Exhibit 99.10
Ind AS Consolidated
INDEPENDENT AUDITOR’S REPORT
TO THE BOARD OF DIRECTORS OF INFOSYS
LIMITED
Report on the Audit of the Interim
Consolidated Financial Statements
Opinion
We have audited the accompanying interim
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 Consolidated Balance Sheet as at December 31,
2019, the Consolidated Statement of Profit and Loss (including Other Comprehensive Income) for the three months and nine months
period ended on that date, the Consolidated Statement of Changes in Equity and the Consolidated Statement of Cash Flows for the
nine months period ended on that date, and a summary of the significant accounting policies and other explanatory information (hereinafter
referred to as “the interim consolidated financial statements”).
In our opinion and to the best of our
information and according to the explanations given to us, the aforesaid interim consolidated financial statements give a true
and fair view in conformity with Indian Accounting Standard 34 “Interim Financial Reporting” (“Ind AS 34”)
prescribed under section 133 of the Companies Act, 2013 (“the Act”) and other accounting principles generally accepted
in India, of the consolidated state of affairs of the Group as at December 31, 2019, the consolidated profit and consolidated total
comprehensive income for the three months and nine months period ended on that date, consolidated changes in equity and the consolidated
cash flows for the nine months period ended on that date.
Basis for Opinion
We conducted our audit of the interim
consolidated financial statements 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 the Auditor’s Responsibilities for the Audit of the Interim
Consolidated Financial Statements 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 interim consolidated financial statements under the provisions of the Act and the Rules made
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.
Key Audit Matters
Key audit matters are those matters that,
in our professional judgment, were of most significance in our audit of the interim consolidated financial statements of the current
period. These matters were addressed in the context of our audit of the interim consolidated financial statements as a whole, and
in forming our opinion thereon, and we do not provide a separate opinion on these matters. We have determined the matters described
below to be the key audit matters to be communicated in our report.
| Sr. No. |
Key Audit Matter |
Auditor’s Response |
| 1 |
Accuracy of revenues
and onerous obligations in respect of fixed price contracts involves critical estimates
Estimated effort is a critical
estimate to determine revenues and liability for onerous obligations. This estimate has a high inherent uncertainty as it requires
consideration of progress of the contract, efforts incurred till date and efforts required to complete the remaining contract performance
obligations.
Refer notes 1.5a and 2.16 to the interim
consolidated financial statements. |
Principal Audit Procedures
Our audit approach was a combination
of test of internal controls and substantive procedures which included the following:
·
Evaluated the design of internal controls relating
to recording of efforts incurred and estimation of efforts required to complete the performance obligations.
·
Tested the access and application controls pertaining
to time recording, allocation and budgeting systems which prevents unauthorised changes to recording of efforts incurred.
·
Selected a sample of contracts and through inspection
of evidence of performance of these controls, tested the operating effectiveness of the internal controls relating to efforts incurred
and estimated.
·
Selected a sample of contracts and performed a
retrospective review of efforts incurred with estimated efforts to identify significant variations and verify whether those variations
have been considered in estimating the remaining efforts to complete the contract.
·
Reviewed a sample of contracts with unbilled revenues
to identify possible delays in achieving milestones, which require change in estimated efforts to complete the remaining performance
obligations.
·
Performed analytical procedures and test of details
for reasonableness of incurred and estimated efforts
|
| 2 |
Investigation on whistle blower
complaints:
The Company received whistle-blower complaints
on September 30, 2019 and October 16, 2019, which included certain allegations relating to financial reporting including revenue
recognition relating to certain customer contracts.
The Company appointed an external law
firm to conduct an independent investigation relating to the allegations in the whistle blower complaints.
Refer note 2.22 to the interim consolidated
financial statements. |
Principal Audit Procedures
Our audit procedures in respect of the
whistle-blower allegations included the following, among others:
•
Evaluated the scope of the investigation, and
the nature and extent of the planned procedures to be performed by the independent investigation team.
•
Involved our internal forensic specialists to consider
the work performed by the investigative team including performing procedures as necessary.
•
Considered the results of the investigation, the
procedures performed by our internal forensic specialists and the additional audit procedures to ascertain the validity of the
allegations and whether any material adjustments are required to the previously issued audited financial statements. |
Emphasis of Matter
As more fully described in Note 2.22
to the interim consolidated financial statements, the Company has received letters from Indian regulatory authorities seeking information
and is under investigation by the Securities Exchange Commission of the United States of America. The scope, duration or outcome
of these matters are uncertain. Our opinion is not modified in respect of this matter.
Management Responsibilities for the Interim Consolidated
Financial Statements
Company’s Board of Directors is
responsible for the preparation and presentation of these interim 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 Ind AS 34 and other accounting principles generally
accepted in India. The respective Board 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 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 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 consolidated financial statements
by the Directors of the Company, as aforesaid
In preparing the interim consolidated
financial statements, the respective Board 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 has no realistic alternative but to do so.
The respective Board of Directors of
the companies included in the Group are also responsible for overseeing the financial reporting process of the Group.
Auditor’s Responsibilities for
the Audit of the Interim Consolidated Financial Statements
Our objectives are to obtain reasonable
assurance about whether the interim 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 consolidated financial statements.
As part of an audit in accordance with
SAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
| · | Identify and assess the
risks of material misstatement of the interim 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 such 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 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 consolidated financial statements, including the disclosures, and whether the interim 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 consolidated
financial statements. We are responsible for the direction, supervision and performance of the audit of financial statements of
such entities included in the interim consolidated financial statements of which we are independent auditors. |
Materiality is the magnitude of misstatements
in the interim consolidated financial statements that, individually or in aggregate, makes it probable that the economic decisions
of a reasonably knowledgeable user of the interim 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 consolidated financial statements.
We communicate with those charged with
governance of the Company and such other entities included in the 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.
From the matters communicated with those
charged with governance, we determine those matters that were of most significance in the audit of the interim consolidated financial
statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report
unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that
a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
For DELOITTE HASKINS & SELLS LLP
Chartered Accountants
(Firm’s Registration No. 117366W/W-100018)
P. R. RAMESH
Partner
|
(Membership No.70928) |
| Bengaluru, January 10, 2020 |
UDIN - 20070928AAAAAC7560 |
INFOSYS LIMITED AND SUBSIDIARIES
Consolidated Financial Statements under Indian
Accounting Standards (Ind AS) for the three months and nine months ended December 31, 2019
| Index |
| Consolidated Balance Sheet |
| Consolidated Statement of Profit and Loss |
| Consolidated Statement of Changes in Equity |
| Consolidated Statement of Cash Flows |
| Overview and notes to the consolidated 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 judgements |
| 1.5 Critical accounting estimates |
| 2. Notes to the consolidated financial statements |
| 2.1 Business combinations and disposal group held for sale |
| 2.2 Property, plant and equipment |
| 2.3 Goodwill and other intangible assets |
| 2.4 Investments |
| 2.5 Loans |
| 2.6 Other financial assets |
| 2.7 Trade receivables |
| 2.8 Cash and cash equivalents |
| 2.9 Other assets |
| 2.10 Financial instruments |
| 2.11 Equity |
| 2.12 Other financial liabilities |
| 2.13 Other liabilities |
| 2.14 Provisions |
| 2.15 Income taxes |
| 2.16 Revenue from operations |
| 2.17 Other income, net |
| 2.18 Expenses |
| 2.19 Leases |
| 2.20 Employee benefits |
| 2.21 Reconciliation of basic and diluted shares used in computing earnings per share |
| 2.22 Contingent liabilities and commitments(to the extent not provided for) |
| 2.23 Related party transactions |
| 2.24 Segment reporting |
| 2.25 Function wise classification of Consolidated Statement of Profit and Loss |
INFOSYS LIMITED AND SUBSIDIARIES
(In 
crore )
| Consolidated Balance Sheets as at |
Note No. |
December 31, 2019 |
March 31, 2019 |
| ASSETS |
|
|
|
| Non-current assets |
|
|
|
| Property, plant and equipment |
2.2 |
11,849 |
11,479 |
| Right-of-use assets |
2.19 |
3,854 |
– |
| Capital work-in-progress |
|
1,337 |
1,388 |
| Goodwill |
2.3.1 and 2.1 |
4,166 |
3,540 |
| Other intangible assets |
2.3.2 |
1,321 |
691 |
| Financial assets: |
|
|
|
| Investments |
2.4 |
4,241 |
4,634 |
| Loans |
2.5 |
23 |
19 |
| Other financial assets |
2.6 |
692 |
312 |
| Deferred tax assets (net) |
2.15 |
1,392 |
1,372 |
| Income tax assets (net) |
2.15 |
5,276 |
6,320 |
| Other non-current assets |
2.9 |
1,458 |
2,105 |
| Total non-current assets |
|
35,609 |
31,860 |
| Current assets |
|
|
|
| Financial assets: |
|
|
|
| Investments |
2.4 |
3,078 |
6,627 |
| Trade receivables |
2.7 |
18,055 |
14,827 |
| Cash and cash equivalents |
2.8 |
17,288 |
19,568 |
| Loans |
2.5 |
226 |
241 |
| Other financial assets |
2.6 |
5,748 |
5,505 |
| Income tax assets (net) |
2.15 |
7 |
423 |
| Other Current assets |
2.9 |
6,438 |
5,687 |
| Total current assets |
|
50,840 |
52,878 |
| Total assets |
|
86,449 |
84,738 |
| EQUITY AND LIABILITIES |
|
|
|
| Equity |
|
|
|
| Equity share capital |
2.11 |
2,122 |
2,170 |
| Other equity |
|
58,734 |
62,778 |
| Total equity attributable to equity holders of the Company |
|
60,856 |
64,948 |
| Non-controlling interests |
|
375 |
58 |
| Total equity |
|
61,231 |
65,006 |
| Liabilities |
|
|
|
| Non-current liabilities |
|
|
|
| Financial Liabilities |
|
|
|
| Lease liabilities |
2.19 |
3,575 |
– |
| Other financial liabilities |
2.12 |
789 |
147 |
| Deferred tax liabilities (net) |
2.15 |
627 |
672 |
| Other non-current liabilities |
2.13 |
224 |
275 |
| Total non-current liabilities |
|
5,215 |
1,094 |
| Current liabilities |
|
|
|
| Financial Liabilities |
|
|
|
| Trade payables |
|
1,876 |
1,655 |
| Lease liabilities |
2.19 |
568 |
– |
| Other financial liabilities |
2.12 |
10,366 |
10,452 |
| Other current liabilities |
2.13 |
5,046 |
4,388 |
| Provisions |
2.14 |
603 |
576 |
| Income tax liabilities (net) |
2.15 |
1,544 |
1,567 |
| Total current liabilities |
|
20,003 |
18,638 |
| Total equity and liabilities |
|
86,449 |
84,738 |
The accompanying notes form an integral part
of the interim 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 |
|
|
|
| |
|
|
|
|
P. R. Ramesh
Partner
|
Nandan M. Nilekani
Chairman |
Salil Parekh
Chief Executive officer and Managing Director |
U. B. Pravin Rao
Chief Operating Officer and Whole-time Director |
| |
|
|
|
| Membership No. 70928 |
|
|
|
| |
|
|
|
|
Bengaluru
January 10, 2020 |
D. Sundaram
Director |
Nilanjan Roy
Chief Financial officer |
A. G. S. Manikantha
Company Secretary |
INFOSYS LIMITED AND SUBSIDIARIES
(in crore, except equity share and
per equity share data)
| Consolidated Statement of Profit and Loss |
Note No. |
Three months ended
December 31, |
Nine months ended
December 31, |
| |
|
2019 |
2018 |
2019 |
2018 |
| Revenue from operations |
2.16 |
23,092 |
21,400 |
67,524 |
61,137 |
| Other income, net |
2.17 |
827 |
753 |
2,189 |
2,218 |
| Total income |
|
23,919 |
22,153 |
69,713 |
63,355 |
| Expenses |
|
|
|
|
|
| Employee benefit expenses |
2.18 |
12,994 |
11,622 |
37,971 |
33,242 |
| Cost of technical sub-contractors |
|
1,721 |
1,618 |
5,010 |
4,432 |
| Travel expenses |
|
617 |
625 |
2,043 |
1,830 |
| Cost of software packages and others |
2.18 |
651 |
712 |
1,947 |
1,863 |
| Communication expenses |
|
132 |
113 |
389 |
356 |
| Consultancy and professional charges |
|
362 |
354 |
996 |
948 |
| Depreciation and amortisation expenses |
2.2 and 2.3.2 |
737 |
580 |
2,144 |
1,480 |
| Finance cost |
2.19 |
42 |
– |
125 |
– |
| Other expenses |
2.18 |
814 |
946 |
2,577 |
2,725 |
| Reduction in the fair value of Disposal Group held for sale |
2.1.2 |
– |
– |
– |
270 |
| Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" |
2.1.2 |
– |
451 |
– |
451 |
| Total expenses |
|
18,070 |
17,021 |
53,202 |
47,597 |
| Profit before tax |
|
5,849 |
5,132 |
16,511 |
15,758 |
| Tax expense: |
|
|
|
|
|
| Current tax |
2.15 |
1,492 |
1,472 |
4,440 |
4,534 |
| Deferred tax |
2.15 |
(109) |
50 |
(233) |
(108) |
| Profit for the period |
|
4,466 |
3,610 |
12,304 |
11,332 |
| Other comprehensive income |
|
|
|
|
|
| Items that will not be reclassified subsequently to profit or loss |
|
|
|
|
|
| Remeasurement of the net defined benefit liability/asset. net |
2.20 and 2.15 |
(120) |
(23) |
(159) |
(19) |
| Equity instruments through other comprehensive income, net |
2.4 and 2.15 |
(36) |
57 |
(31) |
69 |
| |
|
(156) |
34 |
(190) |
50 |
| Items that will be reclassified subsequently to profit or loss |
|
|
|
|
|
| Fair value changes on derivatives designated as cash flow hedge, net |
2.10 and 2.15 |
(29) |
56 |
(36) |
36 |
| Exchange differences on translation of foreign operations |
|
151 |
(288) |
141 |
133 |
| Fair value changes on investments, net |
2.4 and 2.15 |
(11) |
37 |
7 |
(23) |
| |
|
111 |
(195) |
112 |
146 |
| Total other comprehensive income /(loss), net of tax |
|
(45) |
(161) |
(78) |
196 |
| Total comprehensive income for the period |
|
4,421 |
3,449 |
12,226 |
11,528 |
| Profit attributable to: |
|
|
|
|
|
| Owners of the Company |
|
4,457 |
3,609 |
12,273 |
11,330 |
| Non-controlling interests |
|
9 |
1 |
31 |
2 |
| |
|
4,466 |
3,610 |
12,304 |
11,332 |
| Total comprehensive income attributable to: |
|
|
|
|
|
| Owners of the Company |
|
4,406 |
3,448 |
12,187 |
11,526 |
| Non-controlling interests |
|
15 |
1 |
39 |
2 |
| |
|
4,421 |
3,449 |
12,226 |
11,528 |
| Earnings per Equity share |
|
|
|
|
|
| Equity shares of par value 5/- each |
|
|
|
|
|
| Basic () |
|
10.51 |
8.30 |
28.79 |
26.06 |
| Diluted () |
|
10.50 |
8.29 |
28.74 |
26.03 |
| Weighted average equity shares used in computing earnings per equity share |
2.21 |
|
|
|
|
| Basic |
|
4,23,96,07,543 |
4,34,76,73,466 |
4,26,35,69,478 |
4,34,71,30,342 |
| Diluted |
|
4,24,57,16,437 |
4,35,27,31,387 |
4,27,05,09,294 |
4,35,27,05,150 |
The accompanying notes form an integral part
of the interim 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 |
|
|
|
| |
|
|
|
|
P. R. Ramesh
Partner
|
Nandan M. Nilekani
Chairman |
Salil Parekh
Chief Executive officer and Managing Director |
U. B. Pravin Rao
Chief Operating Officer and Whole-time Director |
| |
|
|
|
| Membership No. 70928 |
|
|
|
| |
|
|
|
|
Bengaluru
January 10, 2020 |
D. Sundaram
Director |
Nilanjan Roy
Chief Financial officer |
A. G. S. Manikantha
Company Secretary |
INFOSYS LIMITED AND SUBSIDIARIES
Consolidated Statement of Changes in Equity
(In crore )
| Particulars |
|
OTHER EQUITY |
|
|
|
| |
|
RESERVES & SURPLUS |
Other comprehensive income |
|
|
|
| |
Equity Share capital (1) |
Securities Premium |
Retained earnings |
Capital reserve |
General reserve |
Share Options Outstanding Account |
Special Economic Zone Re-investment reserve (2) |
Other reserves(3) |
Capital redemption reserve |
Equity instruments through other comprehensive income |
Exchange differences on translating the financial statements of a foreign operation |
Effective portion of Cash Flow Hedges |
Other items of other comprehensive income / (loss) |
Total equity attributable to equity holders of the Company |
Non-controlling interest |
Total equity |
| Balance as at April 1, 2018 |
1,088 |
36 |
58,477 |
54 |
2,725 |
130 |
1,583 |
5 |
56 |
2 |
779 |
– |
(12) |
64,923 |
1 |
64,924 |
| Changes in equity for the nine months ended December 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Profit for the period |
– |
– |
11,330 |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
11,330 |
2 |
11,332 |
| Remeasurement of the net defined benefit liability/asset* (refer note no. 2.20.1 and 2.15) |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
(19) |
(19) |
– |
(19) |
| Equity instruments through other comprehensive income* (refer to note no.2.4) |
– |
– |
– |
– |
- |
– |
– |
– |
– |
69 |
– |
– |
– |
69 |
– |
69 |
| Fair value changes on derivatives designated as cash flow hedge*(refer note no. 2.10) |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
36 |
– |
36 |
– |
36 |
| Exchange differences on translation of foreign operations |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
133 |
– |
– |
133 |
– |
133 |
| Fair value changes on investments* (refer to note no.2.4) |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
(23) |
(23) |
– |
(23) |
| Total Comprehensive income for the period |
– |
– |
11,330 |
– |
– |
– |
– |
– |
– |
69 |
133 |
36 |
(42) |
11,526 |
2 |
11,528 |
| Share based payments to employees (Refer to note 2.11) |
– |
– |
– |
– |
– |
139 |
– |
– |
– |
– |
– |
– |
– |
139 |
– |
139 |
| Dividends (including dividend distribution tax) |
– |
– |
(11,614) |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
(11,614) |
– |
(11,614) |
Non-controlling interests on acquisition
of subsidiary (refer to note no.2.11) |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
51 |
51 |
| Exercise of stock options (refer to note no: 2.11) |
– |
62 |
– |
– |
– |
(62) |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
| Transfer on account of options not exercised |
– |
– |
– |
– |
1 |
(1) |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
| Income tax benefit arising on exercise of stock options |
– |
3 |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
3 |
– |
3 |
| Transfer to general reserve |
– |
– |
(1,615) |
– |
1,615 |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
| Amount transferred to other reserves |
– |
– |
(1) |
– |
– |
– |
– |
1 |
– |
– |
– |
– |
– |
– |
– |
– |
Shares issued on exercise of employee stock options -
after bonus issue (Refer to note 2.11) |
– |
6 |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
6 |
– |
6 |
| Transferred to Special Economic Zone Re-investment reserve |
– |
– |
(1,706) |
– |
– |
– |
1,706 |
– |
– |
– |
– |
– |
– |
– |
– |
– |
| Transferred from Special Economic Zone Re-investment reserve on utilization |
– |
– |
716 |
– |
– |
– |
(716) |
– |
– |
– |
– |
– |
– |
– |
– |
– |
| Increase in Equity share capital on account of bonus issue (refer to note no: 2.11) |
1,088 |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
1,088 |
– |
1,088 |
| Amounts utilized for bonus issue (Refer to note 2.11) |
– |
– |
– |
– |
(1,088) |
– |
– |
– |
– |
– |
– |
– |
– |
(1,088) |
– |
(1,088) |
| Balance as at December 31, 2018 |
2,176 |
107 |
55,587 |
54 |
3,253 |
206 |
2,573 |
6 |
56 |
71 |
912 |
36 |
(54) |
64,983 |
54 |
65,037 |
Consolidated Statement of Changes in Equity
(contd.)
(In crore)
| Particulars |
|
OTHER EQUITY |
|
|
|
| |
|
RESERVES & SURPLUS |
Other comprehensive income |
|
|
|
| |
Equity Share capital (1) |
Securities Premium |
Retained earnings |
Capital reserve |
General reserve |
Share Options Outstanding Account |
Special Economic Zone Re-investment reserve (2) |
Other reserves(3) |
Capital redemption reserve |
Equity instruments through Other comprehensive income |
Exchange differences on translating the financial statements of a foreign operation |
Effective portion of Cash Flow Hedges |
Other items of other comprehensive income / (loss) |
Total equity attributable to equity holders of the Company |
Non-controlling interest |
Total equity |
| Balance as at April 1, 2019 |
2,170 |
149 |
57,566 |
54 |
1,242 |
227 |
2,570 |
6 |
61 |
72 |
842 |
21 |
(32) |
64,948 |
58 |
65,006 |
| Impact on account of adoption of Ind AS 116 (Refer to note 2.19)* |
– |
– |
(40) |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
(40) |
– |
(40) |
| |
2,170 |
149 |
57,526 |
54 |
1,242 |
227 |
2,570 |
6 |
61 |
72 |
842 |
21 |
(32) |
64,908 |
58 |
64,966 |
| Changes in equity for the nine months ended December 31, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Profit for the period |
– |
– |
12,273 |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
12,273 |
31 |
12,304 |
| Remeasurement of the net defined benefit liability/asset* (refer note no. 2.20.1 and 2.15) |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
(159) |
(159) |
– |
(159) |
| Equity instruments through other comprehensive income* (refer to note no.2.4) |
– |
– |
– |
– |
– |
– |
– |
– |
– |
(31) |
– |
– |
– |
(31) |
– |
(31) |
| Fair value changes on derivatives designated as cash flow hedge* (refer note no. 2.10) |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
(36) |
– |
(36) |
– |
(36) |
| Exchange differences on translation of foreign operations |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
133 |
– |
– |
133 |
8 |
141 |
| Fair value changes on investments* (refer to note no.2.4) |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
7 |
7 |
– |
7 |
| Total Comprehensive income for the period |
– |
– |
12,273 |
– |
– |
– |
– |
– |
– |
(31) |
133 |
(36) |
(152) |
12,187 |
39 |
12,226 |
| Shares issued on exercise of employee stock options (Refer to note 2.11) |
1 |
2 |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
3 |
– |
3 |
| Buyback of equity shares (Refer to note 2.11 & 2.12) |
(49) |
– |
(4,717) |
– |
(1,494) |
– |
– |
– |
– |
– |
– |
– |
– |
(6,260) |
– |
(6,260) |
| Transaction costs relating to buyback * (Refer to note 2.11) |
– |
– |
– |
– |
(11) |
– |
– |
– |
– |
– |
– |
– |
– |
(11) |
– |
(11) |
| Amount transferred to capital redemption reserve upon buyback ( Refer to note 2.11) |
– |
– |
– |
– |
(50) |
– |
– |
– |
50 |
– |
– |
– |
– |
– |
– |
– |
| Employee stock compensation expense (refer to note 2.11) |
– |
– |
– |
– |
– |
179 |
– |
– |
– |
– |
– |
– |
– |
179 |
– |
179 |
| Exercise of stock options (refer to note no. 2.11) |
– |
88 |
– |
– |
– |
(88) |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
| Effect of modification of equity settled share based payment awards to cash settled awards (Refer to note 2.11) |
– |
– |
(9) |
– |
– |
(32) |
– |
– |
– |
– |
– |
– |
– |
(41) |
– |
(41) |
| Income tax benefit arising on exercise of stock options |
– |
6 |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
6 |
– |
6 |
| Financial liability under option arrangements (refer to note 2.1) |
– |
– |
(598) |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
(598) |
– |
(598) |
| Dividends paid to non controlling interest of subsidiary |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
(33) |
(33) |
| Amount transferred to other reserves |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
| Dividends (including dividend distribution tax) |
– |
– |
(9,517) |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
(9,517) |
– |
(9,517) |
| Non-controlling interests on acquisition of subsidiary (refer to note no.2.11) |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
311 |
311 |
| Transfer to general reserve |
– |
– |
(1,470) |
– |
1,470 |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
– |
| Transferred to Special Economic Zone Re-investment reserve |
– |
– |
(2,048) |
– |
– |
– |
2,048 |
– |
– |
– |
– |
– |
– |
– |
– |
– |
| Transferred from Special Economic Zone Re-investment reserve on utilization |
– |
– |
812 |
– |
– |
– |
(812) |
– |
– |
– |
– |
– |
– |
– |
– |
– |
| Balance as at December 31, 2019 |
2,122 |
245 |
52,252 |
54 |
1,157 |
286 |
3,806 |
6 |
111 |
41 |
975 |
(15) |
(184) |
60,856 |
375 |
61,231 |
* Net of tax
| (1) | | Net of treasury shares |
| (2) | | The Special Economic Zone Re-investment Reserve has been created out of the profit
of eligible SEZ units 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 the terms of the Sec 10AA(2) of the Income
Tax Act, 1961. |
| (3) | | Under the Swiss Code of Obligation, few subsidiaries of Infosys Lodestone are required
to appropriate a certain percentage of the annual profit to legal reserve which may be used only to cover losses or for measures
designed to sustain the Company through difficult times, to prevent unemployment or to mitigate its consequences. |
The accompanying notes form an integral part
of the interim 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 |
|
|
|
| |
|
|
|
|
P. R. Ramesh
Partner
|
Nandan M. Nilekani
Chairman |
Salil Parekh
Chief Executive officer and Managing Director |
U. B. Pravin Rao
Chief Operating Officer and Whole-time Director |
| |
|
|
|
| Membership No. 70928 |
|
|
|
| |
|
|
|
|
Bengaluru
January 10, 2020 |
D. Sundaram
Director |
Nilanjan Roy
Chief Financial officer |
A. G. S. Manikantha
Company Secretary |
INFOSYS LIMITED AND SUBSIDIARIES
Consolidated Statement 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.
(In crore)
| Particulars |
Note No. |
Nine months ended
December 31, |
| |
|
2019 |
2018 |
| Cash flow from operating activities |
|
|
|
| Profit for the period |
|
12,304 |
11,332 |
| Adjustments to reconcile net profit to net cash provided by operating activities: |
|
|
|
| Income tax expense |
2.15 |
4,207 |
4,426 |
| Depreciation and amortization |
2.2 and 2.3.2 |
2,144 |
1,480 |
| Interest and dividend income |
|
(1,220) |
(1,553) |
| Finance cost |
2.19 |
125 |
– |
| Impairment loss recognized / (reversed) under expected credit loss model |
|
89 |
224 |
| Exchange differences on translation of assets and liabilities |
|
113 |
71 |
| Reduction in the fair value of Disposal Group held for sale |
2.1.2 |
– |
270 |
| Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" |
2.1.2 |
– |
451 |
| Stock compensation expense |
2.11 |
183 |
143 |
| Other adjustments |
|
(170) |
(151) |
| Changes in assets and liabilities |
|
|
|
| Trade receivables and unbilled revenue |
|
(2,848) |
(2,325) |
| Loans, other financial assets and other assets |
|
198 |
(852) |
| Trade payables |
|
(1,329) |
782 |
| Other financial liabilities, other liabilities and provisions |
|
2,000 |
1,941 |
| Cash generated from operations |
|
15,796 |
16,239 |
| Income taxes paid |
|
(2,964) |
(5,259) |
| Net cash generated by operating activities |
|
12,832 |
10,980 |
| Cash flows from investing activities |
|
|
|
| Expenditure on property, plant and equipment |
|
(2,638) |
(1,631) |
| Loans to employees |
|
– |
17 |
| Deposits placed with corporation |
|
(53) |
1 |
| Interest and dividend received |
|
1,052 |
1,202 |
| Payment towards acquisition of business, net of cash acquired |
|
(511) |
(521) |
| Payment of contingent consideration pertaining to acquisition of business |
|
– |
(6) |
| Redemption of escrow pertaining to Buyback |
2.6 |
257 |
– |
| Other receipts |
|
35 |
– |
| Payments to acquire Investments |
|
|
|
| Preference, equity securities and others |
|
(41) |
(21) |
| Tax free bonds and government bonds |
|
(19) |
(17) |
| Liquid mutual funds and fixed maturity plan securities |
|
(26,620) |
(58,478) |
| Non convertible debentures |
|
(785) |
– |
| Government securities |
|
(1,561) |
– |
| Certificates of deposit |
|
– |
(1,775) |
| Others |
|
(18) |
(16) |
| Proceeds on sale of financial assets |
|
|
|
| Tax free bonds and government bonds |
|
18 |
1 |
| Non-convertible debentures |
|
1,683 |
342 |
| Government securities |
|
1,406 |
– |
| Commercial paper |
|
500 |
300 |
| Certificates of deposit |
|
2,545 |
1,350 |
| Liquid mutual funds and fixed maturity plan securities |
|
27,085 |
56,482 |
| Preference and equity securities |
|
3 |
5 |
| Others |
|
10 |
– |
| Net cash (used in)/from in investing activities |
|
2,348 |
(2,765) |
| Cash flows from financing activities: |
|
|
|
| Payment of lease liabilities |
2.19 |
(431) |
– |
| Payment of dividends (including dividend distribution tax) |
|
(9,515) |
(11,608) |
| Payment of dividend to non-controlling interest of subsidiary |
|
(33) |
– |
| Shares issued on exercise of employee stock options |
|
4 |
6 |
| Buyback of equity shares including transaction cost |
|
(7,478) |
– |
| Net cash used in financing activities |
|
(17,453) |
(11,602) |
| Net increase / (decrease) in cash and cash equivalents |
|
(2,273) |
(3,387) |
| Cash and cash equivalents at the beginning of the period |
2.8 |
19,568 |
19,871 |
| Effect of exchange rate changes on cash and cash equivalents |
|
(7) |
(36) |
| Cash and cash equivalents at the end of the period |
2.8 |
17,288 |
16,448 |
| Supplementary information: |
|
|
|
| Restricted cash balance |
2.8 |
367 |
351 |
The accompanying notes form an integral part
of the interim 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 |
|
|
|
| |
|
|
|
|
P. R. Ramesh
Partner
|
Nandan M. Nilekani
Chairman |
Salil Parekh
Chief Executive officer and Managing Director |
U. B. Pravin Rao
Chief Operating Officer and Whole-time Director |
| |
|
|
|
| Membership No. 70928 |
|
|
|
| |
|
|
|
|
Bengaluru
January 10, 2020 |
D. Sundaram
Director |
Nilanjan Roy
Chief Financial officer |
A. G. S. Manikantha
Company Secretary |
INFOSYS LIMITED AND SUBSIDIARIES
Notes to the interim consolidated financial
statements
1. Overview
1.1 Company overview
Infosys Limited ('the Company' or Infosys) is
a leading provider of consulting, technology, outsourcing and next-generation digital services, enabling clients to execute strategies
for their digital transformation. Infosys strategic objective is to build a sustainable organization that remains relevant to the
agenda of clients, while creating growth opportunities for employees and generating profitable returns for investors. Infosys strategy
is to be a navigator for our clients as they ideate, plan and execute on their journey to a digital future.
Infosys together with its subsidiaries and controlled
trusts is hereinafter referred to as 'the Group'.
The Company is a public limited company incorporated
and domiciled in India and has its registered office at Electronics city, Hosur Road, Bengaluru 560100, Karnataka, India. The Company
has its primary listings on the BSE Ltd. and National Stock Exchange of India Limited. The Company’s American Depositary
Shares (ADS) representing equity shares are listed on the New York Stock Exchange (NYSE).
The Group's consolidated financial statements
are approved for issue by the Company's Board of Directors on January 10, 2020.
1.2 Basis of preparation of financial statements
These consolidated financial statements are
prepared in accordance with Indian Accounting Standards (Ind AS), under the historical cost convention on the accrual basis except
for certain financial instruments which are measured at fair values, the provisions of the Companies Act, 2013 ('the Act') (to
the extent notified) and guidelines issued by the Securities and Exchange Board of India (SEBI). The Ind AS are prescribed under
Section 133 of the Act read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and relevant amendment
rules issued thereafter.
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.
As the quarter and year-to-date figures are
taken from the source and rounded to the nearest digits, the quarter figures in this statement added up to the figures reported
for the previous quarters might not always add up to the year-to-date figures reported in this statement.
1.3 Basis of consolidation
Infosys consolidates entities which it owns
or controls. The interim consolidated financial statements comprise the financial statements of the Company, its controlled trusts
and its subsidiaries, as disclosed in Note no. 2.23. 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. These 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 judgements
The preparation of the financial statements
in conformity with Ind AS requires the management to make estimates, judgements and assumptions. These estimates, judgements 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 judgements
and the use of assumptions in these financial statements have been disclosed in Note no. 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 consolidated
financial statements.
1.5 Critical accounting estimates and judgments
a. Revenue recognition
The group uses the percentage-of-completion
method in accounting for its fixed-price contracts. Use of the percentage-of-completion method requires the group to estimate the
efforts or costs expended to date as a proportion of the total efforts or costs to be expended. Efforts or costs expended have
been used to measure progress towards completion as there is a direct relationship between input and productivity.
Further, the Group uses significant judgements
while determining the transaction price allocated to performance obligations using the expected cost plus margin approach.
Provisions for estimated losses, if any, on
uncompleted contracts are recorded in the period in which such losses become probable based on the expected contract estimates
at the reporting date.
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 judgements are involved
in determining the provision for income taxes, including amount expected to be paid/recovered for uncertain tax positions. Also
refer to Note no. 2.15 and 2.22
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.
c. Business combinations and intangible assets
Business combinations are accounted for using
Ind AS 103, Business Combinations. Ind AS 103 requires the identifiable intangible assets and contingent consideration to be fair
valued in order to ascertain the net fair value of identifiable assets, liabilities and contingent liabilities of the acquiree.
Significant 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 (Refer to Note no 2.1 and 2.3.2)
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 to Note no 2.2).
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 based on a number of factors including operating results, business plans, future cash flows and economic conditions. The
recoverable amount of CGUs is determined based on higher of value-in-use and fair value less cost to sell. The goodwill impairment
test is performed at the level of the CGU or groups of cash-generating units which are benefiting from the synergies of the acquisition
and which represents the lowest level at which goodwill is monitored for internal management purposes.
Market related information and estimates are
used to determine the recoverable amount. Key assumptions on which management has based its determination of recoverable amount
include estimated long term growth rates, weighted average cost of capital and estimated operating margins. Cash flow projections
take into account past experience and represent management’s best estimate about future developments (Refer to Note no 2.3.1)
f. Non-current assets and Disposal Group
held for sale
Assets and liabilities of Disposal Groups held
for sale are measured at the lower of carrying amount and fair value less costs to sell. The determination of fair value less costs
to sell includes use of management estimates and assumptions. The fair value of the Disposal Groups have been estimated using valuation
techniques including income and market approach which includes unobservable inputs.
Non-current assets and Disposal Group that ceases
to be classified as held for sale shall be measured at the lower of carrying amount before the Non-current asset and Disposal Group
was classified as held for sale adjusted for any depreciation/ amortization and its recoverable amount at the date when the Disposal
Group no longer meets the " Held for sale" criteria. Recoverable amounts of assets reclassified from held for sale have
been estimated using management’s assumptions which consist of significant unobservable inputs (Refer to Note no 2.1.2).
g. Leases
Ind AS 116 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. (Refer to Note no. 2.19)
2.1 BUSINESS COMBINATIONS AND DISPOSAL GROUP
HELD FOR SALE
2.1.1 Business combinations
Accounting policy
Business combinations have been accounted for
using the acquisition method under the provisions of Ind AS 103, 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.
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.
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.
Business combinations between entities under
common control is accounted for at carrying value of the assets and liabilities in the Group's consolidated financial statements.
Transaction costs that the Group incurs in connection
with a business combination such as finder’s fees, legal fees, due diligence fees, and other professional and consulting
fees are expensed as incurred.
Wongdoody Holding Company Inc
On May 22, 2018, Infosys acquired 100% of the
voting interests in WongDoody Holding Company Inc., (WongDoody) an US-based, full-service creative and consumer insights agency.
The business acquisition was conducted by entering into a share purchase agreement for a total consideration of up to $75 million
(approximately 514 crore on acquisition date), which includes a cash consideration of $38 million (approximately 261
crore), contingent consideration of up to $28 million (approximately 192 crore on acquisition date) and an additional consideration
of up to $9 million (approximately 61 crore on acquisition date), referred to as retention bonus, payable to the employees
of WongDoody over the next three years, subject to their continuous employment with the group.
WongDoody, brings to Infosys the creative talent
and marketing and brand engagement expertise. Further the acquisition is expected to strengthen Infosys’ creative, branding
and customer experience capabilities to bring innovative thinking, talent and creativity to clients.
The purchase price has been allocated based
on management’s estimates and independent appraisal of fair values as follows:
(in crore)
| Component |
Acquiree's carrying amount |
Fair value adjustments |
Purchase price allocated |
| Net assets(*) |
37 |
– |
37 |
| Intangible assets - customer relationships |
– |
132 |
132 |
| Intangible assets - trade name |
– |
8 |
8 |
| |
37 |
140 |
177 |
| Goodwill |
|
|
173 |
| Total purchase price |
|
|
350 |
* Includes cash and cash equivalents acquired
of 51 crore.
Goodwill is tax deductible
The fair value of each major class of consideration
as at the acquisition date is as follows:
(in crore)
| Component |
Consideration settled |
| Cash consideration |
261 |
| Fair value of contingent consideration |
89 |
| Total purchase price |
350 |
The gross amount of trade receivables acquired
and its fair value is 12 crore and the amount has been fully collected.
The payment of contingent consideration to sellers
of WongDoody is dependent upon the achievement of certain financial targets by WongDoody. At the acquisition date, the key inputs
used in determination of the fair value of contingent consideration are the discount rate of 16% and the probabilities of achievement
of the financial targets. The undiscounted value of contingent consideration as at December 31, 2019 is $17 million (125
crore).
The transaction costs of 3 crore related
to the acquisition have been included in the statement of profit and loss for the year ended March 31, 2019.
Infosys Compaz Pte Limited (formerly Trusted
Source Pte Ltd)
On November 16, 2018, Infosys Consulting Pte
Limited (a wholly owned subsidiary of Infosys Limited) acquired 60% stake in Infosys Compaz Pte. Ltd, a Singapore based IT services
company. The business acquisition was conducted by entering into a share purchase agreement for a total consideration of up to
SGD 17 million (approximately 91 crore on acquisition date), which includes a cash consideration of SGD 10 million (approximately
54 crore) and a contingent consideration of up to SGD 7 million (approximately 37 crore on acquisition date).
The purchase price has been allocated based
on management’s estimates and independent appraisal of fair values as follows:
(in crore)
| Component |
Acquiree's carrying amount |
Fair value adjustments |
Purchase price allocated |
| Net assets(*) |
92 |
– |
92 |
| Intangible assets - Customer contracts and relationships |
– |
44 |
44 |
| Deferred tax liabilities on intangible assets |
– |
(7) |
(7) |
| |
92 |
37 |
129 |
| Non-controlling interests |
|
|
(51) |
| Total purchase price |
|
|
78 |
* Includes cash and cash equivalents acquired
of 65 crore.
The fair value of each major class of consideration
as at the acquisition date is as follows:
(in crore)
| Component |
Consideration settled |
| Cash consideration |
54 |
| Fair value of contingent consideration |
24 |
| Total purchase price |
78 |
The gross amount of trade receivables acquired
and its fair value is 50 crore and the amount has been substantially collected.
The payment of contingent consideration to sellers
of Infosys Compaz Pte. Ltd is dependent upon the achievement of certain revenue targets by Infosys Compaz Pte. Ltd. At the acquisition
date, the key inputs used in determination of the fair value of contingent consideration are the discount rate of 9% and the probabilities
of achievement of the financial targets. The undiscounted value of contingent consideration as at December 31, 2019 is SGD 7 million
(37 crore).
The transaction costs of 3 crore related
to the acquisition have been included in the statement of profit and loss for the year ended March 31, 2019.
Fluido Oy
On October 11, 2018, Infosys Consulting Pte
Limited (a wholly owned subsidiary of Infosys Limited) acquired 100% of voting interests in Fluido Oy (Fluido), a Nordic-based
salesforce advisor and consulting partner in cloud consulting, implementation and training services for a total consideration of
upto Euro 65 million (approximately 560 crore), comprising of cash consideration of Euro 45 million (approximately 388
crore), contingent consideration of upto Euro 12 million (approximately 103 crore) and retention payouts of upto Euro 8
million (approximately 69 crore), payable to the employees of Fluido over the next three years, subject to their continuous
employment with the group.
Fluido brings to Infosys the Salesforce expertise,
alongside an agile delivery process that simplifies and scales digital efforts across channels and touchpoints. Further, Fluido
strengthens Infosys’ presence across the Nordics region with developed assets and client relationships. The excess of the
purchase consideration paid over the fair value of assets acquired has been attributed to goodwill.
The purchase price has been allocated based
on management’s estimates and independent appraisal of fair values as follows:
(in crore)
| Component |
Acquiree's carrying amount |
Fair value adjustments |
Purchase price allocated |
| Net assets(*) |
12 |
– |
12 |
| Intangible assets - Customer contracts and relationships |
– |
158 |
158 |
| Intangible assets - Salesforce Relationships |
– |
62 |
62 |
| Intangible assets - Brand |
– |
28 |
28 |
| Deferred tax liabilities on intangible assets |
– |
(52) |
(52) |
| |
12 |
196 |
208 |
| Goodwill |
|
|
240 |
| Total purchase price |
|
|
448 |
* Includes cash and cash equivalents acquired
of 28 crore.
Goodwill is not tax deductible
The fair value of each major class of consideration
as of the acquisition date is as follows:
(in crore)
| Component |
Consideration settled |
| Cash consideration |
388 |
| Fair value of contingent consideration |
60 |
| Total purchase price |
448 |
The gross amount of trade receivables acquired
and its fair value is 27 crore and the amount has been fully collected.
The payment of contingent consideration to sellers
of Fluido is dependent upon the achievement of certain financial targets by Fluido. At the acquisition date, the key inputs used
in determination of the fair value of contingent consideration are the discount rate of 16% and the probabilities of achievement
of the financial targets. The undiscounted value of contingent consideration as at December 31, 2019 was EUR 8 million (64
crore).
The transaction costs of 5 crore related
to the acquisition have been included in the Consolidated Statement of Profit and Loss for the year ended March 31, 2019
HIPUS Co., Ltd (formerly, Hitachi Procurement
Service Co. Ltd)
On April 1, 2019, Infosys Consulting Pte Limited
(a wholly owned subsidiary of Infosys Limited) acquired 81% of voting interests in HIPUS Co., Limited, a wholly owned subsidiary
of Hitachi Ltd, Japan for a total cash consideration of JPY 3.29 billion (approximately 206 crore). The company has recorded
a financial liability for the estimated present value of its gross obligation to purchase the Non-controlling interest as of the
acquisition date in accordance with the share purchase agreement with a corresponding adjustment to equity (refer to note 2.12).
HIPUS handles indirect materials purchasing
functions for the Hitachi Group. The entity is expected to provide end-to-end procurement capabilities, through its procurement
function expertise, localized team and BPM networks in Japan. The excess of the purchase consideration paid over the fair value
of assets acquired has been attributed to goodwill.
The purchase price has been allocated based
on management’s estimates and independent appraisal of fair values as follows:
(in crore)
| Component |
Acquiree's carrying amount |
Fair value adjustments |
Purchase price allocated |
| Net assets(*) |
41 |
– |
41 |
| Intangible assets - Customer contracts and relationships |
– |
116 |
116 |
| Deferred tax liabilities on intangible assets |
– |
(36) |
(36) |
| |
41 |
80 |
121 |
| Goodwill |
|
|
108 |
| Less: Non-controlling Interest |
|
|
(23) |
| Total purchase price |
|
|
206 |
* Includes cash and cash equivalents acquired
of 179 crore.
Goodwill is not tax deductible
The gross amount of trade receivables acquired
and its fair value is 1,400 crore and the amount has been fully collected. Trade payables as on the acquisition date amounted
to 1,508 crore.
The transaction costs of 8 crore related
to the acquisition have been included under administrative expenses in the statement of comprehensive income for the year ended
March 31, 2019.
Stater N.V.
On May 23, 2019, Infosys Consulting Pte Limited
(a wholly owned subsidiary of Infosys Limited) acquired 75% of voting interests in Stater N.V (Stater), a wholly-owned subsidiary
of ABN AMRO Bank N.V., Netherland, for a total cash consideration of Euro 154 million (approximately 1,195 crore). The company
has recorded a financial liability for the estimated present value of its gross obligation to purchase the Non-controlling interest
as of the acquisition date in accordance with the share purchase agreement with a corresponding adjustment to equity (refer to
note 2.12)
Stater brings European mortgage expertise and
a robust digital platform to drive superior customer experience. The excess of the purchase consideration paid over the fair value
of assets acquired has been attributed to goodwill.
The purchase price has been allocated based
on management’s estimates and independent appraisal of fair values as follows:
(in crore)
| Component |
Acquiree's carrying amount |
Fair value adjustments |
Purchase price allocated |
| Net assets(*) |
541 |
– |
541 |
| Intangible assets - Customer contracts and relationships |
– |
549 |
549 |
| Intangible assets - Technology |
– |
110 |
110 |
| Intangible assets - Brand |
– |
24 |
24 |
| Deferred tax liabilities on intangible assets |
– |
(140) |
(140) |
| |
541 |
543 |
1,084 |
| Goodwill |
|
|
399 |
| Less: Non controlling interest |
|
|
(288) |
| Total purchase price |
|
|
1,195 |
* Includes cash and cash equivalents acquired
of 505 crore.
Goodwill is not tax deductible
The gross amount of trade receivables acquired
and its fair value is 78 crore and the amount is substantially collected.
The transaction costs of 5 crore related
to the acquisition have been included under administrative expenses in the statement of comprehensive income for the nine months
ended December 31, 2019.
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.
2.1.2. Disposal group held for sale
Accounting policy
Non-current assets and Disposal Group are classified
as held for sale if their carrying amount is intended to be recovered principally through sale rather than through continuing use.
The condition for classification of held for sale is met when the non-current asset or the Disposal Group is available for immediate
sale and the same is highly probable of being completed within one year from the date of classification as held for sale. Non-current
assets and Disposal Group held for sale are measured at the lower of carrying amount and fair value less cost to sell. Non-current
assets and Disposal Group that ceases to be classified as held for sale shall be measured at the lower of carrying amount before
the non-current asset and Disposal Group was classified as held for sale adjusted for any depreciation/ amortization and its recoverable
amount at the date when the Disposal Group no longer meets the "Held for sale" criteria.
In the three months ended March 2018, the Company
had initiated identification and evaluation of potential buyers for its subsidiaries, Kallidus and Skava (together referred to
as "Skava”) and Panaya, collectively referred to as the “Disposal Group”. The Disposal Group was classified
and presented separately as “held for sale” and was carried at the lower of carrying value and fair value. During the
three months ended June 30, 2018, on remeasurement, including consideration of progress in negotiations on offers from prospective
buyers for Panaya, the Company has recorded a reduction in the fair value of Disposal Group held for sale amounting to 270
crore in respect of Panaya.
During the three months ended December 31, 2018,
based on evaluation of proposals received and progress of negotiations with potential buyers, the Company concluded that the Disposal
Group does not meet the criteria for “Held for Sale’ classification because it is no longer highly probable that sale
would be consummated by March 31, 2019 ( twelve months from date of initial classification as “held for sale”). Accordingly,
in accordance with Ind AS 105 -" Non current Assets held for Sale and Discontinued Operations", the assets and liabilities
of Panaya and Skava have been included on a line by line basis in the consolidated financial statements as at March 31, 2019.
On reclassification from “Held for sale”,
the assets of Panaya and Skava have been remeasured at the lower of cost and recoverable amount resulting in recognition of an
adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" of
451 crore (comprising of 358 crore towards goodwill and 93 crore towards value of customer relationships)
in respect of Skava in the consolidated statement of profit and loss for the three months and nine months ended December 31, 2018.
2.2 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:
| Buildings (1) |
22-25 years |
| Plant and machinery (1)(2) |
5 years |
| Office equipment |
5 years |
| Computer equipment (1) |
3-5 years |
| Furniture and fixtures (1) |
5 years |
| Vehicles(1) |
5 years |
| Leasehold improvements |
Over lease term |
| (1) | | Based on technical evaluation, the management believes that the useful lives as
given above best represent the period over which management expects to use these assets. Hence, the useful lives for these assets
is different from the useful lives as prescribed under Part C of Schedule II of the Companies Act 2013. |
(2) 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 is classified as capital advances under other non-current assets and
the cost of assets not ready 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 Consolidated Statement of Profit and Loss 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 the Consolidated
Statement of Profit and Loss.
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 the Consolidated Statement of Profit and Loss 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 the Consolidated Statement
of Profit and Loss 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 depreciation) had no impairment loss been recognized for the asset in prior years.
The changes in the carrying value of property,
plant and equipment for the three months ended December 31, 2019 are as follows:
(In crore)
| Particulars |
Land - Freehold |
Buildings (1) |
Plant and machinery |
Office Equipment |
Computer equipment |
Furniture and fixtures |
Leasehold Improvements |
Vehicles |
Total |
| Gross carrying value as at October 1, 2019 |
1,314 |
9,393 |
3,020 |
1,183 |
6,241 |
1,908 |
980 |
41 |
24,080 |
| Additions |
2 |
38 |
38 |
26 |
297 |
59 |
40 |
2 |
502 |
| Deletions |
– |
– |
(1) |
(2) |
(39) |
(7) |
– |
– |
(49) |
| Translation difference |
– |
29 |
3 |
2 |
14 |
4 |
6 |
– |
58 |
| Gross carrying value as at December 31, 2019 |
1,316 |
9,460 |
3,060 |
1,209 |
6,513 |
1,964 |
1,026 |
43 |
24,591 |
| Accumulated depreciation as at October 1, 2019 |
– |
(3,098) |
(1,989) |
(871) |
(4,527) |
(1,272) |
(474) |
(24) |
(12,255) |
| Depreciation |
– |
(90) |
(77) |
(33) |
(213) |
(58) |
(41) |
(2) |
(514) |
| Accumulated depreciation on deletions |
– |
– |
1 |
1 |
39 |
7 |
– |
– |
48 |
| Translation difference |
– |
(2) |
(1) |
– |
(10) |
(4) |
(4) |
– |
(21) |
| Accumulated depreciation as at December 31, 2019 |
– |
(3,190) |
(2,066) |
(903) |
(4,711) |
(1,327) |
(519) |
(26) |
(12,742) |
| Carrying value as at October 1, 2019 |
1,314 |
6,295 |
1,031 |
312 |
1,714 |
636 |
506 |
17 |
11,825 |
| Carrying value as at December 31, 2019 |
1,316 |
6,270 |
994 |
306 |
1,802 |
637 |
507 |
17 |
11,849 |
The changes in the carrying value of property,
plant and equipment for the three months ended December 31, 2018 are as follows:
(In crore)
| Particulars |
Land- Freehold |
Land- Leasehold |
Buildings (1) |
Plant and machinery |
Office Equipment |
Computer equipment |
Furniture and fixtures |
Leasehold Improvements |
Vehicles |
Total |
| Gross carrying value as at October 1, 2018 |
1,298 |
652 |
8,278 |
2,349 |
1,029 |
5,239 |
1,438 |
578 |
34 |
20,895 |
| Additions/adjustments |
9 |
– |
380 |
91 |
44 |
279 |
65 |
56 |
2 |
926 |
| Additions- Business Combination |
– |
– |
– |
1 |
– |
33 |
5 |
1 |
– |
40 |
| Deletions |
– |
– |
– |
(1) |
(4) |
(62) |
(8) |
(10) |
(1) |
(86) |
| Reclassified under assets held for sale (refer note no 2.1.2) |
– |
– |
– |
1 |
2 |
40 |
8 |
17 |
– |
68 |
| Translation difference |
– |
– |
(26) |
(1) |
(2) |
(14) |
(5) |
(6) |
1 |
(53) |
| Gross carrying value as at December 31, 2018 |
1,307 |
652 |
8,632 |
2,440 |
1,069 |
5,515 |
1,503 |
636 |
36 |
21,790 |
| Accumulated depreciation as at October 1, 2018 |
– |
(34) |
(2,872) |
(1,741) |
(776) |
(3,945) |
(1,099) |
(374) |
(20) |
(10,861) |
| Depreciation |
– |
(1) |
(79) |
(76) |
(31) |
(196) |
(49) |
(22) |
(1) |
(455) |
| Accumulated depreciation on deletions |
– |
– |
– |
– |
3 |
55 |
8 |
9 |
1 |
76 |
| Reclassified under assets held for sale (refer note no 2.1.2) |
– |
– |
– |
(1) |
(1) |
(25) |
(5) |
(15) |
– |
(47) |
| Translation difference |
– |
– |
3 |
1 |
1 |
10 |
3 |
7 |
(1) |
24 |
| Accumulated depreciation as at December 31, 2018 |
– |
(35) |
(2,948) |
(1,817) |
(804) |
(4,101) |
(1,142) |
(395) |
(21) |
(11,263) |
| Carrying value as at October 1, 2018 |
1,298 |
618 |
5,406 |
608 |
253 |
1,294 |
339 |
204 |
14 |
10,034 |
| Carrying value as at December 31, 2018 |
1,307 |
617 |
5,684 |
623 |
265 |
1,414 |
361 |
241 |
15 |
10,527 |
The changes in the carrying value of property,
plant and equipment for the nine months ended December 31, 2019 were as follows:
(In crore)
| Particulars |
Land - Freehold |
Land - Leasehold |
Buildings (1) |
Plant and machinery |
Office Equipment |
Computer equipment |
Furniture and fixtures |
Leasehold Improvements |
Vehicles |
Total |
| Gross carrying value as at April 1, 2019 |
1,307 |
605 |
8,926 |
2,709 |
1,101 |
5,846 |
1,620 |
739 |
38 |
22,891 |
| Additions |
9 |
– |
532 |
351 |
114 |
738 |
350 |
282 |
6 |
2,382 |
| Additions - Business Combination |
– |
– |
– |
– |
– |
60 |
8 |
2 |
– |
70 |
| Deletions |
– |
– |
– |
(2) |
(7) |
(141) |
(16) |
(1) |
(1) |
(168) |
| Reclassified on account of adoption of Ind AS 116 (Refer to note 2.19) |
– |
(605) |
– |
– |
– |
– |
– |
– |
– |
(605) |
| Translation difference |
– |
– |
2 |
2 |
1 |
10 |
2 |
4 |
– |
21 |
| Gross carrying value as at December 31, 2019 |
1,316 |
– |
9,460 |
3,060 |
1,209 |
6,513 |
1,964 |
1,026 |
43 |
24,591 |
| Accumulated depreciation as at April 1, 2019 |
– |
(33) |
(2,927) |
(1,841) |
(813) |
(4,192) |
(1,170) |
(414) |
(22) |
(11,412) |
| Depreciation |
– |
– |
(262) |
(227) |
(96) |
(654) |
(171) |
(104) |
(5) |
(1,519) |
| Accumulated depreciation on deletions |
– |
– |
– |
2 |
6 |
140 |
16 |
1 |
1 |
166 |
| Reclassified on account of adoption of Ind AS 116 (Refer to note 2.19) |
– |
33 |
– |
– |
– |
– |
– |
– |
– |
33 |
| Translation difference |
– |
– |
(1) |
– |
– |
(5) |
(2) |
(2) |
– |
(10) |
| Accumulated depreciation as at December 31, 2019 |
– |
– |
(3,190) |
(2,066) |
(903) |
(4,711) |
(1,327) |
(519) |
(26) |
(12,742) |
| Carrying value as at April 1, 2019 |
1,307 |
572 |
5,999 |
868 |
288 |
1,654 |
450 |
325 |
16 |
11,479 |
| Carrying value as at December 31, 2019 |
1,316 |
– |
6,270 |
994 |
306 |
1,802 |
637 |
507 |
17 |
11,849 |
The changes in the carrying value of property,
plant and equipment for the nine months ended December 31, 2018 were as follows:
(In crore)
| Particulars |
Land - Freehold |
Land - Leasehold |
Buildings (1) |
Plant and machinery |
Office Equipment |
Computer equipment |
Furniture and fixtures |
Leasehold Improvements |
Vehicles |
Total |
| Gross carrying value as at April 1, 2018 |
1,229 |
673 |
8,130 |
2,306 |
1,002 |
4,884 |
1,393 |
531 |
31 |
20,179 |
| Additions |
78 |
– |
514 |
136 |
74 |
676 |
113 |
96 |
6 |
1,693 |
| Additions - Business Combination |
– |
– |
– |
1 |
2 |
34 |
7 |
3 |
– |
47 |
| Deletions |
– |
(21) |
– |
(4) |
(11) |
(117) |
(16) |
(12) |
(2) |
(183) |
| Reclassified from assets held for sale (Refer note 2.1.2) |
– |
– |
– |
1 |
2 |
40 |
8 |
17 |
– |
68 |
| Translation difference |
– |
– |
(12) |
– |
– |
(2) |
(2) |
1 |
1 |
(14) |
| Gross carrying value as at December 31, 2018 |
1,307 |
652 |
8,632 |
2,440 |
1,069 |
5,515 |
1,503 |
636 |
36 |
21,790 |
| Accumulated depreciation as at April 1, 2018 |
– |
(31) |
(2,719) |
(1,597) |
(719) |
(3,632) |
(1,017) |
(330) |
(18) |
(10,063) |
| Depreciation |
– |
(4) |
(232) |
(222) |
(94) |
(554) |
(137) |
(61) |
(4) |
(1,308) |
| Accumulated depreciation on deletions |
– |
– |
– |
3 |
10 |
108 |
16 |
11 |
2 |
150 |
| Reclassified from assets held for sale (Refer note 2.1.2) |
– |
– |
– |
(1) |
(1) |
(25) |
(5) |
(15) |
– |
(47) |
| Translation difference |
– |
– |
3 |
– |
– |
2 |
1 |
– |
(1) |
5 |
| Accumulated depreciation as at December 31, 2018 |
– |
(35) |
(2,948) |
(1,817) |
(804) |
(4,101) |
(1,142) |
(395) |
(21) |
(11,263) |
| Carrying value as at April 1, 2018 |
1,229 |
642 |
5,411 |
709 |
283 |
1,252 |
376 |
201 |
13 |
10,116 |
| Carrying value as at December 31, 2018 |
1,307 |
617 |
5,684 |
623 |
265 |
1,414 |
361 |
241 |
15 |
10,527 |
The changes in the carrying value of property,
plant and equipment for the year ended March 31, 2019 were as follows:
(In crore)
| Particulars |
Land - Freehold |
Land - Leasehold |
Buildings (1) |
Plant and machinery |
Office Equipment |
Computer equipment |
Furniture and fixtures |
Leasehold Improvements |
Vehicles |
Total |
| Gross carrying value as at April 1, 2018 |
1,229 |
673 |
8,130 |
2,306 |
1,002 |
4,884 |
1,393 |
531 |
31 |
20,179 |
| Additions |
78 |
– |
916 |
462 |
136 |
1,129 |
254 |
209 |
9 |
3,193 |
| Additions - Business Combination |
– |
– |
– |
1 |
2 |
34 |
7 |
3 |
– |
47 |
| Deletions |
– |
(68) |
(116) |
(60) |
(40) |
(239) |
(40) |
(21) |
(2) |
(586) |
| Reclassified from assets held for sale (Refer note 2.1.2) |
– |
– |
– |
1 |
2 |
40 |
8 |
17 |
– |
68 |
| Translation difference |
– |
– |
(4) |
(1) |
(1) |
(2) |
(2) |
– |
– |
(10) |
| Gross carrying value as at March 31, 2019 |
1,307 |
605 |
8,926 |
2,709 |
1,101 |
5,846 |
1,620 |
739 |
38 |
22,891 |
| Accumulated depreciation as at April 1, 2018 |
– |
(31) |
(2,719) |
(1,597) |
(719) |
(3,632) |
(1,017) |
(330) |
(18) |
(10,063) |
| Depreciation |
– |
(5) |
(313) |
(293) |
(125) |
(766) |
(185) |
(89) |
(6) |
(1,782) |
| Accumulated depreciation on deletions |
– |
3 |
103 |
50 |
32 |
229 |
36 |
20 |
2 |
475 |
| Reclassified from assets held for sale (Refer note 2.1.2) |
– |
– |
– |
(1) |
(1) |
(25) |
(5) |
(15) |
– |
(47) |
| Translation difference |
– |
– |
2 |
– |
– |
2 |
1 |
– |
– |
5 |
| Accumulated depreciation as at March 31, 2019 |
– |
(33) |
(2,927) |
(1,841) |
(813) |
(4,192) |
(1,170) |
(414) |
(22) |
(11,412) |
| Carrying value as at April 1, 2018 |
1,229 |
642 |
5,411 |
709 |
283 |
1,252 |
376 |
201 |
13 |
10,116 |
| Carrying value as at March 31, 2019 |
1,307 |
572 |
5,999 |
868 |
288 |
1,654 |
450 |
325 |
16 |
11,479 |
| (1) | | Buildings include 250/- being the value of five shares of 50/- each
in Mittal Towers Premises Co-operative Society Limited. |
The aggregate depreciation has been included
under depreciation and amortisation expense in the consolidated Statement of Profit and Loss.
2.3 GOODWILL AND OTHER INTANGIBLE ASSETS
2.3.1 Goodwill
Accounting policy
Goodwill represents the cost of business acquisition
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 cost of business
acquisition, the fair value of net assets acquired is reassessed and the bargain purchase excess is recognized in the capital reserve.
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 goodwill may be impaired, relying on a number of factors including operating results,
business plans and future cash flows. For the purpose of impairment testing, goodwill acquired in a business combination is allocated
to the Group's cash generating units (CGU) or groups of CGU’s expected to benefit from the synergies arising from the business
combination. 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 Consolidated
Statement of Profit and Loss and is not reversed in the subsequent period.
Following is a summary of changes in the carrying
amount of goodwill:
(In crore)
| Particulars |
As at |
| |
December 31, 2019 |
March 31, 2019 |
| Carrying value at the beginning |
3,540 |
2,211 |
| Goodwill on Hipus acquisition (Refer note no. 2.1.1) |
108 |
– |
| Goodwill on Wongdoody acquisition (Refer note no. 2.1.1) |
– |
173 |
| Goodwill on Fluido Oy acquisition (refer note no. 2.1.1) |
– |
240 |
| Goodwill on Stater (Refer note no. 2.1.1) |
399 |
– |
| Goodwill reclassified from assets held for sale, net of reduction in recoverable amount (Refer note 2.1.2) |
– |
863 |
| Translation differences |
119 |
53 |
| Carrying value at the end |
4,166 |
3,540 |
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.
The Chief Operating Decision Maker reviews the goodwill for any impairment at the operating segment level, which is represented
through groups of CGUs.
During the three months ended June 30, 2018,
the Group internally reorganized some of its business segments to deepen customer relationships, improve focus of sales investments
and increase management oversight. Consequent to the internal reorganization, there were changes in the business segments based
on “Management approach” as defined under Ind AS 108, Operating Segments (Refer Note 2.24). Accordingly the goodwill
has been allocated to the new operating segments as at March 31, 2019.
The following table presents the allocation of
goodwill to operating segments as at March 31, 2019 :
(In crore)
| Segment |
As at March 31, 2019 |
| Financial services |
743 |
| Retail |
437 |
| Communication |
389 |
| Energy, Utilities, Resources and Services |
374 |
| Manufacturing |
239 |
| |
2,182 |
| Operating segments without significant goodwill |
417 |
| Total |
2,599 |
Consequent to reclassification from held for
sale (refer note no 2.1.2) goodwill pertaining to Kallidus , Skava (together referred to as Skava) and Panaya acquisitions are
tested for impairment at Panaya and Skava level which amounts to 941 crore as at March 31, 2019.
The recoverable amount of a CGU is the higher
of its fair value less cost to sell and its value-in-use. The fair value of a CGU is determined based on the market capitalization.
The value-in-use is determined based on specific calculations. These calculations use cash flow projections over a period of five
years. An average of the range of each assumption used is mentioned below. As at March 31, 2019, the estimated recoverable amount
of the CGU exceeded its carrying amount. The key assumptions used for the calculations are as follows:
(in %)
| |
As at March 31, 2019 |
| Long term growth rate |
8–10 |
| Operating margins |
17–20 |
| Discount rate |
12.5 |
The above discount rate is based on the Weighted
Average Cost of Capital (WACC) of the Company. Management believes that any reasonable possible changes in the key assumptions
would not cause the carrying amount to exceed the recoverable amount of the cash generating unit.
2.3.2 Other intangible assets
Accounting policy
Intangible assets are stated at cost less accumulated
amortization and impairment. Intangible assets are amortized over their respective individual estimated useful lives on a straight-line
basis, from the date that they are available for use. The estimated useful life of an identifiable intangible asset is based on
a number of factors including the effects of obsolescence, demand, competition, and other economic factors (such as the stability
of the industry, and known technological advances). Amortization methods and useful lives are reviewed periodically including at
each financial year end.
Research costs are expensed as incurred. Software
product development costs are expensed as incurred unless technical and commercial feasibility of the project is demonstrated,
future economic benefits are probable, the Group has an intention and ability to complete and use or sell the software and the
costs can be measured reliably. The costs which can be capitalized include the cost of material, direct labour, overhead costs
that are directly attributable to preparing the asset for its intended use.
Impairment
Intangible 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 CGU to which the asset belongs.
If such assets are considered to be impaired,
the impairment to be recognized in the Consolidated Statement of Profit and Loss 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 the Consolidated Statement
of Profit and Loss 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) had no impairment loss been recognized for the asset in prior years.
The changes in the carrying value of acquired
intangible assets for the three months ended December 31, 2019 are as follows:
(In crore)
| Particulars |
Customer related |
Software related |
Intellectual property rights related |
Brand or Trademark Related |
Others |
Total |
| Gross carrying value as at October 1, 2019 |
1,621 |
619 |
1 |
123 |
82 |
2,446 |
| Additions |
– |
6 |
– |
– |
– |
6 |
| Deletions |
– |
– |
– |
– |
– |
– |
| Translation difference |
40 |
17 |
– |
3 |
2 |
62 |
| Gross carrying value as at December 31, 2019 |
1,661 |
642 |
1 |
126 |
84 |
2,514 |
| Accumulated amortization as at October 1, 2019 |
(633) |
(362) |
(1) |
(54) |
(40) |
(1,090) |
| Amortization expense |
(38) |
(29) |
– |
(4) |
(6) |
(77) |
| Deletions |
– |
– |
– |
– |
– |
– |
| Translation differences |
(14) |
(11) |
– |
(1) |
– |
(26) |
| Accumulated amortization as at December 31, 2019 |
(685) |
(402) |
(1) |
(59) |
(46) |
(1,193) |
| Carrying value as at October 1, 2019 |
988 |
257 |
– |
69 |
42 |
1,356 |
| Carrying value as at December 31, 2019 |
976 |
240 |
– |
67 |
38 |
1,321 |
| Estimated Useful Life (in years) |
1–15 |
3–10 |
– |
5–10 |
3–5 |
|
| Estimated Remaining Useful Life (in years) |
1–14 |
1–9 |
– |
1–7 |
1–2 |
|
The changes in the carrying value of acquired intangible
assets for the three months ended December 31, 2018 are as follows:
(In crore)
| Particulars |
Customer related |
Software related |
Intellectual
property
rights
related |
Land use- rights related |
Brand or Trademark Related |
Others |
Total |
| Gross carrying value as at October 1, 2018 |
613 |
31 |
– |
74 |
35 |
27 |
780 |
| Acquisition through business combination (Refer note no. 2.1.1) |
202 |
– |
– |
– |
28 |
62 |
292 |
| Deletions |
– |
– |
– |
– |
– |
– |
– |
| Reclassified under assets held for sale (refer note no 2.1.2) |
157 |
388 |
1 |
– |
37 |
– |
583 |
| Translation differences |
(22) |
27 |
– |
(2) |
– |
(5) |
(2) |
| Gross carrying value as at December 31, 2018 |
950 |
446 |
1 |
72 |
100 |
84 |
1,653 |
| Accumulated amortization as at October 1, 2018 |
(351) |
(23) |
– |
(11) |
(15) |
(16) |
(416) |
| Amortization expense |
(48) |
(67) |
– |
– |
(4) |
(6) |
(125) |
| Deletions |
– |
– |
– |
– |
– |
– |
– |
| Reduction in value (Refer Note 2.1.2) |
(93) |
– |
– |
– |
– |
– |
(93) |
| Reclassified under assets held for sale (refer note no 2.1.2) |
(56) |
(182) |
(1) |
– |
(21) |
– |
(260) |
| Translation differences |
10 |
(11) |
– |
– |
(2) |
– |
(3) |
| Accumulated amortization as at December 31, 2018 |
(538) |
(283) |
(1) |
(11) |
(42) |
(22) |
(897) |
| Carrying value as at October 1, 2018 |
262 |
8 |
– |
63 |
20 |
11 |
364 |
| Carrying value as at December 31, 2018 |
412 |
163 |
– |
61 |
58 |
62 |
756 |
| Estimated Useful Life (in years) |
1–10 |
3–8 |
– |
50 |
5–10 |
3–5 |
|
| Estimated Remaining Useful Life (in years) |
0–7 |
1 |
– |
43 |
2–8 |
2–3 |
|
Following are the changes in the carrying value
of acquired intangible assets for the nine months ended December 31, 2019:
(In crore)
| Particulars |
Customer related |
Software related |
Intellectual property rights related |
Land use- rights related |
Brand or Trademark Related |
Others |
Total |
| Gross carrying value as at April 1, 2019 |
937 |
441 |
1 |
73 |
99 |
83 |
1,634 |
| Additions |
– |
65 |
– |
– |
– |
– |
65 |
| Acquisition through business combination (Refer note no. 2.1.1) |
665 |
110 |
– |
– |
24 |
– |
799 |
| Reclassified on account of adoption of IndAS 116 |
– |
– |
– |
(73) |
– |
– |
(73) |
| Translation difference |
59 |
26 |
– |
– |
3 |
1 |
89 |
| Gross carrying value as at December 31, 2019 |
1,661 |
642 |
1 |
– |
126 |
84 |
2,514 |
| Accumulated amortization as at April 1, 2019 |
(557) |
(302) |
(1) |
(11) |
(44) |
(28) |
(943) |
| Amortization expense |
(106) |
(81) |
– |
– |
(12) |
(18) |
(217) |
| Reclassified on account of adoption of IndAS 116 |
– |
– |
– |
11 |
– |
– |
11 |
| Translation differences |
(22) |
(19) |
– |
– |
(3) |
– |
(44) |
| Accumulated amortization as at December 31, 2019 |
(685) |
(402) |
(1) |
– |
(59) |
(46) |
(1,193) |
| Carrying value as at April 1, 2019 |
380 |
139 |
– |
62 |
55 |
55 |
691 |
| Carrying value as at December 31, 2019 |
976 |
240 |
– |
– |
67 |
38 |
1,321 |
| Estimated Useful Life (in years) |
1–15 |
3–10 |
– |
– |
5–10 |
3–5 |
|
| Estimated Remaining Useful Life (in years) |
1–14 |
1–9 |
– |
– |
1–7 |
1–2 |
|
Following are the changes in the carrying value
of acquired intangible assets for the nine months ended December 31, 2018:
(In crore)
| Particulars |
Customer related |
Software related |
Intellectual
property
rights
related |
Land use- rights related |
Brand or Trademark Related |
Others |
Total |
| Gross carrying value as at April 1, 2018 |
445 |
19 |
– |
73 |
26 |
27 |
590 |
| Reclassified from assets held for sale (Refer note 2.1.2) |
157 |
388 |
1 |
– |
37 |
– |
583 |
| Additions |
– |
9 |
– |
– |
– |
– |
9 |
| Acquisition through business combination (Refer note no. 2.1.1) |
334 |
– |
– |
– |
36 |
62 |
432 |
| Deletions |
– |
– |
– |
– |
– |
– |
– |
| Translation difference |
14 |
30 |
– |
(1) |
1 |
(5) |
39 |
| Gross carrying value as at December 31, 2018 |
950 |
446 |
1 |
72 |
100 |
84 |
1,653 |
| Accumulated amortization as at April 1, 2018 |
(289) |
(19) |
– |
(10) |
(12) |
(13) |
(343) |
| Reclassified from assets held for sale (Refer note 2.1.2) |
(56) |
(182) |
(1) |
– |
(21) |
– |
(260) |
| Amortization expense |
(87) |
(68) |
– |
(1) |
(7) |
(9) |
(172) |
| Reduction in value (Refer note 2.1.2) |
(93) |
– |
– |
– |
– |
– |
(93) |
| Deletions |
– |
– |
– |
– |
– |
– |
– |
| Translation differences |
(13) |
(14) |
– |
– |
(2) |
– |
(29) |
| Accumulated amortization as at December 31, 2018 |
(538) |
(283) |
(1) |
(11) |
(42) |
(22) |
(897) |
| Carrying value as at April 1, 2018 |
156 |
– |
– |
63 |
14 |
14 |
247 |
| Carrying value as at December 31, 2018 |
412 |
163 |
– |
61 |
58 |
62 |
756 |
| Estimated Useful Life (in years) |
1–10 |
3–8 |
– |
50 |
5–10 |
3–5 |
|
| Estimated Remaining Useful Life (in years) |
0–7 |
1 |
– |
43 |
2–8 |
2–3 |
|
Following are the changes in the carrying value
of acquired intangible assets for the year ended March 31, 2019:
(In crore)
| Particulars |
Customer related |
Software related |
Intellectual property rights related |
Land use- rights related |
Brand or Trademark Related |
Others |
Total |
| Gross carrying value as at April 1, 2018 |
445 |
19 |
– |
73 |
26 |
27 |
590 |
| Reclassified from assets held for sale (Refer note 2.1.2) |
157 |
388 |
1 |
– |
37 |
– |
583 |
| Additions |
– |
9 |
– |
– |
– |
– |
9 |
| Acquisition through business combination (Refer note no. 2.1.1) |
334 |
– |
– |
– |
36 |
62 |
432 |
| Deletions |
– |
– |
– |
– |
– |
– |
– |
| Translation difference |
1 |
25 |
– |
– |
– |
(6) |
20 |
| Gross carrying value as at March 31, 2019 |
937 |
441 |
1 |
73 |
99 |
83 |
1,634 |
| Accumulated amortization as at April 1, 2018 |
(289) |
(19) |
– |
(10) |
(12) |
(13) |
(343) |
| Reclassified from assets held for sale (Refer note 2.1.2) |
(56) |
(182) |
(1) |
– |
(21) |
– |
(260) |
| Amortization expense |
(112) |
(90) |
– |
(2) |
(10) |
(15) |
(229) |
| Reduction in value (Refer note 2.1.2) |
(93) |
– |
– |
– |
– |
– |
(93) |
| Deletions |
– |
– |
– |
– |
– |
– |
– |
| Translation differences |
(7) |
(11) |
– |
1 |
(1) |
– |
(18) |
| Accumulated amortization as at March 31, 2019 |
(557) |
(302) |
(1) |
(11) |
(44) |
(28) |
(943) |
| Carrying value as at April 1, 2018 |
156 |
– |
– |
63 |
14 |
14 |
247 |
| Carrying value as at March 31, 2019 |
380 |
139 |
– |
62 |
55 |
55 |
691 |
| Estimated Useful Life (in years) |
1–10 |
3–8 |
– |
50 |
5–10 |
3–5 |
|
| Estimated Remaining Useful Life (in years) |
0–7 |
1 |
– |
43 |
2–8 |
2–3 |
|
The amortization expense has been included under
depreciation and amortization expense in the Consolidated Statement of Profit and Loss.
Research and Development Expenditure
Research and development expense recognized in
net profit in the consolidated Statement of Profit and Loss for the three months ended December 31, 2019 and December 31, 2018
was 211 crore and 188 crore respectively, and for the nine months ended December 31, 2019 and December 31, 2018 was
620 crore and 573 crore respectively
2.4 INVESTMENTS
(In crore)
| Particulars |
As at |
| |
December 31, 2019 |
March 31, 2019 |
| Non-current |
|
|
| Unquoted |
|
|
| Investments carried at fair value through other comprehensive income (refer note no. 2.4.1) |
|
|
| Preference securities |
108 |
89 |
| Equity instruments |
7 |
11 |
| |
115 |
100 |
| Investments carried at fair value through profit and loss (refer note no. 2.4.1) |
|
|
| Preference securities |
24 |
23 |
| Others (1) |
34 |
16 |
| |
58 |
39 |
| Quoted |
|
|
| Investments carried at amortized cost (refer note no. 2.4.2) |
|
|
| Tax free bonds |
1,891 |
1,893 |
| Government Bonds |
20 |
- |
| |
1,911 |
1,893 |
| Investments carried at fair value through profit and loss (refer note no. 2.4.3) |
|
|
| Fixed maturity plan securities |
– |
458 |
| |
– |
458 |
| Investments carried at fair value through other comprehensive income (refer note no. 2.4.4) |
|
|
| Non convertible debentures |
1,229 |
1,420 |
| Government securities |
928 |
724 |
| |
2,157 |
2,144 |
| Total non-current investments |
4,241 |
4,634 |
| Current |
|
|
| Unquoted |
|
|
| Investments carried at fair value through profit or loss (refer note no. 2.4.3) |
|
|
| Liquid mutual fund units |
1,444 |
1,786 |
| |
1,444 |
1,786 |
| Investments carried at fair value through other comprehensive income |
|
|
| Commercial Paper (refer note no. 2.4.4) |
– |
495 |
| Certificates of deposit (refer note no. 2.4.4) |
– |
2,482 |
| |
– |
2,977 |
| Quoted |
|
|
| Investment carried at amortized cost (refer note no.2.4.2) |
|
|
| Government Bonds |
– |
18 |
| |
– |
18 |
| Investments carried at fair value through profit and loss (refer note no. 2.4.3) |
|
|
| Fixed maturity plan securities |
483 |
– |
| |
483 |
– |
| Investments carried at fair value through other comprehensive income (refer note no. 2.4.4) |
|
|
| Non convertible debentures |
1,151 |
1,846 |
| |
1,151 |
1,846 |
| Total current investments |
3,078 |
6,627 |
| Total investments |
7,319 |
11,261 |
| Aggregate amount of quoted investments |
5,702 |
6,359 |
| Market value of quoted investments (including interest accrued), current |
1,634 |
1,862 |
| Market value of quoted investments (including interest accrued), non current |
4,319 |
4,711 |
| Aggregate amount of unquoted investments |
1,617 |
4,902 |
| Aggregate amount of impairment on value of investments |
– |
– |
| Investments carried at amortized cost |
1,911 |
1,911 |
| Investments carried at fair value through other comprehensive income |
3,423 |
7,067 |
| Investments carried at fair value through profit or loss |
1,985 |
2,283 |
| (1) | | Uncalled capital commitments outstanding as at December 31, 2019 and March 31, 2019
was 70 crore and 86 crore, respectively. |
Refer to Note no 2.10 for Accounting policies
on Financial Instruments.
Details of amounts recorded in Other comprehensive
income :
(In crore)
| |
Three months ended
December 31, 2019 |
Three months ended
December 31, 2018 |
| |
Gross |
Tax |
Net |
Gross |
Tax |
Net |
| Net Gain/(loss) on |
|
|
|
|
|
|
| Non-convertible debentures |
1 |
– |
1 |
28 |
(3) |
25 |
| Certificates of deposit |
(2) |
1 |
(1) |
19 |
(7) |
12 |
| Government securities |
(12) |
1 |
(11) |
– |
– |
– |
| Equity and preference securities |
(30) |
(6) |
(36) |
71 |
(14) |
57 |
(In crore)
| |
Nine months ended
December 31, 2019 |
Nine months ended
December 31, 2018 |
| |
Gross |
Tax |
Net |
Gross |
Tax |
Net |
| Net Gain/(loss) on |
|
|
|
|
|
|
| Non-convertible debentures |
28 |
(3) |
25 |
(20) |
2 |
(18) |
| Certificates of deposit |
(6) |
2 |
(4) |
(8) |
3 |
(5) |
| Government securities |
(16) |
2 |
(14) |
– |
– |
– |
| Equity and preference securities |
(23) |
(8) |
(31) |
83 |
(14) |
69 |
Method of fair valuation:
(In crore)
| Class of investment |
Method |
Fair value as at |
| |
|
December 31, 2019 |
March 31, 2019 |
| Liquid mutual fund units |
Quoted price |
1,444 |
1,786 |
| Fixed maturity plan securities |
Market observable inputs |
483 |
458 |
| Tax free bonds and government bonds |
Quoted price and market observable inputs |
2,162 |
2,125 |
| Non-convertible debentures |
Quoted price and market observable inputs |
2,380 |
3,266 |
| Government securities |
Quoted price |
928 |
724 |
| Commercial Papers |
Market observable inputs |
– |
495 |
| Certificate of deposits |
Market observable inputs |
– |
2,482 |
| Unquoted equity and preference securities - carried at fair value through other comprehensive income |
Discounted cash flows method, Market multiples method, Option pricing model, etc. |
115 |
100 |
| Unquoted equity and preference securities - carried at fair value through profit and loss |
Discounted cash flows method, Market multiples method, Option pricing model, etc. |
24 |
23 |
| Others |
Discounted cash flows method, Market multiples method, Option pricing model, etc. |
34 |
16 |
| Total |
|
7,570 |
11,475 |
Note: Certain quoted investments are classified
as Level 2 in the absence of active market for such investments.
2.4.1 Details of investments
The details of investments in preference, equity
and other instruments at December 31, 2019 and March 31, 2019 are as follows:
(In crore, except otherwise stated)
| Particulars |
As at |
| |
December 31, 2019 |
March 31, 2019 |
| Preference securities |
|
|
| Airviz, Inc. |
4 |
3 |
| 2,282,279 (2,82,279) Series A Preferred Stock, fully paid up, par value USD 0.001 each |
|
|
| Whoop, Inc. |
14 |
14 |
| 16,48,352(16,48,352) Series B Preferred Stock, fully paid up, par value USD 0.0001 each |
|
|
| Nivetti Systems Private Limited |
10 |
10 |
| 2,28,501 (2,28,501) Preferred Stock, fully paid up, par value 1/- each |
|
|
| Waterline Data Science, Inc. |
– |
25 |
| 39,33,910 (39,33,910) Series B Preferred Shares, fully paid up, par value USD 0.00001 each |
|
|
| 13,35,707 (13,35,707) Series C Preferred Shares, fully paid up, par value USD 0.00001 each |
|
|
| Trifacta Inc. |
70 |
27 |
| 31,40,181 (11,80,358) Series C-1 Preferred Stock |
|
|
| Tidalscale, Inc. |
24 |
23 |
| 36,74,269 (36,74,269) Series B Preferred Stock |
|
|
| Ideaforge Technology Private Limited |
10 |
10 |
| 5,402 (5,402) Series A compulsorily convertible cumulative Preference shares of 10 each, fully paid up |
|
|
| Total investment in preference securities |
132 |
112 |
| Equity Instruments |
|
|
| Merasport Technologies Private Limited |
– |
– |
| 2,420 (2,420) equity shares at 8,052 each, fully paid up, par value 10/- each |
|
|
| Global Innovation and Technology Alliance |
1 |
1 |
| 15,000 (15,000) equity shares at 1,000 each, fully paid up, par value 1,000/- each |
|
|
| Unsilo A/S |
6 |
10 |
| 69,894 (69,894) Equity Shares, fully paid up, par value DKK 1/- each |
|
|
| Ideaforge |
– |
– |
| 100 (100) equity shares at 10/-, fully paid up |
|
|
| Total investment in equity instruments |
7 |
11 |
| Others |
|
|
| Stellaris Venture Partners India |
17 |
16 |
| The House Fund II, L.P. |
17 |
– |
| Total investment in others |
34 |
16 |
| Total |
173 |
139 |
| * | | During the quarter ended September 30, 2018; Investment in Convertible promissory
note of Tidalscale was converted into Series B Preferred Stock |
2.4.2 Details of investments in tax
free bonds and government bonds
The balances held in tax free bonds as at December
31, 2019 and March 31, 2019 are as follows:
(In
crore, except as otherwise stated)
| Particulars |
As at December 31, 2019 |
As at March 31, 2019 |
| |
Face Value |
Units |
Amount |
Units |
Amount |
| 7.04% Indian Railway Finance Corporation Limited Bonds 03MAR2026 |
10,00,000 |
470 |
49 |
470 |
50 |
| 7.16% Power Finance Corporation Limited Bonds 17JUL2025 |
10,00,000 |
1,000 |
105 |
1,000 |
105 |
| 7.18% Indian Railway Finance Corporation Limited Bonds 19FEB2023 |
1,000 |
2,000,000 |
201 |
2,000,000 |
201 |
| 7.28% Indian Railway Finance Corporation Limited Bonds 21DEC2030 |
1,000 |
422,800 |
42 |
422,800 |
42 |
| 7.28% National Highways Authority of India Limited Bonds 18SEP2030 |
10,00,000 |
3,300 |
342 |
3,300 |
342 |
| 7.34% Indian Railway Finance Corporation Limited Bonds 19FEB2028 |
1,000 |
2,100,000 |
210 |
2,100,000 |
210 |
| 7.35% National Highways Authority of India Limited Bonds 11JAN2031 |
1,000 |
571,396 |
57 |
571,396 |
57 |
| 7.93% Rural Electrification Corporation Limited Bonds 27MAR2022 |
1,000 |
200,000 |
20 |
200,000 |
21 |
| 8.00% Indian Railway Finance Corporation Limited Bonds 23FEB2022 |
1,000 |
150,000 |
15 |
150,000 |
15 |
| 8.10% Indian Railway Finance Corporation Limited Bonds 23FEB2027 |
1,000 |
500,000 |
52 |
500,000 |
52 |
| 8.20% Power Finance Corporation Limited Bonds 01FEB2022 |
1,000 |
500,000 |
50 |
500,000 |
50 |
| 8.26% India Infrastructure Finance Company Limited Bonds 23AUG2028 |
10,00,000 |
1,000 |
100 |
1,000 |
100 |
| 8.30% National Highways Authority of India Limited Bonds 25JAN2027 |
1,000 |
500,000 |
53 |
500,000 |
53 |
| 8.35% National Highways Authority of India Limited Bonds 22NOV2023 |
10,00,000 |
1,500 |
150 |
1,500 |
150 |
| 8.46% India Infrastructure Finance Company Limited Bonds 30AUG2028 |
10,00,000 |
2,000 |
200 |
2,000 |
200 |
| 8.46% Power Finance Corporation Limited Bonds 30AUG2028 |
10,00,000 |
1,500 |
150 |
1,500 |
150 |
| 8.48% India Infrastructure Finance Company Limited Bonds 05SEP2028 |
10,00,000 |
450 |
45 |
450 |
45 |
| 8.54% Power Finance Corporation Limited Bonds 16NOV2028 |
1,000 |
500,000 |
50 |
500,000 |
50 |
| Total investments in tax-free bonds |
|
74,55,416 |
1,891 |
74,55,416 |
1,893 |
The balances held in government bonds as at
December 31, 2019 and March 31, 2019 are as follows:
(In crore, except as otherwise stated)
| Particulars |
As at December 31, 2019 |
As at March 31, 2019 |
| |
Face Value PHP |
Units |
Amount |
Units |
Amount |
| Treasury Notes Phillippines Govt. 29MAY2019 |
– |
– |
– |
45,000 |
6 |
| Treasury Notes Phillippines Govt. 17APRIL2019 |
– |
– |
– |
90,000 |
12 |
| Treasury Notes Phillippines Govt. 8MARCH2023 |
100 |
55,000 |
8 |
– |
– |
| Treasury Notes Phillippines Govt. 4DECEMBER2022 |
100 |
90,000 |
12 |
– |
– |
| Total investments in government bonds |
|
145,000 |
20 |
135,000 |
18 |
2.4.3 Details of investments in liquid
mutual fund units and fixed maturity plans
The balances held in liquid mutual fund units as
at December 31, 2019 and March 31, 2019 are as follows:
(In crore, except as otherwise stated)
| Particulars |
As at December 31, 2019 |
As at March 31, 2019 |
| |
Units |
Amount |
Units |
Amount |
| Aditya Birla Sun Life Liquid Fund -Growth -Direct Plan |
– |
– |
13,32,847 |
40 |
| Aditya Birla Sun life Corporate Bond Fund -Growth -Direct Plan |
2,66,97,315 |
206 |
1,96,00,407 |
141 |
| Aditya Birla Sun life Money Manager Fund -Growth -Direct Plan |
– |
– |
79,75,385 |
201 |
| Aditya Birla Sun Life Cash Manager - Growth |
1,19,783 |
6 |
1,11,344 |
5 |
| HDFC Money market Fund- Direct Plan- Growth Option |
14,338 |
6 |
7,72,637 |
303 |
| HDFC Liquid fund-Direct Plan growth option |
7,45,080 |
287 |
68,035 |
25 |
| ICICI Prudential Short Term- Direct Plan -Growth |
5,61,31,125 |
244 |
– |
– |
| ICICI Prudential Savings Fund- Direct Plan-Growth |
– |
– |
83,40,260 |
301 |
| IDFC Corporate Bond - Fund Direct Plan |
1,19,02,495 |
16 |
13,14,84,437 |
169 |
| Kotak Liquid Fund- Direct Plan- Growth Option |
6,92,652 |
274 |
– |
- |
| Kotak Money Market Fund- Direct Plan- Growth Option |
– |
– |
9,73,751 |
301 |
| SBI Premier Liquid Fund -Direct Plan -Growth |
8,15,582 |
250 |
10,25,678 |
300 |
| HDFC Corporate Bond Fund -Growth -Direct Plan |
– |
– |
– |
– |
| IDFC Banking and PSU fund Direct Plan- Growth Option |
8,88,49,927 |
155 |
– |
– |
| Total investments in liquid mutual fund units |
18,59,68,297 |
1,444 |
17,16,84,781 |
1,786 |
The balances held in fixed maturity plans as
at December 31, 2019 and March 31, 2019 are as follows:
(In crore, except as otherwise stated)
| Particulars |
As at December 31, 2019 |
As at March 31, 2019 |
| |
Units |
Amount |
Units |
Amount |
| Aditya Birla Sun Life Fixed Term Plan- Series OD 1145 Days- GR Direct |
6,00,00,000 |
73 |
6,00,00,000 |
70 |
| Aditya Birla Sun Life Fixed Term Plan- Series OE 1153 Days- GR Direct |
2,50,00,000 |
31 |
2,50,00,000 |
29 |
| HDFC FMP 1155D Feb 2017- Direct Growth- Series 37 |
3,80,00,000 |
46 |
3,80,00,000 |
44 |
| HDFC FMP 1169D Feb 2017- Direct- Quarterly Dividend- Series 37 |
4,50,00,000 |
45 |
4,50,00,000 |
45 |
| ICICI FMP Series 80-1194 D Plan F Div |
5,50,00,000 |
67 |
5,50,00,000 |
63 |
| ICICI Prudential Fixed Maturity Plan Series 80- 1187 Days Plan G Direct Plan |
4,20,00,000 |
52 |
4,20,00,000 |
49 |
| ICICI Prudential Fixed Maturity Plan Series 80- 1253 Days Plan J Direct Plan |
3,00,00,000 |
37 |
3,00,00,000 |
35 |
| IDFC Fixed Term Plan Series 129 Direct Plan- Growth 1147 Days |
1,00,00,000 |
12 |
1,00,00,000 |
12 |
| IDFC Fixed Term Plan Series 131 Direct Plan- Growth 1139 Days |
1,50,00,000 |
18 |
1,50,00,000 |
17 |
| Kotak FMP Series 199 Direct- Growth |
3,50,00,000 |
43 |
3,50,00,000 |
40 |
| Reliance Fixed Horizon Fund- XXXII Series 8- Dividend Plan |
5,00,00,000 |
59 |
5,00,00,000 |
54 |
| Total investments in fixed maturity plan securities |
40,50,00,000 |
483 |
40,50,00,000 |
458 |
2.4.4 Details of investments in non
convertible debentures, government securities, certificates of deposit and commercial paper
The balances held in non convertible debenture
units as at December 31, 2019 and March 31, 2019 is as follows:
(In crore, except as otherwise stated)
| Particulars |
As at December 31, 2019 |
As at March 31, 2019 |
| |
Face Value |
Units |
Amount |
Units |
Amount |
| 7.03% LIC Housing Finance Ltd 28DEC2021 |
10,00,000/- |
2,500 |
249 |
– |
– |
| 7.24% LIC Housing Finance Ltd 23AUG2021 |
10,00,000/– |
2,500 |
255 |
– |
– |
| 7.48% Housing Development Finance Corporation Ltd 18NOV2019 |
1,00,00,000/– |
– |
– |
50 |
51 |
| 7.58% LIC Housing Finance Ltd 28FEB2020 |
10,00,000/– |
– |
– |
1,000 |
101 |
| 7.58% LIC Housing Finance Ltd 11JUN2020 |
10,00,000/– |
500 |
51 |
500 |
51 |
| 7.59% LIC Housing Finance Ltd 14OCT2021 |
10,00,000/– |
3,000 |
306 |
3,000 |
306 |
| 7.75% LIC Housing Finance Ltd 27AUG2021 |
10,00,000/– |
1,250 |
129 |
1,250 |
127 |
| 7.78% Housing Development Finance Corporation Ltd 24MAR2020 |
1,00,00,000/– |
100 |
107 |
100 |
100 |
| 7.79% LIC Housing Finance Ltd 19JUN2020 |
10,00,000/– |
500 |
52 |
500 |
53 |
| 7.80% Housing Development Finance Corporation Ltd 11NOV2019 |
1,00,00,000/– |
– |
– |
150 |
154 |
| 7.81% LIC Housing Finance Ltd 27APR2020 |
10,00,000/– |
2,000 |
212 |
2,000 |
214 |
| 7.95% Housing Development Finance Corporation Ltd 23SEP2019 |
1,00,00,000/– |
– |
– |
50 |
52 |
| 8.02% LIC Housing Finance Ltd 18FEB2020 |
10,00,000/– |
– |
– |
500 |
51 |
| 8.26% Housing Development Finance Corporation Ltd 12AUG2019 |
1,00,00,000/– |
– |
– |
100 |
105 |
| 8.37% LIC Housing Finance Ltd 03OCT2019 |
10,00,000/– |
– |
– |
2,000 |
216 |
| 8.37% LIC Housing Finance Ltd 10MAY2021 |
10,00,000/– |
500 |
54 |
500 |
54 |
| 8.47% LIC Housing Finance Ltd 21JAN2020 |
10,00,000/– |
– |
– |
500 |
51 |
| 8.49% Housing Development Finance Corporation Ltd 27APR2020 |
5,00,000/– |
900 |
48 |
900 |
49 |
| 8.50% Housing Development Finance Corporation Ltd 31AUG2020 |
1,00,00,000/– |
100 |
104 |
100 |
105 |
| 8.50% LIC Housing Finance Ltd 20JUN2022 |
10,00,000/– |
2,200 |
236 |
– |
– |
| 8.59% Housing Development Finance Corporation Ltd 14JUN2019 |
1,00,00,000/– |
– |
– |
50 |
51 |
| 8.60% LIC Housing Finance Ltd 22JUL2020 |
10,00,000/– |
1,000 |
105 |
1,000 |
107 |
| 8.60% LIC Housing Finance Ltd 29JUL2020 |
10,00,000/– |
1,750 |
183 |
1,750 |
186 |
| 8.61% LIC Housing Finance Ltd 11DEC2019 |
10,00,000/– |
– |
– |
1,000 |
103 |
| 8.72% Housing Development Finance Corporation Ltd 15APR2019 |
1,00,00,000/– |
– |
– |
75 |
75 |
| 8.75% Housing Development Finance Corporation Ltd 13JAN2020 |
5,00,000/– |
2,100 |
114 |
5,000 |
256 |
| 8.75% LIC Housing Finance Ltd 14JAN2020 |
10,00,000/– |
– |
– |
1,070 |
110 |
| 8.75% LIC Housing Finance Ltd 21DEC2020 |
10,00,000/– |
1,000 |
109 |
1,000 |
101 |
| 8.80% LIC Housing Finance Ltd 24Dec2020 |
10,00,000/– |
650 |
66 |
650 |
67 |
| 8.97% LIC Housing Finance Ltd 29OCT2019 |
10,00,000/– |
– |
– |
500 |
52 |
| 9.45% Housing Development Finance Corporation Ltd 21AUG2019 |
10,00,000/– |
– |
– |
3,000 |
318 |
| Total investments in non-convertible debentures |
|
22,550 |
2,380 |
28,295 |
3,266 |
The balances held in government securities as
at December 31, 2019 and March 31, 2019 are as follows:
(In crore, except as otherwise stated)
| Particulars |
As at December 31, 2019 |
As at March 31, 2019 |
| |
Face Value |
Units |
Amount |
Units |
Amount |
| 7.17% Government of India 8JAN2028 |
10,000/– |
2,25,000 |
237 |
6,75,000 |
672 |
| 7.37% Government of India 16APR2023 |
10,000/– |
50,000 |
52 |
– |
– |
| 7.95% Government of India 28AUG2032 |
10,000/– |
– |
– |
50,000 |
52 |
| 7.26% Government of India 14JAN2029 |
10,000/– |
6,00,000 |
639 |
– |
– |
| Total investments in government securities |
|
8,75,000 |
928 |
725,000 |
724 |
The balances held in certificates of deposit
as at March 31, 2019 are as follows:
(In crore, except as otherwise stated)
| Particulars |
As at March 31, 2019 |
| |
Face Value |
Units |
Amount |
| Axis Bank |
1,00,000/– |
90,000 |
872 |
| ICICI Bank |
1,00,000/– |
75,000 |
738 |
| Kotak Bank |
1,00,000/– |
77,000 |
747 |
| Vijaya Bank |
1,00,000/– |
12,500 |
125 |
| Total investments in certificates of deposit |
|
2,54,500 |
2,482 |
The balances held in commercial paper as at March
31, 2019 are as follows:
(In crore, except as otherwise stated)
| Particulars |
As at March 31, 2019 |
| |
Face Value |
Units |
Amount |
| LIC |
5,00,000/– |
10,000 |
495 |
| Total investments in commercial paper |
|
10,000 |
495 |
2.5 LOANS
(In crore)
| Particulars |
As at |
| |
December 31, 2019 |
March 31, 2019 |
| Non Current |
|
|
| Unsecured, considered good |
|
|
| Other loans |
|
|
| Loans to employees |
23 |
19 |
| |
23 |
19 |
| Unsecured, considered doubtful |
|
|
| Other loans |
|
|
| Loans to employees |
27 |
24 |
| |
50 |
43 |
| Less: Allowance for doubtful loans to employees |
27 |
24 |
| Total non-current loans |
23 |
19 |
| Current |
|
|
| Unsecured, considered good |
|
|
| Other loans |
|
|
| Loans to employees |
226 |
241 |
| Total current loans |
226 |
241 |
| Total loans |
249 |
260 |
2.6 OTHER FINANCIAL ASSETS
(In crore)
| Particulars |
As at |
| |
December 31, 2019 |
March 31, 2019 |
| Non Current |
|
|
| Security deposits (1) |
50 |
52 |
| Rental deposits (1) |
217 |
193 |
| Net investment in sublease of right of use asset (refer to note 2.19) (1) |
384 |
– |
| Restricted deposits(1)* |
28 |
67 |
| Others (1) |
13 |
– |
| Total non-current other financial assets |
692 |
312 |
| Current |
|
|
| Security deposits (1) |
6 |
4 |
| Rental deposits (1) |
22 |
15 |
| Restricted deposits (1)* |
1,768 |
1,671 |
| Unbilled revenues (1)# |
2,638 |
2,093 |
| Interest accrued but not due (1) |
973 |
905 |
| Foreign currency forward and options contracts (2) (3) |
36 |
336 |
| Escrow and other deposits pertaining to buyback (Refer note 2.11)(1) |
– |
257 |
| Net investment in sublease of right of use asset (refer to note 2.19) (1) |
33 |
– |
| Others (1) |
272 |
224 |
| Total current other financial assets |
5,748 |
5,505 |
| Total other financial assets |
6,440 |
5,817 |
| (1) Financial assets carried at amortized cost |
6,404 |
5,481 |
| (2) Financial assets carried at fair value through other comprehensive income |
11 |
37 |
| (3) Financial assets carried at fair value through profit or loss |
25 |
299 |
| * | | Restricted deposits represent deposits with financial institutions to settle employee-related
obligations as and when they arise during the normal course of business. |
# Classified as financial asset as right to consideration
is unconditional upon passage of time.
2.7 TRADE RECEIVABLES
(In crore)
| Particulars |
As at |
| |
December 31, 2019 |
March 31, 2019 |
| Current |
|
|
| Unsecured |
|
|
| Considered good (1) |
18,055 |
14,827 |
| Considered doubtful |
498 |
483 |
| |
18,553 |
15,310 |
| Less: Allowance for credit loss |
498 |
483 |
| Total trade receivables |
18,055 |
14,827 |
| (1) Includes dues from companies where directors are interested |
– |
– |
2.8 CASH AND CASH EQUIVALENTS
(In crore)
| Particulars |
As at |
| |
December 31, 2019 |
March 31, 2019 |
| Balances with banks |
|
|
| In current and deposit accounts |
12,969 |
14,197 |
| Cash on hand |
– |
– |
| Others |
|
|
| Deposits with financial institutions |
4,319 |
5,371 |
| Total cash and cash equivalents |
17,288 |
19,568 |
| Balances with banks in unpaid dividend accounts |
31 |
29 |
| Deposit with more than 12 months maturity |
9,388 |
6,582 |
| Balances with banks held as margin money deposits against guarantees |
79 |
114 |
Cash and cash equivalents as at December 31,
2019 and March 31, 2019 include restricted cash and bank balances of 367 crore and 358 crore, 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.
2.9 OTHER ASSETS
(In crore)
| Particulars |
As at |
| |
December 31, 2019 |
March 31, 2019 |
| Non Current |
|
|
| Capital advances |
352 |
489 |
| Advances other than capital advances |
|
|
| Others |
|
|
| Withholding taxes and others |
818 |
929 |
| Prepaid gratuity (refer note no. 2.20.1) |
31 |
42 |
| Prepaid expenses |
146 |
162 |
| Deferred Contract Cost |
111 |
277 |
| Advance for business acquisition (refer note no. 2.1.1) |
– |
206 |
| Total Non-Current other assets |
1,458 |
2,105 |
| Current |
|
|
| Advances other than capital advances |
|
|
| Payment to vendors for supply of goods |
115 |
109 |
| Others |
|
|
| Unbilled revenues # |
3,887 |
3,281 |
| Withholding taxes and others |
1,453 |
1,488 |
| Prepaid expenses |
955 |
751 |
| Deferred Contract Cost |
28 |
58 |
| Total Current other assets |
6,438 |
5,687 |
| Total other assets |
7,896 |
7,792 |
Withholding taxes and others primarily consist
of input tax credits and Cenvat recoverable from Government of India. Cenvat recoverable includes 471 crore which are pending
adjudication. The Group expects these amounts to be sustainable on adjudication and recoverable on final resolution.
| # | | Classified as non financial asset as the contractual right to consideration is dependent
on completion of contractual milestones. |
2.10 FINANCIAL INSTRUMENTS
Accounting policy
2.10.1 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.
2.10.2 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
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 or loss. For trade
and other payables maturing within one year from the Balance Sheet date, the carrying amounts approximate the 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 Ind AS 109, Financial Instruments.
Any derivative that is either not designated as hedge, or is so designated but is ineffective as per Ind AS 109, 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 consolidated Statement of Profit
and Loss 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 consolidated Statement of Profit and Loss. 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 Consolidated Statement of Profit and Loss 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 Consolidated Statement of Profit and Loss.
2.10.3 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 Ind AS 109. 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.
2.10.4 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 approximates
fair value due to the short maturity of those instruments.
2.10.5 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, ECLs 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
ECLs (or reversal) that is required to adjust the loss allowance at the reporting date to the amount that is required to be recognised
is recognized as an impairment gain or loss in Consolidated Statement of Profit and Loss.
Financial instruments by category
The carrying value and fair value of financial
instruments by categories as at December 31, 2019 are as follows:
(In crore)
| 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 no. 2.8) |
17,288 |
– |
– |
– |
– |
17,288 |
17,288 |
| Investments (Refer Note no. 2.4) |
|
|
|
|
|
|
|
| Equity and preference securities |
– |
– |
24 |
115 |
– |
139 |
139 |
| Tax-free bonds and government bonds |
1,911 |
– |
– |
– |
– |
1,911 |
2,1621 |
| Liquid mutual fund units |
– |
– |
1,444 |
– |
– |
1,444 |
1,444 |
| Non convertible debentures |
– |
– |
– |
– |
2,380 |
2,380 |
2,380 |
| Government securities |
– |
– |
– |
– |
928 |
928 |
928 |
| Other investments |
– |
– |
34 |
– |
– |
34 |
34 |
| Fixed maturity plan securities |
– |
– |
483 |
– |
– |
483 |
483 |
| Trade receivables (Refer Note no. 2.7) |
18,055 |
– |
– |
– |
– |
18,055 |
18,055 |
| Loans (Refer Note no. 2.5) |
249 |
– |
– |
– |
– |
249 |
249 |
| Other financials assets (Refer Note no. 2.6)(3) |
6,404 |
– |
25 |
– |
11 |
6,440 |
6,3792 |
| Total |
43,907 |
– |
2,010 |
115 |
3,319 |
49,351 |
49,541 |
| Liabilities: |
|
|
|
|
|
|
|
| Trade payables |
1,876 |
– |
– |
– |
– |
1,876 |
1,876 |
| Financial Liability under option arrangements (refer to note 2.1.1) |
– |
– |
622 |
– |
– |
622 |
622 |
| Other financial liabilities (Refer Note no. 2.12) |
8,267 |
– |
293 |
– |
12 |
8,572 |
8,572 |
| Total |
10,143 |
– |
915 |
– |
12 |
11,070 |
11,070 |
| (1) | | On account of fair value changes including interest accrued |
| (2) | | Excludes interest accrued on tax free bonds and government bonds carried at amortized
cost of 61 crore |
| (3) | | Excludes unbilled revenue for fixed price development contracts where right to
consideration is conditional on factors other than passage of time |
The carrying value and fair value of financial
instruments by categories as at March 31, 2019 were as follows:
(In crore)
| Particulars |
Amortised 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 no. 2.8) |
19,568 |
– |
– |
– |
– |
19,568 |
19,568 |
| Investments (Refer Note no. 2.4) |
|
|
|
|
|
|
|
| Equity and preference securities |
– |
– |
23 |
100 |
– |
123 |
123 |
| Tax-free bonds and government bonds |
1,911 |
– |
– |
– |
– |
1,911 |
2,1251 |
| Liquid mutual fund units |
– |
– |
1,786 |
– |
– |
1,786 |
1,786 |
| Non convertible debentures |
– |
– |
– |
– |
3,266 |
3,266 |
3,266 |
| Government securities |
|
|
|
|
724 |
724 |
724 |
| Commercial paper |
– |
– |
– |
– |
495 |
495 |
495 |
| Certificates of deposit |
– |
– |
– |
– |
2,482 |
2,482 |
2,482 |
| Other investments |
– |
– |
16 |
– |
– |
16 |
16 |
| Fixed maturity plan securities |
– |
– |
458 |
– |
– |
458 |
458 |
| Trade receivables (Refer Note no. 2.7) |
14,827 |
– |
– |
– |
– |
14,827 |
14,827 |
| Loans (Refer Note no. 2.5) |
260 |
– |
– |
– |
– |
260 |
260 |
| Other financials assets (Refer Note no. 2.6) |
5,481 |
– |
299 |
– |
37 |
5,817 |
5,7332 |
| Total |
42,047 |
– |
2,582 |
100 |
7,004 |
51,733 |
51,863 |
| Liabilities: |
|
|
|
|
|
|
|
| Trade payables |
1,655 |
– |
– |
– |
– |
1,655 |
1,655 |
| Other financial liabilities (Refer Note no. 2.12) |
8,731 |
– |
205 |
– |
– |
8,936 |
8,936 |
| Total |
10,386 |
– |
205 |
– |
– |
10,591 |
10,591 |
| (1) | | On account of fair value changes including interest accrued |
| (2) | | Excludes interest accrued on tax free bonds and government bonds carried at amortized
cost of 84 crore |
| (3) | | Excludes unbilled revenue for fixed price development contracts where right to
consideration is conditional on factors other than passage of time |
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 measured at fair value on a recurring basis as at December 31, 2019:
(In crore)
| Particulars |
As at December 31, 2019 |
Fair value measurement at end of the reporting period using |
| |
|
Level 1 |
Level 2 |
Level 3 |
| Assets |
|
|
|
|
| Investments in liquid mutual funds (Refer Note no. 2.4) |
1,444 |
1,444 |
– |
– |
| Investments in tax-free bonds (Refer Note no. 2.4) |
2,141 |
1,676 |
465 |
– |
| Investments in government bonds (Refer Note no. 2.4) |
21 |
21 |
– |
– |
| Investments in equity instruments (Refer Note no. 2.4) |
7 |
– |
– |
7 |
| Investments in preference securities (Refer Note no. 2.4) |
132 |
– |
– |
132 |
| Investments in non convertible debentures (Refer Note no. 2.4) |
2,380 |
1,472 |
908 |
– |
| Investment in Government securities (Refer Note no. 2.4) |
928 |
928 |
– |
– |
| Investments in fixed maturity plan securities (Refer Note no. 2.4) |
483 |
– |
483 |
– |
| Other investments (Refer Note no. 2.4) |
34 |
– |
– |
34 |
| Derivative financial instruments - gain on outstanding foreign currency forward and option contracts (Refer Note no. 2.6) |
36 |
– |
36 |
– |
| Liabilities |
|
|
|
|
| Derivative financial instruments - loss on outstanding foreign currency forward and option contracts (Refer Note no. 2.12) |
90 |
– |
90 |
– |
| Financial liability under option arrangements (refer to note 2.1.1) |
622 |
– |
– |
622 |
| Liability towards contingent consideration (Refer note no. 2.12)(1) |
215 |
– |
– |
215 |
| (1) | | Discount rate pertaining to contingent consideration ranges from 9% to 15% . |
During the nine months ended December 31, 2019,
tax free bonds and non-convertible debentures of 513 crore were transferred from Level 2 to Level 1 of fair value hierarchy,
since these were valued based on quoted price and 459 crore was transferred from Level 1
to Level 2 of fair value hierarchy, since these were valued based on market observable inputs.
The fair value hierarchy of assets and liabilities
as at March 31, 2019 was as follows:
(In crore)
| Particulars |
As at March 31, 2019 |
Fair value measurement at end of the reporting period using |
| |
|
Level 1 |
Level 2 |
Level 3 |
| Assets |
|
|
|
|
| Investments in liquid mutual funds (Refer Note no. 2.4) |
1,786 |
1,786 |
– |
– |
| Investments in tax free bonds (Refer Note no. 2.4) |
2,107 |
1,836 |
271 |
– |
| Investments in government bonds (Refer Note no. 2.4) |
18 |
18 |
– |
– |
| Investments in equity instruments (Refer Note no. 2.4) |
11 |
– |
– |
11 |
| Investments in preference securities (Refer Note no. 2.4) |
112 |
– |
– |
112 |
| Investments in non convertible debentures (Refer Note no. 2.4) |
3,266 |
1,780 |
1,486 |
– |
| Investments in certificates of deposit (Refer Note no. 2.4) |
2,482 |
– |
2,482 |
– |
| Investment in Government securities (Refer Note no. 2.4) |
724 |
724 |
– |
– |
| Investments in commercial paper (Refer Note no. 2.4) |
495 |
– |
495 |
– |
| Investments in fixed maturity plan securities (Refer Note no. 2.4) |
458 |
– |
458 |
– |
| Other investments (Refer Note no. 2.4) |
16 |
– |
– |
16 |
| Derivative financial instruments - gain on outstanding foreign currency forward and option contracts (Refer Note no. 2.6) |
336 |
– |
336 |
– |
| Liabilities |
|
|
|
|
| Derivative financial instruments - loss on outstanding foreign currency forward and option contracts (Refer Note no. 2.12) |
15 |
– |
15 |
– |
| Liability towards contingent consideration (Refer note no. 2.12)(1) |
190 |
– |
– |
190 |
(1) Discount rate pertaining to
contingent consideration ranges from 9% to 16% .
During the year ended March 31, 2019, tax free
bonds and non-convertible debentures of 336 crore were transferred from Level 2 to Level 1 of fair value hierarchy, since
these were valued based on quoted price and 746 crore was 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.
Financial risk management
Financial risk factors
The Group's activities expose it to a variety
of financial risks: market risk, credit risk and liquidity risk. The Group's primary focus is to foresee the unpredictability of
financial markets and seek to minimize potential adverse effects on its financial performance. The primary market risk to the Group
is foreign exchange risk. The Group uses derivative financial instruments to mitigate foreign exchange related risk exposures.
The Group's exposure to credit risk is influenced mainly by the individual characteristic of each customer and the concentration
of risk from the top few customers.
Market risk
The Group operates internationally and a major
portion of the business is transacted in several currencies and consequently the Group is exposed to foreign exchange risk through
its sales and services in the United States and elsewhere, and purchases from overseas suppliers in various foreign currencies.
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 exchange rate between the Indian rupee and foreign currencies has
changed substantially in recent years and may fluctuate substantially in the future. Consequently, the results of the Group’s
operations are adversely affected as the rupee appreciates/ depreciates against these currencies.
The following table analyses the foreign currency
risk from monetary assets and liabilities as at December 31, 2019:
(In crore)
| Particulars |
U.S. dollars |
Euro |
United Kingdom Pound Sterling |
Australian dollars |
Other currencies |
Total |
| Cash and cash equivalents |
1,019 |
738 |
139 |
160 |
1,377 |
3,433 |
| Trade receivables |
11,676 |
2,144 |
1,110 |
695 |
1,663 |
17,288 |
| Other financial assets , loans and other current assets |
5,750 |
1,189 |
392 |
390 |
926 |
8,647 |
| Trade payables |
(553) |
(142) |
(89) |
(72) |
(734) |
(1,590) |
| Other financial liabilities |
(5,838) |
(1,820) |
(584) |
(648) |
(2,426) |
(11,316) |
| Net assets / (liabilities) |
12,054 |
2,109 |
968 |
525 |
806 |
16,462 |
The following table analyses the foreign currency
risk from monetary assets and liabilities as at March 31, 2019:
(In crore)
| Particulars |
U.S. dollars |
Euro |
United Kingdom Pound Sterling |
Australian dollars |
Other currencies |
Total |
| Cash and cash equivalents |
1,640 |
266 |
110 |
213 |
1,113 |
3,342 |
| Trade receivables |
9,950 |
1,844 |
1,025 |
527 |
971 |
14,317 |
| Other financial assets , loans and other current assets |
4,189 |
873 |
285 |
310 |
748 |
6,405 |
| Trade payables |
(708) |
(128) |
(139) |
(80) |
(107) |
(1,162) |
| Other financial liabilities |
(4,201) |
(560) |
(217) |
(382) |
(759) |
(6,119) |
| Net assets / (liabilities) |
10,870 |
2,295 |
1,064 |
588 |
1,966 |
16,783 |
Sensitivity analysis between Indian rupee and
U.S. Dollar
| Particulars |
Three months ended December 31, |
Nine months ended
December 31, |
| |
2019 |
2018 |
2019 |
2018 |
| Impact on the Group's incremental operating margins |
0.46% |
0.46% |
0.45% |
0.48% |
Sensitivity analysis is computed based on the changes
in the income and expenses in foreign currency upon conversion into functional currency, due to exchange rate fluctuations between
the previous reporting period and the current reporting period.
Derivative financial instruments
The Group holds derivative financial instruments
such as foreign currency 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. These derivative financial instruments are valued based on quoted prices
for similar assets and liabilities in active markets or inputs that are directly or indirectly observable in the marketplace.
The details in respect of outstanding foreign currency
forward and option contracts are as follows:
| Particulars |
As at |
As at |
| |
December 31, 2019 |
March 31, 2019 |
| |
In million |
In crore |
In million |
In crore |
| Derivatives designated as cash flow hedges |
|
|
|
|
| Option Contracts |
|
|
|
|
| In Australian dollars |
170 |
851 |
120 |
588 |
| In Euro |
180 |
1,442 |
135 |
1,049 |
| In United Kingdom Pound Sterling |
34 |
320 |
25 |
226 |
| Other derivatives |
|
|
|
|
| Forward contracts |
|
|
|
|
| In Australian dollars |
3 |
13 |
8 |
37 |
| In Brazilian Real |
59 |
104 |
– |
– |
| In Canadian dollars |
20 |
111 |
13 |
68 |
| In Chinese Yuan |
172 |
173 |
– |
– |
| In Euro |
194 |
1,552 |
176 |
1,367 |
| In Japanese Yen |
– |
– |
550 |
34 |
| In New Zealand dollars |
16 |
77 |
16 |
75 |
| In Norwegian Krone |
40 |
32 |
40 |
32 |
| In Philippine Peso |
400 |
56 |
– |
– |
| In Poland Zloty |
86 |
160 |
– |
– |
| In Romanian Leu |
19 |
32 |
– |
– |
| In Singapore dollars |
401 |
2,121 |
140 |
716 |
| In South African Rand |
22 |
11 |
– |
– |
| In Swedish Krona |
50 |
38 |
50 |
37 |
| In Swiss Franc |
15 |
111 |
25 |
172 |
| In U.S. dollars |
894 |
6,391 |
955 |
6,608 |
| In United Kingdom Pound Sterling |
56 |
525 |
80 |
724 |
| Option Contracts |
|
|
|
|
| In Australian dollars |
– |
– |
10 |
49 |
| In Canadian Dollars |
– |
– |
13 |
69 |
| In Euro |
25 |
200 |
60 |
466 |
| In Swiss Franc |
– |
– |
5 |
35 |
| In U.S. dollars |
667 |
4,765 |
433 |
2,995 |
| In United Kingdom Pound Sterling |
– |
– |
10 |
91 |
| Total forwards and options contracts |
|
19,085 |
|
15,438 |
The foreign exchange forward and option contracts
mature within twelve months. The table below analyses the derivative financial instruments into relevant maturity groupings based
on the remaining period as at the Balance Sheet date:
(In crore)
| Particulars |
As at |
| |
December 31, 2019 |
March 31, 2019 |
| Not later than one month |
3,934 |
4,432 |
| Later than one month and not later than three months |
7,966 |
6,921 |
| Later than three months and not later than one year |
7,185 |
4,085 |
| |
19,085 |
15,438 |
During the nine months ended December 31, 2019,
the Group has designated certain foreign exchange forward and option contracts as cash flow hedges to mitigate the risk of foreign
exchange exposure on highly probable forecast cash transactions. The related hedge transactions for balance in cash flow hedges
as of December 31, 2019 are expected to occur and reclassified to the consolidated statement of profit and loss within 3 months.
Hedge effectiveness is determined at the inception
of the hedge relationship, and through periodic prospective effectiveness assessments to ensure that an economic relationship exists
between the hedged item and hedging instrument, including whether the hedging instrument is expected to offset changes in cash
flows of hedged items.
If the hedge ratio for risk management purposes
is no longer optimal but the risk management objective remains unchanged and the hedge continues to qualify for hedge accounting,
the hedge relationship will be rebalanced by adjusting either the volume of the hedging instrument or the volume of the hedged
item so that the hedge ratio aligns with the ratio used for risk management purposes. Any hedge ineffectiveness is calculated and
accounted for in the statement of profit or loss at the time of the hedge relationship rebalancing.
The reconciliation of cash flow hedge reserve
for the three months and nine months ended December 31, 2019 and December 31, 2018 is as follows:
(In crore)
| Particulars |
Three months ended December 31, |
Nine months ended December 31, |
| |
2019 |
2018 |
2019 |
2018 |
| Gain/(Loss) |
|
|
|
|
| Balance at the beginning of the period |
14 |
(20) |
21 |
– |
| Gain / (Loss) recognised in other comprehensive income during the period |
(55) |
111 |
(6) |
92 |
| Amount reclassified to profit or loss during the period |
18 |
(41) |
(40) |
(44) |
| Tax impact on above |
8 |
(14) |
10 |
(12) |
| Balance at the end of the period |
(15) |
36 |
(15) |
36 |
The Group offsets a financial asset and a financial
liability when it currently has a legally enforceable right to set off the recognized amounts and the group intends either to settle
on a net basis, or to realise the asset and settle the liability simultaneously.
The quantitative information about offsetting
of derivative financial assets and derivative financial liabilities is as follows:
(In crore)
| Particulars |
As at |
As at |
| |
December 31, 2019 |
March 31, 2019 |
| |
Derivative financial asset |
Derivative financial liability |
Derivative
financial
asset |
Derivative financial liability |
| Gross amount of recognized financial asset/liability |
55 |
(109) |
338 |
(17) |
| Amount set off |
(19) |
19 |
(2) |
2 |
| Net amount presented in Balance Sheet |
36 |
(90) |
336 |
(15) |
Credit risk
Credit risk refers to the risk of default on
its obligation by the counterparty resulting in a financial loss. The maximum exposure to the credit risk at the reporting date
is primarily from trade receivables amounting to 18,055 crore and 14,827 crore as at December 31, 2019 and March
31, 2019, respectively and unbilled revenues amounting to 6,525 crore and 5,374 crore as at December 31, 2019 and
March 31, 2019, respectively. Trade receivables and unbilled revenues are typically unsecured and are derived from revenue earned
from customers primarily located in the United States. Credit risk has always been managed by the Group through credit approvals,
establishing credit limits and continuously monitoring the creditworthiness of customers to which the Group grants credit terms
in the normal course of business. The Group uses expected credit loss model to assess the impairment loss or gain. The Group uses
a provision matrix to compute the expected credit loss allowance for trade receivables and unbilled revenues. The provision matrix
takes into account available external and internal credit risk factors such as credit default swap quotes, credit ratings from
international credit rating agencies and the Group's historical experience for customers.
The following table gives details in respect
of percentage of revenues generated from top customer and top ten customers:
(In %)
| Particulars |
Three months ended
December 31, |
Nine months ended
December 31, |
| |
2019 |
2018 |
2019 |
2018 |
| Revenue from top customer |
3.0 |
3.4 |
3.1 |
3.7 |
| Revenue from top 10 customers |
18.9 |
19.2 |
19.4 |
19.2 |
Credit risk exposure
The allowance for lifetime ECL on customer balances
for three months and nine months ended December 31, 2019 was 7 crore and 89 crore respectively and was 82
crore and 224 crore for the three months and nine months ended December 31, 2018 , respectively
The movement in credit loss allowance on customer
balance is as follows:
(In crore)
| Particulars |
Three months ended
December 31, |
Nine months ended
December 31, |
| |
2019 |
2018 |
2019 |
2018 |
| Balance at the beginning |
640 |
546 |
627 |
449 |
| Impairment loss recognized |
7 |
82 |
89 |
224 |
| Write-offs |
– |
– |
(73) |
(73) |
| Translation differences |
6 |
(13) |
10 |
15 |
| Balance at the end |
653 |
615 |
653 |
615 |
Credit exposure
The Group’s credit period generally ranges
from 30-60 days.
(In crore except otherwise stated)
| Particulars |
As at |
| |
December 31, 2019 |
March 31, 2019 |
| Trade receivables |
18,055 |
14,827 |
| Unbilled revenues |
6,525 |
5,374 |
Days sales outstanding was 73 days and 66 days
as of December 31, 2019 and March 31, 2019, respectively
Credit risk on cash and cash equivalents is
limited as we generally invest in deposits with banks and financial institutions with high credit ratings assigned by international
and domestic credit rating agencies. Investments primarily include investment in liquid mutual fund units, fixed maturity plan
securities, certificates of deposit, commercial paper, quoted bonds issued by government and quasi-government organizations and
non convertible debentures.
Liquidity risk
The Group's principal sources of liquidity are
cash and cash equivalents and the cash flow that is generated from operations. The Group has no outstanding borrowings. The Group
believes that the working capital is sufficient to meet its current requirements.
As at December 31, 2019, the Group had a working
capital of 30,837 crore including cash and cash equivalents of 17,288 crore and current investments of 3,078
crore. As at March 31, 2019, the Group had a working capital of 34,240 crore including cash and cash equivalents of 19,568
crore and current investments of 6,627 crore.
As at December 31, 2019 and March 31, 2019,
the outstanding compensated absences were 1,961 crore and 1,663 crore, respectively, which have been substantially
funded. Accordingly no liquidity risk is perceived.
Refer note 2.11 Equity for details on Company’s
buyback programme.
The table below provides details regarding the
contractual maturities of significant financial liabilities as at December 31, 2019:
(In crore)
| Particulars |
Less than 1 year |
1-2 years |
2-4 years |
4-7 years |
Total |
| Trade payables |
1,876 |
– |
– |
– |
1,876 |
| Other financial liabilities (excluding liability towards acquisition) (Refer Note no. 2.12) |
8,240 |
22 |
5 |
– |
8,267 |
| Financial liability under option arrangements |
– |
– |
622 |
– |
622 |
| Liability towards acquisitions on an undiscounted basis (including contingent consideration) (Refer Note no. 2.12) |
125 |
79 |
– |
36 |
240 |
The table below provides details regarding the
contractual maturities of significant financial liabilities as at March 31, 2019:
(In crore)
| Particulars |
Less than 1 year |
1-2 years |
2-4 years |
4-7 years |
Total |
| Trade payables |
1,655 |
– |
– |
– |
1,655 |
| Other financial liabilities (excluding liability towards acquisition) (Refer Note no. 2.12) |
8,716 |
11 |
4 |
– |
8,731 |
| Liability towards acquisitions on an undiscounted basis (including contingent consideration) (Refer Note no. 2.12) |
114 |
83 |
– |
36 |
233 |
2.11 EQUITY
Accounting policy
Ordinary Shares
Ordinary shares are classified as equity. Incremental
costs directly attributable to the issuance of new ordinary shares, share options and buyback are recognized as a deduction from
equity, net of any tax effects.
Treasury Shares
When any entity within the Group purchases the
company's ordinary shares, the consideration paid including any directly attributable incremental cost is presented as a deduction
from total equity, until they are cancelled, sold or reissued. When treasury shares are sold or reissued subsequently, the amount
received is recognized as an increase in equity, and the resulting surplus or deficit on the transaction is transferred to/ from
Securities premium.
Retained earnings
Retained earnings represent the amount of accumulated
earnings of the Group.
Securities premium
The amount received in excess of the par value
has been classified as securities premium.
Other Reserves
The Special Economic Zone Re-investment reserve
has been 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 Company 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.
Capital Redemption Reserve
In accordance with section 69 of the Indian
Companies Act, 2013, the Company creates capital redemption reserve equal to the nominal value of the shares bought back as an
appropriation from general reserve.
Other components of equity
Other components of equity consist of currency
translation, remeasurement of net defined benefit liability / asset, equity instruments fair valued through other comprehensive
income, changes on fair valuation of investments and changes in fair value of derivatives designated as cash flow hedges, net of
taxes.
In December 2017, Ind AS 12 – Income Taxes
was amended which clarified that an entity shall recognize the income tax consequences of dividends on financial instruments classified
as equity according to where the entity originally recognized those past transactions or events that generated distributable profits
were recognized. On April 1, 2019, the Group adopted these amendments and there was no impact of these amendments on the Company’s
Consolidated financial statements.
SHARE CAPITAL
(In crore, except as otherwise stated)
| Particulars |
As at |
| |
December 31, 2019 |
March 31, 2019 |
| Authorized |
|
|
| Equity shares, 5 par value |
|
|
| 4,80,00,00,000 (4,80,00,00,000) equity shares |
2,400 |
2,400 |
| Issued, Subscribed and Paid-Up |
|
|
| Equity shares, 5 par value(1) |
2,122 |
2,170 |
| 4,23,97,66,436 (4,33,59,54,462) equity shares fully paid-up(2) |
|
|
| |
2,122 |
2,170 |
Note: Forfeited shares amounted to 1,500
(1,500)
(1) Refer note no. 2.21 for details
of basic and diluted shares
(2) Net of treasury shares 1,87,81,564
(2,03,24,982)
The Company has only one class of shares referred
to as equity shares having a par value of 5/-. Each holder of equity shares is entitled to one vote per share. The equity
shares represented by American Depositary Shares (ADS) carry similar rights to voting and dividends as the other equity shares.
Each ADS represents one underlying equity share.
In the event of liquidation of the Company,
the holders of equity shares will be entitled to receive any of the remaining assets of the Company in proportion to the number
of equity shares held by the shareholders, after distribution of all preferential amounts. However, no such preferential amounts
exist currently, other than the amounts held by irrevocable controlled trusts. For irrevocable controlled trusts, the corpus would
be settled in favour of the beneficiaries.
For details of shares reserved for issue under
the employee stock option plan of the Company refer to the note below
In the period of five years immediately preceding
December 31, 2019:
Bonus Issue
The Company has allotted 2,18,41,91,490 , 1,14,84,72,332
and 57,42,36,166 fully paid-up shares of face value 5/- each during the quarter ended September 30, 2018 , June 30, 2015
and December 31, 2014, respectively pursuant to bonus issue approved by the shareholders through postal ballot. The bonus shares
were issued by capitalization of profits transferred from general reserve. Bonus share of one equity share for every equity share
held, and a bonus issue, viz., a stock dividend of one American Depositary Share (ADS) for every ADS held, respectively, has been
allotted. Consequently, the ratio of equity shares underlying the ADSs held by an American Depositary Receipt holder remains unchanged.
Options granted under the stock option plan have been adjusted for bonus shares wherever appropriate.
The bonus shares once allotted shall rank pari
passu in all respects and carry the same rights as the existing equity shareholders and shall be entitled to participate in full,
in any dividend and other corporate action, recommended and declared after the new equity shares are allotted.
Update on capital allocation policy and buyback
In line with the capital allocation policy announced
in April 2018, the Board, in its meeting held on January 11, 2019, approved the following :
| (a) | | Declared a special dividend of 4/- per equity share; |
| (b) | | Recommended buyback of Equity Shares from the open market route through Indian stock
exchanges of up to 8,260 crore (Maximum Buyback Size) at a price not exceeding 800
per share (Maximum Buyback Price) which would comprise approximately 2.36% of the paid-up equity share capital of the Company,
subject to shareholders' approval by way of Postal Ballot. |
The shareholders approved the proposal of buyback
of equity shares recommended by its Board of Directors in its meeting held on January 11, 2019 through the postal ballot that concluded
on March 12, 2019.
The buyback was offered to all eligible equity
shareholders of the Company (other than the Promoters, the Promoter Group and Persons in Control of the Company) under the open
market route through the stock exchange. The buyback of equity shares through the stock exchange commenced on March 20, 2019 and
was completed on August 26, 2019 . During this buyback period the Company had purchased and extinguished a total of 110,519,266
equity shares from the stock exchange at an average buy back price of 747/- per equity share comprising 2.53% of the pre
buyback paid-up equity share capital of the Company. The buyback resulted in a cash outflow of 8,260 crore (excluding transaction
costs). The Company funded the buyback from its free reserves.
In accordance with section 69 of the Companies
Act, 2013, as at December 31, 2019 the Company has created ‘Capital Redemption Reserve’ of 55 crore equal to
the nominal value of the above shares bought back as an appropriation from general reserve.
After the execution of the above buy back, payment
of special dividend (including dividend distribution tax) of 2,107 crore in January 2019 and payment of special dividend
(including dividend distribution tax) of 2,633 crore in June 2018, the Company has completed the distribution of 13,000
crore, which was announced as part of its capital allocation policy in April 2018.
The Company’s objective when managing
capital is to safeguard its ability to continue as a going concern and to maintain an optimal capital structure so as to maximize
shareholder value. In order to maintain or achieve an optimal capital structure, the Company may adjust the amount of dividend
payment, return capital to shareholders, issue new shares or buy back issued shares. As at December 31, 2019, the Company has only
one class of equity shares and has no debt. Consequent to the above capital structure there are no externally imposed capital requirements.
Dividend
The final dividend on shares is recorded as
a liability on the date of approval by the shareholders and interim dividends are recorded as a liability on the date of declaration
by the Company's Board of Directors.
The Company declares and pays dividends in Indian
rupees. The remittance of dividends outside India is governed by Indian law on foreign exchange and is subject to applicable distribution
taxes. Dividend distribution tax paid by subsidiaries may be reduced / available as credit against dividend distribution tax payable
by Infosys Limited.
Effective fiscal 2018 the Company’s policy
was to pay up to 70% of the free cash flow annually by way of dividend and/or buyback.
Effective from fiscal 2020, the company expects
to return approximately 85% of the free cash flow cumulatively over a 5-year period through a combination of semi-annual dividends
and/or share buyback and/or special dividends, subject to applicable laws and requisite approvals, if any. Free cash flow is defined
as net cash provided by operating activities less capital expenditure as per the consolidated statement of cash flows prepared
under IFRS. Dividend and buyback include applicable taxes.
Amount of per share dividend recognized as
distribution to equity shareholders:
(in )
| Particulars |
Three months ended
December 31, |
Nine months ended
December 31, |
| |
2019 |
2018 |
2019 |
2018 |
| Final dividend for fiscal 2018* |
– |
– |
– |
10.25 |
| Special dividend for fiscal 2018* |
– |
– |
– |
5.00 |
| Interim dividend for fiscal 2019 |
– |
7.00 |
– |
7.00 |
| Final dividend for fiscal 2019 |
– |
– |
10.50 |
– |
| Interim dividend for fiscal 2020 |
8.00 |
– |
8.00 |
– |
*Dividend per share declared previously, retrospectively
adjusted for September 2018 bonus issue
The Board of Directors in their meeting on April
12, 2019 recommended a final dividend of 10.50/- per equity share for the financial year ended March 31, 2019. The same
was approved by the Shareholders at the Annual General Meeting held on June 22, 2019 which resulted in a cash outflow of approximately
5,425 crore, excluding dividend paid on treasury shares and including dividend distribution
tax.
The Board of Directors in their meeting on October
11, 2019 declared an interim dividend of 8/- per equity share which resulted in a net cash outflow of approximately 4,092
crore, (excluding dividend paid on treasury shares) inclusive of dividend distribution tax
The details of shareholder holding more than 5%
shares as at December 31, 2019 and March 31, 2019 are as follows :
| Name of the shareholder |
As at December 31, 2019 |
As at March 31, 2019 |
| |
Number of shares |
% held |
Number of shares |
% held |
| Deutsche Bank Trust Company Americas (Depository of ADR's - legal ownership) |
74,19,56,616 |
17.42 |
74,62,54,648 |
17.11 |
| Life Insurance Corporation of India |
26,81,85,741 |
6.30 |
25,43,32,376 |
5.83 |
The reconciliation of the number of shares outstanding
and the amount of share capital as at December 31, 2019 and March 31, 2019 are as follows:
(In crore, except as stated otherwise)
| Particulars |
As at December 31, 2019 |
As at March 31, 2019 |
| |
Number of shares |
Amount |
Number of shares |
Amount |
| As at the beginning of the period |
4,33,59,54,462 |
2,170 |
2,17,33,12,301 |
1,088 |
| Add: Shares issued on exercise of employee stock options - before bonus issue |
– |
– |
3,92,528 |
– |
| Add: Bonus shares issued |
– |
– |
2,17,37,04,829 |
1,088 |
| Add: Shares issued on exercise of employee stock options – after bonus issue |
16,79,240 |
1 |
11,96,804 |
– |
| Less: Shares bought back (1)(2) |
9,78,67,266 |
49 |
1,26,52,000 |
6 |
| As at the end of the period |
4,23,97,66,436 |
2,122 |
4,33,59,54,462 |
2,170 |
| (1) | | Includes 18,18,000 shares which have been purchased on account of buyback during the
three months ended March 31, 2019 and have not been extinguished as of March 31, 2019 |
| (2) | | Includes 36,36,000 shares which have been purchased on account of buyback during the
three months ended March 31, 2019 but have not been settled and therefore not extinguished as of March 31, 2019 |
Employee Stock Option Plan (ESOP):
Accounting policy
The Group recognizes compensation expense relating
to share-based payments in net profit using fair value in accordance with Ind AS 102, Share-Based Payment. The estimated fair value
of awards is charged to 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 options outstanding account.
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 5,00,00,000 equity shares. To implement the 2019 Plan, upto 4,50,00,000 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) 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 has been 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 2,40,38,883 equity shares (this includes 1,12,23,576 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.
Consequent to the September, 2018 bonus issue,
all the then outstanding options granted under the stock option plan have been adjusted for bonus shares. Unless otherwise stated,
all the prior period share numbers, share prices and weighted average exercise prices in this note have been adjusted to give effect
to the September 2018 bonus issue.
Controlled trust holds 1,87,81,564 and 2,03,24,982
shares as at December 31, 2019 and March 31, 2019, respectively under the 2015 plan. Out of these shares 2,00,000 equity shares
each have been earmarked for welfare activities of the employees as at December 31, 2019 and March 31, 2019.
The following is the summary of grants during
the three months and nine months ended December 31, 2019 and December 31, 2018 under the 2015 Plan:
| Particulars |
Three months ended
December 31, |
Nine months ended
December 31, |
| |
2019 |
2018* |
2019 |
2018* |
| 2015 Plan: |
|
|
|
|
| Equity Settled RSU |
|
|
|
|
| KMPs |
– |
– |
2,12,096 |
2,17,200 |
| Employees other than KMP |
19,39,180 |
– |
19,76,030 |
17,87,120 |
| |
19,39,180 |
– |
21,88,126 |
20,04,320 |
| Cash settled RSU |
|
|
|
|
| Employees other than KMP # |
98,480 |
– |
98,480 |
52,590 |
| |
98,480 |
– |
98,480 |
52,590 |
| |
20,37,660 |
– |
22,86,606 |
20,56,910 |
* Information is adjusted for September
2018 bonus issue.
| # | | Excludes 260,360 RSUs approved by the NARC as of November 1, 2019, pending to be
communicated to employees |
Notes on grants to KMP:
CEO & MD
Under the 2015 plan:
The Board, on April 12, 2019, based on the recommendations
of the Nomination and Remuneration Committee, approved the performance-based grant of RSUs amounting to 13 crore for the
financial year 2020 under the 2015 Plan. These RSUs will vest in line with the employment agreement based on achievement of certain
performance targets. Accordingly, 177,887 performance based RSU’s were granted effective May 2, 2019.
In accordance with the shareholders approval
in the Annual General meeting held on June 22, 2019, the Board, based on the recommendations of the Nomination and Remuneration
Committee, approved to amend the vesting period of the annual performance equity grant from three years to one year. Accordingly
the vesting period of 217,200 (adjusted for September 2018 bonus issue) performance based RSUs granted effective May 2, 2018 and
177,887 performance based RSU's granted effective May 2,2019 have been amended to one year.
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 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 December
31, 2019, since the service commencement date precedes the grant date, the company has recorded employment stock compensation expense
in accordance with Ind AS 102, Share based payments.
Under the 2019 plan:
In accordance with the shareholders approval
in Annual General meeting held on June 22, 2019, the Board, based on the recommendations of the Nomination and Remuneration Committee,
approved performance-based grant of RSUs amounting to 10 crore for financial year 2020 under the 2019 Plan to Salil Parekh,
CEO and MD. These RSUs will vest in line with the employment agreement based on achievement of certain performance targets. Accordingly,
134,138 performance based RSU’s were granted effective June 22, 2019.
COO and Whole time director
In accordance with the shareholders approval
in Annual General meeting held on June 22, 2019, the Board, based on the recommendations of the Nomination and Remuneration Committee,
approved performance-based grant of RSUs amounting to 4 crore for financial year 2020 under the 2019 Plan to U. B. Pravin
Rao, COO and WTD. These RSUs will vest in line with the employment agreement based on achievement of certain performance targets.
Accordingly, 53,655 performance based RSU’s were granted effective June 22, 2019
Other KMP
Based on the recommendations of the Nomination
and Remuneration Committee, the Board, approved performance-based grant of 10,263 RSUs and time based grant of 23,946 RSUs to other
KMP under the 2015 Plan during the nine months ended December 31, 2019. The grants were made effective May 2, 2019. These RSUs
will vest generally over three to four years and additionally the performance based RSUs will vest based on achievement of certain
performance targets.
Break-up of employee stock compensation expense:
(in crore)
| Particulars |
Three months ended
December 31, |
Nine months ended
December 31, |
| |
2019 |
2018 |
2019 |
2018 |
| Granted to: |
|
|
|
|
| KMP |
14 |
4 |
45 |
23 |
| Employees other than KMP |
50 |
42 |
138 |
120 |
| Total (1) |
64 |
46 |
183 |
143 |
| (1) Cash-settled stock compensation expense included above |
2 |
1 |
4 |
4 |
Share based payment arrangements that were
modified during the three months ended December 31, 2019:
In December 2019, the company issued stock appreciation
rights as replacement for outstanding ADS settled RSU and ESOP awards. The replacement was pursuant to SEBI Circular 'Framework
for issue of Depository Receipts' dated October 10, 2019 which prohibited companies to allot ADS to Indian residents and Non resident
Indians. The awards were granted after necessary approvals from the NARC. All other terms and conditions of the replaced awards
remain the same as the original award.
The replacement awards was accounted as a modification
and the fair value on the date of modification of 41 crore is recognized as financial liability with a corresponding adjustment
to equity.
The activity in the 2015 Plan for equity-settled
share based payment transactions during the three months ended December 31, 2019 and December 31, 2018 is set out as follows:
| Particulars |
Three months ended
December 31, 2019 |
Three months ended
December 31, 2018* |
| |
Shares arising out of options |
Weighted average exercise price () |
Shares arising out of options |
Weighted average exercise price () |
| 2015 Plan: RSU |
|
|
|
|
| Outstanding at the beginning |
77,18,374 |
3.31 |
83,19,752 |
2.50 |
| Granted |
19,39,180 |
5.00 |
– |
– |
| Exercised |
2,29,648 |
2.50 |
3,81,960 |
2.50 |
| Modification to cash settled awards |
6,53,252 |
– |
– |
– |
| Forfeited and expired |
94,710 |
2.56 |
2,78,326 |
2.50 |
| Outstanding at the end |
86,79,944 |
3.77 |
76,59,466 |
2.50 |
| Exercisable at the end |
1,66,936 |
3.77 |
18,196 |
2.50 |
| 2015 Plan: Employee Stock Options (ESOPs) |
|
|
|
|
| Outstanding at the beginning |
15,52,026 |
525 |
18,10,002 |
531 |
| Granted |
– |
– |
– |
– |
| Exercised |
54,122 |
531 |
1,03,602 |
525 |
| Modification to cash settled awards |
3,51,550 |
– |
– |
– |
| Forfeited and expired |
– |
– |
64,800 |
499 |
| Outstanding at the end |
11,46,354 |
520 |
16,41,600 |
519 |
| Exercisable at the end |
8,22,656 |
520 |
7,06,724 |
520 |
* Information is adjusted for September, 2018
bonus issue
The activity in the 2015 Plan for equity-settled
share based payment transactions during the nine months ended December 31, 2019 and December 31, 2018 is set out as follows:
| Particulars |
Nine months ended
December 31, 2019 |
Nine months ended
December 31, 2018* |
| |
Shares arising out of options |
Weighted average exercise price () |
Shares arising out of options |
Weighted average exercise price () |
| 2015 Plan: RSU |
|
|
|
|
| Outstanding at the beginning |
91,81,198 |
3.13 |
75,00,818 |
2.50 |
| Granted |
21,88,126 |
5.00 |
20,04,320 |
2.50 |
| Exercised |
16,05,568 |
2.50 |
12,04,432 |
2.50 |
| Modification to cash settled awards |
6,53,252 |
– |
– |
– |
| Forfeited and expired |
4,30,560 |
2.73 |
6,41,240 |
2.50 |
| Outstanding at the end |
86,79,944 |
3.77 |
76,59,466 |
2.50 |
| Exercisable at the end |
1,66,936 |
3.77 |
18,196 |
2.50 |
| 2015 Plan: Employee Stock Options (ESOPs) |
|
|
|
|
| Outstanding at the beginning |
16,23,176 |
516 |
19,33,826 |
493 |
| Granted |
– |
– |
– |
– |
| Exercised |
73,672 |
520 |
1,09,126 |
515 |
| Modification to cash settled awards |
3,51,550 |
– |
– |
– |
| Forfeited and expired |
51,600 |
541 |
1,83,100 |
521 |
| Outstanding at the end |
11,46,354 |
520 |
16,41,600 |
519 |
| Exercisable at the end |
8,22,656 |
520 |
7,06,724 |
520 |
* Information is adjusted for September,
2018 bonus issue
During the three months ended December 31, 2019
and December 31, 2018 the weighted average share price of options exercised under the 2015 Plan on the date of exercise was 714
and 665 (adjusted for September 2018 bonus issue) respectively.
During the nine months ended December 31, 2019
and December 31, 2018 the weighted average share price of options exercised under the 2015 Plan on the date of exercise was 769
and 685 (adjusted for September 2018 bonus issue) respectively.
The summary of information about equity settled
RSUs and ESOPs outstanding as at December 31, 2019 is as follows:
| |
Options outstanding |
| Range of exercise prices per share () |
No. of shares arising out of options |
Weighted average remaining contractual life |
Weighted average exercise price () |
| 2015 Plan: |
|
|
|
| 0 - 5 (RSU) |
86,79,944 |
1.50 |
3.81 |
| 450 - 600 (ESOP) |
11,46,354 |
3.78 |
520 |
| |
98,26,298 |
1.78 |
67 |
The summary of information about equity settled
RSUs and ESOPs outstanding as at March 31, 2019 was as follows:
| |
Options outstanding |
| Range of exercise prices per share () |
No. of shares arising out of options |
Weighted average remaining contractual life |
Weighted average exercise price () |
| 2015 Plan: |
|
|
|
| 0 - 2.50 (RSU) |
91,81,198 |
1.70 |
3.13 |
| 450 - 600 (ESOP) |
16,23,176 |
5.04 |
516 |
| |
1,08,04,374 |
2.20 |
80 |
The fair value of each equity settled award
is estimated on the date of grant using the Black-Scholes-Merton model with the following assumptions:
| Particulars |
For options granted in |
| |
Fiscal 2020-
Equity Shares-RSU |
Fiscal 2020-
ADS-RSU |
Fiscal 2019-
Equity Shares RSU |
Fiscal 2019-
ADS RSU |
| Weighted average share price () / ($- ADS) (1) |
693 |
9.78 |
696 |
10.77 |
| Exercise price ()/ ($- ADS) (1) |
5 |
0.07 |
3.31 |
0.06 |
| Expected volatility (%) |
22–30 |
22–26 |
21–25 |
22–26 |
| Expected life of the option (years) |
1–4 |
1–4 |
1–4 |
1–4 |
| Expected dividends (%) |
2–3 |
2–3 |
2.65 |
2.65 |
| Risk-free interest rate (%) |
6–7 |
1–3 |
7–8 |
2–3 |
| Weighted average fair value as on grant date () / ($- ADS) (1) |
646 |
9.15 |
648 |
10.03 |
(1) Fiscal 2019 values are
adjusted for September, 2018 bonus issue wherever applicable
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. Expected volatility during the expected term of the RSU / ESOP 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 RSU / ESOP.
As at December 31, 2019 and March 31, 2019,
1,124,674 and 1,77,454 (net of forfeitures) cash settled options were outstanding respectively. The carrying value of liability
towards cash settled share based payments was 44 crore and 9 crore as at December 31, 2019 and March 31, 2019 respectively.
2.12 OTHER FINANCIAL LIABILITIES
(In crore)
| Particulars |
As at |
| |
December 31, 2019 |
March 31, 2019 |
| Non-current |
|
|
| Others |
|
|
| Accrued compensation to employees (1) |
22 |
15 |
| Compensated absences |
47 |
44 |
| Financial liability under option arrangements (refer to note 2.1.1)(2) |
622 |
– |
| Payable for acquisition of business (refer to note 2.1.1) (2) |
|
|
| Contingent consideration |
93 |
88 |
| Other Payables (1) |
5 |
– |
| Total non-current other financial liabilities |
789 |
147 |
| Current |
|
|
| Unpaid dividends (1) |
31 |
29 |
| Others |
|
|
| Accrued compensation to employees (1) |
3,015 |
2,572 |
| Accrued expenses (1) |
4,268 |
3,319 |
| Retention monies (1) |
171 |
112 |
| Payable for acquisition of business |
|
|
| Contingent consideration (refer note no. 2.1.1) (2) |
122 |
102 |
| Payable by controlled trusts (1) |
154 |
168 |
| Financial liability relating to buyback (refer to note 2.11)(1) (4) |
– |
1,202 |
| Compensated absences |
1,914 |
1,619 |
| Foreign currency forward and options contracts (2)(3) |
90 |
15 |
| Capital creditors (1) |
216 |
676 |
| Other payables (1) |
385 |
638 |
| Total current other financial liabilities |
10,366 |
10,452 |
| Total other financial liabilities |
11,155 |
10,599 |
| (1) Financial liability carried at amortized cost |
8,267 |
8,731 |
| (2) Financial liability carried at fair value through profit or loss |
915 |
205 |
| (3) Financial liability carried at fair value through other comprehensive income |
12 |
– |
| Contingent consideration on undiscounted basis |
240 |
233 |
| (4) | | In accordance with Ind AS 32, Financial Instruments : Presentation, the Company has
recorded a financial liability as at March 31, 2019 for the obligation to acquire its own equity shares to the extent of standing
instructions provided to its registered broker for the buyback (refer to note 2.11). The financial liability is recognised at
the present value of the maximum amount that the Company would be required to pay to the registered broker for buyback, with a
corresponding debit in general reserve / retained earnings. The liability has been utilized towards buyback of equity shares which
was completed on August 26, 2019. |
2.13 OTHER LIABILITIES
(In crore)
| Particulars |
As at |
| |
December 31, 2019 |
March 31, 2019 |
| Non-current |
|
|
| Others |
|
|
| Deferred income - government grant on land use rights |
41 |
42 |
| Accrued gratuity (refer to note 2.20.1) |
34 |
30 |
| Accrued provident fund liability (refer to note 2.20.2) |
123 |
– |
| Deferred rent (refer to note 2.19) |
– |
174 |
| Deferred income |
24 |
29 |
| Others |
2 |
– |
| Total non-current other liabilities |
224 |
275 |
| Current |
|
|
| Unearned revenue |
3,124 |
2,809 |
| Client deposit |
17 |
26 |
| Others |
|
|
| Withholding taxes and others |
1,793 |
1,487 |
| Accrued gratuity (refer to note 2.20.1) |
2 |
2 |
| Accrued provident fund liability (refer to note 2.20.2) |
105 |
– |
| Deferred rent (refer to note 2.19) |
3 |
63 |
| Deferred income - government grant on land use rights |
1 |
1 |
| Others |
1 |
– |
| Total current other liabilities |
5,046 |
4,388 |
| Total other liabilities |
5,270 |
4,663 |
2.14 PROVISIONS
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.
a. Post sales client support
The Group provides its clients with a fixed-period
post sales support on its fixed-price, fixed-timeframe contracts. Costs associated with such support services are accrued at the
time related revenues are recorded and included in Consolidated Statement of Profit and Loss. 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.
b. 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.
Provision for post-sales client support and
other provisions
(In crore)
| Particulars |
As at |
| |
December 31, 2019 |
March 31, 2019 |
| Current |
|
|
| Others |
|
|
| Post-sales client support and other provisions |
603 |
576 |
| Total provisions |
603 |
576 |
The movement in the provision for post-sales
client support and other provisions is as follows :
(In crore)
| Particulars |
Three months ended |
Nine months ended |
| |
December 31, 2019 |
December 31, 2019 |
| Balance at the beginning |
608 |
576 |
| Provision recognized/(reversed) |
55 |
115 |
| Provision utilized |
(65) |
(107) |
| Exchange difference |
5 |
19 |
| Balance at the end |
603 |
603 |
Provision for post sales client support and
other provisions represents cost associated with providing post 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.
2.15 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 Profit and Loss 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 or settled. 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 securities
premium.
Income tax expense in the consolidated Statement
of Profit and Loss comprises:
(In crore)
| Particulars |
Three months ended December 31, |
Nine months ended December 31, |
| |
2019 |
2018 |
2019 |
2018 |
| Current taxes |
1,492 |
1,472 |
4,440 |
4,534 |
| Deferred taxes |
(109) |
50 |
(233) |
(108) |
| Income tax expense |
1,383 |
1,522 |
4,207 |
4,426 |
Income tax expense for the three months ended
December 31, 2019 and December 31, 2018 includes reversal (net of provisions) of 77 crore and provision (net of reversal
of 14 crore, respectively. Income tax expense for the nine months ended December 31, 2019 and December 31, 2018 includes
reversal (net of provisions) of 196 crore and 47 crore, respectively. These reversal (net of provisions) pertain
to prior periods and is mainly on account of changes to US tax regulations with respect to Base Erosion Anti-abuse Tax.
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:
(In crore)
| Particulars |
Three months ended December 31, |
Nine months ended December 31, |
| |
2019 |
2018 |
2019 |
2018 |
| Profit before income taxes |
5,849 |
5,132 |
16,511 |
15,758 |
| Enacted tax rates in India |
34.94% |
34.94% |
34.94% |
34.94% |
| Computed expected tax expense |
2,044 |
1,793 |
5,770 |
5,506 |
| Tax effect due to non-taxable income for Indian tax purposes |
(801) |
(682) |
(1,977) |
(1,950) |
| Overseas taxes |
194 |
214 |
603 |
644 |
| Tax provision (reversals) |
(77) |
14 |
(196) |
(47) |
| Effect of exempt non-operating income |
(4) |
(11) |
(25) |
(45) |
| Effect of unrecognized deferred tax assets |
16 |
19 |
62 |
75 |
| Effect of differential tax rates |
(55) |
3 |
(74) |
(3) |
| Effect of non-deductible expenses |
62 |
190 |
107 |
307 |
| Branch profit tax (net of credits) |
(33) |
(27) |
(90) |
(83) |
| Others |
37 |
9 |
27 |
22 |
| Income tax expense |
1,383 |
1,522 |
4,207 |
4,426 |
The applicable Indian corporate statutory tax
rate for the nine months ended December 31, 2019 and December 31, 2018 is 34.94% each.
The foreign tax expense is due to income taxes
payable overseas principally in the United States. In India, the Group has benefited from certain tax incentives that the Government
of India had provided for export of software and services from the units registered under the Special Economic Zones (SEZs) Act,
2005. SEZ units which began the provision of services on or after April 1, 2005 are eligible for a deduction of 100% of profits
or gains derived from the export of services for the first five years from the financial year in which the unit commenced the provision
of services and 50% of such profits or gains for further five years. Up to 50% of such profits or gains is also available for a
further five years subject to creation of a Special Economic Zone re-Investment Reserve out of the profit of the eligible SEZ units
and utilization of such reserve by the Group for acquiring new plant and machinery for the purpose of its business as per the provisions
of the Income Tax Act, 1961.
Deferred income tax for the three months and
nine months ended December 31, 2019 and December 31, 2018 substantially relates to origination and reversal of temporary differences.
Infosys is subject to a 15% BPT in the U.S.
to the extent its U.S. branch's net profit during the year is greater than the increase in the net assets of the U.S. branch during
the year, computed in accordance with the Internal Revenue Code. As at March 31, 2019, Infosys' U.S. branch net assets amounted
to approximately 5,196 crore. As at December 31, 2019, the Company has a deferred tax liability for branch profit tax
of 116 crore (net of credits), as the Company estimates that these branch profits are expected to be distributed
in the foreseeable future.
Deferred income tax liabilities have not been
recognized on temporary differences amounting to 8,070 crore and 6,007 crore as at December 31, 2019 and March 31,
2019, respectively, associated with investments in subsidiaries and branches as it is probable that the temporary differences will
not reverse in the foreseeable future.
Deferred income tax assets have not been recognized
on accumulated losses of 3,230 crore and 2,624 crore as at December 31, 2019 and March 31, 2019, respectively, as
it is probable that future taxable profit will be not available against which the unused tax losses can be utilized in the foreseeable
future.
The following table provides details of expiration
of unused tax losses as at December 31, 2019:
(In crore)
| Year |
As at |
| |
December 31, 2019 |
| 2020 |
147 |
| 2021 |
80 |
| 2022 |
137 |
| 2023 |
202 |
| 2024 |
165 |
| Thereafter |
2,499 |
| Total |
3,230 |
The following table provides details of expiration
of unused tax losses as at March 31, 2019:
(In crore)
| Year |
As at |
| |
March 31, 2019 |
| 2020 |
173 |
| 2021 |
80 |
| 2022 |
142 |
| 2023 |
198 |
| 2024 |
187 |
| Thereafter |
1,844 |
| Total |
2,624 |
The following table provides the details of income
tax assets and income tax liabilities as at December 31, 2019 and March 31, 2019:
(In crore)
| Particulars |
As at |
| |
December 31, 2019 |
March 31, 2019 |
| Income tax assets |
5,283 |
6,743 |
| Current income tax liabilities |
1,544 |
1,567 |
| Net current income tax asset / (liability) at the end |
3,739 |
5,176 |
The gross movement in the current income tax
asset/ (liability) for the three months and nine months ended December 31, 2019 and December 31, 2018 is as follows:
(In crore)
| Particulars |
Three months ended December 31, |
Nine months ended December 31, |
| |
2019 |
2018 |
2019 |
2018 |
| Net current income tax asset/ (liability) at the beginning |
4,913 |
4,637 |
5,176 |
4,027 |
| Translation differences |
1 |
2 |
(3) |
(2) |
| Income tax paid |
259 |
1,606 |
2,964 |
5,259 |
| Current income tax expense |
(1,492) |
(1,472) |
(4,440) |
(4,534) |
| Reclassified under assets held for sale (refer note no. 2.1.2) |
– |
– |
– |
23 |
| Reclassified from held for sale (Refer note 2.1.2) |
– |
13 |
– |
13 |
| Income tax benefit arising on exercise of stock options |
(1) |
1 |
6 |
3 |
| Additions through business combination |
– |
(9) |
(40) |
(9) |
| Tax impact on buyback expenses |
– |
– |
4 |
– |
| Income tax on other comprehensive income |
59 |
5 |
72 |
3 |
| Net current income tax asset/ (liability) at the end |
3,739 |
4,783 |
3,739 |
4,783 |
The movement in gross deferred income tax assets
and liabilities (before set off) for the three months ended December 31, 2019 is as follows:
(In crore)
| Particulars |
Carrying value as at October 1, 2019 |
Changes through profit and loss |
Addition through business combination |
Changes through OCI |
Impact on account of Ind AS 116 adoption |
Reclassified from Held for Sale, net |
Translation difference |
Carrying value as of December 31, 2019 |
| Deferred income tax assets |
|
|
|
|
|
|
|
|
| Property, plant and equipment |
256 |
(8) |
– |
– |
– |
– |
– |
248 |
| Lease liabilities |
20 |
58 |
– |
– |
– |
– |
1 |
79 |
| Accrued compensation to employees |
36 |
(1) |
– |
– |
– |
– |
1 |
36 |
| Trade receivables |
181 |
4 |
– |
– |
– |
– |
– |
185 |
| Compensated absences |
433 |
5 |
– |
– |
– |
– |
1 |
439 |
| Post sales client support |
108 |
1 |
– |
– |
– |
– |
(1) |
108 |
| Derivative financial instruments |
8 |
13 |
– |
– |
– |
– |
(3) |
18 |
| Intangibles |
18 |
– |
– |
– |
– |
– |
– |
18 |
| Credits related to branch profits |
279 |
(35) |
– |
– |
– |
– |
1 |
245 |
| Others |
163 |
14 |
– |
(4) |
– |
– |
1 |
174 |
| Total deferred income tax assets |
1,502 |
51 |
– |
(4) |
– |
– |
1 |
1,550 |
| Deferred income tax liabilities |
|
|
|
|
|
|
|
|
| Intangible asset |
(283) |
6 |
– |
– |
– |
– |
– |
(277) |
| Branch profit tax |
(426) |
68 |
– |
– |
– |
– |
(3) |
(361) |
| Derivative financial instruments |
(70) |
34 |
– |
8 |
– |
– |
(1) |
(29) |
| Others |
(67) |
(50) |
– |
– |
– |
– |
(1) |
(118) |
| Total Deferred income tax liabilities |
(846) |
58 |
– |
8 |
– |
– |
(5) |
(785) |
The movement in gross deferred income tax assets
and liabilities (before set off) for the three months ended December 31, 2018 is as follows:
(In crore)
| Particulars |
Carrying value as at October 1, 2018 |
Changes through profit and loss |
Addition through business combination |
Changes through OCI |
Impact on account of Ind AS 116 |
Reclassified as Held for Sale, net |
Translation difference |
Carrying value as of December 31, 2018 |
| Deferred income tax assets |
|
|
|
|
|
|
|
|
| Property, plant and equipment |
232 |
10 |
– |
– |
– |
1 |
(1) |
242 |
| Accrued compensation to employees |
20 |
1 |
– |
– |
– |
4 |
– |
25 |
| Trade receivables |
151 |
14 |
– |
– |
– |
– |
– |
165 |
| Compensated absences |
380 |
5 |
– |
– |
– |
2 |
– |
387 |
| Post sales client support |
107 |
4 |
– |
– |
– |
– |
– |
111 |
| Derivative financial instruments |
58 |
(57) |
– |
2 |
– |
– |
– |
3 |
| Intangibles |
14 |
2 |
– |
– |
– |
– |
– |
16 |
| Credits related to branch profits |
313 |
(38) |
– |
– |
– |
– |
(14) |
261 |
| Others |
122 |
27 |
– |
(5) |
– |
46 |
(9) |
181 |
| Total deferred income tax assets |
1,397 |
(32) |
– |
(3) |
– |
53 |
(24) |
1,391 |
| Deferred income tax liabilities |
|
|
|
|
|
|
|
|
| Intangible asset |
(41) |
30 |
(56) |
– |
– |
(96) |
– |
(163) |
| Branch profit tax |
(437) |
65 |
– |
– |
– |
– |
17 |
(355) |
| Derivative financial instruments |
(1) |
(89) |
– |
(16) |
– |
– |
(1) |
(107) |
| Others |
(32) |
(24) |
(8) |
(19) |
– |
(2) |
4 |
(81) |
| Total Deferred income tax liabilities |
(511) |
(18) |
(64) |
(35) |
– |
(98) |
20 |
(706) |
The movement in gross deferred income tax assets
and liabilities (before set off) for the nine months ended December 31, 2019 is as follows:
(In crore)
| Particulars |
Carrying value as at April 1, 2019 |
Changes through profit and loss |
Addition through business combination |
Changes through OCI |
Impact on account of Ind AS 116 adoption |
Reclassified from Held for Sale, net |
Translation difference |
Carrying value as of December 31, 2019 |
| Deferred income tax assets |
|
|
|
|
|
|
|
|
| Property, plant and equipment |
262 |
(15) |
1 |
– |
– |
– |
– |
248 |
| Lease liabilities |
52 |
19 |
– |
– |
6 |
– |
2 |
79 |
| Accrued compensation to employees |
31 |
7 |
– |
– |
– |
– |
(2) |
36 |
| Trade receivables |
176 |
9 |
– |
– |
– |
– |
– |
185 |
| Compensated absences |
397 |
41 |
– |
– |
– |
– |
1 |
439 |
| Post sales client support |
104 |
5 |
– |
– |
– |
– |
(1) |
108 |
| Derivative financial instruments |
4 |
17 |
– |
– |
– |
– |
(3) |
18 |
| Intangibles |
16 |
1 |
– |
– |
– |
– |
1 |
18 |
| Credits related to branch profits |
340 |
(103) |
– |
– |
– |
– |
8 |
245 |
| Others |
174 |
(1) |
9 |
(8) |
– |
– |
– |
174 |
| Total deferred income tax assets |
1,556 |
(20) |
10 |
(8) |
6 |
– |
6 |
1,550 |
| Deferred income tax liabilities |
|
|
|
|
|
|
|
|
| Intangible asset |
(128) |
30 |
(176) |
– |
– |
– |
(3) |
(277) |
| Branch profit tax |
(541) |
194 |
– |
– |
– |
– |
(14) |
(361) |
| Derivative financial instruments |
(110) |
70 |
– |
10 |
– |
– |
1 |
(29) |
| Others |
(77) |
(41) |
– |
1 |
– |
– |
(1) |
(118) |
| Total Deferred income tax liabilities |
(856) |
253 |
(176) |
11 |
– |
– |
(17) |
(785) |
The movement in gross deferred income tax assets
and liabilities (before set off) for the nine months ended December 31, 2018 is as follows:
(In crore)
| Particulars |
Carrying value as at April 1, 2018 |
Changes through profit and loss |
Addition through business combination |
Changes through OCI |
Impact on account of Ind AS 116 adoption |
Reclassified from Held for Sale, net |
Translation difference |
Carrying value as of December 31, 2018 |
| Deferred income tax assets |
|
|
|
|
|
|
|
|
| Property, plant and equipment |
215 |
26 |
– |
– |
– |
1 |
– |
242 |
| Accrued compensation to employees |
12 |
10 |
– |
– |
– |
2 |
1 |
25 |
| Trade receivables |
141 |
24 |
– |
– |
– |
– |
– |
165 |
| Compensated absences |
366 |
19 |
– |
– |
– |
2 |
– |
387 |
| Post sales client support |
98 |
12 |
– |
– |
– |
– |
1 |
111 |
| Derivative financial instruments |
13 |
(15) |
– |
4 |
– |
– |
1 |
3 |
| Intangibles |
9 |
6 |
– |
– |
– |
– |
1 |
16 |
| Credits related to branch profits |
341 |
(103) |
– |
– |
– |
– |
23 |
261 |
| Others |
117 |
32 |
– |
11 |
– |
33 |
(12) |
181 |
| Total deferred income tax assets |
1,312 |
11 |
– |
15 |
– |
38 |
15 |
1,391 |
| Deferred income tax liabilities |
|
|
|
|
|
|
|
|
| Intangible asset |
(38) |
29 |
(56) |
– |
– |
(86) |
(12) |
(163) |
| Branch profit tax |
(505) |
186 |
– |
– |
– |
– |
(36) |
(355) |
| Derivative financial instruments |
(2) |
(89) |
– |
(16) |
– |
– |
– |
(107) |
| Others |
(26) |
(29) |
(8) |
(20) |
– |
(5) |
7 |
(81) |
| Total Deferred income tax liabilities |
(571) |
97 |
(64) |
(36) |
– |
(91) |
(41) |
(706) |
The deferred income tax assets and liabilities
are as follows:
(In crore)
| Particulars |
As at |
| |
December 31, 2019 |
March 31, 2019 |
| Deferred income tax assets after set off |
1,392 |
1,372 |
| Deferred income tax liabilities after set off |
(627) |
(672) |
Deferred tax assets and deferred tax liabilities
have been offset wherever the Group has a legally enforceable right to set off current tax assets against current tax liabilities
and where the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same taxation authority.
In assessing the reliability of deferred income
tax assets, the 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. The 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.
2.16 REVENUE FROM OPERATIONS
Accounting policy
The Group derives revenues primarily from business
IT services comprising of software development and related services, consulting and package implementation and from the licensing
of software products and platforms across our core and digital offerings (“together called as software related services”).
Effective April 1, 2018, the Company adopted
Ind AS 115 “Revenue from Contracts with Customers” using the cumulative catch-up transition method, applied to contracts
that were not completed as of April 1, 2018. The effect on adoption of Ind AS 115 was insignificant.
Revenue is recognized upon transfer of control
of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for
those products or services.
Arrangements with customers for software related
services are either on a fixed-price, fixed-timeframe or on a time-and-material basis.
Revenue on time-and-material contracts are recognized
as the related services are performed and revenue from the end of the last invoicing to the reporting date is recognized as unbilled
revenue. Revenue from fixed-price, fixed-timeframe contracts, where the performance obligations are satisfied over time and where
there is no uncertainty as to measurement or collectability of consideration, is recognized as per the percentage-of-completion
method. When there is uncertainty as to measurement or ultimate collectability, revenue recognition is postponed until such uncertainty
is resolved. Efforts or costs expended have been used to measure progress towards completion as there is a direct relationship
between input and productivity. Maintenance revenue is recognized ratably over the term of the underlying maintenance arrangement.
Revenues in excess of invoicing are classified
as unbilled revenue while invoicing 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, the Group has applied the guidance in Ind AS 115, Revenue from contract with customer,
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 has measured 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). The Group has applied
the principles under Ind AS 115 to account for revenues from these performance obligations. When implementation services are provided
in conjunction with the licensing arrangement and the license and implementation have been identified as two 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 performance obligation is
estimated using the expected cost plus margin approach. 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 over the period in which the services are rendered.
The Group accounts for volume discounts and
pricing incentives to customers as a reduction of revenue based on the ratable allocation of the discounts/ incentives to each
of the underlying performance obligation that corresponds to the progress by the customer towards earning the discount/ incentive.
Also, when the level of discount varies with increases in levels of revenue transactions, the company recognizes the liability
based on its estimate of the customer's future purchases. If it is probable that the criteria for the discount will not be met,
or if the amount thereof cannot be estimated reliably, then discount is not recognized until the payment is probable and the amount
can be estimated reliably. The Group recognizes changes in the estimated amount of obligations for discounts in the period in which
the change occurs.
Deferred contract costs are incremental costs
of obtaining a contract which are recognised as assets and amortized over the term of the contract.
Contract modifications are accounted for when
additions, deletions or changes are approved either to the contract scope or contract price. The accounting for modifications of
contracts involves assessing whether the services added to an existing contract are distinct and whether the pricing is at the
standalone selling price. Services added that are not distinct are accounted for on a cumulative catch up basis, while those that
are distinct are accounted for prospectively, either as a separate contract, if the additional services are priced at the standalone
selling price, or as a termination of the existing contract and creation of a new contract if not priced at the standalone selling
price.
The Group presents revenues net of indirect
taxes in its statement of Profit and loss.
Revenues for the three months and nine months
ended December 31, 2019 and December 31, 2018 are as follows:
(In crore)
| Particulars |
Three months ended
December 31, |
Nine months ended
December 31, |
| |
2019 |
2018 |
2019 |
2018 |
| Revenue from software services |
21,706 |
20,225 |
63,452 |
57,987 |
| Revenue from products and platforms |
1,386 |
1,175 |
4,072 |
3,150 |
Total revenue from
operations |
23,092 |
21,400 |
67,524 |
61,137 |
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.
For the three months ended December 31, 2019
and December 31, 2018
(In crore)
| 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 |
4,289 |
2,320 |
1,797 |
1,631 |
1,328 |
1,625 |
1,017 |
156 |
14,163 |
| |
4,234 |
2,274 |
1,345 |
1,549 |
1,143 |
1,498 |
772 |
124 |
12,939 |
| Europe |
1,536 |
992 |
481 |
1,067 |
943 |
51 |
511 |
45 |
5,626 |
| |
1,231 |
1,001 |
483 |
925 |
923 |
29 |
531 |
47 |
5,170 |
| India |
331 |
13 |
73 |
5 |
20 |
60 |
11 |
131 |
644 |
| |
345 |
6 |
10 |
1 |
23 |
37 |
3 |
118 |
543 |
| Rest of the world |
1,118 |
205 |
651 |
245 |
87 |
13 |
20 |
320 |
2,659 |
| |
1,143 |
222 |
709 |
266 |
77 |
5 |
29 |
297 |
2,748 |
| Total |
7,274 |
3,530 |
3,002 |
2,948 |
2,378 |
1,749 |
1,559 |
652 |
23,092 |
| |
6,953 |
3,503 |
2,547 |
2,741 |
2,166 |
1,569 |
1,335 |
586 |
21,400 |
| Revenue by offerings |
|
|
|
|
|
|
|
|
|
| Digital |
3,065 |
1,585 |
1,284 |
1,153 |
916 |
653 |
529 |
200 |
9,385 |
| |
2,201 |
1,241 |
955 |
791 |
647 |
515 |
329 |
71 |
6,750 |
| Core |
4,209 |
1,945 |
1,718 |
1,795 |
1,462 |
1,096 |
1,030 |
452 |
13,707 |
| |
4,752 |
2,262 |
1,592 |
1,950 |
1,519 |
1,054 |
1,006 |
515 |
14,650 |
| Total |
7,274 |
3,530 |
3,002 |
2,948 |
2,378 |
1,749 |
1,559 |
652 |
23,092 |
| |
6,953 |
3,503 |
2,547 |
2,741 |
2,166 |
1,569 |
1,335 |
586 |
21,400 |
For the nine months ended December 31, 2019
and December 31, 2018
(In crore)
| 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 |
12,473 |
6,788 |
5,536 |
4,838 |
3,809 |
4,837 |
2,800 |
395 |
41,476 |
| |
11,959 |
6,585 |
3,817 |
4,354 |
3,187 |
4,338 |
2,299 |
305 |
36,844 |
| Europe |
4,444 |
2,972 |
1,370 |
3,097 |
2,639 |
137 |
1,457 |
118 |
16,234 |
| |
3,634 |
2,850 |
1,433 |
2,575 |
2,579 |
71 |
1,519 |
115 |
14,776 |
| India |
969 |
38 |
153 |
7 |
63 |
142 |
29 |
355 |
1,756 |
| |
913 |
18 |
32 |
3 |
65 |
104 |
9 |
411 |
1,555 |
| Rest of the world |
3,458 |
615 |
1,907 |
802 |
257 |
25 |
67 |
927 |
8,058 |
| |
3,166 |
687 |
2,223 |
711 |
161 |
14 |
89 |
911 |
7,962 |
| Total |
21,344 |
10,413 |
8,966 |
8,744 |
6,768 |
5,141 |
4,353 |
1,795 |
67,524 |
| |
19,672 |
10,140 |
7,505 |
7,643 |
5,992 |
4,527 |
3,916 |
1,742 |
61,137 |
| Revenue by offerings |
|
|
|
|
|
|
|
|
|
| Digital |
8,398 |
4,482 |
3,529 |
3,237 |
2,533 |
1,859 |
1,342 |
472 |
25,852 |
| |
5,988 |
3,417 |
2,575 |
2,136 |
1,712 |
1,491 |
957 |
239 |
18,515 |
| Core |
12,946 |
5,931 |
5,437 |
5,507 |
4,235 |
3,282 |
3,011 |
1,323 |
41,672 |
| |
13,684 |
6,723 |
4,930 |
5,507 |
4,280 |
3,036 |
2,959 |
1,503 |
42,622 |
| Total |
21,344 |
10,413 |
8,966 |
8,744 |
6,768 |
5,141 |
4,353 |
1,795 |
67,524 |
| |
19,672 |
10,140 |
7,505 |
7,643 |
5,992 |
4,527 |
3,916 |
1,742 |
61,137 |
(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 |
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, Stater digital platform and Infosys McCamish- insurance platform.
Trade Receivables and Contract Balances
The Group classifies the right to consideration
in exchange for deliverables as either a receivable or as unbilled revenue.
A receivable is a right to consideration that
is unconditional upon passage of time. Revenue for time and material contracts are recognised as related service are performed.
Revenue for fixed price maintenance contracts is recognized on a straight line basis over the period of the contract. Revenues
in excess of billings is recorded as unbilled revenue and is classified as a financial asset for these cases as right to consideration
is unconditional upon passage of time .
Revenue recognition for fixed price development
contracts is based on percentage of completion method. Invoicing to the clients is based on milestones as defined in the contract.
This would result in the timing of revenue recognition being different from the timing of billing the customers. Unbilled revenue
for fixed price development contracts (contract asset) is classified as non financial asset as the contractual right to consideration
is dependent on completion of contractual milestones.
Invoicing in excess of earnings are classified
as unearned revenue.
Trade receivable and unbilled revenues are presented
net of impairment in the Consolidated Balance Sheet.
During the nine months ended December 31, 2019
and December 31, 2018 , the company recognized revenue of 2,281 crore and 1,871 crore arising from opening unearned
revenue as of April 1, 2019 and April 1, 2018 respectively.
During the nine months ended December 31, 2019
and December 31, 2018, 2,909 crore and 2,692 crore of unbilled revenue pertaining to fixed price development contracts
as of April 1, 2019 and April 1, 2018, respectively has been reclassified to Trade receivables upon billing to customers on completion
of milestones.
Performance obligations and remaining performance
obligations
The remaining performance obligation disclosure
provides the aggregate amount of the transaction price yet to be recognized as at the end of the reporting period and an explanation
as to when the Group expects to recognize these amounts in revenue. Applying the practical expedient as given in Ind AS 115, the
Group has not disclosed the remaining performance obligation related disclosures for contracts where the revenue recognized corresponds
directly with the value to the customer of the entity's performance completed to date, typically those contracts where invoicing
is on time and material basis. Remaining performance obligation estimates are subject to change and are affected by several factors,
including terminations, changes in the scope of contracts, periodic revalidations, adjustment for revenue that has not materialized
and adjustments for currency.
The aggregate value of performance obligations
that are completely or partially unsatisfied as at December 31, 2019, other than those meeting the exclusion criteria mentioned
above, is 55,228 crore. Out of this, the Group expects to recognize revenue of around 49% within the next one year and the
remaining thereafter. The aggregate value of performance obligations that are completely or partially unsatisfied as at March 31,
2019 is 51,274 crore. The contracts can generally be terminated by the customers and typically includes an enforceable termination
penalty payable by them.
2.17 OTHER INCOME, NET
Accounting policy
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.
Foreign currency
Accounting policy
Functional currency
The functional currency of Infosys, Infosys
BPM, controlled trusts, EdgeVerve and Skava is the Indian rupee. The functional currencies for other subsidiaries are their respective
local currencies. These financial statements are presented in Indian rupees (rounded off to crore; one crore equals ten million).
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 included in net profit in the Consolidated Statement of Profit and Loss. 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.
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 Consolidated Statement of Profit
and Loss. 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.
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.
Effective April 1, 2018, the Group has adopted
Appendix B to Ind AS 21- Foreign Currency Transactions and Advance Consideration which clarifies the date of transaction for the
purpose of determining the exchange rate to use on initial recognition of the related asset, expense or income when an entity has
received or paid advance consideration in a foreign currency. The effect on account of adoption of this amendment was insignificant.
Government grant
The Group recognizes government grants only
when there is reasonable assurance that the conditions attached to them shall be complied with, and the grants will be received.
Government grants related to assets are treated as deferred income and are recognized in net profit in the Consolidated Statement
of Profit and Loss 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 net profit in the Consolidated Statement of Profit and Loss over the periods necessary to match
them with the related costs which they are intended to compensate.
Other income for the three months and nine months
ended December 31, 2019 and December 31, 2018 is as follows:
(In crore)
| Particulars |
Three months ended
December 31, |
Nine months ended
December 31, |
| |
2019 |
2018 |
2019 |
2018 |
| Interest income on financial assets carried at amortized cost: |
|
|
|
|
| Tax free bonds and Government bonds |
36 |
36 |
108 |
107 |
| Deposit with Bank and others |
264 |
299 |
854 |
941 |
| Interest income on financial assets carried at fair value through other comprehensive income: |
|
|
|
|
| Non-convertible debentures and certificates of deposit, commercial paper and government securities |
61 |
177 |
257 |
503 |
| Income on investments carried at fair value through profit or loss |
|
|
|
|
| Dividend income on liquid mutual funds |
1 |
1 |
2 |
2 |
| Gain / (loss) on liquid mutual funds |
45 |
20 |
148 |
105 |
| Income on investments carried at fair value through other comprehensive income |
10 |
– |
37 |
- |
| Interest income on income tax refund |
242 |
51 |
251 |
51 |
| Exchange gains/ (losses) on foreign currency forward and options contracts |
(130) |
587 |
(33) |
(10) |
| Exchange gains/ (losses) on translation of assets and liabilities |
270 |
(530) |
429 |
273 |
| Miscellaneous income, net |
28 |
112 |
136 |
246 |
| Total other income |
827 |
753 |
2,189 |
2,218 |
2.18EXPENSES
(In crore)
| Particulars |
Three months ended
December 31, |
Nine months ended
December 31, |
| |
2019 |
2018 |
2019 |
2018 |
| Employee benefit expenses |
|
|
|
|
| Salaries including bonus |
12,571 |
11,256 |
36,763 |
32,193 |
| Contribution to provident and other funds |
281 |
247 |
824 |
712 |
| Share based payments to employees (Refer note no. 2.11) |
64 |
46 |
183 |
143 |
| Staff welfare |
78 |
73 |
201 |
194 |
| |
12,994 |
11,622 |
37,971 |
33,242 |
| Cost of software packages and others |
|
|
|
|
| For own use |
269 |
255 |
767 |
693 |
| Third party items bought for service delivery to clients |
382 |
457 |
1,180 |
1,170 |
| |
651 |
712 |
1,947 |
1,863 |
| Other expenses |
|
|
|
|
| Repairs and maintenance |
335 |
328 |
1,081 |
910 |
| Power and fuel |
54 |
50 |
175 |
171 |
| Brand and marketing |
124 |
129 |
385 |
354 |
| Short-term leases (Refer to Note 2.19) |
24 |
– |
66 |
– |
| Operating leases |
– |
149 |
– |
420 |
| Rates and taxes |
44 |
39 |
128 |
135 |
| Consumables |
29 |
11 |
67 |
32 |
| Insurance |
26 |
16 |
67 |
49 |
| Provision for post-sales client support and others |
(9) |
(3) |
1 |
25 |
| Commission to non-whole time directors |
2 |
2 |
6 |
5 |
| Impairment loss recognized / (reversed) under expected credit loss model |
10 |
84 |
98 |
230 |
| Contributions towards Corporate Social responsibility |
87 |
70 |
255 |
201 |
| Others |
88 |
71 |
248 |
193 |
| |
814 |
946 |
2,577 |
2,725 |
2.19 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 the 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.
Transition
Effective April 1, 2019, the Group adopted Ind
AS 116 “Leases” and applied the standard to all lease contracts existing on April 1, 2019 using the modified retrospective
method and has taken the cumulative adjustment to retained earnings, on the date of initial application. Consequently, the group
recorded the lease liability at the present value of the lease payments discounted at the incremental borrowing rate and the right
of use asset at its carrying amount as if the standard had been applied since the commencement date of the lease, but discounted
at the lessee’s incremental borrowing rate at the date of initial application. Comparatives as at and for the year ended
March 31, 2019 have not been retrospectively adjusted and therefore will continue to be reported under the accounting policies
included as part of our Annual Report for year ended March 31, 2019
On transition, the adoption of the new standard
resulted in recognition of 'Right of Use' asset of 2,907 crore, 'Net investment in sublease' of ROU asset of 430
crore and a lease liability of 3,598 crore. The cumulative effect of applying the standard, amounting to 40 crore
was debited to retained earnings, net of taxes. The effect of this adoption is insignificant on the profit before tax, profit for
the period and earnings per share. Ind AS 116 will result in an increase in cash inflows from operating activities and an increase
in cash outflows from financing activities on account of lease payments.
The following is the summary of practical expedients
elected on initial application:
1. Applied a single discount rate to a
portfolio of leases of similar assets in similar economic environment with a similar end date
2. Applied the exemption not to recognize right-of-use
assets and liabilities for leases with less than 12 months of lease term on the date of initial application
3. Excluded the initial direct costs from the
measurement of the right-of-use asset at the date of initial application.
4. Applied the practical expedient to grandfather
the assessment of which transactions are leases. Accordingly, Ind AS 116 is applied only to contracts that were previously identified
as leases under Ind AS 17.
The difference between the lease obligation
recorded as of March 31, 2019 under Ind AS 17 disclosed under Note 2.19 of the 2019 Annual Report and the value of the lease liability
as of April 1, 2019 is primarily on account of inclusion of extension and termination options reasonably certain to be exercised,
in measuring the lease liability in accordance with Ind AS 116 and discounting the lease liabilities to the present value under
Ind AS 116.
The weighted average incremental borrowing rate
applied to lease liabilities as at April 1, 2019 is 4.5%.
Following are the changes in the carrying value
of right of use assets for the three months ended December 31, 2019:
(In crore)
| Particulars |
Category of ROU asset |
Total |
| |
Land |
Buildings |
Vehicles |
Computers |
|
| Balance as of October 1, 2019 |
625 |
3,249 |
18 |
25 |
3,917 |
| Additions |
– |
149 |
2 |
22 |
173 |
| Deletions |
– |
(102) |
– |
– |
(102) |
| Depreciation |
(2) |
(137) |
(2) |
(5) |
(146) |
| Translation difference |
2 |
10 |
– |
– |
12 |
| Balance as of December 31, 2019 |
625 |
3,169 |
18 |
42 |
3,854 |
Following are the changes in the carrying value
of right of use assets for the nine months ended December 31, 2019:
(In crore)
| Particulars |
Category of ROU asset |
Total |
| |
Land |
Buildings |
Vehicles |
Computers |
|
| Balance as of April 1, 2019 |
– |
2,898 |
9 |
– |
2,907 |
| Reclassified on account of adoption of Ind AS 116 (Refer to note 2.2 & 2.3) |
634 |
– |
– |
– |
634 |
| Additions |
– |
586 |
6 |
48 |
640 |
| Additions through business combination (Refer to note 2.1) |
– |
177 |
10 |
– |
187 |
| Deletions |
(3) |
(107) |
– |
– |
(110) |
| Depreciation |
(6) |
(389) |
(7) |
(6) |
(408) |
| Translation difference |
– |
4 |
– |
– |
4 |
| Balance as of December 31, 2019 |
625 |
3,169 |
18 |
42 |
3,854 |
The following is the break-up of current and
non-current lease liabilities as of December 31, 2019
(In crore)
| Particulars |
Amount |
| Current lease liabilities |
568 |
| Non-current lease liabilities |
3,575 |
| Total |
4,143 |
The following is the movement in lease liabilities
during the three months and nine months ended December 31, 2019:
| Particulars |
Three months ended
December 31, 2019 |
Nine months ended
December 31, 2019 |
| Balance at the beginning |
4,077 |
3,598 |
| Additions |
199 |
666 |
| Additions through business combination (Refer to note 2.1) |
– |
224 |
| Deletions |
(111) |
(116) |
| Finance cost accrued during the period |
42 |
125 |
| Payment of lease liabilities |
(137) |
(431) |
| Translation difference |
73 |
77 |
| Balance at the end |
4,143 |
4,143 |
The table below provides details regarding the
contractual maturities of lease liabilities as of December 31, 2019 on an undiscounted basis:
(In crore)
| Particulars |
Amount |
| Less than one year |
726 |
| One to five years |
2,394 |
| More than five years |
1,890 |
| Total |
5,010 |
The group does not face a significant liquidity
risk with regard to its lease liabilities as the current assets are sufficient to meet the obligations related to lease liabilities
as and when they fall due.
Rental expense for recorded for short-term leases
was 24 crore for the three months ended December 31,2019 and 66 crore for the nine months ended December 31,2019
The aggregate depreciation on ROU assets has
been included under depreciation and amortisation expense in the consolidated Statement of Profit and Loss.
The following is the movement in the net investment
in sublease of ROU assets during the three months and nine months ended December 31, 2019:
(In crore)
| Particulars |
Three months ended
December 31, 2019 |
Nine months ended
December 31, 2019 |
| Balance at the beginning |
422 |
430 |
| Interest income accrued during the period |
4 |
11 |
| Lease receipts |
(12) |
(34) |
| Translation difference |
3 |
10 |
| Balance at the end |
417 |
417 |
The table below provides details regarding the
contractual maturities of net investment in sublease of ROU asset as of December 31, 2019 on an undiscounted basis:
(In crore)
| Particulars |
Amount |
| Less than one year |
47 |
| One to five years |
203 |
| More than five years |
243 |
| Total |
493 |
2.20 EMPLOYEE BENEFITS
Accounting policy
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 the Life Insurance Corporation of India as permitted by Indian law.
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 are not reclassified to profit or loss in subsequent
periods. 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 is recognized
in the Consolidated Statement of Profit and Loss.
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 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.
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.
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.
2.20.1 Gratuity
The following tables set out the funded status
of the gratuity plans and the amounts recognized in the Group's financial statements as at December 31, 2019 and March 31, 2019:
(In crore)
| Particulars |
As at |
| |
December 31, 2019 |
March 31, 2019 |
| Change in benefit obligations |
|
|
| Benefit obligations at the beginning |
1,351 |
1,201 |
| Service cost |
133 |
157 |
| Interest expense |
69 |
85 |
| Remeasurements - Actuarial (gains) / losses |
16 |
32 |
| Benefits paid |
(103) |
(128) |
| Translation difference |
1 |
2 |
| Reclassified from held for sale (refer note no 2.1.2) |
– |
2 |
| Benefit obligations at the end |
1,467 |
1,351 |
| Change in plan assets |
|
|
| Fair value of plan assets at the beginning |
1,361 |
1,216 |
| Interest income |
73 |
90 |
| Remeasurements- Return on plan assets excluding amounts included in interest income |
13 |
4 |
| Contributions |
115 |
174 |
| Benefits paid |
(100) |
(123) |
| Fair value of plan assets at the end |
1,462 |
1,361 |
| Funded status |
(5) |
10 |
| Prepaid gratuity benefit (refer to note no 2.9) |
31 |
42 |
| Accrued gratuity (refer to note no 2.13) |
(36) |
(32) |
Amount for the three months and nine months
ended December 31, 2019 and December 31, 2018 recognized in the consolidated statement of Profit and Loss under employee benefit
expense:
(In crore)
| Particulars |
Three months ended
December 31, |
Nine months ended
December 31, |
| |
2019 |
2018 |
2019 |
2018 |
| Service cost |
44 |
39 |
133 |
118 |
| Net interest on the net defined benefit liability/(asset) |
(2) |
(2) |
(4) |
(3) |
| Net gratuity cost |
42 |
37 |
129 |
115 |
Amount for the three months and nine months
ended December 31, 2019 and December 31, 2018 recognized in the consolidated statement of other comprehensive income:
(In crore)
| Particulars |
Three months ended December 31, |
Nine months ended
December 31, |
| |
2019 |
2018 |
2019 |
2018 |
| Remeasurements of the net defined benefit liability/ (asset) |
|
|
|
|
| Actuarial (gains) / losses |
(46) |
30 |
16 |
27 |
| (Return) / loss on plan assets excluding amounts included in the net interest on the net defined benefit liability/(asset) |
(3) |
(2) |
(13) |
(5) |
| |
(49) |
28 |
3 |
22 |
(In crore)
| Particulars |
Three months ended
December 31, |
Nine months ended
December 31, |
| |
2019 |
2018 |
2019 |
2018 |
| (Gain)/loss from change in demographic assumptions |
– |
(1) |
– |
(4) |
| (Gain)/loss from change in financial assumptions |
(24) |
34 |
28 |
21 |
| (Gain)/loss from experience adjustment |
(22) |
(3) |
(12) |
10 |
| |
(46) |
30 |
16 |
27 |
The weighted-average assumptions used to determine
benefit obligations as at December 31, 2019 and March 31, 2019 are set out below:
| Particulars |
As at |
| |
December 31, 2019 |
March 31, 2019 |
| Discount rate |
6.8% |
7.1% |
| Weighted average rate of increase in compensation levels |
8.0% |
8.0% |
The weighted-average assumptions used to determine
net periodic benefit cost for the three months and nine months ended December 31, 2019 and December 31, 2018 are set out below:
| Particulars |
Three months ended
December 31, |
Nine months ended
December 31, |
| |
2019 |
2018 |
2019 |
2018 |
| Discount rate (%) (1) |
7.1 |
7.5 |
7.1 |
7.5 |
| Weighted average rate of increase in compensation levels (%) (2) |
8.0 |
8.0 |
8.0 |
8.0 |
| Weighted average duration of defined benefit obligation (years) (3) |
5.9 years |
6.1 years |
5.9 years |
6.1 years |
Assumptions regarding future mortality experience
are set in accordance with the published statistics by the Life Insurance Corporation of India.
| (1) | | In India, the market for high quality corporate bonds being not developed, the yield
of government bonds is considered as the discount rate. The tenure has been considered taking into account the past long-term
trend of employees’ average remaining service life which reflects the average estimated term of the post- employment benefit
obligations. |
| (2) | | The average rate of increase in compensation levels is determined by the Company,
considering factors such as, the Company’s past compensation revision trends and management’s estimate of future salary
increases. |
| (3) | | Attrition rate considered is the management’s estimate based on the past long-term
trend of employee turnover in the Company. |
Sensitivity of significant assumptions used
for valuation of defined benefit obligation:
(in crore)
| Impact from percentage point increase / decrease in |
As at
December 31, 2019 |
| Discount rate |
74 |
| Weighted average rate of increase in compensation levels |
66 |
Sensitivity to significant actuarial assumptions
is computed by varying one actuarial assumption used for the valuation of the defined benefit obligation by one percentage, keeping
all other actuarial assumptions constant. In practice, this is not probable, and changes in some of the assumptions may be correlated.
Gratuity is applicable only to employees drawing
a salary in Indian rupees and there are no other significant foreign defined benefit gratuity plans.
The Company contributes all ascertained liabilities
towards gratuity to the Infosys Limited Employees' Gratuity Fund 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 trust as at December 31, 2019 and March 31, 2019, the plan assets have been primarily
invested in insurer managed funds.
Actual return on assets for the three months
ended December 31, 2019 and December 31, 2018 were 28 crore and 24 crore, respectively.
Actual return on assets for the nine months
ended December 31, 2019 and December 31, 2018 were 86 crore and 72 crore, respectively.
The Group expects to contribute 50 crore
to the gratuity trusts during remainder of fiscal 2020.
Maturity profile of defined benefit obligation:
(In crore)
| Within 1 year |
211 |
| 1-2 year |
220 |
| 2-3 year |
226 |
| 3-4 year |
237 |
| 4-5 year |
259 |
| 5-10 years |
1,310 |
2.20.2 Provident fund
Infosys has an obligation to fund any shortfall
on the yield of the trust’s investments over the administered interest rates on an annual basis. These administered rates
are determined annually predominantly considering the social rather than economic factors and in most cases the actual return earned
by the Company has been higher in the past years. The actuary has provided a valuation for provident fund liabilities on the basis
of guidance issued by Actuarial Society of India and based on the assumptions provided there is no shortfall as at March 31, 2019.
The details of the benefit obligation as at
March 31, 2019 is as follows:
(In crore)
| Particulars |
As at |
| |
March 31, 2019 |
| Benefit obligation at the period end |
5,989 |
| Net liability recognized in balance sheet |
– |
The following tables set out the funded status
of the defined benefit provident fund plan of Infosys limited and the amounts recognized in the Company's financial statements
as at December 31, 2019
(In crore)
| Particulars |
As at |
| |
December 31, 2019 |
| Change in benefit obligations |
|
| Benefit obligations at the beginning |
5,989 |
| Service cost - employer contribution |
314 |
| Employee contribution |
628 |
| Interest expense |
450 |
| Actuarial (gains) / loss |
147 |
| Benefits paid |
(472) |
| Benefit obligations at the end |
7,056 |
| Change in plan assets |
|
| Fair value of plan assets at the beginning |
5,989 |
| Interest income |
450 |
| Remeasurements- Return on plan assets excluding amounts included in interest income (1) |
(81) |
| Contributions |
942 |
| Benefits paid |
(472) |
| Fair value of plan assets at the end |
6,828 |
| Net liability (refer to note 2.13) |
(228) |
(1) Includes unrealized losses
on certain investments in bonds
Amount for the three months and nine months
ended December 31, 2019 recognized in the consolidated statement of other comprehensive income:
(In crore)
| Particulars |
Three and nine months ended December 31, |
| |
2019 |
| Remeasurements of the net defined benefit liability/ (asset) |
|
| Actuarial (gains) / losses |
147 |
| (Return) / loss on plan assets excluding amounts included in the net interest on the net defined benefit liability/(asset) |
81 |
| |
228 |
Assumptions used in determining the present
value obligation of the defined benefit plan under the Deterministic Approach:
| Particulars |
As at |
| |
December 31, 2019 |
March 31, 2019 |
| Government of India (GOI) bond yield (1) |
6.80% |
7.10% |
| Expected rate of return on plan assets |
8.30% |
9.20% |
| Remaining term to maturity of portfolio |
6 years |
5.47 years |
| Expected guaranteed interest rate |
|
|
| First year |
8.65% |
8.65% |
| Thereafter |
8.60% |
8.60% |
(1) In India, the market for high
quality corporate bonds being not developed, the yield of government bonds is considered as the discount rate. The tenure has been
considered taking into account the past long-term trend of employees’ average remaining service life which reflects the average
estimated term of the post- employment benefit obligations.
As at December 31, 2019 the defined benefit
obligation would be affected by approximately 73 crore on account of a 0.25% increase / decrease in the expected rate of
return on plan assets.
The Group contributed 165 crore and 136
crore to the provident fund during the three months ended December 31, 2019 and December 31, 2018, respectively. The Group contributed
472 crore and 401 crore to the provident fund during the nine months ended December 31, 2019 and December 31, 2018,
respectively. The same has been recognized in the Consolidated Statement of Profit and Loss under the head employee benefit expense.
The Hon’ble Supreme Court of India vide
its judgment and subsequent review petition has ruled in respect of compensation for the purpose of Provident Fund contribution
under the Employee’s Provident Fund Act. The Company has assessed possible outcomes of the judgment on determination of provident
fund contributions and based on the Company’s current evaluation, it is not probable that certain allowances paid by the
Company will be subject to payment of Provident Fund. The company will continue to monitor and evaluate its position based on future
events and developments.
The provident plans are applicable only to employees
drawing a salary in Indian rupees and there are no other significant foreign defined benefit plans.
2.20.3 Superannuation
The Group contributed 62
crore and 56 crore during the three months ended December 31, 2019 and December 31, 2018, respectively. The Group
contributed 180 crore and 158 crore during the nine months ended December 31, 2019 and December 31, 2018, respectively
same has been recognized in the Consolidated Statement of Profit and Loss under the head employee benefit expense.
2.20.4 Employee benefit costs include:
(In crore)
| Particulars |
Three months ended
December 31, |
Nine months ended
December 31, |
| |
2019 |
2018 |
2019 |
2018 |
| Salaries and bonus(1) |
12,726 |
11,393 |
37,189 |
32,568 |
| Defined contribution plans |
87 |
79 |
254 |
227 |
| Defined benefit plans |
181 |
150 |
528 |
447 |
| |
12,994 |
11,622 |
37,971 |
33,242 |
(1)Includes employee stock compensation
expense of 64 crore for the three months ended December 31, 2019 and an employee stock compensation cost of 183 crore,
for the nine months ended December 31, 2019. Similarly, includes employee stock compensation expense of 46 crore and 143
crore for the three months and nine months ended December 31, 2018 respectively.
2.21 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
at 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.
The following is a reconciliation of the equity
shares used in the computation of basic and diluted earnings per equity share:
| Particulars |
Three months ended
December 31, |
Nine months ended
December 31, |
| |
2019 |
2018 |
2019 |
2018 |
| Basic earnings per equity share - weighted average number of equity shares outstanding(1) |
4,23,96,07,543 |
4,34,76,73,466 |
4,26,35,69,478 |
4,34,71,30,342 |
| Effect of dilutive common equivalent shares - share options outstanding |
61,08,894 |
50,57,921 |
69,39,816 |
55,74,808 |
| Diluted earnings per equity share - weighted average number of equity shares and common equivalent shares outstanding |
4,24,57,16,437 |
4,35,27,31,387 |
4,27,05,09,294 |
4,35,27,05,150 |
Information in the table above is adjusted
for September 2018 bonus issue where ev,,e applicable (Refer note no 2.11)
(1) Excludes treasury
shares
For the three months and nine months ended December
31, 2019 and December 31, 2018, there are no options to purchase equity shares which had an anti-dilutive effect
2.22 CONTINGENT LIABILITIES AND COMMITMENTS
(TO THE EXTENT NOT PROVIDED FOR)
(In crore)
| Particulars |
As at |
| |
December 31, 2019 |
March 31, 2019 |
| Contingent liabilities : |
|
|
| Claims against the Group, not acknowledged as debts(1) |
3,572 |
3,081 |
| [Amount paid to statutory authorities 5,209 crore (5,925 crore)] |
|
|
| Commitments : |
|
|
| Estimated amount of contracts remaining to be executed on capital contracts and not provided for (net of advances and deposits) |
1,249 |
1,724 |
| Other commitments* |
70 |
86 |
*Uncalled capital pertaining to investments
| (1) | | As at December 31, 2019, claims against the Group not acknowledged as debts in respect
of income tax matters amounted to 3,342 crore. 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. |
Amount paid to statutory authorities against
the above tax claims amounted to 5,208 crore.
The Audit Committee appointed an external legal
counsel to conduct an independent investigation into the whistleblower allegations which have been previously disclosed to stock
exchanges on October 22, 2019 and to the Securities Exchange Commission (SEC) on Form 6K on the same date.
The outcome of the investigation has not resulted
in restatement of previously issued financial statements relating to fiscals 2018 and 2019 interim and annual periods, and fiscal
2020 interim periods.
As of the date of this results, the Company
is under investigation by the SEC. The Company has also received letters from Indian regulatory authorities seeking information
on the above matters. Additionally, in October 2019, shareholders class action lawsuit was filed in the United States District
Court for the Eastern District of New York against the Company and certain of its current and former officers for violations of
the US federal Securities Laws. The Company is presently unable to predict the scope, duration or the outcome of these matters.
The Group is subject to legal proceedings and
claims, which have arisen in the ordinary course of business. The Group’s management does not reasonably expect that these
legal actions, when ultimately concluded and determined, will have a material and adverse effect on the Company’s results
of operations or financial condition.
2.23 RELATED PARTY TRANSACTIONS
List of related parties:
| Name of subsidiaries |
Country |
Holdings as at |
| |
|
December 31, 2019 |
March 31, 2019 |
| Infosys Technologies (China) Co. Limited (Infosys China) |
China |
100% |
100% |
| Infosys Technologies S. de R. L. de C. V. (Infosys Mexico) |
Mexico |
100% |
100% |
| Infosys Technologies (Sweden) AB. (Infosys Sweden) |
Sweden |
100% |
100% |
| Infosys Technologies (Shanghai) Company Limited (Infosys Shanghai) |
China |
100% |
100% |
| Infosys Tecnologia DO Brasil LTDA. (Infosys Brasil)(25) |
Brazil |
– |
100% |
| Infosys Nova Holdings LLC. (Infosys Nova) |
U.S. |
100% |
100% |
| EdgeVerve Systems Limited (EdgeVerve) |
India |
100% |
100% |
| Infosys Austria GmbH(1) (formerly Lodestone Management Consultants GmbH) |
Austria |
100% |
100% |
| Skava Systems Pvt. Ltd. (Skava Systems) |
India |
100% |
100% |
| Kallidus Inc, (Kallidus) |
U.S. |
100% |
100% |
| Infosys Chile SpA |
Chile |
100% |
100% |
| Infosys Arabia Limited(2) |
Saudi Arabia |
70% |
70% |
| Infosys Consulting Ltda.(2) |
Brazil |
99.99% |
99.99% |
| Infosys CIS LLC(1)(18) |
Russia |
– |
– |
| Infosys Luxembourg S.a.r.l (1)(13) |
Luxembourg |
100% |
100% |
| Infosys Americas Inc., (Infosys Americas) |
U.S. |
100% |
100% |
| Infosys Technologies (Australia) Pty. Limited (Infosys Australia)(3) |
Australia |
- |
100% |
| Infosys Public Services, Inc. USA (Infosys Public Services) |
U.S. |
100% |
100% |
| Infosys Canada Public Services Inc(19) |
Canada |
– |
– |
| Infosys BPM Limited (formerly Infosys BPO Limited) |
India |
99.99% |
99.98% |
| Infosys (Czech Republic) Limited s.r.o.(4) |
Czech Republic |
99.99% |
99.98% |
| Infosys Poland, Sp z.o.o(4) |
Poland |
99.99% |
99.98% |
| Infosys McCamish Systems LLC (4) |
U.S. |
99.99% |
99.98% |
| Portland Group Pty Ltd(4) |
Australia |
99.99% |
99.98% |
| Infosys BPO Americas LLC.(4) |
U.S. |
99.99% |
99.98% |
| Infosys Consulting Holding AG (Infosys Lodestone) |
Switzerland |
100% |
100% |
| Lodestone Management Consultants Inc.(5)(11) |
U.S. |
– |
– |
| Infosys Management Consulting Pty Limited(5) |
Australia |
100% |
100% |
| Infosys Consulting AG(5) |
Switzerland |
100% |
100% |
| Infosys Consulting GmbH(5) |
Germany |
100% |
100% |
| Infosys Consulting S.R.L.(1) |
Romania |
100% |
100% |
| Infosys Consulting SAS(5) |
France |
100% |
100% |
| Infosys Consulting s.r.o.(5) |
Czech Republic |
100% |
100% |
| Infosys Consulting (Shanghai) Co., Ltd.(formerly Lodestone Management Consultants Co., Ltd)(5) |
China |
100% |
100% |
| Infy Consulting Company Ltd(5) |
U.K. |
100% |
100% |
| Infy Consulting B.V.(5) |
The Netherlands |
100% |
100% |
| Infosys Consulting Sp. z.o.o(5) |
Poland |
100% |
100% |
| Lodestone Management Consultants Portugal, Unipessoal, Lda. (5) |
Portugal |
100% |
100% |
| Infosys Consulting S.R.L.(5) |
Argentina |
100% |
100% |
| Infosys Consulting (Belgium) NV (formerly Lodestone Management Consultants (Belgium) S.A.)(6) |
Belgium |
99.90% |
99.90% |
| Panaya Inc. (Panaya) |
U.S. |
100% |
100% |
| Panaya Ltd.(7) |
Israel |
100% |
100% |
| Panaya GmbH(7) |
Germany |
100% |
100% |
| Panaya Japan Co. Ltd(26)(7) |
Japan |
100% |
100% |
| Brilliant Basics Holdings Limited (Brilliant Basics) |
U.K. |
100% |
100% |
| Brilliant Basics Limited(8) |
U.K. |
100% |
100% |
| Brilliant Basics (MENA) DMCC(8)(26) |
Dubai |
100% |
100% |
| Infosys Consulting Pte Limited (Infosys Singapore)(1) |
Singapore |
100% |
100% |
| Infosys Middle East FZ LLC(9) |
Dubai |
100% |
100% |
| Fluido Oy(9)(14) |
Finland |
100% |
100% |
| Fluido Sweden AB (Extero)(15) |
Sweden |
100% |
100% |
| Fluido Norway A/S(15) |
Norway |
100% |
100% |
| Fluido Denmark A/S(15) |
Denmark |
100% |
100% |
| Fluido Slovakia s.r.o(15) |
Slovakia |
100% |
100% |
| Fluido Newco AB(15) |
Sweden |
100% |
100% |
| Infosys Compaz Pte. Ltd (formerly Trusted Source Pte. Ltd) (16) |
Singapore |
60% |
60% |
| Infosys South Africa (Pty) Ltd(9)(17) |
South Africa |
– |
– |
| WongDoody Holding Company Inc. (WongDoody) (10) |
U.S. |
100% |
100% |
| WDW Communications, Inc(12) |
U.S. |
100% |
100% |
| WongDoody, Inc(12) |
U.S. |
100% |
100% |
| HIPUS(20) |
Japan |
81% |
– |
| Stater N.V.(21) |
The Netherlands |
75% |
– |
| Stater Nederland B.V.(22) |
The Netherlands |
75% |
– |
| Stater Duitsland B.V.(22) |
The Netherlands |
75% |
– |
| Stater XXL B.V.(22) |
The Netherlands |
75% |
– |
| HypoCasso B.V.(22) |
The Netherlands |
75% |
– |
| Stater Participations B.V.(22) |
The Netherlands |
75% |
– |
| Stater Deutschland Verwaltungs-GmbH(23) |
Germany |
75% |
– |
| Stater Deutschland GmbH & Co. KG(23) |
Germany |
75% |
– |
| Stater Belgium N.V./S.A.(24) |
Belgium |
53.99% |
– |
| (1) | | Wholly-owned subsidiary of Infosys Limited |
| (2) | | Majority owned and controlled subsidiary of Infosys Limited |
| (3) | | Liquidated effective November 17, 2019 |
| (4) | | Wholly owned subsidiary of Infosys BPM |
| (5) | | Wholly owned subsidiaries of Infosys Consulting Holding AG (formerly Lodestone
Holding AG) |
| (6) | | Majority owned and controlled subsidiaries of Infosys Consulting Holding AG (formerly
Lodestone Holding AG) |
| (7) | | Wholly owned subsidiary of Panaya Inc. |
| (8) | | Wholly-owned subsidiary of Brilliant Basics Holding Limited. |
| (9) | | Wholly-owned subsidiary of Infosys Consulting Pte Ltd |
| (10) | | On May 22, 2018, Infosys acquired 100% of the voting interest in WongDoody |
| (11) | | Liquidated effective May 4, 2018 |
| (12) | | Wholly-owned subsidiary of WongDoody |
| (13) | | Incorporated effective August 6, 2018 |
| (14) | | On October 11, 2018, Infosys Consulting Pte. Ltd, acquired 100% of the voting interests
in Fluido Oy and its subsidiaries |
| (15) | | Wholly-owned subsidiary of Fluido Oy |
| (16) | | On November 16, 2018 , Infosys Consulting Pte. Ltd, acquired 60% of the voting
interest in Infosys Compaz Pte. Ltd |
| (17) | | Incorporated effective December 19,2018 |
| (18) | | Incorporated effective November 29, 2018 |
| (19) | | Incorporated effective November 27, 2018, wholly owned subsidiary Infosys Public
Services Inc |
| (20) | | On April 1, 2019, Infosys Consulting Pte. Ltd, acquired 81% of the voting interests
in HIPUS Co. Ltd, Japan |
| (21) | | On May 23, 2019, Infosys Consulting Pte. Ltd, acquired 75% of the voting interests
in Stater N.V |
| (22) | | Majority owned and controlled subsidiaries of Stater N.V |
| (23) | | Majority owned and controlled subsidiaries of Stater Duitsland B.V. |
| (24) | | Majority owned and controlled subsidiaries of Stater Participations B.V. |
| (25) | | Effective October 1, 2019, merged into Infosys Consulting Ltda, a majority owned
and controlled subsidiary of Infosys Ltd. |
Infosys has provided guarantee for performance
of certain contracts entered into by its subsidiaries.
List of other related party
| Particulars |
Country |
Nature of relationship |
| Infosys Limited Employees' Gratuity Fund Trust |
India |
Post-employment benefit plan of Infosys |
| Infosys Limited Employees' Provident Fund Trust |
India |
Post-employment benefit plan of Infosys |
| Infosys Limited Employees' Superannuation Fund Trust |
India |
Post-employment benefit plan of Infosys |
| Infosys BPM Limited Employees' Superannuation Fund Trust (formerly Infosys BPO Limited Employees Superannuation Fund Trust) |
India |
Post-employment benefit plan of Infosys BPM |
| Infosys BPM Limited Employees' Gratuity Fund Trust (formerly Infosys BPO Limited Employees' Gratuity Fund Trust) |
India |
Post-employment benefit plan of Infosys BPM |
| EdgeVerve Systems Limited Employees' Gratuity Fund Trust |
India |
Post-employment benefit plan of EdgeVerve |
| EdgeVerve Systems Limited Employees' Superannuation Fund Trust |
India |
Post-employment benefit plan of EdgeVerve |
| Infosys Employees Welfare Trust |
India |
Controlled trust |
| Infosys Employee Benefits Trust |
India |
Controlled trust |
| Infosys Science Foundation |
India |
Controlled trust |
| Infosys Expanded Stock Ownership Trust * |
India |
Controlled trust |
Refer note no. 2.20 for information on transactions
with post-employment benefit plans mentioned above.
* Registered on May 15, 2019
List of key management personnel
Whole-time Directors
Salil Parekh , Chief Executive Officer and Managing
Director
U.B. Pravin Rao, Chief Operating Officer
Non-whole-time Directors
Nandan M. Nilekani
Micheal Gibbs (appointed as Independent director
effective July 13, 2018)
Ravi Venkatesan (resigned from his position
as Co-Chairman effective August 24, 2017 and resigned as member of the Board effective May 11, 2018)
Kiran Mazumdar-Shaw
Roopa Kudva
Dr. Punita Kumar-Sinha
D.N. Prahlad
D. Sundaram
Executive Officers
Nilanjan Roy (appointed as Chief Financial Officer
effective March 1, 2019)
Jayesh Sanghrajka (appointed as Interim-Chief
Financial Officer effective November 17, 2018. He resumed his responsibilities as Deputy Chief Financial Officer effective March
1, 2019).
M.D. Ranganath (resigned as Chief Financial
Officer effective November 16, 2018)
Mohit Joshi, President
Ravi Kumar S, President and Deputy Chief Operating
Officer
Krishnamurthy Shankar, Group Head - Human Resources
Inderpreet Sawhney, Group General Counsel and
Chief Compliance Officer
Company Secretary
A.G.S. Manikantha
Transaction with key management personnel:
The related party transactions with above KMP
which comprise directors and executive officers are as follows :
(In crore)
| Particulars |
Three months ended
December 31, |
Nine months ended
December 31, |
| |
2019 |
2018 |
2019 |
2018 |
| Salaries and other employee benefits to whole-time directors and executive officers (1) |
29 |
19 |
88 |
68 |
| Commission and other benefits to non-executive/independent directors |
2 |
2 |
6 |
5 |
| Total |
31 |
21 |
94 |
73 |
| (1) | | Total employee stock compensation expense for the three months ended December 31,
2019 and December 31, 2018 includes a charge of 14 crore and 4 crore, respectively, towards key managerial personnel.
For the nine months ended December 31, 2019 and December 31, 2018, includes a charge of 45 crore and 23 crore respectively,
towards key managerial personnel. (Refer to note 2.11) |
2.24SEGMENT REPORTING
Ind AS 108 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 services. Allocated expenses of segments include expenses incurred for rendering services
from the Group's offshore software development centres and on-site expenses, which are categorized in relation to the associated
efforts of the segment. Certain expenses such as depreciation, which form a significant component of total expenses, are not specifically
allocable to specific segments as the underlying 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. The 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 2.16 Revenue from operations
Business Segments
Three months ended December 31, 2019 and December
31, 2018:
(In crore)
| Particulars |
Financial Services |
Retail |
Communication |
Energy, Utilities, Resources and Services |
Manufacturing |
Hi-Tech |
Life Sciences |
All other segments |
Total |
| Revenue from operations |
7,274 |
3,530 |
3,002 |
2,948 |
2,378 |
1,749 |
1,559 |
652 |
23,092 |
| |
6,953 |
3,503 |
2,547 |
2,741 |
2,166 |
1,569 |
1,335 |
586 |
21,400 |
| Identifiable operating expenses |
3,769 |
1,736 |
1,771 |
1,555 |
1,288 |
1,031 |
834 |
379 |
12,363 |
| |
3,760 |
1,747 |
1,375 |
1,491 |
1,190 |
926 |
704 |
367 |
11,560 |
| Allocated expenses |
1,642 |
710 |
613 |
575 |
509 |
307 |
308 |
258 |
4,922 |
| |
1,373 |
719 |
565 |
563 |
468 |
276 |
266 |
193 |
4,423 |
| Segmental operating income |
1,863 |
1,084 |
618 |
818 |
581 |
411 |
417 |
15 |
5,807 |
| |
1,820 |
1,037 |
607 |
687 |
508 |
367 |
365 |
26 |
5,417 |
| Unallocable expenses |
|
|
|
|
|
|
|
|
743 |
| |
|
|
|
|
|
|
|
|
587 |
| Other income, net (Refer to note 2.17) |
|
|
|
|
|
|
|
|
827 |
| |
|
|
|
|
|
|
|
|
753 |
| Finance costs (Refer to note 2.19) |
|
|
|
|
|
|
|
|
(42) |
| |
|
|
|
|
|
|
|
|
– |
| Reduction in the fair value of Disposal Group held for sale |
|
|
|
|
|
|
|
|
– |
| |
|
|
|
|
|
|
|
|
– |
| Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" (Refer to note 2.1.2) |
|
|
|
|
|
|
|
|
– |
| |
|
|
|
|
|
|
|
|
(451) |
| Profit before tax |
|
|
|
|
|
|
|
|
5,849 |
| |
|
|
|
|
|
|
|
|
5,132 |
| Income Tax Expense |
|
|
|
|
|
|
|
|
1,383 |
| |
|
|
|
|
|
|
|
|
1,522 |
| Net Profit |
|
|
|
|
|
|
|
|
4,466 |
| |
|
|
|
|
|
|
|
|
3,610 |
| Depreciation and amortization expense |
|
|
|
|
|
|
|
|
737 |
| |
|
|
|
|
|
|
|
|
580 |
| Non-cash expenses other than depreciation and amortization |
|
|
|
|
|
|
|
|
6 |
| |
|
|
|
|
|
|
|
|
458 |
Nine months ended December 31, 2019 and December
31, 2018:
(In crore)
| Particulars |
Financial Services |
Retail |
Communication |
Energy, Utilities, Resources and Services |
Manufacturing |
Hi-Tech |
Life Sciences |
All other segments |
Total |
| Revenue from operations |
21,344 |
10,413 |
8,966 |
8,744 |
6,768 |
5,141 |
4,353 |
1,795 |
67,524 |
| |
19,672 |
10,140 |
7,505 |
7,643 |
5,992 |
4,527 |
3,916 |
1,742 |
61,137 |
| Identifiable operating expenses |
11,169 |
5,199 |
5,315 |
4,623 |
3,744 |
3,070 |
2,385 |
1,064 |
36,569 |
| |
10,550 |
5,119 |
3,990 |
4,161 |
3,323 |
2,562 |
2,062 |
1,066 |
32,833 |
| Allocated expenses |
4,731 |
2,060 |
1,788 |
1,761 |
1,521 |
899 |
881 |
704 |
14,345 |
| |
3,965 |
2,005 |
1,578 |
1,574 |
1,286 |
792 |
759 |
597 |
12,556 |
| Segmental operating income |
5,444 |
3,154 |
1,863 |
2,360 |
1,503 |
1,172 |
1,087 |
27 |
16,610 |
| |
5,157 |
3,016 |
1,937 |
1,908 |
1,383 |
1,173 |
1,095 |
79 |
15,748 |
| Unallocable expenses |
|
|
|
|
|
|
|
|
2,163 |
| |
|
|
|
|
|
|
|
|
1,487 |
| Other income, net (Refer to note 2.17) |
|
|
|
|
|
|
|
|
2,189 |
| |
|
|
|
|
|
|
|
|
2,218 |
| Finance costs (Refer to note 2.19) |
|
|
|
|
|
|
|
|
(125) |
| |
|
|
|
|
|
|
|
|
– |
| Reduction in the fair value of Disposal Group held for sale (Refer to note 2.1.2) |
|
|
|
|
|
|
|
|
– |
| |
|
|
|
|
|
|
|
|
(270) |
| Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" (Refer to note 2.1.2) |
|
|
|
|
|
|
|
|
– |
| |
|
|
|
|
|
|
|
|
(451) |
| Profit before tax |
|
|
|
|
|
|
|
|
16,511 |
| |
|
|
|
|
|
|
|
|
15,758 |
| Income Tax Expense |
|
|
|
|
|
|
|
|
4,207 |
| |
|
|
|
|
|
|
|
|
4,426 |
| Net Profit |
|
|
|
|
|
|
|
|
12,304 |
| |
|
|
|
|
|
|
|
|
11,332 |
| Depreciation and amortization expense |
|
|
|
|
|
|
|
|
2,144 |
| |
|
|
|
|
|
|
|
|
1,480 |
| Non-cash expenses other than depreciation and amortization |
|
|
|
|
|
|
|
|
19 |
| |
|
|
|
|
|
|
|
|
733 |
Significant clients
No client individually accounted for more than
10% of the revenues in the three months and nine months ended December 31, 2019 and December 31, 2018
2.25 FUNCTION WISE CLASSIFICATION OF CONSOLIDATED
STATEMENT OF PROFIT AND LOSS
(In crore)
| Particulars |
Note no |
Three months ended December 31, |
Nine months ended December 31, |
| |
|
2019 |
2018 |
2019 |
2018 |
| Revenue from operations |
2.16 |
23,092 |
21,400 |
67,524 |
61,137 |
| Cost of Sales |
|
15,373 |
14,016 |
45,231 |
39,585 |
| Gross profit |
|
7,719 |
7,384 |
22,293 |
21,552 |
| Operating expenses |
|
|
|
|
|
| Selling and marketing expenses |
|
1,204 |
1,156 |
3,539 |
3,248 |
| General and administration expenses |
|
1,451 |
1,398 |
4,307 |
4,043 |
| Total operating expenses |
|
2,655 |
2,554 |
7,846 |
7,291 |
| Operating profit |
|
5,064 |
4,830 |
14,447 |
14,261 |
| Reduction in the fair value of Disposal Group held for sale |
2.1.2 |
– |
– |
– |
(270) |
| Adjustment in respect of excess of carrying amount over recoverable amount on reclassification from "Held for Sale" |
2.1.2 |
– |
(451) |
– |
(451) |
| Other income, net |
2.17 |
827 |
753 |
2,189 |
2,218 |
| Finance cost |
2.19 |
42 |
– |
125 |
– |
| Profit before tax |
|
5,849 |
5,132 |
16,511 |
15,758 |
| Tax expense: |
|
|
|
|
|
| Current tax |
2.15 |
1,492 |
1,472 |
4,440 |
4,534 |
| Deferred tax |
2.15 |
(109) |
50 |
(233) |
(108) |
| Profit for the period |
|
4,466 |
3,610 |
12,304 |
11,332 |
| Other comprehensive income |
|
|
|
|
|
| Items that will not be reclassified subsequently to profit or loss |
|
|
|
|
|
| Remeasurement of the net defined benefit liability/asset |
2.20 and 2.15 |
(120) |
(23) |
(159) |
(19) |
| Equity instruments through other comprehensive income, net |
2.4 and 2.15 |
(36) |
57 |
(31) |
69 |
| |
|
(156) |
34 |
(190) |
50 |
| Items that will be reclassified subsequently to profit or loss |
|
|
|
|
|
| Fair value changes on derivatives designated as cash flow hedge, net |
2.10 and 2.15 |
(29) |
56 |
(36) |
36 |
| Exchange differences on translation of foreign operations, net |
|
151 |
(288) |
141 |
133 |
| Fair value changes on investments, net |
2.4 and 2.15 |
(11) |
37 |
7 |
(23) |
| |
|
111 |
(195) |
112 |
146 |
| |
|
|
|
|
|
| Total other comprehensive income / (loss), net of tax |
|
(45) |
(161) |
(78) |
196 |
| Total comprehensive income for the period |
|
4,421 |
3,449 |
12,226 |
11,528 |
| Profit attributable to: |
|
|
|
|
|
| Owners of the Company |
|
4,457 |
3,609 |
12,273 |
11,330 |
| Non-controlling interests |
|
9 |
1 |
31 |
2 |
| |
|
4,466 |
3,610 |
12,304 |
11,332 |
| Total comprehensive income attributable to: |
|
|
|
|
|
| Owners of the Company |
|
4,406 |
3,448 |
12,187 |
11,526 |
| Non-controlling interests |
|
15 |
1 |
39 |
2 |
| |
|
4,421 |
3,449 |
12,226 |
11,528 |
for and on behalf of the Board
of Directors of Infosys Limited
|
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 |
| |
|
|
Bengaluru
January 10, 2020 |
|
|
