed maturity plan securities (Refer to Note 2.2) | 476 | – | 476 | – |
Investments in quoted debt securities (Refer to Note 2.2) | 5,306 | 3,203 | 2,103 | – |
Investments in certificates of deposit (Refer to Note 2.2) | 547 | – | 547 | – |
Investments in unquoted equity and preference securities (Refer to Note 2.2) | 169 | – | – | 169 |
Investments in unquoted investments others (Refer to Note 2.2) | 32 | – | – | 32 |
Derivative financial instruments - gain on outstanding foreign exchange forward and option contracts | 108 | – | 108 | – |
Liabilities | ||||
Derivative financial instruments - loss on outstanding foreign exchange forward and option contracts | 38 | – | 38 | – |
Financial liability under option arrangements (Refer to note 2.10) | 600 | – | – | 600 |
Liability towards contingent consideration (Refer to Note 2.5)* | 204 | – | – | 204 |
* Discount rate pertaining to contingent consideration ranges from 9% to 15%
During the six months ended September 30, 2019,
quoted debt securities of 279 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
974 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, 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 papers (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 |
Investments in unquoted convertible promissory note (Refer to Note 2.2) | – | – | – | – |
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%
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.
2.4 Prepayments and other assets
Prepayments and other assets consist of the following:
(In crore)
Particulars | As at | |
September 30, 2019 | March 31, 2019 | |
Current | ||
Rental deposits | 21 | 15 |
Security deposits | 7 | 4 |
Loans to employees | 240 | 241 |
Prepaid expenses(1) | 876 | 751 |
Interest accrued and not due | 836 | 905 |
Withholding taxes and others(1) | 1,288 | 1,488 |
Advance payments to vendors for supply of goods(1) | 68 | 109 |
Deposit with corporations* | 1,727 | 1,671 |
Deferred contract cost(1) | 54 | 58 |
Escrow and other deposits pertaining to buyback (refer to note 2.19.1) | – | 257 |
Net investment in sublease of right of use asset (refer to note 2.8) | 32 | – |
Other assets | 243 | 224 |
Total Current prepayment and other assets | 5,392 | 5,723 |
Non-current | ||
Loans to employees | 16 | 19 |
Deposit with corporations* | 23 | 67 |
Rental deposits | 204 | 193 |
Security deposits | 50 | 52 |
Withholding taxes and others(1) | 876 | 929 |
Deferred contract cost(1) | 244 | 277 |
Prepaid expenses(1) | 150 | 162 |
Advance pertaining to business acquisition (1) | – | 206 |
Net investment in sublease of right of use asset (refer to note 2.8) | 390 | – |
Prepaid gratuity(1) | 18 | 42 |
Other assets | 12 | – |
Total Non- current prepayment and other assets | 1,983 | 1,947 |
Total prepayment and other assets | 7,375 | 7,670 |
Financial assets in prepayments and other assets | 3,801 | 3,648 |
(1) Non financial assets
Withholding taxes and others primarily consist
of input tax credits and Cenvat recoverable from Government of India. Cenvat recoverable includes 471 crore which are pending
adjudication. The Group expects these amounts to be sustainable on adjudication and recoverable on final resolution.
* | 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 | |
September 30, 2019 | March 31, 2019 | |
Current | ||
Accrued compensation to employees | 2,626 | 2,572 |
Accrued expenses | 4,178 | 3,319 |
Withholding taxes and others(1) | 1,659 | 1,487 |
Retention money | 102 | 112 |
Liabilities of controlled trusts | 154 | 168 |
Deferred income - government grant on land use rights(1) | 1 | 1 |
Accrued gratuity (1) | 3 | 2 |
Liability towards contingent consideration | 116 | 102 |
Deferred rent (1) | – | 63 |
Capital Creditors | 284 | 676 |
Financial liability relating to buyback # | – | 1,202 |
Other non-financial liabilities(1) | 2 | – |
Other financial liabilities | 714 | 667 |
Total current other liabilities | 9,839 | 10,371 |
Non-current | ||
Liability towards contingent consideration | 88 | 88 |
Accrued gratuity (1) | 36 | 30 |
Accrued compensation to employees | 8 | 15 |
Deferred income - government grant on land use rights(1) | 40 | 42 |
Deferred rent (1) | – | 174 |
Deferred income(1) | 25 | 29 |
Other financial liabilities | 6 | – |
Other non-financial liabilities(1) | 2 | – |
Financial liability under option arrangements (refer to note 2.10) | 600 | – |
Total non-current other liabilities | 805 | 378 |
Total other liabilities | 10,644 | 10,749 |
Financial liabilities included in other liabilities | 8,876 | 8,921 |
Financial liability towards contingent consideration on an undiscounted basis | 235 | 233 |
(1)Non financial liabilities
# | In accordance with IAS 32 Financial Instruments: Presentation, the Company has recorded a financial liability as at March 31, 2019 for the obligation to acquire its own equity shares to the extent of standing instructions provided to its registered broker for the buyback (refer to note 2.19.1). 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. |
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.
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 on 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 | |
September 30, 2019 | March 31, 2019 | |
Provision for post sales client support and other provisions | 608 | 576 |
608 | 576 |
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 1 year.
Provision for post sales client support and other provisions is included in cost of sales in the consolidated statement of comprehensive income.
As at September 30, 2019 and March 31, 2019
claims against the Group, not acknowledged as debts, (excluding demands from income tax authorities- Refer to Note 2.12) amounted
to 230 crore and
230 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 September 30, 2019:
(In crore)
Particulars | Land | Buildings | Plant and machinery | Computer equipment | Furniture and fixtures | Vehicles | Total |
Gross carrying value as at July 1, 2019 | 1,305 | 9,074 | 4,104 | 6,086 | 2,412 | 40 | 23,021 |
Additions | 7 | 330 | 328 | 230 | 258 | 2 | 1,155 |
Deletions | – | – | (1) | (72) | (6) | (1) | (80) |
Translation difference | – | (11) | – | (3) | (2) | – | (16) |
Gross carrying value as at September 30, 2019 | 1,312 | 9,393 | 4,431 | 6,241 | 2,662 | 41 | 24,080 |
Accumulated depreciation as at July 1, 2019 | – | (3,009) | (2,804) | (4,380) | (1,612) | (23) | (11,828) |
Depreciation | – | (88) | (118) | (222) | (82) | (2) | (512) |
Accumulated depreciation on deletions | – | – | 1 | 71 | 6 | 1 | 79 |
Reclassified on account of adoption of IFRS 16 (Refer note 2.8) | – | – | – | – | – | – | – |
Translation difference | – | (1) | – | 4 | 3 | – | 6 |
Accumulated depreciation as at September 30, 2019 | – | (3,098) | (2,921) | (4,527) | (1,685) | (24) | (12,255) |
Capital work-in progress as at July 1, 2019 | 1,944 | ||||||
Carrying value as at July 1, 2019 | 1,305 | 6,065 | 1,300 | 1,706 | 800 | 17 | 13,137 |
Capital work-in progress as at September 30, 2019 | 1,488 | ||||||
Carrying value as at September 30, 2019 | 1,312 | 6,295 | 1,510 | 1,714 | 977 | 17 | 13,313 |
Following are the changes in the carrying value of property, plant and equipment for the three months ended September 30, 2018:
(In crore)
Particulars | Land | Buildings | Plant and machinery | Computer equipment | Furniture and fixtures | Vehicles | Total |
Gross carrying value as at July 1, 2018 | 1,946 | 8,220 | 3,405 | 5,102 | 1,893 | 33 | 20,599 |
Additions | 2 | 45 | 53 | 165 | 38 | 2 | 305 |
Deletions | – | – | (4) | (42) | (3) | (1) | (50) |
Translation difference | – | 14 | 4 | 14 | 9 | – | 41 |
Gross carrying value as at September 30, 2018 | 1,948 | 8,279 | 3,458 | 5,239 | 1,937 | 34 | 20,895 |
Accumulated depreciation as at July 1, 2018 | (32) | (2,794) | (2,443) | (3,789) | (1,374) | (19) | (10,451) |
Depreciation | (2) | (78) | (108) | (183) | (62) | (2) | (435) |
Accumulated depreciation on deletions | – | – | 4 | 40 | 3 | 1 | 48 |
Translation difference | – | – | (2) | (13) | (8) | – | (23) |
Accumulated depreciation as at September 30, 2018 | (34) | (2,872) | (2,549) | (3,945) | (1,441) | (20) | (10,861) |
Capital work-in progress as at July 1, 2018 | 2,044 | ||||||
Carrying value as at July 1, 2018 | 1,914 | 5,426 | 962 | 1,313 | 519 | 14 | 12,192 |
Capital work-in progress as at September 30, 2018 | 2,342 | ||||||
Carrying value as at September 30, 2018 | 1,914 | 5,407 | 909 | 1,294 | 496 | 14 | 12,376 |
Following are the changes in the carrying value of property, plant and equipment for the six months ended September 30, 2019:
(In crore)
Particulars | Land | Buildings | Plant and machinery | Computer equipment | Furniture and fixtures | Vehicles | Total |
Gross carrying value as at April 1, 2019 | 1,910 | 8,926 | 3,951 | 5,846 | 2,220 | 38 | 22,891 |
Additions | 7 | 494 | 487 | 441 | 447 | 4 | 1,880 |
Additions - Business combinations (Refer to Note 2.10) | – | – | – | 60 | 10 | – | 70 |
Deletions | – | – | (6) | (102) | (10) | (1) | (119) |
Reclassified on account of adoption of IFRS 16 (Refer note 2.8) | (605) | – | – | – | – | – | (605) |
Translation difference | – | (27) | (1) | (4) | (5) | – | (37) |
Gross carrying value as at September 30, 2019 | 1,312 | 9,393 | 4,431 | 6,241 | 2,662 | 41 | 24,080 |
Accumulated depreciation as at April 1, 2019 | (33) | (2,927) | (2,697) | (4,192) | (1,541) | (22) | (11,412) |
Depreciation | – | (172) | (231) | (440) | (158) | (3) | (1,004) |
Accumulated depreciation on deletions | – | – | 6 | 101 | 10 | 1 | 118 |
Reclassified on account of adoption of IFRS 16 (Refer note 2.8) | 33 | – | – | – | – | – | 33 |
Translation difference | – | 1 | 1 | 4 | 4 | – | 10 |
Accumulated depreciation as at September 30, 2019 | – | (3,098) | (2,921) | (4,527) | (1,685) | (24) | (12,255) |
Capital work-in progress as at April 1, 2019 | 1,877 | ||||||
Carrying value as at April 1, 2019 | 1,877 | 5,999 | 1,254 | 1,654 | 679 | 16 | 13,356 |
Capital work-in progress as at September 30, 2019 | 1,488 | ||||||
Carrying value as at September 30, 2019 | 1,312 | 6,295 | 1,510 | 1,714 | 977 | 17 | 13,313 |
Following are the changes in the carrying value of property, plant and equipment for the six months ended September 30, 2018:
(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 | 69 | 134 | 89 | 397 | 74 | 4 | 767 |
Additions- Business combinations (Refer note 2.10) | – | – | 2 | 1 | 4 | – | 7 |
Deletions | (21) | – | (10) | (55) | (10) | (1) | (97) |
Translation difference | – | 15 | 4 | 12 | 8 | – | 39 |
Gross carrying value as at September 30, 2018 | 1,948 | 8,279 | 3,458 | 5,239 | 1,937 | 34 | 20,895 |
Accumulated depreciation as at April 1, 2018 | (31) | (2,719) | (2,342) | (3,630) | (1,323) | (18) | (10,063) |
Depreciation | (3) | (153) | (215) | (358) | (121) | (3) | (853) |
Accumulated depreciation on deletions | – | – | 10 | 53 | 10 | 1 | 74 |
Translation difference | – | – | (2) | (10) | (7) | – | (19) |
Accumulated depreciation as at September 30, 2018 | (34) | (2,872) | (2,549) | (3,945) | (1,441) | (20) | (10,861) |
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 September 30, 2018 | 2,342 | ||||||
Carrying value as at September 30, 2018 | 1,914 | 5,407 | 909 | 1,294 | 496 | 14 | 12,376 |
The aggregate depreciation expense is included in cost of sales in the consolidated statement of comprehensive income.
The contractual commitments for capital expenditure
were 1,247 crore and
1,724 crore as at September 30, 2019 and March 31, 2019, respectively.
2.8 Leases
Accounting Policy
The Group as a lessee
The Group’s lease asset classes primarily consist of leases for land and buildings. The group assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the group assesses whether: (1) the contract involves the use of an identified asset (2) the group has substantially all of the economic benefits from use of the asset through the period of the lease and (3) the group has the right to direct the use of the asset.
At the date of commencement of the lease, the Group recognizes a right-of-use asset (“ROU”) and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases) and low value leases. For these short-term and low value leases, the Group recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease.
Certain lease arrangements includes the options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised.
The right-of-use assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset. Right of use 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 Cash Generating Unit (CGU) to which the asset belongs.
The lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates in the country of domicile of the leases. Lease liabilities are remeasured with a corresponding adjustment to the related right of use asset if the group changes its assessment if whether it will exercise an extension or a termination option.
Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.
The Group as a lessor
Leases for which the group is a lessor is classified as a finance or operating lease. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.
When the Group is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately. The sublease is classified as a finance or operating lease by reference to the right-of-use asset arising from the head lease.
For operating leases, rental income is recognized on a straight line basis over the term of the relevant lease.
Transition
Effective April 1, 2019, the Group adopted IFRS 16 “Leases” and applied the standard to all lease contracts existing on April 1, 2019 using the modified retrospective method and has taken the cumulative adjustment to retained earnings, on the date of initial application. Consequently, the group recorded the lease liability at the present value of the lease payments discounted at the incremental borrowing rate and the right of use asset at its carrying amount as if the standard had been applied since the commencement date of the lease, but discounted at the lessee’s incremental borrowing rate at the date of initial application. Comparatives as at and for the year ended March 31, 2019 have not been retrospectively adjusted and therefore will continue to be reported under the accounting policies included as part of our Annual Report for year ended March 31, 2019
On transition, the adoption of the new standard
resulted in recognition of 'Right of Use' asset of 2,907 crore, 'Net investment in sub-lease' of ROU asset of
430
crore and a lease liability of
3,598 crore. The cumulative effect of applying the standard, amounting to
40 crore
was debited to retained earnings, net of taxes. The effect of this adoption is insignificant on the operating profit, net profit
for the period and earnings per share. IFRS 16 will result in an increase in cash inflows from operating activities and an increase
in cash outflows from financing activities on account of lease payments.
The following is the summary of practical expedients elected on initial application:
1. | Applied a single discount rate to a portfolio of leases of similar assets in similar economic environment with a similar end date |
2. | Applied the exemption not to recognize right-of-use assets and liabilities for leases with less than 12 months of lease term on the date of initial application |
3. | Excluded the initial direct costs from the measurement of the right-of-use asset at the date of initial application. |
4. | Applied the practical expedient to grandfather the assessment of which transactions are leases. Accordingly, IFRS 16 is applied only to contracts that were previously identified as leases under IAS 17. |
The difference between the lease obligation recorded as at March 31, 2019 under IAS 17 disclosed under Note 2.15 of the 2019 Annual Report on Form 20F and the value of the lease liabilities as at April 1, 2019 is primarily on account of inclusion of extension and termination options reasonably certain to be exercised, in measuring the lease liability in accordance with IFRS 16 and discounting the lease liabilities to the present value under IFRS 16.
The weighted average incremental borrowing rate applied to lease liabilities as at April 1, 2019 is 4.5%
Following are the changes in the carrying value of right of use assets for the three months ended September 30, 2019:
(In crore)
Particulars | Category of ROU asset | Total | |||
Land | Buildings | Vehicles | Computers | ||
Balance as of July 1, 2019 | 630 | 3,079 | 20 | – | 3,729 |
Additions | 0 | 320 | 2 | 26 | 348 |
Deletions | (3) | (5) | 0 | 0 | (8) |
Depreciation | (2) | (131) | (3) | (1) | (137) |
Translation difference | 0 | (14) | (1) | – | (15) |
Balance as of September 30, 2019 | 625 | 3,249 | 18 | 25 | 3,917 |
Following are the changes in the carrying value of right of use assets for the six months ended September 30, 2019:
(In crore)
Particulars | Category of ROU asset | Total | |||
Land | Buildings | Vehicles | Computers | ||
Balance as at April 1, 2019 | – | 2,898 | 9 | – | 2,907 |
Reclassified on account of adoption of IFRS 16 | 634 | – | – | – | 634 |
Additions | – | 437 | 4 | 26 | 467 |
Additions through business combination (Refer to Note 2.10) | – | 177 | 10 | – | 187 |
Deletions | (3) | (5) | – | – | (8) |
Depreciation | (4) | (252) | (5) | (1) | (262) |
Translation difference | (2) | (6) | – | – | (8) |
Balance as at September 30, 2019 | 625 | 3,249 | 18 | 25 | 3,917 |
The aggregate depreciation expense on ROU assets is included in cost of sales in the consolidated statement of comprehensive income.
The following is the break-up of current and non-current lease liabilities as at September 30, 2019
(In crore)
Particulars | Amount |
Current lease liabilities | 515 |
Non-current lease liabilities | 3,562 |
Total | 4,077 |
The following is the movement in lease liabilities during the three months and six months ended September 30, 2019:
(In crore)
Particulars | Three Months ended September 30, 2019 |
Six Months ended September 30,2019 |
Balance as at Beginning | 3,832 | 3,598 |
Additions | 348 | 467 |
Additions through business combination (Refer to Note 2.10) | – | 224 |
Deletions | (5) | (5) |
Finance cost accrued during the period | 42 | 82 |
Payment of lease liabilities | (154) | (294) |
Translation difference | 14 | 5 |
Balance as at end | 4,077 | 4,077 |
The table below provides details regarding the contractual maturities of lease liabilities as at September 30, 2019 on an undiscounted basis:
(In crore)
Particulars | Amount |
Less than one year | 689 |
One to five years | 2,293 |
More than five years | 1,858 |
Total | 4,840 |
The group does not face a significant liquidity risk with regard to its lease liabilities as the current assets are sufficient to meet the obligations related to lease liabilities as and when they fall due
Rental expense recorded for short-term leases
was 22 crore and
42 crore for the three months and six months ended September 30, 2019.
The following is the movement in the net-investment in sub-lease of ROU asset during the three months and six months ended September 30, 2019:
(In crore)
Particulars | Three Months ended September 30,2019 |
Six Months ended September 30,2019 |
Balance as at Beginning | 429 | 430 |
Interest income accrued during the period | 4 | 8 |
Lease receipts | (23) | (23) |
Translation difference | 12 | 7 |
Balance as at end | 422 | 422 |
The table below provides details regarding the contractual maturities of net investment in sublease of ROU asset as at September 30, 2019 on an undiscounted basis:
(In crore)
Particulars | Amount |
Less than one year | 46 |
One to five years | 200 |
More than five years | 256 |
Total | 502 |
2.9 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 | |
September 30, 2019 | March 31, 2019 | |
Carrying value at the beginning | 3,540 | 2,211 |
Goodwill on Wongdoody acquisition | – | 173 |
Goodwill on Fluido acquisition | – | 240 |
Goodwill reclassified from assets held for sale , net of reduction in recoverable amount | – | 863 |
Goodwill on Stater acquisition (Refer to note 2.10) | 399 | – |
Goodwill on Hipus acquisition (Refer to note 2.10) | 108 | – |
Translation differences | 33 | 53 |
Carrying value at the end | 4,080 | 3,540 |
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.
2.10 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.
The payments related to options issued by the Group over the non-controlling interests in its subsidiaries are accounted as financial liabilities and initially recognized at the estimated present value of gross obligations. Such options are subsequently measured at fair value in order to reflect the amount payable under the option at the date at which it becomes exercisable. In the event that the option expires unexercised, the liability is derecognised.
Business combinations between entities under common control is outside the scope of IFRS 3 (Revised), Business Combinations and is accounted for at carrying value of the assets and liabilities in the Group's consolidated financial statements.
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.
HIPUS Co. Ltd (formerly, 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 HIPUS Co Limited a wholly owned subsidiary of
Hitachi Ltd, Japan for a total cash consideration of JPY 3.29 billion (approximately 206 crore). The company has recorded
a financial liability for the estimated present value of its gross obligation to purchase the Non-controlling interest as at the
acquisition date in accordance with the share purchase agreement with a corresponding adjustment to equity (refer note 2.5)
HIPUS handles indirect materials purchasing functions for the Hitachi Group. The entity is expected to provide end-to-end procurement capabilities, through its procurement function expertise, localized team and BPM networks in Japan. 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(*) | 41 | – | 41 |
Intangible assets - Customer contracts and relationships# | – | 116 | 116 |
Deferred tax liabilities on intangible assets | – | (36) | (36) |
41 | 80 | 121 | |
Goodwill | 108 | ||
Less: Non-controlling interest | (23) | ||
Total purchase price | 206 |
* Includes cash and cash equivalents acquired
of 179 crore.
# Useful life is in the range of 5 to 15 years.
Goodwill is not tax deductible
The gross amount of trade receivables acquired
and its fair value is 1,400 crore and the amount has been fully collected. Trade payables as on the acquisition date amounted
to
1,508 crore.
The transaction costs of 8 crore related
to the acquisition have been included under administrative expenses in the statement of comprehensive income for the year ended
March 31, 2019.
Stater N.V.
On May 23, 2019, Infosys Consulting Pte Limited
(a wholly owned subsidiary of Infosys Limited) acquired 75% of voting interests in Stater N.V (Stater), a wholly-owned subsidiary
of ABN AMRO Bank N.V., Netherland, for a total cash consideration of Euro 154 million (approximately 1,195 crore). The company
has recorded a financial liability for the estimated present value of its gross obligation to purchase the Non-controlling interest
as at the acquisition date in accordance with the share purchase agreement with a corresponding adjustment to equity (refer note
2.5)
Stater brings European mortgage expertise and a robust digital platform to drive superior customer experience. 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(*) | 541 | – | 541 |
Intangible assets - Customer contracts and relationships # | – | 549 | 549 |
Intangible assets - Technology # | – | 110 | 110 |
Intangible assets - Brand # | – | 24 | 24 |
Deferred tax liabilities on intangible assets | – | (140) | (140) |
541 | 543 | 1,084 | |
Goodwill | 399 | ||
Less: Non controlling interest | (288) | ||
Total purchase price | 1,195 |
* Includes cash and cash equivalents acquired
of 505 crore.
# Useful lives are in the range of 5 to 15 years.
Goodwill is not tax deductible.
The gross amount of trade receivables acquired
and its fair value is 78 crore and the amount is substantially collected.
The transaction costs of 5 crore related
to the acquisition have been included under administrative expenses in the statement of comprehensive income for the three months
ended June 30, 2019.
Proposed transfer
On October 11, 2019, the Board of Directors of Infosys authorized the Company to execute a Business Transfer Agreement and related documents with its wholly owned subsidiaries, Kallidus Inc and Skava Systems Private Limited (together referred to as Skava), to transfer the business of Skava to Infosys Limited, subject to securing the requisite regulatory approvals for a consideration based on an independent valuation. The transfer between entities under common control would be accounted for at carrying value and would not have any impact on the consolidated financial statements.
2.11 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.
Infosys Expanded Stock Ownership Program 2019 (the 2019 Plan)
On June 22, 2019 pursuant to the approval by the shareholders in the Annual General Meeting , the Board has been authorized to introduce, offer, issue and provide share-based incentives to eligible employees of the Company and its subsidiaries under the 2019 Plan. The maximum number of shares under the 2019 plan shall not exceed 50,000,000 equity shares. To implement the 2019 Plan , upto 45,000,000 equity shares may be issued by way of secondary acquisition of shares by the Infosys Expanded Stock Ownership Trust. The RSUs granted under the 2019 plan shall vest based on the achievement of defined annual performance parameters as determined by the administrator. The performance parameters will be based on a combination of relative Total Shareholder Return (TSR) and operating performance metrics of the company as decided by administrator. Each of the above performance parameters will be distinct for the purposes of calculation of quantity of shares to vest based on performance. These instruments will generally vest between a minimum of 1 to maximum of 3 years from the grant date.
2015 Stock Incentive Compensation Plan (the 2015 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). 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.
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.
Consequent to the September 2018 bonus issue, all the then 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 1,89,29,512 and 2,03,24,982 shares as at September 30, 2019 and March 31, 2019, respectively under the 2015 plan. Out of these shares 2,00,000 equity shares each have been earmarked for welfare activities of the employees as at September 30, 2019 and March 31, 2019.
The following is the summary of grants during the three months and six months ended September 30, 2019 and September 30, 2018 under the 2015 Plan:
Particulars | Three months ended September 30, |
Six months ended September 30, | ||
2019 | 2018* | 2019 | 2018* | |
2015 Plan: RSU | ||||
KMPs | – | – | 212,096 | 217,200 |
Employees other than KMP | 24,650 | 1,787,120 | 36,850 | 1,787,120 |
Total Grants | 24,650 | 1,787,120 | 248,946 | 2,004,320 |
Incentive unit - cash settled | ||||
Employees other than KMP | – | 52,590 | – | 52,590 |
– | 52,590 | – | 52,590 | |
Total Grants | 24,650 | 18,39,710 | 2,48,946 | 20,56,910 |
* Information is adjusted for September, 2018 bonus issue
Notes on grants to KMP:
CEO & MD
Under the 2015 plan:
The Board, on April 12, 2019, based on the recommendations
of the Nomination and Remuneration Committee, approved the performance-based grant of RSUs amounting to 13 crore for the
financial year 2020 under the 2015 Plan. These RSUs will vest in line with the employment agreement based on achievement of certain
performance targets. Accordingly, 177,887 performance based RSU’s were granted effective May 2, 2019.
In accordance with the shareholders approval in the Annual General meeting held on June 22, 2019, the Board, based on the recommendations of the Nomination and Remuneration Committee, approved to amend the vesting period of the annual performance equity grant from three years to one year. Accordingly the vesting period of 217,200 (adjusted for September 2018 bonus issue) performance based RSUs granted effective May 2, 2018 and 177,887 performance based RSU's granted effective May 2,2019 have been amended to one year.
In accordance with the employee agreement which
has been approved by the shareholders, the CEO is eligible to receive an annual grant of RSUs of fair value 3.25 crore which
will vest overtime in three equal annual installments upon the completion of each year of service from the respective grant date.
Though the annual time based grants for the remaining employment term ending on March 31, 2023 have not been granted as of September
30, 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.
Under the 2019 plan:
In accordance with the shareholders approval
in Annual General meeting held on June 22, 2019, the Board, based on the recommendations of the Nomination and Remuneration Committee,
approved performance-based grant of RSUs amounting to 10 crore for financial year 2020 under the 2019 Plan to Salil Parekh,
CEO and MD. These RSUs will vest in line with the employment agreement based on achievement of certain performance targets. Accordingly,
134,138 performance based RSU’s were granted effective June 22, 2019.
COO and Whole time director
In accordance with the shareholders approval
in Annual General meeting held on June 22, 2019, the Board, based on the recommendations of the Nomination and Remuneration Committee,
approved performance-based grant of RSUs amounting to 4 crore for financial year 2020 under the 2019 Plan to U. B. Pravin
Rao, COO and WTD. These RSUs will vest in line with the employment agreement based on achievement of certain performance targets.
Accordingly, 53,655 performance based RSU’s were granted effective June 22, 2019
Other KMP
Based on the recommendations of the Nomination and Remuneration Committee, the Board , approved performance-based grant of 10,263 RSUs and time based grant of 23,946 RSUs to other KMP under the 2015 Plan duirng the six months ended September 30, 2019.The grants were made effective May 2, 2019. These RSUs will vest generally over three to four years and additionally the performance based RSUs will vest based on achievement of certain performance targets.
Break-up of employee stock compensation expense
(in crore)
Particulars | Three months ended September 30, |
Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Granted to: | ||||
KMP | 13 | 10 | 31 | 19 |
Employees other than KMP | 41 | 44 | 88 | 78 |
Total (1) | 54 | 54 | 119 | 97 |
(1) Cash settled stock compensation expense included in the above | 1 | 2 | 2 | 3 |
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 2020- Equity Shares-RSU |
Fiscal 2020- ADS-RSU |
Fiscal 2019- Equity Shares-RSU |
Fiscal 2019- ADS-RSU | |
Weighted average share price (![]() |
732 | 11.00 | 696 | 10.77 |
Exercise price (![]() |
5.00 | 0.07 | 3.31 | 0.06 |
Expected volatility (%) | 22-24 | 22-26 | 21-25 | 22-26 |
Expected life of the option (years) | 1-4 | 1-4 | 1-4 | 1-4 |
Expected dividends (%) | 2-3 | 2-3 | 2.65 | 2.65 |
Risk-free interest rate (%) | 6-7 | 1-3 | 7-8 | 2-3 |
Weighted average fair value as on grant date (![]() |
676 | 10.43 | 648 | 10.03 |
(1) Fiscal 2019 values are adjusted for September, 2018 bonus issue wherever applicable
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 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 September 30, |
Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Current taxes | ||||
Domestic taxes | 1,063 | 1,214 | 2,163 | 2,339 |
Foreign taxes | 425 | 398 | 784 | 724 |
1,488 | 1,612 | 2,947 | 3,063 | |
Deferred taxes | ||||
Domestic taxes | 33 | (35) | 30 | (30) |
Foreign taxes | (62) | (54) | (153) | (128) |
(29) | (89) | (123) | (158) | |
Income tax expense | 1,459 | 1,523 | 2,824 | 2,905 |
Income tax expense for the three months ended
September 30, 2019 and September 30, 2018 includes reversal (net of provisions) of 76 crore and reversal (net of provisions)
of
2 crore respectively. Income tax expense for the six months ended September 30, 2019 and September 30, 2018 includes
reversal (net of provisions) of
119 crore and reversal (net of provisions)
61 crore respectively. These reversals
(net of provisions) 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 September 30, |
Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Profit before income taxes | 5,496 | 5,633 | 10,663 | 10,626 |
Enacted tax rates in India | 34.94% | 34.94% | 34.94% | 34.94% |
Computed expected tax expense | 1,920 | 1,968 | 3,726 | 3,713 |
Tax effect due to non-taxable income for Indian tax purposes | (604) | (659) | (1,176) | (1,268) |
Overseas taxes | 219 | 228 | 409 | 430 |
Tax provision (reversals) | (76) | (2) | (119) | (61) |
Effect of exempt non-operating income | (10) | (9) | (21) | (34) |
Effect of unrecognized deferred tax assets | 29 | 18 | 46 | 56 |
Effect of differential overseas tax rates | (10) | 6 | (19) | (6) |
Effect of non-deductible expenses | 24 | (9) | 45 | 117 |
Branch profit tax (net of credits) | (28) | (27) | (57) | (56) |
Others | (5) | 9 | (10) | 14 |
Income tax expense | 1,459 | 1,523 | 2,824 | 2,905 |
The applicable Indian corporate statutory tax rate for the three months and six months ended September 30, 2019 and September 30, 2018 is 34.94% each.
Deferred income tax for the three months and six months ended September 30, 2019 and September 30, 2018 substantially relates to origination and reversal of temporary differences
As at September 30, 2019, claims against the
Group not acknowledged as debts from the Indian Income tax authorities amounted to 2,866 crore. Amount paid to statutory
authorities against this amounted to
5,909 crore.
As at March 31, 2019, claims against the Group
not acknowledged as debts from the Income tax authorities amounted to 2,851 crore. Amount paid to statutory authorities
against the above tax claims amounted to
5,924 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.
2.13 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.
2.14 Related party transactions
Refer Note 2.19 "Related party transactions" in the Company’s 2019 Consolidated financial statements under IFRS in indian rupee for the full names and other details of the Company's subsidiaries and controlled trusts.
Changes in Subsidiaries
During the six months ended September 30, 2019, the following are the changes in the subsidiaries:
- | On April 1, 2019, Infosys Consulting Pte Ltd, a wholly-owned subsidiary of Infosys Limited, acquired 81% of voting interest in HIPUS Co Ltd, Japan, a wholly owned subsidiary of Hitachi Ltd, Japan. (Refer to note 2.10) |
- | On May 23, 2019, Infosys Consulting Pte Ltd, a wholly-owned subsidiary of Infosys Limited, acquired 75% of voting interest in Stater N.V along with its eight subsidiaries Stater Netherland B.V., Stater Duitsland B.V., Stater XXL B.V., HypoCasso B.V., Stater Participations B.V., Stater Deutschland Verwaltungs-GmbH, Stater Deutschland GmbH & Co.KG, Stater Belgium N.V./S.A. (Refer to note 2.10) |
Changes in Controlled trust
The following were the changes in controlled trusts:-
- On May 15, 2019, the Company registered Infosys Expanded Stock Ownership Trust
Transaction with key management personnel:
The table below describes the compensation to key managerial personnel which comprise directors and executive officers:
(In crore)
Particulars | Three months ended September 30, |
Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Salaries and other employee benefits to whole-time directors and executive officers (1) | 28 | 25 | 60 | 49 |
Commission and other benefits to non-executive / independent directors | 2 | 2 | 4 | 4 |
Total | 30 | 27 | 64 | 53 |
(1) | Total employee stock compensation expense for the three months ended September
30, 2019 and September 30, 2018 includes a charge of ![]() ![]() ![]() ![]() |
2.15 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. The Chief Operating Decision Maker 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.
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 centers 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.
Disclosure of revenue by geographic locations is given in note 2.16 Revenue from operations
2.15.1 Business segments
Three months ended September 30, 2019 and September 30, 2018
(In crore)
Particulars | Financial Services | Retail | Communication | Energy, Utilities, Resources and Services | Manufacturing | Hi Tech | Life Sciences | All other segments | Total |
Revenues | 7,213 | 3,448 | 2,961 | 2,962 | 2,291 | 1,713 | 1,454 | 587 | 22,629 |
6,644 | 3,469 | 2,529 | 2,527 | 1,989 | 1,537 | 1,321 | 593 | 20,609 | |
Identifiable operating expenses | 3,718 | 1,722 | 1,756 | 1,564 | 1,264 | 1,015 | 770 | 355 | 12,164 |
3,530 | 1,771 | 1,351 | 1,409 | 1,107 | 850 | 691 | 363 | 11,072 | |
Allocated expenses | 1,629 | 688 | 582 | 580 | 518 | 306 | 292 | 225 | 4,820 |
1,338 | 664 | 519 | 522 | 417 | 269 | 254 | 197 | 4,180 | |
Segment profit | 1,866 | 1,038 | 623 | 818 | 509 | 392 | 392 | 7 | 5,645 |
1,776 | 1,034 | 659 | 596 | 465 | 418 | 376 | 33 | 5,357 | |
Unallocable expenses | 733 | ||||||||
463 | |||||||||
Operating profit | 4,912 | ||||||||
4,894 | |||||||||
Other income, net (Refer to note 2.18) | 626 | ||||||||
739 | |||||||||
Finance Costs (Refer Note 2.8) | (42) | ||||||||
– | |||||||||
Profit before income taxes | 5,496 | ||||||||
5,633 | |||||||||
Income tax expense | 1,459 | ||||||||
1,523 | |||||||||
Net profit | 4,037 | ||||||||
4,110 | |||||||||
Depreciation and amortization expense | 727 | ||||||||
463 | |||||||||
Non-cash expenses other than depreciation and amortization | 6 | ||||||||
– |
Six months ended September 30, 2019 and September 30, 2018
(In crore)
Particulars | Financial Services | Retail | Communication | Energy, Utilities, Resources and Services | Manufacturing | Hi Tech | Life Sciences | All other segments | Total |
Revenues | 14,069 | 6,883 | 5,964 | 5,796 | 4,390 | 3,392 | 2,795 | 1,143 | 44,432 |
12,719 | 6,637 | 4,958 | 4,901 | 3,826 | 2,959 | 2,581 | 1,156 | 39,737 | |
Identifiable operating expenses | 7,400 | 3,463 | 3,544 | 3,068 | 2,456 | 2,038 | 1,551 | 685 | 24,205 |
6,790 | 3,372 | 2,615 | 2,670 | 2,132 | 1,636 | 1,358 | 700 | 21,273 | |
Allocated expenses | 3,090 | 1,350 | 1,175 | 1,186 | 1,012 | 592 | 574 | 446 | 9,425 |
2,592 | 1,286 | 1,012 | 1,011 | 818 | 517 | 494 | 403 | 8,133 | |
Segment profit | 3,579 | 2,070 | 1,245 | 1,542 | 922 | 762 | 670 | 12 | 10,802 |
3,337 | 1,979 | 1,331 | 1,220 | 876 | 806 | 729 | 53 | 10,331 | |
Unallocable expenses | 1,419 | ||||||||
900 | |||||||||
Operating profit | 9,383 | ||||||||
9,431 | |||||||||
Other income, net (Refer to note 2.18) | 1,362 | ||||||||
1,465 | |||||||||
Finance Costs (Refer Note 2.8) | (82) | ||||||||
– | |||||||||
Reduction in the fair value of Disposal Group held for sale | – | ||||||||
(270) | |||||||||
Profit before income taxes | 10,663 | ||||||||
10,626 | |||||||||
Income tax expense | 2,824 | ||||||||
2,905 | |||||||||
Net profit | 7,839 | ||||||||
7,721 | |||||||||
Depreciation and amortization | 1,408 | ||||||||
900 | |||||||||
Non-cash expenses other than depreciation and amortization | 11 | ||||||||
270 |
2.15.2 Significant clients
No client individually accounted for more than 10% of the revenues in the three months and six months ended September 30, 2019 and September 30, 2018.
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 IFRS 15 “Revenue from Contracts with Customers” using the cumulative catch-up transition method, applied to contracts that were not completed as at 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 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 six months ended September 30, 2019 and September 30, 2018 are as follows:
(In crore)
Particulars | Three months ended September 30, |
Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Revenue from software services | 21,177 | 19,560 | 41,747 | 37,762 |
Revenue from products and platforms | 1,452 | 1,049 | 2,685 | 1,975 |
Total revenue from operations | 22,629 | 20,609 | 44,432 | 39,737 |
Disaggregated revenue information
The table below presents disaggregated revenues from contracts with customers by geography and offerings 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 September 30, 2019 and September 30, 2018
(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 | 4,151 | 2,245 | 1,858 | 1,644 | 1,305 | 1,617 | 943 | 126 | 13,889 |
4,061 | 2,239 | 1,276 | 1,436 | 1,061 | 1,471 | 786 | 101 | 12,431 | |
Europe | 1,569 | 992 | 439 | 1,036 | 875 | 44 | 473 | 36 | 5,464 |
1,242 | 957 | 468 | 856 | 865 | 26 | 502 | 33 | 4,949 | |
India | 340 | 13 | 51 | 1 | 23 | 46 | 13 | 120 | 607 |
292 | 5 | 11 | 1 | 21 | 32 | 3 | 151 | 516 | |
Rest of the world | 1,153 | 198 | 613 | 281 | 88 | 6 | 25 | 305 | 2,669 |
1,049 | 268 | 774 | 234 | 42 | 8 | 30 | 308 | 2,713 | |
7,213 | 3,448 | 2,961 | 2,962 | 2,291 | 1,713 | 1,454 | 587 | 22,629 | |
6,644 | 3,469 | 2,529 | 2,527 | 1,989 | 1,537 | 1,321 | 593 | 20,609 | |
Revenue by offerings | |||||||||
Digital | 2,828 | 1,475 | 1,173 | 1,113 | 853 | 623 | 449 | 164 | 8,678 |
2,073 | 1,180 | 870 | 705 | 575 | 518 | 325 | 95 | 6,341 | |
Core | 4,385 | 1,973 | 1,788 | 1,849 | 1,438 | 1,090 | 1,005 | 423 | 13,951 |
4,571 | 2,289 | 1,659 | 1,822 | 1,414 | 1,019 | 996 | 498 | 14,268 | |
7,213 | 3,448 | 2,961 | 2,962 | 2,291 | 1,713 | 1,454 | 587 | 22,629 | |
6,644 | 3,469 | 2,529 | 2,527 | 1,989 | 1,537 | 1,321 | 593 | 20,609 |
Six months ended September 30, 2019 and September 30, 2018
(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 | 8,184 | 4,468 | 3,739 | 3,207 | 2,481 | 3,212 | 1,783 | 239 | 27,313 |
7,724 | 4,311 | 2,471 | 2,805 | 2,044 | 2,841 | 1,528 | 182 | 23,906 | |
Europe | 2,907 | 1,981 | 888 | 2,030 | 1,697 | 85 | 947 | 73 | 10,608 |
2,404 | 1,849 | 950 | 1,649 | 1,656 | 42 | 988 | 68 | 9,606 | |
India | 638 | 25 | 81 | 2 | 42 | 83 | 18 | 223 | 1,112 |
568 | 12 | 23 | 2 | 42 | 67 | 5 | 293 | 1,012 | |
Rest of the world | 2,340 | 409 | 1,256 | 557 | 170 | 12 | 47 | 608 | 5,399 |
2,023 | 465 | 1,514 | 445 | 84 | 9 | 60 | 613 | 5,213 | |
14,069 | 6,883 | 5,964 | 5,796 | 4,390 | 3,392 | 2,795 | 1,143 | 44,432 | |
12,719 | 6,637 | 4,958 | 4,901 | 3,826 | 2,959 | 2,581 | 1,156 | 39,737 | |
Revenue by offerings | |||||||||
Digital | 5,333 | 2,897 | 2,244 | 2,085 | 1,617 | 1,206 | 813 | 272 | 16,467 |
3,788 | 2,177 | 1,620 | 1,346 | 1,065 | 976 | 627 | 166 | 11,765 | |
Core | 8,736 | 3,986 | 3,720 | 3,711 | 2,773 | 2,186 | 1,982 | 871 | 27,965 |
8,931 | 4,460 | 3,338 | 3,555 | 2,761 | 1,983 | 1,954 | 990 | 27,972 | |
Total | 14,069 | 6,883 | 5,964 | 5,796 | 4,390 | 3,392 | 2,795 | 1,143 | 44,432 |
12,719 | 6,637 | 4,958 | 4,901 | 3,826 | 2,959 | 2,581 | 1,156 | 39,737 |
(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, Stater digital platform 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( contract assets) 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.
2.17 Unbilled Revenue
(In crore)
Particulars | As at | |
September 30, 2019 | March 31, 2019 | |
Unbilled financial asset (1) | 2,843 | 2,093 |
Unbilled non financial asset (2) | 4,426 | 3,281 |
Total | 7,269 | 5,374 |
(1) Right to consideration is unconditional upon passage of time.
(2) Right to consideration is dependent on completion of contractual milestones.
2.18 Break-up of expenses and other income, net
a. 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.
The Hon’ble Supreme Court of India vide its judgment and subsequent review petition has ruled in respect of compensation for the purpose of Provident Fund contribution under the Employee’s Provident Fund Act. The Company has assessed possible outcomes of the judgment on determination of provident fund contributions and based on the Company’s current evaluation, it is not probable that certain allowances paid by the Company will be subject to payment of Provident Fund. The company will continue to monitor and evaluate its position based on future events and developments.
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.
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.
Operating Profits
Operating profit of the Group is computed considering the revenues, net of cost of sales, selling and marketing expenses and administrative expenses.
b. The table below provides details of break-up of expenses:
Cost of sales
(In crore)
Particulars | Three months ended September 30, |
Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Employee benefit costs | 11,335 | 9,976 | 22,331 | 19,324 |
Depreciation and amortization | 727 | 463 | 1,408 | 900 |
Travelling costs | 441 | 439 | 1,092 | 881 |
Cost of technical sub-contractors | 1,651 | 1,523 | 3,291 | 2,814 |
Cost of software packages for own use | 259 | 220 | 486 | 428 |
Third party items bought for service delivery to clients | 414 | 380 | 798 | 713 |
Operating lease payments | – | 87 | – | 168 |
Short-term leases (Refer to note 2.8) | 21 | – | 38 | – |
Consultancy and professional charges | 13 | 13 | 23 | 24 |
Communication costs | 74 | 59 | 146 | 115 |
Repairs and maintenance | 124 | 92 | 226 | 170 |
Provision for post-sales client support | 19 | 27 | 10 | 28 |
Others | 1 | 2 | 9 | 4 |
Total | 15,079 | 13,281 | 29,858 | 25,569 |
Selling and marketing expenses
(In crore)
Particulars | Three months ended September 30, |
Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Employee benefit costs | 903 | 785 | 1,779 | 1,535 |
Travelling costs | 89 | 98 | 193 | 199 |
Branding and marketing | 120 | 129 | 256 | 224 |
Short-term leases | 1 | – | 4 | – |
Operating leases | – | 20 | – | 37 |
Communication costs | 4 | 6 | 8 | 10 |
Consultancy and professional charges | 34 | 42 | 74 | 66 |
Others | 11 | 8 | 22 | 21 |
Total | 1,162 | 1,088 | 2,336 | 2,092 |
Administrative expenses
(In crore)
Particulars | Three months ended September 30, |
Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Employee benefit costs | 437 | 396 | 866 | 761 |
Consultancy and professional charges | 290 | 229 | 534 | 499 |
Repairs and maintenance | 281 | 228 | 554 | 430 |
Power and fuel | 61 | 60 | 121 | 120 |
Communication costs | 51 | 56 | 103 | 118 |
Travelling costs | 69 | 65 | 142 | 125 |
Impairment loss recognised/(reversed) under expected credit loss model | 36 | 76 | 88 | 146 |
Rates and taxes | 47 | 61 | 84 | 96 |
Insurance charges | 21 | 16 | 40 | 33 |
Operating leases | - | 38 | – | 66 |
Commission to non-whole time directors | 2 | 2 | 4 | 4 |
Contribution towards Corporate Social Responsibility | 100 | 57 | 168 | 131 |
Others | 81 | 62 | 151 | 116 |
Total | 1,476 | 1,346 | 2,855 | 2,645 |
Other income, net
(In crore)
Particulars | Three months ended September 30, |
Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Interest income on financial assets carried at amortized cost | 304 | 331 | 662 | 713 |
Interest income on financial assets carried at fair value through OCI | 81 | 159 | 196 | 326 |
Dividend income on investments carried at fair value through profit or loss | 1 | 1 | 1 | 1 |
Gain/(loss) on investments carried at fair value through PL | 37 | 52 | 102 | 85 |
Gain/(loss) on investments carried at fair value through OCI | 11 | – | 27 | – |
Exchange gains / (losses) on forward and options contracts | (43) | (412) | 96 | (597) |
Exchange gains / (losses) on translation of other assets and liabilities | 205 | 578 | 159 | 803 |
Others | 30 | 30 | 119 | 134 |
Total | 626 | 739 | 1,362 | 1,465 |
2.19 Equity
Accounting policy
Ordinary Shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares, share options and buyback are recognized as a deduction from equity, net of any tax effects.
Treasury Shares
When any entity within the Group purchases the company's ordinary shares, the consideration paid including any directly attributable incremental cost is presented as a deduction from total equity, until they are cancelled, sold or reissued. When treasury shares are sold or reissued subsequently, the amount received is recognized as an increase in equity, and the resulting surplus or deficit on the transaction is transferred to/ from Securities premium.
Retained earnings
Retained earnings represent the amount of accumulated earnings of the Group.
Share premium
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 profit and loss is credited to share premium.
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.
Capital Redemption Reserve
In accordance with section 69 of the Indian Companies Act, 2013, the Company creates capital redemption reserve equal to the nominal value of the shares bought back as an appropriation from general reserve.
Other components of equity
Other components of equity consist of currency translation, remeasurement of net defined benefit liability / asset, 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.
In December 2017, the International Accounting Standard Board issued amendments to IAS 12 – Income Taxes. The amendments clarify that an entity shall recognize the income tax consequences of dividends on financial instruments classified as equity according to where the entity originally recognized those past transactions or events that generated distributable profits were recognized. On April 1, 2019, the Group adopted these amendments and there was no impact of these amendments on the Company’s Consolidated financial statements.
2.19.1 Update on buyback of equity shares
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.
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 buyback of equity shares through the stock exchange commenced on March 20, 2019 and
was completed on August 26, 2019 and the Company purchased and extinguished a total of 11,05,19,266 equity shares at an average
buyback price of 747/- per equity share, comprising 2.53% of the pre-buyback paid-up equity share capital of the Company.
The buyback resulted in a cash outflow of
8,260 crore (excluding transaction costs). The Company funded the buyback from
its free reserves.
In accordance with section 69 of the Companies
Act, 2013, as at September 30, 2019, the Company has created ‘Capital Redemption Reserve’ of 55 crore equal
to the nominal value of the shares bought back as an appropriation from general reserve.
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 September 30, 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
2.19.2 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 fiscal 2018 the Company’s policy was to pay up to 70% of the free cash flow annually by way of dividend and/or buyback.
Effective from fiscal 2020, the company expects to return approximately 85% of the free cash flow cumulatively over a 5-year period through a combination of semi-annual dividends and/or share buyback and/or special dividends, 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 and buyback include applicable taxes.
Amount of per share dividend recognised as distribution to equity shareholders:-
(In )
Particulars | Three months ended September 30, |
Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Final dividend for fiscal 2018* | – | – | – | 10.25 |
Special dividend for fiscal 2018* | – | – | – | 5.00 |
Final dividend for fiscal 2019 | – | – | 10.50 | – |
*Dividend per share declared previously, retrospectively adjusted for September 2018 bonus issue.
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. The same
was approved by the Shareholders at the Annual General Meeting held on June 22, 2019 which resulted in a cash outflow of approximately
5,425 crore, excluding dividend paid on treasury shares and including dividend distribution tax.
The Board of Directors in their meeting on October
11, 2019 declared a interim dividend of 8/- per equity share which would result in a net cash outflow of approximately
4,092
crore excluding dividend paid on treasury shares and including dividend distribution tax.
2.19.3 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. 18,929,512 and 20,324,982 shares were held by controlled trust, as at
September 30, 2019 and March 31, 2019, respectively.
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 | ||
October 11, 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 September 30, 2019, the Condensed Statement of Profit and Loss (including Other Comprehensive Income) for the three months and six months period ended on that date, the Condensed Statement of Changes in Equity and the Condensed Statement of Cash Flows for the six months period 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 September 30, 2019, the profit and total comprehensive income for the three months and six months period ended on that date, changes in equity and its cash flows for the six months period 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) specified under section 143 (10) of the Act. 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 Institute of Chartered Accountants of India (“ICAI”) together with the ethical 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 ICAI’s Code of Ethics. We believe that the audit evidence obtained by us is sufficient and appropriate to provide a basis for our audit opinion.
Management Responsibilities 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 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 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 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 Company 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 interim condensed standalone 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 interim condensed standalone 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.
For DELOITTE HASKINS & SELLS LLP
Chartered Accountants
(Firm’s Registration No. 117366W/W-100018)
P. R. RAMESH
Partner
(Membership No.70928) | |
Bengaluru, October 11, 2019 | UDIN : 19070928AAAAAK5605 |
INFOSYS LIMITED
Condensed Standalone Financial Statements under Indian Accounting Standards (Ind AS) for the three months and six months ended September 30, 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 |
2. Notes to financial statements |
2.1 Property, plant and equipment |
2.2 Leases |
2.3 Investments |
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 Reconciliation of basic and diluted shares used in computing earning per share |
2.20 Contingent liabilities and commitments |
2.21 Related party transactions |
2.22 Segment Reporting |
INFOSYS LIMITED
(In crore)
Condensed Balance Sheet as at | Note No. | September 30, 2019 | March 31, 2019 |
ASSETS | |||
Non-current assets | |||
Property, plant and equipment | 2.1 | 10,564 | 10,394 |
Right-of-use assets | 2.2 | 2,628 | – |
Capital work-in-progress | 1,048 | 1,212 | |
Goodwill | 29 | 29 | |
Other intangible assets | 61 | 74 | |
Financial assets | |||
Investments | 2.3 | 11,353 | 12,062 |
Loans | 2.4 | 18 | 16 |
Other financial assets | 2.5 | 592 | 196 |
Deferred tax assets (net) | 1,085 | 1,114 | |
Income tax assets (net) | 5,942 | 5,870 | |
Other non-current assets | 2.8 | 1,590 | 1,740 |
Total non - current Assets | 34,910 | 32,707 | |
Current assets | |||
Financial assets | |||
Investments | 2.3 | 3,044 | 6,077 |
Trade receivables | 2.6 | 13,788 | 13,370 |
Cash and cash equivalents | 2.7 | 11,233 | 15,551 |
Loans | 2.4 | 2,012 | 1,048 |
Other financial assets | 2.5 | 4,581 | 4,834 |
Income tax assets (net) | – | 423 | |
Other current assets | 2.8 | 5,733 | 4,920 |
Total current assets | 40,391 | 46,223 | |
Total Assets | 75,301 | 78,930 | |
EQUITY AND LIABILITIES | |||
Equity | |||
Equity share capital | 2.10 | 2,129 | 2,178 |
Other equity | 56,346 | 60,533 | |
Total equity | 58,475 | 62,711 | |
LIABILITIES | |||
Non-current liabilities | |||
Financial liabilities | |||
Lease liabilities | 2.2 | 2,400 | – |
Other financial liabilities | 2.11 | 78 | 79 |
Deferred tax liabilities (net) | 426 | 541 | |
Other non-current liabilities | 2.13 | 25 | 169 |
Total non - current liabilities | 2,929 | 789 | |
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 | 1,241 | 1,604 | |
Lease liabilities | 2.2 | 330 | – |
Other financial liabilities | 2.11 | 7,265 | 8,528 |
Other current liabilities | 2.13 | 3,154 | 3,335 |
Provisions | 2.14 | 543 | 505 |
Income tax liabilities (net) | 1,364 | 1,458 | |
Total current liabilities | 13,897 | 15,430 | |
Total equity and liabilities | 75,301 | 78,930 |
The accompanying notes form an integral part of the interim condensed 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 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 October 11, 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 September 30, | Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | ||
Revenue from operations | 2.16 | 19,666 | 18,297 | 38,797 | 35,353 |
Other income, net | 2.17 | 604 | 742 | 1,316 | 1,458 |
Total income | 20,270 | 19,039 | 40,113 | 36,811 | |
Expenses | |||||
Employee benefit expenses | 2.18 | 10,604 | 9,489 | 20,985 | 18,315 |
Cost of technical sub-contractors | 2,046 | 1,902 | 4,090 | 3,569 | |
Travel expenses | 482 | 470 | 1,182 | 936 | |
Cost of software packages and others | 2.18 | 410 | 448 | 773 | 863 |
Communication expenses | 94 | 88 | 187 | 170 | |
Consultancy and professional charges | 253 | 241 | 486 | 493 | |
Depreciation and amortization expense | 542 | 390 | 1,052 | 764 | |
Finance cost | 2.2 | 28 | – | 55 | – |
Other expenses | 2.18 | 688 | 760 | 1,360 | 1,404 |
Reduction in the fair value of assets held for sale | – | – | – | 265 | |
Total expenses | 15,147 | 13,788 | 30,170 | 26,779 | |
Profit before tax | 5,123 | 5,251 | 9,943 | 10,032 | |
Tax expense: | |||||
Current tax | 2.15 | 1,316 | 1,467 | 2,632 | 2,796 |
Deferred tax | 2.15 | (22) | (95) | (87) | (145) |
Profit for the period | 3,829 | 3,879 | 7,398 | 7,381 | |
Other comprehensive income | |||||
Items that will not be reclassified subsequently to profit or loss | |||||
Remeasurement of the net defined benefit liability/asset, net | (18) | 3 | (35) | 2 | |
Equity instruments through other comprehensive income, net | 2 | 7 | 2 | 11 | |
Items that will be reclassified subsequently to profit or loss | |||||
Fair value changes on derivatives designated as cash flow hedge, net | 17 | (29) | (7) | (20) | |
Fair value changes on investments, net | 2.3 | 1 | (13) | 16 | (53) |
Total other comprehensive income/ (loss), net of tax | 2 | (32) | (24) | (60) | |
Total comprehensive income for the period | 3,831 | 3,847 | 7,374 | 7,321 | |
Earnings per equity share | |||||
Equity shares of par value ![]() |
|||||
Basic (![]() |
8.97 | 8.88 | 17.22 | 16.90 | |
Diluted (![]() |
8.96 | 8.88 | 17.21 | 16.89 | |
Weighted average equity shares used in computing earnings per equity share | |||||
Basic | 2.19 | 4,26,88,51,243 | 4,36,83,20,106 | 4,295,439,223 | 4,36,82,85,360 |
Diluted | 2.19 | 4,27,13,30,367 | 4,37,01,48,912 | 4,297,921,834 | 4,37,00,87,496 |
The accompanying notes form an integral part of the interim condensed 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 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 October 11, 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, 2018 | 1,092 | 28 | 55,671 | 1,677 | 130 | 1,559 | 54 | 3,219 | 56 | 2 | – | 14 | 63,502 |
Changes in equity for the six months ended September 30, 2018 | |||||||||||||
Profit for the period | – | – | 7,381 | – | – | – | – | – | – | – | – | – | 7,381 |
Remeasurement of the net defined benefit liability/asset* | – | – | – | – | – | – | – | – | – | – | – | 2 | 2 |
Equity instruments through other comprehensive income* (refer note no. 2.3) | – | – | – | – | – | – | – | – | – | 11 | – | – | 11 |
Fair value changes on derivatives designated as cash flow hedge* (refer note no. 2.9) | – | – | – | – | – | – | – | – | – | – | (20) | – | (20) |
Fair value changes on investments, net* (refer note no. 2.3) | – | – | – | – | – | – | – | – | – | – | – | (53) | (53) |
Total comprehensive income for the period | – | – | 7,381 | – | – | – | – | – | – | 11 | (20) | (51) | 7,321 |
Transfer to general reserve | – | – | (1,615) | 1,615 | – | – | – | – | – | – | – | – | – |
Transferred to Special Economic Zone Re-investment reserve | – | – | (1,068) | – | – | 1,068 | – | – | – | – | – | – | – |
Transferred from Special Economic Zone Re-investment reserve on utilization | – | – | 351 | – | – | (351) | – | – | – | – | – | – | – |
Exercise of stock options (refer note no. 2.10) | – | 42 | – | – | (42) | – | – | – | – | – | – | – | – |
Transfer on account of options not exercised | – | – | – | 1 | (1) | – | – | – | – | – | – | – | – |
Income tax benefit arising on exercise of stock options | – | 2 | – | – | – | – | – | – | – | – | – | – | 2 |
Increase in share capital on account of Bonus issue | 1,092 | – | – | – | – | – | – | – | – | – | – | – | 1,092 |
Amount utilised for Bonus issue | – | – | – | (1,092) | – | – | – | – | – | – | – | – | (1,092) |
Share based payment to employees of the group (refer note no. 2.10) | – | – | – | – | 94 | – | – | – | – | – | – | – | 94 |
Dividends (including dividend distribution tax) | – | – | (7,982) | – | – | – | – | – | – | – | – | – | (7,982) |
Balance as at September 30, 2018 | 2,184 | 72 | 52,738 | 2,201 | 181 | 2,276 | 54 | 3,219 | 56 | 13 | (20) | (37) | 62,937 |
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) | Securities Premium | 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, 2019 | 2,178 | 138 | 54,070 | 190 | 227 | 2,479 | 54 | 3,219 | 61 | 80 | 21 | (6) | 62,711 |
Impact on account of adoption of Ind AS 116 (Refer to note 2.2) | – | – | (17) | – | – | – | – | – | – | – | – | – | (17) |
2,178 | 138 | 54,053 | 190 | 227 | 2,479 | 54 | 3,219 | 61 | 80 | 21 | (6) | 62,694 | |
Changes in equity for the six months ended September 30, 2019 | |||||||||||||
Profit for the period | – | – | 7,398 | – | – | – | – | – | – | – | – | – | 7,398 |
Remeasurement of the net defined benefit liability/asset* | – | – | – | – | – | – | – | – | – | – | – | (35) | (35) |
Equity instruments through other comprehensive income* | – | – | – | – | – | – | – | – | – | 2 | – | – | 2 |
Fair value changes on derivatives designated as cash flow hedge* | – | – | – | – | – | – | – | – | – | – | (7) | – | (7) |
Fair value changes on investments* | – | – | – | – | – | – | – | – | – | – | – | 16 | 16 |
Total comprehensive income for the period | – | – | 7,398 | – | – | – | – | – | – | 2 | (7) | (19) | 7,374 |
Transfer to general reserve | – | – | (1,470) | 1,470 | – | – | – | – | – | – | – | – | – |
Transferred to Special Economic Zone Re-investment reserve | – | – | (1,096) | – | – | 1,096 | – | – | – | – | – | – | – |
Transferred from Special Economic Zone Re-investment reserve on utilization | – | – | 593 | – | – | (593) | – | – | – | – | – | – | – |
Amount transferred to capital redemption reserve upon buyback (refer note no. 2.10) | – | – | – | (50) | – | – | – | – | 50 | – | – | – | – |
Exercise of stock options (refer note no.2.10) | – | 77 | – | – | (77) | – | – | – | – | – | – | – | – |
Share based payments to employees (Refer to note no. 2.10) | – | – | – | – | 117 | – | – | – | – | – | – | – | 117 |
Income tax benefit arising on exercise of stock options | – | 7 | – | – | – | – | – | – | – | – | – | – | 7 |
Buyback of equity shares ( Refer note no. 2.10) | (49) | – | (4,717) | (1,494) | – | – | – | – | – | – | – | - | (6,260) |
Transaction cost relating to buyback* (Refer note no 2.10) | – | – | – | (11) | – | – | – | – | – | – | – | – | (11) |
Dividends (including dividend distribution tax) | – | – | (5,446) | – | – | – | – | – | – | – | – | – | (5,446) |
Balance as at September 30, 2019 | 2,129 | 222 | 49,315 | 105 | 267 | 2,982 | 54 | 3,219 | 111 | 82 | 14 | (25) | 58,475 |
*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 condensed 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 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 October 11, 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. | Six months ended September 30, | |
2019 | 2018 | ||
Cash flow from operating activities: | |||
Profit for the period | 7,398 | 7,381 | |
Adjustments to reconcile net profit to net cash provided by operating activities: | |||
Depreciation and amortization | 2.1 | 1,052 | 764 |
Income tax expense | 2.15 | 2,545 | 2,651 |
Impairment loss recognized / (reversed) under expected credit loss model | 53 | 136 | |
Finance cost | 2.2 | 55 | – |
Interest and dividend income | (837) | (1,020) | |
Stock compensation expense | 107 | – | |
Other adjustments | (66) | 44 | |
Reduction in the fair value of assets held for sale | – | 265 | |
Exchange differences on translation of assets and liabilities | 28 | 35 | |
Changes in assets and liabilities | |||
Trade receivables and unbilled revenue | (1,763) | (2,361) | |
Other financial assets and other assets | 478 | 7 | |
Trade payables | (363) | 428 | |
Other financial liabilities, other liabilities and provisions | 190 | 1,466 | |
Cash generated from operations | 8,877 | 9,796 | |
Income taxes paid | (2,353) | (3,390) | |
Net cash generated by operating activities | 6,524 | 6,406 | |
Cash flow from investing activities: | |||
Expenditure on property, plant and equipment | (1,770) | (986) | |
Deposits placed with corporations | (54) | (8) | |
Loans to employees | 1 | (2) | |
Loan given to subsidiary | (1,201) | – | |
Loan repaid by subsidiary | 276 | – | |
Proceeds from redemption of debentures | 187 | 100 | |
Investment in subsidiaries | – | (67) | |
Proceeds from return of investment | 6 | 33 | |
Payment towards acquisition of business | 2.3 | – | (261) |
Payment of contingent consideration pertaining to acquisition | – | (6) | |
Redemption of escrow pertaining to buyback | 2.5 | 257 | – |
Other receipts | 23 | – | |
Payments to acquire investments | – | ||
Preference, equity securities and others | (41) | (10) | |
Liquid mutual fund units and fixed maturity plan securities | (15,980) | (37,120) | |
Tax free bonds and Government bonds | (12) | (11) | |
Certificates of deposit | – | (926) | |
Government Securities | (1,561) | – | |
Others | – | (3) | |
Proceeds on sale of investments | – | ||
Liquid mutual fund units and fixed maturity plan securities | 16,655 | 36,387 | |
Tax free bonds and Government bonds | 13 | 1 | |
Non-convertible debentures | 1,383 | 302 | |
Certificates of deposit | 1,625 | 950 | |
Commercial paper | 500 | 300 | |
Government Securities | 1,170 | – | |
Interest and dividend received | 836 | 1,005 | |
Net cash used in investing activities | 2,313 | (322) | |
Cash flow from financing activities: | |||
Payment of lease liabilities | 2.2 | (194) | – |
Buyback of equity shares including transaction cost | (7,478) | – | |
Payment of dividends (including dividend distribution tax) | (5,443) | (7,982) | |
Net cash used in financing activities | (13,115) | (7,982) | |
Effect of exchange differences on translation of foreign currency cash and cash equivalents | (40) | (30) | |
Net increase / (decrease) in cash and cash equivalents | (4,278) | (1,898) | |
Cash and cash equivalents at the beginning of the period | 2.7 | 15,551 | 16,770 |
Cash and cash equivalents at the end of the period | 2.7 | 11,233 | 14,842 |
Supplementary information: | |||
Restricted cash balance | 2.7 | 134 | 143 |
The accompanying notes form an integral part of the interim condensed 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 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 October 11, 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).
The interim condensed standalone financial statements are approved for issue by the Company's Board of Directors on October 11, 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). Accordingly, these interim condensed 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 standalone financial statements and related notes included in the Company’s Annual Report for the year ended March 31, 2019. 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-to-date 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-to-date 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 and judgments
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. 2.20.
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. Leases
Ind AS 116 requires lessees to determine the lease term as the non-cancellable period of a lease adjusted with any option to extend or terminate the lease, if the use of such option is reasonably certain. The Company makes an assessment on the expected lease term on a lease-by-lease basis and thereby assesses whether it is reasonably certain that any options to extend or terminate the contract will be exercised. In evaluating the lease term, the Company considers factors such as any significant leasehold improvements undertaken over the lease term, costs relating to the termination of the lease and the importance of the underlying asset to Infosys’s operations taking into account the location of the underlying asset and the availability of suitable alternatives. The lease term in future periods is reassessed to ensure that the lease term reflects the current economic circumstances. Refer note no 2.2
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 September 30, 2019 are as follows:
(In crore)
Particulars | Land- Freehold | 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 July 1, 2019 | 1,305 | 8,234 | 2,700 | 966 | 5,218 | 1,572 | 487 | 39 | 20,521 |
Additions | 7 | 239 | 179 | 52 | 204 | 145 | 126 | 2 | 954 |
Deletions | – | – | (1) | – | (68) | (2) | – | – | (71) |
Gross carrying value as at September 30, 2019 | 1,312 | 8,473 | 2,878 | 1,018 | 5,354 | 1,715 | 613 | 41 | 21,404 |
Accumulated depreciation as at July 1, 2019 | – | (2,872) | (1,832) | (699) | (3,771) | (1,087) | (176) | (22) | (10,459) |
Depreciation | – | (80) | (75) | (31) | (188) | (54) | (22) | (2) | (452) |
Accumulated depreciation on deletions | – | – | 1 | – | 68 | 2 | – | – | 71 |
Accumulated depreciation as at September 30, 2019 | – | (2,952) | (1,906) | (730) | (3,891) | (1,139) | (198) | (24) | (10,840) |
Carrying value as at July 1, 2019 | 1,305 | 5,362 | 868 | 267 | 1,447 | 485 | 311 | 17 | 10,062 |
Carrying value as at September 30, 2019 | 1,312 | 5,521 | 972 | 288 | 1,463 | 576 | 415 | 17 | 10,564 |
The changes in the carrying value of property, plant and equipment for the three months ended September 30, 2018 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 July 1, 2018 | 1,258 | 640 | 7,360 | 2,230 | 851 | 4,422 | 1,274 | 237 | 31 | 18,303 |
Additions | 2 | – | 43 | 23 | 18 | 149 | 16 | 29 | 2 | 282 |
Deletions | – | – | – | (1) | (2) | (31) | (3) | – | (1) | (38) |
Gross carrying value as at September 30, 2018 | 1,260 | 640 | 7,403 | 2,252 | 867 | 4,540 | 1,287 | 266 | 32 | 18,547 |
Accumulated depreciation as at July 1, 2018 | – | (31) | (2,687) | (1,596) | (610) | (3,285) | (934) | (117) | (18) | (9,278) |
Depreciation | – | (1) | (69) | (70) | (30) | (159) | (42) | (11) | (2) | (384) |
Accumulated depreciation on deletions | – | – | – | 1 | 2 | 29 | 3 | – | 1 | 36 |
Accumulated depreciation as at September 30, 2018 | – | (32) | (2,756) | (1,665) | (638) | (3,415) | (973) | (128) | (19) | (9,626) |
Carrying value as at July 1, 2018 | 1,258 | 609 | 4,673 | 634 | 241 | 1,137 | 340 | 120 | 13 | 9,025 |
Carrying value as at September 30, 2018 | 1,260 | 608 | 4,647 | 587 | 229 | 1,125 | 314 | 138 | 13 | 8,921 |
The changes in the carrying value of property, plant and equipment for the six months ended September 30, 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, 2019 | 1,305 | 593 | 8,070 | 2,612 | 938 | 5,052 | 1,454 | 414 | 37 | 20,475 |
Additions | 7 | – | 403 | 267 | 81 | 385 | 265 | 199 | 4 | 1,611 |
Reclassified on account of adoption of Ind AS 116 (Refer to note 2.2) | – | (593) | – | – | – | – | – | – | – | (593) |
Deletions | – | – | – | (1) | (1) | (83) | (4) | – | – | (89) |
Gross carrying value as at September 30, 2019 | 1,312 | – | 8,473 | 2,878 | 1,018 | 5,354 | 1,715 | 613 | 41 | 21,404 |
Accumulated depreciation as at April 1, 2019 | – | (32) | (2,797) | (1,762) | (672) | (3,605) | (1,039) | (153) | (21) | (10,081) |
Depreciation | – | – | (155) | (145) | (59) | (369) | (104) | (45) | (3) | (880) |
Reclassified on account of adoption of Ind AS 116 (Refer to note 2.2) | – | 32 | – | – | – | – | – | – | – | 32 |
Accumulated depreciation on deletions | – | – | – | 1 | 1 | 83 | 4 | – | – | 89 |
Accumulated depreciation as at September 30, 2019 | – | – | (2,952) | (1,906) | (730) | (3,891) | (1,139) | (198) | (24) | (10,840) |
Carrying value as at April 1, 2019 | 1,305 | 561 | 5,273 | 850 | 266 | 1,447 | 415 | 261 | 16 | 10,394 |
Carrying value as at September 30, 2019 | 1,312 | – | 5,521 | 972 | 288 | 1,463 | 576 | 415 | 17 | 10,564 |
The changes in the carrying value of property, plant and equipment for the six months ended September 30, 2018 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 | 33 | – | 132 | 45 | 29 | 350 | 44 | 31 | 4 | 668 |
Deletions | – | (21) | – | (2) | (3) | (39) | (4) | – | (1) | (70) |
Gross carrying value as at September 30, 2018 | 1,260 | 640 | 7,403 | 2,252 | 867 | 4,540 | 1,287 | 266 | 32 | 18,547 |
Accumulated depreciation as at April 1, 2018 | – | (30) | (2,621) | (1,526) | (582) | (3,143) | (896) | (107) | (17) | (8,922) |
Depreciation | – | (2) | (135) | (141) | (59) | (309) | (81) | (21) | (3) | (751) |
Accumulated depreciation on deletions | – | – | – | 2 | 3 | 37 | 4 | – | 1 | 47 |
Accumulated depreciation as at September 30, 2018 | – | (32) | (2,756) | (1,665) | (638) | (3,415) | (973) | (128) | (19) | (9,626) |
Carrying value as at April 1, 2018 | 1,227 | 631 | 4,650 | 683 | 259 | 1,086 | 351 | 128 | 12 | 9,027 |
Carrying value as at September 30, 2018 | 1,260 | 608 | 4,647 | 587 | 229 | 1,125 | 314 | 138 | 13 | 8,921 |
(1) | Buildings include ![]() ![]() |
(2) | Includes certain assets provided on cancellable operating lease to subsidiaries. |
The aggregate depreciation has been included under depreciation and amortization expense in the interim condensed statement of Profit and Loss.
2.2 LEASES
Accounting Policy
The Company as a lessee
The Company’s lease asset classes primarily consist of leases for land and buildings. The Company assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Company assesses whether: (i) the contract involves the use of an identified asset (ii) the Company has substantially all of the economic benefits from use of the asset through the period of the lease and (iii) the Company has the right to direct the use of the asset.
At the date of commencement of the lease, the Company recognizes a right-of-use asset (“ROU”) and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases) and low value leases. For these short-term and low value leases, the Company recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease.
Certain lease arrangements includes the options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised.
The right-of-use assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset. Right of use 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 Cash Generating Unit (CGU) to which the asset belongs.
The lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates in the country of domicile of these leases. Lease liabilities are remeasured with a corresponding adjustment to the related right of use asset if the Company changes its assessment if whether it will exercise an extension or a termination option.
Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.
The Company as a lessor
Leases for which the Company is a lessor is classified as a finance or operating lease. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.
When the Company is an intermediate lessor, it accounts for its interests in the head lease and the sublease separately. The sublease is classified as a finance or operating lease by reference to the right-of-use asset arising from the head lease.
For operating leases, rental income is recognized on a straight line basis over the term of the relevant lease.
Transition
Effective April 1, 2019, the Company adopted Ind AS 116 “Leases” and applied the standard to all lease contracts existing on April 1, 2019 using the modified retrospective method and has taken the cumulative adjustment to retained earnings, on the date of initial application. Consequently, the Company recorded the lease liability at the present value of the lease payments discounted at the incremental borrowing rate and the right of use asset at its carrying amount as if the standard had been applied since the commencement date of the lease, but discounted at the Company’s incremental borrowing rate at the date of initial application. Comparatives as at and for the year ended March 31, 2019 have not been retrospectively adjusted and therefore will continue to be reported under the accounting policies included as part of our Annual Report for year ended March 31, 2019.
On transition, the adoption of the new standard
resulted in recognition of 'Right of Use' asset of 1,861 crore, 'Net investment in sublease' of ROU asset of
430
crore and a lease liability of
2,491 crore. The cumulative effect of applying the standard, amouting to
17 crore
was debited to retained earnings, net of taxes. The effect of this adoption is insignificant on the profit before tax, profit for
the period and earnings per share. Ind AS 116 will result in an increase in cash inflows from operating activities and an increase
in cash outflows from financing activities on account of lease payments.
The following is the summary of practical expedients elected on initial application:
1. | Applied a single discount rate to a portfolio of leases of similar assets in similar economic environment with a similar end date |
2. | Applied the exemption not to recognize right-of-use assets and liabilities for leases with less than 12 months of lease term on the date of initial application |
3. | Excluded the initial direct costs from the measurement of the right-of-use asset at the date of initial application. |
4. | Applied the practical expedient to grandfather the assessment of which transactions are leases. Accordingly, Ind AS 116 is applied only to contracts that were previously identified as leases under Ind AS 17. |
The difference between the lease obligation recorded as of March 31, 2019 under Ind AS 17 disclosed under Note 2.19 of the 2019 Annual Report and the value of the lease liability as of April 1, 2019 is primarily on account of inclusion of extension and termination options reasonably certain to be exercised, in measuring the lease liability in accordance with Ind AS 116 and discounting the lease liabilities to the present value under Ind AS 116.
The weighted average incremental borrowing rate applied to lease liabilities as at April 1, 2019 is 4.4%
Following are the changes in the carrying value of right of use assets for the three months ended September 30, 2019:
(In crore)
Particulars | Category of ROU asset | Total | ||
Land | Buildings | Computers | ||
Balance as of July 1, 2019 | 560 | 1,837 | – | 2,397 |
Additions | – | 290 | 26 | 316 |
Deletion | (3) | – | – | (3) |
Depreciation | (1) | (80) | (1) | (82) |
Balance as of September 30, 2019 | 556 | 2,047 | 25 | 2,628 |
Following are the changes in the carrying value of right of use assets for the six months ended
September 30, 2019:
(In crore)
Particulars | Category of ROU asset | Total | ||
Land | Buildings | Computers | ||
Balance as of April 1, 2019 | – | 1,861 | – | 1,861 |
Reclassified on account of adoption of Ind AS 116 (refer to note 2.1) | 561 | – | – | 561 |
Additions | – | 341 | 26 | 367 |
Deletion | (3) | – | – | (3) |
Depreciation | (2) | (155) | (1) | (158) |
Balance as of September 30, 2019 | 556 | 2,047 | 25 | 2,628 |
The aggregate depreciation expense on ROU assets is included under depreciation and amortization expense in the interim condensed statement of Profit and Loss.
The following is the break-up of current and non-current lease liabilities as at September 30, 2019
(In crore)
Particulars | As at |
September 30, 2019 | |
Current lease liabilities | 330 |
Non-current lease liabilities | 2,400 |
Total | 2,730 |
The following is the movement in lease liabilities during the three months ended September 30, 2019:
(In crore)
Particulars | Three Months ended September 30, 2019 |
Six Months ended September 30, 2019 |
Balance at the beginning | 2,459 | 2,491 |
Additions | 316 | 367 |
Finance cost accrued during the period | 28 | 55 |
Payment of lease liabilities | (100) | (194) |
Translation Difference | 27 | 11 |
Balance at the end | 2,730 | 2,730 |
The table below provides details regarding the contractual maturities of lease liabilities as at September 30, 2019 on an undiscounted basis:
(In crore)
Particulars | As at |
September 30, 2019 | |
Less than one year | 434 |
One to five years | 1,483 |
More than five years | 1,323 |
Total | 3,240 |
The Company does not face a significant liquidity risk with regard to its lease liabilities as the current assets are sufficient to meet the obligations related to lease liabilities as and when they fall due.
Rental expense recorded for short-term leases was
9 crore and
13 crore for the three months ended September 30, 2019 and six months ended September 30,2019 respectively.
Rental income on assets given on operating lease
to subsidiaries was 15 crore and
31 crore for the three months ended and six months ended September 30, 2019 respectively.
The following is the movement in the net investment in sublease in ROU asset during the three months and six months ended September 30, 2019:
(In crore)
Particulars | Three months ended September 30, 2019 |
Six months ended September 30, 2019 |
Balance at the beginning of the period | 429 | 430 |
Interest income accrued during the period | 4 | 8 |
Lease receipts | (23) | (23) |
Translation Difference | 12 | 7 |
Balance at the end of the period | 422 | 422 |
The table below provides details regarding the contractual maturities of net investment in sublease of ROU asset as at September 30, 2019 on an undiscounted basis:
(In crore)
Particulars | As at |
September 30, 2019 | |
Less than one year | 46 |
One to five years | 200 |
More than five years | 256 |
Total | 502 |
2.3 INVESTMENTS
(In crore)
Particulars | As at | |
September 30, 2019 | March 31, 2019 | |
Non-current investments | ||
Equity instruments of subsidiaries | 6,344 | 6,349 |
Debentures of subsidiary | 1,258 | 1,445 |
Preference securities and equity instruments | 134 | 90 |
Others | 16 | 16 |
Tax free bonds | 1,826 | 1,828 |
Government bonds | 12 | – |
Fixed maturity plans securities | – | 401 |
Non-convertible debentures | 609 | 1,209 |
Government Securities | 1,154 | 724 |
Total non-current investments | 11,353 | 12,062 |
Current investments | ||
Liquid mutual fund units | 1,103 | 1,701 |
Certificates of deposit | 547 | 2,123 |
Government bonds | – | 12 |
Fixed maturity plans securities | 416 | – |
Non-convertible debentures | 978 | 1,746 |
Commercial paper | – | 495 |
Total current investments | 3,044 | 6,077 |
Total carrying value | 14,397 | 18,139 |
(In crore, except as otherwise stated)
Particulars | As at | |
September 30, 2019 | March 31, 2019 | |
Non-current investments | ||
Unquoted | ||
Investment carried at cost | ||
Investments in equity instruments of subsidiaries | ||
Infosys BPM Limited | 659 | 659 |
3,38,22,569 (3,38,22,319) equity shares of ![]() |
||
Infosys Technologies (China) Co. Limited | 333 | 333 |
Infosys Technologies (Australia) Pty Limited (1) | – | 5 |
1,000 (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 | 276 |
12,84,20,748 (12,84,20,748) 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 |
23,350 (23,350) - Class A shares of CHF 1,000 each and | ||
26,460 (26,460) - 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) | – | – |
Infosys Consulting 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 | 59 | 59 |
1,346 (1,346 ) shares of GBP 0.005 each, fully paid up | ||
Infosys Arabia Limited | 2 | 2 |
70 (70) shares | ||
Kallidus Inc. | 150 | 150 |
10,21,35,416 (10,21,35,416) shares | ||
Skava Systems Private Limited | 59 | 59 |
25,000 (25,000) shares of ![]() |
||
Panaya Inc. | 582 | 582 |
2 (2) shares of USD 0.01 per share, fully paid up | ||
Infosys Chile SpA | 7 | 7 |
100 (100) shares | ||
Wongdoody Holding Company Inc | 350 | 350 |
2,000 (2,000) shares | ||
Infosys Luxembourg S.a r.l. | 4 | 4 |
3,700 (3,700) 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 | 43 |
8,26,56,605 (8,26,56,605) shares of BRL 1 per share, fully paid up | ||
Infosys Romania | 34 | 34 |
99,183 (99,183) shares of RON 100 per share, fully paid up | ||
6,344 | 6,349 | |
Investment carried at amortized cost | ||
Investment in debentures of subsidiary | ||
EdgeVerve Systems Limited | ||
12,58,00,000 (14,45,00,000) Unsecured redeemable, non-convertible debentures of ![]() |
1,258 | 1,445 |
1,258 | 1,445 | |
Investments carried at fair value through profit or loss | ||
Others (2) | 16 | 16 |
16 | 16 | |
Investment carried at fair value through other comprehensive income (FVOCI) | ||
Preference securities | 133 | 89 |
Equity instruments | 1 | 1 |
134 | 90 | |
Quoted | ||
Investments carried at amortized cost | ||
Tax free bonds | 1,826 | 1,828 |
Government bonds | 12 | – |
1,838 | 1,828 | |
Investments carried at fair value through profit or loss | ||
Fixed maturity plans securities | – | 401 |
– | 401 | |
Investments carried at fair value through other comprehensive income | ||
Non-convertible debentures | 609 | 1,209 |
Government Securities | 1,154 | 724 |
1,763 | 1,933 | |
Total non-current investments | 11,353 | 12,062 |
Current investments | ||
Unquoted | ||
Investments carried at fair value through profit or loss | ||
Liquid mutual fund units | 1,103 | 1,701 |
1,103 | 1,701 | |
Investments carried at fair value through other comprehensive income | ||
Commercial paper | – | 495 |
Certificates of deposit | 547 | 2,123 |
547 | 2,618 | |
Quoted | ||
Investments carried at amortized cost | ||
Government bonds | – | 12 |
– | 12 | |
Investments carried at fair value through profit or loss | ||
Fixed maturity plans securities | 416 | – |
416 | – | |
Investments carried at fair value through other comprehensive income | ||
Non-convertible debentures | 978 | 1,746 |
978 | 1,746 | |
Total current investments | 3,044 | 6,077 |
Total investments | 14,397 | 18,139 |
Aggregate amount of quoted investments | 4,995 | 5,920 |
Market value of quoted investments (including interest accrued) , current | 1,392 | 1,757 |
Market value of quoted investments (including interest accrued) , non current | 3,862 | 4,374 |
Aggregate amount of unquoted investments | 9,402 | 12,219 |
(1) Aggregate amount of impairment in value of investments | 121 | 122 |
Reduction in the fair value of assets held for sale | 854 | 854 |
Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" | 469 | 469 |
Investments carried at cost | 6,344 | 6,349 |
Investments carried at amortized cost | 3,096 | 3,285 |
Investments carried at fair value through other comprehensive income | 3,422 | 6,387 |
Investments carried at fair value through profit or loss | 1,535 | 2,118 |
(2) | Uncalled capital commitments outstanding as of September 30, 2019 and March 31, 2019
was ![]() ![]() |
Refer note no. 2.9 for accounting policies on financial instruments.
Method of fair valuation:
(In crore)
Class of investment | Method | Fair value as at | |
September 30, 2019 | March 31, 2019 | ||
Liquid mutual fund units | Quoted price | 1,103 | 1,701 |
Fixed maturity plan securities | Market observable inputs | 416 | 401 |
Tax free bonds and government bonds | Quoted price and market observable inputs | 2,117 | 2,048 |
Non-convertible debentures | Quoted price and market observable inputs | 1,587 | 2,955 |
Government Securities | Quoted price | 1,154 | 724 |
Certificate of deposits | Market observable inputs | 547 | 2,123 |
Commercial paper | Market observable inputs | – | 495 |
Unquoted equity and preference securities | Discounted cash flows method, Market multiples method, Option pricing model, etc. | 134 | 90 |
Others | Discounted cash flows method, Market multiples method, Option pricing model, etc. | 16 | 16 |
Certain quoted investments are classified as Level 2 in the absence of active market for such investments.
Proposed transfer
On October 11, 2019 , the Board of Directors of Infosys authorized the Company to execute a Business Transfer Agreement and related documents with its wholly owned subsidiaries, Kallidus Inc and Skava Systems Private Limited (together referred to as Skava), to transfer the business of Skava to Infosys Limited, subject to securing the requisite regulatory approvals for a consideration based on an independent valuation. The transaction is between a holding company and a wholly owned subsidiary and the resulting impact would be recorded in “Business Transfer Reserve” at the time of transfer.
2.4 LOANS
(In crore)
Particulars | As at | |
September 30, 2019 | March 31, 2019 | |
Non- Current | ||
Unsecured, considered good | ||
Other Loans | ||
Loans to employees | 18 | 16 |
18 | 16 | |
Unsecured, considered doubtful | ||
Other Loans | ||
Loans to employees | 19 | 18 |
37 | 34 | |
Less: Allowance for doubtful loans to employees | 19 | 18 |
Total non - current loans | 18 | 16 |
Current | ||
Loan receivables considered good - Unsecured | ||
Loans to subsidiaries | 1,808 | 841 |
Other Loans | ||
Loans to employees | 204 | 207 |
Total current loans | 2,012 | 1,048 |
Total Loans | 2,030 | 1,064 |
2.5 OTHER FINANCIAL ASSETS
(In crore)
Particulars | As at | |
September 30, 2019 | March 31, 2019 | |
Non-current | ||
Security deposits (1) | 46 | 47 |
Net investment in Sublease of right of use asset (refer to note 2.2) (1) | 390 | – |
Rental deposits (1) | 156 | 149 |
Total non-current other financial assets | 592 | 196 |
Current | ||
Security deposits (1) | 1 | 1 |
Rental deposits (1) | 2 | 3 |
Restricted deposits (1)* | 1,585 | 1,531 |
Unbilled revenues (1)(5)# | 1,851 | 1,541 |
Interest accrued but not due (1) | 749 | 865 |
Foreign currency forward and options contracts (2)(3) | 102 | 321 |
Net investment in Sublease of right of use asset (refer to note 2.2) (1) | 32 | – |
Escrow and other deposits pertaining to buyback (refer to note 2.10)(1) | – | 257 |
Others (1)(4) | 259 | 315 |
Total current other financial assets | 4,581 | 4,834 |
Total other financial assets | 5,173 | 5,030 |
(1) Financial assets carried at amortized cost | 5,071 | 4,709 |
(2)Financial assets carried at fair value through other comprehensive income | 31 | 37 |
(3)Financial assets carried at fair value through Profit or Loss | 71 | 284 |
(4) Includes dues from subsidiaries | 47 | 34 |
(5) Includes dues from subsidiaries | 61 | 51 |
* | 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 | |
September 30, 2019 | March 31, 2019 | |
Current | ||
Unsecured | ||
Considered good(2) | 13,788 | 13,370 |
Considered doubtful | 416 | 431 |
14,204 | 13,801 | |
Less: Allowances for credit losses | 416 | 431 |
Total trade receivables(1) | 13,788 | 13,370 |
(1) Includes dues from companies where directors are interested | – | – |
(2) Includes dues from subsidiaries | 433 | 325 |
2.7 CASH AND CASH EQUIVALENTS
(In crore)
Particulars | As at | |
September 30, 2019 | March 31, 2019 | |
Balances with banks | ||
In current and deposit accounts | 7,383 | 10,957 |
Cash on hand | – | – |
Others | ||
Deposits with financial institutions | 3,850 | 4,594 |
Total Cash and cash equivalents | 11,233 | 15,551 |
Balances with banks in unpaid dividend accounts | 32 | 29 |
Deposit with more than 12 months maturity | 5,897 | 6,048 |
Balances with banks held as margin money deposits against guarantees | 102 | 114 |
Cash and cash equivalents as at September 30,
2019 and March 31, 2019 include restricted cash and bank balances of 134 crore and
143 crore, respectively. The restrictions
are primarily on account of bank balances held as margin money deposits against guarantees.
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.
2.8 OTHER ASSETS
(In crore)
Particulars | As at | |
September 30, 2019 | March 31, 2019 | |
Non-current | ||
Capital advances | 429 | 486 |
Others | ||
Prepaid expenses | 98 | 95 |
Prepaid gratuity | 6 | 25 |
Deferred contract cost | 198 | 226 |
Withholding taxes and others | 859 | 908 |
Total non-current other assets | 1,590 | 1,740 |
Current | ||
Advances other than capital advance | ||
Payment to vendors for supply of goods | 54 | 94 |
Others | ||
Unbilled revenues(2) | 3,883 | 2,904 |
Prepaid expenses (1) | 681 | 580 |
Deferred contract cost | 46 | 52 |
Withholding taxes and others | 1,069 | 1,290 |
Total current other assets | 5,733 | 4,920 |
Total other assets | 7,323 | 6,660 |
(1) Includes dues from subsidiaries | 143 | 109 |
(2) Classified as non financial asset as the contractual right to consideration is dependent on completion of contractual milestones. |
Withholding taxes and others primarily consist
of input tax credits and Cenvat recoverable from Government of India. Cenvat recoverable includes 453 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.
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 September 30, 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) | 11,233 | – | – | – | – | 11,233 | 11,233 |
Investments (Refer note no.2.3) | |||||||
Preference securities, Equity instruments and others | – | – | 16 | 134 | – | 150 | 150 |
Tax free bonds and government bonds | 1,838 | – | – | – | – | 1,838 | 2,117(2) |
Liquid mutual fund units | – | – | 1,103 | – | – | 1,103 | 1,103 |
Redeemable, non-convertible debentures (1) | 1,258 | – | – | – | – | 1,258 | 1,258 |
Fixed maturity plan securities | – | – | 416 | – | – | 416 | 416 |
Certificates of deposit | – | – | – | – | 547 | 547 | 547 |
Non convertible debentures | – | – | – | – | 1,587 | 1,587 | 1,587 |
Government Securities | – | – | – | – | 1,154 | 1,154 | 1,154 |
Trade receivables (Refer Note no. 2.6) | 13,788 | – | – | – | – | 13,788 | 13,788 |
Loans (Refer note no. 2.4) | 2,030 | – | – | – | – | 2,030 | 2,030 |
Other financial assets (Refer Note no. 2.5) (4) | 5,071 | – | 71 | – | 31 | 5,173 | 5,100(3) |
Total | 35,218 | – | 1,606 | 134 | 3,319 | 40,277 | 40,483 |
Liabilities: | |||||||
Trade payables (Refer Note no. 2.12) | 1,241 | – | – | – | – | 1,241 | 1,241 |
Other financial liabilities (Refer Note no. 2.11) | 5,619 | – | 157 | – | 2 | 5,778 | 5,778 |
Total | 6,860 | – | 157 | – | 2 | 7,019 | 7,019 |
(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 and government bonds carried at amortized
cost of ![]() |
(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, 2019 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) | 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 |
Certificates of deposit | – | – | – | – | 2,123 | 2,123 | 2,123 |
Government Securities | – | – | – | – | 724 | 724 | 724 |
Non convertible debentures | – | – | – | – | 2,955 | 2,955 | 2,955 |
Commercial paper | – | – | – | – | 495 | 495 | 495 |
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 and government bonds carried at amortized
cost of ![]() |
(4) | Excludes unbilled revenue for fixed price development contracts where right to consideration is conditional on factors other than passage of time |
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 September 30, 2019 is as follows:
(In crore)
Particulars | September 30, 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) | 2,105 | 1,461 | 644 | – |
Investments in government bonds (Refer note no. 2.3) | 12 | 12 | – | – |
Investments in liquid mutual fund units (Refer note no. 2.3) | 1,103 | 1,103 | – | – |
Investments in equity instruments (Refer note no. 2.3) | 1 | – | – | 1 |
Investments in preference securities (Refer note no. 2.3) | 133 | – | – | 133 |
Investments in fixed maturity plan securities (Refer note no. 2.3) | 416 | – | 416 | – |
Investments in certificates of deposit (Refer note no. 2.3) | 547 | – | 547 | – |
Investments in non convertible debentures (Refer note no. 2.3) | 1,587 | 320 | 1,267 | – |
Investments in government securities (Refer note no. 2.3) | 1,154 | 1,154 | – | – |
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) | 102 | – | 102 | – |
Liabilities | ||||
Derivative financial instruments - loss on outstanding foreign currency forward and option contracts (Refer note no. 2.11) | 34 | – | 34 | – |
Liability towards contingent consideration (Refer note no. 2.11)(1) | 125 | – | – | 125 |
(1) | Discount rate pertaining to contingent consideration ranges from 10% to 15% |
During the six months ended September 30, 2019,
tax free bonds and non-convertible debentures of 279 crore were transferred from Level 2 to Level 1 of fair value hierarchy,
since these were valued based on Quoted price, and
974 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, 2019 was 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 government securities (Refer Note no. 2.3) | 724 | 724 | – | – |
Investments in tax free bonds (Refer Note no. 2.3) | 2,036 | 1,765 | 271 | – |
Investments in liquid mutual fund units (Refer Note no. 2.3) | 1,701 | 1,701 | – | – |
Investments in government bonds (Refer Note no. 2.3) | 12 | 12 | – | – |
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 non convertible debentures (Refer Note no. 2.3) | 2,955 | 1,612 | 1,343 | – |
Investments in commercial paper (Refer Note no. 2.3) | 495 | – | 495 | – |
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 2.11) | 13 | – | 13 | – |
Liability towards contingent consideration (Refer note no. 2.11)(1) | 116 | – | – | 116 |
(1) Discount rate pertaining to contingent consideration ranges from 10% to 16%
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.
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.
2.10 EQUITY
Accounting policy
Ordinary Shares
Ordinary shares are classified as equity share capital . Incremental costs directly attributable to the issuance of new ordinary shares, share options and buyback are recognized as a deduction from equity, net of any tax effects.
Retained earnings
Retained earnings represent the amount of accumulated earnings of the Company.
Securities premium
The amount received in excess of the par value of equity shares has been classified as securities premium
Capital Redemption Reserve
In accordance with section 69 of the Indian Companies Act, 2013, the Company creates capital redemption reserve equal to the nominal value of the shares bought back as an appropriation from general reserve.
Other components of equity
Other components of equity consist of remeasurement of net defined benefit liability / asset, 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.
2.10.1 EQUITY SHARE CAPITAL
(In crore, except as otherwise stated)
Particulars | As at | |
September 30, 2019 | March 31, 2019 | |
Authorized | ||
Equity shares, ![]() |
||
4,80,00,00,000 (4,80,00,00,000) equity shares | 2,400 | 2,400 |
Issued, Subscribed and Paid-Up | ||
Equity shares, ![]() |
2,129 | 2,178 |
4,25,84,12,178 (4,35,62,79,444) equity shares fully paid-up | ||
2,129 | 2,178 |
(1) Refer note no. 2.19 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. However, no such preferential amounts exist currently.
In December 2017, Ind AS 12 – Income Taxes was amended which clarified that an entity shall recognize the income tax consequences of dividends on financial instruments classified as equity according to where the entity originally recognized those past transactions or events that generated distributable profits were recognized. On April 1, 2019, the Company adopted these amendments and there was no impact of these amendments on the Company’s financial statements.
Update on buyback of equity shares
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.
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 buyback of equity shares through the stock exchange commenced on March 20, 2019 and
was completed on August 26, 2019 . During this buyback period the Company had purchased and extinguished a total of 110,519,266
equity shares from the stock exchange at an average buy back price of 747/- per equity share comprising 2.53% of the pre
buyback paid-up equity share capital of the Company. The buyback resulted in a cash outflow of
8,260 crore (excluding transaction
costs). The Company funded the buyback from its free reserves.
In accordance with section 69 of the Companies
Act, 2013, as at September 30, 2019, the Company has created ‘Capital Redemption Reserve’ of 55 crore equal
to the nominal value of the shares bought back as an appropriation from general reserve.
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 September 30, 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.
The reconciliation of the number of shares outstanding and the amount of share capital as at September 30, 2019 and March 31, 2019 is set out below:
in crore, except as stated otherwise
Particulars | As at September 30, 2019 | As at March 31, 2019 | ||
Number of shares | Amount | Number of shares | Amount | |
As at the beginning of the period | 4,35,62,79,444 | 2,178 | 2,18,41,14,257 | 1,092 |
Add: Shares issued on exercise of employee stock options -before bonus issue | – | – | 77,233 | – |
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) | 9,78,67,266 | 49 | 1,26,52,000 | 6 |
As at the end of the period | 4,25,84,12,178 | 2,129 | 4,35,62,79,444 | 2,178 |
(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 |
2.10.2 DIVIDEND
Final dividend 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 fiscal 2018 the Company’s policy was to pay up to 70% of the free cash flow annually by way of dividend and/or buyback.
Effective from fiscal 2020, the company expects to return approximately 85% of the free cash flow cumulatively over a 5-year period through a combination of semi-annual dividends and/or share buyback and/or special dividends, 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 and buyback include applicable taxes.
The amount of per share dividend recognized as distribution to equity shareholders is as follows:
(in )
Particulars | Three months ended September 30, |
Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Final Dividend for fiscal 2019 | – | – | 10.50 | – |
Final Dividend for fiscal 2018* | – | – | – | 10.25 |
Special dividend for fiscal 2018* | – | – | – | 5.00 |
* Dividend per share declared previously, retrospectively adjusted for September 2018 bonus issue
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. The same
was approved by the Shareholders at the Annual General Meeting held on June 22, 2019 which resulted in a cash outflow of approximately
5,446 crore, including dividend distribution tax.
The Board of Directors in their meeting on October
11, 2019 declared an interim dividend of 8/- per equity share which would result in a net cash outflow of approximately
4,107 crore, inclusive of dividend distribution tax.
2.10.3 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.
Infosys Expanded Stock Ownership Program 2019 (the 2019 Plan) :
On June 22, 2019 pursuant to approval by the shareholders in the Annual General Meeting , the Board has been authorized to introduce, offer, issue and provide share-based incentives to eligible employees of the Company and its subsidiaries under the 2019 Plan. The maximum number of shares under the 2019 plan shall not exceed 5,00,00,000 equity shares. To implement the 2019 Plan , upto 4,50,00,000 equity shares may be issued by way of secondary acquisition of shares by Infosys Expanded Stock Ownership Trust. The RSUs granted under the 2019 plan shall vest based on the achievement of defined annual performance parameters as determined by the administrator. The performance parameters will be based on a combination of relative total shareholders return (TSR) and operating performance metrics of the company as decided by administrator. Each of the above performance parameters will be distinct for the purposes of calculation of quantity of shares to vest based on performance. These instruments will generally vest between a minimum of 1 to maximum of 3 years from the grant date.
2015 Stock Incentive Compensation Plan (the 2015 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). 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.
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.
Consequent to the September 2018 bonus issue, all the then 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 1,89,29,512 and 2,03,24,982 shares as at September 30, 2019 and March 31, 2019, respectively under the 2015 plan. Out of these shares, 2,00,000 equity shares each have been earmarked for welfare activities of the employees as at September 30, 2019 and March 31, 2019.
The following is the summary of grants during the three months and six months ended September 30, 2019 and September 30, 2018 under the 2015 Plan:
Particulars | Three months ended September 30, |
Six months ended September 30, | ||
2019 | 2018* | 2019 | 2018* | |
2015 Plan: RSU | ||||
KMPs | – | – | 2,12,096 | 2,17,200 |
Employees other than KMPs | 24,650 | 17,87,120 | 36,850 | 17,87,120 |
24,650 | 17,87,120 | 2,48,946 | 20,04,320 | |
Incentive unit - cash settled | ||||
Employees other than KMPs | – | 52,590 | – | 52,590 |
– | 52,590 | – | 52,590 | |
Total Grants | 24,650 | 18,39,710 | 2,48,946 | 20,56,910 |
* Information is adjusted for September, 2018 bonus issue
Notes on grants to KMP:
CEO & MD
Under the 2015 plan:
The Board, on April 12, 2019, based on the recommendations
of the Nomination and Remuneration Committee, approved the performance-based grant of RSUs amounting to 13 crore for the
financial year 2020 under the 2015 Plan. These RSUs will vest in line with the employment agreement based on achievement of certain
performance targets. Accordingly, 177,887 performance based RSU’s were granted effective May 2, 2019.
In accordance with the shareholders approval in the Annual General meeting held on June 22, 2019, the Board, based on the recommendations of the Nomination and Remuneration Committee, approved to amend the vesting period of the annual performance equity grant from three years to one year. Accordingly the vesting period of 217,200 (adjusted for September 2018 bonus issue) performance based RSUs granted effective May 2, 2018 and 177,887 performance based RSU's granted effective May 2,2019 have been amended to one year.
In accordance with the employee agreement which
has been approved by the shareholders, the CEO is eligible to receive an annual grant of RSUs of fair value 3.25 crore which
will vest overtime in three equal annual installments upon the completion of each year of service from the respective grant date.
Though the annual time based grants for the remaining employment term ending on March 31, 2023 have not been granted as of September
30, 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.
Under the 2019 plan:
In accordance with the shareholders approval
in Annual General meeting held on June 22, 2019, the Board, based on the recommendations of the Nomination and Remuneration Committee,
approved performance-based grant of RSUs amounting to 10 crore for financial year 2020 under the 2019 Plan to Salil Parekh,
CEO and MD. These RSUs will vest in line with the employment agreement based on achievement of certain performance targets. Accordingly,
134,138 performance based RSU’s were granted effective June 22, 2019.
COO and Whole time director
In accordance with the shareholders approval
in Annual General meeting held on June 22, 2019, the Board, based on the recommendations of the Nomination and Remuneration Committee,
approved performance-based grant of RSUs amounting to 4 crore for financial year 2020 under the 2019 Plan to U. B. Pravin
Rao, COO and WTD. These RSUs will vest in line with the employment agreement based on achievement of certain performance targets.
Accordingly, 53,655 performance based RSU’s were granted effective June 22, 2019
Other KMP
Based on the recommendations of the Nomination and Remuneration Committee, the Board , approved performance-based grant of 10,263 RSUs and time based grant of 23,946 RSUs to other KMP under the 2015 Plan during the six months ended September 30, 2019.The grants were made effective May 2, 2019. These RSUs will vest generally over three to four years and additionally the performance based RSUs will vest based on achievement of certain performance targets.
Break-up of employee stock compensation expense
(in crore)
Particulars | Three months ended September 30, |
Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Granted to: | ||||
KMP | 13 | 10 | 31 | 19 |
Employees other than KMP | 36 | 38 | 76 | 68 |
Total (1) | 49 | 48 | 107 | 87 |
(1) Cash settled stock compensation expense included in the above | 1 | 1 | 1 | 1 |
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 2020- Equity Shares-RSU |
Fiscal 2020- ADS-RSU |
Fiscal 2019- Equity Shares-RSU |
Fiscal 2019- ADS-RSU | |
Weighted average share price (![]() |
732 | 11.00 | 696 | 10.77 |
Exercise price (![]() |
5.00 | 0.07 | 3.31 | 0.06 |
Expected volatility (%) | 22-24 | 22-26 | 21-25 | 22-26 |
Expected life of the option (years) | 1-4 | 1-4 | 1-4 | 1-4 |
Expected dividends (%) | 2-3 | 2-3 | 2.65 | 2.65 |
Risk-free interest rate (%) | 6-7 | 1-3 | 7-8 | 2-3 |
Weighted average fair value as on grant date (![]() |
676 | 10.43 | 648 | 10.03 |
(1) Fiscal 2019 values are adjusted for September, 2018 bonus issue wherever applicable.
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 OTHER FINANCIAL LIABILITIES
(In crore)
Particulars | As at | |
September 30, 2019 | March 31, 2019 | |
Non-current | ||
Others | ||
Compensated absences | 39 | 38 |
Payable for acquisition of business- Contingent consideration | 39 | 41 |
Total non-current other financial liabilities | 78 | 79 |
Current | ||
Unpaid dividends | 32 | 29 |
Others | ||
Accrued compensation to employees | 1,965 | 2,006 |
Accrued expenses (1) | 2,502 | 2,310 |
Retention monies | 55 | 60 |
Payable for acquisition of business - Contingent consideration | 86 | 75 |
Capital creditors | 272 | 653 |
Financial liability relating to buyback # | – | 1,202 |
Compensated absences | 1,526 | 1,373 |
Other payables (2) | 793 | 807 |
Foreign currency forward and options contracts | 34 | 13 |
Total current other financial liabilities | 7,265 | 8,528 |
Total other financial liabilities | 7,343 | 8,607 |
Financial liability carried at amortized cost | 5,619 | 7,067 |
Financial liability carried at fair value through profit or loss | 157 | 128 |
Financial liability carried at fair value through other comprehensive income | 2 | 1 |
Contingent consideration on undiscounted basis | 137 | 135 |
(1) Includes dues to subsidiaries | 2 | 6 |
(2) Includes dues to subsidiaries | 12 | 13 |
# | In accordance with Ind AS 32 Financial Instruments: Presentation, the Company has recorded a financial liability as at March 31, 2019 for the obligation to acquire its own equity shares to the extent of standing instructions provided to its registered broker for the buyback (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 | |
September 30, 2019 | March 31, 2019 | |
Trade payables(1) | 1,241 | 1,604 |
Total trade payables | 1,241 | 1,604 |
(1)Includes dues to subsidiaries | 231 | 220 |
2.13 OTHER LIABILITIES
(In crore)
Particulars | As at | |
September 30, 2019 | March 31, 2019 | |
Non current | ||
Others | ||
Deferred income | 25 | 29 |
Deferred rent (refer to note 2.2) | – | 140 |
Total non - current other liabilities | 25 | 169 |
Current | ||
Unearned revenue | 1,922 | 2,094 |
Client deposits | 10 | 19 |
Others | ||
Withholding taxes and others | 1,222 | 1,168 |
Deferred rent (refer to note 2.2) | – | 54 |
Total current other liabilities | 3,154 | 3,335 |
Total other liabilities | 3,179 | 3,504 |
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 on 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 | |
September 30, 2019 | March 31, 2019 | |
Current | ||
Others | ||
Post-sales client support and others | 543 | 505 |
Total provisions | 543 | 505 |
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 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. 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 September 30, |
Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Current taxes | 1,316 | 1,467 | 2,632 | 2,796 |
Deferred taxes | (22) | (95) | (87) | (145) |
Income tax expense | 1,294 | 1,372 | 2,545 | 2,651 |
Income tax expense for the three months ended
September 30, 2019 and September 30, 2018 includes reversal (net of provisions) of 92 crore and
2 crore, respectively.
These reversals pertain to prior periods on account of adjudication of certain disputed matters in favor of the company across
various jurisdictions.
Income tax expense for the six months ended
September 30, 2019 and September 30, 2018 includes reversal (net of provisions) of 111 crore and
58 crore, respectively.
These reversals pertain to prior periods on account of adjudication of certain disputed matters in favor of the company across
various jurisdictions.
Deferred income tax for the three months and six months ended September 30, 2019 and September 30, 2018, substantially relates to origination and reversal of temporary differences.
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. 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 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 six months ended September 30, 2019 and September 30, 2018 is as follows:
(In crore)
Particulars | Three months ended September 30, |
Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Revenue from software services | 19,613 | 18,224 | 38,682 | 35,223 |
Revenue from products and platforms | 53 | 73 | 115 | 130 |
Total revenue from operations | 19,666 | 18,297 | 38,797 | 35,353 |
Disaggregate revenue information
The table below presents disaggregated revenues from contracts with customers by offerings for the three and six months ended September 30, 2019 and September 30, 2018. The Company 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.
(In crore)
Particulars | Three months ended September 30, |
Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Revenue by offerings | ||||
Core | 12,015 | 12,436 | 24,179 | 24,399 |
Digital | 7,651 | 5,861 | 14,618 | 10,954 |
Total | 19,666 | 18,297 | 38,797 | 35,353 |
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 (contract asset) 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.
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 three months and six months ended September 30, 2019 and September 30, 2018 is as follows:
(In crore)
Particulars | Three months ended September 30, |
Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Interest income on financial assets carried at amortized cost | ||||
Tax free bonds and government bonds | 35 | 34 | 69 | 68 |
Deposit with Bank and others | 258 | 300 | 570 | 654 |
Interest income on financial assets fair valued through other comprehensive income | ||||
Non-convertible debentures, commercial paper, certificates of deposit and government securities | 68 | 144 | 170 | 297 |
Income on investments carried at fair value through other comprehensive income | 11 | – | 27 | – |
Income on investments carried at fair value through profit or loss | ||||
Dividend income on liquid mutual funds | 1 | 1 | 1 | 1 |
Gain / (loss) on liquid mutual funds | 31 | 46 | 93 | 74 |
Exchange gains/(losses) on foreign currency forward and options contracts | (38) | (390) | 80 | (557) |
Exchange gains/(losses) on translation of assets and liabilities | 196 | 564 | 174 | 774 |
Miscellaneous income, net | 42 | 43 | 132 | 147 |
Total other income | 604 | 742 | 1,316 | 1,458 |
2.18 EXPENSES
Accounting Policy
2.18.1 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.
2.18.2 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.
The Hon’ble Supreme Court of India vide its judgment and subsequent review petition has ruled in respect of compensation for the purpose of Provident Fund contribution under the Employee’s Provident Fund Act. The Company has assessed possible outcomes of the judgment on determination of provident fund contributions and based on the Company’s current evaluation, it is not probable that certain allowances paid by the Company will be subject to payment of Provident Fund. The company will continue to monitor and evaluate its position based on future events and developments.
2.18.3 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.
2.18.4 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 September 30, |
Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Employee benefit expenses | ||||
Salaries including bonus | 10,303 | 9,213 | 20,362 | 17,784 |
Contribution to provident and other funds | 227 | 199 | 459 | 387 |
Share based payments to employees (Refer note no. 2.10) | 49 | 48 | 107 | 87 |
Staff welfare | 25 | 29 | 57 | 57 |
10,604 | 9,489 | 20,985 | 18,315 | |
Cost of software packages and others | ||||
For own use | 215 | 206 | 400 | 394 |
Third party items bought for service delivery to clients | 195 | 242 | 373 | 469 |
410 | 448 | 773 | 863 | |
Other expenses | ||||
Power and fuel | 47 | 48 | 94 | 96 |
Brand and Marketing | 102 | 112 | 216 | 192 |
Short-term leases (refer to note 2.2) | 9 | – | 13 | – |
Operating leases | – | 85 | – | 156 |
Rates and taxes | 30 | 46 | 60 | 70 |
Repairs and Maintenance | 314 | 258 | 614 | 482 |
Consumables | 6 | 8 | 13 | 15 |
Insurance | 18 | 13 | 33 | 27 |
Provision for post-sales client support and others | 16 | 22 | 11 | 21 |
Commission to non-whole time directors | 2 | 2 | 4 | 3 |
Impairment loss recognized / (reversed) under expected credit loss model | 9 | 72 | 58 | 139 |
Auditor's remuneration | ||||
Statutory audit fees | 2 | 2 | 2 | 2 |
Tax matters | – | – | – | – |
Other services | 1 | – | 2 | – |
Contributions towards Corporate Social Responsibility | 93 | 52 | 156 | 121 |
Others | 39 | 40 | 84 | 80 |
688 | 760 | 1,360 | 1,404 |
2.19 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.
2.20 CONTINGENT LIABILITIES AND COMMITMENTS
(In crore)
Particulars | As at | |
September 30, 2019 | March 31, 2019 | |
Contingent liabilities : | ||
Claims against the Company, not acknowledged as debts(1) | 2,981 | 2,947 |
[Amount paid to statutory authorities ![]() ![]() |
||
Commitments : | ||
Estimated amount of contracts remaining to be executed on capital contracts and not provided for | 1,211 | 1,653 |
(net of advances and deposits) | ||
Other Commitments* | 17 | 17 |
*Uncalled capital pertaining to investments
(1) | As at September 30, 2019, claims against the company not acknowledged as debts in
respect of income tax matters amounted to ![]() ![]() |
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 Company's financial position and results of operations.
The Company is subject to legal proceedings and claims, which have arisen in the ordinary course of business. The Company’s management does not reasonably expect that these legal actions, when ultimately concluded and determined, will have a material and adverse effect on the Company’s results of operations or financial condition.
2.21 RELATED PARTY TRANSACTIONS
Refer to the Company's Annual Report for the year ended March 31, 2019 for the full names and other details of the Company's subsidiaries and controlled trusts.
Changes in Subsidiaries
During the six months ended September 30, 2019, the following are the changes in the subsidiaries:
- | On April 1, 2019, Infosys Consulting Pte Ltd, a wholly-owned subsidiary of Infosys Limited, acquired 81% of voting interest in HIPUS Co Ltd, Japan, a wholly owned subsidiary of Hitachi Ltd, Japan. |
- | On May 23, 2019, Infosys Consulting Pte Ltd, a wholly-owned subsidiary of Infosys Limited, acquired 75% of voting interest in Stater N.V along with its eight subsidiaries Stater Netherland B.V., Stater Duitsland B.V., Stater XXL B.V., HypoCasso B.V., Stater Participations B.V., Stater Deutschland Verwaltungs-GmbH, Stater Deutschland GmbH & Co.KG, Stater Belgium N.V./S.A. |
Changes in controlled trusts
During the six months ended September 30, 2019, the following are the changes in the controlled trusts:
- On May 15, 2019, the Company registered Infosys Expanded Stock Ownership Trust
The Company’s material related party transactions during the three months and six months ended September 30, 2019 and September 30, 2018 and outstanding balances as at September 30, 2019 and March 31, 2019 are with its subsidiaries with whom the Company generally enters into transactions which are at arms length and in the ordinary course of business.
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 September 30, |
Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Salaries and other employee benefits to whole-time directors and executive officers (1) | 28 | 25 | 60 | 49 |
Commission and other benefits to non-executive / independent directors | 2 | 2 | 4 | 3 |
Total | 30 | 27 | 64 | 52 |
(1) | Total employee stock compensation expense for the three months ended September
30, 2019 and September 30, 2018 includes a charge of ![]() ![]() ![]() ![]() |
2.22 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.
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 October 11, 2019 |
Exhibit 99.10
Ind AS Consolidated
INDEPENDENT AUDITOR’S REPORT
TO THE BOARD OF DIRECTORSOF 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 September 30, 2019, the Consolidated Statement of Profit and Loss (including Other Comprehensive Income) for the three months and six months period ended on that date, the Consolidated Statement of Changes in Equity and the Consolidated Statement of Cash Flows for the six months period 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 September 30, 2019, the consolidated profit and consolidated total comprehensive income for the three months and six months period ended on that date, consolidated changes in equity and the consolidated cash flows for the six months period 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) specified under section 143 (10) of the Act. 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 Institute of Chartered Accountants of India (“ICAI”) together with the ethical 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 ICAI’s Code of Ethics. We believe that the audit evidence obtained by us is sufficient and appropriate to provide a basis for our audit opinion.
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 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.
|
Management Responsibilities 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 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 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 respective financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error which have been used for the purpose of preparation of the interim consolidated financial statements by the Directors of the Company, as aforesaid
In preparing the interim consolidated financial statements, the respective Board of Directors of the companies included in the Group are responsible for assessing the ability of the respective entities to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the respective Board of Directors either intends to liquidate their respective entities 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 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 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 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 interim consolidated 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 interim consolidated 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, 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 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’s Registration No. 117366W/W-100018)
P. R. RAMESH
Partner
(Membership No.70928) | |
Bengaluru, October 11, 2019 | UDIN : 19070928AAAAAJ1694 |
INFOSYS LIMITED AND SUBSIDIARIES
Consolidated Financial Statements under Indian Accounting Standards (Ind AS) for the three months and six months ended September 30, 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 |
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(to the extend not provided for) |
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. | September 30, 2019 | March 31, 2019 |
ASSETS | |||
Non-current assets | |||
Property, plant and equipment | 2.2 | 11,825 | 11,479 |
Right-of-use assets | 2.19 | 3,917 | – |
Capital work-in-progress | 1,059 | 1,388 | |
Goodwill | 2.3.1 and 2.1 | 4,080 | 3,540 |
Other intangible assets | 2.3.2 | 1,356 | 691 |
Financial assets: | |||
Investments | 2.4 | 3,943 | 4,634 |
Loans | 2.5 | 16 | 19 |
Other financial assets | 2.6 | 679 | 312 |
Deferred tax assets (net) | 2.15 | 1,363 | 1,372 |
Income tax assets (net) | 2.15 | 6,407 | 6,320 |
Other non-current assets | 2.9 | 1,717 | 2,105 |
Total non-current assets | 36,362 | 31,860 | |
Current assets | |||
Financial assets: | |||
Investments | 2.4 | 3,518 | 6,627 |
Trade receivables | 2.7 | 16,055 | 14,827 |
Cash and cash equivalents | 2.8 | 16,473 | 19,568 |
Loans | 2.5 | 240 | 241 |
Other financial assets | 2.6 | 5,817 | 5,505 |
Income tax assets (net) | 2.15 | 34 | 423 |
Other Current assets | 2.9 | 6,712 | 5,687 |
Total current assets | 48,849 | 52,878 | |
Total assets | 85,211 | 84,738 | |
EQUITY AND LIABILITIES | |||
Equity | |||
Equity share capital | 2.11 | 2,121 | 2,170 |
Other equity | 58,400 | 62,778 | |
Total equity attributable to equity holders of the Company | 60,521 | 64,948 | |
Non-controlling interests | 360 | 58 | |
Total equity | 60,881 | 65,006 | |
Liabilities | |||
Non-current liabilities | |||
Financial Liabilities | |||
Lease liabilities | 2.19 | 3,562 | – |
Other financial liabilities | 2.12 | 747 | 147 |
Deferred tax liabilities (net) | 2.15 | 707 | 672 |
Other non-current liabilities | 2.13 | 103 | 275 |
Total non-current liabilities | 5,119 | 1,094 | |
Current liabilities | |||
Financial Liabilities | |||
Trade payables | 2,134 | 1,655 | |
Lease liabilities | 2.19 | 515 | – |
Other financial liabilities | 2.12 | 10,037 | 10,452 |
Other current liabilities | 2.13 | 4,389 | 4,388 |
Provisions | 2.14 | 608 | 576 |
Income tax liabilities (net) | 2.15 | 1,528 | 1,567 |
Total current liabilities | 19,211 | 18,638 | |
Total equity and liabilities | 85,211 | 84,738 |
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 October 11, 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. | Three months ended September 30, | Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | ||
Revenue from operations | 2.16 | 22,629 | 20,609 | 44,432 | 39,737 |
Other income, net | 2.17 | 626 | 739 | 1,362 | 1,465 |
Total income | 23,255 | 21,348 | 45,794 | 41,202 | |
Expenses | |||||
Employee benefit expenses | 2.18 | 12,675 | 11,158 | 24,977 | 21,620 |
Cost of technical sub-contractors | 1,651 | 1,523 | 3,291 | 2,814 | |
Travel expenses | 599 | 602 | 1,427 | 1,205 | |
Cost of software packages and others | 2.18 | 680 | 606 | 1,296 | 1,151 |
Communication expenses | 129 | 121 | 256 | 243 | |
Consultancy and professional charges | 341 | 289 | 631 | 594 | |
Depreciation and amortisation expenses | 2.2 and 2.3.2 | 727 | 463 | 1,408 | 900 |
Finance cost | 2.19 | 42 | – | 82 | – |
Other expenses | 2.18 | 915 | 953 | 1,763 | 1,779 |
Reduction in the fair value of Disposal Group held for sale | 2.1.2 | – | – | – | 270 |
Total expenses | 17,759 | 15,715 | 35,131 | 30,576 | |
Profit before tax | 5,496 | 5,633 | 10,663 | 10,626 | |
Tax expense: | |||||
Current tax | 2.15 | 1,488 | 1,612 | 2,947 | 3,063 |
Deferred tax | 2.15 | (29) | (89) | (123) | (158) |
Profit for the period | 4,037 | 4,110 | 7,839 | 7,721 | |
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) | 3 | (39) | 4 |
Equity instruments through other comprehensive income, net | 2.4 and 2.15 | 2 | 8 | 5 | 12 |
(20) | 11 | (34) | 16 | ||
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 | 17 | (29) | (7) | (20) |
Exchange differences on translation of foreign operations | (35) | 334 | (10) | 421 | |
Fair value changes on investments, net | 2.4 and 2.15 | 2 | (15) | 18 | (60) |
(16) | 290 | 1 | 341 | ||
Total other comprehensive income /(loss), net of tax | (36) | 301 | (33) | 357 | |
Total comprehensive income for the period | 4,001 | 4,411 | 7,806 | 8,078 | |
Profit attributable to: | |||||
Owners of the Company | 4,019 | 4,110 | 7,817 | 7,721 | |
Non-controlling interests | 18 | – | 22 | – | |
4,037 | 4,110 | 7,839 | 7,721 | ||
Total comprehensive income attributable to: | |||||
Owners of the Company | 3,984 | 4,411 | 7,782 | 8,078 | |
Non-controlling interests | 17 | – | 24 | – | |
4,001 | 4,411 | 7,806 | 8,078 | ||
Earnings per Equity share | |||||
Equity shares of par value ![]() |
|||||
Basic (![]() |
9.46 | 9.45 | 18.28 | 17.76 | |
Diluted (![]() |
9.44 | 9.44 | 18.25 | 17.74 | |
Weighted average equity shares used in computing earnings per equity share | 2.21 | ||||
Basic | 4,249,343,678 | 4,347,055,177 | 4,275,615,916 | 4,346,857,296 | |
Diluted | 4,255,822,953 | 4,352,208,472 | 4,282,322,537 | 4,351,915,210 |
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 October 11, 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, 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 six months ended September 30, 2018 | ||||||||||||||||
Profit for the period | – | – | 7,721 | – | – | – | – | – | – | – | – | – | – | 7,721 | – | 7,721 |
Remeasurement of the net defined benefit liability/asset* (refer note no. 2.20.1 and 2.15) | – | – | – | – | – | – | – | – | – | – | – | – | 4 | 4 | – | 4 |
Equity instruments through other comprehensive income* (refer to note no.2.4) | – | – | – | – | – | – | – | – | – | 12 | – | – | – | 12 | – | 12 |
Fair value changes on derivatives designated as cash flow hedge*(refer note no. 2.10) | – | – | – | – | – | – | – | – | – | – | – | (20) | – | (20) | – | (20) |
Exchange differences on translation of foreign operations | – | – | – | – | – | – | – | – | – | – | 421 | – | – | 421 | – | 421 |
Fair value changes on investments* (refer to note no.2.4) | – | – | – | – | – | – | – | – | – | – | – | – | (60) | (60) | – | (60) |
Total Comprehensive income for the period | – | – | 7,721 | – | – | – | – | – | – | 12 | 421 | (20) | (56) | 8,078 | – | 8,078 |
Share based payments to employees (Refer to note 2.11) | – | – | – | – | – | 94 | – | – | – | – | – | – | – | 94 | – | 94 |
Dividends (including dividend distribution tax) | – | – | (7,949) | – | – | – | – | – | – | – | – | – | – | (7,949) | – | (7,949) |
Non-controlling interests on acquisition of subsidiary (refer to note no.2.11) |
– | – | – | – | – | – | – | – | – | – | – | – | – | – | – | – |
Exercise of stock options (refer to no no: 2.11) | – | 42 | – | – | – | (42) | – | – | – | – | – | – | – | – | – | – |
Transfer on account of options not exercised | – | – | – | – | 1 | (1) | – | – | – | – | – | – | – | – | – | – |
Income tax benefit arising on exercise of stock options | – | 2 | – | – | – | – | – | – | – | – | – | – | – | 2 | – | 2 |
Transfer to general reserve | – | – | (1,615) | – | 1,615 | – | – | – | – | – | – | – | – | – | – | – |
Amount transferred to other reserves | – | – | (1) | – | – | – | – | 1 | – | – | – | – | – | – | – | – |
Transferred to Special Economic Zone Re-investment reserve | – | – | (1,106) | – | – | – | 1,106 | – | – | – | – | – | – | – | – | – |
Transferred from Special Economic Zone Re-investment reserve on utilization | – | – | 375 | – | – | – | (375) | – | – | – | – | – | – | – | – | – |
Increase in Equity share capital on account of bonus issue (refer to note no: 2.11) | 1,088 | – | – | – | – | – | – | – | – | – | – | – | – | 1,088 | – | 1,088 |
Amounts utilized for bonus issue (Refer to note 2.11) | – | – | – | – | (1,088) | – | – | – | – | – | – | – | – | (1,088) | – | (1,088) |
Balance as at September 30, 2018 | 2,176 | 80 | 55,902 | 54 | 3,253 | 181 | 2,314 | 6 | 56 |
14 |
1,200 | (20) | (68) | 65,148 | 1 | 65,149 |
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, 2019 | 2,170 | 149 | 57,566 | 54 | 1,242 | 227 | 2,570 | 6 | 61 | 72 | 842 | 21 | (32) | 64,948 | 58 | 65,006 |
Impact on account of adoption of Ind AS 116 (Refer to note 2.19)* | – | – | (40) | – | – | – | – | – | – | – | – | – | – | (40) | – | (40) |
2,170 | 149 | 57,526 | 54 | 1,242 | 227 | 2,570 | 6 | 61 | 72 | 842 | 21 | (32) | 64,908 | 58 | 64,966 | |
Changes in equity for the six months ended September 30, 2019 | ||||||||||||||||
Profit for the period | – | – | 7,817 | – | – | – | – | – | – | – | – | – | – | 7,817 | 22 | 7,839 |
Remeasurement of the net defined benefit liability/asset* (refer note no. 2.20.1 and 2.15) | – | – | – | – | – | – | – | – | – | – | – | – | (39) | (39) | – | (39) |
Equity instruments through other comprehensive income* (refer to note no.2.4) | – | – | – | – | – | – | – | – | – | 5 | – | – | – | 5 | – | 5 |
Fair value changes on derivatives designated as cash flow hedge* (refer note no. 2.10) | – | – | – | – | – | – | – | – | – | – | – | (7) | – | (7) | – | (7) |
Exchange differences on translation of foreign operations | – | – | – | – | – | – | – | – | – | – | (12) | – | – | (12) | 2 | (10) |
Fair value changes on investments* (refer to note no.2.4) | – | – | – | – | – | – | – | – | – | – | – | – | 18 | 18 | – | 18 |
Total Comprehensive income for the period | – | – | 7,817 | – | – | – | – | – | – | 5 | (12) | (7) | (21) | 7,782 | 24 | 7,806 |
Shares issued on exercise of employee stock options (Refer to note 2.11) | – | 1 | – | – | – | – | – | – | – | – | – | – | – | 1 | – | 1 |
Increase in Equity share capital on account of bonus issue (Refer to note 2.11) | – | – | – | – | – | – | – | – | – | – | – | – | – | – | – | – |
Employee stock compensation expense (refer to note 2.11) | – | – | – | – | – | 117 | – | – | – | – | – | – | – | 117 | – | 117 |
Buyback of equity shares (Refer to note 2.11 & 2.12) | (49) | – | (4,717) | – | (1,494) | – | – | – | – | – | – | – | – | (6,260) | – | (6,260) |
Transaction costs relating to buyback * (Refer to note 2.11) | – | – | – | – | (11) | – | – | – | – | – | – | – | – | (11) | – | (11) |
Amount transferred to capital redemption reserve upon buyback ( Refer to note 2.11) | – | – | – | – | (50) | – | – | – | 50 | – | – | – | – | – | – | – |
Exercise of stock options (refer to note no. 2.11) | – | 77 | – | – | – | (77) | – | – | – | – | – | – | – | – | – | – |
Transfer on account of options not exercised | – | – | – | – | – | – | – | – | – | – | – | – | – | – | – | – |
Income tax benefit arising on exercise of stock options | – | 7 | – | – | – | – | – | – | – | – | – | – | – | 7 | – | 7 |
Financial liability under option arrangements (refer to note 2.1) | – | – | (598) | – | – | – | – | – | – | – | – | – | – | (598) | – | (598) |
Dividends paid to non controlling interest of subsidiary | – | – | – | – | – | – | – | – | – | – | – | – | – | – | (33) | (33) |
Amount transferred to other reserves | – | – | – | – | – | – | – | – | – | – | – | – | – | – | – | – |
Dividends (including dividend distribution tax) | – | – | (5,425) | – | – | – | – | – | – | – | – | – | – | (5,425) | – | (5,425) |
Non-controlling interests on acquisition of subsidiary (refer to note no.2.11) | – | – | – | – | – | – | – | – | – | – | – | – | – | – | 311 | 311 |
Transfer to general reserve | – | – | (1,470) | – | 1,470 | – | – | – | – | – | – | – | – | – | – | – |
Transferred to Special Economic Zone Re-investment reserve | – | – | (1,145) | – | – | – | 1,145 | – | – | – | – | – | – | – | – | – |
Transferred from Special Economic Zone Re-investment reserve on utilization | – | – | 616 | – | – | – | (616) | – | – | – | – | – | – | – | – | – |
Balance as at September 30, 2019 | 2,121 | 234 | 52,604 | 54 | 1,157 | 267 | 3,099 | 6 | 111 | 77 | 830 | 14 | (53) | 60,521 | 360 | 60,881 |
* 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 October 11, 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 | Note No. | Six months ended September 30, | |
2019 | 2018 | ||
Cash flow from operating activities | |||
Profit for the period | 7,839 | 7,721 | |
Adjustments to reconcile net profit to net cash provided by operating activities: | |||
Income tax expense | 2.15 | 2,824 | 2,905 |
Depreciation and amortization | 2.2 and 2.3.2 | 1,408 | 900 |
Interest and dividend income | (861) | (1,028) | |
Finance cost | 2.19 | 82 | – |
Impairment loss recognized / (reversed) under expected credit loss model | 82 | 142 | |
Exchange differences on translation of assets and liabilities | 54 | 57 | |
Reduction in the fair value of Disposal Group held for sale | 2.1.2 | – | 270 |
Stock compensation expense | 2.11 | 119 | 97 |
Other adjustments | (102) | (65) | |
Changes in assets and liabilities | |||
Trade receivables and unbilled revenue | (1,578) | (2,679) | |
Loans, other financial assets and other assets | 410 | (155) | |
Trade payables | (1,071) | 488 | |
Other financial liabilities, other liabilities and provisions | 930 | 1,722 | |
Cash generated from operations | 10,136 | 10,375 | |
Income taxes paid | (2,705) | (3,653) | |
Net cash generated by operating activities | 7,431 | 6,722 | |
Cash flows from investing activities | |||
Expenditure on property, plant and equipment | (1,891) | (1,091) | |
Loans to employees | 5 | 9 | |
Deposits placed with corporation | (7) | (11) | |
Interest and dividend received | 841 | 989 | |
Payment towards acquisition of business, net of cash acquired | (511) | (210) | |
Payment of contingent consideration pertaining to acquisition of business | – | (6) | |
Redemption of escrow pertaining to Buyback | 2.6 | 257 | – |
Other receipts | 23 | – | |
Payments to acquire Investments | |||
Preference, equity securities and others | (41) | (21) | |
Tax free bonds and government bonds | (19) | (17) | |
Liquid mutual funds and fixed maturity plan securities | (18,295) | (39,650) | |
Non convertible debentures | (52) | – | |
Government securities | (1,561) | – | |
Certificates of deposit | – | (1,268) | |
Others | (16) | (8) | |
Proceeds on sale of financial assets | |||
Tax free bonds and government bonds | 18 | 1 | |
Non-convertible debentures | 1,383 | 302 | |
Government securities | 1,170 | – | |
Commercial paper | 500 | 300 | |
Certificates of deposit | 1,995 | 950 | |
Liquid mutual funds and fixed maturity plan securities | 18,946 | 38,935 | |
Preference and equity securities | 3 | - | |
Others | 10 | - | |
Net cash (used in)/from in investing activities | 2,758 | (796) | |
Cash flows from financing activities: | |||
Payment of lease liabilities | 2.19 | (294) | – |
Payment of dividends (including dividend distribution tax) | (5,422) | (7,949) | |
Payment of dividend to non-controlling interest of subsidiary | (33) | – | |
Shares issued on exercise of employee stock options | 1 | – | |
Buyback of equity shares including transaction cost | (7,478) | – | |
Net cash used in financing activities | (13,226) | (7,949) | |
Net increase / (decrease) in cash and cash equivalents | (3,037) | (2,023) | |
Cash and cash equivalents at the beginning of the period | 2.8 | 19,568 | 19,871 |
Effect of exchange rate changes on cash and cash equivalents | (58) | 64 | |
Cash and cash equivalents at the end of the period | 2.8 | 16,473 | 17,912 |
Supplementary information: | |||
Restricted cash balance | 2.8 | 375 | 330 |
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 October 11, 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 hereinafter 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).
The Group's consolidated financial statements are approved for issue by the Company's Board of Directors on October 11, 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 quarter and year-to-date figures are taken from the source and rounded to the nearest digits, the quarter figures in this statement added up to the figures reported for the previous quarters might not always add up to the year-to-date figures reported in this statement.
1.3 Basis of consolidation
Infosys consolidates entities which it owns or controls. The consolidated financial statements comprise the financial statements of the Company, its controlled trusts and its subsidiaries, as disclosed in Note 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 and judgments
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, value of option arrangements and intangible assets. These valuations are conducted by external valuation experts (Refer to Note no 2.1 and 2.3.2)
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 (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 2.3.1)
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).
g. Leases
Ind AS 116 requires lessees to determine the lease term as the non-cancellable period of a lease adjusted with any option to extend or terminate the lease, if the use of such option is reasonably certain. The Group makes an assessment on the expected lease term on a lease-by-lease basis and thereby assesses whether it is reasonably certain that any options to extend or terminate the contract will be exercised. In evaluating the lease term, the Company considers factors such as any significant leasehold improvements undertaken over the lease term, costs relating to the termination of the lease and the importance of the underlying asset to Infosys’s operations taking into account the location of the underlying asset and the availability of suitable alternatives. The lease term in future periods is reassessed to ensure that the lease term reflects the current economic circumstances. (Refer to Note no. 2.19)
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.
The payments related to options issued by the Group over the non-controlling interests in its subsidiaries are accounted as financial liabilities and initially recognized at the estimated present value of gross obligations. Such options are subsequently measured at fair value in order to reflect the amount payable under the option at the date at which it becomes exercisable. In the event that the option expires unexercised, the liability is derecognised.
Business combinations between entities under common control is accounted for at carrying value of the assets and liabilities in the Group's consolidated financial statements.
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.
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 September 30, 2019 is $17 million (124
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 September 30, 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 September 30, 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
HIPUS Co., Ltd (formerly, 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 HIPUS Co., Limited, a wholly owned subsidiary
of Hitachi Ltd, Japan for a total cash consideration of JPY 3.29 billion (approximately 206 crore). The company has recorded
a financial liability for the estimated present value of its gross obligation to purchase the Non-controlling interest as of the
acquisition date in accordance with the share purchase agreement with a corresponding adjustment to equity (refer to note 2.12).
HIPUS handles indirect materials purchasing functions for the Hitachi Group. The entity is expected to provide end-to-end procurement capabilities, through its procurement function expertise, localized team and BPM networks in Japan. 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(*) | 41 | – | 41 |
Intangible assets - Customer contracts and relationships | – | 116 | 116 |
Deferred tax liabilities on intangible assets | – | (36) | (36) |
41 | 80 | 121 | |
Goodwill | 108 | ||
Less: Non-controlling Interest | (23) | ||
Total purchase price | 206 |
* Includes cash and cash equivalents acquired
of 179 crore.
Goodwill is not tax deductible
The gross amount of trade receivables acquired
and its fair value is 1,400 crore and the amount has been fully collected. Trade payables as on the acquisition date amounted
to
1,508 crore.
The transaction costs of 8 crore related
to the acquisition have been included under administrative expenses in the statement of comprehensive income for the year ended
March 31, 2019.
Stater N.V.
On May 23, 2019, Infosys Consulting Pte Limited
(a wholly owned subsidiary of Infosys Limited) acquired 75% of voting interests in Stater N.V (Stater), a wholly-owned subsidiary
of ABN AMRO Bank N.V., Netherland, for a total cash consideration of Euro 154 million (approximately 1,195 crore). The company
has recorded a financial liability for the estimated present value of its gross obligation to purchase the Non-controlling interest
as of the acquisition date in accordance with the share purchase agreement with a corresponding adjustment to equity (refer to
note 2.12)Stater brings European mortgage expertise and a robust digital platform to drive superior customer experience. 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(*) | 541 | – | 541 |
Intangible assets - Customer contracts and relationships | – | 549 | 549 |
Intangible assets - Technology | – | 110 | 110 |
Intangible assets - Brand | – | 24 | 24 |
Deferred tax liabilities on intangible assets | – | (140) | (140) |
541 | 543 | 1,084 | |
Goodwill | 399 | ||
Less: Non controlling interest | (288) | ||
Total purchase price | 1,195 |
* Includes cash and cash equivalents acquired
of 505 crore.
Goodwill is not tax deductible
The gross amount of trade receivables acquired
and its fair value is 78 crore and the amount is substantially collected.
The transaction costs of 5 crore related
to the acquisition have been included under administrative expenses in the statement of comprehensive income for the six months
ended September 30, 2019.
Proposed transfer
On October 11, 2019, the Board of Directors of Infosys authorized the Company to execute a Business Transfer Agreement and related documents with its wholly owned subsidiaries, Kallidus Inc and Skava Systems Private Limited (together referred to as Skava), to transfer the business of Skava to Infosys Limited, subject to securing the requisite regulatory approvals for a consideration based on an independent valuation. The transfer between entities under common control would be accounted for at carrying value and would not have any impact on the consolidated financial statements.
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 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 as at March 31, 2019.On
reclassification from “Held for sale”, the assets of Panaya and Skava have been remeasured 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 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 year
ended March 31, 2019.
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. 4
The changes in the carrying value of property, plant and equipment for the three months ended September 30, 2019 are as follows:
(In crore)
Particulars | Land - Freehold | Buildings (1) | Plant and machinery | Office Equipment | Computer equipment | Furniture and fixtures | Leasehold Improvements | Vehicles | Total |
Gross carrying value as at July 1, 2019 | 1,307 | 9,074 | 2,798 | 1,126 | 6,086 | 1,747 | 843 | 40 | 23,021 |
Additions | 7 | 330 | 223 | 58 | 230 | 169 | 136 | 2 | 1,155 |
Deletions | – | – | (1) | – | (72) | (6) | – | (1) | (80) |
Translation difference | – | (11) | – | (1) | (3) | (2) | 1 | – | (16) |
Gross carrying value as at September 30, 2019 | 1,314 | 9,393 | 3,020 | 1,183 | 6,241 | 1,908 | 980 | 41 | 24,080 |
Accumulated depreciation as at July 1, 2019 | – | (3,009) | (1,912) | (838) | (4,381) | (1,221) | (444) | (23) | (11,828) |
Depreciation | – | (88) | (78) | (33) | (221) | (59) | (31) | (2) | (512) |
Accumulated depreciation on deletions | – | – | 1 | – | 71 | 6 | – | 1 | 79 |
Translation difference | – | (1) | – | – | 4 | 2 | 1 | – | 6 |
Accumulated depreciation as at September 30, 2019 | – | (3,098) | (1,989) | (871) | (4,527) | (1,272) | (474) | (24) | (12,255) |
Carrying value as at Jul 1, 2019 | 1,307 | 6,065 | 886 | 288 | 1,705 | 526 | 399 | 17 | 11,193 |
Carrying value as at September 30, 2019 | 1,314 | 6,295 | 1,031 | 312 | 1,714 | 636 | 506 | 17 | 11,825 |
The changes in the carrying value of property, plant and equipment for the three months ended September 30, 2018 are as follows:
(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 July 1, 2018 | 1,296 | 652 | 8,220 | 2,327 | 1,011 | 5,102 | 1,417 | 541 | 33 | 20,599 |
Additions | 2 | – | 45 | 23 | 18 | 165 | 19 | 31 | 2 | 305 |
Deletions | – | – | – | (2) | (2) | (42) | (3) | – | (1) | (50) |
Translation difference | – | – | 13 | 1 | 2 | 14 | 5 | 6 | – | 41 |
Gross carrying value as at September 30, 2018 | 1,298 | 652 | 8,278 | 2,349 | 1,029 | 5,239 | 1,438 | 578 | 34 | 20,895 |
Accumulated depreciation as at July 1, 2018 | – | (32) | (2,794) | (1,669) | (745) | (3,791) | (1,053) | (348) | (19) | (10,451) |
Depreciation | – | (2) | (78) | (73) | (32) | (183) | (45) | (20) | (2) | (435) |
Accumulated depreciation on deletions | – | – | – | 2 | 2 | 40 | 3 | – | 1 | 48 |
Translation difference | – | – | – | (1) | (1) | (11) | (4) | (6) | – | (23) |
Accumulated depreciation as at September 30, 2018 | – | (34) | (2,872) | (1,741) | (776) | (3,945) | (1,099) | (374) | (20) | (10,861) |
Carrying value as at July 1, 2018 | 1,296 | 620 | 5,426 | 658 | 266 | 1,311 | 364 | 193 | 14 | 10,148 |
Carrying value as at September 30, 2018 | 1,298 | 618 | 5,406 | 608 | 253 | 1,294 | 339 | 204 | 14 | 10,034 |
The changes in the carrying value of property, plant and equipment for the six months ended September 30, 2019 were as follows:
(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, 2019 | 1,307 | 605 | 8,926 | 2,709 | 1,101 | 5,846 | 1,620 | 739 | 38 | 22,891 |
Additions | 7 | – | 494 | 313 | 88 | 441 | 291 | 242 | 4 | 1,880 |
Additions - Business Combination | – | – | – | – | – | 60 | 8 | 2 | – | 70 |
Deletions | – | – | – | (1) | (5) | (102) | (9) | (1) | (1) | (119) |
Reclassified on account of adoption of Ind AS 116 (Refer to note 2.19) | – | (605) | – | – | – | – | – | – | – | (605) |
Translation difference | – | – | (27) | (1) | (1) | (4) | (2) | (2) | – | (37) |
Gross carrying value as at September 30, 2019 | 1,314 | – | 9,393 | 3,020 | 1,183 | 6,241 | 1,908 | 980 | 41 | 24,080 |
Accumulated depreciation as at April 1, 2019 | – | (33) | (2,927) | (1,841) | (813) | (4,192) | (1,170) | (414) | (22) | (11,412) |
Depreciation | – | – | (172) | (150) | (63) | (440) | (113) | (63) | (3) | (1,004) |
Accumulated depreciation on deletions | – | – | – | 1 | 5 | 101 | 9 | 1 | 1 | 118 |
Reclassified on account of adoption of Ind AS 116 (Refer to note 2.19) | – | 33 | – | – | – | – | – | – | – | 33 |
Translation difference | – | – | 1 | 1 | – | 4 | 2 | 2 | – | 10 |
Accumulated depreciation as at September 30, 2019 | – | – | (3,098) | (1,989) | (871) | (4,527) | (1,272) | (474) | (24) | (12,255) |
Carrying value as at April 1, 2019 | 1,307 | 572 | 5,999 | 868 | 288 | 1,654 | 450 | 325 | 16 | 11,479 |
Carrying value as at September 30, 2019 | 1,314 | – | 6,295 | 1,031 | 312 | 1,714 | 636 | 506 | 17 | 11,825 |
The changes in the carrying value of property, plant and equipment for the six months ended September 30, 2018 were as follows:
(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 | 69 | – | 134 | 45 | 30 | 397 | 48 | 40 | 4 | 767 |
Additions - Business Combination | – | – | – | – | 2 | 1 | 2 | 2 | – | 7 |
Deletions | – | (21) | – | (3) | (7) | (55) | (8) | (2) | (1) | (97) |
Translation difference | – | – | 14 | 1 | 2 | 12 | 3 | 7 | – | 39 |
Gross carrying value as at September 30, 2018 | 1,298 | 652 | 8,278 | 2,349 | 1,029 | 5,239 | 1,438 | 578 | 34 | 20,895 |
Accumulated depreciation as at April 1, 2018 | – | (31) | (2,719) | (1,597) | (719) | (3,632) | (1,017) | (330) | (18) | (10,063) |
Depreciation | – | (3) | (153) | (146) | (63) | (358) | (88) | (39) | (3) | (853) |
Accumulated depreciation on deletions | – | – | – | 3 | 7 | 53 | 8 | 2 | 1 | 74 |
Translation difference | – | – | – | (1) | (1) | (8) | (2) | (7) | – | (19) |
Accumulated depreciation as at September 30, 2018 | – | (34) | (2,872) | (1,741) | (776) | (3,945) | (1,099) | (374) | (20) | (10,861) |
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 September 30, 2018 | 1,298 | 618 | 5,406 | 608 | 253 | 1,294 | 339 | 204 | 14 | 10,034 |
(1) | Buildings include ![]() ![]() |
The changes in the carrying value of property, plant and equipment for the year ended March 31, 2019 were as follows:
(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 |
(1) | Buildings include ![]() ![]() |
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 fair value of net assets acquired is reassessed and the bargain purchase excess is recognized 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 | |
September 30, 2019 | March 31, 2019 | |
Carrying value at the beginning | 3,540 | 2,211 |
Goodwill on Hipus acquisition (Refer note no. 2.1.1) | 108 | – |
Goodwill on Wongdoody acquisition (Refer note no. 2.1.1) | – | 173 |
Goodwill on Fluido Oy acquisition (refer note no. 2.1.1) | – | 240 |
Goodwill on Stater (Refer note no. 2.1.1) | 399 | – |
Goodwill reclassified from assets held for sale, net of reduction in recoverable amount (Refer note 2.1.2) | – | 863 |
Translation differences | 33 | 53 |
Carrying value at the end | 4,080 | 3,540 |
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 Kallidus , Skava (together referred to as Skava) and Panaya acquisitions are
tested for impairment at Panaya and Skava level which amounts to 941 crore as at March 31, 2019.
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, 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 | |
Long term growth rate | 8-10 |
Operating margins | 17-20 |
Discount rate | 12.5 |
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. 4
The changes in the carrying value of acquired intangible assets for the three months ended September 30, 2019 are as follows:
Particulars | Customer related | Software related | Intellectual property rights related | Brand or Trademark Related | Others | Total |
Gross carrying value as at July 1, 2019 | 1,617 | 598 | 1 | 123 | 84 | 2,423 |
Additions | – | 11 | – | – | – | 11 |
Acquisition through business combination (Refer note no. 2.1.1) | – | – | – | – | – | – |
Deletions | – | – | – | – | – | – |
Translation difference | 4 | 10 | – | – | (2) | 12 |
Gross carrying value as at September 30, 2019 | 1,621 | 619 | 1 | 123 | 82 | 2,446 |
Accumulated amortization as at July 1, 2019 | (587) | (325) | (1) | (49) | (35) | (997) |
Amortization expense | (39) | (28) | – | (4) | (6) | (77) |
Deletions | – | – | – | – | – | – |
Translation differences | (7) | (9) | – | (1) | 1 | (16) |
Accumulated amortization as at September 30, 2019 | (633) | (362) | (1) | (54) | (40) | (1,090) |
Carrying value as at July 1, 2019 | 1,030 | 273 | – | 74 | 49 | 1,426 |
Carrying value as at September 30, 2019 | 988 | 257 | – | 69 | 42 | 1,356 |
Estimated Useful Life (in years) | 1-15 | 3-10 | – | 5-10 | 3-5 | |
Estimated Remaining Useful Life (in years) | 1-15 | 1 | – | 1-7 | 1-2 |
The changes in the carrying value of acquired intangible assets for the three months ended September 30, 2018 are as follows:
(In crore)
Particulars | Customer related | Software related | Land use- rights related | Brand or Trademark Related | Others | Total |
Gross carrying value as at July 1, 2018 | 583 | 20 | 73 | 34 | 27 | 737 |
Additions | – | 8 | – | – | – | 8 |
Deletions | – | – | – | – | – | – |
Translation differences | 30 | 3 | 1 | 1 | – | 35 |
Gross carrying value as at September 30, 2018 | 613 | 31 | 74 | 35 | 27 | 780 |
Accumulated amortization as at July 1, 2018 | (309) | (20) | (10) | (14) | (14) | (367) |
Amortization expense | (23) | (1) | (1) | (1) | (2) | (28) |
Deletions | – | – | – | – | – | – |
Translation differences | (19) | (2) | – | – | – | (21) |
Accumulated amortization as at September 30, 2018 | (351) | (23) | (11) | (15) | (16) | (416) |
Carrying value as at July 1, 2018 | 274 | – | 63 | 20 | 13 | 370 |
Carrying value as at September 30, 2018 | 262 | 8 | 63 | 20 | 11 | 364 |
Estimated Useful Life (in years) | 2-10 | 3 | 50 | 5-6 | 5 | |
Estimated Remaining Useful Life (in years) | 0-4 | 2 | 43 | 2-6 | 2 |
Following are the changes in the carrying value of acquired intangible assets for the six months ended September 30, 2019:
(In crore)
Particulars | Customer related | Software related | Intellectual property rights related | Land use- rights related | Brand or Trademark Related | Others | Total |
Gross carrying value as at April 1, 2019 | 937 | 441 | 1 | 73 | 99 | 83 | 1,634 |
Additions | – | 59 | – | – | – | – | 59 |
Acquisition through business combination (Refer note no. 2.1.1) | 665 | 110 | – | – | 24 | – | 799 |
Reclassified on account of adoption of IndAS 116 | – | – | – | (73) | – | – | (73) |
Translation difference | 19 | 9 | – | – | – | (1) | 27 |
Gross carrying value as at September 30, 2019 | 1,621 | 619 | 1 | – | 123 | 82 | 2,446 |
Accumulated amortization as at April 1, 2019 | (557) | (302) | (1) | (11) | (44) | (28) | (943) |
Amortization expense | (69) | (53) | – | – | (8) | (12) | (142) |
Reclassified on account of adoption of IndAS 116 | – | – | – | 11 | – | – | 11 |
Translation differences | (7) | (7) | – | – | (2) | – | (16) |
Accumulated amortization as at September 30, 2019 | (633) | (362) | (1) | – | (54) | (40) | (1,090) |
Carrying value as at April 1, 2019 | 380 | 139 | – | 62 | 55 | 55 | 691 |
Carrying value as at September 30, 2019 | 988 | 257 | – | – | 69 | 42 | 1,356 |
Estimated Useful Life (in years) | 1-15 | 3-10 | – | – | 5-10 | 3-5 | |
Estimated Remaining Useful Life (in years) | 1-15 | 1 | – | – | 1-7 | 1-2 |
Following are the changes in the carrying value of acquired intangible assets for the six months ended September 30, 2018:
(In crore)
Particulars | Customer related | Software 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 | – | 8 | – | – | – | 8 |
Acquisition through business combination (Refer note no. 2.1.1) | 132 | – | – | 8 | – | 140 |
Deletions | – | – | – | – | – | – |
Translation difference | 36 | 4 | 1 | 1 | – | 42 |
Gross carrying value as at September 30, 2018 | 613 | 31 | 74 | 35 | 27 | 780 |
Accumulated amortization as at April 1, 2018 | (289) | (19) | (10) | (12) | (13) | (343) |
Amortization expense | (39) | (1) | (1) | (3) | (3) | (47) |
Deletions | – | – | – | – | – | – |
Translation differences | (23) | (3) | – | – | – | (26) |
Accumulated amortization as at September 30, 2018 | (351) | (23) | (11) | (15) | (16) | (416) |
Carrying value as at April 1, 2018 | 156 | – | 63 | 14 | 14 | 247 |
Carrying value as at September 30, 2018 | 262 | 8 | 63 | 20 | 11 | 364 |
Estimated Useful Life (in years) | 2-10 | 3 | 50 | 5-6 | 5 | |
Estimated Remaining Useful Life (in years) | 0-4 | 2 | 43 | 2-6 | 2 |
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 | 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 | – | 9 | – | – | – | – | 9 |
Acquisition through business combination (Refer note no. 2.1.1) | 334 | – | – | – | 36 | 62 | 432 |
Deletions | – | – | – | – | – | – | – |
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) |
Deletions | – | – | – | – | – | – | – |
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 |
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 September 30, 2019 and September 30,
2018 was 210 crore and
198 crore respectively, and for the six months ended September 30, 2019 and September 30,
2018 was
408 crore and
386 crore respectively
2.4 INVESTMENTS
(In crore)
Particulars | As at | |
September 30, 2019 | March 31, 2019 | |
Non-current | ||
Unquoted | ||
Investments carried at fair value through other comprehensive income (refer note no. 2.4.1) | ||
Preference securities | 134 | 89 |
Equity instruments | 11 | 11 |
145 | 100 | |
Investments carried at fair value through profit and loss (refer note no. 2.4.1) | ||
Preference securities | 24 | 23 |
Others (1) | 32 | 16 |
56 | 39 | |
Quoted | ||
Investments carried at amortized cost (refer note no. 2.4.2) | ||
Tax free bonds | 1,891 | 1,893 |
Government Bonds | 19 | – |
1,910 | 1,893 | |
Investments carried at fair value through profit and loss (refer note no. 2.4.3) | ||
Fixed maturity plan securities | – | 458 |
– | 458 | |
Investments carried at fair value through other comprehensive income (refer note no. 2.4.4) | ||
Non convertible debentures | 678 | 1,420 |
Government securities | 1,154 | 724 |
1,832 | 2,144 | |
Total non-current investments | 3,943 | 4,634 |
Current | ||
Unquoted | ||
Investments carried at fair value through profit or loss (refer note no. 2.4.3) | ||
Liquid mutual fund units | 1,220 | 1,786 |
1,220 | 1,786 | |
Investments carried at fair value through other comprehensive income | ||
Commercial Paper (refer note no. 2.4.4) | – | 495 |
Certificates of deposit (refer note no. 2.4.4) | 547 | 2,482 |
547 | 2,977 | |
Quoted | ||
Investment carried at amortized cost (refer note no.2.4.2) | ||
Government Bonds | – | 18 |
– | 18 | |
Investments carried at fair value through profit and loss (refer note no. 2.4.3) | ||
Fixed maturity plan securities | 476 | – |
476 | – | |
Investments carried at fair value through other comprehensive income (refer note no. 2.4.4) | ||
Non convertible debentures | 1,275 | 1,846 |
1,275 | 1,846 | |
Total current investments | 3,518 | 6,627 |
Total investments | 7,461 | 11,261 |
Aggregate amount of quoted investments | 5,493 | 6,359 |
Market value of quoted investments (including interest accrued), current | 1,747 | 1,862 |
Market value of quoted investments (including interest accrued), non current | 4,013 | 4,711 |
Aggregate amount of unquoted investments | 1,968 | 4,902 |
Aggregate amount of impairment on value of investments | – | – |
Investments carried at amortized cost | 1,910 | 1,911 |
Investments carried at fair value through other comprehensive income | 3,799 | 7,067 |
Investments carried at fair value through profit or loss | 1,752 | 2,283 |
(1) | Uncalled capital commitments outstanding as at September 30, 2019 and March 31, 2019
was ![]() ![]() |
Refer to Note no 2.10 for Accounting policies on Financial Instruments.
Details of amounts recorded in Other comprehensive income :
(In crore)
Three months ended September 30, 2019 | Three months ended September 30, 2018 | |||||
Gross | Tax | Net | Gross | Tax | Net | |
Net Gain/(loss) on | ||||||
Non-convertible debentures | 16 | (2) | 14 | (12) | 2 | (10) |
Certificates of deposit | (3) | 1 | (2) | (7) | 2 | (5) |
Government securities | (13) | 3 | (10) | – | – | – |
Equity and preference securities | 4 | (2) | 2 | 7 | 1 | 8 |
(In crore)
Six months ended September 30, 2019 | Six months ended September 30, 2018 | |||||
Gross | Tax | Net | Gross | Tax | Net | |
Net Gain/(loss) on | ||||||
Non-convertible debentures | 27 | (3) | 24 | (48) | 6 | (42) |
Certificates of deposit | (5) | 1 | (4) | (27) | 9 | (18) |
Government securities | (3) | 1 | (2) | – | – | – |
Equity and preference securities | 7 | (2) | 5 | 12 | – | 12 |
Method of fair valuation:
(In crore)
Class of investment | Method | Fair value as at | |
September 30, 2019 | March 31, 2019 | ||
Liquid mutual fund units | Quoted price | 1,220 | 1,786 |
Fixed maturity plan securities | Market observable inputs | 476 | 458 |
Tax free bonds and government bonds | Quoted price and market observable inputs | 2,199 | 2,125 |
Non-convertible debentures | Quoted price and market observable inputs | 1,953 | 3,266 |
Government securities | Quoted price | 1,154 | 724 |
Commercial Papers | Market observable inputs | – | 495 |
Certificate of deposits | Market observable inputs | 547 | 2,482 |
Unquoted equity and preference securities - carried at fair value through other comprehensive income | Discounted cash flows method, Market multiples method, Option pricing model, etc. | 145 | 100 |
Unquoted equity and preference securities - carried at fair value through profit and loss | Discounted cash flows method, Market multiples method, Option pricing model, etc. | 24 | 23 |
Others | Discounted cash flows method, Market multiples method, Option pricing model, etc. | 32 | 16 |
Total | 7,750 | 11,475 |
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 September 30, 2019 and March 31, 2019 are as follows:
(In crore, except otherwise stated)
Particulars | As at | |
September 30, 2019 | March 31, 2019 | |
Preference securities | ||
Airviz, Inc. | 4 | 3 |
2,282,279 (2,82,279) Series A Preferred Stock, fully paid up, par value USD 0.001 each | ||
Whoop, Inc. | 14 | 14 |
16,48,352(16,48,352) Series B Preferred Stock, fully paid up, par value USD 0.0001 each | ||
Nivetti Systems Private Limited | 10 | 10 |
2,28,501 (2,28,501) Preferred Stock, fully paid up, par value ![]() |
||
Waterline Data Science, Inc. | 26 | 25 |
39,33,910 (39,33,910) Series B Preferred Shares, fully paid up, par value USD 0.00001 each | ||
13,35,707 (13,35,707) Series C Preferred Shares, fully paid up, par value USD 0.00001 each | ||
Trifacta Inc. | 70 | 27 |
31,40,181 (11,80,358) Series C-1 Preferred Stock | ||
Tidalscale, Inc. | 24 | 23 |
36,74,269 (36,74,269) Series B Preferred Stock | ||
Ideaforge Technology Private Limited | 10 | 10 |
5,402 (5,402) Series A compulsorily convertible cumulative Preference shares of ![]() |
||
Total investment in preference securities | 158 | 112 |
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 | 10 |
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 | 11 |
Others | ||
Stellaris Venture Partners India | 16 | 16 |
The House Fund II, L.P. | 16 | – |
Total investment in others | 32 | 16 |
Total | 201 | 139 |
* | 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 September 30, 2019 and March 31, 2019 are as follows:
(In crore, except as otherwise stated)
Particulars | As at September 30, 2019 | As at March 31, 2019 | |||
Face Value ![]() |
Units | Amount | Units | Amount | |
7.04% Indian Railway Finance Corporation Limited Bonds 03MAR2026 | 10,00,000 | 470 | 49 | 470 | 50 |
7.16% Power Finance Corporation Limited Bonds 17JUL2025 | 10,00,000 | 1,000 | 105 | 1,000 | 105 |
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 | 342 |
7.34% Indian Railway Finance Corporation Limited Bonds 19FEB2028 | 1,000 | 2,100,000 | 210 | 2,100,000 | 210 |
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 | 20 | 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 | 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 | 500,000 | 50 | 500,000 | 50 |
Total investments in tax-free bonds | 74,55,416 | 1,891 | 74,54,496 | 1,893 |
The balances held in government bonds as at September 30, 2019 and March 31, 2019 are as follows:
(In crore, except as otherwise stated)
Particulars | As at September 30, 2019 | As at March 31, 2019 | |||
Face Value PHP | Units | Amount | Units | Amount | |
Treasury Notes Phillippines Govt. 29MAY2019 | – | – | – | 45,000 | 6 |
Treasury Notes Phillippines Govt. 17APRIL2019 | – | – | – | 90,000 | 12 |
Treasury Notes Phillippines Govt. 8MARCH2023 | 100 | 55,000 | 7 | – | – |
Treasury Notes Phillippines Govt. 4DECEMBER2022 | 100 | 90,000 | 12 | – | – |
Total investments in government bonds | 145,000 | 19 | 135,000 | 18 |
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 September 30, 2019 and March 31, 2019 are as follows:
(In crore, except as otherwise stated)
Particulars | As at September 30, 2019 | As at March 31, 2019 | ||
Units | Amount | Units | Amount | |
Aditya Birla Sun Life Liquid Fund -Growth -Direct Plan | 514,908 | 16 | 13,32,847 | 40 |
Aditya Birla Sun life Corporate Bond Fund -Growth -Direct Plan | 26,697,315 | 202 | 1,96,00,407 | 141 |
Aditya Birla Sun life Money Manager Fund -Growth -Direct Plan | – | – | 79,75,385 | 201 |
Aditya Birla Sun Life Cash Manager - Growth | 40,457 | 2 | 1,11,344 | 5 |
HDFC Money market Fund- Direct Plan- Growth Option | 87,596 | 36 | 7,72,637 | 303 |
HDFC Liquid fund-Direct Plan growth option | 42,100 | 16 | 68,035 | 25 |
ICICI Prudential Short Term- Direct Plan -Growth | 125,303,364 | 530 | – | – |
ICICI Prudential Savings Fund- Direct Plan-Growth | – | – | 83,40,260 | 301 |
IDFC Corporate Bond - Fund Direct Plan | 11,902,495 | 16 | 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 |
HDFC Corporate Bond Fund -Growth -Direct Plan | 11,40,66,706 | 251 | – | – |
IDFC Banking and PSU fund Direc Plan- Growth Option | 88,849,927 | 151 | – | – |
Total investments in liquid mutual fund units | 36,75,04,868 | 1,220 | 17,16,84,781 | 1,786 |
The balances held in fixed maturity plans as at September 30, 2019 and March 31, 2019 are as follows:
(In crore, except as otherwise stated)
Particulars | As at September 30, 2019 | As at March 31, 2019 | ||
Units | Amount | Units | Amount | |
Aditya Birla Sun Life Fixed Term Plan- Series OD 1145 Days- GR Direct | 6,00,00,000 | 72 | 6,00,00,000 | 70 |
Aditya Birla Sun Life Fixed Term Plan- Series OE 1153 Days- GR Direct | 2,50,00,000 | 30 | 2,50,00,000 | 29 |
HDFC FMP 1155D Feb 2017- Direct Growth- Series 37 | 3,80,00,000 | 46 | 3,80,00,000 | 44 |
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 | 66 | 5,50,00,000 | 63 |
ICICI Prudential Fixed Maturity Plan Series 80- 1187 Days Plan G Direct Plan | 4,20,00,000 | 51 | 4,20,00,000 | 49 |
ICICI Prudential Fixed Maturity Plan Series 80- 1253 Days Plan J Direct Plan | 3,00,00,000 | 36 | 3,00,00,000 | 35 |
IDFC Fixed Term Plan Series 129 Direct Plan- Growth 1147 Days | 1,00,00,000 | 12 | 1,00,00,000 | 12 |
IDFC Fixed Term Plan Series 131 Direct Plan- Growth 1139 Days | 1,50,00,000 | 18 | 1,50,00,000 | 17 |
Kotak FMP Series 199 Direct- Growth | 3,50,00,000 | 42 | 3,50,00,000 | 40 |
Reliance Fixed Horizon Fund- XXXII Series 8- Dividend Plan | 5,00,00,000 | 58 | 5,00,00,000 | 54 |
Total investments in fixed maturity plan securities | 40,50,00,000 | 476 | 40,50,00,000 | 458 |
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 September 30, 2019 and March 31, 2019 is as follows:
(In crore, except as otherwise stated)
Particulars | As at September 30, 2019 | As at March 31, 2019 | |||
Face Value ![]() |
Units | Amount | Units | Amount | |
7.48% Housing Development Finance Corporation Ltd 18NOV2019 | 1,00,00,000/- | 50 | 54 | 50 | 51 |
7.58% LIC Housing Finance Ltd 28FEB2020 | 10,00,000/- | – | – | 1,000 | 101 |
7.58% LIC Housing Finance Ltd 11JUN2020 | 10,00,000/- | 500 | 53 | 500 | 51 |
7.59% LIC Housing Finance Ltd 14OCT2021 | 10,00,000/- | 3,000 | 323 | 3,000 | 306 |
7.75% LIC Housing Finance Ltd 27AUG2021 | 10,00,000/- | 1,250 | 126 | 1,250 | 127 |
7.78% Housing Development Finance Corporation Ltd 24MAR2020 | 1,00,00,000/- | 100 | 105 | 100 | 100 |
7.79% LIC Housing Finance Ltd 19JUN2020 | 10,00,000/- | 500 | 51 | 500 | 53 |
7.80% Housing Development Finance Corporation Ltd 11NOV2019 | 1,00,00,000/- | 50 | 53 | 150 | 154 |
7.81% LIC Housing Finance Ltd 27APR2020 | 10,00,000/- | 2,000 | 208 | 2,000 | 214 |
7.95% Housing Development Finance Corporation Ltd 23SEP2019 | 1,00,00,000/- | – | – | 50 | 52 |
8.02% LIC Housing Finance Ltd 18FEB2020 | 10,00,000/- | – | – | 500 | 51 |
8.26% Housing Development Finance Corporation Ltd 12AUG2019 | 1,00,00,000/- | – | – | 100 | 105 |
8.37% LIC Housing Finance Ltd 03OCT2019 | 10,00,000/- | 2,000 | 207 | 2,000 | 216 |
8.37% LIC Housing Finance Ltd 10MAY2021 | 10,00,000/- | 500 | 52 | 500 | 54 |
8.47% LIC Housing Finance Ltd 21JAN2020 | 10,00,000/- | – | – | 500 | 51 |
8.49% Housing Development Finance Corporation Ltd 27APR2020 | 5,00,000/- | 900 | 47 | 900 | 49 |
8.50% Housing Development Finance Corporation Ltd 31AUG2020 | 1,00,00,000/- | 100 | 102 | 100 | 105 |
8.59% Housing Development Finance Corporation Ltd 14JUN2019 | 1,00,00,000/- | – | – | 50 | 51 |
8.60% LIC Housing Finance Ltd 22JUL2020 | 10,00,000/- | 1,000 | 103 | 1,000 | 107 |
8.60% LIC Housing Finance Ltd 29JUL2020 | 10,00,000/- | 1,750 | 180 | 1,750 | 186 |
8.61% LIC Housing Finance Ltd 11DEC2019 | 10,00,000/- | – | – | 1,000 | 103 |
8.72% Housing Development Finance Corporation Ltd 15APR2019 | 1,00,00,000/- | – | – | 75 | 75 |
8.75% Housing Development Finance Corporation Ltd 13JAN2020 | 5,00,000/- | 2,100 | 112 | 5,000 | 256 |
8.75% LIC Housing Finance Ltd 14JAN2020 | 10,00,000/- | – | – | 1,070 | 110 |
8.75% LIC Housing Finance Ltd 21DEC2020 | 10,00,000/- | 1,000 | 107 | 1,000 | 101 |
8.80% LIC Housing Finance Ltd 24Dec2020 | 10,00,000/- | 650 | 70 | 650 | 67 |
8.97% LIC Housing Finance Ltd 29OCT2019 | 10,00,000/- | – | – | 500 | 52 |
9.45% Housing Development Finance Corporation Ltd 21AUG2019 | 10,00,000/- | – | – | 3,000 | 318 |
Total investments in non-convertible debentures | 17,450 | 1,953 | 28,295 | 3,266 |
The balances held in government securities as at September 30, 2019 and March 31, 2019 are as follows:
(In crore, except as otherwise stated)
Particulars | As at September 30, 2019 | As at March 31, 2019 | |||
Face Value ![]() |
Units | Amount | Units | Amount | |
7.17% Government of India 8JAN2028 | 10,000/- | 3,50,000 | 363 | 6,75,000 | 672 |
7.32% Government of India 28JAN2024 | 10,000/- | 1,00,000 | 105 | – | – |
7.37% Government of India 16APR2023 | 10,000/- | 50,000 | 54 | – | – |
7.95% Government of India 28AUG2032 | 10,000/- | – | – | 50,000 | 52 |
7.26% Government of India 14JAN2029 | 10,000/- | 600,000 | 632 | – | – |
Total investments in government securities | 11,00,000 | 1,154 | 725,000 | 724 |
The balances held in certificates of deposit as at September 30, 2019 and March 31, 2019 are as follows:
(In crore, except as otherwise stated)
Particulars | As at September 30, 2019 | As at March 31, 2019 | |||
Face Value ![]() |
Units | Amount | Units | Amount | |
Axis Bank | 1,00,000/- | 30,000 | 298 | 90,000 | 872 |
ICICI Bank | 1,00,000/- | 25,000 | 249 | 75,000 | 738 |
Kotak Bank | 1,00,000/- | – | – | 77,000 | 747 |
Vijaya Bank | 1,00,000/- | – | – | 12,500 | 125 |
Total investments in certificates of deposit | 55,000 | 547 | 2,54,500 | 2,482 |
The balances held in commercial paper as at September 30, 2019 and March 31, 2019 are as follows:
(In crore, except as otherwise stated)
Particulars | As at September 30, 2019 | As at March 31, 2019 | |||
Face Value ![]() |
Units | Amount | Units | Amount | |
LIC | 5,00,000/- | – | – | 10,000 | 495 |
Total investments in commercial paper | – | – | 10,000 | 495 |
2.5 LOANS
(In crore)
Particulars | As at | |
September 30, 2019 | March 31, 2019 | |
Non Current | ||
Unsecured, considered good | ||
Other loans | ||
Loans to employees | 16 | 19 |
16 | 19 | |
Unsecured, considered doubtful | ||
Other loans | ||
Loans to employees | 25 | 24 |
41 | 43 | |
Less: Allowance for doubtful loans to employees | 25 | 24 |
Total non-current loans | 16 | 19 |
Current | ||
Unsecured, considered good | ||
Other loans | ||
Loans to employees | 240 | 241 |
Total current loans | 240 | 241 |
Total loans | 256 | 260 |
2.6 OTHER FINANCIAL ASSETS
(In crore)
Particulars | As at | |
September 30, 2019 | March 31, 2019 | |
Non Current | ||
Security deposits (1) | 50 | 52 |
Rental deposits (1) | 204 | 193 |
Net investment in sublease of right of use asset (refer to note 2.19) (1) | 390 | – |
Restricted deposits(1)* | 23 | 67 |
Others (1) | 12 | – |
Total non-current other financial assets | 679 | 312 |
Current | ||
Security deposits (1) | 7 | 4 |
Rental deposits (1) | 21 | 15 |
Restricted deposits (1)* | 1,727 | 1,671 |
Unbilled revenues (1)# | 2,843 | 2,093 |
Interest accrued but not due (1) | 836 | 905 |
Foreign currency forward and options contracts (2) (3) | 108 | 336 |
Escrow and other deposits pertaining to buyback (Refer note 2.11)(1) | – | 257 |
Net investment in sublease of right of use asset (refer to note 2.19) (1) | 32 | – |
Others (1) | 243 | 224 |
Total current other financial assets | 5,817 | 5,505 |
Total other financial assets | 6,496 | 5,817 |
(1) Financial assets carried at amortized cost | 6,388 | 5,481 |
(2) Financial assets carried at fair value through other comprehensive income | 31 | 37 |
(3) Financial assets carried at fair value through profit or loss | 77 | 299 |
* | 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 | |
September 30, 2019 | March 31, 2019 | |
Current | ||
Unsecured | ||
Considered good (1) | 16,055 | 14,827 |
Considered doubtful | 477 | 483 |
16,532 | 15,310 | |
Less: Allowance for credit loss | 477 | 483 |
Total trade receivables | 16,055 | 14,827 |
(1) Includes dues from companies where directors are interested | – | – |
2.8 CASH AND CASH EQUIVALENTS
(In crore)
Particulars | As at | |
September 30, 2019 | March 31, 2019 | |
Balances with banks | ||
In current and deposit accounts | 11,754 | 14,197 |
Cash on hand | – | – |
Others | ||
Deposits with financial institutions | 4,719 | 5,371 |
Total cash and cash equivalents | 16,473 | 19,568 |
Balances with banks in unpaid dividend accounts | 32 | 29 |
Deposit with more than 12 months maturity | 6,960 | 6,582 |
Balances with banks held as margin money deposits against guarantees | 105 | 114 |
Cash and cash equivalents as at September 30,
2019 and March 31, 2019 include restricted cash and bank balances of 375 crore and
358 crore, respectively. The restrictions
are primarily on account of bank balances held by irrevocable trusts controlled by the company and bank balances held as margin
money deposits against guarantees.
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.
2.9 OTHER ASSETS
(In crore)
Particulars | As at | |
September 30, 2019 | March 31, 2019 | |
Non Current | ||
Capital advances | 429 | 489 |
Advances other than capital advances | ||
Others | ||
Withholding taxes and others | 876 | 929 |
Prepaid gratuity (refer note no. 2.20.1) | 18 | 42 |
Prepaid expenses | 150 | 162 |
Deferred Contract Cost | 244 | 277 |
Advance for business acquisition (refer note no. 2.1.1) | – | 206 |
Total Non-Current other assets | 1,717 | 2,105 |
Current | ||
Advances other than capital advances | ||
Payment to vendors for supply of goods | 68 | 109 |
Others | ||
Unbilled revenues # | 4,426 | 3,281 |
Withholding taxes and others | 1,288 | 1,488 |
Prepaid expenses | 876 | 751 |
Deferred Contract Cost | 54 | 58 |
Total Current other assets | 6,712 | 5,687 |
Total other assets | 8,429 | 7,792 |
Withholding taxes and others primarily consist
of input tax credits and Cenvat recoverable from Government of India. Cenvat recoverable includes 471 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 and financial liability under option arrangements 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.
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 September 30, 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) | 16,473 | – | – | – | – | 16,473 | 16,473 |
Investments (Refer Note no. 2.4) | |||||||
Equity and preference securities | – | – | 24 | 145 | – | 169 | 169 |
Tax-free bonds and government bonds | 1,910 | – | – | – | – | 1,910 | 2,199(1) |
Liquid mutual fund units | – | – | 1,220 | – | – | 1,220 | 1,220 |
Non convertible debentures | – | – | – | – | 1,953 | 1,953 | 1,953 |
Government securities | – | – | – | – | 1,154 | 1,154 | 1,154 |
Certificates of deposit | – | – | – | – | 547 | 547 | 547 |
Other investments | – | – | 32 | – | – | 32 | 32 |
Fixed maturity plan securities | – | – | 476 | – | – | 476 | 476 |
Trade receivables (Refer Note no. 2.7) | 16,055 | – | – | – | – | 16,055 | 16,055 |
Loans (Refer Note no. 2.5) | 256 | – | – | – | – | 256 | 256 |
Other financials assets (Refer Note no. 2.6)(3) | 6,388 | – | 77 | – | 31 | 6,496 | 6,418(2) |
Total | 41,082 | – | 1,829 | 145 | 3,685 | 46,741 | 46,952 |
Liabilities: | |||||||
Trade payables | 2,134 | – | – | – | – | 2,134 | 2,134 |
Financial Liability under option arrangements (refer to note 2.1.1) | – | – | 600 | – | – | 600 | 600 |
Other financial liabilities (Refer Note no. 2.12) | 8,072 | – | 240 | – | 2 | 8,314 | 8,314 |
Total | 10,206 | – | 840 | – | 2 | 11,048 | 11,048 |
(1) | On account of fair value changes including interest accrued |
(2) | Excludes interest accrued on tax free bonds and government bonds carried at amortized
cost of ![]() |
(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, 2019 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) | 19,568 | – | – | – | – | 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) | 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 carried at amortized
cost of ![]() |
(3) | Excludes unbilled revenue for fixed price development contracts where right to consideration is conditional on factors other than passage of time |
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 September 30, 2019:
(In crore)
Particulars | As at September 30, 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) | 1,220 | 1,220 | – | – |
Investments in tax-free bonds (Refer Note no. 2.4) | 2,179 | 1,535 | 644 | – |
Investments in government bonds (Refer Note no. 2.4) | 20 | 20 | – | – |
Investments in equity instruments (Refer Note no. 2.4) | 11 | – | – | 11 |
Investments in preference securities (Refer Note no. 2.4) | 158 | – | – | 158 |
Investments in non convertible debentures (Refer Note no. 2.4) | 1,953 | 494 | 1,459 | – |
Investments in certificates of deposit (Refer Note no. 2.4) | 547 | – | 547 | – |
Investment in Government securities (Refer Note no. 2.4) | 1,154 | 1,154 | – | – |
Investments in fixed maturity plan securities (Refer Note no. 2.4) | 476 | – | 476 | – |
Other investments (Refer Note no. 2.4) | 32 | – | – | 32 |
Derivative financial instruments - gain on outstanding foreign currency forward and option contracts (Refer Note no. 2.6) | 108 | – | 108 | – |
Liabilities | ||||
Derivative financial instruments - loss on outstanding foreign currency forward and option contracts (Refer Note no. 2.12) | 38 | – | 38 | – |
Financial liability under option arrangements (refer to note 2.1.1) | 600 | – | – | 600 |
Liability towards contingent consideration (Refer note no. 2.12)(1) | 204 | – | – | 204 |
(1) | Discount rate pertaining to contingent consideration ranges from 9% to 15% . |
During the six months ended September 30, 2019,
tax free bonds and non-convertible debentures of 279 crore were transferred from Level 2 to Level 1 of fair value hierarchy,
since these were valued based on quoted price and
974 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, 2019 was as follows:
(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 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 (Refer Note no. 2.4) | 724 | 724 | – | – |
Investments in commercial paper (Refer Note no. 2.4) | 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.
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 September 30, 2019:
(In crore)
Particulars | U.S. dollars | Euro | United Kingdom Pound Sterling | Australian dollars | Other currencies | Total |
Cash and cash equivalents | 931 | 672 | 117 | 162 | 1,341 | 3,223 |
Trade receivables | 10,201 | 1,945 | 1,069 | 518 | 1,596 | 15,329 |
Other financial assets , loans and other current assets | 6,279 | 1,195 | 367 | 356 | 1,087 | 9,284 |
Trade payables | (702) | (127) | (90) | (45) | (877) | (1,841) |
Other financial liabilities | (5,797) | (1,579) | (469) | (604) | (2,418) | (10,867) |
Net assets / (liabilities) | 10,912 | 2,106 | 994 | 387 | 729 | 15,128 |
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 |
Sensitivity analysis between Indian rupee and U.S. Dollar
Particulars | Three months ended September 30, |
Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Impact on the Group's incremental operating margins | 0.46% | 0.49% | 0.45% | 0.48% |
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:
Particulars | As at | As at | ||
September 31, 2019 | March 31, 2019 | |||
In million | In ![]() |
In million | In ![]() | |
Derivatives designated as cash flow hedges | ||||
Option Contracts | ||||
In Australian dollars | 130 | 622 | 120 | 588 |
In Euro | 140 | 1,082 | 135 | 1,049 |
In United Kingdom Pound Sterling | 25 | 220 | 25 | 226 |
Other derivatives | ||||
Forward contracts | ||||
In Australian dollars | 37 | 251 | 8 | 37 |
In Canadian dollars | 13 | 70 | 13 | 68 |
In Euro | 203 | 1,566 | 176 | 1,367 |
In Japanese Yen | – | – | 550 | 34 |
In New Zealand dollars | 16 | 71 | 16 | 75 |
In Norwegian Krone | 40 | 31 | 40 | 32 |
In Singapore dollars | 363 | 1,862 | 140 | 716 |
In South African Rand | 22 | 10 | – | – |
In Swedish Krona | 50 | 36 | 50 | 37 |
In Swiss Franc | 3 | 22 | 25 | 172 |
In U.S. dollars | 1,089 | 7,716 | 955 | 6,608 |
In Poland zloty | 88 | 155 | – | – |
In Romanian leu | 19 | 31 | – | – |
In Renminbi | 151 | 149 | – | – |
In United Kingdom Pound Sterling | 69 | 598 | 80 | 724 |
In Brazilian Real | 55 | 94 | – | – |
Option Contracts | ||||
In Australian dollars | – | – | 10 | 49 |
In Canadian Dollars | – | – | 13 | 69 |
In Euro | 25 | 193 | 60 | 466 |
In Swiss Franc | – | – | 5 | 35 |
In U.S. dollars | 592 | 4,196 | 433 | 2,995 |
In United Kingdom Pound Sterling | – | – | 10 | 91 |
Total forwards and options contracts | 18,975 | 15,438 |
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 | |
September 30, 2019 | March 31, 2019 | |
Not later than one month | 3,357 | 4,432 |
Later than one month and not later than three months | 6,133 | 6,921 |
Later than three months and not later than one year | 9,485 | 4,085 |
18,975 | 15,438 |
During the six months ended September 30, 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 of September 30, 2019 are expected to occur and reclassified to the consolidated 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 reconciliation of cash flow hedge reserve for the three months and six months ended September 30, 2019 is as follows:
(In crore)
Particulars | Three months ended September 30, |
Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Gain/(Loss) | ||||
Balance at the beginning of the period | (3) | 9 | 21 | – |
Gain / (Loss) recognised in other comprehensive income during the period | 46 | (49) | 49 | (19) |
Amount reclassified to profit or loss during the period | (23) | 15 | (58) | (3) |
Tax impact on above | (6) | 5 | 2 | 2 |
Balance at the end of the period | 14 | (20) | 14 | (20) |
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)
Particulars | As at | As at | ||
September 31, 2019 | March 31, 2019 | |||
Derivative financial asset | Derivative financial liability | Derivative financial asset | Derivative financial liability | |
Gross amount of recognized financial asset/liability | 119 | (48) | 338 | (17) |
Amount set off | (10) | 10 | (2) | 2 |
Net amount presented in Balance Sheet | 109 | (38) | 336 | (15) |
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 16,055 crore and
14,827 crore as at September 30, 2019 and March
31, 2019, respectively and unbilled revenues amounting to
7,269 crore and
5,374 crore as at September 30, 2019 and
March 31, 2019, 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 %)
Particulars | Three months ended September 30, |
Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Revenue from top customer | 3.2 | 3.9 | 3.2 | 3.8 |
Revenue from top 10 customers | 19.2 | 19.4 | 19.7 | 19.3 |
Credit risk exposure
The allowance for lifetime ECL on customer balances
for three months and six months ended September 30, 2019 was 34 crore and
83 crore respectively and was
73
crore and
142 crore for the three months and six months ended September 30, 2018
The movement in credit loss allowance on customer balance is as follows:
(In crore)
Particulars | Three months ended September 30, |
Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Balance at the beginning | 674 | 529 | 627 | 449 |
Impairment loss recognized | 34 | 73 | 82 | 142 |
Write-offs | (72) | (73) | (73) | (73) |
Translation differences | 4 | 17 | 4 | 28 |
Balance at the end | 640 | 546 | 640 | 546 |
Credit exposure
The Group’s credit period generally ranges from 30-60 days.
(In crore except otherwise stated)
Particulars | As at | |
September 30, 2019 | March 31, 2019 | |
Trade receivables | 16,055 | 14,827 |
Unbilled revenues | 7,269 | 5,374 |
Days sales outstanding was 66 days and 66 days as of September 30, 2019 and March 31, 2019, 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 September 30, 2019, the Group had a working
capital of 29,638 crore including cash and cash equivalents of
16,473 crore and current investments of
3,518
crore. 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 September 30, 2019 and March 31, 2019,
the outstanding compensated absences were 1,870 crore and
1,663 crore, respectively, which have been substantially
funded. Accordingly no liquidity risk is perceived.
Refer note 2.11 Equity for details on Company’s buyback programme.
The table below provides details regarding the contractual maturities of significant financial liabilities as at September 30, 2019:
(In crore)
Particulars | Less than 1 year | 1-2 years | 2-4 years | 4-7 years | Total |
Trade payables | 2,134 | – | – | – | 2,134 |
Other financial liabilities (excluding liability towards acquisition) (Refer Note no. 2.12) | 8,058 | 8 | 6 | – | 8,072 |
Financial liability under option arrangements | – | – | 600 | – | 600 |
Liability towards acquisitions on an undiscounted basis (including contingent consideration) (Refer Note no. 2.12) | 122 | 77 | – | 36 | 235 |
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 |
2.11 EQUITY
Accounting policy
Ordinary Shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares, share options and buyback are recognized as a deduction from equity, net of any tax effects.
Treasury Shares
When any entity within the Group purchases the company's ordinary shares, the consideration paid including any directly attributable incremental cost is presented as a deduction from total equity, until they are cancelled, sold or reissued. When treasury shares are sold or reissued subsequently, the amount received is recognized as an increase in equity, and the resulting surplus or deficit on the transaction is transferred to/ from Securities premium.
Retained earnings
Retained earnings represent the amount of accumulated earnings of the Group.
Securities premium
The amount received in excess of the par value has been classified as securities premium.
Capital Redemption Reserve
In accordance with section 69 of the Indian Companies Act, 2013, the Company creates capital redemption reserve equal to the nominal value of the shares bought back as an appropriation from general reserve.
Other components of equity
Other components of equity consist of currency translation, remeasurement of net defined benefit liability / asset, 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.
In December 2017, Ind AS 12 – Income Taxes was amended which clarified that an entity shall recognize the income tax consequences of dividends on financial instruments classified as equity according to where the entity originally recognized those past transactions or events that generated distributable profits were recognized. On April 1, 2019, the Group adopted these amendments and there was no impact of these amendments on the Company’s Consolidated financial statements.
SHARE CAPITAL
(In crore, except as otherwise stated)
Particulars | As at | |
September 30, 2019 | March 31, 2019 | |
Authorized | ||
Equity shares, ![]() |
||
4,80,00,00,000 (4,80,00,00,000) equity shares | 2,400 | 2,400 |
Issued, Subscribed and Paid-Up | ||
Equity shares, ![]() |
2,121 | 2,170 |
4,23,94,82,666 (4,33,59,54,462) equity shares fully paid-up(2) | ||
2,121 | 2,170 |
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 1,89,29,512 (2,03,24,982) |
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.
For details of shares reserved for issue under the employee stock option plan of the Company refer to the note below
In the period of five years immediately preceding September 30, 2019:
Bonus Issue
The Company has allotted 2,18,41,91,490 , 1,14,84,72,332
and 57,42,36,166 fully paid-up shares of face value 5/- each during the quarter ended September 30, 2018 , June 30, 2015
and December 31, 2014, respectively pursuant to bonus issue approved by the shareholders through postal ballot. 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 wherever appropriate.
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) which would comprise approximately
2.36% of the paid-up equity share capital of the Company, subject to shareholders' approval by way of Postal Ballot.
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. 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 buyback of equity shares
through the stock exchange commenced on March 20, 2019 and was completed on August 26, 2019 . During this buyback period the Company
had purchased and extinguished a total of 110,519,266 equity shares from the stock exchange at an average buy back price of 747/-
per equity share comprising 2.53% of the pre buyback paid-up equity share capital of the Company. The buyback resulted in a cash
outflow of
8,260 crore (excluding transaction costs). The Company funded the buyback from its free reserves.In accordance
with section 69 of the Companies Act, 2013, as at September 30, 2019 the Company has created ‘Capital Redemption Reserve’
of
55 crore equal to the nominal value of the shares bought back as an appropriation from general reserve.After the execution
of the above buy back, payment of special dividend (including dividend distribution tax) of
2,107 crore in January 2019
and payment of special dividend (including dividend distribution tax) of
2,633 crore in June 2018, the Company has completed
the distribution of
13,000 crore, which was announced as part of its capital allocation policy in April 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 September 30, 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 fiscal 2018 the Company’s policy was to pay up to 70% of the free cash flow annually by way of dividend and/or buyback.Effective from fiscal 2020, the company expects to return approximately 85% of the free cash flow cumulatively over a 5-year period through a combination of semi-annual dividends and/or share buyback and/or special dividends, 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 and buyback include applicable taxes.
Amount of per share dividend recognized as distribution to equity shareholders:
(in )
Particulars | Three months ended September 30, | Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Final dividend for fiscal 2019 | – | – | 10.50 | – |
Final dividend for fiscal 2018 | – | – | – | 10.25 |
Special dividend for fiscal 2018 | – | – | – | 5.00 |
Note: Dividend per share declared previously, retrospectively adjusted for September 2018 bonus issue
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. The same
was approved by the Shareholders at the Annual General Meeting held on June 22, 2019 which resulted in a cash outflow of approximately
5,425 crore, excluding dividend paid on treasury shares and including dividend distribution tax.
The Board of Directors in their meeting on October
11, 2019 declared an interim dividend of 8/- per equity share which would result in a net cash outflow of approximately
4,092 crore, (excluding dividend paid on treasury shares) inclusive of dividend distribution tax
The details of shareholder holding more than 5% shares as at September 30, 2019 and March 31, 2019 are as follows :
Name of the shareholder | As at September 30, 2019 | As at March 31, 2019 | ||
Number of shares | % held | Number of shares | % held | |
Deutsche Bank Trust Company Americas (Depository of ADR's - legal ownership) | 745,678,348 | 17.51 | 74,62,54,648 | 17.11 |
Life Insurance Corporation of India | 25,81,50,593 | 6.06 | 25,43,32,376 | 5.83 |
The reconciliation of the number of shares outstanding and the amount of share capital as at September 30, 2019 and March 31, 2019 are as follows:
(In crore, except as stated otherwise)
Particulars | As at September 30, 2019 | As at March 31, 2019 | ||
Number of shares | Amount | Number of shares | Amount | |
As at the beginning of the period | 433,59,54,462 | 2,170 | 217,33,12,301 | 1,088 |
Add: Shares issued on exercise of employee stock options - before bonus issue | – | – | 3,92,528 | – |
Add: Bonus shares issued | – | – | 2,173,704,829 | 1,088 |
Add: Shares issued on exercise of employee stock options - after bonus issue | 1,395,470 | – | 1,196,804 | – |
Less: Shares bought back (1)(2) | 97,867,266 | 49 | 12,652,000 | 6 |
As at the end of the period | 423,94,82,666 | 2,121 | 433,59,54,462 | 2,170 |
(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 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.
Infosys Expanded Stock Ownership Program 2019 (the 2019 Plan) :
On June 22, 2019 pursuant to approval by the shareholders in the Annual General Meeting , the Board has been authorized to introduce, offer, issue and provide share-based incentives to eligible employees of the Company and its subsidiaries under the 2019 Plan. The maximum number of shares under the 2019 plan shall not exceed 5,00,00,000 equity shares. To implement the 2019 Plan, upto 4,50,00,000 equity shares may be issued by way of secondary acquisition of shares by Infosys Expanded Stock Ownership Trust. The RSUs granted under the 2019 plan shall vest based on the achievement of defined annual performance parameters as determined by the administrator. The performance parameters will be based on a combination of relative Total Shareholder Return (TSR) and operating performance metrics of the company as decided by administrator. Each of the above performance parameters will be distinct for the purposes of calculation of quantity of shares to vest based on performance. These instruments will generally vest between a minimum of 1 to maximum of 3 years from the grant date.
2015 Stock Incentive Compensation Plan (the 2015 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). 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.
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.
Consequent to the September, 2018 bonus issue, all the then 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 1,89,29,512 and 2,03,24,982 shares as at September 30, 2019 and March 31, 2019, respectively under the 2015 plan. Out of these shares 2,00,000 equity shares each have been earmarked for welfare activities of the employees as at September 30, 2019 and March 31, 2019.
The following is the summary of grants during the three months and six months ended September 30, 2019 and September 30, 2018 under the 2015 Plan:
Particulars | Three months ended September 30, |
Six months ended September 30, | ||
2019 | 2018* | 2019 | 2018* | |
2015 Plan: RSU | ||||
KMPs | – | – | 212,096 | 217,200 |
Employees other than KMP | 24,650 | 1,787,120 | 36,850 | 1,787,120 |
24,650 | 1,787,120 | 248,946 | 2,004,320 | |
Incentive unit - cash settled | ||||
Employees other than KMP | – | 52,590 | – | 52,590 |
– | 52,590 | – | 52,590 | |
24,650 | 1,839,710 | 248,946 | 2,056,910 |
*Information is adjusted for September 2018 bonus issue.
Notes on grants to KMP:
CEO & MD
Under the 2015 plan:
The Board, on April 12, 2019, based on the recommendations
of the Nomination and Remuneration Committee, approved the performance-based grant of RSUs amounting to 13 crore for the
financial year 2020 under the 2015 Plan. These RSUs will vest in line with the employment agreement based on achievement of certain
performance targets. Accordingly, 177,887 performance based RSU’s were granted effective May 2, 2019.
In accordance with the shareholders approval in the Annual General meeting held on June 22, 2019, the Board, based on the recommendations of the Nomination and Remuneration Committee, approved to amend the vesting period of the annual performance equity grant from three years to one year. Accordingly the vesting period of 217,200 (adjusted for September 2018 bonus issue) performance based RSUs granted effective May 2, 2018 and 177,887 performance based RSU's granted effective May 2,2019 have been amended to one year.
In accordance with the employee agreement which
has been approved by the shareholders, the CEO is eligible to receive an annual grant of RSUs of fair value 3.25 crore which
will vest overtime in three equal annual installments upon the completion of each year of service from the respective grant date.
Though the annual time based grants for the remaining employment term ending on March 31, 2023 have not been granted as of September
30, 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.
Under the 2019 plan:
In accordance with the shareholders approval
in Annual General meeting held on June 22, 2019, the Board, based on the recommendations of the Nomination and Remuneration Committee,
approved performance-based grant of RSUs amounting to 10 crore for financial year 2020 under the 2019 Plan to Salil Parekh,
CEO and MD. These RSUs will vest in line with the employment agreement based on achievement of certain performance targets. Accordingly,
134,138 performance based RSU’s were granted effective June 22, 2019.
COO and Whole time director
In accordance with the shareholders approval
in Annual General meeting held on June 22, 2019, the Board, based on the recommendations of the Nomination and Remuneration Committee,
approved performance-based grant of RSUs amounting to 4 crore for financial year 2020 under the 2019 Plan to U. B. Pravin
Rao, COO and WTD. These RSUs will vest in line with the employment agreement based on achievement of certain performance targets.
Accordingly, 53,655 performance based RSU’s were granted effective June 22, 2019
Other KMP
Based on the recommendations of the Nomination and Remuneration Committee, the Board , approved performance-based grant of 10,263 RSUs and time based grant of 23,946 RSUs to other KMP under the 2015 Plan during the six months ended September 30, 2019.The grants were made effective May 2, 2019. These RSUs will vest generally over three to four years and additionally the performance based RSUs will vest based on achievement of certain performance targets.
As at September 30, 2019 and March 31, 2019, incentive units were outstanding (net of forfeitures) 1,34,228 and 1,77,454, respectively.
Break-up of employee stock compensation expense:
(in crore)
Particulars | Three months ended September 30, | Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Granted to: | ||||
KMP | 13 | 10 | 31 | 19 |
Employees other than KMP | 41 | 44 | 88 | 78 |
Total (1) | 54 | 54 | 119 | 97 |
(1) Cash-settled stock compensation expense included above | 1 | 2 | 2 | 3 |
The carrying value of liability towards cash
settled share based payments was 8 crore and
9 crore as at September 30, 2019 and March 31, 2019 respectively.
The activity in the 2015 Plan for equity-settled share based payment transactions during the three months ended September 30, 2019 and September 30, 2018 is set out as follows:
Particulars | Three months ended September 30, 2019 |
Three months ended September 30, 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 | 8,978,352 | 3.23 | 7,560,956 | 2.50 | |
Granted | 24,650 | 5.00 | 1,787,120 | 2.50 | |
Exercised | 1,158,468 | 2.50 | 776,316 | 2.50 | |
Forfeited and expired | 126,160 | 2.89 | 252,008 | 2.50 | |
Outstanding at the end | 7,718,374 | 3.31 | 8,319,752 | 2.50 | |
Exercisable at the end | 152,514 | 2.50 | 38,592 | 2.50 | |
2015 Plan: Employee Stock Options (ESOPs) | |||||
Outstanding at the beginning | 1,558,476 | 516 | 1,912,702 | 513 | |
Granted | – | – | – | – | |
Exercised | 6,450 | 499 | 3,600 | 459 | |
Forfeited and expired | – | – | 99,100 | 538 | |
Outstanding at the end | 1,552,026 | 525 | 1,810,002 | 531 | |
Exercisable at the end | 722,726 | 525 | 406,050 | 529 | |
* Information is adjusted for September, 2018 bonus issue
The activity in the 2015 Plan for equity-settled share based payment transactions during the six months ended September 30, 2019 and September 30, 2018 is set out as follows:
Particulars | Six months ended September 30, 2019 |
Six months ended September 30, 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 | 9,181,198 | 3.13 | 7,500,818 | 2.50 |
Granted | 248,946 | 5.00 | 2,004,320 | 2.50 |
Exercised | 1,375,920 | 2.50 | 822,472 | 2.50 |
Forfeited and expired | 335,850 | 3.09 | 362,914 | 2.50 |
Outstanding at the end | 7,718,374 | 3.31 | 8,319,752 | 2.50 |
Exercisable at the end | 152,514 | 2.50 | 38,592 | 2.50 |
2015 Plan: Employee Stock Options (ESOPs) | ||||
Outstanding at the beginning | 1,623,176 | 516 | 1,933,826 | 493 |
Granted | – | – | – | – |
Exercised | 19,550 | 492 | 5,524 | 473 |
Forfeited and expired | 51,600 | 530 | 118,300 | 527 |
Outstanding at the end | 1,552,026 | 525 | 1,810,002 | 531 |
Exercisable at the end | 722,726 | 525 | 406,050 | 529 |
* Information is adjusted for September, 2018 bonus issue
During the three months ended September 30,
2019 and September 30, 2018 the weighted average share price of options exercised under the 2015 Plan on the date of exercise was
788 and
703 (adjusted for September 2018 bonus issue) respectively.
During the six months ended September 30, 2019
and September 30, 2018 the weighted average share price of options exercised under the 2015 Plan on the date of exercise was 780
and
696 (adjusted for September 2018 bonus issue) respectively.
The summary of information about equity settled RSUs and ESOPs outstanding as at September 30, 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) | 7,718,374 | 1.40 | 3.31 |
450 - 600 (ESOP) | 1,552,026 | 4.50 | 525 |
9,270,400 | 1.92 | 91 |
The summary of information about equity settled RSUs and ESOPs outstanding as at March 31, 2019 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) | 9,181,198 | 1.70 | 3.13 |
450 - 600 (ESOP) | 1,623,176 | 5.04 | 516 |
10,804,374 | 2.20 | 80 |
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 2020- Equity Shares-RSU |
Fiscal 2020- ADS-RSU |
Fiscal 2019- Equity Shares RSU |
Fiscal 2019- ADS RSU | |
Weighted average share price (![]() |
732 | 11.00 | 696 | 10.77 |
Exercise price (![]() |
5.00 | 0.07 | 3.31 | 0.06 |
Expected volatility (%) | 22-24 | 22-26 | 21-25 | 22-26 |
Expected life of the option (years) | 1-4 | 1-4 | 1-4 | 1-4 |
Expected dividends (%) | 2-3 | 2-3 | 2.65 | 2.65 |
Risk-free interest rate (%) | 6-7 | 1-3 | 7-8 | 2-3 |
Weighted average fair value as on grant date (![]() |
676 | 10.43 | 648 | 10.03 |
(1) | Fiscal 2019 values are adjusted for September, 2018 bonus issue wherever applicable |
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 | |
September 30, 2019 | March 31, 2019 | |
Non-current | ||
Others | ||
Accrued compensation to employees (1) | 8 | 15 |
Compensated absences | 45 | 44 |
Financial liability under option arrangements (refer to note 2.1.1)(2) | 600 | – |
Payable for acquisition of business (refer to note 2.1.1) (2) | ||
Contingent consideration | 88 | 88 |
Other Payables (1) | 6 | – |
Total non-current other financial liabilities | 747 | 147 |
Current | ||
Unpaid dividends (1) | 32 | 29 |
Others | ||
Accrued compensation to employees (1) | 2,626 | 2,572 |
Accrued expenses (1) | 4,178 | 3,319 |
Retention monies (1) | 102 | 112 |
Payable for acquisition of business | ||
Contingent consideration (refer note no. 2.1.1) (2) | 116 | 102 |
Payable by controlled trusts (1) | 154 | 168 |
Financial liability relating to buyback (refer to note 2.11)(1) (4) | – | 1,202 |
Compensated absences | 1,825 | 1,619 |
Foreign currency forward and options contracts (2)(3) | 38 | 15 |
Capital creditors (1) | 284 | 676 |
Other payables (1) | 682 | 638 |
Total current other financial liabilities | 10,037 | 10,452 |
Total other financial liabilities | 10,784 | 10,599 |
(1) Financial liability carried at amortized cost | 8,072 | 8,731 |
(2) Financial liability carried at fair value through profit or loss | 840 | 205 |
(3) Financial liability carried at fair value through other comprehensive income | 2 | – |
Contingent consideration on undiscounted basis | 235 | 233 |
(4) In accordance with Ind AS 32, Financial Instruments : Presentation, the Company has recorded a financial liability as at March 31, 2019 for the obligation to acquire its own equity shares to the extent of standing instructions provided to its registered broker for the buyback (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 | |
September 30, 2019 | March 31, 2019 | |
Non-current | ||
Others | ||
Deferred income - government grant on land use rights | 40 | 42 |
Accrued gratuity (refer to note 2.20.1) | 36 | 30 |
Deferred rent (refer to note 2.19) | – | 174 |
Deferred income | 25 | 29 |
Others | 2 | – |
Total non-current other liabilities | 103 | 275 |
Current | ||
Unearned revenue | 2,708 | 2,809 |
Client deposit | 16 | 26 |
Others | ||
Withholding taxes and others | 1,659 | 1,487 |
Accrued gratuity (refer to note 2.20.1) | 3 | 2 |
Deferred rent (refer to note 2.19) | 2 | 63 |
Deferred income - government grant on land use rights | 1 | 1 |
Others | – | – |
Total current other liabilities | 4,389 | 4,388 |
Total other liabilities | 4,492 | 4,663 |
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 on 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 | |
September 30, 2019 | March 31, 2019 | |
Current | ||
Others | ||
Post-sales client support and other provisions | 608 | 576 |
Total provisions | 608 | 576 |
The movement in the provision for post-sales client support and other provisions is as follows :
(In crore)
Particulars | Three months ended | Six months ended |
September 30, 2019 | September 30, 2019 | |
Balance at the beginning | 583 | 576 |
Provision recognized/(reversed) | 22 | 60 |
Provision utilized | (12) | (42) |
Exchange difference | 15 | 14 |
Balance at the end | 608 | 608 |
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 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)
Particulars | Three months ended September 30, |
Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Current taxes | 1,488 | 1,612 | 2,947 | 3,063 |
Deferred taxes | (29) | (89) | (123) | (158) |
Income tax expense | 1,459 | 1,523 | 2,824 | 2,905 |
Income tax expense for the three months ended
September 30, 2019 and September 30, 2018 includes reversal (net of provisions) of 76 crore and
2 crore, respectively.
Income tax expense for the six months ended September 30, 2019 and September 30, 2018 includes reversal (net of provisions) of
119 crore and
61 crore, respectively. These reversals pertaining to prior periods on account of adjudication of certain
disputed matters in favour 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 September 30, | Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Profit before income taxes | 5,496 | 5,633 | 10,663 | 10,626 |
Enacted tax rates in India | 34.94% | 34.94% | 34.94% | 34.94% |
Computed expected tax expense | 1,920 | 1,968 | 3,726 | 3,713 |
Tax effect due to non-taxable income for Indian tax purposes | (604) | (659) | (1,176) | (1,268) |
Overseas taxes | 219 | 228 | 409 | 430 |
Tax provision (reversals) | (76) | (2) | (119) | (61) |
Effect of exempt non-operating income | (10) | (9) | (21) | (34) |
Effect of unrecognized deferred tax assets | 29 | 18 | 46 | 56 |
Effect of differential overseas tax rates | (10) | 6 | (19) | (6) |
Effect of non-deductible expenses | 24 | (9) | 45 | 117 |
Branch profit tax (net of credits) | (28) | (27) | (57) | (56) |
Others | (5) | 9 | (10) | 14 |
Income tax expense | 1,459 | 1,523 | 2,824 | 2,905 |
The applicable Indian corporate statutory tax rate for the six months ended September 30, 2019 and September 30, 2018 is 34.94% each.
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.
Deferred income tax for the three months and six months ended September 30, 2019 and September 30, 2018 substantially relates to origination and reversal of temporary differences.
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 September 30, 2019, the Company has a deferred tax liability for branch profit
tax of
148 crore (net of credits), as the Company estimates that these branch profits are expected to be distributed
in the foreseeable future.
Deferred income tax liabilities have not been
recognized on temporary differences amounting to 7,481 crore and
6,007 crore as at September 30, 2019 and March 31,
2019, 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 2,671 crore and
2,624 crore as at September 30, 2019 and March 31, 2019, 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 following table provides details of expiration of unused tax losses as at September 30, 2019:
(In crore)
Year | As at |
September 30, 2019 | |
2020 | 171 |
2021 | 78 |
2022 | 132 |
2023 | 194 |
2024 | 159 |
Thereafter | 1,937 |
Total | 2,671 |
The following table provides details of expiration of unused tax losses as at March 31, 2019:
(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 September 30, 2019 and March 31, 2019:
(In crore)
Particulars | As at | |
September 30, 2019 | March 31, 2019 | |
Income tax assets | 6,441 | 6,743 |
Current income tax liabilities | 1,528 | 1,567 |
Net current income tax asset / (liability) at the end | 4,913 | 5,176 |
The gross movement in the current income tax asset/ (liability) for the three months and six months ended September 30, 2019 and September 30, 2018 is as follows:
(In crore)
Particulars | Three months ended September 30, |
Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Net current income tax asset/ (liability) at the beginning | 4,481 | 4,024 | 5,176 | 4,027 |
Translation differences | (3) | (2) | (5) | (3) |
Income tax paid | 1,904 | 2,225 | 2,705 | 3,653 |
Current income tax expense | (1,487) | (1,612) | (2,947) | (3,063) |
Reclassified under assets held for sale (refer note no. 2.1.2) | – | 1 | – | 23 |
Income tax benefit arising on exercise of stock options | 7 | 2 | 7 | 2 |
Additions through business combination | – | – | (40) | – |
Tax impact on buyback expenses | 4 | – | 4 | – |
Income tax on other comprehensive income | 7 | (1) | 13 | (2) |
Net current income tax asset/ (liability) at the end | 4,913 | 4,637 | 4,913 | 4,637 |
The movement in gross deferred income tax assets and liabilities (before set off) for the three months ended September 30, 2019 is as follows:
(In crore)
Particulars | Carrying value as at July 1, 2019 | Changes through profit and loss | Addition through business combination | Changes through OCI | Impact on account of Ind AS 116 adoption | Reclassified from Held for Sale, net | Translation difference | Carrying value as of September 30, 2019 |
Deferred income tax assets | ||||||||
Property, plant and equipment | 262 | (6) | – | – | – | – | – | 256 |
Lease liabilities | 61 | (41) | – | – | – | – | – | 20 |
Accrued compensation to employees | 33 | 3 | – | – | – | – | – | 36 |
Trade receivables | 182 | (1) | – | – | – | – | – | 181 |
Compensated absences | 416 | 17 | – | – | – | – | – | 433 |
Post sales client support | 103 | 4 | – | – | – | – | 1 | 108 |
Derivative financial instruments | 4 | 4 | – | – | – | – | – | 8 |
Intangibles | 17 | 1 | – | – | – | – | – | 18 |
Credits related to branch profits | 306 | (35) | – | – | – | – | 8 | 279 |
Others | 194 | (25) | – | – | – | – | (6) | 163 |
Total deferred income tax assets | 1,578 | (79) | – | – | – | – | 3 | 1,502 |
Deferred income tax liabilities | ||||||||
Intangible asset | (296) | 14 | – | – | – | – | (1) | (283) |
Branch profit tax | (477) | 63 | – | – | – | – | (12) | (426) |
Derivative financial instruments | (92) | 25 | – | (6) | – | – | 3 | (70) |
Others | (75) | 6 | – | – | – | – | 2 | (67) |
Total Deferred income tax liabilities | (940) | 108 | – | (6) | – | – | (8) | (846) |
The movement in gross deferred income tax assets and liabilities (before set off) for the three months ended September 30, 2018 is as follows:
(In crore)
Particulars | Carrying value as at July 1, 2018 | Changes through profit and loss | Addition through business combination | Changes through OCI | Impact on account of Ind AS 116 | Reclassified as Held for Sale, net | Translation difference | Carrying value as of September 30, 2018 |
Deferred income tax assets | ||||||||
Property, plant and equipment | 219 | 12 | – | – | – | (1) | 2 | 232 |
Accrued compensation to employees | 20 | (1) | – | – | – | 1 | – | 20 |
Trade receivables | 147 | 4 | – | – | – | – | – | 151 |
Compensated absences | 370 | 9 | – | – | – | – | 1 | 380 |
Post sales client support | 100 | 6 | – | – | – | – | 1 | 107 |
Derivative financial instruments | 18 | 34 | – | 5 | – | – | 1 | 58 |
Intangibles | 10 | 4 | – | – | – | – | – | 14 |
Credits related to branch profits | 325 | (32) | – | – | – | – | 20 | 313 |
Others | 126 | (4) | – | 5 | – | (4) | (1) | 122 |
Total deferred income tax assets | 1,335 | 32 | – | 10 | – | (4) | 24 | 1,397 |
Deferred income tax liabilities | ||||||||
Intangible asset | (39) | (1) | – | – | – | – | (1) | (41) |
Branch profit tax | (469) | 59 | – | – | – | – | (27) | (437) |
Derivative financial instruments | (3) | 1 | – | – | – | – | 1 | (1) |
Others | (29) | (2) | – | – | – | (2) | 1 | (32) |
Total Deferred income tax liabilities | (540) | 57 | – | – | – | (2) | (26) | (511) |
The movement in gross deferred income tax assets and liabilities (before set off) for the six months ended September 30, 2019 is as follows:
(In crore)
Particulars | Carrying value as at April 1, 2019 | Changes through profit and loss | Addition through business combination | Changes through OCI | Impact on account of Ind AS 116 adoption | Reclassified from Held for Sale, net | Translation difference | Carrying value as of September 30, 2019 |
Deferred income tax assets | ||||||||
Property, plant and equipment | 262 | (7) | 1 | – | – | – | – | 256 |
Lease liabilities | 52 | (39) | – | – | 6 | – | 1 | 20 |
Accrued compensation to employees | 31 | 8 | – | – | – | – | (3) | 36 |
Trade receivables | 176 | 5 | – | – | – | – | – | 181 |
Compensated absences | 397 | 36 | – | – | – | – | – | 433 |
Post sales client support | 104 | 4 | – | – | – | – | – | 108 |
Derivative financial instruments | 4 | 4 | – | – | – | – | – | 8 |
Intangibles | 16 | 1 | – | – | – | – | 1 | 18 |
Credits related to branch profits | 340 | (69) | – | – | – | – | 8 | 279 |
Others | 174 | (15) | 9 | (4) | – | – | (1) | 163 |
Total deferred income tax assets | 1,556 | (72) | 10 | (4) | 6 | – | 6 | 1,502 |
Deferred income tax liabilities | ||||||||
Intangible asset | (128) | 24 | (176) | – | – | – | (3) | (283) |
Branch profit tax | (541) | 126 | – | – | – | – | (11) | (426) |
Derivative financial instruments | (110) | 36 | – | 2 | – | – | 2 | (70) |
Others | (77) | 9 | – | 1 | – | – | – | (67) |
Total Deferred income tax liabilities | (856) | 195 | (176) | 3 | – | – | (12) | (846) |
The movement in gross deferred income tax assets and liabilities (before set off) for the six months ended September 30, 2018 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 | Impact on account of Ind AS 116 adoption | Reclassified from Held for Sale, net | Translation difference | Carrying value as of September 30, 2018 |
Deferred income tax assets | ||||||||
Property, plant and equipment | 215 | 16 | – | – | – | (1) | 2 | 232 |
Accrued compensation to employees | 12 | 9 | – | – | – | (2) | 1 | 20 |
Trade receivables | 141 | 10 | – | – | – | – | – | 151 |
Compensated absences | 366 | 14 | – | – | – | – | – | 380 |
Post sales client support | 98 | 8 | – | – | – | – | 1 | 107 |
Derivative financial instruments | 13 | 42 | – | 2 | – | – | 1 | 58 |
Intangibles | 9 | 4 | – | – | – | – | 1 | 14 |
Credits related to branch profits | 341 | (65) | – | – | – | – | 37 | 313 |
Others | 117 | 5 | – | 16 | – | (9) | (7) | 122 |
Total deferred income tax assets | 1,312 | 43 | – | 18 | – | (12) | 36 | 1,397 |
Deferred income tax liabilities | ||||||||
Intangible asset | (38) | (1) | – | – | – | – | (2) | (41) |
Branch profit tax | (505) | 121 | – | – | – | – | (53) | (437) |
Derivative financial instruments | (2) | – | – | – | – | – | 1 | (1) |
Others | (26) | (5) | – | (1) | – | (3) | 3 | (32) |
Total Deferred income tax liabilities | (571) | 115 | – | (1) | – | (3) | (51) | (511) |
The deferred income tax assets and liabilities are as follows:
(In crore)
Particulars | As at | |
September 30, 2019 | March 31, 2019 | |
Deferred income tax assets after set off | 1,363 | 1,372 |
Deferred income tax liabilities after set off | (707) | (672) |
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 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. 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 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 three months and six months ended September 30, 2019 and September 30, 2018 are as follows:
(In crore)
Particulars | Three months ended September 30, |
Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Revenue from software services | 21,177 | 19,560 | 41,747 | 37,762 |
Revenue from products and platforms | 1,452 | 1,049 | 2,685 | 1,975 |
Total revenue from operations |
22,629 | 20,609 | 44,432 | 39,737 |
Disaggregated revenue information
The table below presents disaggregated revenues from contracts with customers by geography and offerings 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 September 30, 2019 and September 30, 2018
(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 | 4,151 | 2,245 | 1,858 | 1,644 | 1,305 | 1,617 | 943 | 126 | 13,889 |
4,061 | 2,239 | 1,276 | 1,436 | 1,061 | 1,471 | 786 | 101 | 12,431 | |
Europe | 1,569 | 992 | 439 | 1,036 | 875 | 44 | 473 | 36 | 5,464 |
1,242 | 957 | 468 | 856 | 865 | 26 | 502 | 33 | 4,949 | |
India | 340 | 13 | 51 | 1 | 23 | 46 | 13 | 120 | 607 |
292 | 5 | 11 | 1 | 21 | 32 | 3 | 151 | 516 | |
Rest of the world | 1,153 | 198 | 613 | 281 | 88 | 6 | 25 | 305 | 2,669 |
1,049 | 268 | 774 | 234 | 42 | 8 | 30 | 308 | 2,713 | |
Total | 7,213 | 3,448 | 2,961 | 2,962 | 2,291 | 1,713 | 1,454 | 587 | 22,629 |
6,644 | 3,469 | 2,529 | 2,527 | 1,989 | 1,537 | 1,321 | 593 | 20,609 | |
Revenue by offerings | |||||||||
Digital | 2,828 | 1,475 | 1,173 | 1,113 | 853 | 623 | 449 | 164 | 8,678 |
2,073 | 1,180 | 870 | 705 | 575 | 518 | 325 | 95 | 6,341 | |
Core | 4,385 | 1,973 | 1,788 | 1,849 | 1,438 | 1,090 | 1,005 | 423 | 13,951 |
4,571 | 2,289 | 1,659 | 1,822 | 1,414 | 1,019 | 996 | 498 | 14,268 | |
Total | 7,213 | 3,448 | 2,961 | 2,962 | 2,291 | 1,713 | 1,454 | 587 | 22,629 |
6,644 | 3,469 | 2,529 | 2,527 | 1,989 | 1,537 | 1,321 | 593 | 20,609 |
For the six months ended September 30, 2019 and September 30, 2018
(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 | 8,184 | 4,468 | 3,739 | 3,207 | 2,481 | 3,212 | 1,783 | 239 | 27,313 |
7,724 | 4,311 | 2,471 | 2,805 | 2,044 | 2,841 | 1,528 | 182 | 23,906 | |
Europe | 2,907 | 1,981 | 888 | 2,030 | 1,697 | 85 | 947 | 73 | 10,608 |
2,404 | 1,849 | 950 | 1,649 | 1,656 | 42 | 988 | 68 | 9,606 | |
India | 638 | 25 | 81 | 2 | 42 | 83 | 18 | 223 | 1,112 |
568 | 12 | 23 | 2 | 42 | 67 | 5 | 293 | 1,012 | |
Rest of the world | 2,340 | 409 | 1,256 | 557 | 170 | 12 | 47 | 608 | 5,399 |
2,023 | 465 | 1,514 | 445 | 84 | 9 | 60 | 613 | 5,213 | |
Total | 14,069 | 6,883 | 5,964 | 5,796 | 4,390 | 3,392 | 2,795 | 1,143 | 44,432 |
12,719 | 6,637 | 4,958 | 4,901 | 3,826 | 2,959 | 2,581 | 1,156 | 39,737 | |
Revenue by offerings | |||||||||
Digital | 5,333 | 2,897 | 2,244 | 2,085 | 1,617 | 1,206 | 813 | 272 | 16,467 |
3,788 | 2,177 | 1,620 | 1,346 | 1,065 | 976 | 627 | 166 | 11,765 | |
Core | 8,736 | 3,986 | 3,720 | 3,711 | 2,773 | 2,186 | 1,982 | 871 | 27,965 |
8,931 | 4,460 | 3,338 | 3,555 | 2,761 | 1,983 | 1,954 | 990 | 27,972 | |
Total | 14,069 | 6,883 | 5,964 | 5,796 | 4,390 | 3,392 | 2,795 | 1,143 | 44,432 |
12,719 | 6,637 | 4,958 | 4,901 | 3,826 | 2,959 | 2,581 | 1,156 | 39,737 |
(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, Stater digital platform 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 (contract asset) 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 six months ended September 30, 2019
and September 30, 2018 , the company recognized revenue of 2,014 crore and
1,552 crore arising from opening unearned
revenue as of April 1, 2019 and April 1, 2018 respectively.
During the six months ended September 30, 2019
and September 30, 2018, 2,612 crore and
2,606 crore of unbilled revenue pertaining to fixed price development contracts
as of April 1, 2019 and April 1, 2018 , respectively 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 September 30, 2019, other than those meeting the exclusion criteria mentioned
above, is 54,598 crore. Out of this, the Group expects to recognize revenue of around 50% within the next one year and the
remaining thereafter. The aggregate value of performance obligations that are completely or partially unsatisfied as at March 31,
2019, is
51,274 crore. The contracts can generally be terminated by the customers and typically includes an enforceable
termination penalty payable by them.
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 six months ended September 30, 2019 and September 30, 2018 is as follows:
In crore)
Particulars | Three months ended September 30, |
Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Interest income on financial assets carried at amortized cost: | ||||
Tax free bonds and Government bonds | 36 | 36 | 72 | 71 |
Deposit with Bank and others | 268 | 295 | 590 | 642 |
Interest income on financial assets carried at fair value through other comprehensive income: | ||||
Non-convertible debentures and certificates of deposit, commercial paper and government securities | 81 | 159 | 196 | 326 |
Income on investments carried at fair value through profit or loss | ||||
Dividend income on liquid mutual funds | 1 | 1 | 1 | 1 |
Gain / (loss) on liquid mutual funds | 37 | 52 | 102 | 85 |
Income on investments carried at fair value through other comprehensive income | 11 | – | 27 | – |
Exchange gains/ (losses) on foreign currency forward and options contracts | (43) | (412) | 96 | (597) |
Exchange gains/ (losses) on translation of assets and liabilities | 205 | 578 | 159 | 803 |
Miscellaneous Income, net | 30 | 30 | 119 | 134 |
Total other income | 626 | 739 | 1,362 | 1,465 |
2.18 EXPENSES
(In crore)
Particulars | Three months ended September 30, | Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Employee benefit expenses | ||||
Salaries including bonus | 12,296 | 10,804 | 24,192 | 20,937 |
Contribution to provident and other funds | 269 | 239 | 543 | 465 |
Share based payments to employees (Refer note no. 2.11) | 54 | 54 | 119 | 97 |
Staff welfare | 56 | 61 | 123 | 121 |
12,675 | 11,158 | 24,977 | 21,620 | |
Cost of software packages and others | ||||
For own use | 266 | 226 | 498 | 438 |
Third party items bought for service delivery to clients | 414 | 380 | 798 | 713 |
680 | 606 | 1,296 | 1,151 | |
Other expenses | ||||
Repairs and maintenance | 385 | 310 | 745 | 582 |
Power and fuel | 61 | 61 | 121 | 121 |
Brand and marketing | 123 | 129 | 261 | 225 |
Short-term leases (Refer to Note 2.19) | 22 | – | 42 | – |
Operating leases | – | 145 | – | 271 |
Rates and taxes | 47 | 60 | 84 | 96 |
Consumables | 22 | 12 | 38 | 21 |
Insurance | 22 | 16 | 41 | 33 |
Provision for post-sales client support and others | 19 | 27 | 10 | 28 |
Commission to non-whole time directors | 2 | 2 | 4 | 4 |
Impairment loss recognized / (reversed) under expected credit loss model | 36 | 76 | 88 | 146 |
Contributions towards Corporate Social responsibility | 100 | 57 | 168 | 131 |
Others | 76 | 58 | 161 | 121 |
915 | 953 | 1,763 | 1,779 |
2.19 Leases
Accounting Policy
The Group as a lessee
The Group’s lease asset classes primarily consist of leases for land and buildings. The group assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the group assesses whether: (1) the contract involves the use of an identified asset (2) the group has substantially all of the economic benefits from use of the asset through the period of the lease and (3) the group has the right to direct the use of the asset.
At the date of commencement of the lease, the Group recognizes a right-of-use asset (“ROU”) and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases) and low value leases. For these short-term and low value leases, the Group recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease.
Certain lease arrangements includes the options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised.
The right-of-use assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses.
Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset. Right of use 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 Cash Generating Unit (CGU) to which the asset belongs.
The lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates in the country of domicile of the leases. Lease liabilities are remeasured with a corresponding adjustment to the related right of use asset if the group changes its assessment if whether it will exercise an extension or a termination option.
Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.
The Group as a lessor
Leases for which the group is a lessor is classified as a finance or operating lease. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.
When the Group is an intermediate lessor, it accounts for its interests in the head lease and the sublease separately. The sublease is classified as a finance or operating lease by reference to the right-of-use asset arising from the head lease.
For operating leases, rental income is recognized on a straight line basis over the term of the relevant lease.
Transition
Effective April 1, 2019, the Group adopted Ind AS 116 “Leases” and applied the standard to all lease contracts existing on April 1, 2019 using the modified retrospective method and has taken the cumulative adjustment to retained earnings, on the date of initial application. Consequently, the group recorded the lease liability at the present value of the lease payments discounted at the incremental borrowing rate and the right of use asset at its carrying amount as if the standard had been applied since the commencement date of the lease, but discounted at the lessee’s incremental borrowing rate at the date of initial application. Comparatives as at and for the year ended March 31, 2019 have not been retrospectively adjusted and therefore will continue to be reported under the accounting policies included as part of our Annual Report for year ended March 31, 2019
On transition, the adoption of the new standard
resulted in recognition of 'Right of Use' asset of 2,907 crore, 'Net investment in sublease' of ROU asset of
430
crore and a lease liability of
3,598 crore. The cumulative effect of applying the standard, amounting to
40 crore
was debited to retained earnings, net of taxes. The effect of this adoption is insignificant on the profit before tax, profit for
the period and earnings per share. Ind AS 116 will result in an increase in cash inflows from operating activities and an increase
in cash outflows from financing activities on account of lease payments.
The following is the summary of practical expedients elected on initial application:
1. | Applied a single discount rate to a portfolio of leases of similar assets in similar economic environment with a similar end date |
2. | Applied the exemption not to recognize right-of-use assets and liabilities for leases with less than 12 months of lease term on the date of initial application |
3. | Excluded the initial direct costs from the measurement of the right-of-use asset at the date of initial application. |
4. | Applied the practical expedient to grandfather the assessment of which transactions are leases. Accordingly, Ind AS 116 is applied only to contracts that were previously identified as leases under Ind AS 17. |
The difference between the lease obligation recorded as of March 31, 2019 under Ind AS 17 disclosed under Note 2.19 of the 2019 Annual Report and the value of the lease liability as of April 1, 2019 is primarily on account of inclusion of extension and termination options reasonably certain to be exercised, in measuring the lease liability in accordance with Ind AS 116 and discounting the lease liabilities to the present value under Ind AS 116.
The weighted average incremental borrowing rate applied to lease liabilities as at April 1, 2019 is 4.5%.
Following are the changes in the carrying value of right of use assets for the three months ended September 30, 2019:
(In crore)
Particulars | Category of ROU asset | Total | |||
Land | Buildings | Vehicles | Computers | ||
Balance as of July 1, 2019 | 630 | 3,079 | 20 | - | 3,729 |
Additions | – | 320 | 2 | 26 | 348 |
Deletions | (3) | (5) | – | – | (8) |
Depreciation | (2) | (131) | (3) | (1) | (137) |
Translation difference | – | (14) | (1) | – | (15) |
Balance as of September 30, 2019 | 625 | 3,249 | 18 | 25 | 3,917 |
Following are the changes in the carrying value of right of use assets for the six months ended September 30, 2019:
(In crore)
Particulars | Category of ROU asset | Total | |||
Land | Buildings | Vehicles | Computers | ||
Balance as of April 1, 2019 | – | 2,898 | 9 | – | 2,907 |
Reclassified on account of adoption of Ind AS 116 (Refer to note 2.2 & 2.3) | 634 | – | – | – | 634 |
Additions | – | 437 | 4 | 26 | 467 |
Additions through business combination (Refer to note 2.1) | – | 177 | 10 | – | 187 |
Deletions | (3) | (5) | – | – | (8) |
Depreciation | (4) | (252) | (5) | (1) | (262) |
Translation difference | (2) | (6) | – | – | (8) |
Balance as of September 30, 2019 | 625 | 3,249 | 18 | 25 | 3,917 |
The following is the break-up of current and non-current lease liabilities as of September 30, 2019
(In crore)
Particulars | Amount |
Current lease liabilities | 515 |
Non-current lease liabilities | 3,562 |
Total | 4,077 |
The following is the movement in lease liabilities during the three months and six months ended September 30, 2019:
(In crore)
Particulars | Three Months ended September 30, 2019 | Six Months ended September 30, 2019 |
Balance at the beginning | 3,832 | 3,598 |
Additions | 348 | 467 |
Additions through business combination (Refer to note 2.1) | – | 224 |
Deletions | (5) | (5) |
Finance cost accrued during the period | 42 | 82 |
Payment of lease liabilities | (154) | (294) |
Translation difference | 14 | 5 |
Balance at the end | 4,077 | 4,077 |
The table below provides details regarding the contractual maturities of lease liabilities as of September 30, 2019 on an undiscounted basis:
(In crore)
Particulars | Amount |
Less than one year | 689 |
One to five years | 2,293 |
More than five years | 1,858 |
Total | 4,840 |
The group does not face a significant liquidity risk with regard to its lease liabilities as the current assets are sufficient to meet the obligations related to lease liabilities as and when they fall due.
Rental expense for recorded for short-term leases
was 22 crore for the three months ended September 30, 2019 and
42 crore for the six months ended September 30,2019
The aggregate depreciation on ROU assets has been included under depreciation and amortisation expense in the consolidated Statement of Profit and Loss.
The following is the movement in the net investment in sublease of ROU assets during the three months and six months ended September 30, 2019:
(In crore)
Particulars | Three Months ended September 30, 2019 |
Six Months ended September 30, 2019 |
Balance at the beginning | 429 | 430 |
Interest income accrued during the period | 4 | 8 |
Lease receipts | (23) | (23) |
Translation difference | 12 | 7 |
Balance at the end | 422 | 422 |
The table below provides details regarding the contractual maturities of net investment in sublease of ROU asset as of September 30, 2019 on an undiscounted basis:
(In crore)
Particulars | Amount |
Less than one year | 46 |
One to five years | 200 |
More than five years | 256 |
Total | 502 |
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 September 30, 2019 and March 31, 2019:
(In crore)
Particulars | As at | |
September 30, 2019 | March 31, 2019 | |
Change in benefit obligations | ||
Benefit obligations at the beginning | 1,351 | 1,201 |
Service cost | 89 | 157 |
Interest expense | 46 | 85 |
Remeasurements - Actuarial (gains) / losses | 62 | 32 |
Benefits paid | (66) | (128) |
Translation difference | 1 | 2 |
Reclassified from held for sale (refer note no 2.1.2) | – | 2 |
Benefit obligations at the end | 1,483 | 1,351 |
Change in plan assets | ||
Fair value of plan assets at the beginning | 1,361 | 1,216 |
Interest income | 48 | 90 |
Remeasurements- Return on plan assets excluding amounts included in interest income | 10 | 4 |
Contributions | 109 | 174 |
Benefits paid | (66) | (123) |
Fair value of plan assets at the end | 1,462 | 1,361 |
Funded status | (21) | 10 |
Prepaid gratuity benefit | 18 | 42 |
Accrued gratuity | (39) | (32) |
Amount for the three months and six months ended September 30, 2019 and September 30, 2018 recognized in the consolidated statement of Profit and Loss under employee benefit expense:
(In crore)
Particulars | Three months ended September 30, |
Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Service cost | 45 | 40 | 89 | 79 |
Net interest on the net defined benefit liability/(asset) | (2) | – | (2) | (1) |
Net gratuity cost | 43 | 40 | 87 | 78 |
Amount for the three months and six months ended September 30, 2019 and September 30, 2018 recognized in the consolidated statement of other comprehensive income:
(In crore)
Particulars | Three months ended September 30, |
Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Remeasurements of the net defined benefit liability/ (asset) | ||||
Actuarial (gains) / losses | 33 | (2) | 62 | (3) |
(Return) / loss on plan assets excluding amounts included in the net interest on the net defined benefit liability/(asset) | (4) | (2) | (10) | (3) |
29 | (4) | 52 | (6) |
(In crore)
Particulars | Three months ended September 30, |
Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
(Gain)/loss from change in demographic assumptions | – | 1 | – | (3) |
(Gain)/loss from change in financial assumptions | 27 | 14 | 52 | (13) |
(Gain)/loss from experience adjustment | 6 | (17) | 10 | 13 |
33 | (2) | 62 | (3) |
The weighted-average assumptions used to determine benefit obligations as at September 30, 2019 and March 31, 2019 are set out below:
Particulars | As at | |
September 30, 2019 | March 31, 2019 | |
Discount rate | 6.5% | 7.1% |
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 six months ended September 30, 2019 and September 30, 2018 are set out below:
Particulars | Three months ended September 30, |
Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Discount rate (%) (1) | 7.1 | 7.5 | 7.1 | 7.5 |
Weighted average rate of increase in compensation levels (%) (2) | 8 | 8 | 8 | 8 |
Weighted average duration of defined benefit obligation (years) (3) | 5.9 | 6.1 | 5.9 | 6.1 |
Assumptions regarding future mortality experience are set in accordance with the published statistics by the Life Insurance Corporation of India.
(1) | In India, the market for high quality corporate bonds being not developed, the yield of government bonds is considered as the discount rate. The tenure has been considered taking into account the past long-term trend of employees’ average remaining service life which reflects the average estimated term of the post- employment benefit obligations. |
(2) | The average rate of increase in compensation levels is determined by the Company, considering factors such as, the Company’s past compensation revision trends and management’s estimate of future salary increases. |
(3) | Attrition rate considered is the management’s estimate based on the past long-term trend of employee turnover in the Company. |
Sensitivity of significant assumptions used for valuation of defined benefit obligation:
(in crore)
Impact from percentage point increase / decrease in | As at September 30, 2019 |
Discount rate | 77 |
Weighted average rate of increase in compensation levels | 67 |
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 September 30, 2019 and March 31, 2019, the plan assets have been primarily invested in insurer managed funds.
Actual return on assets for the three months
ended September 30, 2019 and September 30, 2018 were 28 crore and
24 crore, respectively.
Actual return on assets for the six months ended
September 30, 2019 and September 30, 2018 were 58 crore and
48 crore, respectively.
The Group expects to contribute 123 crore
to the gratuity trusts during remainder of fiscal 2020.
Maturity profile of defined benefit obligation:
(In crore)
Within 1 year | 209 |
1-2 year | 218 |
2-3 year | 225 |
3-4 year | 233 |
4-5 year | 255 |
5-10 years | 1,280 |
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 September 30, 2019 and March 31, 2019, respectively.
The details of the benefit obligation is as follows:
(In crore)
Particulars | As at | |
September 30, 2019 | March 31, 2019 | |
Benefit obligation at the period end | 6,339 | 5,989 |
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 | |
September 30, 2019 | March 31, 2019 | |
Government of India (GOI) bond yield | 6.5% | 7.1% |
Remaining term to maturity of portfolio | 5.41 years | 5.47 years |
Expected guaranteed interest rate | ||
First year | 8.65% | 8.65% |
Thereafter | 8.60% | 8.60% |
The Group contributed 160
crore and
136 crore to the provident fund during the three months ended September 30,
2019 and September 30, 2018, respectively. The Group contributed
307 crore and
265
crore to the provident fund during the six months ended September 30, 2019 and September 30, 2018, respectively. The same
has been recognized in the Consolidated Statement of Profit and Loss under the head employee benefit expense.
The Hon’ble Supreme Court of India vide its judgment and subsequent review petition has ruled in respect of compensation for the purpose of Provident Fund contribution under the Employee’s Provident Fund Act. The Company has assessed possible outcomes of the judgment on determination of provident fund contributions and based on the Company’s current evaluation, it is not probable that certain allowances paid by the Company will be subject to payment of Provident Fund. The company will continue to monitor and evaluate its position based on future events and developments.
2.20.3 Superannuation
The Group contributed 61 crore and
53
crore during the three months ended September 30, 2019 and September 30, 2018, respectively. The Group contributed
119 crore
and
102 crore during the six months ended September 30, 2019 and September 30, 2018, respectively same has been recognized
in the Consolidated Statement of Profit and Loss under the head employee benefit expense.
The provident plans are applicable only to employees drawing a salary in Indian rupees and there are no other significant foreign defined benefit plans.
2.20.4 Employee benefit costs include:
(In crore)
Particulars | Three months ended September 30, |
Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Salaries and bonus(1) | 12,412 | 10,893 | 24,464 | 21,176 |
Defined contribution plans | 85 | 76 | 166 | 148 |
Defined benefit plans | 178 | 189 | 347 | 296 |
12,675 | 11,158 | 24,977 | 21,620 |
(1) | Includes employee stock compensation expense 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 | Three months ended September 30, |
Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Basic earnings per equity share - weighted average number of equity shares outstanding(1) | 424,93,43,678 | 434,70,55,177 | 427,56,15,916 | 434,68,57,296 |
Effect of dilutive common equivalent shares - share options outstanding | 64,79,275 | 51,53,295 | 67,06,621 | 50,57,914 |
Diluted earnings per equity share - weighted average number of equity shares and common equivalent shares outstanding | 425,58,22,953 | 435,22,08,472 | 428,23,22,537 | 435,19,15,210 |
Information in the table above is adjusted for September 2018 bonus issue (Refer note no 2.11)
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 and six months ended September 30, 2019 and September 30, 2018, there are no options to purchase equity shares which had an anti-dilutive effect
2.22 CONTINGENT LIABILITIES AND COMMITMENTS (TO THE EXTENT NOT PROVIDED FOR)
(In crore)
Particulars | As at | |
September 30, 2019 | March 31, 2019 | |
Contingent liabilities : | ||
Claims against the Group, not acknowledged as debts(1) | 3,096 | 3,081 |
[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) | 1,247 | 1,724 |
Other commitments* | 72 | 86 |
*Uncalled capital pertaining to investments
(1) | As at September 30, 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 |
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 | |
September 30, 2019 | March 31, 2019 | ||
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% | 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. | – | – |
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% | 100% |
Fluido Sweden AB (Extero)(19) | Sweden | 100% | 100% |
Fluido Norway A/S(19) | Norway | 100% | 100% |
Fluido Denmark A/S(19) | Denmark | 100% | 100% |
Fluido Slovakia s.r.o(19) | Slovakia | 100% | 100% |
Fluido Newco AB(19) | Sweden | 100% | 100% |
Infosys Compaz Pte. Ltd (formerly Trusted Source Pte. Ltd) (20) | Singapore | 60% | 60% |
Infosys South Africa (Pty) Ltd(13)(21) | South Africa | – | – |
WongDoody Holding Company Inc. (WongDoody) (14) | U.S. | 100% | 100% |
WDW Communications, Inc(16) | U.S. | 100% | 100% |
WongDoody, Inc(16) | U.S. | 100% | 100% |
HIPUS(25) | Japan | 81% | – |
Stater N.V.(26) | The Netherlands | 75% | – |
Stater Nederland B.V.(27) | The Netherlands | 75% | – |
Stater Duitsland B.V.(27) | The Netherlands | 75% | – |
Stater XXL B.V.(27) | The Netherlands | 75% | – |
HypoCasso B.V.(27) | The Netherlands | 75% | – |
Stater Participations B.V.(27) | The Netherlands | 75% | – |
Stater Deutschland Verwaltungs-GmbH(28) | Germany | 75% | – |
Stater Deutschland GmbH & Co. KG(28) | Germany | 75% | – |
Stater Belgium N.V./S.A.(29) | Belgium | 53.99% | – |
(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 4, 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 |
(25) | On April 1, 2019, Infosys Consulting Pte. Ltd, acquired 81% of the voting interests in HIPUS Co. Ltd, Japan |
(26) | On May 23, 2019, Infosys Consulting Pte. Ltd, acquired 75% of the voting interests in Stater N.V |
(27) | Majority owned and controlled subsidiaries of Stater N.V |
(28) | Majority owned and controlled subsidiaries of Stater Duitsland B.V. |
(29) | Majority owned and controlled subsidiaries of Stater Participations B.V. |
Infosys has provided guarantee for performance of certain contracts entered into by its subsidiaries.
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 |
Infosys Expanded Stock Ownership Trust * | India | Controlled trust |
Refer note no. 2.20 for information on transactions with post-employment benefit plans mentioned above.
* Registered on May 15, 2019
List of key management personnel
Whole-time directors
Salil Parekh , Chief Executive Officer and Managing Director
U. B. Pravin Rao, Chief Operating officer
Non-whole-time directors
Nandan M. Nilekani
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
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
Ravi Kumar S, President and Deputy Chief Operating Officer
Krishnamurthy Shankar, Group Head - Human Resources
Inderpreet Sawhney, Group General Counsel and Chief Compliance Officer
Company Secretary
A. G. S. Manikantha
Transaction with key management personnel:
The related party transactions with above KMP which comprise directors and executive officers are as follows :
(In crore)
Particulars |
Three months ended September 30, |
Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | |
Salaries and other employee benefits to whole-time directors and executive officers (1) | 28 | 25 | 60 | 49 |
Commission and other benefits to non-executive/independent directors | 2 | 2 | 4 | 4 |
Total | 30 | 27 | 64 | 53 |
(1) | Total employee stock compensation expense for the three months ended September
30, 2019 and September 30, 2018 includes a charge of ![]() ![]() ![]() ![]() |
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. The Chief Operating Decision Maker 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 .
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.
Disclosure of revenue by geographic locations is given in note 2.16 Revenue from operations
Business Segments
Three months ended September 30, 2019 and September 30, 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 | 7,213 | 3,448 | 2,961 | 2,962 | 2,291 | 1,713 | 1,454 | 587 | 22,629 |
6,644 | 3,469 | 2,529 | 2,527 | 1,989 | 1,537 | 1,321 | 593 | 20,609 | |
Identifiable operating expenses | 3,718 | 1,722 | 1,756 | 1,564 | 1,264 | 1,015 | 770 | 355 | 12,164 |
3,530 | 1,771 | 1,351 | 1,409 | 1,107 | 850 | 691 | 363 | 11,072 | |
Allocated expenses | 1,629 | 688 | 582 | 580 | 518 | 306 | 292 | 225 | 4,820 |
1,338 | 664 | 519 | 522 | 417 | 269 | 254 | 197 | 4,180 | |
Segmental operating income | 1,866 | 1,038 | 623 | 818 | 509 | 392 | 392 | 7 | 5,645 |
1,776 | 1,034 | 659 | 596 | 465 | 418 | 376 | 33 | 5,357 | |
Unallocable expenses | 733 | ||||||||
463 | |||||||||
Other income, net (Refer to note 2.17) | 626 | ||||||||
739 | |||||||||
Finance costs (Refer to note 2.19) | 42 | ||||||||
– | |||||||||
Profit before tax | 5,496 | ||||||||
5,633 | |||||||||
Income Tax Expense | 1,459 | ||||||||
1,523 | |||||||||
Net Profit | 4,037 | ||||||||
4,110 | |||||||||
Depreciation and amortization expense | 727 | ||||||||
463 | |||||||||
Non-cash expenses other than depreciation and amortization | 6 | ||||||||
– |
Six months ended September 30, 2019 and September 30, 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 | 14,069 | 6,883 | 5,964 | 5,796 | 4,390 | 3,392 | 2,795 | 1,143 | 44,432 |
12,719 | 6,637 | 4,958 | 4,901 | 3,826 | 2,959 | 2,581 | 1,156 | 39,737 | |
Identifiable operating expenses | 7,400 | 3,463 | 3,544 | 3,068 | 2,456 | 2,038 | 1,551 | 685 | 24,205 |
6,790 | 3,372 | 2,615 | 2,670 | 2,132 | 1,636 | 1,358 | 700 | 21,273 | |
Allocated expenses | 3,090 | 1,350 | 1,175 | 1,186 | 1,012 | 592 | 574 | 446 | 9,425 |
2,592 | 1,286 | 1,012 | 1,011 | 818 | 517 | 494 | 403 | 8,133 | |
Segmental operating income | 3,579 | 2,070 | 1,245 | 1,542 | 922 | 762 | 670 | 12 | 10,802 |
3,337 | 1,979 | 1,331 | 1,220 | 876 | 806 | 729 | 53 | 10,331 | |
Unallocable expenses | 1,419 | ||||||||
900 | |||||||||
Other income, net (Refer to note 2.17) | 1,362 | ||||||||
1,465 | |||||||||
Finance costs (Refer to note 2.19) | 82 | ||||||||
– | |||||||||
Reduction in the fair value of Disposal Group held for sale (Refer to note 2.1.2) | – | ||||||||
270 | |||||||||
Profit before tax | 10,663 | ||||||||
10,626 | |||||||||
Income Tax Expense | 2,824 | ||||||||
2,905 | |||||||||
Net Profit | 7,839 | ||||||||
7,721 | |||||||||
Depreciation and amortization expense | 1,408 | ||||||||
900 | |||||||||
Non-cash expenses other than depreciation and amortization | 11 | ||||||||
270 |
Significant clients
No client individually accounted for more than 10% of the revenues in the three months ended September 30, 2019 and September 30, 2018.
2.25 FUNCTION WISE CLASSIFICATION OF CONSOLIDATED STATEMENT OF PROFIT AND LOSS
(In crore)
Particulars | Note no | Three months ended September 30, | Six months ended September 30, | ||
2019 | 2018 | 2019 | 2018 | ||
Revenue from operations | 2.16 | 22,629 | 20,609 | 44,432 | 39,737 |
Cost of Sales | 15,079 | 13,281 | 29,858 | 25,569 | |
Gross profit | 7,550 | 7,328 | 14,574 | 14,168 | |
Operating expenses | |||||
Selling and marketing expenses | 1,162 | 1,088 | 2,336 | 2,092 | |
General and administration expenses | 1,476 | 1,346 | 2,855 | 2,645 | |
Total operating expenses | 2,638 | 2,434 | 5,191 | 4,737 | |
Operating profit | 4,912 | 4,894 | 9,383 | 9,431 | |
Reduction in the fair value of Disposal Group held for sale | 2.1.2 | – | – | – | (270) |
Other income, net | 2.17 | 626 | 739 | 1,362 | 1,465 |
Finance cost | 2.19 | 42 | – | 82 | – |
Profit before tax | 5,496 | 5,633 | 10,663 | 10,626 | |
Tax expense: | |||||
Current tax | 2.15 | 1,488 | 1,612 | 2,947 | 3,063 |
Deferred tax | 2.15 | (29) | (89) | (123) | (158) |
Profit for the period | 4,037 | 4,110 | 7,839 | 7,721 | |
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) | 3 | (39) | 4 |
Equity instruments through other comprehensive income, net | 2.4 and 2.15 | 2 | 8 | 5 | 12 |
(20) | 11 | (34) | 16 | ||
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 | 17 | (29) | (7) | (20) |
Exchange differences on translation of foreign operations, net | (35) | 334 | (10) | 421 | |
Fair value changes on investments, net | 2.4 and 2.15 | 2 | (15) | 18 | (60) |
(16) | 290 | 1 | 341 | ||
Total other comprehensive income / (loss), net of tax | (36) | 301 | (33) | 357 | |
Total comprehensive income for the period | 4,001 | 4,411 | 7,806 | 8,078 | |
Profit attributable to: | |||||
Owners of the Company | 4,019 | 4,110 | 7,817 | 7,721 | |
Non-controlling interests | 18 | – | 22 | – | |
4,037 | 4,110 | 7,839 | 7,721 | ||
Total comprehensive income attributable to: | |||||
Owners of the Company | 3,984 | 4,411 | 7,782 | 8,078 | |
Non-controlling interests | 17 | – | 24 | – | |
4,001 | 4,411 | 7,806 | 8,078 |
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 October 11, 2019 |
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