Infosys Technologies Ltd., Form 6-K, 12/31/2003
 



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


Form 6-K

Report of Foreign Issuer
Pursuant to Section 13a-16 or 15d-16 of the Securities Exchange Act of 1934

For the quarter ended December 31, 2003

Commission File Number 333-72195

Infosys Technologies Limited

(Exact name of Registrant as specified in its charter)

Not Applicable
(Translation of Registrant’s name into English)

Bangalore, Karnataka, India
(Jurisdiction of incorporation or organization)

Electronics City, Hosur Road, Bangalore, Karnataka, India 561 100. +91-80-852-0261
(Address of principal executive offices)

     Indicate by check mark registrant files or will file annual reports under cover Form 20-F or Form 40-F:

          Form 20-F x    Form 40-F o

     Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g 3-2(b) under the Securities Exchange Act of 1934.

          Yes o   No x

If “Yes” is marked, indicate below the file number assigned to registrant in connection with Rule 2g 3-2(b).

Not applicable.



 


 

     This Form 6-K contains our Quarterly Report for the quarter ended December 31, 2003 that we mailed to our equity shareholders on or about February 3, 2004. The information contained in this Form 6-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.


 

Infosys Technologies Limited
Report for the quarter ended December 31, 2003

(INFOSYS LOGO)

 


 

At a glance - Indian GAAP (Non-consolidated financials)

                                           
                              in Rs. crore, except per share data
     
      Quarter ended   Nine months ended   Year ended
      December 31,   December 31,   March 31,
      2003   2002   2003   2002   2003
     
 
 
 
 
For the period
                                       
Total revenue
    1,235.26       958.64       3,451.99       2,602.83       3,622.69  
Export revenue
    1,227.30       945.18       3,401.93       2,552.93       3,543.51  
Operating profit (PBIDTA)
    410.18       333.49       1,136.91       931.66       1,272.04  
PBIDTA/revenues (%)
    33.21 %     34.79 %     32.93 %     35.79 %     35.11 %
Profit after tax (PAT)
    328.14       256.31       906.42       698.93       957.93  
PAT/revenues (%)
    26.56 %     26.74 %     26.26 %     26.85 %     26.44 %
Earnings per share* (par value of Rs.5 each, fully paid)
                                       
 
Basic
    49.43       38.70       136.73       105.57       144.68  
 
Diluted
    48.54       38.22       135.43       104.70       143.37  
Dividend per share
    NA       NA       14.50       12.50       27.00  
Dividend amount
    NA       NA       96.09       82.76       178.81  
Capital expenditure
    85.19       50.86       212.39       148.66       219.26  
At the end of the period
                                       
Total assets
                    3,725.28       2,707.10       2,860.65  
Fixed assets – net
                    816.22       754.91       772.72  
Cash and cash equivalents
                    1,893.96       1,432.21       1,638.51  
Working capital
                    2,260.67       1,883.96       2,017.92  
Total debt
                                 
Net worth
                    3,725.28       2,707.10       2,860.65  
Equity
                    33.23       33.11       33.12  
Market capitalization
                    36,980.77       31,613.32       26,847.33  

Note : Market capitalization is calculated by considering the share price at National Stock Exchange on the shares outstanding at the period/year end.

*EPS figures have been calculated for the period and have not been annualized.

(TOTAL REVENUE, EXPORTS, ORDINARY ACTIVITIES BAR CHART)

2


 

Letter to the shareholder

Dear shareholder,

Your company is delighted to report another quarter of robust growth. It has increased its guidance for revenue and EPS for this fiscal. Indian GAAP revenues grew by 8.86% over Q2 FY2004, while net profits from ordinary activities witnessed an increase of 9.32%. Revenues in US GAAP terms grew by 9.7%, as compared to the quarter ended September 30, 2003. This quarter, your company saw a record cash addition. Free cash flows amounted to Rs. 344.25 crore.

This was an eventful quarter. Your company completed its first acquisition - Expert Information Systems Pty. Limited, Australia - and is working towards a seamless integration. This will accelerate its market penetration in Australia and provide enhanced value to its clients.

Your company has incorporated its wholly-owned subsidiary in the People’s Republic of China, ‘Infosys Technologies (Shanghai) Co. Limited’. The setting up of the software development center for 200 professionals in Shanghai is progressing well. The China subsidiary will be offering end-to-end software services to domestic as well as multinational companies operating in China.

Your company continued its focus on improving efficiency. At the same time, it completed its reorganization. This will enable it to face a new set of challenges – increased market expectations, a fast-changing economy, and a new competitive scenario. It will also help further empower the business units. Business opportunities continue to grow. Pricing has stabilized, as have margins. Your company’s billing for two clients (on an LTM basis) has crossed $ 50 million each.

This quarter saw the highest number of gross additions in terms of employees - 3,179, including 545 lateral hires. The net employee addition for the quarter stood at 2,689. In fact, 950,000 people applied to your company over the last twelve months. Clearly, it remains an employer of choice.

Your company added 30 new clients during the quarter. Significant wins include one of Canada’s leading telecommunications companies, a premier telecommunications carrier in the Asia Pacific region, one of the world’s premier media and entertainment companies, and a nationwide chain of superstores in the US. In addition, your company established a relationship with a global investment bank based in the UK.

High-tech companies are finding new ways of improving knowledge and expertise in cutting-edge technology. An industry leader providing global data and IP network and integration services for multinational businesses has engaged us in the design, development and support of its global CRM applications. The world’s leading supplier of process control and yield management solutions for the semiconductor and related microelectronics industries also established a partnership with your company during the last quarter. Other significant client additions in this space include a world leader in integrated IT and eProcessing solutions for the financial services industry, and a corporation providing global automated international trade management solutions.

The Banking Business Unit (BBU) made considerable headway in several countries this quarter, including Mauritius and Zimbabwe. BBU also established its presence in China, with one of the leading banks choosing Finacle® for its branches. In addition, Finacle® has emerged as the world’s most scalable open systems - based core-banking solution. In the recently concluded rigorous benchmarking exercise with Sun Microsystems, USA, Finacle® broke all published benchmark results for core banking transaction processing.

As in the past, your company continued to deepen its relationship with global corporations, helping them realize business benefits through the innovative use of technology. Its growth has been made possible through the unstinting commitment of all Infoscions. On your behalf, we thank them for contributing to yet another successful quarter.

         
    /s/ Nandan M. Nilekani   /s/ S. Gopalakrishnan
         
Bangalore   Nandan M. Nilekani   S. Gopalakrishnan
January 9, 2004   Chief Executive Officer, President   Chief Operating Officer
    and Managing Director   and Deputy Managing Director

3


 

Auditors’ report to the members of Infosys Technologies Limited

We have audited the attached Balance Sheet of Infosys Technologies Limited (the Company) as at December 31, 2003, the Profit and Loss Account and Cash Flow Statement of the Company for the quarter and nine months ended on that date, annexed thereto. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

We report that :

(a)   we have obtained all the information and explanations which to the best of our knowledge and belief were necessary for the purposes of our audit;
 
(b)   in our opinion, proper books of account have been kept by the Company so far as appears from our examination of those books;
 
(c)   the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report are in agreement with the books of account;
 
(d)   in our opinion, the Balance Sheet, the Profit and Loss Account and the Cash Flow Statement dealt with by this report comply with the Accounting Standards issued by the Institute of Chartered Accountants of India, to the extent applicable; and
 
(e)   in our opinion and to the best of our information and according to the explanations given to us, the said accounts give a true and fair view in conformity with the accounting principles generally accepted in India :

  (i)   in the case of the Balance Sheet, of the state of affairs of the Company as at December 31, 2003;
 
  (ii)   in the case of the Profit and Loss Account, of the profit of the Company for the quarter and nine months ended on that date; and
 
  (iii)   in the case of the Cash Flow Statement, of the cash flows of the Company for the quarter and nine months ended on that date.

for Bharat S. Raut & Co.
Chartered Accountants

S. Balasubrahmanyam
Partner
Membership No. 53315

Bangalore
January 9, 2004

4


 

Balance Sheet as at

                           
                      in Rs. crore
     
      December 31, 2003   December 31, 2002   March 31, 2003
     
 
 
SOURCES OF FUNDS
                       
SHAREHOLDERS’ FUNDS
                       
Share capital
    33.23       33.11       33.12  
Reserves and surplus
    3,692.05       2,673.99       2,827.53  
 
   
     
     
 
 
    3,725.28       2,707.10       2,860.65  
 
   
     
     
 
APPLICATION OF FUNDS
                       
FIXED ASSETS
                       
Original cost
    1,481.83       1,194.24       1,273.32  
Less : Depreciation and amortization
    744.99       525.74       577.15  
 
   
     
     
 
Net book value
    736.84       668.50       696.17  
Add : Capital work-in-progress
    79.38       86.41       76.55  
 
   
     
     
 
 
    816.22       754.91       772.72  
INVESTMENTS
    615.54       33.20       33.20  
DEFERRED TAX ASSETS
    32.85       35.03       36.81  
CURRENT ASSETS, LOANS AND ADVANCES
                       
Sundry debtors
    683.87       487.32       512.14  
Cash and bank balances
    1,603.83       1,129.87       1,336.23  
Loans and advances
    945.50       948.47       872.78  
 
   
     
     
 
 
    3,233.20       2,565.66       2,721.15  
Less : Current liabilities
    549.96       279.38       315.25  
 
Provisions
    422.57       402.32       387.98  
 
   
     
     
 
NET CURRENT ASSETS
    2,260.67       1,883.96       2,017.92  
 
   
     
     
 
 
    3,725.28       2,707.10       2,860.65  
 
   
     
     
 

This is the Balance Sheet referred to in our report of even date.

             
for Bharat S. Raut & Co.            
Chartered Accountants            
 
S. Balasubrahmanyam   N. R. Narayana Murthy   Nandan M. Nilekani   S. Gopalakrishnan
Partner   Chairman and Chief Mentor   Chief Executive Officer, President   Chief Operating Officer and
Membership No. 53315       and Managing Director   Deputy Managing Director
 
    Deepak M. Satwalekar   Marti G. Subrahmanyam   Philip Yeo
    Director   Director   Director
             
    Omkar Goswami   Larry Pressler   Rama Bijapurkar
    Director   Director   Director
             
    Claude Smadja   Sridar A. Iyengar   K. Dinesh
    Director   Director   Director
             
    S. D. Shibulal   T. V. Mohandas Pai   Srinath Batni
    Director   Director and   Director
        Chief Financial Officer    
             
    V. Balakrishnan        
Bangalore   Company Secretary and        
January 9, 2004   Vice President – Finance        

5


 

Profit and Loss Account for the

                                             
                in Rs. crore, except per share data
       
        Quarter ended   Nine months ended   Year ended
        December 31,   December 31,   March 31,
        2003   2002   2003   2002   2003
       
 
 
 
 
INCOME
                                       
Software services and products
                                       
   
Overseas
    1,227.30       945.18       3,401.93       2,552.93       3,543.51  
   
Domestic
    7.96       13.46       50.06       49.90       79.18  
   
 
   
     
     
     
     
 
 
    1,235.26       958.64       3,451.99       2,602.83       3,622.69  
SOFTWARE DEVELOPMENT EXPENSES
    645.48       481.62       1,805.42       1,283.50       1,813.30  
   
 
   
     
     
     
     
 
GROSS PROFIT
    589.78       477.02       1,646.57       1,319.33       1,809.39  
SELLING AND MARKETING EXPENSES
    92.35       73.60       252.51       198.02       266.98  
GENERAL AND ADMINISTRATION EXPENSES
    87.25       69.93       257.15       189.65       270.37  
 
    179.60       143.53       509.66       387.67       537.35  
OPERATING PROFIT BEFORE INTEREST, DEPRECIATION AND AMORTIZATION
    410.18       333.49       1,136.91       931.66       1,272.04  
Interest
                             
Depreciation and amortization
    62.23       49.48       168.82       136.19       188.95  
   
 
   
     
     
     
     
 
OPERATING PROFIT AFTER INTEREST, DEPRECIATION AND AMORTIZATION
    347.95       284.01       968.09       795.47       1,083.09  
Other income
    47.48       29.80       124.21       72.22       99.61  
Provision for investments
    2.29             8.88       23.76       23.77  
   
 
   
     
     
     
     
 
NET PROFIT BEFORE TAX
    393.14       313.81       1,083.42       843.93       1,158.93  
Provision for taxation
    65.00       57.50       177.00       145.00       201.00  
   
 
   
     
     
     
     
 
NET PROFIT AFTER TAX
    328.14       256.31       906.42       698.93       957.93  
AMOUNT AVAILABLE FOR APPROPRIATION
    328.14       256.31       906.42       698.93       957.93  
DIVIDEND
                                       
 
Interim
                96.09       82.76       82.76  
 
Final
                            96.05  
 
Dividend Tax
                12.31             12.30  
Amount transferred – general reserve
                            766.82  
Balance in Profit and Loss Account
    328.14       256.31       798.02       616.17        
   
 
   
     
     
     
     
 
 
    328.14       256.31       906.42       698.93       957.93  
   
 
   
     
     
     
     
 
EARNINGS PER SHARE (equity shares, par value Rs.5/- each)
                                       
 
Basic
    49.43       38.70       136.73       105.57       144.68  
 
Diluted
    48.54       38.22       135.43       104.70       143.37  
Number of shares used in computing earnings per share
                                       
 
Basic
    6,63,79,862       6,62,21,577       6,62,94,021       6,62,02,947       6,62,11,068  
 
Diluted
    6,76,07,893       6,70,57,160       6,69,29,068       6,67,55,529       6,68,16,821  
   
 
   
     
     
     
     
 

This is the Profit and Loss Account referred to in our report of even date.

for Bharat S. Raut & Co.
Chartered Accountants

             
S. Balasubrahmanyam   N. R. Narayana Murthy   Nandan M. Nilekani   S. Gopalakrishnan
Partner   Chairman and Chief Mentor   Chief Executive Officer, President   Chief Operating Officer and
Membership No. 53315       and Managing Director   Deputy Managing Director
             
    Deepak M. Satwalekar   Marti G. Subrahmanyam   Philip Yeo
    Director   Director   Director
             
    Omkar Goswami   Larry Pressler   Rama Bijapurkar
    Director   Director   Director
             
    Claude Smadja   Sridar A. Iyengar   K. Dinesh
    Director   Director   Director
             
    S. D. Shibulal   T. V. Mohandas Pai   Srinath Batni
    Director   Director and   Director
        Chief Financial Officer    
             
    V. Balakrishnan        
Bangalore   Company Secretary and        
January 9, 2004   Vice President – Finance        

6


 

Cash Flow statement for the

                                           
              in Rs. crore
     
      Quarter ended   Nine months ended   Year ended
      December 31,   December 31,   March 31,
      2003   2002   2003   2002   2003
     
 
 
 
 
CASH FLOWS FROM OPERATING ACTIVITIES
                                       
Profit before tax
    393.14       313.81       1,083.42       843.93       1,158.93  
Adjustments to reconcile profit before tax to cash provided by operating activities
                                       
 
(Profit)/Loss on disposal of fixed assets
    (0.01 )     (0.08 )     (0.02 )     0.05        
 
Depreciation and amortization
    62.23       49.48       168.82       136.19       188.95  
 
Interest and dividend income
    (26.21 )     (19.52 )     (72.39 )     (55.89 )     (78.05 )
 
Provision on long-term investments
    2.29             8.88       23.76       23.77  
 
Exchange differences on translation of foreign currency cash and cash equivalents
    (4.95 )     (1.04 )     (1.09 )     (2.43 )     (2.06 )
Changes in current assets and liabilities
                                       
 
Sundry debtors
    (106.61 )     (29.07 )     (171.73 )     (150.59 )     (175.41 )
 
Loans and advances
    16.73       (12.61 )     15.21       (86.25 )     (127.63 )
 
Current liabilities and provisions
    172.75       13.26       228.34       124.71       158.46  
 
Income taxes paid during the period/year
    (18.80 )     (65.85 )     (79.08 )     (170.75 )     (232.09 )
 
   
     
     
     
     
 
NET CASH GENERATED BY OPERATING ACTIVITIES
    490.56       248.38       1,180.36       662.73       914.87  
 
   
     
     
     
     
 
CASH FLOWS FROM FINANCING ACTIVITIES
                                       
Proceeds on exercise of stock options
    61.53       7.47       66.61       10.62       13.52  
Dividends paid during the period/year, including dividend tax
    (108.40 )     (82.76 )     (216.75 )     (165.49 )     (165.49 )
 
   
     
     
     
     
 
NET CASH USED IN FINANCING ACTIVITIES
    (46.87 )     (75.29 )     (150.14 )     (154.87 )     (151.97 )
 
   
     
     
     
     
 
CASH FLOWS FROM INVESTING ACTIVITIES
                                       
Purchases of fixed assets and change in capital work-in-progress
    (85.19 )     (50.86 )     (212.39 )     (148.66 )     (219.26 )
Advance for acquisition of company
    (50.75 )           (50.75 )            
Proceeds on disposal of fixed assets
    0.01       0.08       0.09       0.25       0.33  
Investments in securities
    (134.82 )           (585.20 )     (12.52 )     (12.53 )
Interest and dividend income
    26.21       19.52       72.39       55.89       78.05  
 
   
     
     
     
     
 
NET CASH USED IN INVESTING ACTIVITIES
    (244.54 )     (31.26 )     (775.86 )     (105.04 )     (153.41 )
 
   
     
     
     
     
 
Exchange differences on translation of foreign currency cash and cash equivalents
    4.95       1.04       1.09       2.43       2.06  
 
   
     
     
     
     
 
Net (decrease)/increase in cash and cash equivalents during the period/year
    204.10       142.87       255.45       405.25       611.55  
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD/YEAR
    1,689.86       1,289.34       1,638.51       1,026.96       1,026.96  
 
   
     
     
     
     
 
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD/YEAR
    1,893.96       1,432.21       1,893.96       1,432.21       1,638.51  
 
   
     
     
     
     
 

This is the Cash Flow Statement referred to in our report of even date.

for Bharat S. Raut & Co.
Chartered Accountants

             
S. Balasubrahmanyam   N. R. Narayana Murthy   Nandan M. Nilekani   S. Gopalakrishnan
Partner   Chairman and Chief Mentor   Chief Executive Officer, President   Chief Operating Officer and
Membership No. 53315       and Managing Director   Deputy Managing Director
             
    Deepak M. Satwalekar   Marti G. Subrahmanyam   Philip Yeo
    Director   Director   Director
             
    Omkar Goswami   Larry Pressler   Rama Bijapurkar
    Director   Director   Director
             
    Claude Smadja   Sridar A. Iyengar   K. Dinesh
    Director   Director   Director
             
    S. D. Shibulal   T. V. Mohandas Pai   Srinath Batni
    Director   Director and   Director
        Chief Financial Officer    
             
    V. Balakrishnan        
Bangalore   Company Secretary and        
January 9, 2004   Vice President - Finance        

7


 

Schedules to the Profit and Loss Account for the

                                           
                      in Rs. crore
     
      Quarter ended   Nine months ended   Year ended
      December 31,   December 31,   March 31,
      2003   2002   2003   2002   2003
     
 
 
 
 
SOFTWARE DEVELOPMENT EXPENSES
                                       
Salaries and bonus including overseas staff expenses
    545.94       378.90       1,483.31       1,019.82       1,433.85  
Staff welfare
    3.76       2.13       9.75       5.42       7.91  
Contribution to provident and other funds
    12.79       8.43       36.53       21.70       31.94  
Overseas travel expenses
    41.11       41.52       125.79       119.80       162.66  
Consumables
    2.60       1.77       6.37       4.19       6.25  
Cost of software packages
                                       
 
for own use
    14.50       22.21       49.57       43.27       54.75  
 
for service delivery to clients
    2.12       2.34       14.46       9.96       12.99  
Computer maintenance
    3.03       2.58       8.47       6.96       9.33  
Communication expenses
    7.73       5.73       23.66       17.99       23.94  
Provision for post-sales client support
    (0.21 )     (3.76 )     (0.36 )     (4.06 )     (6.18 )
Consultancy charges
    10.75       19.77       45.04       38.45       75.86  
Rent
    1.36             2.83              
 
   
     
     
     
     
 
 
    645.48       481.62       1,805.42       1,283.50       1,813.30  
 
   
     
     
     
     
 
SELLING AND MARKETING EXPENSES
                                       
Salaries and bonus including overseas staff expenses
    57.97       40.24       157.17       103.25       141.73  
Staff welfare
    0.15       0.16       0.38       0.47       0.62  
Contribution to provident and other funds
    0.27       0.23       1.44       0.47       1.34  
Overseas travel expenses
    11.53       12.25       29.57       30.84       45.16  
Consumables
    0.06       0.07       0.14       0.14       0.21  
Cost of software packages for own use
          0.01       0.01       0.04       0.21  
Computer maintenance
                0.02             0.01  
Communication expenses
    0.01       0.13       0.01       0.37       0.50  
Traveling and conveyance
    0.56       0.37       1.16       0.82       1.19  
Rent
    3.93       1.29       10.83       3.40       4.79  
Telephone charges
    1.45       1.40       3.74       3.92       5.35  
Professional charges
    1.32       3.03       4.06       8.27       10.63  
Printing and stationery
    0.25       0.25       0.77       1.02       1.43  
Advertisements
    0.04       0.33       0.28       0.73       1.04  
Brand building
    9.16       7.00       24.30       24.36       29.05  
Office maintenance
    0.08       1.66       0.19       2.16       2.72  
Repairs to plant and machinery
                            0.02  
Power and fuel
    0.01       0.04       0.04       0.15       0.22  
Insurance charges
    0.03       0.03       0.07       0.06       0.20  
Rates and taxes
    0.01       0.02       0.04       0.25       0.27  
Bank charges and commission
    0.01       0.03       0.02       0.07       0.09  
Commission charges
    3.33       3.28       6.24       9.50       10.58  
Marketing expenses
    1.88       1.65       4.49       4.96       6.72  
Sales promotion expenses
    0.30       0.13       0.50       0.33       0.46  
Other miscellaneous expenses
                7.04       2.44       2.44  
 
   
     
     
     
     
 
 
    92.35       73.60       252.51       198.02       266.98  
 
   
     
     
     
     
 
GENERAL AND ADMINISTRATION EXPENSES
                                       
Salaries and bonus including overseas staff expenses
    19.14       15.35       53.40       41.73       56.24  
Contribution to provident and other funds
    1.06       0.88       3.35       2.42       3.49  
Overseas travel expenses
    1.26       1.70       4.83       5.65       7.78  
Traveling and conveyance
    5.77       4.47       15.28       11.13       16.76  
Rent
    3.96       6.75       14.73       17.50       24.51  
Telephone charges
    6.57       5.82       21.33       14.83       21.34  
Professional charges
    8.50       9.37       24.78       23.88       37.99  
Printing and stationery
    1.29       1.02       4.68       3.68       4.80  
Advertisements
    0.82       1.05       2.18       2.72       5.15  
Office maintenance
    7.10       5.03       19.65       12.94       20.13  
Repairs to building
    3.97       2.06       7.36       5.08       7.27  
Repairs to plant and machinery
    1.15       1.66       3.75       3.75       4.75  
Power and fuel
    7.48       5.66       21.87       16.64       22.38  
Insurance charges
    6.07       2.34       17.26       6.80       9.83  
Rates and taxes
    1.64       1.33       3.79       3.60       5.14  
Donations
    3.55       1.52       10.57       4.56       6.09  
Auditor’s remuneration
                                       
 
audit fees
    0.08       0.07       0.23       0.20       0.27  
 
certification charges
                            0.03  
 
out-of-pocket expenses
    0.01       0.01       0.02       0.02       0.02  
Provision for bad and doubtful debts
    4.10       0.33       18.12       0.51       0.73  
Provision for doubtful loans and advances
    (0.06 )     (0.02 )     0.07       (0.07 )     (0.07 )
Bank charges and commission
    0.19       0.18       0.54       0.50       0.66  
Commission to non whole time directors
    0.47       0.24       1.25       0.72       1.12  
Postage and courier
    0.84       1.03       2.78       3.00       3.99  
Books and periodicals
    0.44       0.32       1.02       0.97       1.42  
Research grants
    0.18             0.36              
Freight charges
    0.32       0.16       0.62       0.43       0.58  
Professional membership and seminar participation fees
    1.19       0.86       2.46       2.51       3.55  
Other miscellaneous expenses
    0.16       0.74       0.87       3.95       4.42  
 
   
     
     
     
     
 
 
    87.25       69.93       257.15       189.65       270.37  
 
   
     
     
     
     
 

8


 

Schedules to the Statement of Cash Flows for the

                                           
      in Rs. crore
     
      Quarter ended   Nine months ended   Year ended
      December 31,   December 31,   March 31,
      2003   2002   2003   2002   2003
     
 
 
 
 
CHANGE IN LOANS AND ADVANCES
                                       
As per the Balance Sheet
    945.50       948.47       945.50       948.47       872.78  
Less : Deposits with financial institutions and body corporate, included in cash and cash equivalents
    (290.13 )     (302.34 )     (290.13 )     (302.34 )     (302.28 )
 
Advance for acquisition of company
    (50.75 )           (50.75 )            
 
Advance income taxes separately considered
    (339.32 )     (407.00 )     (339.32 )     (407.00 )     (289.99 )
 
   
     
     
     
     
 
 
    265.30       239.13       265.30       239.13       280.51  
Less : Opening balance considered
    (282.03 )     (226.52 )     (280.51 )     (152.88 )     (152.88 )
 
   
     
     
     
     
 
 
    (16.73 )     12.61       (15.21 )     86.25       127.63  
 
   
     
     
     
     
 
CHANGE IN CURRENT LIABILITIES AND PROVISIONS
                                       
As per the Balance Sheet
    972.53       681.70       972.53       681.70       703.23  
Add/(Less) : Provisions separately considered in the Cash Flow Statement
                                       
 
Income taxes
    (418.10 )     (395.38 )     (418.10 )     (395.38 )     (274.81 )
 
Dividends
                            (96.05 )
 
Dividend tax
                            (12.30 )
 
Non Cash transactions
                      (24.50 )     (24.50 )
 
Proceeds received on investment pending regulatory approval
    (6.02 )           (6.02 )            
Less : Opening balance considered
    (375.66 )     (273.06 )     (320.07 )     (137.11 )     (137.11 )
 
   
     
     
     
     
 
 
    172.75       13.26       228.34       124.71       158.46  
 
   
     
     
     
     
 
INCOME TAXES PAID
                                       
Charge as per the Profit and Loss Account
    65.00       57.50       177.00       145.00       201.00  
Add : Increase in advance income taxes
    (9.14 )     65.85       49.33       170.75       53.74  
Add : Increase/(Decrease) in Deferred taxes
    (1.02 )     1.45       (3.96 )     10.81       12.59  
Less : (Increase)/Decrease in income tax provision
    (36.04 )     (58.95 )     (143.29 )     (155.81 )     (35.24 )
 
   
     
     
     
     
 
 
    18.80       65.85       79.08       170.75       232.09  
 
   
     
     
     
     
 
PURCHASES OF FIXED ASSETS AND CHANGE IN CAPITAL WORK-IN-PROGRESS
                                       
As per the Balance Sheet
    67.81       56.80       209.57       237.42       317.87  
Less : Opening Capital work-in-progress
    (62.00 )     (92.35 )     (76.56 )     (150.67 )     (150.67 )
Less : Non Cash transaction
                      (24.50 )     (24.50 )
Add : Closing Capital work-in-progress
    79.38       86.41       79.38       86.41       76.56  
 
   
     
     
     
     
 
 
    85.19       50.86       212.39       148.66       219.26  
 
   
     
     
     
     
 
INVESTMENTS IN SECURITIES
                                       
As per the Balance Sheet
    615.54       33.20       615.54       33.20       33.20  
Add : Provisions on investments
    2.29             8.88       23.76       23.77  
 
Proceeds received on investment pending regulatory approval
    (6.02 )           (6.02 )            
 
   
     
     
     
     
 
 
    611.81       33.20       618.40       56.96       56.97  
Less : Opening balance considered
    (476.99 )     (33.20 )     (33.20 )     (44.44 )     (44.44 )
 
   
     
     
     
     
 
 
    134.82             585.20       12.52       12.53  
 
   
     
     
     
     
 
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD/YEAR
                                       
As per the Balance Sheet
    1,603.83       1,129.87       1,603.83       1,129.87       1,336.23  
Add : Deposits with financial institutions and body corporate, included herein
    290.13       302.34       290.13       302.34       302.28  
 
   
     
     
     
     
 
 
    1,893.96       1,432.21       1,893.96       1,432.21       1,638.51  
 
   
     
     
     
     
 

9


 

1.   Extracts of significant accounting policies and notes on accounts

Company overview

Infosys Technologies Limited (“Infosys”) along with its subsidiaries Infosys Technologies (Shanghai) Co. Limited (“Infosys China”) and Progeon Limited (“Progeon”), is a global technology and services organization engaged in delivering a comprehensive range of end-to-end solutions to customers. Infosys provides solutions across the entire software and process life-cycles including design, development, implementation, maintenance and management using its Global Delivery Model. Infosys offers the following services : consulting, software development, software re-engineering, systems integration, package evaluation and implementation, software maintenance, and Business Process Management services (“BPM”). Infosys also provides proprietary software products for the banking industry.

1.1 Significant accounting policies

1.1.1 Basis of preparation of financial statements

The accompanying financial statements are prepared in accordance with Indian Generally Accepted Accounting Principles (“GAAP”) under the historical cost convention on the accruals basis. GAAP comprises mandatory accounting standards issued by the Institute of Chartered Accountants of India (“ICAI”), the provisions of the Companies Act, 1956 and guidelines issued by the Securities and Exchange Board of India. These accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted by the company. Management evaluates the effect of accounting standards issued on an on-going basis and ensures they are adopted as mandated by the ICAI. There are no recently issued accounting standards that management believes have a material impact on the financial statements of the company.

1.2   Notes on accounts

All amounts in the financial statements are presented in Rupees crore, except for per share data and as otherwise stated. All exact amounts are stated with the suffix “/-”. One crore equals 10 million.

The previous period’s/year’s figures have been regrouped/reclassified, wherever necessary to conform to the current period’s/year’s presentation.

1.2.1   Aggregate expenses

The following are the aggregate amounts incurred on certain specific expenses that are required to be disclosed under Schedule VI to the Companies Act, 1956.

                                           
      Quarter ended   Nine months ended   Year ended
      December 31,   December 31,   March 31,
      2003   2002   2003   2002   2003
     
 
 
 
 
Salaries and bonus including overseas staff expenses
    623.05       434.49       1,693.88       1,164.80       1,631.82  
Contribution to provident and other funds
    14.12       9.54       41.32       24.59       36.77  
Staff welfare
    3.91       2.29       10.13       5.89       8.53  
Overseas travel expenses
    53.90       55.47       160.19       156.29       215.60  
Consumables
    2.66       1.84       6.51       4.33       6.46  
Cost of software packages
                                       
 
for own use
    14.50       22.22       49.58       43.31       54.96  
 
for service delivery to clients
    2.12       2.34       14.46       9.96       12.99  
Computer maintenance
    3.03       2.58       8.49       6.96       9.34  
Communication expenses
    7.74       5.86       23.67       18.36       24.44  
Consultancy charges
    10.75       19.77       45.04       38.45       75.86  
Provision for post-sales client support
    (0.21 )     (3.76 )     (0.36 )     (4.06 )     (6.18 )
Traveling and conveyance
    6.33       4.84       16.44       11.95       17.95  
Rent
    9.25       8.04       28.39       20.90       29.30  
Telephone charges
    8.02       7.22       25.07       18.75       26.69  
Professional charges
    9.82       12.40       28.84       32.15       48.62  
Printing and stationery
    1.54       1.27       5.45       4.70       6.23  
Advertisements
    0.86       1.38       2.46       3.45       6.19  
Office maintenance
    7.18       6.69       19.84       15.10       22.85  
Repairs to building
    3.97       2.06       7.36       5.08       7.27  
Repairs to plant and machinery
    1.15       1.66       3.75       3.75       4.77  
Power and fuel
    7.49       5.70       21.91       16.79       22.60  
Brand building
    9.16       7.00       24.30       24.36       29.05  
Insurance charges
    6.10       2.37       17.33       6.86       10.03  
Rates and taxes
    1.65       1.35       3.83       3.85       5.41  
Commission charges
    3.33       3.28       6.24       9.50       10.58  
Donations
    3.55       1.52       10.57       4.56       6.09  
Auditor’s remuneration
                                       
 
– audit fees
    0.08       0.07       0.23       0.20       0.27  
 
– certification charges
                            0.03  
 
– out-of-pocket expenses
    0.01       0.01       0.02       0.02       0.02  
Provision for bad and doubtful debts
    4.10       0.33       18.12       0.51       0.73  
Provision for doubtful loans and advances
    (0.06 )     (0.02 )     0.07       (0.07 )     (0.07 )
Bank charges and commission
    0.20       0.21       0.56       0.57       0.75  
Commission to non-whole time directors
    0.47       0.24       1.25       0.72       1.12  
Postage and courier
    0.84       1.03       2.78       3.00       3.99  
Books and periodicals
    0.44       0.32       1.02       0.97       1.42  
Research grants
    0.18             0.36              
Freight charges
    0.32       0.16       0.62       0.43       0.58  
Professional membership and seminar participation fees
    1.19       0.86       2.46       2.51       3.55  
Marketing expenses
    1.88       1.65       4.49       4.96       6.72  
Sales promotion expenses
    0.30       0.13       0.50       0.33       0.46  
Other miscellaneous expenses
    0.16       0.74       7.91       6.39       6.86  
 
   
     
     
     
     
 
 
    825.08       625.15       2,315.08       1,671.17       2,350.65  
 
   
     
     
     
     
 

10


 

1.2.2    Obligations on long-term, non-cancelable operating leases

The lease rentals charged during the period and maximum obligations on long-term non-cancelable operating leases payable as per the rentals stated in the respective agreements are as follows :

                                         
    Quarter ended   Nine months ended   Year ended
    December 31,   December 31,   March 31,
    2003   2002   2003   2002   2003
   
 
 
 
 
Lease rentals recognized during the period/year
    9.25       8.04       28.39       20.90       29.30  
                         
    As at   As at
Lease obligations   December 31, 2003   December 31, 2002   March 31, 2003
   
 
 
Within one year of the Balance Sheet date
    27.84       17.96       17.93  
Due in a period between one year and five years
    65.00       40.05       36.00  
Due after five years
    6.60       5.40       7.00  
 
   
     
     
 
 
    99.44       63.41       60.93  
 
   
     
     
 

The operating lease arrangements extend for a maximum of ten years from their respective dates of inception and relates to rented overseas premises and car rentals.

Lease rental commitments on a contract with Progeon, as at December 31, 2003 and December 31, 2002 due to Infosys within one year of the Balance Sheet date amounted to Rs. 8.02 and Rs. 2.46 and due in the period between one and five years amounted to Rs. 11.48 and Rs. 3.76 respectively. The lease for premises extends for a maximum period of five years from quarter ended June 30, 2002 (the period of inception).

The sub-lease rentals received from Progeon during the quarter and nine months ended December 31, 2003 amounted to Rs. 0.39 and Rs. 0.53.

Fixed assets stated below have been provided on operating lease to Progeon, as at December 31, 2003 and December 31, 2002 and March 31, 2003.

                         
Particulars   Cost   Accumulated depreciation   Net book value
   
 
 
Building
    10.24       1.14       9.10  
 
    10.13       0.45       9.68  
 
    10.21       0.62       9.59  
Plant and machinery
    3.76       1.34       2.42  
 
    2.06       0.40       1.66  
 
    2.94       0.70       2.24  
Computers
    1.23       0.91       0.32  
 
    0.85       0.32       0.53  
 
    0.85       0.49       0.36  
Furniture & fixtures
    5.60       2.07       3.53  
 
    1.74       0.50       1.24  
 
    2.64       0.88       1.76  
 
   
     
     
 
Total
    20.83       5.46       15.37  
 
    14.78       1.67       13.11  
 
    16.64       2.69       13.95  
 
   
     
     
 

The aggregate depreciation charged on the above during the quarter and nine months ended December 31, 2003, amounted to Rs. 1.03 and Rs. 2.77 (for the quarter and nine months ended December 31, 2002 was Rs. 0.75 and Rs. 1.67 and for the year ended March 31, 2003 was Rs. 2.69). The rental income from Progeon for the quarter and nine months ended December 31, 2003 amounted to Rs. 1.61 and Rs. 4.43 (for the quarter and nine months ended December 31, 2002 was Rs. 0.61 and Rs. 1.16 and for the year ended March 31, 2003 was Rs. 1.96).

1.2.3    Related party transactions

The company entered into related party transactions with the Progeon. The transactions are set out below.

                                           
      Quarter ended   Nine months ended   Year ended
      December 31,   December 31,   March 31,
Particulars   2003   2002   2003   2002   2003
   
 
 
 
 
Capital transactions :
                                       
 
Financing transactions – amount paid to Progeon for issue of 1,22,49,993 fully paid equity shares of Rs 10/- each at par
                      12.25       12.25  
 
Rental deposit placed
                1.61              
 
 
   
     
     
     
     
 
Revenue transactions :
                                       
 
Purchase of services
                0.14       2.08       2.08  
 
 
   
     
     
     
     
 
 
                0.14       2.08       2.08  
Sale of services
                                       
 
Business consulting services
    0.04       1.83       0.08       2.94       3.56  
 
Shared services including facilities and personnel
    3.08       2.95       9.49       5.32       9.61  
 
 
   
     
     
     
     
 
 
    3.12       4.78       9.57       8.26       13.17  
 
 
   
     
     
     
     
 

11


 

The company entered into related party transactions with Infosys China. The transactions are set out below.

                                         
    Quarter ended   Nine months ended   Year ended
    December 31,   December 31,   March 31,
Particulars   2003   2002   2003   2002   2003
   
 
 
 
 
Capital transactions :
                                       
Financing transactions – amount remitted towards capital
    4.54             4.54              

The company has an alliance with Supplychainge Inc., USA to jointly market and deliver lead-time optimization solutions. Prof. Marti G. Subrahmanyam, an external director of the company, is also a director on the board of Supplychainge Inc. During the quarter, nine months ended December 31, 2003 and year ended March 31, 2003, the company paid Rs. nil, Rs. 0.71 and Rs. nil respectively to Supplychainge Inc., towards marketing services under this alliance. Additionally, amount receivable from Supplychainge Inc., as at December 31, 2003 amounted to Rs. nil (as at December 31, 2002 Rs. 0.03 and March 31, 2003 Rs. 0.03) an amount that has been outstanding for a period exceeding six months and fully provided.

During the quarter and nine months ended December 31, 2003 an amount of Rs. 3.50 and Rs. 10.50 respectively has been donated to Infosys Foundation a not- for-profit trust, in which certain directors of the company are trustees. Donation to the Foundation for the quarter and nine months ended December 31, 2002 and year ended March 31, 2003 were Rs. 1.50, Rs. 4.03 and Rs. 5.53 respectively.

1.2.4 Transactions with key management personnel

Key management personnel comprise our directors and statutory officers.

Particulars of remuneration and other benefits provided to key management personnel

Particulars of remuneration and other benefits provided to key management personnel during the quarters ended December 31, 2003, 2002, nine months ended December 31, 2003, 2002 and the year ended March 31, 2003, are set out below.

                                   
              Contributions to                
              provident and   Perquisites and   Total
      Salary   other funds   incentives   remuneration
     
 
 
 
Executive directors
                               
 
Quarter ended December 31, 2003
    0.30       0.06       0.33       0.69  
 
Quarter ended December 31, 2002
    0.42       0.06       1.88       2.36  
 
Nine months ended December 31, 2003
    1.00       0.18       0.74       1.92  
 
Nine months ended December 31, 2002
    2.19       0.12       3.24       5.55  
 
Year ended March 31, 2003
    2.61       0.18       3.30       6.09  
                                   
                      Reimbursement   Total
      Commission   Sitting fees   of expenses   remuneration
     
 
 
 
Independent directors
                               
 
Quarter ended December 31, 2003
    0.08       0.02       0.06       0.16  
 
Quarter ended December 31, 2002
          0.02       0.11       0.13  
 
Nine months ended December 31, 2003
    1.21       0.02       0.26       1.49  
 
Nine months ended December 31, 2002
    0.89       0.04       0.37       1.30  
 
Year ended March 31, 2003
    0.89       0.05       0.42       1.36  
                                                   
              Contributions to                           Outstanding
              provident and   Perquisites and   Total   Total loans   loans and
      Salary   other funds   incentives   remuneration   granted   advances
     
 
 
 
 
 
Other key managerial personnel
                                               
 
Quarter ended December 31, 2003
    0.03       0.01       0.08       0.12              
 
Quarter ended December 31, 2002
    0.01             0.04       0.05              
 
Nine months ended December 31, 2003
    0.09       0.03       0.17       0.29              
 
Nine months ended December 31, 2002
    0.04       0.01       0.08       0.13              
 
Year ended March 31, 2003
    0.06       0.02       0.09       0.17              

In addition, the details of the options granted to non-wholetime directors and other senior officers during the quarters ended December 31, 2003, 2002, nine months ended December 31, 2003, 2002 and the year ended March 31, 2003 are as follows :

                                           
                      Number of   Exercise price   Expiration of
Name   Date of Grant   Option plan   options granted   (in Rs.)   options

 
 
 
 
 
Non-wholetime directors
                                       
 
Claude Smadja
  July 10, 2002     1999       2,000       3,333.65     July 09, 2012
 
Sridar A. Iyengar
  April 10, 2003     1999       2,000       3,049.75     April 09, 2013

1.2.5 Pro forma disclosures relating to the Employee Stock Option Plans (“ESOPs”)

The company’s 1994 stock option plan was established prior to the SEBI guidelines on stock options.

Had the stock compensation costs for this stock option plan been determined as per the guidelines issued by SEBI, the company’s reported net profit would have been reduced to the pro forma amounts indicated below.

12

 


 

                                           
      Quarter ended   Nine months ended   Year ended
      December 31,   December 31,   March 31,
      2003   2002   2003   2002   2003
     
 
 
 
 
Net profit :
                                       
 
– As reported
    328.14       256.31       906.42       698.93       957.93  
 
– Adjusted pro forma
    325.07       250.31       893.42       680.80       934.76  

1.2.6 Fixed assets

The company has entered into lease-cum-sale agreements to acquire certain properties. In accordance with the terms of these agreements, the company has the option to purchase the properties on expiry of the lease period. The company has already paid 99% of the value of the properties at the time of entering into the lease-cum-sale agreements. These amounts are disclosed as “Land - leasehold” under “Fixed assets” in the financial statements. Additionally, certain land has been purchased for which the company has possession certificate for which sale deeds are yet to be executed as at December 31, 2003.

During the year ended March 31, 2003, the company entered into several arrangements to purchase Intellectual Property Rights (“IPR”). These primarily included :

The purchase of IPR in the Trade IQ, a treasury management product, from IQ Financial Systems Inc., USA (“IQFS”) for a consideration of Rs. 16.97 (US$ 3.47 million).

An agreement to purchase IPR in AUTOLAY, a commercial software application product, with the Aeronautical Development Agency, India (“ADA”). The company has a firm commitment to share revenues with ADA for a maximum of US$ 5 million (Rs. 24.50) payable by 10 years from the contract date after which the ownership of intellectual property in AUTOLAY will transfer to the company.

Purchase of a non-exclusive global license in ILink, a signature display software, from Integra Microsystems Private Limited, for Rs. 0.65.

During the nine months ended December 31, 2003, management reduced the remaining estimated useful life of the intellectual property in a commercial software application product to three months, effective August 2003 and treasury management product to two months, effective November 2003. The revised estimation represents management’s present evaluation of the expected future commercial benefits from these products. The revision has resulted in an increased charge to the profit-and-loss account of Rs. 8.57 crore and Rs. 20.28 crore in the quarter and nine months ended December 31, 2003.

1.2.7 Investment activity

The following are the particulars of strategic investments made during the quarters and nine months ended December 31, 2003 and December 31, 2002, and year ended March 31, 2003 respectively :

                                         
    Quarter ended   Nine months ended   Year ended
    December 31,   December 31,   March 31,
Particulars of investee companies   2003   2002   2003   2002   2003
   
 
 
 
 
Progeon Limited, India
                      12.25       12.25  
Infosys Technologies (Shanghai) Co. Limited, China
    4.54             4.54              
M-Commerce Ventures Pte. Limited, Singapore *
                0.19       0.27       0.27  
 
    4.54             4.73       12.52       12.52  

*Net of redemptions

Progeon was incorporated on April 3, 2002, and is a majority owned and controlled subsidiary, established to provide Business Process Management and transitioning services. As at the balance sheet date, the company has invested Rs. 12.25 in 1,22,49,993 fully paid equity shares in Progeon of face value Rs. 10/- each, at par. Progeon seeks to leverage the benefits of service delivery globalization, process redesign and technology to drive efficiency and cost effectiveness in customer business processes. Progeon obtained its financial closure by securing funding of Rs. 49.00 from Citicorp International Finance Corporation, USA (“CIFC”) in exchange for 43,75,000 cumulative, convertible, redeemable preferred shares of face value Rs. 100/- at a premium of Rs. 12/- per share. The preference shares are convertible to an equal number of equity shares based on certain events as agreed between the company and CIFC.

The company received Rs. 0.35 towards return of premium of S$ 1,110/- each on 126 redeemable preference shares of face value of S$ 1/- each during the quarter ended September 30, 2003 from M-Commerce. Accordingly, the aggregate investment in M-Commerce as at December 31, 2003 amounts to Rs. 2.30.

Current liabilities include an amount of Rs. 6.02 received from CiDRA Corporation, USA on a buy back offer which is pending approval from regulatory authorities.

During the nine months ended December 31, 2003, Infosys received Rs. 3.27 from Workadia Inc., and Rs. 0.46 from Stratify Inc., towards recovery of the amounts invested. The remainder of the investment was written off in the quarter ended December 31, 2003.

1.2.8 Contingent liability

During the quarter ended September 30, 2003, Ms. Jennifer Griffith, a former employee, filed a lawsuit against the company and its former director, Mr. Phaneesh Murthy. The lawsuit was served on the company during the quarter ended December 31, 2003. Management is reviewing the allegations. Based on its present knowledge of facts, management estimates that the lawsuit will not have material impact on the result of operation or financial position of the company.

1.2.9 Segment reporting

The company’s operations predominantly relate to providing IT services, delivered to customers globally operating in various industry segments. Accordingly, IT service revenues represented along industry classes comprise the primary basis of segmental information set out in these financial statements. Secondary segmental reporting is performed on the basis of the geographical location of customers.

The accounting principles consistently used in the preparation of the financial statements are also consistently applied to record income and expenditure in individual segments. These are as set out in the note on significant accounting policies.

Industry segments at the company are primarily financial services comprising customers providing banking, finance and insurance services; manufacturing companies; companies in the telecommunications and the retail industries; and others such as utilities, transportation and logistics companies.

Income and direct expenses in relation to segments is categorized based on items that are individually identifiable to that segment, while the remainder of the costs

13

 


 

are categorized in relation to the associated turnover of the segment. Certain expenses such as depreciation, which form a significant component of total expenses, are not specifically allocable to specific segments as the underlying services are used interchangeably. The company 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 directly charged against total income.

Fixed assets used in the company’s business or liabilities contracted have not been identified to any of the reportable segments, as the fixed assets and services are used interchangeably between segments. Accordingly, no disclosure relating to total segment assets and liabilities are made.

Customer relationships are driven based on the location of the respective client. North America comprises the United States of America, Canada and Mexico; Europe includes continental Europe (both the east and the west), Ireland and the United Kingdom; and the Rest of the World comprising all other places except, those mentioned above and India.

Geographical revenues are segregated based on the location of the customer who is invoiced or in relation to which the revenue is otherwise recognized.

Industry segments

                                                   
      Financial services   Manufacturing   Telecom   Retail   Others   Total
     
 
 
 
 
 
Quarter ended December 31, 2003 and December 31, 2002
                                               
 
Revenues
    457.86       178.85       183.84       151.98       262.73       1,235.26  
 
    360.79       166.23       134.60       112.82       184.20       958.64  
 
Identifiable operating expenses
    190.06       80.49       74.24       57.44       109.49       511.72  
 
    138.26       64.45       46.43       34.97       71.42       355.53  
 
Allocated expenses
    116.14       45.37       46.64       38.56       66.65       313.36  
 
    104.91       45.80       37.08       31.08       50.75       269.62  
 
   
     
     
     
     
     
 
 
Segmental operating income
    151.66       52.99       62.96       55.98       86.59       410.18  
 
    117.62       55.98       51.09       46.77       62.03       333.49  
 
Unallocable expenses
                                            62.23  
 
                                            49.48  
 
                                           
 
 
Operating income
                                            347.95  
 
                                            284.01  
 
Other income (expense), net
                                            45.19  
 
                                            29.80  
 
                                           
 
 
Net profit before taxes
                                            393.14  
 
                                            313.81  
 
Income taxes
                                            65.00  
 
                                            57.50  
 
Net profit after taxes
                                            328.14  
 
                                            256.31  
 
                                           
 
Nine months ended December 31, 2003 and December 31, 2002
                                               
 
Revenues
    1,295.09       522.28       511.59       413.70       709.33       3,451.99  
 
    982.25       442.36       379.19       300.59       498.44       2,602.83  
 
Identifiable operating expenses
    546.67       228.11       204.99       154.06       292.37       1,426.20  
 
    395.17       179.90       129.93       94.94       187.69       987.63  
 
Allocated expenses
    333.54       134.52       131.76       106.51       182.55       888.88  
 
    267.21       113.73       97.26       77.28       128.06       683.54  
 
   
     
     
     
     
     
 
 
Segmental operating income
    414.88       159.65       174.84       153.13       234.41       1,136.91  
 
    319.87       148.73       152.00       128.37       182.69       931.66  
 
Unallocable expenses
                                            168.82  
 
                                            136.19  
 
                                           
 
 
Operating income
                                            968.09  
 
                                            795.47  
 
Other income (expense), net
                                            115.33  
 
                                            48.46  
 
                                           
 
 
Net profit before taxes
                                            1,083.42  
 
                                            843.93  
 
Income taxes
                                            177.00  
 
                                            145.00  
 
Net profit after taxes
                                            906.42  
 
                                            698.93  
 
                                           
 
Year ended March 31, 2003
                                               
 
Revenues
    1,355.94       597.84       543.19       414.54       711.18       3,622.69  
 
Identified operating expenses
    546.77       243.93       186.18       132.45       264.64       1,373.97  
 
Allocated expenses
    377.31       157.77       143.72       109.56       188.32       976.68  
 
   
     
     
     
     
     
 
 
Segmental operating income
    431.86       196.14       213.29       172.53       258.22       1,272.04  
 
Unallocable expenses
                                            188.95  
 
                                           
 
 
Operating income
                                            1,083.09  
 
Other income (expense), net
                                            75.84  
 
                                           
 
 
Net profit before taxes
                                            1,158.93  
 
Income taxes
                                            201.00  
 
                                           
 
 
Net profit after taxes
                                            957.93  
 
                                           
 

14

 


 

Geographic segments

                                           
      North America   Europe   India   Rest of the World   Total
     
 
 
 
 
Quarter ended December 31, 2003 and December 31, 2002
                                       
 
Revenues
    891.80       253.86       7.96       81.64       1,235.26  
 
    708.47       157.71       13.46       79.00       958.64  
 
Identifiable operating expenses
    369.54       101.98       2.80       37.40       511.72  
 
    281.61       51.84       4.58       17.50       355.53  
 
Allocated expenses
    226.23       64.40       2.02       20.71       313.36  
 
    198.14       41.96       7.72       21.80       269.62  
 
   
     
     
     
     
 
 
Segmental operating income
    296.03       87.48       3.14       23.53       410.18  
 
    228.72       63.91       1.16       39.70       333.49  
 
Unallocable expenses
                                    62.23  
 
                                    49.48  
 
                                   
 
 
Operating income
                                    347.95  
 
                                    284.01  
 
Other income (expense), net
                                    45.19  
 
                                    29.80  
 
                                   
 
 
Net profit before taxes
                                    393.14  
 
                                    313.81  
 
Income taxes
                                    65.00  
 
                                    57.50  
 
                                   
 
 
Net profit after taxes
                                    328.14  
 
                                    256.31  
 
                                   
 
Nine months ended December 31, 2003 and December 31, 2002
                                       
 
Revenues
    2,535.05       647.61       50.06       219.27       3,451.99  
 
    1,909.05       450.15       49.90       193.73       2,602.83  
 
Identifiable operating expenses
    1,064.33       260.44       15.70       85.73       1,426.20  
 
    758.31       155.01       17.18       57.13       987.63  
 
Allocated expenses
    652.85       166.64       12.94       56.45       888.88  
 
    496.98       114.76       18.76       53.04       683.54  
 
   
     
     
     
     
 
 
Segmental operating income
    817.87       220.53       21.42       77.09       1,136.91  
 
    653.76       180.38       13.96       83.56       931.66  
 
Unallocable expenses
                                    168.82  
 
                                    136.19  
 
                                   
 
 
Operating income
                                    968.09  
 
                                    795.47  
 
Other income (expense), net
                                    115.33  
 
                                    48.46  
 
                                   
 
 
Net profit before taxes
                                    1,083.42  
 
                                    843.93  
 
Income taxes
                                    177.00  
 
                                    145.00  
 
                                   
 
 
Net profit after taxes
                                    906.42  
 
                                    698.93  
 
                                   
 
Year ended March 31, 2003
                                       
 
Revenues
    2,637.51       641.58       79.18       264.42       3,622.69  
 
Identifiable operating expenses
    1,052.82       224.82       19.79       76.54       1,373.97  
 
Allocated expenses
    704.20       169.21       30.01       73.26       976.68  
 
   
     
     
     
     
 
 
Segmental operating income
    880.49       247.55       29.38       114.62       1,272.04  
 
Unallocable expenses
                                    188.95  
 
                                   
 
 
Operating income
                                    1,083.09  
 
Other income (expense), net
                                    75.84  
 
                                   
 
 
Net profit before taxes
                                    1,158.93  
 
Income taxes
                                    201.00  
 
                                   
 
 
Net profit after taxes
                                    957.93  
 
                                   
 

1.2.10 Reconciliation of basic and diluted shares used in computing earnings per share

                                         
    Quarter ended   Nine months ended   Year ended
    December 31,   December 31,   March 31,
    2003   2002   2003   2002   2003
   
 
 
 
 
Number of shares considered as basic weighted average shares outstanding
    6,63,79,862       6,62,21,577       6,62,94,021       6,62,02,947       6,62,11,068  
Add : Effect of dilutive issues of shares/stock options
    12,28,031       8,35,583       6,35,047       5,52,582       6,05,753  
 
   
     
     
     
     
 
Number of shares considered as weighted average shares and potential shares outstanding
    6,76,07,893       6,70,57,160       6,69,29,068       6,67,55,529       6,68,16,821  
 
   
     
     
     
     
 

15

 


 

Consolidated financial statements of Infosys Technologies Limited and its subsidiaries

Principles of consolidation

The financial statements are prepared in accordance with the principles and procedures for the preparation and presentation of consolidated financial statements as laid down under the accounting standard on Consolidated Financial Statements issued by the ICAI. The financial statements of the parent company, Infosys, and its subsidiaries, Infosys Technologies (Shanghai) Co. Limited (“Infosys China”) and Progeon Limited (“Progeon”) have been combined on a line-by-line basis by adding together the book values of like items of assets, liabilities, income and expenses after eliminating intra-group balances and transactions and resulting unrealized gains/losses. The consolidated financial statements are prepared applying uniform accounting policies in use at Infosys, Progeon and Infosys China.

Management’s Statement on significant accounting policies contained in the audited financial statements.

There are no changes in the accounting policies during the quarter ended December 31, 2003. The significant accounting policies of the company relate to revenue recognition, expenditure, fixed assets and capital work-in-progress, depreciation, retirement benefits to employees–principally gratuity, superannuation and provident fund benefits, research and development, income tax, earning per share, foreign currency transactions and investments.

A complete set of the audited consolidated financial statements is available at www.infosys.com.

Auditors’ report to the Board of Directors on the Consolidated Financial Statements of Infosys Technologies Limited and its subsidiaries

We have audited the attached consolidated balance sheet of Infosys Technologies Limited (the Company) and its subsidiaries as at December 31, 2003, and also the consolidated profit and loss account and the consolidated cash flow statement for the quarter and nine months ended on that date, annexed thereto. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the auditing standards generally accepted in India. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

We report that the consolidated financial statements have been prepared by the Company’s management in accordance with the requirements of Accounting Standard (AS) 21, Consolidated Financial Statements, issued by the Institute of Chartered Accountants of India.

In our opinion and to the best of our information and according to the explanations given to us, the consolidated financial statements give a true and fair view in conformity with the accounting principles generally accepted in India :

(a)   in the case of the consolidated balance sheet, of the state of affairs of Infosys Technologies Limited and its subsidiaries as at December 31, 2003;
 
(b)   in the case of the consolidated profit and loss account, of the profit of Infosys Technologies Limited and its subsidiaries for the quarter and nine months ended on that date; and
 
(c)   in the case of the consolidated cash flow statement, of the cash flows of Infosys Technologies Limited and its subsidiaries for the quarter and nine months ended on that date.

for Bharat S. Raut & Co.
Chartered Accountants

S. Balasubrahmanyam
Partner
Membership No. 53315

Bangalore
January 9, 2004

16

 


 

Consolidated Balance Sheet as at

                         
in Rs. crore
   
    December 31, 2003   December 31, 2002   March 31, 2003
   
 
 
SOURCES OF FUNDS
                       
SHAREHOLDERS’ FUNDS
                       
Share capital
    33.23       33.11       33.12  
Reserves and surplus
    3,690.87       2,670.09       2,824.37  
 
   
     
     
 
 
    3,724.10       2,703.20       2,857.49  
Preference shares issued by subsidiary
    49.00       49.00       49.00  
 
   
     
     
 
 
    3,773.10       2,752.20       2,906.49  
 
   
     
     
 
APPLICATION OF FUNDS
                       
FIXED ASSETS
                       
Original cost
    1,499.00       1,199.09       1,279.04  
Less : Depreciation and amortization
    749.88       526.48       578.54  
 
   
     
     
 
Net book value
    749.12       672.61       700.50  
Add : Capital work-in-progress
    80.47       86.42       77.39  
 
   
     
     
 
 
    829.59       759.03       777.89  
INVESTMENTS
    614.01       20.95       20.95  
DEFERRED TAX ASSETS
    32.85       35.03       36.81  
CURRENT ASSETS, LOANS AND ADVANCES
                       
Sundry debtors
    696.96       491.56       518.65  
Cash and bank balances
    1,616.99       1,138.72       1,346.54  
Loans and advances
    961.69       991.57       913.46  
 
   
     
     
 
 
    3,275.64       2,621.85       2,778.65  
Less : Current liabilities
    555.71       282.17       319.60  
Provisions
    423.28       402.49       388.21  
 
   
     
     
 
NET CURRENT ASSETS
    2,296.65       1,937.19       2,070.84  
 
   
     
     
 
 
    3,773.10       2,752.20       2,906.49  
 
   
     
     
 

This is the Consolidated Balance Sheet referred to in our report of even date.

for Bharat S. Raut & Co.
Chartered Accountants

             
S. Balasubrahmanyam   N. R. Narayana Murthy   Nandan M. Nilekani   S. Gopalakrishnan
Partner   Chairman and Chief Mentor   Chief Executive Officer, President   Chief Operating Officer and
Membership No. 53315       and Managing Director   Deputy Managing Director
             
    Deepak M. Satwalekar   Marti G. Subrahmanyam   Philip Yeo
    Director   Director   Director
             
    Omkar Goswami   Larry Pressler   Rama Bijapurkar
    Director   Director   Director
             
    Claude Smadja   Sridar A. Iyengar   K. Dinesh
    Director   Director   Director
             
    S. D. Shibulal   T. V. Mohandas Pai   Srinath Batni
    Director   Director and   Director
        Chief Financial Officer    
             
    V. Balakrishnan        
Bangalore   Company Secretary and        
January 9, 2004   Vice President – Finance        

17

 


 

Consolidated Profit and Loss Account for the

                                             
in Rs. crore, except per share data
       
        Quarter ended   Nine months ended   Year ended
        December 31,   December 31,   March 31,
        2003   2002   2003   2002   2003
       
 
 
 
 
INCOME - Software services, products and business process management
                                       
 
Overseas
    1,249.09       951.56       3,453.53       2,560.41       3,564.36  
 
Domestic
    7.92       13.46       49.98       49.90       75.62  
 
   
     
     
     
     
 
 
    1,257.01       965.02       3,503.51       2,610.31       3,639.98  
Software development and business process management expenses
    656.70       486.04       1,831.58       1,289.46       1,822.96  
 
   
     
     
     
     
 
GROSS PROFIT
    600.31       478.98       1,671.93       1,320.85       1,817.02  
SELLING AND MARKETING EXPENSES
    94.89       75.09       259.23       200.61       271.73  
GENERAL AND ADMINISTRATION EXPENSES
    92.33       71.21       267.66       192.59       275.67  
 
   
     
     
     
     
 
 
    187.22       146.30       526.89       393.20       547.40  
OPERATING PROFIT BEFORE INTEREST, DEPRECIATION AND AMORTIZATION
    413.09       332.68       1,145.04       927.65       1,269.62  
Interest
                             
Depreciation and amortization
    63.75       50.05       172.32       136.93       190.34  
 
   
     
     
     
     
 
OPERATING PROFIT AFTER INTEREST, DEPRECIATION AND AMORTIZATION
    349.34       282.63       972.72       790.72       1,079.28  
Other income
    46.46       29.78       121.56       73.07       100.26  
Provision for investments
    2.29             8.88       23.76       23.77  
 
   
     
     
     
     
 
NET PROFIT BEFORE TAX
    393.51       312.41       1,085.40       840.03       1,155.77  
Provision for taxation
    65.00       57.50       177.00       145.00       201.00  
 
   
     
     
     
     
 
NET PROFIT AFTER TAX
    328.51       254.91       908.40       695.03       954.77  
 
   
     
     
     
     
 
AMOUNT AVAILABLE FOR APPROPRIATION
    328.51       254.91       908.40       695.03       954.77  
DIVIDEND
                                       
 
Interim
                96.09       82.76       82.76  
 
Final (Subject to deduction of tax, if any)
                            96.05  
 
Dividend tax
                12.31             12.30  
 
Amount transferred - general reserve
                            763.66  
Balance in Profit and Loss Account
    328.51       254.91       800.00       612.27        
 
   
     
     
     
     
 
 
    328.51       254.91       908.40       695.03       954.77  
 
   
     
     
     
     
 
EARNINGS PER SHARE (Equity shares, par value Rs.5/- each)
                                       
   
Basic
    49.49       38.49       137.03       104.98       144.20  
   
Diluted
    48.59       38.01       135.73       104.12       142.89  
Number of shares used in computing earnings per share
                                       
   
Basic
    6,63,79,862       6,62,21,577       6,62,94,021       6,62,02,947       6,62,11,068  
   
Diluted
    6,76,07,893       6,70,57,160       6,69,29,068       6,67,55,529       6,68,16,821  
 
   
     
     
     
     
 

This is the Consolidated Profit and Loss Account referred to in our report of even date.

for Bharat S. Raut & Co.
Chartered Accountants

             
S. Balasubrahmanyam   N. R. Narayana Murthy   Nandan M. Nilekani   S. Gopalakrishnan
Partner   Chairman and Chief Mentor   Chief Executive Officer, President   Chief Operating Officer and
Membership No. 53315       and Managing Director   Deputy Managing Director
             
    Deepak M. Satwalekar   Marti G. Subrahmanyam   Philip Yeo
    Director   Director   Director
             
    Omkar Goswami   Larry Pressler   Rama Bijapurkar
    Director   Director   Director
             
    Claude Smadja   Sridar A. Iyengar   K. Dinesh
    Director   Director   Director
             
    S. D. Shibulal   T. V. Mohandas Pai   Srinath Batni
    Director   Director and   Director
        Chief Financial Officer    
             
    V. Balakrishnan        
Bangalore   Company Secretary and        
January 9, 2004   Vice President – Finance        

18

 


 

Consolidated Cash Flow Statement for the

                                           
in Rs. crore
     
      Quarter ended   Nine months ended   Year ended
      December 31,   December 31,   March 31,
      2003   2002   2003   2002   2003
     
 
 
 
 
CASH FLOWS FROM OPERATING ACTIVITIES
                                       
Profit before tax
    393.51       312.41       1,085.40       840.03       1,155.77  
Adjustments to reconcile profit before tax to cash provided by operating activities
                                       
 
(Profit)/Loss on sale of fixed assets
    (0.01 )     (0.08 )     (0.02 )     0.05       (0.01 )
 
Depreciation and amortization
    63.75       50.05       172.32       136.93       190.34  
 
Interest and dividend income
    (26.59 )     (20.37 )     (73.81 )     (57.87 )     (80.67 )
 
Provisions on long-term investments
    2.29             8.88       23.76       23.77  
 
Exchange differences on translation of foreign currency cash and cash equivalents
    (4.95 )     0.01       (1.09 )     (2.46 )     (2.06 )
Changes in current assets and liabilities
                                       
 
Sundry debtors
    (104.37 )     (31.83 )     (178.31 )     (154.83 )     (181.92 )
 
Loans and advances
    21.89       (13.82 )     16.45       (88.92 )     (132.38 )
 
Current liabilities and provisions
    173.33       10.97       230.22       127.67       163.04  
 
Income taxes paid during the period/year
    (18.89 )     (66.11 )     (79.40 )     (171.16 )     (232.54 )
 
   
     
     
     
     
 
NET CASH GENERATED BY OPERATING ACTIVITIES
    499.96       241.23       1,180.64       653.20       903.34  
 
   
     
     
     
     
 
CASH FLOWS FROM FINANCING ACTIVITIES
                                       
Proceeds from the issue of preference share capital
                      49.00       49.00  
Proceeds on exercise of stock options
    61.53       7.47       66.61       10.62       13.52  
Dividends paid during the period/year, including dividend tax
    (108.40 )     (82.76 )     (216.75 )     (165.49 )     (165.49 )
 
   
     
     
     
     
 
NET CASH USED IN FINANCING ACTIVITIES
    (46.87 )     (75.29 )     (150.14 )     (105.87 )     (102.97 )
 
   
     
     
     
     
 
CASH FLOWS FROM INVESTING ACTIVITIES
                                       
Purchases of fixed assets and change in capital work-in-progress
    (90.50 )     (52.33 )     (224.26 )     (153.52 )     (225.82 )
Advance for acquisition of company
    (50.75 )           (50.75 )           .—  
Proceeds on disposal of fixed assets
    0.02       0.08       0.26       0.25       0.33  
Long-term investments in securities
    (145.54 )           (595.92 )     (0.27 )     (0.27 )
Interest and dividend income
    26.59       20.37       73.81       57.87       80.67  
 
   
     
     
     
     
 
NET CASH USED IN INVESTING ACTIVITIES
    (260.18 )     (31.88 )     (796.86 )     (95.67 )     (145.09 )
 
   
     
     
     
     
 
Effect of exchange differences on translation of foreign currency cash and cash equivalents
    4.95       (0.01 )     1.09       2.46       2.06  
 
   
     
     
     
     
 
Net (decrease)/increase in cash and cash equivalents during the period/year
    197.86       134.05       234.73       454.12       657.34  
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD/YEAR
    1,721.17       1,347.03       1,684.30       1,026.96       1,026.96  
 
   
     
     
     
     
 
CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD/YEAR
    1,919.03       1,481.08       1,919.03       1,481.08       1,684.30  
 
   
     
     
     
     
 

This is the Consolidated Cash Flow Statement referred to in our report of even date.

for Bharat S. Raut & Co.
Chartered Accountants

             
S. Balasubrahmanyam   N. R. Narayana Murthy   Nandan M. Nilekani   S. Gopalakrishnan
Partner   Chairman and Chief Mentor   Chief Executive Officer, President   Chief Operating Officer and
Membership No. 53315       and Managing Director   Deputy Managing Director
             
    Deepak M. Satwalekar   Marti G. Subrahmanyam   Philip Yeo
    Director   Director   Director
             
    Omkar Goswami   Larry Pressler   Rama Bijapurkar
    Director   Director   Director
             
    Claude Smadja   Sridar A. Iyengar   K. Dinesh
    Director   Director   Director
             
    S. D. Shibulal   T. V. Mohandas Pai   Srinath Batni
    Director   Director and   Director
        Chief Financial Officer    
             
    V. Balakrishnan        
Bangalore   Company Secretary and        
January 9, 2004   Vice President – Finance        

19

 


 

Ratio analysis as per Indian GAAP (Non consolidated)

                                           
      Quarter ended   Nine months ended   Year ended
      December 31,   December 31,   March 31,
      2003   2002   2003   2002   2003
     
 
 
 
 
Financial performance
                                       
 
Export revenue/total revenue (%)
    99.36       98.6       98.55       98.08       97.81  
 
Domestic revenue/total revenue (%)
    0.64       1.4       1.45       1.92       2.19  
 
Software development expenses/total revenue (%)
    52.25       50.24       52.3       49.31       50.05  
 
Gross profit/total revenue (%)
    47.75       49.76       47.7       50.69       49.95  
 
Selling and marketing expenses/total revenue (%)
    7.48       7.68       7.31       7.61       7.37  
 
General and administration expenses/total revenue (%)
    7.06       7.3       7.45       7.29       7.46  
 
Selling, general and administration expenses/total revenue (%)
    14.54       14.97       14.76       14.89       14.83  
 
Employee costs/total revenue (%)
    51.9       46.56       50.56       45.92       46.3  
 
Operating profit/total revenue (%)
    33.21       34.79       32.93       35.79       35.11  
 
Depreciation and amortization/total revenue (%)
    5.04       5.16       4.89       5.23       5.22  
 
Operating profit after depreciation and Interest/total revenue (%)
    28.17       29.63       28.04       30.56       29.9  
 
Other income/total revenue (%)
    3.84       3.11       3.6       2.78       2.75  
 
Provision for Investments/total revenue (%)
    0.19             0.26       0.91       0.66  
 
Profit before tax/total revenue (%)
    31.83       32.73       31.39       32.42       31.99  
 
Tax/total revenue (%)
    5.26       6       5.1       5.57       5.55  
 
Tax/PBT (%)
    16.53       18.32       16.25       17.18       17.34  
 
PAT from ordinary activities/total revenue (%)
    26.56       26.74       26.28       26.85       26.44  
 
Capital expenditure/total revenue (%) (LTM)
    6.9       5.3       6.15       5.71       6.05  
 
PAT from ordinary activities/average net worth (%) (LTM)
    36.27       39.05       36.27       39.05       38.78  
 
ROCE (PBIT/Average capital employed) (%) (LTM)
    43.48       46.95       43.48       46.95       46.91  
 
Return on invested capital (%) (LTM)
    87.9       73.29       87.9       73.29       79.86  
 
Capital output ratio (LTM)
    1.39       1.41       1.39       1.41       1.47  
 
Invested capital output ratio (LTM)
    3.55       2.78       3.55       2.78       3.18  
Balance sheet
                                       
 
Debt-equity ratio
                             
 
Debtors turnover (Days) (LTM)
    56       54       56       54       52  
 
Current ratio
    3.26       3.76       3.26       3.76       3.87  
 
Cash and cash equivalents/total assets (%)*
    66.68       52.91       66.68       52.91       57.28  
 
Cash and cash equivalents/total revenue (%) (LTM)*
    55.55       43.63       55.55       43.63       45.23  
 
Depreciation/average gross block (%) (LTM)
    16.56       17.71       16.56       17.71       16.92  
 
Technology investment/total revenue (%) (LTM)
    4.35       3.6       4.35       3.6       3.62  
Year on Year Growth (%) **
                                       
 
Export revenue
    30       46       33       36       39  
 
Total revenue
    29       45       33       35       39  
 
Operating profit
    23       25       22       21       23  
 
Net profit
    28       24       30       17       19  
 
EPS
    28       24       30       17       18  
Per-share data (period end)
                                       
 
Basic earnings per share from ordinary activities (Rs.)
    49.43       38.72       136.87       105.57       144.68  
 
Basic cash earnings per share from ordinary activities (Rs.)
    58.81       46.19       162.33       126.15       173.22  
 
Book value (Rs.)
    561.93       408.91       561.93       408.91       431.84  
 
Price/earning (LTM)
    31.63       34.76       31.63       34.76       28.01  
 
Price/cash earnings (LTM)
    26.58       28.99       26.58       28.99       23.4  
 
Price/book value
    9.9       11.67       9.9       11.67       9.39  
 
PE/EPS growth
    1.14       1.43       1.07       2.06       1.52  
 
Dividend per share (Rs.)
                14.5       12.5       27  

* Investments in Liquid funds have been considered as Cash & Cash equivalents for the purpose of the above ratio analysis.

** Denotes growth compared with figures of the corresponding period in the previous year.

LTM : Last Twelve Months.

20

 


 

At a glance – US GAAP

                                         
US $ millions, except as otherwise stated

    Quarter ended   Nine months ended   Year ended
    December 31,   December 31,   March 31,
    2002   2003   2002   2003   2003
   
 
 
 
 
For the period
                                       
Revenues
    200.01       275.89       537.78       759.91       753.81  
Operating income
    57.27       75.69       159.15       207.54       218.64  
Operating income/revenues (%)
    28.63 %     27.43 %     29.59 %     27.31 %     29.00 %
Net income
    52.25       70.55       141.80       193.53       194.87  
Net income/revenues (%)
    26.12 %     25.57 %     26.37 %     25.47 %     25.85 %
Basic earnings per equity share ($)
    0.80       1.07       2.16       2.95       2.97  
Cash dividend per equity share ($)
    0.26       0.36       0.51       0.71       0.51  
Capital expenditure
    10.80       19.83       30.88       48.63       46.71  
At the end of the period
                                       
Total assets
    635.40       969.24       635.40       969.24       704.31  
Property, plant and equipment- net
    150.71       182.13       150.71       182.13       157.19  
Cash and cash equivalents
    308.56       421.30       308.56       421.30       354.36  
Working capital
    387.42       630.82       387.42       630.82       444.77  
Total debt
                             
Stockholders’ equity
    565.13       821.02       565.13       821.02       626.00  
Common stock
    8.60       8.63       8.60       8.63       8.60  
Market capitalization
    6,586.11       8,118.72       6,586.11       8,118.72       5,648.50  

Note : Market capitalization is calculated by considering the share price at National Stock Exchange on the shares outstanding at the period/year end.

(BAR CHART)

21

 


 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of the Securities Exchange Act of 1934

For the quarter ended December 31, 2003

Commission File Number: 333-72195

INFOSYS TECHNOLOGIES LIMITED

(Exact name of Registrant as specified in its charter)

Not Applicable

(Translation of Registrant’s name into English)

Bangalore, Karnataka, India
(Jurisdiction of incorporation or organization)

Electronics City, Hosur Road, Bangalore, Karnataka, India 560 100. +91-80-852-0261

(Address of principal executive offices)

Indicate by check mark registrant files or will file annual reports under cover Form 20-F or Form 40-F.
Form 20-F  þ    Form 40-F  o

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g 3-2(b) under the Securities Exchange Act of 1934
Yes  o    No þ

If “Yes” is marked, indicate below the file number assigned to registrant in connection with Rule 12g 3-2(b).
Not Applicable

Currency of Presentation and Certain Defined Terms

In this Quarterly Report, references to “U.S.” or “United States” are to the United States of America, its territories and its possessions. References to “India” are to the Republic of India. References to “$” or “dollars” or “U.S. dollars” are to the legal currency of the United States and references to “Rs.” or “rupees” or “Indian rupees” are to the legal currency of India. Our financial statements are presented in Indian rupees and translated into U.S. dollars and are prepared in accordance with United States Generally Accepted Accounting Principles, or U.S. GAAP. References to “Indian GAAP” are to Indian Generally Accepted Accounting Principles. References to a particular “fiscal” year are to our fiscal year ended March 31 of such year.

All references to “we,” “us,” “our,” “Infosys” or the “Company” shall mean Infosys Technologies Limited. “Infosys” is a registered trademark of Infosys Technologies Limited in the United States and India. All other trademarks or tradenames used in this Quarterly Report are the property of their respective owners.

Except as otherwise stated in this Quarterly Report, all translations from Indian Rupees to U.S. dollars are based on the noon buying rate in the City of New York on December 31, 2003, for cable transfers in Indian rupees as certified for customs purposes by the Federal Reserve Bank of New York which was Rs. 45.55 per $ 1.00. No representation is made that the Indian rupee amounts have been, could have been or could be converted into U.S. dollars at such a rate or any other rate. Any discrepancies in any table between totals and sums of the amounts listed are due to rounding. Information contained in our website, www.infosys.com, is not part of this Quarterly Report.

Forward-looking Statements May Prove Inaccurate

In addition to historical information, this Quarterly Report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The forward-looking statements contained herein are subject to certain risks and uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. Factors that might cause such differences include but are not limited to, those discussed in the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date hereof. In addition, readers should carefully review the other information in this Quarterly Report and in the Company’s periodic reports and other documents filed with the Securities and Exchange Commission (“SEC”) from time to time.

22


 

Part I - Financial Information

Item 1. Financial Statements

Consolidated balance sheets

                   
      March 31, 2003 (1)   December 31, 2003
          (Unaudited)
     
 
ASSETS
               
Current Assets
               
 
Cash and cash equivalents
  $ 354,362,918     $ 421,302,898  
 
Investments in liquid mutual fund units
          133,011,380  
 
Trade accounts receivable, net of allowances
    109,119,856       153,010,094  
 
Deferred tax assets
    288,541       472,095  
 
Prepaid expenses and other current assets
    24,384,316       35,637,535  
 
Unbilled revenue
    19,702,186       20,420,935  
 
 
   
     
 
 
Total current assets
    507,857,817       763,854,937  
Property, plant and equipment, net
    157,194,190       182,131,622  
Intangible assets, net
    6,471,236        
Deferred tax assets
    7,264,885       6,509,330  
Investments
    4,613,833       1,925,167  
Prepaid income taxes
    4,452,678       169,688  
Other assets
    16,454,328       14,651,560  
 
 
   
     
 
TOTAL ASSETS
  $ 704,308,967     $ 969,242,304  
 
 
   
     
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Current Liabilities
               
 
Accounts payable
  $ 426,611     $ 342,644  
 
Client deposits
    3,208,295       21,203,634  
 
Other accrued liabilities
    46,249,269       78,656,396  
 
Income taxes payable
          14,321,236  
 
Unearned revenue
    13,202,115       18,510,857  
 
 
   
     
 
Total current liabilities
    63,086,290       133,034,767  
Non-current liabilities
               
Preferred stock of subsidiary
               
 
0.0005% Cumulative Convertible Preference Shares, par value $2 each, 4,375,000 preference shares Authorized, issued and outstanding - 4,375,000 preference shares as of March 31, 2003 and December 31, 2003
    10,000,000       10,757,408  
 
Other non-current liabilities
    5,217,758       4,427,000  
Stockholders’ Equity
               
 
Common stock, $0.16 par value; 100,000,000 equity shares authorized, Issued and outstanding - 66,243,078 and 66,455,992 as of March 31, 2003 and December 31, 2003 respectively
    8,602,909       8,626,207  
 
Additional paid-in capital
    127,042,751       144,070,027  
 
Retained earnings
    524,621,160       670,884,201  
 
Deferred stock compensation
    (2,817,066 )      
 
Accumulated other comprehensive income
    (31,444,835 )     (2,557,306 )
 
 
   
     
 
Total stockholders’ equity
    626,004,919       821,023,129  
 
 
   
     
 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
  $ 704,308,967     $ 969,242,304  
 
 
   
     
 

(1) March 31, 2003 balances were obtained from audited financial statements

Unaudited consolidated statements of income

                                   
      Three months ended December 31,   Nine months ended December 31,
      2002   2003   2002   2003
     
 
 
 
Revenues
  $ 200,014,166     $ 275,886,678     $ 537,775,974     $ 759,911,290  
Cost of revenues (including amortization of stock compensation expenses of $729,994 and $395,344 for the three months ended December 31, 2002 and 2003 and $2,189,981 and $1,653,156 for the nine months ended December 31, 2002 and 2003)
    110,928,922       155,856,199       294,226,283       429,501,225  
 
   
     
     
     
 
Gross profit
    89,085,244       120,030,479       243,549,691       330,410,065  
 
   
     
     
     
 
Operating Expenses:
                               
 
Selling and marketing expenses
    14,952,660       20,827,551       40,734,946       56,243,853  
 
General and administrative expenses
    15,422,086       20,586,131       40,383,534       58,747,502  
 
Amortization of stock compensation expense
    513,954       278,343       1,541,863       1,163,910  
 
Amortization of intangible assets
    924,249       2,647,778       1,744,274       6,719,351  
 
   
     
     
     
 
Total operating expenses
    31,812,949       44,339,803       84,404,617       122,874,616  
 
   
     
     
     
 
Operating income
    57,272,295       75,690,676       159,145,074       207,535,449  
 
Other income, net
    6,907,692       8,842,133       12,538,464       24,385,839  
Income before income taxes
    64,179,987       84,532,809       171,683,538       231,921,288  
 
   
     
     
     
 
 
Provision for income taxes
    11,926,841       13,987,449       29,885,621       38,391,629  
 
   
     
     
     
 
Net income
  $ 52,253,146     $ 70,545,360     $ 141,797,917     $ 193,529,659  
 
   
     
     
     
 
Earnings per equity share
                               
 
Basic
  $ 0.80     $ 1.07     $ 2.16     $ 2.95  
 
Diluted
  $ 0.78     $ 1.05     $ 2.13     $ 2.91  
Weighted equity shares used in computing earnings per equity share
                               
 
Basic
    65,569,377       65,709,862       65,567,814       65,628,199  
 
Diluted
    66,667,561       67,181,796       66,405,932       66,557,167  
 
   
     
     
     
 

See accompanying notes to the unaudited consolidated financial statements

23


 

Unaudited consolidated statements of stockholders’ equity and comprehensive income

                                 
    Common stock   Additional        
   
  paid-in   Comprehensive
    Shares   Par value   capital   income
   
 
 
 
Balance as of March 31, 2002
    66,186,130     $ 8,597,001     $ 123,079,948          
Common stock issued
    43,359       4,480       2,191,234          
Cash dividends
                         
Income tax benefit arising on exercise of stock options
                804,695          
Amortization of compensation related to stock option grants
                           
Comprehensive income
                               
Net income
                      $ 141,797,917  
Other comprehensive income
                               
Translation adjustment
                      8,232,075  
 
                           
 
Comprehensive income
                          $ 150,029,992  
 
   
     
     
     
 
Balance as of December 31, 2002
    66,229,489     $ 8,601,481     $ 126,075,877          
 
   
     
     
         
Balance as of March 31, 2003
    66,243,078     $ 8,602,909     $ 127,042,751          
 
   
     
     
         
Common stock issued
    212,914       23,298       14,560,748          
Cash dividends
                         
Income tax benefit arising on exercise of stock options
                2,466,528          
Amortization of compensation related to stock option grants
                         
Comprehensive income
                               
Net income
                    $ 193,529,659  
Other comprehensive income
                               
Unrealized gain on investments, net of taxes
                      89,130  
Translation adjustment
                            28,798,399  
 
                           
 
Comprehensive income
                          $ 222,417,188  
 
   
     
     
     
 
Balance as of December 31, 2003
    66,455,992     $ 8,626,207     $ 144,070,027          
 
   
     
     
         

[Additional columns below]

[Continued from above table, first column(s) repeated]

                                 
    Accumulated                        
    other                   Total
    comprehensive   Deferred stock   Retained   stockholders’
    income   compensation   earnings   equity
   
 
 
 
Balance as of March 31, 2002
  $ (45,441,148 )   $ (7,620,600 )   $ 363,764,165     $ 442,379,366  
Common stock issued
                      2,195,714  
Cash dividends
                (34,013,046 )     (34,013,046 )
Income tax benefit arising on exercise of stock options
                      804,695  
Amortization of compensation related to stock option grants
          3,731,844             3,731,844  
Comprehensive income
                               
Net income
                141,797,917       141,797,917  
Other comprehensive income
                               
Translation adjustment
    8,232,075                   8,232,075  
Comprehensive income
                               
 
   
     
     
     
 
Balance as of December 31, 2002
  $ (37,209,073 )   $ (3,888,756 )   $ 471,549,036     $ 565,128,565  
 
   
     
     
     
 
Balance as of March 31, 2003
  $ (31,444,835 )   $ (2,817,066 )   $ 524,621,160     $ 626,004,919  
 
   
     
     
     
 
Common stock issued
                      14,584,046  
Cash dividends
                (47,266,618 )     (47,266,618 )
Income tax benefit arising on exercise of stock options
                      2,466,528  
Amortization of compensation related to stock option grants
          2,817,066             2,817,066  
Comprehensive income
                               
Net income
                193,529,659       193,529,659  
Other comprehensive income
                               
Unrealized gain on investments, net of taxes
    89,130                   89,130  
Translation adjustment
    28,798,399                       28,798,399  
Comprehensive income
                               
 
   
     
     
     
 
Balance as of December 31, 2003
  $ (2,557,306 )         $ 670,884,201     $ 821,023,129  
 
   
     
     
     
 

See accompanying notes to the unaudited consolidated financial statements

24


 

Unaudited consolidated statements of cash flows

                 
    Nine months ended December 31,
    2002   2003
   
 
OPERATING ACTIVITIES:
               
Net income
  $ 141,797,917     $ 193,529,659  
Adjustments to reconcile net income to net cash provided by operating activities
               
Loss on sale of property, plant and equipment
    8,437        
Depreciation
    26,466,706       30,717,514  
Amortization of intangible assets
    1,744,274       6,719,351  
Provision for investments
    3,219,030       1,922,070  
Deferred taxes
    (2,228,025 )     853,268  
Amortization of deferred stock compensation expense
    3,731,844       2,817,066  
Changes in assets and liabilities
               
Trade accounts receivable
    (31,876,890 )     (38,665,222 )
Prepaid expenses and other current assets
    (3,401,291 )     (154,127 )
Unbilled revenue
    (11,183,030 )     135,986  
Income taxes
    (3,159,384 )     20,305,900  
Accounts payable
    126,497       (101,250 )
Client deposits
    3,776,724       17,636,155  
Unearned revenue
    8,014,837       4,676,599  
Other accrued liabilities
    14,275,082       29,409,213  
 
   
     
 
Net cash provided by operating activities
    151,312,728       269,802,182  
 
   
     
 
INVESTING ACTIVITIES:
               
Expenditure on property, plant and equipment
    (26,796,968 )     (48,630,139 )
Expenditure on intangible asset
    (4,078,363 )      
Proceeds from sale of property, plant and equipment
    53,222       56,378  
Loans to employees
    (4,973,581 )     3,714,929  
Investments in liquid mutual fund units
          (130,818,049 )
Cash advanced for contemplated business combination
          (11,141,603 )
 
   
     
 
Net cash used in investing activities
    (35,795,690 )     (186,818,484 )
 
   
     
 
FINANCING ACTIVITIES:
               
Proceeds from issuance of common stock
    2,195,714       14,584,046  
Proceeds from issuance of preferred stock by subsidiary
    10,000,000        
Payment of dividends
    (34,013,046 )     (47,153,536 )
 
   
     
 
Net cash used in financing activities
    (21,817,332 )     (32,569,490 )
 
   
     
 
Effect of exchange rate changes on cash
    4,373,092       16,525,772  
Net increase in cash and cash equivalents during the period
    98,072,798       66,939,980  
Cash and cash equivalents at the beginning of the period
    210,485,940       354,362,918  
 
   
     
 
Cash and cash equivalents at the end of the period
  $ 308,558,738     $ 421,302,898  
 
   
     
 
Supplementary information:
               
Cash paid towards taxes
  $ 33,014,206     $ 17,204,767  
Non cash transaction (see Note 2.5)
  $ 5,000,000        

See accompanying notes to the unaudited consolidated financial statements

25


 

Notes to the unaudited consolidated financial statements

1 Company overview and significant accounting policies

1.1 Company overview

Infosys Technologies Limited (“Infosys’’ or “the Company’’) along with its majority owned and controlled subsidiaries, Progeon Limited (“Progeon’’) and Infosys Technologies (Shanghai) Co. Limited is a leading global information technology, or IT, services company. The Company provides end-to-end business solutions that leverage technology thus enabling its clients to enhance business performance. The Company provides solutions that span the entire software life cycle encompassing consulting, design, development, re-engineering, maintenance, systems integration and package evaluation and implementation. In addition, the Company offers software products for the banking industry and business process management services.

1.2 Basis of preparation of financial statements

The accompanying consolidated financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”). Inter-company balances and transactions are eliminated on consolidation. All amounts are stated in U.S. dollars, except as otherwise specified.

Interim information presented in the consolidated financial statements has been prepared by the management without audit and, in the opinion of management, includes all adjustments of a normal recurring nature that are necessary for the fair presentation of the financial position, results of operations and cash flows for the periods shown, and is in accordance with GAAP. These 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 fiscal year ended March 31, 2003.

1.3 Use of estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities on the date of the financial statements, and the reported amounts of revenues and expenses during the period. Examples of estimates include accounting for contract costs expected to be incurred to complete software development, allowance for uncollectible accounts receivable, future obligations under employee benefit plans, provisions for post-sales customer support and the useful lives of property, plant and equipment and intangible assets. Actual results could differ from those estimates.

1.4 Revenue recognition

The company derives revenues primarily from software development and related services, licensing of software products and from business process management services. Arrangements with customers for software development and related services are either on a fixed price, fixed timeframe or on a time and material basis.

Revenue on time-and-material contracts is recognized as the related services are performed. Revenue from the end of the last billing to the balance sheet date is recognized as unbilled revenues. Revenue from fixed-price, fixed-time frame contracts is recognized as per the percentage-of-completion method. Guidance has been drawn from paragraph 95 of Statement of Position (SOP) 97-2 to account for revenue from fixed price arrangements for software development and related services in conformity with SOP 81-1. The input (efforts expended) method has been used to measure progress towards completion as there is a direct relationship between input and productivity. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the current contract estimates. Costs and earnings in excess of billings are classified as unbilled revenue while billings in excess of costs and earnings are classified as unearned revenue. Maintenance revenue is recognized ratably over the term of the underlying maintenance agreement.

The company provides its clients with a fixed-period warranty for corrections of errors and telephone support on all its fixed-price, fixed-time frame contracts. Costs associated with such support services are accrued at the time related revenues are recorded and included in cost of revenues. The company estimates such costs based on historical experience and estimates are reviewed on a periodic basis for any material changes in assumptions and likelihood of occurrence.

In accordance with SOP 97-2, Software Revenue Recognition, license fee revenues are recognized when persuasive evidence of an arrangement exists, delivery has occurred, the license fee is fixed and determinable, and the collection of the fee is probable. Arrangements to deliver our software products generally have three elements: license, implementation and Annual Technical Services (“ATS’’). The company has applied the principles in SOP 97-2 to account for revenue from these multiple element arrangements. Vendor specific objective evidence of fair value (“VSOE”) has been established for ATS. VSOE is the price charged when the element is sold separately. When other services are provided in conjunction with the licensing arrangement, the revenue from such contracts are allocated to each component of the contract using the residual method, whereby revenue is deferred for the undelivered services and the residual amounts are recognized as revenue for delivered elements. In the absence of an established VSOE for implementation, the entire arrangement fee for license and implementation is recognised as the implementation is performed. Revenue from client training, support and other services arising due to the sale of software products is recognized as the services are performed. ATS revenue is recognised ratably over the period in which the services are rendered.

Revenues from business process management and other services are recognized on both, the time-and-material and fixed-price, fixed-time frame basis. Revenue on time-and-material contracts is recognized as the related services are rendered. Revenue from fixed-price, fixed-time frame contracts is recognized as per the proportional performance method using an output measure of performance.

When the company receives advances for services and products, such amounts are reported as client deposits until all conditions for revenue recognition are met.

1.5 Cash and cash equivalents

The company considers all highly liquid investments with a remaining maturity at the date of purchase/investment of three months or less to be cash equivalents. Cash and cash equivalents comprise cash, cash on deposit with banks, and deposits with corporations.

1.6 Property, plant and equipment

Property, plant and equipment are stated at cost, less accumulated depreciation. The company depreciates property, plant and equipment over their estimated useful lives using the straight-line method. The estimated useful lives of assets are as follows:

     
Buildings   15 years
Furniture and fixtures   5 years
Computer equipment   2-5 years
Plant and equipment   5 years
Vehicles   5 years

The cost of software purchased for internal use is accounted under SOP 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. Deposits paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date and the cost of property, plant and equipment not put to use before such date are disclosed under “Capital work-in-progress".

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1.7 Intangible assets

Intangible assets are amortized over their respective individual estimated useful lives on a straight-line basis, commencing from the date the asset is available to the company for its use. Management estimates the useful lives of acquired rights in software applications to range between one through t