Infosys, Believe That Technology Has the Potential to Bring As Much Value to the Poor of India As to the Rich of the United States
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The Power of E-Commerce Only those who dare to fail greatly can ever achieve greatly. Robert Francis Kennedy (1925–1968) At the turn of the last millennium, e-commerce created excitement in the hallowed corridors of Harvard Business School as well as the poorest lanes of Hoshiarpur, Punjab, India. The reasons for this are not far to seek. The two powerful paradigms of anytime-anywhere and virtualization of the corporation have demonstrated their tremendous potential to improve business reach, to reduce costs and cycle times, and to enhance productivity in organizations across the globe. Consequently, consumers can hope for better comfort and greater value-for-money. We, at Infosys, believe that technology has the potential to bring as much value to the poor of India as to the rich of the United States. However, the task of e-enabling corporations to take advantage of this seminal phenomenon requires deep thought and quick action on the part of business leaders and IT professionals. This year, Infosys brings you an abridged version of a very informative panel discussion on the challenges faced by corporations in harnessing The Power of E-Commerce. Contents The year at a glance 3 Awards for excellence – 1999-2000 4 Adieu, NSR 7 Letter to the shareholders 9 The Power of E-Commerce 12 Directors’ report 24 Risk management 38 Corporate governance 45 Report of the committees of the board 57 Management statement 60 Auditors’ report 61 Financial statements prepared in accordance with 64 Indian Generally Accepted Accounting Principles (Indian GAAP) Management’s discussion and analysis of financial condition and results of operations 79 Statement of cash flows 91 Balance sheet abstract and company’s general business profile 93 Financial statements prepared in accordance with 95 the United States Generally Accepted Accounting Principles (US GAAP) Summary of consolidated financial data 96 Management’s discussion and analysis of financial condition and results of operations 97 Report of management 111 Independent auditors’ report 112 Balance sheets 113 Statements of income 114 Statements of stockholders’ equity 115 Statements of cash flows 117 Notes to financial statements 118 Information in Form 20-F of United States Securities and Exchange Commission Shareholder information 173 Frequently asked questions 180 Additional information to shareholders Share performance chart 184 Intangible assets scoresheet 185 Human resources accounting and value-added statement 188 Brand valuation 190 Balance sheet (including the intangible assets) 192 Economic value-added (EVA) statement 193 Ratio analysis 194 Statutory obligations / segment reporting 197 Management structure 200 A historical perspective 201 Infosys Foundation 203 Financial statements prepared in substantial compliance with 205 GAAP requirements of Australia, Canada, France, Germany, Japan and the United Kingdom 2 The year at a glance in Rs. crore, except per share data March 31, 2000 March 31, 1999 Growth % For the year Total revenues 921.46 512.74 80 Export revenues 869.70 500.25 74 Operating profit (PBIDT) 378.88 191.75 98 Profit after tax (PAT) from ordinary activities 285.95 132.92 115 Profit after tax and extraordinary items 293.52 135.26 117 PBIDT as a percentage of total revenues 41.12% 37.40% PAT from ordinary activities as a percentage of total revenues 31.03% 25.92% Earnings per share (from ordinary activities) * Basic 43.23 20.10 115 Diluted 42.15 19.93 112 Dividend per share 4.50 3.75 20 Dividend amount 29.76 12.11 146 Capital investment 159.87 71.68 123 PAT as a percentage of average net worth 40.63% 54.16% At the end of the year Total assets 833.30 574.43 45 Fixed assets - net 207.34 100.72 106 Cash and equivalents 508.37 416.66 22 Working capital 612.13 472.96 29 Total debt – –– Net worth 833.30 574.43 45 Equity 33.08 33.07 – Market capitalization 59,338.17 9,672.80 513 Market capitalization is calculated by considering the Indian market price for shares outstanding at year-end. * Basic and diluted EPS are calculated on profit after tax before considering extraordinary income and effect of extraordinary item – provision no longer required. The basic and diluted EPS for the year ended March 31, 1999 has been restated for a stock split of 2 for 1 (subdivision of 1 share of Rs. 10 par value into 2 shares of Rs. 5 par value) effected during the year. 3 from top to bottom Awards for excellence · Comfactory 1999-2000 Nagaraj N. S. Srinivas T. from top to bottom · CMM Level 5 team Raghavan S. Senthil Nathan M. Bhashyam M. R. Ravikrishnan K. Ramakrishnan M. Ravindra Karanam from top to bottom Lakshmi S. Kumar Mohan Ram B. R. from top to bottom Kiran M. Potdar ¶ The ADR team · Sainsbury's Mohandas Pai T. V. Srinjay Sengupta Phaneesh Murthy Krishnamoorthy A. S. Balakrishnan V. Ramadas Kamath U. Ganapathy P. R. Vinayak Pai V. 4 Awards for excellence 1999-2000 from top to bottom from top to bottom ¸ Kansas City ¸ Aetna Southern Railways project Bart Higgins Priti Rao Sajan Verghis Mathew Jayaraman Nair from top to bottom from top to bottom Muthuvel G. Shinju Damodaran Sanjay Surendranath Madhav Kulkarni ¸ Spurt ¸ E&R team 1 Venkatnarayan S. Prasad T. P. Srivathsa P. S. Yegneshwar S., Dr. Srirangan Rajagopal Kochikar V. P. Srikanth N. R. Nandakumar N. Suma Subramanian Prashant V. Mahajan Sangeetha Pradeep Samuelraj S. Lakshmi Sujayananda Rakesh Agarwal 5 6 Adieu, NSR Nadathur Sarangapani Raghavan or NSR, as he is affectionately called, has several rare distinctions. He was employee Number One at Infosys. He is the oldest amongst the founders. He is the only passable singer and restaurant quality cook among the gang of founders! I can go on and on because NSR has an inexhaustible set of endearing qualities. NSR worked with me when I was head of the software division at Patni Computer Systems (PCS). He was the first person I spoke to about founding Infosys. When, on a cloudy winter morning in Mumbai, I told him that I was going to leave PCS and that I would recommend that he take over from me, his reaction was incredulous – he just wanted to be with me! He had a wife and two teenage sons to support, and here I was – with no concrete idea as to what I was going to do! But, just the comfort that a valued colleague of mine was ready to stake his rosy future at a well- established corporation in favor of an adventurous and somewhat reckless maverick was a great morale booster for me. Thus, Infosys was born with NSR’s house in Matunga as its registered office. In his nineteen years at Infosys, NSR has taken up a variety of responsibilities. He has probably had the most eclectic career profile in this organization. He has handled HRD, Delivery, Education and Research, Planning and Finance, all with distinction. He designed the first revenue tracking system for Infosys, The Billing Performance Report (BPR) – still a widely used application despite our becoming an SAP shop. He was even the first ever chauffeur of an Infosys vehicle – a rented Vespa scooter – ferrying me, the eternal pillion rider, across the streets of Bangalore during 1983! The most striking quality of NSR is his pleasantness. I have rarely seen him get upset about anything. He is best known at Infosys for his saying: You can disagree with me as long as you are not disagreeable. He is also, probably, the most enthusiastic window-shopper in the world! NSR continues to be a Trustee of the Infosys Foundation. He will be dearly missed at Infosys. I hope that NSR and his family are blessed with the best of everything in the future. Bangalore N. R. Narayana Murthy April 11, 2000 Chairman and Chief Executive Officer 7 Board of directors N. R. Narayana Murthy Nandan M. Nilekani Chairman and Chief Executive Officer Managing Director, President and Chief Operating Officer Susim M. Datta Deepak M. Satwalekar Ramesh Vangal Director Director Director Prof. Marti G. Subrahmanyam Philip Yeo Gopalakrishnan S. Director Director Deputy Managing Director Dinesh K. Shibulal S. D. Director Director 8 Letter to the shareholders Dear shareholders: Infosys has had yet another good year. As in the past, we worked very hard to design, develop and deploy high quality solutions for our clients, and thereby further strengthened our partnerships with them. Under Indian GAAP, total revenues grew by 80% while profits after taxes from ordinary activities witnessed an increase of 115% over fiscal 1999. As intended, revenues from the e-business space grew faster than our other revenue streams. We are delighted to report on the year gone by and invite you to review our performance and also to learn more about the trajectory that Infosys intends to take in the future. From the very beginning, our approach to doing business has entailed a client-focussed work ethic. To this end, we have laid great emphasis on harnessing the talents of best-in-class people and on implementing our engagements using world-class quality processes. This, in turn, has brought about a consistent increase in revenues and net income from operations 28 quarters in a row, since we went public in India in 1993. We would like to share with you our thoughts on the drivers for our past successes and on the role that our strategic assets will play in accomplishing our vision for your company’s future. While change is the only constant in the world of technology, we firmly believe that our uniquely implemented business strategies, outlined below, will continue to be the cornerstones of our success in the years to come.