© infosys technologies limited 2006-07 financial performance 2006-07 v. balakrishnan chief...

© Infosys Technologies Limited 2006-07

Financial Performance 2006-07

V. BalakrishnanChief Financial Officer


Safe harbor

Certain statements made here concerning Infosys’ future growth prospects are forward-looking statements which involve a number of risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. The risks and uncertainties relating to these statements include, but are not limited to, risks and uncertainties regarding fluctuations in earnings, our ability to manage growth, intense competition in IT services including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, client concentration, restrictions on immigration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which Infosys has made strategic investments, withdrawal of governmental fiscal incentives, political instability, legal restrictions on raising capital or acquiring companies outside India, and unauthorized use of our intellectual property and general economic conditions affecting our industry. Additional risks that could affect our future operating results are more fully described in our United States Securities and Exchange Commission filings including our Annual Report on Form 20-F for the fiscal year ended March 31, 2007 and the Quarterly Reports on Form 6-K for the fiscal quarters ended June 30, 2006, September 30, 2006 and December 31,2006. These filings are available at www.sec.gov. Infosys may, from time to time, make additional written and oral forward-looking statements, including statements contained in the company's filings with the Securities and Exchange Commission and our reports to shareholders. The company does not undertake to update any forward-looking statements that may be made from time to time by or on behalf of the company.


Highlights

» Revenues of US $3 billion in Fiscal 2007

» Revenue growth of 44% in dollar terms and 46% in rupee terms as against our guidance of 28-30% in April 2006

» Recommended a final dividend of Rs. 6.50 per share (130% on par value of Rs. 5 per share) amounting to Rs. 371 crores. Including Interim dividend, the total dividend recommended for the year is Rs. 11.50 per share (230% on par value of

Rs. 5 per share) amounting to Rs. 649 crores

» Added 160 clients during the year

» Net addition of 19,526 employees

» Award for the best presented Annual Report for fiscal 2006 received from The Institute of Chartered Accountants of India (ICAI) for the 11th consecutive year


Sponsored Secondary ADS Program

» Completed sponsored secondary offering of ADS in Nov 2006 – size of USD 1.6 billion, the largest international equity offering from India at that time

» Included in NASDAQ Global Select Market in July 2006

» First Indian company to be added to the NASDAQ-100 Index and the only Indian company to be part of any major global indices


A great year – Growth exceeded our expectations

Guidance Actual

Revenue (Q1) Rs. Cr. 2,793 – 2,816 3,015

EPS 12.38 – 12.60 14.36

Revenue (Q2) Rs. Cr. 3,257 – 3,280 3,451

EPS 14.73 – 14.89 16.75

Revenue (Q3) Rs. Cr. 3,602 – 3,625 3,655

EPS 16.84 17.64

Revenue (Q4) Rs. Cr. 3,789 – 3,798 3,772

EPS 17.88 20.30


Revenue and profit grew faster…

9,521

13,893

2006 2007

Revenues (Rs. Cr.)

4,455

6,435

2006 2007

Gross profit (Rs. Cr.)

3,091

4,391

2006 2007

Operating profit (Rs. Cr.)

2,458

3,726

2006 2007

Net profit* (Rs. Cr.)

Based on consolidated Indian GAAP Financials* Net profit after tax and minority interest, before exceptional item and tax reversals

46%

44%

42%

52%


…While margins were maintained.

46.8

46.3

2006 2007

Gross profit (%)

32.5

31.6

2006 2007

Operating profit (%)

25.8

26.8

2006 2007

Net profit* (%)

* Net profit after tax and minority interest, before exceptional item and tax reversals


Business mix became richer….

Increased contribution from new services (% to total revenue)

2003 2004 2005 2006 2007

Package Implementation 11.0% 14.5% 15.2% 16.2% 17.5%

Testing 3.4% 5.3% 5.8% 5.9% 6.9%

Consulting 4.3% 3.7% 3.6% 3.5% 3.6%

Business Process Management

0.5% 1.6% 2.7% 4.0% 4.7%

Engineering Services 2.6% 2.2% 2.0% 1.8% 1.6%

Other services 7.8% 8.1% 8.4% 9.7% 9.4%

Total 29.6% 35.4% 37.7% 41.1% 43.7%


…resulting in higher revenue productivity.

Variation in per-capita revenues (in US$ terms)

2003 2004 2005 2006 2007

Onsite (2.5)% (2.9)% 0.2% 0.3% 4.4%

Offshore (4.7)% (2.6)% 1.3% 0.8% 2.7%

Blended (0.8)% (5.0)% (1.0)% 0.7% 4.9%


We continued to leverage the Global Delivery Model

2006 2007

Effort mix (%)

Onsite 31.7 32.9Offshore 68.3 67.1

Total 100.0 100.0

Billed person months

Onsite 95,675 134,767

Offshore 206,579 274,989

Total 302,254 409,756Change in billed person months (%)

Onsite 32.1 40.9

Offshore 30.9 33.1

Total 31.3 35.6

Utilization rates

Including trainees (%) 71.0 69.1

Excluding trainees (%) 78.1 77.1


Wages increased during the year

2006 2007

Wage increase – Offshore 15% 15%

– Onsite 3% 3%

Onsite salaries (% to revenues) 32.9% 32.4%

Offshore salaries (% to revenues) 14.5% 15.6%

Variable salaries (Rs. Cr.) 427 599

Variable salary as a % of offshore salary 25.3% 24.9%


The G&A expenses were under control

2006 2007

General & Administration expenses (Rs. Cr.) 764 1,115

General & Administration cost / revenue (%) 8.0% 8.0%

G&A personnel 2,776 3,548

Total no. of employees 52,715 72,241

% to total employees 5.3% 4.9%


We continued to invest for growth

2006 2007

1) Sales & Marketing expenses (Rs. Cr.) 600 929

Selling & Marketing expenses / revenues (%) 6.3 6.7

Sales & Marketing employees (No.) 444 537

Marketing offices (No.) 37 43

2) R&D Expenses (Rs. Cr.) 102 167

3) Losses in subsidiaries :

China (17) (29)

Consulting (36) (111)


The currency moved favorably

2006 2007

Average rupee dollar rate

This Year 44.21 45.06

Previous Year 44.87 44.21

% change (1.5%) 1.9%

Period end rupee dollar rate

This Year 44.48 43.10

Previous Year 43.62 44.48

% change 2.0% (3.1%)

Forward contracts and options

outstanding as at March 31 ($ Mn) 350 470

Transaction & translation losses (Rs. Cr.) (8) (21)

Benefit due to hedging (Rs. Cr.) (69) 63

Net impact (Rs. Cr.) (77) 42


The end result

2006 % 2007 %

Income 9,521 100% 13,893 100%

Software development and BPM expenses 5,066 53% 7,458 54%

GROSS PROFIT 4,455 47% 6,435 46%

Selling and marketing expenses 600 6% 929 7%

General and administration expenses 764 8% 1,115 8%

Operating profit before interest and depreciation 3,091 32% 4,391 32%

Interest – – – –

Depreciation 437 5% 514 4%

Operating profit after interest, depreciation and amortization 2,654 28% 3,877 28%

Other income 139 1% 372 3%

Provision for investments 1 0% 2 0%

NET PROFIT BEFORE TAX 2,792 29% 4,247 31%

Provision for taxation 313 3% 386 3%

NET PROFIT AFTER TAX 2,479 26% 3,861 28%

Exceptional item – – 6 –

NET PROFIT AFTER TAX, EXCEPTIONAL

ITEM & BEFORE MINORITY INTEREST 2,479 26% 3,867 28%

Minority interest 21 – 11 –

NET PROFIT AFTER TAX, EXCEPTIONAL ITEM & MINORITY INTEREST 2,458 26% 3,856 28%


We have a Healthy Balance Sheet

Rs. Cr. 2007 % 2006 %

SOURCES OF FUNDS

Share capital 286 2 138 2

Reserves and surplus 10,969 97 6,828 97

Minority interest 4 1 68 1

Total 11,259 100 7,034 100

APPLICATION OF FUNDS

Fixed assets 3,771 33 2,226 32

Investments – – 2 –

Deferred tax assets 92 1 65 1

Sundry debtors 2,436 22 1,608 23

Cash & equivalents 6,073 54 4,709 66

Other current assets 1,037 9 770 11

Current liabilities (2,150) (19) (2,346) (33)

Total 11,259 100 7,034 100We continue to be a zero-debt company


2007

36.70%

2.10%2.70%

58.50%

2006

61.10%

4.40%3.20%

31.30%

We exercise tight control over receivables

Age profile of accounts receivable

0 – 30 31– 60 61 – 90 > 90

Days of sales receivable – 64 daysDays of sales receivable – 61 days


We continue to balance between liquidity and profitability

* Cash and cash equivalents include investments in liquid mutual funds

** Excluding Silver Jubilee special dividend in 2006

Target 2005 2006 2007

ROCE (%) 51.4% 44.9% 45.7%

Times cost of capital 2.0 3.8 3.5 3.1

ROIC (%) 123.6% 94.0% 89.1%

Times cost of capital 3.0 9.1 7.3 6.0

Days sales outstanding 60 67 61 64

Cash & cash equivalents / total assets *

40.0% 54.4% 64.7% 50.6%

Cash & cash equivalents / revenue *

25.0% 41.6% 49.4% 43.0%

Dividend % (% to net profits)** Upto 20% 18.5 19.4 19.9


Our revenues are well diversified

FY 00

21%

23%15%

11%

30%

FY 07

20%37%

10%

19% 14%

FY 00

78%

6%1%15%

Revenue by Industry Vertical

Insurance, Banking & Financial ServicesManufacturingTelecomRetailOthers

Revenue by Geography

North AmericaEuropeIndiaRest of the World

FY 07

63%

9%2%

26%


The power of the intangibles

2005 2006 2007

Average age of employees (years) 26.0 26.0 26.0

Education index 100,351 148,499 203,270

Women employees / total employees (%) 24.9% 27.6% 30.9%

Attrition (%) 9.7 11.2 13.7

HR value (Rs. Cr.) 28,334 46,637 57,452

Brand value (Rs. Cr.) 14,153 22,915 31,617

EVA (Rs. Cr.) 1,132 1,540 2,122

Value added (Rs. Cr.) 6,053 8,030 11,879

R&D expenditure (Rs. Cr.) 74 102 167

R&D expenditure / revenue (%) 1.08 1.07 1.20


Performance of subsidiaries

Infosys BPO Limited

Formed Apr 2002

Investment (Rs. Cr.) 637

Holding (%) – Mar 2007 98.92

Shares Buyback in FY 2007– Citicorp– IBPO employees

87,50,000

2,11,909

FY07 Revenue (Rs. Cr.) 662

FY07 PAT (Rs. Cr.) 152

FY07 PAT % 22.9

Y-o-Y Growth Revenue % 74.7

Y-o-Y Growth PAT % 63.4

Employees as of March 31, 2007 11,226



Infosys Technologies (Australia) Pty Limited

Acquired Jan 2004

Investment (Rs. Cr.) 66

Holding (%) – Mar 2007 100.00

FY07 Revenue (Rs. Cr.) 446

FY07 PAT (Rs. Cr.) 71

FY07 PAT % 15.9

Y-o-Y Growth Revenue % 39

Y-o-Y Growth PAT % 294

Employees as of March 31, 2007 306



Infosys Technologies (China) Co. Limited Formed Oct 2003Investment (Rs.Cr.) 46Holding (%) – Mar 2007 100.00FY07 Revenue (Rs.Cr.) 60FY07 PAT (Rs.Cr.) (29)Employees 669



Infosys Consulting Inc.,

Formed Apr 2004

Investment (Rs.Cr.) 90

Holding (%) – Mar 2007 100.00

FY07 Revenue (Rs.Cr.) 213

FY07 PAT (Rs.Cr.) (111)

Employees 209


Financial statements - US GAAP


Financial highlights

2,152

3,090

2006 2007

Revenues

908

1,313

2006 2007

Gross profit

599

852

2006 2007

Operating income

555850

2006 2007

Net income

44%

45%

42%

53%

( US$ Million )


Financial highlights

42.2

42.5

2006 2007

Gross profit (%)

27.8

27.6

2006 2007

Operating income (%)

25.8

27.5

2006 2007

Net income (%)


RISK MANAGEMENT


Infosys’ unified view of the Risk Universe

- Regulatory dynamics - Contractual compliance - IP management - Contractual exposures - Data security management - Litigation/violation response

- Operations planning - Complex execution management - Execution excellence - Contingency planning - Systems & processes

- Talent supply management - Scalability of infrastructure - Talent development - Deployment efficiency - Career Value Management

- Vendor selection - Supply-chain management - Vendor exposure - Customer exposure - Credit management - Customer concentration

- Geopolitical change - Industry & market dynamics - Technical innovation - Access to capital - Competition intensity - Market selection

- Planning effectiveness - Service differentiation - Growth engines - Brand and reputation - Leadership - Execution of strategy

Strategy

Industry

Counter-party

Resources

Operations

Compliance

Info

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© infosys technologies limited 2006-07 financial performance 2006-07 v. balakrishnan chief...

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