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, 2021, the
Condensed Consolidated Statement of Comprehensive Income for the three months and six months ended on that date, the Condensed Consolidated
Statement of Changes in Equity and the Condensed Consolidated Statement of Cash Flows for the six months 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,
2021, the consolidated profit and consolidated total comprehensive income for the three months and six months ended on that date, consolidated
changes in equity and its consolidated cash flows for the six months 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 (“SA”s) 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 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 Boards 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 interim 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 Boards of Directors of the companies included in the Group are responsible for assessing 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 Boards of Directors either intend to liquidate their respective entities or to cease operations, or
has no realistic alternative but to do so.
The respective Boards 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 scepticism 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 the Company’s internal financial controls. |
| · | Evaluate the appropriateness
of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. |
| · | Conclude on the appropriateness
of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on the 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) |
| |
|
| |
|
|
Place: Mumbai
Date: October 13, 2021 |
Sanjiv V. Pilgaonkar
Partner
(Membership No.039826)
UDIN: 21039826AAAAGT8240 |
INFOSYS LIMITED AND SUBSIDIARIES
Condensed Consolidated Financial Statements under
International Financial Reporting Standards (IFRS) in US Dollars for the three months and six months ended September 30, 2021
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 Interim Condensed 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 judgments
1.5 Critical accounting estimates and judgements
1.6 Recent accounting pronouncements
2. Notes to the Interim 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 and other contingencies
2.7 Property, plant and equipment
2.8 Leases
2.9 Goodwill and intangible assets
2.10 Business combination
2.11 Employees' Stock Option Plans (ESOP)
2.12 Income taxes
2.13 Basic and diluted shares used in computing earnings per
equity 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
(Dollars in millions except equity share data)
| Condensed Consolidated Balance Sheet as at |
Note |
September 30, 2021 |
March 31, 2021 |
| ASSETS |
|
|
|
| Current assets |
|
|
|
| Cash and cash equivalents |
2.1 |
2,432 |
3,380 |
| Current investments |
2.2 |
671 |
320 |
| Trade receivables |
|
2,711 |
2,639 |
| Unbilled revenue |
2.17 |
1,268 |
1,030 |
| Prepayments and other current assets |
2.4 |
986 |
912 |
| Derivative financial instruments |
2.3 |
16 |
26 |
| Total current assets |
|
8,084 |
8,307 |
| Non-current assets |
|
|
|
| Property, plant and equipment |
2.7 |
1,809 |
1,863 |
| Right-of-use assets |
2.8 |
620 |
656 |
| Goodwill |
2.9 |
825 |
832 |
| Intangible assets |
|
255 |
283 |
| Non-current investments |
2.2 |
1,360 |
1,623 |
| Unbilled revenue |
2.17 |
102 |
81 |
| Deferred income tax assets |
2.12 |
131 |
150 |
| Income tax assets |
2.12 |
781 |
795 |
| Other non-current assets |
2.4 |
328 |
235 |
| Total Non-current assets |
|
6,211 |
6,518 |
| Total assets |
|
14,295 |
14,825 |
| LIABILITIES AND EQUITY |
|
|
|
| Current liabilities |
|
|
|
| Trade payables |
|
428 |
362 |
| Lease Liabilities |
2.8 |
106 |
101 |
| Derivative financial instruments |
2.3 |
6 |
8 |
| Current income tax liabilities |
2.12 |
331 |
294 |
| Unearned revenue |
|
592 |
554 |
| Employee benefit obligations |
|
301 |
276 |
| Provisions |
2.6 |
116 |
97 |
| Other current liabilities |
2.5 |
1,850 |
1,572 |
| Total current liabilities |
|
3,730 |
3,264 |
| Non-current liabilities |
|
|
|
| Lease liabilities |
2.8 |
587 |
627 |
| Deferred income tax liabilities |
2.12 |
115 |
120 |
| Employee benefit obligations |
|
14 |
13 |
| Other non-current liabilities |
2.5 |
372 |
299 |
| Total liabilities |
|
4,818 |
4,323 |
| Equity |
|
|
|
Share capital -  5 ($0.16) par value 4,800,000,000 (4,800,000,000) equity shares authorized, issued and outstanding 4,190,623,841 (4,245,146,114) equity shares fully paid up, net of 14,840,585 (15,514,732) treasury shares as at September 30, 2021 and March 31, 2021 |
2.19 |
328 |
332 |
| Share premium |
|
301 |
359 |
| Retained earnings |
|
11,100 |
12,087 |
| Cash flow hedge reserve |
|
3 |
2 |
| Other reserves |
|
1,054 |
908 |
| Capital redemption reserve |
|
21 |
17 |
| Other components of equity |
|
(3,387) |
(3,263) |
| Total equity attributable to equity holders of the company |
|
9,420 |
10,442 |
| Non-controlling interests |
|
57 |
60 |
| Total equity |
|
9,477 |
10,502 |
| Total liabilities and equity |
|
14,295 |
14,825 |
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 |
|
|
|
| |
|
|
|
|
Sanjiv V. Pilgaonkar
Partner
Membership No. 039826 |
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 |
Jayesh Sanghrajka
Executive Vice President and
Deputy Chief Financial Officer |
| |
|
|
|
| |
A.G.S. Manikantha
Company Secretary |
|
|
| |
|
|
|
Mumbai
October 13, 2021 |
Bengaluru
October 13, 2021 |
|
|
(Dollars in millions except equity share and per equity
share data)
| Condensed Consolidated Statement of Comprehensive Income |
Note |
Three months ended |
Six months ended |
| |
|
September 30, 2021 |
September 30, 2020 |
September 30, 2021 |
September 30, 2020 |
| Revenues |
2.16 |
3,998 |
3,312 |
7,780 |
6,433 |
| Cost of sales |
2.18 |
2,675 |
2,125 |
5,184 |
4,196 |
| Gross profit |
|
1,323 |
1,187 |
2,596 |
2,237 |
| Operating expenses: |
|
|
|
|
|
| Selling and marketing expenses |
2.18 |
167 |
153 |
336 |
305 |
| Administrative expenses |
2.18 |
215 |
194 |
423 |
385 |
| Total operating expenses |
|
382 |
347 |
759 |
690 |
| Operating profit |
|
941 |
840 |
1,837 |
1,547 |
| Other income, net |
2.18 |
71 |
76 |
155 |
140 |
| Finance cost |
|
6 |
6 |
13 |
12 |
| Profit before income taxes |
|
1,006 |
910 |
1,979 |
1,675 |
| Income tax expense |
2.12 |
272 |
255 |
540 |
456 |
| Net profit |
|
734 |
655 |
1,439 |
1,219 |
| Other comprehensive income |
|
|
|
|
|
| Items that will not be reclassified subsequently to profit or loss: |
|
|
|
|
|
| Re-measurements of the net defined benefit liability/asset, net |
|
2 |
1 |
(2) |
21 |
| Equity instrument through other comprehensive income, net |
|
5 |
(1) |
5 |
(1) |
| |
|
7 |
– |
3 |
20 |
| Items that will be reclassified subsequently to profit or loss: |
|
|
|
|
|
| Fair valuation of investments, net |
|
7 |
(6) |
12 |
1 |
| Fair value changes on derivatives designated as cash flow hedge, net |
|
1 |
4 |
1 |
3 |
| Foreign currency translation |
|
(7) |
213 |
(139) |
254 |
| |
|
1 |
211 |
(126) |
258 |
| Total other comprehensive income/(loss), net of tax |
|
8 |
211 |
(123) |
278 |
| Total comprehensive income |
|
742 |
866 |
1,316 |
1,497 |
| |
|
|
|
|
|
| Profit attributable to: |
|
|
|
|
|
| Owners of the company |
|
733 |
653 |
1,437 |
1,212 |
| Non-controlling interests |
|
1 |
2 |
2 |
7 |
| |
|
734 |
655 |
1,439 |
1,219 |
| Total comprehensive income attributable to: |
|
|
|
|
|
| Owners of the company |
|
741 |
864 |
1,314 |
1,489 |
| Non-controlling interests |
|
1 |
2 |
2 |
8 |
| |
|
742 |
866 |
1,316 |
1,497 |
| Earnings per equity share |
|
|
|
|
|
| Basic ($) |
|
0.17 |
0.15 |
0.34 |
0.29 |
| Diluted ($) |
|
0.17 |
0.15 |
0.34 |
0.29 |
| Weighted average equity shares used in computing earnings per equity share |
2.13 |
|
|
|
|
| Basic |
|
4,210,064,823 |
4,241,908,471 |
4,227,694,034 |
4,241,506,966 |
| Diluted |
|
4,218,293,582 |
4,248,961,564 |
4,236,051,581 |
4,248,434,533 |
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 |
|
|
|
| |
|
|
|
|
Sanjiv V. Pilgaonkar
Partner
Membership No. 039826 |
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 |
Jayesh Sanghrajka
Executive Vice President and
Deputy Chief Financial Officer |
| |
|
|
|
| |
A.G.S. Manikantha
Company Secretary |
|
|
| |
|
|
|
Mumbai
October 13, 2021 |
Bengaluru
October 13, 2021 |
|
|
Condensed Consolidated Statement of
Changes in Equity
(Dollars in millions except equity share data)
| |
Number of 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, 2020 |
4,240,753,210 |
332 |
305 |
11,014 |
594 |
17 |
(2) |
(3,614) |
8,646 |
55 |
8,701 |
| Changes in equity for six months ended September 30, 2020 |
|
|
|
|
|
|
|
|
|
|
|
| Net profit |
– |
– |
– |
1,212 |
– |
– |
– |
– |
1,212 |
7 |
1,219 |
| Remeasurement of the net defined benefit liability/asset, net* |
– |
– |
– |
– |
– |
– |
– |
21 |
21 |
– |
21 |
| Equity instruments through other comprehensive income, net* |
– |
– |
– |
– |
– |
– |
– |
(1) |
(1) |
– |
(1) |
| Fair value changes on investments, net* |
– |
– |
– |
– |
– |
– |
– |
1 |
1 |
– |
1 |
| Fair value changes on derivatives designated as cash flow hedge, net* |
– |
– |
– |
– |
– |
– |
3 |
– |
3 |
– |
3 |
| Foreign currency translation |
– |
– |
– |
– |
– |
– |
– |
253 |
253 |
1 |
254 |
| Total comprehensive income for the period |
– |
– |
– |
1,212 |
– |
– |
3 |
274 |
1,489 |
8 |
1,497 |
| Shares issued on exercise of employee stock options (Refer note 2.11) |
1,752,826 |
– |
1 |
– |
– |
– |
– |
– |
1 |
– |
1 |
| Transfer to other reserves |
– |
– |
– |
(198) |
198 |
– |
– |
– |
– |
– |
– |
| Transfer from other reserves on utilization |
– |
– |
– |
77 |
(77) |
– |
– |
– |
– |
– |
– |
| Employee stock compensation expense (Refer note 2.11) |
– |
– |
18 |
– |
– |
– |
– |
– |
18 |
– |
18 |
| Income tax benefit arising on exercise of stock options |
– |
– |
1 |
– |
– |
– |
– |
– |
1 |
– |
1 |
| Dividends paid to non controlling interest of subsidiary |
– |
– |
– |
– |
– |
– |
– |
– |
– |
(3) |
(3) |
| Dividends (including dividend distribution tax)# |
– |
– |
– |
(532) |
– |
– |
– |
– |
(532) |
- |
(532) |
| Balance as at September 30, 2020 |
4,242,506,036 |
332 |
325 |
11,573 |
715 |
17 |
1 |
(3,340) |
9,623 |
60 |
9,683 |
(Dollars in millions except equity share data)
| |
Number of 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, 2021 |
4,245,146,114 |
332 |
359 |
12,087 |
908 |
17 |
2 |
(3,263) |
10,442 |
60 |
10,502 |
| Changes in equity for six months ended September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
| Net profit |
– |
– |
– |
1,437 |
– |
– |
– |
– |
1,437 |
2 |
1,439 |
| Remeasurement of the net defined benefit liability/asset, net* |
– |
– |
– |
– |
– |
– |
– |
(2) |
(2) |
– |
(2) |
| Equity instruments through other comprehensive income, net* |
– |
– |
– |
– |
– |
– |
– |
5 |
5 |
– |
5 |
| Fair value changes on investments, net* |
– |
– |
– |
– |
– |
– |
– |
12 |
12 |
– |
12 |
| Fair value changes on derivatives designated as cash flow hedge, net* |
– |
– |
– |
– |
– |
– |
1 |
– |
1 |
– |
1 |
| Foreign currency translation |
– |
– |
– |
– |
– |
– |
– |
(139) |
(139) |
– |
(139) |
| Total comprehensive income for the period |
– |
– |
– |
1,437 |
– |
– |
1 |
(124) |
1,314 |
2 |
1,316 |
| Shares issued on exercise of employee stock options (Refer to note 2.11) |
1,285,064 |
– |
1 |
– |
– |
– |
– |
– |
1 |
– |
1 |
| Buyback of equity shares (Refer to note 2.19)** |
(55,807,337) |
(4) |
(86) |
(1,409) |
– |
– |
– |
– |
(1,499) |
– |
(1,499) |
| Transaction cost relating to buyback * |
– |
– |
– |
(4) |
– |
– |
– |
– |
(4) |
– |
(4) |
| Amount transferred to capital redemption reserve upon buyback |
– |
– |
– |
(4) |
– |
4 |
– |
– |
– |
– |
– |
| Transfer from other reserves on utilization |
– |
– |
– |
56 |
(56) |
– |
– |
– |
– |
– |
– |
| Transfer to other reserves |
– |
– |
– |
(202) |
202 |
– |
– |
– |
– |
– |
– |
| Employee stock compensation expense (Refer to note 2.11) |
– |
– |
26 |
– |
– |
– |
– |
– |
26 |
– |
26 |
| Income tax benefit arising on exercise of stock options |
– |
– |
1 |
– |
– |
– |
– |
– |
1 |
– |
1 |
| Dividends paid to non controlling interest of subsidiary |
– |
– |
– |
– |
– |
– |
– |
– |
– |
(5) |
(5) |
| Dividends# |
– |
– |
– |
(861) |
– |
– |
– |
– |
(861) |
– |
(861) |
| Balance as at September 30, 2021 |
4,190,623,841 |
328 |
301 |
11,100 |
1,054 |
21 |
3 |
(3,387) |
9,420 |
57 |
9,477 |
| ** | | including tax on buyback of $256 million |
| (1) | | excludes treasury shares of 14,840,585 as at September 30, 2021, 15,514,732 as at April
1, 2021, 16,905,562 as at September 30, 2020 and 18,239,356 as at April 1, 2020, held by consolidated trust. |
| (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 |
|
|
|
| |
|
|
|
|
Sanjiv V. Pilgaonkar
Partner
Membership No. 039826 |
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 |
Jayesh Sanghrajka
Executive Vice President and
Deputy Chief Financial Officer |
| |
|
|
|
| |
A.G.S. Manikantha
Company Secretary |
|
|
| |
|
|
|
Mumbai
October 13, 2021 |
Bengaluru
October 13, 2021 |
|
|
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.
(Dollars in millions)
| Particulars |
Note |
Six months ended |
| |
|
September 30, 2021 |
September 30, 2020 |
| Operating activities: |
|
|
|
| Net Profit |
|
1,439 |
1,219 |
| Adjustments to reconcile net profit to net cash provided by operating activities: |
|
|
|
| Depreciation and amortization |
2.18 |
228 |
215 |
| Interest and dividend income |
|
(54) |
(35) |
| Finance Cost |
|
13 |
12 |
| Income tax expense |
2.12 |
540 |
456 |
| Effect of exchange rate changes on assets and liabilities, net |
|
8 |
(2) |
| Impairment loss under expected credit loss model |
|
12 |
21 |
| Stock compensation expense |
2.11 |
28 |
24 |
| Other adjustments |
|
5 |
(9) |
| Changes in working capital |
|
|
|
| Trade receivables and unbilled revenue |
|
(401) |
(9) |
| Prepayments and other assets |
|
(40) |
44 |
| Trade payables |
|
47 |
(64) |
| Unearned revenue |
|
47 |
47 |
| Other liabilities and provisions |
|
326 |
56 |
| Cash generated from operations |
|
2,198 |
1,975 |
| Income taxes paid |
|
(484) |
(399) |
| Net cash generated by operating activities |
|
1,714 |
1,576 |
| Investing activities: |
|
|
|
| Expenditure on property, plant and equipment and intangibles |
|
(139) |
(174) |
| Deposits placed with corporation |
|
(69) |
(66) |
| Redemption of deposits placed with corporations |
|
46 |
48 |
| Interest and dividend received |
|
57 |
34 |
| Payment of contingent consideration pertaining to acquisition of business |
|
(7) |
(20) |
| Escrow and other deposits pertaining to Buyback |
|
(57) |
– |
| Redemption of escrow and other deposits pertaining to Buyback |
|
57 |
– |
| Payments to acquire Investments |
|
|
|
| Liquid mutual funds and fixed maturity plan securities |
|
(3,440) |
(1,596) |
| Certificate of deposits |
|
(67) |
– |
| Quoted debt securities |
|
(109) |
(733) |
| Equity and preference securities |
|
(2) |
– |
| Proceeds on sale of Investments |
|
|
|
| Quoted debt securities |
|
357 |
300 |
| Certificate of deposits |
|
67 |
120 |
| Liquid mutual funds and fixed maturity plan securities |
|
3,103 |
1,582 |
| Other Investments |
|
– |
3 |
| Other payments |
|
(3) |
– |
| Other receipts |
|
4 |
3 |
| Net cash (used)/generated in investing activities |
|
(202) |
(499) |
| Financing activities: |
|
|
|
| Payment of Lease Liabilities |
2.8 |
(57) |
(47) |
| Payment of dividends |
|
(861) |
(539) |
| Payment of dividend to non controlling interests of subsidiary |
|
– |
(3) |
| Shares issued on exercise of employee stock options |
|
1 |
1 |
| Other payments |
|
(2) |
– |
| Other receipts |
|
16 |
– |
| Buy back of equity shares including transaction costs and tax on buyback |
2.19.1 |
(1,503) |
– |
| Net cash used in financing activities |
|
(2,406) |
(588) |
| Effect of exchange rate changes on cash and cash equivalents |
|
(54) |
84 |
| Net increase / (decrease) in cash and cash equivalents |
|
(894) |
489 |
| Cash and cash equivalents at the beginning of the period |
2.1 |
3,380 |
2,465 |
| Cash and cash equivalents at the end of the period |
2.1 |
2,432 |
3,038 |
| Supplementary information: |
|
|
|
| Restricted cash balance |
2.1 |
71 |
55 |
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 |
|
|
|
| |
|
|
|
|
Sanjiv V. Pilgaonkar
Partner
Membership No. 039826 |
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 |
Jayesh Sanghrajka
Executive Vice President and
Deputy Chief Financial Officer |
| |
|
|
|
| |
A.G.S. Manikantha
Company Secretary |
|
|
| |
|
|
|
Mumbai
October 13, 2021 |
Bengaluru
October 13, 2021 |
|
|
Overview and Notes
to the Interim Condensed Consolidated Financial Statements
1. Overview
1.1 Company overview
Infosys Limited ('the Company' or Infosys) provides
consulting, technology, outsourcing and next-generation digital services, to enable 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 in India. 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 13, 2021.
1.2 Basis
of preparation of financial statements
The 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, 2021. 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-end figures are taken from
the source and rounded to the nearest digits, the quarter figures in this statement added up to the figures reported for the previous
quarters might not always add up to the year-end figures reported in this statement.
1.3 Basis
of consolidation
Infosys consolidates entities which it owns
or controls. The interim 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. The 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 interim condensed consolidated 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 and judgements 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 interim condensed consolidated
financial statements.
Estimation of uncertainties relating to the global
health pandemic from COVID-19 (COVID-19):
The Group has considered the possible effects that
may result from the COVID-19 pandemic in the preparation of these interim condensed consolidated financial statements including the recoverability
of carrying amounts of financial and non-financial assets. In developing the assumptions relating to the possible future uncertainties
in the global economic conditions because of the COVID-19 pandemic, the Group has, at the date of approval of these interim condensed
consolidated financial statements, used internal and external sources of information including credit reports and related information
and economic forecasts and expects that the carrying amount of these assets will be recovered. The impact of the COVID-19 pandemic on
the Group's financial statements may differ from that estimated as at the date of approval of these interim condensed consolidated financial
statements.
1.5 Critical
accounting estimates and judgements
a. Revenue recognition
The Group’s contracts with customers include
promises to transfer multiple products and services to a customer. Revenues from customer contracts are considered for recognition and
measurement when the contract has been approved, in writing, by the parties to the contract, the parties to contract are committed to
perform their respective obligations under the contract, and the contract is legally enforceable. The Group assesses the services promised
in a contract and identifies distinct performance obligations in the contract. Identification of distinct performance obligations to determine
the deliverables and the ability of the customer to benefit independently from such deliverables, and allocation of transaction price
to these distinct performance obligations involves significant judgement.
Fixed price maintenance revenue is recognized ratably
on a straight-line basis when services are performed through an indefinite number of repetitive acts over a specified period. Revenue
from fixed price maintenance contract is recognized ratably using a percentage of completion method when the pattern of benefits from
the services rendered to the customer and Group’s costs to fulfil the contract is not even through the period of the contract because
the services are generally discrete in nature and not repetitive. The use of method to recognize the maintenance revenues requires judgment
and is based on the promises in the contract and nature of the deliverables.
The Group uses the percentage-of-completion method
in accounting for other fixed-price contracts. Use of the percentage-of-completion method requires the Group to determine the actual efforts
or costs expended to date as a proportion of the estimated total efforts or costs to be incurred. Efforts or costs expended have been
used to measure progress towards completion as there is a direct relationship between input and productivity. The estimation of total
efforts or costs involves significant judgement and is assessed throughout the period of the contract to reflect any changes based on
the latest available information.
Provisions for estimated losses, if any, on incomplete contracts are recorded in the period in which such losses become probable based
on the estimated efforts or costs to complete the contract.
b. Income taxes
The Group'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 us to fair value identifiable intangible assets and contingent consideration to ascertain
the net fair value of identifiable assets, liabilities and contingent liabilities of the acquiree. 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. These measurements are based on information available at the acquisition date and are based on expectations
and assumptions that have been deemed reasonable by management.(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 (CGUs) is less than it’s carrying amount.
For the impairment test, goodwill is allocated to the CGU or groups of CGUs which benefit from the synergies of the acquisition and which
represent the lowest level at which goodwill is monitored for internal management purposes.
The recoverable amount of CGUs is determined based
on higher of value-in-use and fair value less cost to sell. Key assumptions in the cash flow projections are prepared based on current
economic conditions and comprises estimated long term growth rates, weighted average cost of capital and estimated operating margins.
(Refer to note 2.9)
f. Leases
As a lessee, the Group determines 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.
After considering current and future economic conditions, the Group has concluded that no material changes are required to lease period
relating to the existing lease contracts (Refer to note 2.8).
g. Allowance for credit losses on receivables and
unbilled revenue
The Group determines the allowance for credit losses
based on historical loss experience adjusted to reflect current and estimated future economic conditions. The group considered current
and anticipated future economic conditions relating to industries the Group deals with and the countries where it operates. In calculating
expected credit loss, the Group has also considered credit reports and other related credit information for its customers to estimate
the probability of default in future and has taken into account estimates of possible effect from the pandemic relating to COVID-19.
1.6 Recent accounting pronouncements
New and revised IFRS Standards in issue but not
yet effective:
| Amendments to IAS 16 Property, Plant and Equipment |
Proceeds before Intended Use |
| Amendments to IAS 37 Onerous Contracts |
Cost of Fulfilling a Contract |
| Amendments to IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors |
Definition of Accounting Estimates |
| Amendments to IAS 1, Presentation of Financial Statements |
Disclosure of Accounting Policies |
| Amendments to IAS 12, Income
taxes |
Deferred Tax related to Assets and Liabilities arising from a Single Transaction |
Amendments to IAS 16
On May 14, 2020 International Accounting Standards
Board (IASB) has issued amendment to IAS 16 Property, Plant and Equipment — Proceeds before Intended Use (Amendments to IAS 16)
which amends the standard to prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling items
produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by
management. Instead, an entity recognises the proceeds from selling such items, and the cost of producing those items, in profit or loss.
The effective date for adoption of this amendment is
annual periods beginning on or after January 1, 2022, although early adoption is permitted. The Group has evaluated the amendment and
there is no impact on its condensed consolidated financial statements.
Amendments to IAS 37
On May 14, 2020 International Accounting Standards
Board (IASB) has issued Onerous Contracts — Cost of Fulfilling a Contract (Amendments to IAS 37) which specify that the ‘cost
of fulfilling’ a contract comprises the ‘costs that relate directly to the contract’. Costs that relate directly to
a contract can either be incremental costs of fulfilling that contract (examples would be direct labour, materials) or an allocation of
other costs that relate directly to fulfilling contracts (an example would be the allocation of the depreciation charge for an item of
property, plant and equipment used in fulfilling the contract).
The effective date for adoption of this amendment is
annual periods beginning on or after January 1, 2022, although early adoption is permitted. The Group is in the process of evaluating
the impact of the amendment.
Amendments to IAS 8
On February 12, 2021 International Accounting Standards
Board (IASB) has issued amendments to IAS 8 Accounting Policies, Changes in Accounting estimates and Errors which introduced a definition
of ‘accounting estimates’ and included amendments to IAS 8 to help entities distinguish changes in accounting policies from
changes in accounting estimates.
The effective date for adoption of this amendment is
annual periods beginning on or after January 1, 2023, although early adoption is permitted. The Group has evaluated the amendment and
there is no impact on its condensed consolidated financial statements.
Amendments to IAS 1
On February 12, 2021 International Accounting Standards
Board (IASB) has issued amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements
which requires the entities to disclose their material accounting policies rather than their significant accounting policies.
The effective date for adoption of this amendment is
annual periods beginning on or after January 1, 2023, although early adoption is permitted. The Group is in the process of evaluating
the impact of the amendment.
Amendments to IAS 12
On May 7,2021, International Accounting Standards Board
(IASB) has issued amendment to IAS 12 Income Taxes which narrowed the scope of the initial recognition exemption so that it does not apply
to transactions that give rise to equal and offsetting temporary differences.
The effective date for adoption of this amendment is
annual periods beginning on or after January 1, 2023, although early adoption is permitted. The Group is in the process of evaluating
the impact of the amendment.
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, 2021 |
March 31, 2021 |
| Cash and bank deposits |
2,020 |
2,745 |
| Deposits with financial institutions |
412 |
635 |
| Total Cash and cash equivalents |
2,432 |
3,380 |
Cash and cash equivalents as at September 30, 2021
and March 31, 2021 include restricted cash and bank balances of $71 million and $69 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, 2021 |
March 31, 2021 |
| (i) Current |
|
|
|
|
|
| Amortized cost |
|
|
| Quoted debt securities |
3 |
– |
| Fair value through profit or loss |
|
|
| Liquid Mutual funds |
544 |
205 |
| Fair Value through Other comprehensive income |
|
|
| Quoted debt securities |
124 |
115 |
| Total current investments |
671 |
320 |
| |
|
|
| (ii) Non-current |
|
|
| |
|
|
| Amortized cost |
|
|
| Quoted debt securities |
287 |
294 |
| Fair value through Other comprehensive income |
|
|
| Quoted debt securities |
1,028 |
1,293 |
| Unquoted equity and preference securities |
30 |
23 |
| Fair value through profit or loss |
|
|
| Unquoted Preference securities |
3 |
2 |
| Unquoted Compulsorily convertible debentures |
1 |
1 |
| Others(1) |
11 |
10 |
| Total Non-current investments |
1,360 |
1,623 |
| |
|
|
| Total investments |
2,031 |
1,943 |
| Investment carried at amortized cost |
290 |
294 |
| Investments carried at fair value through other comprehensive income |
1,182 |
1,431 |
| Investments carried at fair value through profit or loss |
559 |
218 |
| (1) | | Uncalled capital commitments outstanding as on September 30, 2021 and March 31, 2021 was
$4 million and $6 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, 2021 |
As at March 31, 2021 |
| Liquid mutual fund units |
Quoted price |
544 |
205 |
| Quoted debt securities- carried at amortized cost |
Quoted price and market observable inputs |
340 |
347 |
| Quoted debt securities- carried at Fair value through other comprehensive income |
Quoted price and market observable inputs |
1,152 |
1,408 |
| Unquoted equity and preference securities carried at fair value through other comprehensive income |
Discounted cash flows method, Market multiples method, Option pricing model |
30 |
23 |
| Unquoted equity and preference securities - carried at fair value through profit or loss |
Discounted cash flows method, Market multiples method, Option pricing model |
3 |
2 |
| Unquoted compulsorily convertible debentures - carried at fair value through profit and loss |
Discounted cash flows method |
1 |
1 |
| Others |
Discounted cash flows method, Market multiples method, Option pricing model |
11 |
10 |
| |
|
2,081 |
1,996 |
| 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 carried 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 carried 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 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.
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
carried at fair value through profit or loss.
This category includes 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 carried 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 transaction.
..
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 condensed consolidated 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 these 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 recorded is recognized
as an impairment gain or loss in condensed consolidated statement of comprehensive income.
Financial instruments by category
The carrying value and fair value of financial instruments by categories
as at September 30, 2021 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 note 2.1) |
2,432 |
– |
– |
– |
– |
2,432 |
2,432 |
| Investments (Refer to Note 2.2) |
|
|
|
|
|
|
|
| Liquid mutual fund units |
– |
– |
544 |
– |
– |
544 |
544 |
| Quoted debt securities |
290 |
– |
– |
– |
1,152 |
1,442 |
1,492(1) |
| Unquoted equity and preference securities
|
– |
– |
3 |
30 |
– |
33 |
33 |
| Unquoted Compulsorily convertible debentures |
– |
– |
1 |
– |
– |
1 |
1 |
| Unquoted investment others |
– |
– |
11 |
– |
– |
11 |
11 |
| Trade receivables |
2,711 |
– |
– |
– |
– |
2,711 |
2,711 |
| Unbilled revenues (Refer note 2.17)(3) |
626 |
– |
– |
– |
– |
626 |
626 |
| Prepayments and other assets (Refer to Note 2.4) |
552 |
– |
– |
– |
– |
552 |
542(2) |
| Derivative financial instruments |
– |
– |
11 |
– |
5 |
16 |
16 |
| Total |
6,611 |
– |
570 |
30 |
1,157 |
8,368 |
8,408 |
| Liabilities: |
|
|
|
|
|
|
|
| Trade payables |
428 |
– |
– |
– |
– |
428 |
428 |
| Lease liabilities |
693 |
|
– |
– |
– |
693 |
693 |
| Derivative financial instruments |
– |
– |
6 |
– |
– |
6 |
6 |
| Financial liability under option arrangements (Refer to note 2.5) |
– |
– |
94 |
– |
– |
94 |
94 |
| Other liabilities including contingent consideration (Refer to note 2.5) |
1,685 |
– |
16 |
– |
– |
1,701 |
1,701 |
| Total |
2,806 |
– |
116 |
– |
– |
2,922 |
2,922 |
| (1) | | On account of fair value changes including interest accrued |
| (2) | | Excludes interest accrued on quoted debt securities carried at amortized cost of $10 million. |
| (3) | | Excludes unbilled revenue for contracts where the right to consideration is dependent
on completion of contractual milestones |
The carrying value and fair value of financial instruments by categories
as at March 31, 2021 were as follows:
(Dollars in millions)
| Particulars |
Amortized cost |
Financial assets/ liabilities at fair value through profit or loss |
Financial assets/liabilities at fair value through OCI |
Total carrying value |
Total fair value |
| |
|
Designated upon initial recognition |
Mandatory |
Equity instruments designated upon initial recognition |
Mandatory |
|
|
| Assets: |
|
|
|
|
|
|
|
| Cash and cash equivalents (Refer to Note 2.1) |
3,380 |
– |
– |
– |
- |
3,380 |
3,380 |
| Investments (Refer note 2.2) |
|
|
|
|
|
|
|
| Liquid mutual fund units |
– |
– |
205 |
– |
– |
205 |
205 |
| Quoted debt securities |
294 |
– |
– |
– |
1,408 |
1,702 |
1,755(1) |
| Certificate of deposits |
– |
– |
– |
– |
– |
– |
– |
|
Unquoted Compulsorily convertible debentures |
– |
– |
1 |
– |
– |
1 |
1 |
|
Unquoted equity and preference securities |
– |
– |
2 |
23 |
– |
25 |
25 |
| Unquoted investment others |
– |
– |
10 |
– |
– |
10 |
10 |
| Trade receivables |
2,639 |
– |
– |
– |
– |
2,639 |
2,639 |
| Unbilled revenues(Refer note 2.17)(3) |
489 |
– |
– |
– |
– |
489 |
489 |
| Prepayments and other assets (Refer to Note 2.4) |
544 |
– |
– |
– |
– |
544 |
531(2) |
| Derivative financial instruments |
– |
– |
23 |
– |
3 |
26 |
26 |
| Total |
7,346 |
– |
241 |
23 |
1,411 |
9,021 |
9,061 |
| Liabilities: |
|
|
|
|
|
|
|
| Trade payables |
362 |
– |
– |
– |
– |
362 |
362 |
| Lease liabilities |
728 |
– |
– |
– |
– |
728 |
728 |
| Derivative financial instruments |
– |
– |
8 |
– |
– |
8 |
8 |
| Financial liability under option arrangements (Refer to note 2.5) |
– |
– |
95 |
– |
– |
95 |
95 |
| Other liabilities including contingent consideration (Refer to note 2.5) |
1,351 |
– |
22 |
– |
– |
1,373 |
1,373 |
| Total |
2,441 |
– |
125 |
– |
– |
2,566 |
2,566 |
| (1) | | On account of fair value changes including interest accrued |
| (2) | | Excludes interest accrued on quoted debt securities carried at amortized cost of $13 million. |
| (3) | | Excludes unbilled revenue for contracts where the right to consideration is dependent
on completion of contractual milestones |
For trade receivables and trade payables and other assets and payables maturing
within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.
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, 2021
(Dollars in millions)
| Particulars |
As at September 30, 2021 |
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) |
544 |
544 |
– |
– |
| Investments in quoted debt securities (Refer to Note 2.2) |
1,492 |
1,230 |
262 |
– |
| Investments in unquoted equity and preference securities (Refer to Note 2.2) |
33 |
– |
– |
33 |
| Investments in unquoted compulsorily convertible debentures (Refer to Note 2.2) |
1 |
– |
– |
1 |
| Investments in unquoted investments others (Refer to Note 2.2) |
11 |
– |
– |
11 |
| Derivative financial instruments - gain on outstanding foreign exchange forward and option contracts |
16 |
– |
16 |
– |
| Liabilities |
|
|
|
|
| Derivative financial instruments - loss on outstanding foreign exchange forward and option contracts |
6 |
– |
6 |
– |
| Financial liability under option arrangements |
94 |
– |
– |
94 |
| Liability towards contingent consideration (Refer to note 2.5)* |
16 |
– |
– |
16 |
* Discount rate pertaining to contingent consideration ranges from 8%
to 14.5 %
During the six months ended September 30, 2021, quoted
debt securities of $136 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 $212 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, 2021
(Dollars in millions)
| Particulars |
As at March 31, 2021 |
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) |
205 |
205 |
– |
– |
| Investments in quoted debt securities (Refer to Note 2.2) |
1,755 |
1,556 |
199 |
– |
| Investments in unquoted equity and preference securities (Refer to Note 2.2) |
25 |
– |
– |
25 |
| Investments in unquoted investments others (Refer to Note 2.2) |
10 |
– |
– |
10 |
| Investments in unquoted compulsorily convertible debentures (Refer to Note 2.2) |
1 |
– |
– |
1 |
| Derivative financial instruments- gain on outstanding foreign exchange forward and option contracts |
26 |
– |
26 |
– |
| Liabilities |
|
|
|
|
| Derivative financial instruments- loss on outstanding foreign exchange forward and option contracts |
8 |
– |
8 |
– |
| Financial liability under option arrangements (Refer to Note 2.5) |
95 |
– |
– |
95 |
| Liability towards contingent consideration (Refer to Note 2.5)* |
22 |
– |
– |
22 |
* Discount rate pertaining to contingent consideration ranges from 8%
to 14.5%
During the year ended March 31, 2021 quoted debt securities
of $14 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 $161 million were transferred from Level 1 to Level 2 of fair value hierarchy, since these were valued based on market
observable inputs.
A one percentage point change in the unobservable inputs
used in fair valuation of Level 3 assets and liabilities does not have a significant impact in its value.
Majority of investments of the Group are fair valued
based on Level 1 or Level 2 inputs. These investments primarily include investment in liquid mutual fund units, fixed maturity plan securities,
certificates of deposit, commercial papers, quoted bonds issued by government and quasi-government organizations and non convertible debentures.
The Group invests after considering counterparty risks based on multiple criteria including Tier I capital, Capital Adequacy Ratio, Credit
Rating, Profitability, NPA levels and Deposit base of banks and financial institutions. These risks are monitored regularly as per its
risk management program.
2.4 Prepayments and other assets
Prepayments and other assets consist of the following:
(Dollars in millions)
| Particulars |
As at |
| |
September 30, 2021 |
March 31, 2021 |
| Current |
|
|
| Rental deposits |
8 |
4 |
| Security deposits |
1 |
1 |
| Loans to employees |
26 |
22 |
| Prepaid expenses(1) |
183 |
159 |
| Interest accrued and not due |
67 |
85 |
| Withholding taxes and others(1) |
281 |
286 |
| Advance payments to vendors for supply of goods(1) |
9 |
19 |
| Deposit with corporations* |
292 |
276 |
| Deferred contract cost(1)(#) |
57 |
9 |
| Net investment in sublease of right of use asset |
6 |
5 |
| Other non financial assets(1) |
3 |
– |
| Other financial assets |
53 |
46 |
| Total Current prepayment and other assets |
986 |
912 |
| Non-current |
|
|
| Loans to employees |
6 |
4 |
| Security deposits |
7 |
7 |
| Deposit with corporations * |
9 |
6 |
| Defined benefit plan assets(1) |
4 |
3 |
| Prepaid expenses(1) |
12 |
11 |
| Deferred contract cost(1)(#) |
121 |
20 |
| Withholding taxes and others(1) |
92 |
96 |
| Net investment in sublease of right of use asset |
45 |
48 |
| Rental Deposits |
25 |
30 |
| Other financial assets |
7 |
10 |
| Total Non- current prepayment and other assets |
328 |
235 |
| Total prepayment and other assets |
1,314 |
1,147 |
| Financial assets in prepayments and other assets |
552 |
544 |
Withholding taxes and others primarily consist of input
tax credits and Cenvat recoverable from Government of India.
| * | | Deposit with corporation represents amounts deposited to settle certain employee-related
obligations as and when they arise during the normal course of business. |
| # | | Includes technology assets taken over by the Company from a customer as a part of transformation
project which is not considered as distinct goods or services and the control related to the assets is not transferred to the Company
in accordance with IFRS 15 - Revenue from contract with customers. Accordingly, the same has been considered as a reduction to the total
contract value and accounted as Deferred contract cost. Further as at September 30, 2021 the Company has entered into a financing arrangement
with a third party for these assets for $99 million which has been considered as financial liability. This includes $90 million settled
directly by the third party to the customer on behalf of the Company and accordingly considered as non-cash transaction (Refer to note
2.5) |
2.5 Other liabilities
Other liabilities comprise the following:
(Dollars in millions)
| Particulars |
As at |
| |
September 30, 2021 |
March 31, 2021 |
| Current |
|
|
| Accrued compensation to employees |
542 |
550 |
| Accrued defined benefit plan liability(1) |
– |
1 |
| Accrued expenses |
842 |
612 |
| Withholding taxes and others (1) |
322 |
297 |
| Retention money |
2 |
2 |
| Liabilities of controlled trusts |
28 |
27 |
| Deferred income - government grants(1) |
2 |
– |
| Liability towards contingent consideration |
9 |
10 |
| Capital creditors |
32 |
51 |
| Other non financial liabilities(1) |
1 |
1 |
| Other financial liabilities# |
70 |
21 |
| Total Current other liabilities |
1,850 |
1,572 |
| Non-Current |
|
|
| Liability towards contingent consideration |
7 |
12 |
| Accrued compensation to employees |
1 |
– |
| Accrued expenses |
88 |
78 |
| Accrued defined benefit plan liability(1) |
42 |
44 |
| Deferred income - government grants(1) |
8 |
8 |
| Deferred income (1) |
2 |
2 |
| Financial liability under option arrangements |
94 |
95 |
| Withholding taxes and others(1) |
50 |
50 |
| Other financial liabilities# |
80 |
10 |
| Total Non-current other liabilities |
372 |
299 |
| Total other liabilities |
2,222 |
1,871 |
| Financial liabilities included in other liabilities |
1,795 |
1,468 |
| Financial liability towards contingent consideration on an undiscounted basis |
18 |
25 |
| (1) | Non financial liabilities |
| # | | Deferred contract cost in note 2.4 includes technology assets taken over by the Company from
a customer as a part of transformation project which is not considered as distinct goods or services and the control related to the assets
is not transferred to the Company in accordance with IFRS 15 - Revenue from contract with customers. Accordingly, the same has been considered
as a reduction to the total contract value and accounted as Deferred contract cost. Further as at September 30, 2021 the Company has
entered into a financing arrangement with a third party for these assets for $99 million which has been considered as financial liability.
This includes $90 million settled directly by the third party to the customer on behalf of the Company and accordingly considered as
non-cash transaction. |
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 and other contingencies
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.
Contingent liability is a possible obligation arising
from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events
not wholly within the control of the entity or a present obligation that arises from past events but is not recognised because it is not
probable that an outflow of resources embodying economic benefits will be required to settle the obligation or the amount of the obligation
cannot be measured with sufficient reliability.
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, 2021 |
March 31, 2021 |
| Provision for post sales client support and other provisions |
116 |
97 |
| |
116 |
97 |
Provision for post sales client support represents
costs 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 condensed consolidated statement of comprehensive income.
As at September 30, 2021 and March 31, 2021, claims
against the Group, not acknowledged as debts, (excluding demands from income tax authorities- Refer to Note 2.12) amounted to $83 million
(614 crore) and $82 million (599 crore), respectively.
Legal Proceedings
The Group is subject to legal proceedings and claims,
which have arisen in the ordinary course of business. The Group’s management reasonably expects based on currently available information
that these legal actions, when ultimately concluded and determined, will not have a material and adverse effect on the Group’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 |
Lower of useful life of the
asset or 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 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 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 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 three months ended September 30, 2021:
(Dollars in millions)
| Particulars |
Land |
Buildings |
Plant and machinery |
Computer equipment |
Furniture and fixtures |
Vehicles |
Total |
| Gross carrying value as at July 1, 2021 |
188 |
1,446 |
675 |
1,068 |
416 |
6 |
3,799 |
| Additions |
2 |
41 |
18 |
42 |
10 |
– |
113 |
| Deletions* |
– |
– |
– |
(55) |
(1) |
– |
(56) |
| Translation difference |
– |
1 |
– |
– |
– |
– |
1 |
| Gross carrying value as at September 30, 2021 |
190 |
1,488 |
693 |
1,055 |
425 |
6 |
3,857 |
| Accumulated depreciation as at July 1, 2021 |
– |
(509) |
(497) |
(786) |
(301) |
(5) |
(2,098) |
| Depreciation |
– |
(14) |
(13) |
(36) |
(12) |
– |
(75) |
| Accumulated depreciation on deletions* |
– |
– |
– |
55 |
1 |
– |
56 |
| Translation difference |
– |
– |
– |
– |
– |
(2) |
(2) |
| Accumulated depreciation as at September 30, 2021 |
– |
(523) |
(510) |
(767) |
(312) |
(5) |
(2,117) |
| Capital work-in progress as at September 30, 2021 |
|
|
|
|
|
|
69 |
| Carrying value as at September 30, 2021 |
190 |
965 |
183 |
288 |
113 |
1 |
1,809 |
| Capital work-in progress as at July 1, 2021 |
|
|
|
|
|
|
182 |
| Carrying value as at July 1, 2021 |
188 |
937 |
178 |
282 |
115 |
1 |
1,883 |
Following are the changes in the carrying value of property, plant and equipment
for three months ended September 30, 2020:
(Dollars in millions)
| Particulars |
Land |
Buildings |
Plant and machinery |
Computer equipment |
Furniture and fixtures |
Vehicles |
Total |
| Gross carrying value as at July 1, 2020 |
183 |
1,332 |
626 |
930 |
384 |
6 |
3,461 |
| Additions |
– |
2 |
8 |
42 |
8 |
– |
60 |
| Deletions |
– |
– |
(1) |
(5) |
(1) |
– |
(7) |
| Translation difference |
5 |
33 |
15 |
22 |
11 |
– |
86 |
| Gross carrying value as at September 30, 2020 |
188 |
1,367 |
648 |
989 |
402 |
6 |
3,600 |
| Accumulated depreciation as at July 1, 2020 |
– |
(448) |
(434) |
(674) |
(254) |
(4) |
(1,814) |
| Depreciation |
– |
(13) |
(16) |
(36) |
(13) |
– |
(78) |
| Accumulated depreciation on deletions |
– |
– |
1 |
5 |
1 |
– |
7 |
| Translation difference |
– |
(11) |
(10) |
(15) |
(8) |
– |
(44) |
| Accumulated depreciation as at September 30, 2020 |
– |
(472) |
(459) |
(720) |
(274) |
(4) |
(1,929) |
| Capital work-in progress as at September 30, 2020 |
|
|
|
|
|
|
198 |
| Carrying value as at September 30, 2020 |
188 |
895 |
189 |
269 |
128 |
2 |
1,869 |
| Capital work-in progress as at July 1, 2020 |
|
|
|
|
|
|
178 |
| Carrying value as at July 1, 2020 |
183 |
884 |
192 |
256 |
130 |
2 |
1,825 |
Following are the changes in the carrying value of property, plant and equipment
for six months ended September 30, 2021:
(Dollars in millions)
| Particulars |
Land |
Buildings |
Plant and machinery |
Computer equipment |
Furniture and fixtures |
Vehicles |
Total |
| Gross carrying value as at April 1, 2021 |
191 |
1,445 |
679 |
1,045 |
416 |
6 |
3,782 |
| Additions |
2 |
62 |
25 |
87 |
16 |
- |
192 |
| Additions- Business Combinations (Refer Note 2.10) |
- |
- |
- |
- |
- |
- |
- |
| Deletions* |
- |
- |
(1) |
(62) |
(2) |
- |
(65) |
| Translation difference |
(3) |
(19) |
(10) |
(15) |
(5) |
- |
(52) |
| Gross carrying value as at September 30, 2021 |
190 |
1,488 |
693 |
1,055 |
425 |
6 |
3,857 |
| Accumulated depreciation as at April 1, 2021 |
- |
(503) |
(492) |
(771) |
(294) |
(4) |
(2,064) |
| Depreciation |
- |
(28) |
(27) |
(69) |
(24) |
- |
(148) |
| Accumulated depreciation on deletions* |
- |
- |
1 |
62 |
2 |
- |
65 |
| Translation difference |
- |
8 |
8 |
11 |
4 |
(1) |
30 |
| Accumulated depreciation as at September 30, 2021 |
- |
(523) |
(510) |
(767) |
(312) |
(5) |
(2,117) |
| Capital work-in progress as at September 30, 2021 |
|
|
|
|
|
|
69 |
| Carrying value as at September 30, 2021 |
190 |
965 |
183 |
288 |
113 |
1 |
1,809 |
| Capital work-in progress as at April 1, 2021 |
|
|
|
|
|
|
145 |
| Carrying value as at April 1, 2021 |
191 |
942 |
187 |
274 |
122 |
2 |
1,863 |
| * | | During each of the three months and six months ended September 30, 2021, certain assets which
were old and not in use having gross book value of $35 million (net book value: Nil) were retired. |
Following are the changes in the carrying value of property, plant
and equipment for six months ended September 30, 2020 :
(Dollars in millions)
| Particulars |
Land |
Buildings |
Plant and machinery |
Computer equipment |
Furniture and fixtures |
Vehicles |
Total |
| Gross carrying value as at April 1, 2020 |
174 |
1,324 |
621 |
882 |
381 |
6 |
3,388 |
| Additions |
9 |
7 |
12 |
88 |
11 |
– |
127 |
| Deletions |
– |
– |
(2) |
(6) |
(2) |
– |
(10) |
| Translation difference |
5 |
36 |
17 |
25 |
12 |
– |
95 |
| Gross carrying value as at September 30, 2020 |
188 |
1,367 |
648 |
989 |
402 |
6 |
3,600 |
| Accumulated depreciation as at April 1, 2020 |
– |
(434) |
(418) |
(646) |
(243) |
(4) |
(1,745) |
| Depreciation |
– |
(26) |
(32) |
(63) |
(24) |
– |
(145) |
| Accumulated depreciation on deletions |
– |
– |
2 |
6 |
2 |
– |
10 |
| Translation difference |
– |
(12) |
(11) |
(17) |
(9) |
– |
(49) |
| Accumulated depreciation as at September 30, 2020 |
– |
(472) |
(459) |
(720) |
(274) |
(4) |
(1,929) |
| Capital work-in progress as at September 30, 2020 |
|
|
|
|
|
|
198 |
| Carrying value as at September 30, 2020 |
188 |
895 |
189 |
269 |
128 |
2 |
1,869 |
| Capital work-in progress as at April 1, 2020 |
|
|
|
|
|
|
167 |
| Carrying value as at April 1, 2020 |
174 |
890 |
203 |
236 |
138 |
2 |
1,810 |
The aggregate depreciation expense is included in cost of sales in the consolidated
statement of comprehensive income.
The contractual commitments for capital expenditure primarily comprise of
commitments for infrastructure facilities and computer equipments aggregating to $133 million and $100 million as at September 30, 2021
and March 31, 2021, 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 include 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.
Following are the changes in the carrying value of right of use assets for
the three months ended September 30, 2021
(Dollars in millions)
| Particulars |
Category of ROU asset |
| |
Land |
Buildings |
Vehicle |
Computer |
Total |
| Balance as of July 1, 2021 |
85 |
499 |
3 |
26 |
613 |
| Additions* |
– |
28 |
– |
7 |
35 |
| Deletions |
– |
– |
– |
(2) |
(2) |
| Depreciation |
|
(22) |
(1) |
(2) |
(25) |
| Translation difference |
– |
(1) |
– |
– |
(1) |
| Balance as of September 30, 2021 |
85 |
504 |
2 |
29 |
620 |
* Net of adjustments on account of modifications
Following are the changes in the carrying value of right of use assets for
the three months ended September 30, 2020
(Dollars in millions)
| Particulars |
Category of ROU asset |
| |
Land |
Buildings |
Vehicle |
Computer |
Total |
| Balance as of July 1, 2020 |
83 |
435 |
3 |
8 |
529 |
| Additions |
1 |
51 |
– |
1 |
53 |
| Deletions |
– |
(4) |
– |
– |
(4) |
| Depreciation |
– |
(20) |
– |
(1) |
(21) |
| Translation difference |
2 |
10 |
– |
– |
12 |
| Balance as of September 30, 2020 |
86 |
472 |
3 |
8 |
569 |
Following are the changes in the carrying value of right of use assets for
the six months ended September 30, 2021
(Dollars in millions)
| Particulars |
Category of ROU asset |
| |
Land |
Buildings |
Vehicle |
Computer |
Total |
| Balance as of April 1, 2021 |
86 |
545 |
3 |
22 |
656 |
| Additions* |
– |
7 |
– |
13 |
20 |
| Deletions |
– |
– |
– |
(2) |
(2) |
| Depreciation |
– |
(43) |
(1) |
(4) |
(48) |
| Translation difference |
(1) |
(5) |
– |
– |
(6) |
| Balance as of September 30, 2021 |
85 |
504 |
2 |
29 |
620 |
* Net of adjustments on account of modifications
Following are the changes in the carrying value of right of use assets for
the six months ended September 30, 2020
(Dollars in millions)
| Particulars |
Category of ROU asset |
| |
Land |
Buildings |
Vehicle |
Computer |
Total |
| Balance as of April 1, 2020 |
83 |
461 |
2 |
5 |
551 |
| Additions* |
1 |
49 |
1 |
4 |
55 |
| Deletions |
– |
(12) |
– |
– |
(12) |
| Depreciation |
– |
(40) |
– |
(1) |
(41) |
| Translation difference |
2 |
14 |
– |
– |
16 |
| Balance as of September 30, 2020 |
86 |
472 |
3 |
8 |
569 |
The aggregate depreciation expense on ROU assets is
included in cost of sales in the condensed consolidated statement of comprehensive income.
The following is the break-up of current and non-current lease liabilities
as of September 30, 2021 and March 31, 2021
(Dollars in millions)
| Particulars |
As at |
| |
September 30, 2021 |
March 31, 2021 |
| Current lease liabilities |
106 |
101 |
| Non-current lease liabilities |
587 |
627 |
| Total |
693 |
728 |
2.9 Goodwill
and intangible assets
2.9.1 Goodwill
Accounting Policy
Goodwill represents purchase consideration 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 purchase consideration, the fair
value of net assets acquired is reassessed and the bargain purchase gain is recognized immediately in the 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 the recoverable amount of a cash generating unit (CGU) is less than its carrying amount. For
the impairment test, goodwill is allocated to the CGU or groups of CGU’s which benefit from the synergies of the acquisition. 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, 2021 |
March 31, 2021 |
| Carrying value at the beginning |
832 |
699 |
| Goodwill on acquisition |
– |
102 |
| Translation differences |
(7) |
31 |
| Carrying value at the end |
825 |
832 |
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.
2.9.2 Intangibles
Accounting policy
Intangible assets are stated at cost less accumulated
amortization and impairment. Intangible assets are amortized over their respective individual estimated useful lives on a straight-line
basis, from the date that they are available for use. The estimated useful life of an identifiable intangible asset is based on a number
of factors including the effects of obsolescence, demand, competition, and other economic factors (such as the stability of the industry
and known technological advances). and the level of maintenance expenditures required to obtain the expected future cash flows from the
asset. Amortization methods and useful lives are reviewed periodically including at each financial year end.
Research costs are expensed as incurred. Software product
development costs are expensed as incurred unless technical and commercial feasibility of the project is demonstrated, future economic
benefits are probable, the Company has an intention and ability to complete and use or sell the software and the costs can be measured
reliably. The costs which can be capitalized include the cost of material, direct labour, overhead costs that are directly attributable
to preparing the asset for its intended use.
Impairment
Intangible assets are evaluated for recoverability
whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment
testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual
asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the
recoverable amount is determined for the CGU to which the asset belongs.
If such assets are considered to be impaired, the impairment
to be recognized in the 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 the 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) had no impairment loss been recognized for the asset in prior years
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 purchase price in 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 purchase price 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. Contingent consideration is remeasured at fair value at each reporting date and changes in the
fair value of the contingent consideration are recognized in the Consolidated Statement of Comprehensive Income.
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 assets acquired and
liabilities assumed.
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.
2.11 Employees'
Stock Option Plans (ESOP)
Accounting Policy
The Group recognizes compensation expense relating
to share-based payments in net profit based on estimated fair-values of the awards on the grant date. The estimated fair value of awards
is recognized as an expense in net profit in the consolidated statement of comprehensive 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 Restricted Stock Units (RSUs) granted under the 2019 plan shall vest based on the achievement of defined
annual performance parameters as determined by the administrator (Nomination and Remuneration Committee). The performance parameters will
be based on a combination of relative Total Shareholder Return (TSR) against selected industry peers and certain broader market domestic
and global indices 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 was 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 equity settled and cash settled RSUs and stock
options would vest generally over a period of 4 years and shall be exercisable within the period as approved by the Nomination and Remuneration
Committee (NARC). 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.
Controlled trust holds 14,840,585 and 15,514,732 shares
as at September 30, 2021 and March 31, 2021, 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, 2021 and March 31, 2021.
The following is the summary of grants during three months and
six months ended September 30, 2021 and September 30, 2020
| Particulars |
2019 Plan |
2015 Plan |
| |
Six months ended September 30, |
Six months ended September 30, |
| |
2021 |
2020 |
2021 |
2020 |
| Equity settled RSU |
|
|
|
|
| KMPs |
73,962 |
207,808 |
101,697 |
204,097 |
| Employees other than KMP |
– |
– |
– |
24,600 |
| Total grants |
73,962 |
207,808 |
101,697 |
228,697 |
Note: No grants were made during the three months ended September
30, 2021 and September 30, 2020
Notes on grants to KMP:
CEO & MD
Under the 2015 plan:
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, 2021, since the service commencement date precedes the grant date, the company has recorded employment stock compensation
expense in accordance with IFRS 2, Share based payments.
The Board, on April 14, 2021, based on the recommendations
of the nomination and remuneration committee, in accordance with the terms of his employment agreement, approved the grant of performance-based
RSUs of fair value of 13 crore for fiscal 2022 under the 2015 Plan. These RSUs will vest in line with the employment agreement
based on achievement of certain performance targets. Accordingly, 96,150 performance based RSU’s were granted effective May 2, 2021.
Under the 2019 plan:
The Board, on April 14, 2021, based on the recommendations
of the Nomination and Remuneration Committee, approved performance-based grant of RSUs amounting to 10 crore for fiscal 2022 under
the 2019 Plan. These RSUs will vest in line with the employment agreement based on achievement of certain performance targets. Accordingly,
73,962 performance based RSU’s were granted effective May 2, 2021.
Other KMP
Under the 2015 plan:
On April 14, 2021, based on the recommendations of
the Nomination and Remuneration Committee, in accordance with employment agreement, the Board, approved performance-based grant of 5,547
RSUs to other KMP under the 2015 Plan. The grants were made effective May 2, 2021. The performance based RSUs will vest over three years
based on certain performance targets.
Break-up of employee stock compensation expense:
-
(Dollars in millions)
| Particulars |
Three months ended September 30, 2021 |
Three months ended September 30, 2020 |
Six months ended September 30, 2021 |
Six months ended September 30, 2020 |
| Granted to: |
|
|
|
|
| KMP |
3 |
3 |
5 |
5 |
| Employees other than KMP |
10 |
9 |
23 |
19 |
| Total (1) |
13 |
12 |
28 |
24 |
| (1) Cash
settled stock compensation expense included in the above |
1 |
3 |
2 |
6 |
The fair value of the awards are estimated using the
Black-Scholes Model for time and non-market performance based options and Monte Carlo simulation model is used for TSR based options.
The inputs to the model include the share price at
date of grant, exercise price, expected volatility, expected dividends, expected term and the risk free rate of interest. Expected volatility
during the expected term of the options 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 options. Expected volatility of the comparative company have been
modelled based on historical movements in the market prices of their publicly traded equity shares during a period equivalent to the expected
term of the options. Correlation coefficient is calculated between each peer entity and the indices as a whole or between each entity
in the peer group.
The fair value of each equity settled award is estimated on the date of
grant using the following assumptions:
| Particulars |
For
options granted in |
| |
Fiscal 2022-
Equity Shares-RSU |
Fiscal 2022-
ADS-RSU |
Fiscal 2021-
Equity Shares-RSU |
Fiscal 2021-
ADS-RSU |
| Weighted average share price () / ($ ADS) |
1,352 |
18.2 |
1,253 |
18.46 |
| Exercise price ()/ ($ ADS) |
5.00 |
0.07 |
5.00 |
0.07 |
| Expected volatility (%) |
29-35 |
30-37 |
30-35 |
30-36 |
| Expected life of the option (years) |
1-4 |
1-4 |
1-4 |
1-4 |
| Expected dividends (%) |
2-3 |
2-3 |
2-3 |
2-3 |
| Risk-free interest rate (%) |
4-5 |
0.1-0.6 |
4-5 |
0.1-0.3 |
| Weighted average fair value as on grant date () / ($ ADS) |
1,189 |
16.8 |
1,124 |
16.19 |
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.
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 equity or 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 equity.
Income tax expense in the consolidated statement of
comprehensive income comprises:
(Dollars in millions)
| Particulars |
Three months ended September 30, 2021 |
Three months ended September 30, 2020 |
Six months ended September 30, 2021 |
Six months ended September 30, 2020 |
| Current taxes |
|
|
|
|
| Domestic taxes |
190 |
184 |
385 |
332 |
| Foreign taxes |
78 |
54 |
145 |
80 |
| |
268 |
238 |
530 |
412 |
| Deferred taxes |
|
|
|
|
| Domestic taxes |
14 |
23 |
30 |
48 |
| Foreign taxes |
(10) |
(6) |
(20) |
(4) |
| |
4 |
17 |
10 |
44 |
| Income tax expense |
272 |
255 |
540 |
456 |
Income tax expense for the three months ended September
30, 2021 and September 30, 2020 includes reversal (net of provisions) of $ 2 million and $ 14 million, respectively. Income tax
expense for the six months ended September 30, 2021 and September 30, 2020 includes reversal (net of provisions) of $ 4 million and $31
million respectively. These reversals pertain to prior periods primarily on account of adjudication of certain disputed matters in favor
of the Company and upon filing of tax return 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, 2021 |
Three months ended September 30, 2020 |
Six months ended September 30, 2021 |
Six months ended September 30, 2020 |
| Profit before income taxes |
1,006 |
910 |
1,979 |
1,675 |
| Enacted tax rates in India |
34.94% |
34.94% |
34.94% |
34.94% |
| Computed expected tax expense |
352 |
317 |
692 |
584 |
| Tax effect due to non-taxable income for Indian tax purposes |
(113) |
(84) |
(203) |
(156) |
| Overseas taxes |
32 |
24 |
59 |
46 |
| Tax provision (reversals) |
(2) |
(14) |
(4) |
(31) |
| Effect of differential tax rates |
(6) |
(6) |
(10) |
(10) |
| Effect of exempt non operating income |
(1) |
(1) |
(4) |
(2) |
| Effect of unrecognized deferred tax assets |
- |
2 |
- |
4 |
| Effect of non-deductible expenses |
4 |
4 |
9 |
9 |
| Impact of change in tax rate |
(6) |
- |
(6) |
- |
| Others |
12 |
13 |
7 |
12 |
| Income tax expense |
272 |
255 |
540 |
456 |
The applicable Indian corporate statutory tax rate
for the three months ended and six months ended September 30, 2021 and September 30, 2020 is 34.94% each.
Deferred income tax for the three months ended and
six months ended September 30, 2021 and September 30, 2020 substantially relates to origination and reversal of temporary differences.
The Company’s Advanced Pricing Arrangement (APA)
with the Internal Revenue Service (IRS) for US branch income tax expired in March 2021. The Company has applied for renewal of APA and
currently the US taxable income is based on the Company’s best estimate determined based on the expected value method.
As at September 30, 2021, claims against the Group
not acknowledged as debts from the Income tax authorities amounted to $508 million (3,771 crore).
As at March 31, 2021, claims against the Group not
acknowledged as debts from the Income tax authorities amounted to $473 million (3,462 crore).
Amount paid to statutory authorities against the tax
claims amounted to $684 million (5,074 crore) and $834 million (6,095 crore) as at September 30, 2021 and March 31, 2021
respectively.
The claims against the group primarily represent demands
arising on completion of assessment proceedings under the Income Tax Act, 1961. These claims are on account of multiple issues of disallowances
such as disallowance of profits earned from STP Units and SEZ Units, disallowance of deductions in respect of employment of new employees
under section 80JJAA, disallowance of expenditure towards software being held as capital in nature, payments made to Associated Enterprises
held as liable for withholding of taxes.
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 Basic and diluted shares used in computing
earnings per equity share
Accounting Policy
Basic earnings per equity share is computed by dividing
the net profit attributable to the equity holders of the Group 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 Group 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 2.20 "Related party transactions"
in the Company’s 2021 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 six months ended September 30, 2021, the following are the changes
in the subsidiaries:
| - | Simplus North America Inc., a wholly-owned subsidiary
of Outbox Systems Inc., has been liquidated effective April 27, 2021. |
| - | Simplus Europe, Ltd., a wholly-owned subsidiary
of Outbox Systems Inc., has been liquidated effective July 20, 2021. |
| - | Stater GmbH, a wholly-owned subsidiary of Stater
N.V., was incorporated on August 4, 2021. |
| - | Infosys Green Forum, a wholly-owned subsidiary
of Infosys Limited, was incorporated on August 31, 2021. |
| - | Infosys Consulting (Shanghai) Co., Ltd., a wholly-owned
subsidiary of Infosys Consulting Holding AG, has been liquidated effective September 01, 2021. |
| - | Sqware Peg Digital Pty Ltd, a wholly-owned subsidiary
of Simplus Australia Pty Ltd, has been liquidated effective September 02, 2021. |
| - | Beringer Commerce Inc. renamed as Blue Acorn iCi
Inc. |
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, 2021 |
Three months ended September 30, 2020 |
Six months ended September 30, 2021 |
Six months ended September 30, 2020 |
| Salaries and other employee benefits to whole-time directors and executive officers(1)(2) |
5 |
5 |
10 |
9 |
| Commission and other benefits to non-executive/ independent directors |
– |
– |
1 |
– |
| Total |
5 |
5 |
11 |
9 |
| (1) | Total employee stock compensation expense for
the three months ended September 30, 2021 and September 30, 2020 includes a charge of $ 3 million and $3 million respectively, towards
key managerial personnel. For the six months ended September 30, 2021 and September 30, 2020, includes a charge of $5 million and $5 million
respectively, towards key managerial personnel. (Refer note 2.11) |
| (2) | Does not include post-employment benefit based
on actuarial valuation as this is done for the Company as a whole. |
2.15 Segment
Reporting
IFRS 8 Operating Segments 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 (CODM) evaluates the Group's performance and allocates resources
based on an analysis of various performance indicators by business segments. Accordingly, information has been presented along business
segments. The accounting principles used in the preparation of the financial statements are consistently applied to record revenue and
expenditure in individual segments, and are as set out in the accounting policies.
Business segments of the Group are primarily enterprises
in Financial Services and Insurance, enterprises in Manufacturing, enterprises in Retail, Consumer Packaged Goods and Logistics, enterprises
in the Energy, Utilities, Resources and Services, enterprises in Communication, Telecom OEM and Media, enterprises in Hi-Tech, enterprises
in Life Sciences and Healthcare and all other segments. The Financial services reportable segments has been aggregated to include the
Financial Services operating segment and Finacle operating segment because of the similarity of the economic characteristics. All other
segments represent the operating segments of businesses in India, Japan, China, Infosys Public Services & other enterprises in Public
Services.
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 and amortization, 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, 2021 and September
30, 2020
(Dollars in millions)
| Particulars |
Financial Services(1) |
Retail(2) |
Communication(3) |
Energy, Utilities, resources and Services |
Manufacturing |
Hi Tech |
Life Sciences(4) |
All Other Segments (5) |
Total |
| Revenues |
1,292 |
585 |
495 |
473 |
435 |
339 |
284 |
95 |
3,998 |
| |
1,061 |
492 |
417 |
408 |
302 |
303 |
225 |
104 |
3,312 |
| Identifiable operating expenses |
722 |
284 |
299 |
252 |
255 |
204 |
162 |
77 |
2,255 |
| |
546 |
234 |
246 |
209 |
155 |
170 |
112 |
69 |
1,741 |
| Allocated expenses |
213 |
98 |
86 |
83 |
82 |
52 |
43 |
29 |
686 |
| |
196 |
83 |
81 |
88 |
58 |
43 |
38 |
29 |
616 |
| Segment operating income |
357 |
203 |
110 |
138 |
98 |
83 |
79 |
(11) |
1,057 |
| |
319 |
175 |
90 |
111 |
89 |
90 |
75 |
6 |
955 |
| Unallocable expenses |
|
|
|
|
|
|
|
|
116 |
| |
|
|
|
|
|
|
|
|
115 |
| Operating profit |
|
|
|
|
|
|
|
|
941 |
| |
|
|
|
|
|
|
|
|
840 |
| Other income, net (Refer Note 2.18) |
|
|
|
|
|
|
|
|
71 |
| |
|
|
|
|
|
|
|
|
76 |
| Finance cost |
|
|
|
|
|
|
|
|
6 |
| |
|
|
|
|
|
|
|
|
6 |
| Profit before Income taxes |
|
|
|
|
|
|
|
|
1,006 |
| |
|
|
|
|
|
|
|
|
910 |
| Income tax expense |
|
|
|
|
|
|
|
|
272 |
| |
|
|
|
|
|
|
|
|
255 |
| Net profit |
|
|
|
|
|
|
|
|
734 |
| |
|
|
|
|
|
|
|
|
655 |
| Depreciation and amortization |
|
|
|
|
|
|
|
|
116 |
| |
|
|
|
|
|
|
|
|
115 |
| Non-cash expenses other than depreciation and amortization |
|
|
|
|
|
|
|
|
– |
| |
|
|
|
|
|
|
|
|
1 |
| (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 |
Six months ended September 30, 2021 and September 30, 2020
(Dollars in millions)
| Particulars |
Financial Services (1) |
Retail(2) |
Communication (3) |
Energy, Utilities, resources and Services |
Manufacturing |
Hi Tech |
Life Sciences(4) |
All Other Segments (5) |
Total |
| Revenues |
2,542 |
1,150 |
957 |
930 |
801 |
653 |
540 |
207 |
7,780 |
| |
2,044 |
940 |
834 |
807 |
600 |
575 |
433 |
200 |
6,433 |
| Identifiable operating expenses |
1,442 |
555 |
581 |
490 |
463 |
391 |
300 |
142 |
4,364 |
| |
1,061 |
444 |
497 |
414 |
325 |
319 |
217 |
130 |
3,407 |
| Allocated expenses |
423 |
192 |
170 |
164 |
155 |
101 |
84 |
62 |
1,351 |
| |
401 |
182 |
166 |
170 |
120 |
87 |
77 |
61 |
1,264 |
| Segment operating income |
677 |
403 |
206 |
276 |
183 |
161 |
156 |
3 |
2,065 |
| |
582 |
314 |
171 |
223 |
155 |
169 |
139 |
9 |
1,762 |
| Unallocable expenses |
|
|
|
|
|
|
|
|
228 |
| |
|
|
|
|
|
|
|
|
215 |
| Operating profit |
|
|
|
|
|
|
|
|
1,837 |
| |
|
|
|
|
|
|
|
|
1,547 |
| Other income, net (Refer Note 2.18) |
|
|
|
|
|
|
|
|
155 |
| |
|
|
|
|
|
|
|
|
140 |
| Finance cost |
|
|
|
|
|
|
|
|
13 |
| |
|
|
|
|
|
|
|
|
12 |
| Profit before Income taxes |
|
|
|
|
|
|
|
|
1,979 |
| |
|
|
|
|
|
|
|
|
1,675 |
| Income tax expense |
|
|
|
|
|
|
|
|
540 |
| |
|
|
|
|
|
|
|
|
456 |
| Net profit |
|
|
|
|
|
|
|
|
1,439 |
| |
|
|
|
|
|
|
|
|
1,219 |
| Depreciation and amortization |
|
|
|
|
|
|
|
|
228 |
| |
|
|
|
|
|
|
|
|
215 |
| Non-cash expenses other than depreciation and amortization |
|
|
|
|
|
|
|
|
– |
| |
|
|
|
|
|
|
|
|
2 |
| (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 |
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, 2021 and September 30, 2020, respectively.
2.16 Revenue
from Operations
Accounting Policy:
The Group derives revenues primarily from IT services
comprising software development and related services, cloud and infrastructure services, maintenance, consulting and package implementation,
licensing of software products and platforms across the Group’s core and digital offerings (together called as “software related
services”) and business process management services. Contracts with customers are either on a time-and-material, unit of work, fixed-price
or on a fixed-timeframe basis.
Revenues from customer contracts are considered for
recognition and measurement when the contract has been approved by the parties, in writing, to the contract, the parties to contract are
committed to perform their respective obligations under the contract, and the contract is legally enforceable. Revenue is recognized upon
transfer of control of promised products or services (“performance obligations”) to customers in an amount that reflects the
consideration the Group has received or expects to receive in exchange for these products or services (“transaction price”).
When there is uncertainty as to collectability, revenue recognition is postponed until such uncertainty is resolved.
The Group assesses the services promised in a contract
and identifies distinct performance obligations in the contract. The Group allocates the transaction price to each distinct performance
obligation based on the 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 the absence of such evidence, the primary method used to estimate standalone selling
price is the expected cost plus a margin, under which the Group estimates the cost of satisfying the performance obligation and then adds
an appropriate margin based on similar services.
The Group’s contracts may include variable consideration
including rebates, volume discounts and penalties. The Group includes variable consideration as part of transaction price when there is
a basis to reasonably estimate the amount of the variable consideration and when it is probable that a significant reversal of cumulative
revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.
Revenue on time-and-material and unit of work based
contracts, are recognized as the related services are performed. Fixed price maintenance revenue is recognized ratably either on a straight-line
basis when services are performed through an indefinite number of repetitive acts over a specified period or ratably using a percentage
of completion method when the pattern of benefits from the services rendered to the customer and Group’s costs to fulfil the contract
is not even through the period of contract because the services are generally discrete in nature and not repetitive. Revenue from other
fixed-price, fixed-timeframe contracts, where the performance obligations are satisfied over time is recognized using the percentage-of-completion
method. Efforts or costs expended are used to determine progress towards completion as there is a direct relationship between input and
productivity. Progress towards completion is measured as the ratio of costs or efforts incurred to date (representing work performed)
to the estimated total costs or efforts. Estimates of transaction price and total costs or efforts are continuously monitored over the
term of the contracts and are recognized in net profit in the period when these estimates change or when the estimates are revised. Revenues
and the estimated total costs or efforts are subject to revision as the contract progresses. Provisions for estimated losses, if any,
on incomplete contracts are recorded in the period in which such losses become probable based on the estimated efforts or costs to complete
the contract.
The billing schedules agreed with customers include
periodic performance based billing and / or milestone based progress billings. Revenues in excess of billing are classified as unbilled
revenue while billing 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, 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 measures 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.
Certain cloud and infrastructure services contracts
include multiple elements which may be subject to other specific accounting guidance, such as leasing guidance. These contracts are accounted
in accordance with such specific accounting guidance. In such arrangements where the Group is able to determine that hardware and services
are distinct performance obligations, it allocates the consideration to these performance obligations on a relative standalone selling
price basis. In the absence of standalone selling price, the Group uses the expected cost-plus margin approach in estimating the standalone
selling price. When such arrangements are considered as a single performance obligation, revenue is recognized over the period and measure
of progress is determined based on promise in the contract.
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).When implementation services are provided in conjunction
with the licensing arrangement and the license and implementation have been identified as two distinct 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 Group uses the expected cost plus margin approach in
estimating the standalone selling price. 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
on a straight line basis over the period in which the services are rendered.
Contracts with customers includes subcontractor services
or third-party vendor equipment or software in certain integrated services arrangements. In these types of arrangements, revenue from
sales of third-party vendor products or services is recorded net of costs when the Group is acting as an agent between the customer and
the vendor, and gross when the Group is the principal for the transaction. In doing so, the group first evaluates whether it controls
the good or service before it is transferred to the customer. The Group considers whether it has the primary obligation to fulfil the
contract, inventory risk, pricing discretion and other factors to determine whether it controls the goods or service and therefore is
acting as a principal or an agent.
The incremental costs of obtaining a contract (i.e.,
costs that would not have been incurred if the contract had not been obtained) are recognized as an asset if the Group expects to recover
them.
Certain eligible, nonrecurring costs (e.g. set-up or
transition or transformation costs) that do not represent a separate performance obligation are recognized as an asset when such costs
(a) relate directly to the contract; (b) generate or enhance resources of the Company that will be used in satisfying the performance
obligation in the future; and (c) are expected to be recovered.
Capitalized contract costs relating to upfront payments
to customers are amortized to revenue and other capitalized costs are amortized to cost of sales over the respective contract life on
a systematic basis consistent with the transfer of goods or services to customer to which the asset relates. Capitalized costs are monitored
regularly for impairment. Impairment losses are recorded when present value of projected remaining operating cash flows is not sufficient
to recover the carrying amount of the capitalized costs
The Group presents revenues net of indirect taxes in
its condensed consolidated statement of comprehensive income.
Revenues for the three months ended and six months
ended September 30, 2021 and September 30, 2020 is as follows
(Dollars in millions)
| Particulars |
Three months ended September 30, 2021 |
Three months ended September 30, 2020 |
Six months ended September 30, 2021 |
Six months ended September 30, 2020 |
| Revenue from software services |
3,756 |
3,063 |
7,261 |
5,967 |
| Revenue from products and platforms |
242 |
249 |
519 |
466 |
| Total revenue from operations |
3,998 |
3,312 |
7,780 |
6,433 |
The Group has evaluated the impact of the COVID–19 pandemic on (i)
the possibility of constraints in our ability to render services which may require revision of estimations of costs to complete the contract
because of additional efforts; (ii) onerous obligations; (iii) penalties relating to breaches of service level agreements, and (iv) termination
or deferment of contracts by customers. The Group has concluded that the impact of the COVID–19 pandemic is not significant based
on these estimates. Due to the nature of the COVID-19 pandemic, the Group will continue to monitor developments to identify significant
uncertainties relating to revenue in future periods.
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 revenues and cash flows are affected by industry, market and other economic
factors.
Three months ended September 30, 2021 and September 30, 2020
(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 |
802 |
397 |
271 |
244 |
212 |
316 |
203 |
31 |
2,476 |
| |
613 |
324 |
218 |
230 |
158 |
286 |
154 |
27 |
2,010 |
| Europe |
227 |
155 |
117 |
188 |
213 |
7 |
75 |
7 |
989 |
| |
219 |
139 |
94 |
141 |
135 |
6 |
66 |
7 |
807 |
| India |
63 |
3 |
14 |
5 |
3 |
14 |
1 |
1 |
104 |
| |
53 |
2 |
10 |
1 |
2 |
9 |
1 |
22 |
100 |
| Rest of the world |
200 |
30 |
93 |
36 |
7 |
2 |
5 |
56 |
429 |
| |
176 |
27 |
95 |
36 |
7 |
2 |
4 |
48 |
395 |
| Total |
1,292 |
585 |
495 |
473 |
435 |
339 |
284 |
95 |
3,998 |
| |
1,061 |
492 |
417 |
408 |
302 |
303 |
225 |
104 |
3,312 |
| Revenue by offerings |
|
|
|
|
|
|
|
|
|
| Digital |
673 |
357 |
300 |
274 |
250 |
196 |
161 |
32 |
2,243 |
| |
501 |
254 |
204 |
194 |
135 |
150 |
93 |
37 |
1,568 |
| Core |
619 |
228 |
195 |
199 |
185 |
143 |
123 |
63 |
1,755 |
| |
560 |
238 |
213 |
214 |
167 |
153 |
132 |
67 |
1,744 |
| Total |
1,292 |
585 |
495 |
473 |
435 |
339 |
284 |
95 |
3,998 |
| |
1,061 |
492 |
417 |
408 |
302 |
303 |
225 |
104 |
3,312 |
| (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 |
| | | |
| * | | Geographical revenues is based on the domicile
of customer |
Six months ended September 30, 2021 and September 30, 2020
(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 |
1,579 |
774 |
512 |
478 |
407 |
608 |
389 |
62 |
4,809 |
| |
1,190 |
612 |
457 |
456 |
330 |
543 |
292 |
49 |
3,929 |
| Europe |
450 |
311 |
229 |
369 |
374 |
15 |
141 |
14 |
1,903 |
| |
420 |
273 |
178 |
277 |
251 |
9 |
131 |
14 |
1,553 |
| India |
118 |
7 |
29 |
9 |
4 |
26 |
2 |
20 |
215 |
| |
102 |
3 |
17 |
1 |
4 |
19 |
2 |
43 |
191 |
| Rest of the world |
395 |
58 |
187 |
74 |
16 |
4 |
8 |
111 |
853 |
| |
332 |
52 |
182 |
73 |
15 |
4 |
8 |
94 |
760 |
| Total |
2,542 |
1,150 |
957 |
930 |
801 |
653 |
540 |
207 |
7,780 |
| |
2,044 |
940 |
834 |
807 |
600 |
575 |
433 |
200 |
6,433 |
| Revenue by offerings |
|
|
|
|
|
|
|
|
|
| Digital |
1,326 |
681 |
562 |
525 |
445 |
369 |
298 |
77 |
4,283 |
| |
953 |
468 |
401 |
368 |
270 |
264 |
168 |
65 |
2,957 |
| Core |
1,216 |
469 |
395 |
405 |
356 |
284 |
242 |
130 |
3,497 |
| |
1,091 |
472 |
433 |
439 |
330 |
311 |
265 |
135 |
3,476 |
| Total |
2,542 |
1,150 |
957 |
930 |
801 |
653 |
540 |
207 |
7,780 |
| |
2,044 |
940 |
834 |
807 |
600 |
575 |
433 |
200 |
6,433 |
| (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 |
| | | |
| * | | Geographical revenues is based on the domicile of customer |
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, Panaya platform, Skava platform, Stater digital platform and Infosys McCamish-
insurance platform.
Trade Receivables and Contract Balances
The timing of revenue recognition, billings and cash
collections results in receivables, unbilled revenue, and unearned revenue on the Group’s Consolidated Balance Sheet. Amounts are
billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g., monthly or quarterly)
or upon achievement of contractual milestones.
The Group’s receivables are rights to consideration
that are unconditional. Unbilled revenues comprising revenues in excess of billings from time and material contracts and fixed price maintenance
contracts are classified as financial asset when the right to consideration is unconditional and is due only after a passage of time.
Invoicing to the clients for other fixed price contracts
is based on milestones as defined in the contract and therefore the timing of revenue recognition is different from the timing of invoicing
to the customers. Therefore, unbilled revenues for other fixed price contracts (contract asset) are classified as non-financial asset
because the 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 financial position.
2.17 Unbilled revenue
(Dollars in millions)
| Particulars |
As at |
| |
September 30, 2021 |
March 31, 2021 |
| Unbilled financial asset (1) |
626 |
489 |
| Unbilled non financial asset (2) |
744 |
622 |
| Total |
1,370 |
1,111 |
| (1) | Right to consideration is unconditional and is due only after a 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 and Pensions
The Group provides for gratuity, a defined benefit
retirement plan ('the Gratuity Plan') covering eligible employees majorly 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. The Company contributes Gratuity 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 operates defined benefit pension plan in
certain overseas jurisdictions, in accordance with the local laws. These plans are managed by third party fund managers. The plans provide
for periodic payouts after retirement or for a lumpsum payment as set out in rules of each fund and includes death and disability benefits.
Liabilities with regard to these defined benefit plans
are determined by actuarial valuation, performed by an external actuary, at each Balance Sheet date using the projected unit credit method.
These defined benefit plans expose the Group to actuarial risks, such as longevity risk, currency risk, interest rate risk and market
risk.
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 net profits in the condensed consolidated
statement of comprehensive income.
2.18.2 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.
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 of India. The company has an obligation to make good the shortfall,
if any, between the return from the investments of the Trust and the notified interest rate.
In respect of Indian subsidiaries, eligible employees
receive benefits from a provident fund, which is a defined contribution plan. Both the eligible employee and the respective companies
make monthly contributions to this provident fund plan equal to a specified percentage of the covered employee's salary. Amounts collected
under the provident fund plan are deposited in a government administered provident fund. The companies have no further obligation to the
plan beyond its monthly contributions.
2.18.4 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.
The Code on Social Security, 2020 (‘Code’)
relating to employee benefits during employment and post-employment benefits received Presidential assent in September 2020. The Code
has been published in the Gazette of India. However, the date on which the Code will come into effect has not been notified. The Company
will assess the impact of the Code when it comes into effect and will record any related impact in the period the Code becomes effective.
2.18.5 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 foreign currency
assets and liabilities. Interest income is recognized using the effective interest method. Dividend income is recognized when the right
to receive payment is established.
2.18.6 Foreign Currency
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 recognized in the Consolidated Statement of Comprehensive Income and reported within exchange gains/ (losses)
on translation of assets and liabilities, net, except when deferred in Other Comprehensive Income as qualifying cash flow hedges. 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. The related revenue and expense
are recognised using the same exchange rate.
Transaction gains or losses realized upon settlement
of foreign currency transactions are included in determining net profit for the period in which the transaction is settled. Revenue, expense
and cash-flow items denominated in foreign currencies are translated into the relevant functional currencies using the exchange rate in
effect on the date of the transaction.
The translation of financial statements of the foreign
subsidiaries to the presentation currency is performed for assets and liabilities using the exchange rate in effect at the Balance Sheet
date and for revenue, expense and cash-flow items using the average exchange rate for the respective periods. The gains or losses resulting
from such translation are included in currency translation reserves under other components of equity. When a subsidiary is disposed off,
in full, the relevant amount is transferred to net profit in the Statement of Comprehensive Income. However, when a change in the parent's
ownership does not result in loss of control of a subsidiary, such changes are recorded through equity.
Other Comprehensive Income, net of taxes includes translation
differences on non-monetary financial assets measured at fair value at the reporting date, such as equities classified as financial instruments
and measured at fair value through other comprehensive income (FVOCI).
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.
2.18.7 Government grants
The Group recognizes government grants only
when there is reasonable assurance that the conditions attached to them will be complied with, and the grants will be received. Government
grants related to assets are treated as deferred income and are recognized in the net profit in the statement of comprehensive income
on a systematic and rational basis over the useful life of the asset. Government grants related to revenue are recognized on a systematic
basis in the statement of comprehensive income over the periods necessary to match them with the related costs which they are intended
to compensate.
2.18.8 Operating Profits
Operating profit of the Group is computed considering
the revenues, net of cost of sales, selling and marketing expenses and administrative expenses.
The table below provides details of break-up of expenses:
Cost of sales
(Dollars in millions)
| Particulars |
Three months ended |
Six months ended |
| |
September 30, 2021 |
September 30, 2020 |
September 30, 2021 |
September 30, 2020 |
| Employee benefit costs |
1,905 |
1,603 |
3,754 |
3,194 |
| Depreciation and amortization |
116 |
115 |
228 |
215 |
| Travelling costs |
19 |
17 |
35 |
30 |
| Cost of technical sub-contractors |
412 |
220 |
745 |
435 |
| Cost of software packages for own use |
47 |
40 |
92 |
78 |
| Third party items bought for service delivery to clients |
139 |
108 |
267 |
187 |
| Short term leases |
1 |
1 |
2 |
2 |
| Consultancy and professional charges |
4 |
1 |
7 |
3 |
| Communication costs |
10 |
11 |
20 |
23 |
| Repairs and maintenance |
12 |
18 |
25 |
36 |
| Provision for post-sales client support |
5 |
(1) |
5 |
– |
| Others |
5 |
(8) |
4 |
(7) |
| Total |
2,675 |
2,125 |
5,184 |
4,196 |
Selling and marketing expenses
(Dollars in millions)
| Particulars |
Three months ended |
Six months ended |
| |
September 30, 2021 |
September 30, 2020 |
September 30, 2021 |
September 30, 2020 |
| Employee benefit costs |
145 |
134 |
288 |
271 |
| Travelling costs |
2 |
1 |
2 |
1 |
| Branding and marketing |
13 |
13 |
29 |
20 |
| Consultancy and professional charges |
5 |
3 |
11 |
5 |
| Communication costs |
– |
– |
1 |
1 |
| Others |
2 |
2 |
5 |
7 |
| Total |
167 |
153 |
336 |
305 |
Administrative expenses
(Dollars in millions)
| Particulars |
Three months ended |
Six months ended |
| |
September 30, 2021 |
September 30, 2020 |
September 30, 2021 |
September 30, 2020 |
| Employee benefit costs |
76 |
68 |
149 |
134 |
| Consultancy and professional charges |
52 |
34 |
96 |
66 |
| Repairs and maintenance |
27 |
29 |
56 |
60 |
| Power and fuel |
4 |
5 |
9 |
9 |
| Communication costs |
10 |
10 |
19 |
20 |
| Travelling costs |
1 |
2 |
3 |
4 |
| Rates and taxes |
9 |
8 |
17 |
15 |
| Short-term leases |
1 |
1 |
2 |
3 |
| Insurance charges |
5 |
5 |
10 |
9 |
| Commission to non-whole time directors |
– |
– |
1 |
– |
| Impairment loss recognized/(reversed) under expected credit loss model |
6 |
8 |
12 |
22 |
| Contributions towards Corporate Social Responsibility |
16 |
19 |
35 |
35 |
| Others |
8 |
5 |
14 |
8 |
| Total |
215 |
194 |
423 |
385 |
Consequent to the Companies (Corporate Social Responsibility
Policy) Amendment Rules, 2021 (“the Rules”), the Company intends to transfer its CSR capital assets created prior to January
2021 to a controlled subsidiary Infosys Green Forum established in accordance with Section 8 of the Companies Act, 2013 for charitable
objects. The transfer will be undertaken upon obtaining the required approvals from regulatory authorities.
Other income, net
(Dollars in millions)
| Particulars |
Three months ended |
Six months ended |
| |
September 30, 2021 |
September 30, 2020 |
September 30, 2021 |
September 30, 2020 |
| Interest income on financial assets carried at amortized cost |
33 |
42 |
77 |
81 |
| Interest income on financial assets carried at fair value through other comprehensive income |
21 |
13 |
42 |
25 |
| Dividend income on investments carried at fair value through profit or loss |
– |
1 |
– |
1 |
| Gain/(loss) on investments carried at fair value through profit or loss |
6 |
1 |
9 |
5 |
| Gain/(loss) on investments carried at fair value through other comprehensive income |
– |
4 |
– |
7 |
| Exchange gains / (losses) on forward and options contracts |
18 |
41 |
8 |
47 |
| Exchange gains / (losses) on translation of foreign currency assets and liabilities |
(11) |
(35) |
6 |
(39) |
| Others |
4 |
9 |
13 |
13 |
| Total |
71 |
76 |
155 |
140 |
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 Share premium.
Description of reserves
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 condensed consolidated statement
of comprehensive income is credited to share premium. Amounts have been utilized for bonus issue and share buyback from share premium
account.
Special Economic Zone Re-investment reserve
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 include currency translation,
re-measurement of net defined benefit liability/asset, fair value changes of equity instruments fair valued through other comprehensive
income, changes on fair valuation of investments, net of taxes.
Cash flow hedge reserve
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. The cumulative gain or loss previously recognized in the cash flow hedging reserve is transferred to
the net profit in the consolidated Statement of Comprehensive Income upon the occurrence of the related forecasted transaction.
2.19.1 Capital Allocation Policy
Effective 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.
Update on buyback announced in April 2021:
In line with the capital allocation policy, the Board,
at its meeting held on April 14, 2021, approved the buyback of equity shares, from the open market route through the Indian stock exchanges,
amounting to 9,200 crore (Maximum Buyback Size, excluding buyback tax) at a price not exceeding 1,750 per share (Maximum
Buyback Price), subject to shareholders' approval in the ensuing General Meeting.
The shareholders approved the proposal of buyback of
Equity Shares recommended by its Board of Directors in the Annual General meeting held on June 19, 2021.
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 June 25, 2021 and was completed on September
8, 2021. During this buyback period the Company had purchased and extinguished a total of 55,807,337 equity shares from the stock exchange
at a volume weighted average buyback price of 1,648.53/- per equity share comprising 1.31% of the pre buyback paid up equity share
capital of the Company. The buyback resulted in a cash outflow of 9,200 crore (excluding transaction costs and tax on buyback).
The Company funded the buyback from its free reserves including Securities Premium as explained in Section 68 of the Companies Act, 2013.
In accordance with section 69 of the Companies Act, 2013, as at September 30, 2021, the Company has created ‘Capital Redemption
Reserve’ amounting to $4 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, 2021, 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. Income tax consequences of dividends on financial instruments classified as equity will be recognized according to
where the entity originally recognized those past transactions or events that generated distributable profits.
The Company declares and pays dividends in Indian rupees.
Companies are required to pay/distribute dividend after deducting applicable withholding income taxes. The remittance of dividends outside
India is governed by Indian law on foreign exchange and is also subject to withholding tax at applicable rates.
Amount of per share dividend recognized as distribution
to equity shareholders:
| Particulars |
Six months ended
September 30, 2021 |
Six months ended
September 30, 2020 |
| |
in |
in US Dollars |
in |
in US Dollars |
| Final dividend for fiscal 2021 |
15.00 |
0.20 |
– |
– |
| Final dividend for fiscal 2020 |
– |
– |
9.50 |
0.13 |
The Board of Directors in their meeting held on April
14, 2021 recommended a final dividend of 15/- per equity share (approximately $0.20 per equity share) for the financial year ended
March 31, 2021. The same was approved by the shareholders in the Annual General Meeting (AGM) of the Company held on June 19, 2021 and
resulted in a net cash outflow of $861 million excluding dividend paid on treasury shares.
The Board of Directors in their meeting
held on October 13, 2021 declared an interim dividend of 15/- per equity share (approximately $0.20 per equity share) which would
result in a net cash outflow of approximately 6,286 crore ($847 million) excluding dividend paid on treasury shares.
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. 14,840,585 shares and 15,514,732 shares were held by controlled trust, as at September
30, 2021 and March 31, 2021, 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 |
Jayesh Sanghrajka
Executive Vice President and
Deputy Chief Financial Office |
| |
|
|
A.G.S. Manikantha
Company Secretary |
|
|
| |
|
|
Bengaluru
October 13, 2021 |
|
|
