Directors' report

To the members,

We are delighted to present the report on our business and operations for the year ended March 31, 2011.

1. Results of operations

in Rupee Symbolcrore, except per share data

 

2011

2010

Income from software services and products

25,385

21,140

Software development expenses

14,267

11,559

Gross profit

11,118

9,581

Selling and marketing expenses

1,219

974

General and administration expenses

1,485

1,247

Operating profit before interest and depreciation (PBIDTA)

8,414

7,360

Interest

–

–

Depreciation

740

807

Operating profit before tax

7,674

6,553

Other income, net

1,147

919

Net profit before tax and exceptional item

8,821

7,472

Provision for taxation

2,378

1,717

Net profit after tax and before exceptional item

6,443

5,755

Income on sale of investments, net of taxes (1)

–

48

Net profit after tax and after exceptional item

6,443

5,803

Profit and Loss account balance brought forward

13,806

10,305

Amount available for appropriation

20,249

16,108

Dividend

Interim

574

573

30th year special dividend – interim

1,722

–

Final

1,149

861

Total dividend

3,445

1,434

Dividend tax

568

240

Amount transferred to general reserve

645

580

Amount transferred to capital reserve

–

48

Balance in Profit and Loss account

15,591

13,806

EPS before exceptional item (2)

Basic

112.26

100.37

Diluted

112.22

100.26

EPS after exceptional item (2)

Basic

112.26

101.22

Diluted

112.22

101.10
Notes : Rupee Symbol1 crore equals Rupee Symbol10 million.
   

(1)

Income from sale of investments in OnMobile Systems Inc., U.S., net of taxes and transaction costs.
 

(2)

Equity shares are at par value of Rupee Symbol5/- each.

2. Building Tomorrow's Enterprise

During the year, we formally launched our new corporate strategy, Building Tomorrow's Enterprise to showcase our plan for leading the services industry into the new era as the next generation global consulting and services company. In our journey to increase our client relevance and sustain industry leadership, we have made organizational changes towards creating Infosys 3.0 – a truly global enterprise partner for our clients to drive their transformational, operational and innovation priorities and helping them build their enterprise of the future.

To further our transition towards business-led consulting combined with innovative products and solutions, we have regrouped our existing industry units globally into the following groups :

This transition will enable us to increase our client relevance, strengthen our strategic partnerships with our clients and evolve our business model.

It will help us to sharpen our industry vertical focus, allow us to invest in capabilities to deliver higher business value and align our innovation agenda with that of our clients. The new structure will also significantly expand our global market and provide opportunities for the next generation of leaders.

3. Business

Our total income increased to Rupee Symbol25,385 crore from Rupee Symbol21,140 crore in the previous year, at a growth rate of 20.1%. Our software export revenues aggregated to Rupee Symbol24,791 crore, up by 18.8% from Rupee Symbol20,871 crore in the previous year. Out of the total revenue 66.2% came from North America, 20.7% from Europe and 10.7% from the Rest of the World.

Our revenues from India have increased from Rupee Symbol269 crore to Rupee Symbol594 crore, with a growth rate of 120.8% which is higher than that of the other regions. The share of the fixed-price component of the business was 42.1%, compared to 40.8% during the previous year.

Our gross profit amounted to Rupee Symbol11,118 crore (43.8% of revenue) as against Rupee Symbol9,581 crore (45.3% of revenue) in the previous year. The onsite revenues increased from 48.7% in the previous year to 50.2% in the current year. The onsite person-months comprised 26.5% of the total billed efforts, compared to 26.1% during the previous year. The Profit Before Interest, Depreciation, Taxes and Amortization (PBIDTA) amounted to Rupee Symbol8,414 crore (33.1% of revenue) as against Rupee Symbol7,360 crore (34.8% of revenue) in the previous year. Sales and marketing costs were 4.8% and 4.6% of our revenue for the years ended March 31, 2011 and March 31, 2010 respectively. General and administration expenses were 5.8% and 5.9% of our revenues during the current year and previous year respectively. The net profit after tax was Rupee Symbol6,443 crore (25.4% of revenue) as against Rupee Symbol5,803 crore (27.5% of revenue) in the previous year. The net profit for the previous year includes income from sale of investments in OnMobile Systems Inc., U.S., of Rupee Symbol48 crore, net of taxes and transaction costs.

We seek long-term partnerships with our clients that enhance their value while addressing their IT requirements. Our customer-centric approach has resulted in high levels of client satisfaction. We derived 98% of our revenues from repeat business. We, along with our subsidiaries, added 139 new clients, including a substantial number of large global corporations. The total client base at the end of the year stood at 620. Further, we have 366 million-dollar clients (338 in the previous year), 187 five-million-dollar clients (159 in the previous year), 126 ten-million-dollar clients (97 in the previous year), 28 fifty-million-dollar clients (26 in the previous year), and 11 hundred-million-dollar clients (6 in the previous year).

During the year, we added 19.86 lakh sq. ft. of physical infrastructure space. The total available space now stands at 276.63 lakh sq. ft. The number of marketing offices as at March 31, 2011 was 64 as compared to 65 in the previous year.

4. Subsidiaries

We have nine subsidiaries : Infosys BPO Limited, Infosys Technologies (Australia) Pty. Limited, Infosys Technologies (China) Company Limited, Infosys Consulting, Inc., Infosys Technologies S. de R. L. de C. V., Infosys Technologies (Sweden) AB, Infosys Tecnologia do Brasil Ltda, Infosys Public Services Inc., U.S., and Infosys Technologies (Shanghai) Company Limited. We have four step-down subsidiaries : Infosys BPO s.r.o., Infosys BPO (Poland) Sp.Z.o.o, McCamish Systems LLC, and Infosys Consulting India Limited.

As per Section 212 of the Companies Act, 1956, we are required to attach the Directors' report, Balance Sheet, and Profit and Loss account of our subsidiaries. The Ministry of Corporate Affairs, Government of India vide its circular no. 2/2011 dated February 8, 2011 has provided an exemption to companies from complying with Section 212, provided such companies publish the audited consolidated financial statements in the Annual Report. Accordingly, the Annual Report 2010-11 does not contain the financial statements of our subsidiaries. The audited annual accounts and related information of our subsidiaries, where applicable, will be made available upon request. These documents will also be available for inspection during business hours at our registered office in Bangalore, India. The same will also be published on our website, www.infosys.com

5. FinacleTM

Finacle™, our universal banking solution, partners with banks across the globe to power their innovation agenda enabling them to differentiate their products and services thereby enhancing customer experience and achieving greater operational efficiency.

FinacleTM is a comprehensive, flexible and fully web-enabled solution that addresses the core banking, treasury, wealth management, Islamic banking, consumer and corporate e-banking, direct banking, financial inclusion and mobile banking requirements of universal, retail and corporate banks worldwide. Other offerings in the FinacleTM universal banking solution include the FinacleTM Core Banking solution for regional rural banks; the FinacleTM Alerts Solution, which enables banks to alert end-users on events recorded by diverse business systems; FinacleTM Advizor, which combines the convenience of human intervention with banking self-service channels through the interplay of video, audio and data communication; and FinacleTM WatchWiz, a comprehensive new-generation monitoring solution that allows banks to monitor, diagnose and resolve issues. Our professional services complement the solutions portfolio and include consulting, package implementation, independent validation, migration, application development and maintenance, system integration, software performance engineering and support. These offerings make Finacle™ a strong innovation facilitator, enabling banks to accelerate growth, while maximizing value from their large-scale business transformation.

FinacleTM is chosen by 140 banks across 73 countries to power operations across 47,000 branches. Today, FinacleTM enables its customer banks to serve 390 million accounts and 289 million consumers worldwide. Finacle™ is also leading the financial inclusion agenda in India. Of the 82 regional rural banks in the country, 45 have opted to leverage FinacleTM across 9,900 branches. Independent reports by renowned research firms have positioned FinacleTM among the leaders in the global evaluation of retail core banking solution vendors. Finacle™ is one of the most scalable core banking solutions in the world with an unparalleled performance benchmark of 104 million effective transactions per hour for channel (non-branch) transactions and 41 million effective transactions per hour for branch transactions.

6. Quality

We continue our journey of delivering value to our clients through significant investments in quality programs. In September 2010, an enterprise-wide CMMi assessment was conducted by an SEI-certified high-maturity appraiser, and we were assessed at CMMi Level 5. This is the highest level of the CMMi assessment. SEI-CMMi is the Carnegie Mellon Software Engineering Institute's Capability Maturity Model, which assesses the quality of an organizations' processes and methodologies.

Our Quality department handles large change-management initiatives to drive quality and productivity improvements across the organization and is managed through the Balanced Scorecard and Infosys Scaling Outstanding Performance (iSOP) program.

During the year, the Quality department, in collaboration with multiple stakeholders across the organization, had developed a framework called 'Business Value Articulation' which ensures alignment of our approaches to deliver value to our customers. Some of our key initiatives are :

ENCORE : An initiative to promote reuse and reduce cycle time by creating and deploying reusable technical and business components.

i-Trim : A framework based on lean practices, focusing on eliminating non-compete activities to optimize process performance, addressing business and operational challenges in service delivery.

BrITe : Our customer centric, systematic, data driven methodology to create an impact on the business results and assist in maximizing profits.

Proso++ : An empirical model based on the best practices and execution experience of the delivery teams at Infosys.

We continue to focus on institutionalizing large initiatives. Some of our achievements in the area are listed below :

Infy Swift : Our differentiated methodology for the Global Delivery Model (GDM) to achieve faster time to market.

ESTEEM : This is our Centre of Excellence to enhance estimation maturity for improved predictability and de-risking of our client delivery.

TRANSCEED : Our initiative to enhance program management capabilities, including development of integrated systems and tools, relevant enabling / certification and ecosystem for collaboration / knowledge exchange.

ASCENT : A framework to provide a robust and integrated platform for account management that further facilitates account planning, monitoring and reviews.

PROSPER : A differentiated methodology for driving excellence in production support services.

TIDE : A solution that brings together tools, systems and processes across lifecycle stages and enhances data integrity by capturing accurate data.

We are certified under various standards to meet our client demands and improve value delivery. These certifications include TL 9000-SV, ISO 9001 : 2008, AS EN 9100, ISO 20000, BS25999, OHSAS 18001, ISO 14001, ISO 23026, ISO 27001 and ISO 13485. Infosys BPO has been certified for eSCM – SP v. 2.0 Level 5, the eSourcing Capability Model for Service Providers developed by a consortium led by Carnegie Mellon University's Information Technology Services Qualification Center. Our Australia and Shanghai centers have been assessed at SEI-CMMi Level 5 and ISO 27001.

7. Infosys Labs

Infosys Labs, launched as part of our strategic direction 'Building Tomorrow's Enterprise', is responsible for driving innovation across the mega trends identified by us that will transform the businesses of our clients. Building on the successes of the award winning SETLabs, Infosys Labs will focus on the Company's vision and enable customer co-creation, while continuing its focus on service differentiation and developing client-focused business solutions.

Organized as a global network of research labs and innovation hubs, Infosys Labs will :

During the year, more than 96 articles were published by Infosys Labs' researchers in leading journals, magazines and conference proceedings. SETLabs Briefings, our highly respected peer-reviewed journal, published multiple issues this fiscal year, in areas such as e-Governance, Green IT, Business Platforms for Next-Gen Enterprise Packages, Leveraging IT for Better Performance, Service Oriented Performance, Digital Convergence and Perspectives on Software Engineering. Infosys Labs collaborated with leading national and international universities such as the University of Southern California, Indian Institute of Technology, Bombay – Monash Research Academy, Purdue University, IIIT, Hyderabad and IIIT, Bangalore.

During the year, Infosys Labs' IP Cell filed 91 patent applications in the United States Patent and Trademark Office (USPTO) and the Indian Patent Office. We now have an aggregate of 357 patent applications pending in India and the U.S. The USPTO has granted us 22 patents.