UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 6-K

 

Report of Foreign Private Issuer

 

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

 

For the quarter ended June 30, 2020

 

Commission File Number 001-35754

 

Infosys Limited

(Exact name of Registrant as specified in its charter)

 

Not Applicable

(Translation of Registrant's name into English)

 

Electronics City, Hosur Road, Bangalore - 560 100, Karnataka, India. +91-80-2852-0261

(Address of principal executive offices)

 

 

Indicate by check mark whether the 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 if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1) : o

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7) : o

 

 

 

TABLE OF CONTENTS

 

DISCLOSURE OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
SIGNATURES
INDEX TO EXHIBITS
EXHIBIT 99.1
EXHIBIT 99.2
EXHIBIT 99.3
EXHIBIT 99.4
EXHIBIT 99.5
EXHIBIT 99.6
EXHIBIT 99.7
EXHIBIT 99.8
EXHIBIT 99.9
EXHIBIT 99.10
EXHIBIT 99.11

 

 

 

DISCLOSURE OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

 

Infosys Limited (“Infosys” or “the Company” or “we”) hereby furnishes the United States Securities and Exchange Commission with copies of the following information concerning our public disclosures regarding our results of operations and financial condition for the quarter ended June 30, 2020.

 

The following information 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.

 

On July 15, 2020, we announced our results of operations for the quarter ended June 30, 2020. We issued press releases announcing our results under International Financial Reporting Standards (“IFRS”) in U.S. dollars and Indian rupees, copies of which are attached to this Form 6-K as Exhibits 99.1 and 99.2, respectively.

 

On July 15, 2020, we held a press conference to announce our results, which was followed by a question and answer session. The transcript of this press conference is attached to this Form 6-K as Exhibit 99.3.

 

We have also made available to the public on our web site, www.infosys.com, a fact sheet that provides details on our profit and loss account summary for the quarters ended June 30, 2020 and 2019 (as per IFRS); revenue by client geography offering, business segment; information regarding our client concentration; employee information and metrics; and consolidated IT services information. We have attached this fact sheet to this Form 6-K as Exhibit 99.4.

 

On July 15, 2020, we also held a teleconference with investors and analysts to discuss our results. The transcripts of the teleconference are attached to this Form 6-K as Exhibit 99.5.

 

We placed form of releases to stock exchanges and advertisements in certain Indian newspapers concerning our results of operations for the quarter ended June 30, 2020, under Ind AS. A copy of the release to the stock exchanges and the advertisement is attached to this Form 6-K as Exhibit 99.6.

 

We have made available to the public on our web site, www.infosys.com, the following: Audited Interim Condensed Financial Statements in compliance with IFRS in US dollars and the Auditors Report; Audited Interim Condensed Financial Statements in compliance with IFRS in Indian Rupees and the Auditors Report; Audited Interim Ind AS Condensed Standalone Financial Statements and Auditors Report; Audited Interim Ind AS condensed Consolidated Financial Statements and Auditors Report for the quarter June 30, 2020. We have attached these documents to this Form 6-K as Exhibits 99.7, 99.8,99.9 and 99.10 respectively.

 

The Board in their meeting held on July 15, 2020 also revised the Corporate Governance Guidelines, a copy of which is made available to the public on our web site, www.infosys.com and attached to this Form 6-K as exhibit 99.11.

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized

 

 

Infosys Limited

/s/ Inderpreet Sawhney

   
Date: July 20, 2020

Inderpreet Sawhney

General Counsel and Chief Compliance Officer

 

 

 

INDEX TO EXHIBITS

 

Exhibit No. Description of Document
99.1 IFRS USD press release
99.2 IFRS INR press release
99.3 Transcript of July 15, 2020 press conference
99.4 Fact Sheet regarding extract of Registrant's Statement of Profit and Loss for the quarter ended June 30, 2020 and 2019 (as per IFRS); revenue by Business Segment, revenue by Offering, revenue by Client Geography, information regarding Client Concentration; Employee Information and Metrics,  Consolidated IT Services Information and cash flow information
99.5 Transcript of July 15, 2020 Earnings Call
99.6 Form of release to stock exchanges and advertisement placed in Indian newspapers
99.7 Audited Interim Condensed Consolidated Financial Statements of Infosys Limited and its Subsidiaries in compliance with International Financial Reporting Standards (IFRS) in US Dollars and the Auditors Report thereon
99.8 Audited Interim Condensed Consolidated Financial Statements of Infosys Limited and its Subsidiaries in compliance with IFRS in Indian Rupees and the Auditors Report thereon
99.9 Audited Interim Condensed Financial Statements of Infosys Limited for the quarter ended June 30, 2020 in compliance with Indian Accounting Standards (INDAS) and Auditors Report thereon.
99.10 Audited Interim Condensed Consolidated Financial Statements of Infosys Limited and its subsidiaries in compliance with INDAS for the quarter ended June 30, 2020 and Auditors Report thereon.
99.11 Revised Corporate Governance Guidelines

 

 Exhibit 99.1
IFRS USD Press Release

 

 

High quality growth of 1.5% year-on-year (constant currency) with expanded operating margin at 22.7%

 

Bengaluru, India – July 15, 2020

 

“Our Q1 results, especially growth, are a clear testimony to the relevance of our service offerings and deep understanding of clients’ business priorities which is resonating with them in these times. It also demonstrates the remarkable dedication of our employees and leadership during this period”, said Salil Parekh, CEO and MD. “Our confidence and visibility for the rest of the year is improving driven by our Q1 performance and large deal wins.”

 

 

 

·Revenues declined year-on-year by 0.3% in USD; grew by 1.5% in constant currency
·Digital revenues at $1,389 million (44.5% of total revenues), year-on-year growth of 25.5% in constant currency
·Operating margin at 22.7%, increase of 220 basis points year-on-year
·Free Cash Flow at $728 million; year-on-year growth of 50.1%
·Voluntary attrition for IT services declined to 11.7% from 20.2% in Q1 20
·FY 21 Revenue growth guidance in the range of 0%-2% in constant currency
·Operating margin for FY 21 to be in the range of 21%-23%

 

1.Financial Highlights – Consolidated results under International Financial Reporting Standards (IFRS)

 

For the quarter ended June 30, 2020

 

Revenues were $3,121 million, decline of 0.3% YoY and 2.4% QoQ

 

Operating profit was $708 million, growth of 10.1% YoY and 4.9% QoQ. Operating margin was 22.7%

 

Basic EPS was $0.13, growth of 3.8% YoY and decline of 5.4% QoQ

 

“During the last few months, we took multiple steps aimed at employee safety and well-being while providing seamless services to our clients. Clients have recognized us for the speed, security and effectiveness of our remote enablement efforts”, said Pravin Rao, COO. “The strength and diversity of our portfolio was evident in good revenue performance, sizeable large deal wins, high focus on operating metrics and significant decline in attrition.”

 

“Operating margin expanded to 22.7% driven by preemptive deployment of our strategic cost levers along with tactical opportunities triggered by the COVID situation”, said Nilanjan Roy, CFO. “Collections were robust and capex was focused, which led to 50% year on year increase in Free Cash Flows. Our liquid and debt free Balance Sheet is a huge source of strength in these times.”

 

2.Board changes

 

The Board, based on the recommendation of the Nomination and Remuneration Committee, appointed Bobby Parikh as an additional and Independent Director of the Company effective July 15, 2020 for a period of 3 years, subject to the approval of the shareholders.

 

3.Client wins & Testimonials

 

·Infosys partnered with the State of Rhode Island in launching a privacy-first contact tracing solution to help Rhode Islanders and state officials slow the spread of coronavirus throughout the state. The application, called “CRUSH COVID RI,” will utilize Infosys’ Location Based Services platform to create individualized location diaries, while protecting user privacy.
·Infosys was selected by GlobalFoundries (GF), the world’s leading specialty foundry, as its partner for the company’s Digital Transformation program. Through this partnership, Infosys will provide expertise and analytical solutions to optimize the overall efficiency and agility of GF’s manufacturing and business operations.
·FE CREDIT, a subsidiary of VP Bank, the market leader in consumer lending in Vietnam, upgraded its Finacle Digital Banking solution suite to the latest version and migrated it from an on-premise deployment to a Software-as-a-Service (SaaS) model. Finacle’s cloud-native, microservices-based digital banking solution suite will run on the AWS cloud.
·A large CPG company selected Infosys as the strategic transformation partner for IT services. With this engagement Infosys will provide end-to-end support for enabling integrated operations across Applications, Infrastructure and Cybersecurity.

 

4.Recognitions
   
·Positioned as a leader in IDC MarketScape: EMEA Digital Transformation Service Providers for Oil and Gas Industry 2020 Vendor Assessment
·Ranked as a leader in IDC MarketScape: Worldwide Blockchain Services 2020 Vendor Assessment
·Ranked as a leader in IDC MarketScape: Worldwide Business Analytics Consulting and Systems Integration Services 2020 Vendor Assessment
·Ranked as a leader in IDC MarketScape: Worldwide Cloud Business Analytics Services 2020 Vendor Assessment
·Positioned as a leader in Everest Group's Open Banking IT Services PEAK Matrix Assessment 2020
·Positioned as a leader in Everest Group’s Risk & Compliance PEAK Matrix Assessment 2020
·Ranked number one in HFS Top 10: Agile Software Development, 2020
·Recognized as a leader in HFS Top 10: Enterprise Blockchain Services 2020
·Recognized as a leader in NelsonHall Mortgage & Loan Services NEAT 2020
·EdgeVerve Systems was positioned as a Leader in Process Discovery and Mining in NelsonHall NEAT 2020
·Won the award for 2020 Microsoft Datacenter Migration Partner of the Year
·Won the “2020 BEST Awards” by The Association for Talent Development (ATD), USA
·Won the Pega Partner Award for Excellence in Growth and Delivery.
·Awarded the 2020 IBM Beacon Award for our Cognitive Digital Commerce platform
·Celent recognized Emirates NBD’s millennial focused digital-only bank Liv as ‘The Best Digital Bank’ for driving a compelling digital-only proposition leveraging Finacle Core Banking solution
·Infosys’ Investor Relations (IR) function was recognized as the top IR functions amongst Indian companies in an annual survey conducted by FinanceAsia
·Adjudged as the company most committed to social causes and amongst top three in environmental stewardship in India by FinanceAsia

 

About Infosys

 

Infosys is a global leader in next-generation digital services and consulting. We enable clients in 46 countries to navigate their digital transformation. With nearly four decades of experience in managing the systems and workings of global enterprises, we expertly steer our clients through their digital journey. We do it by enabling the enterprise with an AI-powered core that helps prioritize the execution of change. We also empower the business with agile digital at scale to deliver unprecedented levels of performance and customer delight. Our always-on learning agenda drives their continuous improvement through building and transferring digital skills, expertise, and ideas from our innovation ecosystem.

 

Visit www.infosys.com to see how Infosys (NYSE: INFY) can help your enterprise navigate your next.

 

 

Safe Harbor

 

Certain statements in this release concerning our future growth prospects, financial expectations and plans for navigating the COVID-19 impact on our employees, clients and stakeholders are forward-looking statements intended to qualify for the 'safe harbor' under the Private Securities Litigation Reform Act of 1995, 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 COVID-19 and the effects of government and other measures seeking to contain its spread, risks related to an economic downturn or recession in India, the United States and other countries around the world, changes in political, business, and economic conditions, fluctuations in earnings, fluctuations in foreign exchange rates, 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, industry segment concentration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks or system failures, 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 or expiration of governmental fiscal incentives, political instability and regional conflicts, legal restrictions on raising capital or acquiring companies outside India, unauthorized use of our intellectual property and general economic conditions affecting our industry and the outcome of pending litigation and government investigation. 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, 2020. 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 unless it is required by law.

 

Contact

 

Investor Relations

Sandeep Mahindroo

+91 80 3980 1018

Sandeep_Mahindroo@infosys.com

 
Media Relations

Mehak Chawla
+91 80 4156 3998

Mehak.Chawla@infosys.com

Chiku Somaiya
+1 71367 06752

Chiku.Somaiya@infosys.com

 

 Infosys Limited and subsidiaries

 

Extracted from the condensed consolidated Balance Sheet under IFRS as at:

(Dollars in millions)

  June 30, 2020 March 31, 2020
ASSETS    
Current assets    
Cash and cash equivalents 2,515 2,465
Earmarked bank balance for dividend (3) 536
Current investments 371 615
Trade receivables 2,487 2,443
Unbilled revenue 949 941
Other Current assets (4) 865 748
Total current assets 7,723 7,212
Non-current assets    
Property, plant and equipment and Right-of-use assets 2,354 2,361
Goodwill and other Intangible assets 956 950
Non-current investments 853 547
Other non-current assets 1,151 1,190
Total non-current assets 5,314 5,048
Total assets 13,037 12,260
LIABILITIES AND EQUITY    
Current liabilities    
Trade payables 366 377
Unearned revenue 410 395
Employee benefit obligations 253 242
Other current liabilities and provisions 2,400 1,743
Total current liabilities 3,429 2,757
Non-current liabilities    
Lease liabilities 512 530
Other non-current liabilities 288 272
Total non-current liabilities 800 802
Total liabilities 4,229 3,559
Total equity attributable to equity holders of the company 8,747 8,646
Non-controlling interests 61 55
Total equity 8,808 8,701
Total liabilities and equity 13,037 12,260

 

Extracted from the condensed consolidated statement of comprehensive income under IFRS for:

 

(Dollars in millions except per equity share data)

  3 months ended June 30, 2020 3 months ended June 30, 2019
Revenues 3,121 3,131
Cost of sales 2,071 2,122
Gross profit 1,050 1,009
Operating expenses:    
 Selling and marketing expenses 151 169
 Administrative expenses 191 198
Total operating expenses 342 367
Operating profit 708 642
Other income, net(5) 57 100
Profit before income taxes 765 742
Income tax expense 201 196
Net profit (before minority interest) 564 546
Net profit (after minority interest) 558 546
Basic EPS ($) 0.13 0.13
Diluted EPS ($) 0.13 0.13

 

NOTES: 

 

1.The above information is extracted from the audited condensed consolidated Balance sheet and Statement of Comprehensive Income for the quarter ended June 30, 2020 which have been taken on record at the Board meeting held on July 15, 2020.
2.A Fact Sheet providing the operating metrics of the Company can be downloaded from www.infosys.com
3.Represents bank balance earmarked for final dividend. Payment date for dividend was July 3, 2020.
4.Other receivables include $80 million towards redemption of mutual funds.
5.Other Income includes Finance Cost.

 

 

 

 

 

 

 

 

 Exhibit 99.2
IFRS INR Press Release

 

 

High quality growth of 1.5% year-on-year (constant currency) with expanded operating margin at 22.7%

 

Bengaluru, India – July 15, 2020

 

“Our Q1 results, especially growth, are a clear testimony to the relevance of our service offerings and deep understanding of clients’ business priorities which is resonating with them in these times. It also demonstrates the remarkable dedication of our employees and leadership during this period”, said Salil Parekh, CEO and MD. “Our confidence and visibility for the rest of the year is improving driven by our Q1 performance and large deal wins.”

 

 

 

·Revenues grew year-on-year by 8.5% in INR; grew by 1.5% in constant currency
·Digital revenues at $1,389 million (44.5% of total revenues), year-on-year growth of 25.5% in constant currency
·Operating margin at 22.7%, increase of 220 basis points year-on-year
·Free Cash Flow at 5,524 crore; year-on-year growth of 63.5%
·Voluntary attrition for IT services declined to 11.7% from 20.2% in Q1 20
·FY 21 Revenue growth guidance in the range of 0%-2% in constant currency
·Operating margin for FY 21 to be in the range of 21%-23%

 

1.Financial Highlights – Consolidated results under International Financial Reporting Standards (IFRS)

 

For the quarter ended June 30, 2020

Revenues were 23,665 crore, growth of 8.5% YoY and 1.7% QoQ

 

Operating profit was 5,365 crore, growth of 20.0% YoY and 8.9% QoQ. Operating margin was 22.7%

 

Basic EPS was 9.98, growth of 13.1% YoY and decline of 2.0% QoQ

 

“During the last few months, we took multiple steps aimed at employee safety and well-being while providing seamless services to our clients. Clients have recognized us for the speed, security and effectiveness of our remote enablement efforts”, said Pravin Rao, COO. “The strength and diversity of our portfolio was evident in good revenue performance, sizeable large deal wins, high focus on operating metrics and significant decline in attrition.”

 

“Operating margin expanded to 22.7% driven by preemptive deployment of our strategic cost levers along with tactical opportunities triggered by the COVID situation”, said Nilanjan Roy, CFO. “Collections were robust and capex was focused, which led to 50% year on year increase in Free Cash Flows. Our liquid and debt free Balance Sheet is a huge source of strength in these times.”

 

2.Board changes

 

The Board, based on the recommendation of the Nomination and Remuneration Committee, appointed Bobby Parikh as an additional and Independent Director of the Company effective July 15, 2020 for a period of 3 years, subject to the approval of the shareholders.

 

3.Client wins & Testimonials

 

·Infosys partnered with the State of Rhode Island in launching a privacy-first contact tracing solution to help Rhode Islanders and state officials slow the spread of coronavirus throughout the state. The application, called “CRUSH COVID RI,” will utilize Infosys’ Location Based Services platform to create individualized location diaries, while protecting user privacy.
·Infosys was selected by GlobalFoundries (GF), the world’s leading specialty foundry, as its partner for the company’s Digital Transformation program. Through this partnership, Infosys will provide expertise and analytical solutions to optimize the overall efficiency and agility of GF’s manufacturing and business operations.
·FE CREDIT, a subsidiary of VP Bank, the market leader in consumer lending in Vietnam, upgraded its Finacle Digital Banking solution suite to the latest version and migrated it from an on-premise deployment to a Software-as-a-Service (SaaS) model. Finacle’s cloud-native, microservices-based digital banking solution suite will run on the AWS cloud.
·A large CPG company selected Infosys as the strategic transformation partner for IT services. With this engagement Infosys will provide end-to-end support for enabling integrated operations across Applications, Infrastructure and Cybersecurity.

 

4.Recognitions

 

·Positioned as a leader in IDC MarketScape: EMEA Digital Transformation Service Providers for Oil and Gas Industry 2020 Vendor Assessment
·Ranked as a leader in IDC MarketScape: Worldwide Blockchain Services 2020 Vendor Assessment
·Ranked as a leader in IDC MarketScape: Worldwide Business Analytics Consulting and Systems Integration Services 2020 Vendor Assessment
·Ranked as a leader in IDC MarketScape: Worldwide Cloud Business Analytics Services 2020 Vendor Assessment
·Positioned as a leader in Everest Group's Open Banking IT Services PEAK Matrix Assessment 2020
·Positioned as a leader in Everest Group’s Risk & Compliance PEAK Matrix Assessment 2020
·Ranked number one in HFS Top 10: Agile Software Development, 2020
·Recognized as a leader in HFS Top 10: Enterprise Blockchain Services 2020
·Recognized as a leader in NelsonHall Mortgage & Loan Services NEAT 2020
·EdgeVerve Systems was positioned as a Leader in Process Discovery and Mining in NelsonHall NEAT 2020
·Won the award for 2020 Microsoft Datacenter Migration Partner of the Year
·Won the “2020 BEST Awards” by The Association for Talent Development (ATD), USA
·Won the Pega Partner Award for Excellence in Growth and Delivery.
·Awarded the 2020 IBM Beacon Award for our Cognitive Digital Commerce platform
·Celent recognized Emirates NBD’s millennial focused digital-only bank Liv as ‘The Best Digital Bank’ for driving a compelling digital-only proposition leveraging Finacle Core Banking solution
·Infosys’ Investor Relations (IR) function was recognized as the top IR functions amongst Indian companies in an annual survey conducted by FinanceAsia
·Adjudged as the company most committed to social causes and amongst top three in environmental stewardship in India by FinanceAsia

 

About Infosys

 

Infosys is a global leader in next-generation digital services and consulting. We enable clients in 46 countries to navigate their digital transformation. With nearly four decades of experience in managing the systems and workings of global enterprises, we expertly steer our clients through their digital journey. We do it by enabling the enterprise with an AI-powered core that helps prioritize the execution of change. We also empower the business with agile digital at scale to deliver unprecedented levels of performance and customer delight. Our always-on learning agenda drives their continuous improvement through building and transferring digital skills, expertise, and ideas from our innovation ecosystem.

 

Visit www.infosys.com to see how Infosys (NYSE: INFY) can help your enterprise navigate your next.

 

 

Safe Harbor

 

Certain statements in this release concerning our future growth prospects, financial expectations and plans for navigating the COVID-19 impact on our employees, clients and stakeholders are forward-looking statements intended to qualify for the 'safe harbor' under the Private Securities Litigation Reform Act of 1995, 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 COVID-19 and the effects of government and other measures seeking to contain its spread, risks related to an economic downturn or recession in India, the United States and other countries around the world, changes in political, business, and economic conditions, fluctuations in earnings, fluctuations in foreign exchange rates, 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, industry segment concentration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks or system failures, 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 or expiration of governmental fiscal incentives, political instability and regional conflicts, legal restrictions on raising capital or acquiring companies outside India, unauthorized use of our intellectual property and general economic conditions affecting our industry and the outcome of pending litigation and government investigation. 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, 2020. 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 unless it is required by law.

 

Contact

 

Investor Relations

Sandeep Mahindroo

+91 80 3980 1018

Sandeep_Mahindroo@infosys.com

 
Media Relations

Mehak Chawla
+91 80 4156 3998

Mehak.Chawla@infosys.com

Chiku Somaiya
+1 71367 06752

Chiku.Somaiya@infosys.com

   

Infosys Limited and subsidiaries

 

Extracted from the condensed consolidated Balance Sheet under IFRS as at:

(in crore)

  June 30, 2020 March 31, 2020
ASSETS    
Current assets    
Cash and cash equivalents 18,993 18,649
Earmarked bank balance for dividend (3) 4,046
Current investments 2,805 4,655
Trade receivables 18,778 18,487
Unbilled revenue 7,166 7,121
Other Current assets (4) 6,529 5,664
Total current assets 58,317 54,576
Non-current assets    
Property, plant and equipment and Right-of-use assets 17,774 17,867
Goodwill and other Intangible assets 7,220 7,186
Non-current investments 6,440 4,137
Other non-current assets 8,688 9,002
Total non-current assets 40,122 38,192
Total assets 98,439 92,768
LIABILITIES AND EQUITY    
Current liabilities    
Trade payables 2,762 2,852
Unearned revenue 3,099 2,990
Employee benefit obligations 1,910 1,832
Other current liabilities and provisions 18,122 13,182
Total current liabilities 25,893 20,856
Non-current liabilities    
Lease liabilities 3,865 4,014
Other non-current liabilities 2,170 2,054
Total non-current liabilities 6,035 6,068
Total liabilities 31,928 26,924
Total equity attributable to equity holders of the company 66,073 65,450
Non-controlling interests 438 394
Total equity 66,511 65,844
Total liabilities and equity 98,439 92,768

 

Extracted from the condensed consolidated statement of comprehensive income under IFRS for:

 

(in crore except per equity share data)

  3 months ended  June 30, 2020 3 months ended  June 30, 2019
Revenues 23,665 21,803
Cost of sales 15,703 14,779
Gross profit 7,962 7,024
Operating expenses:    
   Selling and marketing expenses 1,146 1,174
   Administrative expenses 1,451 1,379
Total operating expenses 2,597 2,553
Operating profit 5,365 4,471
Other income, net (5) 427 696
Profit before income taxes 5,792 5,167
Income tax expense 1,520 1,365
Net profit (before minority interest) 4,272 3,802
Net profit (after minority interest) 4,233 3,798
Basic EPS () 9.98 8.83
Diluted EPS () 9.97 8.82

 

NOTES:

 

1.The above information is extracted from the audited condensed consolidated Balance sheet and Statement of Comprehensive Income for the quarter ended June 30, 2020 which have been taken on record at the Board meeting held on July 15, 2020.
2.A Fact Sheet providing the operating metrics of the Company can be downloaded from www.infosys.com
3.Represents bank balance earmarked for final dividend. Payment date for dividend was July 3, 2020.
4.Other receivables include 602 crore towards redemption of mutual funds.
5.Other Income includes Finance Cost.

 

 

 

 

 

 

   Exhibit 99.3

Press Conference

 

   

“Infosys-Press Call”

July 15, 2020

 

 

CORPORATE PARTICIPANTS:

 

Salil Parekh

Chief Executive Officer & Managing Director

 

Pravin Rao

Chief Operating Officer and Whole-time Director

 

Nilanjan Roy

Chief Financial Officer

 

MEDIA

 

Kritika Saxena

CNBC TV18

 

Chandra Ranganathan

ET Now

 

Agam Vakil

BloombergQuint

 

Kushal Gupta

Zee Business

 

Ayan Pramanik

The Economic Times

 

Varun Sood

The Morning Context

 

Debasis Mohapatra

Business Standard

 

Shilpa Phadnis

Times of India

 

Ayushman Baruah

Mint

 

Saritha Rai

Bloomberg

 

Derek Francis

Reuters

 

Srinath Srinivasan

The Financial Express

 

Nikita Periwal

Cogensis

 

Jochelle Mendonca

ET Prime

 

Rukmini Rao

Business Today

 

Swathi Moorthy

Moneycontrol

 

 

 

 

 

 

Garima

 

Good evening everyone and thank you for joining us today for Infosys Q1 FY21 financial results. I am Garima and on behalf of Infosys, I would like to welcome all to this press conference. In these unusual times we hope you, your family, and your dear ones are safe and well. Before we begin, I wanted to share a few guidelines with our attendees today. Please note that all journalists will be on mute by default throughout the press conference. You will be requested to unmute yourself when your name is called out for asking a question. Should you drop out, please rejoin using the same invite link. With that let me invite Mr. Salil Parekh, CEO, Infosys to take us through the quarter gone by. Over to you, Salil, please.

 

 

 

 

 

 

Salil Parekh

 

Good afternoon everyone. I trust each of you and your loved ones are safe and healthy in these times. We have had an exceptionally good quarter in our First Quarter of this Financial Year. I am extremely proud of what we have achieved as a team. Let me share a few highlights, the rest you have seen within our press release as well.

 

First, our revenues in this quarter grew by 1.5% YoY in constant currency terms. Our Digital revenue grew at 25.5% and now accounts for 44.5% of our overall business. We delivered 22.7% operating margins, which is an expansion of 220 basis points YoY and 160 basis points sequentially. This was achieved after rewarding our employees with higher variable pay. Our employees have displayed incredible dedication and resilience and have been an integral to our Q1 performance.

 

Our large deals wins were at $1.7 bn in the quarter. We are also happy to report that yesterday we announced a landmark Digital Transformation engagement with Vanguard. We will partner with Vanguard to drive Digital Transformation of the record-keeping services on to a Cloud based platform. Coupled with our strong Q1 results this gives us a powerful foundation for the rest of the year.

 

What is pulling the large stimulus programs in the US and Europe there are still economic uncertainties in those markets as there are still emerging medical scenarios. There are also emerging medical outcomes in India that are not fully known. However, with what we have learnt in Q1 and ongoing strong client connects, we see the strength of our franchise is coming through clearly, and with that, we reinstate our guidance.

 

For the full financial year, our revenue growth guidance is 0% to 2% YoY growth in constant currency. Our operating margin guidance for the full year is 21% to 23%.

 

 

 

 

 

 

Garima

 

Thank you, Salil and with that, we will now open the floor for Q&A. Joining Salil, we have with us Mr. Pravin Rao, COO, Infosys, and Mr. Nilanjan Roy, CFO, Infosys. In the interest of time and to give everyone a fair chance, can I please request our media friends to ask one question per person only. We will now move on to our questions. Our first question is from Kritika Saxena from CNBC.

 

 

 

 

 

 

Kritika Saxena

 

Hi Gentlemen, good to see you albeit virtually. Salil you have given guidance, you have gotten back to giving out the guidance for FY21 and the margin figures as well seems to be that you are set to expand margins, you have actually come in with a good set of margins in this quarter as well, help us understand what the recovery trajectory is going to look like, can we assume then that recovery is going to be back on track in the September period roughly September to December period?

 

Very quickly a couple of questions as far as the margin trajectory is concerned? Nilanjan can you do break up margins for this quarter, what was the exact impact of COVID-19 pandemic I believe that you took in the full impact, so how are you able to expand margins in that time period, what was the kind of operational efficiencies you saw?

 

Pravin to you I wanted to just get a quick sense you had said last quarter that you are going to try to absorb all the commitments that you have made with respect to employee engagement, lateral hires, campus hires, can you give us some numbers and there have been some reports on possible involuntary attrition in mid and senior-level roles, can you give some clarity on that and also the attrition figure has come down quite substantially, so some color on that as well? Thank you so much.

 

Salil Parekh

 

Thank you for the question Kritika. I think in terms of demand and where we see the business scenarios, we felt that in Q1 we had a very good quarter with large deal wins.

 

Nilanjan Roy

 

….(inaudible) COVID had just broken out in the world. There were three large headwinds we were fundamentally facing ….(inaudible)what we had promised them and we had actually mentioned in the previous quarter that actually we had lost some revenues in the prior quarter and therefore first thing from a margin perspective we had to ….(inaudible) about that. The second was the uncertainty of the demand equation and since we were already hiring ….(inaudible). And thirdly, of course, we knew that some of the clients who are more distressed could come back and ask for maybe temporary pricing reduction. So, the background of these three factors, which have played out in various degrees. We looked at the overall cost structure in three fundamental ways. First is what could we do to avoid cost increases; and some of them we have announced last time is looking at the utilization curve in terms of our promotion freezes or fresh offers, which were put on hold although we on-boarded everybody, we made offers in the previous quarter. So these moves in terms of cost avoidance, re-skilling existing talent for new digital demand – we did not hire but actually re-skilled our employees. So, these were largely what I call cost avoidance and if we had not done this we would have actually seen some distress on our margins. The second is what we call the short term and temporary cost cuts, which we have done on discretionary work. For instance, travel and visa costs have come down nobody is traveling, now as you know, so we have got a benefit of that. We will have to see how it pans out, how much of that will continue. The same thing in terms of discretionary spends. We have of course cut back on things like branding, marketing, done aggressive rate negotiations. So, these like I said will be the ones, which have flown into margins when I give you the margin walk. And finally we have strategic cost levers, which we have been continuously talking about, which are around the pyramid, around the onsite-offshore mix, around subcon costs, around automation. Those are the ones we continuously work on. So, these are the three things we focused on and in terms of our margin we have seen a sequential improvement from 21.1% to 22.7%. Specifically, from a work perspective first thing that helped us was in terms of currency. As you know, the average rates for the quarter in terms of rupee had depreciated. So, we got about 70 basis points benefit from that. We got about 230 basis points of benefit between visa and travel costs and the third we got about 110 basis points benefit due to other discretionary costs of SG&A, etc. So that was about 410 basis points. We lost about 150 basis points on operational parameters. As you saw utilization came down because of the demand gap, we faced some pressures on RPP, in fact onsite also got hit by about 40 basis points and those also impacted margins as well. And finally, as Salil mentioned, we thought it was very, very important to reward our employees and we have actually upped the variable pay so far and the other cost increases we have had including variable pay hike, was a hit of about 100 basis points, so net-net that is the overall 160 basis points Q-Q increase in our margins.

 

Pravin Rao

 

On the commitment made to prospective employees in the last quarter, which we had deferred, almost 90% of the people we have already on-boarded, balance about 10% of people will be on-boarded this quarter. We have already communicated the joining dates of these people – these are laterals. In terms of freshers, as I said last time as well we expect about 20000 plus people to join. For them we will start on-boarding in a phased manner starting later this quarter. But normally we take two, three quarters to on-board freshers from campuses and that is something, which we will continue to follow. In terms of the voluntary attrition from IT Services perspective, it has declined to 11.7% as compared to about 20.2% one year back or even 15.3% over a quarter back. So, we have seen a significant combination of all the employee engagement activities and things that we have done over the last few quarters resulting in much lower attrition.

 

 

 

 

 

 

Garima

 

Thank you for that Kritika and thank you for those answers. The next question is from Chandra from ET Now.

 

Chandra

 

Hi, Chandra here from ET NOW. Salil when we spoke to you in the first week of June I think it had many clues in that interview. You said there have been no cancellations of projects, pricing is stable and that you will take a call on guidance by the end of quarter. But in the same interview you also mentioned that there is some pressure on discretionary spend in verticals such as retail and manufacturing. So, have those also started rebounding, bouncing back and in that case, you see perhaps upping the guidance for the next quarter? And the second part is in the recent AGM you spoke about actively looking for acquisitions outside India, can you take us through that? Was this a generic statement or something that you are consciously looking at?

 

Nilanjan, a question on the pricing. How is it trending, our clients renegotiating contracts at this point, is it stable? Finally, Pravin I think I am not sure if you answered the question on the moves that Infosys is making to sort of correct the employee pyramid? If you are going to do away with some senior roles and you can give us clarity on that? And also if you have a proportion of work from home versus work from office like is it going to be 75:25, 50:50, if you can give us a percentage ratio? Thank you.

 

Salil Parekh

 

Thanks, Chandra. You are right. When we had that discussion some of these points we had started to elaborate. In terms of the acquisition first I think what I shared at our AGM was essentially what we have been engaged in all through, at least in the past couple of quarters, which is looking at available opportunities from a large array. We have a list of possible acquisition candidates that we are evaluating and that goes on. We feel quite good that now the market is evolving, and we will continue to do these sorts of acquisitions, so there was nothing more specific. In terms of the sectors, Pravin will elaborate a little bit more on the specific sectors, I will give you some initial color. We have discussed Manufacturing, we have discussed Retail, but we do not see that something is dramatically in that. What I would like to say is, we do not see that those are further declining at this stage. We, of course, have specific data on each of our sectors and for example, Hi-tech has done extremely well in Q1 for us. We see some of the strengths in other sectors, which have done quite well as well. Let me now pass it on to Nilanjan first for his part.

 

Nilanjan Roy

 

Thanks, Salil. On the client renegotiations as we mentioned and expectedly so, few clients have come back and basically on two types of issues. One is of course pricing and discounts - some of which are temporary and some more longer term - and of course we work through that with the clients. And since we have had long relationships with them we support them wherever required. Other clients have come back – some of them on the cash side because who are facing a cash crunch cycle have come sometimes…….(inaudible) work with our clients because our relationship was long and deep. We have a long repeat business and wherever we have seen a way to support them, we have done that.

 

Pravin Rao

 

On the pyramid side, pyramid is integral to our operating model. It’s has been there for ages together. In fact, when we started our onsite localization effort as well, we have really not only recruited the locals with experience but we have also recruited people from universities as well in an endeavor to build pyramid onsite as well. So that remains integral to them. I do not think there is any change in the strategy – it will continue. In fact, 70% to 80% of the people we recruit every year are from campuses. That help us in building the pyramid. And we are not really looking at letting go any senior people. As usual every cycle we have performance-based exits and that is something as high-performance organization we have always endorsed and adhered to. But there is no structured program for letting go senior people.

 

In terms of the operating model, our vision or our view is that we need to have a hybrid operating model where people will have the ability to work from office or work from home in a seamless manner. All our efforts today are in that direction. At this stage, it is really academic to say whether it is 20%, 50%. There are a lot of variables in that, but we are very confident. I mean today less than 1% of the people are working in the office and 99% are working from home and we have enabled it very successfully. So our effort and focus is mainly on making an operating model where we can seamlessly swap between from work from home and work from office; and beyond that, I do not think we are looking at any specific numbers.

 

 

 

 

 

Garima

 

Thank you for those answers Pravin, Nilanjan, and Salil. Thank you for that question, Chandra. Now we will move to our next question which is from Agam from BloombergQuint.

 

 

 

 

 

 

Agam Vakil

 

Salil my question to you is that I am sure COVID-19 has now accelerated demand for certain products and services over many others. Can you elaborate a little more on what kind of conversations you are having with your clients when it comes to these relatively new requirements? Also I know this is probably going to be a hard one for you, but a probability of a possible increase in guidance going forward, if that is the case what would you like to see before you start evaluating a revision in guidance? Pravin if you could tell us a little more about how the supply side of things have changed over the last three months. I am sure a lot must have been done and what of these changes which will remain permanent according to you? Nilanjan, a word on capital allocation. If you could just give us an idea about whether or not there are any changes at this point in time?

 

Salil Parekh

 

I will start off. Agam, On your first part, which is focused on what are the things, which our clients are looking for, we see that this whole crisis has really accelerated the digital thinking across most large enterprises. There we see a lot of demand in the area of Cloud, we see more plan for workplace transformation projects, we see more demand for doing digital transformation activities, we are also seeing demand for automation and cost efficiency and we are seeing demand in the area of consolidation. Clients have seen that we have delivered quite effectively in this work from home environment and given them seamless service. And they also seen a strong financial position that we aim. So, we are seeing some conversations in that regard. Another bit with respect to the guidance – whatever I had to say about guidance, I have already said.

 

 

 

 

 

 

Agam Vakil

 

Pravin, my question to you was to do with the supply side of things and I am sure there were a lot of challenges in the last quarter. What do you think we have changed in this particular quarter when it comes to adapting to the new environment among all the changes that you have brought in the last three to four months – what of that is expected to remain permanent going forward in Infosys?

 

Pravin Rao

 

As you rightly said we have done multiple things in terms of enabling the supply side and ensuring business continuity and we have done that without compromising on the safety and the health of the employees. First, obviously we have enabled everyone to be able to work from home by providing the right level of computing assets. Today more than 99% of the people are enabled to work from home. The balance while they are enabled, they are required to work from office based on the client requirements. So, that is the first thing we have done and today it is very easy for us to switch back from work from home to work from office because people have been enabled. We have also invested in network infrastructure, we have invested in cybersecurity tools, we have invested in collaboration tools, productivity tools, and so on. So that while people are working from home, there is no decrease in productivity, and we are able to maintain the service level to our clients and so far we have not seen any negativity there. So this is one thing, as I said earlier in the new normal, people will have the ability to switch from working from office to working from home and it is not the same set of people. I mean there are set of people who may work in office for some time, they may choose to work from home for a few days and so on. So, with these assets and the infrastructure today we have enabled people to do that, that’s number one. Second one, in this quarter even though there has been in general hiring freeze we have on-boarded more than 5000 laterals globally and we have been able to on-board them remotely. So again, we have used the infrastructure, we have used our investment in the latest platform to enable and again the feedback has been pretty positive. In fact, we had some rebadging from clients and we have been even able to onboard them virtually. For us this is something which will become part of the new normal because this pandemic could remain for some time – on and off and remote onboarding will probably be an element which will continue to remain going forward as well.

 

Similarly, for training as well, we have seen huge adoption of training – again LEX platform has been a huge positive. When COVID broke out, we had 5000 plus people who were undergoing training in Mysore. They had to abort the training, but since then they have completed training in a virtual manner and this quarter we will be even certifying them and deploying them in production. So net-net, in terms of everything required in supply chain whether it is hiring, whether it is training, whether it is enabling, whether it is inducting them in projects and so on, we have been able to do it remotely and that mechanism and the practices will hold good going forward as well whenever there is a need.

 

Nilanjan Roy

 

Agam on your question on capital allocation as you know, last year this time, in fact, we had increased our payout ratios from 70% to 85% of free cash flows and the whole idea was to give back more to the shareholders and to make the dividend payouts and buybacks much more predictable. In fact, in the start of this year when we announced our final dividend in the midst of the crisis, we continued to hold our dividend. We just paid out over Rs.4000 Crores at the beginning of July to our shareholders. So, we continued to follow our capital allocation policy as of now.

 

 

 

 

 

 

Garima

 

We will now move onto our next question, which is from Kushal Gupta from Zee Business.

 

Kushal Gupta

 

My first question would be to Mr. Parekh about the deal pipeline. For instance we know that ABN AMRO, you have had a deal before and now Vanguard we have seen the partnership blooming. Now can you give us a count of how many deals are in the pipeline right now, you are in negotiations with, you are trying to be a partner with for the next few quarters? Secondly, the question would be particularly to Mr. Rao about the H-1B Visa impact which we could possibly see, which we have seen. And I also wanted to know what is the current percentage of localization in the US right now? And the third question is directed to Mr. Roy about the verticals. How is the growth shaping up for BFSI as well as Retail wherein we are seeing amidst the current pandemic, the second wave of Coronavirus is also coming up? So how are you planning for that?

 

Salil Parekh

 

Thanks for that. Let me start off with the first part which is focusing on what we are seeing in the deal pipeline. I think the new areas of service that we have really pivoted to very quickly, we have seen a nice expansion of our pipeline in those areas and we feel comfortable that for those areas, for example in cloud or in automation and cost efficiency, a workplace transformation even more work in cyber security and then in consolidation, we will see some good activity over the coming quarters. I am not able to give you specific numbers; we do not share those externally, but suffice to say that our pipeline is looking quite okay. Let me pass it on to Pravin for the next part.

 

Pravin Rao

 

On the H-1B Visa obviously, it does not really make any logical sense. Various independent studies have clearly demonstrated the value that Indian IT service providers are putting to the US economy and how they make the American companies very competitive. Having said that, in the short term, we do not see any impact because anyway there has been zero travel due to the travel restrictions and even the Consulates are shut down. So, in short-term till December it does not make any difference. But having said that, from an Infosys perspective our focus on localization has really helped us. Today more than 60% of our employees are visa independent, this we generally started about two and a half years back and since we made the announcement in May of 2017, we have recruited more than 13,000 US nationals. So from our perspective, we are entirely de-risked and I mean even in the medium to long term, we do not see an impact. Even though, I mean personally, we do feel that it does not really make sense, even the unemployment rate is very low in the tech sector, all the value adds that we are doing, but from Infosys perspective, I mean given our localization efforts, we are fairly comfortable.

 

Nilanjan Roy

 

I think Salil mentioned that as well on the pipeline, I think we have seen a strong pipeline across our verticals. Of course, FS being the largest, we have seen a heightened level of conversations and the recent deal which you have seen yesterday, just one of the reflections. Healthcare, Life Sciences continues to do well, CMT does continue to do well, it is not impacted much by the pandemic. On Retail and on the Manufacturing side, there are lot of conversations which are self-sourced, which we are talking to a various number of clients. So, all in all, as Salil said, there is a heightened level of activity, much more that we have ever seen before, and that is very positive news for us.

 

 

 

 

 

Garima

 

We will now move to our next question, which is from Ayan, The Economic Times. Ayan could not join us right now here, so I am going to read out the question he had sent. The first question is you have announced the Vanguard deal yesterday that involves the transfer of 1300 people. Do you see more such deals happening given this slowdown? The second question is what is the breakup of voluntary and involuntary attrition? The third question is one of your peers said that the H-1B is unfair and impact business. What is your view? Salil maybe you can take the first question.

 

Salil Parekh

 

Let me start off I think we were delighted yesterday when Vanguard announced the strong partnership with Infosys for the digital transformation of a critical component of their business. We are delighted to work on this and we are delighted to look at several large enterprises in their digital transformation journeys. We have active discussions across number of sectors as there has been referenced through in earlier parts of the call. In terms of what we see going ahead clearly as we progress through quarters then we will be able to share more as opposed to talking about it at this stage upfront. The second one Garima, maybe if you can just repeat that?

 

 

 

 

 

Garima

 

Sure. The second question was what is the breakup of voluntary and involuntary attrition?

 

Pravin Rao

 

As I said earlier voluntary attrition for IT services is 11.7%. We do not give a breakup between voluntary and involuntary attrition. There was a question on H-1B which I had already answered. As I said earlier it is unfortunate, it does not make any logical sense, but from Infosys perspective, we have a very derisked business model and we should be okay in dealing with this.

 

 

 

 

 

Garima

 

Thank you so much for those answers Salil and Pravin. We will now move onto our next question. It is coming from Varun Sood from The Morning Context.

 

 

 

 

 

Varun Sood

 

Congratulations firstly on a good set of numbers especially in times where we are in. Sir three quick questions and I leave it to the management to answer whoever wants to answer each of these three questions. The first question is have we bottomed yet on utilization that is the first question. The second is, Sir do you see work from home say in a long term period to be a margin driver considering among many things, work from home is leading to higher productive width, so can I have thoughts on this work from home being a margin driver in 18 to 24 months’ time? and Sir third question quickly is how are the budgets standing? If more clients are coming back and spending. What is new if I can say the new, if I can say the new normal which we are seeing, well answer earlier that is in the midst of this pandemic, you are seeing a lot of transformational work. So with this your spends from the transformational work, does this mean that this business in new is translating to more revenue for you, just to quickly give you an analogy in publishing world for almost all newspaper companies ….(inaudible) advertised is very difficult, those get the monetizing it then selling it, something is this a similar kind of an analogy which is playing out in the IT service, then you are moving to you are getting revenue or some of the technology?

 

Salil Parekh

 

Let me start off and then Pravin or Nilanjan will add as appropriate. Varun first we could not hear everything in the question – it was breaking in and out. So, I will address what I thought I understood. The question about what is really the client’s demand or what is the selling or what is growing in IT services - if you look at our numbers for Q1, we had our digital business growing at 25.5%. We have also seen since the start of the crisis more and more interests with our clients in the areas of digital, of Cloud, some more interest in the areas of cybersecurity, workplace transformation and then on cost efficiency automation and consolidation. Also, I think that, in general the overall IT spend is constrained. We have to be very careful that it does not mean the overall pie is at a growth level. We do see some growth in these specific areas and we ourselves have seen a growth overall for our company. In terms of utilization the first point that you made; I will start off if Pravin wants to add something else he will add to it. On utilization we have certainly seen our utilization reduce in Q1. We will have to wait and see how the rest of the demand flows out. We see that we had some impact in the first quarter; however, we also see some of our utilization in the US coming back up as well. I could not hear other parts of the question. Pravin if you picked up something that you want to answer? Please go ahead.

 

Pravin Rao

 

I think Salil responded on the utilization and obviously, it is a function of demand. Thankfully after the initial drop, we have seen utilization onsite has come back to a normal level so that is less of a concern. Offshore is probably still a concern and we still have to onboard campus offers that we have made for this year, which we will do over a period of time. So, again it is based on the demand. We will see utilization may be operating in a narrow band. There was a question on productivity during work from home. So far we have seen productivity holding good. By and large we have seen productivity is stable. We have seen in some areas productivity actually improving, in other areas we have seen some marginal dip. Overall we have not seen too much concern. But again these are early days – we are really talking about two, three months of experience. And we have to also remember when you talk about work from home, it is not only about technology enabling people to work from home, but there are lot of softer factors, which we have to really figure out because how do you engage with people better if there is a lot of work from home? Many people have adopted well, but some people are still stressed out by the work from home thing. How do you deal with that, how do you provide them emotional and physical wellbeing kind of thing? Then when you are inducting new people how do you imbibe your organization trust, organization culture and values? So, there are lot of unanswered questions and lot of things we have to learn from work from home and many of them will have some bearing on the productivity. So, our sense is while it has held good, it is too early to conclude whether work from home will always be more productive than work from office.

 

 

 

 

 

 

Garima

 

Now we will move onto our next question. The next question is from Debasis from Business Standard, which I am going to read out. He asks, will Infosys look at acquisition in FY2021 to boost growth given the guidance of 0% to 2% revenue growth?

 

Salil Parekh

 

The view that we have on acquisitions is really where it makes strategic sense to help us in the areas that we want to drive our business towards, which we have defined in our digital framework within the pentagon, those are the first areas that we look at. It is not driven specifically to boost or not boost growth in general. In addition to that, there are sometimes opportunistic acquisitions where we see something in a specific sector or geography or offering, which has a strategic fit but also gives us new capability where we are already strong or want to be stronger. So, those are the ways we look and continue to look at acquisitions – not to do some sort of growth compensation. Our business, as we have shared with you, we feel, in fact, is doing well and we feel quite confident given some of the factors or what we are seeing going ahead.

 

 

 

 

 

 

Garima

 

Thank you, Salil. Now we move onto our next question, which is from Shilpa Phadnis from The Times of India.

 

 

 

 

 

 

Shilpa Phadnis

 

You signed about $1.7 bn of deal in the last quarter. If you can take us through how much of it came from vendor consolidation? Also if you can help us understand how are these deals been structured, is it a combination of upfront payments or deferred payments or deep discounting, that is my first question? Second, if you can also talk about the potential pricing pressure that could weigh in on the revenues going forward? Third digital comprises 45% of your revenues, the pace at which it has grown in your overall revenue but the revenue per employee comparison that is really not got up – it is still at $53000. So, I just wanted to understand from you do you think the pricing differential is getting blurred with digital becoming more mainstream? If you can help us with your responses?

 

Salil Parekh

 

Thanks, Shilpa. I will try to include some of the points and then Pravin and Nilanjan will add to it. I think the first question was the segmentation of $1.7bn of large deals, we do not typically share that sort of segmentation externally in the dimensions that you are referring to. I think there was a question on pricing. I will give a little bit of color and after I finish there could be some more additions from Nilanjan or Pravin. On pricing, we have seen some level of impact, but it has not been broad-based or widespread at all. We have seen some pricing discomfort very narrowly with a few clients in the impacted sectors in Retail and Manufacturing. Third in terms of our Digital business, we have shared this in the past – our operating margin for digital has in fact been higher than the company average in the past. We feel quite good about how our digital business is growing and we feel that it is at the right level in the way we are structuring these deals. Of course, we will always look for ways to improve that keeping the client interest and Infosys' interest in mind. Anything else Nilanjan and Pravin?

 

Nilanjan Roy

 

No Salil, I think you answered the pricing question and I had already answered earlier.

 

 

 

 

 

 

Garima

 

We can now move onto our next question, which is from Ayushman Baruah from Mint which I am going to read out. The first question is do you see recovery in Q2 or Q3? What will drive the demand in a post COVID world? The second question is hasn’t digital become mainstream and yet as you continue to call it out separately? And the third is what led to an increase in profits year-on-year? Salil, may I please request you to speak a bit louder while you take this question. Thank you.

 

Salil Parekh

 

On the first one, what do we see in terms of the timeline for recovery. We have not specified and not looked at that from a quarter perspective, our guidance is really for the full year. As you saw we have seen a growth in the first quarter and we continue to see a pipeline in a good place. So, we feel that that is a measure that we will track, but then look at the overall economic environment as well. As I mentioned earlier in my opening comments, there are still a lot of uncertainties in that environment. But we are going to make sure we look at that carefully on a week-by-week, on a month-by-month basis. Then there was another question, maybe Nilanjan.

 

Nilanjan Roy

 

I will take that. The question on operating profit like I had mentioned earlier, last year in this time we had 20.5% operating margins and now we are at 22.7%. So, as the year has progressed throughout last four quarters we have continuously shown the improvement in margins from various cost-optimization levers. We have talked about consistently around the pyramid, onsite/offshore mix, automation. So, all that is helping us. In the long run, to structurally improve our business, as well to show stability in margins after the FY2019 decline. And because of these tailwinds we have also continued to hold and show resilience in our margin guidance for FY21, which Salil mentioned remains the same as guidance, which we gave last year, which was at 21% to 23%. So, I think all these things are contributing to our confidence in ensuring that we have a stable and margin guidance, which we can continue to hold and show.

 

 

 

 

 

 

Garima

 

We will now move onto our next question. Can we have our next question from Saritha Rai from Bloomberg.

 

Saritha Rai

 

Thanks, Garima. Hello Pravin, Salil and Nilanjan. I had a couple of questions. One is the feeling that I get that Infosys has somehow overcome all of the challenges whether it is work from home, travel restrictions, or the Visa ban. So, I would really love for you to give me an idea of what the challenges are from here on? Your margin guidance is extremely positive. I want to understand what the challenges are for you ahead? Then also would love to hear, you talked about the heightened level of deals. What kind of deals, what kind of verticals are you talking about? And the last question for you on the Visa situation. You talked about de-risking the Visa situation completely. How have you done that and what are the plans if the situation goes beyond the year-end as it is only supposed to last till the year-end for now?

 

Salil Parekh

 

Thanks, Sarita. Let me start off and certainly on the visa piece I know Pravin will add a few points as well. On the challenges first, we feel good with how the Q1 outcome has developed. However, the global economic environment has still got uncertainties as I shared in the opening statement and those are things we have to watch carefully. We have some understanding and experience and learning how the Q1 progressed and how all of these parameters that you describe, for example, work from home, engaging with clients in this contactless manner, how transitions happen in a remote digital fashion. But there is still crisis the world over in different ways and we have to be extremely careful how we navigate that. It is not to say that it is behind us by any stretch.

 

I just want to mention a little bit about the visa situation and localization. One is to put in place a few years ago was this idea of building local talent in all the geographies we operate. We started with the U.S., we had set out a large target for recruitment locally, we have far exceeded that target. We have set up six digital centers in the U.S., we have also set up digital centers in Europe and in Australia. Our thinking really is, Nilanjan and Pravin alluded to this earlier, are to do college recruitment and build a full pyramid in those environments. By doing that we are building a business model, where there is more and more resilience in the future. It is not to say that we anticipated something like this that happened in this past quarter to happen. It is more to say that because of those decisions and the investments we made in building the model we feel more able to navigate in this environment. Of course, it is not to say that we have all of the answers, but our business model is much more resilient we feel than it was in the past and maybe much more resilient than what we see is going on in the market today. With that, I’ll just pause, if there are points to be added Pravin or Nilanjan.

 

Pravin Rao

 

Salil, you have added all the points nothing more that.

 

Salil Parekh

 

Back to you Garima.

 

 

 

 

 

 

Garima

 

Thank you so much. We will now move onto our next question; it’s coming from Derek from Reuters.

 

Derek Francis

 

First of all, congratulations on the numbers. I had a couple of questions. The first one was I wanted some clarity on the BFSI segment itself. I see that the revenues have risen, but I want to know like how are the sectors doing as a whole and how it will continue to do going forward for the rest of the year also given the current environment? The next question was to Nilanjan. I know he said that you are in talks with clients on contract with renegotiations, but I want to know that will trim margins and what sort of an impact the company is expecting to take on that. And the third thing to Salil is I just want a little more color on the guidance and what gave you the confidence to provide that guidance 0% to 2% revenue growth?

 

Salil Parekh

 

On the financial services, let me request Pravin to kick that off, and then I will come back for the guidance.

 

Pravin Rao

 

On the financial services, we had a positive constant currency year-on-year growth. At the beginning of the quarter, we have seen some concerns in that segment, but as the quarter progressed, we saw volumes coming back and demand uptick with the result we have seen some positive growth - primarily in Banking in the America and in Asia Pacific. We have also seen a very healthy pipeline. In fact, of the 15 deals that we won, large deals in Q1, five of the large deals were from BSFI space and you have heard about the recent Vanguard deal. This is not reflected in the Q1 on the large deal count, but early this quarter we have already won Vanguard deal, so the deal pipeline is healthy. We see some continued weakness in Capital Markets and Cards and Payment space, but on the positive side as I said we have this huge pipeline. We also done a phenomenal job in terms of enabling people to work for home and that is one of the reasons why we have seen volumes come back and pick up in financial services. So, we remain reasonably optimistic about this sector.

 

Nilanjan Roy

 

Question on the deal renegotiation I think renegotiation happens every quarter because every quarter they are certain deals which expire. That is nothing new and we could closely work with our clients on these matters. People look for productivity improvement, some people look for some pricing benefits. So I think that is nothing new and like Salil mentioned in terms of pricing, we have seen some impact and in the sectors which were, in the forefront like the Retail and Manufacturing, but not broad-based. And like I said, we have deep relationships with our clients and we continue to work with them.

 

Salil Parekh

 

On the guidance, as I shared earlier, we saw the first $1.7 bn in large deal wins in the first quarter. We also saw yesterday a very significant announcement from Vanguard. Digital transformation work, we will partner with them. And we have seen through this past quarter good traction with some of the newer areas; for example, on cloud, on cost-efficiency automation and on consolidation. With all those factors we felt, even with significant uncertainty in the global economic environment, where we see still some different scenarios for the medical situation, we felt that we were in a position to give guidance of growth of 0% to 2% for the full year in constant currency terms.

 

 

 

 

 

 

Garima

 

Thank you, Salil. Now next question is from Srinath Srinivasan from the Financial Express. I am going to read out this question. In the interest of time, we will read out only one question that he has shared. Can you share about investment and R&D and how we have changed post-COVID?

 

Salil Parekh

 

In terms of R&D investments, we continue to invest in innovation, which is something we look at for newer technologies, especially focused on artificial intelligence, machine learning. However, we do not have an R&D investment much like a research company. What we are clear about is, those investments in artificial intelligence, machine learning or some of the new areas of cloud actually are continuing even in this new environment because those are areas where we see more traction with our clients.

 

 

 

 

 

 

Garima

 

Thank you, Salil. The next question is coming from Jochelle from ET Prime.

 

Jochelle Mendonca

 

Thank you so much for taking the time out to listen to my question. I have just two. ISG seems to suggest that though the number deals in the quarter had held up, the sizes have decreased dramatically. I think they said 90% of the deals are in an average contract value of $5mn to $10mn. Infosys seems to be bucking that trend. Could you give me some color on how you see the sizes of deals in your pipeline holding up? And the second question – cash collections were fantastic in the quarter. How much of that do you believe is related to the stimulus that governments have provided to the companies and do you have a view on how cash collections might hold up once this stimulus is removed? Thank you.

 

Nilanjan Roy

 

On the cash collection, again I think we were very, very focused as the quarter started in times of this pandemic when liquidity becomes very, very critical, to ensure we set up a cash collection office so to speak, and monitor all our collections on a daily basis. I must say that the sales teams have really risen up and worked with our clients to make sure that there has been no slip-up in our overall collection cycle. And like I said at the same time we have been able to also extend temporary credits wherever clients have come back and have seen some stress on their balance sheets. So, we have been able to navigate this part of the collection cycle very, very well. As regards to the stimulus part, I am not sure how much of that is coming through the stimulus side because a lot of the stimulus is directly to individual employees etc. Most of the actual cash has come from companies borrowing and if you know in the overall global bond markets companies have already borrowed about a trillion dollars in the first five months of this year versus a trillion dollars in the full last year. So, a lot of this cash collection is actually coming from the borrowing which companies are doing. But having said that, lot of our franchisees are in the top US Fortune 200 companies, which also have strong balance sheets as well. So, I think we have been quite confident in terms of overall outlook on our DSOs.

 

 

 

 

 

 

Garima

 

Thank you so much. Now we will move on to our next question, it’s from Rukmini Rao from Business Today. I am going to read out Rukmini’s question. Can you give us some sense of how vendor consolidation opportunities are looking like?

 

Salil Parekh

 

On vendor consolidation what we have seen, as was shared by Pravin here, our work approach that we put in place has resonated with our clients and through that and through the strength of our business and financial position with the strong balance sheet, we see some increased interest with some clients to consolidate with us. We will now see in the next quarters how that plays out. There are active discussions in our pipeline, we will see how that plays out in the coming quarters.

 

 

 

 

 

 

Garima

 

Thank you so much, Salil. We will move on to the next question, which is from Swathi Moorthy from Moneycontrol.

 

Swathi Moorthy

 

I have these two questions, one is your core has come down by 14%, so do you see digital overtaking core at some point. And to Pravin, the voluntary attrition number you used to give till last quarter is there any reason why the company is not sharing it this year? And some color on the lateral hiring and fresher hiring plan for FY21?

 

Salil Parekh

 

Thanks for that question. I think one of the things we have put in place is really how we want to drive digital and the reason is that is where clients are making the biggest changes and that is the transformation journey that they are embarking upon. By bringing digital component to 44.5%, we feel more and more strong that we aligned with what is relevant for our clients as Navigating The Next. So, it is not a question of will digital replace or be bigger than core, it is really being much more aligned to what our clients are looking for and then making sure that we have those capabilities to provide them the right service, and that is the approach. For the other part, Pravin over to you.

 

Pravin Rao

 

On the voluntary attrition from this quarter, we will be disclosing only the voluntary attrition for IT services because that is what we have seen most people in the industry use and that is what really makes sense. So, that is what we will disclose going forward and as we said this quarter it was 11.7% as compared to over 20% about a year back. In terms of lateral hiring as I said in April, there is a general freeze of lateral hiring. However, we will continue to look for talents in niche areas. In Q1 itself we had 4000 plus lateral hiring and the trend will continue going forward as well – based on the needs we will look at it. From fresher hiring from campuses – again we had already said we are looking at about 20,000 plus people joining us towards later part of this year and early next year.

 

 

 

 

 

 

Garima

 

Thank you so much for your answers. Nikita had sent out the question across which I am going to read out. I want to get a sense on interactions with clients in the Retail and Insurance space?

 

Pravin Rao

 

See on the Retail front it is obviously very stressed at this stage. Barring grocery segment all other segments of Retail, be it apparel, be it specialty retail, logistics or any other segment in Retail, there seems a huge demand contraction and a lot of supply chain disruptions so obviously clients are trying to grapple with it and one of their big focus is on variabilizing the cost structures and taking cost off. So, that one of the conversations we are having with the clients and the second one is obviously we are also looking at continued investment in digital and that is other level of conversation we are having. Likewise on the Insurance in most sectors in today’s pandemic, one of the common thing is everyone is looking at virtual ways of engaging with their stakeholders, that is one common thing and that is the thing that we are having with Insurance companies as well. And the second one is, we are also accelerating the digitization because again Insurance has been little bit geared in terms of digital transformation. So, given lot of focus on digitization there is a lot of uptick in there. So, these are some of the conversations we are having both these Retail clients as well as the Insurance clients.

 

 

 

 

 

 

Garima

 

Thank you so much for answering all the questions so patiently. That wraps up the Q&A segment for today. Thank you, gentlemen.

 

Salil S. Parekh

 

Thank you, everyone.

 

Garima

 

We shall now conclude today’s press conference. As we sign off, I would like to inform you all that the archived webcast of the press conference will be available on the Infosys website as well as our YouTube channels sometime later today, please keep an eye out. Thank you once again for joining us. Please take care and stay safe.

 

 

 

Exhibit 99.4

Fact Sheet

 

 

 

 

 

 

 

 

 

 

 

     

 

 

 

  

   Exhibit 99.5

Earnings Call

 

  

Infosys Earnings Call Q1 FY2021

July 15, 2020

 

CORPORATE PARTICIPANTS:

Salil Parekh
Chief Executive Officer & Managing Director

Pravin Rao
Chief Operating Officer and Whole-time Director

Nilanjan Roy
Chief Financial Officer

Sandeep Mahindroo
Financial Controller and Head – Investor Relations

ANALYSTS

Keith Bachman

Bank of Montreal

 

Diviya Nagarajan

UBS

 

Edward Caso

Wells Fargo

 

Bryan Bergin

Cowen

 

Parag Gupta

Morgan Stanley

 

Moshe Katri

Wedbush

 

Sudheer Guntupalli

 

Motilal Oswal Financial

 

James Friedman

Susquehanna

 

Ankur Rudra

JP Morgan

 

Rod Bourgeois

DeepDive Equity

 

Moderator

 

Ladies and gentlemen good day and welcome to the Infosys earnings conference call. As a reminder all participant lines will be in the listen-only mode, and there will an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing “*” and “0” on your touch tone telephone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sandeep Mahindroo. Thank you and over to you Sir!

 

 

 

 

 

 

Sandeep Mahindroo

 

Hello everyone and welcome to Infosys earnings call to discuss Q1 FY2021 financial results. This is Sandeep from the Investor Relations team in Bengaluru. Joining us today on this call is CEO & MD - Mr. Salil Parekh, COO - Mr. Pravin Rao, CFO - Mr. Nilanjan Roy, along with other members of the senior management team. We will start the call with some remarks on the performance of the company by Salil, Pravin and Nilanjan before opening up the call for questions. Please note that anything which we say which refers to our outlook for the future is a forward-looking statement, which must be read in conjunction with the risks that the company faces. A full statement and explanation of these risks is available in our filings with the SEC, which can be found on www.sec.gov. I would now like to pass it on to Salil.

 

Salil Parekh

 

Thank you, Sandeep. Good evening and good morning to everyone on the call. I trust each of you and your loved ones are safe and healthy.

 

We have had an exceptionally good quarter in our first quarter of this financial year. I am extremely proud of what we have achieved as a team. The results for Q1 were strong across multiple dimensions - revenues, continued differentiation in our digital offerings, large deal wins, operating margins, collections & cash flows and reduction in employee attrition.

 

Let me share with you some highlights:

 

·Our revenues grew at 1.5% YoY in constant currency terms.

 

·Digital revenue grew at 25.5% YoY in constant currency and now accounts for 44.5% of our revenues.
·We delivered 22.7% operating margin which is an expansion of 220 basis points YoY and 160 basis points sequentially. This was achieved after rewarding our employees with a higher variable pay. Our employees have displayed incredible dedication & resilience and have been an integral part of our Q1 performance.
·Large deal wins were at $1.74 bn for the quarter.

 

·Large deal pipeline has improved over the past three months as clients look at expanding engagements with us due to their trust in us and our exemplary service delivery in the crisis.
·Voluntary attrition in IT services is down to 11.7%

 

·Increased focus on collections yielded results and this was evident in our operating cash flow of $783 mn for the quarter.
·Our balance sheet remains strong with cash and investments position at $3.8 bn with no debt.

 

I am also happy to report that yesterday we announced a landmark digital transformation engagement with Vanguard. We will partner with Vanguard to drive the digital transformation of their record-keeping services onto a cloud-based platform. Coupled with our strong Q1 results, this gives us a powerful foundation for the rest of year.

 

While achieving these outstanding results in Q1, our focus and attention has been on the well being of our employee and highest level of service delivery for our clients.

 

We have focused on the safety and hygiene of the environment in our office locations and also leverage our technology infrastructure to enable 99% of about 240,000 employees across 46 countries to work from home. For our clients, we have ensured the highest level of service. The extensive digital investments we have made over the past several years enable us to operate with tremendous stability and combat uncertainty with resilience. This is serving to increase the trust that our clients have in us.

 

We reoriented our clients focus with speed to their new and emerging needs – cloud and digital, cost efficiency & automation and consolidation discussions. Our investment in localization in the U.S. over the past several years resulting in six digital centers, college hiring and a majority of our U.S. workforce being local, helped us to better manage the evolving visa regulations in the US. Our business model is more resilient as we look ahead.

 

We have put in place a comprehensive cost and cash management program as the crisis started and it has provided us significant benefits and will form the basis of our operating approach for this financial year.

 

We remain committed to support the communities we live and work in. In India we have provided medical support, food supplies, technology support and contact tracing for government agencies. We are also providing medical and contact tracing support in the U.S. and the UK and to different government bodies.

 

Notwithstanding the large stimulus programs in the U.S. and Europe, there are still economic uncertainties in those markets as there are still emerging medical scenarios. There are also emerging medical outcomes in India that are not fully known. However, with what we have learnt in Q1 and ongoing strong client connects, we feel the strength of our franchise is coming through clearly and with that we will reinstate our guidance.

 

For the full financial year, our revenue growth guidance is 0% to 2% YoY in constant currency. Our operating margin guidance for the full year is 21% to 23%.

 

With our continued attention to client needs, employee well-being, cost and cash focus and strong client reaffirmation, I am more convinced now that we will emerge stronger from this crisis.

 

With that, let me hand over to Pravin. Thank you.

 

 

 

 

 

 

Pravin Rao

 

Thank you, Salil. Hello everyone.

 

The pandemic has created an unprecedented impact on the global economy and the way businesses function. At Infosys, our primary focus has been on employee safety and client continuity.

 

Thanks to our evolved BCP methods, we have been able to respond well to this situation through multiple measures for employees like enabling work from home for our global workforce, health and safety measures, evacuation of stranded employees, enhanced support, remote engagement, overnight policy changes and extended communication.

 

On the client side as well, we responded very swiftly in enabling them to run their operations seamlessly, which is visible in our strong and resilient Q1 performance, which I will now touch upon. Clients have recognized us for the speed, security and effectiveness of our remote enablement efforts.

 

Our steps on supply enablement and client centricity led to a lower impact of COVID on Q1 compared to what we were expecting at the start of the year. Despite the COVID related challenges, we registered 1.5% YoY revenue growth in constant currency terms in Q1. Financial Services, Hi-Tech, Life Sciences and Healthcare segments witnessed positive growth on a year on year basis while Communications, Manufacturing and Energy, Utilities, Resources & Services segments were flattish. Retail segment saw weakness as expected. Geography wise, Europe grew by 4.4% YoY in constant currency while North America remained stable.

 

As expected, utilization in Q1 was lower. However, onsite utilization remained steady for Q1 after a drop in the early part of the quarter. This was due to our extended focus on cost optimization and hiring freeze. Onsite and offshore effort mix deteriorated slightly from Q4 but was better than Q1 FY20 by 70 bps.

 

Only 10% of the revenue impact in Q1 FY21 was due to supply side issue as we have achieved remote work enablement for almost 99% of our employees.

 

Large deal wins were healthy at $1.74 bn for Q1. This excludes the largest ever deal signed in Infosys’ history that we have closed in Q2. We won 15 large deals in Q1, out of which five deals were in Financial Services; three deals each in Retail, Energy Utilities Resources &

 

Services and Hi-Tech; and one deal in Manufacturing. Region wise, 13 were from Americas, and two were from Europe. Share of new deals was 19%.

 

From this quarter we will be disclosing voluntary attrition for IT services, the key monitorable for us. Voluntary attrition for IT services declined to 11.7% compared to 20.2% in Q1 last year. This is significantly lower than our comfort band of 14%-15%.

 

Let me talk about some broad themes that are playing out before I touch up on the segments.

 

-Clients are looking at building resiliency in their operations, improving efficiency and cutting costs.
-There is growing interest in remote workplace solutions, employee experience, cloud solutions and cyber security.
-There is a growing acceptance that the pace of digitization must accelerate.
-There is weakness in spending especially in the area of discretionary spend, as clients continue to focus on preserving cash and maintaining liquidity.

 

All these translate to

 

-A deal pipeline which is robust with focus on cost takeout, digital transformation, captive takeover and vendor consolidation.
-We are increasingly seen as a preferred partner for clients due to our focus on digital capabilities, differentiated localization strategy and improved geographical footprint.

 

Moving to the business segments.

 

Financial Services after an initial drop in early part of Q1 saw a faster recovery in business volumes and deals during the quarter, especially in the U.S. and APAC banking. Strength in the vertical was also driven by high levels of remote enablement for our employees in different geographies. We see some softness in the capital markets and cards & payment sectors. Likewise, near zero interest rates are also expected to affect profitability of banks. On the positive side, we had multiple deal signings in Q1. In early Q2 we signed the largest ever deal in Infosys’ history in this vertical.

 

Retail segment remains under pressure, with clients in non-grocery, apparels, lifestyle & fashion, restaurants, logistics segments seeing demand contraction and supply chain disruptions. Non-food, non-home and health CPG companies are also in similar turmoil. As the challenges persist, we see clients looking for opportunities to improve efficiency of their tech spend and we continue to see a robust pipeline of deals in this segment.

 

Performance in Communications segment stabilized on a sequential basis, although clients, especially in Media & Entertainment industry are under pressure due to weaker advertisement spend and cancellation of events. Network resilience and business continuity remain highest priority while companies are also investing in digital channels. We expect some delays in 5G rollouts due to COVID-19 related disruptions.

 

Energy, Utilities, Resources & Services vertical is seeing pressure due to lower activity in Energy and Resources segment. However, we have been wining deals in this segment and a continued strong pipeline makes us hopeful on the future prospects despite near term volatility.

 

Similarly, in Manufacturing, we have seen weak performance on a sequential basis due to demand, production and supply chain disruptions and this is expected to continue in near term. Auto & Aero sectors are majorly impacted with factory closures, delays and cancellations in aircraft purchases and so on. We however, remain encouraged by new account openings and a steady deal pipeline in this segment.

 

Our digital portfolio and prowess continue to grow. In the last quarter we have been rated as a leader in seven service-related capabilities across digital pentagon areas by industry analysts.

 

With that I will hand over to Nilanjan.

 

 

 

 

 

 

Nilanjan Roy

 

Good evening everyone. I hope all of you are well and healthy with your families and loved ones.

 

As we mentioned during the last quarter and elucidated by Salil and Pravin earlier, the company’s priorities during the quarter were focused on three key dimensions.

 

Firstly, ensuring that we continue to stay relevant to clients and meeting our delivery commitments whilst keeping the health and safety of employees as paramount. Revenues in Q1 were $3121 mn and grew 1.5% YoY in constant currency terms which is satisfying in the context of the larger economic crisis and competitive context.

 

Secondly, tight management of cost and cost control initiatives. This was a combination of a three-pronged approach which we adopted,

 

a)cost avoidance measures like hiring freeze, reskilling bench talent to improve utilization etc. These measures are critical to avoid any margin deterioration in the quarter.
b)short term discretionary cost cuts, some enforced by COVID like travel and other cuts on professional charges, marketing, rate negotiation with vendors etc.
c)Our ongoing strategic cost levers of automation, pyramid, onsite mix and subcons.

 

Consequently, operating margins increased to 22.7% compared to 21.1% in Q4, an expansion of 160-basis points explained as follows:

 

70-basis points benefit from rupee depreciation offset by impact of revenue hedges and cross currency; 230-basis points benefit due to lower travel and visa costs; 110-basis points benefits due to lower SG&A costs as mentioned above. These were offset by 150-basis points headwind due to operational parameters like lower utilization, higher onsite mix and lower RPPs; and a 100-basis points increase in salary costs, including higher variable pay & others as we rewarded teams in the time of this crisis.

 

As you can see from the factors above, some of these are one time/temporary gains while others are long-term structural improvements.

 

The final priority during the quarter was focus on cash and liquidity in the midst of this crisis. FCF of $728 mn grew 50% YoY and was at a record high, supported by robust collections despite some increases due to client extension requests, government tax deferrals in some jurisdictions and tight capex control. FCF as a percentage of net profit was a creditable 130%.

 

While we aim to increase capital return to our shareholders, we continue to maintain a very strong, debt free and liquid balance sheet. Cash and investments at the end of Q1 were $3.8 bn excluding the $536 mn earmarked for dividend payouts made in early July.

 

Yield on cash balance declined to 6.11% in Q1 compared to 7.06% in Q4 due to declining interest rates in India. Q1 also marked the 20th consecutive quarter of positive forex income despite significant currency volatility globally.

 

Return on equity increased to 27.7% compared to 25.9% in Q4 20. EPS growth was 3.8% in US$ terms and 13.1% in rupee terms on a YoY basis.

 

Our margin aspiration in these stressed times is focused on resilience and stability and consequently our operating margin guidance remains unchanged as last year within the band of 21%-23%.

 

With that we can open up the call for questions.

 

 

 

 

 

 

Moderator

 

Thank you very much, we will now begin the question and answer session. The first question is from the line of Keith Bachman from Bank of Montreal. Please go ahead.

 

Keith Bachman

 

Thank you very much. I want to ask two questions if I could. The first question is on your revenue comments for the year. You just posted 1.5% YoY constant currency growth and you are talking about 0% to 2% for the year. It seemed to me that the economy is improving and the backdrop is improving, that growth would actually improve during the year but I just wanted to hear a little bit about the puts and takes that we should be thinking about over the next couple of quarters as it relates to revenues.

 

Salil Parekh

 

Thanks Keith, this is Salil. I will address that point on the revenue. What we saw as we came into the close of the quarter was good large deal wins that we shared at $1.7 bn and then we had the announcement yesterday about the strong partnership with Vanguard. And in addition

 

we have seen, as we pivoted to the new needs of our clients, especially focused on the cloud area, or the area of cost efficiency and automation, or the area of consolidation, we could see some good traction in those areas. That gave us the confidence with respect to demand outlook and revenue. However, there is still the global medical situation playing out.

 

As I shared in my comments today, while the broad economic indicators in our major markets are more positive, we still do not have complete control on the medical situation in those markets or in India. Keeping all of those factors in mind, we first decided that it was time to reinstate guidance and second to clearly communicate that we were looking for growth this year. That is how we came to a view of 0% to 2% guidance in constant currency terms.

 

 

 

 

 

 

Keith Bachman

 

My follow-up question then is on workforce. And what I mean by that is, with the distribution of work, in the June quarter on-site mix was 28% and offshore was 72%, given this is an election year in the U.S., politics and visas will probably increasingly be an issue regardless of which party wins. How are you thinking about the distribution of work over the next 12 to 18 months that may or may not be related to visas, but I would think it is going to be harder, not easier. If you could talk about the distribution of work over the next 12 to 18 months and how you think about where work gets done.

 

Congratulations on a very strong quarter given the backdrop.

 

Salil Parekh

 

I will start with a specific set of comments and then Pravin may add a few thoughts on the work distribution. One of the things we put in place a couple of years ago or more, was an extreme focus on localization within the U.S. While we obviously had no inkling about the situation that has developed today, both with no travel in the crisis and the changing visa regulations, the fact that we recruit locally and we have a majority of our team in the U.S. that is local, we have a college recruitment program and a full pyramid, all of those helped us to mitigate these scenarios both on travel and on visa. Let me pause there and Pravin, if you want to add anything please.

 

Pravin Rao

 

Our onsite ratio has deteriorated just marginally as compared to Q4, it is at 28% and when we compare, about a year back it is better by 70 basis points than what it was in Q1 FY20. From that perspective, if you look back over several quarters, we have seen that the onsite ratio varies within a narrow band. Even when I look at on the deals that we have won, the nature of work distribution and solution for all the deal wins that we have had, we have always had a combination of onsite-offshore and we have not seen any significant difference. Obviously depending on the life cycle of the product there may be a need for a lot more onsite for particular part of the lifecycle and there are times when you can do significant work offshore. We don’t expect that to change. More importantly in dealing with the current pandemic, we have been able to do all functions - whether it is on-boarding, whether it is delivering on planned commitments without any loss of productivity, even selling as well has been done remotely. So in the new normal, our experience that we have learnt in various lifecycle activities will come to bear. Going forward, while we do not see any significant difference in the onsite offshore ratio, we will also probably see much more usage of remote ways of working. In that sense a good percentage of things can be worked anywhere wherever you have skill sets. It does not necessarily have to be in front of the client.

 

 

 

 

 

 

Moderator

 

Thank you. The next question is from the line of Diviya Nagarajan from UBS. Please go ahead.

 

Diviya Nagarajan

 

Thanks for taking my question and congratulations on a very strong execution in a very tough quarter. The guidance was also an unexpected surprise. I think you have already explained in great detail some of the factors that drove this. My question is how much of your wins this quarter according to you have come from share gains versus increased customer requirements on certain topics like digitalization and migration to the cloud that you addressed? That is question number one.

 

Question two to Pravin, I think you have disclosed that the voluntary attrition has come down and I do understand that you do not want to disclose involuntary, but could you talk about

 

any employee realignment that you had in the quarter, specifically around what you had in terms of the excess employee bench during the quarter?

 

Salil Parekh

 

Thank you for those questions. On the first one, while I do not have specifics on the share gains, I think what we see for sure is, as we look around there is some distance we have found with the extreme work we have done in the work from home and service delivery that Pravin referenced earlier and we find more discussions with clients in engaging with us as we look at variety of options for their needs. We also see that our performance is stronger than what the industry analyst organizations have suggested for the industry and so we feel that could indicate a market share gain. Those are some of the factors we consider, but I do not have the specifics in terms of what we think with individual peers and so on. On the second part Pravin, over to you please.

 

Pravin Rao

 

Thanks Salil. Diviya just to add on the first part, one way to look at is, if you look at the large deals of $1.74 bn, 19% was net new. In some sense that has come at the expense of someone else, that is one way of looking at it. But again there will always be an element of new and existing and it is very difficult to carve out in any granular level what has come from taking share from peers.

 

On the attrition, as I said voluntary attrition is about 11.7% and we do not have any structured plan to let go people or anything. Being a high-performance company, will always have strong focus on performance and wherever people are not delivering, we will let them go. This happens periodically, once a year for some set of people and every six months for the other set of people. So we have not done anything differently from involuntary attrition perspective. Whatever practices that we followed historically, the same thing we have continued in this quarter as well.

 

 

 

 

 

 

Diviya Nagarajan

 

My last question is to Nilanjan. You have started the year with the top-end of guidance in terms of the margins. So, how should we think about the puts and takes for your full year band still being at 21% to 23%?

 

Nilanjan Roy

 

Yes, Diviya, so as we mentioned for us it is very important to show margin stability and resilience. This was also the theme we adopted last year when we said we want to shore up to 21% to 23% and that is the same guidance we are keeping. Of course, the start of the year has been at the higher end, but we know some of these costs may creep up in terms of things like promotion or compensation, visa and travel costs may open up once the pandemic subsides faster. So we still have things which are unknown. So for us it is more about the band in which we operate and to get stability and resilience around these numbers.

 

 

 

 

 

 

Diviya Nagarajan

 

Just a follow-up I kind of missed what the net new number that Pravin said, if you could clarify that and thanks again and have a good year.

 

Nilanjan Roy

 

We mentioned 19% Diviya.

 

 

 

 

 

 

Moderator

 

Thank you. The next question is from the line of Edward Caso from Wells Fargo. Please go ahead.

 

Edward Caso

 

I was curious if you could differentiate between the trends in outsourcing related work, it sounds like some of the newer opportunities have more of an outsourcing deal to them relative to discretionary work, and then what are the implications for margins?

 

Salil Parekh

 

Let me start with my observations on that. What we see is more traction in what we have defined as our digital portfolio. Digital consists both of discretionary and multiyear contracts. We have not seen, at least at this stage a separation. Clearly some level of discretionary work in the quarter was slow and stopped especially earlier in April. But as we got through May, June, some of that started to come back. However, we have not seen a huge separation because there are new projects which are digital oriented, which are also discretionary because that is the traction we have. Equally there are new multi-year contracts which we start to see, which contain outsourcing like elements but which are focused on automation and efficiency. In terms of impact on margin, nothing more granular than that at least at this stage from us. The one point to reiterate, our digital portfolio margins are typically higher than the average of the company.

 

 

 

 

 

 

Edward Caso

 

My other question is if you could give some color on the pace of moving forward on the part of your clients, Europe versus the U.S., is one ahead of the other? And then maybe within Europe, differentiate between the United Kingdom and the continent.

 

Pravin Rao

 

Overall, if you notice in this quarter, we had a superior performance in Europe on a YoY basis, Europe grew by 4.4% on constant currency whereas North America was flattish. Even historically when we have looked at our past quarters performance, we have seen Europe performing relatively better. But from a sector perspective if we look at, from a Banking and Financial Services perspective, we are seeing a probably lot more traction in Americas and APAC at this stage than in Europe. Whereas in the most of the other sectors we are not seeing too much of difference between Europe or North America.

 

 

 

 

 

 

Moderator

 

The next question is from the line of Bryan Bergin from Cowen. Please go ahead.

 

 

 

 

 

 

Bryan Bergin

 

I wanted to ask on COVID-related engagements, contract tracing, remote enabled for clients. Was that a material contribution to large deal signings or Q1 revenue, and if so, can you give us a sense of how much that might be?

 

Salil Parekh

 

I think I understood the question was if COVID-related work which is contact tracing etc, if that is a material part? If that is the question, no it is not a material part. We are helping in some situations and scenarios. It is not a material part of our revenue in Q1.

 

 

 

 

 

 

Bryan Bergin

 

The second question I have, just work from home, how are clients thinking about long-term work from home, the model for services? So, in some of the large deals you won during the quarter, how was work from home accounted for? Are there any stated delivery mix factors being made in contracts or anything like that or is it too early to call there?

 

Salil Parekh

 

I will start off and Pravin will have some color to add to it. The way today that we are engaging with clients, we see clients are extremely comfortable to look at work from home scenarios in a different fashion. One is constrained to how the medical situation evolves and another is defined around what could the post medical scenario look like and what should be the work from home situation. So, we find a lot of flexibility in the clients, the way they are engaging with us in defining those situations. We even have a very useful example. In the U.S. in certain geographies, we have been able to do new work with clients where work from home enables us to deliver across the U.S. from different geographies to different client locations. So today they have a lot of flexibility. We do not have a sense how this will continue, but for now we see flexibility.

 

 

 

 

 

 

Bryan Bergin

 

Just last one, on your outlook for fiscal 2021, did you change anything in the process you take and how you typically arrive at guidance, particularly on revenue growth?

 

Salil Parekh

 

As you know we did not provide a guidance as we started Q1. Then we looked at this quarter, gained some experience and saw some traction, especially in the wins, and then there is a model for how things would look. There are some considerations which I should reiterate, that I shared in the opening comments. So, everything about the medical situation is not yet stabilized as you well know. And we try to take into account the stimulus and how we have seen some of our clients respond and our pipeline expand. But it still has some uncertainty which is obviously different from how the process is run in any other typical year.

 

 

 

 

 

 

Moderator

 

The next question is from the line of Parag Gupta from Morgan Stanley. Please go ahead.

 

Parag Gupta

 

Good evening everyone and thanks for taking the question and congratulations on a fantastic quarter. Salil, my first question was to you – it was kind of going back to the revenue guidance. While you just did explain a little bit on the process, but the question I had is that when we spoke at the end of the fourth quarter, you did mention as one of the reasons for not providing a guidance was uncertainties on the medical situation and primarily with respect to a second wave of infections, lockdowns either globally or in India. Now, given that that situation probably still kind of lingers, but you have provided a guidance. So does that mean that some part of the potential risks are built in to the lower end of the guidance or do you think that could pose downside risk if you see a big spike up in infections and lockdown globally as well. I wanted to clear on that front.

 

Salil Parekh

 

What we have tried to build in is, what we see as a situation today. We typically found both from the demand perspective how clients are working, and from a supply perspective, how we have enabled work from home. The environment has adapted to the way to work around within the medical crisis. It is not to say that if things have a step function different outcome, in either of those scenarios, we would not have to relook at things. But there is some level of understanding – not a complete understanding – of how to engage in it. As Pravin shared earlier that through our technology enablement, we are managing to enable over 99% of our employees to work from home. We are also able to add new employees into the company, we are able to do transitions, we are able to work with clients in sales situation that gives us some level of comfort to start to work in this environment. But of course, if there is a different kind of an unusual medical situation that arises, we would have to relook at things. But given where we are today, we felt it was a right thing to reinstate the guidance.

 

 

 

 

 

 

Parag Gupta

 

That is pretty clear and the other bit was on BFSI. Again you did mention in the previous earnings call that while banking is holding up right now, there is a possibility of loan loss defaults or credit card defaults later in the year. I wanted to understand, based on the conversations you are having with your customers and potential customers, are you seeing some of those risks subside given the stimulus measures or do you still see a fair chance of some of these risks are coming to the fore in the next few quarters?

 

Salil Parekh

 

My sense is those risks are still there. As I looked at some of the provisions that couple of the large banks have taken in the last few days, for their Q2 numbers, at least the money center banks in the U.S. market, you can see that they have expanded those set of provisions, which would mean that they see something of that nature possibly in the future quarters. We have not seen anything in discussions. It is more modeling implication of some of the analysis that our leadership in financial services have done that would give us a view that there is a possibility of those things, may be over the next few quarters. We do not have a sense of the timing, but that still is in the background.

 

 

 

 

 

 

Moderator

 

The next question is from the line of Moshe Katri from Wedbush. Please go ahead.

 

Moshe Katri

 

Thanks for taking my question and congrats on the performance for the quarter. Two questions, first, appreciate the guidance for the year of 0% to 2% constant currency growth. How do you suggest modeling the quarters down the road for the next two, three quarters? And then you indicated that the pipeline looks pretty strong. Can we get some color in terms of where we are seeing some of the demand coming through the pipeline?

 

Salil Parekh

 

Moshe, as you know we do not provide specific quarterly guidance in the way we look at revenue or margin, so I do not have simple answer for that. We do have a sense around the full year, but we do not provide the guidance quarterly.

 

On the pipeline, we see good traction in some of these newer areas which relate to cloud or digital. There is a lot of discussions on cost efficiency and automation, cyber security, workplace transformation. Our leadership team has built a new set of offerings which are more tailored for this environment and we see traction of those offerings with our clients, and we see possibility of some consolidation opportunities. So those are the sort of things we think will be more in the mix in the coming quarters.

 

 

 

 

 

 

Moshe Katri

 

Just follow on for the pipeline question. If I am looking at the entire pipeline of business, is there a way to quantify which portion is actually coming in from renewals versus new logos?

 

Salil Parekh

 

We do have that view internally, but unfortunately we do not share that information externally.

 

 

 

 

 

 

Moderator

 

The next question is from the line of Sudheer Guntupalli from Motilal Oswal Financial. Please go ahead.

 

Sudheer Guntupalli

 

Good evening gentlemen. Congratulations on a great performance. My first question is to Salil. I am sure you would have seen the performance of some of your competitors and had done some competitor benchmarking. Of course, their performance was also very resilient, given the current context. However, Infosys seems to be a few miles ahead on multiple counts in this quarter. So if you take a step back and introspect, what do you think are the underlying factors that have driven this delta? Is it merely a function of the differential portfolio mix or something else? I would like to know your thoughts on this.

 

Salil Parekh

 

Thanks for that question. I think there are a few good factors that we can think of. One of course the fundamental – we have an extremely strong franchise been built over the years and that resilience is coming through quite nicely now. First one of the points Pravin mentioned, there was an extreme focus on ensuring clients service delivery and employee safety and that we move faster. In fact, we have a small business in China, and we learnt from how that situation developed, which was couple of months earlier, and that gave us a little bit of time advantage to put things in place a little bit faster. Then our technology infrastructure which enabled work from home, made a significant difference. Second, we pivoted, I think quite quickly, to the new needs, to the new sales opportunities and that has given us a good traction and even the pipeline expansion in the quarter. The third, we have had a good focus on the way we built our digital capabilities, and that as you can see, is getting more and more traction in this environment with clients. And fourth, the approach we put in place for localization a few years ago where we built a completely new business model, recruiting from colleges, building digital centres in Europe and US and hiring locally, that has helped us manage a little bit better with the travel and the upcoming visa changes and so on. So those are some of the factors, I am sure, there might be others, at least those come to mind.

 

 

 

 

 

 

Sudheer Guntupalli

 

Thanks for that answer. It looks like pricing and cash collections have not been a big problem so far. So, do you see the worst on these variables to be completely behind by this quarter or

 

can some of it actually show up in the subsequent quarters. What are your expectations on that?

 

Nilanjan Roy

 

So, as we mentioned we have seen some pricing pressures and some requests from clients for extended payment terms and that is normal in these times. We have a longstanding relationship with these clients over the years and it is very important for us to continue working with these clients when they need it. It is difficult to predict the future how it goes, because a lot of it has to do with what is the impact of the crisis on the clients going forward. Like we said that we will continue to work with them, and we have a strong balance sheet as well, so that makes us more confident of where we are.

 

 

 

 

 

 

Moderator

 

Thank you. The next question is from the line of James Friedman from Susquehanna. Please go ahead.

 

James Friedman

 

Many congratulations. I just wanted to ask, Pravin, in your prepared remarks you mentioned that there was some modest supply chain impact from disruption to the revenue. I was wondering if you could help us quantify that or give us some additional characterization in the supply chain impact.

 

And then as a follow-up, Pravin, in an answer to a previous question, I think that you had responded about the relative growth in the BFS sector between Europe and the U.S., but it was a little hard for me to hear. If you could just repeat that one. So, the first on the supply chain and the second on the Banking. Thank you.

 

 

 

 

 

 

Pravin Rao

 

On the supply chain what we said is if we look at the revenue impact on a QoQ basis – constant currency 2% de-growth, less than 10% could be attributed to supply issues, 90% or more was demand issues. So it was significantly lower than what we had seen in the last

 

quarter. And as Salil mentioned today, we have more than 99% of the people enabled to work from home and the percentage of people required to work from offices due to client requirement has also come down dramatically. So, we are doing good there.

 

Second one, on BFSI – overall at the beginning of the quarter there were some concerns. We had seen some drop initially but as the quarter progressed, we started seeing fast recovery in business volumes and deals during the quarter. This was particularly in US and APAC. On the negative side, we continue to see some softness in the capital markets and cards & payment sector. Similarly like it was discussed in this call, the near zero interest rates could also impact profitability of banks and it could potentially have some bearing on the tech spending. But on the positive side, we have seen multiple deal signings, in fact out of the 15 large deals that we won in Q1, five were from the BFSI space and in early part of Q2 we saw the Vanguard deal as well. So, net-net it is a mixed thing, but given the increased volume that we have seen coming back early in the quarter and latter part, and large deal wins, we remain optimistic about this sector.

 

 

 

 

 

 

Moderator

 

Thank you. The next question is from the line of Ankur Rudra from JP Morgan. Please go ahead.

 

Ankur Rudra

 

Thank you, and great execution and thank you for the resumption of guidance. Could you elaborate, as you went through the quarter, which parts of the business surprised you positively and negatively in terms of signings and execution, maybe in terms of industries, geographies or services?

 

Salil Parekh

 

Thanks Ankur for the question. The view in terms of the signings or execution, as the quarter progressed, we saw more and more positivity actually across the sectors. We saw a little bit of positive action even in some of the sectors that were significantly impacted earlier in the quarter. Overall, as you saw sectors like Manufacturing, Retail were still quite difficult in the quarter. And then, of course, what we saw in Hi-Tech is extremely strong in this market and Pravin shared some views in an earlier discussion. Nilanjan also shared some views on that. We think there is a set of resilience, which comes from a lot of spend which is geared toward companies executing more digital work, more cloud work, more work on cyber and data. And those are the sort of things that looked positive as the quarter progressed.

 

 

 

 

 

 

Ankur Rudra

 

And on that note, if I could dig a bit deeper, it has been two-and-a-half years since you have scoped out the focus toward digital services through your Digital Pentagon and your investments towards that in the last few years. How is demand changing due to the pandemic in parts of your digital portfolio? Are there areas where you are seeing a lot more success and areas where you are lighter and have scope for bulking up in the direction of the new demand?

 

Salil Parekh

 

If I understood the question, there are definitely areas, for example cloud which is growing even faster than our overall digital business. Cyber security is good. All of the digital areas we are finding to be in good shape today, but some like cloud are expanding even faster.

 

 

 

 

 

 

Ankur Rudra

 

On the second part of the question Salil was are there any areas where you think you have been lighter, in terms of where the demand is going, where you may look to bulk up in future?

 

Salil Parekh

 

I don't know if we are lighter, but in a sense, you have seen at least two of the acquisitions we have done have been with SaaS cloud services players in the last 12 months. We think there is more of it that we can do, where in a sense we are not lighter, but we see the demand in a very good position. So, we will look to see how we can add to such capacity. On most of the areas in that Pentagon, we have ideas and open discussions and if a lot of those things mesh up well – pricing, culture, etc., then we are looking to do some more additions.

 

 

 

 

 

 

Ankur Rudra

 

Just a last question for Nilanjan. Nilanjan, you have highlighted the margin walk for the quarter. I just wanted to get a sense of, we are clearly at the upper end of the guidance, so I know you have highlighted some of the areas with potential downside. How do you think about the need to balance investments outside of maybe promotions coming ahead as we look for growth, not just for this year but also for the next year?

 

Nilanjan Roy

 

As the year progresses, we will take a structured view of how the market is operating, what we need to do to be competitive because a lot of this is also driven by the competitive context and therefore we will take some of these calls as the year progresses. I think the investments, which are very, very critical are we continue doing reskilling of our talent. So, at this time when bench was higher, a tremendous amount of reskilling of people was done looking at new digital skills. Those are the kind of investments we continue to do, because in the long run, sustainable advantage will only come as we create that differentiation with competition.

 

 

 

 

 

 

Moderator

 

Thank you. The next question is from the line of Rod Bourgeois from DeepDive Equity. Please go ahead.

 

Rod Bourgeois

 

Congratulations on the execution in this environment. Related to that, as you look at the longer term concerning your work from home percentage, are you able to share a view at this point on where you think the long-term plan will be in terms of how many employees will be working from home? And then the follow-up to that, can you give us a sense of the structural margin benefit that you receive based on the percentages of your staff that is working from home?

 

Pravin Rao

 

Overall from our perspective, we are really looking at a hybrid model, where people should have ability to work from home or work from office in a seamless manner. There may be set of people who are at times working from office, at times working from home. So, in our mind, it is immature to attribute some percentage to it, because a lot of things depend on the nature of work, client comfort and things like that. Our endeavor has been to make sure that we build in enough systems, processes, tools and capabilities, where we can seamlessly switch. Also right now, what we have seen is technologically we are able to deliver good quality without compromising on service levels or quality to the clients. But in the long run, we really need to figure out how we will continue to engage with employees when they are working in a remote manner. We have already seen many people have adopted well, some people do have stress levels and other things, how do you deal with that. More importantly, for new people coming on board, how do you inculcate your values and culture. So there are a lot of unanswered questions.

 

The easy part is the technology thing which we have solved but there are lot of unanswered questions and there will be a lot of learning as this evolves. From our perspective, we are making sure that we have a flexible model and we continue to evolve and learn from feedback that we have seen and continue to invest in this model. At this stage, we are not really venturing into hazarding a guess on how much will be working from office and how much will be working from home.

 

Nilanjan Roy

 

On your question on margins, in this quarter, we have said, the benefit on margins from lower travel and visa cost is about 230 basis points and that is the biggest impact. We will, of course, have to see as the world opens up in terms of travel and people are back, taking flights, etc., meeting clients. That we will have to see in the new normal. But on a long-term basis, going from the work from home, again this has to be played out. Yes, at one end, you may see some benefits on the facilities costs etc., but at the same time, you have to invest in facilities in terms of social distancing, you have to invest in communication costs as people work from home, you will have to invest in more cyber security, bandwidth. It is going to be a mixed bag in terms of what comes out of this. And as Pravin mentioned, it is also something about a hybrid model of work from home. It is not that the entire population will

 

be working from home or a certain percentage is going to be hybrid with office and work. So, we will have to see how that plays itself out.

 

 

 

 

 

 

Moderator

 

Thank you. Ladies and gentlemen that was the last question for today. I now hand the conference over to the management for closing comments.

 

Sandeep Mahindroo

 

I would like to pass on to Salil for his closing comments. Over to Salil please.

 

Salil Parekh

 

Thanks, Sandeep. Thank you everyone for joining the call and for your questions. We are really delighted with the results that we have had in Q1. We see extremely strong client relationships, good affirmation of what we have done, very good work from home and client service delivery activities that Pravin shared with you. A strong continued focus on cash and collections that Nilanjan shared with you and a real pivot to what our clients are looking for in the new environment in terms of cloud, digital, consolidation, cost & efficiency and automation. With all of those, we feel we are in a good position. Of course, there are uncertainties as we go forward. When we see from the experience we have had in Q1, we stand to see this financial year in a somewhat better light. Thank you everyone for joining the call. Take care and stay safe.

 

 

 

 

 

 

Moderator

 

Thank you very much members of the management. Ladies and gentlemen on behalf of Infosys that concludes this conference. Thank you for joining us and you may now disconnect your lines.

 

 

 

Exhibit 99.6
Form of Release to Stock Exchanges

 

 

INDEPENDENT Auditor’s Report ON THE AUDIT OF THE CONSOLIDATED FINANCIAL RESULTS

 

To The Board of Directors of INFOSYS Limited

 

Opinion

 

We have audited the accompanying Statement of Consolidated Financial Results of INFOSYS Limited (the “Company”) and its subsidiaries (the Company and its subsidiaries together referred to as the “Group”) for the quarter ended June 30, 2020, (the “Statement”) being submitted by the Company pursuant to the requirements of Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended (the “Listing Regulations”).

 

In our opinion and to the best of our information and according to the explanations given to us, the Statement:

 

(i)includes the results of the entities as given in the Annexure to this report;

 

(ii)is presented in accordance with the requirements of Regulation 33 of the Listing Regulations; and

 

(iii)gives a true and fair view in conformity with the recognition and measurement principles laid down in the Indian Accounting Standard 34 “Interim Financial Reporting” (“Ind AS 34”) prescribed under section 133 of the Companies Act, 2013 (the “Act”) read with relevant rules issued thereunder and other accounting principles generally accepted in India of the consolidated net profit and consolidated total comprehensive income and other financial information of the Group for the quarter ended June 30, 2020.

 

Basis for Opinion

 

We conducted our audit in accordance with the Standards on Auditing (“SAs”) specified under Section 143(10) of the Act. Our responsibilities under those Standards are further described in Auditor’s Responsibilities for audit of the consolidated financial results section of our report. We are independent of the Group in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (“ICAI”) together with the ethical requirements that are relevant to our audit of the consolidated financial results under the provisions of the Act and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI’s Code of Ethics. We believe that the audit evidence obtained by us is sufficient and appropriate to provide a basis for our audit opinion.

 

Emphasis of Matter

 

As described in Note 1 (d) to the Statement, the Company has responded to inquiries from Indian regulatory authorities relating to whistle blower allegations. The scope, duration or outcome of these matters are uncertain.

 

Our opinion is not modified in respect of this matter.

 

Management’s Responsibilities for the Consolidated Financial Results

 

This Statement, which is the responsibility of the Company’s Management and approved by the Company’s Board of Directors, has been compiled from the audited interim condensed consolidated financial statements. The Company’s Board of Directors is responsible for the preparation and presentation of these consolidated financial results that give a true and fair view of the consolidated net profit and consolidated other comprehensive income and other financial information of the Group in accordance with the recognition and measurement principles laid down in the Ind AS 34, prescribed under Section 133 of the Act, read with relevant rules issued thereunder and other accounting principles generally accepted in India and in compliance with Regulation 33 of the Listing Regulations.

 

The respective Boards of Directors of the companies included in the Group are responsible for maintenance of the adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Group and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and the design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the respective financial results that give a true and fair view and are free from material misstatement, whether due to fraud or error, which have been used for the purpose of preparation of the consolidated financial results by the Directors of the Company, as aforesaid.

 

In preparing the consolidated financial results, the respective Boards of Directors of the companies included in the Group are responsible for assessing the ability of the respective entities to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the respective Board of Directors either intends to liquidate their respective entities or to cease operations, or have no realistic alternative but to do so.

 

The respective Boards of Directors of the companies included in the Group are responsible for overseeing the financial reporting process of the Group.

 

Auditor’s Responsibilities for Audit of the Consolidated Financial Results

 

Our objectives are to obtain reasonable assurance about whether the consolidated financial results as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial results.

 

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

 

Identify and assess the risks of material misstatement of the consolidated financial results, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

 

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of such controls.

 

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors.

 

Evaluate the appropriateness and reasonableness of disclosures made by the Board of Directors in terms of the requirements specified under Regulation 33 of the Listing Regulations.

 

Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the ability of the Group to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial results or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

 

Evaluate the overall presentation, structure and content of the consolidated financial results, including the disclosures, and whether the consolidated financial results represent the underlying transactions and events in a manner that achieves fair presentation.

 

Obtain sufficient appropriate audit evidence regarding the Financial Information of the entities within the Group to express an opinion on the consolidated financial results. We are responsible for the direction, supervision and performance of the audit of financial information of such entities included in the consolidated financial results of which we are the independent auditors.

 

Materiality is the magnitude of misstatements in the consolidated financial results that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the consolidated financial results may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the consolidated financial results.

 

We communicate with those charged with governance of the Company and such other entities included in the consolidated financial results of which we are the independent auditors regarding, among other matters, the planned scope and timing of the audit and significant audit findings including any significant deficiencies in internal control that we identify during our audit.

 

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

 

For DELOITTE HASKINS & SELLS LLP

Chartered Accountants

(Firm’s Registration No. 117366W/W-100018)

 

 

 

Sanjiv V. Pilgaonkar

Partner

Place: Mumbai

Date: July 15, 2020

(Membership No.039826)

UDIN: 20039826AAAAFJ2599

 

Annexure to Auditors’ Report

 

List of Entities:

 

  1. Infosys Technologies (China) Co. Limited
  2. Infosys Technologies S. de R. L. de C. V.
  3. Infosys Technologies (Sweden) AB.
  4. Infosys Technologies (Shanghai) Company Limited
  5. Infosys Tecnologia DO Brasil LTDA. (effective October 01, 2019, merged into Infosys Consulting Ltda.)
  6. Infosys Nova Holdings LLC.
  7. EdgeVerve Systems Limited
  8. Infosys Austria GmbH
  9. Skava Systems Pvt. Ltd.
  10. Kallidus Inc.
  11. Infosys Chile SpA
  12. Infosys Arabia Limited
  13. Infosys Consulting Ltda.
  14. Infosys CIS LLC
  15. Infosys Luxembourg SARL
  16. Infosys Americas Inc.
  17. Infosys Public Services, Inc.
  18. Infosys Canada Public Services Inc.
  19. Infosys BPM Limited
  20. Infosys (Czech Republic) Limited s.r.o.
  21. Infosys Poland Sp Z.o.o
  22. Infosys McCamish Systems LLC
  23. Portland Group Pty Ltd
  24. Infosys BPO Americas LLC.
  25. Infosys Consulting Holding AG
  26. Infosys Management Consulting Pty Limited
  27. Infosys Consulting AG
  28. Infosys Consulting GmbH
  29. Infosys Consulting S.R.L, Romania
  30. Infosys Consulting SAS
  31. Infosys Consulting s.r.o.
  32. Infosys Consulting (Shanghai) Co., Ltd.(formerly Lodestone Management Consultants Co., Ltd)
  33. Infy Consulting Company Limited
  34. Infy Consulting B.V.
  35. Infosys Consulting Sp. Z.o.o
  36. Lodestone Management Consultants Portugal, Unipessoal, Lda.
  37. Infosys Consulting S.R.L, Argentina
  38. Infosys Consulting (Belgium) NV
  39. Panaya Inc.
  40. Panaya Limited.
  41. Panaya GmbH
  42. Panaya Japan Co. Ltd (liquidated effective October 31, 2019)
  43. Brilliant Basics Holdings Limited

Annexure to Auditors’ Report

 

List of Entities:

 

  1. Brilliant Basics Limited
  2. Brilliant Basics (MENA) DMCC
  3. Infosys Consulting Pte Ltd.
  4. Infosys Middle East FZ LLC
  5. Fluido Oy
  6. Fluido Sweden AB (Extero)
  7. Fluido Norway A/S
  8. Fluido Denmark A/S
  9. Fluido Slovakia s.r.o
  10. Fluido Newco AB
  11. Infosys Compaz PTE. Ltd
  12. Infosys South Africa (Pty) Ltd
  13. Wong Doody Holding Company Inc.
  14. WDW Communications, Inc.
  15. WongDoody, Inc
  16. HIPUS (Acquired on April 01, 2019)
  17. Stater N.V. (Acquired on May 23, 2019)
  18. Stater Nederland B.V. (acquired on May 23, 2019)
  19. Stater Duitsland B.V. (acquired on May 23, 2019)
  20. Stater XXL B.V. (acquired on May 23, 2019)
  21. HypoCasso B.V. (acquired on May 23, 2019)
  22. Stater Participations B.V. (acquired on May 23, 2019)
  23. Stater Deutschland Verwaltungs-GmbH (acquired on May 23, 2019)
  24. Stater Deutschland GmbH & Co. KG (acquired on May 23, 2019)
  25. Stater Belgium N.V./S.A. (Acquired on May 23, 2019)
  26. Outbox systems Inc. dba Simplus (US) (acquired on March 13, 2020)
  27. Simplus North America Inc. (acquired on March 13, 2020)
  28. Simplus ANZ Pty Ltd. (acquired on March 13, 2020)
  29. Simplus Australia Pty Ltd (acquired on March 13, 2020)
  30. Sqware Peg Digital Pty Ltd (acquired on March 13, 2020)
  31. Simplus Philippines, Inc. (acquired on March 13, 2020)
  32. Simplus Europe, Ltd. (acquired on March 13, 2020)
  33. Simplus U.K., Ltd. (acquired on March 13, 2020)
  34. Simplus Ireland, Ltd. (acquired on March 13, 2020)
  35. Infosys Employees Welfare Trust
  36. Infosys Employee Benefits Trust
  37. Infosys Science Foundation
  38. Infosys Expanded Stock Ownership Trust

 

 

 

 

INDEPENDENT Auditor’s Report ON THE AUDIT OF THE STANDALONE FINANCIAL RESULTS

 

To The Board of Directors of INFOSYS Limited

 

Opinion

 

We have audited the accompanying Statement of Standalone Financial Results of INFOSYS LIMITED (the “Company”), for the quarter ended June 30, 2020, (the “Statement”), being submitted by the Company pursuant to the requirements of Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended (the “Listing Regulations”).

 

In our opinion and to the best of our information and according to the explanations given to us, the Statement:

 

  1. is presented in accordance with the requirements of Regulation 33 of the Listing Regulation; and

 

  1. gives a true and fair view in conformity with the recognition and measurement principles laid down in the Indian Accounting Standard 34 “Interim Financial Reporting” (Ind AS 34) prescribed under section 133 of the Companies Act, 2013 (the “Act”) read with relevant rules issued thereunder and other accounting principles generally accepted in India of the net profit and total comprehensive income and other financial information of the Company for the quarter ended June 30, 2020.

Basis for Opinion

 

We conducted our audit of the Statement in accordance with the Standards on Auditing (“SA”s) specified under Section 143(10) of the Act. Our responsibilities under those Standards are further described in Auditor’s Responsibilities for the Audit of the Standalone Financial Results section of our report. We are independent of the Company in accordance with the Code of Ethics issued by the Institute of Chartered Accountants of India (“ICAI”) together with the ethical requirements that are relevant to our audit of the Standalone Financial Results under the provisions of the Act and the Rules thereunder, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ICAI’s Code of Ethics. We believe that the audit evidence obtained by us is sufficient and appropriate to provide a basis for our audit opinion.

 

Emphasis of Matter

 

As described in Note 1(d) to the Statement, the Company has responded to inquiries from Indian regulatory authorities relating to whistle blower allegations. The scope, duration, or outcome of these matters are uncertain.

 

Our opinion is not modified in respect of this matter.

 

Management’s Responsibilities for the Standalone Financial Results

 

This Statement, which is the responsibility of the Company’s Management and approved by the Board of Directors, has been compiled from the related audited interim condensed standalone financial statements for the quarter ended June 30, 2020. The Company’s Board of Directors is responsible for the preparation and presentation of the standalone financial results that give a true and fair view of the net profit and other comprehensive income and other financial information in accordance with the recognition and measurement principles laid down in Ind AS 34, prescribed under Section 133 of the Act, read with relevant rules issued thereunder and other accounting principles generally accepted in India and in compliance with Regulation 33 of the Listing Regulations. This responsibility also includes maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and the design, implementation and maintenance of adequate internal financial controls that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the standalone financial results that give a true and fair view and is free from material misstatement, whether due to fraud or error.

 

In preparing the standalone financial results, the Board of Directors is responsible for assessing the Company’s ability, to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

 

The Board of Directors is also responsible for overseeing the financial reporting process of the Company.

 

Auditor’s Responsibilities for the Audit of the Standalone Financial Results

 

Our objectives are to obtain reasonable assurance about whether the standalone financial results as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these standalone financial results.

 

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

 

Identify and assess the risks of material misstatement of the standalone financial results, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

 

Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

 

Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Board of Directors.

 

Evaluate the appropriateness and reasonableness of disclosures made by the Board of Directors in terms of the requirements specified under Regulation 33 of the Listing Regulations.

 

Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the ability of the Company to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the Statement or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

 

Evaluate the overall presentation, structure and content of the standalone financial results, including the disclosures, and whether the standalone financial results represent the underlying transactions and events in a manner that achieves fair presentation.

 

Obtain sufficient appropriate audit evidence regarding the standalone financial results of the Company to express an opinion on the standalone financial results.

 

Materiality is the magnitude of misstatements in the standalone financial results that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the standalone financial results may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the standalone financial results.

 

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings including any significant deficiencies in internal control that we identify during our audit.

 

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

 

For DELOITTE HASKINS & SELLS LLP

Chartered Accountants

(Firm’s Registration No. 117366W/W-100018)

 

 

 

Sanjiv V. Pilgaonkar

Partner

Place: Mumbai

Date: July 15, 2020

(Membership No.039826)

UDIN: 20039826AAAAFL4685

 

 

 

 

 

   

 

Infosys Limited

Regd. office: Electronics City, Hosur Road,
Bengaluru – 560 100, India

CIN : L85110KA1981PLC013115

Website: www.infosys.com

email: investors@infosys.com

T: 91 80 2852 0261, F: 91 80 2852 0362 

 

Statement of Consolidated Audited Results of Infosys Limited and its subsidiaries for the quarter ended June 30, 2020 prepared in compliance with the Indian Accounting Standards (Ind-AS)

 

(in ₹ crore, except per equity share data)

Particulars  Quarter ended
June 30,
 Quarter ended
March 31,
 Quarter ended
June 30,
Year ended
March 31,
  2020 2020 2019 2020
  Audited Audited Audited Audited
Revenue from operations  23,665  23,267  21,803  90,791
Other income, net  475  614  736  2,803
Total Income  24,140  23,881  22,539  93,594
Expenses        
Employee benefit expenses  13,604  12,916  12,302  50,887
Cost of technical sub-contractors  1,626  1,704  1,640  6,714
Travel expenses  116  667  827  2,710
Cost of software packages and others  893  755  617  2,703
Communication expenses  163  139  127  528
Consultancy and professional charges  262  339  291  1,326
Depreciation and amortisation expenses  756  749  681  2,893
Finance cost  48  45  40  170
Other expenses  880  1,071  847  3,656
Total expenses  18,348  18,385  17,372  71,587
Profit before tax  5,792  5,496  5,167  22,007
Tax expense:        
Current tax  1,321  1,335  1,460  5,775
Deferred tax  199  (174)  (95)  (407)
Profit for the period  4,272  4,335  3,802  16,639
Other comprehensive income        
Items that will not be reclassified subsequently to profit or loss        
Remeasurement of the net defined benefit liability/asset, net  147  (21)  (17)  (180)
Equity instruments through other comprehensive income, net  (1)  (2)  3  (33)
Items that will be reclassified subsequently to profit or loss        
Fair value changes on derivatives designated as cash flow hedges, net  (6)  (24)  (36)
Exchange differences on translation of foreign operations  164  237  25  378
Fair value changes on investments, net  54  15  16  22
Total other comprehensive income/(loss), net of tax  358  229  3  151
Total comprehensive income for the period  4,630  4,564  3,805  16,790
Profit attributable to:        
Owners of the company  4,233  4,321  3,798  16,594
Non-controlling interest  39  14  4  45
   4,272  4,335  3,802  16,639
Total comprehensive income attributable to:        
Owners of the company  4,586  4,545  3,798  16,732
Non-controlling interest  44  19  7  58
   4,630  4,564  3,805  16,790
Paid up share capital (par value ₹5/- each, fully paid)  2,122  2,122  2,137  2,122
Other equity *#  63,328  63,328  62,778  63,328
Earnings per equity share (par value ₹5/- each)**        
Basic (₹)  9.98  10.19  8.83  38.97
Diluted (₹)  9.97  10.18  8.82  38.91

 

*Balances for the quarter ended June 30, 2020 and June 30, 2019 represents balances as per the audited Balance Sheet for the year ended March 31, 2020 and March 31, 2019 respectively as required by SEBI (Listing and Other Disclosure Requirements) Regulations, 2015 

**EPS is not annualized for the quarter ended June 30, 2020, March 31, 2020, and June 30, 2019
#Excludes non-controlling interest

 

1. Notes pertaining to the current quarter

 

a)The audited interim condensed consolidated financial statements for the quarter ended June 30, 2020 have been taken on record by the Board of Directors at its meeting held on July 15, 2020. The statutory auditors, Deloitte Haskins & Sells LLP have expressed an unmodified audit opinion. The information presented above is extracted from the audited interim condensed consolidated financial statements. These interim condensed consolidated financial statements are prepared in accordance with the Indian Accounting Standards (Ind-AS) as prescribed under Section 133 of the Companies Act, 2013 read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and relevant amendment rules thereafter.

 

b)Board appointment:
   
  The Board, based on the recommendation of the Nomination and Remuneration Committee, appointed Bobby Parikh as an additional and Independent Director of the Company effective July 15, 2020 for a period of 3 years, subject to the approval of the shareholders.

 

c)Estimation of uncertainties relating to the global health pandemic from COVID-19 ( COVID-19):
   
  The Group has considered the possible effects that may result from COVID-19 in the preparation of these interim condensed consolidated financial statements including the recoverability of carrying amounts of financial and non financial assets. In developing the assumptions relating to the possible future uncertainties in the global economic conditions because of COVID-19, the Group has, at the date of approval of these condensed financial statements, used internal and external sources of information including credit reports and related information and economic forecasts and expects that the carrying amount of these assets will be recovered. The impact of COVID-19 on the Group's financial statements may differ from that estimated as at the date of approval of these interim condensed consolidated financial statements.

 

d)Update on the whistleblower matter
   
  On the matters pertaining to the whistle blower allegations, previously disclosed by the Company on October 22, 2019, the Company has responded to all the inquires received from the Indian regulatory authorities. Additionally, on the matter pertaining to the shareholder class action suit, as previously disclosed by the Company in October 2019, the plaintiff voluntarily dismissed the lawsuit without prejudice on May 21, 2020.

 

2. Information on dividends for the quarter ended June 30, 2020

 

For financial year 2020, the Board recommended a final dividend of ₹ 9.50/- per equity share. The same was approved by the shareholders in the Annual General Meeting of the company held on June 27, 2020 and was paid on July 3, 2020. 

 (in ₹)

Particulars  Quarter ended
June 30,
 Quarter ended
March 31,
 Quarter ended
June 30,
Year ended
March 31,
  2020 2020 2019 2020
Dividend per share (par value ₹5/- each)        
 Interim dividend  8.00
 Final dividend  9.50  9.50

 

3. Segment reporting (Consolidated - Audited) 

(in ₹ crore)

Particulars  Quarter ended
June 30,
 Quarter ended
March 31,
 Quarter ended
June 30,
Year ended
March 31,
  2020 2020 2019 2020
Revenue by business segment        
Financial Services (1)  7,457  7,282  6,856  28,625
Retail (2)  3,391  3,622  3,435  14,035
Communication (3)  3,165  3,017  3,004  11,984
Energy, Utilities, Resources and Services  3,027  2,992  2,833  11,736
Manufacturing  2,256  2,363  2,099  9,131
Hi-Tech  2,063  1,831  1,679  6,972
Life Sciences (4)  1,575  1,484  1,341  5,837
All other segments (5)  731  676  556  2,471
Total  23,665  23,267  21,803  90,791
Less: Inter-segment revenue
Net revenue from operations  23,665  23,267  21,803  90,791
Segment profit before tax, depreciation and non-controlling interests:        
Financial Services (1)  2,001  1,863 1,714 7,306
Retail (2)  1,048  1,058 1,032 4,212
Communication (3)  621  560 622 2,424
Energy, Utilities , Resources and Services  851  856 724 3,216
Manufacturing  506  557 413 2,059
Hi-Tech  598  431 370 1,604
Life Sciences (4)  476  344 278 1,431
All other segments (5)  20  37 5 64
Total  6,121  5,706  5,158  22,316
Less: Other Unallocable expenditure  756  779 687 2,942
Add: Unallocable other income  475  614 736 2,803
Less: Finance cost  48  45  40  170
Profit before tax and non-controlling interests  5,792  5,496  5,167  22,007

  

(1)Financial Services include enterprises in Financial Services and Insurance
(2)Retail includes enterprises in Retail, Consumer Packaged Goods and Logistics
(3)Communication includes enterprises in Communication, Telecom OEM and Media
(4)Life Sciences includes enterprises in Life sciences and Health care
(5)All other segments include operating segments of businesses in India, Japan, China, Infosys Public Services & other enterprises in Public Services

 

Notes on segment information

 

Business segments

Based on the "management approach" as defined in Ind-AS 108 - Operating Segments, the Chief Operating Decision Maker evaluates the Group's performance and allocates resources based on an analysis of various performance indicators by business segments. Accordingly, information has been presented along these business segments. The accounting principles used in the preparation of the financial statements are consistently applied to record revenue and expenditure in individual segments.

 

Segmental capital employed

 

Assets and liabilities used in the Group's business are not identified to any of the reportable segments, as these are used interchangeably between segments. The Management believes that it is not practicable to provide segment disclosures relating to total assets and liabilities since a meaningful segregation of the available data is onerous.

 

4. Audited financial results of Infosys Limited (Standalone Information)

(in ₹ crore)

Particulars  Quarter ended
June 30,
 Quarter ended
March 31,
 Quarter ended
June 30,
Year ended
March 31,
  2020 2020 2019 2020
Revenue from operations  20,325  20,187  19,131  79,047
Profit before tax  5,378  5,128  4,821  20,477
Profit for the period  4,008  4,069  3,569  15,543

 

The audited results of Infosys Limited for the above mentioned periods are available on our website, www.infosys.com and on the Stock Exchange website www.nseindia.com and www.bseindia.com. The information above has been extracted from the audited interim standalone condensed financial statements as stated.
 
 

By order of the Board

for Infosys Limited

 

Bengaluru, India

July 15, 2020

U.B. Pravin Rao

Chief Operating Officer
and Whole-time Director

 
The Board has also taken on record the condensed consolidated results of Infosys Limited and its subsidiaries for the quarter ended June 30, 2020, prepared as per International Financial Reporting Standards (IFRS) and reported in US dollars. A summary of the financial statements is as follows:

 

(in US$ million, except per equity share data)

Particulars  Quarter ended
June 30,
 Quarter ended
March 31,
 Quarter ended
June 30,
Year ended
March 31,
  2020 2020 2019 2020
  Audited Unaudited Audited Audited
Revenues 3,121 3,197 3,131 12,780
Cost of sales  2,071  2,133  2,122  8,552
Gross profit  1,050  1,064  1,009  4,228
Operating expenses  342  390  367  1,504
Operating profit  708  674  642  2,724
Other income, net  63  84  106  395
Finance cost  6  6  6  24
Profit before income taxes  765  752  742  3,095
Income tax expense  201  160  196  757
Net profit  564  592  546  2,338
Earnings per equity share *        
Basic  0.13  0.14  0.13  0.55
Diluted  0.13  0.14  0.13  0.55
Total assets  13,037  12,260  12,417  12,260
Cash and cash equivalents and current investments  2,886  3,080  3,044  3,080

 

* EPS is not annualized for the quarter ended June 30, 2020, March 31, 2020, and June 30, 2019.

 

Certain statements in this release concerning our future growth prospects, financial expectations and plans for navigating the COVID-19 impact on our employees, clients and stakeholders are forward-looking statements intended to qualify for the 'safe harbor' under the Private Securities Litigation Reform Act of 1995, 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 COVID-19 and the effects of government and other measures seeking to contain its spread, risks related to an economic downturn or recession in India, the United States and other countries around the world, changes in political, business, and economic conditions, fluctuations in earnings, fluctuations in foreign exchange rates, 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, industry segment concentration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks or system failures, 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 or expiration of governmental fiscal incentives, political instability and regional conflicts, legal restrictions on raising capital or acquiring companies outside India, unauthorized use of our intellectual property and general economic conditions affecting our industry and the outcome of pending litigation and government investigation. 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, 2020. 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 unless it is required by law.

 

 

 

 

 

 

 

Infosys Limited

Regd. office: Electronics City, Hosur Road,
Bengaluru – 560 100, India

CIN : L85110KA1981PLC013115

Website: www.infosys.com

email: investors@infosys.com

T: 91 80 2852 0261, F: 91 80 2852 0362 

  

Statement of Audited results of Infosys Limited for the quarter ended June 30, 2020 prepared in compliance with the Indian Accounting Standards (Ind-AS)

(in ₹ crore, except per equity share data)

Particulars  Quarter ended
June 30,
 Quarter ended
March 31,
 Quarter ended
June 30,
Year ended
March 31,
  2020 2020 2019 2020
  Audited Audited Audited Audited
Revenue from operations  20,325  20,187  19,131  79,047
Other income, net  478  585  713  2,700
Total income  20,803  20,772  19,844  81,747
Expenses        
Employee benefit expenses  11,222  10,666  10,380  42,434
Cost of technical sub-contractors  2,095  2,168  2,044  8,447
Travel expenses  92  564  700  2,241
Cost of software packages and others  481  457  363  1,656
Communication expenses  114  100  93  381
Consultancy and professional charges  193  284  234  1,066
Depreciation and amortisation expense  546  548  510  2,144
Finance cost  31  31  27  114
Other expenses  651  826  672  2,787
Total expenses  15,425  15,644  15,023  61,270
Profit before tax  5,378  5,128  4,821  20,477
Tax expense:        
Current tax  1,225  1,194  1,316  5,235
Deferred tax  145  (135)  (64)  (301)
Profit for the period  4,008  4,069  3,569  15,543
Other comprehensive income        
Items that will not be reclassified subsequently to profit or loss        
Remeasurement of the net defined benefit liability / asset, net  156  (25)  (17)  (184)
Equity instruments through other comprehensive income, net  (3)  (31)
Items that will be reclassified subsequently to profit or loss        
Fair value changes on derivatives designated as cash flow hedges, net  (6)  (24)  (36)
Fair value changes on investments, net  49  13  15  17
Total other comprehensive income/ (loss), net of tax  199  (15)  (26)  (234)
Total comprehensive income for the period  4,207  4,054  3,543  15,309
Paid-up share capital (par value ₹5/- each fully paid)  2,129  2,129  2,145  2,129
Other Equity*  60,105  60,105  60,533  60,105
Earnings per equity share ( par value ₹5 /- each)**        
Basic (₹) 9.41 9.55 8.26 36.34
Diluted (₹) 9.41 9.55 8.25 36.32

 

*Balances for the quarter ended June 30,2020 and June 30, 2019 represents balances as per the audited Balance Sheet for the year ended March 31, 2020 and March 31, 2019 respectively as required by SEBI (Listing and Other Disclosure Requirements) Regulations, 2015

 

**EPS is not annualized for the quarter ended June 30, 2020, March 31, 2020, and June 30, 2019.

 

1. Notes pertaining to the current quarter

 

a)The audited interim condensed standalone financial statements for the quarter ended June 30, 2020 have been taken on record by the Board of Directors at its meeting held on July 15, 2020. The statutory auditors, Deloitte Haskins & Sells LLP have expressed an unmodified audit opinion. The information presented above is extracted from the audited interim condensed standalone financial statements. These interim condensed standalone financial statements are prepared in accordance with the Indian Accounting Standards (Ind-AS) as prescribed under Section 133 of the Companies Act, 2013 read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and relevant amendment rules thereafter.

 

b)Board appointment:
   
  The Board, based on the recommendation of the Nomination and Remuneration Committee, appointed Bobby Parikh as an additional and Independent Director of the Company effective July 15, 2020 for a period of 3 years, subject to the approval of the shareholders.

 

c)Estimation of uncertainties relating to the global health pandemic from COVID-19 ( COVID-19):
   
  The Company has considered the possible effects that may result from COVID-19 in the preparation of these interim condensed standalone financial statements including the recoverability of carrying amounts of financial and non financial assets. In developing the assumptions relating to the possible future uncertainties in the global economic conditions because of COVID-19, the Company has, at the date of approval of these condensed financial statements, used internal and external sources of information including credit reports and related information and economic forecasts and expects that the carrying amount of these assets will be recovered. The impact of COVID-19 on the Company's financial statements may differ from that estimated as at the date of approval of these interim condensed standalone financial statements.

 

d)Update on the whistleblower matter
   
  On the matters pertaining to the whistle blower allegations, previously disclosed by the Company on October 22, 2019, the Company has responded to all the inquires received from the Indian regulatory authorities. Additionally, on the matter pertaining to the shareholder class action suit, as previously disclosed by the Company in October 2019, the plaintiff voluntarily dismissed the lawsuit without prejudice on May 21, 2020.

  

2. Information on dividends for the quarter ended June 30, 2020

 

For financial year 2020, the Board recommended a final dividend of ₹ 9.50/- per equity share. The same was approved by the shareholders in the Annual General Meeting of the company held on June 27, 2020 and was paid on July 3, 2020.

 

(in ₹)

Particulars  Quarter ended
June 30,
 Quarter ended
March 31,
 Quarter ended
June 30,
Year ended
March 31,
  2020 2020 2019 2020
Dividend per share (par value ₹5/- each)        
 Interim dividend  8.00
 Final dividend  9.50  9.50

 

3. Segment Reporting

 

The Company publishes standalone financial statements along with the consolidated financial statements. In accordance with Ind AS 108, Operating Segments, the Company has disclosed the segment information in the audited interim condensed consolidated financial statements. Accordingly, the segment information is given in the audited consolidated financial results of Infosys Limited and its subsidiaries for the quarter ended June 30, 2020.

 

 

By order of the Board

for Infosys Limited

 

Bengaluru, India

July 15, 2020

U.B. Pravin Rao

Chief Operating Officer and Whole-time Director

 

Certain statements in this release concerning our future growth prospects, financial expectations and plans for navigating the COVID-19 impact on our employees, clients and stakeholders are forward-looking statements intended to qualify for the 'safe harbor' under the Private Securities Litigation Reform Act of 1995, 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 COVID-19 and the effects of government and other measures seeking to contain its spread, risks related to an economic downturn or recession in India, the United States and other countries around the world, changes in political, business, and economic conditions, fluctuations in earnings, fluctuations in foreign exchange rates, 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, industry segment concentration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks or system failures, 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 or expiration of governmental fiscal incentives, political instability and regional conflicts, legal restrictions on raising capital or acquiring companies outside India, unauthorized use of our intellectual property and general economic conditions affecting our industry and the outcome of pending litigation and government investigation. 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, 2020. 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 unless it is required by law.

  

 

 

 

 

  

 

Infosys Limited

Regd. office: Electronics City, Hosur Road,
Bengaluru – 560 100, India

CIN : L85110KA1981PLC013115

Website: www.infosys.com

email: investors@infosys.com

T: 91 80 2852 0261, F: 91 80 2852 0362 

 

Statement of Consolidated Audited Results of Infosys Limited and its subsidiaries for the quarter ended June 30, 2020 prepared in compliance with the Indian Accounting Standards (Ind-AS)

 

(in ₹ crore, except per equity share data)

Particulars  Quarter ended
June 30,
Yearended
March 31,
 Quarter ended
June 30,
  2020 2020 2019
Revenue from operations  23,665  90,791  21,803
Profit before tax  5,792  22,007  5,167
Profit for the period  4,272  16,639  3,802
Total comprehensive income for the period (comprising profit for the period after tax and other comprehensive income after tax)  4,630  16,790  3,805
       
Profit attributable to:      
Owners of the company  4,233  16,594  3,798
Non-controlling interest  39  45  4
   4,272  16,639  3,802
Total comprehensive income attributable to:      
Owners of the company  4,586  16,732  3,798
Non-controlling interest  44  58  7
   4,630  16,790  3,805
Paid-up share capital (par value ₹5/- each fully paid)  2,122  2,122  2,137
Other equity*#  63,328  63,328  62,778
Earnings per share (par value ₹5/- each)**      
Basic (₹)  9.98  38.97  8.83
Diluted (₹)  9.97  38.91  8.82

 

*Balances for the quarter ended June 30, 2020 and June 30, 2019 represents balances as per the audited Balance Sheet for the year ended March 31, 2020 and March 31, 2019 respectively as required by SEBI (Listing and Other Disclosure Requirements) Regulations, 2015

 

**EPS is not annualized for the quarter ended June 30, 2020 and June 30, 2019

 

#Excludes non-controlling interest

 

1. Notes pertaining to the current quarter

 

a)The audited interim condensed consolidated financial statements for the quarter ended June 30, 2020 have been taken on record by the Board of Directors at its meeting held on July 15, 2020. The statutory auditors, Deloitte Haskins & Sells LLP have expressed an unmodified audit opinion. The information presented above is extracted from the audited interim condensed consolidated financial statements. These interim condensed consolidated financial statements are prepared in accordance with the Indian Accounting Standards (Ind-AS) as prescribed under Section 133 of the Companies Act, 2013 read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and relevant amendment rules thereafter.

 

b)Board appointment:
   
  The Board, based on the recommendation of the Nomination and Remuneration Committee, appointed Bobby Parikh as an additional and Independent Director of the Company effective July 15, 2020 for a period of 3 years, subject to the approval of the shareholders.

 

c)Estimation of uncertainties relating to the global health pandemic from COVID-19 ( COVID-19):
   
  The Group has considered the possible effects that may result from COVID-19 in the preparation of these interim condensed consolidated financial statements including the recoverability of carrying amounts of financial and non financial assets. In developing the assumptions relating to the possible future uncertainties in the global economic conditions because of COVID-19, the Group has, at the date of approval of these condensed financial statements, used internal and external sources of information including credit reports and related information and economic forecasts and expects that the carrying amount of these assets will be recovered. The impact of COVID-19 on the Group's financial statements may differ from that estimated as at the date of approval of these interim condensed consolidated financial statements.

 

d)Update on the whistleblower matter
   
  On the matters pertaining to the whistle blower allegations, previously disclosed by the Company on October 22, 2019, the Company has responded to all the inquires received from the Indian regulatory authorities. Additionally, on the matter pertaining to the shareholder class action suit, as previously disclosed by the Company in October 2019, the plaintiff voluntarily dismissed the lawsuit without prejudice on May 21, 2020.

  

2. Information on dividends for the quarter ended June 30, 2020

 

For financial year 2020, the Board recommended a final dividend of ₹ 9.50/- per equity share. The same was approved by the shareholders in the Annual General Meeting of the company held on June 27, 2020 and was paid on July 3, 2020.

 

 (in ₹)

Particulars  Quarter ended
June 30,
Year ended
March 31,
 Quarter ended
June 30,
  2020 2020 2019
Dividend per share (par value ₹5/- each)      
 Interim dividend  8.00
 Final dividend  9.50

 

3. Audited financial results of Infosys Limited (Standalone information) 

  (in ₹ crore)

Particulars  Quarter ended
June 30,
Year ended
March 31,
 Quarter ended
June 30,
  2020 2020 2019
Revenue from operations  20,325  79,047  19,131
Profit before tax  5,378  20,477  4,821
Profit for the period  4,008  15,543  3,569

 

The above is an extract of the detailed format of Quarterly audited financial results filed with Stock Exchanges under Regulation 33 of the SEBI (Listing and Other Disclosure Requirements) Regulations, 2015. The full format of the Quarterly Audited Financial Results are available on the Stock Exchange websites, www.nseindia.com and www.bseindia.com, and on the Company's website, www.infosys.com.

 

Certain statements in this release concerning our future growth prospects, financial expectations and plans for navigating the COVID-19 impact on our employees, clients and stakeholders are forward-looking statements intended to qualify for the 'safe harbor' under the Private Securities Litigation Reform Act of 1995, 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 COVID-19 and the effects of government and other measures seeking to contain its spread, risks related to an economic downturn or recession in India, the United States and other countries around the world, changes in political, business, and economic conditions, fluctuations in earnings, fluctuations in foreign exchange rates, 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, industry segment concentration, our ability to manage our international operations, reduced demand for technology in our key focus areas, disruptions in telecommunication networks or system failures, 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 or expiration of governmental fiscal incentives, political instability and regional conflicts, legal restrictions on raising capital or acquiring companies outside India, unauthorized use of our intellectual property and general economic conditions affecting our industry and the outcome of pending litigation and government investigation. 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, 2020. 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 unless it is required by law.

 

 

By order of the Board

for Infosys Limited

 

Bengaluru, India

July 15, 2020

U.B. Pravin Rao

Chief Operating Officer and
Whole-time Director

 

 

 

 

 

 

 

 

 

 

   Exhibit 99.7

IFRS USD Earning Release

 

   

INDEPENDENT AUDITOR’S REPORT TO THE BOARD OF DIRECTORS OF INFOSYS LIMITED

 

Report on the Audit of the Interim Condensed Consolidated Financial Statements

 

Opinion

 

We have audited the accompanying Interim condensed consolidated financial statements of INFOSYS LIMITED (the “Company”) and its subsidiaries (the Company and its subsidiaries together referred to as the “Group”), which comprise the Condensed Consolidated Balance Sheet as at June 30, 2020, the Condensed Consolidated Statement of Comprehensive Income, the Condensed Consolidated Statement of Changes in Equity and the Condensed Consolidated Statement of Cash Flows for the period ended on that date, and a summary of the significant accounting policies and other explanatory information (hereinafter referred to as the “interim condensed consolidated financial statements”).

 

In our opinion and to the best of our information and according to the explanations given to us, the aforesaid interim condensed consolidated financial statements give a true and fair view in conformity with International Accounting Standard 34 “Interim Financial Reporting” (“IAS 34”) as issued by the International Accounting Standards Board (“IASB”), of the consolidated state of affairs of the Group as at June 30, 2020, the consolidated profit and consolidated total comprehensive income, consolidated changes in equity and its consolidated cash flows for the period ended on that date.

 

Basis for Opinion

 

We conducted our audit of the interim condensed consolidated financial statements in accordance with the Standards on Auditing (SAs) issued by the Institute of Chartered Accountants of India (“ICAI”). Our responsibilities under those Standards are further described in the Auditor’s Responsibilities for the Audit of the interim condensed consolidated financial statements section of our report. We are independent of the Group in accordance with the Code of Ethics issued by the ICAI and we have fulfilled our other ethical responsibilities in accordance with the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the interim condensed consolidated financial statements.

 

Emphasis of Matter

 

As described in Note 2.7 to the interim condensed consolidated financial statements, the Company has responded to inquiries from Indian regulatory authorities relating to whistle blower allegations. The scope, duration or outcome of these matters are uncertain.

 

Our opinion is not modified in respect of this matter.

 

Management’s Responsibilities for the Interim Condensed Consolidated Financial Statements

 

The Company’s Board of Directors is responsible for the preparation and presentation of these interim condensed consolidated financial statements that give a true and fair view of the consolidated financial position, consolidated financial performance, consolidated total comprehensive income, consolidated changes in equity and consolidated cash flows of the Group in accordance with IAS 34 as issued by the IASB. The respective Board of Directors of the companies included in the Group are responsible for maintenance of adequate accounting records for safeguarding assets of the Group and for preventing and detecting frauds and other irregularities; selection and application of appropriate accounting policies; making judgments and estimates that are reasonable and prudent; and design, implementation and maintenance of adequate internal financial controls, that were operating effectively for ensuring the accuracy and completeness of the accounting records, relevant to the preparation and presentation of the respective interim financial statements that give a true and fair view and are free from material misstatement, whether due to fraud or error which have been used for the purpose of preparation of the interim condensed consolidated financial statements by the Directors of the Company, as aforesaid.

 

In preparing the interim condensed consolidated financial statements, the respective Board of Directors of the companies included in the Group are responsible for assessing ability of the respective entities to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the respective Board of Directors either intends to liquidate their respective entities or to cease operations, or has no realistic alternative but to do so.

 

The respective Board of Directors of the companies included in the Group are responsible for overseeing the financial reporting process of the Group.

 

Auditor’s Responsibilities for the Audit of the Interim Condensed Consolidated Financial Statements

 

Our objectives are to obtain reasonable assurance about whether the interim condensed consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these interim condensed consolidated financial statements.

 

As part of an audit in accordance with SAs, we exercise professional judgment and maintain professional scepticism throughout the audit. We also:

 

·Identify and assess the risks of material misstatement of the interim condensed consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

 

·Obtain an understanding of internal financial controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on effectiveness of the Company’s internal financial controls.

 

·Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

 

·Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the ability of the Group to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the interim condensed consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.

 

·Evaluate the overall presentation, structure and content of the interim condensed consolidated financial statements, including the disclosures, and whether the interim condensed consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

 

·Obtain sufficient appropriate audit evidence regarding the financial information of the entities within the Group to express an opinion on the interim condensed consolidated financial statements. We are responsible for the direction, supervision and performance of the audit of the financial statements of such entities included in the interim condensed consolidated financial statements of which we are independent auditors.

 

Materiality is the magnitude of misstatements in the interim condensed consolidated financial statements that, individually or in aggregate, makes it probable that the economic decisions of a reasonably knowledgeable user of the interim condensed consolidated financial statements may be influenced. We consider quantitative materiality and qualitative factors in (i) planning the scope of our audit work and in evaluating the results of our work; and (ii) to evaluate the effect of any identified misstatements in the interim condensed consolidated financial statements.

 

We communicate with those charged with governance of the Company and such other entities included in the interim condensed consolidated financial statements of which we are the independent auditors regarding, among other matters, the planned scope and timing of the audit and significant audit findings including any significant deficiencies in internal control that we identify during our audit.

 

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

 

For DELOITTE HASKINS & SELLS LLP

Chartered Accountants

(Firm’s Registration No. 117366W/W-100018)

 

 

Sanjiv V. Pilgaonkar

Partner

Place: Mumbai

Date: July 15, 2020

(Membership No.039826)
UDIN: 20039826AAAAFO4472

 

 

 

 

 

INFOSYS LIMITED AND SUBSIDIARIES

 

Condensed Consolidated Financial Statements under International Financial Reporting Standards (IFRS) in US Dollars for the three months ended June 30, 2020

 

Index  
Condensed Consolidated Balance Sheet  
Condensed Consolidated Statements of Comprehensive Income  
Condensed Consolidated Statements of Changes in Equity  
Condensed Consolidated Statements of Cash Flows  
Overview and notes to the financial statements  
1. Overview  
1.1 Company Overview  
1.2 Basis of preparation of financial statements  
1.3 Basis of consolidation  
1.4 Use of estimates and judgments  
1.5 Critical accounting estimates and judgements  
1.6 Recent Accounting pronouncements  
2. Notes to the interim Condensed Consolidated Financial Statements  
2.1 Cash and cash equivalents  
2.2 Earmarked bank balance for dividend  
2.3 Investments  
2.4 Financial instruments  
2.5 Prepayments and other assets  
2.6 Other liabilities  
2.7 Provisions and other contingencies  
2.8 Property, plant and equipment  
2.9 Leases  
2.10 Goodwill  
2.11 Business combination  
2.12 Employees' Stock Option Plans (ESOP)  
2.13 Income taxes  
2.14 Reconciliation of basic and diluted shares used in computing earnings per share  
2.15 Related party transactions  
2.16 Segment Reporting  
2.17 Revenue from Operations  
2.18 Unbilled revenue  
2.19 Break-up of expenses and other income, net  
2.20 Equity  

 

 

Infosys Limited and Subsidiaries

(Dollars in millions except equity share data)

Condensed Consolidated Balance Sheet as at Note June 30, 2020 March 31, 2020
ASSETS      
Current assets      
Cash and cash equivalents 2.1  2,515 2,465
Earmarked bank balance for dividend 2.2  536  
Current investments 2.3  371 615
Trade receivables    2,487 2,443
Unbilled revenue 2.18  949 941
Prepayments and other current assets 2.5  852 739
Income tax assets 2.13  1 1
Derivative financial instruments 2.4  12 8
Total current assets    7,723 7,212
Non-current assets      
Property, plant and equipment 2.8  1,825 1,810
Right-of-use assets 2.9  529 551
Goodwill 2.10  711 699
Intangible assets    245 251
Non-current investments 2.3  853 547
Deferred income tax assets 2.13  198 231
Income tax assets 2.13  723 711
Other non-current assets 2.5  230 248
Total Non-current assets    5,314 5,048
Total assets    13,037 12,260
LIABILITIES AND EQUITY      
Current liabilities      
Trade payables    366 377
Lease liabilities 2.9  87 82
Derivative financial instruments 2.4  11 65
Current income tax liabilities 2.13  286 197
Client deposits    3 2
Unearned revenue    410 395
Employee benefit obligations    253 242
Provisions 2.7  84 76
Other current liabilities 2.6  1,929 1,321
Total current liabilities    3,429 2,757
Non-current liabilities      
Lease liabilities 2.9  512 530
Deferred income tax liabilities 2.13  123 128
Employee benefit obligations    7 5
Other non-current liabilities 2.6  158 139
Total liabilities    4,229 3,559
Equity      
Share capital - ₹5 ($0.16) par value 4,800,000,000 (4,800,000,000) equity shares authorized, issued and outstanding 4,241,345,393 (4,240,753,210) equity shares fully paid up, net of 17,809,235 (18,239,356) treasury shares as at June 30, 2020 and (March 31, 2020) 2.20  332 332
Share premium    314 305
Retained earnings    11,095 11,014
Cash flow hedge reserve    (3) (2)
Other reserves    539 594
Capital redemption reserve    17 17
Other components of equity    (3,547) (3,614)
Total equity attributable to equity holders of the company    8,747 8,646
Non-controlling interests    61 55
Total equity    8,808 8,701
Total liabilities and equity    13,037 12,260

 

The accompanying notes form an integral part of the interim condensed consolidated financial statements.

 

As per our report of even date attached

 

for Deloitte Haskins & Sells LLP for and on behalf of the Board of Directors of Infosys Limited
   
Chartered Accountants
 
Firm’s Registration No :
117366W/ W-100018

 

Sanjiv V. Pilgaonkar

Partner

Membership No. 039826

Nandan M. Nilekani

Chairman

Salil Parekh

Chief Executive Officer

and Managing Director

U. B. Pravin Rao

Chief Operating Officer

and Whole-time Director

       
 

D. Sundaram

Director

Nilanjan Roy

Chief Financial Officer

A. G. S. Manikantha

Company Secretary

       
Mumbai
July 15, 2020
Bengaluru
July 15, 2020
   

 

 

Infosys Limited and Subsidiaries

(Dollars in millions except equity share and per equity share data)

Condensed Consolidated Statements of Comprehensive Income Note Three months ended June 30,
    2020 2019
Revenues 2.17  3,121  3,131
Cost of sales 2.19  2,071  2,122
Gross profit    1,050  1,009
Operating expenses:      
Selling and marketing expenses 2.19  151  169
Administrative expenses 2.19  191  198
Total operating expenses    342  367
Operating profit    708  642
Other income, net 2.19  63  106
Finance cost    6  6
Profit before income taxes    765  742
Income tax expense 2.13  201  196
Net profit    564  546
Other comprehensive income      
Items that will not be reclassified subsequently to profit or loss:      
Re-measurements of the net defined benefit liability/asset, net    20  (3)
Equity instrument through other comprehensive income, net    –  -
     20  (3)
Items that will be reclassified subsequently to profit or loss:      
Fair valuation of investments, net    7  2
Fair value changes on derivatives designated as cash flow hedge, net    (1)  (3)
Foreign currency translation    40  17
     46  16
Total other comprehensive income/(loss), net of tax    66  13
Total comprehensive income    630  559
Profit attributable to:      
Owners of the company    558  546
Non-controlling interests    6  –
     564  546
Total comprehensive income attributable to:      
Owners of the company    624  559
Non-controlling interests    6  -
     630  559
Earnings per equity share      
Basic ($)    0.13  0.13
Diluted ($)    0.13  0.13
Weighted average equity shares used in computing earnings per equity share 2.14    
Basic    4,241,101,049  4,302,176,860
Diluted    4,246,278,846  4,308,286,160

 

The accompanying notes form an integral part of the interim condensed consolidated financial statements.

 

As per our report of even date attached

 

for Deloitte Haskins & Sells LLP for and on behalf of the Board of Directors of Infosys Limited
   
Chartered Accountants
 
Firm’s Registration No :
117366W/ W-100018

 

Sanjiv V. Pilgaonkar

Partner

Membership No. 039826

Nandan M. Nilekani

Chairman

Salil Parekh

Chief Executive Officer

and Managing Director

U. B. Pravin Rao

Chief Operating Officer

and Whole-time Director

       
 

D. Sundaram

Director

Nilanjan Roy

Chief Financial Officer

A. G. S. Manikantha

Company Secretary

       
Mumbai
July 15, 2020
Bengaluru
July 15, 2020
   
       

 

Infosys Limited and Subsidiaries

 

Condensed Consolidated Statements of Changes in Equity

(Dollars in millions except equity share data)

Particulars Shares(1) Share capital Share premium Retained earnings Other reserves (2) Capital redemption reserve Cash flow hedge reserve Other components of equity Total equity attributable to
equity holders of
the company
Non-controlling interest Total equity
Balance as at April 1, 2019 4,335,954,462 339 277 11,248  384  10  3  (2,870) 9,391  9 9,400
Impact on account of adoption of IFRS 16 *        (6)          (6)    (6)
   4,335,954,462  339  277  11,242  384  10  3  (2,870)  9,385  9  9,394
Changes in equity for the three months ended June 30, 2019                      
Net profit        546          546    546
Remeasurement of the net defined benefit liability/asset*                (3)  (3)    (3)
Fair value changes on investments, net*                2  2    2
Fair value changes on derivatives designated as cash flow hedge*              (3)    (3)    (3)
Foreign currency translation                17  17    17
Total comprehensive income for the period        546      (3)  16  559    559
Shares issued on exercise of employee stock options - before Bonus issue (Refer note 2.12)  230,552                    
Buyback of equity shares  (64,781,000)  (5)    (897)          (902)    (902)
Transaction cost relating to buyback *        (1)          (1)    (1)
Amount transferred to capital redemption reserve upon buyback        (5)    5          
Non-controlling interests on acquisition of subsidiary                    46  46
Transfer to other reserves        (83)  83            
Transfer from other reserves on utilization        35  (35)            
Financial liability under option arrangements        (86)          (86)    (86)
Employee stock compensation expense (Refer note 2.12)      9            9    9
Dividends (including dividend distribution tax)        (782)          (782)    (782)
Balance as at June 30, 2019  4,271,404,014  334  286  9,969  432  15    (2,854)  8,182  55  8,237
Balance as at April 1, 2020  4,240,753,210  332  305  11,014  594  17  (2)  (3,614)  8,646  55  8,701
Changes in equity for the three months ended June 30, 2020                      
Net profit        558          558  6  564
Remeasurement of the net defined benefit liability/asset (Refer note 2.19)*                20  20    20
Fair value changes on investments, net*                7  7    7
Fair value changes on derivatives designated as cash flow hedge*              (1)    (1)    (1)
Foreign currency translation                40  40    40
Total comprehensive income for the period        558      (1)  67  624  6  630
Shares issued on exercise of employee stock options (Refer note 2.12)  592,183    1            1    1
Transfer to other reserves        (42)  42            
Transfer from other reserves on utilization        97  (97)            
Employee stock compensation expense (Refer note 2.12)      8            8    8
Dividends        (532)          (532)    (532)
Balance as at June 30, 2020  4,241,345,393  332  314  11,095  539  17  (3)  (3,547)  8,747  61  8,808

 

* net of tax

 

(1)excludes treasury shares of 17,809,235 as at June 30, 2020, 18,239,356 as at April 1, 2020, 20,094,430 as at June 30, 2019 and 20,324,982 as at April 1, 2019, held by consolidated trust.

 

(2)Represents the Special Economic Zone Re-investment reserve created out of the profit of the eligible SEZ unit in terms of the provisions of Sec 10AA(1)(ii) of Income Tax Act,1961. The reserve should be utilized by the Group for acquiring new plant and machinery for the purpose of its business in terms of the provisions of the Sec 10AA(2) of the Income Tax Act, 1961.

 

The accompanying notes form an integral part of the interim condensed consolidated financial statements.

 

As per our report of even date attached

 

for Deloitte Haskins & Sells LLP for and on behalf of the Board of Directors of Infosys Limited
   
Chartered Accountants
 
Firm’s Registration No :
117366W/ W-100018

 

Sanjiv V. Pilgaonkar

Partner

Membership No. 039826

Nandan M. Nilekani

Chairman

Salil Parekh

Chief Executive Officer

and Managing Director

U. B. Pravin Rao

Chief Operating Officer

and Whole-time Director

       
 

D. Sundaram

Director

Nilanjan Roy

Chief Financial Officer

A. G. S. Manikantha

Company Secretary

       
Mumbai
July 15, 2020
Bengaluru
July 15, 2020
   
       

 

Infosys Limited and Subsidiaries

 

Condensed Consolidated Statements of Cash Flows

 

Accounting Policy

 

Cash flows are reported using the indirect method, whereby profit for the period is adjusted for the effects of transactions of a non-cash nature, any deferrals or accruals of past or future operating cash receipts or payments and item of income or expenses associated with investing or financing cash flows. The cash flows from operating, investing and financing activities of the Group are segregated. The Group considers all highly liquid investments that are readily convertible to known amounts of cash to be cash equivalents.

(Dollars in millions)

Particulars Note Three months ended June 30,
    2020 2019
Operating activities:      
Net Profit    564  546
Adjustments to reconcile net profit to net cash provided by operating activities :      
Depreciation and amortization 2.19  100  98
Interest and dividend income    (18)  (22)
Finance cost    6  6
Income tax expense 2.13  201  196
Effect of exchange rate changes on assets and liabilities    3  2
Impairment loss under expected credit loss model    13  7
Stock compensation expense 2.12  10  9
Other adjustments    3  (10)
Changes in working capital      
Trade receivables and unbilled revenue    (57)  (97)
Prepayments and other assets    13  (17)
Trade payables    (12)  (147)
Client deposits    1  -
Unearned revenue    14  (1)
Other liabilities and provisions    37  175
Cash generated from operations    878 745
Income taxes paid    (95)  (115)
Net cash provided by operating activities    783  630
Investing activities:      
Expenditure on property, plant and equipment and intangibles    (55)  (145)
Loans to employees      2
Deposits placed with corporation    (17)  5
Interest and dividend received    14  11
Payment towards acquisition of business, net of cash acquired      (72)
Payment of contingent consideration pertaining to acquisition of business    (20)  
Redemption of escrow pertaining to Buyback      30
Payments to acquire Investments      
Liquid mutual fund units and fixed maturity plan securities    (666)  (1,447)
Quoted debt securities    (406)  (110)
Others      (2)
Proceeds on sale of Investments      
Quoted debt securities    154  173
Certificate of deposits    33  90
Commercial papers      72
Liquid mutual fund units and fixed maturity plan securities    763  1,551
Equity and preference securities      1
Others    3  
Other receipts    2  
Net cash (used)/generated in investing activities    (195)  159
Financing activities:      
Payment of lease liabilities    (19)  (20)
Payment of dividends      (648)
Share issued on exercise of employee stock options    1  
Buy back of equity shares including transaction costs      (689)
Net cash used in financing activities    (18)  (1,357)
Effect of exchange rate changes on cash and cash equivalents    16  5
Net increase / (decrease) in cash and cash equivalents    570  (568)
Cash and cash equivalents at the beginning of the period 2.1  2,465  2,829
Cash and cash equivalents at the end of the period    3,051  2,266
Supplementary information:      
Restricted cash balance 2.1  51  55
Closing cash and cash equivalents as per consolidated statement of cash flows    3,051  2,266
Less: Earmarked bank balance for dividend 2.2  (536)  
Closing cash and cash equivalents as per Consolidated Balance Sheet 2.1  2,515  2,266

 

The accompanying notes form an integral part of the interim condensed consolidated financial statements.

 

As per our report of even date attached

 

for Deloitte Haskins & Sells LLP for and on behalf of the Board of Directors of Infosys Limited
   
Chartered Accountants
 
Firm’s Registration No :
117366W/ W-100018

 

Sanjiv V. Pilgaonkar

Partner

Membership No. 039826

Nandan M. Nilekani

Chairman

Salil Parekh

Chief Executive Officer

and Managing Director

U. B. Pravin Rao

Chief Operating Officer

and Whole-time Director

       
 

D. Sundaram

Director

Nilanjan Roy

Chief Financial Officer

A. G. S. Manikantha

Company Secretary

       
Mumbai
July 15, 2020
Bengaluru
July 15, 2020
   
       

 

Notes to the Interim Condensed Consolidated Financial Statements

 

1. Overview

 

1.1 Company overview

 

Infosys Limited ('the Company' or Infosys) provides consulting, technology, outsourcing and next-generation digital services, to enable clients to execute strategies for their digital transformation.

 

Infosys together with its subsidiaries and controlled trusts is herein after referred to as the "Group".

 

The Company is a public limited company incorporated and domiciled in India and has its registered office at Bengaluru, Karnataka, India. The Company has its primary listings on the BSE Limited and National Stock Exchange of India Limited in India. The Company’s American Depositary Shares representing equity shares are listed on the New York Stock Exchange (NYSE).

 

The Group's interim condensed consolidated financial statements are authorized for issue by the company's Board of Directors on July 15, 2020.

 

1.2 Basis of preparation of financial statements

 

The interim condensed consolidated financial statements have been prepared in compliance with IAS 34, Interim Financial Reporting as issued by International Accounting Standards Board, under the historical cost convention on the accrual basis except for certain financial instruments which have been measured at fair values. Accordingly, these interim condensed consolidated financial statements do not include all the information required for a complete set of financial statements. The interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the company’s Annual Report on Form 20-F for the year ended March 31, 2020. Accounting policies have been consistently applied except where a newly issued accounting standard is initially adopted or a revision to an existing accounting standard requires a change in the accounting policy hitherto in use.

 

1.3 Basis of consolidation

 

Infosys consolidates entities which it owns or controls. The interim condensed consolidated financial statements comprise the financial statements of the company, its controlled trusts and its subsidiaries. Control exists when the parent has power over the entity, is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns by using its power over the entity. Power is demonstrated through existing rights that give the ability to direct relevant activities, those which significantly affect the entity's returns. Subsidiaries are consolidated from the date control commences until the date control ceases.

 

The financial statements of the Group companies are consolidated on a line-by-line basis and intra-group balances and transactions including unrealized gain / loss from such transactions are eliminated upon consolidation. The financial statements are prepared by applying uniform accounting policies in use at the Group. Non-controlling interests which represent part of the net profit or loss and net assets of subsidiaries that are not, directly or indirectly, owned or controlled by the company, are excluded.

 

1.4 Use of estimates and judgments

 

The preparation of the financial statements in conformity with IFRS requires management to make estimates, judgments and assumptions. These estimates, judgments and assumptions affect the application of accounting policies and the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the period. Application of accounting policies that require critical accounting estimates involving complex and subjective judgments and the use of assumptions in the financial statements have been disclosed in Note 1.5. Accounting estimates could change from period to period. Actual results could differ from those estimates. Appropriate changes in estimates are made as management becomes aware of changes in circumstances surrounding the estimates. Changes in estimates are reflected in the financial statements in the period in which changes are made and, if material, their effects are disclosed in the notes to the interim condensed consolidated financial statements.

 

Estimation of uncertainties relating to the global health pandemic from COVID-19 (COVID-19):

 

The Group has considered the possible effects that may result from the pandemic relating to COVID-19 in the preparation of these interim condensed consolidated financial statements including the recoverability of carrying amounts of financial and non financial assets. In developing the assumptions relating to the possible future uncertainties in the global economic conditions because of this pandemic, the Group has, at the date of approval of these condensed financial statements, used internal and external sources of information including credit reports and related information and economic forecasts and expects that the carrying amount of these assets will be recovered. The impact of COVID-19 on the Group's financial statements may differ from that estimated as at the date of approval of these interim condensed consolidated financial statements.

 

1.5 Critical accounting estimates and judgements

 

a. Revenue recognition

 

The Group’s contracts with customers include promises to transfer multiple products and services to a customer. Revenues from customer contracts are considered for recognition and measurement when the contract has been approved, in writing, by the parties to the contract, the parties to contract are committed to perform their respective obligations under the contract, and the contract is legally enforceable. The Group assesses the services promised in a contract and identifies distinct performance obligations in the contract. Identification of distinct performance obligations to determine the deliverables and the ability of the customer to benefit independently from such deliverables, and allocation of transaction price to these distinct performance obligations involves significant judgement.

 

Fixed price maintenance revenue is recognized ratably on a straight-line basis when services are performed through an indefinite number of repetitive acts over a specified period. Revenue from fixed price maintenance contract is recognized ratably using a percentage of completion method when the pattern of benefits from the services rendered to the customer and Group’s costs to fulfil the contract is not even through the period of the contract because the services are generally discrete in nature and not repetitive. The use of method to recognize the maintenance revenues requires judgment and is based on the promises in the contract and nature of the deliverables.

 

The Group uses the percentage-of-completion method in accounting for other fixed-price contracts. Use of the percentage-of-completion method requires the Group to determine the actual efforts or costs expended to date as a proportion of the estimated total efforts or costs to be incurred. Efforts or costs expended are used to measure progress towards completion as there is a direct relationship between input and productivity. The estimation of total efforts or costs involves significant judgement and is assessed throughout the period of the contract to reflect any changes based on the latest available information.

 

Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the estimated efforts or costs to complete the contract.

 

b. Income taxes

 

The company's two major tax jurisdictions are India and the U.S., though the company also files tax returns in other overseas jurisdictions.

 

Significant judgments are involved in determining the provision for income taxes, including amount expected to be paid/recovered for uncertain tax positions.

 

In assessing the realizability of deferred income tax assets, management considers whether some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences become deductible. Management considers the scheduled reversals of deferred income tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the level of historical taxable income and projections for future taxable income over the periods in which the deferred income tax assets are deductible, management believes that the group will realize the benefits of those deductible differences. The amount of the deferred income tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carry forward period are reduced (also refer note 2.13).

 

c. Business combinations and intangible assets

 

Business combinations are accounted for using IFRS 3 (Revised), Business Combinations. IFRS 3 requires us to fair value identifiable intangible assets and contingent consideration to ascertain the net fair value of identifiable assets, liabilities and contingent liabilities of the acquiree. Estimates are required to be made in determining the value of contingent consideration, value of option arrangements and intangible assets. These valuations are conducted by external valuation experts. These measurements are based on information available at the acquisition date and are based on expectations and assumptions that have been deemed reasonable by management.

 

d. Property, plant and equipment

 

Property, plant and equipment represent a significant proportion of the asset base of the Group. The charge in respect of periodic depreciation is derived after determining an estimate of an asset’s expected useful life and the expected residual value at the end of its life. The useful lives and residual values of Group's assets are determined by management at the time the asset is acquired and reviewed periodically, including at each financial year end. The lives are based on historical experience with similar assets as well as anticipation of future events, which may impact their life, such as changes in technology (Refer note 2.8).

 

e. Impairment of Goodwill

 

Goodwill is tested for impairment on an annual basis and whenever there is an indication that the recoverable amount of a cash generating unit (CGUs) is less than its carrying amount. For the impairment test, goodwill is allocated to the CGU or groups of CGUs which benefit from the synergies of the acquisition and which represent the lowest level at which goodwill is monitored for internal management purposes.

 

The recoverable amount of CGUs is determined based on higher of value-in-use and fair value less cost to sell. Key assumptions in the cash flow projections are prepared based on current economic conditions and comprises estimated long term growth rates, weighted average cost of capital and estimated operating margins.

 

f. Leases

 

IFRS 16 requires lessees to determine the lease term as the non-cancellable period of a lease adjusted with any option to extend or terminate the lease, if the use of such option is reasonably certain. The Group makes an assessment on the expected lease term on a lease-by-lease basis and thereby assesses whether it is reasonably certain that any options to extend or terminate the contract will be exercised. In evaluating the lease term, the Company considers factors such as any significant leasehold improvements undertaken over the lease term, costs relating to the termination of the lease and the importance of the underlying asset to Infosys’s operations taking into account the location of the underlying asset and the availability of suitable alternatives. The lease term in future periods is reassessed to ensure that the lease term reflects the current economic circumstances. After considering current and future economic conditions, the Group has concluded that no material changes are required to lease period relating to the existing lease contracts (Refer note 2.9).

 

g. Allowance for credit losses on receivables and unbilled revenue

 

The Group determines the allowance for credit losses based on historical loss experience adjusted to reflect current and estimated future economic conditions. The group considered current and anticipated future economic conditions relating to industries the Group deals with and the countries where it operates. In calculating expected credit loss, the Group has also considered credit reports and other related credit information for its customers to estimate the probability of default in future and has taken into account estimates of possible effect from the pandemic relating to COVID-19.

 

1.6 Recent accounting pronouncements

 

New and revised IFRS Standards in issue but not yet effective:

 

Amendments to IAS 16 Property, Plant and Equipment Proceeds before Intended Use
Amendments to IAS 37 Onerous Contracts Cost of Fulfilling a Contract

 

Amendments to IAS 16

 

On May 14, 2020 International Accounting Standards Board (IASB) has issued amendment to IAS 16 Property, Plant and Equipment — Proceeds before Intended Use (Amendments to IAS 16) which amends the standard to prohibit deducting from the cost of an item of property, plant and equipment any proceeds from selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Instead, an entity recognises the proceeds from selling such items, and the cost of producing those items, in profit or loss.

 

The effective date for adoption of this amendment is annual periods beginning on or after January 1, 2022, although early adoption is permitted. The Group is in the process of evaluating the impact of the amendment.

 

Amendments to IAS 37

 

On May 14, 2020 IASB has issued Onerous Contracts — Cost of Fulfilling a Contract (Amendments to IAS 37) which specify that the ‘cost of fulfilling’ a contract comprises the ‘costs that relate directly to the contract’. Costs that relate directly to a contract can either be incremental costs of fulfilling that contract (examples would be direct labour, materials) or an allocation of other costs that relate directly to fulfilling contracts (an example would be the allocation of the depreciation charge for an item of property, plant and equipment used in fulfilling the contract).

 

The effective date for adoption of this amendment is annual periods beginning on or after January 1, 2022, although early adoption is permitted. The Group is in the process of evaluating the impact of the amendment.

 

2. Notes to the Interim Condensed Consolidated Financial Statements

 

2.1 Cash and cash equivalents

 

Cash and cash equivalents consist of the following:

(Dollars in millions)

Particulars As at
  June 30, 2020 March 31, 2020
Cash and bank deposits  1,728  1,624
Deposits with financial institutions  787  841
Total Cash and cash equivalents  2,515  2,465

 

Cash and cash equivalents as at June 30, 2020 and March 31, 2020 include restricted cash and bank balances of $51 million and $52 million, respectively. The restrictions are primarily on account of bank balances held by irrevocable trusts controlled by the company and bank balances held as margin money deposits against guarantees.

 

The deposits maintained by the Group with banks and financial institutions comprise of time deposits, which can be withdrawn by the Group at any point without prior notice or penalty on the principal.

 

2.2 Earmarked bank balance for dividend

(Dollars in millions)

Particulars As at
  June 30, 2020 March 31, 2020
Current    
 Earmarked bank balance for dividend  536  –
Total  536  –

 

The Board of Directors in their meeting held on April 20, 2020 recommended a final dividend of ₹ 9.50/- per equity share (approximately $0.13 per equity share) for the financial year ended March 31, 2020. The same was approved by the shareholders at the Annual General Meeting held on June 27, 2020. Earmarked bank balance for dividend represents cash which is deposited in a designated bank account only for payment of final dividend for financial year ended March 31, 2020.

 

2.3 Investments

 

The carrying value of investments are as follows:

(Dollars in millions)

Particulars As at
  June 30, 2020 March 31, 2020
(i) Current    
Fair value through profit and loss    
 Liquid Mutual fund units    
 Fair value  156  278
 Fixed Maturity Plan Securities    
 Fair value  13  65
Fair Value through Other comprehensive income    
 Quoted debt securities    
 Fair value  84  123
 Certificate of deposits    
 Fair value  118  149
Total current investments  371  615
(ii) Non-current    
Amortized cost    
 Quoted debt securities    
 Cost  244  244
Fair value through Other comprehensive income    
 Quoted debt securities    
 Fair value  587  281
 Unquoted equity and preference securities    
 Fair value  14  14
Fair value through profit and loss    
 Unquoted Preference securities    
 Fair value  1  1
 Others    
 Fair value(1)  7  7
Total Non-current investments  853  547
Total investments  1,224  1,162
Investment carried at amortized cost 244 244
Investments carried at fair value through other comprehensive income 803 567
Investments carried at fair value through profit and loss 177 351

 

(1) Uncalled capital commitments outstanding as of June 30, 2020 and March 31, 2020 was $8 million each.

 

Refer note 2.4 for accounting policies on financial instruments.

 

Method of fair valuation:

(Dollars in millions)

Class of investment Method Fair value
    As at
June 30, 2020
As at
March 31, 2020
Liquid mutual fund units Quoted price  156  278
Fixed maturity plan securities Market observable inputs  13  65
Quoted debt securities- carried at amortized cost Quoted price and market observable inputs  296  284
Quoted debt securities- carried at Fair value through other comprehensive income Quoted price and market observable inputs  671  404
Certificate of deposits Market observable inputs  118  149
Unquoted equity and preference securities at fair value through other comprehensive income Discounted cash flows method, Market multiples method, Option pricing model  14  14
Unquoted equity and preference securities - carried at fair value through profit or loss Discounted cash flows method, Market multiples method, Option pricing model  1  1
Others Discounted cash flows method, Market multiples method, Option pricing model  7  7
     1,276  1,202

 

Certain quoted investments are classified as Level 2 in the absence of active market for such investments.

 

2.4 Financial instruments

 

Accounting Policy

 

2.4.1 Initial recognition

 

The group recognizes financial assets and financial liabilities when it becomes a party to the contractual provisions of the instrument. All financial assets and liabilities are recognized at fair value on initial recognition, except for trade receivables which are initially measured at transaction price. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities, that are not at fair value through profit or loss, are added to the fair value on initial recognition. Regular way purchase and sale of financial assets are accounted for at trade date.

 

2.4.2 Subsequent measurement

 

a. Non-derivative financial instruments

 

(i) Financial assets carried at amortized cost

 

A financial asset is subsequently measured at amortized cost if it is held within a business model whose objective is to hold the asset in order to collect contractual cash flows and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

 

(ii) Financial assets at fair value through other comprehensive income (FVOCI)

 

A financial asset is subsequently measured at fair value through other comprehensive income if it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets and the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. The Group has made an irrevocable election for its investments which are classified as equity instruments to present the subsequent changes in fair value in other comprehensive income based on its business model.

 

(iii) Financial assets at fair value through profit or loss (FVTPL)

 

A financial asset which is not classified in any of the above categories is subsequently fair valued through profit or loss.

 

(iv) Financial liabilities

 

Financial liabilities are subsequently carried at amortized cost using the effective interest method, except for contingent consideration and financial liability under option arrangements recognized in a business combination which is subsequently measured at fair value through profit and loss. For trade and other payables maturing within one year from the balance sheet date, the carrying amounts approximate fair value due to the short maturity of these instruments.

 

b. Derivative financial instruments

 

The group holds derivative financial instruments such as foreign exchange forward and option contracts to mitigate the risk of changes in exchange rates on foreign currency exposures. The counterparty for these contracts is generally a bank.

 

(i) Financial assets or financial liabilities, at fair value through profit or loss.

 

This category has derivative financial assets or liabilities which are not designated as hedges.

 

Although the group believes that these derivatives constitute hedges from an economic perspective, they may not qualify for hedge accounting under IFRS 9, Financial Instruments. Any derivative that is either not designated as hedge, or is so designated but is ineffective as per IFRS 9, is categorized as a financial asset or financial liability, at fair value through profit or loss.

 

Derivatives not designated as hedges are recognized initially at fair value and attributable transaction costs are recognized in net profit in the Statement of Comprehensive Income when incurred. Subsequent to initial recognition, these derivatives are measured at fair value through profit or loss and the resulting exchange gains or losses are included in other income. Assets/ liabilities in this category are presented as current assets/current liabilities if they are either held for trading or are expected to be realized within 12 months after the balance sheet date.

 

(ii) Cash flow hedge

 

The group designates certain foreign exchange forward and options contracts as cash flow hedges to mitigate the risk of foreign exchange exposure on highly probable forecast cash transactions.

 

When a derivative is designated as a cash flow hedging instrument, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive income and accumulated in the cash flow hedging reserve. Any ineffective portion of changes in the fair value of the derivative is recognized immediately in the net profit in the Statement of Comprehensive Income. If the hedging instrument no longer meets the criteria for hedge accounting, then hedge accounting is discontinued prospectively. If the hedging instrument expires or is sold, terminated or exercised, the cumulative gain or loss on the hedging instrument recognized in cash flow hedging reserve till the period the hedge was effective remains in cash flow hedging reserve until the forecasted transaction occurs. The cumulative gain or loss previously recognized in the cash flow hedging reserve is transferred to the net profit in the Statement of Comprehensive Income upon the occurrence of the related forecasted transaction. If the forecasted transaction is no longer expected to occur, then the amount accumulated in cash flow hedging reserve is reclassified to net profit in the Statement of Comprehensive Income.

 

2.4.3 Derecognition of financial instruments

 

The group derecognizes a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset and the transfer qualifies for derecognition under IFRS 9. A financial liability (or a part of a financial liability) is derecognized from the group's balance sheet when the obligation specified in the contract is discharged or cancelled or expires.

 

2.4.4 Fair value of financial instruments

 

In determining the fair value of its financial instruments, the group uses a variety of methods and assumptions that are based on market conditions and risks existing at each reporting date. The methods used to determine fair value include discounted cash flow analysis, available quoted market prices and dealer quotes. All methods of assessing fair value result in general approximation of value, and such value may never actually be realized.

 

Refer to table ‘Financial instruments by category’ below for the disclosure on carrying value and fair value of financial assets and liabilities. For financial assets and liabilities maturing within one year from the Balance Sheet date and which are not carried at fair value, the carrying amounts approximate fair value due to the short maturity of those instruments.

 

2.4.5 Impairment

 

The Group recognizes loss allowances using the expected credit loss (ECL) model for the financial assets and unbilled revenue which are not fair valued through profit or loss. Loss allowance for trade receivables and unbilled revenues with no significant financing component is measured at an amount equal to lifetime ECL. For all other financial assets, expected credit losses are measured at an amount equal to the 12-month ECL, unless there has been a significant increase in credit risk from initial recognition in which case those are measured at lifetime ECL. The amount of expected credit losses (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognized is recognized as an impairment gain or loss in Statement of Comprehensive Income.

 

Financial instruments by category

 

The carrying value and fair value of financial instruments by categories as at June 30, 2020 were as follows:

 

(Dollars in millions)

Particulars Amortized cost Financial assets/ liabilities at fair value through profit or loss Financial assets/liabilities at fair value through OCI Total carrying value Total fair value
    Designated upon initial recognition Mandatory Equity instruments designated upon initial recognition Mandatory    
Assets:              
Cash and cash equivalents (Refer note 2.1)  2,515          2,515  2,515
Earmarked bank balance for dividend (Refer note 2.2)  536          536  536
Investments (Refer note 2.3)              
Liquid mutual funds      156      156  156
Fixed maturity plan securities      13      13  13
Quoted debt securities  244        671  915  967(1)
Certificate of deposits          118  118  118
Commercial Paper              
Unquoted equity and preference securities:      1  14    15  15
Unquoted investment others      7      7  7
Trade receivables  2,487          2,487  2,487
Unbilled revenues (Refer note 2.18)(3)  400          400  400
Prepayments and other assets (Refer note 2.5)  551          551  539(2)
Derivative financial instruments      10    2  12  12
Total  6,733    187  14  791  7,725  7,765
Liabilities:              
Trade payables  366          366  366
Lease liabilities  599          599  599
Derivative financial instruments      7    4  11  11
Financial liability under option arrangements      88      88  88
Other liabilities including contingent consideration  1,559    24      1,583  1,583
Total  2,524    119    4  2,647  2,647

 

(1)On account of fair value changes including interest accrued

 

(2)Excludes interest accrued on quoted debt securities carried at amortized cost of $12 million

 

(3)Excludes unbilled revenue for contracts where the right to consideration is dependent on completion of contractual milestones

 

The carrying value and fair value of financial instruments by categories as at March 31, 2020 were as follows:

 

(Dollars in millions)

Particulars Amortized cost Financial assets/ liabilities at fair value through profit or loss Financial assets/liabilities at fair value through OCI Total carrying value Total fair value
    Designated upon initial recognition Mandatory Equity instruments designated upon initial recognition Mandatory    
Assets:              
Cash and cash equivalents (Refer note 2.1)  2,465          2,465  2,465
Investments (Refer note 2.3)              
Liquid mutual funds      278      278  278
Fixed maturity plan securities      65      65  65
Quoted debt securities  244        404  648  688(1)
Certificate of deposits          149  149  149
Unquoted equity and preference securities      1  14    15  15
Unquoted investment others      7      7  7
Trade receivables  2,443          2,443  2,443
Unbilled revenues(Refer note 2.18) (3)  369          369  369
Prepayments and other assets (Refer note 2.5)  476          476  465(2)
Derivative financial instruments      7    1  8  8
Total  5,997    358  14  554  6,923  6,952
Liabilities:              
Trade payables  377          377  377
Lease liabilities  612          612  612
Derivative financial instruments      62    3  65  65
Financial liability under option arrangements      82      82  82
Other liabilities including contingent consideration  1,054    45      1,099  1,099
Total  2,043    189    3  2,235  2,235

 

(1)On account of fair value changes including interest accrued

 

(2)Excludes interest accrued on quoted debt securities carried at amortized cost of $11 million

 

(3)Excludes unbilled revenue for contracts where the right to consideration is dependent on completion of contractual milestones

 

Fair value hierarchy

 

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.

 

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

 

Level 3 - Inputs for the assets or liabilities that are not based on observable market data (unobservable inputs).

 

The following table presents fair value hierarchy of assets and liabilities as at June 30, 2020:

(Dollars in millions)

Particulars As at June 30, 2020 Fair value measurement at end of the reporting period using
     Level 1 Level 2 Level 3
Assets        
Investments in liquid mutual fund units (Refer note 2.3)  156  156    
Investments in fixed maturity plan securities (Refer note 2.3)  13    13  
Investments in quoted debt securities (Refer note 2.3)  967  753  214  
Investments in certificate of deposit (Refer note 2.3)  118    118  
Investments in unquoted equity and preference securities (Refer note 2.3)  15      15
Investments in unquoted investments others (Refer note 2.3)  7      7
Derivative financial instruments - gain on outstanding foreign exchange forward and option contracts  12    12  
Liabilities        
Derivative financial instruments - loss on outstanding foreign exchange forward and option contracts  11    11  
Financial liability under option arrangements (Refer note 2.11)  88      88
Liability towards contingent consideration (Refer note 2.6)*  24      24

 

* Discount rate pertaining to contingent consideration ranges from 8% to 14%

 

During the three months ended June 30, 2020, quoted debt securities of $16 million were transferred from Level 2 to Level 1 of fair value hierarchy, since these were valued based on quoted price and quoted debt securities of $157 million were transferred from Level 1 to Level 2 of fair value hierarchy, since these were valued based on market observable inputs.

 

The following table presents fair value hierarchy of assets and liabilities as at March 31, 2020:

(Dollars in millions)

Particulars As at March 31, 2020 Fair value measurement at end of the reporting period using
     Level 1 Level 2 Level 3
Assets        
Investments in liquid mutual fund units (Refer note 2.3)  278  278    
Investments in fixed maturity plan securities (Refer note 2.3)  65    65  
Investments in quoted debt securities (Refer note 2.3)  688  618  70  
Investments in certificate of deposit (Refer note 2.3)  149    149  
Investments in unquoted equity and preference securities (Refer note 2.3)  15      15
Investments in unquoted investments others (Refer note 2.3)  7      7
Derivative financial instruments- gain on outstanding foreign exchange forward and option contracts  8    8  
Liabilities        
Derivative financial instruments- loss on outstanding foreign exchange forward and option contracts  65    65  
Financial liability under option arrangements (Refer to note 2.11)  82      82
Liability towards contingent consideration (Refer note 2.6)*  45      45

 

* Discount rate pertaining to contingent consideration ranges from 8% to 14%

 

During the year ended March 31, 2020, quoted debt securities of $87 million were transferred from Level 2 to Level 1 of fair value hierarchy, since these were valued based on quoted price and quoted debt securities of $7 million were transferred from Level 1 to Level 2 of fair value hierarchy, since these were valued based on market observable inputs.

 

A one percentage point change in the unobservable inputs used in fair valuation of Level 3 assets and liabilities does not have a significant impact in its value.

 

Majority of investments of the Group are fair valued based on Level 1 or Level 2 inputs. These investments primarily include investment in liquid mutual fund units, fixed maturity plan securities, certificates of deposit, commercial papers, quoted bonds issued by government and quasi-government organizations and non convertible debentures. The Group invests after considering counterparty risks based on multiple criteria including Tier I capital, Capital Adequacy Ratio, Credit Rating, Profitability, NPA levels and Deposit base of banks and financial institutions. These risks are monitored regularly as per its risk management program.

 

2.5 Prepayments and other assets

 

Prepayments and other assets consist of the following:

(Dollars in millions)

Particulars As at
  June 30, 2020 March 31, 2020
Current    
Rental deposits  5  4
Security deposits  1  1
Loans to employees  20  32
Prepaid expenses(1)  127  128
Interest accrued and not due  61  62
Withholding taxes and others(1)  238  209
Advance payments to vendors for supply of goods(1)  20  19
Deposit with corporations*  256  237
Deferred contract cost(1)  7  4
Net investment in sublease of right of use asset  5  5
Other non financial assets(1)  4  4
Other financial assets **  108  34
Total Current prepayment and other assets  852  739
Non-current    
Loans to employees  2  3
Security deposits  7  7
Deposit with corporations*  5  7
Prepaid gratuity(1)  12  20
Prepaid expenses(1)  10  11
Deferred contract cost(1)  10  13
Withholding taxes and others(1)  103  103
Net investment in sublease of right of use asset  51  53
Rental Deposits  28  29
Other financial assets  2  2
Total Non- current prepayment and other assets  230  248
Total prepayment and other assets  1,082  987
Financial assets in prepayments and other assets  551  476

 

(1) Non financial assets

 

Withholding taxes and others primarily consist of input tax credits and Cenvat recoverable from Government of India. Cenvat recoverable includes $49 million which are pending adjudication. The Group expects these amounts to be sustainable on adjudication and recoverable on final resolution.

 

*Deposit with corporation represents amounts deposited to settle certain employee-related obligations as and when they arise during the normal course of business.

 

**Other receivables includes $80 million towards redemption of mutual funds.

 

2.6 Other liabilities

 

Other liabilities comprise the following:

(Dollars in millions)

Particulars As at
  June 30, 2020 March 31, 2020
Current    
Accrued compensation to employees  444  391
Accrued provident fund liability (1)    9
Accrued expenses  514  518
Withholding taxes and others(1)(2)  352  232
Retention money  8  10
Liabilities of controlled trusts  24  25
Deferred income - government grants(1)  4  
Liability towards contingent consideration  17  29
Capital creditors  63  37
Final dividend payable to shareholders (3)  472  
Others non financial liabilities(1)  1  1
Others  30  69
Total Current other liabilities  1,929  1,321
Non-Current    
Liability towards contingent consideration  7  16
Accrued compensation to employees  3  3
Accrued gratuity(1)  5  4
Accrued provident fund liability (1)  12  24
Deferred income - government grants(1)  6  6
Deferred income(1)  3  3
Financial liability under option arrangements  88  82
Withholding taxes and others(1)  33  
Others  1  1
Total Non-current other liabilities  158  139
Total other liabilities  2,087  1,460
Financial liabilities included in other liabilities  1,671  1,181
Financial liability towards contingent consideration on an undiscounted basis  28  48

 

(1) Non financial liabilities 

 

(2) Includes withholding tax of $62 million on final dividend payable to share holders for fiscal 2020 (Refer note no 2.20).

 

(3) Pertains to final dividend declared by the Company for fiscal 2020 and approved by the shareholders on June 27, 2020. Payment date for dividend is July 3, 2020. (Refer to note no. 2.20)

 

Accrued expenses primarily relate to cost of technical sub-contractors, telecommunication charges, legal and professional charges, brand building expenses, overseas travel expenses and office maintenance.

 

2.7 Provisions and other contingencies

 

Accounting Policy

 

A provision is recognized if, as a result of a past event, the Group has a present legal or constructive obligation that is reasonably estimable, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability.

 

Contingent liability is a possible obligation arising from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the entity or a present obligation that arises from past events but is not recognised because it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation or the amount of the obligation cannot be measured with sufficient reliability.

 

Post sales client support

 

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

 

Onerous contracts

 

Provisions for onerous contracts are recognized when the expected benefits to be derived by the Group from a contract are lower than the unavoidable costs of meeting the future obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established the Group recognizes any impairment loss on the assets associated with that contract.

 

Provisions comprise the following:

(Dollars in millions)

Particulars As at
  June 30, 2020 March 31, 2020
Provision for post sales client support and other provisions  84  76
   84  76

 

Provision for post sales client support and other provisions represents costs associated with providing sales support services which are accrued at the time of recognition of revenues and are expected to be utilized over a period of 1 year.

 

Provision for post sales client support and other provisions is included in cost of sales in the condensed consolidated Statement of Comprehensive Income.

 

As at June 30, 2020 and March 31, 2020, claims against the Group, not acknowledged as debts, (excluding demands from income tax authorities- Refer note 2.13) amounted to ₹259 crore ($34 million) and ₹230 crore ($30 million), respectively.

 

Legal Proceedings

 

On the matters pertaining to the whistle blower allegations, previously disclosed by the Company on October 22, 2019, the Company has responded to all the inquires received from the Indian regulatory authorities.

 

The Group is subject to legal proceedings and claims, which have arisen in the ordinary course of business. The Group’s management reasonably expects that these legal actions, when ultimately concluded and determined, will not have a material and adverse effect on the Group’s results of operations or financial condition.

 

2.8 Property, plant and equipment

 

Accounting Policy

 

Property, plant and equipment are stated at cost, less accumulated depreciation and impairment, if any. Costs directly attributable to acquisition are capitalized until the property, plant and equipment are ready for use, as intended by management. The group depreciates property, plant and equipment over their estimated useful lives using the straight-line method. The estimated useful lives of assets are as follows:

 

Building 22-25 years
Plant and machinery(1) 5 years
Computer equipment 3-5 years
Furniture and fixtures 5 years
Vehicles 5 years
Leasehold improvements Lower of useful life of the asset or lease term

 

(1) includes solar plant with a useful life of 20 years

 

Depreciation methods, useful lives and residual values are reviewed periodically, including at each financial year end.

 

Advances paid towards the acquisition of property, plant and equipment outstanding at each balance sheet date and the cost of assets not put to use before such date are disclosed under ‘Capital work-in-progress’. Subsequent expenditures relating to property, plant and equipment is capitalized only when it is probable that future economic benefits associated with these will flow to the Group and the cost of the item can be measured reliably. Repairs and maintenance costs are recognized in the Statement of Comprehensive Income when incurred. The cost and related accumulated depreciation are eliminated from the financial statements upon sale or retirement of the asset and the resultant gains or losses are recognized in net profit in the consolidated Statement of Comprehensive Income.

 

Impairment

 

Property, plant and equipment are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs.

 

If such assets are considered to be impaired, the impairment to be recognized in net profit in the Statement of Comprehensive Income is measured by the amount by which the carrying value of the assets exceeds the estimated recoverable amount of the asset. An impairment loss is reversed in net profit in the Statement of Comprehensive Income if there has been a change in the estimates used to determine the recoverable amount. The carrying amount of the asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortization or depreciation) had no impairment loss been recognized for the asset in prior years.

 

Following are the changes in the carrying value of property, plant and equipment for the three months ended June 30, 2020:

(Dollars in millions)

Particulars Land Buildings Plant and machinery Computer equipment Furniture and fixtures Vehicles Total
Gross carrying value as at April 1, 2020  174  1,324  621  882  381  6  3,388
Additions  9  5  4  46  3    67
Deletions      (1)  (1)  (1)    (3)
Translation difference    3  2  3  1    9
Gross carrying value as at June 30, 2020  183  1,332  626  930  384  6  3,461
Accumulated depreciation as at April 1, 2020    (434)  (418)  (646)  (243)  (4)  (1,745)
Depreciation    (13)  (16)  (27)  (11)    (67)
Accumulated depreciation on deletions      1  1  1    3
Translation difference    (1)  (1)  (2)  (1)    (5)
Accumulated depreciation as at June 30, 2020    (448)  (434)  (674)  (254)  (4)  (1,814)
Capital work-in progress as at June 30, 2020              178
Carrying value as at June 30, 2020  183  884  192  256  130  2  1,825
Capital work-in progress as at April 1, 2020              167
Carrying value as at April 1, 2020  174  890  203  236  138  2  1,810

 

Following are the changes in the carrying value of property, plant and equipment for the three months ended June 30, 2019:

(Dollars in millions)

Particulars Land Buildings Plant and machinery Computer equipment Furniture and fixtures Vehicles Total
Gross carrying value as at April 1, 2019  276  1,291  572  845  321  5  3,310
Additions    24  23  30  27    104
Additions- Business Combinations        9  1    10
Deletions      (1)  (4)  (1)    (6)
Reclassified on account of adoption of IFRS 16  (87)            (87)
Translation difference      1  1  2    4
Gross carrying value as at June 30, 2019  189  1,315  595  881  350  5  3,335
Accumulated depreciation as at April 1, 2019  (5)  (423)  (390)  (606)  (223)  (3)  (1,650)
Depreciation    (13)  (16)  (31)  (11)    (71)
Accumulated depreciation on deletions      1  4  1    6
Reclassified on account of adoption of IFRS 16  5            5
Translation difference      (1)  (1)  (1)    (3)
Accumulated depreciation as at June 30, 2019    (436)  (406)  (634)  (234)  (3)  (1,713)
Capital work-in progress as at June 30, 2019              281
Carrying value as at June 30, 2019  189  879  189  247  116  2  1,903
Capital work-in progress as at April 1, 2019              271
Carrying value as at April 1, 2019  271  868  182  239  98  2  1,931

 

The aggregate depreciation expense is included in cost of sales in the Statement of Comprehensive Income.

 

The contractual commitments for capital expenditure primarily comprises of commitments for infrastructure facilities and computer equipment’s aggregating to $136 million and $180 million as at June 30, 2020 and March 31, 2020, respectively.

 

2.9 Leases

 

Accounting Policy

 

The Group as a lessee

 

The Group’s lease asset classes primarily consist of leases for land and buildings. The group assesses whether a contract contains a lease, at inception of a contract. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the group assesses whether: (1) the contract involves the use of an identified asset (2) the group has substantially all of the economic benefits from use of the asset through the period of the lease and (3) the group has the right to direct the use of the asset.

 

At the date of commencement of the lease, the Group recognizes a right-of-use asset (“ROU”) and a corresponding lease liability for all lease arrangements in which it is a lessee, except for leases with a term of twelve months or less (short-term leases) and low value leases. For these short-term and low value leases, the Group recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease.

 

Certain lease arrangements includes the options to extend or terminate the lease before the end of the lease term. ROU assets and lease liabilities includes these options when it is reasonably certain that they will be exercised.

 

The right-of-use assets are initially recognized at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or prior to the commencement date of the lease plus any initial direct costs less any lease incentives. They are subsequently measured at cost less accumulated depreciation and impairment losses.

 

Right-of-use assets are depreciated from the commencement date on a straight-line basis over the shorter of the lease term and useful life of the underlying asset.

 

Right of use assets are evaluated for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. In such cases, the recoverable amount is determined for the Cash Generating Unit (CGU) to which the asset belongs.

 

The lease liability is initially measured at amortized cost at the present value of the future lease payments. The lease payments are discounted using the interest rate implicit in the lease or, if not readily determinable, using the incremental borrowing rates in the country of domicile of these leases. Lease liabilities are remeasured with a corresponding adjustment to the related right of use asset if the group changes its assessment if whether it will exercise an extension or a termination option.

 

Lease liability and ROU asset have been separately presented in the Balance Sheet and lease payments have been classified as financing cash flows.

 

The Group as a lessor

 

Leases for which the group is a lessor is classified as a finance or operating lease. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.

 

When the Group is an intermediate lessor, it accounts for its interests in the head lease and the sublease separately. The sublease is classified as a finance or operating lease by reference to the right-of-use asset arising from the head lease.

 

For operating leases, rental income is recognized on a straight line basis over the term of the relevant lease.

 

Following are the changes in the carrying value of right of use assets for the three months ended June 30, 2020:

 

(Dollars in millions)

Particulars Category of ROU asset
  Land Buildings Vehicles Computers Total
Balance as of April 1, 2020  83  461  2  5  551
Additions*    (2)  1  4  3
Deletions    (8)      (8)
Depreciation    (19)    (1)  (20)
Translation difference    3      3
Balance as of June 30, 2020  83  435  3  8  529

 

* Net of lease incentives of $7 million related to lease of Buildings

 

Following are the changes in the carrying value of right of use assets for the three months ended June 30, 2019:

(Dollars in millions)

Particulars Category of ROU asset
  Land Buildings Vehicles Total
Balance as of April 1, 2019    419  1  420
Reclassified on account of adoption of IFRS 16  92      92
Additions    17    17
Additions through business combination    26  2  28
Depreciation    (18)    (18)
Translation difference  (1)  2    1
Balance as of June 30, 2019  91  446  3  540

 

The aggregate depreciation expense on ROU assets is included in cost of sales in the consolidated Statement of Comprehensive Income.

 

The following is the break-up of current and non-current lease liabilities as of June 30, 2020 and March 31, 2020:

 

(Dollars in millions)

Particulars As at
  June 30, 2020 March 31, 2020
Current lease liabilities  87  82
Non-current lease liabilities  512  530
Total  599  612

 

2.10 Goodwill

 

Accounting Policy

 

Goodwill represents purchase consideration in excess of the Group's interest in the net fair value of identifiable assets, liabilities and contingent liabilities of the acquiree. When the net fair value of the identifiable assets, liabilities and contingent liabilities acquired exceeds the purchase consideration, the fair value of net assets acquired is reassessed and the bargain purchase gain is recognized immediately in the net profit in the Statement of Comprehensive Income. Goodwill is measured at cost less accumulated impairment losses.

 

Impairment

 

Goodwill is tested for impairment on an annual basis and whenever there is an indication that the recoverable amount of a cash generating unit (CGU) is less than its carrying amount. For the impairment test, goodwill is allocated to the CGU or groups of CGU’s which benefit from the synergies of the acquisition. A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or group of assets. Impairment occurs when the carrying amount of a CGU including the goodwill, exceeds the estimated recoverable amount of the CGU. The recoverable amount of a CGU is the higher of its fair value less cost to sell and its value-in-use. Value-in-use is the present value of future cash flows expected to be derived from the CGU.

 

Total impairment loss of a CGU is allocated first to reduce the carrying amount of goodwill allocated to the CGU and then to the other assets of the CGU pro-rata on the basis of the carrying amount of each asset in the CGU. An impairment loss on goodwill is recognized in net profit in the Statement of Comprehensive Income and is not reversed in the subsequent period.

 

Following is a summary of changes in the carrying amount of goodwill:

(Dollars in millions)

Particulars As at
  June 30, 2020 March 31, 2020
Carrying value at the beginning  699  512
Goodwill on HIPUS acquisition    16
Goodwill on Stater acquisition    57
Goodwill on Simplus acquisition    130
Translation differences  12  (16)
Carrying value at the end  711  699

 

For the purpose of impairment testing, goodwill acquired in a business combination is allocated to the CGU or groups of CGUs, which benefit from the synergies of the acquisition.

 

2.11 Business combination

 

Accounting Policy

 

Business combinations have been accounted for using the acquisition method under the provisions of IFRS 3 (Revised), Business Combinations.

 

The cost of an acquisition is measured at the fair value of the assets transferred, equity instruments issued and liabilities incurred or assumed at the date of acquisition, which is the date on which control is transferred to the Group. The cost of acquisition also includes the fair value of any contingent consideration. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value on the date of acquisition. Contingent consideration is remeasured at fair value at each reporting date and changes in the fair value of the contingent consideration are recognized in the Statement of Comprehensive Income.

 

The interest of non-controlling shareholders is initially measured either at fair value or at the non-controlling interests’ proportionate share of the acquiree’s identifiable net assets. The choice of measurement basis is made on an acquisition-by-acquisition basis. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests’ share of subsequent changes in equity of subsidiaries.

 

Business combinations between entities under common control is outside the scope of IFRS 3 (Revised), Business Combinations and is accounted for at carrying value of the assets and liabilities in the Group's consolidated financial statements.

 

The payments related to options issued by the Group over the non-controlling interests in its subsidiaries are accounted as financial liabilities and initially recognized at the estimated present value of gross obligations. Such options are subsequently measured at fair value in order to reflect the amount payable under the option at the date at which it becomes exercisable. In the event that the option expires unexercised, the liability is derecognised.

 

Transaction costs that the Group incurs in connection with a business combination such as finders’ fees, legal fees, due diligence fees, and other professional and consulting fees are expensed as incurred.

 

Proposed transfer

 

On October 11, 2019, the Board of Directors of Infosys authorized the Company to execute a Business Transfer Agreement and related documents with its wholly-owned subsidiaries, Kallidus Inc and Skava Systems Private Limited (together referred to as Skava), to transfer the business of Skava to Infosys Limited, subject to securing the requisite regulatory approvals for a consideration based on an independent valuation. The transfer between entities under common control would be accounted for at carrying value and would not have any impact on the consolidated financial statements.

 

X15AO

 

 

2.12 Employees' Stock Option Plans (ESOP)

 

Accounting Policy

 

The Group recognizes compensation expense relating to share-based payments in net profit based on estimated fair-values of the awards on the grant date. The estimated fair value of awards is recognized as an expense in net profit in the consolidated statement of comprehensive income on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was in-substance, multiple awards with a corresponding increase to share premium.

 

Infosys Expanded Stock Ownership Program 2019 (the 2019 Plan):

 

On June 22, 2019 pursuant to approval by the shareholders in the Annual General Meeting, the Board has been authorized to introduce, offer, issue and provide share-based incentives to eligible employees of the Company and its subsidiaries under the 2019 Plan. The maximum number of shares under the 2019 plan shall not exceed 50,000,000 equity shares. To implement the 2019 Plan, upto 45,000,000 equity shares may be issued by way of secondary acquisition of shares by Infosys Expanded Stock Ownership Trust. The RSUs granted under the 2019 plan shall vest based on the achievement of defined annual performance parameters as determined by the administrator (Nomination and Remuneration Committee). The performance parameters will be based on a combination of relative Total Shareholder Return (TSR) against selected industry peers and certain broader market domestic and global indices and operating performance metrics of the company as decided by administrator. Each of the above performance parameters will be distinct for the purposes of calculation of quantity of shares to vest based on performance. These instruments will generally vest between a minimum of 1 to maximum of 3 years from the grant date.

 

2015 Stock Incentive Compensation Plan (the 2015 Plan):

 

On March 31, 2016, pursuant to the approval by the shareholders through postal ballot, the Board was authorized to introduce, offer, issue and allot share-based incentives to eligible employees of the Company and its subsidiaries under the 2015 Stock Incentive Compensation Plan (the 2015 Plan). The maximum number of shares under the 2015 plan shall not exceed 24,038,883 equity shares (this includes 11,223,576 equity shares which are held by the trust towards the 2011 Plan as at March 31, 2016). The Company expects to grant the instruments under the 2015 Plan over the period of 4 to 7 years. The plan numbers mentioned above would further be adjusted for the September 2018 bonus issue.

 

The equity settled and cash settled RSUs and stock options would vest generally over a period of 4 years and shall be exercisable within the period as approved by the Nomination and Remuneration Committee (NARC). The exercise price of the RSUs will be equal to the par value of the shares and the exercise price of the stock options would be the market price as on the date of grant.

 

Controlled trust holds 17,809,235 and 18,239,356 shares as at June 30, 2020 and March 31, 2020, respectively under the 2015 plan. Out of these shares 200,000 equity shares each have been earmarked for welfare activities of the employees as at June 30, 2020 and March 31, 2020.

 

The following is the summary of grants during the three months ended June 30, 2020 and June 30, 2019:

 

  2019 Plan 2015 Plan
Particulars Three months ended June 30, Three months ended June 30,
  2020 2019 2020 2019
Equity settled RSU        
KMPs  207,808  187,793  204,097  212,096
Employees other than KMP  –  –  24,600  12,200
   207,808  187,793  228,697  224,296

 

Notes on grants to KMP:

 

CEO & MD

 

Under the 2015 plan:

 

In accordance with the employee agreement which has been approved by the shareholders, the CEO is eligible to receive an annual grant of RSUs of fair value ₹3.25 crore (approximately $0.50 million) which will vest overtime in three equal annual installments upon the completion of each year of service from the respective grant date. Though the annual time based grants for the remaining employment term ending on March 31, 2023 have not been granted as of June 30, 2020, since the service commencement date precedes the grant date, the company has recorded employment stock compensation expense in accordance with IFRS 2, Share based payments.

 

The Board, on April 20, 2020, based on the recommendations of the Nomination and Remuneration Committee, in accordance with the terms of his employment agreement, approved the performance-based grant of RSUs amounting to ₹13 crore (approximately $2 million) for the fiscal 2021 under the 2015 Plan. These RSUs will vest in line with the employment agreement based on achievement of certain performance targets. Accordingly, 192,964 performance based RSU’s were granted effective May 2, 2020.

 

Under the 2019 plan:

 

The Board, on April 20, 2020, based on the recommendations of the Nomination and Remuneration Committee, approved performance-based grant of RSUs amounting to ₹10 crore (approximately $1.50 million) for fiscal 2021 under the 2019 Plan. These RSUs will vest in line with the employment agreement based on achievement of certain performance targets. Accordingly, 148,434 performance based RSU’s were granted effective May 2, 2020.

 

COO and Whole time director

 

Under the 2019 plan:

 

The Board, based on the recommendations of the Nomination and Remuneration Committee, approved performance-based grant of RSUs amounting to ₹4 crore (approximately $0.50 million) for fiscal 2021 under the 2019 Plan. These RSUs will vest in line with the employment agreement based on achievement of certain performance targets. Accordingly, 59,374 performance based RSU’s were granted effective May 2, 2020.

 

Other KMP

 

Under the 2015 plan:

 

On April 20, 2020, based on the recommendations of the Nomination and Remuneration Committee, in accordance with employment agreement, the Board, approved performance-based grant of 11,133 RSUs to other KMP under the 2015 Plan. The grants were made effective May 2, 2020. The performance based RSUs will vest over three years based on certain performance targets.

 

Break-up of employee stock compensation expense:

(Dollars in millions)

Particulars Three months ended June 30,
  2020 2019
Granted to:    
KMP 2 3
Employees other than KMP 8 6
Total(1)  10  9
(1) Cash settled stock compensation expense included in the above 2  –

 

The fair value of the awards are estimated using the Black-Scholes Model for time and non-market performance based options and Monte Carlo simulation model is used for TSR based options.

 

The inputs to the model include the share price at date of grant, exercise price, expected volatility, expected dividends, expected term and the risk free rate of interest. Expected volatility during the expected term of the options is based on historical volatility of the observed market prices of the Company's publicly traded equity shares during a period equivalent to the expected term of the options. Expected volatility of the comparative company have been modelled based on historical movements in the market prices of their publicly traded equity shares during a period equivalent to the expected term of the options. Correlation coefficient is calculated between each peer entity and the indices as a whole or between each entity in the peer group.

 

The fair value of each equity settled award is estimated on the date of grant using the following assumptions:

 

Particulars For options granted in
  Fiscal 2021-
Equity Shares-RSU
Fiscal 2021-
ADS-RSU
Fiscal 2020-
Equity Shares-RSU
Fiscal 2020-
ADS-RSU
Weighted average share price (₹) / ($ ADS) 674 8.93  728  10.52
Exercise price (₹)/ ($ADS)  5.00  0.07  5.00  0.07
Expected volatility (%) 29-42 29-42  22-30  22-26
Expected life of the option (years) 1-4 1-4  1-4  1-4
Expected dividends (%) 2-3 2-3  2-3  2-3
Risk-free interest rate (%) 4-5 0.2-0.3  6-7  1-3
Weighted average fair value as on grant date (₹) / ($ADS)  563  8.23  607  7.84

 

The expected life of the RSU/ESOP is estimated based on the vesting term and contractual term of the RSU/ESOP, as well as expected exercise behavior of the employee who receives the RSU/ESOP.

 

2.13 Income taxes

 

Accounting policy

 

Income tax expense comprises current and deferred income tax. Income tax expense is recognized in net profit in the consolidated Statement of Comprehensive Income except to the extent that it relates to items recognized directly in equity, in which case it is recognized in other comprehensive income. Current income tax for current and prior periods is recognized at the amount expected to be paid to or recovered from the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date. Deferred income tax assets and liabilities are recognized for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements except when the deferred income tax arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of the transaction. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

 

 

Deferred income tax assets and liabilities are measured using tax rates and tax laws that have been enacted or substantively enacted by the Balance Sheet date and are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered. The effect of changes in tax rates on deferred income tax assets and liabilities is recognized as income or expense in the period that includes the enactment or the substantive enactment date. A deferred income tax asset is recognized to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can be utilized. Deferred income taxes are not provided on the undistributed earnings of subsidiaries and branches where it is expected that the earnings of the subsidiary or branch will not be distributed in the foreseeable future.

 

The Group offsets current tax assets and current tax liabilities, where it has a legally enforceable right to set off the recognized amounts and where it intends either to settle on a net basis, or to realize the asset and settle the liability simultaneously. The income tax provision for the interim period is made based on the best estimate of the annual average tax rate expected to be applicable for the full financial year. Tax benefits of deductions earned on exercise of employee share options in excess of compensation charged to income are credited to share premium.

 

Income tax expense in the consolidated Statement of Comprehensive Income comprises:

(Dollars in millions)

Particulars Three months ended June 30,
  2020 2019
Current taxes    
Domestic taxes  147  158
Foreign taxes  27  52
   174 210
Deferred taxes    
Domestic taxes  24  (1)
Foreign taxes  3  (13)
   27  (14)
Income tax expense  201  196

 

Income tax expense for the three months ended June 30, 2020 and June 30, 2019 includes reversal (net of provisions) of $17 million and reversal (net of provisions) of $6 million respectively. These reversals pertain to prior periods on account of completion of audits in certain jurisdiction.

 

A reconciliation of the income tax provision to the amount computed by applying the statutory income tax rate to the income before income taxes is summarized below:

(Dollars in millions)

Particulars Three months ended June 30,
  2020 2019
Profit before income taxes  765  742
Enacted tax rates in India 34.94% 34.94%
Computed expected tax expense  267  259
Tax effect due to non-taxable income for Indian tax purposes  (72)  (82)
Overseas taxes  23  27
Tax provision (reversals)  (17)  (6)
Effect of differential tax rates  (4)  (1)
Effect of exempt non operating income  (1)  (2)
Effect of unrecognized deferred tax assets  2  2
Effect of non-deductible expenses  5  3
Branch profit tax (net of credits)  (1)  (4)
Others  (1)  –
Income tax expense  201 196

 

The applicable Indian corporate statutory tax rate for the three months ended June 30, 2020 and June 30, 2019 is 34.94% each.

 

Deferred income tax for the three months ended June 30, 2020 and June 30, 2019 substantially relates to origination and reversal of temporary differences.

 

As at June 30, 2020, claims against the Group not acknowledged as debts from the Indian Income tax authorities amounted to ₹3,372 crore ($447 million). Amount paid to statutory authorities against this amounted to ₹5,352 crore ($709 million).

 

As at March 31, 2020, claims against the Group not acknowledged as debts from the Indian Income tax authorities amounted to ₹3,353 crore ($443 million). Amount paid to statutory authorities against the above tax claims amounted to ₹5,352 crore ($707 million).

 

The claims against the group majorly represent demands arising on completion of assessment proceedings under the Income Tax Act, 1961. These claims are on account of multiple issues of disallowances such as disallowance of profits earned from STP Units and SEZ Units, disallowance of deductions in respect of employment of new employees under section 80JJAA, disallowance of expenditure towards software being held as capital in nature, payments made to Associated Enterprises held as liable for withholding of taxes.

 

These matters are pending before various Appellate Authorities and the management including its tax advisors expect that its position will likely be upheld on ultimate resolution and will not have a material adverse effect on the Group's financial position and results of operations.

 

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

 

Accounting Policy

 

Basic earnings per equity share is computed by dividing the net profit attributable to the equity holders of the company by the weighted average number of equity shares outstanding during the period. Diluted earnings per equity share is computed by dividing the net profit attributable to the equity holders of the company by the weighted average number of equity shares considered for deriving basic earnings per equity share and also the weighted average number of equity shares that could have been issued upon conversion of all dilutive potential equity shares. The dilutive potential equity shares are adjusted for the proceeds receivable had the equity shares been actually issued at fair value (i.e. the average market value of the outstanding equity shares). Dilutive potential equity shares are deemed converted as of the beginning of the period, unless issued at a later date. Dilutive potential equity shares are determined independently for each period presented.

 

The number of equity shares and potentially dilutive equity shares are adjusted retrospectively for all periods presented for any share splits and bonus shares issues including for changes effected prior to the approval of the financial statements by the Board of Directors.

 

2.15 Related party transactions

 

Refer note 2.21 "Related party transactions" in the Company’s 2020 Annual Report on Form 20-F for the full names and other details of the Company's subsidiaries and controlled trusts.

 

Changes in Subsidiaries

 

During the three months ended June 30, 2020, the following are the changes in the subsidiaries:

 

-On June 1, 2020, Fluido Oy, acquired 100% of the voting interests in Simplus U.K Ltd and Simplus Ireland Ltd. from Simplus Europe Ltd.

 

Change in key management personnel

 

The following are the changes in the key management personnel:

 

- D.N. Prahlad resigned as director of the Company effective April 20, 2020.

- Uri Levine appointed as independent director of the Company effective April 20, 2020.

 

Transactions with key management personnel

 

The table below describes the compensation to key management personnel which comprise directors and executive officers:

 

(Dollars in millions)

Particulars Three months ended June 30,
  2020 2019
Salaries and other employee benefits to whole-time directors and executive officers(1)(2)  4 5
Commission and other benefits to non-executive/ independent directors  –  –
Total  4 5

 

(1)For the three months ended June 30, 2020 and June 30, 2019, includes a charge of $2 million and $3 million respectively, towards employee stock compensation expense (Refer note 2.12).

 

(2)Does not include post-employment benefit based on actuarial valuation as this is done for the Company as a whole.

 

2.16 Segment Reporting

 

IFRS 8 establishes standards for the way that public business enterprises report information about operating segments and related disclosures about products and services, geographic areas, and major customers. The Group's operations predominantly relate to providing end-to-end business solutions to enable clients to enhance business performance. The Chief Operating Decision Maker evaluates the Group's performance and allocates resources based on an analysis of various performance indicators by business segments. Accordingly, information has been presented along business segments. The accounting principles used in the preparation of the financial statements are consistently applied to record revenue and expenditure in individual segments, and are as set out in the accounting policies.

 

Business segments of the Group are primarily enterprises in Financial Services and Insurance, enterprises in Manufacturing, enterprises in Retail, Consumer Packaged Goods and Logistics, enterprises in the Energy, Utilities, Resources and Services, enterprises in Communication, Telecom OEM and Media, enterprises in Hi-Tech, enterprises in Life Sciences and Healthcare and all other segments. The Financial services reportable segments has been aggregated to include the Financial Services operating segment and Finacle operating segment because of the similarity of the economic characteristics. All other segments represent the operating segments of businesses in India, Japan, China, Infosys Public Services & other enterprises in Public Services.

 

Revenue and identifiable operating expenses in relation to segments are categorized based on items that are individually identifiable to that segment. Revenue for 'all other segments' represents revenue generated by Infosys Public Services and revenue generated from customers located in India, Japan and China and other enterprises in public service. Allocated expenses of segments include expenses incurred for rendering services from the Group's offshore software development centers and on-site expenses, which are categorized in relation to the associated efforts of the segment. Certain expenses such as depreciation and amortization, which form a significant component of total expenses, are not specifically allocable to specific segments as the underlying assets are used interchangeably. The management believes that it is not practical to provide segment disclosures relating to those costs and expenses, and accordingly these expenses are separately disclosed as "unallocated" and adjusted against the total income of the Group.

 

Assets and liabilities used in the Group's business are not identified to any of the reportable segments, as these are used interchangeably between segments. Management believes that it is currently not practicable to provide segment disclosures relating to total assets and liabilities since a meaningful segregation of the available data is onerous.

 

Business segment revenue information is collated based on individual customers invoiced or in relation to which the revenue is otherwise recognized.

 

Disclosure of revenue by geographic locations is given in note 2.17 Revenue from operations.

 

2.16.1 Business Segments

 

Three months ended June 30, 2020 and June 30, 2019

(Dollars in millions)

  Financial Services(1) Retail(2) Communication(3) Energy, Utilities, Resources and Services Manufacturing Hi Tech Life Sciences(4) All Other segments(5)  Total
Revenues  984  447  417  399  298  272  208  96  3,121
   985  493  431  407  301  241  193  80  3,131
Identifiable operating expenses  515  210  251  205  169  149  105  61  1,665
   529  250  257  216  171  147  112  47  1,729
Allocated expenses  205  99  84  82  62  44  40  32  648
   210  95  85  87  71  41  40  32  661
Segment profit  264  138  82  112  67  79  63  3  808
   246  148  89  104  59  53  41  1  741
Unallocable expenses                  100
                   99
Operating profit                  708
                   642
Other income, net (Refer Note 2.19)                  63
                   106
Finance cost                  6
                   6
Profit before income taxes                  765
                   742
Income tax expense                  201
                   196
Net profit                  564
                   546
Depreciation and amortization                  100
                   98
Non-cash expenses other than depreciation and amortization                  –
                   1

 

(1) Financial Services include enterprises in Financial Services and Insurance

(2) Retail includes enterprises in Retail, Consumer Packaged Goods and Logistics

(3) Communication includes enterprises in Communication, Telecom OEM and Media

(4) Life Sciences includes enterprises in Life sciences and Health care

(5) Others include operating segments of businesses in India, Japan, China, Infosys Public Services & other enterprises in Public Services

 

2.16.2 Significant clients

 

No client individually accounted for more than 10% of the revenues for the three months ended June 30, 2020 and June 30, 2019, respectively.

 

2.17 Revenue from Operations

 

Accounting Policy:

 

The Group derives revenues primarily from IT services comprising software development and related services, maintenance, consulting and package implementation, licensing of software products and platforms across the Group’s core and digital offerings (together called as “software related services”) and business process management services. Contracts with customers are either on a time-and-material, unit of work, fixed-price or on a fixed-timeframe basis.

 

Revenues from customer contracts are considered for recognition and measurement when the contract has been approved by the parties, in writing, to the contract, the parties to contract are committed to perform their respective obligations under the contract, and the contract is legally enforceable. Revenue is recognized upon transfer of control of promised products or services (“performance obligations”) to customers in an amount that reflects the consideration the Group has received or expects to receive in exchange for these products or services (“transaction price”). When there is uncertainty as to collectability, revenue recognition is postponed until such uncertainty is resolved.

 

The Group assesses the services promised in a contract and identifies distinct performance obligations in the contract. The Group allocates the transaction price to each distinct performance obligation based on the relative standalone selling price. The price that is regularly charged for an item when sold separately is the best evidence of its standalone selling price. In the absence of such evidence, the primary method used to estimate standalone selling price is the expected cost plus a margin, under which the Group estimates the cost of satisfying the performance obligation and then adds an appropriate margin based on similar services.

 

The Group’s contracts may include variable consideration including rebates, volume discounts and penalties. The Group includes variable consideration as part of transaction price when there is a basis to reasonably estimate the amount of the variable consideration and when it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved.

 

Revenue on time-and-material and unit of work based contracts, are recognized as the related services are performed. Fixed price maintenance revenue is recognized ratably either on a straight-line basis when services are performed through an indefinite number of repetitive acts over a specified period or ratably using a percentage of completion method when the pattern of benefits from the services rendered to the customer and Group’s costs to fulfil the contract is not even through the period of contract because the services are generally discrete in nature and not repetitive. Revenue from other fixed-price, fixed-timeframe contracts, where the performance obligations are satisfied over time is recognized using the percentage-of-completion method. Efforts or costs expended are used to determine progress towards completion as there is a direct relationship between input and productivity. Progress towards completion is measured as the ratio of costs or efforts incurred to date (representing work performed) to the estimated total costs or efforts. Estimates of transaction price and total costs or efforts are continuously monitored over the term of the contracts and are recognized in net profit in the period when these estimates change or when the estimates are revised. Revenues and the estimated total costs or efforts are subject to revision as the contract progresses. Provisions for estimated losses, if any, on uncompleted contracts are recorded in the period in which such losses become probable based on the estimated efforts or costs to complete the contract.

 

The billing schedules agreed with customers include periodic performance based billing and / or milestone based progress billings. Revenues in excess of billing are classified as unbilled revenue while billing in excess of revenues are classified as contract liabilities (which we refer to as unearned revenues).

 

In arrangements for software development and related services and maintenance services, by applying the revenue recognition criteria for each distinct performance obligation, the arrangements with customers generally meet the criteria for considering software development and related services as distinct performance obligations. For allocating the transaction price, the Group measures the revenue in respect of each performance obligation of a contract at its relative standalone selling price. The price that is regularly charged for an item when sold separately is the best evidence of its standalone selling price. In cases where the Group is unable to determine the standalone selling price, the Group uses the expected cost plus margin approach in estimating the standalone selling price. For software development and related services, the performance obligations are satisfied as and when the services are rendered since the customer generally obtains control of the work as it progresses.

 

Revenue from licenses where the customer obtains a “right to use” the licenses is recognized at the time the license is made available to the customer. Revenue from licenses where the customer obtains a “right to access” is recognized over the access period.

 

Arrangements to deliver software products generally have three elements: license, implementation and Annual Technical Services (ATS).When implementation services are provided in conjunction with the licensing arrangement and the license and implementation have been identified as two distinct separate performance obligations, the transaction price for such contracts are allocated to each performance obligation of the contract based on their relative standalone selling prices. In the absence of standalone selling price for implementation, the Group uses the expected cost plus margin approach in estimating the standalone selling price. Where the license is required to be substantially customized as part of the implementation service the entire arrangement fee for license and implementation is considered to be a single performance obligation and the revenue is recognized using the percentage-of-completion method as the implementation is performed. Revenue from client training, support and other services arising due to the sale of software products is recognized as the performance obligations are satisfied. ATS revenue is recognized ratably on a straight line basis over the period in which the services are rendered.

 

Contracts with customers includes subcontractor services or third-party vendor equipment or software in certain integrated services arrangements. In these types of arrangements, revenue from sales of third-party vendor products or services is recorded net of costs when the Group is acting as an agent between the customer and the vendor, and gross when the Group is the principal for the transaction. In doing so, the group first evaluates whether it controls the good or service before it is transferred to the customer. The Group considers whether it has the primary obligation to fulfil the contract, inventory risk, pricing discretion and other factors to determine whether it controls the goods or service and therefore is acting as a principal or an agent.

 

The incremental costs of obtaining a contract (i.e., costs that would not have been incurred if the contract had not been obtained) are recognized as an asset if the Group expects to recover them. Any capitalized contract costs are amortized, with the expense recognised as the Group transfers the related goods or services to the customer.

 

The Group presents revenues net of indirect taxes in its consolidated Statement of Comprehensive Income.

 

Revenues for the three months ended June 30, 2020 and June 30, 2019 is as follows:

(Dollars in millions)

Particulars

Three months ended

June 30,

  2020 2019
Revenue from software services  2,904  2,953
Revenue from products and platforms  217  178
Total revenue from operations  3,121  3,131

 

The Group has evaluated the impact of COVID–19 resulting from (i) the possibility of constraints to render services which may require revision of estimations of costs to complete the contract because of additional efforts; (ii) onerous obligations; (iii) penalties relating to breaches of service level agreements, and (iv) termination or deferment of contracts by customers. The Group has concluded that the impact of COVID–19 is not material based on these estimates. Due to the nature of the pandemic, the Group continues to monitor developments to identify significant uncertainties relating to revenue in future periods.

 

Disaggregated revenue information

 

The table below presents disaggregated revenues from contracts with customers by geography and offerings for each of our business segments. The Group believes that this disaggregation best depicts how the nature, amount, timing and uncertainty of our revenues and cash flows are affected by industry, market and other economic factors.

 

Three months ended June 30, 2020 and June 30, 2019

(Dollars in millions)

Particulars Financial Services(1) Retail(2) Communication(3) Energy , Utilities, resources and Services Manufacturing Hi Tech Life Sciences(4) Others(5) Total
Revenues by Geography*                  
North America  577  287  239  226  171  257  138  23  1,918
   579  319  270  224  169  229  121  16  1,927
Europe  202  134  83  137  117  4  66  7  750
   192  142  65  143  118  6  68  5  739
India  49  1  8  –  2  9  1  20  90
   43  2  4  –  3  5  1  15  73
Rest of the world  156  25  87  36  8  2  3  46  363
   171  30  92  40  11  1  3  44  392
Total  984  447  417  399  298  272  208  96  3,121
   985  493  431  407  301  241  193  80  3,131
Revenue by offerings                  
Digital  452  213  197  174  136  114  75  28  1,389
   359  204  154  140  110  84  52  16  1,119
Core  532  234  220  225  162  158  133  68  1,732
   626  289  277  267  191  157  141  64  2,012
Total  984  447  417  399  298  272  208  96  3,121
   985  493  431  407  301  241  193  80  3,131

 

(1) Financial Services include enterprises in Financial Services and Insurance

(2) Retail includes enterprises in Retail, Consumer Packaged Goods and Logistics

(3) Communication includes enterprises in Communication, Telecom OEM and Media

(4) Life Sciences includes enterprises in Life sciences and Health care

(5) Others include operating segments of businesses in India, Japan, China, Infosys Public Services & other enterprises in Public Services

 

* Geographical revenues is based on the domicile of customer

 

Digital Services

 

Digital Services comprise of service and solution offerings of the Group that enable our clients to transform their businesses. These include offerings that enhance customer experience, leverage AI-based analytics and big data, engineer digital products and IoT, modernize legacy technology systems, migrate to cloud applications and implement advanced cyber security systems.

 

Core Services

 

Core Services comprise traditional offerings of the Group that have scaled and industrialized over a number of years. These primarily include application management services, proprietary application development services, independent validation solutions, product engineering and management, infrastructure management services, traditional enterprise application implementation, support and integration services.

 

Products & platforms

 

The Group also derives revenues from the sale of products and platforms including Finacle – core banking solution, Edge Suite of products, Infosys Nia - Artificial Intelligence (AI) platform which applies next-generation AI and machine learning, Panaya platform, Skava platform, Stater digital platform and Infosys McCamish- insurance platform.

 

Trade Receivables and Contract Balances

 

The timing of revenue recognition, billings and cash collections results in receivables, unbilled revenue, and unearned revenue on the Group’s Consolidated Balance Sheet. Amounts are billed as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals (e.g., monthly or quarterly) or upon achievement of contractual milestones.

 

The Group’s receivables are rights to consideration that are unconditional. Unbilled revenues comprising revenues in excess of billings from time and material contracts and fixed price maintenance contracts are classified as financial asset when the right to consideration is unconditional and is due only after a passage of time.

 

Invoicing to the clients for other fixed price contracts is based on milestones as defined in the contract and therefore the timing of revenue recognition is different from the timing of invoicing to the customers. Therefore unbilled revenues for other fixed price contracts (contract asset) are classified as non-financial asset because the right to consideration is dependent on completion of contractual milestones.

 

Invoicing in excess of earnings are classified as unearned revenue.

 

Trade receivables and unbilled revenues are presented net of impairment in the consolidated Balance Sheet.

 

2.18 Unbilled revenue

(Dollars in millions)

Particulars As at
  June 30, 2020 March 31, 2020
Unbilled financial asset(1)  400  369
Unbilled non financial asset(2)  549  572
Total  949  941

 

(1) Right to consideration is unconditional and is due only after a passage of time.

(2) Right to consideration is dependent on completion of contractual milestones.

 

2.19 Break-up of expenses and other income, net

 

Accounting Policy

 

2.19.1 Gratuity

 

The Group provides for gratuity, a defined benefit retirement plan ('the Gratuity Plan') covering eligible employees of Infosys and its Indian subsidiaries. The Gratuity Plan provides a lump-sum payment to vested employees at retirement, death, incapacitation or termination of employment, of an amount based on the respective employee's salary and the tenure of employment with the group.

 

Liabilities with regard to the Gratuity Plan are determined by actuarial valuation, performed by an independent actuary, at each balance sheet date using the projected unit credit method. The company fully contributes all ascertained liabilities to the Infosys Limited Employees' Gratuity Fund Trust (the Trust). In case of Infosys BPM and EdgeVerve, contributions are made to the Infosys BPM Employees' Gratuity Fund Trust and EdgeVerve Systems Limited Employees' Gratuity Fund Trust, respectively. Trustees administer contributions made to the Trusts and contributions are invested in a scheme with Life Insurance Corporation of India as permitted by law of India.

 

The Group recognizes the net obligation of a defined benefit plan in its balance sheet as an asset or liability. Gains and losses through re-measurements of the net defined benefit liability / asset are recognized in other comprehensive income and not reclassified to profit or loss in subsequent period. The actual return of the portfolio of plan assets, in excess of the yields computed by applying the discount rate used to measure the defined benefit obligation is recognized in other comprehensive income. The effect of any plan amendments are recognized in net profits in the Statement of Comprehensive Income.

 

2.19.2 Superannuation

 

Certain employees of Infosys, Infosys BPM and EdgeVerve are participants in a defined contribution plan. The Group has no further obligations to the Plan beyond its monthly contributions which are periodically contributed to a trust fund, the corpus of which is invested with the Life Insurance Corporation of India.

 

2.19.3 Provident fund

 

Eligible employees of Infosys receive benefits from a provident fund, which is a defined benefit plan. Both the eligible employee and the company make monthly contributions to the provident fund plan equal to a specified percentage of the covered employee's salary. The company contributes a portion of the contributions to the Infosys Limited Employees' Provident Fund Trust. The trust invests in specific designated instruments as permitted by Indian law. The remaining portion is contributed to the government administered pension fund. The rate at which the annual interest is payable to the beneficiaries by the trust is being administered by the government. The company has an obligation to make good the shortfall, if any, between the return from the investments of the Trust and the notified interest rate.

 

In respect of Indian subsidiaries, eligible employees receive benefits from a provident fund, which is a defined contribution plan. Both the eligible employee and the respective companies make monthly contributions to this provident fund plan equal to a specified percentage of the covered employee's salary. Amounts collected under the provident fund plan are deposited in a government administered provident fund. The companies have no further obligation to the plan beyond its monthly contributions.

 

2.19.4 Compensated absences

 

The Group has a policy on compensated absences which are both accumulating and non-accumulating in nature. The expected cost of accumulating compensated absences is determined by actuarial valuation performed by an independent actuary at each balance sheet date using projected unit credit method on the additional amount expected to be paid/availed as a result of the unused entitlement that has accumulated at the balance sheet date. Expense on non-accumulating compensated absences is recognized in the period in which the absences occur.

 

2.19.5 Other income

 

Other income is comprised primarily of interest income, dividend income, gain/loss on investment and exchange gain/loss on forward and options contracts and on translation of other assets and liabilities. Interest income is recognized using the effective interest method. Dividend income is recognized when the right to receive payment is established.

 

2.19.6 Foreign Currency

 

Transactions and translations

 

Foreign-currency denominated monetary assets and liabilities are translated into the relevant functional currency at exchange rates in effect at the Balance Sheet date. The gains or losses resulting from such translations are recognized in the Consolidated Statement of Comprehensive Income and reported within exchange gains/ (losses) on translation of assets and liabilities, net, except when deferred in Other Comprehensive Income as qualifying cash flow hedges. Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at fair value are translated at the exchange rate prevalent at the date when the fair value was determined. Non-monetary assets and non-monetary liabilities denominated in a foreign currency and measured at historical cost are translated at the exchange rate prevalent at the date of transaction. The related revenue and expense are recognised using the same exchange rate.

 

Transaction gains or losses realized upon settlement of foreign currency transactions are included in determining net profit for the period in which the transaction is settled. Revenue, expense and cash-flow items denominated in foreign currencies are translated into the relevant functional currencies using the exchange rate in effect on the date of the transaction.

 

The translation of financial statements of the foreign subsidiaries to the presentation currency is performed for assets and liabilities using the exchange rate in effect at the Balance Sheet date and for revenue, expense and cash-flow items using the average exchange rate for the respective periods. The gains or losses resulting from such translation are included in currency translation reserves under other components of equity. When a subsidiary is disposed off, in full, the relevant amount is transferred to net profit in the Statement of Comprehensive Income. However when a change in the parent's ownership does not result in loss of control of a subsidiary, such changes are recorded through equity.

 

Other Comprehensive Income, net of taxes includes translation differences on non-monetary financial assets measured at fair value at the reporting date, such as equities classified as financial instruments and measured at fair value through other comprehensive income (FVOCI).

 

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the exchange rate in effect at the Balance Sheet date.

 

2.19.7 Government grants

The Group recognizes government grants only when there is reasonable assurance that the conditions attached to them will be complied with, and the grants will be received. Government grants related to assets are treated as deferred income and are recognized in the net profit in the statement of comprehensive income on a systematic and rational basis over the useful life of the asset. Government grants related to revenue are recognized on a systematic basis in the stateme